DOE releases FY2011 Budget Request

The Department of Energy released their budget request for fiscal year 2011 today. While the Office of Energy Efficiency and Renewable Energy's budget is slated for a slight increase, the Industrial Technologies Program's budget request is the same as 2010's request - $100 million (although the actual 2010 budget as passed by Congress was only $96 million).

We are disappointed that the request is not higher. ACEEE recommends that the ITP budget should be $150 million, closer to the funding a decade ago.

However, we are also surprised (and still disappointed) at how the funds are apportioned. While funding for most cross-cutting research, CHP, and technology deployment is slightly up (from $84 in 2010 to $87 million in 2011), the Industrial Assessment Center program is still being run at the unsustainable level of $4 million, roughly unchanged in the past 5 years (except for a small amount of stimulus funds). The IAC's need closer to $8 million to properly run all 26 centers. For more info on the IAC, see here and here.

More importantly, industry-specific research, once the backbone of ITP, has been cut to almost nothing. ITP currently partners with the top energy-intensive industries, such as forest & paper products, aluminum, steel, metal casting, glass, and chemicals; in 2011 they will only fund projects for the chemicals and cement industries (a new addition to ITP).

But most surprisingly is the apparent plan to replace this proven method of partnering with industries to perform R&D with a new program called "Manufacturing Energy Systems". This program will supposedly conduct R&D and/or technology deployment at 2 major universities to address the technology needs of specific industries through "rapid innovation of new products and processes" to reduce energy and greenhouse gas emissions.

We're withholding judgment on this program until we see more details. It has potential to be an effective tool to reduce manufacturing energy use in this country, but we feel this activity should not be done at the expense of the proven methods of the Industries of the Future program.

ACEEE supports the work of the Industrial Technologies Program, but feels, along with a recent peer review of ITP, that it should focus more on industry-specific research.

The President has spoken often on the importance of the manufacturing sector in our economy, on how research and development is essential to securing our long-term economic growth, and on the vital role energy efficiency plays in increasing our energy independence and ensuring a clean energy future. However, he has not taken the necessary steps to support the only program in the federal government that is actively addressing all three.

ACEEE signs coalition letter in support of manufacturing EE jobs

In December, ACEEE and 26 other leading trade associations, industrial firms, and NGOs signed a letter in support of provisions in upcoming jobs legislation that will create jobs, improve energy efficiency in manufacturing, and help make American industry more competitive.

The letter can be read in full here [PDF].

Because the House of Representatives passed their own version of a jobs bill last month, the coalition letter was sent to Senators, specifically those on the Energy and Natural Resources Committee, those who are members of the Northeast-Midwest Senate Coalition, as well as to Majority Leader Reid and Minority Leader McConnell. The letter was also sent to key executive officials, including Energy Secretary Chu, Commerce Secretary Locke, and Senior Counselor for Manufacturing Policy Ron Bloom.

The Senate is expected to release preliminary drafts of its jobs bill in the next few days.

Forum on Energy Efficiency in Agriculture - February 7-9, 2010

The 3^rd Forum on Energy Efficiency in Agriculture is right around the corner!

Madison, Wisconsin
February 7-10, 2009
Monona Terrace Community Center

Learn how to cut energy costs with energy efficiency, new business opportunities with renewable energy production and carbon sequestration.

National agriculture leaders will speak, including Rick Tolman, CEO of the National Corn Growers Association and Roger Johnson, President of the National Farmers Union.

Regular registration for the 2010 Ag Forum and associated events ENDS January 18, 2010. We know budgets are tight, so register now at www.aceee.org/conf/10ag! You can find the program here.

Wisconsin’s Dairy Business Innovation Center (DBIC) is organizing an accompanying one-day event, the Profitability and Environmental Sustainability in the Dairy Industry Conference. For details on both of these important events, visit www.aceee.org/conf/10ag.

The hotel reservation deadline at the Hilton Madison Monona Terrace is January 15th. Go to: http://www.aceee.org/conf/10ag/index.htm#when to secure your reservations at the low conference rate of $125 per night. Mention ACEEE when making your reservations.

In addition, scholarships are available for interested farm families for the DBIC one-day event only. You can receive a $50 scholarship (maximum 2 per family) if you send a brief email to maggiemfitzsimmons@gmail.com outlining why you're interested in attending and why you need financial assistance at this time.

Register Now and we'll see you in Madison!

Obama's "Framework for Revitalizing American Manufacturing" a step in the right direction

On December 16, 2009, President Obama released a report on revitalizing manufacturing in the United States. The report lays out the current state of manufacturing in America, discussing seven key cost drivers, how government action--or inaction--can affect those costs, and how the Obama Administration plans to use government influence to improve American manufacturing.

Some key backgrounds discussed in the report are:

• the successes of American manufacturing: "the United States has had the largest increase in manufacturing output among major developed countries" since 1978
  
• that manufacturing directly provides quality jobs: manufacturing employees earn 22% more than service sector employees and are more likely to have employer-provided health care
• that manufacturing creates 3 jobs in other sectors for each job in manufacturing.
• the reasons for the decline in manufacturing employment
• the effect of manufacturing on communities.
  

The report goes details seven ways in which government can impact manufacturing costs and lays out specific policy proposals that will aid American manufacturers. The seven items are:

1. Provide workers with the opportunity to obtain the skills necessary to be highly productive.
2. Invest in the creation of new technologies and business practices.
3. Develop stable and efficient capital markets for business investment.
4. Help communities and workers transition to a better future.
5. Invest in an advanced transportation infrastructure.
6. Ensure market access and a level playing field.
7. Improve the business climate, especially for manufacturing.

While none of the individual policies are new (many call for increased funding for certain programs or cutting bureaucratic red tape for small businesses), this is the first time an Administration has acknowledged the impact government has on manufacturing and has made a coordinated effort to ensure the effect is a positive one.

ACEEE applauds this report as a vital first step in improving American manufacturing. However, the report underrates the role role energy efficiency can play in increasing manufacturing competitiveness. Energy efficiency lowers energy costs, which are typically higher in the U.S. than in many competing countries. This makes energy efficiency a key target for improving American manufacturing. Additionally, producing advanced energy-efficient products, much like producing renewable energy equipment, can allow American manufacturers to retool and serve a much needed market segment.

This is not to say that energy efficiency is absent in the Obama plan. There are a number of policies that would improve manufacturing energy efficiency in America, such as:

• Job training - while not directly targeting efficiency, a more educated and better trained workforce is a key need for improved industrial energy efficiency.
• Doubling R&D budgets - unfortunately the report does not mention the important research done through DOE's Industrial Technologies Program.
• Doubling funding for Manufacturing Extension Partnerships - the MEP program focuses on improving competitiveness more broadly, but also achieves gains in energy efficiency
• Advanced Energy Manufacturing Tax Credit - encourages manufacturers to retool to produce clean energy technologies, including energy-efficient products.
• Investments in advanced transportation infrastructure - lowers the cost of transporting freight.
• Modernizing the electric grid - enables energy efficiency through greater controls, among other benefits.
• Next-gen information and communications technologies - ICT has already been one of the largest contributors to manufacturing energy efficiency in the last 20 years.
• Passing comprehensive energy and climate legislation - if a climate bill like ACESA in the House or an energy bill like ACELA in the Senate are passed, it will mean billions of dollars for manufacturing energy efficiency. However, both bills fall short of what truly comprehensive energy legislation could accomplish.

One policy not mentioned in the report is DOE's Industrial Assessment Center (IAC) program. Expanding this program (as directed under the ACELA bill) would establish workforce training at universities and community colleges, improve competitiveness of American manufacturing, and reduce energy use.

Manufacturing grows in December

According to a new report released by the Institute for Supply Management, in December the U.S. manufacturing sector grew for the fifth straight month. The ISM's index of national factory activity rose to 55.9 from 53.6, putting it at its highest level since April 2006.

See the Reuters article for details.

McKinsey: Credit Starting to Flow

Is credit starting to flow?

Every six weeks, the Quarterly conducts an economic conditions snapshot survey of a panel of executives around the world. For the first time in more than a year, the proportion of respondents who report that their companies have sought external funds has changed significantly—increasing to 41 percent, from 32 percent in October. What’s more, a higher proportion of these companies actually received the money they sought. Our findings may indicate a rising—and apparently well-founded—hope among executives that credit will be available.


From McKinsey Consulting:

For more on the views of our executive panel, read “Economic Conditions Snapshot, December 2009: McKinsey Global Survey results” (December 2009).

Interagency report on international competitiveness and climate regulations released

On December 2, a number of collaborators from several federal agencies released a report [PDF] at the request of five Senators from manufacturing states: Evan Bayh (D-IN), Sherrod Brown (D-OH), Arlen Specter (D-PA), Debbie Stabenow (D-MI), and Claire McCaskill (D-MO).

The original letter from the Senators asked that the Administration offer an analysis of four primary points:

1. Determination of which industries will likely be eligible for the energy-intensive, trade-exposed (EITE) industry allocations provided in the American Clean Energy and Security Act of 2009 (HR 2454);
2. Assessment of the potential impacts of this legislation on EITE industries;
3. Identification of additional data that would be useful for determining trade impacts, allocation requirements, and greenhouse gas emission in other countries; and
   
4. The other measures within ACES that could help to mitigate the effects of a cap-and-trade system on EITE industries.

The report is thorough and impressive in its scope and depth. The executive summary states:

The modeling indicates that, even absent the mitigating allocation measures, total annual emission leakage to unregulated countries associated with a cap-and-trade program’s impacts on the international competitiveness of domestic “trade-vulnerable” industries is likely to be only on the order of 10 MMTCO2e. The modeling projects that the vast majority of emission reductions achieved by these industries under a cap-and-trade program will be from reductions in the emission-intensity of their production (e.g., increased energy efficiency, or shifts to lower-emission production methods), rather than from declines in production associated with increased imports from unregulated countries. Importantly, while output-based allocations can essentially eliminate the leakage that is associated with the reduced international competitiveness of domestic industry, if carefully designed, these allocations can do so while preserving incentives for industry to reduce the emission-intensity of its production. With such allocations, leakage associated with impacts on the international competitiveness of domestic industries falls to about one MMTCO2e, or about one percent of the estimated emission reductions from those industries.

There are several caveats outlined in the full report, as well as potential issues with the administrability of the EITE provisions of ACES.

ACEEE commends the report's authors for their hard work, and we hope that this will help to pave the way for Senate legislation that will lead to a more energy-efficient, rejuvenated, competitive, and sustainable manufacturing sector in the United States.