OLR Research Report

January 16, 2008




By: Kevin E. McCarthy, Principal Analyst

You asked for a discussion of “eco-friendly” legislation passed in Connecticut, i.e., legislation that promotes energy efficiency and renewable energy, among other things. You also wanted to know what other states have done in these areas. With regard to the second question, this report focuses on measures that have not been implemented to date in Connecticut.


Over the past ten years, the Connecticut legislature has adopted a wide variety of measures to promote energy efficiency and renewable energy. Many of these measures were established in PA 98-28, the legislation that restructured the electric industry to permit retail competition. Other major legislation was adopted in 2003, 2005, and 2007.

With regard to energy efficiency, the legislature has required electric companies to establish conservation programs funded by a charge on electric bills, established energy efficiency requirements for various appliances, and created tax and other incentives for efficiency. The legislature has also required electric companies to obtain increasing proportions of their power from renewable resources under the renewable portfolio standard (RPS), created the Clean Energy Fund to encourage the development and deployment of renewable energy technologies, and created tax incentives for these technologies. Finally, the legislature has required large construction projects to meet “green building” standards and adopted other “eco-friendly” initiatives.

We have enclosed OLR reports 2005-R-0067, 2007-R-0220, 2007-R-0429, 2007-R-0538, 2008-R-0037, which provide further information on these topics.

Many states have adopted measures similar to those adopted in Connecticut, notably in the areas of conservation and renewable energy funding, renewable portfolio standards, and sales and property tax exemptions for energy efficiency and renewable energy. On the other hand, several states have taken steps that Connecticut has not. These include providing personal income and business tax incentives for investing in efficiency, renewable energy or green buildings; providing tax incentives tied to the production of energy from renewable resources; and establishing research and development agencies. In addition, several states have established more aggressive RPS requirements or building code energy efficiency standards than Connecticut has.


Utility Conservation Programs

PA 98-28 requires the Department of Public Utility Control (DPUC) to assess a charge of 0.3 per kilowatt-hour to fund energy conservation programs through the Energy Efficiency Fund. The electric companies must develop a comprehensive plan to promote cost-effective conservation programs and programs to develop more energy-efficient products. The companies must implement the plan as approved by DPUC.

Currently, the primary residential energy conservation subsidy program is the Smart Living Catalog, which offers energy-efficient products at a substantial discount over retail. The catalog offers a wide variety of products, including lighting; heating, ventilation, and air conditioning; and thermostats. It also offers water efficient products. The companies offer a wide range of conservation programs for commercial, industrial, and municipal customers. The websites for Connecticut Light & Power's residential and business programs are and, respectively. For United Illuminating, they are and, respectively.

By law, natural gas companies had to develop annual conservation plans, but prior law did not provide a funding mechanism. PA 07-242 requires that the plans be funded by the growth in the utilities gross receipts tax in each fiscal year over the amount contained in the revenue estimate in the adopted state budget for that year, subject to a $10 million per year cap. The act also establishes a fuel oil conservation program. Under the act, funding for this program comes from the excess in revenue from the petroleum products gross receipts tax sales above the 2006 revenue, subject to a $10 million annual cap. (PA 07-1, June Special Session, reduced the limit to $5 million per year starting in FY 09.)

Appliance Energy Efficiency Standards

PA 04-85 requires DPUC to establish, by regulation, energy efficiency standards for specified heating, cooling, and lighting, and other types of products. The products include, among other things, large packaged air conditioning systems, and commercial heaters, refrigerators and freezers, and clothes washers. PA 07-242 establishes energy efficiency standards for various commercial products. These include certain medium voltage transformers, bottled water dispensers, and commercial hot food holding cabinets. In most cases, the standards go into effect January 1, 2009.

Tax Incentives for Energy Efficiency

PA 05-02 and PA 05-4 of the October 25, 2005 special session temporarily exempted various energy efficiency products from the sales tax. The exemption applied to: (1) insulation, programmable thermostats, water heaters and water heater blankets, window film, window and door weather strips, and caulking; (2) natural gas and propane furnaces and boilers that meet federal Energy Star standards; (3) windows and doors that meet federal Energy Star standards; (4) oil furnaces and boilers that are at least 85% efficient; and (5) ground-based heat pumps that meet the minimum federal efficiency rating. PA 07-242 (1) makes the exemption permanent, (2) makes oil furnaces and boilers that are 84% efficient eligible for this exemption, and (3) permanently exempts compact fluorescent light bulbs from the sales tax.

Renewable Portfolio Standard

PA 98-28 required electric companies and competitive suppliers to obtain part of the power they procure for their customers from renewable resources under the state's renewable portfolio standard (RPS). They must get part of this power from “class I” resources such as solar or wind energy, some types of biomass, or fuel cells. They must obtain an additional proportion of their power from “class II” resources, which includes municipal solid waste and most types of biomass projects. Under prior law, both proportions increased over time, adding up to 10% by 2010. PA 07-242 increases the RPS for class I resources to 8% starting in 2011, with further increases in subsequent years, to 20% in 2020 and thereafter. The act continues to require the company or supplier to get an additional 3% of its power from class I or class II resources each year.

PA 05-1, June Special Session, additionally required the electric companies and suppliers to get part of their power from class III resources as part of the RPS. Originally, these resources were (1) electricity produced by cogeneration (combined heat and power) systems developed at commercial and industrial facilities and (2) electricity savings from conservation and load management programs at these facilities that began on or after January 1, 2006. PA 07-242 expands these resources to include (1) systems that recover waste heat or pressure from commercial and industrial processes installed on or after April 1, 2007 and (2) electricity savings from residential conservation programs that started on or after January 1, 2006.

Clean Energy Fund

PA 98-28 established the Clean Energy Fund, which receives 0.1 cents per kilowatt-hour (kWh) sold in the state by electric companies and competitive suppliers. The fund supports a wide range of renewable energy programs, encouraging growth in both renewable energy supply and demand. Further information about the fund's programs is available at

Residential PV Rebate Program. This program offers rebates for customers who install photovoltaic (PV) systems on their homes. The incentives are available only through participating installers that have been designated by the Clean Energy Fund. Systems may be of any size but must be connected to the electric grid. The program offers an incentive of $5 per watt for the first 5 kw of system and installation costs, with a maximum rebate of $25,000 per household. Homes can have one to four family residences.

Other Programs. The Clean Energy Fund, in collaboration with SmartPower, a nonprofit organization, administers the Connecticut Clean Energy Communities Program. The program encourages municipalities to seek to obtain 20% of their electric consumption from renewable resources by 2010. Municipalities that adopt this goal and meet certain benchmarks, such as having 100 residents enroll in the “green options” program described above, are eligible for a free PV or other clean energy system worth at least $10,000.

The Community Innovations Grants Program, initiated in June 2006, is a pilot program that provides eligible municipalities with a $5,000 block grant to support public awareness and education projects that promote renewable energy. This program aims to identify creative ways

of promoting and supporting renewable energy in Connecticut. The program is open to the first 40 Connecticut municipalities that commit to the 20% by 2010 campaign.

The Operational Demonstration Program provides funding for early stage clean energy projects that rely on the innovative use or application of renewable energy resources or technology. Funding is available to demonstrate new technologies or technology applications of renewable energy generation resources including wind, solar, fuel cells, wave power, biomass, landfill gas resources, certain types of hydropower, and other renewable resources and technologies.

Renewable Energy Tax Incentives

Under prior law (CGS 12-81) municipalities could exempt residential solar energy systems from the property tax. PA 07-242 requires, rather than allows, municipalities to exempt these systems, but limits the exemption to systems installed on or after October 1, 2007. PA 07-242 also requires municipalities to exempt any passive or active solar water or space heating system or geothermal energy resource, in any type of building, installed on or after October 1, 2007.

PA 07-242 exempts from the sales tax (1) solar electric and space and water heating systems and related equipment and installation services, (2) geothermal systems and related equipment and installation services, and (3) ice storage systems used for cooling and related equipment and installation services for utility customers billed on time-of-use rates.

Companies engaged in the research, design, manufacture, sale, or installation of solar collectors and other alternative energy systems are exempt from the corporation business tax under certain circumstances. To be exempt, the company (1) must derive at least 75% of its gross revenues from such activities, (2) must have gross annual revenues under $100 million, and (3) cannot be owned or controlled by another company.

Other Renewable Energy Initiatives

Net Metering. PA 98-28 required electric companies and competitive suppliers to provide a credit for the power produced by residential customers in one- to four-unit buildings who generate electricity from class I renewable resources. It requires electric companies to install metering equipment for such customers. The equipment must measure the amount of electricity the customer consumes, the amount he produces, and the difference between these amounts. The electric company or supplier must, in effect, pay the customer its retail rate for the power he produces. PA 07-242 expands these provisions to cover all customers with generation capacity up to two megawatts. It provides for credits to customers who generate more power than they use in a given billing period, with annual reconciliation in which the customer is paid for any excess production at the avoided wholesale cost.

Green Option. PA 03-135 requires electric companies to offer their customers a “green option” in which the proportion of power coming from renewable resources exceeds the RPS.

Project 100. CGS 16-244c requires electric companies to enter into contracts running at least ten years for at least 100 megawatts (a megawatt is 1,000 kilowatts) of Class I renewable capacity. The renewable energy generators selected under this program will receive a price premium of 5.5 per kwh in addition to their costs. The selected generators must have (1) gone into operation after 2003, (2) received funding from Connecticut's Clean Energy Fund and (3) a generating capacity of at least one megawatt. PA 07-242 increases the contract amount to 125 megawatts for the period October 1, 2007 to October 1, 2008 and 150 megawatts starting October 1, 2008. Further information about this program is available at

Distributed Resources Incentives. PA 05-1, June Special Session creates incentives for customers for installing “distributed resources” on their premises. These resources include small- and medium-size generating facilities, which could include renewable energy facilities. The incentives include capital- and operating-cost subsidies and the provision of long-term financing. The act also provides low-interest financing for distributed resources. Capital costs and project-development costs are eligible for financing and the maximum total amount of financing for projects under this program is $150 million.

Further information about these incentives can be found on DPUC's website,

Municipal Grant Program. PA 07-242 requires Connecticut Innovations Inc., (CII) to establish a municipal renewable energy and efficient energy generation grant program. CII must make grants under the program to municipalities to purchase and operate, for municipal buildings, (1) renewable energy sources, including solar energy, geothermal energy, and fuel cells or other energy-efficient hydrogen-fueled energy or (2) energy-efficient generation sources, including cogeneration units that are at least 65% efficient. CII must give priority to applications for disaster relief centers and high schools. Each grant must make the cost of purchasing and operating the generation source competitive with the municipality's current electricity expenses. The act authorizes up to $50 million in bonding for the program.

Green Buildings

PA 06-187 requires large state facility construction projects funded on or after January 1, 2007, to meet specified energy and environmental standards. By that date, the Office of Policy and Management (OPM) secretary must adopt regulations adopting construction standards that meet or exceed the silver LEED rating or an equivalent standard. The alternative standard must at least include a two globe rating under the Green Globes USA design program. The secretary, in consultation with the public works commissioner and the Institute for Sustainable Energy, must exempt a facility from the regulations if the institute finds that the cost of compliance significantly outweighs the benefits of compliance. PA 07-242 extends the requirements to the following types of projects with at least $2 million or more in state funding: (1) renovations to state facilities approved and funded on or after January 1, 2008, (2) new school construction projects authorized by the legislature on or after January 1, 2009 that cost $5 million or more, and (3) school renovation projects authorized by the legislature on or after that date costing at least $2 million. The act also requires all of these facilities to exceed the current building code energy efficiency standards by at least 20%.

PA 07-242 authorizes $30 million in bonds for CII, which administers the Clean Energy Fund, to fund renewable energy and cogeneration projects in state buildings. To be eligible, the building must be certified in the LEED program or in the process of being certified.

Finally, PA 07-242 requires the state building inspector and the Codes and Standards Committee to amend the State Building Code to require (1) buildings costing $5 million or more built after January 1, 2009 and (2) renovations costing $2 million or more starting January 1, 2010 to meet the LEED silver standard or its equivalent. The requirements apply to private and public sector projects, other than residential buildings with up to four units. The act requires the inspector and the committee to waive these requirements if the Institute for Sustainable Energy finds that the cost of compliance significantly outweighs the benefits.

Other Initiatives

PA 07-242 requires electric companies, with the approval of DPUC, to engage in “integrated resources planning” in which the need for electricity is first met by conservation.

The act requires the Energy Conservation Management Board (ECMB) to evaluate and approve technologies that can be deployed by “Connecticut electric efficiency partners” (including electric company customers and energy management companies) to reduce electric demand. These technologies can include demand-side measures such as conservation and supply-side measures such as renewable generation and emergency generators that can be centrally dispatched, as well as high efficiency natural gas and oil furnaces. ECMB must have filed its evaluation with DPUC by October 15, 2007. DPUC must approve or modify the analysis by that date.

Starting April 1, 2008, anyone can seek DPUC approval and funding as a partner by showing adequate financial resources, managerial ability, and technical competence. The application must describe the services and DPUC-approved technologies the partner will buy or provide and the amount of funding it is seeking. DPUC must determine how much of the cost of an approved application the customer will bear and how much will be funded by ratepayers. DPUC must ensure that approved applications achieve a two-to-one payback ratio. No more than $60 million in ratepayer funds can go to this program each year.

The act also requires DPUC to develop a low-interest loan program to finance the customer's share of the capital cost of the technologies. It can provide these loans through a mechanism in existing law, under an agreement with the Connecticut Development Authority, or through an entity chosen by competitive bid. The financing agreements entered into with the Connecticut Development Authority cannot exceed $10 million dollars.


Energy Efficiency

Appliance Efficiency Standards. Connecticut has among the most comprehensive appliance efficiency standards in the country. However, several states have standards that do not have a counterpart here. For example, California, New York, and Oregon have standards for several types of consumer electronics and New Jersey is developing such standards. Maryland and New York are developing standards for residential gas furnaces.

Energy Efficiency in the Building Code. Both California and Connecticut have extensive energy efficiency provisions as part of their state building codes. But, California's code goes beyond Connecticut's by:

1. being more comprehensive, e.g., by setting lighting efficiency standards for residential buildings and “cool roof” requirements for commercial buildings;

2. giving energy savings produced during peak demand periods a higher value than savings during off-peak periods under the performance approach for commercial buildings;

3. requiring increased use of natural lighting in certain low rise commercial buildings; and

4. allowing local governments to adopt and enforce their own energy standards that are more stringent than the state standards.

Tax Incentives. Arizona provides an individual income tax credit to the original owner of a new energy efficient home. The credit may be claimed in the year that the house is sold. It is equal to 5% of the sales price excluding commissions, taxes, and certain charges, up to a maximum of $5,000.

California allows taxpayers to deduct the interest paid on loans used to buy purchase energy efficient products or equipment for their residence. The deduction is for loans from a publicly-owned utility company for the purchase of energy-efficient heating, ventilation, air-conditioning, lighting, solar, advanced metering of energy usage, windows, insulation, zone heating products, and weatherization systems. Customers of publicly-owned utility companies that do not offer customer financing may be able to deduct the interest from a home equity or home improvement loan used to purchase energy efficient products and equipment.  

Montana allows taxpayers to deduct part of the cost of a capital investment in a building that promotes energy conservation against the corporation tax. If the building is a residence, up to $1,800 may be deducted; if the building is non-residential, up to $3,600 may be deducted.

Renewable Energy

Clean Energy Funds. As noted above, Connecticut's Clean Energy Fund offers rebates to customers who install PV systems. California's Energy Commission has a broader program that offers rebates to customers who install fuel cells using renewable energy, wind systems, and solar thermal electric systems, as well as PV systems. The program provides a rebate of $1.50 to $3.20 per watt of installed capacity, depending on the type of technology. The rebate is 25% higher for systems installed at affordable housing projects. The program is funded by a charge on the bills of electric companies. Further information is available at

The commission also administers a $400 million program to work with homebuilders and the building industry to accelerate the growth of PV systems in new subdivisions. The program is part of the state's Million Solar Roofs initiative, which has the goal of creating 3,000 megawatts (the equivalent of five conventional power plants) of solar electricity by the end of 2017. Part of the program's funding will be allocated to special incentives for low-income and affordable housing.

Renewable Portfolio Standards. Many of the states that have restructured their electric industries have adopted RPS provisions that are broadly similar to Connecticut's. Currently, 17 states have mandatory renewable portfolio standards, while Illinois, Minnesota, and Vermont (which has not restructured its industry) have similar goals. The definitions of what counts as renewable energy varies by state, often reflecting locally available resources.

Several states have more rigorous RPS requirements than Connecticut. Maine's restructuring law requires that 30% of the electricity sold in the state come from renewable resources. California's restructuring law requires electric companies to obtain 20% of their power from renewable resources by 2017. In light of the companies' performance in meeting this requirement, the state's energy and public utilities commission have set a goal meeting the 20% standard by 2010.

Several states have additional requirements for specific renewable resources. For example, Arizona requires that solar energy account for at least half of the power used to meet its RPS. Illinois requires that wind account for at least 6% of the power sold by electric companies.

Financial Incentives for Renewables. Every state except Arkansas and West Virginia provides one or more financial incentives for renewable energy. Detailed descriptions of these incentives are available in the U.S. Department of Energy's Database of State Incentives for Renewable Energy and Efficiency, available online at As noted above, Connecticut provides a number of incentives for renewable energy systems. On the other hand, it does not provide personal income tax or corporation tax incentives or state production incentives.

Several other states provide such incentives. For example, Arizona provides tax credits for businesses and other non-residential customers who install solar energy technologies. The tax credit, which may be applied against corporate or personal taxes, is equal to 10% of the installed cost of qualified solar energy devices, and applies through December 31, 2012.  The maximum credit per taxpayer is $25,000 for any one building in the same year and $50,000 in total credits in any year. Massachusetts allows corporations to deduct expenditures from their income for corporation tax purposes paid or incurred during a taxable year for a solar or wind powered climate control unit or water heating unit, including installation costs. New Mexico has a 30% personal income tax credit (up to $9,000) for unincorporated businesses and individuals who purchase and install certified solar thermal and photovoltaic systems. Oregon provides a Business Energy Tax Credit for investments in renewable energy resources, among other things. The credit is for 50% of the total eligible expenditures, with a maximum credit of $10 million. The credit is taken over five years at 10% each year. Any unused credit can be carried forward up to eight years. Those projects with eligible costs of $20,000 or less may take the credit in one year. The credits are available until January 1, 2016. The credit has a “safe harbor” provision that allows a project owner to transfer the credit to a pass-through partner in return for a lump-sum cash payment, allowing owners without tax liability to benefit from the credit.

Oregon also provides a business tax credit for manufacturers of renewable energy systems. The credit equals 50% of the construction costs of a facility that will manufacture renewable energy systems, and includes the costs of the building, excavation, machinery, and

equipment. The credit can also be applied to the costs of improving an existing facility which will be used to manufacture renewable energy systems. The credit is taken over the course of 5 years, at 10% each year, and cannot exceed $10 million.  

Several states provide incentives that are tied to the amount of energy produced by a renewable energy system, with the incentives usually provided through utilities. (In Connecticut, Project 100 in effect provides a production credit funded by the electric companies.) However, several states provide such incentives directly. For example, California provides supplemental energy payments to renewable generators for the above-market costs of eligible procurement by California's retail sellers as they fulfill their RPS obligations. As of August 2007, total funding available was approximately $734 million.

Florida has a tax credit to encourage the development and expansion of renewable energy facilities in the state. This corporate tax credit is equal to 1.0/kwh of electricity produced and sold by the taxpayer in a given tax year. For facilities placed in service after May 1, 2006, the credit is based on the sale of the facility's entire electrical production. For an expanded facility, the credit is based on the increase in the facility's electrical production that is achieved after May 1, 2006.  The credit is available for the electrical, mechanical, or thermal energy produced from hydrogen, biomass, solar energy, geothermal energy, wind energy, ocean energy, waste heat, or hydroelectric power. The credit can be claimed for electricity produced and sold from January 1, 2007 through June 30, 2010. The credit has a five-year carry-forward. The combined total amount of credits which can be granted under the program is limited to $5 million per fiscal year.

Minnesota offers a payment of 1.0 to 1.5/kwh for electricity generated by new hydroelectric and wind facilities and on-farm anaerobic manure methane digesters. Qualifying projects receive payments, which are funded by the state's Renewable Development Fund, for 10 years. New York is unusual in combining a grant for anaerobic digesters with a production incentive. Owners of such digesters receive a grant of $500 per kilowatt of capacity, up to $350,000, or 50% of project cost, whichever is less. They also receive a 10 cents/kWh production payment for new systems or a 2 cents/kWh maintenance payment on production from systems installed or substantially upgraded since January 1, 2003. The application period ends May 30, 2009 and $11 million is available to fund incentive payments, up to $1 million per system.

Solar Easements and Related Provisions. Unlike Connecticut, 31 states have laws that explicitly permit the creation of solar easements, i.e., agreements between neighbors that ensure that the owner of solar technologies will retain access to direct sunlight on their property. Minnesota, Montana, and Nebraska similarly allow easements to protect access to wind. Wisconsin allows property owners with wind or solar energy systems to apply for municipal permits guaranteeing unobstructed access to wind or solar resources (.Wis. Stat. 66.0401 et seq.).

Several states additionally prohibit restrictions on solar access. For example, Florida (Fla. Stat. 163.04) forbids ordinances, deed restrictions, covenants, or similar binding agreements from prohibiting solar equipment use. Indiana (Ind. Code 36-7-2-1 et seq.) bars planning and zoning authorities from prohibiting or unreasonably restricting the use of solar energy.

Other Initiatives

Green Buildings. Several states, unlike Connecticut, provide financial incentives for developers of “green buildings.” New Mexico has personal and corporate tax credits for sustainable buildings. Buildings can meet these standards by using various approaches, including using renewable energy, energy efficiency, and water conservation. The credits apply to both commercial and residential buildings, and vary by how “green” the building is. For example, new commercial construction that meets the LEED silver standard is entitled to a credit of $3.50 per square foot for the first 10,000 square feet, $1.75 per square foot for the next 40,000 square feet, and $.70 for each square foot between 40,000 and 500,000 square feet.

Maryland allows counties and municipalities to provide a credit against the property tax for buildings which achieve at least a Silver rating under LEED standards or that meet comparable green building guidelines or standards approved by the state.   The counties or municipalities may determine the credit's amount and duration and the criteria and qualifications for receiving it.

New York's Green Building Tax Credit can be applied against business and personal income taxes. The incentive applies to owners and tenants of eligible buildings and tenant spaces that meet certain "green" standards. To be considered “green”, new construction must use no more than 65% of energy use allowed under the state building code; rehabilitated buildings must use no more than 75% of the energy allowed under the code. The buildings must meet other standards, e.g., addressing indoor air quality. Credits are also available for investments in fuel cells, photovoltaic systems, and new air conditioning equipment using refrigerants that do not deplete the ozone layer. Applications can be made until 2009 and taxpayers have until 2014 to claim the credits. Unredeemed credits can be transferred to a new owner or tenant.

Oregon gives homeowners and renters a credit against their income taxes if they purchase premium-efficiency appliances or renewable energy systems for their homes or alternative fuel vehicles and charging or fueling systems.

Utility Resources Procurement. In 2003, the California Public Utilities Commission adopted the state's Energy Action Plan. Among other things, the plan requires electric utilities to follow a “loading order” in meeting the state's needs. They must first use conservation and demand response measures to minimize increases in electricity and natural gas demand. Next, they must invest in renewable resources and distributed generation. Finally, they can use conventional resources to meet remaining needs. As noted above, PA 07-242 has somewhat similar provisions, which are being implemented.

Research and Development. While Connecticut's Clean Energy Fund helps commercialize new renewable energy technologies, it does not conduct research and development. In contrast, the New York State Energy Research and Development Authority (NYSERDA) conducts research on renewable energy and energy efficiency, including research and development in the transportation sector, as well as administering the state's electric and gas conservation programs. NYSERDA derives its funding from an assessment on the sales of the state's investor-owned electric and gas utilities, voluntary annual contributions by the New York Power Authority and the Long Island Power Authority, and funding from corporations. NYSERDA's Website is

The North Carolina Solar Center participates in several national and statewide programs related to renewable energy, including the National Million Solar Roofs Program. It works with schools across the state to design and install PV systems on campus. The center also administers a continuing education program for professionals seeking information and hands-on training in renewable energy technologies and sustainable building practices. The program offers interdisciplinary training in solar thermal, PVs, wind, residential green buildings, and biomass and biofuel technologies. Further information is available at