The energy efficiency market is growing rapidly around the world, and U.S. utility companies are playing a significant part in its expansion. According to the latest investment figures from the Consortium for Energy Efficiency, American electricity and gas utilities are spending more than $7.8 billion annually on programs designed to assist customers use energy more efficiently.
The CEE report finds that total U.S. utility investment in energy efficiency and demand side management, which includes programs aimed at shifting customers’ energy use to cheaper times of day, rose 3 percent in 2016. Inflation-adjusted investment rose 8 percent over a five-year period from 2011 to 2016, the latest full year for which statistics are available.
Ralph Cavanagh, co-director of the Natural Resources Defense Council’s Energy Program, welcomes the progress but believes more can be achieved. “[W]e can do better, and we must in order to meet our climate and clean energy goals,” writes Cavanagh. “Today’s programs don’t tap anywhere near all cost-effective energy efficiency savings that we could achieve.”
Improvements would result in “lower energy bills, reduced power plant pollution, and more jobs,” he added.
Multi-billion dollar investments
The International Energy Agency’s (IEA) figures for 2016 underscore that the positive numbers for U.S. utility investment are part of a global trend.
Global energy efficiency investment increased 9 percent to $231 billion, with the most rapid increase seen in China (24 percent). Europe is currently the largest source of energy efficiency investment.
According to the IEA, the U.S. invested $41 billion in energy efficiency in 2016, although other studies using different approaches indicate that figure could be as high as $100 billion.
The agency estimates that around 58 percent of energy efficiency investment occurs in buildings, 26 percent in transportation, and 16 percent in industry.
Prospects for future growth appear bright. The 2016 Energy Efficiency Indicator survey by Johnson Controls found that 72 percent of corporate executives expect to increase investment in efficiency programs, compared to just 42 percent in 2013.
Among U.S. respondents, 64 percent of companies said they had a carbon reduction goal, compared to 41 percent in 2013.
A long way to go
Although on an upward trend, the IEA and industry experts want to see investment growth accelerate. The IEA has called for investment in energy efficiency to reach $1 trillion in the coming years, a more than four-fold increase from 2016 levels.
New tools are being developed to encourage investors to enter the energy efficiency market by committing finances to projects such as building retrofits. Recently, the Investor Confidence Project added its Investor-Ready Energy Efficiency (IREE) certification to a global platform of instruments designed to promote investment. The certification provides reassurances to wary investors by offering standardized verification metrics so it’s easier to monitor how a project will perform.
According to Victor Rojas, a senior financial policy manager with Environmental Defense Fund’s Climate and Energy program, the expansion of IREEs mean that “we’re on a path to scaling energy efficiency investments from a one-building-at-a-time approach to a portfolio approach. On this smarter path to boosting financial savings, while cutting energy use and pollution, we can all breathe a bit easier.”
While investors taking advantage of this new tool have mainly spent their money in Britain and Europe, the market for building retrofits in the US to improve energy efficiency is estimated at $20 billion, meaning there is broad scope for growth.
According to the American Counsel for an Energy-Efficient Economy, only one in four businesses and households currently adopt energy efficiency measures. There are several reasons behind this, including the lack of financing and up-front capital to carry out long-term investments, a belief that energy efficient technology is expensive, and the perception that many commercial and housing units are already energy efficient.
The ACEE outlines 10 proposals to encourage businesses and individuals to invest in energy efficiency and grow the market in financial terms. Among them are improving marketing strategies to promote the benefits of such investments, establishing an energy efficiency benchmarking system for buildings, and easing access to financing as well as expanding building codes, appliance regulations, and utility efficiency initiatives to areas of the country that do not yet have them.
The financial might of utility companies appears set to play a significant role in the realization of these proposals, as well as other plans to increase the nation’s energy efficiency investment.
Jordan Smith is an freelance journalist and translator covering issues related to energy, the environment, and politics. His work has appeared on the independent news site Opposing Views and at the Canadian Labour Institute.