Minnesota utilities can meet or exceed energy-saving goals: here’s how

A long-awaited Minnesota Department of Commerce study released in December found that the state’s electric and natural gas utilities can continue to cost-effectively meet their annual energy savings goals over the next decade using new and existing energy efficiency programs. Key highlights that the study team found include:

  • Minnesota’s electric and natural gas utilities can cost-effectively meet their 1.5 percent and 1.0 percent annual energy savings goals from 2020 – 2029
  • Minnesota currently has some of the lowest-cost and best-performing energy conservation programs in the nation, with abundant opportunities for both investor-owned utilities and cooperative and municipal utilities
  • New and existing utility-led programs such as air-source heat pumps and commercial and industrial lighting and building system design programs will be critical in helping the state achieve its goals

Minnesota policy makers have long recognized energy efficiency as a backbone of the state’s energy policy. In 2007, Minnesota enacted the Next Generation Energy Act, which established Minnesota’s energy efficiency resource standard (EERS), requiring electric and natural gas utilities to develop plans to achieve energy savings of 1.5 percent and 1.0 percent of their average annual retail sales each year. Since its passage, Minnesota utilities have achieved significant cost-effective energy savings that has earned Minnesota national attention, ranking 8th in the nation in 2018 by ACEEE in terms of state policies and programs that improve energy efficiency. Minnesota has previously reported that such programs have returned four dollars to the state’s economy for every one dollar spent on them, and energy efficiency continues to be cheapest cost resource available.

In their most recent study, the Department of Commerce sought to estimate the overall statewide energy savings potential for electric and natural gas utilities from the customer-side of the meter—everything from efficiency improvements in home appliances and lighting to building shells and controls. The study shows high savings potential for all utilities, with realistic annual ‘program’ achievable savings averaging 1.9 percent of total sales for investor-owned utilities (IOUs) and 1.7 percent of total sales for cooperative and municipal utilities over the next decade. Achieving the study’s identified savings will be a major contributor toward meeting current and future state energy and climate goals.

The table above and below highlight the report’s main findings. The ‘program’ percent savings is a realistic savings expectation while the ‘max achievable’ is a technically and economically feasible but ambitious scenario. The table above shows electric energy savings potential for different classes of electric utilities.

This table demonstrates natural gas energy savings potential.

The study’s findings are crystal clear: utilities’ efficiency programs will need to evolve and transform alongside technology improvements, state and federal appliance and lighting standards, and consumer trends and behaviors. Electric commercial and industrial programs will dominate almost 80 percent of all cumulative electric savings potential, and will play a critical role in utilities’ programs over the next decade (see first graph above). Electric utility residential programs will need to transition from traditional lighting incentives and rebates to new programs for cold-climate air source heat pumps that have already begun to replace inefficient electric baseboard heating systems in Minnesota’s rural and urban climates. Space heating upgrades to furnaces and boilers will also account for the lions-share of both residential and commercial and industrial program potential for natural gas programs (see figures below).

Breakdown of total electric energy savings by sector (residential and C&I) and by program.

Natural gas savings by sector and program. Space and water heating improvements, such as upgrading to an efficient air-source heat pump, will play a central role in achieving electric and natural gas residential energy savings, while lighting programs will remain the top opportunity for commercial and industrial electric savings.

This study is one of many sources of information that will help inform utilities, policy makers, and regulators of emerging technologies, program models, key market sectors, and policy approaches that can be targeted to maximize cost-effective energy efficiency. While Minnesota utilities have already been proactive in designing and implementing comprehensive, effective program models, more will need to be done to incorporate deeper energy saving, including partnering with trade groups and contractors, offering programs for larger and harder-to-reach customers, and scaling-up and coordinating projects with other utilities. Fresh Energy actively participated in the study’s Advisory Committee and is committed to working in 2019 with elected officials, policy makers, utilities, advocacy organizations, and others to drive deep reductions in energy consumption from all sectors of Minnesota’s economy .

The Department of Commerce study was coordinated by Center for Energy and Environment, with project partners Optimal Energy and Seventhwave, assistance from ACEEE and ESource, and funding from the Minnesota Department of Commerce’s Conservation Applied Research and Development (CARD) program.  A webinar summarizing the researchers finding are available here.

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