Energy Action Agenda
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KEEA Position Paper
The State of Energy Efficiency in Pennsylvania
- KEEA Accomplishments
Energy Challenges Facing the Keystone State
The Economic Benefits of Investing in Energy Efficiency
KEEA's Recommended Next Steps
During the last eight years, Pennsylvania has laid the foundation for the state’s competitiveness in the expanding clean energy economy. The Alternative Energy Investment Act of 2007 invested $50 million in residential energy efficiency and was Pennsylvania’s first significant investment in energy efficiency outside the low-income residential sector. KEEA members were instrumental in the design and passage of this legislation. KEEA members also helped Pennsylvania’s Department of Environmental Protection (DEP) design the initial programs and financing that launched the Keystone Home Energy Loan Program (HELP).
KEEA members conducted a broad based, statewide public education and advocacy effort which led to the successful passage of Pa Act 129 in 2008. This state law requires electric utilities to save 1% of total electricity by 2011, 3% by 2013 and reduce peak load by 4.5% by 2013. PA Act 129 mandates that every electric utility develop and implement energy efficiency programs for all customer classes. KEEA believes that work to extend and expand Act 129 should begin now.
The American Council for an Energy Efficient Economy (ACEEE) published “Potential for Energy Efficiency, Demand Response, and Onsite Solar Energy in Pennsylvania” in April 2009. This landmark study assesses the true size of the energy efficiency resource in Pennsylvania and provides a roadmap for policy makers to follow in developing the state’s energy efficiency and solar energy resources. ACEEE found that fully 35% of all of Pennsylvania’s energy needs could be cost effectively met through energy efficiency and conservation, saving $ 5 billion a year and creating 27,000 new jobs in the process.
Energy Challenges Facing the Keystone State
Though the state’s legislative and economic achievements can serve as the building blocks of energy efficiency market transformation, Pennsylvania is at a critical juncture and needs to coordinate and accelerate its numerous fledgling efforts at market transformation. There are a number of very important sustainability efforts underway across Pennsylvania: 24 municipalities have signed on to the ICLEI Climate Change reduction protocol and have taken inventory of their greenhouse gas emissions to develop a sustainability plan; 4 communities have become sustainable Transition Towns; and 155 municipalities have active Environmental Advisory Committees (EACs). Unfortunately these efforts often work in isolation without sharing resources, lessons learned, or best practices. Pennsylvania must connect energy efficiency stakeholders across the state in order to maintain its momentum towards energy efficiency market transformation.
The state has also benefited greatly from federal stimulus funding, but that support will end in the next few years. The American Recovery and Reinvestment Act (ARRA) provided $16.7 billion nationally for energy efficiency focused projects. Pennsylvania was awarded over $6.7 billion in ARRA funding, almost $814 million of which is dedicated to energy efficiency projects. Through partnering and leveraging, over 30,000 homes and hundreds of commercial buildings will be retrofitted, 10 megawatts of solar power will be installed, and $233 million invested in Smart Grid technology. ARRA funding has jumpstarted many initiatives, including wind, solar and energy efficiency projects, and every one of the state’s 65 counties is benefitting from these funds. Once the ARRA funding is gone, Pennsylvania must be in a position to continue reducing carbon emissions and saving money through energy efficiency. Key initiatives that are essential to build the energy efficiency industry across the Commonwealth need to be identified and supported now.
The second half of ARRA implementation promises to be a crucial time for Pennsylvania. The state has been aggressive and on top of its production requirements in the first year of ARRA ending on September 30, 2010, putting Pennsylvania in a position to receive additional funding diverted from underperforming states. If the Commonwealth has a clear plan to maximize energy efficiency, solar, and wind in the state, it will be able to take full advantage of the federal ARRA funding and ensure that it becomes a leader in the clean energy economy. Without a plan, the best opportunity to create jobs and facilitate economic recovery in the Keystone State will surely be lost.
The Economic Benefits of Investing in Energy Efficiency
Energy conservation and efficiency are not only the cleanest, cheapest, and most abundant clean energy resources in Pennsylvania, they are also the best at creating jobs. A strategic approach to the implementation of energy efficiency strategies in buildings statewide would yield 27,000 new jobs by 2025.
Fully 29 percent of the 1.59 million residential buildings in Pennsylvania were built before 1940, making them more likely to be energy and cost inefficient. The plethora of leaky houses is therefore a great opportunity to simultaneously create jobs, improve Pennsylvania’s housing stock, help the environment, and allow homeowners to save money.
With unemployment hovering near 10 percent and nearly 100,000 construction workers still out of work, getting Pennsylvanians back on the payroll is a high priority. In 2007, the construction industry in Pennsylvania was growing by over 1,000 jobs per year. According to the Bureau of Labor Statistics, Pennsylvania lost more than 31,000 construction jobs between 2007 and 2009. But construction workers can easily transition into the energy efficiency industry because they already have many of the basic skills required. They can easily be trained in the energy efficiency aspects of their trade.
Pennsylvania is already home to more than a dozen manufacturers of energy efficiency products, solar photovoltaic modules, wind turbines, and solar thermal collectors. With the proper coordination and incentives, the Keystone State could become a manufacturing powerhouse of clean energy technologies. The key is to sustain the momentum created by ARRA funding and shift from federal money to private capital in order to fully harness the forces of market transformation.
According to the Pew Charitable Trusts (2007), Pennsylvania has the third highest number of green jobs in the nation. The Department of Labor and Industry in its Green Jobs Report (2010) concluded that Pa is just beginning to actualize its potential green job sector.
“Support of the clean energy industry is the most reliable way to create jobs and strengthen economic development all across Pennsylvania. Because of its proximity to markets, its transportation assets, and its diverse labor force, Pennsylvania is an ideal location for virtually all aspects of these rapidly growing industries: corporate headquarters for international firms, centers for distribution, fabrication, manufacturing, installation, marketing, sales, customer service and back-office support,” (Department of Labor and Industry, 2010).
In the last six months, Pennsylvania has dramatically increased green jobs training capacity statewide, expanding from one weatherization training center to six. This was accomplished with ARRA funding, but it will be critically important to maintain at least three training centers after the ARRA ramp-up and to broaden the range of training offered to prepare the workforce needed to meet the demands of this rapidly developing industry. Fortunately, the Energy Coordinating Agency (ECA) in Philadelphia and the West Penn Power Sustainable Energy Fund (WPPSEF) in Allegheny County have been training energy auditors to the national Building Performance Institute standard for the last two years. There are now more than 250 BPI certified auditors in Pennsylvania. This workforce will facilitate a rapid development of the market rate sector, but much more training for contractors is needed to keep pace with growing market demand for retrofit services.
Lower Energy Costs
Failing to invest in energy efficiency leaves Pennsylvanians fully exposed to rising energy prices. This path leads to a steady decline in jobs, businesses, and industry. Energy affordability for all residents and employers can be achieved through development of energy conservation and efficiency programs. After all, according to the law of supply and demand, if demand goes down enough through deep and sustained conservation efforts, lower prices will follow. Given the large percentage of Pennsylvania’s population that is low- and moderate-income, this is absolutely vital to the health of the entire state. Pennsylvania should establish clear goals for energy savings, including a 20 percent average reduction in building energy use by 2025 that will save state residents and businesses approximately $5 billion every year.
KEEA’s Recommended Next Steps
Extension and Expansion of Pennsylvania Act 129
While Act 129 provides a significant first step in energy efficiency for Pennsylvania, it only affects the electricity industry. Almost 95 percent of Pennsylvanians heat with natural gas, fuel oil, or propane. Pennsylvania must develop stable, statewide programs to help home and business owners reduce their consumption of these fuels. KEEA strongly urges that Act 129 be amended to include natural gas, fuel oil and propane. Act 129 provides for specific conservation targets through only 2013. The initial programs need to be assessed and extended, either by legislation or regulation, with annual savings goals increased each year through 2025.
Marcellus Shale Tax for Energy Efficiency Initiatives
The natural gas trapped in the Marcellus Shale is a tremendous potential energy resource, but it is not without significant risks. Chief among them is widespread environmental damage to local water and land. Most states with a shale gas asset (the three largest being Oklahoma, Texas, West Virginia), already have a natural gas extraction tax, yet Pennsylvania does not. Pennsylvania must ensure that a substantial extraction tax is passed in order to pay for all damage attendant to hydraulic fracturing and related industrial practices. KEEA supports a tax on Marcellus shale gas extraction, with 10% of the proceeds dedicated to funding energy efficiency initiatives for all natural gas, propane, and fuel oil customers statewide.
This resource has been described as “vast”, and no doubt it is potentially significant, but like all fossil fuel, it is finite. Renowned energy investment banker Matthew Simons described shale gas as having a very limited life span of 30 to 40 years. It is absolutely critical that Pennsylvania reduce its demand for energy as deeply and as quickly as possible in order to be able to withstand the relentless economic pressure from rising energy prices.
Currently the beneficiaries of Marcellus Shale gas are the state of Pennsylvania and private landowners. Yet all Pennsylvanians feel the burden of high energy prices. It is essential for ALL Pennsylvanians to benefit from this natural resource by reducing their energy consumption this year and every year. Investing 10% of this tax in increasing the energy efficiency of residential, commercial, municipal and industrial customers all across the state will pay lasting economic, social, and environmental dividends statewide.
Statewide Education and Coordination
Consistent public education on energy is urgently needed and is best led and coordinated at the state level. The state, in partnership with local governments, nonprofits, educational institutions, and utilities, is ideally positioned to play a leading role in educating all Pennsylvania residents to help them save energy, build the clean energy economy, and protect the environment.
Pennsylvania has a vast network of colleges and universities to support the development and deployment of new solutions to meet our energy needs more efficiently and in less environmentally damaging ways. As noted in the Pennsylvania Department of Labor and Industry’s Green Jobs report, the majority of employment opportunities require certification, so the connection to higher level education is critical for preparing the green workforce.
Statewide Home Performance Program
Home Performance is a whole house approach to home energy improvement. Currently deployed in 29 states, Home Performance provides typical energy savings of 20% or more. Pennsylvania should develop a statewide Home Performance program, expanding on the effort now underway in the Philadelphia region. A statewide program would spur market transformation statewide, serving as a platform for Act 129 residential programs.
In order to drive market transformation, Pennsylvania must couple strong consumer financing and financial incentives (tax credits, rebates, etc.) with a network of qualified professionals with technical training and certification from the Building Performance Institute (BPI). While home energy savings of 20 percent or more are easily obtained, the upfront costs discourage homeowner investment. Home Performance, if implemented well, can help reduce those barriers and provide Pennsylvania with a sustainable platform for consumer energy savings and economic development.
Financing for Residential and Commercial Customers
Pennsylvania is fortunate to have several successful financing tools in place to finance energy efficiency improvements to both residential and commercial buildings. The Pennsylvania Treasury Department created the Keystone Home Energy Loan Program (HELP) in 2006 to offer consumers affordable energy efficiency financing options. The program was recently expanded to a loan and rebate program and is now offered by the Pennsylvania Department of Environmental Protection (DEP) in partnership with the Treasury Department, the Pennsylvania Housing Finance Agency, and AFC First Financial. KEEA recommends that Pennsylvania invest further in consumer-friendly financing for investments in energy efficiency.
Pennsylvania is receiving about $252 million in ARRA funding for its low-income weatherization program, which allows an average investment of up to $6,500 per home in energy efficiency upgrades and is available for families making up to 200 percent of the federal poverty level. Current low-income programs in Pennsylvania, including WAP and the utilities’ Low-Income Usage Reduction Program (LIURP), should improve coordination in order to best serve the state’s low-income customers. Pennsylvania has moved quickly to spend weatherization funding in order to receive additional funding.
Programs for Multi-Family Buildings
Saving energy is more difficult in multi-family buildings than in single-family residences, and such housing is disproportionately used by low- and moderate-income families, making consumers particularly vulnerable to inefficient housing. Pennsylvania’s first large scale multi-family program is currently underway with WAP funding to Pennsylvania Housing Finance Agency (PHFA). This pilot will provide invaluable lessons to build upon to develop large scale programs which can succeed in cities with a large presence of multi-family buildings. These programs should prioritize the development of local workforce and infrastructure for comprehensive energy retrofits in order to create a sustainable path forward.
Attracting corporate investors will be essential to ramping up these programs to scale. Also, there is a need for more alternatives to mortgage-based financing for retrofit projects. Too often the property value is insufficient collateral for low income buildings, and building owners may have competing priorities for upgrades to their buildings. Going forward, the challenge will be to attract more corporate investor interest in multi-family building energy conservation to allow more loans with lower interest rates.
Small Business Energy Efficiency Grant Program
The commercial building sector in Pennsylvania accounts for about 30 percent of electricity consumption in the state and 25 percent of natural gas consumption. Commercial buildings also represent a significant share of the potential for energy efficiency, with major opportunities in lighting retrofits, heating and cooling upgrades, and retro commissioning. One of the programs being rolled out by DEP is the Small Business Energy Efficiency Grant Program.
Because Pennsylvania’s priority with energy efficiency stimulus funds should be to build in-state capability for comprehensive energy retrofits, the Small Business Energy Efficiency Grant Program serves as a good starting point for energy efficiency in the commercial sector. Although it targets a limited type of small businesses, it should begin to build the workforce capacity for more broad-scale commercial building efficiency retrofits. With this foundation in place, Pennsylvania can expand upon the program to provide incentives to all building owners for improvements that achieve energy savings of no less than 20 percent with performance-based incentives calibrated to encourage 30 percent savings or greater. The ENERGY STAR Building benchmarking program would be used to document and verify performance.
State Facilities and Schools
Energy savings performance contracting (ESPC) is one model that states can use to make comprehensive energy efficiency upgrades, which often have high up-front costs, in state facilities. The Commonwealth’s Guaranteed Energy Savings Act (GESA) authorizes Pennsylvania governmental units, including state, county, city, municipality, school board, etc., to engage in guaranteed energy savings contracts with qualified Energy Service Companies (ESCOs). The Department of General Services (DGS), which facilitates the program, has certified 18 ESCOs who have completed 45 projects. This model is ideal for additional funding for efficiency, as it leverages private capital to conduct major energy-saving retrofit projects.
Schools represent huge opportunities for energy savings, as well. There are literally hundreds of millions of dollars in energy waste in the Pennsylvania public schools. Harvesting these savings will bring stability to school districts’ budgets and also provide one of the best opportunities for public education as students, teachers, administrators and support staff all learn how to save energy. Programs around the country have shown that children can be effective ambassadors of energy conservation, taking the lessons home to their families and communities. Exemplary programs such as the Alliance to Save Energy’s Green Schools Program are easily replicable.
Statewide Industrial Conservation Initiative
Workforce development has emerged as critical for implementation of energy efficiency in manufacturing, as well as expansion of production and productivity improvements more broadly. DOE’s Industrial Assessment Center (IAC) program has worked for over 30 years to address these kinds of issues, providing small- and medium-sized firms with the technical assistance needed to make energy efficiency improvements in their facilities. The program is beneficial for industrial facilities, achieving energy savings and productivity enhancements and producing well-educated, highly skilled energy engineers. However, current demand for these adept employees far outstrips the supply. As recommendations at the federal level are being made to expand and enhance this program, efforts at the state level are also needed to mobilize existing resources and prepare to best take advantage of a stronger federal program.
A statewide government/utility/industrial collaborative in Pennsylvania would seek to address the three key barriers to expanded industrial energy efficiency: the need for assessments that identify energy efficiency opportunities; access to industry-specific expertise; and the need for an expansion of the trained manufacturing workforce with energy efficiency experience. The initiative could start by expanding efforts at the current Industrial Assessment Center (IAC) at Lehigh University and eventually opening another center in western Pennsylvania. Expanding beyond the IAC model, these centers would partner with local community colleges and trade schools to bring their students into the larger network centered on the local Centers of Excellence. State stimulus funding for industrial efficiency could possibly come from R&D funding to the DOE EERE Office.
In order to implement an energy plan, Pennsylvania will need financial and policy support from the federal level and from corporations, and there are now significant opportunities for collaboration. The Department of Energy continues to fund grants to state energy offices and public utility commissions that show leadership in energy conservation. Congress intends to address the nation’s energy crisis by fostering the growth of energy efficiency and renewable. There is real opportunity to build Pennsylvania’s clean energy economy by taking advantage of these initiatives
Congress is currently considering a number of bills to begin stabilizing the climate and investing in energy efficiency. Home Star, the $6 billion federal investment in home energy retrofitting, already passed in the U.S. House of Representatives and is currently in the U.S. Senate. As this funding will be distributed on a first come, first serve basis, rather than a state by state allocation, Pennsylvania must act quickly to capitalize on this opportunity.
Pennsylvania is at a crossroads. The next few years are the most critical in economic recovery and in the development of a clean energy future for all Pennsylvanians. KEEA has developed a roadmap for significant job creation, cost savings, and economic development by realizing the energy efficiency potential of the state. Fully 35 percent of Pennsylvania’s energy needs can be cost effectively met through energy efficiency and conservation, and KEEA is working to make that vision a reality.
• Setting a goal of reducing energy consumption from 2009 levels by 25% by 2025.
• Expanding Act 129 to include natural gas, fuel oil and propane, and extending it through 2025.
• 10% of the Severance tax should be used for natural gas, fuel oil and propane conservation programs for residential, commercial and industrial users statewide.
• Incorporating energy efficiency as a resource in PJM’s forward capacity markets
• Home Performance, whole house energy efficiency programs should be launched statewide,
• Coordination of existing low income programs should be improved in order to improve effectiveness
• Statewide energy education effort which coordinates utility and local efforts into one coherent whole
• School based energy education program should be implemented statewide
• Expanded Financing Programs both for Residential and Commercial customers to leverage more private investment
• Improved workforce development in building science, alignment with national standards, and integration with community colleges and four year colleges and universities to build a world class clean energy workforce statewide.