HONEYWELL COMMENTS ON THE ENVIRONMENTAL PROTECTION AGENCY S PROPOSED CLEAN POWER PLAN

Transcription

1 HONEYWELL COMMENTS ON THE ENVIRONMENTAL PROTECTION AGENCY S PROPOSED CLEAN POWER PLAN December 1, 2014 The Honorable Gina McCarthy Administrator, United States Environmental Protection Agency 1200 Pennsylvania Avenue, NW Washington, DC Dear Administrator McCarthy, Honeywell appreciates the opportunity to comment on the Environmental Protection Agency s (EPA) proposed Clean Power Plan (CPP). While our comments focus primarily on the CPP s building block four on demand-side energy efficiency, we also provide commentary on biomass energy and the potential impact of power outages and utility price increases on Honeywell. We hope that the recommendations and issues identified in this letter are helpful as the Agency moves towards finalizing the rule next year. Introductory Comments As part of an effective national energy policy, Honeywell has long held that the United States should strive to do more energy generation (oil, gas, renewables etc.) and energy conservation to provide low cost power and put more money in consumers pockets. As a company, Honeywell does not take a position on the proposed CPP in its entirety. There is tremendous opportunity presented through energy efficiency (EE) - Honeywell s technologies and those of other companies. As such, we applaud the EPA for making EE a focus in the proposed CPP. We also appreciate that the CPP, once finalized, will require states, utilities and other stakeholders to change their approaches to power generation. In many cases, this will be a difficult process. As a company, we have resource-intensive manufacturing facilities that are significantly impacted when there is even a slight change in the price of power, or if the power grid is unreliable and there is an outage. We expand on these challenges below. We appreciate that the EPA will analyze the potential economic impacts across the U.S. as the Agency develops the final CPP, and also feel that EPA s focus on providing flexibility in the rule is critical. In deploying EE measures, states can opt for a variety of approaches today including utility and state-led programs, and private sector delivered projects like energy savings performance contracts (ESPCs). As a company, we have seen firsthand that EE technologies are low cost (relative to other options), low risk 1, 1 Maggie Molina, American Council for an Energy Efficient Economy, The Best Value for America s Energy Dollar: A National Review of the Cost of Utility Energy Efficiency Programs (Mar. 2014), available at 1

2 and can have a significant carbon reduction impact 2. The attached Honeywell-generated graphic provides key statistics that highlight the energy efficiency opportunity in the U.S. In this comment letter, we discuss areas where we believe the EPA can provide more specific guidance to states in the final CPP on acceptable EE programs and projects to include in state implementation plans, and on biomass energy as well. Also included are some thoughts we have from our perspective as a manufacturer on the potential impact of the rule on both energy reliability and prices. We would welcome the opportunity to discuss these comments in more detail in the future as EPA finalizes the rule. About Honeywell Honeywell invents and manufactures technologies to address some of the world s toughest challenges initiated by revolutionary macrotrends in science, technology and society. A Fortune 100 company, we create solutions to improve the quality of life of people around the globe: generating clean, healthy energy and using it more efficiently; increasing our safety and security; enabling people around the world to connect, communicate, and collaborate; and equipping our customers to be even more productive. With approximately 135,000 employees worldwide, including more than 22,000 engineers and scientists, we have an unrelenting commitment to quality and delivering results in everything we make and do. Honeywell has over 100 years of experience in providing energy management solutions. You will find Honeywell systems in more than 150 million homes, ten million buildings, 24 of the top 25 refineries, and industrial sites around the world. Approximately 50 percent of our product portfolio delivers energy efficiency benefits. In addition, 2 million homeowners across North America are using Honeywell thermostats, along with load-control switches we ve installed, to help more than 100 utilities trim energy use when overall consumption peaks and strains the electrical gird, reducing the potential for outages and decreasing the need for new power plants. As a result of our technology and services, utilities now have the combined ability to temporarily lower the demand for energy by 2.1 gigawatts, almost 20 times the power needed to operate all the NFL stadiums on any given Sunday or the equivalent generation of 30 small power plants. Honeywell has also completed almost 5,700 energy savings performance contracts (ESPCs) for schools, cities, military bases and other government entities; these projects are expected to deliver $6 billion in guaranteed energy and operational savings. Honeywell Energy Efficient technologies include: Building controls that allow building owners to reduce energy usage in the range of 20 percent while still keeping their tenants comfortable. 2 Sarah Hayes et al., American Council for an Energy Efficient Economy, Change Is in the Air: How States Can Harness Energy Efficiency to Strengthen the Economy and Reduce Pollution (Apr. 2014), available at 2

3 ESPCs where our experts go into a facility, analyze energy use, implement conservation measures and guarantee that the subsequent savings will pay for the upgrades. Innovations such as wifi communicating thermostats that allow homeowners to more easily manage and reduce their energy use while providing utilities with the ability to deliver electric savings, peak reduction and gas savings in one program. Heating and cooling (space conditioning) accounts for almost 48 percent 3 of residential use. A recent study found that connected thermostats would save approximately: 5% of energy use for home space heating; 19% of energy use for home cooling during a normal weather year; and 7% of energy use for heating and cooling 4. Solstice low-global-warming-potential blowing agents that provide energy efficiency to foam insulation for homes and appliances. Foam insulation that creates R-30 values, saving considerable energy. Updated Process Control Systems for any manufacturing process facility that can save up to 10%. Honeywell supports the use of existing state- and utility-led energy efficiency programs. These mechanisms help to provide a long-term signal to the market of the importance of energy efficiency. We encourage the EPA to build on these existing programs. The next several sections provide Honeywell s targeted recommendations for the proposed CPP s building block four. Demand Response Electric, gas and water utilities face increasing pressure to deliver more successful DR and EE programs to help address utility demand-side objectives. For over 30 years, Honeywell s Smart Grid Solutions team has worked with more than 100 utilities worldwide to help meet their DR and EE goals. Honeywell asks that EPA, in the final CPP, recognize and encourage DR programs at the state level. DR can assist with emissions reduction through helping to integrate renewable energy sources of power 5, and supports load-shifting which can boost cleaner power generation. DR technologies can also reduce peak demand and can help avoid the need for investment in peaking capacity freeing up capital for other investments 6. These are technologies that are widely in use now and support the goals set forth in the proposed CPP. 3 U.S. Energy Information Administration, Heating and cooling no longer majority of U.S. home energy use (Mar. 2013), available at 4 The Cadmus Group (prepared for Honeywell), Energy Savings from Honeywell Total Connect Comfort Thermostats (Oct. 2014), available at %20Energy%20Savings%20from%20Honeywell%20Connected%20Thermostats%2013OCT2014_Final.pdf 5 Sila Kiliccote, Lawrence Berkeley National Laboratory, The Building as an Energy Storage Device: Fast Demand Response as a Solution to Intermittent Renewables (Aug. 2012), available at 6 Federal Energy Regulatory Commission, A National Assessment of Demand Response Potential (June 2009), available at 3

4 Energy Savings Performance Contracts ESPCs are comprehensive, self-funded projects where the equipment and technology installed to modernize buildings and facilities are paid for by guaranteed energy and operational savings. ESPCs allow for a building owner to make significant EE upgrades without upfront cost. While Building Block 4 did not exclude ESPCs as a means of compliance that states can utilize, we feel that ESPCs should be explicitly called-out in the final version of the rule, providing sufficient guidance to states so that they can determine if ESPCs should be included in their implementation plans. Honeywell is part of a coalition of other energy service companies (ESCOs) that has developed a technical document 7 to support this and other recommendations related to inclusion of ESPCs in the final CPP. There are significant opportunities at the state level where EPSCs can be more widely adopted in the MUSH market - municipal and state governments, universities and colleges, K-12 schools, and hospitals resulting in substantial decreases in energy consumption 8. Non-Utility Ratepayer-Funded Energy Efficiency Programs In addition to ESPCs, we recommend that EPA provide specific guidance to states that other non-utility delivered EE can be included in state compliance plans. Some specific examples where EPA may wish to provide additional information in the final CPP include: Building Codes: States should get credit for EE and CO 2 reductions resulting from adopting, updating and increasing compliance with building energy codes. Financing: States should receive credit for energy savings that result from EE finance programs such as Property Assessed Clean Energy (PACE). State Tax Incentives & Rebate Programs: State and municipal tax incentives, regulations and product rebate programs can accelerate investment in EE technologies and improve EE outcomes. Industrial Energy Efficiency Honeywell asks that EPA provide clear guidance in the final CPP that industrial energy efficiency programs, both rate-payer programs and non-utility programs, can be included in state implementation plans if those projects are using a tool that can measure and verify energy savings. Taking a broad approach and giving clear guidance could be a significant driver for increased industrial efficiency efforts (energy management systems, combined heat and power) in the states. 7 AJW on behalf of Ameresco, Honeywell, Ingersoll Rand, Johnson Controls, Schneider Electric, Siemens, and United Technologies, Greenhouse Gas Reductions Through Performance Contracting Under EPA s Clean Power Plan (Nov. 2014), available at 8 Elizabeth Stuart et al., Lawrence Berkeley National Laboratory, Current Size and Remaining Market Potential of the U.S. Energy Service Company Industry (Sept. 2013), available at e_0.pdf 4

5 Biomass Energy Production Honeywell UOP, through its joint venture Envergent Technologies, offers a proven method to convert biomass into a liquid biofuel that can generate renewable heat and power or even be upgraded in the future to produce green transport fuels. Honeywell encourages EPA to consider all pathways to lower carbon footprint electricity including biomass. Biomass energy, specifically waste biomass and residues from sustainable forestry management and forest products manufacturing, provides low-carbon energy. Biomass provides consistent, baseload energy and we recommend that EPA provide a clear pathway for utilization in the final rule. Most states with renewable portfolio standards recognize biomass energy. If the EPA provides a clear pathway to credit the resulting carbon mitigation of low-carbon sustainable biomass in the final rule, this could encourage greater use of this clean energy technology with resulting GHG reductions. Grid Reliability & Cost Increases EPA may want to consider the potential impact of the Proposed Rule on grid reliability. As a company with large, energy intensive manufacturing facilities in the U.S., reliable electricity is critical and power outages have severe economic impacts to Honeywell. We develop contingency plans to prepare for these outages in our facilities. These plans, along with investments in alterative electricity supply options, are costly. We ask that EPA consider the severe impact of outages and the importance of grid reliability to U.S. manufacturers in developing the final Clean Power Plan. Honeywell also wants to share some thoughts on the impact of the Proposed Rule on our manufacturing operations. As the CPP is implemented, there may potentially be cost increases due to market drivers on the cost of natural gas, and also related to utility capital investment in: new generating assets to replace coal units; converting coal to natural gas; investing in new renewable energy assets; and investment in new transmission infrastructure to support additional renewable assets. While it is the utilities that must make these capital investments, it is the ratepayer (consumers) who pay for the investments. In Virginia, a state where Honeywell has energy intensive manufacturing facilities, the estimated electricity price increase to ratepayers is expected to be approximately 30 percent by As with grid reliability, we ask that EPA consider the negative consequences of power price increases that might result from the CPP. Evaluating, Measuring and Verifying End-Use Efficiency We agree with other organizations that are urging EPA to provide clear guidance for evaluating, measuring and verifying (EM&V) savings from EE. Doing so will give states assurance that proposed enduse efficiency efforts in their 111(d) compliance plans will receive credit for meeting emissions reduction goals. 9 Peter Bacque, Richmond Times-Dispatch, Dominion Virginia Power customers could see bills rise 30 percent by 2025 to meet EPA plan (November 2019), available at 5

6 More specifically, EPA should: describe approaches to EM&V that states can use that are both accurate and least burdensome; identify widely used EM&V protocols for use by states in their compliance plans; and, provide draft EM&V guidance to states before publishing the final rule. Providing clear EM&V pathways that are not overly complex is a critical component 10 if EPA wishes to see increased EE activity in the states as a result of the CPP. Crediting Early Action We support the long-term signaling of the importance of energy efficiency but also for the ability of entities to capture savings prior to As currently stated, the Proposed Rule provides credit for emission reductions that occur during the period. Energy savings in 2014, 2015 and to a lesser degree 2016 are already underway based on current standards (e.g. EERS) and various state and utility programs. Entities that are early to act should be encouraged and rewarded for those activities. We believe the publication of the final rule, including clarity on EM&V, will allow for the basis to capture approved savings from state level plans beginning as soon as Conclusion Honeywell believes that the CPP has significant potential to promote increased demand-side energy efficiency programs, incentives and policies. And we feel that there are significant opportunities to do more EE at the state level. We ask the EPA broaden the scope of demand-side EE options states can use in complying with the rule, and provide specific guidance in the final CPP that will give states the necessary assurance to include various EE programs and projects in their implementation plans. We also ask that EPA provide specific guidance in the final CPP on the use of biomass energy. Finally, we respectfully request that EPA consider the impact of the CPP on U.S. manufacturers, specifically the areas of grid reliability and energy costs. Honeywell thanks the EPA for the opportunity to provide comments and welcomes the opportunity to serve as a resource going forward as EPA works to finalize the CPP. 10 Alliance to Save Energy, The Evaluation, Measurement & Verification Challenge: The Importance of Evaluating Energy Efficiency Program Effectiveness (Mar. 2013), available at 6