Energy efficiency reduces overall energy intensity for a specific energy use without concern for the timing of the use. It is a permanent change in energy consumption, generally with no decrease in service level. Examples include putting insulation in a building to reduce heating and cooling loads, installation of energy efficient lighting, and replacing older electric motors with variable speed drive motors.
Consumers may invest in energy efficiency for one or more reasons. The most common is simply to reduce energy bills while still maintaining the same level of service. But energy efficiency may also be funded by various programs including:
- Aggregation of energy efficiency installations as part of an ISO wholesale capacity market
- Utility incentives or rebates designed to reduce the need to build new generation or transmission/distribution capacity
- Investments by a third party as part of a carbon offset program
In many cases energy efficiency is viewed as the lowest-cost method of attaining new electric capacity and reducing greenhouse gas emissions. It can also reduce utility peak demand, allowing the utility to avoid purchasing gas or electricity when prices are the highest.