Lies, Damn Lies and Statistics: A Look at Demand Response and Energy Efficiency

Oct. 27, 2016
How big of a "market" is demand response and energy efficiency?

What dollar value do we get if we simply take current energy-efficiency (EE) and demand response (DR) energy and capacity savings, assign a generous retail market rate to them and multiply the dolar per kWh to get some numbers?

Let’s be generous and easy on ourselves mathematically, and answer this question multiplying energy by 10 cents per kWh, and capacity with a “generous” number of $1,000 per kW. EIA’s most recent data, per the table below, can be our starting point:

Taking the figures on the right of the EIA table, we end up with what appears to be a slow growth rate of less than 1% in customers as shown in Table 2’s Total Savings dollar amounts. 

There are some pitfalls Mark Twain’s quotation about “damned statistics” should keep us weary of. For example, the temptation to take an average and show a per-person savings would yield deceptive results of $1,300 per person and 10 times as much for “new” customers. Why would such averages be bogus? Because they are meaningless averages based, to an indeterminate extent, on “noise” due to the data being a mix of commercial and industrial customers along with residential, and due to the annual variations in what portion of total potential peak savings was achieved in one year versus the next.

Shouldn’t we expect DR and EE to grow, given what a small portion of total U.S. electric utility customers are currently involved?  How does performance compare to predicted values for investments in these programs going forward. 

With such considerations, it is of interest to remember that any market forecast or trend prediction is, literally, a “pre-diction,” or a speaking in advance. 

I like reminding myself of this because it reconnects me with who actually has the final say.

The final say about the size of a market is how and where money gets spent in it.

In some markets, a prediction from a pundit can directly impact the market penetration of a newly-introduced product.  But most electric utility infrastructure investments are not in that category, since utilities cannot shift their investments based on opinions about the fashion of the day. 

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