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Energy Efficiency: "The Lunch You Get Paid to Eat"

As far as I can tell, the entirety of the pushback to the state’s energy efficiency plan that was recently rejected by the PUC stemmed from people and businesses who didn’t like the final price tag, and see that money as a “subsidy” for people who want to save on energy costs. Indeed, this framing is popular among journalists covering the story. But in this blog post, I’m going to explain what that framing misses.

Here's a simple fact: when I make my home or business more efficient it saves me money. This is obvious and true.

But now a more complicated fact: sometimes, when I make my home or business more efficient, it saves *you* money too.

How? Follow me down the rabbit hole my friend.

Electric Savings Lower Electricity Rates

My in laws recently got their home tightened up through NH Saves. When they did so, they reduced their electric bill by getting some old incandescent bulbs swapped for LEDs. (One in particular was in a rarely opened coat closet, and for years everyone knew to double and triple check that the bulb was off when the door was closed because it was a genuine fire hazard.)

When they did that, they participated on a micro-scale in lowering New England’s electricity demand. This saves everyone money because electricity is paid for through auctions run by a not-for-profit corporation called the Independent System Operator (ISO). In those auctions, the cheapest ways to generate electricity are selected to run first and the most expensive last and we all split the cost of whatever supplies our electrons.

The price of every kilowatt hour sold at each moment is set by the most expensive power plant that is turned on at that moment. Here's how those auctions work. So my in-laws new LEDs save me money by ensuring that the power-plants run on jet fuel never (or rarely) turn on.

What’s more, my in-laws getting free light bulbs helps make it so that the New England system as a whole is actually forecast to need less electricity in 2030 than it does today, and more than 4,000 MW less than if we weren’t investing so aggressively in efficiency measures.

In a world in which we didn't pay my in-laws to swap out that old coat-closet fire hazard, we'd be paying for a lot of power lines, power plants, transformers and insulators through our electric bills.

But wouldn't it be cheaper to just let my in-laws pay a higher electric bill? Well, in fact, when you compare the cost of buying my in-laws some LEDs, vs. the cost of all those power plants we didn’t have to buy, investing in efficiency starts to look like a pretty darn good choice. Here's the price breakdown of the various options, put together by the American Council for an Energy Efficient Economy.

Really, we face a choice: buy cheap energy efficiency now, or let demand grow out of control and buy expensive power plants later.

Gas Savings Lower Electric Rates

Recently, some friends of mine who heat with natural gas got their house insulated through NH Saves. Believe it or not that choice will *also* save you and me money on my electricity bill.

What is this witchcraft, you ask?

New England’s electricity generation is dominated by natural gas, which means the price of natural gas almost always sets the price of electricity. This effect is even more important in winter, since the cold weather pushes up gas demand and therefore prices. The coldest winter days, when New England’s pipelines are full to the max, can have astonishingly high electricity prices as a result.

All of this means that when my friends insulated their gas-heated home, they freed up a little extra space in New England’s gas pipelines, which will make gas for our power plants a little cheaper, which will help keep my electric rates low as a result.

Mind blown yet? It actually gets even more next level.

The LEDs that my in-laws installed? Because our electricity prices are set by natural gas supply and demand, reducing electricity demand reduces electricity prices AND gas prices which then FURTHER reduces electricity prices. (Don’t believe me? Google “E-G-E Cross Dripe”. I promise its true!)

So How Much Does Me Investing In Efficiency Save You?

It all depends: some houses cost more to weatherize than others, some factories have more low-hanging efficiency fruit. But here are two graphs from deep in the appendices of the state’s three-year energy efficiency plan. They show the impacts of the efficiency programs on the electricity rates of people who take advantage of NH Saves, and people who don’t. The two graphs are for two different kinds of efficiency projects: residential and commercial or industrial.

Source: 2020-2023 Triennial Energy Efficiency Plan

What these graphs say*, is that it’s true that if you don’t take advantage of NH Saves *at all* your electric bill will be *slightly* higher than it would have been otherwise. But not much higher: the approximately $5 a month that comes out of your bill to pay for NH Saves is *almost entirely compensated for* in lower electric bills overall: 0.6% higher.

For an average residential rate-payer, that’s about 50 cents a month. And yes, your reading the Large C&I Graph correctly: non-participants should actually *save* money thanks to the subsidies they give their neighbors.

Truly, in the words of Amory Lovins, that’s not a free lunch, that’s a lunch you get paid to eat.

*A footnote here: to realize these savings, utilities need to submit a new rate case with a reduced “revenue requirement.” This should happen every couple of years, and regulators need to push utilities in those proceedings to pass efficiency savings along to customers. For all the much ballyhooed talk of the nearly $400 million price tag of the energy efficiency plan that the NH PUC just rejected, the utilities estimated that their revenue requirement would fall by nearly exactly that same amount thanks to that investment. Demanding we see those savings on our bills is why we have regulators and consumer advocates working for us.

Yes, those are the forecasts for how much lower the utilities electric rates would have been. Source: 2020-2023 Triennial Energy Efficiency Plan

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