State Energy Efficiency Efforts Yield Economic Gains Amid Federal Pullback

January 29, 2025

Amid rising concerns over energy consumption and costs, state-level initiatives on energy efficiency have become increasingly significant, especially in light of the federal rollback on climate policies by the Trump administration. The American Council for an Energy-Efficient Economy (ACEEE) released a report highlighting the progress and setbacks in state energy efficiency policies, specifically the establishment of energy efficiency resource standards (EERS).

The Role of States in Energy Efficiency

State-level action has been pivotal in driving energy efficiency across the United States, particularly as federal attention to this issue has waned. The ACEEE report reveals that only 26 states and the District of Columbia have adopted an EERS, which mandate utilities to enact measures like weatherization and appliance rebates to reduce annual energy consumption. These measures have proven effective; however, progress in adopting these standards has been sluggish, with more states repealing their standards since 2012 than adopting new ones. Jasmine Mah, a senior research analyst at ACEEE and a co-author of the report, emphasized the need for ongoing commitment. She noted that only three states have established new standards since 2012, while others like New Hampshire, Ohio, and Iowa have rolled back their standards to less demanding forms. Arizona, too, is considering a rollback. The report aims to encourage state policymakers and utility regulators to recognize the concrete benefits of EERS and to both maintain and enhance these standards to drive more extensive energy savings.

Adoption and Impact of EERS

Despite the challenges, states that have adopted EERS have experienced remarkable success. According to a 2017 ACEEE report, states with EERS achieved electricity savings that were four times greater than those without such standards. This significant improvement underscores the effectiveness of these measures. Moreover, as of 2023, states with EERS represented about 59 percent of the U.S. population but accounted for a staggering 82 percent of the total national energy savings. The economic advantages for states that have embraced these measures are evident. For example, Barry Rabe, a political scientist at the University of Michigan specializing in energy and climate politics, highlighted Texas’s early adoption of EERS in 1999, despite its general inclination toward fossil fuels. He pointed out that while interest in energy efficiency tends to decrease when energy supplies are abundant and prices remain stable, the recent surge in natural gas consumption in the U.S. has also affected enthusiasm.

Success Stories and Economic Benefits

The financial benefits for states that have implemented EERS are clear. Reduced energy consumption directly translates to cost savings for both utilities and consumers, while decreasing reliance on non-renewable sources reduces greenhouse gas emissions. States with EERS not only achieve greater energy efficiency but also stimulate their economies by creating jobs in sectors related to energy efficiency, such as retrofitting homes and installing energy-efficient appliances. Rabe cautioned that while economic and environmental benefits are significant, the U.S.’s current trend toward increasing natural gas usage might lead to a decline in the momentum of energy efficiency measures. Despite this, the continued adoption and enhancement of EERS by more states could counteract this trend, ensuring long-term economic and environmental benefits.

Advanced Initiatives and Their Impact

Next-Generation Policies

In addition to the basic EERS, some states have taken further steps by implementing what the ACEEE report terms “next-generation” initiatives. These advanced measures aim to achieve objectives beyond merely reducing energy consumption. They target reductions in greenhouse gas emissions, promote electrification, support low-income populations, and alleviate the financial burdens associated with energy costs. Among the 27 jurisdictions with an EERS, most have adopted at least one advanced initiative, but only nine have incorporated all the suggested advanced measures. This indicates that there is still substantial room for progress. The report highlights that integrating such initiatives can amplify the benefits of EERS, extending savings and efficiencies beyond the immediate reduction in energy use.

Leading Examples

States such as Illinois and Massachusetts serve as leading examples of these next-generation policies. Illinois has set an ambitious goal of relying solely on clean energy by 2050, a target that necessitates a comprehensive overhaul of its energy infrastructure. Similarly, Massachusetts has committed to installing half a million heat pumps by 2030, a move that would significantly reduce greenhouse gas emissions and promote energy efficiency. Other states have focused on the social aspects of energy efficiency. Michigan mandates that a substantial portion of energy efficiency funds be dedicated to programs for low-income customers, ensuring that energy cost savings are accessible to those who need them the most. New York and Minnesota have set caps on utility costs relative to customer income at 6 and 4 percent, respectively, to make energy more affordable. These initiatives demonstrate that advanced policies not only drive energy efficiency but also promote social equity and economic sustainability.

Challenges and Criticisms

Funding Structures and Federal Influence

While state-level initiatives have proven effective, they often face financial challenges, particularly regarding funding structures. The discussion around the possible impact of President Trump’s proposed repeal of the 2022 Inflation Reduction Act (IRA) is crucial in this context. The funding for state EERS systems frequently relies on application fees added to utility bills. Justin Brant, utility program director at the Southwest Energy Efficiency Project, affirmed that this fee-based funding model enables significant investment in energy efficiency programs, making them effective and broadly applied. However, this model can be contentious. Critics argue that the costs associated with these fees disproportionately affect consumers, including those who do not directly benefit from the energy efficiency measures.

Opposition and Financial Concerns

Opponents like Arizona Corporation Commissioner Nick Myers contend that the $3 billion cost burden on customers is too high, suggesting that utilities should be free to focus on cost-effective energy mixes without mandatory government interventions. Despite such criticism, the effectiveness of EERS investments is evident. Arizona’s largest electric utility reported that the 2023 EERS investments yielded double the returns compared to the expenses. This highlights the financial benefits of energy efficiency programs, which extend to all customers, not just those who directly participate. These economic returns can be reinvested in further energy efficiency measures, creating a beneficial cycle that enhances both economic and environmental outcomes. While opposition exists, the data indicate that well-implemented EERS can be highly effective and financially beneficial.

Future Directions and Policy Suggestions

Federal Support and Potential Rollbacks

Looking ahead, the role of federal support remains critical. The IRA provision of nearly $9 billion for energy efficiency and electrification demonstrates continued federal backing through state-administered programs, especially for low-income households. However, potential rollbacks of federal tax credits by the Republican-controlled Congress could jeopardize state efforts to achieve their energy efficiency and next-generation goals. The uncertainty in federal policy creates a challenging environment for states attempting to sustain and expand their energy efficiency programs. The potential dilution of financial support underscores the importance of state-level initiatives maintaining momentum regardless of federal actions.

Staggering Energy Use

With increasing concerns about energy consumption and costs, state-level efforts on energy efficiency are becoming more critical. This trend is even more important in the wake of the Trump administration’s federal rollback on climate policies. The American Council for an Energy-Efficient Economy (ACEEE) has released a report that sheds light on both the advancements and challenges in state energy efficiency policies. The report specifically focuses on the creation and implementation of energy efficiency resource standards (EERS).

These state-level measures aim to address the growing demand for energy efficiency in the face of diminished federal action. By setting energy efficiency resource standards, states are taking proactive steps to reduce energy consumption and costs, while also working to mitigate environmental impacts. This approach is essential for ensuring sustainable energy practices and securing long-term economic benefits. Initiatives like those highlighted by the ACEEE report showcase the importance of state involvement in energy efficiency efforts, particularly when federal support is lacking.

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