Generating Energy through Efficiency

Commonwealth of Virginia Energy & Sustainability Conference

September 18, 2007

Brian T. CastelliExecutive Vice President

& Chief Operating Officer

2

What is the Alliance to Save Energy?

An NGO whose mission is: To promote energy efficiency worldwide to achieve a healthier economy, a cleaner environment, and greater energy security

Guided by a 37-Member, Elected Board of Directors

- Led by Sen. Mark Pryor (D-AR) & Jim Rogers, CEO of Duke Energy

- 9 Members of Congress – Bi-Cameral; Bi-Partisan

- Environmental, consumer, and trade associations heads, state and local policy makers, corporate executives

3

Forging Alliances: Business, Govt. & Public Interest

Alliance enjoys sponsorship by more than 150 businesses and

organizations across a broad spectrum of economic sectors. Unique structure with expertise in research, policy advocacy,

education, technology deployment, and communications

4

What: The Alliance to Save Energy’s Energy Efficiency Global Forum & Exposition, better known as “EE Global”

When: April 27-29, 2008

Where: Palais des Congres de Paris, Paris, France

About: EE Global will serve as the premier gathering and showcase for the energy-efficiency industry, attracting industry professionals, academics and policy makers from around the world, not only to exchange the latest technical, commercial and policy information, but to forge partnerships and develop “best practices” policies and strategies for global implementation. The conference will feature plenary sessions and in-depth executive dialogue sessions with high-level speakers representing all end-use sectors and regions of the world as well as an exposition hall where attendees can see the latest technological advances in energy efficiency.

Web: www.eeglobalforum.org

EE Global Forum

5

Energy Efficiency: an Abundant & Affordable National Resource

CHEAPER Each $1 invested in Energy Star program = $75 in energy cost

savings and $15 of investment in new efficiency technologies Average cost of utility DSM programs = $0.02 -0.04/kWh

QUICKER In 2001, California cut peak electricity use by 10% in less than a

year CLEANER

“Negawatts” produce NO ENVIRONMENTAL FOOTPRINT IMPROVE THE ECONOMY and ENERGY SECURITY

Minimize Needs for Imported Energy Create New Jobs Help Keep Energy Prices Lower by Reducing Demand

Why Energy Efficiency?

6

Energy Efficiency:America’s Greatest ResourceEnergy Efficiency: America's Greatest Energy Resource

0 5 10 15 20 25 30 35 40 45

Energy Efficiency and Conservation

Petroleum

Natural Gas

Coal

Nuclear Power

Wood, Waste, and Alcohol

Hydroelectric

Geothermal, Solar, and Wind

Quads (2004)

Energy Savings

Domestic Production

Net Imports

Source: Alliance to Save Energy

America's Greatest Energy Resource Energy Efficiency and Conservation Improvements Since 1973

Have Reduced Annual Energy Consumption by 49 Quads

0.7

3

3

8

22

23

40

49

0 10 20 30 40 50 60

Geothermal, Solar and Wind

Conventional Hydroelectric

Wood, Waste, Alcohol

Nuclear Electric Power

Natural Gas

Coal

Petroleum

Energy Efficiency and Conservation

Quads

2006 Domestic Production Net ImportsAlliance to Save EnergyNovember 2007

7

America’s Largest Energy Savers to Date*

1) Appliance and Equipment Standards

2) Energy Star Labeling Program

3) Building Energy Codes

4) Electric and Gas Utility Demand-Side

Management (DSM) Programs

[Also:]

5) Tax incentives

6) Public sector energy efficiency leadership* Excluding auto efficiency standards

8

The Action Is in the States 45 Quads savings since 1973

- ~ 20% resulting from intentional policy- 80% from technology advances & market forces- So the best policies encourage technology &

complement markets Energy efficiency supports many policy objectives

- Reduce GHG emissions- Lower criterion air pollutants (SIPs)- Slow demand growth – reduce need to build power

plants & transmission lines- Reduce energy price increases & price volatility- Economic development goals- Energy costs for government operations

9

Opportunities for States(& State-led Federal Policy) Building energy codes & “beyond-code” programs Appliance & equipment standards Utility programs and policies; Public Benefit Funds Tax incentives and project finance Public sector leadership “Smart Growth” & Transportation System

Management Climate policies and utility resource planning Public information campaigns EE workforce development Community-based initiatives

10

National Benefits of Building Energy Codes

41 US states have adopted model energy codes (BCAP website)

$7.4 billion savings (cumulative) since 1991 Future potential if all states update energy codes

- CO2 reductions over 50 million metric tons - $7 billion in energy cost savings to consumers- Avoid 32 new 400-MW power plants

Cost-effectiveness of building codes- DOE national program: $1 cost = $105 benefit- Energy-saving measures: 2.5 - 6 years payback

Opportunities for Virginia:- Enforce the 2006 IECC model codes- Advance the code (30% by 2010; TOU; commissioning)- Compliance: training, dedicated fees, utility condition-of-

service

11

Code Adoption Uneven in US

12

Beyond Code:ENERGY STAR Homes

Opportunities for Virginia:- Design assistance- Accelerate permits- Tax incentives- Public buildings 30% beyond code

13

Delivering Energy Efficiency Through Appliance and Equipment Standards

Sets minimum energy performance

Refrigerators sold today use three-fourths less energy than in 1973

Demand reduction = 18 Nuclear Plants

Refrigerator Price 72-03- Decrease = 64 %

In 1983 $

Refrigerator Size 72-03- 17.5 ft3 to 22.5 ft3

- Increase = 29 % Energy Use 72-03

- Decrease = 74 % Source: Graphic -- Collaborative Labeling and Appliance Standards Program

Statistics – Art Rosenfeld (CEC) and David Goldstein (NRDC)

14

Future Opportunities for State Appliance Standards

Federal standards generally preempt states, but… 12 States have standards in place Priorities for actions in Virginia (according to ASAP)

- General Service and reflector light bulbs*- Metal halide fixtures*- Residential gas furnaces*- Walk-in refrigerators/freezers- Bottle-type water dispensers- Hot food holding cabinets- Audio products; DVD players/recorders- External power supplies*- Spas (hot tubs) and pool pumps

Added annual savings by 2020: (if all states adopted) - 52 TWh (2% of buildings electricity)- 100 Bcf natural gas- 12 MMT carbon (= 8 million cars)- Benefit/cost ratio 4.5:1

15

Energy Star Voluntary Labeling Program

Environmental Protection Agency (EPA) and Department of Energy (DOE) with private sector partners

Labels for energy efficient products:- Appliances- Lighting- Furnaces and Air-Conditioners- Computers and electronics

Energy Star Homes Commercial Building Rating High levels of public awareness Actions for Virginia: information

campaigns; incentives; codes & standards (?)

16

Utility Energy Efficiency Programs & Policies

Many kinds of DSM program (electricity, gas, peak load)- Appliance rebates- Technical assistance, training, energy audits- Financing- Consumer education; metering/billing feedback

Current utility & PBF spending as percent of revenues- US average 0.5%- 10+ states above 1%; VT 3%

EE portfolio standards (EERs); “clean energy loading order”

17

National Action Plan for Energy Efficiency

Goal One: Establishing Cost-Effective Energy Efficiency as a High Priority Resource

Utilities and applicable state agencies are encouraged to:

Create a process to explore the energy efficiency potential in the state and commit to its full development

Regularly identify cost-effective energy efficiency potential in conjunction with state ratemaking bodies.

Set energy savings goals consistent with the cost-effective potential

Integrate energy efficiency into energy resource plans at the utility, state and regional levels

18

National Action Plan for Energy Efficiency

Goal Two: Developing Processes To Align Utilities Incentives Equally for Efficiency and Supply Resources

Applicable state agencies are encouraged to:

Work with utilities to implement revenue mechanisms to promote utility and shareholder indifference to supplying energy savings, as compared to energy generation options

Remove utility disincentives to energy efficiency such as the utility throughput disincentive and other ratemaking ideas

Ensure timely cost recovery in place for party(ies) that administer energy efficiency programs

19

Utility Regulatory Actions Regulatory incentives for utilities

- Direct cost recovery Rate case – 14 states SBC/surcharge – 13 states

- Fixed cost recovery Decoupling or rate adjustments – 15 states, additional states

pending- Performance Incentives – 11 states- Return-on-investment: NV proposal; Duke “Save-a-

Watt,” etc. Virginia – A State Corporation Commission

proceeding developed a report to meet a 10% reduction in electricity consumption – Also filed a report with recommendations – Waiting for further guidance from the General Assembly

(per the 4/4/2007 SB 1416)

20

Funding: Public Benefits Charge

Dedicated funding for energy efficiency, low-income assistance, renewable energy, and/or R&D- Usually 0.01-0.3 cent/kWh surcharge on electric bills

Virginia Opportunity- Create a Public Benefit Fund for efficient and clean energyKey: Red & Gold states have Public Benefit Funds

21

Federal Tax Incentives – Buildings (2006-07) - Extension?

New Homes Builder tax credit - up to $2,000 if 50% more efficient compared to 2004 IECCC code; $1,000 for an Energy Star manufactured home.

Existing HomesHomeowner tax credit – 10% of cost of installing building envelope components consistent with IECC 2000; capped at $500; $200 can apply to windows.

Commercial Buildings Deduction up to $1.80/sq.ft. for buildings designed to use 50% less energy than ASHRAE-90.1 (2001)

Public Buildings: Assignable deduction!

22

State Tax IncentivesOpportunities for Virginia

13 states have incentives- New homes

Homeowner - AZ, DC, MT, NM Builder - OK, OR

- Existing homes – CA, DC, ID, OR- Commercial buildings – NM, NY, OR- Property tax exemptions – MD local option, NV- ENERGY STAR sales tax holidays – GA,CT, VA

States using a Green Building Rating (LEED)- MD, NV, NM, OR

23

Energy Efficiency Financing Virginia Opportunities – all of the below

- ESCO projects- Revolving loan funds

20 states (e.g., Texas Loan Star, Iowa, CA…) Mostly government facilities, schools

- Energy development districts; municipal bond authority- “Cambridge Model”

Goals, public leadership, $100 M partnership with lenders & ESCOs

EE Partnership of Greater Washington – VA Tech, Pepco, Hannon-Armstrong – (H-A commits $500 million)

- Energy-efficient mortgages (?)

24

Climate policies 19 states have GHG reduction goals Western Climate Initiative

- GHG, multiple sectors - 15% below 2005 by 2020 (one third below BAU)

California vehicle CO2 emissions standards- 18% savings by 2020, 27% by 2030

Regional Greenhouse Gas Initiative - CO2 from power plants down 10% (2005 to 2019)

Virginia Opportunity - Join RGGI- At a minimum, become an official RGGI “Observer”- Adopt relevant SABAP Climate Recommendations in

report being completed now

25

Regional Collaboration Sharing information & experience Regional trading of Green certificates and White

certificates- Link DSM to utility resource planning & grid reliability

Pollution prevention, by airshed Market transformation

- Regional media markets- Coordinated tax holidays- Bulk procurement- Harmonized appliance standards & code requirements

26

State Action Makes a Difference!

Per Capita Electricity Use

0

2,000

4,000

6,000

8,000

10,000

12,000

14,000

19

60

19

62

19

64

19

66

19

68

19

70

19

72

19

74

19

76

19

78

19

80

19

82

19

84

19

86

19

88

19

90

19

92

19

94

19

96

19

98

20

00

20

02

20

04

California

United States

Brian T. Castelli (bcastelli@ase.org)1850 M Street, NW, Suite 600

Washington, D.C. 20036Phone: 202.857.0666

Website: www.ase.org

Thank You!Alliance to Save Energy