Anchoring costs: the role of industry programs in U.S. ratepayer-funded energy efficiency

Panel: 1. Programmes to promote industrial energy efficiency

This is a peer-reviewed paper.

Authors:
Nate Aden, World Resources Institute, USA
Anna Chittum, American Council for an Energy-Efficient Economy, USA
James Bradbury, Climate and Energy Program, World Resources Institute, USA

Abstract

Over the past decade, sustained energy efficiency growth has helped transform U.S. energy use. At the household level, this transformation is illustrated by the drop of 2013 electricity demand to 10,819 kilowatt-hours per U.S. household, which is roughly the same level as 2001 average household power usage (10,535 kWh), though real GDP has grown more than 20 percent over the same period. Energy savings are achieved through federal energy efficiency standards, state building codes, private energy service company programs and investments, ratepayer-funded energy efficiency programs, and structural changes in the economy. Among these, ratepayer-funded energy efficiency (EE) programs have doubled in the past five years in terms of total annual budgets and estimated energy saved. These programs help participating customers reduce their energy costs, and keep the cost of electricity down for all customers, by reducing overall demand for electric power generation and fossil fuels. As ratepayer-funded efficiency programs have continued to grow, a number of states are debating how to treat large industrial customers, some of whom have lobbied through industrial ratepayer advocacy groups to be excluded from funding ratepayer efficiency programs. To help inform ongoing policy debates on the role of the industrial sector in ratepayer-funded EE programs, this paper offers a quantitative assessment of how such programs have performed to date. In particular, this paper assesses the cost-effectiveness and total energy savings achieved by industrial programs compared to the performance of programs that target residential and commercial sectors.

By virtue of their low costs, industrial EE programs help keep energy costs down for all consumers. There’s no single best practice for ratepayer-funded industry sector energy efficiency programs, but this assessment underscores the importance of keeping industry in the picture as energy efficiency programs continue to develop.