Energy Efficiency in Energy Legislation, Waxman-Markey, and Stimulus:Update and Overview

Joe Loper, Lowell Ungar, Brad Penney
Alliance to Save Energy
June 29, 2009
Energy Efficiency in Energy Legislation, Waxman-Markey, and Stimulus:Update and Overview

Federal Energy and Climate Legislation
Brad Penney
Director of Government Relations
June 29, 2009

Federal Energy and Climate Legislation - Overview
In the House
ACES (The American Clean Energy and Security Act, or Waxman-Markey) reported by E&C on May 21st ;
Status: Narrowly passed the House on Friday by a vote of 219 to 212.
In the Senate
ACELA (The American Clean Energy Leadership Act)
Scope: Energy

EPW working on a climate section, to be integrated

Status: Approved by ENR on June 27th

Ad in Roll Call, The Hill, Politico
Dear Members of Congress:
As businesses and organizations that employ thousands of workers in the
clean energy industry, we urge Congress to move and improve the
American Clean Energy and Security Act.
A strong clean energy policy that promotes innovation and deployment in
energy efficiency and renewable energy can help reduce energy costs for
consumers and provide the basis for sustained economic growth.
1.  Energy efficiency generates $3 in economic benefits for each $1
invested, producing jobs in every Congressional district in America;
2.  Renewable energy will stabilize energy costs as we reduce our
dependence on fossil fuels and use sources of energy that have no
or low cost such as wind, sun, water, geo-thermal and biomass;
3.  Taken together, energy efficiency and renewable energy can reduce the
costs of achieving our climate goals by lowering overall energy demand
and the costs of generating power – saving Americans money on their
utility bills while cutting greenhouse gas emissions.
Without a change in direction, the United States economy will
continue to lose ground to other countries that are more
aggressively investing in clean energy technology. Strong clean
energy legislation can provide that framework and restore
American leadership in job creation and innovation.
We urge every Member of Congress to vote in favor of the American
Clean Energy and Security Act of 2009 now!

Climate Outlook in Senate
Senate EPW Chairwoman Boxer hopes to introduce a cap-and-trade measure in July and mark it up before August recess (week of Aug. 3?)
Other committees have tentatively agreed to be through with their amendments by Sept. 18
Majority Leader Reid wants to bring comprehensive bill to the floor in the fall; we are hearing October for floor action
Boxer released climate principles in February
House bill will be the framework

EE Highlights in ACES
Cap on carbon: 83% reduction in covered emissions by 2050 (85% of emissions are covered)
Building codes, building labels, appliance standards and labels
Renewable electricity standard of 20% by 2020 – a quarter may be met through EE, or 40% if governor requests
Vehicle emissions standards
Land use planning to reduce VMT

EE Highlights in ACELA

Renewable electricity standard of 15% by 2021
4% may come from efficiency if governor petitions
Improvements in model building energy codes
30% by 2010
50% by 2016
Energy Efficiency in Manufacturing
Funding for research and implementation of EE technologies, expansion of IACs
Clean energy investment fund
Loans, loan guarantees, etc., for commercialization of clean energy technologies

EE Highlights in ACELA

New energy efficiency standards
for portable lighting fixtures, commercial furnaces and reflector lamps; new appliance test procedures
State building retrofit grant program
Grants for retrofits of residential and commercial buildings

Voluntary building energy performance information program
To display relative energy performance; raise public awareness
Residential High-Performance Zero-Net-Energy Buildings Initiative
Goal to enable residential buildings without net emissions to be cost-effective by 2020

The Waxman-Markey Bill: A Giant Leap Forward (or Sideways)
Joe Loper
June 29, 2009

Overview
Meaningful cap
Significant and reasonable cost control measures
Substantial energy efficiency program funding
At least two major concerns

Cap is the crown jewel
85% of GHG emissions covered by cap
Other emissions TBD
Covered emissions reduced 83% in 2050
Cap will need defending

Cap creates a carbon price
Allowance price
$10/ton/CO2e rising to $62/ton in 2050
Energy price increases vary widely
Across fuels and regions
Source: Alliance analysis based on HR 2454 and EPA Preliminary Analysis of the Waxman-Markey Discussion Draft, April 20, 2009

Impact on Energy Demand
Flattens overall demand thru 2050
2050 demand 12% below BAU
Nuclear a big winner
Source: EPA Analysis of the Waxman-Markey Discussion Draft, June 23, 2009

Controlling Cost
Different types of hurt
all -- minimize overall cost
some – ease transition
for a while -- avoid price shocks
Note trade-offs
Many measures to control cost
We like -- EE policies/programs
Of great concern in WM -- offsets, muting prices

Allowance allocations
Allocations do not undermine the cap
Major concern about allocations is fairness (not emissions levels)
Allocations can reduce cost of abatement
If purchasing least cost abatement resource
Justified by market barriers
Including program cost
But can also raise overall abatement cost/price
If not purchasing the least cost abatement resource
If allowed to mute price signal – e.g., utility allowances

Complementary EE Funding
3-6% of allowance value
$85 to $174b over 2012-2050

Impact on Electric Demand
More than 1/3 of 2030 demand reduction from policy/program
EE policy/program impact small in 2050
EE policy/program do not affect overall NG demand
Unclear impact on NG generation
Source: EPA Analysis of the Waxman-Markey Discussion Draft, June 23, 2009

Allowance Allocations by Program

State & Local Governments

DOE to establish “State Energy & Environmental Development” (SEED) Accounts for EE/RE programs
5.2% of total allowance value SEED
Annual funding for EE = $0.8b to $3b
Largest source of EE funding

Natural Gas Utilities
Natural gas utilities receive 7.7% of total allowance value from 2016 --2029
Must use one-third for energy efficiency
$1.9 billion per year for 2016 -- 2029;
Alliance recommends same for electric utilities

Building Code Incentives
0.5% of allowance value states for code development and enforcement
$380 million annually
$14.8 billion over the life of the bill

Home Heating Oil, Propane and Kerosene
To states based on residential/commercial consumption of home heating oil
1.4% of total allowance value 2012 -- 2029
One-half for energy efficiency
$465 million annually for EE

Renewable Electricity Standard
$25/MWh in lieu charge
For states to promote EE and RE
Perhaps hundreds of millions for EE annually

Clean Energy Innovation Centers
DOE to 8 Clean Energy Innovation Centers
one will likely focus on energy-efficient building systems and designs, per FY 2010 budget request
Centers to receive 0.45% of emission allowances, distributed on a competitive basis (1/8 to EE?)
1.05% of emissions allowances go to ARPA-E( 1/8 to EE?)
$142 million annually for EE R&D (?)

Other
(allocations and authorizations)
Electric and plug-in hybrid vehicles;
Smart Grid;
Transportation Planning;
Industrial energy efficiency and waste heat recovery;
Low-income energy efficiency

That’s a lot of offsets!
Up to 2 billion tons annually (One-third to two-thirds of total allowances)
EE may not fare so well
1/5 of CDM credits is EE
But 90% is power generation
Source: Alliance to Save Energy analysis based on HR 2454

Make them real
If offsets are not real
Cap is undermined
Cost/ton reduction is higher, not lower
EMV critical
WM addresses – EPA, advisory board, random audits
Hard decisions deferred
Discourage other countries’ policies?
BAU policies reduce “additional” potential
WM addresses -- int’l clean energy fund, sectoral offsets, int’l reserve allowances

Muting the End-use Price Signal
Transfers burdens to others
Increases overall cost of abatement
Utility free allowances
Allocation formula only partially linked to emissions and…
rebates cannot be “solely based” on electric consumption, but……
if utilities simply surrender free allowances, could be perfect muting of price signal

EE Policy and Program Challenges
Address real market barriers
Imperfect information, externality costs, split incentives
Inelastic demand is not a market barrier
Deploying EE at large scale
No more CFLs!
EMV
RES, programs

Joe Loper
Senior VP, Policy and Research
202-530-2223
jloper@ase.org

Strategic reserve
Reduces effective stringency
Pressure relief varies
$28/ton plus for first 3 years
60% above rolling 3-year average most other years
Limits
10% of total allowances
20% of a single entity’s allowances
Not a problem

Energy Efficiency Policies as a Carbon Cap Complement
June 29, 2009
Lowell Ungar
Director of Policy

Goals
Policies will no longer save more energy. Instead they will—
Reduce cost of meeting carbon cap by
Addressing market barriers, especially among energy end-users

Efficiency Policies
Buildings:

Building codes
Building labels
Appliance standards + labels
Federal energy use + ESPCs

Utilities:

Efficiency + renewable standard
Smart grid + transmission

Industry
Transportation

Vehicle emissions standards
Reducing driving through land use planning + transit

Codes and Standards
Address major market barriers
Split incentives
Decision/transaction costs
Higher levels may be justified by carbon price

Building Energy Codes: Development
Senate + House:

Energy savings targets:
30%, 50%, and beyond
ICC and ASHRAE get first chance, with DOE help
DOE sets if they don’t

Building Energy Codes: Targets

Building Energy Codes: Adoption

Building Energy Codes: Compliance

Appliances and Lighting: New Standards

Appliances and Lighting: Standards Process

Efficiency Information
Make price signal more effective by addressing information barriers
Building efficiency labels
Improvements to Energy Star

Building Efficiency Labels
House and Senate:
EPA to establish model ratings and labels

Actual performance and designed performance ratings
Build up EIA surveys (CBECS, RECS) as basis

Implementation:

EPA to work with states andlocal governments

House: lists disclosure methods, limited to new construction

Appliances and Lighting: Energy Star Label

Utilities: Efficiency Programs
Standard for savings from programs
Efficiency as resource in combined standard
Allowance value to fund programs
Use of allowances to utilities
Use of allowances to states, local govt’s

Utilities: Efficiency and Renewable Electricity Standard
Efficiency without bill likely to reach 5%

Transportation
House only:
Light duty vehicle emission standards
Emission standards for trucks, trains, ships, and airplanes
Require states to set emissions reduction goals and large MPOs to set plans that meet them.

Authorizations
Building energy code implementation
Building retrofits
Building labeling programs
Manufactured home replacement
“Best-in-class” appliance program
Motor rebates
Waste heat recovery grants
Vehicle electrification and plug-in vehicle programs
SmartWay heavy duty vehicle program
ARPA-E and Clean Energy Innovation Centers
Low Income energy efficiency program

Savings Estimates
Potential energy and carbon savings (toward meeting cap) from key policies in 2030 (ACEEE):

Thank You!
Lowell Ungar
Phone: (202) 857-0666
Email: lungar@ase.org
Website: www.ase.org

Stimulus Overview and Update
June 29, 2009
Brad Penney

$65B Related to Energy Efficiency
(Millions of US Dollars)

Funding Rollout
Energy Funds Slow to Unroll:
1% of FY2009 awards
90% of FY2009 awards go to health, transportation and education
Funding allotted in segments:
For SEP & WAP:
10% on initial app approval
40% on comprehensive app approval
Remaining 50% contingent on demonstrated success
Projected timing of all funds made available to states and localities.
FY09 and FY12 funding for states and localities
http://www.recovery.gov/sites/default/files/GAO-09-580+Recovery+Act.pdf

Program Timeline
Sept. 30: All funds to be obligated
March 31: All funds to be spent
Initial Apps Due – 10% of funding
Progress reports quarterly through-
out stimulus period
Estimated time for DOE Approval
Comp Apps Due – 40% of funding
18 months after award: Funds to be obligated
State Apps due
36 months after award: Funds to be Spent
Local Apps due
Sept. 30: All funds to be obligated
March 31: All funds to be spent
Progress reports quarterly through-
out stimulus period
Initial Apps Due – 10% of funding
Comp Apps Due - 40% of funding
Administration Application Review
www.ase.org/stimulusresources

Core Energy FundingObligation & Spending to date
SEP
Appropriated: $3.1 billion
Obligated: $301.6 million
Spent: $9.4 million
EECBG
Obligated: $0
WAP
Appropriated: $5 billion
Obligated: $553.4 million
Spent: $8.3 million
Green Jobs
Appropriated: $500 million
Obligated: $0
Smart Grid Investment Grant Program
Obligated: $0
Smart Grid Demonstration Projects
Appropriated: $615 million
Awarded: $4.7 million
Spent: $0
HUD’s EE Public Housing Capital Funds
Appropriated: $4 billion
Awarded: $0
HUD’s Green Retrofit Program
Appropriated $250 million
Obligated: $0
$890 million of $18 billion awarded (.5%)

Uses of Funds:State Energy Programs Plans
Plans Due May 12: ~15 SEP Plans Released
Available through ASE Stimulus Resources Page, NAESCO Recovery.gov when they are approved by DOE
Some more complete than others
Trends:
Building Energy Efficiency Programs
State, industrial, residential, performance contracting
Energy Efficiency Financing Mechanisms
Revolving Loans, Grants, Rebates
Green Job Training Programs
Technical installation, auditing, energy assessments
Transportation
Hybrid vehicles, Smart Traffic Management systems

State Energy Programs (cont.)
Updated on our stimulus resources page: www.ase.org/stimulusresources

Oversight and Advocacy
Immense problems of implementation
size and complexity;
challenge of administration within limited time frame;
political appointees not in place;
demands on career appointees
Credibility of future energy efficiency initiatives depends on competent and effective implementation
Problem of EM & V: How do we measure savings?
Continuity of Programs: What happens when the funding goes away?

Energy Efficiency Coalition
100+ energy efficiency, environmental, public interest organizations and corporations
Focus on ARRA formation, passage, implementation. Now also works on other legislation
Coalition Activities:
SEP – Utility Rate Reform
SEP - Disclosure of Plans
WAP – Davis Bacon Issues
State-level Collaboration needed
SEP, WAP, & EECBG Best practices, knowledge sharing

For More Information…
Brad Penney
The Alliance to Save Energy
bpenney@ase.org
(202) 530-3348