New National Study Shows Efficiency and Renewables Can Provide Immediate Relief From High Natural Gas Prices

September 8, 2003

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Wendy Koch, 202-507-4753, Senior Director, Marketing & Communications

Washington, D.C. — New investments in energy efficiency and renewable energy generation could begin lowering natural gas prices immediately and help retain manufacturing jobs, a study prepared by the American Council for an Energy-Efficient Economy (ACEEE) released today shows. The Energy Foundation (EF) commissioned ACEEE to prepare the study, Impacts of Energy Efficiency and Renewable Energy on Natural Gas Markets, to determine whether efficiency and renewables would produce significant price reductions and cost savings by reducing demand for natural gas.

"This study shows that we can quickly reduce wholesale natural gas prices 10-20 percent and save consumers over $75 billion in the next five years, " stated David Wooley, Vice President of the Energy Foundation. "The fastest, surest way to give gas and electricity consumers relief from spiking energy prices is to enact state and federal policies to expand renewable power generation and to help consumers install more efficient electric and gas appliances, heating and cooling systems."

Specific policy solutions outlined in the study include: update state and federal appliance efficiency standards; require electric utilities to use more renewable power generation; expand rebates and grants to consumers to improve equipment efficiency and install clean on-site power generation; expand federal research and development support for emerging efficiency and renewable generation technologies; and establish tax credits for efficiency and renewable energy investments.

"The study, which is based on a scientific analysis of natural gas markets, outlines the specific benefits that energy efficiency and renewables would provide to our economy by reducing the high energy costs borne by consumers and industry," explained Dr. Neal Elliott, Industry Program Director at ACEEE and co-author of the study. "Contrary to what many are saying, there is something we can do about natural gas prices right now. Increased efficiency and renewable energy can reduce natural gas prices quickly and affordably."

According to the study, lower natural gas prices and consumption would save consumers $15 billion/year nationally from 2004 to 2008 for cumulative savings of over $75 billion over the next five years. This translates into an average residential household savings of $96 per year on natural gas bills. Additional savings would occur from lower electricity bills.

"Along with a robust and diverse supply of energy, increased efficiency is clearly a critically important component of our response to the natural gas crisis," said Peter Molinaro, Dow's Vice President of Government Affairs. "Affordable and available natural gas is critical to the health of American industry, our economy, and the environment. Leaders in the public and private sector need to do everything they can to spur investment in more efficient insulation, appliances, motors, heating and cooling systems, lighting, and clean on-site generation."

An increasing share of the electricity generated in the U.S., particularly in the Northeast, South, and on the West Coast, comes from natural gas-fired power plants. The analysis shows that natural gas expenditures by electric power generators would decrease by $6.2 billion in 2004 and by as much as $10.4 billion by 2008. This reduction in natural gas expenditures would reduce electricity rates in these regions, an additional benefit for electric power consumers.

ACEEE's Elliott noted that rapidly rising gas prices are forcing industries to close or move production to other countries. The study shows that higher levels of energy efficiency and renewable energy would stem this decline. He added, "Energy efficiency and renewable energy investments help employment in the manufacturing sector because they reduce natural gas prices and help preserve U.S.-based jobs that rely on natural gas as a manufacturing feedstock. They also create substantial numbers of jobs in construction, installation, and component manufacturing." Natural gas is used as a fuel and raw material for a wide range of products including fertilizer, plastics, chemicals, and steel.

In the wake of the northeastern blackout in August, Wooley of the Energy Foundation said that the policies that help reduce energy prices are consistent with steps needed to avoid future electric system failures. "Energy efficiency and distributed renewable generation lower peak demand on the electric transmission system and reduce the risk of system failures. They make our electric supply more secure without increasing our dependence on fossil fuel imports."

A copy of the summary report can be downloaded at http://aceee.org/energy/EFnatgas-study.htm. The ACEEE Web site also includes the following supplementary material: a resource contact list, a summary of the study's results, and a technical white paper on the methodology.