The following is a contributed article by Laura Sherman, President of the Michigan Energy Innovation Business Council.
Nearly every sector of the economy has been negatively affected by the COVID-19 pandemic, and the energy efficiency industry is no different. Energy efficiency workers in the U.S. filed for nearly 70,000 unemployment claims in March, according to the recent Clean Jobs America report. This is a number four times higher than the next-biggest clean energy sector for unemployment claims, renewable energy, at 16,500 claims.
In the weeks since social distancing became widespread, many efficiency companies, which perform important projects such as home energy audits, retrofits like the installation of LED lighting, insulated windows and smart climate controls, and more, have been able to resume work with the help of strict safety protocols, projects at unoccupied buildings, virtual audits and other adaptations (more on those below). Michigan Gov. Gretchen Whitmer’s, D, May 1 order that began a phased-in economy restart specifically allowed efficiency contractors like HVAC contractors to return to work as long as they follow a series of safety procedures, such as daily health screenings.
But now there is another danger — the crisis has led some state actors to cynically question the value of efficiency as a matter of policy. Energy efficiency policies have allowed the U.S. to avoid a 60% increase in energy consumption since 1980, according to a 2019 report from the Alliance to Save Energy, the American Council for an Energy-Efficient Economy and the Business Council for Sustainable Energy, so anyone who cares about saving customers money on electric bills, increasing resiliency and meeting emissions reduction goals should view these unwise tradeoffs with concern.
In Missouri, for example, the Office of the Public Counsel recently recommended that the state’s regulators cut the charge on customers’ bills that funds energy efficiency programs, arguing that “we need to minimize expenses as much as possible in anticipation that things will get worse.”
In addition, in Ohio — where energy efficiency goals have already been greatly weakened by recent legislation — the state’s consumer advocate claimed that as a result of the pandemic, utility efficiency program funds should be diverted to bill payment programs.
These proposals are shortsighted and in the long run will hurt the customers they are intended to help. To begin to explain why, consider the strong contrast between these two states and their regional neighbor Michigan, where the reaction during the pandemic thus far has been not to gut efficiency, but to defend it.
In an April 15 order, the Michigan Public Service Commission (MPSC) called for a work plan to determine how to keep efficiency programs going and mitigate the hurdles the pandemic is creating for utilities to meet energy waste reduction targets. Particular attention should be paid to low- and moderate-income households, the MPSC said, especially because we are in “a time in which affordability is ever so critical.”
This approach treats efficiency and affordability as complementary, not contradictory, a mindset diametrically opposed to the position taken by the Ohio and Missouri consumer advocates.
The goal of reducing energy waste and the goal of maintaining affordability are not at odds with each other. “Michigan’s programs are cost-effective, meaning that the benefits far outweigh the costs over the life of the programs,” MPSC Commissioner Sally Talberg told us for this article, explaining the commission’s thinking behind the order. “In some cases, the costs are less than operating existing power plants, let alone building new generation.”
Some critics have argued, including recently on Utility Dive, that the full savings of efficiency are inflated by a “free rider” problem where some utility customers cash in by receiving rebates for upgrades they would have done anyway.
While that might be a valid concern in a small number of cases, the likely limited costs of these unnecessary rebates pales in comparison to the avoided costs of billion-dollar generation projects, so it’s not a reason to begin cutting efficiency programs.
While efficiency can provide some quick turnaround savings in the form of lower electric bills, the full benefits of efficiency are not realized immediately because the cost savings from not having to build multi-billion-dollar infrastructure projects are spread out over time. That is why the moves in Missouri and Ohio to discredit energy efficiency would ultimately harm ratepayers — cutting these programs would give customers little to no relief now, and potentially saddle them with huge rate increases for years to come.
Utilities are typically in the business of selling electricity, so getting them to put efforts into helping their customers use less electricity requires robust policy and regulatory support, even in the best of times. Michigan has been one of the strongest states in the Midwest for encouraging energy efficiency.
Since 2008, the state has had targets for utilities to make continual improvements in energy waste reduction. In 2016, with the support of the Michigan Energy Innovation Business Council (EIBC) and other stakeholders, this standard was expanded, requiring utilities to cut electricity use by 1% of the previous year’s retail electricity sales each year through 2021.
The Institute for Energy Innovation (IEI), Michigan EIBC’s research arm, showed the value of efficiency in the leadup to the 2016 bill. In a 2015 whitepaper, IEI found through economic modeling that energy efficiency “represents the most cost effective compliance measure available” for Michigan’s future energy mix.
More recent resource planning by Michigan’s utilities further demonstrate the ability of energy efficiency to serve as an emissions-free and cost-effective replacement for power plants. “With power plants retiring in Michigan, utilities are relying on programs to cut energy waste as an alternative to building expensive new generation,” Talberg said. “Being able to count on these programs delivering consistent, predictable energy and demand savings is critical to ensure Michigan’s electric reliability is maintained.”
The attorney general’s office in Michigan has also worked to support efficiency. Attorney General Dana Nessel has successfully argued against proposals to create fixed billing, a practice that tends to work against efficiency because the more a customer’s bill is fixed, the less that customer can save money by cutting their energy use.
In addition, Nessel has helped push the state’s two biggest utilities, DTE and Consumers Energy, to use efficiency as a resource that can replace power plants, and has led a push along with fourteen other state attorneys general in lawsuits against federal government rollbacks of efficiency rules, stating recently: “Establishing energy efficiency savings standards that encourage steady growth and investment in the environmental arena is working."
Big problems ahead
But despite all its benefits, the energy efficiency industry is facing some big problems. How can Michigan or other states keep on track with their targets for reducing energy waste when efficiency work and employment have taken such a huge hit?
Even under these challenging conditions, efficiency providers are finding ways to perform their work safely, at least on a limited level, while abiding by social distancing rules. According to the Michigan Energy Efficiency Contractors Association (a partner organization of the Michigan EIBC), there are a number of energy efficiency services that can be completed with little or no personal contact. Examples include upgrades at industrial facilities that are temporarily shuttered due to the pandemic, work on exterior HVAC systems, and LED lighting upgrades that can be done with one or two workers in isolated parts of a home or facility.
Regular on-site work is being rolled out carefully and with strict procedures for use of personal protective equipment, worker and client exposure and other considerations. Efficiency service companies are sharing information with each other on best practices so that they can meet the highest standards.
For example, Walker-Miller Energy Services, a Detroit-based provider of residential retrofits and other efficiency services and a Michigan EIBC member, has a detailed plan for ramping business back up safely. That includes maintaining a three-month supply of PPE, daily safety briefings with employees and a strict protocol for sanitizing before, during and after a job.
“Say you're installing a thermostat and your arm rests against that wall. It's important that you sanitize,” Walker-Miller Program Manager Cameron Seeley said in a recent webinar on best practices for efficiency held by the nonprofit organization Michigan Saves (also a Michigan EIBC member). “It’s kind of like a national park,” he said. “Don't take anything in and don't bring anything out.”
These efforts will be challenging, but with strong state support and perseverance among utilities, regulators and policymakers to keep programs on track, there will continue to be a market for efficiency providers and their employees. By reaffirming their commitment to reducing energy waste, other states can follow Michigan’s lead and ensure they don’t waste this opportunity to truly protect ratepayers for years to come.