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.

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.

New reports: Industry's role in addressing climate change

A new study by the World Wildlife Fund examines the need for US industries to undergo a fundamental transformation to decrease carbon emissions to necessary levels. According to the executive summary:

This report models the ability of low-carbon industries to grow and transform within a market economy. It finds that runaway climate change is almost inevitable without specific action to implement low-carbon re-industrialisation over the next five years. The point of no return is estimated to be 2014.

While WWF focuses on the need for the industrial sector to address climate change before the point of no return, a separate report by the Presidential Climate Action Project gives several important government recommendations for addressing industrial decarbonization.

Efficiency, as expected, plays a huge role in these recommendations. Among the recommendations are the bolstering of two critical DOE programs: Industries of the Future, and Industrial Assessment Centers. ACEEE has been advocating for these programs for many years, and we expect that they will certainly play a key role in addressing climate change in the industrial sector.

DOE Announces $155 Million for Industrial Energy Efficiency

DOE announced today they would be awarding over $155 million for industrial energy efficiency projects and technical assistance. "Many companies already realize that improving efficiency saves money while helping the environment," said DOE Secretary Steven Chu. "These projects will make energy efficiency technologies more widely available, cutting energy use and reducing carbon pollution across the country."

About $146 million was awarded to nine companies implementing energy efficiency projects in plants across the country.

The remaining $9.5 million was awarded to the university-based Industrial Assessment Centers (IAC), state agencies, regional partnerships, and a national technical assistance provider to offer local technical support for the industrial sector. These awards went to 15 IACs, 11 state energy offices/organizations, five regional efficiency partnerships, and one national technical assistance provider.

More detail on the grant selections can can be found here.

This announcement is a very good step for industrial energy efficiency. The bulk of the grant money will go toward the implementation of projects, in accordance with the goals of the stimulus package. Some funds will be retained for more strategic uses such as technical assistance which can beget even more projects down the road.

However, the demand for industrial energy efficiency remains extremely high. DOE has publicly stated that requests for this funding exceeded $10 billion, or nearly 65 times the funds available. The industrial sector continues to be undervalued by policymakers. Despite accounting for one-third of the energy use and 27% of greenhouse gas emissions in the United States (LBNL), the industrial sector has not been receiving appropriate consideration and funding to reflect this importance. As a reference point, industrial energy efficiency was given about 0.02% of stimulus funds, and receives about 4% of DOE Energy Efficiency and Renewable Energy budget.

ACEEE commends today's DOE grant allocation, and hopes that future policies and appropriation will give increased attention to the industrial sector.