If codes and standards are making us more efficient, do utilities need to continue to invest in energy efficiency? Yes! Read on to see why.

Last month I got a question from my mom that stood out because it’s a question I get a lot both from folks working in the industry and people wondering about what we do here at SACE. The question at a high level is: if energy demand is flat or declining, why do we still need to invest in energy efficiency?

I’ve included the original email and my response pasted below. Hope you find this helpful!

The falling energy demand + still needing energy efficiency measures is a good question and one I get asked a lot even from folks “in the know.” The question is murky lately because some utilities have been muddying the waters about different kinds of energy savings by claiming the need for utility energy efficiency programs is not there because improvements in codes and efficiency standards have worked so well. It is true that codes and standards are improving overall efficiency, but it is not true that that success negates the need for utility energy efficiency programs.

Falling load is driven by three main factors outside of utilities investing in energy efficiency:

1. General divergence of economic growth’s relationship with energy use (the way the economy is growing doesn’t necessarily use more electricity like it has in the past).
2. Efficiency standards by DOE on appliances and equipment have been bringing up the efficiency of the least-efficient models. This impact has taken a long time to have an impact because people and businesses don’t buy new appliances every year and the standards have steadily gotten more strict.
3. Improvements in building codes have made a difference too, but as you know once a code is updated all the buildings don’t automatically meet that code, so that takes time as well.

Energy efficiency programs paid directly by utilities, however, are primarily driven by economics. They tend to be put in place where algorithms tells us that it’s cheaper to incentivize a customer to use less than to purchase that power for them or build a new power plant. The way I explain this to folks is using an example of buying a refrigerator. When most folks have to buy a new fridge, they aren’t looking at energy consumption, and are likely on a tight budget so let’s say they opt for the cheapest model that is also probably the least efficient. Over time, the DOE standard for refrigerators has improved the minimum efficiency of that model, but it still isn’t the most efficient option. While changes in appliance standards merely raise minimum efficiency levels, utility efficiency programs incentivize people to select higher efficiency options.

A utility efficiency program could give a customer a $500 rebate for buying a more efficient refrigerator  that costs $1,000 more than the cheapest. As a result, the customer saves on their electric bill without having to front the full $1,000 difference in cost, the utility can purchase less power or build less generation and thus avoid raising rates, and everybody wins. (Check out this website from Energy Star to search for rebates available in your zip code.)

Some utility efficiency programs are for moral reasons instead of economics, i.e. low-income weatherization for homes to help lower bills where there’s really poor housing stock like the Share the Pennies program in Memphis, Tennessee. But most utility energy efficiency funding is strictly an economic decision.

So, falling or stagnant demand does not negate the need for these programs to lower utility costs for all customers.

Hopefully this helps explain a little better what we’re working on here at SACE. Visit our website to learn more about energy efficiency and what SACE is doing to promote smart policies and programs that benefit all electric customers in our region.