In our last few posts we started walking through the EPA’s calculation of state goals for CO2 emissions, covering Building Block 1, Building Block 2 and Building Block 3. In this post, we’ll conclude the walk-through with Building Block 4: Energy Efficiency.

Like Building Block 3, energy efficiency can be thought of as a way to meet energy needs with zero emissions. Energy efficiency is the fourth and final building block included in the EPA’s proposal. When we add this to the other three Building Blocks it yields the state’s final emissions rate of 702 lbs/MWh (states are also subject to an interim goal which we’ll describe in a later post).

Arizona was actually recognized in the EPA’s proposal as a top-performing state in terms of achieving energy efficiency savings. This is largely attributed to the Arizona Corporation Commission’s Energy Efficiency Resource Standard, which applies to investor owned utilities such as APS and TEP. SRP has also set ambitious energy savings goals as part of its Sustainable Portfolio Principles. Given Arizona’s past performance and ambitious policy goals, the EPA anticipated that energy efficiency can lower electricity use in the state by about 1.5% each year (as a percent of the prior year’s electricity sales). 1.5% annual savings is a relatively high amount, although Arizona utilities such as APS and SRP have surpassed it in recent years. Yet, there is some concern about whether this level of savings can be sustained and questions about what new types of energy efficiency measures might be needed to do so (we’ll explore these questions in later posts).

Overall, Arizona ranks 15^th out of states in terms of the overall EE savings expected by EPA in 2030 (based on cumulative annual savings as a percent of retail sales).

This level appears to be somewhat higher than what Arizona’s current policies require. While Arizona utilities currently have one of the most ambitious EE savings goals of any in the country, the state’s existing policies and utility plans expect EE savings to level off after the year 2020 and thus their effect on helping the state meet EPA’s requirements will be diminished unless changes are made. In order to achieve or surpass the EPA’s expectations for Block 4, Arizona would need to continue the current trajectory of EE savings beyond the 2020 timeframe.

Written by Eddie Burgess, Energy Policy Innovation Council