South Carolina ’ s Energy Future Recommendations for Energy Efficiency, Water Efficiency, and Demand Response in Meeting

1. South Carolina’s Energy FutureRecommendations for Energy Efficiency, Water Efficiency, and Demand Response in Meeting South Carolina’s Resource Needs Presented to the PURC Energy Advisory Council December 14, 2010 Suzanne Watson Policy Director American Council for an Energy-Efficient Economy

2. The American Council for an Energy-Efficient Economy (ACEEE) • 30 year old, non-profit 501(c)(3) dedicated to advancing energy efficiency through research and dissemination. • 35+ staff in Washington DC, + field offices in DE, MI, WA and WI. • Focus on End-Use Efficiency in Industry, Buildings, Utilities, and Transportation; Economic Analysis & Human Behavior; and State & National Policy • Funding: • Foundations (34%) • Federal & State Grants (7%) • Specific Contract work (21%) • Conferences and Publications (34%) • Contributions and Other (4%)

3. U.S. GDP Expansion as a Function of Energy Efficiency Improvements, 1970-2008 GDP Index (1970=1) U.S. Gross Domestic Product Productivity growth as a function of energy efficiency improvements Expansion of the economy, based growth in labor, capital, and energy Source: Preliminary author calculations adapting Ayres and Warr (2009) using BEA and EIA data.

4. A Key Insight: The Energy Efficiency Resource Is Larger than Generally Believed Typical Pre-1980 Forecasts AEO 2010 Forecast Extended Enabled by smart Infrastructure, new materials, new technologies, and innovative behaviors Low-Energy Future Projection Based Upon 1980 DOE Analysis Actual Historical Consumption Catalyzed by Smart Policies and Investments With renewables and bioenergy resources powering the balance? Source: DOE 1980 Policy Analysis, AEO 2010, and ACEEE estimates 2010

5. How Big Energy Efficiency? • Since 1970 energy efficiency – in it’s various forms – has satisfied ~75 percent of our nation’s increased demand for energy-related services while new energy supplies only 25 percent of the new demands. • Renewable energies, in their many forms, might be able to power the remaining work that needs to be done with the aid of aggressive efficiency. • Bioenergy resources can deliver significant levels of chemical feedstocks as a further efficiency improvement. • New generation and infrastructure will still be needed since we will want to replace older, less efficient generation including transmission and distribution.

6. Suite of Electric Efficiency Policies for South Carolina • Set a long-term, electricity savings goal to be met through energy efficiency programs or policies: • Suggested Energy Efficiency Resource Standard (EERS) goal of 18% by 2025 – as a 1st step consider a less aggressive ramp up standard to this goal over a number of years? • Eight of the suggested energy efficiency policies to count towards EERS savings goal • Eight stand-alone policies generate savings independent of the implementation of the EERS = 10% of goal • Electric Utilities can meet the remaining 8% through efficiency programs • Balance of policies build energy efficiency infrastructure

7. Adopting an Energy Efficiency Resource Standard • An EERS is mechanism established by law that encourages more efficient use of electricity and natural gas by requiring utilities to save a certain amount of energy either on an annual basis, cumulative basis, or both. • Generally expressed as a percentage of energy sales. Slowly increase over time to achieve greater savings in subsequent years • Targets achieved through three types of initiatives: • End-use efficiency measures at customer facilities • Distributed generation efficiency measures at end-user sites • Transmission and distribution improvements

8. Energy Efficiency Resource Standards 25 States – November 2010 Standard Voluntary Goal Pending Standard Combined RES/EERS For more information about an individual state EERS, please visit the ACEEE State Energy Efficiency Policy Database athttp://www.aceee.org/sector/state-policy

9. Addressing the Concerns of Utilities • Lost Revenue Recovery Mechanisms must be considered in order to alleviate financial impact of increased utility investment in energy efficiency • Types of Revenue Recovery: • Program Cost Recovery – recovery of the direct costs of an energy efficiency program • Lost Margin Recovery – recovery of lost margin from a reduction in sales due to successful implementation of a program • Performance/Shareholder Incentives – incentivize utility investment in efficiency and allow a return on that investment for energy efficiency programs similar to that for supply-side resources • For more information on adopting a state EERS, including model language, visit ACEEE’s State Technical Assistance Toolkit at: www.aceee.org/sector/state-policy/toolkit

10. Issues with Large Energy Customers • Large energy customers (C&I), often suggest “opting out” of paying for system-wide utility EE programs, noting that: • They have already invested in all cost-effective efficiency in their facilities • They often feel their needs are not adequately served by local C&I efficiency programs • Facility managers or company owners are most familiar with the internal realities of the operation their firms • Energy Efficiency is a system resource: • Investments in efficiency, regardless of the customer making them, benefit the entire system • Thus, all customers should pay for efficiency, just as all customers pay for a new power plant • Instead of total “opt out”, allow large energy customers to “self-direct” their investments in efficiency and require periodic reporting to ensure investments are effective

11. Electricity Savings from Policies Analyzed 2025 Electric Savings = ~20 Billion KWh • Policies Contributing to EERS: • Advanced Buildings • Behavioral Initiative • Combined Heat and Power • Lead by Example • Low-Income Weatherization • Manufactured Homes • Manufacturing Initiative • Rural and Agricultural Initiative • Utility Programs • Building Energy Codes

12. Building Energy Codes = 13% • South Carolina’s building codes currently follow the 2006 IECC. • Updating the code is the obligation of the South Carolina Building Codes Council (SCBCC) • On September 3, 2010, the U.S. Department of Energy issued determinations that the 2009 IECC and ASHRAE Standard 90.1-2007 achieves greater savings than the previous iterations of the codes: • The 2009 IECC has been estimated to achieve an average of 15% greater savings over the 2006 IECC • ASHRAE 90.1-2007 has been estimated to achieve an average of 8% savings over ASHRAE 90.1-2004 • States have two years following the issuing of a determination to file a letter with DOE regarding their compliance • 20 states have adopted either one or both of the latest standards, or are making progress towards their adoption

13. Lead by Example = 10% • Governor Mark Sanford signed H. 4766 on June 11, 2008, an act obligating state agencies to meet annual energy consumption reductions of 1% and a total of 20% by 2020 • SC government buildings comprise 27% of commercial building electricity use, or 6,000 GWh annually. • Utilizing Energy Service Performance Contracting (ESPC) will facilitate process, allow government to repay efficiency projects through savings generated. • More information on LBE best practices can be found on ACEEE’s State EE Policy Database: http://www.aceee.org/node/3009/all

14. Manufactured Homes = 10% • About 20% of South Carolina building stock is manufactured housing, 70% of which was built before 1990 • SB 1141 created the Energy Efficient Manufactured Homes Incentive Program, providing a $750 tax credit for their purchase • Program expires July 1, 2019 • Funding from ARRA helped establish a low-income manufactured housing retrofit and evaluation program, administered by the SCEO and OEO • Achieving savings outlined in this study would require upgrading 80,000 homes through 2025, or ~530 annually. • ENERGY STAR website lists Builder Partners in South Carolina (www.energystar.gov)

15. Low-Income Weatherization = 9% • Administered by the OEO, the SC WAP has $58 million in funding from ARRA and annual funds (~$4 million) from DOE • This will fund the weatherization of 6,500 homes over three years through ARRA and 500 homes over two years from DOE WAP • 13% of all SC families live below the poverty level, occupying ~270,000 homes (single-, multi-family, and manufactured homes) of a total stock of 2.1 million homes • There will need to be a concerted effort to increase funding for low-income weatherization once ARRA funding runs out in April 2012 • At current rates, including ARRA-funded homes, it will take over 100 years to weatherize the current stock of low-income residences • When ARRA runs out, at a rate of 250 homes annually, it will take over 1000 years

16. Advanced Buildings = 5% • Building codes and weatherization focus on sealing the building envelope and upgrading HVAC systems • To maximize energy savings from efficient buildings, a more holistic approach must be taken: • In residential buildings, focus is on low-income households and manufactured housing. SC must extend incentives to all income levels and provide incentives for other efficient end-use products, such as appliances and water heating equipment • In commercial buildings, focus must be not only on upgrading equipment, such as through retrocommissioning, but providing services to identify efficiency opportunities and training qualified workers to install and operate increasingly complex building systems.

17. Behavioral Initiative = 4% • Focuses on influencing consumer behavior by providing periodic reports on end-use consumption patterns in the home • OPOWER is leading organization in this field, working with utilities to disseminate pertinent information to their customers • Simple, data-rich reports can be included in utility bills and/or provided online • Savings are modest, around 2-3%, but sustainable and allow homeowners the opportunity to become familiar and more-efficiently control home system dynamics • Technology is quickly becoming more advanced as more firms (Google) enter the market

18. Combined Heat and Power = 2% • Despite low potential identified for the SC, CHP can increase the fuel utilization efficiency of power production to 60-80%, compared to an average of 35% for coal-fired electricity generation and 60% for combined-cycle gas turbines • CHP systems are ideal for facilities that require significant amounts of electricity for extended periods of time, usually 24 hours a day, 7 days a week: • Manufacturing facilities • Universities • Hospitals • Visit ACEEE’s State EE Policy Database for information on state best practices for CHP: http://www.aceee.org/node/2958/all • Visit ACEEE’s online State Technical Assistance Toolkit for more information on policies and resources for CHP deployment: http://www.aceee.org/sector/state-policy/toolkit/chp

19. Impact of Efficiency Policies on Electricity Needs in South Carolina

20. Demand Response Complements Efficiency in Reducing Electric Peak Load 2025 peak demand reduction = ~6000 MW (32%)

21. Water Efficiency Policies Analyzed 2025 Savings for Public Water Systems = 32.3 million gallons per day • Statewide Plumbing Efficiency Standards • Inefficient Plumbing Replacement • Utility System Water Loss Reduction • Water Efficient Landscape Irrigation • Electric Utility Clothes Washer Incentives • Water Conserving Rate Structures – Were recommended, but potential water savings were not quantified

22. Relationship Between Water and Electric Savings • Water Efficiency Policies by 2025: • 32.3 mgd potable water savings 85 GWh electric savings • Electric Efficiency Policies by 2025: • 19,569 GWh electric savings 1,800 mgd cooling water savings

23. Consumer Economic Impacts of Energy and Water Efficiency Policies • $2.1 billion annual consumer savings on electric and water bills in 2025 • $790 million cumulative energy and water efficiency investments in 2025 • $5.1 billion cumulative net consumer savings on electric and water bills by 2025

24. Net Impacts of Energy Efficiency Policies on South Carolina’s Economy • Annual reduction of 12.5 million tons CO2 in 2025 • Cumulative reduction of 74 million tons CO2 through 2025 Carbon Emissions Reductions

25. Conclusions • Sufficient energy efficiency resources to meet SC electricity growth through 2025 • Investing in efficiency will: • Promote new jobs & economic growth • Reduce consumer electric bills • Ensure a stable & reliable electric system • Reduce cooling water requirements, improving reliability of supply for all surface water users • Make important contributions to addressing global warming

26. Contact and Report Information • Max Neubauer • Research Associate • 202-507-4005 • mneubauer@aceee.org • Suzanne Watson • Policy Director • swatson@aceee.org • 202-507-4006 • ACEEE • 529 14th Street, NW, Suite 600 • Washington, D.C. 20045 • For more information visit: www.aceee.org • Download the report here: www.aceee.org/research-report/e099