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State EERSs Produce Cost-Effective Energy Savings, Reports Say

State Energy Efficiency Resource Standards (EERS) have grown in prominence over the last ten years as a means of lowering consumers’ utility bills, reducing the need to build expensive new power plants and decreasing emissions of heat-trapping greenhouse gases from fossil fuels. Texas initiated the trend in1999, and by the spring of 2011, 25 more states had established EERSs for electricity and 12 had instituted standards for gas, too.

In order to determine whether these policies have been successful, the American Council for an Energy Efficient Economy (ACEEE), a non-profit organization, undertook two studies: one to measure states’ progress in reaching their energy-efficiency targets and a second to determine the factors that contributed to differing levels of success.

The reports, published on June 15th, contain encouraging news.  Most states with EERSs have done a good job of meeting, or at least closely approaching, their goals, and some have even exceeded them.  All have reaped considerable financial benefits from energy-efficiency investments, the reports said.

“These states are demonstrating that energy efficiency-programs deliver real savings for utilities and ratepayers, and [are] more affordable than any supply-side energy source,” said Michael Sciortino, one of the lead authors, in a press release.

In 2009, the most recent year with complete figures, utilities put $3.4 billion into efficiency programs for electricity consumption and $0.9 billion into gas. Their returns on investment were impressively high.  Electricity savings cost only 2.5 to 3 cents per kilowatt-hour, about one-quarter to one-third the price of generating power, and the cost-benefit ratio of investments to savings for many states was in the vicinity of 1:3, the studies found. But a few states had truly spectacular outcomes. Hawaii, for example, anticipates a staggering 546 percent return on its efficiency investment of $46.9 million dollars, over the lifetime of the measures that received rebates and were installed, the reports said.

ACEEE chose to define EERSs broadly so as to encompass not only dedicated statewide efficiency standards but also energy-efficiency components within renewable portfolio standards and long-term energy-savings requirements tailored to specific utility companies. Its research showed that simply establishing an EERS led to greater energy savings, even in states with no prior energy-efficiency experience.  But the so-called “start-up” states had to be sure to allow utilities a sufficient amount of time to ramp-up programs that they were unaccustomed to running, the studies said.

The reports also determined that the states with the most aggressive goals and profitable results shared a set of key features, including:

  • Liberal and predictable long-term funding levels;
  • Supportive regulatory environments for utilities undertaking programs;
  • Complementary energy-saving efforts through strong building codes and appliance standards; and
  • Engagement of a cross-section of stakeholders in developing and implementing programs.

In order to achieve the best results, it was critical to have buy-in from utilities and to align the interests of companies’ shareholders with the efficiency goals before starting programs, ACEEE found. State policies that decoupled energy sales and company profits, allowed for cost recovery, set clear procedures for measuring energy savings and provided meaningful financial rewards for good performance all helped states gain the required support. Massachusetts and California, two of the states with especially aggressive targets, also have rules requiring utilities to obtain all cost-effective efficiency resources before acquiring supply-side resources from power plants.

Not surprisingly, program design matters, too, the studies found. Success was enhanced by strategies that target specific technologies, including new and emerging ones, and offer deep savings – that is, not just replacing light bulbs but effecting permanent and comprehensive change by installing building insulation and Energy Star appliances, or working with commercial and industrial customers to streamline protocols and processes.  Only after devising effective multifaceted programs does it make sense for utilities to work at enlarging consumer participation, the reports found.

The public’s level of buy-in depends on both effective broad-spectrum advertising strategies and specially crafted outreach that targets new and underserved markets, ACEEE said. Generous incentives were as important to end-users as to utilities, particularly because upfront costs for deeper efficiency measures are higher. And the reports said that funding for outreach and incentives must inevitably be higher in states with established energy-efficiency programs, where the low-hanging fruit has already been harvested.

Leading industry experts and program managers are optimistic about their ability to implement innovative strategies and meet even the most aggressive efficiency targets, ACEEE reports.  But they also agreed that doing so requires states to maintain sufficient levels of funding to achieve the desired savings.

– By Eleanor Saunders

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