Energy Efficiency Continues to Be Cheaper Than Natural Gas

May 13, 2020

A new study by Lawrence Berkeley National Laboratory (Berkeley Lab) estimates that utility efficiency programs for natural gas achieved energy savings at an average cost to program administrators of 40 cents per therm from 2012 to 2017. (That figure does not include any participant share of the costs.) For comparison, the national average retail price of natural gas during that period was about one dollar per therm.1 U.S. households and businesses spent approximately $65 billion on utility-supplied natural gas in 2018,2 and U.S. natural gas utilities spend about $1.3 billion a year on energy efficiency programs.3

The cost of saved energy represents the "avoided costs" for the natural gas commodity, plus transportation, delivery, and storage, as well as any environmental factors or gas price risk that may be considered. The results are similar to a 2014 Berkeley Lab study, which found savings at 38 cents a therm from 2009 to 2011.

A report summarizing the study, Cost of Saving Natural Gas Through Efficiency Programs Funded by Utility Customers: 2012–2017, can be downloaded here. A webinar highlighting key findings will be offered at 10:00 a.m. Pacific on June 4, 2020. Register for the free webinar here: https://lbnl.zoom.us/webinar/register/WN_Rkhn-QXxSiiatlnyTNi-oQ

Berkeley Lab researchers compiled4 and analyzed efficiency program data reported by investor-owned utilities and other program administrators in a dozen states representative of the four U.S. Census regions — Arkansas, California, Connecticut, Iowa, Massachusetts, Michigan, Minnesota, New Jersey, New York, Oklahoma, Rhode Island and Utah (see map). Depending on the year, the dataset accounts for about 50 percent to 70 percent of annual national spending on natural gas efficiency programs.5

Berkeley Lab researchers expected the results for the new study to be higher than their 2014 study for several reasons, including the assumed impacts of inflation on efficiency program costs and the use of different base years (2017 versus 2012). The new study includes data from more utilities. Additional analysis is required to understand factors that would explain why costs held relatively steady.

The analysis focuses on estimating the program administrator levelized cost of saved energy for three core sectors for natural gas: commercial and industrial (C&I), residential and low-income households, and these sectors’ combined performances (see graph). It aggregates these sectors to provide regional and national values. The study reports savings-weighted averages, unweighted medians, and interquartile ranges (25th and 75th percentiles) of the levelized program administrator cost of saving gas, in constant 2017 dollars. 

Other findings include the following, subject to additional research:

  • C&I programs provided the lowest savings-weighted average cost of gas savings (18 cents per therm), yet represented a minority of overall spending (about 20 percent). The cost of savings for residential and low-income programs was 43 cents per therm and $1.47 per therm, respectively. Residential and low-income programs accounted for about three-quarters of national gas program spending in the dataset.6
  • Cost varied by geographic region, with the largest differences between the Midwest (25 cents per therm) and the West (59 cents therm). The large amount of spending on low-income programs in the Western regional dataset likely drives some of this disparity, as well as differences in savings opportunities between cold and temperate regions.
  • Average program costs trended downward from 2012 to 2017. Part of the driver for this change appears to be a shift toward longer-lasting measures.

Utilities use cost performance metrics to assess effectiveness of energy efficiency program portfolios, determine what programs to offer customers, and meet projected gas system needs at the most affordable cost.

The U.S. Department of Energy’s Building Technologies Office supported this work. Report authors are Steven R. Schiller, Ian Hoffman, Sean Murphy, Greg Leventis and Lisa Schwartz.

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1 U.S. Energy Information Administration.
2 American Gas Association.
3 https://library.cee1.org/content/2018-cee-annual-industry-report/
4 Data in this report are based on costs and savings reported by utilities and other program administrators. Berkeley Lab did not independently determine or validate these values.
Based on national spending on programs as reported by the Consortium for Energy Efficiency. 
For the study period, residential programs represented about 48 percent of total spending in the sample and low-income programs about 28 percent of the total.

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