Coming out of two tough winters, the cost of energy is a top concern for consumers. A recent study by Acadia Center shows that energy efficiency might be one of the best solutions for keeping those costs under control. Thanks to existing investment in electric efficiency programs, customers in Northeast states saved some $1.5 billion in winter 2014 alone.
“We know that saving energy is cheaper than paying for additional supply,” said Daniel L. Sosland, president of Acadia Center. “But this analysis shows how valuable electric efficiency is, especially during the periods when we need greatest relief from high prices.”
Lower demand reduces the prices that consumer pay for power and provides significant relief during peak demand when prices are highest. To help quantify this crucial value, Acadia Center estimated what electricity demand, wholesale prices and consumer costs would have been in the winter of 2014 without electric efficiency programs and found that:
- Demand would have been 14 percent higher;
- The price of wholesale electricity would have been 24 percent higher; and
- Overall costs for electricity would have been $1.5 billion higher.
Since 2000, electric efficiency programs have reduced electricity demand in New England by nearly 2.2 GW – equivalent to the combined capacity of the coal-fired Brayton Point and nuclear-powered Pilgrim power plants.
Electricity prices in the winter of 2014 were unusually high because of various reasons, including the region’s over-reliance on natural gas for power generation and below-average temperatures, which increased consumption of natural gas for heating. With the constrained fuel supply, the price of electricity was higher.
Electricity market reforms and lower prices for liquefied natural gas helped keep costs lower during winter 2015 despite colder temperatures, but electric efficiency investments also significantly contributed to keeping energy more affordable.
“Without efficiency, winter costs would have been much higher,” said Jamie Howland, director of Acadia Center’s Climate and Energy Analysis (CLEAN) Center. “Saving electricity through efficiency costs about 4 cents per kilowatt-hour, while the regional average wholesale price of electricity was about four times that in winter of 2014. When weather and market forces cause electric prices to rise, efficiency becomes even more valuable.”
The analysis comes as states consider making long-term investments in gas pipelines and electric transmission lines to add to the region’s energy supply. This data showing the role of efficiency as a way to cost-effectively reduce energy demand could help influence how states shape their energy plans.
“Energy efficiency will always generate savings, regardless of volatile fuel prices,” Howland said. “As the states in the region determine the appropriate mix of resources to address winter electric prices, the policy of all cost-effective efficiency should be a prerequisite to any proposals that ask ratepayers to bear the risk of infrastructure investments.”
Some states also face important decisions related to continuing with long-term investments in electric efficiency programs, all of which are opportunities to capture more efficiency as a cost-saving resource. This includes: the development of spending plans for 2016-2018 in Massachusetts, which to date is top in the nation for efficiency investments; the establishment of an energy efficiency resource standard in New Hampshire; and, the 2016-2018 plan for efficiency in Connecticut.
“Measuring the huge savings from efficiency in times of high demand helps show how valuable this resource has been for meeting our region’s energy needs and demonstrates the role electric efficiency can play in planning and building a clean energy future,” said Varun Kumar, policy and data analyst at Acadia Center and lead author of the report.