Summary of the American Clean Energy and Security Act of 2009 (ACES) Discussion Draft

Overview and Energy Efficiency Provisions

On March 31, the House Energy and Commerce Committee Chairman Henry Waxman (D – CA.) and Subcommittee on Energy and Environment Chairman Edward Markey (D –MA) released a discussion draft of legislation entitled the American Clean Energy and Security Act of 2009 (ACES), which combines energy and climate policy into one package.

The draft of the American Clean Energy and Security Act of 2009 consists of four titles covering clean energy, energy efficiency, reducing global warming pollution and assistance in the transition to a clean energy economy. The draft bill combines standards and incentives to promote clean energy and energy efficiency technologies with a firm cap on greenhouse gas emissions.

REDUCING GLOBAL WARMING POLLUTION TITLE

Scope
The emissions cap applies to around 85% of U.S. greenhouse gas emissions. The reductions targets, which are based on 2005 emissions, begin with 3% reductions in 2012, rising to 20% in 2020, 42% in 2030 and 83% in 2050. Special programs address emissions from HFCs and black carbon.

Regulated Entities 
Electric utilities, oil companies, large industrial sources, and various other entities are covered.:

Environmental Protection Agency (EPA) is to establish emission standards on various sources not covered by the program as well as new coal fired power plants.

Price Stability and Cost Control
Trading and banking of emissions allowances may occur in unlimited quantities. Additionally, a regulated entity may borrow emission allowances from one year ahead without penalty, and can borrow from two to five years ahead with restrictions at an 8% interest rate for each year between the year borrowed and the vintage year of the allowance. Regulated entities can use verified offsets (greenhouse gas reductions outside the scope of the cap) not exceeding an economy-wide total of 2 billion tons per year, divided evenly between domestic and international sources. A discount is applied for the emission reductions attained by offsets, requiring the entities to submit five tons of offset credits for every four tons of emissions being offset. EPA is to determine the types of eligible offset projects, but the crediting period for each project is not to be less than 5 and greater than 10 years. The draft specifies some additionality requirements and directs EPA to establish a process for accrediting third party verifiers and to establish measurement methodologies while giving consideration to the existing protocols. In addition, a strategic reserve of about 2.5 billion allowances is to be set aside for auction to regulated entities to cushion the market in case the allowance prices rise faster than projected.

Allowance Allocation
The bill does not spell out a plan for allocation of the emission allowances, leaving this to be determined at a later date. Approximately 5% of the allowance value is to be used for preventing international deforestation, resulting in additional greenhouse gas reductions in 2020 equivalent to 10% of U.S. emissions in 2005.

ENERGY EFFICIENCY TITLE

Subtitle A—Building Energy Efficiency Programs

Sec. 201: Greater Energy Efficiency in Building Codes
This section sets targets for the national model building energy codes and standards to achieve overall energy savings of at least 30 percent starting with the next edition of the model codes and 50 percent with the editions of each code that comes after January 1, 2016, as compared to the 2006 IECC for homes and ASHRAE Standard 90.1-2004 for commercial buildings. After 2016, the U.S. Department of Energy (DOE) is to set these targets at least once every 3 years at the maximum level of energy efficiency that is technologically feasible and life-cycle cost effective. DOE must also assist IECC and ASHRAE, determine whether their model codes meet the targets, and establish modified model codes if the IECC and ASHRAE codes do not achieve the efficiency goals.

This section also directs states to adopt the model codes or codes with equivalent energy savings, and to demonstrate high rates of compliance with their codes. It authorizes incentive funding to the states for adoption and implementation of advanced building energy codes, as well as for training and for implementing a plan to achieve compliance with these codes.

Sec. 202: Building Retrofit Program
This section directs EPA and DOE to establish standards for a national energy and environmental building retrofit policy for the commercial and residential sectors and to develop the Retrofit for Energy and Environmental Performance (REEP) program to implement these policies. This program would promote cost-effective energy efficiency and other environmental improvements in existing buildings through low-cost audits, technical help, training, incentive financing and other mechanisms. This section specifies the amounts and forms of support that can be provided under this program and requires that REEP funding not exceed 50% of the total cost of retrofit in each building. Funding for this program will flow through the State Energy Offices (or their equivalents, as determined by the governor) based on the formula used for allocating State Energy Program (SEP) funding for the first year and a combination of the SEP formula and state-wide performance on energy savings achieved through REEP. In addition, this section also directs EPA and DOE to make appropriate use of existing programs such as the EPA Energy Star for Buildings in creating and operating REEP.

Sec. 203: Energy Efficient Manufactured Homes
This section provides rebates to low-income families living in pre-1976 manufactured homes to be used for purchasing Energy Star-rated manufactured homes. Each rebate is not to exceed $7,500 per manufactured home and funds are to be distributed based on each state’s share of manufactured homes that are used as primary residences and constructed prior to 1976. The provision also requires that the old residences be destroyed.

Sec. 204: Building Energy Performance Labeling Program
This section directs the EPA to create a model building energy performance labeling program. EPA is to conduct demonstration projects for different building types to assess the sufficiency of the current Commercial Buildings Energy Consumption Survey and other data, inform the development of measurement protocols for other building types and identify any areas of needed data improvement. EPA and DOE are to coordinate these demonstration projects with those undertaken for the Zero-Net-Energy Commercial Buildings Initiative adopted in Energy Independence and Security Act of 2007 (EISA). EPA, in consultation with DOE, is to work with the State Energy Offices (or other state entities) on implementation of the labeling program.

Funding under this section is available to states that have adopted assessment and labeling requirements under this program and have an implementation plan within 6 months of establishment of the program. One third of the funds are to be allocated equally among these states, the remaining funds will be allocated in proportion to the number of eligible buildings in each state.

Subtitle B—Lighting and Appliance Energy Efficiency Programs

Sec. 211: Lighting Efficiency Standards
This section establishes efficiency standards for outdoor luminaires, increasing from 50 lumens per watt by 2011 to 80 lumens per watt by 2015, and for outdoor high light output lamps to 45 lumens per watt by 2012. It also requires that portable light fixtures manufactured on or after 2012 be made for use with Energy-Star certified CFLs or LEDs - not incandescent lamps of any type. Additionally, GU-24 base lamps shall not be incandescent, and DOE must come out with new standards for incandescent reflector lamps within 1 year of the bill’s enactment.

Sec. 212: Other Appliance Efficiency Standards
This section establishes energy efficiency standards for water dispensers, hot food holding cabinets, and portable electric spas, gas- and oil-fired commercial warm air furnaces.

Sec. 213: Appliance Efficiency Determinations and Procedures
This section prescribes a water efficiency standard for shower heads, faucets, water closets, and urinals, and an energy efficiency standard and optional water efficiency standard for clothes washers and dishwashers. It also requires manufacturers of products with efficiency standards to submit reports to DOE regarding their compliance, economic impact of a standard, and sales.An estimated total annual carbon output on appliance "Energy Guide" labels is also required.

Sec. 214: Best-in-Class Appliances Deployment Program 
This section establishes a Best-in-Class Appliances Deployment Program, administered by DOE, that rewards retailers with 1) bonuses for increasing the sales of high efficiency equipment, electronics, and appliances and 2) bounties for the replacement and recycling of old, inefficient appliances. It also awards bonuses to manufacturers for developing "superefficient" best-in-class products.

Subtitle C—Transportation Efficiency

Sec. 221: Emissions Standards 
This section requires the President to set federal motor vehicle standards that would harmonize standards for passenger vehicles and light trucks set by EPA, the National Highway Traffic Safety Administration, and the state of California. The new federal standard must be "achievable" by automobile manufacturers, yet must also yield at least as much emissions reductions as would be achieved by implementation of California’s standards in California and the others states that have adopted it. In addition, this section amends the Clean Air Act by adding greenhouse gas emission standards for mobile sources. This amendment would require EPA to create greenhouse gas emission standards for heavy duty vehicles and engines – in the categories of automobiles, marine vessels, locomotives, and aircraft – that ensure the greatest achievable emissions reductions for each kind. It also allows EPA to establish trading rules of greenhouse gas emission credits among and between these categories.

Sec. 222: Greenhouse Gas Emissions Reductions through Transportation Efficiency 
This section requires states to submit within 3 years to EPA goals for greenhouse gas reductions over a 10- and 20-year period achievable through transportation planning. Individual state goals should be developed in concurrence with the state’s air quality and transportation agencies, metropolitan planning organizations of all areas of a population exceeding 200,000 within the state, and should include statewide targets as well as those that are specific to each qualifying metropolitan area. Among the strategies to be considered for each plan are efforts to increase public transportation use, updates to zoning and land use regulation, implementation of 'complete streets' policy (that ensures accommodation of pedestrians, bicyclists, motorists, and public transportation users, the elderly, the disabled, etc.) and pricing measures (such as congestion fees.) Goals will be established on a statewide basis and for each metropolitan area, and must be revised every 4 years. EPA will award grants to metropolitan planning organizations on a competitive basis, according to emissions reductions goals.

Sec. 223: SmartWay Transportation Efficiency Program 
This section authorizes the SmartWay Transportation Efficiency Program that requires EPA to develop measurement protocols to quantify and evaluate the energy consumption and greenhouse gas impacts from technologies and strategies in the mobile source sector, including freight carriers. In addition, EPA would demonstrate and promote the benefits of technologies, products, fuels and operational strategies that reduce energy consumption and emissions through this program. The program would also establish a financing program to award funding to public and private entities (States, tribes, local governments, regional organizations, non-profit organizations, and for profit companies) for the adoption of low-greenhouse gas technologies and strategies in the mobile source sector.

Sec. 224: State Vehicle Fleets 
This section amends the Energy Policy Act of 1992 by allowing DOE to revise the rules for state vehicle fleet with respect to the types of alternative fuel vehicles so that they are in compliance with any updates to the alternative fuel vehicles allowed for the minimum federal fleet efficiency requirements.

Subtitle D– Utilities Energy Efficiency

Sec. 231: Energy Efficiency Resource Standard for Retail Electricity and Natural Gas Distributors
The draft establishes a federal standard requiring electricity and natural gas utilities to help their customers implement measures to reduce their electric and natural gas use each year from 2012 to 2020. The reduction targets are based on the average energy use in the two years prior to the enactment of the bill and increase incrementally to reach savings of 15% of electricity and 10% of natural gas by 2020 achieved through these programs since the bill’s enactment. Below is a table of energy efficiency targets for calendar years 2012 through 2020. Eligible activities to achieve energy savings include: utility efficiency programs, building energy codes, appliance standards,combined heat and power, distribution system savings and related efficiency measures.Utilities can also buy savings from customers and from third parties through bilateral contacts, though no open market trading will be allowed. 
DOE is to set measurement and verification and other rules, and states that choose to do so will administer the standard for their utilities, with oversight from DOE. For energy savings to count, the utility must demonstrate significant utility involvement, beyond business-as-usual measures, and third-party verification.

For more information about EERS, see our fact sheet

Subtitle E—Industrial Energy Efficiency Programs

Sec. 241: Industrial Plant Energy Efficiency Standards
Under this section, DOE will develop voluntary industrial plant energy efficiency performance criteria to complement American National Standards Institute energy benchmarking standards currently under development. The details of this program are yet to be finalized.

Sec. 242: Electric and Thermal Energy Efficiency Award Programs
These programs provide awards to electric and thermal energy generation facilities for the innovative recovery of waste heat for electricity production or thermal use. Only fossil and nuclear facilities are eligible. The awards can be as much as 25% of the value of energy projected to be recovered through the first five years of program activity or the amount necessary to make the project economically viable, as established by DOE. Under this program, DOE must work with the state regulatory agencies to aid electricity providers in the sale of thermal byproducts. These activities are also eligible for SEED Fund Loans, discussed below.

Subtitle F—Improvements in Energy Savings Performance Contracting

Sec. 251: Energy Savings Performance Contracts
This section amends requirements for Energy Saving Performance Contracting of federal buildings by requiring a competitive application process, allowing for the purchase of renewable energy from utilities, and allowing for the installation of renewable or efficient energy systems on site, including electric, thermal, cogeneration and heat recovery programs. The competitive application process requires the head of a Federal agency to review the qualifications, request references, and conduct discussions with two or more contractors. The selected contractor(s) must then conduct a site-survey and submit a firmed-fixed price proposal to implement specific energy conservation measures prior to the issuance of the delivery order.

Subtitle G—Public Institutions

Sec. 261: Public institutions
This section amends the Energy Policy and Conservation Act of 1975 to designate nonprofit hospitals and public health facilities as eligible public institutions for energy efficiency grants and loans. It also makes changes to funding levels in that section.

ENERGY EFFICIENCY in the CLEAN ENERGY TITLE

Subtitle A—Renewable Electricity Standard

Sec. 101: Federal Renewable Electricity Standard 
This section creates a renewable electricity standard requiring retail electricity suppliers selling one million megawatt hours of electricity or more in any given year to meet a specified percentage of their load with electricity generated from renewable resources, like wind, biomass, solar, geothermal, biomass or landfill gas, qualified hydropower and marine and hydrokinetic renewable energy. This requirement starts at 6% in 2012, gradually increases to 25% in 2025 and remains the same through 2039. Each state has an option to use energy efficiency to comply with up to 20% of this requirement each year.

Subtitle D—State Energy and Environment Development Funds

Sec. 131: State Energy and Environment Development Funds
The draft bill requires the DOE to develop a common framework for states to manage federal energy funding through the establishment of State Energy and Environment Development (SEED) Funds. The DOE will develop model regulations for the operation of SEED fund program, which will help states manage and account for money provided to clean energy, energy efficiency and climate change programs; including appropriations for weatherization, state energy programs, and recovery act monies. States may expend the funds through low-interest loans, grants, or other forms of support.

Subtitle E —Smart Grid Advancement

Sec. 142: Incorporation of Smart Grid Capability in Energy Star Program
This section expands the Energy Star labeling to include an indicator of products' smart grid-capability, based on studies to assess functionality, integration with smart grid features, and use by consumers.

Sec. 143: Smart Grid Peak Reduction Goals
A program to set out peak reduction goals for load-serving entities of greater than 250MW capacity is proposed, to be developed by those entities and the states. It does not set out specific reductions or mitigation that would be expected, merely that such entities would develop their own targets in conjunction with FERC. FERC, DOE, and NERC would collaborate to develop measurement and verification rules. Peak load reduction plans could be managed in a number of ways, including efficiency programs, demand response, distributed generation, and stored energy. It would have to be tested to ensure effectiveness.

Sec. 144 Reauthorization of Energy Efficiency Public Information Program to Include Smart Grid Information
The Energy Efficiency Public Information program, originally created by EPAct 2005, but for which funds were never appropriated, would be expanded to include information about smart grid and the program would be extended to 2020. The program, in which the DOE conducts activities to raise public awareness about efficiency, would be expanded to include smart grid. Advertising and media awareness campaigns would be used to inform the public about smart grid and efficiency. Such campaigns would be conducted in collaboration with the private sector, state governments, and local governments. The program would also be extended to 2020.

Sec. 145: Inclusion of Smart-Grid Features in Appliance Rebate Program
Smart grid-capable appliances would be eligible to receive rebates under this federal appliance rebate program, which was created in EPAct 2005, and is operated through state offices. It would also clarify that states are only required to match the administrative costs of the program rather than the entire costs. The program would fund states to issue rebates to consumers purchasing energy efficient or smart grid-capable appliances.

Subtitle F —Transmission Planning

Sec. 151 Transmission Planning
This section would make furthering the integration of renewable and other zero-carbon energy sources and taking into account all demand- and supply-side options a policy of federal electric grid planning. The demand- and supply-side technologies that would be supported would include energy efficiency, distributed generation, smart grid, demand response, storage, voltage regulation, advanced conductor technologies, underground transmission, and conventional transmission capacity and corridors. FERC would develop principles for planning accordingly. It would also coordinate and collaborate with regional entities to manage conflict resolution and enable multi-regional meetings to plan transmission.