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Kentucky’s New State Energy Plan
Questions posed by the Alliance to Save Energy, Answers provided by Environmental and Public Protection Cabinet (EPPC)
Secretary LaJuana S. Wilcher
Secretary Wilcher's Opening Remarks: Thank you for the opportunity to share the key elements of Kentucky's new Comprehensive Energy Strategy. Last year, Governor Ernie Fletcher convened the Commonwealth Energy Policy Task Force to develop Kentucky's first comprehensive energy strategy. To ensure that the policy was being considered at the highest levels of government, six of Kentucky's nine cabinet secretaries served as task force members, along with the co-chairs of the Kentucky General Assembly's Special Subcommittee on Energy.
The task force held public meetings at three locations throughout the state, and heard from almost fifty people in oral presentations. In addition, the task force received written submissions from groups and individuals representing interests as diverse as the Sierra Club, the Kentucky Solar Partnership, the Kentucky Clean Fuels Coalition and the Kentucky Coal Association. Universities, power companies, wildlife groups, business interests and individuals all shared their views of Kentucky's energy future.
Secretary Jim Host, Secretary of Commerce, and co-chair of the task force, provided much of the impetus and leadership for the group, being dubbed Kentucky's "green" Commerce secretary before the task force completed its work. I had the privilege of serving as co-chair with him in developing an innovative and environmentally sensitive plan for Kentucky's energy future.
1. The first nine recommendations of Kentucky's Comprehensive Energy Strategy relate to energy efficiency. Why did you place such a strong focus on efficiency?
When Governor Fletcher announced the formation of the Commonwealth Energy Policy Task Force, he established three principles to guide policy development: 1) maintain Kentucky's low-cost energy; 2) responsibly develop Kentucky's energy resources; and, 3) preserve Kentucky's commitment to environmental quality. Energy efficiency is one of the best ways, if not the best way, to accomplish all of those goals. We had plenty of opportunity in Kentucky ... our residential customers consumed 28% more electricity than the national average. Reducing our consumption to just the national average would reduce the average resident's bill about $14.00 per month. Efficient energy use and conservation can reduce overall energy costs, help address environmental issues and improve our economy.
Energy efficiency touches all sectors of our economy, whether we implement cost-saving conservation and efficiency measures at home, work or school. Specifically, several of the recommendations focus on state government. It is state government's role to show leadership in energy efficiency and in doing so, I believe we become better stewards of the Commonwealth's resources and better leaders in our state. Toward that end, our recommendations include implementing an aggressive utility saving initiative throughout state government to improve energy efficiency; implementing procurement policies that encourage sustainable practices, products and energy efficiency; and, examining state building codes to determine if enhanced energy efficiency gains are possible through progressive policy and regulatory revisions.
Over the years, Kentucky has relied heavily on supply-side approaches to whet our growing energy appetite and strengthen our economy. This approach has left many energy efficiency opportunities by the wayside. In today's economy, with oil prices skyrocketing, it makes even more sense for us to begin to capture energy efficiency opportunities and save money in the process.
2. Would you describe one or more recent policies introduced by the Kentucky Legislature that encourages energy efficiency? Absent legislation, can you describe other mechanisms used by the State to promote energy efficiency?
In February, 2005, when Governor Fletcher unveiled the comprehensive energy strategy, he signed several Executive Orders that immediately put into effect several important recommendations from the plan. One of the executive orders created the Utility Savings Council for state government. The Council will study the energy use of state agencies, make recommendations and put plans into action that will produce cost savings with the goal of saving at least 10 percent in energy costs annually throughout state government. The Council has already had its first meeting, is working toward achieving the goals set forth by Governor Fletcher, and is in the process of hiring a full time utility savings program manager.
Another executive order required employees using the Transportation Cabinet's fleet of conventional vehicles to use either an E10 ethanol blend or a B2 biodiesel blend as their primary fuel whenever possible. Kentucky has both an in-state ethanol and biodiesel refinery so it makes sense that we use our clean renewable fuels in our state fleet. The Governor's strategy also encourages our K-12 bus fleet to use a B20 biodiesel blend. We fully expect the state's primary, secondary and post-secondary schools will strive to meet the challenges presented by the Governor and will institute progressive policies involving renewable fuels, energy efficiency and energy management. And we've already introduced hybrid vehicles into the state fleet! I love driving around in my burgundy Toyota Prius.
Finally, the legislators on the task force helped shape the comprehensive strategy and I believe they will work with other legislators in the General Assembly to enact legislation that will help position Kentucky as a national energy efficiency leader.
3. According to the report, Kentucky enjoys some of the lowest electricity rates in the nation. Does inexpensive electricity make promoting energy efficiency more difficult?
It sure does! As you might expect, paybacks for energy conservation measures can take longer with lower prices. On the other hand, this gives us great opportunities for improvement. Maintaining the state's low electricity rates, an essential part of the plan, will require that we teach people the opportunities for abandoning energy-intensive practices, processes and procedures in exchange for the advantages of lower consumption, lower energy bills and improvements in the environment. The citizens of the Commonwealth can not only enjoy the lowest electricity rates in the nation, but also pay the lowest electricity bills if we can become more energy efficient.
Despite our low cost energy, we have already been successful in helping Kentuckians lower their energy bills by promoting energy efficiency. This has been accomplished through programs such as ENERGY STAR. ENERGY STAR overcomes market barriers limiting the adoption of cost-effective, energy-saving products and practices and helps unleash savings for individuals and organizations. At this time, Kentucky has more than ninety ENERGY STAR partners in the state and that number is growing. We are also proud that two of our larger corporations, Toyota Motor North America Manufacturing, Inc. and General Electric Consumer and Industrial Appliances, were recognized as ENERGY STAR partners of the year, in April of 2005.
4. How can Kentucky best ensure that its coal resources are used as efficiently as possible, while minimizing environmental impacts?
Kentucky generates over 90 percent of its electricity from coal, so research to use coal more efficiently and in a cleaner way is very important to our environment and economy. The comprehensive Energy Strategy has recommendations that promote clean coal technologies and clean coal facilities, as well as changes in how we generate electricity. Clean-coal technology is a new generation of energy processes that reduces air emissions and other pollutants compared to older coal-burning systems. Investments in clean coal technology will allow low-cost Kentucky coal to be utilized as a primary energy resource in this country while still reducing unwanted emissions. For example, integrated gasification combined cycle (IGCC) generation is an exciting technology that offers one of the most versatile and cleanest ways to convert coal into electricity.
5. Kentucky is one of 34 states that allow its utility customers to benefit from a home or business-based renewable energy generating system (e.g., net metering). What are the political challenges to implementing net metering? Has Kentucky achieved consensus on how to proceed with implementation?
In 2004, Governor Fletcher supported and signed Senate Bill 247, authorizing net metering for small-scale solar electric systems in Kentucky. We worked closely with the state's investor-owned utilities, electric cooperatives, and environmental groups to reach consensus on the legislation. As you point out, many other states have adopted net metering laws, with some states having financial incentives to encourage small-scale renewable energy systems. Connecting these small generating systems to the nation's electrical grid can help offset the large demand for energy during peak times, decrease the need for utilities to build more power plants and lessen the likelihood of blackouts during peak demand hours.
In supporting the legislation, we worked to educate both legislators and energy providers that clean, renewable sources of energy complement our existing energy base. Renewable energy adds diversity to our fuel mix and helps better balance our energy portfolio. Although we have a lot of work to do to help people take advantage of this legislation, we are hopeful that more and more Kentuckians will let the sun shine in and roll their electric meters back.
On another renewable energy front, one of our cooperative energy providers (East Kentucky Power Cooperative) has initiated a landfill gas program to generate renewable energy for their customers who want to purchase green power. This initiative is proving to be very successful.
6. The Comprehensive Energy Strategy recommends policies to promote the development and use of ethanol and biodiesel. Toyota recently announced plans to build a plant in Kentucky to build hybrid versions of the popular Toyota Camry. What role does the Commonwealth see hybrids playing in reducing the use of petroleum in the transportation sector?
Toyota's decision to build hybrids in Kentucky is a great opportunity for us ... from both an environmental and economic standpoint. Toyota Motor Manufacturing North America, Inc. achieved its ENERGY STAR Partner of the Year status by reducing assembly plant energy consumption by 26 percent per vehicle and carbon dioxide generation by 17 percent per vehicle, while increasing its U.S. vehicle production by 54 percent. It is very rewarding to have corporate leaders in Kentucky set exemplary standards that other industries can emulate. Toyota is manufacturing more environmentally friendly automobiles in an environmentally responsible fashion. That certainly is a "win-win" for us all.
We expect Toyota will be able to take advantage of a new tax incentive created by Governor Fletcher and the legislature earlier this year for companies that manufacture products that are easier on the environment than competing products. The production of the Toyota hybrid Camry in Kentucky will increase the hybrids on our highways, grow jobs for our people and improve air quality, while saving gas and money for the consumer.
Our state's new energy strategy, combined with the recent federal incentives and initiatives for energy efficiency and renewable energy, give us boundless opportunities to match Kentucky's Unbridled Spirit!
 
State Energy Savings and the Energy Bill
By Kara Saul Rinaldi
Director of Policy, ASE
 Earlier this month, President Bush signed the Energy Policy Act of 2005 into law. The culmination of more than five years of debate, this energy bill sets policies and authorizes funding for a variety of energy resources, including energy efficiency. Several of the energy efficiency provisions in the bill are targeted at helping states save energy.
In addition to increasing and extending authorization for the Low Income Home Energy Assistance Program (LIHEAP) and Weatherization Assistance, the energy bill amends the State Energy Programs to expand state energy efficiency goals, requiring each state to improve its energy efficiency by 25 percent above 1990 levels by 2012.
 The energy bill also authorizes the following new programs to help states increase their efficiency:
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Energy Efficient Appliance Rebate Programs –Authorizes funds  for state energy offices to pay up to 50 percent of the cost of establishing and carrying out an energy efficient appliance rebate program to provide rebates to consumers for the purchase of new residential Energy Star products to replace a similar used appliance.
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Energy Efficient Public Buildings – Authorizes grants for states to improve the energy efficiency of new public buildings (only buildings that are 30 percent more efficient than the model IECC code are eligible for the funds) or the renovation of old public buildings (this applies to buildings that are made 30 percent more efficient than the baseline).
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Low Income Community Energy Efficiency Pilot Program – Authorizes grants to local governments; private, non-profit community development organizations; and, Indian tribe economy development entities to improve energy efficiency and develop alternative energy sources in low income rural and urban communities.
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State Technologies and Advancement Collaborative – Authorizes the establishment of a cooperative program for research, development, demonstration and deployment of technologies in which there is a common Federal and State energy efficiency, renewable energy, and fossil energy interest.
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State Building Energy Efficiency Codes Incentives – Authorizes $25 million per year, for five years, to support state building energy codes, including a new program to assist states and local governments in achieving high rates of compliance with the most recent residential (IECC) and commercial (ASHRAE) energy efficiency building codes.
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Net Metering, Smart Metering and Additional Standards – Requires state commissions to consider mandating net metering services and smart metering services for consumers with on-site generation from renewable and high efficiency sources. Also requires states to consider adopting standards for interconnection of distributed generation to the grid.
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Energy Efficiency Performance Standard –Authorizes a study by DOE, NARUC, and NASEO on state and regional policies to promote cost-effective programs to increase end-use energy efficiency. Also Authorizes $25 million in funding over 5 years for 3-7 state pilot programs to develop plans and programs designed to reduce electricity and natural gas consumption.
While these programs have the potential to provide a great deal of energy savings, the energy bill only authorizes, as opposed to actually appropriating, funding for these programs. While each of the above programs is authorized to begin in October, 2005, the funding bills for fiscal year 2006 are nearing completion – and do not reflect the newly authorized programs in the energy bill. These programs likely will face tough competition for dwindling dollars during the next appropriations cycle (fiscal year 2007), as many lauded, well-established efficiency programs already are anticipating cuts.
The Energy Policy Act of 2005 set out an outline of potential action and incentives for states to increase their energy efficiency. However, to realize these savings funding must be provided to states to meet the ambitious plans set out by the bill.
 The Alliance to Save Energy encourages states, state agencies, and others interested in working to ensure adequate funding in FY 2007 for these energy efficiency programs to contact us at policyinfo@ase.org. With your help, we can work to ensure that both the Administration’s 2007 budget request and the Congress include significant funding for these important state energy efficiency programs.
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