Two things you should know about energy efficiency: it’s still the cheapest “fuel” around, but it’s getting more expensive, according to a new report from the Edison Foundation’s Institute for Electric Efficiency (PDF).
In 2010, utilities spent $4.8 billion on ratepayer-funded energy efficiency programs, and as a result saved about 112 terawatt-hours of electricity, enough to power nearly 10 million homes, the report finds. (That’s about 2.5 percent of the 4,000 terawatt-hours of electricity the U.S. consumed in 2009, according to the Energy Information Administration.)
That adds up to a cost of about 3.5 cents per kWh, as cheap or cheaper than almost every source of power generation out there, including natural gas and coal. But that cost has also gone up in the past few years, according to Lisa Wood, IEE’s executive director. In 2009, energy efficiency cost 3.2 cents per kilowatt hour, according to IEE figures.
In other words, changing light bulbs, fixing HVAC systems and installing double-pane windows can only get you so far. Each round of efficiency efforts helps find and fix the "low-hanging fruit" of wasteful and thoughtless energy use — but that means that each succeeding round of efficiency is going to get harder to attain, she said.
Indeed, the price of efficiency is “not going to get better over time -- it’s going to get harder,” she said. “In the long run, if you use it all up, there’s an equilibrium number, and it’s expensive -- you don’t do it anymore.”
That doesn’t mean there isn’t a lot of fruit still left for picking. Energy efficiency budgets for 2011 were $6.4 billion, 85 percent of that from utilities, the report found. It didn’t project how much more expensive efficiency might get on a cents-per-kilowatt hour basis over the coming years, however.
IEE’s report didn’t get at how each dollar of utility energy efficiency money was spent, though it’s clear that the majority is still coming from simple steps like replacing lights and appliances with newer, more efficient models, as well as encouraging people to change behavior in energy-saving ways, Wood said.
That leaves unclear what impact new energy-efficiency technologies might be having on the trend, or how they might aid in capturing harder-to-reach efficiency gains to come, she said. Energy efficiency has outpaced solar in terms of number of green technology VC investments over the past few quarters, although solar is still taking in more money, according to the Cleantech Group.
Commercial and industrial building efficiency is a hot field for new technology, with stalwarts like Honeywell, Johnson Controls, Schneider Electric, Siemens and GE enlisting the help of startups with new technologies or financing models to crack open the market. High-tech home energy efficiency has had a slower time taking off, though it could hold promise in the longer run.
The report also included demand response and load control programs, which help turn down customer power usage to manage peak power demands, and found that they brought the cost of energy saving to 4.5 cents per kilowatt-hour when added to efficiency programs. The report didn’t isolate the costs of demand response on its own, however.