ACEEE Blog

New York REVs up as commission includes efficiency in earnings opportunities; efficiency targets to be decided later
May 26, 2016 - 9:36 am

By Steven Nadel , Executive Director


Last week the New York State Public Service Commission (PSC) released its final decision in Phase 2 of the Reforming the Energy Vision (REV) proceeding. REV is the New York initiative to reform the utility industry by building the rules that govern the utility system of the future. Phase 2 of the proceeding dealt mostly with financial issues, particularly how utilities can earn money. Several aspects of the decision affect energy efficiency, chiefly the inclusion of energy efficiency in an “earning adjustment mechanism” and a pledge to “develop targets for energy efficiency beyond [existing plans and targets].”

The heart of the decision is establishing two new earning opportunities for utilities – platform service revenues and earning adjustment mechanisms.

Platform service revenues

According to the decision, “[p]latform service revenues [PSRs] are new forms of utility revenues associated with operation and facilitation of distribution-level markets. In early stages, utilities will earn from displacing traditional [distribution] infrastructure projects with non-wires alternatives. As markets mature, opportunities to earn with PSRs will increase.” Among the non-wires alternatives utilities can use are energy efficiency, demand response, distributed generation and storage.

Earning adjustment mechanisms

The new earning adjustment mechanism is a type of performance-based ratemaking—a system where utility earnings are adjusted up or down based on performance on specifically-defined metrics. The REV2 decision specifies four categories of earning adjustment mechanisms: system efficiency (achieving peak reduction and load factor improvement targets), energy efficiency (discussed below), customer engagement and information access (providing tools and opt-in rates and use of these tools and rates), interconnection (ease with which third-parties can connect to the grid). Additionally, the commission decided that affordability issues are important and will receive attention in other dockets. In addition to the energy efficiency metric, energy efficiency can contribute to the system efficiency metric and to addressing affordability issues.

For the energy efficiency category, the PSC specifies that one of the metrics should be based on electric usage intensity (e.g., electric use per customer), but that additional metrics can be developed, including ones based on program-specific savings, cost-savings, and innovative efficiency measures that address the PSC’s strategic goals. The next step in this process is for the Clean Energy Advisory Council (CEAC, a group of state officials, senior utility executives, and perhaps others) to develop recommendations on energy efficiency targets and earnings mechanisms for meeting and exceeding those targets. In another proceeding, the PSC has asked the CEAC to develop recommendations by the end of the year.

Looking beyond earnings

The decision also addresses greenhouse gas reductions, competitive market-based earnings and data access. The greenhouse gas section notes a separate Clean Energy Standard proceeding (addressing renewable and nuclear energy) but also says that “[u]tilities will… be encouraged to propose programs to accelerate the conversion of transportation and building end uses to efficient electric alternatives.” This provision could include efforts to promote electric vehicles or cold climate heat pumps. On competitive market-based earnings, the decision allows utility subsidiaries to compete in markets provided they meet five criteria specified in the decision (at page 49) and implement standards to avoid affiliate abuse. This provision might, for example, affect utility subsidiaries that develop combined heat and power systems at customer facilities. The data access section requires utilities to make certain basic data available for free but utilities may charge a fee for more refined data or analysis.

In addition, the decision also addresses rate-setting, encouraging residential opt-in time-of-use rates and specifying that future rate cases will examine ways to make demand charges for commercial and industrial customers more time-sensitive. The decision also asks PSC staff to work with stakeholders and report to the commission on possible residential opt-out variable rate scenarios including time-of-use rates, demand charges and peak-coincident demand charges. “Opt-in” means customers must make a proactive decision to enroll, which typically means low participation rates. “Opt-out” means customers are automatically enrolled, but can make a proactive decision to opt-out. Participation rates are generally much higher with opt-out.

Many decisions to be made later

Overall, the PSC decision contains some promising opportunities for energy efficiency, although how extensive the opportunities are will be determined over the balance of this year by the Clean Energy Advisory Council and subsequent PSC decisions addressing such issues as setting energy efficiency targets and earnings incentive mechanism details. ACEEE hopes that CEAC will recommend strong energy efficiency targets and earnings mechanisms, which is the combination ACEEE finds deliver the largest savings.

The full PSC decision can be found here. It includes a summary beginning on page 23.


To check progress toward 2025 fuel economy targets, we took a look at the Ford F-150
May 24, 2016 - 10:00 am

By Siddiq Khan, Senior Researcher


Recent press accounts of automobile fuel economy trends express concern that light trucks won’t be able to keep up with rising fuel economy (CAFE) standards. While most new model passenger cars are years ahead of their CAFE targets, only 40% new model pickups and SUVs are 2016 CAFE compliant. But sales of pickups and SUVs have surged in 2015, and this surge is likely to continue in 2016. Meanwhile, fuel economy and greenhouse gas standards for cars and light trucks for model years 2022 through 2025 are under review. Will lagging pickups really pose an obstacle to meeting the 2025 fuel economy goals?

Since Ford’s F-Series has been the best-selling vehicle in America for 34 years, let’s take a look at the F-150 pickup (F-150 comes under light-duty CAFE, but not F-250 and F-350; they are heavy-duty vehicles). The F-150 has four engine options that, together with choice of two- or four-wheel drive,  affect fuel economy. Ford has garnered much attention in recent years for its downsized, turbocharged “Ecoboost” engines in the F-150 (among other nameplates) and a 700-lb. mass reduction across all F-150 models. Thanks to these and other changes, many F-150s meet or exceed their 2016 fuel economy targets. But others, like those with the 5.0L naturally aspirated engine, do not. Using a Ford projection of sales shares of the various engines and assuming that two-thirds of F-150s will have four-wheel drive, we estimate that the average fuel economy of all F-150s sold this year will be 24.2 miles per gallon (mpg), falling a bit short of their 2016 average fuel economy target of 24.7 mpg. Additional credits for air conditioning efficiency and other “off-cycle”technologies should allow Ford to close that ½-mpg gap and hit the F-150 target for 2016 without difficulty.

Looking forward to 2025, multiple technologies assessed by federal agencies in setting CAFE standards remain available to further increase fuel economy. All models can take advantage of advanced valve train technologies, greater transmission efficiency and shift optimization, aerodynamic drag reduction, low rolling resistance tires and further mass reduction, among others. Models with Ecoboost engines can adopt cooled exhaust gas recirculation. Start-stop technology, which saves fuel by shutting off the engine when the vehicle is at rest, is already standard with the 2016 2.7L Ecoboost engine, but will be new to the 3.5L Ecoboost starting in 2017.

Note: Fuel consumption reduction estimates for individual technologies are from NHTSA Final Regulatory Impact Analysis, August 2012

With the addition of the technologies shown in the above figure, all F-150 models except the 5.0L 4WD reach or exceed their average 2025 fuel economy target of 32.1 mpg (an estimate based on today’s size distribution of F-150s sold). Assuming the same shares for the four engines assumed for 2016 and two-thirds four-wheel drive, the entire F-150 line reaches its average target of 32.1 mpg in 2025 as shown in the figure below.

But in fact, Ford could substantially exceed the 2025 fuel economy target for the F-150.  We estimate that, if all models moved to turbocharged, downsized engines, for example, the F-150 could reach 34.1 mpg on average, 2.0 mpg over the 2025 target. Even if naturally aspirated engines remain in the line-up, they are likely to benefit substantially from advances such as high compression ratio and cooled exhaust gas recirculation (EGR).

So it looks like the F-150 could go well beyond its 2025 target using well-known technologies, with no vehicle electrification (beyond start-stop), and without even taking advantage of the multiple flexibilities in the program that make it easier for manufacturers to meet the standards. If the F-150 is any indication, the real question for the agencies’ review of the 2022-2025 CAFE standards is: can we do better than previously thought? 


Explaining the unique energy burden of low-income households
May 20, 2016 - 10:00 am

By Ariel Drehobl, Research Analyst, Local Policy


In a recent report released by ACEEE and Energy Efficiency for All, Lifting the High Energy Burden in America’s Largest Cities, we measured energy burdens in 48 of the largest cities in the United States. Energy burden means the percentage of household income that goes toward energy costs, and we looked specifically at utility energy bills (transportation energy costs are also a significant household expense, but it was outside the scope of the analysis). We found that low-income, African American, Latino, and renters pay up to three times more than the average household on home energy costs. Higher energy burdens have real implications on the health and wellbeing of families and individuals. For example, the median income for low-income households in Memphis is around $19,000, and we found that they can spend upwards of $2,500 to $4,700 a year on their utilities. Families like these households, who have to devote higher proportions of their income to utility bills, may have to make trade-offs between heating and cooling their homes and affording other important necessities, such as food, medicine, and childcare.  

Lower incomes, less efficient housing, and limited access to energy efficiency programs can explain the higher energy burdens faced by these groups. We found that even though these families paid less overall on energy bills, they paid more per square foot, which indicates the relative inefficiency of their homes.

When analyzing energy burden, it’s important to look beyond averages and medians in order to better understand the burden faced by those worst-off economically. In this study, we also looked at the energy burden “quartiles” for each group (quartiles represent the middle value of the lowest half and upper half of the dataset).

The figure below illustrates the energy burden quartiles experienced by low-income households, indicated by the orange, green, and blue points. The dotted green line indicates the median energy burden for all households in our study, not just low-income households. Three-fourths of low-income households experienced an energy burden greater than the orange point (the lowest burden quartile), one-half of households experienced a burden greater than the green point (the median), and one-fourth of households experienced a burden higher than the blue point (the highest burden quartile). Take New Orleans for example: a quarter of low-income households in New Orleans experienced an energy burden greater than 19%. This is not unique. In 17 cities, a quarter of low-income households experienced an energy burden greater than 14%. This represents a significantly higher energy burden compared to the median energy burden across all cities in our sample, which was 3.5%, suggesting these low-income households devote a significantly higher portion of their income to utility bills.

What next? States, cities, and utilities can take action to address high energy burdens in their communities. Utility-funded energy efficiency programs are an underutilized strategy that can complement bill assistance and weatherization programs. To address high energy burdens, we suggest improving and expanding low-income utility programs by following the best practices laid out in our report, Building Better Energy Efficiency Programs for Low-Income Households. The same applies for the programs that serve multifamily buildings where building owners and managers experience unique barriers to upgrading housing stock with traditional efficiency measures and the majority of low-income residents are renters. We outline best practices for the delivery of multifamily energy efficiency programs in our report, Apartment Hunters: Programs Searching for Energy Savings in Multifamily Buildings. Utilities should also collect, track, and report demographic data on program participation in order to ensure that efficiency programs are meeting goals.

Cities and states can also work to ensure that cost-effectiveness testing of energy efficiency programs include multiple benefits and also that strong low-income savings goals are in place for both investor- and municipally-owned utilities. The Clean Power Plan also offers an opportunity for increased investment in low-income energy efficiency programs through the Clean Energy Incentive Program. Local stakeholders have many policy and program options to help those most in need in their communities to reduce their utility energy costs and alleviate energy burdens.

For more information on the topics covered in this post, see our low-income energy efficiency programs and multifamily homes topic pages.

Data Points is a blog series focusing on the graphs and other images that tell the energy efficiency story.


Oakland is living up to California’s high bar on energy efficiency, and then some
May 19, 2016 - 10:00 am

By Tyler Bailey, Research Analyst, Local Policy


Local governments of all sizes can invest days, months, and years into advancing energy efficiency programs and policies. Yet many go unrecognized for their efforts. Because the City Energy Efficiency Scorecard only covers 51 large cities, ACEEE created the Local Energy Efficiency Self-Scoring Tool so that any community can evaluate itself. Once a community has completed the tool, we can recognize their policy efforts in the State and Local Policy Database.

Oakland, California was the first city not covered by our Scorecard to complete the tool, and scored extremely well. Here are some of their highlights followed by a Q&A with a local government staff person.

Highlights from Oakland

A score of nearly 70 out of 100 would have earned Oakland a spot in the top ten of our 2015 City Scorecard were the city included. Oakland scored well in several policy areas, but its exemplary score can be attributed in part to its performance in a couple policy areas, namely transportation policies and actions to support efficiency efforts among energy and water utilities. In transportation, Oakland tied Arlington County, Virginia for the highest score of all cities we’ve assessed. Some of Oakland’s transportation-related achievements include: widespread availability of the AC transit and BART rail service and high regional spending on transit, a Green Fleet resolution to encourage efficient driving behavior, and active government participation in Oakland’s Clean Cities Coalition partnership. Oakland’s high score in energy and water utilities was due to several factors, including strong utility spending on electric and natural gas efficiency programs and Oakland’s support for these programs through the Local Government Sustainable Energy Coalition’s Energy Policy Committee.

A Conversation with Oakland

To share Oakland’s story, I corresponded with Daniel Hamilton, the Energy Program Director for the City of Oakland over email. The following exchange has been edited for clarity.  

Tyler Bailey: What have been the most effective energy efficiency programs Oakland has implemented that have saved the most energy?

Daniel Hamilton: Oakland participates in a range of regional programs to increase energy efficiency in buildings, the most effective of which is the single family and multifamily home retrofit programs of the Bay Area Regional Energy Network (BayREN). BayREN is a joint effort of the cities and counties of the San Francisco Bay Area, and has had great success in addressing the hard-to-reach market of existing residential buildings. Meeting our long-term efficiency goals requires greater penetration into the existing building stock, and working collaboratively with other local governments, rather than independently, has allowed us to manage programs like this at a scale that is much more effective.

TB: Based on your successes and experience with overcoming hurdles, what advice do you have for other localities working to improve energy efficiency?

DH: Cities have an unprecedented level of resources available to them now to support advanced energy efficiency policies and programs. Nonprofits like the New Buildings Institute and the Institute for Market Transformation, in addition to federal agencies like the Department of Energy, have developed comprehensive guides to assist cities in drafting ordinances, designing programs, and improving compliance and implementation. The ACEEE Scorecard criteria also provide a great framework for understanding the range of actions that a city can take to improve its energy performance and reduce its associated GHG emissions.

TB: Where do you see the greatest (untapped) potential for energy efficiency in Oakland and how are you working to tap that potential?

DH: There are two areas of greatest potential for Oakland to lower our energy consumption—energy conservation ordinances and community choice aggregation (CCA). The city adopted the Energy and Climate Action Plan which calls for the consideration of both residential and commercial energy conservation ordinances, and the city is pursuing multiple strategies for developing such ordinances in 2016. In addition, the city is participating in a countywide effort to form a community choice energy program, creating more renewable energy demand and a new provider of energy efficiency services. Developing these efforts into programs to be considered by the city council are key priorities in our efforts to substantially lower energy consumption and increase renewable energy generation in Oakland.


Why utilities are investing in this technology as a way to boost resiliency and reduce consumer costs
May 18, 2016 - 10:00 am

By Anna Chittum, Visiting Fellow, Industry


What if there was a technology your utility could deploy today that was cheaper and cleaner than most existing power generation, that boosted system resiliency and reliability, and was twice as efficient? Would you want them to use it?

Customers of Duke Energy in North Carolina may soon enjoy these benefits. Duke Energy is just the latest example of utilities around the country that are investing in customer-sited combined heat and power (CHP) plants to bring cleaner, cheaper, and more quickly deployable energy resources to their customers. Duke has proposed to develop, own, and operate a 21 Megawatt (MW) CHP plant located at Duke University.

CHP is different from traditional power generation because the large amount of heat generated during the electric generation process is used, instead of wasted. Whereas traditional power plants dump their excess heat into the air or a nearby river or lake, CHP captures that heat and uses it for a productive purpose. In this case, the heat generated at the Duke plant will serve the university’s need for space heating, water heating, and steam for uses such as cleaning and sterilization at Duke University Hospital. The increased efficiency means the university will reduce its energy-related CO2 emissions by about 25%. And by siting CHP near the point of consumption, the utility reduces losses along transmission and distribution lines, which average over 7% but can climb as high as 20% during times of peak system use.

While the university itself stands to benefit from this arrangement, the project was given the go-ahead by the utility in large part due to the benefits to all users of Duke Energy’s system. The 21 MW of new capacity is more cost-effective than other supply alternatives the utility considered, and can come online faster than most other types of power generation. The power generated by the new plant will serve both the university, as well as the surrounding Durham community.

Duke Energy is not alone in tapping CHP for its near-term energy needs. Other utilities have realized that siting distributed CHP power plants at customer locations can bring benefits to the whole system. In Texas, Austin Energy owns a 4.3 MW CHP system located near Seton’s Dell Children’s Medical Center, providing low-cost and highly reliable power and thermal energy to the hospital and nearby buildings. In Florida, Florida Public Utilities (FPU) is developing a 20 MW CHP system located at a Rayonier Advanced Materials cellulose plant. Rayonier will use the steam in its production process, and the power will serve FPU’s nearby customers on Amelia Island. The plant is expected to save FPU customers $28 million over the 20-year contract period. State regulators were very enthusiastic about the project, and are hoping to see others like it.

In addition to the efficiency and emissions reduction benefits, utilities and customers are increasingly recognizing the reliability benefits of CHP and viewing it as critical infrastructure for staying online in even the worst weather events. Given so many benefits, it is natural to wonder why we don’t see more CHP owned by utilities as supply-side assets. One reason is that utilities do not usually consider CHP in their long-term resource planning efforts. That situation is changing as more and more states identify CHP as an important option to be considered alongside traditional generation. Indeed, Duke Energy has indicated that the CHP plant at Duke University is just one of possibly four additional customer-sited CHP developments it plans in the near future. Stay tuned as ACEEE continues to explore the emerging role of CHP as a distributed utility resource. 

 


Huge progress on lighting efficiency improvements
May 12, 2016 - 12:56 pm

By Steven Nadel , Executive Director


Several recent sets of data show large improvements in lighting energy efficiency in recent years. First, DOE has commissioned two US Lighting Market Characterization studies – one with data on installed lighting in 2001, the other with data on installed lighting in 2012. Figure 1 compares these two studies for the residential sector, showing how conventional incandescent lamps declined from 69% of total annual light provided in 2001 to 49% in 2010. In 2010, fluorescent lamps (tubes and compact fluorescent lamps) plus halogen and other lamps accounted for more than half of the lighting provided to US homes.

Figure 1. Residential lighting, percent of total annual lumen-hours in 2001 and 2010 by lamp type. Source: ACEEE analysis of DOE data from here and here.

The residential lighting mix continues to change rapidly. Figure 2 shows the distribution of A-line screw-in lamp sales by year using data compiled by the National Electrical Manufacturers Association (A-line means the standard pear-shaped light bulb). Standard incandescent lamps declined from nearly 75% of lamp sales in 2011 to only 8% of lamp sales in the fourth quarter of 2015 in which half of sales were halogen lamps, 23% were compact fluorescent lamps, and 17% were LEDs (light-emitting diode lamps).

Figure 2. Distribution of screw-in A-line lamp sales by lamp type, 2011-2015. Source: National Electrical Manufacturers Association (see here).

Comparable trends can be seen in data for the commercial sector. Figure 3 summarizes data for lighting in the commercial sector in 2001 and 2010. “T12” lamps (1.5 inches in diameter and typically using 34 or 40 watts of power) declined from 69% to 49% of light provided, while “T8” and “T5” lamps (1 and 5/8 inch diameters and typically using 26-32 watts of power) increased from 25% to 55% of lighting provided.

Figure 3. Commercial lighting, percent of total annual lumen-hours in 2001 and 2010 by lamp type. Source: ACEEE analysis of DOE data from here and here.

The large energy savings that result are shown by recently released data from the 2012 Energy Information Administration (EIA) Commercial Buildings Energy Consumption Survey (CBECS). EIA found that commercial building lighting energy use declined by 46% from 2003 to 2012, as shown in Figure 4, even though EIA also found that commercial building floor area increased by 22% over this period.

Figure 4. Total commercial energy consumption for lighting and other end-uses, 2003 and 2012. Source: EIA 2012 CBECS results.

These four figures show recent trends, but lighting continues to rapidly evolve. Figure 5 looks at the saturation of LED lighting in different applications on a market diffusion curve. Some applications are now largely LED, such as exit signs and refrigerator case lighting. In all likelihood, even applications with low LED penetration currently, such as linear fixtures and decorative lighting will move steadily up the market diffusion curve in coming years.

Figure 5. US LED installed penetration on a market diffusion curve. Source: Architectural SSL magazine, Feb. 2016. Available here.

Data Points is a blog series focusing on the graphs and other images that tell the energy efficiency story.


Want to improve your multifamily energy efficiency program? Our new report shows you the way
May 10, 2016 - 4:21 pm

By Michael Jarrett, Research Analyst, Utilities, State, and Local Policy Team


Multifamily buildings are home to millions of people across the US. In fact, multifamily buildings make up one quarter of the housing stock. These buildings range from duplexes with five or six units to high-rises with more than 50. Most properties are leased to residents, while others are owned by their occupants. Rental buildings can be owned by mom-and-pop landlords or companies that own and operate hundreds of buildings nationwide. These are just some of the factors utilities and other program implementers must consider when designing energy efficiency programs for the multifamily sector.

Since 2013, ACEEE has been working to help multifamily buildings save energy as part of our Multifamily Energy Savings Project. The project aims to improve and expand utility energy efficiency programs that target multifamily housing. Our new report, Reaching More Residents: Opportunities for Increasing Participation in Multifamily Energy Efficiency Programs, builds upon existing research and identifies the strategies that energy efficiency programs designed for multifamily housing use to achieve high participation.

What did we find?

We collected information from all types of energy efficiency programs for multifamily housing from across the country. For data, we turned to our Multifamily Utility Working Group, consisting of multifamily energy efficiency program administrators from electric and gas utilities. We analyzed 30 programs to identify those with high participation and interviewed administrators to learn how they reach their customers.

We found that programs serve anywhere from 1,700 units to over 54,000 units every year and reach 1% to 26% of their eligible customers annually. However, most programs only serve a small percentage of their eligible customers in multifamily housing allowing for plenty of opportunities for programs to expand their reach. There are many factors that determine the number of customers a program reaches and how much energy is saved. The comprehensiveness of a program and its budget can affect the number of customers served. Whole-building programs typically reach fewer customers but achieve higher energy savings per unit than those that rely on simpler direct install measures. Regardless of program type, participation matters. We found that programs, both new and old, are applying effective strategies to reach more customers in multifamily buildings.

Successful strategies

The Bay Area Regional Energy Network’s (BayREN) multifamily energy efficiency program in California is one of the newest programs highlighted in our report. Although BayREN only served a modest number of customers in its first year, it far exceeded its participation goals and already has tens of thousands of units waiting to participate in the program. BayREN credits the high interest in its program to its combination of savvy marketing strategies and partnerships with local city and county governments.

Austin Energy’s multifamily energy efficiency program in Texas is one of the most established programs we analyzed, having served over 40% of its customers in multifamily housing over the last decade. They attribute much of their success to building relationships with the multifamily housing community, including the Austin Apartment Association. Establishing relationships with building owners helps Austin Energy create interest in their program. Austin Energy’s next goal is reaching more of its low-income customers in multifamily buildings. They are currently in the process of launching a new program designed specifically for these customers.

Some programs, like the District of Columbia Sustainable Energy Utility’s (DCSEU) Low-Income Multifamily Initiative are already targeting low-income customers. DCSEU serves roughly 5% of its income-eligible customers every year and achieves a notably high per unit energy savings. This program not only works to save energy, but it also preserves affordable housing and reduces utility costs for the city’s most vulnerable communities.

If I’m a program administrator, how can I reach more of my customers?

The programs highlighted above are just a few of the many examples of successful strategies we call out in the report. Although each program puts a unique twist on their marketing and outreach strategies, we identify six practices that programs can use to reach more customers in multifamily housing. These best practices include:

  1. Simplifying access to program services
  2. Targeting decision makers
  3. Tailoring marketing to specific segments of the market
  4. Partnering with state and local housing organizations to market and deliver programs
  5. Partnering with trade allies to market programs
  6. Delivering effective messages that demonstrate value with actionable guidance

What’s next?

The findings of this report show that multifamily energy efficiency programs can serve high numbers of customers and achieve substantial energy savings. We also recognize that better data are needed to assess the reach and scope of energy efficiency programs serving customers in multifamily buildings. At ACEEE we are committed to continuing this research to help ensure more customers in multifamily buildings and the communities where they reside benefit from energy efficiency. 


Should we promote heat pumps to save energy and reduce greenhouse gas emissions?
May 04, 2016 - 10:00 am

By Steven Nadel , Executive Director


Heat pumps are going through a period of innovation including more wide-spread availability of ductless heat pumps, development of cold climate heat pumps, higher minimum efficiency standards for heat pumps, and development of gas-fired heat pumps. Heat pumps are generally fairly efficient as they extract heat from the air, even cold air. A typical new heat pump in the United States is on average roughly twice as efficient as electric resistance heat, although performance varies with climate. While heat pumps can be efficient, they are also more expensive than many types of heating systems, and they generally don’t work well at very cold temperatures. 

More than 2% of residential energy use can be saved

In order to examine which applications are good for obtaining cost-effective energy savings from heat pumps, ACEEE conducted a pair of analyses that we are releasing today. One addresses opportunities to replace electric resistance heat with heat pumps and the other addresses replacing gas furnaces with heat pumps. Both analyses use data on actual energy consumption in homes throughout the US collected as part of the Energy Information Administration’s Residential Energy Consumption Survey (RECS). Our analysis of replacing electric resistance heat with heat pumps finds an opportunity to reduce residential sector electricity use nationwide by more than 2%. Additional energy would be saved from using heat pumps instead of gas furnaces in some important applications. Furthermore, multiple analysts (e.g., here and here) see electric heat pumps powered with clean electricity as an important strategy for displacing emissions from in-home combustion of fossil fuels.

For our analysis of converting homes with electric resistance heat to heat pumps, we used data on space heating energy use in a representative sample of nearly 2,000 homes in RECS now using electric resistance heat. This analysis looked at replacing both electric furnaces (which distribute heat via ducts) and electric baseboard heat (heating coils along the baseboard in each room) with heat pumps. Electric furnaces are particularly common in the south but are uncommon in the north. Nearly 90% of homes with electric furnaces already have central air conditioning. We found that installing a new heat pump at the time the existing central air conditioner needs replacement will generally be cost-effective, with the median simple payback period (time for the energy savings to fully pay back the additional cost) being 4.7 years. The distribution of simple payback periods is shown in the figure below. Economics were similar for the 17% of homes with electric baseboard heat that also have central air conditioning. But for homes without central air conditioners, the cost to install a heat pump is higher, and the median simple payback was nearly 15 years, although just over 10% of homes have simple payback periods of five years or less.

Distribution of simple payback periods for heat pump conversions for homes with electric furnaces and central air-conditioning. These figures are for single-family homes and multifamily buildings with two to four units per building. This distribution applies the weighting factors in the RECS sample.

For our analysis of replacing gas furnaces with heat pumps, we looked at average space heating energy use of homes with gas furnaces in each of 20 states. We compared the gas used by gas furnaces with the gas used at the power plant to operate a heat pump. For each state, we looked at a variety of furnace, heat pump, and power plant efficiency levels. We also looked at the relative economics for many of the comparisons. We found that electric heat pumps generally use less energy in warm states and have moderately positive economics in these states if a heat pump can replace both the furnace and a central air conditioner. Moderately cold states (as far north as Pennsylvania and Massachusetts) can save energy if electricity comes from the highest-efficiency power plants, but from an economic point of view, life cycle costs for gas furnaces in existing homes will be lower than for heat pumps in these states. (We did not look at new construction where using electric heat and hot water can avoid the need to install gas service.)  For cold states (colder than Massachusetts and Pennsylvania), high-efficiency furnaces use less energy than today’s heat pumps, but further development of cold-temperature electric heat pumps and gas-fired heat pumps will be useful from an energy-saving point of view.

Next steps needed to realizing savings

Based on these analyses, we recommend the following next steps:

  • State officials and utilities should conduct further analysis at the state, local, and utility levels. More nuanced analysis at the utility or local level, based on specific rate schedules and climate zones, will more clearly indicate who might benefit from heat pumps and who will not.
  • Manufacturers and R&D organizations should continue work to develop good cold-climate electric air-source heat pumps and gas-fired heat pumps.
  • Energy efficiency program administrators should consider programs to encourage use of heat pumps in warm states, starting with further localized analysis and proceeding to pilot programs.

More localized analysis is needed, but our analyses find likely opportunities to save energy and money and reduce emissions by using electric heat pumps, particularly in warm states. 


Making sense of commercial-sector energy use data
April 29, 2016 - 10:16 am

By Jennifer Thorne Amann, Buildings Program Director


Commercial-sector energy use in the US increased by 63% from 1979 to 2012, rising from total source energy use of 10.6 quads in 1979 to a peak of 18.4 quads in 2008 before declining to 17.4 quads in 2012.  This growth can largely be attributed to a corresponding increase in commercial building floor area, which grew by 70% over the same period. But that is only part of the story. As the graph below illustrates, as floor area has trended upward over time, energy use per square foot has gone up and down, peaking in the 1999-2003 period but declining since then. As of 2012, energy use per square foot was 4% lower than 1979.  

Commercial building floor area and energy consumption per square foot, 1979-2012

Source: ACEEE analysis based on EIA data from the Monthly Energy Review and the Commercial Buildings Energy Consumption Survey

Why is that? Reductions in energy use per square foot are due in part to improvements in the efficiency of new construction and key end-use equipment, a shift to less energy-intensive building uses, and higher growth in more temperate regions. At the same time, some of the improvement in energy use per square foot (which we report on a source energy basis) is offset by the significant increase in electricity use in commercial buildings, which has doubled since 1979 while other fuel usage has remained flat.

While these data begin to sketch a picture of the broader landscape of commercial sector energy use trends, we need more details to understand which technologies, practices, and policies are driving changing energy performance in individual buildings. EIA recently released preliminary consumption data from the 2012 Commercial Building Energy Consumption Survey (CBECS). This long-awaited and highly-anticipated data comes almost a decade after the last CBECS survey for 2003. In the coming months as the full dataset is released, we’ll dig in and report further insights on the most important efficiency trends in commercial buildings. 

Data Points is a blog series focusing on the graphs and other images that tell the energy efficiency story.


Can energy efficiency rise to its $279 billion potential and help meet climate goals?
April 29, 2016 - 10:00 am

By Brian Stickles , Research Analyst, Finance Policy


Energy efficiency financing has seen record growth over the past year. Property-assessed clean energy (PACE) hit a billion dollar milestone, the nation’s largest green bank has roughly $4 billion of projects in the pipeline, and green bond issuance grew from $3 billion four years ago to over $40 billion in 2015. Total energy efficiency investment in buildings is slated to reach $125 billion by 2020, which is still less than half of the estimated $279 billion available.

But is it enough? On one hand, the market is telling us that we are poised to leave hundreds of billions of dollars on the table, while the Paris climate negotiations earlier this year set investment targets of over $200 billion to help avoid climate change. Energy efficiency financing is growing fast, but can it grow fast enough?

Green banks have emerged to meet the demand previously unmet by cash-strapped public enterprises and risk-wary private ones. They are facilitating billions of dollars of investment and growing nascent program to scale, but there are just a handful of them and many are nascent programs themselves.

PACE has seen astounding success in the past year, but all that success is still a fraction of its potential. Of the 32 states with enabling legislation, only 16 have active programs, and the vast majority of projects are being done in just one.

For this reason, green banks and PACE are headlining this year’s ACEEE Energy Efficiency Finance Forum in Newport, Rhode Island. These two topics exemplify the theme of this year’s conference, “going deep,” as they have both just scratched the surface of their potential. In order to scale, we need deep energy efficiency retrofits as well as deep market penetration. We need to move beyond swapping out light bulbs and reaching only early adopters.

At this year’s conference we explore all facets of the industry: residential; commercial; multifamily; and the municipalities, universities, schools, and hospitals sector. Within these tracks we will feature case studies of successful financial programs and products so that you can apply these concepts in your own companies and communities. Covering utility programs, different lease agreements, and all types of energy performance contracts, this year’s Finance Forum will spread myriad success stories.

To shed more light on these topics, we will be joined by Rhode Island general treasurer Seth Magaziner who will give the opening plenary speech. Massachusetts energy secretary Matthew Beaton will cross state lines from the top-ranked state in energy efficiency to give Monday’s luncheon address. Tuesday morning, Judith Greenwald, deputy director for climate, environment, and energy efficiency from the Department of Energy’s Office of Energy Policy and Systems Analysis (EPSA) will talk about the Quadrennial Energy Review.

We’d welcome you joining in the discussion. There’s still time to register and book a room at conference rates. Please visit our Finance Forum web page for more information. See you in Newport!