Testimony for Increasing Funding Energy Star Funding at EPA

Introduction

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 leadership of the Alliance is also a partnership between the private sector and government chaired by Senator Byron Dorgan (D-ND) and co-chaired by Dean Langford the former CEO of Osram Sylvania. Over seventy companies currently 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 other companies committed to promoting sound energy use.

Thank you for the opportunity to testify regarding the energy-related components of the Environmental Protection Agency's FY 2003 budget request. Specifically, I respectfully urge you to significantly increase your support for Energy Star, a program of the Environmental Protection Agency (EPA) which uses energy efficiency to deliver significant environmental benefits to the nation while yielding significant economic benefits for businesses, state and local government institutions such as colleges and universities, public schools, and hospitals, and of course to millions of consumers who purchase Energy Star-labeled products.

The Alliance has a long history of advocating for as well as researching and evaluating the effectiveness of federal efforts to promote energy efficiency. While many of these include laws passed by this Congress and federal regulations and standards issued pursuant to those laws, we especially applaud those that rely not on government mandates, but on cooperative partnerships between government and business and between the federal and state governments. The EPA Energy Star program is a shining example of these voluntary partnerships. President Bush and Vice President Cheney have referred to Energy Star for furthering national goals of broad-based economic growth, environmental protection, energy security and economic competitiveness simultaneously. The Climate Protection Division at EPA works closely with private sector manufacturers, retailers, building owners, and energy service providers, as well as state and local governments, non-profits, and other organizations to promote energy efficient products and buildings. And they do it extremely well - for every tax dollar spent by the Energy Star program, 75 dollars worth of energy savings is returned.

Energy Star Improves Energy Reliability

Mr. Chairman, last year our nation faced emergencies in energy reliability. This could happen again. The dire situation surrounding electricity supply in California and the West brought renewed concern about America's energy needs. President Bush took a large step in issuing conservation orders for federal agencies in the midst of the crisis, yet this could do little to address demand. It was the help of Americans who stood up to the crisis and reduced their demand that helped prevent a further strain on supply. While this winter was mild, last year Americans staggered under massive increases in natural gas for their heating needs.

Energy Star has an important role to play in reliability. By promoting energy-efficient buildings, appliances, and other products Energy Star is helping reduce peak demand for electricity in homes, businesses, hospitals, and government buildings. By giving consumers guidance on heating and cooling equipment, Energy Star is helping those homeowners take back control of their home finances.

Energy Efficiency as a Potent Energy Resource

Mr. Chairman, the debate over energy policy is in full swing on the Senate floor. Much of that debate can be boiled down to the simple elements of supply and demand. There are those who are focusing on the supply end, calling for increasing the supply of our energy resources through expanded drilling, power plant licensing, and through other avenues. Then, there are those Senators who have turned their backs to supply to focus on demand. While we at the Alliance to Save Energy applaud that endeavor we realize that we cannot save our way our out of our dependence on fossil and nuclear fuels. An effective energy policy must include a combination of measures that provides electricity, heating fuel, and motor fuel to Americans. But to do that we must first go after the resource that is cheapest, can be delivered most quickly, and can stand up to all environmental scrutiny - that resource is energy efficiency.

Energy efficiency isn't just a marginal activity by which we can chip a little bit off of our consumption and save a few bucks around the edges. Energy efficiency measures are powerful and dynamic policy tools through which prices, supply, and emissions can be radically changed.
It seems that every year technological developments bring more and better measures at our disposal to reduce electricity demand, make homes more energy-efficient, and go further on less gasoline. But Mr. Chairman, a strategy to maximize these resources must begin with reasoned analysis of our energy situation, not a predisposition to one course or another.

Energy Star Capitalize on This Resource

Mr. Chairman, EPA's Energy Star has proven to be an extremely effective way for this nation to capitalize on the untapped potential of energy efficiency as a resource. In fact, Energy Star proves that environmental protection can not only be achieved without harming the economy, but also that such protections can act to boost consumer savings and economic growth.

Energy Star is composed entirely of voluntary partnerships, and they have grown since the early 1990s to include thousands of partnerships with product manufacturers, private and public building owners and operators, homebuilders, small businesses, utilities, and retailers. The sheer number of these partnerships is a testament to the fact that energy efficiency delivers "pollution prevention at a profit."

Recently, the Alliance to Save Energy asked many of Energy Star's partners if they would support our request for a significant increase in funding for these important programs. The response was remarkable. Hundreds of businesses, from large manufacturers like Canon USA in New York to smaller businesses like Mayer Electrical Supply Co. in Alabama, have pledged their company's support for these important programs. Each member of the Subcommittee with receive a copy of this letter with the list of businesses.

Energy Star serves broad constituencies across every state in the country. Energy Star includes over 1600 manufacturing partners of over 30 different product types, who make and market over 11,000 different models of Energy Star compliant products. Energy Star assists over 2,800 small businesses with their efforts to maximize the energy efficiency of their facilities. Energy Star's work with partners further advances the education of energy efficiency and the reduction in energy consumption. For example, by working with builders, Energy Star helps the customers of those builders make smart decisions - decisions that will save the consumer money and the country pollution - for as long as the home is standing. Energy Star counts more than 1600 builder partners and partners who supply products and services for energy-efficient home construction. To date, more than 25,000 Energy Star labeled homes have been built, locking in financial savings for homeowners of more than $7.5 million annually. Energy Star Buildings participants now include over 15% of the nation's total commercial, public, and industrial market, resulting in more than 25 billion kilowatt hours of energy saved.

Energy Efficiency Investments Pay Back for Years

Energy efficiency improvements achieved through Energy Star are like "the gift that keeps on giving." There are not only the immediate environmental and economic benefits, but also those that are achieved through the long term investments.

While consumers who purchase Energy Star labeled products save through the life of the product, product manufacturers get the economic boost and incentives from the purchases of these products. EPA predicts expenditures on energy-efficient technology of almost $13 billion through 2010. In addition, EPA predicts cumulative net energy bill savings for consumer and businesses of $70 billion through 2010 - an average net savings of more than $5 billion per year.

Pollution savings are as dramatic as the financial savings. In 2001 alone, reductions in greenhouse gas emissions totaled 38 million metric tons of carbon equivalent (MMTCE) - that's similar to taking more than 25 million cars off the road. Last year, emissions of 140,000 tons of nitrogen oxides (NOx) were also prevented. Because many of the investments in energy-efficient technology promoted by Energy Star offer a life of ten years or more, these investments will continue to deliver economic and environmental benefits through 2010 and beyond. EPA estimates that emissions reductions averaging more than 35 MMTCE per year between now and 2010 were locked in last year based on actions already taken by Energy Star partners.

In considering the environmental value of the purchasing decisions that Energy Star helps consumers make more wisely, it is important to realize that over 50 percent of U.S. greenhouse gas emissions in 2010 will be coming from products and capital equipment not yet purchased. The Energy Star program seeks to influence those capital investment decisions in a way that helps individual purchasers save money while simultaneously helping the nation meet its clean air and greenhouse gas emissions-reduction goals.

All of this through voluntary participation in Energy Star, and the voluntary, market-based choices made by thousands of partners and millions of American consumers. No regulations, no government mandates.

Energy Efficiency Enhances Electric System Reliability

Mr. Chairman, Energy Star, and energy efficiency in general, also enhance the security of our energy supply in another very significant, but largely unappreciated, way. I am referring to the reliability of our electric system. As every member of Congress is aware, the nation is in the midst of a transition in the structure of our electric utility industry from a system of regulated monopolies to a competitive market for electricity generation and retail sales. While true competition should be a boon for efficiency on the generation side, this transition brings with it many uncertainties. Under regulation, utilities planned for and built power plants to meet a predetermined reserve generation capacity, and were assured of recovering costs plus a profit margin through the regulatory rate-setting process. Under competition, markets - composed of electric generating businesses, investors, and consumers - will decide which supplies will be needed and economical. The ability of markets to accurately forecast future demand and potential revenues and translate those into timely investments in supply capability remains to be seen.

Compounding this problem, impending restructuring has put a chill on utilities' interest in helping their customers to use energy more efficiently. Since 1993, utilities have slashed spending on their "demand-side management" programs, the largest component of which is usually energy efficiency, by 45 percent. The reason for this is simple: in a competitive environment, electricity generators no longer have an interest in helping their customers reduce the consumption of their product. The foregone energy savings and peak demand reductions from energy efficiency programs have been substantial, and they have exacerbated the steady growth in demand for electricity created by our strong economy. Many summers have brought "capacity crunches" in various regions of the country; shortages of either electric supply or transmission and distribution capacity needed to deal with peak demand on hot summer days.

Energy efficiency, by reducing demand, unquestionably contributes to system reliability. Quite simply, energy efficiency reduces both the base load, the amount of energy required to be supplied to an area or region, as well as the peak power demand. Different technologies may contribute primarily to one or the other, for example: lighting and refrigeration efficiencies reduce base load, while air conditioner efficiency improvements reduce summertime peak load. (Of course, any reduction in base load also reduces the "height" of peak loads.) Thus, energy efficiency in the aggregate helps maintain adequate margins of generation supply, and by reducing the load and stress on various points in the power distribution network, also enhances the security of the system. Energy Star, with its broad reach, covers all the bases. In fact, EPA works with more than 100 utilities and state energy efficiency providers that serve approximately 50% of the households in the US in promoting energy efficiency with Energy Star.

The Bush Administration's energy policy released last year also touted the benefits of the Energy Star program and called for an expansion of this important initiative. In their report to the President, the National Energy Policy Development Group recommended that: "the President direct the EPA Administrator to develop and implement a strategy to increase public awareness of the sizable savings that energy efficiency offers to homeowners across the country. Typical homeowners can save about 30 percent (about $400) a year on their home energy bill by using Energy Star labeled products." The report further complimented the program. Noting not only that "Conservation and energy efficiency are important elements of a sound energy policy" but also that "The federal government can also promote energy efficiency through programs like the Energy Star program, and search for more innovative technologies that improve efficiency and conservation through research and development."

The Need, and the Answer, Are Clear

The need for energy efficiency to contribute even more strongly to our nation's economic growth and energy security is clear. The potential for energy efficiency programs like Energy Star to meet that need is just as clear, and just as strong. At the end of its first decade, Energy Star is now achieving widespread recognition. EPA's latest market research shows that not only do most American's recognize the unique Energy Star label, but it also is highly influential in influencing their purchases. Each year, Energy Star recognizes companies and organizations that go above and beyond to advance energy efficiency, and these honors speak volumes about the program itself.

Corporations such as Maytag, located in Newton, Iowa, are being recognized this year for their products and public education efforts that demonstrate that, working with businesses, Energy Star can leverage private sector dollars to advance marketing efforts for efficient products. Maytag now offers 68 Energy Star qualified appliance models, which is almost 100 percent increase over last year. In 2001, Maytag concluded a concert tour with educational messages about energy and water savings and their "Mother Earth" float in the Macy's Day Parade displayed the Energy Star logo reaching millions of consumers around the country with messages of energy saving.

In addition to marketing efforts with Energy Star partners, the Energy Star program participates in research and is always on the lookout for new and innovative ways to reduce energy use. This year, a West Virginia company will receive one of the special recognition awards for technical innovation. Royal Venders, Inc. located in Kearneysville, West Virginia has developed a new vending machine technology; Royal Vendors' customers use approximately 50 percent less energy. The technology consists of a more energy efficient T8 lighting package, cooling unit, GE evaporator fan, and software to further reduce consumption during non-peak hours. All new 2002 Royal Vendors machines are available with the optional energy efficiency package, which saves energy, money, and maintenance/service calls. With approximately one million Royal Vendors machines in place in the US, upgrading the existing stock of machines will bring energy savings for years to come. Recognition of the technology is another way that Energy Star helps push energy efficiency advancements into more common use.

Much Has Been Accomplished, but Huge Potential Remains Untapped

The questions are often asked: "If energy efficiency is so great, why don't consumers and businesses just do it on their own? Why do we need a government program to promote it and incent people to do it?" Well, we know that for reasons sometimes hard to understand, people often don't do what is in their own interest. For example, people should save for their retirement, right? It's certainly in their long-term self-interest. Yet, the government goes to great lengths, and great expense, to goad people into saving for their retirement, through tax breaks for 401(k)s and other retirement plans, IRA's etc. How about home ownership? It's the American dream to own your own home - for peace of mind, long-term security, etc. - yet Congress long ago enacted the home mortgage-interest tax deduction, to convince people to buy their home and help them afford it. Compared to things like these, the federal funds spent on Energy Star are a pittance.

There are no tax breaks or subsidies in these programs. Appropriations go directly to fund the underlying research, program implementation, and technical assistance to partners. These funds are hugely leveraged through EPA's thousands of voluntary partnerships with product manufacturers, home builders, state and local government institutions, commercial building owners, and small businesses. For every federal dollar spent on these programs, EPA can show an average of $75 in utility bill savings to someone, $15 in private sector investment in energy efficient technology, reductions in greenhouse gas emissions of 1.0 MMTCE, and an addition of over $60 to the economy.

Conclusion

Over the past decade, the Energy Star programs have demonstrated their effectiveness by achieving great savings in the nation's collective energy bill and in energy-related pollution. But, as successful as these programs have been, much more could be accomplished with increased funding. It is estimated that if all consumers chose only Energy Star-labeled products over the next decade or so, the nation's energy bill would be reduced by about $100 billion, while avoiding 300 MMTCE in greenhouse gas emissions. If all commercial building owners took advantage of the cost-effective efficiency-improvement opportunities, they could achieve another $130 billion in energy savings and 350 MMTCE in emissions reductions over the next ten years.

These programs are wildly successful by any measure. They are well-run, they are cost-effective, they have consistently exceeded their goals, and they have the support, even explicit endorsement of businesses across the country. Unfortunately, these important programs have received a virtual level funding request for the past two years, even as the number of products and manufacturers in the Labeling program has greatly expanded, the number of partners in the Buildings, Homes, and Small Business programs have soared, and both President Bush and Vice President Cheney have publicly touted the benefits of Energy Star and promoted voluntary pollution reduction.

Energy Star's effectiveness in terms of national energy bill savings and pollution reduction are truly impressive. While there are many demands on the countries financial resources, I respectfully urge greater support to what works. Energy Star has proven tremendously cost-effective and it can deliver even greater benefits to the nation with increased funding resources.

Thank you again for the opportunity to testify.