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Federal Document Clearing House
Congressional Testimony
May 3, 2001, Thursday
SECTION: CAPITOL HILL HEARING TESTIMONY
LENGTH: 6934 words
COMMITTEE:
HOUSE SCIENCE
SUBCOMMITTEE: ENERGY AND
ENVIRONMENT
HEADLINE: TESTIMONY ENERGY CONSUMPTION
TESTIMONY-BY: HOWARD GELLER , FORMER EXECUTIVE DIRECTOR
AFFILIATION: AMERICAN COUNCIL FOR AN ENERGY EFFICIENT
ECONOMY
BODY: TESTIMONY OF HOWARD GELLER, FORMER
EXECUTIVE DIRECTOR THE AMERICAN COUNCIL FOR AN ENERGY-EFFICIENT ECONOMY (ACEEE)
BEFORE THE COMMITTEE ON SCIENCE, ENERGY SUBCOMMITTEE U.S. HOUSE OF
REPRESENTATIVES HEARING ON ENERGY REALITIES: RATES OF CONSUMPTION, ENERGY
RESERVES, AND FUTURE OPTIONS May 3, 2001 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. 1 appreciate the opportunity to appear again before
the Science Committee. There are a variety of serious energy challenges
confronting the United States at this time. California is experiencing power
shortages and severe electricity price spikes. Power reliability problems could
spread this summer or in coming years to other regions such as the Pacific
Northwest or New York. Natural gas prices have significantly increased in many
parts of the country, causing skyrocketing home energy bills this past winter.
And our reliance on imported oil has grown due to a combination of declining
domestic oil supply and growing demand linked to the lack of fuel efficiency
improvement in motor vehicles. Oil imports more than doubled during the past 15
years and oil imports now exceed domestic oil production. 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 three-quarters of this
decline is attributable to real energy efficiency improvements and about
one-quarter is due to structural changes 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
estimates that increasing energy efficiency throughout the economy could cut
national energy use by IO percent or more in 2010 and about 20 percent in 2020,
with net economic benefits for consumers and businesses. ACEEE estimates that
adopting a comprehensive set of policies f6r 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. Whether the energy savings potential 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. Energy Efficiency Policy Recommendations Here are five
"top priority" energy efficiency policy recommendations from ACEEE and our
allies-. These policies involve a combination of "carrots" and "sticks"-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. They would not entirely
solve our nation's energy problems, but they would make a major contribution
towards addressing the energy challenges our nation is now facing. 1)Reject the
Deep Cuts in Funding Proposed for DOE's Energy Efficiency Programs and Instead
Expand These Programs in FY2002 The 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 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." 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,
over the past two decades. 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 other indicators of success and effectiveness besides the
20 projects reviewed in this report. DOE's Office of Industrial Technologies
(OIT) tracks the adoption and utilization of new technologies it has funded over
the years. It recently documented that OIT has contributed to the development of
over 45 commercially available technologies. These technologies, as well as some
of OIT's technical assistance activities, have reduced industrial energy use by
over 1.6 quadrillion BTUs cumulatively through 1999. This is equivalent to
industry cutting its energy bills by $6.5 billion. DOE's Office of Building
Technology, State and Community Programs (OBTS) has helped to develop and
commercialize a number of important energy efficiency technologies including
low-emissivity window coatings, electronic ballasts for fluorescent lamps, high
efficiency compressors for refrigeration equipment, and new housing designs and
retrofit techniques. Appliance efficiency standards established by DOE have
already saved consumers tens of billions of dollars on their utility bills.
Likewise, building code development, adoption, and support activities carried
out by OBTS have saved about 0.5 quadrillion BTUs of energy or $3.5 billion in
energy costs cumulatively through 2000. DOE's Office of Transportation
Technologies (OTT) has helped to increase the fuel efficiency of both passenger
vehicles and heavy trucks. OTT contributed to the development of new composite
materials such as reinforced polymers and techniques for using aluminum and
metal alloys in order to reduce vehicle weight and improve fuel economy. OTT
also is contributing to the development of the hybrid-electric vehicles U.S.
manufacturers will introduce over the next few years. These vehicles will get
25- 1 00% better fuel economy than typical vehicles produced today. OTT also has
helped to increase the efficiency and reduce the emissions of diesel engines
used in heavy vehicles, and its Clean Cities program has played a critical role
in promoting the purchase and use of alternative fuel vehicles. DOE's Federal
Energy Management Program (FEMP) has helped to reduce energy use per square foot
of floor area in Federal buildings by 19% since 1985, thereby cutting Federal
energy expenditures by over $6 billion cumulatively. The FEMP has trained over
13,000 Federal energy managers, assisted with the design of over 200 energy
savings projects in Federal facilities, and helped Federal agencies make use of
energy savings performance contracts. For each dollar invested in energy
efficiency in Federal buildings, there are typically $4 in energy cost savings
for Federal agencies over the life of the project. The Bush Administration has
proposed cutting energy efficiency R&D and technology deployment programs
(apart from grants to low- income households for home weatherization) by $180
million (29%) in FY2002. Some programs would be cut by 50% or more. Cutting
funding for DOE's energy efficiency programs will increase consumers' energy
bills, hurt U.S. economic growth, increase the likelihood of power shortages,
put upward pressure on energy prices, increase oil imports, and increase air
pollution. Deep cuts in DOE's energy efficiency programs also would harm public-
private partnerships that have been built up over many years and harm the energy
efficiency R&D and deployment "infrastructure" that exists at the national
labs, state energy offices, and elsewhere. These cuts should be rejected by the
Congress. In light of the serious energy problems our nation is facing, we
should expand, not cut, energy efficiency R&D and deployment programs. ACEEE
and our allies recommend increasing DOE's energy efficiency programs, both
technology R&D and deployment programs including grants for weatherization
of low-income households, by $170 million (20%) in FYO2. The increase should be
spread across the programs, covering R&D projects in all sectors as well as
deployment programs. Increasing funding for a broad array of energy efficiency
programs will help consumers and businesses lower their energy bills in the near
term, while developing the new technologies needed to address our energy
challenges over the medium and long term. In relative terms, this increase is
less than one percent of the overall DOE budget and would result in energy
efficiency programs receiving just 5 percent of the total DOE budget. Further
details concerning our budget recommendations are included in a new report
titled Sensible Energy Policies for Our Growing Economy which I would like to
submit to the Subcommittee. 2)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 IO 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. 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. 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 4 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. 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. 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 oil reserves today. The
avoided carbon dioxide emissions would reach about 82 million metric tons (MMT)
of carbon equivalent by 2010 and 225 MMT by 2020. The fuel consumption cap
proposed in S. 597 would result in a similar level of energy savings and avoided
C02 emissions in the near term (i.e., by 2010). 3) Adopt 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
they provide energy bill savings for households and businesses are around twice
costs (both the program costs and measure costs).' However, increasing
competition and restructuring have led to a decline in these "public benefit
expenditures" over the past five years. Total utility spending on all demand
side management programs (i.e., energy efficiency and peak load reduction) fell
by nearly 50% from a high of $3.0 billion in 1993 to $1.6 billion in 1998 (1998
dollars). 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 (kWhs)
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
Senator Jeffords (S. 1369) and Rep. Pallone (H.R. 2569) in the last Congress.
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. 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 130 TWh (3.5% of projected electricity use) in 2005 and
340 TWh (9% of projected use) in 2010." 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. 4)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. We recommend tax incentives for the following products:
Appliances. Ataxcreditof$50-
100formanufacturersofhighlyefficientclotheswashersand 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, Rep. Nussle, and
others. It is strongly supported by the appliance industry. 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. 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. Hybrid Electric and Fuel Cell Vehicles. Tax credits of up to
$5,000 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 April 24 by Sen. Hatch and others. 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 (S. 207).
Combined Heat and Power. We support either a IO% 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. 5)Enact or Strengthen Efficiency Standards on Various 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." 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). In order to provide
additional cost-effective savings under this program, we recommend three
actions: DOE, with adequate funding and encouragement from the Congress, should
commit to completing equipment standard rulemakings in a timely manner. These
rulemakings include initial standards for distribution transformers as well as
new, updated standards for commercial air conditioning systems and residential
heating systems. On-going proceedings should be completed within two years, new
proceedings within three years. The Congress should adopt new efficiency
standards for products now or soon to be covered by state efficiency standards.
Among the products that should be included are distribution transformers
(Congressional adoption will be quicker and easier than a DOE rulemaking),
.commercial refrigerators, exit signs, traffic lights, torchiere lighting
fixtures, and ice makers. 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 appliances and electronic
products such as televisions, VCRs, cable boxes, and audio equipment. Doing so
would substantially reduce the amount of electricity consumed when products are
not "on". The Congress should urge the Bush Administration to permit final
adoption of a SEER 13 efficiency standard for residential central air
conditioners and heat pumps. The Administration recently proposed rolling back
the standard issued in January from SEER 13 to SEER 12. The controversy over the
residential air conditioner standard will continue through this summer as DOE's
extended rulernaking process coincides with likely electric reliability problems
and surging prices in the west. Stepping up from SEER 12 to 13 will cut peak
electricity demand by 18,000 MW once the standard is fully phased in and cut
consumer electricity bills by over $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. ACEEE estimates that
these three steps can cost-effectively reduce energy use in 2020 by 1.0 quad,
nearly a 1% reduction in projected U.S. energy use. Consumers and businesses
would see their energy bills decline by approximately $7 billion per year by
2020. Savings in 2010 would be a little less than half this amount. Conclusion
ACEEE and our public interest allies are not the only organizations 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 just completed an in-depth report on our energy
challenges and what should be done about them. The Council concludes, "Energy
policy has underplayed energy efficiency and demand- management measures for two
decades." "Take a proactive government position on demand management. " and
"Review and establish new and stricter CAFE mileage standards, especially for
light trucks. " This is not the Sierra Club speaking, it's the Council on
Foreign Relations. 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." Many of these
proposals were incorporated in the Energy Policy Act of 1992, and the budget for
and impacts of DOE's energy efficiency programs rose throughout the previous
Bush Administration. To cite one other example, the PCAST report mentioned above
recommended doubling DOE's energy efficiency R&D programs between FY1998 and
FY2003, and estimated that this investment could produce a 40 to I return for
the nation. 14 The Congress increased funding for DOE's energy efficiency
programs about 30% during the past three years, but this falls well short of the
doubling called for by the PCAST. The PCAST panel that produced this report
consisted mainly of distinguished academics and private sector executives. Thus,
support for increasing federal funding for and enacting new policies to improve
energy efficiency is very broad. The current Bush Administration should make
improving energy efficiency a cornerstone of its energy strategy. But if the
Bush Administration fails to do so, the Congress should insist that energy
efficiency be properly valued and strongly supported in new energy legislation
and in appropriations for energy programs. That concludes my testimony. Thank
you for the opportunity to present these views.
LOAD-DATE: May 10, 2001, Thursday