Synergies between energy efficiency (EE) and renewable energy systems (RES)

Any serious vision of a sustainable energy economy requires major commitments to both efficiency and renewables. Up to now, most policies and programmes for energy efficiency (EE) and renewable energy (RES) have been deployed separately. Significant synergies between both pillars can be realized however by combining these two policy agendas.

Last May, the American Council for an Energy-Efficient Economy (ACEEE) released a report on this topic.

The report discusses the following five synergies:

  • Timing synergies. EE can provide large savings in the short and medium term, but the remaining opportunities in the long term will be limited. Conversely, RES will supply limited amount energy on the short term, but its opportunities are expected to expand over time.
  • Economic synergies. Combining EE with RES can reduce the overall cost of the electricity system compared to a renewables-only policy.
  • Geographic synergies. States with fewer RES can exploit EE opportunities to compensate. This will also help build a broader political consensus around a clean energy policy.
  • Power system synergies. EE and RES have different load shape impacts, depending upon the time of day and season, so a combination of both can be a benefit to overall system operations.
  • Several other synergies exist. For example, there are major opportunities for combined heat and power (CHP). CHP can play a role in both energy efficiency and distributed generation programmes.

The ACEEE report demonstrates these synergies with a series of U.S. case studies.

#1 Public Benefit Funds for EE and RES

Public Benefit Funds (PBFs) are generated by a small charge on consumers’ electricity bills or through contributions from utilities. They provide money in varying degrees for energy efficiency measures (EE), renewable energy systems (RES), energy research and development, and low-income housing energy assistance.

Several U.S. states adopted PBFs following the restructuring of the electric industry in the mid-1990s. This restructuring had eliminated many, if not most, of the previous incentives to invest in EE and RES.

California a golden example

The most extensive PBF is that of California, where incentives were established and set in place for a specified term from 2000 to 2012. Funds are generated by a surcharge in consumers’ electricity bills that averages 25 cent per kWh, or about two per cent of the electricity price. This generates $525 million per year, of which 43 per cent ($228 million) goes toward EE and 26 per cent ($135 million) toward RES initiatives.

Benefits of PBFs

  • PBFs lead to reduced greenhouse gas emissions.
  • PBFs result in job creation. Indeed, investing in EE and RES leads to more jobs per dollar invested than investing in conventional energy supply options.
  • PBFs allow each state the flexibility to invest in the best mix of EE and RES that meet its particular needs.
  • PBFs lead to improved reliability of the electricity supply and to a reduction in peak prices of electricity. In 2001, California’s emerging PBF had already reduced peak demand by ten per cent and in this way helped to alleviate the blackouts that had threatened the economy and to mitigate the electricity peak price.

#2 Energy Efficiency Resource Standards (EERS) and Renewable Portfolio Standards (RPS)

Renewable Portfolio Standards (RPS) set a target for electric utility companies for the purchase of renewable power, typically as a percentage of total electricity sales. Energy Efficiency Resource Standards (EERS) set a target for electric or gas utility companies for end-use energy savings, expressed in terms of energy units, percentage of load growth forecast, or percentage of total energy sales.

Adopted by nine U.S. states

Nine U.S. states have adopted combined EERS and RPS policies. The benefits of combining EE and RES are similar to those experienced in the case of PBFs: emission reductions, job creation, improved reliability, and increased pressure on the electricity prices. And like PBFs, it is a flexible system in which each state can choose its optimal mix of EE and RES.

In Nevada, the latest RPS legislation stipulates that RES and EE together must meet 20 per cent of the states electricity production by 2015, of which up to 25 per cent can be met with EE. Hawaii has a similar regulation, but with a cap on EE at 50 per cent of the target. In Connecticut, EE and RES have separate targets within the same regulatory framework.

High potential impact

EERS and RPS combined can have a large impact. Suppose an EERS reduces demand growth by 20 per cent in 2020, and RPS targets are set at 20 per cent of electricity sales, the two policies combined will reduce conventional energy generation by 36 per cent. This will likewise reduce carbon emissions.

#3 Zero-energy homes: reducing residential energy consumption

Zero-energy houses represent the next generation of dwellings. Their total energy needs are generated on site. Today, residential renewable energy systems are still some years away from being cost effective. Through energy efficiency measures, the overall energy demand of the building can be reduced, thus magnifying the potential of renewable energy to provide a high proportion of the energy demand.

Building low-energy houses

The Building Industry Research Alliance (BIRA), part of the Building America Program, established a Zero Energy House (ZEH) programme. At present, 416 low-energy houses have been built in California alone through this program. Those houses have reduced their grid energy consumption by an average of 51 per cent compared to a standard house. 32 per cent of this savings was realized by energy savings and 19 per cent by a photovoltaic system.

Low-energy houses obviously benefit homeowners through reduced home electricity bills. They benefit the utility companies through significant peak demand savings. Other benefits include:

  • Reduced GHG emissions
  • A stimulation for the home-buying market and the local economy
  • They keep growth in electricity demand by residential buildings to a minimum

Still R&D required

By 2020, the Building America Program aims to produce 'real' ZEH homes that require zero energy from utilities and pump electricity back into the grid during peak hours. Reaching this goal still requires substantial R&D to reduce the cost of ZEH and facilitate its market penetration.

#4 A corporate policy for green power and energy efficiency

Staples is the largest office supply chain in the world and has branches throughout the U.S.A. A few years ago, it became an early leader in establishing company-wide energy policies. Their Central Office of Environmental Affairs, established in 2002, developed a long-term strategy combining both energy efficiency (EE) and renewable energy systems (RES).

This strategy has brought them many benefits:

  • Energy efficiency measures mainly provide financial savings on short-term, while renewable energy capacity will provide long-term financial savings.
  • Including energy efficiency measures in a green energy plan has enabled Staples to invest in green energy while maintaining its internal policies regarding return on capital investment.
  • The money saved by energy efficiency in the first phase of the project, can be invested in extra renewable energy in the second phase.

Thanks to their long-term, holistic view, Staples was able to raise its share of energy from renewable resources to 10 per cent in 2004 or 53 million kWh, leading the industry at that time. Part of this energy was purchased in the form of renewable energy certificates, and part of it was generated by solar arrays on distribution centres in California and New Jersey.

In the meantime, the market for green power purchases by larger corporations has been burgeoning. Staples will need to continue to step up its goals to stay ahead of the pack. One of the main barriers is the regulatory differences between the various U.S. states. These are hampering Staples’ ability to institutionalize its renewable energy purchasing practices company-wide.

#5 Austin Energy municipal utility: a pioneer in combining EE with RES

Austin Energy is a utility company owned by the city of Austin, the capital of Texas. It provides electricity for 692,000 people and is one of the leading pioneers in combining energy efficiency (EE) and renewable energy (RES) programmes.

The utility launched a visionary strategic plan in 2003, containing self-imposed RES and EE standards. The goal for 2020 is to achieve:

  • 20 per cent of its electricity from renewable sources
  • 15 per cent improvement in efficiency compared to 2003

From rebates to demand side management

These targets will be met through a diverse array of programmes. These include:

  • Offering a rebate for energy savings on a dollar per kW basis
  • Offering a rebate for grid-tied photovoltaic systems
  • A Green Building Training programme, teaching builders and designers the principles of sustainable design
  • Free energy analysis for the owners of existing homes and businesses, showing where potential energy reductions can be made
  • Providing customers with free radio-controlled thermostats which allow Austin Energy to turn off customer’s air conditioning remotely during times of peak electricity demand, and other demand side control programmes

The first to analyse synergies

The current strategic plan is far from being the first for Austin Energy. In 1979, Roger Duncan, at that time an Austin City Council member, ran a campaign against the proposed South Texas Nuclear Project. Though the nuclear plant was eventually built, Mr. Duncan subsequently became an executive at Austin Energy and continued to work on establishing the energy conservation programmes that would have been needed to balance the rejection of the major new power source.

By 1982, these efficiency programmes had reduced Austin’s energy demand so dramatically that the city could remove a projected coal-fired power plant from its long-term generation plan. In the beginning of the 1990s, Austin Energy began a further reduction in its fossil fuel use by ramping up renewable energy investments; at that time primarily wind technology.

These efforts led the utility to become the first to formally analyse the synergies between EE and RES. It determined the following main synergies:

  • Combining RES programmes with EE programmes leads to larger financial savings for the customers
  • Larger financial savings lead to better public support
  • EE and RES programmes have complementary benefits on the electric utility load curves and on the reliability of the grid
  • Savings from EE programmes provide leverage for increasing the contribution of RES
  • EE and RES provide a perfect two-step plan for reducing GHG emissions

A challenging future

According to the senior management of Austin Energy, the next focus must be on creating net zero energy buildings. But for a utility company to survive in a zero energy building marketplace, a new business model needs to be created. For Austin Energy, always a pioneer, this represents the next great frontier.

#6 Efficient use of Landfill Gas

A Combined Heat and Power (CHP) unit burning a renewable gas is a perfect example of integrating green energy with energy efficiency. In Model City in the state of New York, the Innovative Energy Corporation uses landfill gas to power a CHP unit. By capturing the greenhouse gases and other potentially hazardous landfill emissions, they are prevented from escaping into the atmosphere.

Combining electricity generation with a tomato greenhouse

Collecting and burning landfill gas is a widely commercialized, cost-competitive technology. The Model City Energy project is a best practice case because it also makes optimally use of the heat from the CHP unit. Along with the generation plant, a ten-acre tomato-growing company H2Gro was founded and is now producing 5,000 kg of tomatoes each day.

The H2Gro greenhouse is heated entirely by the CHP unit, which supplies 31 million Btus/h of heat (32.77 GJ/h or 9.08 MW). Moreover the CHP unit produces 5.6 MW of electrical power which is mainly sold to the grid.

The key benefits of this project are:

  • Magnified resource potential through the use of CHP technology
  • Reduced greenhouse gas emissions since the system captures GHG emissions that would otherwise escape into the atmosphere as well as reduces demand for electricity that comes from carbon emitting fossil fuels
  • Financial benefits. Landfill gas is one of the cheapest forms of renewable energy to produce. H2Gro saves about $800,000/year by using heat from the landfill gas burning unit; a 38 per cent cost savings on operations
  • Economic stimulus. The project drives the local development in the CHP and clean energy sector


The report 'The Twin Pillars of Sustainable Energy: Synergies between Energy Efficiency and Renewable Energy Technology and Policy' by the American Council for an Energy-Efficient Economy (ACEEE).

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