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Testimony of David Hamilton, Policy Director,
Alliance to Save Energy
To the Senate Subcommittee on Interior Appropriations
Regarding the Bush Administration FY 2003 Budget Request for Energy-Efficiency Programs at the Department of Energy
April 5, 2002
Introduction
The Alliance to Save Energy appreciates the opportunity to comment on the fiscal year 2003 budget for energy-efficiency programs at the Department of Energy. We believe that the funding levels for these critical research, development, and deployment programs should be significantly higher, but there are positive aspects to the current document.
My name is David Hamilton. I am the Policy Director 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; it is currently led by Sen. Byron Dorgan as chair, with Sen. James Jeffords and your colleague, Rep. Ed Markey as vice-chairs.
Seventy companies and organizations currently belong to the Alliance to Save Energy. If it pleases the Chairman I would like to include for the record a complete list of the Alliance's Board of Directors and Associate members, which includes the nation's leading energy efficiency firms, electric and gas utilities, and other companies committed to cutting their energy bills.
The Alliance has a long history of researching and evaluating federal energy efficiency efforts. We also have a long history of supporting efforts to promote energy efficiency that rely not on mandatory federal regulations, but on partnerships between government and business and between the federal and State governments. DOE efficiency programs 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 technology in cooperation with the national laboratories, by working with the private sector to deploy that technology, and by fostering energy efficiency activities in the states. And they do it well.
A Critical Juncture For the Nation
In April, 2002, we remain in the midst of a fierce debate on national energy policy. Thus far, there has been no resolution as the Senate continues to work on its energy bill. Meanwhile, critical geopolitical issues point up our continued vulnerability to supply disruptions and price instability. One might have thought that the terrorist attacks of September 11 would have changed more attitudes about energy than it has. While some concern is being paid to the physical security of energy infrastructure from terrorism surprisingly little has yet been done to protect the nation's economy from energy supply and price disruptions.
The energy events that gave rise to the push for energy legislation seem like they have subsided and are further away, but I don't believe they are very far away, Mr. Chairman. Gasoline has risen nearly 30 cents per gallon as the Israeli-Palestinian crisis has intensified during the past few weeks. The rush to build new electricity generation that immediately followed the California electricity crisis has greatly abated as prices have fallen and near-term supplies have stabilized. Nobody has yet come up with an adequate answer to how we maintain a stable and cheap natural gas supply when nearly all new generation coming on line is gas-fired.
Boom and Bust Test Our Economic Security
Energy is a boom and bust business, Mr. Chairman. Supply gets tight and the price goes up, then there is a rush to secure greater supply. That additional supply creates a glut that send prices and profit margins falling until a combination of falling supply and rising demand renew the cycle.
Mr. Chairman, it is arguable how well our economy absorbs the shocks of the boom and bust cycle. The oil crises of the 1970s clearly caused economic disruption on a large scale. The California electricity crisis opened a drainpipe in the state treasury, while price spikes in the East and mid-west during the past few years sent prices spiraling for short periods. The natural gas spike of two winters ago caused severe economic hardships for families that heat with gas.
Energy issues are so often intermingled with "national security" issues these days, it gets more and more difficult to sort out where they really intersect. Now viewing the world through a terrorism template, we talk about the physical security of nuclear power plants in the same breath as whether to drill for oil in the Arctic National Wildlife Refuge. The issues of physical and economic security are often confused.
In the end, Mr. Chairman, what has been a blind trust in boom and bust markets to determine our energy supply has again and again jeopardized our economic security. Every oil shock in our history has been followed by a recession, Mr. Chairman. What's worse, Mr. Chairman, is that we have actively avoided taking steps to mitigate our vulnerability.
Energy Efficiency Is Insurance Against Boom and Bust
Reducing demand in oil, electric, and home heating sectors reduces the impact on the economy of the boom and bust cycle. Increased energy efficiency in vehicles cuts the leverage that OPEC has over our oil supply. It keeps electricity supply clear of the crisis level that causes prices to spike to many times its normal level. Levels of electricity conservation in California of 6-10 percent since last year have substantially helped keep the state out of the danger zone it faced so recently. As we say here every year, Mr. Chairman, reducing demand through energy efficiency increases energy supply, often more quickly, cheaply, and cleanly than any other method.
Everybody Agrees?
The one thing that everyone has agreed on Mr. Chairman, is that energy efficiency should be a key part of our national energy policy. Virtually all the chief governmental proponents of energy legislation, whether President Bush, Sen. Daschle, Chairman Tauzin or Sen. Murkowski have said it: energy efficiency (or conservation if you prefer; although used interchangeably, they are not the same) is a significant policy option available to balance the pursuit of increased supply. The Alliance believes we need both, but the proposals being considered fall far short of aggressive attempts to maximize energy efficiency.
But what people don't agree on, Mr. Chairman, is what constitutes real energy efficiency. The Alliance to Save Energy believes that we need both new supply and aggressive demand-reduction. But H.R. 4, the House energy policy bill, largely ignored energy efficiency options in the transportation and electric sectors and thus constitutes little more than a missed opportunity to have a balanced national energy policy. A complete failure to include meaningful provisions to save oil and save electricity make H.R. 4 a supply bill, that - aside from some useful tax incentives - provides little other than window dressing on efficiency.
The FY 2003 Budget Request
The fiscal year 2003 budget for energy efficiency programs submitted by the Administration makes significant changes in programs and process within these programs. An additional order of magnitude of change to be evaluated is the recent reorganization of the entire Office of Energy Efficiency and Renewable Energy announced by Assistant Secretary David Garman last week.
To begin at a macro level, we are disappointed that the Administration's FY 2003 request slates energy efficiency programs for a cut. The Alliance continues to believe that energy efficiency efforts are not funded at an adequate level. In addition, while we are pleased with the critical increase in the Weatherization Assistance Program outlined in the request, we are very concerned with the more than 10 percent cut in funding for research, development, and deployment programs.
We cannot cease to aggressively pursue new technology options in the buildings, industrial and transportation sectors, Mr. Chairman. The breakthroughs achieved by DOE's past research into more efficient technology have revolutionized our buildings, our lighting, and a variety of commercial and industrial practices. Programs designed to overcome market obstacles to the adoption of existing technologies are just as critical. Cuts in the President's request for windows research, industrial Best Practices, Clean Cities, and automotive Hybrid Systems R&D are examples of places that need more focus and concentration, not less.
In addition, the 14 percent reduction in funding for State Energy Programs weaken a key cog in the promotion, distribution of knowledge, and adoption of energy efficient technologies. The states remain strong and active partners, and should be on a rising, not falling, curve of support.
FY 2003 Budget Request Has Strong Points
In addition to a more vibrant commitment to weatherization, this budget has other items and increases to recommend it. The increase in Energy Star would finally give more adequate support to a program long supported strongly by the Alliance and one that is becoming an essential guide for consumers who wish to purchase energy efficient appliances, windows, and other products. A more aggressive Building America program will help break down the barriers that home builders face in incorporating energy-efficient technologies into residential construction. Increased support for the Federal Energy Management Program will enable DOE to accelerate its leadership role in gaining energy savings from federal facilities.
The Alliance strongly believes that increasing fuel economy standards is the best and quickest way to reduce our nation's oil dependence, Mr. Chairman. We are wary that some of the heralding of the "Freedom Car" program may lessen the focus on standards as a way to reduce oil consumption. That being said, we strongly support accelerated work on automobile fuel cells that can perhaps shorten the 15-20 year expected interval before fuel cell cars will be on the road in significant numbers.
EERE Reorganization
The reorganization announced last week by Assistant Secretary Garman is broad in scope and will require significant attention in the coming weeks. Its basis is a 236-page strategic review that has just become available to the public. It eliminates the former sectors within energy efficiency -- buildings, industrial, and transportation -- reducing some of them to program categories. The combination of business functions may have larger implications for the traditional distribution of the functions between the Energy and Water and Interior Appropriations bills.
It is critical that Congress not allow a fudging of the priorities that have been laid out for the Department by this reorganization. The Alliance is sympathetic and supportive of changes that can make energy efficiency programs accomplish more and use taxpayer dollars more efficiently, and we commend Assistant Secretary Garman for tackling these tough issues. When analyzing the reorganization, Mr. Chairman, please pay close attention to the following:
- Does the reorganization create de facto shifts in program priority for EERE and what are they?
- For which programs does the reorganization make it harder or easier to do business;
- How does the mandated routing of all communication activities through the Assistant Secretary's office enhance or detract from the office's ability to get its message out?
Recommendations
The Alliance to Save Energy generally recommends at least a 20 percent increase over FY 2002 funding for non-grant energy efficiency programs.
We are particularly disturbed about cuts in:
Window Research
Thermal Insulation and Building Materials
Best Practices
Hybrid Systems R&D
Lightweight Materials Technology
Clean Cities
COEECT (eliminated)
The Alliance strongly supports the included and additional increases for:
Energy Star
Lighting and Appliance Standards
State Building Codes
Federal Energy Management Program
Industrial Assessment Centers
Building America
Auto Fuel Cell R&D
In addition, the Alliance recommends additional increases for:
NICE-3
Industries of the Future - Specific
Sensors and Control Technologies
Thank you again, Mr. Chairman, for offering the Alliance to Save Energy the opportunity to testify before you today and for your support in past years for energy efficiency. I welcome any questions that you or the Subcommittee might have.
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