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Conservation & DSM


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Major Topic Sections

Fossil-fueled Power
Non-Fossil Generation
End-Use Efficiency
Electricity T&D
Carbon Sequestration
Non-CO2 Reductions
Other GHG Reductions

Related topics in this section

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Conservation & DSM
Solar Water Heating
Geo. Heat Pumps


 Energy Conservation & Demand-Side Management



Energy conservation and demand-side management (DSM) encompass those activities that influence customer use of electricity to produce both desired changes in a utility's load shape and reduced costs for the customer.

The implementation of energy-efficiency programs is a vital part of industry’s short- and long-term efforts to reduce its carbon intensity. From 1989 to 2005, electric utility DSM programs saved more than 796 billion kWh of electricity – enough to power nearly 74 million average U.S. homes for one year according to EIA. This savings is equal to the annual electricity output of slightly more than 338 baseload power plants (rated at 300 MW). During the same time period, the electric utility sector spent more than $30 billion on DSM programs. These are graphed in the figures below:

(reprinted from The Power Partners Annual Report, January 2007, p. 19,

According to DOE’s Energy Information Administration in its Electric Power Annual 2005, electricity providers reported demand-side management spending in 2005 of $1.9 billion – an increase of more than 23 percent from 2004. Total actual peak-load reductions from DSM totaled 25,710 megawatts, while energy savings were reported to be 59,897 megawatt-hours.

DSM projects have made a significant contribution to the success of Power Partners thus far. Electric utility companies may provide incentives (e.g., rebates) and/or direct installation of measures to encourage actions that will improve efficiency and have potential to contribute to energy use reduction and load shifting. Utilities may also provide information and education, including technical and design assistance. The reduced energy needs associated with DSM activities will result in reduced greenhouse gas emissions.

As part of their DSM portfolios, electric utilities have invested in energy-efficiency programs and incentives. In 2005, the industry spent $1.169 billion on these efforts – a 28.5 percent increase from 2004. To help promote energy efficiency and better end use by customers, many utilities: participate in, and have won awards from, EPA’s Waste-Wise and ENERGY STAR® programs; offer energy-efficiency and other DSM programs; and provide Web-based resources to help customers calculate energy savings or estimate costs for energy-efficient practices (installing insulation, buying new appliances, installing energy-efficient windows, etc.).

The following text provides additional information and links on energy conservation and DSM for the commercial, residential, and industrial sectors respectively.

Residential Energy Conservation

Residential energy conservation activities encompass a broad range of utility and customer actions, including almost any type of program involving residential customers. Some activities involve direct conservation of energy, while others reduce peak demand requirements.

Residential energy conservation programs are primarily directed at three areas:

  Improving energy efficiency of customer appliances
  Improving energy efficiency of new and existing construction
  Managing residential load

"Load shifting" will result in reduced GHG emissions when the off-peak electricity is generated with a lower carbon fuel, or by a more efficient process, than the on-peak electricity.

Examples of some current utility programs directed at improving the energy efficiency of customer appliances and at reducing greenhouse gas emissions include:

  Installing air source and geothermal (ground source) heat pumps (GHPs)
  Replacing old inefficient air conditioners with high-efficiency units
  Installing heat pump water heaters
  Replacing incandescent lighting with compact fluorescent lighting where appropriate
  Replacing old refrigerators and freezers with new, high-efficiency units
  Performance testing of appliances and equipment

Examples of programs directed at improving the energy efficiency of new and existing construction include:


For existing construction weatherization measures




Air sealing


Window treatments


For new construction promoting whole house energy performance improvements


Increased insulation


Better windows


Superior air sealing


Improved heating and air conditioning distribution systems


Mechanical ventilation


Passive solar design and construction


Other appropriate renewable applications

Examples of programs aimed at managing residential load are:

  Home automation systems
  Direct utility control of customer air conditioners and water heaters
  Rate structures that encourage off-peak electricity consumption

Commercial Energy Conservation

Commercial energy conservation activities encompass a broad range of utility/customer interactions including almost any type of utility program involving commercial customers.

Commercial energy conservation technology options have demonstrated the potential to enable customers to exercise some level of control over their monthly energy bills while simultaneously helping their local utility achieve its load shape modification goals. Six general categories of technology options for commercial customers are:

  Building envelopes

Efficient equipment






Variable speed drives


HVAC equipment

  Thermal storage equipment
  Subsystems control
  Load management
  Community energy systems (district heating and cooling)

Industrial Energy Conservation

The industrial sector accounts for about 40 percent of both electricity and other energy consumption in the U.S. economy. The industrial market represents major opportunities for large increments of load growth, conservation, and load management.

Industrial energy conservation activities encompass a broad range of utility and customer actions:

  Load management
  Interruptible rates
  Time-of-use pricing
  End-use applications

Primary end use applications for industrial electricity can be grouped under four major headings:

  Motor drives and controls
  Process applications


  Space conditioning

The results of industrial energy conservation technology options may include:

  Reduced capital requirements
  Reduced energy consumption
  Reduced spoilage/waste
  Flexibility of raw material base
  Greater control over production
  Improved product quality and yield
  Decoupling of production from fuel supply
  Increased competitiveness
  Increased production at less energy per unit produced

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 Power Partners Projects

National Action Plan for Energy Efficiency. Launched in July 2006, the National Action Plan for Energy Efficiency (NAPEE) is designed to help invigorate efforts to conserve and use energy more wisely. The National Action Plan is facilitated by DOE and EPA, with the participation of utilities, public utility commissions, energy consumers, and non-governmental groups. Member companies of the Edison Electric Institute (EEI) are emphasizing the following actions to help implement NAPEE:
  Helping foster more energy-efficient buildings
  Promoting the development and deployment of more energy-efficient electric appliances, consumer electronics, and other electric technologies
  Accelerating the development and use of “smart” or advanced electric meters
  Supporting development of innovative electric rate-making and rate design that promote efficiency and provide customers more control over their electricity bills
  Helping commercialize PHEVs to improve transportation efficiency, reduce fuel costs, improve the environment, and help reduce dependence on foreign oil

Adoption of these and other untapped energy-efficiency practices could yield significant savings in total electricity demand nationwide by 2025, which in turn could help cut load growth compared to current forecasts. To help promote adoption of these types of practices, several tools and resources are being developed, including: a NAPEE report that details key barriers to energy efficiency, and policy and program solutions that have been used to overcome those barriers; an energy-efficiency benefits calculator to help make the business case for energy efficiency; and a number of outreach and resource materials on energy efficiency.

AEP is implementing “Energy Efficiency Plans” to offset 10 percent of the annual energy demand growth in its Texas service territory. In 2003 alone, AEP achieved more than 47 million kWh of reductions from installation of energy-efficiency measures in customers’ homes and businesses. The program is expected to achieve more than 247 million kWh of energy-efficiency gains.

APPA’s Demonstration of Energy-Efficient Developments program awards utility grants and student scholarships for a variety of projects. Since 1980, it has provided more than $6 million to about 300 projects that are of special interest to community-owned utilities. Some recent work includes research on the efficiency of photovoltaic systems, GHG emissions strategies, generating electricity from sewage sludge and digester gas, expanding renewable resources in smaller utility resource portfolios, and the impact of distributed generation on distribution systems.

As one of the founding members of the Alliance for Climate Action – a group of local, regional, and state-level professionals committed to working to reverse the growth of GHG emissions in Burlington, Vermont – Burlington Electric Department (BED) operates energy-efficiency programs targeted to all customers. Through these efforts, BED has developed relationships with energy users and gained experience in how best to meet their needs. As a result of BED’s energy-efficiency programs, annual electricity consumption in Burlington is only two percent higher than it was 1989. For its innovative program, BED earned the 2005 “Star of Energy Efficiency Award” from the Alliance to Save Energy.

The City of Shelby, North Carolina, saved more than five tons of CO2 emissions from 2003 to 2005 by switching from mercury vapor to sodium bulbs in its street lights.

In July 2006, ComEd launched Customers’ Affordable Reliable Energy (CARE), a multi-year initiative to help residential customers with their electricity bills in preparation for rate increases coming in January 2007, after the end of a nine-year rate freeze. A key component is the CARE Web site, www.ComEdCARE.com, dedicated to helping customers better manage their energy usage. As part of the program, ComEd customers purchased more than 1.2 million discounted ENERGY STAR® compact fluorescent light bulbs to help them reduce their energy usage and save money.

Delta-Montrose Electric Association (DMEA), a rural electric distribution co-op serving more than 25,000 members in Colorado, received EPA’s “Excellence in ENERGY STAR® Outreach 2006 Award” for its outstanding contribution to reducing GHG emissions through its “Brightening Our Communities” campaign. The campaign promotes the purchase of compact fluorescent lights (CFLs). DMEA’s promotional campaign resulted in the sale of 5,000 CFLs, which are expected to save 350,000 kWh annually, with a lifetime reduction of 1,200 metric tons of GHG emissions. DMEA also finances the installation of geothermal heat pumps for its members with a 7.5-percent interest rate for 30 years. The GeoExchange program has added more than 500 four-ton equivalent units with an estimated lifetime reduction of 20,000 tons of CO2. DMEA was recognized by the Association of Energy Service Professionals with its “2005 Award for Best Marketing Program.”

Energy-efficiency efforts in Exelon’s own Energy Delivery business resulted in decreased energy usage across 74 facilities by three percent annually in both 2003 and 2004. In 2005, Exelon Power saved 4.7 percent in energy costs compared to 2004 – exceeding its goal of three percent – due in part to energy-reduction initiatives like valve-open starts, which reduce the plants’ start-up time, associated fuel burn, and emissions by approximately 50 percent. At Exelon Nuclear, the most cost-effective initiatives identified in energy assessments are in the process of being implemented.

By 2008, all of FPL Group’s DSM and energy conservation programs are expected to reduce peak demand by 2,800 MW. Through these programs, FPL is able to reduce energy costs for its customers, defer the construction of new power plants, and make more efficient use of its existing generating units.

Great River Energy (GRE) of Elk River, Minnesota, spent nearly $18 million on load management and energy-efficiency efforts in 2005. GRE offers a variety of energy-efficiency programs that are promoted through rebates or special electric rates and incentives. For example, in 2005 GRE provided rebates for more than 5,600 ENERGY STAR® residential air conditioners and heat pumps. GRE’s energy-efficiency efforts will yield a lifetime energy savings of nearly 400 million kWh  –  or enough to power nearly 29,000 residential homes for one year.

Muscatine Power and Water (MPW), in Iowa, sponsors many DSM activities, including programs for MPW and its customers to replace lighting fixtures, light bulbs, and large motors with more energy-efficient models. In 2005, MPW saved nearly 1,700 MWh of electricity through DSM actions.

Omaha Public Power District’s DSM projects saved more than 33,000 MWh of electricity in 2005.

Progress Energy’s DSM programs saved 6,000 MWh of electricity in 2005.

Salt River Project, in Phoenix, conducts a number of DSM programs, including PowerWise Homes, M-Power, and energy audits. In 2005 alone, these efforts saved more than 130,000 MWh of electricity.

Springfield, Illinois, City Water, Light & Power’s DSM actions include both residential and commercial programs that saved nearly 3,300 MWh of electricity in 2005. This savings resulted in more than 4,000 tons of avoided CO2 emissions.

TVA and the distributors of TVA power offer residential energy-efficiency programs marketed under the brand name energy right®. The program promotes the construction of energy-efficient new homes and the installation of energy-saving heat pumps in existing homes and small businesses. The program also offers energy-management tools to help consumers analyze their power consumption and find ways to use energy wisely. The energy right® program also promotes sustainable development. The program certified 954 ENERGY STAR® homes in the Tennessee Valley through the end of the 2006 fiscal year. TVA also addresses the commercial and industrial sectors through more customized energy-efficiency efforts. These combined initiatives across all sectors accounted for estimated reductions in power demand of 45 MW in 2005, and an additional 50 MW in 2006. In total, these efforts have contributed to a cumulative demand reduction of 496 MW since 1996.

Wisconsin Public Power’s DSM programs saved more than 125,000 MWh of electricity in 2005.

Xcel Energy’s DSM activities saved more than one million MWh of electricity in 2005. Examples of programs include energy-efficient equipment and process rebates, and load management programs for residential and business customers.

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 References, Sources, and Other Useful Data


American Council for an Energy-Efficient Economy (ACEEE), “ACEEE Industry and Agriculture Program: Manufacturing”

ACEEE is actively engaged in developing national industrial energy strategies while serving as a resource to government, utilities, public interest groups, and businesses. ACEEE's Industry Program has been working on issues related to energy efficiency in manufacturing since its creation in 1993. They conduct research and technical analysis of energy savings potential and work to promote and advance more efficient technologies and processes utilized in all areas of manufacturing. Increased efficiency in this sector means lower energy bills for the manufacturers themselves, economic growth for the U.S. as a whole, and reduced pollution including carbon dioxide and other greenhouse gases. This page contains all of the reports produced by the Industry Program since its creation in 1993 as well as white papers and other policy papers and analysis.

Collaborative for High Performance Schools (CHPS)

The Collaborative for High Performance Schools (CHPS) aims to increase the energy efficiency of schools in California by marketing information, services, and incentive programs directly to school districts and designers. The Collaborative's goal is to facilitate the design of high performance schools: environments that are not only energy efficient, but also healthy, comfortable, well lit, and containing the amenities needed for a quality education.

Edison Electric Institute, "Get Energy Active"

This website, sponsored by the Edison Electric Institute (EEI), is aimed primarily at residential consumers and educating them about the wise use of electricity and steps they can take. Topics covered include the value of electricity, climate change, wise use of electricity, investing in the future, getting involved, and others. Discussion boards and links to videos and interactive maps extend and tailor the content to the user's needs. Read their monthly newsletters to learn why a smart electric future benefits us all.

Elliott, R. Neal, Miriam Pye, and Steven Nadel, “Partnerships: A Path for the Design of Utility/Industrial Energy Efficiency Programs” (ACEEE publication, 1996)

The programs featured in this paper demonstrate that successful models do exist for utility industrial energy-efficiency programs. Replicating successful utility/industry partnerships that result in part in energy savings could contribute to the competitiveness and strength of both industries and utilities in the future.

Energy & Environmental Building Association

EEBA provides education and resources to transform the residential design, development and construction industries to profitably deliver energy efficiency and environmentally responsible buildings and communities. EEBA membership is designed to provide industry professionals, manufacturers and organizations with services that enhance their work through education, networking, marketing and advocacy. It also sponsors the “Excellence in Building Conference & Expo”.

Environmental Protection Agency and U.S. Department of Energy, “Energy Star Program”

ENERGY STAR is a government-backed program helping businesses and individuals protect the environment through superior energy efficiency.

Jordan, Jennifer and Steven Nadel, “Industrial Demand-Side Management Programs: What's Happened, What Works, What's Needed” (ACEEE publication, 1993)

This report documents utility experience with industrial DSM programs and provides recommendations to utilities and other key players on steps that could be taken to advance the field of industrial DSM. The database contains 31 incentive-based, energy-saving industrial DSM programs offered by 17 utilities. The appendix to this report summarizes the results of approximately 60 industrial DSM programs.

Martin Schweitzer and Miriam Pye, “Key Factors Responsible for Changes in Electric-Utility DSM Usage” (ACEEE publication, 1995)

In light of recent and ongoing changes in the electric-utility industry, considerable attention has been focused on the question of how utility-sponsored demand-side management (DSM) programs will fare in a more competitive environment. Researchers at Oak Ridge National Laboratory and the American Council for an Energy-Efficient Economy surveyed staff at 37 electric utilities and 22 state regulatory commissions for the purpose of identifying recent and projected changes in utilities' use of DSM resources and the key factors responsible for this. In general, utilities reported that their programs will change over the next few years in ways designed to make them more cost-effective and service-oriented.

"National Action Plan for Energy Efficiency"

The goal of the National Action Plan for Energy Efficiency is to create a sustainable, aggressive national commitment to energy efficiency through gas and electric utilities, utility regulators, and partner organizations. The National Action Plan for Energy Efficiency is a private-public initiative begun in the fall of 2005 to create a sustainable, aggressive national commitment to energy efficiency through the collaborative efforts of gas and electric utilities, utility regulators, and other partner organizations. Such a commitment can take advantage of large opportunities in U.S. homes, buildings, and schools to reduce energy use, save billions on customer energy bills, and reduce the need for new power supplies. National Action Plan Leadership Group members are identifying key barriers limiting greater U.S. investment in energy efficiency, and developing and documenting sound business practices for removing these barriers. The Leadership Group members and Observers have been joined by numerous other key stakeholders in making commitments under the National Action Plan to work within their own organizations and across their spheres of influence to increase attention to, remove barriers to, and increase investment in cost-effective energy efficiency.

New Buildings Institute

The New Buildings Institute, Inc. (Institute) is a not-for-profit corporation dedicated to making buildings better for people and the environment. Incorporated in 1997, its mission is to promote energy efficiency in buildings through policy development, research, guidelines and codes.

Southern Cal Edison, “2006 Energy Efficiency Annual Report” (May 2006)

SCE’s nationally recognized expertise, leadership and track record of success in energy efficiency. Their extensive annual reports describe their numerous activities in both the residential and commercial sectors. This Summary Report and Technical Appendix document results for the year 2005.

U.S. Department of Energy, Energy Information Administration, “Electric Power Annual 2007” (January 2009)

Released in January 2009, this EIA report includes data and trends on electric demand, retail customers and sales, and demand-side management savings. Chapter 9 of the report compiles summary statistics from Form EIA-861 on DSM capacity load reductions, energy savings and costs.

U.S. Department of Energy, “DOE Partnerships for Affordable Housing”

DOE’s Partnerships for Affordable Housing help housing providers improve the energy efficiency and affordability of public and privately owned single-family and multifamily housing for low- and moderate-income families. The program collaborates with other federal agencies, state and local governments, utilities, and the housing development and financing industries to meet the needs defined by local housing providers. Partnerships are designed to build lasting capabilities among housing managers for technical analysis, financial management, project development, and to apply proven technologies and practices in communities.

U.S. Department of Energy, Office of Energy Efficiency and Renewable Energy, “Industrial Technologies Program”

In its Industries of the Future Program, the Industrial Technologies Program (ITP) maximizes its technology investments through collaborative R&D partnerships in nine vital industries. These nine industries necessarily use large amounts of heat and energy to physically or chemically transform materials. Collectively, they supply 90% of the materials vital to our economy, produce $1 trillion in annual shipments, directly employ over 3 million people, and indirectly provide an additional 12 million jobs at all skill levels.

U.S. Department of Energy, Office of Energy Efficiency and Renewable Energy, “Weatherization & Intergovernmental Program: Weatherization Assistance”

The U.S. Department of Energy (DOE) Weatherization Assistance Program reduces energy costs for low-income households by increasing the energy efficiency of their homes while ensuring their health and safety. DOE provides funding to states, which manage the day-to-day details of the program. Low-income families receive services from a network of more than 900 local weatherization service providers.

U.S. Green Building Council (USGBC)

The U.S. Green Building Council is the nation’s foremost coalition of leaders from across the building industry working to promote buildings that are environmentally responsible, profitable and healthy places to live and work. Council members work together to develop LEED® (Leadership in Energy and Environmental Design) products and resources, the Greenbuild annual International Conference and Expo, policy guidance, and educational and marketing tools that support the adoption of sustainable building. LEED Green Building Rating System is a national consensus-based, market-driven building rating system designed to accelerate the development and implementation of green building practices.

Western Area Power Administration (WAPA), “Energy Fact Sheets”

These are downloadable fact sheets designed for customer use as a part of residential outreach programs. These fact sheets can provide basic information to your customers on how to "think" about energy efficient appliances and what questions to ask when making purchasing decisions.

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Last revised: Dec. 11, 2009.