2 studies just came to a striking conclusion about the economics of energy efficiency

What’s cheaper than producing energy? Using less of it in the first place.

Two noteworthy energy efficiency studies just hammered that point home. This week, the American Council for an Energy Efficient Economy (ACEEE) found that it costs utilities 2.8 cents on average to reduce electricity consumption by 1 kilowatt-hour. That’s two to three times less than it costs to generate the same amount of electricity at a power plant.

Reducing electricity use is two to three times cheaper than producing electricity (Source: ACEEE, March 2014) Reducing electricity use is 2-3 times cheaper than producing electricity. (Source: ACEEE)


Last week, Lawrence Berkeley National Laboratory (LBNL) published a similar finding. According to their study on the cost of saved energy through utility efficiency programs, it takes just over 2 cents of investment to save a kilowatt-hour — and an average of just 1.8 cents for residential programs. Both studies aggregated years of data from efficiency programs across the United States. That meant evaluating the cost-effectiveness of all kinds of efficiency initiatives — from promoting efficient lighting, to providing rebates for efficient appliances, to encouraging consumers to change their behavior — then averaging the result. The ACEEE study went a step further, comparing the cost of running an energy efficiency program to the cost of building and operating new power plants. It turns out that when you tally up all the expenses and all the energy output of a natural gas power plant or a wind farm over its lifetime, it costs about 7 cents on average to generate a kilowatt-hour of electricity — more than double the price of saving a kilowatt-hour through an efficiency program. Moreover, producing electricity through an approach like advanced coal technology is four times as expensive as taking an efficiency approach. Utilities have taken note. That’s why they’re spending record amounts on efficiency — now more than $7.2 billion annually, according to the Consortium for Energy Efficiency. And they’re getting big returns. Over the past four decades, investments in efficiency have made a bigger contribution to meeting America’s growing energy needs than all new energy supply resources combined. Of course, there’s still a lot of room for unlocking the potential of efficiency. Opower recently found, for example, that there are 19 billion kilowatt-hours in energy savings and $2.2 billion in consumer savings up for grabs in the US through residential behavioral energy efficiency alone. 

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