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The Continued Value of Efficiency in a Decarbonization World

Posted by Charley Cormany, EFCA Executive Director

It’s human nature — everyone wants to find that magic “silver bullet” that will solve all their problems. It’s no different in the energy efficiency space, where the industry is constantly looking to find the latest and greatest technology or product that will fix everything. But while we have a lot of innovative solutions, from the simple (smart thermostats) to the complex (hydronic space heating paired with solar thermal collectors), the thing they have in common is that no single approach alone is the answer.

Electric heat pumps are the latest silver bullet. Some in the industry suggest we give up on efficiency altogether and concentrate our efforts on electrification with electric heat pumps.

Don’t get me wrong; I advocate heat pumps for heating and cooling and water heating. Heat pumps are far cleaner and more efficient than their gas-burning alternatives. We must electrify our buildings, and heat pumps will be an integral part of this transition. But until every electron we use comes either directly from solar panels on our rooftops or from solar-powered battery storage, we’ll need other solutions.

Rather than give up on energy efficiency, it’s time to double down and step up our efforts to promote and include it in all decarbonization efforts. It’s a pretty basic concept. Using less of a resource reduces its impact. When that resource negatively impacts the environment, using less is even more critical. Study after study has demonstrated that energy efficiency improvements are the cheapest renewable resource. The California Public Utilities Commission includes savings from energy efficiency improvements as a strategic component of its long-term planning strategy.

In addition, efficiency has other advantages. For years, many of us in the industry have said that the full value of energy efficiency improvements is not recognized and that health, improved durability, comfort, and other non-energy benefits need to be part of the conversation. It has taken time, but the message is finally getting through to the powers that be.

In 2021, the California Public Utilities Commission (CPUC) announced it would now use the Total Savings Benefit or TSB as the new metric for valuing energy efficiency savings. The TSB looks beyond simple financial benefits and considers other factors. Grid impacts, location of savings, and greenhouse gas emissions now contribute to the value of energy efficiency projects. These changes are welcome and help reinforce the concept that saving energy has multiple benefits.

Placing a dollar value of the avoided costs of generation is also essential. It’s a pretty simple concept. If we can encourage energy efficiency upgrades to meet a specific need, those upgrades have a measurable value. For years we energy geeks have promoted something like this with the idea of “Negawatts” – the watts not generated due to energy efficiency improvements. The term Negawatts hasn’t caught on, but the idea has, in the form of avoided costs. The CPUC now provides an avoided cost calculator for valuing and quantifying the savings from energy efficiency improvements.

Avoided costs can be high and wide-ranging. Imagine how much it costs to build a new power plant. How much benefit would it be to the public if you could avoid building that plant by simply adopting some low-cost energy efficiency improvements? The same logic holds for new distribution lines, transformers, storage, and the overall cost of updating the electrical grid. Energy efficiency has value, and it’s good to see that policymakers are finally quantifying the monetary and societal benefits.

It’s also important to consider when the energy is used. You may have seen news articles or reports about the concern for brownouts or blackouts this summer. When it’s hot out, people stay inside and insulate themselves from the heat with air conditioning. Most air conditioning loads start to increase in the afternoon and may remain high well into the night.

The good news is that in the middle of the day, much of the electricity powering these air conditioners is sourced from solar power. However, as the sun goes down, more and more power has to come from dirty fossil fuel power plants-usually natural gas. If you plot solar energy production throughout the day, the shape of the graph resembles a duck’s body – see the example below.

CAISO Duck Curve


The steep evening ramp-up of the “duck curve” is a big problem for decarbonizing and maintaining the grid’s stability. In the middle of the day, we have an abundance of clean, carbon-free energy generation from solar production, sometimes more than we can use. But when solar output declines as the sun sets, the grid must shift to dirtier generation sources to meet the demand. The sudden addition of loads during peak hours can even lead to brownouts and blackouts, as happened in the summer of 2020.

In other words, the impacts of electricity generation are time-dependent – not all electrons are created equal. If you charge your electric vehicle (EV) in the middle of the night, you likely rely on dirty electricity. Ideally, you would charge your car with carbon-free electricity when the sun is out. Until we have large-scale storage solutions, the time dependency of generation will be the most significant challenge to meeting the state’s goals of “electricity from 100% carbon-free sources by 2045.”

Energy efficiency improvements help take care of this address this problem as well. Combined air sealing and insulation, for example, are very effective ways to reduce heating and cooling loads substantially. Energy efficiency improvements reduce overall loads, and they help reduce peak loads, the spike in demand between 4:00 pm to 8:00 pm. Another benefit is that, unlike heating and cooling equipment which gets replaced every 15-18 years, energy efficiency upgrades last the life of the building.

As we reduce loads in a building, we can often significantly downsize the heating and cooling appliances. The new equipment can often be half the size of the previous unit and still provide comfort. Think about the value of this strategy. First, we reduce the loads with basic building envelope improvements, then “right-size” the heating and cooling equipment. Now we can provide the same level of comfort with half the energy.

One concern is that the push toward building electrification will add new electrical loads as we shift away from fossil fuel appliances. Say you live in a neighborhood with older homes. Everyone in the community buys an electric vehicle at the same time due to huge rebates. The loads in this neighborhood have just doubled. The utility now needs to replace feeder lines and transformers to meet the increased demand, which is expensive.

It’s a valid concern and one that energy efficiency upgrades combat head-on. A better approach is to reduce electrical loads first, then electrify. You might even promote this strategy as Efficiency First; it’s a catchy name. Imagine the impact of applying simple energy efficiency upgrades to buildings at scale as a part of electrification. We think this is the correct approach.

Take the same community and strongly incentivize energy efficiency upgrades. The building shells are improved, with air sealing and insulation. Next, homeowners replace their heating systems with right-sized heat pumps. The net result is the overall energy use drops drastically, supporting the added loads of vehicle charging with no modifications to the electrical distribution system.

Which solution do you think is more cost-effective? The question has been asked and answered many times. Implementing energy efficiency measures to reduce loads is significantly cheaper than grid upgrades.

Decarbonization and electrification will play a significant role in meeting the state’s aggressive climate goals, but it would be a mistake not to recognize the value of energy efficiency. Efficiency might not be sexy, it might not be the first thing you think of, but I assure you it is a critical tool in reducing our impact on the planet. The goals may be changing, but the message is clear: energy efficiency is the unsung hero of our push towards a clean energy future.

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