Last summer, the Maryland Public Service Commission approved one of the most aggressive energy efficiency goals in the country, a call for utilities to cut retail sales by 2% annually. It was called a “huge step” by advocates, and may be the highest mandated target in the nation.
And yet some believe Maryland, along with every other state, could do a lot more.
“What you've got is a changing landscape and that's important to remember,” said David Farnsworth, a senior associate with the Regulatory Assistance Project (RAP). “Things that seem difficult today become simpler, and other things that were beyond the pale are in reach.”
According to a new report released by RAP, through a systematic focus on energy efficiency, reconsidering definitions and lifting investment barriers, it is possible to meet 30% of the United States' electricity system needs in 10 years through efficiency.
The report, "The Next Quantum Leap in Efficiency: 30 Percent Electric Savings in Ten Years," acknowledges that meeting this goal would require "unwavering commitment" and "innovative thinking and approaches."
“What we're talking about is a stretch goal. There's no doubt about that,” Farnsworth said.
That means Maryland, with one of the most aggressive targets in the nation, would need to find 50% more efficiency in its programs and products. States with 1% and 1.5% targets would need to triple or double their efforts. That is, as Farnsworth said, a stretch. Getting there would require policy changes in every state. But history shows states are getting better at efficiency, seeing the value and ramping up spending. Taking the savings to a next level requires recommitting, he said.
“What seems to be happening is, states 10 years ago were getting 1% savings and were leaders of the pack. It's much more commonplace now. A handful are getting 2% or more,” said Farnsworth.
A decade ago, ratepayer-funded efficiency programs had budgets of just $1.6 billion, and only three states had first-year savings greater than 0.8% of sales. Now, according to RAP's research, that spending figure is $5.9 billion and almost 20 states topped decade-ago savings levels.
In fact two states – Massachusetts and Rhode Island – reached 2.5% savings while five others (Arizona, California, Connecticut, Maryland, and Vermont) have 2% or better targets.
Expanding the definition of efficiency
If those totals in New England sound impressive, RAP's report uses them as aspirational examples, a reality check and a policy point as well.
In Massachusetts, utilities reached savings of nearly 2.8% of sales in 2014, or 2.75% after a few small combined heat and power (CHP) projects are excluded. National Grid in Rhode Island achieved roughly 3.5% savings the same year, but RAP said a quarter of those savings were from “a uniquely large CHP project.” With those savings pulled out, Rhode Island annual totals are close to 2.5% of sales.
After you pull out the CHP savings, which are typically not counted as efficiency, RAP said these are “not unpredicted, one-off results.”
“They represent a continuation of a steady upward trajectory in savings over the past several years in both states,” the report said. “Moreover, both states are projecting slightly higher annual savings levels in the coming years.”
While there are many factors behind the two states' efficiency achievements, the report finds one basic idea underpins their policy choices: “Both states endeavor to treat efficiency as a resource that should be acquired whenever it is less expensive than supply alternatives. “
But as for the CHP programs, RAP said that two resources not typically considered as efficiency could help the country “bridge the gap” from the roughly 17% savings that current best practices could achieve over the next decade, to the 30% targets.
CHP and conservation voltage reduction (CVR) could “play important roles in providing additional savings, but would require changes in how we view and account for efficiency." CHP systems are problematic because they do burn additional fuel, but typically generate more energy than a central station plant would using the same amount. CVR systems are used by utilities to manage voltage levels, rather than sending out excess power to get around line inefficiencies.
According to RAP, deploying CVR systems where most cost-effective could produce national savings of about 2.3%.
New market systems and other policy tweaks
The biggest policy change needed to incentivize energy efficiency is, basically, to want it. Farnsworth said states need to eliminate mandates and regulations which might direct a utility to pursue economic efficiency but also cap program budgets.
Getting to 30% requires “an all hands on deck kind of an approach,” Farnsworth said. “It involves actively removing a number of barriers, looking at things freshly, reconsidering the cost efficiency rules, maybe revisiting competing goals.”
“The first step here is recognizing the value you get from an efficiency resource.”
RAP's report concluded that in order to capture all available, economic efficiencies, then several policies would need to be reexamined, including rules that:
- fail to address utility profitability concerns;
- over-reward short-term savings;
- artificially cap efficiency program spending;
- limit investment in market transformation efforts;
- and discourage innovation and appropriate levels of risktaking.
Farnsworth also said that new market concepts for efficiency would be needed to scale up efforts. For example, rather than a utility pushing incentives for a few products it works with, the incentives could be moved to the retailer.
“It's like selling lots of other things, automobiles or snow tires. It's about recognizing the ability of retailers and putting resources out in the retailers hands, so they can sell more of these more efficiencies,” Farnsworth said.
That might apply to a television or a washer/dryer. And the same concept could also apply to third-party services which are aggregating efficiency programs for utilities, he said.
“One of the biggest challenges with efficiency is that it is so distributed. So many different activities in every different house," Farnsworth said. "So to the degree you can get upstream somehow – and aggregation is one of those ways – what you're doing is still capturing savings. But you are recognizing there is still an economy of scale achievable by getting someone a little upstream to aggregate the savings and sell those to the market."