PDF: Energy Efficiency Issue Brief.
Summary
| Energy efficiency is one of the most important, cost-saving tools available to utilities to meet energy demand, defer generation investment, and reduce greenhouse gas and other emissions. |
| The federal government creates incentives for energy efficiency through legislation, regulations, the tax code, and executive orders. |
| APPA is generally supportive of federal efforts to encourage and support such activities, so long as they are cost-effective for consumers and have a reasonable payback period. |
| Given that many energy efficiency improvements require changes in customer behavior that are beyond a utility’s control, APPA believes Congress should continue to provide incentives, grants, rebates, and federal support for energy efficiency re-search and development to encourage, but not mandate, achieving greater energy efficiency. |
Background
Energy efficiency is the ability to maximize energy use via more efficient technologies throughout the electric utility system, as well as for electric customers to minimize their energy use via a variety of tools, technologies, and behaviors. Beginning with the Energy Policy and Conservation Act of 1975, Congress has passed several laws to promote energy efficiency standards for consumer products and equipment. Today, the Department of Energy’s (DOE) Building Technologies Office implements minimum energy conservation standards for more than sixty categories of products. The standard setting process, which includes the publication of a proposed rule in the Federal Register, allows for public and stakeholder feedback. DOE is required to set standards that are “technically feasible and economically justified.” In 2007, Congress passed the Energy Independence and Security Act, which required DOE to create a schedule for the regular review and updating of efficiency standards. DOE, along with the Environmental Protection Agency, also administers the voluntary ENERGY STAR program to identify products and building materials that go beyond federal efficiency standards.
While many of the efficiency standards set by DOE regulate consumer products, including ceiling fans, light bulbs, furnaces, and refrigerators, some may directly impact public power utilities, notably the efficiency standards for distribution transformers. Public power utilities, especially smaller municipally owned electric utilities, are often distribution-only asset owners and operators. A significant portion of their capital costs are for the transformers and wires that bring electricity to end-use customers. Thus, APPA believes that any energy efficiency regulations on distribution transformers must be economically justified to ensure that end-use customers recoup the costs for any increases in capital investments required through such regulations. Complex electric system equipment, like a distribution transformer, also requires an especially flexible and thoughtful approach when it comes to energy efficiency regulations as there are often situations where efficiency gains can come at the cost of broader optimal system operability.
APPA has previously filed public comments in response to DOE proposals to increase energy efficiency standards for distribution transformers and EPA ENERGY STAR proposals for distribution transformers. The comments supported the need for flexible and economically justified regulations. Most recently, in December 2021, APPA responded to a DOE pre-filing for distribution transformers standards recommending that DOE delay implementation of a new energy efficiency regulation until the market for transformer materials returned to the projections used in the economic justification for the proposed regulation, citing current supply chain constraints for distribution transformers. On December 28, 2022, DOE released its Notice of Proposed Rulemaking for new efficiency standards for all categories of distribution transformers that would use amorphous steel cores.
In response to increasingly severe distribution transformer supply chain constraints, in May 2022, APPA and the National Rural Electric Cooperative Association sent a letter to DOE Secretary Jennifer Granholm urging her to temporarily waive the existing energy conservation standard for distribution transformers. Manufacturers could use the waiver at their discretion to increase output as much as possible until the immediate supply crisis has abated, thereby increasing the stock of transformers available to public power and other utilities. DOE subsequently denied the request.
Congressional Action
Several energy efficiency provisions were included in the Energy Act of 2020, which passed as part of the Consolidated Appropriations Act of 2021 and was signed into law in December 2020. Specifically, the law reauthorized the Weatherization Assistance Program (WAP), a DOE program that funds energy efficiency upgrades for low-income households. The Energy Act of 2020 also directed DOE to establish rebate programs to encourage the replacement of inefficient electric motors and transformers, which APPA supports.
The Infrastructure Investment and Jobs Act (P.L. 117-58), which was signed into law in November 2021, appropriated an additional $2.5 billion for the WAP. It also appropriated $550 million for the DOE Energy Efficiency Conservation Block Grant program, which provides block grants to cities, states, and Indian tribes for energy efficiency and conservation projects. Additionally, the law will create a grant program for energy efficiency improvements and renewable energy deployment at public schools.
Finally, the Inflation Reduction Act (P.L. 117-169), which was signed into law in August 2022, extended or created several new tax incentives for residential energy efficiency improvements, including increasing the credit for residential energy efficiency home improvements, creating a rebate program for residential energy saving retrofits, and providing new grants for states to support energy efficiency training for contractors.