Energy efficiency: What are the laggards thinking?

By Elisa Wood

May 17, 2012

Why do some states avoid creating policies that encourage consumers and businesses to save energy? What’s the psychology of the laggards?

A new report by the American Council for an Energy Efficiency Economy sheds some insight as it examines the states that consistently fall behind in the organization’s annual energy efficiency ranking.

The bottom states are: Alabama, Kansas, Mississippi, Missouri, North Dakota, Oklahoma, South Carolina, South Dakota, West Virginia, and Wyoming. The good news is that even these laggards are beginning to adopt policies to save energy, according to the report, “Opportunity Knocks: Examining Low-Ranking States in the State Energy Efficiency Scorecard.”

But they still have a lot of catching up to do. And why did they fall behind in the first place?

The report authors, who interviewed 55 stakeholders, found  one reason is a general  lack of awareness about energy efficiency’s benefits. Another is an aversion to government mandates. But one of the most fascinating barriers is a misperception about energy costs.

Industry folklore says that consumers in states with low electric rates have no motivation to save energy. This folklore discourages policymakers from putting time and money into energy efficiency programs. In truth, these states have good economic reasons to  encourage consumers to insulate, install better lighting, and undertake other energy savings measures.  It turns out that even though electric rates are low in these states, consumers are paying high monthly bills.

This may sound counterintuitive. But consider these numbers. In Alabama electric utilities charge 10.67 cents/kWh and households pay an average $147.69/month for electricity. Similarly, in South Carolina rates are 10.5 cents/kWh and monthly bills are $137.59/month. Compare Alabama and South Carolina to  Massachusetts and California, two states with aggressive energy efficiency efforts. Massachusetts’ electric rates are high, averaging $14.59 cents/kWh, but monthly bills  are low, only $97.34. California, too, has high rates of 14.75 cents/kWh and low monthly bills of $82.85. 

So electric rates are higher in Massachusetts and California, yet households in those two states pay less per month for power than households in Alabama and South Carolina. This is because they consume less power. Households in the efficient states have an edge; they need less electricity each month to secure the same level of comfort and service in their homes as those in Alabama and South Carolina. So there should be plenty of good motivation for households in the low-rate states to pursue efficiency measures.

Another point of confusion involves the cost to society of investing in energy efficiency.  Because it’s generally categorized with other ‘green’ initiatives, energy efficiency is perceived as boutique and expensive.  To the contrary, it is cheaper to avoid energy use than to make new electricity, according to ACEEE.  Energy efficiency measures cost an average 2.5 cents/kWh while building a new power plant cost 6 to 15 cents/kWh. Because of this cost differential several states now mandate that utilities institute cost-effective energy efficiency before building new generation.

These are arguments, unfortunately, that might get lost in the din of an election year, one in which energy is shaping up to be a major issue. However, as is often the case, the states are leading the way and not relying on federal policy. Even the laggard states are picking up their pace when it comes to energy efficiency, as the ACEEE report describes. More here.

Elisa Wood is a long-time energy writer whose work appears in many top industry publications. See her articles at RealEnergyWriters.com

Are your electric rates high? Here’s the good news

By Elisa Wood

October 13, 2010

If your electric rates are high, there is a silver lining. Chances are you live in a state that offers some of the greatest innovations and incentives for energy efficiency – or soon will. By taking advantage of these programs, you can reduce your bill.

Take a look at the chart below that I put together after reading the American Council for an Energy-Efficient Economy’s “2010 State Energy Efficiency Scorecard.” I list the ten most expensive states for household electricity and note where each stands in ACEEE’s scorecard, a report that ranks states from best to worst for their energy efficiency efforts.

Not surprising, seven of the most expensive states also are launching the most ambitious energy efficiency efforts. Several of these states are in the pricey Northeast, now one of the best markets for the energy efficiency industry.

It would be nice if these states would just reduce their electric rates, but for a variety of reasons that is unlikely to occur, at least in any dramatic way. The pricey states are often plagued by old energy infrastructure, transmission line congestion, and lack of indigenous fossil fuels, all factors that drive up energy costs.

As a result, policymakers in these states now talk not so much about reducing electric rates, but about reducing electric bills. If you’re a New Yorker, your electric rate may stay at 19 cents/kWh, but your monthly bill will drop if your home is better insulated or your refrigerator new and efficient. This is why the pricey states are so motivated to achieve energy savings.

The high-cost energy states may be among the most aggressive when it comes to energy efficiency, but they are not alone in their pursuit. The latest ACEEE scorecard comes at a time when states in general – not the federal government – are leading the way in bringing unprecedented energy efficiency incentives to consumers. Congress has contemplated some policy innovations over the last two years to spur energy savings, but has been unable to pass an energy bill. Steven Nadel, ACEEE executive director, says that “the overall story here is one of states getting done what Congress has so far failed to do.”

ACEEE points out that the US – thanks to the states – has never experienced an energy efficiency boom as large as this one. During the last efficiency boom (a boomlet really) in 1993, ratepayer-funded efficiency programs amounted to $1.8 billion, before slacking off to about $900 million in 1998. By 2009, the number was $4.3 billion. ACEEE expects the state programs to keep growing, possibly reaching $12.4 billion by 2020. And this does not include the one-time injection of $30 billion in federal stimulus money, the largest single investment in energy efficiency in US history.

ACEEE’s full report is available for free download here:http://www.aceee.org/research-report/e107

Comparison of electric rates and ACEEE state ranking

	Ten states with the highest residential electric rates *	ACEEE ranking for energy efficiency
	Connecticut	8
	New York	4
	New Jersey	12
	Rhode Island	7
	New Hampshire	22
	Vermont	5
	California	1
	Maine	10
	Maryland	16
10.	Massachusetts	2

*Source: Energy Information Administration, June 2010

Note: The chart above ranks only the lower 48 states. Because of their remote locations, Hawaii and Alaska face unusual energy challenges.

Elisa Wood is co-author of “Energy Efficiency Incentives for Businesses 2010: Eastern States,” available at www.realenergywriters.com.

Best states for energy efficiency

By Elisa Wood

September 2, 2010

If you live in Connecticut, California, Maryland, Massachusetts, Pennsylvania, New York, Texas, North Carolina, New Jersey or Ohio your state is doing something right – a lot right – when it comes to energy efficiency.

The ten states deserve kudos, in that order, for policies that encourage energy efficiency, according to a report issued this week by the Center for American Progress and Energy Resource Management Corp.

If other states achieve similar market dynamics, the US construction industry may pull out of its current slump, says the report, “Efficiency Works: Creating Good Jobs and New Markets through Energy Efficiency.”

The US could add 625,000 full-time sustained jobs over the next decade if it retrofits 40 percent of the nation’s homes and commercial buildings, according to the report. Such an effort would bring $500 billion in new investments to upgrade 50 million homes and office buildings and generate as much as $64 billion a year in cost savings for U.S. electric ratepayers.

Why is this especially important now? Because the economic downturn cost more than one in three construction workers their jobs, leaving unemployment in the industry “at Depression-era levels,” the report said.

“To confront this crisis, the U.S. jobs market needs sustained new demand for the skills of construction workers that is grounded in providing real value to the economy through enhanced productivity, greater efficiency, and improved asset value for real estate,” said the report. “Such a solution is readily available. Our country needs a national program to retrofit America’s homes, offices, and factories for energy efficiency—a program that can provide an important answer to the jobs crisis facing our country.”

As is often the case with US energy policy, it is states, not the federal government, leading the way in fostering energy efficiency markets. The report identifies ten strategies employed by top states. They are:

• Energy efficiency measures in Renewable Portfolio Standards—policies that not only require utility companies to meet a set portion of demand from renewable energy but also include energy efficiency as a qualifying form of clean energy.
• Energy efficiency measures in Renewable Energy Credits—policies that establish markets for tradable clean energy credits and include energy efficiency as a qualifying clean energy resource.
• Energy efficiency specific standards that require utilities to plan for meeting a percentage of future growth in demand through energy efficiency instead of increasing supply. These policy tools include Energy Efficiency Resource Standards and Energy Efficiency Portfolio Standards.
• Unbundled utility structures in which energy transmission and distribution utilities are separate from power generation companies that own power plants, encouraging least costs strategies for meeting energy demand through conservation.
• Decoupled utility rate structures, where utilities’ rates are adjusted to compensate for changes in the volume of energy sold, removing the structural disincentive to conserve energy.
• Aligning efficiency with utility companies’ shareholder benefits, such as bonus rates of return, reimbursing program costs, or other incentives that help transform efficiency from a special program into a core business practice.
• Penalties for noncompliance with energy efficiency standards, to ensure that well-intentioned programs are effectively implemented, monitored, and improved upon over time. Effective policies must have real consequences.
• Regulatory cost-benefit tests that focus on utilities’ real costs, in order to isolate the specific value offered by energy efficiency investments.
• Property-assessed financing structures that link the benefits of installed efficiency to a building, rather than the owner of the building, allowing repayment of financed investments to transfer automatically to new owners.
• Service assessment delivery structures, which allow government jurisdictions to directly facilitate financing of upfront capital costs, assuring repayment through municipal or other service assessment mechanisms.

The top states do not use all of these measures, but they have “developed important pieces of the puzzle,” the report said. Still others are moving in the right direction, among them Virginia, Hawaii, Michigan, Maine, Nevada, Delaware, New Mexico, Florida, Illinois and Utah.

For more details see the full report athttp://www.americanprogress.org/issues/2010/08/good_jobs_new_markets.html.

Elisa Wood is co-author of “Energy Efficiency Incentives for Businesses 2010: Eastern States,” http://www.realwriters.net/rew/rtlnkpr.htm

Where is energy's cell phone?

By Elisa Wood

June 4, 2009

Electric industry restructuring often gets criticized for failing to deliver the goods. It was supposed to not only drive down rates, but also spark innovative new technologies. After all, deregulation of the telecommunications industry gave us the cell phone. Where is energy’s nifty gadget?

Initiated more than a decade ago, electric deregulation has produced no such consumer hit. But it has led to innovation, albeit more complex and less tangible than the cell phone. For an example, listen to Lisa Cohn’s podcast: “How states can best use energy efficiency stimulus money” with Mark Sinclair of the Clean Energy States Alliance (CESA) http://www.realwriters.net/rew/rtlnkmr.htm.

Sinclair describes how a dozen or more states have served as laboratories over the last decade, laying the groundwork for today’s federal push to advance clean energy as a jobs builder. What got these states started? It turns out it was restructuring. CESA’s founder, Lew Milford, was an early advocate of restructuring and instrumental in the creation of rules in key states. He saw restructuring as an opportunity to open the door for development of clean energy, then largely a fringe resource. Milford pushed for a special utility rate structure, a systems benefit charge, that would channel funds into laboratory-like exploration at the state level.

Much of clean energy’s progress in the marketplace is due to these state programs: “People tend to think somehow that these projects have appeared magically and that’s not the case… states have spent a significant amount of money putting dollars on the ground and then leveraging private capital to make those projects,” Milford says in an interview with E&E TV http://www.cleanenergystates.org/press/Milford_OnPoint-1.14.09_text.pdf.

Those states now offer specific templates for building clean energy economies that others can follow as they receive federal stimulus dollars. The clean energy states have tested rebates, grants and loans to stimulate markets. They’ve seen where poor regulation slows installations. They know what attracts clean energy companies and what drives them away.

By studying the work of experienced states, those new to clean energy can bypass years of experimentation. So there lies an example of innovation from electric industry restructuring. Restructuring provided a mechanism for states to experiment with clean energy. Now, these pioneering efforts will save a lot of time and money for the states that are new to clean energy and find themselves with little time to ramp up the industry and attract jobs. True, electric restructuring did not produce a gadget that you can hold in your hand; instead it produced a clean energy roadmap, one that by many accounts could help create a lot of economic activity at time when it is most needed.

Visit Elisa Wood at www.realenergywriters.com and pick up her free Energy Efficiency Markets podcast and newsletter.