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I Alicia Williamson - Energy Efficiency Article Page I1,1 Alicia William son Energy...... Efiie c

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Energy Efficiency Article

Alicia, Attached please find the article: Energy Efficiency: The Smart Way to Reduce Global Warming Pollution in the Northeast, National Associate of State PIRGS, August 2005.

Please let me know if I can be of further assistance. See you Monday.

Katie Broom Environmental Scientist Earth Tech Greenville, SC 864.234.2287 katie, broom @earthtech.com CC:

"Hurley, Bobbie" <Bobbie.Hurley@earthtech.com>

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Energy Efficiency:

The Smart Way to Reduce Global Warming Pollution in the Northeast IS,

Energy Efficiency:

The Smart Way to Reduce Global Warming Pollution in the Northeast Travis Madsen, Frontier Group Frank Gorke, MASSPIRG Education Fund Rob Sargent, National Association of State PIRGs August 2005

Acknowledgments The authors thank William Prindle of the American Council for an Energy-Efficient Economy and Sue Coakley and Julie Michals of Northeast Energy Efficiency Partnerships for their input and insightful review of this paper. The economic model in this report was originally designed by Economic Research Associates in Alexandria, Virginia. The authors are extremely grateful for the firm's expert technical advice and assistance. Thanks also to Tony Dutzik and Susan Rakov of the Frontier Group for editorial assistance.

The financial support of the Pew Charitable Trusts, the John Merck Fund, the Energy Foundation and the Oak Foundation made this project possible.

The views and opinions expressed here are those of the authors and do not necessarily reflect the views of our funders or those who provided editorial input. The recommenda-tions are those of the National Association of State PIRGs. Any factual errors are strictly the responsibility of the authors.

© 2005 National Association of State PIRGs With public debate around important issues often dominated by special interests pursuing their own narrow agendas, the State Public Interest Research Groups (PIRGs) offer an independent voice on behalf of the public interest. The State PIRGs, a national network of state-based, nonprofit, nonpartisan public interest advocacy organizations, work to pre-serve the environment, protect consumers and promote good government. We investigate problems, craft solutions, educate the public, and offer citizens meaningful opportunities for civic participation.

For more information about the State PIRGs, visit www.pirg.org.

Frontier Group is the research arm of the state Public Interest Research Groups (PIRGs).

Frontier Group provides research and policy analysis designed to support state-based ef-forts toward a cleaner, healthier and more democratic society.

Table of Contents Executive Summary 5

Introduction 9

Energy Demand is Rising 11 Rising Demand Makes Cuts in Global Warming Pollution More Difficult and Costly 11 Energy Efficiency Reduces Demand 14 The Northeast Has Enough Efficiency Resources to Eventually Halt Growth in Electricity Demand 14 Reducing Demand Makes Pollution Cuts 18 Easier and Less Expensive Efficiency Measures Are Cheaper than 18 Generating and Delivering Electricity Reduced Energy Demand Leads to Lower Energy Prices 20 Efficiency Measures Help to Avoid Reliability Payments 20 Energy Efficiency Can Stimulate the Local Economy 21 Efficiency Programs Improve the Effectiveness of a Carbon Cap 21 Energy Efficiency Won't Happen On Its Own 22 Policy Recommendations 24 Northeastern States Should Make Energy Efficiency 24 a Central Part of Their Plan of Attack on Global Warming Methodology 26 Notes 29

4 Energy Efficiency: The Smart WayTo Reduce Global Warming

Executive Summary ine Northeast states from Delaware to Maine are currently working to develop a regional cap-and-trade system to limit global warming pollution from power plants. The program, known as the Regional Greenhouse Gas Initiative (RGGI), represents one of the first signifi-cant efforts to mitigate the serious impacts of global warming in the United States.

In order to achieve the greatest reduc-tion in pollution at the least cost, energy efficiency must play a prominent role in the Northeast's overall global warming strategy.

According to government forecasts, demand for electricity in the Northeast will increase 23 percent by 2020, mak-ing cuts in global warming pollution more difficult and more expensive than they need to be.

• The U.S. Department of Energy (DOE) projects electricity demand will increase 1.4 percent per year between now and 2020.

• To satisfy increasing demand and replace retiring facilities, the North-east will require over 8,500 MW of new power plants. The DOE predicts that at least 85 percent of these plants will bum natural gas or other fossil fuels, which produce global warming pollution. Increasing demand also makes it more difficult to retire older, high-emitting power plants, which may be needed to ensure that the electric system continues to operate reliably.

Under these circumstances, DOE forecasts that emissions of carbon dioxide (the leading global warming pollutant) will rise 37 million tons per year by 2020.

The Northeast has enough efficiency resources to slow and eventually halt growth in electricity demand-thus making emission reductions easier to achieve.

• A variety of state, university and non-profit studies have identified large potential for greater energy efficiency in Northeast states. For example, New England's currently active efficiency programs will capture less than one-Executive Summary 5

fifth of the region's achievable energy savings potential by 2013.

Deploying the achievable efficiency measures identified in these studies would reduce projected electricity demand in the Northeast by an average of 1.3 percent per year in the next decade, effectively keeping demand at 2007 levels. (See Figure ES-1.)

" Halting growth in electricity demand would reduce upward pressure on regional carbon dioxide emissions and ease the pressure to continue operating older, carbon-inefficient plants to maintain the reliability of the electric system-making progress against global warming easier to achieve.

Efficiency measures make progress against global warming less expensive.

Efficiency measures are two-thirds less expensive than generating and deliver-ing electricity. In 2002, New England's public benefit fund programs produced energy savings at an average cost of 2.4 Figure ES-I: Forecast Energy Deman Scenario 450,000 cents per kWh. In comparison, whole-sale power in New England is projected to cost from 4 to over 5 cents per kWh over the next decade-and over 9 cents per kWh including the cost of trans-mission infrastructure and energy losses.

• In addition to saving consumers money directly, reduced energy demand leads to lower energy prices. For every I percent reduction in national demand for natural gas, prices decline 0.8 percent to 2 percent below otherwise expected levels.

" Deploying identified cost-effective energy efficiency measures over the next decade would reduce Northeast electricity demand by 11 percent and utility natural gas demand by 11 percent versus projections in 2015-reducing the average price of electric-ity by 0.4 cents per kWh and the average wellhead price of natural gas by 2.6 cents per thousand cubic feet.

By 2020, Northeast consumers would save a net of $13 billion, lowering the I-Base Case Compared to Efficiency V1 0

430,000 410,000 390,000 OOOW 0000 0000 370,000 2005 2010 2015 6

Energy Efficiency: The Smart Way To Reduce Global Warming

residential consumer's average energy bill by $1.56 a month (before factoring in the cost of a carbon cap).

• At the same time, efficiency measures will improve reliability of electric service and help avoid the need for special reliability payments to genera-tors. Pending approval, new "Locational Installed Capacity" (or LICAP) charges could go into effect in 2006, giving generators an incentive to supply transmission-constrained areas but costing consumers as much as $13 billion over the next five years.

" When consumers spend less on en-ergy-much of which goes outside the region to pay for fossil fuels-they spend more on local goods and ser-vices, stimulating the economy. The Regulatory Assistance Project esti-mates that from 2000 to 2010, existing energy efficiency programs in New England will create $2 billion in economic output, over 1,000 jobs annually, and nearly $700 million in wages-while reducing carbon dioxide pollution by 2 million tons per year.

The economic benefits of efficiency programs will allow for a tighter carbon cap without requiring additional sacri-fices by ratepayers.

• Efficiency savings could offset in-creases in electricity cost caused by the carbon cap, enabling a stronger cap to be set at the same or less cost.

• Combining energy efficiency with a strong carbon cap would encourage high-polluting coal-and oil-fired power plants to reduce their emissions or give way to low-carbon forms of generation, delivering significant cuts in pollution.

e However, energy efficiency won't happen automatically in a cap-and-trade program, because market barri-ers and other fundamental obstacles prevent efficiency measures from competing with supply-side measures on equal footing.

Northeastern states should make en-ergy efficiency a central part of their plan of attack on global warming.

" The forthcoming carbon cap-and-trade policy under negotiation in the North-east should explicitly include support of energy efficiency programs in order to be most effective. Emission allow-ances (that is, permits that allow a facility to emit carbon dioxide) should not be given to generators for free.

Instead, they should be sold at market price and the proceeds should be dedicated to fund energy efficiency and other public benefit programs, reducing the overall cost of the pro-gram and enabling the Northeast to meet more meaningful pollution reduction targets.

" The cap should reduce global warming pollution to 25 percent below current levels by 2020, growing tighter over time.

" Reductions should be achieved first and foremost from a mandatory cap on Executive Summary 7

carbon dioxide emitted from fossil-fuel power plants in the Northeast. Elec-tricity imports should be included in the cap to prevent leakage. Offsets outside the regional electricity sector should not be considered until the cap-and-trade program has matured and been proven effective. If offsets are eventually considered, they should meet conservative and rigorous criteria to ensure that they enhance the benefit of the program.

Northeastern states should pursue a comprehensive set of energy efficiency policies outside of and in parallel to the cap-and-trade program, including but not limited to:

" Establishing dedicated efficiency programs (like Efficiency Vermont) that are independent of electricity and gas service providers and ensuring enough funding to tap achievable efficiency potential;

" Improving residential and commer-cial building codes;

" Setting minimum appliance effi-ciency standards; o Stimulating the deployment of combined heat and power technolo-gies; and o Educating consumers about energy efficiency opportunities.

8 Energy Efficiency: The Smart Way To Reduce Global Warming

Introduction cross the Northeast and the world as a whole, there is a growing con-sensus that action to reduce global warming pollution is necessary and urgent.

Global warming threatens to signifi-candy increase the average temperature in the Northeast and around the world, caus-ing dramatic changes in our economy and quality of life. Within the next century, the impacts of global warming in the North-east could include coastal flooding, shifts in populations of fish and plants, loss of hardwood trees responsible for fall foliage displays, longer and more severe smog sea-sons, increased spread of exotic pests, more severe storms, increased precipitation and intermittent drought.

With leadership from Washington D.C.

absent, the governors of nine Northeast states (Connecticut, Delaware, Maine, Massachusetts, New Hampshire, New Jer-sey, New York, Rhode Island and Vermont) have initiated a process that offers a good chance to reduce the region's impact on global warming by cleaning up power plants-which emit over one-fifth of the region's global warming pollution.' The process, known as the Regional Green-house Gas Initiative (RGGI), would cap regional carbon dioxide pollution from electricity generation and set up a trading mechanism to achieve the required emis-sions reductions in an economically effi-cient way. (See "Cap and Trade, A Primer" on page 10.)

In order for the cap to be effective in producing benefits for the environment and public health, it should be set at an achiev-able but ambitious level that forces the de-velopment and deployment of new technologies.

The main argument against an aggres-sive cap is that it will cost too much. But a strategy that couples limits on carbon di-oxide emissions with vigorous energy effi-ciency measures can reduce the cost of the program, enable greater emission reduc-tions, and boost the region's economy.

The Northeast has a variety of exem-plary energy efficiency programs that are already producing results. Efficiency pro-grams in New England in 2002 achieved lifetime savings of 10 billion kilowatt-hours (kWh) of electricity at an average cost of 2.4 cents per kWh, according to the Regu-latory Assistance Project.' Existing New England efficiency programs will create over $2 billion in economic output between Introduction 9

2000 and 2010, while preventing over 18 million tons of carbon dioxide emissions and saving over 44 billion kWh of electric-ity (enough to power 4.4 million homes for a year).3 In New York as of the end of 2003, the Energy $mart program reduced state electricity use by one billion kWh per year, lowering peak demand by 880 megawatts (MW) and contributing to the overall sta-bility of NewYorks electricity system.4 The program is expected to create an average of 5,500 jobs annually from 1998 to 2006.5 In the first three years of NewJersey's Clean Energy Program (2001-2003), workers in-stalled equipment with a lifetime energy savings of 7 billion kWh, which will avoid emission of over 4 million tons of carbon dioxide pollution.6 In 2003, the program provided $100 million in funding for projects that will save consumers $400 mil-lion in energy costs over their useful lifetime.7 As this report explores, the potential for cost-effective energy efficiency programs in the Northeast remains immense. Develop-ing these resources will increase the stabil-ity of the electric grid, accelerate the transition to less carbon-intensive energy sources and improve the economy. And it will make possible the achievement of a meaningful and effective near-term goal for reducing carbon dioxide pollution through the RGGI framework, creating momentum toward the deeper cuts that will be neces-sary in the long term.

Cap-and-Trade: A Primer Traditionally, environmental goals have been achieved through direct perfor-mance requirements. Regulators established limits on emissions or required facilities to adopt certain technologies to reduce pollution. These rules were then enforced through civil or in some cases criminal penalties.

Beginning in the 1970s, economists and government officials began to experi-ment with market-based approaches to environmental protection. These mar-ket-based approaches made the right to emit pollution a tradable commodity, allowing facilities to generate credits for emission reductions that go above and beyond legal requirements. These credits could then be sold to companies that wished to build new facilities, increase their emissions, or reduce the expense of complying with environmental safeguards.

Cap-and-trade programs are among the market-based approaches with the best track record of success in reducing emissions. In a cap-and-trade system, gov-ernment first establishes an overall limit on pollutant emissions within an eco-nomic sector (the "cap'). This total amount of pollution is then converted into "allowances" to emit a given quantity of the pollutant, which regulated facilities must hold in order to emit pollution. Facilities that reduce their emissions can hold fewer allowances, enabling them to sell their excess allowances to other facilities that may be having a harder time achieving emission reductions. Such trading allows the economic sector covered by the cap-and-trade program to achieve the desired emission reductions at lower aggregate cost. Additionally, regulators can reduce the amount of pollution over time by tightening the cap.

10 Energy Efficiency: The Smart WayTo Reduce Global Warming

Energy Demand is Rising s population and the economy in the Northeast continue to grow, so does demand for electricity. Government forecasts predict that much of that energy will come from fossil fuels, increasing the amount of global warming pollution from power plants in the Northeast.

Under these circumstances, attempts to reduce the Northeast's contribution to glo-bal warming will be more difficult and more expensive than they have to be.

Figure 1: Forecast Electricity Demand Rising Demand Makes Cuts in Global Warming Pollution More Difficult and Costly According to the U.S. Energy Information Administration (EIA), demand for electric-ity in the-Northeast will increase 23 per-cent by 2020, an average of 1.4 percent per year.8 (See Figure 1).

To meet this demand and replace the 500,000 1 400,000 L.

PU Q

300,000 200,000 100,000 0

2005 2010 2015 2020 Energy Demand is Rising 11

output of facilities that retire, EIA predicts that the Northeast will require over 8,500 MW of new generating capacity. At least 85 percent of these facilities will burn natu-ral gas or other fossil fuels, emitting car-bon dioxide-the leading global warming pollutant 9 (See Figure 2.)

Increasing demand also makes it more difficult to retire older, high-emitting power plants that serve areas with limited transmission capacity. As demand rises in these areas, amid serious questions about the ability of restructured electricity mar-kets to provide adequate supplies, local power plants are increasingly necessary to ensure that the electric system continues to operate reliably. For example, the coal-fired Salem Harbor power plant in Massa-chusetts serves a transmission-constrained area of eastern Massachusetts. In February 2005, Dominion, the plant's operator, requested permission from the New England Independent System Operator (ISO-NE) to shut down the plant. ISO-NE rejected the application, finding that Salem Harbor was necessary to ensure reliability.'0 To the extent that increased demand aggravates transmission constraints, shutting down other high-emission coal-fired power plants like Salem Harbor will be more difficult.

EIA forecasts that only 70 MW of coal-fired generators in the Northeast will be retired before 2020. Despite the replace-ment of oil-fired generators with more ef-ficient natural gas combined cycle plants, DOE forecasts that carbon dioxide emis-sions from electricity generation will in-crease 37 million tons per year by 2020 under this scenario.

Under these circumstances, reducing global warming pollution from the electricity sector is bound to be difficult and expensive.

Figure 2: Forecast Power Plant Additions and Retirements In the Northeast through 2020 w Additions n Retirements EU 7,000-6,000-5,000-4,000-3,000 -

2,000 1,000 0

07-1 cow Natural Gas Combined Cycle Gas/ON Comnbnu-on Tuvbne/Die-Renewables Distributed Genration 12 Energy Efficiency: The Smart Way To Reduce Global Warming

A Note On Electricity Units M egawatts (MW) are the standard measure of a power plant's generating ca-pacity, or the amount of power it could produce if operating at full speed.

Utilities measure their ability to supply demand on the grid at any one time in terms of MW. One MW equals 1,000 kilowatts (kW). One thousand MW equals one gigawatt (GW).

Power plant output and electricity consumption over a fixed length of time are measured in terms of megawatt-hours (MWh). For example, a 50 MW power plant operating at full capacity for one hour produces 50 MWh of electricity. If that plant operates for a year at full capacity, it generates 438,000 MWh of elec-tricity (50 MW capacity x 8,760 hour0.0088 days <br />0.211 hours <br />0.00126 weeks <br />2.8918e-4 months <br />s/year). To give a sense of scale, an average household uses about 10 MWh of electricity each year.

Most plants do not operate at full capacity all the time; they may be shut down for maintenance or they may be operated at only part of their maximum generat-ing potential because their power is not needed or their power source (such as wind) is not available. The actual amount of power that a plant generates com-pared to its full potential is reported as its capacity factor. Thus a 50 MW plant with a 33 percent capacity factor would produce 144,540 MMh of electricity in a year (50 MW x 8,760 hour0.0088 days <br />0.211 hours <br />0.00126 weeks <br />2.8918e-4 months <br />s/year x 33% capacity factor).

Energy Demand is Rising 13

Energy Efficiency Reduces Demand educing carbon dioxide emissions from power plants doesn't have to be like swimming upstream. By tapping into regional potential for energy efficiency, the Northeast can reduce growth in electric-ity demand and in global warming pollution.

Efficiency programs produce long-last-ing enhancements to buildings and equip-ment that save energy, reducing energy waste without reducing levels of service.

Efficient products deliver the same amounts of light, heat, cooling, work, and access to information and entertainment as their counterparts-with less energy input.

The Northeast has a great deal of po-tential for additional energy efficiency mea-sures, building on current programs to reduce-and eventually halt-growth in electricity demand.

The Northeast Has Enough Efficiency Resources to Eventually Halt Growth in Electricity Demand Many Northeast states already have active energy efficiency programs. However, vast energy efficiency resources in the North-east remain to be tapped.

According to an analysis by Optimal Energy, Inc. for Northeast Energy Effi-ciency Partnerships, New England's cur-rently active efficiency programs will capture less than one-fifth of the region's achievable energy savings by 2013." New York, NewJersey and Delaware have simi-larly large potential to save more energy.

There are three ways to look at energy efficiency potential: technically possible measures, economical measures, and achievable measures. Technically possible measures include all options regardless of cost; economical measures include all op-tions that would make economic sense; and achievable measures take into account mar-ket and public acceptance barriers that limit how fast and how deeply economically sen-sible efficiency measures can actually pen-etrate society.

The Northeast has enormous economi-cal efficiency potential. The New York State Energy Research and Development Agency (NYSERDA) found economic po-tential for savings of at least 50 million MWh per year by 2012, over 30 percent of forecast demand in New York and enough energy to supply 5 million households.'2 14 Energy Efficiency: The Smart Way To Reduce Global Warming

Similarly, the New Jersey Board of Public Utilities and Rutgers University found that New Jersey could economically save close to 12 million MWh per year in 2020, 17 percent of 2004 demand.'"

A majority of these efficiency measures are achievable as well. Optimal Energy Inc.

and Northeast Energy Efficiency Partner-ships found that achievable energy effi-ciency measures in New England could reduce regional energy demand by over 34 million MWh by 2013-more than offset-ting the region' forecasted demand growth.

Achievable measures could produce savings equivalent to the output of 28 combined cycle power plants (300 MW each) and re-turn electricity demand to 1993 levels.' 4 Reviewing a set of leading recent studies on achievable efficiency potential nationwide, the American Council for an Energy Effi-cient Economy concludes that the typical state could reasonably achieve energy sav-ings of 24 percent below forecast levels within 20 years."

Compiling the estimates of the economi-cally achievable energy efficiency potential from the Northeast efficiency studies leads to the conclusion that the Northeast could reasonably reduce projected electricity de-mand by 1.3 percent per year in the next decade, effectively halting growth in de-mand at 2007 levels. At this pace, by 2015 energy demand would be 11 percent lower than forecast levels. (See Figure 3.) (See Methodology on page 26 for modeling details.)

New technologies continue to emerge that can sustain this trend, given policies and programs that support their deployment.16 Figure 3: Forecast Energy Demand: Base Case Compared to Economically Achievable Efficiency Potential 450,000 1 430,000 0

410,000 390,000 370,000 20E 00,00 05 2010 2015 Energy Efficiency Reduces Demand 15

Energy Efficiency-Can It Be Done?

E* nergy efficiency-because it represents energy saved, rather than energy produced ---

can seem less tangible than a power plant. However, energy efficiency resources are real and produce valuable results. With active devel-opment, support and regional coordination, efficiency measures can be a criti-cal part of meeting the Northeast's energy needs.

Efficiency Programs Deliver Results Efficiency programs tap into proven resources that deliver valuable energy savings to consumers.

Efficiency Vermont provides a great example of a successful and well-de-signed efficiency program. Efficiency Vermont is the nation's first statewide energy efficiency utility, specializing in assisting homeowners and businesses to identify and take advantage of cost-effective energy saving opportunities.

Through technical assistance and financial incentives, Efficiency Vermont develops energy efficiency potential.

Efficiency Vermont is funded by a surcharge on consumers' electricity bills.

The funds are administered by an independent non-profit organization under contract to the Vermont Public Service Board, and all work undergoes inde-pendent financial and savings verification audits, ensuring that the public's money is being well spent.

In 2004, Efficiency Vermont worked with 12 percent of the state's electric ratepayers to complete efficiency investments that resulted in:"

e 58 million kWh of annual savings, achieved at 37 percent of the cost utilities would have paid to purchase that energy on the wholesale market and deliver it to customers; 9 Reducing growth in the state's energy needs by 44 percent and cutting summer peak energy demand by 9 MW; and

• $38 million in lifetime economic value-bringing the total value of efficiency measures installed over five E[ffkIe Vermont years to $172 million.

The type of work Efficiency Vermont does is exemplified by the renovation of Enosburg Falls Middle and High School. Black River Design called on Efficiency Vermont to help optimize the energy efficiency of the project. Ef-ficiency Vermont developed a design that capitalized on opportunities for cost-effective heating, ventilating, cooling and lighting-resulting in significant savings and a quality building. The school district spent $57,600, with incen-tives from Efficiency Vermont totaling $62,000, achieving annual energy cost savings of $32,600-a 56 percent return on the investment.

16 Energy Efficiency: The Smart Way To Reduce Global Warming

Efficiency Measures Need Active Support If consumers have access to products that use less electric-ity, they may be able to pay higher rates for the electricity those products consume and still emerge with lower overall bills. However, there are many well-documented market bar-riers that prevent consumers from taking advantage of these

]

efficiency opportunities (in-cluding information barriers; split incentives between build-ers and homeowners and land-lords and tenants, in which one buys the equipment and the other must pay operating costs; and the need to pay for im-proved energy efficiency up-Enosburg Falls Middle and High School front versus over time).

was designed witb effidency in mind.

Efficiency programs are nec-essary to overcome these bar-riers. Well designed efficiency programs take these barriers head on--educating consumers, reducing split incentives, providing subsidies that reduce the up-front costs, and systematically driving the penetration of effi-cient technologies into the marketplace where they can make the greatest difference. As noted earlier, the potential for increased energy savings is large.

However, efficiency programs need policy support and consistent funding to access this potential.

Efficiency Should Play a Central Role in Energy Strategy Energy efficiency and conservation provide so many benefits for consumers, the environment, the local economy and the competitiveness of our busi-nesses and industry that it should play a central role in the region's energy strategy. State officials, regulators, business associations and others should recognize these benefits, treat energy efficiency as a resource and take a lead-ership role in making conservation and energy efficiency a centerpiece of any broad-based initiative to promote economic growth and development, im-prove energy security and reliability, and protect the environment.

Energy Efficiency Reduces Demand 17

Reducing Demand Makes Pollution Cuts Easier and Less Expensive fficiency investments can provide the energy needed by a growing popula-tion and economy, while reducing pressure to build new power plants or op-erate older facilities to maintain reliability.

Without this pressure, reducing global warming pollution will become easier to achieve.

Energy efficiency can also reduce the cost of cutting global warming pollution.

Efficiency measures reduce costs to con-sumers in several ways. First, those indi-viduals and businesses that implement energy efficiency see direct reductions in their energy costs over time. Second, all electricity consumers benefit from reduced costs to generate and supply power-par-ticularly at peak periods when electricity is at high demand and is most costly to sup-ply. Finally, all consumers benefit from re-duced demand for fossil fuels, such as natural gas, which are used in several sec-tors of the economy.

Moreover, energy efficiency improve-ments benefit local economies. By reduc-ing energy costs, efficiency measures free up money that consumers can then use on other goods and services. And consumer spending on energy efficient products tends to benefit local merchants and efficiency service providers, as opposed to spending on fossil fuels, which tends to siphon con-sumer dollars outside of the region-and often outside of the country.

The economic benefits of energy effi-ciency can offset the cost of a carbon cap, enabling a tighter carbon cap to be set at the same or less cost. Combining energy efficiency with a strong carbon cap would encourage high-polluting coal-and oil-fired power plants to reduce their emissions or give way to low-carbon forms of genera-tion, delivering significant cuts in pollution.

Efficiency Measures Are Cheaper than Generating and Delivering Electricity Efficiency measures are two-thirds less ex-pensive than generating and delivering electricity.

In 2002, New England's public benefit fund programs produced energy savings at an average cost of 2.4 cents per kWh.18 Northeast Energy Efficiency Partnerships estimates that capturing all remaining 18 Energy Efficiency: The Smart Way To Reduce Global Warming

Potential Efficiency Measures Span All Sectors of the Economy D otential efficiency measures span all sectors of the economy and practically all uses of electricity. (See Table 1.) Lighting-as one of the major uses of electric-ity-holds a great deal of efficiency potential. In New England, lighting holds the greatest potential for savings in the commercial and residential sectors.26 For ex-ample, commercial office buildings (without recent lighting upgrades) could re-duce lighting expenses by half, producing net savings within one to three years."

Heating and cooling air and water hold potential for energy savings nearly as large.

In the industrial sector, energy savings can come from more efficient motors, com-bined heat and power applications and advanced manufacturing technologies.

Table 1: Selected Efficiency Measures and Their Costs Efficiency Measure Net Cost (cents per kWh, levelized)

LED Traffic Signals-

-6.3 Improved Industrial Pump Efficiency" 0.0 Residential Compact Fluorescent Lighting30 0.1 Appliance Efficiency Standards31 1.0 Improved Building Codes32 2.5 achievable energy efficiency potential in New England would cost just 3.1 cents per kWh."9 In comparison, projections of the whole-sale cost of power in New England range from 4 cents per kWh to over 5 cents per kWh over the next decade."0 Including the cost of transmission and distribution capac-ity and transmission line losses, estimates increase to 9.4 cents per kWh.2" In 2004, Northeast consumers paid an average of 10.9 cents per kWh for electric-ity service.22 However, electricity rates do not include the broader social, economic, environmental or public health impacts of electricity generation.23 The nuclear indus-try, for example, has received more than

$100 billion in federal subsidies since the end of World War 11.24 Fine particulate air pollution from power plants (largely coal-fired) causes an estimated 30,000 prema-ture deaths each year as well as many illnesses, imposing health care and other costs on the economy.23 The recent spike in natural gas prices-driven in part by in-creased demand from electric power plants-has had widespread economic ramifications beyond increases in electric rates. Environmental damage caused by the extraction of fossil fuel resources is ex-tremely costly to remediate. Finally, the potential economic damage that could be caused by global warming is incalculable.

After considering these substantial costs, energy efficiency becomes even more attractive.

Making Pollution Cuts Easier 19

Reduced Energy Demand Leads to Lower Energy Prices In addition to saving consumers money di-rectly, reduced energy demand leads to lower energy prices.

This effect is explained by the economic principle of supply and demand. For ex-ample, energy efficiency reduces demand for natural gas and slows the upward pres-sure on natural gas prices. This is especially true because natural gas is often used for generation at the marginal (or peak) peri-ods of demand, where efficiency has the greatest effect. (This is also particularly true when demand and supply are in tight bal-ance-as they currently are for natural gas.)

With efficient electricity use, people and industries that depend on natural gas have slightly smaller bills than without. These savings can then be reinvested in other parts of the economy, rather than spent on high-priced fuel imported from outside the re-gion. This additional spending creates positive impacts throughout the economy.

Researchers at the Lawrence Berkeley National Laboratory estimate that for ev-ery 1 percent reduction in national natural gas demand, natural gas prices fall by 0.8 percent to 2 percent below forecast levels."

Reduced demand for electricity would have a similar effect on electricity prices.

In a recent analysis, the American Coun-cil for an Energy-Efficient Economy found that by 2008, the continental U.S. could reduce electricity consumption by 3.2 per-cent and natural gas consumption by 4.1 percent, while more than doubling renew-able energy generation. These efforts would reduce natural gas prices 22 percent below projected levels.14 In the Northeast region, a program of investment in effi-ciency and renewable energy could cut natural gas usage by 5 percent in five years, cutting natural gas prices by 6 percent."

We estimate that deploying identified cost-effective energy efficiency measures in the Northeast electricity sector over the next decade would reduce electricity de-mand by 11 percent and utility natural gas demand by 11 percent versus projections in 2015. As a result, the average price of electricity would fall by 0.4 cents per kWh and the average wellhead price of natural gas would decline by 2.6 cents per thou-sand cubic feet. (See Methodology on page 26 for modeling details.)

Under this scenario, Northeast consum-ers would save a net of $13 billion from 2006 to 2020 (before factoring in the cost of a carbon cap). On average, a typical resi-dential consumer would spend $1.56 less per month on energy bills over this period.

A $51 billion investment in efficiency mea-sures over the next decade would in 2020 yield direct savings of $47 billion from re-duced electricity purchases, supplemented by $17 billion in savings through lower energy prices. These savings would rapidly grow in magnitude beyond 2020. Signifi-cant additional savings would stem from the social, environmental and public health benefits of efficiency investments.

Efficiency Measures Help to Avoid Reliability Payments At the same time, efficiency measures will help to avoid reliability payments that New England's Independent System Operator (ISO-NE) is proposing to pay to genera-tors in transmission-constrained areas.

Currently, ISO-NE makes payments to generators who have requested to shut down their plants when it determines that those plants are critical for reliability. Called "reliability must-run" contracts, ISO-NE considers these payments as evidence that the New England capacity market is bro-ken. Salem Harbor in Massachusetts is one such plant under must-run contract.

ISO-NE has proposed an alternative market plan, called "Locational Installed Capacity" (or LICAP), in which payments will be made to generators based on the 20 Energy Efficiency: The Smart WayTo Reduce Global Warming

need for supply in a given geographic area.

The proposal of LICAP is a tacit admis-sion that deregulation has not worked as promised. The assumption entering into deregulation was that market forces would ensure adequate capacity installations in the right places at the right times to ensure the continued function and reliability of the electric system. However, the proposal for LICAP shows that market forces have not succeeded in creating the most reliable con-figuration for the electric system.

A coalition of New England members of Congress predicts that regional electric-ity customers could pay up to $13.5 billion over the next five years, with no guarantee that generators would build new capacity to meet reliability concerns.3 6 The plan has been officially protested by the governors and public utility commissions in all six New England states."

However, to the extent that advanced efficiency programs relieve pressure in transmission-constrained areas by reducing demand, energy efficiency can reduce the need for LICAP-and for reliability must-run contracts. The improved reliability ef-fects of efficiency measures could thus save consumers even more money.

Energy Efficiency Can Stimulate the Local Economy Money saved by consumers through effi-ciency programs can then be spent for other goods and services, creating jobs and stimu-lating the local economy-in addition to reducing pollution.

The Regulatory Assistance Project esti-mates that from 2000 to 2010, existing en-ergy efficiency programs in New England will reduce carbon dioxide pollution by 2 million tons per year-while creating $2 billion in economic output, over 1,000 jobs annually, and nearly $700 million in wages.3" A 2004 study by Synapse Energy Eco-nornics found that making greater use of energy efficiency and renewable energy nationwide would reduce carbon dioxide pollution almost 50 percent below business as usual by 2025-and generate $36 billion annually in savings.39 A 2003 study by the Tellus Institute for the World Wildlife Fund found that a suite of national-level clean energy policies would reduce electricity demand by 25 per-cent below projections and carbon dioxide pollution by 60 percent below 2000 levels-while producing net energy savings of $ 100 billion annually by 2020.

Efficiency programs can create produc-tivity benefits as well, especially in the in-dustrial sector. Investments that increase industrial energy efficiency can improve product quality, lower capital and operat-ing costs, increase employee productivity, or help capture specialized product mar-kets.A° By increasing reliability and prevent-ing power outages, efficiency programs can also create value for the economy. One re-cent study estimated the cost of power out-ages to U.S. businesses alone at between

$104 billion and $164 billion per year.4' Energy efficiency is the key to reducing carbon dioxide pollution at the least cost-providing a net overall economic stimulus in response to investment in energy saving technologies. This can offset the effect of the carbon cap or stand on its own, making energy efficiency a "win-win" alternative for the Northeast.

Efficiency Programs Improve the Effectiveness of a Carbon Cap The economic benefits of efficiency invest-ments can enable a tighter carbon cap to be set without additional sacrifices by ratepayers, delivering more bang for the buck.

Efficiency savings would offset any in-creases in electricity cost caused by the Making Pollution Cuts Easier 21

carbon cap, enabling a stronger cap to be set at the same or less cost.

A carbon cap, by limiting the amount of carbon dioxide generators are allowed to emit and establishing a trading mechanism for carbon allowances (or permits to emit global warming pollution), would create additional costs for generators that would then be passed on to consumers. Energy efficiency (when explicitly included as a part of the cap-and-trade policy) can offset the increased price of electricity, because it saves consumers money directly on elec-tricity bills, reduces the price of energy and reduces the need for reliability payments.

More importantly, however, with energy efficiency, policy makers could set a tighter carbon cap without additional sacrifices by ratepayers, delivering greater progress faster and a less cost. Setting a strong car-bon cap would give high-polluting coal-and oil-fired power plants a strong incen-tive to reduce their emissions or give way to low-carbon forms of generation, deliv-ering significant cuts in pollution. Since the owners of the plants would have to pay a fee for the right to emit each ton of pollu-tion, power from those plants would be-come more expensive relative to power from cleaner, low-carbon power plants, thus tilting the market toward cleaner resources.

Halting growth in electricity demand will reduce pressure to continue operating the region's older, carbon-inefficient plants to maintain the reliability of the electric system. Efficiency programs do not need transmission lines in order to have an ef-fect in transmission-congested areas, un-like central station power plants. Efficiency programs can reduce demand in these ar-eas and thus help to increase the reliability of service-and reduce the extent to which older power plants are necessary to ensure that available capacity can meet demand.

As a result, replacing these older plants will be more technically feasible.

A weak cap with no energy efficiency will force changes in technologies used to meet new demand for electricity. However, the old sources will face little incentive to re-duce their emissions and may, in fact, face increasing pressure to continue operating to serve growing demand. A strong cap with energy efficiency, by contrast, will force changes in existing generation and its re-placement with cleaner renewable tech-nologies--delivering greater progress faster and for less cost.

Efficiency programs will have the addi-tional benefit of reducing the pressure to import cheaper electricity from outside the region, resulting in leakage outside of the cap. If regulators fail to prevent this prob-lem by regulating electricity imports as part of the cap-and-trade system, energy effi-ciency can mitigate the price differential that would result between the Northeast and neighboring regions with cheap (and often carbon-intensive) electricity. While efficiency measures on their own would likely not be enough to prevent leakage al-together, it would reduce the pressure to shift demand from Northeast generators to unregulated sources outside the region.

Energy Efficiency Won't Happen On Its Own Because cap-and-trade programs are mar-ket-based mechanisms, many stakeholders expect that the market will automatically pick the least expensive route to comply-and if that route involves energy efficiency, price signals will be enough to drive the process.

However, markets, tend to substantially under-value energy efficiency, preventing it from competing with supply-side mea-sures on equal footing. Fundamental as-pects of cap-and-trade policy design can also impede full consideration of energy efficiency opportunities. 42 For example:

• Substantial market barriers exist between sensible technologies and marketplace penetration, including:

22 Energy Efficiency: The Smart Way To Reduce Global Warming

o Consumer awareness of energy saving measures; o The up-front capital cost of efficient technologies (balanced by long-term savings); and o Split incentives between builders and buyers or landlords and tenants.

(For example, builders typically do not have an incentive to spend extra time and effort designing and building the most efficient building possible, and emphasize lower design and construction costs over reduced energy bills-making new buildings typically less efficient than they could be.)

Because the proposed cap-and-trade program caps global warming pollu-tion and not energy use, an electricity generator would not be able to take direct credit for reducing customer energy use. Financial incentives in the electricity market also promote greater electricity sales. Additional sales bring revenue to power generators and utility companies, while efficiency measures directly reduce retail revenue and lower wholesale market prices.

Incorporating energy efficiency into a cap-and-trade program through an offset-mechanism poses challenges with the potential for double-counting and determining "additionality," or to what degree those investments would have happened anyway under business as usual conditions.43 Despite the advantages of energy effi-ciency-low cost, reduced pollution, eco-nomic stimulus--cap-and-trade programs don't necessarily promote energy efficiency automatically. Explicit policy support for efficiency measures is required to overcome the many barriers to a level playing field.

Making Pollution Cuts Easier 23

Policy Recommendations he forthcoming carbon cap-and-trade policy under negotiation in the North-east should explicitly include support of energy efficiency programs in order to produce the most effective results. States in the region should also pursue a compre-hensive set of energy efficiency policies outside of, and parallel to, the cap-and-trade program.

Northeastern States Should Make Energy Efficiency a Central Part of Their Plan of Attack on Global Warming Emissions allowances should be sold at market price and the proceeds should be dedicated to fund energy efficiency and other public benefit programs.

• To ensure the fairness of the cap-and-trade program, emission allowances (that is, permits that allow a facility to emit carbon dioxide) should not be given to generators for free. Emissions allowances have monetary value.

Giving them away for free would effectively create billions of dollars in "windfall" profit for polluters.

Instead, facilities that emit pollution should be required to purchase allow-ances, creating a "polluter pays" mechanism. The proceeds should be directed toward energy efficiency and other public benefit programs, reduc-ing the overall cost of the policy, accelerating the transition of the electric system toward less carbon-intensive fuels and enabling the Northeast to meet meaningful pollu-tion reduction targets.

The cap should reduce global warming pollution to 25 percent below current levels by 2020, growing tighter over time.

In order for the cap to be effective in producing benefits for the environ-ment and public health, the cap must first be set at an achievable but ambi-tious level that forces the development and deployment of new technologies.

In the case of a carbon cap, the cap must be set low enough to promote 24 Energy Efficiency: The Smart Way To Reduce Global Warming

curtailment, efficiency improvements, and fuel switching at the most pollut-ing power plants. Tightening the cap over time can continue momentum toward the desired region-wide shifts in the electricity system. If the cap is set at a weak level, it will fail to drive significant technology changes.

Reductions must be achieved first and foremost from a mandatory cap on car-bon dioxide emitted from fossil-fueled power plants in the Northeast, includ-ing electricity imports.

" To maximize the benefit of a cap-and-trade program, the scope of the program needs to be clearly defined.

The cap must include regulations on electricity imports to prevent leakage.

Otherwise, generators outside the Northeast could sell cheap and car-bon-intensive power into the region, undermining the effect of the cap.

" Some cap-and-trade programs allow offsets, or pollution-reducing actions from outside the industry to which the cap applies. However, it is difficult or impossible to guarantee that offsets deliver equivalent emissions reduc-tions. Offsets also have the potential to eliminate the ancillary benefits of direct and local actions. For example, allowing an offset for an energy efficiency program in India would not create jobs and economic growth in the Northeast, or help to reduce health-damaging pollution from local power plants. Offsets should not be considered at all until a cap-and-trade program has matured and been proven effective. If offsets are eventually considered, they should meet conser-vative and rigorous criteria to ensure that they enhance the benefit of the cap-and-trade program.44 Northeastern states should pursue a comprehensive set of energy efficiency policies outside of and in parallel to the cap-and-trade program, including but not limited to:

• Establishing dedicated efficiency programs that are independent of electricity and gas service providers (like Efficiency Vermont), and ensur-ing enough funding to tap achievable efficiency potential;

" Improving residential and commercial building codes;

" Setting minimum appliance efficiency standards;

" Stimulating the deployment of com-bined heat and power technologies; and

" Educating consumers about energy efficiency opportunities.

'A!

Energy-saving compact fluorescent IM13light bulbs Policy Recommendations 25

Methodology n this report, we model the investment required to develop achievable efficiency savings in the Northeast, the direct sav-ings consumers would receive, and the ef-fects energy efficiency would have on overall electricity and natural gas prices-compared to a business-as-usual case derived from Energy Information Admin-istration forecasts.

Establishing the Default Path To allow for a comparison with the ben-efits of energy efficiency, we first estab-lished a baseline forecast for energy demand in the Northeast from 2005 to 2020. In general, the baseline forecast was estab-lished using the most recent statistics from the U.S. Energy Information Administra-tion (EIA) for the Northeast's electricity sector, forecast to 2020 using the trajectory set in the regional tables of EIA's Annual Energy Outlook 2005.4 Annual Energy Outlook tables are divided by region. Region 7 includes all of New England; Region 6 represents New York; and New Jersey and Delaware are part of Region 3 along with other Mid-Atlantic states. For New Jersey and Delaware, we started with energy demand in 2002 from EI's State Electricity Profiles, then ex-trapolated to 2020 using the growth rate in the Annual Energy Outlook. Estimates for New England, New York, and NewJersey and Delaware were added together to rep-resent the 9-state Northeast region.

We made similar forecasts for electric-ity prices, natural gas consumption (total and utility-only) and coal consumption, based on EIA data. We also looked up pro-jected national demand for coal and natu-ral gas for use in calculating the price effects of regional energy efficiency programs.

Creating an Energy Efficiency Scenario Based on estimates of achievable energy efficiency potential compiled from four studies, listed below, we concluded that the Northeast region as a whole could reason-ably reduce forecast energy demand by 1.3 percent per year through 2015.

1) New England, by Optimal Energy, Inc. for Northeast Energy Efficiency Partnerships

2) New York, by Optimal Energy, Inc. et al. for the New York State Energy Research and Development Authority, 26 Energy Efficiency: The Smart Way To Reduce Global Warming

3) New Jersey, by KEMA Associates for the New Jersey Board of Public Utilities and Rutgers University, and

4) Delaware, using a compilation of national studies by the American Council for an Energy Efficient Economy as a proxy.

Modeling Consumer Savings and Price Dynamics We developed a Northeast-specific energy and economic model to project the specific energy price impacts of deploying identi-fied energy efficiency measures from 2006 to 2015.

To model consumer savings, we calculated:

" Consumer investment necessary to achieve the efficiency scenario;

• Direct avoided electricity costs due to reduced energy demand;

" Consumer savings on non-utility natural gas purchases, caused by natural gas price dynamics;

" Consumer savings on electricity due to electricity price dynamics;

" Annual net savings; and

" Cumulative net savings.

All dollar values are used and reported in terms of 2002 equivalent.

Consumer Investment To yield the required level of energy sav-ings, we estimated that a ten year energy efficiency program would be required, with spending levels of $3.2 billion per year from 2006 to 2015, divided into the following categories:

• 15 percent for administrative expenses; 0 Of the remainder, 38 percent for residential efficiency programs, 45 percent for commercial, and 17 percent for industrial.

We assumed energy savings of 3.14 GvW~iyr for every million dollars of invest-ment and a 1 5-year benefit period, based on an analysis of public benefit fund expen-ditures in New England by the Regulatory Assistance Project.46 Additionally, we as-sumed a declining rate of investment ef-fectiveness of two percent per year, assuming that the most effective invest-ments would be made first.

Consumer Savings and Price Dynamics Consumer savings estimates consisted of avoided electricity purchases-simply the amount that would have been spent to pur-chase electricity in the absence of efficiency savings-and the effect of reduced energy demand on energy prices.

We assumed that efficiency programs would have the effect of reducing upward pressure on the price of electricity, natural gas and coal, which are set by a regional and national market. Based on estimates of how much natural gas and electricity would be saved compared to the base case fore-cast, we predicted change in national de-mand. In turn, the change in national demand was translated into an estimate of the effect on electricity and natural gas prices in the Northeast.

Natural gas prices were calculated using the following coefficients:"'

Intercept Year Quantity Deflator 0.0052

-0.1485 2.0817 1.0101 And Equation 1 below.

Equation 1:

[Intercept] x (Number of years since 2003)[Y'ear] x [National Demand][Quantity]

[Deflator]

Methodology 27

Electricity price impacts were calculated by estimating displaced utility related invest-ment and operating/maintenance costs in the efficiency scenario compared to the base case.

Annual and Net Consumer Savings We examined the effect of the ten-year efficiency program on consumer spending for energy during the period 2006-2020.

To obtain final estimates for annual and net consumer savings, we added all consumer outlays for efficiency programs and sub-tracted savings from avoided electricity purchases and reduced energy prices. Net savings were obtained by adding annual savings from 2006 to 2020.

28 Energy Efficiency: The Smart Way To Reduce Global Warming

Notes

1. New England: New England Climate Coalition, Global Warming and New England:

Progress, Opportunities and Challenges After Two Years of the Regional Climate Action Plan, Septem-ber 2003; Across the country as a whole, power generation is responsible for more than one-third of emissions: U.S. Department of Energy, Energy Information Administration, Emissions of Greenhouse Gases in the United States 2002, October 2003.

2. Richard Sedano, Regulatory Assistance Project, Economic, Environment and Security Effects of Energy Efficiency and Renewable Energy:

A Reportfor EPA and the New England Governors' Conference, NEEP Policy Conference, 24 May 2005.

3. Ibid.

4. New York State Energy Research and Development Authority, New York Energy Smart Program: Evaluation and Status Report, Data for year 2003, May 3004.

5. Ibid.

6. NewJersey Board of Public Utilities, Office of Clean Energy, New Jerseys Ckan Energy Program: 2003 Annual Report, 2004.

7. Ibid.

8. Energy Information Administration, U.S.

Department of Energy, Annual Energy Outlook 2005 with Projections to 2025, January 2005; See Methodology for details on the derivation of an estimate for the Northeast region as a whole.

9. Ibid.

10. Letter from Stephen Whitley, ISO-NE, to Marisa Sifontes, Dominon,

Subject:

Applications Under Section 1.3.9 of tbe ISO New England Inc.

Transmission, Markets and Service Tariff To Retire Salem Harbor Station Generating Units, 25 February 2005.

11. Optimal Energy, Inc. for Northeast Energy Efficiency Partnerships, Economically Acbievable Energy Efficiency Potential i New England, May 2005.

12. Savings: Optimal Energy, Inc. et al. for New York State Energy Research and Development Authority, Energy Efficiency and Renewable Resource Development Potential in New York State, Final Report, Volume One: Summary Report, August 2003; Forecast demand: Energy Infor-mation Administration, U.S. Department of Energy, Annual Energy Outlook 2005 witb Projections to 2025, Supplemental Tables: Region 6 (NEPCC / New York), January 2005.

13. KEMA, Inc. for New Jersey Board of Public Utilities and Rutgers University Center for Energy, Economic and Environmental Policy, New Jersey Energy Efficiency and Distributed Generation Market Assessment, August 2004.

14. See Note 11.

15. Steven Nadel, Anna Shipley, and R. Neal Elliot, American Council for an Energy Efficient Economy, The Teebnica4 Economic, and Achievable Potential for Energy Efficiency in the U.S.-A Meta-Analysis of Recent Studies, From the Proceedings of the 2004 ACEEE Summer Study on Energy Efficiency in Buildings, American Council for an Energy Efficient Economy, 2004.

Endnotes 29

16. John A "Skip" Laitner and Marilyn Brown, Emerging Industrial Innovations to Create New Energy Efficient Technologies, From the Proceedings of the 2005 ACEEE Summer Studies on Energy Efficiency in Indust"y, American Council for an Energy Efficient Economy, 2005.

17. Efficiency Vermont, Working Together for an Energy Efficient Vermont: Efficiency Vermont 2004 Preliminary Report, subject to audit, downloaded from www.efficiencyvermont.com on 28 July 2005, final report available September 2005.

18. See Note 2.

19. See Note 11.

20. As cited in: Richard Sedano and Catherine Murray, Regulatory Assistance Project, Electric Energy Efficiency and Renewable Enesgy in New England: An Assessment of Eristing Policies and Prospects for the Future, May 2005: "See, for example, New England ISO Regional Transmis-sion Erpansion Plan 2004 (Preliminary version),

Table 7.18, and U.S. EIA Annual Energy Outlook, 2004, Table 66. The latter values, with 2.5% per year inflation adjustment applied, supply the high end of this range; the NE-ISO report supplies the low end of the range." Also noted:

"Comparison of life-cycle costs with system avoided costs should be done with care. With that warning, the Vermont Department of Public in August 2004 released a "base" system avoided cost forecast, which reflects the New England electricity market. Over the average life-cycle of energy efficiency measures installed in 2002 (2003-2014), forecasted annual average system avoided costs range from 4.0 to 5.5 cents."

21. See Note 11.

22. Energy Information Administration, U.S.

Department of Energy, Monthly Electric Utility Database, Form EIA-826, 2004; Values were calculated by summing electric utility revenue and sales, then determining revenue per kWh.

23. Energy Information Administration, U.S.

Department of Energy, Electricity Generation and Environmental Erternalities: Case Studies, September 1995; U.S. Congress, Office of Technology Assessment, Studies of the Environ-mental Costs of Electricity, September 1994.

24. Marshall Goldberg, Renewable Energy Policy Project, Federal Energy Subsidies: Not All Technologies Are Created Equal, July 2000.

25. Clean Air Task Force, Death, Disease and Dirty Power: Mortality and Health Damage Due to Air Pollution fJim Power Plants, October 2000.

26. See Note 11.

27. Alison Bailie et al, Tellus Institute and the Center for Climate and Energy Solutions for the World Wildlife Fund, The Path to Carbon Dioxide-Free Power: Switching to Clean Energy in the Utility Sector, April 2003.

28. Tellus Institute and American Council for an Energy Efficient Economy, Energy Efficiency and Conservation Resource Assessment for the Residen-tial, Commercial and Industrial Sectors, January 2003.

29. Ibid.

30. Ibid.

31. See Note 11.

32. Ibid.

33. Ryan Wiser, Mark Bolinger and Matt St.

Clair, U.S. Department of Energy, Lawrence Berkeley National Laboratory, Easing the Natural Gas Crisis: Reducing Natural Gas Prices through Increased Deployment of Renewable Energy and Energy Efficiency, LBNL-56756, January 2005.

34. R. Neal Elliott, Anna Monis Shipley, Steven Nadel, and Elizabeth Brown, American Council for an Energy-Efficient Economy, Natural Gas Price and Availability Effects of Aggressive Energy Efficiency and Renewable Energy Policies: A Methodology White Paper, 2003; R. Neal Elliott, Anna Monis Shipley, Steven Nadel, and Elizabeth Brown, American Council for an Energy-Efficient Economy, Natural Gas Price Effects of Energy Efficiency and Renewable Energy Practices and Policies, 2003; Elliott, R. Neal Elliott, Anna Monis Shipley, American Council for an Energy-Efficient Economy, Impacts of Energy Efficiency and Renewable Energy on Natural Gas Markets: Updated and Expanded Anabti, 2005.

35. R. Neal Elliott, Anna Monis Shipley and William Prindle, American Council for an Energy-Efficient Economy, The Impacts of Expanded Energy Efficiency and Renewable Energy Resources on Natural Gas Prices in the RGGI Region, 9 August 2005.

36. "Group of New England Legislators Urge FERC to Reject ISO-NEl LICAP Proposal,"

Foster Electric Report, 13 July 2005.

37. Ibid.

38. See Note 2.

39. Bruce Biewald, David White, Geoff Keith, Tim Woolf, Synapse Energy Economics, A Responsible Electricity Future: An Efficient, Cleaner and Balanced Scenario for the US. Electricity System, 11 June 2004.

30 Energy Efficiency: The Smart WayTo Reduce Global Warming

40. United States Congress, Office ofTIichnol-ogy Assessment, Industrial Energy Efficiency, September 1993, page 65; For a more complete discussion on this point, see: Skip Laitner, Economic Research Associates, Energy Efficiency as a Productivity Strategy for the United States, Alexandria, VA, June 1995; and Joseph J. Romm, Lean and Clean Management: How to Boost Profits and Productivity by Reducing Pollution, Kodansha American, Ltd., 1994.

41. Consortium for Electric Infrastructure to Support a Digital Society, The Cost of Power Disturbances to Industrial and Digital Economy Companies, June 2001.

42. Bill Prindle, Steven Nadel, Martin Kushler, Dan York, R. Neal Elliott, Anna Monis Shipley and Elizabeth Brown, American Council for an Energy-Efficient Economy, Clean Air Through Energy Efficiency: Analysis and Recommendations for Multi-Pollutant Cap-and-Trade Policies, Report Number U043, April 2005.

43. Tony Dutzik and Rob Sargent, National Association of State PIRGs, Stopping Global Warming Begins at Home: The Case Against the Use of Offsets in a Regional Cap-and-Trade Program, September 2004.

44. Ibid.

45. Energy Information Administration, U.S.

Department of Energy, Annual Energy Outlook 2005 witb Projections to 2025, Supplemental Tables, January 2005.

46. Richard Sedano and Catherine Murray, Regulatory Assistance Project, Electric Energy Efficiency and Renewable Energy in New England:

An Assessment of Eristing Policies and Prospects for the Future, May 2005.

47. See Note 45.

Endnotes 31

For more information, contact the nearest PIRG affiliate:

ConnPIRG 198 Park Rd., 2nd Floor West Hartford, CT 06119 860-233-7554 www.connpirg.org MASSPIRG 44 Winter St., 4th Floor Boston, MA 02108 617-292-4800 www.masspirg.org NHPIRG 80 N. Main St, Suite 201 Concord, NH 03301 603-229-3222 www.nhpirg.org NJPIRG 11 N. Willow St.

Trenton, NJ 08608 609-394-8155 www.njpirg.org NYPIRG 9 Murray St., 3rd Floor New York, NY 10007 212-349-6460 www.nypirg.org RiPIRG 11 South Angell St. #337 Providence, RI 02906 401-421-6578 www.ripirg.org VPIRG 141 Main St., Suite 6 Montpelier, VT 05602 802-223-5221 www.vpirg.org FA Environment Maine 39 Exchange St., #301 V

Portland, ME 04101 207-253-1965 www.environmentmaine.org