Funding Energy Effciency Under Restructuring:
Local Government Strategies
Energy efficiency reduces energy costs to consumers, increases
the competitiveness of local economies and reduces environmental
impacts. The less electricity that needs to be generated, the less
pollution is released into the air, water and land.
When the City of San Jose shopped around for a cheaper electricity
supply, it discovered that the best deals on the market still only
reduced annual electricity costs by 5 percent, which would realize
savings of $75,000 to $240,000. In contrast, energy efficiency investments
continue to save San Jose more than $4,500,000 annually [See
The Case for
Energy Efficiency: Pioneers in the City of San Jose] .
The reason why energy efficiency offers greater savings opportunities
is illustrated by the accompanying chart, which shows that cutting
generation supply costs only affects 30 percent of a consumer's
bill, while reducing energy use shrinks the entire bill.
Researching available sources of funding for energy efficiency
projects should be one of the first steps a local government takes
when evaluating any long-term strategy to develop a more sustainable
community through local energy policies.
Background:
In recognition of the important benefits of energy efficiency,
California policy makers elected to shape a new strategy to help
California consumers. The management of state funds earmarked for
energy efficiency is shifting away from utilities to other potential
market players that include savvy local governments. An estimated
$220 million will be invested annually in energy efficiency in California
between 1998 and 2002.
These ratepayer funds are earmarked for "market transformation"
energy efficiency programs and will be dispersed by the new California
Board for Energy Efficiency (CBEE). Market transformation programs
seek to make permanent reductions in electricity use by changing
the structure of the energy efficiency market in order to reduce
the need for ongoing subsidies. Local governments that already have
municipal utilities are also now required to develop "public goods"
programs which will likely feature energy efficiency funding.
Opportunities:
New CBEE funding sources, ongoing California Energy Commission
funding and technical assistance options, and opportunities to integrate
efficiency into power supply bids, all offer local governments new
options to reduce energy costs.
Among the key opportunities in the new restructured energy efficiency
market is a new statewide Standard Performance Contracting (SPC)
program. SPC is a statewide program operating within the service
territories of Pacific Gas & Electric, Southern California Edison,
San Diego Gas & Electric and Southern California Gas Co. Consumers,
such as a local governments, can participate directly in reducing
energy consumption at their own facilities or they can work through
Energy Service Companies (ESCOs). The SPC program offers fixed price
incentives, paid out over two years, for verified energy savings.
In addition, local governments can also choose from over 70 other
programs targeted to residential, commercial, industrial and agricultural
sectors, including residential spare refrigerator recycling, LED
traffic signals and a grant program to fund innovative energy efficiency
projects which are outside CBEE administration.
Funding can also be obtained through the following Energy Commission
and public sector sources:
- Energy Partnership Program for City and County Governments.
Under this Commission program there are no up-front costs for
local government participants. The Commission will pay 75 percent
of the cost of technical assistance up to a maximum of $10,000.
Technical assistance includes the preparation of feasibility studies
and project bid documents and help in selecting contractors or
ESCOs.
- Energy Efficiency Project Financing. Cities, counties and certain
other entities are eligible for low-interest loans of up to $600,000
for energy efficiency projects that recoup the initial investment
from energy sources within 8 years. Current interest rates are
below 6 percent; loans are typically approved within 45 days of
application completion.
Other Energy Commission opportunities include the Bright Schools
Partnership Program for public K-12 schools and the Community Colleges
Program.
Challenges:
Interest in energy efficiency waned with the termination of popular
utility programs that offered rebates for the installation of energy
savings devices. Most local governments exploring opportunities
under restructuring have focused on developing ways to access different
power supplies other than those offered by their current utility
providers.
Proposed Solutions:
Because of the lack of significant savings available through power
purchases in the open market, most energy service providers are
offering "value added" energy efficiency services to help improve
savings opportunities. Local governments should mimic what many
large electricity consumers have done. The largest power deal to
date in California, for example, involves Houston-based Enron Corp.
signing a four-year deal with California's university and state
colleges to guarantee broad cuts in power consumption by investing
in energy efficiency at campuses located throughout the state.
Many energy conservation deals like this one are paid for from
the proceeds that accrue from resulting lower utility bills. Local
governments should, in the very least, explore opportunities to
reduce electricity consumption at their own facilities.
For More Information:
California Energy Commission, Efficiency
Services Office
Daryl Mills
1516 9th St. Sacramento, CA 95814
(916) 654-5070 • FAX (916) 654-4304
e-mail: dmills@energy.state.ca.us
California Board for Energy Efficiency/Office
for Ratepayer Advocates
Don Schultz
1227 O St., Sacramento, CA 95815
(916) 657-4210 • FAX (916) 657-4225
e-mail: schultdk@msn.net
Local Government Commission
Pat Stoner
1414 K St. #250, Sacramento, CA 95814
(916) 448-1198 • FAX (916) 448-8246
e-mail: pstoner@lgc.org
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