New Berkeley Lab Study on the Program Administrator Cost of Saved Energy for Utility Customer-Funded Energy Efficiency Programs in the United States

As more states and utilities increasingly turn to energy efficiency programs to manage demand for electricity and natural gas, it is important to understand how much saving energy costs. By examining regulatory reports on efficiency programs in 31 states, Lawrence Berkeley National Laboratory (Berkeley Lab) researchers have determined the cost of saving energy through efficiency programs funded by utility customers in the period 2009-2011. A report published today presents those costs at the national and regional level for all sectors and the most prevalent program types.

The study was written by Megan A. Billingsley, Ian M. Hoffman, Elizabeth Stuart, Steven R. Schiller, Charles A. Goldman, and Kristina LaCommare of the Environmental Energy Technologies Division of Berkeley Lab.

Berkeley Lab researchers gathered a total of more than 4,000 program-years' worth of costs and energy savings data, as reported by 107 program administrators on 1,700 individual efficiency programs. Administrators of those programs typically use different names for their programs, and practices vary among states for reporting program cost and savings information. The researchers developed a standard approach to handling the data and classifying the programs. The result is the most comprehensive and detailed program database reported to date, offering a rich portrait of national and regional efficiency program investments and covering more than 60 different types of efficiency programs. In the report, calculations of the cost of saved energy (CSE) are based upon gross energy savings and the costs borne by the program administrator. Cost contributions by program participants are infrequently reported by program administrators, and thus the reported results are not the "all-in" cost, known in the industry as the total resource cost.

The report provides a levelized CSE by targeted sector (residential, commercial, industrial and low income customers) and program type, as defined by technology, action or delivery approach. For each market sector and program type, the report identifies a range of costs as reported by energy efficiency program administrators including the median CSE value and a savings-weighted average CSE.

Among the key national and regional findings:

• The U.S. weighted-average electricity CSE was slightly more than two cents per kilowatt-hour. While this levelized CSE is somewhat lower than values reported by other studies, it should be noted that this study contains the largest sample of program administrators to date. Furthermore, nearly 40% of the electric program administrators in the LBNL database have offered programs for less than four years and so may be early in accessing energy savings in their respective state economies or may be targeting the least costly savings opportunities first.
• Residential electricity efficiency programs had the lowest average levelized CSE at $0.018/kWh. Lighting rebate programs accounted for at least 44% of total residential lifetime savings with a savings-weighted average levelized CSE of $0.007/kWh.
• Commercial, industrial and agricultural efficiency programs had an average levelized CSE of $0.021/kWh.
• Efficiency programs in the Midwest had the lowest average levelized CSE ($0.014/kWh) while programs in Northeast states had a higher average CSE value ($0.033/kWh). The average CSE for programs in the West and South were $0.023/kWh and $0.028/kWh, respectively. Note that only four states in the South are included in this report.
• Natural gas efficiency programs had a savings-weighted average levelized CSE of $0.38 per therm, with significant differences between the commercial/industrial and residential sectors (average values of $0.17 vs. $0.56 per therm respectively).
• Annual regulatory reporting on the costs and savings of efficiency programs is inconsistent in quality and thoroughness. Not surprisingly, program administrators in different states often use varying definitions of savings and program costs. Market sectors and program types are not characterized in a standard fashion. Many program administrators do not provide the basic data needed to calculate a levelized cost of saved energy at the program level.

The report asserts that there is a direct connection between the maturation of energy efficiency as a resource and the need for consistent, high-quality data and periodic reporting of efficiency program costs and impacts. The report urges state regulators and program administrators to consider annually reporting certain essential data at a portfolio level and more comprehensive reporting of program-level data (e.g., lifetime energy savings, participant costs). Policymakers and system planners have shown increasing interest in integrating energy efficiency as a resource, and the value of transparent and complete reporting of program metrics is a foundation for increasing their confidence in this resource.

The report "The Program Administrator Cost of Saved Energy for Utility Customer-Funded Energy Efficiency Programs" was written by Megan A. Billingsley, Ian M. Hoffman, Elizabeth Stuart, Steven R. Schiller, Charles A. Goldman, and Kristina LaCommare of the Environmental Energy Technologies Division.

This research was funded by the U.S. Department of Energy's Office of Electricity Delivery and Energy Reliability.