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Energy efficiency policies in the industry sector
Policies aimed at improving energy efficiency in the industrial sector are directed from multiple jurisdictions, including the federal, state, municipal and utility levels.
At the federal level, the government establishes minimum performance standards for equipment used by the industrial sector, some of which are mandatory and others of which are voluntary. The EPA’s ENERGY STAR programme also has applications for the industrial sector, whereby manufacturing facilities can earn designation as ENERGY STAR Certified Plants. The EPA also runs the ENERGY STAR for Industry programme that assists companies in developing energy management schemes. The Energy Policy Act of 1992 authorised the DOE to create minimum energy efficiency performance standards for certain common industrial systems, including motors, pumps, fans and compressors. Since then, voluntary labelling programmes such as the National Electrical Manufacturers Association’s (NEMA’s) NEMA Premium have gained traction. Under the Energy Independence and Security Act of 2007, Congress directed the DOE to upgrade the mandatory standards towards NEMA Premium levels.
Beyond standards, the federal government also provides financial and technical assistance for energy efficiency improvements in the industrial sector as well as R&D into technological efficiency solutions. For example, the DOE runs Industrial Assessment Centers (IACs) that provide no-cost assessments by teams located in universities to small and medium-sized manufacturers on measures they can pursue to achieve energy and cost savings. The DOE estimates that IACs usually identify at least USD 130 000 per year in savings for companies that it assesses. The DOE has conducted more than 18 000 IACs.
The DOE is the primary agency for federal industrial energy efficiency programmes, notably through its Advanced Manufacturing Office (AMO), which provides R&D support to early-stage manufacturing technologies that support energy savings. The AMO is also involved in the development and application of energy managementrelated ISO 50001 standards, which are standards issued for companies by the non-profit intergovernmental organisation International Organization for Standardization.
The DOE also administers the Superior Energy Performance (SEP) programme, which certifies companies based on energy management and performance improvements at industrial facilities. SEP certification requires companies to meet ISO 50001 standards and the American National Standard, ANSI/MSE 50021, which defines additional energy performance benchmarks. A DOE study of nine SEP-certified facilities found they achieved savings of USD 87 000 to USD 984 000 annually by pursuing low-cost or no-cost measures. On average, SEP implementation has demonstrated payback periods of less than two years for facilities that have total energy costs of more than USD 1.5 million.
Demand response
Demand response (DR) entails the shifting of energy consumption from periods of peak demand to periods of low demand, compared with energy efficiency measures
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that result in total energy consumption reductions. DR is thus not an energy efficiency measure per se, but can help balance the energy load more efficiently (see more on DR in Chapter 9, “Electricity”).
In the past decade, DR has proliferated in the United States, playing an increasingly important role in electricity markets, where it is now valued as an integral resource in managing power markets (FERC, 2018). DR measures are rooted in providing incentives for consumers to postpone their energy consumption, either in the form of retail price reductions or direct payments, during periods of high demand.
According to the EIA, in 2017, 9.4 million customers across the United States participated in DR programmes, the vast majority of which (88%) came from the residential sector, resulting in around 1.3 million megawatt-hours of total energy savings. The commercial sector accounted for 11% of DR participation and the industrial sector just 1%. In terms of energy demand shifting, residential efforts accounted for 72%, commercial 19%, and industrial 9% of savings (EIA, 2018).
As part of this effort, utilities continue to deploy advanced meters to their customers. In 2017, the EIA estimated a total number of 79 million advanced meters operating nationwide out of a total of 152 million meters, accounting for 52% of all meters (a number that has been steadily rising in the past decade) (EIA, 2018). A number of state regulators have also approved, or are considering, time-based electricity rate setting, in an effort to galvanise DR.
Utility efficiency obligations
Though the federal government does not administer a national energy efficiency obligation on utilities, 26 states have energy efficiency resource standards (EERS) in place for the electricity sector while 16 states have EERS in place for natural gas (ACEEE, 2018d). These standards require utilities to achieve a set amount of energy savings over at least a three-year time horizon. Of these, seven states mandate that utilities achieve all cost-effective energy efficiency, or the maximum amount possible. The standards have resulted in improved energy efficiency and a reduction in consumer electricity bills since they were established.
The Federal Energy Regulatory Commission (FERC) is currently studying the role of distributed energy resources more broadly, including energy efficiency, in wholesale capacity and energy markets. In December 2017, FERC forbade states from preventing energy efficiency from competing in regional power markets without its approval.
Assessment
The United States continues to exhibit commendable improvements in energy efficiency since the last in-depth review in 2014. The energy intensity of the economy has been steadily falling, decoupling energy consumption (down by 1.7%) from economic growth (up by 15.3%) in the last decade.
Current projections in the EIA 2019 Annual Energy Outlook see a general improvement in energy efficiency, albeit at a slower pace than in the past. The EIA’s estimated 1.6%
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average annual decrease in energy intensity from 2018 to 2050 under the current policy regime will keep energy consumption essentially flat, but fall short of reaching the previously set national goal of reducing energy intensity by half by 2030 compared with 2005. US energy efficiency potential indicates that a further cost-effective reduction of total energy consumption should be possible.
Saving energy is often more cost-efficient than producing energy; improving energy efficiency directly translates into economic growth, job creation and environmental protection for the society, but these wider benefits do not always align with the financial interest of energy suppliers or landlords. EERS, which mandate a quantified energy efficiency goal for an energy provider or jurisdiction within a predetermined time frame, have proven one of the most cost-effective state-level policies, yet the extension of these policies to all states has been stalling in the last decade. The federal government should expedite ongoing efforts to ease the bidding of energy efficiency resources into wholesale capacity markets (where they exist) regulated by FERC. The development of a standardised product recognised and understood throughout the industry would also help provide clarity on the role of energy efficiency in the power system.
The federal level of support to applied R&D of energy-efficient technologies has substantially increased. The R&D budget for energy efficiency and renewables has grown by 25% since the last in-depth review (USD 2 379 billion appropriated for the 2019 fiscal year), and continues to offer the basis for efficiency gains. The research in national laboratories and institutions supported by federal funds has helped develop many technologies driving past energy productivity gains, such as light-emitting diodes (LEDs). The use of outside research contracts and technology transfer are important steps to accelerate and focus beneficial R&D output. The continued high levels of funding in efficient technologies and advanced manufacturing bodes well for future energy demand reductions while improving the competitiveness of the US economy. Additional support of newly developed technologies towards market readiness could complement policies and foster cost-effective energy productivity.
Since the last in-depth review, the DOE’s technical assistance to building energy codes allowed state authorities to update requirements in line with technological developments to ensure their effectiveness. The floor space covered under energy use benchmarking or disclosure policies continued to grow from 7.8% to over 13%, further supporting the energy efficiency renovations in the building sector but leaving a lot of potential for improving transparency and certification. Still, given that 75% of the building stock is expected to be either new or renovated by 2035, there is more scope to ensure that new builds or updates achieve significant energy savings. The inclusion of demand optimising and managing technologies in building codes and the development of building code strategies towards energy-neutral buildings offer the potential to achieve more costeffective savings in more buildings.
The federal government is the largest owner and user of building space in the United States, with an annual federal energy bill of USD 16.1 billion. The Federal Energy Management Program Office assists federal agencies in identifying economically sensible energy efficiency improvements co-ordinated by the Office of Federal Sustainability, and fosters access to private-sector financing and third-party contracting. The DOE has identified self-financing efficiency measures of up to USD 15 billion. While total federal energy savings performance contracts (ESPCs) investment was down in 2017, the federal government has invested more than USD 1.8 billion in ESPCs since
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the last in-depth review. This trend is a signal that federal agencies might not have the resources to tackle this task outside of their core objective. A centralised management and contracting of all federal building efficiency improvements, supported by federal loan guarantees for service providers, could allow for economies of scale and a more optimal allocation of resources, thus reducing costs to the federal budget. A fixed federal building improvement rate as a continuation of the reduction goals in the Energy Independence and Security Act and contrary to Executive Order 13834 that abolished previous costeffective annual reduction rates would further help create a market for efficient technologies and service companies while benefiting the federal budget and the whole economy.
The ongoing shale gas revolution offers some benefits to energy efficiency. The abundance of gas allows for more flexible gas-fired co-generation, which has multiple benefits, including improving energy productivity and electricity systems reliability and supporting a better integration of variable renewable energy sources, and decreasing energy system costs overall. Conversely, the operational capacity of co-generation has not increased by much since the last in-depth review, providing only 8.5% of total generation in 2017.
Steady industrial efficiency improvements have played a large role in past energy productivity gains. Federal programmes such as SEP and the IACs are important drivers. Nevertheless, industry still offers the largest potential for future gains. Demand for energy audits is greater than current capacities, signalling potential benefits in extending these programmes. Implementing smart manufacturing, utilising efficient technologies such as inline-four (IE4) motors and promoting a strategic approach to energy management can enable significant future energy productivity gains. During 2012-17, the United States saw a growth in certification of ISO 50001 from 6 in 2012 to 77 in 2017. While the energy performance improvements that US companies participating in the SEP programme have obtained are impressive, the programme hasn’t driven ISO 50001 certifications to the same extent as other measures in Europe, specifically tax incentives in Germany. The government’s financial support of the ISO 50001 energy management standard in other IEA member countries is an example of how the federal government could nudge companies in implementing this standard, delivering benefits to the whole economy. Incentivising a system of energy audits in large industries could help identify potential cost-effective efficiency improvements and spread best practice solutions for energy efficiency.
The transportation sector is the second-largest energy consumer in the United States. Over the last decade, minimum fuel economy standards have stabilised the sector‘s energy consumption, after two decades of strong demand increase, and yielded incentives for the automotive industry to develop more efficient internal combustion engines or EVs using batteries and fuel cells. Ambitious fuel economy standards with a long timeline are paramount for a continuation of this trend and requested by the US car industry for investment certainty: lightand heavy-duty vehicles are globally traded products with US manufacturers developing and producing to satisfy global demand. The federal government should take these additional benefits into account when projecting developments in the transportation sector: i) set ambitious future CAFE standards to create investment certainty in line with global trends; ii) continue to incentivise efficient vehicles and support the development of efficient mobility solutions; iii) operate only the most fuel-efficient vehicle fleet itself to pull the market; iv) and fully support state-level efforts to decrease the energy demand of transportation. Moreover, a global trend
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