12/08/16 : Kevin Lucas

How Energy Policy Will Shape How We Use And Pay Energy In The Future

An Alliance to Save Energy analysis of the Energy Information Administration’s latest Annual Energy Outlook confirms that the decisions we make today on energy efficiency policy will have enormous consequences on how much energy we use in the coming decades and how much consumers pay in energy bills.

The Energy Information Administration (EIA) released its Annual Energy Outlook (AEO) on September 15.  This version of the AEO is particularly important because it’s the first to include extensive policy updates that occurred in 2015. Specifically, this version fully incorporates the many appliance standards that were finalized during 2015, the federal production tax credit (PTC) and investment tax credit (ITC) extensions for renewable energy generators, and the Clean Power Plan (CPP). 

While much has happened since the September release that may impact some of the policies, it is clearer than ever that we need to fully understand the future implications of the present choices we make.  To this end, the Alliance has performed an analysis comparing three different AEO scenarios with shared fundamental assumptions on energy prices and economic growth to explore how various energy policy choices impact our economy and our national energy productivity levels.  The differences in the 2040 results – and the trajectories for the years beyond – are quite stark.

EIA’s research contains two business-as-usual trend projections: the 2016 Reference case, which includes a mass-based, regional implementation of the CPP, and an alternative case without the CPP.They also included an Extended Policies case that continues policy support for energy efficiency and renewable energy beyond the existing statutory and regulatory levels.  Our analysis explores how total energy consumption, energy prices and bills, penetration of efficient appliances and renewable energy, and CO2 emissions vary with each case.

The good news is that smart, proactive energy policies can substantially improve our national energy productivity, reduce our overall energy use, increase the deployment of energy efficiency and renewable energy, and reduce CO2 emissions, all while holding down energy bills.  In fact, the most aggressive policy case produces some of the strongest economic and environmental results. 

To those of us who live in the energy efficiency world, this is no surprise.  We have long known that energy efficiency is the most powerful economic tool we have to meet our world’s growing energy needs, and one of the most effective ways to enable households and businesses to control their energy costs.  It is refreshing to see this borne out through EIA’s analysis. 

However, this analysis also shows the impact of slowing down or rolling back energy policies such as enhanced building codes, appliance standards and the CPP.  Energy use climbs much more quickly, average equipment efficiency lags, and household and commercial energy bills rise.  The economy would forgo billions of dollars in new investment into energy efficiency and clean energy sources, and would fail to capture the potential improvement in energy productivity and reduction in CO2 emissions.

While it is unrealistic to assume that AEO (or any forecast) will perfectly capture the next 25 years of our energy economy’s evolution, it is also perfectly clear that there are multiple paths that we can take today that will lead to a substantially different energy future.  We at the Alliance will work to continue bending the path toward the outcomes that maximize energy efficiency, increase energy productivity, reduce consumer’s energy bills, and lower CO2 emissions.  EIA’s AEO 2016 has shown one possible future, and now it is up to all of us to turn it into a reality.

To read the Alliance’s AEO 2016 analysis, please click here to download.