# Presentation: 001923

## Energy Efficiency Resource Standards: The New Kid on the Block

**Steven Nadel**
**American Council for an Energy-Efficient Economy**
**NREL Seminar**
**July 13, 2006**

## Energy Efficiency Resource Standards 

- Electric and/or gas savings targets for utilities
- Savings must be documented in accordance with evaluation rules established by regulators
- Often a market-based trading system to exchange savings credits
- Analogous to an RPS

## Target Options

- % of kWh or therm sales
- % of peak kW demand
- % of annual load growth

## Why an EERS?

- Achieve substantial energy and emissions savings
- Performance based – emphasizes savings, not spending
- Can be easier to legislate savings targets than spending amounts
- Can complement or supplement a public benefit fund (PBF)

## Spending on Utility Sector Energy Efficiency Programs 1992-2003  [nominal dollars]

## States with Utility Sector Energy Efficiency Programs—Public Benefits or DSM

**States with Utility Sector Energy Efficiency Programs—Public Benefits or DSM**

- Blue states have public benefit funds that support EE

- Green states have utility DSM under regulated structure

## States with EERS-Like Policies

- Black= has EERS
- Grey= EERS pending

## Texas

- EERS in place since 1999
- Reduce demand growth 10%
- Measured in kW
- Commission developed implementing regulations and monitors evaluations
- Utilities have exceeded targets each year
- Now discussion of increasing targets

## Hawaii

- RPS established in 2001 calls for 8% of kWh sales in 2005, 20% in 2020
- Expanded by legislature in 2004 to count efficiency including CHP
- Make 2020 targets more achievable
- In 2004, RE and EE accounted for 11.4% of sales
- 68% RE, 32% EE

## Nevada 

- Had RPS and in 2005 legislature modified this to raise target and include EE
- Target is 15% of electricity sales in 2015
- Up to 1⁄4 can be EE
- Commission developed implementing rules including ways for 3rd parties to participate
- Utilities now ramping up EE programs to achieve 3.75% savings by 2015

## California

- Ten year savings targets set by CPUC
- ~10% of electricity sales, 12% of peak demand
- Targets somewhat lower for natural gas
- Implementation just beginning
- To meet targets have to double annual electricity savings and triple natural gas savings
- Utilities have decoupling and shareholder incentives for reaching targets

## Vermont

- Programs run by non-profit that won an RFP to provide statewide programs
- Savings targets in contract with PSB
- From 2000-2004, reduced sales over 3%
- New targets call for >1% additional savings each year
- Discussions underway about increasing targets significantly

## Connecticut

- Added EE targets to existing RPS
- Separate targets for EE, tier 1 RE and tier 2 RE
- Efficiency targets are 4% of C&I sales over the 2006-2010 period
- CHP counts
- Savings from existing PBF count
- Additional savings will need to be purchased from ESCO’s and other third parties
- Can also purchase credits from state at default rate

## Pennsylvania

- Alternative Energy Portfolio Standards Act passed in 2004
- Requires 8% of power in 2021 to be meet “tier 1” requirements (clean renewables)
- Requires an additional 10% of power in 2021 to meet “tier 2” requirements
- Includes efficiency, hydro, MSW & waste coal
- Tier 2 resources in 2003 were about 8% of sales
- Commission developed implementing regulations including “deemed savings” values for common EE measures

## Other States

- Illinois developing a proposal similar to the one in Texas but meet 25% of load growth
- NJ pursuing two approaches:
- Energy savings targets in contract with efficiency implementers (like VT)
- A pure EEPS to complement their existing PBF
- Colorado – settlement agreement with largest utility sets EE targets for 2006-2013
- 320 MW and 800 GWh/yr savings in 2013

## United Kingdom

- Energy Efficiency Commitment establishes savings targets for electric & gas suppliers
- Covers residential sales
- Many measures with deemed savings values
- Required 62 billion kWh lifetime savings over 2002-2005 period
- Suppliers exceeded this target by 40%
- Many creative approaches employed
- Requiring 130 billion kWh for 2005-2008
- ~0.7% savings per year

## Italy

- Italian regulator established savings obligation for gas & electric distribution companies
- Initial targets cover 2005-2009
- Ramp up to 1% savings in the final year
- Distributors can operate programs themselves or buy credits from 3rd parties
- Vibrant credit market established in first year

## Other Countries

- France passed law establishing energy savings targets in 2005; implementation just beginning
- Flemish Region of Belgium established program in 2003; covers electric distributors
- Requires savings of about 1%/year
- Distributors easily met targets in first 2 yrs

## A Federal EERS?

- Various Senators working on stand-alone EERS bills
- Similar to proposed federal RPS with growing targets
- Also proposals developed for multiple “advanced” energy resource standards including:
- Efficiency (sometimes called DSM)
- Renewables
- Advanced coal (varies on how “clean”)
- New nuclear plants

## EERS Issues

- EERS implementation details
- Which providers covered?  (gas? size cap?)
- Which measures eligible? (CHP? T&D?)
- Appropriate targets?
- How many years should an EERS extend?
- Trading and/or cost caps?
- Relationship with RPS?
- Monitoring and verification?
- Relationship to other policies? (PBF, decoupling)

## ACEEE Analysis of EERS Savings

- Simple spreadsheet driven off of EIA AEO 2006 forecast
- Assume 0.25% savings in 1st year, 0.5% additional in 2nd year, 0.75% additional thereafter
- Estimate levelized cost of 3 cents/kWh, 30 cents/therm with utility paying 1/3
- Emissions savings based on generation mix in AEO, both new and old plants

## Summary of Results

## Conclusions

- An EERS is a promising energy-saving strategy for both states and the federal government
- Significant experience on which to build
- Savings are substantial – 4.6% reduction in 2020 energy consumption
- Approximately 3X efficiency savings of EPAct
- Savings equivalent to 40mpg CAFÉ, starting 2010

## For More Information

- ACEEE March 2006 report on *Energy Efficiency Resource Standards: Experience and Recommendations. *_[http://www.aceee.org/store/proddetail.cfm?CFID=517558&CFTOKEN=14977790&ItemID=409&CategoryID=7](http://www.aceee.org/store/proddetail.cfm?CFID=517558&CFTOKEN=14977790&ItemID=409&CategoryID=7)__ _