Clean energy competitiveness, by the numbers

This blog was written by John D. Wilson, former Deputy Director for Regulatory Policy at the Southern Alliance for Clean Energy.

Guest Blog | September 11, 2009 | Energy Efficiency, Energy Policy, Nuclear, Utilities

If reason drove the national energy and climate debate, we wouldn’t need more studies about costs and jobs. It seems fairly obvious that if you invest in a lower cost energy resource (such as energy efficiency), it will save consumers money. And if that lower cost resource depends primarily on American workers, rather than buying fuel from coal, gas and oil companies, then it would lead to more jobs, keeping energy dollars in local communities.

This week, both the American Council for an Energy Efficient Economy (ACEEE) and the Center for American Progress released reports that focus on jobs and consumer savings. ACEEE found that the energy efficiency provisions in the the American Clean Energy and Security Act (ACES, HR 2454) would create 383,800 jobs nationwide in the next decade, saving consumers over $63 billion in 2020, or $215 per household.  These benefits will be seen across the United States, including in southeastern states.

Jobs in 2020
Energy Savings in 2020
(billion BTU)
Net Household Savings in 2020
CO2 Savings
(million tons through 2020)
Alabama 5,000 110 $ 289 7.9
Florida 20,600 290 $ 229 17.4
Georgia 13,300 180 $ 276 12.5
Mississippi 3,100 60 $ 278 3.8
North Carolina 10,900 140 $ 207 8.9
South Carolina 5,000 100 $ 266 7.3
Tennessee 7,700 110 $ 226 7.9
Virginia 10,300 110 $ 197 6.2
8 Southeastern States
75,900 1,100 $ 246 72.0
8 States w/Enhanced Efficiency
129,900 1,890 $ 302 119.6
National 383,800 4,650 $ 215 295.7

I’ve also highlighted the increased benefits if three ACEEE recommendations, discussed below, are adopted. A 70% increase in job growth – while saving consumers even more money – should not be discounted.

These jobs and consumer savings come at a cost, no doubt, but the cost proves to be a worthwhile investment once the numbers are broken down. Through 2020, the total cost of ACES energy efficiency programs would be about $212 billion, including $52 billion by the federal government. (The rest of the spending would be by utilities, and the share of the cost carried by consumers.) Comparing that total cost ($212 billion) to the annual consumer savings of $63 billion, that works out to a a payback on investment in just 3.4 years for measures that generally last 10-20 years. Putting it all together, the net annual household energy savings are projected to be $283 per household in 2020.

Given the economics of the issue (lower cost resources, more local labor to deliver the services), you’d think the issue would be closed. But it isn’t – studies by American Council for Capital Formation and National Association of Manufacturers, Heritage Foundation, and Charles River Associates require repeated debunking of their incomplete and biased analyses. The bottom line is that electricity bills will be reduced, and the overall economy will be healthier when a clean energy strategy becomes law.

These new studies by ACEEE and the Center for American Progress don’t just tally up the benefits of jobs and cost savings from energy efficiency, they also provide an overview of how effective various provisions of energy and climate legislation will be at saving consumers money and reducing global warming pollution. These provisions include electric utility efficiency programs, building codes, lighting and appliance standards, transportation, and several other strategies.

Finally, ending energy waste with a national energy efficiency resource standard

ACES includes two strategies to help households, businesses and government end energy waste. The bigger strategy is a national energy efficiency resource standard (EERS). Unfortunately, the proposed EERS has now been combined with a renewable energy standard into the Combined Efficiency and Renewable Energy Standard (CERES). This combination has weakened the role of energy efficiency and renewable energy in the overall legislation. Nevertheless, the energy efficiency component within the CERES does mandate more energy efficiency, as much as 4-8% in 16 states and the District of Columbia.

Our findings are that the CERES would reduce electricity use by about 5% nationwide. (ACEEE doesn’t account for various exemptions in as much detail; its estimate for energy savings appears to be about 5.5%.) According to ACEEE, this would result in over $9 billion in consumer savings in 2020, at a cumulative cost of about $38 billion.  This means that simple payback on on these investments is about 4 years on average.

However, the ACEEE report calls for improving on this by restoring the stand-alone EERS at a level of at least 10 percent by 2020. In this time of lingering unemployment and fiscal stress, implementing a strong energy efficiency resource standard will put hundreds of thousands of Americans to work immediately using the skills they already have, including weatherizing homes, retrofitting old buildings and conducting energy audits.

If a stand-along EERS is restored at a 10 percent by 2020 level, ACEEE estimates that the consumer savings would increase from $9.4 to $17.4 billion. This is an enormous increase for what might seem like a small change — the current standard calls for 5 to 8% of energy demand to be met with efficiency savings. The near-doubling in benefits results from both the higher standard level and the restoration of a stand-alone EERS that does not include significant exemptions offered with the CERES to address perceived renewable energy issues.

Lighting the way, building smarter

Building on the success of Energy Star, national appliance and lighting standards (Ka-BOOM!), and state building codes, the House bill would also substantially accelerate the “codes and standards” strategy.

While codes and standards are similar in that they both reflect the federal government setting a floor for building and equipment performance, they have quite different economics. Standards tend to affect equipment with relatively short lifetimes. As such they require relatively quick payback (about one year) and appear highly cost-effective. Building codes, however, reflect investments in the basic structure of a building which lasts 20 to 40 years. This once-in-a-building-life opportunity means that it makes sense to invest in opportunities with a longer payback – hence, the average payback in this area is 7 to 11 years.  State implementation of a national building code would be supported by resources from the State Energy and Environmental Development Account (Section 782).

It is this level of detail in the analysis that gives one confidence that the ACEEE analysis is reflecting smart, real-world considerations. We can only hope that those who implement this legislation will exercise the same thoughtfulness!

Getting there at less cost

Over 40% of the efficiency savings in the House bill, according to ACEEE, are related to vehicle efficiency and transportation planning. The bill would direct about $32 billion in investment through 2020 in vehicle efficiency and transportation investments (transit, highways, etc.) designed to reduce global warming pollution and save energy. The impact would be tremendous: ACEEE estimates about $27 billion in annual consumer savings. That’s an almost-instant payback of 14 months!

More than half of this benefit is from Section 821 of ACES, which “directs EPA to issue greenhouse gas standards for new heavy-duty trucks by 2010, and for non-road engines and vehicles two years later.” While Congress has already enacted EISA legislation in 2007 which sets stronger efficiency standards for trucks and engines, EPA found that a 40% reduction in greenhouse gas emissions is possible by 2015, much sooner than required by the EISA legislation. ACES effectively accellerates this process.

The remaining provisions affecting transportation are the transportation sector greenhouse gas reduction targets (Section 841) and manufacturer incentives to accelerate the commercialization of advanced technology vehicles (Section 124).

Other approaches round out the efficiency package

Several other smaller efficiency provisions are also analyzed by ACEEE. Most important is funding for state and utility support for non-electric efficiency programs. While the EERS (or CERES) targets efficiency gains in the electric utility sector, households and businesses that use non-electric fuels will also benefit from increased efficiency opportunities. Section 782 requires that one-third of the free allowances given to natural gas utilities must be used  specifically for energy efficiency, and a similar provision is included for states related to heating oil. For industry, similar funding is available to offer rebates on upgrades to more efficient motors and equipment. By 2020, ACEEE estimates that annual consumer savings of about $5 billion would result from these efficiency programs.

The legislation would also fund R&D centers to accelerate the development and commercialization of technologies that cut energy waste.

Recommended policy improvements

The ACEEE report recommends three specific elements to include in the Senate bill in order to achieve greater energy efficiency and yield benefits including greater job growth, consumer savings, and carbon reduction. The three enhanced elements include:

  • A requirement that electric utilities allocate one-third of their greenhouse gas allowances to support energy efficiency (the bill already contains a similar requirement for natural gas utilities).
  • A stand-alone energy efficiency resource standard, requiring utilities to achieve 10% efficiency savings by  2020. (This would replace the efficiency portion of the CERES requirement, as discussed above.)
  • Expanding the role of the State Energy and Environmental Development fund (SEED).  ACES currently allocates up to $65 billion to energy efficiency programs through the SEED fund. In fact, SEED-funded programs provide the majority of the benefits of the current legislation through 2020. The ACEEE report recommends extending the life and increasing the impact of this provision.

Stay involved!

Right now, our US Senators are working in committees to produce climate and energy legislation that will shape our future.  Weaving the recommended policy enhancements described above into Senate legislation will mean that your household and our global environment will be more prosperous and at less risk from global warming.

Time is of the essence as the Senate is expected to produce a bill this fall.  In order to maximize this historic opportunity to pass strong climate and energy legislation that will keep jobs and energy dollars right here in our communities, citizens and businesses must get involved. For the latest opportunities to make a difference, sign-up to receive our E-News Alerts.

The Southern Alliance for Clean Energy is providing an opportunity on Thursday, September 24th, to learn about the options and opportunities that await the Southeast and how to get involved to urge support for a clean energy future. Our region has significant resources of energy efficiency and renewable energy and stands to benefit tremendously if progressive climate and energy policies are implemented soon. Join us for a webinar presentation with Jennifer Rennicks, SACE Federal Policy Director, on Thursday, September 24th from 12:00 – 1:00 PM EST.

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