Energy Efficiency

Study examines average cost of saving electricity for public power utilities

A study from the Lawrence Berkeley National Laboratory finds that energy efficiency programs for customers of public power utilities saved electricity at an average cost of 2.4 cents per kilowatt-hour (kWh) from 2012 to 2017.

The study, “Cost of Saving Electricity Through Efficiency Programs Funded by Customers of Publicly Owned Utilities: 2012-2017,” also highlights several potential future areas of research that could advance understanding of the role of electricity efficiency to achieve the objectives of publicly-owned utilities including minimizing both system and customer costs.

Alex Hofmann, senior director for energy and environmental services at the American Public Power Association, was one of the reviewers for the study, and will participate in a webinar related to the study on Jan. 15.

Report focuses on the program administrator cost of saving electricity

The report focuses on the program administrator cost of saving electricity (PA CSE). Expressed in dollars per kilowatt-hour of electricity savings, the PA CSE measures costs from the perspective of utilities and other program administrators. 

Utilities rely on this metric to compare relative costs of various types of efficiency programs. They also use the metric to compare efficiency options to other demand and supply choices for serving electricity needs as they plan investments to meet reliability and other requirements at a reasonable cost, and then procure resources consistent with that plan. 

Berkeley Lab collects and analyzes efficiency program data on a national scale to help utilities and state, local, and regional decision makers assess cost performance across geographic regions, states, and market sectors and for specific types of programs. 

In previous studies, the lab quantified the levelized PA CSE for electricity (and the cost of saving natural gas) for the period 2009 to 2011, the PA CSE and total cost of saving electricity—including participant costs—from 2009 to 2013, trends in the PA CSE during this same period and multiple performance metrics and trends covering 41 states from 2009 to 2015. All these prior analyses focused on programs funded by customers of investor-owned utilities (IOUs). 

Study marks first time programs funded by public power utilities are examined

For this study, the lab turned for the first time to programs funded by customers of POUs. In 2017 POUs served about 15 percent of U.S. electricity customers and 16 percent of electric load served by utilities. 

POU program administrators reported annual efficiency program savings in 2017 that, using a simple average, represent 0.7 percent of POU reported sales.  However, POU program administrators, on a weighted average basis, reported annual savings in 2017 amounting to 1 percent of POU reported retail sales, reflecting somewhat higher savings acquisition among the largest POU program administrators, the study noted.

“Expanding our data collection and analysis to POUs provides insight into ways their efficiency initiatives vary among market sectors and geographic regions, as well as factors that differentiate the cost performance of these programs from programs funded by IOU customers—and where commonalities exist,” the study’s authors noted.

Both POUs and IOUs offer largely similar kinds of efficiency programs.  However, POUs have a   fundamentally different economic structure, and state public utility commissions generally do not oversee their programs.  Other differences include some of the drivers for POU programs, the size and diversity of their markets, the scale at which they can operate, reporting requirements, and financing options for energy efficiency activities.

All of these factors may affect program ambitions, opportunities, and costs. POUs also may have more control over other sources of end-use electricity savings such as building energy code adoption, inspection, and enforcement; municipal buildings and other public structures; and street lighting, the study said.

Report objectives and data collection overview are expansive

The study’s authors said that the study is by far the most expansive effort to date to quantify the levelized cost of electricity savings for efficiency programs funded by POU utility customers, noting it assesses the cost of saving electricity for efficiency programs funded by customers of POUs, as reported by the POUs, and the associated data.

The report addresses the PA CSE at the market sector level -- commercial and industrial (C&I), residential, and low income -- and answers several fundamental questions:

  • What is the cost of saving electricity for POUs for recent years, nationwide and by region? 
  • How is the cost changing over time? 
  • What is the current state of POU program reporting and data?

Researchers at Berkeley Lab collected data from 111 efficiency program administrators that operate programs funded by customers of 219 POUs in 14 states.  The collection includes data in all four U.S. Census regions. 

Most POUs covered by the data are municipal utilities, but many— including several of the largest POUs in the collection—are public utility districts, irrigation districts, and other political subdivisions whose territories often extend beyond a single municipality.

Berkeley Lab obtained POU program data through multiple sources including utilities responding to the American Public Power Association’s request to provide data.

Berkeley Lab considered several factors in prioritizing collection of program data including, among other things:

  • Geographic diversity; 
  • Likelihood of acquiring complete data (savings and full program spending) and, secondarily, reporting of program- or sector-level measure lifetimes to increase the sample from which the number of years for levelizing costs could be drawn; and  
  • Data for large POUs with diverse markets, mostly retail sales and generally robust reporting, in order to use these utilities’ large volumes of savings and related costs in our analyses

Findings

Based on data reported by 111 POU efficiency program administrators in 14 states, covering 219 POUs, the study estimates the savings-weighted average PA CSE at $0.024/kWh (2017$) for the period 2012–2017.  The C&I sector provides the largest and least-cost supply of POU savings. 

“This finding contrasts with our studies of IOU customer-funded programs that have consistently identified the residential sector as the lowest-cost source of efficiency.  Reasons for the divergence may include differences in savings weighted average measure lifetime for the residential sector and embedding some low-income efficiency activities within the residential sector,” the study’s authors wrote.

The PA CSE varies by region, with a wide difference between the Midwest average of $0.014/kWh and Northeast average of $0.041/kWh. Average values in the South and West are on par with one another.  Because the South and West account for 88 percent of savings in the dataset, these regions largely define the overall savings-weighted average PA CSE for all 111 POU program administrators in the sample. 

Also, based on 79 POU program administrators with continuous portfolio-level data across the study period, the 2012–2017 trend in the average PA CSE was flat, while the relative magnitude of savings increased (1.1 percent of retail sales in 2012 to 1.3 percent in 2017).  “These findings suggest that POU program administrators, on average, have managed to reach moderately high savings levels while containing costs.” 

Future research areas

The study highlights several potential future areas of research that could advance understanding of the role of electricity efficiency to achieve POU objectives, including minimizing both system and customer costs.

Those potential future areas of research include, among others:

  • Ways to increase POUs’ use of the energy efficiency program reporting tool that Berkeley Lab developed with the Association;
  • Cost performance for large versus small POU program administrators, for a range of program types, to assess the potential for scaling programs and savings cost-effectively;
  • Energy efficiency program models for smaller POUs; and
  • Detailed characterization of residential sector programs to improve understanding of costs attributable to programs targeting low-income households 

Webinar on Jan. 15

A webinar related to the study will be held on Jan. 15. Speakers will include Alex Hofmann, senior director for energy and environmental services at the American Public Power Association and Berkeley Lab report authors Lisa Schwartz, Steve Schiller, Greg Leventis, and Sean Murphy of the Berkeley Lab.

Details on how to register for the webinar are available here.

The report is available for download here.