Federal Energy Policy Update

Steven NadelACEEEJuly, 2009

The Federal Energy Trifecta

•Stimulus bill -- passed•Energy bill

• Senate Energy Committee developed bill; • House has energy titles in climate bill

•Climate change bill • House passed combined energy and climate bill• Senate hoping for bill in Oct.

Stimulus Bill

•Total stimulus package $787 billion•Focus on spending/stimulus in 2009 and 2010, not long-term• About $30 billion energy-efficiency related

Major Stimulus Bill EE-Related Items

• $5 billion for low-income weatherization• $3.1 billion for State Energy Program + $300 million for

appliance rebates• $3.2 billion for EE&C Block Grants to municipalities • $8.8 billion for efficient federal buildings and vehicles• ~$2 billion for residential retrofit tax credit• ~$1 billion low/moderate income housing targeting EE• $4.5 billion for Smart Grid• $2.5 billion for DOE EERE research, $2 billion

advanced batteries, $400 million ARPA-E• $2.3 billion for tax credits for investments to produce

EE and clean energy products• $17.7 billion for public transportation• $500 million for job training

Low Income Weatherization

•$5 billion to expand program • Recently received ~$250 million/year

•Ramp-up to Obama goal of 1m homes/yr•Existing formula’s determine distribution•As of July 13, 38 state plans approved•$1.49b spent so far. 10% upon approval of initial application; 40% after approval of comprehensive plan; 20/20/10% obligated after progress reports•Key challenges:

• Davis-Bacon compliance • Capacity of weatherization network

State Energy Program

•$3.1 billion to expand long-running program that goes to State Energy Offices; formula determines funding•Conditioned on three certifications•States have large discretion on how to spend•States submitted proposals and DOE is steadily reviewing these and approving many

• As of July 13, 29 state/territory comprehensive plans approved

•$700m spent so far. 10% upon approval of initial application; 40% after approval of comprehensive plan; 20/20/10% obligated after progress reports

State Energy Program: Key Challenges

1. Capacity concerns

2. NEPA Compliance

3. Supplement/Supplant

4. EM&V

SEP Certifications Needed

Governor’s need to certify:1. “The applicable State regulatory authority will seek to implement…

a general policy that ensures that utility financial incentives are aligned with helping their customers use energy more efficiently…”

2. “The State, or the applicable units of local government,… will implement…for residential buildings, building energy codes… that meets or exceeds the most recently published IECC… [and, for] commercial buildings…ASHRAE Standard 90.1-2007.” (Also, will implement a code compliance plan achieving 90% compliance within 8 years).

3. “The State will to the extent practicable prioritize the grants toward…the expansion of existing energy efficiency programs approved by the State or the appropriate regulatory authority, including energy efficiency retrofits of buildings and industrial facilities…

EE&C Block Grants

•New program established by EISA 2007, but not yet implemented•$1.9 billion for municipalities of 35,000 or more, counties of 200,000 or more, or 10 largest cities and counties in each state •$784 million for states, which pass on $470 million to cities and counties not eligible for direct funding•Requires application meeting DOE criteria•$456 million to awarded in a competitive pool•Many municipalities submitted proposals, rest due Aug.10•Awards between $250k-$2m: Fully funded upon approval of application; Awards +$2m: 50% of funding awarded upon approval of application

Smart Grid

• $4.5 billion for R&D, demonstration projects and matching grants

• Demonstration projects and matching grants will be competitive, with federal government paying up to 50%• RFP just issued

Advanced Energy Investment Credits

• New 30% tax credit for the manufacture of “advanced energy property”

• Includes technology for the production:• Renewable energy• Energy storage• Energy conservation• Efficient T&D• Carbon capture and sequestration

• Apply to IRS for certification• $2.3 billion available • Program guidance due Aug. 15th

Job Training

• $500 million for research, labor exchange and job training projects to prepare workers for careers in energy efficiency and renewable energy industries. 

• To be administered by Dept. of Labor• 5 grant solicitations now available

Appliance Rebates

•Funding Opportunity Announcement released July 14.

$296 million to states• Initial application due 8/15, Comprehensive app due 10/15• States must establish or supplement ENERGY STAR rebate

programs• 50% match on admin costs required

•Authorized in EPAct 2005 but never funded•Rebates are for Energy Star (or better?) products (which?) that replace existing products (operable?)•Based on NYSERDA room AC turn-in program

DOE Funding Opportunity Announcements

Title Reference # Est. Funding Amount

Application Due Date

Smart Grid Investment Grant Program

DE-FOA-0000058

$3.4b 8/6

Energy-Efficient Appliance Rebate Program

DE-FOA-0000119

$296m 8/15

Advanced Energy Efficient Building Technologies

DE-FOA-0000115

$25-$75m (cost share of at least 20-50%)

8/18

Building America Energy Efficient Housing Partnerships

DE-FOA-0000099

$25m 8/24

Solid State Lighting U.S. Manufacturing

DE-FOA-0000057

$22m 8/24

State Electricity Regulators Assistance

DE-FOA-0000100

$46m 8/31

Energy Bill: Efficiency Policy Provisions

•Energy efficiency resource standards•Appliance and equipment standards•Improved building codes•Residential and commercial retrofits•Building labeling•Appliance incentives•Job training – IAC, BAC•Programs for industry•Demand response•Tax incentive extensions/enhancements

Energy Efficiency Resource Standards Analogous to a Renewable Portfolio StandardElectric and/or gas savings targets for utilities

• Includes end-use efficiency and sometimes combined heat & power (CHP) and codes/standards

• Targets generally start low and increase over timeSavings must be documented in accordance with

evaluation rules established by regulatorsCan authorize bilateral contracts to exchange

savings credits and provide a role for 3rd parties

Why an EERS?

Achieve substantial energy and emissions savings

Performance based – emphasizes savings, not spending

Can be easier to legislate savings targets than spending amounts

Can start programs quickly, without many years of study (but targets should be based on cost-effective opportunities)

States with Energy Efficiency Resource Standards (EERS)

These plus BAU EE will save ~5% nationally by 2020

Pending EERS

State EERS

Texas

•First state to establish an EERS•Initially 10% of load growth but increased by legislature to 20% of load growth•Utilities have not had difficultly meeting and exceeding targets•In 2009, bill likely to come up to increase to 30% or even 50% of load growth or the equivalent as % of sales

Vermont – Raising Efficiencyto a New Level

Source: Efficiency Vermont and VT Dept of Public Service

Federal EERS Activities

• Markey (H.R. 549) and Schumer (S. 548)• 15% electric, 10% gas EERS by 2020• CHP, codes & standards count• DOE develops M&V rules• States lead implementation

• Waxman-Markey as passed House• Includes 20% RES with 5-8% EE

• Senate Energy Committee bill• 15% RES with efficiency up to 4% EE• Proposals to increase this likely on Senate

floor

Savings Grow Over Time Electric Natural GasAnnual Cumulative Annual Cumulative

2011 0.33% 0.3% 0.25% 0.3%2012 0.67% 1.0% 0.50% 0.8%2013 1.00% 2.0% 0.75% 1.5%2014 1.25% 3.3% 1.00% 2.5%2015 1.25% 4.5% 1.00% 3.5%2016 1.50% 6.0% 1.25% 4.8%2017 1.50% 7.5% 1.25% 6.0%2018 2.50% 10.0% 1.25% 7.3%2019 2.50% 12.5% 1.25% 8.5%2020 2.50% 15.0% 1.50% 10.0%

Note: Savings count from date of passage

Impacts of a Federal EERS(10% electric; savings over and above existing state EERS’s)

• Peak demand savings of ~33,000 MW (110 power plants, 300 MW each)

• CO2 emissions down 74 MMT in 2020 (equivalent to taking 14 million vehicles off the road for a year)

• 76,000 net jobs created• Cumulative net savings of $66 billion

(B/C ~3:1)

Appliance and Equipment Efficiency Standards

•Currently federal standards on more than 40 products

• Congress generally establishes initial standards• DOE periodically revises (now working on >20)

•House bill adds 6 products, Senate bill two•Also some reforms to improve decision making, primarily in House bill

New Product Standards

House

Portable lighting fixtures

Commercial furnaces

BR lamps (rulemaking)

Outdoor lighting fixtures

Drinking water dispensers

Hot food holding cabinets

Hot tubs

Senate

Portable lighting fixtures

Commercial furnaces

BR lamps (rulemaking)

Reforms to the Standards ProgramHouse•Multiple metrics•Rebuttable presumption – 5 yrs, harder to rebut•State petitions for exemption from preemption eased•Performance-based building codes•State injunctive enforcement•DOE data collection•Carbon price and impact on energy prices in LCC

Senate•Deadlines to rule on petitions•Test procedures – can petition for changes; direct final rules for consensus proposals

Building Codes

•Likely to be in House and Senate bills•IECC and ASHRAE to revise codes to achieve:

• 30% savings by 2010• 50% savings by 2014-2016 (varies by sector, bill)• House bill raises this by 5% every 3 years

•If don’t, DOE to develop model codes•States encouraged to implement and achieve 90% compliance within 8 years

• Grants to states to help pay for this

Incentives for Building Retrofits

• Performance-based incentives for comprehensive retrofits – in both House and Senate bills

• Targeting savings of 20% or more• EPA provides technical program guidance• DOE provides funds to states to run programs• Funding in House bill to come from emissions

allowances• Senate has not yet considered allowance

allocations

Residential Program

•Builds on Home Performance with Energy Star program•$1000 for 10% savings (point system)•$2000 for 20% savings (point system)

• Point system may be phased out

•$3000 for 20% savings using calculation software

• Additional $150 per 1% savings

Commercial Program

• Builds on Energy Star Buildings Program• Incentives per sq. ft. based on savings. In

Senate:• $.15/sf for 20% savings• $.75/sf for 25% savings• $1.20/sf for 30% savings• $1.60/sf for 35% savings• $2.05/sf for 40% savings• $2.50/sf for 45% savings• $3.00/sf for 50% savings

Multifamily and Manufactured Housing

• Senate bill includes a competitive grant program for innovative EE projects for multifamily and manufactured housing

• House bill includes a program to give grants of up to $7500 for replacing pre-1976 mobile homes with Energy Star manufactured homes

Best-in-Class Appliance Incentives

•New program in House bill •Includes building equipment, appliances and consumer electronics•Incentives to retailers or distributors for new products meeting best-in-class criteria set by DOE

• Can be no looser than top 10% of products on market

•Incentive levels set by DOE, based primarily on energy savings•Includes provisions for demand-response capability

Building Labeling

• In both House and Senate bills, but House limited to new construction

• EPA to develop program• Includes both performance and design ratings

• Performance = based on actual energy use• Design = based on building plans

• Encourage states and federal agencies to use• Funding and TA for demonstration projects

Sample Label

Industrial and Building Assistance Centers

Industrial Assessment Centers (IAC)• Based at universities• Provide free energy assessments to small/medium

industrial plants• Give students practical experience• House and Senate both expand program

Building Training and Assistance Centers• New program based on IAC included in both bills

Centers of Excellence – regional centers to coordinate building, industry & clean energy centers in both bills

Additional Programs for Industry(all in Senate bill)

Industrial EE grant programSmall business loansInnovation in industry grantsCoordination of R&D of EE techs for industryEnergy-efficient technologies assessmentIndustry-specific road mapsStudy of advanced energy technology

manufacturing capabilitiesIndustrial program advisory committee

Demand Response(in House bill)

•Peak demand reduction targets to be set by utilities, overseen by FERC•Energy Star to consider incorporating demand response capabilities•FTC to consider adding Smart Grid capability to Energy Guide label•Demand response added to appliance rebate program

Tax Incentives

• Very unclear what will be included• New home and heavy-duty vehicle

incentives need renewal or will expire 12/31/09

• Some refinements to new home, commercial building and HVAC incentives being discussed

• Many other ideas been proposed

Possible Changes to Tax Incentives for Buildings

• Add a higher tier to new home incentives, for 50% savings in all energy use

• Increase commercial building incentive and simplify paperwork• Suggestion is $3/sf, up from $1.80/sf

Potential New Tax Incentives

•Retirement of CFC chillers• AHRI and ACEEE

proposing $200/ton plus $100/ton for downsizing

• Must meet 90.1-2010 efficiency levels

•Advanced motors – advanced variable speed

• Credits to manufacturers to help develop these motors

Transportation Provisions in House CC Bill

•Three percent of allowances to advanced vehicle tech until 2017, 1 percent thereafter

• Strong emphasis on plug-in vehicle deployment• Funding also for manufacturers to retool for

advanced tech more generally

•House also includes greenhouse gas emissions standards for heavy-duty vehicles by 2010, other mobile sources later on (aircraft, marine vessels, locomotives and perhaps other non-road vehicles)

Transportation Provisions in House CC Bill – Transportation Planning

• Directs EPA to set national targets for transportation sector GHG reductions “commensurate with” bill’s overall reductions

• Requires states to set targets for transportation GHG reductions as well, and to integrate these into the transportation planning process (a prerequisite for receipt of federal infrastructure funding)

• But no consequences for states failing to meet targets, and no dedicated funding

• Senate EPW expected to adopt House transportation planning provisions

Additional Transportation Provisions in House CC Bill (cont.)

•Aligning passenger vehicle fuel economy and greenhouse gas emissions standards

•Greenhouse gas emissions standards for heavy-duty vehicles, aircraft, marine vessels, locomotives and perhaps other nonroad vehicles.

Estimated Energy Savings

2020 Energy (Quads)

2020 GHG (MMT)

2030 Energy (Quads)

2030 GHG (MMT)

House 5.2 347 11.6 670

Senate 2.3 134 4.3 239

Estimated Energy Efficiency Savings from Waxman-Markey

2020: Save 5 quads (5%) 2030: Save 12 quads (12%)

Source: ACEEE 2009

National Wholesale Electricity Prices in Climate Framework and Clean Energy Scenarios

$50

$55

$60

$65

$70

$75

$80

$85

2020 2025

Wh

ole

sale

Ele

ctri

city

Pri

ces

(200

6$/M

Wh

) Climate FrameworkHouse RES in Climate Framework10% EE + 5% NG in Climate Framework15-15 in Climate Framework

Note: Cost of efficiency programs will raise prices at retail level modestly.

Source: ACEEE Dec. 2007 EERS-RES study

NREL 5/09 Study on RES Proposals

Bingaman = 20% RES by 2020, ¼ from EEMarkey = 25% RES by 2020Waxman = 20% RES + 15% EERS by 2020

EPA Analysis of Waxman-Markey

Source: EPA June 23, 2009 analysis

EPA Analysis of Waxman-Markey

Source: EPA June 23, 2009 analysis

Costs and Savings per Household

CBO: $175/hh in 2020EPA: $80-111/hh annual NPV savings

averaged over 2010-2050ACEEE: • Save $200+/hh from EE in 2020, ~$350

in 2030• Cumulative net savings >$1000 by 2020,

>$3000 by 2030

Prognosis

Leadership will make serious effort to enact climate legislation in 2009

Senate floor in Oct., conference in Nov., enactment in Dec.?

But CC legislation is complex and needs time to gestate

May have energy bill in 2009, climate bill in early 2010

Contact Information

Steven Nadel

snadel@aceee.org

202-507-4000

www.aceee.org