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  • Writer's pictureCSGA

Energy Efficiency and RGGI

On Thursday, January 19, Deron Lovass and David Smedick spoke about Energy Efficiency. This is a summary of the discussion. Phil Favero summarized the problem of climate change resulting from greenhouse gasses such as CO2 emissions. Efforts in Maryland to promote energy efficiency are critical to the efforts to reduce CO2 emissions.

Deron Lovaas, Senior Policy Advisor for Urban Solutions, Natural Resources Defense Council, discussed the EmPOWER Maryland Program. Deron primarily works in three states for the Energy Efficiency For All Project. His experience reveals stark difference between policies in Maryland and Virginia. Maryland is at the forefront of energy efficiency policy.

What is efficiency? Efficiency is providing the same services with less energy. Thus, a refrigerator that preserves the same or more food using less energy is more efficient. The goal of energy efficiency programs is to provide the same (or better) standard of living while using less energy.

EmPOWER Maryland is the primary efficiency policy for Maryland. The EmPOWER program was enacted into law in 2008 at the beginning of Governor O’Malley’s administration. The law essentially set a 15% goal in savings in electricity sales by 2015. The law left most of how to achieve the saving goal to the Public Service Commission (PSC). The initial phase of the EmPOWER program was from 2008 through 2015. The law is not clear on what efficiency standards should be targeted after 2015.

American Council for an Energy-Efficient Economy (ACEEE) has ranked Maryland in the top 10 states for energy efficiency policy. The EmPOWER program is a significant driver of this high ranking. ACEEE recently released a report on the effectiveness of the EmPOWER program from 2008 through 2015. The report was released at Ravens Stadium, the only Leadership in Energy and Environmental Design Gold rated stadium in the nation. The Gold rating is due to incentives funded in part by EmPOWER program. Due to the presence of the Ravens, there was significant press coverage including TV coverage highlighting the success of the EmPOWER program. The Green and Healthy Homes initiative noted the benefits to home owners of the EmPOWER program. Affordable housing developer, Wishrock group, explained the benefits of the EmPOWER program to residents of affordable housing. Towson University explained that Towson saves about $1.1 million/year by implementing efficiency measure made possible by EmPOWER programs.

Energy efficiency programs are not as visible as renewable energy programs. But they are just as critical to extend renewable energy as far as possible to reduce the use of fossil fuels. EmPOWER promotes a wide range of energy efficiency measures from better home insulation and caulking through improved heating, ventilation and air conditioning systems. ACEEE has analyzed the many ways residential, commercial and industrial building are improved using EmPOWER programs. ACEEE estimates that over the life of the program EmPOWER will save Maryland consumers about $4 billion in electricity charges. This is due an estimated 26 million energy savings measures installed in MD buildings. This reduction in electricity use avoids over 19 million metric tons of CO2 emissions along with 34 million pounds of nitrogen oxide and 78 million pounds of sulfur dioxide.

Energy programs go through rigorous cost effectiveness analysis, both prospective and retrospective, to determine return on investment. ACEEE finds that there is $2 return for every $1 spent by EmPOWER. The benefits are real and cost effective. The programs are progressive providing most benefits for low income citizens.

The law leaves energy efficiency targets beyond 2015 nebulous. However in 2105, the PSC determined that they would establish 2% saving per year target going forward. Such annual savings are possible. Massachusetts is setting successful policies that are resulting in 3-4% annual reduction in electricity expenditures.

EmPOWER covers the five investor-owned utilities in Maryland. The current Maryland policy is thus to reduce the electricity sold by these five utilities by 2% per year. In Maryland the Department of Housing and Community Development (DHCD) administers energy efficiency programs for affordable housing. The utilities administer energy efficiency programs for other electricity consumers. Each year the PSC reviews the programs from DHCE and the utilities to determine if they are effective to reach the target reduction.

We are at a pivot point in 2017. Utilities plan on a three-year cycle, so we are currently planning for 2018-2021. This fall the PSC will look at the utilities and DHCDs plans for next three years. However, the PSC looks very different than it did in 2015. Three of five appointees are Hogan appointees. The chair Kevin Hughes, dates from the O’Malley administration. However, advocates are quite nervous about what is going to happen with this PSC.

The Maryland Energy Advocates Coalition monitors these issues. The coalition urges the Governor and the PSC to continue the 2% reduction targets, but they are also now working with the legislature. There are bills in both Maryland House and Senate to codify the 2% annual savings targets. These are very simple bills that merely repeat what the PSC ordered in 2015. The bills deal with two issues 1) improvements in cost effectiveness testing and 2) put the 2% savings rate into law.

This is an exciting time for energy policy in Maryland. Senate Bill 184 has been introduced. Cosponsors are still being sought for the house bill. The hearing on Senate Bill 184 is scheduled for January 31.

David Smedick, from the Beyond Coal Campaign of the Maryland Sierra Club, discussed the Regional Greenhouse Gas Initiative (RGGI). RGGI is a cap and invest program. Maryland’s greenhouse reduction goals were set in April 2016 when Governor Hogan signed the reauthorization of the Greenhouse Gas Reduction Act. The original bill set a goal of a 25% reduction by 2020. We are on track to meet this goals. The reauthorization sets new goal of 40% by 2030. We now need to figure out how to reach this new goal.

Charting a path to meet the 2030 goal will rely heavily on EmPOWER, RGGI and the Renewable Portfolio Standard. The Maryland Department of the Environment released an updated greenhouse gas inventory which shows that electricity generation remains our top source of greenhouse gasses in Maryland. RGGI directly reduces greenhouse gasses from electricity generation.

RGGI started in 2008. It is currently a compact of nine states. (It originally included New Jersey, but New Jersey withdrew under Gov. Christie.) RGGI is now a compact between Maryland, Delaware, New York and the six New England states. RGGI is a ground-breaking cap and invest program. The program sets a cap for the pool of power producers in the nine states. The power plants then need to purchase allowances for greenhouse gas emissions. Essentially the power plants pay for their pollution. Each year from 2008-2020 the cap steps down. The money from the allowance auctions is reallocated to each state. The money is used for energy efficiency programs, for renewable energy programs and for low income energy assistance programs.

We are currently in the process of extending RGGI from 2020 to 2030. RGGI has been very successful. RGGI reports that the cumulative impact is 15 million tons of CO2 emissions have been avoided. RGGI has resulted in $4.5 billion of funds for the states to use for their programs. Maryland invests its allocation with about 50% going to direct bill assistance for low income electricity consumers. The remaining is invested in energy efficiency programs and green energy grants. Maryland receives the second most money of RGGI states after New York. Maryland utilities purchases a lot of allowances because MD still has many coal power plants. Maryland receives about $80 million a year in auction proceeds.

Under its current agreement RGGI would continue after 2020, but the cap would not change. However, the participating states have on average a goal of 40% reduction in greenhouse gas emissions by 2030. To reach that 40% target, an annual cap reduction of 5% would be required to reduce emissions from fossil fuel electricity generation. Recent RGGI models show that cap reductions of 3.5% will raise rates only slightly over a cap reduction of 2.5%. An additional 40 million tons of CO2 would be avoided if an 3.5% annual reduction was implemented rather than an 2.5% annual reduction. However, increasing the reduction from 2.5% to 3.5% is projected to raise wholesale electricity prices by only 1-2%.

Since most RGGI analyses have been run there have been three new governors elected in RGGI states and a new US President elected. This significantly changes the landscape of the power generation sector. It is unclear how the changes in national energy policy will affect RGGI. More analysis is required. This is currently being done. Much more information regarding RGGI will be coming out in 2017. The next round of information from RGGI will be released in January 31 webinar. The Sierra Club and others are monitoring the progress of the discussions and will provide new information as it becomes available.

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