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45–011 2008

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EFFICIENCY: THE HIDDEN SECRET TO SOLVING 

OUR ENERGY CRISIS 

HEARING 

BEFORE THE

JOINT ECONOMIC COMMITTEE 

CONGRESS OF THE UNITED STATES 

ONE HUNDRED TENTH CONGRESS 

SECOND SESSION 

JULY 30, 2008 

Printed for the use of the Joint Economic Committee 

( 

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JOINT ECONOMIC COMMITTEE 

[Created pursuant to Sec. 5(a) of Public Law 304, 79th Congress] 

SENATE 

CHARLES E. SCHUMER, New York, Chairman 

EDWARD M. KENNEDY, Massachusetts 

JEFF BINGAMAN, New Mexico 

AMY KLOBUCHAR, Minnesota 

ROBERT P. CASEY, JR., Pennsylvania 

JIM WEBB, Virginia 

SAM BROWNBACK, Kansas 

JOHN E. SUNUNU, New Hampshire 

JIM DEMINT, South Carolina 

ROBERT F. BENNETT, Utah 

HOUSE OF REPRESENTATIVES 

CAROLYN B. MALONEY, New York, Vice Chair 

MAURICE D. HINCHEY, New York 

BARON P. HILL, Indiana 

LORETTA SANCHEZ, California 

ELIJAH E. CUMMINGS, Maryland 

LLOYD DOGGETT, Texas 

JIM SAXTON, New Jersey, Ranking Minority 

KEVIN BRADY, Texas 

PHIL ENGLISH, Pennsylvania 

RON PAUL, Texas 

MICHAEL LASKAWY, Executive Director 

CHRISTOPHER J. FRENZE, Republican Staff Director 

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C O N T E N T S 

OPENING STATEMENT OF MEMBERS

Page 

Statement of Hon. Charles E. Schumer, Chairman, a U.S. Senator from 

New York .............................................................................................................. 1 

Statement of Hon. Carolyn B. Maloney, Vice Chair, a U.S. Representative 

from New York ..................................................................................................... 3 

Statement of Hon. Sam Brownback, a U.S. Senator from Kansas ...................... 4 

WITNESSES

Statement of Ian Bowles, Secretary of Energy and Environmental Affairs, 

Commonwealth of Massachusetts, Boston, MA ................................................. 6 

Statement of Dan Reicher, Director ....................................................................... 8 

Statement of Dr. Jonathan Koomey ....................................................................... 10 

Statement of Mark P. Mills .................................................................................... 11 

SUBMISSIONS FOR THE RECORD

Prepared statement of Senator Charles E. Schumer ............................................ 26 

Prepared statement of Representative Carolyn Maloney ..................................... 29 

Prepared statement of Senator Sam Brownback .................................................. 31 

Prepared statement of Ian Bowles ......................................................................... 33 

Prepared statement of Dan W. Reicher ................................................................. 48 

Prepared statement of Jonathan Koomey ............................................................. 60 

Prepared statement of Mark P. Mills .................................................................... 82 

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(1) 

EFFICIENCY: THE HIDDEN SECRET TO 

SOLVING OUR ENERGY CRISIS 

WEDNESDAY, JANUARY 30, 2008 

CONGRESS OF THE UNITED STATES, JOINT ECONOMIC COMMITTEE, Washington, DC. 

The committee met at 10:00 a.m., in room 106 of the Dirksen 

Senate Office Building, the Honorable Charles E. Schumer (chairman) presiding. 

Senators present: Bingaman, Klobuchar and Brownback. 

Representatives present: Maloney and Hinchey. 

Staff present: Christina Baumgardner, Tamara Fucile, Nan 

Gibson, Colleen Healy, Israel Klein, Michael Laskawy, Ted Boll, 

Chris Frenze, Tyler Kurtz, Gordon Brady, Robert O’Quinn, Jeff 

Schlagenhauf and Jeff Wrase. 

OPENING STATEMENT OF HON. CHARLES E. SCHUMER, 

CHAIRMAN, A U.S. SENATOR FROM NEW YORK 

Chairman Schumer. The hearing will come to order, and I 

want to apologize to my colleagues, the witnesses, and the audience. I had a bill on the Floor, and I had to speak on it at 10:00, 

so I apologize for being late. 

I want to thank everybody for coming to our Joint Economic 

Committee hearing on energy efficiency. I want to welcome my colleagues and the Chairman of our Energy Committee, Senator 

Bingaman, who has shown great interest in this issue, as in all of 

the energy issues. 

Now, of course, everywhere we go—Legion Halls, parades, weddings—the high price of gasoline is one of the very first things people bring up. In a few short months, families from New York to 

Washington State, will also be struggling to pay their winter heating bills, so it’s no wonder that Congress has held 60 hearings on 

energy policy so far this year, 20 alone in July. 

Americans across the country are being squeezed. Middle class 

families are paying $2,000 more in gasoline costs alone—double 

what they spent in 2001. 

We had a Committee hearing last month to examine whether 

these high prices were a temporary bubble or a new reality for our 

economy. At that late June hearing, oil topped $134 a barrel; it’s 

now $122 a barrel. If there’s no oil bubble or if prices temporarily 

decline, as they have, and we put off doing the necessary things we 

have to do, like investing in efficiency programs and alternative 

fuels, we’ll be even further behind than we are now from breaking 

our foreign oil dependence. 

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So, it’s clear that demand for energy, especially in rapidly-developing, large countries, like China and India, is on the rise, so the 

reality is, we need to look beyond quick fixes that will do little for 

consumers and less to address this energy crisis. 

In the long term, we must address the demand side of the energy 

equation. And while I have supported some targeted drilling in the 

Gulf of Mexico, I don’t believe we can drill our way out of this crisis, and neither do the American people. 

According to a recent poll, 76 percent of Americans said we 

should focus on investing in new energy technologies, renewable 

fuels, and more efficient vehicles, rather than expanding oil exploration and drilling. 

One of the good things that came out of the oil shock of the ’70s 

was the dramatic push for energy conservation. Why don’t we do 

more of that now? 

California made tremendous efforts under Governor Jerry 

Brown, during that time, to reduce consumption, and they are now 

well below the national average in energy usage per capita. Let me 

repeat that: California, home of the car, is below average in terms 

of energy consumption, and that’s simply because they did smart 

conservation measures 30 years ago. 

One environmentalist said, ‘‘Alternative fuels are the sizzle, but 

conservation and efficiency is the steak.’’ We’re here to have a nice 

steak dinner at this hearing. 

But to some, conservation has the connotation of discomfort— 

using an extra blanket in the winter, easing up on the air conditioning in the summer—but as our witnesses will discuss, energy 

efficiency is actually doing more with less. 

We’ll learn about the most recent state to implement landmark 

energy efficiency and alternative energy programs, from the Massachusetts Secretary of Energy, Ian Bowles. 

But what should we be doing in Washington to address this problem? We should be requiring utilities to achieve 10-percent energy 

savings each year, by helping their customers with energy efficiency programs, improving energy efficiency in their own distribution systems, or through credit trading. 

We need to require states to update their commercial and residential building codes to achieve a 30-percent energy savings by 

2015, and 50 percent by 2022, based on the 2006 building code 

standards. That’s an idea that offers big bang for the buck, because 

buildings consume a great deal of our energy and are very inefficient. 

By most statistics, heating and cooling buildings consumes more 

energy than the gasoline with which we drive our cars, so we’re ignoring this whole area, and it’s important. 

I want to thank Senator Bingaman. In our Democratic energy 

proposal, some of the things that I’ve been talking about with 

building efficiency, he added into his comprehensive plan. 

Finally, we should be giving states like Massachusetts the ability 

to set higher appliance standards, with the proper approval from 

the Department of Energy, to help the Federal Government and big 

manufacturers stay ahead of the technology curve. 

Another idea that Dan Reicher addresses prominently in his testimony and is long overdue, a reinvigorated and beefed up weatherjbell on PRODPC61 with HEARING

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ization program to help millions of Americans consume less energy, 

stay warmer in the winter and cooler in the summer. 

Given the recent inability of the Senate to increase funding for 

the Low-Income Home Energy Assistance Program that we all call 

LIHEAP, in what is predicted to be a terrible winter heating season, I’m worried that families in New York and around the country 

will be choosing between heat and food, or between heat and 

healthcare. 

This common-sense investment in reducing energy consumption 

is an energy hat trick. It helps families to make ends meet, improves our energy security, and strengthens our economy. 

The bottom line is, if you don’t encourage energy efficiency, if you 

don’t invest in alternative energy, and if you don’t tell the big oil 

companies that they can no longer run energy policy in America, 

we will not succeed, plain and simple. 

Our witnesses today are experts in doing more with less, which 

is why they will get only 5 minutes to make their opening statements. 

[Laughter.] 

But also because we have—and even I took 5 minutes and 22 

seconds, and I’m not known for brevity. 

[The prepared statement of the Honorable Charles E. Schumer 

appears in the Submissions for the Record on page 26.] 

Chairman Schumer. Congresswoman Maloney. 

OPENING STATEMENT OF HON. CAROLYN B. MALONEY, VICE 

CHAIR, A U.S. REPRESENTATIVE FROM NEW YORK 

Vice Chair Maloney. Thank you, Chairman Schumer, for holding this hearing to examine the role that efficiency measures can 

play in our energy strategy. 

Three years ago, the Republican-controlled Congress passed energy legislation they said would bring down the cost of gasoline and 

end our dependence on foreign oil. Instead, the price of gasoline 

has nearly doubled since then. 

Whether it’s paying over $4 per gallon for gas or milk, due to 

soaring fuel costs, Americans are paying a hefty price for the failure of this Administration to pursue a sensible energy strategy 

over the past seven years of this Administration. 

We cannot drill our way out of the problem. Meeting the energy 

needs of our nation will require a comprehensive strategy for 

achieving greater efficiency and investing more in renewable fuels. 

The Democratic-led Congress has already enacted into law, the 

first new Fuel Efficiency Standards in over three decades and made 

an historic commitment to biofuels grown here at home, both of 

which are reducing consumption and saving families money. 

We are building on these steps by encouraging the use of mass 

transit, and expanding tax incentives for renewable energy to spur 

American innovation and business investment and create green 

jobs. 

Record energy prices are forcing all of us to rethink the way we 

live and commute, and companies are also rethinking the way they 

do business. In short, we all need to think outside the oil barrel. 

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ergy efficiencies, which Mr. Reicher has noted is perhaps the fastest, cleanest, and cheapest way of addressing our energy challenges. 

More flexible workplace policies can also play an important role. 

A recent survey by the Society of Human Resources Management 

found that 26 percent of businesses are offering flexible schedules 

to help employees cope with high gas prices. 

Across the nation, local governments are altering work schedules 

to save energy and cut costs. Utah’s Republican Governor, John 

Huntsman, recently announced that most state employees will be 

moving to a mandatory four-day work week, to reduce the state’s 

energy consumption, while also providing workers with greater 

flexibility. 

A bill I have coauthored with Senator Kennedy, the Working 

Families Flexibility Act, would help working families across the 

country by putting a process in place for employees to request a 

change in their work schedules, and providing job protection when 

making that request. 

More and more businesses are finding that flexible work schedules and other family-friendly programs are good for the bottom 

line in terms of reducing turnover and increasing productivity. 

What’s also coming to light are the ways in which these policies 

can help companies and families reduce consumption, cut energy 

costs, and ease traffic congestion. 

Our nation’s continued prosperity depends on meeting the challenges of our energy needs and bringing relief to American families. 

Chairman Schumer, again, I thank you for holding this hearing 

and I look forward to our panelists’ testimony. Thank you. 

[The prepared statement of the Honorable Carolyn Maloney appears in the Submissions for the Record on page 29.] 

Chairman Schumer. Thank you, Vice Chair Maloney. Senator 

Brownback. 

OPENING STATEMENT OF HON. SAM BROWNBACK, A U.S. 

SENATOR FROM KANSAS 

Senator Brownback. Thank you, Mr. Chairman, thank you for 

holding the hearing, thank you, witnesses, for being here, and I 

look forward to the testimony. 

Mr. Chairman, there is much we can do to improve efficiency, 

and, doing so, is certainly one part of the equation, using less, but 

we must address the supply side of the equation, as well. And since 

this is the Joint Economic Committee, I think it’s interesting and 

appropriate to look at some of the economics of this, as well. 

As a nation, we produce barely half the amount of crude oil and 

about the same amount of natural gas as we did in 1970. Roughly, 

we consume 25 percent of the world’s oil and produce about three 

percent of it. 

According to BEA, in the first quarter of 2008, our imports of pe- troleum products amounted to $451 billion, on an annualized basis. 

Tomorrow, when BEA releases its first look at the second quarter 

GDP, I suspect we’ll see an even higher number. 

I mention this in terms of GDP, because imports are a subtraction from GDP, and lower GDP, meaning fewer jobs, lower government revenues, and a larger trade deficit. In the first five months 

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of this calendar year, had we imported one million barrels less, just 

one million barrels of oil less per day, our trade deficit would have 

been $14 billion lower over those five months, and our government 

deficit would have been lower, substantially, as well. 

The policy that the other side of the aisle is defending with such 

zeal, by failing to promote the discovery and drilling and production of additional domestic oil supplies, is sending money and jobs 

outside the United States by the truckload. 

This is wrong and must be stopped. That is what I and my colleagues on this side of the aisle have been fighting so hard for over 

on the Senate floor. It’s time we took action and gave the American 

people some needed and real relief, and it’s time we started acting 

like the Senate and start voting on these issues. 

Let’s have some votes on these, and let’s move forward with also 

addressing the supply side and the economic side of this equation. 

I want to close by noting that drilling is not the entire answer 

to the entire question. We need a broad-based approach that continues to encourage the development and use of alternative sources 

of energy like biofuels, wind, solar, and so on, and using less. But 

we also have to produce more. 

We should require that an increasing share of the vehicles sold 

in the United States be flexfuel, or alternative fuel vehicles that 

can run on ethanol, methanol, or gasoline, and any combination. 

A tripartisan group of Senators has put forward a bill, and filed 

an amendment on the Energy Bill as well. But we must also maximize in an environmentally sensitive manner our existing resources so we are not sending all of those petroleum dollars overseas. 

To do less would be irresponsible. My colleagues on the other 

side of the aisle need to recognize quickly that both sides of the 

equation—supply and demand—must be addressed. 

Thank you, Mr. Chairman. 

[The prepared statement of Senator Sam Brownback appears in 

the Submissions for the Record on page 31.] 

Chairman Schumer. Thank you, Senator Brownback. 

We are now going to go to our witnesses. Because we have votes 

coming up we are going to try to move the hearing along. It is such 

an important hearing, and I hope people, my colleagues, will hear 

about this because it is one of the sort of, as we called the hearing, 

The Hidden Secret To Solving Our Energy Crisis. 

That is only a little hyperbolic. It is still hidden, and it will not 

solve the energy crisis, but it will do a lot more than a lot of other 

things. So now let me introduce our witnesses and ask them each 

to—you can each put your entire statements in the record—to try 

and keep within that five-minute limit. 

Ian Bowles is Secretary of the Executive Office of Environmental 

Affairs in Massachusetts. He oversees the Commonwealth’s six environmental natural resource and energy regulatory agencies, and 

has nearly 20 years of both public and private-sector experience in 

the energy and environmental sectors. He served in the Clinton Administration as Associate Director of the White House Council on 

Environmental Quality. 

Dan Reicher is Director of Climate Change and Energy Initiatives for Google.org, the arm of Google devoted to making investjbell on PRODPC61 with HEARING

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ments and advancing policy in the areas of climate change and energy, global development, and global health. He, too, has 20 years 

of experience in business, government, and nongovernment organizations. When I heard Mr. Reicher lecture on energy efficiency, it 

sort of blew me away and I have been dedicated to that issue ever 

since hearing him speak several years ago. 

Jonathan Koomey is Professor at Stanford University. He is a 

project scientist at the Lawrence Berkeley National Laboratory, a 

consulting professor at Stanford University. For more than 11 

years he led the National Laboratories End-Use Forecasting Group 

which analyzes markets for efficient products and technologies for 

improving the energy and environmental aspect of these products, 

and is author or co-author of 8 books and 150 articles. 

And Mark P. Mills of ICU Technology is the co-founder and 

Chairman of that company. He is also a founding partner of Digital 

Power Capital, served as a technology advisor for Bank of America 

Securities, and is a co-author of the Huber-Mills Digital Power Report. Under President Reagan he served as staff consultant to the 

White House Science Office. 

Secretary Bowles, your entire statement will be read in the 

record. You may begin. 

STATEMENT OF THE HONORABLE IAN BOWLES, SECRETARY 

OF ENERGY AND ENVIRONMENTAL AFFAIRS, COMMONWEALTH OF MASSACHUSETTS, BOSTON, MASSACHUSETTS 

Mr. Bowles. Thank you, Mr. Chairman, and other Members of 

the Committee. I am delighted to be here. 

My main message to you all is that we have, broadly speaking, 

built an inefficient delivery system for energy in the United States 

and we have rewarded utilities predominantly for selling power 

and not necessarily for meeting the load of their consumer in the 

least-cost type of way. 

We have done a number of things in Massachusetts to address 

that, and I will give a summary of those and then be happy to take 

your questions. 

Massachusetts has long been a leader in this area. We, like our 

neighbors in New York and in Connecticut, do not have much in 

the way of indigenous fossil supply. So for us we have high transportation costs and inherently higher energy costs in our region. 

That has made some of our efficiency investments relatively cheaper as compared to the price of power than some of our other states. 

We are just behind New York and Connecticut as the third most 

energy efficient state in terms of the economic productivity we get 

out from each energy unit that is consumed. 

We today face the challenge of greenhouse gas emissions, record 

high fuel prices, and other factors that make now the right time 

for us to be investing more in energy efficiency. Governor Patrick, 

I think, has also seen the economic opportunity in clean energy 

technology and made it a major part of his economic strategy to 

good effect in Massachusetts. 

Historically we have had utility-operated energy efficiency programs that helped consumers with retrofitting their appliances, 

helped in replacing other equipment that is oftentimes heavy energy users, but historically this has been capped. 

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We have said you have a certain amount of money each year that 

you can spend on efficiency that the ratepayers provided, but we 

have never had a true market where energy efficiency could compete with power generation to figure out who can meet the needs 

of our consumers in the cheapest way. So it is very simple and a 

very American concept of having a true energy market where we 

are trying to figure out what is the least-cost way for our consumers to be able to meet their energy needs. 

So some sweeping energy legislation that the Governor signed recently really uncaps sufficiency and puts in place a system, in 

wonkie terms called ‘‘least-cost procurement,’’ where essentially we 

require the utilities to go out and buy energy efficiency that is 

cheaper than the marginal cost of buying power. 

It is a relatively simple idea that says: Focus on the least-cost 

solutions. 

Our Public Utility Commission has also just issued a broad rate 

decoupling order that essentially breaks the disincentive the utilities have had. If they get rewarded and their revenues are tied to 

how much power they sell, their incentive is obviously not to have 

people use less of it because they get less revenue. 

Essentially rate decoupling turns that on its head and said you, 

the utilities, and our deregulated power market don’t own any 

power generation. They should not have any financial interest in 

how much they are selling through their wires. They are just in the 

wires’ business. 

So essentially rate decoupling severs that link and puts them 

into the efficiency business. I think it is a very sensible policy driven by cost imperatives. 

We have done a variety of other things in Massachusetts that are 

relevant to these matters. A new building code. Several of the other 

New England States have done this, and others. We require now 

greenhouse gas analysis in the context of state environmental review, our version of NEPA in the state, and we require our major 

developers to go through and analyze their greenhouse gas emissions and look at opportunities to avoid, minimize, and mitigate 

those emissions in their projects. 

We have a far-reaching executive order requiring that any new 

state buildings be lead-certified plus 20 percent better in terms of 

energy efficiency, and have been working away in that regard. 

In terms of federal policy that is relevant, I would echo the 

Chairman’s remarks about appliance standards. We in New England are I think shortly going to apply for a waiver on furnace efficiency, something provided for in your statute. This is an area to 

my mind of real federal leadership. 

Setting a broad carbon policy for the Nation to my mind would 

be very helpful. We in Massachusetts, and many other states, have 

been building systems like the Regional Greenhouse Gas Initiative, 

but I think we all understand we need a common currency for pricing carbon across our economy. So we encourage you in that area. 

Model building codes are really focusing on end-use energy efficiency in buildings. 

And then there is an obvious federal role in the technology piece 

as well, here, and major economic opportunity for the Nation. 

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Acknowledging the comments made by Senator Brownback, I am 

happy to talk some about how supply matters in Massachusetts as 

well. My main point for you all is that there are cheap efficiencies 

that we should be getting simply by aligning the incentives on our 

utilities in a smart way that focuses on cost. 

Thank you all very much. 

[The prepared statement of Ian Bowles appears in the Submissions for the Record on page 33.] 

Chairman Schumer. Thank you, Secretary Bowles. 

Mr. Reicher. 

STATEMENT OF THE HONORABLE DAN REICHER, DIRECTOR, 

CLIMATE AND ENERGY INITIATIVES, GOOGLE.ORG, MOUNTAIN VIEW, CALIFORNIA 

Mr. Reicher. Mr. Chairman, Vice Chair, Ranking Members, 

thank you for the opportunity to testify. 

Chairman Schumer. If you could turn on your mike, please, 

sir? 

Mr. Reicher. Thank you for the opportunity to testify. 

To meet the critical challenges of the 21st Century, climate 

change, energy security, and economic development, we need a bold 

new vision for how America generates and uses electricity. 

The core of that vision must be an electricity system that is 

clean, efficient, reliable, and secure; one that enables hundreds of 

thousands of megawatts of green power, millions of plug-in vehicles, and tens of millions of energy-smart homes and businesses. 

Dramatically increased energy efficiency is fundamental. By 

many measures, it is our fastest, cheapest, and cleanest opportunity to address our energy challenges, the real low-hanging fruit 

in our economy. 

From cars and homes to factories and offices we know how to 

cost-effectively deliver vast quantities of energy savings today. 

In the 1970s and 1980s we were asked to do less with less, to 

lower the thermostat, turn off the lights, don a sweater, and leave 

the car in the garage. Energy efficiency takes a different approach, 

offering the opportunity to do more with less, to use energy more 

productively. 

As one energy expert colorfully puts it, all people want is cold 

beer and hot showers. We are interested in the results of energy 

use, not the energy itself. How much energy we use to cool the beer 

and heat the water is a choice we make. 

According to a 2007 study by McKinsey, efficiency opportunities 

could keep global energy demand growth at less than one percent 

per year, or less than half of what is projected to 2020. This would 

cut global demand by the equivalent of 64 million barrels of oil per 

day, or almost 150 percent of today’s energy U.S. energy consumption. 

A new McKinsey study makes clear the attractive benefits of investments in efficiency. Additional global investment of $170 billion 

annually for the next 13 years would be sufficient to cut projected 

global demand by at least half. 

These investments would have an annual average rate of return 

of 17 percent and would generate annual energy savings ramping 

up to $900 billion per year by 2020. And they would deliver up to 

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half of the reduction in global greenhouse gases required to cap 

long-term atmospheric concentrations. 

Capturing this vast potential, however, will require a significant 

policy push. Aggressive federal policy can increase investment in 

energy efficiency. 

In my written testimony I outline a number of promising approaches. Let me briefly highlight four: 

First is automobile fuel efficiency. Congress’s recent boost in 

CAFE is a good step, but we can do better. Existing technologies, 

hybrid electric drives, drive-train improvements, lightweight materials, can today get us to roughly double the mileage of our current 

passenger fleet. 

An exciting technological development is the recent emergency of 

plug-in hybrids which connect to the electric grid for recharging. 

Charged at night, they can use lower-cost and cleaner off-peak electricity. Plugged in during the day, they can send power back to the 

grid to meet peak demand. 

Google.org has converted several regular hybrids to plug-ins. In 

a recent test, our plug-ins achieved as much as 93 miles per gallon 

on average for all trips, and 115 miles per gallon for city trips. 

In June we cohosted a conference with Brookings to explore how 

government can help accelerate their commercialization. At a minimum we need to increase funding for federal R&D, invest in the 

electricity infrastructure to support hybrid plug-ins, modernize our 

regulatory system to permit real-time pricing of power, and provide 

incentives such as federal tax credits. 

The second important federal policy is an energy efficiency resource standard. The EERS sets efficiency resource targets for electricity and gas suppliers over a given period of time, building on 

policies in nine states. 

Texas utilities, for example, now meet a specified percentage of 

their load growth needs through efficiency programs. The EERS is 

a compelling complement to a national renewable portfolio standard. 

Last year the House adopted a combined RPS/EERS that allowed 

up to 4 percent of a 15 percent national renewable mandate to be 

met through energy efficiency. Congress should give strong consideration to this combined approach. 

Mr. Chairman, the third policy I want to highlight is low-income 

home weatherization. Across the Nation low-income families this 

winter will increasingly face the choice between heating and eating. 

Congress continues to debate the traditional fix, LIHEAP, an absolutely critical but in no way sufficient answer to this problem. 

What we need is home weatherization. By upgrading a home’s furnace, sealing leaky ducts, fixing windows, and adding insulation, 

we can cut energy bills by 20 to 40 percent in winter and summer 

and save even more with efficient appliances and lighting. 

Unfortunately, our national policies have failed to recognize the 

benefits of low-income weatherization. While the Nation has weatherized about 6 million low-income homes since 1976, more than 28 

million remain eligible. Congress should make a national commitment to weatherize at least 1 million low-income homes each year 

for the next decade. 

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The price tag for retrofitting 10 million low-income homes is relatively modest, about $2 billion annually, with the added benefit 

of major greenhouse gas reductions and jobs. 

Finally, government-backed financial mechanisms could significantly increase the deployment of clean energy technologies, including energy efficiency. Senator Bingaman’s recent bill would encourage banks to make loans for clean-energy projects by providing a 

secondary market for their loans. 

Senator Domenici’s bill creates a clean-energy investment bank 

with authority to invest in eligible clean-energy projects using a variety of financial tools. 

In a recent hearing, I urged both Senators to integrate the best 

of their bills to take clean energy to scale. 

In conclusion, the Federal Government has a significant role to 

play in increasing investment in energy efficiency. By adopting a 

forward-thinking set of policies, Congress can stimulate significant 

near-term investment in energy efficiency with major economic, environmental, and security benefits. 

Thank you. 

[The prepared statement of Dan Reicher appears in the Submissions for the Record on page 48.] 

Chairman Schumer. Thank you, Mr. Reicher. 

Dr. Koomey. 

STATEMENT OF DR. JONATHAN KOOMEY, PROFESSOR, 

STANFORD UNIVERSITY, STANFORD, CALIFORNIA 

Dr. Koomey. Thank you, Mr. Chairman, and to the other members of the Committee for the opportunity to share my views with 

you today. To keep the lawyers happy I have to say that this testimony represents my professional opinion, not that of the Department of Energy or the Lawrence Berkeley National Laboratory. 

So as Dan mentioned, one of the most important lessons of the 

past few decades in energy policy is that improving energy efficiency is the fastest, cheapest, cleanest way to address the problems of energy security and climate risks. 

Energy supply technologies will also no doubt play an important 

role in dealing with these problems, but the history is clear. Energy 

efficiency is the most abundant and least expensive of all the options was have. 

So how can we best capture that resource? Now some have called 

for an Apollo Project for energy technologies, but I think a better 

analogy would be the broader U.S. response after the Soviet Union 

launched Sputnik. 

That means broad societal mobilization, massive investments in 

science and engineering education, substantial increases in basic 

and applied research and development, and implementation efforts 

on the scale of the Apollo Project. 

Now for energy efficiency that means more energy efficiency 

standards, that means Energy Star labeling, utility programs, revenue-neutral fee baits, tax credits, prizes like the automotive X 

Prize, business plan competitions like the California Clean Tech 

Open, institutional commitments to efficiency goals as Dan mentioned, institutional procurement of efficient products; more fundjbell on PRODPC61 with HEARING

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ing for education and training; and big increases in energy R&D 

funding, which has fallen to historical lows since the 1970s. 

But we need more than just technological innovation. People and 

institutions also need to evolve to meet the new challenges with the 

overarching goal of breaking down barriers to efficiency and making the more efficient choice always the more profitable choice. 

So I am going to give you an example from some recent work I 

have been doing in data centers. These are the high density computing facilities that power the internet and that help virtually all 

modern companies to operate efficiently. 

What you find in these facilities is that typically the people who 

buy the computers have one budget and the people who buy the 

electricity and supply the cooling to the computers have a separate 

budget. 

And so the people who buy the computers do not have an incentive to spend even an additional dollar for a more efficient server 

because the savings accrue and the savings are substantial—typically $5 or $10 for every $1 spent on a server for efficiency—the 

savings are substantial, and yet they accrue in someone else’s 

budget. 

So the IT folks just will not buy a more efficient server. So that 

is an example—I have others that we can talk about in the question period—that is an example of the kind of institutional issues 

that are surmountable, but we need to figure out how to solve 

these problems more effectively and more broadly. Keep in mind 

that these are the most mission-critical, the most sophisticated, the 

most carefully designed facilities in business today. And even in 

these facilities we see these kind of misplaced incentives. 

That to me means that it is likely these misplaced incentives are 

pervasive throughout the economy. 

Great challenge also means great opportunity. The U.S. has the 

chance to set a new course, one that combines economic benefits 

with improvements in environmental quality. Now is the time, with 

oil prices near record highs, and the climate crisis bearing relentlessly down upon us, to make that new future a reality. 

My testimony, submitted for the record, describes some specific 

ideas for how to take up that challenge. Thank you again for the 

opportunity to present today. 

[The prepared statement of Dr. Jonathan Koomey appears in the 

Submissions for the Record on page 60.] 

Chairman Schumer. Thank you, Dr. Koomey. 

Mr. Mills. 

STATEMENT OF MARK P. MILLS, PARTNER, DIGITAL POWER 

CAPITAL (AN AFFILIATE OF WEXFORD CAPITAL L.L.C.), ARLINGTON, VIRGINIA 

Mr. Mills. Thank you, Mr. Chairman, members of the Committee, for the opportunity to present some thoughts, high-level 

thoughts in my case, on the role of energy efficiency in the U.S. 

economy. 

I think history will record that we are today on the cusp of an 

energy revolution, one involving efficiency, with implications as 

deep and far-reaching as the industrial and the electric revolutions 

of the previous two centuries. 

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Each of these previous pivots in history was similarly anchored 

in profound changes in the efficiency with which we could use basic 

resources, and energy resources in particular. 

The emerging efficiency revolution derives directly from our Nation’s collective investment of trillions of dollars in the intellectual 

capital and infrastructure of the Silicon and digital economy. It is 

not a single device or program or a solution, but the emergency of 

an entirely new structural approach to energy efficiency—what I 

would call a hybrid energy economy. 

The nature and implications of this paradigm shift are epitomized by the hybrid electric car which some of the other witnesses 

have talked about. 

Conventional cars waste gasoline. Stop and go, coasting, running, 

unnecessary stops, and generally operating an engine suboptimally. 

You could do manually much of what a hybrid car does automatically, though it would be rather annoying. You would turn the engine off every time you do not need it. At every stop, when you are 

braking, when you are coasting. You restart it to accelerate, or 

cruise. 

This kind of behavior would increase urban fuel economy 10 to 

50 percent, or you could hybridize the car, which is to wrap the engine, and the drive shaft with sensors, power electronics, electric 

motors, batteries, microprocessors, software, and high-speed communications, in short all of the stuff of the digital economy, and 

then you let all that digital stuff seamlessly and invisibly juggle 

the on/off and optimally operate the constellation of energy-consuming components in real time, reacting to dynamic conditions in 

ways you could never accomplish manually. 

Nearly everything in our economy operates like today’s cars— 

suboptimally. Building and running things in the physical world is 

difficult to do optimally. Cars in fact are the simplest things to fix 

in this regard, much simpler than factories, offices, and homes. 

Yet, the latter collectively consumes 70 percent of all of our energy suboptimally. The technologies that enable a hybrid economy 

arrive first to serve the information markets—the data, voice, 

video. They came first, to put it simplistically, because data doesn’t 

weigh anything. So pure information devices just need milliwatts 

or watts. 

To move tons of stuff, and people, and materials, you need kilowatts and terawatts. This is a much more difficult task and took 

longer to do. 

The emerging hybrid economy takes America to the next quantum leap beyond automation, or supply chain management, or such 

things as telecommuting and e-commerce. All those energy saving 

systems are of course important, but they are just building blocks 

to the deeper hybrid economy phenomena that I am describing. 

Over the past 50 years the 20th Century’s technology has doubled the overall efficiency of the U.S. economy. This has allowed 

the GDP to increase six-fold with a comparatively modest two-anda-half-fold increase in our energy consumption. 

The hybrid economy can do this and much more in the future. 

One thing to keep in mind is that radical improvements in energy 

efficiency produce unexpected and, by and large, beneficial outcomes. 

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I mean, Energy efficiency—two specific examples from one of our 

witnesses today of course is what made Google possible, one made 

Apple possible. Operating at the energy efficiency of the first computer as a single Google Data Center would consume the entire 

electricity supply of New York City. 

At the efficiency of early radios, iPhones would be the size of 

trunks and served by cell towers the size of the Washington Monument. 

Instead, today we have staggering improvements in computing 

and information energy efficiency and there are consequently thousands of data centers and billions of computers and cell phones. 

Both have become ubiquitous industries of their own with vast, 

sprawling, and productive infrastructures. 

There is every reason to believe that more of the same of this is 

in store with the next wave of efficient technologies emerging in 

what I would call the hybrid energy economy. 

But much of it is unpredictable in both direction and form. It is 

because efficiency, like its economic cousin labor productivity, 

arises primarily from technology progress that the challenge—this 

is an old challenge for the Congress and for States—the challenge 

is to find ways to incentivize and accelerate innovative technology. 

How do we encourage markets to adopt near-term innovation and 

invest in enabling long-term infrastructure? I would suggest in 

both cases money is the most powerful tool. 

In the short term, high-cost energy does accelerate near-term 

capital investment in more efficient technologies. In the long term, 

however, this is where federal funding has a central role in basic 

R&D that is essential to fuel the next cycle of innovation, and 

frankly to educate the emerging class of energy innovators. 

Thank you, Mr. Chairman, members of the Committee, for the 

opportunity to present these thoughts. 

[The prepared statement of Mr. Mills appears in the Submissions 

for the Record on page 82.] 

Chairman Schumer. Thank you, Mr. Mills. 

I want to thank all four of our witnesses for excellent testimony. 

I am going to yield my time to Chairman Bingaman to ask questions, and then I will have to step out for a minute and Vice Chair 

Maloney will continue the hearing. I will be back to ask questions 

at the end rather than at the beginning. Thank you. 

Chairman Bingaman. 

Senator Bingaman. Thank you very much, Mr. Chairman, for 

having this hearing, and thanks to all the excellent witnesses. 

One of the obvious points I guess for people who have looked at 

this efficiency issue is that we need to get the right information to 

the people who are making decisions at every stage, or in every 

part of our economy in order to get maximum efficiency in the system. 

We have a proposal in an amendment that I have offered related 

to energy on the speculation bill that is currently pending in the 

Senate to establish a requirement that all vehicles beginning in 

2012 have a fuel economy monitoring device put on them, similar 

to what you see when you drive a Prius. 

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A very similar concept is the smart metering idea with regard to 

electricity that allows people to know how much electricity they are 

using at any particular time. 

I guess, Dr. Koomey, let me start with you. Another example of 

one of the issues you were pointing to there about the incentives 

being in the wrong place, the people deciding which computer to 

buy didn’t have any incentive to buy an energy-efficient computer. 

Another example which is pretty clear is the Coca-Cola and the 

various companies that put in these vending machines in federal 

buildings, or any building, who have very little interest in how 

much energy they use because there is no savings to them, obviously. They just plug it into the wall and the landlord pays the bill. 

Do you have any additional insights you could give us as to how 

we get this information to people in a way that allows them to 

make the right decision, Dr. Koomey? 

Dr. Koomey. Thank you, Senator. You raised one of my favorite 

examples in the vending machine. Another example is the cable 

box. The cable company buys the cable box and you pay the electric 

bill to warm your cat and do other important tasks. 

So the question you ask relates to information. My initial response is: Information is important when the people who are able 

to make the decision can take that information and use the skills 

that they have to come to the right decision. 

But in many cases these choices are small choices. So the choice 

of how much electricity your cable box uses, that is a difficult thing 

for an ordinary person to investigate. So we have to think a little 

bit about the transaction costs associated with getting people to do 

the calculation. 

Maybe it does not make sense to have the customer do the calculation. Maybe it makes sense to have an Energy Star label where 

EPA and the Department of Energy did the calculation once already, and then all the customer needs to do is find the Energy 

Star label. Or to have an energy efficiency standard, again. 

So I think information is very important, but in some cases I 

want to emphasize that sometimes the transaction costs aren’t 

worth it for individuals to do these kinds of calculations. There are 

other tools we can bring to bear to solve the problem. 

Senator Bingaman. You also had a comment in your written 

testimony about how we ought to consider directing FERC to tell 

us how to go about promoting standardized electronic formats for 

utility rates. Could you elaborate on that a little bit? 

Dr. Koomey. So one of the problems that big companies face is 

that they have facilities in many different states. And the utility 

rates for companies particularly are very complicated. So there’s 

Demand Charges, and Electric Charges, and they vary by time of 

day. Unfortunately, most of these rates are only published on paper 

nowadays. 

So it is very hard for a company to do the comparisons they need 

to do to choose to use energy efficiently. The proposal I made in 

the testimony was to standardize those formats for the electronic 

rates, and have that standardization help companies like Google 

design web tools to help these big companies, as well as small consumers, to compare rates and make the most efficient choice for 

them. 

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So this is again use of information technology, as Mr. Mills pointed out, use of information technology to do our energy sums more 

carefully and come to the more efficient conclusion at the end of 

the day. 

Senator Bingaman. Secretary Bowles, did you try to address 

any of these issues in the recent legislation you adopted in Massachusetts? 

Mr. Bowles. Senator, we did to a degree. Just for your backdrop, 

we have in Massachusetts a very high penetration of real-time 

meter and real-time pricing of power in the industrial and commercial areas where peak power is ten times or more, sometimes much 

more than that, more expensive than baseload power. And so companies can get tremendous economics by moving their load around 

and avoiding the peak hours. 

They do that, and they have responded well. What we have not 

seen in our deregulated power market in New England is really 

penetration into the retail level. Whereas we have consumers who 

have figured out cell phones—you know, we need to buy 500 minutes to 1000—we do not have those products available in the retail 

market, in part because the competitive energy suppliers just have 

not seen enough profit potential in that area to really get into that 

market. 

So one of the barriers is cheap real-time meters. I think that is 

an area where the Federal Government could intervene, to my 

mind, helpfully. 

In direct answer to your question, yes, the Legislature created a 

pilot program that will get at some of this. Our utilities, many of 

them, have somewhat smart meters for the purposes of service efficiency, but they aren’t in the dynamic pricing business yet. 

So the energy legislation takes a step in that regard, but it has 

not been one of the lowest hanging fruit for us as yet in terms of 

cost. 

Senator Bingaman. Thank you very much, Mr. Chairman. 

Mr. Hinchey [presiding]. Senator Bingaman, thank you. Senator 

Brownback. 

Senator Brownback. Thank you very much, Mr. Chairman, appreciate that. 

What is the Automotive X Prize, Dr. Koomey, that you were talking about? 

Dr. Koomey. So the original X Prize was for space travel. 

Senator Brownback. Right. 

Dr. Koomey. It was a prize of I think $100 million for the 

first—— 

Senator Brownback. It was $10 million to get up to space 

twice within two weeks. 

Dr. Koomey. Okay. So the Automotive X Prize is a similar sort 

of idea. So it’s a large amount of money that is given for automobiles that reach a certain efficiency target. So it’s not standard—— 

Senator Brownback. It has not been set yet? It is something 

that you’re advocating for? 

Dr. Koomey. No, it’s something that—the same group that did 

the X Prize for Space is also doing this for Automotive—— 

Senator Brownback. And do you have specifics on this? 

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Dr. Koomey. I do not know the details on this, but the general 

idea is that having these kinds of prizes stimulates innovation because it gets many different teams of engineers to focus on solving 

the problem. 

Senator Brownback. I agree. I agree. It is just that is the first 

I had heard about it, so I was curious about the specifics on it and 

I wanted to see if we could do more with that. Because I find a lot 

of people, as I am out traveling around or doing town hall meetings, everybody is talking about what they are doing. 

I was talking about a bio diesel the other day on the phone at 

the airport and a guy behind me is listening and said, hey, I have 

got a conversion system to take old vegetable oil. I’m doing this. 

And I was on a town hall meeting last night and this guy called 

in and he said: You know, if you guys would just license us to drive 

golf carts around our little town here, I am already plugging it in. 

You know, if we can get up to—it goes everywhere I need to go. 

And I thought, well, that is kind of an interesting idea in a 

small-town setting. I hope somebody is thinking about doing that. 

It is just interesting, the innovation that you are seeing and that 

the high prices do stimulate to take place. 

This would be I think a good one. I am hoping in the future we 

are going to have a plug-in hybrid flexfuel vehicle that will be the 

standard model. So you plug it in, do 20 or 30 miles on electricity; 

it switches over to hybrid, it can do flexfuel, it can run on ethanol, 

methanol, gasoline, or any combination thereof, and that is existing 

technology that we could do and really stretch a gallon of gasoline 

a long ways. 

Mr. Mills, I guess that is really along your line of a hybrid energy economy, which I find very exciting. From a State like mine 

with a lot of wind sources, a lot of agricultural sources, we look at 

this as okay now this is a chance that we can really produce in this 

economy. 

Let me ask you, though. You seem to premise your basis on the 

key here is to create an investment strategy to do this. Am I catching that right, or not? 

Mr. Mills. The key is to understand how we can accelerate capital turnover to new technologies. In a sense it is an investment 

strategy. Businesses will buy more efficient equipment when it is 

in their interest because most of them, in my experience, are aware 

of what it costs them to do things, and particularly these days 

where they are buying electricity or oil. 

But equipment has sunk costs. It still works well. There’s no capital in it if it’s fully depreciated. So having a decision internally to 

move to the next generation of technology, whether you are a manufacturing plant, a commercial building, is generally literally an investment decision for the operator. 

Senator Brownback. We stimulate that here from tax policy, 

tax credits—— 

Mr. Mills. Accelerated depreciation. 

Senator Brownback [continuing]. Subsidization, accelerated 

depreciation, research R&D would be the primary route forward? 

Mr. Mills. The latter would help long-term technology. I think 

one area where probably the whole panel agrees is it is important 

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to stimulate long-term R&D, which is predominantly a federal role 

typically in the long-term science engineering. 

But that does not do much for us today, obviously, to get businesses to change their behavior. Like consumers, you have to decide to buy a new car. The car you have may be fully paid for, and 

you have got zero capital, additional capital cost in that even 

though it is inefficient. 

Senator Brownback. That is where I think we ought to go. I 

read a paper on this one time and it talked about the three waves 

of, really, environmental concern, the first wave being conservation, 

the second wave being regulation, and the third wave being an investment strategy. 

It sure strikes me that that is the way we could all agree upon 

to move on forward with, is that you incentivize the investment in 

this. It makes sense for the economy. It makes sense for the ecology. And it is primarily focused on the energy end of the equation, 

which I think would be critical. 

One final question, if I could get it in here, is there is a lot of 

talk about diffusing energy sourcing. So you have energy, instead 

of from big power plants, but in addition to big power plants you 

go to diffusing the energy. 

What do you think of that (a);(b) if you can do it quickly, how 

would you incentivize that? 

Mr. Mills. Usually for price mechanisms—you’re talking about 

distributed energy where there are lots of small power plants? We 

make lots of small power plants already. That’s our cars. We make 

millions and millions of them a year. They are power plants. They 

can make electricity. 

The distributed energy market is bigger globally in developing 

economies largely because they do not have the economies of scale 

that we have. 

On average it is cheaper to make energy centrally, but in a highcost environment there are a lot of folks who will look at distributed generation. Rooftop solar can make more sense than utility 

solar because you are paying for high cost at the point of use as 

opposed to competing with a very cheap power at the point of generation. 

So there is certainly room for it. In fact I think we will have not 

much choice as a matter of fact. 

Mr. Hinchey. Mr. Bowles. 

Mr. Bowles. I just wanted to comment on your question, Senator 

Brownback, about distributed power. It goes back to the rate structure point I was making, again that in our system prior to rate decoupling the utilities had had every reason not to want to have 

that distributed power because their revenue is tied to the power 

that flows through their wire to your home. 

So if you did a big solar array, then they just lose money. So that 

is part of the point of, to my mind, the simple things we can do 

to have the utilities be in the wires business and indifferent to 

whether or not you do solar in your home, or someone does a combined heat and power unit in a commercial development. I think 

that is an important part of the puzzle. 

Senator Brownback. Thank you, Chairman. 

Mr. Hinchey. Senator Klobuchar. 

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Senator Klobuchar. Thank you very much, Mr. Chairman. 

Thank you to our witnesses. I am sorry I was late. We were trying 

to get those energy tax extenders done, as well as some other 

things in the transportation area. 

I think you all know I come from the State of Minnesota where 

we believe in science and the potential for new technology. We have 

brought the world everything from the Post-It Note to the Pacemaker. 

We are also very advanced in what we are doing with energy. We 

have one of the most aggressive energy portfolio, renewable energy 

portfolio standards in the country with the 25 percent goal with renewable electricity by 2025. 

We also have some interesting things with Best Buy and Super 

Value and some of our other major companies that are working in 

the energy area. 

My question first is this idea of the energy efficiency in the 

homes. I have noticed, especially Mr. Reicher, if you could answer 

this first, that there is just much more interest in our state now. 

It is no longer Jimmy Carter going on the TV in a sweater talking 

about, in a glum face, what is going to happen. 

We have a number of loan programs in our state. We have one for up to $10,000 you can get a loan to update your homes. But 

there is really a low usage rate of this program because people 

have to initiate it on their own. 

Could you talk a little bit about incentives, and anyone else can 

join in, for home owners to make improvements and how we could 

better get them involved in this? Because I see this as part of the 

key. It is no longer just an environmental issue; to them it is an 

economic issue. And if they could get those meters on their washers 

and dryers and figure out how to do it so they could get the information, I think we would be a lot better off. 

Mr. Reicher. It is a great opportunity. Home energy use, building energy use, is a very significant percentage of our overall energy use, and we have great opportunities to reduce it dramatically. 

Obviously we have financial incentives right now with higher energy prices, but that does not get us all that we need. I think there 

is a variety of things. 

First we have to give people better information. This once a 

month paper energy bill we get from our utility just does not do 

it. Most people do not understand it. They do not know how to—— 

Senator Klobuchar. Like me. 

[Laughter.] 

Mr. Reicher. Yes. 

Senator Klobuchar. Okay. 

Mr. Reicher. And so that is the place to start, is just giving people better information. And that starts with a home energy audit, 

which is available increasingly from utilities and from other providers. 

You can go in and get a very good baseline assessment of what 

is going on in your house. We even have advanced technologies now 

to do that. You can use something called a Blower Door Test which 

pressurizes the house and, with an infrared monitor, you can find 

everything down to the size of a pin hole in terms of leaks. 

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With that you really understand where to go. So that is the first 

thing is just setting a baseline so people understand. 

Giving them access to real-time information about their energy 

use. As we say, let’s give them a speedometer, not an odometer. 

Let’s give them actual real-time usage as you have increasingly in 

automobiles. If we had that for our homes, if you knew at any 

given moment that your child was up there in the second-floor bedroom and somehow lots of things were on that did not need to be 

on, you could make some adjustments. 

Even better—— 

Senator Klobuchar. So how much would it cost to buy these 

things? Would regular people be able to buy them? Would we sell 

them at places like Best Buy? Or would the government give some 

kind of deal to get them so that we could get people going on this? 

That is what I am trying to figure out. 

Mr. Reicher. Yes, there are lots of approaches, but one of the 

most significant—and I think one that has potentially the greatest 

impact—are what we call smart meters. You replace your simple 

dome electric and gas meters with something that has two-way information, can talk to the utility, can send information to the consumer on a real-time basis that you get in your laptop. 

We have many utilities now in the United States which have 

committed to putting in smart meters. Southern California Edison 

is going to be installing over 5 million. And that is the sort of thing 

that really gets people going. 

In terms of Federal incentives, tax credits both to industry and 

utilities and to homeowners for installing this kind of equipment 

could help a great deal. 

Real-time pricing, so that there is some incentive for example to 

wash your clothes and dry them at night instead of during the day. 

A choice, not a mandate but a choice, because you knew if you did 

it would be 50 percent less. 

Air conditioners that can actually talk to the utility on their own. 

So at any given point you have made a deal with the utility that 

you are willing to have your air conditioner cycled off for 5 or 10 

minutes at a time when the temperature hits X degrees, and you 

get an extra $25 off your electricity bill as a result of that. 

So there are all sorts of things that can be done that start with 

technology, that move from there to federal and state support. The 

good news is, this is not rocket science any longer. We have these 

technologies available. 

Senator Klobuchar. Secretary Bowles. 

Mr. Bowles. Yes. I would agree with your comment very much. 

We in Massachusetts now, the Governor has been talking about energy audits, we now have such a backlog of them that we are not 

even scheduling them now until November. That is a phenomenon 

where we have only given a certain amount of energy efficiency 

funding to the utilities to spend until it is gone. 

What we have done in restructuring the energy market in Massachusetts is basically said to the utilities: You can spend any 

money on these efficiency investments, including energy audits, insulation, weather stripping, appliance subsidies, things like that, 

until the point that the next investment is more expensive than 

power generation. 

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So as long as it is cheaper than buying the next kilowatt hour 

of power, you can make those investments. And any state can do 

that. A number of states have. It is, again in wonkie terms, called 

‘‘least-cost procurement,’’ but it is basically the idea of buying the 

cheapest energy resource. 

So state utility commissions can do that. Legislatures can do 

that. That is the biggest thing structurally we can do to really create an energy efficiency marketplace that again competes on costs. 

We are not taking about any crazy expensive things, we are talking 

about things that are cheaper than power generation. 

With the costs of commodities, natural gas going up so much, 

there is a lot more cheap efficiency out there. So at the end of the 

wires as a consumer what that means is you have more people 

showing up on your doorstep saying, you know, do you have a 20- 

year-old refrigerator in your basement that is still plugged in? 

Twenty percent of your load could be just that old refrigerator you 

forgot about a decade ago. If you unplug it, it would probably be 

cheaper for all of us if we just bought you a small new refrigerator 

and took that damn thing away. But there is a variety of things 

we have not done because we have not given the utilities really the 

incentive to focus on saving money. 

Senator Klobuchar. Okay. 

Chairman Schumer [presiding]. Congressman Hinchey. 

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

Thank you, gentlemen, very much, for this opportunity to listen 

to you and to learn a number of very important things. We are 

grateful to you for being here. 

The idea of energy efficiency I think is very critical. Last year 

the Congress finally passed an energy efficiency bill which upgraded the CAFE standards, the automobile fuel efficiency standards, upgraded them to 34 or 35 miles a gallon by the year 2020. 

This was the first time that that was done in 32 years. That 

standard was good, but it seems to many of us that a lot more 

could be done. A number of us have introduced another bill last 

year, which would jack up these CAFE standards to at least 40 

miles a gallon by the year 2016, which is I think very easily achievable. 

I would just like to hear your comments on that. What do you 

think that we could do in terms of CAFE standards, automobile efficiency, miles to a gallon, how much? How quickly do you think 

that we could accomplish that kind of efficiency? 

Mr. Reicher. Congressman Hinchey, I think there is a great 

deal that can be done. The great news is that the automobile companies themselves I think are much more convinced about that 

than they have been in the past. 

I mentioned in my testimony that at Google we actually converted several Toyota Priuses and Ford Escapes to be plug-in vehicles, and we tested those with professional drivers following Federal data on how consumers actually drive. The Ford Escape plugins got 50 miles per gallon. The plug-in Priuses got over 90 miles 

per gallon. 

So we know how to do this. This is technology that is available. 

So I think it would be fair to revisit the CAFE law and consider 

increasing those requirements. 

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In conjunction with that, I do think we need to also provide some 

help with some of the infrastructure that our utilities are going to 

need, for example, if we are going to move to plug-in hybrids. Because I think that is a big opportunity. So I would encourage you 

to take a look at that, as well. 

Mr. Hinchey. Thank you. Dr. Koomey. 

Dr. Koomey. Congressman, thanks for your question. 

One of the issues that I think people need to think about when 

they are examining the car efficiency question is the mass of the 

vehicle. We have designed vehicles more or less in the same way 

for a long time using materials that have changed somewhat over 

the last 20 years, but there are a lot of new materials that we now 

know are more energy absorbing, lighter, and allow vehicles to still 

be a good size but much lighter and therefore more efficient. 

So part of the thinking around this, I agree with Dan that we 

need to re-examine where those CAFE standards should go, but 

part of that evaluation I think should be kind of whole system redesign using current materials, current information technologies, 

not assuming the way we have always designed cars is the way 

they need to be designed going forward. 

Mr. Hinchey. Mr. Mills. 

Mr. Mills. Congressman, I just first want to thank you. Your 

brother has taught a couple of my sons at school locally, and 

they—— 

Mr. Hinchey. He is a great math teacher. 

Mr. Mills. He is a great math teacher. 

Mr. Hinchey. Thank you. 

Mr. Mills. The automotive industry is fascinating. As I think everybody knows, they have figured out that they might have to build 

different kinds of cars in this price climate. I think the automotive 

industry believes the price climate is in this range for awhile. 

I just want to answer briefly the question about timing that you 

had asked. There are today dozens of car models that get between 

30 and 40 miles per gallon, so consumers have the ability to buy 

high efficiency cars today. 

It is not like auto makers have not figured out how to make 

them. They do exist. In fact, demand for used Honda Civics, I was 

reading recently in The Wall Street Journal, are priced at the same 

price as new Honda Civics because they are north of 30 miles per 

gallon on the highway, and you can almost have yourself paid to 

buy a Silverado taken off the lot at some GM dealers. 

So some of the market response is already taking place. A couple 

of witnesses have noted the auto industry has figured this out, and 

in fact ironically enough there is some remarkable leadership going 

on in the R&D labs at the auto industry in my experience through 

the investment work that I do. 

I would not call it stealth work; they just are not getting that 

much credit for it, frankly, from studying changes in car architecture, or car design, not just hybrids and plug-in hybrids. 

When I first wrote about plug-in hybrids a few years ago in a 

Forbes article, the fact-checker called all the major auto makers 

and they all said universally to the fact-checker at Forbes that I 

was wrong; I was nuts; they were not going to make them; they 

were not in the plans. 

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I think at that time it was not so much they had their head in 

the sand. I happen to know from my own intel, if you like, that 

they were doing that. They just did not want to signal where they 

were in the path in a few cases, particularly in Toyota’s case. They 

are very secretive about these radical changes they make in car design. 

Mr. Hinchey. Secretary Bowles. 

Mr. Bowles. Congressman, I would just say, to endorse what the 

others have said about revisiting CAFE. I think it makes sense for 

the United States. 

The one other element I just would throw into the mix is we in 

California and in 14 States have been pursuing a waiver from the 

EPA for the CAL LEV standard, which would allow us as states 

to decide on one other standard that we could pursue more aggressively, and I think that is another step that Congress could step 

in and override, in my view, the recalcitrance from the EPA in 

terms of letting states go further when they are ready to, and recognizing it is only one other standard. We are not talking about a 

myriad of standards. So that is another thing that Congress could 

do if they did not want to touch CAFE right now. 

Chairman Schumer. Thank you, Congressman Hinchey. And I 

want to thank all of the witnesses once again. 

First to Mr. Reicher. I am very interested in the low income 

home weatherization program. I am going to put in some legislation to move it up. 

Can you talk a little bit more about the program? Why is it so 

uniquely positioned to help reduce energy consumption as well as 

U.S. emissions? What can we in Congress do to ensure the remaining $28 million homes eligible for assistance receive the weatherization support they need? 

There is such bang for the buck, and frankly as you said it is a 

permanent solution, whereas LIHEAP is a year-to-year solution. 

Mr. Reicher. Mr. Chairman, it is a great program that has received very little attention. 

Chairman Schumer. Why, do you think? 

Mr. Reicher. We have not focused on energy efficiency as—— 

Chairman Schumer. At all. 

Mr. Reicher [continuing]. At all. And when we have gotten into 

trouble in terms of higher energy prices, the general reaction in 

Congress has been, let’s put more money into the Low Income 

Home Energy Assistance Program, LIHEAP, which is an important 

program. It does buy down people’s energy bills. 

But that is a one-time buy-down. To be candid, it really gets to 

a very, very small percentage of the need both in terms of eligible 

families and how much it actually helps them. 

The great thing about weatherization as a complement to 

LIHEAP is that it continues to return savings year after year after 

year. Twenty to forty percent improvement in energy bills, not even 

taking into account what you can do if you also improve some of 

the electricity using appliances in the home. 

The great news is, there is an established base of home weatherization providers all around the United States, scores of them. 

They have been added since the 1970s. They have done roughly 6 

million homes. There is a very established process for doing it that 

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starts with the Home Energy Audit. There’s a standardized set of 

tools you use for that, a standardized set of approaches you take 

to making the changes in the home. 

What is exciting now, though, is that there is increasingly the opportunity to not just have this be federally funded but there may 

well be ways to aggregate hundreds or thousands of homes into a 

financeable package. I mentioned that in my testimony. 

Chairman Schumer. Right. 

Mr. Reicher. Imagine being able to not only have federal dollars 

going into this, but also get the private sector to start investing in 

these kinds of upgrades. 

The problem today is we are only weatherizing on the order of 

100- or 200,000 homes a year. The Energy Department has actually 

proposed this year to zero out the weatherization budget, as you 

know. 

Chairman Schumer. Yes. That is hard to believe, given everything that has happened. 

Mr. Reicher. We should be going the opposite direction. A million homes a year for the next ten years we would at least get to 

a third of what we could do. The job creation is extraordinary. The 

climate change impacts are extraordinary. We would even moderate the price of natural gas. 

Chairman Schumer. How long does it—if you weatherize a 

home in year one, how long does it stay weatherized? Forever? Or 

do some things deteriorate? 

Mr. Reicher. Well the savings are over many, many years. 

Chairman Schumer. Right. But would you have to re-weatherize it 20 years from now? 

Mr. Reicher. Certain things will still be in effect. You know, 

good insulation can last longer than that. Good windows can last 

longer than that. Other things, you might have to go back but normal home maintenance would get you there. But those first 10, 20, 

25 years you really see major savings. 

Chairman Schumer. Yep. Mr. Mills, do you disagree with anything Mr. Reicher said about weatherization? Not about in general, 

but just on weatherization? 

Mr. Mills. Well, no. I mean, weatherization of homes and buildings is important. I think that the only thing that I would be nervous about is the financing structure, just because it is difficult in 

practical systems. This has been done before in many states, to 

weatherize low-income homes. And utilities in a variety of states 

have moved, gas utilities in particular, to put programs in place. 

It turns out, just my experience working with the utilities over 

the years, that the old expression the devil is in the details, it is 

very difficult to implement these things. 

To the point earlier about Minnesota has programs that have not 

been taken advantage of, it is hard to incent people to do these 

things. And it is hard to force them to do these things. So it tends 

to go slower than people expect. 

Chairman Schumer. Right. That is probably true. But my 

guess is there are millions more who would do it in a New York 

minute. 

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Mr. Mills. I think that my view would be, of the New York 

Minute, would be with New York prices it would be a New York 

second. 

Chairman Schumer. Exactly. 

Mr. Mills. I think the big, big push will be because prices are so high. One winter at $4 or $5 a gallon heating oil, people get religion very fast. 

Chairman Schumer. Right. Just a quick question to, let me ask 

Dr. Koomey, Secretary Bowles. My time is running out and we 

have a vote, so we are going to have to be quick. 

It is hard to give a quick answer, but if you could do one thing, 

if we, the Senate, the House, the President, could do one thing to 

encourage efficiency right now to help us save money, reduce oil 

consumption, reduce prices, what would you choose? 

Secretary Bowles. But you’ve got to answer quickly. 

Mr. Bowles. I’ll give you a two part. For this winter, which will 

be very cold and we need weatherization, LIHEAP very badly because people are going to die from this cold winter—— 

Chairman Schumer. Right. 

Mr. Bowles [continuing]. I would do a lot of subsidization of insulation and weather stripping. That is the biggest short-term 

thing. 

Long term, I would give the states irresistible incentives to totally restructure their electricity market as we have done and California has done. 

Chairman Schumer. Right. Dr. Koomey. 

Dr. Koomey. I would help the states to adopt decoupling and 

profit incentives for energy efficiency because when you make it 

profitable for companies to pursue efficiency, they go after it. 

Chairman Schumer. Yes. Your ideas are very interesting, and 

you are harnessing the free market to do some good. Now there 

are, I do not know if you would call them externalities, but imperfections in the free market that do not allow it to happen. 

If there were perfect knowledge, the little example you gave of 

the IT buyer not caring about efficiency would not matter—I don’t 

know if it is perfect knowledge. I do not know what you call it. Yes, 

it is, perfect knowledge of the CEO at the top of the company. 

Dr. Koomey. And also misplaced incentives. 

Chairman Schumer. Right. I want to thank our witnesses. I 

know this hearing was a little brief because of the votes and unfortunate scheduling, but it was a great hearing. This is to me one 

of the great frustrations: Energy efficiency is the steak. It does not 

get the attention it deserves, and our job here will be to try to 

move some of these pieces forward. So thank all four of you. 

The hearing is adjourned. 

[Whereupon, at 11:30 a.m., Wednesday, July 30, 2008, the hearing was adjourned.] 

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