As a clean energy provider, we receive inquiries about renewable energy every day. While we advocate for a healthy generation mix, there are compelling economic reasons to consider energy efficiency before solar, wind or even biomass energy projects.
Energy Efficiency continues to be the single-most cost effective way to produce kilowatt hours. At an average of 2.5 cents per kilowatt hour, conserving energy is significantly less costly than both traditional generation sources and alternative energy sources. To produce the same kilowatt hour via wind power costs 7 cents while solar power tops all of the generation sources at a cost of 13.5 cents per kilowatt hour. The permanent cost reduction of 10% to 30% that follows an energy efficiency project further contributes to the favorable cost profile of energy efficiency. Additionally, the maintenance costs of solar and wind often runs 2-3 times the cost of the initial installation, further inflating the cost per kilowatt hour to maintain renewable energy.*
Existing infrastructure need not be replaced or upgraded in order to accommodate energy efficiency. In turn, this means very little disruption to business as a result of becoming more energy efficient. In many cases, alternative energy systems face dual obstacles: siting and infrastructure. Although the industry continues to advance in both products and technology, renewable energy sources must both be located in close proximity to the existing grid and be sited in a location that can sufficiently house the required components. Upon siting, infrastructure must be installed that allows the renewable energy produced to be converted into usable power. Conversely, measures such as high efficiency lighting, controls, and mechanical equipment upgrades are typically turn-key, one for one replacements of existing systems.
Both energy efficiency programs and renewable energy projects benefit greatly from tax breaks and government funding. However, due to the high initial outlay of capital for an alternative energy installation, there is a high reliance on a government incentive or tax break to help pay for the project and diminish the payback period. Established Energy Efficiency Standards in 27 states have largely passed the responsibility of incentivizing energy efficiency to utilities. Innovative utility programs deliver energy efficiency to the doors of businesses around the country with very little out-of-pocket cost to the consumer. Paybacks typically range from four months to under two years and projects can be completed outside the purview of government involvement.
Alternative energy sources certainly have their place in the market and in the right circumstance, can bring tremendous value to business. In many cases, bundling energy efficiency with a renewable project is an ideal solution that achieves both reduction and reliability goals and also decreases the longer payback associated with renewables. However, as the cheapest, most abundant source of energy in the nation, energy efficiency remains the first fuel of choice.
*Source: Navigant Consulting 2009. All costs per kilowatt hour based on a 10 year useful life of the equipment.