Electricity

Introduction to
Electricity and Energy Efficiency

Decarbonization is rapidly transforming the electricity system in the U.S., and energy efficiency has an important role to play. Beneficial electrification – replacing direct fossil fuel use with electricity – saves fuel, money, and emissions. Efficient end-use technologies like electric vehicles and electric heat pump space and water heaters use less energy to provide the same services.

“Why should a course on radical energy efficiency consider electricity? Because the energy future is efficient and electric. The two strategies strongly reinforce one another.”
— Amory Lovins

Renewable generation, end-use efficiency, and flexibility of electric loads and sources are the keys to decarbonizing the U.S. electricity grid. In the old model, large, centralized plants powered by fossil fuels or nuclear energy form the foundation of the system, meeting “baseload” demand, while renewables provide intermittent, supplemental power. Economies of scale apply in the old model: large, centralized plants produced the cheapest energy until their efficiency stagnated and their business case collapsed, starting in the 1990s.

The new, decarbonized system turns the old model upside down. Renewables – especially solar PV and wind – form the foundation of electricity generation. Power plants no longer have to be large to be cost-effective. In the new model, smaller, decentralized solar PV and wind generation will be able to provide cheaper electricity than large, centralized fossil fuel or nuclear plants. Onshore wind and utility-scale solar PV are currently the cheapest sources of new electricity to build in most parts of the world, and they provide the best climate benefits in the shortest amount of time.

Transforming the Electricity Sector

Decentralized grids are also more flexible and resilient. Grids that combine many smaller sources of generation are less vulnerable to large-scale grid failure, since multiple sources would have to fail at once.

Renewables are well-suited to today’s complex electrical grids. In modern grids, all generators can serve all parts of the grid, and the grid can serve all loads. In competitive electricity markets, grid operators use merit-order dispatch: they purchase electricity from multiple different sources, choosing the options with the lowest wholesale prices. Solar PV and wind are the least-cost choice when they’re available, and they’re deployable immediately.

Contrary to traditional thinking, demand is changeable and flexible. Negawatts (increased efficiency) and flexiwatts (changing when electricity is used, known as demand response) have immense power to decrease and restructure demand to better match supply. By adopting energy-efficient end-use technologies and using integrative design to re-engineer transportation, buildings, and industry, we can provide the same – or better – energy services with far less electricity, while supplying the needed electricity with mostly variable renewable sources.

Changing when customers use electricity helps even out demand, matching it to supply rather than the other way around. Smart, connected devices can shift demand automatically in ways that don’t change services; consumers may not even notice the changes that adjust their electricity use.

Energy efficiency and demand flexibility are often less expensive than building new generation capacity, but most decision-making models don’t consider negawatts or flexiwatts. Most North American electric utilities are required to conduct “integrated resource planning” (IRP), but only a few actually integrate the demand-side efficiency resource in their models and seek the least-cost portfolio of supply and demand-side resources. 

To decarbonize our energy system quickly, we must compete and compare the demand side with supply-side resources. RMI’s (formerly Rocky Mountain Institute) analysis found that together, renewable energy, flexiwatts, negawatts, and storage are capable of providing all grid services traditionally provided by gas-fired power plants at a lower cost, with lower climate impact.

Battery storage will play an important role in a decarbonized energy supply by increasing the impact of intermittent renewables. Batteries capture excess electricity for later use, helping to fill the gaps when solar and wind resources aren’t generating as much electricity. Batteries also enable solar PV and wind to keep running when there’s too much electricity on the grid. Without a way to store excess energy, operators must curtail (shut down) excess renewable electricity generation.

Electricity from battery storage is still more expensive than generation, but costs have decreased dramatically in the past decade. Today’s lithium-ion batteries cost only 3% of what they cost in 1991. Combining batteries with wind or solar PV is already cost-competitive with other sources of electricity.

Energy efficiency has an important role to play in decarbonizing the grid. Even without integrative design, efficiency could save a third of global electricity generation by 2040. Integrative design could increase those savings dramatically in many applications, providing double the efficiency at a fraction of the cost.

Utilities will have to adapt to remain viable in a world of decentralized renewable generation. Decoupling utilities’ profits from the amount of electricity they sell opens the door for creative strategies to incentivize efficiency and load flexibility, and fully exploring these demand-side resources in all utility IRPs would accelerate decarbonization while reducing customer bills. 

“We need to encourage utilities to make customers’ increasing market power a source of collaborative success rather than competitive distress.”
— Amory Lovins

Our Lecture on
Electricity and Energy Efficiency

This is Stanford University's Integrative Design for Radical Energy Efficiency course lecture on electricity and energy efficiency. Given the length of this lecture (about 2 and a half hours), we have divided it into two separate videos. We strongly encourage you to watch both videos for a full treatment of the topic.

As renewable technologies and efficiency gain ground, the electricity system is changing rapidly. In Part 1, Amory Lovins provides a history of the U.S. electricity system and explains how renewables and efficiency are turning the traditional model upside down. In Part 2, Lovins explores how and why the electricity system is changing so radically, and what it means for utilities.

For a complete learning experience, we also encourage you to review the essential readings we assign to our students before watching this lecture.

Presented by: Amory Lovins, Lecturer, Civil and Environmental Engineering, Stanford University; Co-founder and Chairman Emeritus of RMI (founded as Rocky Mountain Institute)
Recorded: February 2023   Duration: 2 hours 40 minutes

Electricity Part 1: Electricity in the Era of Decarbonization (87 minutes)

Electricity Part 2: Transformation of the Electricity System (73 minutes)

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