A Layer Cake of Benefits: Recognizing the Full Value of Energy Efficiency

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Energy efficiency is recognized as a low-cost, reliable resource, yet investments in efficiency programs lag far behind the level needed to capture all cost-effective efficiency resources. State utility commissions can support increased efficiency investments by conducting a full valuation of energy efficiency benefits. In many cases, only electric utility-related benefits are considered when evaluating energy efficiency measures. Other benefits, including resource benefits like water, sewer, and natural gas savings have been regarded as “externalities” – external to power system considerations – and are typically not evaluated, despite clear evidence of the magnitude of these benefits to society.

In the recent paper “Recognizing the Full Value of Energy Efficiency”, Jim Lazar and Ken Colburn identify three categories of efficiency benefits — utility system, participant, and societal benefits — and provide guidance for properly quantifying each type. Drawing on a “layer cake” analogy, the authors build each layer of benefits to create a cake that is taller and more valuable than many recognize.

In a RAP webinar held on October 9, 2013, Mr. Lazar and Mr. Colburn share case studies demonstrating how different states quantify the significant categories of efficiency savings, and examine the full spectrum of energy efficiency benefits, including so-called non-energy benefits. They also explore how energy regulators can identify areas that have benefits outside of energy, and where joint consideration of benefits with other agencies concerned with air, water, health, low-income assistance and economic development may be appropriate.

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