Assessment of EPA's Clean Power Plan: Evaluation of Energy Efficiency Program Ramp Rates and Savings Levels
White Paper, December 2014
States have demonstrated that they are able to meet, and could possibly exceed, the energy efficiency (EE) requirements proposed in the Environmental Protection Agency's (EPA) Clean Power Plan, according to a new report conducted by Analysis Group. In the report, "Assessment of EPA's Clean Power Plan: Evaluation of Energy Efficiency Program Ramp Rates and Savings Levels," Analysis Group researchers comprehensively reviewed past state and utility implementations of EE programs to assess whether the EPA's key plan assumptions are reasonable.
The EPA's draft Clean Power Plan, issued in the summer of 2014, sets state-specific standards for the amount of carbon dioxide allowed to be emitted per megawatt-hour of electricity produced at affected power generating facilities. In setting each state's standard, the EPA considered the ability of states to reduce system-wide CO2 emissions through investments in demand-side EE at the businesses and residences of the state based on an evaluation of historical experiences with EE programs administered by utilities over the past several decades.
The Analysis Group team -- Principal Paul Hibbard, Vice President Andrea Okie, and Manager Katie Franklin -- reviewed an expanded set of data on states' experiences drawn from literature on EE program implementation and performance, publicly available data sources, and state- and utility-specific documentation. The authors found that, as part of a Clean Power Plan compliance strategy, states could achieve rates of growth in EE savings in excess of 0.2 percent per year, and could likely sustain levels of energy savings (and associated emission reductions) above 1.5 percent of state retail electricity sales throughout the Clean Power Plan's compliance period.
Key findings of the report include:
- Many states and utilities have demonstrated the ability to achieve growth in energy savings through EE investments at rates in excess of 0.2 percent; a number of states have doubled or tripled that rate of savings.
- Many states and utilities have demonstrated an ability to quickly change gears to increase the annual rate of savings in response to policy changes, indicating that a major, rapid expansion of EE programs does not require a long lead time.
- States have demonstrated the ability to sustain high levels of EE savings over many years, in some cases at annual average savings rates above the EPA's estimate of 1.5 percent.
- The successful demonstration of states' ability to meet aggressive ramp rate and sustained savings levels holds true across a wide cross section of states and EE program delivery mechanisms.
- The point at which sustained annual savings from EE begin to experience increased unit costs would be at annual savings rates well above the levels the EPA has assumed in its evaluation of sustainable savings levels.