SMART ENERGY POLICY 1

Transcription

1 SMART ENERGY POLICY 1

2 WHY POLICY? ENVIRONMENT 2

3 WHY POLICY? SECURITY 3

4 WHY POLICY? EFFICIENCY 4

5 THREE TYPES OF ENERGY POLICY Economic Signals Support for R&D Reduce costs of Performance Standards Create markets for 5

6 ECONOMIC SIGNALS SET THE PRICE OF ENERGY TO REFLECT ITS TRUE VALUE Fully account for costs and benefits: Environmental impact Health impact Economic impact (jobs, GDP) Infrastructure costs Fuel costs 6

7 ECONOMIC SIGNALS Advantages: Markets allowed to find the lowest cost solution Reduced government interference Prices affect decisions about the purchase and usage of technologies, and these reinforce each other Disadvantages: Some sectors are resistant to price signals (ex. split incentives) Setting a true price can be politically difficult For some consumers, energy prices do not affect their behavior Costs still too low to matter No alternative option 7

8 PERFORMANCE STANDARDS SET REQUIREMENTS FOR TECHNOLOGY PERFORMANCE Examples: Fuel efficiency standards for cars Appliance and equipment standards Building codes Impact of refrigerator efficiency standards 8

9 PERFORMANCE STANDARDS Advantages: Proven very effective historically Overcomes market barriers Stimulates technological innovation Accelerates market saturation Spurs market competition Disadvantages: If poorly-designed, may accidentally induce unreasonable prices If well-design, may fail to change consumer behavior Or inadvertently affect the wrong behavior E.g. the rebound effect 9

10 SUPPORT FOR R&D INVEST IN AND ASSIST EARLY-STAGE TECHNOLOGIES Fraunhofer Institute for Machine Tools and Forming Technology 10

11 SUPPORT FOR R&D Advantages: Accelerating innovation can Spur private investment Create news jobs and businesses Increase the number of alternatives, which drives healthy competition Disadvantages: Energy R&D is greatly underfunded <0.5% of both the U.S. federal budget and U.S. private sector expenses Scale of investment needed is too financially risky for private companies Some technologies have benefits that are currently not monetized Ex: pollution reduction 11

12 SEVEN POLICY DESIGN PRINCIPLES Require continuous improvements Set clear policy goals, and let the market find best solutions Reward performance, not investment Include strong programs for measurement, evaluation, and future policy adjustment Go upstream, capture 100 percent of the market Influence investment in new infrastructure when it is designed, rather than waiting to retrofit or replace it Facilitate private sector innovation 12

13 1. REQUIRE CONTINUOUS IMPROVEMENT Incentivizes dynamic technologies Allocates some improvement to the public good 13

14 1. REQUIRE CONTINUOUS IMPROVEMENT Example of policy without steady improvements: CAFE Standards Nearly two decades of unimproved policy 14

15 2. SET CLEAR POLICY GOALS Montreal Protocol signed LET THE MARKET FIND THE BEST SOLUTION CFCs HCFCs HFCs The Montreal Protocol banned CFCs, requiring manufacturers to find alternatives 15

16 2. SET CLEAR POLICY GOALS Country comparison of fuel economy standards and targets BEWARE UNINTENTED CONSEQUENCES: (e.g. more efficient cars reduced costs of driving increased VMT) 16

17 3. REWARD PERFORMANCE, NOT INVESTMENT LBNL, EIA Production Tax Credit: Credit for electricity generation from wind Investment Tax Credit: Covers portion of wind project development costs Requires project to be placed in service within certain timeframe 17

18 3. REWARD PERFORMANCE, NOT INVESTMENT UK s Renewables Obligation Committed to generating 15% of power from renewables by 2020 Generators of renewable electricity earn certificates (ROC) on a per MWh basis Onshore: 0.9 ROC/MWh Offshore: 2 ROC/MWh 18

19 3. REWARD PERFORMANCE, NOT INVESTMENT AVOID LOOPHOLES, VALUE THE CORRECT METRIC (GENERATION, NOT CAPACITY) 19

20 4. MEASUREMENT, EVALUATION, AND FUTURE POLICY ADJUSTMENT Impact evaluation: Tests whether designed and implemented policies have their intended effect Benefits: Invests limited resources for maximum impact Identifies areas for policy adjustment and improvement Creates opportunity to pilot and test new policy approaches 20

21 5. INFLUENCE INVESTMENT IN NEW INFRASTRUCTURE DO NOT WAIT TO RETROFIT OR REPLACE Infrastructure can last for decades or centuries Lock in efficiency from the start Synchronize investment with capital stock turnover Avoid unnecessary upgrade or replacement costs 21

22 6. GO UPSTREAM, CAPTURE 100% OF THE MARKET VS. A handful of car manufacturers Millions of drivers ENFORCE EFFICIENCT TECHNOLOGIES/SYSTEMS, RATHER THAN EFFICIENT CUSTOMERS 22

23 6. GO UPSTREAM, CAPTURE 100% OF THE MARKET GENERATION CONSUMPTION ENFORCE REGULATION AT GENERATION STAGE, RATHER THAN CONSUMPTION STAGE 23

24 7. FACILITATE PRIVATE SECTOR INNOVATION SEND LONG-TERM SIGNALS Benefits: Creates clear R&D strategies and investment targets More cost-effective Less political uncertainty Comports with capital cycle Planning Time Horizon (5 to 50 years) 24

25 7. FACILITATE PRIVATE SECTOR INNOVATION CONSIDER NON-PRICE BARRIERS Contract structures Project siting Transmission connection Access to foreign talent 25

26 EXAMPLE: THE TRANSPORTATION SECTOR Transportation responsible for ¼ of total U.S. GHG emissions Transportation surpasses electricity as the most emitting sector in the U.S. EPA.gov 26

27 SIX POLICIES FOR TRANSPORTATION Clean Vehicles Clean Fuel Clean alternative mobility Standards 1 Vehicle efficiency standards* 2 Renewable Fuel Standard Low Carbon Fuel Standard 3 Sustainable urban design Smart urban transport Fiscal Vehicles Pricing Fuel Pricing VMT pricing Congestion pricing Road fee * Vehicle efficiency standards includes fuel economy standards and CO 2 / GHG standards 27

28 APPLY THE FRAMEWORK TO VEHICLES 1. Require continuous improvement Fuel efficiency standards increase every year 2. Set clear policy goals Fuel Efficiency Standards (not weight, not size, not displacement) 3. Reward performance Feebates, subsidies, fuel taxes 4. Monitoring, evaluation, and future policy adjustment 5. Influence investment in new infrastructure Subsidy programs, fuel efficiency standards, equipment testing procedures Access to government resources for equipment and efficiency testing 6. Go upstream, capture market Set efficiency standard with the manufacturer 7. Facilitate private sector innovation Enforce proper testing procedures, do not let underperformers enter the market 28

29 EXAMPLE: THE BUILDING SECTOR BUILDINGS ACCOUNT FOR 40% OF U.S. CO 2 EMISSIONS Geospatial.blogs.com 29

30 BUILDING PERFORMANCE STANDARDS OPPORTUNITIES Appliance Standards: More than 50 products covered 90% home energy use 60% commercial energy use By 2020, Saves enough energy to supply the U.S. electricity sector for nearly 9 months Avoids CO 2 emissions equivalent to running over 1,000 coal-fired power plants for a year Saves $900 billion in utility bill savings 30

31 BUILDING PERFORMANCE STANDARDS OPPORTUNITIES Building Codes: 43 states with commercial building codes 42 states with residential building codes In 2012, Saved enough energy to power 880,000 homes Avoided CO 2 emissions equivalent to taking 2 million cars off the road ACEEE 31

32 TOP TEN POLICIES Transportation: 1. Vehicle performance standards 2. Fuel and vehicle levies 3. Smart urban design Utilities: 4. Feed-in tariff and/or renewable portfolio standards 5. Utility-scale energy efficiency programs Buildings and Industry: 6. Effectively enforced building codes 7. Energy efficiency standards and labels 8. Industrial energy efficiency programs System-wide: 9. Properly aligned economic incentives 10. Support for R&D and innovation 32

33 @ E N E R G Y I N N O V L H A L _ H A R V E Y THANK YOU 33 W W W. E N E R G Y I N N O VAT I O N.O R G