ACEEE TESTIMONY

TESTIMONY OF PATRICK QUINLAN, ENERGY POLICY DIRECTOR

THE AMERICAN COUNCIL FOR AN ENERGY-EFFICIENT ECONOMY
ON THE U.S. DEPARTMENT OF ENERGY'S OFFICE OF ENERGY EFFICIENCY
AND RENEWABLE ENERGY PROGRAMS

DOE PUBLIC HEARINGS
WASHINGTON, DC

June 26, 2001

Thank you for the opportunity to provide comments to the Department of Energy on Energy Efficiency and Renewable Energy (EERE) programs. ACEEE is a non-profit organization dedicated to advancing technologies, programs, and policies that improve energy efficiency. We were founded in 1980 and have contributed in key ways to energy policy formulation and legislation during the past twenty years, including the Energy Policy Act of 1992 and the National Appliance Energy Conservation Act of 1987. We have maintained a solid reputation for providing valued observations of DOE energy efficiency programs for the past two decades, including candid assessments of program strengths and weaknesses. We appreciate the opportunity to provide input on DOE's EERE programs today.

This year's comments of DOE EERE programs, by ACEEE and others, are important because they can be used to inform policymakers addressing rising concerns about energy challenges in the United States. While there are needs for new energy generation and infrastructure, energy efficiency and conservation represent our best short-term options. The U.S. spent over $600 billion on energy last year, with U.S. oil imports climbing to approximately $120 billion, nearly $440 of imported oil for every American. These amounts would have been even higher if not for past investments in energy efficiency research and development (R&D) and deployment programs—and continued progress is critical for sustaining and increasing these benefits.

DOE's Energy Efficiency Programs are a Success

Last year, DOE documented the results of twenty of its most successful energy efficiency and renewable energy technologies and initiatives over the past two decades.¹ These technologies and activities have already saved the nation 5.5 quadrillion BTUs of energy, equivalent to the amount of energy needed to heat every household in the U.S. for about a year. 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.

Based on data published by the Energy Information Administration (EIA), ACEEE estimates that total primary energy use per capita in the U.S. in 2000 was almost identical to that in 1973. Over the same period, economic output per capita increased 74 percent. Also, 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 the rest is due to structural changes and fuel switching. 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. Between 1996 and 2000, GDP increased 19 percent while primary energy use increased just 5 percent. Today's energy problems would be dramatically worse if energy use had also increased by 19 percent during 1996-2000.

In 1997 the President's Committee of Advisors on Science and Technology (PCAST), a panel that consisted mainly of distinguished academics and private sector executives, conducted a detailed review of DOE's energy efficiency R&D programs. Based on this review, PCAST concluded 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." PCAST further recommended that the DOE energy efficiency budget should be doubled between FY1998 and FY2003, and estimated that this investment could produce a 40 to 1 return for the nation including reductions in fuel costs of $15—30 billion by 2005 and $30—45 billion by 2010.

ACEEE Energy Efficiency Policy Recommendations for DOE EERE

ACEEE believes that DOE's overall energy efficiency programs should be significantly expanded, given the effectiveness of these programs and the energy challenges now confronting our nation. Based on our review, we have identified several programs that we believe should be top priorities for program expansion. Our recommended priorities are not given in any particular order.

1. Lighting and Appliance Standards - Appliance standards provide huge benefits for consumers and the nation. Analyses by DOE and others indicate that in 2000, appliance and equipment efficiency standards saved 1.3% of U.S. electric use and reduced consumer bills by approximately $9 billion. Missing greater progress, DOE is now many years behind the statutory deadlines set by the Congress for establishing new or revised efficiency standards on a wide range of products. Increasing commitment is needed to move forward on high priority rulemakings on products such as furnaces, boilers, transformers, and commercial heating and cooling equipment, and to begin rulemakings on dishwashers and refrigerators. In addition, DOE should consider establishing standards on several products not currently covered by the standards program, such as torchiere lighting fixtures, consumer electronics, ceiling fans, and furnace and heat pump circulation fans. These recommendations conform with the National Energy Policy Group report recommendation to "expand the scope of the appliance standard program, setting standards for additional appliances where technologically feasible and economically justified."⁽²⁾
   
   
2. Building Equipment and Materials R&D - DOE has proposed downsizing the Equipment, Materials and Tools R&D in 2002. This reversal would cripple fundamental research on more efficient lighting, space conditioning and refrigeration systems, and windows. These programs are working on many promising, innovative energy efficiency measures with considerable private sector involvement and support.
   
   
3. Energy Star Program - DOE proposed a ten-percent scale-back in the Energy Star program in 2002. This modest program is playing a valuable role in educating consumers and overcoming barriers to the adoption of energy-efficient technologies, some of which DOE helped to develop. Additional support is needed to cover a wider range of products and increase promotion efforts, in light of the recommendations of the National Energy Policy Group report. Consumers will often choose high-quality, efficient investments if they have the information to inform their choices.
   
   
4. 4. Industries of the Future (Crosscutting) - IOF Crosscutting programs include very successful federal industrial energy efficiency initiatives, such as the Industrial Assessment Centers, Sensors and Controls, and Best Practices Motors, as well as important state IOF, Combustion, and Cost-Shared Plant-Wide Assessments. These programs foster technology transfer that enhances competitiveness, reduces energy use and cuts pollution. For example, the 26 Industrial Assessment Centers at universities across the U.S. provide valuable energy efficiency reviews for over 700 small and medium-sized businesses, resulting in savings of $36 million annually at an overall 5-to-1 annual cost to savings ratio. Each dollar of DOE funding for Best Practices Motors has been matched by $2.6 in funding from state and private sector partners.
   
   
5. Vehicle Technologies R&D - This is by far the largest component of DOE's Transportation Sector work, and contains major funding for work on both light and heavy duty vehicles within the PNGV and 21st Century Truck Programs. We strongly support the Hybrid Systems program, which focuses on R&D for hybrid vehicles and components that is high-risk and therefore might not be conducted independently by industry. Fuel cells have the potential to greatly reduce vehicle energy use and emissions, and DOE is supporting critical enabling technology and fuel cell systems R&D. There is a worldwide race underway to develop practical fuel cells for both stationary and vehicle applications. Cutting government support for fuel cell R&D in the U.S. would put our manufacturers at a competitive disadvantage. The Advanced Combustion Engine R&D is problematic in its focus on diesel engines, which are at once more efficient and more polluting than gasoline engines. Given the opportunities to achieve high fuel economy without threatening progress on criteria pollutants and air toxics, we have reservations about investing public funds in this program. Heavy Vehicles Systems R&D is another program we support, though we recommend greater openness to public input in the future. This program has set performance goals for truck fuel economy improvements that are significant. These targets would produce major economic and environmental gains and would not likely be achieved without DOE involvement.
   
   
6. Transport Technology Deployment - The Technology Deployment programs promote use of both alternative-fuel vehicles and advanced technology vehicles. They include the Clean Cities program, which is achieving significant alternative fuel vehicle deployment in certain markets, including school buses and delivery fleets, in a growing list of cities. Clean Cities provides a wealth of information to local coalitions interested in advanced technology and fuel-efficient vehicles and is a key player in a new initiative to help industry and the environmental community jointly promote "green vehicles." Technology Deployment also conducts an important Testing and Evaluation program to conduct performance and reliability testing of promising new hybrid-electric vehicles, both light-duty and buses, and helps Federal agencies increase their use of alternative fuel and advanced technology vehicles.
   

Industry Cannot be Relied Upon for 100 Percent of These Energy Investments

Private industry investments do not directly address national energy security, system reliability, environmental, and economic goals—for a variety of reasons. Industry may be too fragmented in a particular sector to fund significant R&D (e.g., in the building sector); deployment time-frames may be too long; or investment risk may be too great for any one business. A critical mass of expertise may not exist in an industry for a particular technology. The projected return for a particular application may be lower than for other non-energy investments. Competitive and financial market pressures make it increasingly difficult for the private sector to take full responsibility for long-term R&D.

DOE programs in energy efficiency in many cases form the programmatic foundation for collaborative funding from state, local governments and the private sector. These programs leverage considerable private investment, providing cost-sharing and broader participation. The high level of cost-sharing from private investment is a testimonial to the value of DOE's efficiency programs.

Conclusion

The Department of Energy has made and is continuing to make many valuable contributions towards increasing the energy efficiency of U.S. buildings, appliances, vehicles, and industries. In aggregate these programs have been very effective at reducing energy use, with program benefits many times the cost to the federal government.

Unfortunately, the Bush Administration has proposed cutting energy efficiency R&D and technology deployment programs in FY 2002. 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. Cuts in DOE's energy efficiency programs will harm public-private partnerships that have been built up over many years and harm R&D and deployment "infrastructure" that exists at the national labs, state energy offices, and elsewhere. In light of the serious energy problems our nation is facing, ACEEE recommends that DOE expand energy efficiency R&D and deployment programs by 20 percent annually, until the PCAST goal of doubling spending is met. As PCAST noted, "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.⁽³⁾

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^3. President's Committee of Advisors on Science and Technology, Panel on Energy Research and Development. Federal Energy Research and Development for the Challenges of the Twenty-First Century. Executive Office of the President, November 1997.