September Policy Tracker: A+ For Effort

As school starts back up, students are returning to their academic routines and teachers are setting plans for the year. Similarly, a few states in New England have the utilities going through their three-year planning process for energy efficiency. Connecticut, Maine, and Massachusetts planning sessions are in full swing, and thus far, they get an A+ effort. There’s always room for growth, though.

Connecticut will have its day in court on September 13 in the legal case against the state for the diversion of energy efficiency funds to the state general funds. Advocates have been working for the return of ratepayer funds to support statewide clean energy and efficiency plan. This comes at a time where the Energy Efficiency Board (EEB) considers the next three year Conservation and Load Management (C&LM) Plan to cover 2019-2021. NEEP submitted comments on what should be considered and key issues to consider when drafting the C&LM Plan.

The state has committed to achieving aggressive greenhouse gas (GHG) mitigation goals through the Global Warming Solutions Act, including 10 percent below 1990 levels by 2020, 45 percent below 2001 levels by 2030, and 80 percent below levels by 2050. NEEP highlighted that in developing the 2019-2021 C&LM Plan, EEB has an important opportunity to work towards these carbon reduction goals by prioritizing the use of energy efficiency along with strategic electrification and demand response to decarbonize building sector energy use.

One way to do this is ensuring the cost-effectiveness test accounts for the public policy benefits and participant benefits associated with the programs in the C&LM Plan. Cost-effectiveness directly impacts program design, therefore it is important to have symmetrical and transparent benefit-cost analysis. CT Department of Energy and Environmental Protection (DEEP) is hosting a public meeting on the cost-effectiveness of the CL&M Plan. The only way to achieve public policy goals is to include the benefits in cost-effectiveness testing by following the principles and framework laid out in the National Standard Practice Manual.

Maine is also going through the process of developing the 2020-2022 triennial plan. The Efficiency Maine Trust Act includes a mandate for the Trust to capture all cost-effective energy efficiency opportunity that is reliable and achievable. The Trust includes some non-energy impacts in its cost-effectiveness testing for the triennial plan, including monetizing reduced water usage, operations and maintenance impacts, and avoided bad debt from low-income initiatives. The Trust’s low-income initiatives target energy conservation funding to eligible households through three channels:

• Market-based initiatives, where low-income customers participate in the same programs the Trust offers to other residential customers. In some cases, the Trust may offer enhanced incentives to eligible low-income customers;
• Direct installation of conservation measures, where the Trust covers up to 100 percent of the cost of equipment and installation and oversees contractor support; and
• Direct-mail campaigns, where customers receive an offer for free, small energy-saving devices, along with a postage-paid order form.

The Trust offered various measures under the low-income initiative in fiscal year 2018 that continue to be cost-effective. These include lost opportunity and retrofit heat pump water heaters (HPWHs), air-sealing and insulation measures, and a suite of small energy-saving measures relying on do-it-yourself (DIY) or volunteer installation. This shows how important it is to have a relevant cost-effectiveness test to public policy, because while the Trust has to capture all cost-effective energy efficiency opportunities, the program design is dependent on the cost and benefits that are included in the test. By expanding the non-energy impacts included in the test, more initiatives may prove cost-effective.

The Innovation Program is also used by the Trust to conduct pilot and demonstration projects of innovative types of energy efficiency, conservation, or alternative energy measures. By conducting pilots on a smaller scale before making large investment on the program design and incentives, the Trust is able to determine if the program is cost-effective and popular within the Maine marketplace. In this current draft of the plan, the Trust will allocate approximately 0.5 percent of its total program budgets to the Innovation Program. An important distiction in this program is that pilot projects that are awarded funding through the Regional Greenhouse Gas Initiative (RGGI) Fund, may have to demonstrate that the measure could quantifiably and cost-effectively achieve greenhouse gas reductions, even though GHG reduction is not a part of Maine's cost-effectiveness testing.

Massachusetts has also been actively working on its next three year plan for 2019-2021. Similar to Maine, the utilities are obligated to acquire “all available energy efficiency and demand reduction resources that are cost-effective or less expensive than supply,” as stipulated in the Green Communities Act (GCA). In the Energy Efficiency Advisory Council’s (EEAC) response to the draft plan, the Council stipulates that energy efficiency investments planned under the GCA should reflect the Commonwealth’s long‐term greenhouse gas (GHG) reduction requirement of 80 percent GHG reduction from 1990 levels by 2050, as established in the Global Warming Solutions Act (GWSA). In order to do this, the three-year plan will have to prioritize cost‐effective energy efficiency and demand reduction resources that lead to greater lifetime emissions reductions. Strategies that should be considered include strategic electrification of space heating and water heating equipment by promoting and incentivizing fuel-switching in all sectors, improving thermal efficiency, and integrating buildings as grid assets.

Accordingly, recently signed into law, An Act to Advance Clean Energy (the Act), has provisions that will impact the three-year planning process by adding energy storage, active demand management technologies, and strategic electrification as eligible under energy efficiency programs.

Relative to this provision, during the recent EEAC meeting the program administrators discussed performance incentive mechanisms (PIMs) and recommended energy efficiency goals. The goals include the traditional electric savings, but add energy savings from all fuels to include fuel switching MMBtus, and MWs of active demand management including storage for summer and winter peak. The consultants recommend an additional component to the PIMs specific to incentives for goals that are not suitably addressed in savings components, such as active demand management, underserved customers, and fuel switching.

A portion of the three-year efficiency plan budget is dedicated to program administrator performance incentives for meeting or exceeding goals put forward in the plan. PIMs are an important tool for encouraging utilities to invest in advanced energy efficiency. By achieving targets established in the three-year planning process, performance incentives allow the utilities to receive a return on their investment.

The Act also adds programs that result in customers switching to renewable energy sources or other clean energy technologies to the energy efficiency plans. In addition, cost-effectiveness screening is broadened to ensure that programs "obtain energy savings and other benefits with value greater than the costs of the program" rather than energy savings and system benefits. It also requires that energy efficiency program cost-effectiveness testing be aggregated/screened by sector rather than by measure. By adding the “other benefits” language to the provisions for cost-effectiveness, Massachusetts has the opportunity to include non-energy impacts such as carbon reduction, economic development, and other benefits relevant to public policy goals.

In order to achieve deep carbon reduction, it is important for energy efficiency to be integrated with strategic electrification and clean energy. Connecticut, Maine, and Massachusetts have begun to take steps in improving the cost-effectiveness testing to account for public policy goals that include these strategies. The program design of these three-year plans have responded to recent public policy provisions and have started to incorporate strategies for carbon reduction.

Making our way through the fall semester, it’ll only be a matter of time before finals arrive and the utilities have filed their final plans with public utility commissions.