4G

Energy Efficiency Policy

Dr. Paul Komor

Renewable & Sustainable Energy Institute
University of Colorado
Boulder, CO USA
 Energy efficiency review

• Energy efficient technologies offer much lower electricity use (>50% savings), and
better comfort/performance.
• Although these technologies often have higher first (initial) costs, they pay those
costs back very quickly.
• Some of these technologies are not widely used, despite their clear advantages.
• There is considerable remaining potential for more energy efficiency: electricity use
could be cut significantly, without a reduction in ‘energy services’.
• Energy efficiency does not mean discomfort or reduced economic growth.
• Energy efficiency and ‘demand response’ can help the utility cut peaks and avoid
the need for new power plants.
 Energy efficiency policy

Source: IEA, WEO 2013

 What are the policy options?
There are many, including:
• Consumer/Producer Regulations:
– Appliance standards*
– Building codes*
– Retrofit-on-resale requirements
• Utility Regulations:
– Decoupling utility profits from kWh sales*
– Requiring use of Integrated Resource Planning (IRP)*
– Energy efficiency performance standards (EEPS)*
• Information:
– Energy labeling for buildings and appliances
– Voluntary certification for high-efficiency buildings and appliances*
• Financial Incentives:
– Tax credits and deductions for energy efficient investments
– -Energy taxes

*Discussed in more detail

 Appliance standards

• A requirement that energy-using devices

(refrigerators, furnaces, etc.) use no more than
a set amount of energy/year.
• Such standards in place in many countries.
• Overall - energy savings from these standards
have been large, and costs reasonable.
Source: ACEEE, 2009
Appliance standards - lessons learned

• Decide on goal first: Is it to eliminate the least efficient

models, to ‘transform the market’ so only more efficient
models are sold, to create a market demand for new
technologies, other?
• Change the requirements as technologies advance.
• Work with manufacturers to set requirement levels and
timelines.
• Set performance, not technology-specific, standards.
 Building codes

• A requirement that new buildings meet a

minimum efficiency level
• Can be prescriptive (must use at least X cm of
insulation in ceiling) or performance (building
can use no more than X kWh/m2/yr).
• Building codes are already in place for health
and safety, this extends codes to energy
efficiency.
 Building codes - lessons learned

• Work with builders, architects, others to design

codes that work well.
• Design codes that are easy to enforce.
• Training and education require $.
• Consider voluntary codes for advanced
building technologies (e.g., LEED)
 Decoupling utility profits from
utility kWh sales
• What is it?
– Utilities typically earn profits as a % of sales -
creating a financial disincentive for utilities to
promote energy efficiency
– If profits can be disconnected (‘decoupled’) from
sales, utilities can have a financial incentive for
efficiency.
Decoupling: How can this be done?
Example methods:
• Explicitly calculate ‘lost’ sales due to utility
efficiency programs, add that number back in
to the rate base. (Plus an efficiency bonus).
• Allowing a higher rate of return on efficiency
spending.
• Revenue recovery for efficiency spending
• There are other methods. For more information, see www.raponline.org/
 Decoupling: pros and cons
Pros:
Gives utilities $ incentives to find the best ways to
implement efficiency.
Direct costs to government are low.

Cons:
Not clear how this would work in a competitive retail
electricity market.
Can be very complicated.
Require Integrated Resource Planning
(IRP)
• What is it? IRP means to provide energy
services at lowest total cost
• Finds the optimal mix of supply-side resource
(power plants) and demand-side resources
(energy efficiency and demand response)
• Government can require utilities to use this
planning method.
 Require IRP - pros and cons

• Pros:
– Can lead to optimal use of efficiency and demand
response.
– No direct cost to government
• Cons:
– Little experience in using this option in a competitive
retail electricity market
– Can be complicated and time-consuming.
– Awkward for utility to promote reduced consumption.
 Energy efficiency performance
standards (EEPS)
• What is it? Requiring electricity retailers to meet a
specific efficiency goal. Example goals:
– 2% MW, 2% MWh reduction from forecasts
– 100 MW, 500,000 MWh documented savings
• Also called ‘Energy Efficiency Resource Standard’
(EERS)
• Similar to Renewable Portfolio Standard (RPS), except
for Efficiency.
Energy efficiency performance standards (EEPS) - Pros
and Cons

• Pros:
– Allows retailer to find least expensive way to meet
goal
– Little direct cost to government
– Can work in competitive electricity markets
• Cons:
– Goal set politically, not economically optimal
– Measuring saved electricity is uncertain and prone
to disagreements.
 Voluntary certification

• What is it? Providing an official ‘stamp of

approval’ to very efficient appliances and
buildings.
• Not a regulation or requirement.
• Has worked well in the U.S.: “Energy Star”
 Voluntary Certification: “Energy Star”
• Covers more than 50 energy-using products.
A partial list:

Source: www.energystar.gov
Voluntary Certification: “Energy Star”

• Also available for new homes.

• Politically popular - not a regulation, low
administrative costs.
• Used as a marketing tool by manufacturers
• and retailers.
• Claimed to save 5% of U.S.
electricity*
• For more information, see www.energystar.gov

*http://www.energystar.gov/ia/partners/annualreports/annual_report_2008.pdf
Earthrise, 1968