Economic growth and increased electricity demand have long gone hand-in-hand. However, as U.S. utilities are well aware, demand for electricity has been flat for a decade, even as the economy has recovered from the Great Recession. Another decade of flat demand is predicted. Energy efficiency standards are a significant part of the explanation for the
de-coupling of demand for power and economic growth.
Energy efficiency regulation began slowly in the 1970’s, but the pace of standard setting has accelerated dramatically in recent years. Thirty-six efficiency standards were put in place during the first two decades of the program. At least twice that number have been adopted under Presidents Bush and Obama, and new standards continue to tumble out. The standards have also become stricter, as the efficiency requirements for already regulated products can be ratcheted up at the six-year review point for each standard. The focus of the program has expanded to include efficiency requirements for stand-by and “off” modes, as well as regional standards where differences in weather warrant different standards.
While the rules seek first and foremost to reduce the energy consumption of industrial and consumer products, the carbon reduction opportunities have received particular attention under the Obama Administration.
The stated goal of the U.S. Department of Energy (DOE) is the adoption of efficiency standards that contribute 325 million metric tons in emissions reductions by 2025. Importantly, a recent appellate court decision held that DOE could properly count the avoided “social cost of carbon” in applying the cost/benefit test each new standard must pass.
The efficiency program has been made a priority. Staffing, budgets and political support have all grown, at a time when other regulatory programs are under attack. Congress has updated and expanded the program several times – generally with bipartisan support. Particularly noteworthy has been the development of a strong working relationship among representatives of the regulated industries, efficiency advocates and DOE. They routinely work together to develop new rules – a far cry from the 1980’s and 1990’s when it seemed that the industry brought suit over every new rule. The small and specialty manufacturers who lack the resources to engage at the standard-setting stage may face the greatest challenge in remaining competitive as the standards – and associated requirements for complex manufacturing capabilities – grow.
The rules are complex, with distinct testing, certification and substantive standards compliance obligations imposed for every regulated product, from light bulbs to distribution transformers. Since 2010, DOE has also enhanced its enforcement program. Those who run afoul of the rules, whether knowingly or otherwise, face potentially stiff penalties. Although DOE announced its intent to bring greater consistency to penalty-setting, fines for violations affecting a single product line have ranged from a few thousand dollars up to and beyond US$5 million.
Energy efficiency requirements seem to be here to stay. The European Union and parts of Asia, where higher efficiency norms have long prevailed, now have company. Each jurisdiction pays attention to the others in determining what is possible. A convergence – in the form of ever higher standards – seems likely to follow.