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Is Energy Efficiency Finally Reducing the Use of Electricity?

A new report from energy efficiency advocates suggests that those practices might be behind the drop in U.S. demand for electricity


For most of the past century, electricity sales and economic activity have fluctuated in tandem. This was certainly true in 2008, when an economic recession saw sales dip sharply after reaching a historic high the year before.

Since then, however, the trajectories of economics and electricity appear to have diverged. While the U.S. gross domestic product has crawled steadily back to pre-recession levels, electricity sales experienced a brief lift only to fall again over the past two years.

In 2012, for example, sales were 1.9 percent below their 2007 peak, according to a recent white paper by the American Council for an Energy-Efficient Economy (ACEEE), and sales over the first 10 months of 2013 are even lower than in the corresponding period in 2012.

The factors driving electricity consumption are complex, and there's little doubt that lingering economic doldrums, particularly in the manufacturing sector, continue to play a role. But there's also reason to believe that policies and programs aimed at increased energy efficiency are playing a role -- perhaps even a strong role, according to the paper's authors.

"We were hoping to see efficiency having an effect when we conducted our analysis," said Steven Nadel, executive director of ACEEE and lead author of the report. "We were excited by just how clear that effect seems to be."

A push from all sides
That energy efficiency should be gaining traction now might seem, at first, a little surprising, as the most basic market incentive for efficiency -- a high cost of energy -- is missing thanks to an ongoing glut of natural gas. Also surprising is that utilities appear to be leading the push, when the traditional utility business model pegs profits to bulk sales of electrons.

But there are other driving forces at work, said Nadel.

"For one thing, you've got more than 20 states offering their utilities incentives to hit energy efficiency targets," he said. These are generally financial incentives, tailored to align the interests of states' residents with the interests of a utility's shareholders, he said.

Other states are implementing policies to decouple utilities' revenue streams from sales, rewarding them instead for supplying electricity reliably while adding more renewables and efficiency measures to their portfolios.

Meanwhile, federal laws like the Energy Independence and Security Act of 2007 have raised the bar for everything from tighter building codes to more efficient light bulbs, creating standards that can endure even if markets swing or states roll back their climate commitments.

Even outside of policy, it's likely that, in an era of financial and market uncertainty, power purchasers have identified energy efficiency as low-hanging fruit, Nadel said.

"Many see it as a least-cost option," he said. "Compared to building a new power plant, efficiency is fast to ramp up, and given the current uncertainty over regulations and the economy, a number of utilities have shown an interest in it as the kind of small, incremental step they can take safely."

While efficiency doesn't generate or replace power, it provides other services that can cut an operator's costs -- shaving down peak power loads and eliminating the need for backup plants, for example.

The authors caution that their results should be seen as indicative, rather than definitive, and note that other factors, including warmer winters over the 2011 and 2012 period, likely also played a role.

Reprinted from Climatewire with permission from Environment & Energy Publishing, LLC. www.eenews.net, 202-628-6500

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