States like Vermont are considering clean energy programs backed by ARRA funds, but will have to navigate stringent oversight and reporting requirements.
As states begin to receive the vast stimulus funds available for energy efficiency programs, many are scurrying to ensure that they maximize the money’s potential to expand jobs and cost savings within the law’s three-year time frame. By all accounts, it’s a tremendous opportunity – but one that carries a unique set of challenges, energy sources said.
The stimulus law, officially known as the American Recovery and Reinvestment Act (ARRA), is pumping more than $10 billion dollars into energy efficiency, clean energy, and weatherization for low-income homes. “I think our real challenge is: How do we make sure that that money is not squandered?” said Jessie Stratton, director of government relations at Environment Northeast, a nonprofit.
Stratton and other experts participated in a session on “Ramping up to Meet the Flow of ARRA Funds,” held in conjunction with the CSG/ERC Annual Meeting on August 3 in Burlington, Vermont. By leveraging stimulus dollars with other funds available for energy-efficiency investments, states can get the most out of the money and make sure those investments last over time, said Blair Hamilton, policy director of the Vermont Energy Investment Corporation. That is critical for a state like Vermont, where a recent policy calls for 40 percent of the state’s building stock — 80,000 households – to be retrofitted to cut energy use by at least 25 percent by 2020.
In neighboring Maine, legislation enacted this year calls for 100 percent of residences and 50 percent of businesses to be weatherized by 2020. The stimulus funds carry with them stringent oversight and reporting requirements to ensure transparency. The requirements have slowed spending within some state agencies – particularly those administering the low-income Weatherization Assistance Program – but participants speculated the end result would be positive.
Many people who have spent years working on energy-efficiency programs have been pleasantly surprised by efforts among officials at the U.S. Department of Energy (DOE), which is administering the funds, to make sure they are spent wisely and in ways that make a difference, said Hamilton. For example, DOE has created targets suggesting what would be a good rate of return for specific types of investments. Officials have also provided guidance that directs agencies to invest certain funds in energy efficiency because it generates the most jobs, can be implemented fast and leads to big savings, said Hamilton.
Compared with other states in the U.S., much of the Northeast region already stands out as having achieved comparatively high cost savings from energy efficiency, and continues to invest in policies that would accelerate those gains. They include: systems benefits charges that are tacked onto utility bills to fund energy-efficiency improvements; energy-efficiency resource standards, in which utilities are required to glean a certain percentage of energy savings per sales; and least-cost procurement policies, which require utilities to purchase all energy efficiency that is cheaper than supply.
Other policies that promote energy efficiency include decoupling a utility’s sales from revenue streams and creating performance standards, which set energy-efficiency targets for utilities to meet. These policies ensure that utilities generate returns by achieving greater efficiency – in other words, by selling less energy. They differ from traditional policies in which utilities generate profits solely by selling more energy. In addition, Northeastern states participating in the Regional Greenhouse Gas Initiative (RGGI) are allocating the bulk of their proceeds from the auction of carbon allowances toward energy efficiency and low-income weatherization.
In the U.S. as a whole, there was a 34 percent increase in efficiency between 2006 and 2008, and the Northeast was responsible for a significant portion of that spending, said Stratton of Environment Northeast. Per-capita spending on energy efficiency is expected to continue its rise: in the next two years, spending in Vermont will go from $55 per capita to $66, and in Rhode Island it will shoot up from $14 to $41. Spending in Massachusetts is also skyrocketing because of a least-cost procurement policy established last year.
Find out more about the Council of state Governments here Council of State Governments