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Linda Qiu
By Linda Qiu December 12, 2016

Energy efficiency rules help reduce, but don't demand, electricity use

President Barack Obama didn't give up on his hopes of reducing utilities' electric use upon the death of the cap-and-trade bill.

The bill called for utilities to generate 20 percent of their electricity from renewables and to improve productivity by at least 2.5 percent per year beginning in 2012. That's about a 22 percent increase in productivity by 2020.

When cap and trade ultimately fizzled in Congress during his first term, Obama in his second term turned to the executive branch to tackle the goal.

In 2015, the Environmental Protection Agency issued the final version of the Clean Power Plan, which seeks to reduce carbon emissions nationwide by 32 percent from 2005 levels by 2030. The rule establishes carbon emission reductions goals for the power sector.

While the Clean Power Plan doesn't contain any requirements for energy efficiency, energy efficiency is nonetheless featured as a key compliance tool, said Lowell Ungar, a senior policy analyst for the American Council for an Energy-Efficient Economy.

According to the EPA analysis, the Clean Power Plan will result in a 7 percent reduction in electricity demand by 2030 — not quite as ambitious as Obama's original goal of 15 percent by 2020.

The rule, however, is in legal limbo. While some states have begun the compliance process and are on their way to meeting their targets, it's unclear if the requirement will withstand scrutiny from the judicial branch (not to mention the incoming Republican administration). It is under review by the District of Columbia Court of Appeals.

Experts pointed out that Obama has also used the Departments of Energy and Transportation as well as the EPA to issue energy efficiency regulations on, for example, buildings and appliances. While these don't require utilities to reduce electricity demand, they lead to it.

Kenneth Gillingham, an environmental and energy economist at Yale University, estimates that the Energy Department has issued some 45 rules on energy efficiency, with another dozen or so in the process of being finalized. It's difficult to analyze the effect of all these rules. But Gillingham said the overall trend of electricity generation, if we factor in GDP growth, is in decline.

"(U.S. Energy Information Administration) data indicates that net generation for all sectors has declined very slightly, but largely held steady since 2008, despite GDP growing over that time" he said. "So the electricity intensity of GDP has declined, even if net electricity production/consumption has not."

Altogether, the Obama administration has "made remarkable progress" in energy efficiency, said Ungar. But there are no blanket rules mandating utilities to reduce demand. We rate this a Compromise.

Our Sources

Environmental Protection Agency, Clean Power Plan Fact Sheet, July 14, 2016

Interview with Lowell Ungar

Email interview with Kenneth Gillingham

By Catharine Richert October 12, 2009

Cap-and-trade bill requires energy efficiency

As part of his plan to lower greenhouse gas emissions and wean consumers off foreign oil, President Barack Obama made energy efficiency a part of his campaign platform.

He's delivering on that pledge through a number of initiatives.

For example, buried in the cap-and-trade bill is a requirement that, by 2020, utility companies will be required to meet 20 percent of their load with electricity generated from renewable resources and electricity savings. At least a fourth of those reductions must come from greater energy efficiency.

Some of those efficiency savings will come from more aggressive standards for efficiency in buildings, a requirement also included in the cap-and-trade bill. New buildings will be 30 percent more energy efficient in 2012 and 50 percent more efficient in 2016. Those standards will increase 5 percent every three years. That means that by 2030, new buildings will be 75 percent more efficient than they are today, according to the bill's fine print.

Obama is also pushing greater appliance efficiency; the Department of Energy is in the process of updating an array of appliance standards per a memorandum Obama issued on Feb. 5.

But while the administration has made efficiency a priority, all these efforts are still in the process of being finalized. The Senate has yet to vote on its version of the cap-and-trade bill, and the Energy Department has yet to put all the new appliance standards on the book. As a result, we rate this one In the Works.

Our Sources

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