While the Retail Cost of Electricity is Increasing Faster than Ever, the electricity industry is being challenged to deliver even more power while making sure that less and less carbon is emitted into the environment. Energy-efficiency programs are a valuable near-term option to achieve a low-carbon future. However, we need to think of the concept more broadly than we ever have.
Here is a little-known fact. The electricity industry is the single-largest end user of electricity in the United States. We certainly know how to use what we produce. Our expertise also can allow us to find opportunities to be more efficient throughout the electricity-delivery chain.
Power plants are a great example. For some old fossil plants with environmental controls, we may be using as much as 8% to 10% of the electricity we generate in the operation of the plant. On average, almost 5% to 6% of all the electricity that we produce is used to operate generation stations.
Continuing along the delivery chain, transmission losses occur in the 2% to 3% range. On the final segment of the delivery chain, moving the energy from the substation to the consumer, we estimate losing another 5% to 6% of electricity. Our industry uses almost 12% to 15% of the electricity we produce, and there are certainly opportunities to improve efficiency across the electricity generation and delivery chain.
We are currently spending approximately US$2 billion per year in state- and utility-administered energy-efficiency programs in residential, commercial and industrial facilities. We can be even more efficient on the end-use side; however, we also need to increase our efforts in generation, transmission and distribution. There may be some areas where the cost of saving a kilowatt-hour of energy or reducing a kilowatt of peak demand is less than an end-use energy-efficiency measure. A kilowatt-hour of energy savings is the same regardless of where we are achieving it. We need to be aggressive in looking for opportunities to use electricity efficiently across the end-to-end chain.
Our industry has started to embrace this opportunity. On the distribution side, in December 2007, the Northwest Energy Efficiency Alliance completed the Distribution Efficiency Initiative Report, which looks primarily at opportunities for voltage optimization for reducing distribution losses. The Electric Power Research Institute has launched a distribution-system initiative focusing on assessing the cost, benefit and technical criteria for implementing distribution-efficiency measures in numerous distribution circuits. With more than 65 circuits in the study currently, this initiative will result in developing a comprehensive database that will allow our industry to get its arms around the technical, economic and implementation issues with various distribution-system efficiency measures. And all this will be done in a collaborative way. Next year, this collaboration will be extended to include transmission and generation auxiliary-power use.
The interest in distribution-system efficiency is also a result of the huge interest in deploying smart meters. With these meters in place, the distribution system will have a plethora of information. That data could enable us to not only model losses but measure and profile them, as well. When did that opportunity ever exist? Now is the time to move these opportunities from concept to practice. But there are challenges, and we will overcome them with credible data.
Our industry needs a clear road map for reducing losses or minimizing energy use in generation and delivery. It will have to begin with facts. We need to accurately account for losses in different parts of our system using consistent metrics. Understanding the impact and cost of various loss-reducing measures requires more data. With this information, we can more aggressively implement impactful energy-efficiency measures.
Consider that if we can improve the energy efficiency of our generation, transmission and distribution system by 10%, the kilowatt-hours saved would be enough to power approximately 5 million homes per year. Powering those same homes with wind energy, assuming a 35% capacity factor, would require about 19 GW of wind generation. This is about equal to the entire installed base of wind in the United States today.
But we need to place more focus on this topic as an industry. When was the last time you were at a generation, transmission and distribution conference focusing on efficiency that attracted more than 50 people? Contrast this with the American Wind Energy Association's annual conference, held in June 2008, which attracted roughly 13,000 attendees.
The time has come for our industry to embrace end-to-end energy-efficiency strategies and to understand the technical, economic and implementation issues with various efficiency measures. With industry know-how and an enabling regulatory policy, we can begin to implement those strategies across the electricity value chain.
Arshad Mansoor is the vice president of Power Delivery and Utilization for the Electric Power Research Institute.