A Cost-Saving Two-fer: Efficiency Reduces Total Electricity Needs and Peak Demand

December 16, 2020

Electricity systems are designed to meet peak demand — the maximum load during a specified period, typically in summer — even if that demand occurs only a few hours in a year. Yet most evaluations of electricity efficiency programs focus on reductions in annual energy use. However, these efficiency programs are also delivering peak demand savings at an affordable cost.

A new study, Peak Demand Savings From Energy Efficiency: Practices and Opportunities, by the Department of Energy’s Lawrence Berkeley National Laboratory (Berkeley Lab) explores the program administrator (PA) cost – or the cost to implement an energy efficiency program to a utility or third party administrator – of saving peak demand through efficiency programs for electric utility customers.

A free webinar on January 7, 2021, 3 p.m. to 4 p.m. Eastern, will discuss the findings. Register for the webinar here: https://lbnl.zoom.us/webinar/register/WN_Ef991s6XTmqbjwjO1Zs4qQ. Slides will be posted several days in advance of the webinar here.

Berkeley Lab collected data on costs, annual energy savings, and peak demand savings for electricity efficiency programs for 52 utilities and other program administrators in 15 states between 2014 and 2018. The analysis focused on eight program types that represent 68% of the peak demand savings for the utilities and program administrators studied. The findings improve our understanding of which energy efficiency programs produce the most peak demand savings and their cost performance.

The study found that about half of all peak demand reductions from the efficiency programs studied have a levelized PA cost of less than $100 per kilowatt (kW) saved, and three-quarters cost less than $200 per kW saved. (Levelized costs take into account the economic lifetime of actions taken as a result of a program.) Which efficiency programs deliver the most peak demand savings varies by region (see figure). In the Midwest and Northeast, commercial and industrial (C&I) efficiency programs have made the greatest contribution to reported demand reductions, but in the South the largest reductions came from residential programs. In the West, efficiency programs supporting codes and standards have had the largest impact on peak demand. 

Program types accounting for the largest share of portfolio demand reductions also vary by state. Residential behavioral and C&I custom programs have produced the most peak demand reductions — 19-41% and 19-46%, respectively — in eight of the states included in the study (AR, IL, MI, NC, NY, PA, SC, TX). Residential lighting programs accounted for more than 10% of demand savings in eight states (AR, AZ, CO, MA, MD, MI, MN, PA), and commercial lighting programs accounted for more than 10% of demand savings in six states (CO, FL, IL, MN, NC, SC).

Among other study findings:

  • The levelized cost of saving peak demand and cost of saving electricity generally have a linear relationship, meaning that programs that have a low cost of saving electricity typically have a low cost of saving peak demand as well.
  • Among residential programs studied, lighting had the lowest cost of saving peak demand and saving electricity.
  • For the C&I sector, custom programs have the lowest cost of saving peak demand, and prescriptive programs have the lowest cost of saving electricity.
  • Low-income programs cost more than programs for other market sectors, for both energy and demand savings.
  • Defining key characteristics and metrics for reporting peak demand savings can improve understanding of energy efficiency's value to provide peak demand. The study introduces a new typology that utilities and state regulators can consider for reporting peak demand impacts from efficiency programs.

Study authors are Natalie Mims Frick, Sean Murphy, Chandler Miller, Chuck Goldman, Greg Leventis, Kristina LaCommare and Lisa Schwartz in the Electricity Markets and Policy Department at Berkeley Lab. The U.S. Department of Energy’s Office of Energy Efficiency and Renewable Energy supported this work.