It's an energy efficiency freak's dream, a power-selling utility's nightmare, and in a growing number of states, it might be coming true.

That's "negative load growth," or what happens when energy efficiency improvements shrink power use faster than demand can grow. In a growing number of states, the equation is increasingly shifting toward efficiency, Steve Nadel, Executive Director of the American Council for an Energy Efficient Economy trade group, said Monday.

At least 10 states – including Connecticut, California, Illinois, New Jersey, Ohio and Wisconsin – have targeted energy use reductions of 1.5 percent to 2.5 percent over the coming years, Nadel said during Monday morning's Energy Efficiency Forum co-sponsored by the United States Energy Association (USEA) and Johnson Controls.

"They're targeting negative load growth – in other words, the energy savings will be more than underlying load growth," he said. If the practice spreads to more states, that could lead to a long-term trend of shrinking, rather than growing, electricity demand across the country, he said.

In the short term, it's already happening, although it's mainly because of the recession's blow to the economy, which cuts power needed by factories and new homes (see Power Consumption Down for a Year in U.S., Solar Dips Too).

Still, positive steps to do the same amount of work with less energy are also part of the equation, Nadel said. And, if it leads to long-term trends that could mean fewer coal-fired power plants, which is good for the environment.

It's also a challenge for utilities that make money strictly on how much power they sell and how much they can recover in increased rates from the capital investments of building new generation sources, he said.

A number of states, such as California, have policies that "decouple" utility revenues from power sales, he said. Increasing that number will be critical for helping utilities help meet that challenge, he said.

Utilities can also get credit for energy efficiency improvements in meeting renewable energy goals set forth in the energy and climate legislation now before Congress, which will help make those investments worth something, depending on if and when the bill is passed and in what form, he said (see Green Light post).

There's a lot more money going to energy efficiency than ever before, with the Department of Energy making it a target of billions of dollars of stimulus grants and loans (see DOE Stimulus Spending: $17B So Far, $30B by Year's End).

Part of that includes $5.5 billion for federal building efficiency, and $5 billion more for low-income home weatherization (see Air Force Base Efficiency, One House at a Time).

But there's also lots of action on the state level, and not just because of DOE's $3.2 billion in state energy efficiency stimulus block grants. California is spending $3.1 billion over the next three years to boost energy efficiency through building and appliance retrofits, and others are planning billions more.

The DOE has a 2020 goal of seeing "cost-competitive" homes that are "zero energy buildings," capable of generating more power than they consume, said Mark Ginsberg of the DOE's Energy Efficiency and Renewable Energy, and has set a 2025 goal to see the same for zero-energy commercial buildings.

The DOE has identified about $1 billion in short-term energy efficiency savings from factories and office buildings that can improve their compressed air, steam and motor efficiency, he said. It's looking for partnerships with private industry to bring new efficiency technologies to market (see Green Light post).

Clay Nesler, vice president of building efficiency and global energy and sustainability for Johnson Controls, pointed out some ways it can accelerate energy efficiency if they can use new financing models, like property tax-backed efficiency investments now being popularized by cities like Berkeley, Calif. (see Green Retrofits Through Property Tax: The New Cash for Clunkers?).

But with increased government funding comes increased scrutiny, Nadel warned. In other words, be ready to prove your energy efficiency retrofit works as promised. 

"Utility commissions are requiring you have evaluations that show these energy savings are real," Nadel said.