Tradable Energy Savings Certificates (ESC)

1. Tradable Energy Savings Certificates (ESC) • An ESC can be represented in units of electricity savings • Assigning 1 MWh to an ESC simplifies its use. • Common energy units better for markets broader than electricity. • ESCs can be designed to incorporate estimated savings over the expected lifetime of the efficiency measureor to represent energy savings accrued annually. • Like RECs, ESCs can be used to buy and sell the environmental and other public benefits of an efficiency measure as a separate tradable commodity, with the bundle of benefits belonging to each successive owner. • Major purposes: • Secondary source of revenue to reduce payback periods. • Mechanism to support aggregators and reduce transaction costs. • Leverage market forces to better value energy efficiency. ESCs can bring same market-based flexibiilty RECs have brought to RE markets.

2. Estimate of Potential ESC Market Potential ESC Compliance Market in States with Existing Long-Term Energy Efficiency Obligations

3. Consumer Action – Voluntary Markets Voluntary renewables market has been growing rapidly, some slow down as a result of the economy. ~25% of U.S. utilities offer a green power program, but small number of programs dominate market. About 1 million customers buy green power. REC sales to non-residential customers (i.e. Whole Foods) have been driving growth in the market; although initially conceived of as residential market. GHG offsets from renewables recently emerged. Certification standards are new. Cap and trade implementation can impact their viability going forward. National Renewable Energy Laboratory Innovation for Our Energy Future

4. Voluntary vs. Compliance RE Markets • Voluntary renewable energy markets have been sizable, on par with generation required to meet state RES targets • Compliance market requirements increase significantly in coming years Data sources: LBNL, NREL 2009. National Renewable Energy Laboratory Innovation for Our Energy Future

5. U.S. Voluntary Green Power Sales 41% CAGR in sales2004-2008; REC market sales leading the growth

6. 2008 Solid Growth, 2009 Slower Growth • Limited data on 2009, but available data show economic crisis is slowing growth • 9% increase in purchases through EPA Green Power Partnership in 2009, slower than previous years, some downsizing • BUT, significant number of new commercial purchasers – somewhat surprisingly • Anecdotal information from utility programs about losing customers, others seem to be holding their own -- regional differences

7. Top 10 Utility Programs - Customer Participation Rate (as of December 2009) 7

8. Top 20 U.S. Green Power Purchasers(as of July 7, 2009) Nonresidential purchases dominate market; ¾ of all sales

9. Companies Increasingly Advertising Purchases • Voluntary markets are important • for their educational role • Raise awareness of benefits of • renewables and efficiency • Enable consumers to take action to • address their own impacts

10. Sponsorship/ Naming of Wind Farms March 18, 2008 Wege Wind Energy Farm named after Steelcase furniture company founding family University of Colorado wind purchase

11. ESCs Voluntary Markets Haven’t Taken Off • Did the savings really accrue? Need for rigorous measurement and verification • Are consumers willing to pay more for EE measures implemented elsewhere? Consumers can do their own EE. • Would the EE measures have been implemented anyway? • Need for consistent, rigorous, and transparent standards for credibility • If used more widely for compliance purposes (EEPS), voluntary markets might be able to piggy-back National Renewable Energy Laboratory Innovation for Our Energy Future

12. Federal Policy Debate • Will there be a federal RPS with REC/ESC trading? • A combined EE and RE standard? • Is there a dual REC system of both federal and state RECs? • How will carbon emissions policies unfold (regional and/or federal)? • Will voluntary green power purchasers be able to claim that they create a carbon emissions benefit? • Are voluntary markets needed if increased policies? National Renewable Energy Laboratory Innovation for Our Energy Future

13. Federal RES Legislation Update 13 • House Passed Waxman-Markey Bill (H. 2454) • American Clean Energy and Security Act • Pass House floor vote 219-212 on June 26 • 20% RES by 2020 with up to 40% met with EE by petition • Only REC trading (no EE trading), 2.5¢/kWh ACP, FERC • Senate Bingaman Bill (S. 1462) • American Clean Energy Leadership Act • Cleared Energy Natural Resources committee June 17 • 15% RES by 2021, with up to 27% efficiency • REC and energy efficiency trading by 2011 • 2.1¢/kWh ACP, 3 RECs for renewable DG, DOE admin

14. Consumer Implications • Under current proposals, state RES policies would remain intact; all states would need to meet federal minimum • Federal RECs could be traded separately – likely a dual REC system • Efficiency would be allowed to substitute to meet targets; utilities would have incentive to promote EE • Efficiency provisions designed to keep costs down and allow states with limited resources option of efficiency • Triple credit for solar PV; additional incentive • Under Bingaman, system of energy efficiency credits would be developed and be interchangable with RECs National Renewable Energy Laboratory Innovation for Our Energy Future

15. Comparing Original and Revised RES Bills 15 Markey bill remained unchanged, and is not shown here