Connecting Clean Air Act Compliance with Ratepayer Funded Energy Efficiency

Abstract

Over the past decade, state electricity policy has evolved to encourage end-use efficiency as part of utilities’ efforts to serve their customers’ needs. Programs implemented in response to these policies have grown rapidly across the United States and are expected to save approximately 20 billion kWh per year over the coming decade. These energy savings translate to roughly 15,000 tons of avoided NOx emissions, 45,000 tons of avoided SO2, and 16 million tons of avoided CO2 each year. At the same time, many states are still struggling to meet existing ambient air quality standards under the Clean Air Act, and states and utilities both are planning for a raft of new regulations that are expected to add another $100 billion to air compliance costs. Despite the clear environmental benefit of existing end-use efficiency programs, very few states have incorporated them into air quality compliance plans. This paper explores the barriers that have led to this under-utilization of end-use efficiency as a Clean Air Act compliance tool, explains EPA’s efforts to provide pathways towards compliance credit, and identifies opportunities for states to capitalize on the overlap between EPA’s requirements and the pre-existing state energy regulatory framework.