Part 1 of this post compared current U.S. state-level policy, investment, and development for renewable energy and energy efficiency, using data from recent reports by the American Council for an Energy-Efficient Economy (ACEEE) and the American Council On Renewable Energy (ACORE). When reading the two reports, however, it is difficult to ascertain the specific synergies of renewables and efficiency. The answer lies in part in a joint report released by these two organizations in 2007, “The Twin Pillars of Sustainable Energy: Synergies between Energy Efficiency and Renewable Energy Technology and Policy.”
This report makes a strong case for why renewable energy and energy efficiency should be pursued in tandem. Efficiency measures can greatly decrease the United States’ total energy load so that renewable energy generation can more significantly reduce national dependence on fossil fuels. Efficiency provides primarily short-term and medium-term benefits through energy savings, while renewables provide a more far-reaching, longer-term solution to a sustainable energy future. Without decreasing energy use, renewables will chase elusive production targets. Similarly, rising energy demand will quickly counteract any curtailment of carbon emissions from efficiency measures if low-carbon, renewable energy technologies have not begun to be rapidly deployed.
The report uses the example of a strategic energy development plan for 2020 that encompasses 10 states in the Midwest, where efficiency initiatives could reduce electricity consumption by 28 percent and renewable energy development could account for 22 percent of the region’s electricity supply. This combined efficiency and renewables scenario could cut conventional energy generation by 44 percent in comparison to the business-as-usual forecast. An older collaborative study from the U.S. national energy laboratories, Scenarios for a Clean Energy Future, estimated that a coordinated approach with efficiency measures and renewables could reduce greenhouse gas emissions 47 percent below the reference case by 2020.
Meanwhile, a recent Worldwatch Institute report concurred with projections that efficiency improvements would lower total energy production and help renewable energy provide a greater share of the total production, as well as reducing greenhouse gas emissions associated with energy production. In Worldwatch’s scenario, half of the global energy needs in 2030 can be covered by renewables if strong renewable and efficiency policies are implemented.
Efficiency measures often have relatively low initial investments and quick payback periods. After paying off the upfront costs, savings will accrue over time. On the other hand, renewable energy typically costs more per kilowatt-hour than energy generated from conventional fuels. An integrated efficiency and renewables plan will reduce total electricity costs compared to a renewables-only approach. A combined renewables and efficiency plan is also likely to decrease energy prices and their volatility. In lowering demand, efficiency can neutralize wholesale energy price spikes and decrease the average price of energy over the power system while renewables can grant energy prices greater independence from fossil fuel price volatility.
Thus, a plan that incorporates both renewables and efficiency will have an inherent hedge value, where a diverse and robust sustainable energy portfolio affords increased price stability and security across the power market. In addition, renewable energy and energy efficiency both channel investments into domestic projects, which, in turn, simulates local, state, and regional economic growth and job creation.
A public benefits fund (PBF) is a strong state-level mechanism for energy development and improvement. California has one of the most extensive PBFs in the United States, including provisions for both renewable energy and energy efficiency. A PBF is usually generated from a small surcharge on consumers’ electric bills or from fixed utility contributions, and then specifically allocated to sustainable energy infrastructure, research, and education. Rates vary by utility and customer type, but on average California charges 0.16 cents per kilowatt-hour for renewables, 0.54 cents per kilowatt-hour for efficiency, and 0.15 cents per kilowatt-hour for related energy research, design, and development (RD&D).
According to the U.S. Energy Information Administration’s latest figures, the average family in California consumes about 587 kilowatt-hours per month, at a rate of 13.8 cents per kilowatt-hour. This means that a typical Californian family will pay about $4.99 per month toward renewables and efficiency through the PBF out of a monthly electric bill of $81.06. These charges add to a substantial reserve: renewable energy receives $65.5 million annually, energy efficiency receives $228 million annually, and RD&D receives $62.5 million annually. There is a small allotment for natural gas as well, which started at $12 million annually in 2005 and has increased $3 million each year before capping off at $24 million annually. California’s PBF—the largest in the United States—endows programs such as emerging renewable energy technology development and energy efficiency services for low-income households.
Other examples of renewables and efficiency being pursued simultaneously are energy resource standards and policies. Four or five years ago, many states chose to have a combined renewable portfolio standard (RPS) and energy efficiency resource standard (EERS). Nevada is one of the few states to maintain a combined RPS-EERS policy, which has been active since 2005. In 2009, the state increased its RPS target from 20 to 25 percent of all electricity sales by 2025, yet efficiency gains can still account for up to 25 percent of the RPS. Of late, however, many states have chosen to enact parallel RPS and EERS policies so that both standards are met precisely. In 2009, Hawaiian legislators decided to set a separate EERS—rather than keeping it as part of the state’s RPS—that calls for a 30-percent reduction of energy consumption from its 2007 level by 2020.
The connection between renewable energy and energy efficiency is often blurry. Yet renewables and efficiency provide complementary energy solutions toward sustainability. With an integrated approach to renewable energy and energy efficiency development, the United States can make great strides in reducing its total energy consumption and greenhouse gas emissions.