Energy Efficiency Resource Standard (EERS)

A performance-based standard for utility energy-efficiency programs that reduces energy costs, improves reliability, and cuts pollution

EERS Overview

An Energy Efficiency Resource Standard (EERS) is a flexible mechanism to ensure that utilities adopt energy efficiency as a clean, cost-effective energy resource. A federal EERS would require that electricity and natural gas utilities help their customers reduce energy use by a specified and increasing amount each year, based on a percentage of total energy sales. It complements a renewable electricity standard (RES), which requires that a percentage of electricity generation be from renewable sources. EERS is a tested policy measure that has successfully reduced energy use in several states. A national EERS would lower energy costs, reduce air pollution and global warming, and improve energy reliability throughout the nation.

Why Utilities Should Promote Energy Efficiency

Energy efficiency is often the cheapest, fastest, cleanest, and most reliable new energy resource. Experience shows that energy efficiency improvements often cost between 3 to 4 cents per saved kilowatt-hour (kWh), ¹ less than half of the cost of new conventional electricity. Energy efficiency programs also usually have no siting issues, require no power lines or pipelines, emit almost no air pollution, and improve energy reliability. And they can start contributing in a fraction of the time of new power plants.

States with Energy Efficiency Resource Standards (EERS)

State Successes with EERS

In the past decade, more than a dozen states have created an EERS or allowed energy efficiency to meet part or all of an RES, with more pending. Some examples include:

• Texas requires utilities to avoid 20% of the forecast increase in peak electric demand through efficiency programs (as of 2009). Illinois and Ohio require new electricity savings that will rise to 2% of sales each year, and Michigan requires 1% annual new savings from electricity and 0.75% annual new savings from natural gas.
• North Carolina allows energy efficiency to meet up to 25% (rising to 40%) of its RES. Connecticut revised its RES to add a separate tier requiring utilities to add savings through energy efficiency of 1% of electricity use each year through 2010.
• The California Public Utilities Commission sets multi-year targets for electric and natural gas utilities based on a study of the potential cost-effective savings of the programs.
• Vermont has performance requirements in its contract with an independent efficiency provider.

National EERS Proposal

One proposal for a national Energy Efficiency Resource Standard was recently introduced by Rep. Ed Markey (D-MA) in H.R. 889, the Save American Energy Act. The standard would require savings rising to 15% of electricity and 10% of natural gas by 2020, as shown in the table here.

Under the proposed EERS, utilities can achieve energy savings though a variety of means including reducing end-use consumption, adjusting appliance standards and building codes, promoting combined heat and power at customer facilities, and reducing energy losses in energy distribution. Utilities can also purchase efficiency credits from end-users or third-party efficiency providers to meet their required reductions. The program will be monitored by the Department of Energy, which will set evaluation, measurement, and verification (EM&V) rules to estimate program savings. States are invited to administer and enforce the program and may use their own EM&V rules. Additionally, states can implement efficiency standards more aggressive than the federal EERS baseline.

H.R. 889 is a step toward President Obama’s commitment to reduce electricity use by 15% by 2020. A similar bill, S. 548, has also been recently proposed by Sen. Charles Schumer (D-NY).  In the last Congress, several bills were introduced that contained either an EERS or a broader electricity portfolio standard that included efficiency as an eligible resource: the House energy bill; a proposal by Sen. Schumer from the 2007 Senate energy bill debate; bills by Rep. Shays (R-CT) and by Sen. Hagel (R-NE), and three climate bills: H.R. 1590 by Rep. Waxman (D-CA), S. 485 by Sen. Kerry (D-MA) and Sen. Snowe (R-ME), and S. 309 by Sen. Sanders (I-VT).

Benefits of the Proposed EERS Program

According to the American Council for an Energy Efficient Economy, the EERS proposed in the Save American Energy Act would reduce peak demand by 90,000 MW by 2020, a savings equal to the output of about 300 medium-sized power plants. Each year the measure would save consumers an estimated $35 billion, cut 250 million tons of carbon dioxide emissions, and create almost 250,000 new jobs. ⁴

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For more information please contact Alliance policy staff at (202)857-0666 or policyinfo@ase.org.

Footnotes