Improving Energy Efficiency in Virginia: A Better Way Forward from the Virginia Advanced Energy Industries Coalition
- Jul 7, 2018 8:50 pm GMT
A recent assessment of statewide energy efficiency initiatives by the American Council for an Energy-Efficient Economy (ACEEE) ranked Virginia 36th among the 50 states and the District of Columbia (see map below). So it’s no surprise there’s been a gaping void of credible policy recommendations designed to create markets for services that can help all Virginia residents, businesses and government agencies conserve the electricity and natural gas they use . . . until now.
The Virginia Advanced Energy Industries Coalition crafted six priority recommendations backed up by several others designed to empower virtually all electricity and natural gas users to better manage how they use energy and, in the process, save money. In the second of my series about how clean energy advocates in Virginia envision a more sustainable energy future – and industry – for Virginia, this assessment focuses solely on energy efficiency. The first in this series focused on renewable energy. You can find that one here.
If the Virginia General Assembly adopted just half of VAEIC’s recommendations, I’d bet Virginia could jump into the top 20 of ACEEE’s ranking. In the process, energy and money would be saved while spawning and growing energy efficiency businesses throughout the commonwealth.
VAEIC’s Priority Energy Efficiency Recommendations
1. Commission a new energy study to assess the potential for energy efficiency as a resource to draw from in Virginia. The study should address the potential for electric, natural gas and joint-fuel programs.
2. Establish an advisory board to examine current programs and recommend incentive mechanisms to encourage utilities to undertake all cost-effective efficiency, conservation and peak-demand reduction programs. Because the current Governor, Democrat Terry McAuliffe, already has an Energy Council and Commission on Climate Resiliency working with him, I wonder how yet another such body could add much more value.
What the leaders in drafting the efficiency recommendations said is needed is a carefully focused commission / board to figure out:
(a) just what DSM (demand-side management) programs are already out there;
(b) how could Virginia reach its potential (as established in the study); and
(c) what incentive mechanisms could help the utilities to do more.
In their eyes, the existing commissions aren’t composed to tackle such work or it falls outside their mission.
3. Ensure all costs and benefits of efficiency programs are accounted for. Here the VAEIC, and its energy efficiency working group which is comprised of local, state and national energy efficiency companies, call on the Attorney General’s office and the state’s two energy / environmental agencies to take into account all economic and societal benefits of efficiency and demand response initiatives.
The Attorney General is empowered to represent consumers before the SCC but this advocacy has often amounted to a short-term focus on rates. That short-sightedness neglects the longer-term costs of building and sustaining infrastructure, which investment in energy efficiency and demand response can defray. In the short term, efficiency and demand response have the added benefit of lowering overall customer bills, a benefit that has been sorely under-recognized in regulatory proceedings.
SIDEBAR: In assessing energy efficiency tests, why is Virginia the ‘last holdout’ focusing mostly on rate impacts, not energy savings?
The impact on electricity rates for a long time has been the deciding factor in whether Dominion Virginia Power deploys energy efficiency programs that can help its customers save money. Virtually all other states rely on a more robust mix of tests that take into account overall bill impacts societal benefits such as cleaner air and reduced long-term costs.
True, Dominion has very competitive rates and it likes those bragging rights. But it pursues such interests at the expense of many households and organizations interested in saving money by reducing their consumption even if it means paying at a higher rate.
The stickler in this is what’s called the “Rate Impact Measure”, or RIM, test. The RIM is one of a variety of tests to assess the cost effectiveness of efficiency programs. Dominion Virginia Power, by its own admission, is one of the “last holdouts” among utilities relying primarily on this test, Ripley Newcomb, Dominion’s Manager of Demand-Side Planning at Dominion, acknowledged in an interview.
The upshot: customers might like the rate they pay, but potentially their bills are larger and their options for saving electricity are fewer than in forward-looking states. While their rates may rise a bit with energy efficiency programs, customers could actually save money, and energy, with system-wide conservation incentives, including smart meters, time-of-use rates and a growing variety of smart home applications. Fairly designed, efficiency programs could make more money for Dominion and its shareholders. How is that not a ‘win-win’?
4. Mandate energy bench-marking and performance contracting in state-owned facilities. This would require state buildings to disclose their energy use and justify any decisions not to undertake efficiency improvements that could be deployed by contracts that all but guarantee energy cost savings.
5. Align Virginia’s Uniform State Building Code with the International Energy Conservation Code and require the Department of Mines, Minerals and Energy (DMME) to report on compliance throughout the Commonwealth.
6. Correct a statutory defect in legislation permitting Property Assessed Clean Energy (PACE) loans to give PACE liens the same priority as a tax lien. Because this would give PACE liens seniority over the first mortgage, one can expect opposition from mortgage companies and the real estate industry, which are very influential in Virginia.
Here are selected additional recommendations by the VAEIC. You’ll notice that many of the following recommendations “encourage” the General Assembly to take certain actions. In Virginia, that is often interpreted as wishful thinking. But these recommendations at least spotlight the types of initiatives that are succeeding in other states such as North Carolina and thus have real-world experience to draw from. You can find a summary of all of VAEIC’s recommendations here.
7. Establish a mandatory energy efficiency resource standard that fully incentivizes utilities to treat efficiency as a clean resource vis a vis power generation. Such a standard would include annual demand reduction goals and provide utilities the opportunity to recover program costs and lost revenue. It would also enable utilities to earn a rate of return on their investments equal to their authorized return on equity.
8. Clarify and standardize the Energy Savings Performance Contracting process. Here, energy savings would pay for improvements in residential, commercial, industrial and municipal buildings over time. Evidently, there is a LOT of confusion that needs to be cleared up.
9. Establish an energy efficiency utility, funded by a surcharge on utility bills, to implement state-wide programs. Now this would a very bold move and thus is a real long shot for traditional-bound Virginia. Such an entity exists in a half dozen states so much could be learned from their experiences to date.
Among the programs an efficiency utility could implement: consumer education and financial incentives for heating, ventilation and air-conditioning maintenance and replacements; more energy efficient appliances, insulation and air duct sealing. It could also support commercial building and professional credentialing.
10. Decouple utility distribution rates from sales. Rather than rely on utilities selling more electricity to make more money, decoupling rates from sales aligns utilities’ roles with benefits to their customers, their communities and the state overall. This reduces both the upside and downside risk for utility shareholders and owners and their customers. The VAEIC asserts this “should not have a significant impact on investor-owned utilities’ return-on-equity.
11. Develop joint-fuel programs with utilities. This would avoid confusion caused by one utility offering a service that another does not.
12. Require the installation of advanced meters and clearly enumerate the cost-saving and other benefits that can come from them. VAEIC doesn’t spell it out exactly this way but this IS the upshot of this recommendation.
13. Encourage utilities to implement and promote on-bill financing. This would enable investments in energy management systems for companies which could finance such improvements over time with on-bill payments.
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