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2.5 Cents Per Kilowatt Hour: America's Cheapest, Cleanest Fuel 'Holds Steady'

It's not news that energy efficiency is cost-effective. But new numbers from the American Council for an Energy-Efficient Economy (ACEEE) quantify just how cheap the resource has become relative to other power generation types.

The figure today: two and a half cents per kilowatt-hour (kWh).

That's one-third or less the price of any new source of electricity, making efficiency the cheapest option available – conventional or renewable – and a no-brainer investment for big utilities.

ACEEE notes, for instance, that in 2008 coal cost between 7 and 14 cents per kWh; natural gas cost between 7 and 10 cents per kWh; and wind between 4 and 9 cents per kWh. In terms of new nuclear, some estimates put its price at 15 cents per kWh, or more.

The main point is straightforward: Conventional energy costs are climbing, and coming carbon regulation will kick those costs up even more. Not the case with energy efficiency. The price of saving a kilowatt has stayed steady or dropped over the last half decade, reinforcing why states and utilities are adding aggressive efficiency programs, and forcing this question: Why aren't the feds doing the same?

"Saving Energy Cost-Effectively: A National Review of the Cost of Energy Saved through Utility-Sector Energy Efficiency Programs" updates ACEEE's frequently cited research from 2004. The original data determined that the average cost of delivering energy efficiency programs in the U.S. was 3 cents per kWh.

The 2004 study reviewed the cost-effectiveness results from nine top states. The current, more in-depth version expands that to 14 states – California, Connecticut, Iowa, Massachusetts, Minnesota, Nevada, New Mexico, New Jersey, New York, Oregon, Rhode Island, Texas, Vermont and Wisconsin.

The conclusion is pretty much the same: Efficiency is the safest energy investment there is and the cheapest power source left. Expect more of the same for the foreseeable future:

"The U.S. Energy Information Administration (EIA) estimates that in 2020 new conventional power plants including coal and nuclear will cost about $0.10 per kWh, or four times higher than current energy efficiency program costs," the study finds.

The research findings should have implications in U.S. Senate deliberations on climate legislation and state-level decisions about new power, ACEEE says.

According to the group, the new numbers are the talk of the Hill. But whether they will have the desired impact is another story.

States are certainly moving forward – California the fastest. The climate-action leader just passed a three-year, $3.1 billion energy efficiency budget for the state's four biggest utilities. It's the largest commitment ever made by a state to energy efficiency.

But not all governors are marching in sync.

"While funding for energy efficiency has rebounded from the low point that it reached during industry restructuring [during the mid- to late 1990s], many states still lack well-funded comprehensive energy efficiency programs," writes ACEEE.

Most analysts agree the federal government could use its considerable power to steer all states toward greater efficiency. And the American Clean Energy and Energy Security Act (ACES), the nation's potential future climate law, has been seen as the best hope.

The bill passed the U.S. House in June. As it stands, its energy efficiency building and appliance codes would create 600,000 new jobs and avoid the need for 419 new coal plants by 2030, according to an August analysis by ACEEE.

Those potential gains are impressive. But adding a federal energy efficiency standard (EERS) would substantially increase them.

In fact, if the U.S. were prepared to require utilities to get 10 percent of new capacity from efficiency by 2020, over 1 million new jobs would be created and the need for 512 new coal plants averted through 2030.

Consulting firm McKinsey has run its own numbers on efficiency, and they're just as striking.

The U.S. could save $1.2 trillion in ten years by investing $520 billion in efficiency improvements, according to a July 2009 study. In a 2007 report, McKinsey found the nation could offset 85 percent of the projected incremental demand for electricity in 2030 with efficiency alone, "largely negating the need for the incremental coal-fired power plants."

Most agree a national EERS would help achieve these gains. Such a standard would cut global-warming pollution faster and cheaper than any other resource, eliminate the need for power plants, slash demand for new and costly transmission upgrades and even save consumers money.

But the policy has been all but ignored in the drive for a post-coal economy. The primary opponents are utility companies. The reason is simple: The profits of most are still tied to the amount of electricity sold.

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