What is the Cost of Saved Energy?

Strong policy decisions should be based on data. Energy efficiency policies are no different – examining existing energy efficiency programs and using their data can help policy-makers and program administrators continually improve their initiatives.

Recently, the Lawrence Berkeley National Laboratory (LBNL) released a study on the cost of saved energy. Their report, “The Program Administrator Cost of Saved Energy for Utility Customer-Funded Energy Efficiency Programs,” collected annual program data from 100 energy efficiency programs in 31 states. Their goal was to provide an analysis of the data that would assist program designers and implementers in crafting more cost-effective strategies for delivering energy savings. The report focused primarily on program administrator costs, which include staffing and administration, program design, implementation contractor costs, marketing and outreach, incentive or rebate costs, and evaluation activities.

LBNL also developed program typologies to classify, organize, and analyze annual program data that they collected. They divided programs into seven broad sectors: residential, commercial, industrial/agriculture, low income, and cross-cutting. Within those sectors programs were further broken down into categories based on implementation strategy and technology type.

The study found that the US average levelized cost of saved energy (CSE) is around $0.02 per kWh. Residential programs lead the pack with an average levelized CSE of $0.018 per kWh; this low CSE might be a result of the prevalence of residential lighting rebate programs. Commercial, industrial, and agricultural programs came in at $0.021 per kWh. The study also notes that larger programs typically have lower levelized CSE values, since there are economies of scale with administering a large-scale program. Additionally, the report notes regional differences in the CSE – the Midwest had the lowest CSE, and the Northeast had the highest. The low CSE for the Midwest is likely due to the fact that energy efficiency programs are a relatively recent trend in the area and that the low-hanging fruit of energy efficiency is still largely available. It is unfortunate that given the potential in the Midwest for energy efficiency programs, these initiatives are in trouble in Indiana and Ohio. The Northeast, however, has a longer history of energy efficiency programs and evaluation requirements, making mining for more comprehensive energy saving more costly. Even though more aggressive programs are costlier, energy efficiency still remains less expensive than energy generation. The potential for investment in energy efficiency is still viable across the USA.