Energy efficiency spending on utility customers could rise to $9.5 billion by 2025, offsetting most of the expected energy demand growth in the United States over the coming decade, according to a report released yesterday.

The projection is almost double the $4.8 billion spent in 2010, according to the report, prepared by researchers at the Lawrence Berkeley National Laboratory. It also represents the middle efficiency growth projection highlighted in the study. The low scenario, roughly representing an efficiency plateau, projects an increase to $6.5 billion, and the high scenario, which hinges on strong policies and wide-scale implementation, projects $15.6 billion in efficiency measures.

The programs, from home insulation upgrades to guiding consumers to more energy-efficient behavior, could offset between 70 to 80 percent of energy load increases over the next 12 years, researchers said.

Charles Goldman, a co-author and head of the energy analysis department at Berkeley Lab, said the findings provide critical information about how efficiency measures can change the energy landscape in the United States.

"There are other studies out there that summarize existing and current budgets for energy efficiency programs, but there is no other study out there that tries to forecast future spending and savings trends with an analytical framework," he said.

Using current state efficiency incentives and declared ambitions, the researchers calculated how initiatives to make homes, businesses and industry use energy more effectively would pan out based on three models of how aggressively states would pursue them.

"One of the contributions of our study was to translate [energy] savings goals into spending projections," Goldman said, explaining that the researchers tabulated how much new standards or certain programs would cost.

From the coasts to the Midwest

The researchers also found that efficiency investment would likely spread more evenly throughout the country.

"Historically, different regions of the country adopted different approaches to meeting their electric-sector needs," said Goldman. He observed that coastal states with high electricity costs have traditionally pursued energy efficiency as an alternative to building new transmission lines or generators.

But the Midwest and South also have to contend with growing gas and electricity demand, so these states are getting into the efficiency game, as well.

"Because of legislation, if folks carry out what they're projecting, the distribution of spending across the country will change," he said.

"In some states, energy efficiency is becoming a very large portion of the resource mix. It's not just a percent here and there," added Ian Hoffman, a senior research associate and another co-author.

The efficiency programs include home energy audits and upgrades, in which an auditor examines a house for leaky windows, porous walls and poor insulation. When the auditor adds up all the gaps and leaks in a typical home, "you end up, in aggregate, with a hole the size of a basketball," Hoffman said.

Utilities can also make efficiency gains in urban homes and businesses. "In a high-rise, a lot of these buildings were built by somebody who is not necessarily going to be paying the electric and gas bill," Hoffman said. Improvements like caulk, weather stripping and motion-sensitive lighting can dramatically reduce the energy footprint of these buildings.

A 'hedging strategy' against uncertainty

Other efficiency programs include giving customers bills that track their energy consumption relative to their neighbors, applying subtle peer pressure to get people to switch off lights and turn down the heat.

Some states also target industrial facilities, like metal forges and assembly plants, which devour electrons and British thermal units and thus make attractive targets.

"Where you have a factory, the program will send out trained engineers and contractors who will go out and do a very top-to-bottom assessment of the structures and the processes that are used and identify areas where there is waste," Hoffman said. Factories in turn can find out if it's cost-effective to upgrade to better motors, capture waste heat or install low-energy lighting.

Funding these programs will fall to end-users who may end up paying higher energy rates. However, efficiency gains can more than counter these increases, leading to lower bills overall for most energy consumers, according to Goldman. He projected that rates would increase by 1 percent, but consumption would decrease by 3 to 5 percent, depending on the state, the utility and the energy market.

In addition, previous studies indicate that rebound effects from greater energy efficiency -- people using more because it costs less -- are modest (ClimateWire, Aug. 8, 2012).

Though policies are not set in stone, pursuing energy efficiency still makes sense to most energy utilities.

"It's a good hedging strategy -- against fuel prices and regulatory uncertainty," said Goldman, noting that pushing customers to use less helps energy companies defer big decisions, like whether to build a new power plant, until energy markets stabilize or government officials decide on new environmental regulations.

Goldman acknowledged that increasing energy rates to fund greater efficiency would draw scrutiny from the industry, utility customers and the government, but noted that when it comes to dealing with the country's growing hunger for energy, "efficiency is attractive economically compared to many supply-side options."