Energy Efficiency Is Cheaper Than Gas

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Originally published on the NRDC Expert Blog.
by Sheryl Carter, Director, Power Sector, Climate & Clean Energy Program 

A new study shows that programs to increase the energy efficiency of our homes and businesses remain even cheaper than natural gas, demonstrating once again that this abundant energy “resource” is the most cost-effective path to a cleaner future.

Energy efficiency programs work by offering incentives to customers who invest in money-saving fixtures, like attic insulation and energy-smart appliances. Time and time again, these programs have proven to be the cheapest way to cut our energy waste and forestall climate change.

In addition to saving money and easing the effects of climate change, energy efficiency programs also generate high-quality jobs. Energy efficiency accounted for nearly half of the energy industry’s overall net of new jobs in 2019, and it employs twice as many U.S. workers as the entire fossil fuel industry.

The results

The research, conducted by Lawrence Berkeley National Laboratory, estimated that the cost of utility customer-funded energy efficiency programs averaged out to 40 cents per therm between 2012 and 2017. For comparison, the national average retail price of natural gas over the same period was about a dollar per therm. In 2018, U.S. households and businesses spent roughly $65 billion on utility-supplied natural gas, while natural gas utilities spend only about $1.3 billion per year on energy efficiency programs.

The commercial and industrial sector resulted in the lowest average cost of gas savings at 18 cents per therm, but represented only 20 percent of overall spending. Residential and low-income efficiency programs, which represented three-quarters of program spending, saw a cost of savings of 43 cents per therm and $1.47 per therm, respectively. But that higher cost of efficiency improvements to low-income housing does not account for the fact that it also helps ease both America’s housing affordability and climate crises. The data found that the overall cost of saved energy was trending downward, likely thanks to the shift toward longer-lasting efficiency measures.

These results indicate it would be more cost-effective for utilities (and their customers) to spend far more on these programs.

Researchers compiled and analyzed program data in a dozen states representing the four U.S. Census regions. Cost of savings were found to vary by region, with the most significant differences found in Midwest at 25 cents per therm and the West at 59 cents per therm. These variations are likely driven by higher spending on low-income programs in the Western region, and the fact that savings opportunities fluctuate depending on a region’s climate.

Something the study didn’t consider

The electrification of end uses that currently use gas or other fossil fuels (like furnaces, stoves, and water heaters) — if it decreases our overall energy use (and the associated climate-warming emissions from generating it by relying on renewable resources) — is also a form of energy efficiency. When electric technologies are more efficient, utility programs can be a way to encourage customer adoption, but it is not yet common to assess end use efficiency across fuels, so we don’t always end up with the cleanest and most efficient solutions.

Efficient electrification and energy efficiency are crucial to eliminating carbon (or decarbonizing) from our buildings and industry and several countries and municipal coalitions are already leading with ambitious plans to achieve net-zero emissions buildings sectors — meaning the energy running them comes from primarily emissions-free renewable resources — by 2050 at the latest.

Reducing our gas footprint is good for customers and the environment

Gas has been touted as a bridge fuel to a clean energy future, thanks to its role in displacing coal. But the truth is that it has become one of the biggest drivers of emissions growth both in the United States and abroad. It may be the least polluting fossil fuel, but it still results in a significant carbon footprint, which is exacerbated by leaks during its production and transportation.

What’s more, gas development and infrastructure is expanding at a breakneck pace, with domestic supplies actually exceeding demand and resulting in a slump in price for producers. Around 90 percent of the proposed gas power plants and their accompanying pipelines are likely to be unnecessary by 2035 as cheaper and cleaner energy alternatives outcompete them. If this happens, customers could be left shouldering the cost, since utility-owned pipelines often roll construction and operations expenses into the utility’s electricity rates.

Increasing the efficiency with which we use gas to power our homes and businesses means we need less of it. That means less impact on frontline communities, our health, our environment, and our pocketbooks. And because efficiency is cheaper than gas, it should be playing an even more prominent role in our transition to a clean, equitable, and decarbonized economy.

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