Energy Savings Credits: Are Potential Benefits Being Realized?
A growing number of U.S. states are adopting energy efficiency resource standards (EERS) or renewable electricity standards (RES) that can be partially met through energy efficiency measures. By the end of 2009, 21 states had such requirements in place. These state requirements, as well voluntary trading of energy savings and of carbon offsets based on energy efficiency projects, often require tracking and crediting mechanisms. There also is the prospect for a federal EERS as well as a carbon offset program under climate and energy legislation that is pending before the U.S. Congress.
The scope for trading of energy savings credits (ESCs) offers both opportunities and challenges.
In Energy Savings Credits: Are Potential Benefits Being Realized? Alliance to Save Energy staff examined issues associated with ESCs, including potential benefits of trading, current experience, and impediments. The authors conclude that ESC trading can offer significant potential benefits including reducing the cost of energy efficiency (EE) deployment, increasing resources available for EE investment and targeting of EE investment where it provides greatest value. Notwithstanding these important potential benefits, the authors find that, to date, the American experience with ESC trading is very limited. The report finds that most ESC trading today is compliance driven and that its greatest potential is in compliance markets, such as for meeting EERS, RES, or carbon offset requirements.
The authors conclude that the stringency of EERS or other requirements is critical to the value of ESCs and trading. Further, the authors find that inter-state or national trading could be challenging given that states may have differing definitions of eligible EE measures, may use different baselines and business-as-usual (BAU) energy use assumptions, and/or may impose different evaluation, measurement, and verification (EM&V) standards.
The authors suggest that measurement of energy savings may represent both the greatest barrier to energy efficiency trading as well as its greatest benefit. ESC trading and performance-based compensation mechanisms for utilities in some states create vested interests that shine a light on savings measurement methods and data. With or without trading, EM&V is critically important. Credible savings measurement will be a vital part of a sustained scale-up of energy efficiency programs and the integrity of any trading program.
Given the overarching importance of EM&V, the authors have written a second, companion report, Scaling-Up Energy Efficiency Programs: The Measurement Challenge, which delves further into the issues and challenges facing EM&V for energy efficiency programs. The report was made possible under a U.S. Department of Energy, State Energy Program – Special Projects grant with the Pennsylvania Department of Environmental Protection, with additional funding from the Kresge Foundation. The Alliance is grateful to these organizations for their generous support of this project and we appreciate the dedication, creativity and hard work of all involved in the research and writing of this report.
The following presentation summarizes key points of this report:
