Maryland regulators deserve particular praise, and more attention than they’re receiving, for their decision to set one of the most ambitious energy-efficiency targets in the nation.
The Maryland Public Service Commission has directed the state’s electric utilities to keep cutting electricity usage by the equivalent of 2 percent of their retail sales every year, starting in 2020 at the latest. This target places Maryland squarely in the top five states in the United States in terms of energy efficiency policy for utilities — alongside Massachusetts, Rhode Island, Vermont and Oregon.
Energy efficiency is a no-brainer. It saves money and reduces emissions, both of greenhouse gases and harmful particulates. Energy efficiency is by far the cheapest and fastest way to reduce carbon emissions as we try to rein in climate change. According to the nonprofit Chesapeake Climate Action Network, Maryland’s energy-efficiency target will reduce carbon emissions by about 900,000 tons a year, the equivalent of taking 173,000 cars off the road (about 3.6 percent of Maryland’s total vehicle fleet).
Why is a mandate required if energy efficiency is a no-brainer? Consumers, who most stand to gain from reducing electricity consumption (as it would reduce their monthly bills), are often unaware of the easy steps they can take to cut their usage without sacrificing comfort. In some cases, they may need help financing the upfront costs of energy-efficiency retrofits.
Meanwhile, utilities aren’t always eager to inform their clients of what can be done to save energy: Less electricity consumption means less revenue for them. But this is short-term thinking on the utilities’ part, as managing demand can forestall the need to build expensive plants or to buy high-priced power in the market to meet peak demand on hot summer days, for example. It can also make it possible to accelerate the decommissioning of older, and possibly more polluting, plants that are costly to upgrade to the latest environmental standards.
By setting a target, Maryland’s energy regulators are giving utilities the extra impetus they need to aggressively promote energy efficiency. A 2 percent target is ambitious but attainable. In 2013, before the latest target, Maryland utilities achieved energy savings of about 1.3 percent of their sales. More can be done by giving customers incentives to install LED light bulbs and energy-efficient appliances, by fine-tuning air conditioning and furnaces, by installing better insulation and by managing demand with technologies such as smart thermostats (which can detect when you’re away from home and adjust the air-conditioner).
Innovative financing methods also hold a lot of potential. The Environmental and Energy Study Institute, for instance, promotes “on-bill financing,” in which utilities issue loans to their customers for energy improvements, which are then repaid as part of their electricity bills. No upfront payments by ratepayers are necessary, and the loan repayments are covered in whole or in part by the savings resulting from the energy retrofits.
There is great potential at the utility level as well. In particular, combined heat and power systems can capture the waste heat from power plants (or from large industrial facilities) and use it to provide heating, cooling and/or hot water to nearby buildings and facilities. This increases the energy efficiency of power generation from approximately 33 percent to up to almost 90 percent.
Energy efficiency may not be sexy, and state regulatory commissions definitely aren’t, which is probably why the Public Service Commission’s announcement received scant attention. That is a shame because ambitious initiatives such as these are absolutely critical if we’re ever going to stop climate change in its tracks.
The writer is chairman of the board of the Environmental and Energy Study Institute.