One interesting result of the Clean Power Plan has been the rafts of new analysis examining the United States' power sector. Everyone wants to know what it will cost.
That new analysis has allowed the South-central Partnership for Energy Efficiency as a Resource (SPEER) to complete a new assessment on the potential of energy efficiency. Using data on CPP compliance from both the U.S. Energy Information Administration and the Electric Reliability Council of Texas (ERCOT), SPEER believes demand in 2030 could be reduced by as much as 10% using a “modest” slate of tools and relatively low savings goals.
And by moderating demand and delaying new generation, SPEER said efficiency has the potential to put downward pressure on wholesale electricity prices – to the tune of 7% to 13%.
“They were showing how costly the Clean Power Plan was. I think they never thought about how effective efficiency was,” said Steve Isser, an attorney and energy economist who authored the report for SPEER.
The report, "Efficiency and the Low-Carbon Future," predicts the "convoluted litigation" surrounding the Clean Power Plan has put up only a temporary roadblock, and "the reality [is] that a transition to a greener grid will continue."
"The Clean Power Plan is symbolic more than anything," Isser said. "Have you heard of any new coal plants planned for the near future?"
Currently the CPP implementation is on hold as the finalized rule is left to the courts to review.
SPEER's analysis concludes that by utilizing utility incentive programs, appliance standards and building codes, significant energy savings can be obtained at affordable costs for 20 or more years. “Eventually, diminishing returns will set in as thermodynamic limits are approached and cost effective measures are exhausted,” the report said. “Hopefully, efficiency can buy time for the green transition to occur in a relatively painless manner.”
Efficiency, it seems, has replaced natural gas as the resource expected to span the gap between traditional generation and the distributed, renewable future.
“This is why we talk about energy efficiency as a bridge,” said Isser. “Right now it's the cheapest form of carbon reduction and energy reduction. ... It provides time for batteries and renewables to come down in price. All these technologies that are out there, but are too expensive to be implemented without subsidies."
Isser said CPP analysis by both ERCOT and the EPA show that energy efficiency can keep put downward pressure on wholesale prices. Financing new generation requires higher prices, and the report finds power markets with slower demand growth will have “lower prices and less investment in the short-run.”
And while achievable energy efficiency savings reach up to 3% in some states, Isser said that 1% is a more reasonable place to begin. “Let's walk first, and if walking is comfortable then let's try and jog,” he said.
SPEER's report is focused on Texas, and Isser points to the gap between the state as a whole and Austin Energy's savings as an indication of what can be done with policy. The state, since 2013, has achieved a 0.21% efficiency rate. Austin Energy, however, hits the 1% target and has saved 1,453 GWh between 1982 and 2011.
Highest potential in residential sector
SPEER's report shows efficiency in Texas is already reducing wholesale electricity costs by slowing demand growth. An additional 7% incremental reduction in the electricity demand projected for 2030 would depress wholesale prices by almost $5 per MWh, “providing annual savings of close to $2 billion in the wholesale market. In addition, those consumers who invested in EE would avoid $1.7 billion per year in energy purchases.”
The largest potential gains are in the residential sector, Isser said. In 2009, the sector consumed 1,400 TWh and the nine largest appliances accounted for almost 900 TWh of the total (HVAC, washer/dryer, dishwashers, hot water heaters, cooking appliances, refrigerators, freezers, and lighting).
If all nine of those appliances were replaced with more efficiency versions, SPEER predicts it would result in a reduction of 525 TWh – albeit at an initial capital cost of almost $1.7 trillion.
“More realistically,” the group said, looking at only cost-effective upgrades, “the net economic potential would correspond to a net annual benefit of $42 billion to consumers.” The cost-effective measure would require $415 billion saving 172 TWh per year, or more than 12% of residential consumption.
“Limiting upgrades to only end-of-life replacement and market growth, 3% of electricity could be saved, and would require an investment of $112 billion in upfront costs,” SPEER said. “This is equivalent to about 5 cents per kWh assuming a ten year life and 7 percent discount rate (though most appliances have longer lives than ten years).”
“Eventually you run out of cheap efficiency, but worry about that when you get there,” said Isser. “As long as its cost effective, you'd be stupid not to do it.”
Building efficiency in from the start
Isser points to more stringent building codes as an example of how efficiency can undercut the price of other energy resources. “They're costless,” he said, pointing to thousands of dollars in energy savings and the potential for higher home values.
“When you build a house, it's much easier to build efficiency into a house rather than retrofit.
Right now builders don't make a house more efficient because they don't know how to market it.”
Building in efficiency from the start means eventually upgrades become standard. “You don't need these massive programs repeating themselves,” he said, pointing to utility program administration as another area to reduce costs.
But for now, utility efficiency programs are about connecting consumers with knowledgeable technicians who can assess their needs and install upgrades, and developing economic systems to speed payback.
“The reason you need programs, is that what is cost effective from a society point of view might not be cost effective for a homeowner who lacks the knowledge and the skills,” Isser said. “One reason utility programs work, is they takes some of the risk away from the person putting the efficiency in. The average person has no idea how their house uses energy.”