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 Pennsylvania: Energy Efficiency is a Smart Design Tool for Portfolio Standards
By Kathleen A. McGinty, Secretary,Pennsylvania Department of Environmental Protection
On November 30, Pennsylvania joined 18 other states and three of our neighbors—New York, New Jersey and Maryland—in promoting renewable energy by establishing a portfolio standard that ensures in 15 years, 18 percent of all of the energy generated in the Commonwealth comes from clean, efficient sources. The provisions in this law are important to addressing today's energy challenges while ensuring we meet tomorrow's energy needs.
As demand for electricity continues to grow, portfolio standards are becoming more popular as a way to ensure that new demand is met with emissions-free generation. Still, these portfolio standards often do little to address the core issue of reducing electricity demand. That's why Pennsylvania's Alternative Energy Portfolio Standard, or AEPS, has included eligibility provisions for demand-side management measures.
Eligible demand-side management measures include energy efficiency measures undertaken by residential, commercial, institutional or governmental customers; load management and demand response approaches that shift electric load from periods of higher demand to lower demand; and the reuse of energy from exhaust gases or other manufacturing byproducts or useful thermal energy for electricity production by industrial and manufacturing customers. The latter is often referred to as recycled energy.
Including demand-side management measures in a portfolio standard provides many benefits, including the opportunity to address continually increasing consumer demand. The regional transmission organization in Pennsylvania, PJM, estimates that demand for electricity will rise approximately 1.4 percent each year. That means that 15 years from now, the peak year for AEPS compliance, demand for electricity in Pennsylvania will be 23 percent higher than it is today. To meet that demand without the requirements of AEPS or corresponding demand-side management measures, the state would need approximately 4,200 megawatts of new conventional capacity. This is equal to two very large coal-fired or nuclear power plants.
Measures taken to reduce demand also provide an opportunity for electricity customers to benefit from the energy credit market created by the portfolio standard. Customers who reduce their electricity demand through energy efficiency and load management, or who generate electricity by recycling energy, will earn “alternative energy credits” that can then be sold to utility companies required to comply with the portfolio standard. This provides a dual financial benefit to the customer. Not only do they reduce their energy costs and improve their bottom line by decreasing their demand, but the potential to generate alternative energy credits also creates an additional revenue stream for the company. Providing opportunities for customers to receive direct financial rewards from a portfolio standard is a design component that can win over electricity customers who typically may be opposed to portfolio standards for fear of rising electricity prices.
Concerns over prices are one of the long-standing objections to portfolio standards, although analysis done recently in states such as Colorado and New York have demonstrated that the price impacts from portfolio standards can actually be positive. In Pennsylvania, a study by the global engineering firm Black and Veatch Corp. Inc., which used for analysis a plan similar to Pennsylvania's AEPS, found that the portfolio standard would save consumers $140 million in electricity prices. It also would generate $10 billion in increased output, $3 billion in additional earnings and between 3,500 and 4,000 new jobs for residents over the next two decades.
In many cases, demand-side management measures were the cheapest possible compliance option and were often projected to provide a positive cash flow to the customer or utility implementing those measures.
Pennsylvania's Public Utility Commission will be promulgating rules governing the verification and tracking of demand-side management measures. These rules will provide methods for tracking and monitoring the benefits of demand-side management in other policy areas, such as the Commonwealth's State Implementation Plan for air quality improvement.
Ensuring reliable, affordable and secure electricity is an important mission of all states. In Pennsylvania, we have designed a portfolio standard that marries the dual benefits of renewable and advanced energy with demand-side management to achieve those goals.
It is important that new generation comes from domestic resources and be as clean as possible, but it is even more important that we do everything we can to reduce the need for new generation by providing an array of policy tools and financial options to promote reductions in electricity consumption.
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Alliance Spearheads New Initiative in South Carolina
By Kate Offringa, Director, Market Transformation and Christopher Russell, Director, Industrial Sector, Alliance ot Save Energy
The Alliance to Save Energy 's Director of Industrial Programs, Christopher Russell, partnered with Clemson University 's South Carolina Institute for Energy Studies in October to organize and execute an Environmental Business Roundtable.
The Roundtable represents a first step in developing a business-friendly, economic development orientation for mitigating environmental impacts from industry's air, water, and solid contaminants.Energy efficiency is linked to this agenda by its relationship to air emissions, water consumption, and material scrap rates.
The Alliance set the following goals for this new initiative:
- Streamline the process for environmental regulations as applied to manufacturing; reduce the compliance burden as currently experienced by industry.
- Encourage regulatory agencies to include technical assistance in achieving business-smart stewardship of energy, air emissions, and waste water.
- Support state and regional manufacturing activities by fostering pro-competitive, sustainable business practices.
Presentations and discussion at the October workshop focused on regulations and their impact on industry, views from state agencies, and business-friendly philosophies for resource stewardship.
Workshop participants included representatives from the South Carolina State Energy Office, Department of Health and Environmental Control, and the Department of Commerce Business Recycling Assistance Program. Additional participants included manufacturers headquartered in the region, as well as representatives from the office of Senator Lindsay Graham (R-SC), and the U.S. Department of Energy Southeast Regional Office.
Inspiration for this new Alliance initiative came from a U.S. Department of Commerce report entitled Manufacturing in America . The report, released in January 2004, summarizes industry feedback regarding the many ways that U.S. government policies and regulations both hinder industry performance and potentially boost productivity and competitiveness.While the report highlights the problems, it offers little in the way of solutions and next steps.The Alliance therefore organized this roundtable to generate recommended solutions with respect to sustainable business practices. Click here to download a copy of the Manufacturing in America report.
The challenges of current regulatory practices include the following:
- Industry is challenged by reporting and monitoring requirements imposed by multi-tiered environmental regulations.
- Interpretation, application, and enforcement are inconsistent across tiers of regulatory authority and across jurisdictions.
- Reporting responsibilities are often redundant across the authorities.
Mr. Russell's goal for the October roundtable was to generate recommendations for streamlining reporting/monitoring duties and for developing a business-friendly philosophy for future regulatory relationships.
A report from the roundtable is forthcoming. The report will:
- Document some of the best, pro-business services coming from public sector environmental programs;
- Outline the potential for enhancing these services as a tool for state business retention and economic development; and
- Generate follow-on programmatic work to be sponsored by key state and/or federal agencies.
For more information on this initiative and potential replication in other states, please contact Christopher Russell at crussell@ase.org .
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