Demand Side Efficiency
SINCE THE INTRODUCTION OF PERVASIVE ENERGY ACCESS IN INDUSTRIALIZED ECONOMIES, GROWTH IN ECONOMIC ACTIVITY HAS LED TO GROWTH IN ELECTRICITY CONSUMPTION.
For example, in the United States, the energy intensity, or kWhs required to produce one dollar of GDP, more than doubled between the 1940s and 1970s, as the economy grew and new technologies that consumed electricity were introduced. With the US Energy Crisis in the 1970s came the first significant focus on energy efficiency and conservation which may have fueled the persistent decline in energy intensity observed in the US since the 70s. This trend is not unique to the US; indeed, with advancements in devices that consume electricity, energy intensity around the world continues to decline. LED lights consume almost 80% less than their incandescent counterparts; the latest heating, ventilation, and air conditioning (HVAC) equipment can be 30% more efficient than
Challenges
Traditional utility revenue models are at risk as efficiency continues to reduce consumption growth
Lack of incentives to invest in efficiency for buildings that are not owner occupied, as the occupant typically pays for the energy usage
Energy efficiency (and consumer behavior) can be challenging to coordinate as a generation resource, vs. larger centralized power stations
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older equipment. As other commercial and industrial equipment evolves, such as motors and drives, their respective per-unit energy consumption decreases.
For utilities that rely on capacity tariffs for revenue, declining energy intensity can be an issue. The cost of installing and servicing equipment in most cases is not declining, but now this cost must be covered over a decreasing amount of electricity sales. Decoupling rates from capacity charges, instituting other charges, and allowing utilities to earn a return on efficiency investment are among the many ways regulators are addressing this issue. In countries where electrical grids are still being extended, efficiency can often be a “first fuel.” It eliminates the need for generation capacity, reduces the size of transmission and distribution infrastructure, and reduces fuel consumption. Electricity customers see demand-side efficiency investments not only as a way to reduce their bills, but also as a way to reduce their carbon footprint.
Opportunities
New revenue opportunities for utilities and other energy industry stakeholders
Lower energy spend by electricity customers, and potentially lower carbon footprint
Lower overall generation and distribution capacity costs in fast-growth and large markets
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