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Berkeley Lab Predicts More Energy Efficiency Incentives in South, Midwest

January 22, 2013 By Linda Hardesty

Spending on energy efficiency programs funded by electric and natural gas utility customers will double by 2025 to about $9.5 billion per year, according to projections published by researchers at Berkeley Lab.

These funds, which come from a charge on utility bills, historically constitute the nation’s largest source of spending on programs to foster the adoption of more efficient products and buildings. According to the Berkeley Lab report, The Future of Utility Customer-Funded Energy Efficiency Programs in the United States: Projected Spending and Savings to 2025, energy efficiency programs funded by utility customers are projected to continue expanding beyond the traditional bastions of energy efficiency in the Northeast and West. By 2025, states in the Midwest and South could account for 49 percent of total US spending on customer-funded energy efficiency programs, up from 27 percent in 2010. By 2025, only a handful of states would not have significant customer-funded efficiency programs.

The projected growth in program spending is driven by policies in a number of states requiring that utilities obtain all cost-effective energy efficiency savings. Another driver is energy efficiency resource standards, which require electric utilities to meet minimum energy savings goals each year. In addition, some utilities are turning to energy efficiency as part of their strategy for reliable delivery of electricity as older coal-fired generators are retired.

The Berkeley Lab analysis was based on a detailed review of all relevant state policies and legislation, regulatory filings and decisions, and utility integrated resource and demand-side management plans. The researchers refined the scenarios through extensive interviews with regional and national energy efficiency experts, efficiency program administrators, regulatory staff, and other industry actors.

Total US spending on electric and gas efficiency programs (excluding load management programs) is projected to grow in all scenarios examined, ranging from $6.5 billion to $15.6 billion in 2025, with a mid-range projection of $9.5 billion under a scenario in which states are fairly successful in ramping up their programs to meet state energy-savings policies now on the books. This compares to total spending of $4.8 billion in 2010.

Uncertainties include concerns about utility rate impacts from energy efficiency programs, the timing and pace of the economic recovery, the long-term trend in natural gas prices, and the impact of changes to federal and state minimum efficiency standards for appliances and building codes.

If states remain on their current policy paths, annual incremental savings from electric energy efficiency programs could be expected to reach about 0.8 percent of retail electricity sales in 2025, compared to about 0.5 percent of retail electricity sales in 2010. Significantly, electricity savings at that level in 2025 could offset the majority of load growth forecasted through that year in the Energy Information Administration (EIA)’s most recent reference case forecast for electricity usage. This assumes that the EIA forecast correctly estimates savings from future customer-funded energy efficiency programs.



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