The True Value of Energy Efficiency Savings

By Cynthia A. Arcate 12 March, 2013

For many years, energy efficiency companies and consumer advocates have argued that the forecasts by ISO New England of energy growth were overstated because they did not fully reflect the impact of efficiency programs implemented by the New England states. Now, a major breakthrough has occurred. The most recent ISO long term forecast of growth in energy demand shows a greatly reduced amount of electricity needed in the region. This is the result of the successful energy efficiency programs in New England, and that means customers will be saving hundreds of millions of dollars in energy and transmission costs.

Because the forecasts did not fully reflect the effects of energy efficiency, customers were in effect paying twice – once through retail delivery charges for the energy efficiency program costs and again through supply charges since the ISO were buying more energy than necessary.

PowerOptions and other groups recognized this double-whammy problem and have demanded change for the past several years. The ISO is to be congratulated for making the move it did recognizing the reduction in energy use driven by efficiency programs. But vigilance must be maintained to make sure that regional energy planning continues to fully reflect what is happening within the states.

This also means that each New England state needs to take steps now to make sure its valuation of energy efficiency for cost/benefit analysis is consistent with the ISO forecast.

If those state usage reductions are not reflected in the wholesale energy marketplace, then the benefits to customers will not be realized in the avoided costs of electricity. Now that we know how the ISO will value the effects of efficiency efforts, it is time for states to reexamine the regional avoided cost study and ensure that its assumptions truly match current regional planning.

The impacts of the ISO’s forecasts are staggering. The current long-term forecast shows summer peak demand growing by an average of 1.5 percent annually through 2021, and annual electricity consumption growing by an average of 0.9 percent. But when the effects of energy efficiency are considered, the forecast’s peak demand growth drops to 0.9 percent annually and the electricity consumption is zero – flat. Another effect of the forecast is that the ISO has taken $260 million of transmission projects off the drawing board. This is fabulous news for consumers because it reduces transmission costs paid by consumers for years to come.

The New England states have a great story to tell about the benefits of their energy efficiency programs. And they now have a clear and objective benchmark to measure success and need not calculate the value on the assumption of what should happen in the markets and in planning forecasts, but on the basis of what is happening.

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