[House Hearing, 107 Congress]
[From the U.S. Government Publishing Office]
NATIONAL ENERGY POLICY: CONSERVATION AND ENERGY EFFICIENCY
=======================================================================
HEARING
before the
SUBCOMMITTEE ON ENERGY AND AIR QUALITY
of the
COMMITTEE ON ENERGY AND COMMERCE
HOUSE OF REPRESENTATIVES
ONE HUNDRED SEVENTH CONGRESS
FIRST SESSION
__________
JUNE 22, 2001
__________
Serial No. 107-50
__________
Printed for the use of the Committee on Energy and Commerce
Available via the World Wide Web: http://www.access.gpo.gov/congress/
house
__________
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____________________________________________________________________________
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COMMITTEE ON ENERGY AND COMMERCE
W.J. ``BILLY'' TAUZIN, Louisiana, Chairman
MICHAEL BILIRAKIS, Florida JOHN D. DINGELL, Michigan
JOE BARTON, Texas HENRY A. WAXMAN, California
FRED UPTON, Michigan EDWARD J. MARKEY, Massachusetts
CLIFF STEARNS, Florida RALPH M. HALL, Texas
PAUL E. GILLMOR, Ohio RICK BOUCHER, Virginia
JAMES C. GREENWOOD, Pennsylvania EDOLPHUS TOWNS, New York
CHRISTOPHER COX, California FRANK PALLONE, Jr., New Jersey
NATHAN DEAL, Georgia SHERROD BROWN, Ohio
STEVE LARGENT, Oklahoma BART GORDON, Tennessee
RICHARD BURR, North Carolina PETER DEUTSCH, Florida
ED WHITFIELD, Kentucky BOBBY L. RUSH, Illinois
GREG GANSKE, Iowa ANNA G. ESHOO, California
CHARLIE NORWOOD, Georgia BART STUPAK, Michigan
BARBARA CUBIN, Wyoming ELIOT L. ENGEL, New York
JOHN SHIMKUS, Illinois TOM SAWYER, Ohio
HEATHER WILSON, New Mexico ALBERT R. WYNN, Maryland
JOHN B. SHADEGG, Arizona GENE GREEN, Texas
CHARLES ``CHIP'' PICKERING, KAREN McCARTHY, Missouri
Mississippi TED STRICKLAND, Ohio
VITO FOSSELLA, New York DIANA DeGETTE, Colorado
ROY BLUNT, Missouri THOMAS M. BARRETT, Wisconsin
TOM DAVIS, Virginia BILL LUTHER, Minnesota
ED BRYANT, Tennessee LOIS CAPPS, California
ROBERT L. EHRLICH, Jr., Maryland MICHAEL F. DOYLE, Pennsylvania
STEVE BUYER, Indiana CHRISTOPHER JOHN, Louisiana
GEORGE RADANOVICH, California JANE HARMAN, California
CHARLES F. BASS, New Hampshire
JOSEPH R. PITTS, Pennsylvania
MARY BONO, California
GREG WALDEN, Oregon
LEE TERRY, Nebraska
David V. Marventano, Staff Director
James D. Barnette, General Counsel
Reid P.F. Stuntz, Minority Staff Director and Chief Counsel
______
Subcommittee on Energy and Air Quality
JOE BARTON, Texas, Chairman
CHRISTOPHER COX, California RICK BOUCHER, Virginia
STEVE LARGENT, Oklahoma RALPH M. HALL, Texas
Vice Chairman TOM SAWYER, Ohio
RICHARD BURR, North Carolina ALBERT R. WYNN, Maryland
ED WHITFIELD, Kentucky MICHAEL F. DOYLE, Pennsylvania
GREG GANSKE, Iowa CHRISTOPHER JOHN, Louisiana
CHARLIE NORWOOD, Georgia HENRY A. WAXMAN, California
JOHN SHIMKUS, Illinois EDWARD J. MARKEY, Massachusetts
HEATHER WILSON, New Mexico BART GORDON, Tennessee
JOHN SHADEGG, Arizona BOBBY L. RUSH, Illinois
CHARLES ``CHIP'' PICKERING, KAREN McCARTHY, Missouri
Mississippi TED STRICKLAND, Ohio
VITO FOSSELLA, New York THOMAS M. BARRETT, Wisconsin
ROY BLUNT, Missouri BILL LUTHER, Minnesota
ED BRYANT, Tennessee JOHN D. DINGELL, Michigan
GEORGE RADANOVICH, California (Ex Officio)
MARY BONO, California
GREG WALDEN, Oregon
W.J. ``BILLY'' TAUZIN, Louisiana
(Ex Officio)
(ii)
C O N T E N T S
__________
Page
Testimony of:
Clark, Jordan, President, United Homeowners Association...... 104
Cooper, Josephine S., President, Alliance of Automobile
Manufacturers.............................................. 69
Garman, Hon. David K., Assistant Secretary for Energy
Efficiency and Renewable Energy, U.S. Department of Energy. 13
Hoover, Frederick H., Jr. Director, Maryland Energy
Administration, on Behalf of the National Association of
State Energy Officials..................................... 16
Nadel, Steven, Executive Director, American Council for an
Energy-Efficient Economy................................... 46
Nemtzow, David M., President, Alliance to Save Energy........ 74
O'Hagen, Malcolm, President, National Electrical
Manufacturers Association.................................. 62
Peterson, Dean E., Center Leader, Los Alamos National
Laboratories, Material Science Technology-Superconductivity
Technology Center.......................................... 93
Rodgers, Mark E., Chief Executive Officer, Smartsynch, Inc... 90
Silva, Patricio, Project Attorney, Natural Resources Defense
Council.................................................... 96
Swofford, Gary, Vice President and Chief Operating Officer--
Delivery, Puget Sound Energy............................... 82
Wagner, Mark F., Director, Johnson Controls, Inc............. 57
Material submitted for the record by:
American Chemistry Council, prepared statement of............ 128
Chevron Energy Solutions, prepared statement of.............. 135
Farrar, Stephen P., Director of International Business,
Guardian Industries Corp., prepared statement on behalf of
the Primary Glass Manufacturers Council.................... 125
Kneiss, Sharon, Vice President for Regulatory Affairs,
American Forest & Paper Association, prepared statement of. 134
(iii)
NATIONAL ENERGY POLICY: CONSERVATION AND ENERGY EFFICIENCY
----------
FRIDAY, JUNE 22, 2001
House of Representatives,
Committee on Energy and Commerce,
Subcommittee on Energy and Air Quality,
Washington, DC.
The subcommittee met, pursuant to notice, at 9:33 a.m., in
room 2123, Rayburn House Office Building, Hon. Joe Barton
(chairman) presiding.
Members present: Representatives Barton, Burr, Whitfield,
Bryant, Walden, Tauzin (ex officio), Boucher, Markey, Barrett,
and Dingell (ex officio).
Staff present: Jason Bentley, majority counsel; Joe Stanko,
majority counsel; Sean Cunningham, majority counsel; Peter
Kielty, legislative clerk, Andy Black, policy coordinator; Bob
Meyers, majority counsel; Sue Sheridan, minority counsel; and
Erick Kessler, minority professional staff.
Mr. Barton. The subcommittee will come to order.
Today we are going to hold another in our series of
hearings on our National Energy Policy. Today's focus is going
to be on conservation and energy efficiency, which have to be
an important part of any comprehensive and balanced plan.
Already our Nation is among the most energy efficient
nations in the world. Gains in the last 25 years in energy
conservation have been tremendous. They need to continue and
improve.
With the electricity shortage that we have already seen on
the Western coast, we know that the need for conservation is
still prevalent. The Federal Government must take the lead in
encouraging conservation.
We should further increase our energy savings at Federal
facilities. For example, Federal buildings should decrease
their energy consumption per square foot, as we had in the
short-term bill dealing with the California energy crisis.
Energy performance savings should also be encouraged and
expected in Federal contracts.
We should expand some of these new applications, these new
conservation measures in the applications. Also, new technology
should be fostered which might help reduce energy loss and help
Americans save energy themselves.
We have witnesses today to discuss many of these issues. I
want to welcome you, the first two on our first panel. I
particularly want to welcome the Honorable David Garman, who is
a newly confirmed member of the administration. I am glad to
have you here.
The President's plan includes many good provisions in this
area, some of which do not require congressional action. As the
administration indicated, the Federal Government should
consider whether it is reasonable to increase the fuel economy
of cars and light trucks. Corporate average fuel economy, or
CAFE, deserves a new look with the explosion in sales of
vehicles which have been classified as light trucks. Light
trucks have a lower mile-per-gallon average than do cars. These
so-called light trucks are actually heavier than the cars that
have the higher standard.
Last week, I asked the Secretary of Energy what a
reasonable CAFE standard might be. To his credit, he said the
administration is working on that answer, but he really didn't
have an answer for us. I was with the Vice President earlier
this week in Michigan, with some of the folks in the automobile
industry, and this was a topic that was under consideration. I
am going to ask the witnesses today what a reasonable CAFE
standard might be, also.
Not all the increases that have been put into legislative
form appear to be reasonable. Some appear to be too stringent.
Factors that must be carefully considered are the safety of the
automobile, the energy savings from the CAFE increase, the
impact upon the work force and the impact upon the economy, and
the consumer's choice in the marketplace.
Today, some consumers already vote with their pocketbooks
and purchase more fuel-efficient cars. However, some are
clearly comfortable with the low-fuel economy of some SUVs.
This is a delicate issue, obviously, politically and, most
importantly, in the real world. Chairman Tauzin and I encourage
members to start taking a fresh look at fuel economy, but to do
it in a reasonable fashion.
In the next several weeks, the subcommittee is going to
begin to consider legislative elements of a comprehensive
energy plan. Upon return from the 4th of July recess, it is
extremely reasonable to--if you can be extreme and reasonable
at the same time, to expect action on conservation,
hydroelectric relicensing, nuclear power, clean coal technology
and more. And that is just in this subcommittee.
Very soon thereafter, we hope to move a comprehensive
electricity restructuring bill with an important focus on
transmission infrastructure, the so-called ``rules of the
road.''
Finally, I wish to make a great announcement. We had the
congressional charity baseball game last night. Mr. Largent is
not here. He is probably recuperating, but he pitched a
complete 9 to 1 game in which we atoned, we being the
Republicans, atoned for the thrashing the Democrats gave us in
last year's game.
I am trying to think. Mr. Doyle on the subcommittee was in
that game. He was a catcher and did admirably for the
Democratic side. Mr. Stupak pitched; although he is not on the
subcommittee, he is on the full committee. So we had a number
of our committee and subcommittee members active in the game.
Mr. Pickering played third base for the Republicans.
It was a memorable game. And Mr. Shimkus. Mr. Burr has
pointed out, well, yours truly was the has-been coach at third
base and managed to not trip over the chalk lines trotting back
and forth to the dugout. So it was a successful game in that
regard.
Anyway, we had a lot of fun and raised a lot of money. And
as far as I know, nobody got hurt on either side.
Anyway, with that, I would like to recognize my ranking
member, Mr. Boucher of Virginia, for an opening statement.
[The prepared statement of Hon. Joe Barton follows:]
Prepared Statement of Hon. Joe Barton, Chairman, Subcommittee on Energy
and Air Quality
Today, the Energy & Air Quality Subcommittee holds another in its
series of hearings on national energy policy. Today we focus on
conservation and energy efficiency, two very important parts of a
comprehensive and balanced plan.
Our Nation is among the most energy-efficient Nations in the world.
Our gains have been tremendous, but they must continue. With the
electricity shortages out West, many Americans understand the need for
conservation unlike ever before.
The Federal government must take the lead in encouraging
conservation. First, we should further increase our energy savings at
Federal facilities. Federal buildings should decrease energy
consumption per-square-foot, as we had in the short-term bill dealing
with the California energy crisis. Next, energy performance savings
contracts should be expanded to new applications. Also, new
technologies should be fostered which might help reduce energy loss and
help Americans save energy themselves.
We have witnesses today to discuss many of these issues, and I
welcome you. I particularly want to welcome David Garman, a newly
confirmed member of the administration. Welcome to the Subcommittee.
The President's plan includes many good provisions in this area, some
of which do not require Congressional action.
As the administration's plan indicated, the Federal government
should consider whether it is reasonable to increase the fuel economy
of cars and light trucks. Corporate Average Fuel Economy standards, or
CAFE, deserve a new look with the explosion in sales of vehicles
classified as light trucks. Light trucks have a lower miles-per-gallon
average than do cars, but they are heavier.
Last week I asked the Secretary of Energy what a reasonable CAFE
standard was. He said the administration is working on that answer. I
will ask many of the witnesses today what a reasonable CAFE standard
is, too. Not all increase proposals are reasonable, certainly. Factors
that must be carefully considered are the safety of the automobile, the
energy savings from a CAFE increase, the impact upon the workforce, and
the impact upon the economy and the consumers in the marketplace for
vehicles.
Today, some consumers already vote with their pocketbook and
purchase more fuel-efficient cars. Some, however, are clearly
comfortable with the low fuel economy of some SUVs. This is a delicate
issue politically and, more importantly, in the real world. Chairman
Tauzin and I encourage Members to start taking a fresh look at fuel
economy, but to do so reasonably.
In the next several weeks, this Subcommittee will begin to consider
legislative elements of a comprehensive energy policy. Upon return from
the 4th of July recess, expect action on conservation, hydroelectric
relicensing, nuclear power, clean coal, and more. Very soon thereafter,
we will move to electricity restructuring, with an important focus on
our transmission infrastructure and rules of the road.
After the great Congressional Baseball Game last night, at which
Mr. Largent starred in his final appearance, Members should be rested
and ready for the coming action. It's time to roll up our sleeves on a
bipartisan basis and get to work. Today's hearing will help us get on
our way.
Mr. Boucher. Thank you very much.
Mr. Chairman, I appreciate your conducting today's hearing
on conservation and energy efficiency as part of our series of
hearings on the development of a comprehensive National Energy
Policy.
In my view, new approaches to promote conservation and
efficiency should be a cornerstone of our national energy
strategy. Energy savings alone will not suffice. We must also
take steps to accommodate new energy supplies. But conservation
and new efficiencies can make an impressive contribution to a
successful energy strategy, and they must be a fundamental part
of it.
Over the past quarter century, the Nation has become far
more energy efficient. Our per capita energy consumption today
is almost the same as in 1973, while over that same period of
time, our per capita economic output has increased by 75
percent.
While much of this improvement is attributable to
underlying economic transformations, such as the arrival of an
information economy, which is far less energy intensive than is
traditional manufacturing, it is generally believed that more
than one-half of the total improvement is due to energy
efficiency advances.
And much more can be done. It is variously estimated that
the adoption of new energy efficiency policies could lower
national energy use between 20 percent and 33 percent over the
next 2 decades. These are savings that are well worth pursuing.
Conservation efforts can produce even greater savings beyond
these energy efficiency savings.
As the chairman knows, I am a proponent of policies that
will promote greater production. And let me say this morning
that I am very pleased by the bipartisan efforts that we have
under way today to craft legislation that will facilitate the
arrival of new coal-fired electricity generating units and
addressing in a substantial way the primary concerns of the
nuclear power industry. These conservations are productive, and
I want to thank the chairman for the bipartisan spirit in which
he is approaching the construction of legislation that will
establish a comprehensive national energy strategy.
But, Mr. Chairman, I also want to stress this morning that
I personally have an equal commitment to the adoption of broad
new measures that will encourage greater energy efficiency and
greater energy conservation.
The American public is expecting this committee to adopt
energy savings policies. A recent national opinion survey
revealed that by a margin of 68 percent to 21 percent, the
public favors energy savings over new production as the
preferred means of meeting our Nation's energy needs.
I have never believed that we should govern by poll
results, but I don't think we should ignore them either,
particularly when they are as compelling as this national
survey.
While there is much that I personally support in the
administration's energy policy recommendations, I will have to
confess that I have a measure of disappointment in the overall
balance of the report. It simply doesn't focus enough on energy
savings, new efficiencies and conservation as a means of
meeting the Nation's energy needs. I am very disappointed in
the recommendation from the administration that funding for the
Department of Energy's energy efficiency research and
development and technology deployment programs be reduced next
year in fiscal year 2002 by 30 percent as compared to the
funding level for the current fiscal year. These programs
deserve funding increases, not funding reductions.
I look forward to the recommendations from our witnesses
this morning of constructive steps that we should take in
adopting forward-looking energy efficiency and energy
conservation policies which will buildupon our national success
over the last quarter century in becoming a more energy-
efficient Nation.
And I look forward to working with you, Mr. Chairman, and
with members of this committee on both your side and our side
as we seek to place in our legislation substantial, broad, new
measures that will promote energy savings.
Thank you and I yield back.
Mr. Barton. Thank you, Congressman Boucher. We now
recognize the vice chairman of the full committee, Congressman
Burr of North Carolina, for an opening statement.
Mr. Burr. I thank the chairman. I have always said that the
sign of a good leader is a person who knows his limitations.
Mr. Chairman, your decision to coach, rather than to play this
year, is a sign of that great leadership that we found as a
quality of yours.
Mr. Chairman, Mr. Boucher, I want to thank you for holding
this hearing on energy efficiency and conservation. The work of
this committee in these two areas of the energy sector have to
be examined and addressed first before we move forward with
developing new sources of energy. I applaud the fact that the
two of you recognize this by scheduling this hearing as we work
toward developing a long-term domestic energy policy.
The need for a long-term energy policy is simple. We are
experiencing a fundamental imbalance between energy supply and
consumer demand that poses a tremendous risk to our Nation's
well-being, our standard of living, and to a great extent our
national security.
If we continue energy production and consumption at a rate
equal to the one set in the 1990's, by 2020 we will be
experiencing a shortfall of supply and demand of nearly 50
percent.
That shortfall, caused in part by a booming high-tech
economy, can be made up in only three ways: import more energy,
improve energy efficiency even more than expected, and increase
domestic energy supply.
As I stated earlier, today's hearing will focus on the
second of these two areas, improving energy efficiency even
more than expected. President Bush's energy policy devotes 42
of his 105 recommendations to energy efficiency and
conservation.
The easiest and most productive way to achieve recognizable
conservation and efficiency goals is to provide as much
information to the consumers as possible. Among other things,
the President recommends continued and expanded promotion of
the Energy Star program, a joint effort of the Environmental
Protection Agency and the Department of Energy that promotes
the most energy-efficient products on the market.
Energy Star currently applies only to major appliances, but
the President has recommended that the Energy Star
classification be expanded to a broader range of products.
Energy efficiency can be improved by establishment of a minimum
energy efficiency standard.
In 1987 and 1988, Congress established minimum energy
efficiency standards for major appliances. These standards
apply to manufacturers, but not to consumers. New standards
recommended by the President, which simulate energy savings
that benefit the consumer, reduce fossil fuel consumption, thus
reducing air emissions.
While the initial cost of these energy-efficient appliances
might be more than traditional appliances, access to more
information will allow customers to better comprehend the long-
term savings on their energy bills. These long-term savings
will compensate the extra money spent on the more energy-
efficient products.
I look forward to the testimony of our panelists today,
especially the comments from our first panel.
Now, Mr. Chairman, as you can see, I have not prepared my
testimony on a roll of toilet paper or anything like last year
this year. And while I am still suspect about the 1.5-gallon-
per-flush toilet, I hope that our panelists will address the
Clinton Administration's rulemaking on washing machines, as
well as tax credit legislation on energy-efficient appliances.
Again, Mr. Chairman, Mr. Boucher, I want to thank both of
you for holding this hearing. I do look forward to working with
both of you throughout the summer, and probably the fall, as we
look at all aspects of a comprehensive energy policy that is
very well needed in this country.
I yield back.
[The prepared statement of Hon. Richard Burr follows:]
Prepared Statement of Hon. Richard Burr, a Representative in Congress
from the State of North Carolina
Mr. Chairman and Mr. Boucher, I want to thank you for holding this
hearing on energy efficiency and conservation. The work of this
Committee in these two areas of the energy sector have to be examined
and addressed first before we more forward with developing new sources
of energy. I applaud the fact that the two of you recognize this by
scheduling this hearing first as we work towards developing a long-
term, domestic energy policy.
The need for a long term energy policy is simple. We are
experiencing a fundamental imbalance between energy supply and consumer
demand that poses a tremendous risk to our nation's economic well-
being, our standard of living and, to a great extent, our national
security. If we continue energy production and consumption at a rate
equal to the one set in the 1990s, by 2020 we will be experiencing a
shortfall of supply and demand of nearly 50%. That shortfall, caused in
part by a booming high tech economy, can be made up in only three ways:
import more energy; improve energy efficiency even more than expected;
and increase domestic energy supply. As I stated earlier, today's
hearing will focus on the second of these two areas' improving energy
efficiency even more than expected.
President Bush's Energy Policy devotes 42 of its 105
recommendations to energy efficiency and conservation. The easiest and
most productive way to achieve recognizable conservation and efficiency
goals is to provide as much information to the consumers as possible.
Among other things, the President recommends continued and expanded
promotion of the Energy Star Program, a joint effort of the
Environmental Protection Agency (EPA) and the Department of Energy
(DOE) that promotes the most energy efficient products on the market.
Energy Star currently applies only to major appliances, but the
President has recommended that Energy Star classification being
expanded to a broader range of products. Energy efficiency can be
improved by the establishment of minimum energy efficiency standards.
In 1987 and 1988, Congress established minimum efficiency standards for
major appliances. These standards apply to manufacturers, but not
consumers. New standards recommended by the President would stimulate
energy savings that benefit the consumer, and reduce fossil fuel
consumption, thus reducing air emissions. While the initial cost of
these new energy efficient appliances might be more than traditional
appliances, access to more information will allow customers to better
comprehend the long term savings on their energy bills. These long term
savings will compensate the extra money spent on the more energy
efficient product.
I look forward to the testimony of the panelists today, especially
the comments from our first panel.
Now, Chairman Barton, as you can see I have not prepared my
testimony on a roll of toilet paper or anything like that this year.
And while I am still suspect about the 1.5 gallon per flush toilet, I
hope that the panelists will address the Clinton Administration's
rulemaking on washing machines, as well as tax credit legislation on
energy efficient appliances.
Again, Mr. Chairman, Mr. Boucher, thank you for holding this
hearing. I look forward to working with both of you over the Summer and
early Fall on this and all the other aspects of a National energy
policy.
Mr. Barton. I thank the gentleman from North Carolina. I
would like to comment on his comment that I showed leadership
by deciding not to play. I think Mr. Burr has shown great
leadership by, the entire time he has been in the Congress,
making no attempt to even come out for the game.
Mr. Burr. Clearly, Mr. Chairman, knowing one's limitations
does display I have shown tremendous leadership.
Mr. Barton. That is very true.
We would like to recognize the distinguished full committee
chairman if he wishes to make an opening statement.
Chairman Tauzin. Thank you, Mr. Chairman. Again,
congratulations for last night, a great game.
I want to congratulate you perhaps on something more
important than a great victory last night and that is on the
decision to make conservation the first major emphasis of the
major package.
Mr. Barton. Of course, let us be honest. The decision to
make this the first bill was made at a higher level than the
subcommittee chairmanship.
Chairman Tauzin. I want to thank the chairman for being a
good follower as well as a good leader.
But the bottom line is that it is important that we make
this statement that the demand reduction is, indeed, not only a
critical element of the National Energy Policy that we hope to
enact this year, but that it should be the first step we make,
it should be the first emphasis we literally develop in the
whole package of both the supply and delivery and market
improvements we make in the energy markets of our country.
My own secretary of natural resources, Jack Caldwell, was
in town this week to talk on the CARA bill. But I congratulated
him because in Louisiana's recommendations to the Vice
President, he led off with demand reduction, emphasizing that
Louisiana was either first or second in per capita energy
consumption in the Nation, because we literally have so many
primary refining and manufacturing facilities that use natural
gas, for example, as raw material, not just as an energy
source, to make fertilizer for our country and for other
important plastics and other products for Americans.
As a result, as an energy consumer, we were the first to
feel the effects of too high prices of natural gas when 7 out
of 12 of our petrochemical plants had to shut down because of
that high price. So we led off our recommendations to the Vice
President with a request that the policy include a significant
effort at more demand reduction.
But let us be very clear about this. Just last week, the
Wall Street Journal reported in a half-page ad on energy
efficiency at IBM, IBM cut their energy bills by 25 percent.
They have saved over $527 million over the past 10 years.
The Federal Government, which is the single largest energy
user in the country, has already cut its energy consumption by
20 percent since 1985 and saved the taxpayers like $2 billion
in 1999 alone. That is pretty good stuff, all using energy
efficiency already.
And as technology advances and we develop smarter processes
and better ways to use energy efficiently, we are going to
continue to see those kinds of improvements. Our job as a
committee is to accelerate and to emphasize that facet of the
energy picture in our country.
The economic prosperity we enjoy today is due in large part
to the fact that we are becoming more and more energy efficient
in America. During the time, for example, the economy grew 126
percent, energy use grew only 26 percent in the country. That
is a pretty good gain.
Energy intensity, the amount of energy required to produce
a dollar of gross domestic product, has steadily declined in
America. The reason: accommodation of technology improvement,
better management practices, and putting them both to work.
The administration cites, for example, automobiles, which
use roughly 60 percent of the gasoline they did in the 1970's
per mile driven. That is good improvement.
Could we do better? You bet. Home refrigerators use about a
third of the electricity they did in 1972. That translates into
enormous savings for consumers and for our energy future.
You know, the House is not going to be willing to produce
oil and gas from the Gulf of Mexico just because it is 130-
some-odd miles from the panhandle of Florida when it is right
adjacent to fields that are major producing fields for this
country. The House is going to turn down the ability of America
to take perhaps 7 trillion cubic feet of natural gas and nearly
2 billion barrels of oil that are available for us, easily
obtained without environmental risk any different from the
wells next-door, south of Louisiana. If we are going to shut
down a field that was not under a moratorium, if we are not
going to add more natural gas to the American supply market, we
had better pass a doggoned good conservation bill here or we
are in deep trouble.
Ninety-two percent of the new power plants--Mr. Chairman,
you know this--say they are going to need natural gas, and we
are not producing anymore. Where are we going to get it from?
If we don't emphasize conservation in a big way, we are in
trouble. Even if we emphasize it in a big way, I think we are
in trouble. So we had better emphasize it in a very big way.
Mr. Chairman, I want to thank you and the witnesses who
have come to testify today. And I especially want to
congratulate our witness, Mr. Garman, on his recent appointment
as Assistant Secretary for Energy Efficiency and Renewable
Energy.
I want to pledge to you and Mr. Dingell and Mr. Boucher,
and to your staffs, that in the next couple weeks, we are going
to spend an awful lot of good time together. And this committee
is going to do what it always does in a bipartisan fashion, we
are going to produce a good energy policy for the country, and
we will start here with conservation.
[The prepared statement of Hon. W.J. ``Billy'' Tauzin
follows:]
Prepared Statement of Hon. W.J. ``Billy'' Tauzin, Chairman, Committee
on Energy and Commerce
I would like to thank Chairman Barton for holding this important
hearing in our series on a National Energy Policy. Any serious,
comprehensive National Energy Policy must address energy efficiency and
conservation. It is unfortunate, but perhaps necessary, that high
energy prices seem to be the driver for advancements in energy
efficiency. As Americans, we are innovative when we have to be, but
even more so when there is a dollar to be made or saved.
Just this week in the Wall Street Journal, there was a half-page ad
on energy efficiency at IBM. They cut their energy bills by 25% and
saved $527 million dollars over the past ten years by improving the
efficiency at their facilities.
The Federal Government, the single largest energy user in the
country, has cut its energy consumption per gross square foot by 20%
since 1985, and saved taxpayers more than $2 billion in 1999 alone--all
through improving energy efficiency. As technology advances and we
develop smarter processes, the potential for saving both energy and
money grows exponentially.
The economic prosperity we enjoy today is due in large part to
improvements in efficiency over the past 30 years. During that time,
the economy grew 126% while energy use only grew 26%. Energy intensity,
the amount of energy required to produce $1 of gross domestic product,
has steadily declined. The reason: a combination of technological
improvements, better management practices, and putting these
technologies and practices to their best use.
The Administration cites, for example, automobiles, which use
roughly 60% of the gasoline they did in the 1970's per mile driven. New
home refrigerators use about one-third the electricity they used in
1972. That translates into substantial savings for consumers.
The time is ripe for a renewed look at our Nation's energy
efficiency programs. While the marketplace is perhaps the best driver
for efficiency, it is not always perfect. There are technologies and
practices that can be accelerated into the market with appropriate
funding. There are conditions the Federal government can place upon
itself to meet efficiency requirements, and there is information we can
give consumers that will allow them to better manage their energy
usage.
The first pieces of legislation this Committee will produce of the
President's National Energy Policy will be on conservation and
efficiency. I look forward to working closely with the ranking Members,
Mr. Dingell and Mr. Boucher, on the elements of that package. All of
the Committees have been asked by the House Leadership to produce
energy legislation in the coming month. As the primary Committee of
jurisdiction for energy policy, we plan to deliver. July will be a busy
month.
I thank all of our witnesses for coming to testify here today. I
especially want to congratulate our DOE witness, Mr. Garman, on his
recent appointment as Assistant Secretary for Energy Efficiency and
Renewable Energy. I look forward to hearing all of your testimonies.
Mr. Barton. Thank you, Chairman Tauzin.
The Chair will recognize the distinguished gentleman from
Oregon, Mr. Walden, for an opening statement.
Mr. Walden. Thank you very much, Mr. Chairman. I intend to
keep my remarks short.
I think we have heard a lot of the data already that is out
there about the importance of energy conservation. What has
taken place already in this country is, people have responded
to the marketplace and looked forward to higher prices. If
indeed, as the chairman of the full committee says, we are not
going to explore, not going to develop domestically and,
indeed--in fact, take more areas out of production, put more
restrictions around our domestic ability to supply our own
needs, then it seems to me in the supply demand market the
choice is higher prices.
That is going to put pressure on conservation. It is going
to put, ironically, pressure back on this Congress to do
something about high prices at the same time this Congress--
some, have taken action to decrease supply. I don't get how you
reverse the laws of economics. You can't have it both ways.
So, Mr. Chairman, I am a strong advocate of conservation
measures. I believe very strongly in the need for increasing
alternative sources of energy.
In our region and in my district there is a lot of
development going on, upwards of 2000 megawatts of power of
wind turbines which work well in a hydro system because it
helps shape the power curve. It allows us to store water to be
released later when the wind is not blowing. So there is a
unique partnership, at least in the Northwest, in terms of how
it can be used elsewhere in the country. I think there is other
work that can be done on solar and geothermal research and some
of the fossil fuel research.
So I am actually pleased that yesterday we restored some of
the funding, that the administration proposed a cut, in some of
these areas. So as we work together, I hope we come out with a
balanced program that encourages higher standards of
conservation in the vehicles that we drive, in the appliances
that we use, but also respects the fact that we don't want to
price people out of the market and create an inability for them
to be able to afford those appliances or drive those vehicles.
So it is a tightrope we walk, but it is one we must.
Mr. Chairman, I look forward to the testimony today and
thank you for leading with conservation. I think it is
critical.
Mr. Barton. I thank the gentleman from Oregon. And i
welcome another veteran of the congressional baseball game, Mr.
Bryant, who played in the game last night and, if I heard him
correctly, told Mr. Oxley after the game he might be
considering retirement from next year's game. I hope I heard
that incorrectly, but I do believe I heard something along
those lines.
Mr. Bryant. I hoped not to make a formal record of this,
but I did make a pledge to myself--when Mel Watts struck me out
the first time--I was hanging it up. So that event occurred
last night. And I asked my office this morning what was the
only thing that Cal Ripkin and I had in common, and that is, we
are both retiring this year. I asked Oxley for the opportunity
to make a victory lap around the outfield, and he held me back
and would not let me do that.
Mr. Barton. The fact that you think you could make a
victory lap around the outfield is commendable. I could watch
you make a victory lap.
Mr. Bryant. Actually, I was talking about driving around
the outfield in a very efficient automobile, I might add, fuel
efficient.
But I also want to add my appreciation for your having this
hearing and talking about, and I think actually putting into
action, a plan to----
Mr. Barton. Would the gentleman yield? We need to make sure
everybody understands you indicated to Oxley you weren't going
to play in the baseball game next year. You are retiring from
the baseball game, you are not retiring from the Congress. We
need to make that clear.
Mr. Bryant. That is right.
Mr. Barton. The Democrats over here, their eyes were
lighting up.
Mr. Boucher. Mr. Chairman, in all fairness, my eyes were
only lifting in surprise, not in pleasure. I would very much
like to see my colleague remain here.
Mr. Barton. All right.
Mr. Bryant. Thank you. I have a very yellow dog Republican
district, so it is--I am not sure there is much hope there even
if I were to retire from that. But to be clear, it is just the
baseball team.
But anyway, I do appreciate your advancing a plan to bring
forth a conservation bill. I think it sends the right signal to
America. I think we all agree that we cannot conserve our way
out of--you know, out of an energy crisis; but we must have a
broad, comprehensive plan that includes all aspects of the use
of power and energy, and certainly, conservation and more
efficient use of our fuel is a key component of that
comprehensive, national plan that we have.
Quickly, I want to point out two things that I am involved
with personally that will be showing up somewhere in this
process of energy bills. Both have to do with diesel fuel. One
is an instance of being more efficient in our use of diesel
fuel.
I don't know how many of you--I am sure most of you travel
the highways and stop at truck stops occasionally, or drive by
and see just hundreds and thousands of trucks that are sitting
there, particularly overnight, running their engines and using
up diesel fuel and sending out emissions into the air. And we
wonder, why does this have to happen?
There are technologies being developed today that are
workable, particularly in the area of truck stops, that--where
auxiliary power can be used to energize these trucks and
provide the air conditioning and television and telephones and
all those things that ordinarily these truckers keep their
engines running all night to have.
This would result in a great savings, this type of
technology would, in terms of what is going into the air,
polluting the air, as well as the cost of fuel and saving fuel.
That will be an amendment I will make at some point along the
way in a conservation bill.
Second, one that I am cosponsoring with my colleague from
Tennessee, Bart Gordon, regarding raising the standards--
actually, the EPA has already set a higher standard for
emissions in terms of diesel fuel itself, but actually they are
phasing that in over a number of years. That makes no sense, in
many ways, to everybody involved in this in terms of--if we are
going to convert to a higher standard, let us go ahead and do
that at one time so that we don't have to have additional
equipment, two sets of pumps, and perhaps create confusion and
put the wrong type of fuel into the trucks and the engines that
will be using this more efficient diesel fuel.
So we will be adding that to something along the way also.
I think all of the--both of these ideas are win-win-win-win
type situations for all involved. So with that, again thank you
for holding this hearing, and I will yield back the balance of
my time.
Mr. Barton. We thank the gentleman from Tennessee.
Seeing no other members present that wish to make an
opening statement, the Chair would ask unanimous consent that
all members not present have the requisite number of days to
put a formal opening statement in the record. Is there an
objection to that? Hearing none, so ordered.
[Additional statement submitted for the record follows:]
Prepared Statement of Hon. Edward J. Markey, a Representative in
Congress from the State of Massachusetts
Thank you, Mr. Chairman. Let me begin by commending you for calling
today's hearing.
Yesterday, the House of Representatives voted 247-164 to bar
drilling off of the Florida coast, and it voted 242-173 to bar drilling
in National Monuments. At the same time, the House also voted 216 to
194 to prevent any further delay in enforcing rules adopted by the
Clinton Administration to require mining companies to pay for the full
cost of environmental cleanups on federal lands.
These votes reflect the very strongly held views of the American
public that we should not be sacrificing our nation's environmental
heritage to help the oil and gas industries. A New York Times/CBS poll
released yesterday shows that only 33% of the public favors the Bush
Administration's energy plan, while 55% oppose it. 53% of the public
believes that the U.S. should abide by the Kyoto Treaty on Global
Climate Change, while only 32% agree with the President's position
rejecting the treaty. 55% of the public believes that protecting the
environment is more important than increasing energy production, while
only 29% feel that energy production is more important.
The public also recognizes the importance of energy conservation
and efficiency. According to the Times poll, 68% of the public agrees
that encouraging efficiency and conservation should be a higher
priority than increasing oil and gas production. 81% of the public
would support stronger fuel efficiency standards for cars and trucks,
with 66% still supporting such stronger standards even after they were
told that they would result in higher prices to buy a new vehicle.
I believe that the American public is actually quite wise in their
assessment of the situation that we face. They know that our nation's
competitive advantage against OPEC is not in oil drilling. We can never
match the huge oil reserves of Saudi Arabia and the other OPEC nations.
Our advantage is that we are the world's technological giant. If we can
harness the innovative and entrepreneurial genius of our nation to
making ourselves more energy efficient, we can bring OPEC to its knees.
How do we do this? First, we need to create a Conservation and
Renewable Energy public benefits fund to provide $1 billion annually
for efficiency, conservation and solar, wind and other renewables.
Second, we need to strengthen fuel efficiency standards for cars and
light trucks, including SUVs and minivans. Third, we need tax credits
for investments in more energy efficient buildings, homes, vehicles,
and appliances. Forth, we must dramatically increasing funding for the
Department of Energy research into innovative new efficiency
technologies. Fifth, we must require the Energy Department to issue
stronger minimum efficiency standards for a wide array of electricity-
consuming appliances. Sixth, we must demand that the federal government
be required to become more efficient in its consumption of energy.
Seventh, we must help state and local governments make schools and
other public buildings more efficient.
We believe that these proposals form the core of what is needed to
help America exploit technology to reduce its energy consumption. We
recognize, of course, that increasing energy production is necessary--
consistent with protecting the environment. That is why we also support
incentives for increasing production from marginal wells, construction
of a natural gas pipeline in Alaska, and continued exploration and
production on those public lands which are less sensitive and have been
set aside for oil and gas production.
I look forward to today's hearing, Mr. Chairman. I was particularly
heartened to read your remarks in today's papers indicating that you
agree that ``a `just say no' approach [on CAFE standards] is just not
going to be viable this year'' and that ``it makes sense to try to
conserve.'' I could not agree more and I look forward to working with
you and other Members of the Subcommittee as we prepare to legislate in
this important area.
Mr. Barton. Okay. We would like to welcome our first panel.
We have the Honorable David Garman, who is the Assistant
Secretary for Energy Efficiency and Renewable Energy at the
U.S. Department of Energy; and we have Mr. Frederick Hoover,
who is the director of the Maryland Energy Administration, who
is here on behalf of the National Association of State Energy
Officials.
Gentlemen, we welcome you. Your statements are in the
record in their entirety.
We are going to start with our Federal witness, Mr. Garman.
We will give you 7 minutes to summarize your testimony, and
then we will give Mr. Hoover the same 7 minutes, and then we
will ask you some questions. Welcome to the subcommittee.
STATEMENTS OF HON. DAVID K. GARMAN, ASSISTANT SECRETARY FOR
ENERGY EFFICIENCY AND RENEWABLE ENERGY, U.S. DEPARTMENT OF
ENERGY; AND FREDERICK H. HOOVER, JR. DIRECTOR, MARYLAND ENERGY
ADMINISTRATION, ON BEHALF OF THE NATIONAL ASSOCIATION OF STATE
ENERGY OFFICIALS
Mr. Garman. Thank you, Mr. Chairman, and members of the
committee. I will try to take less than 7 minutes, if possible.
It is very important and notable that you are starting out
your first hearing on this very important subject of energy
efficiency. Energy efficiency is, of course, a critical
component of the administration's National Energy Policy. As
has been pointed out, of the 105 recommendations contained in
the policy, more than 20 directly or indirectly address energy
efficiency and another 16, refer to renewable energy.
By implementing these recommendations, our Nation will
continue the trend that has begun on decreasing energy use per
dollar of GDP while improving our standard of living and
protecting the environment.
My office is responsible for DOE's research, development,
demonstration and deployment of advanced energy technologies
and practices. We are quickly working to implement the
recommendations contained in the President's National Energy
Policy.
For example, the policy calls for a review of current
funding and historic performance of the Department of Energy's
Office of Energy Efficiency and Renewable Energy Programs.
Within 12 days after I was sworn in, we were conducting public
meetings at various locations across the Nation in an effort to
receive public comments on the objectives of our energy
efficiency programs, the objectives of our future programs,
program implementation, whether or not our programs were
achieving their intended objectives, and new ideas for public-
private partnerships.
With the benefit of public comment, we are now proceeding
with a top-to-bottom strategic review of all of our 31 programs
to assess their performance and potential to be complete by
September 1.
Our review will complement a National Academy of Sciences'
review that is also under way, studying some of our energy
efficiency programs, and that review is expected to be released
in mid-July. Based on these reviews, we will be in a position
to propose appropriate levels of funding for our programs in
the future, as well as to continue to engage the Congress as it
concerns spending levels for fiscal year 2002. It is our aim to
promote a diverse portfolio of activities that are performance-
based and modeled on public-private partnerships.
Let me cite just a couple of examples of what we have
accomplished so far to illustrate why I am enthusiastic about
our capacity to fulfill many of the recommendations contained
in the President's National Energy Policy document.
In the transportation sector in our government, the
investment in our government/industry partnership for new
generation of vehicles is paying off. Hybrid electric drive
options will be offered by each of the three automakers in the
2003-2004 timeframe: Dodge Durango in 2003, Ford Escape in
2003, Chevrolet Silverado in 2004, and Ford Explorer in late
2004.
In general, these configurations of hybrid vehicles will
deliver equal or better performance while also improving fuel
economy between 15 and 35 percent.
In our industrial programs, through cost-shared R&D on
precompetitive technologies, the Department has helped develop
over 140 technologies that are now in the marketplace. For
example, a new oxygen-fueled combustion process in the glass
industry averages energy savings of 15 percent on larger
furnaces and can achieve savings of up to 45 percent in smaller
furnaces, all while reducing NOX and particulate
emissions; in the buildings arena, the introduction of new
technology to increase energy efficiency that can have
significant economic and environmental benefits.
Two examples of reduced energy use that EERE has played a
role in include low emissivity windows that now comprise 40
percent of the market and reduce heat loss from the windows by
one-third. Also, energy-efficient refrigerators, as has been
pointed out this morning, use a quarter of the energy needed by
refrigerators as recently as 1974.
I want to stress that nearly our entire portfolio of energy
R&D is based on public-private partnerships. We believe that
working with the private sector stimulates private investments
and leverages Federal dollars. These partnerships also help
ensure that we develop technologies that the private industry
will carry forward into the marketplace.
Finally, Mr. Chairman, in the letter asking us to testify,
you asked that we identify any statutory changes that might
further promote energy efficiency. We find that at very first
blush, we have significant existing authority to carry out
programs under the provisions of the National Energy Policy Act
of 1992, the Energy Policy and Conservation Act, the National
Energy Conservation Act, the Energy Security Act, and many
other provisions of law.
Prior to the completion of our strategic reviews, which
will be complete September 1, we are not yet in a position to
identify other legislative initiatives beyond those included in
the National Energy Policy that the administration is prepared
to recommend at this time. However, we will look forward to
working with the Congress and this committee as you move
forward in these areas.
Mr. Chairman, I believe that the National Energy Policy
recognizes the critical role that energy efficiency plays in a
balanced energy policy. Thank you for the opportunity to
testify today, and I look forward to any questions the that the
panel may have. Thank you.
[The prepared statement of David K. Garman follows:]
Prepared Statement of David K. Garman, Assistant Secretary for Energy
Efficiency and Renewable Energy, U.S. Department of Energy
Chairman Barton and members of the Subcommittee, it is a pleasure
for me to be here today to discuss the Administration's National Energy
Policy and its relationship to the Department of Energy's Energy
Efficiency programs. Mr. Chairman, the National Energy Policy, which
was issued on May 16, 2001, by the National Energy Policy Development
Group, is a balanced, comprehensive long-term approach highlighting the
promise of technology in meeting our energy, environmental and economic
challenges. The National Energy Policy promotes energy efficiency and
improved energy conservation as a national priority. Of the 105
recommendations in the Policy, more than 20 directly or indirectly
address energy efficiency in residences, commercial establishments,
industrial sites, electrical power plants, and transportation. By
implementing these actions, this nation will continue our trend of
decreasing energy use per dollar of GDP, while improving our standard
of living and protecting the environment.
Mr. Chairman, I am pleased to report the Office of Energy
Efficiency and Renewable Energy will continue to build on our
successful technology research, development, demonstration and
deployment (RDD&D) activities to meet the recommendations of the
National Energy Policy. EERE is poised to play a major role in this
nation's energy future. The Office funds research, development,
demonstration and deployment of affordable, advanced energy
technologies and practices. This effort is organized around five energy
sectors--(1) buildings, (2) industry, (3) transportation, (4) power
generation and delivery, and (5) federal government facilities--which
are incorporated into 31 programs. Let me cite only a few examples of
what we've accomplished so far to illustrate why I am so enthusiastic
about EERE's capacity to fulfill many of the recommendations of the
National Energy Policy.
In the transportation sector, the investment in our government/
industry Partnership for a New Generation of Vehicles (PNGV) is paying
off: Hybrid-electric drive options will be offered by each of the three
automakers in the 2003-2004 timeframe: Dodge Durango in 2003, Ford
Escape in 2003, Chevrolet Silverado in 2004, and Ford Explorer in late
2004. In general, these configurations will deliver equal or better
performance while also improving fuel economy by between 15 to 35
percent. To the individual consumer, this could mean roughly a twenty
percent reduction in fuel use, which allow a fifth fewer trips to the
gas station and reduced fuel costs.
In our industrial programs, through cost-shared R&D on pre-
competitive technologies, the Department has helped develop over 140
technologies which are currently in the marketplace. These technologies
provide environmental and general productivity improvements, as well as
reducing farm and factory energy bills. For example, a new oxygen-
fueled combustion process in the glass industry averages energy savings
of 15% on larger furnaces and can achieve savings of up to 45% in
smaller furnaces while reducing NOX and particulate
emissions.
In the buildings arena, the introduction of new technology to
increase energy efficiency can have significant economic and
environmental benefits. Two examples of reduced energy use are: Low
emissivity windows which reduce heat loss from windows by one-third and
now comprise 40% of the windows market; and energy use in refrigerators
has gone from over 1800 kilowatt hours per year for a typical unit sold
in 1974 to a new standard of 476 kilowatt hours for a typical unit sold
after July 1, 2001, reducing refrigerator energy use by roughly three-
quarters.
And, finally, we have also had successes in our Federal Energy
Management program. In FY 1999, the Government reached its Energy
Policy Act of 1992 FY2000 goal of 20% decreased energy consumption per
gross square foot since FY1985--a year early. In FY 1999 constant
dollars, the Federal government's utility bill in FY 1985 for
facilities was $5.6 billion dollars. In FY 1999, the bill was $3.41
billion dollars--$2.2 billion less in constant dollars.
I want to stress that nearly our entire portfolio of energy
efficiency programs is based on public/private partnerships. We believe
that working with the private sector stimulates private investments and
leverages scarce federal dollars. These partnerships also help ensure
that we develop technologies that private industry will carry forward
to the marketplace.
Mr. Chairman, the Department has already begun to implement some of
the recommendations from the National Energy Policy report. The Policy
calls for a review of current funding and historic performance of the
Department of Energy's Office of Energy Efficiency and Renewable Energy
programs. I am pleased that Secretary Abraham asked me to begin the
review process. My office has undertaken the reviews by using a two-
pronged approach: (1) A period of public comments; and (2) an internal
programmatic review. We scheduled seven meetings across the country
throughout the month of June to receive public comments on the NEP as
it relates to EERE programs. Six of the meetings have been completed.
We've asked the public to provide their views on (1) the objectives of
the current energy efficiency and renewable energy research,
development, demonstration and deployment programs, (2) suggested
potential objectives for future programs, (3) implementation of current
and future programs, (4) whether these federal programs are achieving
intended objectives, and (5) and ideas for public/private partnerships.
When public input concludes on June 29, we will begin reviewing all
EERE programs to determine their performance and potential in terms of
delivering benefits to the public. We have committed to reevaluating
those programs that have not made progress toward national energy
goals. Likewise, we will redouble our efforts in those programs that
have shown, and continue to show, good performance and potential in
contributing to national energy goals. We have set the ambitious goal
of completing the formal program review by September 1 at which point
we will provide recommendations to the Secretary. I fully expect, that
when the review is complete, we will have a diverse portfolio of
activities--from basic research to deployment projects--that is
performance-based. This is consistent with the national need to develop
a balanced energy technology R&D portfolio that delivers short-term,
intermediate, and long-term energy benefits. Further, this review will
complement the National Academy of Sciences study of our programs which
is expected to be released in mid-July.
Mr. Chairman, we are leading by example. President Bush, on May 3,
2001, issued a directive to Federal agencies, echoing the NEP
recommendation that Federal managers take appropriate actions to
conserve energy at their facilities to the maximum extent possible.
These Federal actions, which were to begin immediately, are expected to
reduce peak load and serve as examples of energy conservation for the
rest of the country. They may even help reduce the extent of
electricity shortages this summer in susceptible areas including
California, the Northeast and the Northwest. Secretary Abraham has
asked EERE's Federal Energy Management Program (FEMP) to work with
federal agencies to implement the President's directive. This week we
transmitted to the Vice President for his review, the consolidated
report of Federal Agencies outlining the Federal Government's efforts
to save electricity and reduce peak load in response to the President's
directive.
The National Energy Policy report recommended that the President
increase funding the Weatherization Assistance Program by $1.2 billion
over 10 years. In concert with this recommendation, the President
requested an additional $120 million in the FY 2002 budget submission
for this purpose. This funding increase will enable States to
weatherize 123,000 low-income homes. This represents an increase of
48,000 additional low-income homes as compared to FY 2001, thereby
providing assistance to low-income citizens whose energy costs
represent a disproportionate share of their income.
Mr. Chairman, I know that the Subcommittee is considering statutory
changes that might further promote energy efficiency. We find, at first
blush, that we have significant existing authority to carry out our
programs under the provisions of the Energy Policy Act of 1992, the
Energy Policy and Conservation Act, the National Energy Conservation
Act, the Energy Security Act, the National Appliance Energy
Conservation Policy Act, the Federal Energy Management Improvement Act,
and the Department of Energy Organization Act, among others. Moreover,
Executive Orders provide us with additional authority and guidance.
Prior to completion of our strategic reviews, we cannot identify other
legislative initiatives beyond those included in the National Energy
Policy that the Administration is prepared to recommend.
Mr. Chairman, we believe that the National Energy Policy recognizes
the critical role that energy efficiency plays in a balanced energy
policy. Thank you for the opportunity to testify today and I will be
happy to respond to any questions you may have.
Mr. Barton. Thank you, Mr. Garman.
And we now hear from Mr. Hoover.
STATEMENT OF FREDERICK H. HOOVER, JR.
Mr. Hoover. Mr. Chairman, members of the subcommittee, my
name is Frederick Hoover, Jr., and I am pleased to testify
today to discuss the views of the National Association of State
Energy Officials on energy efficiency programs. I am the
Director of the Maryland Energy Administration. I am also an
officer of NASEO, which represents 49 of the State energy
offices, as well as the territory of the District of Columbia.
NASEO's overall objective is to support balanced national
energy policies and to provide State perspectives on energy
issues. NASEO members operate energy programs in all sectors of
the economy and all types of energy resources. The State energy
officials are also generally the Governor's energy advisors.
I want to congratulate Assistant Secretary Garman on his
appointment. He has been open to State views, and we look
forward to working with him in the future. We also applaud the
subcommittee for holding this hearing today on energy
efficiency.
In short, energy efficiency is a critical component of a
responsible National Energy Policy. It is certainly not the
only component of a balanced policy, but it is both undervalued
and underfunded.
Energy efficiency cannot be seen as one individual program
or policy. It works most effectively when implemented through a
combination of public-private partnerships, government
encouragement and programs, deployment and research,
development and demonstration.
One of the many roles that State energy offices play is to
promote energy efficiency activities through all these
vehicles. Our offices push for the passage of energy
legislation at the State level, such as electric restructuring
with public benefit programs, building code upgrades, State tax
credits for energy efficiency, and the promotion of
transportation efficiency programs such as telecommuting and
ride-sharing.
Many in Washington, DC, see energy efficiency as a series
of stark choices in contrast. We do not view it in this manner.
For example, some on Capitol Hill and in the administration
believe that the only Federal Government role is to promote
R&D. We believe this is not correct. NASEO strongly supports
aggressive R&D programs at the Federal and State level, but R&D
alone is not sufficient.
A sensible energy policy is built upon encouraging
deployment of new technologies, especially in the energy
efficiency area. I would cite as an example the Energy Star
program, a partnership with States between the Department of
Energy and the Environmental Protection Agency to promote
energy-efficient appliances.
Our State energy officials have their fingers on the pulse
of the actions that businesses and homeowners are taking. We
know what sells to the public. R&D without deployment is a
waste. We conduct both applied and long-term R&D at the State
level in concert with our business partners.
Feedback is critical to directing that work so that it is
relevant. Often, our Federal R&D programs lack that necessary
feedback loop to the energy offices and the industries to
provide practical advice on the direction of this research and
its practical application.
The recent action by the House Subcommittee on Interior of
the Committee on Appropriations, and approved by the full
committee on June 13, to increase funding for Federal energy
efficiency programs to $940 million in fiscal year 2002 is a
very positive step. The Subcommittee on Interior should be
applauded for its leadership and bipartisan cooperation in
recognizing the significance of our energy problems.
Of greatest importance was the proposed increase in the
State energy program from $38 million to $62 million and the
weatherization assistance program from $153 million to $249
million. In general, most of the energy efficiency R&D programs
unfortunately remain closed to fiscal year 20O1 levels.
The review of these programs being conducted by the
Department of Energy is described by Assistant Secretary Garman
as a positive development. This review is intended to focus on
measures of success in the presence of public-private
partnerships. Our State energy offices have been participating
in these meetings. We stand ready to assist the new
administration during this review process.
The State energy offices are in a unique position to get us
precisely this type of review which our Governors and
legislatures call on us to undertake on a regular basis. We
look forward to providing useful input. Progress has been made
in recent years, and we look forward to continuing to work with
the agency in this area.
We do feel that there are a number of areas that require
specific legislative attention beyond the budget and
appropriation issues. Residential tax credits for new and
existing building energy efficiency is a critical piece of
legislation. The school sector is one area where we have a
serious energy problem.
The efforts on the part of Representative Udall and the
gentleman from New York, Mr. Boehlert, who had the foresight to
introduce such legislation which will provide funding for
energy efficiency and improvements at schools is a positive
development. This legislation is basically included in both
Senator Mikulski and Chairman Bingaman's comprehensive bills.
It should be included in any bill this subcommittee moves
forward.
In the transportation sector, the President's proposal for
hybrid and fuel cell vehicles and Senator Hatch's Clear Air Act
legislation are very positive developments. We cannot fully
address our energy problems without dealing with the
transportation sector.
I would also like to congratulate the efforts by the
gentleman from Louisiana, Chairman Tauzin, and the gentleman
from North Carolina, Mr. Burr, to remove the weatherization
match requirement that was taken yesterday.
NASEO is pleased to have had the opportunity to testify
today. We look forward to working with the subcommittee in the
future on this very important issue. Thank you.
[The prepared statement of Fredrick H. Hoover, Jr.
follows:]
Prepared Statement of Frederick H. Hoover, Jr., Director, Maryland
Energy Administration on Behalf of the National Association of State
Energy Officials
Mr. Chairman, members of the Subcommittee, my name is Frederick H.
Hoover, Jr., and I am pleased to testify today to discuss the views of
the National Association of State Energy Officials (NASEO) on energy
efficiency programs. I am Director of the Maryland Energy
Administration. I am also an officer of NASEO, which represents forty-
nine of the state energy offices, as well as the territories and the
District of Columbia. NASEO's overall objective is to support balanced
national energy policies and to provide state perspectives on energy
issues. NASEO members operate energy programs involving all sectors of
the economy and all types of energy resources. The state energy
officials are also generally the Governors' energy policy advisors.
Obviously, this has been an exciting time for us all. Ed Pinero of
Pennsylvania testified on behalf of NASEO at a recent coal hearing held
by this Subcommittee and I testified at a recent Senate Energy and
Natural Resources hearings on U.S. energy trends and changes in energy
markets. We applaud the Subcommittee for holding this hearing today on
energy efficiency. In short, energy efficiency is a critical component
of a responsible national energy policy. It is certainly not the only
component of balanced policy, but it is both under-valued and under-
funded.
At both the state and federal levels we have been suffering with
high energy prices and critical infrastructure problems. Public
reaction is predictable and political rhetoric tends to follow. One
thing we have learned about energy crises is that no two are ever
exactly alike and our response should not be worse than the disease.
NASEO provided input to the Vice-President's energy policy task
force and we are happy to provide input on a non-partisan basis to both
the House and Senate. Our members are called upon to advise our
Governors and legislatures with respect to legislative, policy,
programmatic and regulatory options to address our energy situation.
Energy efficiency is an important part of that broader discussion.
APPROACH TO ENERGY EFFICIENCY
Energy efficiency cannot be seen as one individual program or
policy. It works most effectively when it is implemented through a
combination of public-private partnerships, government encouragement
and programs, deployment and research, development and demonstration.
One of many of the roles of the state energy offices is to promote
energy efficiency activities through all these vehicles. Our offices
push for passage of energy legislation at the state level, such as: 1)
electricity restructuring with public benefits programs; 2) building
code upgrades; 3) state tax credits for energy efficiency; 4) promotion
of transportation efficiency programs (telecommuting, ridesharing),
etc. In my own state of Maryland, the Governor with the General
Assembly has been in the forefront of promoting tax credits for
purchases of energy efficient products, such as appliances, with the
Maryland Clean Energy Incentive Act. Regulatory actions are another key
component of energy efficiency strategies. In Maryland, we see energy
efficiency as part of a broader agenda to limit sprawl. These anti-
sprawl initiatives look at energy use and distribution, telecommuting,
redevelopment of inner suburbs and cities, environmental policies, etc.
Energy efficiency will be an ever-increasing part of this effort.
``Smart Growth'' initiatives are an important part of energy policy.
Governor Glendening, in his role as Chairman of the National Governors'
Association (NGA) this year, is encouraging work in this area on a
national basis. This year the Governor issued an Executive Order,
entitled ``Sustaining Maryland's Future with Clean Power, Green
Buildings and Energy Efficiency.'' Environmentally responsible building
practices which reduce the use of energy through site orientation and
design, promotion of natural day-lighting and ventilation, encouraging
use of recycled and reused materials are all part of this effort.
Energy efficiency is not turning the thermostat up to 80 degrees
and dramatically changing the lifestyles of Americans. Our programs in
Maryland, and the work of my colleagues nationwide, is focused on
integrating technological advances into the everyday lives of our
taxpayers, including not only the residential sector, but the
commercial and industrial sector as well.
Energy efficiency programs at the state level are often seen as
economic development programs. The state energy offices are a key
component of economic development at the state level. Part of our work
focuses on helping businesses reduce operating costs to become more
competitive. Part of the reason our nation's productivity has increased
is that our energy use has decreased per unit of economic output. This
is not accidental.
On the other hand, keeping the focus on energy efficiency is not
easy when energy prices are low. As you know, everyone cares when the
prices rise, but generally only producing states care when the prices
are low. We agree that extreme price volatility is damaging to both
producing and consuming states. We need to fight the urge to ignore
energy when prices drop. The compromise that you worked out, Chairman
Barton, when the Energy Policy and Conservation Act (EPCA) was
reauthorized, to establish a regional petroleum reserve in exchange for
a price-triggered strategic petroleum reserve fill is the type of
example that the states support as a creative response to energy
problems. There are many examples in the pending congressional debate
on energy policy that might lend themselves to similarly creative
solutions.
On the regulatory side the federal government has the statutory
responsibility to issue appliance energy efficiency standards. We hope
that higher standards can be developed for a number of products. There
has been great controversy about choosing the lower standard for air
conditioning products, which we think is unfortunate. We encourage
Congress to prod the Administration to take the suggestion in the Vice-
President's report very seriously and quickly move to enhance these
standards.
Many in Washington, D.C. see energy efficiency as a series of stark
choices and contrasts. We do not view it in this manner. For example,
some on Capitol Hill and the Administration believe that the only
federal government role is to promote R&D. This is simply wrong. NASEO
strongly supports aggressive R&D programs at the federal and state
levels, but R&D alone it is not sufficient. A sensible energy policy is
based upon encouraging deployment of new technologies, especially in
the energy efficiency arena. Our state energy officials have their
fingers on the pulse of actions that businesses and homeowners are
taking. We know what ``sells'' to the public. R&D without deployment is
a waste. We conduct both applied and long-term R&D at the state level,
in concert with our business partners, and feedback is critical to
directing that work so that it is relevant. Often our federal R&D
programs lack the necessary feedback loop to the energy offices and
industry to provide practical advice on the direction of this research
and its practical application.
In the same manner, some support exclusive promotion of so-called
``market transformation'' programs as opposed to direct energy
deployment programs. Market transformation programs promote things such
as the development and use of a new breed of high efficiency
appliances. The correct answer is that there is a role for both types
of programs. Most of the state public benefit programs established
through electricity restructuring statutes recognize the value of
promoting both types. This can be done by funding educational programs
to promote the use of energy efficient appliances, while also
supporting rebates to businesses to implement energy service
performance contracts. Energy Service Performance Contracts (ESPCs) are
an excellent example of deployment programs that work. The energy
services industry is a $1-1.5 billion/year business, focused on energy
efficiency programs. NASEO is very supportive of these efforts. We are
working closely with DOE's Rebuild America Program to promote this
activity.
BUDGET/APPROPRIATIONS ISSUES
The recent action of the House Interior Appropriations Subcommittee
(approved by the full Committee on June 13) to increase funding for the
federal energy efficiency programs to $940 million in FY-02 is a very
positive step. The Interior Appropriations Subcommittee should be
applauded for its leadership and bi-partisan cooperation in recognizing
the significance of our energy problems. Of greatest importance was the
proposed increase of the State Energy Program from $38 million to $62
million and the Weatherization Assistance Program from $153 million to
$249 million. In general, most of the energy efficiency R&D programs
remained close to FY-01 levels.
This is a dramatic improvement from the President's Budget request,
which generally called for 50% reductions in most R&D programs, while
calling for an increase in the Weatherization Program. Another
innovative program which was proposed for a large decrease in the
President's budget (from $14 million to $5 million) was the State
Energy Programs Special Projects. This exciting program allows states
with their private partners to submit competitive proposals to fund
replicable projects, with substantial cost-shares. The projects fit
into the basic categories of buildings, industry, transportation, power
and energy management and provide real energy savings very quickly.
More funding needs to be provided to this activity, not less. Another
important program is a small $6 million state-federal cooperative
R,D,D&D program, strongly supported by the Interior Appropriations
Subcommittee that is intended to link federal and state programs.
Certain other programs should be increased by at least some amount,
including: 1) international market development (+$2 million); 2)
buildings research (+$2 million); 3) energy star (+$2 million); 4)
industry energy efficiency (+$2 million); and 5) the Federal Energy
Management Program (+ $2 million). Unfortunately, we continue to oppose
a 25% match requirement imposed on the Weatherization Program, which
was repealed last year by this authorizing committee as part of the
reauthorization of the Energy Policy and Conservation Act.
The review of these programs being conducted by the Department of
Energy, and being led by Assistant Secretary Garman, is a positive
development. This review is intended to focus on measures of success
and the presence of public-private partnerships. Our state energy
offices are participating in these public meetings. We stand ready to
assist the new Administration during this review process. The state
energy offices are in a unique position, because it is precisely this
type of review which our Governors and legislatures call on us to
undertake on a regular basis. We look forward to providing useful
input. Progress has been made in recent years and we look forward to
continuing to work with the agency in this area.
During the campaign the President proposed a doubling of the State
Energy Program to $76 million and the Weatherization Program to $306
million. The budget request suggested a $120 million increase for
Weatherization and no increase for the State Energy Program. These
approximate increases in authorization levels were included in the
Senate-passed Bankruptcy bill, through an amendment primarily sponsored
by Senator Bingaman. This amendment also included proposed increases
for the Low-Income Home Energy Assistance Program (LIHEAP) to the $3-$4
billion level; an increase we support, as well as more aggressive
funding for the Federal Energy Management Program (FEMP). Similar
funding levels are included in legislation separately introduced by
Senators Bingaman and Murkowski--in other words there is bi-partisan
support.
These authorization levels do point out a difficult problem for
Congress. In an effort to pass comprehensive energy legislation, it
will be easier to simply authorize funding for a panoply of programs of
all types, without any expectation that funding will be provided
through the appropriations process. For example, many of the programs
established in the Energy Policy Act of 1992 have never been funded at
their authorized levels. While this may bring votes, it fails an
important leadership test for a balanced energy policy. If energy
problems are that serious, we must find the resources to address the
problem. This applies to supply-side as well as demand-side solutions.
The State Energy Program is the key federal-state coordinating tool
for energy programs. The energy offices bring a substantial amount of
non-federal funding to the development of energy projects and programs
at the state level. This runs the gamut of deployment to research and
development, and involves all sectors of the economy. The leverage
provided to the small amount of federal funding for this program is
many times in excess of any other energy efficiency program presently
provided with federal funds. In fact, state funding for these programs
(directly and indirectly) far exceeds the funds provided by the federal
government.
As we mentioned the budget also suggested a 50% reduction in many
of these energy efficiency programs, though the words of the new
National Energy Policy Development Group report seemed to suggest an
important role for these programs. There appears to have been a
disconnect, which will require further attention. We hope that Congress
will finish the good work of the Interior Appropriations Subcommittee
in the House and fund these programs at least at the House Committee-
passed level for FY-02, with the additions noted above.
ENERGY LEGISLATION
A number of areas require specific legislative attention, beyond
the budget and appropriations issues.
Residential tax credits for new and existing building energy
efficiency is a critical piece of legislation. This issue demands
attention and can provide both short-term and long-term benefits to
homeowners to reduce their energy use, and make home ownership more
affordable. A number of bills have been introduced and should be
relatively easy to meld. Representative Weller introduced such a bill
on June 13, 2001. Similar provisions are included in H.R. 2108 offered
by Representative Matsui and S. 207, offered by Senator Bob Smith and
Senator Feinstein. Chairman Bingaman and Senator Murkowski support
similar provisions. House Ways and Means Chairman Thomas introduced a
bill similar to Representative Weller's in the previous session of
Congress. This is a must-pass bill. We believe that a compromise can be
achieved which will allow: 1) outside inspections of less than 100% of
tract-built homes (assuming compliance); 2) a higher tax credit level
than that provided in the Smith/Feinstein bill, though possibly not
quite as high as in other bills for a 30% increase in efficiency with a
possible second tier; and 3) consideration given to credits being
offered to builders.
The schools sector is one area where we have a serious energy
problem. Congress and the Administration on a bi-partisan basis
recognize the importance of improving educational opportunities for our
students and ensuring that funding is provided in an efficient manner.
The state of our nation's schools is poor. Even if you do not support a
broad school construction program through bonding, increasing the
energy efficiency of our schools (both new and existing) should be a
top priority. Every dollar spent on energy costs for these institutions
is one less dollar that goes into educating our sons and daughters.
Representatives Udall and Boehlert had the foresight to introduce such
legislation, which would provide funding for energy efficiency
improvements in schools. This legislation is basically included in both
Senator Murkowski's and Chairman Bingaman's comprehensive bills. It
should be included in any bill this Subcommittee moves forward.
In the transportation sector the President's proposal for hybrid
and fuel cell vehicles and Senator Hatch's ``Clear Air Act''
legislation are very positive developments. We cannot fully address our
energy problems without dealing with the transportation sector. We must
seriously consider either an increase in CAFE standards or some other
alternatives, such as Senator Bingaman's fuel use legislation, that
will increase our vehicle fuel efficiency. Some notable developments in
the use of light weight materials, hybrid engines, fuel cells and use
of alternative fuels (such as ethanol) are all providing opportunities
to reduce our oil use in the transportation sector. We hope that the
upcoming National Academy of Sciences study will help conclude the
debate.
If Congress proceeds on comprehensive energy legislation, a
rational public benefits program could be a real asset to both energy
efficiency programs as well as federal-state relations. Funding of
energy efficiency programs is a key piece of such a public benefits
program, with discretion provided to states.
Also in the energy conservation arena, expansion of daylight
savings time deserves strong consideration.
EXAMPLES OF EFFECTIVE ENERGY EFFICIENCY PROGRAMS
There are certainly a myriad of successful programs, policies,
regulations and statutes at the state level that should inform a
federal discussion on energy efficiency programs. We are ready to work
with DOE, EPA and the Administration as a whole, as well as Congress,
to help improve programs.
Some examples of successful state efforts are as follows:
Iowa established an energy management program a number of
years ago to provide energy efficiency improvement for public
buildings utilizing private financing. Thus far, $141 million
in improvements have been made, saving $21 million annually.
Avoided emissions total 4,052 tons of Nox, 45,782 tons of Sox
and 5,341 tons of particulate matter.
In Texas 192 schools have implemented energy efficiency
measures resulting in annual savings of $4.4 million, with
cumulative savings thus far of $10.5 million. An additional 262
schools have yet to be retrofitted, but are scheduled for
improvements.
Idaho has operated a low-interest loan program for
residential, commercial, agricultural, government and school
projects. Almost 2000 loans have been provided totaling $13.4
million, with almost $4 million in annual energy savings. Idaho
has also implemented scores of energy efficiency programs in
the agricultural sector focusing on such items as irrigation
delivery and management.
Tennessee operates a local government loan program for
schools, emergency response facilities and other publicly-
supported buildings. The $7 million in loans provided thus far
have produced cumulative savings of $39 million. The state also
operates a small business loan program that has provided $8.2
million in loans to 217 entities for cumulative savings of
$14.2 million thus far.
Wisconsin's Energy Initiative 2 for schools has saved $3.4
million per year for 314 projects, with improvements to over 32
million square feet of space, with dramatic reductions in
natural gas and electricity use. The state energy office is
also operating a pilot energy efficiency program within the
Wisconsin Public Service Corporation service territory, with
substantial results.
New York operates the FlexTech program to provide technical
assistance to small businesses and non-profits to reduce energy
costs. The program leverages $14 in private funds for every $1
of state grant funds, and returns $4 per year in savings to the
owner. Nineteen state facilities under the Envest program have
utilized $75 million in private financing to make major energy
efficiency capital improvements. Multiple changes to the New
York State Energy Code will save $3.5 million per year in
24,000 new homes and over $42 million per year in operating
costs at new commercial buildings.
ENERGY/ENVIRONMENT INTEGRATION
One area where the states have taken the lead is an attempt to
integrate energy and environmental policy. As has been the case
historically at the federal level, state energy agencies, utility
commissions and environmental agencies had generally treated energy and
environmental programs separately. Obviously, we know intuitively that
energy and environmental policies, programs and regulations need to be
addressed together or you operate less efficient, cost-effective and
environmentally sound programs. Energy efficiency is a big piece of
this effort. Beginning in August of 1999, then with larger meetings in
March of 2000 and September of 2000, NASEO, along with the National
Association of Regulatory Utility Commissioners (NARUC), the
Environmental Council of the States (ECOS)(state environmental
commissioners) and the State and Territorial Air Pollution Program
Administrators/Association of Local Pollution Control Officials
(STAPPA/ALAPCO), worked together to bring members from the different
states together to begin to address these important problems. Solutions
range from energy efficiency and renewable energy, to demand restraint
programs of Independent System Operators (ISO), to promotion of
distributed generation, to electricity reliability issues. We have had
cooperation from the Department of Energy and the Environmental
Protection Agency. A number of states are working to institute pilot
programs, where we examine these issues together, including my own
state of Maryland, as well as Utah, Wisconsin, Georgia. A regional
effort in the west, known as the Western Regional Air Partnership, is
examining innovative solutions to air quality problems, utilizing
energy efficiency and renewable energy alternatives, among other
options. The Northeast is working together to develop a specific
technical standard for distributed generation, to avoid a mismatch from
state-to-state within one ISO.
The VA-HUD and Independent Agencies Appropriations Bill for FY-2001
recognized the value of these efforts and encouraged EPA and DOE to
continue to cooperate with the states. We would certainly appreciate
the support of this Committee. It is a clear ``win-win'' situation with
no partisan issues. This effort is completely voluntary among the
states.
CONCLUSION
NASEO was pleased to have the opportunity to testify today. We look
forward to working with the Subcommittee as you systematically address
the array of serious energy problems.
Mr. Barton. Thank you.
The Chair would recognize himself for 5 minutes for
questions, and I don't expect to take 5 minutes.
Mr. Garman, how long have you actually been in the
Department of Energy this year?
Mr. Garman. I was sworn in on May 31.
Mr. Barton. So you have been there less than a month.
Mr. Garman. Yes, sir.
Mr. Barton. Okay. Have you, in your mind, had adequate time
to assimilate some of the programs that are under your
jurisdiction? Do you feel like you have got a good working
knowledge based on that?
Mr. Garman. I have an initial working knowledge, yes, sir.
Mr. Barton. Okay. Of the people that are directly under
your control, are any of them people that you brought with you,
or are they pretty much people that were there?
Mr. Garman. No, sir, I brought no one with me.
Mr. Barton. Do you expect to have some assistants that are
of your choosing at some point in the near future?
Mr. Garman. Yes, sir, I do.
Mr. Barton. Okay. So far, you have been in the Department
less than a month, and you have the career staff that are in
that part of the Department that you are in charge of?
Mr. Garman. That is correct. And I would add that it is
truly an excellent and exceptional career staff. We are
fortunate in that regard.
Mr. Barton. We would expect you to say that in their
presence. And I am sure it is a true statement, so I am not
being facetious about that.
When I was chairman of the Subcommittee on Oversight and
Investigations of this committee, I did numerous hearings on
the efficiency of the Department of Energy and the programs
under that department. It was like throwing darts at a dart
board. Wherever you hit, you found a problem. It was just--
without exception, the programs were not well run, were not
cost effective, were very wasteful of taxpayer dollars.
So I am very interested, as you settle in, in your personal
analysis of these conservation programs that you are in charge
of, because my experience has been, at the surface, they may
appear to be performing ably, but in fact, if you look beneath
the surface, there are problems. I am not talking about
corruption problems, I am just talking about, does the program
deliver what it is supposed to deliver in terms of the
expectation of the country and the Congress.
So I would encourage you to really stress in your
programmatic reviews that we expect these things to deliver. We
expect these programs to deliver.
Now, having given you that lecture, which is just that
everybody is going to be--the first time you get elected a
Congressman, everybody is nice to you, they smile at you, they
laugh at jokes that they've heard 1,000 times like they have
never heard them. I mean it is amazing, okay?
But be a real manager. Work underneath.
Do you feel, is there one particular program under your
review that you, on initial review, you think is really
performing well?
Mr. Garman. Part of it could be my previous position, sir,
since I come from the South, I have a certain affinity for
automobiles, transportation technology. Yes, you can picture my
home where I grew up is one that had cars in the back on
blocks. That is where I come from.
The time that I have been able to spend with the
transportation technologies, with the development of hybrid
vehicles, fuel cells, and looking at some of these other
technologies, I find that they are truly exciting.
I also see a great deal of promise in the area of
bioproducts, biofuels, opportunities to provide renewable
resources on the farm and turn them into products that can
benefit the Nation from an energy standpoint and from an
economic standpoint.
Those are two things that have jumped out at me.
Mr. Barton. I will ask you a question I asked the
management of General Motors in Detroit this past Monday. Do
you see a point in the future where the fuel cell will become
so well developed and so efficient that it is economically
competitive or preferred over the internal combustion engine,
regardless of the cost of gasoline?
Mr. Garman. You have put your finger on a very strong
technological challenge. We calculate that for a fuel cell to
be economically competitive with an internal combustion engine,
it is going to have to come down to the level of about $50 a
kilowatt.
Right now, the catalyst component of the fuel cell itself
costs $57 or $60 for that unit of energy. When you add the
compressor pumps, the graphite stack and all the other
components that make a fuel cell, yes, we have some significant
technological challenges before we will have a cost-effective,
efficient fuel cell vehicle.
Having said that, though, hybrid technologies, gasoline-
electric-drive hybrid technologies present an excellent bridge
technology--that can score some efficiency gains along that
pathway.
Mr. Barton. My time has expired, so I want to just make one
final comment and recognize Mr. Boucher.
When I asked the GM executive that question, my impression
was that they have given all their thought to how fuel cells
are going to compete in a higher oil price market, their
assumption is that as the price of oil escalates, fuel cells
become more competitive because they can bring the fuel cell
cost down and the oil cost is going to go up.
I may have misinterpreted his reaction, but my
interpretation of his reaction was, they haven't given any
thought to what happens when OPEC says, oh, fuel cells are
becoming pretty efficient. We had better lower the price of oil
so that internal combustion engines are still competitive. We
better pump more.
If your only asset is hundreds of billions of barrels of
oil reserves, and the Western economy moves to fuel cells and
says, the heck with the internal combustion engine, then you
don't have an asset. So all these projections that oil prices
are going to $50, $60, $70, $80 a barrel, that is only if we
don't develop an alternative.
If we really develop an alternative, those prices are going
to go down to stay competitive. I don't think that at least the
GM people had thought about that. We need to think about that
if we are going to put all of our eggs into fuel cell
technology, because the people that are providing the oil are
not crazy people. They are going to eventually say, we have got
to lower our price to stay competitive.
The gentleman from Virginia is recognized for 5 minutes for
questions.
Mr. Boucher. Well, thank you very much, Mr. Chairman.
And, Mr. Garman, I also want to congratulate you on your
appointment and thank you very much for being here today and
say that we look forward to working with you as we develop the
energy conservation and efficiency portions of our national
energy strategy legislation.
Let me direct your attention to a provision in the report
of the administration's Energy Task Force, recently released,
which recommends--and I will simply quote this; that will save
you actually having to open it up. You are probably familiar
with this direction, in any event. The recommendation is that
``the President direct the Secretary of Energy to establish a
national priority for improving energy efficiency.''
I would like for you, if you would this morning, to give us
a sense of how that direction is going to be translated into
concrete recommendations. Give us a status report, if you
would, on your work in developing the recommendations stemming
from that direction.
Here is where you may want to take a note or two. In
particular, I would appreciate your indicating how the
Department of Energy would propose to have energy efficiency
improvements in the following areas. And I will be very precise
about the areas that I would like for you to address.
First of all, how soon do you intend to update the existing
standards for a residential dishwasher and for refrigerators,
residential dishwashers and refrigerators?
Second, how soon do you expect to complete the ongoing
proceedings, which I think have been under way for a matter of
years, extending well back into the last administration,
relating to electricity distribution transformer efficiency?
Then, third, will the administration support new efficiency
standards for the following: commercial refrigerators, exit
signs, traffic lights, icemakers, and commercial unit heaters?
The reason I have selected these precise latter topics is
because we are getting recommendations from other witnesses who
will appear this morning that in our legislation we include
these precise items with directions that energy efficiency
improvement standards be established. So anticipating those
recommendations, I would like to get your view on those
subjects.
I will yield the balance of my time to you for that.
Mr. Garman. One of the things that we are working to do--
and I will be candid with you, looking at that particular
recommendation that you cited, making energy efficiency a
national priority, gives us something of an open field.
What the Secretary has directed, the Deputy Secretary, the
No. 2 official in the Department, us to do is to take this
document and to translate it into implementation actions. We
were in a meeting yesterday in his office going over some of
these very points.
It is going to require in most cases a collaboration
between the other agencies--the Department of Transportation,
the Environmental Protection Agency--frankly, a level of
collaboration we haven't always seen in the past. So in
addition to the fundamental issue of translating this, we are
going to have to refashion the dialog and improve the dialog
between the disparate Federal agencies to begin to put some
meat on the bones of these recommendations.
Now, that process is under way, and on a weekly basis, we
have updated matrixes to try to implement the policy and really
put a fine point on it.
With respect to the specific standards, we are well along
the way on distribution transformers, and I can't give you an
exact timeframe because, of course, it is a regulatory process
and there are opportunities for some of the stakeholders in the
process to lengthen or expedite depending on--but let me----
Mr. Boucher. Can you just give us a general sense?
Mr. Garman. Sure. I think we can--I think that distribution
transformers are an opportunity for a reasonably expeditious
win. I think that--and part of this, because one of the
programs that we are actually going to review in the context of
this strategic review are our rulemaking processes on setting
new standards for these various items.
I can tell you that some that you have mentioned,
refrigeration, commercial, are on our higher priority list. And
I would beg the indulgence of the committee--and perhaps this
is something I can provide you for the record--something of a
matrix of our current thinking on the prioritization of these
various appliances and the general timeframes in which we think
we will be turning to them.
Mr. Boucher. Mr. Chairman, thank you. My time has expired.
Let me simply conclude by thanking Secretary Garman for his
attendance here and his answer to this question.
And, Mr. Secretary, I would very much welcome at the
earliest time that you could provide it that written response
to this question that establishes these priorities and some
suggested timeframes for completing these various rulemakings.
And to the extent that you can talk about your level of support
for the specific items that I indicated in the last part of the
question for refrigerators and the other items, that would be
welcome, too.
Now, we are proceeding on a fairly rapid schedule here to
adopt legislation on this set of issues, and so if you could
provide an answer perhaps by next week, that would be timely
and helpful to us. And I thank you and thank you, Mr. Chairman.
[The following was received for the record:]
Summary of Priorities
Standards and Determinations (D)
------------------------------------------------------------------------
------------------------------------------------------------------------
High Priority Products Low Priority Products
Residential Central AC/HP \1\* Clothes Dryers
Distribution Transformers Clothes Washers*
Residential Furnaces and Boilers Cooking Products--Electric*
Air-Cooled Central Air Conditioners and Direct Heating Equipment,
Air-Source Heat Pumps, 65-240 kBtu/h Gas
Packaged Terminal Air Conditioners and Dishwashers
Heat Pumps
Small Electric Motors (D) Electric Motors, 1-200 HP
Niche Products-Residential A/C Fluorescent Lamp Ballasts*
Cooking Products--Gas High Intensity Discharge
Lamps (D)
Lamps
Mobile Home Furnaces
Plumbing Fixtures/Fittings
Medium Priority Products Pool Heaters, Gas
Central Air Conditioners and Heat Pumps, 3 Refrigerators*
phase, <65 kbtu
Oil- and Gas-Fired Commercial Packaged Residential Water Heaters*
Boilers
Tankless Gas-Fired Instantaneous Water Room Air Conditioners *
Heaters
------------------------------------------------------------------------
\1\ Drops to Low Priority upon Completion
*Final Rules for these products have been recently published.
Mr. Walden [presiding]. That would be good for all the
committee members to have a copy of.
The Chair now recognizes the gentleman from Louisiana, the
chairman of the full committee, Mr. Tauzin.
Chairman Tauzin. Thank you, Mr. Chairman.
Mr. Garman, again my congratulations, and thanks for being
here.
Let me ask you, sir, in terms of the administration's
position to give the air conditioning efficiency standard a hit
for me, where is the administration on this, and what kind of
support can we expect for regulations that would improve air
conditioning efficiency?
I realize it is pretty controversial, but maybe you can
explain where you are on it.
Mr. Garman. Sure. I will try to make a couple of points on
this.
First of all, the current air conditioning standard is set
at a seasonal energy efficiency ratio of 10. Approximately 79
percent of the air conditioners on the market today are at a
level 10. What the administration is expected to shortly
propose--and that rulemaking has not been offered up yet--is to
raise standards for residential air conditioners and heat pumps
20 percent from a SEER 10 to a 12. I would expect that
rulemaking to occur in the next week or 2.
Chairman Tauzin. In terms of the drive to make Federal
facilities more energy-efficient, you recently saw the
President make an announcement that in California, he expected
a 10 percent reduction in energy use in these facilities,
particularly during the State's three emergencies.
In the bill that Mr. Barton was proposing, we had even
increased that to 20 percent, because our information was that
that was achievable. We have seen 20 percent reductions in
Federal facility energy consumption mandated over time and
achieved. Is it time for another mandate for the buildings and
the facilities of our country that are Federal to target and to
achieve energy efficiency reductions?
Mr. Garman. There is an existing executive order, if I am
not mistaken, that is in place currently, it has not been
rescinded, that is calling for continuous improvement in the
Federal arena.
Chairman Tauzin. We are told, for example, Mr. Garman, that
an investment in a simple thing of replacing incandescent bulbs
with more efficient bulbs could obviously be a little costly.
Most Americans are more willing to buy a 30-cent incandescent
bulb rather than a $4 very efficient, high-quality bulb because
of the initial investment in cost. But we are told that you can
recover those costs within a 4-, 5-year period; and that would,
in the long term, make great economic sense, particularly for
Federal officials.
If we included a new mandated number, a target, a goal in
our legislation, do you think that ideas like that could be
utilized by the Federal facilities to achieve even greater
efficiencies than they are currently doing?
Mr. Garman. Yes. Let me put it this way. Against the 1985
baseline, we have outperformed the goal, slightly outperformed
the goal, government-wide, that appeared in the Energy Policy
Act of 1992. We achieved the goal a year early, the 2000 goal.
Now, that is not to say there is not a lot, frankly, in
pursuit of that goal, a lot of the low-hanging fruit such as
those you have mentioned, ballasts, changing incandescent
bulbs. That is not to say that----
We are testing the system now, for instance, in California
where the Federal Government uses about one and a half percent
of all the energy in California. We had our managers, in
response to the President's directive, try load-sharing
opportunities, and at one point I believe we were able to cut
load during peak time on the order of 20, 25 percent.
Chairman Tauzin. You know, we hear big numbers like that.
Mr. Hoover, I suspect the State facilities are doing
similar work. Can we expect that if, in fact, we in our
legislation encourage and incentivize State and local
governments to achieve similar results, is that possible? Is
that achievable?
Mr. Hoover. Well, in my own State we have a legislative
reduction goal that increases by a certain percentage each year
from a 1992 base line, and now we are up to discussing going to
a 30 percent reduction. So I think all of these are very
achievable.
Chairman Tauzin. I want to know what either of you know
about Sterling engines. One of our members, Charlie Bass, has
presented a lot of information to us on the latest developments
on the Sterling engine.
We hear a lot about hybrid fuel cells, and our bill
obviously is going to try to incentivize more than--and also
because of the environmental aspects of fuel cell use and
hybrid engines on the Nation's highways. We were thinking, for
example, why not allow people to use an HOV lane if they have
got a high-mileage, low-emission vehicle even if you are only
one person in that car? Why not incentivize you to do that?
But in terms of the Sterling engine, do we have a good
understanding of its capabilities as it has been recently
modified to add to all sorts of new energy efficiencies in the
market?
Mr. Garman. I had the opportunity to actually see a
Sterling engine a couple of weeks ago. It is not a particularly
new technology.
Chairman Tauzin. It is very old.
Mr. Garman. But, as you pointed out, there are new
modifications and possibilities that it affords. I think in--
particularly in some of, renewable energy where an external
heat source can be applied.
Chairman Tauzin. We are also told that in distributive
energy systems Sterling engines can be extraordinarily useful,
particularly new designs. I would love to have something from
you to complement what Charlie Bass has brought on our
committee, if you can to give us your latest of its potential
as part of a conservation and distributive energy initiative.
[The following was received for the record:]
Stirling engines have several attributes that make them attractive
for distributed energy applications as well as renewable energy
applications:
(1) Flexible. Stirling engines are external combustion engines and
can accept heat input from a variety of sources, including solar
energy. Stirling engines can be designed to bum more than one fuel and
operate in a ``Hybrid'' mode. DOE has worked with several engine
manufacturers (such as STM Corporation) to develop an engine that is
capable of using solar energy and/or biogas in combination with natural
gas, landfill gas, and hydrogen. This would provide a potentially
dispatchable power supply for grid-connected utility as well as off-
grid remote applications.
(2) Efficient. The efficiency of the Stirling engine is
approximately 40 percent as compared to 30 percent for microturbine
technologies. This is the reason why the Stirling technology is
currently the engine of choice for solar dish systems. Solar dish
systems, with a Stirling engine at the focal point, have an overall
system solar-to-AC power efficiency of nearly 30 percent.
(3) Modular. Current Stirling engines range in size from several
hundred watts to 25 kilowatts, with applications including
refrigeration, cryogenics, cogeneration, and power generation. This
makes them ideal for on-site power applications.
Chairman Tauzin. Finally, I just wanted a comment from both
of you on one of the most important elements of conservation.
When California had price caps on the retail market on its
electricity, we discovered in our surveys in California a drop
in conservation of 8 percent. It shouldn't have surprised us.
Price controls tend to encourage demand and weaken conservation
efforts. Price increases have the opposite results always. We
saw a 13 percent increase in conservation in California the
moment it was announced that those price controls would be
lifted on the retail market.
Is the price of gasoline going up, shortage of natural gas,
prices of natural gas going up? How much do prices and
increases in prices under your analysis create conservation
incentives? What is the relationship in that? Is it a one-to-
one relationship? Is it a one-to-two?
How high do prices have to go before people really get
serious, for example, and change all the incandescent bulbs in
their houses and buy the systems that turn our air conditions
on and off when we are gone and turn them back on when we are
coming home? Those are very cheap items to buy. We don't buy
them. We don't install them. But they could save enormous
amounts of energy for the consumers and for the country. How
high do prices have to get, and what is the relationship in
price conservation reaction?
Mr. Garman. Pricing is, of course, an obviously--a very
powerful incentive to conservation. And it is not always the
magnitude of the price, but the pace of the price increase.
I know that when I was in my own home, was noticing that my
price of gas was going to roughly double, based on the contract
I had entered into on December 31, you can bet that in November
I was at the Home Depot buying the computerized thermostat,
buying the extra insulation. I mean, price was a very powerful
motivator, and I think it is--particularly when it comes in a
very short time span.
And I would echo, because I think you asked me for this,
your observations with respect to the situation in California.
However well-intentioned, the edict of the legislative body or
executive can't repeal the laws of supply and demand and the
impact that price has on the rational consumer economic
behavior toward conservation. It is a very, very powerful and
persuading force.
Chairman Tauzin. My time is up, Mr. Hoover, but I would
love to hear your response.
Mr. Hoover. Well, the one thing I would add to that is I
think that price is a big motivator to make people want to
conserve. But I also think that the increases that we saw in
heating prices last year caused a lot of people to look at
things that they hadn't looked at in a long, long time. The
problem is you have to make sure that when the individuals get
that price signal, whether it is an opening or monthly utility
bill or whatever signal they see, that they have the
opportunity to take advantage of conservation activities.
So the infrastructure, so to speak, for conservation and
efficiency has to be there. The products have to be in the
marketplace. The programs, whether they are run by State
government or the Federal Government, need to be there so that
people can do something.
Because the problem is, a lot of times, there is that
initial reaction to it. But if you don't take some substantive
action to it, that opportunity is gone, so you just get a lot
of----
Chairman Tauzin. If I may add one more thing, and that is
why I think there is a responsibility, particularly at this
level, it is making sure consumers know at the right moment
what is available and how economic those opportunities are in
terms of cost savings for them in the short and the long run.
Thank you very much, Mr. Chairman.
Mr. Barton. The Chair now recognizes the gentleman from
Wisconsin, Mr. Barrett, for 5 minutes.
Mr. Barrett. Thank you very much, Mr. Chairman. I
appreciate you holding this hearing.
Good morning, gentlemen.
At least until the recent spate of rolling blackouts in
California, the history of blackouts in our country seems to
have been one that showed a tight correlation between blackouts
in the summer and high energy demands in the summer as well. I
think we all probably would recognize that. Not surprisingly,
that is a time when there is the greatest demand for air
conditioning; and it is for that reason that I was simply blown
away by this Administration's decision to basically gut the
rule that the Clinton Administration put into effect to
increase the energy efficiency standards for air conditioners.
I was amazed even more so when I realized that Amana, the
second or third largest producer of air conditioners, was in
support of this.
So it boggles my mind how, at the one time this
administration comes to Congress, comes to the American people
and says, we have an energy crisis in this country, an energy
crisis, and we have to do more for production, production,
production, the Vice President basically makes fun of
conservation and energy efficiency, when right before us is a
rule that would allow us to save energy, energy efficiency, by
increasing the energy efficiency standards for air
conditioners.
I think the fact that this rule was basically set aside on
Good Friday evening, when the major press didn't pay any
attention to it, was a signal to anybody watching this issue
that this was simply an attempt to gut this rule. Now, I
understand that it is involved in litigation right now. But,
for the life of me, can you tell me what was wrong with what
the Clinton Administration tried to do?
Mr. Garman. Yes, sir. And thank you for that question.
I think a couple of points--it is important to make, first
of all, that the incoming administration reviewed and adopted
without change efficiency standards promulgated during the last
administration covering washing machines, water heaters and
commercial heating and cooling systems. Only in the case of
residential air conditioners and heat pumps did this
administration propose any variation from the prior
administration.
Mr. Barrett. This is the big enchilada, though. This is the
one that people care about.
Mr. Garman. Right. But the real heart of matter is that the
Department of Energy analysis produced by the careerists, and
it is the same analysis that was used by the prior
administration, in the 13 SEER standard showed that it would
represent an unreasonable burden on consumers, particularly
low-income consumers. The analysis that DOE prepared indicated
that 64 percent of the low-income consumers would be faced with
paying increased life-cycle costs under the 13 SEER standard
for split air conditioners.
Mr. Barrett. But they would save money with their monthly
bill if it was more energy efficient.
Mr. Garman. No, sir. Sixty-four percent would incur
increased life-cycle costs for low-income consumers.
Now, in general, when you take all of the consumers, you
know, some would save more than others. The median payback
period for this particular 13 SEER standard on a split air
conditioning system would be 14 years. Most of these systems
last an estimated 18.4 years. That is, the standard use in the
rulemaking and the law directs us to use other factors other
than energy efficiency to promulgate these standards.
Mr. Barrett. But this was a standard that was already in
effect when your administration took place. Isn't there a law
that says you are not allowed to backtrack? Hasn't this
administration violated Federal law by backtracking because it
has reduced energy efficiency standards?
Mr. Garman. No, sir. Because that--and we are getting
perilously close to the issue of contention in the legal
matters.
Mr. Barrett. That doesn't bother me. I would consider it an
important issue.
Mr. Garman. But--no, it is the contention of the Department
of Energy that the standard was not final, was not in force and
effect and would not be until, I believe, 2005. So this is not
a back-pedaling.
Mr. Barrett. Why did Amana support it if this is such a bad
rule?
Mr. Garman. Pardon?
Mr. Barrett. Why did Amana support this if it was such a
bad rule?
Mr. Garman. Amana's parent company, Goodman Manufacturing,
is kind of an interesting niche manufacturer.
Mr. Barrett. Irresponsible citizen?
Mr. Garman. No. No. In fact, they are very smart
businessmen. They are essentially building a commodity product,
an air conditioner. They view it as a commodity product. They
don't attempt to differentiate their air conditioner from
others.
Goodman Manufacturing I think markets their air conditioner
under 5 or 6 brand names. They are one of the manufacturers
that control, you know, 97 percent of the market. I believe
that seven manufacturers control 97 percent of the market. But
Goodman was in a position, under our analysis, to actually come
out much better in relation to the other manufacturers, and I
think they are acting responsibly and economically, rationally,
but according to our analysis, they are a manufacturer that
benefits from----
Mr. Barrett. So the other six manufacturers were opposed to
it.
Mr. Garman. Other manufacturers suffer pretty significant
economic impacts. And again----
Mr. Barrett. But they could raise prices even though it
would hurt the poor. Under your analysis, why would it have a
negative impact if they could raise prices?
Mr. Garman. Our analysis indicates that, because of not
only this rule but a number of other rules----
Mr. Barrett. But this is the rule we are talking about.
Mr. Garman. Yes. But the cumulative effect on
manufacturers, it can in affect seriously alter the landscape
of the manufacturing base of air conditioning and heat pumps in
the country; and that is why the Department of Justice had
expressed similar concerns with the 13 standard. The Department
of Justice, as you know, under the law is required to review.
It had done that with the 12 standards. But one of the things
the DOE did not do in the prior administration when it jumped
the 13 standard was to fully consult, it is my understanding,
with the Department of Justice to fully understand the impacts,
the anti-trust impacts and the way that the landscape of the
market would be changed.
Mr. Barrett. I think my time has expired. Let me just say
again I find it hard to believe that that administration can
come to us with a straight face and say that they care about
energy efficiency and say that there is an energy crisis in
this country and not act more aggressively to increase the
energy efficiency standards for the product that virtually
every American recognized is the demand product during the time
of the year when demand is greatest, causes the most blackouts,
causes the biggest pressure on our electric system in this
country. It just boggles my mind.
And I would yield back my time.
Mr. Barton. The Chair now recognizes the vice chair of the
full committee, Mr. Burr, for 5 minutes.
Mr. Burr. I thank the chairman.
I found the last bit of information fascinating because I
never knew that the Minnesota market for air conditioners was
quite as high as it seems to be from the gentleman's
statements. As a matter of fact, I found it interesting
because, in my prior life--prior to serving in Congress--with a
wholesale distributor, we represented the Amana company
regionally; and North Carolina is a market where air
conditioners, when it gets hot, do sell.
It is amazing to watch consumers. Some do pay attention to
the energy standards, and they make a buying decision based
upon that. Some people can't afford a doubling of the price,
which, in fact, some have testified the move to 13 did. But at
12 we have a 20 percent increase, and it is affordable,
especially seniors who are susceptible in hot times to a health
hazard.
I commend the administration for trying to find a balance
of improvement but, also, the realities of the pricing
constraints that many of the consumers are under.
Let me thank both of you for coming.
Mr. Hoover, I want to also thank you for being observant to
what we did do yesterday on the point of order. I think
sometimes we have a feeling that nobody pays any attention to
what happens in Congress, but clearly you must pay a little bit
of attention because that was a very quick process that we went
through.
Let me ask you, Mr. Secretary, has the Bush Administration
taken a position as it relates to the Clinton Administration's
rulemaking regarding clothes washers?
Mr. Garman. Yes, sir. The administration is adopting the
clothes washers' rule.
Mr. Burr. Were you involved in that decision?
Mr. Garman. No, sir.
Mr. Burr. What does the standard mean?
Mr. Garman. I am sorry?
Mr. Burr. What does the standard that we are moving to
mean?
Mr. Garman. I do not have that because that is a past
rulemaking. I don't have that at my fingertips, and I would be
happy to supply that to you and for the record.
Mr. Burr. I think it is important that in your position you
should know that, and I know you have been there a very short
period of time. My concern is this is not an attempt to
eliminate from the marketplace top-loading washers, is it?
Mr. Garman. No, sir. No, sir. And, in fact, there are now
on the market some new top-loading models that do meet the new
standard.
Mr. Burr. We have certainly seen in this committee a
tremendous amount of evidence about the water usage of the
toilet regulations that we currently have. I don't think
anybody envisioned the fact that it would take three or four
flushes to evacuate a toilet, and that, in fact, with a new one
point six gallon standard, after four flushes you have used
more than the original toilet that we replaced. But I think a
move toward conservation must also make a determination as to
whether the standard that we set can be met and can be met
successfully.
Let me ask you, Mr. Hoover, we did move the Interior
appropriations bill for fiscal year 2002 yesterday. It will now
be considered in the Senate and ultimately in a conference
committee to resolve the differences between the two bodies.
What programs or funding initiatives would you suggest to those
potential conferees that need to be preserved that would
promote energy efficiency out of that particular appropriations
bill?
Mr. Hoover. I mean, obviously, the ones that I mentioned in
my testimony about the support of the State energy programs,
which is what funds our efforts to do energy efficiency, we
view as very important and also the weatherization assistance
program which, you know, provides the type of activities and
help to low-income consumers to make their housing stock much
more energy efficient. It helps them not only in the wintertime
with heating problems but also in the summertime with cooling
situations. Those two in particular, so--okay.
Then also an increase in the Federal Energy Management
program, the FEM program, and also Energy Star, the $2 million
increase for the Energy Star program which we view as a
critical and very important one because it is one where States
take advantage of the Federal Government's activities to
promote energy efficient appliances, and it plays into some of
the State programs.
In my own State we have a sales tax credit for the purchase
of Energy Star appliances, and so we don't have to go through
the certification process to determine what those products are,
it is right there, and we just use that criteria to apply our
sales tax credit.
Mr. Burr. Well, I can't speak for the committee, but for me
personally my hope is that in this conservation piece that we
can extend the Energy Star program to include more areas.
I want to thank the chairman for this opportunity and yield
back the balance of my time.
Mr. Barton. The gentleman yields back his time.
The Chair now recognizes the singer/songwriter from
Massachusetts for 5 minutes.
Mr. Markey. Thank the chairman very much. I appreciate that
introduction.
Mr. Garman, I authored this legislation back in 1987; and I
have a certain proprietary interest in this air conditioning
issue. So Mr. Dingell and I may be the last of the Mohicans to
remember the 1980's, but we remember them vividly. And one of
the reasons why we built in the no-rollback standard into this
bill was that the Reagan Administration had promulgated
essentially a no-standard standard standard whereby they met
the technically minimal requirements of a regulation by doing
nothing. But they went through the whole rulemaking. So we had
to make sure that in the future we would protect Congress
against a willful administration violating the intent of our
law.
Now, you contend that this was not a final rule. This was a
final rule, Mr. Garman. It is illegal for the Bush
Administration to roll back this rule. It had been published in
the Federal Register. It had a delayed effective date for
compliance, as many regulations do. But it was a final rule in
effect as you took office.
There was no basis whatsoever, Mr. Garman, for the Bush
Administration to take this rule off the books, except for the
fact that the Bush Administration has a drilling agenda, not an
energy efficiency agenda, and the entire Bush energy plan is
nothing more than a Trojan horse designed by the energy
companies to take environmental and energy efficiency and
health laws off the books which they have opposed over the
years.
Obviously, if the air conditioning standard reduced
dramatically the need for new coal-fired or nuclear-fired or
gas-fired electrical generating plants, then that is right in
concert with the Bush vision. Now, at the same time, the Bush
Administration says that they are a technology-based
administration, and they point, in fact, to the Department of
Energy.
Let me put up over here--here is their vision for war
fighting, for abrogation of the Anti-Ballistic Missile treaty,
that we will be able to deploy this war fighting scenario in
outer space with technologies that have yet to be invented, yet
to be deployed, yet to be proven effective. But we are willing
to destroy an entire arms control regime which has create
stability in the world for 30 years, and the Department of
Energy and the weapons labs is given a responsibility for
helping to develop that.
Now, at the same time, the Department of Energy, in
analyzing this Bush Administration, in analyzing air
conditioners, says this: Here is an air conditioner. Now we
can't figure out how to make an air conditioner meet a standard
which the second largest manufacturer in America is already
meeting.
Now, if you look at the complexity of the task that the
Department of Energy has in both assignments, one, which almost
every scientist at MIT and Cal Tech says is technologically
impossible but the administration defies that, you have to have
the will, they say, and compare that with the fact that the
second largest manufacturer is already making the air
conditioners that the Clinton Administration has put on the
books as a standard for every industry participating to meet 5
years from now, giving them plenty of time to phase in a
technology that is already out on the market, it would seem to
me that the careerists that you point to in the Bush
Administration should be put in new jobs because the
consequence of not complying with that air conditioning
standard is to insure that we are going to become more
dependent upon energy sources that are inconsistent with the
environmental and health and national security interests of the
United States.
Now, I have a list of 132 air conditioners made by 25
companies that meet or exceed the standard promulgated by the
Clinton Administration and illegally taken off of the books by
the Bush Administration, and I would ask unanimous consent that
this be put in the record.
Mr. Barton. Without objection.
[The information referred to follows:]
[GRAPHIC] [TIFF OMITTED] T3731.001
[GRAPHIC] [TIFF OMITTED] T3731.002
[GRAPHIC] [TIFF OMITTED] T3731.003
[GRAPHIC] [TIFF OMITTED] T3731.004
[GRAPHIC] [TIFF OMITTED] T3731.005
Mr. Markey. Now, let's look at this issue.
Mr. Barton. Will the gentleman yield?
Mr. Markey. I will be glad to yield.
Mr. Bryant. I just want to inform the chairman that it is a
5-minute rule, and Mr. Markey is one of our more eloquent
speakers, but he has had his 5 minutes. So if he has a
question, let's ask the question, rule; and if he wants to
continue to make a statement, he can continue to do that at a
later point in the hearing.
Mr. Dingell. Mr. Chairman, I am enjoying this so much that
I am compelled to make a unanimous consent request. I ask
unanimous consent that I be permitted to insert my opening
statement in the record and be recognized at this time to yield
5 minutes of my time to Mr. Markey.
Mr. Barton. Well, reclaiming the Chair, even from this part
of the podium, we will certainly accept the unanimous consent
request to put the gentleman's opening statement in the record,
which was already made before the gentleman arrived.
In terms of the second unanimous consent request, you are
asking that Mr. Markey be given an additional 5 minutes right
now?
Mr. Dingell. I am asking that you give him my 5 minutes.
Mr. Barton. Well, your 5 minutes will be given after Mr.
Walden's 5 minutes. If you want to yield at that time----
Mr. Dingell. I was hoping I could yield it at this time. As
I have indicated, I have been enjoying Mr. Markey's comments.
Mr. Bryant. Well, I will object to the second part of the
unanimous consent request, and we will do regular order in
terms of when questions are to be asked.
Mr. Barton. Objection is so noted. We have allowed others
to go over some; and Mr. Markey, if you have a question you
want to pose at this point, it appears that you will have
another 5 minutes there after I ask my questions.
Mr. Markey. I thank the chairman for yielding to me at this
time for a quick question.
Well, here is the question I have. Up until my questioning,
the Chair had been operating under a no-standard standard----
Mr. Barton. No, in terms of the time, that is not true. Mr.
Markey, we have actually been keeping track. We have been going
over about a minute and a half. At 48 seconds over, I flip my
mike on just to give you a signal that we were approaching that
time limitation.
Mr. Bryant. When I was in the Chair--when I asked my
questions, I asked questions for 5 minutes and 20 seconds.
Mr. Barton. We have now used up another 1\1/2\ minutes on
this debate, so if you have----
Chairman Tauzin. We are not being very efficient here.
Mr. Markey. So how do you want to proceed, Mr. Chairman?
Mr. Barton. Well, as I said, if you have a quick question
you want to ask, it appears Mr. Dingell will be yielding you 5
minutes after I get my first round of questions in, since I
haven't had that opportunity yet. So if you have a quick
question, we can do it. I will take my 5, and then it appears
Mr. Dingell will yield to you his 5.
Mr. Markey. Okay. I thank you, Mr. Chairman.
The EPA Energy Star website, Mr. Garman, this morning lists
the 132 model lines made by 25 different manufacturers that
already meet or exceeded the SEER 13 standard. Why can't the
other industry participants meet that standard?
What is the difficulty, knowing that low-income users, 60
percent of whom rent, are in situations where they effectively
pay the electricity bill every day that they are in these
apartments, where the estimates are that the rent would only
increase by $2 a month if a more efficient SEER 13 standard was
installed in each one of those homes?
Why isn't a low-income user better off in the long term if
the landlord is forced--not forced but because the air
conditioning industry is forced to only have more efficient air
conditioners out in the marketplace?
Please explain again the deep concern that this
administration seems to have for low-income people in this one
area if every economic analysis demonstrates that the consumer
is better off by having low electricity bills in the long term.
Mr. Garman. You have raised a number of issues, and I will
try to constrain my comments to the most recent one. But the--
--
Let me, first of all, point out that the matter on the
legality is an issue before the United States Court of Appeals
for the Second Circuit, and we will not resolve that issue here
today. So if I can put that issue of whether or not a 12 SEER
is legal under the provisions of EPCA, we just need to put that
aside.
I want to make it very clear, we are not arguing and it has
not been argued, to my knowledge, that it is not technically
possible to make an air conditioner that has a SEER 13 standard
or a 15 standard or actually even a 18 standard. It is
technically possible. Residing the compressor, increasing the
size of the cooling array, and other steps can be taken. It is
not a technological issue. It is an economic issue.
It is economically unwise to, you know, in terms of its
impact on consumers and the industry, to move to this standard
this quickly. This is not to say the consumers in areas of the
country where they can achieve a quick payback are not free to
buy these air conditioners. They are. They are available on the
market, and they can buy them. And if you live in Phoenix or
Miami you should by them.
But if you live in Minnesota or Wisconsin and you are a
low-income person who wants to live in his own home and you
want to buy an air conditioner that is going to have a
reasonable payback period, keep in mind we are promulgating a
minimum national standard that has to apply in all regions of
the country. If you want an Energy Star air conditioner that
has a higher SEER standard, that is certainly available.
The question and the tests that are put in the law that we
are supposed to use in promulgating these standards don't rest
on the single issue of energy efficiency alone. We are told to
evaluate the economic impact of the standard on the
manufacturers and the consumers. We are told to evaluate the
savings and operating costs throughout the life of the product.
We are told to evaluate the total projected amount of energy
that can be saved. In total, seven items in the law that we are
required to evaluate in setting these standards. It is a
balancing act. What the administration is pointing toward is a
standard of 12, an energy efficiency standard that will raise
energy efficiency over the current standard by 20 percent.
Mr. Barton. Okay. Thank you. We need to move on. We are 8
minutes and 56 seconds on that one.
So, Mr. Garman, I now yield myself 5 minutes for purposes
of questioning.
I would like to follow up on this issue of the SEER
standards and the other recommendations that the Bush
Administration did adopt. Can you go back through those, the
ones that you did adopt and the energy savings levels for each
of those appliances? Because, for some of us, air conditioning
is not the biggest user of power, especially if you are in the
rather cool Northwest. It is heating. It is water heating. And
I wonder if you could go back through the ones that you did
adopt.
Mr. Garman. Yes, sir. Adopted were standards covering
washing machines, water heaters, commercial heating and cooling
systems.
I would also want to point out that in the National Energy
Policy we were expressly directed to look to new areas that----
Mr. Barton. What are those new areas?
Mr. Garman. Well, they didn't specify it. But we are
looking at everything ranging from, of course, it has been
mentioned earlier, distribution transformers, residential
furnaces and boilers, small electric motors, gas cooking
products, residential or larger commercial central air
conditioners and heat pumps, oil and gas-fired commercial
package boilers, tankless gas-fired instantaneous water
heaters, a whole range of things that we are looking at for
possible new standards.
Mr. Barton. So is the SEER standards on air conditioning
from 13 recommended by Secretary Richardson? Was that figure
the figure recommended by the professional staff of the
Department of Energy?
Mr. Garman. My understanding is that the--and again, this
is anecdotal and I wasn't there. But it has--I have been told
that the general staff recommendation presented to Secretary
Richardson based on the technical support document, the same
numbers developed by the same staff put before Secretary
Abraham was to adopt the 12 SEER standard.
Mr. Barton. So you are saying the 12 SEER standard is the
one that the staff recommended based on your knowledge, not the
13.
Mr. Garman. Yes, sir.
Mr. Barton. And what savings would people see on a 12
standard versus a 13?
Mr. Garman. It depends on the region of the country, where
they lived, how----
Mr. Barton. Right.
Mr. Garman. You know, it varies widely. I can give you a
very kind of gross median savings.
Mr. Barton. Well, my understanding is the industry
estimates that the cost of an air conditioner will increase by
$407, 16.9 percent increase at 12 SEER, and $712 or a 29.5
percent increase at a 13 SEER. So the difference is nearly
double between the 12 and 13, just in the cost of the air
conditioner. Correct?
Mr. Garman. Yes, sir. The DOE numbers are actually lower
than those numbers provided I think by the air conditioning
manufacturers' trade. But they still are significant. It is--we
estimate, particularly when you look at heat pumps, a SEER 13
heat pump is projected to cost $4,000 when these regulations
take place.
Mr. Barton. A SEER 13 would cost $4,000----
Mr. Garman. $4,000. And that is lower DOE number estimate.
Mr. Barton. And what would a SEER 12 cost?
Mr. Garman. The SEER 12--I don't have that number at my
fingers. But you are leading me to a very important point, and
it goes right to the issue of energy efficiency. The choice
that a consumer makes between air conditioners and heat pumps
is a very important one.
Mr. Barton. Why?
Mr. Garman. Because what can happen, as I said, the
installed price of a 13 SEER heat pump is projected to be
$4,000 compared to $2,571 for a split air conditioning system.
Now, if we were to go to the 13 SEER, there would be an
incentive for the consumer to team up the lower priced air
conditioning system with a resistance heater furnace at a lower
cost to get their heating and cooling. If only 4 percent of the
consumers buying new equipment did this, they would erase the
energy savings achieved by the 13 SEER standard.
Mr. Barton. Can you say that again? Because I think that is
a critical point in this debate if we are trying to get energy
conservation.
Mr. Garman. If the price difference between a 13 SEER heat
pump and a 13 SEER air conditioner, which is significant,
drives only a fraction of consumers, 4 percent, to opt for the
lower up front cost of teaming up an air conditioner with a
resistance heating unit or resistance heating furnace----
Mr. Barton. Right.
Mr. Garman. [continuing] they will more than erase the
nationwide savings that would be achieved.
Mr. Barton. So if 96 percent of consumers go for the 14
SEER air conditioner, if that is the new requirement----
Mr. Garman. Heat pump.
Mr. Barton. Heat pump. I am sorry--then you would erase the
savings achieved by the higher standards because you would
drive people to go to the other.
Mr. Garman. That is right. I mean, that is the other thing.
Mr. Barton. So in fact the regulations we put in place
could actually have an inverse response by consumers, and you
could end up then consuming more energy.
Mr. Garman. That is right. 13 SEER could have the
unintended effect of actually making us take a step backward in
terms of energy conservation.
Mr. Barton. All right. My time has expired. Thank you, Mr.
Garman.
The Chair now yields 5 minutes to the gentleman from
Michigan, Mr. Dingell.
Mr. Dingell. Mr. Chairman, I thank you.
I would simply observe that the policies of this
administration on these matters appear to be a triumph of
conservative ideology of over technology and good sense, and I
yield to my good friend from Massachusetts.
Mr. Markey. I thank the gentleman very much.
Let me move back in, Mr. Garman, about the administration's
concern for poor people. And, by the way, congratulations.
Because the New York Times poll yesterday, poling all voters in
the United States, when asked the question of which Americans
the Bush Administration favors most, an astounding 57 percent
of all Americans--Bush policies generally favor the rich--57
percent of Americans say the rich, 8 percent say middle class,
and 2 percent of all voters say that the Bush Administration
favor poor people. So congratulations. You seem to have found
the one issue where the Bush Administration is favoring poor
people.
Now let's explore that concern as the driving force for
rolling back this air conditioning standard.
So there are about 15 million people, Mr. Garman, who live
at or below the poverty line in the United States. Now, 3.7
million of those households use central air conditioning, 60
percent of those rent. So we are talking maybe 2.2 million
households now. Now, understanding the way the population of
the United States works for central air conditioning, most of
those homes would be in Texas and Florida and California. They
would be in the warmer States, obviously. Almost by definition,
those are the people who would need it most, and that is where
they would be centralized.
Now, central air conditioners last about 18 years and cost
between $2,000 and $5,000. According to DOE's high-cost
estimates, a 30 percent improved standard will cost about $340
more than current basic models. If a landlord chose to attempt
to recoup this increment by raising rent over an 18-year
product life, the rent increase would be less than $2 per
month.
Now the 40 percent of the 3.7 million low-income households
with central air conditioning who own their homes at some point
would face the cost of replacing a central air conditioning
system, and there--I think you would agree that for most of
these households the monthly utility bill savings from the
strongest standard over the life of the home will outweigh the
incremental cost of financing a more inefficient air
conditioner. So, again, could you go back through this analysis
and tell me why the low-income renter or owner is worse off
having a national SEER 13 standard 5 years from now than having
a 12 standard over the lives of their families?
Mr. Garman. I will again reiterate as best I can the
consumer impact comparison between 12 and 13 SEER for split air
conditioners and heat pumps. The median payback period for an
average consumer and the 12 SEER standard is 10 years,
according to DOE analysis, notwithstanding the fact that the
law tells us to use as a general guidepost a rebuttable
presumption of a 3-year payback. But, nevertheless, the
administration placed the emphasis and the importance of energy
efficiency as saying that we are going to promulgate a minimum
national standard that the average consumer could not recoup
until 10 years. The low-income consumer would take 12 years to
recoup it. In the case of the 13 SEER standard, those numbers
become 11 years to 14 years.
Mr. Markey. What is the electricity price that you assume
in that?
Mr. Garman. These are minimum payback periods.
Mr. Markey. No. What is the minimum?
Mr. Garman. It depends, because electricity prices vary
with region.
Mr. Markey. How long would it take the electricity rates
that have been in California for the last year and that the
Bush Administration refuses to interject themselves to use cost
of service rate, how long would it take to get a recovery for
California low-income users?
Mr. Garman. For, of course, a much shorter time in any area
of the country----
Mr. Markey. Thank you.
Mr. Garman [continuing]. Where rates are higher or when
temperatures are higher and air conditioners are used more
often.
Mr. Markey. How about in Texas? How long would it take to
get a return?
Mr. Garman. It should not--it should take a matter of
several years to get a return in Texas.
Mr. Markey. What do you mean, ``several years''?
Mr. Garman. Well, again, it depends on a number of factors.
Mr. Markey. So you would get the return after maybe 3 or 5
years in Texas or California, and then for every other year
after that there would be savings which the consumer or the
landlord would be enjoying.
Mr. Garman. Correct. Remember, sir, we are promulgating a
minimum national standard. Consumers in Texas or Louisiana are
free to buy Energy Star devices today in the marketplace.
Mr. Markey. But you understand that the landlord has no
incentive.
Mr. Barton. The gentleman's time has now expired.
Mr. Markey. If I may just finish my thought. The landlord
has no incentive to buy an efficient central air conditioning
system since they can pass the cost on to the tenant, to the
poor tenant; and so it is not the poor person who makes that
decision. The poor person is subjected----
Mr. Barton. The gentleman's time is expired.
We want to thank the panelists for their presentations
today. If members have further questions, they are welcome to
submit them in writing.
We have a number of panelists who are here today to testify
in our next panel, so we would welcome them up to the committee
table at this time.
We want to welcome our panelists this morning. Each of you
will have 7 minutes to make your presentations. We have your
written testimony which has been entered into the official
record of the committee. Feel free to work off of that or to
summarize your remarks in an oral manner.
We would like to start with Mr. Steven Nadel, the Executive
Director of the American Council for an Energy-Efficient
Economy. Welcome to the committee. We appreciate your taking
the time to testify today. Please begin your remarks.
STATEMENTS OF STEVEN NADEL, EXECUTIVE DIRECTOR, AMERICAN
COUNCIL FOR AN ENERGY-EFFICIENT ECONOMY; MARK F. WAGNER,
DIRECTOR, JOHNSON CONTROLS, INC.; MALCOLM O'HAGEN, PRESIDENT,
NATIONAL ELECTRICAL MANUFACTURERS ASSOCIATION; JOSEPHINE S.
COOPER, PRESIDENT, ALLIANCE OF AUTOMOBILE MANUFACTURERS; DAVID
M. NEMTZOW, PRESIDENT, ALLIANCE TO SAVE ENERGY; GARY SWOFFORD,
VICE PRESIDENT AND CHIEF OPERATING OFFICER--DELIVERY, PUGET
SOUND ENERGY; MARK E. RODGERS, CHIEF EXECUTIVE OFFICER,
SMARTSYNCH, INC.; DEAN E. PETERSON, CENTER LEADER, LOS ALAMOS
NATIONAL LABORATORIES, MATERIAL SCIENCE TECHNOLOGY-
SUPERCONDUCTIVITY TECHNOLOGY CENTER; PATRICIO SILVA, PROJECT
ATTORNEY, NATURAL RESOURCES DEFENSE COUNCIL; AND JORDAN CLARK,
PRESIDENT, UNITED HOMEOWNERS ASSOCIATION
Mr. Nadel. Okay. Thank you, Mr. Chairman and other
committee members.
Mr. Barton. Could you pull that microphone just a little
bit closer? Need to be fairly close for us to hear. Thank you.
Mr. Nadel. Yes. I very much appreciate the opportunity to
testify before the committee today.
Energy efficiency in our opinion should be the cornerstone
of American energy policy. Other aspects are also going to be
needed, but energy efficiency is the cornerstone.
As Mr. Boucher reported earlier, energy efficiency has
increased enormously in the U.S. Over the last 25 years. If we
had not increased our energy efficiency as much as we have over
these last 25 years, our energy bills last year would have been
more than $4 billion higher, a very high number. It has made a
dramatic difference.
Likewise, there are enormous opportunities to improve
energy efficiency. Analysis by the National Laboratories or DOE
found that we can reduce energy use cost effectively by about
10 percent in 2010, about 20 percent in 2020. Our estimates at
ACEEE are that even higher savings are possible.
In my time here today I mainly wanted to focus on three
recommendations that we have in terms of policy recommendations
as this committee moves forward with legislation. In our
written comments we have six recommendations, but in the
interest of time I am going to concentrate on three of them.
First is to adopt efficiency standards for several
products. As several of the committee members have pointed out
before, the appliance standards program is one of the most
effective Federal energy-saving programs. As a result of
efficiency standards that have already been adopted and are in
effect, we have reduced peak demand by the equivalent of more
than 200 power plants. Energy bills last year were about $9
billion lower as a result of these standards, and these savings
keep increasing every year as more and more products turn over.
The efficiency standards program was last revised by
Congress in 1992 as part of the Energy Policy Act. It is 9
years later, and there has been a lot of work going on at the
State level to develop new State standards, also in development
of voluntary standards by industry associations, by Energy Star
and by others.
We think it is time for Congress to add some additional
products to the energy standards program. The Bush
Administration and the national energy plan does propose to add
some new standards where technically feasible and economically
justified. In a few cases they do have existing legislative
authority to do that. In most cases, though, they do not, which
is why congressional action is needed.
Also, DOE is very much behind schedule in many of its
rulemakings, and this goes back for many administrations. So to
the extent Congress can set consensus standards that
dramatically speeds up the process and we should have DOE
rulemakings only when there is important outstanding technical
issues that can't be resolved through consensus negotiations.
Specifically, we recommend that Congress adopt new
efficiency standards for distribution transformers, commercial
refrigerators, exit signs, traffic lights, torchiere lighting
fixtures, icemakers, commercial unit heaters and consumer
electronic equipment; and I provide some information in my
written testimony on some of those products.
In addition, we believe that Congress should direct DOE to
set standards on residential ceiling fans, heat pump
circulation fans and refrigerated vending machines. We put
those last three in a separate category because there are some
technical issues to be resolved there.
For all of these products we are just not completing an
analysis looking at the opportunities for energy savings. We
conclude that by 2020 setting new standards on these products
that I have just named will reduce electricity use from the
residential and commercial sectors by about 5 percent. So that
is quite a significant savings.
We are talking energy savings to consumers of billions of
dollars. Over the next 15 years, we project that these
standards would save consumers about $85 billion on a net
present value basis. The benefits to our estimation are about
five times greater than the cost.
These are pretty straightforward standards. Many of them
right now are being adopted in California without controversy.
The paybacks tend to be very rapid, nothing like some of the
more controversial products we have been discussing of late.
So that would be one of our important recommendations.
Second, we recommend that Congress establish a national
system benefit trust fund. Many States and utilities have
historically offered energy efficiency, low-income research and
development and other types of programs as part of their effort
to help provide services to people who are on the system. In
general, these programs have cost less than 3 cents for each
kilowatt hour that they save, so far cheaper than generating
electricity.
Unfortunately, as a result of restructuring and
competition, the budgets for these programs have been
dramatically cut. Over the last 6 years, spending on these
types of programs has declined by more than 50 percent.
Some States have enacted their own system benefit programs,
but many States have not. We recommend that the Federal
Government establish a program to provide matching funds to the
States.
Specifically, there are proposals by Senator Jeffords and
Representative Pallone that would establish a Federal fund,
funded by a charge of two-tenths of a cent per kilowatt hour of
sales, a very small charge on electric service that would then
be used to match State expenditures. States would decide how to
spend the funds within their States, to choose the mix of
efficiency versus low income versus other needs.
But we think this type of program would be an important
inducement to the States to establish these programs, and it
follows a precedent for the Universal Service Fund under the
Telecommunications Act which this committee helped develop back
in 1996. We find that, from our analysis, that this type of
program could result in energy savings fairly quickly. We
figure this could reduce energy use in 2005 by about 1.4
percent in this country, and by 2010 it would reduce
electricity use by about 7 percent.
So each of these things are saving a couple of percent, and
it really adds up.
The third policy I wanted to mention was to improve
automobile fuel economy, to increase corporate average fuel
economy standards or undertake other policy steps that will
result in similar savings. To the extent we work with CAFE, we
recommend improving the standards by 5 percent per year for the
next 10 years. That would bring the car standards to 44 miles
per gallon and the light truck standard to 33 miles per gallon
by 2012.
We do support tax incentives for advanced car technologies,
but we believe from our analyses that these will have a very
small impact relative to the impact of CAFE. The market has not
worked well when it comes to automobile fuel economy. Average
fuel economy has come down in recent years, not gone up.
CAFE standards were very effective in the 1970's and 1980's
since they were first signed by President Ford. Manufacturers
were able to meet the standards at a modest cost and without
compromising safety, and we believe it is time to increase
these standards again. In particular, we recommend that
Congress do it because this will provide greater certainty to
the manufacturers of what the long-term targets are rather than
these annual rulemakings that just make very small, incremental
changes.
Mr. Barton. If you could sum up your comments, sir.
Mr. Nadel. Okay. Just to wrap up on that one, there is a
large amount of oil at stake here. The savings from the CAFE
proposal, like I mentioned, is more than three times proven
reserves of oil in the United States.
In conclusion, the Bush Administration has endorsed energy
efficiency rhetorically in their national energy plan but is
short on specifics when it comes to energy efficiency. Congress
should adopt--address these shortcomings by adopting some of
the specific policies I have recommended here as well as in my
written statements.
It has broad public support for these policies. A Gallup
poll last month found that more than 8 percent of consumers
supported mandating new, more efficient appliances and
mandating more efficient cars. So I would urge this committee
to put some action behind the rhetoric and endorse efficiency
through these policies. Thank you.
[The prepared statement of Steven Nadel follows:]
Prepared Statement of Steven Nadel, Executive Director, American
Council for an Energy-Efficient Economy
INTRODUCTION
ACEEE is a non-profit organization dedicated to increasing energy
efficiency as a means for both promoting economic prosperity and
protecting the environment. We were founded in 1980 and have
contributed in key ways to energy legislation adopted during the past
20 years, including the Energy Policy Act of 1992 and the National
Appliance Energy Conservation Act of 1987. I appreciate the opportunity
to appear again before this Committee.
Energy efficiency improvement has contributed a great deal to our
nation's economic growth and increased standard of living over the past
25 years. Consider these facts which are based primarily on data
published by the Energy Information Administration:
1. Total primary energy use per capita in the United States in 2000 was
almost identical to that in 1973. Over the same 27-year period
economic output (GDP) per capita increased 74 percent.
2. National energy intensity (energy use per unit of GDP) fell 42
percent between 1973 and 2000. About 60% of this decline is
attributable to real energy efficiency improvements and about
40% is due to structural changes in the economy and fuel
switching.
3. If the United States had not dramatically reduced its energy
intensity over the past 27 years, consumers and businesses
would have spent at least $430 billion more on energy purchases
in 2000.
4. Between 1996 and 2000, GDP increased 19 percent while primary energy
use increased just 5 percent. Imagine how much worse our energy
problems would be today if energy use increased 10 or 15
percent during 1996-2000.
Even though the United States is much more energy-efficient today
than it was 25 years ago, there is still enormous potential for
additional cost-effective energy savings. Some newer energy efficiency
measures have barely begun to be adopted. Other efficiency measures
could be developed and commercialized in coming years, with proper
support:
The Department of Energy's national laboratories estimate that
increasing energy efficiency throughout the economy could cut
national energy use by 10 percent or more in 2010 and about 20
percent in 2020, with net economic benefits for consumers and
businesses.1
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\1\ Interlaboratory Working Group. 2000. Scenarios for a Clean
Energy Future. Washington, D.C.: Interlaboratory Working Group on
Energy-Efficient and Clean-Energy Technologies, U.S. Department of
Energy, Office of Energy Efficiency and Renewable Energy.
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ACEEE estimates that adopting a comprehensive set of policies
for advancing energy efficiency could lower national energy use
by as much as 18 percent in 2010 and 33 percent in 2020, and do
so cost-effectively.2
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\2\ H. Geller, S. Bernow, and W. Dougherty. 1999. Meeting America's
Kyoto Protocol Target: Policies and Impacts. Washington, D.C.: American
Council for an Energy-Efficient Economy.
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All of these savings are from efficiency improvements, meaning
improving equipment and systems to get the same or greater output (e.g.
miles traveled or widgets produced) but with less energy input.
Additional energy can be saved from energy conservation, meaning
reduced energy use, including reducing energy waste (which is generally
desirable) and reducing energy services (which is generally not
desirable). In my testimony here today, I will talk only about energy
efficiency and not about energy conservation.
Whether the savings potential from energy efficiency is 20 or 30
percent, increasing the efficiency of our homes, appliances, vehicles,
businesses, and industries should be the cornerstone of national energy
policy today since it provides a host of benefits. Increasing energy
efficiency will:
Reduce energy waste and increase productivity, without forcing
consumers or businesses to cut back on energy services or
amenities;
Save consumers and businesses money since the energy savings
more than pay for any increase in first cost;
Reduce the risk of energy shortages and improve the
reliability of overtaxed electric systems;
Reduce energy imports;
Reduce air pollution of all types since burning fossil fuels
is the main source of most types of air pollution;
Lower U.S. greenhouse gas emissions and thereby help to slow
the rate of global warming.
Furthermore, increasing energy efficiency does not present a trade-
off between enhancing national security and energy reliability on the
one hand and protecting the environment on the other, as do a number of
energy supply options. Increasing energy efficiency is a ``win-win''
strategy from the perspective of economic growth, national security,
reliability, and environmental protection.
We are not saying that energy efficiency alone will solve our
energy problems. Even with aggressive actions to promote energy
efficiency, U.S. energy consumption is likely to rise for more than a
decade, and this growth, combined with retirements of some aging
facilities, will mean that some new energy supplies and energy
infrastructure will be needed. But, aggressive steps to promote energy
efficiency will substantially cut our energy supply and energy
infrastructure problems, reducing the economic cost, political
controversy, and environmental impact of energy supply enhancements.
ENERGY EFFICIENCY POLICY RECOMMENDATIONS
The remainder of my testimony will focus on six priority energy
efficiency policies which are cost-effective to consumers and
businesses and will substantially reduce U.S. energy use. The first
four of these recommendations are within this Committee's area of
jurisdiction, the other two fall under the jurisdiction of other
Congressional committees. Each of these recommendations could reduce
U.S. energy use by more than 1% in 2020; taken together they would
reduce U.S. energy use by about 20%. These policies involve a
combination of ``carrots'' and ``sticks,'' including new incentives,
funding for R&D and technology deployment, and new regulations. The
policies would significantly increase the efficiency of energy use in
our homes, commercial buildings, factories, and vehicles.
1. Adopt Efficiency Standards for Several New Products
Federal appliance and equipment efficiency standards were signed
into law by President Reagan in 1987 and expanded under President Bush
in 1992. Minimum efficiency standards were adopted because many market
barriers, such as lack of awareness, rush purchases when an existing
appliance breaks down, and purchases by builders and landlords, inhibit
the purchase of efficient appliances in the unregulated market.
Standards remove inefficient products from the market but still leave
consumers with a full range of products and features to choose among.
Appliance and equipment standards are clearly one of the federal
government's most effective energy-saving programs. Analyses by DOE and
others indicate that in 2000, appliance and equipment efficiency
standards saved 1.2 quadrillion Btu's (quads) of energy (1.3% of U.S.
electric use) and reduced consumer energy bills by approximately $9
billion with energy bill savings far exceeding any increase in product
cost.3 By 2020, standards already enacted will save 4.3
quads/year (3.5% of projected U.S. energy use), and reduce peak
electric demand by 120,000 MW (more than a 10% reduction). The
President's National Energy Plan devotes half a page to this program
and notes that these ``standards will stimulate energy savings that
benefit the consumer, and reduce fossil fuel consumption, thus reducing
air emissions.'' 4
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\3\ H. Geller, T. Kubo, and S. Nadel. 2001. Overall Savings from
Federal Appliance and Equipment Efficiency Standards. Washington, D.C.:
American Council for an Energy-Efficient Economy.
\4\ National Energy Policy Development Group. 2001. National Energy
Policy. U.S. Government Printing Office, Washington, D.C.: National
Energy Policy Development Group.
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In order to provide additional cost-effective savings under this
program, we recommend three actions:
A. DOE, with adequate funding and encouragement from the Congress,
should commit to completing equipment standard rulemakings in a
timely manner. Current rulemakings include initial standards
for distribution transformers as well as new, updated standards
for commercial air conditioning systems and residential heating
systems. Rulemakings should also be started soon to update
existing standards for residential dishwashers, and
refrigerators. On-going proceedings should be completed within
two years, new proceedings within three years.
B. The Congress should enact new efficiency standards for products now
or soon to be covered by state efficiency standards and by
several voluntary standards programs. Among the products that
should be included are distribution transformers, 5
commercial refrigerators, exit signs, traffic lights, torchiere
lighting fixtures, ice makers, and commercial unit heaters.
California is now adopting standards on many of these products
and Massachusetts and Minnesota already have standards on
distribution transformers. None of these standards have been
controversial and all involve highly cost-effective energy
savings. In addition, the Congress should adopt limits on
standby power consumption for household electronic products and
appliances based on levels promoted through the Energy Star
program and should also direct DOE to adopt standards on
furnace fans, ceiling fans, and cold-drink vending machines.
Setting standards for household electronic products such as
televisions, VCRs, cable boxes, and audio equipment would
substantially reduce the approximately 5% of household
electricity consumed when products are not ``on''. Standards
for the other products mentioned above will be very cost-
effective, but certain technical details need to be worked out
which is why DOE and not the Congress should set specific
standard levels.
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\5\ Congressional enactment of transformer standards will be
quicker and easier than the DOE rulemaking discussed in section A
above. Congress first called for a DOE transformer rulemaking in 1992,
but now it is nine-years later and this rulemaking has barely begun.
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C. The Bush Administration should permit a SEER 13 efficiency standard
for residential central air conditioners and heat pumps to
proceed. The Administration recently announced that it will
soon propose rolling back the standard issued in January from
SEER 13 to SEER 12. A SEER 13 standard relative to a SEER 12
standard will cut peak electricity demand by 18,000 MW
(equivalent to 60 power plants of 300 MW each) once the
standard is fully phased in, and will cut consumer electricity
bills by more than $18 billion over the next 30 years. This is
one of the most important steps the Federal government can take
to help California and other states avoid future power
shortages.
The first two of these recommendations are consistent with the
President's National Energy Plan which recommends that the Secretary of
Energy: (1) ``support [the] appliance standards program for covered
products, setting higher standards where technologically feasible and
economically justified;'' and (2) ``expand the scope of the appliance
standard program, setting standards for additional appliances where
technologically feasible and economically justified.'' 6
However, we recommend that the Congress take action in order to
accelerate savings (Congressional action can avoid a 3-10 year DOE
rulemaking process) and because DOE currently lacks authority to set
standards for commercial and industrial equipment not currently covered
by the federal standards program.
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\6\ National Energy Policy Development Group, op. cit. (see note
4).
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ACEEE estimates that these three steps can cost-effectively reduce
energy use in 2020 by about 2.4 quadrillion Btu's (quads), nearly a 2%
reduction in projected U.S. energy use. Consumers and businesses would
see their energy bills decline by nearly $20 billion per year by 2020.
Savings in 2010 would be about one-third of these amounts.7
A forthcoming ACEEE analysis estimates that the benefits of just the
second step will be approximately five times greater than the costs,
and will provide net benefits to consumers and businesses of about $80
billion from products sold through 2020.
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\7\ Preliminary results of an ACEEE analysis to be published July
2001.
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2. Establish a National System Benefit Trust Fund
Electric utilities historically have funded programs to encourage
more efficient energy use, assist low-income families with home
weatherization and energy bill payment, promote the development of
renewable energy sources, and undertake research and development.
Experience with utility energy efficiency programs in New England, New
York, and California shows that the energy bill savings for households
and businesses are around twice costs (both the program costs and
measure costs).8 However, increasing competition and
restructuring have led to a decline in these ``system benefit
expenditures'' over the past six years. Total utility spending on all
demand side management programs (i.e., energy efficiency and peak load
reduction) fell by more than 50% from a high of $3.1 billion in 1993 to
$1.4 billion in 1999 (1999 dollars).9
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\8\ S. Nadel and M. Kushler. 2000. ``Public Benefit Funds: A Key
Strategy for Advancing Energy Efficiency.'' The Electricity Journal.
October, 74-84.
\9\ Ibid. Also EIA. 2000. ``Electric Utility Demand Side Management
1999.'' www.eia/gov/cneaf/electricity/dsm99. Washington, D.C.: U.S.
Department of Energy, Energy Information Administration.
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In order to ensure that energy efficiency programs and other public
benefits activities continue following restructuring, 15 states have
established system benefits funds through a small charge on all
kilowatt-hours (kWh) flowing through the transmission and distribution
grid. We recommend creation of a national systems benefits trust fund
that would provide matching funds to states for eligible public
benefits expenditures. Specifically, we recommend a non-bypassable
wires charge of two-tenths of a cent per kWh. This concept and specific
amount were included in utility restructuring bills sponsored by Rep.
Pallone (H.R. 2569) and Senator Jeffords (S. 1369) in the last
Congress. This concept is based on the Universal Service provisions
contained in the Telecommunications Act of 1996.
This policy would give states and utilities a strong incentive to
expand their energy efficiency programs and other public benefits
activities. All states and utilities would pay into the fund, but they
would only get money back out if they establish or continue energy
efficiency programs and other public benefit activities. However,
individual states, not the federal government, would decide how the
money gets spent in each state. The Pallone and Jeffords bills provide
one national dollar for each state dollar but other matching ratios
could also be considered such as a 2:1 national:state match, or a
baseline funding amount with no matching requirement plus an additional
supplemental amount subject to a match.
We believe this policy would lead to widespread energy efficiency
improvements in lighting, appliances, air conditioning, motors systems,
and other electricity end uses. We estimate it could save as much as 54
TWh (1.4% of projected electricity use) in 2005 and 291 TWh (7% of
projected use) in 2010.10 With these levels of electricity
savings, the risk of power shortages in the future will diminish, there
will be fewer price spikes caused by periods of tight supply and
demand, and there will be less need to build often contentious new
power plants. In addition, pollutant emissions from power plants will
fall, thereby improving public health and helping cities and states
meet the ambient air quality standards.
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\10\ Preliminary results of an ACEEE analysis to be published in
July 2001.
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3. Increase Corporate Average Fuel Economy (CAFE) Standards for Cars
and Light Trucks or Adopt an Equivalent Fuel Consumption Cap
The average fuel economy of new passenger vehicles (cars and light
trucks) has declined from about 26 miles per gallon (mpg) in 1988 to 24
mpg in 2000 due to increasing vehicle size and power, the rising market
share of light trucks, and the lack of tougher Corporate Average Fuel
Economy (CAFE) standards. The original CAFE standards for cars were
adopted in 1975 and reached their maximum level in 1985.
We recommend increasing the CAFE standards for cars and light
trucks 5% per year for 10 years so that they reach 44 mpg for cars and
33 mpg for light trucks by 2012, with further improvements of 3% per
year beyond 2012. Alternatively, the standards for cars and light
trucks could be combined into one value for all new passenger vehicles,
specifically 38 mpg by 2012. This level of fuel economy improvement is
technically feasible and cost effective for consumers, and it can be
achieved without compromising vehicle safety.11 The 5%
annual fuel economy improvement is the rate of improvement that Ford
has indicated it will achieve voluntarily for its SUVs over the next
five years. If this rate can be achieved in SUVs, it can be achieved in
all new vehicles made by Ford as well as other manufacturers.
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\11\ J. DeCicco, F. An, and M. Ross. 2001. Technical Options for
Improving the Fuel Economy of U.S. Cars and Light Trucks by 2010-2015.
Washington, D.C.: American Council for an Energy-Efficient Economy.
Also, J. Mark. 1999. Greener SUVs: A Blueprint for Cleaner, More
Efficient Light Trucks. Cambridge, Mass.: Union of Concerned
Scientists.
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Car manufacturers will protest and say ``it can't be done'' or ``it
will cost a fortune,'' as they did when the original CAFE standards
were debated. The initial CAFE standards were enacted by the Congress
and signed into law by President Ford in 1975 in the face of industry
opposition, and the car companies complied with these standards at
reasonable cost. Tougher standards are now long overdue and should be
adopted before we face another oil price shock or crisis, considering
``technological feasibility, economic practicability, and the need of
the nation to conserve energy,'' as stated in the Energy Production and
Conservation Act of 1975.
Tougher fuel economy standards should be complemented by tax
credits for purchasers of innovative, highly efficient vehicles (see
policy 5 below), expanding taxes on gas guzzling vehicles, increasing
labeling and consumer education efforts, and continuing vigorous R&D on
fuel-efficient, low emissions vehicles. This combination of policies
would facilitate compliance with the tougher standards.
The CAFE standards proposed here would save about 1.5 million
barrels of petroleum per day by 2010 and 4.8 million barrels per day by
2020. Over 40 years, increasing vehicle efficiency as suggested above
would save 10-20 times more oil than the projected supply from the
Arctic National Wildlife Refuge (ANWR) and more than three times total
proven U.S. oil reserves today.12 The avoided carbon dioxide
emissions would also be very substantial.
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\12\ H. Geller. 2001. Strategies for Reducing Oil Imports:
Expanding Oil Production vs. Increasing Vehicle Efficiency. Washington,
D.C.: American Council for an Energy-Efficient Economy.
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An alternative approach would be to establish a cap on the use of
petroleum products by passenger vehicles and then come up with the
policy mechanisms, including but not limited to stronger CAFE
standards, that would enable the cap to be met. This approach was
included in recent Senate legislation (S. 597), which sets the cap at
105% of fuel consumption in 2000 starting in 2008. This fuel
consumption cap would result in a energy savings and avoided
CO2 emissions in the near term (i.e., by 2010) similar to
those achieved by strengthened CAFE standards.
4. Promote Clean, High-Efficiency Combined Heat and Power Systems
Combined heat and power (CHP) systems (also called cogeneration)
produce multiple usable energy forms (e.g., electricity and steam) from
a single fuel input. These combined systems can achieve much greater
efficiency than separate systems because they produce the heat that
would otherwise need to be generated in a separate boiler, while also
producing power on-site at a higher efficiency than most central
station power plants.
Several inequities in government and utility regulations hinder
development of CHP resources. These include utility rules that make it
difficult for many CHP systems to connect to the utility grid, tax
depreciation rules that vary the depreciation period for CHP systems
from 5-39 years depending on plant ownership, and environmental
standards that do not recognize the efficiency gains of CHP systems.
Each of these problems need to be addressed.
CHP and other distributed generation technologies have encountered
hurdles to interconnecting with the electric utility system, which has
lead to a hostile environment for CHP in many utility service
territories. These hurdles include a lack of standard technical
specifications, which means that each utility develops its own
specification. While many of these utility specifications are
reasonable, others are not and contain unreasonable requirements, such
as expensive equipment or project studies, and discriminatory pricing
and contractual practices such as ``exit fees'' and onerous terms and
conditions of service.
While some states have begun to address these issues, many have
not, and those that have, take somewhat different approaches. Federal
legislation is needed to address these issues in a consistent manner
across states. The legislation should require that CHP facilities be
interconnected with the local distribution facilities if the CHP owners
comply with new IEEE interconnection standards and pay the directly
related costs. CHP facilities should have a right to back-up power sold
at rates, terms, and conditions that are reasonable and not
discriminatory as determined by the appropriate regulatory authority.
Provisions along these lines are included in H.R. 1945 which was
recently introduced by Rep. Quinn and others. In addition, high-
efficiency CHP systems should be exempted from exit fees that are not
directly related to service to that customer.
Under current IRS rules, CHP assets are depreciated over varying
time periods depending on system configuration and owner (i.e., the
same equipment can be depreciated over as little as five years to as
much as 39 years). For example, equipment at a data center is
depreciated over 5 years, while the same system installed in an owner-
occupied commercial building is deprecated over 39 years. This
treatment is a result of policies that did not envision the changes in
technology and markets that have occurred in recent years. Most modern
CHP systems use combustion turbines derived from jet engines, which
have much lower capital costs than older systems but require more
extensive and expensive maintenance. These systems are projected to run
7-10 years before needing major capital investment. A common
depreciation period is needed for CHP equipment. Based on the technical
and market life of current systems, we recommend a depreciation period
in the range of 7-10 years (at the high end of this range if a separate
investment tax credit is offered; at the low end of this range if there
is not a separate investment tax credit). This is consistent with the
President's National Energy Plan which recommends that ``the Secretary
of the Treasury [should] work with Congress to encourage increased
energy efficiency through combined heat and power (CHP) projects by
shorterning the depreciation life for CHP projects or providing an
investment tax credit.'' 13
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\13\ National Energy Policy Development Group, op. cit. (see note
4).
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Most stationary-source air quality regulations are based on either
the emissions per unit of fuel burned or the concentration of a
pollutant in the smokestack. This smokestack approach makes no
adjustment in allowable emissions based on the efficiency of energy
use. Thus, a CHP system receives no credit for net total emissions
reductions achieved when compared to separate systems for providing
heat and power. To address this problem, the permitting of CHP systems
should be shifted from an input-based to an output-based approach
(i.e., maximum emissions per unit of useful energy output). Output-
based levels equivalent to current input-based levels for separate heat
and power should be developed by EPA.
DOE and EPA have set a goal of adding 50,000 MW of new CHP capacity
by 2010. With these barriers removed, we believe this target is
achievable, and further growth could add an additional 95,000 MW over
the 2011-2020 period. Relative to the conventional power plants these
systems would displace, this new CHP capacity would result in net
energy savings of approximately 1.5 quads in 2010 and 4 quads in 2020.
Carbon dioxide emissions would be cut substantially.14
Owners of CHP systems (businesses and industries) will realize net cost
savings that pay back the first cost in 4-5 years on
average.15
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\14\ Geller, Bernow, and Dougherty, op. cit. (see note 2).
\15\ H. Geller, S. Nadel, N. Elliott, M. Thomas, and J. DeCicco.
1998. Approaching the Kyoto Targets: Five Key Strategies for the United
States. Washington, D.C.: American Council for an Energy-Efficient
Economy.
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5. Enact Tax Incentives for Highly Energy-Efficient Vehicles, Homes,
Commercial Buildings, and Other Products
Many new energy-efficient technologies including fuel cell power
systems, hybrid and fuel cell vehicles, gas-fired heat pumps, super-
efficient refrigerators and clothes washers, and super-efficient new
buildings have been commercialized in recent years or are nearing
commercialization. But these technologies may never get manufactured on
a large scale or widely used due to their initial high cost, market
uncertainty, lack of consumer awareness, and other barriers.
Tax incentives can help manufacturers justify mass marketing for
innovative energy-efficient technologies. Tax credits also can help
buyers (or manufacturers) offset the relatively high first cost premium
for the new technologies, thereby helping to build sales and market
share. Once the new technologies become widely available and produced
on a significant scale, costs should decline and the tax credits can be
phased out.
We recommend providing tax incentives for a variety of highly
energy-efficient vehicles, buildings, and other products. A key element
in designing the credits is for only highly efficient products to be
eligible. If the eligibility level is set too low, then the cost to the
Treasury will be high and incremental energy savings low because many
of the credits will go to projects that would have occurred even
without the credits (so-called ``free riders'').
We recommend tax incentives for the following products:
Hybrid Electric and Fuel Cell Vehicles. Tax credits of up to $4,000
for hybrid electric vehicles and $8,000 for fuel cell vehicles will
help jump start introduction and purchase of these innovative, fuel-
efficient technologies. The incentives should be based primarily on
energy performance and provide both fuel savings and lower emissions,
as is the case in the CLEAR Act introduced by April 24 by Sen. Hatch
and others, and by Rep. Camp in the House (H.R. 1864). The President's
National Energy Plan also endorses tax credits along these lines.
Combined Heat and Power. We support either a 10% investment tax
credit or seven-year depreciation period for combined heat and power
systems with an overall efficiency of at least 60-70% depending on
system size. This proposal has strong industry support and is included
in both the Murkowski and Bingaman bills and in the Quinn bill (H.R.
1945) in the House. This proposal is also endorsed in the President's
National Energy Plan.
New Homes. A tax credit of up to $2,000 for highly efficient new
homes will stimulate efficiency and help lower housing costs for
American families. Versions of this proposal have been introduced by
Sen. Bob Smith (S. 207) and Rep. Bill Thomas and others, and variants
are included in both the Murkowski-Lott (S. 389) and Bingaman-Daschle
(S. 596) energy bills.
Appliances. A tax credit of $50-100 for manufacturers of highly
efficient clothes washers and refrigerators will help save energy and
water (with a cap on the total credit per manufacturer). This proposal
has been introduced by Sens. Grassley and Allard in the Senate and
Reps. Nussle and Tanner in the House (H.R. 1316). It is strongly
supported by the appliance industry.
Commercial Buildings. We support a tax deduction of $2.25 per
square foot for investments in commercial buildings and multifamily
residences that achieve a 50% or greater reduction in heating and
cooling costs compared to buildings meeting current model energy codes.
This proposal is included in legislation sponsored by Sen. Bob Smith in
the Senate and Rep. Cunningham in the House (H.R. 778).
Other Building Equipment. We support a 20% investment tax credit
with caps for innovative building technologies including very efficient
furnaces, stationary fuel cell power systems, gas-fired heat pumps, and
electric heat pump water heaters. This proposal is included in the
Bingaman bill.
6. Reject the Deep Cuts in Funding Proposed for DOE's Energy Efficiency
Programs and Instead Expand These Programs and EPA's Energy
Star Programs in FY2002 and Subsequent Years
The U.S. Department of Energy (DOE) has made many valuable
contributions towards increasing the energy efficiency of U.S.
buildings, appliances, vehicles, and industries. Consequently, the
President's Committee of Advisors on Science and Technology (PCAST)
stated in 1997 that ``R&D investments in energy efficiency are the most
cost-effective way to simultaneously reduce the risks of climate
change, oil import interruption, and local air pollution, and to
improve the productivity of the economy.'' 16
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\16\ [PCAST] President's Committee of Advisors on Science and
Technology, Panel on Energy Research and Development. 1997. Federal
Energy Research and Development for the Challenges of the Twenty-First
Century, Washington, D.C.: Executive Office of the President.
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This is not just a rhetorical statement. DOE recently documented
that 20 of its most successful energy efficiency projects have already
saved the nation 5.5 quadrillion Btus of energy, worth about $30
billion in avoided energy costs, mostly over the past
decade.17 The cost to taxpayers for these 20 activities was
$712 million, less than 3 percent of the energy bill savings so far. In
fact, the energy bill savings from these 20 projects alone is over
three times the amount of money appropriated by the Congress for all
DOE energy efficiency and renewable energy programs during the 1990s,
demonstrating that spending taxpayers money on energy efficiency R&D
and deployment is a very sound investment. There are many other
indicators of success and effectiveness besides the 20 projects
reviewed in this report.
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\17\ Office of Energy Efficiency and Renewable Energy. 2000. Clean
Energy Partnerships: A Decade of Success. Washington, D.C.: U.S. Dept.
of Energy, Office of Energy Efficiency and Renewable Energy.
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The Energy Star deployment programs operated by EPA and DOE have
also been very successful. Since starting the Green Lights program in
1991, EPA has shown great creativity in developing cost-effective,
practical programs that are having a substantial impact. For example,
16 percent of the commercial and public sector building space in the
country has now signed up for the Energy Star Buildings program. The
Energy Star New Homes program is growing rapidly with over 1,600
builders now participating and more than 25,000 Energy Star Homes
built. These homes use 35 percent less energy for heating and cooling
on average compared to current ``good practice'' model building codes.
And the Energy Star labeling program has transformed the market for
personal computers, photocopiers, printers, and facsimile machines.
Prior to Energy Star, most of this equipment consumed energy whether
the machine was in use or not. Through the Energy Star program, EPA
stimulated use of power management which allows equipment to go into a
low-power ``sleep mode'' when equipment is not in use. As a result of
cumulative purchases, consumers saved more than 49 billion kWh in
2000--worth about $3.9 billion.18
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\18\ EPA.2001. The Power of Partnerships, Climate Protection
Partnerships Division, Achievements for 2000--In Brief. Washington,
D.C.: U.S. Environmental Protection Agency.
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The Bush Administration has proposed cutting DOE's energy
efficiency R&D and technology deployment programs (apart from grants to
low-income households for home weatherization) by $180 million (29
percent) in FY2002. Some programs would be cut by 50 percent or more.
Proposed funding for EPA's Energy Star program is approximately level
with last year. On the other hand, the President's National Energy
Plan, directs DOE and EPA to ``promote greater energy efficiency''
including to: ``expand the Energy Star program beyond office buildings
to include schools, retail buildings, health care facilities and homes;
extent the Energy Star labeling programs to additional products,
appliances, and services; [and] strengthen . . . public education
programs relating to energy efficiency.'' 19 In order to
meet the directives in the energy plan, DOE and EPA energy efficiency
funding will need to be increased, not decreased.
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\19\ National Energy Policy Development Group, op. cit. (see note
4).
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The 1997 review of energy research programs by PCAST recommended
that funding for DOE's energy efficiency R&D programs be increased from
$373 million in fiscal year 1997 to $880 million in fiscal year 2003.
This increased funding would be used to expand programs in many areas
such as for work in transportation on more fuel-efficient cars and
trucks, work in industry on improved electric motors, material-
processing technologies and manufacturing processes, and work in
residential and commercial buildings on high-technology windows, super-
insulation, more efficient lighting, and advanced heating and cooling
systems. In fiscal year 2001, funding for these programs is $556, so to
meet the PCAST recommendations, funding will need to be increased about
25% per year for the next two years. PCAST estimated that if these
recommendations are adopted, energy bills could be reduced by $30-45
billion in 2010 and $75-95 billion in 2020 (these savings overlap some
with savings from the other policies we recommend).20
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\20\ PCAST, op. cit. (see note 16).
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Funding for the EPA programs should also be expanded. EPA has
projected that with continued funding at current levels, energy and
emissions savings in 2010 will be more than double savings in 2000,
including carbon emissions reductions of about 90 MMT 21
(these savings overlap to some extent with other policies we
recommend.) With increased funding, savings could be even greater. EPA
and DOE should expand the scope and level of promotion associated with
the Energy Star program. Energy Star labeling should be extended to
additional types of electronic products, commercial refrigeration
equipment, motors, and other mass-produced products not currently
covered. The commercial building benchmarking and rating program so far
only applies to offices and schools and should be expanded to other
sectors as recommended in the President's plan. And more funding is
needed to expand promotion and training activities in the Energy Star
new homes and small business programs, to develop and implement a major
program to encourage home energy retrofits, as well as to increase
consumer awareness and market penetration of energy-efficient Energy
Star products of all types. We recommend funding increases for the
Energy Star programs of 20% per year for the next two years.
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\21\ EPA, op. cit. (see note 18).
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CONCLUSION
Energy efficiency is an important cornerstone for America's energy
policy. Taken together, the six policies recommended here can reduce
U.S. energy use by about 20 percent in 2020. These efficiency policies
alone will not solve all of our energy problems--energy use will
continue to grow for a decade or more while these energy-saving
policies gradually take effect. Furthermore, sustaining current rates
of energy use into the long-term future will require new sources of
energy supply and distribution. However, these efficiency policies will
substantially reduce our energy problems, making it easier to find
reasonably priced and environmentally acceptable energy supplies to
meet U.S. energy demand. In other words, relative to a supply-focused
energy strategy, a balanced energy strategy that complements efforts to
expand supplies with a major focus on improving efficiency, has a
greater chance of success in terms of ensuring the reliability of the
U.S. energy system, reducing economic costs (since all the efficiency
strategies incorporated here save consumers and businesses money at
projected future energy costs), and protecting the environment.
ACEEE is not the only organization suggesting that national policy
makers should increase support for and adopt new policies to raise
energy efficiency. The Council on Foreign Relations convened an
independent task force that recently completed an in-depth report on
our energy challenges and what should be done about them.22
The Council concludes: ``Energy policy has underplayed energy
efficiency and demand-management measures for two decades.'' The
Council urges that we ``take a proactive government position on demand
management'' including to ``review and establish new and stricter CAFE
mileage standards, especially for light trucks.''
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\22\ Council on Foreign Relations. 2001. Strategic Energy Policy
Challenges for the 21st Century. Forthcoming. Washington, D.C.: Council
on Foreign Relations.
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In addition, the general public voices strong support for
increasing energy efficiency and a balanced energy strategy. For
example, a recent nationwide poll conducted for the Los Angeles Times
found that when people were asked how to meet our energy needs, ``15
percent called for greater conservation efforts, 17 percent supported
development of new supplies and 61 percent said they favored both steps
in equal measure.'' 23 Similarly, in a May 2001 Gallop Poll,
47% of respondents said the U.S. should emphasize ``more conservation''
versus only 35% who said we should emphasize production (an additional
14% volunteered ``both''). In this same poll, when read a list of 11
actions to deal with the energy situation, the top four actions
(supported by 85-91% of respondents) were ``invest in new sources of
energy,'' ``mandate more energy-efficient appliances,'' ``mandate more
energy-efficient new buildings,'' and ``mandate more energy-efficient
cars.'' Options for increasing energy supply and delivery generally
received significantly less support.24
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\23\ Mark Barabak. 2001. ``Bush is Criticized as Environment
Weighed. Los Angeles Times. April 30, A1.
\24\ David W. Moore. 2001. ``Energy Crisis: Americans Lean toward
Conservation over Production.'' www.gallup.com/poll/releases/
pr010515.asp. Princeton, N.J.: The Gallup Organization.
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Ten years ago the previous Bush Administration issued its National
Energy Strategy. It gave considerable priority to greater energy
efficiency and called for expansion of energy efficiency R&D and
technology deployment programs, new policies to stimulate utility
energy efficiency programs, establishing new appliance and equipment
energy efficiency standards, and new federal incentives to increase
energy efficiency.25 Many of these proposals were
incorporated in the Energy Policy Act of 1992, and the budget for and
impacts of DOE's and EPA's energy efficiency programs rose throughout
the previous Bush Administration.
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\25\ National Energy Strategy: Powerful Ideas for America. 1991.
Washington, D.C.: U.S. Government Printing Office.
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The current Bush Administration has endorsed energy efficiency
rhetorically, but their National Energy Plan is short on specifics when
it comes to energy efficiency. The Congress should address this problem
by adopting the specific efficiency policies I have discussed here
today. These policies will benefit our economy and our environment and
will help bring energy supply and energy demand into better balance,
helping to protect U.S. consumers and businesses from supply and price
disruptions of the type we have experienced recently.
That concludes my testimony. Thank you for the opportunity to
present these views.
Mr. Barton. Thank you very much. We appreciate your
testimony, and the complete testimony will be in our record.
The Chair now recognizes Mr. Wagner.
STATEMENT OF MARK F. WAGNER
Mr. Wagner. Thank you, Mr. Chairman.
I am Mark Wagner, representing Johnson Controls. Since the
1880's when our founder, Warren Johnson, invented the
thermostat, Johnson Controls has been working hard to make
government facilities, schools, hospitals and commercial
buildings more energy efficient.
We do this through the design, manufacture and installation
of energy monitoring equipment and control systems, HVAC
systems, as well as utility, lighting, security and fire
management systems for nonresidential buildings.
Last week we cosponsored the 12th Annual Energy Efficiency
Forum along with the United States Energy Association at the
National Press Club. Our goal at this forum was to promote an
energy efficiency ethic through the presentation of national
and worldwide views on energy efficiency, environmental impacts
and economic growth.
Congressman Markey was one of our featured speakers, and he
did indeed provide an interesting analysis of the Nation's
energy situation for the over 400 business leaders and
government policy leaders who were present.
We were pleased to have a number of other notable speakers,
including Vice President Cheney, FERC Chairman Curt Hebert and
Senate Energy Committee Chairman Jeff Bingaman, who opened the
program by stating, ``Energy efficiency is a bi-partisan issue.
The entire country will benefit.''
This was our 12th consecutive Energy Efficiency Forum. In
the beginning, we called it the Energy Conservation Forum. We
changed the name several years ago because we recognized the
negative association with the word conservation. It brings to
mind cardigan sweaters, turning down thermostats in the winter,
turning them up in the summer, shutting down escalators and
other uncomfortable or burdensome measures.
It is important to note the difference between conservation
and efficiency.
Conservation means shutting off the lights and saving
energy the day you do it. Efficiency means replace the light
and fixture with energy efficient bulbs and lighting controls
such as motion sensors that automatically turn off the lights
when not needed, which saves energy tomorrow and well into the
future.
Conservation means adjusting the thermostat up or down
depending upon the season and being uncomfortable. Efficiency
means automatically controlling temperature, heating and
cooling rooms and buildings only when they are occupied.
Conservation can save energy in the short-term, energy
efficiency means sustainability for the future.
As our energy needs continue to rise in the office
environment, we need to expand our deployment of current off-
the-shelf technology to achieve energy efficiency in a high-
tech world.
According to the Department of Energy, there are some 4.5
million existing commercial buildings involving 55 billion
square feet of space. These buildings consume 30 to 40 percent
of all energy and 60 percent of all electricity. It is
estimated that these facilities waste 20 to 40 percent of their
energy or their electricity. They can capture those savings and
benefits from the reductions, not by fiddling with the
thermostat, but by retrofitting with energy efficient boilers,
chillers, lighting and building control systems.
At a recent forum Vice President Cheney said, thanks to new
energy efficient technologies it can mean doing things better,
smarter and cheaper.
Many of these energy improvements for commercial buildings,
schools, hospitals and government facilities are accomplished
through something called Energy Savings Performance Contracts,
which is shown on the chart at the end of the table. This is a
type of contracting in which energy service companies privately
finance the investment of installing energy efficient equipment
with no up-front cost to the customer. The building owner pays
the investment off over time with the dollars saved on energy
and maintenance bills. The energy services company guarantees
the savings, so the owner won't pay more than they are
currently paying for utility costs. After the investment is
paid off, the building owner gets all the subsequent savings.
It is a win-win situation.
Businesses and organizations are seeing extraordinary
results by installing energy efficient technology using ESPC
and other methods. Good examples can be found at the Keller
Independent School District in your district, Mr. Chairman;
also at southern Oregon University in Mr. Walden's district;
not to mention the Roanoke County schools, Mr. Boucher's
district.
Mr. Barton. That is pretty good staff work. Serendipity
picked the three members who are actually at the hearing.
Mr. Wagner. Actually I have one for every member of the
committee if you would like me to go on through, but I will
submit them for the record if you prefer.
Also notable is the work being done in some Federal
facilities. As the largest single consumer of energy in the
United States, the Federal Government spends over $3.5 billion
a year, $3.5 billion a year to light, heat, and operate its
500,000 buildings. You are right, Mr. Chairman, we do need to
increase the energy efficiency of our Federal buildings. We
applaud the President's recent directives for Federal
facilities to reduce energies. Some of them are already doing
that.
For example, we have a project with the Denver Federal
Center that will save over $200,000 annually. It is an ESPC
contract. It saves energy operational costs while reducing 6.6
million pounds of carbon dioxide emissions a year. It also
involves recommissioning an existing solar domestic hot water
system, improving an irrigation system which will save nearly
11 million gallons of water per year. All this was done with
existing technologies.
These are the kinds of projects that work. Unfortunately,
the question is, why aren't we doing more? Why aren't more
Federal sites reaping the benefits of energy efficiency through
ESPC and saving the taxpayer dollars? There are two quick
reasons. First of all, there are great successes like the
Denver Federal Center. Many sites are reluctant to enter into
ESPC. This committee and Congress passed this authority back in
1992 but some agencies and sites are still reluctant to develop
projects. Energy savings must become part of the Federal
culture. Instead of asking where we would do an ESPC, we need
to ask why isn't everyone doing them. There must be a more
consistent effort to use the ESPCs throughout the Federal
Government.
There is a second problem, one of micromanagement and delay
of projects inside the Beltway. The current contracting
mechanisms were designed to streamline ESPC, but some agencies
exercise an unnecessarily burdensome review and approval
process that add months or years to the process. This delay in
projects defers taxpayer savings and ties up contractor
resources which could be used to develop more projects. It is
time for the headquarters to trust their field organizations
will make good decisions and allow quicker projects. Federal
leadership----
Mr. Barton. Can you wrap it up? We love your testimony but
you need to summarize it.
Mr. Wagner. I will only suggest that the subcommittee may
wish to consider the advantages of public benefit funds which
can help spur energy efficiency throughout country.
[The prepared statement of Mark F. Wagner follows:]
Prepared Statement of Mark. F. Wagner, Director, Federal Government
Relations, Johnson Controls, Inc.
Mr. Chairman and members of the Subcommittee, thank you for
inviting me to speak on the important role of energy efficiency. My
name is Mark Wagner, and I am Director, Federal Government Relations
for Johnson Controls, Inc.
Johnson Controls is a global market leader in facility services and
control systems. Since the 1880s when Warren Johnson invented the
thermostat, Johnson Controls has been working with government
facilities, schools, hospitals and commercial buildings to help create
comfortable, productive and safe building environments that are energy
efficient.
We do this through the design, manufacture, installation and
service of energy monitoring and control systems, HVAC systems, as well
as utility, lighting, security and fire management systems for non-
residential buildings. Included in our service offering is energy
savings performance contracting which I will discuss in more detail
later.
In March, EPA recognized Johnson Controls with the 2001 Energy Star
Award for Service Providers for its vast array of special endeavors
relating to energy efficiency, from the operations of our own
facilities, to our leadership in community outreach and customer
education efforts.
One of those outreach efforts took place just last week. We co-
sponsored the 12th Annual Energy Efficiency Forum along with the United
States Energy Association at the National Press Club. Our goal for the
Forum is to promote an energy efficiency ethic through the presentation
of national and worldwide views on energy efficiency, environmental
impacts and economic growth.
Congressman Markey was one of our featured speakers, and he
provided an interesting analysis of the nation's energy situation to
over 400 business leaders and government policy makers and others who
were present.
We were pleased to have a number of other notable speakers,
including Vice President Cheney, FERC Chairman Curt Hebert and Senate
Energy Committee Chairman Jeff Bingaman, who opened the program by
stating that, ``Energy efficiency is a bi-partisan issue . . . the
entire country will benefit.''
This was our 12th consecutive Energy Efficiency Forum. In the
beginning, the event was called the Energy Conservation Forum. Several
years ago, we recognized the negative associations with the word
``conservation.'' It brings to mind cardigan sweaters, turning down
thermostats in the winter and turning them up in the summer, shutting
down escalators and other uncomfortable or burdensome measures.
It is important to appreciate the difference between conservation
and efficiency. Conservation means shutting off the lights and saving
energy the day you do it; efficiency means replacing the light and
fixture with energy efficient bulbs and lighting controls such as
motion sensors that automatically turn lights off when not needed--
which saves energy tomorrow and well into the future. Conservation
means adjusting the thermostat up or down depending upon the season and
being uncomfortable. Efficiency means automatically controlling
temperatures, heating and cooling rooms and buildings only when they
are occupied. Conservation can save energy in the short term, energy
efficiency means sustainability for the future.
As energy needs continue to rise in the typical office environment,
we need to expand deployment of current off-the shelf technology to
achieve energy efficiency in a high tech world. For example, Johnson
Controls is currently working to install an energy monitoring and
controls system as part of the renovation of the Pentagon. When the
Pentagon was built over 50 years ago, there was one telephone for every
three desks and manual typewriters were used. Today, every desk has a
phone, computers,task lighting and other equipment, supported by a wide
array of printers and copiers, all which put out heat. As the ``plug
load'' expands the demand for electricity in aging buildings, energy
efficiency measures become vital.
According to the U.S. Department of Energy, there are some 4.5
million existing commercial buildings involving 55 billion square feet
of space. These buildings consume 30-40% of all energy and use 60% of
all electricity. It's estimated these facilities use 20-40% more energy
than necessary. They can capture those savings and benefit from the
reductions--not by fiddling with the thermostat, but by retrofitting
with energy efficient equipment.
At our recent Forum, Vice President Cheney said, thanks to new
energy efficiency technologies it can mean doing things ``better,
smarter, cheaper.'' Congressman Markey stated that, ``we need to take
command of our destiny.'' And other speakers noted that the technology,
which has been developed over the past 20 years, has made conserving
energy irrelevant. We are now in the energy efficiency business.
Many of these energy efficiency improvements for commercial
buildings, schools, hospitals and government facilities are
accomplished through Energy Savings Performance Contracts (ESPC). This
is a type of contracting in which an energy services company like
Johnson Controls privately finances the investment of installing energy
efficient equipment with no up-front costs to the customer. The
investment includes identifying building energy requirements and
acquiring, installing, operating, and maintaining the energy-efficient
equipment. The building owner pays for these retrofits and new
equipment over time with dollars saved on energy and maintenance bills.
The energy services company guarantees the savings, so the customer
won't pay more than they are currently paying for utility costs. After
the investment is paid off, the building owner gets all the subsequent
savings. It's a win-win situation.
We've determined that Johnson Controls performance contracting
customers alone will see $18 billion in total energy savings by 2010.
That's a 3400 megawatt reduction in electrical demand, the equivalent
of taking offline more than three large generating plants or seventy 50
megawatt peaking plants. It also eliminates 350 million tons of
emissions--just like removing the pollution from four million
automobiles or planting 29 million acres of trees. But we need to go
further. Many organizations benefit from energy effectiveness: using
technology and knowledge that make better buildings for a livable
future.
It's all about collaborative design, engineering, and operations.
The U.S. Green Building Council's Leadership in Energy and
Environmental Design (LEED) rating provides a comprehensive,
sustainable plan for new construction. Existing buildings become more
effective through efforts such as Energy Star's promotion of efficient
lighting, heating and ventilating technology--and the controls to
measure, monitor and manage their performance.
Many businesses and organizations see extraordinary results by
installing energy efficient technology and evaluating operations and
maintenance. For example, we have done projects for:
Central City Cyberschool, Milwaukee, Wisconsin
St. Mary's County Public Schools, Leonardtown, Maryland
St. John Medical Center, Tulsa, Oklahoma
North Carolina Baptist Hospital/Bowman Gray School of
Medicine, Winston-Salem North Carolina
St. Charles Medical Center, Bend, Oregon
Kansas City Convention Center, Kansas City, Missouri
Also notable is the work being done at some Federal facilities. As
the largest single consumer of energy in the United States, the federal
government spends over $3.5 billion a year to light, heat, and operate
its 500,000 buildings. According to the Department of Energy, the
Federal Government has three--billion square feet of floor space,
located in all climates. High-rise offices, research laboratories,
aircraft hangars, libraries, hospitals, tourist areas, parks, and
prisons must all be considered. In total they consume almost 54--
billion kilowatt-hours of electricity each year, costing taxpayers more
than $3.1--billion annually.
We applaud the President's recent directive for federal facilities
to reduce energy. Some facilities are already working hard at saving
energy. For example, Johnson Controls, entered into an Energy Savings
Performance Contract with the Denver Federal Center. It will save
$450,000 per year in energy and operational costs for the next 11 years
while reducing more than 6.6 million pounds of carbon dioxide
emissions. It also involves recommissioning an existing solar domestic
hot water heating system and improving an irrigation system, which will
save nearly 11 million gallons of water per year. All was done with
existing technologies.
These are the kinds of projects that work. Unfortunately, the
question is--why aren't we doing more? Why aren't more federal sites
reaping the benefits of energy efficiency and saving energy plus
taxpayer dollars? There are two answers.
First, while there are great success stories at some federal sites
like the Denver Federal Center and others, at many other sites there is
reluctance to enter into ESPCs. Congress passed the authority for
agencies to enter into ESPCs back in 1992. But some sites and agencies
are still reluctant to develop projects because it can be a complicated
process or they may be concerned over the long-term nature of some
projects.
Energy savings must be made a part of the federal culture. Instead
of asking, ``where can we do an ESPC?'' we need to ask why isn't
everybody doing them? From a Department's headquarters in Washington,
to regional offices, to site directors and base commanders, all the way
down to the boiler room, there must be a consistent effort to use
ESPCs.
The second problem is one of micro-management and delay of projects
inside the beltway. The current ESPC contracting mechanisms were
designed with streamlining in mind. But some agencies exercise an
unnecessary and burdensome review and approval process adding months or
more to effort. This delay in projects defers taxpayer savings and ties
up contractor resources, which could be used to develop more projects.
The federal government does an excellent job providing technical
resources and training government employees in the field on how to do
ESPCs. It's time for headquarters to trust that they will make good
decisions and allow projects to be approved quicker.
Yes, it's important to be sure that the project is a good deal for
the government. But the questions and issues that headquarters need to
be review can be answered at the preliminary proposal stage, before a
contractor makes a significant investment. Unfortunately, the micro-
management and drawn-out questioning is often done at the final
proposal stage, delaying projects and tying up capital for months.
Everyone looses--the site, the contractor and ultimately the taxpayer
too.
Johnson Controls is a large company. We're in this for the long
haul. But other contractors, especially small and disadvantaged
subcontractors, may not have the financial wherewithal to wait for
months to hear that a project is going forward.
And even in our case, we have a responsibility to our stockholders
to maintain a degree of profit. We are forced to financially consider
whether we should even develop other federal proposals because we know
we may lose money waiting for approval.
The good news is that neither of these problems are insurmountable
barriers.
Federal leadership for energy efficiency should start by example.
The federal government needs to utilize ESPCs more at federal
facilities. Make the federal building stock truly energy efficient. Cut
energy consumption and save the taxpayer money. Leading by that
example, showing that it can and should be done is as powerful a tool
as any statutory or regulatory measure you could pass.
As far as any new statutory or regulatory measures are concerned,
the Subcommittee may wish to consider the advantages of public benefit
funds. The days of utility rebates seem to be in the past but the
results of those programs continue to save energy. Public benefit funds
can spur energy efficiency, particularly where an ESPC type mechanism
may not be practical, because the project is too small or the payback
too long. Or they could be used to help buy down the project cost of an
ESPC to help make it affordable.
Energy efficiency is not just in our nation's best interest, it is
a vital part of maintaining a strong and secure economy. We encourage
this committee to continue its efforts to spur more efficiency in the
future. We look forward to reaping the many benefits of energy
efficiency--a strong, secure economy, lower taxes, a cleaner
environment, and a federal government that leads our nation.
Thank you again for the opportunity to testify.
Mr. Barton. We would now like to hear from Dr. Malcolm
O'Hagan who is President of the National Electrical
Manufacturers Association.
STATEMENT OF MALCOLM O'HAGAN
Mr. O'Hagan. Chairman Barton, Mr. Boucher.
Mr. Barton. You need a microphone.
Mr. O'Hagan. Chairman Barton, Mr. Boucher, Chairman Tauzin,
my name is Malcolm O'Hagan. I am President of the National
Electrical Manufacturers Association. On behalf of the 450
members of NEMA who manufacture all of the products in the
electricity supply chain from the generator to the light bulb,
I thank you for this opportunity to share good news with the
committee.
We are from the private sector and we are here to help.We
have the technology solutions to secure our Nation's energy
needs but we need your help also. In the early days of Mr.
Edison, electricity was a curiosity. Today it is the lifeblood
of our technology-based society. But the fact of the matter is
we waste a lot of electricity in this great country of ours. We
jealously defend our comfortable life-style as a God-given
right. But we can preserve these comforts which we have worked
hard to achieve without using so much energy.
The President's energy report estimated that we could save
the equivalent of 600 300-megawatt power plants through the
deployment of energy-efficient technologies and conservation
measures. We agree. And that is a lot of energy.
How is it possible to realize these savings? Let me offer a
few examples. Lighting upgrades in commercial buildings can cut
energy consumption by up to 40 percent. And commercial
buildings, as the chart on the left shows, account for 22
percent of electricity consumption. By adding lighting
controls, substantial additional savings can be achieved, and
these numbers are indicated on the second chart. Transformers
that meet NEMA TP-1 efficiency levels can greatly reduce power
losses in getting electricity from the generating station to
the outlet. And typical savings for a transformer are indicated
in chart number 3. NEMA premium efficiency motors and
industrial control systems can substantially reduce energy
consumption in steel mills, water treatment plants, irrigation
systems, and myriad other industrial applications which account
for 51 percent of electricity consumption. Transmission and
distribution line losses account for 8 to 10 percent of
production. Solutions exist to cut these losses significantly.
Mr. Chairman, members of the committee, the technology
exists. NEMA members offer it. But it is not enough. Experience
has demonstrated that efficiency by itself does not do the job.
With efficient products, unfortunately, come higher first
costs, presenting an economic barrier. Consequently, there are
three additional requirements:
First, we need economic incentives or other measures to
drive the technology solutions and address that first cost
issue.
Second, we need the government to lead by example, not by
fiat. For example, all government buildings should be upgraded
to meet Energy Star building requirements as soon as possible.
And a good place to start, Mr. Chairman, would be right in this
hearing room which I would point out is using low-efficiency
lighting.
Mr. Barton. That is a point well taken. We will check. We
think those lights may be left over from when Chairman Dingell
was Chairman. We will check on that.
Mr. O'Hagan. We also recommend, Mr. Chairman, that all
government procurements should be based on industry consensus
standards for energy efficiency such as ASHRAE 90.1, NEMA
Premium motors, and NEMA TP-1 transformers. I would like to
note for the committee that NEMA Premium efficiency levels
exceed the levels mandated by the government under REPAC.
Finally we need the government to spearhead a massive
education campaign to promote the use of energy-efficient and
energy-controlled technologies. In our written testimony we
expand on these comments and we stand ready to provide the
committee with whatever additional information would be helpful
to its deliberations.
In the final analysis, only solutions that are
technologically feasible, economically justifiable, and
commercially available will succeed. As in all human endeavors,
balance is the key.
Mr. Chairman, we thank you for scheduling this hearing.
Thank you for allowing us to participate.
[The prepared statement of Malcolm O'Hagan follows:]
Prepared Statement of Malcolm O'Hagan, President, National Electrical
Manufacturers Association
INTRODUCTION
Good morning Chairman Barton, Representative Boucher, and members
of the Subcommittee on Energy and Air Quality. I am Dr. Malcolm O'Hagan
and I am President of the National Electrical Manufacturers Association
(NEMA). NEMA, celebrating its 75th anniversary, is the leading trade
association in the United States representing the interests of
electroindustry manufacturers. Founded in 1926 and headquartered near
Washington, D.C., our 450 member companies manufacture products used in
the generation, transmission and distribution, control, and end-use of
electricity. Annual shipments of these products total $100 billion.
My testimony today will focus on the following four main areas:
1. The role of NEMA products and services to achieve energy efficiency
and conservation in helping to meet out national energy needs;
2. The federal government's role in promoting conservation and
efficiency and the use of new technologies and innovative
practices that use energy more efficiently.
3. The barriers to the widespread application of energy efficient
practices and technologies; and
4. The statutory or regulatory provisions that should be reformed to
enable the greater use of energy efficient technologies.
Mr. Chairman, let me take this opportunity to commend you and the
other members of the subcommittee for the steps you have collectively
taken to address the need for a comprehensive national energy policy.
Indeed, the issues of energy efficiency and conservation are crucial
aspects of the energy policy debate and your foresight in examining
these matters are applauded by the 450 NEMA member companies.
On behalf of NEMA, I also commend the work of the Administration
and its recommendations; we support the Bush Administration's National
Energy Policy plan and look forward to the enactment of those
recommendations. NEMA has also reviewed several other proposals and we
are committed, and look forward to, working in a bipartisan fashion to
craft a comprehensive and balanced national energy policy. NEMA has
reviewed the President's recommendations and I have attached those
findings for your reference. Let me succinctly summarize our findings:
NEMA member companies have an interest in every chapter of the National
Energy Policy and can substantively contribute to the efficiency
recommendations contained in the report.
NEMA ELECTRICAL ENERGY AND ENERGY EFFICIENCY POLICY PRINCIPLES
NEMA has crafted a set of electrical energy and energy efficiency
principles for your guidance and consideration as you and your
colleagues proceed on a comprehensive national energy policy. I have
included the principles for your reference, but let me take this
opportunity to highlight the three main points from our principles:
A comprehensive electrical energy policy should rely on
affordable, proven technology to address energy supply and
demand;
Second, it is critical to understand that energy efficiency
and conservation don't mean sacrifice and reduced access, but
rather doing more with existing capacity by achieving reduction
in energy usage through the use of more efficient products and
systems; and
Third, market-based incentives and solutions should be the
primary vehicle to enhance energy efficiency and conservation.
However, NEMA acknowledges that, on a case-by-case basis, there
is value in other interventions such as targeted government
research and development, incentives and standards.
With regard to energy efficiency issues, NEMA specifically proposes
the following concepts as guidelines:
NEMA believes energy efficiency is a national concern that
should be driven by market forces to achieve energy efficiency
and conservation. The litmus for efficient products and control
systems is technological feasibility, economic justification,
energy savings and commercial availability.
NEMA acknowledges the key role the federal government should
play in fostering public use of energy efficient products and
systems. Specifically, NEMA believes that the federal
government should promote user education on energy efficiency;
support energy efficient upgrades through programs such as the
Federal Energy Management Program; encourage performance-based
incentives in the private sector; and promote the use of
economically sound energy efficient products and systems.
NEMA MEMBER COMPANY PRODUCTS AND SERVICES ACHIEVE ENERGY EFFICIENCY AND
CONSERVATION
NEMA recognizes that a comprehensive national energy policy
requires a mix of conservation and production, and the promotion of new
technologies that promise greater efficiency and environmental
protection. NEMA member products are at all stages of the electrical
energy process from generators, transformers, wire and cable, to
lighting, motors, and switches at the consumer and end-user points. An
intriguing example of how technology can save energy, NEMA
manufacturers have developed technology and products for the
Intelligent Transportation Systems (ITS) a project under the auspices
of the Department of Transportation. This project is a highly cost
effective means of reducing transportation fuels consumption,
associated air pollution, and also reduces the non-productive time
workers spend commuting. As you will see in our recommendations, this
and other NEMA products serve to make the system work better and faster
without compromising availability. NEMA is able to do this by taking
the best of industry technology and standardizing those products so
that they are available globally, delivered locally, competitively
priced, able to perform predictably and are safe and environmentally
sound.
THE FEDERAL GOVERNMENT'S ROLE IN PROMOTING ENERGY EFFICIENCY
As mentioned earlier, NEMA acknowledges the key role the federal
government should play in fostering public use of energy efficient
products and systems. Industry appreciates those government programs
that educate and inform business and the consumer about energy
efficiency. Specifically, NEMA believes that the federal government
should promote user education on energy efficiency; support energy
efficient upgrades through programs such as the Federal Energy
Management Program, the Department of Energy's Office of Industrial
Technology, Building, Technology State and Community programs, and
aspects of the Energy Star program; and promote the use of economically
sound energy efficient products and systems.
I have communicated with NEMA manufacturers about a variety of
federal government programs. They recognize the value of several energy
efficiency programs. In the motors and industrial controls area, the
Department of Energy Office of Industrial Technology Best Practices
program works to promote those industry practices that promote
efficiency. The Motor Challenge program adds credibility to efficiency
messages and broadens the communications efforts beyond industry. In
the lighting area, industry appreciates the ``Light Right'' and the
``Vision 20 20'' programs. These and other programs, such as the
Federal Energy Management Program, all serve to help American consumers
and businesses use energy more efficiently and effectively.
NEMA believes that the federal government can set the standard--and
a good example--for energy efficiency by starting with the public's own
facilities. In this regard, the Department of Energy's Energy Star
Buildings Program has made significant advances in improving the
efficiency of commercial buildings. However, the vast majority of
Federal facilities have not yet achieved the Energy Star rating, a
classification given only to the top 25% of buildings in terms of watts
used per square foot. Therefore, NEMA recommends that existing
buildings be upgraded to meet the Energy Star Building Program
requirements.
A program to require energy efficient upgrades of building systems
in existing federal buildings offers the potential for significant
energy savings. As the President and Congress have recognized, the
federal government is a major consumer of electrical energy. NEMA
proposes that, with respect to existing buildings, the proposed program
would not require adherence to a rigid standard, but rather would
provide flexibility to agencies to adopt the most efficient systems
that meet their needs. For new construction or buildings that undergo
major renovation/remodeling, it is appropriate to require adherence to
the most current consensus energy efficiency standards.
Finally, the Department of Energy has been instructed to follow
provisions of the so-called ``Process Improvement Rule.'' NEMA
recommends that the federal government, and in particular the
Department of Energy, follow the rule to achieve its intended results.
By way of background, in July 1996, the Department of Energy published
an interpretive rule setting forth procedures for the consideration of
new or revised energy conservation standards for consumer products (see
61 Fed. Reg. 36973 (July 15, 1996). The ``process improvement'' rule
was produced with the input of all stakeholders in the appliance and
consumer products efficiency standards program. Designed to remedy
standards process shortcomings utilized by the Department of Energy,
the process improvement rule is designed to encourage consensus on
energy efficiency standards. To this end, the rule language includes a
series of rebuttable presumptions, agreed to by all sectors of industry
and the energy efficiency community, which provide a basis for mutual
understanding and cooperation in the development of consensus
standards.
The process improvement rule incorporates critical principles for
every stage of the energy efficiency standards setting process. Careful
observance of these requirements is essential for any standards program
to be effectively implemented. However, as good and practical this rule
is, it is not a binding requirement on the Department of Energy. NEMA
manufacturers--and all of the regulated community--require additional
assurance that there will be careful adherence to all aspects of the
process improvement rule in all future standards setting rulemakings
for consumer, commercial and industrial products. Greater certainty
will be provided if the process improvement rule is formally
incorporated into the Department of Energy's regulations governing the
establishment of energy efficiency standards.
BARRIERS TO THE WIDESPREAD APPLICATION OF ENERGY EFFICIENT PRACTICES
AND TECHNOLOGIES
While much good has been done to promote energy efficiency, there
remains work to be finished. NEMA believes the primary barriers to
investing in energy efficient technology primarily includes: (1) the
cost of investment in energy efficient technologies and whom should
receive the financial benefit of the energy efficient investment; (2)
the lack of awareness of a systems and controls based approach for
energy efficient cost effectiveness; (3) and issues surrounding codes
and standards.
Currently, the federal tax code does not fully encourage an
investor to make energy efficient investments, upgrades or retrofits to
facilities. To that end, NEMA recognizes the efforts by you and your
colleagues to encourage the private sector use of energy efficient
products and systems through a variety of tax incentives. While NEMA
has not taken a position on the wide variety of incentive proposals
currently being considered, we would generally emphasize the need to
explore and promote those incentives that make the maximum use of
energy efficient products and systems and delivers the incentive to the
individual or entity that makes the investment.
NEMA believes that energy efficiency should be evaluated and
rewarded on a energy savings and systems basis. When creating
incentives, the beneficiary of the cost incentive should be the
investor in the equipment. Very simply put, if a building owner makes
the capital investment, that owner should get the benefit. As a result
the energy savings benefit can get passed on down the line in the form
of energy savings, including other electricity customers through lower
rates.
While the technology exists to achieve broad cost savings through
energy efficient devices and controls, there is a lack of awareness of
the benefits of a systems and control based approach. This is opposed
to a piecemeal component approach, to achieve the maximum level of cost
effective energy efficiency. To that end, NEMA proposes that the
federal government move from strictly encouraging products or
components, to promoting the implementation of systems and controls to
efficiently manage energy on a wider basis. For example, California
recently enacted legislation that would provide energy efficient
upgrades for lighting systems. California recognized the large
efficiency gains that would be realized by encompassing lighting
controls, occupancy sensors, and luminaires added to any upgrade.
Similar efficiency gains can be achieved at the commercial level with
industrial and automated controls.
Industry and government both strive to achieve the best
performance. But for too long, the hopeful and anticipated approaches
of both camps have been belied by the unintended consequences of
mandated standards. Voluntary, consensus-driven codes and standards
will achieve the greatest level of cooperation and distribution of
energy efficient technology in the marketplace. Already, the
marketplace recognizes industry-driven standards to achieve efficient
products. In particular, the NEMA Premium( Motor program recognizes
efficient motors above the standards contained in current law. The same
can be said for distribution transformer consensus standards
represented by NEMA TP-1. Industry believes that industry consensus
building codes can be a valuable part of ensuring that cooperative
goals are achieved and efficiency gained.
RECOMMENDED STATUTORY OR REGULATORY REFORMS TO ENABLE THE GREATER USE
OF ENERGY EFFICIENT TECHNOLOGIES
NEMA believes that technological solutions combined with industry
consensus and proven results will lead to enhanced energy efficiency.
This formula is made even stronger if the cooperative efforts of
industry and policymakers are joined. To that end, NEMA proposes the
following reforms to further enhance energy efficiency and conservation
as part of a comprehensive national energy policy.
Motors.
The NEMA Premium TM motor program is a collaborative
effort with the Department of Energy, motor manufacturers and electric
utilities. It is an excellent model of how voluntary industry standards
can improve efficiency thereby providing a benefit to consumers and the
environment. It has broad support, as reflected in the recent
endorsement from the Consortium for Energy Efficiency.
The NEMA Premium TM motor program expands high
efficiency motors standards beyond current requirements. The program
covers a broader range of motors than do minimum federal energy
efficiency standards (up to 500 horsepower, whereas federal standards
apply only up to 200 hp), and it is a more exacting standard. In fact,
Department of Energy analyses shows that the NEMA Premium TM
Motor program, including commercial and agricultural applications,
would save 5,800 gigawatt hours of electricity and prevent the release
of nearly 80 million metric tons of carbon into the atmosphere in the
next ten years. Electric-motor-driven equipment consumes about 60% of
all the electricity produced in the country, according to the
Department of Energy.
The NEMA Premium TM motor program has real-life impact.
The Cummins Engine Company's Columbus Engine Plant in Columbus, Indiana
retrofitted energy efficient motors on to existing machining and
transfer lines and installed the most efficient motors available onto
the new lines. Cummins saw a 2.75 percent reduction in total energy
costs for the Columbus plant and was hailed by company executives as a
significant savings. The Department of Energy's Office of Industrial
Technologies indicated that if every plant in the United States
integrated motor system upgrades to the extent that Cummins did,
American industry would save an estimated one billion dollars annually
in energy costs. This would be the equivalent of the amount of
electricity supplied to the State of New York for three months.
Recently, President Clinton issued Executive Order 13123 which
seeks to encourage the acquisition of energy efficient products by the
federal government. In addition, programs such as the Federal
Procurement Challenge encourage agencies to buy energy efficient
products. However, while the executive order and the Federal
Procurement Challenge have resulted in many efficient upgrades, many
agency heads have not had their feet held to the fire to comply with
such orders. Many opportunities still exist in federal agency and
Congressional offices to achieve energy efficiency.
NEMA, therefore, recommends that the federal government be required
to purchase motors based on the NEMA Premium( motor standard. Doing so
would enable all new equipment acquisitions to be based on current
energy efficiency standards with the dual result of energy savings to
the government and widespread market penetration of the most highly
efficient technologies in energy-intensive equipment. It would also
serve as a demonstration of energy efficient savings to the private
sector.
Transformers.
In 1996, the Transformers Products Section of NEMA developed
voluntary energy efficiency standards for distribution transformers.
Distribution transformers help move electricity on the grid and reduce
loss. The basic efficiency standard, known as NEMA TP-1 and the
associated test and labeling standards (TP-2 and TP-3, respectively)
have gained widespread acceptance as the industry norm for energy
efficient transformers.
As another excellent example of industry led consensus standard
making, if TP-1 were used nationwide, NEMA estimates an energy savings
would be in the range of 2-3 quads over a 30-year period. This is an
average energy savings of between 5 and 10 billion kilowatt-hours per
year. By using NEMA Standard TP-1, the energy used by low-voltage
transformers can be cut by one-third, and by twenty-five percent for
medium voltage transformers. Better yet, the payback period for such
transformer investments is relatively short--only three to five years.
With these demonstrated savings in mind, NEMA recommends that the
federal government should be required to use NEMA TP-1 transformers in
its purchase specifications and be required to replace failed
transformers with new units meeting TP-1 efficiencies. Moreover, the
Department of Energy's current rulemaking should use NEMA TP-1 as a
benchmark for standards discussions.
Building Efficiency.
Energy efficient buildings achieve some of the greatest cost
savings when it comes to energy efficiency. There is, perhaps, no
better example to demonstrate these savings than energy efficient
lighting systems.
NEMA believes that lighting efficiency can be summed up in the
following way: Efficient lighting means turning the lights off when
your done, and using lighting at levels to complete the task at hand.
NEMA manufacturers make products to do just that from systems and
controls to draw the greatest light using the least amount of
electricity all the while employing technologies to shut the lights off
when no one is around.
The Department of Energy estimates that technologies developed
during the past 10 years can help us cut lighting costs 30% to 60%.
Lighting accounts for 20% to 25% of all electricity consumed in the
United States. The cost savings distinction is even greater when
looking at residences and business. An average household dedicates 5%
to 10% of its energy budget to lighting, while commercial
establishments consume 20% to 40% of their total energy just for
lighting.
NEMA advocates a system approach to upgrading lighting efficiency
in commercial buildings and, where feasible, residential housing. In a
typical residential or commercial lighting installation, 50% or more of
the energy is wasted by obsolete equipment, inadequate maintenance, or
inefficient use. Where it is feasible, a systems approach is best, but
components are just as important. Improved lighting quality makes
visual tasks easier and saves 50% or more on energy costs. A dramatic
example of how energy use for lighting can be reduced while improving
the quality of lighting is the Jefferson Memorial relighting project.
The energy use will be reduced from a current 126,000 watts to 16,000
watts, while dramatically improving the visual impact of this majestic
monument, its inscriptions, and the magnificent statute of Thomas
Jefferson.
That is why NEMA proposes the federal government update its federal
building energy code to the latest model building code for energy
efficiency in commercial and multifamily high rise residential
buildings. This would avoid a time consuming regulatory process to
adopt the latest update, which was itself developed through a consensus
process involving a consortium representing the full range of interests
in building sector energy efficiency, including the Department of
Energy.
In addition, NEMA recommends that the Secretary of Energy issue a
determination that the most updated model building code (ASHRAE/IESNA
90.1-1999), which was developed over the past ten years involving
interested stakeholders, would improve energy efficiency in commercial
buildings. Of note, the Department of Energy has already performed a
quantitative analysis and a detailed textual analysis of the estimated
differences between the 1989 and 1999 editions of Standard 90-1. No
further analysis should be necessary for the Secretary to determine
that the update will improve energy efficiency in commercial buildings.
Moreover, a determination by the Secretary will encourage states to
expedite consideration of the updated standard thereby encouraging
energy efficiency.
CONCLUSION
In conclusion, let me reiterate the three points I began with
today. A comprehensive electrical energy policy should rely on
affordable, proven technology to address energy supply and demand.
Second, it is critical to understand that energy efficiency and
conservation don't mean sacrifice and reduced access, but rather doing
more with existing capacity by achieving reduction in energy usage
through the use of more efficient products and systems. Third, market-
based solutions should be the primary vehicle to enhance energy
efficiency and conservation. I thank the subcommittee and I am happy to
answer your questions.
Mr. Barton. Thank you, Doctor.
We would now like to hear from Mrs. Josephine Cooper who is
the President of the Alliance of Automobile Manufacturers. And
your testimony is in the record. We ask to you elaborate in 7
minutes. Thank you.
STATEMENT OF JOSEPHINE S. COOPER
Mrs. Cooper. Thank you, Mr. Chairman. On behalf of the 13
members of the Alliance of Automobile Manufacturers, it is a
pleasure to be here today to provide the subcommittee with our
position on the role of cars and light trucks in our national
energy policy.
Today I would like to make three basic points:
First, existing energy policies, including auto fuel
economy programs like CAFE, are not delivering anticipated
results. That is really why we are here today.
Second, to be successful we must have a consumer focus.
Consumers determine energy consumption every day through their
purchasing decisions and the use of the products they buy.
Artificial mechanisms to increase fuel economy are destined to
fail unless consumers can be brought into the process.
Third, markets work. With your help, we can increase the
fuel economy of the fleet and meet consumer demands by
accelerating the induction of advanced technology vehicles that
are very fuel efficient. That is why we support consumer
credits for advanced technology vehicles.
The Federal fuel economy requirements are established by a
regulatory program known as Corporate Average Fuel Economy, or
we all call it CAFE. In 1992, the National Academy of Sciences
called CAFE a flawed program in need of review. At the
direction of the Congress, the NAS, National Academy, is once
again reviewing CAFE and will issue a report later this summer.
This report may well focus on CAFE which only addresses the
supply side of the equation.
But I am not here to dwell on the inefficiencies in the
CAFE program. I am here today to focus on the future of CAFE.
Alliance members oppose any legislation that would increase
CAFE standards. Congress does not need to set new standards or
change the structure of CAFE. Current law requires the
Department of Transportation to set new light truck standards
at the maximum feasible level based on a number of prescribed
criteria. The National Highway Traffic Safety Administration
will start that process in October, after having the benefit of
the analysis of the National Academy study. Meanwhile, auto
makers have consistently increased the fuel efficiency of their
models since the 1970's.
While car and light truck fuel efficiency continues to
increase at 2 percent per year according to EPA data, their
combined fuel economy has stabilized for one reason: Consumers
are in the driver's seat when it comes to determining fuel
economy. This is the demand side of the equation.
In surveys consumers indicate they want greater fuel
economy, but in their purchases they don't want to sacrifice
size, safety, cargo room, acceleration, towing capacity or
other vehicle attributes to get it. Today manufacturers offer
more than 50 models with fuel economy ratings above 30 miles
per gallon. We also offer vehicles that achieve 40 miles per
gallon or greater, but these highly fuel-efficient vehicles
account for less than 2 percent of sales.
So here we are. CAFE only addresses the supply side of the
fuel economy issue. And to be successful we have to maintain a
consumer focus, a focus on the demand side. We all want greater
fuel economy, but how do we get there from here? The auto
industry strongly believes that technology, not CAFE, will
allow us to address energy conservation goals and still provide
consumers with the vehicles that meet their family and business
needs. That is why we support the alternative fuel and advanced
technology provisions in Vice President Cheney's national
energy policy. We also support consumer tax incentives such as
the one in Congressman Camp's bill, H.R. 1864, the clean
efficient automobiles resulting from advanced car technologies,
or the CLEAR Act of 2001.
Mr. Chairman, consumer tax credits for vehicles like
hybrids, which were described earlier and fuel cells, the
brochure that you all received this morning, all of those will
only be needed for a limited time. But we believe they are
critical to prime the pump for these new technologies which
initially are more expensive than the conventional ones they
replace.
These credits will accelerate the market penetration of
highly fuel-efficient vehicles. As a result, manufacturers can
increase production and lower costs for consumers. Consumers
will have more fuel-efficient vehicles, with the vehicle
attributes they desire, and policymakers will see increases in
fuel economy.
In conclusion, don't legislate increased fuel economy
standards. As we go forward, we have to maintain a consumer
focus. And last, let the markets work. Tax credits will
accelerate the market penetration of highly fuel-efficient
vehicles that consumers will buy.
Thank you, Mr. Chairman.
[The prepared statement of Josephine S. Cooper follows:]
Prepared Statement of Josephine S. Cooper, President & CEO, The
Alliance of Automobile Manufacturers
Mr. Chairman, thank you for the opportunity to testify before your
Subcommittee regarding energy policy issues. My name is Josephine S.
Cooper and I am President and CEO of the Alliance of Automobile
Manufacturers, a trade association of 13 car and light-truck
manufacturers. Our member companies include BMW of North America, Inc.,
DaimlerChrysler Corporation, Fiat, Ford Motor Company, General Motors
Corporation, Isuzu Motors of America, Mazda, Mitsubishi, Nissan North
America, Porsche, Toyota Motor North America, Volkswagen of America,
and Volvo.
Alliance member companies have more than 620,000 employees in the
United States, with more than 250 manufacturing facilities in 35
states. Overall, a recent University of Michigan study found that the
entire automobile industry creates more than 6.6 million direct and
spin-off jobs in all 50 states and produces almost $243 billion in
payroll compensation annually.
The Alliance supports efforts to create an effective energy policy
based on broad, market-oriented principles. Policies that promote
research, development, and deployment of advanced technologies and
provide customer-based incentives to accelerate demand for these
advanced technologies set the foundation. This focus on bringing
advanced technologies to market leverages the intense competition of
the automobile manufacturers worldwide. Incentives will help consumers
overcome the initial cost barriers of advanced technologies during
early market introduction and increase demand, bringing more energy
efficient vehicles into the marketplace.
This year, there has been increased attention on vehicles and their
fuel economy levels with particular discussion of the Corporate Average
Fuel Economy (CAFE) program. The Alliance believes, however, that
Congress does not need to set new standards or change the structure of
the program. The law requires the Department of Transportation (DOT) to
promulgate new light truck standards (pickups, SUVs, minivans and vans)
at the maximum feasible level based upon certain prescribed criteria.
The National Highway Traffic Safety Administration (NHTSA) will start
that process this October. Automakers will be working with the DOT to
ensure appropriate standards are set.
Additionally, Congress provided for a study of CAFE standards in
legislation passed last year. The National Academy of Sciences (NAS) is
now studying the effectiveness and impacts of the CAFE program and will
issue its report this summer. The Alliance has been focusing our
resources on working constructively with the NAS panel on the future of
the CAFE program.
Rather than simply engage in an exercise updating a program that
was found by the NAS in 1992 to be flawed, Congress needs to consider
new approaches for the 21st century, which put the consumer first. The
Alliance and its 13 member companies believe that the best approach for
improved fuel efficiency is to aggressively promote the development of
advanced technologies--through cooperative, public/private research
programs and competitive development--and then provide incentives to
help pull the technologies into the marketplace as rapidly as possible.
We know that advanced technologies with the potential for major fuel
economy gains are possible. As a nation, we need to get these
technologies on the road as soon as possible in an effort to reach the
national energy goals quickly and efficiently.
The Alliance is pleased that Vice President Cheney's National
Energy Policy report recommends and supports a tax credit for advanced
technology vehicles. Specifically, it proposes a tax credit for
consumers who purchase a new hybrid or fuel cell vehicle between 2002
and 2007. In addition, the report supports the broader use of
alternative fuels and alternative fuel vehicles. This is consistent
with the Alliance's position of supporting enactment of tax credits for
consumers to help offset the initial higher costs of advanced
technology and alternative fuel vehicles until more advancements and
greater volumes make them less expensive to produce and purchase.
In reviewing House legislation that has been crafted to spur the
sale of advanced technology fuel-efficient vehicles, the Alliance is in
general agreement with H.R. 1864 introduced by Congressman Camp.
Automakers would like to see some minor, technical changes made to the
hybrid-electric vehicle section of the bill and would also support the
inclusion of tax credits for advanced lean burn technology. The
Alliance believes that the overall concepts and provisions found in
H.R. 1864 are the right approach and would benefit American consumers.
The bill would ensure that advanced technology is used to improve
fuel economy. Performance incentives tied to improved fuel economy are
incorporated into the legislation in order for a vehicle to be eligible
for the tax credits. These performance incentives are added to a base
credit that is provided for introducing the technologies into the
marketplace.
Automobile manufacturers believe that CAFE, however well-intended,
has not achieved its desired goals and has had a number of unintended
consequences. Meeting CAFE standards is not something that
manufacturers can do by themselves. Because the standards are a sales-
weighted fleet average, the ultimate outcome depends on what the
consumer purchases. If not enough customers purchase the higher fuel
economy models of a given manufacturer, then the fleet average for that
automaker may not achieve the CAFE standard. Since manufacturers have
widely varying fleet mixes and product offerings, the CAFE program has
had widely disparate impacts on automakers and has afforded some
manufacturers with significant competitive advantages at times.
Increasing CAFE standards will only exacerbate these problems.
Higher standards may result in vehicles that are less attractive to
customers in terms of meeting their needs for work and family. If
consumer demand is not aligned with manufacturers production, there is
the potential for significant negative impact on employment throughout
the industry. Ultimately, any fuel savings that result will come at
high cost to consumers, manufacturers and the economy. In short,
automakers need to produce vehicles that appeal to customers. CAFE acts
as a market intrusion that over time will create distortions and
unintended adverse consequences.
Recent sales figures support this position. The top ten most fuel-
efficient vehicles account for less than 2% of total sales. The
ultimate goal for any business is to provide products consumers want to
buy. Increasing CAFE standards will require automakers to produce less
of the products that American consumers are actually purchasing today
and more of the products that are in lower demand. These are some of
the reasons why the Alliance is opposed to Congressman Olver's bill,
H.R. 1815, which would require all light trucks, not just SUVs, to meet
the same fuel economy standard as passenger cars. The bill would
dramatically affect the functionality and performance of the pickup
trucks, vans and SUVs that consumers currently find so appealing.
In the industry, CAFE regulations affect each Alliance member
differently. Manufacturers whose fleets are comprised primarily of
larger vehicles are more constrained in their product planning by CAFE
standards than manufacturers with fleets comprised mainly of smaller
vehicles. As each manufacturer attempts to design, produce and sell
vehicles in their target markets, CAFE operates, for some
manufacturers, as a roadblock to supplying their vehicles to the
market.
Another consequence of CAFE has been the downsizing of the
passenger car fleet. Weight and size reductions remain one of the prime
means of achieving improved fuel efficiency. The basic laws of physics
dictate that smaller lighter vehicles fare worse in accidents than
larger, heavier vehicles, all things being equal.
A better way to improve vehicle and fleet fuel economy, and one
that is more in tune with consumer preferences, is to encourage the
development and purchase of advanced technology vehicles (ATVs).
Consumers are in the drivers seat and most independent surveys show
that Americans place a high priority on performance, safety, space and
other issues with fuel economy ranking much lower even with today's gas
prices. ATVs hold great promise for increases in fuel efficiency
without sacrificing the other vehicle attributes consumers desire. Just
as important, the technology is transparent to the customer.
Member companies of the Alliance have invested billions of dollars
in research and development of more fuel-efficient vehicles. Automobile
companies around the globe have dedicated substantial resources to
bringing cutting-edge technologies--electric, fuel cell, and hybrid
electric vehicles as well as alternative fuels and powertrain
improvements--to the marketplace. These investments will play a huge
role in meeting our nation's energy and environmental goals.
These advanced technology vehicles are more expensive than their
gasoline counterparts during early market introduction. As I mentioned
earlier, the Alliance is supportive of Congressional legislation that
would provide for personal and business end-user tax incentives for the
purchase of advanced technology and alternative fuel vehicles. Make no
mistake: across the board, tax credits will not completely cover the
incremental costs of new advanced technology. However, they will reduce
the cost premiums that manufacturers face in pricing the new products.
In short, tax credits will help bridge the gap towards winning broad
acceptance among the public leading to greater volume and sales figures
throughout the entire vehicle fleet. This type of incentive will help
``jump start'' market penetration and support broad energy efficiency
and diversity goals.
Enabling consumers to make better choices, rather than mandating
product design by government regulation, makes more sense to achieve
the desired outcome. After all, the industry already spends a
significant amount on compliance with government regulations while
investing large sums in capital improvements and competitive designs.
Some of the discussion today has centered on the vehicles of the
automobile manufacturers. But it is important not to forget about a
vital component for any vehicle--the fuel upon which it operates. As
automakers looking at the competing regulatory challenges for our
products--fuel efficiency, safety and emissions--and attempting to move
forward with advanced technologies, we must have the best possible and
cleanest fuels. EPA has begun to address gasoline quality but it needs
to get even cleaner. This is important because gasoline will remain the
prevalent fuel for years to come and may eventually be used for fuel
cell technology.
Beyond gasoline, the auto industry is working with a variety of
suppliers of alternative fuels. In fact, the industry already offers
more than 25 vehicles powered by alternative fuels. More than 1 million
of these vehicles are on the road today and more are coming. Today, we
find vehicles that use:
Natural gas, which reduces carbon monoxide emissions by 65 to
90 percent;
Ethanol, which produces fewer organic and toxic emissions than
gasoline with the longer term potential to substantially reduce
greenhouse gases;
Liquefied petroleum gas (propane), the most prevalent of the
alternative fuels, which saves about 60% VOC emissions; and
For the future, hydrogen, which has the potential to emit
nearly zero pollutants.
The Alliance also supports an extension of the CAFE credits for
dual fuel vehicles produced through 2008. Current law provides CAFE
credits--up to 1.2 mpg--for manufacturers that produce vehicles with
dual fuel capability. These vehicles can operate on either gasoline or
domestically produced alternative and renewable fuels, such as ethanol.
However, the dual fuel credits end in model year 2004 unless extended
via rulemaking by the National Highway Traffic Safety Administration.
The Alliance believes an extension is important so that these vehicles
continue to be produced in high volume to help encourage the expansion
of the refueling infrastructure and giving consumers an alternative to
gasoline.
In addition to alternative fuels, companies are constantly
evaluating fuel-efficient technologies used in other countries to see
if they can be made to comply with regulatory requirements in the
United States. One such technology is diesel engines, using lean-burn
technology, which have gained wide acceptance in Europe and other
countries. Automakers have been developing a new generation of highly
fuel-efficient clean diesel vehicles--using turbocharged direct
injection engines--as a way to significantly increase fuel economy and
reduce greenhouse gas emissions. However, their use in the U.S. must be
enabled by significantly cleaner diesel fuel.
Earlier this year, EPA promulgated its heavy-duty diesel rule that
the Alliance supports, as far as it goes. The rule reduces the amount
of sulfur in the fuel. Low sulfur diesel fuel is necessary to enable
the new clean diesel technology to be used in future cars and light
trucks. Providing cleaner fuels, including lowering sulfur levels in
gasoline and diesel fuel, will provide emission benefits in existing
on-road vehicles. Sulfur contaminates emissions control equipment, such
as catalytic converters. Efforts to reduce sulfur content will provide
environmental benefits and allow vehicles to operate more efficiently.
Unless there are assurances that fuels will be available, companies
will not invest in new clean diesel technologies.
As you can tell, the automobile companies--from the top executives
to the lab engineers--are constantly competing for the next
breakthrough innovation. If I can leave one message with the
Subcommittee today, it is to stress that all major manufacturers have
advanced technology programs to improve vehicle fuel efficiency, lower
emissions and increase motor vehicle safety. These are not ``pie in the
sky'' concepts on a drawing board. In fact, many companies have
advanced technology vehicles in the marketplace right now or have
announced production plans for the near future. That's why now is the
perfect time for the enactment of tax credits to help spur consumers to
purchase these new vehicles which years of research and development
have made them possible.
Higher CAFE standards, with all of the disparate impacts inherent
in that program, would divert limited resources from these ongoing
efforts and distort the market for our products. Competition will drive
improvements and success in the area of increasing vehicle fuel
economy. This powerful market force should be allowed to work where it
can and should be enhanced with incentives where they are needed to
``prime the pump.''
We would urge that public policy decisions focus on the steps that
will achieve real improvements in fuel consumption and benefits our
environment. We believe that advanced technology vehicles and
appropriate tax policy are a better way to increase fuel efficiency
than the policy of CAFE that effectively limits consumer choice,
adversely affects safety and affordability and creates ``winners and
losers'' within the auto community.
Thank you for the opportunity to testify before the Subcommittee
today. I would be happy to answer any questions you may have.
Mr. Barton. The gentleman from Louisiana.
Chairman Tauzin. I would like to make a unanimous request.
As you know, the House adjourned for the weekend, and
unfortunately many of our members made different plans because
they needed to be home for events. One of our members, Mr.
Whitfield, is on a tight schedule with a plane commitment to be
home. I wondered if you might, by unanimous consent, recognize
him out of order for 5 minutes.
Mr. Barton. Without objection. For what purpose does the
gentleman from Kentucky wish to be recognized out of order?
Mr. Whitfield. I want to make a brief statement, Mr.
Chairman, because I know that you enjoy my remarks.
Mr. Barton. The gentleman is recognized for 5 minutes.
Mr. Whitfield. Mr. Chairman, I want to just thank you for
this hearing, and particularly I wanted to thank the witnesses.
We have a number of witnesses today who are here talking about
the very important subject of conservation and energy. And as
we strive to work forward in implementing a major energy policy
for our country, I just wanted them to know that even though
there are very few members here today, I for one am taking the
testimony and will actually be reading it on the plane. I know
other members will be reading this testimony as well because we
do value your input and your suggestions. I don't have to tell
you this is a complicated subject and there are not any easy
solutions to it.
But the conservation provisions are going to be a major
part of our package that Chairman Tauzin and Chairman Barton
and the ranking minority member, Mr. Boucher, have been working
on. So I just want to thank you for being here and tell you
that we all look forward to working with you as we strive to
help solve the crisis facing our country today.
Thank you, Mr. Chairman.
Mr. Barton. We thank the gentleman. We would now like to go
to Mr. David Nemtzow who is President of the Alliance to Save
Energy. You are recognized for 7 minutes.
STATEMENT OF DAVID M. NEMTZOW
Mr. Nemtzow. Thank you, Mr. Chairman and thank you for
inviting me to testify today. It has been such an interesting
morning, and in the interest of time I am tempted not only to
shorten my testimony but perhaps abandon it all together. In
fact, I am tempted to yield my time, if I could, to you and Mr.
Boucher and Mr. Tauzin and the other members who today have
displayed, on a bipartisan, multiregional basis, your continued
support for energy efficiency.
Chairman Tauzin was very articulate earlier today about the
political choice that this committee and this Congress is
facing. You have heard the poll numbers, and I have all the
poll numbers you want from the New York Times and the
Washington Post, and they are very clear that Americans favor
energy efficiency as their first choice for energy policy, not
their only choice.
My group, the Alliance to Save Energy, a bipartisan group
of leading companies such as Johnson Controls, supports energy
efficiency and we also think we need new supplies in this
country. I think that is also of wide view. But Americans think
efficiency and conservation should be No. 1. Not only that, Mr.
Chairman, if I could highlight one observation from these
polls--and they are very congruent, the different polls--not
only do Americans support conservation first but the numbers
are going up over time.
When you look at the tracking polls within either of these
polls, we see that support for conservation is going up. In the
New York Times yesterday, it has gone from 60 percent to 68
percent in just a month's time. I think that pattern is not
surprising and it is very important.
Second, the percent of Americans who have no opinion on
energy is remarkably small. In fact, if you look in either of
these polls at the series of issues, they ask about education,
tax cuts, how the President is handling the economy, the
smallest number of ``don't knows'' is energy. I think that is
something that you probably appreciate after all your hard work
and the members of the committee's hard work on energy issues
to have a full engagement of the American public. I think you
have that.
I think now, if I could say, the easy work is over. And the
easy work is, I think that it is clear we need more energy
efficiency in this country. The hard work--this committee, this
Congress led by this committee, will now make the tough
decisions about how to embrace energy efficiency and how that
works in the real world that helps companies make money by
making more efficient products and helps consumers cut their
own energy bills.
If I could address that in my few remaining minutes, the
work that you have done in the past--I have a chart on your
right--looks at if we considered energy efficiency and energy
resource the same way we would oil or gas or coal, we would see
that today the green bar is our No. 2 energy resource in this
country.
This is the success of this committee over the years. The
laws that you have passed and Congress has endorsed has made
energy efficiency our number 2 energy resource. Oil is still
No. 1 in this country. Of course, over half of oil is imported.
That is the red part of my chart. So if you think of domestic
energy resources, energy efficiency is in fact number 1. So we
are number 2. I guess we are Avis. We would like to be Hertz,
we want to be number 1. But we are ahead of natural gas and
coal and nuclear and hydro and the other renewables.
Of course, that does not mean our work is done. There are
many opportunities left, and I don't think any of us need a
lesson on how Americans are still not using available
technology and are still being wasteful. And so that is the
challenge before this committee and this Congress: Have you
encouraged remaining energy efficiency improvements?
I would like to cite just a few policy areas that are
really the key areas for this committee. Some are within the
jurisdiction of this committee some are not. Number 1 is this
issue that you heard earlier, the public benefit fund issue
that belongs in part of any national energy legislation. This
is a small non-bypassable fee. So there are no competitive
impacts. That can be used for a variety of public policy
purposes: energy efficiency, low-income assistance, research
and development, et cetera. And by doing that, we can help
electricity consumers cut their own demand in the future.
Nineteen States have done this. Republican Governors and
Democratic Governors alike have signed them into law.
Number 2 is the issue of tax credits for highly efficient
products. There are a series of tax credits that have been
proposed in this Congress and that the Ways and Means Committee
will be addressing quite soon. We hope that you will engage in
that debate and will support tax credits for hybrid cars, as
Mrs. Cooper talked about, as well as for highly efficient new
homes, for upgrading existing homes for combined heat and
power, and certainly for highly efficient appliances.
Number 3 is the issue of fuel economy. I have to disagree
strongly with Mrs. Cooper. I would submit it is one of the most
successful energy policies this country has ever adopted,
perhaps the second after rural electrification; I think the
most important policy, period. It saves 3 million barrels per
day already. Unfortunately, because light trucks and SUVs are
treated more leniently than passenger cars, we are missing the
opportunity to save at least 1 million barrels per day just
from that part of the sector. So you need to tighten the fuel
economy standards in general and particularly for light trucks
and SUVs. That should be part of a broader approach that helps
educate consumers, that provides tax credits, but also ask
Detroit to put their pedal to the metal, as it were, to improve
fuel economy.
Next is the issue of Department of Energy and EPA
efficiency programs. Mr. Walden talked earlier--I appreciate
your support for the Energy Star program. I think it is the
poster child of how you want to help consumers in this country.
And there are other public education programs. That is the
single leading one. And this committee has jurisdiction not
only over the appropriations but over the oversight of those,
and I hope you will come back and oversee those. You are
allowed to oversee programs that you think are working as well
as the ones you think are not working. I hope you will do that
and look at those deployment programs.
Finally is the issue of appliance standards. We heard a
very spirited conversation about that. I will just add one of
the problems with the DOE analysis is that it is old. They use
1996 numbers. I don't have to tell anybody in this room that if
you use 1996 projections at future electricity prices, you are
going to get it wrong. Electricity prices have gone up
dramatically in the past 4 years and their analysis does not
reflect those new costs. California and Oregon's price
increases alone have increased the national--the average
national energy bill by over a quarter of a cent per kilowatt
hour. That alone justifies the increase to a SEER of 13, if not
beyond, and your consumers are feeling that every day.
Mr. Wagner talked about Federal facilities, school
facilities, and on the other side of this subcommittee's
jurisdiction are the cap and trade programs which also promote
energy efficiency.
I thank you again for holding this hearing and I appreciate
the hard work that you have done to try to turn the theory of
energy efficiency into real live policies. I think you have
some good choices ahead of you, Mr. Chairman. I look forward to
working with you.
[The prepared statement of David M. Nemtzow follows:]
Prepared Statement of David M. Nemtzow, President, Alliance to Save
Energy
Mr. Chairman and Members of the Committee, thank you for the
opportunity to testify before you today about the role of energy
efficiency in serving as the foundation of national energy policy.
My name is David Nemtzow. I am 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; it is currently
chaired by Senators Jeff Bingaman and James Jeffords as well as
Representative Ed Markey.
Over 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 many of the nation's
leading energy efficiency firms, electric and gas utilities, and other
companies providing cost savings and pollution reduction to the
marketplace.
The Alliance has a long history of researching and evaluating
federal energy efficiency efforts. We also have a long history of
supporting and participating in 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. Federal energy efficiency programs at the Department of
Energy (DOE), the Environmental Protection Agency (EPA), and other
agencies are largely voluntary programs that further the national goals
of environmental protection, as well as broad-based economic growth,
national security and economic competitiveness.
I. INTRODUCTION
Energy-Efficiency: A Bipartisan Tradition
From the days of our first national nightmare of gas lines and
soaring fuel prices, energy efficiency has had champions in Congress
from both sides of the aisle. Sen. Charles Percy, who founded the
Alliance to Save Energy in 1977, recognized the need to promote energy
efficiency to address a glaring hole in our nation's economic security.
He knew that a partnership between business, government,
environmentalists, and consumer advocates would not only result in
benefits for each sector, it would help avoid the need for coercive
regulation when our problems reach crisis level.
Support of action by the federal government to promote energy
efficiency has also been historically bipartisan. Though the
establishment of the Department of Energy and energy efficiency
programs is most often associated with the Carter Administration, key
advancements in federal efforts were made under the Reagan and Bush
Administrations. While funding was cut severely from Carter-era levels,
President Ronald Reagan signed the National Appliance Efficiency and
Conservation Act (NAECA) the law requiring DOE to set energy efficiency
standards for appliances and other equipment. That program has led to
tens of billions of dollars in savings for the American people and
significant carbon emissions reductions. The first Bush Administration,
in the context of its support for the Rio Treaty, began to
significantly expand funding for DOE energy efficiency and renewable
energy efforts and created the Green Lights and Energy Star programs at
EPA. In addition, former President Bush signed the Energy Policy Act of
1992, which expanded the scope and magnitude of energy efficiency
efforts.
The House and Senate caucuses devoted to promoting renewable energy
and energy efficiency continue that tradition of bipartisanship.
Currently, the House Renewable Energy Caucus features well over 100
members from both parties. Such support from all parts of the political
spectrum is what has made clean energy a driving force in the American
economy.
Today's Testimony
I am here today to testify on how investment in energy-efficient
technologies can help address our energy needs, ease strain on our
energy supply, reduce air emissions harmful to the environment, and
save taxpayers money. At no time since the late 1970s has energy been
such a prominent topic of public debate. The release of President
Bush's energy plan, and now the consideration of comprehensive
legislation by Congress, have served as platforms for a great national
conversation regarding what we want out nation to look like as the 21st
Century proceeds.
Mr. Chairman, all energy sources are not created equal. Some cost
more than others. Some pollute more than others. Some require the
approval of local communities to be transported from one place to
another, whereas others do not. Some generate profits that accrue only
to a few, while others disperse benefits widely among the public.
By virtue of its ability to ease strain on energy supplies thus
reducing energy prices, increase reliability of supply, not only not
exacerbate--but reduce--pollution, increase our national economic
security, and disperse benefits widely over the population, energy
efficiency is a superior choice for investment by the federal
government.
Let me also say that while energy efficiency should be the
cornerstone of national energy policy, the nation will also need clean,
new energy supplies. Our energy problems are severe enough that we will
need major contributions from both the supply and the demand side of
the meter.
Americans Choose Energy Efficiency
Americans want a true, aggressive effort to achieve energy
efficiency, Mr. Chairman. The American public is concerned about our
nation's energy use and believes that energy efficiency and
conservation are key components to addressing our energy needs. A
Gallup poll published in mid May found that 85% of the U.S. public
showed strong support for mandating more energy efficient appliances,
buildings and cars. And support is only rising. An ABC News/ Washington
Post poll released on June 5th found that of the 1004 adults surveyed,
ninety percent support action by the federal government to encourage
more energy conservation by business and industries. Ninety percent
also support action by the federal government to encourage more energy
conservation by consumers. An overwhelming 89 percent of those polled
said they would ``require car manufacturers to improve the fuel-
efficiency of vehicles sold in this country.''
I hope the recent debate over energy policy has resolved at least
one point. When we talk about energy efficiency, we are not talking
about personal sacrifice, or any other reduction in economic well-being
or quality of life. Energy efficiency means providing the services that
our modern economy and lifestyles demand--lighting, heating, cooling,
transportation, IT, and much more--but doing so with less energy input.
Energy efficiency means relying on technologies--many of which are
familiar, while others are still innovative or even still in the
laboratory that can provide the same or superior services, productivity
and comfort while using less energy input. And lessening energy input
means reducing the numerous pollutants and environmental stresses that
result from our currently wasteful energy practices.
II. ENERGY EFFICIENCY AND THE ECONOMY
Energy efficiency makes money and puts people to work. The economic
gains from energy efficiency come in two forms. The greatest benefit
comes from displaced costs--money that households and businesses can
spend elsewhere because they no longer have to spend it on energy. That
spending includes additional investment and hiring additional workers.
Direct economic benefits come from growth in industries that generate
energy-efficient products and services. Companies that sell insulation
or efficient windows domestically and/or for export employ Americans in
high-skill service and manufacturing jobs. Secondary economic benefits
come from businesses and consumers re-spending these newfound energy
savings in sectors of the economy which are more labor-intensive than
energy supply.
Energy efficiency Must Be Measured as an Energy Source
Our energy system operates against the backdrop of a U.S. economy
that has become significantly more energy-efficient over the past
quarter-century. But we often fail to realize the actual contribution
of energy efficiency to our GDP and national well being.
Mr. Chairman, it isn't easy to compare the contribution of energy
efficiency to the environment and the economy with more traditional
energy sources such as oil and coal. It requires the observer to regard
saved or unused energy as created energy in the same way that oil comes
out of the well and coal comes out of the mine. In addition, I think
that any economist would tell you that energy efficiency measures have
increased the supply of energy and thus helped to lower the price.
Energy not used is just as salable and usable when conserved as when
produced. Upgrades in energy efficiency made to home appliances,
industrial equipment, building systems, or car and truck fleets serve
as an energy source that increases our overall supply of electricity,
coal, oil, and natural gas.
Energy-Efficiency, our Number 2 Energy Source in 1999
Alliance research shows that, for 1999, the most recent year for
which we have complete data, energy efficiency was the second leading
source of energy for U.S. consumption, and if we consider only domestic
energy sources, it's number one. Mr. Chairman, it would have been
number-one if we declined to count oil imports, now more than half of
this nation's oil consumption. Our analysis of 1999 energy consumption
shows that energy efficiency provided the nation with 27 quadrillion
Btus (quads), approximately 22 percent of U.S. energy consumption.
While energy efficiency trails our mammoth oil consumption (38 quads),
it significantly outstrips the contribution of natural gas (22 quads),
coal (22.0 quads), nuclear (8 quads) and hydro (4 quads).
Mr. Chairman, the contribution of energy efficiency to our nation's
overall supply is now so great that we cannot regard it as an esoteric
externality anymore. We must promote and support it in the same way we
do the coal belt and the oil patch, which enjoy a variety of tax breaks
and subsidies based on their use of fuel.
These figures show energy efficiency for what it is--an
unparalleled driver of environmentally sound economic growth.
Mr. Chairman these economic snapshots of efficiency show an energy
industry that spans the economy and the populace. But it is not an
energy industry that looks like what we have known in the past.
However, all the functions of traditional energy industries are
represented. But with energy-efficiency, the miners are businesses
trying to cut their costs. The roughnecks are homeowners trying to keep
their families warmer in the winter. The geologists are mechanical
engineers working to get more out of less. Energy efficiency is highly
dispersed throughout the economy. And because of its diffuse nature,
energy efficiency doesn't carry the political clout of the coal-mining
regions, or of the oil and gas-producing regions. There is no ``energy
efficiency patch.''
By the same token there is not a defined energy efficiency
industry. Whirlpool makes highly efficient appliances but they sell
washing machines and refrigerators, not energy efficiency. Honeywell
sells controls that regulate building systems that can save a company
millions of dollars a year, not energy efficiency. Owens-Corning sells
fiberglass insulation which can make a house warmer, more comfortable,
and more economical to live in, but they sell insulation, not energy-
efficiency.
So when we have to make tough choices about what we do with federal
dollars and initiative, we must think about energy efficiency as what
it is--an energy source that is essential for the economic health of
our nation--and one that thus far has paid off like a gusher for the
American people. And yes, Mr. Chairman, that energy is produced
cleanly, displacing both conventional air pollutants as well as ones
believed by many to be causing a warming of the Earth's climate. It
enhances our national security, as this year we again went to war to
protect our interests in Mideast oil fields. Energy efficiency cuts
costs for businesses and consumers, and it increases our international
competitiveness--all the things we have traditionally talked about.
The tough choices on energy must be made with a clear eye on the
contribution to the environment, the economy, national security, and
international competitiveness delivered in the past and promised for
the future by energy-efficiency.
III. ACCURATELY ASSESSING OUR ENERGY NEEDS
Whether in relation to volatility in oil supplies and gasoline
prices, electricity, or price spikes in home heating fuels, we must
consider the range of options available to deal with our national
energy problems. That requires a close look at demand side as well as
supply side measures. Prudent decisions require the comparison of costs
and an assessment of what the benefits are and where they accrue.
How Many New Power Plants Will We Need?
Let's look at the electricity situation. Earlier this year, Vice
President Cheney cited the Energy Information Administration (EIA)
projection that we would need at least 1300 additional power plants to
satisfy our new electricity needs through 2020. His comments left the
impression that this was a fait accompli, and that Americans would have
to face that fact as surely as the Sun setting in the west.
When we look more closely at the facts, Mr. Chairman, building 1300
new plants is only one item on a menu of alternatives we can employ to
meet our electricity needs. But, in fact, aggressive investments in
energy efficiency could free up enough electricity supply to eliminate
the need for most of those 1300 plants. And it would do it in a way
that would be much better for the environment, dispersing benefits much
more broadly across the economy.
Let's examine the facts behind the 1300-powerplant argument. DOE's
forecast is based on the Energy Information Administration's Annual
Energy Outlook, which uses a macroeconomic model called the National
Energy Modeling System (NEMS). But NEMS, like all models, can miss the
mark. For example, in 1999 NEMS predicted no increases in natural gas
prices. The 1300-powerplant forecast would drop dramatically if it used
these inputs:
230 of the 1300 power plants are for replacing current units,
a task much easier than building completely new units. So the
net new demand for power is actually 1070 plants.
300 power plants' worth of capacity, already in the pipeline,
will come on line by the end of 2002. That leaves the need at
770.
Appliance efficiency standards for clothes washers, water
heaters, and air conditioners, passed by the Clinton
administration in January, and agreed to by the Bush
administration, will reduce demand by 127 power plants in 2020.
That cuts the need to 643.
If the Bush administration supported the air conditioner
standard at the SEER 13 level approved by Clinton, instead of
the reduced SEER 12 level they announced in April, another 43
plants would be saved, reducing the need to 600. Pursuing
strong standards for commercial air conditioning would save
another 50 plants, cutting the need to 550.
Programs to reduce energy use in new buildings, such as
building energy codes, tax credits, and public benefit
programs, would avoid 170 power plants. That means reducing new
homes' demand by one 1 kW per home, and new commercial building
demand by 1 watt per square foot. Modern building codes alone
can easily achieve those kinds of savings; doing so takes the
need down to 380 power plants.
Programs to improve existing buildings, by targeting
residential air conditioners, commercial lighting, and
commercial cooling, can trim demand projections by another 210
power plants. That leaves the tally at 170.
Since our electricity industry is producing 300 plants over the
next two years, it is reasonable to assume that another 170 can be
brought on line over the following eighteen. Many if not all of those
could be renewable-energy plants, producing little or no pollution.
Realizing the energy efficiency gains, especially the 380 power
plants from new and existing buildings, will take a concerted effort,
involving increased R&D funding, aggressive support for building codes,
new federal tax credits, and public benefits funding from electricity
sales to support state-based efficiency programs.
Before we arrive at what the solutions to our energy problems
should be, Mr. Chairman, we need to do this kind of analysis. What are
our options? What can be done quickly and cleanly. What is the relative
cost of the options?
IV. ENERGY-EFFICIENCY POLICY MEASURES
The Alliance to Save Energy believes that the following five items
should be contained in any national energy policy legislation:
1.) National System Benefits Trust Fund
2.) Targeted Tax Credits for Highly Efficient Products and Technologies
3.) Increased Fuel Economy in the Transportation Sector
4.) Increased Investment in Energy Efficiency Research and Development
5.) Expand the Appliance Standards Program
National System Benefits Trust Fund
Many parts of the nation are facing on unprecedented challenges in
preventing electricity shortages, reducing air pollution, and
responding to high consumer energy bills. Energy efficiency provides
the cleanest, fastest, and cheapest way to respond to these needs. A
federal public benefits fund is the most effective national means to
support these needed investments.
One of the reasons that demand-growth overtook electricity supply
in California is the fall-off in energy efficiency spending by
utilities in beginning in 1995. The onset of competition in California
changed the traditional relationships between state regulators,
utilities, and the need to provide public benefits, such as energy
efficiency and renewable energy investments and low-income programs.
These programs had been highly successful in California up until that
time. The Rand Corporation issued a report in 2000 that quantified the
benefits of the state's utility energy efficiency programs, finding
that between 1980 and 1995, utility efficiency investments generated
roughly $1000 in returns for every $1 spent. Rand also found that the
overall economic benefit to the state from these programs was
responsible for 3 percent of the California gross state product in
1995. Finally the study concluded that energy efficiency programs had
avoided a 40 percent increase in stationary source air pollution during
that period. Some have characterized energy efficiency in California as
a failure and a cause of current gap between demand and supply. That is
highly inaccurate. In fact, it was wildly successful. They just didn't
grab enough of it.
The Alliance supports the creation of a systems benefit trust fund,
to augment state spending on just the kind of measures that were so
successful in California. The fund would come from a non-bypassable
charge on electricity, which would then go to match state expenditures
on energy efficiency, low income programs, renewable energy, and state-
based research and development.
States are spending about $1.7 billion this year on public benefits
programs, including efficiency, renewables, low-income programs, R&D,
and related public goods. A federal match at this level would raise
another $1.7 billion annually. The residential share of this would
amount to about $6 per year per family--about 50 cents a month.
The benefits would be enormous; they are projected to include:
92,000 Megawatts of electric capacity savings by 2020 (equivalent to
about 300 powerplants); 1.24 trillion kWh saved over 20 years, cutting
consumer energy bills by $100 billion; and 150,000 tons of nitrogen
oxides emissions avoided.
The public benefits fund is off-budget, providing an efficient way
to support the states in their efforts to respond to their mandates for
reliability, clean air, and affordable energy. 50 cents a month is a
very small price to pay for keeping the lights on, the air clean, and
energy bills down.
Tax Credits for Energy Efficient Products and Technologies
Members of both parties in both the House and Senate have
introduced legislation to promote tax credits to spur energy-efficient
technologies and products. The Alliance believes that tax credits
provide strong mechanisms to both attack market obstacles to the
adoption of efficient products and provide an incentive for the rapid
adoption of the next generation technologies that are not yet produced
on a mass basis.
The Alliance supports establishing tax incentives in the following
areas:
Residential tax credits for the construction of highly-
efficient new single family homes and substantial upgrades of
existing homes.
A production tax credit to manufacturers of extra-high
efficiency refrigerators and clothes washers.
A tax deduction for investments in new multi-family and other
commercial buildings.
An investment tax credit for purchases of highly efficient
hybrid gas-electric and fuel cell vehicles.
A tax credit and/or accelerated depreciation schedule are
provided for investment in combined heat and power systems
The intensive of analysis of specific proposals is currently taking
place in the Ways and Means Committee. I urge this Committee to work
with that Committee to promote these important energy-related tax
incentives.
Increased Fuel Economy
The fuel economy of today's cars and light trucks are at their
lowest point in twenty years. But while fuel economy has fallen, oil
imports and oil prices have continued to rise. U.S. oil imports have
more than doubled over the past 15 years and prices of petroleum
imports hit $110 billion, or one quarter of the U.S. trade deficit in
2000. Cars and light trucks consume 40 percent of the oil used in the
U.S. every day and emit 20 percent of U.S. carbon pollution. With
gasoline prices rising across the country America has found itself in a
crisis of its own making. We must raise the fuel economy of the
vehicles on American roads.
Fuel economy standards are popular everywhere but Detroit, thus
making them a bone of contention in Congress. In fact, eighty-nine
percent of the adults polled this month by ABC News/Washington Post
support action by the federal government to require car manufacturers
to improve vehicle fuel efficiency in the U.S.
There are many ways to increase fuel economy including closing what
is known as the light-truck loophole which would make the SUV parked in
the supermarket meet the same 27.5 mile per gallon CAFE standard as the
car beside it. In 1999, this loophole cost consumers $27 billion at the
pump; closing it would save at least 1 million barrels of oil a day.
Another option is increasing the fuel economy of cars and light trucks
to meet a 40-mile per gallon standard that could save 1,500 gallons of
gas per second. Or, a consumption cap could be applied to encourage
manufactures to continue to increase their fleet fuel efficiency
without the standard CAFE formulation. Offering tax credits for high
efficiency vehicles can contribute to the transformation of America's
gluttonous vehicle market.
The American public is tired of paying too much at the pump because
they don't have the choices at the auto dealership to get the car they
want with the high-efficiency technology that is available. And it is
available. A report by the Union of Concerned Scientists released
Wednesday shows that US automakers could produce a fleet of cars and
trucks that get an average of 40 miles per gallon by 2012, and 55 mpg
by 2020 with no decrease in safety or performance. This increased fuel
efficiency would save consumers billions of dollars each year, cut 273
million tons of annual greenhouse gas emissions by 2010 and 888 million
tons by 2020, and create tens of thousands of new jobs in the auto
industry.
Increased Research, Development, and Deployment at DOE and EPA
In 1996, Mr. Chairman, the General Accounting Office did a study of
a variety of success stories detailing energy and cost savings to the
Nation which DOE had published in 1994. Unfortunately, the purpose of
the study appeared to be political, and it attempted to discredit
energy efficiency programs by attacking DOE's methodology for preparing
the success stories. But rather than achieving this goal, it ended up
validating billions in energy savings for a few key technologies which
far outstrip out entire national investment in energy efficiency over
the past 20 years.
Mr. Chairman, the accumulated success of these programs at saving
money for American consumers and taxpayers is remarkable. The GAO study
validated DOE's assertion that just five technologies 1
developed or assisted by the DOE buildings program resulted in $28
billion in energy savings over the past 20 years for an approximate $8
billion in investment as of 1994. DOE has updated results for those
programs which credits them with returning $50.9 billion to the U.S.
economy through 1999. Add gains from the low-income Weatherization
Assistance Program, state energy programs, and building and appliance
standards work, and returns total $89.6 billion. Add FEMP gains and it
moves to $101 billion. Add the hundreds of other technologies to come
out of the business, industrial, and transportation programs and the
additional accrued energy savings of the past 5 years and you get a
portrait of an overwhelmingly cost-effective effort which has
contributed significantly and directly to the quality of life of
Americans.
---------------------------------------------------------------------------
\1\ The technologies are: low-emissivity windows, electronic
ballasts, advanced refrigerator compressors, the flame retention head
oil burner, and DOE-II building design software.
---------------------------------------------------------------------------
Mr. Chairman, I have yet to know of a federal program that has
returned more than $100 billion to the economy for the relatively small
investment of $12.0 billion through 1999.
By the same token, the EPA Energy Star and Green Lights programs,
as well as other EPA climate programs, have already returned more than
$40 billion in energy savings to the economy from less than $750
million in federal investment through 1999. In addition, these federal
partnerships with businesses, state and local governments, school
districts, non-profits, and other organizations have yielded reductions
of more than 300 million metric tons of carbon equivalent pollution.
Expand the Federal Appliance Standards Program
One of the true top performers in energy efficiency has been the
appliance standards program at the Department of Energy. Every
refrigerator that is sold today is well more than twice as efficient as
the comparable model from 25 years ago. The same is true for a variety
of other products. These improvements have been very successful and
cost-effective. A key route to increasing the energy efficiency of the
economy is to expand the appliance standards program to include
additional products such as commercial refrigerators, torchieres, ice
makers, traffic lights, and exit signs, as well as reducing the stand-
by power requirement of electronic appliances. The savings in 2020 are
estimated to reach $20 billion per year from expanding this highly
successful program.
In addition, Mr. Chairman, the Alliance strongly supports the rule
promulgated by the Department of Energy earlier this year to raise
energy standards for residential central air conditioners and heat
pumps to a Seasonal Energy Efficiency Rating (SEER) of 13. Soon after
taking office, the Administration elected to rollback the rule and to
reduce the proposed increase to SEER 12. This was done despite the fact
that due to worsening electricity problems in Western, and perhaps
other, states and increases in electricity prices, the SEER 13 standard
is even more cost-effective and justified than it had been earlier.
Furthermore, all major air conditioner manufacturers already sell
models that meet the 13 standard and that two of them strongly support
the original rule. Additionally, as you know, earlier this week, a
lawsuit was initiated by the Natural Resources Defense Council, the
Consumer Federation of America, three state Attorneys General and
others to reverse that decision. I ask this Committee to urge the
Administration to take into account the new facts governing the
nation's electric reliability and prices and to re-affirm the SEER 13
standard.
VI. CONCLUSION
A comprehensive national energy policy must seize the opportunity
to exploit energy efficiency in each of these critical areas. Public
opinion is overwhelming that a true effort to increase efficiency is
desired by the nation. Many times, Mr. Chairman, I have sat in hearings
and listened to Members say that, despite our best efforts at energy
efficiency, we still need to focus on production. I do not now, nor
have I ever said that energy-efficiency can do all that needs to be
done to provide for the energy needs of this country. I will say,
however, that--as a nation--we have not even begun to give our best
effort to make our economy more efficient.
A balanced, comprehensive energy policy must take aggressive steps
to save energy wherever it is cost-effective and feasible. Energy-
efficiency may be our second largest energy source, but it should be
our first energy priority.
Thank you for the opportunity to testify before your Committees
today. I'm happy to address any questions you might have.
Mr. Barton. Thank you, sir. We now want to hear from Mr.
Gary Swofford who is the Vice President and Chief Operating
Officer for Puget Sound Energy. We will put your statement in
the record and ask you to elaborate on it for 7 minutes.
STATEMENT OF GARY B. SWOFFORD
Mr. Swofford. Thank you, Chairman Barton, Congressman
Boucher, and Congressman Walden, thank you for the opportunity
to testify before THE subcommittee this morning.
I want to say a few words about the important role that
real-time electricity pricing can play in solving current
problems as well as securing our energy future, and also a
couple of comments about the program our company has put in
place on a real-time pricing program we call Personal Energy
Management.
Simply put, to achieve the levels of energy efficiency in
the use of electricity, customers need to see the real price of
electricity that they are purchasing before they make the
purchase decision. California is the poster child for the kind
of results we get when we have wholesale prices that are
unregulated and retail prices are fixed so that customers do
not see the impact of the purchase decisions they are making.
Failure to give customers the proper price signals promotes the
wasteful use of energy, higher cost, and, quite frankly, just
plain bad habits. With proper price signals in place, we get
efficient use of energy, we get lower cost, and we get a
sustainable energy use ethic in this country.
Wasteful use of energy also has severe environmental
consequences. We use costly, inefficient, and polluting
resources. We construct more generating resources while we need
them more than would be necessary, and we construct more of a
transmission and distribution system than we would need.
Substantial costs can be avoided by the implementation of
real-time electricity pricing. There is a study that has
recently been done by the McKinsey Company--I have included a
copy in my testimony--where they have found that $14.8 billion
annually can be saved by the implementation of real-time
pricing in this country; 8 billion of that is in the
residential sector.
In the energy study that was conducted last summer after
the price spikes like we saw in California, they found that a
2.5 percent reduction in their usage at peak times would have
saved Californians $700 million last summer. A study done by
the Brattle Group, concluded that a 10 percent reduction in
energy at peak usage time results in a 50 percent reduction in
the cost of energy during that same peak period.
So what does it take to make real-time pricing of
electricity available? It takes the integration of a couple of
key technologies, the first of those being metering systems or
so called smart meters. They gather the information in 15-
minute increments. They store it. Communication systems can
then transmit that information in daily intervals, in hourly
intervals, whatever the market is demanding at any given point
in time. That is then brought into new customer information
systems. They take that information on usage, match it up with
what is going on in the pricing area, contemporaneously, and
then give it back to customers so they can see both what they
are using as well as what the price is at any given moment.
At Puget Sound Energy, we began providing usage information
to 410,000 of our customers last December. That is residential
commercial and industrial. In addition to the monthly
information we gave them in summary form in their monthly
bills, they can also access that information daily via our Web
site. So the customer now can get usage information, and in the
time of what they are using and in the time block in which it
is being used. They can now make decisions about how much they
are using and in which time periods they are using it, because
at peak times it is more expensive than it is at off-peak
times. They can look the next day and they can see the
consequences of choices they made to either reduce energy usage
or to shift their energy usage.
In a study that we conducted just last month of how
customers received this information that they were receiving,
the survey showed that 80 percent of residential customers and
70 percent of commercial and industrial customers had taken
actions to alter their energy use. We think that was pretty
fantastic results for a 4-month program that we had adopted.
On April 25 of this year, the Washington Utilities and
Transportation Commission shifted that program from an
information only, that approved the tariffs that we filed, to
convert that to a billing and pricing program so that 300,000
of our customers will now be receiving bills based upon time of
use that they are using their energy. It is an important first
step to the actual delivery of real-time pricing for our
customers.
As a matter of national energy policy, all customers need
to have the ability to be able to see how much energy they are
using at any given point in time. The emphasis to date on most
programs has been in the commercial-industrial sector, while
the McKinsey study shows that over half of the value in the
avoided cost occurs in the residential sector.
So what is preventing the national deployment of real-time
pricing? Well, there are several issues, but I want to focus on
just one here for just a second. It is the upfront capital cost
of installing new metering technology.
It is for this reason that we strongly support and urge
Congress to pass a bill introduced by Congresswoman Jennifer
Dunn, H.R. 1797, the Energy Efficiency and Conservation
Incentive Act of 2001. If passed, this bill would provide
utilities with a tax deduction for either retrofitting or
installing the new technology metering systems for their
customers.
In conclusion, I have submitted written testimony, and you
have seen I have included the McKinsey white paper for you
also. I would look forward to any opportunity to answer any
questions you might have.
[The prepared statement of Gary B. Swofford follows:]
Prepared Statement of Gary B. Swofford, VP and Chief Operating
Officer--Delivery, Puget Sound Energy
Chairman Barton, Congressman Boucher and members of the
Subcommittee, thank you for inviting me to testify before the
Subcommittee on Energy and Air Quality.
My name is Gary Swofford. I'm the Vice President and Chief
Operating Officer for the Delivery Business unit at Puget Sound Energy.
Puget Sound Energy is a natural gas and electricity distribution
company serving 1.4 million customers in Western Washington. I have
been asked to speak to you today about our Personal Energy Management
TM Program and the important role real-time electricity
pricing can play in a national energy policy.
For the country to achieve the levels of efficiency that are
possible in our use of electricity, customers need to see the real
price of electricity before they make their purchase decisions. If we
are to see wholesale electricity prices rationalize, then the retail
prices that customers pay cannot remain fixed and unresponsive to the
demand for more supply. We need only look at the chaos that has been
associated with the price of electricity in California to see the
effects of wholesale markets that are deregulated and retail markets
that remain regulated. The remedy sought by California is a return to
regulation through the use of caps on the price of wholesale
electricity, when what they need is for customers to be able to see and
respond to the price of electricity while needed new supplies are
developed and brought on line.
The imperative for real-time electricity pricing is considerable.
Failure to give customers proper price signals encourages 1) the
wasteful use of energy, 2) unnecessarily high costs and 3) bad habits.
On tile other hand, giving customers the proper price signals results
in 1) tile efficient use of energy, 2) lower costs and 3) a sustainable
energy use ethic.
In addition to driving up the costs, the wasteful use of energy has
substantial negative environmental impacts. We use marginal resources
that are both more expensive to operate and more polluting, and we
build more resources and electric system infrastructure than would
otherwise be needed. In a recent analysis undertaken by the McKinsey
Company, they found that the U.S. could avoid spending $14.8 billion
annually by implementing real-time electricity pricing--with almost $8
billion of that avoided cost occurring in the residential sector (see
figure 1).
A significant portion of that avoided cost comes from the large
impact on the marginal price of wholesale electricity from a modest
reduction in demand. The Electric Power Research Institute (EPRI) found
that if California had been able to reduce its demand on peak this past
summer by just 2\1/2\%, they could have reduced what they paid by $700
million. The Brattle Group in a report they did concluded that a 10%
reduction in peak demand resulted in a lowering of the peak wholesale
price of 50%.
Real-time electricity pricing is made possible by the integration
of several key technologies that are all available today (see figure
2).
Customer usage data is gathered by using newly developed metering
technology that gathers and stores this information in as small as 15-
minute increments. This information can then be gathered and sent daily
or even hourly if so desired. Newly developed customer information
systems (CIS) can take that usage information and match it with what
the market price is at the time of usage and can provide that
information back to customers making it possible for them to make
informed purchase decisions.
At Puget Sound Energy (PSE) we began providing usage information to
410,000 of our residential, commercial and industrial customers last
December. In addition to monthly information in our billing statements,
our customers can also gain access to their usage data over the most
recent 24-hour period on our web site. They also see the time blocks
their usage occurred in (see figure 3). If they don't have a computer,
they can call our customer access center and talk to a representative
who will review the information with them. The customer now has the
usage information and the time blocks in which their usage occurred and
the price of electricity in each of those time periods. They can now
make decisions about how much energy they are using and when they want
to use it. The next day they can look and see the impact of their
choices (see figure 4).
Customer acceptance and use of this information has been
exceptional. In a recently conducted survey of customers who have been
receiving usage information from the program we call Personal Energy
Management (PEM TM), we were gratified to see that 91% of
residential customers and 72% of business customers were aware of our
information program (see figure 5), and that the most important things
they learned were 1) the need to conserve energy, 2) how they used
energy by time-of-day' 3) the need to shift to off peak energy usage,
and 4) how to save and shift their energy usage (see figure 6). The
survey also showed that 79% of residential customers and 70% of
business customers had taken actions to alter their energy use (see
figure 7), and finally that as a result of the information they
received about their usage 43% of residential customers shifted when
they used electricity, and 41% reduced their usage. For business
customers 4% shifted their usage while 45% reduced what they used (see
figure 8). These are truly outstanding results for an information
program.
On April 25th of this year, the Washington Utilities and
Transportation Commission (WUTC) approved our filing to move from
information only to pricing electricity according to the time during
which it is used, so called time-of-use pricing. This is a pilot
program for 300,000 of our residential customers, and it is an
important first step in providing customers with the information they
need to manage their energy use and their electric bill. We are now
working on a filing we plan to make later this summer that will bring
this program to all classes of our customers and move us another step
closer to real-time electricity pricing.
As you can see, we are very proud of our Personal Energy Management
TM program. On June 5, 2001 PSE received the Edison Award
from the Edison Electric Institute (EEI). This award is presented
annually by EEI to the utility that demonstrates leadership and
innovation in contributing to the advancement of the electricity
industry for the benefit of all. We earned this award in recognition of
our Personal Energy Management TM program, a program that
brings realtime electricity pricing capabilities to our customers.
As a matter of national energy policy, all customers need to have
the ability to receive real-time information about their usage and the
price of electricity. The emphasis to date has been on large commercial
and industrial customers, while the McKinsey analysis shows that over
half of the annual avoided costs are in the residential area.
The integration and development of the systems needed to provide
real-time electricity pricing for PSE customers demonstrates that the
technology is available now. Our survey results show its value to
customers. We have the means to achieve $15 billion in annual avoided
cost savings and in so doing, reduce the cost of electricity to
customers, ensure that we are using the resources we have as
efficiently as possible, and only build the new resources that are
necessary.
What is preventing a national deployment of real-time pricing?
We believe one of the issues for a utility is the up-front capital
cost of installing new metering technology. For this reason, we
strongly support and urge this Congress to pass a bill introduced by
Congresswoman Jennifer Dunn--H.R. 1797, the ``Energy Efficiency and
Conservation Incentives Act of 2001.'' If passed, this bill would
provide utilities with a tax deduction for either retrofitting or
installing new real-time metering systems for their customers. We
believe this bill will provide utilities with the financial incentive
they need to deploy a real-time pricing on a much greater scale.
In conclusion, I have submitted written copies with my testimony as
well as a copy of the McKinsey white paper I referenced in my remarks.
Again, I appreciate the opportunity to address the subcommittee, and I
would be happy to answer any questions you may have.
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Mr. Barton. Thank you sir.
We now want to hear from Mr. Mark Rodgers who is the Chief
Executive Officer of SmartSynch, Incorporated in Jackson,
Mississippi.
STATEMENT OF MARK E. RODGERS
Mr. Rodgers. Thank you, Mr. Chairman.
Mr. Barton. The gentleman from Louisiana.
Chairman Tauzin. I want our witnesses to know and the
chairman to know that we have had our first meeting with the
House Administration officials about upgrading this room so
that we can both be more energy efficient and more
technologically smart. Apologize for the shortness of the
wires.
Mr. Rodgers. Mr. Chairman and members of the subcommittee,
I am Mark Rodgers. I am the President and CEO of SmartSynch,
Incorporated, based in Jackson, Mississippi. SmartSynch is an
emerging energy technology company that is fairly
representative of the private sector's response to the energy
crisis. Over the last 5 years we have seen venture capital
backing of energy technology companies increase from as small
as $50 million 5 years ago to over $1.1 billion in the current
year. Clearly, the private sector is seeing the value of
emerging technologies as one possible mechanism of providing
energy efficiency and significant conservation programs.
SmartSynch has developed an end-to-end solution that
provides the ability for energy utilities, for municipals, for
even regional transmission organizations to communicate
directly with their commercial industrial customers. I
appreciate very much Mr. Swofford's introduction for me. If I
didn't have a prepared text, I would yield the balance of my
time to him because he made the case very well, in fact, for
smart metering systems.
SmartSynch is a company that has developed such a system.
We use a combination of public wireless networks as well as the
Internet to connect those commercial and industrial meters
directly to the utilities. In the restructuring of the electric
utility marketplace, we see now a tremendous impact of the
transactions that used to be self-contained within a vertical
utility. Currently we have now several different participants
in the marketplace that need this information, starting with
the generators that generate the power, the regional
transmission organizations that are charged with the efficient
transmission of that power, as well as the energy service
providers and customers, end use customers.
Our technology actually enables the timely utilization of
the data that is inherent at each one of these customers and
brings those back in and allows that information to free-flow
in two-way form to all the participating parties. As a result,
smart metering provides the backbone for the real-time pricing
that is necessary to see significant energy conservation,
particularly in the peak demand periods.
Real-time pricing when properly implemented is certainly a
win-win for end-use customers as well as the electric utility
industry. First, it allows end-use customers to see the
availability of the prevalent and prevailing low cost of power
the majority of the time. Further, it does provide that price
sensitivity and the connectivity of that price sensitivity to
the end-use customer, allowing them to make economic decisions
based on their ability to reduce load and change habits and
change their operational procedures as a result of those
increases in pricing.
In addition to that, as load curtailment programs continue
to be evolved, one of the significant problems that regional
transmission organizations face is the inability to accurately
identify exactly how much load has been shed during these peak
demand periods. Smart metering allows that information to come
back into both the utilities and right onto the regional
transmission organizations as recent as every 5 minutes during
that load curtailment event, allowing for the very efficient
flow of energy across the grid as a result. It also allows the
energy suppliers to have a much better ability to forecast
actual usage and actual curtailment, and thus have a much
better opportunity to manage supply across the grid and
ultimately avoid some of the rolling blackouts that we have
certainly seen in California.
Smart metering provides many other benefits, one of which
would be the ability to monitor the power quality and the power
reliability at the point of customer presence. This will become
increasingly important as alternatives are being evaluated to
lower nominal voltage on the grid as one way of reducing power
consumption. This could have a very significant impact on
downstream sensitive devices, medical systems, and certainly a
host of server-based economy companies that are needing not
only power that is efficient but is reliable.
As a result, we have seen the rapid adoption of smart
metering technology. And in summary, I would encourage you to
look at the implementation of a plan on a national basis for
smart-metering technology to be deployed certainly at all
Federal facilities and other government facilities across the
country, and also the ability for both end-use customers,
utilities, to recoup the costs, the upfront capital costs
associated with such investments.
Again, I would like to thank you for this opportunity and
certainly applaud the efforts of this subcommittee to implement
a cohesive national strategy.
[The prepared statement of Mark E. Rodgers follows:]
Prepared Statement of Mark E. Rodgers, President and CEO, SmartSynch,
Inc.
Mr. Chairman and Members of the Subcommittee, I am Mark Rodgers,
President and CEO of SmartSynch, Inc. Thank you for the opportunity to
testify on how technology advancements are affecting meaningful energy
conservation programs and promoting energy efficiency. SmartSynch is a
private, venture capital backed Company, headquartered in Jackson,
Mississippi. Our technology enables energy and utility companies to
communicate with their commercial and industrial (``C&I'') electric
meters using wireless communications and the Internet (``Smart
Metering''). I greatly appreciate your efforts to create an effective
National Energy Policy and believe that technology companies can play a
vital role in reducing energy demand and creating new energy
efficiencies.
The restructuring of the electric utility industry has exposed the
importance of transactions that were formerly internalized within the
vertical utility structure. These transactions are the foundation for
efficient power delivery and peak demand conservation programs. Within
the new horizontal structure, this requires two-way communications
among regional transmission organizations, power generators, energy
service providers, and end use customers. Smart Metering provides the
backbone for this information flow by capturing not only actual power
consumption, but also when the power is consumed. The availability of
this information provides immediate benefits to all market
participants.
Smart Metering provides the ability to implement meaningful real
time pricing programs. Real time pricing is a win-win for energy users
and energy suppliers. First, it allows the energy customer to take
advantage of low cost wholesale power that is available the majority of
the time. Additionally, it connects the customer to short term price
fluctuations during peak demand periods, leading to load reduction
programs that can substantially reduce overall system demand during
these periods.
Smart Metering provides two-way communication flow on actual load
curtailment during periods of high demand. The ability to access this
information allows C&I customers to ensure that they have reduced load
in accordance with curtailment programs. In addition, it allows energy
suppliers to verify that load reduction is achieved and regional
transmission organizations to better manage energy supply across the
power grid, avoiding rolling blackouts that may be otherwise necessary
during periods of high demand.
Smart Metering provides many other significant benefits, including
the ability to monitor power quality and reliability. Monitoring power
quality and reliability ensures that planned or exception based voltage
reductions do not adversely affect critical process equipment at
medical, public safety, and other customer facilities. Additionally,
real time usage information will allow energy suppliers to improve load
forecasts, avoid costly imbalance penalties, enter into meaningful
long-term contracts, settle accounts, and significantly enhance
customer service.
These benefits have propelled the rapid adoption of Smart Metering
in the energy and utility marketplace. While the demand for Smart
Metering is most prevalent on the West Coast, many utilities across the
country are investing in Smart Metering to capture the benefits
highlighted in this testimony, mitigate risk, and provide a new level
of customer service in this rapidly shifting market.
In conclusion, I would like to applaud the efforts of this
Committee to implement a cohesive, national energy policy and believe
that energy technology solutions, like Smart Metering, should be
considered within this planning environment.
Mr. Walden [presiding]. We thank you for your help and your
testimony.
Now we would like to hear from Dr. Dean Peterson, Center
Leader, Los Alamos National Laboratories, Material Science
Technology Superconductivity Technology Center. That is a
mouthful. Thank you, Mr. Peterson, for being here.
STATEMENT OF DEAN E. PETERSON
Mr. Peterson. It is a pleasure to have the opportunity to
address the subcommittee on the topic of energy conservation
efficiency. I am the director of the Superconductivity
Technology Center at Los Alamos which is located in Los Alamos,
New Mexico. The mission of the Superconductivity Technology
Center is to collaborate with American industry to develop
applications of high-temperature superconductivity.
Superconductors are materials that when cooled to low
temperatures lose all electrical resistance and don't have any
resistive losses or heating. The high-temperature
superconductors were discovered in 1987 and are superconducting
at much higher temperatures than the previous materials that
were available. High-temperature superconductor wires can
actually carry as much as 100 times the current carrying
capacity of, say, copper or aluminum, conventional conductors,
and thus enable more efficient and powerful electrical
equipment such as improved power transmission lines.
The U.S. Department of Energy, the Energy Efficiency
Renewable Energy Office of Power Technologies has the lead
Federal role in developing these new materials and developing
electric power applications of these, and is responsible for
coordinating the activities of seven DOE laboratories that work
in partnership with American industry and universities.
An important part of the program is practical high-
temperature superconductivity wire development that is done in
parallel with research on large-scale electric systems, such as
the development of transmission cables and transformers and
motors generators, fault current controllers. These devices
will enable electric utilities to deliver more power at much
higher efficiencies. The ultimate benefits of this new
superconductor activity will be a reduction in operating costs,
the lowering of the frequency of power outages, as well as
reducing environmental pollution while creating a new high-tech
industry.And so it has been estimated that a high-temperature
superconducting industry would create 150,000 new jobs while
strengthening reliability of the U.S. power grid.
Superconductivity can fundamentally reshape the technology
of electricity generation, transmission, storage and end use in
the 21st century. Important technical progress has been made
since the program began in the late 1980's, but there are still
significant and numerous challenges remaining to really market
this technology: successful development and commercialization
of the HTS applications, a formidable task requiring working
partnerships among the national labs, private industry, and the
academic community. It has been estimated the HTS product
market can be as large as 45 billion by the year 2020. And so
it is very important that the United States maintain
international leadership in this technology.
The U.S. currently leads the world in development of high-
temperature superconducting wires and the development of power
applications as the direct result of these strategic national
lab/industry/university partnerships. About 300 miles of first-
generation high-temperature superconducting tape is now
annually produced for sale in the United States, with plans to
increase yearly production to 6,000 miles next year. The
national labs, in partnership with industry, are developing
this second-generation high-temperature superconducting coated
conductor tape to dramatically improve properties. I am proud
to be able to report to you that our Los Alamos team has played
a seminal role in raising the performance of these coated
conductor tapes to record levels. It is expected that these
improved high-temperature superconductivity tapes will be
commercially available for use in power applications within 3
years.
Over 10 percent of electricity generated in the United
States each year is lost due to the resistance of copper and
aluminum wire. And that if the energy lost were reduced, the
saved electricity could supply the combined energy needs of
California, Oregon, Arizona, New Mexico, as well as saving
about $16 billion annually in wasted energy costs.
One of the most important uses of high-temperature
superconductivity wires is in power transmission cables. In the
United States today there exists over 200,000 miles of overhead
and around 3,500 miles of underground electric transmission
cable. Over 60 percent of the existing underground cables are
nearing the end of their useful life. Therefore, there is a
possible window of opportunity for renewing America's power
infrastructure. High-temperature superconductivity cables are
candidates to replace the conventional underground cables,
enabling transmission into urban areas of significantly higher
power levels with higher efficiencies.
The DOE has developed a national effort known as the
Superconductivity Partnership Initiative, where national labs
collaborate with private industry to accelerate the development
of the superconducting power applications. Two of these SPI
projects involve development of prototype high-temperature
superconducting cable installations. A three-phase
superconducting cable system has been reliable in running power
to a corporate manufacturing facility in Georgia for over a
year now. And high-temperature superconducting cables are also
being installed in underground conduits in Detroit to transmit
power from a substation to a transformer that will begin later
this summer.
Large motors are the primary users of electricity, often
requiring up to 70 percent of the power for any manufacturing
process. High-temperature superconductive motors, in addition
to being about 50 percent smaller and lighter, can have
significantly lower losses than conventional motors. Similar
advantages can be cited for superconducting flywheels, current
controllers, transformers, and generators. And these
superconducting power applications are being developed as part
of the Department of Energy's SPI projects.
Major efforts are underway in Japan and Germany to be the
first to market with high-temperature superconductive products.
For example, Japan has a national superconductor effort funded
at more than 100 million annually. The Department of Energy's
superconducting program is currently funded at about 37 million
for fiscal year 2001. To meet the challenge of foreign
competition, I recommend that the committee consider supporting
the substantial increase in the Department of Energy budget for
high-temperature superconducting development and demonstration.
This increase in support will assure rapid commercialization of
HTS products and continued U.S. leadership on the path to the
future electric superhighway.
I wish to thank the subcommittee for the opportunity to
testify.
[The prepared statement of Dean E. Peterson follows:]
Prepared Statement of Dean E. Peterson, Director, Superconductivity
Technology Center, Los Alamos National Laboratory
It is a pleasure to have this opportunity to address the Committee
on the topic of Energy Conservation and Efficiency. I am director of
the Superconductivity Technology Center (STC) at the Los Alamos
National Laboratory located in Los Alamos, New Mexico. The mission of
the STC is to collaborate with American industry to develop
applications of high temperature superconductivity (HTS).
Superconductors are materials that when cooled to low temperatures,
allow electrical current to pass through them without resistive losses
or heating. The HTS materials, discovered in 1987, are superconducting
at much higher operating temperatures than were possible with earlier
materials. HTS wires can have as much as 100 times the current-carrying
capacity of ordinary conductors and so enable more powerful and
efficient electric equipment such as improved power transmission
cables.
The U.S. Department of Energy, Office of Power Technologies, has
the lead federal role in developing electric power applications of HTS
materials and is responsible for coordinating efforts of the seven DOE
laboratories that are working in partnership with companies and
universities. An important part of the program is practical HTS wire
development that is done in parallel with research on large-scale
electric systems such as transmission cables, transformers, fault
current controllers, and motors. These devices will enable electric
utilities to deliver more power at higher efficiencies. The ultimate
benefits of this new superconductor technology will be the reduction of
operating costs, the lowering of the frequency of power outages, and
reducing environmental pollution while creating a new high-technology
industry. It has been estimated that a HTS industry would create
150,000 new jobs while strengthening the reliability of the US power
grid. Superconductivity can fundamentally reshape the technology of
electricity generation, transmission, storage, and end-use in the 21st
century.
Important technical progress has been made since the program began
in the late 1980s; however, numerous and varied challenges remain.
Successful development and commercialization of HTS applications is a
formidable task requiring working partnerships between national
laboratories, private industry, and the academic community. It has been
estimated that the HTS product market will be as large as $45 billion
by the year 2020. It is important that the United States maintain
international leadership in this technology.
The United States currently leads the world in the development of
HTS wires and power applications as a direct result of these strategic
national lab-industry-university partnerships. About 300 miles of the
first generation HTS tape are now annually produced for sale in the
United States with plans to increase yearly production to 6000 miles
next year. The national laboratories in partnership with industry are
developing second-generation HTS coated conductor tapes with
dramatically improved properties. I am proud to be able to report to
you that our Los Alamos team has played a seminal role in raising the
performance of coated conductor tapes to record levels. It is expected
that these improved HTS tapes will be commercially available for use in
power applications within three years.
Over 10% of the electricity generated in the United States each
year is lost due to the resistance of copper and aluminum wire. If the
energy lost were reduced, the saved electricity could supply the
combined energy needs of California, Oregon, Arizona, and New Mexico as
well as saving $16B annually in wasted energy costs. One of the most
important uses of HTS wire is in power transmission cables. In the
United States today, there exists over 200,000 miles of overhead and
around 3500 miles of underground electrical transmission cable. Over
60% of the existing underground cables are nearing their end of useful
life; therefore there is a possible window of opportunity for renewing
America's power infrastructure. HTS cables are candidates to replace
conventional underground cables enabling transmission into urban areas
of significantly higher power levels with higher efficiencies.
The DOE has developed a national effort known as the
Superconductivity Partnership Initiative (SPI) where national
laboratories collaborate with private industry to accelerate
development of HTS power applications. Two of these SPI projects
involve development of prototype HTS cable installations. A three phase
HTS cable system has been reliably providing power to a corporate
manufacturing facility in Georgia for over a year now. HTS cables are
also being installed in underground conduits in Detroit to transmit
power from a substation to a transformer beginning later this summer.
Large motors are the primary users of electricity, often requiring
up to 70% of the power for any manufacturing process. HTS motors, in
addition to being about 50% smaller and lighter, can have significantly
lower losses than conventional motors. Similar advantages can be cited
for HTS flywheels, current controllers, and transformers. These HTS
power applications are being developed as a part of the DOE SPI
projects.
Major efforts are underway in Japan and Germany to be the first to
market with HTS products. For example, Japan has a national
superconductor development effort funded at more than $100M annually.
The DOE HTS program is currently funded at $37M for FY01. To meet the
challenge of foreign competition, I recommend that the committee
consider supporting a substantial increase in the DOE budget for HTS
development and demonstration. This increase in support will assure
rapid commercialization of HTS products and continued US leadership on
the path to the future electric superhighway.
Mr. Walden. Dr. Peterson, thank you for your analysis and
testimony and the research that you are doing. I look forward
to asking you some questions.
Let's go to Mr. Silva, Project Attorney, Natural Resources
Defense Council. Welcome. Thank you for coming today.
STATEMENT OF PATRICIO SILVA
Mr. Silva. Thank you, Mr. Chairman and members of the
subcommittee, for the opportunity to present recommendations on
increasing energy efficiency opportunities. The Natural
Resources Defense Council is dedicated to protecting the
environment and public health on behalf of over 500,000 members
nationwide. We have been engaged in energy efficiency advocacy
now for over 30 years. And we have specific recommendations in
our testimony that has already been submitted. I am just going
to review some of the key highlights.
Analysis of markets and policies for promoting least-cost
energy investments demonstrate that there are four generic
types of Federal and State policies that are most effective and
economical at achieving their objectives. They are:
Energy efficiency standards for major users of energy such
as buildings, appliances, equipment and automobiles.
Targeting incentives for more efficient technologies based
on performance. These incentives have been administrated
primarily by utilities, although the State of Oregon has run
successfully a tax incentive program of a similar nature.
Education and outreach on energy efficiency, although
educational programs have worked best when performed in the
context of financial incentive programs.
Research on energy efficiency technologies and systems. The
three policies noted above only work when they are economically
attractive options. As Dr. Peterson just pointed out, without
deployment of HTS and similar technologies like that, there is
very little in the pipeline. And that is for us an increasing
concern.
Federally funded research has led to new opportunities for
these other policies to work. They have also provided for a
host of high-technology jobs across the country. Within each of
these four categories there are significant roles that can be
undertaken by the Federal Government. And first, Federal policy
should begin with the principle of ``first do no harm.''
Unfortunately, this has not been the direction of the last few
months.
Despite some kind words for energy efficiency in the
administration's national energy policy, the actual substantive
policies posed by the administration have pushed the country
even further off the path toward minimizing energy costs for
consumers or energy-related damage to the environment.
The most egregious example so far is DOE's proposal to roll
back the final air conditioner standard published in the
Federal Register in January. To be clear, the Natural Resources
Defense Council has joined other petitioners in challenging
that action by the Department of Energy. We feel quite
confident that we will prevail once the court reviews the
record and the requirements of the law. The rule being
considered for weakening is actually a final rule that was
promulgated 7 years late. It was due under a statutory deadline
over 7 years ago. This rollback, if it were to succeed, would
cause the need to construct 43 of those 300 megawatt power
plants we have been hearing so much about by the year 2020 and
would cost consumers billions of dollars that could be avoided.
Had the Department of Energy promulgated this standard on time,
over 7 years ago, rather than last January, the Western grid
would be enjoying some 400 to 600 megawatts of peak power
relief, half of which would have been achieved by last year.
That alone could have curtailed some of the rolling blackouts
that California suffered.
Proposed budget reductions and programs to promote
appliance and building efficiency standards. These efforts are
among the most cost-effective investments the Federal
Government makes for any purpose. Every dollar invested in
developing and enforcing energy efficiency standards for
appliances yields between 200 to $1,000 in private sector
benefits. Yet these activities, representing a tiny fraction of
the Federal budget, are proposed for significant reductions.
The office that currently handles rollout of the new standards
is expected to lose approximately 40 percent of its funding
which now stands at a modest $10 million. This proposal is all
the worse because it hinders DOE's ability to meet the
statutory deadlines that require these standards.
The proposed budget reductions for energy efficiency and
research and development. While the national energy plan notes
the importance of new technology for improving energy
efficiency, it just doesn't happen. Someone needs to pay for
it. And unfortunately, the market failures make it uneconomical
for the private sector to shoulder this burden entirely.
Government R&D on energy efficiency should be increased, not
cut back as is currently proposed in the Department of Energy
budget.
Why is this important? For virtually all of the last 3
decades, energy has been an important issue because of the
impact of energy costs on economic growth and the environment.
Even before the recent jumps in energy prices, our Nation's
energy bill exceeded half a trillion annually or approximately
6 percent of the gross domestic product. This is much higher
than in other industrialized countries. So in addition to
harnessing household budgets and reducing the bottom line of
energy-consuming businesses, energy is now a competitive drag
on the U.S. economy.
Throughout the last 30 years, energy has been a major
threat to the environment, accounting for the overwhelming bulk
of air pollutants, most chiefly U.S. greenhouse gas emissions,
and it has also been a significant fraction of threats to
wilderness lands and recreation areas due to energy
development. Promoting energy efficiency is perhaps the only
approach that can both protect the environment and promote
economic development. But last year specific new challenges
arose that are impacting businesses and consumers: electric
reliability and high costs of gas and heating oil.
These things could be alleviated by several pieces of
legislation that are currently proposed and pending before this
Congress. I would like to just take a moment to single out one
of them. It is the Cunningham-Markey bill, H.R. 778, which
could be a critical piece of a national solution to electric
reliability problems. Air conditioners currently represent
about 30 percent of summertime peak electric loads. Air
conditioners that use a third less power can be purchased
today, but they are not produced in large enough quantities to
make a difference at peak load. If incentives were made
available as are required under 778, they could make a
significant cut in that peak load, especially for the West, and
they could do that in a matter of months, not years.
A signal like enacting H.R. 778 could spur manufacturers of
more energy-efficient air conditioners to get larger numbers of
units out into the market, which could have, say, significant
beneficial effect in shaving peak loads not just in the West
but elsewhere. And we have a number of recommendations in our
testimony that was submitted for the record.
[The prepared statement of Patricio Silva follows:]
Prepared Statement of Patricio Silva, Midwest Coordinator, Air & Energy
Programs, Natural Resources Defense Council
I. POLICY FRAMEWORK
Good strategic planning--whether for the national government or for
a private business--requires that one first set a clear mission
statement and overarching goals, and then develop objectives and
policies that can implement the goals. One of the factors preventing a
thoughtful debate on the subject of energy strategy is that we've
jumped to the detailed steps before first discussing goals.
What is the goal of a national energy policy? Much of the current
energy debate seems to be based on the overarching but unstated premise
that it is the goal of national policy to balance energy supplies with
projected energy demands. This was the view of many in the 1970's, as
well.
The problem with this approach is that it requires top-down,
central planning that stifles innovation: government is assumed to be
responsible for assuring adequate supplies and, if necessary, doing
something about demand. Since the 70's we have altered American energy
policy to rely more and more on markets. Building supply to match
demand is no longer a federal government function, if it ever was.
So what should be the purpose of national energy policy? NRDC
submits that the purpose of a national energy policy should be to
develop mechanisms and market incentives that satisfy growing demands
for energy services and environmental protection at the least cost to
the nation. Energy services are those valuable things that energy is
used to produce, such as comfortable buildings, ways of getting to and
from places we want to go, providing lighting systems and computers,
and, in businesses, producing products that we can sell.
Fundamentally, most people don't care much about global issues of
energy supply and demand. But they do care a lot about reliable
electric service and what they pay for utility bills and for gasoline.
And they also care about clean air and water, preserving wild
environments from industrialization, and protecting the planet from the
effects of accelerating global warming.
Energy services can be produced at a variety of different levels of
efficiency, and with a variety of choices of fuel. Some of the choices
are more environmentally damaging than others. As a matter of policy,
we should pick the cleaner choices. Some of these choices are more
expensive than others. As a matter of policy, we should get the cheaper
ones first. Some of the choices are riskier than others. As a matter of
national policy, we should balance risks and construct a portfolio of
choices that minimizes risk.
If we accept the goal of societal cost minimization--which is
strikingly similar to the goals Congress chose when it established DOE
1--then the next step should be to produce an actual least-
cost energy plan. This sounds like a daunting activity, but in fact has
been undertaken successfully, at least for the electricity sector, for
over 15 years. The Northwest Power Planning Council, beginning in the
mid-1980's, developed a Northwest Power Plan which compared a range of
choices on energy efficiency with all of the available options that
could be identified on the supply side and ranked them in least-cost
order. In calculating costs, risk and environmental cleanliness were
taken into account. This was less difficult than might be imagined,
because in general the cheaper options also turned out to be cleaner
and lower risk. And all this was done in an open public process.
---------------------------------------------------------------------------
\1\ The Department of Energy was established by Congress, (42 USC
Sec. 7112) among other things, to:
``Promote maximum energy conservation measures''
Provide for a mechanism through which a coordinated
national energy policy can be formulated and implemented to deal with
the short-, mid- and long-term energy problems of the nation; and to
develop plans and programs for dealing with domestic energy production
and import [sic] shortages.
Create and implement a comprehensive energy conservation
strategy that will receive the highest priority in the national energy
program.
Place major emphasis on the development and commercial use
of solar, geothermal, recycling and other technologies utilizing
renewable energy resources.
Promote the interests of consumers through the provision
of an adequate and reliable supply of energy at the lowest reasonable
cost.
Assure incorporation of national environmental protection
goals in the formulation and implementation of energy programs, and to
advance the goals of restoring, protecting, and enhancing environmental
quality and ensuring public health and safety.''
---------------------------------------------------------------------------
The results were good, in two respects. First, the Plan lessened
the degree of political controversy over energy and replaced it with
wide, if not total, consensus. Second, the region avoided some really
bad investments and moved into a position of leadership on energy
efficiency.
From analyses that have already been done at the state and regional
level, as well as at the federal level, it is already clear that energy
efficiency will be the cornerstone of a national least-cost energy
strategy.
Once the measures that we are trying to implement have been
identified, the next step is to look at markets and determine whether
policy interventions are feasible and what sorts of policy actions
would be most effective in achieving the objectives identified in the
least-cost plan.
Looking at markets is critical because energy and most energy
services are produced in markets. Many of these markets are global, and
simple-minded interventions in such markets don't always have the
desired effect.
Analysis of markets and policies for promoting least-cost energy
investments demonstrates that there are four generic types of federal
and state policies that are the most effective and the most economical
at achieving their objectives. They are:
Efficiency standards for major users of energy, such as
buildings, appliances, equipment, and automobiles.
Targeted incentives for more efficient technologies based on
performance. These incentives have been administered primarily
by utilities, although the state of Oregon has run a successful
tax incentive program as well.
Education and outreach on energy efficiency, although
educational programs have worked best when performed in the
context of financial incentive programs.
Research on energy efficiency technologies and systems. The
three policies noted above only work when there are
economically attractive options available. Federally funded
research has led to new opportunities for these other policies
to work.
Within each of these four categories, there are significant roles
that can be undertaken by the federal government.
Federal policy should begin with the principle: ``first do no
harm.'' Unfortunately, that has not been the direction of the last few
months. Despite some kind words for energy efficiency in the
Administration's ``National Energy Policy,'' the actual substantive
policies proposed by the Administration have pushed the country even
farther off the path towards minimizing energy costs for consumers or
energy-related damage to the environment. The most egregious examples
so far are:
The Department of Energy's proposal to roll back the final
rule for air conditioner standards published in the Federal
Register in January. NRDC, the Consumer Federation of America,
and three states believe that this action is illegal on
procedural grounds--the rule being considered for weakening is
a Final Rule promulgated 7 years past the statutory deadline
under a law that prohibits rollbacks of Final Rules--but it is
also hard to defend on policy grounds.
The air conditioner rollback alone--were it to succeed--would
cause the need to construct 43 new 300 megawatt power plants by
the year 2020 and would cost consumers billions of dollars. Had
the Department of Energy promulgated this standard on time
rather than 7 years late, the Western grid would be enjoying
some 400-600 megawatts of peak power relief, half of which
would have occurred last year. That alone might have been
enough to prevent rolling blackouts.
Proposed budget reductions in programs to develop and promote
appliance and building energy efficiency standards. The
standards efforts are among the most cost-effective investments
of the federal government for any purpose. Every dollar
invested in developing and enforcing energy efficiency
standards for appliances has yielded $200-1,000 in private
sector benefits. Yet these activities, representing a tiny
fraction of the federal budget, are proposed for drastic
reductions. This proposal is all the worse because it hinders
DOE's ability to meet statutory deadlines for standards.
Proposed budget reductions for energy efficiency research and
development (R&D). The National Energy Plan notes the
importance of new technology for improving energy efficiency.
But new technology doesn't just happen. Someone needs to pay
for it. And, unfortunately, market failures make it
uneconomical for the private sector to do so. Government R&D on
energy efficiency should be increased, not cut back.
II. WHY ENERGY IS IMPORTANT IN SUMMER 2001
For virtually all of the last three decades, energy has been an
important issue because of the impacts of energy cost on economic
growth and on the environment. Even before the recent jumps in energy
prices, our nation's energy bill exceeded half a trillion dollars a
year 2--or 6% of the gross domestic product (GDP). This is
much higher than in other industrialized countries. So, in addition to
harming household budgets and reducing the bottom line of energy-
consuming businesses, energy is a competitive drag on the U.S. economy.
---------------------------------------------------------------------------
\2\ Energy Information Administration's ``Energy Overview'' data
for 1997 show $567 billion spent nationwide for energy, while GDP was
about $8.5 billion.
---------------------------------------------------------------------------
Throughout the last 30 years, energy has been a major threat to the
environment, accounting for the overwhelming bulk of air pollution
emissions, most U.S. greenhouse gas emissions, and significant fraction
of threats to wilderness lands and recreation areas posed by energy
development. Promoting energy efficiency is perhaps the only approach
that can both protect the environment and promote economic development.
But in the last year, specific new challenges arose that are
impacting businesses and consumers: electrical reliability and high
costs of gas and heating oil.
Let's start with the problem of electric reliability. Not only in
California and the West, but in many other regions as well, we are
facing the risk of electrical blackouts and/or excessively high
electricity prices this summer and next. Regions confronting these
problems are trying to move forward aggressively both on energy
efficiency programs and on power plant construction. But the lead times
for most actions on the supply side are far too long to provide a
solution. And demand-side approaches attempted on a state-by-state
level are much less effective than coordinated national activities.
There are few policy levers that can be pulled that will address
the problem of physical shortages. But that doesn't mean that there is
nothing that federal policy initiatives can do. To the contrary,
targeted incentives for those end-uses focused heavily on peak power
reduction can begin to make a difference as soon as next summer.
Here, H.R. 778 could be a critical piece of a national solution to
electric reliability problems. Air conditioners, for example, represent
about 30% of summertime peak electric loads. Air conditioners that use
a third less power can be purchased today, but they are not produced in
large enough quantities to make a difference to peak load. If
incentives are made available, manufacturers could begin to mass-
produce these products in a matter of months, not years. Mass
production and increased competition for tax incentives will drive
prices sharply lower, so the incentives will be self-sustaining in the
long-term. And with 5 million air conditioners being sold every year, a
sudden increase in energy efficiency could have a significant effect in
balancing electricity supply and demand even after less than a year.
Another peak power efficiency measure with a very short lead time
is the installation of energy-efficient lighting systems--either new or
retrofit--in commercial buildings. Some 15% of electrical peak power
results from lighting in commercial buildings. Efficient systems, such
as those NRDC designed and installed in our own four offices, can cut
peak power demand by over two-thirds while improving lighting quality.
Lighting systems are designed and installed with a lead time of months,
so incentives for efficient lightings as provided in H.R. 778 could
begin to mitigate electric reliability problems as soon as next summer.
The second major new problem is the skyrocketing cost of natural
gas, which caused heating bills throughout the country to increase last
winter. Improved energy efficiency can cut gas use for the major uses--
heating and water heating--by 30%-50%. Much of this potential could be
achieved in the short term, because water heaters need replacement
about every ten years, and are the second largest user of natural gas
in a typical household (and largest gas user in households living in
efficient homes or in warm areas). Water heaters are covered by H.R.
778.
Clothes washers also turn over about every 15 years, and efficient
clothes washers save natural gas by reducing the amount of hot water
needed to get clothes clean and reducing the amount of time they must
spend in the dryer. H.R. 1316 can provide the incentives to get large
numbers of clothes washers out into the marketplace in time to reduce
pressure in natural gas prices by winter 2002-3.
These types of quick-acting incentives help consumers in two
different ways: first, they provide new choices that are not currently
available in practice for families and businesses that want to cut
their own energy costs while obtaining tax relief. Second, they help
non-participants because reduced demand cuts prices for everyone.
III. SPECIFIC POLICY RECOMMENDATIONS
A. Energy Efficiency Standards for Appliances and Equipment
The two most effective energy policies of the past 30 years have
been energy efficiency standards for appliances and equipment, and the
Corporate Average Fuel Economy (CAFE) standards for automobiles.
Appliance efficiency standards adopted to date will save the nation's
consumers some $200 billion while reducing electricity consumption at
the peak by a projected 12.6% in 2020. Even larger savings can be
achieved by standards that could be adopted in the future by DOE or
states. Congress has a key role to play in the adoption of these
standards. Specifically, the following actions can produce immense
economic as well as environmental benefits while encouraging American
competitiveness and promoting new technologies:
1. Provide DOE with sufficient funding to get back on statutory
schedule for all appliances. The National Appliance Energy
Conservation Act (NAECA) of 1987 and its amendments of 1988,
along with EPAct, established a continuing non-discretionary
schedule of rulemakings on appliance and efficiency standards
for DOE. Yet, DOE has fallen years behind statutory schedule on
virtually all appliances. Much of this is due to an
insufficient budget.
Things are so stalled at DOE that it has conducted Prioritization
Proceedings for the last several years to determine how to
manage its failure to comply with the law. DOE looks at its
existing resources and decides how many of its non-
discretionary schedules it can meet, and where it could obtain
the greatest bang for the buck for the schedules it does meet.
This is a ridiculous way to conduct government policy. DOE
should propose a budget that allows it to get back on schedule
and Congress should provide sufficient funds and oversight to
make sure that DOE is indeed on schedule.
2. Congress should establish legislative standards for a number of
appliances and direct DOE to set standards for others. There is
a long list of products, both used by business and by
consumers, for which standards are not currently in effect and
where immense potential for highly cost-effective savings
exist. In many cases, states such as California are well on the
way to adopting such standards. Congress could simply enact
these same numbers legislatively, as it did in the previous
three pieces of appliance efficiency legislation. For other
products, additional administrative inquiry is necessary, and
Congress should authorize such actions and set appropriate
deadlines.
3. Congress could allow greater state discretion in setting appliance
efficiency standards. States agreed to the previous pieces of
appliance efficiency legislation in return for a strong
national policy, in which DOE would set and update standards to
the maximum level of efficiency that is technologically
feasible and economically justified. This agreement is cold
comfort to a state if the DOE rulemakings fall years behind
schedule and show no sign, in many cases, of ever catching up.
Congress could put a sunset on preemption by allowing states
the freedom to set appliance efficiency standards if DOE falls
more than three years behind its mandated schedule. Indeed, one
of the most effective policies Congress could implement to
address the California energy crisis is to allow it to enforce
its own air conditioner efficiency standards by next summer.
4. Congress should extend the mandatory rulemakings in the appliance
acts to require new standards to be considered every 5 or 7 or
10 years. When NAECA was first negotiated in 1986, it required
DOE to consider revising standards for most products every 5
years, and for some products every 7 or 10 years ad infinitum.
When the legislation was reintroduced in 1987, the number of
rulemakings was limited, but there is no policy reason for this
limitation. Just as labor productivity is expected to continue
growing, even to grow at accelerated rates--so should we expect
the efficiency of buildings and appliances to continue to grow.
DOE should continue to evaluate appliance efficiency standards
on a regular schedule as long as these evaluations keep
showing, as they have, the opportunity for large savings in
energy and money.
B. Energy Efficiency Standards for Buildings
1. DOE should set tougher efficiency standards for federal buildings
and extend these rules to the private sector. Under EPAct,
states are required to adopt national model standards for
energy efficiency in commercial buildings and to consider the
adoption of national model standards for residential buildings.
Unfortunately, the models on which this legislation is based
have not been managed effectively by their non-governmental
sponsors: increasingly they fail to maximize cost-effective
energy efficiency. The reference ASHRAE standard for commercial
buildings has been revised only once since 1989, for an
additional energy savings of a paltry 5% or less. At the same
time, typical buildings in California often use 30% and 40%
less energy than this standard, and NRDC's own buildings have
been designed to operate at enhanced comfort and productivity
levels for a third or less of the energy of the national model.
DOE should be required to establish model standards that save
at least 30% and these should be adopted by states. Similar
percentages could be mandated for residential buildings at a
net savings in money to consumers.
2. Almost a third of new housing construction is manufactured houses.
The efficiency of manufactured homes is regulated at the
national level, and the standards have not been changed in
about 10 years, despite improvements in energy efficiency
technologies and reductions in their cost. Congress should
require the Department of Housing and Urban Development to
revise its energy efficiency standards for manufactured housing
based on minimizing lifetime owning and operating costs to the
consumer, including analysis of the efficiency savings from
higher efficiency heating, cooling, and water heating
equipment.
C. Energy Efficiency Standards for Automobiles
1. Congress should set higher fuel economy standards. America's
automobile efficiency standards, which contributed to
improvements in fuel economy throughout the rest of the world
as well as here in the U.S., were undoubtedly a major
contributor to the low energy prices that prevailed in the
decade and a half following their implementation. And the
current stagnation in fuel economy standards, which have
remained essentially unchanged since 1985, undoubtedly is a
cause of OPEC's pricing power in today's market.
2. Congress should raise fuel economy standards for automobiles.
Studies have shown that raising the CAFE standard to 40 mpg for
cars and light trucks is feasible. Even though there is a
significant lead time for manufacturers to design and mass
produce new technologies for fuel efficiency, the lead time is
still faster than that for developing new oil resources.
Ultimately, if we are concerned about oil imports, the only
solution is to use less domestically: supply options are
grossly insufficient ever to allow a reduction in imports
without aggressive demand side action.
3. Congress should set standards for replacement tires. It is a little
known fact that auto manufacturers use highly-efficient tires
to comply with current CAFE requirements, but comparable tires
are not available to the consumers as replacements. Congress
should require replacement tires to meet the same
specifications as those sold on new cars. This measure alone
would save over 70% more oil than is likely to be found if
drilling were permitted in the Arctic National Wildlife Refuge.
D. Targeted Incentives for Energy Efficiency
Economic incentives have proven to be an effective policy for
providing advances in energy efficiency technology and for making
markets begin to work at supplying energy efficiency. Most of the
effective incentives have been applied through the utility system;
numerous third-party studies of these programs have shown that they
typically have benefit/cost ratios of 2-1 or better.
Incentives have been even more effective at bringing major
technological advances into the marketplace and getting them widely
accepted. This is called market transformation. Market transformation
incentive programs tend to require longer lead-times and more
consistent availability of funding. This is what manufacturers have
asked for, and this is what has worked in the modest number of examples
where programs have been implemented. The scope of such programs can be
vastly expanded by adding programs that operate through the tax system.
Specific policies that can accomplish this purpose are:
1. Congress should pass tax incentives for energy efficiency. Because
tax incentives are in effect for a long time, it is important
that they be designed carefully and to maximize competition on
a level-playing field. NRDC urges your support for specific
proposals that have been well-vetted and meet these criteria.
These are all bipartisan proposals. They are:
a. Enact Cunningham/Markey Bill, H.R. 778. This bill provides tax
incentives for energy efficiency in buildings. Buildings
account for over a third of energy use and air pollution,
and almost half of total energy costs. This bill provides
performance-based and fuel neutral incentives for large
savings in energy--typically 30%-50%--and then phases out
after 6 years. It is one of the very few opportunities that
the federal government has to improve the peak power
situation in the West, and in other regions facing this
problem, as soon as 2002.
b. Enact Nussle/Tanner Bill, H.R. 1316. This bill provides tax
incentives for super efficient clothes washers and
refrigerators, and was developed through a consensus
process between states, utilities, energy efficiency
advocates, and the appliance industry.
c. Enact Camp Bill H.R. 1864. This bill was developed
collaboratively between many of the nation's automobile
manufacturers and public interest organizations. It
provides tax incentives for a variety of advanced
technologies and alternative fuel vehicles, including
hybrids and those that run on fuel cells.
d. Provide tax incentives for energy efficiency improvements in
existing homes. In the few cases where trained energy
inspectors can look at energy performance of homes, they
will typically find the opportunity to save 30% or even 50%
of energy cost with an investment so low that the interest
payments on a loan to finance energy efficiency are smaller
than the monthly utility bill savings. Yet market barriers
prevent these retrofits from taking place in most cases.
NRDC has suggested a modest and medium-term tax incentive
for home retrofits that are certified by independent third
parties to save energy and money.
2. Enact a matching public benefit trust fund that matches state public
benefit trust expenditures on energy efficiency. This is
similar to what was proposed in last year's S. 1369. Public
benefit trust expenditures help businesses, both large and
small, as well as consumers, improve energy efficiency. They
can be managed by their implementers for maximum effectiveness.
This is a program that has worked in the states where it has
been tried, and should be expanded to take advantage of a
greater fraction of the available opportunities.
3. Education, outreach, and information provisions have been other ways
to promote energy efficiency. These methods work best when they
are conducted in parallel with economic incentive programs.
Thus, utilities that have developed energy information centers
have found them to have a measurable favorable impact on the
market in areas where the utilities were also offering economic
incentives for efficiency. The federal Energy Star labeling and
information program has been effective at establishing brand
awareness for energy efficiency nationwide and even more
effective in areas where it is complemented by utility-based
incentives. Congress should provide increased funding for the
Energy Star program. Parallel promotional efforts are likely to
be handled by funding made available through the public
benefits trust.
E. Research and Development
As noted by D. Allen Bromley, former President Bush's Science
Advisor from 1989-1993, ``the major driver of our nation's economic
success is scientific innovation . . . the proposed [Administration's]
cuts to scientific research are self-defeating policy. Congress must
increase the federal investment in science. No science, no surplus.
It's that simple.''
This observation applies even more strongly to energy efficiency,
where we already know that many types of innovation appear feasible
with additional research and that market barriers make it foolish for
private sector companies to invest in this R&D.
The chilling effect of market failures on energy efficiency R&D is
easy to understand. In today's market, most consumers will overlook
investments in energy efficiency that payback their additional costs in
as little as 2-3 years. Manufacturers know this and generally do not
offer efficiency options at all, or else only offer those that payback
exceedingly quickly. Thus, if there is a potential new technology that
could reduce energy cost dramatically, but would payback in 3 years,
manufacturers have no incentive at all to perform the research and
development. A smart manufacturer quickly recognizes that even if the
R&D is fully successful, and the product performs equally well and
saves energy with a 3-year payback, it won't sell.
In order to meet the critical environmental goals of improving air
quality and mitigating global warming, our nation must invest more
money, not less, in federal research and development in energy
efficiency and renewable energy sources. These options offer the best
possibilities to meet environmental goals while promoting economic
development and reducing energy cost, rather than raising costs and
hurting the economy.
NRDC believes that compliance with the Kyoto Protocol goals would
actually enhance economic development, and that compliance can be
achieved largely through the types of policies discussed above. Energy
efficiency policy offers a golden opportunity for the United States to
promote national and global economic development while meeting our
environmental goals: particularly the goal of protecting the global
climate. Our research, and that of our colleague organizations in the
public interest sector, shows that the United States can achieve
compliance with the Kyoto Protocol through purely domestic policy
actions at a net gain to the economy, not a cost. This solution comes
about through the implementation of already existing technologies for
improving energy efficiency and harnessing renewable energy resources.
Enhanced research and development would allow newer technologies to
further reduce compliance costs and expand environmental benefits.
Rather than cutting budgets for energy efficiency R&D, Congress should
increase them.
F. A National Least-Cost Energy Plan
This testimony began with a discussion of the role that a National
Energy Plan striving for achieving energy service needs at the least
cost could play in simultaneously promoting environmental protection
and economic development. Such a least-cost approach is fully
consistent with the legislative instructions DOE was given when
Congress established it. It is also a requirement of EPAct.
Despite the manifest reasons for developing a least-cost approach
to national energy planning, the Department of Energy, under both
Democratic and Republican Administrations, has failed to take a least-
cost approach. Congress should explicitly require that subsequent
national energy plans be based on an approach of minimizing the cost of
providing energy services for an expanding economy. The Department has,
through its national labs and other resources, the ability to do this
work. A national least-cost plan will be the first step towards
generating bipartisan and multi-interest-group consensus on national
energy policy.
Mr. Walden. Mr. Silva thank you for your testimony and for
being here today.
Now let's go to our final witness in the panel, Mr. Jordan
Clark, President, United Homeowners Association. Mr. Clark
thank you for being here. We look forward to your comments.
STATEMENT OF JORDAN CLARK
Mr. Clark. Thank you, Mr. Chairman. I was hoping you would
go alphabetically, either Clark or consumer, but I guess save
the best till last.
Mr. Walden. Mr. Clark, since I'm at the end of the alphabet
being W, that doesn't go far.
Mr. Clark. You have my introduction and my written
testimony. I am going to try to synopsize it. We represent the
consumer in this whole discussion on the crisis of energy and
want to remind everybody that everything we buy has an energy
cost conducted to it. And it is probably the most important
thing that Congress is going to face this year and in the years
to come.
The depressing part of my introduction is I realize I have
been at this for 3 decades as part of the House of
Representatives staff during the oil embargoes, and after I was
with Mr. Garvin in 1983 and 1984 in the Energy Department,
running conservation and renewable programs and have been a
consumer advocate for the last 10 years. I guess in spite of
realizing I am getting old and have been at this too long--we
have been at this for 30 years also, and we are still asking
the same questions. I guess that is the rub right here.
Are we going to solve these problems once and for all, at
least make a serious attempt at it? I have to say that I am
encouraged by the activities of the committee with Chairman
Tauzin currently, and certainly Chairman Barton and the other
subcommittees, and to a certain extent the White House, with
the energy policy. At least we have something we can look at
and react to. We may not agree with it all, but it is the first
one I have seen since 1976 that is as comprehensive as it is.
Let me now go on to the questions we were asked. I will get
off my soapbox. The chairman asked us to basically look at the
role of energy efficiency and conservation in helping to meet
our Nation's energy demands. I don't think efficiency is a
product, I think it is a result. And when it comes to the
consumer's efficient choice, that is kind of a chicken or egg
problem, as I say in my testimony. We can't choose, as
consumers, efficient products unless they are on the
marketplace, unless they are affordable. It is pretty simple.
It is a matter of mathematics when it comes to cost. It is a
matter of how efficient this thing we are buying is, whether it
is an appliance or air conditioner or whatever. If we don't
know how efficient it is or we don't care how efficient it is,
it is not a factor in our equation.
That doesn't mean as consumers we are exempt from making
the right choice as far as energy is concerned. I guess this is
tough love for a consumer advocate to say that consumers are
probably as much to blame for some of our energy problems as
are the manufacturers and transportation industry for not
bringing us the most efficient products we can afford.
And I have no sympathy for someone filling their SUV up and
complaining about gas prices, or a person sitting in his hot
tub and wondering how he is going to pay his electric bill. I
do have concern over people that can't afford it, and the fact
that LIHEAP and weatherization have been funded better than
they have in the past is encouraging. I would encourage this
committee and others to make sure that that continues, and if
supplemental appropriations are needed, to do so.
I am going to talk about the middle-income household here
more than anything else. Conservation is probably the most
important contribution that consumers can make. And it usually
comes as a result of high energy prices or lack of supply,
rolling blackouts, whatever you want to call it. So it is not a
matter of it is the right thing, I should do as a consumer; it
is a matter of it is hitting my pocketbook so I better do it,
because I will not be able to afford my electric bill or gas
bill.
Whether or not there is the right motive is questionable.
And what we can do about it I will have a little more to say
later on. But the motive for consumers now is a pocketbook
motive. It is not let's do the right thing, because they don't
quite understand that we are still going to have an energy
crisis problem unless we address our dependency on fossil
fuels, alternative fuels, et cetera.
As I say in my testimony, conservation is not a voluntary
consumer action; it is produced by substantial increases in
prices and/or decrease in reliability.
What is the role of the Federal Government, specifically
this body, the House of Representatives and the Senate, in
promoting conservation, efficient use of energy? I hate to say
this but I think your role as the House, the primary role is to
look at legislation and regulation which as a result of
legislation, has come out of this body. And I congratulate once
again this subcommittee chairman for bringing us down this
path. The administration has a great deal to do with it,
obviously, but the Federal Government is really the consumer's
advocate, friend, or enemy in this energy crisis we face.
For the first time, we are as consumers experiencing
simultaneous energy crisis, the price of gasoline and the price
of electricity, price of heating our homes, other than
electricity, price of natural gas et cetera. And it is going to
have an extraordinary effect not only now on our direct cost,
which is our electric bill every month, but the indirect costs
which have not yet been passed down to the consumer.
I had a chance to talk to one of the CEOs and the chairman
of a top 10 company, Fortune 10 company, on Monday and he told
me it is costing him over $100 million, and they haven't passed
it to the consumer yet. So when that kicks in, we are really
going to be more sensitive to the energy prices.
I think the government's chief role you can play--it all
costs us money, obviously--is education. Consumers are going to
make this move, correctly or incorrectly. They are going to put
demands on not only you as politicians and elected officials
they are going to put demands on manufacturers if they see
there is a crisis that is not going to be solved. So educating
them is extremely important.
I can go and buy an appliance--if I go and buy a washer and
dryer, I don't know how much energy it uses. If I buy an air
conditioner, I do. I have to make that a part of my
decisionmaking process. If my energy bill was $80 this month
and it is all of a sudden 300, that has become part of my
energy decision process. And I think that is I don't see in the
long-term future, the near future, any substantial reductions
in our energy prices. But consumers have an obligation to look
at energy as a decisionmaking process. If I want to make that
decision, can I? Not always. I just bought a washer and dryer
and I don't know what--frankly, the energy wasn't a decision.
That was, you know, how much--how many gallons of water did it
use, how big it was, and could it serve my family needs.
If I wanted to make the decision, I didn't have the
opportunity to do so because there is no energy sticker on it.
I think we recommend heartily that the standards be revisited,
be increased, and that they be mandatory on all appliances. I
think anything that goes in a home that burns energy, as a
consumer, I should have a right to know how much it does burn.
How can I affect my electric bills otherwise?
Whether that is going to be voluntary or mandated to the
manufacturing industry, I guess is up to you. I think the
history of voluntary standards is questionable at best. We saw
that with CAFE. I think it was avoided for 20 years, and we
created the sub, and no matter what you think it is, it didn't
work as well as it should. Now we are revisiting them.
Hopefully, we can have greater standards.
Mr. Barton. Mr. Clark, could you summarize? You are about a
minute over.
Mr. Clark. Let me summarize it by using an example. I think
this is the point I am trying to make. This is a Cuisinart
coffee maker. Three things should happen when I buy this as a
consumer, and I didn't. I mean, I bought this because it has a
carafe at the bottom so we don't have to have two things on the
counter.
The first is that I should have an energy choice with this.
Is Cuisinart better than GE as far as energy is concerned? I
don't know. Cuisinart didn't tell me. I am not picking on
Cuisinart.
Second, should I know from the standpoint of the
government? Yes, this should have an energy label on it whether
or not Cuisinart likes it or not.
Third, Cuisinart missed a great opportunity, because this
is probably the most energy-efficient coffee maker in the
country because it doesn't have a heating element under it. It
goes right into the carafe.
So when we get to the point where I as a consumer consider
energy as a choice, and when we get to the point where I can
make an educated decision, and when we get to the point where
the market forces promoting Cuisinart and other manufacturers
to use energy as a selling product, I guess we have solved this
problem. Thank you.
[The prepared statement of Jordan Clark follows:]
Prepared Statement of Jordan Clark, President, United Homeowners
Association
Mr. Chairman, members of the Committee, I appreciate the
opportunity to testify today on the most important subject faced by
Congress, the White House and 280 million Americans: ENERGY. I am
Jordan Clark, President of the United Homeowners Association (UHA) a
decade old non-profit organization representing the interests of
homeowners here in Washington. UHA has been actively involved in energy
issues for a many years. As a House Committee Staff Member during the
oil embargoes and as administrator of the Department of Energy's
Conservation and Renewable programs in the mid eighties, I have been
personally involved in energy issues for three decades.
For homeowners across the country the cost of energy is finally
taking center stage. A fact which is not missed by the 54 members of
the California delegation and a growing number of members in other
states, not to mention the White House. Unfortunately, despite the fact
that, for decades, basic math and the laws of supply and demand could
demonstrate beyond any doubt that our energy situation was precarious,
it has taken a major decrease in supply and increase in cost to get the
attention needed to start down the path of problem solving. I thank the
committee for dealing with such a politically charged issue and hope
that it will not rest until short, middle and long-term solutions are
put into place.
In your letter of invitation, Mr. Chairman you asked me to address
the issues of energy efficiency and conservation: Although tempted to
pursue deregulation, generation, production, transmission,
transportation, the recently released National Energy Policy, CAFE
Standards, and other energy concerns affecting consumers, I'll resist
temptation and proceed as requested.
THE ROLE OF ENERGY EFFICIENCY AND CONSERVATION IN HELPING TO MEET OUR
NATION'S ENERGY DEMANDS.
Efficiency
Which comes first the chicken or the egg? Energy efficiency for the
most part is in the hands of the manufacturing and transportation
sectors. Consumers don't build products, they buy them. If we want more
energy efficiency from consumers, manufacturing and transportation
companies are going to have to produce more energy efficient
refrigerators, air conditioners, water heaters, washers, dryers,
toasters, light bulbs, vehicles (including SUVs), etc., etc., etc.
Whether they will do this voluntarily or are forced to by legislation
and or regulation is addressed later.
The fact that the private sector has not produced the most energy
efficient appliances, heating and air conditioning systems or vehicles,
doesn't excuse consumers from making wise energy choices. When we
purchase a product, we should consider energy efficiency.
Unfortunately, for other than the working poor and those on limited
fixed income this consideration only occurs when energy prices sky
rocket and is quickly forgotten when
prices recede. As much as manufacturers and the auto industry are
to blame for not producing more energy efficient products, consumers
have to share the blame for not being more energy conscious.
Conservation
There are some positive results of high-energy prices and lack of
supply, consumers are being forced to be more efficient and more
conservative in their energy use.
Will revived energy sensitive consumers have ``an effect on helping
to meet our energy demands?'' Not much, unless they know how and are
willing to take the necessary actions, such as, turning down the
thermostat in the winter, up in the summer, consolidating their trips
to the marketplace, carpooling, using public transportation if
available, turning out the lights and more.
As stated so well in the National Energy Policy Report (p 4-1),
``For a family or business, conserving energy means lower energy
bills.''
More explicity, if a consumer's electric bill goes from $85 a month
to $185, that consumer will start to think about ways to reduce
consumption. Conversely, if the bill remains around $85, lowering the
energy bill is not an issue and conservation is forgotten. Conservation
is not a voluntary consumer action; it is produced by a substantial
increase in price and/or a decrease in reliability.
THE ROLE OF THE FEDERAL GOVERNMENT IN PROMOTING CONSERVATION AND
EFFICIENT USE OF ENERGY.
For the first time, Americans are experiencing simultaneous
increases in their electric and heating bills, gasoline prices and in
some areas of the country reliability problems. If direct energy prices
remain high (our monthly bills from utilities and gas pump receipts)
and prices of goods and services continue to increase because of higher
energy prices being paid by manufacturers and providers, the Federal
government will be forced to address the problem. Wednesday's proposed
rebate action by the FERC is a good example of forced action because of
consumer interest.
Because of its authority and responsibility under the interstate
commerce clause of the Constitution and in light of a deregulated
marketplace, the Federal Government is the key player in not only
solving our short term energy crises, but also in insuring that long
term policies are set in place which will fill our energy needs.
Education
Helping to educate consumers about energy use is the easiest role
for the federal government to play. ``The federal government can
promote energy efficiency and conservation by including the
dissemination of timely and accurate information regarding the energy
use of consumers' purchases, setting standards for more energy
efficient products and encouraging industry to develop more efficient
products.'' This is a direct quote from the National Energy Policy
Report and a recommendation which, we hope, Congress will act upon.
However, we are not convinced that encouragement alone will be enough
to move industry.
Since 20% of our monthly energy bills goes toward running our
appliances we recommend that energy guide labels be required on all
home appliances, not just some. We also recommend that energy labels be
consumer friendly. The one accompanying my statement is not. It is from
a water heater I recently purchased. Not only is it difficult to read,
it is outdated and places the burden of comparison on the consumer. A
burden which most consumers will not accept.
Energy Standards
We are also convinced that minimum energy efficiency standards must
be revisited and revised. Manufacturers can do this voluntarily in
reaction to market demand or involuntarily as a result of legislation
and/or regulation. Unfortunately, the most effective increase in energy
standards to date has been a result of legislation and regulation, not
voluntary actions of manufacturers or the transportation industry.
I would like to believe otherwise, but if Congress wants energy
efficiency to play a role in reducing our consumption of energy, it
will have to impose greater energy efficiency standards on
manufacturers, the auto industry and, if it had jurisdiction, the home
building industry. If there are doubts about voluntary standards versus
legislated, consider this quote from the National Energy Policy Report
(p4-10) ``Despite the adoption of more efficient transportation
technologies, U.S. average fuel economy has been flat for ten years. In
large part, this is due to the growth of low fuel economy pick up
trucks, vans and sport utility vehicles.''
``Growth'' is an interesting choice of words by the author. Gas-
guzzlers aren't grown, they are manufactured. The author also failed to
mention that CAFE (Corporate Average Fuel Economy) standards were
circumvented and SUV's were born. The lesson being, that revised energy
standards must not have loopholes allowing either manufactures or
consumers to circumvent the intended results of the standards.
We also recommend that Congress consider renewing the successful
tax deductions/credits programs of the seventies and eighties for the
installation of energy saving devices or materials by homeowners.
However, contrary to the national Energy Policy Report, we do not
recommend giving consumers ``a tax credit for fuel-efficient
vehicles.'' A more effective policy would be to place a substantial tax
on manufacturers and consumers whose new vehicles do not meet fuel
efficiency standards.
Just as important, Congress and the White House have to
sufficiently fund the Low Income Energy Assistance Program (LIHEAP) and
DOE's Weatherization Assistance Program. To its credit, the
Appropriations Committee doubled the request for LIHEAP funding and the
Administration substantially increased the budget request for
Weatherization funds. However, with energy prices at an all time high
and little hope for the immediate future, we implore Congress to
consider supplemental appropriations as needed for these programs.
The use of new and/or existing technologies and barriers to their
widespread application.
Consumers are at the mercy of industry and government when it comes
to the application of technology in the goods and services they
purchase. As taxpayers and the ones most effected by high-energy costs,
we hope that industry has enough bottom line incentive to develop and
offer us energy efficient products at reasonable prices. However, from
experience, we know that energy efficiency has not been a ``burning
issue'' for either the private or public sector.
Existing technologies which save energy and in many cases the
environment are not always available to the public. For example, the
technology to run our autos on natural gas has been available for years
and has been proven by fleet use. Yet, the choice is not available to
the public. In our homes 6% of our energy is consumed by lighting.
Highly efficient bulbs are available, but most homeowners suffer
sticker shock and buy the cheaper less efficient bulbs.
Even with my background in conservation and renewable energy, I
don't pretend to know the scope of existing technologies available, nor
like most consumers am I aware of new technologies that could be
introduced. Those questions are best answered by DOE, other agencies
and the private sector.
As for barriers to the efficient use of energy and conservation,
there are many, the market place itself being one. Except for
competition, there are little if any incentives for the producers of
energy to promote efficiency or conservation. Their bottom line depends
on consumers using energy, not conserving it. Our continued dependency
on fossil fuels although we know the supply is limited, is the best
example of market control over energy policy.
We consumers will continue to be barred from access to efficient
and affordable energy use until the economic and social costs become
too great for us to bear and change is demanded in the marketplace and
political arena. A few more spikes in energy costs or rolling blackouts
and we could be at that pivotal point.
I will be happy to answer any questions you have and appreciate the
opportunity to present our views.
Mr. Barton. Thank you, Mr. Clark.
The Chair would recognize the distinguished full committee
chairman, Mr. Tauzin, for 5 minutes.
Chairman Tauzin. Thank you, Mr. Chairman. Let me first
mention, Mr. Clark, that I was just a recipient of one of the
new Foreman grills. George Foreman on television is selling an
awful lot of electricity appliances to an awful lot of
consumers and teaching them how to live leaner, I suppose, but
those are pretty inefficient-type cook units; and yet we are
promoting them, as you know, in a big way.
I wanted to make a point, Mr. Chairman, because my friend
from Massachusetts is back, and I listened to his concern about
the SEER 12 and SEER 13 argument. So let me thank you for your
kind comments and your note. But perhaps you don't know this,
but my uncle was an air-conditioning man. He had a heating and
air-conditioning company and a one-man operation. And my dad
was an electrician.
And I spent most of my college years wiring up houses and
crawling through blown-insulated attics in south Louisiana, in
the middle of the summer, putting in air-conditioning systems
and repairing broken air conditioners. I know a little bit
about the business, and I know a little bit about air-
conditioning, and I know a little bit about blown insulation
and what it does to open pores when you crawl in a 120-degree
attic, trying to install duct work.
What I do know, also, is that this rule was another one of
these last-minute rules adopted when President Clinton was
leaving town with a truckload of furniture. And I know that
this is another problem we have to deal with because it is one
of those last-minute decisions made by the administration that
was not supported by DOE staff. We have to keep that in mind.
DOE staff recommended the 12 SEER, and they did so for a good
reason, as a minimum, because DOE staff understood, indeed, the
balance: concerns about different regions of the country and
how it might make better sense in my part of the country to use
a 13 SEER, but it may not make that kind of sense in another
part of the country.
He also knew that if you are concerned about poor people,
that 13 SEER standard is going to be a heck of an economic cost
to particularly the 30 percent of Americans who live in mobile
homes and mobile units. And you better think about that as we
go through this business, because we could really make an awful
problem for those consumers who probably would go to air-
conditioning rather than heat pumps because of the cost, and
then you have blown your energy savings. We have got to think
of all of these balancings.
Also, SEER 13 units are much bigger than SEER 12 units.
When you change them, you have got to change the internal
coils. And we totally neglected the cost of installation of
larger units and of changing larger coil. None of that was
considered in this rule.
So there are a lot of factors and complications in here
that last-minute rules sometimes don't take into account,
particularly when they go against the recommendations of the
staff of the agency.
Now, if we can get a 20 percent energy saving in the new
rule the administration wants to propose, and I still have the
right in my home State to buy an available 13 SEER unit, that
is a pretty good compromise, a pretty good--perhaps not just a
compromise, but the right decision, because it might, indeed,
mean that we are going to make decisions that are not only
economically feasible but achieve the best energy savings
without forcing some people to go to a higher energy-consuming
system rather than a better energy-consuming system.
So it is not an easy one to decide. But we are going to,
again, do our best to work through it.
Let me, however, turn to a subject where I think there are
huge savings. And I want to compliment Mr. Peterson for the
work that Los Alamos is doing here. In Detroit, they are
putting down superconductive cables as we speak. And if 6,000
miles will be constructed for delivery next year, with new
efficiencies developed by Los Alamos, we are making some big
progress here.
I have been asking this question, I get a lot of different
answers, but I think you gave me one the other day. I would
like to get it on the record. How much energy do we use just
transmitting it around the country? See, we have got a NIMBY
problem. Nobody wants the electric power plant next to their
backyard, next to their scenic overlook.
So if we build them further away, we have got to move the
energy to the towns, to the cities and urban areas. And when we
do that, we are losing energy in the transmission. We have got
to build all these grids which are inadequate. So we have got a
tension here.
How much do we lose in the transmission of the energy over
these grids? Mr. Peterson, why don't you give us some idea?
Mr. Peterson. About 7 percent of the energy is lost due to
the transmission.
Chairman Tauzin. Seven percent. That is a huge amount. When
you multiply 7--energy demand increased 2 percent last year. If
we could save that 7 percent, we would be in an extremely
better position when it came to supply, demand and balance,
would we not?
Mr. Peterson. That is correct.
Mr. Markey. Mr. Chairman, Chairman Barton.
Mr. Barton. The gentleman from Massachusetts, yes, sir.
Mr. Markey. Thank you, Mr. Chairman.
Mr. Barton. I was in a conversation with the gentleman from
Virginia.
Mr. Markey. And that is why I was trying to get your
attention, because I know what a stickler you are for the 5-
minute rule today.
Mr. Barton. I am.
Mr. Markey. And it is at 5 minutes and 30 seconds.
Chairman Tauzin. I will cease immediately, Mr. Markey.
Thank you, Mr. Chairman.
Mr. Barton. We become sticklers about a minute and a half
after the 5 minutes. So he had another minute of leeway.
Chairman Tauzin. But, Mr. Chairman, I will not take it.
Mr. Barton. Okay.
Mr. Markey. I ask unanimous consent----
Chairman Tauzin. And I will set a good example to my friend
from Massachusetts.
Mr. Markey. I ask unanimous consent that the gentleman be
given the full 6\1/2\ minutes.
Chairman Tauzin. I ask unanimous consent that I not take
it.
Mr. Markey. Excellent.
Mr. Barton. Well, we are in good faith on both sides here.
The gentleman's time had expired. And the gentleman--did the
questioner get his--did you get your answer? We don't limit our
answerers.
Chairman Tauzin. Yes.
Mr. Barton. Okay. So the gentleman from Virginia is now
recognized for 5 minutes.
Mr. Boucher. Thank you very much, Mr. Chairman.
I want to commend this panel and thank each of you for
taking the time to come and share this information with us
today. I think the last hour and a half that you have been
testifying here has been perhaps the single most informative
session that we have had in a matter of months, and I want to
express appreciation to each of you for the information that
you have shared.
I would like to take just a moment to talk with this panel
about some matters that I have some interest in. And while
there is a lot of information that we could cover here, I am
going to be quite selective in terms of these questions, and
devote these to ways in which we can try to get greater use and
efficiency from our existing generating capacity without having
to build new capacity in some instances to meet our needs.
That translates to two basic areas. First of all, real-time
metering and, second, demand-side management. What I would be
interested in learning from members of this panel is, what
steps do you believe we could take that would encourage real-
time metering to a greater extent? And with regard to demand-
side management, I would note that there has been approximately
a 50 percent decline in the use of demand-side management as
deregulation has made its way into the various States.
I would ask you if we should be concerned about that
decline and the use of demand-side management and what
recommendations you might have for ways that we could reverse
that decline and perhaps encourage a greater use of demand-side
management so as to level the peaks of electricity demand and
get greater use and efficiency from the existing generating
capacity.
I think Mr. Nemtzow, Mr. Nadel, Mr. Silva, Mr. Swofford,
Mr. Rodgers might have comments in answer to these questions,
but I would not limit the answers to those members. So in
whatever order you choose to begin, I would like to hear from
you. Mr. Nemtzow.
Mr. Nemtzow. In the order that you used our names, rather
than alphabetical, I would support that. Your observation is
accurate, Mr. Boucher. The investment by utilities in demand-
side management helping customers cut their own energy use has
fallen by half during the 1990's. This is one of the
consequences of competition. With all competition's benefits,
this is one of the down sides.
The only policy that can be adopted at the national level
that will reverse that is the adoption of a public benefit fund
or public benefit trust, a very small fee that is charged not--
it must be nonbypassable, that no generator has any advantage
over any other, charge it on the transmission wires so that
everybody participates. And that fund can be used to replace
some of these activities.
In fact, I think you will see, as we have seen in New York
and New Jersey and Massachusetts and several other States, that
these new programs will be much more effective than the old
ones because, by pooling the resources, you don't worry about
each utility worrying about their own needs. You worry about a
statewide approach to these problems.
And it is not just efficiency. It also can be used for low-
income assistance or renewables and other public schools.
Mr. Boucher. And how would the monies from that fund be
applied, and how would the application of those monies advanced
to demand-side management--just a quick way how the fund would
be used.
Mr. Nemtzow. The right way to do it is to do a matching
fund for the States, so that at the Federal level the money is
collected. But it should not be spent at the Federal level.
This should not be a new Federal bureaucracy. It should be left
at the State level for the States and utilities to work
together. And that could be an investment in real-time meters.
It can be an investment in new technologies, in smart homes and
appliances and controls. But that should be decided at the
State level, with guidance from the Congress.
Mr. Boucher. All right. Other responses.
Mr. Swofford. I would suggest that real-time metering is
the next wave of demand-side management in putting the
information in the hands of the consumer so that they can make
wise choices about buying thermostats, buying insulation,
buying doors, based upon what they see, the price they are
paying. So from our perspective, giving customers usage and
pricing information is, in fact, the next wave of demand-side
management.
Now, with respect to encouraging demand real-time metering
investments, the tax legislation that I talked about of
Congresswoman Jennifer Dunn, is a piece of getting past the
capital investment piece. The other would be anything that you
all could do to encourage regulators, because this, again, is a
State regulation area where State regulators get involved.
Anything you can do to encourage them. There is a concern on
there part----
Mr. Boucher. Let me ask, do you agree with Mr. Nemtzow,
that if we choose to do anything to encourage a greater use of
demand-side management, it would be this public benefits trust
that he defined; or do you think there is something else we can
do?
Mr. Swofford. Personally, I think public benefits trust--I
am not sure how all that money gets spent, how efficient it is
that it gets spent.
Mr. Boucher. So you don't endorse that. But if we don't do
that, what should we do? Do you have another alternative or
setup?
Mr. Swofford. I think we can provide incentives to
utilities to invest in the things that they can do to provide
information to customers so that the customers will take the
actions. And we have got a lot of manufacturers here that are
willing to produce the kinds of goods and services that
customers will need once they get the information. But I think
that kind of thing, to encourage utilities to make the
installation.
Mr. Boucher. Thank you. Mr. Rodgers.
Mr. Rodgers. I certainly concur with Mr. Swofford. I
believe that we have to be practical, and the practical
realities are real-time pricing is going to be effective with
the commercial-industrial class of customers first, typically
representing less than 10 percent of the customer base, but
consuming well above 33 percent of the overall power.
There is not yet any clear evidence of a will for real-time
pricing at the residential level. So a trust that is focused on
residential today may or may not be an effective use.
I would agree with the recommendation that you use all
efforts to influence the statewide regulatory bodies to go from
what we are seeing today in California, which is a 200-
kilowatt-and-above customer being a viable candidate for real-
time metering systems, and bringing that down to 50-kilowatt
customers.
And as a substantial incentive to do that, I think the
ability to be remunerated for the cost of those meters, whether
the end consumer, the end customer buys those meters, or
whether it is from the utility or a new energy service
provider, because I think we will see all three of those.
We are already working with several large----
Mr. Barton. Could you shorten your answer so that we keep
the questioner's time period within 8 minutes?
Mr. Rodgers. Working with several large national accounts
that already are seeing the benefits of this information and
are investing on their own, even in advance of utility of
smart-metering systems.
Mr. Boucher. Thank you, Mr. Rodgers.
Mr. Chairman, I would like to pursue this a bit further,
but I have heard what you just said.
Let me just ask any other members of the panel who would
like to respond to the question, if you could send us a brief
letter containing that response, that would be helpful. Thank
you Mr. Chairman.
Mr. Barton. Thank you. The gentleman from Oregon is
recognized.
Mr. Walden. Thank you, Mr. Chairman. I will try and rip
through these.
Mr. Wagner, I am just curious. You mentioned about the
motion light switches, and I have seen those show up more and
more. What is their cost? What is their savings? In a quick
snippet.
Mr. Wagner. It depends. There are any number of lighting
controls--that varies--that you can do that. And payback on--
and I just noticed one when I was in the restroom here, before
I came in, which was encouraging.
Lighting controls generally have probably a very quick
payback, because it is fairly low on the installation in terms
of the equipment that goes in. So they can be anywhere from 3
to 5 years, David?
Mr. Nemtzow. Three to 5.
Mr. Wagner. On some of those things. What you can do
oftentimes, if I may, is when you finance the project, you want
to bundle those with higher capital investment things such as
boiler or chiller oftentimes, and then have a project that is
very payable.
Mr. Walden. I have seen those and I was curious. You see
them more and more as you go in and out of restrooms and other
rooms.
Mr. Wagner. We have technology that can track people in
buildings and see where they are, and just heat and cool and
light rooms where they are moving.
Mr. Walden. I have constituents that believe all that, too.
I don't dispute it.
Let me go to Ms.--I think we all have them. Then we get
into the contrail issue.
Mrs. Cooper, I believe that is correct, the CAFE standards.
The question I have is--and I have got several for others so we
can move pretty quickly here--why are light trucks and SUVs
treated differently than cars when it comes to the CAFE
standards?
Ms. Cooper. I think when the original program was put in
place, there was a recognition that passenger cars have
different features, utilities, and performance than light
trucks. And that is really the basis for it. The size, the
drive train, the torque and things like that in light trucks
really require----
Mr. Walden. They have different demands.
Ms. Cooper. That is right. They have different demands
concerning fuel.
Mr. Walden. We talked some about using tax credits to
promote purchase of these hybrid vehicles, and there is
something in my mind that says Arizona tried this and something
went sideways on them, about ate that budget alive.
Ms. Cooper. I believe, and I am not totally familiar with
the Arizona situation, but the Arizona situation related to
being able to retrofit vehicles to change, I think, the fuel
for natural gas. It was an allowance after people bought the
vehicles. So it was an after-market thing that was not involved
with manufacturing.
Mr. Walden. For initial purchase.
Ms. Cooper. That is exactly right.
Mr. Walden. I was reading something, and they were
exploding their budget.
Ms. Cooper. Yeah, they had a real challenge there to
control their program.
Mr. Walden. Mr. Nemtzow, you talked about the polls
regarding conservation and energy. I understand all that. I
have also seen polls like in health care that people want all
sorts of things; and then you say, but are you willing to pay
for it? And all of a sudden, the poll numbers change
dramatically. So we always have to balance that.
But there is another comment you made that intrigued me
about the SEER's standards, because you said the Department of
Energy relied on 1996 power price estimates. And we all know
what power has done this year. I guess the question I have is,
I have also seen projections for power purchase contracts out
over the next 3 years, and this huge peak we have seen is
coming back down.
Was this the anomaly, do you think; and so maybe the 1996
numbers when looked at, other than during this peak, may be
legitimate numbers to use or may be slightly lower than what we
are going to see later?
Mr. Nemtzow. I think not. You know the old adage about
never making predictions, especially about the future, and that
certainly is a reminder here.
I think the 1996 numbers were the anomaly. In 1996, we were
all very optimistic about what competition and decontrol would
do to prices. When the EIA part of DOE did those projections in
1996, that was the height of optimism and, therefore, the
lowest point of price projection. So I don't want to say that
today's projections are perfect, but the 1996 ones are flawed.
The other point is to remember the difference between
summertime rates and average rates. The reason I mention that
is air conditioners, of course, are during summertime rates. In
1996, the difference between summertime rates and average
annual rates was only about .5 cent per kilowatt hour
nationwide. Now, because of the capacity constraints, we have
seen the mid-Atlantic and West and elsewhere, that spreads
about 2.5 cents.
So DOE would do summertime rates and current projections,
then let the careerists go to work. Keep the political
influence away from them. Just make sure that they use good
numbers and good projections, and they will come up with the
right answer, I am sure.
Mr. Walden. Mr. Rodgers, I have a question. The concept of
this net metering makes a lot of sense to me. But I wonder
about cost shifts that can occur in a market. I am curious to
know, obviously if you can shift the amount you have to buy at
peak, that is going to be a savings to the utilities and to the
customer.
But what about industries? I think of my own. I am a radio
broadcaster. My transmitter runs constant, hopefully, 24, 7. It
is hard to shift. I might get my competitors to, if they are
more powerful. That would be a good thing. What about those--
would this result in----
Mr. Markey. Mr. Chairman, I hate to interrupt someone on a
question like that.
Mr. Barton. We know you hate to interrupt.
Mr. Markey. We have a precedent for interrupting people on
littler questions than that.
Mr. Barton. That is all right.
Mr. Markey. Mr. Walden, I am sure, appreciates attention to
the specifics.
Mr. Walden. I certainly do.
Mr. Markey. I would want for him to be able to finish the
sentence before he finished; but I did want to, for procedural
purposes, raise the point in a very timely fashion.
Mr. Barton. All right.
Mr. Walden. I appreciate that.
Mr. Barton. He was at the 17 second over the 5-minute at
the time you raised the procedural question. I want you to
know, Mr. Markey, you have been the most consistent
participant, which is a positive thing.
Mr. Markey. Thank you, Mr. Chairman.
Mr. Barton. But you have also been the most consistent in
not getting to the first question in your 5-minute question
until after the 5-minute mark.
Mr. Markey. Well, I am Irish.
Mr. Barton. So, you know, you have----
Mr. Markey. We have got to tell our story first, our
personal stories first.
Mr. Barton. You have been given the same amount, if not
more flexibility, than any other member, and it is because you
are a member who knows the issues and likes to elaborate on
them, which is a positive thing for the hearing record. But I
don't want you to go home to Massachusetts feeling that you
have been put upon, that you somehow have been abused,
mistreated, you know, malnourished in the ability to get your
positions before the various hearings, because that is not the
case.
Mr. Markey. If I can, if the gentleman will yield, there
does seem to be a certain, at least for the purposes of this
hearing, and I love the witnesses, all ten of them and----
Mr. Barton. I consent.
Mr. Markey. [continuing] and the 7 minutes apiece that they
each got for their opening statement. But there does seem to be
a certain asymmetry to then having the five Members of Congress
have 5 minutes to question 10 witnesses that had 7 minutes a
piece.
Mr. Barton. If we had all 31 members of the subcommittee
here, the asymmetry would be opposite.
Mr. Markey. My point would be that given the paucity of
attendance at this particular hearing on a Friday morning, and
the fact that those of us that stayed here overnight rather
than getting on a plane and going back to our districts, and
the amount of obvious time that each of us could have to make
the points that we wanted to, that there could be some
flexibility, given the fact that all the other chairs are not
occupied.
Mr. Barton. And we were showing flexibility.
Mr. Markey. And the members who did come obviously were
doing so in good faith.
Mr. Barton. It is because you are here, to which I have
commended you on.
Mr. Markey. That is my general objection.
Chairman Tauzin. Mr. Chairman.
Mr. Barton. The gentleman from Louisiana. We are having a
nice little family discussion.
Chairman Tauzin. I don't want to take any more time except
to remind everyone here that this is still a hearing, and our
job was primarily accomplished when we heard from our
witnesses. The exchange we have with them is always good, but
it is always a lesser part of this process. I want to thank all
10 of you for taking your job so seriously and using up your
time to teach us. Thank you.
Mr. Barton. Well, it is obviously--this is not only a
hearing, it is a hearing that is going to result in legislative
action within the next 3 weeks.
This subcommittee, the next time, it is going to have
another hearing next Wednesday, and then we are going to go
into the July 4 break. Then we are going to come back the
second week in July, and we will marking bills up, one of which
will be a conservation bill that all 10 of you and the two
witnesses before you and the 31 members of the subcommittee are
going to be encouraged to be working on in a drafting and in a
language-submitting process starting this afternoon.
So this is not just a hearing. It is a hearing that is
going to result in a bill or bills that come out of this
subcommittee within the next month.
Mr. Walden. Mr. Chairman.
Mr. Barton. You are entitled to at least one question more
after all of this.
Mr. Walden. Actually, I don't have a question more, but the
same courtesy as I extended to Mr. Markey to allow the
panelists to answer my question would be appreciated. I might
suggest that, when this whole thing started, we ended up 9
minutes over the 5 minutes to accommodate the discussion, Mr.
Markey.
Mr. Barton. Discussion is good. Democracy requires debate.
Mr. Walden. All I want is an answer. Thank you.
Mr. Rodgers. I actually remember the question.
Mr. Barton. Let us let the panel answer Mr. Walden's
question. You are the next questioner.
Mr. Markey. I don't care how much time we take here, okay.
We are alone, okay.
Mr. Barton. Well, actually----
Mr. Markey. So if Mr. Walden has----
Mr. Barton. [continuing] Mr. Boucher has a pending
engagement. I have a plane to catch. So we may end up letting
you Chair the hearing by yourself until midnight if that is the
wish of the gentleman from Massachusetts. But let us let them
answer Mr. Walden's question, and then you are the next
questioner.
Mr. Markey. By unanimous consent, I second that motion.
Mr. Rodgers. The question, if I can go back, was how do
industries that don't have the ability to----
Chairman Tauzin. How do you remember the question?
Mr. Rodgers. I was so pleased to answer it because I was
afraid, based on the earlier panel, that I was going to be
asked about the missile defense system of which I know nothing
about. So I am really focused on this one.
The benefits of real-time metering always extend to not
just the commercial industrial accounts that are using that but
to all participants because it is a peak demand load reduction.
So what happens is the accounts that are actually using the
system benefit, and it has a rollover effect to all other
industries, not only within a SEER's territory of utility but
within a regional transmission organization in total.
Mr. Walden. So while no one is looking--so you don't look
at a different rate structure for those on a net metering
versus those not?
Mr. Rodgers. Because it is a demand reduction program, the
actual power prices on an hourly basis begin to mitigate back
down toward the norm, which benefits all consumers.
Mr. Walden. Thank you.
Mr. Barton. The gentleman from Massachusetts is recognized
for 5 minutes.
Mr. Markey. Thank you, Mr. Chairman, very much.
Let me see here. Ms. Cooper, how come the Toyota and Honda
manufacturers, rather than Ford or GM, were the first to
introduce more efficient cars like the Honda Insight and Toyota
Prius? What is wrong with those companies in America that are
behind the foreign companies?
Ms. Cooper. Mr. Chairman, Mr. Member, I believe all of the
automakers now, all the major manufacturers, are in fierce
competition to introduce highly fuel-efficient technologies.
Mr. Markey. You can see I don't have much time. Why do they
have models out on the market and you don't?
Ms. Cooper. I think the markets in Japan are different. The
highway configurations in Japan are different. The fuel prices
in Japan are different. They have been seeking highly fuel-
efficient technologies for a long time simply because of the
demands of their market.
Mr. Markey. So you are saying the marketplace in the United
States doesn't work to create more efficient vehicle.
Ms. Cooper. Well, the automakers today have in the
marketplace more than 50 models that get more than 30 miles per
gallon.
Mr. Markey. But I am talking about the Prius and the
Insight that get 60 or 70 miles a gallon. Are you saying that
the American marketplace does not create the incentives for
American automotive factories to produce those cars?
Ms. Cooper. Based on what our data demonstrates in terms of
what consumers are asking for when they go to dealers and look
for vehicles, fuel economy, fuel efficiency is number 25 on a
list of 26 attributes that American consumers are looking for.
That is why we say consumers are in the driver's seat here, and
whatever we do----
Mr. Markey. I appreciate that. You understand, though, that
national security is No. 1 on the list of American priorities,
though; and our dependence upon imported oil is basically, you
know, now deemed by this administration to be a national
security issue, and that two-thirds of all oil that we consume
in the United States goes into gasoline tanks. So if the
marketplace can't respond, then obviously that leaves the
government to respond.
Mr. Nemtzow, let me ask you about poor people and air
conditioners. The administration official today testified that
poor people are victims of a more efficient air conditioning
standard. Can you deal with that question, please?
Mr. Nemtzow. Yes. Just the opposite is true. As you pointed
out from the numbers you ran through earlier, we are only
talking about, at most, a million low-income households, a
million low-income households who have central air
conditioning. So the number of potential victims is quite
small.
No. 2, there are actually beneficiaries. The bigger
beneficiaries actually are senior citizens. The greatest threat
to senior citizens is when the electric grid goes down, when
there are rolling blackouts because of their health threats. So
the reliability benefit of the higher SEER air conditioner
helps poor people, it helps seniors, it helps all Americans,
never mind the businesses that need quality power.
So just the opposite. Especially since so many live in
rental housing, the cost of the air conditioner goes to the
landlord. The benefits of the lower bills go to the low-income
family.
Mr. Markey. Thank you.
Mr. Silva, could you tell us which statutory deadlines DOE
is now failing to comply with?
Mr. Silva. Those are under the national appliance----
Mr. Markey. Appliance efficiency standard.
Mr. Silva. I am sorry, the National Appliance Energy
Conservation Act of 1987 and its amendments of 1998. Currently,
they have fallen at least 7 years behind the statutory schedule
for the AC standard, and they are also several years behind the
other standards. Currently, our best estimates are their
current budget, which is facing a 40 percent reduction in
fiscal year 2002, would require a tripling to allow the staff
to simply catch up on the existing backlog.
Mr. Markey. So to meet the efficiency standards, DOE would
need a tripling of its budget in its field?
Mr. Silva. Yes, for that office.
Mr. Markey. Now, if they can't meet the deadlines that
Congress establishes in the law, should we consider writing new
standards directly into the law as it did back in 1987 and
1992?
Mr. Silva. It certainly appears obvious that they have been
forced to actually engage a prioritization schedule,
sacrificing certain products and appliances for deferred
action; and the result has been that we have actually
stagnated. So in that light, yes, it seems obvious that it is
desperately needed, an update to that law to encourage DOE,
along with adequate funding. Because, again, without the
adequate appropriations, you will not resolve this dilemma.
Mr. Markey. I think that there is an ethical dimension to
this generation not improving the fuel economy standards
dramatically and SUVs and other vehicles and appliances; and
instead, first thing, we would go to the Arctic Refuge and
other precious lands in the United States that should be
preserved for subsequent generations.
I think this generation, the technology generation, has an
obligation to first extract the highest level of efficiency
that is technologically possible; and at this juncture, I think
that we are about to engage in a historic debate over that
choice.
I thank you, Mr. Chairman. I yield back.
Mr. Barton. I thank the gentleman.
The Chair would recognize himself for 5 minutes.
I wanted to ask our electricity people on the smart meters,
the net metering, what does a conventional meter cost today
like I have in my home that just goes around and around? What
does that cost?
Mr. Swofford. Probably around $30 to $40.
Mr. Barton. Thirty to $40. What would one of these net
meters cost?
Mr. Swofford. Well, the meter is the same. There is a
device you put in that meter. So the meter is the same. You put
a chip in there that actually----
Mr. Barton. What does the chip cost then?
Mr. Swofford. About $50.
Mr. Barton. An additional $50. So a net metering device
would cost 100 bucks.
Mr. Swofford. If you put that chip in the--if you
retrofitted it, that is about the cost. If you put it into a
new manufacturing where it is more efficient, it is less than
that.
Mr. Barton. Well, if that is the cost, why do we need a tax
incentive for that? I am all for net metering and smart
metering, but why, if that is the cost, why a tax incentive? I
mean----
Mr. Swofford. There is more to the system, as I tried to
describe, than just the metering costs that are associated with
gathering the data and storing it. You have to transmit that
data over a communications system, and you have to have a
customer information system at the other end that takes all
that information in and be able to match that up with pricing
information. There is costs associated with that, also.
Mr. Barton. So we want a tax incentive for a software
program?
Mr. Swofford. No. We want the tax incentive. I believe that
the tax incentive, just based upon the metering system alone,
is enough to get more utilities to move.
Mr. Barton. Well, here is--I am not--I mean, I am for all
this stuff.
Mr. Swofford. I understand.
Mr. Barton. But I am not sure--and I am not saying I am
opposed to the tax incentive package or Congresswoman Dunn's
bill. I am not saying that at all. But I am trying to say what
is--if we are going to--why do we need to put a tax incentive
in place to do the right thing which everything is--for which
incrementally doesn't appear to be that expensive to begin
with?
It is a little bit different deal when we get to the car
part of this program. If we want to go to these hybrid
vehicles, they are talking about an incremental cost of two to
$3,000. Now, average consumer might be willing to fork out an
additional $40 or $50 or $60 or $100 over a 12-month period if
they actually save electricity. But to get the average consumer
to fork out two to $3,000 to buy a hybrid vehicle when the
incremental savings is not all that great, that is a little bit
different deal. But there is a public purpose at work on that
issue. So I am trying to get this worked out in my mind.
Mr. Swofford. Let me say there is a regulatory issue here
of a concern about being able to go to a commission ultimately
to get your cost recovered. So I think that the incentive to
give you some mechanism of what you are going to get your cost
back is very important in this thing, also.
Mr. Barton. All right. Let me go to Ms. Cooper, who has
been strangely unquestioned, given the sensitivity of the issue
that you are here to testify on.
There is a Wall Street Journal story today that says you
were going to come and change the industry's position from a
``just say no, we don't need any CAFE increase'', that you were
going to testify, ``well, we don't want the Congress to do it;
we want the technical people through the transportation
association to do it''. I didn't hear you say that. Are you
aware of this Wall Street Journal story?
Ms. Cooper. I am not only aware of this article, all of my
members have called about this article. My staff have written a
letter to the editor before 9 a.m. This morning to basically
dispose of the notion that the industry----
Mr. Barton. So you are not here to change the industry's
position. You are just as hardheaded and hardnosed as you were
before you came--not you personally.
Ms. Cooper. I have been called worse, Mr. Chairman, I hate
to tell you. But, yes, the industry does oppose changes in the
CAFE standards.
Mr. Barton. By anybody. You don't want the Bush
Administration to do it, you don't want the Congress to do it,
you don't want the National Highway and Transportation
Administration to do it, you don't want anybody to do it.
Ms. Cooper. What we said, Mr. Chairman, is we are waiting
for the National Academy of Sciences' panel report to come back
with whatever recommendations they are going to make. And
because the congressional freeze will not continue unless the
Congress acts on it after October 1, we would fully expect the
National Highway Traffic Safety Administration, using the
criteria they use, to look at CAFE standards. But we do not
support their increase, whether it is through legislation or
through regulation.
Mr. Barton. Okay.
Ms. Cooper. We don't think the program--we think, as the
National Academy said in 1992, we believe the program is
flawed. The real challenge is to get consumers into the
formula, and that is really what needs to happen if fuel
economy, fuel efficiency are going to be values that consumers
look for when they purchase vehicles.
Mr. Barton. My time has expired. We still have--we have
one, two, three, four. Does any member wish to ask one follow-
up question before we conclude the hearing?
Chairman Tauzin. Can I clarify one thing?
Mr. Barton. The gentleman from Louisiana is recognized.
Chairman Tauzin. I just want to clarify because you raised
this point. You testified, I believe, that the net metering
device only costs $50. Sandia Labs and Los Alamos came jointly,
and I looked at a metering device. They told me it cost $2,000.
What is correct? Can you straighten that out for me?
Mr. Rodgers. I was going to make a point of record. That
was the price for residential net meters which I think you were
asking about. Commercial industrial meters have ranged from a
high of $2,000. Now, typically, due to cost reductions, those
are down around $800 to $1,000 installed.
Mr. Barton. I want to thank this panel.
Mr. Markey. Mr. Chairman, if we can ask one additional
question, I would appreciate it.
Mr. Barton. The offer stands.
Mr. Markey. I thank you.
Back when I was elected in 1976, there was a big debate
over whether or not we can improve the fuel economy standards
of automobiles from 13 miles a gallon to 27 miles a gallon. The
industry said it couldn't do it, but we were in the middle of
an energy crisis. We passed that law. And to be honest with
you, Gerald Ford, who was the President from Michigan, from an
auto State, had the courage to sign that law. That took a lot
of courage. That was a lot of courage, going against his own
history, his own State, his own philosophy.
While the industry said they couldn't do it, by 1981 they
had it up to 24 miles per gallon. By 1986, we had OPEC on its
back with $12 a barrel oil. Pretty big victory for technology,
even though the industry said they couldn't do you it.
Now, the average fleet economy now for the auto industry is
24 miles an gallon, same as 1981, which is really not a good
thing for our country since that is where two-thirds of all oil
goes; and it is, by definition of this administration, a
national security issue.
What standard, Ms. Cooper, do you think this industry can
meet as a corporate average for SUVs like vans and for
automobiles by the year 2010?
Ms. Cooper. Mr. Chairman, I can't give you a number. I
think if you look at the industry's record, fuel efficiency of
those vehicles has continued to go up since 1970 2 percent a
year. It is the fleet mix of vehicles that has allowed the fuel
economy standards to plateau, and it really relies on putting
the consumer in the driver's seat.
Mr. Markey. Does your industry oppose congressional
imposition of any higher CAFE standards for your industry?
Ms. Cooper. Yes, sir.
Mr. Markey. You do.
Ms. Cooper. We do oppose legislative changes in the
corporate average fuel economy standards.
Mr. Markey. Do you also continue to maintain that it is
economically unviable in an American economy to match the
standard for efficiency which Honda and Toyota are now matching
in the construction of their new vehicles?
Ms. Cooper. We think it is very important to deliver to
consumers all of the features they want. And fuel economy, if
that is a part of it, we have to be able to deliver the
features that consumers are looking for.
Mr. Markey. I will tell you this final little anecdote,
because I think your position is inconsistent with American
national security and our long-term economic interests.
But I asked my father in 1976, I said: Pop, what was your
first car?'' he said, ``Well, it was a Model A. We got it in
1930.'' I said, ``Well, what did it get for mileage?'' He said,
``Well 12, 14 gallons a miles probably.'' I said, ``What does
your Ford Fairlane get?'' he says, ``Well, 12, 14 miles a
gallon.'' Forty-six years later.
The industry told us in 1976 they couldn't improve on that.
Congress mandated that they should, to double the efficiency.
They didn't want to do it, but they did. Part of it was because
they wanted to keep out these Japanese efficient cars that were
coming in, so that we would put up barriers, only let them in a
certain percentage of them to give them time to retool, to
compete.
I am just afraid that we are repeating history here, Ms.
Cooper; that the key to dealing with this energy crisis long
term is to deal with where we put the oil, which is in gas
tanks.
We don't have an electricity crisis across the country.
There is none in Massachusetts or in Florida or in the Midwest.
There is one in California because of a stupid law and a
drought in the Northwest.
But we do have an oil crisis. And the oil crisis is
directly related to transportation, and transportation is
related to fuel economy standards, and that is related to your
industry, and you are telling us you can't meet it. And I am
afraid that, at the end of the day, Congress is going to have
to deal with that issue if we are going to deal with what is
being described by this administration as an energy crisis that
affects our national security.
Chairman Tauzin. Mr. Chairman.
Ms. Cooper. May I respond?
Mr. Barton. Briefly. There is a law of diminishing returns
in fuel economy. There is also a law of diminishing returns in
a hearing and continuing the process. But the gentlelady can
respond, and we will give the full committee chairman the last
word.
Ms. Cooper. All I wanted to say is I think the automakers
are making an incredibly valiant effort to introduce new
technologies into the marketplace. I think that is where the
promise for the future is. Whether it is hybrid electric
vehicles, fuel cell vehicles, I really believe that is the
answer. We believe that is why it is important to support that
through the tax incentive program.
Thank you, Mr. Chairman.
Mr. Barton. Mr. Tauzin, and then we are going to conclude.
Chairman Tauzin. Just to put a balance on this, I don't
think your grandfather's Model A, nor mine, had power steering,
nor power brakes, nor air conditioning, nor power windows, nor
power locks and all the many other features that automobiles
now contain that are powered and that require more power.
When you factor in the enormous new capacities of the
American automobile with the Model A against the fuel
efficiencies, I suspect you get a much different picture. And
Americans I don't think are ready to give up their power
steering and thier power brakes and the power windows and
everything else that comes in a package.
Yes, we can do better. And, Mr. Markey, we have asked as a
committee the automobile industry to come to the table before
we finish this process with what they can contribute to new
fuel efficiencies into the future. We will be discussing this.
But we need to keep that in perspective.
Second, let me make a point, Mr. Markey, and I know you do
care about poor people. I happen to have an awful lot of them
in my State. And I know you care about air conditioning of my
poor people. If you want to help us, let me ask you to do
something for me. Why don't you help me equalize the formula
for LIHEAP funding? Why don't you help me equalize the funding
that goes to southern States where people die from the heat
equal to the funding that northern States get where people need
help with their heating costs in their homes?
When you are ready to equalize those two funding systems,
then I will know you really care about the poor Louisiana folks
dying in the heat, and I was almost one of them crawling
through those attics.
Mr. Markey. Will the gentleman yield?
Mr. Barton. We are not going to have a food fight between
my two good friends.
Mr. Markey. Not at all. I am willing to go with the
gentleman to see President Bush and ask him to raise the
funding for LIHEAP.
Chairman Tauzin. No, you didn't hear me. What I asked was
to equalize the funding. I am not talking about raising it for
you. I am talking about just raising it for us equal to what
you folks get in the north.
Mr. Markey. But if the gentleman----
Mr. Barton. Can we--I am going to recall regular order. I
hate to call down my full committee chairman, because it means
I won't be subcommittee chairman for another 30 seconds, but I
want to do that.
Mr. Markey. But, Mr. Chairman----
Mr. Barton. I hate to ask my good friend from Mass-
achusetts----
Mr. Markey. But in defense of my father? My father?
Mr. Barton. No. Mr. Boucher and I have planes to catch.
Mr. Markey. Twenty seconds for my father.
Mr. Barton. No. I will give you an opportunity.
Chairman Tauzin. For your mother, maybe.
Mr. Markey. She was sitting right next to him. She always
nuzzles up right next to him.
Mr. Barton. I want to thank this panel. We are going to
legislate in the next 3 weeks. Any legislative language you
need to, put forward to the various members of the subcommittee
that you have the best working relationship with.
We appreciate the attendance, and the hearing is adjourned.
[Whereupon, at 1:20 p.m., the subcommittee was adjourned.]
[Additional material submitted for the record follows:]
Prepared Statement of Stephen P. Farrar, Director of International
Business, Guardian Industries Corp. on Behalf of the Primary Glass
Manufacturers Council
Thank you, Chairman Barton and Mr. Boucher, for the opportunity to
provide testimony to the Subcommittee on Energy and Air Quality. My
name is Stephen Farrar, Director of International Business at Guardian
Industries Corp. Today I represent the industry that manufactures flat
glass. Flat glass, as you know, is an essential ingredient in today's
homes and commercial buildings. Technological advances in recent years
have made flat glass products highly energy efficient. I will explain
today why these products are a critical part of a national strategy.
The companies I represent strongly support President Bush's emphasis on
increasing energy supply, but we are also convinced that energy
conservation is both essential and economical.
All U.S. flat glass manufacturers strongly encourage the adoption
and advancement of the following programs, initiatives, and actions.
The reasons supporting each action are discussed in more detail below:
ENERGY STAR
Promote widespread awareness and use of the Energy
Star' program, especially the Energy
Star' Home and Energy Star' Window
programs, administered by the Environmental Protection Agency
(EPA), in partnership with the Department of Energy (DOE).
Ensure that the value of high-performance windows is
emphasized in DOE and EPA consumer awareness campaigns to
promote Energy Star' and energy conservation.
Require the federal government to purchase, install, and
utilize only energy-efficient fenestration products that carry
the EPA's Energy Star' label.
STATE BUILDING CODES
The DOE should require the States to review their residential
building codes regarding energy efficiency against the
standards contained in the International Energy Conservation
Code (IECC) (formerly the Model Energy Code (MEC)), promulgated
by Building Officials and Code Administrators International,
Inc. (BOCA).
The DOE should encourage the States to 1) align their codes
with the IECC; and 2) promote the use of MECcheck, a free
software package developed by the DOE that explains
requirements and simplifies calculations for builders.
WEATHERIZATION ASSISTANCE PROGRAM
Include language in the appropriation for the DOE
Weatherization Assistance Program, which provides grant funding
to states and localities to encourage cost-effective, energy-
saving home improvements, making it clear that high-performance
windows are eligible for grants under the program.
Encourage the Secretary of Energy and his staff to allocate
program funds specifically for high-performance windows.
MORTGAGE ASSISTANCE
Encourage energy efficiency through reduced home mortgage
rates or other preferences to help offset the higher initial
costs of energy-efficient building products.
TAX DEDUCTION AND/OR CREDIT
Encourage energy efficiency by providing tax credits and/or
deductions to individuals and businesses to offset the cost of
purchasing energy-efficient glass products.
why promoting energy-efficient windows is in the national interest
1. High-Performance Glass Products Have Tremendous Potential to
Significantly Reduce Overall Energy Consumption by Individual
Homeowners, Businesses, and the Nation.
Buildings and homes in the United States consume more than 40% of
the national energy budget, i.e., 35 quadrillion Btu's of energy
(quads)--principally for heating, cooling, lighting, and operation of
appliances. Residential structures consume more than half of this
total--approximately 22% (19 quads). Lawrence Berkeley National
Laboratory (LBNL) estimates that the 1994 stock of 19 billion square
feet of residential windows accounts for approximately 2%, or 1.7 quads
per year (1.3 quads for heating and .4 quads for cooling) of total U.S.
energy consumption.
Glass products are an essential part of a home's exterior and, if
chosen wisely, can have a significant effect on the amount of energy
consumed. A wide array of energy-saving glass products are currently
available. These products can reduce heat loss in northern climates by
up to 70% compared to traditional products. Similarly, in southern,
cooling-dominated areas, coated glass products can reduce solar gain,
and therefore air-conditioning loads, by up to 60% compared to
traditional non-coated products. Moreover, use of energy-saving glass
products allows the use of larger window areas, which, in turn, permits
better use of natural lighting, lowering energy use still further.
According to the LBNL analysis, if all new residential windows sold
throughout the United States were energy efficient, the energy savings
in the year 2010 would be approximately 0.5% of the total national
energy budget, or .43 quads (.19 cooling and .24 heating). For
illustrative purposes, .43 quads is equivalent to:
Over 20 million short tons of coal, or enough coal to fill a
coal train of railroad cars almost 2,000 miles long
418 billion cubic feet of natural gas
Almost 3.5 billion gallons of gasoline, or more than 10 days
of U.S. gasoline consumption
Almost 10 hours of the entire world's energy use (based on
consumption levels in 1996)
Nearly half of the approximate annual primary consumption of
any one of the following states: Arizona, Arkansas, Colorado,
Iowa, Kansas, Mississippi, or Oregon (based on consumption
levels in 1996)
This .43 quads represents a 39% total annual savings in cooling and
a 19% savings in heating, or a total heat and cooling savings of
approximately $2.5 billion per year by 2010 (given an adoption baseline
of 1996).
This potential energy savings is comparable to eliminating the
future need for approximately 20 (300 MW) power plants over the next
decade and up to 60 power plants over the next 20 years.
This significant reduction in energy consumption offers an
opportunity to likewise substantially reduce carbon dioxide
(CO2) emissions. More than one-third of CO2
emissions--about 187 million metric tons--are directly related to the
performance of the building envelope.1
---------------------------------------------------------------------------
\1\ The building envelope is the roof, walls, and foundation of a
building. The envelope provides the thermal barrier between the indoor
and outdoor environment and is the key determinant of a building's
energy requirements. See Oak Ridge National Laboratory web site,
``Questions and Answers about Building Envelope Research at ORNL'' at
http://www.ornl.gov/roofs+walls/q__and__a.html.
---------------------------------------------------------------------------
2. While Use of Energy-Saving High Performance Glass Products is
Becoming More Prevalent, Their Use Remains Far Below Potential.
Insulating glass, with its superior insulating performance, has
been available for decades, but as of the early 1970's represented only
about 20% of the windows used in the United States. It took the oil
embargoes of 1974 and 1979 to propel more widespread use.
The introduction of low emissivity (``low-e'') glass, which has
even greater energy-conserving potential, is a more recent development.
Low-e glass usage has grown slowly during the past decade,
averaging about 2% change per year, and is now used for almost 40% of
the nation's window installations by surface area (see chart above).
The total surface area put in place over the decade was 2.24 billion
square feet. Low-e glass that is already in place greatly contributes
to the reduction of heating and cooling-related energy consumption, and
saves, on an annual basis, .58 quads.
Based on the trend indicated in the chart above, low-e glass usage
will continue to grow but will only reach the 50% level in
approximately five years. The recommendations in this statement are
specifically aimed at accelerating the growth of low-e glass usage so
that the significant energy-savings that are possible with increased
use of high-performance glass will be realized.
3. The Bush Administration's Energy Plan Recognizes the Under-
utilization of Advanced Window Products and Recommends
Addressing the Problem Through Consumer Education Campaigns and
Increased Funding.
In the Report of the National Energy Policy Development Group (the
National Energy Report), the Bush Administration proposes that the
Secretary of Energy be charged with strengthening the Energy
Star' program and promoting greater awareness of the
benefits of energy efficiency. The Administrator of the Environmental
Protection Agency is charged with developing and implementing ``a
strategy to increase public awareness of the sizeable savings that
energy efficiency offers to homeowners across the country.''
2
---------------------------------------------------------------------------
\2\ See Report of the National Energy Policy Development Group,
Chapter 4, ``Using Energy Wisely: Increasing Energy Conservation and
Efficiency,'' May 2001.
---------------------------------------------------------------------------
The Energy Star' program was introduced by the U.S.
Environmental Protection Agency (EPA) in 1992 as a voluntary labeling
program designed to identify and promote energy-efficient products in
order to reduce CO2 emissions. The EPA partnered with the
U.S. Department of Energy in 1996 to promote the Energy
Star' labeling program, which has expanded to cover a
variety of products including windows, homes, residential heating and
cooling equipment, major appliances, and other products. On its web
site, the EPA notes that:
If all consumers, businesses, and organizations in the United
States [including governmental organizations] made their
product choices and building improvement decisions with Energy
Star' over the next decade, the national annual
energy bill would be reduced by about $200 billion. With that
would come a sizable contribution to reducing air pollution and
protecting the earth's climate for future
generations.3
---------------------------------------------------------------------------
\3\ See EPA web site at http://www.epa.gov/nrgystar/about.html
---------------------------------------------------------------------------
The National Energy Report also recommends significantly increased
funding for the Department of Energy's Weatherization Assistance
Program, which provides grants for energy-saving improvements in homes
around the country. The Report notes that:
The energy burden on low-income households, as a proportion of
income, is four times greater than for other American
households. The Weatherization Program provides grant funding
for a network of all states and some 970 local weatherization
agencies to provide insulation, duct system improvements,
furnace upgrades, and other cost-effective, energy-saving
improvements based on the energy needs of each home
weatherized. Currently, each dollar spent on home
weatherization generates $2.10 worth of energy savings over the
life of the home, along with additional economic,
environmental, health, and safety benefits associated with the
installations and resulting home improvements. Typical savings
in heating bills, for a natural gas heated home, grew from
about 18 percent in 1989 to 33 percent today.
The Primary Glass Manufacturers Council strongly supports both of
the initiatives proposed by the Administration. The use of high-
performance low-e glass is one of the most important ``cost-effective,
energy saving improvements'' that can be made to make homes more energy
efficient.
4. But More Needs to be Done. In Particular, the Federal Government
Needs to Encourage the States to Strengthen Their Building
Codes to Require More Energy-Efficient Construction.
Section 101 of the Energy Policy Act of 1992 authorizes the
Secretary of Energy to require states to review their residential
building code(s) regarding energy efficiency and to determine whether
the code(s) should be revised to meet or exceed the Council of American
Building Officials (CABO) Model Energy Code (MEC), 1992, or successor
codes. A successor code was adopted last year--the International Energy
Conservation Code (IECC), 2000. The IECC sets standards for the entire
building envelope. It requires high-performing windows, with both well-
insulated frames and coated glass. It is under review in several
states. A push from the DOE, by exercising its Section 101 authority,
would help States understand and accept this significant step forward
in energy-conserving building codes. The DOE has greatly facilitated
the adoption of the IECC by developing MECcheck, a software package
that explains requirements and simplifies calculations.
5. Federal Support For Mortgages Is Necessary To Help Offset The Higher
Initial Costs Of Energy-Efficient Glass Products.
A new home that meets Energy Star' can typically cost 5%
more than a conventional home. Energy Star' mortgages, which
effectively deduct this incremental cost from the qualifying amount,
are available but are not widely understood or utilized.
In addition, the flat glass industry recommends that Fannie Mae
provide preferential mortgage rates for buyers of Energy
Star' homes and homes that exceed the IECC standard.
6. Finally, A Tax Credit Or Deduction Is Necessary To Help Offset The
Higher Initial Costs Of Energy-Efficient Glass Products.
Energy-efficient low-e glass products are readily available and a
broad industry infrastructure is in place to provide them, but still
market acceptance has been slow and a huge potential for energy
conservation remains unrealized. A credit against the tax of an
individual homeowner or businesses for energy conservation expenditures
or a deduction from the taxable income of homeowners is necessary to
help offset higher initial costs and to encourage consumers to take
full advantage of these energy-saving products.
This statement is submitted by the Primary Glass Manufacturers
Council (PGMC) and its member companies, Guardian Industries Corp., PPG
Industries Inc., and Pilkington North America, in conjunction with non-
PGMC members AFG Industries Corp., Visteon and Cardinal. This diverse
group of corporations accounts for 100% of the flat glass manufacturing
capacity in the United States.
______
Prepared Statement of the American Chemistry Council
ENERGY AND THE BUSINESS OF CHEMISTRY
A comprehensive national energy policy is vitally important to
members of the American Chemistry Council. We use energy products as
fuel, electricity and steam for our operations. In addition, and this
distinguishes us from most other sectors of the economy, we use energy
as raw materials (feedstocks) for our production processes. In fact,
the chemical industry converts some $20 billion in energy into more
than $200 billion in products found in every American home, office, and
automobile. Many of the products we make from energy resources actually
help to make the nation more energy-efficient. Insulation materials and
lightweight plastics are two examples of product innovations that play
a vital role in making America more energy efficient.
Reliable and affordable energy helped make America's chemical
industry globally competitive. Exports grew 13 percent in 2000 to $79.9
billion. We are the nation's largest export industry, but high energy
costs and other factors have eroded our competitiveness. As energy
costs rose dramatically during 1999 and 2000, our trade surplus fell by
half from $13.4 billion in 1998 to $6.3 billion in 2000. Reflecting
further deterioration, the trade surplus for 2001 is projected to fall
further to $2.0 billion. Selling into global markets provides jobs for
about one-fourth of the one million Americans working in the industry.
Unstable markets and rising domestic energy prices are, however,
forcing key segments of the chemical industry out of world markets,
resulting in layoffs and extended plant shutdowns.
Business of Chemistry Voluntary Programs
Chemistry companies, driven by competition, economics and a strong
sense of environmental stewardship, have been improving their energy
efficiency for many years, beginning long before the recent energy
market disruptions.
In the current context of energy market disruptions and efforts to
develop a comprehensive national energy strategy, as well as continuing
concern about potential manmade climate change and efforts to reduce
greenhouse gas emissions, members' energy efficiency improvement
efforts assume even greater importance.
The results of our members' voluntary efforts over the years are
impressive. Since 1974 the business of chemistry has reduced its fuel
and power consumed per unit of output by 41%. Data submitted
voluntarily to the Council by members participating in its annual
Energy Efficiency and Greenhouse Gas Emissions Survey indicate that
their energy efficiency continued to improve during the 1990s: by 1.9%
per year since 1990, measured as Btu/1990$, and 3.3% per year since
1992, measured as Btu/pound of product.
To facilitate further energy efficiency improvement efforts by our
member companies, to recognize their outstanding accomplishments, and
to share information about their best practices, in 1993 the American
Chemistry Council (then known as the Chemical Manufacturers
Association) instituted an Energy Efficiency Continuous Improvement
Program (EECIP) for its members.
The EECIP relies on voluntary actions by Council member companies.
An underlying rationale for the EECIP is that conscientious voluntary
efforts to continuously improve energy utilization efficiency will
achieve significant and demonstrable reductions, per unit of
production, in energy use and associated environmental impacts. A
second underlying belief is that voluntary efforts are far preferable
to government mandates or punitive taxes designed to achieve energy
efficiency improvements.
One major element of the EECIP is the Council's annual Energy
Efficiency and Greenhouse Gas Emissions Survey referred to above.
Members participating in this survey voluntarily report their energy
consumption and related CO2 emissions; emissions of other
important greenhouse gases; major changes in corporate structure or
operations affecting energy use and emissions patterns; and,
participation in voluntary Council and government programs to improve
energy efficiency and reduce greenhouse gas emissions. Aggregation of
companies' data allows the Council to obtain a picture of overall
current performance as well as overall performance trends over time.
A second major element of the EECIP is the Energy Efficiency Award
Program. This program is a way of publicly recognizing the energy
efficiency improvement visions and practices of Council member
companies. An annual competition, it demonstrates that companies
engaged in the business of chemistry continually and voluntarily find
innovative ways to improve energy efficiency in their operations and to
substantially reduce greenhouse gases and other emissions. These
improvements help American businesses compete globally and also help
protect the environment.
In the most recent competition last fall, awards for 1999
activities were given in four categories:
The ``Significant Improvement in Manufacturing'' award is
given for activities that demonstrate improvement in energy
efficiency resulting from technical innovations, creative
projects or novel procedures or actions.
The ``Environmental Impact'' award is presented for
environmentally driven initiatives with associated energy
efficiency improvements.
The ``Energy Efficiency Program'' award is awarded for broad
programs to achieve energy efficiency improvements, such as
goal setting, communications, management and recognition.
The ``Non-Manufacturing Improvement'' award is awarded for
improvements such as energy efficient lighting, building
improvements and other non-manufacturing energy efficiency
improvements.
The Attachment to this statement lists all of the 1999 award
winners. They are organized by award category and by corporate level.
Each listing gives the facility location and the name of the award
winning activity. This list shows the diversity of membership,
geography, and activity encompassed by this awards program.
American Chemistry Council members will continue the industry's
long-standing tradition of improving energy efficiency and reducing the
carbon intensity of our operations. However, many of our members
believe that much ``low-hanging fruit'' has been picked, and that
future energy efficiency and greenhouse gas emissions improvements with
current technology will be more difficult and more costly than in the
past.
ENERGY EFFICIENCY IMPROVEMENT TECHNIQUES
Some of this reported energy efficiency improvement over the years
resulted in changes in the composition of the industry's product mix;
that is, toward more higher value-added, less fuel-intensive specialty
products. However, the bulk of the improvement resulted from chemistry
companies using a variety of methods such as the following examples
drawn from the Council's Energy Efficiency Award Program.
Cogeneration/Combined heat and power
A company installed a new, highly efficient, state-of-the-art gas
turbine generator with a large heat recovery steam boiler. This
significantly reduced use of an aged cogeneration unit and boilers with
significant NOX emissions, displaced purchased electricity,
and enabled intermittent sales of excess electricity back to the grid.
Total plant NOX emissions are lower than before even with
much higher output, and energy savings are about 19.2% per unit of
production.
A company installed a second gas turbine cogeneration system to
meet expanded steam needs. The new unit has duel fuel capability and
uses byproduct gas from another on-site process as well as natural gas.
Use of byproduct gas displaced purchased natural gas and ended flaring
of the byproduct gas. Energy savings are about 30%, with associated
emissions reductions including NOX reductions from selective
catalytic reduction.
Because cogeneration/combined heat and power is especially
important to the business of chemistry as a means of continuing to
improve its energy efficiency and environmental performance, additional
information about this technology is provided in the following section
(page 8).
Improved process technologies
The Tephram' Diaphram used as a separator between anode
and cathode compartments of a chlorine production cell results in
energy savings of about 4.4% and improves product quality. This
proprietary technology is licensed to others.
By-product streams from three on-site locations that were formerly
incinerated are now collected, processed and used as feedstock for
another process. This results in energy savings of about 13%.
Increased use of insulation
Insulation was installed on critical components of a hot oil
furnace after analysis by infrared thermography indicated excessive
heat loss through these components. This resulted in energy savings of
about 11% per unit of production.
Higher-efficiency electrical motors and drives
A corporate team from various sites and departments built on
commercially available programs to develop comprehensive and detailed
electric motor management guidelines for use throughout the company.
Estimated potential energy savings expected to result when this program
is fully implemented are in the 3-5% range.
Improved boiler and furnace technologies
A new, energy efficient furnace designed by company staff replaced
an existing furnace nearing the end of its useful life. The new furnace
is 92% energy efficient compared to the old furnace's 82% efficiency.
Retrofit of an existing natural gas-fired boiler with a new, fuel-
efficient burner and automated control system resulted in plant-wide
natural gas consumption savings of about 9%.
Extensive modification of existing boilers to enable co-firing with
hydrogen that was no longer needed elsewhere at the site reduced the
need for natural gas and resulted in total site energy savings of 6.3%.
Computerization and other gains in process control
technologies
Software changes and better operator training improved the process
control of a large air compressor, resulting in energy savings of about
1.3% per unit of production.
Sophisticated analysis of relevant variables affecting voltage in a
mercury cell producing chlorine, development of a new computer program
to calculate and report critical data in real time, and better operator
training resulted in a 0.85% reduction in electricity use in this
highly energy intensive device.
Physical connection of heating, ventilation and air conditioning
(HVAC) systems in four office and research buildings, and installation
of variable speed drives, temperature sensors and equipment controllers
linked to a digital control system with computer interface resulted in
retirement of newly-superfluous equipment and energy savings of 33.7%
for the four buildings.
Improved recovery and use of waste heat, steam and by-products
Stack temperatures from waste heat boilers' flue gas were 100-200(F
too high because of inefficient heat transfer between the flue gas and
feedwater tubes. Cleaning of the tubes under appropriate environmental
safeguards improved heat transfer, lowered stack temperatures and
resulted in energy savings of about 16%.
Slightly-impure process steam was previously vented. Following
necessary analysis and low-cost infrastructure changes, this steam is
now used for its heat content, displacing purchased steam, and the
organic impurity is captured and remediated. Energy savings are about
1.8% per unit of production.
A stream from a hydrocarbon cracking plant contained hydrogen and
fuel-gas, primarily methane. While the hydrogen was recovered, the
fuel-gas often could not be recovered and was flared. Installation of
new piping, control systems and operating software resulted in 100%
recovery of the fuel-gas for use in boilers. Energy savings are about
1.5%.
Systematic energy efficiency improvement programs
A joint venture combining operations of three companies determined
to improve energy efficiency by identifying best practices among the
three companies and implementing them throughout the joint venture. A
comprehensive leadership structure and vigorous implementation plan
resulted in energy savings of about 5.4% per unit of production.
A company established an energy efficiency improvement program in
the early 1990s under a steering committee chaired by a division
president and consisting of very senior corporate management . Notable
aspects of the program included corporate technical support; site
energy surveys and mid-term goals; a company award program; and
publicity in the corporate newsletter. In 1999 energy savings were
about 10% per unit of production.
COGENERATION/COMBINED HEAT AND POWER
Because many chemical plants are large users of both steam and
electricity, they are ideally suited for cogeneration, which is the
sequential production of electricity and steam (useful thermal energy)
from the same energy input. Cogeneration units producing steam and
electricity attain double the fuel efficiencies of a typical electric
utility power plant.
Cogeneration units producing steam and electricity readily attain
fuel efficiencies of 65%-75%, as compared to 35% for a typical electric
utility. Even advanced gas turbine combined cycle electric utility
units can only achieve a 50% overall efficiency. These same advanced
gas turbines will achieve 75%-80% overall efficiency in a cogeneration
application.
The reason for the efficiency advantage is that a chemical plant
uses most of the steam from the cogeneration unit in its chemical
processes. Without cogeneration, this steam would have to be supplied
in some other manner (boiler steam, direct heating with natural gas,
etc.). In contrast to cogeneration technologies, a typical utility unit
would simply condense the steam and release the waste heat into the
atmosphere or cooling water.
Cogeneration offers significant environmental benefits. By
combining the production of steam and power, cogeneration facilities
burn far less fuel and release fewer emissions, including greenhouse
gas (CO2) emissions, than the combined emissions from
separate utility power plants and industrial steam generation
facilities.
Cogeneration units built close to the sites where their power is
consumed reduce power losses during transmission, alleviate
transmission congestion and reduce the need to build additional
transmission lines in many regions of the country. Reliability of power
supplies to all electricity consumers is therefore improved as more
cogeneration units generate ``on-site'' power.
The chemistry industry's cogeneration units provide steam and
electricity to their own chemical plants and are connected to
utilities' transmission and distribution systems. Section 210 of the
Public Utility Regulatory Policies Act (PURPA) ensures that any excess
electricity from a qualifying cogeneration unit can be sold to a local
electric utility. Equally important is that this section ensures that a
qualifying cogeneration unit can receive backup and maintenance power
from the utility at just and reasonable, nondiscriminatory rates.
Given the environmental benefits of cogeneration, its importance to
the chemistry industry and the current need for every available
kilowatt of power, now is not the time to repeal these provisions of
PURPA. Properly structured energy policy legislation should spur the
development of new cogeneration facilities that will help alleviate
power shortages and transmission congestion that many high-growth
states and regions are facing.
CHEMISTRY PRODUCT BENEFITS TO OTHER INDUSTRIES AND CONSUMERS
Council members will continue research and development of new
energy saving product innovations. Many products of the business of
chemistry are essential to intermediate consumers as well as end users
in improving their energy efficiency and reducing their CO2
and other emissions. Well-known examples are insulation, lubricants and
plastics.
Over the last two years the American Chemistry Council and the
American Plastics Council have contracted for life cycle analyses of
popular chemistry products by outside consultants. Results of these
analyses clearly demonstrate the energy and environmental benefits of
insulation used in refrigerators and freezers; ``housewrap'' used in
residential construction; and, most recently, plastic materials used in
automobiles. The Council intends to continue to support such analyses
as an important means of demonstrating and communicating the benefits
of chemistry.
THE GOVERNMENT'S ROLE
Government can support and facilitate energy efficiency improvement
and conservation throughout the economy in a number of ways. One
important way government can help is to devise and implement
appropriate fiscal and monetary policies to ensure the continued health
of the U.S. economy. A healthy economy facilitates company earnings
that can be used for investment in new plant and equipment and the
turnover of capital stock, and for private research and development.
Second, government can help by supporting research and development
of energy efficiency improvement and conservation technologies and
implementation of energy efficiency improvement and conservation
programs. Such activities, adequately funded, should be an essential
component of any national energy policy.
Third, government can help by removing existing government
barriers, and avoiding the creation of new barriers, to deployment of
more energy efficient technologies and equipment. New and existing
environmental policies should consider impacts, in particular
unintended impediments, on the ability to explore, produce and use a
variety of energy resources in an environmentally sound manner. The
Administration's National Energy Policy Development Group has
identified Clean Air Act New Source Review regulations, including
administrative interpretation, implementation and enforcement actions
as appropriate for review in this context. Current permitting and new
source review interpretations can often have the effect of retarding
and reducing energy efficiency upgrades and investment in new, cleaner,
and more efficient technology.
Congress can promote energy efficiency improvement and conservation
by providing financial incentives to industries that invest in highly
efficient cogeneration units. Incentives might include faster capital
cost recovery for cogeneration assets (e.g., shortened depreciation
schedules), and amendment of technical rules that sometimes require a
cogenerator to pay taxes on behalf of an electric utility to which the
cogeneration facility is connected. As an industry leader in
cogeneration, the business of chemistry will work with the Committee
and the Congress to develop targeted incentives that will effectively
promote these highly efficient forms of power generation.
The Council also strongly supports a market-based approach to
encourage electricity customers to reduce their power consumption in
times of peak demand. The Federal Energy Regulatory Commission (FERC)
has approved such an approach for the Western electricity market, and
we believe this should be extended nationwide. This approach would
allow electricity customers to sell back their contracted power to the
electric grid in times of peak demand. It promises to help reduce this
peak demand when electricity is needed most and would have a tempering
effect on prices by bringing demand closer into balance with supply.
The Council would like to emphasize that new government mandates
that impose additional costs on the business of chemistry, whether
punitive energy and/or emissions taxes, or hard caps on energy use or
energy-related or other greenhouse gas emissions, would be self-
defeating. They would reduce funds available to the chemistry business
for investment and research and development. This in turn would limit
our ability to invest in new, more energy-efficient and
environmentally-friendly capital equipment, as well as research and
development of new energy-saving and emissions-avoiding products and
processes. Government mandates of this nature should be avoided if the
business of chemistry is to fulfill its role in achieving energy
efficiency and conservation objectives as part of a comprehensive
national energy policy.
ILLUSTRATIONS OF ENERGY MARKET DISRUPTIONS' EFFECTS ON THE BUSINESS OF
CHEMISTRY
Notwithstanding the successful efforts of the business of chemistry
over many years to improve its energy efficiency, it remains vulnerable
to energy market disruptions and has been seriously affected by recent
energy market conditions. On February 28, 2001 the Council submitted to
this Subcommittee, in connection with the Subcommittee's hearing on
formation of a national energy policy, a statement for the record. In
that statement, among other things the Council provided examples of how
recent volatility in natural gas and electricity markets had disrupted
operations at chemistry facilities across the country. We invite the
Subcommittee's attention to that earlier statement. For convenience, we
quote the following excerpt from that statement:
A chemical plant in Chicago has recently seen dramatic
increases in natural gas prices. In the year 2000, natural gas
spending was 6.5% of the manufacturing budget but and today,
with nearly the same output natural gas, now consumes 20% of
the plant's manufacturing budget. Spending on natural gas has
now overtaken the plant's spending on wages.
A small Louisiana electro-chemicals producer eked out a modest
operating profit of about $700,000 dollars in 1999. In 2000,
the producer lost about $500,000. In 2001, if the plant
operates at budgeted rates throughout the year, it will lose at
least $6,000,000. The cause of the mounting operating losses is
rapidly escalating energy costs. The plant's cost of power
increased by 32% in 2000 and is expected to increase by another
40% in 2001, and there is no relief in sight.
Because of the exceedingly high cost of electricity in the
Seattle Washington area, local production of liquid nitrogen
and oxygen via an Air Separation Plant was shut down. On some
days the cost of power spiked to more than 35 times the normal
price. Without local production, hospitals and industry in
general are faced with shortages. Oxygen and nitrogen are
products vital to public health and the safe operation of many
industries such as the refining and chemical industries. Many
end users of oxygen and nitrogen in the western United States
who can get industrial gases are faced with surcharges,
distribution fees, and shortages.
An elemental phosphorus plant near Pocatello, Idaho, employing
440 employees and many contract workers, scaled back operations
because of high electricity costs. The plant uses four huge
electric arc furnaces to melt rock in extracting phosphorus
during the production process. Approximately 100 employee and
contractor jobs were displaced. Normally the plant's annual
electricity cost is $45 million which translates to $125,000
per day. If the plant were to operate at full production today,
which it cannot afford to do, that electricity cost would be
approximately $750,000 per day or $275 million on an annualized
basis.
A composites manufacturer (produces unsaturated polyesters)
experienced utility costs of $513,653 in January 2000. In
January 2001 its costs were $1,067,095. That's an increase of
$554,342. Almost all of this is due to the price of natural
gas. Styrene is the manufacturer's number one raw material--the
USA has gone from being the low-cost supplier to the high-
priced supplier in under 5 months, mainly driven by increases
in natural gas prices. The same company's emulsion plant
experienced a 67% increase in energy cost mainly due to natural
gas. In January 2000, the company paid $305,600 for natural gas
purchases. In January 2001, the bill was $759,6000.
CONCLUSION
The American Chemistry Council strongly supports Congressional and
Administration efforts to develop a national energy strategy to ensure
dependable, affordable and environmentally sound energy resources, now
and for the future. Energy efficiency improvement and conservation must
be essential components of this strategy. We thank the Subcommittee for
its contribution to those efforts. The American Chemistry Council is
committed to working with Congress and the Administration as they
proceed.
______
Prepared Statement of Sharon Kneiss, Vice President for Regulator
Affairs, American Forest & Paper Association
The American Forest & Paper Association appreciates the opportunity
to provide testimony to today's meeting of the Subcommittee on Energy
and Air Quality.
The American Forest & Paper Association represents more than 240
member companies and related associations that engage in or represent
the manufacturers of pulp, paper, paperboard and wood products.
America's forest and paper industry ranges from state-of-the-art paper
mills to small, family-owned sawmills and some nine million individual
woodlot owners.
The U.S. forest products industry is vital to our Nation's economy.
We employ 1.5 million people and rank among the top ten manufacturing
employers in 42 states, with an estimated payroll of $51 billion. Sales
of U.S. forest and paper products top $250 billion annually in the
United States and export markets. Products from America's forest and
paper industry represent more than eight percent of our country's
manufacturing output.
As the Nation's most capital-intensive manufacturing industry and
one of the country's most energy-intensive, the forest products
industry continues to look for ways to be more energy efficient and to
make greater use of biomass--a renewable fuel. Therefore, we encourage
policies that promote increased efficiency, development of more
efficient technologies and the use of diverse energy sources.
Furthermore, we encourage a regulatory approach that makes it easier
for facilities to adopt new technologies.
Energy shortages and price increases are hurting the
competitiveness of the forest products industry and putting additional
pressure on the already strained financial resources of our member
companies. This situation would be far worse, had it not been for our
industry's commitment to fuel efficiency and energy independence over
the past three decades. Since 1972, we have reduced our average total
energy usage by 30 percent (per ton of product produced). In addition,
we have reduced fossil fuel and purchased energy consumption by 53
percent and dramatically increased energy self-sufficiency. The strong
emphasis by our member companies on research and development into
cleaner, more efficient technologies has been responsible for this
success.
One of the areas where we have seen the greatest improvement is in
on-site electricity generation. Currently, the forest products industry
meets nearly 60 percent of our own energy needs. At many mills, self-
generated electricity not only serves our on-site production needs, but
also provides supplemental electricity to the surrounding electric
power grid. In fact, the forest products industry produces nearly 43
percent of our Nation's total self-generated electricity--more than any
other manufacturing sector.
Biomass sources--including wood chips, bark, sawdust and pulping
liquors--produce 85 percent of the onsite electricity generated in our
industry. Cogeneration processes allow the industry to turn these waste
materials into a renewable energy source, diverting the waste from
landfills, reducing reliance on fossil fuels and offsetting greenhouse
gas emissions. The forest product industry's use of renewable fuels
represents the equivalent of 205 million barrels of oil per year--which
is equal to taking 16 million cars off the road.
Following the 1992 Energy Policy Act that provided incentives for
efficiency research and development, the forest products industry was
the first to develop a partnership with the Department of Energy (DOE).
In 1994, the industry signed an agreement with DOE, formally
establishing the Agenda 2020 program--a voluntary partnership that
fosters cost-shared research and development projects. Over the past
six years, this partnership has allowed the industry to embark on
important research and development projects that promise new energy
efficiency and other technological innovations. Together we have made
some important breakthroughs, including the development of the Methane
de Nox boiler that burns sludge with lower emissions.
The industry's next goal is to add biomass gasification to its
energy technology portfolio. Black liquor is one biomass fuel created
during the chemical pulping process. Gasification converts these
pulping extractives into combustible gases that can be efficiently
burned like natural gas. If fully commercialized, this technology could
produce enormous energy and environmental benefits. First, it would
render the U.S. forest products industry completely energy self-
reliant. Second, it would generate a surplus of 22 gigawatts of power
to the grid--the equivalent of one-half of California's peak summertime
electric use. Finally, this use of biomass would remove 42 million tons
of carbon emissions per year and significantly reduce SOX,
NOX and other emissions. Thus, the realization of
gasification technology would significantly contribute to energy
security, the use of diverse fuels, greenhouse gas reductions and
overall environmental benefits.
Our member company, Georgia-Pacific, is building the first
demonstration biomass (black liquor) plant in Big Island, Virginia. It
is scheduled to go on-line in 2003. In addition, we hope to pursue
other demonstration tests over the next several years. Yet, as with any
investment with great potential for positive return, biomass
gasification research and development is costly and risky. The forest
products industry is moving forward, but we cannot do this alone. The
industry needs a consistent and committed partner to ensure successful
commercialization.
The Big Island project is part of the Agenda 2020 program. Forest
product industry participants provide 50 percent of the investment
capital for these demonstration projects. Partnerships, such as this,
promise new energy efficiency and other technological innovations. We
believe this sort of government-industry partnership should remain an
important component of our national energy policy and Congress should
continue to support these initiatives.
As research and development projects yield more efficient and
environmentally friendly production methods, our attention must turn to
making it easier for facilities to adopt new technologies. Right now,
forest product industry facilities are hindered in their adoption of
cogeneration and self-generation technologies by inefficient and
counterproductive permitting restrictions.
With its expensive 18-month permitting process, the Environmental
Protection Agency's New Source Review Program has had a pernicious
impact on our economy and our environment. It forces companies to use
fuels that are high in price and short in supply while discouraging new
investment in energy-efficient and environmentally-friendly
technologies and processes.
The one-two punch of increased fuel prices combined with an
economic downturn is wreaking havoc on the competitiveness of American
pulp and paper producers. As natural gas prices continue to spiral
upward, forest product manufacturers desperately need the flexibility
to substitute lower-cost alternative fuels to run their boilers.
American firms cannot afford to be locked into a single, high-cost fuel
source when they are literally fighting for survival in a global market
characterized by unregulated competitors and razor-thin profit margins.
Mr. Chairman, we believe there is an immediate need for policy
reforms that will accelerate--not hinder--projects that increase energy
efficiency and conservation. Research and development of new
technologies should be encouraged and supported. And streamlined
permitting processes should provide maximum flexibility for facilities
to meet energy needs in the most efficient, cost-effective and
environmentally sound manner possible.
______
Prepared Statement of Chevron Energy Solutions
Chevron Energy Solutions appreciates the opportunity to discuss the
need for energy efficiency in our country, and barriers we have
encountered in trying to do business with the Federal government to
increase energy efficiency in public buildings. We believe that some
small, but critical changes to current law would help increase the use
of Energy Savings Performance Contract provisions which we, as well as
many others, believe are underutilized. These changes would help both
public officials and contractors cut through the ``red tape'', and get
the job done of increasing energy efficiency in our public buildings.
By way of background, Chevron Energy Solutions is an energy
services company headquartered in San Francisco, California, with 12
offices nationwide. In July 2000, Chevron acquired the retail energy
services business of PG&E Corporation, and integrated the expertise
into Chevron's own proven capabilities in this area. Chevron Energy
Solutions has programs for energy management, energy efficiency, power
quality, and power reliability to meet the ever-changing and growing
demand of both private companies and public agencies. With the Federal
government, over the past several years, we have done and continue to
do a substantial amount of contract work for the Department of the Navy
and other Federal agencies (many high security agencies) in both energy
efficiency and infrastructure improvement upgrades. In the State of
California alone, we have implemented energy performance contracts for
community colleges and school districts, municipalities and other
government agencies in an effort to assist them in meeting the
challenges associated with energy shortages and escalating energy
costs. We are also under contract with the Metropolitan Washington
Council of Governments to make energy performance contracts available
to their member agencies and departments throughout the greater
metropolitan Washington area.
Energy Savings Performance contracts are an important and
innovative tool for government agencies to fund energy efficiency
measures. We estimate a savings of over $175 million in energy costs
could be saved in Federal buildings alone under existing law--and
substantially more if some changes are made to existing law. Government
facilities represent a significant opportunity to help us meet our
national energy goals. Our experience has shown that many of these
facilities have aging and energy inefficient equipment and
infrastructure that requires modernization to allow them to operate at
peak efficiency. To help address these needs, and provide a financial
mechanism to obviate the necessity of a large capital outlay, Congress
included ``performance contracts'' as part of the Energy Policy Act of
1992 to allow energy upgrades to be paid for through savings obtained
through energy efficiency.
We are very supportive of the energy contracting provisions in
current law, but we have learned that ``one size does not fit all'',
and increased flexibility is needed. We strongly advocate that changes
be made in existing law to provide for some of this additional
flexibility. If these changes were made, we believe that these
provisions would be more workable and utilized by more Federal
departments and agencies and could result in energy cost savings of
greater than $500 million. In addition, State and local government
agencies are adopting and implementing similar provisions, which mirror
the Federal statute.
The focus of current law is on ``cost savings'' and not necessarily
on ``energy savings''--and it is important that we also address
conservation as a means to help us meet our national energy goals.
Reducing energy use does not always correlate with cost savings,
although in many instances it does. The rising cost per unit of energy
may also mean that a performance contracting initiative may result in a
reduction in the total amount of energy consumed, yet there may be no
cost savings at all. Therefore broadening the scope of the law is not
only desirable, but it is entirely appropriate.
We would recommend that the following changes be made to existing
law:
(1) Broaden the definition of energy savings measures to include
infrastructure improvements that contribute to energy conservation,
including operational efficiency of building heating, ventilation and
air conditioning systems, lighting systems, building envelopes,
domestic and hot water systems, measures that result in verifiable
operational efficiencies within the building, and other comparable
measures. Certainly, these measures should be a part of the overall
definition because they represent the breadth of what energy efficiency
is about--that certainly operational changes are key to achieving this
goal. Efficiencies do not arise solely from one piece of equipment
within a facility, but from the interrelationship of systems within the
facility
(2) Allow for a single contract to cover work that is related to
implementing energy efficiency measures. In order to install energy
efficiency measures, often times other incidental work must be done
first. For example, asbestos may need to be removed prior to revamping
a building's electrical system or a roof repaired prior to revamping
the heating system. Under current law, the agency must let a separate
contract for this work although the work is related to installation of
the energy efficiency measures. This work could very well be done, and
should be done by the same contractor. If the Federal agency had the
option to provide one umbrella contract for all work related to
implementing the energy savings contracts, then this would eliminate
``red tape'', and the energy efficiency measures could be installed
faster and less expensively. In addition, Federal agencies should have
the option to finance these costs from their capital budgets.
(3) Expand provision to cover ``energy usage'' as a factor that can
be counted in determining the ``savings.'' This would provide
incentives for conservation, and not restrict the ``savings'' solely to
costs. We recommend that changes would provide for being able to
account for a corresponding reduction or change in energy use. With
rising energy costs, there may be no decrease in funds but yet energy
is being conserved.
(4) Provide incentives and educate school districts regarding
performance contracting. Public schools are continually plagued with
aging inefficient energy systems, and lack funds up front to pay for
the upgrades. Performance contracting is a tool that would allow public
schools to do the necessary upgrades without expending capital funds up
front. We recommend that DOE and the Department of Education work
together to develop incentives for public schools to use performance
contracts.
(5) Provide some flexibility in the methodology in how the energy
savings are verified. In current law, an ``annual energy audit'' is
required. An ``annual audit'' is not always necessary because energy
efficiency standards are in place and the use of these conventional
standards (which have already been verified) is accurate measurement.
For example, if there is a lighting retrofit, the specifications for
those lights include energy use and costs--therefore, ``an annual
energy audit'' performed by the contractor to verify energy savings is
unnecessary and redundant.
Again, we appreciate the opportunity to submit testimony for the
record and believe that these changes are needed to add flexibility to
this provision so that it will be more fully utilized and ultimately
increase energy efficiency at our government facilities. We are hopeful
that Congress will include these changes in the energy legislation now
being considered.
Thank you for your consideration.