Tuesday, December 3, 2013

U.S. Utility Efficiency Budgets Continue to Grow

Customer or end-user incentives from utilities for energy efficiency (rebates, incentives and information that lower the cost of using electricity and gas) is an important part of any corporate energy management program and are forecast to continue to grow from $4.8B in 2012 to $9.5B in 2025.    While new and existing programs are not always communicated well to companies (and the paper work can be frustrating), these programs represent "free" money for organizations and can be the tipping point for an acceptable financial payback for a project.

This year, Lawrence Berkeley National Laboratory (Berkeley Lab) and Innovation Electricity Efficiency (IEE) issued reports detailing current and projected energy efficiency budgets for utilities.  Berkeley Lab projects that total spending on electricity and gas energy efficiency programs will increase from $4.8B in 2010 to $9.5B by 2025 (in the "medium case" scenario).  This is a 4% yearly growth rate (CAGR), but the most significant growth is in the upcoming years.

Not surprisingly, spending in California is by far the largest, followed by New York, Massachusetts, and Florida.  Future growth is expected primarily in the Midwest and the South, as the West and Northeast maintain their large spending programs.  The Midwest has already seen three states (Indiana, Ohio, and Pennsylvania) more than doubled their electricity program spending in 2011 from 2010 levels.

The persistent growth in these energy efficiency programs are due to higher interest in energy efficiency by regulators, state efficiency goals and targets that increase over time, and a reduction in coal-generated electricity in some states, according to the reports.

Some see a scenario where spending will increase beyond $9.5B in 2025.  The "high case" scenario for spending is $14.3B in 2025, and, given that the energy efficiency standards are only established in half of all U.S. states, IEE believes that expenditures could even top $14.3B in 2025. 

In short, U.S. utilities have and will continue to be valuable partner to help you meet your energy reduction goals.  Be sure to check sites from DOE and DSIRE for utility incentives in your state and obviously ask your utility reps. If you have not already, consider ensuring that your CFO is aware of these programs and she has a summary of incentives received the last several years for all facilities.  We facilities and energy management teams strengthen the support of Finance when finance understand the wealth of utility incentives available.

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