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Sustainable: ECO Act broadens energy efficiency options for businesses and consumers

Last updated: 06-04-2021

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Sustainable: ECO Act broadens energy efficiency options for businesses and consumers

One of the few bipartisan bills to emerge from this year’s legislative session could offer businesses and homeowners more opportunities to invest in green technologies and energy efficiency.

Signed by Gov. Tim Walz last week, the Energy Conservation and Optimization Act (ECO) updates the state’s Conservation Improvement Program (CIP) by allowing for a greater range of energy efficiency and heating and cooling options. Utilities will encourage customers to switch from natural gas and propane to less carbon-intensive electric heat from air and ground source heat pumps and other electric appliances.

Utilities may focus more on load management that encourages businesses and consumers to shave electricity use at high-demand times or move consumption to other parts of the day and night. The act also triples the amount of money investor-owned utilities must devote to low-income programs.

The act could be good news for developers and building owners looking to build and operate properties with higher efficiency and lower utility bills. Helping solve the global climate crisis by reducing greenhouse gases offers another attractive and likely marketable feature for businesses.

Gregg Mast, executive director of Clean Energy Economy Minnesota, said the ECO Act “gives consumers and businesses more choices and better control over their energy use. Whether it’s moving forward with installing more efficient heating and cooling systems, building insulation, or load management opportunities where energy can be used at optimal times throughout the day, this legislation will help Minnesota residents and businesses save more energy and money while supporting tens of thousands of local jobs.”

The bill drew an astonishingly diverse group of backers. Every investor-owned utility in the state and representatives of consumer-owned utilities such as municipal and electric cooperatives testified in favor of the bill. The state’s clean energy and environmental organizations backed the ECO Act, as did electrical and mechanical contractor unions.

The ECO Act drew the backing of the Commerce Department, CenterPoint Energy, Xcel Energy, the Minnesota Electrical Association, the Minnesota Mechanical Contractors Association, the National Electrical Contractors Association, Fresh Energy, Clean Energy Economy Minnesota, Energy CENTS Coalition, Citizens Utility Board of Minnesota, Blue Green Alliance, Sierra Club, Conservation Minnesota, IBEW Local 292 and other unions.

Only a handful of opponents emerged. The Minnesota Propane Association believes the bill will have a detrimental impact on sales if consumers shift to electric heat. The Minnesota Chamber of Commerce also opposed the bill, claiming fuel switching would bring higher energy costs and changes to it might curtail traditional energy conservation programs and practices. Several chamber members, however, endorsed the ECO Act.

The Center for Energy and Environment policy and external affairs director Mike Bull praised the ECO Act’s chief authors, Sen. Jason Rarick (R-Pine City) and Rep. Zack Stephenson (DFL-Champlin), for finding common ground among all the businesses and organizations affected by the bill. Committee chairs Jamie Long (DFL-Minneapolis) and David Senjem (R-Rochester) also contributed to the bill’s success by gathering bipartisan support.

Bull believes the bill could open the door to more significant innovation and a faster reduction in greenhouse gases, ultimately the goal of the state, balancing what has worked over the program’s four decades with what the future might hold.

Bringing together the coalition became imperative after the 2015 legislative session when the House passed a bill to repeal CIP. Bull and other efficiency advocates began working on expanding CIP following “the wakeup call” from legislators. The result has something for everyone.

“We didn’t have to give up the kind of energy conservation successes that we’ve done forever,” Bull said. “This allows for innovation that will create more jobs and allow for greater creativity in the program.”

Managed by the Commerce Department, the nation-leading CIP program is responsible for saving Minnesotans $6 billion over the past 20 years and helping create more than 45,000 jobs for contractors around the state. Advocates believe the act will add to that total since energy conservation work is local by nature. Estimates show every $1 of CIP spending produces $3.75 in benefits.

The program was last updated in the 2007 Next Generation Energy Act. Funded by ratepayers, CIP requires electric utilities to reduce average retail sales by 1.5% and spend at least 1.5% of gross annual operating revenues. Gas utilities have less aggressive goals.

ECO Act takes away the spending requirements while slightly increasing the energy savings to 1.75% for investor-owned utilities. The 1.5% standard remains for consumer-owned utilities.

Former state legislator Jeremy Kalin, now an attorney with Avisen, was the House chief author of the 2007 CIP legislation that increased the energy savings level required by utilities. The ECO Act takes that advance even further, modernizing it for a new energy age.

“We left a whole lot of effective energy conservation on the table, because we couldn’t get political consensus,” Kalin said. “This year’s ECO Act continues to allow utilities and businesses to use energy more efficiently across the board and reduce carbon.”

Darrick Moe, president and CEO of the Minnesota Rural Electric Association, said a meaningful change was removing the spending requirement. Meeting the spending goal has become more difficult because the program limited what utilities could offer residential customers – basically updating lighting to LEDs and appliance rebates.

With the ECO Act the opportunities to serve residential and business customers with electric options will grow. The goal now with the new ECO Act is to reduce costs, carbon and total energy. That could be air source heat pumps, geothermal or electric car charging stations. “It has to have that trifecta of benefits” to qualify for CIP, he said.

Fresh Energy policy associate Isabel Ricker said demand response agreements are standard between utilities and large businesses today. But they rarely get used except in times of crisis. With more sophisticated smart energy management tools, those programs could be better tailored to move business customers to off-hours electricity consumption, allowing for greater integration of renewable energy and less investment in energy plants to meet short term demand, Ricker said.

Advocates for the legislation, including the two authors, believe it could spur employment growth in the manufacturing and contracting industries. Legislators supporting the act often highlighted that Minnesota serves as the headquarters for several large companies with energy conservation products and services as part of their business, including Trane, Daikin, 75F, 3M, Honeywell, and Andersen Windows.

Andy Snope, legislative and political director for the electrician’s union IBEW 292, said ECO Act could result in more jobs. For trades and businesses that do electrical work, this is really the work that we do,” he said. “Energy efficiency – whether it’s replacing fluorescent tubes with LED light fixtures or converting gas-powered heat sources with air source heat pumps – is electrical work and that’s our bread and butter.”

Jim Douglas, vice president of the energy consulting firm Willdan in Minnetonka, said the act will allow “owners, developers, designers to evaluate really optimal combinations of energy efficiencies, solutions and fuel source in order to meet operational goals.” He imagines developers, for instance, deploying a mixture of electric air source heat pumps and natural gas heating that reduces overall emissions in a new building.

CEE’s Bull said ECO Act represents an achievement of sorts in a “purple” state, bridging the rural-urban divide, bringing together unions, environmentalists, and businesses in a rare agreement on a piece of legislation that comes at the at a time of fundamental change in the nation’s energy infrastructure.

Wind and solar investments dominate the energy landscape. The state’s utilities looked poised to move beyond getting more than half their energy from renewables in just the next few years. However, The Conservation Improvement Program is a reminder that cutting consumption makes the transition faster to a much cleaner energy grid.

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