News Article
April 29, 2010

Around the Globe, Emerging Energy Policies Promote Renewables and Efficiency

Energy PoliciesClean energy is key to environmental sustainability. Reliable, affordable energy is fundamental to economic development. While dense megacities continue to emerge as the dominant population centers of the 21st century, over two billion of the world’s people still lack access to basic energy services. Affordable energy infrastructure and technology, coupled with the development of a low-polluting, clean energy system, is critical to long term sustainable development efforts. To align short and long term goals, policy and technological innovation must be considered together: energy infrastructure joining with building design and technologies to create lasting, sustainable solutions.

 

Changing the Electrical Power System

Utilities around the world have traditionally relied on large fossil-fuel powered electrical generation. Consequently, they have established incentive structures that reward successful implementation of that model. In recent decades, new policies have sought to diversify power generation and move away from an exclusive reliance on fossil fuels. These policies seek to reward and sometimes require a greater reliance on clean energy and efficiency. Some of the more popular policies in support of renewable technologies and energy efficiency around the world include:

  • Renewable energy standards (RES)

  • Energy efficiency resource standards (EERS)

  • Energy savings certificates (ESC)

  • Feed-in tariffs

  • Net metering



Renewable Energy Standards

Dozens of countries have implemented renewable energy (or “electricity”) standards (RES), which typically require utilities to generate or purchase a percentage of power from renewable energy sources such as wind, solar, and geothermal. The requirement generally increases over time, which helps shepherd new projects and technologies into the market.

For more on RES, see the World Resources Institute’s Bottom Line on Renewable Electricity Standards.



Efficiency Resource Standards

Some RES policies allow electric power suppliers to count energy efficiency improvements toward a portion of their RES requirements. In other jurisdictions, there exist separate energy efficiency resource standards (EERS).1 Rather than require that a certain percentage of needs be met through renewables, an EERS mandates efficiency gains.



As of late 2009, 23 U.S. states had established an EERS or allowed energy efficiency to meet part or all of an RES, with more to come.2 Texas, for example, requires utilities to avoid 20 percent of the forecast increase in peak electrical demand through efficiency programs. North Carolina allows energy efficiency to meet up to 25% (rising to 40%) of its RES.3



For more on EERS, see the U.S. EPA’s Energy Efficiency Resource Standards (EERS): An Overview.



Energy Savings Certificates

An EERS typically requires that electricity and natural gas utilities help their customers reduce energy use by a specified and increasing amount each year, based on a percentage of total energy sales.4 One way to accomplish this is through the use of energy savings certificates (ESCs)--tradable certificates that typically represent one megawatt-hour (MWh) of energy savings from efficiency projects. Examples of efficiency projects that can generate ESCs include commercial and industrial lighting upgrades, cogeneration or combined heat and power (CHP), and increased efficiency of heating, ventilation, and air conditioning (HVAC) systems, or improved insulation to prevent losses.5

 

Within the U.S., Connecticut, Nevada, Pennsylvania, and New Jersey are among the states that have included provisions in their legislation that would allow third parties, such as commercial and industrial customers, to generate energy savings certificates (ESCs) and sell them to utilities that are seeking to comply with energy efficiency targets.6



Outside the U.S., New South Wales, Australia instituted the first EERS-type program that uses ESCs in 2003. Italy, Great Britain and France have since established ESC trading programs, and in June 2008 India released a Climate Action Plan that encouraged the creation of a national market for ESCs.7



For more on ESCs, see WRI’s Bottom Line one Energy Savings Certificates.



Feed-in Tariffs

In addition to renewable energy mandates, some countries have implemented energy policies that include guaranteeing renewable projects a set payment for every kilowatt hour of energy they produce – a fixed rate above the “brown power” price to help overcome the higher upfront capital costs of many renewable energy technologies. These feed-in tariff structures are increasingly popular and have been successful in creating significant investments in renewable energy in Europe.



Wind-Works.org lists renewable energy tariffs by country on their website, which also contains an extensive collection of articles on feed-in tariffs and similar mechanisms.



Net Metering

Feed-in tariffs are only one mechanism for allowing distributed energy technologies to enter the energy market. “Net metering” is another policy which has helped bring renewables onto the grid. Net metering rules require the utility company to purchase power from homes or buildings when the power is being generated. The meter is “netted” out between the electricity demand of the building and the electricity being created at that building.



On-site, building-integrated renewable energy and clean energy technology can include solar PV, solar thermal hot water, geothermal heat pumps, fuel cell technology among many others. But most on-site distributed power and clean energy technologies require significant up-front capital investments. Finding approaches to level the playing field and rewarding local clean generation remains a challenge. Over the long term, these clean power technologies are efficient both from a price of power generation and because they avoid the need for additional central power plant investments and new transmission lines. Some policies have emerged in the past several decades that recognize those advantages and other policies seek to diversify the power mix for a variety of benefits.



See Net Metering Policies on the U.S. Department of Energy’s Energy Efficiency and Renewable Energy website for more on net metering policies, including maps and tables of state and utility net-metering rules.



Additional Information

The Database of State Incentives for Renewables & Efficiency (DSIRE) website contains an interactive map and database of U.S. federal and state incentives for renewable and efficiency.

Renewable & Alternative Energy Portfolio Standards in the U.S – an interactive map from The Pew Center on Global Climate Change.

April 2010

 

 

1http://www.wri.org/publication/bottom-line-renewable-electricity-standards

2 U.S. EPA, Energy Efficiency Resource Standards (EERS): An Overview [http://www.epa.gov/statelocalclimate/documents/pdf/brown_presentation_1-19-2010.pdf].

3 Alliance to Save Energy, Energy Efficiency Resource Standard (EERS) [http://ase.org/resources/energy-efficiency-resource-standard-eers].

4 Alliance to Save Energy, Energy Efficiency Resource Standard (EERS) [http://ase.org/resources/energy-efficiency-resource-standard-eers].

5 World Resources Institute, Bottom Line on Energy Savings Certificates [http://www.wri.org/publication/bottom-line-energy-savings-certificates].

6 World Resources Institute, Bottom Line on Energy Savings Certificates [http://www.wri.org/publication/bottom-line-energy-savings-certificates].

7 World Resources Institute, Bottom Line on Energy Savings Certificates [http://www.wri.org/publication/bottom-line-energy-savings-certificates].

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