For much of the past two decades, energy efficiency offered utilities a relatively straightforward value proposition: reducing demand was often less expensive than new generation or upgrades to transmission and distribution infrastructure. When load growth remained relatively modest, efficiency allowed utilities to defer investments while delivering measurable customer savings.
But the environment has changed.
Data centers, artificial intelligence, advanced manufacturing, and electrification are driving unprecedented load growth forecasts. Utilities across North America are preparing to invest billions in generation and grid infrastructure to keep pace.
So, what is the role of energy efficiency in an age of load growth?
The answer to that question requires acknowledging that the era of easy, inexpensive savings is ending. Lighting has long been a cornerstone of utility efficiency portfolios. Through incentives, education and market transformation, utilities helped turn LEDs from an emerging technology into the industry standard.
That success created a new challenge. LEDs are now the norm, prices have fallen considerably, and increasingly stringent building codes and standards have captured much of the savings that once flowed through utility programs. The savings opportunity that once fueled portfolios is steadily shrinking.
Historically, efficiency was designed to avoid supply-side investments. Every kilowatt-hour saved was one that didn't need to be generated, transmitted, or distributed. That model worked when utilities were managing a modest incremental load growth, but today's challenge is different.
Utilities can’t efficiency their way out of gigawatts of new demand. But they can reduce the amount of infrastructure required, improve asset utilization, and lower the total cost of serving that growth.
No realistic amount of lighting retrofits or appliance upgrades will eliminate the need for new infrastructure investments, but that doesn't make efficiency less valuable. The industry's opportunity is to rethink how energy efficiency creates value in a high-growth environment.
Instead of asking whether efficiency can eliminate infrastructure investment, utilities should consider how it can reduce the scale, pace, and cost of that investment. Reducing demand can alleviate constraints on individual feeders, substations and other parts of the grid. It can reduce peak requirements, extend the useful life of existing assets and, in the right circumstances, defer or reduce the size of planned upgrades.
Those benefits become increasingly important as affordability moves to the center of the utility conversation. Infrastructure comes at a cost, much of which customers will ultimately bear through their rates.
The most valuable demand-side investments will be those that deliver multiple benefits: lower energy consumption, reduced peak demand, greater flexibility, improved resilience, and targeted relief for constrained portions of the grid.
That evolution is already underway as energy efficiency and demand flexibility begin to converge. Historically, efficiency reduced consumption while demand response managed timing. Connected technologies do both. Smart thermostats, EV chargers, batteries, connected HVAC systems, and smart water heaters can deliver energy savings while giving utilities greater flexibility to manage when energy is consumed.
Recent Franklin Energy research reinforces the connection between technology adoption and grid flexibility. Our study found that homeowners who adopt advanced electric technologies are significantly more likely to participate in utility load management programs, creating a natural pathway from technology adoption to grid flexibility.
Smart controls are an important part of this shift. Across homes, commercial buildings, multifamily properties, and industrial facilities, smart controls—from thermostats to building automation systems—can continuously identify inefficiencies, optimize operations, and respond to changing grid conditions.
The next generation of efficiency, then, may be defined less by the equipment we install and more by how intelligently that equipment operates.
But technology alone isn't enough. Connected devices only create grid value when customers participate. Helping customers understand, adopt and embrace these technologies may prove just as important as the technologies themselves.
The utility industry is entering a period in which substantial infrastructure investment and aggressive demand-side management will need to happen at the same time. They are not competing strategies.
Utilities will need new infrastructure to accommodate significant load growth. But building for growth without simultaneously finding ways to reduce, optimize, and shift demand risks making an already expensive transition even more costly.
That's where the next chapter of energy efficiency begins.
Success will increasingly be measured not only by kilowatt-hours saved, but by when and where demand is reduced and what those reductions mean for customers and the grid.
Energy efficiency is still relevant; it’s just evolved.
Franklin Energy helps utilities evolve energy efficiency programs to meet changing customer and grid needs—from program strategy and design to emerging technologies, demand flexibility, and customer participation. Connect with our experts to explore what's next for your programs.