Blog Post

A Brighter and More Efficient Tomorrow: Major 2023 Savings Fuel 2024 Ambitions

January 2, 2024

In 2023, the U.S. made significant strides advancing appliance efficiency and industrial decarbonization and implementing the Inflation Reduction Act, which was pivotal in spurring clean energy investments. In 2024, these efforts can continue to cut costs and climate pollution.

Energy efficiency in the United States surged in 2023, with a decline in energy intensity by an impressive 4%, according to the International Energy Agency. This achievement marks one of the highest annual reductions in decades. As we move into 2024, our commitment is stronger than ever: we aim to build on this momentum, helping the U.S. to achieve the recent global pledge set in Dubai to double global energy efficiency improvements to 4% per year by 2030.

Efficiency improvements in 2023 were aided by mild weather, so to hit 4% year after year will require significantly increased and sustained efforts. With the Inflation Reduction Act injecting over $300 billion into clean energy initiatives, the path ahead is clear. This year, we'll see the launch of transformative programs that promise to lower household costs, save lives, and create jobs. Join us as we explore the key developments of 2023 and the even greater strides we're poised to make in 2024.

Inflation Reduction Act

The Inflation Reduction Act, enacted in summer 2022, includes tens of billions for energy efficiency. Implementation began in 2023, with tax incentives, publication of guidance on many non-tax provisions, many funding awards (e.g., to nine manufacturers for new and expanded heat pump production facilities), and issuance of dozens of funding opportunity notices. In 2024, many more programs will begin, and many funding opportunity notices will result in awards. The Department of Energy (DOE) is expected this month to announce winners of its Industrial Demonstration Projects on transformative industrial investments, and the Environmental Protection Agency (EPA) is due to select administrators for the Greenhouse Gas Reduction Fund (sometimes called the “Green Bank”) in March. Also, in 2024, state energy offices will begin offering home energy rebates to homeowners and multifamily building owners for home energy retrofits, including electrification. The first states will probably start programs in the spring of 2024, with more states in the summer and other states later.

Estimates are that investments under these and other clean energy programs will create about 400,000 jobs, lower household costs, and save lives from reduced pollution. Donald Trump has suggested that if elected, he will roll back many of these programs, threatening jobs and increasing household costs.

Vehicle standards and electric vehicles

EPA proposed new greenhouse gas (GHG) emissions standards for light and heavy vehicles in 2023. The light-duty vehicle standard could reduce emissions from new vehicles by up to 61% in 2032, and the heavy-duty standard could cut emissions by about 16–45% by 2032, depending on the vehicle class. Both standards would do this through electrification and efficiency improvements to internal combustion vehicles. A final decision on both standards is due in April. ACEEE has recommended strengthening both standards, particularly for heavier vehicles.

Meanwhile, in 2023, U.S. electric vehicle (EV) sales grew to over 1 million, about 9% of sales. Projections are that U.S. EV sales will increase by about 32% in 2024.

While much of the focus is on the vehicles, energy use and emissions also depend on how far they travel. In November, the Federal Highway Administration issued rules requiring state transportation departments to include emissions reductions in their plans as a condition for federal funding. The actual plans will be submitted in 2024, and we will encourage states to address GHG emissions by establishing transportation GHG and vehicle-miles-traveled reduction goals.

Appliance efficiency standards

In December 2022, the White House set a goal: save consumers $570 billion and avert 2.4 billion metric tons of carbon pollution with new appliance efficiency standards. Over the past year, DOE made significant progress, catching up on a huge backlog of overdue standards and putting the administration on track to meet its goals. DOE completed a dozen new standards, including long-awaited new furnace standards, which will boost minimum efficiency to 95 percent, effective in late 2028. In September, the Appliance Standards Awareness Project (which is housed at ACEEE) and its allies reached an agreement with the Association of Home Appliance Manufacturers (AHAM) on consensus new standards to improve energy and water efficiency for refrigerators and freezers, beverage and wine chillers, clothes washers, clothes dryers, dishwashers, and cooking products. For 2024, DOE plans to complete some two dozen more efficiency standards, including final rules based on the agreement with AHAM and new standards for residential water heaters, commercial and industrial fans, rooftop air conditioners, utility distribution transformers, and many other products.   

Industrial decarbonization

Efforts to decarbonize industrial processes ramped up in 2023. DOE issued a series of reports on how to jumpstart industrial decarbonization efforts, including reports on chemicals, refining, and low-carbon cement. ACEEE has also been focusing on these sectors. For cement, we think a combination of substituting calcined clays for limestone and using electric kilns can reduce emissions from cement manufacture by 50–70%. Likewise, we looked at decarbonization opportunities in Indiana for steel and aluminum manufacturing.

Another major development was the launch by ACEEE and partners of the Industrial Heat Pump Alliance, which is seeking to transform low- and medium-temperature industrial heating to electric heat pumps. Our cross-cutting work on process heat included new recommendations on how industry can play a critical role in stabilizing the grid in the face of variable renewable energy.

In 2024, we expect these efforts to grow and that the DOE Industrial Demonstration Program will fund transformative projects in many sectors, including steel, cement, aluminum, and chemicals.

Building retrofits and new construction

The year 2023 also saw progress toward decarbonizing new buildings and increasing energy retrofits in existing buildings. Massachusetts and California have led efforts to dramatically improve new buildings. In Massachusetts, most communities have opted into a state-developed stretch code for residential and commercial buildings. The local stretch codes are more rigorous than the state’s underlying building energy code. In 2023, a new stretch code took effect in many communities, including an optional net-zero code that five municipalities, including Boston, have adopted. In addition, 10 Massachusetts communities will pilot an all-electric code for new construction.

In 2024, California’s new 2025 building code will be published; a draft proposed that new heat pumps should be installed instead of new central air conditioning systems, thereby preparing homes to switch from fossil-fuel-based heating to efficient electric heating. Likewise, in 2024, ASHRAE (formerly the American Society of Heating, Refrigerating, and Air-Conditioning Engineers) will continue work on its 2025 model building code en route to a zero-net-carbon emissions code in 2031. Also in 2024, ACEEE will kick off a new DOE-funded building codes collaborative to help states strengthen energy codes.

In 2023, the Department of Housing and Urban Development and the Department of Agriculture proposed requiring the latest model building energy codes for new buildings they help finance. ACEEE has also been leading a coalition to convince the Federal Housing Finance Agency (FHFA) to direct Fannie Mae and Freddie Mac to require mortgages for new homes that they back to meet the latest national model energy codes. ACEEE helped organize a group letter in support of FHFA action. Together, these proposals, along with veterans loans that follow the same requirements, would cover about 70% of new homes purchased with loans.  We hope these loan requirements will be finalized in 2024.

Regarding building retrofits, in October, DOE announced the 45 communities that won its Buildings Upgrade Prize, including 39 focused on affordable housing. Prize winners that center underserved communities will receive $400,000 each to begin implementing energy efficiency and decarbonization programs for existing buildings in their communities. ACEEE engaged with DOE to develop this idea. We assisted in evaluating applications, and through our Residential Retrofits for Energy Equity (R2E2) initiative will provide technical assistance to the winners. In 2024, these programs will get started and will be able to access DOE home energy rebates from the Inflation Reduction Act. ACEEE also hopes to assist additional communities beyond the 45 winners in establishing and expanding energy upgrade programs for affordable housing.

State and local energy policy

Building performance standards (BPSs) and clean heat standards (CHSs) continued to expand in 2023. Seattle and Cambridge, Massachusetts, adopted new building performance standards last year. A standard is pending in Portland, Oregon this year. This year, the first stage of New York City’s BPS takes effect. Last May, ACEEE published a report profiling the jurisdictions that have adopted or are developing building performance standards.

Clean heat standards require that emissions from burning gas, oil, and propane be gradually reduced through efficiency, electrification, methane leak reduction, and the use of lower carbon fuels. CHSs were adopted in Colorado and Minnesota in 2021 and Vermont in 2023. In 2023, utilities in Colorado and Minnesota filed their initial clean heat plans with decisions on the plans due this year. In addition, Massachusetts and Maryland will consider adoption of CHS in 2024.

In November, Governor Gretchen Whitmer of Michigan signed into law a major legislative package that makes the state a national leader in saving energy and reducing planet-warming emissions. The legislation includes strengthening utility energy efficiency program savings requirements, enabling the programs to support electrification, and increasing energy savings for low-income households. Other significant state and local actions in 2023 include legislation in Maryland setting goals for low-income efficiency programs and New York State directing that most new buildings not use fossil fuels. In 2024, legislation to change Maryland’s energy-saving goals from kilowatt hours to GHG is likely to pass, as is legislation in New York to allow the retirement of gas lines.

To reduce emissions from transportation, several localities updated or expanded land use policies to increase location efficiency, make their cities more livable, and reduce fuel consumption. Richmond, Virginia removed requirements for a minimum number of parking spaces in new buildings, joining cities like Minneapolis and Saint Paul that did so a few years earlier. St. Petersburg, Florida updated its zoning codes to allow greater residential density in the urban core, and new zoning in Memphis establishes a transit-oriented development district. New York’s Metropolitan Transportation Authority board approved a congestion pricing plan for lower Manhattan, putting the program one step closer to starting this spring.

2024 could be transformative

Reflecting on the substantial energy efficiency gains of 2023, we recognize the critical groundwork laid for the transformative year ahead. Our journey into 2024 is not just about maintaining this momentum; it's about amplifying our efforts to harness energy efficiency as an engine of economic growth and a vital solution to reducing emissions globally.

This year will be crucial for implementing the Inflation Reduction Act, with many programs rolling out. Vehicle emission standards, many appliance standards, and energy requirements for federally supported new building construction will likely be finalized. Electrification of factories, vehicles, and buildings is accelerating, with recent projections estimating a 4.7% growth in power demand over the next five years. Matching last year’s energy intensity reduction of 4% could be difficult. Still, we know the path to achieving it: using energy efficiency as a critical strategy to grow our economy and reduce emissions.

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