[Senate Hearing 113-222]
[From the U.S. Government Publishing Office]
S. Hrg. 113-222
STATE EFFICIENCY AND
RENEWABLE PROGRAMS
=======================================================================
HEARING
before the
SUBCOMMITTEE ON ENERGY
of the
COMMITTEE ON
ENERGY AND NATURAL RESOURCES
UNITED STATES SENATE
ONE HUNDRED THIRTEENTH CONGRESS
SECOND SESSION
ON
LESSONS FROM STATE EFFICIENCY AND RENEWABLE PROGRAMS
__________
FEBRUARY 12, 2014
Printed for the use of the
Committee on Energy and Natural Resources
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COMMITTEE ON ENERGY AND NATURAL RESOURCES
RON WYDEN, Oregon, Chairman
TIM JOHNSON, South Dakota LISA MURKOWSKI, Alaska
MARY L. LANDRIEU, Louisiana JOHN BARRASSO, Wyoming
MARIA CANTWELL, Washington JAMES E. RISCH, Idaho
BERNARD SANDERS, Vermont MIKE LEE, Utah
DEBBIE STABENOW, Michigan DEAN HELLER, Nevada
MARK UDALL, Colorado JEFF FLAKE, Arizona
AL FRANKEN, Minnesota TIM SCOTT, South Carolina
JOE MANCHIN, III, West Virginia LAMAR ALEXANDER, Tennessee
BRIAN SCHATZ, Hawaii ROB PORTMAN, Ohio
MARTIN HEINRICH, New Mexico JOHN HOEVEN, North Dakota
TAMMY BALDWIN, Wisconsin
Joshua Sheinkman, Staff Director
Sam E. Fowler, Chief Counsel
Karen K. Billups, Republican Staff Director
Patrick J. McCormick III, Republican Chief Counsel
------
Subcommittee on Energy
AL FRANKEN, Minnesota, Chairman
TIM JOHNSON, South Dakota JAMES E. RISCH, Idaho
MARY L. LANDRIEU, Louisiana DEAN HELLER, Nevada
MARIA CANTWELL, Washington JEFF FLAKE, Arizona
BERNARD SANDERS, Vermont LAMAR ALEXANDER, Tennessee
DEBBIE STABENOW, Michigan ROB PORTMAN, Ohio
MARK UDALL, Colorado JOHN HOEVEN, North Dakota
JOE MANCHIN, III, West Virginia
MARTIN HEINRICH, New Mexico
TAMMY BALDWIN, Wisconsin
Ron Wyden and Lisa Murkowski are Ex Officio Members of the
Subcommittee
C O N T E N T S
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STATEMENTS
Page
Clark, Randall R., Senior Vice President, NORESCO................ 32
Franken, Hon. Al, U.S. Senator From Minnesota.................... 1
Glick, Mark, State Energy Administrator, Department of Business,
Economic Development & Tourism, State of Hawaii, Honolulu, HI.. 27
Nadel, Steven, Executive Director, American Council for an
Energy-Efficient Economy (ACEEE)............................... 6
Rodgers, William A., Jr., Chief Executive Officer and President,
GoodCents Holdings, Inc., Atlanta, GA.......................... 36
Rothman, Mike, Commissioner of the Minnesota Department of
Commerce....................................................... 21
Schatz, Hon. Brian, U.S. Senator From Hawaii..................... 4
Shaheen, Hon. Jeanne, U.S. Senator From New Hampshire............ 1
Taylor, William E., Director, Texas State Energy Conservation
Office, Arlington, VA.......................................... 15
APPENDIX
Responses to additional questions................................ 55
STATE EFFICIENCY AND RENEWABLE PROGRAMS
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WEDNESDAY, FEBRUARY 12, 2014
U.S. Senate,
Subcommittee on Energy,
Committee on Energy and Natural Resources,
Washington, DC.
The subcommittee met, pursuant to notice, at 2:50 p.m. in
room SD-366, Dirksen Senate Office Building, Hon. Al Franken
presiding.
OPENING STATEMENT OF HON. AL FRANKEN, U.S. SENATOR FROM
MINNESOTA
Senator Franken. Good afternoon everybody. The subcommittee
will come to order.
My apologies to everyone who expected us to start 20
minutes ago. We're in the middle of some votes on the Floor. In
fact, we're going to have to go back to that.
Everybody knows that this hearing is about what the states
are doing on energy efficiency and renewable energy. I'm
pleased that Ranking Member Risch and--is doing this with me.
But we're going to start off with Senator Jeanne Shaheen who
has been a leader in this area. In fact there's a bill called
the Shaheen/Portman bill, maybe some of you have heard of it.
I'm going to ask Senator Shaheen to deliver her statement and
then we can move on to the work of the subcommittee.
Welcome, Senator, to the Energy Committee here.
STATEMENT OF HON. JEANNE SHAHEEN, U.S. SENATOR
FROM NEW HAMPSHIRE
Senator Shaheen. Thank you very much, Chairman Franken.
I like this idea that you and I would do hearings, just the
2 of us. You know, I bet we could get a lot done in the Energy
Committee if we did that.
Senator Franken. We could. We'd probably get stuff passed
unanimously.
[Laughter.]
Senator Shaheen. I think that would be a great idea.
Senator Franken. OK, done.
[Gavel bangs.]
Senator Franken. OK. I'm sorry. I didn't mean to do that.
Senator Shaheen. All kidding aside, I very much appreciate
the opportunity to be here this afternoon. The opportunity to
talk, not just about energy efficiency, but about the Energy
Efficiency and Industrial Competitiveness Act that Senator Rob
Portman, who is also on the Energy Committee and I have been
working on now for over 3 years.
I know that this hearing is to talk about how state
practices can inform Federal policies. So I really want to
begin by pointing out that I got excited about energy
efficiency as a Governor when I realized we could retrofit
state buildings in New Hampshire for energy efficiency. We
could do it through performance contracts and not cost
taxpayers any money and save, not only significant dollars, but
also thousands of pounds of pollution in the state.
We also reached a settlement agreement with our largest
utility that allowed us to set up a fund to encourage energy
efficiency in the state. That has, by now, saved consumers over
a billion dollars. So there are very real savings here. Energy
efficiency is the cheapest, fastest way to deal with our energy
needs. It is a win in terms of job creation, a win in terms of
saving taxpayers money and a win on the environment.
I believe that's exactly what the Energy Efficiency and
Industrial Competitiveness Act would provide to the Federal
Government and to the business community. As I said, it's known
as Shaheen/Portman. What it would do is really set a national
energy efficiency strategy.
We have, today, been endorsed by about 260 different
businesses and groups. Everything from the U.S. Chamber of
Commerce to the National Association of Manufacturers, the
Natural Resources Defense Council, the International Union of
Painters and Allied Trades, just to name a few of the groups
that have endorsed the bill.
According to the American Council for an Energy Efficient
Economy, Shaheen/Portman, if it were passed this year, by 2025
would create 136,000 new jobs. By 2030 it would save consumers
about $14 billion a year. It would lower CO2
emissions and air pollution by the equivalent of taking 22
million cars off the road. So it really is a win/win/win.
There are provisions in the legislation that deal with the
building sector which uses about 40 percent of our energy, that
deal with the manufacturing sector which is the largest user of
energy in terms of any sector of the economy and also the
Federal Government which, as we all know, is the biggest user
of energy in the country.
You may remember that the bill got to the Floor briefly in
September before the government shutdown. We had to pull it
because of negotiations around the shutdown. We are now working
to include a number of amendments that had been cleared by the
committee, bipartisan amendments, because the bill did pass the
Energy committee back in September on a very strong bipartisan
vote, 19 to 3.
Some of the examples of amendments that we are hoping to
include in the reintroduced version is one around benchmarking
that you will recognize since it's your amendment. That would
require federally leased buildings to disclose their energy use
data so we can continue to learn more about those buildings.
There's an amendment that would address Federal data
centers and the amount of energy that those centers use. That's
co-sponsored by Senator Risch, who is your ranking member on
this subcommittee and Senator Udall.
Then there's another provision called the SAVE Act written
by Senators Bennet and Isakson to improve the accuracy of
mortgage underwriting by including energy efficiency as a
factor in determining the value and affordability of the home.
Those are just 3 of about 10 amendments that we've been
looking at to include in the bill. All of which have bipartisan
support. Most of which have bipartisan sponsors.
So we believe that we're going to have a bill that's going
to be even better to re-introduce. The positive thing, I
believe, about this legislation is not just the savings that it
would provide on energy, the savings on pollution, the job
creation, but the fact that there is also a similar bill in the
House that is supported by Representative McKinley, a
Republican of West Virginia and Representative Welch, Democrat
of Vermont. So it's got strong bipartisan support and the House
leadership has expressed an interest in acting on it.
So I believe if we can get this legislation through the
Senate that it has a great chance of passing and can make a
real difference in terms of our energy use in this country.
So thank you very much, Mr. Chairman, for the opportunity
to be here. I'm happy to provide any further information that
the committee would like and to answer any questions.
Senator Franken. Thank you, Senator. We are talking, as you
mentioned, about what is done on the State level and you talked
about getting excited this as a Governor. You are part of a
small sorority of women who have been Governor and a United
States Senator. How big is that sorority?
Senator Shaheen. That's a group of one. Thank you.
Senator Franken. Oh, I didn't know that.
I did. I did.
[Laughter.]
Senator Franken. But look, you and Senator Portman have
done wonderful work on this very important bill, the Energy
Savings and Industrial Competitiveness Act is exactly the kind
of legislation that we need to make the energy sector more
efficient. Obviously, I support the goals of your bill.
I know that we have some votes. Why don't you, if you want,
you can go head down there. Tell them I'll be along shortly
here.
Senator Shaheen. OK. If I could just add one more, 2 more
points that I forgot that I think are important. That is that
the legislation contains no mandates and it also provides no
additional cost to the Federal Government, both of which, I
think, are very important as we look to being able to pass this
bill.
Senator Franken. Yes and it's bipartisan and bicameral and
all set to go.
Thank you, Senator.
Senator Shaheen. Thank you very much.
Senator Franken. We--I guess I would like the witnesses to
come and take their seats.
Senator Schatz. Mr. Chairman.
Senator Franken. I would like the Senator from Hawaii to
introduce one of our guests today.
STATEMENT OF HON. BRIAN SCHATZ, U.S. SENATOR
FROM HAWAII
Senator Schatz. Thank you very much, Mr. Chairman. Thank
you very much to all of the testifiers for making the trek to
Washington, DC.
It's my great pleasure to introduce Mark Glick, the
Administrator of the Hawaii State Energy Office and a good
friend. Mark has been in this position since 2011 and has
continued the good work of his predecessors in helping to
implement and oversee the Hawaii Clean Energy Initiative which
has some of the most aggressive renewable energy and efficiency
goals in the Nation. Mark takes a holistic approach to these
goals working very hard to ensure that the state, the private
sector and the utility and the not for profit sector all
benefit from the changes that are made in terms of jobs,
economic development, environmental protection and energy
security.
Mark knows that Hawaii's opportunities and challenges are
tremendous. But he knows them as well as anyone. We're lucky to
have him working tirelessly for our state. But he also has
enormous experience from before he came to us serving as a
Senior Advisor to the Texas Land Commissioner and working in
the private sector.
Mark's testimony today will be a major benefit to the
committee as it considers the lessons learned by our States in
their pursuit of clean energy and economic opportunity.
Mr. Chairman, thank you again for the opportunity to
introduce and invite Mark. I'm looking forward to this
excellent and timely hearing that you've convened.
Senator Franken. Thank you, Senator. Welcome, Mr. Glick.
We are going to unfortunately take a recess now. So I'm
glad you all took your seats at the table and may want to visit
with each other and discuss what you're doing in each of your
States while we go and vote. I think we'll do the end of one
vote and the beginning of another and then we'll come back and
start.
So thank you, gentlemen.
[RECESS]
Senator Franken. The subcommittee will come back to order.
I will make my opening statement.
In the United States we produce a lot of energy and we use
a lot of energy. Our energy consumption is about one fifth of
the world's total. Although the majority of this energy is
produced from fossil fuel sources, such as coal and natural
gas, a rapidly growing portion comes from newly installed
renewable energy. In fact 37 percent of new energy capacity in
the U.S. last year came from renewable sources.
The Federal Government has played a large role in the
growth of our domestic energy sector. New sources of energy
including oil and gas in the Bakken region of North Dakota were
made possible in large part by government support for research
and development of hydraulic fracturing technology, in the case
of the Bakken. So investing in research and development is
critical and that's true for renewables and energy efficiency
as well, but it's not enough. We also have to put into place
forward thinking policies that will unleash the Nation's
potential to deploy efficiency and renewable technologies.
Unfortunately it's been difficult for Congress to pass
comprehensive clean energy legislation, even though this is
prerequisite if we are going to win the global clean energy
race.
In the meantime, many States which are really the
laboratories of our democracy have gone forward with their own
programs. States have established goals and mandates for
renewable energy production as well as for increased energy
efficiency of government and commercial buildings. These
standards are stimulating the economy and creating new high
skilled jobs.
My goal in this hearing is to learn more about some of the
important energy programs underway in our States and to hear
about what the Federal Government can do to better support
them.
For example, a number of state and local governments have
adopted policies that require benchmarking of energy and water
use by large commercial buildings. This allows the owners of
the buildings to explore ways to save on costs by improving
energy efficiency. It's not just the owners that benefit. Of
course this also helps businesses identify new markets and
opportunities for energy efficiency. That's why we have a
representative from a major energy service company here today
to talk about the impact of some of these programs on their
business model.
Developing and manufacturing the technology to retrofit
these buildings will create jobs and contribute to economic
growth in States across our country. This is something I've
seen and encouraged in Minnesota. But being more efficient is
only part of the story.
States have also supported new sources of renewable energy
through renewable portfolio standards. These standards found in
30 States now incentivize renewable energy generation.
Renewable energy producers and particularly the innovative
startup companies need certainty for investment. These
portfolio standards guarantee a market for their products and
jobs for their employees.
These are just a few examples of the exciting programs that
States have developed to grow and develop our energy sector. I
hope to hear today about these programs so we can learn from
them and potentially use them as models for Federal policy. I
also invite the witnesses to talk about challenges that their
States are facing in implementing these programs so that we may
be able to identify how the Federal Government can help them
overcome these challenges.
As chairman of this subcommittee I want to do everything in
my power to ensure that the clean energy and energy efficiency
programs we have across America are working as well as they
possibly can.
So I'm very pleased that we have with us such an excellent
panel of experts. Right now I would like to have you speak to
the state of energy issues that we're considering today. We'll
just go from your right to my right as if you're looking from
the top. Underneath, never mind.
So with us today we have Steve Nadel, who is Executive
Director of the American Council for an Energy Efficient
Economy.
William E. Taylor, Director of the State Energy
Conservation Office in Texas.
Mike Rothman, Commissioner of the Minnesota Department of
Commerce.
Mark Glick, who Senator Schatz introduced, Administrator of
the Department of Business, Economic Development and Tourism in
the State of Hawaii.
Randy C. Clark, Senior Vice President and General Manager
of NORESCO.
William A. Rodgers, Jr., CEO and President of GoodCents.
So we will start with you, Mr. Nadel and we'll go down the
table. I'm going to be here so if any of you has to catch a
plane or something, let me know, but otherwise, you know, take
about 5 minutes, but whatever you really want.
I know you'll have to leave and I know you'll want to hear
Mr. Glick.
If you want me to have Mr. Glick go before anybody, let me
know because he flew in from Hawaii. I don't know if you know
how far that is.
[Laughter.]
Senator Franken. So if you need Mr. Glick to go because I
know you want you.
Senator Schatz. Mr. Chairman, we're fine as it is. I'll
just have to leave before 4.
Senator Franken. OK.
Mr. Nadel.
STATEMENT OF STEVEN NADEL, EXECUTIVE DIRECTOR, AMERICAN COUNCIL
FOR AN ENERGY EFFICIENT-ECONOMY (ACEEE)
Mr. Nadel. OK. Thank you very much, Chairman Franken and
assembled staff. We very much appreciate your holding a hearing
on this important topic.
As you noted, I'm the Executive Director of the American
Council for an Energy Efficient Economy. We're a non-profit
research and education organization that works on energy
efficiency policies and programs.
Given the difficulties that we've had here in Washington
reaching consensus on energy policy States are increasingly
taking the lead. ACEEE has been working on state policy for
more than a decade. We have assisted officials and
organizations in more than half the States with policy and
program development and implementation and are well known for
our state energy efficiency policy data base with information
on energy efficiency policies in each of the 50 States and for
our annual State energy efficiency scorecard.
I included a summary of our scorecard, a summary map, on
page 2 of my written testimony.
Based on our work with States it is apparent that most
States are now taking at least some action to help consumers
and businesses reduce their energy use and their energy bills
and also to promote economic development through energy
efficiency.
My written testimony describes 6 areas where States are
working. In these brief oral comments I will just discuss 4 of
them. I will leave the other 2 areas for some of the other
witnesses, having seen their testimony.
The first area is utility programs and policies. Electric
and gas utilities serve nearly every American household. They
are generally regulated monopolies with an obligation to
provide quality and reliable services to all customers at
reasonable rates. Over the past several decades a substantial
majority of States and utilities have recognized that programs
that help utility customers to use energy more efficiently are
less expensive per kilowatt/hour saved than the cost of
generating a kilowatt/hour from a new power plant.
This is illustrated in Figure 2 on page 4 of my written
testimony which shows that energy efficiency is typically half
to a third of the cost of power from a new power plant.
Just to give a few examples.
Vermont is one of the leaders in utility sector energy
efficiency programs. They have established an energy efficiency
utility called Efficiency Vermont which operates energy
efficiency programs in most of the State. Over the past decade
Efficiency Vermont programs have reduced electricity use by
about 12 percent, a figure that is increasing about 2 percent
each year. So this is one of Vermont's largest industry
resources.
In 2012 the program has provided the State's consumers and
businesses with net economic benefits of over $100 million.
That's the benefits minus the cost, still saving $102 million
which is quite substantial for a State as small as Vermont.
Independent study estimated a net gain of about 1900 job from
those investments.
Energy efficiency creates jobs because designing,
installing efficiency measures is generally more labor
intensive than building and operating new power plants.
Another recent example of State leadership comes from
Arkansas where the Public Service Commission established a
series of rules to provide policy guidance guarding energy
efficiency programs and how utilities would be paid for this
work. It began with a set of quick start programs to gain
experience and have now expanded to a full set of utility run
programs.
In 2013 the neighboring States of Mississippi and Louisiana
decided to begin their utility energy efficiency programs
following what they called the Arkansas model.
Now utility regulation is primarily the province of States.
However the Federal Government does provide technical
assistance to States through the State and local energy
efficiency action network which is a joint project of DOE and
EPA. In addition I would note that utility sector energy
efficiency programs are likely to be the lowest cost compliance
option for meeting emission standards EPA is now preparing for
existing power plants. Furthermore energy efficiency is the
only compliance option that can save consumers money.
The second area I wanted to mention was building
benchmarking disclosure. As we discussed earlier, as Senator
Shaheen noted, Senator Franken, we thank you very much for the
bill you've introduced on the topic. We are very glad to see
that Senator Shaheen just announced that they will be
incorporating that into their new amendment. So hopefully that
will allow this to move forward along with some of the other
important provisions in that bill.
Just to give a couple of examples.
The District of Columbia later this year will require all
commercial and multifamily buildings over 50 thousand square
feet to report benchmarking data. They will also eventually
need to report their energy and water use to the district.
In Kansas, another example. A law was passed in 2003
requiring the disclosure of energy information for new homes.
The energy rating law was amended in 2007 to move the time of
disclosure from the time of closing to the time the house was
being shown. The State has developed a standard energy
efficiency checklist to be provided to potential buyers which
compares the new homes features to the State's energy code
guidelines. therefore, allows the consumers, the people who are
buying these homes, to make informed choices.
We think an excellent way for the Federal Government to
help the States is through passage of your bill, S. 1206,
Senator Franken or passage of the new version of the Shaheen/
Portman bill which now incorporates it.
Turning to a third area. Combined heat and power systems
produce heat and electricity at the same time. By using the
same system to produce both forms of energy waste is reduced
and much higher efficiencies obtained.
For example with CHP systems combined efficiencies of 60 to
80 percent can be obtained, much better than the 30 percent
efficiency of a typical existing power plant, even the 50
percent efficiency of the very best new plants.
Some States are leading the way to increase the cost
effective use of CHP systems. I provide some specific examples
from Mr. Taylor's State of Texas as well as from New Jersey.
Fourth and last I wanted to note that about building codes.
Most States have building codes that specify construction
practice to protect health and safety, reduce building energy
use. In the case of energy use, national consensus
organizations develop model codes and the States then adopt
them.
As of this past October 40 States have adopted at least the
2009 model codes and that includes 14 States with more updated
codes. So major progress is being made.
I'd also point out that working to have good implementation
of the codes is also important. Idaho is an excellent example,
as referred to my written testimony. Idaho has developed a plan
that will achieve 90 percent compliance with their code by 2017
and is working with the Northwest Energy Efficiency Alliance to
measure compliance in the residential sector. I understand that
initial results are quite good.
Idaho also has an energy co-collaborative stakeholder group
that helps train building officials, builders and other
contractors.
The Federal Government has been working with model code
organizations and there are a number of improvements on how the
Federal Government can better work with and assist States in
the Shaheen/Portman bill. So hopefully those will be adopted,
when and if it reaches the Senate Floor.
In conclusion, I'd note that States are stepping out and
leading energy efficiency efforts. It's a way to save energy,
lower consumer bills and promote economic development. States
can learn from each other to advance their efforts. The Federal
Government can help by providing information on best practices,
technical assistance, matching grants for innovative efforts
and assistance in setting financing programs which some of the
other witnesses will discuss.
The Federal Government can learn from successful State
efforts and pass legislation such as Shaheen/Portman that
builds on what States have done so far and helps them to do
more in the future.
With that I conclude my testimony and look forward to your
questions.
[The prepared statement of Mr. Nadel follows:]
Prepared Statement of Steven Nadel, Executive Director, American
Council for an Energy-Efficient Economy (ACEEE)
Summary
States are increasingly taking action to help consumers and
businesses reduce their energy use and costs and promote economic
development through energy efficiency. In this testimony I describe six
areas where states are taking action: utility programs and policies,
building benchmarking and disclosure, financing, state lead-by-example
efforts, combined heat and power systems, and building codes. Most
states have some good energy efficiency policies, and I provide
specific examples in each area. States can learn from the practices of
other states. The federal government can assist states in a variety of
ways including sharing best practices, technical assistance,
facilitating coordination among states, and providing challenge funding
for innovative efforts. I make specific suggestions in the discussion
of each program area. In addition, in light of the current propane
crisis in the upper Midwest and Northeast, I briefly discuss how states
can use energy efficiency to reduce demand for propane and fuel oil.
I conclude that states are stepping out and leading energy
efficiency efforts in the United States. In most cases these have been
bipartisan measures. The federal government can learn from specific
state efforts, and perhaps also see that energy efficiency enjoys
bipartisan support and may be one of the few areas where Congress can
make progress this year. The Senate Energy Committee reported out the
Shaheen-Portman Energy Savings and Industrial Competitiveness Act (S.
1392) on a strong bipartisan vote. Since then a variety of bipartisan
amendments have been added, including several that build on successful
state efforts and would help states do more. I hope this spirit of
bipartisanship will spread to the full Senate and House and that the
Shaheen-Portman bill will be enacted into law.
Introduction
My name is Steven Nadel, and I am the executive director of the
American Council for an Energy-Efficient Economy (ACEEE), a nonprofit
organization that acts as a catalyst for energy efficiency policies,
programs, technologies, investments, and behavior. We were formed in
1980 by energy researchers and now work with an array of researchers,
businesses, and national, state, and local policymakers. I have been
personally involved in energy efficiency issues since the late 1970s
and have testified multiple times before this committee and its
subcommittees as well as before the House Energy and Commerce
Committee.
ACEEE has been working on state policy for more than a decade. We
have assisted officials and organizations in more than half the states
with policy and program development and implementation. We have an
online database with detailed information on policies in each of the
states (http://aceee.org/sector/state-policy). We also publish an
annual State Energy Efficiency Scorecard that ranks each of the states
on 26 variables and assigns an overall score.\1\ These rankings have
motivated many governors--including those at the top and bottom of the
rankings-to take action to improve their state's rank. To provide just
one example, at his 2012 Energy Summit, Governor Phil Bryant of
Mississippi pledged to improve his state's low ranking, and in 2013
Mississippi was one of the most improved states in our scorecard. A
summary map from our 2013 state scorecard is provided on the next page.
Details for each of the states can be found at http://aceee.org/state-
policy/scorecard.
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\1\ A. Downs et al., The 2013 State Energy Efficiency Scorecard
(Washington, DC: American Council for an Energy-Efficient Economy,
2013). http://aceee.org/research-report/e13k.
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Figure 1.* Summary results of ACEEE 2013 State Energy Efficiency
Scorecard
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* All figures have been retained in subcommittee files.
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Based on our analysis of state policy over the past decade, we are
happy to report that the majority of states have taken action to
promote energy efficiency as a means of saving energy, lowering
consumer bills, and promoting economic development. Furthermore, we
find that the number of state energy efficiency programs and policies
is increasing each year. State action and leadership on energy
efficiency are particularly important given the difficulties Congress
has had in reaching consensus on energy policy in recent years.
In this testimony I discuss six areas where states can lead, and
have led, on energy efficiency, providing specific examples for each.
These areas are:
1. Utility programs and policies
2. Building benchmarking and disclosure
3. Financing
4. State lead-by-example efforts
5. Combined heat and power systems
6. Building codes
In addition, given the propane crisis now facing the upper Midwest,
I have been asked to briefly discuss strategies for using energy
efficiency to reduce demand for propane and heating oil.
Areas of State Leadership
Utility Programs and Policies
Electric and gas utilities serve nearly every American household.
They are generally regulated monopolies with an obligation to provide
quality and reliable services to all customers at reasonable rates.
Over the past several decades, a substantial majority of states and
utilities have recognized that programs that help utility customers to
use energy more efficiently are less expensive per kilowatt hour (kWh)
saved than the cost of generating a kWh from a new power plant. For
example, a forthcoming ACEEE report finds that in recent years energy
efficiency programs have cost utilities on average about 3 cents per
kWh saved,\2\ which is about one half to one third the cost of power
from a new power plant as shown in figure 2 below.
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\2\ M. Molina, Still the First Fuel: National Review of Energy
Efficiency Cost of Saved Energy (draft title) (Washington, DC: ACEEE,
forthcoming April 2014).
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In 2012 (the last year for which data are available), American
utilities invested over $7 billion in energy efficiency programs.
Annual incremental savings from these programs totaled about 23 billion
kWh per year, or enough energy to power over 2 million average American
homes for a year.\3\ These programs save money for consumers and
businesses in two ways. First, participants in the programs receive a
direct benefit: lower energy use reduces their energy bills. Second,
because energy efficiency programs are less expensive per kWh than new
power plants, all customers benefit from a reduced need for rate
increases to pay for expensive new plants. In some cases, energy
efficiency savings can also defer or eliminate the need for
transmission and distribution upgrades, further reducing the need for
rate increases.\4\
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\3\ Downs et al. 2013. See footnote 1
\4\ Regulatory Assistance Project, U.S. Experience with Efficiency
as a Transmission and Distribution Resource (Montpelier, VT: Regulatory
Assistance Project, 2012). http://raponline.org/document/download/id/
6120
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Figure 2. Cost per lifetime kWh of various electric resources.
High-end range of coal includes 90 percent carbon capture and
compression. PV stands for photovoltaics. IGCC stands for integrated
gasification combined cycle, a technology that converts coal into a
synthesis gas and produces steam. Source: Energy efficiency portfolio
data from Molina 2014 (see footnote 2); all other data from Lazard
2013.\5\
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\5\ Lazard, Levelized Cost of Energy Analysis Version 7.0.
(Washington, DC: Lazard, 2013). http://gallery.mailchimp.com/
ce17780900c3d223633ecfa59/files/
Lazard__Levelized__Cost__of__Energy__v7.0.1.pdf
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Vermont is a leader in utility-sector energy efficiency programs.
They have established an energy efficiency utility called Efficiency
Vermont which operates energy efficiency programs in most of the state.
Over the past decade, Efficiency Vermont's programs have reduced
electricity use by about 12 percent, a figure that is increasing by
about 2 percent each year. In 2012, according to an Efficiency Vermont
estimate that has been verified by the state regulator, the programs
provided the state's consumers and businesses with net economic
benefits of $102 million.\6\ An independent study estimated a net gain
of about 1,900 job-years from 2012 investments plus spending of the
money saved as a result of efficiency measures installed in 2012.\7\
Energy efficiency creates jobs because designing and installing
efficiency measures is generally more labor-intensive than building and
operating new power plants.
---------------------------------------------------------------------------
\6\ Efficiency Vermont, 2012 Annual Report (Burlington, VT:
Efficiency Vermont, 2013). http://www.efficiencyvermont.com/docs/
about__efficiency__vermont/annual__reports/Efficiency-Vermont-Annual-
Report-2012.pdf
\7\ 7 Optimal Energy and Synapse Resource Economics, Economic
Impacts of Energy Efficiency Investments in Vermont: Final Report
(Rutland, VT: Optimal Energy, 2011). Appendix 5 in http://
publicservice.vermont.gov/sites/psd/files/Pubs__Plans__Reports/
State__Plans/Comp__Energy__Plan/2011/2011 percent20CEP__Appendixes
percent5B1 percent5D.pdf. A job year is a full-time-equivalent (FTE)
job for one year.
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Another recent example of state leadership comes from Arkansas
where the Public Service Commission established a series of rules to
provide policy guidance regarding energy efficiency programs and how
utilities would be paid for this work. Arkansas began with a set of
quick-start programs to gain experience and now has expanded to a full
set of utility-run programs, with a savings target in 2015 of 0.9
percent of sales from measures installed in 2015. In 2013, the
neighboring states of Mississippi and Louisiana decided to begin
utility energy efficiency programs using the Arkansas model.
Utility regulation is primarily the province of states. However,
the federal government does provide technical assistance to states
through the State and Local Energy Efficiency Action Network (SEE
Action), a joint project of DOE and EPA. This program conducts studies
on best practices that all states can use and also provides customized
assistance when requested by states.
A more aggressive federal strategy would be to establish federal
energy-saving targets for utilities. Twenty-six states have set such
targets.\8\ A forthcoming ACEEE study finds that most of these states
are either exceeding, meeting, or close to meeting their targets.\9\
Based on this record of success, Senator Markey has proposed federal
targets in S. 1627.
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\8\ Downs et al. 2013. See footnote 1. This scorecard lists 25
states; Connecticut is a more recent addition.
\9\ A. Downs and C. Cui, EERS Progress Report (draft title)
(Washington, DC: ACEEE, forthcoming March 2014).
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building benchmarking and disclosure
A variety of states and cities have established policies to require
benchmarking buildings' energy performance relative to similar
buildings; in some cases they also require the disclosure of this
information to potential purchasers or renters. Some policies apply
just to public facilities, others to large properties (e.g., buildings
with a floor area of 50,000 square feet or more), and others more
broadly. Such policies allow building owners to identify inefficient
buildings and target them for retrofits. Where disclosure is required,
knowledge of building operating costs can inform the decisions of
prospective purchasers and renters.
The District of Columbia and Kansas provide examples of what states
can do. In the District of Columbia, by later this year all commercial
and multifamily buildings over 50,000 square feet will be required to
report benchmarking data to the District on a yearly basis. The EPA
ENERGY STAR Portfolio Manager is used to measure a building's energy
performance. In the District, 266 buildings, representing 90 million
square feet have taken the next step and been certified with the ENERGY
STAR label. District buildings of more than 150,000 square feet were
required to report their 2012 energy and water use to the District
Department of the Environment prior to April 2013. The scope of the
policy is set to expand in coming years and will ultimately include all
commercial and multifamily buildings of more than 50,000 square feet.
In Kansas, a law was passed in 2003 requiring the disclosure of
energy efficiency information for new homes (K.S.A. 66-1228). The state
developed a standard reporting format for builders and sellers in which
new homes' features are compared to the state's energy code guidelines.
The energy rating law was amended in 2007 to move the time of
disclosure from the time of closing to the time the house was being
shown. A completed energy efficiency checklist must be made available
to potential buyers.
The federal government can help state efforts in this area by
providing technical assistance and perhaps some funding to help states
and other market players get started. S. 1206, introduced by Senator
Franken, will encourage and help states to do benchmarking and
disclosure by (1) conducting a study on benchmarking and disclosure
best practices, (2) combining existing databases of benchmarking data
to make it easier to compare and analyze data, and (3) establishing a
small competitive grant program for utilities and their partners to
make whole-building data available to building owners and help them
benchmark the performance of their buildings. My understanding is that
Senators Shaheen and Portman will be incorporating this bill into their
larger Energy Savings and Industrial Competitiveness Act (S. 1392). We
commend Senators Franken, Shaheen, and Portman for their efforts to
develop this bill and move it forward.
Financing
Energy efficiency measures generally require an up-front cost but
then pay back in terms of lower energy bills over several years. While
some consumers and businesses have access to the capital needed to make
these investments, consumers who lack the capital need financing to
undertake energy-saving projects. Some building owners finance
efficiency upgrades when they refinance their mortgages. While some
banks are interested in financing specifically for energy efficiency
upgrades, most are unfamiliar with such upgrades and so are not
involved in this market. To facilitate the flow of private capital into
this market, many states have partnered with banks and other lenders in
a variety of ways to make financing widely available. Other states have
set up their own financing and/or incentive programs. Two strong
examples are Pennsylvania and Alaska.
Pennsylvania has offered the Keystone HELP program since 2006. The
program is run out of the State Treasurer's office. AFC First
Financial, an independent financial institution, originates the loans
and completes the work through a network of approved in-state
contractors. To date, more than 11,000 loans have been made totaling
about $75 million. Capital was initially provided through the
Treasurer. However in 2013 the Treasurer packaged and sold nearly 4,700
loans to investors, raising $31.3 million to replenish the capital
available for new loans.
Alaska uses substantial state appropriations to fund energy
efficiency incentive programs. The Home Energy Rebate Program uses $160
million in state funding appropriated in 2008, a major investment
relative to the state's population, but an important one given the
state's extreme climate and high heating bills. The program allows
rebates of up to $10,000 based on improved efficiency and eligible
receipts. Energy ratings are required before and after the home
improvements. The program also provides expert advice on energy
efficiency improvements for consumers and tracks their savings.
To take a few more examples, Texas has run a very successful
``LoanStar'' program for more than two decades. Tennessee has partnered
with Pathway Lending, a small-business lending initiative that has
grown into a statewide economic development lender, to provide low-
interest energy efficiency loans to businesses. Nebraska has a Dollar
and Energy Savings Loan program that has financed a range of projects
covering all sectors. Connecticut's new ``Green Bank'' program is off
to a good start, particularly with commercial PACE loans. (PACE is an
acronym for Property Accessed Clean Energy, a financing system where
the financing charges are included on property tax bills.) Hawaii has
also started some interesting on-bill financing programs in the past
few years, but I will let the witness on this panel from the Hawaii
Energy Office discuss these.
The federal government can help with technical assistance and
making capital available. The Federal Housing Administration is
offering an Energy Savers loan program that some states are promoting.
The federal government should also study the default rate for energy
efficiency loans and for mortgages associated with such loans to
provide improved information on the relative risk of various types of
energy efficiency financing.
In addition, several relevant bills are pending before Congress.
Senators Sanders, Wyden, and Murkowski introduced S. 1200 to expand the
availability of residential financing. Congress can also make it easier
to use home mortgages to improve a home's energy efficiency at the time
of purchase. S. 1106 by Senators Bennet and Isakson introduces a
variety of reforms in this regard. My understanding is that Senators
Shaheen and Portman will incorporate this latter bill into S. 1392.
State Lead-by-Example Efforts
States can make their own buildings, fleets, and other facilities
more energy efficient and thereby reduce their operating costs. Such
efforts also set a good example that shows in-state businesses what
they can do.
To take one instance, over the past decade Minnesota has shown its
commitment to sustainable buildings by setting high performance
standards and implementing integrated programs that design, manage, and
improve building energy performance. The state has set a long-term goal
of having a zero-carbon state building stock by 2030, and it offers a
complementary benchmarking program to track energy use as well as a
program to help implement retrofits. Minnesota also requires on-road
vehicles owned by state departments to reduce gasoline consumption by
50 percent by 2015. Additionally, new on-road vehicles must have a fuel
efficiency rating that exceeds 30 mpg for city and 35 mpg for highway.
In Mississippi, the Energy Sustainability and Development Act of
2013 requires all state agencies to report energy consumption or face
penalties. Agencies work with the Mississippi Development Authority
Energy and Natural Resources Division to develop energy management
plans. The state has also set a goal of achieving 20 percent energy
savings in public facilities by 2020 and has upgraded its energy codes
for public and private buildings. Mississippi is also working to
improve its fleet efficiency, requiring at least 75 percent of state
vehicles to meet fuel economy standards of at least 40 mpg by mid-2014.
Likewise, Hawaii's lead-by-example program offers comprehensive
energy efficiency services to state agencies. Aggressive policies
underpin the program and include a benchmarking requirement that all
state agencies evaluate energy efficiency in existing buildings of
qualifying size and energy characteristics. Each agency sets benchmarks
for these buildings using ENERGY STAR Portfolio Manager or a similar
tool, and buildings must be retro-commissioned every five years.\10\ In
addition, new state buildings must meet LEED Silver standards. As a
result of Hawaii's lead-by-example program, in 2011 total state agency
electricity consumption was 4.6 percent below that of the 2005 baseline
year.
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\10\ When a building is new, its various systems need to be tested
and calibrated so they operate as designed, a process called
commissioning. But systems get out of calibration and should be
periodically retro-commissioned.
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Oklahoma also stands out in this area. Their lead-by-example
efforts were a key factor in their being recognized as one of the most
improved states in the ACEEE 2012 State Energy Efficiency Scorecard.
The federal government has been a leader in developing Energy
Savings Performance Contracts (ESPC) that leverage private capital to
upgrade federal buildings. While quite a few states have used this
mechanism, some have not. The Department of Energy should step up its
efforts to help these latter states establish their own ESPC programs.
Combined Heat and Power
Combined heat and power (CHP) systems produce both heat and
electricity at the same time. By using the same system to produce both
forms of energy, waste is reduced and much higher efficiencies can be
obtained. For example, with CHP systems, combined efficiencies of 60
percent to 80 percent can be obtained, much better than the 30 percent
efficiency of an average power plant or even the 50 percent efficiency
of a new high-efficiency plant.
The growth of CHP has been slow due to a variety of barriers in
some states, including overly stringent requirements to hook up to the
electric grid, high backup power charges, and environmental regulations
that fail to recognize the higher efficiency of CHP systems.
Some states are leading the way to increase the use of cost-
effective CHP systems. For example, in May 2013, Texas House Bill 2049
became law, amending the state Utilities Code to allow owners of CHP
units to sell excess electric power at retail prices to more than one
purchaser of the CHP unit's thermal output. Owners of CHP units who do
this are not subject to regulation as a retail electric utility. This
new law should make it simpler for CHP operators to sell excess power
and make investment in CHP more attractive.
After New Jersey was particularly hard hit by Hurricane Sandy in
October 2012, the state began to look at CHP as protection against
future extreme weather events. New Jersey previously had CHP incentive
programs and had set a target of 1,500 megawatts (MW) of new CHP
facilities by 2020. Following Sandy, the state decided to prioritize
facilities such as hospitals, prisons, and wastewater treatment plants
that would be most in need of power in the event of another Sandy-like
scenario. New Jersey is now establishing new policies and programs to
put these plans into effect.\11\
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\11\ M. Winka, ``New Jersey's Clean Energy Program: Opportunities
for CHP'' (presentation to NGA Policy Academy on Industrial EE and CHP)
(Trenton, NJ: New Jersey Board of Public Utilities, 2013). http://
www.nga.org/files/live/sites/NGA/files/pdf/2013/
1303PolicyAcademyWINKA.pdf .
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The federal government can encourage and help states to adopt
policies that support cost-effective CHP systems. The joint DOE/EPA SEE
Action program is one example. Federal tax incentives are also
available for CHP systems meeting efficiency thresholds, a program
originally enacted in the Emergency Economic Stabilization Act of 2008.
Building Codes
Most states have building codes that specify construction practices
to protect health and safety and reduce building energy use. In the
case of energy use, national consensus organizations develop model
codes (e.g., the American Society of Heating, Refrigerating and Air-
Conditioning Engineers [ASHRAE] and the International Energy
Conservation Code [IECC]). States generally adopt these model codes,
which are typically updated every three years.
The American Recovery and Reinvestment Act of 2009 (ARRA)
encouraged states to adopt the then most recent codes. Forty states
plus the District of Columbia have either adopted at least one these
codes or were on a clear path to adoption as of October 2013. Moreover,
14 states have adopted a code based on model codes published in 2010 or
their equivalent. Of these, ten states updated both residential and
commercial codes (California, Connecticut, Illinois, Iowa, Maryland,
Massachusetts, New York, Rhode Island, Vermont, and Washington), and
four states updated just commercial codes (Mississippi, North Carolina,
Oregon, and Utah).
Working to improve compliance with the codes is also important.
Idaho is a good example. They have developed a plan to achieve 90
percent compliance with their code by 2017, and the Idaho Energy Code
Compliance Database for tracking compliance has been operational since
June 2012. Idaho is working with the Northwest Energy Efficiency
Alliance (a regional organization serving four northwestern states) to
measure compliance in the residential sector, and the initial results
are quite good. Idaho also has an energy code collaborative stakeholder
group that trains building officials, builders, and other contractors.
The federal government has been working with the model code
organizations and states for many years. DOE could improve these
efforts by setting targets for new codes through a public process,
providing increased technical assistance to code-setting organizations,
and better assisting and encouraging states to adopt the latest codes
and implement them well. Such provisions are contained in Title I of
the Energy Savings and Industrial Competiveness Act (S. 1392) which was
reported out of the full Energy Committee last year. DOE assistance to
states to help with code development and implementation is underfunded;
we encourage this committee to work with the Appropriations Committee
to rectify this situation.
Policies to Reduce Propane Use
The Energy Information Administration estimates that in 2013, about
0.50 quadrillion Btu (``quads'') of propane were used in the
residential sector, 0.15 quads in the commercial sector, and 0.05 quads
for transportation. Much more was used in industry, but propane is
combined with other fuels and not broken out.\12\ Given the current
propane shortage and the likelihood that the events that precipitated
this shortage could happen again, it makes sense to improve the energy
efficiency of propane-fired appliances and propane-heated buildings.
Accelerated efficiency efforts for propane will not solve the current
crisis, but they can help avert future crises.
---------------------------------------------------------------------------
\12\ Energy Information Administration (EIA), 2014 Annual Energy
Review, Early Release (Washington, DC: EIA, 2013). http://www.eia.gov/
forecasts/aeo/er/.
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In 2006 ACEEE published a study called Reducing Oil Use through
Energy Efficiency: Opportunities Beyond Cars and Light Trucks.\13\ As
most propane comes from oil, this study included many energy efficiency
opportunities to reduce propane use, including more efficient propane-
fired furnaces and water heaters, and improving the energy efficiency
of propane-heated homes. For example, we found opportunities to reduce
propane for home heating by about 38 percent, and opportunities to
reduce propane for water heating by about 28 percent.
---------------------------------------------------------------------------
\13\ R.N. Elliott et al., Reducing Oil Use through Energy
Efficiency: Opportunities Beyond Cars and Light Trucks (Washington, DC:
ACEEE, 2006). http://aceee.org/research-report/e061.
---------------------------------------------------------------------------
Many utilities offer energy efficiency programs for homes and
businesses that use electricity and natural gas. But none offers
programs for propane and fuel oil, and the fuel dealers are usually too
small and undercapitalized to offer energy efficiency services. To
address this gap, several states have begun programs to help residents
using propane and oil. These programs are most common in the Northeast
where a higher proportion of homes use oil and propane than in other
regions.
For example, in addition to its electric efficiency program,
Efficiency Vermont spends about $5 million per year on programs to save
unregulated fuels including propane, oil, and wood. The funds come from
Efficiency Vermont bids into the ISO-New England forward capacity
market and from sales of emissions allowances under the regional
greenhouse gas program. Most of the funds are used for the Home
Performance with ENERGY STAR residential retrofit service, which
retrofitted about 1,300 homes using unregulated fuels in 2013. Smaller
funding amounts serve the small business and commercial sectors.\14\ An
alternative funding source is illustrated by New York state, which has
a very small tax on fuel oil. States could use a similar mechanism for
propane, with the funds benefitting propane users.
---------------------------------------------------------------------------
\14\ Scott Johnstone, Executive Director, Vermont Energy Investment
Corp. (which runs Efficiency Vermont), email to Steven Nadel, February
6, 2014.
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The federal government could encourage and assist more states to
implement energy efficiency programs for unregulated fuels through
technical assistance, competitive grants, and financing.
Conclusion
States are stepping out and leading energy efficiency efforts in
the United States as a way to save energy, lower consumer bills, and
promote economic development. States can learn from each other to help
advance their efforts. The federal government can help with information
on best practices, technical assistance, matching grants for innovative
efforts, and assistance in setting up financing programs. The federal
government can also learn from successful state efforts and pass
legislation such as the Shaheen-Portman bill (S. 1392) that builds on
what states have done so far to help them do more in the future.
Good programs and policies are found in the majority of states,
both blue and red. Energy efficiency has been a bipartisan effort at
the state level, as it has been in the Senate Energy Committee. I hope
this spirit of bipartisanship can spread to the full Senate and House.
This concludes my testimony. Thank you for the opportunity to
present this information.
Senator Franken. Thank you, Mr. Nadel.
We've been joined by the Ranking Member, Senator Risch of
Idaho of which you were--the State which we just heard about
the efficiency of your building codes. So thank you for joining
us. We are--have been talking--we're just beginning the
testimony because of the votes.
We started off with Senator Shaheen of Shaheen/Portman fame
or Portman/Shaheen fame now. We're joined by the esteemed
Senator from Ohio.
So I guess we'll continue our testimony with Mr.
Taylor.Prepared Statement of William E. Taylor, Director, Texas
State Energy Conservation Office, Arlington, VA
STATEMENT OF WILLIAM E. TAYLOR, DIRECTOR, TEXAS STATE ENERGY
CONSERVATION OFFICE, ARLINGTON, VA
Mr. Taylor. Chairman Franken and Ranking Member Risch, my
name is William E. ``Dub'' Taylor. I served as the Director of
the Texas State Energy Conservation Office. Today I'm
testifying on behalf of the National Association of State
Energy Officials, known as NASEO, where I served as Vice
Chairman.
I formally served as chairman as NASEO. Our Association
includes all of the 56 State offices that represent energy
issues in the State's territories and the District of Columbia.
I'm pleased to be appearing before this subcommittee to discuss
the activities within my own State, but also actions around the
United States and finally how State actions in the energy arena
can inform Federal policy and legislation.
You have my full written testimony and from that I would
like to highlight 2 key areas.
First of all, select State actions.
Our Texas LoanSTAR revolving loan program has operated for
2 decades and has provided public entities over $390 million at
low cost financing so they can implement energy and water
efficiency improvements. LoanSTAR, which is also the nickname
of our State, in this case stands for Loans to Save Taxes and
Resources, a play on words. This program has made a major
difference in bringing the utility costs down for public
facilities thus allowing taxpayer dollars to be utilized for
priority issues. We have hit our targets. The energy savings of
$423 million have exceeded the costs and there has never been a
loan default.
In addition to our own resources we've added funds from the
American Recovery and Reinvestment Act to this program and this
has made a significant difference allowing us to greatly expand
the program. More recently Texas has begun to implement the
Property Assessed Clean Energy or PACE Act in Texas which
permits financing to be provided upfront allowing permanent
energy and water efficiency improvements to be made by
commercial and industrial businesses with repayment be a
voluntary property assessment. To facilitate an orderly,
consistent State wide approach to PACE design and
implementation, we are working with a coalition of stakeholders
including local governments, property owners, lenders, energy
service companies and others. The results have been very
positive.
I also want to highlight some of the actions being--taking
place in other States.
Obviously you're also hearing today from Minnesota and
Hawaii. We at NASEO attempt to work with the individual States
and on a collective basis to provide good ideas and spread the
successes.
Just like our LoanSTAR program almost 40 States have some
form of energy financing programs.
In Alaska, for example, they established a $250 million
Alaska energy efficiency revolving loan fund in 2010. The fund
is available to finance energy efficiency improvements on
public facilities throughout the State.
While most are revolving loan funds, we are beginning to
see the development of so called green banks in the States.
In addition to financing, we've also seen a big increase in
the development of comprehensive energy plans. NASEO has
studied State actions and shared the best practices with all of
our colleagues.
For example, in Idaho, the Governor's Office of Energy
Resources which is the State Energy Office, coordinates energy
planning with all State agencies, the Idaho PUC, the
legislature, local elected officials and other stakeholders.
Idaho has also participated in regional energy dialogs.
The second area I wanted to cover is what can the Federal
Government do?
NASEO has been very pleased with the increased level of
cooperation we are seeing from DOE under Secretary Moniz along
with the new EPSA office led by Melanie Kenderdine, the Office
of Electricity Delivery and Energy Reliability known as OE and
the Office of Energy Efficiency and Renewable Energy.
Coordination on energy emergencies through OE and EPSA has
continued and has been necessary in light of this winter's
propane issues and the aftermath of Super Storm Sandy in the
Northeast. The extraordinary technical and analytical expertise
of OE combined with the State energy offices emergency
planning, mitigation and response efforts is a Nation's first
line of defense in limiting the health and safety impacts of
energy supply emergencies, big and small that happen every year
from weather, cyber and other market disruptions.
NASEO supports the continued next, on behalf of NASEO, I
want to stress the support of certain legislation and Federal
actions. NASEO supports the continued and expanded funding of
the State Energy Program, SEP, and the Weatherization
Assistance Program. These programs are a critical element of
the State/Federal partnership. As you move toward FY'15 we hope
the appropriations process will continue to recognize the
import of these programs.
The most recent national laboratory study of SEP showed
that for every Federal dollar invested almost $11 is leveraged
from non-Federal sources and over $7 is saved where the State
energy programs are involved. Senators Coons, Collins and Reed
have proposed a bipartisan bill, S. 1213 to reauthorize SEP and
Weatherization. NASEO strongly endorses S. 1213 and we had
hoped it would have been included in the Shaheen/Portman bill,
S. 1392.
Congress and the Administration can also help beyond the
basic reauthorization by ensuring that the entire SEP
appropriation go for the basic formula allocation.
NASEO also believes that the passage of the Energy
Production Innovation Challenge, originally introduced as S.
1209 by Senators Warner, Manchin, Tester and Schatz, would be
another opportunity for State/Federal cooperation. The bill
would challenge States to develop new ideas and strategies for
developing energy savings and improving energy productivity.
NASEO also supports the Sanders/Wyden/Murkowski Residential
Energy Savings Act introduced as S. 1200. This bill would
provide specific support in the residential sector by enabling
people to borrow money at reasonable rates, improve the energy
efficiency of their homes and pay back the loans.
These 3 bills would all complement the proposals contained
in Shaheen/Portman and the McKinley/Welch H.R. 1616 bill in the
House which NASEO also supports.
In addition, Chairman Franken's bills on building
benchmarking, S. 1206 and the Local Energy Supply and
Resiliency Act, S. 1205, that would encourage waste heat
recovery systems are both common sense actions.
We would be happy--I'd be happy to respond to any
questions. Thank you for the opportunity to testify.
[The prepared statement of Mr. Taylor follows:]
Prepared Statement of William E. Taylor, Director, Texas State Energy
Conservation Office, Arlington, VA
Chairman Franken and Ranking Member Risch, my name is William E.
``Dub'' Taylor, and I serve as the Director of the Texas State Energy
Conservation Office. Today, I am testifying on behalf of the National
Association of State Energy Officials (``NASEO''), where I serve as the
Vice-Chairman. I formerly served as Chairman of NASEO. Our association
includes all the 56 energy offices from the states, territories and the
District of Columbia. Our objective is to operate programs and develop
and implement policies that improve our nation's energy position, and
to diversify our energy portfolio. While the state energy offices are
all in different places in state government, there are a common set of
activities focused on energy and economic development, sensible energy
efficiency and renewable energy policies, balanced portfolios and
coordination with our peers.
I am pleased to be appearing before this Subcommittee to discuss
the activities within my own state, but also actions around the United
States, and finally how state actions in the energy arena can inform
federal policy and legislation. I am very pleased to be appearing
before you with my counterparts from Hawaii and Minnesota.
In my own state of Texas, we obviously have a large resource base
in the oil and gas area. The shale revolution in my region, centered
now on the Eagle Ford, has dramatically helped to improve our nation's
energy position. As part of our commitment to a diverse resource base,
we have implemented policies to facilitate the development of our Clean
Renewable Energy Zone (``CREZ'') transmission system upgrades, which
has led to the multi-billion dollar development of wind resources in
west Texas and high voltage electric transmission facilities to move
those resources to the population centers further east. As the
Subcommittee knows, our intrastate transmission system, ERCOT, is not
regulated at FERC, but we believe our uniquely Texas system has been
responding to changes in the energy marketplace. We certainly work
closely with the large local governments in our state, such as Austin
and San Antonio, which have helped expand renewable energy and energy
efficiency opportunities.
I want to discuss a couple of programs in Texas in more detail.
First, our LoanSTAR (``Loans to Save Taxes And Resources'') energy and
water revolving loan program has operated for two decades and has
provided hundreds of millions of dollars in low-cost financing to
public facilities to implement energy and water efficiency
improvements. This program has made a major difference in bringing the
utility costs down for public facilities, thus allowing taxpayer
dollars to be utilized for priority issues. We have hit our targets.
The energy savings have exceeded the costs and there has never been a
loan default. In addition to our own resources, we added funds from the
American Recovery and Reinvestment Act (``ARRA''), and this made a
significant difference, allowing us to greatly expand the program. In
addition, local governments in Texas have begun to implement a
Commercial and Industrial PACE program, which permits financing to be
provided up-front, and energy efficiency improvements to be made by
businesses, while keeping payments manageable. My office has been
working closely with the local governments to ensure uniformity and
avoid needless duplication of tasks. The results have been positive.
While we proud Texans like to think we are the biggest and the
best, just last week the state energy officials met in Washington, D.C.
for our winter meeting. The energy directors all share very good
information and we love to ``steal'' ideas from each other for good
programs and policies. Of course, the overlay of the difficult
situation in the propane market was discussed, and we are hopeful that
situation will begin to ease, both on price and supply. Interestingly,
Energy Secretary Moniz spoke to our group and forcefully made the case
that he wanted better and more expanded partnerships with state and
local governments. He indicated that he wanted our ideas for the newly
developing Quadrennial Energy Review (``QER''), and we will be working
together to supply those ideas to the Secretary. Some of the critical
issues we discussed at the meeting revolve around interdependencies of
our energy systems, resiliency, energy policy and environmental
connections and how the states and the federal government can
coordinate more effectively. After his speech to NASEO, the Secretary
headed to Texas for meetings to discuss new developments and see
firsthand the advances made in clean energy technology deployment,
smart grid, infrastructure enhancements and responsible development of
energy resources. He said in many ways, Texas is a perfect example of
an all-of-the-above energy strategy as it leads the country in oil, gas
and wind energy production.
I also want to take the opportunity to discuss some of the actions
taking place in other states. Obviously, you are also hearing today
from Minnesota and Hawaii. We at NASEO attempt to work with the
individual states and on a collective basis to provide good ideas and
spread the successes.
We have seen a big increase in the development of comprehensive
state energy plans. NASEO has studied state actions and shared best
practices with all of our colleagues. For example, in Idaho the
Governor's Office of Energy Resources (the state energy office)
coordinates energy planning with all state agencies, the Idaho PUC,
legislatures, local elected officials and other stakeholders. Idaho has
also participated in regional energy dialogues.
Just like our LoanSTAR program, almost 40 states have some form of
energy financing programs. While most are revolving loan funds, we are
beginning to see the development of so-called ``Green Banks.''
Connecticut has implemented such a ``Green Bank'' and they are focusing
on commercial PACE activities. Connecticut used $40 million to attract
more then $180 million in private investment. Mark Glick and the folks
in Hawaii have a Green Bank that is developing solar energy programs.
My colleagues in New York have announced the development and
implementation of a new Green Bank, which is being capitalized up to $1
billion. One interesting example is in Nebraska, where they have
coordinated with the local banks and credit unions on a program that
has operated for 24 years. The Nebraska Dollar and Energy Savings Loan
Program has supported 28,100 projects for a total of $301 million. The
total defaults for that program over 24 years is less than $110,000.
This program involves a lot of private dollars, but also some funds
from the oil overcharge refunds and ARRA. Another interesting example
is in Kansas, where that state has utilized an energy service company
model and they have implemented energy efficiency measures in over 76
percent of the state governmental buildings. The Energy Service
Performance Contracting (``ESPC'') model is certainly being used across
the country. A big focus on schools has helped in Idaho, where they
completed 894 K-12 school building audits, followed by HVAC and control
system tune-ups on 836 buildings and the installation of new energy
software in 91 buildings. The federal government's ESPC program has
also been expanding, which is a positive development. Last year in
Oklahoma, Governor Fallin announced a new effort to increase the energy
efficiency in state buildings by 20 percent by 2020. We are seeing a
big expansion in energy financing programs throughout the country, and
these are successful when they are coupled with public education
activities so businesses and consumers see the value of actions in this
area. In Georgia, they have ramped up performance contracting from $4.5
million to $80 million, just for state facilities. They have also
lowered loan rates for local efficiency projects at water facilities,
wastewater plants and landfills.
In Tennessee the state energy office is working closely with the
Tennessee Valley Authority in a integrated resource planning process.
The state has also developed a large, new education and outreach
initiative to businesses, homeowners and government to expand the use
of energy efficiency and renewable energy.
In Alaska, they established a $250 million Alaska Energy Efficiency
Revolving Loan Fund in 2010. The fund is available to finance energy
efficiency improvements on public facilities throughout the state.
First, SEP funds were used to collect benchmarking data on
approximately 1300 public facilities, plus an additional 100
university-owned buildings.
In Arizona, SEP funds have supported energy efficiency improvements
in 33 school districts across the state. In addition, 57 small school
districts are being helped to install solar photovoltaic systems.
In Michigan, over 25 loans and grants have been made through the
Michigan Clean Energy Advanced Manufacturing program. One example has
been the company that constructed a pilot scale biomass gasification
center and an advanced manufacturing rapid prototyping center. They
have also aggressively moved forward with an energy financing program.
In New Mexico, in November the utility commission approved a
``whole home'' energy efficiency program, as well as programs for low-
income New Mexicans and home energy use reporting programs ($22.5
million).
In North Dakota, they have worked hard to expand industrial energy
efficiency activities in partnership with North Dakota State
University. They have also dramatically expanded educational outreach
to farmers in order to increase their energy efficiency.
In Ohio, they have also focused on implementation of an Energy
Efficiency Program for Manufacturers (``EEPM''), recognizing that
reducing their costs keeps them more competitive.
In Louisiana, the state, working with Entergy has invested $14.7
million in 61 energy efficiency improvements that has resulted in $30
million in annual fuel savings. The SEP program has also supported
their Home Energy Rebate Option Program (``HERO''), which has resulted
in over 1,100 home retrofits and a 30 percent average increase in
energy efficiency.
In South Dakota, they have implemented cost-effective energy
efficiency projects in 55 state-owned building, totaling more than 7.4
million square feet of building space, saving substantial sums for
taxpayers.
In Wisconsin they have implemented a statewide network of trained
contractors to conduct energy use assessments and install energy
efficiency products that help small business owners reduce their energy
costs. They have developed a K-12 energy education program. They have
also expanded a municipal alternative-fueled vehciles program.
What Can the Federal Government Do?
The Subcommittee has asked NASEO to provide our thinking on what
the federal government can do to work with the states and to learn from
experiences within the states. First of all, NASEO has been very
pleased with the increased level of cooperation we are seeing from
Secretary Moniz, the new EPSA Office led by Melanie Kenderdine, Pat
Hoffman and the Office of Electricity Delivery and Energy Reliability
(``OE''), David Danielson and the Energy Efficiency and Renewable
Energy Office, Adam Sieminski at EIA and the Congressional and
Intergovernmental Affairs Office. Coordination on energy emergencies
through OE and EPSA has continued, and has been necessary in light of
this winter's propane issues and the aftermath of Superstorm Sandy in
the northeast. The extraordinary technical and analytical expertise of
OE, combined with state energy offices' energy emergency planning,
mitigation and response efforts, is our nation's first line of defense
in limiting the health and safety impacts of energy supply
emergencies--big and small--that happen every year from weather, cyber,
and other market disruptions. Importantly, more rapid restoration of
liquid fuel, natural gas, and electricity services also means a faster
return to normal economic activity, which makes a real difference in
communities across the country every year. Increasingly, energy supply
disruptions are impacted by interdependencies among energy
infrastructure (electric, gasoline, diesel) and other market sectors
(e.g., rail, water, cyber, food supplies). The state-federal-private
energy emergency and interdependencies efforts led by DOE and the
states need your support and increased attention with regard to the
great value they deliver to consumers and businesses and their
relevance to the nation's economic and energy security. The states also
continue to work with EPA on the voluntary Energy Star programs. We are
working with HUD and DOE on manufactured housing standards and we
certainly support efforts to incorporate energy costs in the appraisal
process, both administratively at FHA and through legislation, such as
the Bennet/Isakson bill (the ``SAVE'' Act). The ``Tenant Star'' bill
(H.R. 2126) that recently passed the House Energy and Commerce
Committee is another example of good legislation that would help
address the split incentives between building owners and lessees. Now
that the Congress has passed and the President has signed the new
multi-year Farm bill (H.R. 2642), there is a real opportunity to expand
such important programs as the Rural Energy for America Program
(``REAP''), contained in the Energy Title, which would provide $50
million per year in mandatory funding for energy programs for farmers,
ranchers and rural small businesses. The $889 million in mandatory
funding in the Energy Title supports a variety of activities. In
addition, the financing program for rural electric cooperatives--the
Energy Efficiency and Loan Conservation Program--based on a South
Carolina model would permit RUS to support up to $250 million in these
zero-interest loans. NASEO believes these are all positive steps.
Continued and expanded funding for the State Energy Program
``SEP'') ($50 million in FY'14) and the Weatherization Assistance
Program ($174 million in FY'14) is the first order of business. These
programs are a critical element of a state-federal partnership. As you
move towards FY'15, we hope the appropriations process will continue to
recognize the import of these programs. The most recent national
laboratory study of SEP showed that for every federal dollar invested,
almost $11 is leveraged from non-federal sources and over $7 is saved
where energy efficiency programs are involved. Senators' Coons, Collins
and Reed have proposed a bipartisan bill (S. 1213) to reauthorize SEP
and Weatherization. This bill has reduced authorization levels from
past statutes, recognizes the flexibility provided through SEP and
would update the Weatherization Program to move towards enhanced
quality assurance and to permit the development of an innovation
program which should allow volunteer organizations (such as Habitat for
Humanity and Rebuilding Together) to expand their role. NASEO strongly
endorses S. 1213, and we had hoped that it could have been included in
the Shaheen-Portman bill (S. 1392). Congress and the Administration can
also help beyond the basic reauthorization by ensuring that the entire
SEP appropriation of $50 million go for the basic, formula allocation.
Other proposals, as set forth below, could be used for competitive
funding. A competitive allocation should not come out of the basic
formula appropriation.
NASEO also believes that passage of the Energy Productivity
Innovation Challenge (``EPIC''), originally introduced as S. 1209 by
Senators' Warner, Manchin, Tester and Schatz, would be another
opportunity for state-federal cooperation. The bill would challenge
states to develop new ideas and strategies for developing energy
savings and improving energy productivity. An estimate by my fellow
panelist at ACEEE assumed that $8.40 in energy savings would be
returned for every dollar invested. This would be a voluntary
initiative that would allow states to lead the way.
NASEO also supports the Sanders, Wyden, Murkowski, Residential
Energy Savings Act (``RESA''), introduced as S. 1200. This bill would
provide specific support in the residential sector, by enabling people
to borrow money at reasonable rates, improve the energy efficiency of
their homes and pay back the loans. The U.S. Treasury would provide
funds to states who would loan the money out and eventually the
Treasury would be paid back. Again, it is voluntary and flexible and
would directly help residential consumers.
These three bills: a) reauthorization of SEP and WAP, with a new
innovation fund and quality assurance provisions; b) EPIC; and c) RESA,
would all complement the proposals contained in Shaheen-Portman (S.
1392) and the McKinley/Welch (H.R. 1616) bill in the House, which NASEO
supports. In addition, Chairman Franken's bills on building
benchmarking (S. 1206) and the Local Energy Supply and Resiliency Act
(S. 1205), that would encourage waste heat recovery systems, are both
common sense actions.
We would be happy to respond to any questions. Thank you for the
opportunity to testify.
Senator Franken. Thank you, Mr. Director. Your endorsement
of my amendments and I'm sure Senator Portman was listening and
Senator Shaheen will have copies of the testimony and we'll try
to--I support those as well.
I'd like to welcome my friend, Mike Rothman, from
Minnesota, Commissioner of Department of Commerce there. Thank
you for making the trip. Please go ahead.
STATEMENT OF MIKE ROTHMAN, COMMISSIONER OF THE MINNESOTA
DEPARTMENT OF COMMERCE
Mr. Rothman. Chairman Franken, Ranking Member Risch and
members of the committee, thank you for the opportunity to
speak on the topic today of lessons from State efficiency and
renewable programs.
As the Commissioner of the Minnesota Department of
Commerce, I am one of the energy regulators for the State of
Minnesota. With me today is Janet Strath, the Director of our
State energy office. I want to applaud you, Mr. Chair, for
holding this hearing. In addition to the written testimony I
want to supplement and highlight some key important points.
We in Minnesota are honored to be recognized for our work
in energy efficiency and renewable energy. I would like to
repeat a few words of Governor Mark Dayton from his last State
of the State speech and to say, ``That we will not rest on our
laurels, but rather we want to use our past achievements as
springboards for Minnesota's next big leap toward a sustainable
energy future.''
Minnesota does not have, as you know, any of its own oil,
natural gas or coal resources. We, however, do have a
significant potential to capture energy efficiency and an
abundance of wind and solar resources. Minnesotans recognize
the imperative to transform our energy future toward a more
sustainable, environmentally friendly and reliable energy
system.
Today I want to share some of our great success stories.
Over the past several decades, through our Conservation
Improvement Program, known as CIP, Minnesota utilities have
invested hundreds of millions of dollars in improved energy
efficiency. Minnesota's 2007 Next Generation Act expands upon
energy efficiency and moved utilities toward an energy savings
goal of 1.5 percent.
Energy efficiency is the first option for reducing energy
use and minimizing related environmental concerns. In real
terms, Minnesota's energy efficiency programs have avoided the
need for about two 500 megawatt natural gas combined cycle
plants.
In 2007 Minnesota also established the United States most
aggressive renewable energy standard at the time. The standard
requires the State's electric utilities obtain 25 percent of
electric generation from renewable sources by 2025. The largest
utility, Xcel, must meet a 30 percent standard by 2020.
I'm pleased to say that all electric utilities are on track
to meet the goals with current and planned renewable power
generation projects.
Minnesota has also established an ambitious statewide
greenhouse gas reduction goal of 15 percent by 2015, 30 by 2025
and 80 percent by 2050.
Now this year Minnesota made several very important steps
on the pathway of our renewable energy future. Surprisingly
Minnesota has an abundance of solar energy, even in our
northern climate. We're proud to point out that Minnesota has
nearly almost the same solar capacity as Houston. To capitalize
on this opportunity the State adopted a solar electricity
standard to obtain 1.5 percent of retail electricity sales from
solar to electricity by the end of 2020 and a 10-percent goal
by 2030.
Minnesota also embarked on developing a value of solar rate
as an alternative to enhanced distributive generation which is
meant to achieve for utilities a price that reflects the true
value of solar to the energy grid. We will be the first State
in the Nation to implement a value of solar rate. We will be
creating a model for the country.
We believe this will be a big leap for Minnesota's solar
energy market. I can imagine the day when Minnesota has a
strong solar energy component to diversify and strengthen our
clean energy resources.
As background for your legislation.
Since 2004 all public buildings in Minnesota were evaluated
using an innovative benchmarking tool. During that time
sustainable building design guidelines were also developed for
all public buildings that received a bond funds. In 2008 the
guidelines expanded to a sustainable buildings 2030 program
which significantly reduced carbon dioxide emissions. The 66
buildings designed under this program are predicted to save
$5.24 million each.
On your legislation I want to congratulate you on passing
the Rural Energy for America program. The REAP program is part
of the Ag bill. It's a significant boost for the Ag community
and Minnesota.
The Minnesota Department of Commerce supports your
benchmarking bill, reflects the need for all building owners to
easily understand how energy efficient their building are or
are not.
We also support the Local Energy Supply and Resilience Act
that promotes district heating, CHP. Minnesota, as you know,
has a great success story in the St. Paul District Energy which
supplies heating and cooling for Minnesota's capital complex as
well as for much of the St. Paul downtown area.
I also want to express support for the State Energy Program
and the Weatherization program. We are hopeful that Congress
could head toward a more sustainable level for SEP of at least
$230 million this coming year. The $50 million is certainly an
important improvement, but a more sustainable level would be
$75 million this coming year.
We also strongly support the WAP, Weatherization Assistance
Program, the WAP program. The $174 million provided for
Weatherization in fiscal year 2014 is a really good step in the
right direction.
If you will indulge me for a minute I'd like to touch on
the propane crisis in Minnesota.
Senator Franken. That's a very important crisis right now.
In fact, we were in near Faribault on a farm doing a roundtable
or kind of a kitchen table event just this past weekend. So,
please, I--you know, as much time as you want on that.
Not as much time, but go ahead.
Mr. Rothman. I know you all have flights, so I will make it
as short as possible.
But thank you, Senator Franken, for your strong leadership
on the propane emergency.
Minnesota, like many other States, has been gripped by a
prolonged shortage of propane. Over 15 percent of homes in
rural Minnesota are heated with propane and many poultry and
livestock farmers depend on propane to keep animals from
freezing to death during our coldest winter in over 30 years.
That's just as of today.
As you know, Governor Dayton has taken a number of
emergency steps and I should say a lot of Governors have as
well including declaring a state of peace time emergency.
Minnesota and other States have experienced price shock of
double and triple the normal retail prices. Dozens of homes
throughout Minnesota have run out of fuel to heat their homes
in sub zero weather over the last 2 or 3 years.
I strongly urge this subcommittee to focus on the causes of
the propane crisis and to take actions to avert one from
happening next year and the years after. Governor Dayton has
written to the Administration and asked for additional funding
this year for low income heating assistance, urged the Congress
to take a look at that as well so that Minnesota can supplement
its program.
I am pleased to join my colleagues here today. Energy
efficiency and renewable energy are critical elements of all of
our programs. It will help us achieve a clean energy future. As
you indicated at the top to be able to achieve a global, clean
energy race and win it.
Thank you, Mr. Chairman.
[The prepared statement of Mr. Rothman follows:]
Prepared Statement of Mike Rothman, Commissioner of the Minnesota
Department of Commerce
Chairman Franken and Members of this Committee, thank you for the
opportunity to submit this statement for inclusion in the record of the
hearing by the Senate Energy Subcommittee on February 12, 2014
entitled, ``Lessons from state efficiency and renewable programs.''
As the Commissioner of the Minnesota Department of Commerce, I am
one of the energy regulators for the State of Minnesota. The
Department's mission is to protect the public interest, advocate for
Minnesota's consumers and ensure a strong, competitive and fair
marketplace on a wide range of industries in Minnesota, including
energy, telecommunications, insurance, banking, and securities, among
others. The Division of Energy Resources, which includes our state
energy office, is contained within the Department of Commerce.
From the outset, I want to applaud Senator Franken for holding this
hearing and his leadership on energy efficiency and renewable energy.
Today, I want to share some of Minnesota's successful and innovative
programs in energy efficiency and renewable energy and how those
programs relate to energy issues that concern the entire nation.
ENERGY EFFICIENCY
conservation improvement program
Energy efficiency is a cost effective means to decrease the amount
of energy used. Minnesota instituted substantial energy efficiency
programs through its utilities in the early 1990s. In 2007, the
Legislature required all electric and natural gas utilities to annually
save 1.5 percent of their retail sales starting in 2010. While
individual utility performance has varied, collectively Minnesota
utilities exceeded the 1.5 percent requirement in 2011, the year of our
most recent data. Incremental annual electric and gas savings (first
year savings from newly installed energy efficiency measures) over 2010
and 2011 totaled approximately 1.8 million megawatt hours and 5.4
million dekatherms. Combined, these energy savings are equivalent to
approximately 11.5 million BTUs-enough energy to heat, cool and power
over 102,000 homes in Minnesota for one year. Energy savings through
efficiency and conservation also have a sizeable impact on carbon
emissions. As a result of the savings in 2010-2011, nearly two million
tons of CO2 emissions were avoided annually--equivalent to
removing approximately 370,000 cars from the road for one year.
buildings--b3 and sb2030
Minnesotans recognize the importance of understanding how our
buildings work. Starting in 2004, all public buildings were evaluated
using an innovative benchmarking tool. During that time, sustainable
building design guidelines were also developed for all public buildings
that received bond funds. In 2008, the guidelines expanded to become
the Sustainable Buildings 2030 program -standards that significantly
reduce carbon dioxide emissions by lowering energy use in new and
substantially renovated buildings through cost effective, energy
efficiency performance standards. The 40 buildings designed to the
SB2030 Energy Standard so far are predicted to save approximately 250
million kBTUs per year-saving $3.25 million each year. These buildings
are being built at the same cost as a building built to code.
The benchmarking tool-B3-has become the energy management tool used
by all state agencies, allowing them to gauge which buildings are most
cost effective to retrofit. Senator Franken's benchmarking bill
reflects the need for all building owners to easily understand how
their buildings are working-the Minnesota Department of Commerce
supports the passage of this bill (S.1206--Benchmarking).
The Minnesota Department of Commerce also supports Senator
Franken's bill (S. 1205--Local Energy Supply and Resiliency Act) that
promotes district heating and cooling-Saint Paul District Energy
supplies heating and cooling for the Capitol Complex as well as for
much of the Saint Paul downtown area. In addition, last year the
Minnesota Legislature passed legislation that allows waste heat
recovery projects to count in utility efficiency programs.
RENEWABLE ENERGY
solar electricity standard/res
In 2013, the state adopted a solar electricity standard to obtain
1.5 percent of investor-owned utility retail electricity sales from
solar electricity by the end of 2020. This solar standard is on top of
Minnesota's Renewable Energy Standard passed in 2008, which requires
all electric utilities in the state to generate at least 25 percent of
their electricity from renewable energy resources 2025 and 30 percent
by 2020 for the state's largest incumbent utility Xcel Energy
(altogether about 27.5 percent by 2025). This will result in six-to-
seven thousand megawatts of renewable capacity by 2025. All Minnesota
utilities have complied with the standard to date-18 percent for Xcel
Energy and 12 percent for all other utilities.
value of solar tariff
The Legislature also directed my agency to establish a Value of
Solar methodology. The methodology (developed by the Department and
submitted to the state's Public Utilities Commission (PUC) at the end
of January) included the value of energy and its delivery, generation
capacity, transmission capacity, transmission and distribution line
losses, and environmental value. We expect Value of Solar to provide an
innovative alternative to net metering by providing fair compensation
to solar customers while also allowing utilities to recover the
reasonable costs of grid services. Investor-owned utilities may apply
to the PUC for a Value of Solar Tariff that compensates customers
through a credit (i.e., moving the netting from the meter to the bill)
for the value to the utility, its customers, and the environment for
operating distributed solar PV systems interconnected to the utility
and operated by the customer primarily for meeting their own energy
needs.
renewable energy integration study
Minnesota utilities and transmission companies, in coordination
with the Midcontinent Independent Transmission Service Operator (MISO)
are conducting an engineering study on increasing the state's Renewable
Energy Standard to 40 percent by 2030, and to higher proportions
thereafter, while maintaining system reliability. The Commerce
Department is directing the study; we appointed a Technical Review
Committee comprised of individuals with experience and expertise in
electric transmission system engineering, electric power system
operations and renewable energy generation technology to review the
study's methods, assumptions, ongoing work and preliminary results. The
study will be completed in November 2014.
LINKS WITH FEDERAL PROGRAMS
state energy program
Much of the work that I have described has been completed utilizing
resources from the U.S. State Energy Program (SEP). This federally-
funded program has been instrumental in the last two decades as
Minnesota has progressed in the deployment of its energy efficiency and
renewable energy programs. The State Energy Program has provided the
opportunity to have technical experts in energy efficiency and
renewable energy technologies as those technologies have matured in the
state. For example, these technical experts helped shape the Value of
Solar tariff and are participating in the Renewable Energy Integration
Study.
The State Energy Program also has a history of success working
across all sectors of the economy and supporting cost-effective energy
efficiency improvements. The last comprehensive study of the program by
Oak Ridge National Lab showed that each federal dollar invested in the
State Energy Program is leveraged by nearly $11 of state and private
funds and results in more than $7 in annual energy savings. These SEP-
supported projects and programs include a wide-range of activities,
such as school and public building energy efficiency programs, energy
efficiency financing activities, industrial and commercial programs,
and energy efficiency for homeowners, and agricultural projects.
energy assurance--propane situation
State Energy Program staff also leads the Commerce Department's
energy assurance program, working with Homeland Security staff to
ensure they have up-to-date information on Minnesota's energy system.
This has been particularly important these past several weeks as a
critical propane situation has developed in our state. Minnesota, like
many other states, has been gripped by a prolonged shortage of propane.
Over 15 percent of homes in rural Minnesota are heated with propane,
and many poultry and livestock farmers depend on propane to keep
animals from freezing during our coldest winter in 30 years.
Our State Energy Program and state-supported energy assurance
efforts, in conjunction with the technical and analytical resources of
DOE are our nation's first line of defense in limiting the health and
safety impacts of energy supply emergencies-big and small-that happen
every year from weather, cyber, and other market disruptions.
Importantly, more rapid restoration of liquid fuel, natural gas, and
electricity services also means a faster return to normal economic
activity, which makes a real difference in communities across the
country every year. Increasingly, energy supply disruptions are
impacted by interdependencies among energy infrastructure (electric,
gasoline, and diesel) and other market sectors (e.g., rail, water,
cyber, food supplies). The state-federal-private energy emergency and
interdependencies efforts led by DOE and the states need your support
and elevation with regard to the great value they deliver to consumers
and businesses and their relevance to the nation's economic and energy
security.
In addition, we are doing all we can to provide assistance through
the Low Income Home Energy Assistance Program (LIHEAP) during this
emergency, but will need additional funds to get through the rest of
the winter. Governor Dayton has called on the President to ask Congress
to make more funding available and I join him in urging the members of
this Committee to heed his call.
weatherization assistance program
The Weatherization Assistance Program (WAP) has helped low-income
families, seniors, veterans, and individuals with disabilities make
lasting and cost-effective energy efficiency improvements to their
homes and reduce the burden of high energy prices for more than three
decades. To date, more than 7.4 million homes have been weatherized in
the nation, providing as much as $450 in savings on a household's
annual energy bill. Weatherization also supports thousands of high
quality jobs. The National Association of State Community Services
Programs estimates that there are approximately 10,000 highly skilled
jobs in the weatherization network, with countless more supported in
related businesses including materials suppliers, vendors, and
manufacturers who make more than 90 percent of the products used in
weatherization. The Weatherization Assistance Program has helped the
construction industry and given a boost to American manufacturers and
small businesses during challenging economic times. In addition,
electric and gas utilities in many states depend on the WAP delivery
network to carry out low-income residential efficiency initiatives,
leveraging scarce resources and measurably increasing the impact of WAP
in these states. As the program's funding has declined in recent years,
both the state-level and private sector programs that rely on the WAP
network and infrastructure have been impaired.
These two federal programs provide important links to ongoing state
work. We strongly encourage you to restore funding for the
Weatherization Assistance Program to pre-Recovery Act levels. The $174
million provided for Weatherization in FY'14 is a good step in the
right direction. This equals the FY'11 funding level. We are hopeful
that Congress could head towards a more sustainable level of at least
$230 million this coming year. For SEP, the $50 million is certainly an
improvement, but a more sustainable level, consistent with expanded
responsibilities, would be $75 million this coming year.
We also support the Coons (D-DE), Collins (R-ME), Reed (D-RI) bill
(S.1213) to reauthorize State Energy Program and Weatherization
Assistance Program-two programs that are essential in helping states
further energy efficiency and renewable energy at home.
ee/re as 111(d) compliance options
In a letter to EPA Secretary McCarthy on December 16, 2013,
Minnesota expressed its view on the proposed Greenhouse Gas Rules for
existing sources that energy efficiency resource standards and
renewable portfolio standards provide some of the most cost-effective
options to reduce carbon pollution, reduce electricity costs to
ratepayers, increase local economic activity, and create jobs. As noted
above, Minnesota has a target of reducing energy use by 1.5 percent per
year through energy efficiency measures and requires its electric
utilities to generate 27.5 percent of their power from renewable
sources by 2025. Carbon dioxide emissions savings from our Conservation
Improvement Program have been increasing in recent years, reaching more
than 800,000 tons in 2010. From 2005-2011, Minnesota reduced overall
CO2 emissions by 6.9 million tons, lowering its
CO2 rate by 17.5 percent, even while power generation
increased slightly. Minnesota is committed to continuing its
transformation of the generation mix for electric power and look to
this federal rulemaking to help meet our commitments.
conclusion
Minnesota is a national leader in the areas of energy efficiency
and renewable energy. We continue to innovate to meet the growing need
to find alternatives to fossil fuels while maintaining reliable energy
services at affordable rates. We are eager to work closely with this
Committee and Congress, as well as the Administration to achieve our
shared goals.
Thank you, Chairman Franken and Members of this Committee, for the
opportunity to submit this written statement.
I look forward to your questions.
Senator Franken. Thank you, Mr. Commissioner.
Let me just make Senator Portman clear. Since I'm chairing
this I'll ask questions last. I--Senator Schatz has to make a
flight and Senator Risch has to go to the Floor to make a
speech. So you're going to be asking the first questions, if
you can stay.
I don't know if you're catching a flight.
Senator Portman. I have to leave about 4:35.
Senator Franken. Mr. Glick.
STATEMENT OF MARK GLICK, STATE ENERGY ADMINISTRATOR, DEPARTMENT
OF BUSINESS, ECONOMIC DEVELOPMENT & TOURISM, STATE OF HAWAII,
HONOLULU, HI
Mr. Glick. Good afternoon, Chairman Franken, Ranking Member
Risch, members of the subcommittee and especially to our dear
friend, Senator Schatz and quite an energy savvy Senator. Thank
you for inviting me to testify before you today about Hawaii's
innovative efficiency and renewable energy policies and to
identify opportunities the Federal Government can take to
support job creation and innovation at the State and local
level.
My written testimony will--goes into more detail about all
those issues, but and offers others examples of State
leadership that might inform your deliberations featuring both
Republican and Democratic State administrations. I'll be happy
to address any questions you might have afterwards.
By deploying clean energy and attracting test bedded
investments and innovation Hawaii is creating a clean energy
cluster that is the leading source of new construction
expenditures and green jobs. For example, distributed PV
insulation accounted for 28.5 percent of all construction
expenditures in Hawaii in 2012. As we reached second place in
the Nation for solar PV insulations per capita.
Now at the heart of our energy and economic transformation
is a bold policy agenda and coalition of energy stakeholders
called the Hawaii Clean Energy Initiative starting with a
partnership between the State and Department of Energy in 2008,
the Hawaii legislature adopted the Nation's strongest renewable
portfolio standard, RPS, in 2009 requiring 40 percent of our
electricity to be generated from renewable sources by 2030.
Hawaii also adopted an energy efficiency portfolio standard
in the same year requiring 43 hundred gigawatts of energy by
2030 to be reduced for power generation, roughly a 40 percent
reduction in electricity use from 2007 levels.
Now we've made significant progress. When the 2013 figures
are released we expect our renewable portfolio standard to be
at 18 percent which means that we will have surpassed, by 3
percent, the 2015 interim goals 2 years early. Now in
efficiency Hawaii has led the Nation for 2 years, consecutive
years, in the value of our energy savings performance
contracts.
I'm pleased to report that Hawaii has recently executed
$167 million in 2 energy savings performance contracts, one
that covers 12 airports statewide that will save at least $518
million over the next 20 years, and is the largest single
performance contract by any single State agency in the Nation.
In 2013 Governor Abercrombie proposed and gained passage of
S. 1087, a measure designed by the Hawaii State Energy Office,
my office, that combines a rate reduction securitized bond
structure and on-bill financing to enable broader base of
utility customers to acquire a renewable energy system or
energy efficiency device. When it's rolled out by year end, we
expect the Green Energy Market Securitization, also known as
GEMS program, to make energy improvements more affordable and
accessible to Hawaii's underserved markets, such as low and
moderate income homeowners, renters and non-profits.
Now for Hawaii connecting our grids is an essential
ingredient in going beyond 40 percent renewable penetration.
It's a commitment to exceed our Nation leading RPS made by
Governor Abercrombie last year. A major policy achievement
toward that end was passage of S. 2785 establishing a
regulatory framework and financing structure for inter island
transmission cable development. Analysis commissioned by the
Hawaii State Energy Office with SEP funding and U.S. DOE
support has demonstrated that unifying the Oahu and Maui grids
with an undersea transmission cable will expand renewable
penetration, lower electricity rates, enhance grid stability
and reduce curtailment of renewable energy.
Now some of our suggestions for Federal action.
Since 2010 State energy program funding has provided Hawaii
with $1.2 million helping us move the needle on our key
metrics, RPS, EEPS, the Energy Efficiency Portfolio Standard
and job growth. SEP has supported the State energy office's
capability and leadership and regulatory proceedings, building
efficiency systems and infrastructure analysis and energy
assurance planning. It should continue to do so.
The U.S. State Energy Program is the only program
administered by the U.S. Department of Energy that delivers
cost shared formula funding directly to the States and allows
each State to target funds to meet their needs. That
flexibility has contributed to the program's long term success.
In conclusion the State of Hawaii strongly supports SEP. We
urge Congress to continue your vigorous support for this engine
of economic transformation.
Thank you for this opportunity to highlight Hawaii's clean
energy agenda and offer suggestions on how future SEP funding
can contribute to economic growth and innovation for Hawaii and
the Nation.
[The prepared statement of Mr. Glick follows:]
Prepared Statement of Mark Glick, State Energy Administrator,
Department of Business, Economic Development & Tourism, State of
Hawaii, Honolulu, HI
Good afternoon, Chairman Franken, and Members of the Subcommittee.
Thank you for inviting me to testify before you today about Hawaii's
innovative efficiency and renewable energy policies, and to identify
opportunities the federal government can take to support job creation
and innovation at the state and local level. I will also provide some
other examples of state leadership that might inform your
deliberations.
Hawaii's commitment to a clean energy future is propelling Hawaii
into national leadership for renewable energy installations and energy
efficiency measures. Energy transformation is a key component of the
the HI Growth Initiative; our State's economic development strategy to
create high growth, high wage jobs. By deploying clean energy and
attracting test bed investments and innovation, Hawaii is creating a
clean energy cluster that is a leading source of new construction
expenditures and green jobs. This is growing our economy and
diversifying our business base away from a heavy reliance on the
tourism sector. For example, distributed PV installations accounted for
28.5 percent of all construction expenditures in Hawaii in 2012 as we
reached second place in the nation for solar PV installations per
capita. Hawaii is second in the U.S. for cumulative installed PV
capacity per capita in 2012, according to the Interstate Renewable
Energy Council, and also second for solar PV capacity installed in
2012, according to Environment America Research. We happen to be the
most isolated population center in the world, 2,500 miles from the U.S.
West Coast, with oil imports accounting for 74 percent of our
electrical production in 2013 at a cost of $4.5 billion. Averaging 34-
cents per kilowatt hour, Hawaii has the highest electricity rates in
the nation, more than three times higher than the national average.
Hawaii's clean energy policies are designed to transform the most oil
dependent state in the nation to a national model for job creation,
industrial transformation, environmental compliance, and technological
innovation.
At the heart of the transformation is a bold policy agenda and
coalition of energy stakeholders called the Hawaii Clean Energy
Initiative. Initiated by a Memorandum of Understanding (``MOU'')
between the State and the U.S. Department of Energy in 2008, the Hawaii
Legislature adopted a Renewable Portfolio Standard (``RPS'') in 2009
requiring 40 percent of our electricity to be generated from renewable
energy by 2030. Hawaii also adopted an Energy Efficiency Portfolio
Standard (``EEPS'') in the same year to reduce electricity use by 4,300
gigawatt-hours (``GWh'') by 2030, roughly a 40 percent reduction in
electricity use from 2007 levels.
In the six years since that MOU, we have made significant progress.
When 2013 figures are released in a couple of months, we expect our
Renewable Portfolio Standard to be at 18 percent, which means we will
have surpassed the 2015 interim goal two years early.
In efficiency, Hawaii has led the nation for two consecutive years
in the per capita value of our energy performance contracts. Our state
has committed to the Clinton Global Initiative-CGI America to more than
double Hawaii's existing energy savings performance contracting
investments by State and County Agencies by 2015. As a partner in the
U.S. Department of Energy's Performance Contracting Accelerator
Program, Hawaii has also pledged to execute an additional $100 million
in performance contracting projects by the close of 2016. These are not
empty pledges. I'm pleased to report that Hawaii has recently executed
$167.4 million in energy savings performance contracts featuring two
state agencies. One covers 33 buildings that will save $28 million over
the 20-year contract term. A second contract covers 12 airports
statewide that will save at least $518 million over the next 20 years
and is the largest single performance contract by a single state agency
in the nation.
In 2013, Governor Neil Abercrombie also established the State's
first energy policy directives and dedicated the State to move the
needle even further when he announced that Hawaii is going beyond 40
percent for renewables at the State's annual energy summit last year,
the Asia Pacific Clean Energy Summit and Expo. Hawaii's energy policy
also encourages full use of our diverse, abundant indigenous natural
resources, such as solar, wind, geothermal, biomass, and hydro, each
which compete favorably with the avoided cost of oil. Please go to
energy.hawaii.gov for complete information on Hawaii's energy agenda
and online clean energy tools.
Our early success has brought unexpected challenges for our six
isolated, island grid networks. On Oahu, our major population center,
25 percent of circuits are beyond the 100 percent of minimum daytime
load. Hawaii Island has 46 percent renewable penetration and at certain
times of the day exceeds 100 percent of minimum daytime load. This
translates to something that mainland interconnected grids rarely
experience, curtailment of excess renewable energy on a regular basis,
and in some cases grid instability on a system level.
We have called upon the most qualified subject matter experts in
the nation to help us craft unprecedented solutions for unprecedented
challenges in clean energy deployment. Our mantra is to focus on high
impact solutions and leverage funding and other resources to build the
solutions for a new energy ecosystem. States cannot do it alone.
State Energy Program (``SEP'') funding has provided Hawaii with
$1.2 million since 2010, helping us move the needle on our key metrics:
RPS, EEPS, and job growth. SEP has supported the State Energy Office's
capability and leadership in regulatory proceedings, building
efficiency, systems and infrastructure analysis, and energy assurance
planning. Federal collaborations and funding have been and will
continue to be critical ingredients in our success.
In 2013, Governor Abercrombie proposed and gained passage of SB
1087, a measure designed by the Hawaii State Energy Office that
combines a rate-reduction securitized bond structure and on-bill
financing to enable a broader base of electric utility customers to
acquire a renewable energy system or energy efficiency device.
We call this ``GEMS,'' for Green Energy Market Securitization and
we're using SEP funding to implement what is potentially a national
model. When it is rolled out by year end, we expect GEMS to make energy
improvements more affordable and accessible to Hawaii's underserved
markets, such as low- to moderate-income homeowners, renters and
nonprofits.
SEP can help Hawaii and all other states with our increasing load
of unfinished business. Building a 21st century grid is a must. In
stretching the limits of what utilities can and should do, state energy
offices, often with the coordination of the National Association of
State Energy Officials (``NASEO''), can provide analysis, planning and
regulatory support to fill the gaps. Smart technologies, such as
advanced metering infrastructure and energy storage, are critical near
term solutions to improving customer choice and widely deploying demand
response.
For Hawaii, connecting our grids is an essential ingredient in
going beyond 40 percent renewable penetration. A major policy
achievement in 2012 was passage of SB 2785, establishing a regulatory
framework and financing structure for interisland transmission cable
development. Analysis commissioned by the Hawaii State Energy Office,
with SEP and U.S. DOE support, has demonstrated that unifying the Oahu
and Maui grids with an undersea transmission cable will expand
renewable penetration, lower rates, enhance grid stability and reduce
curtailment of renewable energy. This analysis is helping inform
decisions soon to be made by the Hawaii Public Utilities Commission on
next steps.
SEP funding can also be effectively used, as it has been in Hawaii,
to build and update a suite of online tools that provide developers,
investors and policy makers with assistance in clean energy project
permitting, interactive resource data, and GIS mapping. We note that
competitive SEP funding is useful, but increasing the formula funding
offers greater flexibility for program design and implementation.
Clean energy has propelled Hawaii into one of the world's leading
test beds for energy innovation. Our isolated, island setting has
attracted entrepreneurs from around the world, looking to develop, test
and prove emerging technologies and strategies before going to market.
By leveraging state funding sources with federal SEP, we plan on
seeding an innovation ecosystem to spur the development of clean energy
solutions while also creating high-wage jobs and economic opportunities
for the people of Hawaii.
Other State Examples
Like my colleagues appearing today from Minnesota and Texas, I am
pleased to note that all the states have programs that we each learn
from. We also believe that these examples can assist you as you
consider options for federal action.
For example, in Arkansas they have developed a loan-loss reserve
financing program through the utility bills. This on-bill financing
program is intended to address the needs of residential customers. Like
many other states, Arkansas has also targeted multi-family housing for
energy efficiency services-- low-income homes are a special problem
since the percentage of their income used for energy costs is so high.
In California, the voters approved a $2.5 billion California Clean
Energy Jobs Act, especially targeting schools and other public
buildings. They have also developed a program for clean transportation
infrastructure and energy -related R&D investments at a level of $240
million annually. The state uses their SEP funds in the development and
implementation of building codes and standards.
Colorado has instituted large new energy efficiency and renewable
energy programs in the past few years. They are moving towards their
targets of 5 percent reduction in peak electricity demand by 2018 and
30 percent of electricity coming from renewable energy by 2020. The
state is estimating that this effort will add $4.3 billion to the
state's economy and 33,000 jobs.
In Kentucky, they have taken the lead in promoting ``zero net
energy'' (``ZNE'') schools. They have now constructed 10 schools under
this program, and they are finding that the initial costs of ZNE
schools is comparable to less energy-efficient schools. This is really
a ``no-brainer''.
In Massachusetts, my colleagues have aggressively promoted energy
efficiency, solar development and greenhouse gas emission reduction
targets, while maintaining double digit clean energy industry growth.
They recently began to implement a $40 million program of community
self-resilience associated with power outages caused by severe weather
and climate change.
In New England, the governors of Connecticut, Massachusetts, Maine,
New Hampshire, Rhode Island and Vermont signed a regional
infrastructure statement that commits them to develop a reliable,
affordable and diverse energy portfolio. Working with the regional
utilities they are focusing on expanding energy efficiency programs and
renewable energy use, while also developing new natural gas and
electric transmission capacity.
In Oregon, the state has helped fund more than $11 million of
projects in 60 school districts, including lighting upgrades, window
replacements, HVAC improvements and biomass boiler installations. They
are also implementing a program to convert 20 percent of all public and
private fleets to alternative fuels. Pennsylvania has joined other
states in promoting alternative fuels.
Pennsylvania has contributed $20 million in incremental cost
incentives for the purchase or retrofit of heavy duty natural gas
vehicles. They have also deployed charging stations at all the rest
stops on the Pennsylvania Turnpike. Whether utilizing ethanol,
biodiesel, natural gas or electric vehicles, the states are pushing to
diversify the fuels used within the transportation sector.
In Rhode Island they have implemented a partnership to achieve 20
percent energy use reductions in 100 public facilities by 2016. They
have also targeted new combined heat and power (``CHP'') incentives
that has already resulted in a new 12.5 MW project that reduced
electricity use by 80 percent.
In Vermont, they have implemented a variety of renewable energy and
energy efficiency projects for schools, communities and businesses,
ranging from a biogas cogeneration project, a 12 MW wind plant and a
300 kW PV system.
In Washington, the state energy office announced the award of over
$14 million to financial institutions as seed funding to help
individuals and companies finance residential and commercial building
energy efficiency retrofits and renewable energy installations. The
Governor created 5 clean energy loans funds to stimulate economic
development in the clean energy sector, and this is the first
installment.
In West Virginia they have initiated an extensive energy planning
process looking at all resources, both on the supply side and the
demand side. This state is also trying to target the commercial/
industrial sector through partnerships with the West Virginia
University Industrial Assessment Center and the NIST-supported
Manufacturing Extension Partnership.
Suggestions for Federal Action
The U.S. State Energy Program is the only program administered by
the U.S. Department of Energy that delivers cost-shared, formula
funding directly to the states, and allows each state to target funds
to meet their needs. When Congress established SEP, it recognized that
states were in the best position to understand their energy policy and
program needs and opportunities. This flexibility is what has resulted
in the program's track record of success. SEP is used by Hawaii, and
all the states, to catalyze new energy business opportunities, reduce
market barriers to energy efficiency and other alternatives, and
support our governor's and legislature in the kind of energy planning
and policy development that has transformed the energy sector over the
past five years. SEP funding provided the seed funding and linkage to
DOE that made the Hawaii Clean Energy Initiative possible. Similarly,
the foundation for Hawaii's now successful ESPC program was laid using
flexible SEP funding to develop public-private partnerships and
technical assistance over a period of years--unlocking energy savings
in the public buildings sector. This allowed our state to further
advance ESPC when we recently partnered with DOE on the ESPC
accelerator.
Conclusion
In conclusion, the State of Hawaii strongly supports SEP and we
urge Congress to continue to provide your vigorous support to this
engine for economic transformation.
Thank you for this opportunity to highlight Hawaii's clean energy
leadership and offer suggestions on how future SEP funding can
contribute to economic growth and innovation for Hawaii and the nation.
As noted in Mr. Taylor's testimony, we also support enactment of the
Shaheen/Portman bill (S. 1392), the SEP/Weatherization reauthorization
bill (S. 1213), the Energy Productivity Innovation Challenge (S. 1209),
the Residential Energy Savings Act (S. 1200), as well as Chairman
Franken's legislation on building benchmarking (S. 1206) and the Local
Energy Supply and Resiliency Act (S. 1205).
Senator Franken. Thank you, Mr. Glick. I think as everyone
realizes Hawaii is a little isolated and renewable energy is a
big piece of that portfolio. I think your electricity costs are
about 3 times out of the average, right?
Mr. Glick. That's correct.
Senator Franken. So, thank you for your testimony. Thank
you for mentioning your great work with energy saving
performance contracts which brings us to Mr. Clark, who is the
Head--who is the Senior Vice President and General Manager of
an energy service company.
Please, Mr. Clark.
STATEMENT OF RANDALL R. CLARK, SENIOR VICE PRESIDENT, NORESCO
Mr. Clark. Thank you, Chairman Ranken or Chairman Franken,
Ranking Member Risch and the subcommittee. Thank you for
inviting me to testify.
Senator Franken. I like that, by the way.
[Laughter.]
Senator Franken. That was good.
Mr. Clark. Regarding the role private sector plays in
advancing State energy efficiency. I am Randy Clark, as you
mentioned, Senior Vice President of NORESCO, one of the largest
energy service companies in the United States. We are part of
United Technologies Corporation, a leading provider to the
aerospace and building industries employing 220,000 people
globally and 90 thousand people in the United States.
NORESCO specializes in developing and implementing energy
saving performance contracts, also known as ESPCs, for
government and institutional clients spanning the Federal,
State and municipal sectors. In my role at NORESCO I manage the
performance contracting business with State agencies, local
governments, school districts, universities and health care
institutions. Today I will discuss how this private sector
contracting mechanism provides a cost effective pathway toward
reducing building energy use, lowering costs and reducing
greenhouse gas emissions.
Under an ESPC a private sector company like NORESCO
installs new energy efficient equipment at no upfront capital
cost to the building owner. At its most basic an ESPC converts
the money a building owner currently spends on wasted energy
into a payment stream that finances the energy savings capital
improvements in the facility. The building owner repays this
investment over time using the utility savings.
The energy service company will measure and guarantee these
savings and private sector financiers provide the capital.
Under the contract the building owner never pays more than they
would have paid for utilities if they had not entered into the
ESPC. States are increasingly turning to ESPCs to achieve cost
effective energy efficiency.
In 2011 Minnesota enacted legislation allowing State
agencies to enter into ESPCs. The State created the Office of
Guaranteed Energy Savings Programs to help pre-qualify energy
savings companies on behalf of State agencies and to provide
technical and financial assistance and oversight in the
implementation of projects. Over 30 States have authorized ESPC
programs and the energy service company market is estimated to
exceed $5 billion annually. Regional benefits include local job
creation of approximately 95 direct jobs and 114 indirect jobs
for every $10 millions of investment.
Despite the benefits of utilizing an ESPC the mechanism is
under utilized by State and local governments. The barriers to
increased use are difficult to quantify, but stem from the fact
that performance contracting is different from traditional
procurements for government and institutions. Additionally,
many ESPC projects are financed with long term, tax exempt
leases or bonds. With increased uncertainty around State and
local tax revenues since the economic downturn building owners
are reluctant to incur debt related to building improvements
even when these building improvements are funded through energy
savings.
Some States are taking steps to address these barriers.
The State of Delaware created the Sustainable Energy
Utility, the SEU, to create a market for energy efficiency for
buildings in the State. The SEU issues tax exempt debt on
behalf of public entities in the State in order to fund the
investment in building infrastructure. The SEU issued $70
million of bonds in 2011 and has a number of comprehensive
energy efficiency projects completed or in the final stages of
implementation.
I want to spend a minute discussing a forthcoming Federal
action that will have a substantial impact on the States. EPA
is preparing a rule directing States to establish carbon
dioxide performance standards for existing electricity
generation units under Section 111(d) of the Clean Air Act.
This rule is understandably controversial but the bottom line
is that energy efficiency is the compliance option that can
dramatically lower the cost of regulation for both utilities
and consumers while achieving substantial carbon dioxide
reductions.
States and utilities have a successful track record
investing in energy efficiency programs. ESPCs provide an
additional opportunity to cost effectively reduce energy demand
and deliver carbon dioxide reductions. To date the
environmental potential through ESPC projects is far from being
captured.
According to a Lawrence Berkeley National Laboratory
report, ``Barriers to implementing performance contracts remain
high in private sector, commercial and industrial facilities,''
resulting in a penetration rate of less than 10 percent. By
allowing States to credit these projects EPA can unlock this
potential while also achieving the rulemakings goal of
realizing substantial emission reductions at lowest cost.
In closing ESPCs are a valuable, but underutilized private
sector financing mechanism that allows governments and building
owners to increase their energy efficiency, decrease their
energy costs without upfront capital investment. The savings
are guaranteed by the contractor.
Chairman Franken and members of this subcommittee, I stand
ready to answer any questions you might have.
[The prepared statement of Mr. Clark follows:]
Prepared Statement of Randy Clark, Senior Vice President, NORESCO
Chairman Franken, Ranking Member Risch and members of the
subcommittee, thank you for inviting me to testify today regarding
private sector mechanisms and financing available to advance energy
efficiency in the states.
I am Randy Clark, Senior Vice President, NORESCO, one of the
largest energy service companies in the United States utilizing
performance-based contracting to deliver energy and maintenance savings
and significant infrastructure upgrades to existing facilities. NORESCO
is part of UTC Building and Industrial Systems, a unit of United
Technologies Corporation. United Technologies is a leading provider to
the aerospace and building systems industries employing 220,000 people,
including 90,000 in the United States. NORESCO specializes in
developing and implementing Energy Savings Performance Contracts for
governmental and institutional clients spanning the Federal, state and
municipal sectors. In my role at Noresco, I manage the performance
contracting business with state agencies, local governments, school
districts, public and private universities, and healthcare
institutions.
Energy Savings Performance Contracting (ESPCs)
I am here today to discuss how ESPCs deliver energy and cost
savings at the state and city level to municipalities, universities,
school districts and hospitals (commonly referred to as the ``MUSH''
market). This same mechanism is also used to deliver cost savings
through energy efficiency to multi-family housing agencies.
Specifically, I will discuss how this private sector contracting
mechanism provides a cost effective pathway toward reducing building
energy use, lowering costs and reducing greenhouse gas emissions.
Under an ESPC, a private sector company like Noresco installs new
energy efficient equipment at no upfront capital cost to the building
owner. ESPCs are typically used for larger facilities or building
campuses where there is an opportunity to capture significant energy
cost savings. At its most basic, an ESPC converts the money a building
owner currently spends on wasted energy into a payment stream that
finances energy-saving capital improvements in the facility. The
building owner repays this investment over time with funds saved on
utility costs. The energy service company will measure, verify and
guarantee these energy savings, and private sector financiers provide
the capital, which today is available at historically low interest
rates. Under the contract, the building owner never pays more than they
would have paid for utilities if they had not entered into the ESPC. In
addition to generating energy and dollar savings, years of deferred
maintenance at buildings are successfully addressed by ESPC projects at
no additional cost to the owner. For these reasons, ESPCs have proven
to be a highly successful means to implement comprehensive energy
efficiency projects.
States are increasingly turning to ESPCs to achieve cost effective
energy efficiency. In 2011, Minnesota enacted enabling legislation
(16.144/Executive Order 11-12) allowing state agencies to enter into
ESPC's. Since that time, the Department of Commerce created the Office
of Guaranteed Energy Savings Programs to help pre-qualify Energy
Savings Companies (ESCOs) on behalf of state agencies and to provide
technical and financial assistance and oversight in the implementation
of projects. There are a number of Minnesota state agency projects
current under development in this new program.
Over 30 states have now authorized state ESPC programs and the
energy service company market is estimated to exceed $5 billion
annually. ESPCs provide a number of benefits to the facility, which
include:
Guaranteed performance and cost
Enhanced reliability and energy security
Reduced carbon footprint and emissions
Improved and modernized infrastructure
Decreased deferred maintenance burden
Improved indoor working environments
Regional benefits also accrue and include:
Local job creation of approximately 95 direct and 114
indirect jobs for every $10 million of investment\1\
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\1\ Federal Performance Contracting Coalition, accessed February
10, 2014 http://federalperformancecontracting.com/WYSIWYGImage/
Job%20Impact%20of%20ESPCs%20chart%20-%20ESPCs.pdf
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Engineering, manufacturing and trade labor engagement
Small, minority-owned, and women-owned business
subcontracting opportunities
Most ESPC contracts range from 12 to 20 years. This allows for the
bundling of multiple energy conservation measures; that is, the ability
to pull a comprehensive package of energy saving measures together that
maximizes energy and cost savings opportunities for the customer.
Individual energy conservation measures (ECMs) which can make up a
bundled ESPC project may include lighting, building controls, HVAC,
boiler or chiller plant improvements, building envelop modifications,
water savings, refrigeration, renewable energy systems, load shifting
and others. The ESCO guarantees that savings accrue and is reimbursed
for their investment over this period.
The market for building energy efficiency projects is strong.
According to a 2013 ESCO market survey sponsored by the National
Association of Energy Services Companies (NAESCO) and conducted by the
Lawrence Berkeley National Laboratory, the total market potential for
energy services project investment in non-federal facilities is between
$66 and $120 billion. Of that, the investment potential for K12 schools
and state and local buildings alone is between $26 and $45 billion. The
good news is that the ESCO community is capable of delivering these
energy savings. According to the 2013 LBNL study, there are more than
140 companies across the U.S. that characterize themselves and serve
the marketplace as ESCOs, and 45 of these provide the wide range of
supply and demand side services that meet the NAESCO definition of an
ESCO
Challenges and Opportunities
Despite the associated benefits of utilizing an ESPC, including
financing critical facility improvements without the need for upfront
capital, the mechanism is underutilized. The barriers to increased
usage are difficult to quantify but revolve mostly around the fact that
performance contracting is different from traditional procurement
processes for government and institutions. The vast majority of ESPC
projects for MUSH building owners are financed with long-term tax
exempt leases or bonds rather than through capital funds or
appropriations, but these leases and bonds have their own challenges
especially in light of the increased uncertainty around state and local
tax revenues since the economic downturn in late 2008. Overall, MUSH
building owners have been reluctant to incur new or additional debt
related to building improvements even when the building improvements
are 100 percent funded from energy and operational savings.
According to a 2008 LBNL study, the differences in the penetration
rates of ESPC projects in the surveyed states appear to be related to
the ability of state governments to overcome policy and programmatic
barriers to ESPC implementation. The study included among its
recommendations that State agencies should consider pursuing funding
and technical assistance available through ratepayer-funded energy
efficiency programs administered by utilities or third party
administrators, and possibly integrating these resources with ESCO-
delivered energy efficiency investments to maximize the level of dollar
and energy savings to be mined from state facilities.
Some states are taking steps to address these barriers. The State
of Delaware created the Sustainable Energy Utility (SEU) to assist with
and encourage energy performance contracting for buildings in the
State. The SEU issues tax-exempt debt on behalf of public entities in
the State in order to fund the investment in building infrastructure.
The SEU issued $70 million of bonds in late 2011 and has a number of
comprehensive energy efficiency projects completed or in the final
stages of implementation. The Maryland Clean Energy Center is pursuing
a similar approach to facilitating the financing of energy efficiency
projects as is the Chicago Infrastructure Trust. In Massachusetts, a
project recently completed by NORESCO with the University of
Massachusetts Dartmouth was supported by $2.7 million of investment
from the local utility, NSTAR. This project is expected to reduce
greenhouse gas emissions by 16,000 tons (CO2 equivalent).
ESPCs Provide an Opportunity to Cost Effectively Lower Greenhouse Gas
Emissions
The Environmental Protection Agency (EPA) is preparing to propose a
rule directing states to establish carbon dioxide performance standards
for existing electricity generation units under Section 111(d) of the
Clean Air Act. This rule is understandably controversial and there are
many perspectives about how EPA might best enable State flexibility in
giving utilities a menu of cost effective compliance options. The fact
of the matter is that when this rule is finalized, energy efficiency is
the compliance option that can dramatically lower the cost of
regulation for both utilities and consumers while achieving substantial
carbon dioxide reductions.
States and utilities have a long, successful track record in
investing in energy efficiency programs. These programs include demand
response initiatives, energy efficient appliance rebate programs and
education efforts. ESPCs provide an additional and largely unrealized
opportunity to cost effectively reduce energy demand and deliver carbon
dioxide reductions. In addition, energy service companies are already
responsible for measuring, verifying and sustaining the energy savings
over long periods of time, so the emission reductions are real.
To date, the environmental potential through ESPC projects is far
from being fully realized. According to a Lawrence Berkeley National
Laboratory report, ``barriers to implementing performance contracts
remain high enough in private sector commercial and industrial
facilities,'' resulting in a penetration rate of less than 10 percent.
By allowing states to satisfy reduction goals under such carbon dioxide
performance standards through ESPC projects, EPA can unlock this
potential while also achieving the rulemaking's goal of realizing
substantial emission reductions at lowest cost.
The mechanism for crediting major building energy efficiency
investments under a Section 111(d) compliance plan can build on widely
accepted approaches already implemented in the private sector for major
energy efficiency projects. Therefore, EPA should (1) recognize ESPC
projects as a favored method towards meeting compliance; (2) require
States to include measurement, monitoring, verification and reporting
results for all contractual methods of energy efficiency used to meet
the EPA compliance requirement; and (3) provide additional procedures
needed to translate energy savings into creditable emission reductions.
Conclusion
In summary, ESPCs are a private sector financing mechanism that
allows governments and building owners to increase their energy
efficiency, decrease their energy costs without upfront investment and
the savings are guaranteed by the contractor.
Chairman Franken and members of this subcommittee, thank you for
the opportunity to appear before you today. I stand ready to answer any
questions you might have.
Senator Franken. Thank you, Mr. Clark.
That is, what you're talking about is providing
flexibilities for States to do energy efficiency offsets for
these new rules on existing coal fired plants, etcetera. So and
I think that's very, very interesting.
Finally, Mr. Rodgers.
STATEMENT OF WILLIAM A. RODGERS, JR., CHIEF EXECUTIVE OFFICER
AND PRESIDENT, GOODCENTS HOLDINGS, INC., ATLANTA, GA
Mr. Rodgers. Right.
Chairman Franken, Ranking Member Risch, Senator Portman, my
name is Bill Rodgers and I am the President and CEO of
GoodCents Holdings which is headquartered in Atlanta, Georgia.
We provide operations in 22 States as well as Canada and we
deliver over 85 energy efficiency programs currently.
I thank you for the opportunity to testify before you today
on the important topic of energy efficiency and the lessons
learned from State programs.
Two years ago I was privileged to testify before this
committee on an innovative concept using an energy efficiency
program to supplement new generation capability. The State of
Indiana, recognizing the need to balance clean air
considerations with reliable and affordable electricity
chartered a middle course by enacting long term energy
efficiency standards. At that time this program was in its
infancy and now today, it has matured into a broad based energy
efficiency program covering a full spectrum of services.
From the initial program design focused on delivery of
targeted savings to the critical marketing services which
derive customer education and behavior, to the field
implementation and last the measurement and verification of the
program's actual savings. This program provides a template for
other States grappling with similar concerns and should serve
as an example for this committee of the type of results can be
achieved when regulators, power companies, consumers and
environmental groups all work together toward a common goal.
Let me explain how we've done this.
In 2009 the State of Indiana took a firm stance on energy
conservation and established an aggressive time line to achieve
annual savings goals over a 10-year period. Through a
coordination committee of the Utility Regulatory Commission,
made up of representatives of each of the utilities,
municipalities and consumer groups in the State, they went to
the marketplace and selected our company, GoodCents as the
independent third party administrator for this statewide
initiative. Branded Energizing Indiana, the initiative is a
united effort by the State participating utilities, businesses,
residents and consumer organizations to offer energy efficiency
programs that will benefit communities all across the State.
This extensive statewide suite of 6 core energy efficiency
programs includes commercial and industrial customer projects,
residential/home energy assessments, income qualified
weatherization program, residential lighting expansion through
participating retail locations and energy educational programs
and building assessments for Indiana schools. As Administrator,
GoodCents coordinates, manages, implements and reports on this
core suite of programs to meet the annual energy savings goals
identified for each participating utility.
A few accomplishments over the past 2 years, if I may share
with you.
First and foremost we created nearly 400 new jobs in the
State of Indiana.
We've enrolled over 200,000 residential customers into
these programs.
We've worked with almost a thousand retail stores to sell
an excess of 6 million energy efficient light bulbs.
We've educated over 155,000 elementary school students
about energy efficiency.
We've established a network of over 2,000 nonprofit
organizations representing over a million members to educate
and market the programs.
We've developed a statewide trade ally network that has
delivered over $450 million in energy savings projects to the
commercial and industrial sector.
Most importantly, we've achieved over 900 million kilowatt
hours of energy savings which is enough to power the residents
of Boise, Idaho for an entire year.
GoodCents strongly believes that by consolidating energy
efficiency programs into one core initiative Energizing Indiana
has benefited many utility customers including the businesses,
schools and homeowners. The power of offering an integrated and
tailored approach most definitely drives increased
productivity, consistent branding and marketing messages and
ultimately the highest value, most cost effective program for
its customers.
Similar to the driving force behind Indiana many other
States have established their own standards. Once these have
been set they develop the proper alignment between all
stakeholders to drive toward their aggressive goals. This
allows for the best thinking to be put toward the market based
program requirements verses establishing Federal prescriptive
programs that become difficult to realize ultimate success.
Costs of these programs are market driven and tested as
well as included into the local rate structures. The market
forces ultimately drive participation and returns once the
standards are established. These structures allow for a uniform
measurement system affording the required transparency of the
return on investment and energy impact.
Two years ago the debate in Washington was how to best
incentivize and grow efficiency programs and what, if any
impact, would they have on energy use? Today we know that these
programs not only can thrive, independent of Federal subsidies
and support, but also that their results can be measured, can
be verified and that efficiency can deliver savings to rate
payers and utilities alike.
We must continue to build on this progress. As Congress and
the Administration look to balance the seemingly competing need
for abundant, affordable energy with environmental
considerations, energy efficiency programs can and must be part
of the overall systems based solution.
I thank you for the opportunity to be here with you today
and look forward to any questions you may have.
[The prepared statement of Mr. Rodgers follows:]
Prepared Statement of William A. Rodgers, Jr., Chief Executive Officer
and President, GoodCents Holdings, Inc., Atlanta, GA
GoodCents Overview
Mr. Chairman and members of the Committee on Energy and Natural
Resources, my name is Bill Rodgers and I am the President and CEO of
GoodCents Holdings, Inc. GoodCents is headquartered in Atlanta, Georgia
and provides operations in 22 states as well as Canada delivering over
85 energy efficiency programs. I thank you for the opportunity to
testify before you today on the important topic of energy efficiency.
Our company has been in existence for over 34 years and has provided
multiple types of Demand Side Management and Energy Efficiency programs
to over 150 Utilities, including Investor-Owned, Co-operatives and
Municipalities. We have over 600 employees located across North America
who wake up each and every morning focused on helping both residents
and businesses learn to utilize their energy in a more efficient and
smarter fashion, as well as conserving as much energy as possible.
Our company partners with both electric and gas Utilities to
deliver the most effective programs targeted at reducing their energy
footprint. Some of the programs we deliver are:
Facility Audits (both residential and commercial)
Income Qualified Weatherization
Residential and Commercial Rebate Programs
--Trade Ally Network development and management
Equipment Efficiency Studies
Retrofit Programs for Commercial and Industrial
--Lighting
--H.V.A.C.
Equipment (motors, drives, refrigeration etc.)Energy End-Use
Studies Our involvement covers the full spectrum of services:
From initial program design, focused on the delivery of
required or targeted savings; to the critical marketing
services which drive customer education and program
enrollments; to field implementation; and lastly, the
measurement and verification of the program's actual savings
which are reported back to the respective regulatory body.
Since the purpose of this hearing is to consider lessons
learned from state efficiency and renewable programs, I would
like to call your attention to the Energizing Indiana program.
GoodCents has lead as the Third Party Administrator of this
state-wide, multiple-utility program since 2011.
Energizing Indiana Overview
In 2009, the State of Indiana joined many other states, and since
that time many others have followed, to establish long-term Energy
Efficiency Resource Standards (EERS). These standards set forth energy
savings targets with specific timetables for achievement. Once the EERS
were established, Indiana undertook an exhaustive review of their
options for goal achievement. Their model evaluated the need for a true
partnership of all stakeholders in order to achieve their goals. They
established a Demand Side Management Coordination Committee (DSMCC) of
the Indiana Utility Regulatory Commission (IURC) made up of
representatives of each of the Utilities, municipalities and consumer
groups in the state. They went to the marketplace to select an
Independent Third Party Administrator for their statewide initiative.
GoodCents was selected and entered into a contract targeted at
aggressive energy savings over the first two contract years of 2012 and
2013. Branded ``Energizing Indiana,'' the initiative is a united effort
by the state, participating Utilities, businesses, residents, and
consumer organizations to offer energy efficiency programs that will
benefit communities across the state.
This extensive, state-wide suite of six core energy efficiency
programs includes: Commercial & Industrial Prescriptive program
targeting the most energy consuming equipment and process improvements,
Residential Home Energy Assessments, Income-Qualified Weatherization
Services, Residential Lighting expansion through participating retail
locations, Energy Educational Programs and Commercial Building
Assessments for Indiana Schools.
As administrator, GoodCents coordinates, manages, implements and
reports on this core suite of programs to meet the annual energy
savings goals identified for each participating Utility. A few key and
central accomplishments over the past two years:
Created nearly 400 new Indiana jobs
Enrolled over 200,000 residential customers
Worked with 960 retail stores to sell over 6,200,000 energy
efficient bulbs
Educated over 155,000 elementary students about energy
efficiency within their own homes
Established a network of over 2,000 non-profit organizations
representing over 1,000,000 members to educate and market the
programs
Energy Advisors logged over 4,600,000 miles serving the
residents and businesses throughout Indiana
Installed over 800,000 measures in commercial and industrial
facilities
Achieved over 900,000,000 kWh of energy savings in just the
first two years which is enough to power the residents of Salt
Lake City, Utah for an entire year.
In addition, the Utilities also offer other ``Core Plus'' programs
directed toward expanding to an even greater suite of energy efficiency
services that GoodCents works to educate the ultimate customers on the
combined value. GoodCents has built a world-class team of experienced
professionals from across the state of Indiana and is managing the
program from offices in Indianapolis, Crown Point, Fort Wayne, and
Evansville.
GoodCents strongly believes that by consolidating energy efficiency
programs into one core initiative, Energizing Indiana has benefitted
many Utility customers, including industry, businesses, schools, and
homeowners. The power of offering an integrated and tailored approach
most definitely drives increased productivity, consistent branding and
marketing messages, and ultimately the highest value, most cost-
effective programs for customers.
Driving Program Success
Through our years of experience implementing energy efficiency
programs like Energizing Indiana we have found that program success is
driven primarily by two factors:
Is the program designed to achieve savings; and
Is it effectively implemented and marketed to reach out to
customers to engage, educate and ultimately drive
participation.
Below is a further overview of the Demand Response and Energy
Efficiency programs currently being successfully delivered by GoodCents
through our design, marketing and implementation efforts.
Demand Response Programs
For more than three decades, GoodCents has been a valued partner
for Utilities implementing and leveraging home area networking,
advanced metering infrastructure and demand response programs.
GoodCents combines smart meter deployment, infrastructure component
installation, proprietary scheduling and routing applications, and
customer call to ensure the most efficient and successful deployment of
smart grid programs.
We utilize decades of experience in implementing and installing
demand response program equipment such as communicating thermostats,
water heaters and pool pumps. We also work inside the home to leverage
the optimal solutions for our customers in establishing the most
effective home area networks to allow for maximum understanding of
customers home energy usage. Home area networks connect all aspects of
the home to best understand how, where and to what degree energy is
being used.
GoodCents' demand response portfolio includes programs in
California, Georgia, Illinois, Indiana, Utah, North Carolina, Ohio,
South Carolina, Virginia, Nevada, Kentucky, Oklahoma and Washington.
Energy Efficiency Programs
The goals of the energy efficiency programs offered by GoodCents
are to provide Utilities and their customers, both residential and
commercial, with an avenue to reduce energy and demand requirements,
save money on electric bills, and meet energy reduction goals set forth
by state legislatures and commissions. The three most popular
residential programs to be utilized are Income-Qualified
Weatherization, Rebates, and Home Energy Assessments. In order to
impact usage on a larger scale, commercial programs such as Commercial/
Industrial Energy Assessments, and Custom and Prescriptive Rebates must
be leveraged.
Residential Energy Efficiency
GoodCents believes that on-site energy assessments provide the best
opportunity to reshape the energy usage habits of all customers, for
both Income-Qualified Weatherization and Home Energy Assessment
programs. Our highly trained and experienced advisors perform detailed
site surveys and work closely with the customer to install energy
efficiency measures as determined by the Utility and their customers.
Our program delivery may include combustion safety testing, blower door
guided air sealing, arranging for improved attic insulation, providing
conservation education, and encouraging adoption of energy efficiency
measures.
Along with installing measures, we are also capable and equipped to
conduct in-out testing for implementation-style assessments such as
weatherization, duct repairs, ceiling insulation and more. We are then
able to educate the homeowner on the most impactful improvements they
can make to their home to increase efficiency. Typically these
improvements are supported through utility-funded Rebate programs.
GoodCents generally uses six common elements for on-site energy
efficiency programs: pre-visit and authorization, home health and
safety, installed measures, energy audit inputs, energy audit analytic
engine, and homeowner's energy report. Our portfolio includes program
implementations in Indiana, Ohio, West Virginia, Florida, Virginia,
Kentucky North and South Carolina.
Commercial & Industrial Energy Assessments
GoodCents' Commercial and Industrial programs include energy
assessments that are supported by prescriptive and custom incentive
structures that reward participants with monetary incentives based on
installation of energy efficiency equipment upgrades. Following the
energy assessment, the customer is educated on the most cost effective
improvements to implement at their business that will reduce the
greatest amount of energy. These upgrades include lighting, motors and
pumps, HVAC, and potentially other equipment such as ENERGY STARr
transformers and efficient package refrigeration. Incentives are
provided for one-for-one replacements, retrofits and new installations
of qualified equipment.
The objectives of the C&I Prescriptive Program are to:
Lower electric energy consumption in the C&I market sector.
Help C&I customers decrease their overall energy costs.
Build market-based activity that captures near and long-term
energy and demand savings.
Encourage equipment vendors and contractors to actively
promote and install energy efficient technologies for their C&I
customers.
Active Programs are being delivered in Indiana, Kentucky, North
Carolina, Ohio, South Carolina, Virginia and West Virginia.
Customer Engagement and Participation
Through years of experience, GoodCents has identified a variety of
tools that are effective in engaging customers and changing their
behavior, resulting in optimal program enrollment. The key to a
program's success is establishing a strong marketing campaign that
spans multiple channels and provides multiple touches to Utility
customers to increase both awareness and program participation. In
addition, it is essential to develop an enrollment channel that is easy
and convenient for customers to use.
Effective marketing is the key to robust participation. GoodCents
has a complete array of marketing capabilities including print
collateral design and production, social marketing programs (community
engagement programs, social media implementation, local enrichment
programs, etc.), and electronic communications to include website
development, landing pages, email campaigns, and online program
administration. In many programs, incentives are used to drive higher
response rates through direct mail, trade ally networks, and community
enrichment.
GoodCents also works with Utilities to establish program awareness
through social marketing platforms and pushes to engage local
newspapers and media channels for additional support. In addition, we
leverage social media resources such as Facebook, Twitter, and YouTube
to raise awareness of energy efficiency and demand response programs.
GoodCents works with the Utility to build a program webpage that
provides program information and allows the customers to enroll. In
addition, we leverage some program marketing approaches with many of
the Utility's current and future media campaigns or marketing efforts.
When working within the energy efficiency business the key to
gaining both commercial and residential customer acceptance is in
educating them as to the benefits of the programs, allowing them to
understand the financial impact and return on their investment, and
working to make the participation process simple. Page 14 of 14
Conclusion
Similar to the driving force behind Energizing Indiana, many other
states have established their own Energy Efficiency Resource Standards.
Once these goals and standards have been set they then develop the
proper alignment between the state, regulators, local communities,
Utilities, industrial and commercial businesses and residential
customers to drive towards their aggressive goals. This allows for the
best thinking to be put towards the market-based program requirements
versus establishing federal prescriptive programs that become difficult
to realize ultimate success. Costs of these programs are market driven
and tested as well as the proper review and inclusion in the local rate
structures. The market forces ultimately drive the programs,
participation and returns once the standards are established. These
structures allow for a standard and common measurement system that
drives the most consistent and clear understanding of the return on
investment and energy impact.
Senator Franken. Thank you, Mr. Rodgers.
I'm going to go to Senator Portman, but just I love the
idea of energy efficiency education for kids. I've often
thought that we should--I'm on the Education Committee, that we
should reinvent, we should re-establish Home Ec and that home
economics should include financial literacy. It should include
nutrition, about how to cook nutritiously and I think it should
involve how to keep your home energy efficient.
Let's go to Senator Portman.
Senator Portman. Thank you. Thank you, Mr. Chairman for
having this hearing and for the great testimony that you've
brought before us. I'm really impressed with what you have
going on in your States and some of the examples we've heard
from today.
As you know this Portman/Shaheen bill that the chairman
called it, is really called Shaheen/Portman, but she's not
here. So we're going to change the name for this purpose.
But Jeanne did testify earlier, I understand, correct?
Senator Franken. She did. It was Shaheen/Portman then.
Senator Portman. Yes. That doesn't surprise me.
[Laughter.]
Senator Portman. She's no longer on the committee so we can
get away with this now and again.
But we are hoping to get it up soon. Thank you for all the
help many of you have provided. I know there have been some
disappointments we haven't been able to do more in this first
piece of legislation. But it is really a huge step forward.
I take the position that we should have an all of the above
strategy. I think that includes natural gas production in
States like Ohio, but also energy efficiency, certainly
renewables, coal in Ohio, oil, nuclear. Our legislation is
consistent with what you talked about today in the sense that
as was just stated, I think, well by Mr. Rodgers, you know, it
doesn't have mandates.
It does have incentives. It does rely on the market. It
does have some new provisions and new office funding. I think
it's the kind of thing that will have a very substantial impact
on efficiency but without losing the bipartisan support that
it's had thus far. So that's our hope. I'm hopeful we'll see
something even in the next month on it on the Floor of the
Senate.
We think now on the bill that will be reintroduced probably
not next week because we're out of session, but the next week
we'll have a deficit reduction component as well of about $10
million. We'll also have a lot more savings than that because
it requires the Federal Government, the largest user of energy
in the world, to be more efficient and that will save taxpayers
a lot in the long run. So I think we can argue this is also
cost effective.
It does have some good support including the Chamber of
Commerce, National Association of Manufacturers, the
Environmental Defense Fund, American Chemistry Council,
Alliance to Save Energy, among others. Significantly
distinguished groups represented here today. Like NASEO the
ACEEE, thank you, and NORESCO have all been great and
supportive and we appreciate that, again, even when sometimes
you haven't gotten everything in that you wanted.
Thanks to the work of Chairman Wyden and Ranking Member
Murkowski we now have 10 additional bipartisan provisions we're
adding to the bill to improve energy efficiency to the Federal
Government, to deal with some of the regulatory barriers to
private companies looking to save energy. These provisions have
allowed us to pick up the support now of the American Gas
Association, the Edison Electric Institute, the National Rural
Electric Cooperative Association and others. We have about 270
groups so far.
One of those amendments is authored by your own Senator,
Mr. Franken, who happens to be here today. I would have
mentioned it anyway even if he wasn't.
Another one of the amendments is actually, Mr. Risch, who
just left us. I know his staff is still here so they will like
the fact that I'm calling it Risch/Udall rather than Udall/
Risch.
We thank Senator Franken.
Senator Franken. I sense a pattern.
Senator Portman. Yes.
But it's good stuff. It got through this committee with a
19 to 3 vote which is unusual. Now again, we're working to try
to re-introduce this bill with a lot more amendments included
in the bill, the base bill, and frankly, therefore some more
support and some more substance in the legislation.
I've got 3 quick questions.
One is for Mr. Rodgers. On your testimony you talked a lot
about efficiency being best tailored, specifically, to State
requirements, conditions driven by markets. From your
experience if a consumer is able to receive a clear picture of
what the benefits are of a particular energy efficiency
investment are they likely to make a reasonable decision on
their own that reduces energy costs and saves them money?
Mr. Rodgers. Thank you, Senator.
I think that's probably one of the biggest challenges our
industry has always faced. That's one of an educational
component ensuring that the customers truly understand how and
when energy is being utilized. We have found that when that
education is put into place and in many cases it's now being
put in place through technology, they absolutely will behave
and take the steps necessary on their own to participate in
energy saving measures.
It is typically when they are not as aware. I always like
to use the story of if we all when we go to the grocery store
only got a bill from the grocery store at the end of the month
we would have no idea how to best curb the spending there. The
same thing happens now with the utility bill. We don't have the
insight and the knowledge. But that technology is continuing to
be spread across the country which I think is driving that
proper behavior.
Senator Portman. I appreciate that experience you bring at
the end of the day when of the business that you're in. I agree
with you entirely. Of course, we do have some new amendments in
the bill along those lines. Bennet and Ayotte establishing a
voluntary certification recognition program to promote
efficiency in commercial buildings.
Senators Isakson and Bennet, as you may know, we have that
legislation now as part of ours which it's going to be quite
substantial in its effect, I believe, aimed at encouraging
residential efficiency investments by allowing the homes
expected energy cost savings to be factored into its value and
affordability, part of the mortgage process.
Then finally, Senator Franken's bill which requires
federally leased buildings to benchmark energy usage data.
Those are all, again, included now in the base legislation
which I think will make consistent with what you're talking
about.
To Mr. Taylor, thank you again to you and NASEO for your
continued support. I know some of the provisions, again, fell
out of the bill that you had hoped would be part of it. We just
appreciate the support of the organization. We want to continue
to work with you on that.
Mr. Nadel, so many questions but if you can tell us just
briefly what you have learned in your economic analysis of
Shaheen/Portman. Maybe you could speak a little bit to some of
the benefits that you have measured quickly and what kind of
energy savings we can expect if the bill is enacted into law?
Mr. Nadel. OK, certainly.
Senator Portman. I thought you'd be ready for that. I'd
thought you'd have your paper.
Mr. Nadel. Oh, OK.
Senator Shaheen actually summarized the benefits from our
recent analysis. I did not bring those with you. But they are
very substantial in terms of large energy savings many, you
know, more than a hundred thousand jobs.
I'd be happy to supply those for the record. I didn't bring
them with me.
Senator Portman. That would be great.
Senator Portman. By 2030 energy savings that equal 12
quads, the equivalent of taking roughly 80 million homes off
the grid, a cumulative savings amount to $100 billion by 2030.
As you say, there's also some jobs figures you were able to
provide us with which we really appreciate. I think it was 130
thousand, if I'm not mistaken.
So thank you.
Maybe for the record, Mr. Chairman, if we could that, that
would be great.
Again, thank you all very much for being here today. To the
Chairman, thank you for your indulgence. We really look forward
to working with all of you to try to move this legislation
forward.
Again, I think even within the next month we have a good
opportunity.
Thank you very much.
Senator Franken. Thank you, Senator, for your great work in
Shaheen/Portman.
I guess I've got you all to myself so since I do--and by
the way Senator Risch's questions will be submitted for the
record. OK?
Senator Franken. I do want to talk a little bit about
propane right at the start. This is on energy efficiency and
renewables, but I just want to talk a little bit about that.
We had kind of a perfect storm and we saw the price of
propane go from under $2 to over $6. Commissioner Rothman and I
met with some folks at a farm near Faribault, Minnesota this
weekend. It seems that it is the crisis is the worst, seems to
be, over hopefully. But we are going to in 8 months be back to
the drawing season for our corn and our grain and then we'll
have another winter.
So, we saw some good things happening, including since we
have a representative from Texas here, that we saw some propane
coming up on the pipeline. We saw some trucked up. I just want
to ask our Minnesota and Texas representatives here what your
thoughts are on going forward how we can ensure faster delivery
of propane on pipelines, on rails and on other modes, like
trucking during emergencies.
Any thoughts.
Yes, Mr. Rothman.
Mr. Rothman. Mr. Chair, thank you.
The one thing I would like to note, at least for Minnesota
is that, as you know, the Cochin pipeline coming down from
Canada is scheduled to reverse flow. So if----
Senator Franken. That's 40 percent of our propane comes
from that pipeline. It's reversing for next year, right?
Mr. Rothman. Exactly.
So in addition to the weather and the crop issues we have a
delivery/pipeline problem. We've urged and I think with your
leadership urging all of the pipelines, the marketers, the
suppliers, distributors from the reserves that we have, the
supplies that we have throughout the United States to the home
in Minnesota needs to be examined very carefully.
Senator Franken. We will do that either in the subcommittee
or as the committee as a whole we need to be looking at this in
anticipation of next year.
Mr. Rothman. That's great.
In addition it is part of the things--and Mr. Chair, maybe
what I'd like to do is just suggest. We were collecting in the
Administration, some ideas and suggestions for legislation,
perhaps either for you, things at the State level and then
things that we see as necessary. You know, off the top, there's
potential for looking at a propane reserve system for the
Midwest, just for crisis situation.
I bumped into a friend over the weekend who said he had
recently switched off of propane to natural gas for the home
but used the Federal tax credit as financing to help do that. I
don't know if that's still in place or not or whatever.
What I would say is that we'll submit and work with you to
develop, you know, good alternatives to solve a problem or at
least mitigate the problem as it goes into next winter and
appreciate that opportunity.
Senator Franken. Mr. Taylor, any thoughts? Just I know this
isn't necessarily your area in Texas, but.
Mr. Taylor. Thank you, yes.
From a supply perspective propane, of course, is the
byproduct of natural gas processing and petroleum refining. So
where those activities occur you tend to have supplies of
propane stored in large volumes. In Texas, Mont Belleview is
the largest storage area and the pricing basis point for
wholesale supply.
The challenge with propane is getting it, is moving it from
those large stores to places where it's consumed. The recent
FERC action allowing propane to flow north on a priority basis
certainly helps. But that still takes, in some cases, weeks for
that product to move through the pipeline.
Senator Franken. Right.
Mr. Taylor. The starting process is like that earlier. It's
certainly important. As a backstop of sorts, moving propane by
rail, although rail lines are congested with other traffic, but
by truck is another alternative in moving smaller shipments.
In our State our Governor initiated a waiver and renewed
that recently allowing out of State trucks and drivers to come
into Texas, come to propane terminals, fill their trucks and
move back north and into the Midwest. So that's certainly an
action that is allowable under our State law and I assume will
continue on.
Senator Franken. The Department of Transportation did a
waiver on ours as a service for truck drivers. So, but that can
only last so long.
[Laughter.]
Senator Franken. Before you get a different kind of
problem.
I like the idea of a propane reserve system for the
Midwest. It could be similar to a model that already exists for
heating oil reserve in the Northeast. So we'll look into that.
Let's segway from heating, keeping people warm in the
winter to some--to this what we're talking about here which is
weatherization, the Weatherization Assistance Program.
This is Mr. Rodgers, Mr. Nadel or any other panelist. What
can we do at the Federal level to incentivize or to help do
weatherization?
Mr. Nadel.
Mr. Nadel. I can take a stab a little bit at it.
I think helping to provide good financing for consumers to
help finance weatherization would be very useful. I would
particularly note the on bill financing that Hawaii has as well
as New York, California is starting it. This allows consumers
to basically get the money through the utility bill, sometimes
from the utility, sometimes through a third party financer who
works with the utility and then they make the payment on the
bill. So it makes it very easy.
The Federal Government can provide technical assistance and
help facilitate it. I'm not saying that they'd provide the
capital, but that would be very useful.
As Senator Portman said, more education on what people can
do, more technical assistance working through the States would
be very helpful as well, obviously if we're talking low income
weatherization funding for the Weatherization Assistance
Program.
Then I'd point out whatever can be done to encourage
utility sector and energy efficiency programs because the
utilities are often helping to provide technical assistance and
other support for weatherization would be very useful.
A final comment I would make is while the utilities are
very helpful if we're talking things like propane or oil you
need these other measures to help it. The utilities are great
for natural gas and for electricity, but I think all too often
propane and fuel oil efficiency has not gotten the attention it
needs. The crisis helps point to the need for that. If we can
reduce the demand, obviously we're not going to do it this
winter, but gradually weatherize these homes.
I've heard reports. We have one person in our office whose
uncle lives in Minnesota and he's getting like a $10,000
propane bill this year for not a very large farmhouse. I'm sure
you've heard many more. But how do we make those homes more----
Senator Franken. All of our buildings more efficient is one
of the things that we're talking about. You're talking about
financing models. I just, but I know Mr. Rodgers has something
to say.
But I do want to ask about--it seems that this comes up a
lot whether we're talking about energy savings, performance
contracts or whether we're talking about pace. We talk a lot
about financing mechanisms, but Mr. Rodgers, what were you
going to say?
Mr. Rodgers. Mr. Chairman, I think the--what I would add to
what has already been said is we manage literally thousands of
weatherization projects a year across the country. These are
all through the utilities, who I think the utilities do a
tremendous job in being able to support their customers and
driving these very important programs.
But I think I'll play off a little bit of question that
Senator Portman had asked earlier and that's in the area of
education. I think that's one thing that all customers need to
have more of and that is an understanding of how energy is
being used within their home and what are the things that they
can do to help prevent rising costs to help prevent leaking/
leakage out of their homes.
We find, when we go into income qualified communities and
work with the residents they are incredibly supportive and
embracing of all of the activities that the utilities are
providing as long as they understand what the impact is going
to be on their home. So, I think if we think about it both at
the Federal level and at the State level an increase in
education, an increase in knowledge, for these end customers to
really be able to understand what these various measures will
do for their home, I think is a critically, critically,
important element.
Senator Franken. Mr. Nadel was talking about getting help
from utilities to do these things. In Minnesota we have an
energy efficiency standard. Now it's called--you talk about
having standards, but not mandates, right? That was part of
your testimony.
What's the difference really? I mean, if you're saying to
the utilities this is--you have to improve your customer's
energy efficiency by 1.5 percent every year. That's a mandate,
isn't it? That standard is a mandate.
That incentivizes utilities to help finance weatherization.
Doesn't it?
I mean is there something that we're being a little too
cute when we talk about the difference between saying we need
standards, but not mandates. Aren't mandates useful?
Anyone want to take that or Mr. Rodgers, I seem to be
talking to your----
Mr. Rodgers. Mr. Chairman, I think when you break down the
difference in my mind. The standards are setting, you know,
kind of the goals and objectives as to what you want to
accomplish within that State. The mandates, as I think about
mandates, start to become more prescriptive as far as how you
go about doing that.
So if we think of those as really higher level goals and
objectives to allow the market and the utilities within those
markets to really, you know, reach out and bring the best of
what companies like ours have to bear to their customers, you
know, I think they can be viewed as one and the same.
I think my concern when I talk about mandates are really
starting to see that those prescriptive requirements are coming
at a higher level where really we need to allow the market to
drive what those prescriptive measures would be.
Senator Franken. Right.
You can voluntary standards or mandatory standards, but in,
I think, that in many cases we're talking about a distinction
without a difference that a standard is a mandate.
Mr. Rodgers. Right.
Senator Franken. But it's a mandate that's not so
prescriptive that it allows the market to figure out how to
meet that standard.
Commissioner Rothman.
Mr. Rothman. Mr. Chair, to your point.
I think all stakeholders have an opportunity. Utilities,
consumers, everybody, the environmental community to focus on
the fact that you can achieve through a standard certainty,
certainty not just having a goal, but in achieving something
which results in carbon reduction and efficiency standards. But
also creates the certainty from the public policy perspective
that's necessary to lay the foundation so that utilities can
work with something and understand what that policy is. With
that certainty you get a better business outcome for them and
for the States by having the standard.
So as to whether it's useful, it's absolutely helpful.
Senator Franken. We have an energy efficiency standard or
I'm sorry, a renewable portfolio standard in Minnesota of 25
percent by 2025 for Xcel it's 30 by 20, right?
Mr. Rothman. Yes.
Senator Franken. Then we're meeting that, as you said.
Mr. Rothman. Yes.
Senator Franken. Mr. Nadel, can you give us a broad
overview of how these programs and they are mandates, how
they're working across the country that the States have decided
to impose upon themselves through their legislature or through
their Governors?
Mr. Nadel. Yes. At this point 26 States have established
energy saving goals that kind of have mandatory nature to them,
meaning there are rewards for hitting them or perhaps some
consequences for not. They set these standards based on past
experience, based on neighboring States, based on studies what
is cost effective. Nobody sets a standard being a pie in the
sky. They set them based on what they can achieve.
We're in the process of coming out with a report probably
next month on the results of these States and how well they're
doing. Updating a report we did a couple of years ago. What
we're finding is the vast majority of States are either
exceeding their standards, equaling them or coming very close.
Only in a few cases are they falling a little bit short.
But when they have these levels they really sharpen their
pencils and figure out how to do them. They are very flexible.
So typically, now in Minnesota it's one and a half percent
savings a year. It doesn't say how much comes from
weatherization verses commercial lighting etcetera. The
utilities have a lot of flexibility to do them.
As someone who used to work in the utility industry and has
a lot of friends there, I have noticed that these people really
pay attention to hitting their goals. I had I remember one
friend telling me that whenever he bumped into the CEO of his
company, the guy would always ask him, so how are you coming on
your goals because in that case one, they cared, but 2, they
actually stood to make more than a million dollars in extra
shareholder incentives from hitting their goals. We now have
over 20 States that have type of incentive.
So I think they can work very well. But they do have a lot
of flexibility to, you know, they're not highly prescriptive.
It's achieve these savings the best way you can.
Senator Franken. Which is what Mr. Rodgers was saying that
they're flexible not overly prescriptive, but they're all
learning from each other.
Mr. Glick, Mr. Rothman, Mr. Taylor, do you want to talk
about how your--what your successes and challenges in
implementing your standards have been in your States?
Mr. Glick. Sure, Chairman Franken.
In Hawaii what we've noticed is that success has come--has
raised a lot of challenges. So we have now a number of circuits
which were overloaded. Hawaiian Electric estimates that 20 or
30 percent of circuits on Oahu, our population center, are
overloaded.
So most of our work today is how do we solve those
problems? How do we work to create better renewable
penetration?
So a lot of our solutions now are looking to short term
efforts, the things that we can use in the SEP or State energy
program.
Senator Franken. When you mean overloaded you mean your
base load doesn't meet high demand, peak hours or something? Is
that what you're saying?
Mr. Glick. Yes, what I'm----
Senator Franken. OK, I just wanted to make sure I
understood.
Mr. Glick. Sure. It means that at certain times of the day
we may be exceeding peak penetration levels by, you know, we
may have 120 percent of our capacity. It's overloaded. That
means we curtail renewable energy because we have too much
producing at that time.
We also have reduced demand because of our energy portfolio
standard and because of conservation efforts. So it's a matter
of balance.
Senator Franken. Oh, I'm sorry. Your output is exceeding
your need.
Mr. Glick. That's right.
Senator Franken. Oh, I see what you're saying.
Now are you doing any kinds of things like storage in order
to deal with that?
Mr. Glick. Immediately there are smart inverters that can
help ease some of the burden. Another technical fixes that can
happen, either the residential or the utility level, but the
medium term fixes include a lot of energy storage, pump storage
strategies that are being pursued in Kauai, Maui, on Oahu.
Long term combining our grids because we are unique in the
sense that we have 6 independent grids. Just the combination of
unifying the Maui and Oahu grids could increase overall
penetration by another 53 megawatts because of the redundancy
in the system that it will eliminate.
Senator Franken. That's laying a cable.
Mr. Glick. It's an undersea cable.
Senator Franken. On the ocean floor or?
Mr. Glick. Basically, yeah, that's right which have been
done throughout the world.
Senator Franken. Right.
Mr. Glick. There's over 50 instances of successful undersea
cables.
Senator Franken. OK.
Either Commissioner Rothman or Director Taylor?
Mr. Rothman. Chairman, let me address the 3 various
standards that we have quickly.
On the Conservation Improvement Program, you know, as Mr.
Nadel said and suggested, Minnesota has all the utilities file
and, you know, plans for their CIP. Working with them there's a
really good dialog. It's a great opportunity.
Over time many of the low hanging fruit projects,
obviously, have been taken into account. Continuing those
successes are important.
On the RES, the Renewable Energy Standard, I'd say the
challenge is making sure we have the infrastructure in place,
the grid technology, to keep unlocking our renewable energy in
our sector, in Minnesota, as you know.
Then in the new solar one, I think it's going to be finding
the best, appropriate solar strategies to meet those challenges
and how the market will play out over the next 5/10 years where
we have a bunch of strategies in place and hopefully we'll take
some lessons from Hawaii and achieve our goals there.
Mr. Taylor. Mr. Chairman, in Texas in 1999 we passed
legislation to restructure our electric markets. We have
competitive retail markets. In the place of what had been
utility efficiency programs under a regulated, fully
integrated, investor owned utility model, those transferred
over to what we know as the Energy Efficiency Portfolio
Standard. I think it may have been one of the first, if not the
first, in the country.
The first, OK.
[Laughter.]
Mr. Taylor. Originally that started off as a 10-percent
offset in growth and demand for electricity customers within
the investor owned service areas. That has now grown to 20 and
now 30 percent offset. The utilities have exceeded that goal in
each of the past several years.
A few years ago a performance bonus component was added to
that to incent the utilities to do more. That has performed
well.
Outside of the investor owned utilities our municipal
utilities and electric cooperatives don't have this
requirement. Yet, they are still moving in that same direction.
One example, the CPS Energy which is the municipal electric
and gas provider for San Antonio originally had planned to
build a new 700 megawatt power plant to address future growth
and load. Instead they adopted a package of efficiency measures
across the service territory as well as distributed solar and
some other renewable activities to achieve the same objective.
Senator Franken. Mr. Clark, Mr. Rodgers, how do these
standards impact your business models?
Mr. Clark. Certainly as part of energy savings performance
contracts, we've had the good fortune of implementing a number
of renewable technologies for the Federal Government customers,
State and local government customers including wind energy
projects for a Bureau of Prisons facility in Victorville,
California as well as an offshore Navy base and a considerable
amount of photovoltaic or PV products both for the State of
Hawaii, for example, to the Department of Accounting in General
Services.
I still think, from our perspective at least, fantastic
projects, fantastic components to a project, but if evaluated
on a purely economic basis we still feel that's it's pretty
compelling that, you know, not using energy is the most
renewable form of energy all together. That efficiency on a per
kilowatt/hour or per megawatt/hour investment for our customers
tends to be the most cost effective solution. But certainly the
renewable portfolio standards have grown that aspect of our
business and have grown that portion of energy savings
performance contracts.
Senator Franken. Now you were talking about financing
barriers. I'll go to Mr. Rodgers, but I want to talk about the
barriers that you have to getting, to making sure there's
finances there, for Mr. Nadel as well, is talk about how we can
make sure that there is financing for these kinds of projects.
Mr. Rodgers. Mr. Chairman, in regards to the impact on
companies like ours, it really begins to set the overarching,
you know, standard to allow companies like ours to exist and
companies like ours to assist our utility customers and our
utility clients to help their customers.
A couple of things I think these standards have done is it
has really brought out the best of what businesses like our do,
of thinking of new and innovative ways to be able to deliver
energy savings measures into the commercial, the industrial and
the residential marketplace.
But one of the things, I think, that has become a challenge
to our market and one that we have embraced wholeheartedly,
especially in our project that I referenced in my comments on
Indiana and that is of measurement and reporting. We find that
there is not necessarily a consistent way of looking across the
entire country at how these programs roll up and what really is
the return on the investment that's being made in the
marketplace. So standards like this also drive innovation
through technology of really trying to take this information
and the savings that is being provided to the end customers and
really be able to report it in a meaningful and useable way to
really bring it back to an economic discussion.
Senator Franken. Is that important, Mr. Nadel, that the
idea of establishing data that is that people can count on and
say we know that this is what this technology does or we know
this is what our savings will be?
Mr. Nadel. Having better data to better assure consumers
how much they will save will be very helpful. You're not going
to hit it exactly, but to very much narrow the range of
uncertainty, likewise better data on the performance of
projects, will be very helpful to the financiers to be able to
help evaluate the risks of making different loans.
Senator Franken. Therefore help to get financing and that
takes me back to Mr. Clark on the barriers to getting
financing.
Mr. Clark. It's truthfully, Chairman Franken, it's a
relatively new barrier. I would say that up until the point
that there was the economic downturn in 2008 I think that on
the State and municipal side of the equation, I don't want to
say financing was abundant. But it was less of an issue.
I think today as people manage the credit rating of an
entity whether it be a city or a State and in lieu of events in
the city of Detroit or the city of Harrisburg where they had
credit difficulties. I think it's become an increasing concern.
I think one of the, or several of the things that have helped
alleviate that have been the creation of these not for profit
entities for the purpose of investing in energy efficiency.
I mentioned the sustainable energy utility in Delaware, the
Maryland Clean Energy Commission, the Chicago Infrastructure
Trust. So to the extent that these entities for investment in
energy efficiency are propagated and willing and able to hold
that financing that will stimulate a market and help a market
get out of the condition that it has been.
I'd also say that, you know, a number of tax credits,
whether it be an investment tax credit associated with
investments in photovoltaic assets or new market tax credits
that may be able to finance central planned assets for a design
builder or build on operate projects. Certainly the
continuation of and the availability of those tax credits makes
it a much more cost effective transaction structure for State
and local governments to do comprehensive infrastructure
related energy efficiency improvements.
Senator Franken. You brought up in your testimony the EPA
which has indicated that it's going to engage States and
stakeholders and the public to establish carbon pollution
standards for existing power plants and how that could unleash
projects for energy efficiency and basically as offsets. I'd
like to discuss how these regulations could be crafted in such
a way to do that and give States maximum flexibility to carry
them out.
Anybody and I know, Mr. Clark, you have ideas on that.
Commissioner Rothman.
Why don't we--we haven't heard from Commissioner Rothman in
a few minutes. So let's go to him first.
Mr. Rothman. Sure.
Senator Franken. Give you a rest.
Mr. Clark. Give me a rest.
Senator Franken. Mr. Clark.
Mr. Rothman. Of course I was a bit of a designated hitter
on this topic a little bit.
First of all, Minnesota supports the efforts of Sec. 111(d)
and the Administration going forward with these, with the
rulemaking, wants to participate in the partnership and that
dialog and has actively done so.
I'll just reference the letter that came out of my sister
agency, the MPCA, pollution control on December 12, 2013 which
we can submit for the record as on each of these points.
The major ones are, as you're indicating, is a topic of
importance for today on energy efficiency. From our perspective
in Minnesota we want to make sure that those rules have, the
rule has flexibility to allow the credit for energy efficiency
and renewables. Renewables should allow for definitions within
each of the States. They aren't the same.
I think the key point in going back to your questioning
just a minute ago, is that there needs to be key tools for data
collection and measurement build in so that there can be proper
credit for those kinds of offsets.
Then the last part about it that I'd like to say is that
with respect to that data collection is that there needs to be,
from Minnesota's perspective, an accommodation for the
achievement and the successes that we've had already in the
past so that Minnesota can, in essence, take credit for the
opportunities we've had.
Then finally, as we note in our letter, that there needs to
be some flexibility by the States with the timing. It may take
more than a year to get all this in place. But we want to have
that dialog.
Thank you, Mr. Chair.
Senator Franken. Ah good.
Mr. Clark? Then Mr. Nadel, I know that you have a lot of
thoughts about this. So we'll do that.
Mr. Clark. Certainly agree with everything that's been said
on the topic. From our perspective an energy savings
performance contract in its very design is well suited to
take--to both measure, verify, quantify, the CO reduction
achieved in energy efficiency products done outside the utility
fence. So we believe it's an excellent delivery mechanism.
Also one of the barriers at times can be the economics of
an individual project or collection of energy efficiency
projects. Certainly the ability to monetize a CO2
reduction or carbon dioxide reduction over a period of time
could be a catalyst or transformational in the energy
efficiency market by giving another source of economics or
savings stream to compel building owners to take action, you
know, in cooperation and concert with a utility program.
Senator Franken. Mr. Nadel.
Mr. Nadel. Yes. We believe that energy efficiency is a
critical ingredient to make these Sec. 111(d) regulations on
existing power plants work. It's low cost emissions savings. In
fact it's savings that help reduce customer bills unlike
anything else you can do.
So we do strongly support the flexibility that Mr. Rothman
talked about to give States to allow them to use various
mechanisms to incorporate efficiency and renewable. We think
that efficiency should be considered. We need a system approach
where you look what can be saved in the whole system, in the
power plant itself, but also in that larger system outside
including the end user to get much more emissions reductions
then.
We do believe that if done right, flexible and, you know,
including a lot of efficiencies, can be done in ways that will
actually help the economy rather than hurt the economy. I know
there's been a lot of angst here in Congress among some people
that this will be a job killer or really hurt things. Yes, you
could do it badly. But if you do it well and really include a
strong role for efficiency we think it can actually be----
Senator Franken. Unleash a lot of activity is really what
Mr. Clark. We see some nodding here. Mr. Rodgers I see.
Mr. Nadel. Right. The one thing I would add is we are
actually now doing a study looking at the impacts of including
significant efficiency in 111(d) for each of the 50 States. We
hope to have that come out at the end of March.
I know just this morning I was in a meeting where we were
reviewing some of the results of Alabama. It happened to be
yes. The benefits, it creates jobs. It increases State income.
It looked like it could be quite positive.
Senator Franken. I've been told that we have to get out of
here in about 10 minutes. They're having, I think, an arena
soccer game will be here a little later. We're trying to
balance our budget here in Congress too and that helps, every
bit helps it.
So I just wanted to ask about distributed generation and
combined heat and power. This is--I'm very glad that my
benchmarking amendment has been adopted by Shaheen/Portman. I
like combined heat and power for a lot of different reasons.
Mr. Rothman talked about something we do in St. Paul where
they have distributed energy where we really burn the biomass
that's picked up from our homes in St. Paul. We burn it and it
does it. It provides the electricity for St. Paul and heats and
cools about 80 percent of the buildings. Right?
So Mr. Nadel, I know that you've mentioned it and if you
could also encourage Mr.--or Senator Portman and Senator
Shaheen maybe we can get that as part of this too.
Mr. Nadel. Yes. I mean, CHP is very important and you have
a bill that would expand that to include district heating
systems. We do support that. It will be a little bit
challenging because there are some costs involved in trying to
get bipartisan support for anything that has--costs money is
challenging.
More broadly, I think much can be done by encouraging and
assisting States to look at the hook up requirements in their
States, look at the backup power rates to make sure that they
are fair to the CHP system, to the utility and to all the other
ratepayers.
Also looking at some of the environmental permitting
systems. In many States they do not recognize the higher
efficiency of combined heat and power. They, therefore, have
overly strict emissions requirements for them.
So there are things that can be done to help encourage.
Your bill is an excellent start, but there's also some other
things that can be done.
Senator Franken. The bill's resiliency as well. These
things operate in island mode or can operate in island mode and
that can, especially if you're doing things like storing
important data. It's a security piece too.
Look, I just want to thank you all for your testimony. We--
I know that Senator Risch is submitting some questions to the
record and I might as well.
Senator Franken. But I want to thank you all for the great
work that you're doing. We're going to try to learn as much as
we can from this and continue doing this.
But I just want to thank you for what each of you are doing
in your States or around the country. I guess by now we'll
adjourn this hearing.
[Whereupon, at 5 p.m., the hearing was adjourned.]
APPENDIX
Responses to Additional Questions
----------
Responses of Mark Glick to Questions From Senator Murkowski
Question 1. Can you please elaborate on the Memorandum of
Understanding that Hawaii signed with the Department of Energy in 2008?
Answer. The January 2008 Memorandum of Understanding (MOU) between
the U.S. Department of Energy (DOE) and the State of Hawaii established
the Hawaii Clean Energy Initiative (HCEI), creating a groundbreaking
partnership between the state, DOE, the military and the public and
private sectors. The purpose of the MOU was to forge an alliance
between Hawaii and DOE that would extend to energy stakeholders and
opinion leaders to pursue strategies to transform Hawaii's energy
sector to achieve a target of ``70 percent clean energy'' by 2030. In
2009, the following targets to be achieved by 2030 were set consistent
with the MOU: 1) a 4,300 GWh reduction of electrical energy consumption
in the power sector as defined in the Energy Efficiency Portfolio
Standard of Hawaii Revised Statutes 269-92; 2) 40 percent of Hawaii's
electrical generation requirements coming from renewable resources as
defined in the Renewable Portfolio Standard of Hawaii Revised Statutes
269-92; and 3) a displacement of 385,000 million gallons per year of
petroleum for ground transportation as a voluntary objective of the
HCEI Road Map which can be found at energy.hawaii.gov. The HCEI Road
Map, which was last updated in 2011, established working groups to
address key sectors of the energy economy--electricity generation, end-
use efficiency, transportation and fuels. Hawaii and DOE are currently
updating the MOU for execution in the second quarter of 2014 that
outlines the next phase of HCEI.
Question 2. Are you meeting the goals for your Energy Efficiency
Portfolio Standard (EEPS)? If so, how do you know?
Answer. The State of Hawaii is meeting the EEPS goals. One way the
Hawaii State Energy Office tracks progress on EEPS is through the
annual EEPS report by the Hawaii Public Utilities Commission (PUC) to
the Hawaii Legislature. The most recent report in January of 2014
stated that `` . . . Hawaii is on track to achieve more than 1,550 GWh
in savings by 2015, exceeding the interim 2015 EEPS target of 1,375 GWh
by more than 12 percent.'' This report can be found at http://
puc.hawaii.gov/wp-content/uploads/2013/04/2013-PUC-EEPS-
Report__FINAL.pdf
Another method of verification is the recent independent evaluation
released by the PUC on January 15, 2014 of the energy efficiency market
potential in the State of Hawaii from 2013-2030. This evaluation was
conducted by EnerNOC Utility Solutions Consulting to assess whether the
State is on track to meet the overall 2030 EEPS goal. From a baseline
in 2012, the study presents estimates of potential electricity savings
for 2013 through 2030. According to the evaluation, the projected
``cost-effective cumulative energy efficiency potential to be achieved
by 2030 is 6,210 GWh, or about 144 percent of the current EEPS goal.
Question 3. It seems from your testimony that you are continuing to
add renewable power even though you are having grid stability issues.
How are you maintaining grid stability? What do you use for base load
power?
Answer. Adding high degrees of intermittent renewable generation
resources safely and reliably in Hawaii has been challenging. This has
necessitated recalibration of our grid reliability standards, specific
technical solutions pursued by utilities, including customer-sited and
grid-sited technologies to address any issues related to exceeding or
increasing the current penetration threshold, and continued reliance on
fossil-fueled dispatchable generation resources to assure grid
stability and suitable power quality. Another challenge is the size of
Hawaii's existing base-load power plants, particularly the AES coal
plant and the amount of spinning reserve that must be kept running to
back it up. State policy has encouraged the diversity of dispatchable
renewable resources available including geothermal, waste-to-energy,
biomass and biofueled generation resources. Hawaii has more than one
dozen energy storage projects and the PUC may approve efforts to
procure additional storage technologies and demand response resources.
The utilities and the stakeholders of the Hawaii Clean Energy
Initiative have leveraged federal, state and utility funding to
commission studies using more sophisticated and accurate models that
account for the addition of renewable energy resources and their grid
impacts. Essentially, the utilities are seeking to understand to what
extent conventional generators can be turned-down to allow for greater
renewable energy penetration and still maintain grid stability.
Question 4. How do you partner with private sector companies and
local businesses to achieve your goals?
Answer. For efficiency private sector projects, the State Energy
Office partners with private lending institutions to offer low-interest
loans supported by an ARRA-funded loan loss reserve.
In the renewable energy arena, the Hawaii State Energy Office
reaches out to the private sector to determine which are the most
pressing issues preventing renewable energy development. Once the
bottlenecks are identified, we develop and deploy solutions to break-
down these barriers. For example, inefficiencies in permitting
processes and siting selection were determined to be major roadblocks
to renewable energy development in Hawaii. Consequently, the State
Energy Office pooled resources to develop the following tools to
improve how developers design and deploy renewable energy projects in
Hawaii:
Renewable EnerGIS Map provides renewable energy resource and
site information for specific Hawaii locations. It is intended
to help landowners, developers, and policy makers understand
the renewable energy potential of sites statewide.
Renewable Energy Permitting Wizard was developed to help
those proposing renewable energy projects understand the
county, state and federal permits that may be required for
their individual project. This tool works for projects ranging
in size from residential solar installations to large utility-
scale facilities. It is currently being upgraded to reflect
current permitting requirements, improve user functions, and be
available in an open source software environment.
e-Permitting Portal (Department of Health) allows for the
electronic processing of DOH environmental health permits.
Permitting Guidebook provides guidance on the permitting and
siting of renewable energy projects in Hawaii. Hence, it better
prepares applicants for the permitting processes, which also
saves time and resources for the permitting agencies and
developers.
Developer & Investor Center provides guidance and
information on all facets of commercial and residential
renewable energy development in Hawaii (siting, financing,
utility interconnection, taxation, permitting, business
registration, other opportunities).
International Agreements--The Okinawa-Hawaii Clean Energy
Cooperation agreement was signed by Hawaii, the Japan Ministry of
Economy, Trade and Industry (METI), the U.S. DOE, and Okinawa
Prefecture to facilitate policy dialogues to share best practices and
deploy joint projects in the field of renewable energy and energy
efficiency including smart grids and smart city systems. Additional
parties agreed to work with the principals under the framework,
including the Japan New Energy and Industrial Technology Development
Organization (NEDO), the Japanese Ministry of Foreign Affairs (MOFA),
other related organizations and research institutions.
Among the several significant joint efforts that have emerged from
this partnership is the Japan-US Smart Grid Demonstration Project.
Known as JUMPSmart Maui, this innovative smart grid project is being
funded primarily by NEDO using $37 million provided by Japan's Ministry
of Economy, Trade and Industry. The US Department of Energy is
supporting the project by providing access to their experts at three of
their national laboratories (National Renewable Energy Lab, Sandia
National Lab, and the Pacific Northwest National Lab). Among the many
private sector partners are Hitachi, Mizuho, Maui Electric Company and
Hawaiian Electric Company. This project helps Hawaii achieve R&D
investment goals of the state's strategic plan for clean energy. By
investigating system impacts and the means to enable increased levels
of distributed generation PV, JUMPSmart Maui is a good example of
Hawaii's emergence as one of the world's leading test beds for proving
advanced clean energy concepts and early stage technical solutions.
______
Responses of William Rodgers, Jr. to Questions From Senator Murkowski
Question 1. Please describe how a statewide approach is the best
solution for Indiana but may not be for other states.
Answer. A statewide program approach, such as the Indiana statewide
program, is a great fit for states that do not have strong, established
and consistently defined efficiency programs that are offered by
utilities in the state. Starting from the ground up enables the state
to align program goals, structures and requirements seamlessly. What
makes the Indiana program successful from a customer and utility
perspective is that it is the same program offered to all customers
across the entire state. This uniform approach can easily be applied to
other states in similar situations. It is typically more challenging to
modify and streamline existing programs with a longer history offered
by multiple utilities into a single unified statewide approach.
Brand awareness, customer education, data management and program
reporting are the clear advantages of a statewide approach. By aligning
all of the individual utility goals there is synergy when it comes to
program participation and overall program evaluation.
In the case of Indiana, a unique brand called ``Energizing
Indianar'' was established for the entire suite of programs offered by
all utilities. By combining all utilities under one brand, GoodCents
was able to drive customer education and awareness on a much larger
scale. Additionally statewide program channels allow for consistent
messaging across multiple service territories which opens additional
enrollment channels and the ability to leverage large scale branding
campaigns to educate customers and drive increased cross selling and
program participation.
Finally, offering a common program across an entire state through
multiple utilities promotes economies of scale through a third-party
administrator. These economies of scale include increased visibility,
stronger data capture and management, and enhanced reporting
capabilities across a common platform to provide information to key
stakeholders. All program activities across all utilities are measured
and tracked through the same process and with the same system. The
requirements of program success are clearly laid out, and the data
needed to back those numbers is collected and reported from the first
customer interaction through the life of their participation. The
unification of the program is maximized by the consistency in program
implementation; data capture and ultimately program reporting.
Question 2. How have you been able to measure the success of
Energizing Indiana since its beginning, three years ago? More
specifically, how to you obtain tangible metrics that let you know if
your efforts are really working, and how much you have saved consumers?
Is it possible for you to know exactly what you are paying for? How?
Answer. As the third-party implementer for Energizing Indiana,
GoodCents is required to collect, analyze and report on data from every
aspect of the program. This information is then reported directly to
the utilities and the Demand Side Management Coordination Committee
(DSMCC). GoodCents leverages our fully integrated technology platform,
GoodCents Connectr, to manage the data requirements of all programs for
each participating utility. The GoodCents Connect technology platform
supports all of the systems utilized in the delivery of the program and
enables us to track and report on each part of the customer's lifecycle
with the Energizing Indiana Program; we track each detail of the
process from the time they are initially marketed through the
completion of the program. This approach provides a single platform to
support all program functionality and minimize the number of
integrations required to share data, lessening impact to internal and
external systems.
By tracking both the data and details of each program transaction
we can easily measure program success by participation, transaction and
deemed or measured savings. This information is presented to all
program stakeholders through the Reporting Portal portion of GoodCents
Connect which enables the data to be analyzed and program success and
goals to be tracked in real time. The ability to continuously track a
program's success and accomplishments allows us to gauge what is
working and what can be improved to increase program participation or
results. Unique to a consolidated statewide approach, data can be
tracked and managed for all utilities in one system which allows us to
easily monitor and report on the program as a whole, at any given time.
GoodCents Connect also enables us to increase our reporting ability
by integrating measure level savings and reporting for improved
performance accuracy. Knowing the kilowatt hours (kWh) saved by
transaction, program and utility allows us to easily report and
calculate total savings. By drilling both transactional and budget data
down we can easily track dollars spent against program participation.
This results in the capability to illustrate exactly where program
dollars are being spent and the savings you are achieving for program
spend.
______
Responses of Mike Rothman to Questions From Senator Murkowski
Question 1. How do you partner with private sector companies and
local businesses to achieve your goals?
Answer. We partner with companies in three key ways to help them
succeed. These partnerships inform of us of what they need to succeed
(Obtain Input); allow us to tailor assistance and polices to best
address those needs (Provide Technical Assistance); and connect them to
financial resources best suited to help them grow (Connect to Financial
Assistance).
Obtain Input
Partner with businesses to assure that our activities and policy
recommendations are based on current and leading challenges and
opportunities for a given sector.
Actively participate in sector specific (energy efficiency
and the production, distribution and use of renewable and non-
renewable heat, power and fuel) industry meetings and events.
Subscribe to sector specific trade journals, news services
and trade associations.
Provide Technical Assistance
Partnerships are strengthened by building trust and demonstrating
integrity through serving as an on-going, unbiased source of
information and expertise.
Provide one-on-one, confidential review of an energy
company's innovation to best enable them to compete for funding
and succeed in the market place.
Train entrepreneurs on use of a Commercialization Milestone-
based, decision making process commonly favored by DOE and DOD
grant programs.
Connect business to resources most suited to expedite
development including,
--Formal partnerships with Non-profit commercialization accelerator
programs
--DOE Clean Energy Innovation and Clean Energy Commercialization
programs, and federal labs, and
--Formal partnership with Minnesota Business First Stop--nine state
agencies that synchronize assistance and leverage expertise
as needed to address concerns common to innovative or
complex projects today.
Connect to Financial Assistance
Strengthen partnerships through serving as a ``go-to'' source of
information for current financial incentives and funding.
Promote subscription to our email list server State and
Federal Funding Notification Service so businesses can be
informed of appropriate solicitations.
Educate emerging companies on appropriate SBIR/STTR Programs
and Venture Capital Networks.
Educate businesses on federal and state Renewable Energy Tax
Exemptions, Minnesota Energy Savings Programs and Rebates for
Energy Efficiency.
Question 2. Regarding your Solar Value Tariff, how much solar power
has been derived, and how is it valued (at a retail or wholesale rate)?
How has the program been received by ratepayers?
Answer. Minnesota's Value of Solar tariff is still in the
development phase so numbers for solar power derived are not yet
available. The Department's Value of Solar Methodology is currently
under review by the Minnesota Public Utilities Commission (PUC). A
decision from the PUC is due by April 1, 2014. The value of solar rate
is neither a retail nor wholesale rate-it is a calculation of the real
value of distributed solar electricity to the utility, ratepayers, and
society. We are happy to provide further details.
Question 3. In your testimony, you note ``the value of energy and
its delivery, generation capacity, transmission capacity, transmission
and distribution line losses and environmental value.'' How is the term
``environmental value'' defined? How is it measured?
Answer. Minnesota's Value of Solar Methodology uses environmental
values based on existing Minnesota and EPA environmental externality
costs. CO2 and non-CO2 natural gas emissions
factors (pounds of pollution per MM BTU of natural gas) are taken from
the EPA.\1\ Avoided environmental costs are based on the federal social
cost of carbon values\2\ and the Minnesota PUC-established externality
costs for non-CO2 emissions.\3\
---------------------------------------------------------------------------
\1\ See http://www.epa.gov/climatechange/ghgemissions/ind-
assumptions.html and http://www.epa.gov/ttnchie1/ap42/.
\2\ See http://www.epa.gov/climatechange/EPAactivities/economics/
scc.html, EPA technical document appendix, May 2013.
\3\ ``Notice of Updated Environmental Externality Values,'' issued
June 5, 2013, PUC docket numbers E-999/CI-93-583 and E-999/CI-00-1636.
---------------------------------------------------------------------------
Question 4. Please elaborate on Minnesota's views that the proposed
Greenhouse Gas Rules for existing sources. Do you believe that
Minnesota will be able to reach its own targets of a 1.5 percent
reduction in energy use per year through efficiency measures and 27.5
percent generation from renewables by 2025? Why or why not? How do you
believe the rulemaking can be helpful to your efforts?
Answer. Yes, we do believe that Minnesota will be able to continue
to reach the goals it has set for itself.
Minnesota has required electric and gas utility companies to
deliver energy efficiency to their customers since the early 1980s, but
the programs have been continually strengthened. Originally, the
Conservation Improvement Program, or CIP (Minnesota Statutes Sec.
216B.241) law measured utility spending on efficiency. In 2007, the
Next Generation Energy Act (NGEA) strengthened CIP to require an annual
energy savings goal of 1.5 percent of retail sales for electric and
natural gas utilities, one of the most aggressive standards in the
country. Although individual utility performance has varied, Minnesota
electric utilities collectively exceeded the 1.5 percent standard in
2011, while natural gas utilities collectively achieved the 0.75
percent and 1.0 percent minimum savings standards. In 2010, CIP
projects reduced electricity consumption in Minnesota by approximately
1.3 percent out of an estimated growth rate of 2.3 percent without CIP.
Energy savings through efficiency and conservation have a sizable
impact on carbon emissions. On average, each megawatt-hour (MWh) of
electricity saved in Minnesota avoids 1,823 pounds (0.9 tons) of
CO2 emitted to the atmosphere, while each MCF of natural gas
saved avoids 121 pounds (0.1 tons) of CO2.\4\ As a result of
the electric and natural gas savings achieved through CIP in 2010-2011,
nearly 2,000,000 tons of CO2 emissions were avoided
annually, equivalent to removing approximately 370,700 cars from the
road for one year.\5\
---------------------------------------------------------------------------
\4\ The electric CO2 emissions rate is provided by the
Minnesota Pollution Control Agency to the Minnesota Public Utilities
Commission and Minnesota Department of Commerce in Docket No. E,G999/
CI-00-1343 and was last updated on March 17, 2009. The gas
CO2 emissions rate of 121 pounds of CO2 per Dth
is a standard emissions factor for natural gas combustion and assumes a
properly tuned boiler or furnace such that nearly 100% of fuel carbon
is converted to CO2.
\5\ Calculated using the US Environmental Protection Agency's
Greenhouse Gas Equivalencies Calculator (http://www.epa.gov/
cleanenergy/energy-resources/calculator.html#results), accessed Feb 1,
2013.
---------------------------------------------------------------------------
In 2007, Minnesota also enacted one of the nation's most aggressive
Renewable Energy Standards (RES), requiring Xcel Energy to generate at
least 30 percent of its electricity from renewable energy sources such
as wind, solar, and biomass by 2020, and all the state's other
utilities to generate at least 25 percent of their electricity by 2025
(altogether about 27.5 percent by 2025). This is roughly equivalent to
6,000 to 7,000 megawatts of renewable capacity by 2025. All 16
utilities are on track to meet the 2012 Renewable Energy Standard (RES)
benchmark goals\6\ of 18 percent (Xcel) and 12 percent (all other
utilities).
---------------------------------------------------------------------------
\6\ See ``Progress on Compliance by Electric Utilities with the
Minnesota Renewable Energy Objective and the Renewable Energy
Standard,'' which is prepared for the Minnesota Legislature once every
two years. View the full RES report and more on RES. June 1, 2013
report to Public Utilities Commission: Docket No. 13-186
---------------------------------------------------------------------------
Most of the renewable energy generated by the RES will come from
wind power. Low wind turbine prices and federal tax incentives have
driven the cost of new wind generation to historically low levels and
turned wind into a cost-competitive resource option. For some
utilities, wind is now the least expensive option available to reliably
satisfy demands for energy-even when the environmental benefits of wind
power are not included.
In 2013, Minnesota adopted a solar electricity standard to obtain
1.5 percent of retail electricity sales from solar electricity by the
end of 2020; this standard is in addition to the existing Renewable
Energy Standard. The new law is limited to investor-owned utilities,
exempting cooperative and municipal utilities. Mining and paper mills,
some of Minnesota's largest electricity users, are also exempted. There
is a 10 percent carve out for small scale solar photo-voltaic capacity
less than 20 kilowatts. The statute also created a goal of obtaining 10
percent of the entire state's retail electricity sales from solar
electricity by 2030.
Minnesota has shown its commitment to reduce Green House Gas (GHG)
emissions through its strong energy efficiency and renewable energy
goals. Continued reductions will rely on the successful implementation
of 111(d) rules. Recognizing that each state is responsible for the
implementation of a federal program, Minnesota believes that it is
important that the 111(d) program be flexible in the variety of things
a state can do (plant retirements, refueling, renewable energy and
energy efficiency), and that sufficient time is given (one year) to
develop State 111(d) plans. Also, because of reductions that Minnesota
has already achieved in emissions, it is important that past actions be
taken into account when establishing the 111(d) rules.
______
Responses of William E. Taylor to Questions From Senator Murkowski
Question 1. How do you partner with private sector companies and
local businesses to achieve your goals?
Answer. Private sector companies and local businesses are critical
partners and service providers in achieving Texas' goals of growing
domestic energy resources, enhancing energy security and leveraging
related economic opportunities. Specifically, our office engages
private sector consulting engineers to conduct energy assessments of
public facilities, which leads to energy and water saving retrofit
projects financed via our LoanSTAR revolving loan program that are then
implemented by local mechanical, electrical and plumbing contractors.
We also provide support to emerging clean energy technology companies
through a network of university-affiliated business incubators--where
young companies receive professional consultation on business plans,
management structure, investment strategies and technology validation.
Nationally, the 56 State and Territory Energy Offices engage
private sector companies in most of their work to expand energy
opportunities. This work ranges from the development of statewide
energy plans created through public-private stakeholder processes to
support for energy technology business incubators and demonstration
projects. In addition to the state activities described in our
testimony, several other examples include:
Alaska's public facilities retrofits program includes a $250
million Alaska Energy Efficiency Revolving Loan Fund. The fund
finances energy efficiency improvements linked to the
benchmarking of 1,300 public facilities across the state. The
benchmarking effort identifies high-energy use buildings and
provides an Investment Grade Audit prior to the retrofit to
help determine which improvements are needed.
Louisiana's Home Energy Rebate Option Program works with
private sector providers that link cash rebates for energy
retrofits with training and quality control for the energy
raters who certify the projects. This approach builds the
capabilities of private sector providers to offer retrofit
services to a broad range of homeowners. Over 1,100 existing
homes were retrofitted, resulting in a 30 percent average
increase in energy efficiency.
Nebraska has operated the Dollar and Energy Saving Loan
Program through 394 private banks for more than 22 years. The
program finances energy efficient improvements in homes, farms,
businesses, industrial facilities, and schools. Over 27,339
projects have been completed using more than $258.7 million in
low-interest loans made through the state's participating
private sector lenders. In it's more than 22 years of
operation, this public-private financing program has seen
defaults of only $106,000 out of the $258 million in loans.
North Dakota operates a cost-shared training initiative
implemented by North Dakota State University that helps farmers
adopt conservation farming practices to lower production cost.
To date, 43 workshops have been held with 861 participants.
Ohio's Energy Efficiency Program for Manufacturers (EEPM) is
a multi-phase program that provides assistance to manufacturers
to diagnose, plan, and implement cost-effective energy
improvements at their facilities. The state estimates ongoing
savings of 28,331,432 kwh/year (electric) and 876,349 MMBTU/
year (gas, oil).
Washington has partnered with BMW and the SGL Group to
launch the construction of a state-of-the-art carbon fiber
automotive facility. The $100 million joint venture began in
2010. Through the development and construction stages of this
process, over 200 jobs were created, and since opening,
approximately 80 permanent, full-time positions have been
maintained.
Wisconsin's Smart Fleet initiative aims to evaluate
government and business vehicle fleets to identify areas where
they can add vehicles that run on alternative fuels like
compressed natural gas. The recently launched program has
evaluated 29 participating public and private vehicle fleets
across the state.
In addition to working with the private sector on energy programs
that expand energy opportunities and resources, the State Energy
Offices also lead energy emergency planning and response, with a
particular focus on liquid fuels (e.g., gasoline, propane, heating
oil). There are many great examples of how states have partnered with
private sector fuel and energy providers to ensure rapid restoration of
services in support of health, safety, and a return to normal economic
activity. The response of the Massachusetts energy office to Hurricane
Sandy is a great illustration of this work. Following the hurricane the
state convened a workgroup to develop ``outside the box'' emergency
plans to ensure the state's petroleum needs were met and to assist the
New York Harbor area with obtaining petroleum product. The resulting
plan would allow Boston terminals to load petroleum products onto
barges for shipment to New York.
Question 2. In your testimony, you describe ``Green Banks,'' and
say that Connecticut `used $40 million to attract more than $180
million in private investment'. How exactly does that work? What is the
return on investment for the private entities?
Answer. The primary strategy that states are using in the operation
of ``green banks'' or infrastructure banks is to attract that private
capital through credit enhancement mechanisms, rather than through
direct lending to borrowers (although direct loans may be part of other
state energy financing programs). Credit enhancements allow public
funds to leverage private capital in the following ways:
The state commits public funds to support a specific energy
purpose, such as loans for home energy efficiency and renewable
energy projects.
The state solicits partner private sector financial
institutions to offer loans for that purpose, using the banks'
own loan application, underwriting, and payment collection
processes.
The state funds are not used directly for the loans; rather,
the state funds serve the purpose of decreasing the banks'
exposure to default risk. In addition, this approach can build
a track record of successful bank loans in the energy
efficiency area selected, which may lead to increasing amounts
of private capital for loans and a diminished need for the
public funds over time.
Leverage is calculated based on the ability of the public funds to
increase the pool of money that is made available from the private
sector for that specific type of investment. Many state financing
programs do not go by the term ``green bank'' but have achieved up to
7:1 leverage ratios, meaning that for each public dollar used for
financing, banks and credit unions have matched it with another $7 in
private capital.
Credit enhancements are usually structured to fit the comfort level
and return on investment expectations of the partner banks and
financial institutions. Common strategies include:
Loan loss reserve (LLR): the state establishes a fund that
insures a portion of each loan against loss. Usually the LLR
identifies some threshold or event that allows the bank to
drawdown on the LLR fund.
Interest rate buy-down (IRB): the state funds reduce the
interest rate on the loans.
Loan guarantee: the state puts its credit behind the loans,
enabling borrowers that would typically not be considered
``creditworthy'' (based on FICO score, income, history of
bankruptcy, business size, or other factors) to access loans or
lines of credit from private banks.
The above strategies provide a subsidy, but at a far lower cost to
the taxpayer than traditional grants. Importantly, they help to
catalyze actions by the private sector to open new markets and fill
gaps in traditional lending over time.
In addition to credit enhancements, states have been working to
open a secondary market to resell these loans and achieve further
leverage. For example, home energy efficiency loans in Pennsylvania and
New York are structured in a ``conforming'' way and have a history of
good performance and low defaults. This allows these states to package
and sell those loans to the secondary market and use the revenues from
the sales to expand the existing loan pool. NASEO has been working with
the states, CITI Bank and other institutions to expand this approach.
The idea is to show investors in the secondary market that these types
of assets have value and can be traded.
A review of state financing programs was completed by NASEO and is
available at: http://www.naseo.org/data/sites/1/documents/publications/
Unlocking-Demand.pdf
Question 3. It is fair to say that the Weatherization Assistance
Program (WAP) and the Low Income Heating Energy Assistance Program
(LIHEAP) are helpful to low-income families with high energy bills.
But, what metrics are used to ensure that this money is being used
wisely? How do we know that we are getting what we pay for?
Answer. Federal regulation requires that every energy retrofit
measure undertaken through the Weatherization Assistance Program (WAP)
have a positive savings to investment ration, or payback, of at least
$1 in energy savings for every $1 of installation. In addition, the
U.S. Department of Energy`s (DOE) Oak Ridge National Laboratory
completed evaluation of the Weatherization Assistance Program (WAP) in
2006, which showed an average $437 average annual energy savings for
each weatherized home. A new WAP evaluation is being completed and will
be issued in about six months. According to DOE, preliminary results
from this evaluation provide assurance that WAP continues to provide a
great value for taxpayers.
In the case of LIHEAP, approximately 6.9 million of the 115 million
residential households in the United States are receiving energy
assistance. This is a reduction from the 8.1 million households served
in 2010, due to reduced federal funding for the program. Prolonged cold
weather across much of the nation this winter, as well as extraordinary
spikes in propane and heating oil costs, mean that the average
purchasing power of LIHEAP has declined from 47 percent of the cost of
home heating to 40 percent.
The National Energy Assistance Directors Association is working
closely with the U.S. Department of Health and Human Services (HHS) to
develop a comprehensive program integrity plan. In addition, HHS has
increased the agency's audits of the program and is in the final stages
of implementing a performance measures program.
______
Response of Randall R. Clark to Question From Senator Murkowski
Question 1. Energy Savings Performance Contracts have a solid track
record. They work to save energy and are financed by the private
sector, yet they are underutilized, especially in the commercial
market. In your testimony you discuss what states are trying to do to
overcome some of the barriers they face. You mentioned EPA's rule, but
is there a non-regulatory role for the federal government here as well?
Or are these contracts best handled at the state level?
Answer. Thank you Ranking Member Murkowski for the question on how
the federal government can encourage states to increase utilization of
Energy Savings Performance Contracts (ESPCs).
As more states enact legislation or create programs to authorize
ESPCs, the market for these contracts continues to grow. The federal
government can fill gaps that exist in some state programs by improving
existing national databases of energy consumption information,
including the Commercial Buildings Energy Consumption Survey. To
stimulate the market for purchasers and lessees of commercial buildings
to utilize ESPCs, the Department of Energy could develop standardized
tools and methodologies to develop an energy performance score. The
scores value is to inform those states or localities enacting energy
disclosure regulations and create an incentive for building owners to
benchmark buildings and seek opportunities for energy savings. The
federal government could also send a signal to the commercial and
residential market by recognizing the value of energy efficiency
investments through credit support mechanisms, such as property
assessed clean energy lending and extending those programs to the
commercial market.