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TESTIMONY OF
DAVID M. NEMTZOW
PRESIDENT, THE ALLIANCE TO SAVE ENERGY
U.S. SENATE AND U.S. HOUSE OF REPRESENTATIVE
COMMITTEES ON APPROPRIATIONS
SUBCOMMITTEES ON FOREIGN OPERATIONS, EXPORT FINANCING, AND
RELATED PROGRAMS
FY 2004 BUDGET FOR USAID'S ENERGY PROGRAMS
APRIL 30, 2003 and APRIL 02, 2003
My name is David Nemtzow. I am the president of the Alliance to Save Energy, a bi-partisan, non-profit coalition of business, government, environmental, and consumer leaders dedicated to improving the efficiency with which our economy uses energy. Senators Charles Percy and Hubert Humphrey founded the Alliance in 1977. The Alliance is chaired by Senator Byron Dorgan (D-ND) and co-chaired by Dean Langford the former CEO of Osram Sylvania Inc. Our vice-chairs are Senators Susan Collins (R-ME), Jeff Bingaman (D-NM), Jim Jeffords (I-VT) and Representative Edward Markey (D-MA). Over seventy-five companies and organizations participate in the Alliance 's Associates program and with your permission, Mr. Chairman, I would like to include for the record a complete list of the Alliance 's Board of Directors and Associates. This list includes the nation's leading energy efficiency firms, electric and gas utilities, and many other companies committed to promoting sound energy use.
The Alliance has a long history of designing and evaluating energy efficiency programs in the U.S. and abroad. We also have a history of supporting efforts to promote energy efficiency that rely not only on mandatory federal regulations, but on partnerships between government and business and between the federal and state governments. The Alliance to Save Energy strongly supports the energy efficiency programs at the U.S. Agency for International Development (USAID) and appreciates the Subcommittee's past support of these valuable activities. We believe that USAID plays a vital and unique role in supporting efforts to promote the development of sustainable energy policies in developing and transitional countries. USAID's funding for energy efficiency, renewable energy, and power sector reform not only helps to leverage millions of additional dollars in foundation, development bankand other federal agency support, but also spurs the transfer of energy-efficient technologies and services overseas. By working with the private sector to design and implement policies that break down barriers to energy efficiency activities, USAID has been instrumental in helping the U.S. companies enter new markets and further increase sales of their products.
The Alliance has had a great deal of success developing private-public partnerships in countries such as Brazil , India , Mexico , Ukraine , Serbia , and Ghana , often working with USAID. Our work has clearly proven the USAID premise that a strong institutional framework for energy efficiency in developing countries creates jobs, reduces costs, and protects the environment.
Unfortunately, despite these successes there is an alarming trend in funding for vital energy efficiency program support at USAID. During the past few years the clean energy programs, represented first in the Office of Energy and now in the Energy Team within the Office of Energy and Information Technology, have received a cut in funding – with the FY04 request ($8 million) cut to 50 percent of the FY01 ($16 million) funding. Not only are these programs expected to continue to provide the technological support and strategic leadership to the field, as they have successfully for years. These important programs cannot continue their valuable work without appropriate funding. We urge Congress to fully fund these programs, in fact return these programs to their earlier funding levels so that they can do more to improve sustainable energy use around the world.
In addition, the Global Environment Facility (GEF) plays an important role in funding energy efficiency. In addition to increasing energy efficiency, GEF resources have helped poor countries and countries in transition conserve biological diversity, accelerate the adoption of renewable energy technologies, protect international waters and eliminate the use of ozone-depleting compounds. Tackling these critical global environmental problems is good for America and other nations and the Alliance supports its full funding.
Why USAID Should Promote Energy Efficiency: U.S. Jobs and Security
Energy is absolutely critical to the economic, social and security development of nations. Even conservative projections show that – if left unchecked – future global energy demand would result in impossibly high levels of local and global pollution and far outstrip any reasonable amount of investment or supply resources. High global energy demand would also mean increased energy prices to American consumers and businesses as the U.S. economy competes with others for important but limited energy resources, particularly oil. The typical policy solution to this problem is to produce more energy, and the world will have to produce more. But the option that holds the greatest potential for mitigating our long-term global energy problem is energy efficiency.
Without the strong participation of USAID, we will not come close to realizing the energy efficiency potential in transitional and developing countries. Over the past 30 years, the United States has led the world in developing the energy efficiency supply resource – while our economy has well more than doubled, our energy use has only increased by 27 percent. This is an American success story and USAID is critically positioned to work with private companies, NGOs, universities and many others to transfer this knowledge to other countries so they can use the techniques and technologies we have developed to make similar improvements.
Improving energy efficiency in transitional and developing countries benefits the U.S. in several ways. One, it opens up new markets around the world for U.S. energy efficiency products and technologies. USAID programs have introduced ten of thousands of international decision makers to the energy efficiency market. These efforts are creating new businesses and jobs in the U.S. Two, it improves the lives and economic opportunities of people in impoverished countries, lessening the appeal of radicalism and anti-Western sentiment. Energy efficiency can provide job opportunities not only in the U.S. but in other countries, all the while lowering consumer energy costs and enhancing physical comfort. Three, energy efficiency mitigates global pollution in a way that actually results in more economic benefit than doing nothing at all. Once again, energy efficiency's ability to reduce pollution is a business and job winner for America .
Domestic Energy Security Starts Abroad
September 11 and the turmoil in the Middle East remind us of the importance of energy reliability and security both domestically and among our allies and trading partners. Even as we work to try to ensure our economy has adequate, reliable energy supplies, we cannot forget that the energy use of other countries directly impacts both the supply and price of our energy resources here at home.
In fact, pondering strategies to guarantee adequate energy supplies in the U.S. reminds us how the energy efficiency programs run by USAID help protect and enhance the economies and standard of living of developing nations around the world. It also reveals how - due to the reality of a single integrated global petroleum market - these efficiency programs directly benefit U.S. consumers: by lessening demand for oil abroad, we are helping to loosen supply and hold down price pressures domestically. Quite simply, lowered oil demand in Thailand helps truckers in Tucson . Lowered oil use in Madras helps drivers in Michigan .
Consuming countries such as the U.S. will only be able to protect our energy-related economic future if we can help lessen demand for oil both here and worldwide. USAID's energy efficiency programs do just that -- and in doing so they help Americans as they help developing and transitional nations.
Some of the most destitute countries, lacking many of the basic energy related services USAID can help provide, are the breeding grounds for terrorists. By enabling legitimate governments to meet the needs of their citizenry through basic energy service such as clean water, refrigeration, health care, and lighting, the ensuing economic develop can go a long way in keeping potential terrorists in real jobs with a hopeful future.
The Role of USAID in the Energy Sector
Although USAID's energy programs do not often receive the visibility of the USAID's more traditional development programs , they are crucial to the goal of sustainable development in the developing and transitional world. While it is impossible to ignore the pressing physical needs of the communities USAID serves, reasonably priced, clean, and reliable energy supplies often play an equally important role in the lives of the world's needy citizens by reducing respiratory illnesses and improving access to heating, lighting, refrigeration, and water. Whether it is clean fuel for cooking in India that helps prevent some of the estimated half-million deaths per year of women and children from atrocious indoor air, electricity for refrigeration in tropical climates that provides the vital link for vaccinations, affordable heat for Eastern Europe that keeps people from freezing to death, or the energy needed to pump and clean water to satisfy the basic subsistence needs of the over 2 billion currently unserved people, energy plays a very central role in the lives of all the world's inhabitants.
Unfortunately, energy supplies in most of the world's countries are not always reliable or safe. Power plant emissions from the combustion of poor-quality coal have fouled not only the skies but the lungs of millions of Chinese; radiation from the failed Chernobyl nuclear reactor in Ukraine has sickened a generation of children; and drought conditions in many parts of Africa have left hydropower turbines quiet and cities dark. In addition, explosive economic growth in most of the developing world, especially Asia , has precipitated a surge in demand for energy supplies. Over two billion of the world's people lack access to reliable supplies of fuel for cooking or electricity for rudimentary lighting and refrigeration, and face even tougher times with large fluctuations in oil prices. Residents in some of the developing world's largest cities continue to experience rolling electricity brownouts, blackouts, and inadequate access to the power grid. These electricity shortages lead to constraints on industry and the commercial sector that stifle economic growth, limit the potential of U.S. foreign trade, and lead to further hardships from unemployment and foregone export revenues.
Energy efficiency provides an attractive solution to these problems. Not only are energy conservation programs in developing countries a relatively low-cost alternative to the construction of new hydroelectric or fossil fuel plants, they can also reduce the risk of electricity shortages and increase the competitiveness of the industrial sector. The following are examples of USAID's successes.
Ukraine. In Ukraine , USAID empowers municipalities and the private sector to save energy and provide basic service to members of society most in need. Working with the city of Lviv to develop an energy management strategy, USAID worked to promote the efficiency of an orphanage and school housing many of the Chernobyl victims. Working with U.S. companies and local non-profits, the school and orphanage were weatherized and had a high efficiency boiler installed. The immediate benefit to orphans no longer needing to wear winter coats in classrooms and to the school having enough money to buy books was significant. However, the more important outcome of the project was the hundreds of other schools that have been upgraded or are going to be upgraded based on this model and the new Ukrainian companies that participated in this project now weatherize buildings all over Ukraine . Simply put, USAID helps develop replicable models and the technical capacity to carry them out.
USAID's competitive advantage over other development vehicles in the energy efficiency sphere is two-fold. USAID clearly understands the role of capacity building as the basis for any sustainable energy efficiency program and USAID also recognizes the overwhelming potential of the private sector to drive the energy efficiency development agenda.
Ghana. One of the most successful examples of a national energy conservation program has been Ghana's Energy Foundation. With support from USAID, that the Energy Foundation has helped reduce the inefficient use of energy in most sectors of the economy. The Energy Foundation has worked with the industrial sector to perform energy audits and implement efficiency projects that have saved Ghanaian companies energy and money. In addition, the Energy Foundation helped energize the private sector to improve energy efficiency by setting up the Ghana Association of Energy Services Companies and Consultants (GHAESCO), which has dozens of members actively pursing energy efficiency projects. The Energy Foundation has also worked to educate consumers through public awareness campaigns and its Green Schools program that teaches students how to use energy more efficiently.
Helping U.S. Companies. USAID works to help energy efficiency companies raise awareness about energy efficiency and encourage implementation of cost-effective energy efficiency improvements. USAID funded partnership programs with private industry have recorded $35 worth of sales for every $1 spent. The Alliance has worked with USAID on this effort and can report that since 1995, more than 50 energy efficiency seminars in countries around the world, including Mexico , China , India , Philippines , Portugal , Hungary , and Poland , and Thailand . Through these seminars, more than 85 energy efficiency companies have passed on their experience and knowledge to more than 4,000 engineers and managers from industry, hotels and hospitals, as well as representatives from government agencies, and non-profit organizations, and trade associations. Energy efficiency companies participating in the Alliance 's “Energy Efficiency Industry Partnerships” seminars benefit from the opportunity to develop new project leads and cultivate potential distributors and representatives for their products and services. As of May 2001, participating companies have reported that, as a result of contacts made at the seminars, projects worth $6.2 million have been completed, with another $9.9 million being considered or in the pipeline.
Mr. Chairman, these are not just small companies, but large companies and companies on the verge of expanding and seeing energy efficiency as an important market for investment. Armstrong International, with facilities in Florida and Michigan , is one of the nation's leading manufacturers of energy-efficient industrial steam technologies. Historically concentrated in the domestic market, their strategic planning indicated that if they wanted to grow product sales they needed to expand globally but as a small business, lacked the capability. Then, USAID order some steam technologies from Armstrong for use in energy efficiency program in Bulgaria . Armstrong contacted USAID to find out more and began to take advantage of the market introduction opportunities USAID energy efficiency program made available to U.S. businesses. Taking advantage of these opportunities enabled Armstrong to develop a global presence, greatly expanding the scope of their business, creating new jobs.
There are many companies that have had similar experiences with USAID's energy efficiency programs. Honeywell, with key facilities in New Jersey , Minnesota and Arizona , is one of the nation's largest manufacturers of efficient energy management building controls and energy-saving performance contracting services. These two products, control systems to reduce energy use and methods to provide financing for energy saving upgrades, hold great promise to solve energy waste problems in former communist, transitional countries. Honeywell has partnered with USAID to provide training and private sector expertise to a wide range of USAID sponsored programs and forums. In doing so, Honeywell has expanded its business practice throughout the region. For instance, by helping USAID provide training in the Kaliningrad Oblast on energy efficient district heating control, Honeywell was able to meet key officials and was in perfect position to take part in a $5 million World Bank loan that Kaliningrad secured to upgrade its system.
In many cases investments in global energy efficiency that the U.S. makes through organizations such as the World Bank would be underutilized without the ability of USAID to develop the capacity of governments, NGOs and other stakeholders to manage energy use and recognize the various benefits of energy efficiency. For example, the World Bank gave the first of its kind loan to the Brazilian Energy Efficiency Program, PROCEL, solely to promote energy efficiency. For approximately two years the money has sat idle in spite of a crippling energy and water shortage in Brazil . USAID has been working with PROCEL to develop a strategy for utilizing the loan and working with potential loan recipients such as municipal water utilities to develop worthy energy and water-saving projects. In particular, an energy and water management model with the municipal water utility in the city of Fortaleza , Brazil was developed with USAID support. In the first year of the program, five megawatts of energy were saved in Fortaleza while water service was expanded especially in poor areas. The water utility still registered a net cost savings, demonstrating that the energy savings offset the cost of improving water service to the poor
In addition, USAID has developed critical ties with the U.S. energy efficiency industry and built the potential of local energy efficiency private sector partners. The U.S. Asia Environmental Partnership alone has been responsible for transferring over $1 billion worth of goods and services to developing countries since 1992. USAID has supported the development of Energy Efficiency Business Councils in India , Mexico , Ghana and Thailand . These councils combine the resources of many smaller companies to jointly promote the benefits of energy efficiency to end-users. In many cases energy efficiency companies from the U.S. have lent their expertise to train end users on energy efficient technologies, expanding their markets in the process. These councils have begun to break down barriers to implementing energy efficiency including reducing tariffs on imported energy efficient goods.
These examples clearly demonstrate how USAID's programs serve a unique and valuable function in helping policymakers and other stakeholders in developing countries adopt sustainable energy practices and programs. The Agency's programs have been instrumental not only in replicating the broad energy lessons of the United States, such as the importance of integrated resource planning, competition, and proper pricing, but have also been useful in demonstrating more specific policy measures such as energy-efficient appliance standards and model building codes. In addition, USAID's activities play a role in leveraging the resources of others. USAID's FY 2001 estimates show the highly successful private and public leveraging of these programs. An internal USAID accounting shows that Clean Energy Programs have leveraged over $213.4 million for sustainable energy activities in such countries as Brazil , Ghana , Guatemala , India , the Philippines and Southern Africa – leveraging grants from foundations and support from the private sector, the World Bank and others.
Recommendations
Mr. Chairman, I hope that I have helped to demonstrate that part of good governance is found in improving the way in which the world uses energy, and USAID's energy efficiency programs assist this endeavor. Energy efficiency can enhance international security through global governance programs and therefore deserves to garner a significant portion of these additional resources.
The Alliance to Save Energy would like to respectfully recommend the Subcommittee take the following actions to best utilize energy efficiency at USAID.
• We recommend a significant increase in funding for USAID's energy efficiency programs. Key energy efficiency opportunities are being missed due to a lack of funds. We recommend an increased funding effort in the transportation, industrial, and water sectors. These sectors are not only pivotal in any true development model and energy efficiency strategy, but they also represent major areas of potential U.S. investment and trade.
• We recommend that Congress place a line item in the Foreign Operations appropriations bill for the energy efficiency programs within the Office of Energy and Information Technology in an effort to ensure the survival of these essential programs. Last year, at the direction of this Subcommittee, the Senate bill included such a line item, however this provision was rejected in Conference committee.
• We recommend targeted support to energy efficiency throughout USAID by ensuring that Missions have an energy efficiency goal that complements the current goals of the mission. The Bureau for Economic Growth, Agriculture and Trade; Europe and Eurasia Bureau; the U.S. Asia Environmental Partnership; and the Asian Bureau all have the capacity to do more highly effective energy efficiency activities. In addition, more USAID missions have tremendous potential to take on more energy efficiency activities. Currently, only about 13 of the more than 70 USAID missions have energy efficiency strategic objectives even though all missions could find clear advantages to incorporating energy efficiency into their development strategies.
• USAID programs do not systematically take advantage of energy efficiency programs as an element of achieving their strategic objectives. For example, efficiency efforts can play a key role in promoting economic growth (as described above by trade and investment enhancement, business development, and reduced costs); democracy (developing energy efficiency NGOs); and social reforms (using weatherization targeted to low income households to mitigate opposition to energy sector reforms and price increases). This problem is quite extreme even in Russia with its extreme weather, where there is a complete disconnect between USAID's Russian assistance program and energy efficiency.
• Furthermore there is often a failure to incorporate energy efficiency into ongoing energy and municipal reform efforts at USAID. For example the Europe and Eurasia Bureau has no strategic approach to the significant energy and environmental challenges facing municipal infrastructure reform in transitional countries. USAID needs to better ensure that energy efficiency is an integral component of existing efforts (including municipal infrastructure reform; and privatization and other reform of heat, water and wastewater companies).
Conclusion
Mr. Chairman, USAID's energy programs assist policymakers, non-governmental organizations, and businesses in developing and transition countries use energy efficiently and economically. Just as importantly, this work benefits U.S. citizens, energy consumers and businesses by enhancing global energy markets. The Alliance respectfully urges the Subcommittee to recognize and support the important work USAID is doing in the energy sector. In addition, we ask the Subcommittee to provide USAID with the funds and other resources to administer and manage their energy programs efficiently. Without an effective organization in Washington and in the field, programmatic resources will not be used to their full advantage.
In short, vigorous Congressional support for USAID's energy programs will help to ensure that countries such as Mexico , India , Brazil , and Ghana are not only able to develop their economies in a manner that is environmentally sustainable, but to take on additional responsibilities to curb greenhouse gas emissions and environmental degradation. Also, by reducing waste around the world, the U.S. can more easily guarantee its domestic energy supply.
Thank you again, Mr. Chairman, for the providing the Alliance to Save Energy with the opportunity to testify.
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