Saving Electricity is Cheaper than Generating It

The average investment into energy efficiency required to save 1 kWh for a business in the United States is $0.03, 2-5 times cheaper than industrial customers typically pay for electricity. That is one of the results of a new study into the costs of energy efficiency programs by the Lawrence Berkeley National Laboratory [1] as well as a 2014 study by the American Council for an Energy-Efficient Economy [2].

“Energy efficiency is clearly holding steady as the least-cost energy option that provides the best value for America’s energy dollar.” [2]

The Berkeley Lab study used data from 20 US states. The metric used is the levelized total cost of saved energy, which is the total cost of the energy saved, spread in equal payments over the economic lifetime of the actions taken through a program (or sector or portfolio), then divided by the annual energy saved. The levelized total cost treats energy efficiency as an investment, with costs spread of the lifetime of the efficiency actions. This makes it comparable with the levelized costs of energy supply, allowing for insights into the merit of investing in energy efficiency programs.SectorParticipant CostProgram Administrator CostTotal CostIndustrial$0.030$0.025$0.055Residential$0.014$0.019$0.033Low Income$0.008$0.134$0.142All Sectors$0.022$0.023$0.046

All costs of saved electricity above are in dollars per kWh [1].

The study found that the average total cost of saved electricity for commercial and industrial customers was $0.055 per kWh. This cost was split between program administrators (e.g. energy utilities) and the businesses, with businesses typically paying slightly more than half of the total cost. In the end, businesses paid $0.030 per kWh saved on average, which is 2-5 times cheaper than industrial customers typically pay for kWh used.

This supports data from a 2014 report by American Council for an Energy-Efficient Economy (ACEEE) [2]. This study focused on the utility costs to delivery energy efficiency programs, and found the average cost of saved electricity for commercial/industrial portfolios to be $0.027 per kWh. This is again significantly lower than the cost of generating 1 kWh.

Energy Efficiency Costs vs Energy Production Costs

This is particularly useful insight for corporations with strong environmental commitments. For example, if a business were to decide to have a net zero carbon footprint by 2020 (using no more electricity than it is producing from renewable sources), how should the business go about achieving this goal?

Both reports suggest that energy efficiency is the right place to start. The costs of saving a kWh are currently significantly lower than the cost of generating an extra kWh [2]:

The ACEEE report also looked at the Total Resource Cost, which takes a system-wide, high-level view. The Total Resource Cost show benefit-cost ratios ranging from 1.24 to 4.0, meaning that every dollar invested by utilities and customers in energy efficiency measures yields $1.24 to $4.00 in benefits [2].

The ACEEE report further points out further benefits of energy efficiency programs: “avoided transmission and distribution costs, peak demand benefits, price mitigation effects in wholesale markets, and reduced pollution. Program participants can also benefit from lower water and fuel usage and improved comfort. In addition, energy efficiency programs result in reinvestment of local dollars in local jobs and industries” [2].

Where Ecogate Fits In

At Ecogate, we have been providing our customers with our energy-efficient controls for industrial exhaust ventilation for over 15 years. Exhaust ventilation is typically the single largest consumer of electricity in factories, often being 35% or more of the factory’s total electricity bill.

Our intelligent system typically saves customers 68% off their exhaust ventilation costs, which can be more than 20% of the entire factory’s electricity bill. You can read about how we reduced the bill for Bernhard Furniture’s factory by 22% in our case study here (pdf).

If you’re curious about what Ecogate intelligent ventilation can do for you, please do not hesitate to contact us. Getting started is easy, and the savings are will convince you.


[1] The Total Cost of Saving Electricity through Utility Customer-Funded Energy Efficiency Programs: Estimates at the National, State, Sector and Program Level. Ian M. Hoffman, Gregory Rybka, Greg Leventis, Charles A. Goldman, Lisa Schwartz, Megan Billingsley, and Steven Schiller.

[2] The Best Value for America’s Energy Dollar: A National Review of the Cost of Utility Energy Efficiency Programs. Maggie Molina.

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