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Use of energy explained Energy efficiency and conservation

Energy efficiency and conservation

Energy efficiency (EE) and energy conservation (EC) 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 consuming devices and building materials. Energy conservation generally includes actions to reduce the amount of energy end use. For example, installing energy-efficient lights is an EE measure, whereas turning them off when not needed, either manually or with timers or motion sensor switches, is an EC measure.

EE and EC measures can help to directly lower energy costs for consumers and potentially reduce greenhouse gas emissions associated with energy use. Consumers also benefit indirectly when reducing their electricity demand helps to reduce costs of electricity generation, transmission, and distribution. High electricity demand often results in higher costs for power generation and electricity transmission, which are passed on to customers in their utility bills.

Examples of EE and EC 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 utility EE and EC 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 EE and EC programs

Many electric utilities offer EE and EC programs to their customers in part because of state energy efficiency resource standards (see below), which set mandatory, long-term targets for reducing energy use, and/or as required by state utility regulatory agencies (public utility commissions) as part of investor-owned utility resource planning. While EE and EC 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 EE and EC programs in the rates they charge their customers.

Electric utility EE and EC programs are often focused on reducing electricity use during periods of high customer demand and/or in times of supply constraints and are called demand-side management (DSM) programs. DSM programs range from simply encouraging electricity consumers to undertake EE and EC measures, to providing various financial incentives to do so, to offering participation in more direct and active demand-response (DR) programs.

Utility financial incentives for EE and EC may include rebates for purchasing energy-efficient products, appliances, and equipment and/or devices that automatically or remotely control their operation. Some utilities encourage their customers to voluntarily shift large electricity uses to off-peak or low-demand periods by offering time-of-use or time-of-day electricity rates, which include higher rates during peak demand periods and lower rates during off-peak demand periods. 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 periods of high electricity demand or when there are critical supply events. Advanced smart meters are often components of DR programs.

According to the U.S. Energy Information Administration’s (EIA’s) annual survey of electric power sales, revenue, and energy efficiency (Form EIA-861), in 2020, 502 electric utilities had EE programs that resulted in an estimated 28,167,459 megawatthours (MWh) (or about 28.2 billion kilowatthours [kWh]) reductions (savings) in total annual electricity consumption. Residential customers accounted for about 47% of the total annual electricity savings from utility EE programs and commercial customers accounted for 44% of the energy efficiency savings in 2020.

Also in 2020, 392 utilities had DR programs with about 11.7 million customer participants that resulted in an estimated 1,509,124 MWh (or about 1.51 billion kWh) in energy savings. Residential customers accounted for 97% of the participants and 79% of the electricity savings from DR programs in 2020. Commercial and industrial customers in DR programs accounted for about 3% and 0.3% of total DR program participants respectively, but they accounted for about 17% and 5% respectively for the resulting total annual electricity savings.

State government EE and EC programs

Many states have established Energy Efficiency Resource Standards (EERS) that encourage or require electric and/or natural gas utilities operating in their states to reduce their customer’s electricity and natural gas use by targeted amounts and 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/or natural gas consumption. In most cases, utilities must achieve energy savings with DSM programs. As of September 2021, 25 States had mandatory statewide EERS and five States and the District of Columbia had energy efficiency goals. Some states provide financial incentives such as tax credits or rebates for consumers and business to purchase energy-efficient appliances. Details on state EERS are available from the Database of State Incentives for Renewables and Efficiency®.

Federal government EE and EC programs

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

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Since 1992, ENERGY STAR® and its partners have helped save American families and businesses about $450 billion and 3.5 trillion kilowatthours of electricity while also achieving broad emissions reductions—all through voluntary action.

Last updated: January 21, 2022