Industry Market Trends

Which States Are Most Energy Efficient? And Which Are Not?

Nov 01, 2012

There are a million rankings done by organizations far and wide in the U.S., but one set of rankings published recently by the American Council for an Energy-Efficient Economy (ACEEE) gives us a good idea of how U.S. states are becoming more energy efficient. The number-one state for energy efficiency, for the second year in a row, is Massachusetts, followed by California, New York, Oregon and Vermont. Rounding out the bottom five? South Dakota, Wyoming, West Virginia, North Dakota and, dead last, Mississippi.

Exactly what are some states doing well and others not doing as well? Looking deeper into the ACEEE rankings offers some clues.

Ben Foster, a senior policy analyst at the ACEEE, and lead author of the "State Energy Efficiency Scorecard," explained that the organization bases its rankings in six policy areas:

1) Utility and "public benefits" programs and policies

2) Transportation policies

3) Building energy codes

4) Combined heat and power (CHP) policies

5) State-government-led initiatives around energy efficiency

6) Appliance and equipment standards

The baseline year against which the ACEEE assesses policy and program changes varies by policy category. Policy scores are based on policies in place as of September 2012.



According to Foster, the report aims to capture the diversity of efforts related to energy efficiency at the state level and to encourage friendly competition among the states in crafting innovative policies and programs that deliver the economic, environmental and energy security benefits of efficiency.

"What we're looking for is how states are improving from year to year and also how their institutional frameworks make it easier for companies to be more energy efficient," says Foster, who adds that his nonprofit research group received sponsorship from the Environmental Protection Agency and the Department of Energy.

Massachusetts was ranked first for many reasons, Foster says, but primarily because of the state's 2008 Green Communities Act. Signed into law by Governor Deval Patrick, it requires the state's utilities to focus on energy efficiency before purchasing additional equipment and products.

Mark Silvia, Massachusetts Commissioner of the Department of Energy Resources, explains how the law works. "The state requires statewide energy plans that are submitted by the utilities to be approved by the Department of Public Utilities," Silvia says. "They each have to submit a plan every three years, and certain standards have to be met. A lot of the utilities had to ramp up their efforts to do what we were asking them to do."

The law also requires the state's regulatory authority, the Department of Public Utilities (DPU), to ensure that energy efficiency programs "are delivered in a cost-effective manner capturing all available efficiency opportunities, minimizing administrative costs to the fullest extent practicable and utilizing competitive procurement processes to the fullest extent practicable."

In addition, the law directs the DPU to appoint and convene an Energy Efficiency Advisory Council (EEAC), whose members play a key role in designing, approving and monitoring the energy efficiency programs of Massachusetts' investor-owned utilities.

Silvia says some of the state's goals include meeting a certain reduction of kilowatt-hours of electricity. He adds that in the 2011 report that the state just finished, Massachusetts' investment of $2 billion in energy efficiency will reap a $6 million benefit.

Other programs that Massachusetts is embarking on include a free home energy audit program for consumers. The state also created 71,000 new green jobs in the past 12 months, Silvia says.


Middle-of-the-Pack Montana Moves Up 

Montana Governor Brian Schweitzer is known for his straight talk and strong, commanding presence when addressing a room. So when he told Richard Opper, director of Montana's Department of Environmental Quality, and his state government colleagues in 2008 that he wanted to reduce the state's energy use by 20 percent over the next two years, "well, he's not a guy you say no to," Opper says.

So Opper went to work on implementing some of the governor's plans.

One major change was the founding of the State Building Energy Conservation initiative, which is a revolving loan initiative in which state agencies borrow money from Montana to pay for energy upgrades in state buildings, including lighting and window improvements. The agencies then pay the loan back through their savings on energy costs, Opper explains.

But what really helped Montana jump up in the ACEEE rankings from number 35 in 2011 to number 25 this year was the dramatic increase in funding for the program. Thanks in large part to the 2009 economic stimulus enacted by President Barack Obama and Congress, Montana was able to go from spending $1.5 million on the program to $20 million.


Energy-efficient buildings like this one in Great Falls, Mont. are helping the state move up the ACEEE rankings.


"Those investments we've made over the past several years are really starting to pay off," Opper says. "We've invested in drinking [water] and wastewater programs as well that have helped."

Montana has also improved thanks to Northwestern Energy, the state's largest utility and provider of electricity to 90 percent of the state's population, funding programs through a lost revenue adjustment mechanism. Montana also has programs that receive funding from a universal system benefits charge, paid by all customers of competitive electricity providers and cooperative utilities.The Montana Public Service Commission oversees the programs, while the Montana Department of Revenue ensures all of the money is spent on qualifying programs.

Two other big factors that Opper cites are the heavy emphasis on public relations designed to change people's behavior and making them aware of all the little things they can do to become more energy efficient, and a program managed by the state that has changed the systems of heating and cooling in state buildings.

Laggards Need to Step Up Programs

Some states are still lagging pretty far behind in instituting energy efficiency measures. Mississippi ranks last among states, and ACEEE said that's mainly because the state has very few energy efficiency programs. The Consortium for Energy Efficiency reports that the state's budget for electric utility energy efficiency program is just $12.5 million.

According to the ACEEE's Foster, what states like Mississippi aren't doing is seizing opportunities to create programs that would help.

"For example, Mississippi has no policies in place that would encourage more efficient transportation," Foster says. "And they don't have building energy codes to streamline and put in place rules that would force utilities to comply and become more efficient." Foster adds that states like Mississippi, North Dakota and South Carolina are also "not doing as much to capture the market failures around energy efficiency -- things that other states are recognizing."

There is plenty of time for states to learn to become more efficient, and for the bottom 10 states, a big part of it is educating the public to pay more attention to energy efficiency -- just like in Montana.

Foster is pleased to learn that one day after the ACEEE rankings came out, he read that Mississippi Governor Phil Bryant waved the rankings in front of his staff and vowed that the state can be better.

If only all politicians could be that fired up about energy...