No Compromise Without Energy Efficiency

Over the past month, lawmakers in the Ohio House have been debating an energy bill that has led to a lot of confusion around its purpose. It’s been a struggle to see how a new program under the bill, dubbed the “Ohio Clean Air Program,” would actually provide the cleaner air suggested in its title. The truth behind the proposal is that it aims to support a pair of failing nuclear plants, while eliminating Ohio’s successful renewable energy and energy efficiency standards, leading to anything but cleaner air for the state. At best, this proposal maintains status quo. At worst, energy bills will increase significantly and as will carbon emissions from Ohio’s power sector. Amid all the debate, the focus has once again been placed on Ohio’s energy efficiency programs. Any way you slice it, these energy efficiency programs are worth fighting for. Here are some of the key questions that lawmakers have raised during the debate.

What does Ohio’s energy efficiency standard do?

Ohio’s energy efficiency standard provides significant economic benefit to the state while reducing energy costs. The standard ends up more than paying for itself since for every dollar invested, Ohio electricity customers save nearly three dollars. These savings usually end up back in the local economy, and the labor to make our homes and business more energy efficient is done by local companies that hire from our communities. Eliminating the standard, like Substitute HB 6 proposes, would eliminate a powerful tool to help keep electricity prices under control, and make the costly ‘nuclear bailout tax’ harder on Ohio families.

Do we really need the energy efficiency standard? Haven’t we already gotten all the benefits from the energy efficiency program? What’s left to do?

Ohio is far from completing all the work that should be done in energy efficiency—there’s a reason why energy efficiency businesses are booming in Ohio and account for close to 82,000 jobs in 2018. Without these programs we are leaving jobs and savings on the table. While some customers will replace appliances with more energy efficient appliances without aid from the energy efficiency standard, the standard motivates customers to buy even more efficient products (not just the cheapest one) and take more measures to reduce the amount of energy wasted in their homes and businesses. The Ohio utilities’ own studies show these programs are working and are savings customers much more than what a customer would do on their own, going beyond what we call “business as usual”. The filings of Ohio’s utilities with the PUCO, evaluated by an independent third party, show that over $5 billion have been saved to date through these programs.

Are there jobs in energy efficiency?

There are 81,676 jobs to be exact that are based right here in Ohio. Gutting the energy efficiency programs will threaten these jobs and halt progress in a job-creating field that continues to grow. Just last year, energy efficiency jobs grew by over 2 percent, in other words, 2,000 new jobs were created. They manufacture ENERGY STAR-rated kitchen appliances; install efficient lighting systems at car dealerships; implement software that optimizes traditional heating, ventilation and air conditioning (HVAC) systems in high schools and handle advanced building materials at new office towers.

The utilities continued to voluntarily run programs when we had the “freeze” in 2014 and 2015, so why do we need a mandate?

During this two-year “freeze,” FirstEnergy dramatically reduced their program offerings, with significant adverse effects for their customers in the form of foregone savings. Getting rid of the mandate on Ohio’s monopoly utilities now would create great inequity between Ohioans in service territories of utilities more interested in efficiency programs and those served by uninterested utilities—for reasons having nothing to do with the potential benefits of such programs. Not all utilities continued to run programs during the two-year “freeze,” or at least not at a significant scale.

Since the utilities knew it was only a “pause” and that they could be expected to pick up the programs again in two years, there was a significant disadvantage—or cost risk—to stopping programs when you may have to rebuild the infrastructure to deliver programs again soon. This two-year freeze is not a good indicator of what may happen if the programs are made voluntary going forward.

Mandates for efficiency programs force some customers to pay for the benefits of others, even though the beneficiaries see improved value in the homes. Isn’t that inequitable?

There are many benefits of efficiency programs that accrue to all customers, regardless of who is participating and generating the savings. That includes not having to build out new utility-scale power plants if we can eliminate electricity waste (yes, we can potentially waste enough electricity to need an entirely new power plant). By driving down demand, electricity programs also reduce market clearing prices for both energy and capacity—reducing costs for everyone. Finally, they reduce risk of costs associated with potential future environmental regulations.

Many investments on the supply side are paid by all customers, including many customers who do not benefit at all from those investments. Consider the need to upgrade the capacity of a substation because a home-builder built a new subdivision of homes whose demand for electricity could not be served by the existing substation. All utility customers will pay for that upgrade, not just the builder of the new homes, yet all customers will not benefit from this like they do from efficiency programs.

Are we are wasting money, with 50 percent of the dollars going to “overhead” instead of customer rebates?

There is nothing bad about spending money on things other than rebates. Utilities also spend money on training of builders and trade allies, technical support to customers, marketing and education of customers so that they are aware of efficiency opportunities, and evaluation of the programs to make sure that they are getting real savings we can count on. In fact, most non-rebate spending isn’t overhead.

Efficiency programs exist because many customers face market barriers to investing in efficiency, and it’s not just high cost. Other key barriers include lack of information, inadequate technical skill, risk or uncertainty, etc. To be successful, efficiency programs must address all these barriers. For some efficiency measures, it may make most sense to just offer big rebates. For other measures, a greater emphasis on technical support or education and marketing may be more important and appropriate. To consider that wasteful is like telling Pepsi that they are wasting money when they spend it on anything other than producing their product.

In the end, what matters most is whether total program spending is less than the benefits that are returned from efficiency programs. And that’s been shown repeatedly to be the case. The programs are wildly cost-effective as currently delivered. Is there any waste? Could they be even more cost-effective? Maybe, but probably not dramatically so. And getting rid of them because they deliver only $3 in benefits for every $1 spent when maybe they could deliver $3.50 for every $1 is “throwing the baby out with the bath water” and it’s our fellow Ohioans who will pay the price.

Do energy efficiency programs have any impact on Ohio’s carbon emissions?

According to an NRDC review of the bill impacts, carbon emissions under HB 6 would be up to 25 percent higher than if we keep the current efficiency and renewable energy standards. That is equivalent to the carbon emissions of more than 2.5 million cars on the road. This increase in emissions is due to the increased electricity demand caused by eliminating the energy efficiency standard; since Ohio would not be creating workable policies to foster the growth of renewable energy, fossil fuels are likely to meet the increased demand. The NRDC analysis also shows that we could achieve a significant drop in carbon pollution by either maintaining or doubling down on energy efficiency measures, even if the low-carbon nuclear plants retire absent HB 6.  

Eliminating Ohio’s energy efficiency standards would be a drastic mistake. Energy bills would increase for Ohio’s families and businesses, carbon emissions and other air pollutants would increase, and thousands of jobs would be at risk.

About the Authors

Daniel Sawmiller

Ohio Energy Policy Director, Climate & Clean Energy Program

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