Why Energy Efficiency Matters

Brian T. CastelliExecutive Vice President Programs & Development

INCYTAM 2008Mexico City, DF

November 19, 2008

What is the Alliance to Save Energy?

Mission: To promote energy efficiency worldwide to achieve a healthier economy, a cleaner environment, and greater energy security

Co-Chaired by Senator Mark Pryor (D-AR) and James Rogers (CEO, Duke Energy)

Guided by a 37-Member, Elected Board of Directors

- 9 Members of Congress – Bi-Cameral; Bi-Partisan

- Environmental, consumer, and trade associations heads, state and local policy makers, corporate executives

Forging Alliances: Business, Govt. & Public Interests

Sponsorship and participation of more than 150 organizations Involvement by businesses in all economic sectors Initiatives underway in research, policy advocacy, education, technology

deployment, and communications

What is the Alliance to Save Energy? Mission: To promote energy efficiency worldwide to achieve a healthier economy, a cleaner environment, and greater energy security.

The Alliance is… –Thirty years in the making

–Fuel neutral

–Staffed by 50+ professionals

–Active in policy, research, education, communications, technology deployment and market transformation

–Headquartered in Washington, D.C. with operations in Eastern Europe, South Africa, Mexico, India and several states in the U.S.

Alliance Outside the US: an Overview

All REGIONS of the World: Asia Latin American Africa Eastern Europe

TOPICS: Survey of Efficient Transportation for APEC Watergy: EE in water supply & wastewater treatment EE Financing through Performance Contracting Municipal EE Improving EE in Private Enterprises Strengthening the EE Industry

MUNICIPAL EE Internationally

Watergy • Efficiency in bulk supply and end use • Our largest municipal program

Building EE - building local capacity in… • energy codes • energy audits • monitoring techniques

Street Lighting • Simple & cost-effective

Transportation • Survey of effective approaches for APEC • Includes succinct summaries of ~50 examples

Connecting to the Private Sector Around the World

Financing through Performance Contracting

Strengthening Local EE Industries

• Create local EE Associations • Strengthen ESCOs

Improving EE in Private Enterprises, e.g…. Hotels Hospitals Manufacturing

U.S. Energy Situation: Energy Use Continues to Rise

Growing Gap between Energy Supply and Demand

Climate Change !

As an energy resource, efficiency is: CHEAPER

- Each $1 invested in Energy Star program = $75 in energy cost savings and $15 of investment in new efficiency technologies

QUICKER- In 2001, California cut peak electricity use by 10% in less

than a year

CLEANER- “Negawatts” produce NO ENVIRONMENTAL FOOTPRINT

MORE SECURE- A “homegrown” resource!

Why Energy Efficiency?

Past Successes – But Much More is Needed

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Qu

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$ 1.7 Trillion

$ 1.0 Trillion

New Physical Supply = 25 Q

Avoided Supply = 70 Quads in 2005

If E/GDP had dropped 0.4% per year

Actual (E/GDP drops 2.1% per year)

Source: Art Rosenfeld, CEC

Energy Efficiency is Already Our FIRST Energy Resource

Energy Efficiency: America's Greatest Energy Resource

0 5 10 15 20 25 30 35 40 45 50

Geothermal, Solar and Wind

Conventional Hydroelectric

Wood, Waste, Alcohol

Nuclear Power

Natural Gas

Coal

Petroleum

Energy Efficiency and Conservation

Quads

Energy Savings

Domestic Production

Net Imports

Alliance to Save Energy, 2007 (2006 data)

Huge EE Potential Remains

40% Energy Efficiency

Adapted from McKinsey Analysis

Globally, EE is One Possible Means to Contain Demand

And the U.S. Can Clearly Do Better!

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10,000

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1960 1965 1970 1975 1980 1985 1990 1995 2000

KW

h

US CA Western Europe

Per Capita Electricity Consumption

The Challenge?Overcoming Market Barriers

Principal Agent or “Split Incentives”- Home builder versus buyer- Utility versus customer

Transaction Costs- Lack of information on life-cycle cost for products

and/or paybacks for upgrades Lack of Investment in RD&D and EE

Programs Public Policies Essential Investment in EE Programs Essential

Policy Drivers: A “Perfect Storm”

Rising Gasoline Prices- (and electricity, natural gas!)

Global Climate change- GHG emissions increasing faster than

projected Energy Security

- World markets for oil and gas- Electricity generating capacity & grid reliability

Energy Efficiency: Tools for Success

Research and Development – Create new technology

- RD&D Partnerships with Industry Incentives & voluntary programs – Create buyer demand

- Tax incentives, rebates, loan guarantees, etc.

- Utility programs (DSM, Demand Response) Public Education – Build market share

- Consumer education and awareness campaigns

- Labeling (ENERGY STAR, LEED, GreenGlobes, etc.) Standards – Set a floor & trigger innovation

- Buildings, equipment, vehicles

- Utility Energy Efficiency Resource Standards (EERS) Public sector leadership – Reduce market risk

Comparing the 2005 and 2007 Energy Legislation Energy Policy Act of 2005 will by 2020:

- Reduce U.S. energy use by 2%- Reduce electricity demand by 4%- Reduce CO2 by 3%- Reduce oil use by 0%Includes All Five Policy Tools

Energy Independence and Security Act of 2007 will by 2030- Reduce U.S. energy use by 7% - Reduce electricity demand by 5% - Reduce CO2 by 9%- Reduce oil use by 10%Missing: Incentives

Light Bulb Standards U.S. set performance standards for general service light bulbs,

starting in 2012-2014 25-30% savings: will phase out traditional incandescent bulbs Second standard in 2020 must achieve roughly 65% savings If fully implemented, these light bulb standards

could save consumers– $18 billion annually on their electricity bills– Avoid 158 million tons of CO2 and 5700 lbs. of airborne

mercury emissions– Reduce the need for 30 baseload power plants

Appliance Standards Are Among the Most Effective EE Policies

Total savings from existing standards in 2000:- 2.5% of U.S. electricity use- 21,000 MW of peak power demand- $50 billion in net consumer savings

Total savings from existing standards by 2020:- 7.8% of projected U.S. electricity use- 120,000 MW of peak power demand- $186 billion in net consumer savings

Track Record of Appliance Efficiency Standards

Today’s new refrigerators use 75% less energy than in 1973

From 1972 to 2003:- Energy Use down

74 %

- Capacity up 29%

- Price down 64 %

Source: Graphic -- Collaborative Labeling and Appliance Standards Program

Statistics – Art Rosenfeld (CEC) and David Goldstein (NRDC)

Energy Star Labeling Program Joint program: EPA and

DOE Label energy efficient

products:- Appliances- Lighting products- Furnaces and Air-

Conditioners- Computers and

electronics Energy Star Homes Commercial Building Label

Building Energy Efficiency Codes

Minimum requirements for residential and commercial building energy efficiency design

Energy codes primarily regulate:- Wall and roof insulation (R-value)- Windows, doors and skylights (U-factor, SHGC)- HVAC equipment installed in new buildings- Control systems (SEER, EER, COP, etc.)

Model energy codes developed by national organizations- International Energy Conservation Code by ICC (residential)- ASHRAE Standard 90.1 (commercial)

Codes adopted and enforced by state and local governments

Codes: Helping to Cut Global Energy Demand Growth

Source: McKinsey Global Institute

Better Building Codes are part of the solution to cutting global energy demand growth from 2.2% to 0.7%

Dynamic Building Codes for Residential Homes Federal Legislation to Drive 30% Improvement in

Residential and Commercial EE Codes by 2010; 50% by 2020

“30% Solution Campaign” to Insure 30% Improvement in 2009 IECC Residential Building Code

New Federal Regulations Requiring New Federal Facilities to Demonstrate 30% EE Improvement

Efforts Supported by: the Alliance to Save Energy and U.S. DOE, Utilities, Businesses, NGOs

Realizing the Potential: Energy Efficient Codes Coalition (EECC)

Public Sector Leadership: Federal Buildings Example

A credible energy/climate policy requires government to do more (sooner) than it asks of private businesses

and the public!

FISCAL YEAR

10% Goal - 1995 (NECPA)

20% Goal - 2000 (EPACT)

30% Goal - 2005

Actual Energy Use

35% Goal - 2010

Actual site energy use

1985 1990 1995 2000 2005 2010

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100

90

120

130

140

Sit

e E

ner

gy,

100

0 B

tu/s

q.f

t.

29.6% Reduction,

2005

Utility Energy Efficiency Programs Help customers save electricity or natural

gas Many kinds of programs

- Consumer education

- Technical training

- Energy audits

- Appliance rebates

- Financing

Why Should Utilities Fund Energy Efficiency?

Cheaper, quicker, and cleaner than conventional new energy supply

Demand-Side Management (DSM) avoided 24 GW of peak load in 2004—about 80 power plants

Reported costs of about 2-4 cents/kWh Can be targeted and closely managed Can be added in small or large increments

States Lead the way in Energy Efficiency

Energy Efficiency Resource (Performance) Standards- States establish energy efficiency as a resource through

energy savings targets (TX, IL, CA, CT, HI, NJ, PA) Priority Loading Orders

- For California and the Pacific Northwest, efficiency is the first priority (lowest cost) energy resource

- Next: Renewables, CHP, conventional fuels “Decoupling” Utility Revenues/Profits from Sales Regional greenhouse gas initiatives (NE, W Coast) State Tax Incentives Next: Rail/Transit Infrastructure & “Smart Growth”

Why Do More? Answering the Climate Challenge

In Summary: Need a Balanced Approach to Energy Efficiency

Building Energy Codes & Appliance Standards- New construction and renovation- Appliances & equipment efficiency standards

Voluntary market transformation (Energy Star)- Appliance labeling- Building performance rating/disclosure- Incentives- Public sector leadership

Targeted portfolio of utility DSM RD&D Partnerships

Watergy on the Border

Alliance Watergy program now spans entire Alliance Watergy program now spans entire border:border: •• Baja CaliforniaBaja California (Tijuana) (Tijuana)

•• SonoraSonora (Guyamas) (Guyamas) [still in discussion stage] [still in discussion stage]

•• ChihuahuaChihuahua (Hidalgo de Parral) (Hidalgo de Parral)

•• CoahuilaCoahuila (Monclova-Frontera) (Monclova-Frontera)

•• Nuevo LeonNuevo Leon (Monterrey)(Monterrey)

•• Tamaulipas Tamaulipas (Matamoros, Tampico)(Matamoros, Tampico)

WHAT IS WATERGY? A Quick

SnapshotWatergy makes the best use of two valuable, Watergy makes the best use of two valuable, limited resources: water & energylimited resources: water & energy

WHY IS THIS IMPORTANT?WHY IS THIS IMPORTANT? Every liter of water that passes through a system has a Every liter of water that passes through a system has a significant significant energy costenergy cost..

Water sector efficiency leaves more funds for crucial and Water sector efficiency leaves more funds for crucial and often often underfundedunderfunded public servicespublic services..

In Mexico, the water supplied that is In Mexico, the water supplied that is lostlost:: 1/31/3

AND IT’S COST EFFECTIVE…AND IT’S COST EFFECTIVE… Rapid Rapid PaybackPayback:: generally from a few months to 3 yearsgenerally from a few months to 3 years

Huge Huge SavingsSavings: : at least 20% in energy costs; much higher at least 20% in energy costs; much higher possiblepossible

Makes the most of existing Makes the most of existing infrastructureinfrastructure; reduces the ; reduces the need for newneed for new

The Most Cost-Effective Interventions

Pumps

Leak Management

Automated Controls

Metering & Monitoring

COMMON BARRIERSCOMMON BARRIERS to Energy & Water Efficiencyto Energy & Water Efficiency

1. Lack of Awareness Especially true applying energy efficiency to water sector

2. Aversion to Risk Fear of change. Must convey that benefits outweigh any risks.

3. Change May Imply a Problem with the Status Quo Suggestions for change may imply criticism of performance, ability.

4. Subsidies Water should be priced to recover costs. Can be politically sensitive.

5. Financing Efficiency “Performance” (savings)-based financing in cases where capital outlays required.

A Look at Two Projects

TIJUANA (Baja California)

SUCCESS: Needs of Rapidly Growing City Met with Same Amount of Water

ISSUESRapid population growth: >20,000 households per year (~80,000 people)Water moved at great cost from Colorado River over mountains

APPROACH Automation Peak demand management Shifted sources so much less coming over mountains

Tijuana, continued

RESULTS 4.1 million kWh saved per year

>$400,000 saved per year

Water losses one of lowest in Mexico (19%)

Water provided to 46,000 new households with only slightly higher water production

Need for large investment into an aqueduct deferred for 6 years

MONCLOVA (Coahuila)

SUCCESS: Once Sporadic Service Now 24/7

ISSUES 48% losses from system

Water provided only 6 hours every 3 days

APPROACH

Leak detection

Variable speed drives

Electromechanical efficiency improvements

Managerial & operational improvements

Monclova, continued

RESULTS 20% reduction in water losses

Service now 24/7

Water Saved per year: 10 million m3

Energy Saved per year: 6.1 million kWh (36%)

Cost Saved per year: $727,000

1850 M Street, NWSuite 600

Washington, D.C. 20036Phone: 202.857.0666

Website: www.ase.org

Alliance to Save Energy

THANK YOU!