Energy Efficiency: The First and Best Choice to Reduce Power Plant CO2 Emissions
The administration is drafting regulations on carbon dioxide (CO2) emissions from existing power plants, due out in June. Energy efficiency is key to whether these rules will significantly and cost effectively reduce our greenhouse gas emissions. If done right, these regulations could kick-start a huge amount of electric efficiency throughout the nation.
The administration is drafting regulations on carbon dioxide (CO2) emissions from existing power plants, due out in June. Energy efficiency is key to whether these rules will significantly and cost effectively reduce our greenhouse gas emissions. If done right, these regulations could kick-start a huge amount of electric efficiency throughout the nation.
Energy Efficiency Potential to Reduce CO2
While power plant dispatch, lower carbon generation, and other generation-side strategies offer important options, end-use energy efficiency offers the greatest and most cost-effective opportunity for CO2 emission reductions.
Along with others, the Alliance to Save Energy (Alliance) and the American Council for an Energy-Efficient Economy (ACEEE) have found time and again that energy efficiency is the nation’s most abundant, reliable, cleanest, and cost-effective energy resource. If not for energy efficiency and energy productivity gains since the 1970s, the United States would need to consume about 50% more energy to support our current economy, with concomitant impacts on environmental quality as well as on energy bills and energy reliability.
Many of the gains have come from the electric power sector, where a growing number of states have enacted end-use energy efficiency programs. The 2013 ACEEE State Energy Efficiency Scorecard reported $5.9 billion in U.S. electric ratepayer demand-side management programs in 2012. The Consortium for Energy Efficiency found that investments in such programs achieved 117,404 gigawatt-hours (GWh) in gross savings in 2011, avoiding roughly 83 million tons of CO2 emissions.
These energy efficiency investments are cost effective, and the potential is large. Electricity savings can often be delivered at about two to four cents per kilowatt hour (kWh). And the most advanced states are already achieving 1.5% to 2.0% additional savings each year. These savings deliver substantial economic, environmental, energy security, and reliability benefits.
About half of the states achieve these savings through energy efficiency resource standards (EERS) or similar requirements for electricity savings. Various states also implement resource planning, rate design, and financial incentive programs to encourage demand-side energy efficiency. Non-utility policies and programs also yield significant electricity savings and, thus, avoided emissions. These policies and programs include building energy codes, equipment efficiency standards, energy performance contracting, low-income home weatherization, and tax incentives.
Energy Efficiency In the EPA Guidelines
Not only is energy efficiency our first fuel, but it should also be the first-choice compliance option in meeting CO2 emission regulations. The ability of states and utilities to use energy efficiency to meet anticipated regulations, however, rests in the hands of the Environmental Protection Agency (EPA) which right now is crafting emissions guidelines for states under Section 111(d) of the Clean Air Act.
President Obama directed the EPA to propose guidelines by June 1, 2014 and to finalize them by June 1, 2015. States will then develop implementation plans that will be due to the EPA in June 2016. While called “guidelines,” what EPA issues will be a binding rule, albeit one that will likely offer states considerable flexibility.
EPA must address two questions related to energy efficiency. First, in setting the standard, should it consider only actions that can be taken at regulated power plants, or should it look to the broader electricity system? Currently, existing power plants offer few feasible options for achieving large CO2 emissions reductions short of blending in or shifting to lower-carbon fuels. In contrast, recognizing the electricity system for what it is—a system—opens up a suite of options with greater savings. States and utilities could draw on these options to tailor least-cost strategies for their particular contexts, including changing the regional generation mix or dispatch of power plants, reducing transmission losses, and most importantly, using end-use energy efficiency.
Second, whatever the standard levels, should EPA allow states to use energy efficiency as a flexibility mechanism to meet them? Counting end-use efficiency would require careful verification of electricity savings (as is already required for the ratepayer-funded programs described above), but it could allow much more cost-effective approaches to achieving the emissions reduction goals.
The Alliance and ACEEE strongly support the recognition and promotion of energy efficiency as an emissions reduction strategy. As detailed in our comments to EPA, we recommend that the forthcoming guidelines:
- Allow for a system-based approach to setting standards that considers the entire electricity system, instead of a source-based approach that only includes measures that can be taken within the fence lines of individual power plants
- Give states flexibility in applying various compliance strategies including end-use energy efficiency
- Establish a way to recognize and build on diverse state experiences, such as the growing number of state EERS as well as the Regional Greenhouse Gas Initiative covering northeastern states
- Particularly for states with modest resources and limited energy efficiency experience, set forth adequate guidance to help states implement 111(d) requirements while also allowing them the flexibility to be innovative and to tailor implementation to their circumstances
By following our prescription, EPA would give states diverse supply- and demand-side options, enabling them to adopt least-cost approaches most suitable to their own contexts. It would allow states to build on their own experiences with energy efficiency policies and programs and to learn from other states’ approaches. It would support those states with fewer resources and less experience while encouraging those at the forefront of policy innovation.
And, the result? We believe the evidence clearly shows that using energy efficiency as a first fuel for the utility sector and a first option for emissions reductions not only will yield large environmental benefits but will drive economic prosperity and improve reliability.
Our organizations will continue to work with the EPA, states, the private sector, non-governmental organizations, and other stakeholders through the Section 111(d) regulatory rulemaking and development of state implementation plans to seize this important opportunity to advance energy efficiency nationwide.
