Why EIA Funding Cuts May Disrupt Energy Efficiency Investments

Blog Post | May 02, 2011 - 1:54 pm

Last Thursday, the Energy Information Administration (EIA) announced cuts in Energy Data and Analysis Programs resulting from the Fiscal Year 2011 Budget deal. While the 14% annual cut looks small, because we are half-way through the fiscal year, this translates into a much larger cut for the remainder of the year, which ends in September. Among the reductions announced are national surveys that collect data on energy investment and usage — data that can’t be collected in the future if it isn’t collected now. While efforts to reduce the deficit necessitate painful cuts to important programs at many levels of government, the cuts at EIA are particularly harmful. These reductions will deprive energy users, businesses, utility regulators, and other policymakers of information they need to take advantage of opportunities in energy efficiency, which is the cheapest, quickest, and cleanest source of energy. 

Unfortunately, the decline in funding for EIA is not a new trend, and has most likely already resulted in lost opportunities for energy efficiency savings. These new cuts will take a toll on a number of important programs — examples and their consequences include:

  • Work on EIA's 2011 Commercial Buildings Energy Consumption Survey (CBECS) will be suspended. CBECS is the nation's only source of statistical data for energy consumption and related characteristics of commercial buildings. The last CBECS was published almost a decade ago in 2002/3. This survey is typically conducted every three or four years, but the 2007/8 version used an experimental method in an attempt to cut costs, which yielded results that were not statistically rigorous enough to publish. These data are used to design and implement energy efficiency programs around the country, and the less accurate the data, the harder it is to design programs to help commercial businesses save energy.
  • Data collection from smaller entities across a range of EIA electricity and coal surveys will be reduced. As we contemplate the impacts of impending EPA regulations on electricity generators, it is important to have accurate data for regulators and decision-makers for all the affected entities.
  • Upgrades to the National Energy Modeling System (NEMS) will be suspended. NEMS is the country's preeminent tool for developing projections of U.S. energy production, consumption, prices, and technologies; its results are widely used by policymakers, industry, and others in making critical decisions. NEMS and its suite of analytical tools are in need of significant updating to reflect changes in energy markets, technologies, and growing knowledge about market behavior. Suspending these changes means the Annual Energy Outlook (AEO) and other key EIA analyses required by Congress and relied on by all energy market stakeholders are based on dated methodologies.
  • Responses to requests from policymakers for special analyses will be limited.This deprives policymakers of a primary independent analytic resource that helps them understand the complex impacts on energy markets and the economy of legislation, regulation, and policy changes. 

As shown, these programs provide information that guides decisions made by energy users, lawmakers, and regulators at the federal, state, and local levels. Lack of good quality information has proven costly in the past. During the 1980s, poor forecasting, including underestimates of energy efficiency, resulted in significant overinvestment in electricity generation, resulting in not only the need to site power plants and transmission lines, but increased electric rates to recover the utilities’ costs of building that excess capacity. We are currently facing another era of investment in new power plants and infrastructure due to load growth and the potential retirement of aging coal plants. Given the fragile nature of the U.S. economy, it is essential that we avoid a repeat of a similar costly overinvestment around the country.

Additionally, EIA’s services are invaluable to businesses and institutions in all sectors of the economy that need energy information to make intelligent, strategic investment decisions. As any investor knows, uncertainty in market intelligence will discourage investment. This uncertainty can have many deleterious effects, from hospital administrators who will be unable to decide upon energy efficiency measures which could save hospitals money that could be directed to patient care, to owners of energy-related businesses such as heat-pumps or motor manufacturers who would be unable to determine potential market demand for their products.

While the EIA budget of $95.4 million may still seem high, the return on investment is incredible when you consider the fact that the activities this budget supports guide an energy market that was worth about $1.2 trillion dollars in 2006 (the last year for which we have reliable data), and affects almost the entire U.S. economy. As lawmakers wrestle with the difficult decisions necessary to pass the FY 2012 budget, almost every government supported program must necessarily come under review. In this case though, funding EIA’s efforts should be a high priority — the agency’s activities pay for themselves many times over.