Study: Saving Energy Really is Cheaper than Making it

March 26, 2014
A new federal study confirms that saving energy really is cheaper than buying it – even cheaper than we previously thought. Here is what LBNL found when it analyzed more than 4,000 utility program records

Energy efficiency is a bargain, even less expensive than previously thought, according to recent findings by the Lawrence Berkeley National Laboratory.

The report says that energy efficiency costs about 2 cents/kWh for utility programs. An earlier study by the American Council for an Energy Efficient-Economy pegged the cost to be about 29 percent higher.

The LBNL researchers looked at a broader swath of utility programs than did ACEEE, analyzing 4,184 records of  investor-owned utilities in 31 states from 2009 to 2011.

The 2 cents/kWh figure suggests that it is far cheaper to install energy efficiency measures than to buy electricity. Average US retail electricity prices are about 10.13 cents/kWh, according to the Energy Information Administration.

The study  found big differences in the cost of energy efficiency by region. Energy efficiency cost only 1.4 cents/kWh in the Midwest and 3.3 cents/kWh in the Northeast. The difference may lie in the maturity and sophistication of the efforts. Massachusetts and Vermont, for example, have pursued energy efficiency for many years. So they have  moved beyond the low-hanging fruit, such as simple lighting retrofits, and are tackling deeper and more costly energy problems in buildings.

The study also found that household energy efficiency programs are less expensive on average than those for businesses. Low-income programs cost the most (7.7 cents/kWh), LBNL said. Lighting accounted for about 40 percent of the energy savings achieved in homes.

LBNL urged states to do a better job reporting energy efficiency data. (Less than 45 percent of the utilities reported lifetime savings.) This would help policymakers see how energy efficiency stacks up against generation and help grid operators understand how to integrate efficiency into wholesale markets. In addition, better data will help grid operators tease out the impact of energy efficiency on demand, as they try to determine the need (or not) for more generation and transmission.

“One objective is to develop better load forecasts in order to inform transmission planning, market development and operations. A second objective is to gain visibility into the future for wholesale energy and capacity markets. More rigorous and consistent reporting can help energy markets count and confidently value energy efficiency resources,” LBNL said. “Finally, all stakeholders that are engaged in any aspect of the efficiency effort share an interest in making energy-efficiency portfolios as cost effective as possible; consistent and more standardized reporting of efficiency program data and metrics are a prerequisite for this to occur.”

The full report, “The Program Administrator Cost of Saved Energy for Utility Customer Funded Energy Efficiency Programs,”is here.

About the Author

Elisa Wood | Editor-in-Chief

Elisa Wood is an award-winning writer and editor who specializes in the energy industry. She is chief editor and co-founder of Microgrid Knowledge and serves as co-host of the publication’s popular conference series. She also co-founded, where she continues to lead a team of energy writers who produce content for energy companies and advocacy organizations.

She has been writing about energy for more than two decades and is published widely. Her work can be found in prominent energy business journals as well as mainstream publications. She has been quoted by NPR, the Wall Street Journal and other notable media outlets.

“For an especially readable voice in the industry, the most consistent interpreter across these years has been the energy journalist Elisa Wood, whose Microgrid Knowledge (and conference) has aggregated more stories better than any other feed of its time,” wrote Malcolm McCullough, in the book, Downtime on the Microgrid, published by MIT Press in 2020.

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