Energy efficiency takes place at the microlevel, balancing upfront costs with future cost savings. Market imperfections may cause underinvestment in energy efficiency if its benefits are not fully recognized by investors.
Energy providers and consumers have access to capital at various interest rates, reflecting differences in knowledge about investments’ likely performance.
Economic Benefits
Energy efficiency is often the least costly utility system resource, providing a return on investment equal to one third to one fourth that of fossil fuel-based supply-side investments. Utilities also enjoy other advantages including greenhouse gas reductions, customer utility bill savings and job creation.
High-efficiency technologies can significantly lower household energy costs while simultaneously improving comfort in homes, schools, offices and businesses. Such savings are particularly advantageous for lower-income households that often face higher energy costs that fluctuate more widely in price than their higher income counterparts.
Energy efficiency is a vital element of energy system reliability and resilience. Reducing demand helps lower the risk of power outages while providing long-term advantages like decreased water use. Energy efficiency programs in New England are helping us cut emissions and electricity bills – we just must ensure they reach every renter, homeowner, and business owner in New England.
Environmental Benefits
Energy efficiency helps us reduce greenhouse gas emissions, air and water pollution, as well as our overall ecological footprint. It makes us better stewards of natural resources while creating a cleaner, healthier world for all.
Efficiency measures help relieve strain on the power grid and other infrastructure systems by cutting energy use. Lighting, appliances and insulation measures in buildings reduce energy demand while decreasing electricity generated from fossil fuels; new cars with regenerative braking further lower demand for gasoline or diesel.
Energy efficiency improvements are integral to reaching zero emissions from the energy sector by 2050, with an anticipated contribution from energy intensity improvement of 33% of required emission cuts from fuels (via technical efficiency improvements and behavior change initiatives). This aligns with COP28 outcome statement which highlighted energy efficiency as one of three major actions necessary to combat climate change.
Health Benefits
Energy efficiency benefits people by saving them money, decreasing emissions of harmful pollutants and climate-warming CO2, and addressing key social and economic determinants of health, such as energy burden (the percentage of household income spent on heating and cooling). Furthermore, energy-efficient healthcare equipment provides improved experiences for both patients and staff while lowering operational costs.
LED lighting technology can significantly reduce energy usage while providing higher-quality illumination in hospital rooms, and installing energy-saving equipment like ventilators and operating rooms can dramatically cut operating costs while increasing patient comfort and safety.
State, local and tribal policymakers interested in screening-level estimates of the outdoor air quality-related health benefits associated with EE/RE/ES+ projects can turn to the Environmental Protection Agency for screening-level estimates of their kilowatt hour savings projects; their Benefits Per Kilowatt Hour or BPK values provide estimates that can help quantify this benefit in dollars saved. These values can then be multiplied with each project to get estimates in dollars saved.
Social Benefits
Energy efficiency can be a powerful way of tackling systemic social challenges and creating more equitable, sustainable societies. It goes well beyond reducing utility bills or creating jobs; its effects reach into communities, industries, and the very fabric of society itself.
Building energy-efficient structures can significantly lower construction and operating costs for businesses, which in turn allows them to pass these savings onto consumers or reinvest them into expanding the business further. Furthermore, energy efficiency reduces reliance on volatile fossil fuel prices, improving energy security.
Energy efficiency improvements can create jobs in manufacturing, installation and related services that provide an economic boost to local economies. Many of these jobs cannot be outsourced to foreign locations and thus contribute to building up a skilled, diverse workforce. Low-income households can particularly benefit from policies which identify affordable yet energy efficient appliances and offer subsidies that support their purchase and usage; this helps ensure their energy consumption does not increase when their financial circumstances improve; instead it keeps utility costs manageable.