1. I NDUSTRIAL E NERGY E FFICIENCY : P OLICIES, T RENDS, AND L ESSONS L EARNED Ian Adams Wisconsin Industrial Energy Efficiency Stakeholder Meeting #1 Tuesday, July 1, 2014 1

2. Midwest Energy Efficiency Alliance (MEEA) MEEA is a collaborative network whose purpose is to advance energy efficiency to support sustainable economic development and environmental preservation. Formed in 1999 to bring strategic partners together to improve market conditions for energy efficiency. 2

3. Presentation Outline Importance of Industrial Energy Efficiency Current Policy Landscape Challenges and Opportunities 3

4. –Industrial sector accounts for 1/3 of all end-use energy in the U.S. –Energy efficiency is the lowest cost supply-side resource –Industrial energy efficiency provides numerous benefits to industrial customers, to utilities, to all ratepayers, and to society as a whole –Industrial capacity growth Importance of Industrial Energy Efficiency Programs 4 Source: U.S. Energy Information Administration

5. Energy Efficiency and Electric Growth Midwest industrial sector growth –Low natural gas prices –Re-shoring –EE price suppression Projected annual electric growth in the region driven by industrial sector growth –Residential: -0.04% –Industrial: +1.45% 5

6. D/R: Governor Affiliation State Legislature H/S: Repub. H/S: Dem. H/S: Split State House/Senate and Governor party affiliation at the time of the first enactment of EEPS Policy * Indiana recently eliminated its EEPS policy, but is considering new legislation. Ohio has recently weakened its EEPS with a two-year “freeze” on the standard. Energy Efficiency is a Bipartisan Issue June 2014 R D VT: D R D D R D HI: R R* D D R D D* D D R R D CT: R RI: R MD: D DE: D MA: D D D R D

7. Midwest Efficiency Targets and Funding Levels 2010$1.11 billion 2015$1.67 billion Illinois 2% elec by 2015 1.5% gas by 2017 Illinois 2% elec by 2015 1.5% gas by 2017 Iowa Set on a utility basis 1.2% elec current plans 0.85% gas current plans Iowa Set on a utility basis 1.2% elec current plans 0.85% gas current plans Wisconsin No specific targets 0.6% elec current est. 0.5% gas current est. Wisconsin No specific targets 0.6% elec current est. 0.5% gas current est. Michigan 1% elec by 2012 0.75% gas by 2012 Michigan 1% elec by 2012 0.75% gas by 2012 Ohio Two-year “freeze” after 2014 Future legislation & funding unclear. Ohio Two-year “freeze” after 2014 Future legislation & funding unclear. Indiana Overturned 2014 Future legislation & funding unclear Indiana Overturned 2014 Future legislation & funding unclear Minnesota 1.5% elec by 2010 1.0% gas by 2010 (gas goal reduced by commission) Minnesota 1.5% elec by 2010 1.0% gas by 2010 (gas goal reduced by commission) Missouri IRP process; Voluntary electric Missouri IRP process; Voluntary electric Kentucky Voluntary electric and gas Kentucky Voluntary electric and gas North Dakota South Dakota Nebraska Kansas Voluntary energy efficiency only North Dakota South Dakota Nebraska Kansas Voluntary energy efficiency only ?

8. Timeline of Midwest EE Policy 201420112010200920082007199620051991 1990 1983 MN: Pilot Legislation MN: CIP Requirement Adopted IA: Initial Legislation IA: Legislation Updated WI: Public Benefit Fund Restructured MN: EERS Legislation (elec & gas) IL: EERS Legislation (elec) MI: EERS Legislation (elec & gas) OH: EERS Legislation (elec) IL: EERS Legislation (gas) MO: Voluntary EE Legislation (elec) IA: EE Executive Order (elec & gas) IN: EERS Regulatory Order (elec) WI: EERS Regulatory Order (elec & gas) WI: EERS Adjusted by Legislation IN: EERS Overturned by Legislation OH: EERS “Frozen” by Legislation LegislativeExecutive/Regulatory OrderRollback June 2014

9. Timeline of Midwest EE Policies 1983MNPilot legislation 1990IAInitial legislation 1991MNCIP requirement adopted 1996IALegislation updated 1999WIPublic Benefit Fund adopted (electric & gas) 2007ILEERS legislation adopted (electric) 2007MNEERS legislation adopted (electric & gas) 2008MIEERS legislation adopted (electric & gas) 2008OHEERS legislation adopted (electric) 2008IAEE mandated by Executive Order (electric & gas) 2009ILEERS legislation adopted (gas) 2009INEERS implemented by regulatory order 2009MOVoluntary EE standard legislation adopted (electric) 2010WIEERS implemented by regulatory order 2011WIEERS adjusted by legislation 2014INEERS overturned by legislation $ Billion Energy Efficiency Policies & Investment in the Midwest

10. Self-Direct and Opt-Out Large industrial customers advocating for lower bills State EE rollbacks in Indiana and Ohio –Partially driven by pressure from some large users –Both laws created opt-outs for large customers Importance of good program design and education on EE programs value Wisconsin’s success 10

11. Industrial Energy Efficiency Self-Direct and Opt-Out Policies     Electric Natural Gas Both Industrial programs, no SD/OO policies Applicable Programs Opt-Out  Self-Direct Policy Type

12. Challenges, Opportunities, and Lessons Learned Barriers to adoption –Unique industrial processes –Program variation –Low participation rates –Capital constraints –Awareness Opportunities –Lowest cost of saved energy –Job-creation impacts –Growth potential –Process Efficiency 12

13. Industrial Efficiency Lessons Learned Clearly demonstrate the value proposition Credibility Buy-in; C-suite champion Flexibility Long term engagement and relationship building 13

14. Other Important Lessons Important emerging areas: –Strategic Energy Management –Whole Facility Performance Incentives –Quantification and Recognition of non-energy benefits Alignment of incentives contributes to outcomes –Wisconsin Self-Direct –EE investment in Kentucky –Decoupling and Fixed & Variable Rate Charges Minnesota Centerpoint example 14 Source: SEE Action

15. EPA Clean Power Plan Proposed rule under Section 111(d) to regulate carbon emissions Released June 2014 Comment period deadline on proposed rule: October 16, 2014 Significant role for energy efficiency: considered by EPA to be one of the four main “building blocks” to comply with rule Significantly policy driver over next several years 15

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17. Questions and Resources Contact Information: Ian Adams, Policy Manager Midwest Energy Efficiency Alliance iadams@mwalliance.org 312.784.7271 Resources: –MEEA’s Website: www.mwalliance.orgwww.mwalliance.org –MEEA’s Industrial Efficiency Resource: www.midwestindustrial.org www.midwestindustrial.org –SEE Action IEE & CHP Working Group: http://www1.eere.energy.gov/seeaction/combined_heat_po wer.html http://www1.eere.energy.gov/seeaction/combined_heat_po wer.html 17