Rising energy prices – coupled with environmental and national security concerns – make investments in energy efficiency increasingly vital. Rhode Island has taken important steps to address this issue, and strong leadership is needed to keep moving these solutions forward, especially by the state’s next governor.
The linchpin of the state’s effort is the 2006 Comprehensive Energy Conservation, Efficiency, and Affordability Act, designed to make Rhode Island’s energy system cheaper and cleaner through three primary policy reforms:
• Energy-efficiency procurement is an innovative regulatory approach for purchasing electric-efficiency resources that are cheaper and cleaner than the traditional supply. Under the old system, National Grid purchased power from power plants and passed the costs directly through to customers. Other often lower-cost alternatives such as efficiency, distributed generation, and demand response were limited. The energy-efficiency procurement model requires the utility to consider all available energy resources, and to invest in efficiency whenever it is cheaper than traditional supply.
• System-reliability procurement sets a regional precedent to develop an electric-system reliability plan that looks at an array of customer-side energy resources and how to maximize them as part of Rhode Island’s energy mix, including distributed generation, targeted efficiency and demand-response measures. These options reduce the strain on the electricity grid and the need for dirtier local, generators and enable the utility to defer expensive distribution-system upgrades. These sustainable alternatives to distribution upgrades will result in lower customer costs while securing local sources of energy supply and capacity.
• The Energy Efficiency and Resource Management Council – a consumer, business, low-income and environmental-stakeholder council – was created to oversee the implementation of the 2006 act and ensure that National Grid fulfills the new mandate to invest in all cost-effective electric efficiency that is cheaper than supply and pass the savings to consumers. Since becoming fully operational in 2008, R.I.’s EERMC has taken important steps to put the new reforms into action while building consensus based on quality information.
Other roles for the EERMC include: natural gas efficiency procurement and recommending policies, standards and programs to promote the development of eligible renewable energy resources. As a result of the EERMC, Rhode Island’s efficiency investments have increased from $14 million to $32 million in 2010, saving consumers hundreds of millions of dollars in lower energy costs and avoiding millions of tons of greenhouse gas emissions.
To maintain this progress and more, Rhode Island’s next governor needs to make the following energy-system and planning investments.
Energy-efficiency efforts yield results
Energy efficiency – a major economic category that includes insulation, heating and cooling equipment, appliances, lighting, building materials, and countless other technologies – can deliver large economic benefits to Rhode Island quickly and reliably, while improving our environment and increasing our energy independence. And because they cost less than traditional fossil fuel supply, energy-efficiency investments are also the best way to help customers reduce their energy bills.
Recent economic studies show that for every $1 invested in efficiency, Rhode Island energy customers save $4. This leaves more money in customers’ pockets to spend on other things and more money in Rhode Island’s economy. The most important thing the next governor can do on efficiency is to work with the Public Utilities Commission to ensure that the available low-cost efficiency investment of $43 million is made in 2011, saving customers more than $120 million.
Support utility-rate reform
Adjusting the way utilities collect revenue is essential to achieving large increases in energy- efficiency investment. Historically, Rhode Island utilities’ earnings have been linked to the amount of energy they sell, so revenue grows as energy use increases. The new governor should support the recently passed mandate that removes this disincentive to utility investment in efficiency programs and customer-sited resources. Utilities will no longer have to worry about hurting their own bottom lines when they invest in programs that help customers reduce the amount of energy they use.
Bring efficiency benefits to all fuels
The 42 percent of Rhode Islanders who heat their homes and businesses with oil should have access to the same quality, comprehensive efficiency and weatherization services that are currently available to natural gas and electric customers. Offering weatherization and efficiency programs to home heating-oil customers will reduce their energy bills and limit their exposure to volatile petroleum prices.
Fund system reliability investments
Significant opportunities exist for demand-side resources to be used to defer or avoid expensive upgrades and additions to the region’s transmission system, improving the overall efficiency and reliability of the electric grid. In order to realize these opportunities, nontransmission alternatives such as energy efficiency, distributed generation and demand response should have the same funding opportunities available to transmission facilities proposed to meet reliability needs.
Rhode Island and the Regional Greenhouse Gas Initiative
The Regional Greenhouse Gas Initiative is a market-based, cap-and-trade program designed to reduce carbon dioxide emission from electric power plants in the Northeastern and mid-Atlantic states.
RGGI is the first binding GHG cap-and-trade system in the United States, and it works by auctioning allowances to emit carbon dioxide. Rhode Island has received more than $9 million from the sale of emissions allowances and has wisely chose to direct 100 percent of the allowance revenue (after administrative costs) to energy efficiency.
When consumers use energy more efficiently, demand for electricity declines, bringing down supply costs and power plant emissions. Capturing energy efficiency’s dual benefits of lower supply costs and lower carbon costs is one of RGGI’s greatest achievements.
Opportunity for leadership
If fully implemented, Rhode Island’s three-year, least-cost procurement efficiency plan for 2009-2011 will put the state in the top 5 nationally for annual savings from electric-efficiency investments. Customers will see more than $280 million in net lifetime benefits. Lower energy bills also reduce the cost of doing business in the state, bolstering the global competitiveness of local employers and promoting additional growth.
Put another way, every dollar invested in cost-effective energy efficiency will boost Rhode Island’s Gross State Product by $3.80, to $5.30, and every $1 million invested will create roughly 50 new job-years of employment.
Rhode Island is showing national leadership and taking important steps to build a strong, alternative energy economy. The next governor’s support in advancing the solutions outlined in this memo is critical to maintaining this progress. •
Abigail Anthony is a policy analyst and Daniel L. Sosland is the executive director of ENE (Environment Northeast), a nonprofit organization (www.env-ne.org) that researches and advocates policies that tackle environmental challenges while promoting sustainable economic development.
