September 24, 2012

MAINE COMPASS: Maine needs to invest in all forms of cost-effective energy efficiency

Tom Tietenberg

Since everyone seems to agree that energy cost is a main impediment to Maine's prosperity, a vote on Wednesday could have a significant effect on our future.

That's when the Board of Trustees for the Efficiency Maine Trust will vote on its new three-year plan for the state.

The draft plan contains two scenarios:

* A full energy savings option that seeks to go after all achievable, cost-effective energy efficiency.

* A meeker version that captures a bit less than half of the potential savings.

Both rely on the proven strategies and programs that Efficiency Maine has used for many years. There is little debate that these approaches actually help homeowners and businesses reduce their energy bills, often by 20 percent to 40 percent.

Eliminating waste via energy efficiency is the cheapest energy resource available. All realistic strategies to significantly lower energy costs in Maine rely on potential energy efficiency savings.

Legislation calls for Efficiency Maine to develop a plan for all cost-effective energy efficiency programs. Investments in these programs actually save money, but they can be confused with expenditures, resulting in less support.

After the board adopts a plan, the Public Utilities Commission will assure that it is in the interest of ratepayers.

Both versions of the plan will save consumers huge amounts of money, even considering the cost of the efficiency investments and administrative overhead.

Efficiency Maine's analysis, however, clearly shows that the full-savings plan will net Maine energy consumers $350 million more savings than the lower investment alternative.

Why would Maine want to choose a plan that would leave $350 million in cost-cutting on the table?

Investments by Efficiency Maine achieve verified savings of 3-4 cents per kilowatt-hour. (According to my CMP bill, I now pay 7.3 cents to produce a kilowatt-hour of electricity.) The state can either choose to eliminate waste at 3-4 cents per kilowatt-hour or choose to keep paying for it at 7.3 cents per kilowatt-hour.

Central Maine communities have benefited greatly from these programs.

Some 170 Waterville housing units reduced their energy bills as a result of a locally run, Efficiency Maine-supported, program, and an Efficiency Maine grant helped to fund Colby College's new biomass plant.

Not only do participating businesses save money on their energy bills but those lower bills allow them to be more competitive.

Tex Tech Industries of Monmouth noted recently that this energy efficiency assistance allowed the firm to keep its production in Maine rather than outsourcing it.

Another business leader told me that his lowered energy cost was probably an important factor in saving his Maine plant. When the parent company had to close one facility, a plant in another state shut its doors, not the one in Maine.

The benefits the state receives, however, are even larger than saving money or increasing competitiveness. Spending the money locally on energy efficiency rather than sending it out of state for imported energy produces a multiplier effect on both income and employment.

Every dollar spent locally on energy efficiency produces a larger increase in income and employment than a dollar spent on imported energy.

And the benefits don't stop there. Energy efficiency investments also lower our dependence on imports and reduce our emissions of the gases that contribute to climate change.

Finally, efficiency goods and services represent a growing sector of our economy, creating good-paying jobs for electricians, weatherization contractors, heating and cooling technicians, engineers, vendors and others.

The state has a choice.

We can fully invest in energy efficiency programs, so that energy costs can be lowered and Maine's future can be protected, or we can be timid and accept not only less than the full-savings plan called for in Maine law, but also less than Maine has been doing in recent years.

Timidity would result in higher than necessary energy costs, would maintain our high dependence on oil and would sacrifice the competitive edge we would otherwise gain from lower energy costs.

I hope our state chooses to lower energy costs by fully investing in the cheapest energy source -- energy efficiency.

Tom Tietenberg is the Mitchell Family Professor of Economics, Emeritus at Colby College and a former board member of Efficiency Maine Trust.

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