Feb 3, 2015 4:08:46 PM
Jan 5, 2015 10:33:00 AM
EARLIER THIS YEAR, Ohio approved a two-year freeze on all energy efficiency and renewable energy mandates, keeping them at 2014 levels. After signing the bill, Ohio Governor John Kasich felt he had made the correct decision, because “most people are unhappy with it – which means I got it exactly right.” Predictably, environmental groups are not happy with the legislation. What’s even more newsworthy is that most investor-owned utilities plan to maintain their energy efficiency programs anyway. Then why the need to take action?
In May 2008, Ohio passed legislation (SB 221: bit.ly/1zALP4V) containing energy efficiency requirements for investor-owned utilities and also established the Ohio Alternative Energy Portfolio Standard (AEPS). Electric utilities were required to implement energy efficiency and peak demand reduction programs that produced a cumulative electricity savings of 22 percent by the end of 2025. Specific annual benchmarks were laid out, as seen in this table from DSIRE: bit.ly/1wUc4QH. In addition, utilities were required to reduce peak demand by 1 percent in the first year (2009), and 0.75 percent annually from 2010 to 2018.
Energy efficiency measures would include financial incentives to recycle old appliances, such as refrigerators or CRT televisions, efficient equipment upgrade rebates and discounted energy audits. Renewable investments could encompass the expansion of solar and wind sources, by either creating solar and/or wind farms or offering incentives for customer-owned solar panels on private property.
In late March 2014, the Ohio Senate proposed a temporary freeze on required electric savings and peak demand reduction. Senate Bill 310 also called for the creation of a 12-person Energy Mandates Study Committee. This committee was tasked with comparing the actual cost (to consumers) of existing mandated energy efficiency projects and renewable energy power plants against the projected future cost of such programs, assuming the mandates were to continue increase annually. The committee has until mid-December 2015 to produce the study. Finally, new rules would be passed requiring every utility, investor-owned or otherwise, to disclose the costs of such programs on every customer’s bill. For a typical household, these costs come to about $3 per month.
Justifying the Freeze
The cost of energy efficiency programs seems to be one of a handful of factors influencing investor-owned utility FirstEnergy Corporation to support of SB 310. They claim customers are paying more in rate increases than they’re saving. According to FirstEnergy, energy efficiency requirements are also making it harder for them to sell more power. Finally, power from wind farms is causing coal-fired plants to ramp down production.
Timken, a global steel and bearing manufacturer/supplier based in North Canton, Ohio, wanted to opt out of the SB 221 rules, as they felt they were unneeded. Energy-efficient equipment is crucial to their profit margin, and mandates harm their profit-making ability. Alcoa, a Pittsburgh-based aluminum producer, had a similar opinion, and also felt the utility programs were redundant.
State Rep. Peter Stautberg, a Cincinnati-area Republican, said the mandates were achievable when they were passed in 2008, but aren’t now. He prefers to see utilities craft their own energy efficiency programs and buy renewable energy on the open market.
According to a media report, other business groups, including the Ohio Energy Group (representing the state’s largest industrial users) and Ohio Chamber of Commerce, also supported SB 310.
Energy, Environment and the Economy
Some organizations opposed SB 310 based on environmental/air quality concerns. Others wondered if this bill had anything to do with Rule 111.d, which targets carbon emissions from power plants.
1) “Kasich speaks out on signing bill to freeze green energy standards” by Karen Kasler, 89.7 WKSU, June 17, 2014.
2) “Ohio legislature approves two-year freeze on renewable energy, energy efficiency standards” by Jeremy Pelzer, Northeast Ohio Media Group, May 29, 2014. http://bit.ly/1heKNqQ
3) “Ohio renewable energy and efficiency rules frozen for two years as Gov. John Kasich signs legislation” by John Funk, The Cleveland Plain-Dealer, June 13, 2014. http://bit.ly/1qQbGS8
4) “AEP keeping it ‘green’” by Dan Gearino, The Columbus Dispatch, July 23, 2014. http://bit.ly/1x0BZXg
5) “Despite Ohio Freeze, Renewable Energy Continues To Be Hot” by Michael Brower, Clean Technica, July 10, 2014. http://bit.ly/1qr58sJ
6) “Ohio GOP Bill would freeze state energy efficiency and renewable energy at current levels” by John Funk, Cleveland Plain-Dealer, March 28, 2014. http://bit.ly/1jr8vya
7) Ohio Energy Efficiency Portfolio Standard, 7/24/2014. http://bit.ly/1wUc4QH
8) “Amid energy law freeze, Ohio solar market stalls” by Kathiann M. Kowalski, Midwest Energy News, September 18, 2014. http://bit.ly/1wHURyn
9) Ohio SRECs, Flett Exchange, November
21, 2014. http://bit.ly/1xMx2F
10) “FirstEnergy plans to buy renewable energy credits despite freeze on requirement” by J. Thomas Siwo, Lexology, October 30, 2014
Prior to the passage of SB 310, Ohio’s solar & solar REC (SREC) market was growing, with SRECs selling between $40 and $45 each. Now? Prices plummeted to $18 each before moving up to $20 each as of press time. Meanwhile, growth in Ohio’s solar industry has stagnated. New solar capacity is being added at a tenth (or less) of the pre-SB 310 rate. Solar manufacturers and installers are targeting work in other states in order to stay in business.
To make matters worse, SB 310 removed the in-state requirement on the purchase of RECs and SRECs. This provides utilities with the ability to seek optimal pricing, which is a good thing for consumers since, according to FirstEnergy spokesman Doug Colafella, the “costs of the credits are passed directly through to the state’s electricity consumers.” The potential downside is that as FirstEnergy seeks to purchase “250,000 RECs and 5,100 SRECs,” they could very well buy those from another state, which would be another blow to Ohio’s renewable energy industry.
Things get a little dizzying when one examines FirstEnergy’s shifting public stance on this debate. William Ridmann, the company’s top executive for rates & regulatory affairs, said the temporary rate increases created by the mandates cost $1 billion, and those could balloon to $5 billion by 2017 when the incremental efficiency increases return. He also said “consumers on average are paying about $4.50 a month in extra charges to pay for the efficiency programs.” Yet in 2012, they filed a “three-year plan that balances near-term energy savings opportunities among all rate classes with longer-term programs that continue to create jobs and build capacity for delivering greater energy and demand reduction impacts in the future.” And in a 2013 report filed to the Public Utilities Commission that reflected on FirstEnergy’s costs and benefits for 2012-2013, it was determined that “for every $1 spent on energy efficiency, customers had saved more than $2 in power costs.” The company would later distance themselves from their own findings, citing lack of participation and complex math.
We can understand the need to evaluate such a significant ratepayer-funded requirement. However, halting the program for two years to gather potentially unreliable data seems a bit extreme. On the flip side, the data that everyone is most likely concerned about, the effect of SB 221 and/or SB 310 on the overall state economy, won’t be discernible for years. By the time that data is obtainable, it’ll be too late to correct any problems and a lot of time will have been lost.
Questionable data, harm to a growing industry, potential loss of intrastate commerce: Is that what the Governor and legislature were seeking? We doubt it. Hopefully, state legislators will give a chilly reception to any attempt to make permanent the current two-year pause in efficiency gains.
Note: We would like to recognize the exceptional reporting by John Funk of The Cleveland Plain-Dealer on this subject. His work has been insightful and in depth.
Oct 19, 2014 6:51:28 PM
More and more builders are recognizing the importance of creating a unique “green” identity, but navigating through the myriad of green building programs can be overwhelming. Similarly, even knowledgeable homebuyers are confused by the plethora of options.
Sep 15, 2014 6:16:43 PM
General Code Information
In early June, an amended version of SB 1023 passed the State Senate by a 47-1 vote. The bill attempts to do away with the current code adoption process, which calls for two-thirds approval of a code change or it is rejected. The amended version of SB 1023 allows “all proposed code changes to be adopted unless two-thirds of the Review and Advisory Council (RAC) votes them out.” It also adds “two members to the RAC with expertise in building energy efficiency.”
The bill still has to pass the House. On July 2, it was amended in committee and then tabled, so no vote is scheduled for the full House yet. Finally, the RAC has to make a decision on the 2015 IECC by June 2015 and perform the required analysis. (Details of the amendment can be read here: http://tinyurl.com/k3q2swr)
Jul 9, 2014 2:07:00 PM
THE LIVING BUILDING CHALLENGE is a green building certification program that reaches beyond projects’ physical boundaries. As more green building programs delve into the manufacturing process, they will create a demand for products with established life-cycle assessments (LCSs) and reduced use of harmful chemicals.
In the Beginning…
In 1992, then Sen. Conrad Burns (R-Montana) had secured an earmark of approximately $1.2 million to be administered by the U.S. Department of Commerce’s National Institute of Standards and Technology (NIST) for the intent of funding sustainability projects. At the same time, Montana State University’s (MSU) Office of Research and Technology Transfer was charged with identifying appropriate projects and funding green building technology research.