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Use of energy explained Energy efficiency and conservation

Energy efficiency and conservation

Energy efficiency and energy conservation are related and often complimentary or overlapping ways to avoid or reduce energy consumption. Energy efficiency generally pertains to the technical performance of energy conversion and energy-consuming devices and to building materials. Energy conservation generally includes actions to reduce the amount of end-use energy consumption. For example, installing energy-efficient lights is an efficiency measure. Turning lights off when not needed, either manually or with timers or motion sensor switches, is a conservation measure.

Efficiency and conservation measures can help to directly lower consumers' energy bills and potentially reduce greenhouse gas emissions associated with energy use. Consumers also benefit indirectly when reducing their electricity consumption helps to reduce demand on the electric system. High electricity demand often results in higher costs for generating and transmitting electricity that may be passed on to utility customers.

Examples of energy efficiency and conservation measures for consumers include:

  • Buying energy-efficient products and vehicles with high fuel economy
  • Using programmable thermostats to control heating and cooling systems
  • Installing energy management and control systems in commercial and industrial facilities
  • Turning off lights and electric appliances when not in use
  • Participating in energy efficiency and conservation programs that utilities offer their customers

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People can do their own home energy audit. The ENERGY STAR® Home Energy Yardstick helps people compare their home's energy use with similar homes across the country. Home Energy Yardstick also provides recommendations for energy-saving home improvements.

Utility energy efficiency and conservation programs

Many electric utilities offer energy efficiency and conservation programs to their customers, in part, because of state energy efficiency resource standards. These standards set mandatory, long-term targets for reducing energy use, which are sometimes required by state utility regulatory agencies (public utility commissions) as part of investor-owned utility resource planning. Although efficiency and conservation reduce utility bills for consumers, they may also result in reduced revenues and increased expenses for utilities. Utilities may be compensated for the expenses related to efficiency and conservation programs in the rates they charge their customers.

Electric utility efficiency and conservation programs are often focused on reducing electricity use during periods of high (or peak) customer demand or in times of supply constraints (such as a power plant outage). These programs are often called demand-side management (DSM) programs. DSM programs range from encouraging electricity consumers to take efficiency and conservation measures, providing various financial incentives to take those measures, and offering participation in more direct and active demand-response (DR) programs.

Utility efficiency and conservation programs may include financial incentives such as rebates for purchasing energy-efficient products, appliances, and equipment or devices that remotely control appliances. Some utilities encourage customers to voluntarily shift high electricity-use activities to off-peak or low-demand periods by offering time-of-use or time-of-day electricity rates. These rates are generally higher during peak demand and lower during off-peak demand. Some DR programs allow utilities or electric power system operators to reduce their customers’ electricity load (demand) by remotely controlling cooling and heating equipment, water heaters, or energy-intensive industrial and manufacturing equipment during high electricity demand or when there are critical supply events. Advanced smart meters are often components of DR programs.

According to EIA's annual survey of electric power sales, revenue, and energy efficiency (Form EIA-861), in 2022, 448 electric utilities had efficiency programs that resulted in an estimated 28,167,459 fewer megawatthours (MWh) (or about 28.2 billion kilowatthours [kWh]) in total annual electricity consumption. Residential customers accounted for about 48% and commercial customers accounted for 44% of the total annual reduced electricity consumption.

Also in 2022, 333 electric utilities had DR programs, with about 10.3 million customer participants, that resulted in an estimated 1,292,980 MWh (or about 1.3 billion kWh) lower electricity consumption (savings). Residential customers accounted for 97% of total DR program participants and 78% of the electricity savings. Commercial customers accounted for about 2% and industrial customers accounted for about 0.4% of total DR program participants, but commercial customers accounted for about 10% and industrial customers accounted for about 13% of the resulting total annual electricity savings.

State government energy efficiency and conservation programs

Many states have established Energy Efficiency Resource Standards (EERS) that encourage or require electric and natural gas utilities operating in their states to reduce their customer’s electricity and natural gas use by targeted amounts according to a defined timeline or schedule. In many ways, EERS are similar to renewable energy portfolio standards (RPS). Similar to RPS, EERS differ in the requirements and timing across states. EERS policies may have separate reduction targets for electricity sales, peak electricity demand, and natural gas consumption. In most cases, utilities must achieve energy savings with DSM programs. According to the Database of State Incentives for Renewables and Efficiency®, as of November 2023, 25 states have mandatory statewide EERS and 5 states and the District of Columbia have energy efficiency goals. Some states offer financial incentives such as tax credits or rebates for consumers and business to purchase energy-efficient appliances.

Federal government EE and EC programs

Examples of federal government EE and EC measures and programs include:

Last updated: January 12, 2024.