State Current: States Move on Energy-Related Recovery Act Funding

Blog Post | March 31, 2010 - 8:00 pm

The one-year anniversary of the signing of the American Recovery and Reinvestment Act (ARRA) provided the opportunity for legislators and the public to examine its progress achieving the stated goals of both stimulating job growth and laying a foundation for sustained economic growth. Of interest for energy efficiency sector stakeholders is the status of implementation for a few programs in particular: the State Energy Program (SEP), Weatherization Assistance Program (WAP), and Energy Efficiency and Conservation Block Grant Program (EECBG). A spate of reports, Congressional briefings and hearings, and newspaper articles elucidated the challenges and successes of these programs so far. A report from the Department of Energy’s Inspector General (IG) on the Weatherization Assistance Program announced only a small fraction of homes had actually been weatherized, and only a small portion of funds actually spent. The main culprits for the delay are a handful of requirements embedded in ARRA legislation including the Davis-Bacon wage stipulations, Buy American requirements, and compliance issues with the National Historic Preservation and National Environmental Protection Acts.

A February report from the Government Accountability Office (GAO) explained the barriers affecting the implementation of all Recovery Act funding.  The Davis-Bacon wage stipulations required the Department of Labor to determine prevailing wage determinations for weatherization workers in each county in the United States, a requirement that never applied to the WAP or SEP before. Guidance is now complete for both WAP and SEP. The Buy American provisions in ARRA required guidance from the Department of Energy, which issued it in December 2009. The NEPA provisions have also been explained with DOE guidance, and NHPA issues are quickly being identified and resolved at the state and national level.

Now that the major obstacles have been resolved, it is expected that WAP will get on track to meet the 2012 goals for ARRA funding, completing 600,000 home retrofits. The Department of Energy anticipates the biggest boost in job creation by mid-summer. DOE Recovery Act programs reported over 16,000 full-time jobs directly created or saved in the last reporting period, in addition to 4,000 contracted jobs and 12,600 jobs for energy grants in lieu of tax credits. States have committed well over one-half of the SEP funds (grantees selected and awards made), and approximately $777 million out of the $3.1 billion appropriated is actually under contract.

Nevertheless, there is a misconception that the IG and GAO reports signal a failure for energy-related ARRA funding. It is important to remember that energy funds from ARRA were expected to roll out slower than other ARRA funding. The Recovery Act was designed to be a multi-year program — the first year providing fast-acting emergency relief, tax, and infrastructure measures and the following years offering energy programs that will underpin long-term economic growth. As an April GAO report predicted, only 1% of ARRA funds spent in FY2009 would be energy funds. Given the massive ramp-up required for WAP and SEP, and the effort needed to begin the EECBG, an entirely new program, the current situation is understandable.

The energy-related ARRA funds will allow cash-strapped state governments to lower utility bills. Schools, hospitals, and other public facilities will also use ARRA-funds to lower operating costs and invest energy savings into important services for communities. For example, in California, where state budget issues make national news, $25 million in SEP funds will establish a revolving loan fund to improve state government buildings. Similarly, The Utah State Energy Program (USEP) in partnership with the Utah Division of Facilities and Construction awarded $10 million dollars in ARRA grants and loans to multiple state agencies and higher education institutions for advanced energy modeling, energy efficiency retrofits, and renewable energy projects. USEP expects to leverage $60 million dollars with the grant monies.

The energy programs funded by ARRA will leverage substantial private sector investment, spurring job creation in industries hit hard by the recession such as construction and manufacturing. Michigan allocated $24 million for energy efficiency in small industrial operations and supplier expansion into renewable energy sectors. Ohio is targeting $15 million to industrial efficiency and will initiate a program with $30 million to provide low-interest financing to leverage non-public funds to facilitate energy efficiency, re-tool existing manufacturing operations to supply the renewable energy market, and foster businesses in the energy sector.

For more updates on energy-related ARRA spending in the states, see this report from NASEO.