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I Alicia Williamson - Energy Efficiency Article Page I1,1

. Alicia

.. .....son William - Energy......

... Efiie c Article.. *,*.. ................. . .. . . .... . 11.

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To: "Alicia Williamson" <ARWI@nrc.gov>

Date: 05/03/2007 11:20:11 AM

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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 new power plants. The DOE predicts to Maine are currently working to that at least 85 percent of these plants ine Northeast develop states from a regional Delaware cap-and-trade will bum natural gas or other fossil system to limit global warming pollution fuels, which produce global warming from power plants. The program, known pollution. Increasing demand also as the Regional Greenhouse Gas Initiative makes it more difficult to retire older, (RGGI), represents one of the first signifi- high-emitting power plants, which cant efforts to mitigate the serious impacts may be needed to ensure that the of global warming in the United States. electric system continues to operate In order to achieve the greatest reduc- reliably.

tion in pollution at the least cost, energy Under these circumstances, DOE efficiency must play a prominent role in the forecasts that emissions of carbon Northeast's overall global warming strategy. dioxide (the leading global warming pollutant) will rise 37 million tons per According to government forecasts, year by 2020.

demand for electricity in the Northeast will increase 23 percent by 2020, mak- The Northeast has enough efficiency ing cuts in global warming pollution resources to slow and eventually halt more difficult and more expensive than growth in electricity demand-thus they need to be. making emission reductions easier to

• The U.S. Department of Energy achieve.

(DOE) projects electricity demand will

• A variety of state, university and non-increase 1.4 percent per year between profit studies have identified large now and 2020. potential for greater energy efficiency

• To satisfy increasing demand and in Northeast states. For example, New replace retiring facilities, the North- England's currently active efficiency east will require over 8,500 MW of programs will capture less than one-Executive Summary 5

fifth of the region's achievable energy cents per kWh. In comparison, whole-savings potential by 2013. sale power in New England is projected to cost from 4 to over 5 cents per kWh Deploying the achievable efficiency over the next decade-and over 9 cents measures identified in these studies per kWh including the cost of trans-would reduce projected electricity mission infrastructure and energy demand in the Northeast by an losses.

average of 1.3 percent per year in the next decade, effectively keeping

• In addition to saving consumers money demand at 2007 levels. (See Figure ES-1.) directly, reduced energy demand leads to lower energy prices. For every I

" Halting growth in electricity demand percent reduction in national demand would reduce upward pressure on for natural gas, prices decline 0.8 regional carbon dioxide emissions and percent to 2 percent below otherwise ease the pressure to continue operating expected levels.

older, carbon-inefficient plants to maintain the reliability of the electric " Deploying identified cost-effective system-making progress against energy efficiency measures over the global warming easier to achieve. next decade would reduce Northeast electricity demand by 11 percent and utility natural gas demand by 11 Efficiency measures make progress percent versus projections in 2015-against global warming less expensive. reducing the average price of electric-Efficiency measures are two-thirds less ity by 0.4 cents per kWh and the expensive than generating and deliver- average wellhead price of natural gas ing electricity. In 2002, New England's by 2.6 cents per thousand cubic feet.

public benefit fund programs produced By 2020, Northeast consumers would energy savings at an average cost of 2.4 save a net of $13 billion, lowering the Figure ES-I: Forecast Energy Deman I-Base Case Compared to Efficiency Scenario 450,000 V1 430,000 OOOW 0

0000 410,000 0000 390,000 370,000 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 prevent efficiency measures from Regulatory Assistance Project esti- competing with supply-side measures mates that from 2000 to 2010, existing on equal footing.

energy efficiency programs in New England will create $2 billion in Northeastern states should make en-economic output, over 1,000 jobs ergy efficiency a central part of their annually, and nearly $700 million in plan of attack on global warming.

wages-while reducing carbon dioxide " The forthcoming carbon cap-and-trade pollution by 2 million tons per year.

policy under negotiation in the North-east should explicitly include support The economic benefits of efficiency of energy efficiency programs in order programs will allow for a tighter carbon to be most effective. Emission allow-cap without requiring additional sacri- ances (that is, permits that allow a fices by ratepayers. facility to emit carbon dioxide) should

• Efficiency savings could offset in- not be given to generators for free.

creases in electricity cost caused by the Instead, they should be sold at market carbon cap, enabling a stronger cap to price and the proceeds should be be set at the same or less cost. dedicated to fund energy efficiency and other public benefit programs,

• Combining energy efficiency with a reducing the overall cost of the pro-strong carbon cap would encourage gram and enabling the Northeast to high-polluting coal- and oil-fired power plants to reduce their emissions meet more meaningful pollution reduction targets.

or give way to low-carbon forms of generation, delivering significant cuts " The cap should reduce global warming in pollution. pollution to 25 percent below current levels by 2020, growing tighter over e However, energy efficiency won't time.

happen automatically in a cap-and-trade program, because market barri- " Reductions should be achieved first ers and other fundamental obstacles and foremost from a mandatory cap on Executive Summary 7

carbon dioxide emitted from fossil-fuel " Establishing dedicated efficiency power plants in the Northeast. Elec- programs (like Efficiency Vermont) tricity imports should be included in that are independent of electricity the cap to prevent leakage. Offsets and gas service providers and outside the regional electricity sector ensuring enough funding to tap should not be considered until the cap- achievable efficiency potential; and-trade program has matured and

" Improving residential and commer-been proven effective. If offsets are eventually considered, they should cial building codes; meet conservative and rigorous criteria " Setting minimum appliance effi-to ensure that they enhance the benefit ciency standards; of the program.

o Stimulating the deployment of Northeastern states should pursue a combined heat and power technolo-comprehensive set of energy efficiency gies; and policies outside of and in parallel to the cap-and-trade program, including o Educating consumers about energy but not limited to: efficiency opportunities.

8 Energy Efficiency: The Smart Way To Reduce Global Warming

Introduction regional carbon dioxide pollution from as a whole, there is a growing con- electricity generation and set up a trading sensusthe cross that action to and Northeast reduce world the global mechanism to achieve the required emis-warming pollution is necessary and urgent. sions reductions in an economically effi-Global warming threatens to signifi- cient way. (See "Cap and Trade, A Primer" candy increase the average temperature in on page 10.)

the Northeast and around the world, caus- In order for the cap to be effective in ing dramatic changes in our economy and producing benefits for the environment and quality of life. Within the next century, the public health, it should be set at an achiev-impacts of global warming in the North- able but ambitious level that forces the de-east could include coastal flooding, shifts velopment and deployment of new in populations of fish and plants, loss of technologies.

hardwood trees responsible for fall foliage The main argument against an aggres-displays, longer and more severe smog sea- sive cap is that it will cost too much. But a sons, increased spread of exotic pests, more strategy that couples limits on carbon di-severe storms, increased precipitation and oxide emissions with vigorous energy effi-intermittent drought. ciency measures can reduce the cost of the With leadership from Washington D.C. program, enable greater emission reduc-absent, the governors of nine Northeast tions, and boost the region's economy.

states (Connecticut, Delaware, Maine, The Northeast has a variety of exem-Massachusetts, New Hampshire, New Jer- plary energy efficiency programs that are sey, New York, Rhode Island and Vermont) already producing results. Efficiency pro-have initiated a process that offers a good grams in New England in 2002 achieved chance to reduce the region's impact on lifetime savings of 10 billion kilowatt-hours global warming by cleaning up power (kWh) of electricity at an average cost of plants-which emit over one-fifth of the 2.4 cents per kWh, according to the Regu-region's global warming pollution.' The latory Assistance Project.' Existing New process, known as the Regional Green- England efficiency programs will create house Gas Initiative (RGGI), would cap over $2 billion in economic output between Introduction 9

2000 and 2010, while preventing over 18 dioxide pollution. 6 In 2003, the program million tons of carbon dioxide emissions provided $100 million in funding for and saving over 44 billion kWh of electric- projects that will save consumers $400 mil-ity (enough to power 4.4 million homes for lion in energy costs over their useful lifetime.7 ayear).3 In New York as of the end of 2003, As this report explores, the potential for the Energy $mart program reduced state cost-effective energy efficiency programs in electricity use by one billion kWh per year, the Northeast remains immense. Develop-lowering peak demand by 880 megawatts ing these resources will increase the stabil-(MW) and contributing to the overall sta- ity of the electric grid, accelerate the bility of NewYorks electricity system.4 The transition to less carbon-intensive energy program is expected to create an average sources and improve the economy. And it of 5,500 jobs annually from 1998 to 2006.5 will make possible the achievement of a In the first three years of NewJersey's Clean meaningful and effective near-term goal for Energy Program (2001-2003), workers in- reducing carbon dioxide pollution through stalled equipment with a lifetime energy the RGGI framework, creating momentum savings of 7 billion kWh, which will avoid toward the deeper cuts that will be neces-emission of over 4 million tons of carbon 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-tradeprograms 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 Rising Demand Makes Cuts Northeast continue to grow, so does population sdemand and the economy for electricity. in the Government in Global Warming Pollution forecasts predict that much of that energy will come from fossil fuels, increasing the More Difficult and Costly amount of global warming pollution from According to the U.S. Energy Information power plants in the Northeast. Administration (EIA), demand for electric-Under these circumstances, attempts to ity in the-Northeast will increase 23 per-reduce the Northeast's contribution to glo- cent by 2020, an average of 1.4 percent per bal warming will be more difficult and more year.8 (See Figure 1).

expensive than they have to be. To meet this demand and replace the Figure 1: Forecast Electricity Demand 400,000 500,000 1 L.

300,000 200,000 PU Q

100,000 0

2005 2010 2015 2020 Energy Demand is Rising 11

output of facilities that retire, EIA predicts requested permission from the New England that the Northeast will require over 8,500 Independent System Operator (ISO-NE)

MW of new generating capacity. At least to shut down the plant. ISO-NE rejected 85 percent of these facilities will burn natu- the application, finding that Salem Harbor ral gas or other fossil fuels, emitting car- was necessary to ensure reliability.'0 To the bon dioxide-the leading global warming extent that increased demand aggravates pollutant 9 (See Figure 2.) transmission constraints, shutting down Increasing demand also makes it more other high-emission coal-fired power plants difficult to retire older, high-emitting like Salem Harbor will be more difficult.

power plants that serve areas with limited EIA forecasts that only 70 MW of coal-transmission capacity. As demand rises in fired generators in the Northeast will be these areas, amid serious questions about retired before 2020. Despite the replace-the ability of restructured electricity mar- ment of oil-fired generators with more ef-kets to provide adequate supplies, local ficient natural gas combined cycle plants, power plants are increasingly necessary to DOE forecasts that carbon dioxide emis-ensure that the electric system continues sions from electricity generation will in-to operate reliably. For example, the coal- crease 37 million tons per year by 2020 fired Salem Harbor power plant in Massa- under this scenario.

chusetts serves a transmission-constrained Under these circumstances, reducing area of eastern Massachusetts. In February global warming pollution from the electricity 2005, Dominion, the plant's operator, sector is bound to be difficult and expensive.

Figure 2: Forecast Power Plant Additions and Retirements In the Northeast through 2020 wAdditions n Retirements 7,000-6,000-5,000-EU4,000-3,000 -

2,000 1,000 0

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

A Note On Electricity Units M pacity, egawatts (MW) are the standard measure of a power plant's generating ca-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 energy efficiency resources in the North-from power plants doesn't have to be east remain to be tapped.

educing like swimming dioxide By carbonupstream. emissions tapping According to an analysis by Optimal into regional potential for energy efficiency, Energy, Inc. for Northeast Energy Effi-the Northeast can reduce growth in electric- ciency Partnerships, New England's cur-ity demand and in global warming pollution. rently active efficiency programs will Efficiency programs produce long-last- capture less than one-fifth of the region's ing enhancements to buildings and equip- achievable energy savings by 2013." New ment that save energy, reducing energy York, NewJersey and Delaware have simi-waste without reducing levels of service. larly large potential to save more energy.

Efficient products deliver the same amounts There are three ways to look at energy of light, heat, cooling, work, and access to efficiency potential: technically possible information and entertainment as their measures, economical measures, and counterparts-with less energy input. achievable measures. Technically possible The Northeast has a great deal of po- measures include all options regardless of tential for additional energy efficiency mea- cost; economical measures include all op-sures, building on current programs to tions that would make economic sense; and reduce-and eventually halt-growth in achievable measures take into account mar-electricity demand. 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 Enough The Northeast has enormous economi-cal efficiency potential. The New York Efficiency Resources to State Energy Research and Development Eventually Halt Growth in Agency (NYSERDA) found economic po-tential for savings of at least 50 million Electricity Demand MWh per year by 2012, over 30 percent of Many Northeast states already have active forecast demand in New York and enough energy efficiency programs. However, vast energy to supply 5 million households.'2 14 Energy Efficiency: The Smart Way To Reduce Global Warming

Similarly, the New Jersey Board of Public the American Council for an Energy Effi-Utilities and Rutgers University found that cient Economy concludes that the typical New Jersey could economically save close state could reasonably achieve energy sav-to 12 million MWh per year in 2020, 17 ings of 24 percent below forecast levels percent of 2004 demand.'" within 20 years."

A majority of these efficiency measures Compiling the estimates of the economi-are achievable as well. Optimal Energy Inc. cally achievable energy efficiency potential and Northeast Energy Efficiency Partner- from the Northeast efficiency studies leads ships found that achievable energy effi- to the conclusion that the Northeast could ciency measures in New England could reasonably reduce projected electricity de-reduce regional energy demand by over 34 mand by 1.3 percent per year in the next million MWh by 2013-more than offset- decade, effectively halting growth in de-ting the region' forecasted demand growth. mand at 2007 levels. At this pace, by 2015 Achievable measures could produce savings energy demand would be 11 percent lower equivalent to the output of 28 combined than forecast levels. (See Figure 3.) (See cycle power plants (300 MW each) and re- 4 Methodology on page 26 for modeling details.)

turn electricity demand to 1993 levels.' New technologies continue to emerge Reviewing a set of leading recent studies that can sustain this trend, given policies on achievable efficiency potential nationwide, 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 00,00 0

410,000 390,000 370,000 20E05 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 FallsMiddle 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 to benefit local merchants and efficiency energy needed by a growing popula- service providers, as opposed to spending tion and investments fficiency can provide economy, while the reducing on fossil fuels, which tends to siphon con-pressure to build new power plants or op- sumer dollars outside of the region-and erate older facilities to maintain reliability. often outside of the country.

Without this pressure, reducing global The economic benefits of energy effi-warming pollution will become easier to ciency can offset the cost of a carbon cap, achieve. enabling a tighter carbon cap to be set at Energy efficiency can also reduce the the same or less cost. Combining energy cost of cutting global warming pollution. efficiency with a strong carbon cap would Efficiency measures reduce costs to con- encourage high-polluting coal- and oil-sumers in several ways. First, those indi- fired power plants to reduce their emissions viduals and businesses that implement or give way to low-carbon forms of genera-energy efficiency see direct reductions in tion, delivering significant cuts in pollution.

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 Efficiency Measures Are at high demand and is most costly to sup- Cheaper than Generating ply. Finally, all consumers benefit from re-duced demand for fossil fuels, such as and Delivering Electricity natural gas, which are used in several sec- Efficiency measures are two-thirds less ex-tors of the economy. pensive than generating and delivering Moreover, energy efficiency improve- electricity.

ments benefit local economies. By reduc- In 2002, New England's public benefit ing energy costs, efficiency measures free fund programs produced energy savings at up money that consumers can then use on an average cost of 2.4 cents per kWh.18 other goods and services. And consumer Northeast Energy Efficiency Partnerships spending on energy efficient products tends 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 ofone the economy and practically all uses of electricity. (See Table 1.) Lighting-as of the major uses of electric-ity-holds a great deal of efficiency potential. In New England, lighting holds the 26 greatest potential for savings in the commercial and residential sectors. 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 30 0.1 Residential Compact Fluorescent Lighting 31 1.0 Appliance Efficiency Standards 32 2.5 Improved Building Codes achievable energy efficiency potential in end of World War 11.24 Fine particulate air New England would cost just 3.1 cents pollution from power plants (largely coal-per kWh."9 fired) causes an estimated 30,000 prema-In comparison, projections of the whole- ture deaths each year as well as many sale cost of power in New England range illnesses, imposing health care and other from 4 cents per kWh to over 5 cents per costs on the economy.23 The recent spike kWh over the next decade."0 Including the in natural gas prices-driven in part by in-cost of transmission and distribution capac- creased demand from electric power ity and transmission line losses, estimates plants-has had widespread economic increase to 9.4 cents per kWh.2" ramifications beyond increases in electric In 2004, Northeast consumers paid an rates. Environmental damage caused by the average of 10.9 cents per kWh for electric- extraction of fossil fuel resources is ex-ity service.22 However, electricity rates do tremely costly to remediate. Finally, the not include the broader social, economic, potential economic damage that could be environmental or public health impacts of caused by global warming is incalculable.

electricity generation.23 The nuclear indus- After considering these substantial costs, try, for example, has received more than energy efficiency becomes even more

$100 billion in federal subsidies since the attractive.

Making Pollution Cuts Easier 19

Reduced Energy Demand next decade would reduce electricity de-mand by 11 percent and utility natural gas Leads to Lower Energy demand by 11 percent versus projections Prices in 2015. As a result, the average price of electricity would fall by 0.4 cents per kWh In addition to saving consumers money di- and the average wellhead price of natural rectly, reduced energy demand leads to gas would decline by 2.6 cents per thou-lower energy prices. sand cubic feet. (See Methodology on page This effect is explained by the economic 26 for modeling details.)

principle of supply and demand. For ex- Under this scenario, Northeast consum-ample, energy efficiency reduces demand ers would save a net of $13 billion from for natural gas and slows the upward pres- 2006 to 2020 (before factoring in the cost sure on natural gas prices. This is especially of a carbon cap). On average, a typical resi-true because natural gas is often used for dential consumer would spend $1.56 less generation at the marginal (or peak) peri- per month on energy bills over this period.

ods of demand, where efficiency has the A $51 billion investment in efficiency mea-greatest effect. (This is also particularly true sures over the next decade would in 2020 when demand and supply are in tight bal- yield direct savings of $47 billion from re-ance-as they currently are for natural gas.) duced electricity purchases, supplemented With efficient electricity use, people and by $17 billion in savings through lower industries that depend on natural gas have energy prices. These savings would rapidly slightly smaller bills than without. These grow in magnitude beyond 2020. Signifi-savings can then be reinvested in other parts cant additional savings would stem from the of the economy, rather than spent on high- social, environmental and public health priced fuel imported from outside the re-benefits of efficiency investments.

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 Efficiency Measures Help to gas demand, natural gas prices fall by 0.8 percent to 2 percent below forecast levels."

Avoid Reliability Payments Reduced demand for electricity would have At the same time, efficiency measures will a similar effect on electricity prices. help to avoid reliability payments that New In a recent analysis, the American Coun- England's Independent System Operator cil for an Energy-Efficient Economy found (ISO-NE) is proposing to pay to genera-that by 2008, the continental U.S. could tors in transmission-constrained areas.

reduce electricity consumption by 3.2 per- Currently, ISO-NE makes payments to cent and natural gas consumption by 4.1 generators who have requested to shut percent, while more than doubling renew- down their plants when it determines that able energy generation. These efforts those plants are critical for reliability. Called would reduce natural gas prices 22 percent "reliability must-run" contracts, ISO-NE below projected levels.14 In the Northeast considers these payments as evidence that region, a program of investment in effi- the New England capacity market is bro-ciency and renewable energy could cut ken. Salem Harbor in Massachusetts is one natural gas usage by 5 percent in five years, such plant under must-run contract.

cutting natural gas prices by 6 percent." ISO-NE has proposed an alternative We estimate that deploying identified market plan, called "Locational Installed cost-effective energy efficiency measures in Capacity" (or LICAP), in which payments the Northeast electricity sector over the 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. A 2004 study by Synapse Energy Eco-The proposal of LICAP is a tacit admis- nornics found that making greater use of sion that deregulation has not worked as energy efficiency and renewable energy promised. The assumption entering into nationwide would reduce carbon dioxide deregulation was that market forces would pollution almost 50 percent below business ensure adequate capacity installations in the as usual by 2025-and generate $36 billion right places at the right times to ensure the annually in savings.39 continued function and reliability of the A 2003 study by the Tellus Institute for electric system. However, the proposal for the World Wildlife Fund found that a suite LICAP shows that market forces have not of national-level clean energy policies succeeded in creating the most reliable con- would reduce electricity demand by 25 per-figuration for the electric system. cent below projections and carbon dioxide A coalition of New England members pollution by 60 percent below 2000 levels-of Congress predicts that regional electric- while producing net energy savings of $ 100 ity customers could pay up to $13.5 billion billion annually by 2020.

over the next five years, with no guarantee Efficiency programs can create produc-that generators would build new capacity tivity benefits as well, especially in the in-to meet reliability concerns.3 6 The plan has dustrial sector. Investments that increase been officially protested by the governors industrial energy efficiency can improve and public utility commissions in all six product quality, lower capital and operat-New England states." ing costs, increase employee productivity, However, to the extent that advanced or help capture specialized product mar-efficiency programs relieve pressure in kets.A° By increasing reliability and prevent-transmission-constrained areas by reducing ing power outages, efficiency programs can demand, energy efficiency can reduce the also create value for the economy. One re-need for LICAP-and for reliability must- cent study estimated the cost of power out-run contracts. The improved reliability ef- ages to U.S. businesses alone at between 4

fects of efficiency measures could thus save $104 billion and $164 billion per year. '

consumers even more money. 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 Energy Efficiency Can the carbon cap or stand on its own, making Stimulate the Local energy efficiency a "win-win" alternative for the Northeast.

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 Efficiency Programs reducing pollution. Improve the Effectiveness The Regulatory Assistance Project esti-mates that from 2000 to 2010, existing en-of a Carbon Cap ergy efficiency programs in New England The economic benefits of efficiency invest-will reduce carbon dioxide pollution by 2 ments can enable a tighter carbon cap to million tons per year-while creating $2 be set without additional sacrifices by billion in economic output, over 1,000 jobs ratepayers, delivering more bang for the buck.

annually, and nearly $700 million in Efficiency savings would offset any in-wages.3" creases in electricity cost caused by the Making Pollution Cuts Easier 21

carbon cap, enabling a stronger cap to be new demand for electricity. However, the set at the same or less cost. old sources will face little incentive to re-A carbon cap, by limiting the amount of duce their emissions and may, in fact, face carbon dioxide generators are allowed to increasing pressure to continue operating emit and establishing a trading mechanism to serve growing demand. A strong cap with for carbon allowances (or permits to emit energy efficiency, by contrast, will force global warming pollution), would create changes in existing generation and its re-additional costs for generators that would placement with cleaner renewable tech-then be passed on to consumers. Energy nologies--delivering greater progress faster efficiency (when explicitly included as a part and for less cost.

of the cap-and-trade policy) can offset the Efficiency programs will have the addi-increased price of electricity, because it tional benefit of reducing the pressure to saves consumers money directly on elec- import cheaper electricity from outside the tricity bills, reduces the price of energy and region, resulting in leakage outside of the reduces the need for reliability payments. cap. If regulators fail to prevent this prob-More importantly, however, with energy lem by regulating electricity imports as part efficiency, policy makers could set a tighter of the cap-and-trade system, energy effi-carbon cap without additional sacrifices by ciency can mitigate the price differential ratepayers, delivering greater progress that would result between the Northeast faster and a less cost. Setting a strong car- and neighboring regions with cheap (and bon cap would give high-polluting coal- often carbon-intensive) electricity. While and oil-fired power plants a strong incen- efficiency measures on their own would tive to reduce their emissions or give way likely not be enough to prevent leakage al-to low-carbon forms of generation, deliv- together, it would reduce the pressure to ering significant cuts in pollution. Since the shift demand from Northeast generators to owners of the plants would have to pay a unregulated sources outside the region.

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, Energy Efficiency Won't thus tilting the market toward cleaner Happen On Its Own resources.

Because cap-and-trade programs are mar-Halting growth in electricity demand will reduce pressure to continue operating ket-based mechanisms, many stakeholders expect that the market will automatically the region's older, carbon-inefficient plants pick the least expensive route to comply-to maintain the reliability of the electric and if that route involves energy efficiency, system. Efficiency programs do not need price signals will be enough to drive the transmission lines in order to have an ef-process.

fect in transmission-congested areas, un-like central station power plants. Efficiency However, markets, tend to substantially under-value energy efficiency, preventing programs can reduce demand in these ar-it from competing with supply-side mea-eas and thus help to increase the reliability sures on equal footing. Fundamental as-of service-and reduce the extent to which pects of cap-and-trade policy design can older power plants are necessary to ensure that available capacity can meet demand. also impede full consideration of energy As a result, replacing these older plants will efficiency opportunities. 42 For example:

be more technically feasible.

• Substantial market barriers exist A weak cap with no energy efficiency will between sensible technologies and force changes in technologies used to meet marketplace penetration, including:

22 Energy Efficiency: The Smart Way To Reduce Global Warming

o Consumer awareness of energy electricity market also promote greater saving measures; electricity sales. Additional sales bring revenue to power generators and o The up-front capital cost of efficient utility companies, while efficiency technologies (balanced by long-measures directly reduce retail revenue term savings); and and lower wholesale market prices.

o Split incentives between builders and buyers or landlords and tenants. Incorporating energy efficiency into a (For example, builders typically do cap-and-trade program through an not have an incentive to spend extra offset-mechanism poses challenges time and effort designing and with the potential for double-counting building the most efficient building and determining "additionality," or to possible, and emphasize lower what degree those investments would design and construction costs over have happened anyway under business 43 reduced energy bills-making new as usual conditions.

buildings typically less efficient than they could be.)

Despite the advantages of energy effi-Because the proposed cap-and-trade ciency-low cost, reduced pollution, eco-program caps global warming pollu- nomic stimulus--cap-and-trade programs tion and not energy use, an electricity don't necessarily promote energy efficiency generator would not be able to take automatically. Explicit policy support for direct credit for reducing customer efficiency measures is required to overcome energy use. Financial incentives in the the many barriers to a level playing field.

Making Pollution Cuts Easier 23

Policy Recommendations Giving them away for free would policy under negotiation in the North- effectively create billions of dollars in he eastforthcoming should explicitly cap-and-trade carboninclude support "windfall" profit for polluters.

of energy efficiency programs in order to Instead, facilities that emit pollution produce the most effective results. States should be required to purchase allow-in the region should also pursue a compre-ances, creating a "polluter pays" hensive set of energy efficiency policies mechanism. The proceeds should be outside of, and parallel to, the cap-and- directed toward energy efficiency and trade program. other public benefit programs, reduc-ing the overall cost of the policy, accelerating the transition of the electric system toward less carbon-Northeastern States Should intensive fuels and enabling the Northeast to meet meaningful pollu-Make Energy Efficiency a tion reduction targets.

Central Part of Their Plan of The cap should reduce global warming Attack on Global Warming pollution to 25 percent below current Emissions allowances should be sold at levels by 2020, growing tighter over market price and the proceeds should time.

be dedicated to fund energy efficiency In order for the cap to be effective in and other public benefit programs.

producing benefits for the environ-

• To ensure the fairness of the cap-and- ment and public health, the cap must trade program, emission allowances first be set at an achievable but ambi-(that is, permits that allow a facility to tious level that forces the development emit carbon dioxide) should not be and deployment of new technologies.

given to generators for free. Emissions In the case of a carbon cap, the cap allowances have monetary value. must be set low enough to promote 24 Energy Efficiency: The Smart Way To Reduce Global Warming

curtailment, efficiency improvements, considered at all until a cap-and-trade and fuel switching at the most pollut- program has matured and been proven ing power plants. Tightening the cap effective. If offsets are eventually over time can continue momentum considered, they should meet conser-toward the desired region-wide shifts vative and rigorous criteria to ensure in the electricity system. If the cap is that they enhance the benefit of the set at a weak level, it will fail to drive cap-and-trade program.44 significant technology changes.

Northeastern states should pursue a Reductions must be achieved first and comprehensive set of energy efficiency foremost from a mandatory cap on car- policies outside of and in parallel to the bon dioxide emitted from fossil-fueled cap-and-trade program, including but power plants in the Northeast, includ- not limited to:

ing electricity imports.

• Establishing dedicated efficiency

" To maximize the benefit of a cap-and- programs that are independent of trade program, the scope of the electricity and gas service providers program needs to be clearly defined. (like Efficiency Vermont), and ensur-The cap must include regulations on ing enough funding to tap achievable electricity imports to prevent leakage. efficiency potential; Otherwise, generators outside the Northeast could sell cheap and car- " Improving residential and commercial bon-intensive power into the region, building codes; undermining the effect of the cap. " Setting minimum appliance efficiency

" Some cap-and-trade programs allow standards; offsets, or pollution-reducing actions " Stimulating the deployment of com-from outside the industry to which the bined heat and power technologies; cap applies. However, it is difficult or and impossible to guarantee that offsets deliver equivalent emissions reduc- " Educating consumers about energy tions. Offsets also have the potential to efficiency opportunities.

eliminate the ancillary benefits of direct and local actions. For example, allowing an offset for an energy efficiency program in India would not 'A! Energy-saving create jobs and economic growth in the Northeast, or help to reduce compact health-damaging pollution from local fluorescent power plants. Offsets should not be IM13light bulbs Policy Recommendations 25

Methodology EI's State Electricity Profiles, then ex-required to develop achievable efficiency trapolated to 2020 using the growth rate in n this report, savings we model the in the Northeast, theinvestment direct sav- the Annual Energy Outlook. Estimates for ings consumers would receive, and the ef- New England, New York, and NewJersey fects energy efficiency would have on and Delaware were added together to rep-overall electricity and natural gas prices- resent the 9-state Northeast region.

compared to a business-as-usual case We made similar forecasts for electric-derived from Energy Information Admin- ity prices, natural gas consumption (total istration forecasts. and utility-only) and coal consumption, based on EIA data. We also looked up pro-jected national demand for coal and natu-Establishing the Default Path ral gas for use in calculating the price effects To allow for a comparison with the ben- of regional energy efficiency programs.

efits of energy efficiency, we first estab-lished a baseline forecast for energy demand in the Northeast from 2005 to 2020. In Creating an Energy general, the baseline forecast was estab- Efficiency Scenario lished using the most recent statistics from Based on estimates of achievable energy the U.S. Energy Information Administra- efficiency potential compiled from four tion (EIA) for the Northeast's electricity studies, listed below, we concluded that the sector, forecast to 2020 using the trajectory Northeast region as a whole could reason-set in the regional tables of EIA's Annual ably reduce forecast energy demand by 1.3 Energy Outlook 2005.4 percent per year through 2015.

AnnualEnergy Outlook tables are divided by region. Region 7 includes all of New 1) New England, by Optimal Energy, England; Region 6 represents New York; Inc. for Northeast Energy Efficiency and New Jersey and Delaware are part of Partnerships Region 3 along with other Mid-Atlantic 2) New York, by Optimal Energy, Inc. et states. For New Jersey and Delaware, we al. for the New York State Energy started with energy demand in 2002 from Research and Development Authority, 26 Energy Efficiency: The Smart Way To Reduce Global Warming

3) New Jersey, by KEMA Associates for

• 15 percent for administrative expenses; the New Jersey Board of Public 0 Of the remainder, 38 percent for Utilities and Rutgers University, and residential efficiency programs, 45

4) Delaware, using a compilation of percent for commercial, and 17 national studies by the American percent for industrial.

Council for an Energy Efficient We assumed energy savings of 3.14 Economy as a proxy. GvW~iyr for every million dollars of invest-ment and a 15-year benefit period, based on an analysis of public benefit fund expen-Modeling Consumer Savings and ditures in New England by the Regulatory Price Dynamics Assistance Project.46 Additionally, we as-We developed a Northeast-specific energy sumed a declining rate of investment ef-and economic model to project the specific fectiveness of two percent per year, energy price impacts of deploying identi- assuming that the most effective invest-fied energy efficiency measures from 2006 ments would be made first.

to 2015.

To model consumer savings, we calculated: Consumer Savings and Price Dynamics

" Consumer investment necessary to Consumer savings estimates consisted of achieve the efficiency scenario; avoided electricity purchases-simply the

• Direct avoided electricity costs due to amount that would have been spent to pur-reduced energy demand; chase electricity in the absence of efficiency savings-and the effect of reduced energy

" Consumer savings on non-utility natural gas purchases, caused by demand on energy prices.

We assumed that efficiency programs natural gas price dynamics; would have the effect of reducing upward

" Consumer savings on electricity due to pressure on the price of electricity, natural electricity price dynamics; gas and coal, which are set by a regional

" Annual net savings; and and national market. Based on estimates of how much natural gas and electricity would

" Cumulative net savings. be saved compared to the base case fore-cast, we predicted change in national de-All dollar values are used and reported mand. In turn, the change in national in terms of 2002 equivalent. demand was translated into an estimate of the effect on electricity and natural gas Consumer Investment prices in the Northeast.

To yield the required level of energy sav- Natural gas prices were calculated using ings, we estimated that a ten year energy the following coefficients:"'

efficiency program would be required, with Intercept Year Quantity Deflator spending levels of $3.2 billion per year from 0.0052 -0.1485 2.0817 1.0101 2006 to 2015, divided into the following categories: And Equation 1 below.

Equation 1:

[Intercept] x (Number of years since 2 003 )[Y'ear] x [National Demand][Quantity]

[Deflator]

Methodology 27

Electricity price impacts were calculated for energy during the period 2006-2020.

by estimating displaced utility related invest- To obtain final estimates for annual and net ment and operating/maintenance costs in the consumer savings, we added all consumer efficiency scenario compared to the base case. outlays for efficiency programs and sub-tracted savings from avoided electricity purchases and reduced energy prices. Net Annual and Net Consumer Savings savings were obtained by adding annual We examined the effect of the ten-year savings from 2006 to 2020.

efficiency program on consumer spending 28 Energy Efficiency: The Smart Way To Reduce Global Warming

Notes

1. New England: New England Climate 10. Letter from Stephen Whitley, ISO-NE, to Coalition, Global Warming and New England: Marisa Sifontes, Dominon,

Subject:

Applications Progress,Opportunitiesand ChallengesAfter Two Under Section 1.3.9 of tbe ISO New EnglandInc.

Years of the Regional Climate Action Plan, Septem- Transmission, Markets and Service Tariff To Retire ber 2003; Across the country as a whole, power Salem HarborStation Generating Units, 25 generation is responsible for more than one- February 2005.

third of emissions: U.S. Department of Energy, 11. Optimal Energy, Inc. for Northeast Energy Energy Information Administration, Emissions of Efficiency Partnerships, Economically Acbievable Greenhouse Gases in the United States 2002, Energy Efficiency Potentiali New England,May 2005.

October 2003. 12. Savings: Optimal Energy, Inc. et al. for New

2. Richard Sedano, Regulatory Assistance York State Energy Research and Development Project, Economic, Environmentand Security Authority, Energy Efficiency and Renewable Effects of Energy Efficiency and Renewable Energy: Resource Development Potentialin New York State, A ReportforEPA and the New EnglandGovernors' FinalReport, Volume One: Summary Report, Conference, NEEP Policy Conference, 24 May August 2003; Forecast demand: Energy Infor-2005. mation Administration, U.S. Department of

3. Ibid. Energy, Annual Energy Outlook 2005 witb

4. New York State Energy Research and Projectionsto 2025, Supplemental Tables: Region Development Authority, New York Energy Smart 6 (NEPCC / New York), January 2005.

Program:Evaluationand Status Report, Data for 13. KEMA, Inc. for New Jersey Board of Public year 2003, May 3004. Utilities and Rutgers University Center for

5. Ibid. Energy, Economic and Environmental Policy, New Jersey Energy Efficiency andDistributed

6. NewJersey Board of Public Utilities, Office GenerationMarket Assessment, August 2004.

of Clean Energy, New Jerseys Ckan Energy Program:2003 Annual Report, 2004. 14. See Note 11.

7. Ibid. 15. Steven Nadel, Anna Shipley, and R. Neal Elliot, American Council for an Energy Efficient

8. Energy Information Administration, U.S. Economy, The Teebnica4 Economic, andAchievable Department of Energy, Annual Energy Outlook Potentialfor Energy Efficiency in the U.S.-A 2005 with Projectionsto 2025, January 2005; See Meta-Analysis ofRecent Studies, From the Methodology for details on the derivation of an Proceedingsof the 2004 ACEEE Summer Study on estimate for the Northeast region as a whole. Energy Efficiency in Buildings,American Council

9. Ibid. for an Energy Efficient Economy, 2004.

Endnotes 29

16. John A "Skip" Laitner and Marilyn Brown, 27. Alison Bailie et al, Tellus Institute and the Emerging IndustrialInnovationsto Create New Center for Climate and Energy Solutions for the Energy Efficient Technologies, From the Proceedings World Wildlife Fund, The Path to Carbon of the 2005 ACEEE Summer Studies on Energy Dioxide-FreePower: Switching to Clean Energy in Efficiency in Indust"y, American Council for an the Utility Sector, April 2003.

Energy Efficient Economy, 2005. 28. Tellus Institute and American Council for an

17. Efficiency Vermont, Working Togetherfor an Energy Efficient Economy, Energy Efficiency and Energy Efficient Vermont: Efficiency Vermont 2004 ConservationResource Assessmentfor the Residen-PreliminaryReport, subject to audit, downloaded tial,CommercialandIndustrialSectors,January from www.efficiencyvermont.com on 28 July 2003.

2005, final report available September 2005. 29. Ibid.

18. See Note 2. 30. Ibid.

19. See Note 11. 31. See Note 11.

20. As cited in: Richard Sedano and Catherine 32. Ibid.

Murray, Regulatory Assistance Project, Electric Energy Efficiency and Renewable Enesgy in New

33. Ryan Wiser, Mark Bolinger and Matt St.

Clair, U.S. Department of Energy, Lawrence England: An Assessment ofEristing Policiesand Berkeley National Laboratory, Easing the Prospectsfor the Future, May 2005: "See, for NaturalGas Crisis: ReducingNaturalGas Prices example, New England ISO Regional Transmis-through IncreasedDeployment ofRenewable Energy sion Erpansion Plan 2004 (Preliminaryversion),

and Energy Efficiency, LBNL-56756, January Table 7.18, and U.S. EIA Annual Energy Outlook, 2005.

2004, Table 66. The latter values, with 2.5% per year inflation adjustment applied, supply the 34. R. Neal Elliott, Anna Monis Shipley, Steven high end of this range; the NE-ISO report Nadel, and Elizabeth Brown, American Council supplies the low end of the range." Also noted: for an Energy-Efficient Economy, NaturalGas "Comparison of life-cycle costs with system Price andAvailability Effects ofAggressive Energy avoided costs should be done with care. With Efficiency and Renewable Energy Policies: A that warning, the Vermont Department of Methodology White Paper,2003; R. Neal Elliott, Public in August 2004 released a "base" system Anna Monis Shipley, Steven Nadel, and avoided cost forecast, which reflects the New Elizabeth Brown, American Council for an England electricity market. Over the average Energy-Efficient Economy, Natural Gas Price life-cycle of energy efficiency measures installed Effects ofEnergy Efficiency and Renewable Energy in 2002 (2003-2014), forecasted annual average Practicesand Policies, 2003; Elliott, R. Neal system avoided costs range from 4.0 to 5.5 cents." Elliott, Anna Monis Shipley, American Council for an Energy-Efficient Economy, Impacts of

21. See Note 11.

Energy Efficiency and Renewable Energy on Natural

22. Energy Information Administration, U.S. GasMarkets: Updatedand ExpandedAnabti, 2005.

Department of Energy, Monthly Electric Utility

35. R. Neal Elliott, Anna Monis Shipley and Database,Form EIA-826, 2004; Values were William Prindle, American Council for an calculated by summing electric utility revenue Energy-Efficient Economy, The Impacts of and sales, then determining revenue per kWh.

ExpandedEnergy Efficiency and Renewable Energy

23. Energy Information Administration, U.S. Resources on NaturalGas Prices in the RGGI Department of Energy, Electricity Generation and Region, 9 August 2005.

EnvironmentalErternalities:Case Studies,

36. "Group of New England Legislators Urge September 1995; U.S. Congress, Office of FERC to Reject ISO-NEl LICAP Proposal,"

Technology Assessment, Studies of the Environ-FosterElectricReport, 13 July 2005.

mental Costs ofElectricity,September 1994.

37. Ibid.

24. Marshall Goldberg, Renewable Energy Policy Project, FederalEnergy Subsidies: Not All 38. See Note 2.

TechnologiesAre Created Equal,July 2000. 39. Bruce Biewald, David White, Geoff Keith,

25. Clean Air Task Force, Death, Disease and Tim Woolf, Synapse Energy Economics, A Dirty Power: Mortality and Health DamageDue to Responsible Electricity Future:An Efficient, Cleaner Air PollutionfJim PowerPlants,October 2000. and Balanced Scenariofor the US. Electricity System, 11 June 2004.

26. See Note 11.

30 Energy Efficiency: The Smart WayTo Reduce Global Warming

40. United States Congress, Office ofTIichnol- Multi-PollutantCap-and-TradePolicies, Report ogy Assessment, IndustrialEnergy Efficiency, Number U043, April 2005.

September 1993, page 65; For a more complete 43. Tony Dutzik and Rob Sargent, National discussion on this point, see: Skip Laitner, Association of State PIRGs, Stopping Global Economic Research Associates, Energy Efficiency Warming Begins at Home: The Case Against the as a Productivity Strategyfor the United States, Use of Offsets in a Regional Cap-and-Trade Alexandria, VA, June 1995; and Joseph J. Romm, Program, September 2004.

Lean and Clean Management: How to Boost Profits 44. Ibid.

and Productivity by Reducing Pollution, Kodansha American, Ltd., 1994. 45. Energy Information Administration, U.S.

Department of Energy, Annual Energy Outlook

41. Consortium for Electric Infrastructure to 2005 witb Projectionsto 2025, Supplemental Support a Digital Society, The Cost ofPower Tables, January 2005.

Disturbancesto Industrialand DigitalEconomy Companies,June 2001. 46. Richard Sedano and Catherine Murray, Regulatory Assistance Project, ElectricEnergy

42. Bill Prindle, Steven Nadel, Martin Kushler, Efficiency and Renewable Energy in New England:

Dan York, R. Neal Elliott, Anna Monis Shipley An Assessment of EristingPoliciesand Prospectsfor and Elizabeth Brown, American Council for an the Future,May 2005.

Energy-Efficient Economy, Clean Air Through Energy Efficiency: Analysis and Recommendationsfor 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