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Clean Energy Policy Definitions
State Programs
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State Planning and Incentive Structures | Energy Efficiency Actions | Energy Supply Options
State Planning and Incentive Structures
Lead by Example—Energy Efficiency in Public Facilities
A policy to promote energy efficiency in public facilities can be structured in various ways. For example, a policy can establish a goal to reduce energy consumption in existing facilities by some stated percentage within a set timeframe; create a requirement that new or renovated buildings meet certain energy-per-square-foot usage (energy budget); or place energy efficiency design requirements on new or remodeled buildings. It can also require specific energy efficiency measures in state facilities or require state agencies to develop and implement energy efficiency strategies. Many states make use of the U.S. Green Building Council’s Leadership in Energy and Environmental Design (LEED®) rating system for their design requirements. LEED includes a minimum energy performance level as a component but does not necessarily require buildings to optimize energy performance. States with LEED requirements plus energy efficiency targets for state buildings are considered to have completed this policy. States with stand-alone LEED requirements (i.e., the state has adopted LEED requirements for its buildings but has not yet specified energy efficiency targets for those buildings) are listed as “Completed With Caveat (C*).”
Lead by Example—Energy Efficient Appliance and Equipment Purchase Requirements for Public Facilities
Some states require that equipment purchased for or installed in public facilities meet certain energy efficiency standards, such as ENERGY STAR or other standards that can potentially cover a wide range of products (e.g., lighting, HVAC equipment, office equipment). These standards might take the form of procurement policies or standards specifications. Specific legislative action might be required to modify procurement regulations where mandatory low-bid requirements are in place.
Lead by Example—Clean Energy Goals for Public Facilities
States can establish clean and/or renewable energy purchasing or generation goals for their own facilities. These goals might take the form of requirements to obtain a certain percentage of electricity usage from renewable sources, or a minimum clean energy purchase volume (in megawatt-hours [MWh]) by a given date. They also might involve goals for self-generation of clean or efficient energy, such as clean distributed generation or combined heat and power (CHP). These goals can be met through various methods, including onsite generation, purchasing green power products, or purchasing renewable energy certificates (RECs).
Lead by Example—Energy Efficiency and Alternative Fuel Goals for Public Fleets
State lead by example measures for public fleets are structured in a number of ways, including establishing overall energy reduction goals for the state fleet; requiring that a percentage of the state fleet or all new purchases be hybrid, fuel-efficient, or capable of running on alternative fuels; and requiring that the state fleet purchase and use alternative fuels.
State and Regional Energy Planning
A state energy plan is a strategic effort to develop and promote energy goals and formulate related policies and programs. Most states have created individual energy plans; others have developed them as part of regional energy plans involving several states. The effort to develop a state energy plan can be driven by the governor, legislature, or a specific agency (usually the state energy office). It can include a broad set of state agencies and sometimes will involve external stakeholders through an advisory group or similar body. Energy plans can include a number of elements, such as: 1) identifying and promoting a package of cost-effective options to meet energy, environmental, and economic goals; 2) recognizing and assessing a full range of short- and long-term benefits from energy efficiency, renewables, and clean distributed generation; and 3) helping state agencies from different states within a region coordinate their efforts to better achieve complementary goals.
Determining the Air Quality Benefits of Clean Energy—Energy Efficiency/Renewable Energy Set Asides (NOX Budget Trading Program)
In 1998, under the Clean Air Act, EPA issued a call for state implementation plans (SIPs) from 22 eastern states and the District of Columbia to address interstate ozone pollution from power plants and other large combustion sources. Under this SIP Call, EPA established emission reduction requirements for nitrogen oxides (NOX), emission budgets for the states, and the interstate NOX Budget Trading Program. The NOX Budget Trading Program is a market-based cap and trade program created to reduce emissions of NOX from power plants and other large combustion sources in the eastern United States. States are allowed to set aside trading allowances, which can then be awarded to energy efficiency and renewable energy projects as an incentive to encourage those projects. The NOX Budget Trading Program under the SIP Call will expire at the end of 2008.
Determining the Air Quality Benefits of Clean Energy— Energy Efficiency/Renewable Energy Set Asides (CAIR Budget Trading Program)
The Clean Air Interstate Rule (CAIR) is a regional cap and trade program to reduce NOX and sulfur dioxide (SO2) emissions from power plants that are larger than 25 megawatts (MW). The rule applies to 28 eastern states and the District of Columbia. The NOX caps, which apply annually and seasonally (May through September), will begin in 2009. The SO2 cap applies annually and will begin in 2010. All caps will become more stringent in 2015. CAIR includes a NOX emission cap and trade program that will replace the NOX Budget Trading Program. As under the NOX Budget Trading Program, states subject to CAIR are allowed to set aside trading allowances, which can then be awarded to energy efficiency and renewable energy projects as an incentive to encourage those projects.
Energy Efficiency Actions
Energy Efficiency Portfolio Standards
Similar to renewable portfolio standards, energy efficiency portfolio standards (EEPS) require that energy providers meet a specific portion of their electricity demand through energy efficiency within a particular timeframe (e.g., reduce electricity demand 10 percent between 2008 and 2012). EEPS are intended to help overcome the various barriers that keep utilities and other stakeholders from investing in cost-effective energy efficiency measures. States have found that establishing explicit targets, based on sound analysis of technical and economic potential, can help reduce energy demand as well as lower electricity prices, cut emissions, and help address concerns with system reliability. Standards may be voluntary or quasi-voluntary in nature. Where states have set goals (indicating that they are voluntary), they are classified as “Completed With Caveat (C*).”
Public Benefit Funds for Energy Efficiency
Public benefit funds (PBFs) for energy efficiency are a pool of resources used by states to invest in energy efficiency projects, and are typically created by levying a small charge on customers’ electricity rates (i.e., a system benefits charge [SBC]). PBFs, also known as clean energy funds, provide an annual revenue stream to fund energy efficiency programs.
Building Codes for Energy Efficiency—Commercial Programs
Building energy codes establish energy efficiency standards for residential and commercial buildings, thereby setting a minimum level of energy efficiency and locking in the energy savings at the time of new construction or renovation. Codes typically specify requirements for “thermal resistance” in the building shell and windows, minimum air leakage, and minimum heating and cooling equipment efficiencies. Well-designed, implemented, and enforced codes can help eliminate inefficient construction practices and technologies with little or no increase in total project costs. Some states have laws that limit their ability to impose building requirements on municipalities. In these “home rule” states, local governments can adopt their own codes. Home rule states for commercial codes include Arizona, Colorado, Missouri, Nevada, Oklahoma, South Dakota, and Wyoming.
Building Codes for Energy Efficiency—Residential Programs
Building energy codes establish energy efficiency standards for residential and commercial buildings, thereby setting a minimum level of energy efficiency and locking in the energy savings at the time of new construction or renovation. Codes typically specify requirements for “thermal resistance” in the building shell and windows, minimum air leakage, and minimum heating and cooling equipment efficiencies. Well-designed, implemented, and enforced codes can help eliminate inefficient construction practices and technologies with little or no increase in total project costs. Some states have laws that limit their ability to impose building requirements on municipalities. In these “home rule” states, local governments can adopt their own codes. Home rule states for residential codes include Arizona, Colorado, Illinois, Missouri, Nevada, South Dakota, and Wyoming.State Appliance Efficiency Standards State appliance efficiency standards establish minimum energy efficiency levels for equipment and other appliances that are not covered by federal efficiency standards. Appliance efficiency standards typically prohibit the sale of less efficient models within a state. States are finding that appliance standards offer a cost-effective strategy for improving energy efficiency and lowering energy costs for businesses and consumers.
Energy Supply Options
Renewable Portfolio Standards
A renewable portfolio standard (RPS) requires electric utilities and other retail electricity providers to supply a specified minimum percentage (or absolute amount) of customer load with eligible sources of renewable electricity (e.g., 20 percent by 2015). Many states have adopted RPS requirements because they are an administratively efficient, cost-effective, and market-based approach to achieve renewable electricity policy objectives. States have tailored their RPS requirements to satisfy particular state policy objectives, electricity market characteristics, and renewable resource potential. Consequently, there is wide variation in RPS rules from state to state with regard to the minimum requirement of renewable energy, implementation timing, eligible technologies and resources, and other policy design details.
Public Benefit Funds for Clean Energy Supply
Public benefits funds (PBFs), or clean energy funds, are typically created by levying a small fee or surcharge on electricity rates paid by customers (i.e., system benefits charge [SBC]). For renewable energy, this fee is often 0.001 to 0.01 cents per kilowatt-hour (kWh). To date, PBFs primarily have been used to fund energy efficiency and low-income programs. More recently, however, they have also been used to support clean energy supply (i.e., renewable energy and combined heat and power [CHP]). PBFs are seen as a mechanism for continuing support for clean energy and the benefits it provides in a competitive market.
Output-Based Environmental Regulations
Output-based environmental regulations (OBR) relate emissions to the productive output of a process. Establishing emission limits on an output basis (i.e., units of pollutant per unit of useful output [pounds per megawatt-hour, lb/MWh]) recognizes efficiency improvements as pollution prevention. The goal of OBR is to encourage the use of fuel conversion efficiency (e.g., combined heat and power [CHP]) and renewable energy as air pollution control measures. Traditionally, boilers and power generators have been regulated using input-based limits, which do not account for the pollution prevention benefits of process efficiency nor encourage the application of more efficient generation approaches. OBR can be an important tool for promoting an array of innovative energy technologies that will help achieve national environmental and energy goals by reducing fuel use.
Interconnection Standards—Clean Distributed Generation
Standard interconnection rules establish clear and uniform processes and technical requirements that apply to utilities within a state. States use standard interconnection rules for distributed generation (DG), including renewable energy and combined heat and power (CHP), to accelerate the development of clean energy supply by reducing uncertainty and preventing time delays that clean DG systems can encounter in obtaining approval to connect to the grid. The primary objective of a standard interconnection rule is to obtain the benefits that clean DG can provide without comprising grid safety or reliability. Customer-owned DG systems are typically connected in parallel to the electric utility grid and are designed to provide some or all of the onsite electricity needs. In some cases, excess power is sold to the utility company.
State public utility commissions approve interconnection rules used for investor-owned utilities and, in some cases, public power utilities. DG interconnections that do not involve power sales to third parties typically are regulated by the states. The Federal Energy Regulatory Commission (FERC) regulates DG interconnections used to export power or for interstate commerce. Most DG is used to serve load at the customer’s site, so states approve interconnection standards used for the majority of interconnections for small, clean DG. To be counted as a state with “Completed” interconnection standards in EPA’s best practices policy tracking, the state must have interconnection standards for all DG that meets a certain size criteria. If a state has standards for only net metered projects, renewable energy, or a specific technology, this state is not counted as having “Completed” interconnection standards.
Interconnection Standards—Net Metering
Net metering provisions can be considered a subset of interconnection standards for small-scale projects. When distributed generation (DG) output exceeds the site’s electrical needs, the utility might pay the customer for excess power supplied to the grid or have the net surplus carry over to the next months’ bill. Net metering provisions streamline interconnection standards but often are limited to specific sizes and types of technologies. Net metering rules often apply only to relatively small systems, specific technologies, or fuel types of special interest to policymakers. A state with “Completed” status may fall in to one of three categories: net metering offered by one or more individual utilities; statewide net metering for certain utility types; or statewide net metering for all utility types.