Use of energy explained Energy efficiency and conservation

Energy efficiency and conservation

Energy efficiency and energy conservation are two ways to avoid or reduce energy consumption. Energy efficiency generally pertains to the technical performance of energy conversion and energy-consuming devices. Energy conservation generally involves actions to reduce the amount of end-use energy consumption. For example, installing energy-efficient lights is an efficiency measure, and turning lights off when not needed, either manually or with timers or motion sensor switches, is conservation.

Efficiency and conservation can help to lower consumers' energy bills and potentially reduce greenhouse gas emissions associated with energy use. Consumers can also benefit indirectly when reducing their electricity consumption because it 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 for consumers include:

• Buying energy-efficient products
• Buying 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 the energy efficiency and conservation programs that utilities offer

Utility energy efficiency and conservation programs

Many electric utility companies 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 as part of investor-owned utility resource planning. Although efficiency and conservation reduce utility bills for consumers, they also may result in reduced revenues and increased expenses for utility companies. Utilities may be compensated for the expenses related to efficiency and conservation programs through 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
• 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 customer's 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 critical supply events occur. Advanced smart meters are often components of DR programs.

EIA's Annual Electric Power Industry Report (Form EIA-861) collects this type of data on annual electricity consumption, electricity savings, and electric utility efficiency programs.

State 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 on a set 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 energy efficiency and energy conservation programs

Examples of federal government energy efficiency and energy conservation measures and programs include:

• Establishing energy efficiency and performance standards for appliances, light bulbs, motors, and other electrical devices
• Supporting development of energy-efficient building codes
• Setting fuel economy standards for vehicles
• Providing tax credits and other financial incentives for purchasing energy-efficient products
• Providing assistance for energy efficiency and conservation measures for low-income households through the Weatherization Assistance Program
• Providing educational and technical assistance for consumers and federal agencies, including the:
  • EnergyStar® program, which promotes and assists purchases of energy-efficient appliances and products
  • Consumer education resources
  • Federal Energy Management Program (FEMP) for federal government agencies

Last updated: March 27, 2025.