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In the past few years, legislatures in nearly all states have considered a variety of energy efficiency policies. While states have made noteworthy headway in increasing energy efficiency, study indicates that there is still room to develop. Policymakers have invigorated statewide initiatives to modernize efficiency efforts, target particular sectors or demographics and boost economic investments.
Buildings are considered to be the largest consumers of energy worldwide and will continue to be an important source of demand if the situation does not change. IEA gives following information, that residential and commercial sectors of world economy consume over 30% of global total final energy and both swallow up half of produced electricity. Currently about 60 percent of all electricity is generated by burning fossil energy sources, which leads to conclusion that residential and commercial sectors are responsible for almost 30 percent of global CO2 emissions. Various studies confirm the economic viability of implementing energy-saving programs in buildings. Thus, Considerable efforts in policy-making were made during last 20 years to slow down energy demand growth in buildings, however there has been a 20% rise in the demand since 2000, even though global population has grown only by 16% . In the foreseeable future, further population growth is expected, which will certainly entail floor area growth.
Fig. 1 Final buildings energy consumption by fuel share in 2012 worldwide. (Source: Energy Technology Perspectives 2015, IEA, 2015)
However, those taken actions to temper the increasing demand were partly successful. The introduction of energy-saving technologies prevented the use of an additional 12% of energy resources that would have been used otherwise. Energy efficiency is one of the main factors contributing to the divergence of energy consumption from economic development . The deviation is graphically represented in Figure 2.
According to the IEA’s projection through 2050, energy efficiency will account for 38% of cumulative emissions reductions, renewables will account for 30%, and carbon capture and sequestration (CCS) will account for 14%.
This segment uses a very wide range of technologies, starting with the construction of the building, their isolation and completing the business equipment. Some of these technologies are already cost effective with a payback period of less than 5 years, other are more expensive and require government support and regulation. The main factors hindering the widespread adoption of technology are market constraints, so effective public policy is crucial to achieving goals.
We can observe a similar situation with overall energy consumption in the US. According to U.S. Energy Information Administration about 39% of U.S. total primary energy was consumed by the residential and commercial sectors in 2017, two thirds of this share are used in the production of electricity . There are approximately 112 million households and commercial buildings in the U.S., and their total energy consumption equals 38.3 *1015 BTU, or roughly 1.4 billion metric tons of burned coal. Continuing rising trend in buildings stock causes the amount of new built power plants. For 20 years, from 1985 to 2006, there has been an increase in the sale of electricity, 87% of which is for the building sector needs .
Figure 2. Global final energy use with and without energy efficiency, 2000 – 2017 (Source: www.iea.org)
Reasonable use of such significant amounts of energy will bring many benefits, ranging from reduced electricity bills and ending with a reduction in global temperature growth. Structural changes should occur at all levels of government. So the federal programs can serve as an impetus for the development of the economy and welfare in general, and the steps implemented at the local level can be an example for larger-scale actions.
If the introduction of energy efficiency standards for new buildings under construction is determined, then for existing buildings there are some difficulties. The complex structure of market relations and the large number of different players impede the modernization of the existing stock of buildings. In the late 2000s, an evaluation project was conducted to determine the consequences of market failures in end-use energy consumption, which brought out the main barriers to increasing energy efficiency investments . These limiters include:
- Principal agent barriers. They are common in the rental industry. Homeowners or persons acting on their behalf determine the equipment that will be installed and which is not always energy efficient, because tenants will pay for the bills.
- Information (transaction) cost barriers. End-use consumers experience a drawback in satisfactory information or expertise to make prudent decisions, which will safe energy and money.
- Externality cost barriers. Electricity production in traditional ways is associated with large impacts on the environment and human health. For this reason, the cash value of electricity does not fully reflect the true price we pay.
- Policies applied at different jurisdictional levels will be presented below. The main goal of these tools is to change the market, which will be characterized by the presence of competitive energy-efficient technologies. According to Brown and Busche, achievement of market transformation characterized by two main strategies that contribute to market opening for the technologies and its further expansion :
- Barrier Reduction. Policies that are aimed to remove hurdles to energy efficient technologies. They include those that create universal norms for new technologies.
- Technology Approachability. Dropping down initial acquisition and installation costs by delivering tax incentives, grants, subsidies, etc.
Federal and state policies
Given the characteristics of the US political system, there are different levels of jurisdiction for legislating and regulating policy action.
First steps to implement comprehensive energy-efficiency policies were followed by the energy crisis of the 1970s. The federal government policies were designed to have a significant impact on the available housing stock, as well as on newly built buildings. The widespread influence and uniformity of the implemented measures are the advantages of federal initiatives. To stimulate the use of energy-efficient technologies in the buildings following policies are often being employed:
- Appliance and equipment efficiency standards. Standards charge that technical modernizations in the new equipment must provide enhanced efficiency among different types of products. The least efficient products are turned out of the market. The National Appliance Energy Conservation Act of 1987 (NAECA) is federal regulatory legislation, that calls for the revision of national standards for home appliances by the US Department of Energy (DOE).
- Appliance labeling. This tool obliges manufacturers to label their products with comparative information on the energy use or efficiency for the consumers facilitating them to make purchasing decisions. It comes in two forms in the United States: “Energy Guide” and “Energy Star”. The former informs consumers of appliance’s annual energy consumption in comparison with the products in the same class. The latter uses a specific symbol on the product’s surface, stating that the item is the most energy efficient in its own kind.
- Building codes and standards. In most cases, these tools are applicable to new buildings, although as improvements and renovations are made to old buildings, the requirements of these codes should be met at least minimally. This type of regulation has for the long term realization since it designed to help dwellers to save resources over a buildings usage period by controlling building’s outer shell, lightning, heating, ventilation, and air-conditioning systems. However, the United States federal government develops the model codes for buildings, helps to adopt the standards but does not have direct jurisdiction to effect on adoption of the building codes by the states that then may amend the codes to meet local requirements. Most states have entered on codes based on model codes developed by the International Energy Conservation Code (IECC) and American Society of Heating, Refrigeration and Air Conditioning Engineers (ASHRAE) .
- Government purchasing and procurement and public sector facility management. This category refers to the mandatory execution by public institutions to increase energy efficiency of used items. The Federal Energy Management Program (FEMP) defines specifications for products.
- Tax incentives, both financial and non-financial. Federal government offers various programs such as tax incentives to consumers, commercial utilities to induce demand for high-efficiency products, equipment and building reconstruction. Since new introduced energy efficient technologies may have higher up-front capital costs relative to alternatives, it creates economic burdens on buyers. The provision of tax incentives, subsidies, grants and etc. will decrease the cost barrier and will impel the development and proliferation of technology.
However, legislating and regulating on the federal state have its own limitations. For example, the uniformity may cause market restrictions on the state level and in general the federal level control mechanisms have a flaw not always fit the conditions and circumstances of a certain state.
Capacity to propose broad-impact, yet more personalized norms and incentives using more sophisticated tools based on local conditions and needs at the state level is one of the strengths that may enhance energy-efficiency policy. Also an important factor is the prerogative of states to regulate activities of electrical utilities. The following policy tools are used at the state level in addition to the aforementioned:
- Funding of public benefit programs and activities. Many states provide funding opportunities for new energy-efficiency related programs. Since most states have authority to regulate activities of electricity utilities, it permits them to create energy-efficiency funds (public benefits funds – PBF). These funds have at their disposal cash originating in utility bills.
- Existing building benchmarking. Benchmarking is a measuring of the energy efficiency of a building over time compared to other similar buildings or for the modeled building constructed according to a specific standard (for example, an energy code).
Although there is a need to assess the results of the policy implementation, the measurement is difficult due to several reasons. Factors such as overlapping properties of tools being used in the policy, the constraints arising in calculating the saved energy as a result of a certain policy, insufficiently developed coordination between participants, and influence of factors, that lay beyond policy framework (i.e. economical context, scientific breakthroughs) negatively contribute in developing a recognized methodology of policy efficiency evaluation. Generally, the changes in the total U.S. energy consumption per dollar of gross domestic product (GDP), or energy intensity, acts as an estimate of energy efficiency improvements in each sector.
Since there are periodic changes in the standards issued by IECC and ASHRAE, the DOE issues determinations on the codes. Since IECC doesn’t provide cost-effectiveness analysis, so DOE makes verifies that new codes have better impact in comparison with older ones by indicating approximate evaluations on different parameters (e.g. cost savings, source energy savings, etc.). States are required to comply with the iterations of the codes, and send letters to DOE verifying the adoption of the codes or provide a reason for the refusal within two years. Given this circumstance, different states use codes of different years. States have broad competency for monitoring the buildings conditions, conducting research every 3-5 years, forming a system that includes programs and methodologies that involve different stakeholders, conducting training sessions and other qualifying events.
In this paper, a review was made for measures applied in the buildings’ energy efficiency policies of the states of Montana and North Dakota. Since climatic conditions play an important role in determining the necessary policy measures, and both states are located on the border with Canada and are characterized by manifestations of harsh climatic conditions, causing increased demands on building envelops, insulation, heating and ventilation.
According to the 2018 State Energy Efficiency Scorecard Montana ranks 25th in the cumulative ranking of 50 states and the district of Colombia . The overall score for categories like residential and commercial codes stringency, compliance study, additional compliance activities, benchmarking and transparency, and energy rating and labeling of homes is 5 out of 8. The evaluation is based on the information provided mainly by the Building Codes Assistance Program (BCAP), the DOE Building Energy Codes Program, and the national network of regional energy efficiency organizations.
Montana Department of Environmental Quality’s Energy Bureau is the body implementing the exertion on implementation, tracking, and regulation. Energy Efficiency and Compliance Assistance, and Energy Planning and Renewables are two departments within the Energy Bureau.
Energy Efficiency and Compliance Assistance Section
This unit manages following directions:
- State Buildings Energy Conservation Program (SBECP). Responsible for enhancement facilities and equipment that outcome of cost savings by reducing utility costs over the life of the enhancement;
- Small Business Environmental Assistance Program (SBEAP);
- Smart Schools
- Educational activities and explanatory work regarding Montana Energy Code
- tracking Energy Data and Energy Performance Contracting (EPC).
“Senate Joint Resolution 31 (2017): Creates a study on utility decoupling—a process that separates utility profits from total electricity or gas sales, eliminating the financial disincentive for utilities to invest in efficiency. As efficiency decreases sales, it can reduce utility profits in states without decoupling.”
Figure 3. Status of State Energy Codes: Residential Sector. (Source Buildings Energy Data Book, 2011)
Figure 4. Status of State Energy Codes: Commercial Sector. (Source Buildings Energy Data Book, 2011)
. Energy Technology Perspectives 2015, IEA, 2015
 https://www.iea.org/efficiency2018 (accessed 11/20/2018)
. https://www.eia.gov/todayinenergy/detail.php?id=36412 (accessed 11/19/2018)
. US Department of Energy, Office of Energy Efficiency and Renewable Energy (EERE), “Energy Efficiency Trends in Residential and Commercial Buildings”, 2008, http://apps1.eere.energy.gov/buildings/publications/pdfs/corporate/bt_stateindustry.pdf
 Prindle, Bill. 2007. Quantifying the Effects of Market failures in the End-Use of Energy. Paris, France: International Energy Agency.
 Brown E., Busche, 2008. State of the States. Renewable Energy Trends and the Role of Policy. Golden, Co: NREL.
 National Renewable Energy Laboratory (NREL) of the U.S. Department of Energy. “Energy Efficiency Policy in the United States: Overview of Trends at Different Levels of Government”, Technical report, 2009.
 Berg, W., Nowak, S., et. al. The 2018 State Energy Efficiency Scorecard. American Council for an Energy-Efficient Economy, 2018.
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