The 14 best states for energy efficiency

By Elisa Wood and Reid Smith

April 16, 2009

Once a “token gesture,” energy efficiency is now increasingly becoming a “first fuel” — the resource utilities seek before any other, even before renewable energy or other in-favor generation sources.

So says the report, “Meeting Aggressive New State Goals for Utility-Sector Energy Efficiency: Examining Key Factors Associated with High Savings,” issued today by the American Council for an Energy-Efficient Economy.

Chances are you are experiencing the benefits of efficiency – or are about to do so – if you live in one of 14 states the report identifies as leaders: California, Massachusetts, Connecticut, Vermont, Wisconsin, New York, Oregon, Minnesota, New Jersey, Washington, Texas, Iowa, Rhode Island, and Nevada.

These states show the biggest gains from efficiency. They also spend the most on programs and have the greatest legislative support.

What else makes the states stand out?

*Almost all offer direct financial incentives for delivering utility energy efficiency programs well.

*Eight of the top 14 states have an energy efficiency resource standard (EERS), which requires they meet a certain percentage of energy demand through efficiency. Typically, the requirement ramps up gradually over several years. Such standards do not deliver a lot of savings yet, but will in later years as requirements increase.

The report also looked at which efficiency measures generate the most savings. Lighting retrofits top the list, accounting for 63% to 92% of all residential energy savings and 55% to 69% of commercial and industrial savings.

The winning states still have a long way to go. Few report energy efficiency savings of 1.5% to 2.0% per year or more – the amount targeted by many state policies. Vermont is an exception with energy savings close to 2.0% of total electricity sales. What can speed delivery of results? There is no magic bullet, but the report recommends shareholder incentives, decoupling and support from top utility management.

The report is available for free download at http://www.aceee.org/

Making efficiency easy with on-bill financing

By Elisa Wood

April 9, 2009

Even if hostile governments corner all of the oil, the polar caps melt, and Oprah, herself, says, “It is time to save energy!” consumers will not pursue efficiency in a big way unless it is easy and painless.

That is why a growing number of state regulators are taking a close look at a concept known as on-bill financing. When a customer upgrades a heating system, insulates walls, or undertakes some other efficiency measure, the utility pays for it and then recoups the cost gradually over time in the customer’s monthly energy bill. The approach spares the customer the sticker shock of springing for the improvement all at once. It also gives the customer the opportunity to reduce energy use, which lowers heat or electricity charges and offsets at least some of monthly cost of the efficiency installation.

Utilities offer on-bill payment in two different ways: through loans or tariffs. A loan is assigned directly to the customer who must pay it back even if he moves. In contrast, the tariff approach links the charge to the meter, meaning that whoever lives at the house or owns the business pays the fee. If the customer moves, the new occupant picks up the payment.

The tariff approach allows for a long payment term and therefore lower monthly costs. “It also encourages renters to participate in the program because they only pay for energy saving measures while they benefit from them, and remain in the premises,” says Paying for Energy Upgrades through Utility Bills, a recent brief by the Alliance to Save Energy.

On-bill financing makes a lot of sense, but utilities are not jumping on board quickly. Many see the approach as experimental, given that it has yet to be tested widely. Further, while on-bill financing makes life easier for the customer, it complicates billing for the utility, which must modify its systems, said the ASE brief.

Connecticut and California have the largest on-bill programs. ASE says to keep an eye on New Hampshire, which has the greatest experience with the tariff-based systems. Hawaii and Kansas also have programs underway and may soon report results. Michigan appears to be heading toward adopting an on-bill program. Massachusetts and Rhode Island have used the approach for almost two decades.

More details are available at http://ase.org/content/article/detail/5476.

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

Electricity still hot

By Elisa Wood

April 2, 2009

Latest federal projections reveal that our passion isn’t cooling for large air-conditioned homes and electric gadgets.

US households have increased their electricity use by 23% over the past decade, and consumption will grow another 20% by 2030, according Annual Energy Outlook 2009, released March 31 by the Energy Information Administration. http://www.eia.doe.gov/oiaf/aeo/index.html?featureclicked=1&

The report sees air conditioning use rising 24%, as the population migrates to the South and West. The number of refrigerators, washers and dryers grows as we add more houses; home electronics continue to “proliferate,” EIA says.

It is not just households gobbling up the power. We go to hotels, restaurants, stores, and movie theaters more. And they require more computers and other electronic equipment to serve us. In addition, as the population ages, it needs more electric medical and monitoring equipment. So power use in commercial buildings grows an average of 1.4% per year to 2030.

Of course, the economic recession is likely to dampen electricity consumption somewhat for now. But the report attempts to look “beyond current economic and financial woes and focus on factors that drive U.S. energy markets in the longer term.”

Energy efficiency is a bit like computer software created to negate viruses. The more viruses, the more updates to the software we need. So as electricity use grows, the efficiency industry is likely to find growing demand for its product — technology that allows us to use more and more electronic devices, but less and less electricity.

The report points out that best available efficiency technology cuts energy use without reducing service. By installing compact fluorescent bulbs, solid-state lighting, and condensing gas furnaces, we can reduce home energy consumption 29% over a business-as-usual scenario. Concern about energy prices, power plant emissions and energy independence will drive demand for these products.

The bottom line? Electricity will remain hot, and efficiency may be even hotter.

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

Federal energy stimulus: The check is in the mail

By Elisa Wood

March 26, 2009

Energy efficiency companies waiting for federal stimulus money probably feel like they are being told, “The check is in the mail.” It is supposed to arrive, but when?

The federal government will channel a large pot of the money through state agencies, so it is wise to keep an eye on announcements by governors and state energy offices. States must apply by May 12 for $3.1 billion in what is known as the State Energy Plan funds under the American Recovery and Reinvestment Act. The money will go toward rebates to consumers for home energy audits or other energy saving improvements; development of renewable energy projects; promotion of Energy Star products; efficiency upgrades for state and local government buildings; and other efforts initiated by the states.

To secure this money, state governors must write letters to the US Department of Energy explaining spending plans and providing assurance that they will meet federal stipulations. In many cases, the states will pass along money to utilities, which will then hire energy efficiency installers, auditors and others to do the actual work. To see how much money your state will receive and your governor’s letter when it is sent, go to http://www.energy.gov/recovery. Scroll down and click on the map at the bottom of the page.

The DOE recovery site also links to information on funds for weatherization, advanced battery manufacturing, environmental management, research and development, smart grid and other energy programs.

Some states are moving ahead more quickly than others in making public their plans for use of federal money.

In Pennsylvania, Governor Edward Rendell announced this week the names of five companies that will receive $3.8 million for energy conservation improvements. In all, the state expects to receive $366 million through the State Energy Plan program.

The Massachusetts Division of Energy Resources let businesses and public agencies know that funds may be available soon to help them purchase green vehicles. The state expects to receive $5 to $15 million of a $300 million pot for alternative vehicles. To qualify, businesses and public agencies must submit letters of commitment to the state by May 18. The state will apply for the federal money by May 29.

In Connecticut, Governor Jodi Rell sent a letter to DOE explaining the state’s plans to focus on growing its existing fuel cell industry and responding to consumer demand for solar thermal and geothermal products with part of the $38.5 million Connecticut expects through the State Energy Plan program.

Two national efficiency organizations also are working to smooth the flow of stimulus money into the industry. The Alliance to Save Energy has launched an initiative to help publicly-owned utilities expand conservation programs. ASE is undertaking the effort with the American Public Power Association and the Large Public Power Council. Meanwhile, The American Council for an Energy-Efficient Economy continues to frequently update www.energytaxincentives.org, which has details on recovery act and other incentives available for consumers and businesses.

In addition, K&L Gates is tracking energy stimulus funding and recently reported several grant solicitations, including one to accelerate the market introduction and penetration of advanced electric drive vehicles. Details are available through the DOE’s Vehicle Technologies Program.

So, while the stimulus check for energy efficiency may still be “in the mail,” many hands appear to be ferrying it toward delivery.

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

$3.1 billion for state energy efficiency programs - Just one catch

By Patrick Costello, guest contributor

March 19, 2009

The American Recovery and Reinvestment Act promises to advance the U.S. energy efficiency movement with an unprecedented $26 billion infusion of funds. Of that, $3.1 billion goes to state energy efficiency programs through the Department of Energy’s State Energy Program.

Great news, right? Maybe not, says the Electricity Consumers Resource Council (ELCON) and the National Association of Regulatory Utility Commissioners (NARUC).

To receive the federal stimulus money, states must agree to set up financial incentives that encourage utilities to pursue energy efficiency programs. ELCON and NARUC fear that this promotes a “one-size-fits-all” approach to the administration of energy efficiency programs. In particular, they are concerned that these stimulus funds will sway states to implement revenue decoupling at the expense of developing a more unbiased energy efficiency program plan.

Revenue decoupling is a ratemaking mechanism that breaks the link between a utility’s revenues and energy sales. Since utilities normally profit from selling energy, it’s not in their best interest to push efficiency. Doing so reduces demand for their product. Revenue decoupling counters this problem by allowing utilities to earn a fair rate of return, and sometimes additional financial incentives, on energy efficiency programs. Decoupling has become a common way to align utility financial interests with state efforts to achieve greater energy efficiency.

The debate over revenue decoupling is central to discussion over what makes an energy efficiency program effective. Ratepayers measure success based on how much money they save. And how much money they save may depend on who runs the program.

Utilities, state agencies, third party non-profit organizations, or some combination of the three typically administer efficiency initiatives. Each state shapes its own approach. No one program design seems to be the most effective. Many highly regarded programs differ greatly from one another. But the best programs share one commonality: They are tailored to the unique policies and economic profile of the state and are based on input from a variety of stakeholders.

Critics of the stimulus bill argue that ‘the catch’ – the condition placed upon states before they can receive stimulus money – may stifle such tailoring, hinder development of a state’s full energy efficiency potential, and diminish cost savings. Decoupling creates the foundation for utilities to serve as the primary administrators of efficiency programs. By pushing for revenue decoupling, a state is arguably saying it wants utilities, not a third party non-profit or state agency, to take the lead in developing and administering energy efficiency programs. Therefore, the stimulus bill walks a fine line between encouraging states to implement only utility-administered programs and encouraging them to reform their ratemaking policy so that utilities can, on some level, contribute to the development of a sound energy efficiency program.

Decoupling is somewhat arcane, but ratepayers should be aware of how it may influence their rates as energy efficiency programs evolve.

This is the House Energy and Commerce Committee’s report where the controversial provision can be found on page 26:

http://www.rules.house.gov/111/CommJurRpt/111_hr1_encrpt.pdf

To see a breakdown of the stimulus package’s energy efficiency measures, visit:

http://ase.org/content/article/detail/5388

To learn about and obtain forms for stimulus package energy efficiency tax incentives, visit:

http://www.energytaxincentives.org/

To see how your state’s energy efficiency efforts rank nationally, visit:

http://www.aceee.org/pubs/e086.htm

Visit us at www.realenergywriters.com and pick up our free Energy Efficiency Markets podcast and newsletter.

How US businesses can access federal stimulus money

By Elisa Wood

March 11, 2009

I thought that “federal stimulus” would be high on Google’s hit list. But alas, when I checked its analysis of hot trends yesterday, I discovered that “Rockin’ Robin” is number one.

Thanks to American Idol this 1950s song dominates the search engine. Bringing more music to the ears of business owners, however, is the $20 billion made available for energy efficiency through the American Recovery and Reinvestment Act of 2009. While it is easy to find information about homeowner opportunities (www.energystar.gov), it is difficult to ferret out how Joe-business USA can take advantage of the act’s benefits.

I did, however, find a few valuable sources. Linked-in brought me to a paper by law firm K&L Gates that advises companies with early stage projects on how to apply for money. The paper focuses on renewable energy, but also touches on efficiency, and includes guidance on how to approach government fund managers. Applicants need to make the case that their projects are “game changing” to win priority. They also must be “shovel-ready” – able to begin in 90 days. The paper is available by contacting fred.greguras@klgates.com.

Energytaxincentives.org, a coalition of public interest groups, offers detailed information on existing incentives for commercial buildings, appliance manufacturers and combined heat and power. But the site appears to be still updating to include the ARRA, not surprising considering how many funding details are yet to be worked out, particularly at the state level.

The old standby, Dsireusa.org, is quickly updating information to include ARRA offerings. Those who manufacture certain energy saving and renewable energy products will find details about the 30% tax credit at the site. The program offers $2.3 billion in credits for projects certified by the US Treasury. Preference will go to those projects that are commercially viable, and are best at producing jobs, reducing air pollution, deploying commercial technology and getting off the ground quickly. The Treasury also will look at the applicant’s costs for generating energy, saving energy or reducing greenhouse gases. Additional guidelines will be available in August.

Please post here, or email lisawood@aol.com, with other sites, papers or reports that offer details about how businesses can access incentives through the ARRA 2009.

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

How well is clean energy weathering the recession?

By Elisa Wood

March 5, 2009

The clean energy industry may not be popping the champagne cork, but it is at least holding the bottle in hand. While not unscathed by the recession, the industry sees growth in several sectors, according to recent reports.

For example, use of smart meters—a key technology for better energy management and efficiency – is increasing at a rapid clip. A study by ABI Research, “Advanced Metering Infrastructure (AMM and AMI),” forecasts that the number of smart meters installed worldwide will reach 76 million this year, up from 49 million in 2007. Smart meters will benefit from an estimated $4.5 billion that the US plans to spend on smart grid initiatives as part of the federal stimulus package.

“We don’t think that the economic crisis is having a significant effect,” says Sam Lucero, senior analyst for ABI Research. “Utilities’ smart metering deployments are typically multi-year plans developed in the context of regulated market environments, and not terribly susceptible to short-term economic fluctuations.”

Press reports indicate that two other energy-cutting products are poised for significant growth this year. Moneynews.com quotes analysts who say demand response companies are likely to see recovery in 2009 following a dramatic fall in stocks of some leading companies. Meanwhile, industry insiders say they expect continued expansion for combined heat and power, a resource that has won new federal tax incentives and state support. See my article in the January/February issue of Cogeneration and Onsite Power Production magazine for more details.

Not all the news is good though. Greentech Media and the Prometheus Institute for Sustainable Development project that the global market for photovoltaics will shrink 15% this year to $12 billion. This is solar energy’s poorest performance since 1994, according to the report. At the same time, Lux Research says this year’s solar shakeout – caused by oversupply of cell and module capacity – will push solar prices closer to grid parity and precipitate expansion.

Meanwhile, expect to read a lot more about the clean energy sector in the coming year. William Brent’s Search for Cleantech reports that members of the media foresee heightened coverage of the cleantech sector in 2009 (and it certainly wasn’t light coverage last year.) Seventy-five percent of bloggers, mainstream newspapers, magazines and broadcasters surveyed say readers and editors will demand more coverage of the sector. So while the champagne may not be flowing yet, the information certainly is.

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