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New national furnace standards will save consumers money, but stronger standards could save even more
February 11, 2015 - 12:00 am

By Andrew deLaski, Executive Director, Appliance Standards Awareness Project (ASAP)

Yesterday, the US Department of Energy (DOE) issued a proposed rule for furnaces that would provide significant savings for consumers on their home heating bills, and be among the biggest natural-gas saving standards ever completed by the agency. The new standards would reduce gas and propane furnace energy consumption by about 13% relative to basic furnaces sold today.

Improved furnace efficiency standards are a crucial energy-savings opportunity for homeowners and the nation, since about one-fifth of all the energy consumed in US homes goes to operate gas and propane furnaces. These furnaces provide heat for more than 40% of homes, and their minimum efficiency standards have been virtually unchanged since 1992.

DOE’s analysis published yesterday shows that efficiency levels higher than those in the proposed rule would achieve even larger savings for consumers, and increase national energy savings by 50% compared to DOE’s proposal. The agency cited concerns about potential impacts on manufacturers to explain its selection of the lower proposed levels.

Based on DOE’s analysis, ASAP estimates that typical consumers would save $600 to $800 over the lifetime of a furnace meeting new standards, depending on the standard level. A preliminary DOE analysis published last fall showed that consumers save money in both northern and southern regions, whether purchasing their furnace for a newly built home or to replace an older furnace, and at either the proposed standard level or the higher potential level. An updated version will likely be released soon.

On a national level, furnaces meeting the proposed new standards sold over 30 years would save about 3.1 quadrillion Btus (quads) of energy—enough to meet the gas and propane heating needs of all of New England for 17 years—and net savings of $4-19 billion for consumers. The higher potential standards would save 4.4 quads, or enough to heat New England for 24 years, netting consumers up to $25 billion.

The current furnace standards can be met using non-condensing furnaces, which send much of the heat from the combustion process up the flue and cannot achieve efficiencies higher than about 80%. (For DOE standards, furnace efficiency is measured by calculating annual fuel utilization efficiency, or AFUE.) The new proposed standards could be met with condensing furnaces, which extract additional heat by condensing the water vapor in the flue gases, resulting in efficiency ratings of 90% or higher. Condensing furnaces make up about 45% of current sales.

Improved furnace standards have been a long time coming. Efficiency advocates and states sued DOE over the first revision completed in 2007, because it did very little to improve efficiency. As a result, the agency committed to redo the standard. In 2011, DOE completed a new standard based on a consensus agreement between manufacturers and efficiency advocates that would have raised the minimum efficiency level for furnaces effective in 2013, but only in the northern region. However, the American Public Gas Association (APGA) filed a lawsuit objecting to the expedited process used to adopt the 2011 standards. In 2014, a settlement agreement was approved that vacated the 2011 standards and required DOE to complete yet another new rulemaking. Yesterday’s proposed rule is a key step in the process for achieving improved standards.

Critics of improved furnace standards argued that the prior DOE analyses for the 2011 final rule failed to fully take into account potential switching to electric heat and the full impact of new furnace standards on the installation cost of new furnaces. The agency’s new analysis is substantially revised to address those critics’ concerns and now estimates that about 10% of furnace purchasers would switch to electric heat, primarily heat pumps, as a result of the standard. Most fuel switching would likely occur in those regions of the country where heat pumps are a cost-competitive option compared to gas heating. DOE also updated its estimates of installation costs. A small portion of consumers may face unusually high installation costs when replacing an 80% efficient furnace with a condensing product. ASAP and our allies have worked to develop approaches that would potentially exempt very high-cost installations and remain open to exploring options to provide relief for consumers facing unusually high installation costs. Fortunately, new venting technologies already are bringing down the cost of venting condensing furnaces in even the most difficult circumstances, and may make any special treatment unnecessary. Examples are herehere and here.

Yesterday’s proposed rule would apply to non-weatherized gas furnaces. Non-weatherized furnaces are the most common type and are located indoors, while weatherized furnaces are generally part of an outdoor unit that provides both heating and air conditioning. DOE completed standards for weatherized furnaces in 2011 that took effect on January 1 of this year.

DOE is required by the settlement agreement to publish a final rule for new efficiency standards for non-weatherized furnaces by April 2016, and the standards would take effect five years later. ASAP and our allies look forward to working with other stakeholders and DOE to come up with a final standard that will deliver on the large savings possible with improved standards.

Why we don’t have to choose between energy efficiency programs and market-driven solutions
February 10, 2015 - 12:00 am

By Steven Nadel , Executive Director

Part One in a series where ACEEE examines the most effective roles for energy efficiency programs and market-driven solutions in scaling the deployment of energy efficiency.

The fundamental question that policymakers ask themselves is, Are we being the most responsible stewards of public dollars? For those tasked with finding ways to increase cost-effective energy savings, the gold standard for the last 30 years has been ratepayer-funded programs administered by utilities, or in some cases, by state agencies or third parties. This model has worked very well, saving customers billions of dollars and helping to contain increases in energy prices.

In the search for even more effective policy solutions, some have periodically asked if states and utilities should bow out and allow private-sector service providers in the market to completely take over. The reasoning is that the energy efficiency market will never mature as long as energy efficiency programs exist, so we must choose between these programs and the private sector. Our belief, founded on over 30 years of research, is that this is a false choice: private-sector providers are already the dominant player when it comes to energy efficiency, and energy efficiency programs still fulfill a vital role due to their proven track record of success and the impediments to energy efficiency that they address.

An extensive body of research documents the many factors that result in customers' underutilization of energy efficiency in the absence of energy efficiency programs. These factors include a lack of information, the scarcity of high-efficiency options in the local market, local suppliers' and contractors' lack of training and experience in the latest high-efficiency techniques, customer economic payback requirements that are vastly different than the utility system, the hassle factor of having to arrange an energy efficiency retrofit, and split incentives between building owners and tenants. Well-designed energy efficiency programs help overcome these barriers and allow private-market actors to provide their services more effectively.

This partnership between markets and programs should not be abandoned. As we discuss below, our research indicates that at the present time, private service providers alone will deliver less energy savings than if they continue to work together with successful energy efficiency programs. That said, we are excited about the possibilities of leveraging even more private-sector dollars and activity in the future as a vital complement to customer-funded programs.

In our research we find that the private market has done a lot to promote energy efficiency in the past, and even more may be possible in the future. There are some market segments, such as large institutions, where the private market has done well, but many others where the success of market-focused approaches has been limited. We should encourage the private market where it works well and experiment with new market-based approaches in other promising market segments. But we should also continue to use proven approaches like energy efficiency programs, transitioning to alternative approaches only when such alternatives prove their efficacy in specific market segments. If we reduce proven program approaches prematurely, energy efficiency savings will likely be lower, consumer costs higher, and impacts on the environment more severe.

This blog post is the first in a multipart series on these issues. Today’s blog post summarizes our findings but does not include the underlying details. In the coming weeks we will publish two additional posts: one on our findings from past programs, and one looking at recent developments and potential opportunities ahead. Subsequent posts in this series will look into the role of financing and the New York REV proposal in particular.

Our findings can be summarized in five points.

The market is already a major force in delivering energy efficiency.

2013 ACEEE study estimated that about $70–100 billion was spent in 2010 on energy efficiency measures, with a substantial majority of this funding coming from the private market. Well-developed and well-deployed energy efficiency programs leverage and enhance the role of private retailers and service providers. Utility incentives typically cover a third to half of the cost of measures, leaving end users to pay the rest. Efficiency measures are mostly purchased through privately-owned stores and service providers. And many customers will invest in efficiency without utility or government involvement. The question is not whether to rely on the market, since we already do that; the question is whether we can rely even more on the market in the future.

Energy efficiency programs have a record of cost-effective success.

Energy efficiency programs have done a very good job of improving energy efficiency cost effectively. Utilities and other program implementers began offering energy-efficiency programs in the 1980s because it generally cost less to save a kWh of energy than to build a power plant and generate a kWh. These programs have ramped up since then and are now offered in most states. According to data compiled by the Energy Information Administration (EIA), these programs reduced electricity use by about 138 billion kWh in 2012, enough to power more than 13 million average American homes for a year. A 2014 ACEEE study found that on average, these programs cost utilities 2.8 cents per kWh saved, which is less than half the cost of new generating plants. The EIA data show that some states have used energy efficiency programs to reduce energy use by more than 10% over multiyear periods.

Past experience shows us the pitfalls of abandoning energy efficiency programs.

It is instructive to look at times when policymakers sought to rely more on markets. For example, there was a major push for market-based solutions in the 1990s. A 2001 ACEEE evaluation of these efforts found that private-sector energy service companies could play an important role, but they primarily reached institutional and large commercial customers and showed little interest in and ability to serve residential and small business customers. They also had limited success serving industrial markets.

Likewise, the retail electricity commodity supplier industry did not show itself to be an effective vehicle for achieving energy efficiency improvements, due to such challenges as a high failure rate among supplier firms, their mixed interest in energy efficiency, their minimal effort to actually market tangible energy efficiency measures, and a lack of customer interest in obtaining energy efficiency from them. This period also saw experiments in which bids were solicited for energy efficiency improvements and "standard performance contracts" were offered; in both cases private firms received payments per kWh and/or kW saved. These experiments tended to yield only certain types of savings (such as lighting improvements) and relatively high prices—higher per kWh saved than the cost of utility-operated programs.

So far we also have seen limitations in the energy efficiency financing market. We agree that financing is an important and useful tool, and we encourage efforts to experiment with new strategies in order to extend financing's reach. However, financing should not be the only tool in our kitbag. Lack of access to capital is just one of the key barriers to energy efficiency, and not all customers want to or can access financing. Many firms currently have large cash reserves, and capital is available for low-risk customers at very attractive rates. For other customers, past experience indicates that while some of them will take out loans, others will not for a variety of reasons. These may include a poor credit rating, aversion to debt, or financial procedures that make on-the-books financing difficult for some companies. This limited use of loans is documented in a 2011 ACEEE report that looks at leading energy efficiency loan programs around the country and is also illustrated by reports from private small lenders convened as part of ACEEE’s Small Lender Energy Efficiency Community (SLEEC).

The future of the energy efficiency market is promising, although not a universal solution.

It is also important to look at what may be possible in the present and near future—and what may not. The past decade has seen market and technology developments that could enhance the role of market players in future years. For example, energy service companies have refined their offerings and now are doing nearly $6 billion a year in business, primarily in energy-saving performance contracts that guarantee a level of savings, often for ten years or more. These contracts are still primarily with institutional customers, with many fewer commercial and industrial customers and very little in the residential sector. There are also new smart thermostats available for homes that, while expensive, have been popular with early adopters. And in the commercial sector, new smart building services can help optimize building operations , saving 10% or more in some applications.

These are promising developments, but still only a fraction of the 20% plus savings opportunity from cost-effective energy efficiency measures that studies have found. In addition, these service providers tend to emphasize the largest businesses and upscale consumers, meaning that many customers are not receiving services.

The best results come from the market and energy efficiency programs working together.

Cooperation between the market and energy efficiency programs often produces the best results. For example, quite a few energy efficiency programs have promoted smart thermostats, contributing to their market growth. The Connecticut Green Bank has undertaken more than 20 projects with Commercial Property-Assessed Clean Energy (C-PACE) finance; most of these projects have also received rebates from energy efficiency programs. The ENERGY STAR® program has helped increase the market share of energy-efficient equipment, aided by program promotion efforts and incentives. Energy efficiency programs have also helped to advance efficiency in new construction by working with developers, architects, and engineers. We will provide further information on these and other examples in the third post in this series.

We believe the fundamental question is not which approach works best—markets or energy efficiency programs—but how to build upon a cooperative endeavor that has proven itself effective and that is already providing billions of dollars of energy savings. Look for subsequent posts in our series on this topic. We also encourage you to join the conversation in the comments section below; we will try to reply to as many posts as we can.

Click here to continue to Part Two.

Energy efficiency and community resilience: making the connection to keep the lights on and our homes warm
February 04, 2015 - 12:00 am

By David Ribeiro, Senior Analyst

Communities face a growing number of stresses that pose risks to their energy systems and economies. These include aging infrastructure in need of costly maintenance upgrades and severe weather events. Energy efficiency is a strategy—albeit not a broadly recognized one—to enhance the resilience of energy systems and the communities they serve. One example is the role that CHP played during Superstorm Sandy to keep the power on at critical facilities, including hospitals and universities, when 8.5 million customers lost power. But efficiency could also be key to community resilience in less obvious ways, including helping communities to weather economic stresses. For example, natural gas customers in Massachusetts are paying more on their bills this winter because insufficient transmission infrastructure in the state is leading to congestion in the transmission system. Natural gas efficiency programs would help natural gas customers avoid paying these high congestion prices and allow them to spend more on other potential needs, further improving community resilience.

Communities that embrace energy efficiency are more “resource resilient.” That is, energy efficiency reduces a community’s natural resources demands, enabling it to instead spend its income on needs that directly benefit the local economy, including other resilience measures. Take energy efficiency improvements in homes. They make communities more resilient in several ways: spending on efficiency creates more economic activity and jobs; buildings have increased economic value, durability, and safety in case of disaster; energy savings from improvements means fewer emissions of greenhouse gases and other pollutants, improving public health; and smaller and less volatile energy bills allows households to spend their money in more beneficial ways.

ACEEE is kicking off a new research project this year to identify the connection between efficiency and resilience, and to identify opportunities for integrating energy efficiency into resilience strategies. As part of our research report, we’ll explore how efficiency can be specifically implemented to enhance resilience and which specific efficiency measures result in what resilience benefits. For example, what do investments in improved public transit systems mean for community resilience? Or which specific efficiency measures implemented by water utilities result in which resilience benefits? We’ll also work to determine which metrics are appropriate to measure efficiency-related resilience, and explore the opportunities in policy and program development to integrate efficiency into resilience efforts and vice versa.

We anticipate releasing our research report this coming summer. We are very interested in your thoughts, as members of the energy efficiency and resilience communities, on how you view the efficiency-resilience interconnection. We’re interested to hear your suggestions about valuable literature, case studies, potential metrics, and policy and program opportunities. Those interested should feel free to e-mail me.

Fewer dollars up the chimney with DOE’s proposal for gas fireplaces
January 29, 2015 - 12:00 am

By Marianne DiMascio, Outreach Director, Appliance Standards Awareness Project (ASAP)

Proposed new standards for gas fireplaces may make a cozy night in front of the fire a little cheaper. For decorative hearth products, the little blue flame that stands ready to light your gas fireplace at a moment’s notice can account for about 40% of the total annual energy consumed. Standing pilots lights are on 24/7, continuously burning small amounts of gas and sending dollars needlessly up your chimney. A proposed rule issued by the Department of Energy (DOE) yesterday would eliminate this waste with new energy-saving standards. ­­But don’t fret—with the energy-saving technology, you’ll still be able start up your romantic, cozy, or mood-setting fireplace with the press of a button or turn of a knob.

DOE estimates that the proposed standards would net the average consumer $165 in savings over the life of the product. On a national level, hearth products meeting the new standards sold over 30 years would reduce natural gas consumption by about 7 billion therms, which is equivalent to the annual natural gas consumption of 10 million US households, and net consumers up to $3 billion in savings. Over the same period, the standards would reduce CO2 emissions by 37 million metric tons, an amount equal to the annual emissions of more than 3 million US homes

The proposed standards, the first for hearth products, apply to all vented or ventless hearth products including space heating hearth products, decorative products, gas logs, gas stoves, and outdoor hearth products. The standards would require manufacturers to eliminate the continuously burning pilot light. Many products already use electronic ignition—similar to what is used on gas ranges and ovens—eliminating the need for wasteful pilot lights.

A final rule is expected in December 2015 with an expected effective date five years later.

Fuel economy standards will propel America’s vehicle technology, if we let them.
January 21, 2015 - 12:00 am

By Therese Langer, Transportation Program Director

In his State of the Union address, President Obama rightly pointed to a thriving domestic auto industry as a bright spot in the U.S. economy. It’s a good time to recall that the government’s 2008-2009 intervention on behalf of GM and Chrysler played a big role in that outcome, as did energy efficiency.

The domestic industry’s inability to deliver high quality, fuel-efficient cars was a major factor in the dire financial situation that led to the two bankruptcies. So, in the course of the government-assisted restructuring, the auto industry endorsed the administration’s ambitious new Corporate Average Fuel Economy (CAFE) standards, projected to nearly double the fuel economy of cars and light trucks by 2025, when they were proposed in 2011.

Yet, at this year’s Detroit Auto Show, manufacturers left little doubt they would seek to weaken the 2025 CAFE standards in the upcoming “midterm review” of the program. They argue that low gas prices will keep consumers from buying the advanced vehicles needed to meet the standards. But in fact, the standards rely very little on sales of electric or other advanced technology vehicles. The vast majority of fuel economy gains between now and 2025 are expected to come from gradual improvements to conventional vehicles: better engines, advanced transmissions, mass reduction. The role of CAFE standards is to ensure that all manufacturers adopt such advances across their product lines, even as fuel prices fluctuate.

While the standards can keep technology moving forward, they can’t stem enthusiasm for larger vehicles when gas prices plummet. It is important to realize that such episodes will not prevent manufacturers from meeting the standards, because mile-per-gallon targets under CAFE decline if the size of vehicles grows. A bigger fleet will, however, erode the fuel savings and greenhouse gas emissions reductions of the CAFE program.

That problem calls for a different solution. As many have noted, today’s low fuel prices offer a great opportunity to rethink the federal gasoline tax, which has remained at 18.4 cents per gallon for over two decades. A $3-per-gallon floor on the pump price of gasoline would bolster auto manufacturers’ confidence in their technology investments and nudge consumers towards more fuel-efficient and predictable vehicle purchase and travel choices. It’s tempting to suggest using the resulting revenue to fill the gaping hole in the Highway Trust Fund. But first, let’s see whether the new Congress takes note of the shifts in Americans’ travel habits as they set priorities for infrastructure investment in this year’s transportation bill.

Expanding the energy efficiency pie through high program participation
January 13, 2015 - 12:00 am

By Dan York, Utilities, State, and Local Policy Program Fellow

Energy efficiency programs serving utility customers have grown rapidly over the past decade. While the rates of growth may have slowed in the last couple of years, most states have policies in place to achieve higher and higher energy savings from utility energy efficiency programs. In order to achieve high energy savings, program administrators can follow two key strategies: (1) get more customers to participate, and (2) get more savings from each participating customer. A report released today by ACEEE examines this first strategy—achieving high program participation. We examined a set of prevalent program types to identify programs that have achieved high participation and better understand the challenges with data and nomenclature. We also wanted to identify program areas that are ripe for growth in participation rates.

Participation rates are key variables for estimating the future potential savings of energy efficiency programs, especially for efficiency program plans and integrated resource planning. Participation rates also are key metrics for tracking past program results. Program administrators, evaluators and regulators need accurate tracking of program participation to evaluate program impacts and success.

But while program participation is simple in principle, it is complex in practice. We found that despite the importance of participation data within many aspects of efficiency (such as potential studies, program planning, implementation, and evaluation), it’s not reported consistently or completely. There are no industry standards and conventions for defining and measuring participation. Definitions and nomenclature used to report participation metrics vary significantly, although there is generally greater consistency of such metrics for a given type of program.

Despite these data challenges, we identified many examples of programs that have achieved high participation. Programs serving mass markets, such as residential customers shopping for lighting products, can move millions of products annually. The cumulative result is that in some markets energy-efficient lighting comprises 40% of all household lighting. Other programs serve much smaller markets with more specialized needs, such as industrial customers or commercial builders. Leading new commercial construction programs may reach 50-60% of all new projects. Some programs providing custom incentives to the largest commercial and industrial customers have achieved 50-70% participation over several years. Other types of programs, such as those serving small- to medium-size manufacturers, are ripe for growth in participation rates (another ACEEE report documents successful practices for reaching this sector).

The keys to high participation are not too surprising. They are simply the fundamentals of successful energy efficiency programs: (1) good program design that makes participation easy and offers a range of services valued by customers, (2) attractive incentives, and (3) effective and innovative marketing to targeted customer segments.

Our research reveals that an ever-growing number of utility customers are already participating in energy efficiency programs, and many more could participate. The resulting energy savings are expanding the utility energy efficiency resource pie—a resource that reduces utility system demand and corresponding costs. Participating customers receive the direct benefits of improved energy efficiency while all customers receive the broader system benefits, such as lower pollution and job creation, that cost-effective energy efficiency programs can provide.

This broader view of program participation is important as we seek to achieve a variety of economic and environmental goals through improved energy efficiency. Program participation needs to be seen through the lenses of overall portfolios and applicable markets over long periods. In leading regions with longstanding programs, a majority of customers have benefited directly from participating in available programs. In this way program administrators are expanding the pie of energy savings through improved energy efficiency, enabling ever more customers to share this important resource and collectively contribute to a cleaner energy economy.


Assessing favorability for CHP deployment in your state
January 08, 2015 - 12:00 am

By Meegan Kelly, Senior Research Analyst, Industry Program

Here at ACEEE we are big fans of combined heat and power (CHP). It’s energy efficient, it helps with resiliency, and it could be a key strategy for complying with carbon pollution reduction requirements. Each year, as part of the State Energy Efficiency Scorecard, we rank states on policies that encourage deployment of CHP. With each iteration, we review our scoring methodology and collect information on the environment facing CHP developers. As with all of our metrics, scoring of CHP in the State Scorecard focuses on states’ policies, which is only one element that influences the favorability of a state to CHP development.

In a recent blog post, we looked for a correlation between 2014 CHP State Scorecard scores and actual new CHP installations as a simple way to examine the overall relationship between policy and deployment. While the results indicate a moderate correlation between scores and deployment, some inconsistencies exist in states where CHP installations have stayed low despite numerous supportive policies being on the books for many years.

We know that state policies are only a piece of the puzzle when it comes to CHP. A variety of economic factors influence deployment—most importantly, the financial attractiveness of individual CHP investments to host facilities. One of the biggest factors influencing economic attractiveness is the retail price of energy. In states with very low electricity prices, it is often more economical to buy electricity from the grid than to generate electricity onsite with CHP. By contrast, higher electricity prices can make the case for onsite generation with CHP more favorable. Similarly, lower and more stable natural gas prices offer cheaper fuel costs that can improve the economics for CHP.

To get a rough look at the degree to which prices influence the CHP market in a given state, we developed a state-by-state CHP favorability index using information we collected for our 2014 State Scorecard project and for another recent analysis. In that analysis, we estimated the CHP potential achievable in each state using publicly available data from ICF International. Then, we used sector- and state-specific electricity and gas prices forecasted by EIA from 2016 to 2030 and operating characteristics of the potential CHP in each state, which yielded an adjusted CHP potential that includes only those projects that remain cost-effective under future forecasts. The ratio of our original “ACEEE Estimated Achievable CHP potential” to the estimated potential that was adjusted for cost-effectiveness is a market favorability index, which tells us how favorable electricity and gas prices are to the future business case for CHP in a given state.

Recognizing that better policies yield overall improvements in project economics, such as when improved interconnection standards yield reduced costs, we also developed a policy metric using 2014 State Scorecard scores as a proxy for such regulatory factors. This policy favorability index tells us how favorable the existing policy environment is for CHP in a given state. The figure below shows the market favorability index side-by-side with the policy favorability index for twelve Midwestern states.

Midwest CHP favorability index

Seven of the Midwest states show an extremely high level of market favorability for CHP deployment, coupled with only moderate to low levels of policy activity. Future state policy and regulatory action is likely to have the greatest impact in states such as Wisconsin, Illinois, and Ohio, where the market favorability index is high and the groundwork for policy measures are in place. Michigan is an example of a state where, due to unfavorable economic conditions, CHP installations are unlikely to increase despite having supportive policies in place. However, in a state such as Nebraska, which has favorable economics, policies like those in Michigan or Wisconsin could result in greater deployment.

Advocates often wonder why the volume of investments in CHP falls short of their estimated potential. The favorability index may answer this by giving us a glimpse of the impact of market and policy favorability on the potential capacity for CHP installations in a state. In the figure below, we show the original ACEEE-estimated achievable CHP potential by 2030 for each state in yellow. In blue, we apply the market favorability index to existing potential to demonstrate how market conditions can prevent some potential CHP installations from occuring. Finally, in gray, we apply both the policy and market favorability index to existing potential to demonstrate how market conditions and regulatory barriers lower potential CHP penetration.

Impact of market and policy favorability on CHP potential

In the figure, accounting for market conditions (in blue) actually does little to diminish the CHP potential in the majority of Midwest states. This suggests that even when the economics are there, it is a lack of supportive state policy (in gray) that is largely responsible for affecting investments in new CHP projects.

We think the CHP favorability index concept that we’ve presented here can be a useful tool for CHP developers, policymakers, and advocates to use in their discussions. It highlights states where policy changes can make a difference, and where they probably will not. We would be remiss if we did not mention, as a caveat, that both indices exclude certain economic considerations beyond energy prices that can also impact market favorability for CHP. However, the approach represents a start at visualizing the interplay between policies and economic factors influencing CHP deployment and gives us a new way of discussing this subject. We look forward to receiving comments on the usefulness of this tool.

How energy efficiency investment creates a ripple effect of multiple benefits for businesses beyond energy savings
January 06, 2015 - 12:00 am

By Christopher H. Russell, Visiting Fellow, Industry

Everyone knows that energy efficiency results in saving energy, but evidence points to an array of wider benefits. The term “multiple benefits” has emerged to describe the additional value that emerges with any energy performance improvement. The benefits that occur onsite can be especially meaningful to manufacturing, commercial, and institutional facilities. Energy efficiency’s positive ripple effects include increased productivity and product quality, system reliability, and more. Business leaders take note: the bonus value of energy efficiency’s multiple benefits amplifies the return on energy efficiency investments.

Over the past few decades, researchers have documented numerous cases of energy efficiency improvements—almost always focusing exclusively on energy savings. Non-energy benefits are often recognized, but only in concept. ACEEE’s new report, Multiple Benefits of Business-Sector Energy Efficiency, summarizes what we know about the multiple benefits for the business sector. True quantification of these benefits remains elusive due to a lack of standard definitions, measurements, and documentation, but also in part because variations in business facility design and function ensures that a comprehensive list of potential energy efficiency measures is long, varied, and often unique to the facility.

To give some concrete examples of non-energy benefits at work: Optimizing the use of steam in a plywood manufacturing plant not only reduces the boiler’s natural gas consumption, it also improves the rate of throughput, thus increasing the plant’s daily product yield. A lighting retrofit reduces electricity consumption while also introducing lamps with a longer operating life, thus reducing the labor costs associated with replacing lighting. In many instances, monitoring energy use also provides insights into water or raw material usage, thereby revealing opportunities to optimize manufacturing inputs and eliminate production waste. By implementing energy efficiency, businesses can also boost their productivity. This additional value may make the difference in a business leader’s decision to pursue certain capital investment for their facility.

Meanwhile, energy resource planners at utilities and public utility commissions recognize the impact of large-facility energy demands on the cost and reliability of generation and transmission assets. By maximizing consumer efficiency, costs are reduced or offset throughout a utility system. So the ability to quantify the multiple benefits of investing in energy efficiency, if only in general terms, is an appealing prospect for resource planners eager to encourage greater participation in efficiency programs.

Unfortunately, our research shows that this quantification rarely happens, even though the multiple benefits are frequently evident. A number of studies offer measurement methodologies, anticipating the availability of proper data. When these methodologies are employed with limited samples, we see how proper accounting of non-energy benefits dramatically improves the investment performance of energy efficiency improvements—for example, improving payback times by 50% or better. Samples may provide impressive results, but the data remains too shallow to confidently infer the value to come for any single project type implemented in a specific industrial configuration. Developing such metrics will require more data.

To that end, we describe an ideal resource that would allow an analyst or investor to infer multiple benefit values for any energy efficiency improvement proposal. Of course, the data requirements for such an exercise are staggering—not only for the volume required, but also for its collection and codification. Progress toward this goal will require some intermediate steps. For one, stakeholders require a protocol for defining and measuring non-energy benefits. The vast majority of such data would be self-reported by facility management professionals who will need guidance, perhaps from a template to facilitate their assimilation of the appropriate data.

This report represents the first phase of our analysis of energy efficiency’s multiple benefits. We will begin our second phase later this month, and are looking for sponsors and advisors to help shape definition, measurement, and reporting protocols. If you are interested, please reach out to me at crussell@aceee.org.

2014 was a good year for energy efficiency. The outlook for 2015 is uncertain, but we’re guardedly optimistic.
January 05, 2015 - 12:00 am

By Steven Nadel , Executive Director

The New Year is usually a good time to take stock of the year just ended, and to look forward to the year ahead. Regarding energy efficiency, 2014 was generally a good year. Energy-saving technologies and practices continued to advance. For example, in 2014 LED lighting became a mainstream source of light. The Design Lights Consortium now lists more than 70,000 LED lighting products. And a recent DOE report estimates that by 2020, LED lighting will account for about 48% of product sales.

Similarly, intelligent efficiency—using sensors, controls, software, and “big data” to identify sources of energy waste in real time and enable quick solutions—is poised for rapid growth with multiple firms now offering intelligent efficiency services in the commercial sector, and new smart thermostat products from Honeywell and others as direct competition to Nest. Many of these developments were presented at ACEEE’s November Intelligent Efficiency Conference.

There were also policy advances, including the completion of multiple new federal energy efficiency standards that collectively will save consumers more than $50 billion, the inclusion of energy efficiency in the proposed standard regulating greenhouse gases from existing power plants, and the president’s order to set new fuel efficiency standards for large trucks .

States and cities also generally made progress on energy efficiency. For example, utility investments in and savings from energy efficiency programs continue to increase. On the other hand, there were rollbacks of efficiency efforts in Florida,Indiana, and Ohio, and the U.S. Congress could not enact even modest energy efficiency legislation.

For 2015, the outlook is uncertain, but we’re guardedly optimistic. Energy saving technologies and practices will continue to advance. For example, we see the coming year as a pivotal one for zero-net-energy buildings. Several states will be considering improvements to their energy efficiency policies, including Illinois, Michigan, Minnesota, and Pennsylvania.

Congressional leaders, such as Senator John Hoeven (R-ND), have signaled an openness to energy efficiency provisions, quite possibly as part of broader energy legislation. EPA will be finalizing their emissions standards for existing power plants, and energy efficiency is likely to play a major role, spurring additional state actions in future years. New truck efficiency standards that the president promised last year will be formally proposed this year. And DOE is planning to finalize new efficiency standards for many important products this year. To provide just one example, a new standard will be finalized for commercial rooftop air conditioners. DOE estimates that the draft standard will save businesses $16-50 billion.

On the other hand, Arizona and New York are considering proposals that could reduce their commitment to energy efficiency. And some members of the new congressional majority are pledging to use appropriations riders and other techniques to slow the president’s climate change agenda, which could affect some energy efficiency initiatives.

ACEEE has a very active 2015 planned. We’ll be hosting a record seven conferences. Topics will include market transformation, energy efficiency finance, energy efficiency as a utility system resource, and industrial energy efficiency. We have about 30 research reports planned. Some of the areas we will be examining include: non-energy benefits, intelligent efficiency, new energy efficiency opportunities in buildings, industry and transportation, measuring the jobs benefits of energy efficiency, the business case for utility investments in energy efficiency, links between resiliency and energy efficiency, programs with high participation rates, and best practices for municipal utilities and for low-income programs. In addition, our City Energy Efficiency Scorecard will be published in late spring, and our State Energy Efficiency Scorecard will be published in the fall.

Overall, energy efficiency is a bipartisan issue that has made progress under both Democrats and Republicans, a track record we hope and expect to continue. Energy efficiency makes progress each year and those incremental steps steadily add up.

My New Year’s resolutions: get SMART, travel more, use less energy
December 19, 2014 - 12:00 am

By Virginia Hewitt , Local Policy Research Assistant

I start thinking about my New Year’s resolution earlier than most. I like to think ahead and know what I’m getting into before committing. This year I could go to the gym more, eat fewer hamburgers, or do more traveling. OK, let’s start with just one thing. Maybe I’ll try to travel more. But how do I set the perfect goal for me? Where do I even start?

Thanks to my organization’s work on community energy planning, I know I can use the SMART goal-setting framework to wrap my head around my plans.

  • Specific: Where do I want to go?
  • Measureable: Does my goal mean cover more miles, or see more new places?
  • Attainable: Can I really afford trips to England, France, and Germany?
  • Relevant: Would a trip to Germany and Japan be putting my language skills to use?
  • Time-bound: Will I achieve this all in one year or is my goal really about developing a new life-long habit?

Communities and large organizations can use this same framework to set their goals. Our new technical assistance toolkit piece, Local Government Energy Management Goals: Best Practices and Platforms, describes issues and options for cities to consider in setting goals for energy usage intensity reduction. Maybe visiting every continent doesn’t make the most sense for me, but reducing energy use makes sense for every local government. Using less energy saves taxpayer dollars, reduces pollution, and enables a local government to improve its services and shift resources toward achieving other goals.

Like my resolution, a city’s energy management goal should be SMART. A specific goal is defined with a consistent metric. Energy usage can be defined in kilowatt-hours (kWh) or by a proxy such as greenhouse gas emissions (GHGs). Next, a goal cannot be achieved if it is not measured. A local government should institutionalize an energy usage tracking system. Benchmarking software, such as ENERGY STAR® Portfolio Manager, tracks and measures building- and portfolio-level energy usage and delivers feedback.

The third criterion is attainability. A local government should set a target that is meaningful yet challenging to achieve. What past energy savings has the city achieved? What resources are or will be available to achieve new savings? What is the level of commitment from leaders to pursue goals? Relevance is also important. Energy management goals should be in line with a city’s overall vision. An appropriate goal enables short-term success and builds a foundation for long-term energy management. Finally, a goal exists within a time frame. Baseline and target years are commonly used to bound the time period over which progress is measured.

A city that considers the five SMART aspects is on its way to setting a reasonable and effective goal. As part of developing a goal for an individual city, it can be good to research the goals of peer cities. For example, Boston aims to reduce energy use by 20% by 2014, relative to a 2009 baseline. Alternatively, Austin aims to make all City of Austin facilities, fleets, and operations totally carbon-neutral by 2020.

Still need more help deciding on a resolution? How about a usage reduction goal? Luckily, our toolkit piece also presents five standardized and best-practice goal-setting platforms. Local governments that partner with the U.S. Department of Energy’s Better Buildings Challenge pledge to reduce energy usage intensity across building stock by at least 20% over 10 years. Additionally, the Alliance to Save Energy’s Energy 2030 offers cities a roadmap to doubling the U.S. energy productivity by 2030, a big part of which involves energy efficiency. Using less energy to perform the same tasks? That seems like a pretty solid New Year’s resolution to me.