The GREEN DMV Report
February 2011
Energy Efficiency: Current and Pending Programs and Policies
Contributing Writer: Steve Nadel

Cost-effective energy efficiency improvements to homes and apartments can generally reduce energy use and energy bills by 20-40%.  These improvements range from increased insulation to high-efficiency heating systems and sealing ducts and the home envelope so that conditioned air does not escape.  And at the macro level, energy efficiency tends to be much less expensive than new energy supplies.  For example, a recent ACEEE study (http://www.aceee.org/research-report/u092 ) found that energy efficiency programs cost utilities an average of 2.5 cents per kWh saved, which is less than a third of the cost of power from a new power plant. 

In recent years the number and breadth of energy efficiency programs and policies have grown substantially at the federal, state, utility and local levels.  Federal economic stimulus legislation passed in 2009 included about $30 billion for energy efficiency with large shares going to state and local governments to expand the low-income Weatherization Assistance Program and run a variety of other energy-saving initiatives for  residential customers, businesses and facilities owned by state and local governments.  2011 is likely to be the peak spending year for these programs before they wind down in early 2012. 

For information on programs, see http://www.energy.gov/recovery/states.htm .  Additional funding for these programs beyond 2012 is very unlikely although some states and municipalities are finding innovative ways to leverage a variety of funds to keep some of these initiatives going.

Federal tax credits for energy efficiency were originally enacted by Congress in 2005 and for most of these programs were recently extended for 2011.  Included are incentives for very-efficient new homes, incentives to appliance manufacturers to reduce the cost of highly-efficient appliances, and incentives for homeowners to improve the efficiency of their homes.  In 2011 the home retrofit incentives will typically cover 10% of the cost of eligible projects, up to a maximum of $500 per home.  For details on all of the federal efficiency tax incentives, see www.energytaxincentives.org .

In addition, many electric and natural gas utilities offer programs to encourage their customers to use energy more efficiently.  State regulations and laws have encouraged these programs and some utilities have come to understand that energy efficiency is cheaper per kWh saved than it costs to generate a kWh from a new power plant.  Total budgets for these programs were about $5.5 billion in 2010 and will likely be higher in 2011 and 2012 as mandatory energy-saving targets in 26 states (see http://www.aceee.org/topics/eers ) and policy actions in some other states ramp-up.

Additional policies are pending at both the state and federal levels.  At the state level, several states are considering setting or increasing savings targets for their utilities and other policies are pending as well.  At the federal level, President Obama and several Republican Senators have proposed a “Clean Energy Standard” that would require that a portion of electric sales come from renewable and nuclear energy, clean fossil fuels, and energy efficiency.  At ACEEE we are working to make sure that energy efficiency is included and that there is not a cap on energy efficiency.  It makes no sense to cap our cheapest resource. 

In addition, existing federal tax incentives for energy efficiency could be extended and improved.  For example, we are working on performance-based tax incentives for homes and commercial buildings (including multifamily buildings) that would reward achieving energy savings or 20% or more, with incentives increasing as the savings increase.  And new provisions for improved building codes and new programs for multifamily and manufactured housing made progress in 2010 and could be enacted in 2011.  More information on federal policy in 2011 can be found at: http://www.aceee.org/blog/2011/02/cup-half-full-energy-efficiency-policy-opportunities-2011 .

Overall, 2011 will be a good year to take advantage of existing programs, and to encourage enactment of new policies. so that there are even more opportunities in future years.

Steven Nadel is the Executive Director of the American Council for an Energy-Efficient Economy (ACEEE).

Steve has been at ACEEE for 20 years serving as Deputy Director of the organization and Director of ACEEE’s Utilities and Buildings programs prior to his promotion to Executive Director in 2001.

Prior to ACEEE he planned and evaluated energy efficiency programs for New England Electric, a major electric utility; directed energy programs for the Massachusetts Audubon Society, Massachusetts’ largest environmental organization; and ran energy programs for a community organization working on housing rehabilitation in the poorest neighborhoods of New Haven, CT.

Steve has worked in the energy efficiency field for 30 years and has over 100 publications on energy-efficiency subjects. He has testified ten times before Congress on energy efficiency subjects and also testified before multiple state legislatures. He was a major contributor to national energy legislation passed by Congress in 1987, 1992, 2005, 2007, and 2009 (so far only passed House of Representatives).

His current research interests include utility-sector energy efficiency programs and policies, state and federal energy and climate change policy, and appliance and equipment efficiency standards. He has a M.S. in Energy Management from the New York Institute of Technology, and a M.A. in Environmental Studies and B.A. in Government from Wesleyan University in Connecticut.