Energy Efficiency Resource Standard (EERS)

An Energy Efficiency Resource Standard (EERS) is a flexible mechanism to ensure that utilities adopt energy efficiency as a clean, cost-effective energy resource. A federal EERS would require that electricity and natural gas utilities help their customers reduce energy use by a specified and increasing amount each year, based on a percentage of total energy sales. It complements a renewable electricity standard (RES), which requires that a percentage of electricity generation be from renewable sources. EERS is a tested policy measure that has successfully reduced energy use in several states. A national EERS would lower energy costs, reduce air pollution and global warming, and improve energy reliability throughout the nation.

Why Utilities Should Promote Energy Efficiency

Energy efficiency is often the cheapest, fastest, cleanest, and most reliable new energy resource. Recent studies have estimated the average cost of electricity saved by energy efficiency programs at 2.5 to 6.4 cents per saved kilowatt-hour (kWh),¹ much less than the cost of new conventional electricity. Energy efficiency programs also usually have no siting issues, require no power lines or pipelines, emit almost no air pollution, and improve energy reliability. And they can start contributing in a fraction of the time of new power plants.

States with Energy Efficiency Resource Standards (EERS), including those allowing efficiency to count towards a renewable standard

Beginning in the early 1990s, utilities were integral in helping their customers save energy through programs including energy-efficient appliance rebates, energy audits and weatherization, consumer education, and incentives for commercial lighting retrofits and industrial improvements. These programs, along with programs to shift demand away from peak times, have resulted in electricity demand reductions equivalent to the generation of almost one hundred 300-megawatt (MW) power plants. Despite these early successes, utility deregulation in the mid-1990s caused major cuts in demand side management, and the budget for utility programs fell by nearly half.² Today, a patchwork of ratepayer-funded state and utility programs has emerged to again encourage energy efficiency. The budget for state and utility electric and natural gas efficiency programs reached $5.3 billion in 2009,³ in part due to state EERS programs, and a national EERS program would encourage energy efficiency in all states and foster the widespread implementation of smart energy management.

State Successes with EERS

In the past decade, more than a dozen states have created an EERS or allowed energy efficiency to meet part or all of an RES, with more pending. Some examples include:

• Texas requires utilities to avoid 20% of the forecast increase in peak electric demand through efficiency programs (as of 2009). Illinois and Ohio require new electricity savings that will rise to 2% of sales each year, and Michigan requires 1% annual new savings from electricity and 0.75% annual new savings from natural gas.
• North Carolina allows energy efficiency to meet up to 25% (rising to 40%) of its RES. Connecticut revised its RES to add a separate tier requiring utilities to add savings through energy efficiency of 1% of electricity use each year through 2010.
• The California Public Utilities Commission sets multi-year targets for electric and natural gas utilities based on a study of the potential cost-effective savings of the programs.
• Vermont has performance requirements in its contract with an independent efficiency provider.

National EERS Proposal

One proposal for a national Energy Efficiency Resource Standard was introduced in the 111th Congress by Rep. Ed Markey (D-Mass.) in H.R. 889, the Save American Energy Act. The standard would have required savings rising to 15% of electricity and 10% of natural gas by 2020, as shown in this table.

Under Markey’s EERS proposal, utilities could achieve energy savings though a variety of means including reducing end-use consumption, adjusting appliance standards and building codes, promoting combined heat and power at customer facilities, and reducing energy losses in energy distribution.  Utilities could also purchase efficiency credits from end-users or third-party efficiency providers to meet their required reductions, although trading would be mostly limited to within the state.  The program would be monitored by the Department of Energy, which would set evaluation, measurement, and verification (EM&V) rules to estimate program savings.  States would be invited to administer and enforce the program and could use their own EM&V rules.  Additionally, states could implement efficiency standards more aggressive than the federal EERS baseline. A similar bill, S. 548, was also been proposed by Sen. Charles Schumer (D-N.Y.). 

Several proposals for renewable energy standards (RES) in the 111th Congress included efficiency provisions within an RES, including the House-passed  American Clean Energy and Security Act (H.R. 1454).  Sen. Lindsey Graham’s (R-S.C.) discussion draft bill, the Clean Energy Act of 2009, would create a broader ‘Federal Clean Energy Standard’ for renewables, coal with carbon capture, and nuclear that would allow up to 25% of the requirement to be met with energy efficiency.

Benefits of the Proposed EERS Program

An EERS such as was proposed in H.R. 889 would be a step toward President Obama’s commitment to reduce electricity use by 15% by 2020. According to the American Council for an Energy Efficient Economy, the EERS proposed in the H.R. 889 would reduce peak demand by 90,000 MW by 2020, a savings equal to the output of about 300 medium-sized power plants. Each year the measure would save consumers an estimated $35 billion in utility bills, cut 250 million tons of carbon dioxide emissions, and create almost 250,000 additional jobs.⁴ 

Footnotes

Other Resources

Energy Savings Credits: Are Potential Benefits Being Realized?, a report by Alliance staff on energy efficiency credit trading - an issue relevant to many existing and proposed EERS programs

Deal or No Deal: Pros and Cons of Trading Under an Energy Efficiency Resource Standard, a report by Alliance staff on energy efficiency credit trading, presented at the ACEEE Summer Study, August 2008

Presentation by Alliance staff on EERS (PDF, 321kb)

Updated February 2011