Energy Efficiency as a Resource in Alabama Max Neubauer ACEEE Presented at the PowerUp Forum December 12, 2013

The American Council for an Energy- Efficient Economy (ACEEE) ACEEE is a nonprofit 501(c)(3) that acts as a catalyst to advance energy efficiency policies, programs, technologies, investments & behaviors. Nearly 50 staff based in Washington, D.C. Focus on end-use efficiency in industry, buildings, utilities & transportation Other research in economic analysis; behavior; national, state & local policy. Funding: ◦Foundation Grants (52%) ◦Contract Work & Gov. Grants (20%) ◦Conferences and Publications (20%) ◦Contributions and Other (8%)

ACEEE has been Engaged in the South for 7 Years ACEEE has prepared potential studies for 10 southern states ACEEE actively involved with 4 other states Dramatic increase in activities over past 6 years

Agenda 1.Overview of the Benefits of Energy Efficiency 2.Energy Efficiency as a Resource in the South and in Alabama 3.How Do States Succeed with Energy Efficiency? General Issues and Deconstructing Mississippi’s Success 4.Roles for State Government 5.Defining Success 6.Resources for Alabama 7.Conclusion/Questions

1. Benefits of Energy Efficiency Economic development strategy Energy independence Customer bill savings Helps contain future increases in energy prices Low-cost path for environmental compliance Helps the most vulnerable families & businesses make ends meet Enhances energy security in face of natural disasters—energy assurance

Energy Efficiency is the Least-Cost Resource

Energy Efficiency & Assurance/ Resiliency—Least-Risk Strategy Source: CERES. Practicing Risk-Aware Electricity Regulation. April 2012

Net Incremental Electricity Savings by State State 2011 Net Incremental Savings (MWh) % of Retail SalesState 2011 Net Incremental Savings (MWh) % of Retail Sales Vermont117, %New Mexico106, % Massachusetts789, %Missouri369, % Arizona1,028, %North Carolina514, % California3,399, %Tennessee333, % Connecticut394, %South Carolina255, % Hawaii130, %Nebraska80, % New York1,791, % Florida583, % Rhode Island96, %Kentucky224, % Ohio1,880, %Oklahoma117, % Minnesota818,512*1.21%Texas721, % Maine120, %South Dakota20, % Iowa475, %Delaware20, % Pennsylvania1,553, %Mississippi66, % Michigan1,000, %Arkansas63, % Oregon465, %Georgia152, % Washington853, %Virginia109, % Utah245, %Wyoming14, % Idaho189, %Kansas30, % Nevada250,559*0.74%Alabama69, % New Jersey530, %North Dakota9, % Illinois951, %West Virginia7, % Colorado347, %Alaska1, % New Hampshire69,409*0.64%Louisiana15, % Maryland397, %District of Columbia00.00% Montana80, %US Total22,879, % Indiana605, %Median245, % Wisconsin408, % ACEEE 2013 Scorecard

2. Energy Efficiency as a Resource in the South and in Alabama Though energy prices are low, bills are high AL has energy efficiency role models Efficiency programs & policies taking on regional character ACEEE brought Energy Efficiency as a Resource Conference to Nashville—record attendance, with many from region

Energy Efficiency as a Resource in the South and in Alabama Every state is unique South has some common attributes: Low electricity prices More rural customers Unique networks that can enable energy efficiency Lots of efficiency opportunities, but less experience & resources to implement Regional policy & program models emerging States can now look to regional leaders Building a base of efficiency expertise that others states can leverage

Customers Pay Bills, Not Rates Electricity Expenditures Relative to Household Income State Avg. Residential Electricity Price (¢/kWh) Electricity Consumption per Household (kWh) Median Household Income ($2011) Electricity Expend. in 2011 (Million $) Expend. per Household in 2011 Expend. as a Percent (%) of Median Income Mississippi¢ ,887$36,919$1,966$1,8194.9% Alabama¢ ,892$41,415$3,661$1,9854.8% S. Carolina¢ ,414$42,367$3,405$1,9254.5% Florida¢ ,372$44,299$13,389$1,8844.3% Tennessee¢9.9817,455$41,693$4,298$1,7424.2%

South Represents Region of Energy Efficiency Opportunity 2013 State Energy Efficiency Scorecard Rankings Source: American Council for an Energy-Efficient Economy

Leadership Prudent Regulatory Policy to Address the Utility Business Model Energy Efficiency as a Resource: Integrated Resource Planning Rigorous Program Design Thorough Evaluation, Measurement, and Verification 3. How Do States Succeed with Energy Efficiency? General Thoughts and Deconstructing Mississippi’s Success

Leadership Executive Legislative Regulatory Private Sector Non- government organizations

Mississippi’s Leadership Governor Phil Bryant has touted the need for increased energy efficiency as an economic development strategy Staff at the Mississippi Public Service Commission promoted proposed rules (Rule 29) for years prior to adoption Staff at the Southeast Energy Efficiency Alliance (SEEA) convened individual/group stakeholder meetings for several years to educate and raise awareness Stakeholder engagement was key to bringing businesses and other non-profit organizations on board SEEA and ACEEE will continue to engage with stakeholders on specific policy and program issues in the future

Regulatory Policy to Address the Utility Business Model Regulatory environment for utilities favors selling energy over saving it – “throughput incentive” Must develop energy efficiency as a revenue- generating business opportunity Program and fixed cost recovery Shareholder incentives / rate of return on investments Setting energy savings targets for utilities

Brief Review of Rule 29 in Mississippi (Docket 2010-AD-2) Quick Start and Comprehensive Program Phases Quick Start programs implemented within 6 months of approval for utilities with 25,000< meters Quick Start programs exempt from cost-effectiveness requirements Established procedures for filing plans and report requirements during both phases Established cost recovery and incentive structures Established cost-effectiveness tests for evaluating Comprehensive utility EE programs

Energy Efficiency as a Resource: Integrated Resource Planning Regulatory Assistance Project, 2013

Energy Efficiency as a Resource: Integrated Resource Planning Acknowledges energy efficiency as a system- wide energy resource Understand how energy efficiency fits in with long-term capacity needs All utilities do some sort of long-range planning based on least-cost procurement of resources, and some may develop an IRP even in the absence of a regulatory requirement Can aid in developing energy savings targets

Understanding the Market Market Assessment and Segmentation; Soliciting stakeholder input Leveraging Existing Infrastructure and Resources Coordinate with other utilities and third-party program administrators: uniform messaging for statewide programs like low-income weatherization and energy efficiency education Maximizing Participation Keep participation simple Designing Effective Energy Efficiency Programs

Evaluation, Measurement & Verification Provides accurate, transparent and consistent assessments of program methods and performance Ex-post EM&V helps understand program cost and benefits, as well as the efficacy of program design Did the program deliver estimated savings? How certain are the savings? What can be done to improve performance in the future? No need to reinvent the wheel—existing evaluation methodologies should be used Federal Energy Management Program (FEMP) M&V Guidelines International Performance Measurement & Verification Protocol (IPMVP)

Customer Class ElectricityNatural Gas GWh%*MMCF%* Residential1,2756.5%1,0605.3% Commercial3, %1,8858.8% Industrial2, %2, % Total6, %5,2529.8% Summary of Findings from ACEEE Mississippi Study $4.3 billion in net economic output $1.1 billion in increased wages Almost 33,000 new jobs Statewide Energy Efficiency Policy and Program Achievable Potential through 2025

4. Program Roles for State Government Lead by Example Building Energy Codes Benchmarking and Disclosure

Lead by Example (LBE) State governments can advance energy-efficient technologies and practices in the marketplace by promoting energy efficiency in their own everyday operations Allows governments to benchmark (and disclose) their energy use to identify areas for improvement Communications and outreach to stakeholders outside state government, like taxpayers, can show the benefits of energy efficiency and “smart government”

Building Energy Codes Buildings are much more difficult and costly to retrofit for energy savings after they are built; i.e., they become “lost opportunities” for energy savings Alabama currently requires compliance with the 2009 iterations of the IECC (residential) and ASHRAE 90.1 (commercial and industrial)

Benchmarking and Disclosure Market-based policy tool that can increase awareness of building energy performance and generate demand for energy efficiency improvements Disclosure policies require these performance metrics to be made public, providing a more accurate picture of a building’s total operational costs and allowing for better investment decisions Critical for developing credible LBE program Nationwide there is a considerable lack of awareness about public building energy consumption patterns

5. Defining Success

Quantifiable Metrics for Success Levelized Cost of Saved Energy ($/kWh) – the level of annual payment necessary to recover the total investment over the life of a measure; or “bang for the buck” Program Participation (%) – a measure of the market share reached by a program Savings as a Percent of Sales (%) – keeping track over time can help guide the setting of energy savings targets Budgets as a Percent of Revenues (%) – total energy efficiency budgets relative to statewide utility revenues

Reduced customer energy bills Job creation / economic growth Meeting / exceeding future energy savings targets Quantifiable Metrics for Success

Qualitative Metrics for Success Improved customer satisfaction / perception Improved comfort and productivity at home and in the workplace Customers have greater awareness and control over their energy consumption

6. Resources for Alabama Regulatory Assistance Project ( National Action Plan for Energy Efficiency ( SEE Action Network ( Southeast Energy Efficiency Alliance ( American Council for an Energy-Efficient Economy ( State Policy Database: policyhttp://aceee.org/sector/state- policy

7. Conclusions Continue to communicate and collaborate through formal and informal settings Awareness growing that energy efficiency is: The least-cost energy resource A strategy to improve the economy & environment An energy assurance strategy to manage risk Energy efficiency no longer something just for the Northeast & California Unique southern model for energy efficiency emerging—MS and AR are paving the way, making it easier for other states to follow suit

Thank you! Max Neubauer Senior Policy Analyst Visit ACEEE on the Web: