Strong NY Efficiency Goal? Check. Time for Follow Through

Responding to Governor Cuomo’s call for New York to achieve an aggressive energy efficiency target by 2025, the New York State Energy Research & Development Authority (NYSERDA) and Department of Public Service (DPS) have released a highly anticipated white paper chock full of energy-saving strategies to help the state achieve its goal. It covers everything from ways to ensure buildings and appliances are built to higher energy-saving standards, all the way to encouraging "deep retrofits" of existing buildings that seal leaks with insulation, replace windows, and install highly efficient electric heating and cooling equipment in place of natural gas or oil-powered boilers.

Energy efficiency is essential to meeting New York’s climate goals and will bring many benefits to New Yorkers, including lowering energy bills, creating local clean energy jobs and protecting public health. Now, the Public Service Commission (PSC), New York’s utility regulator, must act quickly to ensure that the state’s new energy efficiency initiative is a success.

Two key blanks to fill to get the state on track

Beyond making steady progress on the many policies and programs set forth in the white paper, the PSC must address—in the very near term, for the state to achieve the Governor's goal—the following two fundamental areas:

(1) What’s the ramp-up, and how fast should utilities go? The PSC must provide clear expectations of the state’s utilities in terms of what their year-over-year ramp up on how much energy they will help customers save. While the white paper sets a higher-level state target, we still need more info on what precisely that means for each of the state’s utilities. Given the task at hand, the PSC should order short-term progress as it sorts out the details of what will be necessary in the longer term. Utilities should be required to ramp up their annual energy efficiency savings targets at a pace that is on par with what nation-leading utilities have demonstrated to be feasible. Doing so will provide the essential regulatory clarity that New York’s utilities require to immediately begin planning how to scale up their energy efficiency efforts.

(2) Clarify that smart efficiency costs can be recovered by utilities. The PSC also must make clear that utilities will be empowered to fund these energy-saving efforts through utility rates, while at the same time ensuring they will receive bonuses for delivering more savings at lower cost.

The NYSERDA/DPS white paper puts the state in a great position to use more energy efficiency to cut customers’ bills, lower power plant emissions, and create thousands of new jobs. But without further immediate steps to require and enable concrete action from utilities, Cuomo’s ambitious target could slip out of reach.

The white paper includes numerous strategies, along with a smart high-level structure

New York’s energy efficiency initiative, alongside the state’s plan to generate 50 percent of its electricity from renewable resources by 2030, is a major component of its clean energy framework. Energy efficiency will deliver roughly one-third of New York’s 2030 greenhouse gas reduction goal if the efficiency target is achieved, meaning that success is critical to the state’s overall climate strategy.

The white paper provides more detail on New York’s energy efficiency initiative, and includes 85 separate recommendations to advance this critical resource. In addition to including ideas for many different new programs and implementation priorities, like a plan to achieve deeper energy and carbon savings in state-owned facilities, the paper gets a lot right with regard to the essential structural features that NRDC and a large coalition of other groups emphasized are needed:

• It sets an ambitious target for energy savings from all fuels. The 185 trillion British thermal units goal is equivalent to fueling and powering over 1.8 million New York homes by 2025. The focus on all fuels, as opposed to solely electricity savings, will help energy efficiency companies provide holistic solutions to address a building’s full needs, using not only strategies like installing more efficient lighting that saves electricity, but also home weatherization and highly efficient electric heat pumps that reduce or eliminate the use of natural gas or oil to heat buildings.
• It makes clear that utilities must play a central role in advancing energy efficiency, accelerating and increasing their efforts to help customers save energy.
• It emphasizes the need to provide all New Yorkers with the benefits of energy efficiency, acknowledging the need to do better in this area and directing programs and other efforts toward low-to-moderate income customers.
• It provides for a smart “top-down, bottom-up” efficiency reporting framework that will set a high-level goal, but also track progress on individual programs and policies. A consistent reporting framework will provide greater accountability for savings and enhance understanding of New York’s various energy efficiency efforts (which is important so that the many different market players, like energy efficiency companies that retrofit buildings and banks that provide financing to cover the capital required to do so, are able to access the opportunities provided by New York’s efficiency initiative).  

But some vital pieces need refining

As noted above, however, a couple of critical puzzle pieces are still missing, so the state needs to act soon to fill them in. Most importantly:

• The state has not yet set specific expectations for each utility and does not yet have a clear timeline for making the critical policies in the white paper enforceable. While some components of the plan will necessarily require more development, such as the plan’s recommendation to introduce legislation to provide access to data on energy use for buildings larger than 50,000 square feet (which will allow companies to identify savings opportunities), the core features of the initiative, including a framework for accelerated utility savings, can be adopted in the near term. The PSC must act now to ensure that ironing out the details of specific strategies does not delay the launch of the program. It should immediately put utilities on notice that they will be expected to achieve more energy savings beginning in January 2019, and set a schedule for finalizing an order that sets the state’s policies in law. For example, Con Edison, the state’s largest utility, will soon be submitting its multi-year utility rate request for 2019—without clarity on how much energy efficiency it will be expected to achieve in the immediate term, it’s nearly impossible for the company to develop the best possible suite of strategies aimed at achieving that level of savings.
• The white paper does not provide clarity on how utility energy efficiency programs will be funded. To achieve success, regulations need to make the utilities’ energy efficiency investments at least as profitable as traditional infrastructure, like new power lines and substations, while providing incentives for them to achieve more savings with every efficiency dollar spent. Experience has shown that without clarity on whether energy efficiency efforts will be funded through customer rates, utilities will propose lackluster programs. It is abundantly clear that existing utility efforts need to be significantly ramped up for the state to achieve its goals. That won’t happen unless the PSC not only sets a high bar for utilities, but also gives them the green light to expand their efficiency portfolios by indicating that these investments can be funded through utility rates. Bonuses for good performance—and potentially penalties for failing to achieve goals—can be added to this framework to give utilities the right incentive to reduce costs, but they aren’t a replacement for program funding.

We can get there, but only if the PSC acts quickly

Fortunately, nothing in the white paper prevents the state from taking these critical steps. Further, the state can draw upon a long and rich procedural history to justify its actions, built over the past four years. That includes recommendations from the Clean Energy Advisory Council, comments submitted on utilities’ Distributed System Implementation Plans, technical conferences leading up to the governor’s announcement, and much more.

The time for debate is over. New York State’s new energy efficiency initiative makes clear that the state intends to become an efficiency leader. NYSERDA and DPS have the state off to a great start with their comprehensive white paper and now the PSC must follow through with quick action to put the regulations in place to make the initiative a success.