Amid soaring U.S. electricity use, new analysis from the American Council for an Energy-Efficient Economy (ACEEE) finds that the fastest and cheapest way to alleviate rapid electric load growth is through expanding investment in energy efficiency and demand flexibility. Even as families are already struggling with energy affordability, utility regulators are being asked to approve new gas power plants, putting utility customers on the hook for expensive projects that may not be needed.
Read the Report Utility energy efficiency programs—which provide incentives for households and businesses to make upgrades like improving insulation or heating and cooling systems—save energy for a median cost of only $21 per megawatt-hour, the report found. That’s less than half the cost of generating electricity with even the least expensive new gas-fired power plants, which typically range from $45 to $108 per megawatt-hour. The report found that by 2040, energy efficiency improvements have the aggregate national potential to reduce electricity demand by about 70 gigawatts.
Making energy use flexible is also a critical way to save money and reduce peak demand. Over the next decade, deploying load flexibility measures—like shifting EV charging or most water heating to off-peak times—could reduce peak demand by 60 to 200 gigawatts, an amount up to double the most aggressive projections of total U.S. data center capacity by 2030, according to studies cited in the report.
Both energy efficiency and demand flexibility programs can be scaled up within months when they receive strong policy and financial support, according to the report. In contrast, new gas plants and grid upgrades currently take five years or more because of permitting, equipment backlogs, and interconnection delays.
“Our power system needs to meet rapidly growing electric demand while ensuring reliability and affordability. The first-line approach should be tapping into our massive reserve of energy efficiency and load flexibility, not spending billions on new power plants,” said Mike Specian, utility research manager at ACEEE and lead author of the report. “Demand-side measures are faster and cheaper to deploy today than new generation. They can be targeted to specific locations to defer or avoid the need to build new infrastructure, saving families and businesses money in the process.”
The report contains a set of recommendations for how state legislators, utilities, regulators, and large load customers can best utilize energy efficiency and load flexibility to meet our energy needs. These recommendations include:
- Establishing pathways for large load customers to benefit from bringing their own demand-side management capacity to their grid regions through channels like third-party aggregators, demand-side environmental attribute certificates, and utility energy efficiency programs.
- Requiring utilities to consider both supply- and demand-side resources in an integrated fashion before approving new investments to meet load growth.
- Utilizing proven solutions like introducing or strengthening state energy efficiency resource standards, establishing decoupling to remove utilities’ disincentive for saving energy, rewarding utilities for demand side performance, and supporting robust utility demand-side management programs, especially those that deliver savings during peak demand periods.
