With the prospect of abundant supply and low natural gas prices into the foreseeable future, and the potential for continued declining use per customer, many natural gas companies are asking themselves a fundamental question about energy efficiency: why do it? Or perhaps better stated, why do anything more than meet the minimum regulatory or legislative requirements?
The case for doing more in natural gas energy efficiency revolves around answering two central questions:
(1) With low natural gas prices, are there any energy efficiency measures that make economic sense for customers and utilities alike?
(2) Is there an approach to energy efficiency that makes sense for shareholders?
Low natural gas prices are generally very good for customers. Nonetheless, low commodity costs produce less potential savings from traditional natural gas energy efficiency measures, perhaps leading customers to conclude that higher upfront costs for greater efficiencies may not be recovered over a product’s useful life. Similarly, low avoided costs create challenges for natural gas local distribution companies (LDCs) in terms of meeting traditional regulatory cost-effectiveness tests for these programs. In pure economic terms, customers seek a solid return on investment (ROI) or simple payback on efficiency investment; and, LDCs seek certain cost recovery (and perhaps more). That’s a tall order on both counts.
This paper is the first in a series of white papers. Learn more about the other white papers in the series by following the links to Natural Gas Energy Efficiency: Making It Work for Shareholders and Natural Gas Energy Efficiency: Cost Effectiveness-Getting It Right.Download the first natural gas EE white paper