Maryland PIRG Foundation
Maryland is at an energy crossroads — facing a crisis, but also an
Marylanders are paying more to light and heat their homes, run their businesses, and to get where they need to be.
In five years, electricity and natural gas prices have jumped more than 50 percent, even after adjusting for inflation. Millions of dollars are leaving the state to pay for fuel imports, draining our local economy.
Moreover, the Public Service Commission says unless we take action, Maryland will likely face rolling electric blackouts as early as 2011.
The fastest, cheapest and cleanest way to address this crisis is to turn what is now wasted energy into a useful resource to power our homes, offices and factories. Right now, Maryland has the opportunity to increase energy efficiency, so that we can get more heat, light, and work from the energy we already use. Rather than spend billions on new power plants, transmission lines and higher rates, we can invest in energy-efficient technologies — saving significant amounts of electricity and natural gas, and saving every homeowner and business money on their energy bills.
For guidance, Maryland can look to states across the country that have adopted strategies to increase energy efficiency.
These programs deliver dollar savings for the citizens, businesses and institutions that participate. Moreover, they reduce costs, improve the reliability of the energy system, delay the need to build new power plants, slow rising energy prices, create jobs, and strengthen the economy for society as a whole.
Energy efficiency programs can help homeowners tap into vast potential energy savings, offsetting up-front costs and delivering long-term savings on energy bills. For example:
- Through public education and targeted rebates, New York encourages homeowners to replace outdated and inefficient appliances with energy-saving models. Participating families save an average of $600 per year in energy costs.
- New Jersey offers rebates to homeowners who purchase efficient furnaces or air conditioners. Tens of thousands of New Jersey households have participated and now save an average of $63 per year on heating and cooling.
- A Minnesota gas utility offers low-cost home energy audits to help identify areas where more efficient insulation and weatherization can save significant amounts on energy bills. For the more than 20,000 homeowners who have participated, the program has helped to blunt the impact of recent spikes in the cost of natural gas.
- California utilities provide discounts on compact fluorescent light bulbs, which deliver the same levels of light as incandescent bulbs while using 75 percent less electricity and lasting up to 10 times as long. Pacific Gas & Electric estimates that in 2007, its customers installed about 25 million efficient bulbs — which will yield on the order of $300 million in electricity savings over time.
- Vermont educates home-builders about energy-efficient design and building techniques, increasing the quality of home construction. In 2006, 22 percent of all new homes in the state met Energy Star performance standards, with energy bills at least 30 percent lower than a typical home.
- Pennsylvania helps low-income customers reduce their energy bills through free home energy audits and weatherization. In 2004, the program saved the average low-income family about $300 per year, or 2 percent of their annual income.
Energy efficiency programs can help businesses, industry, local government and institutions achieve new competitiveness by managing energy use. For example:
- In Massachusetts, a utility offers free energy audits for small business customers, plus financial incentives toward the installation of efficient equipment—paying up to 70 percent of the cost of the new equipment, with interest-free financing on the rest. Participating businesses typically see a 30 percent reduction in their energy use.
- New York offers a program that helps schools, hospitals, businesses, factories and local governments incorporate energy efficient design and install efficient equipment at the time of construction, when it is most cost-effective. The program offers up to $55,000 in design assistance, free ongoing advice from trained architects and engineers, incentives for the purchase of energy efficient technologies, and rewards of up to $15,000 for achieving high energy performance.
- Minnesota’s largest electric utility helps businesses identify opportunities to reduce lighting costs and provides rebates to facilities that install energy efficient lighting. From 2001 to 2003, the program saved businesses and institutions in Minnesota nearly $16 million on electricity—savings that will last many years.
- Connecticut offers a program that helps businesses to replace outdated equipment with energy-efficient models—covering the entire additional cost of efficient equipment over standard versions.
- Wisconsin created a program to help manufacturers and industrial facilities reduce energy use, providing technical advice, training, information, and financial incentives. In 2006, Wisconsin businesses saved more than $17 million through energy efficiency. In addition to helping individual homeowners and businesses, energy efficiency programs benefit society as a whole.
- Energy efficiency can be deployed quickly to help avert an energy crisis. For example, when California was facing ongoing electric blackouts in the summer of 2000, state leaders worked to educate Californians on how to use energy and resources more efficiently. Within 12 months, electricity demand declined by 14 percent—equivalent to the output of 10 large power plants.
- Energy savings function like virtual power plants or virtual natural gas pipelines—but without the need to build costly infrastructure. For example, efficiency measures deployed in Connecticut from 2000 to 2006 will, over time, save the equivalent of the electricity needs of more than 2 million Maryland homes for a year; and between 2001 and 2005, New Jersey’s efficiency programs reduced electricity demand enough to replace a medium sized power plant (450 megawatts).
- Efficiency programs reduce energy prices for everyone. For example, every 1 percent reduction in natural gas demand reduces market prices by 0.8 to 2 percent below forecast levels.
- Energy efficiency is extremely cost effective. For example, every dollar spent on efficiency in Connecticut yields about $4 in consumer savings over time.
- Efficiency resources cost less than new energy facilities. For example, in 2005, efficiency programs in Wisconsin saved electricity for 3 cents per kWh and natural gas for 18 cents per therm —60 to 80 percent less than average retail prices.
- Efficiency programs create jobs and grow the economy. For example, New York’s Energy Smart programs have created 4,200 jobs since 2002, and Wisconsin’s Focus on Energy program is expected to increase disposable income for Wisconsin residents by more than $4 billion over 25 years.
With deregulation of its electricity market, Maryland stopped funding its energy efficiency programs.
- Before the deregulation of the electricity market, Maryland required its utilities to offer energy efficiency services. However, in the years leading up to deregulation in 2000, utility spending on efficiency plummeted from near $100 million per year (in 2007 dollars) to almost nothing.
- In contrast, states with excellent energy efficiency programs all have policies requiring utilities to set aside money specifically for energy efficiency, or meet specific targets for energy savings.
Maryland can once again realize the benefits of energy efficiency by establishing a comprehensive energy efficiency program. The state should:
- Reduce statewide per-capita electricity consumption 15 percent below 2007 levels by 2015.
- Set energy savings targets for 2020 and beyond, aiming to capture all cost-effective energy-saving opportunities.
- Establish a public benefits fund to promote energy efficiency, including programs targeted at residential, low income, and small business customers.
- Establish a parallel goal of reducing peak electricity demand 15 percent by 2015, reducing the need to build new power plants.
- Finally, the state should act to create a similar energy efficiency goals aimed at reducing consumption of natural gas and heating oil.