At LightFair, I was part of a panel presenting the impacts of electrification on the lighting industry. This article is Part 3, about various factors that will all drive up energy costs for building owners and motivate much larger energy efficiency retrofits moving forward.
Electric utility rates have historically increased an average of 2.5% annually over the past 20+ years. However, according to utility expert Robert Bryce:
“Last year, U.S. all-sector electricity prices jumped by 12.5%. In some states, prices rose even faster. (California’s rates were up by 14.4%, Oklahoma’s were up by 18.2%, and Maine’s all-sector electricity prices soared by 26.1%.)
But those 2022 price increases are likely only a soupçon of the price surges to come. While overall inflation in the U.S. economy was 8% last year, the cost of utility products—a host of items ranging from pole-mounted transformers and copper wire to anchor bolts and wood poles—soared by 18%. And that inflation came on top of the 2021 increase of 14%. Thus, utility product costs have risen by 34% or more than twice the inflation rate across the U.S. over the past two years.”
These unprecedented electricity rate spikes will continue under the pressure of rapid electrification. Higher electricity rates increase the return on investment (ROI) for energy efficiency retrofits in all types of buildings.
Rising electricity rates aren’t the only driver, however. In Part 2 of this series, I discussed significant new electrical infrastructure required to add EV charging and electric heat and hot water to existing buildings. These can include new transformers before the property line and additional breaker box service. Moderate size commercial buildings can face $1 Million of added infrastructure to electrify and add EV chargers. Increasing building efficiency could reduce the additional infrastructure costs, creating a new ROI for increased efficiency.
Many states and municipalities are instituting fines on building owners to enforce new energy / GHG benchmarking requirements. I’ll cover these new fines in another article, but they will provide another new ROI for deeper efficiency retrofits.
Tightening energy codes covered in the Part 1 article will also drive greater efficiency retrofits when code compliance is required for renovation projects. This isn’t an ROI calculation, simply a code compliance requirement.
Finally, many companies are beginning to take action on climate resiliency planning and goals. This often involves generators, battery energy storage, and even on-site generation, like solar panels. Costs for all of these resiliency measures can be reduced by significantly reducing building energy use through efficiency retrofits. This is also a new ROI for deeper efficiency retrofits.
Combined, the above factors will significantly increase the ROI for deep energy efficiency retrofits. Both LED lighting and advanced lighting controls will often be a part of such efficiency retrofits.
Part 1, about rapidly changing building and energy codes, can be found here.
Part 2, about new electrification products sold in the lighting industry, such as EV chargers and e-bikes, can be found here .
Image: https://robertbryce.substack.com/p/untransformed
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