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My name is Kateri Callahan, President of the Alliance to Save Energy, a bipartisan, nonprofit coalition of business, government, environmental, and consumer leaders committed to promoting energy efficiency worldwide to achieve a healthier economy, a cleaner environment, and energy security. The Alliance was founded in 1977 by Senators Charles Percy (R-IL) and Hubert Humphrey (D-MN). The current Chair is Senator Byron Dorgan, and Vice-Chairs are Senators Susan Collins, Jeff Bingaman, and James Jeffords and Representative Ed Markey. More than 75 companies and organizations currently support the Alliance as Associates. The Alliance has a long history of researching and evaluating federal energy efficiency programs. We also have a long history of supporting efforts to promote energy efficiency based on partnerships between government and business and between the federal and state governments. Energy efficiency programs at the Department of Energy (DOE) are largely voluntary programs that further the national goals of broad-based economic growth, environmental protection, national security, and economic competitiveness. The Office of Energy Efficiency and Renewable Energy does this through the development of new energy-efficient technologies in cooperation with the national laboratories, by working with the private sector to deploy those technologies, and by fostering energy efficiency activities in the states. I appreciate this opportunity to comment on the fiscal year 2005 budget for energy efficiency programs at DOE. Why these programs are needed: Our nation in recent years has been gripped by a series of energy crises. For the third winter in four years, natural gas spot prices are more than twice the price of just a few years ago. They are not expected to come down again. The high prices have already caused plant closings and loss of manufacturing jobs, and have made many low-income homeowners unable to pay their heating bills. Last September, the National Petroleum Council, in a report requested by the Secretary of Energy, concluded that supply from traditional North American production will not be able to meet projected natural gas demand, and that “greater energy efficiency and conservation are vital near-term and long-term mechanisms for moderating price levels and reducing volatility.” A recent study by the American Council for an Energy-Efficient Economy found that reduced demand for natural gas due to energy efficiency measures could lower natural gas prices by 20 percent in the next few years. Recently 70,000 Californians faced a short blackout when unseasonably hot weather created unexpected electricity demand. When a series of similar rolling blackouts and electricity price spikes hit California in 2000-2001, the state undertook a massive electricity efficiency outreach campaign that reduced electricity use by 7 percent in just one year, and thus helped avoid further shortages. This past year marked the 30th anniversary of the OPEC oil embargo, and we now import three times as much oil from the Persian Gulf as we did then. We cannot produce our way to oil independence, even if we drilled in the Arctic National Wildlife Refuge. And we remain – and perhaps are even more – in jeopardy from price and supply volatility. Gasoline prices are at their highest dollar level ever (not adjusting for inflation), in the third price spike in a year. We must find ways to make our transportation system more fuel-efficient. Energy efficiency is now the nation's greatest energy resource—we now save more energy each year due to actions since 1973 to increase energy efficiency than we get from any single energy source. Many of those efficiency improvements have relied on technologies that were developed and deployed in part through DOE programs. If we tried to run today's economy without the energy efficiency improvements that have taken place since 1973, we would need to use about 40 percent more energy than we do now. Imagine what natural gas prices, electricity reliability, and oil imports would be like if our domestic demand were 40 percent greater. A record of success: Federal energy efficiency programs provide enormous economic and environmental returns. A 2001 National Research Council report found that every dollar invested in the 17 DOE energy efficiency research and development (R&D) programs the NRC studied returned nearly $20 to the U.S. economy in the form of new products, new jobs, and energy cost savings to American homes and businesses. Environmental benefits were estimated to be of a similar magnitude. DOE itself estimates that its efficiency and renewables programs will result in major savings, including $134 billion in energy bills, 153 GW of avoided new conventional power plants, 1.9 quads of natural gas, and 213 MMT of greenhouse gas emissions in 2025. Role of DOE: We cannot reap these savings without federal support, as the private sector alone cannot, or will not, make the needed investment—energy R&D spending is the lowest by any major industry and has declined dramatically since the 1980's. The lack of R&D investment is due in part to the uncertainty of energy markets, such as in the partially restructured electricity sector. But there are also major institutional barriers. The buildings industry, for example, is highly segmented, with more than 100,000 builders, mostly small businesses. These companies do not have the resources to do important research in buildings technologies or integration of those technologies. Deployment efforts, including standards, consumer education, and technical training, are equally critical to overcome market barriers to highly efficient technologies. I will mention just three of these barriers: Many appliance purchasers, including home builders and most landlords, do not pay for the energy those appliances use -- and thus have no incentive to purchase efficient products. Energy efficiency is not as apparent to purchasers as other product characteristics. And consumers don't pay the full environmental or security costs of the energy they use. Budget studies and recommendations: A series of reports and bills has supported a substantial increase in funding for DOE energy efficiency programs. In 1997, the President's Committee of Advisors on Science and Technology, Panel on Energy Research and Development, recommended that DOE energy efficiency R&D programs be more than doubled over six years, from $373 to $880 million (the FY 2004 budget for these R&D programs is roughly $550 million). The Bush Administration's 2001 National Energy Policy Report called for expansions in funding for Energy Star, appliance standards, and federal energy management. The Energy Future Coalition and the National Energy Policy Initiative have called for more funding for some of these programs as well. The pending energy bill conference report would authorize $695 million for energy efficiency R&D and $600 million for the Weatherization Assistance Program, State Energy Program, and new state programs in FY 2005. The authorization increases up to a total of $1.625 billion in FY 2008, an increase of 85 percent over the actual FY04 appropriation, not counting additional authorizations for distributed generation and for fuel cells. Summary of the President's Request: The President's overall fiscal year 2005 budget request for DOE energy efficiency programs is $876 million, down $2 million from the FY 2004 appropriation, and almost level with the administration's FY 2004 request. This continues a gradual slide from the $913 million appropriated in FY 2002. Despite three years of emphasis on the need for increased funding for DOE research, development, and deployment (RD&D) programs, including in the President's National Energy Plan and in the current energy bill, the proposed budget has dropped 4 percent before considering inflation. Moreover, within the slow overall decline there are some major changes in priorities. Once again the President has requested major increases for weatherization of low-income homes and for fuel cell vehicle research. The money for those increases was taken from other energy efficiency programs—thus overall RD&D programs in energy efficiency other than the weatherization and state energy grants would be cut 10 percent from FY 2004; if one excludes the long-term FreedomCar fuel cell vehicle program as well, remaining RD&D programs would be cut 17 percent overall in a year. While we fully support the weatherization and fuel cell programs, they do not take the place of core RD&D programs that can have a broader energy savings impact than weatherization and a more certain and more near-term impact than fuel cells. We believe that a substantial increase in support for DOE energy efficiency programs is vital for addressing the critical energy problems facing our nation, and that the proven track record of DOE programs in reducing energy demand provides a solid foundation for such an increase. Thus, the Alliance recommends a doubling of federal support for energy efficiency over the next five years (2005-2009). Specifically, in 2005 we support a 20 percent increase in funding for DOE energy efficiency RD&D programs, as well as the increase requested in the President's budget for weatherization . We recognize that this is a substantial investment, especially at a time of severe budget constraints. But the returns will be large, and the costs of not making the investment—to the economy, to energy security and reliability, and to the environment—would be even larger. This recommendation is consistent with the PCAST report from 1997, and with the authorization levels in the energy bill. This year there is an especially critical need for increased funding for current programs and new initiatives that will reduce consumption of natural gas in the near and long terms. Natural gas is a relatively clean and flexible fuel that is being used increasingly throughout the economy. It also is likely to be the dominant source for hydrogen for some time, should hydrogen-powered fuel cells become a commercial reality. But the current high natural gas prices already are moving manufacturing plants and jobs overseas, causing severe hardships for low-income homeowners, and costing most people in the colder parts of the country hundreds of dollars in increased heating bills. Recent projections suggest the problem could get worse, as North American supplies fail to keep up with rising demand. The specific increases and new initiatives proposed below, therefore, are intended in large part to reduce natural gas demand. In some cases this is done by reducing electricity demand. Reducing electricity use directly impacts natural gas use, as most “peaking” power plants and most new power plants are fueled by natural gas. It is important that these budget increases (and the increases proposed by the administration for weatherization and for fuel cell vehicles) not be taken from other efficiency programs, as most of them also reduce natural gas use and further other national energy priorities. In particular the Alliance opposes deep cuts, such as those to the Industries of the Future (specific) and Insulation and Building Materials R&D programs. Increases needed for current programs • Building Technologies: Of all the DOE energy efficiency programs, Building Technologies has had perhaps the greatest success at reducing energy use. The National Research Council study found that just three small buildings R&D programs -- in electronic ballasts for fluorescent lamps, refrigerator compressors, and low-e glass for windows -- have already achieved cost savings totaling $30 billion, at a total federal cost of about $12 million. Current buildings research programs, such as solid state (LED) lighting, are equally promising. Associated deployment programs, especially equipment efficiency standards, have been necessary both to commercialize the new technologies and to drive the innovation process forward. • Equipment Standards and Analysis : Federal appliance standards already save an estimated 2.5 percent of all U.S. electricity use. Existing and draft standards are expected to save consumers more than 100 quads of energy (more than the total annual U.S. energy consumption in a year) and $180 billion over the next couple of decades. However, a number of standards are years behind schedule and appear stalled. For example, new standards for residential furnaces and boilers should have taken effect in 2002, but DOE has not yet even issued an Advanced Notice of Proposed Rulemaking (ANOPR). The standard is roughly 10 years behind schedule. Similar delays affect current rulemakings for large air conditioners and distribution transformers. There are currently 15 high-priority (and 19 other) rulemakings in progress, along with seven high-priority (and 19 other) test procedures under development. No new rules (other than two test procedures) have been issued in the past three years. In addition, if the consensus standards provision in the energy bill passes, it would add 11 more products to DOE's plate. Additional funding is required to handle this workload expeditiously and effectively. Every day of delay is simply throwing energy and money away. Yet the Administration's budget proposes to reduce this line by 25 percent. This area is a high priority for increased support. The Alliance recommends a $2 million increase over the fiscal year 2004 appropriations level for total funding of $12.4 million. • Residential and Commercial Building Energy Codes : Residential and commercial building codes have the same kind of impact on building envelopes that standards do on appliances. While the codes are implemented at a state level, the states rely on DOE for technical specifications, training, and implementation assistance. There are 15 states that have efficiency codes well below the newest model codes; if those states upgraded their codes, they would save 4.9 Quads of energy, primarily electricity and natural gas. This is a cheap way of boosting the efficiency of buildings across the nation. Additional support is needed under Buildings Technologies for technical assistance that can only be efficiently provided at a national level. Funding is especially needed this year to support work occurring on improved ASHRAE commercial codes. The Alliance recommends a $0.5 million increase for residential codes, for total funding of $1.1 million, and a $1 million increase for commercial codes, for total funding of $1.5 million. • Windows R&D Windows account for fully 15 percent of all building energy use in the U.S. Yet windows have the potential to provide a net energy gain by providing heat and daylight to a building while insulating to reduce the need for heating and cooling. The Windows R&D program has played a critical role in the development and deployment of much more efficient windows technologies, including dual-pane glass, low-E coatings, simulation tools, and efficiency ratings and labels. For a modest investment, these technologies have saved consumers and businesses billions of dollars-worth of energy. New advanced technologies, such as electrochromics and aerogels, as well as more widespread deployment of existing technologies, could save billions more. Yet the program has been cut in recent years. The Alliance recommends a $3 million increase, for total funding of $8 million. • Energy Star: Energy Star is a successful voluntary deployment program that has made it easy for consumers to find and buy many energy-efficient products. For every federal dollar spent, Energy Star produces average energy bill savings of $75 and sparks $15 in investment in new technology. Last year alone, Americans, with the help of Energy Star, saved enough energy to power 20 million homes and avoid greenhouse gas emissions equivalent to those from 18 million cars—all while saving $9 billion. DOE's Energy Star program focuses on windows, clothes washers, refrigerators, dishwashers, compact fluorescent lighting, and room air conditioners (a larger portion of Energy Star is at EPA). Windows and air conditioners have an especially large impact on natural gas use. Additional funding is needed both to add new products and to increase consumer awareness and market penetration of Energy Star products. Energy Star is now recognized by about 56 percent of U.S. households, and nearly 60 percent of these households purchased an Energy Star product within the last year. But some states, notably New York, have shown that awareness can be raised much higher with paid advertising and other pro-active consumer awareness efforts. The President proposed a significant increase, from $3.7 to $5 million, but even more is needed. The Alliance recommends a $3 million increase for total funding of $6.7 million in Weatherization and Intergovernmental Programs. • Building Codes Training and Assistance: The importance of building efficiency codes and of the federal role was discussed above. This account focuses on assistance to states for code implementation. Even in states that have adopted strong codes, compliance remains a serious problem. To strengthen enforcement and compliance, funds are especially needed to provide training for state and local code officials. Funds also are needed for improved tools to help builders and designers comply with the codes. The Alliance recommends a $2 million increase, for total funding of $6.4 million in Weatherization and Intergovernmental Programs. • Federal Energy Management Program : The federal government is the nation's largest energy consumer and energy waster, with Federal agencies using 1 percent of all energy consumed in the US. However, DOE's Federal Energy Management Program (FEMP) has provided critical leadership and coordination to federal agencies. FEMP's efforts have resulted in a 23.6 percent reduction in federal building energy use and billions of dollars in savings for the U.S. taxpayer since 1985. But the federal government still has a long way to go in order to lead by example. Federal energy management is facing a serious crisis because of the lapsed authority to utilize Energy Service Performance Contracts (ESPCs), an essential financing mechanism for implementing efficiency retrofits. Now more than ever, FEMP needs increased support to maintain the technical assistance capacity that agencies need in order to identify and implement energy savings projects, and to be prepared to implement the many changes anticipated in the pending national energy policy legislation. Supporting FEMP results in permanent reductions in government waste. Unlike the other efficiency programs, the savings from FEMP return directly to the federal treasury. The Alliance recommends a $3 million increase, for total funding of $22.7 million. • Energy Information Administration (EIA) End-Use Surveys: At a time of rising and volatile energy prices, and in light of energy supply disruptions over the past few years, policy makers need detailed and up-to-date data on how energy is used in order to accurately evaluate various energy policy options. Congressional staffs, national laboratories and industry use this data to evaluate appliance standards, tax incentives, and R&D spending. Businesses use the data to identify market opportunities, utilities for load forecasting, students for research projects. EIA itself uses the data to project future energy use trends. To develop an environmentally and economically viable energy path for the United States requires knowledge of the many dimensions of the energy economy, including how that energy is being used. Over the last decade, funding for EIA's residential, commercial and manufacturing energy consumption surveys has fallen in real terms by more than $2.5 million. Consequently, EIA has been forced to cancel the Residential Transportation Energy Consumption Survey (RTECS), limit surveys to every four years (rather than three), and drop key questions from the surveys. Continued funding at the current level of $2.2 million could force the EIA to drop another of the three remaining surveys. In order to reverse these cuts, and enable EIA to prepare a special report on the contributions of energy efficiency to the US economy, the Alliance recommends a $3 million increase, for total funding of $5.2 million. New initiatives: • Public awareness campaign: A public education campaign is the quickest way of impacting consumer behavior and reducing natural gas demand. Public education campaigns have had impressive success at reducing energy use. As mentioned above, a concerted campaign in California reduced electricity load and helped avoid expected blackouts in the summer of 2001. A recent campaign in New York educated millions of newspaper readers, TV viewers, and radio listeners on energy efficiency, and (in conjunction with a bounty program) resulted in consumers trading in 160,000 old, inefficient room air conditioners in favor of new Energy Star models. Around the country, Energy Star has achieved high levels of recognition as an energy-efficiency label. The proposed new funds would be used to plan and execute a major national public awareness campaign to educate the residential, commercial, and industrial sectors on natural gas efficiency and conservation actions. The Alliance recommends a $3.5 million increase in Communications and Outreach, Program Management. • Energizing U.S. manufacturing performance: The DOE Industrial Technologies Program conducts plant-wide energy assessments, develops diagnostic software, conducts training, develops technical references, and demonstrates success stories. Oak Ridge National Laboratory reports that DOE-ITP's BestPractices outreach saved 82 trillion BTU in 2002, worth $492 million. University-based energy assessment activities sponsored by DOE-ITP have an immediate impact on the competitive performance of hundreds of U.S. factories. The same efforts train industry's next generation of innovators. Additional DOE funding can allow these programs to impact thousands, as opposed to hundreds, of U.S. factories. A capable but underfunded regional efficiency network, including universities, state offices, and trade associations, is effectively mobilized with federal sponsorship. The Alliance recommends a $5 million increase in Industrial Technologies, Crosscutting. • Natural gas strategic plan : As mentioned above, programs that impact natural gas demand are spread throughout the DOE energy efficiency programs. The Alliance requests the appropriation of a small amount of funding to assure that DOE's energy efficiency programs effectively target use of natural gas. Congress should direct DOE to prepare an EERE-wide strategic plan to coordinate R&D and deployment efforts that relate to natural gas throughout the organization. The Alliance recommends a $0.2 million increase in Program Management, Planning. DOE's energy efficiency programs have a remarkable track record of developing and deploying new energy efficiency technologies, reducing energy use, and thus helping to achieve a healthier economy with more jobs, a cleaner environment, and energy security. Many of these programs, such as those on equipment standards and building codes, have few natural advocacy constituencies, but they nonetheless provide a great service to the American people and represent effective public policy.. A series of recent price spikes and blackouts shows a compelling need to boost these programs this year. We are faced with huge increases in the price of natural gas and oil, and with electricity blackouts as suppliers struggle to keep up with growing demand. Energy efficiency is generally the quickest, cheapest, and cleanest way of making energy supplies meet energy needs. While Congress has been debating energy policy for three years, it has enacted energy policy in the form of DOE energy efficiency program appropriations, and this funding overall has been slowly declining. The Alliance believes that the relatively modest increases in funding requested for DOE's important energy efficiency programs are a wise and critically-needed investment, as they can provide the research, tools, practices, and education to help us avoid future supply problems. We recognize that the fiscal situation is tight, but the cost of not boosting these programs is simply too high. Thank you again for the opportunity to testify and for your support for energy efficiency programs. |
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