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Michigan earns $4 for every $1 it spends on energy efficiency. These striking economics explain why.

When we spoke with DTE Energy’s Director of Energy Efficiency earlier this week, she told us that her utility is doing everything it can to “make sure [efficiency investments] deliver the highest possible return” for consumers. In particular, she noted that Michigan’s energy efficiency programs are delivering $3 to $4 dollars in savings for every $1 spent — a remarkable rate of return. That good news just got even better.

New data from the Michigan Public Service Commission show that the $253 million utilities spent on efficiency programs in 2013 will directly generate $948 million in savings in the years ahead. Energy companies will enjoy from lower operating costs, and consumers will benefit from energy bills. And to us, that math is starting to sound pretty familiar. To take one example, we noted earlier this year that a $20 million efficiency investment in eight southeastern states has yielded $78 million in returns. That’s about $1 in costs for $4 in benefits, just like in Michigan.

 The dramatic success of these efficiency investments reflects a striking truth about the economics of energy in the 21st century. In March, researchers at Lawrence Berkeley National Laboratory found that the price of saving a kilowatt-hour through efficiency measures is less than half what it costs to generate one at a power plant. Other recent studies have reached similar conclusions.

 

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The chart above, coupled with real-world data from 36 U.S. states, goes a long way toward explaining why energy efficiency standards like Michigan’s work so well. By incentivizing utilities to use their cheapest, cleanest energy resource — avoided kilowatts — smart regulations are aligning utilities’ interests with their customers’ interests. That’s saving everyone money, and it’s abating the carbon pollution that causes climate change. Consumers are justifiably pleased about that.

In our interview with Vicki Campbell, DTE’s Energy Efficiency Director, she pointed out that efficiency programs have helped utilities like hers build stronger relationships with their customers: “Energy efficiency programs are a great way to increase customer engagement and provide an important service. Many customers just aren’t aware of how they use energy at home, what the ‘right’ amount of energy is, or what they can do to reduce their energy use — and ultimately their energy bills.” Offering that kind of personalized help is becoming a strategic imperative for utilities around the world. And that’s why we're proud to partner with Michigan utilities like DTE Energy and Consumers Energy to give more than 700,000 Michiganders the tools they need to better manage their energy use.

To read the full report from the Michigan Public Services Commission, click here

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