Are state energy plans worth the effort? Presenting the business case for state-specific action
Some believe the most recent U.S. EPA greenhouse gas rules (111(d)) are a subtle way to create a national state energy plan or require states to develop their own. But, do state energy plans work and is there a right way to put one together? The EPA rules and the subsequent plans to adhere to them will impact all facets of energy generation and delivery. Today there are 38 states that have a state energy plan and, interestingly, these states developed them prior to the development and creation of EPA’s greenhouse gas rules.
The Missouri Energy Initiative
The Missouri Energy Initiative is a 501(c)(3) nonprofit working to build collaborative partnerships between public and private entities to increase support for energy education, research, economic development, and better or consensus-driven policy development. As of early 2014, 18 states were updating or considering developing new energy plans. This retrospective analysis is MEI’s first attempt at looking at the common threads concerning state energy plans. We believe that more research needs to be done.
State Energy Plans (SEPs) can be a vital and comprehensive way to bring together extremely complex and technical topics such as energy into the state’s economic development, educational, regulatory, agricultural, and policy arenas. Energy is a vital component of modern life. Energy plays a role in our health care system, our food production, our transportation advances, as well as our everyday lives. Whether by regulation or technology, changes are coming to the energy landscape.
A state energy plan, one that is reviewed and tracked on a regular basis, can ensure that a state or country is at the forefront of developing and securing affordable, reliable, and sustainable energy sources. The 38 states with state energy plans are already seeing results, as found in the 2013 study by the Missouri Energy Initiative:
· SEPs have very common components and objectives. The vast majority of states have similar goals in their state energy plans; 35 cite energy efficiency, 34 mention renewable energy, 23 transportation, 16 natural gas, 15 public education, 13 call out innovation and emerging technologies and eight states set goals for oil and petroleum production. A common thread in state energy goals was the effort to reduce energy prices, reduce the environmental impact of current energy portfolio mix and to increase local economic benefits. Growing energy demands and energy security remain major concerns for many states and our country and the most common way to address these concerns through SEPs was energy efficiency and alternative energy goals. The most common energy efficiency goals included the revision of building codes, creating or supporting demand-side management programs and net-metering.
· SEPs work well if plans are developed and tracked appropriately. Most SEPs developed before 2014 did not include metrics to identify cost savings, job production or economic growth. Of the 38 states that have state energy plans only 21 track progress against their state energy plan, but only a fraction utilize metrics that can provide input for policymakers or program implementers. Most states rely on recommendations, suggestions or tasks, but lack evaluation. Monitoring and quantitative metrics allow plans to be data-driven which increases accountability and transparency.
· States with SEPs underperformed early in analysis, but rebound quickly.Whether by coincidence or as the motivating factor, states with SEPs underperformed states without plans at the beginning of MEI’s evaluation period. On average, states with SEPs started with energy prices 2% higher than those without plans. However, MEI’s analysis of the data shows that, over time, states with SEPs significantly improved their cost of energy as exemplified by SEP states seeing a decrease in power costs from $12.5cents/kwh to $10.9cents/kwh. At the end of the evaluation period, states with SEPs had reduced electricity prices below those states without energy plans. Results also show that the recession hit states with SEPs harder than states without SEPs, with significant job losses and reductions in new businesses.
· States without SEPS saw energy prices increase. While states with SEPs saw their economies grow and energy prices decrease, states without SEPs saw energy prices increase. Specifically, both residential and commercial electricity prices improved for SEP states, but did not outperform non-SEP state electricity prices at the end of the evaluation period.
The Economics of State Energy Plans
The recession of the late 2000s impacted all states, but data shows it hit states with SEPs harder than those without SEPs. While data is limited, the MEI analysis shows that in years 2006 and 2007 states with SEPs consistently underperformed those states that did not SEPs. However, the reverse is true between 2008 and 2010, with states with SEPs outperforming than non SEP states by 1% in 2009.
Energy is the foundation of our country, connecting our homes and businesses, our healthcare and our economic stability, our environment and our finances. State efforts, using metric-based State Energy Plans, can assure greater energy security, affordable, reliable and sustainable energy as useful tools that can hold elected officials accountable and provide transparent policies for our communities. To assure good and effective policies State Energy Plans should be reviewed further once more data becomes available.
For the full white paper, please visit www.moenergy.org. OR for full paper and analysis of Missouri’s past energy plans and its current efforts visit www.moenergyplan.org. OR visit the Midwest Energy Policy Conference website to see how this year’s conference will be addressing state energy planning.