Reaching the Kyoto Targets, ACEEE For the analysis of future equipment efficiency standards, the basic approach was to compare the current standard with a projected new standard in order to estimate average energy savings per unit sold. We then multiplied these savings by annual product sales for each year the new standard is in effect. In general, standard levels were chosen that in our judgement have a very good chance of being implemented, as evidenced by models on the market today. The key assumptions used and details of the analysis are shown in Appendix B. Regarding the priority rulemakings now underway, we assume DOE requires tumble-action (also known as horizontalaxis) clothes washers effective in 2006, electronic ballasts effective in 2003, central air conditioners and heat pumps with a minimum SEER of 13.0 effective in 2005, and water heaters at levels achieved by the most efficient conventional technology products in 2003. For the analysis of small appliances and packaged refrigeration equipment, we reviewed studies by Thorne and Suozzo (1998) and ADL (1996) to estimate total savings available from low-cost improvements (defined as just a few dollars in the former case, and a two-year payback or less in the latter case), and then assumed that 50-75 percent of these savings (varying by type of equipment) could be achieved from voluntary programs by 2010. The early response to a new labeling program for TVS and VCRs indicates that high participation and savings are possible. This analysis is also summarized in Appendix B. The cost of administering these policy initiatives is relatively low. DOE spends about $6 million per year analyzing, setting, and enforcing appliance efficiency standards, for example. Since these administrative costs are less than 1 percent of the capital costs of efficiency measures in our analysis, we exclude them from consideration. Overall, our analysis found that new efficiency standards and related voluntary programs could result in the following: Primary energy savings of about 1.15 Quads in 2010 and 2.14 Quads in 2020. Avoided carbon emissions of approximately 25 MMT in 2010 and 44 MMT in 2020. By 2010, over $20 billion per year in consumer energy bill savings, or about $175 per household. Over the 1999-2010 period, the standards would lead consumers to invest some $13.4 billion in efficient appliances but would result in savings over the life of this equipment more than two times the cost, resulting in net savings to consumers of about $15 billion (on a net present value basis). Reaching the Kyoto Targets, ACEEE Table 2. Summary of Savings from Appliance and Equipment Efficiency Standards and Related Voluntary Programs. Reaching the Kyoto Targets, ACEEE PUBLIC BENEFIT TRUST FUND AS PART OF ELECTRIC UTILITY INDUSTRY RESTRUCTURING Opportunity Electricity generation accounts for over 36 percent of national energy use (excluding cogeneration). ELA's Reference Case Forecast projects that grid-connected electricity generation will increase from 34.2 Quads in 1996 to 40.2 Quads in 2010, an average growth rate of about 1.2 percent per year (ELA 1997a). Carbon emissions due to electric generation are expected to climb to 663 MMT by 2010, 28 percent greater than emissions in 1996 and 39 percent greater than emissions in 1990. Nearly 90 percent of the carbon emissions from the electric sector are due to coal-fired power plants. While the use of natural gas for power generation is increasing, coal-fired power plants are still expected to account for 83 percent of sectoral carbon emissions in 2010. Electric utilities have historically incorporated expenditures for a variety of activities that benefit the public and are not directly tied to electricity production and supply in their rates. Examples include expenditures to do the following: assist and encourage customers to use energy more efficiently; assist low-income families with weatherization and fuel assistance; promote the development of pre-commercial renewable energy sources; and undertake research and development activities that could have long-term benefits but lack short-term commercial returns. In 1995, the latest year for which full data are available, electric utility expenditures on public purpose programs totaled $6 to 7.5 billion. In 1995, utility energy efficiency programs saved 55 billion kWh (1.8 percent of national electricity use) while renewable energy systems generated 63 billion kWh (not including hydroelectric power). Utility low-income programs served approximately two million low-income households2 (Scheer, Brinch, and Eto 1998). While utility DSM programs have captured many efficiency opportunities over the past decade, opportunities for cost-effective electricity savings remain large. For example, approximately 80 percent of fluorescent lighting in commercial and industrial buildings still utilizes inefficient T12 lamps and magnetic ballasts (Calwell, Dowers, and Johnson 1998). Citing another example, a 1997 analysis for the Mid-Atlantic states of New York, New Jersey and 2 Low-income households served based on ACEEE estimate of $200 average expenditure per household. Reaching the Kyoto Targets, ACEEE Pennsylvania found that cost-effective efficiency measures can reduce electricity use in the region 33 percent by 2010 (Nadel et al. 1997). With a cumulative investment of $27 billion in efficiency measures during 1997-2010, consumers could realize electricity bill savings of $79 billion during the same period, according to this study. Barriers Restructuring, by design, is intended to spur price competition between electricity suppliers, with the result that all nonessential costs, including public benefit expenditures, are likely to be slashed. There is already ample evidence that public benefit expenditures have declined significantly since the publication of California's landmark restructuring proposal in April 1994. For example, total utility spending on demand-side management (DSM) was $1.9 billion in 1996, down from a peak of $2.7 billion in 1993 (ELA 1997). Utility direct spending on energy efficiency programs peaked in 1993 at $1.61 billion per year, declining to $1.05 billion in 1996 (see Figure 2). Incremental energy savings from utility energy efficiency programs (additional savings relative to savings achieved in the prior year) have plunged even further, from nearly 10 billion kWh in 1993 to 4.3 billion kWh in 1996 (see Figure 3). And according to a recent study by the General Accounting Office (GAO 1996), electric utility R&D expenditures declined from approximately $710 million in 1993 to $476 million in 1996, a drop of 33 percent. From all informal reports, these declines continued during 1997 and 1998. Strategy In order to ensure that important public benefit activities continue to take place following restructuring, several states have established public benefit funds. Funds are raised from a small Reaching the Kyoto Targets, ACEEE charge on electricity distribution service, with charges ranging from 0.3 to 4.0 tenths of a cent per kWh. (Note: a tenth of a cent is often referred to as one mil.) All electricity providers who use the T&D grid (whether traditional utilities, independent power producers, or others) are assessed the charge and contribute to the fund, thereby "leveling the playing field" among providers. As of June 1998, nine states had adopted public benefit funds California, Connecticut, Illinois, Massachusetts, Montana, New Hampshire, New York, Pennsylvania and Rhode Island.' Funds raised are allocated by state officials to a variety of public benefit activities. Of the funds already established, nearly all cover programs for low-income households, energy efficiency, and renewable energy, and some explicitly list R&D and unique state-specific activities (Energetics 1998).* At the national level, Chairman Richard Cowart of the Vermont Public Service Board has proposed that a National Systems Benefits Trust be created to match, on a dollar for dollar basis, state expenditures on specified public benefit activities (Cowart 1997). Two legislative proposals S. 686 authored by Senator Jeffords (R-VT) and H.R. 1359 authored by Congressman DeFazio (D-OR)-incorporate the Cowart proposal. The proposal has since been endorsed by 30 other state public utility commissioners and numerous consumer, environmental and industry groups. It is also included in the Clinton Administration's restructuring proposal released in March 1998. Specifically, the Administration has proposed a $3 billion per year public benefit fund (PBF) to provide matching funds to states. Under all of these proposals, states would make decisions on how to spend funds, choosing among four areas-services for low-income households, energy efficiency, renewable energy sources not receiving credit through a renewable portfolio standard, and public interest R&D (i.e., R&D activities with significant public benefits that are not likely to be funded through the private market). Funds would be collected by transmission system operators under FERCapproved transmission tariffs, and paid over to an independent administrator designated by FERC. Program governance (e.g., developing detailed implementation policies) would be the responsibility of a Joint Federal-State Board made up of FERC commissioners and state 'In addition, Arizona, Maine, and Maryland have decided to fund certain public benefit activities through the rates of distribution utilities. Several other states are close to finalizing public benefit funds including New Jersey, Oregon, Vermont and Wisconsin. * In states without Renewable Portfolio Standards, a variety of renewable energy activities are funded through the Public Benefit Fund. In states with Renewable Portfolio Standards, expenditures from Public Benefit funds are generally limited to development and demonstration of pre-commercial renewable energy sources. State-specific public benefit activities include environmental protection programs in New York and clean coal technology development in Illinois. 'In addition, Jeffords includes "universal” and “affordable” service, meaning reasonably priced services for rural residents. |