Significant changes to our energy system are underway. Renewable energy, energy storage and other distributed energy resources are cost-competitive with traditional resources such as coal, natural gas and nuclear in certain states. These new resources, in addition to a shift towards electrification and changes in consumer preferences, are poised to transform the energy system landscape in Midwest states.
Federal, state and local lawmakers are also exploring various tools to facilitate decarbonization while ensuring the affordability and resilience of the energy system. One key tool in facilitating this transition and effectively planning for a rapidly changing energy landscape is a state energy plan. A state energy plan allows a state to convene stakeholders, outline a vision and implement a plan that aligns energy policies, programs and initiatives with statewide policy objectives. MEEA asserts that at the heart of an effective state energy plan must be a focus on the lowest-cost energy resource available to many states, energy efficiency.
Over the course of the past year, MEEA devoted strategic reserve funding to monitoring state energy planning efforts in the Midwest, identifying best practices and strategies and talking to key stakeholders about their lessons learned and recommendations. In fall 2020, MEEA interviewed coordinators of active and prospective state energy plans in five states and supported state energy planning efforts in Wisconsin and Missouri. MEEA synthesized initial findings into a high-level brochure on the basic components and benefits of a state energy plan, as well as the ways it can contribute to overarching policy objectives such as environmental protection, equity, economic development and energy system resilience.
Why State Energy Plans are Still Relevant: A Brief History and Update on the Midwest
Nine of 13 states in MEEA’s territory have developed a state energy plan in the last two decades. Plans from 2005-2010 were primarily focused on energy independence to reduce reliance on foreign sources of fuel by developing in-state energy resources. During this timeframe, states began to adopt energy efficiency policies, such as energy efficiency portfolio standards, authorizing utilities to offer programs that deliver more benefits to ratepayers and the energy system than they cost. These policies were a statement from policymakers across the Midwest that energy efficiency is a priority for energy service and is aligned with priorities to improve states’ economies, reduce dependence on fuel imports and reduce energy bills.
New planning processes were spurred in the last decade as attention turned to emerging technologies— i.e., renewable energy, storage, electric vehicles—and a public interest in decarbonization. The impetus for current state energy planning in Illinois, Michigan and Wisconsin are now explicitly decarbonization and environmental justice, for example.
For contrast, other states, such as Missouri, have not issued a decarbonization goal, though many of the benefits sought through their plan are similar—management of impending energy challenges, diversity of energy resources, and resilient, affordable infrastructure. Other states, namely Kansas and Iowa, are likely to develop and revisit their state energy plans as well for different reasons. In Kansas, a bill introduced in the 2021 session aimed to create a task force to develop a state energy plan, a recommendation from rate studies ordered by the legislature to understand the state’s high energy costs relative to neighboring states. While the bill did not advance beyond committee, it can still be considered next session.
In Iowa, the Iowa Economic Development Authority—home to the state’s energy office and energy center—is likely to update their state energy plan in the coming year. A provision included in the state’s tax omnibus, passed this session, creates a new Energy Infrastructure Revolving Loan Program that requires projects funded to contribute to the state’s energy plan and the energy office’s policy goals.
In conclusion, state energy planning is increasingly relevant across the Midwest, although often prompted for different state-specific issues and policy objectives.
Energy Efficiency: A Foundation of a State Energy Plan
Demand-side management is among the suite of viable solutions to challenges presented by market-driven electrification and the variability of renewable resources. We must prioritize reducing energy waste in the building stock and investing in technologies that enable grid flexibility, regardless of fuel source. For customers residing in older, substandard housing—like many renters in affordable multifamily housing—targeted efficiency investments are vital to reduce disproportionately high energy bills and address access to efficient housing and technologies.
Utility ratepayer-funded programs, the largest source of investment in energy efficiency, are required to be cost-effective, with the exception of income-qualified programs. Often not factored in cost-effectiveness are the multitude of non-energy benefits that contribute to meeting policy objectives of state energy plans, including economic development, health and environmental protection.
Programs designed for the commercial and industrial sectors deliver the greatest energy savings and comprise the majority of the emissions reduction potential of energy efficiency. Commercial programs support business attraction and retention and support small businesses by reducing energy costs. With 40% of energy savings of the nation’s energy savings potential residing in the industrial sector, process improvements through strategic energy management and incentives for efficient industrial technologies deliver significant environmental benefits in addition to improvement in productivity.
A growing market for efficient buildings, products and services requires an expansion of the energy efficiency workforce, already the largest workforce of any sector in the clean energy economy, with jobs in nearly every county in the region. Trainings and diverse supplier requirements are an opportunity to expand the workforce while directing opportunities to people of color, an under-represented demographic in the industry.
To sum up, state energy plans must prioritize investment in efficiency behind the meter when it costs less than investment on the supply-side. Doing so provides long-term downward pressure on energy costs and frees resources for all customers, in particular those with the greatest energy burden. Energy efficiency, the lowest cost resource to meet demand in most cases, also addresses emerging challenges in affordability, equity, decarbonization, resilience and workforce development.
MEEA’s team of experts in programs and policies can provide insights on how energy efficiency can be implemented in Midwest states through state energy plans. MEEA will be hosting two webinars this fall focused on: 1) ongoing state energy planning efforts and first-hand perspectives from state stakeholders and 2) examples of energy end-use sector strategies to incorporate energy efficiency. To learn more about state energy plans, ongoing planning processes or to discuss developing an energy efficiency strategy in your state, connect with our Policy Team.