To: Dr. Judy Layzer, Director MIT Urban Sustainability Assessment Project From: Brendan McEwen, Researcher MIT Urban Sustainability Assessment Project Political Memo: The Case for Local Government Action in Energy Efficiency Upgrade Programs There is a compelling case for local government involvement in energy efficiency upgrade programs1. At the national scale, energy efficiency and conservation can greatly enhance America’s prosperity and security, providing the most affordable, environmentally friendly, healthy and safe means of meeting our energy needs. Considering only non-transportation efficiency resources, McKinsey & Company (2009) estimate that American society could reduce energy use 23 percent, and greenhouse gas emissions 26 percent, below ‘business as usual’ projections by2020. While investment in energy efficiency would need to increase five times over, such investment would save on the order of $600 billion.2 In addition to economic and environmental benefits, energy efficiency could play a major role in national energy security by freeing capacity for electricity and natural gas to substitute for foreign oil in our transportation systems. Comprehensive energy upgrade programs targeting existing private residential and commercial buildings can supply roughly one third of that savings potential. The benefits for such programs accrue locally, as well as nationally, providing local leaders with strong justification for involving themselves in such programs. Benefits include: 1 Saving Citizens and Businesses Money – The average US households wastes hundreds per year in energy spending, many businesses thousands or more. A community of 50,000 people could easily collectively waste $30 million annually through energy inefficiency. 3 This is money that leaves the community, bound for large utilities and distant energy companies. Job Creation - Encouraging energy efficiency stimulates the American construction, trades and manufacturing industries. Analysis by the California Energy Commission indicates that for approximately every 5.5 houses that undergo EE improvements, one new job is created – that The programs reviewed as part of this work target whole-building energy efficiency improvements in the residential and commercial sectors. Programs variably provide outreach to potential customers; funding and financing assistance; workforce development; quality assurance regimes; and other services to support and grow the market in energy efficiency upgrades. Whole-building upgrades encompass improvements to building envelops, HVAC (heating, ventilation and air conditioning) systems, major appliances, and equipment. Programs supporting such comprehensive measures require greater coordination and different program infrastructure than energy efficiency efforts with a narrower scope, such as efficient lighting giveaways or appliance exchange programs. 2 McKinsey & Company. 2009. Unlocking Energy Efficiency in the US Economy. http://www.mckinsey.com/clientservice/electricpowernaturalgas/downloads/us_energy_efficiency_full_report.pd f 3 Assumes the average household and commercial spending attributed to each household, and 30 percent costeffective energy efficiency opportunities available. means that upgrading one percent of California’s homes creates 24,000 jobs4. EE upgrades have a greater ‘job density’ than traditional energy supply sources5. Promoting Equity – Low income peoples spend a disproportionate amount of their income on energy. While the average American household spends five percent of income on home utilities, low income families spend 15 percent, and some fixed income families 35 percent6. Energy efficiency can reduce this burden on low-income peoples. Moreover, local governments may be in unique positions to recruit low-income people into efficiency programs. Despite its benefits, low and moderate income groups have proven difficult to reach through existing programs; local governments can focus on achieving greater benefits for these groups than efficiency programs would otherwise provide. Local governments are also often more trusted messengers than utilities. Promoting Health – Building energy upgrades have proved capable of improving indoor air quality and ameliorate associated health impacts7. A wide variety of indoor air contaminants and other health hazards are found in existing homes. While still uncommon, many program administrators and advocates recognize the need to fold health initiatives and energy efficiency into one comprehensive building upgrade initiative. Address local governments’ environmental priorities – Many local governments have adopted climate action emissions targets and plans. Building upgrades comprise a crucial source of emissions reductions over the next decade, frequently comprising a quarter or more of community wide reduction potential. Generally, local governments cannot and should not implement energy efficiency programs entirely independently. Local energy efficiency programs are originated and implemented by a range of actors, including State Energy Offices, utilities, non-profit organizations, and local governments; they groups can collaborate and adopt different program functions as suits their interests and the success of the program. Notably, local governments can serve to establish organizations that will administer programs (semi-autonomously), serve as a conduit for senior government grants and/or bond financing, and provide a vital link to local communities. Significant staff resources are required to for programs to have a chance at success, but local governments need not fund the entire program to make an impact. 4 Panama Barthol. January 2011. Unlocking the Whole-Building Upgrade Opportunity: Energy Upgrade California. California Energy Commission. Webinar; US Census Bureau. California State Quick Facts. Housing Units, 2009. http://quickfacts.census.gov/qfd/states/06000.html 5 Max Wei, Shana Patadia, Daniel Kammen. 2010. "Putting renewables and energy efficiency to work:How many jobs can the clean energy industry generate in the US?" Energy Policy 38. p 919-931. 6 McKinsey & Company. 2009. Unlocking Energy Efficiency in the US Economy. 7 Wilkinson, Paul, et al. 2009. "Public Health Benefits of Strategies to Reduce Greenhouse-Gas Emissions: Household Energy." The Lancet 374, no. 9705: 1917-29.