by Julia Pyper
September 14, 2018

Renewables, energy storage and electric vehicles often hog the spotlight in the clean energy space, while energy efficiency toils away on the sidelines.

This week was no exception. The conversation quickly turned to renewables and batteries with the signing of California’s 100 percent clean electricity mandate on Monday. Renewable energy and electric vehicle commitments dominated news coverage around the Global Climate Action Summit.

“As soon as this issue of clean energy and climate change [comes up], the next words are ‘solar’ and ‘wind’ — which I totally support; I think they’re wonderful,” said Stephen Cowell, president of E4TheFuture, on the sidelines of GCAS. “But if we’re wasting lots of energy, we’re going to have to do way more clean energy in order to meet our needs.”

“The net result is we’ve got to do them together,” he said.

President of the California Public Utilities Commission, Michael Picker, took that thought a step further.

“Getting people’s minds off of renewables to begin thinking about all of the other opportunities and the other challenges we have is probably the biggest challenge we have in California,” he said at a CPUC event this week.

The success of California’s energy efficiency programs, which date back 40 years, “is probably the most singular feature of energy policy here in California,” he added.

Investments the state has made in reducing demand for electricity — from appliance standards, to buildings standards, to the deployment of cogeneration — haven’t been cheap. That’s part of why California’s electricity rates are so high, said Picker. But, thanks to efficiency, Californians’ electricity bills are actually lower.

“So when I talk to people in other states and they ask me why people aren’t rioting in the streets over the high electric rates in California, I point to the lower bills,” he said.

While it’s not the most attention-grabbing, states continue to advance bold energy efficiency policies. Massachusetts, for instance, just passed a clean energy bill that takes into account new technologies and approaches, including demand management and “strategic” electrification. According to Cowell, the Massachusetts bill represents a breakthrough in comprehensive energy efficiency planning.

More states are also following in California’s footsteps and starting to take action on appliance standards — a policy area where the federal government has typically led.

This column takes a closer look at some of the most important efficiency measures put in place this year, now that many state legislative sessions have come to an end.

An innovative efficiency program in Massachusetts

Massachusetts is already known for its nation-leading energy efficiency policies. In passing the Act to Advance Clean Energy, the state took its energy efficiency policymaking to a new level. 

The legislation broadens the definition of costs and benefits related to efficiency programs to more fairly account for the benefits side. “It means that measures which might not be cost-effective under a really strict set of screening [criteria] will now be eligible for ratepayer funding,” said Rachel Gold, utilities program manager at the American Council for an Energy Efficient Economy (ACEEE). “And it means that benefits that were previously more difficult to quantify may be captured by the programs.” 

Ultimately, that means the Massachusetts Department of Public Utilities can add other demand management technologies to efficiency programs, including energy storage, EV charging and renewables. According to E4TheFuture, the bill also “increases the scope of demand management, incorporating strategic electrification and establishing cost effectiveness criteria on a sector level rather than by program measure.” In addition, it explicitly incorporates greenhouse gas reduction goals into Mass Save.

The bill asks utilities to account for all available clean energy resources in setting and meeting their efficiency targets, said Cowell.

There’s still a lot of work that has to be done on this, he added. The DPU and other stakeholders now have to evaluate alternative technologies, like switching from oil and gas to a heat pump. What kinds of heat pumps are available today? What’s their carbon impact? How should these technologies be valued? How can that value be monetized?

“What the legislation did is say, ‘Get rid of the silos, step back and put it all together in a logical, step-by-step plan to meet our climate and energy goals together,’” said Cowell. That probably means Massachusetts will eventually have to adjust its renewable energy goals as well, he added.

Massachusetts is the first state in the nation to integrate a comprehensive set of energy efficiency goals in this way.

According to ACEEE, states that lead on energy efficiency typically have three types of programs in place:

  1. An energy efficiency resource standard, which sets electric and/or natural-gas energy savings targets for utilities, much like an RPS for efficiency. According to ACEEE, 26 states are currently implementing long-term (three or more years), binding energy savings targets. 
  2. Revenue decoupling, which removes disincentives for efficiency by ensuring utilities have full cost recovery of authorized revenue requirements, no matter the level of electricity sales.
  3. Performance-based incentives or ratemaking, which offers a reasonable earnings opportunity for the successful implementation of energy efficiency programs. 

Massachusetts had all three of these policies in place before passing the Act to Advance Clean Energy.”

“What the recent bill addresses,” said Gold, “is some of the challenges associated with energy efficiency, even if you have those great programs in place.”

Other states boost efficiency requirements

Massachusetts wasn’t the only state to pass meaningful efficiency policy this year. 

The Arkansas Public Service Commission, for instance, boosted its energy efficiency resource standard this summer to 1.2 percent of utility baseline sales per year from 2020-2022, establishing Arkansas as a leader on energy efficiency savings in the South. The policy was initially put forward by the Sierra Club, Audubon Arkansas and the Arkansas Advanced Energy Association. The state’s previous energy efficiency resource standard topped out at 1 percent in 2019.

New York also increased its energy efficiency target earlier this year. The new standards call for investor-owned utilities to achieve annual efficiency savings equal to 3 percent of sales by 2025. The change is expected to accelerate energy efficiency by more than 40 percent over current forecasts and reduce energy consumption by 185 trillion Btu, which should help the state achieve nearly one-third of its 2030 emissions reduction goal.

New Jersey, meanwhile, is in the process of updating the state’s master clean energy plan to help guide Gov. Phil Murphy’s goal of making Jersey a 100 percent clean energy state by 2050. Energy efficiency is a critical piece of that plan, but also a controversial one.

Stakeholders are currently debating how to structure rebates and how to measure program performance. Policymakers are also weighing how to convince businesses to improve the efficiency of their buildings through tax incentives and scoring systems. The master plan is due next June, and the next public hearing on the plan is scheduled for September 20.

An energy efficiency policy trend to watch going forward, said ACEEE’s Gold, is how efficiency is valued — in the same way that Massachusetts is addressing this.

“One of the biggest things is moving toward recognition of energy efficiency, both for its time value and for its value as a broad-based resource,” she said.

Different energy efficiency resources offer value at different times of the day. An HVAC system, for instance, does not have the same load profile as energy-efficient lighting. States across the country should be doing a better job of using energy efficiency as a resource in that way, said Gold.

Energy efficiency is also closely tied to electrification, she said. EVs and heat pump water heaters are more efficient product options, and states should be using them to help integrate renewables. “But that all requires better valuation,” Gold said.

Many states, however, still need to take the first step, which involves setting efficiency targets and tweaking the traditional utility business model so that they’re incentivized to begin tackling efficiency.

States take up the mantle on appliance standards

Energy efficiency programs for utilities aren’t the only efficiency programs that states have the authority to enact.

Since they were created in 1987, federal energy efficiency standards for appliances, equipment and electronics have saved American homes and businesses more than $2 trillion on their energy bills. Over the past decade, the bulk of the progress on energy efficiency standards has happened at the federal level — which manufacturers generally prefer. But progress has stalled under the Trump administration, so states are stepping in to fill the gap.

Under federal law, states are generally prohibited from establishing their own energy-efficiency standards for products already covered by federal rules. But states can create their own standards for products that are not already covered by the federal program. A number of significant products are not covered by federal standards, such as computers and monitors, water-using products and air purifiers.

According to the Natural Resources Defense Council, five states have introduced efficiency standards bills so far this year. One of those states — Vermont — passed its bill into law. Vermont joins California as a leading state, with a comprehensive suite of state-level energy efficiency standards. Texas, Oregon, Arizona and New Hampshire have also implemented state standards for a select number of products.

Legislation passed this year in Vermont (H.410) creates efficiency standards for more than a dozen products, including air compressors, commercial dishwashers, portable air conditioners, portable electric spas and even urinals.

“Water-saving products represent some of the biggest savings: If all states adopted standards for faucets, showerheads, lawn spray sprinklers and toilets, consumers would save more than $10 billion annually on their utility bills by 2035,” NRDC’s Lauren Urbanek wrote in a recent blog post. “Saving water saves energy, too: By using less water, energy savings are achieved by not having to pump and treat the water — or heat as much hot water.” 

Several other states introduced appliance standards this year, but were unable to pass them.

Washington introduced legislation (HB 2327) in January, which would require standards for more than 20 new products, including faucets, showerheads and computers. Rhode Island passed an appliance bill (S 2362) out of committee. Despite its success in approved energy efficiency program updates for utilities, Massachusetts did not succeed in passing appliance standards this year, but the bill that included proposed standards (H 4737) did make it out of the House. Hawaii got as far as holding a hearing on new appliance standards.

Urbanek said this lack of progress does not discourage her.

“In some of these places, this is the first time they’ve talked about standards in a while,” she said in an interview. “So we think that just the introduction of these bills, and the hearings and debate about them, is setting a really good baseline for progress in future years.”

Energy efficiency is “not an easy a sell or as sexy as something like renewables or storage or electric vehicles, but it really is something that we and other organizations have taken a lot of effort to educate [policymakers on] and keep pushing how important efficiency is and how it helps not only with climate goals, but how it helps with goals related to renewables. […] And it’s generally very cost-effective and will save customers lots and lots of money.”

NRDC and the Appliance Standards Awareness Project have developed a model energy-efficiency standards bill for interested states to consider adopting. According to an analysis by ASAP, the adoption of state standards for the 21 products outlined in the model legislation would save consumers nearly $16 billion annually by 2035.

Efficiency employment snapshot

As of last year, there were more than 2.25 million Americans in the energy efficiency workforce, according to a recent report by E2 and E4TheFuture. The Energy Efficiency Jobs in America  report also states that energy efficiency is the fastest-growing jobs market in the energy sector, and employs twice as many workers in the U.S. as all fossil fuel sectors combined. 

Unsurprisingly, California leads the nation in energy efficiency jobs.

To continue job growth in the efficiency sector, the report calls on states to undertake the following:

  1. Strong energy efficiency standards with consistent funding.
  2. Broader use of performance contracting in public buildings.
  3. Innovative commercial and residential PACE programs.
  4. Modernization of utility regulation with revenue protection, decoupling, performance rates and the ability to earn a profit on procurement of energy efficiency as a service.