Repowering chicago: accelerating the cleaner, more resilient and more affordable electricity market transformation
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- LEDs are taking over in the lighting sector.
- Site Electricity Savings (TWH)
- Sector 2015 2020 2025 2030`
- There will be a greater reduction in electricity sales in the Chicago region through increased LED market share than the national and Midwest averages.
- 4,679 47.7 67.4 41.9 14.3
- The calculation for the commercial and industrial sectors has more variables, but is likely in the range of an additional 3.5% reduction of overall electricity demand in Northern Illinois by 2025.
- That percentage might be even higher
- Retail prices on LEDs are falling quickly and speeding adoption rates.
- More Energy Efficient Appliances: Game Changing Energy Efficiency Impacts in Reducing Electricity Demand
In short, the Chicago region’s and the overall Midwest’s economic growth is de-linked to electricity use. Our Chicago regional economy is growing more efficiently. These negative 1.0% - 1.5% annual regional electricity demand reductions will help enable the Chicago region and Midwest to grow by reducing businesses’ electricity costs, thereby helping their bottom lines, and by providing residential consumers with more disposable income to spend on their local State Streets and Main Streets. The electricity demand reductions will help achieve carbon pollution reduction goals without sacrificing overall economic growth. This will help enable the Midwest to transition through the retirement of more coal plants without creating reliability problems. These electricity demand reductions will also help to hold down wholesale power market prices, which cause a financial problem for owners of existing power plants, but creates economic savings for almost all other business, residential and governmental electricity consumers. These are exciting, challenging and transformative times for Chicago and the Midwest to achieve environmental progress and economic growth together. Why is this happening? The structural changes in the Midwest economy with the shift from energy-intensive manufacturing to a less energy-intensive service economy held electricity use lower than it otherwise would have grown. Manufacturing that has “stayed” in the Chicago region and Midwest is much more energy efficient. Electricity demand declined during the 2008 - 2009 economic recession. But that wasn’t just a temporary blip as some then argued. Electricity demand and use has continued to decline during the post-recession housing recovery while Chicago’s economy is growing. The 4.0% - 5.0% delta between electricity sales decline and economic growth is due, in (large) part, to the quiet revolution in energy efficiency – and there’s more to come.
Energy efficiency is quietly reducing electricity use and sales in the Chicago region through the cumulative decremental impacts of continual technological improvements in lighting, HVAC, appliances, pumps and motors and other equipment efficiencies. As consumers regularly replace their refrigerators and HVAC systems, buy other new appliances, upgrade commercial lighting and replace old incandescent bulbs, that steady turnover results in less overall electricity use. The especially significant impacts of the great leap forward of highly efficient LED lighting and more efficient appliances are explained below. They are part of the quiet revolution in energy efficiency due to policies, research labs’ R&D and technological advances, and “normal” consumer purchasing decisions to replace old light bulbs and upgrade their appliances.
LED lighting is a game changer. The rapid market penetration of more efficient Light Emitting Diode (LED) lighting, alone, will likely reduce overall electricity demand in the Chicago region by about 7.5% by 2025. LED lights are 85% more efficient than incandescent bulbs and can last up to 20 times longer. LEDs increasingly come in a wide range of pleasing color spectrums, are dimmable, can be designed and sold in various sizes, and, unlike CFLs, don’t contain mercury. LEDs are moving to the “front and center” position in lighting sales displays at retail stores. Trend-setter Ikea recently announced that it will only sell LED bulbs and LED lamps by 2016.35
In November 2014, GE stated in a presentation that LED technology will reduce United States lighting energy consumption by 15% in 2020 and by 40% in 2030, resulting in a cumulative savings from 2013 to 2030 equivalent to the electricity used by 51 million households.38 Philips projected that the entire lighting market would grow 5% - 7% annually in 2013 - 2016, with the LED segment of the market realizing much higher growth. From 2011 to 2012, Phillips’ LED lighting sales rose by 58%.39 A former CEO of Philips noted in April 2012 that he saw an 80% LED penetration rate “in the cards” and projected 25% penetration by 2014.40 Navigant Consulting, in conjunction with the U.S. Department of Energy, published a thorough estimation of the energy savings potential of LED lighting in the United States.41 They found that LED market share, as a percentage of lumen hours, will reach a market share of 84% by 2030, saving 261 TWh annually by then—a 40% reduction in site electricity consumption relative to baseline estimates. This is the equivalent to the capacity of roughly 50 1,000-MW coal-fired power plants, and approximately $25 billion at today’s energy prices. LED adoption in the residential sector alone—with LEDs constituting about 83% of lumen hours in 2030—are projected to account for 61 TWh of savings in 2030, about 11 power plants’ capacity, and a 53% reduction in site electricity consumption. Market penetration in the commercial sector will be similar at 82%, while energy savings are significantly greater at 139 TWh. The market share for LED’s in the commercial sector is expected to accelerate even more rapidly than in the residential sector as shown in Table 2. Table 1: Total U.S. LED Forecast Results
Table 2: LED Market Penetration Forecast by Sector
The potential for electricity use savings in the Midwest are even greater. According to a report prepared for the U.S. Department of Energy by DNV KEMA Energy & Sustainability and Pacific Northwest National Laboratory, every Midwestern state had above-average energy consumption for lighting in 2010.44 The exact cause for this trend cannot be determined definitively without more data. However, the report notes that the Midwest has above average lamps per household (71.2 - 89 v. 67.4 U.S.) and power per lamp (49.4W- 53W v. 47.7W U.S.). Table 3: U.S. Household (HH) Lighting Statistics by State
This data shows that Illinois and Missouri have a combination of the highest average lamp power per household, the largest average number of light bulbs (lamps) per household, and the largest average number of incandescent bulbs per household. The bottom line: the acceleration of LEDs’ market share will achieve above-average large electricity use savings in Illinois, which has a 15.1% higher than national average number of overall light bulbs and a 20% higher than the national average number of old, inefficient incandescent bulbs to be replaced. In Commonwealth Edison’s service territory in Northern Illinois, lighting is a much larger percentage of the residential and commercial sectors’ electricity use than the national average percentages. Therefore, the energy savings impacts of switching from incandescent bulbs to LEDs are even greater here.
For Commonwealth Edison’s service territory in Northern Illinois, here’s the impact by the numbers. The projected switching 71% of the lumen-hours (“lighting”) to LEDs in the residential sector by 2025 would, alone, reduce almost 3% of overall electricity demand in Northern Illinois.49 The calculation for the commercial and industrial sectors has more variables, but is likely in the range of an additional 3.5% reduction of overall electricity demand in Northern Illinois by 2025.50 Add in more electricity use reductions from LED installations in governmental facilities that are not included in the commercial customer class. The projected market penetration of LEDs by 2025 is thus likely to reduce overall electricity use in Northern Illinois by about 7.5% from the combined residential, commercial and industrial, and governmental customer classes. That percentage might be even higher in Chicago than the average across Northern Illinois because of the high concentration of downtown commercial office buildings with savvy energy managers and the large number of governmental buildings with potential for energy savings through LED installations. The energy savings potential of more efficient lighting technologies, especially LEDs, is immense. Through policy developments and market forces, the United States is on an accelerating path of energy savings that can reduce the need for centralized generating plants.
McKinsey & Company updated its 2011 study on the global lighting market in 2012 to show that LED package prices were eroding 4% per year faster than expected.51 This means that the so-called “inflection point” for LED lights in the residential sector (the price point at which paybacks are faster than the perceived consumer acceptance of a 2 - 3 year threshold) will be reached in 2015. Navigant remarks in its study that some SSL manufacturers foresee LED market penetration occurring at faster-than-projected rates.52 The rapid price reductions are also referenced by several major manufacturers’ public statements and activity. In January 2012, Philips announced price cuts to its LED light bulbs, and its CEO has stated they are aiming for a price point for LED bulbs at “well below $10”.53 Cree, a U.S. manufacturer, cut the price of outdoor streetlights by 50%. In 2012, Environmental Law & Policy Center staff found only three different brands of indoor LED lights being sold at Home Depot that were priced below $10 per bulb. Now, in 2015, there are at least eight brands of LEDs with sub-$10 offerings. These price drops and consumer acceptance of LEDs is occurring around the Midwest. In Ohio, for example, American Electric Power reported that although only 2% - 3% of bulbs sold were LEDs in 2013, the market share for LEDs rose to 11% in 2014. LEDs are an easily-installed game changing efficiency technology that will significantly reduce electricity use in Chicago and throughout the nation over the next decade.
The energy savings potential of more efficient residential and commercial appliances is very large. Federal and state appliance efficiency standards driven by public policies, technological improvements as appliance manufacturers compete on the basis of energy efficiency ratings, and market demand driven by ENERGY STAR ratings and overall consumer awareness are combining to reduce electricity demand. In some cases, European standards have also caused manufacturers to improve their efficiencies for appliances sold in global markets. The Illinois Energy Efficiency Performance Standards program and other Illinois-specific efficiency programs, which provide rebates and other incentives for purchases of more efficient lighting, appliances and other equipment, “nudge” consumers to adjust their buying patterns to upgrade sooner (thereby gaining energy savings sooner) and choose to purchase more efficient products.
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