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Planning for energy use and conservation

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Title:
Planning for energy use and conservation
Creator:
Esperance, Marette
Language:
English
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95 leaves : charts ; 28 cm

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Subjects / Keywords:
Energy conservation -- United States ( lcsh )
Energy policy -- United States ( lcsh )
Energy conservation ( fast )
Energy policy ( fast )
United States ( fast )
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Academic theses. ( lcgft )
bibliography ( marcgt )
theses ( marcgt )
non-fiction ( marcgt )
Academic theses ( lcgft )

Notes

Bibliography:
Includes bibliographical references (leaves 92-95).
General Note:
Submitted in partial fulfillment of the requirements for the degree, Master of Planning and Community Development, College of Design and Planning.
Statement of Responsibility:
submitted by Marette Esperance.

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Source Institution:
University of Colorado Denver
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Auraria Library
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All applicable rights reserved by the source institution and holding location.
Resource Identifier:
13789262 ( OCLC )
ocm13789262
Classification:
LD1190.A78 1986 .E778 ( lcc )

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Full Text
PLANNING
s'
FOR
ENERGY USE AND
CONSERVATION
SUBMITTED BY MARETTE ESPERANCE
In partial fulfillment of the requirements for the Degree of Master of Planning and Community Development University of Colorado at Denver Spring 1986


ACKNOWLEDGEMENTS
Ken, you've always helped me when I've needed it. Thanks.
Herb, your understanding and expertise have been invaluable. Thanks.
Sheila, Cass, Sue, Madeline, Carla, Janet, Cindilou: You listened. Thanks.
Fred, you got it on the paper. Thanks.
Scott, you've been agreeable throughout. Thanks.


TABLE OF CONTENTS
Introduction...............................................1
Chapter 1. Energy:
Crisis, Conservation,Policies, Programs, and Planning....4
Chapter 2. Barriers to Energy Conservation...............24
Chapter 3. Federal-State Energy Conservation Programs....31
Chapter 4. State Activites: Focus on Financing...........49
Chapter 5. Planning Energy Use and Conservation: Recommendations for State and Local Governments...........64
Chapter 6. Conclusion.....................................89
Selected Bibliography,
92


LIST OF FIGURES
Figure 1.............................................5
Figure 2.............................................6
Figure 3.............................................8
Figure 4............................................17
Figure 5............................................34
Figure 6............................................51
Figure 7............................................52
Figure 8,
.58


INTRODUCTION


INTRODUCTION
Energy conservation pleases my thrifty soul. It improves my comfort and it reduces my costs. It gives me a way to put my money where my mouth is because, to steal a phrase, caulk is cheap. The effect that the current drop in oil prices may have on conservation worries me. The cheap prices at the pumps make many people think the energy crisis is over. I know it isn't so. The energy crisis is just changing its nature.
For Colorado and some other states, and many local governments, the coming energy crisis won't be one of availability, it will be one of higher end-use prices, exacerbated by a loss of tax revenues due to lower crude oil prices. For example, projections show that electricity is increasing it's share as an end-use source of energy and prices of electricity are expected to double within 10 years. Increased end-use energy prices and lower tax revenues will put state and local governments in an energy and budget crunch while citizens are guzzling at the gas pumps. The next, largely invisible, energy crisis will be a fiscal one for state and local governments that citizens may be unaware of.
The Federal government has experimented with stimulating energy conservation. However the lack of financial commitment and the experimental nature of federal-state energy conservation programs, as they are now, make them inadequate for the task of providing the
1


long-term technical and management assistance that state and local governments need to plan for and implement energy conservation action that can alleviate future budget crunches. Unless these dinosaurs change, they will die out and leave us only memories as their residue. One extraordinary thing, however, provides the opportunity to change the old, piecemeal, experimental approach to planning for energy conservation: the oil overcharge settlements currently being directed by the federal courts to five federal-state energy conservation programs. The allocation of these monies (over $21 million to Colorado in the latest settlement) to energy conservation programs, while it does not make the regulatory changes in the programs that would most benefit state agencies and local governments, does provide substantial, stable funding for energy conservation activities.
This paper addresses the continuing importance of energy conservation as an element of state and local government planning in spite of the public’s perception of energy abundance and low price. It discusses the current federal-state energy conservation programs and the opportunities and constraints they offer. It shows that, supported by oil overcharge funds, federal-state energy conservation programs, with regulatory changes, can provide the climate for long-term planning and implementation of energy conservation measures that will save both energy and money for state and local governments and their communities. Finally, it suggests planning and management approaches that have been
2


shown to be effective and can be used by state and local governments both in their own management activities and in developing energy conservation within their own communities.
Caulk is, indeed, cheap. While not all energy conservation measures are as inexpensive, only planning for energy use and conservation can control the cost of energy for state and local governments and shelter them from the next energy 'crisis'.
3


CHAPTER 1
ENERGY:
CRISIS, CONSERVATION, POLICIES PROGRAMS, AND PLANNING


CHAPTER 1 ENERGY:
CRISIS, CONSERVATION, POLICIES, PROGRAMS, AND PLANNING
In recent years, the availability and use of the world's energy resources has become an issue facing individuals, businesses, institutions and all levels of government. Each has had to deal with rising costs and fluctuating supplies of traditional sources of energy. Each has experienced financial pressures, planning uncertainties and performance limitations because of the cost or availability of energy. Each has taken action to curtail demand and this combination of actions-federal-state energy conservation programs, market and political forces, and individual conservation efforts—has joined with a declining economy and may be
i 9
responsible for today's apparent oil glut ’ that has pushed the price of oil
-a
to its lowest level in thirteen years. The energy crisis has eased.
It has not, however, disappeared. It is only in hiding. The current energy situation is neither stable nor predictable. Usage is on the rise again^ (see figures 1 and 2) and while lower prices provide some relief to the consumer, price projections suggest that the worst is still to corned Three things in particular will cause problems for state and local governments:
4


Figure 1. Consumption of Energy by Source, 1949 - 1984
Quadrillion Btu
Nuclear Power
Hydropower, Geothermal, and Other Petroleum
1949 1955
1960 1965 1970 1975
1980 1984
Annual Energy Review 1984 - Energy Information Administration
5


Figure 2. Consumption of Energy byEnd - Use Sector, 1949 -1984
8uadrillion Btu umulative 100-
Electric Utilities
* Fossil Fuel Only
Annual Energy Review 1984 - Energylnformation Administration
6


First, end use energy sources, those sources used for the final
work desired, are shifting from natural gas to electricity.
Electricity consumption is expected to grow more rapidly than
the demand for all other fuels. This is true for the
residential, commercial, and industrial sectors.^ (figure 3)
Although recent studies show that the growth of electricity
7 8
comsumption will not be as rapid as it was before 1973, ’ primarily due to more efficient industrial and commercial processes, electricity will take up a bigger percentage of utility bills than it has in the past. This shift to electricity takes place by default, rather than by design, as the production of electricity increases. Local governments will increasingly use electricity as a source of end-use energy.
Second, while it is impossible to predict long term energy prices with precision, the general upward trend is expected to continue. At a minimum, energy costs are expected to track the annual rate of inflation. By some estimates, the price of electricity will almost double by the year 2000, with inflation factored out.9
Third, many state and local governments will face significant losses of tax revenues from lower crude oil prices. Dropping oil prices will cost Colorado counties $8.2 to $15.3 million in tax
7


Figure 3. End - Use Energy Consumption by Energy Source, Selected Years.
^ Coal
1970 1975 1980 1985 1990 1995
Note: Percentage shares may not sum to 100 percent due to independent rounding.
Source : ‘History: Energy Information Administration, State Energy Data Report. 1960 - 1982. DOE/EIA - 0214 (82) (Washington, DC, 1984). •Projections: Appendix A, Table A4
8


revenue annually if oil prices remain around $15./ barrel. Over half of Colorado counties won't feel that loss until 1988 because the property tax levies lag two years behind production.^
These three factors promise that states and local governments will face declining municipal revenues while municipal utility bills increase. Although planning for energy use and conservation in the face of both an uncertain energy future and the public perception of energy abundance is difficult, it is a necessary task. State and local governments have the responsibility to spend their citizen's and businesses' tax dollars wisely. They also share in the responsibility for dealing with the energy problems of their local communities. Appropriate long-term planning for energy use and conservation by state and local governments fulfills these responsibilities.
DEFINITION OF ENERGY CONSERVATION
Energy conservation has at least two distinct meanings.
First, conservation means using energy more efficiently and ending energy waste. Buildings can be more tightly sealed. Newer, less expensive technologies can be substituted for other, older ones to produce the same output of goods and services as before. Lights can be turned off manually or by sensors; street lighting can be modified to accomodate more efficient
9


fixtures. There is no reduction in comfort and no impact on life style.
Using energy more efficiently in these ways is called a 'technical fix'. * ^
Second, conservation means saving energy through life style changes,
12
whether modest or severe, and curtailing activities. Carpooling, thermostat set-backs, and shorter hours of service are examples.
People almost always regard energy conservation as a dull, if sometimes necessary, evil, an unpleasant duty that is best dismissed in private. Methods and incentives for energy conservation have been characterized as "grim little lectures". In general, this paper discusses painless energy conservation, the 'technical fix’, which is credited with reducing energy usage in 1980 by 10x10^ BTU's or a stunning 11%.^
The 'technical fix' costs money, but it pays for itself in the long run. It is the easiest, most durable, and most politically sensitive method that can be used to save energy and money. Since it can guarantee energy savings it is also the most reliable element in any energy use plan. Energy conservation's 'technical fix’ can effectively control the use of energy by the consumer.
ENERGY AS A COMMODITY
Energy is a commodity. As such, supply and price are well outside the control of the end-use consumer. Energy follows the same 'hog cycle' that plagues the mythical midwest farmer. When the price of pork bellies climbs, the farmer and all his neighbors breed more hogs and end up
10


glutting the market. The price of hog bellies then drops, and the farmers breed fewer hogs, creating shortages that jack up prices, and the process starts all over again.
Historically, production and consumption of energy have followed the same slow but steady increase. Price remained fairly constant until 1973 when reliance on imported oil to meet demand began to increase dramatically^ and the first round of OPEC price increases seemed to signal the end of cheap and plentiful energy supplies for the U.S. In response, domestic and foreign exploration and development of previously unprofitable reserves took off in earnest. Utilities began to expand capacity and people turned down the heat. In 1980, the war between Iran and Iraq exaggerated the instability of petroleum supplies and years of inflation pushed the price of a barrel of oil to a high of over $40. At the same time, Three Mile Island served as a symbol of all the problems associated with high-tech alternative energy sources. Conservation became one of the easiest, cheapest, and cleanest 'sources' of energy around. Beginning in 1978, conservation and the declining economy combined to create a decline in energy consumption that lasted until 1983.^’^
By early 1986, political and market forces blew the bottom out of the barrel and oil prices plummeted to their lowest level in thirteen years. Consumers reaped the benefits as the cost of unleaded gasoline dropped below $.75/gal. Governmental support of energy conservation fell: energy consevation programs were cut between 11% and 22% in the 1986 Federal budget and tax credits for energy conservation were allowed to expire.


Rather than continue to expand capacity and develop new reserves, private
development and exploration screeched to a halt. The cheapest way to
19
acquire oil reserves now is to merge with another company.
FEDERAL ENERGY CONSERVATION POLICIES
If the latest drop in price signals the bottom of the energy cycle, the Reagan administration has always signaled its belief that the energy crisis was a figment of someone else's imagination. The two emergency energy conservation programs mandated by President Carter in 1977 (Emergency Building Temperature Restrictions, which required us to be ’hot in summer and cold in winter'; and the Emergency Energy Conservation Act, which guided and proposed funding for State contingency planning for energy shortages) were discontinued within days of Reagan's inauguration in 1979. Gas rationing planning was killed in 1980, long before the ill conceived coupons were buried in Pueblo. More recently, gas mileage standards have been relaxed, appliance efficiency ratings are no longer required, energy conservation tax credits have been allowed to expire, and the Federal Power Authorities, the largest producers and cheapest brokers of domestic electicity, have been suggested for the auction block as elements in the plan to 'privatize' America. Federal energy conservation policy has been inconsistent and unclear. It has been characterized as "temporary, and often misguided, efforts to come to terms with the new national energy condition. They were mostly experiments and expedients
12


99
to buy time." However, one message is clear: energy policy has shifted toward greater reliance on market forces. The role of the government in mandating conservation has ended and its position as direct supplier and stimulator of alternative energy sources has drastically changed. Saving energy is no longer a national priority.
Less clear is the role of current federal energy conservation programs first authorized by Congress in 1975. Implemented through state energy offices, federal conservation programs have become the principal government energy efficiency programs in the U.S. Products of the '70's, they have been subject to budget reductions, Reagan administration termination proposals, and increasing scepticism regarding their need in the mid-'80's. Market advocates consider that^conomic incentives make them redundant; advocates of government intervention argue that they are cost-effective and address continuing market imperfections. In many states, they are the only state-wide energy conservation programs available. Their importance may increase as other federal initiatives are discontinued and their role will certainly expand as Congress and the courts continue to direct to them the billions of dollars emerging from oil overcharge and misallocation settlements.^ On the whole, the federal-state conservation programs were designed to provide information to the consumer, whether individual, commercial or governmental, that would encourage the consumer to proceed with energy efficiency improvements. Direct funding for a 'technical fix' has been limited to the low-income residential consumer and to schools and hospitals, institutions
13


primarily concerned with delivery of quality community services, where cost efficiency remains a secondary concern. Limited as they are by regulation and budget, they often cannot provide State and local governments with the leadership, expertise, or creativity necessary to meet their needs.
CURRENT FEDERAL-STATE ENERGY CONSERVATION PROGRAMS
In 1975, The Energy Policy and Conservation Act established the basic framework of the current federal-state energy programs. The act provided federal funds for states to establish State Energy Conservation Plans. These responsibilities and accompanying administration money helped institutionalize state energy offices and set the model for subsequent federal-state conservation activities in which the federal government provides the funding and regulatory framework and the states serve as implementation agencies that apply for their share of annual appropriations, adapt the federal mandates to their context, and implement the actual programs. The intent was to end reliance on foreign energy producers by reducing consumption and to buy time for the development of domestic reserves and new energy technologies.
While the original energy programs aimed a shotgun at all sectors, current federal-state energy activity centers on the following programs:
the State Energy Conservation Program, (SECP), which contains both mandatory and optional program elements;
14


the Energy Extension Service, (EES), which provides information to small-scale energy users;
the Institutional Conservation Program, (ICP), which funds audits and capital construction projects for schools and hospitals; and
the Weatherization Assistance Program, (WAP), which weatherizes low-income dwelling units.
The expectation was that information would lead to independent action by individuals, businesses, local governments, and state agencies who would be motivated by potential savings to bear the costs of capital improvements. Conservation would be subsidized for those unable to afford it: the low-income family and public and private, non-profit schools and hospitals.
The Reagan administration has proposed termination and phase-out or zero funding for most of the programs in each annual budget request.
Although similar opposition and ambivalence exists in Congress, the majority there has forced the programs' continuation. Federal appropriation levels have decreased steadily, except in 1983 when the Jobs Act provided two programs with an additional $150 million. Nearly all energy offices have had to greatly reduce their staff and program activities as a result of the instability of funding and smaller basic appropriations. Congress' budgetary habits also contribute to an episodic and piecemeal approach to programs. Appropriations are never guaranteed, the amounts budgeted are always threatened, and final appropriations have been in
15


jeopardy until the moment of Congressional voting. Yet state plans for the expenditure of the funds are required within weeks of the appropriations. There is little incentive to plan programs for imaginary money or to run programs that span more than one year. Activities that would require additional funding in following years are seldom implemented or may not be carried out to their logical conclusion. As the principal government energy efficiency programs in the U.S., the federal-state energy conservation programs lack commitment and continuity.
OIL OVERCHARGE SETTLEMENTS
In the last few years, however, the states have received over $250 million in oil overcharge settlement awards for use in the programs. The first settlement, $200 million, was distributed in 1983 to governors for use in five federal-state conservation programs. In 1986, the courts have directed that an Exxon settlement of over $2 billion (This represents ten times the amount of funding appropriated by Congress in 1986 for conservation programs. Colorado will receive $21 million.) also be allocated to the five programs. Eventual settlements in the Petroleum Violation Escrow Account could exceed $7 billion. (Figure 4)
16


OIL OVERCHARGE COLLECTIONS
(In billions of dollars)
Collections in government
escrow account $1.16
Exxon's Hawkins Field pavment 2.10
Expected from maior refiners 1.60
Expected from other oil companies 1.40
Expected from Wichita court case 1.43
TOTAL $7.69
NOTE: Includes overcharges for both crude oil
and refined products
Source: U.S. Department of Energy
Figure 4 Oil Overcharge Collections
So in the face of apparent gluts of oil, a declining commitment from the Congress, and a public perception of energy abundance, over $2 billion from overcharge and misallocation settlements has recently been directed to energy conservation programs. Although the programs as they exist now have limited abilities to meet the needs of state and local governments for direct capitalization of technical improvements, oil overcharge funds can provide a substantial, stable source of support for the federal-state energy conservation programs. Freed from threats of termination and
17


assured of funds, energy conservation activities sponsored by these funds may be able to produce the climate and technical assistance necessary for state and local governments' long term planning efforts for energy use and conservation.
PLANNING ENERGY USE AND CONSERVATION
Planning energy use and conservation is a difficult task for state and local governments for a variety of reasons.
• Predictions about energy price and availability are difficult to make, making planning uncertain.
• Highly visible lower gasoline prices blunt the public incentive to conserve and reduce support for conservation activities.
• Conservation activities are technical and often require expertise that is not readily available.
• Energy conservation retrofits often require large initial capital outlays. Subsidies for retrofit projects are prohibited by the federal-state energy conservation program regulations, forcing State and local governments to bear the entire cost of the retrofit
In spite of these difficulties, state and local governments must act now to plan for their efficient use of energy and its conservation in order to avoid the budget problems that unchecked and wasteful energy use guarantee.
• Although predicting energy prices and availability is uncertain, increased energy consumption and costs are guaranteed if state and
18


local governments fail to plan for efficient energy use.
• Although lower gas prices can reduce support for conservation activities, efficient management and planning activities can win support by delivering lower costs.
• Although conservation activities require technical expertise, the techniques and expertise are available.
• Although conservation retrofits often require initial capital outlays, they can pay for themselves and continue to produce 'revenue' by avoiding future costs.
By including energy use and conservation considerations in their planning and management activities, governments begin to meet an aspect of their fiscal responsibility to taxpayers. By integrating the painless 'technical fix’ into routine municipal management and planning procedures, energy management and conservation can escape the onus of 'grim little lectures' and become popular efficiency activities. Municipal governments can control their energy use and cushion their budgets against the next invisible energy crisis, in spite of the public perception of abundant energy, if energy conservation activities are routinely undertaken as efficient operating procedures in both municipal activities and land development practices.
19


Footnotes: Chapter 1
1. U.S. Department of Energy, Energy Use from 1973 to 1980: The Role of Improved Energy Efficiency. Oak Ridge National Laboratory, (Oak Ridge, Tn. NTIS December, 1981), p.40.
2. U.S. Department of Energy, Energy Information Agency, Annual Energy Review 1984. (Washington, D.C.: Government Printing Office, April, 1985).
3. Ibid.
4. Projecting energy price, consumption, and production is uncertain, at best, and may be impossible. The Energy Information Administration acknowledges this in its annual forecasting report. "Energy consumption projections in this report are determined by a variety of factors including economic growth, energy prices, and energy conservation trends.
Considerable uncertainty is associated with estimating the behavior of these determining factors. It is also uncertain whether these determining factors will influence future energy consumption in the same way they did in the past." U.S. Department of Energy, Energy Information Agency,
Annual Energy Outlook. 1984. With Projections to 1995. (Washington, D.C.: Government Printing Office, January, 1985) p.91
5. Ibid., p. 94.
6. Ibid., p. 91
7. Ibid., p. 91
8. Walter A. Rosenbaum, Energy. Politics, and Public Policy. (Washington, D.C., Congressional Quarterly Press, 1981), pp.209-211.
9. American Gas Association, Total Energy Resource Analysis Model. (Arlington, VA January 1986.
20


10. Colorado’s leading oil producing counties—Rio Blanco, Weld, Cheyenne, Washington, and Adams—will be hit the hardest by the revenue drops. In 1984, Colorado counties collected $68.8 million in ad valorum taxes.
Production taxes average 7.15%. Property taxes on lease equipment are in addition to these levies. Colorado Oil and Gas Conservation Commission report. Michael Rounds, "Oil price drop may trim tax revenue.", Rockv Mountain News. 2/27/86.
11. Amory B Lovins, Soft Energy Paths: Toward a More Durable Peace..
(New York, Harper and Row, 1977) p.32
12. U.S. Environmental Protection Agency, Office of Environmental Engineering and Technology, Federal Energy Conservation Programs; Perspectives from the Public and Private Sectors: Volume L (Washington, D.C., Government Printing Office, May 1982), pp4-5.
13. Vincent Carroll, "Oil proved slippery indeed for the prophets.", editorial, Rockv Mountain News. 3/7/86.
14. U.S. DOE, Energy Use from 1973 to 1980. pp.37-38
15. U.S. DOE, EIA, Annual Energy Review 1984. p.24.
16. Ibid.
17. U.S. DOE, Energy Use from 1973 to 1980. p.41.
18. U.S. Congress, Joint Budget Committee, Budget. 1986. (Washington, D.C., March, 1986),
19. David Pauly, "The Unmaking of an Oil Cartel", Newsweek. 2/3/86, pp.36-38.
20. Editorial Research Reports, Energy Issues: New Directions and Goals (Washington, D.C., Congressional Quarterly, Inc., May, 1982), p. 14.
21


21. The Reagan Administration announced its plan to sell the five federal power authorities—Bonneville,Western Area, Southwestern, Southeastern, and Alaska-in its fiscal year 1987 budget proposal.
Based on a suggested sale price of $13.9 billion, contained in the White House budget plan, The American Public Power Association estimated that power costs would rise roughly 68% or approximately $2.2 billion a year.
Because administration officials have hinted that the final sales price could be open to negotiations, the "rate shock" could be even more severe.
If the sales price of the power authorities were based on the Heritage Foundation's estimates, the price would be set at $65.9 billion and would boost power costs by about 390% or $12.6 billion a year for those affected. Energy Users News. 3/24/86
22. Rosenbaum, Energy. Politics, and Public Policy, p. 193.
23. Stephen W. Sawyer, "Federal-State Conservation Programs: The states' assessment." Energy Policy. April 1985, pp.156-168.
24. In 1973, federal regulations were imposed to hold petroleum prices down, encourage domestic production, and reduce American dependence on foreign petroleum sources. Prices for domestic crude oil and petroleum production were controlled from the well-head to the service station pump. Both deliberate and accidental violations were committed by oil royalty holders, refiners, distributors, and marketers before President Reagan eliminated the regulations in January, 1981, shortly after his inauguration. Until controls ended, most violations were settled by requiring violators to lower their prices. Since prices were controlled at every step from production to distribution, the lower costs were passed on to comsumers.
After deregulation, refunds could not be passed on directly to the consumer and DOE began using various forms of indirect restitution in oil overcharge cases, including reaching a broad cross-section of the affected population by funding energy conservation programs.
To date, the courts have ordered the funds from overcharge cases to be distributed under the procedures of 1982 legislation that has become known as the Warner Amendment, named for Sen. John Warner, R-Va.
This amendment governs the use of escrow funds from earlier petroleum
22


pricing violation cases.
Under the Warner Amendment, each state receives a share of the funds based on the ratio between its consumption of refined petroleum products and the total U.S. consumption of those products during the six years of federal price controls. The Warner Amendment also provides for distribution of oil overcharge money, at the discretion of the Governors, through five federal programs: The Weatherization Program, The State Energy Conservation Program, The Energy Extension Service, The Institutional Conservation Program, and the Low-Income Energy Assistance Program. Interestingly, the legislation expressly prohibits use of the money for administrative expenses.
25. A fifth Federal-State program, the Low Income Energy Assistance Program is a utility payment subsidy rather than a conservation program and is not within the scope of this paper.
26. U.S. Department of Energy, Office of State and Local Assistance Programs, 1985 Report. (NTTS, October, 1985).
23


CHAPTER 2
BARRIERS TO ENERGY CONSERVATION


CHAPTER 2 BARRIERS TO ENERGY CONSERVATION
In 1983, the Salida School District audited the energy usage of two of the district’s school buildings. Faced with increasing utility costs and decreasing student enrollment and state funding, the School District in central Colorado received a grant from the Institutional Conservation Program that paid for half of the $8,000 audits. The audits recommended, and the district pursued, energy conservation measures that would cost more than $60,000 and pay for themselves within two years. In 1984, the district applied for funding from the Institutional Conservation Program for those activities. That year applicants' requests exceeded the funds available in the ICP in Colorado. Salida School District received funding for only one energy conservation measure in only one school, the lowest on its priority list for capital spending. The School Board would not commit any of the limited funds of the district for capital improvements in that building and although Federal funds would have paid for 65% of the project, the grant was dropped by the school.* Attitudes, finances, and federal regulations were barriers to energy conservation that the School District in Salida could not overcome.
In general, barriers to energy conservation fall into four categories: attitudinal, informational, financial, and regulatory or legal barriers. They often combine to make energy conservation a difficult task.
24


ATTITUDINAL BARRIERS
Attitudinal barriers deny the necessity of conservation or the efficacy
of particular conservation measures. Rosenbaum cites the 'psychology of
2
abundance' as the American mind-set that most inhibits conservation.
Gas prices below $.90/gal do little to alter that mind-set even though other energy sources may be increasing in price. Attitudinal barriers that inhibit conservation actions include such petty, yet crucial, things as a facilities manager's dislike of the director of facilities and the subsequent lack of cooperation between the two or the more political animosities that may exist between a treasurer's office and an agency wanting to pursue a new financing option for capital construction. Attitudinal barriers are often the most difficult to overcome because they can be emotional and irrational, arising from beliefs that are not responsive to complicated arguments or information. The energy experts who predicted oil prices of $60 to $80 per barrel before the end of the decade appear to have been wrong and the public is not likely to forget that. 'Expert' energy advice may not have the clout it once did.
INFORMATIONAL BARRIERS
Lack of credible information about energy conserving improvements is often pointed to as a principal obstacle to increased energy
25


*1
conservation. In some instances, consumers are unaware of the relative benefits of various energy conservation strategies. In other instances, when information is available and accessible, it may be inaccurate and unreliable or one-sided and incomplete. In cases requiring technical engineering documentation and design, staff may lack the necessary expertise and procurement requirements may be so formidable that projects are not initiated. Although technical expertise in the area of energy management and conservation has increased, that expertise may remain within a small sector of energy consumers. Municipal governments may not be aware of the experts available to commercial institutions and the technology available in the commercial sector may not be readily transferred to local government use or scale.
FINANCIAL BARRIERS
Lack of capital and limited access to credit will reduce the opportunities for 'technical fixes' even when technical information is available and the attitudes are right. Consumers are wary about assuming new debt when interest rates are high and they may worry that the improvements may not result in the expected savings. Municipal agencies may not be able to undertake construction or retrofits outside of the capital improvements budget and that budget may be prepared several years in advance. Off-line financing and leasing may be prohibited, as well as incurring debt without the approval of voters. While new financing
26


mechanisms are now being used to fund technical efficiency improvements, their very newness may limit their acceptance.
REGULATORY AND LEGAL BARRIERS
Building codes can help or hinder energy conservation. Local ordinances may directly prohibit some types of retrofits. Neighborhood covenants may forbid solar collectors or clotheslines. Rent controls can forbid the sharing of costs of energy investments by the landlord and the tenant, but they may allow landlords to raise rents to cover increased utility bills. Municipalitites may be prohibited by charter from assuming some types of long term debt. The 1985 Tax Reform Act makes bond issues less appealing for investors and more risky for all levels of government. Regulatory and legal barriers to energy conservation may be the most difficult to remove. They can be subtle and pervasive and changes may produce significant ramifications that are unexpected or unwanted.
Regulatory barriers to conservation exist within the federal-state energy conservation programs that have been established to promote conservation. Capitalization of construction projects for all but low-income households and schools and hospitals is prohibited. Petroleum violation escrow funds cannot be used for administration expenses of the programs they suppport. Congress' budgetary procedures leave program
27


appropriations in doubt year after year encouraging ad hoc programs rather than comprehensive ones.
REDUCING BARRIERS
Although barriers to energy conservation exist, many programs and activities have been undertaken which have lessened their impact significantly. Federal-state energy conservation programs have provided a wealth of accurate, available information for consumers and often include telephone hot-lines for immediate answers to questions. These programs have also produced a nationwide pool of professional engineers with an expertise in energy conservation measures and an audit framework that clearly spells out the costs and benefits of retrofits to buildings. Direct, leveraged capitalization for projects done by public and private, non-profit, schools and hospitals is available. Direct financial subsidies have, for the most part, remained outside of the scope of these programs. There are, however, many examples of financing projects and experiments which have taken place without federal funding.
Local government efforts to alleviate the problems associated with barriers to energy conservation within their own structures have centered on employee and agency incentives which give agencies authority to rebudget savings attributed to energy conservation rather than have them revert to the general fund. Regulation review and modification,
28


procurement policy changes to require energy use considerations in life-cycle costing, and integration of energy conservation considerations into capital budgeting and management policies are more comprehensive attempts to institutionalize conservation in government activities.^ As part of their responsibilities to their communities at large, local governments have also included energy use considerations in land use planning, transportation planning, and residential building codes in both ad hoc projects and more comprehensive approaches.^
While barriers to energy conservation exist and may even be strengthened by the current low price of oil, experiments have shown that energy management and conservation can be accomplished and encouraged. In 1985, Salida School District received another ICP grant which funded over $29,000 in projects more in line with the school district's priorities. Work is proceeding.^
29


Footnotes: Chapter 2
1. Janet Hartsfield, Colorado ICP Manager, interview, Denver, Co., October, 1985
2. Rosenbaum. Energy. Politics, and Public Policy, p.65.
3. U.S. EPA. Perspectives from the Public and Private Sectors, p.21.
4. Duncan Erley and David Mosena, Energy Conserving Development Regulation: Current Practice. (Chicago, II., American Planning Association, August, 1980), p.23.
5. Ibid.
6. Janet Hartsfield, interview, October, 1985.
30


CHAPTER 3 FEDERAL-STATE
ENERGY CONSERVATION PROGRAMS


CHAPTER 3 FEDERAL-STATE ENERGY CONSERVATION PROGRAMS
PHILOSOPHY OF FEDERAL-STATE ENERGY CONSERVATION PROGRAMS
Current federal-state energy conservation programs have become the principal government energy efficiency programs in the U.S. In many states, they are the only state-wide energy conservation programs available. Current energy conservation activities center on the following programs:
• the State Energy Conservation Program (SECP), which contains both mandatory and optional program elements and focuses on energy conservation planning;
• the Energy Extension Service (EES), which provides information to small-scale energy users;
• the Institutional Conservation Program (ICP), which provides leveraged capitalization for technical audits and construction projects for schools and hospitals; and
• the Weatherization Assistance Program (WAP), which weatherizes low-income dwelling units.
The programs' intentions are simply stated: provide information and technical assistance and subsidize capitalization of construction for those least able to afford it— low-income households and public and private, non-profit schools and hospitals. The programs’ expectations are equally
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straight forward: information will motivate action. With that philosophical background, the federal-state energy conservation programs prohibit expenditures for capital construction for all but a limited sector of energy consumers. The philosophy is consistent with the concept of government as a stimulator of conservation, encouraging activities and leveraging limited program appropriations with funds from the private sector. New program strategies explicitly encourage this leveraging with the private sector as federal appropriations continue to shrink. *
The rapidly falling price of oil and the assignment of funds from oil overcharge settlements to the federal-state conservation programs significantly change the conditions that determine this operating philosophy for two reasons. First, information will not motivate action when the economic benefit is not perceived. Second, directed by the Warner amendment to conservation programs in an attempt to provide restitution to all energy consumers for overpayments, oil overcharge funds provide substantial amounts of money that are independent of and far larger than congressional tax appropriations. While it may be appropriate that government funds encourage conservation for all and only capitalize construction for a few, restitution funds by their nature and amounts should provide lasting conservation activities that continue to save energy and money for all consumers.
No better way exists than capitalization of energy conservation retrofits for public purpose entities: state and local governments and public and private, non-profit organizations.
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Without legislative or regulatory change to permit funding of energy conservation construction projects for public purpose entities, the federal-state conservation programs and the millions of dollars allocated to them for restitution from oil overcharges will not realize their extraordinary potential for energy savings for all consumers.
STATE ENERGY CONSERVATION PROGRAM
The administrative framework of the federal-state conservation programs was established with the passage of the Energy Policy and Conservation Act in 1975. This act and the subsequent Energy Conservation and Production Act of 1976 provided financial assistance in the form of grants to States to develop, modify and implement State energy conservation plans. Together, the EPCA provisions regarding plans and the ECPA provisions regarding supplemental plans constitute the State Energy Conservation Program. Prior to the implementation of the SECP, most states did not have state energy offices or any related central focal point for their various energy programs. The SECP has provided the states with the funding needed to establish, maintain and at times expand their capability to plan, design, and implement a wide variety of energy programs. Staff support for other federal-state energy conservation programs such as the Energy Extension Service and the Institutional Conservation Program is usually provided by the state energy offices and these offices also often provide the focal point for data collection and
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Figure 5 Federal appropriations for state energy conservation programs (rounded off to the nearest million!.___________________________________
State Energy 1979 1980 1981 1982 1983 1984 1985
Conservation Plana $58 $48 $48 $24 $24 $24 $23
Energy Extension Service 15 25 22 10 10 10 10
Institutional Conservation
Program 100 119 158 46 98b 48 48
Weatherization Assistance
Program 199 199 175 144 245c 190 190
TOTAL 372 391 403 224 377 272 271
a. This includes funds for both the base and supplemental SECP programs.
b. This includes $50 million from the 1983 Jobs Act.
c. This includes $100 million from the 1983 Jobs Act.
Source: U.S. Department of Energy
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analysis of resources and needs. They are able to maintain this capacity largely due to the SECP.
The objectives of the SECP program, as stated in the enabling legislation, are:
- To enable states to develop and implement conservation plans that will reduce projected energy consumption in each state. Initially, each state's plan was directly linked to scheduled progress toward, and achievement of, a 5%, or greater, reduction in projected energy consumption. Since 1980, the goal has been increased yearly in percentage increments to continually enhance the original goal.
During 1984, the target energy savings goals for each state was 20%
9
over that established for the year 1980.
To develop each state's capability to handle comprehensive energy conservation planning and implementation.
To provide states with efficient technical support to implement their various energy conservation measures efficiently and effectively. To accomplish this objective, DOE has attempted to enhance each state's capability to satisfy its technical requirements with its own resources, augmenting them as necessary with technical assistance.
Under SECP, a state receives financial and technical assistance to carry out a plan. To be eligible for financial assistance for implementation, the plan must be designed to achieve scheduled progress toward a specific
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energy conservation goal and must include the following five required program measures specified in EPCA:
1. implement lighting efficiency standards for non-Federal public buildings;
2. promote the availability and use of carpools, vanpools and public transportation;
3. implement standards and policies relating to energy efficiency in the procurement practices of a state and its political subdivisions;
4. implement thermal efficiency standards and insulation requirements for new and renovated non-Federal buildings; and
5. enact a traffic law or regulation which permits motor vehicles to turn right at a red light after stopping.
These measures are required components of each state's conservation program.
SECP also encourages states to develop and implement additional energy conservation measures appropriate for their local needs. This state-initiated component of SECP has resulted in hundreds of programs that are now responsible for almost two-thirds of all projected energy savings. Additional measures have included activities to promote energy conservation in oil recycling, transportation, commercial buildings and industrial processes, residential buildings, agriculture and utilities. Several states have proposed state tax credits and other incentives to encourage individuals to take energy conserving actions. Measures aimed at local governments have included energy management programs designed to
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provide both the technical expertise necessary to guarantee energy savings
and also the management tools and skills necessary to implement the 4
programs.
The SECP provides the vehicle for programs aimed at state and local governments. While successful programs exist for these target groups, a recent state assessment of SECP shows that State Energy Offices rate their successes as limited. "States criticized the lack of conservation in state buildings, but this appears to result from an absence of programs rather than failed ones. The most critical comments were reserved for local government officials who have failed to pursue even modest conservation programs, despite extensive SEO efforts. The resulting disdain for local officials exceeded the customary scorn each level of government has toward others."^ Many states do report highly successful programs, however. In each case, direct, on-site involvement and specific technical assistance seem to be key elements of appeal.
For example,
- The Mississippi Department of Energy and Transportation has developed a comprehensive Transportation Management Program which is being utilized Statewide in public school districts. Working with the State Department of Education and institutions of higher learning, the primary objective is to provide school administrators with organizational and procedural strategies for implementing an effective energy management program. Regional administrator workshops are conducted to emphasize the economic advantages of implementing services available through the
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Department which include: computerized bus routes and schedules; computerized operational and maintenance cost control reporting/record keeping; and driver training workshops which emphasize improved efficiency and safety through modification and improvement of driving habits. An administrator's handbook, driver training manual, and other materials have been distributed Statewide.^
- North Carolina's Energy Division contracted with private engineering firms to provide detailed engineering analyses to 18 municipal water and wastewater treatment facilities to identify the energy conservation potential in operating and maintenance procedures, low-cost improvements, and high capital cost modifications. Studies have shown
that most municipalities spend 30%-50% of their energy dollars on utilities, including water and wastewater facilities. Engineering analyses completed on the first 12 facilities indicated a potential for annual savings of 14%-35% depending on the implementation of recommended measures. With the completion of all 18 audits, the Energy Division contracted for the development of case studies utilizing the results. The program included development of a workbook incorporating a "how-to" audit and the case studies, and presentation of workshops for system operators and plant
7
personnel.
- Kentucky designed a Local Government Energy Management Program to lessen the burden of energy costs on local governments. Under this program, an energy coordinator was offered to the governments for a year on a competitive basis. After the first year, each local unit would
38


decide whether to continue the position with funds saved from implementation of coordinator recommendations during the initial year.
By expanding the program to include the private sector, governments could provide local businesses with the opportunity to receive advice from the coordinator pertinent to their businesses. In return, the governments would receive from the business community financial support for
Q
continuing the position.
Other states have also provided some type of direct staff assistance to
local governments. In Minnesota and Washington technical assistance
teams traveled to towns; Ohio has funded an energy coordinator in several
large cities; Maryland provided local energy coordinators; North Carolina
o
guaranteed the salary of 17 local energy officers. These programs suggest that site or situation specific technical assistance is a key element of popular local government programs.
Technical assistance alone, however, does not save energy, and SECP specifically prohibits funding for suggested retrofits or capital construction. This program limitation seriously inhibits implementation of energy conservation measures suggested by these studies. Although follow through on implementation of suggested actions is rarely, if ever, evaluated, an informal survey of local government officials in Colorado who had received energy audits for some of their buildings showed that only one of the local government officials who requested the audit remembered that his buildings had been audited.*® The philosophical assumption of the program regulations that information would inspire action has proved false
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for local governments, most probably because already tight budgets have no capital for energy conservation retrofits.
A rule change in the SECP in 1983 considered lifting the prohibition on the use of funds for retrofits, especially for state and local government buildings, or at least permitting these activities with Petroleum Violation Escrow Funds (Section 155). The sugggested changes were not allowed.
"DOE believes that it is not permissible to differentiate between the use of Section 155 and appropriated funds. It was the intent of Congress to have a single set of uses for these two sources of funds.
DOE notes that the Congress has given some consideration in the past to energy conservation retrofits and other types or renovations for State and local government buildings, but legislation has not been reported out of committee which would permit such activities. In addition, a bill has been introduced recently in the Senate to amend Section 155 to allow retrofits for local government buildings to be funded under Section 155. DOE has, therefore, decided not to permit, at this time, the direct purchase or installation of equipment or materials for energy conservation building retrofits or weatherization. For clarity, a prohibition on the use of SECP grant funds for energy conservation building retrofits or weatherization has been added.” ^
To date, no legislation has been sponsored that would permit retrofits or capital construction with either SECP funds or Petroleum Violation Escrow Funds. Although the latest oil overcharge settlement raises the hope that these regulatory or legislative changes will be considered again,
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no actions have been initiated in either area by the Federal government
and SECP funds and the companion funds from oil overcharge funds may
12
not be used for energy conservation retrofits or capital construction.
Although Petroleum Violation Escrow Funds can provide a stable source of funds for SECP over a number of years, which will free the optional state programs from the funding uncertainties they have faced in the past, the prohibition against retrofits and construction will seriously limit the effectiveness of the technical assistance programs. Studies done under the auspices of SECP document the savings to be had from retrofits and construction. In the face of the higher utility costs and declining tax revenues for state and local governments, the prohibition should be lifted by legislative or regulatory change or modification of the court order to facilitate state and local government energy conservation.
The concept of consumer restitution requires that the public receive some long term, continuing relief from energy costs. Energy conservation retrofits for public putpose entities can provide that relief.
THE ENERGY EXTENSION SERVICE
Modelled after the agricultural extension service, the Energy Extension Service (EES) was developed to provide personalized information to small-scale energy users. Authorized by the National Energy Extension Service Act of 1977, the program was initiated as a two year pilot program in ten States. Based on an evaluation of the pilot program which
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demonstrated significant effectiveness, Congress approved expansion of the effort nation-wide in 1979.
The states have great flexibility in developing EES programs and have devised hundreds of residential, small business, and local government outreach efforts. With small-scale energy users accounting for almost 40% of U.S. energy use, these EES outreach efforts have the potential for significant energy savings. EES activities consist primarily of information efforts, workshops and energy audits. In an assessment by the states of the program, the most successful activities were identified as workshops that provided immediately relevant information, were conducted on-site, and were arranged through and co-sponsored by a private group. ^
Energy auditor training programs were a second successful group of programs. The appeal of these programs was the development of tangible expertise and the subsequent use of that expertise to provide on-site audits and demonstrate no cost/low cost conservation for key target populations. These EES activities often supplement other conservation and state energy office programs.
EES has suffered with other Federal-State energy conservation programs from reduced funding. The concept of leveraging dollars, attracting additional money from local resources following the initial Federal investment, has allowed states to maintain higher levels of activities than would be permitted with the reduced federal funds. In 1982, Colorado eliminated funding for four of nine EES Centers located across the State. Two of those Centers were able to maintain services
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through funding, both direct and in-kind, from banks, utilities, city governments, and other sources. In 1986, EES funding for all EES Centers in Colorado was discontinued. These Centers may be able to continue to provide services for small energy users with funds provided from the private and local government sectors.
THE INSTITUTIONAL CONSERVATION PROGRAM
Authorized by the National Energy Conservation Act of 1978, the Institutional Conservation Program (ICP) currently provides grants to public and private, non-profit schools and hospitals to identify and implement energy conservation activities in their buildings. Perhaps the most effective of the federal-state energy conservation programs, ICP was developed to subsidize conservation in institutions least responsive to high energy costs and least able to pay for conservation activities because of their focus on service. Initial appropriations provided funds for technical audits of buildings owned by public and private schools and hospitals, local governments, and public care institutions. Schools and hospitals were eligible for funding to implement the energy conservation measures identified in the audits. Funds have not been appropriated in recent years for grants to local governments and public care institutions
ICP focuses on the 'technical fix’ for schools and hospitals and it has been remarkably successful. Estimates are that fewer than 25% of the capital improvements would have been made independently and that their
43


energy savings pay back capital costs in an average of 3.2 years in the 1983 awards. Recipients of ICP retrofit grants reduced energy consumption by an average of 13% at a cost six times less than purchasing
oil. Of the almost half a million institutional buildings eligible, only 10% had participated in ICP by 1985.^
Beyond this traditional, direct financial assistance role, the ICP's most recent long term strategy is to involve untapped or underutilized private sector financial resources and expertise in promoting institutional energy conservation. To accomplish this, ICP encourages alternatives to public sector financing for institutions which have applied for but not received ICP grants. A structured technology transfer of program knowledge and expertise is now being encouraged.^
The Institutional Conservation Program originally recognized the needs of local governments for technical assistance in developing information and building inventories for energy conservation planning.
The original legislation funded Preliminary Energy Audits, Energy Audits, and Technical Assistance Audits for local governments. However, funds for these activities by local governments were discontinued in 1980.
ICP, with its structure of technical audits supporting and directing operations and maintenance procedures and energy conservation retrofits, provides a logical structure for additional assistance to state and local governments in their conservation and energy management activities. A legislative or regulatory change in ICP permitting the full range of activities for state and local governments would maximize the value of
44


both appropriated funds and oil overcharge funds.
THE WEATHERIZATION ASSISTANCE PROGRAM
The Weatherization Assistance Program (WAP) increases residential energy efficiency by providing grants to states to enable community agencies to install weatherization materials in the homes of low-income citizens, particularly the elderly and handicapped. This effort is authorized by the Energy Conservation and Production Act of 1976, and amended by the National Energy Conservation Policy Act of 1978, the Energy Security Act of 1980 and the Human Services Reauthorization Act of 1984. Local service organizations implement the program. Eligible weatherization measures installed under this program include caulking, weatherstripping, insulation installation, and heating and cooling system repairs, tune-ups and efficiency improvements. States are allowed to average up to $1,600. per dwelling unit for weatherization measures.
The federal effort to weatherize homes of low-income families began on an emergency basis soon after the 1973 oil embargo. In 1975 a weatherization program was mandated by statute to be administered by the Community Services Administration. This agency made grants directly to local organizations which concentrated their efforts on inexpensive and easy to install measures.
In 1976, Congress enacted the Energy Conservation and Production Act, authorizing a weatherization grant program to run parallel to, and
45


supplement, the existing program. In 1979, following passage of the National Energy Conservation Policy Act, DOE became the sole Federal agency responsible for weatherization assistance grants. DOE estimates that almost 2 million homes will have been weatherized through these programs, saving the equivalent of up to 3.75 million barrels of oil each year.***
Since 1982, states have been able to direct up to 15% of their Low-Income Energy Assistance Program (LEEAP) funds to supplement the WAP. The redirected funds have often been greater than direct appropriations for the WAP. In Colorado, the Cost Effective Energy Conservation (CEEC) program focuses on no cost/low cost and the 'house doctor' approach to weatherization.
Although the competing social goals of training field personnel and assisting low-income families sometimes reduces the energy conservation potential of the WAP, the weatherization concept continues to receive strong funding support in Congress. It is the only federal-state energy conservation program which has not experienced cuts in funding.
The federal-state energy conservation programs are often considered
20 21
experimental attempts to stimulate energy conservation. ’ As such they have created a body of information and expertise that could easily be extended to a larger, more comprehensive approach to energy conservation by state and local governments. The federal-state energy conservation programs could provide the technical and financial assistance that would
46


be the catalyst for ongoing energy management and conservation activities by municipal governments. They have already provided the impetus for many more experimental programs outside of the auspices of the Federal government which widely extend to concept of subsidy for energy conservation.
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FOOTNOTES: CHAPTER 3
1. U.S. Department of Energy, Office of State and Local Assistance Programs, "ICP Multi Year Strategy", Memorandum, October, 1985.
2. U.S. Department of Energy, Office of Energy Management and Extension, Annual Report to the President and the Congress, on the State Energy Conservation Program for Calendar Year 1984. (NTIS, August, 1985), p.l.
3. Ibid.
4. U.S. Doe. Program Activities. 1985. p.l.
5. Sawyer, "Federal-State Conservation Programs", p. 160.
6. U.S. DOE, Annual Report. 1984. p. 6.
7. Ibid.
8. U.S. Doe. Program Activities. 1985. p. 5.
9. Sawyer, "Federal-State Conservation Programs", p. 160.
10. Janet Hartsfield, Local Government Program Manager, interview, Denver, Co., January, 1986.
11. U.S. DOE, State Energy Conservation Program, 48 Fed. Reg. 39,356 (April, 1983) (10 CFR Part 420).
12. Several States have united to ask that the court modify its order to allow administration costs and capital construction. No changes have been made. 4/86.
13. U.S. DOE. Program Activities. 1985. p. 7.
14. Sawyer, "Federal-State Conservation Programs", p. 161.
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15. IJ.S. Department of Energy. An Evaluation of the Institutional Conservation Program: Results of on-site analyses.1983. Oak Ridge National Laboratory, (NTIS, 1984), p. 32.
16. U.S. DOE, ICP Multi Year Strategy.
17. U.S. DOE Program Activities, 1985, p. 35.
18. Ibid.
19. Sawyer, "Federeal-State Conservation Programs", p. 165.
20. Ibid. p. 166.
21. Rosenbaum. Energy. Politics, and Public Policy, p.149.
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CHAPTER 4 STATE ACTIVITIES: FOCUS ON FINANCING


CHAPTER 4 STATE ACTIVITIES: FOCUS ON FINANCING
In one sense, federal regulations that restrict financing for energy conservation retrofits have encouraged an additional commitment to energy conservation by some state governments. Presented with public and private entities eager to undertake energy conservation activities but thwarted by a lack of capital or access to capital, some states have instituted financing programs, or state subsidies, for sectors ineligible for federal subsidies. These financing programs run the gamut from indirect subsidies such as tax credits to direct financial subsidies. While the incentives, funding sources, and the amounts of subsidy for conservation may vary, these state programs attempt to reduce the traditional financial barriers to energy conservation.
FINANCIAL INCENTIVES
State financial incentives for energy conservation activities take several forms:
-tax credits,
—principal buydowns of commercial loans,
—interest buydowns of commercial loans,
—loan guarantees for commercial loans, and -direct low-interest loans made by the state.


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TAX CREDITS
Tax credits generally target residential energy users and are modelled after federal tax credits, as in Colorado. The subsidy is an indirect one, financed by a reduction in resident taxes, and results in lower tax revenues collected by the state rather than a state expenditure of taxes previously collected. Middle and upper class residents and energy intensive businesses take most advantage of tax credits as a financial incentive for conservation.
In Oregon, the State Department of Energy will pay 35%, through tax credits, of the cost of energy conservation projects in commercial and industrial buildings that reduce energy use by at least 10%. Ten million dollars has been available for projects in both 1985 and 1986. The funds, given in the form of tax credits over five years, apply to conservation measures that reduce electrical and/or natural gas use. They cover the cost of engineering, design and feasibility studies, as well as the cost of equipment and installation. *
California provides tax credits for residents, investors, and businesses that install solar or renewable energy resource equipment. California homeowners and businesses have taken state tax credits totaling $364.4 million between 1976 and 1983.(figures 6 and 7) A 1978 federal law provides further incentives for power producers. The Public Utility Power Regulatory Act of 1978 requires utilities to buy electricity from power
50


producers at prices that equal the utility's power costs, thus guaranteeing
2
the producers a market for their electricity.
CALIFORNIA RESIDENTIAL TAX CREDITS FOR SOLAR EQUIPMENT
Thousands of Dollars 150000
135060 120120 105180 90240 75300 60360 45420 30480 15540 600
1976-1977-1978-1979-1980-1981-1982-1983-1984 Figure 6.
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CALIFORNIA RESIDENTIAL APPLICANTS FOR TAX CREDIT FOR SOLAR EQUIPMENT
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Thousands of Applicants
1976-1977-1978-1979-1980-1981-1982-1983-1984 Figure 7.
PRINCIPAL AND/OR INTEREST BUYDOWNS
Principal and/or interest buydowns of commercial loans are financial subsidies aimed at various targets of energy consumers. Interests rates may be subsidized at a specific level below the prime rate or rates may vaiy based on pre-determined criteria. For example, the interest rate on commercial residential or business loans might be determined by the income level of the borrower. The interest rates on loans made to public or private, non-profit agencies might be determined by some local factor


such as the median income of the county, the unemployment rate, or the needs of the clientele served.
Principal buydowns are most frequently used in conjunction with other financial subsidies. The Solar and Conservation Bank, a federal program designed to encourage conservation by families at 125% of the federal poverty guidelines (and not eligible for the services of the Weatherization Assistance Program), may fund direct principal reduction of a loan while the remainder is financed with a reduced interest rate.
LOAN GUARANTEES
Commercial lenders are often unwilling to make loans for unfamiliar activities or lack confidence in new technologies. State loan guarantees for commercial loans reduce the risk to the lender and make credit available to selected targets for energy improvements. The incentive in this case is not directly for the energy consumer but for the financial community in order to make credit available for energy conservation projects.
DIRECT STATE LOANS
Some states finance energy conservation activities through direct state loan programs in which the state is the lender and the interest rates are reduced. California provides loans through the Energy Conservation Assistance Account for local government entities, schools, hospitals, and


special districts. Authorized by the California legislature in 1979 and running through 1990, the program was funded with $8.8 million. The interest rate on loans is indexed from l%-9.5%. The program has three separate loan categories:
-loans for Energy Audits or Combined Energy and Technical Audits; -loans for Simplified Measures, conservation measures which have proven energy savings; and
-loans for more complex equipment and building modification installations.
A feature unique to loans made for energy conservation and put to use by the California Energy Commission is that all loans can and must be repaid from energy savings: no obligation on general fund revenues is created. In addition, the California Attorney General has ruled that borrowing these funds by a city, county or school district is covered by the California special fund exemption to constitutional debt limitations, thereby removing this constraint to borrowing by local government entities.
Minnesota has undertaken a multi-faceted approach to energy finance that combines several financing incentives. To promote energy conservation by school districts and local governments, the Minnesota legislature created the Public School Energy Conservation Investment Loan program in 1983. The District Heating grant program was created in 1981 to encourage district heating and modified in 1984 to include grants and loans to local governments for energy improvements. Funded by state general obligation bonds, the loan program for municipalities has several


ft
ft
ft
ft
ft
ft
ft
ft
ft
unique characteristics that make it unlike traditional financing.
To qualify for a loan, a city must demonstrate that the project is economically and technically feasible. They must also demonstrate that adequate provisions have been made to assure proper and efficient operation and maintenance of the project. The security the city must pledge for the loan depends on the economic viability of the project and can vary from project revenues to an ad valorum tax. Municipalities have up to twenty years to repay the loan, with principal deferred for the first five years to ease cash flow. After the fifth year, loans are repaid on a 25-year payment schedule with a balloon payment at the end of the twentieth year. The interest rate is the same as that for the state bonds.
Minnesota uses funds generated by the issuancet>f tax-exempt industrial development bonds to provide financial support to small businesses for energy conservation. Of the $9.3 million appropriated for business energy finance, $7.5 million was allocated to the Energy Loan Insurance program. This program operates in partnership with private financial institutions. An applicant and its participating financial institution develop a loan package together based on the lender's credit analysis and determination of appropriate financing. The Energy Loan Insurance program will insure up to 90% of the loan principal, the actual percentage determined by the credit analysis and loan package. Interest rates are negotiated between borrower and lender but may not exceed three percentage points above the prime rate.
The Energy Development Fund was allocated $1.8 million for projects.
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ft
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ft

Unlike the Loan Insurance program, the Energy Development Loan program issues direct loans from the state to the borrower. Loans provide below-market interest rates and may be for up to 90% of project costs, with the actual percentage determined by a credit and project analysis.^
Oregon initially targeted commercial and industrial energy users with construction plans for generating facilities in its loan program. The Small Scale Energy Loan program, authorized in 1981, now makes loans to Oregon's individuals, businesses, non-profit organizations, and municipal governments. Financed by state general obligation bonds, the interest rates are set at 1% above the rate of the bond which finances the loan. In all cases, estimated energy cost savings must exceed loan payments.^
SOURCES OF FUNDING FOR STATE FINANCIAL INCENTIVE PROGRAMS
State financial incentive programs for energy conservation are funded in several ways:
first, through general tax revenues which can provide tax credits or a pool of funds for loan programs;
second, through specific taxes, such as oil severence taxes, with a set-aside for conservation activities; and third, through the authority to issue state general obligation bonds or industrial development bonds, the proceeds of which fund specific energy conservation projects.
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r
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At this time, only interest buy-downs of commercial loans (an eligible SECP activity) could be funded by oil overcharge funds. A legislative or regulatory change permitting capital construction or retrofits under the SECP or widening the eligible institutions in the ICP would make oil overcharge funds available for state financing programs. This could be essential for those programs funded by government bonds since the Tax Reform Act of 1985 brings the tax-exempt status of many types of bonds into question and severely limits their appeal to buyers.^
In any case, state financing programs provide an important example of commitment to energy conservation.
ISSUES OF SUBSIDIZING ENERGY CONSERVATION
The federal government has taken a fairly restricted approach to its subsidy of energy conservation: information and technical assistance, direct retrofits only to those most unable to provide them. In undertaking incentives designed to finance energy conservation equipment, retrofits, and capital construction for a wide variety of energy consumer, states have considerably broadened the scope of subsidy for energy conservation. The issues of equity, effectiveness, legality and approach are important ones.
EQUITY
57
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Tax credits are generally taken advantage of by the middle and upper classes and energy intensive businesses, yet are paid for by all citizens. Credits, by their very nature, may not be available for the low income resident, who pays little or no taxes and still cannot afford conservation retrofits. The reduction in tax revenues can be a massive one (an estimated $3.37 billion for the federal tax credits in the years 1978-1983)^ (figure 8) which may limit programs and services to those unable to take advantage of the credits.
Millions of Dollars
$600
580
560
540
520
500
480
1978-1979-1980-1981-1982-1983
Figure 8.
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I
On the other hand, paying off the cost of new utility power plants that
would be unnecessary if conservation retrofits were carried out is an
unofficial but massive alternate tax on individuals and businesses.
The appropriateness of supporting certain private businesses with
state subsidies is also a concern. The favorable decision by the Minnesota
Supreme Court in May 1984, determining the constitutionality of using
public funds to support private business and allowing the Minnesota
8
Business Energy Finance programs to proceed does not pass judgment on the wisdom of allocating $7.5 million to energy loan guarantees rather than other state needs.
EFFECTIVENESS OF THE INCENTIVE
Consumer protection and convenience features of loans may be as important to the decision and ability to retrofit as loan availability itself. Few evaluative studies have been done which can show that loan programs themselves stimulate conservation. While loan programs may help compress the time of implementing conservation measures, they may be just one, expensive technique among many, less expensive techniques that
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stimulate conservation.
Secondary objectives of loan financing programs can provide important justifications for their activities. Loan programs have an important economic development component, stimulating local economies with jobs, spending, and, in some cases, retraining of workers for projects
59
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that might not otherwise have been undertaken. Since energy conservation projects can be repaid from energy cost savings, the benefit to the economy is multiplied because the savings continue beyond the life of the loan.
Some within the solar and renewable energy industry contend that tax credits support research and development and that the loss of credits will blunt America's technological edge. Others argue that credits support equipment sales far more than technological breakthroughs. In either case, the magnitude of tax credits taken on federal and state returns suggests that credits are effective incentives for certain segments of energy user and that the subsidy extends beyond the immediate consumer to a range of alternative energy industry elements.
LEGAL OBSTACLES
Legal obstacles abound when new approaches to financing merge the public and private sectors. Federal-state energy conservation programs take an indirect approach, attempting to leverage technical assistance expertise for private financing and thereby skirting the issue of providing public funds for private projects. State loan programs confront the issue head on. The larger goal of saving energy as a general public good has overshadowed questions of appropriateness of the public/private subsidy. Lower energy prices may make this argument less tenable in the immediate future.


New financing arrangements also bring into question the general issue of debt obligation by municipalities. Lease/purchase arrangements are fairly new methods of acquiring equipment for state agencies and local governments that circumvent the constitutional limitations on borrowing without voter approval. Loans for energy conservation which are repaid out of savings may be another convenient method of off-line financing for state agencies and local governments. However, these types of loans may finance major projects outside of the normal capital budgeting procedures and without requiring the review which would place the projects within the overall scope of agency or municipal capital planning.
AD HOC VS. COMPREHENSIVE APPROACH TO ENERGY
CONSERVATION
Loan programs typically fund specific capital construction projects. In the case of programs funded by general obligation bonds, loan applications for specific projects are often taken before the bonds are issued. While this ad hoc approach to conservation may yield impressive results in large buildings or for energy source conversions, many energy-conserving principles and practices are interrelated—operations and maintenance procedures and retrofits, for example. Considering options in concert can prevent overlooking certain opportunities that may have highly beneficial results—something that may occur under an ad hoc approach. Financing energy conservation measures on a project by project basis, as loan
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programs do, may mean that a wide range of activities not directly related to the project will not be undertaken and opportunities for further savings may be lost because they are outside the scope of the loan project and are simply not considered.
An ad hoc approach to conservation will provide energy saving. A comprehensive energy management plan will provide more energy savings. Programs that focus only on financing capital construction and equipment can limit the perspective of the energy consumer on energy savings. To maximize the return from the energy savings potential of a wide range of options, financing programs should exist within a wider range of programs offering technical and management assistance for energy use and conservation.
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CHAPTER 4: FOOTNOTES
1. Energy User News. 3/24/86.
2. Los Angeles Times. 11/19/85.
3. Terri Gray, California Energy Commission, interview, January, 1986.
, Loan Application, Energy Conservation Assistance State Loan Program,
November, 1985.
4. Minnesota Department of Energy and Economic Development, Energy Finance: Report to the Legislature. January 1985.
5. Greg Jeffrey, Oregon Department of Energy, interview, January, 1986.
Loan application, Small Scale Energy Loan Program, May 1984.
r 6. Timothy B. Clark, "Tax Reform Debate Stems the Rising Tide of Municipal
Revenue Bonds", National Journal. 1/25/86, pp. 216-220.
7. Los Angeles Times. 11/19/85.
I 8. Ibid.
9. U.S. Department of Energy, The Role of Financial Incentives in Utility Sponsored Residential Conservation Programs. Linda G. Berry, Oak Ridge National Laboratory, (NTIS, December, 1982) p. 24.
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CHAPTER 5
PLANNING ENERGY USE AND CONSERVATION: RECOMMENDATIONS FOR
STATE AND LOCAL GOVERNMENTS


CHAPTER 5 PLANNING ENERGY USE AND CONSERVATION: RECOMMENDATIONS FOR STATE AND LOCAL GOVERNMENTS
COMPREHENSIVE VS. AD HOC APPROACHES TO ENERGY USE AND CONSERVATION
State and local governments share a two-fold responsibility to citizens:
• to manage municipal spending efficiently, and
• to create efficient conditions for the community.
By including energy use and conservation considerations in their planning activities, governments begin to meet one aspect of these responsibilities.
The approach a municipality takes to planning for energy use and conservation can vary. A comprehensive approach simply means that a community reviews a range of conservation opportunities and picks one or several that meet the needs of the community. A comprehensive approach may encompass many facets of community operations such as energy use in government buildings, schools, and municipal automobile fleets, as well as land use, or be limited to only one, such as community planning for land development.
An ad hoc approach to energy use and conservation usually is developed in response to specific local or agency problems, opportunities or interests as needs arise. Although ad hoc activites may not benefit from the synergistics of the wider range of possibilities offered in a


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comprehensive approach, significant individual action can be taken to save energy.
There are arguments in favor of and against both kinds of approaches.
Advantages of a comprehensive approach, disadvantages of
an ad hoc approach.
1. Some design options have a relatively low potential for saving energy by themselves. A program that combines a variety of them can produce cumulative energy savings that are more significant. An ad hoc approach that focuses on only one kind of option may have only limited results.
2. Many energy-conserving principles and practices are interrelated. Considering options in concert can prevent overlooking certain opportunities that may have highly beneficial results. An ad hoc approach may miss the connections.
3. Comprehensive energy planning shows developers, decision makers, funders, and the courts that a community takes energy use seriously. This is especially important when mandatory regulations are enacted and new restrictions are imposed on developers and the public, or when funding for expensive retrofit measures is requested. A court decision on mandatory regulations may hinge on whether they are based on a comprehensive plan. A legislative decision on funding of an energy conserving technical fix may balance on the committment to energy
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management shown throughout municipal actions. An ad hoc approach may not produce sufficient support for adoption of regulations, or their defense in court, or for funding of expensive capital construction projects.
4. Planning can eliminate potential conflicts among energy conserving practices. For example, the use of landscaping to provide summer shade could conflict with the objective of protecting solar access. An ad hoc approach could overlook such conflicts.
5. Fiscal austerity and rising costs mean that communities must pick and choose actions carefully, selecting only those that are truly energy and cost effective. Comprehensive programs and plans provide a means of weighing these aspects while an ad hoc approach could fail to differentiate on the basis of cost effectiveness.
6. Finally, a comprehensive approach, like all planning, allows for consideration of a broad range of actions, rather than a more limited set developed in response to narrow concerns. It opens up opportunities for innovation and initiative and the potential for greater overall payoffs.
Advantages of an ad hoc approach, disadvantages of a
comprehensive approach.
1. An ad hoc approach allows a local government to proceed on a limited basis with energy conservation if technical aids are not available or a commitment to energy conservation is not fully developed. It can be an appropriate way to lead into more comprehensive activity as broader
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interest increases and more information on how to save energy becomes available.
2. An ad hoc approach may lead to action more often than a
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comprehensive approach if a community responds to a specific interest by making regulatory changes. With a comprehensive approach, there is the possiblity that a study or set of policies could be considered to be enough effort, stifling further implementation of energy-saving options.
3. An ad hoc approach is likely to cost less than a comprehensive approach. Less staff or consultant time is likely to be required to evaluate
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a single option than a range of options.
4. An ad hoc approach can take immediate advantage of public
interest in energy conservation if planners act quickly. It is conceivable r
that public interest could wane during a lengthy process of developing a comprehensive program.
The two can certainly be combined. A community that is developing a comprehensive program can also be open to specific opportunities as they arise and may decide to put aside the broad based effort in order to respond. Another community may wish to respond to individual issues as a primary focus but develop a broader plan over a period of time, as interest develops and funding permits. Time, budget, available expertise,
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RECOMMENDATIONS FOR STATE AND LOCAL GOVERNMENTS: A PROGRAM FOR ACTION.
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State and local governments can save energy in their own municipal functions and in their land development practices. While the types of actions taken in each area can overlap, it is helpful to consider them separately because the actions needed to implement energy conservation measures may be discretionary for many municipal functions but are almost always legislative in nature for land development practices. The broad class of actors varies, too: cooperation and compliance is required from municipal employees in an administrative energy program and from private developers and citizens in a land use program.
The following recommendations for state and local governments and the activities suggested are a comprehensive approach to planning and managing energy use and conservation. While it may seem impossible to implement the entire package, groups of activities can also provide energy savings.
RECOMMENDATIONS FOR PLANNING AND MANAGING ENERGY USE AND CONSERVATION IN PROVIDING MUNICIPAL SERVICES
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RECOMMENDATION Create a climate in which efficient energy use is considered a part of sound management practices—in facilities use, in capital planning, in purchasing, and in driving.
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Managing energy use often seems to be beyond direct control. It can be done, however, by educating users, expecting and requiring efficient practices, and rewarding energy use reduction. A program integrating energy use and conservation principles into management principles should include the following activities:
ACTIVITY: Establish an administrative energy policy.
Leadership is a vital ingredient in energy conservation because of its potential for coalescing support. Leadership can elicit cooperation from staff and can foster high levels of participation from key conservation actors. Many different kinds of officials can provide conservation leadership as long as they have an understanding of the issues involved, a commitment to problem solutions, and a willingness to sustain and support conservation actions.
Effective energy management requires a statement of administrative commitment Established policy provides direction, support, budget, and administrative backing necessary for an effective program. Typical policy statements include:
• A statement of concern regarding the economic effect of energy costs on the municipality.
• A statement recognizing the advisability and cost-effectiveness of developing energy management procedures.
• A statement of commitment.
• Preliminary implementation considerations such as:
- authorizing a point of contact for energy issues, and


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- authorizing the creation of an energy data base and requesting a plan establishing goals for energy savings.
• Reporting requirements which would incorporate evaluative
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data and further recommendations. ’
ACTIVITY: Establish an energy education and training program for maintenance personnel, planners, purchasing agents,
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and fleet drivers.
The actual daily operations and maintenance of facilities is often in the hands of janitors and maintenance personnel. Training them to recognize
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and act on energy needs such as caulking and weatherizing, relamping, and boiler operations begins the process of energy efficient facilities maintenance.
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The benefits of energy education and training extend beyond mainenance personnel to planners as they consider capital facilities location and construction and land use planning decisions. Energy considerations sometimes require technical expertise outside of the normal range of experience. Planners must recognize energy use requirements and their own limitations in understanding them. Seeking technical assistance in determining the most efficient siting or building design should be standard procedure.
Life cycle costing includes energy use considerations. Purchasing
^ agents should be trained in life cycle costing methods in order to insure
that equipment and supplies purchased are not more expensive to use than they are to buy.
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Fleet drivers such as school bus drivers and municipal waste collectors, account for most of the energy use in any agency or municipal transportation budget. DECAT, Driver Energy Conservation and Training, suggests that energy use can be reduced from 10%-35% by training emphasizing energy conservation. Drivers should receive continual education and training about efficient driving habits.
Energy use education and training for personnel responsible for facilities, planning, purchasing, and driving can result in immediate, long term, inexpensive energy savings.
ACTIVITY: Establish schedules for maintenance personnel and drivers and energy use evaluation elements for planners and purchasers.
Supervisors must expect that education and training will be effective. They must support the attempts of employees to conserve energy by committing the time and money necessary to carry out energy efficient practices. They must establish schedules for operating and maintenance procedures as regular employee responsibilities rather than additions to the regular work load. They must provide most supplies without burdensome paperwork. Drivers’ supervisors must recognize that energy efficient driving habits may affect the length of time it takes to complete some routes. Computer routing schedules are available which can lay out the most energy efficient paths for regular routes without significantly lengthening the time it takes to complete them. Using energy efficient route scheduling can add exponentially to an individual's driving savings


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without requiring any restructuring of a department's time priorities or personnel requirements.
An energy use evaluation must be a part of every purchasing decision and capital facilities plan and land use decision. Although not the sole deciding factor, energy use must be formally evaluated and used as a ranking factor in decisions made by purchasers and planners. An energy use evaluation requirement, with the flexibility to account for the diversity of needs within agencies, will insure that the energy education and training given to purchasers and planners will be systematically applied and will result in consistent, energy efficient purchases and decisions.
Management must support the energy conservation efforts of employees by integrating those efforts into daily routines and responsibilities. This support can magnify the conservation effect.
ACTIVITY: Create a program that rewards energy savings.
Energy use and conservation must be a part of sound management practices, however the incentive to integrate one more piece into the greater puzzle of management is often limited. In a time when oil prices seduce us into believing that energy is no longer a public concern, the incentive for conservation must be tied to an agency's self-interest.
Energy use can be measured. It can be adjusted for seasonal temperature variations, the installation of new, more efficient equipment, and changes in building use. State and local government agencies can evaluate current energy use against past use on an agency wide or facility specific basis. With the computer tools available and the engineering
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analyses possible, energy use and savings attributable to conservation activities can be measured in many cases. For agencies with control of their operating budgets, energy savings are an immediate reward. As an example, continued energy savings by school districts can be translated into teaching positions. In many cases, however, budget savings from any source return to the general fund. Recognizing the unique character of energy savings, measurable and attributable to efficient practices, state and local governments should take steps to insure that at least a portion of energy savings returns to the agency responsible for the savings. Since energy cost savings are, in a sense, additional revenues for state and local governments, the money should be made available to the agency for its discretionary use. It could be earmarked for projects that enhance the primary service of the agency, for building enhancement or furniture replacement outside of regular repair or replacement, or for annual agency picnics. Efficient energy management and conservation are not without effort. They produce measureable dollar savings and they deserve dollar rewards.
RECOMMENDATION: ACKNOWLEDGE THE TECHNICAL NATURE OF ENERGY CONSERVATION ACTIVITIES.
ACTIVITY: Designate a contact point for energy questions -an energy 'expert'.
Information on energy conservation practices and products is
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available. Technical engineering expertise has developed in response to the energy needs of specific institutions and industries. The technical energy information network is limited, however, and is often unknown to state agencies and local governments. As planning for energy use and conservation expands to include conservation retrofits and projects that require large expenditures of funds, the potential for savings and the actual contribution of the energy measures must be quantified and clearly understood. State and local governments should designate an internal contact point for energy information or an energy 'expert' who would be available to all government agencies for information, advice, and technical assistance. In some cases, that person might be responsible for co-ordinating the development and management of a municipal energy data base and might have authority for an overall plan to implement options suggested by technical studies.
Small local governments might put a consultant on retainer and pay her salary out of energy savings, or hire an energy 'circuit rider' who would provide services to a group of municipal governments. State governments might designate the state energy office or an engineering department within the university system as the official state energy point of contact. Agencies within a city might share the salary of an engineer who would provide specific energy expertise to several agencies. A planner with an interest in energy use and a network of contacts within the local government agencies could field the questions and locate the appropriate 'expert' to provide the answers. Knowing the needs of


agencies, that person might prepare energy education and training programs for selected employees and could serve as a sounding board for energy considerations for all types of projects.
Coordinating energy activites among agencies could be an impossible task, but savings can be magnified if all agencies follow the same procedures and implement a concerted energy reduction program. A stated energy policy and the commitment of municipal officials helps to support the coordinating activity of an energy expert.
In all cases, studies show that energy savings are most impressive when there is involvement of motivated staff who identifiy with conservation opportunities and appropriate solutions. A designated energy contact point can present the comprehensive approach to managing energy use and conservation within municipal facilities.
RECOMMENDATION: CREATE AN ENERGY DATA BASE
The ability to coordinate massive amounts of data is possible for almost any state agency or local government with the use of a personal computer. Developing a comprehensive data base is critical to any long term plan that includes retrofits or improvements for a number of facilities and a variety of equipment. Based on accurate, comprehensive information, decisions to retrofit for energy conservation can make the best use of resources and can integrate multiple opportunities for conservation. They can produce immediate savings which in turn can produce continuing


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ACTIVITY: Create energy inventories of municipal facilities and special equipment.
Inventories create the data base. Building inventories, by type of facility or use, show the first opportunities for energy management and conservation savings. They provide a picture of the age, type, size, condition, and energy use of all buildings that can be used to compare and rank activities that promise energy savings.
To be effective, building inventories must include energy consumption data for at least the prior year in addition to current consumption data.
Base line energy consumption data provides the information needed to evaluate potential and current savings. Analysis of consumption data by means of computer programs such as FASER (Fast Accounting Systems for Energy Reporting) also allows facilities managers to spot inconsistent energy use patterns that might indicate faulty utility meters, structural damage, or improperly used or faulty equipment.
Energy inventories of public buildings and special equipment are the building blocks of a municipal energy data base. Energy inventories, used in conjunction with information gained from an analysis that shows how buildings or equipment are actually using energy, provide the information necessary to begin a comprehensive approach to managing energy use throughout municipal facilities.
ACTIVITY: Conduct comprehensive technical and economic studies detailing energy use and the potentials for conservation.
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Technical analyses of buildings can clearly show the cost and pay back time of conservation opportunities. They can be used to rank projects for implementation and to evaluate projects in terms of other municipal priorities. They can also be used as support for funding requests from the legislature. Presented with comprehensive studies showing that annual savings of $9.2 million could result from a one-time investiment of $15.6 million, the Texas State legislature authorized the issuance of revenue bonds to finance approximately $12 million of the recommended projects.^
To be most effective, technical studies should evaluate energy efficient operations and maintenance procedures for each building. Technical review of these procedures may suggest options that regular employees may miss or be unfamiliar with. Some^studies suggest that implementing energy efficient operations and maintenance procedures can pay for the cost of the entire technical study, including the engineering studies to support retrofit and construction options, within one year.
Technical studies provide the basis for any plan that goes beyond operations and maintenance activities to more expensive retrofit projects. Comprehensive technical studies can permit local governments to pick truly energy and cost effective projects on a time and budget schedule best suited to their abilities. Without technical studies of the great majority of municipal facilities, each project stands on its own. Failure of one for any reason jeopardizes any further commitment of funds for others.
RECOMMENDATION: Establish a plan for reducing energy use.
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ACTIVITY: Analyze energy needs and establish goals for
energy reductions.
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Sound management procedures require that certain goals be established. In energy management, goal setting is generally expressed as a percentage reduction of current consumption. The historical consumption
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for energy use reductions determined by the technical studies provide the
basis for energy reduction goals. t
Just as establishing a goal gives a program initial direction, assessing progress toward that goal sustains direction and momentum. Energy accounting systems provide the means of evaluating success.
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Technical studies provide the information needed to evaluate specific conservation activities while budget constraints might dictate the final level of yearly activity. A municipality might choose to spend $50,000 yearly for retrofits that pay for themselves within a specific time period.
Since energy savings continue beyond the initial payback period, if savings can be reprogrammed into additional work, later years can support larger ^ retrofit budgets than the original $50,000 commitment.
ACTIVITY: BUILD ENERGY RETROFITS INTO THE CAPITAL BUDGETING PROCESS.
^ Since energy conservation retrofits can be extensive and expensive it
is often cost effective to combine them with other capital construction projects needed in the same building. For example, installing insulation is
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often done in conjunction with needed roof repairs or replacements. By including energy retrofits within the scope of the capital budgeting process, projects can be coordinated that save time and money. Energy conservation projects also receive the overall review of the capital budgeting process and the municipality is assured that the projects fall within the overall scope of the municipality's goals and objectives.
The commitment of consideration within the capital budgeting process helps to insure that plans for reducing energy use move off the shelves and into the buildings where they offer effective dollar saving activities.
RECOMMENDATIONS FOR REDUCING COMMUNITY ENERGY USE THROUGH LAND DEVELOPMENT PRACTICES.
Almost every aspect of land development has an effect on energy use, from specific architectural details to general density considerations. Four areas of energy use stand out as targets for energy efficient land use practices. They are:
1. Reducing heating and cooling needs. This can be accomplished by energy efficient site design practices such as solar orientation or landscaping and by encouraging housing types which use less energy.
Some options for reducing heating and cooling needs are:
• Design developments so that buildings are oriented to the sun. This means designing streets to run from east to west; lots to run from north to south; and the long axes of buildings to run from


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• Develop south facing slopes first They are warmer in winter than slopes facing other directions.
• Use landscaping to shade buildings, parking lots, streets, and other paved areas. This prevents over-heating of buildings in summer and lowers summer air temperature near pavement.
• Use windbreaks to protect buildings from winter winds. Windbreads reduce the infiltration of cold air into buildings.
• Build housing with a lower proportion of outside surface to interior space. Townhouses, with more common walls, are an example.
• Encourage housing design innovations that save energy, such as earth sheltered housing.
2. Reducing dependence on automobile transportation. The energy used to move people and things in a community is determined in part by patterns of development. The spatial relationships of individual buildings and entire neighborhoods can determine in part how far and by what means people will travel. Compact development with a mixture of different land uses, where goods, services, jobs, residences, and recreation are closer together, permits less travel and perhaps more opportunity for public transportation than low-density development. Some options for reducing transportation needs are:
• Develop at increased densities, especially near activity centers, mass transportation stops, and in areas with existing sewer,
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water, and street capacity to handle it.
• Develop skipped over parcels within existing developments.
• Combine different kinds of land uses within development projects and neighborhoods.
• Provide convenience shopping and service facilities in otherwise residential neighborhoods.
• Provide facilities to encourage bicycling and walking. Pathways, parking facilities, and bike paths can encourage biking and walking.
• Develop at densities that support mass transit and locate highest density development near mass transit lines.
• Design street systems to reduce overall lengths.
3. Reducing embodied energy needs. Compact, higher density development has less energy tied up in streets, utilities, and other infrastructures than low density, detached development. Excessive design standards waste embodied energy. Requirements for parking spaces that are based on older, larger automobiles waste asphalt and energy for construction as well as money. Some principles for reducing embodied energy needs are:
• Develop at higher densities. More people can be served by sewers, water lines, streets and other infratructure.
• Develop areas that are already served by streets and utilities.
• Use narrower streets where possible.
• Use fewer and smaller parking spaces and lots where possible.
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• Cluster buildings together to reduce the lenth of streets and utilities.
4. Promoting the use of alternative energy. The practicality of alternative energy systems can be determined in part by land development. Some recommendations for encouraging the use of alternative energy sources and systems are:
• Facilitate the use of district heating or other production and distribution systems by developing at appropriate densities and with greater integration of uses.
• Facilitate the use of solar energy systems by planning development so that access to sunlight is protected.
• Substitute technologies that use renewable energy sources for conventional building systems whenever feasible.
Energy efficiency depends in part on how development is planned and carried out. Conventional development regulations, such as zoning ordinances and subdivision regulations, can be adapted in many ways to promote energy conservation at the community level. Rather than designing radically new regulations, incorporating a variety of energy objectives into existing zoning, subdivision, site plan review, landscaping regulations and incentive provisions offers a path of least resistance for municipalities seeking to control the energy use of the community.
RECOMMENDATION: CREATE A CLIMATE IN WHICH ENERGY


EFFICIENT LAND USE PRACTICES ARE CONSIDERED SOUND DEVELOPMENT ACTIVITIES.
ACTIVITY: Adopt a municipal energy policy.
Just as an administrative policy expresses a commitment to energy conservation in municipal services to municipal employees, a policy statement adopted by the municipal legislature expresses that commitment to citizens. A state or local government energy policy provides direction and supports a regulatory approach to energy conserving land development practices. It shows developers, decision makers, and the courts that a community takes energy use seriously. As communities consider energy conserving development regulations, there are many things other than energy—rising housing costs, legal rights, administrative costs, and political acceptability—that will affect their decisions. A stated energy policy can insure that development regulations will address energy use in ways appropriate to the needs of the community.
RECOMMENDATION: ADAPT THE LEGAL TOOLS AVAILABLE TO ENCOURAGE AND INSTITUTIONALIZE ENERGY CONSERVATION.
Existing zoning, subdivision, site plan review, and landscaping regulations and incentive provisions can be used to promote energy efficient land development. The three basic approaches to incorporating different types of development options into regulations involve increasing
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levels of stringency. First, regulations that stand in the way of energy-conserving practices can be changed to remove the barriers. Second, development regulations can be used to encourage energy-conserving practices either by providing incentives or by creating development settings in which they are easier to use. Third, regulations can require energy-efficiency in new development.
ACTIVITY: Remove barriers to energy conservation.
Some development regulations and design standards currently in use stand in the way of energy conservation, usually unintentionally. For example, the installation of solar collectors has been prohibited in some communities by aesthetic regulations. Yard and setback or lot layout specifications in subdivision regulations and zoning can limit flexibility in passive siting of buildings. In some cases design standards are excessive—for example, street width requirements that are greater than they need to be for adequate safety and traffic flow. Such standards can actually promote energy waste. Removing regulatory barriers allows developers and consumers to initiate energy-conserving design options without unnecessary hindrance.
ACTIVITY: Encourage energy conservation.
Planners and public officials are also in a position to actively encourage the use of energy conserving development practices by providing regulatory incentives. In the past, local governments have offered developers incentives to provide desired public amenities such as open space, plazas, and better design. The same can be done for energy
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conserving design options. Density bonuses, priority processing of develoment proposals, even decreases in development fees are examples of incentives that can be offered to developers to make their projects more energy efficient. The incentive approach can be applied to almost all of the available practices for saving energy, from landscaping of project sites to locating projects near mass transit stops.
ACTIVITY: Mandate energy conservation.
The toughest approach to conserving energy in land development practices is to require it by regulation. Land use controls place many kinds of requirements on developers, and many of these address issues that have important energy implications and offer opportunities to make development more energy efficient. For example, zoning imposes restrictions on building height and setback. This means that zoning can be a tool for requiring that development be designed to protect solar access and that regulations can be imposed to require proper lot and building orientation and landscaping. The police power inherent in development controls offers an excellent opportunity to require many energy efficient practices in development.
ADMINISTRATIVE ISSUES OF ENERGY CONSERVING DEVELOPMENT REGULATIONS
Energy conserving development regulations raise two general administrative issues. First, reviewing proposals for their energy impact
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adds a new dimension to the review process and increases the extent of discretion that planners and planning officials exercise. Second, it requires more expertise on the part of planners. Planners will need new skills in assessing energy implications and the application of conservation practices in development proposals and projects.
Many energy-saving development practices are site specific. Infill development of substandard lots requires flexible development standards and a case-by-case approach to development review. Planners must address many concerns in reviewing such proposals. In the same way, landscaping for energy conservation will vary from one site to the next, depending on topography, wind flow, the location of parking lots and other variables. This adds another dimension to landscaping previously reviewed only for aesthetic purposes.
In these ways, staff exercises discretion over a greater number of issues. The discretionary quality of staff review raises several issues not necessarily limited to energy conserving development regulations but affecting them just the same.
Does more discretion result in development that is better tailored to community needs and environmental objectives?
Does it justify increased processing time and planning costs for both the developers and the municipality?
Does it open up opportunities for abuse?
The need for new skills for planners for reviewing land development for energy efficiency produces another administrative issue. Planners will
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need additional expertise in areas such as density, climate, landscaping, and building techniques. Until that expertise has matured, the review process may be slowed and less effective.
State and local governments share the burden of creating an environment in which energy efficiency is standard operating procedure, both in internal government functions and in the community at large. While short term, specific problem solutions can save energy and tax dollars, long-range, comprehensive planning for energy use and conservation, rather than ad hoc approaches, will pave the road to an energy efficient community.
The information is available. The techniques have been developed. Programs have experimented with implementation. State and local governments must take the responsibility that is theirs and initiate energy conserving policies and actions for themselves and their citizens. They'll save money in the process.
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FOOTNOTES: CHAPTER 5
1. Erley and Mosena, Energy Conserving Development Regulations. pp.28-29.
2. Public Utility Commission of Texas, Energy Efficiency Division, Managing Energy Efficient Shcools. (Austin, Texas, October 1984), p. 126.
3. U.S. Department of Energy, State Programs Branch, Local Government Programs to Save Energy: Case Studies of Four Selected Communities.
Martin Schweitzer and Sam A Carnes, Oak Ridge National Laboratory, (NTIS, September 1983), p. 21.
4. Public Utility Commission of Texas, Energy Efficiency Divison, Cost Containment through Energy Efficiency: Technical Analyses of Selected State Buildings, (Austin, Texas, May 1985), pp. 6-7.
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CHAPTER 6 CONCLUSION


Full Text

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PLANNING / FOR ENERGY USE AND CONSERVATION SUBMITTED BY MARETTE ESPERANCE In partial fulfillment of the requirements for the Degree of Master of Planning and Community Development University of Colorado at Denver Spring 1986

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ACKNOWLEDGEMENTS Ken, you've always helped me when I've needed it. Thanks. Herb, your understanding and expertise have been invaluable. Thanks. Sheila, Cass, Sue, Madeline, Carla, Janet, Cindilou: You listened. Thanks . • Fred, you got it on the paper. Thanks. Scott, you've been agreeable throughout. Thanks.

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TABLE OF CONTENTS Introduction ..................................................................................... ! Chapter 1. Energy: Crisis, Conservation,Policies, Programs, and Planning ............. 4 Chapter 2. Barriers to Energy Conservation ............................. 24 Chapter 3. Federal-State Energy Conservation Programs ...... 31 Chapter 4. State Activites: Focus on Financing ....................... 49 Chapter 5. Planning Energy Use and Conservation: Recommendations for State and Local Governments ................ 64 Chapter 6. Conclusion ................................................................... 89 Selected Bibliography .................................................................... 92

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LIST OF FIGURES Figure 1 .................•.•.........•......................•..........•.....•............ 5 Figure 2 ....................................................•..............•.............. 6 Figure 3 .................................................................................. 8 Figure 4 .................................................................................. 17 Figure 5 ..•.....•..........•................................................•............. 34 Figure 6 ..•.....................................................................•...•..... 51 Figure 7 ..........................................................................•....... 52 Figure 8 ...................•....•......•................................................... 58

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INTRODUCTION •

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INTRODUCTION Energy conservation pleases my thrifty soul. It improves my comfort and it reduces my costs. It gives me a way to put my money where my mouth is because, to steal a phrase, caulk is cheap. The effect that the current drop in oil prices may have on conservation worries me. The cheap prices at the pumps make many people think the energy crisis is over. I know it isn't so. The energy crisis is just changing its nature. For Colorado and some other states, and many local governments, the corning energy crisis won't be one of availability, it will be one of higher end-use prices, exacerbated by a loss of tax revenues due to lower crude oil prices. For example, projections show that electricity is increasing it's share as an end-use source of energy and prices of electricity are expected to double within 10 years. Increased end-use energy prices and lower tax revenues will put state and local governments in an energy and budget crunch while citizens are guzzling at the gas pumps. The next, largely invisible, energy crisis will be a fiscal one for state and local governments that citizens may be unaware of. The Federal government has experimented with stimulating energy conservation. However the lack of financial commitment and the experimental nature of federal-state energy conservation programs, as they are now, make them inadequate for the task of providing the 1

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• long-term technical and management assistance that state and local governments need to plan for and implement energy conservation action that can alleviate future budget crunches. Unless these dinosaurs change, they will die out and leave us only memories as their residue. One extraordinary thing, however, provides the opportunity to change the old, piecemeal, experimental approach to planning for energy conservation: the oil overcharge settlements currently being directed by the federal courts to five federal-state energy conservation programs. The allocation of these monies (over $21 million to Colorado in the latest settlement) to energy conservation programs, while it does not make the regulatory changes in the programs that would most benefit state agencies and local governments, does provide substantial, stable funding for energy conservation activities. This paper addresses the continuing importance of energy conservation as an element of state and local government planning in spite of the public's perception of energy abundance and low price. It discusses the current federal-state energy conservation programs and the opportunities and constraints they offer. It shows that, supported by oil overcharge funds, federal-state energy conservation programs, with regulatory changes, can provide the climate for long-term planning and implementation of energy conservation measures that will save both energy and money for state and local governments and their communities. Finally, it suggests planning and management approaches that have been 2

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shown to be effective and can be used by state and local governments both in their own management activities and in developing energy conservation within their own communities. Caulk is, indeed, cheap. While not all energy conservation measures are as inexpensive, only planning for energy use and conservation can control the cost of energy for state and local governments and shelter them from the next energy 'crisis'. 3

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CHAPTER I ENERGY: CRISIS, CONSERVATION, POLICIES, PROGRAMS, AND PLANNING

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CHAPTER 1 ENERGY: CRISIS, CONSERVATION, POLICIES, PROGRAMS, AND PLANNING In recent years, the availability and use of the world's energy resources has become an issue facing individuals, businesses, institutions and all levels of government. Each has had to deal with rising costs and fluctuating supplies of traditional sources of energy. Each has experienced financial pressures, planning uncertainties and performance limitations because of the cost or availability of energy. Each has taken action to curtail demand and this combination of actions--federal-state energy conservation programs, market and political forces, and individual conservation efforts--has joined with a declining economy and may be responsible for today's apparent oil glut 1 • 2 that has pushed the price of oil to its lowest level in thirteen 3 years. The energy crisis has eased. It has not, however, disappeared. It is only in hiding. The current energy situation is neither stable nor predictable. Usage is on the rise again 4 (see figures 1 and 2) and while lower prices provide some relief to the consumer, price projections suggest that the worst is still to come. 5 Three things in particular will cause problems for state and local governments: 4

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Figure 1. Consumption of Energy by Source, 1949-1984 8uadrillion Btu umulative 100-90-80-70-60-50-40-30-20-10-01949 Nuclear Power lmf!!i!!l Hydropower, Geothermal, and Other Petroleum Natural Gas 11 eoal 1955 1960 1965 1970 1975 Annual Energy Review 1984 Energy Information Administration 5 1980 1984

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Figure 2. Consumption of Energy byEndUse Sector, 1949-1984 guadrillion Btu 1 (Xf-ulative I \ I Electric Utilities 908070605040-3020-10-0-1949 l::::::::::::;j Transportation* Industrial* m Residential and Commercial* 1955 1960 1965 1970 1975 *Fossil Fuel Only Annual Energy Review 1984-Energylnformation Administration 6 1980 1:84

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First, end use energy sources, those sources used for the final work desired, are shifting from natural gas to electricity. Electricity consumption is expected to grow more rapidly than the demand for all other fuels. This is true for the residential, commercial, and industrial sectors. 6 (figure 3) Although recent studies show that the growth of electricity comsumption will not be as rapid as it was before 1973,1• 8 primarily due to more efficient industrial and commercial processes, electricity will take up a bigger percentage of utility bills than it has in the past. This shift to electricity takes place by default, rather than by design, as the production of electricity increases. Local governments will increasingly use electricity as a source of end-use energy. Second, while it is impossible to predict long term energy prices with precision, the general upward trend is expected to continue. At a minimum, energy costs are expected to track the annual rate of inflation. By some estimates, the price of electricity will almost double by the year 2000, with inflation factored out. 9 Third, many state and local governments will face significant losses of tax revenues from lower crude oil prices. Dropping oil prices will cost Colorado counties $8.2 to $15.3 million in tax 7

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70 60 50 40 30 20 10 Figure 3. End Use Energy Consumption by Energy Source, Selected Years. Coal Electricity 0 Natural Gas 32% 30% 28% 26% 27% 24% 0........_ __ 1970 1975 1980 1985 1990 1995 Note: Percentage shares may not sum to 100 percent due to independent rounding. Source : •History: Energy Information Administration, State Energy Data Report. 1960 -1982. DOE/EIA 0214 (82) (Washington, DC, 1984). •Projections: Appendix A, Table A4 8

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revenue annually if oil prices remain around $15./ barrel. Over half of Colorado counties won't feel that loss until 1988 because the property tax levies lag two years behind production. 10 These three factors promise that states and local governments will face declining municipal revenues while municipal utility bills increase. Although planning for energy use and conservation in the face of both an uncertain energy future and the public perception of energy abundance is difficult, it is a necessary task. State and local governments have the responsibility to spend their citizen's and businesses' tax dollars wisely. They also share in the responsibility for dealing with the energy problems of their local communities. Appropriate long-term planning for energy use and conservation by state and local governments fulfills these responsibilities. DEFINITION OF ENERGY CONSERVATION Energy conservation has at least two distinct meanings. First, conservation means using energy more efficiently and ending energy waste. Buildings can be more tightly sealed. Newer, less expensive technologies can be substituted for other, older ones to produce the same output of goods and services as before. Lights can be turned off manually or by sensors; street lighting can be modified to accomodate more efficient 9

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fixtures. There is no reduction in comfort and no impact on life style. Using energy more efficiently in these ways is called a 'technical fix'.11 Second, conservation means saving energy through life style changes, whether modest or severe, and curtailing activities.12 Carpooling, thermostat set-backs, and shorter hours of service are examples. People almost always regard energy conservation as a dull, if sometimes necessary, evil, an unpleasant duty that is best dismissed in private. Methods and incentives for energy conservation have been characterized as "grim little lectures" .13 In general, this paper discusses painless energy conservation, the 'technical fix', which is credited with reducing energy usage in 1980 by 1 Ox 1015 BTU's or a stunning 11%. 14 The 'technical fix' costs money, but it pays for itself in the long run. It is the easiest, most durable, and most politically sensitive method that can be used to save energy and money. Since it can guarantee energy savings it is also the most reliable element in any energy use plan. Energy conservation's 'technical fix' can effectively control the use of energy by the consumer. ENERGY AS A COMMODITY Energy is a commodity. As such, supply and price are well outside the control of the end-use consumer. Energy follows the same 'hog cycle' that plagues the mythical midwest farmer. When the price of pork bellies climbs, the farmer and all his neighbors breed more hogs and end up 10

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glutting the market. The price of hog bellies then drops, and the farmers breed fewer hogs, creating shortages that jack up prices, and the process starts all over again. Historically, production and consumption of energy have followed the same slow but steady increase. Price remained fairly constant until 1973 when reliance on imported oil to meet demand began to increase dramatically 15 and the first round of OPEC price increases seemed to signal the end of cheap and plentiful energy supplies for the U.S. In response, domestic and foreign exploration and development of previously unprofitable reserves took off in earnest. Utilities began to expand capacity and people turned down the heat. In 1980, the war between Iran and Iraq exaggerated the instability of petroleum supplies and years of inflation pushed the price of a barrel of oil to a high of over $40. At the same time, Three Mile Island served as a symbol of all the problems associated with high-tech alternative energy sources. Conservation became one of the easiest, cheapest, and cleanest 'sources' of energy around. Beginning in 1978, conservation and the declining economy combined to create a decline in energy consumption that lasted until1983. 1 6, 1 7 By early 1986, political and market forces blew the bottom out of the barrel and oil prices plummeted to their lowest level in thirteen years. Consumers reaped the benefits as the cost of unleaded gasoline dropped below $. 75/gal. Governmental support of energy conservation fell: energy consevation programs were cut between 11% and 22% in the 1986 Federal budget18 and tax credits for energy conservation were allowed to expire. 11

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Rather than continue to expand capacity and develop new reserves, private development and exploration screeched to a halt. The cheapest way to acquire oil reserves now is to merge with another company. 1 9 FEDERAL ENERGY CONSERVATION POLICIES If the latest drop in price signals the bottom of the energy cycle, the Reagan administration has always signaled its belief that the energy crisis was a figment of someone else's imagination. The two emergency energy conservation programs mandated by President Carter in 1977 (Emergency Building Temperature Restrictions, which required us to be 'hot in summer and cold in winter'; and the Emergency Energy Conservation Act, which guided and proposed funding for State contingency planning for energy shortages) were discontinued within days of Reagan's inauguration in 1979. Gas rationing planning was killed in 1980, long before the ill conceived coupons were buried in Pueblo. 20 More recently, gas mileage standards have been relaxed, appliance efficiency ratings are no longer required, energy conservation tax credits have been allowed to expire, and the Federal Power Authorities, the largest producers and cheapest brokers of domestic electicity, have been suggested for the auction block as elements in the plan to 'privatize' America. 21 Federal energy conservation policy has been inconsistent and unclear. It has been characterized as "temporary, and often misguided, efforts to come to terms with the new national energy condition. They were mostly experiments and expedients 12

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to buy time." 22 However, one message is clear: energy policy has shifted toward greater reliance on market forces. The role of the government in mandating conservation has ended and its position as direct supplier and stimulator of alternative energy sources has drastically changed. Saving energy is no longer a national priority. Less clear is the role of current federal energy conservation programs first authorized by Congress in 1975. Implemented through state energy offices, federal conservation programs have become the principal government energy efficiency programs in the U.S. Products of the '70's, they have been subject to budget reductions, Reagan administration termination proposals, and increasing scepticism regarding their need in the mid-'80's. Market advocates consider that'tconomic incentives make them redundant; advocates of government intervention argue that they are cost-effective and address continuing market imperfections. In many states, they are the only state-wide energy conservation programs available. 23 Their importance may increase as other federal initiatives are discontinued and their role will certainly expand as Congress and the courts continue to direct to them the billions of dollars emerging from oil overcharge and misallocation settlements. 24 On the whole, the federal-state conservation programs were designed to provide information to the consumer, whether individual, commercial or governmental, that would encourage the consumer to proceed with energy efficiency improvements. Direct funding for a 'technical fix' has been limited to the low-income residential consumer and to schools and hospitals, institutions 13

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primarily concerned with delivery of quality community services, where cost efficiency remains a secondary concern. Limited as they are by regulation and budget, they often cannot provide State and local governments with the leadership, expertise, or creativity necessary to meet their needs. CURRENT FEDERAL-STATE ENERGY CONSERVATION PROGRAMS In 1975, The Energy Policy and Conservation Act established the basic framework of the current federal-state energy programs. The act provided federal funds for states to establish State Energy Conservation Plans. These responsibilities and accompanying administration money helped institutionalize state energy offices and set the model for subsequent federal-state conservation activities in which the federal government provides the funding and regulatory framework and the states serve as implementation agencies that apply for their share of annual appropriations, adapt the federal mandates to their context, and implement the actual programs. The intent was to end reliance on foreign energy producers by reducing consumption and to buy time for the development of domestic reserves and new energy technologies. While the original energy programs aimed a shotgun at all sectors, current federal-state energy activity centers on the following programs: the State Energy Conservation Program, (SECP), which contains both mandatory and optional program elements; 14

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the Energy Extension Service, (EES), which provides information to small-scale energy users; the Institutional Conservation Program, (ICP), which funds audits and capital construction projects for schools and hospitals; and the Weatherization Assistance Program, (W AP), which weatherizes low-income dwelling units. 2 5 The expectation was that information would lead to independent action by individuals, businesses, local governments, and state agencies who would be motivated by potential savings to bear the costs of capital improvements. Conservation would be subsidized for those unable to afford it: the low-income family and public and private, non-profit schools and hospitals. The Reagan administration has proposed termination and phase-out or zero funding for most of the programs in each annual budget request. Although similar opposition and ambivalence exists in Congress, the majority there has forced the programs' continuation. Federal appropriation levels have decreased steadily, except in 1983 when the Jobs Act provided two programs with an additional $150 million. Nearly all energy offices have had to greatly reduce their staff and program activities as a result of the instability of funding and smaller basic appropriations. 26 Congress' budgetary habits also contribute to an episodic and piecemeal approach to programs. Appropriations are never guaranteed, the amounts budgeted are always threatened, and final appropriations have been in 15

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jeopardy until the moment of Congressional voting. Yet state plans for the expenditure of the funds are required within weeks of the appropriations. There is little incentive to plan programs for imaginary money or to run programs that span more than one year. Activities that would require additional funding in following years are seldom implemented or may not be carried out to their logical conclusion. As the principal government energy efficiency programs in the U.S., the federal-state energy conservation programs lack commitment and continuity. oa OVERCHARGE SETTLEMENTS In the last few years, however, the states have received over $250 million in oil overcharge settlement awards for use in the programs. The first settlement, $200 million, was distributed in 1983 to governors for use in five federal-state conservation programs. In 1986, the courts have directed that an Exxon settlement of over $2 billion (This represents ten times the amount of funding appropriated by Congress in 1986 for conservation programs. Colorado will receive $21 million.) also be allocated to the five programs. Eventual settlements in the Petroleum Violation Escrow Account could exceed $7 billion. (Figure 4) 16

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OIL OVERCHARGE COLLECTIONS (In billions of dollars) Collections in government escrow account Exxon's Hawkins Field payment Expected from major refiners Expected from other oil companies Expected from Wichita court case TOTAL NOTE: Includes overcharges for both crude oil and refined products Source: U.S. Department of Energy Figure 4 Oil Overcharge Collections $1.16 2.10 1.60 1.40 1.43 $7.69 So in the face of apparent gluts of oil, a declining commitment from the Congress, and a public perception of energy abundance, over $2 billion from overcharge and misallocation settlements has recently been directed to energy conservation programs. Although the programs as they exist now have limited abilities to meet the needs of state and local governments for direct capitalization of technical improvements, oil overcharge funds can provide a substantial, stable source of support for the federal-state energy conservation programs. Freed from threats of termination and 17

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• assured of funds, energy conservation activities sponsored by these funds may be able to produce the climate and technical assistance necessary for state and local governments' long term planning efforts for energy use and conservation. PLANNING ENERGY USE AND CONSERVATION Planning energy use and conservation is a difficult task for state and local governments for a variety of reasons. • Predictions about energy price and availability are difficult to make, making planning uncertain. • Highly visible lower gasoline prices blunt the public incentive to conserve and reduce support for conservation activities. • Conservation activities are technical and often require expertise that is not readily available. • Energy conservation retrofits often require large initial capital outlays. Subsidies for retrofit projects are prohibited by the federal-state energy conservation program regulations, forcing State .and local governments to bear the entire cost of the retrofit In spite of these difficulties, state and local governments must act now to plan for their efficient use of energy and its conservation in order to avoid the budget problems that unchecked and wasteful energy use guarantee. • Although predicting energy prices and availability is uncertain, increased energy consumption and costs are guaranteed if state and 18

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local governments fail to plan for efficient energy use. • Although lower gas prices can reduce support for conservation activities, efficient management and planning activities can win support by delivering lower costs. • Although conservation activities require technical expertise, the techniques and expertise are available. • Although conservation retrofits often require initial capital outlays, they can pay for themselves and continue to produce 'revenue' by avoiding future costs. By including energy use and conservation considerations in their planning and management activities, governments begin to meet an aspect of their fiscal responsibility to taxpayers. By integrating the painless 'technical fix' into routine municipal management and planning procedures, energy management and conservation can escape the onus of 'grim little lectures' and become popular efficiency activities. Municipal governments can control their energy use and cushion their budgets against the next invisible energy crisis, in spite of the public perception of abundant energy, if energy conservation activities are routinely undertaken as efficient operating procedures in both municipal activities and land development practices. 19

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Footnotes: Chapter 1 1. U.S. Department of Energy, Use from 1973 to 1980: The Role of Improved Efficiency, Oak Ridge National Laboratory, (Oak Ridge, Tn. NTIS December, 1981), p.40. 2. U.S. Department of Energy, Energy Information Agency, Annual Review 1984, (Washington, D.C.: Government Printing Office, April, 1985). 3. Ibid. 4. Projecting energy price, consumption, and production is uncertain, at best, and may be impossible. The Energy Information Administration acknowledges this in its annual forecasting report. "Energy consumption projections in this report are determined by a variety of factors including economic growth, energy prices, and energy conservation trends. Considerable uncertainty is associated with estimating the behavior of these determining factors. It is also uncertain whether these determining factors will influence future energy consumption in the same way they did in the past." U.S. Department of Energy, Energy Information Agency, Annual Outlook. 1984. With Projections to 1995, (Washington, D.C.: Government Printing Office, January, 1985) p. 91 5. Ibid., p. 94. 6. Ibid., p. 91 7. Ibid., p. 91 8. Walter A. Rosenbaum, Politics. and Public Policy, (Washington, D.C., Congressional Quarterly Press, 1981), pp.209-211. 9. American Gas Association, Total Resource Analysis Model. (Arlington, VA January 1986. 20

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10. Colorado's leading oil producing counties--Rio Blanco, Weld, Cheyenne, Washington, and Adams--will be hit the hardest by the revenue drops. In 1984, Colorado counties collected $68.8 million in ad valorum taxes. Production taxes average 7.15%. Property taxes on lease equipment are in addition to these levies. Colorado Oil and Gas Conservation Commission report. Michael Rounds, "Oil price drop may trim tax revenue.", Rocky Mountain News. 2/27/86. 11. Amory B Lovins, Soft Paths: Toward a More Durable Peace .. (New York, Harper and Row, 1977) p.32 12. U.S. Environmental Protection Agency, Office of Environmental Engineering and Technology, federal Conservation Perspectives from the Public and Private Sectors: Volume 1. (Washington, D.C., Government Printing Office, May 1982), pp4-5. 13. Vincent Carroll, "Oil proved slippery indeed for the prophets.", editorial, Rocky Mountain News, 317/86. 14. U.S. DOE, Use from 1973 to 1980, pp.37-38 15. U.S. DOE, EIA, Annual Review 1984. p.24. 16. Ibid. 17. U.S. DOE, Use from 1973 to 1980, p.41. 18. U.S. Congress, Joint Budget Committee, 1986. (Washington, D.C., March, 1986), 19. David Pauly, "The Unmaking of an Oil Cartel", Newsweek. 2/3/86, pp.36-38. 20. Editorial Research Reports, Issues: New Directions and Goals. (Washington, D.C., Congressional Quarterly, Inc., May, 1982), p. 14. 21

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21. The Reagan Administration announced its plan to sell the five federal power authorities--Bonneville,Western Area, Southwestern, Southeastern, and Alaska--in its fiscal year 1987 budget proposal. Based on a suggested sale price of $13.9 billion, contained in the White House budget plan, The American Public Power Association estimated that power costs would rise roughly 68% or approximately $2.2 billion a year. Because administration officials have hinted that the final sales price could be open to negotiations, the "rate shock" could be even more severe. If the sales price of the power authorities were based on the Heritage Foundation's estimates, the price would be set at $65.9 billion and would boost power costs by about 390% or $12.6 billion a year for those affected. Users News, 3/24/86 22. Rosenbaum, Politics. and Public Policy, p. 193. 23. Stephen W. Sawyer, "Federal-State Conservation Programs: The states' assessment." Policy, April1985, pp.156-168. 24. In 1973, federal regulations were imposed to hold petroleum prices down, encourage domestic production, and reduce American dependence on foreign petroleum sources. Prices for domestic crude oil and petroleum production were controlled from the well-head to the service station pump. Both deliberate and accidental violations were committed by oil royalty holders, refiners, distributors, and marketers before President Reagan eliminated the regulations in January, 1981, shortly after his inauguration. Until controls ended, most violations were settled by requiring violators to lower their prices. Since prices were controlled at every step from production to distribution, the lower costs were passed on to comsumers. After deregulation, refunds could not be passed on directly to the consumer and DOE began using various forms of indirect restitution in oil overcharge cases, including reaching a broad cross-section of the affected population by funding energy conservation programs. To date, the courts have ordered the funds from overcharge cases to be distributed under the procedures of 1982 legislation that has become known as the Warner Amendment, named for Sen. John Warner, R-Va. This amendment governs the use of escrow funds from earlier petroleum 22

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pricing violation cases. Under the Warner Amendment, each state receives a share of the funds based on the ratio between its consumption of refined petroleum products and the total U.S. consumption of those products during the six years of federal price controls. The Warner Amendment also provides for distribution of oil overcharge money, at the discretion of the Governors, through five federal programs: The Weatherization Program, The State Energy Conservation Program, The Energy Extension Service, The Institutional Conservation Program, and the Low-Income Energy Assistance Program. Interestingly, the legislation expressly prohibits use of the money for administrative expenses. 25. A fifth Federal-State program, the Low Income Energy Assistance Program is a utility payment subsidy rather than a conservation program and is not within the scope of this paper. 26. U.S. Department of Energy, Office of State and Local Assistance Programs, 1985 Report, (NTIS, October, 1985). 23

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CHAPTER2 BARRIERS TO ENERGY CONSERVATION

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CHAPTER 2 BARRIERS TO ENERGY CONSERVATION In 1983, the Salida School District audited the energy usage of two of the district's school buildings. Faced with increasing utility costs and decreasing student enrollment and state funding, the School District in central Colorado received a grant from the Institutional Conservation Program that paid for half of the $8,000 audits. The audits recommended, and the district pursued, energy conservation measures that would cost more than $60,000 and pay for themselves within two years. In 1984, the district applied for funding from the Institutional Conservation Program for those activities. That year applicants' requests exceeded the funds available in the ICP in Colorado. Salida School District received funding for only one energy conservation measure in only one school, the lowest on its priority list for capital spending. The School Board would not commit any of the limited funds of the district for capital improvements in that building and although Federal funds would have paid for 65% of the project, the grant was dropped by the schoo1. 1 Attitudes, finances, and federal regulations were barriers to energy conservation that the School District in Salida could not overcome. In general, barriers to energy conservation fall into four categories: attitudinal, informational, financial, and regulatory or legal barriers. They often combine to make energy conservation a difficult task. 24

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ATTITUDINAL BARRIERS Attitudinal barriers deny the necessity of conservation or the efficacy of particular conservation measures. Rosenbaum cites the 'psychology of abundance' as the American mind-set that most inhibits conservation. 2 Gas prices below $.90/gal do little to alter that mind-set even though other energy sources may be increasing in price. Attitudinal barriers that inhibit conservation actions include such petty, yet crucial, things as a facilities manager's dislike of the director of facilities and the subsequent lack of cooperation between the two or the more political animosities that may exist between a treasurer's office and an agency wanting to pursue a new financing option for capital construction. Attitudinal barriers are often the most difficult to overcome because they can be emotional and irrational, arising from beliefs that are not responsive to complicated arguments or information. The energy experts who predicted oil prices of $60 to $80 per barrel before the end of the decade appear to have been wrong and the public is not likely to forget that. 'Expert' energy advice may not have the clout it once did. INFORMATIONAL BARRIERS Lack of credible information about energy conserving improvements is often pointed to as a principal obstacle to increased energy 25

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conservation. 3 In some instances, consumers are unaware of the relative benefits of various energy conservation strategies. In other instances, when information is available and accessible, it may be inaccurate and unreliable or one-sided and incomplete. In cases requiring technical engineering documentation and design, staff may lack the necessary expertise and procurement requirements may be so formidable that projects are not initiated. Although technical expertise in the area of energy management and conservation has increased, that expertise may remain within a small sector of energy consumers. Municipal governments may not be aware of the experts available to commercial institutions and the technology available in the commercial sector may not be readily transferred to local government use or scale. FINANCIAL BARRIERS Lack of capital and limited access to credit will reduce the opportunities for 'technical fixes' even when technical information is available and the attitudes are right. Consumers are wary about assuming new debt when interest rates are high and they may worry that the improvements may not result in the expected savings. Municipal agencies may not be able to undertake construction or retrofits outside of the capital improvements budget and that budget may be prepared several years in advance. Off-line financing and leasing may be prohibited, as well as incurring debt without the approval of voters. While new financing 26

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mechanisms are now being used to fund technical efficiency improvements, their very newness may limit their acceptance. REGULATORY AND LEGAL BARRIERS Building codes can help or hinder energy conservation. Local ordinances may directly prohibit some types of retrofits. Neighborhood covenants may forbid solar collectors or clotheslines. Rent controls can forbid the sharing of costs of energy investments by the landlord and the tenant, but they may allow landlords to raise rents to cover increased utility bills. Municipalitites may be prohibited by charter from assuming some types of long term debt. The 1985 Tax Reform Act makes bond issues less appealing for investors and more risky for all levels of government. Regulatory and legal barriers to energy conservation may be the most difficult to remove. They can be subtle and pervasive and changes may produce significant ramifications that are unexpected or unwanted. Regulatory barriers to conservation exist within the federal-state energy conservation programs that have been established to promote conservation. Capitalization of construction projects for all but low-income households and schools and hospitals is prohibited. Petroleum violation escrow funds cannot be used for administration expenses of the programs they suppport. Congress' budgetary procedures leave program 27

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appropriations in doubt year after year encouraging ad hoc programs rather than comprehensive ones. REDUCING BARRIERS Although barriers to energy conservation exist, many programs and activities have been undertaken which have lessened their impact significantly. Federal-state energy conservation programs have provided a wealth of accurate, available information for consumers and often include telephone hot-lines for immediate answers to questions. These programs have also produced a nationwide pool of professional engineers with an expertise in energy conservation measures and an audit framework that clearly spells out the costs and benefits of retrofits to buildings. Direct, leveraged capitalization for projects done by public and private, non-profit, schools and hospitals is available. Direct financial subsidies have, for the most part, remained outside of the scope of these programs. There are, however, many examples of financing projects and experiments which have taken place without federal funding. Local government efforts to alleviate the problems associated with barriers to energy conservation within their own structures have centered on employee and agency incentives which give agencies authority to rebudget savings attributed to energy conservation rather than have them revert to the general fund. Regulation review and modification, 28

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procurement policy changes to require energy use considerations in life-cycle costing, and integration of energy conservation considerations into capital budgeting and management policies are more comprehensive attempts to institutionalize conservation in government activities. 4 As part of their responsibilities to their communities at large, local governments have also included energy use considerations in land use planning, transportation planning, and residential building codes in both ad hoc projects and more comprehensive approaches. 5 While barriers to energy conservation exist and may even be strengthened by the current low price of oil, experiments have shown that energy management and conservation can be accomplished and encouraged. In 1985, Salida School District received another ICP grant which funded over $29,000 in projects more in line with the school district's priorities. Work is proceeding. 6 29

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Footnotes: Chapter 2 1. Janet Hartsfield, Colorado ICP Manager, interview, Denver, Co., October, 1985 2. Rosenbaum, Politics. and Public Policy, p.65. 3. U.S. EPA, Perspectives from the Public and Private Sectors, p.21. 4. Duncan Erley and David Mosena, Development Current Practice, (Chicago, ll., American Planning Association, August, 1980), p.23. 5. Ibid. 6. Janet Hartsfield, interview, October, 1985. 30 •

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CHAPTER3 FEDERAL-STATE ENERGY CONSERVATION PROGRAMS

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CHAPTER 3 FEDERAL-STATE ENERGY CONSERVATION PROGRAMS PHILOSOPHY OF FEDERAL-STATE ENERGY CONSERVATION PROGRAMS Current federal-state energy conservation programs have become the principal government energy efficiency programs in the U.S. In many states, they are the only state-wide energy conservation programs available. Current energy conservation activities center on the following programs: • the State Energy Conservation Program (SECP), which contains both mandatory and optional program elements and focuses on energy conservation planning; • the Energy Extension Service (EES), which provides information to small-scale energy users; • the Institutional Conservation Program (ICP), which provides leveraged capitalization for technical audits and construction projects for schools and hospitals; and • the Weatherization Assistance Program (W AP), which weatherizes low-income dwelling units. The programs' intentions are simply stated: provide information and technical assistance and subsidize capitalization of construction for those least able to afford it-low-income households and public and private, non-profit schools and hospitals. The programs' expectations are equally 31

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straight forward: information will motivate action. With that philosophical background, the federal-state energy conservation programs prohibit expenditures for capital construction for all but a limited sector of energy consumers. The philosophy is consistent with the concept of government as a stimulator of conservation, encouraging activities and leveraging limited program appropriations with funds from the private sector. New program strategies explicitly encourage this leveraging with the private sector as federal appropriations continue to shrink. 1 The rapidly falling price of oil and the assignment of funds from oil overcharge settlements to the federal-state conservation programs significantly change the conditions that determine this operating philosophy for two reasons. First, information will not motivate action when the economic benefit is not perceived. Second, directed by the W amer amendment to conservation programs in an attempt to provide restitution to all energy consumers for overpayments, oil overcharge funds provide substantial amounts of money that are independent of and far larger than congressional tax appropriations. While it may be appropriate that government funds encourage conservation for all and only capitalize construction for a few, restitution funds by their nature and amounts should provide lasting conservation activities that continue to save energy and money for all consumers. No better way exists than capitalization of energy conservation retrofits for public purpose entities: state and local governments and public and private, non-profit organizations. 32

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Without legislative or regulatory change to permit funding of energy conservation construction projects for public purpose entities, the federal-state conservation programs and the millions of dollars allocated to them for restitution from oil overcharges will not realize their extraordinary potential for energy savings for all consumers. STATE ENERGY CONSERVATION PROGRAM The administrative framework of the federal-state conservation programs was established with the passage of the Energy Policy and Conservation Act in 1975. This act and the subsequent Energy Conservation and Production Act of 1976 provided financial assistance in the form of grants to States to develop, modify and implement State energy conservation plans. Together, the EPCA provisions regarding plans and the ECPA provisions regarding supplemental plans constitute the State Energy Conservation Program. Prior to the implementation of the SECP, most states did not have state energy offices or any related central focal point for their various energy programs. The SECP has provided the states with the funding needed to establish, maintain and at times expand their capability to plan, design, and implement a wide variety of energy programs. Staff support for other federal-state energy conservation programs such as the Energy Extension Service and the Institutional Conservation Program is usually provided by the state energy offices and these offices also often provide the focal point for data collection and 33

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Figure 5 Federal appropriations for state energy conservation programs (rounded off to the nearest million). State Energy Conservation Plana Energy Extension Service Institutional Conservation Program We&therization Assistance Program TOTAL 1979 1980 $58 $48 15 25 100 119 199 199 372 391 1981 1982 1983 1984 $48 $24 $24 $24 22 10 10 10 158 46 48 175 144 245c 190 403 224 377 272 a. This includes funds for both the base and supplemental SECP programs. b. This includes $50 million from the 1983 Jobs Act. c. This includes $100 million from the 1983 Jobs Act. Source: U.S. Department of Energy 34 1985 $23 10 48 190 271

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analysis of resources and needs. They are able to maintain this capacity largely due to the SECP. The objectives of the SECP program, as stated in the enabling legislation, are: To enable states to develop and implement conservation plans that will reduce projected energy consumption in each state. Initially, each state's plan was directly linked to scheduled progress toward, and achievement of, a 5%, or greater, reduction in projected energy consumption. Since 1980, the goal has been increased yearly in percentage increments to continually enhance the original goal. During 1984, the target energy savings goals for each state was 20% over that established for the year 1980. 2 To develop each state's capability to handle comprehensive energy conservation planning and implementation. To provide states with efficient technical support to implement their various energy conservation measures efficiently and effectively. To accomplish this objective, DOE has attempted to enhance each state's capability to satisfy its technical requirements with its own resources, augmenting them as necessary with technical assistance. Under SECP, a state receives financial and technical assistance to carry out a plan. To be eligible for financial assistance for implementation, the plan must be designed to achieve scheduled progress toward a specific 35

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energy conservation goal and must include the following five required program measures specified in EPCA: 1. implement lighting efficiency standards for non-Federal public buildings; 2. promote the availability and use of carpools, vanpools and public transportation; 3. implement standards and policies relating to energy efficiency in the procurement practices of a state and its political subdivisions; 4. implement thermal efficiency standards and insulation requirements for new and renovated non-Federal buildings; and 5. enact a traffic law or regulation which permits motor vehicles to tum right at a red light after stopping. 3 These measures are required components of each state's conservation program. SECP also encourages states to develop and implement additional energy conservation measures appropriate for their local needs. This state-initiated component of SECP has resulted in hundreds of programs that are now responsible for almost two-thirds of all projected energy savings. Additional measures have included activities to promote energy conservation in oil recycling, transportation, commercial buildings and industrial processes, residential buildings, agriculture and utilities. Several states have proposed state tax credits and other incentives to encourage individuals to take energy conserving actions. Measures aimed at local governments have included energy management programs designed to 36

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provide both the technical expertise necessary to guarantee energy savings and also the management tools and skills necessary to implement the programs. 4 The SECP provides the vehicle for programs aimed at state and local governments. While successful programs exist for these target groups, a recent state assessment of SECP shows that State Energy Offices rate their successes as limited. "States criticized the lack of conservation in state buildings, but this appears to result from an absence of programs rather than failed ones. The most critical comments were reserved for local government officials who have failed to pursue even modest conservation programs, despite extensive SEO efforts. The resulting disdain for local officials exceeded the customary scorn each level of government has toward others." 5 Many states do report highly successful programs, however. In each case, direct, on-site involvement and specific technical assistance seem to be key elements of appeal. For example, The Mississippi Department of Energy and Transportation has developed a comprehensive Transportation Management Program which is being utilized Statewide in public school districts. Working with the State Department of Education and institutions of higher learning, the primary objective is to provide school administrators with organizational and procedural strategies for implementing an effective energy management program. Regional administrator workshops are conducted to emphasize the economic advantages of implementing services available through the 37

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Department which include: computerized bus routes and schedules; computerized operational and maintenance cost control reporting/record keeping; and driver training workshops which emphasize improved efficiency and safety through modification and improvement of driving habits. An administrator's handbook, driver training manual, and other materials have been distributed Statewide. 6 North Carolina's Energy Division contracted with private engineering firms to provide detailed engineering analyses to 18 municipal water and wastewater treatment facilities to identify the energy conservation potential in operating and maintenance procedures, low-cost improvements, and high capital cost modifications. Studies have shown that most municipalities spend 30%-50% of their energy dollars on utilities, including water and wastewater facilities. Engineering analyses completed on the first 12 facilities indicated a potential for annual savings of 14%-35% depending on the implementation of recommended measures. With the completion of all 18 audits, the Energy Division contracted for the development of case studies utilizing the results. The program included development of a workbook incorporating a "how-to" audit and the case studies, and presentation of workshops for system operators and plant personnel. 7 Kentucky designed a Local Government Energy Management Program to lessen the burden of energy costs on local governments. Under this program, an energy coordinator was offered to the governments for a year on a competitive basis. After the first year, each local unit would 38

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decide whether to continue the position with funds saved from implementation of coordinator recommendations during the initial year. By expanding the program to include the private sector, governments could provide local businesses with the opportunity to receive advice from the coordinator pertinent to their businesses. In return, the governments would receive from the business community financial support for continuing the position. 8 Other states have also provided some type of direct staff assistance to local governments. In Minnesota and Washington technical assistance teams traveled to towns; Ohio has funded an energy coordinator in several large cities; Maryland provided local energy coordinators; North Carolina guaranteed the !J"dlary of 17 local energy officers. 9 These programs suggest that site or situation specific technical assistance is a key element of popular local government programs. Technical assistance alone, however, does not save energy, and SECP specifically prohibits funding for suggested retrofits or capital construction. This program limitation seriously inhibits implementation of energy conservation measures suggested by these studies. Although follow through on implementation of suggested actions is rarely, if ever, evaluated, an informal survey of local government officials in Colorado who had received energy audits for some of their buildings showed that only one of the local government officials who requested the audit remembered that his buildings had been audited. 10 The philosophical assumption of the program regulations that information would inspire action has proved false 39

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for local governments, most probably because already tight budgets have no capital for energy conservation retrofits. A rule change in the SECP in 1983 considered lifting the prohibition on the use of funds for retrofits, especially for state and local government buildings, or at least permitting these activities with Petroleum Violation Escrow Funds (Section 155). The sugggested changes were not allowed. "DOE believes that it is not permissible to differentiate between the use of Section 155 and appropriated funds. It was the intent of Congress to have a single set of uses for these two sources of funds. DOE notes that the Congress has given some consideration in the past to energy conservation retrofits and other types or renovations for State and local government buildings, but legislation has not been reported out of committee which would permit such activities. In addition, a bill has been introduced recently in the Senate to amend Section 155 to allow retrofits for local government buildings to be funded under Section 155. DOE has, therefore, decided not to permit, at this time, the direct purchase or installation of equipment or materials for energy conservation building retrofits or weatherization. For clarity, a prohibition on the use of SECP grant funds for energy conservation building retrofits or weatherization has been added." 11 To date, no legislation has been sponsored that would permit retrofits or capital construction with either SECP funds or Petroleum Violation Escrow Funds. Although the latest oil overcharge settlement raises the hope that these regulatory or legislative changes will be considered again, 40

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no actions have been initiated in either area by the Federal government and SECP funds and the companion funds from oil overcharge funds may not be used for energy conservation retrofits or capital construction.12 Although Petroleum Violation Escrow Funds can provide a stable source of funds for SECP over a number of years, which will free the optional state programs from the funding uncertainties they have faced in the past, the prohibition against retrofits and construction will seriously limit the effectiveness of the technical assistance programs. Studies done under the auspices of SECP document the savings to be had from retrofits and construction. In the face of the higher utility costs and declining tax revenues for state and local governments, the prohibition should be lifted by legislative or regulatory change or modification of the court order to facilitate state and local government energy conservation. The concept of consumer restitution requires that the public receive some long term, continuing relief from energy costs. Energy conservation retrofits for public purpose entities can provide that relief. THE ENERGY EXTENSION SERVICE Modelled after the agricultural extension service, the Energy Extension Service (EES) was developed to provide personalized information to small-scale energy users. Authorized by the National Energy Extension Service Act of 1977, the program was initiated as a two year pilot program in ten States. Based on an evaluation of the pilot program which 41

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demonstrated significant effectiveness, Congress approved expansion of the effort nation-wide in 1979. 1 3 The states have great flexibility in developing EES programs and have devised hundreds of residential, small business, and local government outreach efforts. With small-scale energy users accounting for almost 40% of U.S. energy use, these EES outreach efforts have the potential for significant energy savings. EES activities consist primarily of information efforts, workshops and energy audits. In an assessment by the states of the program, the most successful activities were identified as workshops that provided immediately relevant information, were conducted on-site, and were arranged through and co-sponsored by a private group. 14 Energy auditor training programs were a second successful group of programs. The appeal of these programs was the development of tangible expertise and the subsequent use of that expertise to provide on-site audits and demonstrate no cost/low cost conservation for key target populations. These EES activities often supplement other conservation and state energy office programs. EES has suffered with other Federal-State energy conservation programs from reduced funding. The concept of leveraging dollars, attracting additional money from local resources following the initial Federal investment, has allowed states to maintain higher levels of activities than would be permitted with the reduced federal funds. In 1982, Colorado eliminated funding for four of nine EES Centers located across the State. Two of those Centers were able to maintain services 42

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through funding, both direct and in-kind, from banks, utilities, city governments, and other sources. In 1986, EES funding for all EES Centers in Colorado was discontinued. These Centers may be able to continue to provide services for small energy users with funds provided from the private and local government sectors. THE INSTITUTIONAL CONSERVATION PROGRAM Authorized by the National Energy Conservation Act of 1978, the Institutional Conservation Program (ICP) currently provides grants to public and private, non-profit schools and hospitals to identify and implement energy conservation activities in their buildings. Perhaps the most effective of the federal-state energy conservation programs, ICP was developed to subsidize conservation in institutions least responsive to high energy costs and least able to pay for conservation activities because of their focus on service. Initial appropriations provided funds for technical audits of buildings owned by public and private schools and hospitals, local governments, and public care institutions. Schools and hospitals were eligible for funding to implement the energy conservation measures identified in the audits. Funds have not been appropriated in recent years for grants to local governments and public care institutions ICP focuses on the 'technical fix' for schools and hospitals and it has been remarkably successful. Estimates are that fewer than 25% of the capital improvements would have been made independently and that their 43

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energy savings pay back capital costs in an average of 3.2 years in the 1983 awards. Recipients of ICP retrofit grants reduced energy consumption by an average of 13% at a cost six times less than purchasing oil. Of the almost half a million institutional buildings eligible, only 10% had participated in ICP by 1985.15 Beyond this traditional, direct financial assistance role, the ICP's most recent long term strategy is to involve untapped or underutilized private sector financial resources and expertise in promoting institutional energy conservation. To accomplish this, ICP encourages alternatives to public sector financing for institutions which have applied for but not received ICP grants. A structured technology transfer of program knowledge and expertise is now being encouraged. 1 6 The Institutional Conservation Program originally recognized the needs of local governments for technical assistance in developing information and building inventories for energy conservation planning. The original legislation funded Preliminary Energy Audits, Energy Audits, and Technical Assistance Audits for local governments. However, funds for these activities by local governments were discontinued in 1980. ICP, with its structure of technical audits supporting and directing operations and maintenance procedures and energy conservation retrofits, provides a logical structure for additional assistance to state and local governments in their conservation and energy management activities. A legislative or regulatory change in ICP permitting the full range of activities for state and local governments would maximize the value of 44

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both appropriated funds and oil overcharge funds. THE WEATHERIZATION ASSISTANCE PROGRAM The Weatherization Assistance Program (W AP) increases residential energy efficiency by providing grants to states to enable community agencies to install weatherization materials in the homes of low-income citizens, particularly the elderly and handicapped. This effort is authorized by the Energy Conservation and Production Act of 1976, and amended by the National Energy Conservation Policy Act of 1978, the Energy Security Act of 1980 and the Human Services Reauthorization Act of 1984.17 Local service organizations implement the program. Eligible weatherization measures installed under this program include caulking, weatherstripping, insulation installation, and heating and cooling system repairs, tune-ups and efficiency improvements. States are allowed to average up to $1,600. per dwelling unit for weatherization measures. The federal effort to weatherize homes of low-income families began on an emergency basis soon after the 1973 oil embargo. In 1975 a weatherization program was mandated by statute to be administered by the Community Services Administration. This agency made grants directly to local organizations which concentrated their efforts on inexpensive and easy to install measures. In 1976, Congress enacted the Energy Conservation and Production Act, authorizing a weatherization grant program to run parallel to, and 45

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supplement, the existing program. In 1979, following passage of the National Energy Conservation Policy Act, DOE became the sole Federal agency responsible for weatherization assistance grants. DOE estimates that almost 2 million homes will have been weatherized through these programs, saving the equivalent of up to 3. 75 million barrels of oil each year.18 Since 1982, states have been able to direct up to 15% of their Low-Income Energy Assistance Program (LIEAP) funds to supplement the W AP. The redirected funds have often been greater than direct appropriations for theW AP.19 In Colorado, the Cost Effective Energy Conservation (CEEC) program focuses on no costllow cost and the 'house doctor' approach to weatherization. Although the competing social goals of training field personnel and assisting low-income families sometimes reduces the energy conservation potential of theW AP, the weatherization concept continues to receive strong funding support in Congress. It is the only federal-state energy conservation program which has not experienced cuts in funding. The federal-state energy conservation programs are often considered experimental attempts to stimulate energy conservation. 20 •21 As such they have created a body of information and expertise that could easily be extended to a larger, more comprehensive approach to energy conservation by state and local governments. The federal-state energy conservation programs could provide the technical and financial assistance that would 46

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be the catalyst for ongoing energy management and conservation activities by municipal governments. They have already provided the impetus for many more experimental programs outside of the auspices of the Federal government which widely extend to concept of subsidy for energy conservation. 47

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FOOTNOTES: CHAPTER3 1. U.S. Department of Energy, Office of State and Local Assistance Programs, "ICP Multi Year Strategy", Memorandum, October, 1985. 2. U.S. Department of Energy, Office of Energy Management and Extension, Annual Report to the President and the on the State Conservation for Calendar Year 1984, (NTIS, August, 1985), p.1. 3. Ibid. 4. U.S. Doe, Activities. 1985. p.l. 5. Sawyer, "Federal-State Conservation Programs", p. 160. 6. U.S. DOE, Annual Report. 1984, p. 6. 7. Ibid. 8. U.S. Doe, Activities. 1985, p. 5. 9. Sawyer, "Federal-State Conservation Programs", p. 160. 10. Janet Hartsfield, Local Government Program Manager, interview, Denver, Co., January, 1986. 11. U.S. DOE, State Energy Conservation Program, 48 Fed. Reg. 39,356 (April, 1983) (10 CFR Part 420). 12. Several States have united to ask that the court modify its order to allow administration costs and capital construction. No changes have been made. 4/86. 13. U.S. DOE, Proeram Activities. 1985, p. 7. 14. Sawyer, "Federal-State Conservation Programs", p. 161. 48

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15. U.S. Department of Energy, An Evaluation of the Institutional Conservation Results of on-site analyses.1983. Oak Ridge National Laboratory, (NTIS, 1984), p. 32. 16. U.S. DOE, ICP Multi Year Strategy. 17. U.S. DOE Program Activities, 1985, p. 35. 18. Ibid. 19. Sawyer, "Federeal-State Conservation Programs", p. 165. 20. Ibid. p. 166. 21. Rosenbaum, Politics. and Public Policy, p.149. 49

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CHAPTER4 STATE ACTIVITIES: FOCUS ON FINANCING

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• • CHAPTER 4 STATE ACTIVITIES: FOCUS ON FINANCING In one sense, federal regulations that restrict financing for energy conservation retrofits have encouraged an additional commitment to energy conservation by some state governments. Presented with public and private entities eager to undertake energy conservation activities but thwarted by a lack of capital or access to capital, some states have instituted financing programs, or state subsidies, for sectors ineligible for federal subsidies. These financing programs run the gamut from indirect subsidies such as tax credits to direct financial subsidies. While the incentives, funding sources, and the amounts of subsidy for conservation may vary, these state programs attempt to reduce the traditional financial barriers to energy conservation. FINANCIAL INCENTIVES State financial incentives for energy conservation activities take several forms: --tax credits, --principal buydowns of commercial loans, --interest buydowns of commercial loans, --loan guarantees for commercial loans, and --direct low-interest loans made by the state . 49

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• TAX CREDITS Tax credits generally target residential energy users and are modelled after federal tax credits, as in Colorado. The subsidy is an indirect one, financed by a reduction in resident taxes, and results in lower tax revenues collected by the state rather than a state expenditure of taxes previously collected. Middle and upper class residents and energy intensive businesses take most advantage of tax credits as a financial incentive for conservation. In Oregon, the State Department of Energy will pay 35%, through tax credits, of the cost of energy conservation projects in commercial and industrial buildings that reduce energy use by at least 10%. Ten million dollars has been available for projects in both 1985 and 1986. The funds, given in the form of tax credits over five years, apply to conservation measures that reduce electrical and/or natural gas use. They cover the cost of engineering, design and feasibility studies, as well as the cost of equipment and installation. 1 California provides tax credits for residents, investors, and businesses that install solar or renewable energy resource equipment. California homeowners and businesses have taken state tax credits totaling $364.4 million between 1976 and 1983.(figures 6 and 7) A 1978 federal law provides further incentives for power producers. The Public Utility Power Regulatory Act of 1978 requires utilities to buy electricity from power 50

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• • producers at prices that equal the utility's power costs, thus guaranteeing the producers a market for their electricity. 2 CALIFORNIA RESIDENTIAL TAX CREDITS FOR SOLAR EQUIPMENT Thousands of Dollars 120120 1-1--+--+--+--1--1---f---t--11 105180 1--l--t---t----l!---t---t----i'---+-90240 1--l--t---t----i......._-t--+----i'---+-75300 1--l--+---+---l--+--+---l--60360 45420 1--1----+---+--+---, 15540 600---1976-1977-1978-1979-1980-1981-1982-1983-1984 Figure 6 . 51

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I I I CALIFORNIA RESIDENTIAL APPLICANTS FOR TAX CREDIT FOR SOLAR EQUIPMENT Thousands of Applicants 150 135.5 106.5 77 .5 1---l:---+--+--+-, 63 5:.--__ _ 1976-1977-1978-1979-1980-1981-1982-1983-1984 Figure 7. PRINCIPAL AND/OR INTEREST BUYDOWNS Principal and/or interest buydowns of commercial loans are financial subsidies aimed at various targets of energy consumers. Interests rates may be subsidized at a specific level below the prime rate or rates may vary based on pre-determined criteria. For example, the interest rate on commercial residential or business loans might be determined by the income level of the borrower. The interest rates on loans made to public or private, non-profit agencies might be determined by some local factor 52

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such as the median income of the county, the unemployment rate, or the needs of the clientele served. Principal buydowns are most frequently used in conjunction with other financial subsidies. The Solar and Conservation Bank, a federal program designed to encourage conservation by families at 125% of the federal poverty guidelines (and not eligible for the services of the Weatherization Assistance Program), may fund direct principal reduction of a loan while the remainder is financed with a reduced interest rate. LOAN GUARANTEES Commercial lenders are often unwilling to make loans for unfamiliar activities or lack confidence in new technologies. State loan guarantees for commercial loans reduce the risk to the lender and make credit available to selected targets for energy improvements. The incentive in this case is not directly for the energy consumer but for the financial community in order to make credit available for energy conservation projects. DIRECT STATE LOANS Some states finance energy conservation activities through direct state loan programs in which the state is the lender and the interest rates are reduced. California provides loans through the Energy Conservation Assistance Account for local government entities, schools, hospitals, and 53

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• • I I I I I I I I I special districts. Authorized by the California legislature in 1979 and running through 1990, the program was funded with $8.8 million. The interest rate on loans is indexed from 7%-9.5%. The program has three separate loan categories: -loans for Energy Audits or Combined Energy and Technical Audits; -loans for Simplified Measures, conservation measures which have proven energy savings; and -loans for more complex equipment and building modification installations. A feature unique to loans made for energy conservation and put to use by the California Energy Commission is that all loans can and must be repaid from energy savings: no obligation on general fund revenues is created. In addition, the California Attorney General has ruled that borrowing these funds by a city, county or school district is covered by the California special fund exemption to constitutional debt limitations, thereby removing this constraint to borrowing by local government entities. 3 Minnesota has undertaken a multi-faceted approach to energy finance that combines several financing incentives. To promote energy conservation by school districts and local governments, the Minnesota legislature created the Public School Energy Conservation Investment Loan program in 1983. The District Heating grant program was created in 1981 to encourage district heating and modified in 1984 to include grants and loans to local governments for energy improvements. Funded by state general obligation bonds, the loan program for municipalities has several 54

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• I I I I I I • • • • unique characteristics that make it unlike traditional financing. To qualify for a loan, a city must demonstrate that the project is economically and technically feasible. They must also demonstrate that adequate provisions have been made to assure proper and efficient operation and maintenance of the project. The security the city must pledge for the loan depends on the economic viability of the project and can vary from project revenues to an ad valorum tax. Municipalities have up to twenty years to repay the loan, with principal deferred for the first five years to ease cash flow. After the fifth year, loans are repaid on a 25-year payment schedule with a balloon payment at the end of the twentieth year. The interest rate is the same as that for the state bonds. Minnesota uses funds generated by the issuance't>f tax-exempt industrial development bonds to provide financial support to small businesses for energy conservation. Of the $9.3 million appropriated for business energy finance, $7.5 million was allocated to the Energy Loan Insurance program. This program operates in partnership with private financial institutions. An applicant and its participating financial institution develop a loan package together based on the lender's credit analysis and determination of appropriate financing. The Energy Loan Insurance program will insure up to 90% of the loan principal, the actual percentage determined by the credit analysis and loan package. Interest rates are negotiated between borrower and lender but may not exceed three percentage points above the prime rate. The Energy Development Fund was allocated $1.8 million for projects . 55

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I I • • • • • • • • • Unlike the Loan Insurance program, the Energy Development Loan program issues direct loans from the state to the borrower. Loans provide below-market interest rates and may be for up to 90% of project costs, with the actual percentage determined by a credit and project analysis. 4 Oregon initially targeted commercial and industrial energy users with construction plans for generating facilities in its loan program. The Small Scale Energy Loan program, authorized in 1981, now makes loans to Oregon's individuals, businesses, non-profit organizations, and municipal governments. Financed by state general obligation bonds, the interest rates are set at 1% above the rate of the bond which finances the loan. In all cases, estimated energy cost savings must exceed loan payments. 5 SOURCES OF FUNDING FOR STATE FINANCIAL INCENTIVE PROGRAMS State financial incentive programs for energy conservation are funded in several ways: first, through general tax revenues which can provide tax credits or a pool of funds for loan programs; second, through specific taxes, such as oil severence taxes, with a set-aside for conservation activities; and third, through the authority to issue state general obligation bonds or industrial development bonds, the proceeds of which fund specific energy conservation projects . 56

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• • I At this time, only interest buy-downs of commercial loans (an eligible SECP activity) could be funded by oil overcharge funds. A legislative or regulatory change permitting capital construction or retrofits under the SECP or widening the eligible institutions in the ICP would make oil overcharge funds available for state financing programs. This could be essential for those programs funded by government bonds since the Tax Reform Act of 1985 brings the tax-exempt status of many types of bonds into question and severely limits their appeal to buyers. 6 In any case, state financing programs provide an important example of commitment to energy conservation. ISSUES OF SUBSIDIZING ENERGY CONSERVATION The federal government has taken a fairly restricted approach to its subsidy of energy conservation: information and technical assistance, direct retrofits only to those most unable to provide them. In undertaking incentives designed to finance energy conservation equipment, retrofits, and capital construction for a wide variety of energy consumer, states have considerably broadened the scope of subsidy for energy conservation. The issues of equity, effectiveness, legality and approach are important ones . EQUITY 57

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• • Tax credits are generally taken advantage of by the middle and upper classes and energy intensive businesses, yet are paid for by all citizens. Credits, by their very nature, may not be available for the low income resident, who pays little or no taxes and still cannot afford conservation retrofits. The reduction in tax revenues can be a massive one (an estimated $3.37 billion for the federal tax credits in the years 1978-1983) 7 (figure 8) which may limit programs and services to those unable to take advantage of the credits. FEDERAL RESIDENTIAL TAX CREDITS FOR SOLAR AND WIND ENERGY Millions of Dollars 560 540 520 500 480 460 1978-1979-1980-1981-1982-1983 Figure 8 . 58

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On the other hand, paying off the cost of new utility power plants that would be unnecessary if conservation retrofits were carried out is an unofficial but massive alternate tax on individuals and businesses. The appropriateness of supporting certain private businesses with state subsidies is also a concern. The favorable decision by the Minnesota Supreme Court in May 1984, determining the constitutionality of using public funds to support private business and allowing the Minnesota Business Energy Finance programs to proceed 8 does not pass judgment on the wisdom of allocating $7.5 million to energy loan guarantees rather than other state needs. EFFECTIVENESS OF THE INCENTIVE Consumer protection and convenience features of loans may be as important to the decision and ability to retrofit as loan availability itself. Few evaluative studies have been done which can show that loan programs themselves stimulate conservation. While loan programs may help compress the time of implementing conservation measures, they may be just one, expensive technique among many, less expensive techniques that stimulate conservation. 9 Secondary objectives of loan financing programs can provide important justifications for their activities. Loan programs have an important economic development component, stimulating local economies with jobs, spending, and, in some cases, retraining of workers for projects 59

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• • • • that might not otherwise have been undertaken. Since energy conservation projects can be repaid from energy cost savings, the benefit to the economy is multiplied because the savings continue beyond the life of the loan. Some within the solar and renewable energy industry contend that tax credits support research and development and that the loss of credits will blunt America's technological edge. Others argue that credits support equipment sales far more than technological breakthroughs. In either case, the magnitude of tax credits taken on federal and state returns suggests that credits are effective incentives for certain segments of energy user and that the subsidy extends beyond the immediate consumer to a range of alternative energy industry elements . LEGAL OBSTACLES Legal obstacles abound when new approaches to financing merge the public and private sectors. Federal-state energy conservation programs take an indirect approach, attempting to leverage technical assistance expertise for private financing and thereby skirting the issue of providing public funds for private projects. State loan programs confront the issue head on. The larger goal of saving energy as a general public good has overshadowed questions of appropriateness of the public/private subsidy. Lower energy prices may make this argument less tenable in the immediate future . 60

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• • New financing arrangements also bring into question the general issue of debt obligation by municipalities. Lease/purchase arrangements are fairly new methods of acquiring equipment for state agencies and local governments that circumvent the constitutional limitations on borrowing without voter approval. Loans for energy conservation which are repaid out of savings may be another convenient method of off-line financing for state agencies and local governments. However, these types of loans may finance major projects outside of the normal capital budgeting procedures and without requiring the review which would place the projects within the overall scope of agency or municipal capital planning. AD HOC VS. COMPREHENSIVE APPROACH TO ENERGY CONSERVATION Loan programs typically fund specific capital construction projects. In the case of programs funded by general obligation bonds, loan applications for specific projects are often taken before the bonds are issued. While this ad hoc approach to conservation may yield impressive results in large buildings or for energy source conversions, many energy-conserving principles and practices are interrelated--operations and maintenance procedures and retrofits, for example. Considering options in concert can prevent overlooking certain opportunities that may have highly beneficial results--something that may occur under an ad hoc approach. Financing energy conservation measures on a project by project basis, as loan 61

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• • programs do, may mean that a wide range of activities not directly related to the project will not be undertaken and opportunities for further savings may be lost because they are outside the scope of the loan project and are simply not considered. An ad hoc approach to conservation will provide energy saving. A comprehensive energy management plan will provide more energy savings. Programs that focus only on financing capital construction and equipment can limit the perspective of the energy consumer on energy savings. To maximize the return from the energy savings potential of a wide range of options, financing programs should exist within a wider range of programs offering technical and management assistance for energy use and conservation . 62

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• • • CHAPTER4: FOOTNOTES 1. Enercy User News. 3/24/86. 2. Los Anceles Times, 11119/85. 3. Terri Gray, California Energy Commission, interview, January, 1986. Loan Application, Energy Conservation Assistance State Loan Program, November, 1985. 4. Minnesota Department of Energy and Economic Development, Finance: Report to the January 1985. 5. Greg Jeffrey, Oregon Department of Energy, interview, January, 1986. Loan application, Small Scale Energy Loan Program, May 1984. 6. Timothy B. Clark, "Tax Reform Debate Stems the Rising Tide of Municipal Revenue Bonds", National Journal. 1125/86, pp. 216-220. 7. Los Times, 11/19/85. 8. Ibid. 9. U.S. Department of Energy, The Role of Financial Incentives in Utility Sponsored Residential Conservation Linda G. Berry, Oak Ridge National Laboratory, (NTIS, December, 1982) p. 24 . 63

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• • CHAPTERS PLANNING ENERGY USE AND CONSERVATION: RECOMMENDATIONS FOR STATE AND LOCAL GOVERNMENTS

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• • • • CHAPTER 5 PLANNING ENERGY USE AND CONSERVATION: RECOMMENDATIONS FORST ATE AND LOCAL GOVERNMENTS COMPREHENSIVE VS. AD HOC APPROACHES TO ENERGY USE AND CONSERVATION State and local governments share a two-fold responsibility to citizens: • to manage municipal spending efficiently, and • to create efficient conditions for the community. By including energy use and conservation considerations in their planning activities, governments begin to meet one aspect of these responsibilities . The approach a municipality takes to planning for energy use and conservation can vary. A comprehensive approach simply means that a community reviews a range of conservation opportunities and picks one or several that meet the needs of the community. A comprehensive approach may encompass many facets of community operations such as energy use in government buildings, schools, and municipal automobile fleets, as well as land use, or be limited to only one, such as community planning for land development. An ad hoc approach to energy use and conservation usually is developed in response to specific local or agency problems, opportunities or interests as needs arise. Although ad hoc activites may not benefit from the synergistics of the wider range of possibilities offered in a 64

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• comprehensive approach, significant individual action can be taken to save energy. There are arguments in favor of and against both kinds of approaches. Advantages of a comprehensive approach, disadvantages of an ad hoc approach. 1. Some design options have a relatively low potential for saving energy by themselves. A program that combines a variety of them can produce cumulative energy savings that are more significant. An ad hoc approach that focuses on only one kind of option may have only limited results. 2. Many energy-conserving principles and practices are interrelated. Considering options in concert can prevent overlooking certain opportunities that may have highly beneficial results. An ad hoc approach may miss the connections. 3. Comprehensive energy planning shows developers, decision makers, funders, and the courts that a community takes energy use seriously. This is especially important when mandatory regulations are enacted and new restrictions are imposed on developers and the public, or when funding for expensive retrofit measures is requested. A court decision on mandatory regulations may hinge on whether they are based on a comprehensive plan. A legislative decision on funding of an energy conserving technical fix may balance on the committment to energy 65

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• • • management shown throughout municipal actions. An ad hoc approach may not produce sufficient support for adoption of regulations, or their defense in court, or for funding of expensive capital construction projects. 4. Planning can eliminate potential conflicts among energy conserving practices. For example, the use of landscaping to provide summer shade could conflict with the objective of protecting solar access. An ad hoc approach could overlook such conflicts. 5. Fiscal austerity and rising costs mean that communities must pick and choose actions carefully, selecting only those that are truly energy and cost effective. Comprehensive programs and plans provide a means of weighing these aspects while an ad hoc approach could fail to differentiate on the basis of cost effectiveness. 6. Finally, a comprehensive approach, like all planning, allows for consideration of a broad range of actions, rather than a more limited set developed in response to narrow concerns. It opens up opportunities for innovation and initiative and the potential for greater overall payoffs. Advantages of an ad hoc approach, disadvantages of a comprehensive approach. 1. An ad hoc approach allows a local government to proceed on a limited basis with energy conservation if technical aids are not available or a commitment to energy conservation is not fully developed. It can be an appropriate way to lead into more comprehensive activity as broader 66

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• • • interest increases and more information on how to save energy becomes available. 2. An ad hoc approach may lead to action more often than a comprehensive approach if a community responds to a specific interest by making regulatory changes. With a comprehensive approach, there is the possiblity that a study or set of policies could be considered to be enough effort, stifling further implementation of energy-saving options. 3. An ad hoc approach is likely to cost less than a comprehensive approach. Less staff or consultant time is likely to be required to evaluate a single option than a range of options. 4. An ad hoc approach can take immediate advantage of public interest in energy conservation if planners act quickly. It is conceivable that public interest could wane during a lengthy process of developing a comprehensive program. The two can certainly be combined. A community that is developing a comprehensive program can also be open to specific opportunities as they arise and may decide to put aside the broad based effort in order to respond. Another community may wish to respond to individual issues as a primary focus but develop a broader plan over a period of time, as interest develops and funding permits. Time, budget, available expertise, political support, and the presence of an interested change agent all contribute to the approach taken. 1 67

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RECOMMENDATIONS FOR STATE AND LOCAL GOVERNMENTS: A PROGRAM FOR ACTION. State and local governments can save energy in their own municipal functions and in their land development practices. While the types of actions taken in each area can overlap, it is helpful to consider them separately because the actions needed to implement energy conservation measures may be discretionary for many municipal functions but are almost always legislative in nature for land development practices. The broad class of actors varies, too: cooperation and compliance is required from municipal employees in an administrative energy program and from private developers and citizens in a land use program. The following recommendations for state and local governments and the activities suggested are a comprehensive approach to planning and managing energy use and conservation. While it may seem impossible to implement the entire package, groups of activities can also provide energy savings. RECOMMENDATIONS FOR PLANNING AND MANAGING ENERGY USE AND CONSERVATION IN PROVIDING MUNICIPAL SERVICES RECOMMENDATION Create a climate in which efficient energy use is considered a part of sound management practices--in facilities use, in capital planning, in purchasing, and in driving. 68

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• • • Managing energy use often seems to be beyond direct control. It can be done, however, by educating users, expecting and requiring efficient practices, and rewarding energy use reduction. A program integrating energy use and conservation principles into management principles should include the following activities: ACTIVITY: Establish an administrative energy policy. Leadership is a vital ingredient in energy conservation because of its potential for coalescing support. Leadership can elicit cooperation from staff and can foster high levels of participation from key conservation actors. Many different kinds of officials can provide conservation leadership as long as they have an understanding of the issues involved, a commitment to problem solutions, and a willingness to sustain and support conservation actions. Effective energy management requires a statement of administrative commitment Established policy provides direction, support, budget, and administrative backing necessary for an effective program. Typical policy statements include: • A statement of concern regarding the economic effect of energy costs on the municipality. • A statement recognizing the advisability and cost-effectiveness of developing energy management procedures . • A statement of commitment. • Preliminary implementation considerations such as: authorizing a point of contact for energy issues, and 69

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• • authorizing the creation of an energy data base and requesting a plan establishing goals for energy savings. • Reporting requirements which would incorporate evaluative data and further recommendations. 2 • 3 ACTIVITY: Establish an energy education and training program for maintenance personnel, planners, purchasing agents, and fleet drivers. The actual daily operations and maintenance of facilities is often in the hands of janitors and maintenance personnel. Training them to recognize and act on energy needs such as caulking and weatherizing, relamping, and boiler operations begins the process of energy efficient facilities maintenance. The benefits of energy education and training extend beyond mainenance personnel to planners as they consider capital facilities location and construction and land use planning decisions. Energy considerations sometimes require technical expertise outside of the normal range of experience. Planners must recognize energy use requirements and their own limitations in understanding them. Seeking technical assistance in determining the most efficient siting or building design should be standard procedure. Life cycle costing includes energy use considerations. Purchasing agents should be trained in life cycle costing methods in order to insure that equipment and supplies purchased are not more expensive to use than they are to buy. 70

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Fleet drivers such as school bus drivers and municipal waste collectors, account for most of the energy use in any agency or municipal transportation budget. DECAT, Driver Energy Conservation and Training, suggests that energy use can be reduced from 10%-35% by training emphasizing energy conservation. Drivers should receive continual education and training about efficient driving habits. Energy use education and training for personnel responsible for facilities, planning, purchasing, and driving can result in immediate, long term, inexpensive energy savings. ACTIVITY: Establish schedules for maintenance personnel and drivers and energy use evaluation elements for planners and purchasers. Supervisors must expect that education and training will be effective. They must support the attempts of employees to conserve energy by committing the time and money necessary to carry out energy efficient practices. They must establish schedules for operating and maintenance procedures as regular employee responsibilities rather than additions to the regular work load. They must provide most supplies without burdensome paperwork. Drivers' supervisors must recognize that energy efficient driving habits may affect the length of time it takes to complete some routes. Computer routing schedules are available which can lay out the most energy efficient paths for regular routes without significantly lengthening the time it takes to complete them. Using energy efficient route scheduling can add exponentially to an individual's driving savings 71

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without requiring any restructuring of a department's time priorities or personnel requirements. An energy use evaluation must be a part of every purchasing decision and capital facilities plan and land use decision. Although not the sole deciding factor, energy use must be formally evaluated and used as a ranking factor in decisions made by purchasers and planners. An energy use evaluation requirement, with the flexibility to account for the diversity of needs within agencies, will insure that the energy education and training given to purchasers and planners will be systematically applied and will result in consistent, energy efficient purchases and decisions. Management must support the energy conservation efforts of employees by integrating those efforts into daily routines and responsibilities. This support can magnify the conservation effect. ACTIVITY: Create a program that rewards energy savings. Energy use and conservation must be a part of sound management practices, however the incentive to integrate one more piece into the greater puzzle of management is often limited. In a time when oil prices seduce us into believing that energy is no longer a public concern, the incentive for conservation must be tied to an agency's self-interest. Energy use can be measured. It can be adjusted for seasonal temperature variations, the installation of new, more efficient equipment, and changes in building use. State and local government agencies can evaluate current energy use against past use on an agency wide or facility specific basis. With the computer tools available and the engineering 72 •

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analyses possible, energy use and savings attributable to conservation activities can be measured in many cases. For agencies with control of their operating budgets, energy savings are an immediate reward. As an example, continued energy savings by school districts can be translated into teaching positions. In many cases, however, budget savings from any source return to the general fund. Recognizing the unique character of energy savings, measurable and attributable to efficient practices, state and local governments should take steps to insure that at least a portion of energy savings returns to the agency responsible for the savings. Since energy cost savings are, in a sense, additional revenues for state and local governments, the money should be made available to the agency for its discretionary use. It could be earmarked for projects that enhance the primary service of the agency, for building enhancement or furniture replacement outside of regular repair or replacement, or for annual agency picnics. Efficient energy management and conservation are not without effort. They produce measureable dollar savings and they deserve dollar rewards. RECOMMENDATION: ACKNOWLEDGE THE TECHNICAL NATURE OF ENERGY CONSERVATION ACTIVITIES. ACTIVITY: Designate a contact point for energy questionsan energy 'expert'. Information on energy conservation practices and products is 73

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• available. Technical engineering expertise has developed in response to the energy needs of specific institutions and industries. The technical energy information network is limited, however, and is often unknown to state agencies and local governments. As planning for energy use and conservation expands to include conservation retrofits and projects that require large expenditures of funds, the potential for savings and the actual contribution of the energy measures must be quantified and clearly understood. State and local governments should designate an internal contact point for energy information or an energy 'expert' who would be available to all government agencies for information, advice, and technical assistance. In some cases, that person might be responsible for co-ordinating the development and management of a municipal energy data base and might have authority for an overall plan to implement options suggested by technical studies. Small local governments might put a consultant on retainer and pay her salary out of energy savings, or hire an energy 'circuit rider' who would provide services to a group of municipal governments. State governments might designate the state energy office or an engineering department within the university system as the official state energy point of contact. Agencies within a city might share the salary of an engineer who would provide specific energy expertise to several agencies. A planner with an interest in energy use and a network of contacts within the local government agencies could field the questions and locate the appropriate 'expert' to provide the answers. Knowing the needs of 74

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• • agencies, that person might prepare energy education and training programs for selected employees and could serve as a sounding board for energy considerations for all types of projects. Coordinating energy activites among agencies could be an impossible task, but savings can be magnified if all agencies follow the same procedures and implement a concerted energy reduction program. A stated energy policy and the commitment of municipal officials helps to support the coordinating activity of an energy expert. In all cases, studies show that energy savings are most impressive when there is involvement of motivated staff who identifiy with conservation opportunities and appropriate solutions. A designated energy contact point can present the comprehensive approach to managing energy use and conservation within municipal facilities. RECOMMENDATION: CREATE AN ENERGY DATA BASE The ability to coordinate massive amounts of data is possible for almost any state agency or local government with the use of a personal computer. Developing a comprehensive data base is critical to any long term plan that includes retrofits or improvements for a number of facilities and a variety of equipment. Based on accurate, comprehensive information, decisions to retrofit for energy conservation can make the best use of resources and can integrate multiple opportunities for conservation. They can produce immediate savings which in tum can produce continuing 75

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• • • funding for further projects. ACTIVITY: Create energy inventories of municipal facilities and special equipment. Inventories create the data base. Building inventories, by type of facility or use, show the first opportunities for energy management and conservation savings. They provide a picture of the age, type, size, condition, and energy use of all buildings that can be used to compare and rank activities that promise energy savings. To be effective, building inventories must include energy consumption data for at least the prior year in addition to current consumption data. Base line energy consumption data provides the information needed to evaluate potential and current savings. Analysis of consumption data by means of computer programs such as FASER (Fast Accounting Systems for Energy Reporting) also allows facilities managers to spot inconsistent energy use patterns that might indicate faulty utility meters, structural damage, or improperly used or faulty equipment. Energy inventories of public buildings and special equipment are the building blocks of a municipal energy data base. Energy inventories, used in conjunction with information gained from an analysis that shows how buildings or equipment are actually using energy, provide the information necessary to begin a comprehensive approach to managing energy use throughout municipal facilities. ACTIVITY: Conduct comprehensive technical and economic studies detailing energy use and the potentials for conservation . 76

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• • • I • • • I • • • Technical analyses of buildings can clearly show the cost and pay back time of conservation opportunities. They can be used to rank projects for implementation and to evaluate projects in terms of other municipal priorities. They can also be used as support for funding requests from the legislature. Presented with comprehensive studies showing that annual savings of $9.2 million could result from a one-time investiment of $15.6 million, the Texas State legislature authorized the issuance of revenue bonds to finance approximately $12 million of the recommended projects. 4 To be most effective, technical studies should evaluate energy efficient operations and maintenance procedures for each building. Technical review of these procedures may suggest options that regular employees may miss or be unfamiliar with. Some-studies suggest that implementing energy efficient operations and maintenance procedures can pay for the cost of the entire technical study, including the engineering studies to support retrofit and construction options, within one year . Technical studies provide the basis for any plan that goes beyond operations and maintenance activities to more expensive retrofit projects. Comprehensive technical studies can permit local governments to pick truly energy and cost effective projects on a time and budget schedule best suited to their abilities. Without technical studies of the great majority of municipal facilities, each project stands on its own. Failure of one for any reason jeopardizes any further commitment of funds for others. RECOMMENDATION: Establish a plan for reducing energy use . 77

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• • • • • ACTIVITY: Analyze energy needs and establish goals for energy reductions. Sound management procedures require that certain goals be established. In energy management, goal setting is generally expressed as a percentage reduction of current consumption. The historical consumption and cost patterns developed in the energy inventories and the potentials for energy use reductions determined by the technical studies provide the basis for energy reduction goals. Just as establishing a goal gives a program initial direction, assessing progress toward that goal sustains direction and momentum. Energy accounting systems provide the means of evaluating success. Technical studies provide the information needed to evaluate specific conservation activities while budget constraints might dictate the final level of yearly activity. A municipality might choose to spend $50,000 yearly for retrofits that pay for themselves within a specific time period. Since energy savings continue beyond the initial payback period, if savings can be reprogrammed into additional work, later years can support larger retrofit budgets than the original $50,000 commitment. ACTIVITY: BUILD ENERGY RETROFITS INTO THE CAPITAL BUDGETING PROCESS . Since energy conservation retrofits can be extensive and expensive it is often cost effective to combine them with other capital construction projects needed in the same building. For example, installing insulation is 78

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• • • • often done in conjunction with needed roof repairs or replacements. By including energy retrofits within the scope of the capital budgeting process, projects can be coordinated that save time and money. Energy conservation projects also receive the overall review of the capital budgeting process and the municipality is assured that the projects fall within the overall scope of the municipality's goals and objectives. The commitment of consideration within the capital budgeting process helps to insure that plans for reducing energy use move off the shelves and into the buildings where they offer effective dollar saving activities. RECOMMENDATIONS FOR REDUCING COMMUNITY ENERGY USE THROUGH LAND DEVELOPMENT PRACTICES. Almost every aspect of land development has an effect on energy use, from specific architectural details to general density considerations. Four areas of energy use stand out as targets for energy efficient land use practices. They are: 1. Reducing heating and cooling needs. This can be accomplished by energy efficient site design practices such as solar orientation or landscaping and by encouraging housing types which use less energy. Some options for reducing heating and cooling needs are: • Design developments so that buildings are oriented to the sun. This means designing streets to run from east to west; lots to run from north to south; and the long axes of buildings to run from 79

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• • • east to west. • Develop south facing slopes first They are warmer in winter than slopes facing other directions. • Use landscaping to shade buildings, parking lots, streets, and other paved areas. This prevents over-heating of buildings in summer and lowers summer air temperature near pavement. • Use windbreaks to protect buildings from winter winds. Windbreads reduce the infiltration of cold air into buildings. • Build housing with a lower proportion of outside surface to interior space. Townhouses, with more common walls, are an example. • Encourage housing design innovations that save energy, such as earth sheltered housing. 2. Reducing dependence on automobile transportation. The energy used to move people and things in a community is determined in part by patterns of development. The spatial relationships of individual buildings and entire neighborhoods can determine in part how far and by what means people will travel. Compact development with a mixture of different land uses, where goods, services, jobs, residences, and recreation are closer together, permits less travel and perhaps more opportunity for public transportation than low-density development. Some options for reducing transportation needs are: • Develop at increased densities, especially near activity centers, mass transportation stops, and in areas with existing sewer, 80

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t • • • • • • • • • water, and street capacity to handle it. • Develop skipped over parcels within existing developments. • Combine different kinds of land uses within development projects and neighborhoods. • Provide convenience shopping and service facilities in otherwise residential neighborhoods . • Provide facilities to encourage bicycling and walking. Pathways, parking facilities, and bike paths can encourage biking and walking . • Develop at densities that support mass transit and locate highest density development near mass transit lines. • Design street systems to reduce overall lengths . 3. Reducing embodied energy needs. Compact, higher density development has less energy tied up in streets, utilities, and other infrastructures than low density, detached development. Excessive design standards waste embodied energy. Requirements for parking spaces that are based on older, larger automobiles waste asphalt and energy for construction as well as money. Some principles for reducing embodied energy needs are: • Develop at higher densities. More people can be served by sewers, water lines, streets and other infratructure . • Develop areas that are already served by streets and utilities. • Use narrower streets where possible. • Use fewer and smaller parking spaces and lots where possible . 81

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0 • Cluster buildings together to reduce the lenth of streets and utilities. 4. Promoting the use of alternative energy. The practicality of alternative energy systems can be determined in part by land development. Some recommendations for encouraging the use of alternative energy sources and systems are: • Facilitate the use of district heating or other production and distribution systems by developing at appropriate densities and with greater integration of uses. • Facilitate the use of solar energy systems by planning development so that access to sunlight is protected. • Substitute technologies that use renewable energy sources for conventional building systems whenever feasible. Energy efficiency depends in part on how development is planned and carried out. Conventional development regulations, such as zoning ordinances and subdivision regulations, can be adapted in many ways to promote energy conservation at the community level. Rather than designing radically new regulations, incorporating a variety of energy objectives into existing zoning, subdivision, site plan review, landscaping regulations and incentive provisions offers a path of least resistance for municipalities seeking to control the energy use of the community. RECOMMENDATION: CREATE A CLIMATE IN WHICH ENERGY 82

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EFFICIENT LAND USE PRACTICES ARE CONSIDERED SOUND DEVELOPMENT ACTIVITIES. ACTIVITY: Adopt a municipal energy policy. Just as an administrative policy expresses a commitment to energy conservation in municipal services to municipal employees, a policy statement adopted by the municipal legislature expresses that commitment to citizens. A state or local government energy policy provides direction and supports a regulatory approach to energy conserving land development practices. It shows developers, decision makers, and the courts that a community takes energy use seriously. As communities consider energy conserving development regulations, there are many things other than energy--rising housing costs, legal rights, administrative costs, and political acceptability--that will affect their decisions. A stated energy policy can insure that development regulations will address energy use in ways appropriate to the needs of the community. RECOMMENDATION: ADAPT THE LEGAL TOOLS AVAILABLE TO ENCOURAGE AND INSTITUTIONALIZE ENERGY CONSERVATION. Existing zoning, subdivision, site plan review, and landscaping regulations and incentive provisions can be used to promote energy efficient land development. The three basic approaches to incorporating different types of development options into regulations involve increasing 83

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levels of stringency. First, regulations that stand in the way of energy-conserving practices can be changed to remove the barriers. Second, development regulations can be used to encourage energy-conserving practices either by providing incentives or by creating development settings in which they are easier to use. Third, regulations can require energy-efficiency in new development. ACTIVITY: Remove barriers to energy conservation. Some development regulations and design standards currently in use stand in the way of energy conservation, usually unintentionally. For example, the installation of solar collectors has been prohibited in some communities by aesthetic regulations. Yard and setback or lot layout specifications in subdivision regulations and zoning can limit flexibility in passive siting of buildings. In some cases design standards are excessive--for example, street width requirements that are greater than they need to be for adequate safety and traffic flow. Such standards can actually promote energy waste. Removing regulatory barriers allows developers and consumers to initiate energy-conserving design options without unnecessary hindrance. ACTIVITY: Encourage energy conservation. Planners and public officials are also in a position to actively encourage the use of energy conserving development practices by providing regulatory incentives. In the past, local governments have offered developers incentives to provide desired public amenities such as open space, plazas, and better design. The same can be done for energy 84

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conserving design options. Density bonuses, priority processing of develoment proposals, even decreases in development fees are examples of incentives that can be offered to developers to make their projects more energy efficient. The incentive approach can be applied to almost all of the available practices for saving energy, from landscaping of project sites to locating projects near mass transit stops. ACTIVITY: Mandate energy conservation. The toughest approach to conserving energy in land development practices is to require it by regulation. Land use controls place many kinds of requirements on developers, and many of these address issues that have important energy implications and offer opportunities to make development more energy efficient. For example, zoning imposes restrictions on building height and setback. This means that zoning can be a tool for requiring that development be designed to protect solar access and that regulations can be imposed to require proper lot and building orientation and landscaping. The police power inherent in development controls offers an excellent opportunity to require many energy efficient practices in development. ADMINISTRATIVE ISSUES OF ENERGY CONSERVING DEVELOPMENT REGULATIONS Energy conserving development regulations raise two general administrative issues. First, reviewing proposals for their energy impact 85

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adds a new dimension to the review process and increases the extent of discretion that planners and planning officials exercise. Second, it requires more expertise on the part of planners. Planners will need new skills in assessing energy implications and the application of conservation practices in development proposals and projects. Many energy-saving development practices are site specific. Infill development of substandard lots requires flexible development standards and a case-by-case approach to development review. Planners must address many concerns in reviewing such proposals. In the same way, landscaping for energy conservation will vary from one site to the next, depending on topography, wind flow, the location of parking lots and other variables. This adds another dimension to landscaping previously reviewed only for aesthetic purposes. In these ways, staff exercises discretion over a greater number of issues. The discretionary quality of staff review raises several issues not necessarily limited to energy conserving development regulations but affecting them just the same. Does more discretion result in development that is better tailored to community needs and environmental objectives? Does it justify increased processing time and planning costs for both the developers and the municipality? Does it open up opportunities for abuse? The need for new skills for planners for reviewing land development for energy efficiency produces another administrative issue. Planners will 86

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need additional expertise in areas such as density, climate, landscaping, and building techniques. Until that expertise has matured, the review process may be slowed and less effective. State and local governments share the burden of creating an environment in which energy efficiency is standard operating procedure, both in internal government functions and in the community at large. While short term, specific problem solutions can save energy and tax dollars, long-range, comprehensive planning for energy use and conservation, rather than ad hoc approaches, will pave the road to an energy efficient community. The information is available. The techniques have been developed. Programs have experimented with implementation. State and local governments must take the responsibility that is theirs and initiate energy conserving policies and actions for themselves and their citizens. They'll save money in the process. 87

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FOOTNOTES: CHAPTERS 1. Erley and Mosena, Development pp.28-29. 2. Public Utility Commission of Texas, Energy Efficiency Division, Efficient Shcools, (Austin, Texas, October 1984), p. 126. 3. U.S. Department of Energy, State Programs Branch, Local Government to Save Case Studies of Four Selected Communities, Martin Schweitzer and Sam A Carnes, Oak Ridge National Laboratory, (NTIS, September 1983), p. 21. 4. Public Utility Commission of Texas, Energy Efficiency Divison, Cost Containment through Energy Efficiency: Technical Analyses of Selected State Buildings, (Austin, Texas, May 1985), pp. 6-7. 88

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CHAPTER6 CONCLUSION

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CHAPTER 6 CONCLUSION State and local governments confront the problem of obtaining and financing energy supplies for their own operations and they share in the responsibility for dealing with the energy problems of the local community. Efficient management of energy use and energy conserving land development planning practices are the tools that can be used to meet these responsibilities. State and local governments can save energy and money for themselves and their citizens, with no reduction in comfort and a favorable impact on life style, by planning for efficient energy use and conservation. For the most part, however, they are on their own. Public support for energy conservation activities may be lessened by lower gas prices. That lack of support may enhance the already formidable attitudinal, informational, legal, and financial barriers to conservation. National energy policy is little help: it is unclear and confusing. Federal financial support is uncommited. Federal-state energy conservation programs have been limited, for the most part, to providing information, relying on that information to spur capital outlays for retrofit work. The programs have been experimental in nature; they lack the financial support of the current Administration and much of the Congress; and their regulations stand in the way of retrofit work for state and local governments. Ironically, the distribution of oil overcharge funds to the federal-state energy 89

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conservation programs may convince Congress that Federal support of energy conservation is no longer necessary. Oil overcharge funds, though an important source of support for energy conservation programs, are limited by those program regulations. If those limitations remain, the consumer purpose of providing restitution to an injured public may be thwarted since the most energy conserving activities, construction and equipment retrofits, are denied for public purpose entities. In spite of the lack of a national commitment to energy conservation, federal-state energy conservation programs have demonstrated the possibilities of conservation and have developed a network of people trained in energy management and technology. Information and expertise is available, even if it is occasionally difficult to find. Some states have shown a commitment to energy conservation beyond that of the federal government by recognizing the value of the technical fix and extending the concept of subsidy for energy conservation from information to actual retrofit work. State financing programs have used tax credits, subsidized commercial loans, and direct state loans to encourage and underwrite energy conservation projects. Successful programs show that energy management techniques focusing on operations and maintenance procedures save energy. They demonstrate that careful retrofit work can pay for itself and continue to provide 'revenue' for state and local governments in the form of avoided costs. Land development practices that are already widely accepted and 90

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used to meet a variety of needs can be used to enhance the energy efficiency of the community. Energy efficient land-use patterns, design principles, site planning, landscaping, and construction practices can be integrated with current land development regulations to insure that energy use is considered in the design of the community. Considering a wide range of energy options before choosing activities appropriate for the community results in the most effective use of the communitiy's resources. Although a reaction to a particular problem or opportunity presented to the community can save energy and money, a comprehensive energy approach containing elements involving both municipal services and land development practices guarantees that state and local governments will save the most for every tax dollar spent and continue those savings into the future. A comprehensive approach to energy use and conservation is not without problems. Time, budget, available expertise, and public and political support are constraints that may limit the actions a municipality is able to take. In any case, the techniques of planning for energy use and conservation have been demonstrated. Leadership, commitment, planning, management and technical expertise are vital. Although energy price and availability may be beyond the control of the consumer, planning for energy use and conservation provides the tools to control energy use. State and local governments can use those tools to meet their energy responsibilities to their citizens. 91

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SELECTED BIBLIOGRAPHY

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SELECTED BIDLIOGRAPHY Editorial Research Reports. Issues: New Directions and Goals. Washington, D.C. Congressional Quarterly Press. May 1982. EnergyTalk. "Oil overcharge funds to be shot-in-arm for energy programs." Denver, CO February 1986. The Daily. "A158% Rate Hike? TV A Tallies the Cost of a Privatization Move." March 7, 1986. User News. "Oregon Offering 35% Tax Credit for Conservation." March 24, 1986. Energy User News. "Federal Plan to Sell PMA's Could Lead to Rate Shock." March 24, 1986. Erley, Duncan and Mosena, David. Develo.pment Current Practice. American Planning Association. Chicago, IL August 1980. Greenwald, John. "Awash in an Ocean of Oil." Time Economy and Business, February 3, 1986. pp52-55. Lovins, Amory B. Soft Paths: Toward a Durable Peace. New York, NY Harper and Row. 1977. Lynch, Kevin. Site Cambridge, MA M.I.T. Press. 1962. Mazria, Edward. The Passive Solar Book. Emmaus, PA Rodale Press. 1979. Meshenberg, Michael. The Administration of Flexible Technigues. Chicago, IL American Society of Planning Officials. June 1976. Minnesota Department of Energy and Economic Development. Energy 92

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Finance: Report to the St. Paul, MN January 1985. Pauly, David. "The Unmaking of an Oil Cartel." Newsweek, February 3, 1986. pp36-38. Peirce, Neil. "Energy Conservation: Dead Duck of the '80's?" National Journal. March 15, 1986. Public Utility Commission of Texas. Energy Efficiency Division. Qru Containment Efficiency: Technical Analyses of Selected State ACR Energy Engineering, Inc. Austin, TX May 1985. Public Utility Commission of Texas. Energy Efficiency Division. Efficient Schools. Austin, TX October 1984 Puget Sound Council of Governments. Energy Division. Actions By Local Governments of the Pacific Northwest. Puget Sound, WA July 1980. Rankin, Bill. "Oil Price Blues As Congressmen Count the Cost To States." Daily. March 10, 1986. Rocky Mountain News. "Oil price drop may trim tax revenue." Denver, CO February 27.1986. Rocky Mountain News. "Oil proved slippery indeed for the prophets." editorial. Denver, CO March 7, 1986. Rocky Mountain News. "$8 oil would damage global economy, expert says." column. Denver, CO March 14,1986. Rosenbaum, Walter A. Politics. and Public Policy. Washington, D.C. Congressional Quarterly Press. 1981. Sawyer, Stephen W. "Federal-state conservation programmes: The states' assessment." Policy. April1985 pp156-167. 93

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U.S. Congress. Office of Technical Assessment. Efficiency of in Cities. Washington, D.C. U.S. Government Printing Office March 1982 U.S. Department of Energy. Energy Information Agency. Annual Review 1984. Washington, D.C. National Technical Information Service. April1985. U.S. Department of Energy. Energy Information Agency. Annual Outlook 1984: With Projections to 1995. Washington, D.C. National Technical Information Service. January 1985. U.S. Department of Energy. Energy Information Agency. State Overview 1983. Washington, D.C. National Technical Information Service. August 1985. U.S. Department of Energy. Office of Energy Management and Extension. Annual Report to the President and the on the State Conservation for Calendar Year 1984. Washington, D.C. August 1985. U.S. Department of Energy. Use from 1973 to 1980: The Role of Improved Efficiency. Eric Hirst, Co-ordinator. Oak Ridge National Laboratory. National Technical Information Service. December 1981. U.S. Department of Energy. Loan Impacts in Home Audit A Minnesota Example. Linda G. Berry and Bruce Tonn. Oak Ridge National Laboratory. National Technical Information Service. February 1984. U.S. Department of Energy. State Programs Branch. Local Government to Save Case Studies of Four Selected Communities. Martin Schweitzer and Sam A. Carnes. Oak Ridge National Laboratory. National Technical Information Service. September 1983. U.S. Department of Energy. Office of State and Local Assistance Programs. Activities. DOE State and Local Assistance 1985 94

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Report. National Technical Information Service. October 1985. U.S. Department of Energy. State Programs Branch, Office of State and Local Assistance Programs. Past Efforts and Future Directions for State Conservation N.E. Collins. Oak Ridge National Laboratory. National Technical Information Service. April 1985. U.S. Department of Energy. Office of Federal Energy Management Primer On Efficiency Improvements in Federal Facilities. DHR, Inc. McLeans, VA March 1985 U.S. Department of Energy. The Role of Financial Incentives in Utility Sponsored Residential Conservation A Review of Customer Surveys. Linda G. Berry. Oak Ridge National Laboratory, National Technical Information Service. December 1982. U.S. Department of Housing and Urban Development. Office of Policy Development and Research. Local Government Approaches to Conservation. Washington, D.C. U.S. Government Printing Office. September 1979. U.S. Environmental Protection Agency. Office of Environmental Engineering and Technology. Federal Conservation Perspectives from the Public and Private Sectors. 2 vols. Summary of Public Hearings. Washington, D.C. July 1981. 95