Connecticut’s Energy Future Removing Barriers to Promote Energy Sustainability: Public Policy and Financing December 2, 2004 Legislative Office Building

Connecticut’s Energy Connecticut’s Energy FutureFuture Removing Barriers to Promote Energy Removing Barriers to Promote Energy Sustainability: Public Policy and Sustainability: Public Policy and FinancingFinancing

December 2, 2004December 2, 2004

Legislative Office Legislative Office BuildingBuilding

Hartford, CT Hartford, CT

Daniel L Sosland, Executive Director

December 2, 2004December 2, 2004 Environment NortheastEnvironment Northeast 22

Environment Northeast

Non-profit environmental research and Non-profit environmental research and advocacy organization with staff of advocacy organization with staff of legal and policy experts located in legal and policy experts located in Hartford, New Haven and MaineHartford, New Haven and Maine

Advocated for Energy Conservation Advocated for Energy Conservation and Clean Energy Funds; RPS, Green and Clean Energy Funds; RPS, Green Power Choice; member of the Energy Power Choice; member of the Energy Conservation Management Board; Conservation Management Board; active in numerous DPUC proceedings active in numerous DPUC proceedings and at the General Assemblyand at the General Assembly


Factors Driving Connecticut Factors Driving Connecticut Energy PoliciesEnergy Policies

• Key DriversKey DriversCongestion in Congestion in

Southwest Southwest ConnecticutConnecticut

Energy Prices Energy Prices Environmental Environmental

IssuesIssues• Air QualityAir Quality

• Climate Change Climate Change GoalsGoals

• Key Priorities:Key Priorities:Energy Efficiency Energy Efficiency

FundsFunds• Electric, Gas and OilElectric, Gas and Oil

Remove Barriers to Remove Barriers to Advance EfficiencyAdvance Efficiency• Utility Rate ReformUtility Rate Reform

Advanced Building Advanced Building DesignDesign

Distributed Distributed GenerationGeneration


Connecticut is Making Significant Progress Connecticut is Making Significant Progress Promoting Sustainable Energy PoliciesPromoting Sustainable Energy Policies

1998 20041998 2004

• Inadequate Energy Inadequate Energy Conservation Fund – missing Conservation Fund – missing key savings and key key savings and key customerscustomers

• No renewable investment fundNo renewable investment fund• Interconnect engineering Interconnect engineering

standards obstaclestandards obstacle• Building Code in need of Building Code in need of

updatingupdating• Efficiency Standards need Efficiency Standards need

updatingupdating• No green power marketNo green power market

– No Renewable Portfolio No Renewable Portfolio StandardStandard

– No Green OfferNo Green Offer– No Efficiency OfferNo Efficiency Offer

• Conservation Fund increased Conservation Fund increased in 2000 and producing large in 2000 and producing large cost effective savingscost effective savings

• Clean Energy Fund existsClean Energy Fund exists• Uniform interconnect Uniform interconnect

standards adoptedstandards adopted• Building energy code Building energy code

updatedupdated• Efficiency standards bill Efficiency standards bill

enactedenacted• Green power offer pendingGreen power offer pending• Efficiency offer pendingEfficiency offer pending• Renewable Portfolio Renewable Portfolio

Standard kicking in Standard kicking in • Project 100: Installing Project 100: Installing

Renewable Energy in Renewable Energy in ConnecticutConnecticut


Good Public Policy Can Promote Solutions:Good Public Policy Can Promote Solutions:Connecticut’s Conservation Fund A Connecticut’s Conservation Fund A Nationally Significant Success StoryNationally Significant Success Story• Cumulative summer peak load savings of 630 MW Cumulative summer peak load savings of 630 MW

that would otherwise hit the lines-- 10% of state’s that would otherwise hit the lines-- 10% of state’s installed generating capacityinstalled generating capacity

• Energy efficiency resources are achieved at costs Energy efficiency resources are achieved at costs from $.02 to $.05 per lifetime kWh savedfrom $.02 to $.05 per lifetime kWh saved

• Significant environmental benefits in avoided Significant environmental benefits in avoided emissionsemissions

• Since 2000, producing net benefits of Since 2000, producing net benefits of approximately $ 1.4 billion dollars in avoided approximately $ 1.4 billion dollars in avoided energy costs over life of the conservation energy costs over life of the conservation investmentsinvestments

• Significant Public Input and Oversight – A Model Significant Public Input and Oversight – A Model for Good Policy Developmentfor Good Policy Development


Impact of Fund: Making Connecticut Impact of Fund: Making Connecticut More Efficient and Reducing Consumer More Efficient and Reducing Consumer CostsCosts Current programs Current programs

if fully funded if fully funded avoid over 60MW avoid over 60MW annuallyannually

Reduces state’s Reduces state’s annual growth in annual growth in capacity demand capacity demand from 1.7% to 0.6%: from 1.7% to 0.6%: 80% reduction80% reduction

5800

6000

6200

6400

6600

6800

7000

W/O

EE

GeneratingNeedWithout EE

GeneratingNeedWithEE


$0.00

$200.00

$400.00

$600.00

$800.00

$1,000.00

$1,200.00

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24

Hour

$/MW ECP w/ DSM

ECP w/out DSM

Efficiency Impact: Reducing Market Prices to Efficiency Impact: Reducing Market Prices to ConsumersConsumers

115 MW in energy efficiency load reductions avoided about $6.7 million in additional costs (06/07/99)


We Can Do More: Achieve Level or We Can Do More: Achieve Level or Reduced Growth in DemandReduced Growth in Demand

Figure 1-2 - Connecticut Energy Forecast (GWh):Base Case, Continued Current Energy Efficiency, and

Maximum Achievable Cost Effective Potential

27,000

28,000

29,000

30,000

31,000

32,000

33,000

34,000

Year

GW

h

Base Case (no C&LM)

Continued Current EnergyEfficiency

Maximum Achievable CostEffective Potential

For the "Continued Current Energy Efficiency" scenario, values for the years 2009 - 2012 are estimates prepared by GDS Associates.


Connecticut Demand Growth:Connecticut Demand Growth:The Need for Policy ActionThe Need for Policy Action

Sources and Projected Growth in Demand and Resulting Sources and Projected Growth in Demand and Resulting Increases in CT Carbon Emissions (MMTC) Increases in CT Carbon Emissions (MMTC)

CategoryCategory 20002000 20502050 % Increase% IncreaseElectric powerElectric power 2.542.54 3.78 - 8.043.78 - 8.04 50% - 220%50% - 220%MobilityMobility 4.144.14 6.676.67 61%61%Residential Residential 2.212.21 2.212.21 0%0%IndustrialIndustrial 1.501.50 1.881.88 25%25%Commercial Commercial 1.061.06 1.061.06 0% 0% State totalState total 11.3311.33 16.21 - 20.4716.21 - 20.47 43% - 81%43% - 81%

2050 Target2050 Target 2.83 MMTC2.83 MMTC (75%)(75%)


Sustainable Energy Policies: Sustainable Energy Policies: Where To Next?Where To Next?

• Natural Gas: Increase Efficient Natural Gas: Increase Efficient UseUse

• Home heating oil efficiencyHome heating oil efficiency• Remove barriers to additional Remove barriers to additional

cost-effective energy efficiencycost-effective energy efficiency Reform Outdated Utility Rate Design Reform Outdated Utility Rate Design

that Discourages Conservation and that Discourages Conservation and Promotes Inefficient SalesPromotes Inefficient Sales

• Pursue Advanced Building Pursue Advanced Building Energy standardsEnergy standards

• Protect the Conservation and Protect the Conservation and Clean Energy Funds from further Clean Energy Funds from further raidsraids


Natural Gas and Oil Natural Gas and Oil ConservationConservationNatural Gas: Why Promote ConservationNatural Gas: Why Promote Conservation

Natural gas use increasing – Connecticut Natural gas use increasing – Connecticut becoming more dependent on natural gas for becoming more dependent on natural gas for powerplant generation powerplant generation

Provide benefits to natural gas customers that Provide benefits to natural gas customers that are only available now to electric customersare only available now to electric customers

Studies show natural gas conservation is highly Studies show natural gas conservation is highly effective way to reduce electricity and gas effective way to reduce electricity and gas prices by reducing marginal demand prices by reducing marginal demand

A modest fund of 3% of gas utility revenues A modest fund of 3% of gas utility revenues would provide substantial economic, consumer would provide substantial economic, consumer and environmental benefitsand environmental benefits


Connecticut Needs to Promote Connecticut Needs to Promote Gas Efficiency to All CustomersGas Efficiency to All Customers

States with Natural Gas Conservation Projects in States with Natural Gas Conservation Projects in GreenGreen


Natural Gas Conservation Natural Gas Conservation Reduces Gas PricesReduces Gas PricesNatural Gas Price Effects of Energy Efficiency and Renewables Policies

New England Gas Market

0.00

1.00

2.00

3.00

4.00

5.00

6.00

7.00

2001

2002

2003

2004

2005

2006

2007

2008

Date

Pri

ce (

$/M

cf)

Business as Usual Forecast

EE & RE Policy Impacts


Oil ConservationOil Conservation• Connecticut consumes around 1 billion gallons of distillate Connecticut consumes around 1 billion gallons of distillate

oil annually at cost of over $1.3 billionoil annually at cost of over $1.3 billion• Oil consumption is nearly equivalent to natural gas on btu Oil consumption is nearly equivalent to natural gas on btu

basisbasis• Substantial savings to consumers with the creation of a Substantial savings to consumers with the creation of a

modest fuel oil efficiency programmodest fuel oil efficiency program Provide oil customers efficiency optionsProvide oil customers efficiency options

• Upgrade boilersUpgrade boilers• Perform thermal insulationPerform thermal insulation

Modest fund would save 6 million gallons a year at Modest fund would save 6 million gallons a year at benefit to cost ratio likely greater than 3.0benefit to cost ratio likely greater than 3.0

Joint Fuel Programs Joint Fuel Programs Whole Building Treatment: Thermal, Electric, Gas End Whole Building Treatment: Thermal, Electric, Gas End

UsesUses Avoids Equity issue of electric ratepayers funding Avoids Equity issue of electric ratepayers funding

measures that save gas and oilmeasures that save gas and oil


Utility Rate Design: Remove Utility Rate Design: Remove Disincentives to Use Fuels EfficientlyDisincentives to Use Fuels Efficiently

• Current electric and gas utility rates provide Current electric and gas utility rates provide increased profits as sales volumes increase increased profits as sales volumes increase

• Result is a disincentive to promote efficient Result is a disincentive to promote efficient use of fuelsuse of fuels

• Remove this barrier by reforming revenue Remove this barrier by reforming revenue collection methodscollection methodsUtilize an adjustment mechanism to make Utilize an adjustment mechanism to make

utilities indifferent to salesutilities indifferent to salesExamine performance based ratemakingExamine performance based ratemaking


Tax Incentives and Leading By Tax Incentives and Leading By ExampleExample

Tax incentives to promote Tax incentives to promote renewable energy, DG and CHP renewable energy, DG and CHP are importantare important

Key example: Federal wind tax Key example: Federal wind tax credit supports wind credit supports wind developmentdevelopment

State: examine the State: examine the effectiveness of approaches effectiveness of approaches such as sales tax exemptions for such as sales tax exemptions for renewables, impact of property renewables, impact of property tax exemption for renewables tax exemption for renewables and cogenerationand cogeneration

State procurement policies: State procurement policies: green purchases, building green purchases, building design standardsdesign standards


Further InformationFurther Information

Environment NortheastEnvironment Northeast

http://www.env-ne.org/Sustainable_Connecticut.htmhttp://www.env-ne.org/Sustainable_Connecticut.htm

28 Grand Street, Hartford, CT 06106 860-246-712128 Grand Street, Hartford, CT 06106 860-246-7121

101 Whitney Avenue, New Haven, CT 06510 203-101 Whitney Avenue, New Haven, CT 06510 203-495-8224495-8224

Documents

Connecticut’s Energy Future Removing Barriers to Promote Energy Sustainability: Public Policy and Financing December 2, 2004 Legislative Office Building