ENERGY EFFICIENCY RETROFITS.....IN NUMBERS WE TRUST

There has been much ado about the recent paper published by E2e; Do Energy Efficiency Investments Deliver? Evidence from the Weatherization Assistance Program, the final word on which is yet to be written.

Decades of experience and verification prove energy efficiency programs deliver huge benefits to consumers and the environment - and these benefits far exceed the costs. But numbers can be distorted and therein is the bane of Energy efficiency projects.

E2e has some heavy duty sponsors; Berkeley University of California, MIT, University of Chicago, in the words of the sponsor the findings of their study cannot be extrapolated;

"This is one study in one state looking at one subpopulation and one type of measure," study co-author Meredith Fowlie, an associate professor of economics at the University of California, Berkeley, told the Washington Post. "I would not feel comfortable generalizing from our study in Michigan."

But for now the damage is done with headlines appearing in the media:

"Energy efficiency upgrades cost double the projected benefits'
"Do Energy Efficiency Investments Deliver?"

As energy efficiency practitioners', we don't need these unwelcome headlines. We live by providing ROI numbers everyday, and as any sane excel modeler will bear out that 'garbage-in' leads to 'garbage-out', and extrapolating trend can be a dangerous thing.

For a reality check; Lawrence Berkeley National Laboratory maintains a database of the measured and verified costs and savings from energy efficiency programs across the United States. Their most recent report found that the 2,100 program years they examined had a total cost of saved electricity, weighted by the energy saved, of 4.6 cents per kilowatt-hour (kWh) across all sectors. This includes both program costs and participant costs related to the energy efficiency measure. This is about half the cost of building a dirty coal power plant.

The LBL report shows that residential efficiency on average costs 3.3 cents per kWh, and commercial and industrial efficiency costs 5.5 cents per kWh. Not surprisingly, low-income programs cost more (14.2 cents per kWh) and have a smaller customer contribution due to the participants' inability to pay. Given that these low-income programs provide more benefits than just energy savings, and that the average rate U.S. utilities charge residential customers is about 13 cents per kilowatt hour, this is still a good deal.

Is efficiency a cost-effective way to mitigate carbon?

Numerous studies have calculated that the public investment in energy efficiency is more cost-effective than procuring new power sources. Even if real costs are higher than previously thought, efficiency provides a critical and immediate opportunity for large-scale emissions reductions that are cost-effective compared to other options.

As practitioners it is very important we use the right set of numbers in making our assumptions and generating positive ROI for our customers.

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Tags: E2e, Efficiency, Energy, ROi

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Comment by Bijou Lulla on July 17, 2015 at 8:55am

Nate, you have a point, consumers usually don't look at ROI as a measure, they view 'comfort' as a metric.

But again, how many customers are proactive in doing 'energy-efficiency' upgrades, customers are mainly reactive i.e. when their comfort levels are affected (too hot/cold being common grounds). 

Any incentive based program will have be governed by a set of financial metrics as we are dispensing tax dollars here. The basis of these metrics are always debatable. 

This also boils down to the individual level; are we merely fixing or upgrading what is wrong or are we delivering financial value to the customer? 

Comment by Nate Adams on July 16, 2015 at 7:47am

Who are our clients? Utilities or consumers? If utilities are footing most of the bill, it seems difficult to show ROI in energy savings. If consumers are paying for the lion's share of upgrades, for reasons other than efficiency, and their goals are being met, does their ROI matter? We've found it doesn't.

Yet big carbon reductions can happen, and depending how utilities structure incentives, they could show serious ROI if they only foot a few percent of the upgrade cost.

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