National Study Shows Energy Efficiency and Renewable Energy Can Provide Fast Relief From High Natural Gas Prices

Washington, D.C. — New investments in energy efficiency and renewable energy generation would lower natural gas prices rapidly and help retain manufacturing jobs, a national study prepared by the American Council for an Energy-Efficient Economy (ACEEE) shows. The study, Impacts of Energy Efficiency and Renewable Energy on Natural Gas Markets, was commissioned by the Energy Foundation to determine whether increased use of efficiency and renewables would reduce demand for and prices of natural gas. It parallels the National Petroleum Council (NPC)'s latest report on natural gas (to be released September 25), using the same methodology but applying a recommended set of efficiency and renewables policies.

Bill Prindle, Deputy Director of ACEEE stated, "This study defines a concrete path to reducing wholesale natural gas prices 10-20 percent in the next 5 years through specific policy actions. We hope that the NPC report will recommend a similar path. It won't be enough to express general support for efficiency and renewables: the specific policy details and funding levels make all the difference."

The ACEEE study identifies national policies that would help lower natural gas prices, including: efficiency targets for utilities, appliance efficiency standards, building energy codes, increased federal deployment program funding, renewable energy portfolio standards, and tax credits for efficient and renewable energy technologies. "Taken on a national scale these actions would save Americans over $75 billion on gas bills alone in the next five years," explained David Wooley, Vice President of the Energy Foundation. "This translates into an average household savings of $96 per year on natural gas bills. Additional savings would also result from lower electricity bills."

"Contrary to what many are saying, there is something we can do about natural gas prices right now. Increased efficiency and renewable energy can reduce natural gas prices quickly and affordably," explained Dr. Neal Elliott, Industry Program Director at ACEEE and co-author of the study. Most analyses of the gas situation look only at supply solutions that will take five or more years to make an impact, whereas the ACEEE study focuses on results in the critical next five years.

Reducing Demand for Electricity is Key to Saving Natural Gas

Energy efficiency and distributed renewable generation lower peak demand on the electric transmission system and reduce the risk of system failures. Increased use of these common-sense solutions makes our electric supply more secure without increasing our dependence on fossil fuel imports.

An increasing share of the electricity generated in the U.S., particularly in the Northeast, South, and on the West Coast, comes from natural gas-fired power plants. The analysis shows that natural gas expenditures by electric power generators would decrease by $6.2 billion in 2004 and by as much as $10.4 billion by 2008 with adoption of energy efficiency and renewable energy policies. This reduction would likely reduce electricity rates as well.

Energy Efficiency Can Save U.S. Manufacturing Jobs

"Along with a robust and diverse supply of energy, increased efficiency is clearly a critically important component of our response to the natural gas crisis," said Peter Molinaro, Dow's Vice President of Government Affairs. "Affordable and available natural gas is critical to the health of American industry, our economy, and the environment. Leaders in the public and private sector need to do everything they can to spur investment in more efficient insulation, appliances, motors, heating and cooling systems, lighting, and clean on-site generation."

ACEEE's Elliott noted, "Energy efficiency and renewable energy investments help employment in the manufacturing sector because they reduce natural gas prices and help preserve U.S.-based jobs that rely on natural gas as a manufacturing feedstock." Natural gas is used as a fuel and raw material for a wide range of products including fertilizer, plastics, chemicals, and steel.

State Policy Action Can Save Consumers Billions

In addition to providing a national overview, ACEEE's report takes a close look at state and regional efforts. State-specific data released for the first time today shows that state and regional action can help solve local energy problems and save consumers money:

• In California, Oregon and Washington, a package of efficiency and renewables policies would reduce consumer gas bills in California by $5.6 billion between 2004 and 2008, and by about $1 billion in Oregon and Washington combined in the same time period.
• Southwestern and Rocky Mountain states would recognize large savings from energy efficiency (EE) and renewable energy (RE) policies on a national level. In Texas, consumers could save $10.2 billion from 2004 to 2008 from EE and RE strategies adopted at the national level. Consumers in Arizona, New Mexico, Colorado, Utah and Nevada would save almost $2.9 billion. Nevada has adopted an RPS and Colorado is considering one; proposals are in play to expand renewables and energy efficiency in New Mexico, Arizona and Utah.
• If implemented in the New England and Mid-Atlantic states, EE and RE policies would reduce wholesale natural gas prices in the region by 11.9% in 2008, saving consumers in the region $7.2 billion in the 2004-2008 period. Annual residential natural gas bills would decline by about $60 per customer. State officials in Maryland, Pennsylvania and New Jersey are considering whether to adopt appliance efficiency standards and new or expanded RPS policies.
• In the six New England states, EE and RE policies would save customers over $1.4 billion in the five year period studied. The savings help validate the RPS recently adopted by the Connecticut legislature, revised Massachusetts RPS regulations, and increased funding for efficiency and renewables through the system benefit funds collected through utility bill surcharges.
• In New York the RPS proposed by Governor Pataki would reduce gas spent on electricity generation by $384.7 million between 2005 and 2008.
• In the Midwest, a national set of policies on renewables and energy efficiency would reduce consumer costs by $21.6 billion in the period from 2004-2008. Annual residential natural gas bills would decline by $90 to $140 per customer. Many Midwestern residential and commercial customers rely on natural gas for heating and cooling. These results support proposals for an RPS in Illinois and Kansas, Minnesota's recent expansion of renewable energy requirements, and appliance efficiency standards proposed in Illinois. The results strongly suggest that states should adopt aggressive natural gas and electricity efficiency programs to encourage and cost-share adoption of more efficient gas and electric appliances and industrial gas uses.

A copy of the summary report can be downloaded at http://aceee.org/energy/EFnatgas-study.htm. The ACEEE Web site also includes the following supplementary material: a resource contact list, a summary of the study's results, and a technical white paper on the methodology.