Outsized contribution of appliances to residential electricity use
With all of the talk about “deep retrofits”, “whole home” approaches and workforce education, it’s easy to forget that the bulk of electricity consumption is associated with simple plug-in devices, like refrigerators and televisions, purchased by individuals at retail – most of which don’t require the support of a contractor.
When you tally up all of the plug load end uses, including portable and room air conditioners, they account for roughly 75% of household consumption, a share that has increased over the past decade [1]. The same basic pattern can be seen across the country, for example, in the Energy Information Administration’s periodic Residential Energy Consumption Survey datasets.
Stop energy waste behind the meter for the greatest emissions reductions
Despite the headlines, climate mitigation is not all about greening the grid by increasing the share of electricity generated from renewable sources...or about electrifying end-uses. A recent study by The Brattle Group for the United States found that individual residential customer actions have the potential to reduce GHG emissions by nearly twice as much as supply-side reductions and that electric efficiency measures are by far the largest component of total residential emissions reduction potential in 2030, more than rooftop solar [2].
And, lest we forget, the vast majority of the electric efficiency measures are appliances and other plug-in devices, typically bought at retail by individuals.
But how do we influence those hundreds of millions of buying decisions?
Despite dominating electricity demand – and contrary to the nationwide Brattle study cited above – the 2021 Potential and Goals Study for California [3] identified zero achievable potential to cost-effectively reign in the consumption of appliances and other plug loads with energy efficiency rebate programs.
Think about that. This study suggests that we have no way to reduce 75% of the electric consumption of households, despite high electricity rates, within the current cost-effectiveness framework in California. So, should we just throw in the towel and leave consumers to their own “devices”?
I invite you to consider another recent California study [4], which looked at efficiency potential in the low-income customer segment and found that over 57% of electric savings potential in 2030 was associated with appliances and other plug loads, not the least because such measures generally are quick and easy to install (don’t require professional installation) and, for renters, don’t depend on building owner authorization.
So why do these studies find large residential plug load efficiency potential for the low-income segment, but none for other residential customers? There are two main reasons for this counter-intuitive result:
- The model framework doesn't reflect the potential of innovative programs that focus on eliminating barriers to efficient purchases in the course of natural replacement cycles, without incentives, and
- California’s energy efficiency cost-effectiveness framework penalizes private investment by taking into account participant costs. The low-income energy efficiency program offers free products (no participant cost) and uses a different approach to cost-effectiveness, capturing much more of the technical potential.
So, is giving away free products to everyone the answer, or is there a better, more pragmatic, lasting and affordable approach? Economics 101 and policy best practices tell us that the way to transform markets at scale is to ensure transparency and competition and eliminate barriers that prevent consumers from acting on their ambition to buy efficient products for their homes that will reduce bills and protect the climate system.
Sixty-four percent of Americans think individual citizens should do more to address global warming, and this value is above 50% in every state in the union [5].
As shown above, the most impactful thing a consumer can do to reduce greenhouse gas emissions is buy energy efficient appliances. That single purchase decision will drive lasting greenhouse gas emissions over the lifetime of the product (over 10 years, on average).
Eliminating barriers, empowering consumers
The trend towards online shopping, which got a boost from COVID-related stay-at-home orders and remote work options, represents a significant opportunity to revamp product efficiency programs with a view to eliminating pervasive and persistent barriers and transforming entire markets rapidly and at scale. Online research is ubiquitous, and the share of major domestic appliances bought online has already surpassed 30%. The core barriers that prevent consumers from buying the efficient products they aspire to – namely, market, cognitive, psychological, and financial barriers – can all be tackled through online retail channels. If done right.
A growing number of academic studies and independent evaluations have demonstrated that a consumer-centric, energy-aware online retail channel, designed with economic and behavioral insights in mind, can drive more efficient purchases, without the need for rebates [6]. I'll be sharing results of the latest studies in another blog soon.
Here's how energy and climate professionals can help
Step 1 is to acknowledge the key takeaways from the data presented above:
- Individual retail purchase decisions have an outsized impact on a home’s electricity consumption and GHG emissions, as they lock in 75% of demand over the lifetime of the product.
- Traditional product energy efficiency and climate programs leave this savings potential largely untapped.
- The right program designs – ones that focus on eliminating barriers and empowering consumers to buy efficient – can capture much more of that potential, while shielding utility customers from bill increases driven by other costs, such as grid modernization and wildfire mitigation.
What this means for efforts to cut residential greenhouse gas emissions between now and 2030 is that the consumer is the key to success.
This was evident and top of mind for many who attended the annual meeting of the National Association of State Energy Offices (NASEO) last week, where Enervee shared information on the efficient shopping ecosystem we are orchestrating, in partnership with other market actors, such as nationwide retailers, lenders and state green banks, to make the efficient choice simple and compelling for consumers – and to offer a turnkey channel for policymakers and utilities to empower consumers to cut greenhouse gas emissions. Any government funds can be precisely targeted to benefit those who face financial barriers, but efficient markets and good program design should come first.
Merely converting the $1,000 cost of an efficient appliance into $25 monthly payments through inclusive financing, such as the Eco Financing loan product launched by Enervee and One in August 2021, can eliminate the up-front purchase price barrier for many. Initial data show that 95% of all Eco Financing loans are going to underserved borrowers.
The NASEO event was a great opportunity for us to talk directly and informally with policymakers and those tasked with judiciously directing clean energy and climate funds for greatest impact, and we look forward to working with state and local governments to realize the vision of Efficient Shopping for All, the (emerging) unsung hero of residential greenhouse gas emissions reductions.
Further information can be found in our Newsroom.
Notes
[1] 2019 California Residential Appliance Saturation Study
[2] The Customer Action Pathway to National Decarbonization
[3] 2021 Energy Efficiency Potential and Goals Study
[4] 2021 Low-Income Potential and Goals Study
[5] Yale Climate Opinion Maps 2020
[6] Eliminating Market & Behavioral Barriers with Choice Engines
