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States' Critical Role in Fostering Energy Efficiency Businesses

For businesses to go green, it doesn't just take a smart CEO and savvy business plan. It also takes strong state leadership to ensure that the best incentives, policies, and programs are in place to help businesses improve both the sustainability and profitability of their companies.

Much of what makes a company more sustainable and profitable has to do with smart energy management. Energy is one of the biggest expenses for business owners today, and will only become a greater financial burden as energy prices continue to escalate. The more businesses can do to lower energy use and costs through greater energy efficiency, the better prepared they will be to weather economic storms and thrive and grow.

Today, the American Council for an Energy-Efficient Economy releases its annual State Energy Efficiency Scorecard report that ranks all 50 states and Washington, D.C. on their progress toward advancing energy efficiency policies across a wide array of sectors -- from buildings to industry -- that help businesses lower energy use and costs, as well as create a healthy energy efficiency industry.

This year's scorecard shows that despite federal inaction on energy policy, many states are taking the lead to help businesses reduce energy use and costs, and boost business development by embracing stronger energy efficiency measures.

California again ranked No. 1 -- the state has had a four-year run at the top of our rankings. California continues to advance a wide array of energy efficiency policies affecting utilities, transportation, building codes, combined heat and power systems, state government initiatives, and appliance efficiency standards, many of which provide direct benefits to businesses.

For example, utilities throughout California provide a variety of incentives for businesses to upgrade their facilities, improve performance, and lower energy costs. California's commitment to ensuring utilities meet long-term efficiency goals means that businesses can count on these incentive opportunities in their future planning. In addition, California's utility regulations make it easier for businesses to develop combined heat and power (CHP) systems, which generate electricity on site while recovering excess heat to meet thermal needs such as space conditioning and manufacturing processes, substantially lowering their energy costs.

But California's lead is diminishing, with Massachusetts now nipping at California's heels. For example, Massachusetts has improved its transportation policies and has approved a plan to more than double the annual energy savings from utility energy efficiency programs.

Some of our most-improved states, such as Arizona, Utah, and New Mexico, have moved up in the ranks this year by setting annual energy-saving goals for power providers. What this does is require utilities to meet these goals in a number of ways, such as providing financial incentives and rebates to businesses to make energy-saving improvements to offices and industrial facilities. Or by offering tiered electricity rates so that companies using less energy than the industry average are rewarded through lower energy bills.

All of these steps states are taking not only help businesses lower energy use, reduce risk, and save money, but they also help create a thriving energy efficiency industry. It takes a lot of construction workers, contractors, designers, engineers, and energy service professionals to help businesses take a bite out of energy costs. For example, in a recent ACEEE report on energy efficiency opportunities in Ohio,  we estimated that a strong suite of energy efficiency policies in the state would create more than 30,000 net jobs by 2025 ("net" means jobs created in energy efficiency minus the jobs lost because energy demand is lower).

Not all states are winners this year in our scorecard. North Dakota and Mississippi are at the bottom of our rankings because neither state is doing much to advance energy efficiency. Texas and New Hampshire dropped this year in ranking because they have done little recently to scale up their efforts, allowing other states to pass them. And several states  -- Connecticut, New Jersey, New York, New Hampshire, and the District of Columbia -- went so far as to raid millions of dollars of energy efficiency funds in an attempt to balance state budgets or reduce deficits. This short-sighted approach to state spending will only serve to throw businesses (and consumers) into greater energy debt and stunt the development of a thriving energy efficiency marketplace.

So how did YOUR state rank? Should you be thanking your state leaders for their commitment to smart energy efficiency policy, or pushing them to do more? The future of your business may depend on it.

Steven Nadel is the executive director of the American Council for an Energy-Efficient Economy, a non-profit research organization that works on programs and policies to advance energy efficient technologies and services.

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Randy Son of Robert.

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