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93–758PS 2004

THE IMPACT OF FEDERAL ENERGY

EFFICIENCY AND RENEWABLE

ENERGY R&D PROGRAMS

HEARING

BEFORE THE

SUBCOMMITTEE ON ENERGY

COMMITTEE ON SCIENCE

HOUSE OF REPRESENTATIVES

ONE HUNDRED EIGHTH CONGRESS

SECOND SESSION

MAY 19, 2004

Serial No. 108–59

Printed for the use of the Committee on Science

(

Available via the World Wide Web: http://www.house.gov/science

(II)

COMMITTEE ON SCIENCE

HON. SHERWOOD L. BOEHLERT, New York, Chairman

RALPH M. HALL, Texas

LAMAR S. SMITH, Texas

CURT WELDON, Pennsylvania

DANA ROHRABACHER, California

KEN CALVERT, California

NICK SMITH, Michigan

ROSCOE G. BARTLETT, Maryland

VERNON J. EHLERS, Michigan

GIL GUTKNECHT, Minnesota

GEORGE R. NETHERCUTT, JR.,

Washington

FRANK D. LUCAS, Oklahoma

JUDY BIGGERT, Illinois

WAYNE T. GILCHREST, Maryland

W. TODD AKIN, Missouri

TIMOTHY V. JOHNSON, Illinois

MELISSA A. HART, Pennsylvania

J. RANDY FORBES, Virginia

PHIL GINGREY, Georgia

ROB BISHOP, Utah

MICHAEL C. BURGESS, Texas

JO BONNER, Alabama

TOM FEENEY, Florida

RANDY NEUGEBAUER, Texas

VACANCY

BART GORDON, Tennessee

JERRY F. COSTELLO, Illinois

EDDIE BERNICE JOHNSON, Texas

LYNN C. WOOLSEY, California

NICK LAMPSON, Texas

JOHN B. LARSON, Connecticut

MARK UDALL, Colorado

DAVID WU, Oregon

MICHAEL M. HONDA, California

BRAD MILLER, North Carolina

LINCOLN DAVIS, Tennessee

SHEILA JACKSON LEE, Texas

ZOE LOFGREN, California

BRAD SHERMAN, California

BRIAN BAIRD, Washington

DENNIS MOORE, Kansas

ANTHONY D. WEINER, New York

JIM MATHESON, Utah

DENNIS A. CARDOZA, California

VACANCY

VACANCY

VACANCY

SUBCOMMITTEE ON ENERGY

JUDY BIGGERT, Illinois, Chair

RALPH M. HALL, Texas

CURT WELDON, Pennsylvania

ROSCOE G. BARTLETT, Maryland

VERNON J. EHLERS, Michigan

GEORGE R. NETHERCUTT, JR.,

Washington

W. TODD AKIN, Missouri

MELISSA A. HART, Pennsylvania

PHIL GINGREY, Georgia

JO BONNER, Alabama

SHERWOOD L. BOEHLERT, New York

JOHN B. LARSON, Connecticut

NICK LAMPSON, Texas

JERRY F. COSTELLO, Illinois

LYNN C. WOOLSEY, California

DAVID WU, Oregon

MICHAEL M. HONDA, California

BRAD MILLER, North Carolina

LINCOLN DAVIS, Tennessee

BART GORDON, Tennessee

KEVIN CARROLL Subcommittee Staff Director

TINA M. KAARSBERG Republican Professional Staff Member

CHARLES COOKE Democratic Professional Staff Member

JENNIFER BARKER Staff Assistant

KATHRYN CLAY Chairwoman’s Designee

(III)

C O N T E N T S

May 19, 2004

Page

Witness List ............................................................................................................. 2

Hearing Charter ...................................................................................................... 3

Opening Statements

Statement by Representative Judy Biggert, Chairman, Subcommittee on Energy, Committee on Science, U.S. House of Representatives ........................... 11

Written Statement ............................................................................................ 12

Statement by Representative John B. Larson, Ranking Minority Member,

Subcommittee on Energy, Committee on Science, U.S. House of Representatives ....................................................................................................................... 13

Written Statement ............................................................................................ 14

Statement by Representative Sherwood L. Boehlert, Chairman, Committee

on Science, U.S. House of Representatives ........................................................ 16

Prepared Statement by Representative Jerry F. Costello, Member, Subcommittee on Energy, Committee on Science, U.S. House of Representatives ....................................................................................................................... 15

Statement by Representative Brad Miller, Member, Subcommittee on Energy,

Committee on Science, U.S. House of Representatives ..................................... 15

Witnesses:

Mr. Steven M. Nadel, Executive Director, American Council for an EnergyEfficient Economy

Oral Statement ................................................................................................. 17

Written Statement ............................................................................................ 19

Biography .......................................................................................................... 27

Financial Disclosure ......................................................................................... 30

Mr. Paul Konove, President, Carolina County Builders of Chatham County,

Inc.

Oral Statement ................................................................................................. 32

Written Statement ............................................................................................ 33

Biography .......................................................................................................... 41

Ms. Vivian E. Loftness, Head, School of Architecture, Carnegie-Mellon University

Oral Statement ................................................................................................. 41

Written Statement ............................................................................................ 44

Biography .......................................................................................................... 56

Financial Disclosure ......................................................................................... 57

Mr. John B. Carberry, Director, Environmental Technologies, DuPont Central

Research & Development

Oral Statement ................................................................................................. 58

Written Statement ............................................................................................ 59

Biography .......................................................................................................... 61

Mr. Peter R. Smith, President, New York State Energy Research and Development Authority, New York State

Oral Statement ................................................................................................. 62

Written Statement ............................................................................................ 64

Biography .......................................................................................................... 66

Page

IV

Mr. Daniel L. Sosland, Executive Director, Environment Northeast

Oral Statement ................................................................................................. 67

Written Statement ............................................................................................ 69

Discussion ................................................................................................................. 76

(1)

THE IMPACT OF FEDERAL ENERGY EFFICIENCY AND RENEWABLE ENERGY R&D

PROGRAMS

WEDNESDAY, MAY 19, 2004

HOUSE OF REPRESENTATIVES, SUBCOMMITTEE ON ENERGY, COMMITTEE ON SCIENCE, Washington, DC.

The Subcommittee met, pursuant to call, at 10:06 a.m., in Room

2318 of the Rayburn House Office Building, Hon. Judy Biggert

[Chairman of the Subcommittee] presiding.

2

3

HEARING CHARTER

SUBCOMMITTEE ON ENERGY

COMMITTEE ON SCIENCE

U.S. HOUSE OF REPRESENTATIVES

The Impact of Federal Energy

Efficiency and Renewable

Energy R&D Programs

WEDNESDAY, MAY 19, 2004

10:00 A.M.–12:00 P.M. 2318 RAYBURN HOUSE OFFICE BUILDING

1. Purpose

On Wednesday, May 19, 2004, the Subcommittee on Energy of the U.S. House of

Representatives’ Committee on Science will hold a hearing to examine the potential

contribution of energy efficiency and renewable energy to the Nation’s energy needs.

The hearing will focus on the contributions of the renewable energy and efficiency

R&D programs at the Department of Energy.

2. Witnesses

Mr. Steven Nadel is the Executive Director of the American Council for an EnergyEfficient Economy (ACEEE), a non-profit research organization that works on programs and policies to advance energy-efficient technologies and services.

Mr. Paul Konove is President of Carolina Country Builders of Chatham County

Inc., a company that specializes in custom solar home design and construction.

Ms. Vivian Loftness is Head of the School of Architecture at Carnegie-Mellon University. Her design and consulting work has led to the design and construction of

numerous energy conserving buildings here and abroad.

Mr. John B. Carberry is Director of Environmental Technology for the DuPont

Company in Wilmington, Delaware. His responsibilities include leading DuPont’s efforts to find and use affordable renewable energy and energy efficiency technologies.

Mr. Peter Smith is President of the New York State Energy Research and Development Authority (NYSERDA).

Mr. Daniel L. Sosland is Executive Director of Environment Northeast, a nonprofit research and advocacy organization, working on energy efficiency and renewable energy, climate change and air quality issues.

3. Overarching Questions

The hearing will address the following overarching questions:

• What are the likely U.S. energy needs for the coming decades? What is the

potential for energy efficiency and renewable energy to help meet those

needs?

• What are the public benefits of energy efficiency and renewable energy, and

what is the proper role for the Federal Government in helping to reap those

benefits?

• How have energy efficiency improvements contributed to meeting current energy demands? What programs at the State and federal level, along with programs implemented by industry, have been most successful at promoting energy efficiency and the use of renewable energy resources?

4. Overview

Over the past two decades, the U.S. has become increasingly dependent on foreign

sources of energy, particularly oil and natural gas. The U.S. imported 27 percent

of its energy (61 percent of its petroleum, of which 70 percent is used for transportation) in 2001. Assuming that current conditions continue into the future, often referred to as a ‘‘business-as-usual’’ scenario, imports are projected to grow to 39 perVerDate 11-MAY-2000 21:24 Dec 18, 2004 Jkt 093758 PO 00000 Frm 00007 Fmt 6633 Sfmt 6621 C:\WORKD\ENER04\051904\93758 SCIENCE1 PsN: SCIENCE1
4

1 Annual Energy Outlook 2004, p. 133. Energy Information Administration.

cent of total energy use, and 76 percent of petroleum use by 2025.1 As the country

looks to reduce its dependence on imported energy, there are four potential options:

increase the Nation’s energy efficiency, increase the domestic production of fossil

fuels, increase the use of nuclear power, and increase the use of renewable energy.

All of these options face unique challenges to provide the 136 quadrillion BTUs the

United States is projected to use in 2025. In fact, it is likely that only a combination

of approaches will yield enough energy to sustain economic growth.

Most experts agree that if the United States is going to reduce its dependence on

imported energy, renewable energy and energy efficiency will need to meet an increasing percentage of energy demand in the United States over the next 20 years.

This is particularly true in the near-term since energy efficiency improvements can

reduce demand more quickly than longer-term development of new sources of nuclear or fossil-based energy can expand supply. Many of the additional public benefits attributable to energy efficiency and renewable energy, such as reduced emissions and better peak-load management, are not reflected in their price to consumers.

Energy efficiency is better management of processes, equipment, personnel, and

other resources to reduce energy use. For example, by actively managing their energy-intensive industrial processes, the DuPont Company has kept energy use constant since 1990, while production has increased by 40 percent over the same period. Although accelerated efficiency improvements could make a significant impact

on demand, there will still be a need for new sources of energy. To meet the growth

in demand, the U.S. will require a mix of energy sources, including renewable energy resources. Renewable energy sources such as wind and solar power are competitive in some markets—particularly sunny or windy areas, regions with high energy costs, or specific niche applications—but some expert suggest, that with additional technology improvements, wind and solar power could be cost-competitive in

nearly all regions of the country.

Market Barriers

There are significant market barriers to the wider use of energy efficiency and renewable energy to reduce overall demand and substitute for imported energy. Conventional energy technologies have a head start in terms of experience and existing

infrastructure, and end-users who might invest in renewable energy and energy efficiency technology do not always realize the full benefits of their investments under

current market structures. A familiar example is the landlord-tenant problem,

where the landlord who pays for efficiency upgrades does not receive the benefits

of the investment; savings go to the occupants of a building who pay the energy

bills.

When electricity consumers do improve their end-use efficiency, results can be

dramatic. In fact, upgrading the energy efficiency of existing facilities is often less

expensive than installing new generating and transmission capacity. According to

experts, efficiency improvements often produce co-benefits. More efficient lighting,

for example, can reduce cooling costs and improve productivity. Including the savings from reduced energy costs and co-benefits, efficiency improvements can actually

provide a return of up to four cents per kilowatt-hour (¢/kWh). Even without co-benefits, lighting, refrigeration, and space heating improvements typically cost between

0–3 ¢/kWh, well below the average cost of electric power. Additionally, there are numerous public benefits from these kinds of improvements. Avoided emissions, reduced infrastructure requirements, reduced sensitivity to fuel-price volatility, and

reduced physical disturbances to the energy system, are benefits to the public that

are generally not included in the costs borne by consumers.

For renewable energy, the primary barrier is cost. Renewable energy is also relatively immature compared to other energy technologies. Immature technologies

tend to fall in cost faster than conventional technology because manufacturers have

less knowledge and experience working with them. Therefore federal R&D investments and production incentives can have a large impact on immature technologies,

by helping manufacturers reduce costs. For example, Figure 1 shows federal support

for photovoltaics R&D and the cost reductions in photovoltaic solar modules that occurred over the same period of time, although it is difficult to isolate the impacts

of federal spending from other factors. Similar cost reductions over time are seen

for other renewable energy technologies.

5

2 ‘‘Electricity Generation and Environmental Externalities: Case Studies September 1995,’’ p.

44, Energy Information Administration.

Another barrier to accelerated market penetration of renewable energy resources

is the fact that their lower environmental impact is not reflected in the price of energy. Although the economic value of the environmental impacts of energy use is

difficult to quantify, some estimates of the full cost of energy technologies calculate

the total costs of renewable energy as lower than the total current cost of conventional technologies.2

Another benefit of energy efficiency and renewable energy is their capacity to reduce the peak demand for electricity and natural gas. By displacing the usage of

peak generation plants (which are typically the most expensive to operate, the least

efficient, and have higher emissions) the use of energy efficiency and renewable energy technologies can lower the price of electricity and natural gas for all consumers, whether or not they directly purchase renewable power or an energy efficient appliance. Both the National Petroleum Council and the American Council for

an Energy Efficient Economy have cited energy efficiency as a key step in reducing

natural gas prices in the short-term, and reducing price volatility in the longerterm.

R&D Funding

Energy efficiency program funding has varied over the years, peaking, along with

energy prices, in the early 1980s. Recently, efficiency R&D programs have been flatfunded at best, with efficiency R&D programs cut by 10 percent ($63 million) in the

President’s Fiscal Year 2005 (FY05) budget request. These funding cuts are proposed even though energy efficiency R&D funding has been shown to be highly costeffective. In response to a Congressional request to examine the effectiveness of

DOE’s energy efficiency programs, a National Academy of Sciences study estimated

that for every dollar spent on all efficiency programs between 1978 and 2000 more

than four dollars of economic benefits were realized. For example, the Academy estimated that the benefits from efficient lighting research returned $5.3 billion to the

public in the form of lower energy bills, while the cost of this research was only $2.5

million, including $755,000 paid by industry. Renewable energy has fared better, increasing by five percent in the FY05 request, although the largest increase is requested for the hydrogen and fuel cell programs.

6

5. Background

Energy Efficiency

Historically, energy efficiency improvements have reduced the need for more energy production. Energy intensity (energy consumed per unit of output) has improved by an average of one to two percent per year in the U.S. The International

Energy Association (IEA) estimates that without the improvements made since 1973

in processing and using energy, world energy use in the year 2000 would have been

50 percent higher—in the U.S. this would be approximately 50 quadrillion BTUs

(quads). When a concerted effort is made to improve energy efficiency, reductions

in demand can be even larger. Several states have implemented their own programs, with excellent results. New York State reduced energy intensity by average

2.7 percent per year from 1977–1999, and some states have realized annual efficiency improvements greater than three percent. Federal facilities spent $6 billion

less in 2001 than they did in 1985 (in constant 2001 dollars), and used 31 percent

less energy, in part due to improved energy efficiency.

Energy efficiency improvements can be realized relatively quickly, since there are

no delays for siting and construction. In several state programs, utilities have discovered that paying customers to reduce demand is less expensive than building

new generation equipment. On a cost per kilowatt-hour basis, efficiency improvements are often the least expensive form of ‘‘new generation.’’

Renewable Energy

Renewable energy generation currently represents a small fraction of the energy

portfolio in the U.S., but it is growing rapidly. As Figure 2 shows, at the turn of

the last century, oil and gas had limited market shares, but were able to dominate

the market within fifty years. Wind and solar photovoltaics have the fastest growth

rates in the electricity industry worldwide, with wind generation rates growing at

roughly 35 percent per year, and photovoltaics growing at 25 percent per year.

Japan is leading the pack by installing 219 Mega-Watts (MW) of solar photovoltaic

generating capacity in 2003 alone.

7

There are also signs in Europe that renewables can supply a large fraction of electrical power. In some regions of Spain and Germany, and all of Denmark, wind supplies more than 10 percent of the electricity demand throughout the year, and in

some states in Germany wind provides over 50 percent of local electricity needs for

certain months.

As a consequence of aggressive government programs to support wind and solar

power technology development and deployment, the Japanese and European manufacturers’ market shares of wind and solar power generation equipment have increased dramatically, while the U.S. manufacturers’ market share has declined. Japan’s share of the world solar photovoltaics market went from 26 percent to 49 over

eight years from 1995 to 2003, while U.S. share of the world market went from 45

percent in 1996 to 12 percent in 2003. Similar declines in the U.S. share of the

world market for wind equipment can be seen, with the majority of the increases

captured by European manufacturers.

Current Activities

Despite the barriers, numerous companies, individuals and government entities

have invested in efficiency improvements and renewable energy and have seen large

returns. Dupont has kept energy use constant since 1990, while production has

grown 40 percent, for a savings of $1.5 billion. This type of success has been replicated in other companies and industrial sectors, with large corporations such as

BP (the international energy firm), IBM, Kimberly-Clark and others setting efficiency as a high-priority goal for improving profitability. In the buildings sector, efforts by the joint Environmental Protection Agency (EPA)–Department of Energy

(DOE) EnergyStar program and voluntary standards released by the Green Building Council, an independent non-governmental organization, have contributed to

growth in the high-efficiency buildings market. These efforts have also expanded the

market for on-site renewable generation.

State governments have also taken an active role in promoting efficiency and renewables. In response to calls for conservation during the electricity crisis of 2000

and 2001, consumers’ efficiency efforts produced a 10 percent reduction in demand

in less than a year. California is currently promoting demand response and energy

efficiency technologies to meet demand before considering new fossil generation.

More generally, several states with strong efficiency programs were able to reduce

energy intensity by more than three percent per year from 1977–1999.

The Federal Government has several current activities aimed at increasing the

use of highly efficient and renewable technologies. These include the R&D in the

Office of Energy Efficiency and Renewable Energy (EERE) at DOE, with a funding

request of $919 million in 2005. This amount represents a proposed decrease in the

FY 2005 budget request, by 10 percent ($63 million) versus current spending. Renewable energy has fared better, increasing by five percent in the 2005 budget request, although the largest increase was for the hydrogen and fuel cell programs.

8

3 Rosenfeld, Arthur H., Pat McAuliffe, and John Wilson. ‘‘Energy Efficiency and Climate

Change.’’ Encyclopedia on Energy, edit. Cutler Cleveland, Academic Press, Esevier Science,

2004. 4Loftness, V. ‘‘Improving Building Energy Efficiency in the U.S.: Technologies and Policies for

2010 to 2050,’’ proceedings of The 10–50 Solution: Technologies and Policies for a Low-Carbon

Future. Pew Center on Global Climate Change and the National Commission on Energy Policy. 5The Energy Information Administration is the most commonly cited source for domestic energy demand projections. All of its base projections, to ensure consistency, assume no changes

in policy. The projections also do not account for variations in R&D spending.

As Table 1 shows, non-hydrogen research in EERE would decline by 10 percent

under the Administration’s request.

The Federal Government has also set efficiency standards for several appliances

in recent years, which have resulted in large reductions in demand. The benefits

have been significant, reducing residential heating, cooling and refrigeration energy

use by 25 percent, 60 percent, and 75 percent respectively.3 Four pending standards

are expected to save consumers $10 billion in energy costs by 2010.4 Federal tax

incentives for electricity produced from wind are credited by experts with boosting

the market share of wind generation, although the wind production tax credit expired on December 31, 2003. Incentives for wind and other renewable generation,

as well as credits for highly efficient technologies, are included in several legislative

proposals, including H.R. 6, the Energy Policy Act of 2003.

The Federal Government has also attempted to lead by example in the marketplace. Federal purchases of renewable energy totaled 362 gigawatt hours (GWh) in

2001, with a goal of 2.5 percent of electricity use by 2005, or 1,384 GWh. By an

Executive Order issued in 1999, which the Bush Administration has continued to

implement, federal buildings are required to improve their energy efficiency by 30

percent by 2005, and 35 percent by 2010 compared with baseline energy use in

1985. By creating a market for energy efficient and renewable technologies, the government can use its purchasing power to lower the technology adoption costs for

other consumers.

Potential

If all states promoted energy efficiency as successfully as the five best states, the

reduction in energy intensity (defined as unit of production per unit of energy consumed) would be 2.4 percent per year, a 50 percent improvement over current annual projections.5 If this level could be sustained, the savings in 2020 would be the

equivalent of 3.4 billion barrels of oil.

9

Some of the most impressive benefits come from the combination of renewables

and efficiency. High efficiency homes with solar power systems on the roof are allowing the creation of homes with near zero energy bills. Some of the larger homebuilding firms are offering high efficiency and ‘‘zero-energy’’ homes, even creating

planned communities of entirely Energy-Star homes, which are high-efficiency

homes certified by the EPA.

The primary goal of the renewables programs at DOE is to reduce costs so that

renewable technologies can be competitive in the market without further government subsidies. Wind technology is already competitive in areas with the highest

wind speed, but further reductions are needed to make wind a viable power source

in lower wind speed regions.

6. Questions for the Witnesses

Questions for Mr. Steve Nadel:

1. What is the potential contribution of energy efficiency to meeting future national energy needs? What is the potential for renewable energy? What portion of that potential is cost-effective today, and what portion would require

additional research or other incentives?

2. What are the impacts of increased energy efficiency and renewable energy

on the natural gas market?

3. What federal and State policies have been successful in encouraging efficiency and renewable energy? What state efforts could be expanded to a federal level?

4. What would be the most cost-effective way for the Federal Government to

encourage the use of energy efficiency and renewable energy technologies?

Questions for Mr. Paul Konove:

1. What are the key technology improvements that can result in cost-effective

energy savings in today’s homes and buildings? Are there renewable energy

technologies that can be utilized in new construction in cost-effective manner?

2. What has your experience been with constructing high efficiency buildings?

What have been the successes, and the challenges?

3. What areas of energy efficiency and renewable energy technologies need research to improve their operation or cost-effectiveness? What technologies

are ready for the marketplace but need improved technology transfer to be

widely adopted?

4. How do energy efficiency improvements in new construction differ from retrofitting older buildings? Given that about half the housing we expect to have

in the year 2025 has not yet been built, what contribution can improved

technologies make toward reducing the energy demands of the future housing stock?

Questions for Ms. Vivian Loftness:

1. What portion of U.S. energy demand do buildings consume? How is that divided among lighting, heating and other major appliances? What are the relative shares of commercial, residential, and industrial building consumption?

2. The Energy Information Administration predicts that energy demand will

grow from about 100 quadrillion BTUs (quads) in 2000 to 136 quads in 2025.

Taken together, what portion of the 36 percent projected growth in energy

demand to 2025 would be attributed to buildings? What proportion of that

demand could be met by efficiency investments?

3. What are the greatest opportunities that have not yet been fully explored in

federally-sponsored energy efficiency research? Given historical results, what

would you estimate the economic rate of return to R&D funding to be?

Questions for Mr. John B. Carberry:

1. Which federal energy efficiency and renewable energy programs has DuPont

found to be successful? What benefits has DuPont seen from these efforts?

2. What motivated DuPont to invest in energy efficiency and renewable technology? What federal programs and regulations encouraged or hampered

that investment? How should the Federal Government improve its efforts?

10

3. What is the potential for further efficiency improvements at DuPont? In your

opinion, what are the potential impacts of efficiency improvements and the

use of renewable resources in the industrial sector on national energy demand? How replicable are the gains made at DuPont? Are any of the improvements considered proprietary? If so, do you license them?

4. How can efficiency improvements and the use of renewable energy throughout the economy affect natural gas prices in the U.S.? How have increased

natural gas prices affected DuPont’s decisions about plant location?

Questions for Mr. Peter Smith:

1. Why did Governor Pataki feel that it was important to make a commitment

to improving New York’s energy efficiency, and to increasing the use of renewable energy? What benefits has New York State seen from these efforts?

How much did the programs cost?

2. How does New York State measure the effectiveness of its investments in energy efficiency and renewable energy technologies? Does New York State involve industry in its research, and if so how is industry involved? Is industry

required to share research costs?

3. What are the potential synergies between State and federal efforts? Are

these areas being fully exploited? How can federal efforts be improved? Are

there any state policies that should be adopted at the federal level?

4. What are other states doing to promote energy efficiency and renewable energy?

Questions for Mr. Daniel L. Sosland:

1. Why did the Connecticut Legislature feel that it was important to make such

a strong commitment to energy efficiency standards, and to increasing the

use of renewable energy? What benefits do you expect to see from these efforts? How much are the programs projected to cost?

2. How does the State of Connecticut measure the effectiveness of its investments in energy efficiency and renewable energy technologies? Does the

State of Connecticut involve industry research in its efforts, and if so how

is industry involved? Is industry required to share research costs?

3. What are the potential synergies between State and federal efforts? Are

these areas being fully exploited? How can federal efforts be improved? Are

there any State policies that should be adopted at the federal level? What

are other states doing to promote energy efficiency and renewable energy?

4. What are technology opportunities that have not yet been fully explored in

federally-sponsored energy efficiency research?

11

Chairman BIGGERT. This is a meeting of the Science Subcommittee on Energy. I want to welcome everyone here to today’s

hearing to assess the impact and direction of federal energy efficiency and renewable energy research and development.

This hearing couldn’t be more timely. Just this week, the average nationwide price of a gallon of gasoline rose above $2 for the first

time ever.

This really should come as no surprise. It was three years ago

this month that President Bush released his National Energy Policy in response to volatile and rising energy prices: three years ago.

Two of the eight chapters of that policy document were dedicated

to energy efficiency and renewable energy.

And three times in the last three years the House passed comprehensive energy legislation that greatly expands our use of energy efficiency and renewable energy to meet our growing energy

challenges. The same, however, can not be said of the Senate,

which hasn’t even been able to take an up-or-down vote on the energy bill conference report, because of procedural obstacles.

As a result, we have yet to benefit from a comprehensive energy

policy. The United States still imports from foreign sources almost

60 percent of the oil we consume. Even if we increase foreign imports of oil or dip into the Strategic Petroleum Reserve, as some

have suggested, we have no way to turn that oil into gasoline or

diesel fuel or to get it where it is needed most. We still have static

pipeline capacity. We haven’t built a large refinery in about 20

years, and we have half as many refineries as we did 30 years ago.

Those refineries are operating at almost 100 percent capacity.

And that is just gasoline. I haven’t even mentioned electricity or

natural gas. In every case, the bottom line is this: we simply can

not meet today’s energy needs with yesterday’s energy infrastructure. No pun intended, but we are virtually in the dark ages when

it comes to energy infrastructure. Unless we begin to address some

of these fundamental problems, we are going to experience high

and volatile energy prices every year, well into perpetuity.

One of the best, most effective ways to address such seemingly

insurmountable challenges is through the use of technology: energy

efficiency and renewable energy technologies.

In terms of energy efficiency, we are talking about technologies

that deliver more goods and services for the same amount of energy. In our homes, that means loads of clean laundry or more bags

of chilled groceries without increasing the amount of energy that

we use. For our industry, that means increased production without

increased energy consumption. For all of us, reducing energy use

means lowering our energy costs, reducing our emissions of pollutants and greenhouse gases, and increasing our energy security. In

this way, energy efficiency is a very powerful idea.

In terms of renewable energy, we are talking about technologies

that allow us to derive energy from sources that can be replenished. During the last decade, renewable energy contributed substantially to the growth in U.S. energy production, outpacing all

fuel sources, except for nuclear energy. Despite this progress, renewable energy still only accounts for two percent of our electric

generating capacity today. In other words, we still have a long way

to go.

12

Renewable energy is a growing, global industry, and our international competitors are taking renewable energy R&D very seriously. Government investments in renewable energy technologies

in Europe and Japan have meant growing market shares for wind

and solar power generation equipment for those countries while the

U.S. market share is declining. As a nation, we can’t afford to sit

on the sidelines.

Americans want affordable energy and a clean and safe environment, and yet, because we have ignored technology, we act as

though those two are mutually exclusive. That is not true of some

of the witnesses we will hear from today. They recognize the multiple benefits of energy efficiency and renewable energy technologies. They invested in the necessary R&D, some independently,

some in partnership with the Federal Government, but in all cases,

they have success stories to tell and insights to share as we assess

the impact of federal energy efficiency and renewable energy R&D

programs.

We must continue to invest in these R&D programs if we are to

encourage the development and rapid deployment of energy efficiency and renewable energy technologies, but we must do more

than that. We must take stock of where we have been and where

we are. More importantly, we must figure out where we want to

go and determine if existing federal R&D programs can get us

there. I know this distinguished panel assembled here will help us

to accomplish this today.

[The prepared statement of Chairman Biggert follows:]

PREPARED STATEMENT OF CHAIRMAN JUDY BIGGERT

I want to welcome everyone to today’s hearing to assess the impact and direction

of federal energy efficiency and renewable energy research and development (R&D).

This hearing couldn’t be more timely. Just this week, the average nationwide price of a gallon of gasoline rose above $2 for the first time ever.

This really should come as no surprise. It was three years ago this month that

President Bush released his national energy policy in response to volatile and rising

energy prices—three years ago. Two of the eight chapters of that policy document

were dedicated to energy efficiency and renewable energy.

And three times in the last three years the House passed comprehensive energy

legislation that greatly expands our use of energy efficiency and renewable energy

to meet our growing energy challenges. The same, however, can not be said of the

Senate, which hasn’t even been able to take an up-or-down vote on the energy bill

conference report because of procedural obstacles.

As a result, we have yet to benefit from a comprehensive energy policy. The

United States still imports from foreign sources almost 60 percent of the oil we consume. Even if we increase foreign imports of oil or dip into the Strategic Petroleum

Reserve, as some have suggested, we have no way to turn that oil into gasoline or

diesel fuel, or get it to where it is needed most. We still have static pipeline capacity. We haven’t built a large refinery in about 20 years, and we have half as many

refineries as we did 30 years ago. Those refineries are operating at almost 100 percent capacity.

And that’s just gasoline. I haven’t even mentioned electricity or natural gas. In

every case, the bottom line is this: we simply cannot meet today’s energy needs with

yesterday’s energy infrastructure. No pun intended, but we’re virtually in the dark

ages when it comes to energy infrastructure. Unless we begin to address some of

these fundamental problems, we’re going to experience high and volatile energy

prices every year—well into perpetuity.

One of the best, most effective ways to address such seemingly insurmountable

challenges is through the use of technology—energy efficiency and renewable energy

technologies.

In terms of energy efficiency, we are talking about technologies that deliver more

goods and services for the same amount of energy. In our homes, that means more

loads of clean laundry, or more bags of chilled groceries, without increasing the

13

amount of energy we use. For our industry, that means increased production without increased energy consumption. For all of us, reducing energy use means lowering our energy costs, reducing our emissions of pollutants and greenhouse gases,

and increasing our energy security. In this way, energy efficiency is a very powerful

idea.

In terms of renewable energy, we are talking about technologies that allow us to

derive energy from sources that can be replenished. During the last decade, renewable energy contributed substantially to the growth in U.S. energy production, outpacing all fuel sources except for nuclear energy. Despite this progress, renewable

energy still only accounts for two percent of our electric generating capacity today.

In other words, we still have a long way to go.

Renewable energy is a growing, global industry, and our international competitors

are taking renewable energy R&D very seriously. Government investments in renewable energy technologies in Europe and Japan have meant growing market

shares for wind and solar power generation equipment for those countries, while the

U.S. market share is declining. As a nation, we can’t afford to sit on the sidelines.

Americans want affordable energy and a clean and safe environment, and yet, because we’ve ignored technology, we act as though the two are mutually exclusive.

That’s not true of some of the witnesses we will hear from today. They recognized

the multiple benefits of energy efficiency and renewable energy technologies. They

invested in the necessary R&D, some independently, some in partnership with the

Federal Government. But in all cases, they have success stories to tell, and insights

to share as we assess the impact of federal energy efficiency and renewable energy

R&D programs.

We must continue to invest in these R&D programs if we are to encourage the

development and rapid deployment of energy efficiency and renewable energy technologies. But we must do more than that. We must take stock of where we’ve been

and where we are. More importantly, we must figure out where we want to go, and

determine if existing federal R&D programs can get us there. I know the distinguished panel assembled here will help us accomplish this today.

Chairman BIGGERT. Before we start with the witnesses, I would

like first to turn to the Subcommittee’s distinguished Ranking

Member, Mr. Larson, for his opening statement.

Mr. LARSON. Thank you, Madame Chair. I would also like to

thank our distinguished panelists for taking time out from their

busy schedules to join with us today. I know many of you have

traveled a long way to be with us, and we want you to know how

much we appreciate that.

I would also like to associate myself with the remarks of our distinguished Chair, but especially when it comes to addressing federal R&D policy and energy efficiency and renewable energy. I believe we often fail to look for insight and information from outside

the beltway. From officials in the Administration, from economists

and advocacy groups, there is never a shortage of people here willing to help Congress understand this issue, and most often on a national, if not a global scale.

When it comes to putting these policies and technologies into action, it helps to look at those doing this work at the state level.

This is not only where we see the results and benefits of innovation

and clean energy, this is where we should look for new directions

in federal research, development, and demonstration.

Many of us in Congress today come from state legislative backgrounds, and I believe it was Judge Brandise who said that states

are the laboratories for democracy. I also believe that they are

great laboratories where scientific thought and experiment and pilots take place. And I commend the Chairman again because of our

need to continually look at this. We are fortunate today to have assembled the diverse group on this panel of experts who have come

to us with genuine hands-on expertise in the field of energy efficiency and renewable energy. Though we may ask them to specuVerDate 11-MAY-2000 21:24 Dec 18, 2004 Jkt 093758 PO 00000 Frm 00017 Fmt 6633 Sfmt 6601 C:\WORKD\ENER04\051904\93758 SCIENCE1 PsN: SCIENCE1
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late on America’s future energy needs, our panelists are not theorists. In their own way, each works firsthand at implementing

clean energy policies and technological innovation.

I would specifically like to take this opportunity to introduce one

of the witnesses in particular, Mr. Dan Sosland who is the Executive Director of Environmental Northeast, a non-profit environmental research and advocacy organization located in my District.

While his efforts have had profound effects on energy efficiency and

renewable energy policy in Connecticut, results from Mr. Sosland’s

work through Environment Northeast can be seen throughout the

region. Dan, thank you so much for joining us today.

Now my State of Connecticut is severely capacity constrained in

terms of electricity production. Mr. Sosland will testify, Southwest

Connecticut is on the Federal Energy Regulatory Commission’s top

ten list of congested areas in the country. And we know that construction of new fossil fuel or nuclear power plants is not the only

answer to our problems. It is crucial that areas like ours around

the country discover new ways to produce power while conserving

energy and reducing emissions.

The United States Department of Energy has invested billions in

the last 25 years on energy efficiency and renewable energy research and development. And in many ways, their efforts have paid

off. The technologies developed at the national labs and through

partnerships with industry have had untold benefits in the last two

decades. However, I believe the question we are trying to get at

today is how do the people making energy policy and technical decisions utilize what has been learned in these two decades of federal

energy efficiency and renewable energy research.

And that is why you are here. And again, we would like to thank

you so much for taking time from your busy schedules to join us

and share your expertise.

[The prepared statement of Mr. Larson follows:]

PREPARED STATEMENT OF REPRESENTATIVE JOHN B. LARSON

Thank you Madame Chairman. I would also thank our distinguished panelists for

taking time out of their schedules to join us today. Many of you have traveled a

long way to be with us and we appreciate that.

When it comes to addressing federal R&D policy in energy efficiency and renewable energy, we often fail to look for insight and information from outside the traditional Washington, D.C. sources. From officials in the Administration, economists,

and advocacy groups there is never a shortage of people here willing to help Congress understand this issue, and most often on a national, if not global, scale.

But when it comes to putting these policies and technologies into action, it helps

to look at those doing this work at the State, local and industry level. This is not

only where we see the results and benefits of innovation in clean energy; this is

where we should look for new directions in federal research, development and demonstration.

We are fortunate today to have assembled a diverse panel of experts who come

to us with genuine hands-on experience in the field of energy efficiency and renewable energy. Though we may ask them to speculate on America’s future energy

needs, our panelists are not theorists. In their own way, each one works firsthand

at implementing clean energy policies and technological innovation.

I would like to take this opportunity to introduce one of the witnesses, in particular. Mr. Dan Sosland is the Executive Director of Environment Northeast, a nonprofit environmental research and advocacy organization located in my district of

Hartford, Connecticut. While his efforts have had profound effects on energy efficiency and renewable energy policy in Connecticut, results from Mr. Sosland’s work

through Environment Northeast can be seen throughout the region. Thank you for

joining us today.

15

My State of Connecticut is severely capacity-constrained in terms of electricity

production. As Mr. Sosland will testify, Southwest Connecticut is on the Federal Energy Regulatory Commission’s top ten list of congested areas in the country. We

know the construction of new fossil fuel or nuclear power plants is not the only answer to our problems. It’s crucial that areas like ours around the country discover

new ways to produce power while conserving energy and reducing emissions.

The U.S. Department of Energy has invested billions in the last twenty-five years

on energy efficiency and renewable energy research and development, and in many

ways their efforts have paid off. The technologies developed at the National Labs

and through partnerships with industry have had untold benefits in the last two

decades. However, I believe the question we are trying to get at today is, ‘‘How do

the people making energy policy and technical decisions utilize what has been

learned in these two decades of federal energy efficiency and renewable energy research?’’

I look forward to the testimony of our panel. Thank you Madame Chairman and

I yield back the balance of my time.

Chairman BIGGERT. Thank you, Mr. Larson.

[The prepared statement of Mr. Costello follows:]

PREPARED STATEMENT OF REPRESENTATIVE JERRY F. COSTELLO

Good morning. I want to thank the witnesses for appearing before our committee

to discuss the potential contributions of energy efficiency and renewable energy to

the Nation’s energy needs.

Our nation needs a modern, sound energy system so that Americans will continue

to enjoy the benefits of more efficient, available, and affordable energy. Constituents

have told me that they are frustrated with rising gas prices and electricity rates.

Families have felt pinched at the pump at a time when the state economy is depressed. One thing we know is that it is time to decrease our dependence on foreign

sources of oil, especially sources in the Middle East. We must find new ways to

produce cheaper and cleaner energy.

In addition to further developing the technology to burn coal as cleanly as possible

which directly affects and benefit the economy of Southern Illinois in my district,

I believe non-fossil energy sources including ethanol, solar power, and wind energy

are extremely important initiatives. As such, I am displeased renewable energy resources remain flat, decreased, or were eliminated and believe we should dedicate

more resources toward these programs.

Finally, I am interested in federal energy programs in federal buildings and what

actions the Federal Government is taking to be a leader in energy conservation and

innovation.

I welcome our witnesses and look forward to their testimony.

Chairman BIGGERT. I would now like to welcome the witnesses.

And starting from my left, Mr. Steven Nadel is the Executive Director of the American Council for an Energy Efficient Economy, a

non-profit research organization that works on programs and policies to advance energy efficient technologies and services. Welcome.

And I would now yield to the distinguished Member from North

Carolina, Mr. Miller, to introduce Mr. Konove.

Mr. MILLER. Thank you, Madame Chair.

I am very pleased to introduce Paul Konove, the President of

Carolina Country Builders based in Pittsboro, North Carolina,

which is in Chatham County, which is not in my District, but is

certainly near my District. It is split between David Price’s District

and Bob Etheridge’s District.

Carolina Country Builders Mr. Konove founded in 1985. The

focus is on custom solar home design and construction. Mr. Konove

is a former Chair of the North Carolina Solar Energy Association,

which is now known as North Carolina Sustainable Energy Association. He was also one of the founders of the North Carolina

Solar Center at North Carolina State University, which is in my

District. He was also one of the founders of the Chatham HomeVerDate 11-MAY-2000 21:24 Dec 18, 2004 Jkt 093758 PO 00000 Frm 00019 Fmt 6633 Sfmt 6601 C:\WORKD\ENER04\051904\93758 SCIENCE1 PsN: SCIENCE1
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builders Association and has participated in the National Renewable Energy Laboratories Exemplary Homes program. He has

chaired and helped with several North Carolina Sustainable Energy Association’s solar home tours throughout North Carolina. He

is a distinguished guest of this panel, Madame Chair, and I am

very proud to introduce him.

Chairman BIGGERT. Thank you very much, Mr. Miller.

Next on our panel, we have Ms. Vivian Loftness. She is Head of

the School of Architecture at Carnegie Mellon University. Her design and consulting work has led to the design and construction of

numerous energy-conserving buildings here and abroad. Welcome.

And Mr. John Carberry is the Director of Environmental Technologies for the DuPont Company in Wilmington, Delaware. His responsibilities include leading DuPont’s efforts to find and use affordable renewable energy and energy efficiency technologies. Welcome to you, Mr. Carberry.

I now yield to the very distinguished Chairman of the Science

Committee from New York, Chairman Boehlert, to introduce Mr.

Smith.

Chairman BOEHLERT. I thank you, Madame Chair. And if I may

take a moment just before the introduction. I would like to once

again thank Mr. Miller. It seems every time this subcommittee or

Full Committee has a hearing, we always have a witness from

North Carolina. Mr. Miller, thank you, and I thank the Tar Heel

State.

Secondly, I want to compliment you, Madame Chair, and the

Ranking Member and every Member of the Subcommittee for the

time and effort and thoughtful deliberation you are putting in to

this subject matter. It is critically important, and you know it is

crowding off the front page, hopefully, some of the news from

abroad and making us focus more on the problems here at home.

And there are some people coming up with instant remedies like

releasing the oil from the national stockpile, which is foolhardy and

short-sited. It might have an impact of a penny or two per gallon

of gasoline on the price at the pump, but it would make us vulnerable in the times of national emergency, so the President wisely

has resisted that.

And let me compliment, Mr. Larson, on your party’s presumptive

nominee. He, too, has rejected that idea. What we have to do—you

know, people say where there is a will, there is a way. Well, we

have got the way, and the way comes from this Science Committee.

We have got to develop the will in the minds of the American people. There are a lot of things we can do, like increasing CAFE

standards, which should be a no-brainer. We have got the technology. It can be done. It should be done retroactively. As more investment comes from this committee and we direct it to renewable

energy sources, we are doing a great deal in regard to our effective

and responsible response to the challenges facing America. And to

the credit of the President, he is trying to give this Nation an energy policy. I know we all might have some disagreement on certain segments of it, but we don’t have an energy policy. Shame on

us as the most technologically advanced nation in the world. We

darn well better get one. And I think we all have to work together.

17

That leads me to introducing our next witness, Mr. Peter Smith,

who is the President of the New York State Energy and Research

and Development Authority. We affectionately refer to it by its acronym up in New York, NYSERDA. Mr. Smith has been with

NYSERDA since 1995, and he started as Program Director for Energy Analysis. In addition to working for the great state of New

York, pardon my pride, but you can understand it, Mr. Smith was

also educated in the Empire State at Lemoyne College in Syracuse,

and he has a masters in public administration. And I am particularly anxious to hear not only what all of the witnesses will tell us,

but from Mr. Smith, because I think of the great leadership of the

governor of the State of New York, who has made it a goal for New

York State to be 25 percent dependent, at a minimum, on renewable energy by the year 2010. That is a worthy goal. So Mr. Smith,

any light you can shed on that will be helpful to all of us.

I thank you for letting me indulge the Subcommittee. It is an important hearing. It should be packed. There should be a lot of

media here, but the media is more interested in other things that,

perhaps, have a little more sex appeal but not nearly as much general appeal and direction. Thank you.

Chairman BIGGERT. Thank you very much, Mr. Chairman.

Finally, let me just mention again, our last panelist is Mr. Daniel

Sosland, Executive Director of Environment Northeast.

And with that, as our witnesses may know, and if you don’t, we

limit spoken testimony to five minutes each, after which the Members of the Energy Subcommittee will have five minutes each to

ask questions, so even if you don’t get all of your testimony in, it

usually comes up in the questions. So welcome to you all.

And we will begin with Mr. Nadel.

I think you might need to turn on your mike or pull it closer.

STATEMENT OF MR. STEVEN M. NADEL, EXECUTIVE DIRECTOR, AMERICAN COUNCIL FOR AN ENERGY-EFFICIENT

ECONOMY

Mr. NADEL. Thank you. How is that?

Thank you, Madame Chair.

As you noted, I represent the American Council for an EnergyEfficient Economy. We are a non-profit research organization

formed in 1980 to serve as a bridge between the technical and program and policy making communities, to help bring information

from one community to another so that we can make progress in

terms of energy efficiency.

As you noted, Madame Chair, energy prices are up dramatically.

You mentioned some of the oil and gasoline prices, but also natural

gas prices have been dramatically higher for the past year, and

electricity and coal prices are also climbing. All of these different

energy markets are linked. Unfortunately, most economists are

predicting that these relatively high prices will be with us for the

long-term. Energy supplies have tightened. Our economy is growing. The world economy is growing in places like China, which is

now becoming a major oil importer. As you mentioned, refinery capacity is tight. For all of these reasons, the—we can’t really expect

cheap energy to continue. We may expect some modest price reduction from the very peaks, but ultimately, these prices are going to

18

be determined by world markets, be it the price of liquefied natural

gas, in terms of the natural gas markets, and likewise the world

price of oil as determined as much by countries like China and

India as it is by the United States. I think we need to be prepared

for higher prices than we have had in the past decade.

Fortunately, as you noted, energy efficiency and renewable energy can do a lot to help blunt the impact of these higher prices.

Obviously, efficiency reduces energy bills: people use less, they pay

less. In addition, efficiency helps actually reduce the price of these

energy commodities. The markets are so tight now that if you loosen demand a little bit, then the price goes somewhat down. We did

a study last year working with Energy and Environmental Analysis, the same contractor that the National Petroleum Council

used, looking at the impacts of energy efficiency and renewable energy on natural gas prices. We found that the markets are so tight

that if we were to do a medium level of energy efficiency and renewable energy, two percent savings in the first year, getting up

to five percent total savings after five years, natural gas prices

would decline by about 20 percent. We are just at that steep of a

part of the demand curve.

Fortunately, this energy efficiency has done a lot in the past. It

is not just an idea, but it has, in fact, been proven over the past

29 years. If you look at energy use now compared to back in 1973,

energy use is basically the same now, despite the fact that our

economy has grown by more than 75 percent. If it wasn’t for efficiency, we would now be spending nearly $500 billion more on energy purchases each year. So we can thank efficiency for a lot of

what we have accomplished of late, but there is a lot more to be

done.

We looked at a variety of different studies on what could be

achieved from additional energy efficiency renewable energy. Most

of these studies conclude that we can save at least another 20 percent from cost-effective energy-efficient technologies by 2020. That

ranges in studies by the national labs to studies by various states,

including, I know, New York has recently done a study to that effect. Many different studies were done. Utilities have found similar

things. 20 percent savings by 2020 seems very achievable.

In addition, renewable energy can save quite a bit. A study by

the Union of Concerned Scientists estimated that by 2020 we can

get about 10 percent of our energy use from renewable energy.

That, in part, is based on the fact that energy efficiency reduces energy consumption and therefore renewables, as a percentage, goes

up.

In my written testimony, I provide a number of different suggestions on different policy measures that can be implemented to help

improve energy efficiency and therefore help address some of the

energy price and other problems that we have been discussing.

Since the title of this hearing is on research and development, I

will concentrate, in my closing minutes, on just those aspects. Bear

with me a second.

Back in 2001, the National Research Council did a study looking

at DOE’s Energy Efficiency Programs. They concluded that just six

projects have saved consumers and businesses about $30 billion,

more than compensating for the total cost of all of the R&D proVerDate 11-MAY-2000 21:24 Dec 18, 2004 Jkt 093758 PO 00000 Frm 00022 Fmt 6633 Sfmt 6601 C:\WORKD\ENER04\051904\93758 SCIENCE1 PsN: SCIENCE1
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grams many times over. Similarly, the President’s Council of Advisors on Science and Technology 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 improve the productivity of the economy. They recommended that energy—federal energy efficiency

R&D and renewable energy expenditures be doubled over a fiveyear period and concluded that this would provide $40 in net economic benefits for each federal dollar invested.

Unfortunately, we are concerned that energy efficiency budgets

R&D budgets are actually declining now. The latest proposal is for

a modest decline in these budgets, not for the increase that the

PCAST panel supported. We would urge this committee to weigh

in with your—the Appropriations Committee to try to restore those

cuts and maybe even have a modest increase, if at all possible.

Likewise, we are concerned that so many resources are going to

fuel cells and into hydrogen. These are promising technologies, but

they are also very high-risk. And what we are hearing from people

in Federal Government and in the research agencies is that a lot

of other programs are being starved for funds as a result. We need

a balanced portfolio, not just investing in a few high-risk investments, just like a stock investor, you know, will have a balanced

portfolio, and won’t just put it into one or two hot tips. We need

to do the same with our R&D dollars.

The final thing I wanted to mention is we have—a lot of focus

tends to be on energy efficiency technologies, you know, better LED

lights, fuel cells, and those are very important, but there is also a

lot of opportunity from better energy efficiency practices, how we

engineer things, how we maintain things. And while a lot of this

happens at the local level, the Federal Government can be critical

in helping to develop things like software, optimization tools, conducting the research to help demonstrate to building owners the

benefits of these optimization techniques that I would urge the

Committee to pay attention to these energy-saving practices as well

as to the technologies.

Thank you very much.

[The prepared statement of Mr. Nadel follows:]

PREPARED STATEMENT OF STEVEN M. NADEL

Thank you for the opportunity to speak with the Subcommittee this morning. My

name is Steven Nadel, and I am Executive Director of the American Council for an

Energy-Efficient Economy (ACEEE). ACEEE is a national nonprofit organization

dedicated to advancing energy efficiency for economic prosperity and a cleaner environment. Established in 1980 to build bridges among the very different worlds of

energy efficiency technology research, state and national policy-makers, and energy

consumers, ACEEE conducts research, publishes reports, holds conferences, and provides information to policy-makers around the country and the world.

I have been asked by Chairman Biggert to speak with you today about three subjects: (1) a brief overview of expert opinions on today’s energy situation and projections for the next 20 years; (2) the potential contribution of energy efficiency and

renewable energy for meeting future national energy needs, and the impact increased efficiency would have on natural gas markets;and (3) federal and State policies that have been successful in encouraging efficiency and renewable energy, with

an emphasis on research and development (R&D) programs, the subject of today’s

hearing.

As you are aware, energy price and supply are front-page issues today. Gasoline

prices have hit record levels this month, following on the heels of record natural gas

prices. Economic and energy experts from Chairman Greenspan on down are now

20

1http://tonto.eia.doe.gov/oog/info/gdu/gasdiesel.asp

2 Banerjee, Neela, 2004, ‘‘Tight Oil Supply Won’t Ease Soon,’’ New York Times, May 16, p. 1. 3 EIA, 2004, Short-Term Energy Outlook—May 2004, http://www.eia.doe.gov/emeu/steo/pub/

contents.html

saying that these higher prices are expected to stay high for years to come, as rising

energy demand outstrips national and world supply systems. Clearly, there has

never been a stronger imperative for a new commitment to energy efficiency as part

of a balanced energy policy.

Fortunately, there is a large potential for cost-effective energy savings. Many recent studies indicate that cost-effective energy-efficient technologies and practices

could reduce U.S. energy use by 20 percent or more. Recent research by ACEEE on

natural gas markets indicates that even achieving a fraction of these savings would

reduce natural gas prices by about 20 percent—markets are so tight now that even

modest demand reductions would have substantial price effects.

In order to realize these opportunities, we recommend five key policy initiatives:

1. Promote substantial improvements in the fuel economy of passenger vehicles.

2. Work with states to substantially expand utility and State energy efficiency

programs.

3. Work with industry to establish and implement expanded voluntary energy

efficiency commitments.

4. Expand and update federal equipment efficiency standards.

5. Expand federal R&D and deployment programs.

Regarding energy efficiency research, development, and deployment (RD&D) in

the United States, our research indicates that a renewed commitment to efficiency

RD&D is critical to the Nation’s economic future and to meeting the environmental

challenges we face in air quality and global climate change. We are concerned, however, that declining federal funding for efficiency RD&D in recent years dims the

prospects for economic recovery and falls far short of the level needed to respond

to the climate challenge. In fact, the overall downward trend in efficiency RD&D

may be approaching the point where basic U.S. infrastructure for producing new energy efficiency technologies will be crippled.

In the balance of my testimony, I will expand on each of these points.

The Current Energy Situation

As you are aware, energy price and supply are front-page issues today. Gasoline

prices have hit their highest levels in more than a decade, following on the heels

of record natural gas prices. Economic and energy experts from Chairman Greenspan on down are now saying that these higher prices are expected to stay high for

years to come, as rising energy demand outstrips national and world supply systems. These higher fuel prices are also spilling over into the electricity sector. Coal

prices are up sharply this year; and since coal and natural gas together generate

two-thirds of U.S. electricity, spot markets for electricity are up as well.

More specifically, according to the Energy Information Administration, retail gasoline prices averaged $1.94 per gallon on May 10, 2004, an increase of $0.10 per gallon relative to a week earlier and an increase of $0.45 per gallon relative to a year

earlier.1 Crude oil closed at a record high of $41.38 a barrel in the New York exchange last Friday (May 14). According to industry experts, these high prices are

caused by rising demand (due in particular to economic growth in China, India, and

the United States) and tight supplies, particularly for refined products and ‘‘sweet

crude’’ (low sulfur crude oil that can be more easily refined than higher sulfur

crude). A ‘‘risk premium’’ associated with violence and uncertainty in the Middle

East is also a factor.2

The big question is how long these high prices will last. Experts agree that there

is great uncertainty regarding future prices, with future prices determined by such

factors as demand for oil (particularly in key markets such as China and the United

States), the supply of sweet crude, the construction of new refineries (particularly

refineries that can process the higher sulfur crude that comes from Saudi Arabia),

OPEC pricing policies and the degree to which these policies are followed by OPEC

and non-OPEC members, and whether there are significant supply interruptions,

such as in the Middle East or Venezuela. The Energy Information Administration

is probably at the optimistic end of the spectrum of opinion, saying that ‘‘[o]il price

declines are expected in 2005 as Iraqi oil production continues to increase and inventories are rebuilt toward more normal levels.’’ 3 However, other experts are much

less sanguine. For example, speaking at a luncheon at the Petroleum Club in Midland Texas, T. Boone Pickens, the West Texas oilman and financial speculator, preVerDate 11-MAY-2000 21:24 Dec 18, 2004 Jkt 093758 PO 00000 Frm 00024 Fmt 6633 Sfmt 6621 C:\WORKD\ENER04\051904\93758 SCIENCE1 PsN: SCIENCE1
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4 Romero, Simon, 2004, ‘‘Why the Saudis May Not Rescue Oil Markets This Time,’’ New York

Times, May 16, Section 3, p. 5. 5Oilnergy, 2004, http://www.oilnergy.com/1gnymex.htm. Spot prices for the past year have varied from a low of $4.50 to a high of almost $7.30 per mcf. 6See note #3.

7 EIA, 2004, Annual Energy Outlook 2004, DOE/EIA–0383 (2004), p. 153, Washington, DC:

U.S. Energy Information Administration. 8 EEA, 2004, EEA Natural Gas Forecast April 2004, Arlington, Va.: Energy and Environment

Analysis Inc. 9Weissman, Andrew, 2004, ‘‘Macro Level Trends,’’ Energy Pulse, May 5. http://

www.energypulse.net/centers/article/article¥print.cfm?a¥id=715 10http://www.eia.doe.gov/cneaf/electricity/epm/table5¥6¥a.html 11See note #3. 12 Reuters, 2004, ‘‘High Coal Price Could Bring Summer Energy Crunch,’’ May 14.

dicted that oil prices will never fall below $30 per barrel again. ‘‘I think you’ll see

$50 a barrel before you see $30,’’ he concluded.4

Natural gas prices are also very much in the news. Wholesale natural gas prices

have been fluctuating around an average of $5–6 per thousand cubic feet (commonly

abbreviated mcf) for the past year at the key Henry hub distribution point,5 up from

the $2–3 level that prevailed for much of the last decade. As a result, prices charged

to consumers, businesses, and power plant operators are up substantially. EIA has

recently projected that ‘‘[n]atural gas spot prices (composites for producing area

hubs) are likely to average about $5.80 per thousand cubic feet (mcf) this year.’’ 6

Again, there is great uncertainty about future prices. EIA’s last long-term forecast, published in January 2004, projects that natural gas wellhead prices (which

are slightly lower than prices at transportation hubs) will decline to below $4 per

thousand cubic feet by 2010, and will then gradually rise to the $4–5 range by 2015

and stay in that range over the 2015-2025 period.7 Independent forecasts, such as

Energy and Environmental Analysis’ widely respected projection, see similar prices

in the 2015–2020 period, largely driven by world liquefied natural gas (LNG) prices.

For the next few years, its forecasts are higher than the EIA forecast, projecting

annual average hub prices rising from $5.46 this year to $6.13 in 2006, before declining to the $4.50–5.00 range towards the end of the decade.8 Some analysts are

more bullish on prices over the next few years. Andrew Weissman, publisher of Energy Business Watch, stated earlier this month that the ‘‘supply/demand balance in

the U.S. market is deteriorating rapidly, and that a substantial further price adjustment will be required to bring the market back into equilibrium.’’ He suggests that

recent ‘‘good luck’’ with mild weather has kept us from realizing how tight markets

really are. He is projecting prices above $7.00 per mcf for at least the next year or

so.9

Volatility and price increases in oil and natural gas markets are in turn affecting

other energy sources. For example, natural gas use for generating electricity has

been growing rapidly in recent years, and thus natural gas prices have a significant

impact on electricity prices. Due largely to natural gas price increases, on a national

average basis, electricity prices rose modestly in 2003.10 With retail prices still regulated in many states, the effect of natural gas prices on electricity prices has been

blunted. However, in deregulated markets such as New Jersey and Texas we are

seeing 10–20 percent electricity price increases due to rising fuel prices, and customers in some states such as Maryland and Virginia are likely to see similar increases as price controls come off over the next year or so.

With natural gas prices higher, coal is becoming more attractive, and EIA projects

a 4.7 percent increase in coal prices this year.11 However, this includes coal under

long-term contracts. Looking just at spot prices, according to Reuters, spot prices for

northern and central Appalachian coal last Friday (May 14th) were $58 per ton—

more than twice the price last August.12 With coal demand up, railroads are beginning to experience rolling stock availability problems, which appear to be responsible for some of the recent increases in new coal contract prices. Coal reserves are

large, so future prices for using coal, while somewhat dependent on prices of competing fuel, will probably be more affected by future air pollution regulations and

the availability of rail infrastructure to deliver greater volumes to users. In the

short-term, some utilities are concerned that they may exceed their emissions allowance for coal power plants as they run those plants more. This situation may result

in generators asking state environmental regulators for waivers of allowances to

avoid having to shut the plants down later in the year if electric demand remains

high. In the longer-term, the President’s ‘‘Clear Skies’’ proposal calls for gradual

tightening of emissions regulations relative to current levels. Other legislative proposals call for more substantial emissions declines. The end result is that the cost

22

13Murtishaw, S. and L. Schipper, 2001, Untangling Recent Trends in U.S. Energy Use, Washington, D.C.: U.S. Environmental Protection Agency. 14 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.

of coal as an energy source will go up too, but it is hard to project by how much

until Congress chooses which regulatory approach it will take.

Overall, the clear trend is that energy prices are rising. Most experts are projecting higher prices in the future than in the past—the only question is how much

higher. If we’re lucky, prices will be only modestly higher. But there’s also a good

chance prices will be substantially higher, providing a considerable drag on our

economy, particularly hurting energy-intensive industries such as chemicals, fertilizers, and trucking. Fortunately, prices are determined by the balance between

supply and demand. Accelerated efforts to improve energy efficiency would have a

significant impact on prices, while also providing substantial environmental and

economic benefits. In the next section of my testimony, I will discuss how energy

efficiency is a critical part of the balanced energy policy that is needed to address

these trends.

The Role of Energy Efficiency

Energy Efficiency’s Historic Contributions

Energy efficiency is a quiet but effective energy resource, contributing substantially to our nation’s economic growth and increased standard of living over the past

30 years. Energy efficiency improvements since 1973 accounted for approximately

25 quadrillion BTUs in 2002, which is about 26 percent of U.S. energy use and more

energy than we now get annually from coal, natural gas, or domestic oil sources.

Consider these facts which are based primarily on data published by the federal Energy Information Administration:

• Total primary energy use per capita in the United States in 2002 was almost

identical to that in 1973. Over the same 29-year period, economic output

(GDP) per capita increased 74 percent.

• National energy intensity (energy use per unit of GDP) fell 43 percent between 1973 and 2001. About 60 percent of this decline is attributable to real

energy efficiency improvements and about 40 percent is due to structural

changes in the economy and fuel switching.13

• If the United States had not dramatically reduced its energy intensity over

the past 29 years, consumers and businesses would have spent at least $430

billion more on energy purchases in 2002.

• Between 1996 and 2002, GDP increased 21 percent while primary energy use

increased just two percent. Imagine how much worse our energy problems

would be today if energy use had increased 10 or 20 percent during 1996–

2002!

Clearly, improvements in energy efficiency are essential to a healthy economy. Efficiency keeps energy demand growth down to sustainable levels. If demand grows

too fast, supply systems cannot keep up, raising energy prices and possibly creating

shortages, which hobble the economy. This effect is true whether the energy comes

from fossil, nuclear, or renewable sources. There will always be limits on the materials, land, and capital needed to develop supply infrastructure; there is thus no ‘‘silver bullet’’ energy source or supply system that obviates the need for efficiency. Efficiency has been and will continue to be the keystone of a sustainable energy economy.

Energy Efficiency’s Future Potential

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.14

• ACEEE, in our Smart Energy Policies report, estimates that adopting a comprehensive set of policies for advancing energy efficiency could lower national

23

15 Nadel, Steven and Howard Geller, 2001, Smart Energy Policies: Saving Money and Reducing Pollutant Emissions through Greater Energy Efficiency, Report E012, Washington, D.C.:

American Council for an Energy-Efficient Economy. 16 Nadel, S., A. Shipley, and R.N. Elliott, 2004, ‘‘The Technical, Economic, and Achievable Potential for Energy Efficiency in the United States—A Meta-Analysis of Recent Studies,’’ In Proceedings of the 2004 ACEEE Summer Study on Energy Efficiency in Buildings (forthcoming).

Washington, D.C.: American Council for an Energy-Efficient Economy. 17Geller, Howard and Toru Kubo, 2000, National and State Energy Use and Carbon Emissions Trends, Washington, D.C.: American Council for an Energy-Efficient Economy. 18 California Energy Commission, 2001, Emergency Conservation and Supply Response 2001,

Report P700–01–005F, Sacramento, Calif. 19Global Energy Partners, 2003, California Summary Study of 2001 Energy Efficiency Programs, Final Report. Lafayette, Calif. 20Sachs, Harvey et al., 2004, Emerging Energy-Saving Technologies and Practices for the

Buildings Sector (forthcoming), Report A042, Washington, D.C.: American Council for an Energy-Efficient Economy. 21Martin, Nathan et al., 2000, Emerging Energy-Efficient Industrial Technologies, Report

IE003, Washington, D.C.: American Council for an Energy-Efficient Economy. 22See note #7. 23 Clemmer, Steve et al., 2001, Clean Energy Blueprint, Cambridge, Mass.: Union of Concerned Scientists.

energy use from EIA projections by as much as 11 percent in 2010 and 26

percent in 2020.15

• Another recent ACEEE paper examined and synthesized the results of a

dozen recent studies on the technical, economic, and achievable potential for

additional energy savings in the United States. The review found that most

studies agree that there is a cost-effective opportunity to reduce U.S. electricity and natural gas use by 20 percent or more.16

• The opportunity for saving energy is also illustrated by experience in California in 2001. Prior to 2001, California was already one of the most efficient

states in terms of energy use per unit gross state product (ranking 5th in

1997 out of 50 states17 ). But in response to pressing electricity problems,

California homeowners and businesses reduced energy use by 6.7 percent in

the summer of 2001 relative to the year before (after adjusting for economic

growth and weather),18 with savings costing an average of three cents per

kWh,19 far less than the typical retail or even wholesale price of electricity.

These estimates are generally based on already commercialized technologies. Substantial additional energy can be saved from technologies and practices now being

developed by private companies, and through federal and state R&D programs. For

example, ACEEE is now completing a study that identifies dozens of promising

emerging technologies for use in buildings.20 A previous ACEEE study identified

many emerging technologies that offer promise for cost-effective energy savings in

the industrial sector.21

Renewable Energy Technology

ACEEE concentrates its work on energy-efficient technologies and practices.

While we are not renewable energy experts, I was asked to comment briefly on the

potential for renewable energy in the United States. Recent estimates on renewable

energy potential have been made by both EIA and the Union of Concerned Scientists (UCS). EIA estimates that non-hydro renewables accounted for about 3.3

quadrillion BTUs of energy consumption in 2002, which was about 3.3 percent of

total U.S. energy consumption that year. In its Reference Case, EIA projects that

non-hydro renewables will increase to 5.7 quads in 2020, which is about 4.4 percent

of estimated consumption in that year.22 In contrast, UCS estimates that with appropriate policy support, non-hydro renewables can increase to 10.6 quads by 2020.

When energy efficiency is factored into the equation (efficiency reduces consumption), UCS estimates that non-hydro renewables can meet 10.3 percent of U.S. energy needs in 2020, more than double the level estimated by EIA.23

The Impact of Energy Efficiency and Renewable Energy on the Natural Gas

Market

In 2003, ACEEE and Energy and Environmental Analysis, Inc. conducted an

analysis to investigate the impact of energy efficiency and renewable energy on natural gas prices. The analysis looked at increased levels of energy efficiency and renewable energy investment, resulting in energy savings of about two percent in one

year and a total of five percent over five years. These investments are cost effective

with a benefit cost ratio of 3.4.

By reducing demand for electricity and natural gas, especially during peak periods, and increasing the share of renewable energy, the study found that natural gas

24

24 Elliott, R. Neal et al., 2003, Natural Gas Price Effects of Energy Efficiency and Renewable

Energy Practices and Policies, Report E032, Washington, D.C.: American Council for an EnergyEfficient Economy. 25See note #15. 26 EPA, 2004, Light-Duty Automotive Technology and Fuel Economy Trends: 1975 Through

2004, EPA420–R–04–001, Washington, D.C.: U.S. Environmental Protection Agency. 27 York, Dan and Martin Kushler, 2002, State Scorecard on Utility Public Benefits Energy Efficiency Programs: An Update, Report U023, Washington, D.C.: American Council for an EnergyEfficient Economy. 28Described in Kushler, Martin, Dan York, and Patti Witte, 2004, Five Years In: An Examination of the First Half-Decade of Public Benefits Energy Efficiency Policies, Report U042, Washington, D.C.: American Council for an Energy-Efficient Economy. 29S. 1754, the Electric Reliability Security Act.

prices will both be reduced and be made less volatile. Specifically, we found that

in just 12 months, nationwide efforts at this scale could reduce wholesale natural

gas prices by 20 percent and save consumers $15 billion per year in retail gas and

electric power costs. As efficiency investments continue over the following four

years, this level of gas price reduction can be maintained. It is worth noting that

changes in just one state or region can result in smaller though still significant price

reductions in the immediate region as well as more modest reductions in the Nation

as a whole. Nationwide efficiency and renewable energy efforts would result in energy bill savings to residential, commercial, and industrial consumers exceeding

$104 billion and require an investment of slightly more than $30 billion over five

years.24

This analysis was based on forecasts from almost a year ago. We have seen little

change in demand and in fact markets have grown tighter so price effects would

likely be even greater were we to rerun the analysis today.

Policies to Encourage Energy Efficiency

From our research, there are several key policies that can do much to help

achieve the large available cost-effective efficiency improvements discussed above.

In our 2001 report entitled Smart Energy Policies: Saving Money and Reducing Pollutant Emissions Through Greater Energy Efficiency, we discuss nine policies that

will help the United States to achieve these energy savings.25 In this testimony, I

will briefly summarize several of the most important of these policies.

1. Promote substantial improvements in the fuel economy of passenger vehicles.

The fuel economy of the U.S. passenger cars has declined nearly every year since

1987. In 2003, the average passenger vehicle sold had an EPA composite (lab) fuel

economy of 24.2 miles per gallon (MPG), down from 25.9 in 1987.26 Since 1987, federal fuel economy regulations have remained essentially unchanged, and SUVs and

other light trucks have increased dramatically in sales. Fuel economy improvements

in the United States and other countries in the 1970s and 1980s substantially reduced demand relative to previously predicted levels, contributing to an excess of

supply relative to demand and reducing world oil prices. A renewed commitment to

fuel economy could save large amounts of energy and money, reduce U.S. dependence on imports from unstable regions of the world, and provide downward pressure

on oil prices. However, discussions about changing U.S. fuel economy regulations

have been highly controversial. There is a need for creative solutions in order to

raise average passenger vehicle fuel economy to at least 30 mpg, and preferably to

40 mpg or more.

2. Work with states to substantially expand utility and state energy efficiency programs.

In many states, utility regulators and legislatures have established ‘‘demand side

management programs’’ under which utilities and/or state governments encourage

customers to reduce energy use and peak demand through information, technical assistance, and financial incentive programs. Currently, such programs exist in more

than 20 states, with total annual program funding of more than $1 billion nationwide.27 These programs can be marketed and refined to reflect state-specific markets and needs. However, some states have very modest programs and other states

have no programs at all. States should be encouraged to expand or start such programs. Such encouragement can take the form of matching federal programs and/

or requirements to achieve a minimum level of energy and peak savings each year

(the latter based on legislation passed in Texas and signed by then Governor

Bush28 ). Senator Jeffords has introduced federal legislation along these lines to encourage such state programs.29

25

30 Elliott, R. Neal, 2003, Industrial Voluntary Agreements in Context, Report IE033, Washington, D.C.: American Council for an Energy-Efficient Economy. 31Kubo, Toru, Harvey Sachs, and Steven Nadel, 2001, Opportunities for New Appliance and

Equipment Efficiency Standards: Energy and Economic Savings Beyond Current Standards Programs, Report A016, Washington, D.C.: American Council for an Energy-Efficient Economy. 32 National Research Council, 2001, Energy Research at DOE: Was It Worth It? Washington,

D.C.: National Academy Press.

3. Work with industry to establish and implement expanded voluntary energy efficiency commitments.

Several programs now exist to encourage large companies to make and implement

commitments to improve energy efficiency and reduce emissions of greenhouse

gases, including EPA’s Climate Savers program and DOE’s Climate Vision. However, commitments to date have been modest, in part because there is little incentive or technical assistance for firms to participate and in part because rules to

track savings (and give credit for these savings in future emissions trading schemes)

have not been sufficiently developed.30 Existing programs should be substantially

expanded, and DOE and EPA given: (a) resources to assist industrial customers to

participate; and (b) a directive to develop appropriate regulations so that firms can

track and receive credit for the reductions they achieve.

4. Expand and update federal equipment efficiency standards.

One of the Federal Government’s most successful energy efficiency programs has

been minimum-efficiency standards on appliances and other energy-consuming

equipment. The initial legislation was passed by Congress and signed by President

Reagan in 1987; the program was substantially expanded by Congress in 1993 and

signed by the first President Bush. As of 2000, the appliance and equipment efficiency standards program had reduced U.S. electricity use more than two percent

and saved consumers about $50 billion. Standards already set will increase annual

savings approximately three-fold by 2020. Updating existing standards and setting

new standards on additional products would increase 2020 savings by an additional

60 percent.31 Several new consensus standards are included in pending energy legislation passed by the House and Senate. DOE is working on revising other standards, but has been making very slow progress. Congress should complete action on

the energy efficiency title in the pending energy bill and should encourage DOE to

speed up now-pending standards rule-makings.

5. Expand federal R&D and deployment programs.

R&D programs at DOE and at the state level help to develop new technologies,

so that there continue to be substantial opportunities to improve energy efficiency

in the future. We elaborate further on the need to expand federal R&D efforts in

the section below. In addition, federal efforts to deploy energy-saving technologies

and practices should also be expanded. For example, the EPA/DOE ENERGY STAR

program has been very effective in achieving energy savings and emissions reductions. We recommend that this program be doubled in size over the next few years.

Likewise, state building codes also achieve substantial energy savings. DOE provides important technical assistance and grants to the states for this work—we also

recommend that these programs be doubled as well.

Savings from these Policies

Overall, we estimate that full pursuit of these five policies will reduce U.S. annual

energy use by about 27 quadrillion BTUs by 2020, a 21 percent reduction relative

to the EIA Reference Case forecast. These policies will result in discounted net economic benefits to consumers and businesses of more than $500 billion (1999 $) and

will reduce U.S. carbon emissions by more than 400 million metric tones in 2020,

a 20 percent reduction relative to the EIA Reference Case. In addition, by making

the United States a leader again in energy efficiency, we will be well positioned to

provide efficient goods and services in world markets and will be less dependent on

imports from unstable regions of the world.

The Key Role of Federal RD&D

To realize efficiency’s benefits for the economy and the environment, the efficiency

technology ‘‘pipeline’’ must continue to flow. Efficiency technologies, especially those

developed through U.S. Department of Energy RD&D, have produced enormous benefits over the past three decades. A National Research Council study issued in 2001

quantified the economic benefits of just six Department of Energy-funded technologies at about $30 billion, based on an R&D investment of about $400 million.32

26

33President’s Committee of Advisors on Science and Technology, 1997, Federal Energy Research and Development for the Challenges of the Twenty-First Century, Washington, D.C.: President’s Committee of Advisors on Science and Technology. 34See, for example, Broad, William, 2004, ‘‘U.S. Is Losing its Dominance in the Sciences,’’ New

York Times, May 3. p. 1. 35 ACEEE, 2002, ‘‘Energy Efficiency Research, Development, and Deployment: Why Is Federal

Support Necessary?’’ Washington, D.C.: American Council for an Energy-Efficient Economy.

This reinforced the earlier recommendations of the President’s Committee of Advisors on Science and Technology (PCAST):

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.33

The PCAST report recommended that DOE’s efficiency budget be doubled over a five-year period. It projected that so doing would return $40 in net economic benefits

for every federal dollar invested.

This committee is aware of the broader concerns about the decline of science and

technology funding in America. Recent reports bring into dramatic relief the consequences of failing to maintain a robust RD&D infrastructure for the Nation’s key

technologies.34 Not the least of these is the decline in competitiveness of U.S. industry, especially in the emerging technology markets that represent future economic

opportunities. The United States spends less per dollar of GDP than our OECD competitors like Japan and Germany.35 It’s not surprising, therefore, that non-U.S.

firms dominate markets for key efficiency and renewable technologies such as lighting, hybrid vehicles, industrial automation and machine tools, solar photovoltaics,

and wind power. Without a renewed commitment to federal RD&D, U.S. firms will

continue to lose ground in these markets, and the American economy and American

consumers will be worse off.

In order to work towards the R&D objectives recommended by PCAST, ACEEE

recommends that:

• The Administration should use the authorization levels in the pending energy

bill as guidelines for its energy efficiency RD&D requests for the FY 2006–

2010 budget requests. These authorizations would allow funding to rise by

about 50 percent above current levels. While this is only half of the PCAST

recommendation, it would represent a significant new commitment to these

vital technologies.

• The Committee should commission a study on the state of energy efficiency

RD&D infrastructure in the United States. This study should examine the

history of RD&D since the 1970s, covering federal, State, and private industry

funding. It should describe the RD&D infrastructure as it has evolved over

time and as it stands today. It should compare and contract U.S. RD&D to

that of other OECD nations. It should also assess the current adequacy of

RD&D infrastructure and funding levels, and make recommendations for

changes needed to improve the United States’ position on this key issue.

• The Committee should commission a study of emerging energy technologies

that will improve U.S. energy efficiency. This study should include a review

of current federal, State, and private industry RD&D programs, identify and

assess candidate technologies, project potential energy savings, and recommend a set of RD&D priorities to the Department of Energy and other affected agencies. Such a study should look at energy-saving practices as well

as energy-saving technologies. In our recent work, we have found that R&D

on practices (e.g., best practice optimization techniques and software) can be

just as important as R&D on technologies. Also, in developing research priorities, a balanced portfolio should be assembled. We are concerned, for example, that R&D on fuel cells and hydrogen are squeezing out important research on nearer-term technology options such as improved hybrid vehicles.

A balanced portfolio is needed, just as investment professionals recommend

a mix of investments rather than putting all investment dollars into a few

high-risk gambles.

• The Committee should review the state and practice of energy analysis in the

Federal Government. This includes a review of the macro-economic models

and other analysis tools used by the Energy Information Administration and

other federal agencies that do quantitative analysis of energy policy issues.

Our experience is that these models are frequently unable to model the effects

of energy technologies’ effects on markets in a ‘‘bottom up’’ fashion, and thus

frequently underestimate the potential economic benefits of energy efficiency

27

RD&D and other policy initiatives. Based on this review, the Committee

should make recommendations to the appropriate agencies for improving

their analytical processes and tools to better capture the benefits of energy

efficiency and other technologies.

In conclusion, it is apparent that energy markets are becoming increasingly volatile and that energy prices are increasing. The amount of the increase is highly uncertain, but accelerated efforts to pursue energy efficiency would save consumers

and businesses money and have a moderating impact on prices. There is much that

policy-makers can do to increase energy efficiency, including expanding federal

RD&D programs in order to keep developing new energy-saving technologies and

practices. Such efforts will reduce energy bills, moderate energy prices, help protect

the environment, and keep the U.S. competitive in the world economy.

ACEEE appreciates the opportunity to share our thoughts with you on these important issues, and we look forward to working with the Committee on them in the

future.

BIOGRAPHY FOR STEVEN M. NADEL

EXPERIENCE

American Council for an Energy-Efficient Economy, Washington, D.C., 1989–

present. Executive Director (2001–present); Deputy Director (1993–2000); Senior Associate (1989–1992). Manage a non-profit research organization devoted to promoting energy efficiency through research and advocacy. Directed the Buildings/

Equipment and Utilities programs for many years. Major activities include:

• Responsible for overall management of the organization including supervising

program directors, fund-raising, overseeing administrative systems, and working with the Board of Directors.

• Directed Buildings and Equipment Program for many years including work

on appliance and equipment efficiency standards, building codes, and market

transformation programs. Led successful effort to incorporate lamp, motor

and HVAC standards and luminaire and office equipment labeling in the federal Energy Policy Act of 1992. Led efforts to adopt additional efficiency

standards that passed the U.S. House of Representatives and the U.S. Senate

in 2003. Played a leading role in initiating market transformation programs

promoting high-efficiency refrigerators, clothes washers, residential and commercial air conditioners, and commercial packaged refrigeration systems.

Continue to play a major role on U.S. efficiency standards and market transformation programs.

• Directed Utilities Program for many years and continue to play active role.

Led path-breaking studies on lessons learned from utility DSM programs (including residential and commercial lighting programs) and on the ‘‘achievable

potential’’ from these programs. Currently active in the development of public

benefit programs and policies in several states and in the development and

implementation of programs to promote advanced lighting, HVAC and refrigeration technologies.

• Supervise Industry Program and led or assisted in numerous studies. Co-authored a book for program and policy planners on ‘‘Energy-Efficient Motor

Systems.’’

• Lead and assist with projects to promote energy efficiency in developing countries including work in China, Thailand, India, and Egypt. Spent a year in

China working on projects to promote utility integrated resource planning

(IRP) and demand-side management (DSM) and to improve the efficiency of

refrigerators, air conditioners, motors and lighting equipment in China. Cowrote manual on IRP/DSM for Chinese utilities and made a series of presentations in China. Led development of Project Brief and Project Document for

an $8 million GEF grant for the China Green Lights program. Continue to

advise on project implementation. Led development of a $1.5 million UNIDO/

UN Foundation project to improve optimization of motor systems in Shanghai

and Jiangsu province. Currently coordinate evaluation of this project. Assisting China National Institute of Standardization to develop priorities for new

efficiency standards and labels. Technical lead on project assisting Thai government to develop minimum efficiency standards, labels and incentives for

eight products.

• Led or assisted on numerous research projects, leading to over 100 published

papers.

28

New England Power Service Company, Westborough, MA, 1987–89. Senior Analyst

(1988–89). Analyst (1987–88). Planned and evaluated energy conservation programs

for a major electric utility. Supervised research assistants and consultants.

• Responsible for program evaluation and market research for the Company’s

commercial and industrial (C&I) lighting programs, new construction programs, stand-by generation program, large C&I shared savings program and

residential water heater rebate program. Evaluation work included energy

savings, cost-benefit and process evaluations. Market research included mail

and phone surveys, focus groups and market data analysis.

• Coordinated a collaborative planning process on commercial and industrial

programs involving Company employees, the Conservation Law Foundation,

and other interested outside parties.

University of Massachusetts at Boston, 1988–89. Adjunct Professor. Taught undergraduate course entitled ‘‘Energy Trends.’’

Massachusetts Audubon Society, Lincoln, MA, 1983–87. Staff Energy Scientist and

Energy Priority Coordinator. Responsible for coordinating energy programs for a

statewide environmental organization.

• Coordinated planning for the Energy Transition Priority, one of the Society’s

three major priorities for the 1980’s.

• Directed research projects including projects to: evaluate the fuel savings

achieved by the statewide low income Weatherization Assistance Program; estimate the costs and benefits of appliance efficiency standards in Massachusetts; and monitor the performance of innovative solar energy systems.

• Prepared educational materials including a widely distributed series of consumer handbooks. Provided technical training on energy conservation and

solar energy issues to community groups. Directed technical training for regional operators of a statewide, residential, energy conservation loan program.

• Participated in public policy forums. Testified on energy issues before the

Massachusetts legislature and state regulatory bodies. Member of official

state boards dealing with the energy sections of the Massachusetts building

code, the Residential Conservation Service, and urea-formaldehyde foam insulation.

• Wrote and administered grants.

Independent Consultant, New Haven, CT, 1982–1983. Responsible for coordinating

projects for several clients with an emphasis on energy conservation in multi-family

housing.

• Evaluated the Hartford Heating Plant Efficiency Loan Program—a program

for improving heating systems in multi-family housing.

• Coordinated and authored an analysis on the impact of energy prices on housing abandonment and condominium conversion in Hartford, CT.

Wesleyan University, Middletown, CT, 1982. Teaching Associate. Taught undergraduate course entitled ‘‘Energy Policy: Conflicting Values, Difficult Choices.’’

Home Maintenance Corporation, New Haven, CT, 1979–1981. Energy Coordinator.

Responsible for energy conservation, alternative energy, energy planning and energy

instruction programs for a non-profit community group working in the Upper Hill,

New Haven’s poorest neighborhood.

• Developed a ‘‘one stop shop’’ energy conservation program. Set up energy

audit and financial counseling procedures, and trained and supervised workers in them.

• Helped develop and implement procedures for integrating energy conservation

work into the organization’s housing rehabilitation activities.

Congressman Morris Udall, Washington, D.C. Summer, 1975. Intern. Researched

and wrote on land use issues.

EDUCATION

M.S. in Energy Management, New York Institute of Technology, Dec., 1985. Program combined engineering, energy management and business administration classes. Thesis on low income weatherization programs.

29

M.A. in Environmental Studies, Wesleyan University, Jan., 1980. Thesis on energy

use, conservation and supply in urban areas.

B.A. in Government, magna cum laude, Wesleyan University, May, 1979.

Energy Engineering, Rensselaer Polytechnic Institute. Graduate course work in energy conversion systems, thermodynamics and heating, ventilating and air conditioning analysis.

PROFESSIONAL AFFILIATIONS

American Society of Heating, Refrigeration and Air Conditioning Engineers—member of SSPC 90.1 for many years (Energy-Efficient Design of New Commercial

Buildings).

Northeast Energy Efficiency Partnerships—member Board of Directors, Chair of

Program Committee.

New Buildings Institute—member Board of Directors and Treasurer.

30

31

32

Chairman BIGGERT. Thank you very much.

And now Mr. Konove is recognized.

STATEMENT OF MR. PAUL KONOVE, PRESIDENT, CAROLINA

COUNTY BUILDERS OF CHATHAM COUNTY, INC.

Mr. KONOVE. Yes. Good morning, Madame Chairman and Members of the Subcommittee. Thank you for inviting me to present my

views on the potential of the home-building sector in meeting our

nation’s energy challenges. My name is Paul Konove, and I am

from Pittsboro, North Carolina. I am honored to be here on behalf

of my company and on behalf of the Sustainable Buildings Industry

Council.

SBIC’s mission is to advance the design affordability, energy performance, and environmental soundness of buildings nationwide.

My company designs and builds custom homes in central North

Carolina, as was said earlier, in the Raleigh, Durham, Chapel Hill

area. Nearly all of my firm’s homes rely on passive solar design.

The homes and additions we have completed utilize a variety of architectural styles and a variety of budgets. In my experience, I can

tell you that sustainable buildings offer enormous potential for addressing our nation’s energy needs. I agree with SBIC’s position

that a new coordinated U.S. buildings program with coherent longterm, non-partisan research, development, and deployment programs on the national level is necessary to achieve better buildings

and housings nationwide.

I am going to give you my perspective as a homebuilder and the

perspective of SBIC on the questions that you have asked of us.

In my opinion, there are a number of building strategies that improve the performance of the houses that we build today because

of improvements in technology, and many of them are cost-effective

now. In brief, there are products for foundations, exterior walls,

and windows, to name a few, that are utilizing innovative new

technologies and now allow for much greater building efficiency.

Depending upon why and how these products are used, they may

be cost-competitive with conventional products. Fluorescent lighting, both fixtures and lights, are now more available and more affordable than just a few years ago. And there are numerous energy-efficient appliances available on the market, and the Energy

Stock program is helping customers identify these products.

If solar access and proper orientation are provided, I believe passive solar design and solar hot water technologies are cost-effective

today. Passive solar design can provide space heating in winter and

space cooling in summer. Also, building analysis tools, such as Energy-10 software designing low-energy buildings, helps us make

cost-effective design decisions. Solar water heating systems, when

included in a mortgage, will have a net positive impact on monthly

payments. The first home in which I consciously incorporated a

whole building framework was completed in 1991. The result was

a home that included passive solar design and many other features.

My company continues to use this whole building approach, and,

when possible, we have worked to incorporate new products and

strategies when the opportunities allow. I have learned that the potential for incorporating energy-efficient and renewable energy

strategies in new homes is not limited by the design style or conVerDate 11-MAY-2000 21:24 Dec 18, 2004 Jkt 093758 PO 00000 Frm 00036 Fmt 6633 Sfmt 6601 C:\WORKD\ENER04\051904\93758 SCIENCE1 PsN: SCIENCE1
33

struction—excuse me, design style or the project cost. If whole

building strategies are not incorporated into the design and construction planning, they will be difficult to include at a later date

and will likely cost more at the end of the overall project. An integrated approach to design is the most important way to ensure a

high-performance and cost-effective building.

When I participated in the Exemplary Home Program, I learned

that our homes’ solar designs substantially minimized our need for

air conditioning in the hot North Carolina summer. The barriers to

passive solar, solar water heating, and photovoltaics, I believe, are

not technical but rather a lack of awareness by builders and customers. There is still a need, though, for materials research and development and mass production to reduce the cost of photovoltaics.

SBIC has also cited an urgent need for R&D in the area of building

performance, monitoring, and verification. Many of the energy-efficient renewable technologies that my company and others around

the country are building are very cost-effective today, I believe.

I postponed an appointment for this morning with a developer

planning a large project in the county where I live. We were to discuss how these whole building ideas might be applied to the development they are planning. I believe his interest resulted from attending educational activities in my area and the opportunity to

meet someone experienced with the whole building approach. But

this type of contact is not the norm for most builders in the country.

For an industry as important to the Nation’s economy as construction, there should be a coordinated federal strategy for integrating energy efficient and renewable technology into our building

methods. Cooperative Extension Service for years has provided this

type of reliable information and training for our nation’s farmers.

One could argue that the construction industry should be supported in a similar fashion in order to remain strong and advanced

technologically. Residential buildings represent approximately 20

percent of all U.S. energy consumption. Heating and cooling consume the most energy in buildings. We can cut energy consumption

of our homes dramatically if we, as a country, set our minds to

achieving this goal.

Madame Chairman and Members of the Subcommittee, thank

you very much, and I look forward to answering any other questions.

[The prepared statement of Mr. Konove follows:]

PREPARED STATEMENT OF PAUL KONOVE

Madam Chairman and Members of the Subcommittee:

Thank you for conducting this important hearing and for inviting me to present

my views on the potential of the building sector—and of energy efficient, sustainable

single-family homes in particular—in meeting our nation’s energy challenges. My

name is Paul Konove, and I started Carolina Country Builders in 1985 in Pittsboro,

North Carolina. I am honored to be here today on behalf of my company and also

on behalf of the Sustainable Buildings Industry Council, also known as SBIC, an

organization I first joined in the early ’90s. The Council’s mission is to advance the

design, affordability, energy performance, and environmental soundness of residential, commercial, and institutional buildings nationwide. I am also a member of the

National Association of Home Builders and my local home builders association.

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This morning I will discuss the opportunities I see for the buildings sector—and

home building in particular—to be part of a national strategy toward energy independence. From my experience as a home builder, my training as a mechanical engineer, and my involvement in the solar building industry over the last 19 years, I

can tell you that sustainable buildings offer enormous potential for addressing our

nation’s energy needs. Moreover, they can contribute significantly toward solving

other critical issues: housing affordability, water quality and supply, environmental

protection, economic strength, and the health and safety of the American people. It

is essential that builders and designers, government program administrators, and

policy-makers understand the importance of integrating energy efficient building

technologies and renewable energy technologies if we are to achieve this goal for the

buildings sector.

My company designs and builds custom homes in a two-county area that is part

of the Triangle Region of North Carolina, which is the area around the cities of Raleigh, Durham, and Chapel Hill. My firm focuses mainly on new solar homes, although periodically we have built additions to existing homes. Nearly 100 percent

of the new homes and more than 75 percent of the additions we have built rely on

passive solar design, which I will address later. The homes have many different architectural styles, and the project budgets are diverse. Besides my design and construction work, I have been involved in solar energy education and training activities in North Carolina. To keep my business on the leading edge, I strive to be

aware of national activities and building trends related to energy efficiency, renewable energy and sustainability. As a small-volume builder, I am representative of

many U.S. home-building companies. According to the National Association of Home

Builders, 68 percent of their members have four or fewer employees, and 15 percent

of their members build 10 or fewer houses per year.

Madam Chairman, you asked me to respond to some specific and important questions about energy efficiency and renewable energy technologies in buildings. I am

eager to give you my perspective as a home builder, and I am also proud to provide

SBIC’s perspective on these questions, a perspective resulting from a quarter-century of research and development of policy positions, publications, technical training, and other resources on ‘‘low energy,’’ sustainable buildings.

Because of the complexity of building a home, as a builder it is easy to focus only

on the immediate task at hand rather than the big picture of the entire project. But

for nearly fifteen years, there has been a growing understanding from building scientists and others in the construction profession that the design and construction

of a home needs to be addressed as a complete system. Therefore, I would like to

address your questions in the context of a ‘‘whole building’’ approach to design and

construction. Many architects, builders, home owners, commercial building owners,

and policy makers are adopting a more holistic view of building design. Instead of

viewing a building as a collection of discrete parts, they know that their home,

school, or office building will perform better if it is designed as a system of interrelated parts. Of course, these parts must also perform well, and this is where R&D

on specific technologies is also important. But it is how we put these technologies

together that I believe, SBIC believes, and these forward-thinking architects, builders, owners, and policy-makers believe, is what will truly advance the performance

of buildings in the United States and enable the building sector to live up to its potential in meeting our energy needs, environmental challenges, and goals for affordable, comfortable, and healthful homes and buildings.

As defined in the Renewable Energy Policy Project (REPP) Research Report of

September 1998, Putting it Together: Whole Buildings and a Whole Buildings Policy,

‘‘The whole buildings concept represents a method of siting, design, equipment and

material selection, financing, construction, and long-term operation that takes into

account the systems nature of buildings and user requirements. It treats the overall

building as an integrated system of interacting components. Thus it is more performance-based than prescriptive.’’

As one of SBIC’s workshop instructors puts it, there is no magic bullet that will

make a building energy-efficient, cost effective, sustainable, comfortable, and healthful. There is no single product, material, or technology that will suddenly make the

building perform well for those who breathe the air inside or pay the utility bills.

While building product manufacturers are making amazing strides in the energy

and environmental performance of their products, what is essential is how all the

building components work together. Components should be carefully considered before the designer makes one sketch, and they should be selected based on how they

will interact with the other building components. These decisions should be based

on goals for the project/home that the owners and designers establish in the earliest

stages of programming and design. If these components are not chosen early on, it

will be difficult, more costly, or perhaps impossible to complete a building that is

35

energy efficient and/or that has superior indoor air quality and other ‘‘high performance’’ features.

The Sustainable Buildings Industry Council is one of the few (if not the only) organizations that brings many different buildings-related trade associations, architectural/engineering firms, utilities, consultants, product manufacturers, academic institutions, and builders together under one umbrella in order to advance the knowledge and create the user friendly tools that help designers and builders make complex decisions.

The Federal Government’s Role in Buildings R&D

The building construction industry is highly fragmented, with hundreds of thousands of architects, engineers, contractors, subcontractors and construction workers,

as well as a complex system of real estate investors, financiers, and owners. No one

builder has more than five percent of the market (Builder magazine, 2000). The industry is both structurally incapable and economically unmotivated to take responsibility for the required level of whole building research and strategic coordination

that can yield major economic and environmental benefits.

SBIC believes that a new, coordinated U.S. Buildings Program can bring together

isolated building research programs throughout the government, integrate the full

range of advanced building components developed by individual companies and organizations, disseminate the results of building science research conducted by government labs, and concentrate the efforts of diverse segments of the building industry. The program should consolidate various federal energy efficiency, solar and renewable technologies, and all other building-related programs into a single, integrated effort with a strong, clear vision of high-performance buildings in America’s

future. Only a coherent, long-term, nonpartisan research, development and deployment program on the national level can achieve the necessary next step in achieving

better buildings and houses nationwide. As articulated in the REPP report,

A robust U.S. Buildings Program:

• Is based on a whole building approach

• Provides sufficient long-term resources for professional training and public

education

• Funds collaborative, fundamental, and applied research on building energy

performance

• Partners with industry to stimulate demand for high-performance buildings

through public awareness

• Supports development of prediction and verification tools for measuring building energy performance, cost effectiveness, environmental soundness, and

other important attributes.

Industry-Government Collaboration

Industry needs to inform and contribute to this effort. Programs that foster industry-government collaboration are making great strides. The Department of Housing

and Urban Development’s Partnership in Advancing Technology in Housing, also

known as ‘‘PATH,’’ helps builders and consumers understand and adopt new housing technologies that help them attain various goals, including energy efficiency

(www.pathnet.org). The U.S. Department of Energy’s Building America program is

teaching production builders how to build sustainably, cost effectively, and profitably. The DOE Zero-Energy Buildings program, also known as ‘‘ZEB,’’ was established to fund projects that provide builders with new and innovative ideas on how

to minimize residential energy consumption and use more renewable energy to

power a home. The National Association of Home Builders Research Center worked

with a builder who designed a home that is capable of achieving net-zero energy

consumption. The Tucson Zero Energy Home was modeled with the energy analysis

tool, ENERGY–10, and features active solar space and water heating, energy-saving

fluorescent lighting, low-flow plumbing fixtures, Energy Star rated appliances, a

high efficiency air conditioner, radiant barrier roof decking, windows that minimize

solar heat gain, and air admittance plumbing vents, among other energy efficient

features. Because ZEB is one of the few federal programs that focuses on building

integration, we were alarmed when it looked like it would get lost in the budget

battle. Ironically, it fell through the cracks between the jurisdictions of the Appropriations Committee’s Energy and Water Subcommittee, which funds DOE’s solar

programs, and the Interior Subcommittee, which funds DOE’s buildings (energy conservation) programs.

And now to your specific questions. . .

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1a. What are the key technology improvements that can result in cost-effective savings in today’s homes and buildings?

In my opinion, there are a number of strategies, made possible by improvements

in technology, that improve the performance of houses we build today. Many are

cost effective now. Here are some that are included in SBIC’s Green Building Guidelines: Meeting the Demand for Low-Energy Resource-Efficient Homes (4th Edition).

1) Community and Site Planning

This is not a technology, but it sets the stage for the rest of the project: Proper

orientation of homes and of streets and lot layouts in a development are critical for

achieving optimal solar access and encouraging the use of site-generated solar energy. In addition, incorporating sustainability principles in community and site

planning, such as increasing density, locating new development on infill sites to be

near schools, shopping, and public transportation, and clustering homes and buildings to reduce infrastructure and preserve undeveloped land, helps to protect our

nation’s valuable natural resources.

2) Renewable Energy

If solar access and proper orientation are provided, passive solar design and solar

hot water technologies are cost effective today. Building analysis tools such as Designing Low-Energy Buildings with ENERGY–10 software have been helpful in determining how much passive solar design to incorporate into various projects. I have

found these analysis tools are also helpful when discussing design, materials, and

cost issues with my clients. Potentially complex issues can be presented in easy to

read, graphical format.

3) Building Envelope

Air infiltration control has become a critical issue in housing. There have been

technological improvements in recent years in the quality and longevity of caulks

and sealant products used for this work. This work is not expensive and allows

HVAC systems to be sized smaller (or ‘‘right-sized’’), which balances out extra costs

spent on tightening up a home. HVAC systems have been improved as well. We now

have variable speed fans and much more efficient systems than even just a few

years ago. Foundations, exterior walls, and windows are utilizing innovative new

technologies that now allow for much greater building efficiency. Examples of these

products are structural insulated panels (or SIPs), also known as stress skin panels,

and insulating concrete forms (or ICFs) for exterior walls, and windows with highperformance glazing. Depending on why and how these products are used, they may

be cost competitive with conventional products. I believe they are all poised for more

widespread integration into the construction industry.

4) Energy Efficiency

Installing ductwork within the envelope of the home, insulating it sufficiently, and

making it tight are excellent energy saving techniques. A blower door test and a

duct blaster test have been developed to determine the quality of the installation

and extent of air leakage. These test methods, plus more highly efficient equipment,

help ensure that consumers are getting what they are paying for.

Compact fluorescent lighting (both fixtures and lights) are now more available at

affordable prices, even at large building material retailers. There are numerous energy efficient appliances available on the market, and the Energy Star program

is helping consumers identify these products. I recommend to clients that they investigate these products.

Manufacturers of traditional and innovative building products, many of whom are

members of SBIC (http://www.sbicouncil.org/about/members.html), are meeting

the needs of sustainable building designers. These designers are creating buildings

that save energy and provide comfort and health for their occupants, because they

are integrating excellent products early in the design process. They are also using

energy analysis tools to ensure cost effective design. For efficient buildings to become the norm, however, designers and builders must be able to estimate whole

building performance confidently. Designers must have verification and demonstration that the individual products and systems have been combined and installed

with a whole building approach and are cost effective across a variety of climates

and building types, in both new construction and retrofits.

1b. Are there renewable energy technologies that can be utilized in new construction

in a cost-effective manner?

Passive solar design, which utilizes the local climate characteristic, allows the

building itself to collect, store, and distribute energy from the sun and can provide

37

space heating in the winter and space cooling in the summer. Those trained to apply

passive solar design strategies can do this without adding to the design costs, and

this design significantly reduces the need for purchased energy from nonrenewable

sources. Passive solar homes have been built across the United States for more than

30 years.

Solar water heaters installed in new homes can provide about 50 percent of the

hot water needs of a typical family, and, if included in the mortgage, can have a

net positive impact on the monthly payments. Solar water heaters are a mature

technology and are widely used throughout the United States.

Photovoltaic systems installed in new, energy efficient houses can provide a portion or all of the electrical energy. This may even be considered a cost effective technology if it’s included in the mortgage (in states that have financial incentives) and/

or if a portion of the power generated is sold back to the utility company (for example, during the day when the home’s energy needs are minimal).

2a. What has your experience been with constructing high-efficiency buildings?

The first home in which I consciously incorporated this whole building framework

was completed in 1991. I participated with the architect and the owner as a member

of the design team. The result was a home that included the following features:

• Passive solar design

• Advanced framing

• High insulation levels and minimization of air infiltration

• Efficient heating and air conditioning equipment

• Low-flow plumbing fixtures

• Efficient lighting through extensive use of compact fluorescents and energy

efficient appliances

• Recycling center

• Materials that were chosen for longevity and minimal off-gassing

• Preparation for the installation of solar hot water in the near future (since

at that time North Carolina’s solar energy tax credits discouraged more than

one completed solar system per year).

Since that project, Carolina Country Builders has continued to use these strategies and to incorporate new products and strategies as much as possible, all with

an awareness of the impact on the design and cost of the project.

2b. What have been the successes and the challenges?

An important thing I have learned from my experience is that the potential of energy efficiency and renewable energy strategies is not limited by design style or

project cost. Another is that if these strategies are not incorporated into the planning process for both design and construction, they will be difficult to include at a

later date, and will likely be more costly than if included from the beginning. One

of the surprising things I learned about building passive solar homes resulted from

my participation in the National Renewable Energy Laboratory’s Exemplary Homes

Program. Our own home was monitored for a year under that program. The results

convinced us that passive solar design kept us warm in our cold winters and contributed in substantial ways to keeping us comfortable even in the hot central North

Carolina summers. It was not the temperature but the humidity that caused the

air conditioning system to run. Because we used SBIC’s design guidelines when designing our home, we also have better natural ventilation and substantial cost savings on summer electricity bills. The rule of thumb is that seven percent of the

home’s floor area should contain operable windows. Since most of the new housing

will be built in the South (according to NAHB State and Metro Building Permits,

March 2004 ‘‘Building Permit Activity for 2003’’), I believe this is an important lesson to share with others.

Through the years, I have had both employee and subcontractor turnover. I am

continually pleased to find people who are interested in working on and learning

about the homes I build. But when I have to change subcontractors or find new employees, I have only a few to choose from who have the skills I require. Otherwise,

I have to do on-site training.

Although this changes over time, one of my frustrations is that new products or

techniques that are available in one portion of the country are not available in my

location. I believe the reason for this is the lack of demand, which comes from a

lack of awareness or training about the benefits and cost effectiveness of these strategies.

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3a. What areas of energy efficiency and renewable energy technologies need research

to improve their operation or cost effectiveness?

Passive solar, solar water heating, and photovoltaics are all ready for greater use.

The biggest barriers are not technical in nature, but rather involve a lack of simplified design tools and awareness by both builders and customers. Volume production of solar water heaters would result in economies of scale, which I believe would

create significant market growth. The next version of ENERGY–10 will be such a

tool—combining energy efficiency, passive solar design, solar hot water, and PV in

the same fast and accurate software package. The renewable energy portfolio standards that are becoming widely used in some states to encourage greater use of renewable energy often do not pertain to design strategies such as passive solar and

technology such as solar hot water systems. Those policies should be expanded to

include these strategies and technologies, as that will significantly open new markets.

There are probably many areas of energy efficiency and renewable energy that

need research, but I am only familiar with a few. One is advanced thermal storage

(or plasterboard with integral phase change storage), which could enhance performance of passive solar homes while allowing builders to continue using conventional

construction methods. I am aware that there is some work in the area of advanced

electrically sensitive or switchable glazings that would reduce heat loss in winter

and reduce heat gains in summer.

There is still a need for materials research, development and deployment and volume production to reduce the cost of photovoltaics. Lower cost inverters and lower

cost battery storage will allow photovoltaic systems to provide stand-by emergency

power, which is an especially valuable capability in terms of energy independence

and building security systems.

SBIC believes there is an urgent need for research, development, and deployment

(RD&D) in monitoring and verifying of building performance. As noted in the REPP

report, and this remains true today, we must continue to invest in software tools

that are fast, inexpensive to use, and accurate, and that permit easy analysis of

building envelope and component alternatives, including the effects of their interactions. It is also important that the software gives design guidance, setting priorities on strategies that, in interaction with other approaches, deliver the highest or

most cost effective return for the package. ENERGY–10 is good, but it needs further

development, such as the inclusion of PV as a design option, which has been

planned for nearly five years. These tools must be supplemented by objective, welldocumented case studies and demonstrations to validate computer models, provide

monitored data on actual building cost and performance, and give confidence to both

consumers and lending institutions.

3b. What technologies are ready for the marketplace but need improved technology

transfer to be widely adopted?

Many of the energy efficient and renewable technologies my company and other

builders around the country are using are cost effective today, but they are not

widely used because builders are busy responding to their clients and do not have

time to learn about new technologies. For an industry as important to the Nation’s

economy as construction, there should be a coordinated strategy for educating and

training those in the construction industry about these technologies and building

methods. Achieving the integration of these methods into standard building practices will enable construction companies to be more profitable, provide consumers

with more disposable income by saving on their utility bills, and help the national

economy by keeping the construction industry strong.

Prior to being asked to testify today, I had an appointment scheduled this morning with a representative of a California-based developer planning to build a large

mixed-use community in the county where I live. He is an active member of our

local home builders association, an organization where we have had numerous educational presentations on green building products and strategies over the last two

years. He asked to learn more about green building and how it might be applied

in the developments they are planning, both local and otherwise. My point in mentioning this meeting relates to my perspective on deployment methods of energy efficiency and renewable energy for the construction industry. I would suggest that his

interest was the result of continued local educational activity and the opportunity

to come in contact with someone he thinks of as knowledgeable. There is a model

for this type of technology transfer that has supported a vital member of our nation’s economy for many years: The agriculture industry’s cooperative extension

service provides reliable information and training for our nation’s farmers. Another

model is the Manufacturing Extension Center program, which was established by

39

the U.S. Trade and Competitiveness Act of 1988. I would think that the construction

industry could benefit in a similar fashion.

SBIC has developed a number of programs to disseminate information to builders,

consumers (Green Building Guidelines and seminars), K–12 school board members

and administrators (High Performance School Buildings Research and Strategy

Guide and workshops), federal project managers (workshops on Low-Energy, Sustainable, Secure Building Design for Federal Managers), and designers of small commercial buildings (Designing Low-Energy Buildings with ENERGY–10 workshops).

The Council has conducted hundreds of training activities, but this meets a fraction

of the need. Those who procure buildings need to know how to ask for high performance, and building designers need to learn how to deliver it. Individual, community,

state, and federal building decision-makers must be introduced to the benefits of

whole building concepts, and architects, engineers, and building operators must be

trained to understand how to pursue their trades in the context of whole building

performance. At the very least, this will require the introduction and widespread

dissemination of user-friendly whole building design tools that can lead owners and

designers to sound decisions based on accurate simulations. Again, because of the

fractured nature of the buildings industry, there is an important role for the Federal

Government in developing software tools that no one group could develop alone and

in providing education, training, and technology transfer programs that will help

stimulate a transformation of the marketplace. It is also appropriate for the Federal

Government to stimulate consumer demand for whole building designs that integrate efficiency and renewable energy sources.

4a. How do energy efficiency improvements in new construction differ from retrofitting older buildings?

In my opinion, all the energy efficiency strategies available to new homes can be

used for existing homes, although some of the products, techniques, and/or their cost

effectiveness may change. Renewable energy strategies are different. If the existing

structure is not oriented correctly to take advantage of sun angles, it may or may

not be feasible. Proper orientation for solar roof panels ensures optimal cost effectiveness and aesthetics. In recent years we have been installing more solar hot

water systems on homes because of changes in the North Carolina tax law that allows for multiple systems to be completed within the same year. I am currently

building a passive solar home where we will be installing both solar hot water and

a two kilowatt photovoltaic system. I look forward to building a net zero energy

home, but most builders are not yet ready for this. Their homes are not energy efficient enough to justify and support a renewable energy system. Here’s an analogy:

When doctors plan a heart transplant, they make sure that the body is in good

enough health to receive the new heart. We should likewise have our housing in

good health so that we can integrate renewable energy systems and build cost effective net zero energy homes.

With new construction, owners might have an ability to select a site that provides

excellent solar access, and designers often have the ability to properly orient the

building on the site. Existing structures may have existing conditions that are difficult or impossible to change.

4b. Given that about half the housing we expect to have in the year 2025 has not

yet been built, what contribution can improved technologies make toward reducing the energy demands of the future housing stock?

Applying no-cost and low-cost design principles can lower the energy consumption

of the future housing stock by 30 to 50 percent. By applying a whole building approach in the design and development of homes, we can realize improved comfort,

water-efficiency savings, improved indoor environmental quality, and material efficiency. As stated in SBIC’s Green Building Guidelines, a publication created by

home builders for home builders, the millions of homes built every year require a

combination of wood, concrete, glass, metal, and other products. These residential

buildings consume approximately 20 percent of America’s energy every year thereafter in the form of energy consumption and maintenance needs. It is not necessary

for our homes to be so energy and resource intensive.

There is enormous potential for savings in the home building sector. Buildings account for 36 percent of total U.S. energy consumption and two-thirds of the electricity used. Residential buildings represent approximately 55 percent of that. Heating and cooling consume the most energy in buildings. In residential buildings,

water heating and refrigeration are the next biggest energy consumers, accounting

for 24 percent of the energy consumed. (Energy Research at DOE: Was It Worth It?

Energy Efficiency and Fossil Energy Research 1978 to 2000, http://books.nap.edu/

books/0309074487/html/24.html 2001)

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Currently, there are approximately 100 million residential buildings in the United

States (EIA, 1996). The annual rates of growth and replacement of this building

stock have been approximately two percent for residential buildings over the last

20 years (EIA, 1997). Thus, approximately two million new residential buildings and

200,000 commercial buildings have been constructed each year. (Energy Research at

DOE: Was It Worth It? Energy Efficiency and Fossil Energy Research 1978 to 2000,

http://books.nap.edu/books/0309074487/html/24.html 2001)

Wind, solar, biomass, and geothermal power, although growing, still supply only

a tiny fraction of U.S. energy needs. In January 2000, however, the U.S. DOE’s National Renewable Energy Laboratory released a report which said that the domestic

PV industry could provide up to 15 percent of ‘‘new U.S. peak electricity capacity

expected to be required in 2020.’’ In 2002, shipments of solar PV cells and modules

expanded by 15 percent, to around 112 megawatts, according to EIA’s Renewable

Energy Annual 2002. The average unit price of PV cells decreased in 2002 by 14

percent, to $2.12 per peak megawatt. Solar thermal collector manufacturing rose

modestly in 2002, consistent with the general pattern seen since 1992 (except for

a sharp rise between 2000 and 2001). Total shipments of solar thermal collectors

rose four percent, to 11.7 million square feet. (US DOE Energy Information Administration—Country Analysis Briefs—USA http://www.eia.doe.gov/emeu/cabs/

usa.html as of April 2004).

Sustainable building design benefits the environment. The United States, with the

world’s largest economy, is also the world’s largest single source of human-caused

greenhouse gas emissions. Quantitatively, the most important of these is carbon dioxide, which is released into the atmosphere when fossil fuels (i.e., oil, coal, natural

gas) are burned. Current projections indicate that U.S. emissions of carbon dioxide

will reach 5,985 million metric tons in 2005, an increase of 1,083 million metric tons

from the 4,902 million metric tons emitted in 1990, and around one-fourth of total

world energy-related carbon emissions. (US DOE Energy Information Administration—Country Analysis Briefs—USA http://www.eia.doe.gov/emeu/cabs/usa.html

as of April 2004).

Sustainable design makes homes more affordable. The average household spends

six percent of its gross annual income on energy. For a low income household, this

number is 12 percent. (Department of Health and Human Services FY 2000 Home

Energy Data, http://www.acf.dhhs.gov/programs/liheap/notebook.htm).

Sustainable building design is important to our nation’s economic health. Singlefamily and multifamily construction, plus remodeling, account for about 15 percent

of the Nation’s total economic activity. During economic recoveries, housing’s impact

on the economy is even greater, accounting for up to one-third of the change in the

gross domestic product. (NAHB 2004 Housing Facts and Figures, www.nahb.org).

According to a report in April 2004 by researchers at the University of California

at Berkeley, renewable energy promotes U.S. job growth better than investment in

fossil fuels. The report states that investing in renewable energy such as solar,

wind, and the use of municipal and agricultural waste for fuel would produce more

American jobs than a comparable investment in the fossil fuel energy sources in

place today. ‘‘Across a broad range of scenarios, the renewable energy sector generates more jobs per average megawatt of power installed, and per unit of energy

produced, than the fossil fuel-based energy sector,’’ the report concludes. In terms

of net employment, the report states that ‘‘all states of the Union stand to gain from

the implementation of a portfolio of clean energy policies at the federal level.’’

(http://www.eurekalert.org/pub¥releases/2004-04/uoc¥rep041304.php April 2004)

Sustainable building design is important to human health. According to the U.S.

EPA, indoor air levels of many pollutants may be two to five times, and occasionally

more than 100 times, higher than outdoor levels. Indoor air pollutants are of particular concern because most people spend as much as 90 percent of their time indoors. Children are especially vulnerable because of their small size and early stage

of growth. Common sources can include burning kerosene, wood or oil, smoking tobacco products, releases from household cleaners, pesticides, building materials, and

radon. (http://www.epa.gov/air/concerns/)

Madam Chairman and Members of the Subcommittee, I want to thank you for

this opportunity to share my views and SBIC’s perspective on sustainable building

design. There is no doubt that buildings can be part of the solution to our energy

challenges. I look forward to answering your questions and to continuing this dialogue.

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BIOGRAPHY FOR PAUL KONOVE

Paul Konove is the President of Carolina Country Builders, a design/build firm

based in Pittsboro, NC. He graduated a BS in Mechanical Engineering in 1971.

Carolina Country Builders was founded in 1985. The work of the company focuses

mainly on new custom solar home design and construction. The company builds

homes primarily on large lots from $150,000 to under $600,000. In 1986–87 Konove,

chaired the N.C. Solar Energy Association (NCSEA—now the N.C. Sustainable Energy Association) and assisting in founding the N.C. Solar Center (established at

N.C. State University). Konove also assisted in founding the Chatham Home Builders Association in Chatham County, N. C. From 1993–97 Carolina Country Builders

participated in the National Renewable Energy Laboratory’s Exemplary Homes Program. Konove has both chaired and assisted in organizing numerous NCSEA solar

home tours in the Triangle region of North Carolina and in 2003 initiated the expansion of the tour to North Carolina’s first coordinated statewide green home

building tour.

Integral to Konove’s work over the years are educational presentations that encourage the practical and affordable use of renewable energy, with a focus on passive solar energy and more recently green building strategies. Participants of these

training sessions typically include builders, architects, engineers, and consumers.

Over the years, these activities have occurred at National conferences, around North

Carolina and at local community events.

AWARDS

‘‘Special Recognition for Energy Innovation’’ awarded by U.S. Department of Energy

Technology Transfer—1984

Custom Home of the Year Award for Best Environmental Design from Custom Builder (The Magazine for Builders of Premier Homes)—1992

Solar Hall of Fame Award for recognition of his ‘‘many years of outstanding effort

as a designer, builder, community organizer, educator and advocate of solar energy and green building’’ by the North Carolina Sustainable Energy Association—2003

PRESENTATIONS/SEMINARS

‘‘The Greening of America’s Homes’’—2004 NAHB National Green Building Conference, Austin, Texas

‘‘Green Building Opportunities & Techniques’’—21st Century Building Expo & Conference, N.C. Home Builders Association, Charlotte, NC 2004

‘‘Green Building Design & Construction’’ at NCSEA portion of 2003 ASES National

Green Building Tour

‘‘Green Building Guidelines’’—Boone, N.C. for the NC Solar Center—2003

Solar Home Building Course—N.C. Solar Center—2001

Solar Design and Construction seminar presentation at NCSEA portion of ASES

National Tour of Solar Homes

‘‘All you ever wanted to know about thermal mass for solar homes’’—2000

‘‘Passive Solar Design Rules of Thumb’’—1998

Builders Forum for the American Solar Energy Society (ASES) Annual Conference,

Minneapolis, Minn.—1995

Chairman BIGGERT. Thank you very much.

Ms. Loftness, you are recognized for five minutes.

STATEMENT OF MS. VIVIAN E. LOFTNESS, HEAD, SCHOOL OF

ARCHITECTURE, CARNEGIE MELLON UNIVERSITY

Ms. LOFTNESS. I am going to use visuals. As a trained architect,

there is nothing better than visuals to communicate an idea, although I have lost my own visuals. Oh, there.

[Slide.]

I am representing a handful of universities across this country

that have graduate level master of science and Ph.D. programs in

building research. And indirectly through my positions, I represent

the American Institute of Architects Committee on the EnvironVerDate 11-MAY-2000 21:24 Dec 18, 2004 Jkt 093758 PO 00000 Frm 00045 Fmt 6633 Sfmt 6601 C:\WORKD\ENER04\051904\93758 SCIENCE1 PsN: SCIENCE1
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ment, as well as the U.S. Green Building Council, where I serve

on the board.

I am going to try to rapidly go through some key points that I

think are critical to this debate. One is that buildings consumer

over 35 percent of U.S. energy and over 60 percent of U.S. electricity, and they are an extremely tiny portion of the U.S. R&D

budget. Two is that U.S., through that energy consumption, also

consume a significant amount of water as well as in the building

processes themselves in materials, and they create over 30 to 40

percent of U.S. pollution and waste. The energy consumption story

is rising in almost all sectors, but it is rising the most rapidly in

buildings and in transportation related to building land use.

There is significant potential for impact in a broad range of

building attributes, from lighting, to cooling, to power, to heating,

to land use, and to material selection. And I would like to highlight

five technologies that have a major impact. Number one, appliance

and equipment energy standards and innovations have saved between 50 and 75 percent of the energy use while increasing

functionality and, in fact, increasing our export opportunities. And

these include ballasts and lamps and refrigerators, and air conditioners, and controls. Much of this has been supported through federal funding at Department of Energy and the national labs. And

as was mentioned before, we are looking at things that multiply

from one to 20,000 times the benefits from the costs.

If you look at the impact of standards, we need to understand

that these kinds of standards did not, in fact, inhibit industry.

They actually promoted innovation and development, and again,

export technology. Not looking only at refrigerators, but the impact

of central air conditioners and gas furnaces, there is much more

work to be done at the federal level for a number of other technologies that we have no started because of lack of resources in energy efficiency research and development.

Cool roofs, number two, cool community developments. We have

cooling loads that are about six percent of total U.S. energy use.

10 percent of that can be addressed through cool roof introduction,

which would also reduce our peak load demands by five percent.

These are technologies that can be introduced at the natural cycle

of replacement of roofs. We don’t have to go through massive new

investments. We are looking at innovation, and it has the potential

to reduce storm runoff problems that are pervasive in the U.S. as

well as reducing smog.

Daylight. If we start to count daylight and natural ventilation as

renewables, which I think we should, we will be way past the 10

percent by 2010. I think we are making a big mistake not to include them, because we are actually diminishing the number of

daylit buildings and we are diminishing the number of naturally

ventilated buildings as we pursue renovations across this country.

We have the potential to reduce lighting demands by 30 to 60 percent through effective daylighting and cooling demands between 40

and 75 percent, something that is being actively pursued in Europe

today. High rises can also be naturally ventilated and daylit. There

are many examples, not so many in this country.

The health potential of natural ventilation, work has been going

on through federal funding at Lawrence Burkin National LaboraVerDate 11-MAY-2000 21:24 Dec 18, 2004 Jkt 093758 PO 00000 Frm 00046 Fmt 6633 Sfmt 6601 C:\WORKD\ENER04\051904\93758 SCIENCE1 PsN: SCIENCE1
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tories as showing that the impact of improving ventilation rates, of

which natural ventilation is a key attribute, are also reducing flu

and absenteeism by nine to 20 percent.

Classrooms that are daylit have 10 to 25 percent higher student

test scores. Offices that are daylit have improved productivity

scores—productivity gains as well as reduction in sick building

symptoms, and of course, 30 percent energy savings pervasively,

even in deep section office buildings using perimeter daylight effectively. We, at our research center, have been trying to collect these

data sets to, in fact, put the proof sets into a robust life cycle calculator, and we can see productivity gains between 0.4 percent and

18 percent, which certainly more than compensates for any of the

costs that might be associated with daylighting. Energy, again, is

eight to 75 percent energy savings. They usually won’t drive the innovation, but they are the positive impacts of doing that.

Number four, on-site energy generation and energy cascades will

increase generation efficiencies from 30 to 70 percent, start to put

distributive power plants in campuses, not just academic campuses,

but corporate campuses and hospital campuses, and you can start

to see the benefits of using the waste heat and generations of cascaded energy efficiencies.

We need to understand that the problem is not just in the end—

or in the generation side where almost all of DOE investment is

in new forms of generation. There is a microcosm that is going in

the efficiency side of this equation, and there is also a significant

portion of this, which is transmission losses, that could easily be

addressed on the efficiency side of the equation.

Number five, transportation energy efficiency. I realize it is not

the purview of this committee, but it is critically related to the way

in which buildings are being developed in this country, and we

have got to address land use conditions. We need to look at mixed

use versus single use zoning. We need to look at pedestrianized environments where you have live, work, walk communities, and we

have to understand that there needs to be more than one mode of

transportation between our daily lives destinations. I work in this

environment. It is a mixed use, and there are multiple modes of

transport. I hope it will not decay as a result of lack of land use

policies.

Okay. The last three points. We need to enact policy. The market

will not take care of it. Utility programs and the U.S. Green Building Council’s LEED program leadership in energy environmental

design as well as building standards and appliance standards have

had a magnificent impact on energy efficiency, and we need to continue to promote those programs. We need to look at energy efficiency and renewables as a supply source, not as a demand, in

order to get a balanced portfolio, as was mentioned, in these types

of supplies. If you look at refrigerator energy efficiency alone, the

impact that those innovations and standards have had is equivalent to our hydropower at this point in time, and far greater than

the Three Gorges Dam. And keep in mind that a lot of the Three

Gorges Dam is going to go into refrigerators and air conditioners

and China.

And finally, we need to invest in building research. You are

starving our academic institutions. We have probably 200 Ph.D.

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students total in this country looking at building energy efficiency

and renewables compared to the thousands and thousands that are

looking at a whole host of research agendas, and that is because

there is no federal funding, and it is a very fragmented industry

with no industrial support that will make sure that those Ph.D.

programs can generate the next generation of buildings.

And just to close, this is where I work, a research laboratory,

Carnegie Mellon.

Thank you, Madame Chairman.

[The prepared statement of Ms. Loftness follows:]

PREPARED STATEMENT OF VIVIAN E. LOFTNESS

The building sector is the biggest ‘player’ in the energy use equation and can have

the greatest impact on maximizing energy supply and minimizing energy demand

while providing measurable gains for productivity, health and the environment. The

U.S. Green Building Council has summarized the energy and environmental importance of this sector of the economy: Commercial and residential buildings use 65.2

percent of total U.S. electricity and over 36 percent of total U.S. primary energy.

Buildings use 40 percent of the raw materials globally and 12 percent of the potable

water in the United States. Building activity in the U.S. also contributes over 136

million tons of construction and demolition waste (2.8 lbs/person/day), and 30 percent of U.S. greenhouse gas emissions (USGBC 2001).

An evaluation and international comparison of the energy load breakdowns in residential and commercial buildings reveal substantial opportunities for energy efficiency in the building sector. While it is not possible to give a comprehensive list

of these opportunities, this testimony will illustrate the potential impacts of five

specific directions for building energy efficiency in the next 25 years: appliance innovations, cool communities, daylight and natural ventilation, energy cascades, and

smart land-use planning.

In December 2002, the European Union adopted the Directive on Energy Efficiency of Buildings with the goal of cost-effective energy savings of 22 percent by

2010. The U.S. needs to enact parallel efforts to ensure that the long-term implications of decision-making in the built environment contribute positively to our energy, carbon and pollution mitigation, and quality of life goals. With the right policies, incentives, and research, building energy efficiency and renewables can have

a 20–50 percent impact on building energy use by 2010, and a 75 percent impact

by 2050, outpacing both the industrial and transportation sectors in national energy

gains.

1.0 The Significance of Building Energy Use

The building sector is the biggest ‘player’ in the energy use equation and can have

the greatest impact on maximizing energy supply and minimizing energy demand

while providing measurable gains for productivity, health and the environment (Figure 1, 1997 Interlaboratory working group). The U.S. Green Building Council has

summarized the energy and environmental importance of this sector of the economy:

Commercial and residential buildings use 65.2 percent of total U.S. electricity and

over 36 percent of total U.S. primary energy. Buildings use 40 percent of the raw

materials globally and 12 percent of the potable water in the United States. Building activity in the U.S. also contributes over 136 million tons of construction and

demolition waste (2.8 lbs/person/day), and 30 percent of U.S. greenhouse gas emissions (USGBC, 2001).

45

Illustrating the scale of the impact that building energy efficiency can have on national goals—if improved standards for residential refrigerator efficiencies had not

been introduced in 1975, over 40 GW of additional power plant generation would

have been needed in 2001, producing 32 million tons of carbon (MTC). Of equal importance, EER standards for commercial rooftop air conditioners have avoided 135

GW of peak electricity load with associated carbon savings of over 100 MTC

(Rosenfeld et al., 2004).

The building sector currently receives the least federal attention for research and

development, despite its large potential for addressing climate change through: reducing primary energy requirements and emissions, replacing fuel sources with noncarbon based alternatives, and supporting effective sequestration of carbon in the

built environment.

2.0 Five specific directions in building energy efficiency

An evaluation and international comparison of the energy load breakdowns in residential and commercial buildings reveal substantial opportunities for energy efficiency in the building sector. While it is not possible to give a comprehensive list

of these opportunities, the following paragraphs illustrate the potential impacts of

four specific directions for building energy efficiency in both the 2010 and 2050 time

horizons.

2.1 Appliance and equipment energy standards and innovations

The introduction of California and then national standards for equipment and appliance efficiency has had a major impact on national energy use, reducing energy

consumption for heating, cooling and refrigeration demands by 25 percent, 60 percent and 75 percent respectively (Figure 2a, Rosenfeld et al., 2004). The direct relationship of appliance electricity demand and CO2 production illustrates the value of

these energy savings in addressing climate change. The impact of both R&D and

standards has enabled refrigerator size and amenities to increase while overall energy use is reduced (Figure 2b, Rosenfeld, 2004). Four pending appliance standards

(clothes washers, fluorescent light ballasts, water heaters and central air conditioners) are projected to save consumers $10 billion in energy costs, improve

functionality, and reduce cumulative emissions by as much as 22 MTC through 2010

(U.S. Climate Action Report, 2002). The natural replacement cycle of just four building technologies—ballasts, lamps, windows and refrigerator/freezers—with high performance alternatives would save 190 billion kWh of power demand (and 52MTC)

by 2010, with an additional 130 billion kWh (and 35MTC) and 0.3Mbod saved by

2050. There are few engineering obstacles and significant export growth potential

in expanding appliance and equipment energy efficiency standards to cover the full

range of existing and new equipment being introduced in residential and commercial buildings.

2.2 Shading, Cool Roofs and Cool Development

Six percent of all U.S. energy is used in cooling residential and commercial buildings (Figure 3, Koomey, 1996), at an annual cost of $40 billion, and peak power demands of 250 GW. A 5°F rise in neighborhood temperatures—from excessive absorption of solar energy in our increasingly impervious built environment (due to increases in roads, parking lots and roofs)—considerably increases cooling loads. On

46

a national level, the creation of ‘‘cool communities’’ with white roofs, pervious paving, and shade trees would yield a 10 percent reduction in annual cooling loads, and

a five percent reduction in peak cooling loads (Rosenfeld et al., 2003). Moreover, CO2

would be sequestered more effectively by urban trees than an equivalent number

of new ‘forest’ trees, and urban flooding would be greatly reduced. In addition to the

visible enhancement of our physical environment, cool community planning would

yield a 6–8 percent reduction in smog with commensurate gains in the health of our

citizens. Given the cycle time of roof replacements and tree growth rates, immediate

federal and state policies and incentives are needed to realize the benefits of ‘‘cool

communities’’ by 2020.

2.3 Daylighting and Natural Ventilation

Over 10 percent of all U.S. energy is used for lighting buildings, much of this during the daytime when daylight is abundant. In combination with the six percent of

all U.S. energy used for cooling buildings in summer and winter, there is significant

argument for the environmental benefits of windows for daylighting and natural

ventilation. Given the dominant number of existing buildings—schools, hospitals, offices, manufacturing facilities—originally designed for effective daylighting and natural ventilation, the erosion of natural conditioning is a serious energy cost to the

Nation. Effective daylighting can yield 30–60 percent reductions in annual lighting

energy consumption, with average energy savings for introducing daylight dimming

technologies in existing building at over 30 percent (Loftness, 2002). Emerging

mixed-mode HVAC systems, that interactively support natural ventilation or air

conditioning, are demonstrating 40–75 percent reductions in annual HVAC energy

consumption for cooling. The effective use of natural conditioning with well designed

windows, window controls, and mechanical and lighting system interfaces, promises

to yield major energy efficiency gains of up to five percent of all U.S. energy use,

reduce risk in power outages, and provide measurable productivity, health and quality of life gains (Figures 4 and 5).

2.4 On-site generation, the ‘Building as Power Plant’

There are two major arguments for distributed energy systems, particularly the

development of on-site energy generation that uses neighborhoods and campuses to

ensure system efficiencies. First, U.S. transmission and distribution losses alone totaled 201TWh in 2002, or 55MTC per year. Second, the reject energy from power

generation is a prime resource for building energy loads through co-generation of

steam, chilled water via absorption chillers, desiccant conditioning, and hot water

demands. This co-generation of power and building conditioning dramatically improves power generation efficiencies, from averages of 30 percent to well over 70

percent (WADE, 2002). Add to this distributed renewable energy sources such as

photovoltaic, solar thermal, fuel cells, micro-turbines or biomass, and buildings can

actually become power plants—generating more power than they consume

(Hartkopf, 2002). The U.S. has a limited program in distributed energy systems,

with too small a federal investment in combined heat and power technology to support research of CHP linked to renewable sources or CHP fully integrated with

buildings and campuses. By 2050, each new building completed should be a net energy exporter—a building as power plant—with a diversity of renewable fuel sources

as input (hydrogen, geothermal, solar thermal, solar electric, wind) and a building

conditioning cascade that eliminates generation losses (Figure 6).

2.5 Land-use and urban growth boundaries

Sprawl and the commensurate abandonment of existing buildings and infrastructures is a serious environmental cost to the Nation. A significant portion of the 20

percent growth in transportation energy use in the past ten years is due to increased mileage in single occupancy vehicles—the automobile travel that stitches together the increasingly distributed activities in our daily lives. While fuel efficiency

in automobiles will make an impact on this energy and environmental expense, land

use innovation will have a far greater impact on both of these factors, as well as

health and quality of life. The impact of urban growth boundaries in both Portland

and Seattle has been remarkable, with significant investment in infill construction

to maximize the utilization of existing infrastructures. Moreover, these cities have

emerged as a mecca for young professionals searching for the dynamic, interactive

life styles that are only offered in pedestrian, mixed-use neighborhoods. Dr. Richard

Jackson of the Center for Disease Control in Atlanta has begun to link a number

of chronic ailments in children—depression, obesity and others—to the isolated nature of single use zoning, neighborhoods where kids must be driven to every venue.

For 2050, visionaries such as Malcolm Wells and Peter Calthorpe (references) would

argue for completely new environmentally balanced approaches to land use and development: Landscapes that are natural storm water and waste processors, urban

47

growth boundaries to maximize use of existing infrastructures and support

pedestrianization, concrete budgets and tree canopy standards—a vision for the future with dramatically reduced cooling, transportation, and water demands as well

as improvements in environment, health and quality of life.

3.0 Actions for building energy efficiency and inter-related benefits

In addition to the obvious benefits of reduced energy demand, dramatically accelerated national investments and policies focused on building energy efficiency will

contribute to:

• Reduced unnecessary annual energy consumption (Figure 2)

• Reduced emissions and climate change impacts (Figure 3)

• Increased peak power capacitance and reliability (Figures 6 and 7)

• Improved health, human safety and security

• Improved productivity (Figures 4 and 5)

• Improved quality of life

• Increased exports—products and services

• Setting a proven example for emerging nations with growing demands

With regards to mitigating against climate change, Greg Kats argues in a study

of the costs and financial benefits of green buildings ‘‘The vast majority of the

world’s climate change scientists have concluded that anthropogenic emissions—

principally from burning fossil fuels—are the root cause of global warming. The U.S.

is responsible for about 22 percent of global greenhouse gas emissions. Of this 22

percent, the U.S. building sector is responsible for about 35 percent of U.S. CO2

emissions, the dominant global warming gas’’ (Kats, 2003). In addition to energy efficiency gains, building and infrastructure revitalization can have a major impact

on reducing urban sprawl and the consequent rapid increases in transportation energy use and emissions from single occupancy vehicles. The critical actions needed

to advance building energy efficiency to meet both readily achievable goals in the

short-term as well as visionary goals in 2050 and beyond include changes in policy,

investment and research at the federal, State and industrial level.

3.1 Policy—the market will not take care of it

Energy is cheap, especially if the externalities of pollution, risk, and health are

considered. Consumers do not see energy as a large enough component of their disposable income to evaluate the ROI of energy efficiency in the built environment.

Deregulation has already reduced the efforts of major utilities to pursue demand

side management and weatherization, programs that will have to be picked up by

the already budget constrained States. At the same time, power unreliability concerns may lead residential and commercial building owners to purchase inefficient

and polluting standby power rather than consider the significant opportunity to invest in energy efficiency. The contributions of buildings to the discharge of four primary pollutants—NOΧ, SOΧ, CO2, and particulates—should be fully recognized in

the cost of building energy, to catalyze owners and occupants to pursue more environmentally responsible buildings and building use patterns.

Federal and State energy efficiency standards as well as tax incentives are critical. A remarkable example of environmental gain through policy, especially in today’s under-regulated, under-incentivized market, has been the introduction of

Leadership in Environmental and Energy Design (LEED) by the U.S. Green Building Council. The LEED rating utilizes certification to establish a building’s environmental sustainability level related to: sustainable sites, water efficiency, energy and

atmosphere, materials and resources, indoor environmental quality and innovation

in design practices. LEED goals have been adopted by a growing number of major

building decision makers in the public and private sector impacting an estimated

three percent of new construction with over 50 percent energy efficiency savings—

gains that should be widely adopted.

3.2 Balancing Investment in Supply and Demand

Given the major energy excesses in the built environment, reducing demand must

be seen as a major energy source. Investments in ‘‘mining’’ this new energy supply

will: yield greater economic benefit for a broader array of industries; provide significant gains in reducing environmental pollution; and ensure a longevity to this ‘‘supply’’ that few other sources can ensure. Unfortunately, the continued federal dollars

going into R&D for energy supply outweigh R&D dollars for energy demand six to

one (DOE/CR–0059, 1999), even though the ROI of energy efficiency dramatically

exceeds the ROI of creating new sources. For example, the modest national investments (of around $3M per program) by DOE in R&D for energy efficient ballasts,

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low-E windows, and refrigerator standards, reaped national benefits of $9,000,

$7,000 and $23,000 per dollar invested (Rosenfeld, 2004).

3.3 Building Research—An unrecognized federal mandate

Investing in building energy efficiency as a new energy ‘‘supply’’ would dramatically surpass production from new oil supplies and power plant investments, as well

as offer sustained ‘‘sources’’ of energy that do not generate greenhouse gases. Yet

the combined budgets for building research across the Federal Government is less

than two percent of federally funded R&D, in no way commensurate with the importance of the built environment to our economy and quality of life (Loftness/NSF,

2000). Given this paucity of research support, there are only a handful of university

Ph.D. programs focused on energy efficiency and environmental quality in the built

environment, compared to many dozens of universities with federally funded research related to nano-technology and information security for example. Given that

the building sector is 20 percent of the U.S. economy, over 35 percent of U.S. energy

use and associated environmental quality, and significantly linked to the health and

competitiveness of our nation, the federal sector must move beyond today’s marginal

funding of research in the built environment.

4.0 Conclusions

Energy efficiency in buildings represents a major untapped resource for our energy demands and resultant mitigation of climate change. Standards and removal

of market barriers can lead to significant reductions in energy use from key buildings technologies through their natural replacement cycle. A 1997 study undertaken

by all five national laboratories determined that building energy efficiency could

achieve 230MTC of the 400MTC savings needed by 2010 to meet U.S. targets under

the Kyoto Protocol. With the addition of innovative combined cooling, heat and

power technologies, a further 170MTC could be achieved, fully meeting 2010 goals

through the building sector alone. Over the longer-term, expanded building R&D

budgets, industry and university based research, and continuing national policies

that focus on building energy efficiency, could trigger dramatic improvements in energy and environmental quality in the built environment. Moreover, these investments would ensure ancillary benefits including revitalization of existing buildings

and infrastructures, measurable gains in health and productivity, and a positive influence on energy efficient growth in the built environment of developing nations.

In December 2002, the EU adopted the Directive on Energy Efficiency of Buildings with the goal of cost-effective energy savings of 22 percent by 2010 through

four basic actions (Bowie & Jahn, 2003):

1. General framework for calculation of the integrated performance of buildings.

2. Setting of minimum standards in new and existing buildings.

3. Energy certification of buildings.

4. Inspection and assessment of heating and cooling installations.

The U.S. needs to enact parallel efforts to ensure that the long-term implications

of decision-making in the built environment contribute to our energy, carbon and

pollution mitigation, and quality of life goals. With the right policies, incentives and

research, building energy efficiency can have a 20–50 percent impact on building energy use by 2010, and a 75 percent impact by 2050, outpacing both the industrial

and transportation sectors in national energy savings.

5.0 References

Bowie, Randall and Anette Jahn, ‘‘European Union—The new Directive on the energy performance of buildings—Moving closer to Kyoto,’’ Directive 2002/91/EC,

Official Journal of the European Communities L1/65, 16th Dec. 2002.

Calthorpe, Peter, William Fulton, and Robert Fishman, The Regional City, Island

Press January 2001, ISBN: 1559637846.

DOE Energy Consumption Series ‘‘Measuring Energy Efficiency in the United

States’ Economy: A Beginning.’’ U.S. DOE, Energy Information Administration,

October 1995.

EIA, Annual Energy Review 2002. U.S. DOE, Energy Information Administration.

Hartkopf et al., ‘‘Building as Power Plant,’’ The Austin Papers, Building Green, Inc.

2002, ISBN 1–929884–10–9.

Interlaboratory Working Group 1997. Scenarios of U.S. Carbon Reductions: Potential Impacts of Energy Technologies by 2010 and Beyond. ORNL CON 444.

www.ornl.gov/ORNL/Energy—Eff/labweb.htm

Jochem, Eberhard & Bernard Aebischer. ‘‘Energy End-Use Efficiency in Western

Europe.’’ 1999–2000.

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Kats, Greg, Leon Alevantis, Adam Berman, Evan Mills, Jeff Perlman. ‘‘The Costs

and Financial Benefits of Green Buildings: A Report to California’s Sustainable

Building Task Force.’’ Oct. 2003.

Koomey, Jonathan G. ‘‘Trends in Carbon Emissions from U.S. Residential and Commercial Buildings: Implications for Policy Priorities.’’ Proceedings for the Climate Change Analysis Workshop, 6–7 June 1996.

Koomey, Jonathan and Richard E. Brown. ‘‘The Role of Building Technologies in Reducing and Controlling Peak Electricity Demand.’’ September 2002.

Loftness, Vivian. ‘‘E–Vision: Energy, Productivity and the Critical Role of the Built

Environment.’’ RAND/DOE E–Vision Workshop Proceedings, Oct. 11–13, 2000.

Loftness, V. and V. Harktopf, ‘‘Building Investment Decision Support (BIDS): CostBenefit Tool to Promote High Performance Components, Flexible Infrastructures and Systems Integration for Sustainable Commercial Buildings and Productive Organizations,’’ The Austin Papers, Building Green, Inc. 2002, ISBN 1–

929884–10–9.

Rosenfeld, Arthur H., Joseph H. Romm, Hashem Akbari, Alan C. Lloyd. ‘‘Painting

the Town White—and Green.’’ http://eande.lbl.gov/HeatIsland/PUBS/PAINTING/

Rosenfeld, Arthur H., Pat McAuliffe, and John Wilson. ‘‘Energy Efficiency and Climate Change.’’ Encyclopedia on Energy, edit. Cutler Cleveland, Academic Press,

Elsevier Science, 2004.

Rosenfeld, Arthur H. ‘‘Improving Energy Efficiency 2–3 percent/ year to Save Money

and Avoid Global Warming.’’ Sessler Symposium, LBNL. 15 March 2003.

Rosenfeld, Arthur H. ‘‘The Art of Energy Efficiency: Protecting the Environment

with Better Technology.’’ Annual Review Energy Environment 1999. 24:33–82.

WADE, World Alliance for Decentralized Energy. ‘‘The Real Benefits of Decentralized Energy,’’ 2002 report; www.localpower.org

Wells, Malcolm, Recovering America, A More Gentle Way to Build, 2001, Amazon.com or http://www.malcolmwells.com/books.html#print

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BIOGRAPHY FOR VIVIAN E. LOFTNESS

University Professor and Head, School of Architecture, Carnegie Mellon University;

Senior Researcher, Center for Building Performance and Diagnostics

Vivian E. Loftness is an international sustainability and building performance

consultant for commercial and residential building design. She has edited and written a wide range of publications on advanced building systems, energy, climate and

regionalism in architecture, as well as design for performance in the workplace of

the future. In 2002, she was named Educator of the Year by the American Institute

of Architecture Students.

Over the past ten years, Vivian Loftness has pursued advanced architectural research on the performance of a range of building types, from museums to high tech

offices, and the innovative building delivery processes necessary for improving quality in building performance. Supported by a university-building industry partnership, the Advanced Building Systems Integration Consortium, she is a key contributor to the development of the Intelligent Workplace—a living laboratory of commercial building innovations for performance, along with authoring a range of publications on international advances in the workplace.

In the Center for Building Performance at Carnegie Mellon, Ms. Loftness has

been actively researching and designing high performance office environments with

DOE, DOD, Department of State, GSA, NSF and major building industries such as

Steelcase and Johnson Controls. She has served on five National Academy of

Science panels as well as being a member of the Academy’s Board on Infrastructure

and the Constructed Environment. Her work has influenced both national policy

and building projects, including the Adaptable Workplace Lab at the U.S. General

Services Administration and the Laboratory for Cognition at Electricity de France.

Vivian Loftness has a Bachelor of Science and a Master’s of Architecture from

MIT, is on the National Board of the USGBC, AIACOTE, and DOE FEMAC. She

is a Fellow of the American Institute of Architects and is a registered architect.

57

58

Chairman BIGGERT. Thank you very much, Ms. Loftness.

Mr. Carberry, you are recognized.

STATEMENT OF MR. JOHN B. CARBERRY, DIRECTOR, ENVIRONMENTAL TECHNOLOGIES, DUPONT CENTRAL RESEARCH

& DEVELOPMENT

Mr. CARBERRY. Good morning, Madame Chairman, Mr. Larson,

and Members of the Committee. I am John Carberry, Director of

Environmental Technology for DuPont.

DuPont’s vision is for sustainable growth while continually reducing our environmental footprint. Energy efficiency, renewable

energy, and renewable raw materials are part of that vision. I will

address our experiences, our views of federal programs that have

proven helpful, and how efficiency and renewable energy can help

address high natural gas prices.

The Consumer Federation of America estimated that these high prices have cost consumers an extra $80 billion over the last three

years and no discussion of U.S. energy policy can ignore this issue.

DuPont has focused on energy efficiency for many years. In addition, DuPont determined that the science regarding global climate

change justified rational action, and we established aggressive voluntary reduction goals.

Energy efficiency and renewable energy contributed significantly

to the 65 percent reduction of greenhouse gas emissions that we

have achieved. From 1973 to 1992, we decreased our unit energy

consumption by almost 40 percent. During the ’90s, we held our energy use flat while increasing our production over 35 percent. We

have modernized on-site power generation systems, including extensive use of highly efficient co-generation. We increased operating capacity and up time of our existing plants. We also increased yield, which reduces energy use and waste generation.

We have made major gains through process changes and, in

smaller ways, through improved efficiency in lighting, pumps, and

steam. We estimate that since 1990, we have saved almost $2 billion in energy costs versus the business-as-usual case. We make

products that help others become more energy efficient. Our Tyvek

building wrap, which hopefully all of you see as you have seen new

construction, reduces energy use in one year by an amount equal

to about 10 to 20 times the energy it took to produce the Tyvek.

Our engineering plastics help to make cars lighter and more fuel

efficient, and DuPont fuel cell technologies are helping to create

the next generation of high-efficiency, low-emission power sources.

We have set a goal of 10 percent of our energy by 2010 from renewable energy. We are at about four percent and are hard at work

on projects involving biomass and landfill gas that could yield another four percent.

Partnerships with government agencies have proven to be effective. We are engaged with DOE to develop an integrated, cornbased biorefinery, a technology to more efficiently convert corn into

ethanol and bio-based raw material called PDO. Bio-based PDO is

for DuPont’s bio-based Sarona fiber, which won the President’s

Green Chemistry Challenge Award recently. We collaborated with

both the Department of Energy and the National Institute of

Standards and Technology on fuel cell and superconductivity.

59

Under DOE’s Vision 2020 program, we identified criteria for the

successful development of biomass energy.

Beyond just DuPont’s operation, energy efficiency measures

across the economy have significant impacts. With natural gas supplies tight, demand reductions can help reduce price pressures and

volatility. Congress can expand programs in home weatherization,

building codes, energy efficient appliances, distributed generation,

and incentives for renewable energy. While energy efficiency and

renewable energy by themselves are not sufficient to close the supply-demand gap, they are clearly an important part of a muchneeded national policy for natural gas.

In closing, let me thank you for inviting me. We believe that energy efficiency and renewable energy have a significant role to

play. Congress needs to ensure that important programs, such as

DOE’s EERE programs and NIST’s ATP program, are adequately

funded to help us advance these technologies. In addition, and perhaps more importantly, the U.S. urgently needs a clear, national

policy to address the runaway price of natural gas, a policy that

combines measures such as efficiency and renewables to reduce demand, along with improved infrastructure, as the Chair already

noted, additional liquefied natural gas import, alternative fuels,

such as clean coal, and environmentally responsible domestic natural gas production. I would be happy to ask any—to respond to

any questions.

Thank you.

[The prepared statement of Mr. Carberry follows:]

PREPARED STATEMENT OF JOHN B. CARBERRY

Good morning Madame Chairman, Mr. Larson, and Members of the Committee.

My name is John Carberry, and I am Director of Environmental Technologies for

DuPont Central Research & Development. Among my responsibilities is the technology evaluation to support DuPont’s energy efficiency and renewable energy activities. Over its 202 year history DuPont has brought science to bear to address

human and environmental needs. Our vision is Sustainable growth; increasing

shareholder and societal value while decreasing our environmental footprint. This

is a global vision, implemented in the 70 countries in which we operate and in many

more countries in which we sell products, many of which help others operate more

efficiently. Efficient use of energy, and the use of renewable energy and renewable

raw materials are part of that vision. I applaud you for holding this hearing. It is

particularly relevant at a time when over-reliance on a single fuel, natural gas, is

causing unstable and high natural gas prices that are having significant economic

repercussions throughout the entire U.S. economy, as noted by Federal Reserve

Chairman Alan Greenspan in his prior Congressional testimony.

In my remarks I will address our experiences with energy efficiency and renewable energy, the business value of efficient use of energy, our views of federal programs that have proven helpful in these areas, and how efficiency and renewable

energy can help in addressing high US natural gas prices. Natural gas prices in the

U.S. are currently at, and are projected to remain at, two to three times historical

levels. The Consumer Federation of America recently estimated that over the last

three years these high U.S. natural gas prices have cost consumers an extra $80

billion. No discussion of energy policy in the U.S. can ignore this issue. These sustained high prices are fundamentally the result of a supply-demand imbalance. Government policies are a significant part of the cause, and changes in those policies

are necessary to address this serious problem.

DuPont has focused on energy efficiency for many years, for both economic and

environmental reasons, consistent with our Sustainable Growth vision. Many of our

operations are energy intensive, with energy representing a significant element of

manufacturing cost. In addition, in the early 1990s DuPont determined that the

science regarding global climate change was sufficient to justify action. We recognized that our emissions contributed to the situation, and we established aggressive

voluntary greenhouse gas reduction goals for DuPont. Increasing our energy effiVerDate 11-MAY-2000 21:24 Dec 18, 2004 Jkt 093758 PO 00000 Frm 00063 Fmt 6633 Sfmt 6621 C:\WORKD\ENER04\051904\93758 SCIENCE1 PsN: SCIENCE1
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ciency and enhancing our use of renewable energy sources has contributed significantly to the 65 percent global reduction in DuPont greenhouse gas emissions that

we have achieved, and continues to do so. Other reductions, slightly more than half,

came from actions on non-CO2 gases.

From 1973 to 1992, we decreased our energy consumption per pound of product

produced by almost 40 percent. During the 1990s we held our energy use flat on

a global basis while increasing our production by over 35 percent. We achieved this

in a number of ways, both large and small. We have made changes to our overall

portfolio to emphasize energy efficient operations. We have modernized our on-site

power generation systems, including extensive use of co-generation, also called combined heat and power. This combined production of electricity and steam is up to

twice as efficient and has much lower emissions than typical electric utility power

generation. We have also increased the final product yield at our plants, meaning

we convert more of our raw materials to final product, reducing energy use and

waste generation. In addition, we have increased plant utilization—plants are more

energy efficient when they run at a consistent high rate. We have made gains in

numerous smaller ways as well, improving energy efficiency in everything from

lighting and pumps to how steam is managed on our sites. Many of these improvements are transferable to other manufacturing plants, and we have widely shared

our experiences with others.

Allow me to illustrate with a few examples. At one plant we made changes to

product packaging that reduced our energy usage 30 percent and improved our

packaging. We installed highly efficient large-scale co-generation facilities at several

plants, including at our Victoria and Sabine, Texas sites. I would note that the current and projected high U.S. natural gas prices make further investment in co-generation uneconomical.

These reductions in energy use have returned significant business value to Du- Pont—we estimate that since 1990 we have saved almost $2 billion in energy costs

by our more efficient use of energy versus the ‘‘business-as-usual’’ case. Those savings continue. That is genuine business value from better energy stewardship, and

it contributes to our substantial global reductions in air emissions, including greenhouse gases.

We also create products that help others become more energy efficient. For example, our Tyvek Housewrap, used in both residential and commercial applications,

in one year reduces energy use by an amount equal to 10–20 times the energy it

took to produce the Tyvek. Our engineering plastics help to make cars lighter

weight and therefore more fuel efficient, and DuPont fuel cell technologies are helping to create the next generation of high efficiency low emitting power sources for

applications ranging from portable CD players to cars to community power generating stations. Despite these substantial gains, we continue to pursue energy efficiency aggressively. Throughout this decade our goal is to continue to hold energy

use flat, even as we pursue aggressive growth. These gains will largely derive from

additional incremental measures; most of the larger scale ‘‘low hanging fruit’’ has

been picked. Certainly co-generation offers additional opportunities, but as I have

already noted the sustained high domestic natural gas prices are posing a barrier

in that regard. Energy efficiency and renewable energy sources are also the primary

routes for us to continue to make progress in greenhouse gas reductions.

In addition to our efforts at energy efficiency, we have also set significant public

goals for our use of renewable energy, targeting to secure 10 percent of our global

energy needs by 2010 from renewable sources at competitive pricing. Our renewable

energy goals are consistent with our sustainable growth efforts, including a desire

to reduce our dependence on depletable resources, further reduce our greenhouse

gas emissions and to explore potential new markets. Getting to 10 percent will not

be easy. We are currently getting over four percent of our energy from renewable

sources, and are hard at work on projects involving biomass and landfill gas, both

great substitutes for natural gas, that could yield another four percent. At one site,

a landfill gas project could reduce that site’s natural gas needs by almost 40 percent.

We are exploring opportunities to utilize biomass in our on-site power generation,

and are working on enhancing the fundamentals of photovoltaic technologies to reduce the cost of energy generated from the sun.

Partnerships with government agencies have proven helpful and effective in many

of these endeavors. We are engaged in very productive partnerships with DOE, including a matching grant program to develop an Integrated Corn Based Biorefinery,

a mouthful of a term that basically means that we are developing technology to

more efficiently convert corn into ethanol and a bio-based raw material called PDO

commonly used in the chemical industry. Of particular note is the goal of converting

not just the corn grain itself, but also the corn husks and stalks, which currently

are just left in the fields, to ethanol. This would increase farmers’ revenues signifiVerDate 11-MAY-2000 21:24 Dec 18, 2004 Jkt 093758 PO 00000 Frm 00064 Fmt 6633 Sfmt 6621 C:\WORKD\ENER04\051904\93758 SCIENCE1 PsN: SCIENCE1
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cantly. Also of note, the bio-based PDO will provide a raw material for DuPont’s biobased Sarona fiber, for which DuPont was awarded the President’s Green Chemistry Challenge Award last year. This is consistent with our goals of not only enhancing our use of bio-based energy but also the use of bio-based raw materials in

our operations. We also have fruitful collaborations with both the Department of Energy and the National Institute of Standards and Technology’s Advanced Technology

Program on fuel cell and superconductivity related programs. Under DOE’s Vision

2020 program, and working with the Green Power Market Development Group, convened by the World Resources Institute and consisting of 12 major U.S. companies,

we identified criteria for the successful development of biomass derived renewable

energy that allowed the Group to solicit and evaluate commercial biomass proposals.

In another initiative with DOE’s Office of Innovative Technology we are developing

a tool that will help site engineers quickly estimate energy efficiency opportunities

so that decisions on priorities and allocation of resources can be made. I would note

that we are concerned about inadequate funding for several of these programs in

current budget requests.

Let me now address the benefits of energy efficiency and renewable energy beyond

DuPont’s operations. Aggressive energy efficiency measures across the U.S. economy, including the industrial, commercial and residential sectors, can have significant beneficial economic impacts. Not only the entity reducing its energy use benefits, but more broadly this can have significant beneficial effects on high U.S. natural gas prices. Peak electricity generation, and increasingly base load generation

as well, is largely natural gas fired in the U.S. Reductions in electricity demand

driven by increased energy efficiency will cause the utility sector to decrease their

demand for natural gas. In an environment of tight natural gas supplies, this demand reduction can help to ease upward price pressures and price volatility for natural gas. Estimates by the American Council for an Energy Efficient Economy of

the effects of energy efficiency programs on the demand for natural gas suggest the

impact on natural gas demand could be significant. Certainly the experience in California several years ago showed that electricity demand could be substantially reduced rather quickly with concerted effort. The U.S. could productively expand programs in areas such as home weatherization, enhanced building codes, more energy

efficient appliances and distributed generation. In addition, programs to incentivize

the expanded use of renewables in electricity generation can also serve to reduce

natural gas demand. While energy efficiency and renewable energy by themselves

are not sufficient to close the supply-demand gap for natural gas and bring prices

back to Earth, they are clearly an important part of a much needed national policy

for natural gas, along with environmentally responsible additional natural gas supply and a diversity of fuels for the electric generating sector.

In closing, let me again thank you for holding this hearing and providing me the

opportunity to share our experiences. We believe that energy efficiency and renewable energy sources have a significant role to play in America’s energy mix. Congress needs to ensure that important programs, such as DOE’s EERE programs and

NIST’s ATP program, are adequately funded to help us advance these technologies.

In addition, and perhaps more importantly, the U.S. urgently needs a clear national

policy to address the runaway price of natural gas, a policy that combines measures

such as efficiency and renewables to reduce demand for natural gas, improved infrastructure, additional liquefied natural gas imports, alternative fuels such as clean

coal, and environmentally responsible natural gas production.

BIOGRAPHY FOR JOHN B. CARBERRY

John B. Carberry is Director of Environmental Technology for the DuPont Company in Wilmington, Delaware where he has been employed since 1965. He is responsible for recommendations on technical programs for DuPont based on an analysis of environmental issues. Since 1988, he has led this function in a transition to

increasingly emphasize waste prevention and product stewardship while maintaining excellence in treatment. His major responsibilities have included leading the DuPont focus on the impact of energy costs, finding and using affordable renewable energy, providing technical analysis and recommendations for the DuPont energy

goals, leading a team that provides guidance on avoiding persistent and bioaccumulative chemicals and works with the EPA on science based targeting, and leading

the team that commercialized the revolutionary ‘‘zero emissions, negligible inventory’’ methylisocyanate (MIC) process.

Mr. Carberry is Chair of the National Academy Committee on the Destruction of

the Non-Stockpile Chemical Weapons, a founding member of the Green Power Market Development Group and of the Vision2020 Steering Committee, and a member

of the NAE Committees on; Technologies for Sequestering CO2, and Metrics for DocVerDate 11-MAY-2000 21:24 Dec 18, 2004 Jkt 093758 PO 00000 Frm 00065 Fmt 6633 Sfmt 6621 C:\WORKD\ENER04\051904\93758 SCIENCE1 PsN: SCIENCE1
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umenting Progress in Global Change Research. Since 1990, John has presented 30

lectures on environmental issues at 18 universities, given invited presentations at

63 public conferences worldwide and provided 21 literature interviews, or contributions. He holds a B.ChE. and an M.E. in Chemical Engineering from Cornell University and an MBA from the University of Delaware.

Mr. Carberry is a U.S. citizen, born May 1, 1941. He lives in Newark, DE with

his wife Sandra. They have two married children and two grandchildren who live

nearby.

Chairman BIGGERT. Thank you very much, Mr. Carberry.

Mr. Smith, you are recognized for five minutes.

STATEMENT OF MR. PETER R. SMITH, PRESIDENT, NEW YORK

STATE ENERGY RESEARCH AND DEVELOPMENT AUTHORITY, NEW YORK STATE

Mr. SMITH. Madame Chairman, Chairman Boehlert, distinguished Members of the Subcommittee, thank you for the opportunity to testify today about Governor George E. Pataki’s energy efficiency initiatives.

Governor Pataki is both passionate and committed to pursuing

energy efficiency to benefit the state’s energy consumers, the environment, and the reliability of our energy systems. Energy efficiency is cleaner than renewable resources and cheaper than coal.

Maximizing energy efficiency in all sectors of the state’s economy

is the first step and the lowest cost alternative to improving the

state’s and the Nation’s energy security and reliability.

New York imports about 85 percent of its energy needs and

spends about $38 billion on energy of which approximately c flows

out of the state. Those expenditures represent money spent by New

Yorkers outside of New York, and more than likely, in politically

volatile regions of the world. New York’s efforts have the benefit

of reducing our dependence on imported oil and creating and retaining jobs in New York’s economy.

With regard to new renewable resources, New York is building

the renewable infrastructure through production incentives: training for installers and repair personnel, supporting new technology

with financial and technical assistance, and fostering the development of the biofuels industry. For example, more than 41

megawatts of new wind generation is in operation and being sold

in New York. Recently, the New York State Public Service Commission certificated the first stage, a 300 megawatt wind farm in

central New York, which will be the largest wind farm east of the

Mississippi. Additionally, the Governor asked the New York State

Public Service Commission to convene a regulatory proceeding on

New York’s potential for instituting a renewable portfolio standard

that Chairman Boehlert noted will be 25 percent of New York’s energy bought in 10 years.

With regard to energy efficiency, New York’s public authorities,

including the New York State Energy Research and Development

Authority, the New York Power Authority, and the Long Island

Power Authority invest nearly $290 million annually on energy efficiency, renewable energy technologies, low-income programs, and

research and development. These programs create jobs in manufacturings of new technologies as well as installing and servicing

equipment. For example, today in New York, there are more than

150 companies throughout the state in the energy efficiency busiVerDate 11-MAY-2000 21:24 Dec 18, 2004 Jkt 093758 PO 00000 Frm 00066 Fmt 6633 Sfmt 6601 C:\WORKD\ENER04\051904\93758 SCIENCE1 PsN: SCIENCE1
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ness. That is up from just over a handful in 1998 when we started

what we call the New York Energy $mart program.

Our programs operate on a principle of providing matching funds

through co-funding. New York is also the first state in the Nation

to have a ‘‘green building’’ tax credit. We recognize that building

green is not just good policy, it is good business. The benefits New

York has accrued today from programs operated by NYSERDA, the

New York Power Authority, and LIPA include annual customer

utility bill reductions of over $140 million, a net reduction of electricity use of more than 1,000 gigawatt hours, as well as substantial annual emission reductions. In addition, the dollars invested in

New York caused the creation of approximately 3,000 jobs across

the state.

Governor Pataki’s commitment to energy efficiency and renewable technology is further evidenced by the requirements of Executive Order 111, which he issued in 2001. The Order calls for a 35

percent reduction of energy consumption in state-owned facilities.

The Order also mandates the purchase of renewable power. Another program we have is New York’s Energy Investment program,

or State EnVest, which assists state agencies and authorities in

identifying energy efficiency opportunities in their facilities and

then leveraging the savings to secure third-party, tax-exempt,

lease-purchase financing. The program is supported by competitively procured, master-finance-arrangement and requires no outof-pocket expenditures or on-balance sheet debt.

We also evaluate New York’s programs. Evaluation of our New York Energy $mart program is conducted jointly by competitively

selected, independent, third-party contractors and NYSERDA evaluation staff. Our evaluation efforts have demonstrated that we leverage $3 of private sector capitol for every dollar of public benefit

funds awarded. The key to the success of our program is changing

consumer and business attitudes and behaviors when making energy-related decisions. Part of our New York Energy $mart program is creating sustainable changes in markets.

There are potential synergies between state and federal efforts

that are best exemplified by the EPA–DOE Energy Star program.

Setting a program platform at the federal level and then allowing

the state to act as an implementation partner is a perfect example

of a productive federal-state relationship. States have the natural

delivery systems to help transform markets for energy efficiency.

Cooperation and coordination is also vital to the success of any federal-state partnership. The states need to be involved fully with the

implementation of federal initiatives within their borders. Setting

uniform standards creates a level playing field for businesses that

operate in multiple states.

Much like our efforts under the State EnVest program, a federal

initiative could be coordinated to create a master financing structure, which will allow for advertising the benefits of energy efficient improvements over time. In New York, we believe that energy

efficiency and renewable resource development is good for the environment, good for the economy, and most importantly, good for energy security reliability. The $mart money is on energy efficiency,

which is why in New York we call our program New York Energy

$mart.

64

Madame Chairman and distinguished Members of the Subcommittee, thank you for the opportunity. I look forward to taking

any questions you may have. Thank you, Mr. Boehlert.

[The prepared statement of Mr. Smith follows:]

PREPARED STATEMENT OF PETER R. SMITH

Madam Chairman and distinguished Members of the Subcommittee; thank you

very much for the opportunity to testify today about Governor George E. Pataki’s

energy efficiency initiatives in New York State.

Governor Pataki is both passionate and committed to pursuing energy efficiency

to benefit the State’s energy consumers, the environment, and the reliability of our

energy systems. Energy efficiency is cleaner than renewable resources and cheaper

than coal. Air emissions are avoided, and the dollars saved by the customer are free

to be spent elsewhere within the State’s economy. Maximizing energy efficiency in

all sectors of the State’s economy is the first step, and lowest cost alternative, to

improving the State’s and the Nation’s energy security and reliability.

The Governor’s commitment to energy efficiency and clean, renewable energy

technologies are driven by the goals of increasing sustainability, reliability, energy

security, economic growth, and protection of our environment. New York imports

more than 85 percent of its energy needs and spends about $38 billion dollars annually on energy, of which approximately one-half flows out of the State to pay for imported energy. Those expenditures represent money spent by New Yorkers outside

of New York, and more than likely in politically volatile regions of the world. New

York’s efforts to promote energy efficiency and renewable technology have the benefit of reducing our dependence on imported oil, and creating and retaining jobs in

the New York economy. New York’s efforts acknowledge that we must begin with

the here and now—more efficient energy use means less harm to the environment,

and greater economic growth.

Renewable Resources

New York is building the renewable infrastructure through production incentives

for wind generation, training for photovoltaic installers and repair personnel, supporting digester technology with financial and technical assistance for the agricultural community, and fostering the development of the biofuels industry. As well as

encouraging the use of distributed generation through combined heat and power applications and fuel cell technology. The Governor has set the stage for a growth industry with tremendous energy and economic potential.

For example, more than 41 MW of new wind generation is in operation and being

sold in New York thanks to a public/private partnership under the New York Energy $martSM Program. Recently, the NYS Public Service Commission certificated

the first stage of a 300 MW wind farm on the Tug Hill Plateau in Central NY. The

Flat Rock Wind Project will be the largest wind farm east of the Mississippi.

In addition, the Governor asked the New York State Public Service Commission

to convene a regulatory proceeding on New York’s potential for instituting a Renewable Portfolio Standard (RPS) in an effort to ensure that 25 percent of New York’s

electricity is purchased from renewable sources over the next decade.

Energy Efficiency

New York’s public authorities including, the New York State Energy Research and Development Authority under the New York Energy $martSM Program, as well

as the Programs funded by the New York Power Authority, and the Long Island

Power Authority, invest nearly $290 million annually on energy efficiency, renewable energy technologies, low-income programs, and research and development. The

New York Energy $martSM Program is funded through a System Benefits Charge

on the transmission and distribution of electric energy for the State’s investor-owned

utility company customers.

There are jobs created directly in manufacturing, as well as to install and service

equipment. There are jobs created by companies saving money on their energy bills.

For example, today in New York there are more than 150 companies throughout the

state in the energy efficiency business. That is up from a handful in 1998 when we

started the New York Energy $martSM Program.

Industry partners are essential to helping identify the problems faced by energy

consumers, craft viable solutions, and secure the financial commitment to install the

appropriate technologies. New York’s public benefit programs offer technical assistance and financial incentives that prompt building owners, managers, and related

professionals to leverage their own capital in an effort to make the project a reality.

Our programs operate on the principle of matching funds through co-funding whereVerDate 11-MAY-2000 21:24 Dec 18, 2004 Jkt 093758 PO 00000 Frm 00068 Fmt 6633 Sfmt 6621 C:\WORKD\ENER04\051904\93758 SCIENCE1 PsN: SCIENCE1
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by the assistance we provide stimulates the project toward implementation, but does

not simply provide funding for projects that would have taken place without the

availability of the program. Many of our efforts are aimed at transforming the marketplace to value the multiple benefits of energy efficiency by spurring customer demand and establishing a competent professional infrastructure to provide ‘‘green’’

products and services.

New York is the first State in the Nation to have a ‘‘green building’’ tax credit.

We recognized that building green is not just good policy, but good business.

The benefits New York has accrued to date from the New York Energy $martSM

Program and the programs operated by NYPA and LIPA, include annual customer

utility bill reductions of more than $140 million, a net reduction of electricity use

of more than 1,000 Gwh, the enabling of 41.5 MW of Wind generation capacity, and

300 KW installed photovoltaic capacity; as well as annual emission reductions of

NOΧ by 1,000 tons, SO2 of 1,600 tons and CO2 reductions of 1.3 million tons. In

addition to the energy and environmental savings the program dollars invested has

caused the net creation of approximately 3,000 jobs across the state.

As an example of our efforts, Hudson Valley Community College, outside of Albany, NY is now operating independently of the electric grid by reclaiming the

methane gas from a nearby landfill. The gas is used to fire a combined heat and

power system that provides electricity while using the waste heat for winter thermal

load and summer cooling, coupled with energy efficiency improvements throughout

the campus.

Leadership by Example

Governor Pataki’s commitment to energy efficiency and renewable technology is

further evidenced by the requirements of Executive Order No. 111 which he executed in 2001. The Order calls for a 35 percent reduction of energy consumption in

State owned facilities, from 1990 levels, by 2010. The Order also mandates the purchase of renewable power. Initially 10 percent of the State facilities’ energy purchases must be made from renewable power sources by 2005, and ultimately 20 percent by 2010.

New York’s Energy Investment Program, or State EnVest is further evidence of

Governor Pataki’s leadership by example with State facilities. State EnVest assists

State agencies and authorities in identifying energy efficiency opportunities in their

facilities and then leveraging the savings to secure third-party tax-exempt lease

purchase financing. The annual energy savings potential is identified throughout

the facility and is then amortized over a repayment period to cover principle and

interest. The program is supported by a competitively procured Master Finance arrangement, and requires no out-of-pocket expenditures or on-balance sheet debt.

Program Evaluation and Metrics

To ensure that our programs meet our expectations for participation levels and

meet our established energy and dollar savings goals, we have fully integrated a formal evaluation effort with program design and delivery—the first State in the country to do this.

Evaluation of the New York Energy $martSM Program is conducted jointly by

competitively selected, independent third-party contractors and NYSERDA evaluation staff. Our efforts stress the importance of measuring and verifying program

outcome impacts as an integral part of determining the success of our programs.

Our delivery approach for energy efficiency and renewable energy development is

predicated on establishing public and private partnerships. As such, our evaluation

efforts have shown a three-to-one ratio of private sector capital investment to public

sector dollars. The commitment of the energy services industry, renewable energy

developers, building construction professionals, appliance manufacturers, distributors and dealers, as well as research institutions are an invaluable component in

all of our program initiatives. We have evaluation plans in place to document and

measure the progress of each of the programs in our portfolio within this broader

context.

Key to the success of our programs is changing consumer and business attitudes

and behaviors when making energy-related decisions. Creating sustainable changes

in markets supporting the purchase of energy-efficient products and appliances

bearing the ENERGY STAR label and ENERGY STAR buildings, along with helping

grow an energy services industry, improving the State’s housing stock, and creating

training and certification programs for photovoltaic installers and building operators

and auditors are also directly attributed to the program efforts as documented by

the evaluation findings.

66

Federal/State Cooperation

The potential synergies between State and federal efforts are best exemplified by

the EPA/DOE Energy Star Program. Setting a program platform at the federal level

and then allowing the State’s to act as an implementation partner is a perfect example of a productive federal/State relationship. As long as there is an effective mechanism for feedback, the relationship works very well. The State’s have the knowledge

necessary to reach the appropriate customer base, and understand any regional nuances related to effective implementation.

The coordination of effort is vital to the success of the federal/State partnership.

The State’s need to be fully involved with the implementation of federal initiatives

within their borders. Setting standards on the federal level creates an even playing

field for businesses that operate in multiple states. Individual States can act as

proving grounds for federal initiatives, and help assess the potential for replicability

among other States. Ground level deployment is most effective when managed by

the individual States.

State and federal efforts need to be coordinated to create a financial model for amortizing the benefits of energy efficiency improvements just as you would any other

capital investment. This approach allows the building owner or operator the opportunity to leverage the energy efficiency potential of their facility as a method to finance improvements. The annualized energy savings can service the principle and

interest burden over an amortization period driven entirely by the level of savings

achieved. This approach requires no up front funds, and can be structured as off

balance sheet debt.

Energy efficiency and renewable resource development is good for the environment, good for economic growth, and most importantly, good for energy security.

The smart money is on energy efficiency, which is why in New York we call our

program New York Energy $martSM.

Madam Chairman, and distinguished Members of the Subcommittee, thank you

for the opportunity to testify today. I would be happy to take any questions you may

have.

BIOGRAPHY FOR PETER R. SMITH

Peter R. Smith was appointed President of the New York State Energy Research

and Development Authority by the NYSERDA Board of Directors on January 26,

2004.

Prior to his appointment, Mr. Smith served for nearly one year as Acting President as well as serving as Vice President for Programs at the Authority since 2000.

As Vice President for Programs, he oversaw delivery of the Authority’s energy efficiency, energy analysis, economic development, research & development, residential,

nuclear waste, and bond financing programs. Mr. Smith joined NYSERDA in 1995

as Program Director for Energy Analysis. He also represented NYSERDA’s Chairman on the New York State Board on Electric Generation Siting and Environment.

Peter is responsible for the overall management of the Authority which is a public

benefit corporation of the State of New York with assets of more than $330 million.

NYSERDA is also the third party administrator of New York’s five year $750 million public benefits program which was created as part of the State’s move to electric competition. As administrator, NYSERDA operates over 30 programs under the

umbrella of New York Energy $martSM.

As President he also serves the State of New York as Chairman of the Energy

Planning Board; and as a member of the State Environmental Board, the Water Resources Planning Council, and the Disaster Preparedness Commission. He is the

State’s liaison officer to the U.S. Nuclear Regulatory Commission and represents

New York State on the National Low-Level Radioactive Waste Forum.

Mr. Smith is also active on the national energy scene. He was appointed by the

Secretary of the U.S. Department of Energy (U.S. DOE) to the State Energy Advisory Board (STEAB) which provides programmatic and policy guidance to U.S.

DOE’s Office of Energy Efficiency and Renewable Energy. He also is a member of

the Board of the American Council for an Energy-Efficient Economy (ACEEE). Mr.

Smith serves on the Board of the National Association of State Energy Officials

(NASEO), and is NASEO’s representative on the U.S. DOE/U.S. Environmental Protection Agency-sponsored National Council on Competition and the Electric Industry.

Peter has more than 26 years of experience in analyzing and studying energy and

environmental issues and problems. He holds a Master’s Degree in Public Administration from the Nelson A. Rockefeller School of Public Affairs and Policy, State

67

University of New York at Albany, and a Bachelor of Arts in History from LeMoyne

College in Syracuse, New York.

Chairman BIGGERT. Thank you very much, Mr. Smith.

Mr. Sosland, you may proceed.

STATEMENT OF MR. DANIEL L. SOSLAND, EXECUTIVE

DIRECTOR, ENVIRONMENT NORTHEAST

Mr. SOSLAND. Thank you, Madame Chair and Members of the

Committee. My name is Dan Sosland. I am the Director of Environment Northeast. As Congressman Larson generously noted, we

work at the state level to promote sound energy and climate

change policies. I very much appreciate the opportunity to testify

today on what I believe is one of the most pressing and critical

issues facing the country. And I want to focus on the state of Connecticut and what it is actually doing to capture the benefits that

many of the witnesses have testified to today.

In 2000, like many states in the Northeast, Connecticut restructured its electric utility system. At the time, and these issues continue, and they are familiar to us all, Connecticut was grappling

with the problems of high energy costs, antiquated power plants,

system reliability, and poor air quality issues. In enacting its Electric Restructuring Act, Connecticut chose to take some steps to

make the system more efficient and less polluting. It built on a history of energy efficiency programs by creating a new Conservation

and Load Management Fund. It also created a new Clean Energy

Fund to invest in the technologies of the future. Those two funds

combined put Connecticut as the state with the highest per capita

spending on conservation and renewables in the country. It took

other steps, such as adopting a Renewable Portfolio Standard to

promote clean energy in the marketplace.

I find it interesting, though, that—to note that much of the impetus for these policies came from environmental advocates like myself. There were critics of these provisions that suggested these

funds were too large, that the money could not be spent well, would

be wasted. These were surcharges and taxes. But over the course

of the last four years since 2000, the Conservation and Load Management Fund has proven that it is providing substantial benefits

to this State. The programs it offers are, in fact, oversubscribed,

particularly programs in the business sector, commercial and industrial customers. They are often locked out of programs by April

or May of the calendar year, so demands on the fund are actually

much larger than what the resources can provide. Skeptics at the

time from different walks of life are not among the fund’s largest

boosters.

As Congressman Larson noted, FERC, the Federal Energy Regulatory Commission, has rated Southwest Connecticut, the portion

around Stanford, roughly, up to New Haven, as one of the Nation’s

top ten congested areas for electricity. Public utility commissioners

and regulators in Connecticut and legislators have now recognized

that energy efficiency and other steps, like distributed resources

and clean energy, are among the best tools at relieving stress on

the transmission system and certainly, perhaps—well, not perhaps,

but certainly the lowest cost tool to do that.

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Individual businesses that participate in the programs extol the

value of these efforts to improve productivity at their businesses

and, in many cases, retain or expand jobs. The lesson learned in

Connecticut is that there is enormous potential for energy efficiency that we know how to capture, and that it is a low-cost way,

not only for environmental improvement, but for economic stimulus.

The programs offered are comprehensive. They are designed to

provide services for residential, commercial, and industrial customers, as well as government entities. They are developed under

a stakeholder board, a conservation board, which combines business, environmental, and consumer interests in developing the policies under which the spending occurs. The programs are administered and delivered by the two distribution utilities in the state.

These programs were recently evaluated by an independent consultant and against their peers and ranked, I am very proud to say,

first in delivering a bang for the buck.

The programs range from providing incentives for the purchases

of efficient products, like lighting and air conditioners, to services

and designing new buildings, major renovation, and construction.

Special programs are offered for low-income customers. There is a

new R&D program that has been very effective, and there are even

two building centers, called smart living centers, in the State, one

near Hartford, one near New Haven, that people can drive in from

the road, and see the products that are—that they can purchase.

They have design assistance for architects and builders. These programs are screened through a rigorous cost-effectiveness test that

is required by statute. Every dollar spent is required to provide

more than a dollar in benefits.

And the programs are specifically designed to overcome the market barriers that—many of which are identified in the hearing

charter. These include a lack of information for customers, product

or service unavailability, split incentives.

So what are the impacts? Over the last 10 years of efficiency programs in Connecticut, about 800 megawatts of power plant capacity has been avoided. That is about the size of a medium nuclear

power plant. Consumers have saved over $1 billion that they would

otherwise have paid in energy costs. In the last four years alone,

enough energy has been saved to power 1.8 million homes for a

year.

More importantly, and I think this is a very important point, the

programs reduced the total amount of energy needed to meet the

electricity needs of the state. The studies shown by the conservation board show that the growth in demand for electricity has been

reduced from 1.7 percent every year to 0.6 percent. And on the

margin, what that means is that there is an 80 percent reduction

in the need to build new capacity to meet the electricity demands

of the state.

On price, there have been studies that have shown that for peak

pricing, conservation efforts in New England have reduced the cost

of pricing for hot summer days, when demand is greatest, by millions of dollars. The conservation board has undertaken a fairly

comprehensive study of the potential for conservation in Connecticut. This report will be released soon, and it concludes that

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capturing the maximum cost effective potential will save $1.9 billion over the next 10 years, that is $1.9 billion that would be spent

on energy on customer bills that will not be spent, will avoid 900

megawatts, again, another nuclear power plant, and will be done

at an average cost of 1.4 cents a kilowatt hour. We can actually

level, and in some cases, decrease the growth in demand for electricity. And the impact for economic productivity that that means

is enormous.

Connecticut has taken other steps as well. A few days ago, Governor Rowland signed into law a bill that requires—sets minimum

energy efficiency standards for eight products to be sold in the

state. I also think it is very important that the system operator in

New England, for the first time, and we believe the first time for

any system operator, has included efficiency as a measure to mitigate the problems, the potential brownouts and blackouts that can

occur in the summertime in a congested area like Southwest Connecticut. Efficiency bids of four to 10 megawatts are going to be

provided to help meet that emergency situation.

I realize I am out of time, but I would like to mention a few

things on renewables. The state is taking very active efforts to promote increased renewable energy. Governor Rowland has followed

Governor Pataki’s lead, has called for the state to lead by example

and purchase 20 percent of electricity from clean sources by 2010,

50 percent by 2020, and 100 percent by 2050, that is following a

recommendation from stakeholders involved in the climate process,

bipartisan support for that, improving the portfolio standard, offering customers new options to buy green power and efficiency services, supporting the Clean Energy Fund’s efforts to invest in fuel

cells and other technologies.

There is a great deal that we can do here, a great deal of synergy

between federal and state programs. We have some suggestions on

that, and I would look forward to providing more information in

the future.

Thank you.

[The prepared statement of Mr. Sosland follows:]

PREPARED STATEMENT OF DANIEL L. SOSLAND

Mr. Chairman and Members of the Committee:

My name is Daniel L. Sosland. I am the Executive Director of Environment

Northeast (ENE), an environmental advocacy and research organization based in

Connecticut and Maine. ENE works at the state level to promote sound energy and

climate mitigation policies. Thank you for the opportunity to testify today on the potential for energy efficiency and renewable energy. My testimony will focus on the

impact and potential for energy efficiency in Connecticut with some references to

the rest of New England and the opportunities for a growing role for clean energy.

Why did Connecticut make a commitment to energy efficiency and renewables?

In 2000, like many states in the Northeast, Connecticut chose to restructure its

electric utility system. Connecticut was grappling with a series of issues: high energy costs, antiquated power plants, system reliability and poor air quality. In enacting its Electric Restructuring Act, Connecticut also sought to make its electric

system more efficient and less polluting by:

• establishing an $86 million a year fund to provide programs for commercial,

industrial and residential customers. This fund built on a 10 year history in

the state of developing sound programs that cost-effectively invested rateVerDate 11-MAY-2000 21:24 Dec 18, 2004 Jkt 093758 PO 00000 Frm 00073 Fmt 6633 Sfmt 6621 C:\WORKD\ENER04\051904\93758 SCIENCE1 PsN: SCIENCE1
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payer funds to make Connecticut homes, businesses and government more efficient.

• creating a new Clean Energy Fund, collecting up to $30 million annually, to

invest in bringing new clean energy technologies to the marketplace. The

combined funds made Connecticut the state with the highest per capita

spending on energy efficiency and renewable energy development.

• including provisions to require purchases of clean energy by electricity suppliers through a Renewable Portfolio Standard.

Much of the impetus for these provisions came from environmental advocates like

those of us at Environment Northeast. Critics of these provisions suggested that the

energy efficiency funds could not be spent because the opportunities did not exist.

They complained about added costs as well.

In fact, as the state Conservation and Load Management Fund (C&LM Fund) has

progressed, the programs it supports are oversubscribed. Demands on the funds are

huge—as are the benefits. Skeptics from different walks of life now recognize and

support this effort—indeed some of the most skeptical entities are now among the

fund’s biggest boosters. Regulators see the value of these investments for reducing

consumer costs and addressing the state’s constrained electric system. The environmental benefits are valued as a cost-effective way to help improve the state’s poor

air quality, which, among other things, is a significant constraint on economic

growth. Individual businesses extol the value of the programs to their ability to

lower energy costs, improve productivity and in many cases retain or expand jobs.

In the recently completed state climate change stakeholder process, energy efficiency and renewable policies received unanimous support from business, state and

academic interests. The lesson learned in Connecticut is that there is enormous potential for energy efficiency. Efficiency is a low cost way not only for environmental

improvement, but for economic stimulus. It is a tool ready and available to reduce

energy costs and help business be more productive. This lesson is now influencing

new approaches to pursuing energy efficiency, including, in a nationally significant

precedent, the regional system grid operator, ISO–New England.

What are the benefits of energy efficiency and how is it captured in Connecticut?

Energy efficiency reduces the energy used by customer end-use devices and systems, without affecting the level of service and without loss of amenities. It is not

turning out the lights. Electric energy savings and peak load reductions are

achieved by substituting technically more advanced equipment and processes to

produce the same or an improved level of end-use service with less electricity. All

programs must meet cost-effectiveness tests so that they produce net savings over

time. Connecticut sought to obtain these benefits:

• Reduce load, peak demand & energy use

• Provide direct cost savings to consumers and businesses

• Lower market prices for all consumers by mitigating peak demand costs

• Mitigate market and fuel price volatility

• Reduce security risks and interruptions

• Improve air quality and allow room for economic growth

• Substitute local jobs for fuel purchases

• Mitigate climate change.

Connecticut captures these benefits through several approaches.

Ratepayer Funded Conservation and Load Management Programs

The Conservation and Load Management Fund (C&LM) offers a comprehensive

array of programs tailored to residential, commercial, industrial and governmental

customers. The programs are designed under the guidance of a stakeholder board,

the Energy Conservation Management Board (ECMB), representing business, environmental and consumer interests, and administered by the two distribution utilities—The Connecticut Light and Power Company and The United Illuminating

Company.

Programs range from incentives for purchasing efficient products like lighting and

air conditioners to assistance in making planned new construction and major renovation projects more energy efficient. Special programs are offered to low income

customers. Connecticut has also developed an effective RD&D program with a portion of the funds.

The programs are screened through a rigorous cost-effectiveness test that is required by statute. Every dollar collected is required to provide more than a dollar

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in benefits to the electric system. The cost-benefit test compares the benefits of the

efficiency measure to the costs. In many cases, the benefit to cost ratios exceed

three. New commercial and industrial construction programs produce benefit to cost

ratios in the 4–6 range. Connecticut uses two tests: the ‘‘electric system test’’ and

the ‘‘total resource test.’’ The electric system test compares the present value of future program electric savings to present conservation fund expenditures. The total

resource test compares the present value of future electric system and other customer savings (from other fuels or benefits) to the total of the conservation expenditures and customer costs necessary to implement the programs. Programs are regularly evaluated for their quantitative effectiveness.

The programs are designed to address and overcome market barriers for consumers and market participants, such as:

• Lack of information or search costs, hassle and transaction costs, performance

uncertainties, market response uncertainties, asymmetric information and opportunism,

• Product or service unavailability, organizational practices or customs,

• Split incentives, inseparability of product features, irreversibility, the failure

of market prices to reflect the time-differentiated nature of demand and energy use, and the failure of market prices to reflect the full cost of energy to

society

• Significant institutional barriers as well, including developing market rules

focused on supply resources or on shorter-term demand response.

Programs seek to leverage their financial resources by focusing on ‘‘market timing’’ events—decision points when consumers enter the market to purchase products

or design buildings. When a consumer is ready to purchase a motor, lighting or

build an addition, the programs seek to induce the purchase or design of efficient

products by paying all or a substantial portion of the incremental cost of the efficiency measures. This approach seeks to avoid the problem of lost opportunities:

once a product is purchased, it will remain in use for its lifetime. When a building

is built, it will stand for 30 years or more. By capturing the opportunities when they

occur, the programs seek to ensure that they are not lost for the useful lives of the

equipment or structures.

Types of Measures Installed

Technologies installed range from lighting and cooling systems, to building envelopes, motors and design changes to plant facilities. For example, in commercial

buildings, some of the biggest savings occur from installing lighting systems (lamps,

ballasts and controls can save up to 50 percent of lighting load); updating HVAC

(heating, ventilation and air conditioning) systems; replacing inefficient office equipment and testing and sealing air ducts. Reductions from 15–50 percent will occur

with these changes with payback periods ranging from less than one to five years

typically. The cost of the effective measures is less than three cents/kwh.

Two program examples—both have won ACEEE Exemplary Program Awards:

1. Custom Services: Vendors approach fund managers with specific projects in

mind and the program offers incentives to cover the incremental cost of upgraded efficiency measures.

2. RD&D: Provides funds for innovative electric efficiency and distributed resources for projects that have not been commercially proven. Funded projects

include fuel cell manufacturing technology and residential heat pump clothes

dryer. Projects are screened and evaluated by a stakeholder group of industry, environmental and business members. DOE is represented on this board

and has contributed towards various projects. Industry shares in cost

through co-pay requirements.

What are the Fund’s Results?

Since the early 1990s, the investments from the state’s conservation programs

have avoided the need for another 800 MW of power plant capacity—nearly the size

of a major nuclear power plant. Consumers saved $1 billion in avoided energy

costs—money better used for other purposes. Over the course of the four years from

2000–2003, enough electricity was saved to power 1.8 million Connecticut homes

with electricity for a year.

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Numerous testimonials exist showing how businesses saved money, increased productivity and in many cases were able to hire more employees.

Importantly, these programs are reducing the total amount of energy needed to

meet the demands of the state—a measure of the increase in efficiency and productivity these programs can provide. Studies for the ECMB show that the programs

reduce the state’s annual growth in capacity demand from 1.7 percent to 0.6 percent—an 80 percent reduction. In a state facing severe congestion in its transmission system, efficiency has become a major tool in managing stress on the wires.

And because of the statutory cost-effectiveness requirement, for every $1 spent the

fund produces $4 in benefits in the form of lower energy costs to homeowners and

businesses.

Another important effect of energy conservation in a deregulated market is that

it can have a dramatic effect on peak pricing. The following chart is from a study

by the Massachusetts Department of Energy Resources. It shows that 115 MW of

energy efficiency load reductions avoided about $6.7 million in additional costs on

the spot market on a hot summer day with high peak demand. (06/07/99)

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Future Potential

The ECMB has undertaken a study of the cost-effective energy efficiency potential

in Connecticut for the future. This report will be released soon. It concludes that

capturing the maximum cost-effective potential—not theoretical potential, but what

can actually be obtained at low cost with existing technology—will produce the following economic benefits:

• $1.9 billion in savings over 10 years in the form of avoided energy costs

• $2.8 billion in benefits less $900 million in costs (present value)

• 900 MW avoided capacity

• 4,466 GWh avoided energy consumption by 2012: enough energy to power

600,000 homes

• an average cost of 1.4 cents/kwh.

This graph shows projected trends under three scenarios: no conservation, existing programs and capturing the additional cost-effective potential. This chart indicated that Connecticut can actually achieve level growth in demand—a measure of

the amount of efficiency that can be obtained in the system.

Appliance and Equipment Energy Efficiency Standards

Just over a week ago, Gov. Rowland signed legislation to require minimum efficiency standards for eight commonly purchased products in Connecticut which are

not covered by federal standards. By 2010, these standards will reduce annual electricity demand in Connecticut by 225 gigawatt-hours, equivalent to the electricity

consumption of 37,500 households. These reductions mean that:

• Annual electricity demand in Connecticut will be reduced by 65 megawatts

by 2010 and by 126 megawatts by 2020.

• Annual greenhouse gas emissions will be reduced by 66,000 metric tons,

which is the equivalent of removing 50,000 cars from the road.

• By 2010, Connecticut consumers and businesses will save $40 million on their

electricity bills, savings that grow to $435 million by 2020.

These benefits will increase the overall economic productivity in the state.

ISO New England and Congestion

Southwest Connecticut—Fairfield County, Stamford and Bridgeport—has been

identified by FERC as one of the top 10 congested areas in the country. Each summer, ISO–New England, the grid operator, prepares for summer emergency peaks

by inviting bids for resources to mitigate the problem. This year for the first time,

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1 Clean energy sources eligible under the Renewable Portfolio Standard are defined in Conn.

Gen. Stat. § 16–1(a) as follows:

(26) ‘‘Class I renewable energy source’’ means (A) energy derived from solar power, wind power,

a fuel cell, methane gas from landfills, ocean thermal power, wave or tidal power, low emission

advanced renewable energy conversion technologies, a run-of-the-river hydropower facility provided such facility has a generating capacity of not more than five megawatts, does not cause

an appreciable change in the river flow, and began operation after the effective date of this secand we understand for the first time for any grid operator, ISO added efficiency installations as one of the means to address this need in addition to paying customers

to reduce their load or installing emergency generators. Approximately 4–10 MW of

efficiency improvements were selected to relieve summer congestion. Unlike the

other approaches, efficiency produces no incremental emissions and continues to

provide savings beyond the period covered by the auction. We hope that this trend

of treating efficiency on a level playing field will continue not only in Connecticut

and New England but around the Nation.

Climate Change Solutions: Efficiency as Low Cost Approach

Connecticut has also adopted a bipartisan approach to addressing the challenges

of climate change. Through an intensive nine-month process, stakeholders representing more than 30 business, academic, state agency and environmental interests, including Environment Northeast, met to examine ways Connecticut could reduce its emissions of warming gases. In the modeling upon which that process relied

for information, energy efficiency measures stood out as the most economic way to

meet greenhouse gas targets. Energy efficiency measures not only produce large

emissions reductions, but because they make energy consumption more productive,

they provide economic stimulus and offer opportunities for services and manufacturing.

Next Step in Efficiency: Pursue All Fuels Approach including Natural Gas,

Oil and Electricity

Tremendous potential exists to develop programs that capture efficiencies across

fuel types. If an energy efficiency vendor can treat all fuels in a facility at the same

time—i.e., reducing heating requirements in a building using oil or gas as the fuel

when implementing lighting and other electric efficiency measures—the fuel savings

would be large and at lower cost. Environment Northeast has developed information

on the benefits of a state program for natural gas and oil efficiency. We estimate

programs to invest in natural gas and oil efficiency would produce benefit to cost

ratios of approximately 3.0 and 4.0, respectively. Those are indicators of the enormous potential in these areas for lower consumer costs and reduced fuel consumption.

Renewable Energy Potential

Connecticut has also recognized the importance of spurring market development

of clean energy sources. The benefits to the state include:

• The need to diversify its fuel sources and avoid over reliance on natural gas—

and the corresponding value in reducing exposure to market price volatility

• The need to find effective ways to improve Connecticut’s poor air quality

• The opportunity to create jobs from new industries of the future.

The state is pursuing the goal of increasing renewable energy through several

mechanisms:

• State leading by example: Recently, Governor Rowland endorsed a

recommendation from a state stakeholder process to purchase 20 percent of the state’s electricity from clean energy sources by 2010, 50

percent by 2020 and 100 percent by 2050. This goal, which has bipartisan

support in the state, reflects growing recognition that clean energy sources

are needed to improve air quality. But it also recognizes the value in diversifying the state’s energy mix. Currently, only one percent of the state’s electricity comes from clean sources. Connecticut’s dependence on natural gas as

a major power plant fuel is growing. In the past, over reliance on oil and nuclear power has left the state vulnerable to price hikes and reliability problems.

• Renewable Portfolio Standard: State law requires that sellers of electricity obtain minimum percentages of their power from a defined set of clean

energy options.1 These percentages ratchet up to seven percent of the cleanest

sources by 2010 and an additional 10 percent in other renewable sources.

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tion, or a biomass facility, including, but not limited to, a biomass gasification plant that utilizes

land clearing debris, tree stumps or other biomass that regenerates or the use of which will not

result in a depletion of resources, provided such biomass is cultivated and harvested in a sustainable manner and the average emission rate for such facility is equal to or less than .075

pounds of nitrogen oxides per million BTU of heat input for the previous calendar quarter, except that energy derived from a biomass facility with a capacity of less than five hundred kilowatts that began construction before July 1, 2003, may be considered a Class I renewable energy

source, provided such biomass is cultivated and harvested in a sustainable manner, or (B) any

electrical generation, including distributed generation, generated from a Class I renewable energy source.

(27) ‘‘Class II renewable energy source’’ means energy derived from a trash-to-energy facility,

a biomass facility that began operation before July 1, 1998, provided the average emission rate

for such facility is equal to or less than .2 pounds of nitrogen oxides per million BTU of heat

input for the previous calendar quarter, or a run-of-the-river hydropower facility provided such

facility has a generating capacity of not more than five megawatts, does not cause an appreciable change in the river flow, and began operation prior to the effective date of this section.

• Clean Energy Utility Offers: Connecticut is currently developing the rules

for a ‘‘green power’’ option for its utility customers. This will provide consumers an easy check off system to choose clean power and efficiency offers

from selected market players. These offers should be in place by the fall.

• Clean Energy Fund. The state created the Clean Energy Fund in 2000 to

invest in renewable energy companies and technologies. Seen as an industry

of the future with employment potential, the CCEF has focused on the state’s

fuel cell industry as well as investments in other clean power resources.

Federal/State Synergies and Considerations

Current federal efforts have not accorded energy efficiency the primary policy emphasis which it deserves. One example is the development of appliance efficiency

standards by the Department of Energy, which appears to be stalled. The only significant action has been an effort to roll back an air conditioning standard approved

by the previous administration, which was forestalled by a federal court ruling on

a suit instituted by several states, including Connecticut. As a result, states have

been compelled to take the lead with respect to products not covered by federal

standards, as discussed above. States cannot, however, increase standards for the

many products now covered by federal standards, even if technological advances

warrant improvement. Obviously, it would be far better for DOE to actively pursue

opportunities to develop higher national standards where appropriate and cost-effective. Reasonable standards save energy cost-effectively without the need for devoting State and federal program funds to incentives and marketing activities.

An example of positive federal-state synergy is the relationship of the federally

funded industrial productivity centers and CL&P’s Prime program. Prime provides

productivity audits to achieve greater manufacturing efficiencies through more efficient, streamlined processes and waste minimization. It works closely with

ConnSTEP, a manufacturing resource center for Connecticut which is sponsored by

the Commerce Department’s Manufacturing Extension Partnerships and the State

Department of Economic Development. ConnSTEP also works in partnership with

the DOE sponsored Industrial Assessment Center at the University of Massachusetts to conduct full facility assessments focusing on conserving energy, reducing

pollution, increasing productivity, and reducing costs. The assessments identify energy conservation measures, provide recommendations and estimated costs for implementation, and specify payback periods. ConnSTEP reports that four assessments conducted in Connecticut manufacturing companies during the past year

have identified savings of $588,000 in process improvements; 4,153,200 kWh in electrical energy savings; 63,679 MMBtu in natural gas savings and 7.8 million gallons

in process water savings. These programs have had considerable success in meeting

process productivity and energy efficiency needs in a coordinated manner.

The Energy Star program has also been a valuable ally for state efficiency efforts.

EPA has built a credible and well known brand with Energy Star and it has become

a powerful force for efficiency. The Northeast Energy Efficiency Partnership has developed regional efforts to promote Energy Star products through advertising, customer incentives, buydowns for manufacturers and distributors and other techniques. The combination of the Energy Star brand and coordinated activity by utility and state conservation programs has produced substantial increases in the purchase of efficient appliances and equipment.

The following are a few suggestions for improving the federal role in promoting

energy efficiency.

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• Allow efficiency delivery services and programs to qualify for federal funding.

It is program delivery that produces actual energy savings.

• Work with a wider group of stakeholders in the states to determine DOE priorities. Federal outreach efforts tend to focus on utilities, other large corporations and state agencies. Consider expanding this outreach to consumer, environmental, low-income and community groups for input on their priorities

and perspectives.

• Establish stronger requirements for regional grid organizations to include efficiency improvements as an integral part of their planning and investments.

Additional Opportunities for Federally Sponsored Technology Research

There are a broad range of opportunities to improve the efficiency of equipment

and structures. The following are a few that have been suggested by experts in the

field.

• More research is needed on installation procedures, tune-up methods and outside air access for commercial air conditioning equipment. The opportunities

to reduce summer peak loads are enormous, but the problems are difficult.

• Advanced evaporative cooling technologies could be widely used, but require

additional development and testing.

• Daylighting controls and office plug load controls are well along in development, but need more monitoring and analysis to be perfected.

• Heat-pump water heaters present an opportunity for very substantial savings,

but have yet to be developed to commercial viability.

• Advanced commercial package refrigeration technologies (coolers, ice makers,

etc.) also need development support.

• Promote RD&D on technologies that would further market potential. For example, on-site clean distributed generation combined with efficiency would

produce projects that could (i) resize energy load requirements at a customer

facility and then (ii) install on-site clean generation to meet load requirements.

DISCUSSION

Chairman BIGGERT. Thank you very much.

And now we will turn to questions. Each Member will have five

minutes to ask questions. And I will yield the first time to the distinguished Chairman, Mr. Boehlert, for five minutes.

Chairman BOEHLERT. Let the record show that that is the first

time she has ever yielded to me.

Thank you very much, Madame Chair.

You all know that we are in difficult times with respect to the

budget for a whole variety of reasons far removed from this committee room. If it was up to us, we would up the numbers in just

about every single important area of science, and—but it is not up

to us exclusively. We have things like Iraq and Homeland Security.

And you know, the budget calls for a 10 percent cut in energy efficiency R&D at DOE. We are trying to restore as much of that as

we can. What would be the impact of a 10 percent cut, number

one? And what do we lose in the process? Sometimes, we are shortsighted. We just talk about, well, do you cut 10 percent this year

and—but we fail to recognize that the 10 percent that is cut this

year may result in a loss of 20 percent increase in benefits next

year, et cetera. So could you quickly, panel members, individually

comment on that?

Mr. NADEL. I can add a couple of things. I think a 10 percent

cut would mean several programs would have to be canceled, other

programs would be stretched out. But as you kind of eluded to, it

could also have devastating impacts in terms of staffing. I have

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heard from some of the national labs, for example, that if they

don’t get funds restored, they are going to have to lay off certain

staff, and then there won’t be the ability to restart those programs

in the future. So a lot of this is long-term staff and we are losing

a valuable resource in terms of continuing this work.

Chairman BOEHLERT. But if anyone can guesstimate, a 10 percent cut now results in a loss of 20 or 30 percent. If you could

quantify it in some way. In other words, I am trying, to the best

of my ability, to convince decision-makers outside this committee

that it is very shortsighted and shame on us. How about you, Mr.

Konove?

Mr. KONOVE. As a builder in my local area, it would also be difficult to, I think, come up with a percentage and a number, although I would agree with what Mr. Nadel was saying. But I think

the important thing to consider is how to coordinate the programs

that do exist. There might be some efficiencies that you find there.

There are HUD programs. There are Department of Energy programs. And from my perspective in the field, there is not necessarily a lot of communication between those happening, and so

to try to have some more impact on the local level, having those

coordinated whether in a particular U.S. buildings program, as

SBIC has proposed, or some other entity would be very helpful

with the limited funds that we do have.

Chairman BOEHLERT. Ms. Loftness.

Ms. LOFTNESS. It is a tough question. I guess, working on the

basis that the programs that have existed have had multipliers of

somewhere between 5,000, 10,000, and 20,000 to one, maybe that

gives some impact of what those 10 percent cuts are doing to the

multiplying factor of energy efficiency.

Chairman BOEHLERT. That is music to my ears, and this is unfair, because you are just getting the question. Give some thought

to it after, and would you mind sharing with the Committee some

of your thoughts on it? Because, you know, sometimes you have to

spend money to make money, and a modest expenditure, restoring

all or part of that cut, I think, would produce handsome dividends

for the future. But it is tough to quantify. It is sort of a gut reaction, so whatever you can share with us——

Ms. LOFTNESS. And just one more comment. Almost every energy

efficiency strategy you come up with has at least a 10-year, and in

many cases, a 50-year life. So we are looking at things that are

very long-term consequences for the Nation and its energy use.

Chairman BOEHLERT. Yes. Mr. Carberry.

Mr. CARBERRY. I guess I would follow-up with that. My experience is when you make cuts like that, you destroy momentum, and

momentum takes three, four, five, or 10 years to build and cash in,

so if you make a cut like that, the probability that it would have

a multiplier of 10 to one is pretty serious.

Chairman BOEHLERT. Mr. Smith, any thoughts?

Mr. SMITH. Mr. Boehlert, when we look across the board and we

look at, for instance, what I am familiar with, the federal funds

that come to the states, particularly the state energy programs, a

10 percent cut, we just did an exercise for the Office of Management and Budget to understand the dollar—how much dollars

spent in federal funds, what it leverages out in the states, and it

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leverages about eight or nine to one. For every dollar, federal dollar

that comes to the states through the state energy program, they

can leverage those dollars eight or nine to one. So if you look at

a 10 percent cut, and that is about a $50 million program, that is

the only one I am really very familiar with, then we are looking

at multipliers of that. We are looking at nine or ten times that cut

to the states. And I think the states are aware we deliver those

programs to the people.

Chairman BOEHLERT. Thank you.

Mr. Sosland.

Mr. SOSLAND. Well, I would just note that—I would just start

from the premise that we are not spending enough money on energy efficiency and renewable development. Anyway, I know

that——

Chairman BOEHLERT. That is the premise we start from.

Mr. SOSLAND. Right. And, you know, it is frustrating, because we

can identify with the data from the states and the different organizations and businesses how much the savings that can occur, the

job creation that can occur, and the productivity increases that can

occur, those all get lost when there is an inadequate budget,

whether it is the spending level that you are trying to restore or,

you know, the 10 percent cut only makes it that much worse. We

are losing opportunities every day that will last 10, 20, 30 years,

and we really can’t afford that, given our current energy situation.

Chairman BOEHLERT. Well, I would ask all of you, and thank you

for those answers, to give it some thought as you leave this room

and if you can do anything that would—skip the verbiage, but as

much as possible, a written response, try to quantify the impact of

a cut of this magnitude in terms of lost opportunities for benefit in

the near-term. You have got to spend money to make money. That

is an old adage, and I believe here is an area where we spend the

necessary money, we make it back many fold.

So Madame Chair, I really appreciate that. If you have a second

round, I want you all to be thinking of this, microgeneration, I

would like to discuss that, probably with Ms. Loftness and Mr.

Smith.

Chairman BIGGERT. Thank you.

And the Ranking Member from Connecticut, Mr. Larson, is recognized for five minutes.

Mr. LARSON. Thank you very much, Madame Chairman. I also

hope we have a second round so I can talk about the hydrogen

economy, but I want to follow up on Mr. Boehlert’s line of questioning as well. And with a plea on your part, probably some of the

most effective lobbying we have seen was from the Union of Concerned Scientists. And inasmuch as some of our major governmental institutions have become paralyzed by their own inertia, I

think what it takes to move this Nation is, in fact, people like yourselves who have the expertise, who have the knowledge, and who

have the data to come forward and through a unifying effort, demonstrate to the public, as you have in your testimony, the solid

foundation and basis on which these are value-added areas whose

multiplying effect only benefits us both in the short- and the longterm, and oh, by the way, our cuts only further impair your ability.

79

Throughout the testimony, you mentioned a couple of things, and

if you would just comment on them, again, the starvation that is

going on that you talked about, what that does in terms of impeding students and the future of this country in terms of attracting

people to these areas of science, engineering, and math and what

we see going on by contrast in other countries where we used to

be numero uno, how we are losing out while other countries are

gaining.

Mr. Smith, if you would follow up on your financing idea that

you talked about in terms of the Federal Government. If you would

elaborate more on that in—as part of this question as well, I would

appreciate that. And collectively, starting with Mr. Sosland, if you

would be able to address this issue of what it is, do you think, in

renewables that we would need to do to reduce the dependency on

foreign supplies by 20 percent—25 percent. What are some of the

most immediate things that we could do to achieve those goals?

So if you could answer those for me, I would greatly appreciate

it.

Mr. SOSLAND. Well, I think there are programs in place at the

state level that are—have a lot of promise and are underfunded.

And if we could find a way to support and continue—leverage these

investments, as some of us have mentioned, into R&D, fuel cells.

I mean, I am a big believer in the hydrogen economy, actually, but

I am a believer in doing demonstration projects that prove the market credibility of technologies. And one area that I think has tremendous promise that is totally underfunded is the area of going

into businesses and investing in efficiency, doing a demonstration

where you downsize the load of the facility whether it is an office

building or a manufacturing facility, and then you put on-site generation that is clean, that is maybe not completely accepted in the

marketplace yet, but is viable, you meet some of that load with this

cleaner on-site technology. And you combine the two, and you show

the business community, and you show the world that these can

happen. We almost had projects like that underway in Connecticut

with, for example, a credit card company that needs reliable power.

There was a facility in Connecticut that provides backup services

for ATM machines in Connecticut and New York. If that goes

down, the dollar cost in insurance is in the millions of dollars per

minute. Providing a way to better size the load for that facility, put

in microturbines, to put in fuel cells, even though they are expensive now, downsize with the efficiency investments, show what can

be done at a working, real facility, I think those are the kinds of

projects that I think would provide——

Mr. LARSON. Those are great examples.

Mr. Smith, how about the finance example you were talking

about?

Mr. SMITH. Thank you. Thank you, Mr. Larson.

We—in New York, we use what we call our State EnVest program. And we are working with public buildings, because states

have to lead by example. Public authorities have to lead by example. So what we find is that there is a lack of a capitol out there

for energy service companies to come into state buildings to take

the initiative. So what we did was did a master lease arrangement.

We did a master financing that makes a pool of money available

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to energy service companies to access tax exempt financing, municipal lease financing, and then they are able to go into the state

agencies and to the public authorities and to the localities to undertake energy efficiency initiatives in those buildings, in those operations, no cost to the state agency, no cost to the budget, and then

it is—and allows them to take those——

Mr. LARSON. How much money from the Federal Government

could—would you—would assist that pool? I assume if the Federal

Government gave more money, you could expand the——

Mr. SMITH. Right. In New York, we are doing about $125 million. Our first charge of money was $125 million. We have allocated,

right now, about $90 million of that for state authorities and some.

And what—if we are talking at a federal level, the—recently the

super—that authorization lapsed in September, and that would be

a mechanism in order to undertake it, and we are probably talking

about 10 or 20 times more money to——

Mr. LARSON. So it is something that other states could replicate

as well if——

Mr. SMITH. Certainly. Certainly.

Mr. LARSON. Ms. Loftness.

Ms. LOFTNESS. Yes, let me thank you for asking the question

about universities. I think the—if there is a 10 percent cut at the

Department of Energy, I think that the first thing that would go

is any funding that goes out to the universities in an effort to keep

the labs vital, which they should absolutely be. It is the last piece

in the chain. Having said that, I think there is a tremendous synergy that we are not taking advantage of. The National Science

Foundation and the National Institute of Health are the largest

funders of university-level research and Ph.D. programs, and they

do not have a line in their mandate on either of them that focuses

on buildings and building environment and energy issues. And

even a line in their mandate would totally transform the opportunity to actually seek funding from the National Science Foundation and the National Institute of Health.

Let me add to that that the issue of homeland security has a lot

of synergies with environmental quality. And energy efficiency and

homeland security actually do have an alliance that has not, in

fact, been spelled out in any of the mandates relative to homeland

security, which is beginning to fund university-level efforts and, of

course, a number of issues related to the war and star wars are beginning to actually shift focus at university campuses. And somewhere we have to decide what it is we want to export as a Nation,

and I would think environmental quality is a wonderful thing to

export.

Mr. LARSON. I see my time has run out, but I hope during a second round I will be able to get back to the other panelists and I

have another——

Chairman BIGGERT. Thank you very much.

And—when—years ago, and this is a long time ago, my husband

and I went to Europe on $5 a day, so you know how long ago it

was, that book, ‘‘Europe on $5 a Day.’’ But we stayed in these

funny little hotels that had a lot of staircases. And at night, when

you would come home, you would push a little button, and the

lights would light up on the stairway, but you had to make it to

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the next landing before the lights went off, and if you didn’t, then

you were looking all around to find the lights. And to me, I know

it seemed like a great idea how energy conscious they were over

there. And I always wondered why we never had anything like

that. We seem to be, you know, the big spenders on energy. And

we have talked about a lot of topics here today, and you made a

lot of valuable recommendations on how the Federal Government

can improve its efforts on efficiency and maybe find a way to light

those—you know, to have something like the lights and renewable

energy, but as we have been talking about, this is a very tough

budget year, and I think we are not going to be—very unlikely that

we can fund a lot of the great ideas that you have given us. So if

each of you, and I think that Mr. Sosland has already addressed

this question, if you can name the one item that will give the most

bang for the buck, as you have said, Mr. Sosland, in other words

the most budget efficient, if you will, and I would like you to

start—and very briefly, as short as you can.

Mr. Nadel.

Mr. NADEL. Okay. Thank you.

Probably the single area that gives the most bang for the buck

is the federal Appliance and Equipment Efficiency Standards program that Ms. Loftness talked about. In that case, we are talking

benefit to cost ratio of thousands to one. Relatively modest costs.

The programs is scheduled in the budget to take, I think it was a

$1 million hit or $2 million hit, that will really restrict the ability

to develop new standards. A couple of more million dollars, then we

are talking, you know, thousands of megawatts of additional savings. So that is probably the single biggest bang for the buck.

Chairman BIGGERT. Thank you.

Mr. Konove.

Mr. KONOVE. From my perspective with the home building industry, I would look, again, at coordinating programs that you have in

process now, but also with the perspective of including industry.

People that are associated with home building or construction industries are on the verge of getting involved in a tremendous way

through the green building movement that is coming. And they are

starting to really get active in terms of their products and their

education. But a coordinated effort similar to the manufacturing

extension centers where it is working with business and industry

to get the word out and to get the training out could be helpful.

Chairman BIGGERT. Thank you.

Ms. Loftness.

Ms. LOFTNESS. This one is really tough to come up with one.

I guess my feeling would be that voluntary standards adopted

both at a federal level and in partnership with various states are

going to have, and have had, a major impact, so LEED standards

or equivalent standards for federal and state level buildings.

Chairman BIGGERT. Thank you.

Mr. Carberry.

Mr. CARBERRY. I guess number one would be working on the programs that take the price and price volatility out of the natural gas

supply. The volatility is the largest impediment to investment because of the uncertainty that it drives. And so therefore, looking at

those issues, there is an excellent report, the National Petroleum

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Council’s recent report on this issue, and I recommend that as an

opportunity.

Chairman BIGGERT. Thank you.

Mr. Smith.

Mr. SMITH. Okay. I will say I agree with Mr. Nadel that appliance efficiency and building standards and codes are very, very important. One would be to continue the money for the state energy

offices. I am blessed in New York to have a lot of public benefit

funds. There are many states where the federal funding is crucial

for delivering those programs to people that need them. That

would—I would underline that continued funding for the state energy program is important for that delivery mechanism.

Chairman BIGGERT. Mr. Sosland, would you like to add anything

or——

Mr. SOSLAND. I agree with everyone.

Chairman BIGGERT. Okay.

I think I have time for just one more question, and that is to Mr.

Carberry. I was impressed with DuPont’s future goal to continue

to keep its energy use constant while dramatically increasing production. What would be the impact on natural gas demand if

DuPont’s energy efficiency and renewable technology investments

were replicated throughout the industry?

Mr. CARBERRY. I guess the first thing I might point out is that

if you look at the national statistics, industry is the only sector that

has managed to keep their energy demand relatively flat for the

last 10 years. And of course, that is because, as large industry, you

know, they see the dollars in a concentrated form and put engineers, like me, working on the problem. The gains are in the order

of a reduction of 30 or 40 percent from the business-as-usual case.

I would say that most of our experience is that you can get that

first 10 percent fairly quickly and the rest of it gets good and hard,

but since 1990, for instance, I would say that our business-as-usual

case would put us 40 percent higher than where we are right now.

So, you know, assuming that the others that haven’t done that

could achieve the same gains, those are very, very large gains. And

there is no one magic answer, either. It is a little bit like a winning

football team. Man, you have got to have them all.

Chairman BIGGERT. So if the impact on natural gas demand, if

the Federal Government then made a strong push for the energy

efficiency and renewable energy throughout the country, the gains

would even——

Mr. CARBERRY. That could be very—that could be even more dramatic, because natural gas is at the margin. It is used heavily by

the electrical power industry for variable demand and increasingly

for baseload. So if those efficiencies started rolling through the entire economy, and I believe one of the speakers previously already

made that point, the leverage would be even greater. And I think

we saw that experience in California.

Chairman BIGGERT. Thank you.

Mr. Miller, from North Carolina, is recognized for five minutes.

Mr. MILLER. Thank you, Madame Chair.

Mr. Konove, I had a question about a North Carolina program

that I think is relatively recent, the North Carolina Green Energy

program. Could you describe that program, how it works, and alVerDate 11-MAY-2000 21:24 Dec 18, 2004 Jkt 093758 PO 00000 Frm 00086 Fmt 6633 Sfmt 6601 C:\WORKD\ENER04\051904\93758 SCIENCE1 PsN: SCIENCE1
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though I think it is a little early to say how well it is working, how

well it appears to be working in the first few months?

Mr. KONOVE. I believe you are talking about the green building

program that is getting underway with the North Carolina Solar

Center?

Mr. MILLER. No, actually, this——

Mr. KONOVE. Oh, the Green Power program?

Mr. MILLER. Right, the Green Power program.

Mr. KONOVE. Okay. Well, I am purchasing green power myself.

The Green Power program is a statewide program in North Carolina, allowing consumers to purchase, through their utility bills,

green power for the promotion of the utilities and the state to build

renewable energy development. And from my understanding, I

mean, it is starting to reach the people. It has really just gotten

off of the ground in the last couple of months, but it is a way that

consumers are enabled to—or to take power into their own hands

to purchase renewable energy systems. And we are starting out

with just a limited supply within the state, and we are going to be

monitored by a third-party system. And within a year or two, they

are going to confirm how much renewable energy generation has

been added to the system in North Carolina, and I am looking forward to it improving our capabilities quite a bit.

Mr. MILLER. Thank you.

My second question, not specifically to Mr. Konove, and I think

it may come close to duplicating some earlier questions, particularly Mr. Larson’s questions earlier, most of the talk about energy

conservation and competition has focused on the effective energy

cost. But is there also an international market for conservation

technologies, alternative energy technologies, and how are we doing

in that market? Are we competitive in the international market?

And I don’t know which one of you is most appropriate to answer

that. Mr. Konove, since you are from North Carolina, though, I

would love to have your opinion on any topic you would——

Mr. KONOVE. Thank you, Mr. Miller. I will certainly add something. I am sure that most of the other panelists can add as well.

Clearly, there is tremendous potential for energy efficiency and

renewable energy in the world. And many of the other countries

around the world are actually taking a greater advantage in reaching into this market at a faster rate than we are, I believe. And

we are probably missing that capability, and so I think there is

clearly a need for more investment in technology and spreading the

products that we do have around the world. I think right now, from

my perspective in home building, energy efficiency technology and

renewable energy technology, on one level, we can use whatever we

have now and tremendously increase the benefits of our housing.

We can easily get 30 to 50 percent improvement in the housing

that we build and can, with a little bit of work, get up to a higher

percentage. And that—those technologies could clearly be exported

to other countries around the world, but I don’t believe we are taking advantage of it as nearly as we could.

Mr. CARBERRY. If I could, I would like to—Mr. Miller, I actually

lived and worked in North Carolina for a little while at our Wilmington, North Carolina plant. Would that entitle me to speak on

this subject?

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Mr. MILLER. Not quite the same entitlement, but still, yes.

Mr. CARBERRY. I think the United States had a dramatic opportunity and a significant lead in some of these technologies, particularly photovoltaics and wind power. Unfortunately, we have been

overtaken and passed by, among others, the Germans, particularly

the Germans. And one of the main reasons is that the German program is one of steady progress, and the United States program has

been, unfortunately, hindered by an on again, off again support.

And on again, off again support is very damaging to investment,

as well you can imagine, because investment horizons are long and,

therefore, if support comes and leaves, the business goes someplace

else. And the Germans have passed us in both capacity and technology. And I think that lack of support is a significant issue.

Ms. LOFTNESS. If I could add to that, at this point, when you look

at the rapid growth in China and the amount of construction that

goes on in China, America is exporting expertise to that environment but not actually exporting as much technology as they could,

because our technologies are not competitive, as was eluded to. And

it looks as if in a number of arenas, China is going to be the major

source of some of the most environmentally innovative, including

absorption chillers and a number of different technologies that we

will—we are not investing in and they are. So I think it is a major

export—missed opportunity, and we need to actually set these targets as industrial innovation targets so that we not only improve

the environmental efficiency here in the States, but we also have

something that we can export as we start to decline in some of the

technological advances.

Chairman BIGGERT. Thank you, Mr. Miller.

The gentleman from Georgia, Mr. Gingrey, is recognized for five

minutes.

Mr. GINGREY. Thank you, Madame Chairman.

Going back to the Chairman’s question and in talking about her experience in Europe on $5 a day an how she was going up the

stairs in one of those pincionnes or whatever they are called, late

at night and if you didn’t get to the first landing quickly, all of a

sudden the lights—in this country if you did that, of course, you

probably would run the risk of falling down those stairs and breaking your leg and then there would be a class action lawsuit and all

of this other stuff. And I couldn’t help but think about this place

here, if—you know, God forbid, those of us who sometimes like to

work late at night, you come in the building and you get to walk

up the escalators, because they turn them off, clearly to save a little energy, and I really experienced that, Madame Chairman, this

weekend. I was flying back from Michigan and I got to Atlanta at

about one o’clock in the morning. And all of the trams were shut

down, and I had the pleasure of walking two miles with three bags

on my back to finally get to my car. And I thought, now this is a

heck of a way to save energy, but I understand what you say in

these many rolling blackouts, if you will, and there are some problems with that, because I almost had a heart attack getting to my

car, because of this energy efficiency.

I wanted to ask a question, though, of Mr. Nadel. In your testimony, you gave a fairly broad estimate for the future of natural gas

prices. I think you said $4 per cubic thousand up to, possibly, $7

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per thousand cubic feet of natural gas. In your opinion, how likely

is the extreme case of $7 per thousand cubic feet, and would you—

would increased use of energy efficiency and renewable energy

technologies, would it reduce the likelihood of very high natural

gas prices in the future? And you know, what is the extreme?

Mr. NADEL. Okay. In terms of $7 per thousand cubic feet of natural gas, it is a distinct possibility. I—you know, a 20 percent

chance, 30 percent chance, something along those lines. The markets are extremely tight.

To answer your second question, energy efficiency and renewable

energy can make a big difference. Our study last year, using the

same models as the National Petroleum Council, found that medium levels of efficiency renewables could cut costs by—gas prices

by 20 percent. So if it was $7, that is $1.40 off of it. So there are

pretty significant impacts.

Mr. GINGREY. Anybody else want to respond to that? I think we

have got a little bit more time before my five minutes expire.

Mr. CARBERRY. We have got a divided opinion here, but I believe we have already seen $7, and I believe the futures are already well

north of $6 and maybe going even higher than that, so $7 is more

a reality next summer than a projection almost, it would seem. So

I think we are going to be there. The real issue is probably the—

is again probably the volatility. Everything you look at in terms of

natural gas prices say that there is a lot of technology that if the

natural gas prices are going to be north of, and you can pick any

number, $4, $4.50, $5, there are a lot of breakpoints in there, reliably, there would be a lot of investment put on the ground. The

problem is, the investment usually runs $2 billion for this or that,

and so people have to have a lot of certainty around it. We need

stability, and that is probably the most important—volatility is

hurting us more than the average price practically.

Ms. LOFTNESS. If I could maybe sort of respond to the first half

of your comment, which is that energy efficiency is sort of paralleled with a reduced quality of life or sort of things that sort of

compromise the sort of quality of life, I think there are certainly

a group of energy efficiency strategies that would, in fact, reduce

service, but the large quantity of energy efficient strategies that we

are talking about will actually improve the quality of life. I mean,

you could take the light fixtures in this room and make this a far

more beautiful historic room and cut the energy load here by probably down to 10 percent of what you see with equal light levels.

And so there are things that we should and could be doing that will

enhance the quality of life, better windows improve thermal comfort for senior citizens and housing. So I think it is important not

to think of efficiency as a loss but as, actually, a gain.

Mr. GINGREY. You know, and this comment I made is somewhat

tongue and cheek, and I meant to be humorous, but really it is

kind of serious because, as the Chairman mentioned, I mean this

is years ago when she and her husband were on this trip and

back—they were doing things. And in this country, of course, we

are so burdened by rules and regulations, that is why on the Floor

of the House yesterday the bill of regulatory reform was so important, and then we talk about losing jobs and outsourcing and all

of that. We can’t compete with some of these other countries in reVerDate 11-MAY-2000 21:24 Dec 18, 2004 Jkt 093758 PO 00000 Frm 00089 Fmt 6633 Sfmt 6601 C:\WORKD\ENER04\051904\93758 SCIENCE1 PsN: SCIENCE1
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gard to wages. We know that, but they are killing us, because they

are not burdened by all of these rules and regulations and things

that would really prevent just like she was talking about to be able

to do things like that for fear—God forbid, you know, you go out

of business because of a product liability lawsuit or whatever just

because you are trying to do something that makes sense.

Mr. SMITH. Can I respond to that, the stairwell incident? There

is a company in New York that NYSERDA has invested in that has

dimmable ballasts, dimmable fluorescent lamps that go in stairwells, and they dim down when there is no one in the stairwell.

As soon as someone appears in the stairwell, they come to full

light. They are cost effective. We are demonstrating them right

now in multi-family housing in New York City. It is a start-up company. And this is the kind of technology we can export to the world

and we should look at as opportunities, wherever you are on the

climate change thing, it is opportunities like this to export our

technology and our know-how to the world. And I think we have

answers, and I agree, efficiency isn’t freezing in the dark, it is making—it is using all of the energy you want but in the most efficient

manner.

Chairman BIGGERT. Thank you.

The gentlewoman from California, Ms. Woolsey, is recognized.

Ms. WOOLSEY. Thank you.

First of all, I would like to thank our Chairwoman and our Ranking Member and the six panelists for a magnificent hearing. This

has been great.

And then I want to ask a very broad question that you won’t

want to answer, but then I do have a question. And my question

is how stupid are we? I mean, we are not only not investing in

R&D, we are cutting R&D for efficiency and renewables when our

very security in this country depends upon being independent of

foreign fuel, when our environment depends upon green technologies, not just ours, the world’s, when new technology, green

technology could actually be the answer to what the economy needs

in this country, but we are letting other countries take these technologies that ought to be ours and benefit from them. And I—actually, I have introduced H.R. 1343 called the Renewable Energy and

Energy Efficiency Act, which sets a goal for our nation that at least

20 percent of energy produced domestically will be energy efficient

by the year 2020, and it calls for new investments in renewable energy and energy efficiency R&D. It establishes competitive grants

to help bring new commercial technologies in these areas to market. And in the overall, this bill is an opportunity to help craft responsible energy policy by ensuring our national security through

more diverse energy sources. I have eight co-sponsors on it, seven

of them are Democrats from this committee.

And so my question to you—I am really frustrated by this, obviously. And I haven’t worked this part of the—my bill, so I would

have more if I was working it, believe me. But I want to know

where the grass roots are. Where are the groups in this country

that need to put pressure on Members of Congress to make us do

the right thing, because you are all wonderful, but you are one person each. We need lobby efforts from our Districts, from your industries, your groups. We need it. We need it badly, and we need

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to be told, ‘‘Do the right thing or you are going to get booted out

of office.’’ So my question is where are these people?

From you, yes, Mr. Sosland?

Mr. SOSLAND. Well, I appreciate your comments and many of the

comments here. It is terrific to work in this field and see the interest from this subcommittee. I don’t work in Washington. We work

at the state level and state capitals, and there are so many groups.

There is so much information. ACEEE, Steven Nadel’s group, has

a tremendous amount of material and information. The national

environmental organizations have it. There are trade associations,

energy efficiency service companies. They are all out there, and it—

I don’t have an answer to you other than to say, you know, maybe

you can talk to the foundation community about the grant programs, but we know what the answers are. We have the data from

the states. We have it from NYSERDA. We have it from Connecticut. We have it from California, and——

Ms. WOOLSEY. Yeah, I know that. I have it in my own District,

believe me.

Mr. SOSLAND. Right. And we need to find a way to get that information to resonate.

Ms. WOOLSEY. Okay.

Mr. SOSLAND. And I think we now—I think that the topics that

we are talking about are now answers to problems that are on the

radar screen: energy security, energy independence. Framing the

question that way may help somewhat. The groups are around.

Maybe they need to be more visible, but I think it is——

Ms. WOOLSEY. Well, they do, and that is my question to you, because we all know—I mean, obviously, we know what we should be

doing. We are not doing it. And it is going to come from outside

pressures.

Ms. Loftness, you——

Ms. LOFTNESS. You are absolutely right to chastise us, in a

sense, because——

Ms. WOOLSEY. Well, not you.

Ms. LOFTNESS. Well, no, I mean us in terms of a broader constituency for these goals who have not actually made this—or been

able to put the amount of, sort of, lobbying effort and advocacy effort in Washington. Just as an anecdote that might be pertinent to

this, what—all of the deans of the engineering schools all across

the country come to lobby Congress once a year. And they all fly

in from all over, and they all fly on the same airplanes and so, all

of the—well, anyway, another story. But I—they come to lobby for

the National Science Foundation and the importance of engineering—higher level education and engineering. And I think they have

had an impact. And why the environmental universities in all disciplines, be it policy, engineering, science, architecture, why we are

not coming to make that same pitch is a weakness on our part and

something that we should be addressing.

Ms. WOOLSEY. And you should be bragging as you come about

what you are accomplishing.

Mr. KONOVE. I would also encourage all of us, you all, too, to

make it personal. I think if you go home to your Districts and on

the questionnaires that we—as citizens that we receive from you

all periodically were to simply ask the questions or meetings to ask

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the questions, you are going to find that no matter which side of

the table that people are on or whatever the economic situations,

if you ask them about energy efficiency technologies and renewables in language that they can understand and provide them

the—do they want this or do they not, you are going to find that

an amazing number of people want the capability to make these

changes. And——

Ms. WOOLSEY. Well, let——

Mr. KONOVE.—a lot of these people can not come to Washington

to make themselves known.

Ms. WOOLSEY. Well, actually, in my—I represent the two counties north of the Golden Gate Bridge north of San Francisco. We

have a—I could go on and—I could sit here for five minutes and

tell you what is happening in my District. They get it. Hence they

elected me.

Mr. NADEL. Okay. I totally agree with you that in this country

we are very much fixated on the short-term, be it here in Congress,

be it at different companies around the country, and they don’t realize that this is a very long-term effort that we need to address.

A couple of thoughts, one the fact that energy prices are getting

higher or are certainly getting increased attention. If the predictions that these will be sustained prove true, then I think there

will be a significantly higher voter interest in these topics. Second,

the increasing reliance on oil imports, given all of the concerns

about the Middle East, I think that will also gradually increase interest and attention. Our oil imports are only going up, not down.

Third, I think a lot of it is going to depend on the unions, the private companies who are increasingly less competitive than they

used to be. I know Representative Boehlert was talking about fuel

economy. I mean, I am very concerned that the U.S. manufacturers

have their heads in the sand, that they are maximizing profits

through the next couple of years, but when we have sustained high

oil prices, that they don’t have the hybrids, they don’t have the advanced diesels and that they are going to be at a major competitive

disadvantage. Toyota has now passed Ford to be the world’s number two car company. My guess is within the next 10 years, they

are going to pass GM and become number one. Our companies need

to take a longer-term view and innovate in order to stay competitive.

Ms. WOOLSEY. Be smart.

Oh, and just a comment, but on the oil import. Some of the responses around here would be to drill off our coasts, and that, too,

is short-term thinking.

Thank you, Madame Chairman.

Chairman BIGGERT. Thank you for your comments. You always

tell it like it is, right?

Ms. WOOLSEY. I am known for that.

Chairman BIGGERT. I did have the opportunity to hold a field

hearing with Ms. Woolsey in her District, and it was in a building.

Now this was about alternative fuels, and it was in a building that

was absolutely spectacular.

Ms. WOOLSEY. Right.

Chairman BIGGERT. Solar. Everything that you could think of as

far as energy——

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Ms. WOOLSEY. Building materials from——

Chairman BIGGERT. The works. In my first question—in response

to my first question, all of you listed outreach activities or appliance standards as the most cost-effective ways to improve energy

efficiency. In our comprehensive energy bill, we do have a lot of the

appliance standards, tax credits, and all of those things, and a lot

of this is for the consumer to help with the effort. And it is kind

of discouraging that I think, you know, people don’t really—a lot

of people don’t do that, and Mr. Konove talks about his buildings

and how if you were building something that you can put in all of

these things, particularly in new construction is much more difficult than old construction. Now I happen to live in the tear-down

capital of the world right now, and that is Hinsdale, Illinois, so we

are getting an awful lot of tear-downs and new buildings, but I

don’t see a lot of these efficiencies, the use of solar, the kind of roof

and everything. How do we get the developers and the builders and

the person that wants to build the building to do this? And even

with Ms. Loftness, with your—the type of building that you—the

commercial building that you are talking about, what can we do as

the government? What can you do? And what can we do just in a

broad, general education program of people in this country and how

important this is to face us right now?

Mr. Smith.

Mr. SMITH. In New York, in our New York Energy Smart program, we decided that we had to raise consumer awareness. And

so what we did was we had to spend money in media. And what

we got is we got the spokesman, Steve Toms, from ‘‘This Old

House,’’ was our spokesperson for energy efficiency. So we went on

to the television ads. We bought time on radios. And what we

found was if we educated consumers and we did a lot of media advertising, I could see a bump in our website, and I could also see

that people wanted this—if they understood, because it is complex—we spend more on a cell phone in a year than we spend on

energy. And so people had to understand what they could do, so we

used media, but then we backed it up with certified contractors,

who we would arm them with information. We would arm them

with technologies so they could do a very good job at your house,

and then we would guarantee those savings. And we would back

it up with low-interest financing, and then roll it out across the

state. And it came, you know—home performance with Energy

Star. We partnered with the DOE and EPA, and we took the Energy Star label. And we pushed the Energy Star label very hard.

And so we have a home performance Energy Star, we have assisted

homes for working folks, and we give them a greater incentive to

do this. But we coupled educating contractors with media, with

program details, and by making very comprehensive programs that

touch all of the sectors of the economy. It is a tough thing to do.

It has taken us three or four years. We are getting some traction

now. We are having a lot of responses. $2 per gallon of gasoline

helps a lot as well.

Chairman BIGGERT. Yes, Mr. Sosland.

Mr. SOSLAND. I just wanted to make the point that—to underscore, awareness is very important, but once awareness exists,

there then has to be a method of implementing the request. If a

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consumer is educated, they are requesting a building design, and

the architect needs to be able to respond. The builder needs to be

able to respond. They need to know how to—because too often, and

the data shows this, the reaction is you don’t really want to do

that. It is too expensive. So the premise of a lot of these programs

that work is you combine awareness—whether it is through an

audit program or an advertising program—with the tools to then

implement it, an incentive program that provides the building and

architectural services, and educates the architects. Those kind of

very nuts and bolts activities are what are required, really, to move

it and make it a—make the request something that is real. And I

think that the place to look is those mechanisms.

Chairman BIGGERT. Ms. Loftness.

Ms. LOFTNESS. I would like to add one more dimension to creating the consumer demand. I think the link between health and

energy has not been clearly drawn, and I think there is a real need

for that level of research. It does take—it is typically multi-year research. It is typically the kind of research that NIH and NIEH do

extremely well. I think once you realize how critically linked these

are, including things such as air quality, as well as daylight in

buildings, you will start to see a push from the health side, especially relative to the kids in schools.

Chairman BIGGERT. Mr. Carberry.

Mr. CARBERRY. Well, I don’t claim to be an expert in this area,

but based on the students that I have worked with, it seems to me

we never seem to work on this problem until we work with college

students, and that is too late. And in the discussions that I have

had with high school level science teachers, the level of science and

economics taught at the high school and maybe even at the grade

school level is fairly inadequate compared to what the needs of our

society are. And I really think that part of our reason for our grass

roots problem there is that we have let that get watered down, for

whatever reason, and so it is very hard to then teach to an emerging adult population that doesn’t have the background. We ought

to work on that problem.

Chairman BIGGERT. I would agree, and I also have a bill on financial literacy, and I know that—and have been working on research and development and trying to—and Mr.—Dr. Ehlers will

probably talk about that. That is his project, too. But also just trying to find more young people to go into the sciences. And I think

every time I go out to a school and talk to the students and tell

them how important this is, and particularly, you know, half of the

population that seems to think by seventh and eighth grade that

they shouldn’t be an engineer or they shouldn’t be a scientist,

so——

Mr. Nadel.

Mr. NADEL. Okay. I wanted to add that one very important vehicle for reaching the consumers in business is to move one step up

in the supply chain. It is working with the builders, it is the architects, it is the engineers who in turn would work with these customers. But there is a lot of need for research on how best to identify the benefits so that these people can then sell efficiency or renewable energy to their customers. There is a need for improved

training techniques to train the builders, train the architects on

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these advanced techniques, because they are the ones who are

working with all of these customers, so I see that as a very critical

federal need to help develop those materials that could be used to

educate these key audiences.

Chairman BIGGERT. So there should not be a shift in research

and development? That still is a very important factor in all of

this?

Mr. NADEL. Right, but some of that research and development is

research on what are the benefits and how best to sell them——

Chairman BIGGERT. Okay.

Mr. NADEL.—how—the software, et cetera, so that they can move

into the field.

Chairman BIGGERT. Okay. And then Mr. Konove, since you have

done the building, is there still a huge discrepancy in the cost? If

we have—from, like, the energy bill, if it ever passes, with the tax

incentives for a lot of these things, is there still some—we need to

do that in order to convince the consumer, or are the consumers

going to wake up and say, you know, ‘‘This is really important to—

for the world,’’ really, and our air quality, our water quality, everything that we take advantage of this research and build this type

of house. Or will they say, ‘‘No, I can’t do it, because it is too expensive.’’

Mr. KONOVE. I think it is clearly what everybody else has said.

It needs to be the communication and the education of everyone so

that they can understand what the situation is.

Chairman BIGGERT. I was just wondering if you have run into

that with people in North Carolina.

Mr. KONOVE. Well, what I was going to add was if you communicate and educate then people can understand and make those

judgments of what is affordable with themselves, because it is so

different with—because there are so many different situations in

terms of the costs or the technologies that are involved. But I

would add that the education that needs to be done on the—whether it be media level that—or a statewide level is that the people

that are trained to be able to help or to be the resource people, in

a large state, it needs to be more than just a statewide, even media

effort, because even in North Carolina, which is not as large as

some of the Midwestern states, you go to the east and you go to

the west, and if the media or the resource person is centrally located, the other people still are not reached, and so that is another

component that needs to be clearly taken into account.

Chairman BIGGERT. Thank you.

Quickly, Mr. Carberry.

Mr. CARBERRY. I just realized, you know, there may be an opportunity here in the suppliers of energy efficient equipment. One of

the things that struck me is when I was in California you could

buy a highly efficient, long-life light bulb in practically any drug

store at a reasonable price. In the state of Delaware, you could

search high and low and not be able to buy that same darn bulb,

and it drives me crazy. All right. Why? All right. Because there has

clearly got to be a market for those. I don’t know how to research

that, but something ought to be done about it. I had the same experience when I tried to replace my air conditioner. My 20-year supplier of air conditioners told me he didn’t have any air conditioners

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because he didn’t have any cheap, residential air conditions. And

in the end, he could have sold me, and did, a much better air conditioner, a highly efficient air conditioner, and if he had done the return on investment calculation or somebody had helped him, he

would have realized the darn thing was worth, like, 15 or 18 percent on your money, and that is not a bad investment.

So there is an opportunity here for training, I guess, suppliers,

key suppliers in key areas. I am not sure exactly how to get at it

and certainly not in two minutes, so——

Chairman BIGGERT. Thank you. Thank you very much.

Mr. Larson.

Mr. LARSON. That is where I am going to start with my line of

questioning, because I think that this is something for Lou Dobbs

to go along with outsourcing that he ought to focus on. But it does

get to cut to the chase with respect to the problem, which is investment in research and development, which all of you have eloquently addressed. How do we overcome the hurdle, however, when

we are wed to a system, and we will start with Mr. Carberry,

where, you know, your corporation is geared towards its performance based on quarterly returns, not on long-term investment and

planning, and this is systemic? Now that brings value added to our

economy, and it is something, you know, we don’t want to—we are

not looking to mess that up, but I think that that points out, in

dramatic fashion, all of the more need for research and development on the part of the government for the government to step forward. It also coincides with something that individuals like to receive, which is a tax break. I have never met an individual in society that doesn’t like a tax break. And so when you look at research

and development and it comes square up against investment return

on the stocks that you have invested in or getting a tax cut back

from your government, the public seems all too willing, again, I believe because of the lack of understanding of the value added, that

these investments would bring. Would you comment on that, starting with Mr. Carberry, and then I will go quickly to my next question?

Mr. CARBERRY. Okay. The—yes, the investment barrier is a serious one. Probably the most serious one we face right now is cogeneration. It is one of the most efficient energy generation forms, but

that gets you to natural gas, combined cycle cogeneration, and the

high price and high variability of the cost of natural gas is discouraging that kind of investment right now. So there is again a case

where investment is damaged by a volatile price situation.

Mr. LARSON. So let me ask you, as a follow-up, let us say, for example, that the Federal Government were to project out and say

as we look out and we see that with respect to future building use,

but specifically in the area of federal, municipal, and state buildings, i.e., school buildings we will take for an example, where we

both have to look at buildings that will be energy efficient and cost

effective into the future, and then look at the mode of transportation, whether it be by bus or fleets of automobiles that every municipality, every state, and every federal agency has to purchase,

should the Federal Government step forward and say, ‘‘We are

mandating that by X year that we have hybrids to get us back and

forth to work, that our buildings meet the standards and the scruVerDate 11-MAY-2000 21:24 Dec 18, 2004 Jkt 093758 PO 00000 Frm 00096 Fmt 6633 Sfmt 6601 C:\WORKD\ENER04\051904\93758 SCIENCE1 PsN: SCIENCE1
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tiny and we are providing the research and development dollars to

achieve those goals and the money is funded to states and municipalities so that they can invest to achieve those goals, but here is

the goal.’’ If we don’t have a benchmark, we are never going to get

there. We are just going to end up chasing our tail. How would all

of you respond to that?

Mr. CARBERRY. Rational building and transportation stand rational, gradual, certain, orderly——

Mr. LARSON. What is gradual?

Mr. CARBERRY. I don’t know. You know, you would have to take

each one and work on it——

Mr. LARSON. Okay.

Mr. CARBERRY.—obviously, but you know, you can’t go for 20 percent next year and then stop. But those kind of standards in transportation and housing and all—and appliances, all of those kinds

of standards, national standards, are a very, very strong driver.

Mr. LARSON. Ms. Loftness.

Ms. LOFTNESS. Yeah, I would like to add to that. I think when

you look at individual appliances, standards are absolutely the way

to go, because you can—and at least labeling standards, which help

the consumer understand the difference between two things that

are sitting side by side. And I—it helps to drive very, very quickly

higher performance technologies. Tax breaks also to industry as

well as consumers is a major driver, and in fact, the reason that

I think we are seeing wind power and PB power take off in Europe

far faster than here is because of long-term commitments in terms

of both purchasing those power sources in the federal—in the public sector as well as in providing tax breaks.

I do think that it is important not necessarily to try to mandate

in a building sector a single technology, because there is such a

wide range of issues, I mean, even transportation choices that exist

in school systems around this country, and one of the reasons why

some of the building standards are allowing you to look at a portfolio of choices. And when you hit a LEED silver, you are simply

committing to a certain level of investments across an ensuite of

environmental and energy efficiency——

Mr. LARSON. So you would recommend a portfolio for states that

they could choose from?

Ms. LOFTNESS. That they can choose from, so that they can customize it to the age of the building, the location, and—but we are

all making progress together against a set of goals.

Mr. LARSON. Mr. Nadel.

Mr. NADEL. Yes. I would say the emphasis should be on how do

we encourage the states and the utilities to offer programs at the

more state and regional levels. They are the ones who understand

the local markets that can work with the local media, et cetera. It

is very hard to do that from the federal level. I know we have done

a bunch of work on the federal tax incentives, and we certainly

support them, but they are a relatively blunt instrument, because

you have to—well, relatively simply for the Department of Treasury and the IRS to work with it, you sometimes lose some of the

nuances that are needed. So I would tend to try to encourage

things that a program that Texas adopted under then Governor

Bush where, as part of the utility restructuring, they mandated

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that all of the utilities operate energy efficiency programs to reduce

load growth by at least 10 percent. There is a lot of flexibility for

the utilities to modify that to suit their local needs. They just have

a goal they need to meet. I know Senator Jefferds has introduced

a bill at the national level to set up a similar type of program.

Likewise, there have been proposals for some of the federal matching funding for states programs. You have heard from Pete Smith

about the New York program, from Dan Sosland about the Connecticut program. Could there be some type of federal carrot to encourage states to match those funds and run these types of programs at the more local level?

Mr. LARSON. Mr. Sosland.

Mr. SOSLAND. Well, I—you know, there are various success stories to build future policy off of. The wind production tax credit has

been very important for the wind industry. And it was—it looked

like it might not go forward, they were quite upset. So tax incentives work. I think of a paper company that I had worked with on

its efficiency. And we identify tremendous potential in linking

pumps, old pumps, motors, just, you know, all of the hardware. Internally, they had a return investment commitment and a mandate

from their corporate headquarters. So their efficiency investments

competed against any other investment they would make in the facility. So they were looking at paper improvement and not doing

efficiency. But if you understand how the business has to operate

and there were a tax credit specifically to improve the efficiency in

the facility, something like that might work.

Another example, though, is—relates to what we are talking

about, commercial clothes washers, efficient clothes washers. The

market penetration of those has increased where there have been

utility programs designed to promote those and overcome market

barriers. This idea of overcoming market barriers at the state level

is very, very critical to market penetration of efficient technologies

and products.

Mr. LARSON. That is why we need your fund, right, Mr. Smith?

Mr. SMITH. Yes, sir. I think from the New York perspective, I am

a large state, and we spend a lot of money in public benefit funds,

and we invest about $50 million a year in R&D for energy and environmental products around New York State. One example in

what Mr. Carberry talked about is a combined heat and power applications. We have done about 115 projects across New York State

using combined heat and power generation. A very good example

that is in my testimony is Hudson Valley Community College

whereby we are using landfill gas to take the college off of the electricity grid to run it through some engines, and it—so the college

is totally energy independent now. We have done a very extensive

energy efficiency program at the college. They use the leftover heat

in the summertime to run air conditioning. They use the leftover

heat in the wintertime to heat the buildings. It is cost-effective. It

will help them get a handle on their energy costs so that they don’t

have to raise tuition for those kids coming to community colleges.

It is making smart investments, and it is looking at the opportunities for those investments.

Mr. LARSON. And I did, again, want to acknowledge that you are

from North Carolina and extend my condolences for the University

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of Connecticut’s drubbing of Duke and just pass that on. Unfortunately, Mr. Miller isn’t here to hear that, but——

Chairman BIGGERT. But he will.

Mr. KONOVE. And my hearing is a little deficit now, too.

But no, what I would suggest is whether—you know, similar to

the LEED program that has really encouraged institutional buildings and government buildings around the country to really improve their capabilities, something like that could essentially happen with any product that uses energy, whether it is pumps or

lights or controls or gears. If there are incentives within those industries or awards or some type of program to be recognized for

having the most efficient line of lights or the most efficient line of

pumps, it may not cost much money to do that, but it could provide

marketing capabilities for those industries to say we have this line

of efficient devices. And that could be anything across our country.

But that kind of an effort is not occurring at this point in time,

that I am aware of.

Chairman BIGGERT. Thank you.

The gentleman from Michigan, Dr. Ehlers, is recognized.

Mr. EHLERS. Thank you, Madame Chair.

I am sorry that I missed part of it. This is one of my favorite topics, but I have three Committee meetings going on simultaneously.

But I find it just fascinating listening to the discussion since I have

gotten back, because I have been in this discussion so many times.

And it is a national puzzle. But I think there are some answers.

First of all, people do not understand energy. The average person,

in fact, including some very sharp businessmen, does not understand energy. This led, in the ’70s, when people first began to be

really concerned about energy consumption, led to a bunch of

scheisters getting out there, ripping off the public, and reinforcing

the public’s concern that there is really no good solution.

The—but there is also an attitude, even among hardheaded business folks, that somehow even though efficiency is the hallmark of

success of a company or a corporation, we want to be more efficient, because it means greater productivity, et cetera. But yet

when it applies to energy, energy efficiency is somehow linked to

the idea of longhaired, fuzzy-headed, knee-jerk liberals and therefore can’t be any good. And so they tend to overlook some really

good opportunities to conserve energy in their operations, because

they just discard—out of hand. And I think it is again because of

a lack of understanding energy. And I—as a physicist, it seems to

me the crucial factor is they—it is because they can’t see energy.

There is a physical quantity, but you can not see it. You can’t feel

it. You can’t measure it easily. And the only real measure is the

price at the gas pump or the utility bill at the end of the month.

I have given a number of speeches and written some articles entitled, ‘‘I Wish Energy Were Purple,’’ and I just project what people’s behavior would be if they could see energy, if, in fact, it were

purple and they were driving down the road in their Toyota Prius,

and as it came by there was just a little bit of purple around it,

and then an SUV came by in such a cloud of purple you could hardly make it out. People would quickly change their behavior. Or if

they drove home and saw purple oozing out of the house around

the windows, they would change their behavior. But it is not there,

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and that has—we have to communicate to the public in some

meaningful way what energy is and how you can detect it and how

you can measure it.

That leads me to a question about the Department of Energy.

First of all, I think they should have a much bigger role in this.

They should recognize the problem and more resources. Someone

mentioned during their testimony the agriculture extension services, and I happen to think that that is one of the greatest things

that we have. When I was in the state legislature in Michigan,

Michigan State University, land grant university, they would develop something in the labs one year and farmers had it in the field

the next day. In your field of energies, when I was at Berkeley, we

had a great building energy facility, still there, and I have traced

it since I left there. It takes roughly 20 years from the time they

discover something until carpenters are actually using it in the

field. That is incredible. And if you ask why, the Federal Government spends $440 million per year on agricultural extension service. I doubt if they spend $1 million on energy extension service.

And so we have got a lot of work to do there, especially in DOE.

Something else, this is leading to a question. I am almost finished with my sermon. The question is on the energy modeling, I

think, Mr. Nadel, you mentioned some concern about the energy

modeling that the Department of Energy uses. I have heard other

criticisms of it. And by that, I assume you mean the economic energy model. And I am interested in comments from others, particularly Mr. Smith, because you have had to deal with this issue in

New York. Are the energy models used by DOE useful to you or

not useful? Have you developed any of your own within your organization that you find more useful? And I am not really trying to

put you on the spot here, but I think this is a major problem that

we should look at.

Mr. SMITH. Well, I will take the first shot at this. We do use the

Energy Information Administration’s model, but we customize

them for New York State, because they are too coarse for our use,

and they are also—they don’t reflect what goes on within the state.

So we do use those models, but we customize them for New York

State. We also use our own modeling systems. We also design our

own modeling system, because we find that we want—you know, a

model only gives you a roadmap and what we want to see is more

of the hills and the valleys and the nuances. So we have very extensive econometric models that look at specifically the factors and

influence New York State’s economy that influence on New York

State’s energy systems and the interplay between those systems.

So on a very high level, DOE’s models are useful in that I customize them and do other greater modeling capabilities in the

State to reflect what I need, to reflect what the Governor needs and

his folks.

Mr. EHLERS. Mr. Carberry, let me ask you about one aspect of

this. Energy modeling is complex, I will be the first to admit it, but

I think too many aspects are left out. Just as an example, I have

often believed that—or often made the statement that natural gas

is too good to burn, an incredibly good petrochemical feedstock, and

I think we should not be burning it to produce electricity when we

have very good alternative means for doing that. I am interested

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in your perspective as—coming from a corporation that makes extensive use of natural gas as a petrochemical feedstock, at least I

assume they do. I don’t think that that is entered into the models

at all, that value. If we burn up all of the natural gas or we have

to import LNG at great costs, what impact does that have on the

economy? What impact does that have on your country? And should

that be factored into the energy models?

Mr. CARBERRY. Well, it is—it has an enormous impact on the

economy, and in fact, probably the best example to offer of that is

that most of the high value—the high volume, low value petrochemicals have been eroded from this country and gone to places

like Saudi Arabia, for instance, methanol, which is a basic building

block because of their low price for natural gas as a feedstock. So

yes, the damage of burning natural gas as a fuel spilling over into

the damage as a feedstock, it is an enormously important feedstock

to us, and that damage is very significant. There are numerous examples of it causing U.S. production capacity to move off shore to

places where natural gas is cheaper as a feedstock. So anything

that we do that reduces the demand for natural gas helps our industry that is based on—our chemical industry that is based on

natural gas. And much of the U.S. chemical industry is more based

on natural gas than the European chemical industry, which is a little more petroleum based. So it is a very cogent observation, Mr.

Ehlers.

Mr. EHLERS. Well, basically, our energy modeling or energy policy is resulting in more jobs going abroad in this particular field?

Mr. CARBERRY. To the extent that it drives up the price of natural gas, yes.

Mr. EHLERS. Right. Okay.

Any other comments from any of you on this issue?

Mr. KONOVE. Yes. In terms of energy modeling for homes and

small buildings, there is some software available to us today, one

of which is Energy-10, but you know, it still needs more work, and

we need, as builders and designers, something that we can use that

is work—that works fast and is accurate so that we can verify what

the designs that we are working with, how they will perform. We

need to verify how the—how they are working prior to doing the

actual construction. And I understand that the Energy-10 program

also was about to—you know, it is jumps and starts, in terms of

financing, was about to start to include a photovoltaic portion, and

so there are some things in our area that we could use more work

on but have been very helpful, and they are very easy to use in

terms of providing initial analysis at the beginning of the design

and then further on helping to refine the design as we go on.

Mr. EHLERS. Ms. Loftness.

Ms. LOFTNESS. Yes, if I could add to that, in terms of simulation

tools, I mean, certainly the investment that the Federal Government has put in simulation tools has been well spent. There are

innumerable number of projects and certainly academic programs

that are based upon the use of Energy-10 and DOE–2 and other

software that is critical to our understanding of energy flows. Having said that, there are weaknesses in those tools, and the hardest

ones are really the passive technologies, really simulating the impact of daylight, really understanding the impact of natural venVerDate 11-MAY-2000 21:24 Dec 18, 2004 Jkt 093758 PO 00000 Frm 00101 Fmt 6633 Sfmt 6601 C:\WORKD\ENER04\051904\93758 SCIENCE1 PsN: SCIENCE1
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tilation as a conditioning system, understanding the importance of

time lag or heavy masonry in dry climates, desert climates, where

we are building with abundance but typically with very lightweight

buildings that don’t take advantage of the day-night temperature

swing. So a lot of those performance simulation characteristics are

much harder to simulate because they are dynamic. They can’t be

done with a static calculation, and so there are tools there that

are—that really would be extremely beneficial, especially as decisions are being made in new construction and those environments.

Mr. EHLERS. Mr. Nadel.

Mr. NADEL. I would agree that there are many useful modeling

tools coming out of DOE. The DOE–2 model, for example, is one

of the six technologies that the National Research Council focused

on and so that is producing billions of dollars worth of benefits. But

in terms of the overall modeling of the entire U.S. economy, what

they call the National Energy Modeling System, that definitely

needs some work. We find that when we try to do efficiency and

renewable energy, it just doesn’t have the handles, if you will, to

manipulate. We often have to do spreadsheet analyses separate

from that, and then in order to develop one or two key inputs that

they have. So it is very difficult to do efficiency and renewable energy policies.

Also, they tend to be very static. This committee works on R&D

and new technologies. The models tend to emphasize existing technologies, existing relationships, and don’t assume that the world

continues to innovate. We need much more dynamic modeling to

really be able to take the long-term view and best model appropriate programs and policies.

Mr. EHLERS. All right. Just let me finish with one quick comment. I still remember a friend of mine who went to visit a building development in Colorado, in Denver, because the builder had

advertised ‘‘energy efficient buildings’’. And in fact, he had tried to

make them energy efficient. But he noticed that the builder had

put Styrofoam insulation on the outside of the concrete foundation

up to ground level, but not above it. My friend asked him, and he

said, ‘‘Well, you don’t need it there. You know. It is—you just need

it below ground,’’ which is exactly the opposite. Simply not understanding energy flow and insulation.

I apologize for taking so much time, Madame Chair.

Chairman BIGGERT. Thank you very much, Mr. Ehlers.

Well, this concludes our hearing, so without objection, all written

testimony will be included in the record or entered into the record.

And Members may submit additional questions in writing. I hope

that the panel will answer these questions in writing.

And with that, I would like to thank the panel for your excellent

testimony, your expertise in this subject. And it has been an outstanding panel, so again, thank you very much, all of you.

And with that, the Science Subcommittee on Energy is adjourned.

[Whereupon, at 12:12 p.m., the Subcommittee was adjourned.]