FY '05 Budget Fact Sheet

FY 2005 Proposed Budget for Energy Efficiency Programs
Overall funding cut slightly for third year in a row

Summary: The President’s overall fiscal year 2005 budget request for Department of Energy 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 $913 million appropriated
in FY 2002. However, the slow overall decline masks some major changes. Once again the President has
requested major increases for weatherization of low-income homes and for fuel cell vehicles research.
The money for those increases was taken from other energy efficiency programs—thus overall research,
development, and deployment (RD&D) programs in energy efficiency other than the weatherization and
state energy grants programs would be cut 10% from FY 2004; if one excludes the FreedomCar fuel cell
vehicle program as well, remaining RD&D programs would be cut 17% overall in a year.

Why these programs are needed: Our nation has been gripped by a series of energy crises. When
skyrocketing natural gas prices hit last summer, the Secretary of Energy, the National Petroleum Council,
and other experts quickly concluded that the only thing that could be done in the short term is to reduce
demand through energy efficiency. When rolling blackouts and electricity price spikes hit California in
2000-2001, the state undertook a massive campaign to reduce electricity use, which helped avoid further
shortages. This past year marked the thirtieth anniversary of the OPEC oil embargo, and we now import
three times as much oil from the Persian Gulf as we did then. To address these problems we need
research into better technologies and assistance to industry and to consumers in bringing the technologies
into widespread use.

A record of success: Federal energy efficiency programs provide enormous economic and environmental
returns. A 2001 National Research Council report found that the 17 DOE energy efficiency R&D
programs they studied returned nearly $20 to the U.S. economy for every dollar invested. Every federal
dollar spent by the Environmental Protection Agency on Energy Star cuts energy costs an average of $75
and sparks $15 of investment in new efficiency technologies.

Department of Energy program highlights (Interior bill)

•  Building Technologies: Building technologies would be cut by 3% from FY 2004 funding levels,
  while absorbing the Zero Energy Buildings program that used to be funded elsewhere. Although the
  windows R&D program remains intact at $5 million dollars, the other building envelope R&D
  program, on thermal insulation and building materials, would be eliminated. In addition, funding for
  equipment and appliance standards, used for rulemakings and testing procedures, is to be cut by 13%
  (from $10.387 million to $7.8 million). This cut would further delay a number of standards awaiting
  action, and would not allow for additional rulemakings that would be required by the energy bill.
• Industrial Technologies: While the vital Best Practices and Industrial Assessment Centers programs
  receive modest increases in funding (5% and 16%), the Industries of the Future program, which
  works with several energy-intensive industries to improve efficiency, is to be slashed by 53%. In
  addition, two of the crosscutting programs, on gasification and on robotics, were eliminated.
• Federal Energy Management: According to the Alliance report Leading by Example, the federal
  government wastes one billion dollars a year as a result of inefficient energy use in their buildings
  alone. The Federal Energy Management Program has assisted government agencies in combating
  that waste. In fact, the energy bills have been debated in Congress include additional responsibilities
  for this important program. Nonetheless, this program is to be cut by 9% from $19.7 million to $17.9
  million.
• Fuel Cell and Vehicle Technologies: The proposed budget reflects the President’s focus on hydrogen
  and fuel cell vehicles. Fuel cell technologies would receive 19% more than last year (up 66% from
  FY 2002); research in advanced combustion engines and in fuels would be cut by 34% and 59%
  respectively.
• Weatherization and grants: Grants for local groups to weatherize low-income homes would receive
  the largest increase, from $227 million to $291 million (28%). Although this program provides a
  valuable service to low-income homeowners, it does not serve the same purpose as energy efficiency
  R&D programs. Grants to state energy programs and the Clean Cities program would be cut by 7%
  and 36% respectively.
• Energy Star: The Department of Energy’s small portion of the Energy Star program received a
  significant increase (37%) to $5 million.

  Environmental Protection Agency programs (VA-HUD bill)

• Energy Star: The EPA Energy Star program is level-funded in the proposed budget at $50.3 million.
  For the first time, the funding level for the program is clearly stated in a footnote in budget
  justification materials (its funds are divided among multiple, larger budget categories). This should
  help protect the program from internal cuts by the agency.

  Department of Agriculture programs (Agriculture bill)

• Renewable energy and energy efficiency grants: The 2002 Farm Bill provides $23 million a year in
  mandatory funding (which does not need to be appropriated) for loans, loan guarantees, and grants to
  farmers, ranchers, and small rural businesses for renewable energy and energy efficiency projects.
  The proposed budget suggests the mandatory funding cannot be spent, and recommends
  appropriations for this purpose of only $10.77 million.

  Agency for International Development programs (Foreign Operations bill)

• Clean Energy Initiative: AID’s clean energy program would receive $7.5 million, level with FY
  2004, but down from $10 million the year before. This level is too low to sustain the President’s
  Clean Energy Initiative to meet our commitment to increase access to affordable, reliable, clean, and
  efficient energy for sustainable development. Mission funding for clean energy has also been
  shrinking for the last few years.

For more information please contact Alliance policy staff at (202)857-0666 or policyinfo@ase.org.
The Alliance to Save Energy is a coalition of prominent business, government, environmental and
consumer leaders who promote the efficient use of energy worldwide to benefit consumers, the
environment, the economy, and national security.
Updated February 2004