SACE’s newly released “Energy Efficiency in the Southeast” report shows how our region's largest utilities and states compare when it comes to utility energy efficiency.

Years of underinvestment in energy efficiency means that utilities in the Southeast still have abundant, low-cost efficiency resources available now. This efficiency potential remains untapped at a time when utilities are reporting high anticipated load growth. It is more important now than ever to properly take advantage of energy efficiency as a resource and plan to maximize its benefits. Based on past performance, how do utilities in the region stack up?

Each year the Southern Alliance for Clean Energy (SACE) compiles efficiency savings data from electric utilities across the Southeast. This year’s report ranks utility efficiency portfolios based on energy saved in 2023 as a percentage of the utility’s total amount of electricity sold to customers.

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Why Do Utility Companies Offer Energy Efficiency Programs?

It may seem counterintuitive, but sometimes utility companies encourage their customers to use less energy. Utilities typically offer energy efficiency programs, incentives, and rebates to customers because it is cheaper to invest in helping customers cut energy waste than it is to meet the same energy needs by building new power plants.

In general, energy efficiency programs produce energy savings by reducing the total amount of energy needed to produce a service such as lighting or cooling. A well-designed portfolio of energy efficiency programs should offer opportunities for significant cost savings for customers while also scaling energy savings for the utility.

Utility-funded energy efficiency programs incentivize customers to adopt efficient equipment or building materials sooner than they would have otherwise, or to adopt more efficient equipment than they would have otherwise. An electric utility company’s energy efficiency portfolio is made of multiple programs aimed at reducing energy for different types of customers and different uses of electricity. Program managers then measure the difference between baseline energy usage (often defined by federal minimum efficiency standards) and the equipment installed through energy efficiency programs.

For electric utility companies, these energy savings are measured in megawatt hours (MWh). The performance of a utility company’s energy efficiency portfolio is often expressed by the amount of energy saved as a percent (%) of the amount of energy sold by the utility. This is the primary way that utilities and states are ranked in SACE’s analysis as well.

Southeast Energy Efficiency in Context

In the Southeast, 1% is often used as a symbolic benchmark for respectable performance of a utility-funded energy efficiency program. Note that utility energy efficiency savings are usually reported on a per-utility basis, since statewide savings numbers often include areas with utilities that do not operate energy efficiency programs or under-performing utilities, and therefore are usually lower.

The Southeast consistently falls very short of other regions and the nation as a whole when measuring utility energy efficiency performance by savings as a percentage of the amount of electricity sold. Leading utilities in other regions nationally save up to 2% or more per year, showing just how much higher efficiency saving performance can be.

Some utilities in the Southeast, like Florida Power & Light (FPL) and the Tennessee Valley Authority (TVA), have incorrectly argued in the past that building codes and federal standards make utility energy efficiency programs unnecessary. Yet utilities and states with similar or higher codes and standards in other parts of the country have still managed to deliver savings that are many times higher than the Southeast.

Admittedly, finding the next batch of efficiency savings can sometimes be more challenging and more expensive than reaching for low-hanging fruits. But years of underinvestment in efficiency in the Southeast means that utilities in the region still have abundant, low-cost efficiency resources available now.

This efficiency potential remains untapped at a time when utilities are reporting high anticipated load growth. It is more important now than ever to properly value energy efficiency as a resource and plan to maximize its benefits.

Utility Trends – Large Utility Rankings

In the absence of other serious energy efficiency efforts in the region, Duke Energy’s subsidiaries operating in North & South Carolina continue to lead the Southeast in rankings of utility energy efficiency program savings. However, despite holding up relatively well during the pandemic, Duke’s programs have not yet returned to their previous peaks in 2017-2019 that either neared or exceeded 1.0% of savings.

The next highest performing utility is Dominion Energy South Carolina, which reported savings that bring it near the regional average, a marked difference when compared to its own performance in previous years or when compared to its peers. Southern Company’s operating companies are largely in the middle of the pack, with Mississippi Power notably being one of the only utilities to actually exceed its pre-pandemic levels. In 2023 it was even close to matching the performance of its sister company, Georgia Power, which reported a slight dip in 2023 and fell to the lowest performance it has seen aside from the pandemic.

On the lower end of the rankings are two of our region’s utility giants: FPL and TVA. While both made slight improvements when compared to previous years, due to the size of each utility system, the relatively low performance of both TVA and FPL signals a significant missed opportunity for the region as a whole. TVA’s latest load growth forecast and new funding opportunities resulting from the Inflation Reduction Act (IRA) create the conditions for TVA in particular to become the energy efficiency leader it once promised to be. But TVA’s recently-filed IRP detailed its plans to achieve first-year programmatic energy efficiency savings that are in line with roughly 0.20 – 0.50% of retail sales within the next several years.

Early Impacts of the IRA

With the passage of the IRA in 2022, the federal government took an unprecedented step toward investing in energy efficiency. While the rollout of key programs that target deep savings for home energy efficiency remains ongoing, one of the early impacts that can be seen is the new energy efficiency home improvement tax credits. These tax credits can cover the costs of many types of improvements, including energy audits, efficient air conditioners, and hot water heaters. Nationally, over 2 million households took advantage of these tax credits in 2023, comprising roughly 2% of all tax returns filed. Within the Southeast, almost 400,000 households claimed the new federal home efficiency credit, saving over $300 million on their taxes, plus even more on energy savings.

However, the impacts of some of the IRA’s key energy efficiency investments are still on the horizon because funding applications have only recently been approved. Home Efficiency Rebate (HER) funds made available by the IRA are designed to combine traditional utility energy efficiency programs with the federal spending for deeper savings, especially low-income households. This is crucial for providing a pathway to deeper, whole-home energy efficiency measures that may not be covered by tax credit or utility programs alone. The purpose of the funds is to help pay for energy efficiency upgrades that will save at least 20% of the home’s energy use for single-family and multi-family households.

Unfortunately, this program may be vulnerable to clawbacks or cuts from the incoming federal administration since some states have not yet had their applications approved. Currently, three states in our region have been approved to offer rebates ranging from 50-100% of project costs for energy efficiency upgrades depending on income level: In Georgia, a limited pilot administered by the Georgia Environmental Finance Authority (GEFA) has begun and will allow the state to test processes and develop the participating contractor network. Program design and planning will continue throughout the remainder of 2024 and early 2025, with a full rollout expected by March 31, 2025. North Carolina’s program is expected to launch in early 2025. Florida’s application has also been approved, though no further details are available at the time of writing.

Tennessee and Mississippi have submitted applications and program design blueprints. These applications are in limbo for now, and they could potentially get feedback from the Department of Energy (DOE) and need to submit additional materials. Alabama and South Carolina have not yet submitted a final application to receive funds. It is difficult to tell what incentive levels or total project costs will be covered since those specifications are left up to each state and are not finalized until approved.

The full report covers more rankings of states and utilities, as well as analysis of policies and practices that drive energy efficiency in the Southeast. To learn more outcomes from the latest edition of the report, join our webinar or click below to read the full report.

Read the Full Report Register for the Webinar on January 15