Climate Impacts of Energy Efficiency in

PennsylvaniaPresentation to the Pennsylvania Climate Change

Advisory CommitteeJanuary 10, 2017

Annie Gilleo, Meegan Kelly, and Cassandra Kubes

aceee.org @ACEEEdc

The American Council for an Energy-Efficient Economy is a nonprofit 501(c)(3) founded in 1980. We act as a catalyst to advance energy efficiency policies, programs, technologies, investments, & behaviors.

Our research explores economic impacts, financing options, behavior changes, program design, and utility planning, as well as US national, state, & local policy.

Our work is made possible by foundation funding, contracts, government grants, and conference revenue.

Annie GilleoState Policy Manageragilleo@aceee.org

Meegan Kelly Senior Research Analyst, Industry mkelly@aceee.org

Cassandra KubesSenior Research Analyst, Health and Environment ckubes@aceee.org

Agenda • A bit of background• Multiple benefits of energy efficiency (EE)• Current EE landscape in Pennsylvania • Utility policies and programs: Act 129 and beyond

• Low-income programs • Combined heat and power (CHP)• Building energy codes • EE financing • ACEEE resources

A Bit of Background

6

Total energy use with and without energy efficiency

Source: ACEEE 2016. Greatest Energy Story You Haven’t Heard. http://aceee.org/research-report/u1604

7

In the electricity sector, efficiency is now our 3rd largest resource

Source: ACEEE 2016. Greatest Energy Story You Haven’t Heard. http://aceee.org/research-report/u1604

313 power plant equivalents avoided since 1990… could grow to 800 by 2030

8Source: ACEEE 2016. Greatest Energy Story You Haven’t Heard. http://aceee.org/research-report/u1604

Multiple Benefits of Energy Efficiency

Potential CO2 Reductions from Energy Efficiency in Pennsylvania

Utility 1.5% savings per year

ESCO programs

Building energy codesCHP 500 MW

Source: ACEEE 2016. State and Utility Pollution Reduction Calculator Version 2 (SUPR 2). http://aceee.org/research-report/e1601

Multiple Benefits of Energy Efficiency

Protect health Improve safety and comfort

Save money Create jobs and opportunity

Protect the environment

Energy Efficiency Protects the Environment

• Energy efficiency is an important adaptation strategy for climate change.

Energy Efficiency Protects the Environment

• By avoiding the need to burn, mine, drill, and transport fossil fuels, energy efficiency protects air quality while meeting increasing energy demands due to climate change.

• The reduction of air pollutants like mercury and particulates result in quantifiable health benefits.

Health Benefits of Energy Efficiency • By displacing fossil fuels, energy efficiency

reduces pollutants overall and improves our healthMercury exposure from fossil fuels can damage the brain and nervous system, leading to stroke or loss of intellectual capacity Pollutants such as particulate matter and nitrogen oxides can harm the respiratory system and cause lung cancer, COPD, and asthmaFossil fuels can also damage the cardiovascular system which can lead to coronary heart disease, heart attacks, or congestive heart failure

Source: ACEEE and PSR, 2016. Energy Efficiency and Health. http://aceee.org/sites/default/files/ee-health-1008.pdf

Ambient Health Effects (Outdoor)Dangers Mitigated Health Harms Reduced Example

Fossil fuel air pollutants (PM, NOx, SO2, CO2)

Mercury exposure Extreme weather

events

Death Lung cancer COPD Asthma Coronary heart disease Heart attacks Congestive heart failure Impaired cognitive ability

of babies (brain damage, hearing and vision)

This is discussed in our health and EE fact sheet: http://aceee.org/sites/default/files/ee-health-1008.pdf Coronary heart disease is the leading cause of

death in the US Lung cancer kills more people each year than

any other cancer. COPD (chronic obstructive pulmonary disease)

is the 3rd leading cause of death in the US. Asthma is at epidemic levels and is

disproportionately harmful to minority and poor children.

Indoor Health Effects Dangers Mitigated Health Harms Reduced Example

Indoor air quality (particulates, lead, VOC, CO, CO2, NOx, radon)

Environmental toxins

Thermal stress (extreme temperatures)

Fire safety Mold

Mortality Hospital admissions Upper and lower

respiratory illness Asthma Lead Poisoning Cancer Cardio-vascular disease Depression and anxiety

Housing conditions are responsible for 40% of asthma episodes. Structural leaks, damp foundations, pest infestations, and inadequate ventilation are common and can lead to bacteria, mold, viruses, and dust mites. Damp indoor air environments can also cause asthma and other respiratory illnesses among otherwise healthy children. Some of the triggers for asthma attacks that EE addresses are listed below: Allergic reactions to allergens such as pollen,

mold, animal dander, feather, dust, food and cockroaches

Indoor and outdoor air pollutants, including ozone and particle pollution

Exposure to cold air or sudden temperature change

Respiratory infections and colds Excitement/stress

ACEEE Upcoming Research • Analysis of health benefits of energy efficiency is a new area of research for ACEEE

• Upcoming research to include: • Documenting the environmental and health

impacts that existing efficiency policies now achieve and could achieve by reducing emissions from power plants.

Energy Efficiency Creates Jobs

Source: ACEEE 2016. Energy Efficiency to Reduce Pollution and Create Jobs. http://aceee.org/fact-sheet/ee-jobs-pollution

Energy Efficiency Creates Jobs • Manufacturing and installing energy-efficient equipment supports 1.9 million full and part-time jobs nationwide, and projected to increase by 250,000 more jobs next year.

• Pennsylvania ranked in top 10 states for energy efficiency jobs

• 53,175 energy efficiency workers in Pennsylvania

• 31% of Pennsylvania EE firms focus on installationSource: E2 and E4theFuture, 2016. Energy Efficiency Jobs in America.

http://www.e2.org/wp-content/uploads/2016/12/EnergyEfficiencyJobsInAmerica_FINAL.pdf

Current Landscape

21

22

Utilities

Transp

ortation

Building c

odesCHP

State-le

d initiati

ves

Appliance

stan

dards

0

5

10

15

2020

10

7

4

7

24

34.5

1

4

0

3.55 4.5

2.55

0

Points possibleMedian scorePennsylvania

Pennsylvania & the 2016 Scorecard

23

Utility Policies and ProgramsAct 129 and Beyond

Climate Change Action Plan: Act 129• Support Phase IV and V of Act 129

• Second most cost-effective work plan• Potential Reductions of 18.1 MMTCO2e through 2030

• Develop central organization for management of programs

• Include natural gas• Include rural coops, munis, and smaller utilities• Include societal benefits in analysis• Eliminate 15-year measure life limit• Remove the 2% spending cap

26

2006 2007 2008 2009 2010 2011 2012 2013 2014 20150.00%

0.50%

1.00%

1.50%

2.00%

2.50%

3.00%

3.50%

4.00%

Pennsylvania National Median National High

Elec

tric

ity S

avin

gs(%

Ret

ail S

ales

)

Source: ACEEE State Energy Efficiency Scorecard (2006-2015)

EERS Targets

State

Approx.

annual target

Cost cap

Natural gas State

Approx. annual target

Cost cap

Natural gas

Massachusetts 2.9%   • Iowa 1.2%   •Rhode Island 2.6%   • Michigan 1.0% • •

Arizona 2.5%   • New Hampshire 1.0% •

Maine 2.4%   • Arkansas 0.9%   •

Vermont 2.1%   • Wisconsin 0.8% • •

Maryland 2.0%   New York 0.7%   •

Connecticut 1.5%   • Illinois 0.7% • •

Minnesota 1.5%   • Pennsylvania 0.8% •

Washington 1.5%   New Mexico 0.6%   Hawaii 1.4%   Ohio 0.6%   Colorado 1.3%   • Nevada 0.4%   Oregon 1.3%   • North Carolina 0.4%   California 1.2%   • Texas 0.1% •

Source: ACEEE State Energy Efficiency Scorecard (2006-2015)

Landscape of program administration

28

“hybrids”

primarily third-party program administrators

DC

primarily utility-run programs

Natural Gas Savings Goals

Reaching smaller utilities• Specific Requirement

• Arizona: An electric distribution cooperative shall…file for Commission review and approval an implementation plan for each DSM program to be implemented… An implementation plan shall set forth an energy efficiency goal for each year of at least 75% of the savings requirement specified [for IOUs]

• Voluntary Programs• Iowa: Senate File 2386, enacted in 2008, directed gas

and electric municipal and rural electric cooperative utilities to assess their maximum potential energy and capacity savings and establish an energy efficiency goal based on that assessment.

Calculating Complete Benefits

Resource Value Framework

EERS Targets Revisited – Cost CapsState

Approx.

annual target

Cost cap

Spending (%

revenues) State

Approx.

annual target

Cost cap

Spending (%

revenues)

Massachusetts 2.9%   6.16% Iowa 1.2%   2.86%Rhode Island 2.6%   6.34% Michigan 1.0% • 1.70%Arizona 2.5%   1.31% New Hampshire 1.0% 1.45%Maine 2.4%   2.74% Arkansas 0.9%   2.01%Vermont 2.1%   6.89% Wisconsin 0.8% • 1.07%Maryland 2.0% 3.69% Pennsylvania 0.8% • 1.43%Connecticut 1.5%   3.32% New York 0.7%   1.66%Minnesota 1.5%   2.40% Illinois 0.7% • 2.24%Washington 1.5%   3.87% New Mexico 0.6%   1.54%Hawaii 1.4%   1.34% Ohio 0.6%   1.18%Colorado 1.3%   1.65% Nevada 0.4%   1.34%Oregon 1.3%   3.45% North Carolina 0.4%   0.91%California 1.2%   3.43% Texas 0.1% • 0.54%

2020 2025 20300

2

4

6

8

10

12

14

16

18

1% target 1.5% target

Annu

al C

O2

redu

ced

(mill

ion

shor

t ton

s)Bigger target, more carbon reductions

Calculated using: ACEEE 2016. State and Utility Pollution Reduction Calculator Version 2 (SUPR 2). http://aceee.org/research-report/e1601

Additional Considerations

Robust Policy Structures Support High SavingsAdministrator State Type

2014 electricity savings

as % sales

Energy savings target

Revenue decoupling or

similar mechanism

Performance incentive Penalty

Arizona Public Service AZ IOU 1.65% ● ● ●  Commonwealth Edison IL IOU 1.27% ●     ●Eversource MA MA IOU 2.69% ● ● ●  Naragansett Electric RI IOU 3.54% ● ● ●  National Grid MA MA IOU 2.90% ● ● ●  NSPC (Excel) MN IOU 1.32% ● ●** ●  Otter Tail Power MN IOU 1.21% ●   ●  

Pacific Gas & Electric CA IOU 1.16% ● ● ●  SoCal Edison CA IOU 0.97% ● ● ●  

Tucson Electric Power AZ IOU 2.16% ● ● ●  Fort Collins Utilities CO Muni 1.83% ●      Seattle City Light WA Muni 1.78% ●     ●

Efficiency Vermont VTThird-Party 1.45% ● NA* ●  

Energy Trust of Oregon OR

Third-Party 1.47% ● NA*    

Source: Baatz, Gilleo, and Barigye 2016. http://aceee.org/research-report/u1601

Decoupling

Share of net benefits (12 states)

Savings based (6 states)

DC

Performance incentives that have been authorized but not implemented*

*

*

Rate of return (1 state)

Multi-factor (5 states & DC)

We grouped incentives into four types:

EE Performance Incentives for Electric Utilities

A Complete Business Model Drives Savings

Source: http://aceee.org/sites/default/files/policies-matter.pdf

Offer Great Programs for All Customers

41

Defining opt-out and self-direct• Opt-out provisions allow large

customers to stop contributing funding for energy efficiency programs, and may prevent utilities from incentivizing, measuring, or otherwise accounting for these savings in resource planning efforts

• Self-direct policies typically allow large customers to control how some or all of their energy efficiency fees are used, but do not allow them to opt out of fees & programs completely

Self-Direct & Opt-Out Continuum

Program Type EE Payment M&V of Savings

Use of Funds Follow Up Examples

Opt-out None None Co. uses retained cash for EE

None NC, KY

Less structured self-direct

None Minimal; self-reported

Co. uses retained cash for EE

None to minimal

MN

More structured, lower oversight self-direct

Fully or partially paid on bill

Minimal; self-reported

Rate credit or project rebate

Minimal MT, OR

More structured, higher oversight self-direct

Fully or partially paid on bill

Robust; similar to CRM-funded programs

Personal escrow, rate credit or project rebate

Minimal to substantial

WA, CO

Publ

ic B

enefi

t Max

imiza

tion

43

Size and cost-effectiveness of C&I utility programs

AEP Ohio Xcel Colorado Wisconsin Focus on Energy

1.2¢ 1.9¢ 1.8¢Levelized Cost of C&I Savings ($/kWh)

Source: ACEEE estimates based on 2014 annual reports

44

Combined investments enable greater savings potential

Source: ACEEE Fact Sheet, The Dollars and Cents of Industrial Efficiency Program Investment, February 2016. http://aceee.org/fact-sheet/ieep-dollars-cents

Low-Income Programs

Climate Change Action Plan: Low-Income Efficiency Programs • Develop partnerships to generate non-federal

resources for weatherization. • Expand coordination between state agencies

on WAP, LIHEAP and LIURP.• Incentivize affordable multifamily, master-

metered facilities to install whole house efficiency measures.

• Expand qualifying low-income households to 200% FPIG or consider other qualifiers.

• Encourage utilities to use demographic data to track the success of their low-income programs and see what communities the programs are currently reaching.

• Continue to leverage existing relationships with organizations already reaching low-income households (e.g. foodbanks, housing organizations, etc.)

• Set aside money for health and safety improvements. • Coordinate with rate assistance and other energy

efficiency programs for intake of program participants.• Increase spending, expand program offerings, and take

a whole building approach for multifamily housing.

Improving Low-Income Programs

ACEEE Upcoming Research • Baseline study to review current landscape

of low-income utility programs. • Resources highlighting best practices using

results from baseline study. • Convening multifamily energy efficiency

and low-income utility work groups.

Combined Heat and Power (CHP)

 

Benefits of Combined Heat and Power (CHP)• Fuel efficiency• Avoided transmission losses• Reduced emissions (CO2, SO2, NOx)• Cost savings• Economic development• Improved grid reliability• Avoided infrastructure investments• Increased local resiliency

Role of CHP as climate solution• CHP displaces higher emitting generation• A typical unit results in 43% fewer CO2 emissions than conventional power

SO2

NOx

CO2

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

Emission Reduction from a typical 5-MW CHP

Pollu

tant

(ton

s/ye

ar)

Source: Estimated using EPA CHP Energy and Emissions Savings Calculator (accessed 2017)

CHP’s higher efficiency results in energy and emissions savings

Source: Combined Heat and Power: A Clean Energy Solution, August 2012, DOE and EPA

Existing CHP in PA• As of 2015, 153 sites totaling 2,950 MW• Strong investment in recent years

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

0

10000

20000

30000

40000

50000

60000

Capacity Installed (kW) from 2000 - 2015

Source: DOE Installation Database (accessed Jan 2017)

Pennsylvania is one of the top states for new technical potential for CHP

Source: DOE 2016, CHP Technical Potential in the United States

North Carolina

Louisiana

Georgia

New York

Florida

Ohio

Pennsylvania

Illinois

California

Texas

0 2,000 4,000 6,000 8,000 10,000 12,000 14,000 16,000

Ten states with largest technical potential for CHP

Total technical potential (MW)

Capturing the CO2 benefits of CHP potential in Pennsylvania

0

500,000

1,000,000

1,500,000

2,000,000

2,500,000

3,000,000

3,500,000

4,000,000

CO2 reduction in 2030 (short tons)

240 MW 500 MW 1300 MWSource: ACEEE 2016, State and Utility Pollution Reduction Calculator (SUPR 2)

Climate Change Action Plan: CHP• Standby rates• Interconnection standards• Fair market for excess power sales• CHP in portfolio standards• CHP for critical infrastructure*• Utility ownership of CHP*• Environmental/air permitting

Existing CHP at Critical Infrastructure

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

0

10,000

20,000

30,000

40,000

50,000

60,000

Capacity Installed (kW) from 2000 – 2015

Capacity Installed (kW) MINUS CICritical Infrastructure

Source: DOE Installation Database (accessed Jan 2017)

Policy approaches to encouraging CHP at critical facilities• Requiring consideration of CHP at critical facilities

• Louisiana – HR 167 in 2012• Texas – HB 1831 in 2009; HB 1964 in 2013

• Programs to encourage CHP-supported microgrids

• Connecticut – DEEP Microgrid Program• New York – NY Prize

ACEEE Upcoming Research on CHP as a Grid ResourceValuing the resiliency benefits of CHPUpcoming research from ACEEE in 2017

Utility-Ownership of CHP

More than one model to increase CHP deployment

• Customer installs CHP for onsite benefits

• State policy encourages utilities to incentivize CHP for energy savings and additional benefits

• Customer owns energy products and may sell excess power

• Utility installs CHP for grid/system benefits

• State regulates utility investments in CHP for reliable power at reasonable rates

• Utility owns energy products and sells electricity and thermal

Customer-Owned Utility-Owned

62

Benefits of utility-ownership model• Utility continues to serve customer, no lost

load• Least cost supply-side resource to utility and

ratepayers• Less risky investment overall• Beneficial for the grid• Better service and value for customers• Air quality improvements and carbon

reductions• Encourages economic development

Case Study: Eight Flags Energy CHPBackground• 20 MW CHP• Amelia Island, FL• Owned by FPU/ChesapeakeBenefits• Cheap steam for Rayonier Advanced Materials• Low-cost reliable electricity for local customers• Estimated 160,000 tons/yr of CO2 reduction• Created 100 jobs during construction

For more information, see DOE Case Study: http://southeastchptap.rlmartin.com/Data/Sites/4/documents/profiles/eight-flags-chp_project_profile.pdf

Approaches to encouraging utility-ownership• Look to examples from utilities in other states

• Florida, Alabama, Carolinas• Consider supply-side CHP in resource

planning• Duke Energy IRP

• Facilitate utility-ownership when it provides the most benefit to the system and ratepayers

• Encourage utilities to identify best customers and locations

Building Energy Codes

Climate Change Action Plan: Building Codes • Consistently adopt the latest ICC/IECC

• Cost effective and impactful• Potential Reductions of 85 MMTCO2e through 2030

• Focus on compliance• Code training website• Education and outreach to code officials, policy

makers• Pilot compliance approaches• Formalize and continue PA Energy Code

Collaborative

Code Updates: A Legislative Fix• Act 45: established Uniform Construction Code

• Act 106: established 19 member Review and Advisory Committee

• Act 1: amended code adoption process, requiring 2/3rd majority vote by RAC on each provision of ICC

Legislative Update Requirement• Automatic code update requirement

• Maryland: §12-503 of the Maryland Code requires the Department of Housing and Community Development to adopt the most recent version of the IECC twelve months after it is issued. DHCD may adopt energy conservation requirements that are more stringent than the codes, but may not adopt energy conservation requirements that are less stringent.

Code Compliance

State

Compliance Study(1 pt.)

Gap Analysis(0.5 pts)

Stakeholder Group(0.5 pts)

Utility Involveme

nt(0.5 pts.)

Training(0.5 pts)

Total Score(3 pts.)

Illinois ● ● ● ● ● 3Massachusetts ● ● ● ● ● 3New York ● ● ● ● ● 3Texas ● ● ● ● ● 3Maryland ● ● ●   ● 2.5Pennsylvania ● ● ●   ● 2.5Arkansas ● ●     ● 2New Jersey         ● 0.5Ohio   ●       0.5

Utility Involvement in Compliance• Arizona: Up to 1/3 credit of savings from codes can be

claimed towards annual savings goals. Utilities must demonstrate and evaluate the savings that they claim.

• California: Regulatory guidelines have been established requiring significant utility involvement in supporting building energy code compliance. The CPUC has authorized the IOUs to support standards development since the early 2000s. Since 2008, the CPUC has authorized the IOUs to claim savings from standards development activities.

• Texas: Regulatory guidelines have been established enabling significant utility involvement in supporting energy code compliance. Compliance data is being used to develop new utility programs that will provide incentives to increase residential energy efficiency in new homes.

Energy Efficiency Financing

Climate Change Action Plan: Financing• Energy-efficient mortgages• On-bill financing• Keystone HELP• PACE• Qualified Energy Conservation Bonds• Green Bank

On-bill programs• Role for the state beyond legislation

• Develop standard underwriting guidelines (consider how to reach more customers)

• Continued work to understand utility aversion to these programs

• Guidelines, regulations, and laws should address utility concerns

• Role for continued stakeholder group engagement• Systems upgrades may facilitate on-bill programs

(and more!)• Accounting matters

• Potentially limited by spending cap

Keystone HELP• Plan recommendation: Add funding to continue program

• Considerations:• How to ensure that demand does not continue to

outstrip supply?• Can the state better leverage private capital?• Interconnection of financing, rebate, and

education programs

PACE• Plan recommendation: Develop enabling legislation

• Current Status: Penn STAR commercial PACE legislation moving through legislature

ACEEE Resources

How ACEEE can help• Technical assistance

• Respond to requests for assistance in working through energy efficiency questions

• Help with best practices in program and policy design • Policy research and analysis

• Resources on energy efficiency policies, programs, and technologies

• Data and analysis to estimate GHG reductions from energy efficiency

• Examples from other states• Best practices from other states • Share PA success stories with other states

ACEEE Resources• Heath and Environment

• The Greatest Story You Haven’t Heard - http://aceee.org/research-report/u1604

• Energy Efficiency and Health - http://aceee.org/fact-sheet/ee-and-health

• SUPR 2 - http://aceee.org/research-report/e1601 • Jobs

• Energy Efficiency to Reduce Pollution and Create Jobs - http://aceee.org/fact-sheet/ee-jobs-pollution

• How Does Energy Efficiency Create Jobs? - http://aceee.org/fact-sheet/ee-job-creation

• State Policy • 2016 State Energy Efficiency Scorecard -

http://aceee.org/state-policy/scorecard • State Technical Assistance Toolkit -

http://aceee.org/sector/state-policy/toolkit • State policy database: http://database.aceee.org/

ACEEE Resources• Low-income programs

• Lifting the High Energy Burden in America’s Largest Cities - http://aceee.org/research-report/u1602

• Building Better Energy Efficiency Programs for Low-Income Households - http://aceee.org/research-report/a1601

• CHP • CHP Technical Assistance Toolkit -

http://aceee.org/sector/state-policy/toolkit/chp • CHP Playbook - http://aceee.org/research-report/ie1404 • Utilities and the CHP Value Proposition -

http://aceee.org/research-report/ie134 • Coal Retirements and the CHP Investment Opportunity -

http://aceee.org/research-report/ie134 • Challenges Facing CHP Today: A State-by-State Assessment -

http://aceee.org/research-report/ie111

Thank You!Annie GilleoState Policy Manageragilleo@aceee.org

Meegan Kelly Senior Research Analyst, Industry mkelly@aceee.org

Cassandra KubesSenior Research Analyst, Health and Environment ckubes@aceee.org