The State Current

States Prepare to Spend Recovery Funds on Energy Efficiency

In the Downturn, Manufacturing Must Conserve to Grow

States Lead by Example

ACEEE Helps States out of the Middle, into the Lead

The State Current offers succinct analysis of energy efficiency policy and program developments affecting the prospects for energy efficiency at the state level.

ACEEE values regular feedback from states on current policy and program developments. In order to stay abreast of policy and program developments for its state policy work, ACEEE has established a network of state-level contacts. In July, members of the Network and readers of the State Current should review the newly updated State Energy Efficiency Policy Database and ensure the information is accurate and up-to-date. The policies listed in the database are used to rank the states for the State Energy Efficiency Scorecard.

Also in ACEEE State Policy News:

ACEEE Releases Jobs Calculator for ARRA-funded Energy Efficiency Projects

Make sure to try out the new ACEEE Jobs Calculator for energy efficiency projects funded through the 2009 American Recovery and Reinvestment Act (ARRA). The calculator will be useful for estimating jobs created by state or municipal energy efficiency projects eligible for ARRA funding. The calculator can be used in applications for energy efficiency conservation block grants, state energy programs, weatherization assistance, and efficient transportation programs, among others. The calculator's general structure makes it suitable for projects in any economic sector, with energy savings in any fuel or energy form.

The calculator, along with its users guide, can be found on the Federal Economic Stimulus Legislation section of ACEEE s National Energy Policy web page at http://www.aceee.org/energy/national/recovery.htm.

To get involved in the state network, or to receive this newsletter via e-mail, please contact Michael Sciortino: 202-507-4028.

Since the passage of the Recovery Act (ARRA), state energy offices, energy efficiency advocates, and local governments have worked tirelessly to capitalize on an unprecedented opportunity to save energy and create sustainable economic growth. For energy efficiency projects, states have been preparing applications to the Department of Energy (DOE) for stimulus funds provided through three main avenues: the State Energy Program (SEP), the Energy Efficiency Block Grant Program (EECBG), and the Weatherization Assistance Program (WAP). The comprehensive applications for the SEP and WAP were due in May and most will be approved by DOE in July. Twenty states have already had their SEP plans approved, but around 20% of applications will likely not be approved by the target date of July 25th. The deadline for local and tribal government EECBG applications was recently extended to August 10th.

The quality of SEP applications has varied by state, according to Claire Johnson, energy efficiency advisor in the Office of the Secretary of the DOE. To assist the states in the application process, the DOE has established a task force at the National Renewable Energy Laboratory (NREL), providing guidance on basic application logistics, program development, and their estimated impacts on job creation and energy saved. Some states have expressed concern that the numerous points of contact emerging from DOE have caused confusion. Johnson maintains that the NREL task force is required to respond to inquiries within 36 hours and that the states should utilize the resource and develop a consistent dialogue with an NREL point-person if necessary.

The initial application phase still faces many challenges. Questions remain unresolved over the requirement for Environmental Impact Statements (EIS), required by the National Environmental Policy Act (NEPA) for proposed projects. In response, the DOE has paired a NEPA officer with every state to assist it with compliance issues. The applicability of Davis-Bacon to the Weatherization Assistance Program (WAP), which requires home energy crews to be paid prevailing wages, could halt progress on weatherization due to high wage structures in major cities. The Davis-Bacon issue has been deliberated at length between the Departments of Labor and Energy. Johnson and labor advocates believe the issue should be resolved soon to allow certain economic zones to create a specific wage category for home energy workers, keeping wages at a rate that will allow for ramped-up weatherization efforts in major cities. A “Buy American” clause in the Recovery Act also makes program development and procurement processes difficult for state officials trying to determine where the clause applies.

The capacity of state and local governments to handle the wave of federal dollars has been questioned from the earliest stages of the Recovery Act. Some state energy offices with modest budgets and staff, however, accomplished a great deal prior to ARRA, according to Jeff Genzer, counsel for the National Association of State Energy Officials. He notes that with a staff of around 5 people, the Kansas energy office has led efforts to make a large portion of the state’s building stock energy efficient. Genzer adds, “From what I have seen in reviewing the state plans, the vast majority are what was contemplated by Congress and the Administration in the passage of the ARRA.  We are working closely with all the states and they are working with the local governments and private partners to ensure that the funds will be spent both well and quickly.” Nonetheless, he agrees that states will require oversight from nonprofit organizations and the DOE, particularly on the use of recovery funding that supplants existing programs. Similar to a situation that occurred decades ago when states received oil overcharge funds, the Recovery Act requires states to use the funding to supplement, not supplant, existing programs. 

As the application phase nears its end, states and localities will now begin to implement their approved programs. Among the numerous challenges that the states will face, two stand out as key indicators of successful implementation. The first involves the evaluation, measurement, and verification (EM&V) of job creation, energy saved, and other important metrics that are a direct result of programs. The development of common EM&V protocols will ensure that results of programs funded by the Recovery Act are defensible, transparent, and consistent to allow for savings numbers to be tracked and compared. The second challenge will be to pair these statistics with an emotive public relations campaign to highlight success stories and stay ahead of negative coverage. States are already forming strategies to co-opt media savvy components of state governments such as the Governor’s office and economic development agencies to craft powerful visual messages that extol the benefits of energy efficiency programs.

Although there have been frequent challenges thus far, there have also been successes that bear reporting. Long dormant communication lines among federal agencies and state governments have reopened to facilitate cooperation and sharing of information. It will be critical to keep this trend moving forward, particularly between local and state agencies. In every state, local action is a sure pathway to success. A sustained effort to convene state and local decision-makers, share experiences and best practices, and build relationships will ensure the current momentum for energy efficiency is preserved.

For the latest information on the energy efficiency components of the Recovery Act, visit ACEEE’s Web Resource: www.aceee.org/energy/national/recovery.htm.

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Recent predictions by economists of top U.S. banks that the country will emerge from the recession this summer have many Americans breathing a bit easier. The American Bankers Association’s Economic Advisory Committee predicts around 0.5% growth between July and September due to a rise in home construction and consumer spending. Certainly, this does not spell a full recovery, but the news is welcome nonetheless. At the moment, though, not much will dispel the gloom cast over America’s manufacturing sector. In May, the factory operating rate fell 0.6% from April’s historic low to reach a new record low of 65%, according to the Federal Reserve. This means that slightly less than two-thirds of manufacturers’ plants were operating last month — the smallest share in records going back to 1948. Industrial production as a whole fell 1.1% from April to May, leaving only 68.3% of industrial capacity utilized.

The collapse of traditional industrial production in the U.S. must spur the growth of leaner, more effective processes. The downturn presents an opportunity to forge ahead with new strategies, and impending energy spikes and carbon pricing will certainly demand placing energy efficiency at the core of the next industrial production models.  Energy costs have a significant impact on the financial performance of manufacturers. A January 2008 poll taken by PricewaterhouseCoopers revealed that 60% of senior executives at large, multinational U.S. manufacturing companies believe that oil and energy prices are the leading barrier to company growth. Manufacturers use energy in all forms — electricity and natural gas to produce goods and maintain office operations, and vehicle fuel to receive raw materials and deliver finished goods. In total, the industrial and manufacturing sectors represent the largest share of energy consumed in the U.S. economy.

Lean production, simply referred to as Lean, is a practice established decades ago to identify waste in the industrial process. The basic concept of Lean is to do more with less. Originally developed by Toyota to eliminate all non-value added activity, Lean methods help industrial manufacturers reduce waste involved with the “eight deadly wastes”: overproduction, inventory, transportation, motion, defects, over-processing, under-utilized people, and waiting. Traditionally, the direct identification of energy efficiency opportunities has not been a part of the Lean process, but rather a peripheral capture gained in the effort to reduce other wastes like time and materials. Recent energy price spikes, price fluctuations, and the certainty of more to come have placed energy as a central resource when considering more cost-effective industrial production changes. Recently, the EPA released the Lean and Energy and Lean and Environment Toolkits to outline how environmental and energy wastes can be incorporated into Lean practices, which has spurred pilot projects in the Northeast and Northwest.

The Manufacturing Extension Partnership (MEP) is the primary vehicle through which the federal government delivers Lean programs. MEP leverages $100 million of federal funding through the National Institute of Standards and Technology into a nearly $300 million program by combining funds from industry and state and local governments. Operating 59 centers in 393 locations in every state, MEP provides its industrial customers with services to improve productivity and competitiveness, including programs in Lean manufacturing. The Lean services provided by MEP centers are well-established, cost-saving programs that follow proven methods and guidelines. Incorporating environmental and energy wastes is a natural next step for the program. Lasco Bathware in Washington participated in a pilot Lean program that considered environmental waste and saved $99,300 in energy savings. Large corporations can make enormous gains, such as General Electric, which has saved $70 million in energy costs since 2005. Rather than utilizing MEP’s, large companies generally hire outside consultants to implement a Lean program.

Lean and Energy programs are positioned to have an immediate impact as the economy recovers. Key to its success will be the support of state agencies willing to fund MEP programs and ensure the proper level of technical assistance and training for successful program implementation. Companies will need to be drawn to the program initially with a set of incentives or cost-sharing programs until the savings of the program become evident enough for industrial producers to participate. But in the current economic climate, even a full cost-share might not induce clients to participate in the program, as the Maine MEP has learned over the past year. Rosemary Presnar, director of the Maine MEP, does expect the program to ramp up soon along with other pilot programs in Massachusetts and New Hampshire.

Impending cap and trade legislation, skilled workforce needs, and increasing energy costs will certainly catalyze federal investments in energy efficiency. The Lean and Energy pilot program demonstrates not only how to leverage public and private funds, but also how to leverage established cost-saving programs to effectively incorporate energy efficiency. The Lean and Energy approach is a pairing that promises transformation of operations rather than a piecemeal approach. American manufacturing must adapt to new realities and recognize new opportunities provided by coordinated federal and state resources for energy efficiency improvements.

For more information on Lean manufacturing and energy, visit the EPA Lean Home

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The acceleration of energy efficiency policy adoption at the state level in 2008 revealed that states across the country are ready to take action without federal leadership. Many states have recently stepped forward with policies that require state governments to “lead by example” (LBE) and adopt efficiency standards for vehicle fleets, buildings, and building components. As states face the dual challenges of reducing energy costs and greenhouse gas emissions, these policies help improve the environmental and economic performance of states’ assets while promoting energy conservation to the broader public.          

State and local governments operate many facilities, including office buildings, public schools, and colleges and universities. Combined, this adds up to $11 billion annually on energy costs, which can account for as much as 10% of a typical government’s annual operating budget. Inefficient products and equipment used by these facilities can be a drain on the states energy and budgetary resources. In many buildings, energy efficiency retrofits can reduce energy consumption in buildings up to 35% and new buildings can be built using half the energy of a typical facility.  State vehicle fleets require a considerable amount of resources, which can be targeted with LBE policies as well. State governments operate fleets of about 500,000 vehicles, ranging from about 1,000 to more than 50,000 per state. In doing so, states incur operation and maintenance costs of about $2.5 billion in total, ranging from $7 million to $250 million.

Before setting statewide goals to reduce energy consumption, states have focused on establishing a framework for LBE programs applicable to program development, implementation, and evaluation. The most critical piece of the framework is setting up a fluid and responsive organizational structure that includes a lead LBE team, key agencies and personnel, and other groups to help shape and implement LBE programs. Leadership in the executive and legislative branch can help initiate the LBE efforts through executive orders or by enacting legislation. State energy offices typically play a key role as program implementer, along with facilities and general services departments. Beyond governmental agencies, utility energy programs, energy service companies (ESCOs), and nonprofit organizations can play a variety of roles. Other important elements of successful LBE programs include a steady financial backing, which can be provided through vehicles such as loans, bonds, energy performance contracts, or capital budgets, among many other options.

One of the most widely adopted measures at the state level are requirements for building efficiency in new and existing state government facilities. For example, Florida’s Governor Charlie Crist approved H.B. 7135 last year, requiring newly constructed or renovated buildings financed by the state to be designed and built to meet nationally recognized green building standards. State agencies also must lease ENERGY STAR-rated buildings and employ energy-saving performance contracts when upgrading existing facilities. Executive Order 07-126, signed by Governor Crist on July 13, 2007, applies greenhouse gas standards to the state's procurement processes and directs the Florida Department of Management Services to set Leadership in Energy and Environmental Design (LEED) green building standards for the state's new and existing state-owned buildings. Forty-one states and the District of Columbia have adopted binding targets to reduce energy usage in new and existing state facilities.

In New Hampshire, Executive Order 2005-4 requires every state agency to implement a Clean Fleets program, requiring that all new passenger and light-duty vehicles achieve a highway fuel economy rating of at least 27.5 mpg. Across the country, states have adopted varying types of efficient fleet policies. Some states require the purchase of a certain proportion of alternative fuel while others require a percentage of vehicles be hybrid or use alternative fuel. The presence of a definitive efficiency standard, however, is an essential tool that ensures a reduction in fuel consumption and greenhouse gas emissions.

Leading by example should be a major policy focus for state and local governments moving forward with strengthened energy budgets due to Recovery Act funding and other sources. The implementation of energy-conservation technologies in the public sector saves money for taxpayers and promotes a vital message to decision-makers and the public that efficiency works. 

For more information on how states are leading by example, visit ACEEE’s State Energy Policy Database: www.aceee.org/energy/state/policies/lbe.htm.

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The economic, energy, and climate challenges facing states have spurred innovative policies aimed at reducing energy consumption and increasing the use of clean energy resources. A handful of states have enacted bold energy efficiency measures such as the energy efficiency resource standard (EERS) as well as other policies geared towards industry, commercial, residential, and transportation sectors. Yet, the list of states setting aggressive energy efficiency agendas is far from complete. A growing number of states currently reside in a “middle class,” as revealed in ACEEE’s annual State Energy Efficiency Scorecard, though many are looking to increase their current, limited commitments to efficiency and clean energy or take their first steps toward a sustainable energy future. These states are the focus of ACEEE’s State Clean Energy Resource Project (SCERP), where ACEEE and its team of energy experts develop an energy efficiency and clean energy “roadmap” of policies or programs, quantifying the energy savings potential, costs and benefits, and job impacts from energy efficiency. ACEEE staff then work directly with local stakeholders to encourage implementation and follow-through of the suggested strategies.   

States on the cusp of real energy efficiency action generally have a few common characteristics. A political champion is often present in the governor’s office, state legislature, state energy office, or public utilities commission. In Virginia and Florida, for example, Governors Kaine and Crist were important champions for the pursuit of energy efficiency strategies. Another essential requirement is wide support from in-state stakeholders including governmental and regulatory bodies, foundations, and environmental advocacy groups. These stakeholders have two critical roles in the SCERP process. First, they provide their input and perspective to help ACEEE researchers gain a full understanding of the specific issues in the state, collect data, and build relationships. The second role is to help implement the policy and program suggestions made in the study.

ACEEE also uses its annual State Energy Efficiency Policy Scorecard to determine the best candidates for a SCERP study. The Scorecard ranks states based on a broad range of criteria including utility-sector policies, building codes, vehicle and smart growth policies, and combined heat and power (CHP). States in the lower or middle tiers of the rankings that are poised to move ahead with energy efficiency policies are considered prime candidates. The project also aims to work with states with high energy consumption to make the greatest impact.

Since 2007, ACEEE has completed studies for Texas, Florida, Maryland, Virginia, Ohio, and Pennsylvania as part of our State Clean Energy Resource Project and has also contributed to analyses for Utah and New Mexico. Studies currently underway in North Carolina and South Carolina provide new opportunities for ACEEE to focus heavily on transportation efficiency in North Carolina and water efficiency in both studies.

For more information on the State Clean Energy Resource Project and other ACEEE state policy projects, visit www.aceee.org/energy/state/resources.htm. Also, read ACEEE's new report, Efficiency In Action: ACEEE and State Energy Policy, for an overview of past SCERP projects and the resulting state accomplishments.

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