2.5 Cents Per Kilowatt Hour: America's Cheapest, Cleanest Fuel 'Holds Steady'
by Stacy Feldman - Sep 30th, 2009
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It's not news that energy efficiency is cost-effective. But new numbers from the American Council for an Energy-Efficient Economy (ACEEE) quantify just how cheap the resource has become relative to other power generation types.
The figure today: two and a half cents per kilowatt-hour (kWh).
That's one-third or less the price of any new source of electricity, making efficiency the cheapest option available – conventional or renewable – and a no-brainer investment for big utilities.
ACEEE notes, for instance, that in 2008 coal cost between 7 and 14 cents per kWh; natural gas cost between 7 and 10 cents per kWh; and wind between 4 and 9 cents per kWh. In terms of new nuclear, some estimates put its price at 15 cents per kWh, or more.
The main point is straightforward: Conventional energy costs are climbing, and coming carbon regulation will kick those costs up even more. Not the case with energy efficiency. The price of saving a kilowatt has stayed steady or dropped over the last half decade, reinforcing why states and utilities are adding aggressive efficiency programs, and forcing this question: Why aren't the feds doing the same?
"Saving Energy Cost-Effectively: A National Review of the Cost of Energy Saved through Utility-Sector Energy Efficiency Programs" updates ACEEE's frequently cited research from 2004. The original data determined that the average cost of delivering energy efficiency programs in the U.S. was 3 cents per kWh.
The 2004 study reviewed the cost-effectiveness results from nine top states. The current, more in-depth version expands that to 14 states – California, Connecticut, Iowa, Massachusetts, Minnesota, Nevada, New Mexico, New Jersey, New York, Oregon, Rhode Island, Texas, Vermont and Wisconsin.
The conclusion is pretty much the same: Efficiency is the safest energy investment there is and the cheapest power source left. Expect more of the same for the foreseeable future:
"The U.S. Energy Information Administration (EIA) estimates that in 2020 new conventional power plants including coal and nuclear will cost about $0.10 per kWh, or four times higher than current energy efficiency program costs," the study finds.
The research findings should have implications in U.S. Senate deliberations on climate legislation and state-level decisions about new power, ACEEE says.
According to the group, the new numbers are the talk of the Hill. But whether they will have the desired impact is another story.
States are certainly moving forward – California the fastest. The climate-action leader just passed a three-year, $3.1 billion energy efficiency budget for the state's four biggest utilities. It's the largest commitment ever made by a state to energy efficiency.
But not all governors are marching in sync.
"While funding for energy efficiency has rebounded from the low point that it reached during industry restructuring [during the mid- to late 1990s], many states still lack well-funded comprehensive energy efficiency programs," writes ACEEE.
Most analysts agree the federal government could use its considerable power to steer all states toward greater efficiency. And the American Clean Energy and Energy Security Act (ACES), the nation's potential future climate law, has been seen as the best hope.
The bill passed the U.S. House in June. As it stands, its energy efficiency building and appliance codes would create 600,000 new jobs and avoid the need for 419 new coal plants by 2030, according to an August analysis by ACEEE.
Those potential gains are impressive. But adding a federal energy efficiency standard (EERS) would substantially increase them.
In fact, if the U.S. were prepared to require utilities to get 10 percent of new capacity from efficiency by 2020, over 1 million new jobs would be created and the need for 512 new coal plants averted through 2030.
Consulting firm McKinsey has run its own numbers on efficiency, and they're just as striking.
The U.S. could save $1.2 trillion in ten years by investing $520 billion in efficiency improvements, according to a July 2009 study. In a 2007 report, McKinsey found the nation could offset 85 percent of the projected incremental demand for electricity in 2030 with efficiency alone, "largely negating the need for the incremental coal-fired power plants."
Most agree a national EERS would help achieve these gains. Such a standard would cut global-warming pollution faster and cheaper than any other resource, eliminate the need for power plants, slash demand for new and costly transmission upgrades and even save consumers money.
But the policy has been all but ignored in the drive for a post-coal economy. The primary opponents are utility companies. The reason is simple: The profits of most are still tied to the amount of electricity sold.
There's still a possibility Congress could blaze a new trail on efficiency. Sens. John Kerry (D-Mass.) and Barbara Boxer (D-Calif.) just released their draft of the Senate's sibling to ACES, and the chamber will soon step into fierce debate over its provisions.
The U.S. Senate Committee on Energy and Natural Resources has jurisdiction over the efficiency measures. ACEEE Policy Director Suzanne Watson told SolveClimate that committee member Sen. Charles Schumer (D-N.Y.) is expected to introduce a 10 percent EERS amendment on the Senate floor as part of climate and energy legislation, once "health care is put to bed."
Mid-October is the likely time for this to happen.
"There is good support in several quarters for that. Senators are prepared to stand up for energy efficiency statements on the senate floor the week of October 12, much like what we have seen other senators do related to renewables," Watson said.
See also:
Climate Bill Effectively Zeros Renewable Energy Standard
Energy Efficiency: America’s Best Kept Climate-Fighting Secret
Waking Up to Energy Efficiency: What Washington Can Learn from the States
Report: Energy Efficiency Could Deliver 1 Million Green Jobs by 2030
Researchers to Coal-Addicted U.S. South: Take the Efficiency Plunge – Please!
California Tops List of Most Energy-Efficient States; Idaho Most Improved
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Return on Investment for Commercial Energy Efficiency
Dear Sirs,
I own an industrial supply company in Anchorage, Alaska and want to put together a presentation about the ROI on commercial energy efficiency. Please see below for more details.
Can you offer any suggestions on where I can find average efficiency losses from generation and distribution, when producing electricity from natural gas(#2)? Or put another way, how much cfm of gas would be saved for every kilowatt saved by the end users?
Thanks for any feedback,
Eric McCallum
Arctic Wire Rope and Supply
Comparing commercial energy efficiency to other forms of business investments
Goal: Collect data from four different Anchorage businesses that have done energy retrofits. Share capital costs, energy savings and compare the return to the stock market and real estate while looking at the risk profile of each. Present the findings to different business interests including the Anchorage Chamber of Commerce, BOMA (Building Owners and Managers Association), utility companies, state agencies and legislators responsible for creating a new commercial energy efficiency program.
Background: For some time I have wanted to look at CEE (commercial energy efficiency) from a purely business point of view and separate it from the baggage of green environmentalism.
This is not about “doing the right thing”, LEEDS certification, renewable energy or new building construction. This is about examining whether investing in easy, low hanging technology can give an existing building owner a better ROI with potentially lower risk than other types of investment. Remembering “How much does it cost?” is less important than “What is my return?”
One of the four businesses I will examine is my own, Arctic Wire Rope and Supply, Inc. Beginning in mid 2007 and treating it as a pilot project, we have reduced our total energy bill by 40% (electricity and natural gas heat). This is all fine and good having lowered our carbon footprint but was it a sound business investment? Are there other financial returns to my business and the state as well? This is what I would like to tease out of this data.
Information needed:
1-I contacted several local businesses that have made lighting changes. Getting them to share costs and utility expenses is a little challenging for a variety of reasons. I continue to pursue them and am looking for other companies who have done heating retrofits. I want to keep it local because it will have more impact. (Chugach Electric Assoc. and Enstar Natural Gas have both put their billing on line for the past 2-3 years so this data can easily be emailed to me.)
2-Because of losses along the way, what is the natural gas savings at the very front end of electricity generation per kilowatt saved at building site? 90% of our electrical generation comes from natural gas. We are running out of natural gas in the Anchorage bowl area (50% of state population) and this speaks to whether government has incentives to promote CEE. The state is looking at two new hydro generation options and how do these compare to the cost of generating new energy through CEE? Which is a better investment for them?
3-What is the average return on Anchorage real estate over the last three years and stock market in general?
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