States save big with energy efficiency targets

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Energy efficiency targets implemented in half of U.S. states in 2012 saved enough electricity to power 2 million homes for a year. These are the findings of Energy Efficiency Resource Standards: A New Progress Report on State Experience, a new report released April 9, 2014, by the American Council for an Energy-Efficient Economy, based on the most recently available data. The report also finds that most states met or exceeded their targets and that these targets are making substantial contributions to national energy savings.

"Energy efficiency is a cost effective and reliable resource that deserves to be a significant part of every state's energy portfolio," said Annie Downs, ACEEE state policy research analyst and lead author of the report. "Setting energy efficiency targets is smart policy that encourages utilities to help their customers save energy through efficiency programs, instead of spending even more money building unnecessary new power plants."

Texas was the first state to set efficiency targets, also called an energy efficiency resource standard (EERS), in 1999. Since then, half of the states in the country have followed suit, setting long term targets designed to spur electricity and natural gas savings.

Prompted by EERS policies, utilities in these states have invested in energy efficiency programs ranging from appliance rebates to whole-building retrofits. In Arkansas, utilities worked with customers to replace water heaters, weatherize homes and find energy savings for poultry producers. In Wisconsin, Focus on Energy programs have helped residents and businesses achieve more than $730 million in savings by replacing refrigerators, offering incentives for energy-efficient heating, and conducting free energy assessments for small businesses.

Despite a landscape of EERS policies that are providing cost-effective energy savings in all the states profiled in the report, energy efficiency programs have yet to be embraced everywhere, and some are encountering resistance from opponents. In Indiana, legislators recently passed a bill which terminated energy efficiency programs that had been established by a prior regulatory commission order, eliminating the state's EERS.

State lawmakers in Ohio have begun considering legislation that would freeze the state's energy efficiency targets, which would eliminate the need for further energy efficiency programs. The Ohio Public Utility Commission has found that utilities easily met or even surpassed their savings targets with cost-effective energy efficiency programs. In addition, a plan filed by American Electric Power Ohio demonstrates that a ramp-up in savings is reasonable and achievable.

Some utilities have also claimed that energy efficiency targets are too costly to implement. However, another recent report by ACEEE finds that programs aimed at reducing energy waste cost utilities less than three cents per kilowatt hour, while generating the same amount of electricity from sources such as fossil fuels can cost two to three times more. 

Opponents of energy efficiency savings targets ignore the costs of building expensive new power plants, which are paid for through charges on utility bills," said ACEEE senior fellow Martin Kushler. "Because saving energy through efficiency improvements is much cheaper than building a new power plant, energy efficiency programs end up resulting in lower utility bills for customers."

The report analyzes energy efficiency targets from states across the country, including: Arizona, Arkansas, California, Colorado, Connecticut, Hawaii, Iowa, Illinois, Indiana, Massachusetts, Maryland, Maine, Michigan, Minnesota, New Mexico, New York, Ohio, Oregon, Pennsylvania, Rhode Island, Texas, Vermont, Washington, Wisconsin, North Carolina and Nevada.

Other Key Findings Include:

•           Experience leads to success. States that ramp up targets over time are able to improve programs to meet rising savings targets.

•           The most effective energy savings targets are paired with financial incentives that encourage program administrators to exceed targets.

•           Spending limits and policies that allow large customers like factories to opt-out of efficiency programs artificially limit energy savings potential.

•           EERS policies can be tailored to meet the needs of geographically and politically diverse states.

To read the report, visit: http://aceee.org/research-report/u1403 

ACEEE acts as a catalyst to advance energy efficiency policies, programs, technologies, investments, and behaviors.

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