Energy Efficiency

Energy efficiency will play a “crucial role" in decarbonizing the power system, even as lower-cost renewables make up a greater portion of U.S. generation and in scenarios where lower levels of building electrification keep electricity prices depressed, according to a report from the American Council for an Energy-Efficient Economy.

The U.S. currently generates about 20% of its electricity from renewable resources, and the U.S. Energy Information Administration expects that figure to double by 2050 even without additional policy support for wind and solar, said Mike Specian, a research manager within ACEEE’s state and utility policy program and lead author of the report.

“A major driver of that growth is cost,” he said in a June 21 webinar on the report's findings. “So that raises an important question .... what role, if any, should energy efficiency play in a high-renewable energy future?”

ACEEE examined five grid regions in the U.S. — California, Texas, the Pacific Northwest, the Southeast, and the Midwest — and concluded energy efficiency could reduce customer costs to the tune of $10 billion-$19 billion annually per region by 2050. Savings come from avoided energy use, generation capacity and transmission costs.

The research modeled the effect of 12 individual energy efficiency measures and packages and found that those affecting thermal space conditioning loads “are likely to have the greatest impact on both energy savings and avoided electricity system costs through 2050.” 

Modeled efficiency measures include building envelope improvements, a reduction in plug loads, and the use of more efficient heat pumps, water heaters and clothes dryers. 

There is variability among regions, however, and savings will be larger in regions “with lower baseline building energy codes, lower quality existing building stock, and more extreme temperatures, such as Texas and the Southeast," the report found.

However, the research shows consistently that energy efficiency “provides more value, the more quickly electricity generation decarbonizes,” said Specian. “It does this by offsetting the escalating costs of things like fossil-based energy and carbon capture under high renewable energy scenarios.”

The research also showed that, when considering a scenario where power sector emissions drop 95% below 2005 levels by 2050, commercial efficiency measures tend to deliver greater energy savings sooner, though they are ultimately surpassed by residential energy savings in most regions.

In every region ACEEE studied, commercial savings are greater than residential savings in 2030. And in all regions except California, residential savings are greater than commercial savings in 2050.

“This has to do with a number of factors including the rates of new building construction and the rates of building equipment replacement,” Specian said. “But what it shows is that there is more near-term savings potential in the commercial sector, and more long-term savings potential in the residential sector.”

California regulators on June 29 approved $4.3 billion in investments for energy efficiency efforts from 2024 through 2027, along with a forecasted budget of $4.6 billion from 2028 through 2031.

Around 14% of the budget will be channeled to programs that target disadvantaged and underserved communities, “helping to ensure equitable access to energy efficiency programs for all Californians served by [California Public Utilities Commission]-regulated entities,” the agency said in a statement.

Energy efficiency has been a core part of California’s strategy to meet its climate goals as well as reduce the amount of energy it needs to serve its load, CPUC Commissioner Karen Douglas said at the agency’s June 29 meeting. “It’s one of many strategies that we’ve relied on over time and one of our bedrock approaches,” she added.

Multiple commissioners at the meeting noted that the decision represents a significant investment in energy efficiency, which has been a critical component to meeting the state’s climate goals. 

“Statewide investments in energy efficiency are a powerful economic stimulus and greenhouse gas reduction driver,” CPUC Commissioner Genevieve Shiroma said. 

Previous energy efficiency portfolios adopted by the commission have provided for three segments, Shiroma said: resource acquisition, focused on system impacts from energy and capacity savings as well as greenhouse gas emission reductions; market support, focused on long-term support of the energy efficiency market and technologies; and equity, focused on ensuring better access and increased opportunities for underserved customers. 

This decision adds a fourth segment on codes and standards aimed at improving energy efficiency of buildings and products across the state. 

The investments approved by the CPUC will go into a host of energy efficiency-related measures that will also help improve energy reliability in the state, according to the agency. These include expanding current programs so that consumers can receive energy efficiency along with other home energy benefits – including electrification and energy storage – at the same time, the agency noted. 

California’s energy efficiency portfolio is administered by a host of entities, including the state’s four investor-owned utilities – Pacific Gas & Electric, Southern California Edison, San Diego Gas & Electric and Southern California Gas Co. – one community choice aggregator, Marin Clean Energy, and five regional energy networks, which are entities authorized to administer energy efficiency programs. 

The CPUC’s decision also approved a new regional energy network called ‘Rural REN,’ aimed at providing energy efficiency services to underserved communities in rural areas in Central and Northern California. This network will cover many regions that have the state’s lowest participation rates in energy efficiency programs, and have received fewer economic benefits from them compared to urban areas, the decision noted. 

PG&E is excited to be part of this investment in energy efficiency programs “and we look forward to collaborating with regulators, stakeholders and the energy efficiency community to implement this important policy,” the utility said in an email. 

PG&E offers a range of services to support energy efficiency and in 2022, its energy efficiency portfolio helped customers save 1,782 GWh and 43 million therms of energy, the utility added. In addition, it helped California avoid emissions of more than 677,000 metric tons of carbon dioxide, equal to the emissions from powering 130,000 homes for a year.

Global energy demand rose 1% in 2022, but the rate of energy efficiency improvements was double the average of the past five years, boosted by “surging” sales in more efficient technologies like heat pumps and electric vehicles, the International Energy Agency said in a June 7 report.

In the United States last year, residential heat pump sales exceeded gas furnaces for the first time, making up 53% of heating system sales.

Sales of electric vehicles grew 55% last year in the United States, and in the first quarter of this year they were more than 7% of new car sales. Globally, EVs were 14% of new car sales in 2022 and could reach 18% this year, IEA said.

Global investment in energy efficiency is expected to reach record levels of $624 billion in 2023, IEA said, “though growth is slowing due to increased cost of capital.”

Global energy efficiency investment in 2022 was about $600 billion, according to the report. 

“Sales of key efficiency technologies are surging,” the report said. Heat pump sales grew more than 10% globally last year, and in Europe they increased by almost 40%. There were 2.3 million EVs sold worldwide in the first quarter of this year, a 25% boost over the same period last year.

“We are seeing strong momentum behind energy efficiency,” IEA Executive Director Fatih Birol said in a statement. “We now need to push into a higher gear and double energy efficiency progress by the end of this decade.”

Heat pumps are a “key technology” for decarbonization efforts, according to the report, and new market data show that heat pump sales for residential space heating continue to rise significantly, with a global increase of more than 10% in 2022.

Improvements in primary energy intensity increased to 2.2% in 2022, double the average over the previous five years and four times the rate in the last two years, IEA said. The sales of smart energy controls and building energy management systems increased last year but “remain far from the 2030 IEA Net Zero targets.”

Doubling the rate of energy intensity improvements globally, from 2% to above 4%, would reduce global energy-related carbon dioxide emissions by almost 11 gigatons by 2030, the report concluded.

“We have all the ingredients. What we don’t have is time,” Schneider Electric Chairman Jean-Pascal Tricoire said. “Optimizing how we consume energy is the priority of how we tackle the climate-and-energy crisis.” 

Last year Schneider Electric purchased AutoGrid, a company focused on the optimization and integration of distributed energy resources.

Utilities and regulators in the Southeastern United States “continue to underinvest and deprioritize” energy efficiency, leaving many households with some of the nation’s highest power bills, the Southern Alliance for Clean Energy said in a March 27 report.

The analysis focuses on efficiency savings as a percentage of a utility’s annual electric retail sales and concludes the region has “consistently lagged far behind other regions.” SACE said a “massive infusion” of federal funding could change that, however.

In particular, the report points to Tennessee Valley Authority, Florida Power & Light and Alabama Power as the region’s weakest performers on energy efficiency. TVA and FPL say the report doesn’t tell the whole story, while Alabama Power did not respond to a request for comment.

The Southeastern U.S. has a history of underinvesting in energy efficiency, but SACE officials say policy moves at the federal level could turn that around.

The Inflation Reduction Act last year and the Infrastructure Investment and Jobs Act of 2021 represent a “once-in-a-lifetime infusion of federal funds in energy efficiency,” SACE Executive Director Stephen Smith said in a March 28 webinar discussing the report.

The two measures could include up to $62 billion for energy efficiency, according to SACE, including rebate dollars, tax credits, loan programs and competitive grant opportunities. For the Southeast, there are $1.8 billion in direct funding allocations, said Forest Bradley-Wright, SACE energy efficiency director.

Electric utilities in the Southeast achieved energy savings of 0.19% in 2021, according to SACE’s report, versus a national average of 0.68%. Alabama and Tennessee utilities achieved 0.01% savings, while Florida achieved 0.08%. Most successful in the region was North Carolina, according to SACE, which had 2021 energy savings of 0.57%.

The “opportunity” of efficiency can be compounded, Smith said, because energy efficiency benefits more than individual consumers. It is “a form of economic development because it is a labor-intensive way to go in and really work, in a very direct way, in communities with good-paying jobs,” he said. But utilities in the region “have a very narrow definition of what is economic development.”

In particular, Smith pointed to TVA, which he said is “constantly crowing about economic development.”

TVA is the largest public power utility in the United States and has said it plans to focus on efficiency in its next integrated resource plan. TVA officials say they plan to start work on the next IRP this year.

“Moving forward, TVA is looking at a significant expansion of its energy efficiency programs to help low-income areas through its Home Energy Uplift and similar programs,” spokesman Scott Allen Fiedler said in an email. This year the utility will invest an additional $5 million in the program to pair with matching funds and enable an $11 million investment in the program.

“Unlike bill assistance, Home Uplift focuses on making repairs that enable low-income households to meet their energy needs in the years to come,” Fiedler said. He also noted the utility has been recognized by the federal government’s Energy Star program for its efficiency programs.

SACE’s report puts special focus on manufactured housing, which is prevalent in the Southeast. Florida has the most manufactured homes in the country, while North Carolina ranks third.

"The amount of energy that [type of] household will use is higher than in single-family and multifamily homes by about 50%,” Bradley-Wright said. “So there ought to be considerable opportunities to capture energy savings.”

The first energy efficiency standards for manufactured homes went into effect in 1994, he added. “There still are a majority of manufactured homes out there that predate those energy standards ...  that means that they're durable, long-lasting homes but have high energy intensity, making them a priority for providing programs.”

There are more than 830,000 manufactured homes in Florida — about 10% of the national total, SACE said. 

Florida Power & Light is the largest utility in the state, but, “unfortunately, FPL has consistently resisted expanding energy saving programs — both as a matter of policy and as a matter of company practice,” SACE’s report said.

Gulf Power, which merged with FPL in 2022, also ranked near the bottom of SACE’s analysis.

FPL spokesperson Chris McGrath said the utility continues to support “cost-effective energy efficiency programs that benefit all customers regardless of whether they participate.”

“We have long believed that empowering our customers to make energy-efficient choices that are right for them is a better approach than charging higher electric rates to pay for inefficient programs that only some customers can use,” McGrath said in an email.

Alabama Power had the lowest efficiency savings among major utilities in the region in 2021, according to SACE.

“Alabama does not require utilities to conduct formal integrated resource planning,” the report said. “What Alabama Power files with the commission as its resource plan lacks even the most basic elements of other utilities’ IRPs, namely disclosure of its modeling assumptions and consideration of energy efficiency as an alternative to supply-side resources.”

“Failure to conduct transparent integrated resource planning is a big part of why Alabama consistently has the worst efficiency performance in the Southeast, and its customers have among the nation’s highest electricity consumption and monthly bills,” SACE said.

Alabama Power did not immediately respond to a request for comment.

Florida regulators on March 7 voted 3-2 to streamline the process of setting utility energy efficiency goals, but customer advocates say the changes are largely administrative and will not add transparency to the process, particularly in comparing efficiency with the value of other resources.

The Public Service Commission sets utility energy savings goals every five years for a 10-year period. In 2014 the targets were slashed over cost concerns, and in 2019 utilities proposed almost no increases to their savings targets. Concern over the stagnant targets helped launch the commission’s rulemaking, which concluded yesterday.

Utilities say the streamlined process will allow them to deliver more innovative efficiency programs to customers, while advocates expect Florida will continue to languish when it comes to energy efficiency. 

As electricity prices rise, consumer advocates in the Sunshine State are calling for more focus on energy efficiency, but they say the changes approved yesterday will not move the needle.

“We are still struggling to see how [the changes] meaningfully provide more transparency and clarity in the goal-setting process itself,” George Cavros, Florida director and energy policy attorney at the Southern Alliance for Clean Energy, told regulators March 7 at the PSC open meeting.

The PSC last updated Florida’s energy efficiency rules in the early 1990s, say experts.

The savings targets utilities proposed in 2019 have not been approved yet. That means “we are now heading in the goal setting proceeding next year with effectively the same rule that produced zero or near zero proposed goals,” Cavros said in an email after the PSC vote.

The changes approved March 7 will require utilities to provide a more broad range of cost and benefit information, the PSC said in a statement, and they will require utilities’ energy efficiency program plans to include “an annual estimate of the costs to be recovered by customers.”

But SACE and other groups had advocated for three major changes to the energy savings goal setting process, none of which were adopted. They want to see the PSC move away from a “ratepayer impact measure,” or RIM test, which they say considers energy efficiency as lost revenue for utilities without valuing savings.

“The proposed rule does eliminate some of the reliance on RIM but still does not provide the flexibility to allow the commission to consider all the potential DSM programs,” Patricia Ann Christensen, an attorney representing the Florida Office of Public Counsel, told regulators.

Utilities should be required to present a cost-effectiveness test, which “will provide more information to the commission on the economic benefits of energy efficiency to the general body of ratepayers, because it's the only test that places energy efficiency, investment and supply-side investments on a level playing field,” Cavros said. “It is essentially the RIM test without the lost revenue piece.” 

SACE and other groups also wanted to see the commission set specific low-income energy savings targets and eliminate the use of certain time-based screens to assess the payback of efficiency measures.

Utilities supported the changes the PSC approved.

The updates “provide improvements to the process for establishing goals, programs and plans and thereby allowing utilities like FPL to bring innovative programs to our customers, while continuing to keep rates low,” Florida Power & Light Senior Attorney William Cox told regulators. “That includes a consolidation of the processes establishing [demand side management] goals, programs and plans, which will make the overall goal setting more efficient.”

As for the RIM test, Cox said FPL “believes consideration of revenue requirements is important, and the addition of [a new] test really would add nothing, no new information to the process.”

The commercial building sector is showing a growing interest in energy efficiency, demand response and technologies that can help manage utility bills and reduce carbon emissions, according to a survey published in February by GridPoint.

A new generation of grid-interactive buildings are “able to drive energy efficiency, go after system peaks or their own building peaks and provide relief to the grid,” Rachel Marcus, demand response program manager at GridPoint, said in an interview. The company specializes in helping commercial building owners decarbonize and manage their energy use.

GridPoint’s survey queried more than 800 managers involved in their organization’s energy and sustainability decisions. Almost 80% of respondents reported energy cost increases in the last 12-24 months and 99% said they were concerned about the issue.

“Their budgets are not getting any bigger, but the prices are all going up,” Marcus said. “They’re all looking for ways to cost save, and they're looking to technologies like energy management systems and making their buildings more efficient. We're absolutely seeing a lot of expanded programs and opportunities on both the efficiency and demand response side.”

GridPoint’s survey identified the most common strategies commercial building owners plan to implement: 40% indicated an interest in expanded carbon accounting; 39% in demand response and demand management programs; 39% in expanding participation in utility efficiency programs and 39% in electric vehicle charging, either for customers or their own fleet.

“We were really surprised by the awareness of demand response,” said Katie O’Shea, GridPoint director of marketing, brand and communications.

Some 96% of survey respondents were aware of demand response programs, she said. “With this specific market, historically, it's been something we've needed to educate customers on and say, ‘here's how you can monetize your assets,’” O’Shea said. 

EV charging represents one of the largest opportunities in the space, GridPoint’s survey revealed, with less than a third of respondents saying they have already installed related infrastructure,

“However, this increased demand will put more unpredictable strain on the grid and it needs to be thoughtfully managed,” O’Shea said in an email. “Having visibility into the usage and efficiency of EV chargers, including peak demand patterns and monthly energy spend, is essential for long-term success.”

California once again sits atop the American Council for an Energy-Efficient Economy’s annual rankings of state energy efficiency efforts, scoring 47 out of a possible 50 points on the strength of its focus on equity and efforts to reduce emissions from the transportation, building, and industrial sectors.

California topped the 2020 rankings also, and ACEEE held off on a 2021 assessment due to Covid-19. The group said it altered the scorecard methodology this year to expand its focus on equitable energy efficiency policies.

Rounding out the top five spots this year were: Massachusetts, New York, Vermont and Maine. South Carolina lost the most ground, falling nine slots to 49th on the survey for allowing industries to opt out of efficiency programs and not incentivizing electrification. Wyoming again ranked last in ACEEE’s rankings, based on low energy savings targets and other policies.

The very top and bottom of ACEEE’s rankings look the same as they did in 2020, but that belies significant changes to the assessment’s methodology and shifts in state scores.

“A whopping 40 states lost points this year due to significant changes in the scoring methodology in several categories,” ACEEE said in its report. “Twenty-three states fell in the rankings due to factors including greater progress by other states and to scoring poorly on equity-related metrics across all policy areas.”

That movement “should be expected,” the group added, given the new metrics, including 12 equity metrics in the report representing 20% of total points available.

Among the metrics utility and public benefit program policy makes up 30% of the total points available on ACEEE’s scorecard, transportation policies account for 26%, and building energy efficiency policies for 24%.

“Leading states are shifting their efficiency efforts to focus on decarbonization and reducing energy burdens for the most vulnerable residents, setting an example for other states,” Sagarika Subramanian, senior research analyst at ACEEE and lead author of the report, said in a statement.

ACEEE’s assessment found “significant room for improvement,” given that 34 states earned less than half the available points related to equity policies. New equity metrics include: an examination of state efforts to strengthen community engagement, improve tracking of energy-equity-related data, and ensure equitable distribution of clean energy benefits.

Consumer advocates say the electric power sector is not taking sufficient action to address inherent inequities. Low-income customers have fallen behind on home energy bills to the tune of more than $16 billion as of August, and experts expect the issue will worsen this winter.

A broad range of energy efficiency policies and new rate structures are needed to address inequity in the power system, they say.

Maine was the most improved in ACEEE’s rankings, rising 11 spots to fifth based on new laws to incentivize electrification and decarbonization for affordable housing. Maine also continues to invest in weatherization and heat pump incentive programs, according to the report.

“South Carolina lost points for allowing industrial, manufacturing, and retail commercial customers to opt out of energy efficiency programs and for restricting energy efficiency funds from incentivizing beneficial electrification,” ACEEE said.

“In general, we see a few trends among states losing ground,” ACEEE said in its scorecard. “First, many of those falling behind are not increasing their energy savings annually and are therefore being outpaced as other states ramp up programs to meet higher savings targets.”

States losing ground also “typically have not fully implemented changes to the utility business model that encourage utilities to take full advantage of energy efficiency as a resource,” ACEEE said.

States near the bottom of the rankings “have not made much progress toward incorporating equity in state government planning and processes through dedicated equity task forces or toward setting energy burden reduction targets; they are also failing to dedicate resources toward healthy, affordable, and decarbonized housing,” the group concluded.

California maintained its top slot through a variety of policies, according to the report, including adopting rules to ban the sale of new combustion engine vehicles, prioritizing equitable decarbonization of buildings, and the development of tools to identify and prioritize investments in communities with disproportionate pollution.

About 27.5% of U.S. households qualify to participate in low-income energy efficiency programs, yet they benefit from just 13% of electric and gas utility efficiency spending, according to a report published Nov. 18 by the American Council for an Energy-Efficient Economy.

Despite the disparity, ACEEE says utility spending on income-qualified customers is on the rise. The report evaluates data from 75 utilities and shows, after accounting for inflation, that electric utility spending on low-income efficiency programs grew 8% from 2015 to 2019, to an average of $9.6 million. Average gas utility spending grew to $14.4 million annually from $7.6 million.

“Things are definitely moving in a positive direction,” said Steven Nadel, ACEEE executive director and coauthor of the report. “Yes, it's improving, but there's a lot of work to do.”

ACEEE's report calls for efficiency programs to reach all eligible low-income households with comprehensive energy upgrades over the next 20 years.

“Utilities and Public Service Commissions in some combination need to commit to spending more of their budget [on low-income efficiency] — or more total, as opposed to taking it away from someone else,” Nadel said.

One challenge is that the types of investments required to improve low-income homes can be expensive. “The houses are often substandard,” Nadel said. “There's often repair worked needed before you can install the insulation.”

About one in six American families are behind on their utility bills and in total owe more $16 billion as of August, according to the National Energy Assistance Directors Association. The figure has roughly doubled since the beginning of the Covid-19 pandemic, according to the group. 

Energy justice advocates say the global pandemic has played a major role in getting utilities and regulators to focus more on energy equity and the electricity affordability crisis. The data in ACEEE’s report looks through 2019, but Nadel said he expects the trend in increased low-income efficiency spending will continue.

ACEEE is gathering data for a follow-up assessment of low-income efficiency spending, said Nadel, and expects to release its next report in the second half of 2023.

Engineering consulting firm Arup is aiming to increase its capacity to help civil engineers streamline project management and optimize energy efficiency as they plan smart cities.

The company recently announced a partnership to build products with Matidor.com, a startup that specializes in map-based project management software. The partners described Matidor’s platform in a news release as “a one-stop-shop experience for civil engineers to plan, track and report on their clean energy and sustainability projects.” The goal is to help engineers develop plans with the best possible environmental impact.

Matidor founders Sean Huang and Vincent Lam said they founded the Vancouver-based company after realizing that in urban planning, engineers were using numerous mapping systems and spreadsheets on platforms that could not communicate with one another.

Matidor, backed by technology startup accelerator Y Combinator, has participated in smart city technology competitions, Huang said, including through Innovate Cities. “We basically use these channels to [build] potential working relationships with cities or municipalities that are looking for a geospatial platform,” Huang said. “Based on early discussions, we definitely saw a need there.”

Huang said that sustainable planning factors into not just individual designs, but also whole city-planning use cases such as pedestrian mapping.

Some Arup teams have adopted Matidor’s product for client projects, and the firm hopes to extend its reach. 

“Matidor had identified a gap in our industry and had the experience in [geographic information system mapping] and business development to bring it to market. After looking at other options available, our energy planning team felt the match was right,” said Rebecca Birmingham, Americas ventures manager at Arup, in an email.

Arup hopes that “clients, municipalities, campuses, and other firms that serve energy transition projects will adopt [it] in their project management work,” Birmingham said.

In addition to working with Arup, Matidor has worked with GIS mapping software giant Esri and has been “pretty active” in looking to collaborate with additional organizations, Lam said.

Upcoming Matidor product versions will seek to implement more 3D layering and leverage AI to be more like a digital twin, Lam added. Other possible use cases could include monitoring fugitive emissions.

Huang said it’s too early to describe the nature of its customer base, but he predicts it eventually will be skewed more heavily toward the private sector, still with about 40% government users. Existing city users include Springfield, Massachusetts, and Austin, Texas, on applications related to civil engineering as well as parks and recreation, the company said.