Energy Efficiency Funding in the Stimulus Bill: An Alliance Webinar

At this Alliance webinar on the American Recovery and Reinvestment Act of 2009 (ARRA) – an online event run exclusively for Alliance Associates – experts addressed a top-of-mind issue for those interested in the future of energy efficiency in America: the $26 billion worth of energy efficiency programs funded by ARRA. Summary information is available below. Alliance Associates may access the full webinar by contacting Carol Guest at cguest@ase.org. Additional information on energy efficiency in the stimulus bill—including presentations by senior staff, summary information and policy analyses—is available through our Stimulus Resources page.

Presenters and Presentations:

Major Provisions in the American Recovery and Reinvestment Act of 2009

Following Alliance President Kateri Callahan’s welcome remarks to online participants, Alliance Director of Government Relations Brad Penney set the stage by reviewing the legislative process behind the passage of ARRA, and describing the major energy efficiency programs funded in the bill. The largest pots of funding for energy efficiency in ARRA go to the State Energy Program (SEP; $3.1 billion), the Weatherization Assistance Program (WAP; $5 billion), the Energy Efficiency and Conservation Block Grants Program ($3.2 billion), smart grid projects ($4.5 billion), energy-efficient federal buildings ($4.5 billion), the ENERGY STAR Appliance Rebate Program ($300 million), the Advanced Research Projects – Energy Program ($400 million), grants for retrofits to affordable housing ($250 million) and green jobs ($500 million).

Challenges to Implementation of ARRA EE Provisions

One of the major challenges for both DOE and states in implementing these energy efficiency measures is the need to ramp up administrative capabilities – and quickly. Penney noted that the Energy Efficiency Coalition, which the Alliance leads, will be urging DOE to require the states that receive funding under the State Energy Program to submit robust plans for administrative ramp-ups of their state energy offices as part of the applications they submit for SEP funds.

Other challenges concern the process for spending this money. For example, ARRA mandates that stimulus funds for WAP be spent in accordance with Davis-Bacon labor regulations, which require the program to pay the prevailing wage for a given area to its contractors. The WAP program is usually exempt from this requirement and, as Gil Sperling, program manager of DOE’s Weatherization and Intergovernmental Programs indicated, the new requirement may limit the degree to which a given low-income household can be weatherized. (Sperling stressed that, where the Davis-Bacon regulation force WAP to spend more of its per-house budget on labor, the greater spending will be compensated for with less spending on materials for each household, rather than fewer households weatherized overall.) The Alliance will be working with the Department of Labor and members of the Energy Efficiency Coalition to address the Davis-Bacon issue.

Penney also stressed the importance of ensuring that the states’ plans for the SEP funds are made public in a central clearinghouse so they can be scrutinized for program effectiveness, and of seeing that states follow through on the assurances they are required to make in order to access SEP funding – namely, utility rate reform and the adoption of the most recent residential and commercial building codes. He noted that the Energy Efficiency Coalition will be addressing all of these issues with the relevant offices within DOE and the Department of Labor.

Guidance Released for SEP and WAP

Thus far, DOE has released guidance on two of the major energy efficiency programs funded in ARRA – the SEP and the WAP.

In the case of stimulus funded projects, time is of the essence. In his presentation, Jeff Genzer, counsel to the National Association of State Energy Officials, outlined the swift process by which interested parties should apply for funding for SEP. DOE has set a deadline of March 23, 2009 for receipt of assurance letters from state governors indicating that they intend to comply with the conditions placed on the SEP funding. Some have been quick to act: 19 governors submitted their own letters of assurance – before DOE had even released the guidance for SEP, which included the text of the letter that governors should send along with the initial applications. Sperling indicated that DOE is currently evaluating those ‘early bird’ letters to determine whether they comply with the requirements of ARRA, and that DOE hopes to respond to the governors “in the very near term.”

Sperling pointed out that the just-released SEP guidance emphasizes accountability: DOE will be relying on several milestones to determine state receipt of SEP funds. Ten percent of the funds will be obligated to the state energy offices upon the awarding of the grant, which will follow the initial application due March 23. Another 40 percent will be transferred upon DOE’s approval of the state energy offices' more detailed spending plans, which are due on May 12, 2009. Approval of these plans will be processed under a new structure composed of both DOE’s Office of Energy Efficiency and Renewable Energy and the Risk Mitigation Team that has been set up to ensure that stimulus funding is spent wisely. The remaining funding will be disbursed over time, perhaps in two buckets of 20 percent and 30 percent, as DOE continues to evaluate the programs on several criteria: job creation; energy savings; cost-effectiveness, etc.

Sperling reported that DOE will be performing both announced and unannounced monitoring of grantees that receive money for energy efficiency initiatives under ARRA. DOE will review the record keeping and compliance of both recipients and sub-recipients – including spot-checks on homes that have been weatherized by WAP.

Despite the large increase in funding for WAP, DOE rule-making still requires a preference for WAP services to be provided by non-profit organizations and community action agencies. Genzer recommended that Alliance Associates interested in providing WAP services get in touch with the National Association for State Community Services Programs to discuss this preference.

Other EE Programs

Though guidance has not been released for other programs funded under ARRA, the Alliance is already working with its partners to ensure that they are implemented in the best possible manner. Gil Sperling announced that DOE hopes to issue the formula for distribution of the Energy Efficiency and Conservation Block Grants very soon, and that funding opportunity announcements and guidance will follow later. He also described the state of the Energy Efficient Appliance Rebate program, which he said could potentially establish a rebate program in every state in the U.S. The issue of whether to extend the rebate only to the purchase of “super-efficient appliances,” rather than to all ENERGY STAR appliances regardless of their market share, has not yet been decided, but DOE is looking closely at the issue.

Genzer informed listeners of several pots of funding for the Department of Housing and Urban Development (HUD) that can be used for energy efficiency improvements, among other improvements. The Energy Efficiency Coalition will be pushing for these funds to be directed to energy efficiency to the greatest extent possible, to ensure that investments made under ARRA continue to resonate in the form of energy savings for years to come.

Genzer also pointed out that, although many laudable programs did not receive specific funding under ARRA, DOE has some leeway to direct money to them. $2.5 billion was appropriated to DOE for research & development purposes, and of that amount only $1.2 billion was allocated for specified purposes (for research on biomass and geothermal technologies). Of the remaining $1.3 billion, DOE intends to put $256 million toward industrial energy efficiency technologies, $106 million of which is for combined heat and power.

Looking Forward

Penney, Genzer and Sperling all agreed that the appropriations in ARRA raise questions about the future of funding for energy efficiency programs. A main concern is to keep these programs functioning after the stimulus funds stop flowing in 2010. Sperling stressed that in order to avoid a collapse of these essential programs which will require substantial effort to build and ramp up, Secretary of Energy Chu has made it “an absolute necessity of the stimulus roll-out” that DOE work toward “transformational efforts … that leave something in the wake of the Recovery Act that can be self-sustaining.”

Sperling elaborated that these could include financing mechanisms that leverage funds to the greatest extent possible, so that ultimately programs will not rely largely on federal appropriations. He indicated that DOE will be working with the Weatherization Trainers Consortium to build its capability to support activities beyond WAP, and become involved in programs to retrofit middle-income residences and perhaps even commercial buildings. He stressed the importance of developing a national training plan and a standardized curriculum to facilitate this effort. Sperling also spoke of a Solutions Center that DOE is developing to serve as a clearinghouse for best practices from around the nation. Penney noted that climate revenues may soon become another source of funding for these energy efficiency programs and ensure their continuity.