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The Energy Efficiency & Renewable Energy Set-Aside A New Opportunity for States

The Energy Efficiency & Renewable Energy Set-Aside A New Opportunity for States. Anna Garcia U.S. EPA, OAR/APPD March 22, 1999. The New EE/RE Set-Aside. A new mechanism to encourage energy efficiency and renewables and achieve their side benefits

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The Energy Efficiency & Renewable Energy Set-Aside A New Opportunity for States

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  1. The Energy Efficiency & Renewable Energy Set-AsideA New Opportunity for States Anna Garcia U.S. EPA, OAR/APPDMarch 22, 1999

  2. The New EE/RE Set-Aside • A new mechanism to encourage energy efficiency and renewables and achieve their side benefits • An option available to states as part of the NOx Budget Trading Program • A step that demonstrates the linkage between energy efficiency/renewable energy and air quality

  3. What Is The EE/RE Set-Aside? • A pool of allowances that comes from within a state’s NOx Trading Program budget • electricity budget only • precludes possibility of exceeding the budget • States use these allowances to award end user efficiency (DSM) and renewable actions • that reduce electricity generation from core sources or • that displace core source electricity generation • some supply side actions such as CHP, renewables, landfill methane

  4. Energy Efficiency Improves Air Quality Reduces air pollution more effectively than many end-of-pipe controls Prevents emissions of NOx, PM, CO2, lead and mercury Accelerated adoption of EE/RE technologies can improve a state’s air quality Energy Efficiency Improves the Economy EE saves money by reducing energy use and bills, and lowering compliance costs Creates jobs and increases productivity, resulting in higher Gross State Product Greater economic growth & more $ in state’s budget Why an EE/RE Set-Aside Makes Sense

  5. Barriers to EE/RE in Air Quality Planning Exist Lack an EPA-approved method to get credit for EE/RE Link between energy use & air pollution not always obvious Not always an energy/air connection in states Transparency & uncertainty of results Utility Support for EE Programs is Shrinking According to a recent study by the Environmental Working Group: From1993 to 1997, utility-sponsored EE programs were reduced by 46%, or $736 M Largely occurred in response to deregulation Why EPA Promotes an EE/RE Set-Aside

  6. Why Should States Do an EE/RE Set-Aside? To reward energy efficiency & renewable energy projects • for preventing NOx emissions through avoided generation; & • because projects provide broad societal benefits not rewarded in revenue streams derived by investors* • Savings to consumers (~$5.0 B in 2003) • Savings in compliance costs ($150 M in 2003, or a 10% decrease) • Creates new jobs (> 20,000 in the SIP Call region) • Prevention of other emissions: CO2, PM, Hg, Pb To encourage increased use of energy efficiency and renewable energy to improve air quality *Estimate of potential benefits from a fully subscribed, 5% set-aside in the SIP Call region

  7. How You Do An EE/RE Set-Aside EPA recommendations /answers to key questions: • What are key elements for designing and implementing a set-aside? • What projects are eligible for the set-aside? • What flexibility do states have in the design? • What do states need to submit to include a set-aside in the NOx Budget Trading Program?

  8. Key Elements of a Set-Aside • What size set-aside will be - how many allowances to include in the pool • What quantity of allowances to award to each project, and how to administer them

  9. Key Question: Size of Pool A state determines the size of its set-aside based on: • what types of projects they want to encourage • whether and how to focus allowance awards on “new” projects • whether and how to award credit for actions implemented before 2003 • how many control periods the award will be given for (the length of the award) • how to handle over and under subscription of the allowance pool.

  10. Key Question:Quantifying & Administering Allowances For this, a state must determine: • when the allowance awards are made (timing of awards) • how and when to apply for awards, and what is needed in the application • how to measure and verify results in terms of energy saved or displaced • how to translate project results (energy saved or displaced) into emissions avoided • how to direct allowances to “new” projects -- beyond BAU energy efficiency or renewable gains

  11. The Guidance Provides EPA’s Recommended Approach

  12. Guidance Allows States Flexibility in: • Having a set-aside or not • Determining the size of their set-aside • can be lower/higher than EPA’s recommended range • Whether or not to reward early actions • but not how; must come from the 2003 pool • How to administer the set-aside • as long as it doesn’t compromise tradability or conditions of the NOx Budget Trading Program • Dealing with business-as-usual activities

  13. What Do States Need to Submit? • By September 1999, as part of SIP submission: • Intent to include a set-aside • The size of the state’s set-aside • Whether early credit will be included • A reallocated budget that accommodates set-aside • By a date prior to January 1, 2003: • Outline of design elements - especially in terms of timing requirements • Includes designation of state offices who will be administering set-aside

  14. Guidance Documents • Establishing an Energy Efficiency & Renewable Energy Set-Asidein the NOx Budget Trading Program • Quantifying and Administering Energy Efficiency & Renewable Energy Set-Aside Allowances • Measuring & Verifying Energy Efficiency and Renewable Energy in a Set-Aside Program

  15. Set-aside Guidance Schedule • 1st guidance issued - end of Feb 99 http://www.epa.gov/appdstar/appd/stat_pub.html • Training workshop in D.C., Mar 22-23 • Issue quantification & admin guidance - May 99 • Provide M&V guidance to to states - Fall 99

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