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Unformatted text preview: Clean Energy-Environment Guide to Action Policies, Best Practices, and Action Steps for States Clean Energy-Environment Guide to Action Policies, Best Practices, and Action Steps for States April 2006 EPA Clean Energy-Environment Guide to Action Contents Acknowledgements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ii Preface . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . iii List of Figures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . iv List of Tables . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . vi Key Acronyms and Abbreviations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . viii Executive Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ES-1 Chapter 1: Introduction and Background . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1-1 Chapter 2: Developing a Clean Energy-Environment Action Plan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2-1 Chapter 3: State Planning and Incentive Structures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3-1 Section 3.1: Lead by Example . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3-3 Section 3.2: State and Regional Energy Planning . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3-28 Section 3.3: Determining the Air Quality Benefits of Clean Energy. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3-47 Section 3.4: Funding and Incentives . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3-64 Chapter 4: Energy Efficiency Actions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4-1 Section 4.1: Energy Efficiency Portfolio Standards . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4-3 Section 4.2: Public Benefits Funds for Energy Efficiency . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4-19 Section 4.3: Building Codes for Energy Efficiency . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4-37 Section 4.4: State Appliance Efficiency Standards . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4-54 Chapter 5: Energy Supply Actions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5-1 Section 5.1: Renewable Portfolio Standards . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5-3 Section 5.2: Public Benefits Funds for State Clean Energy Supply Programs . . . . . . . . . . . . . . . . . . . . . . . . 5-21 Section 5.3: Output-Based Environmental Regulations to Support Clean Energy Supply . . . . . . . . . . . . . . 5-32 Section 5.4: Interconnection Standards . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5-43 Section 5.5: Fostering Green Power Markets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5-59 Chapter 6: Utility Planning and Incentive Structures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6-1 Section 6.1: Portfolio Management Strategies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6-3 Section 6.2: Utility Incentives for Demand-Side Resources . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6-24 Section 6.3: Emerging Approaches: Removing Unintended Utility Rate Barriers to Distributed Generation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6-40 Appendices Appendix A: Federal Clean Energy Programs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-1 Appendix B: Energy Efficiency Program Resources . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . B-1 Appendix C: Clean Energy Supply: Technologies, Markets, and Programs . . . . . . . . . . . . . . . . . . . . . . . . . . . . C-1 � Contents i EPA Clean Energy-Environment Guide to Action Acknowledgements The U.S. Environmental Protection Agency would like to acknowledge the many individual and organiza­ tional researchers, government employees, and con­ sultants whose efforts helped bring this extensive report to fruition. The following key contributors and reviewers provided significant assistance: Neil Elliott, Marty Kushler, Bill Prindle, and Dan York, of the American Council for an Energy Efficient Economy; Andrew DeLaski, Appliance Standards Awareness Project; Gwen Fuertes and David Weitz, Building Codes Assistance Project; Sylvia Bender, Michael Martin, and Mike Messenger, California Energy Commission; Lainie Motamedi and Brian Prusnek, California Public Utilities Commission; Lew Milford, Clean Energy States Alliance; Bryan Garcia, CT Clean Energy Fund; Chris James, Connecticut Department of Environmental Protection; James Bush and John Davies, Kentucky Office of Energy Policy; Ed Vine, Lawrence Berkeley National Laboratory; Michelle New, National Association of State Energy Officials; Matthew Brown, National Conference of State Legislatures; Blair Sweezey, National Renewable Energy Laboratory; Ralph Cavanagh and Devra Wang, Natural Resources Defense Council; Paul DeCotis, New York State Energy Research and Development Authority; Jim O’Reilly, Northeast Energy Efficiency Partnerships; Sara Ward, Office of Energy Efficiency, Ohio Department of Development; Cheryl Harrington, Rich Sedano, and Rick Weston, Regulatory Assistance Project; Scott Weiner, Rutgers University; Colin Murchie and Rhone Resch, Solar Energy Industries Association; Amy Royden-Bloom, STAPPA-ALAPCO; Pierre Landry, Southern California Edison; Howard Geller, Southwest Energy Efficiency Project; Theresa Gross, Texas Public Utility Commission; Sean Casten, Turbosteam Corporation; Dan Beckley, Jean J. Boulin, Jerry Kotas, Larry Mansuetti, and Linda Silverman, U.S. Department of Energy; John Byrne and Noah Toly, Center for Energy and Environmental Policy, University of Delaware; and Suzanne Watson, Watson Strategy Group. ii The Guide to Action was developed by the Climate Protection Partnerships Division in EPA’s Office of Atmospheric Programs. Steve Dunn managed the overall development of the Guide to Action. Julie Rosenberg and Andrea Denny provided content and editorial support for the entire document. EPA staff who contributed to the Guide are listed below by section of the Guide to Action: • Developing a Clean Energy-Environment Action Plan: Nikolaas Dietsch and Denise Mulholland • State Planning and Incentive Structures: Art Diem, Steve Dunn, Sue Gander, Caterina Hatcher, Laura Helmke, and Edgar Mercado • Energy Efficiency Actions: Art Diem, Nikolaas Dietsch, Sue Gander, Maureen McNamara, and Sam Rashkin • Energy Supply Actions: Joe Bryson, Kurt Johnson, Tom Kerr, and Katrina Pielli • Utility Planning and Incentive Structures: Stacy Angel, Joe Bryson, Sue Gander, Tom Kerr, and Katrina Pielli A multi-disciplinary team of energy and environmen­ tal consultants provided research, analysis, and tech­ nical support for this project. They include: Eastern Research Group (Lynne Agoston, Sue Eisenfeld, and Scott Warner); Energy and Environmental Analysis (Joel Bluestein); Kajal B. Kapur; Navigant Consulting, Inc. (Lisa Frantzis, Shannon Graham, and Ryan Katofsky); Stratus Consulting (Nimmi Damodaran, Chuck Herrick, Joanna Pratt, and Heidi Ries); Summit Blue (Kevin Cooney); and Synapse Energy Economics, Inc. (Bruce Biewald, Bob Fagan, Lucy Johnston, Geoff Keith, Amy Roschelle, and Bill Steinhurst). � Acknowledgements EPA Clean Energy-Environment Guide to Action Preface The Clean Energy-Environment Guide to Action is a cornerstone of U.S. Environmental Protection Agency’s Clean Energy-Environment State Partnership Program, a voluntary program to help states incorporate clean energy into a low-cost, clean, and reliable energy system. The Guide to Action provides in-depth information about 16 clean energy policies and programs that states are using to meet their energy, environmental, and economic objectives. Each policy description is based on states’ experiences in designing and implementing policies that enhance energy efficiency and/or increase the use of renewable energy and clean distributed gener­ ation (including combined heat and power). States have found that these 16 clean energy policies and programs offer numerous opportunities to save ener­ gy, improve air quality, reduce greenhouse gas emis­ sions, improve system reliability and security, and enhance economic development. � Preface The Guide to Action is intended for use by state ener­ gy, environment, and economic policymakers and public utility commissions. States participating in the Clean Energy-Environment State Partnership Program will use the Guide to Action to develop a Clean Energy-Environment Action Plan for employing exist­ ing and new clean energy policies to increase their use of clean energy. Other states are also encouraged to use the Guide to Action to examine the role clean energy can play. Any comments, questions, and cor­ rections related to the Clean Energy-Environment Guide to Action and the State Partnership Program can be directed to the contacts provided in the Guide to Action on page ES-29. iii EPA Clean Energy-Environment Guide to Action List of Figures Executive Summary Figure ES.1: Clean Energy Is Competitive with Fossil Fuel and Nuclear Generation Technologies . . . . . . . ES-2 Chapter 1: Introduction and Background Figure 1.1a: Nonattainment Areas Ozone (8-hour) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1-3 Figure 1.1b: Nonattainment Areas PM2.5 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1-3 Figure 1.2a: Energy Savings from California’s Energy Efficiency Programs. . . . . . . . . . . . . . . . . . . . . . . . . . . 1-5 Figure 1.2b: Comparison of Energy Efficiency Program Costs to Supply Generation Costs (2000 to 2004). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1-5 Figure 1.3: Clean Energy Is Competitive with Fossil Fuel and Nuclear Generation Technologies . . . . . . . . . 1-7 Chapter 2: Developing a Clean Energy-Environment Action Plan Figure 2.1: Tools and Resources for Assessing the Benefits of Clean Energy . . . . . . . . . . . . . . . . . . . . . . . . . 2-6 Figure 2.2: Sample Outline for a Clean Energy-Environment Action Plan. . . . . . . . . . . . . . . . . . . . . . . . . . . . 2-8 Chapter 3: State Planning and Incentive Structures Figure 3.3.1: Map of Interconnections . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3-50 Figure 3.3.2: NOx and SO2 Emissions by Capacity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3-50 Figure 3.3.3: Historical Emissions Data (New England 2000) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3-51 Figure 3.3.4: Estimated NOx Reductions from Energy Efficiency/Renewable Energy (EE/RE). . . . . . . . . . . . . 3-56 Figure 3.3.5: Marginal Emission Rates in Wisconsin . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3-57 Figure 3.4.1: States with Revolving Loan Funds for Renewable Energy . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3-66 Figure 3.4.2: States with Grant Programs for Renewable Energy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3-68 Figure 3.4.3: Grid-Connected PV Capacity Installed in California (cumulative) . . . . . . . . . . . . . . . . . . . . . . 3-82 Chapter 4: Energy Efficiency Actions Figure 4.1.1: States That Have Adopted or Are Developing EEPS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4-5 Figure 4.2.1: Cost of Energy Saved (cents/kWh) for Six State Public Benefits Funds . . . . . . . . . . . . . . . . . 4-20 Figure 4.2.2: States with PBFs for Energy Efficiency . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4-20 Figure 4.2.3: Ratepayer-Funded Energy Efficiency Programs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4-21 Figure 4.3.1: States with Residential and Commercial Building Energy Codes. . . . . . . . . . . . . . . . . . . . . . . 4-39 Figure 4.4.1: States with or Considering Appliance Standards. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4-56 Figure 4.4.2: Load Savings from Appliance Efficiency Standards As Compared to Other Energy Efficiency Programs in California . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4-56 iv � List of Figures EPA Clean Energy-Environment Guide to Action Chapter 5: Energy Supply Actions Figure 5.1.1a: Projected New Renewable Capacity by 2015 Attributable to Existing RPS Requirements (California compared to all other states) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5-3 Figure 5.1.1b: Projected New Renewable Capacity by 2015 Attributable to Existing RPS Requirements (comparison of all other states) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5-3 Figure 5.1.2: A Sampling of the Impacts of RPS Requirements on Ratepayers. . . . . . . . . . . . . . . . . . . . . . . . 5-5 Figure 5.1.3: States with RPS Requirements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5-5 Figure 5.1.4: State RPS Requirements. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5-6 Figure 5.1.5: Eligible Technologies Under State RPS Requirements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5-7 Figure 5.1.6: Illustration of Renewable Energy Credits (RECs) and Power Markets . . . . . . . . . . . . . . . . . . . 5-10 Figure 5.2.1: Estimated 2005 Funding Levels for State Renewable Energy Programs . . . . . . . . . . . . . . . . . 5-22 Figure 5.2.2: Map of State Renewable Energy Funds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5-23 Figure 5.3.1: CHP System Efficiency . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5-34 Figure 5.4.1: States with DG Interconnection Standards . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5-44 Figure 5.4.2: States with Net Metering Rules . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5-45 Figure 5.5.1: Renewable Energy Capacity Added to Meet Voluntary Green Power Demand Through 2004. . . 5-60 Figure 5.5.2: States with Utility Green Pricing Activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5-62 Figure 5.5.3: States with Competitive Green Power Marketing Activity in Competitive Electricity Markets . . 5-62 Chapter 6: Utility Planning and Incentive Structures Figure 6.1.1: A Laddered Approach to Default Service Contracts Offers Flexibility and Price Stability . . . . 6-6 Figure 6.3.1: Effect of Rate Structure on Electric Savings Revenue for 1.4 MW CHP Project . . . . . . . . . . . 6-40 Appendices Figure B.1: Energy Efficiency Program Costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . B-5 Figure C.1: Typical CHP Configurations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . C-6 Figure C.2: Annual Worldwide Installations for Wind Power and PV . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . C-7 Figure C.3: U.S. Renewable Energy Snapshot (2003 Data) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . C-8 Figure C.4: U.S. CHP Capacity (2004) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . C-9 Figure C.5: Size Distribution of U.S. CHP Projects (2004). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . C-9 � List of Figures v EPA Clean Energy-Environment Guide to Action List of Tables Executive Summary Table ES.1: Summary of Clean Energy Policies by Type of Clean Energy . . . . . . . . . . . . . . . . . . . . . . . . . . . . ES-5 Table ES.2: Summary of Clean Energy Policies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ES-6 Table ES.3: Federal, State, and Nonprofit Resources for Enhancing State Clean Energy Programs . . . . . . ES-24 Chapter 1: Introduction and Background Table 1.1: 2003 Energy Efficiency Spending As a Percentage of Utility Revenues . . . . . . . . . . . . . . . . . . . . . 1-8 Table 1.2: Summary of Clean Energy Policies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1-10 Chapter 3: State Planning and Incentive Structures Table 3.1: State Planning and Incentive Structures. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3-2 Table 3.1.1: State of Colorado Performance Contracting Results Through June 2003 ($ Millions) . . . . . . . 3-15 Table 3.3.1: Existing Policies to Reduce CO2 Emissions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3-59 Table 3.4.1: Economic Multipliers Used for Washington’s Production Incentive Program. . . . . . . . . . . . . . 3-83 Chapter 4: Energy Efficiency Actions Table 4.1: Energy Efficiency Policies and Programs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4-2 Table 4.1.1: Current and Pending State EEPS Policies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4-6 Table 4.2.1: Comparison of 11 State PBFs for Energy Efficiency (sorted by charge level at 1 mill/kWh and greater) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4-22 Table 4.2.2: Common Cost-Effectiveness Tests . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4-25 Table 4.4.1: Estimated Energy Savings and Economics of Appliance Standards Not Covered by Federal Law. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4-55 Table 4.4.2: States with Adopted or Pending Appliance Efficiency Standards . . . . . . . . . . . . . . . . . . . . . . . . 4-57 Table 4.4.3: Products Subject to Existing Federal Appliance Efficiency Standards. . . . . . . . . . . . . . . . . . . . 4-60 Chapter 5: Energy Supply Actions Table 5.1: Energy Supply Policies and Programs . . . . . . . . . . . . . . . . . . ...
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