Utility Efficiency Programs: The Most Cost Effective Way to Address Peak Demand Now

Energy demand across the nation is skyrocketing. The demand generated from crypto-mining and data center development exacerbates already strained grids all over the US. Texas, like other states in the country, is experiencing the same staggering load growth projections. And as many in the state like to remind you, everything is bigger in Texas, so too are our load growth projections…

Current long-term load forecasts for 2032 show peak demand surpassing 367 GW of demand.[1] Put into context, that’s quadrupling our existing peak demand record of 85.5 GW set in 2023. That’s not to say that it’s a guarantee that peak demand will reach that high, however it should serve as a warning sign that we must seriously address both the generation and demand-side needs of the state for the near and long-term now.

SPEER has long been an advocate for the suite of demand-side management policies and practices that directly impact our grid reliability, resilience, and lower customers’ energy costs. These solutions represent the most cost-effective way to address load growth in the near-term. We recognize that demand-side solutions alone will not solve the issue but can act as a bridge to provide state policymakers, generators, and other stakeholders time to build out necessary infrastructure, while simultaneously saving Texans money each month.

 

Energy Efficiency Plans and Reports

Energy efficiency is one such potential bridge product. The Texas investor-owned utilities (IOU) have developed a vast portfolio of energy efficiency programs for residential and small commercial customers to participate in to reduce their demand and save money on energy bills. These programs are consistently effective at doing just that, boasting between 3:1 and 4:1 benefit cost ratios in recent years and reducing demand by hundreds of MWs. Every year SPEER takes some time to review the Energy Efficiency Plan and Reports (EEPR) filed with the Public Utility Commission of Texas (PUCT) by the utilities. These EEPRs provide valuable insight into how the IOUs are performing in their statutorily mandated energy efficiency programs.

Program year 2025 saw an increase in IOU expenditures and an increase in MWs of demand reduced to its highest level yet. This is certainly an accomplishment the IOUs should be proud of, while also signaling the importance of energy efficiency in the planning process.

 

 

The above graphic shows the upward trend we see from the IOU efficiency programs for demand reductions achieved. This increase in MW reductions is made even more impressive by the fact that expenditures have generally stayed stagnant since 2012 (between $120-160 million cumulatively) with larger hikes in spending being a recent phenomenon. In other words, we continue to see the high benefit-cost ratio in action; for every dollar we spend in energy efficiency, Texas gains $3-4 back in benefits.

How does this stack up to the statutorily mandated goals? In a few words, the IOUs did very well against the existing goals. The below graphic shows that every year the utilities have exceeded their goal, and with the inclusion of load management programs, they have cumulatively more than doubled their goal.

 

 

Targeted Efficiency Measures = State EE Strategy

As noted above, the utility programs have remained somewhat stagnant in spending since 2012. One reason for that is that there have been no significant changes to energy efficiency rules since 2012 (until December 2025, where the PUCT adopted a few minor rules on definitions and utility bonus structure). As a result, the programs have been able to continue maturing, however developing new programs under current rules has been challenging for utilities as fully-fledged programs must be cost-effective. Why is this important if the existing programs are still producing results? Is there a need for new programs? These are fair questions to ask. The answer lies in technologies like high efficiency heat pumps, which until recently could not be accurately counted towards utility programs in the state’s technical reference manual. Heat pumps, specifically all-climate variable speed units, have been shown in recent studies to significantly reduce peak demand for Texas residential and small commercial customers, while saving those customers millions of dollars annually.[2] And currently, the primary driver of Texas’ peak load in both summer and winter is residential and small commercial heating and cooling, not data center development, yet.

 

 

To address our existing peak load, designing a system for our utilities to incentivize efficiency measures we know will reduce peak should be paramount, like heat pump adoption. However, without the ability to show their savings potential, IOUs had not been inclined to establish programs for them. SPEER, its internal heat pump working group, and the EM&V contractor for Texas worked to finally develop a stand-alone metric for variable speed all climate heat pumps. SPEER’s heat pump working group has advocated this cycle for continued refinement of the new algorithm so that IOUs earn more accurate savings from the installation of these measures. While still a work in progress, utilities now have more of an incentive to establish heat pump offerings.

Several IOUs have begun the process of adopting more heat pumps in their territories. For example, CenterPoint Houston’s Targeted Low-Income MTP saw installation of over 1,600 heat pumps in eight multi-family complexes and installation of heat pumps in 442 homes across the service territory. Other utilities like AEP Texas and Entergy have all noted in 2026 they plan to promote heat pumps through sub-programs to reduce the number of electric resistance heat units in their low-income communities.

This isn’t to say heat pumps are the only technology that will impact peak load growth in a meaningful way. Smart thermostats, ceiling insulation, and other measures can reduce load quickly if scaled appropriately and strategically. Focusing on these newer, more efficient forms of established energy efficiency measures allows for a reshaping of how the programs are administered, all while some of the established measures are tapped out for scaling.

 

Long Term State Policy Actions

In Texas, there are several initiatives all going on at once to address both generation and demand growth. Much of the public discourse is focused on generation, with the Texas Energy Fund passage, small nuclear reactor development, and the inevitable debates over the role of renewables in the energy resource mixture. On the demand-side, Texas still has its aggregated distributed energy resource (ADER) task force on-going at ERCOT. The State Energy Conservation Office just announced the winner of the $680M Home Energy Rebate contract stemming from the IRA. And not to be lost in the shuffle, the efficiency programs remain a constant fixture in demand-side management. These are just a handful of the demand-side actions taking place in Texas, however now is the perfect time for state leadership to provide a roadmap on where they see all these actions leading.

The Legislature established the Energy Waste Advisory Committee (EWAC), comprised of state agencies that directly impact energy consumption in the state, led by the PUCT. The EWAC is the perfect conduit for state leaders to develop a comprehensive strategic plan to expedite demand-side energy solutions that will enhance grid reliability and resiliency. Texas policymakers have the opportunity to provide valuable insight into the direction of how these various initiatives can work together to act as a force multiplier, boosting energy savings and demand reductions. By focusing on high performing technologies that target specific sections of what our peak demand is comprised of, these efforts could significantly improve the lives of Texans across the state and save precious dollars that can then be spent back into the economy.

 

[1] https://www.ercot.com/news/release/04152026-ercot-releases-preliminary
[2] https://auroraer.com/resources/aurora-insights/articles/impact-of-demand-side-management-in-ercot