1. The Regulatory Assistance Project 50 State Street, Suite 3 Montpelier, VT 05602 Phone: 802-223-8199 web: www.raponline.org Energy Efficiency as an Air Quality Improvement Strategy Presented by John Shenot June 11, 2013 2013 Mid-America Regulatory Conference Annual Meeting Little Rock, AR

2. What are National Ambient Air Quality Standards (NAAQS)? Health-based standards established by EPA for certain air pollutants All areas of the country required to eventually attain the standards Reviewed every 5 years 2

3. Consequences of Nonattainment 3

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5. What if the Ozone NAAQS is Tightened? 5

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7. Average Unit Cost to Control Pollution with Selected Measures Nitrogen Oxides Particulate Matter Sulfur Dioxide Energy Efficiency***$0/ton Selective Catalytic Reduction (“SCR”) $1550+/tonNo reduction Fabric Filter (“Baghouse”)No reduction$42+/tonNo reduction Electrostatic Precipitator (“ESP”) No reduction$40+/tonNo reduction Wet Flue Gas Desulfurization (“Wet Scrubber”) No reduction$80+/ton 7 *** Assuming only cost-effective energy efficiency measures are implemented

8. If EE is such a great air quality strategy, why do we have to convince people to use it? Air regulators have been skeptical: – EPA previously limited the use of EE in SIPs – State air regulators can’t enforce EE programs, so some don’t want to rely on them Even if you overcome skepticism, it’s hard: – Quantifying emission reductions from EE is technically challenging – Is the lemon worth the squeeze? 8

9. Progress at US EPA Support from the top EE/RE “Roadmap” New Tools Advance Program 9

10. 10 EPA’s EE/RE Roadmap “Pathways” Baseline Pathway Control Technology Pathway Emerging/ Voluntary Measures Pathway Weight-Of- Evidence Pathway Types of Projects For “on the book” policies; Best on a state- wide or regional basis For “on the way” policies For locally-based activities; Can be bundled Any SIP Credit Limit None 6% of total required emission reductions No credit taken but do get emissions benefits Enforcement State enforceable but not Federally enforceable Federally enforceable against the responsible party Not enforceable against the responsible party None What happens if SIP reductions do not Materialize? CAA SIP Call; Air agency required to make up for the emissions shortfall Responsible party required to comply State responsible for reductions - Level of Documentation Required Significant analysis to show reductions are in place for planning period, quantify impacts, and ensure no double counting Significant analysis to show reductions are permanent, enforceable, quantifiable and surplus Moderate Can range depending on level of analysis

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12. Progress with State Air Regulators Training and Outreach Requests Pilot Testing of EE/RE “Roadmap” Response to Advance Programs 12

13. The Biggest Challenge It’s difficult enough to estimate energy savings from EE programs It’s harder still to estimate avoided emissions: – Usual EM&V challenges, plus… – Timing and location of energy savings affect amount and location(s) of avoided emissions in complicated ways 13

14. Your Role Many air regulators are just beginning to understand the need and opportunities for EE as an air quality strategy Most are not experts on energy or EE data – They need your help; work with them! Air regulators can be a new ally for your EE and RE programs; work with them! 14

15. About RAP The Regulatory Assistance Project (RAP) is a global, non-profit team of experts that focuses on the long-term economic and environmental sustainability of the power and natural gas sectors. RAP has deep expertise in regulatory and market policies that:  Promote economic efficiency  Protect the environment  Ensure system reliability  Allocate system benefits fairly among all consumers Learn more about RAP at www.raponline.org John Shenot: jshenot@raponline.orgjshenot@raponline.org 802-498-0728