December 1, 2014

Energy Efficiency: The 2015 Sea Change

By Jordan Doria, Manager for Stakeholder Engagement, Ingersoll Rand Center for Energy Efficiency and Sustainability

No, I’m not talking about changes in sea level. Instead, I’m talking about the myriad of changes in energy efficiency that 2015 is likely to bring. It started in 2014, which marked a turning point for energy policy. With the announcement of the EPA’s Clean Power Plan in June, electric generators across the country will soon be required to reduce their carbon dioxide emissions 30 percent by 2030. The EPA has indicated that it will allow states discretion in determining how it meets the carbon reduction goals, and energy efficiency is one means available to states to comply. Since energy efficiency has been demonstrated to be among the least cost-prohibitive carbon mitigation activities, it could be featured prominently in states’ plans.

However, energy efficiency’s treatment under the Clean Power Plan is still a murky subject. While it is pushing states to consider how they will reduce emissions, more guidance is needed on how to include and account for energy efficiency in state plans. At the same time, state decisions on efficiency are playing out as well, largely independent of the Clean Power Plan. However, these two areas are inextricably linked, and decisions in one area impact the other.

As you can tell, energy efficiency policy will be increasingly important going into next year. As 2015 unfolds, we will see:

State Energy Efficiency Standards Under Scrutiny

The traditional utility business model of being compensated primarily for new generation, transmission and distribution is being challenged by a confluence of forces, such as flat and declining demand, tougher environmental regulations and market disruptions, including distributed generation and new consumer demands surrounding energy supply and use. These challenges, among others, have encouraged some states to reevaluate energy efficiency standards in place for their electric utilities. While these standards are not well known to the general public, the programs they support are. These include rebates for more efficient lighting, heating and air conditioning and a variety of other areas that can drive energy savings in homes and businesses.

This year, Indiana repealed its energy efficiency resource standard, Ohio froze its program, and Arizona is currently considering a suspension of its program. In 2015, other states may also reexamine the standards they have in place. However, regulatory changes can allow states to address some of the challenges referenced above and support energy efficiency, while enhancing profitability.

Many states have already begun making progress in this direction. Massachusetts, New York and California are among 14 states that have passed requirements to decouple utility profits from the sale of electricity, which in turn has increased utility support for energy efficiency. While more states are looking to better align the utility business model with support for energy efficiency, this will be resolved on a state-by-state basis, as what makes sense in one state may not work in another.

Energy efficiency gains popularity to support 111(d). Or not.

The Clean Power Plan is pushing states to consider how they will reduce emissions, and energy efficiency will be a big part of this. However, questions around how much energy efficiency can help, and in what way, are causing states to evaluate their ongoing or planned energy efficiency efforts with respect to compliance.

The Clean Power Plan [section 111(d)], requiring electric generators across the country to reduce their carbon dioxide emissions 30% by 2030, offers limited definitive guidance on how energy efficiency programs could help meet this requirement. In particular, uncertainty around measurement, verification, enforceability, as well as third party review of results, is a growing concern among states looking to meet the EPA’s Plan. Ultimately, a balance needs to be struck between the rigor required by the Clean Air Act, and the cost and complexity excessive rigor can result in.

States are evaluating programs to determine if they meet the requirements of current EPA rules. This proves challenging when uncertainty exists around the kinds of issues mentioned above. In addition, there are many questions left unanswered for states around enforceability: What happens when a state falls short of reaching its goal? Who is responsible? How can states make up for this? For states that import energy from other states, how much credit should they receive for demand reductions in another state due to efficiency in their state? These and many other questions need to be clearly addressed by the EPA before states can begin to align programs with the reduction goals.

These are among the critical questions EPA needs to provide answers to when it releases its final Clean Power Plan rule in June of 2015.

Cities pass building energy benchmarking mandates.

Even if the EPA provides guidance on the many energy efficiency questions outstanding, some policies which support efficiency may not be directly “counted” under the plan, but may nonetheless be part of a suite of policies used to drive energy savings. Benchmarking is the process of, for example, comparing a building’s energy performance this year to its performance last year, or the performance at similar facilities, to determine how the building compares to its peers (or its own historic performance).

More cities– particularly the large and midsize ones– have created energy benchmarking programs. New York City, Chicago, Philadelphia and others have already incorporated programs phasing in buildings over time based on square footage and usage. In 2015, we expect more cities to create such programs; some of which will be voluntary, others may be mandatory.

These programs are all relatively new, making it early to assess the benefits of current benchmarking programs. However, we have already seen a direct correlation between benchmarking programs and a reduction in energy consumption. While this decrease in energy consumption may only be a few percentage points for a single building, this can create a groundswell of energy savings when implemented across an entire city. Also, across an entire local market, greater energy use transparency can support more informed decision making on bigger efficiency investments.

As the EPA continues to iron out the details around the Clean Power Plan and states begin to strive to effectively reduce their carbon dioxide emissions, energy efficiency will likely play a large role in both. I look forward to seeing how these issues and trends play out over the next year.

 

About Jordan Doria

Jordan Doria addresses codes, standards and public policies regarding energy efficiency and sustainability that impact Ingersoll Rand’s products and markets. Based in Washington, DC, he represents Ingersoll Rand’s interests in front of government bodies and other influential private entities to ensure that emerging codes, standards and policies are appropriately congruent with the company’s goals. Additionally, he is charged with bringing back important external viewpoints to be incorporated into business planning.

Prior to joining the CEES in 2010, Jordan was manager of government affairs at the Air-Conditioning, Heating and Refrigeration Institute (AHRI), where he worked to advance public policies to further the interests of the HVACR industry.

Jordan is a board member of the Business Council for Sustainable Energy (BCSE), the Demand Response and Smart Grid Coalition (DRSG), the Alliance for Responsible Atmospheric Policy, and has served as Ingersoll Rand’s representative to the United Nations Framework Convention on Climate Change (UNFCCC) negotiations. He earned Bachelor of Arts and Master of Arts degrees in political science from Villanova University.

 

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