American Council for an Energy-Efficient Economy Leading the Way: Continued Opportunities for New State Appliance and Equipment Efficiency Standards (Updated from A051) authored by: Steven Nadel, Andrew deLaski, Maggie Eldridge, Jim Kliesch www.aceee.org ENERGIZING VIRGINIA: EFFICIENCY FIRST September 19, 2008 American Council for an Energy-Efficient Economy Summit Blue Consulting ICF International Synapse Energy Economics ACEEE Report Number E085 © American Council for an Energy-Efficient Economy 529 14th Street, N.W., Suite 600, Washington, D.C. 20045 (202) 507-4000 phone, (202) 429-2248 fax, http://aceee.org Prepared by: American Council for an Energy-Efficient Economy (Project Lead and Energy Efficiency Analysis) Maggie Eldridge (Analysis Coordinator), [email protected] Suzanne Watson (Outreach Coordinator), [email protected] Max Neubauer Neal Elliott Amanda Korane Skip Laitner Vanessa McKinney Dan Trombley Anna Chittum Steve Nadel Summit Blue Consulting (Demand Response Analysis) Dan Violette Marca Hagenstad Stuart Schare ICF International (CHP Analysis) Kenneth Darrow Anne Hampson Bruce Hedman Synapse Energy Economics (Utility Avoided Costs Estimates) David White Rick Hornby Disclaimer: While several organizations, including Summit Blue Consulting, ICF International, and Synapse Energy Economics, assisted ACEEE in the completion of this analysis and report, the ultimate viewpoints and recommendations expressed herein are those of ACEEE. Energizing Virginia: Efficiency First, ACEEE CONTENTS Acknowledgments .................................................................................................................................. ii About the American Council for an Energy-Efficient Economy (ACEEE) .............................................. ii Executive Summary................................................................................................................................iii Policy Recommendations...................................................................................................................iii Economic and Jobs Impacts .............................................................................................................. v Conclusions........................................................................................................................................ v Glossary.................................................................................................................................................vii Introduction.............................................................................................................................................1 Background.............................................................................................................................................2 Virginia Electricity Market...................................................................................................................2 Role of Energy Efficiency and Demand Response ............................................................................5 Barriers to Energy Efficiency and Demand Response.......................................................................7 Project Approach and Methodology .......................................................................................................7 Overall Project Context: Why We Chose Virginia ..............................................................................7 Stakeholder Engagement...................................................................................................................8 Analysis ..............................................................................................................................................9 Reference Case....................................................................................................................................10 Electricity (GWh) and Peak Demand (MW)......................................................................................10 Utility Avoided Costs ........................................................................................................................10 Retail Price Forecast........................................................................................................................12 Energy Efficiency Cost-Effective Resource Assessment .....................................................................13 Residential Buildings........................................................................................................................13 Commercial Buildings.......................................................................................................................15 Industry.............................................................................................................................................17 Combined Heat and Power ..............................................................................................................18 Energy Efficiency Policy Analysis.........................................................................................................21 Energy Efficiency Policy Scenario Results ......................................................................................23 Discussion of Policies.......................................................................................................................25 Assessment of Demand Response Potential .......................................................................................35 Defining Demand Response ............................................................................................................35 Rationale for Investigating Demand Response................................................................................36 Role of Demand Response in Virginia’s Resource Portfolio............................................................36 Assessment of Demand Response Potential in Virginia..................................................................37 Recommendations ...........................................................................................................................38 Macroeconomic Impacts: Impact of Policies on Virginia’s Economy, Employment, and Energy Prices .................................................................................................................................................39 Methodology.....................................................................................................................................39 Impacts of Recommended Energy Efficiency Policies.....................................................................40 Emissions Impacts in Policy Scenario..................................................................................................43 Summary of Findings............................................................................................................................43 Energy Efficiency Resource Potential..............................................................................................43 Impacts of Energy Efficiency and Demand Response.....................................................................44 Discussion and Recommendations ......................................................................................................46 Findings from the Stakeholder Process ...........................................................................................46 Workforce .........................................................................................................................................48 Recommended Next Steps ..............................................................................................................49 Conclusions ..........................................................................................................................................50 References ...........................................................................................................................................53 i Energizing Virginia: Efficiency First, ACEEE ACKNOWLEDGMENTS This report was funded by the Energy Foundation, the U.S. Environmental Protection Agency (EPA), the Agua Fund, Inc., and the WestWind Foundation. The authors thank these organizations for their support. Thank you also to the following people and organizations who supported our efforts through interviews and one-on-one meetings or who reviewed and commented on an earlier draft of this report: R. Daniel Carson and F.D. (Don) Nichols (Appalachian Power); Jack Greenhalgh (New Era Energy, Inc.); Jason Halbert; Robert Burnette and Michael Jesensky (Dominion); Sam Manning (Old Dominion University); Chris Miller and Kate Spencer (Piedmont Environmental Council); Susan Rubin (Association of Electric Cooperatives); Nelson Teed (Manufacturing Technology Center), John Morrill (Arlington County); Diane O’Grady (Loudon County); Glen Besa, Dick Ball, Ivy Main, and Brooks Cressman (Sierra Club); Stephen Walz and Nikki Rovner (Governor’s Office); Brett Vassey and his membership (Virginia Manufacturers Association); Larry Blanchfield (Northrop Grumman Newport News); Sarah Rispin and Cale Jaffe (Southern Environmental Law Center); Mike Kaestner (Virginia Economic Development Partnership); Heidi Binko (WestWind Foundation); John Dudley, David Eichenlaub, and Howard Spinner (State Corporation Commission); David Wooley (Energy Foundation); and many others whose names we may not have listed here