Every year the U.S. Department of Energy (DOE) issues a request for proposals (RFPs) from state energy offices to apply for extramural research and development (R&D) funding of State Energy Projects in topic areas reflecting the Department's range of internal R&D activities in energy efficiency and renewable energy. Depending on the topic area, this RFP specifies a non-Federal cost share typically ranging from 20% to 40% of the total effort. If Virginia used EERE public benefit R&D funds toward leveraging such federal broad-based solicitations, it would give Virginia's businesses and universities a competitive advantage over states that do not provide such support. In the case of DOE's State Energy Project solicitation, the State would receive on average two federal research dollars for every Virginia dollar. Other Broad-Based Solicitations by DOE's Office of Energy Efficiency and Renewable Energy include one dedicated to research, development, and demonstration projects, and another dedicated to education, training, and outreach. There also are focused RFPs for specific DOE programs such as Rebuild America, Clean Cities, and the Million Solar Roofs Initiative.
Even greater R&D leveraging ratios exist with DOE through its SBIR Program, which funds high-risk technology projects at their earliest stages of development, before companies are able to attract venture capital. Grant terms are extremely favorable, and business awardees retain all commercial rights to any resulting patents.
In Fiscal Year 1998, DOE made 34 Phase I awards in topic areas related to energy efficiency and renewable energy (EERE), totaling $2.5 million ($75,000 per project). Fourteen of these Phase I projects went on to receive Phase II funding in FY 1999 for an additional total of $10.5 million ($750,000 per project). Phase II projects covered a wide range of topics ranging from recovery of landfill methane; advanced thin-film materials processing for solar photovoltaic cells; innovative battery, fuel-cell, and motor technologies for electric and hybrid electric vehicles; ice-making systems powered by small wind turbines; corrosion inhibitors for heat pumps and chillers; and modular biomass power plants. There were Phase II projects in Maryland and Delaware, but there were no projects (either Phase I or II) in Virginia.
The nationwide success rate for DOE SBIR funding in FY98 was one-in-ten Phase I proposals and two-in-five Phase II proposals. This is far better than private financing of new technology ventures and thus represents a low-risk investment of State support. A public benefits fund could obtain significant R&D dollar leveraging by providing competitively solicited "Phase Zero" support for small businesses to develop Phase I proposals in energy efficiency and renewable energy SBIR topic areas. Based on the funding levels described above, a proposal assistance award of $7,500 would yield ten federal dollars per State dollar in successful Phase I bids and one hundred federal dollars per State dollar if Phase I leads to a successful Phase II proposal.
SBIR programs have mechanisms to ensure private financing of commercial activities once federal funding ceases at the end of Phase II. Private-sector cost sharing could be enhanced for EERE R&D in Virginia by similar commercialization mechanisms for non-SBIR projects, such as DOE's broad-based solicitations and focused RFPs described on the previous page.
Motor drives account for over half of commercial and industrial sector electricity consumption in the U.S., and significant savings opportunities exist. The greatest potential for savings is with motors under 20 horsepower, where sales volume is highest and market penetration by high-efficiency models is currently lowest. Market barriers to realizing these savings are: higher first cost; customer lack of information; unavailability of the right type, power, or speed of high-efficiency motors at the time when needed; and customer concerns about the motor performance.
The Northeast Energy Efficiency Partnership (NEEP) Commercial and Industrial (C&I) Motor Initiative is specifically designed to address these barriers in six New England and Mid-Atlantic states (Connecticut, Massachusetts, New Jersey, New York, Rhode Island, and Vermont). The C&I Motor Initiative offers rebates for the incremental cost of high-efficiency motors and provides outreach assistance to vendors in "selling" energy efficiency as a premium product feature and altering inventory practices to handle increased regional demand for such motors.
Most motor sales are for replacement of failed or failing equipment, and customers are unlikely to have the time to shop around, but will take whatever is stocked and promoted by vendors. Once replacements have been installed, the opportunity to upgrade them with higher-efficiency models is lost; programs to achieve increased motor efficiency must capture energy savings at the time of natural equipment turnover. Therefore, outreach assistance to manufacturers, distributors, and dealers for coordinated inventory stocking and product promotion is a critical adjunct to incremental cost rebates.
If Virginia was to join the NEEP C&I Motor Initiative, there would be significant economies because this program is already operational. Furthermore, only 6-7% of existing motors are replaced in any given year, so annual rebate funding is expected to be low. Finally, utility DSM experience indicates that C&I programs which capture savings at the time of natural equipment turnover are highly cost-effective; NEEP estimates a 2.5 benefit-to-cost ratio.
Heat pumps can be responsible for 40% to 50% of total energy consumption in Virginia homes. In homes with gas or oil heating, central air conditioners are usually one of the largest consumers of electricity. Central electric cooling is usually a larger contributor to system peak demand and local distribution grid demand than any other residential end use.
The installation of a central air conditioner or heat pump is a market-driven event that occurs just once every 15 or 20 years for the average residential household. After a new system has been selected and installed, most of the critical aspects of the equipment and its installation cannot be cost-effectively changed. Thus, it is critical that energy efficiency savings in heating, ventilation and air conditioning (HVAC) are captured at the time of equipment selection and installation.
Historically, most utility programs to promote residential HVAC energy efficiency have focused on promoting equipment with high efficiency ratings. Studies from across the country, however, have demonstrated that improving efficiency ratings of equipment, while important, will capture only about a third of the potential savings. Most equipment – whether standard-efficiency or high-efficiency – is oversized, improperly installed, and connected to leaky duct systems. Studies suggest that comprehensively addressing sizing, installation, and duct problems in conjunction with promoting high-efficiency equipment can yield savings of 40% to 50%.
Market barriers to improved HVAC equipment and installation practices include:
The NEEP C&I Motor Initiative has been described previously, and a similar initiative exists for residential heat pumps and central air conditioning equipment. The NEEP Residential HVAC Initiative offers rebates initially designed to cover a substantial portion of the incremental cost of high-efficiency central air conditioners and heat pumps. To qualify for a rebate, however, the customer and/or contractor will have to submit documentation of sizing calculations and other key elements of proper equipment installation. Supplemental rebates also are available for duct sealing and installation of programmable thermostats. Equipment rebates probably would be reduced over time as incremental costs come down, contractors become more familiar with good installation practices, and customers become better educated on what to expect from contractors. This is the essence of market transformation.
As with the C&I Motors Initiative, consumer education and vendor outreach assistance are important adjuncts to incremental cost rebates. Educational materials on the benefits and critical features of energy-efficient equipment and installation should be distributed to residential consumers. The program also should provide training to individual HVAC technicians, promote certification of installation contractors, and provide marketing assistance to certified contractors.
Based on NEEP studies, electrical energy savings in Virginia are expected to average 1,100 kWh annually per household, with an associated reduction in peak demand of 0.8 to 1.0 kW for a typical residential service. Such a program would be very cost-effective, with benefits likely to be more than twice as great as costs.
The Maryland Energy Administration has proposed a Standard Offer Program to complement and provide an impetus to performance contracting by energy service companies (ESCOs). The vast majority of C&I electricity consumption in Maryland is attributable to existing buildings and equipment that are unlikely to be replaced by new construction or undergo major renovation in the near future. Much of this equipment is old and inefficient compared to standard and high-efficiency products that are now commercially available. This discretionary retrofit market is estimated to be the largest single source of C&I energy efficiency opportunities in the state.
Several market barriers exist that prevent these opportunities from being realized. Customers distrust ESCOs and performance contracting mechanisms, and they have a poor understanding of energy efficiency life-cycle benefits relative to the first cost of capturing them. On the other side of the table, ESCOs face high transaction and research costs, and there is a high risk that promised savings will not materialize due to circumstances beyond their control. Both of these factors cause ESCOs to require a relatively high rate of financial return before developing a retrofit project, which prevents many savings opportunities from being realized.
Furthermore, the marketplace fails to adequately address externalities costs of electric generation (primarily air pollution), the scarcity and cost of private capital, different payback horizons for ESCOs and their customers, and budgeting distinction between capital projects and operating expenses. In commercial buildings, an added barrier exists for owners who are not responsible for utility costs and therefore would not receive any return on investing in equipment retrofits.
Maryland's SOP is designed to improve the economics of discretionary retrofit projects by providing a "standard offer" to all takers, set at a specific "dollars per lifetime kWh saved", which would be paid out contemporaneously at the time of savings. All existing C&I electric customers would be eligible to participate, but there would be a minimum kWh savings threshold per project, in order to realize economies in overhead and administrative costs. It is therefore expected that small and medium sized customers would participate through aggregation.
The standard offer would be available directly to the customer, or it could be assigned to any third party. As a result, ESCOs may package this incentive into a single, more attractive offer to their customers. Ultimately, the marketplace will determine the most efficient method by which to deliver these incentives to the customer, be it directly or through an ESCO.
Additional program features include provision of technical assistance to customers that choose not to use an ESCO. This service would provide on-site baseline assessments and economic analysis of potential savings opportunities. Furthermore, the SOP would standardize procedures for baseline assessment, project monitoring, and evaluation of results, thereby improving the credibility of performance contracting.
Discretionary retrofit measures cost more per kWh saved than "lost opportunity" measures in new construction or at the time of natural equipment turnover. Since the bulk of SOP activity is likely to be driven by ESCOs, however, this program should not require extensive marketing or customer assistance, reducing non-incentive costs. In addition, the minimum project savings threshold further reduces overhead expenses.
Since part of every performance contract includes a guarantee of energy savings and the monitoring to prove such savings, these programs have built in cost-effective assurance. The incentive level provided by the SOP would be limited to the amount that keeps the program cost effective. This will be determined in part by adding externalities to the customer's cost of electricity and resetting the customer's cost-effectiveness against this revised electricity cost.
Under the U.S. Energy Policy Act, private entities subject to taxation (corporations, small businesses, and home owners) that generate electricity from wind and biomass energy and sell surplus electricity to an unrelated party, are eligible to receive a 1.5¢/kWh tax credit for the electricity sold. For example, if a homeowner or small business installs a wind generator and sells 10,000 kWh of surplus electricity to a local utility over a year, the homeowner can apply for a tax credit of $150.00. Only those biomass power facilities that utilize biomass grown exclusively for energy production ("closed-loop" systems) can qualify for the tax credit.
The 1.5¢/kWh credit is adjusted annually for inflation using a Gross Domestic Product (GDP) adjustment factor relative to the 1992 GDP. The credit applies to electricity produced from qualified sources during a 10-year period after the facility is placed into service. The credit would be phased out if the national average electricity price from these two qualifying renewable energy technologies exceeds 8¢/kWh, based on contracts entered into after December 31, 1989. Legislation recently has been introduced in both Houses of Congress (U.S. Senate Bill S.414 and U.S. House Bill R.750) to extend the federal renewable energy production tax credit five years beyond its current expiration date of 1 July 1999.
The construction or major renovation of a building presents an opportunity to capture maximum energy savings at minimal cost in a comprehensive approach to building design. Failure to capture these savings at the time of construction or renovation is a "lost opportunity" because the measure become prohibitively expensive (e.g., insulating a wall after it has been constructed, or replacing conventional building envelope structures with elements that incorporate solar photovoltaic power generation). Some of the most comprehensive measures simply become impossible to implement (e.g., using building orientation to take advantage of solar radiation and natural light and as a means of reducing the cost of space heating and electric lighting).
The most significant barrier to adopting economical, energy efficient features in building construction and renovation is the inherent bias toward minimizing first cost, because the developer will not ultimately pay the energy bills. This presents a major disincentive for design professionals to incorporate high-efficiency features, and this often is exacerbated by their lack of energy efficiency information and high transaction costs for obtaining it.
A building design technical outreach program should address all energy end uses, including lighting, motors, HVAC, domestic hot water, refrigeration, and industrial process equipment. Comprehensive energy design exploits interaction between end-uses to achieve the lowest possible first cost. For example, adoption of energy-efficient lighting reduces the capital cost of ventilation and cooling equipment, possibly resulting in net savings even though energy-efficient lights are more expensive than standard fixtures and bulbs. Furthermore, designers must look at the interaction between energy systems and building structure to achieve additional first-cost savings. For example, geothermal heat pumps have a higher installation cost than air-source heat pumps, due to the cost of the ground heat-exchange loop. This is offset, however, by savings associated with elimination of rooftop equipment (reduced structural loading and envelope penetration) and smaller mechanical equipment rooms.
Program outreach activities would include technical assistance to design professionals and building commissioning. An example such technical assistance would be to provide building simulation modeling services to design professionals who do not have the experience or tools for computer modeling of building energy flows, or who face economic barriers (time or manpower constraints) to performing such modeling. Another example is the Design Assistance Program offered by the Geothermal Heat Pump Consortium (GHPC) to school facilities planners and architectural and engineering firms bidding on school HVAC renovation or new construction projects. GHPC subsidizes the cost of having a nationally-recognized geothermal design expert assist with feasibility studies and optimization, design lay-out, and project implementation.
Because C&I buildings contain many interacting systems, it is critical that new construction and renovation projects undergo a commissioning process whereby controls are properly calibrated and set, energy management systems are programmed and tested, and major equipment is tuned up after an appropriate break-in period. Without these services, even the best-designed building can be uncomfortable, suffer from poor indoor air quality, and have needlessly high energy bills.
The Maryland Energy Administration (MEA) Solar Schools Program is designed to introduce solar photovoltaic (PV) energy, and the excellent educational opportunity it represents, to the state's primary and secondary schools – both public and private. The MEA has obtained support of its school initiative from the Virginia Alliance for Solar Electricity (VASE), purchasing ten systems worth of PV capacity at a significantly reduced price.
Each school system has a peak output of 1.2 kW and consists of 26 BP-Solarex PV panels, which are expected to generate a total of about 1,936 kWh annually. The MEA also will help each school provide an educational curriculum that instructs students on how PVs work and on the importance of renewable energy to their future and the global environment.
American Electric Power (AEP), the Ohio Office of Energy Efficiency, the Columbus-based Foundation for Environmental Education, and several other organizations are helping the Worthington School District pilot a solar-PV project at Bluffsview Elementary School. Bluffsview is the first school in Ohio to participate in DOE's Million Solar Roofs Initiative.
As part of this cooperative effort, the organizations listed above have purchased and installed a 2 kW PV system at Bluffsview. This project includes hands-on educational tools that enable students to learn about solar energy, which in turn allows the school to incorporate the project into its science curriculum. Using AEP's Web-based Datapult® software, students can monitor the PV system's power output, along with the school building's electric power usage, and create charts of power supply and demand during the course of a particular month or day. According to Bluffsview Principal, Donna Kelley, "Research supports the use of hands-on activities in order to raise student achievement. These kinds of experiences occur in many school settings, but in the innovative model we have implemented, students must use the data they collect to support conclusions they make - the emphasis is placed on students articulating their interpretations of the data gathered in a variety of ways."
Two more schools are going solar this fall, with funding donated by AEP and local businesses. One of these schools, Union Local is located in the state's coal mining region. Glen Kizer, President of the Foundation for Environmental Education, reports that "these kids know a lot about energy, since coal was one of the major players in the local economy over the last 100 years. They are excited because it brings high technology to kids who live in a rural setting." Union Local will dedicate its new PV system in a November ribbon-cutting ceremony.
The primary goal of this project is to mobilize K-12 school systems in Virginia to participate in DOE's Energy$mart Schools Program (described on the next page), using geothermal heat pump technology as a foundation for energy efficiency improvements designed to achieve the lowest life-cycle cost for school heating and cooling. An important secondary goal is to raise awareness among teachers and students of renewable energy and energy efficiency technologies that are cost-effective now, providing maximum classroom comfort while reducing air pollution and yielding utility bill savings that can be re-invested for other educational purposes.
This project will reach out to school administrators, facility planners, and teachers throughout Virginia, providing educational materials on geothermal heat pump (GeoExchange) systems, together with easy-to-use software and questionnaires developed by the Geothermal Heat Pump Consortium (GHPC). Teacher-led student teams will download these materials from a dedicated World Wide Web page and use them to evaluate the likelihood of a successful GeoExchange project at their schools. Taking advantage of a well-established and successful statewide videocast network, Virginia Tech will hold eight interactive videocast workshops in seven geographic regions (two in northern Virginia) during the next two school years. Each workshop will focus on those schools in a given region that show the greatest economic potential and probability of project success, based on the self-evaluations described above. The workshops will be followed up by technical assistance to the participating schools through GHPC's Design Assistance program, which has been described previously in this appendix. With assistance from American Electric Power (AEP), particular attention will be focused on the southwestern portion of the state, where GeoExchange technology has not been widely implemented.
In the summer of 1998, the Department of Energy launched a major initiative to cut energy bills in schools and reinvest the savings in the nation's most valuable resource – our children. This initiative, entitled "Energy$mart Schools," is a partnership that brings together public and private organizations whose goals are to:
Utilizing smart energy practices in both new and existing school facilities helps local school districts realize cost savings and return scarce taxpayer dollars to education. If schools across the nation reduce their energy use, they could spend approximately $1.5 billion more on books, computers, and teachers by the year 2010. This translates to approximately 30,000 new teachers or 40 million new textbooks. The added benefits of building improvements would result in better lighting conditions, better indoor air quality, and better controlled classroom temperature – all of which contribute to improving the productivity and general well-being of students and teachers. DOE will use the previously described proposal solicitation opportunities of existing programs such as the State Energy Program, Rebuild America, Clean Cities, and the President's Million Solar Roofs Initiative to implement its Energy$mart Schools Program.
Although not an Energy$mart School project, the School Energy Rebate Team (SERT) is an example of a locally funded incentive program that accomplishes the goal of re-programming saved utility dollars toward educational purchases and other school discretionary spending. The SERT program is administered by the Montgomery County Public Schools' Department of Facilities Management, but school participation is entirely voluntary. The program provides organizational support and educational materials, but each school is responsible for establishing its own SERT team and implementation plan.
SERT promotes cooperative efforts among school administrators, custodial staff, teachers, and students; everyone is encouraged to participate. Staggered starting of mechanical equipment, switching off lights and computers when not in use, closing shades during hot months, and keeping ventilation units clear of books and papers are some of the simpler ways that SERT teams can reduce power demand and save energy.
The program returns 50% of the utility bill savings realized by each school as a cash rebate. Each school determines how its rebate funds are spent – some might purchase additional computers or books; others might apply the funds to field trips. During the 1997-98 school year, 175 out of 185 Montgomery County Public Schools had a SERT team, and they collectively achieved utility bill savings of $486,000. Some schools received individual rebates as high as $6,000.