States can save significantly more electricity than they currently save through efficiency programs if a range of policy changes is implemented, according to a report recently issued by the Regulatory Assistance Project (RAP).

The Next Quantum Leap in Efficiency: 30 Percent Electric Savings in Ten Years provides a high-level assessment of what is possible through efficiency and makes a series of policy and programmatic recommendations to help states realize a big jump in electric efficiency savings.

“Our analysis shows there is room for more energy efficiency and that the well of energy savings continues to be replenished through advances in technologies and practices, system optimization, and behavioral approaches,” said RAP Principal and U.S. Program Director Richard Sedano. “Though some states have made strong efficiency gains in recent years, we encourage all states to take a fresh look at the possibilities for upping their game on energy efficiency.”

Chris Neme and Jim Grevatt of Energy Futures Group authored the report.

For a variety of reasons, states have often capped the level of spending on efficiency programs. The authors’ first recommendation is to eliminate these types of constraints and pursue all cost-effective efficiency before buying new supply. They further recommend that when considering what is cost-effective, states recognize the full value of energy efficiency, including avoided transmission and distribution costs, reduced environmental compliance costs, lowered risk, and more.

Another recommendation aims to make it profitable for utilities to pursue efficiency resources. Because utility profits are often linked to sales, energy efficiency can have an adverse effect on the profitability of a utility. Neme and Grevatt recommend creating shareholder incentives for meeting efficiency targets and decoupling or other rate design options to break the link between sales and utility profits.

The report rightly highlights the fact that states aren’t always truly getting all cost-effective efficiency, according to Stan Price, executive director of the Northwest Energy Efficiency Council, a nonprofit trade association of the efficiency industry based in Seattle.

“The authors challenge 35 years of orthodoxy in energy efficiency thinking,” Price said. “We need to continue to explore the many threads of this new logic.”

Other recommendations include fixing the way efficiency savings goals are structured; encouraging and rewarding market transformation efforts; striking a better balance in the regulation of utility efficiency programs; exploring new regulatory approaches; and expanding, accelerating, and improving the effectiveness of building codes and appliance standards.

Efficiency reduces business and homeowner exposure to fuel price volatility and other forms of risk, suppresses wholesale market prices, and helps reduce a utility’s costs of environmental compliance, benefits that become even more important given the U.S. Environmental Protection Agency’s Clean Power Plan.

“Coming in at half to a third of the cost of electricity from new power plants, efficiency is still the cheapest resource around,” Sedano said. “Getting as much as we can simply makes sense.”

Read the full report here.

Contact: Jake Brown