Mary Ann Capp, Energy Resource Manager for VMH, Inc.
I. Historical Utility Partnerships in Energy Efficiency
It must be recognized that electric utility industry restructuring will strand the public benefits of integrated resource planning, demand side load management and energy efficiency initiatives. For at least three decades utilities have participated in delivering such programs as the Residential Conservation Service at AEP and Virginia Power, the Allegheny Power WRAP Program, and Potomac-Edison Weatherization Assistance to name a few. Many of these were under delivered under orders or oversight of the Department of Energy or the State Corporation Commission. Nationally, between 1978 and 1989, utilities provided 9.6% ($418 Million) of funding for Low-Income Weatherization specifically. There were 102 utility low-income energy efficiency programs in 1989 with investments totaling $97 Million. (M .Power et al., 1992) By 1992, these numbers had increased to 132 programs with an annual expenditure of $141 Million. (M. Brown et al., 1994) Utilities were responsible for 22% of the units weatherized. The average investment per unit was only about one-third as much as the DOE Weatherization Program. Between 1985-95, utilities became the dominant player in funding the efficient end use of electricity. In 1993, 991 utilities nationwide operated Demand Side & Load Management Programs, spending $2.8 Billion, a 13% increase over 1992 expenditures. DSM investments saved 44,000 Gwh of energy and reduced potential peak demand by 40,000 MW in 1993. Across the nation, at least $4.2 Billion annually is included in the rates of franchised electric utilities for programs dedicated to energy efficiency, renewable and low-income assistance. (Eisenberg, Power, et al., 1997) Since utilities began the move toward restructuring, this trend has reversed. The most cited reason is the cost-effectiveness measure to the utilities, which is based only on the avoided cost of the marginal power production, a very narrow analysis.
II. Energy Efficiency = Affordability
Virginia will be one of the first " Low Cost State's" to move into restructuring its electric utility industry. There will be a propensity for costs to increase for many as the market determines prices and availability. American household spend more of their income for electricity than for all other residential energy resources combined. For low income households, the average expenditure was $607 from an average income of $10,048. (Eisenberg, et al., 1994) Electricity expenditures typically represent 60-65% of total energy expenditures. Low income households spend a higher percentage of their income on electricity despite the fact that they use on average almost 20% less electricity than median income households. The declining block rate structure contributes to this phenomenon. Energy efficiency programs, such as Weatherization, are the answer to Affordability, in 1989 dwellings saved 35.9% of the electricity used for space heating, this represents 12.2% of total electricity use. With some experts projecting a 5-15% increase in costs for small consumers of electricity, this program could offset those risks.
III. Energy Efficiency = Pollution Prevention
Energy related carbon emissions in the U.S. rose for the fifth straight year in 1996 based on data from the U.S. Department of Energy. Emissions from the use of fossil fuels climbed to 1,454 million metric tons (MMT) of carbon equivalent in 1996, an increase of 3.3% relative to emissions in 1995, and 8.7% compared to 1990. Declining improvement in energy efficiency, compared to the achievements in the late 1970's and 80's, was a key factor causing the growth in carbon emissions since 1990 (Geller and Thorne, 1997). Weatherizing a dwelling heated with electricity reduces carbon emissions by .475 metric tons per year. The 1989 Weatherization Program as a whole reduced the equivalent of more than 4 million metric tons over the twenty year lifetime of the measures in 198,000 homes. Expanded residential energy efficiency programs would deliver significant carbon emissions savings.
In the industrial sector, recent estimates of the electricity conservation potential range from 9-45% of total industrial electricity consumption. However, larger costs receive attention before energy (Census 1992). Energy efficiency improvements in this sector are viewed as a component of other broad issues one of which is pollution prevention and environmental compliance. States such as Virginia can influence greater environmental benefits and positive economic impacts such as tourism by supporting energy efficiency incentives or programs for industry.
IV. Energy Efficiency = Jobs and Economic Development
A shift towards greater energy efficiency and renewable energy technologies presents enormous opportunities. A vast array of new technologies can be manufactured and retrofit on virtually all residential and commercial building, and many industrial processes. Many of these new technologies and jobs will come from small businesses. A study called Energy Innovations found that by adopting energy efficiency targets, the economy would support 800,000 additional jobs by 2010 compared to business-as-usual growth in the economy. Consumers would realize net savings of $530 per household per year by 2010 due to energy bill savings exceeding the cost of energy efficiency and renewable energy measures. Other studies, such as a report prepared by five national laboratories of the DOE titled Scenarios of US Carbon Reductions reached a similar conclusion as Energy Innovations, namely, that it is possible to greatly reduce our greenhouse gas emissions without harming the economy if the emphasis is on a technological response rather than onerous taxes and regulation that depress economic growth.
(H. Geller, before the Committee on Small Business, U.S. House of Representatives, June 98).
IV. Policy Actions for Energy Efficiency
1. Unbundle Electricity Pricing: Unbundle the energy and capacity costs (i.e., consumption and demand components) in the pricing to consumers so that they may capture the full savings from load reduction, shifting or energy efficiency projects that they undertake. This action should include provisions for time-of-use and/or net metering.
2. Increase State Building Efficiency Codes: Virginia has yet to adopt the 1995 Model Energy Code and continues construction of buildings that marginally meet the 1993 Model Energy Code.
3. Increase Appliance and Equipment Efficiency Standards: Appliance efficiency standards adopted to date will save consumers $132 billion net over the life of the products and avoid the need for 58,000 MW of new capacity, or the equivalent of more than 100 nuclear or coal-fired plants. Freezing ongoing and future rulemakings could cost consumers over $100 billion in lost energy savings over the next 30 years and create the need for an additional 37,300 MW of new capacity, or 75 power plants by the year 2015.
4. Require Supply, Transmission and Distribution Improvements Compete with Energy Efficiency and Load Management. Give local energy efficiency, load management, and renewable the opportunity to compete as alternatives. Require competitive bid solicitations for proposed projects to determine if alternatives could solve the problem at a lower cost. Comprehensive cost-benefit analysis includes environmental, social and land use components.
5. Establish Portfolio Standards: Require that electricity delivered to all customers include a specified combination of types of generation sources.
6. Implement Emission Reduction Credits for Energy Efficiency. Recognize the contributions of energy efficiency measures to environmental emissions reduction and allow energy efficiency measures to compete with other emission reduction measures in all state emissions limits and reduction requirements. Energy efficiency is the most complete emissions reduction measure because it eliminates all the emissions for the energy it saves. Emission disclosure by generators should be required.
7. Implement Universal Wires Charge and Revive State Tax Credits for Efficiency Improvements and Renewable. Virginia can secure energy affordability, economic growth and global competitiveness by legislating in favor of energy efficiency. Rate mechanisms like the wires charge and tax credits are mechanisms that have been successful in this state and others.
States must make renewable energy development and efficiency a priority because of its substantial environmental and long-term economic benefits. For every dollar spent by the federal government on efficiency standards, a $1,000 return in energy savings is realized. It is for this reason the Clinton Administration's Federal Proposal for Electric Utility Restructuring offers a wires charge and portfolio standards with matching funds to states who have adopted such mechanisms.