SPENDING SPREE: A new study predicts increases in spending on energy efficiency, which have a bigger impact on states with fewer efficiency policies.
CREDIT: ISTOCKPHOTO/TIMHUGHES

The next 12 years will see "a dramatic and sustained increase" in utility spending on energy efficiency, according to a new study by researchers at Lawrence Berkeley National Laboratory.

Efficiency spending financed by utility ratepayers could grow from the $3.1 billion paid out in 2008 to between $5.4 billion and $12.4 billion per year, with a medium case projection of $7.5 billion, the report says.

Forecasts across low-, medium- and high-growth scenarios show several populous states -- Illinois, Maryland, Michigan, North Carolina, Ohio and Pennsylvania -- moving into leadership roles on efficiency despite having been "minor players" in the past.

Those states, which together made up less than 4 percent of energy efficiency program spending in 2008, could account for as much as 60 percent of total U.S. spending over the years 2008 through 2020, the researchers found, based on assessments of energy policies that have recently been enacted or are in the pipeline.

Three states where efficiency policies have traditionally been strong -- New Jersey, New York and Massachusetts -- are likely to see significant funding boosts, as well, the researchers said, while some projections show traditional leaders California, Connecticut, Minnesota and Wisconsin also increasing their investments.

States use a wide range of ratepayer-based strategies for efficiency financing, the researchers noted. Some mandate that utilities reach certain energy savings milestones as a percentage of total electricity sales, while others require that they implement some or all of the efficiency strategies that would be cost-effective.

Today, California is the far-and-away national leader in ratepayer-funded efficiency spending, accounting for about a third of the nationwide total.

That would change under all three scenarios, with spending levels becoming greater even across states as California's ratepayer funding slows in favor of other funding mechanisms, even as other states ramp up.

The projections amount to cumulative savings over the 2010 to 2020 period of between 4.7 percent and 8.6 percent, compared with a base case forecast by the Energy Information Administration.

State programs could swamp national mandates

The researchers noted that given the strong increases projected at the state level, federal efficiency mandates could be a minor factor going forward if they do not set aggressive goals.

A federal energy efficiency resource standard (EERS) or energy efficiency portfolio standard (EEPS) requiring cumulative savings of 5 percent of retail sales by 2020 "would result in little or no incremental increase in energy efficiency savings" over what would likely occur without it, the study says.

The House-passed energy and climate measure would require large utilities to supply 15 percent of their power sales from qualified renewable sources of electricity by 2020, with 5 percent energy savings through efficiency measures. The energy savings figure could alternately grow to 8 percent if state governors opt to limit their renewable energy use.

The committee-passed Senate measure would require utilities nationwide to provide 15 percent of their power from renewable sources like wind and solar power by 2021, while allowing up to a quarter of the requirement to be met with energy-saving measures instead.