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Correction: North Carolina lagged behind 31 states in progress toward its 2017 energy efficiency potential. An earlier version of this story misstated its ranking.
A decade ago, energy conservation was widely viewed as the ‘low-hanging fruit’ of clean energy policy in North Carolina, the cheapest and easiest way to reduce fossil fuel consumption and cut pollution.
Now, experts say too much of that fruit is rotting on the ground.
According to data presented recently to a statewide energy policy panel, the Tar Heel state lagged behind 31 others in fulfilling its 2017 energy efficiency potential, a stark contrast to the state’s ranking of second in the country for solar power.
Energy waste pervades every sector of the state’s economy, from homes and offices to heavy manufacturing, despite the cost-effectiveness of actions like replacing inefficient light bulbs or repairing air leaks. That’s why analysts say the solution can’t rest solely on individual actors – from plant managers to homeowners – deciding to take action.
“Finding the [opportunities for] energy efficiency is easy,” Michael Stowe, a senior engineer with the nonprofit energy consulting firm Advanced Energy, told members of the panel. “Implementation is hard.”
Two laws; only one has worked
Energy efficiency has long been considered the cheapest solution to pollution from fossil fuels. Tighter air seals, replacing inefficient HVAC systems, and other measures cost between 2 to 4 cents per kilowatt hour of energy saved. The next lowest cost option — wind power — is almost twice as expensive, according to the American Council for an Energy Efficient Economy.
North Carolina has two major policies to promote energy savings. One, adopted in 1994, allows government entities to enter into building energy performance contracts that require a large outlay upfront but save money over time. The program has cost taxpayers $60 million but saved $1.3 billion in energy and water bills since 2003, according to Ryan Miller, head of the nonprofit North Carolina Building Performance Association.
“What better return on investment do we have in the energy sector?” Miller said at the August meeting of the Energy Policy Council, an advisory panel comprised of appointments from the governor and the legislature.
The state’s second major policy, a clean energy standard adopted in 2007, hasn’t produced the same results. The law allows utilities to meet a portion of their renewable mandate with energy efficiency measures, capped at 2.5 percent of electricity sales this year and 5 percent in 2021. But efficiency programs administered by Duke Energy, the state’s dominant utility, only account for about 1 percent of its sales.
“We’ve had two campaigns in the last 23 years to push forward energy efficiency policy,” Miller said. “One of them has worked very well. The other needs more meat on the bones.”
‘Hard problem to crack’
Advocates say North Carolina is missing key opportunities for energy conservation in residential and commercial buildings, which make up about half the state’s energy use.
Features like thicker wall insulation are easiest and cheapest to install during a home’s construction. Duke Energy offers builders cash incentives for building homes that exceed minimum conservation requirements, a program many say is highly effective.
But the state’s minimum conservation standard trails behind the national model code, a response to pressure from the residential construction lobby. Exacerbating the problem, state law only allows the conservation code to be overhauled every six years instead of every three.
“The energy conservation code is a major driver among new construction for energy efficiency gains,” said Peter Ledford, counsel with the North Carolina Sustainable Energy Association. “We’re going to be lagging behind most other states when it comes to that code.”
More intractable is the challenge of retrofitting existing homes. Duke offers rebates to customers who replace incandescent bulbs, HVAC systems, and other items with more efficient models, the main source of the company’s 1 percent efficiency savings.
But the company doesn’t project that figure will grow, in part because convincing another wave of customers to upgrade lighting or other features will require more expensive marketing and higher rebates.
“You’re seeing a saturation of some of the energy efficiency measures,” said Tim Duff, who manages Duke’s efficiency program. “It’s always hard to get those last customers to participate.”
While rebates combined with long-term energy savings costs might save consumers money overall, a lack of financing options puts expensive upgrades out of reach for many low- and middle-income families.
“If you’re a middle-class family that owns your own home,” said Ledford, “you’re not necessarily going to be in a position to make $20,000 worth of energy efficiency improvements.”
Unlike solar panels or high-efficiency windows, many energy conservation measures don’t involve a high-priced product buoyed buy their own teams of marketers, installers, and manufacturers.
“In general, it’s a crew of people with caulk guns,” said Amy Musser, who co-founded a consulting firm in Asheville, North Carolina that focuses on conservation primarily in new construction.
A law passed last summer also changes the way utilities calculate how much they spend producing conventional energy. That reduced “avoided cost” rate — combined with what advocates say is an outdated methodology that undervalues certain efficiency measures — will cause regulators to approve lower rebates to customers.
Overcoming these barriers, especially for existing homes, will take a suite of policies, advocates say, from increasing rebates and offering financing options for energy efficiency to more aggressive consumer education and marketing programs.
“The existing homes problem is just hard,” said Musser, “and that’s why we haven’t cracked it.”
‘Bigger than just one thing’
Buildings aren’t the only problem. Large industrial users are also missing chances to save energy in their production processes. Requiring compressed air leak testing and repair, for example, could save as much energy as 54,000 homes use in a year, Stowe of Advanced Energy told the energy council.
It’s not that manufacturers aren’t aware of the advantages of repairing air leaks, said Stowe, who spent nearly three decades in the manufacturing industry. It’s that most plant managers have a long list of responsibilities and not enough time to fulfill them all.
The proverbial fruit, Stowe said, “isn’t low-hanging. It’s already on the floor.”
Making matters worse, electricity customers who use more than 1 million kilowatt hours of electricity per year can also opt out of paying for Duke’s efficiency programs. That benchmark could be raised tenfold, North Carolina State University Professor Stephen Terry told the council, but, “there’s going to be a lot of pushback.”
Underlying the challenge of Duke-run programs is the reality that the regulated utility makes money by selling electricity. Any meaningful policy to drive a surge in efficiency must sever that relationship, advocates say. Performance-based ratemaking, for example, could allow Duke to earn a higher rate of return for meeting certain conservation benchmarks.
At the same time, the state needs an overarching policy that drives conservation across the entire economy — not just the utility sector.
“If you’re going to drive something like a 5 percent efficiency savings,” said Ledford, “you have to look bigger than just any one thing.”
Most observers believe the legislature must do the driving, not the Energy Policy Council, a body with no real teeth that meets quarterly, or the Utilities Commission, which has shown little inclination for stepping outside the bounds drawn for it by lawmakers.
But even though renewables appear to have crowded out efficiency so far, the policy goal shouldn’t be the reverse, many say, since the two resources are complementary, not competing, when it comes to ending reliance on fossil fuels.
“At the market level, that’s not in any way how things shake out,” said Musser, the green building consultant who specializes in efficiency. “I send referrals to solar people all the time, and solar people send referrals to me all the time.”
“As businesses we don’t see it as competition,” she said. “In the bigger picture, we shouldn’t see it that way either.”