U.S. Utilities Spent $5.3 Billion on Energy Efficiency in 2009, but Costs Are Underestimated

U.S. utilities increased their spending on energy efficiency programs by 43% in 2009, according to a new report from the nonprofit Consortium for Energy Efficiency (CEE), which represents energy efficiency program administrators from across the United States and Canada.

U.S. utility spending on energy efficiency programs reached US$5.3 billion, including $4.4 billion for electric energy efficiency programs and $930 million for natural gas programs. Spending on natural gas programs increased the most, at 79%, while electric programs increased by 38%.

Last year, utility energy efficiency programs also expanded geographically, as such programs are now offered in 46 states, compared to only 37 states in 2008. The CEE report notes that electric energy efficiency spending grew the fastest in the Southeast and South Central states, with a 76% increase to $800 million in 2009.

For instance, new legislation in Maryland increased electric energy efficiency spending by a factor of 13, while Tennessee's spending increased by a factor of 5. Electric energy efficiency programs focus a majority of their spending on commercial and industrial facilities, while natural gas programs are skewed more toward residential customers.

Such energy efficiency programs are expected to keep U.S. greenhouse gas (GHG) emissions in check over the next 20 years, but long-term costs have been underestimated, according to Bloomberg New Energy Finance. Even in the absence of new carbon reduction policies, the market research firm predicts that the U.S. will exploit readily available residential and industrial efficiency gains to achieve a 2% drop in GHG emissions by 2030. Once those simpler options are used up, though, the cost for further cuts will rise more steeply than previously thought.

To achieve the Obama Administration's goal of a 17% emissions cut by 2020 would require more fundamental changes to the power and transport sectors.  Even with these changes, Bloomberg New Energy Finance points out that costs can still be held to less than $1 per day per U.S. household. Nevertheless, public policy help is needed to tackle emissions reductions.  And, the CEE report calls for new, more aggressive policies to help speed energy technology improvements and lower the long-term costs of cutting GHG emissions.