Efficiency and renewables: the dream team for a clean energy future

(Steven Nadel, Executive Director ACEEE)

With the promising trend of plunging prices for renewable energy, there may be a temptation to wonder whether energy efficiency is still cost effective. The answer is a very affirmative “yes.”  As companies, cities, and states work to keep energy costs down and meet ambitious greenhouse gas emission reduction goals, the choice should not be energy efficiency versus renewable energy. To meet these goals, we need to maximize both resources.

Energy efficiency remains generally less expensive than renewable energy, so even if renewables are plentiful, using efficiency to reduce electrical loads can still save money. While there have been a few bids of 2-3 cents per kWh for utility-scale renewable power, they include federal renewable energy subsidies that will soon end and do not reflect all of the costs of a renewable energy grid. Yes, renewable prices are coming down, but a hefty dose of efficiency is still needed to minimize both long-term costs and emissions. And incorporating efficiency also brings many other benefits including improved comfort, health, and worker productivity, reduced energy burdens, new jobs, expanded economic development, and increased grid resilience.

The cost of efficiency, home solar, and centralized renewables

Comparisons between energy efficiency and renewable energy are very different at the customer and utility levels. Work by ACEEE and LBL has found that energy efficiency typically costs an electric utility (or other program administrator) an average of about 3 cents per kWh saved over the lifetime of the efficiency measure (while this is the average, portfolio costs vary among program administrators, in the range of about 1.5-5 cents per kWh, according to the ACEEE study linked above). This amount can be compared to the cost to generate power (e.g., from fossil fuels or renewables) and bring it to a home or business. Efficiency’s cost has been surprisingly level in recent years, as shown in the figure below, even with continuing increases in savings…

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