ACEEE TESTIMONY

TESTIMONY OF STEVEN NADEL, EXECUTIVE DIRECTOR

THE AMERICAN COUNCIL FOR AN ENERGY-EFFICIENT ECONOMY

BEFORE THE SUBCOMMITTEE ON ENERGY AND AIR QUALITY,
COMMITTEE ON ENERGY AND COMMERCE,

U.S. HOUSE OF REPRESENTATIVES
HEARING ON NATIONAL ENERGY POLICY:
CONSERVATION AND ENERGY EFFICIENCY

June 22, 2001

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⁾



• 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⁾

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⁾

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. 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.



• 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.



• 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.

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.

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⁾

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.

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.

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.

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⁾

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⁾

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⁾

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.

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⁾

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.

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⁾

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.

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."

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⁾

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.

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.

^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.

^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.

^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.

^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.

^6. National Energy Policy Development Group, op. cit. (see note 4).

^7. Preliminary results of an ACEEE analysis to be published July 2001.

^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.

^10. Preliminary results of an ACEEE analysis to be published in July 2001.

^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.

^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..

^13. National Energy Policy Development Group, op. cit. (see note 4).

^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.

^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.

^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.

^18. EPA.2001. The Power of Partnerships, Climate Protection Partnerships Division, Achievements for 2000--In Brief. Washington, D.C.: U.S. Environmental Protection Agency.

^19. National Energy Policy Development Group, op. cit. (see note 4).

^20. PCAST, op. cit. (see note 16).

^21. EPA, op. cit. (see note 18).

^22. Council on Foreign Relations. 2001. Strategic Energy Policy Challenges for the 21^st Century. Forthcoming. Washington, D.C.: Council on Foreign Relations.

^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.

^25. National Energy Strategy: Powerful Ideas for America. 1991. Washington, D.C.: U.S. Government Printing Office.