This is a guest post by the Center for the New Energy Economy at Colorado State University.

As Energy Efficiency Resource Standards (EERS) approach their target dates and are in need of renewal or replacement, many states are looking for ways to provide market certainty for energy efficiency in a way that would complement an energy efficiency mandate but do not necessarily require one to be in place. With the maturation of the energy efficiency industry driven over the last decade by EERS policies, there are many policy options for states to consider that will reduce barriers, provide financing, and expand the productivity of utility systems across the spectrum. In a new paper prepared for the Advanced Energy Economy Institute (AEE Institute), the Center for the New Energy Economy at Colorado State University (CNEE) examines a suite of policies and programs to expand and grow the marketplace for energy efficiency. With 20 in all, state leaders have a lot of energy efficiency policies to choose from.

While not an exhaustive list, the 20 policies described in State Policies to Expand Market Certainty for Energy Efficiency without an Energy Efficiency Resource Standard – the second in a four-paper series by CNEE on energy efficiency and renewable energy policies - give states a variety of regulatory and legislative options to pursue. They are divided into five categories: regulatory measures, financing programs, technology specific policies, improvements in program administration, and efficiency policies targeting low-income communities. Each policy is described in detail, with model policies and programs drawn from states across the country, so they are all proven in the real world. 

In the regulatory measures category, the paper identifies policies that can be adopted or implemented by public utility commissions (PUCs). Perhaps the most important policy is “decoupling.” Decoupling removes the disincentive for utilities to invest in energy efficiency by separating utility revenue from sales of electricity. While it removes the disincentive, decoupling alone does not bring energy efficiency to par with other potential investments where utilities can earn money, so the paper looks at complementary steps that can be taken to provide utilities a rate of return on energy efficiency. Other regulatory measures include moving energy efficiency to the top of the loading order (essentially, calling on it to meet energy demand before power plants), and adopting approaches to more accurately determine whether an energy efficiency investment is cost-effective, allowing utility efficiency programs to tap more ways to save energy - and money - for customers.

State Policies to Expand Market Certainty for Energy Efficiency also describes multiple forms of financing that can be adopted by utilities and state and local governments. Decades of experience are beginning to open financial markets that now have become familiar with the benefits of energy efficiency. The recent announcement by President Obama to revive the successful Property Assessed Clean Energy (PACE) program, which allows homeowners to borrow at low cost and pay off their investments in energy upgrades on their property tax bill over time, is one example. But increasingly popular state “green banks” and on-bill repayment schemes are others.

In addition to policies and programs that apply to all types of energy efficiency, states can also pursue more targeted policies that support adoption of technologies by finding ways to capture their unique benefits. One example is advanced metering systems. As utility customers have learned to take advantage of data across all other aspects of their lives, the utility sector is ripe for a renaissance of energy data management tools – and there are many companies willing to provide the services if the right policies are in place. State building codes are another example. They make sure builders take advantage of the latest products and developments in construction to create a more efficient built environment. Policies that support combined heat and power (CHP) can spur adoption of this technology that produces heating and electricity from the same fuel source, leading to a much more efficient system for institutional and industrial users that need both.

Finally, low-income policies can be pursued that will not only increase the efficiency of the homes of those on below average incomes, but will save money every month for the families that can least afford rising energy costs.

While these policies can do a great deal to provide companies with the market certainty they need to invest in energy efficiency, markets continue to be driven primary by EERS policies.

In the first paper of our series, CNEE examined the current state and past history of EERS policies, and their importance in creating markets for energy efficiency. Much has changed in the industry since Texas adopted the first EERS in 1999. Today, 26 states have an EERS. These policies represent the backbone of advanced energy policy in the country today and energy efficiency businesses look to these policies when deploying resources and programs to states. The paper looks at the wide variations in these policies and measures states can take to increase market certainty within their EERS. 

This paper series provides analysis that complements other policy tools released by CNEE over the past three years: the Advanced Energy Legislation Tracker and SPOT for Clean Energy, an online tool to identify gaps in policies for advanced energy market preparation, creation, and expansion, state by state The next two papers in the series will examine renewable energy policies - both established, like Renewable Portfolio Standards, and potential complements.