Research shows the least expensive way for utilities to control costs over time is to minimize waste by building energy efficiency resources.
For several years, the link between how much revenue energy utilities collect from the electricity they deliver has been a barrier for adopting energy efficiency practices.
But with tools like “decoupling” demolishing that link, utilities’ incentives to up their profits by increasing sales are starting to diminish. The Regulatory Assistance Project (RAP) shows that with minor periodic adjustments in rates to stabilize revenues, the utility is “indifferent to sales volumes and less prone to risk.”
RAP provides assistance to state commissions on utility business models that remove disincentives to acquire energy efficiency and other demand-side resources, “while providing shareholder incentives for aggressive energy and demand savings.”
According to the Energy Center of Wisconsin, energy efficiency resources can help utilities with everything from minimizing fuel cost and creating more capacity to increasing system reliability and reducing regulatory risk.
Not to mention the local economic benefits that come with efficiency—by cutting the price customers pay for their energy bills and creating a market for energy-efficient products and home services, it creates a more sustainable community, keeps dollars in the pockets of families, and offers potential for job growth.
Analysis from Opower also proves that energy efficient customers are happier customers. People like when they can count on their utilities to serve as a trusted source of information on how to best save energy.
Integrated resource planning (IRP) has been another great efficiency-promoting tool that’s been adopted by over half of the states in the country. It’s created greater transparency in power companies, shining a light on their investment decisions for meeting future electricity demand. It helps assure that investments in energy efficiency are given equal consideration with investments in traditional power plants.
In the Pacific Northwest, IRP has shown that energy efficiency can meet 85 percent of expected electricity demand growth over the next 20 years.
There are still other barriers that stand in the way of utilities fully adopting energy efficiency measures, and there’s no doubt they have a long way to go. Efforts such as improving customer data access to facilitate energy benchmarking and linking utility efficiency programs with energy code savings need to be ramped up.
But the recent developments show promise that more utilities will include efficiency in their business decisions, and IMT will continue to look for ways to make that easier for them.