Friday, July 13, 2012

Key Fact: New Generation Costs Three Times More Than Saving A Kilowatt-hour

Consumers want low-electric bills and a clean environment.  They also demand that the lights stay on.  To achieve those goals requires smart, low-cost investments in our electric system.

The question becomes, what is the lowest cost way of keeping the electricity grid reliable, bills affordable, and pollution reduced? Is it investing in new generation or in saving electricity?  Increasingly, the answer to those questions is major investment on the demand side of the electric marketplace. 

The American Council for An Energy-Efficient Economy (ACEEE) reports that electric utilities made $4.6 billion of investments in energy efficiency programs for consumers in 2010, a more than four-fold increase over the energy efficiency total of $1.1 billion of a decade ago.

One basic fact is driving the increased investment in energy efficiency.  It is cheaper to save a kilowatt-hour than it is to generate a new kilowatt-hour.

ACEEE documents that the cost of saving a kilowatt-hour of electricity is approximately one-third the cost of building new generation.

Smart power companies understand that the electric business is much more than building and operating large, distant central station power plants and then running transmission and distribution lines to carry the power to tens of millions of customers.  Energy efficiency, distributed generation, demand response and other services require a different business model but provide opportunity for nimble power companies and their customers.


  1. Without reading the ACEEE analysis yet, I suspect it shows that the more significant of the avoided costs of capacity expansion are in transmission and distribution, with generation coming in behind those. The challenge at least for IOUs is to keep investment interests high while finding ways to avoid capacity growth (selling more is not always better).

    1. Generation is typically the biggest part of the bundled utility rate. Proportions of generation, transmission, and distribution vary by customer rate class. But transmission is normally less than 10% of a total rate/bill.