Overview of Issue Areas in Current Legislation

Major Energy Efficiency Issues Coming Before Congress in 2009

Congress is considering three major pieces of energy-related legislation in 2009 – an economic stimulus bill, an energy bill, and climate change legislation.  The stimulus bill was enacted in February – click here for more information.  The House of Representatives passed H.R. 2454, the American Clean Energy and Security Act on June 26, 2009. This bill attempts to address climate change and energy independence through a variety of measures, including a number of efficiency provisions – click here for more information. The Senate Energy and Natural Resources Committee has reported out The American Clean Energy Leadership Act, an energy bill which includes a number of efficiency provisions but which does not address climate change – click here for more information. The Senate Environment and Public Works committee is considering a climate bill similar to H.R. 2454 and expects to report such a bill out of committee in September.

Issues relating to energy efficiency in potential and current legislation are discussed below.

Reducing the Cost of Climate Change
Although moving towards a low-carbon economy will include some transitional costs, energy efficiency could reduce these costs significantly through saved energy use. Savings from reduced energy use will be reinvested locally, creating a multiplier effect that will generate economic activity and jobs. Furthermore, the transitional cost of cap-and-trade legislation is reduced by investment in efficiency because fewer new energy facilities are needed and fewer upgrades are needed in existing facilities to help meet emissions ceilings—creating significant additional consumer savings. Finally, by reducing energy demand, efficiency improvements change the supply-demand balance and put downward pressure on energy prices.

• ACEEE has coordinated a multi-organization effort to develop consensus recommendations on the role of energy efficiency in climate change legislation. 
• Reducing the Cost of Addressing Climate Change Through Energy Efficiency - A Synopsis (PDF 03/05/2009)
• Reducing the Cost of Addressing Climate Change Through Energy Efficiency (PDF 03/05/2009)

H.R. 2454 uses a cap and trade approach and calls for 80% reductions in emissions by 2050 relative to 2005 levels.  While the President and Senate leadership hope for passage in 2009, there are many difficult political issues, particularly to get 60 votes in the Senate. Final action could be delayed until early 2010.  Read ACEEE’s 2008 paper on the role of energy efficiency in federal climate change legislation .

Renewable Energy and Energy Efficiency Resource Standards.
H.R. 2454 creates a combined renewable and electricity standard requiring that 20% of electricity sales be met with a combination of renewable energy and energy efficiency by 2020. Energy efficiency programs can be used to meet 5% of the requirement, and governors can petition to bring the percentage devoted to efficiency up to 8%. Many utilities and states will choose to use the maximum amount of efficiency, as efficiency investments tend to be less expensive than renewable energy. Unfortunately, this will only produce around 3% more efficiency beyond business-as-usual, since under existing state policies we expect about 5% efficiency savings by 2020.
The Senate energy bill also includes a Renewable Electricity Standard (RES) that includes energy efficiency, but ACEEE credits no savings to this part of the bill as the maximum level of efficiency in this provision (4% of electricity sales by 2020) is less than business-as-usual when it comes to electricity efficiency.
Savings from the current energy and climate legislation could be much improved by strengthening the Combined Efficiency and Renewable Electricity Standard to require utilities to reduce electricity demand by 10% by 2020. An improved electricity standard would result in an extra $20 billion in cumulative consumer savings by 2030—potential savings that H.R. 2454 is currently leaving on the table.

• New Federal EERS Fact Sheet (March 2009, PDF)
• ACEEE report: Laying the Foundation for Implementing A Federal Energy Efficiency Resource Standard
• For a variety of additional information on a federal EERS, click here.
• For additional details on the House-passed RES and its inclusion of energy efficiency, click here.
• ACEEE report: Assessment of the House Renewable Electricity Standard and Expanded Clean Energy Scenarios

Energy Efficiency Tax Incentives

The American Recovery and Reinvestment Act, passed in February of 2009, renewed and expanded the EPAct 2005 tax incentives for consumer energy-efficient home improvements for tax years 2009 and 2010. New proposals are also being advanced such as incentives to retire old chillers using  CFC refrigerants (click here) and a credit to help manufacturers implement advanced motor designs in equipment and appliances (click here).

• Click here for a summary of the bill's tax incentive provisions. http://aceee.org/energy/national/taxkey.htm
• For specifics on efficiency incentives, visit the Tax Incentives Assistance Project. www.energytaxincentives.org

There are also significant energy efficiency tax incentives in S. 1639, the Expanding Industrial Energy Efficiency Incentives Act of 2009, which would expand or establish tax incentives in four areas for industrial or large commercial facilities.  Section 2 of the bill modifies a recently enacted tax incentive for the installation of combined heat and power.  The new incentive would apply to any size system and apply to the first 25 MW, instead of the first 15 MW.  Furthermore, it expands the definition of "combined heat and power" to include back pressure steam turbines or waste heat from certain industrial processes.  Section 3 of the bill would establish a tax credit for advanced, variable speed motors.  The $120/kW credit would be available to manufacturers of motors and appliances.  Section 4 of the bill would create a $150/ton tax credit for replacing old chillers with newer, more efficient chillers that do not use CFCs.  Finally, Section 5 aims to improve water efficiency.  A 10% to 30% tax credit would be available to projects that reduce water consumption by roughly 20% with only a minor increase in energy use.

Building Codes
In order to meet long-term energy goals, it is important that new buildings be as energy-efficient as is economically justified, since it will be much more expensive to retrofit these buildings after they are completed. One important tool in improving the efficiency of new buildings is the establishment of more stringent building codes.

H.R. 2454 establishes new standards for building efficiency in Section 201, directing DOE to support efforts by model code organizations to update building codes to reduce energy use of new buildings. This provision requires reductions in energy use of 30% in 2010, as well as 50% improvements in 2014 for residential and 2015 for commercial buildings, and 5% additional improvements every 3 years after 2017/2018. The 30% target is based on a goal set by the American Society of Heating Refrigerating and Air-Conditioning Engineers (ASHRAE) for the pending 2010 update of their model commercial building code. The 50% goal is a qualification level for energy efficiency tax credits adopted by Congress in 2005.

States will be responsible for adoption and enforcement of the codes, which will be funded by 0.5% of the total emissions allowances. The Senate bill contains a similar provision, requiring 30% improvements in 2010 and 50% improvements in 2016, but without the additional 5% improvements every three years.

Appliance Standards. 
Federal minimum efficiency standards have been set on more than 40 products. On June 29, 2009, President Obama announced new national minimum energy efficiency requirements to make fluorescent tube lamps more efficient. They also will phase out conventional incandescent reflector lamps, effectively extending the phase out of inefficient incandescent products initiated by Congress in 2007 to the common cone-shaped bulbs used in recessed light fixtures and track lighting.

H.R. 2454 adds a few additional products and clarifies aspects of the process by which DOE periodically revises these standards. The bill includes standards on commercial furnaces, drinking water dispensers, hot food holding cabinets, and portable electric spas. In addition, it includes lighting standards for outdoor lighting fixtures and portable lighting fixtures, and directs DOE to set standards on BR reflector lamps. The Senate bill also includes standards for portable fixtures, commercial furnaces, and a similar BR reflector lamp provision to the House bill.

Energy-Saving Home and Commercial Retrofits
H.R. 2454 (Section 202) and the Senate ACELA (Section 262) both establish a program to promote comprehensive energy efficiency retrofits for residential and commercial buildings.  The House program, called the Retrofit for Energy and Environmental Performance (REEP) program, will be funded by cap-and-trade allowances designated to the SEED (State Energy and Environmental Development) fund. Funding has not yet been established in the Senate bill but is likely to be similar to the House bill.
Under this program, states may provide grants to individual homeowners for energy efficiency retrofits.  The size of these grants is based on the energy savings measured using either a list of energy-savings measures or a home simulation software rating system. States will also be able to use the REEP grants to provide incentives for retrofits to commercial building owners, as long as owners can prove 20 percent savings in energy consumption. Click here for information on the proposal from ACEEE and other organizations (PDF Summary).

Building Labeling/Disclosure. 
The House and Senate energy bills contain a provision to expand the Energy Star building labeling program to include homes and additional types of commercial buildings.  These labels let building owners, prospective purchasers, and prospective tenants know how the energy performance of a building compared to other similar buildings in the area.  The intent is to motive building owners to upgrade their buildings, and to help prospective purchasers and tenants select efficient buildings.  Programs along these lines are now being started in Europe and in several U.S. states.
The House ACES bill establishes a building energy performance labeling program, which the Manager’s Amendment restricted to new construction only. The Senate ACELA bill also contains a version of this program that is not limited to new construction, and which would produce much deeper energy savings. For information on programs in U.S. states, click here (p. 47)

Multifamily and Manufactured Housing.   
ACEEE is also working to develop a new program at DOE that would offer competitive grants for innovative projects to improve the efficiency of multifamily and manufactured housing. This provision is included in the Senate ACELA bill. Saving energy is more difficult in multi-family and manufactured housing and such housing is disproportionately used by low- and moderate-income families.  There are some successful local programs, but the number of programs being operated are few and far between.  For example, creative programs could be developed to encourage retirement of old manufactured homes, to invest in efficiency upgrades for new or existing publicly assisted housing, or to institute multifamily building heating system retrofits.  Given the limited experience to date, we recommend that now is the time to encourage of variety of innovative approaches, to evaluate these approaches, and based on these evaluations to then develop broader programs.  For further details, see the fact sheet.

H.R. 2454 establishes a program to promote energy efficiency in manufactured homes in Section 203. This enables low-income families living in pre-1976 manufactured homes to use a rebate to help purchase an ENERGY STAR manufactured home. This bill does not directly address multifamily buildings.

Industrial Assessment Centers. Workforce has emerged as a critical issue for implementation of energy efficiency in manufacturing, as well as expansion of production and productivity improvements more broadly.  The Industrial Assessment Center (IAC) program is the only manufacturing energy efficiency training program currently funded by the Federal Government.  ACEEE has begun working to expand and enhance this program to meet this growing need. For more information on ACEEE's IAC recommendations, click here. H.R. 2454 creates regional Centers for Energy and Environmental Knowledge and Outreach to coordinate the efforts of the IACs and BACs.

Building Assessment Centers: A new program has been proposed by ACEEE and others to help train building engineers and technicians, similar to the Industrial Assessment Center discussed above.  Today’s commercial buildings have increasingly sophisticated controls and need trained engineers and technicians to help design and operate them optimally.  There is a shortage of such skilled staff today.  A BAC program would help address this need, building on the successful IAC model. Both H.R. 2454 (Section 173) and the Senate ACELA bill (Section 243) include provisions that create Building Application Centers. Click here for further information.

Transportation Planning.   H.R. 2454 directs EPA, in consultation with DOT, to set transportation sector GHG reduction targets “commensurate with” the reductions required for the economy as a whole. States and large Metropolitan areas must integrate GHG targets and other climate considerations into their transportation plans and programs. The relationship between the national targets and the state and regional targets is unclear, as is the enforcement mechanism that would ensure real savings from this provision. Furthermore, there is no funding dedicated specifically to the achievement of the necessary transportation emissions reductions, which will require major improvements in the coordination of transportation and land use planning. Despite these shortcomings, the inclusion of this provision is an important first step toward integrating climate goals with transportation infrastructure planning. A companion provision appears in the draft House transportation bill reauthorization. The Senate Environment and Public Works committee will take the H.R. 2454 language as the starting point for developing a transportation planning element for the climate change bill being developed by the Senate. For more information on current transportation planning legislation, please click here.

Last Updated 11/16/2009

For more information contact:
Steven Nadel, Executive Director

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