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by Martin Kushler, Ph.D. Senior Fellow American Council for an Energy-Efficient Economy INSPIRING MUNICIPAL UTILITIES TO MAXIMIZE ENERGY EFFICIENCY… AS A SYSTEM RESOURCE,AND LOCAL ECONOMIC DEVELOPMENT STRATEGY
“ modeling for the Plan showed that, in the absence of any energy efficiency programming , Michigan would need no fewer than four new 500 MW baseload units by 2015 to meet forecasted demand. With energy efficiency programming , the model decreased the forecasted need to two new baseload units on a staggered basis; and with the addition of the RPS, this projection has been decreased further to one new unit by 2015.”
“ By displacing traditional fossil fuel energy, the energy efficiency program alone could save Michigan $3 billion in electricity costs over the next 20 years . These results compare favorably to other statewide energy efficiency programs.”
IF THE MPSC 21 ST CENTURY PLAN ANALYSIS WAS REPEATED NOW:
Coal plants wouldn’t be selected at all
Load growth is virtually flat
Coal costs now are over 10 cents/kWh (vs. 6 cents in original study)
Energy Efficiency still by far the first priority
Renewables and gas would fill in the remaining need
[Result would look extremely similar to the Pacific NW plans seen earlier]
Coal plant construction costs have doubled over the past decade, and coal fuel costs have soared
10 Michigan counties in the UP faced a 33% rate increase in 2010 from WE Energies new coal plant going into rates
The Illinois Municipal Electric Agency (IMEA) is facing an over 30% rate increase from its 15% share of a new coal plant whose costs have doubled
The MPSC staff estimated the proposed Wolverine coal plant in Rogers City would raise rates by nearly 60%
[And Michigan has to import 100% of the coal we burn]
ENERGY EFFICIENCY vs. RENEWABLE ENERGY: POLICY IMPACTS ON ELECTRIC SYSTEM COSTS [Source: Next Energy & EOS study for MDEQ, 2007] -8% -7% -6% -5% -4% -3% -2% -1% 0% 1% 2% 3% 4% 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 Difference from Base Case EE1 EE2 RPS1 RPS2 RPS1-EE1 RPS2-EE2
Michigan’s utility energy efficiency programs were terminated in 1996, in the rush to utility deregulation
[Many other states maintained their energy efficiency programs, and have realized hundreds of millions of dollars in utility cost savings.]
The situation was finally corrected in 2008 when PA 295 was signed into law, requiring utility energy efficiency programs and setting annual energy savings requirements for electric and natural gas utilities.
Energy Efficiency Resource Standards HI: 4,300 GWh by 2030 20% of load growth by 2010 11.5% by 2020 10% of 2005 sales by 2020 1.5% annual by 2010 >2%% annual by 2015 VT: 2.0% annual now MA: 2.4% annually by 2012 CT: 1.5%/yr now 22 States –February 2010 DC: 20% by 2020 DE: 15% by 2015 ~10% by 2025 VA: 10% by 2020 2% annual by 2015 1.5% annual (post-2010) >1% annual by 2012 1% annual. By 2011 4% by 2020 0.6% annually 2% annual by 2019 1.0% annual by2012 Standard Voluntary Goal Pending Standard or Goal Combined RES/EERS MD: 15% by 2015 (relative to 2007 sales) 20% of 2005 sales by 2020 2% annual by 2019
Cumulative Electricity Savings of State EERS Policies Extrapolated to 2020 *Savings beginning in 2009 extrapolated out to 2020 based on final year of annual savings required Note: Assumptions and methodology detailed in full report State Cumulative 2020 Target State Cumulative 2020 Target Vermont* 27.00% Wisconsin* 13.50% Maryland* 26.70% Maine* 13.40% New York* 26.50% Connecticut* 13.14% Massachusetts 26.10% California 12.94% Rhode Island* 25.26% Ohio 12.13% Arizona 22.00% Michigan 10.55% Illinois 18.00% Oregon* 10.40% Hawaii* 18.00% Pennsylvania* 9.98% Washington 17.24% New Mexico 8.06% Minnesota 16.50% Arkansas* 6.75% Iowa* 16.10% Texas 4.60% Delaware 15.00% Florida 4.06% Colorado 14.93% Nevada 3.76% Indiana 13.81% North Carolina 2.92%
This additional $12 billion annual drain on Michigan’s economy is roughly equivalent to the lost payroll from closing 120 major manufacturing plants .
Even the Wall Street Journal has written about the unprecedented transfer of wealth, calling it a “bonanza” and “windfall” for the handful of big energy producing states (i.e., AK, NM, ND, WY and TX) and countries (e.g., OPEC).
KEY POINT #3: MICHIGAN’S FUTURE IS NOT IN FOSSIL FUELS
MICHIGAN’S RECOVERABLE RESERVES AS A
SHARE OF U.S. RECOVERABLE RESERVES (Source: U.S. EIA)
Natural Gas: 1.3%
For a municipality like Holland, these are all 0%
Why would Michigan policymakers support policies that encourage greater consumption of these resources?
“ The overall goal of an energy optimization plan shall be to reduce the future costs of provider service to customers. In particular, an EO plan shall be designed to delay the need for constructing new electric generating facilities and thereby protect consumers from incurring the costs of such construction .”
Energy Efficiency is the only resource that boosts the economy and provides jobs in 3 key ways:
Direct employment in delivering the EE
Local re-spending of saved energy dollars
Reduced energy costs for all ratepayers
Cheapest resource for the utility system
Downward pressure on market energy prices
HOW LOCAL COMMUNITIES BENEFIT FROM UTILITY SECTOR ENERGY EFFICIENCY PROGRAMS
Direct local employment (installers, electricians, skilled trades, service occupations and retail)
Direct savings on utility bills for customers participating in the energy efficiency programs (10-30% savings is possible)
Indirect benefit from reduced dollar drain from the community (i.e., re-spending of the $ savings by customers)
Reduced air emissions from fossil fuel combustion (& urban areas tend to have the most serious air quality problems …NOx, ozone, smog, mercury, particulates)
As a matter of economic policy, cities should be trying to maximize the amount of energy efficiency resources they can acquire, … and minimize the amount of additional fuel imports needed
FROM THE BURLINGTON 2010 EE ANNUAL REPORT: Energy efficiency expenditures are made almost entirely locally, typically in the form of professional services, skilled trades employment, and equipment purchases. Not only is the value of the City ’ s building and energy-using equipment improved, but locally-retained dollars are “ multiplied ” many times over by subsequent consumer spending. Absent these energy efficiency expenditures, these funds would have gone towards the purchase of electricity and enhanced infrastructure to satisfy increased demands on the City ’ s electrical system. Most of these dollars would have been exported out of state, and many out of the country. Energy Efficiency is a win-win situation for the city of Burlington through increased local economic activity, and through the avoidance of increasingly costly electricity purchases, their associated infrastructure growth and capital expenses, and their environmental impacts.
Most municipalities are 100% dependent upon imported fuels….this creates a huge “dollar drain” from the community
Energy Efficiency is the cheapest, fastest, and cleanest new energy resource….one third to one fourth the cost of new electricity supply
Michigan has huge reserves of ‘untapped’ energy efficiency potential (we have a relatively old and inefficient building and equipment stock)
Energy Efficiency is a completely “Michigan-based” resource. Every bit of efficiency must be “mined” from Michigan homes, businesses, and public facilities….and energy efficiency jobs cannot be “outsourced”.
Municipal energy policy should be: ENERGY EFFICIENCY FIRST , followed by cost-effective LOCAL RENEWABLES
That policy would be entirely justified by the economics …. The environmental benefits are a bonus !
SOME SOURCES FOR EXCELLENT EE PROGRAMS FROM AROUND THE U.S. Compendium of Champions: Chronicling Exemplary Energy Efficiency Programs from Across the U.S. York, Kushler & Witte, ACEEE, 2008 http://www.aceee.org/research-report/u081 [Presents the results of a national search for exemplary utility-sector energy efficiency programs. A detailed appendix includes summary profiles of a total of 90 programs across 20 different program categories.] Energy Efficiency and Electric System Reliability: A Look at Reliability-Focused Energy Efficiency Programs Used to Help Address the Electricity Crisis of 2001 Kushler, Vine and York, ACEEE, 2002. http://aceee.org/research-report/u021 [22 “case studies” of successful examples of “reliability-focused energy efficiency programs”]