Congress is planning to consider three major pieces of energy-related legislation in 2009:

• An economic stimulus bill (just enacted)
• An energy bill
• Climate change legislation

We are referring to this as the “energy trifecta,” making this the busiest year for energy legislation in several decades. The economic stimulus bill was passed in mid-February and is discussed in the following story. The schedule for the other two are less clear, but our best guess is that an energy bill in the summer of 2009 and final climate legislation in early 2010 will emerge. It is also possible that energy and climate legislation will be combined—this is the approach the House of Representatives is taking, at least to start. Further information on the emerging energy and climate bills are discussed below. In addition, Congress will be working on two other bills that relate to energy: 1) a transportation bill that addresses such items as highway and mass transit funding, and 2) a water bill.  We will have further information on the transportation and water bills in the next Grapevine Online. 

Economic Stimulus Legislation

As referenced in a New York Times’ editorial on February 18, “An $80 Billion Start,” the economic stimulus package signed by President Obama on February 17 in Denver has about $80 billion in spending, loan guarantees, and tax incentives aimed at promoting energy efficiency, renewable energy sources, and higher gas mileage for cars. As a stand-alone measure, this investment amounts to the biggest energy bill in history! For energy efficiency, the bill directly allocates about $20 billion to efficiency, with significant additional pots of funds that include efficiency. Major efficiency programs include $5 billion going to support the weatherization of about one million low-income family homes per year; about $8.8 billion going for energy efficiency in federal facilities and vehicles; $6.6 billion for efficiency programs run by states and municipalities including upgrades to state and municipal facilities; and programs for residential, commercial, and industrial programs. For the latter programs, most of the details will be determined at the state and local levels.

Other efficiency-related provisions include about $6 billion for investments in various types of publicly assisted housing, a portion of which will go to energy efficiency; $4.5 billion for “Smart Grid” R&D, demonstration projects, and matching grants; $1.2 billion for R&D on efficiency and renewable energy; and $2.3 billion for Advanced Energy Investment Credits, a new 30% percent investment tax credit for the manufacture of “advanced energy property,” including energy conservation technology. Mass transit will also benefit from an investment of $17.7 billion for mass transit, Amtrak, and high speed rail – a nearly 70% increase over present spending levels.

This legislation should help the federal government, states, and municipalities to implement energy efficiency programs that create significant energy savings over the next few years. These agencies are now seeking to develop program details so that programs can be effective and can also begin quickly.

Please see our new Federal Economic Stimulus Legislation Web page for further information on the bill. We will be posting regular updates on stimulus efforts, so keep checking back.

Energy Legislation

Congress is now starting work on new energy legislation. It is likely to include a Renewable Energy Standard (RES, aka renewable portfolio standard), a variety of energy efficiency provisions, and provisions addressing some supply-side energy issues such as carbon capture and storage for coal-fired power plants, nuclear power, and off-shore oil and gas development. ACEEE is promoting energy efficiency provisions including these:

• Energy Efficiency Resource Standard:  EERS would set mandatory energy-saving targets for electric and gas utilities, building on policies that have been enacted in 18 states to date (discussed below).
• Building Codes:  This would establish energy-savings targets for model building codes and provide incentives to states to adopt these updated model codes. This provision passed the House in 2007 and is likely to come up again.
• Appliance Standards:  Federal minimum efficiency standards have been set for more than 40 products. New legislation may add a few additional products and may clarify aspects of the process by which USDOE periodically revises these standards.
• Energy Efficiency Tax Incentives:  Current tax incentives for efficient new homes and heavy-duty vehicles (trucks and buses) expire at the end of 2009 and could be extended. Refinements to the current commercial building tax deduction are also likely to be discussed.
• Energy-Saving Home Retrofits:  A coalition has formed to expand EPA’s Home Performance with Energy Star program nationwide and to add financial incentives and a variety of program enhancements.
• Building Labeling/Disclosure:  This is a provision to expand the current Energy Star building labeling program to include additional building types such as existing homes, and to provide assistance to state and local programs that promote use of these labels to building owners and prospective building purchasers and renters.
• Multifamily and Manufactured Housing: This would establish a competitive grant program for innovative projects to improve the efficiency of multifamily and manufactured housing. These homes need special attention because saving energy is more difficult in multi-family and manufactured housing and such housing is disproportionately used by low- and moderate-income families. 
• Industrial and Building Assessment Centers:  This would expand the current DOE Industrial Assessment Center (IAC) program and establish a complementary program for buildings. The IAC program trains industrial engineers, in part by having professors and students provide free energy assessments to small- and medium-sized industrial facilities. For both industry and buildings, ACEEE seeks to expand the training effort to include technicians, not just engineers.

Information on these and other potential energy efficiency provisions can be found on our Web site.

Energy Efficiency & Climate Change Legislation

Over the last several months, a number of organizations and individuals have been working together to develop proposals on how energy efficiency can be incorporated into any bill establishing a cap on carbon emissions. Including energy efficiency in a cap-and-trade bill is necessary because energy efficiency provides “avoided tons” of carbon at the lowest cost; therefore, energy efficiency reduces the cost of cap-and-trade because fewer new energy facilities are needed and because a smaller portion of existing facilities need to be upgraded to help meet emissions ceilings.

In addition to reducing greenhouse gas emissions, one of the principal aims of a national cap-and-trade program is to lower the overall societal cost of such reductions. Although a carbon cap is essential to ensure that the U.S. meets its emissions reduction goals, its impact on energy prices alone will not bring about some of the most cost-effective emission reductions due to a number of well-known market barriers to energy efficiency. 

A cap-and-trade program that maximizes the role of end-use energy efficiency in buildings, industry, and transportation systems, will achieve carbon reductions at a lower cost than a program that simply focuses on generators through a carbon cap and carbon price.Climate change legislation should aim to contain costs by advancing energy efficiency in two main ways, in addition to the carbon price:

• By providing funding for energy efficiency using revenue from carbon credits
• Through a set of complementary policies in an energy efficiency title to the legislation.

Use of  Cap-and-Trade Auction Revenues.  ACEEE recommends that funding for energy efficiency focus on state and utility programs serving all customer classes, low-income programs, third-party and end-user programs, and research, development, and demonstration (RD&D) programs. Low-income programs should address weatherization, multifamily and manufactured housing, and transportation issues that are unique to the low-income population. Third-party and end-user programs allow large market players such as energy service companies, large retailers, and large manufacturers to promote efficiency in multiple states in a uniform manner. We suggest programs to "incentivize" both substantial improvements in whole-building energy efficiency and for high-efficiency building equipment, consumer electronics, and household appliances. The policies recommended for RD&D focus on doubling the funding for clean energy:

• RD&D for the Offices of Energy Efficiency and Renewable Energy, Science, and Electricity Delivery and Reliability within USDOE
• additional funding for the new Advanced Research Projects Agency - Energy (ARPA-E).

Underlying the recommended energy efficiency programs and policies is the development of procedures to evaluate, measure, and verify energy savings to ensure that the suggested programs are achieving the desired outcomes.