Role of Energy Efficiency in Addressing Electric System Reliability

and Other Energy Problems

Steven NadelExecutive Director

American Council for an Energy-Efficient Economy

Washington, DC

Reliability Problems Face Multiple Regions

Past DSM Cutbacks Have Contributed to the Problem

0

10000

20000

30000

40000

50000

60000

1993 1994 1995 1996 1997 1998

Year

Pea

k L

oad

Red

uct

ion

(M

W)

Actual Available

1993 Projected Available

Shortfall

Projected vs. Actual Available Peak Reductions for 1998

Source: ACEEE analysis of EIA reports and Form 861 data.

Capacity Margins Continue to Decline

Source: NERC Reliability Assessment, 1999-2008.

Options for Closing the Demand-Supply Gap

• Supply Side– New power plants

(particularly peakers)

– New transmission lines

– Improved system maintenance

• Demand Side– Load management

• Traditional (radio control, I-rates)

• Real-time pricing or credits

– Energy-efficiency programs

• Resource acquisition

• Market transformation

Potential for Cost-Effective Electricity Savings in the Mid-Atlantic States

29

35 34 33

2.654.74

1.88 2.91

0

10

20

30

40

50

Residential Commercial Industrial Total

% Savings

Benefit/Cost Ratio

Note: Savings analysis based on implementation of 80% of cost-effective opportunities by 2010.Source: ACEEE, 1997, Energy Efficiency and Economic Development in NY, NJ, & PA.

Allocation of Peak Demand by End-Use

Process 10.2%

Other 3.6%

Cooling 25.8%

2.9% Refrigeration

2.3% Misc.

1.0% Water Heating

1.0% Lighting

HVAC25.0%

Lighting16.7%

Misc. 9.6%

Refrigeration 1.9% Residential33%

Industrial14%

Commercial53%

Source: Xenergy study for N.J. utilities.

Program Example: Residential Cooling Systems

• Encourage purchase of high-efficiency air-conditioners and heat pumps in new construction and when existing systems are replaced

- National savings potential ~5,000 MW annually

- Examples: NJ, Long Island

• Early replacement of old inefficient a/c (e.g. CA)

• Training and incentives on good installation and maintenance practices

- National savings potential ~20,000 MW

- Examples: NJ for new units, CA for repair of old

Program Example: Commissioning of Existing Commercial Buildings

• Commissioning - 5-15% energy savings, 1-3 year simple paybacks

– Also substantial peak savings (national potential ~22,000 MW)

• Program needs to address:– Service provider training and technical support– Educating building owners/managers about opportunity– Educating maintenance staff on how to maintain savings

• Model programs : NYSERDA, Portland General Electric

Program Example: Residential CFLs

• CFLs reduce energy use ~70% relative to incandescent bulbs

• Prices have been dropping and sizes shrinking

• Savings particularly large in evening hours

• Program approach

– Discount coupons, redeemable in local stores (e.g. NW, PEPCo)

– Complement with public education and point of purchase materials

Summary of Savings Potential from Peak Reduction Programs

Program Available Peak Savings in 2010 (MW)

New Residential Air Conditioning 28,777Residential air conditioning repair 6,900Commercial HVAC equipment 3,900Commercial retrocommissioning 11,000Commercial Lighting Upgrades 9,200Commercial Lighting Designs 4,900

Total 63,000 (adjusted toinclude double-

counting)

•These savings are approximately 40% of expected demand growth over the next decade

Options for State Policy Makers

• Adopt and implement public benefit fund to support energy efficiency programs

• Adopt up-to-date building codes

• Adopt state tax credits for efficient equipment and buildings

• Encourage use of combined heat & power (CHP or cogeneration) systems

Options for State Policy Makers (continued)

• Support/adopt minimum efficiency standards (e.g. CA)

• Finance and implement efficiency upgrades to state and municipal facilities (e.g TX)

• Promote Energy Star equipment and buildings

Status of State Energy Efficiency Public Benefit Programs

States with specific support/policies (18)General support in legislation, nothing yet established (MD,MI,NV) (3)No public benefit support for energy efficiency (AR,NM,OK,VA) (4)Not in this study (25)

State Energy Efficiency Public Benefit Funds

State mills State mills

New Jersey 3.15 Montana 0.70Connecticut 3.00 Arizona 0.40Massachusetts 3.00 Delaware 0.18Vermont 2.50 Ohio 0.10Rhode Island 2.10 Pennsylvania 0.10Maine 1.50 Illinois 0.03 +California 1.30 + Dist. of Columbia TBDWisconsin 1.20 Michigan TBDOregon 1.00 Nevada TBDNew York 0.83 Texas TBDNew Hampshire 0.80Source: www.aceee.org, March 2001.

Note: A plus next to a value means that significant additional funding is available dueto state government appropriations and municipal utility programs.

Residential Building Code Status

Commercial Building Code Status

Winter 2000

IA

VT

NV

NMAZ AR

LA

FL

GA

SC

NC

OH

VA

MD

NJ

NYCT

MA

NH

ME

AL

WY

AK

SD

NE

OK

TX

MS

IL

MO

MI

WVKS

MN

WIRI

DE

CA

UT

OR

WAMT*

TN

IN

KY

PA

CO*

HI *

ID*

ND*

Commercial Code(Number of States)

ASHRAE 90.1 (31)State Owned Only (8)Weaker/ None (11)

* I ndicates thatASHRAE 90.1-1989or an equivalent statecode is voluntarilyadopted by localjurisdictions.

Building Codes Assistance Project

State Tax Incentive Options

• Waive sales tax for Energy Star equipment (e.g. MD; OR has larger incentives)

• Green buildings tax credit for commercial buildings (e.g. NY)

• Credits for efficient new homes

• Titling or other tax waivers/credits for hybrid and fuel cell vehicles (e.g. MD)

Encouraging CHP

• Adopt favorable CHP and distributed generation interconnect and access rules (e.g., Texas PUC)

• Establish interagency team to facilitate siting and permitting (e.g., NY and CA)

• Cost-share CHP feasibility studies (e.g. NY)• Review state facilities for CHP opportunities

(e.g. NY)

Equipment Efficiency Standards

Federal Standards• Retain new residential

standards -- a/c, water heaters and clothes washers

• Develop new standards -- commercial a/c, transformers

State Standards• Stronger a/c standards• Standards on products

not federally regulated -- torchierres, exit signs, transformers & commercial refrigeration

Texas Loan Star Program

• Capital retrofit program for building energy efficiency

• $95 million revolving loan fund

• Over 10 years,$133 million loaned for 118 projects; savings to date $83 million

• Average 22% energy savings

• Continuous commissioning a key component of the program

The ENERGY STAR Label

• Residential– Consumer Electronics,

Dishwashers, Clothes washers, Lighting fixtures, CFLs, HVAC, Refrigerators, Windows, Room A/C, Dehumidifiers, Set-top boxes

The ENERGY STAR Label

• Commercial– Office equipment, Exit signs,

Roofing products, Transformers, Traffic signals, Water coolers

• New Products– Telephony, Ceiling and ventilation

fans, industrial motors, small commercial HVAC

Energy Star Building Labeling Program

Existing Programs• Offices• Schools

In Beta Test• Groceries• Convenience stores

• Other building types planned

Employment Impacts of Energy Efficiency Programs & Policies

0

20,000

40,000

60,000

80,000

100,000

120,000

140,000

160,000

180,000

Net

Incr

ease

in Jo

bs

2000 2005 2010

New York New Jersey Pennsylvania Region

Source: ACEEE, 1997, Energy Efficiency and Economic Development in NY, NJ, & PA.

RAND Study on California Programs

• Examined impacts of energy efficiency programs and policies from 1977-1995

• Found statewide economic benefits of $875-1300 per capita

• Added 3% to state economy

• Reduced air pollution emissions from stationary sources by ~40%

Source: The Public Benefit of California’s Investments in Energy Efficiency