Policy and Process Factors Impacting Commercial Building Energy Efficiency in Pennsylvania and New Jersey

Publication Title: Policy and Process Factors Impacting Commercial Building Energy Efficiency in Pennsylvania and New Jersey

Consortium Member(s): The Pennsylvania State University

Project Contact: Shari Shapiro

Date: October 01, 2011

The purpose of this study was to identify the most significant policy and legal-related process factors effecting energy efficiency (“EE”) in commercial buildings in the Greater Philadelphia area. The research focused on policy areas such as the structure of government, specific laws and regulations, government funded or mandated incentives and other financing mechanisms. Processes included legal-related factors impacting EE transactions, such as contracts, leases, public bidding requirements, and accounting standards.

Government policy and legal-related processes can have both a positive and a negative impact on EE. Some policy and process levers, like mandates, codes, incentives and appliance standards, are designed to directly address the “efficiency gap”—the gap between a customer’s actual investments in EE and those that appear to be in the consumer’s best interest. Other policies and processes act as barriers to EE, either directly, by prohibiting EE technologies or methods from being implemented, or indirectly by imposing additional costs, legal requirements or contradictory signals. Similarly, legal-related processes that were not designed for EE act as barriers through increased transaction costs, reduced valuation of EE assets and similar unintended consequences.

The study revealed that between Pennsylvania and New Jersey, the state and local governments have implemented almost all of the policy levers that advocates have called for to increase EE. For example, both Pennsylvania and New Jersey have up-to-date building and energy codes. The states have invested hundreds of millions of dollars collected from utility ratepayers in EE incentive programs. New Jersey has experimented with alternative rate structures for utilities. Therefore, the primary recommendation of this study is to conduct further legal and market research to compare the effectiveness of the New Jersey and Pennsylvania regulatory initiatives designed to address the efficiency gap, including the incentive and ratemaking efforts.