Achievable Potential from Energy Efficiency and Demand Response Programs in the U.S.: 2010-2030
Electricity consumption in the U.S. residential, commercial, and industrial sectors has grown at an average rate of 1.7 percent per year from 1996 to 2006. The U.S. Energy Information Administration (EIA) in its 2008 Annual Energy Outlook Reference Case forecast (AEO 2008) projects that electrical consumption in the residential, commercial and industrial sectors will grow at an annual rate of 1.07 percent from 2008 to 2030, with consumption increasing by 26 percent, from 4,696 terawatt-hours (TWh) in that period. AEO 2008 is predicated on a relatively flat electricity price forecast in real dollars through 2030. The forecast accounts for the impacts of currently legislated building codes and appliance standards (including those in the Energy Independence and Security Act of 2007) as well as market-driven trends towards efficiency. It also assumes continued contributions of utility- and government-sponsored energy efficiency programs established prior to 2008. 1
Going forward, EPRI estimates that energy efficiency programs have the potential to realistically reduce this growth rate by 22 percent to 0.83 percent per year from 2008 to 2030. Under conditions ideally conducive to energy efficiency programs, this growth rate can be reduced by up to 36 percent to 0.68 percent per year. In 2030, this represents an achievable reduction in electrical consumption of between 236 billion and 382 billion kilowatt-hours (kWh) from the AEO 2008 forecast. This corresponds to a realistic achievable potential of 5 percent to a maximum achievable potential of 8 percent in 2030. 2
Summer peak demand in the U.S., aggregated from non-coincident regional peaks, is estimated as 801 GW in 2008, and is expected to increase to 1,117 GW by 2030, an increase of 39 percent. Summer peak demand is expected to grow at a faster annual rate than electricity use due primarily to the expected growth in the share of air conditioned homes and buildings.
EPRI estimates that the combination of demand response and energy efficiency programs has the potential to reduce non-coincident summer peak demand by 157 GW to 218 GW. This represents a range of achievable potential reduction in summer peak demand in 2030 of 14 percent to 20 percent. This can also be expressed as a reduction in the forecast growth rate in peak demand of 46 percent to 65 percent through 2030. Half the peak demand savings result from energy efficiency actions and the other half from activities specifically designed to reduce peak demand, referred to as demand response.
Peak demand in the U.S. has grown at an average rate of 2.1 percent per year from 1996 through 2006, and is projected by the EIA to grow at an annual rate of 1.5 percent from 2008 through 2030. The combination of energy efficiency and demand response programs has the potential to realistically reduce this growth rate to 0.83 percent per year. Under conditions ideally conducive to energy efficiency and demand response programs, this growth rate can be reduced to as low as 0.53 percent per year.
Comparing estimates with recent program results
Our analysis of energy efficiency potential is based on the turnover of currently installed energy-consuming devices (as well new construction) to efficiency technologies commercially available today, and since most devices have a useful life of less than 15 years, it is instructive to examine the results for the year 2020, by which time the existing stock of most energy-consuming devices has turned over. Over the 12-year period of 2008 to 2020, the achievable potential of energy efficiency programs identified in this study equates to an annual incremental reduction in electricity consumption of 0.40 percent to 0.85 percent per year.
How do these estimates compare with recent program results for the nation? A recent study released by the ACEEE has determined that energy efficiency programs operated in 2006 reduced electricity consumption in the U.S. by an average of 0.24 percent in 2006. This finding underscores that, for the nation as a whole, current energy efficiency program efforts will need to expand by 40 percent to capture the moderate case (i.e., realistic achievable potential) for savings identified in this study. By the same token, according to the ACEEE study, in 2006 eighteen states attained annual electricity savings from programs within the range of national achievable potential (i.e., above 0.40 percent). Of these 18 states, in fact, three states - Rhode Island, Vermont and Connecticut - implemented programs in 2006 that reduced energy consumption that year by more than 1 percent.
In this study, EPRI has applied the condition that new technology does not replace existing equipment instantaneously or prematurely, but rather is "phased-in" over time as existing equipment reaches the end of its useful life. The following three categories of potential analyzed in this study all conform to this condition, and may be termed "phase-in" potentials.
- Technical Potential represents the savings due to energy efficiency and demand response programs that would result if all homes and businesses adopted the most efficient, commercially available technologies and measures, regardless of cost. Technical Potential provides the broadest and largest definition of savings since it quantifies the savings that would result if all current equipment, processes, and practices in all sectors of the market were replaced at the end of their useful lives by the most efficient available options. Technical Potential does not take into account the cost-effectiveness of the measures.
- Economic Potential represents the savings due to programs that would result if all homes and business adopted the most efficient, commercially available, cost-effective measures. It is a subset of the Technical Potential and is quantified only over those measures that pass a widely recognized economic cost-effectiveness screen. The cost-effectiveness screen applied in this study is a variation of the Participant Test, which compares the incremental cost to a consumer of an efficient technology relative to its baseline option, and the bill savings expected from that technology over its useful life. Only those technologies for which the net present value of benefits exceeds its incremental cost to consumers pass the test.
- Achievable Potential refines Economic Potential by taking into account various barriers to customer adoption.
-Maximum Achievable Potential (MAP) takes into account market, societal, and attitudinal barriers that limit customer participation in utility- or government-administered voluntary programs. These barriers reflect, among other phenomena, customers' resistance to doing more than the absolute minimum required or a dislike of a given efficiency option. MAP presumes no impediments to the effective implementation and delivery of programs, such as perfect information, and essentially extrapolates the impacts of the best run, most effective programs nationally.
-Realistic Achievable Potential (RAP) discounts MAP by taking into account impediments to program implementation, including financial, political, and regulatory barriers that are likely to limit the amount of savings that might be achieved through energy efficiency and demand response programs. RAP considers recent utility experience and reported savings, and as such represents a forecast of likely customer response to programs.
Part II will discuss the potential for electricity savings from utility programs, what is realistically achievable, and the cost of achievable potential.
1. The savings impact of energy efficiency programs "embedded" in the AEO 2008 Reference Case is estimated in Chapter 2 of EPRI Report 1016987. Removing this estimate of embedded savings from the AEO 2008 Reference Case results in an adjusted baseline forecast that is higher.
2. The values for realistic- and maximum-achievable potentials in 2030 measured with respect to the adjusted baseline forecast described in Footnote 1 are 398 and 544 billion kWh, respectively, or 8 percent to 11 percent. These values represent the total savings impact of energy efficiency programs in 2030 inclusive of savings embedded in the AEO 2008 Reference Case.