Savings in state's electric efficiency program fall short
Study hits estimates, says costs hurt competition
The state's electric efficiency programs don't deliver the savings they claim, and the costs of these programs make it harder for Massachusetts firms to compete, according to a business group's study to be released today.
The study, commissioned by Associated Industries of Massachusetts, finds savings from efficiency programs are significantly lower than the state estimates, concluding these programs deliver $1.70 in savings for every $1 invested, compared to the state estimate of $2.84 for every $1.
The state and utility estimates - some as high as $5.60 in savings for every $1 invested - fail to consider offsetting costs, such as the "drag" on business activity from utility surcharges that finance efficiency incentive programs and act like a tax, the study says. If energy efficiency could deliver such large paybacks, the study argues, incentive programs wouldn't be needed.
Businesses would invest in electricity-saving equipment and measures on their own.
"These cost-benefit assumptions need to be carefully analyzed before we keep throwing money at it," said Robert Rio, senior vice president at AIM. "We're not arguing you shouldn't have efficiency. We're saying putting all our eggs in the energy efficiency basket isn't the right thing to do."
The state's utilities collect about $125 million a year in surcharges to pay for efficiency programs. The surcharges are a fraction of a cent per kilowatt hour, and barely noticeable to homeowners. But for firms that use large amounts of power, such as manufacturers, those surcharges can boost annual electricity costs by tens of thousands of dollars.
Massachusetts businesses pay among the highest electricity rates in the nation. Several companies have cited high electricity costs as reasons for shutting down plants here or locating in other states.
AIM has called for new power plants and transmission and energy efficiency to increase supply, moderate prices, and meet future demand. But the Patrick administration and environmentalists say spending more on efficiency would have the same effect, but at a lower cost.
"Nothing in the AIM report suggests that energy efficiency does not save money for residential and business customers," said Ian Bowles, secretary of Energy and Environmental Affairs. "The energy reform bill now pending in the Legislature will save ratepayers hundreds of millions of dollars in energy costs by increasing energy efficiency."
The energy bill sets a goal of cutting electricity demand by 10 percent by 2017. But barring technological breakthroughs or dramatic changes in consumer behavior, that goal could be met only by constraining economic growth, shaving about $100 billion from the state's output by 2017, the AIM study says.
Environmentalists, however, say more efficient energy use would help the economy, reducing consumption and overall costs, and ultimately making businesses more competitive. "The cause of high electricity costs is natural gas and oil," said Dan Sosland, executive director of Environment Northeast, an advocacy group. "We can't control those international markets, but we can control how efficiently we use energy."
Robert Gavin can be reached at rgavin@globe.com.
