Energy Efficiency Programs for Large Savings in the Next Decade

Expanded utility-funded energy efficiency programs can significantly slow rising electricity demand and reduce electricity bills; this report explains how.

Expanded utility-funded energy efficiency programs can significantly slow rising electricity demand and reduce electricity bills; this report explains how. Growing electricity demand and rising electricity prices are a concern across the United States. Average rates have increased 29% since 2020 and utilities are proposing many billions of dollars in new and upgraded generation, transmission, and distribution systems to meet increased consumption, which will increase rates even more. Energy efficiency not only lowers utility bills, it is almost always less expensive to implement than new generation, transmission, and distribution per kilowatt hour (kWh). Thus, substituting energy efficiency for some of the planned grid investments can reduce costs and slow down rate increases. By contrast, other grid investments do not reduce consumption and rarely reduce bills. Efficiency efforts also can be ramped up in less time than it takes to build new power plants and expand transmission and distribution, creating “headroom” for new loads. Furthermore, expanded programs can reduce use of polluting fuels, including natural gas, fuel oil, and propane. 

A substantial portion of past efficiency savings were driven by more efficient lighting, such as lighting from LEDs. While some potential lighting savings remain, much greater opportunities are found elsewhere, so programs need to diversify to take advantage of these other money-saving efficiency measures. This report provides many examples of more diversified programs. We examine 13 program areas with opportunities for both large energy savings and large reductions in peak electric demand in summer and winter. While we focus on programs that reduce electricity use, we also highlight where many of these programs reduce fuel use for space and water heating as well as industrial process loads.  

Key findings

• By 2035, expanded utility-funded electric efficiency efforts across 13 program areas can reduce U.S. electricity consumption by 12% relative to projected 2035 electricity consumption, and generally do so at a substantially lower cost per kilowatt hour than new power plants.  
• The expanded electric efficiency programs would simultaneously reduce projected consumption of gas, propane, and oil for space heating and other end uses by 6%. 
• These programs can also substantially reduce growth in peak electricity demand, providing about 173 GW of summer peak demand reductions and about 108 GW of winter peak savings, not counting the fuel switching programs. This is more than the power output of 100 large nuclear power plants in the winter, and even more power plants in the summer.  
• Replacing expensive sources of energy such as fuel oil and propane heat with efficient heat pumps can reduce fuel use by an additional 2%. This reduces the annual electricity savings resulting from electric efficiency programs by 1.3 efficiency points. This fuel switching also increases winter peak electricity demand by 36 GW.  
• The programs with the largest electric energy savings are industrial programs, commercial building retrofits, and distribution efficiency improvements.  
• The programs with the largest peak demand savings are smart thermostat and HVAC programs, followed by the same ones that deliver the largest overall savings. 
• Only a few leading utilities are presently using energy efficiency programs at this level. Most utilities need to dramatically expand their energy efficiency and demand reduction programs to capture available efficiency savings and thereby help serve growing loads and better assist customers in controlling their energy bills. Policymakers should accelerate this adoption by requiring implementation of these programs where utilities continue to lag.