[Senate Hearing 110-38]
[From the U.S. Government Publishing Office]
S. Hrg. 110-38
ENERGY EFFICIENCY OF BUILDINGS
=======================================================================
HEARING
before the
SUBCOMMITTEE ON ENERGY
of the
COMMITTEE ON
ENERGY AND NATURAL RESOURCES
UNITED STATES SENATE
ONE HUNDRED TENTH CONGRESS
FIRST SESSION
TO
RECEIVE RECOMMENDATIONS ON POLICIES AND PROGRAMS TO IMPROVE THE ENERGY
EFFICIENCY OF BUILDINGS AND TO EXPAND THE ROLE OF ELECTRIC AND GAS
UTILITIES IN ENERGY EFFICIENCY PROGRAMS
__________
FEBRUARY 12, 2007
Printed for the use of the
Committee on Energy and Natural Resources
______
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COMMITTEE ON ENERGY AND NATURAL RESOURCES
JEFF BINGAMAN, New Mexico, Chairman
DANIEL K. AKAKA, Hawaii PETE V. DOMENICI, New Mexico
BYRON L. DORGAN, North Dakota LARRY E. CRAIG, Idaho
RON WYDEN, Oregon CRAIG THOMAS, Wyoming
TIM JOHNSON, South Dakota LISA MURKOWSKI, Alaska
MARY L. LANDRIEU, Louisiana RICHARD BURR, North Carolina
MARIA CANTWELL, Washington JIM DeMINT, South Carolina
KEN SALAZAR, Colorado BOB CORKER, Tennessee
ROBERT MENENDEZ, New Jersey JEFF SESSIONS, Alabama
BLANCHE L. LINCOLN, Arkansas GORDON H. SMITH, Oregon
BERNARD SANDERS, Vermont JIM BUNNING, Kentucky
JON TESTER, Montana MEL MARTINEZ, Florida
Robert M. Simon, Staff Director
Sam E. Fowler, Chief Counsel
Frank Macchiarola, Republican Staff Director
Judith K. Pensabene, Republican Chief Counsel
Deborah Estes, Counsel
Kellie Donnelly, Republican Counsel
------
Subcommittee on Energy
BYRON L. DORGAN, North Dakota, Chairman
DANIEL K. AKAKA, Hawaii LISA MURKOWSKI, Alaska
RON WYDEN, Oregon LARRY E. CRAIG, Idaho
TIM JOHNSON, South Dakota RICHARD BURR, North Carolina
MARY L. LANDRIEU, Louisiana JIM DeMINT, South Carolina
MARIA CANTWELL, Washington BOB CORKER, Tennessee
ROBERT MENENDEZ, New Jersey JEFF SESSIONS, Alabama
BERNARD SANDERS, Vermont JIM BUNNING, Kentucky
JON TESTER, Montana MEL MARTINEZ, Florida
Jeff Bingaman and Pete V. Domenici are Ex Officio Members of the
Subcommittee
C O N T E N T S
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STATEMENTS
Page
Bingaman, Hon. Jeff, U.S. Senator from New Mexico................ 2
Callahan, Kateri, President, The Alliance to Save Energy......... 36
Christianson, Kim, Manager, Office of Renewable Energy and Energy
Efficiency, North Dakota Department of Commerce, and also on
behalf of the National Association of State Energy Officials... 4
Dorgan, Hon. Byron L., U.S. Senator from North Dakota............ 1
Hebert, Jack, President and CEO, Cold Climate Housing Research
Center, Fairbanks, AK.......................................... 20
Murkowski, Hon. Lisa, U.S. Senator from Alaska................... 2
Rogers, James E., Chairman, CEO, and President, Duke Energy
Corporation, Charlotte, NC and Chairman, Edison Electric
Institute...................................................... 31
Sanders, Hon. Bernard, U.S. Senator from Vermont................. 3
Stewart, R.K., President, American Institute of Architects....... 11
Zimmerman, Charles R., P.E., Vice President, Prototype and New
Format Development, Wal-Mart Stores, Inc....................... 16
APPENDIX
Additional material submitted for the record..................... 57
ENERGY EFFICIENCY OF BUILDINGS
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MONDAY, FEBRUARY 12, 2007
U.S. Senate,
Subcommittee on Energy,
Committee on Energy and Natural Resources,
Washington, DC.
The subcommittee met, pursuant to notice, at 2:30 p.m. in
room SD-366, Dirksen Senate Office Building, Hon. Byron L.
Dorgan presiding.
OPENING STATEMENT OF HON. BYRON L. DORGAN, U.S. SENATOR FROM
NORTH DAKOTA
Senator Dorgan. We'll call the hearing to order. I'm
Senator Dorgan, chairman of the subcommittee. We're joined by
the chairman of the full Energy and Natural Resources
Committee, Senator Bingaman and we expect others to join us
soon.
We welcome all of you to the first Energy Subcommittee
hearing of the 110th Congress and today the topic is energy
efficiency. We have some excellent witnesses on this subject
and we're anxious to hear them. This is an issue that I've been
involved with for some long while. I was honored to serve as
co-chairman of the Alliance to Save Energy. In fact, I
succeeded in that position the Senator from New Mexico, who
served in that same position for some long while.
Both of us are very interested in this issue of energy
efficiency, but we all recognize we have serious energy
problems and a significant challenge ahead of us with respect
to energy. We import over 60 percent of our oil, much from
troubled parts of the world. We also have substantial
challenges with respect to the production of electricity and
the use of coal, and a whole range of issues in this new age of
interest in energy and climate change and global warming. One
of the evident solutions to dealing with all of these issues is
the area of efficiency. We understand that you have to be
involved in the question of production of energy, conservation
of energy, and the development of renewable energy. We also
understand that a significant part of this issue of energy use
and how we become more efficient is the issue of efficiency
itself, in which we discuss the things that sound like a
foreign language--SEER-13 for air conditioners--and those kinds
of debates which we have been involved with on this committee
for some long while.
Today we're going to focus on two related topics with
respect to efficiency: efficiency in the building sector in
this country, and also the electric and gas utility energy
efficiency programs. The United States Federal Government has
an interest in this issue of efficiency aside from the policy
standpoint. We, in the Federal Government, own and lease about
475 thousand buildings, or about 3.2 billion square feet
throughout the world. GSA, I'm told, spent $380 million dollars
on energy costs in their Federal buildings in FY 2006.
Presidents Clinton and Bush, as well as the Congress through
EPAct 2005, called for the Federal Government to lead by
example in building efficiency, so we know that we have
responsibilities in this area. We know that there's a
substantial amount of energy savings to be achieved by
thoughtful efficiency policy and programs, and that is the
purpose of this hearing. I'm pleased that all the witnesses
have joined us, and let me call on my colleague Senator
Bingaman for any opening statement.
STATEMENT OF HON. JEFF BINGAMAN, U.S. SENATOR FROM NEW MEXICO
The Chairman. Mr. Chairman, I congratulate you on having
the hearing. It's obviously the first issue we need to be
addressing, as we try to improve our energy security, and I'm
glad we could get this distinguished group of witnesses. I'm
looking forward to hearing them. Thank you.
Senator Dorgan. Senator Bingaman, thank you very much. We
are joined by the ranking member of this subcommittee, Senator
Murkowski.
Senator, I have just made a few brief comments as an
opening statement, then I called on Senator Bingaman, and I'd
be happy to have you make any statements you wish to make at
this point.
STATEMENT OF HON. LISA MURKOWSKI, U.S. SENATOR
FROM ALASKA
Senator Murkowski. I appreciate that a great deal; now you
get to get to hear twice how much I appreciate you calling this
hearing on this very, very important topic.
I don't want to take too much time this afternoon, but I
think it is important to repeat and remind folks that when we
consider that about 40 percent of total U.S. energy consumption
goes to heating, cooling, and lighting our buildings and homes,
it is clear that for us to make progress in improving energy
efficiency, we must improve both the design of our commercial
buildings and our homes, as well as the energy efficiency of
their electrical and mechanical systems--the appliances that go
inside of them. We made some good steps with the Energy Policy
Act of 2005, did some good concrete things, but we recognize
and appreciate that we have more to go. We have more to do in
terms of the authorization of certain programs that we saw
through EPAct.
I've been disappointed myself with some of the actions that
we have seen; the weatherization program is one of those. If we
did better at our home weatherization programs, we probably
wouldn't be looking at as much funding as the LIHEAP. I know
that many of the witnesses this afternoon will discuss these
programs and the importance of actually starting to put more
money toward saving energy through appliance and greater
building efficiencies.
I would like to personally welcome one of our witnesses
here this afternoon, Jack Hebert. Jack is from Fairbanks, and I
had the opportunity to visit him at the Cold Climate Housing
Research Center that is located on the University of Alaska,
Fairbanks campus and to go through the model homes that they
have developed using the research. I know most of you don't
like to think that Alaska can be utilizing our solar assets,
but in fact in a place like Fairbanks, where we can have 40
below periods, we've got some research that has demonstrated
incredible advances in our energy efficiency. So Jack, I
appreciate you being here. I know you're trying to get on a
plane to get back North before the snow comes, so we hope that
we're successful in that.
I do want to also note: I was reading through the testimony
and Mr. Stewart, you note that buildings are responsible for 71
percent of the electricity consumed in America and account for
nearly 10 percent of all carbon dioxide emissions. It's
information like that, that I think gets people's attention
here, and again the reason why this hearing this afternoon is
so important. So with that, Mr. Chairman, again I thank you and
look forward to some great suggestions from our panelists this
afternoon.
[The prepared statement of Senator Sanders follows:]
Prepared Statement of Hon. Bernard Sanders, U.S. Senator From Vermont
Chairman Dorgan, Ranking Member Murkowski, thank you for convening
this very vital hearing on one of the best ways to address the problems
of global warming: energy efficiency.
Energy efficiency is so important. In fact, it is one of those win-
win things: you reduce consumers' bills and you reduce the amount of
global warming pollutants released to our atmosphere. So, why is it
that we aren't funding the excellent energy efficiency programs that
are already on the books, including weatherization? Additionally, when
it comes to energy efficiency, we need to make sure that the federal
government leads by example. One simple way to do this is to utilize
energy performance contracts, which do not require any up-front capital
from the agency. We also need to authorize additional energy efficiency
programs, including some mentioned by the witnesses at today's hearing.
I am particularly intrigued by the notion of allowing utilities to make
a profit, perhaps even a greater profit than they would otherwise, by
promoting energy efficiency over generation. I look forward to
exploring this issue more.
I look forward to working with my colleagues and member of the
community to determine the best ways to move forward because I know
that we all share the desire to ensure a better energy future for our
country so that good jobs and a good economy will peacefully co-exist
with a healthy environment.
Senator Dorgan. Senator Murkowski, thank you very much. We
have six excellent witnesses. I appreciate very much all of you
coming to be with us today. I would like to call on all six for
their statements, and after which we will ask some questions. I
also invited someone from North Dakota to be on the panel, so
we have North Dakota and Alaska represented, along with the
four other distinguished witnesses.
Kim Christianson runs the Energy Program in North Dakota,
in the North Dakota Department of Commerce. I was with him
earlier today and did not brag about him, and I should have. He
does an outstanding job. I'm really impressed with the work
that he has done. I've worked with him on a good many issues
but he, and I expect Mr. Hebert, and others, will bring their
perspective to this issue. I think Kim Christianson has a
unique perspective. We're very pleased that you're with us. Mr.
Christianson you may proceed.
STATEMENT OF KIM CHRISTIANSON, MANAGER, OFFICE OF RENEWABLE
ENERGY AND ENERGY EFFICIENCY, NORTH DAKOTA DEPARTMENT OF
COMMERCE, AND ALSO ON BEHALF OF THE NATIONAL ASSOCIATION OF
STATE ENERGY OFFICIALS
Mr. Christianson. Thank you, Senator Dorgan and Senators
Bingaman and Murkowski. In addition to being with the
Department of Commerce in North Dakota, I also chair the
Agriculture and Rural Development task force of the National
Association of State Energy Officials for NASEO. I greatly
appreciate the opportunity to be here today. My testimony today
will serve a dual purpose: to highlight energy efficiency
activities and policy in North Dakota, and to present NASEO
policy positions on energy efficiency and to describe other
State efforts. My written testimony is far longer than what I
am able to cover in 7 minutes so I will very briefly summarize
the testimony content and ask that the full written testimony
be placed into the hearing record.
Senator Dorgan. Without objection.
Mr. Christianson. There's a tremendous amount of energy
development activity taking place in North Dakota today,
especially in the areas of wind energy, ethanol, bio-diesel and
biomass. At the same time, North Dakota has abundant fossil
fuel resources--including lignite, coal, oil, and natural gas--
and a very significant electricity generation industry, which
exports approximately 70 percent of the electricity produced
mostly to the east. North Dakota Governor John Hoeven has
encouraged the existing energy industry and the developing
renewable energy industry to work together where possible. A
good example of this synergy is the announced combined heat and
power plant near my hometown of Jamestown, North Dakota. The
project involves the existing Cargill malting facility, a
proposed 100 million gallon per year ethanol production plant,
and a new Great River Energy 40 megawatt power plant which is
coal-fired. By co-locating facilities and utilizing steam from
the power plant and waste water from the malting facility,
tremendous cost efficiencies will be realized by all of the
parties.
With all the attention on renewable energy developments and
the substantial economic activity generated, it's very easy to
overlook the good work and benefits of energy efficiency
efforts. Our office has been actively involved with efficiency
efforts in North Dakota since the late 1970's, and we continue
to administer the Weatherization Assistance Program and the
State Energy Program. My written testimony highlights the best
practices initiative that our State Weatherization Program has
implemented over the past couple of years. This is a
comprehensive effort to implement state-of-the-art approaches
to residential energy efficiencies flowing from around the
country and to develop an instructional manual that is applied
consistently throughout the State. It includes intensive
training and the use of sophisticated diagnostic equipment, so
that all crews are equipped to do the best job possible to help
low-income households get a handle on their energy consumption
and costs. North Dakota's Best Practices'' initiative has been
recognized around the country as an innovative, comprehensive,
and cost-effective approach to providing energy efficiency
assistance to low-income residents.
I also highlight the energy efficiency work we have done in
North Dakota with State-owned buildings. Over the years we have
provided technical and financial assistance for energy
efficiency projects in 412 buildings, amounting to $24 million
in projects, which have resulted in over $3 million of annual
cost savings. We have combined a unique working partnership
with the North Dakota Association of Physical Plant
Administrators and technical and financial assistance for
energy analyses and efficiency improvements, to greatly reduce
energy consumption and cost. A current example is a $2.3
million project at the University of North Dakota in Grand
Forks, which includes upgrades to 75 buildings. This project is
expected to result in energy cost savings of over $330,000 per
year.
Finally, we are more and more involved in the initial
planning and design stages of proposed new facilities. We have
successfully obtained the Energy Star designation for a number
of new State facilities, including the one in which our agency
is housed, and we continue to expand our efforts in this area.
While we are proud of the energy efficiency efforts in North
Dakota, we are a small agency with limited resources and know
that we have only scratched the surface of what could be
accomplished. I'm very impressed with the innovative programs
and tremendous successes that my colleagues and other State
energy offices have achieved. On behalf of our agency and other
State energy offices, I thank you, Senator Dorgan and other
committee members, for your continuing support of the
Weatherization Assistance Program and State Energy Program. In
our case, and I'm sure with most other States, these two
programs have served as a foundation of our energy efficiency
efforts.
In my written testimony I have included brief summaries of
innovative and successful efficiency programs from a number of
States. I also have a NASEO publication that highlights State
success stories with efficiency and renewable programs, and I
ask that that be included in the record.
Senator Dorgan. Without objection.
Mr. Christianson. Also included in my written testimony are
a number of policy positions put forth by the National
Association of State Energy Officials. I do not have time to
adequately cover these this afternoon, but I would like to
focus on a few key items. Robust energy efficiency expansion
requires both significant research and development, but also
deployment and demonstration programs. It doesn't make sense to
put priority on R&D for future energy-saving opportunities at
the expense of programs which are producing those savings
today. As you consider funding at the Department of Energy,
USDA, and EPA, please consider the value of both sides of the
equation. NASEO recognizes that you have a limited budgets, but
the Energy Policy Act of 2005 authorized and reauthorized a
number of energy programs that are significantly underfunded.
Both the State Energy Program and the Weatherization Assistance
Program are facing budget cuts that we believe are unwarranted.
These are successful programs that help real citizens and real
businesses in all sectors of the economy. There were a number
of programs included in EPAct that were not sufficiently
funded, if at all. These include efforts to target appliance
efficiency standards, the Energy Star program, upgrading
building codes, upgrading public buildings, and others.
I'll just mention one other thing. A number of energy
efficiency provisions in the Farm Bill, especially section
9006, are increasingly important to the States and we would
urge your support of expanding those provisions. Again, there
is a more complete summarization of NASEO's policy positions in
my written testimony. On behalf of my colleagues and other
State energy offices, I thank you for your attention and your
continued support. Thank you.
[The prepared statement of Mr. Christianson follows:]
Prepared Statement of Kim Christianson, Manager, Office of Renewable
Energy and Energy Efficiency, North Dakota Department of Commerce, and
also on behalf of the National Association of State Energy Officials
INTRODUCTION
Good afternoon Senator Dorgan, and subcommittee members. My name is
Kim Christianson, I am the Manager of the Office of Renewable Energy &
Energy Efficiency within the North Dakota Dept. of Commerce and the
Chair of the Agriculture and Rural Development Task Force of the
National Association of State Energy Officials (NASEO). I greatly
appreciate the opportunity to appear before you today. My testimony
today will serve a dual purpose: 1) to highlight energy efficiency
activities and policy in North Dakota; and 2) to present NASEO policy
positions on energy efficiency and to describe other state efforts.
NORTH DAKOTA ACTIVITIES
These are exciting times for energy development and the energy
industry in North Dakota, particularly in the areas of wind energy,
ethanol, biodiesel and other renewable energy developments. In the past
few years, ten wind energy projects have been installed or announced,
including 383 utility-scale wind turbines with a total rated capacity
of 578 MW. Five ethanol production plants and another four biodiesel
production facilities are under construction or soon to begin
construction. Various groups are exploring the potential for biomass
energy development in the state, particularly the use of cellulosic
feedstock for ethanol production.
North Dakota has abundant fossil fuel resources, including lignite
coal, oil, and natural gas, and a significant electric generation
industry that exports nearly 70 percent of the electricity produced to
neighboring states, mainly to Minnesota. Governor John Hoeven has
encouraged the existing fossil fuel industry and the developing
renewable energy industry to work together when feasible. An excellent
example of the synergy potential between the two energy sectors is the
recently announced Spiritwood project, near my hometown of Jamestown,
North Dakota. The project involves the existing Cargill malting plant
outside of Spiritwood, a proposed 100 million gallons per year ethanol
production plant, and a new coal-fired 40 MW generation facility to be
built by Great River Energy. Steam heat from the power plant will be
used at both the ethanol and malting facilities. Waste water from the
malting plant will be utilized by the ethanol facility for their needs.
The electricity generated by this project will be placed on the
transmission grid and sent to Great River's customers in Minnesota.
Because the Cargill malting plant can replace their expensive and often
interrupted supply of natural gas with inexpensive steam from the power
plant, they have recently expanded their operation, making it the
largest of its kind in North America.
With all the attention on renewable energy development and the
substantial economic activity generated, it is easy to overlook the
good work and benefits of energy efficiency efforts. Our office has
been actively involved with energy efficiency efforts in North Dakota
since the late 1970's, and we continue to administer the Weatherization
Assistance Program and the State Energy Program. My testimony will
highlight three particularly successful energy efficiency activities in
North Dakota--the Weatherization program, the State Energy Program and
our efforts to improve the energy efficiency of state-owned buildings.
As you know, the Weatherization Assistance Program provides low-
income households with energy efficiency improvements to their homes.
In North Dakota, our program assists approximately 1,300 households
annually, benefiting over 2,700 low-income persons, 55 percent of whom
are elderly or children. Weatherization services in North Dakota are
delivered by seven regional Community Action Agencies.
Over the last couple of years, our state has implemented what we
call a ``Best Practices'' initiative. This is a comprehensive effort
involving all levels of the state's Weatherization program--from state
administrators, to Community Action Agency energy coordinators, to the
weatherization crews themselves--to implement state-of-the-art
approaches to residential energy efficiency from around the country and
to develop an instructional manual that is applied consistently
throughout the state. The ``Best Practices'' initiative includes
intensive training and the use of sophisticated diagnostic equipment so
that all crews are equipped to do the best job possible to help low-
income households get a handle on energy consumption and costs.
Continuing education is provided to Weatherization crew members to
ensure early adoption of improved methodologies.
In addition to reducing energy costs and improving comfort, the
Weatherization crews have expanded their efforts to include emergency
repair and replacement of furnaces, which in a number of instances has
resulted in the identification and elimination of life-threatening
safety issues. For example, the Community Action Program Region VII,
Inc., in Bismarck reported one particular case in which a woman had
chronic headaches and complained of feeling ill whenever she was in her
mobile home for any length of time. It turned out that the level of
carbon monoxide in her home was elevated well beyond safe levels. She
very easily could have died from carbon monoxide poisoning and was
fortunate that the weatherization crew discovered and corrected the
problem.
North Dakota's ``Best Practices'' initiative has been recognized
around the country as an innovative, comprehensive, and cost-effective
approach to providing energy efficiency assistance to low-income
residents. I'm proud to tell you that my friend and colleague, Cal
Steiner, who along with state manager Howard Sage administers the
program for North Dakota, will be receiving the prestigious James
Gardner National Weatherization Award from the National Association of
State Community Services Programs; their top award for excellence.
In addition to North Dakota's Weatherization program, I want to
discuss our energy efficiency efforts for state-owned buildings. Over
the years, we have provided technical and financial assistance for
energy efficiency projects in 412 buildings, amounting to $24 million
in projects, resulting in over $3 million in annual cost savings.
For many years, our office has had a close working partnership with
the North Dakota Association of Physical Plant Administrators. They
represent all the major state facilities, including the buildings owned
by the state university system, and the group has now expanded to
include major school district facility managers and others. Through the
State Energy Program, we annually provide funds for training programs
implementing a variety of energy efficiency measures. Recent examples
include sessions on direct digital control systems and steam trap
maintenance and replacement programs.
We've done much to encourage reduced energy consumption and costs
in state and local buildings. As I mentioned, we have provided
technical and financial assistance for detailed energy analyses, and
for energy efficiency improvements. In recent years we have encouraged
and assisted state facility managers with two mechanisms to implement
efficiency improvements--a state ``bonding'' program and energy
performance contracting. Many of these activities are supported by the
State Energy Program.
The state facility energy improvement program has provided bond
funds for larger-scale efficiency improvements, based on detailed
energy audits that indicate favorable returns on investment. The
savings on utility costs are then used to pay back the state bonds. A
current example is a $2.3 million project at the University of North
Dakota in Grand Forks, which includes upgrades to seventy-five
buildings. This project is expected to result in energy cost savings of
over $330,000 per year.
A second mechanism for efficiency projects at state facilities is
performance contracting. This allows a third-party vendor to work with
the institution to identify potential energy-saving improvements and to
arrange for the financing for those improvements. Under this program,
the vendor guarantees that the facility will realize sufficient energy
cost and operational savings to pay back the financing within a
prescribed period; usually within ten to fifteen years. Our office
includes a registered and certified energy engineer who works closely
with state facility managers to review proposals and contractual
documents to make sure projected utility savings are realistic and
achievable.
Finally, we are more and more involved in the initial planning and
design stages of proposed new facilities. Our agency is housed in a
very modern and energy efficient office building called the Century
Center, which is owned by the state's Workers Safety and Insurance
agency. Our engineer worked with the building design team to suggest a
geothermal (or ground-source) heating and cooling system and a number
of other efficiency features. The Century Center, along with a nearby
Job Service North Dakota office building, received the Energy Star
designation from the Department of Energy/Environmental Protection
Agency program. We are also working with the Bank of North Dakota (our
state-owned bank) on their new building, currently under construction,
to hopefully also achieve the Energy Star designation.
While we are proud of our energy efficiency efforts in North
Dakota, we are a small agency with limited resources and know that we
have only scratched the surface of what could be accomplished. I'm very
impressed with the innovative programs and tremendous successes that my
colleagues in other state energy offices have achieved. On behalf of
our agency and other state energy offices, I thank you, Senator Dorgan,
and other committee members for your continuing support of the
Weatherization Assistance Program and State Energy Program. In our
case, and I'm sure with most other states, these two programs have
served as the foundation of our energy efficiency efforts. We very much
appreciate it.
STATE ENERGY EFFORTS/FEDERAL APPROPRIATIONS
I also want to highlight the efficiency policy positions of our
national organization, the National Association of State Energy
Officials (NASEO).
On behalf of NASEO, I want to point out that the state energy
offices have been working hard to implement energy efficiency programs
throughout the United States. The state energy offices directly
implement projects, work to develop projects and programs with the
private sector and work with all levels of government to develop
innovative solutions to our energy problems. State energy offices
advise our Governors on energy policy and work cooperatively with the
state public service commissions. We look forward to working with
Andrew Karsner, the relatively new DOE Assistant Secretary for Energy
Efficiency and Renewable Energy, as he attempts to refocus DOE efforts
in creative ways.
The Energy Policy Act of 2005 (EPACT) is a good starting point for
a number of positive programs. EPACT reauthorized the State Energy
Program (SEP)(Section 123), the Weatherization Assistance Program
(Section 122) and the Low-Income Home Energy Assistance Program
(LIHEAP)(Section 121). The authorization levels for FY'07 in EPACT for
these critical programs are: 1) SEP--$100 million; 2) Weatherization--
$600 million; and 3) LIHEAP--$5.1 billion. While we do not know what
the ultimate appropriations will be for FY'07, the FY'08 Administration
request is: 1) SEP--$45.5 million, of which $10.5 million would be for
a new competitive program and $3 5 million for the base grant, which is
well below the $49.5 million in the FY'07 budget request for the base
program; 2) Weatherization--$144 million, which is a cut of almost $100
million from the FY'06 appropriated levels; and 3) LIHEAP--$1.782
billion, of which $1.5 billion would be the regular grant and $278
million would be contingency funds, down from $2.161 billion in FY'07,
plus $1 billion in emergency funds last year. These three programs are
the existing core of the federal-state relationship in the energy area.
In addition to the base Weatherization funds, approximately 10% of
the LIHEAP funds are transferred to Weatherization activities on a
yearly basis. We also ask this Subcommittee to reauthorize these
programs this year.
We urge the Congress to encourage the Administration to support
federal funding in FY'07 of at least $49.5 million for SEP, $242
million for Weatherization and $2.161 billion for LIHEAP, with
supplemental funds equal to the $1 billion level provided last year.
For FY'08, we would encourage Congress to move towards the authorized
levels contained in EPACT, but, at a minimum, to provide $80 million
for SEP, $300 million for Weatherization and the $3.1 billion funding
level for LIHEAP.
Numerous studies of the effectiveness of state energy programs have
been prepared over the past few years by individual states that show
the successes, enormous leverage of private and other public resources
and dramatic delivered energy savings. In addition, a study prepared by
Oak Ridge National Laboratory a few years ago (in an era of lower
energy prices) showed that for every federal dollar invested in the
State Energy Program over $7 in energy savings was realized and over
$10 in leverage of other resources was achieved. This study did not
even account for the critical efforts in energy emergency preparedness
or promotion of alternative fuels and alternative-fueled vehicles.
We are also very concerned with under-funding of DOE's industrial
energy efficiency program. This program received well over $100 million
five years ago and has dropped to $55 million in FY'06, with a further
proposed decrease to $46 million in FY'08. The industrial sector
requires more funding.
In addition to these core programs, a number of other critical
programs were authorized in EPACT, that have not been funded or have
not been sufficiently funded:
1) Energy Efficient Appliance Rebate Program (Section 124)--
$50 million authorization. This is a new program that was
originally proposed by Senator Schumer based upon a successful
model implemented by the New York State Energy Research and
Development Authority (NYSERDA), which helped transform the
market by getting individuals to purchase energy efficient
products. No funds were requested in the FY'08 Budget.
2) Energy Star Program (Section 131)--This joint EPA/DOE
program is an essential component to many state energy
efficiency activities. The Energy Star label is ubiquitous now
and we utilize it to encourage homeowners and businesses to
purchase energy efficient products. Large retailers are also
helping to encourage the use of these products. The EPA program
was proposed for a cut to $43.5 million in FY'08 from $50
million in FY'06. We would recommend that this program be
doubled. NASEO members have developed a number of partnerships
with EPA, and they have delivered real, measurable savings to
help American consumers. The DOE Energy Star Program received a
$1 million increase from the FY'07 request to $6.776 million.
This is insufficient.
3) State Building Energy Efficiency Codes Incentives (Section
128)--$34 million authorization. The Administration requested
$3.75 million in FY'08. The FY'06 funding was $5.575 million.
This program matches state and local efforts to both upgrade
the energy efficiency of building codes and train local code
officials to enforce such codes. This is a key component of any
major energy efficiency effort in buildings in this country.
Without training of local code officials, builders and
architects, a higher building energy code is inadequate.
4) Energy Efficiency Pilot Program (Section 140)--$5 million
authorization. This new program would help encourage best
practices in states. The state energy officials are committed
to working with their brethren in the other states to implement
programs that are road-tested in other jurisdictions. No
funding was requested in FY'08 for this program.
5) Energy Efficient Public Buildings Program (Section 125)--
$30 million authorization. This new initiative was based upon
legislation introduced by Representative Mark Udall (D-CO) and
former Representative Sherwood Boehiert (D-NY), focused on
upgrades to school buildings. In negotiations on a bi-partisan
basis, this program was expanded to all public buildings. No
funds have been requested in FY'08 for this program. Energy
efficiency in public buildings could be greatly improved
throughout the United States. This program would leverage
significant state and local resources, and would leave more
funds for high priority activities such as education and health
care.
6) Appliance Energy Efficiency Standards (Sections 135 and
136)--NASEO supports funding for an accelerated and expanded
appliance standards program. This is an extremely successful
program which requires increased attention by DOE.
In the tax area, we strongly urge Congress to go beyond last year's
tax extenders bill and to extend the energy efficient commercial
buildings deduction, credit for construction of new energy efficient
homes, credit for certain non-business energy property, credit for
energy efficient appliances and the credit for residential energy
efficient property. The proposed tax benefits for combined heat and
power should be included in any new energy tax provision. We support
extension of the production tax credit for wind and other technologies,
as well as the solar investment tax credit, credit for qualified fuel
cells and microturbines and the Clean Renewable Energy Bonds.
In the alternative fuels and transportation area, we support the
recommendations of the Governors Ethanol Coalition and the 25x25 group,
as well as efforts to encourage the further expansion of hybrid
electric and plug-in hybrid vehicles. The proposals advanced during the
Senate Energy and Natural Resources Committee's recent hearing to
encourage the use of biofuels, ethanol with existing feed stocks and
the expanded use of cellulosic ethanol are all strongly supported by
the state energy offices.
Title IX of the 2002 Farm Bill is a good starting point for more
aggressive action in the energy area for the agriculture sector.
Section 9006, providing for energy efficiency and renewable energy for
farmers, ranchers and rural small businesses, has been especially
effective, though under-funded. Mister Chairman, your proposals,
Senator Harkin's ``REAP'' legislation and the President's recent
suggestions are a good starting point for this expansion.
A few issues and trends are worth bringing to the Subcommittee's
attention as you deliberate on new energy legislation and responses to
environmental challenges. First of all, we are seeing the states
working together on a regional basis to a far greater extent than
previously. The resolution and reports prepared by the Western
Governors Association in the summer of 2006, known as the Clean and
Diversified Energy Initiative, is a balanced approach to addressing our
energy needs. The northeast and mid-Atlantic states are moving forward
with their Regional Greenhouse Gas Initiative (RGGI). California and
the west coast states are joining together on comparable programs. New
York and California have established a number of innovative energy
efficiency and renewable energy programs. The state energy offices are
working closely with all these efforts.
A wide variety of states have instituted new statewide energy plans
and programs. A number of jurisdictions are pushing for and
implementing renewable portfolio standards. The Governor of Oregon has
just announced a planned 25% RPS by 2025, expanded use of biodiesel and
ethanol, as well as certain climate change proposals. Georgia issued a
new energy plan in late 2006. The Governor of Connecticut has just
announced a new, expanded energy agency. The Governor of Wisconsin has
also called for a new energy agency. A number of states are expanding
public benefit programs and energy efficiency and renewable energy
programs.
There is broad national recognition among energy professionals that
energy security is an ever-increasing problem. Our state energy offices
are responsible for energy emergency preparedness, but we recognize
that emergency preparedness and response is not sufficient. One of the
critical issues that we are facing is the increasing volatility of
energy supplies. This impacts the electric utility sector, consumers of
all types and especially the agricultural and industrial/manufacturing
sectors of the economy. Our energy efficiency programs must refocus on
reducing peak demands for natural gas in order to moderate this
volatility. The National Action Plan for Energy Efficiency, developed
with state energy office input, through a joint EPA/DOE task force, is
a very positive step. We are working in the individual states and on a
regional basis to implement many of the recommendations of that effort.
It builds on successful ``best practices'' that we have initiated in
each state.
In addition, as you consider both energy policy and funding
decisions, we urge you to consider the key role for both energy R&D and
deployment programs. R&D, without the use of the technology developed,
is a waste.
In addition to our efforts in North Dakota, there are a myriad of
examples of successful state energy programs throughout the United
States. I will be supplying a state-by-state set of examples for the
record.
Some selected examples:
Alabama.--The state energy office has implemented projects in
energy efficient buildings (saving $5 million per year), rural water
leak prevention programs (savings of $1.7 million per year in energy
costs), biomass energy projects (36 projects saving over $10 million
annually so far) and a recycling program (saving $5 million in energy
costs, and recycling 9 million gallons of oil and diverting 1,000 tons
of materials from landfills).
Florida.--The energy office has focused on energy efficiency in
schools. The state is also promoting solar technology, ethanol,
biodiesel and solar water heating for low-income homeowners.
Hawaii.--The Governor proposed, and the legislature enacted, four
new major energy bills in 2006. This effort will expand energy
efficiency in buildings (including promotion of Energy Star products),
expanded biofuels, a 20% RPS by 2020, expansion of energy performance
contracting, and promulgation of a tropical energy efficiency building
code.
Idaho.--The state has been focusing on getting homeowners to
purchase and construct energy efficient manufactured and modular homes
(with a certification program) and new Energy Star high performance
site-built homes. The energy office has also funded alternative energy
demonstration projects, promotion of geothermal projects and a variety
of agricultural energy programs.
Kentucky.--This state has been in the forefront of promoting Energy
Star products. The energy office is focusing on schools and energy
service performance contracts, as well as biofuels.
Louisiana.--The state has been focused on Hurricane Katrina
response and reconstruction. The energy building code was upgraded last
year. The state is educating consumers and building construction
professionals in energy efficient design.
Montana.--The state has focused on improving statewide building
codes and training of local code officials and builders to actually
implement improvements. In addition, the state has issued bonds to
improve energy efficiency in buildings, with 67 projects completed and
21 additional projects in the pipeline. The state is also addressing
the residential sector with a state tax credit of $500 for new and
existing homes. In 2005 alone, $5.6 million was provided to homeowners
for this energy efficiency credit with homes built to Energy Star
standards.
New Jersey.--The Clean Energy Program has expended $124 million for
a variety of energy efficiency and renewable energy projects. In
addition to project implementation, the state has developed a new
wireless energy management demonstration project, a bioheat rebate
program and an alternative fuel vehicle rebate program.
New Mexico.--Expanded programs for energy efficiency utilizing
advanced motors, appliances and new energy codes has been a major new
effort in New Mexico. In the renewable energy area, there has been an
expanded focus on clean fuels, geothermal resources, wind resources and
new incentives for photovoltaic systems and solar water heating.
North Carolina.--In the industrial energy efficiency area, the
state has promoted energy savings improvements that have led to more
than $170 million in projects. In the residential energy efficiency
area, the state is implementing a ``Healthy Built Homes'' program,
focusing on furnaces and energy efficient heat pumps. A utility savings
program for state facilities has saved $30 million since 2002. In
addition the state energy office manages an energy service performance
contracting program that has $40 million in projects underway.
Oregon.--In Oregon, as noted above, the Governor has been promoting
a range of new energy efficiency and renewable energy initiatives. The
35% business energy tax credit for energy efficiency, renewable energy,
recycling and transportation programs, the residential energy tax
credit and the statewide energy loan program have produced $2.1 billion
in energy efficiency project investment and have saved 53.1 trillion
Btu's through 2005. Significant initiatives to promote energy
efficiency in schools and for manufactured homes are key.
South Carolina.--The schools and government buildings energy
efficiency program has provided 29 loans, generating $30 million in
energy savings over the lifetime of the projects. The state has also
certified energy efficient manufactured homes. A unique truck stop
electrification program has been implemented in conjunction with
Georgia and North Carolina. This program has displaced over 220,000
gallons of diesel fuel each year. The energy office has also focused on
developing landfill gas projects.
South Dakota.--The state implemented an energy efficiency grant
program requiring a 50% match. The recent focus has been on heating and
controls upgrades, lighting and energy recovery systems. The energy
office also operates an energy loan program, which recently developed a
$3.3 million project on steam tunnel improvements, as well as
construction of biomass and wood-chip boilers
Tennessee.--The state's small business energy efficiency loan
program has provided $10 million for a variety of energy projects. The
local government energy efficiency loan program has provided over $17
million in loans, producing savings of over $4 million.
Washington.--The state has been focusing on improving building
energy efficiency techniques. The state has focused on net metering,
tax credits and biofuels development. The state energy office has been
working with the Northwest Energy Efficiency Alliance to implement $20
million per year for market transformation efforts and resource
acquisition programs for energy efficiency.
CONCLUSION
Thank you for the opportunity to testify. I would be happy to
answer any questions.
Senator Dorgan. Mr. Christianson, thank you very much for
your testimony. Next we will hear from RK Stewart, who's
president of the American Institute of Architects here in
Washington, DC. Mr. Stewart, you may proceed.
STATEMENT OF RK STEWART, PRESIDENT, AMERICAN INSTITUTE OF
ARCHITECTS
Mr. Stewart. Mr. Chairman, members of the subcommittee,
good afternoon.
I am RK Stewart, the president of the American Institute of
Architects. On behalf of our 80,000 members and the 280,000
Americans who work for architecture firms nationwide, I'd like
to thank you for the opportunity to appear today. I'd like to
share the thoughts of our Nation's architects on energy
consumption and how it relates to the most overlooked sector in
the greenhouse gas debate: buildings, the buildings in which
our people live, work and play. I've submitted written
testimony to the subcommittee and would like to stress those
points the AIA feels is most important.
The AIA feels strongly that now is the time to act to
address climate change by tackling energy use in buildings. Our
Nation needs to begin making significant reductions in the
amount of fossil-fuel-generated energy our buildings consume.
According to the Department of Energy, buildings and their
construction are responsible for nearly half of all greenhouse
gas emissions in the U.S. every year. The building sector--as
the Senator noted--alone, accounts for 39 percent of U.S. total
energy consumption, more than either the transportation or
industrial sectors. Buildings consume 71 percent of U.S.
electricity production and buildings in the United States
account for 9.8 percent of carbon dioxide emissions worldwide.
Put another way, U.S. buildings account for nearly the same
amount of carbon emissions as the economies of Japan, France,
and the United Kingdom combined. If we want to be serious about
energy use reductions, buildings must become a significant part
of the discussion. The AIA believes that architects must
advocate for this sustainable use of our earth's resources. We
have adopted an official position establishing energy reduction
targets for all buildings. Architects across the country have
embraced this position and are expanding the use of design
practices that enhance design quality as they increase the
environmental performance of buildings.
To truly revolutionize the way our Nation designs and uses
buildings, a combination of regulations and incentives must be
used to greatly reduce fossil fuel energy and improve energy
efficiency nationwide. The AIA strongly urges Congress to take
the lead in the fight against global warming by establishing
new energy consumption standards for Federal buildings. As
Congress has jurisdiction over all Federal buildings, Congress
can literally show the way for the private sector to attain
energy consumption reductions by the built environment. The AIA
recommends that Federal agencies be required to immediately
ensure that new buildings and buildings undergoing major
renovations consume no more than half the fossil fuel energy
that a similar Federal building consumed in 2003. Beginning in
2010, agencies should be required to meet a declining cap on
energy consumption such that they meet minimum energy
reductions when compared to the 2003 baseline. We propose that
by 2010 new and significantly renovated Federal buildings be
required to reduce fossil-fuel-generated energy by 60 percent.
By 2015, the cap should be lowered to a 70 percent reduction
continuing until 2030 when we should achieve a 100 percent
reduction in fossil-fuel-generated energy in all Federal
buildings. Setting declining caps on energy usage is not a new
idea. In the past, Congress has adopted similar legislation,
and recently Governor Bill Richardson of New Mexico established
energy reduction targets in his State. These are important
first steps.
Energy reduction requirements have shown a record of
success, as referenced in my written testimony. It demonstrates
that the AIA-recommended energy reduction targets are readily
achievable. In my experience, the primary concern at your
compliance about building green, is first: cost. It is true
that some energy-efficient building systems may cost slightly
more than their traditional counterparts. However, the
buildings, once in operation, the saving and expenditures alone
often far outweigh the initial cost of installing green
systems. There is increasing evidence confirming this, and the
AIA is currently working with economists to research the
economic benefits of energy efficiency in Federal buildings.
The study will analyze estimated energy in dollar savings that
the Federal Government will realize by implementing our energy
reduction goals. We expect to complete this study by this
summer and would be happy to submit it for the record.
Polls show that the American public believes the time is
now to reduce energy usage and reduce the risks of climate
change. They increasingly believe it is important to the
national interest and the planet to reduce our reliance on
fossil-fuel-generated energy and move toward a sustainable
future. Reducing energy use in Federal buildings would be a
major step in redesigning our future. We encourage Congress to
consider our proposal, and I welcome your questions. Thank you,
Mr. Chairman and members of the subcommittee.
[The prepared statement of Mr. Stewart follows:]
Prepared Statement of RK Stewart, President, American Institute of
Architects (AIA)
INTRODUCTION
Mr. Chairman, Members of the Subcommittee--good afternoon. I am RK
Stewart, the President of the American Institute of Architects.
On behalf of our 80,000 members and the 281,000 Americans who work
for architecture firms nationwide, I would like to thank you for the
opportunity to appear today to share some of our nation's architects'
thoughts on energy consumption, energy efficiency and how these
important topics relate to the most overlooked sector in the greenhouse
gas debate, buildings: the buildings in which our people live, work,
and play.
According to the Department of Energy's Energy Information
Administration, buildings and their construction are responsible for
nearly half of all greenhouse gas emissions produced in the U.S. every
year. DOE's recently released Building Energy Data Book reveals that
the building sector accounts for 39 percent of total U.S. energy
consumption, more than both the transportation and industry sectors.\1\
The same study found that buildings are responsible for 71 percent of
U.S. electricity consumption and that buildings in the United States
alone account for 9.8 percent of carbon dioxide emissions worldwide.\2\
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\1\ http://buildingsdatabook.eere.energy.gov/docs/1.1.3.pdf.
\2\ http://buildingsdatabook.eere.energy.gov/docs/3.1.1.pdf.
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In fact, according to the Department of Energy, U.S. buildings
account for nearly the same amount of carbon emissions as all sectors
of the economies of Japan, France, and the United Kingdom combined.\3\
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\3\ http://buildingsdatabook.eere.energy.gov/docs/3.1.1.pdf.
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Therefore, if we in the United States want to be serious about
energy efficiency and energy reductions, buildings must become a
significant part of the discussion.*
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* Graphic has been retained in committee files.
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The data shows that the building sector is only going to become
more critical to the discussion. Annual U.S. energy consumption is
projected to increase by 32 percent over the next twenty five years.\4\
The AIA believes strongly that now is the time to act to reverse this
course and start making significant reductions in the amount of fossil-
fuel generated energy our nation consumes through its buildings.
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\4\ http://www.eia.doe.gov/oiaf/ieo/pdf/ieoreftab_l.pdf.
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Over the next 30 years, the character of the built environment will
change dramatically. Currently, U.S. building stock sits at 300 billion
square feet. Experts predict that between now and 2035, 52 billion
square feet will be demolished, 150 billion square feet will be
remodeled, and another 150 billion square feet will be newly
constructed./5/ Because buildings are such a major producer of
greenhouse gases, the AIA believes that if Congress and our nation want
to reduce greenhouse gas emissions, addressing energy consumption in
the next generation of buildings is a vital endeavor. We believe that
the federal government can and must take the lead to change the way our
buildings use energy.
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\5\ http://www.architecture2030.com.
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SHOWING THE PROMISE OF GREEN BUILDING
The Genzyme Center, Cambridge, MA
The design team, the developer, the client and the construction
team worked together to create a 21st Century center for biotechnology
that employs technology and design to reduce energy costs. The building
uses steam from an adjacent power plant to run its heating and cooling
systems, a ``smart'' ventilation system that shuts off when it senses
that doors and windows are open, and solar panels on the roof, which
help to reduce estimated energy costs by almost half. Occupancy sensing
dimmers and natural daylighting expect to reduce lighting energy by 45
percent. These and other energy saving strategies earned this building
a LEED Platinum rating, the highest LEED rating available.*
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* Graphic has been retained in committee files.
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To reduce energy consumption in the building sector, the AIA
believes that architects must advocate for the sustainable use of our
earth's resources through their work for clients. To support this
principle, in December 2005, the AIA Board of Directors approved an
official Institute position stating that all new buildings and major
renovations to existing buildings be designed to meet an immediate 50
percent reduction in fossil fuel-generated energy (compared to a 2003
baseline) and that at five year intervals, that reduction target be
increased by at least 10 percent until new and renovated buildings
achieve carbon neutrality in 2030. Architects across the country have
embraced this principle and are currently utilizing design practices
that integrate built and natural systems that enhance both the design
quality and environmental performance of the built environment. But in
order to truly revolutionize the way our nation designs buildings, the
public sector, especially the federal government, must also play a
role. The federal government alone has jurisdiction over a significant
portion of all buildings in the U.S.\6\ Through a combination of both
regulation and incentives, we can achieve the goals of greatly reducing
fossil fuel generated energy and improving energy efficiency
nationwide.
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\6\ http://www.eia.doe.gov/emeulcbecs/cbecs2003/introduction.html.
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It is important for the federal government to show that energy
efficient buildings are both realistic and cost-efficient. Requiring
significant energy reduction targets in new and renovated federal
buildings will demonstrate to the private sector that the federal
government is leading by example. It would help spur the development of
new materials, construction techniques, and technologies to make
buildings more energy efficient. And it will help show that significant
energy reductions are both practical and cost-effective.
The AIA strongly urges Congress to take the lead in the fight
against global warming by establishing new energy consumption standards
for federal buildings. As Congress has jurisdiction over all federal
buildings, Congress can literally show the way for the private sector
to attain energy consumption reductions by the built environment.
FEDERAL BUILDING ENERGY EFFICIENCY
The AIA proposes that federal agencies be required to ensure that
new buildings and buildings undergoing major renovations today consume
no more than half the fossil fuel generated energy that a similar
federal building consumed in 2003.
SHOWING THE PROMISE OF GREEN BUILDING
Alberici Corporate Headquarters, Overland, MO
One of St. Louis' oldest construction companies converted this
manufacturing plant into a productive and environmentally friendly
office space. The designers used a ``saw-tooth'' wall pattern to re-
orient the building's facade from southwest to south, reducing heating
levels, and developed an open plan that provides natural light to 75
percent of building occupants. A 65 kilowatt wind turbine provides 20
percent of the building's energy needs, while an underfloor air
distribution system focuses heating and cooling at the occupant's
level. The combination of design and technology allows the building to
exceed ASHRAE 90.1-1999 minimum energy efficiency requirements by 60%
and won it an AIA Committee on the Environment 2006 Top Ten award.
Beginning in 2010, the agencies should then follow a declining cap
on energy consumption such that they meet a minimum energy performance
reduction when compared to the 2003 baseline. We propose that by 2010,
new and significantly renovated federal buildings be required to reduce
fossil fuel generated energy by 60 percent. By 2015, the cap would
lower to a 70 percent reduction, continuing until 2030 when we would
achieve a 100 percent reduction in fossil fuel generated energy in all
new federal buildings.
Setting declining caps on energy usage is not a new idea. In 1999,
President Clinton issued an executive order requiring energy
consumption reductions in all federal buildings; The Energy Policy Act
of 2005 extended and deepened these reduction goals, and last year,
Governor Bill Richardson of New Mexico signed an executive order
calling for a 50 percent reduction in energy consumption for new and
renovated public buildings in the state. And just last month, President
Bush issued an executive order requiring federal agencies to reduce
energy use by almost a third over a 2003 baseline by 2015. These are
important first steps, but we need an aggressive commitment to long
term energy reductions for new buildings and major renovations, well
into the future.
Energy reduction requirements like these have shown a record of
success, as demonstrated by DOE's recently submitted annual report to
Congress on Energy Management and Conservation programs. DOE's report
found that in 2005, federal agencies responding to President Clinton's
1999 Executive Order had reduced their consumption levels by 29.6
percent, narrowly missing the goal established by President Clinton's
Executive Order by only 0.4 percent [see graph below].* This makes it
clear that when they are required to do so, federal agencies have the
ability to meet reduced energy consumption targets.
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* Graphic has been retained in committee files.
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We encourage Congress to build upon these sound policy steps by
taking an even more aggressive stance. A number of Senators have
recently introduced legislation that sets new energy reduction goals in
existing federal buildings. In most cases, these proposals would
require federal agencies to retrofit their facilities to meet the
energy savings targets. While the AIA is happy to see Congress address
the issue, we recommend that instead of mandating retrofits, Congress
should also focus energy reduction goals on new construction and
buildings undergoing significant renovations as it is easier and more
cost-effective to address energy usage issues beginning with the design
stage of the building process.
Requiring all new and significantly renovated federal buildings to
consume significantly less fossil-fuel generated energy is a bold idea,
but one whose time has come. It would show the world and the private
sector that the United States government believes that climate change
is real and that aggressive action is needed in order to reverse its
course. It demonstrates that the AIA-recommended energy reduction
targets are achievable in new and significantly renovated buildings,
often through little or no additional life cycle costs.
SHOWING THE PROMISE OF GREEN BUILDING
Rinker Hall, University of Florida, Gainesville, FL
A LEED Gold building, Rinker Hall's designers faced a challenge: in
Florida's humid environment, metal and glass best release heat. But the
University's prevailing architectural style is brick and masonry, which
traps heat. So the architects designed a metal and glass structure with
a free-standing masonry shade wall on the west and south facades, thus
making it fit in and reduce heating loads. The building is anticipated
to use 57 percent less energy than a building meeting ASHRAE 90.1-1999,
and is expected to reduce annual utility bills by more than $20,000.
Architects across the country are designing high performance or
``Green Buildings'' that are environmentally responsible, healthy
places to work, and economically practical. We are doing this through
the use of better planning, technological tools and smarter material
selection that incorporate natural heating, cooling, ventilation, and
day-lighting strategies. The AIA's Committee on the Environment (COTE)
annually recognizes such accomplishments in its Top 10 Awards for
Sustainable Design. Federal buildings can and should be built in ways
that reduce energy consumption and decrease the amount of greenhouse
gases they produce, as demonstrated through COTE's Top 10 Awards.
THE COST OF BUILDING GREEN
In my professional experience, the primary concern I hear from
clients about building ``green'' is cost. It is true that some energy
efficient building systems may cost slightly more than their
traditional counterparts. However once the building is in operation,
the savings in energy expenditures alone often far outweigh the initial
costs of installing ``green'' systems. While there have been some
studies to date that show this, the AIA is currently working with a
team of economists to research the economic benefits of energy
efficient federal buildings. This study will analyze the estimated
energy and dollar savings that federal government would realize by
implementing our energy reduction goals for federal buildings over the
lifespan of the building. We expect to have the study complete by this
summer and we would be happy to submit it for the record. Other
sources, most importantly the noted cost consultant Davis Langdon,
argue that the cost of sustainability is statistically insignificant to
a project's total cost.\7\
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\7\ Matthissen, Lisa and Morris, Peter. ``Costing Green: A
Comprehensive Cost Database and Budgeting Methodology''. June, 2004;
Davis Landon.
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The economic value of energy reductions from federal buildings can
be seen by looking at previous energy reduction mandates in federal
buildings. Because of federal legislation and President Clinton's 1999
Executive Order, federal agencies consumed nearly 30 percent less
energy per square foot in 2005 compared to 1985. As a result of this
improved energy efficiency, the federal government saved approximately
$2.2 billion on energy costs in standard federal buildings in 2005 when
compared to 1985. While there are clearly other factors aside from
federal energy management activities that go into this reduced
spending, improved energy efficiency and energy reduction clearly
played a large role.
AMERICA IS READY
Finally, the American public believes the time is now to reduce
energy usage and reduce the impacts of climate change. The Tarrance
Group and Lake Research Partners recently conducted a nationwide poll
of voters and found that 74 percent of those polled agreed that ``the
government should take the lead in promoting real estate development
that conserves our natural resources.'' In addition, 71 percent of
voters agreed that ``the government should immediately put into effect
new energy policies that drastically reduce greenhouse gas emissions.''
The American public supports conserving our precious resources, and
believes that it is in the best interests of our nation and the world
to reduce our reliance on fossil fuel produced energy and move towards
a sustainable future. Reducing energy use in federal buildings would be
a major step towards that goal.
We encourage Congress to consider our proposal, and I welcome any
questions from the subcommittee. Thank you Mr. Chairman and members of
the subcommittee.
Senator Dorgan. Mr. Stewart, thank you very much for your
testimony. Next, we'll hear from Mr. Charles Zimmerman, vice
president, Prototype and New Format Development for the Wal-
Mart Stores at Bentonville, Arkansas. Mr. Zimmerman, thank you
for being with us.
STATEMENT OF CHARLES R. ZIMMERMAN, P.E., VICE PRESIDENT,
PROTOTYPE AND NEW FORMAT DEVELOPMENT, WAL-MART STORES, INC.
Mr. Zimmerman. Chairman Dorgan, Chairman Bingaman and
Ranking Member Murkowski, my name is Charles Zimmerman and I'm
vice president of Prototype and New Format Development for Wal-
Mart Stores, Inc.
In my current role, I'm responsible for the architectural
and engineering systems design for all of our retail
facilities. On behalf of Wal-Mart and our 1.8 million
associates around the world, I'd like to thank the subcommittee
for its work on this important issue and for holding this
hearing today. Wal-Mart appreciates the opportunity to
participate in this critical discussion.
Our company holds a unique position in the world of energy.
While there are no firm statistics, it is widely understood
that Wal-Mart is the largest private purchaser of electricity
in the world. In fact the only entity thought to purchase more
electricity than Wal-Mart is the U.S. Government. Since energy
is also Wal-Mart's second largest operating expense, it should
be no surprise that we have been focused on energy efficiency
practically since the day we were founded. Fortunately, our
global presence gives us a great opportunity for energy
comparisons. As Wal-Mart has continued to expand into other
countries, our primary mode of expansion has been to acquire
existing stores in those countries. Therefore it is interesting
to note that the stores that we have built in the United States
are actually more efficient on an energy-per-square-foot basis
then those we've acquired in any other country. This is even
true for stores in countries with much more stringent energy
regulations and much higher utility rates then the United
States, such as the U.K. and Japan.
Nearly one-third of Wal-Mart's energy is consumed in the
form of lighting; therefore, we have developed over the last
decade what we feel is one of the most efficient lighting
systems in the world. In fact, the installed lighting mode in
one of our newer stores is more than 40 percent less than the
baseline requirements established in the Energy Policy Act of
2005. This truly innovative system results in the fact that
during the day our sales floor lighting in stores built in the
last decade is either off or at the very least significantly
dimmed. This is possible thanks to a sophisticated daylight
harvesting system comprised of hundreds of skylights per store
that are connected to sensors and state-of-the-art control
technology. This allows our sales floor lighting system to
continually modulate the amount of energy needed based on the
natural light available. This system is so dynamic that it even
gradually ramps the lighting levels up and down as clouds pass
over the store. In our non-sales floor areas, such as offices,
breakrooms and restrooms, lighting is controlled by occupancy
sensors that turn off the lights when no one is in the space.
Even our freezer-case lighting has now evolved into an
amazing display of advanced technology, as it is now comprised
of motion activated LEDs or Light Emitting Diodes. These lights
turn themselves on as the customer approaches and turn
themselves off as the customer leaves. The result is a building
where virtually all the lighting is dynamic and only on to the
degree the conditions warrant--and this is just our lighting
system.
As efficient and forward thinking as our energy practices
already are, we have very aggressive goals in our
sustainability and energy efficiency efforts for the future. In
October 2005, we announced plans to reduce the energy
consumption of our already energy-efficient existing buildings
by another 20 percent over the next 7 years. We also announced
plans to develop a new store prototype that will increase
energy efficiency 25 to 30 percent over the next 4 years. So
how are we doing in achieving these goals? With regards to our
existing stores, we are in the midst of efforts this year to
retrofit over 400 of our refrigeration systems and 400 of our
HVAC systems with technologies that will reduce our energy
consumption by 8 percent and 6 percent, respectively. Both of
these initiatives have paybacks of somewhere between 18 and 24
months. Additionally, just last Thursday we approved a proposal
to retrofit 500 of our existing stores with our new motion-
activated LED lighting technology. Currently we have over a
dozen similar retrofit initiatives that are in some phase of
development or implementation, all averaging approximately 2-
to 3-year paybacks.
With regards to our new store program, we opened the first
of our newly developed higher efficiency prototypes 3 weeks ago
in Kansas City, Missouri. These stores are predicted to be 20
percent more efficient than our earlier prototypes. By this
time next year, we plan to be opening stores that are 27
percent more efficient, thus reaching our new store prototype
goal mentioned earlier.
As proud as we are of these accomplishments and
innovations, we are more proud to be sharing what we are
learning with everyone, including our competitors. We have
recently shared the details on our energy initiatives and their
related paybacks with the Pentagon, the Defense Science Board,
the Office of Management and Budget, and even with our retail
competitors, Office Depot and Best Buy. We've also taken the
likes of Food Lion, Target, Publix, Costco and many, many other
of our competitors on tours of our recent stores that featured
some of our newer energy-efficient technologies.
The best thing about the information we're sharing is that
it is not theory. It is proven--real initiatives with proven
real paybacks. I'm often told by others that until there are
new technologies, or until there is additional legislation,
energy efficiency will never achieve mainstream attractiveness.
Believe me, the technology exists. We're proof of that, and
while Wal-Mart is not waiting for legislation to cause us to
act proactively in the area of energy efficiency, we would
encourage Congress to continue to look at new incentives that
would help others to act proactively as well.
In conclusion, I'm very proud to work for a company that is
committed to invest to up to $500 million per year to move
toward our goal of eventually being supplied by 100 percent
renewable energy, but I'm even more proud that they encourage
me to proactively share our innovations with the world. We at
Wal-Mart applaud Congress on its efforts to communicate the
necessity and the benefits of energy efficiency.
Thank you for your time, and allowing me to speak on behalf
of Wal-Mart on this very important topic. We look forward to
working with you to effectively and constructively address
these issues. Thank you.
[The prepared statement of Mr. Zimmerman follows:]
Prepared Statement of Charles R. Zimmerman, P.E., Vice President,
Prototype and New Format Development, Wal-Mart Stores, Inc.
Chairman Dorgan, Ranking Member Murkowski and distinguished Members
of the Committee, Wal-Mart Stores, Inc., thanks the Subcommittee for
its work on this important issue and for holding this hearing today.
Wal-Mart appreciates the opportunity to participate in this critical
discussion.
BACKGROUND
Wal-Mart is based in Bentonville, Arkansas. Our company employs
approximately 1.3 million Associates from all 50 states and
approximately 1.8 million Associates worldwide. Each week over 176
million customers worldwide choose to shop at Wal-Mart, which we feel
reflects the success of our dedication to providing Every Day Low
Prices to our customers. Wal-Mart does not just operate stores, clubs,
and distribution centers in communities; we take a proactive stance in
community involvement on a number of issues.
PURPOSE OF HEARING AND WAL-MART'S ROLE
The purpose of this hearing is to receive recommendations on
policies and programs to improve the energy efficiency of buildings and
to expand the role of electric gas utilities in energy efficiency
programs. Wal-Mart is eager to share its information and experiences.
WAL-MART'S POLICIES AND PROCEDURES
Wal-Mart is pleased to be a part of this process. As part of Wal-
Mart's industry-leading sustainability commitment, CEO Lee Scott has
set aggressive goals for Wal-Mart to significantly reduce our energy
consumption and greenhouse gas emissions. In pursuit of those goals we
intend to be the most energy efficient retailer in the world and we are
working hard to achieve this commitment.
While there are no firm statistics, it is widely understood that
Wal-Mart is the largest ``private'' purchaser of electricity in the
world. In fact, Wal-Mart is widely considered to be the second largest
purchaser in total energy, second only to the U.S. government. Energy
is also Wal-Mart's second largest operating expense. Therefore, it
should be no surprise that Wal-Mart has been focused on energy
efficiency practically since it was founded.
As Wal-Mart has continued to expand into other countries, our
primary mode of expansion has been to acquire existing stores in those
countries. The stores we have built in the U.S. are more efficient on
an ``energy per square foot basis'' than those we have acquired in any
other country. This is even true for stores in countries with much more
stringent energy regulation than current U.S. regulations and much
higher utility rate, such as the U.K. and Japan.
Nearly one-third of Wal-Mart's energy is consumed in the form of
lighting. Recognizing this as an opportunity for responsible business
practice, we have developed over the last decade, what we feel, is one
of the most efficient lighting systems in the world. Our installed
lighting load is more than 40% less than the baseline requirements
established in the Energy Policy Act of 2005.
During the day, sales floor lighting, in stores built in the last
decade, is off or significantly dimmed. This is possible thanks to a
sophisticated daylight harvesting system comprised of hundreds of
skylights per store that are connected to state of the art sensors and
control technology. This allows our sales floor lighting system to
continually modulate the amount of energy needed, based on the natural
light available. This system is so dynamic that it gradually ramps up
and down as clouds pass over the store. In our non-sales floor areas
such as offices, break rooms and restrooms, lighting is controlled by
occupancy sensors that turn off the lights when no one is in the space.
Beginning in January, even our freezer case lighting has evolved into
an amazing display of advanced technology when it became comprised of
``motion-activated LEDs''. The lights turn themselves on as a customer
approaches, and turn themselves off as the customer leaves. The result
is a 200,000 square-foot building where virtually all of the lighting
is dynamic and only ``on'' to the degree that conditions warrant.
From an HVAC and refrigeration standpoint, Wal-Mart has always
``reclaimed'' or ``recycled'' the waste heat from our refrigeration
equipment to generate our domestic hot water. We are beginning to take
this a step further in new stores, testing the concept of heating the
entire store with the ``waste heat'' generated by this equipment. Wal-
Mart views the ``waste heat'' as a source of energy and we are
expanding the use of this ``free'' energy source.
Wal-Mart recognizes the influence and implications of responsible
energy policy by a large retailer. We strive to continue to decrease
our footprint on the environment. As efficient and forward-thinking as
our energy policies already are, we have very aggressive goals in our
sustainability and energy efficiency efforts for the future.
In October of 2005, we announced plans to reduce energy consumption
in our existing energy-efficient buildings by 20% over the next 7
years. We also plan to develop a new store prototype that will increase
efficiency 25%--30% over the next 4 years.
We also plan to retrofit over 400 of our refrigeration systems and
HVAC systems this year with technologies that will reduce our energy
consumption by 8% and 6% respectively and have a payback of less than
two years. Additionally, a proposal is currently being reviewed to
retrofit hundreds of stores with new LED lighting technology to reduce
energy consumption by 3% and have a payback of 2 years. Wal-Mart plans
to continue using energy retrofit efforts to reduce energy consumption;
currently over a dozen similar initiatives are in some phase of
development or implementation.
In regards to new store prototypes, we opened the first of our
newly developed ``higher efficiency'' prototypes three weeks ago in
Kansas City, MO. These stores are predicted to be 20% more efficient
than our earlier prototypes. By this time next year we plan to have met
our goal and be opening stores that are 27% more efficient. Plans are
already in development for stores that approach and possibly exceed 50%
efficiency in certain climate zones.
As proud as we are of these accomplishments and innovations, we are
more proud to share what we are learning with everyone, even our
competitors.
Wal-Mart recently opened a new facility in Savannah, GA, which
included the first low-temperature CO2 secondary loop
refrigeration system ever installed in the United States. At the grand
opening, we conducted tours of the facility providing detailed
descriptions of the systems to Target, Food Lion, Publix, Costco, and
many others since.
We have recently shared these details on our initiatives and their
related paybacks at the Pentagon, Defense Science Board, Office of
Management and Budget and even with our retail competitors, Office
Depot and Best Buy. We will also be sharing this information on
February 14, 2007, at a Department of Energy sponsored event at the
National Building Museum here in Washington, DC, and again on February
15, 2007, at the National Academy of Sciences. Furthermore, the
following week we will also be sharing our story of energy efficiency
in Mexico City at a meeting of the Commission on Environmental
Cooperation. The information we are sharing is not theory; it is real
initiatives and real paybacks.
I am often told by others that there needs to be new technologies
or there is a need for new legislation before energy efficiency becomes
something with mainstream attractiveness. While Wal-Mart is not waiting
for legislation to act proactively in the area of energy efficiency, we
would encourage Congress to continue to look at new incentives that
will help others to act proactively like Wal-Mart.
I'm very proud to work for a company that has committed to invest
up to $500 million dollars per year in innovative, energy saving and
climate-friendly technologies, but I am even more proud they encourage
me to pro-actively share our innovations with the world.
CONCLUSION
Wal-Mart seeks excellence and responsibility in everything we do.
We constantly strive to improve our business processes and to enrich
the communities in which we are located. We at Wal-Mart applaud
Congress in its efforts to communicate the necessity and the benefits
of energy efficiency.
Thank you for your time in allowing me to speak on behalf of Wal-
Mart on this very important topic. We look forward to working with you
to effectively and constructively address these issues.
Senator Dorgan. Mr. Zimmerman, thank you very much for your
testimony. Next we will hear from Jack Hebert from the State of
Alaska. He's president and CEO of Cold Climate Housing Research
Center in Fairbanks, Alaska. Mr. Hebert, thank you for being
with us.
STATEMENT OF JACK HEBERT, PRESIDENT AND CEO, COLD CLIMATE
HOUSING RESEARCH CENTER, FAIRBANKS, AK
Mr. Hebert. Thank you, Mr. Chairman. Senator Bingaman and
Senator Murkowski, I am humbled and thank you for inviting me.
I am Jack Hebert, president and CEO of the Cold Climate Housing
Research Center. I'm also a 30-year builder from Alaska,
designer and builder, and represent the National Association of
Homebuilders as their State rep from Alaska, so a rather broad
background. As we all know, Alaska has some big issues. I left
written testimony that formally outlines some of the programs
that we're doing. I'd like to make sure that you look it over
and that's it's entered on the record.
Senator Dorgan. Without objection.
Mr. Hebert. All the things that are affecting this Nation
are exacerbated in our climate up there. It needs to be
understood that if your air conditioning isn't working, you'll
survive--other than Arizona--but in Alaska if the heating isn't
working, you don't survive. Our isolated communities are at a
crisis point on all their infrastructure on their built
environment, but also what supports it. In some of those
communities electricity is running over $1 a kilowatt hour.
Fuel oil is over $6 a gallon, and there's no economy, so that's
a challenge. It's a beautiful State but things are changing. We
also have the issue up there--as I'm sure you're all aware--of
climatic changes. For one reason or another, it is happening
and it's happening very strongly in Alaska. Whole communities
that have been settled for 10,000 years are now threatened in
their very existence. So whatever we do must be done right, and
that first step is knowing what is right.
Toward that end, the Alaska State Homebuilding
Association--working builders in the State--established the
Cold Climate Housing Research Center because locally, in our
community of Alaska and our family of Alaska, we were borrowing
from everywhere else, with no strong research supporting what
was working and what wasn't working. Out of that frustration,
those of us who swung a hammer created a 501(c)(3) so that we
could do the research that addressed what we saw as real
problems. We brought in partnerships. We knew we couldn't do
this research alone, so we brought in Federal, State and
industry partners to address this problem, and there's been a
lot of success. We were able to build a $6 million research and
testing facility in Fairbanks. This is an amazing facility and
I thank you for mentioning it, Senator. We're doing everything
in that building from creating energy from renewable sources,
through wood-fired co-generation, and work that we're doing
with that to produce both heat and electricity on a residential
scale. We're partnering with BP Solar to do a solar
demonstration project for rural villages that can show that
solar, combined with other systems, can address in a renewable
form energy for small communities.
There's many things that I think the Nation can learn from
our isolation and the extremes that we have in Alaska, and
maybe the biggest one is working together. Alaska Housing
Finance Corporation is one of our major partners. It's a State-
owned loaning institution that basically is taking the money
from their loans and putting it back in improving shelter--a
very nice program. Our local utilities are our partners. They
have green energy programs. We're working with geothermal with
them. We're looking at using bio-waste for generation. Again
the partnerships are a critical thing. Part of that partnership
is the Federal Government, a big part of that partnership. We
have to have money for programs that promote and move us ahead
to deal with this crisis, and there have been some very good
ones: Building America, the DOE program that involved
production builders, and builders like myself, to introduce
energy-efficient technologies at or below the same cost as
conventional technologies in the built environment, are very
important, as well as the PATH program, Department of Energy's
PATH program--Partnership for the Advancement and Technology in
Housing. These are very much applied research programs. They
need to be funded if we're going to find these answers. We may
want to build the most energy-efficient building in the world,
but if we don't know how or if we're doing it wrong, do we
really have the time or the resources to do it over? I also
think that this is a real opportunity, a real moment for the
Nation, to come together. If we can agree and not bicker about
the problems that we have with energy, with housing, with
sheltering our people and turning on the lights at night, and
realize that we can't continue to go in the direction we're
going. As a Nation, as individuals, if we can agree on them, we
can accomplish so much. We're proud to be Americans because we
addressed challenges and we found solutions--but only when we
work together, only when we collectively decide this is what
we're going to do. Again, thank you for having me and this will
be a lifetime experience. Thanks.
[The prepared statement of Mr. Hebert follows:]
Prepared Statement of Jack Hebert, President and CEO, Cold Climate
Housing Research Center, Fairbanks, AK
INTRODUCTION
Although there is not a firm consensus on the exact figures, there
is agreement between builders and researchers that buildings account
for a significant amount of the United States energy consumption. The
energy usage is divided almost equally between residential buildings
and commercial buildings (Source: Annual Energy Review 2003. DOE/EIA-
0384 (2003). Energy Information Administration, U.S. Department of
Energy. September 2003.)
With proper planning, most developments and buildings today can be
designed to use much less energy at little additional cost. Attention
to siting, building form, glass properties and location, material
selection and the incorporation of natural heating, cooling,
ventilation, and day-lighting are among the strategies available to
achieve this end. Through the application of the most current research,
the energy needed by a building, a development or a community, can be
supplied or supplemented by renewable sources such as solar,
photovoltaic, wind, biomass, and other viable sources. All of these
strategies incorporate energy efficiency and conservation to produce
the most effectively-sustainable buildings and homes for the nation and
beyond.
In Alaska, energy efficiency is important for our very economic
viability and survival, especially in our homes and buildings. To that
end, the Cold Climate Housing Research Center (CCHRC) is currently
engaged in research, demonstration projects, and in product testing and
development to provide healthy, durable housing that is affordable and
energy efficient--in a word, sustainable. Our research has made clear
those areas where the federal government can help support the research
in the development of building technologies that use much less energy
in the near term, with the goal of our nation's building stock being
more efficient in construction and operation. It should also be noted
that Alaska's needs are indicative of the needs for energy systems in
many under-developed regions of the world. Systems deployed
successfully in Alaska will have applications in many parts of the
world, opening new markets for innovative American businesses.
Additionally, experience with new technologies in remote Alaska
settings will be applicable for growing the use of distributed-
generation technologies in the lower 48 states power grid.
If U.S. building energy usage is halved or even approaches zero in
the foreseeable future, this will have a major impact on national
energy security and the sustainability of our communities--not to
mention the fuel bills of home and business owners! In this effort,
CCHRC is leading by example. Our new Building and Infrastructure
Research and Testing Facility (RTF) is designed to use 60% less energy
than a conventional building of comparable size and function in
Fairbanks, Alaska. CCHRC is also working to reduce fossil fuel use even
further by using bio-fuels and solar energy systems.
Included here are six aspects of work that CCHRC is doing to reduce
energy usage in Alaska: and recommendations for how the federal
government can further that work.
PRIVATE SECTOR COLLABORATION--CCHRC EXAMPLES
In 1999, the Alaska State Home Building Association, representing
over 1000 building industry members, and itself a member of the
National Association of Home Builders, recognized the need to conduct
research, test, and develop materials and technologies appropriate to
northern climates. To this end, the members committed to the creation
of the Cold Climate Housing Research Center, a 501(c)(3) nonprofit
entity, whose mission is: promoting and advancing the development of
healthy, durable and sustainable shelter for Alaskans and circumpolar
people through applied research. Four years after its start, the CCHRC
Board of Directors authorized construction of a facility to house the
testing and product development labs needed to accomplish its mission.
The charge is clear: research, test, and develop, if necessary, the
materials and technologies to provide healthy, durable, and
economically sound housing for the people of Alaska and other northern
locales.
CCHRC's nonprofit status allows it to establish collaborations with
both private and public sector partners. CCHRC is located on the campus
of America's only Arctic university, the University of Alaska
Fairbanks. (UAF) where the newly-constructed Research and Testing
Facility (RTF) is housed. CCHRC works with UAF faculty and staff to
develop joint research proposals. Major funding comes from state and
federal agencies that collaborate with many private sector donors who
contribute materials, products, labor, and funds to support the goals
of the RTF. CCHRC is also developing relationships with industry
partners to help further guide and support the product testing and
development programs at the RTF.
Some examples of the collaboration with private sector partners in
product testing include:
HVAC digital control systems--Siemens Building Technologies;
Insulation--DuPont, Johns Manville, Thermo-Kool, Western
Insulfoam, Vertex;
Ventilation--Venmar, Lifebreath, Fantech, Solutions to
Healthy Breathing;
Heating--Weil-McLain, Viesmann, Monitor, Stone Castle
Masonry;
Windows--Capitol Glass/Northerm Window;
Building materials--Spenard Builders Supply, Mannington
Commercial, Rivers Wood Products; and,
Data collection and display--GW Scientific, Campbell
Scientific;
CCHRC also has cooperative agreements with such other nonprofit
agencies as:
Golden Valley Electric Cooperative--demonstration of
alternative energy systems and conservation strategies and
technologies;
Interior Alaska Building Association--outreach and
continuing education;
Alaska Building Science Network--outreach, education, and
training;
Cooperative Extension Service, UAF--outreach, education, and
sustainability; and,
Audubon International--outreach and community
sustainability.
CCHRC Recommends
Cooperative programs involving private sector partners need
increased funding by the federal government. Programs such as the
Partnership for Advancing Technology in Housing (PATH), Partnerships
for Home Energy Efficiency (PHEE), The Small Business Innovation
Research (SBIR) and the National Science Foundation's Partnerships for
Innovation (PFI), Building America, Healthy Homes, Weatherization, and
others, benefit from private sector partnerships because they have the
ability to leverage government funding into grounded projects that
address real private sector needs.
NATIONAL SECURITY, GLOBAL WARMING, SUSTAINABILITY, AND ENERGY
To meet growing energy needs, the U.S. imports an ever-increasing
percentage of its energy supply, in the form of gas and oil, each year.
This creates an unsustainable and unstable situation for national
security, environmental concerns, and economic needs. It places U.S.
energy security in the hands of other nations, fuels concerns over
climate change, and may contribute to the increase in dramatic weather
events with significant costs in terms of human life and public and
private funds. The U.S. does not have enough reserves of its own to
reverse the nation's supply shortages by simply increasing domestic
production. Development of economically and environmentally sustainable
energy efficiency programs and alternative sources of energy is
critical and will require a significant investment. One way to reduce
energy consumption in the built environment is through efficiency and
conservation, which takes committing large amounts of both public and
private resources.
CCHRC has undertaken several initiatives to address this situation:
CCHRC Research and Testing Facility is designed to lead by
example using 60% less energy than a comparable building and
showcasing several strategies for energy efficiency,
conservation, and alternatives.
Audubon International has designated CCHRC as the Alaska
Center for Sustainable Community Development.
With the North-North Network and UAF, CCHRC is working on a
Sustainability Initiative to increase the sustainability of the
UAF campus and to begin an interdisciplinary curriculum in
northern sustainable design at UAF.
With partners at the Alaska Housing Finance Corporation
(AHFC) and the Canadian Mortgage & Housing Corporation (CMHC),
CCHRC is planning a Forum on Sustainable Northern Shelter to be
held in Fairbanks this October.
With the Cooperative Extension Service at UAF, CCHRC is
committed to finding solutions to community sustainability in
rural Alaska, especially housing and related systems.
With the Alaska Housing Finance Corporation and the Alaska State
Home Builders Association, CCHRC has begun the process of recasting the
Alaska Building Energy Efficiency Standard in terms of the
International Energy Conservation Code with the intent that it might be
addressed by a statewide building code review.
CCHRC Recommends
The federal government, through programs at U.S. Department of
Energy, the U.S. Environmental Protection Agency, the National Science
Foundation, and the U.S. Department of Housing and Urban Development
must initiate programs aimed at energy independence. Part of this
effort must: (a) target energy use reduction through increased
efficiency and conservation in homes and other buildings, and (b)
develop environmentally-sound energy sources for buildings and
communities. Partnerships that involve the private sector, along with
universities and state agencies, are particularly well-suited to
contribute real solutions. National support for transformative
processes already underway by groups such as the National Association
of Home Builders (NAHB) and the many state and local groups focused on
green building will be essential.
DEMONSTRATION PROJECTS--THE RTF EXAMPLE
The CCHRC Building and Infrastructure Research and Testing Facility
(RTF) on the University of Alaska Fairbanks campus is designed with
transparency in mind. CCHRC encourages public tours of the building and
visits to its website to demonstrate how it operates. CCHRC wants to
show:
how much energy from each source is being utilized,
how efficiently and cleanly the energy is consumed,
the different ways to heat and cool the building,
the better ways to filter indoor air,
how wall and window systems are performing,
that the lighting strategy is providing maximum daylight and
using minimum electricity,
that the water system is collecting rainwater, recycling
grey water and storing storm water on our green roof; and
how the building is interacting with the permafrost and
ground water beneath it.
Over 400 sensors are embedded in and beneath the building to
monitor its operation and performance. In addition to housing research,
testing and product development, the building itself is a multitude of
research and testing projects.
Demonstration projects such as this are important to lay the
foundation for change. The public needs to see that efficient
strategies exist and that they work. Essentially, people need to be
able to ``kick the tires'' before they will ``buy'' new ways to design
communities, get to work and play, and build and live in homes and
office buildings that consume much less energy.
CCHRC has an agreement with Golden Valley Electric Cooperative to
demonstrate alternative energy systems, such as solar, wind, bio-fuel,
and hybrid systems, at the RTF. The Fairbanks North Star Borough is
also funding a project in the facility to demonstrate the use of
several clean-burning, wood-fired heating appliances with the goal of
making the building produce more energy than it uses.
The success of the RTF as a demonstration project is remarkable.
CCHRC has had so many requests for public tours that it has had to set
up a regular public tour schedules on Thursday afternoons. CCHRC has
had a steady interest from UAF faculty and students in proposing joint
research projects. CCHRC has also had many requests to test products,
even though it is not yet set up to do so. Finally, CCHRC fields
frequent calls from future homeowners seeking advice about a piece of
equipment or a certain approach to building. Obviously, there is
substantial public interest in building better shelter.
CCHRC Recommends
Demonstration projects are important elements to facilitate change
for efficiency in the building community. Even if the technology is
well proven to scientists and engineers, it is still crucial to educate
builders and owners about better ways to design and construct
buildings. The federal government must vigorously fund and support
state and local efforts to demonstrate products and technologies that
can make this change happen.
ALTERNATIVE ENERGY PROJECTS AT CCHRC
One of CCHRC's important goals is to test, develop, and demonstrate
alternative energy solutions. Some of the technologies are built into
the RTF and some await future funding to be implemented. However, some
alternative energy projects are already underway or are on the thawing
board and they include:
Masonry Heater Project.--The first thing one sees when entering the
RTF is a beautiful, natural rock fireplace called a masonry heater. It
has an enclosed firebox, like a woodstove with a glass door, and a
massive rock edifice like an old-fashioned fireplace. The flue does
not, however, go straight up the chimney as it would in a stove or
fireplace; rather, it is convoluted throughout the masonry so that the
heat of the fire can be transferred to the rock and brick. In this way,
one hot fire per day can provide enough constant radiant heat to warm
an average house throughout the cold Fairbanks winter. This technology
was first developed in China and Greece long ago and was widely used in
15th century northern Europe. Because the fire is so hot (reaching 2000
degrees F) it burns very cleanly compared to a conventional wood stove
or fireplace. The RTF heater is instrumented so that CCHRC can document
its efficiency and emissions levels. The heater's massive size and
associated cost are drawbacks to widespread use of masonry heaters in
homes, yet CCHRC plans to work toward developing lower cost versions as
options for people who want to burn wood in the most efficient and
environmentally sound manner.
Wood Energy Project.--The wild land fires in the interior of Alaska
pose both a challenge and an opportunity. A primary way to reduce the
risk to settlements in and adjacent to these vast forested regions is
to reduce the fire fuel-load by clearing fire breaks around individual
structures as well as along entire ridge lines. This presents an
opportunity to develop local economic enterprises utilizing the bio-
fuel that otherwise would be wasted. If a sufficiently robust industry
can be developed using this ``waste wood,'' it could help fund the
continued creation of firebreaks around the vulnerable areas of the
Fairbanks North Star Borough.
The Fairbanks North Star Borough has funded a project to research,
develop and test a variety of wood-burning technologies and products
that could be the basis for local enterprises. These technologies range
over a wide scale of complexity and size from ordinary wood stoves and
pellet stoves to masonry heaters and village-scale combined heat and
power units. Perhaps the most compelling need is to develop the
technology for building combined heat and power (CHP) generators in
villages in rural Alaska where the price of fuel oil and electricity is
threatening their very existence. This project will evaluate the
technological options for providing the fuel source, processing it, and
feeding it into a CHP boiler. CCHRC will provide some of these critical
evaluations, testing and demonstration links in establishing new and
sustainable local enterprises. In addition the project will develop and
test the cleanest wood burning technologies available so as to minimize
the impact on the urban air shed in Fairbanks.
Solar-Thermal Demonstration Project.--Utilizing the sun to heat
domestic hot water is practical in Fairbanks, Alaska for about 8 months
out of the year. Solar-heated domestic water systems have reasonable
payback periods even though they are only usable for part of the year.
They also may allow oil-fired boilers to be shut down for several
months, thereby eliminating the worst period of standby losses. These
systems are particularly well suited for visitor industry facilities
that only operate seasonally.
CCHRC plans to purchase an evacuated-tube solar hot water collector
and the associated parts to integrate this system into its Viesmann
Boiler domestic hot water system. CCHRC is also working with the Golden
Valley Electric Association and the Cooperative Extension Service to
offer a technical training class in the installation of solar hot water
collection systems which will feature hands-on training actually
installing this system in the RTF. The system will be instrumented so
that performance and cost-effectiveness can be demonstrated in an on-
going manner to a broader audience via the internet.
Solar Photovoltaic Hybrid Demonstration Project.--The Cold Climate
Housing Research Center has proposed to partner with British Petroleum
(BP) and Alaska Native corporations on a project to develop a
sustainable solar power system that works in circumpolar regions. The
project will be based at CCHRC's Research and Testing Facility. The
``Beyond Petroleum''--Integrating Solar Energy in Rural Alaskan
Communities Research Project will benefit many communities in the
circumpolar regions. Many rural circumpolar communities face ever-
increasing energy costs due to being off the grid and the rising costs
of fuel transport. The RTF is a perfect site for testing northern solar
power systems and developing Alaskan expertise in solar system design,
installation and maintenance to benefit Alaskan villages. The Fairbanks
climate offers the full range of weather conditions for cold climate
testing and performance evaluation of products, systems and techniques.
The purpose of this project is to design, install, and operate a
micro-hybrid power system. It will consist of 15 KW of PV solar panels,
battery banks, AC and DC coupled inverters with capability to tie into
the GVEA grid, and a back-up generator. A web-based data acquisition
component will be incorporated allowing researchers to share results.
The system will feature: (a) testing of several different solar/micro-
grid configurations, (b) the potential to incorporate other energy
technologies (bio-diesel, fuel cells, bio-mass etc.), (c) robust data
collection, and (d) education, research and outreach components,
including an interactive ``Solar on the Web'' feature.
CCHRC Recommends
These critical research, development, and demonstration projects
usually involve, in one way or another, the donation of equipment,
materials, and labor from private sector partners. This important
private sector contribution should be encouraged by offering tax
incentives. Congress should consider tax incentives that would
encourage more investment by private sector partners that work on
projects to shift away from fossil fuels to alternative,
environmentally sound energy sources. By utilizing private sector
partners in this way, the burden of developing and expanding critical
research in efficiency programs is not shouldered solely by industry or
government alone.
A strong federal and state partnership to develop and demonstrate
new energy-saving, energy-generation and transmission technologies is
clearly warranted. Such an investment would not only serve Alaska's
residents, but also help to develop a market for American technologies
by inviting the developing world to see how America is solving its
energy needs for its rural and remote regions. Alaska could easily
become America's showcase for distributed power generating
technologies.
DOE BUILDING AMERICA IN ALASKA
CCHRC was funded by two grants under the Department of Energy's
Building America program. Some of CCHRC's work began with funding from
the second grant and has been. carried forward with funds from Alaska
Housing Finance Corporation. These grants have led to important
advances in basic envelope design in Alaskan residential construction,
which is called the Residential Exterior Membrane Outside-insulation
Technique (REMOTE), or REMOTE technique.
Building America in Alaska I.--CCHRC, the U.S. Department of
Energy, and Alaska Housing Finance Corporation (AHFC) formed a federal/
state/industry partnership to implement the Building America program in
Alaska. A Building America in Alaska (BAA) team of building industry
professionals from across the state worked with cold climate experts
from the Building Science Consortium. The primary goal of this project
was to develop plans for energy efficient, durable, healthy, and cost
effective homes that are affordable to moderate-income Alaskans. The
team designed a single-family residential home with modifications for
each of three major climatic regions/environments found in Alaska.
Building America home, using the CCHRC design or Building America
technology, were constructed by Bee Construction in North Pole
(Interior) and blu-Spruce Construction in Juneau (Southeast) and sold
shortly at or near completion. The performance target for these homes
is Five Star Plus, or the highest level of efficiency.
A Final Report was delivered to AHFC October 30, 2001, and included
the building design, material list, construction costs, and performance
testing and energy modeling of the finished homes. CCHRC staff worked
with the Fairbanks Chapter of Habitat for Humanity to utilize the
Building America design and technology in other projects. The Builders
Guide: Cold Climates, developed through the Building America program,
was reviewed by the Alaska team and CCHRC staff and updates were
recommended, compiled, and delivered to the Building Science
Consortium.
Building America in Alaska II.--CCHRC's second grant from the
Department of Energy was awarded for a State Energy,Program Special
Project to continue work on the Building America in Alaska program. The
goals were: (1) to develop builder's education courses on BAA
approaches to residential construction and to continue education and
promotion of Building America techniques to the Alaskan home building
industry; (2) to test and monitor the Building America houses
constructed in Alaska in 2001 and assess their performance; and (3) to
develop a Building America strategy to address the cold, wet climate of
Southeast Alaska which includes construction of a test module for
checking wall panels for moisture, durability and energy efficiency.
Within this project, the CCHRC Mobile Test Lab (MTL) was constructed in
North Pole and shipped to Juneau in January 2003. Students of
Construction Technology at the University of Alaska SE built and
monitored various wall systems in the test module for a year. The wall
built with the REMOTE technique out performed other wall sections in
terms of drying. The MTL was later re-fitted with new wall panels, new
equipment, and continues to be monitored under funding from AHFC.
REMOTE Wall.--The REMOTE technique combines an outside insulation
wall envelope system with more conventional roof and foundation
envelopes to maximize the benefits of both systems. An impermeable
membrane is attached to the exterior of the wall's sheathing with foam
insulation exterior to that. This membrane is then tied to an interior
vapor barrier for the roof and foundation of the structure. The benefit
of this system is that condensation within the building envelope is
eliminated along with all the associated moisture problems. Nine wall
systems were tested in Juneau utilizing the Mobile Test Lab. Of the
nine walls tested, the best performing wall was the REMOTE wall. The
REMOTE wall offered the most reliable results to the drying of built-in
moisture and had the lowest recorded moisture content in the sheathing,
framing and bottom plate at the conclusion of the testing. During
intentional wetting experiments in which moisture was introduced to the
wall cavity, the empty cavities dried in days, the fiberglass filled
cavities dried in weeks, and the foam-filled cavities did not dry
during the experiment. This shows that the fundamental design where all
of the insulation is on the outside of the wall is the most robust for
eliminating moisture problems.
In September 2005, the Tlingit-Haida Regional Housing Authority
(THRHA) received an award in recognition for its development and
application of innovative approaches and best practices in housing and
community development at the U.S. Department of Housing and Urban
Development's (HUD) National Indian Housing Summit. The work involved
an application of the REMOTE wall. THRHA was one of six housing
organizations from around the country to receive one of the prestigious
awards. In addition, THRHA was recognized for its partnerships with
CCHRC, the University of Alaska Southeast Construction Technology
Department, and Southeast Alaska Building Industry Association for
exploring new building techniques and materials suitable to Southeast
Alaska's climate.
CCHRC Recommends
The U.S. Department of Energy's Building America program has been
very important for developing and demonstrating improved building
techniques. Greater focus should be given to energy efficiency and
conservation in buildings within this program. The program should also
be expanded with funding to ensure its availability in all of the
states with a regional structure, primarily so that applications can be
considered in the context of the local region. Building America has
been very successful nationwide and has been embraced by NAHB and the
homebuilding industry.
HUD HEALTHY HOMES AND DOE WEATHERIZATION
CCHRC, the Alaska Housing Finance Corporation, University of Alaska
Fairbanks and Anchorage, and state of Alaska Weatherization agencies in
Fairbanks and Anchorage partnered on the Healthy Homes in Alaska
Project which studied the connection between indoor air quality (IAQ)
and asthma in children. CCHRC has also done several other projects on
IAQ and ventilation issues, including the mold survey and wildfire
smoke remediation studies described below. All of these studies are
more fully reported at http://www.cchrc.org/completed.html. There is an
essential connection between the development of energy efficient
buildings and ventilation: as we insulate and tighten up buildings to
prevent heat loss or entry, it becomes increasingly important to
provide intentional, mechanical ventilation to supply fresh air and to
control the build up of moisture in the buildings. The ventilation
system must be optimized to use the minimum amount of energy and
materials consistent with the air exchange requirements. Finally,
outdoor air is not necessarily ``fresh,'' so it is often important to
filter the incoming and re-circulated air to obtain the best, healthy
indoor air quality.
The Healthy Homes in Alaska Project.--This project was designed to
test whether or not improving the indoor environmental quality of homes
for children with asthma might improve their health. Only children who
lived in low-income homes were eligible, and the parent or guardian of
the child was required to own the home. Another goal of this project
was to increase the capacity of the Low-income Weatherization Program
to remove possible respiratory hazards in the homes of low-income
people who have children with asthma or other upper respiratory
diseases. The Healthy Homes in Alaska project was conducted in two
areas in the state. Fairbanks is Alaska's second largest city and is
located in the Interior. Hooper Bay is a larger bush community of 1014
residents on the Bering Sea coastline. These communities were selected
because they have residents with diagnosed asthma, have an involved
health provider in the region, and are generally representative of
conditions and housing stock throughout the state. The project provided
indoor air quality assessment, health screenings of affected children,
and housing remediation to selected homes. We identified and studied a
total of 36 homes: 10 eligible participants in the Fairbanks area, 9
participants in Hooper Bay, and 8 and 9 control homes in Fairbanks and
Hooper Bay, respectively. The remediation in the control homes
consisted of the standard weatherization items such as improving
insulation, replacing windows and doors, sealing air leaks, as well as
providing some safety items such as smoke and CO detectors. In the
participants houses the weatherization protocol was augmented by items
designed to remove possible asthma triggers such as moldy window sills,
bedding, or furniture. Some changes in the home were made to prevent
the moisture and temperature conditions that lead to the growth of mold
such as adding clothes dryers, installing shelving and bed frames to
improve air circulation by the walls and floors, and installing quiet
bath and kitchen fans to remove moist air from the house.
Qualitatively, the clients in the healthy homes reported improved
comfort and health as well as reduced energy bills. While the
quantitative results of this study were based on a small number of
research subjects, and asthma is a disease with multiple causes, there
are some interesting suggestive results: (1) It is possible that the
homes of children with asthma have higher levels of indoor air
pollution than the homes of similar people without asthma; and (2) The
remediation may have helped to improve the pulmonary function tests and
the IgE levels of asthmatic children, although the numbers from this
small a study were not sufficient to reach statistical significance.
Mold and Mildew Survey.--The prevalence of mold in Alaska Native
housing is a significant health issue. CCHRC documented over 1,700
residences with mold problems in a survey funded by HUD. See http://
www.cchrc.org/completed.html#mold. These instances varied from mild
mildew around windows, in kitchens, or in bathrooms to severe mold
development requiring the destruction of the building. CCHRC has been
funded by the Alaska Housing Finance Corporation to provide consulting
services to Alaska Native housing authorities on these and other issues
including the development of low-cost ventilation systems as adequate
ventilation is one of the keys to maintaining a healthy, mold-free
home.
Remediation of Wildfire Smoke in Fairbanks Homes.--For over two
weeks in the summer of 2004, fires around interior Alaska raised the
outdoor particulate level significantly over EPA's fine particle
standard for PM 2.5 of 65mg/m3. The actual figure exceeded
1,000m/m3 during part of that period. This study
demonstrated a 76-92% improvement of indoor air quality, depending on
method of remediation. See http://www.cchrc.org/FANTECH.pdf. Indoor air
was tested in houses pressurized with filtered outdoor air, as well as
in non-pressurized houses in which the air was re-circulated and
filtered. Although residents of all houses rated the improvements from
``better'' to ``very significant,'' the percentage reduction in fine
particulates was greatest in pressurized houses. This study has
implications for builders in areas in which air quality can be
hazardous to health, no matter the cause.
CCHRC Recommends
The DOE Weatherization programs provide a significant improvement
in the older housing stock, reducing the annual gas heating bills by an
average of 32% (see http://www1.eere.energy.gov/office_eere/pdfs/
wap_fs.pdf). As CCHRC develops more strategies for retrofitting older
houses, the lessons learned by the weatherization agencies across the
nation will be increasingly important to incorporate. Improvements in
the health of children and adults with asthma and other respiratory
conditions can also be made with the development and application of
appropriate ventilation and filtration standards.
In addition to the work of CCHRC, we are acutely aware of the
national focus on energy consumption of buildings, green building and
the need for incentives to promote sustainable building practices.
These issues have gained significant prominence in national public
policy forums.
ENERGY CONSUMPTION AND EFFICIENCY
Energy efficiency is the primary focus for many builders and home
buyers. While many figures are being thrown around these days, the
Energy Information Administration (EIA) estimates that buildings
accounted for 39.4% of total U.S. energy consumption in 2002.
Residential buildings accounted for 54.6% of that total, while
commercial buildings accounted for the other 45.4% (Annual Energy
Review 2003, DOE/EIA-0384 (2003))--for heating, cooling and electric
appliances. Builders know that building with energy conservation in
mind is both practical and profitable.
Recently, a number of groups, including the U.S. Conference of
Mayors, have joined with the American Institute of Architects (AIA) to
support the Architecture 2030 Challenge, which suggests that buildings
are the major source of demand for energy and materials and,
incidentally, produce greenhouse gases. The Challenge includes the
goals of:
All new buildings must be designed to use 50% less fossil
fuels;
An equal amount of existing building area must be renovated
annually to use 50% of the amount of fossil fuel they are
currently consuming; and,
All new buildings must be carbon-neutral by 2030 (i.e., uses
no fossil fuels and emits no greenhouse gases in operation).
A more detailed look at data provided by the EIA reveals that the
2030 challenge has arbitrarily derived the number of ``half'' of energy
consumption and greenhouse gases by combining two categories for which
the EIA reports and creating a new ``buildings'' category. Based on
EIA's 2000 Annual Energy Review, adding the categories of
``Commercial,'' ``Residential,'' and a portion of the ``Industry''
categories, the 2030 challenge arrives at a number of 48%. This
estimate reflects a portion of the industrial sector that is attributed
to buildings because of heating, cooling, etc., but how the AIA arrive
at the actual percentage is open to question.
Older homes, for which present day builders and architects bear
little responsibility, account for a very large share of residential
energy consumption. Single family and multifamily units built in the
decade before the Residential Energy Consumption Survey (RECS) of 2001
account for only 2.5 percent of total energy consumption in the U.S.
Even if each of the new homes built over the 1991-2001 period consumed
zero energy, it would only have reduced total consumption in the U.S.
by 2.5 percent. Finally, more than half of total residential energy
consumption consists of energy lost between generation and
consumption--that is, energy lost in the process of producing and
transmitting electricity, rather than energy actually used in
residential structures. This fact illustrates the importance of
developing energy producing systems in the structures themselves.
ENERGY STAR AND GREEN BUILDING
Energy Star is the most prominent of the many voluntary programs
builders utilize and was the very first program endorsed by the
National Association of Home Builders (NAHB). Energy Star homes meet
specific energy efficiency guidelines established by the U.S.
Environmental Protection Agency that achieve notable energy savings
above the current energy standards. To date, more than a half-million
above-code Energy Star homes have been built.
Energy Star also serves as a resource and efficiency benchmark and
as an integration point for NAHB's own Model Green Home Building
Guidelines. Since the 1990s, NAHB has been preparing for the evolution
of green building into the main stream. Green building means energy
efficiency, water and resource conservation, sustainable or recycled
products, and indoor air quality all incorporated into the everyday
process of home building.
Published in 2005, NAHB's Model Green Home Building Guidelines
(Guidelines) were developed through an extensive year-long review of
existing programs and industry best practices within an open,
consensus-based process involving more than 60 industry stakeholders--
including builders, researchers, manufacturers, environmentalists, and
government agencies. The NAHB Research Center, an American National
Standards Institute (ANSI)-accredited standards developing
organization, co-developed the Guidelines with NAHB. Due to broad
acceptance by local home builder associations, the Guidelines will
undergo formal consideration procedures to become the ANSI-accredited
standard and serve as an official ``industry standard practice.''
The Guidelines embody the flexibility that builders need to achieve
efficiency and conservation goals without meeting costly national or
state-wide mandates. Local adoption of the Guidelines allows builders
to more appropriately address regional and local environmental
concerns, properly assess life-cycle costs based on local building
codes and climate zones, and encourage innovation to meet higher and
broader energy efficiency objectives. Simply, there is no one size-
fits-all green building standard. Alaska, North Dakota, Florida, and
Maine all have different efficiency needs and requirements based on
their climate and builders need the flexibility of a program like the
Guidelines to reach those goals.
One popular green building standard that is being considered as a
requirement throughout the country, particularly at the state and local
level, is the Leadership in Energy Efficient Design (LEED), sponsored
by the U.S. Green Building Council (USGBC). Due to its success at
mandating LEED-NC programs for many government facilities, USGBC is
currently offering a pilot program, LEED-H for homes, to further
encourage the penetration of the LEED brand into the private sector.
While many state and local governing bodies have mandated the use
of LEED, some local leaders, e.g., in Boston, have recognized an
important fact that many builders also recognize: the LEED-H program is
costly, requires many mandatory provisions, offers little flexibility,
and contains extensive implementation fees that could cost a builder,
and ultimately the public, from $12,000 to $15,000 extra per home. A
close analysis of NAHB's Model Green Home Guidelines and USGBC's LEED-H
for homes is attached.
Overall, at a time when housing needs the most innovation and most
resources spent on achieving resource and energy efficiency, builders
should not be forced to use those resources for certification and
implementation fees just to comply with costly mandates for programs
like LEED-H. Builders need many options and methods for achieving
strides in energy efficiency and will be sidelined with requirements,
for LEED or otherwise, by any government--state, local, or federal.
TAX INCENTIVES FOR ENERGY EFFICIENT HOUSING
Finally, another crucial way to encourage energy efficiency in
housing is by extending and expanding tax incentives that passed as
part of the Energy Policy Act of 2005. Unlike spending programs or one-
size-fits-all rules, tax provisions allow market participants--
builders, homeowners, and homebuyers--to marry the energy incentives
with market-determined supply and demand.
For example, the newly established New Energy Efficient Home Credit
(Section 45L of the Internal Revenue Code) provides a $2,000 tax credit
for the construction and sale of a new home which reduces energy use by
50% or more. This program provides benefits to home buyers and
communities by facilitating the construction of new property that takes
advantage of the latest technology--and in a manner that will work in
the marketplace. Rules that simply eliminate the market for new homes
or other property through unreasonable restrictions do not encourage
the adoption of energy efficient property. In fact, they do the
opposite. They encourage retention of older, less efficient property.
Other examples of new energy tax incentives are the energy
efficient commercial building deduction (Section 179D), the existing
homes tax credit (Section 25C), and the solar credit for residential
property (Section 25D).
Congress could improve the efficiency of these programs by making
them permanent. Presently, these tax incentives are scheduled to expire
over the 2007 and 2008 period. This limited duration reduces the
effectiveness of these programs as home building in many cases takes
months or even a year or more to complete.
CONCLUSION
A directed national effort must be initiated immediately to address
the global issue of unsustainable energy consumption and its many
effects. Buildings, land development and related infrastructure,
including electrical generation, transportation, water and wastewater
systems are major factors to consider. Applied research and
demonstration projects are very necessary components for identifying
and developing technologies and strategies that will move toward
effective solutions. The direction the nation takes is dependent on the
quality and application of that research. Through a collaborative
approach involving industry and the marketplace, financial incentives,
federal and state regulatory agencies, and most importantly each
individual's commitment, we can make a positive change. The United
States must lead this effort by example to the rest of the world. This
is an opportunity for the nation to come together. For the first time
there is general agreement about the impacts of unrestrained energy use
and a real concern for the future. This issue can galvanize us as a
nation around a common goal for the common good. CCHRC and the building
and research communities of Alaska are prepared to embrace that
movement. It is our hope that we can be a valuable part of that
solution.
Senator Dorgan. Mr. Hebert, thank you very much. You've
traveled a long distance to be with us today and we deeply
appreciate that, appreciate the unique message you bring. Mr.
James Rogers is chairman of the Edison Electric Institute. He's
also chairman, president and CEO of Duke Energy Corporation in
Charlotte, North Carolina. Mr. Rogers, it's nice to see you
again, welcome.
STATEMENT OF JAMES E. ROGERS, CHAIRMAN, CEO, AND PRESIDENT,
DUKE ENERGY CORPORATION, CHARLOTTE, NC AND CHAIRMAN, EDISON
ELECTRIC INSTITUTE
Mr. Rogers. Thank you. Chairman Dorgan, Chairman Bingaman,
Senator Murkowski, good afternoon. I want to thank you all for
inviting me to testify today on behalf of Duke Energy and the
Edison Electric Institute, the Association of Shareholder Owned
Electric Utilities. I believe that energy efficiency is central
to achieving this country's environmental goals meeting the
growing demand for electricity as well as achieving our energy
security goals. It is also a critical component in advancing
our technology future.
Duke serves approximately 3.9 million customers in North
and South Carolina, Ohio, Indiana and Kentucky. Leading a large
energy company means that I have a duty to both our customers
and shareholders to understand what the future holds, in terms
of economic and environmental pressures. Even though prices for
electricity have been declining in real terms for a decade and
a half, prices have started to rise driven by escalated fuel
costs, greater environmental expenditures, and America's
insatiable appetite for all things electronic, stimulating the
need to build new plants and make other infrastructure
improvements. These forces pressure consumers with higher
electric bills. Consequently, we recognize the need for our
industry to mitigate these pressures.
I also believe that many of our energy efficiency programs
of the past were in need of an extreme makeover. My co-
chairmanship of the National Action Plan on Energy Efficiency--
which was supported by the EPA and DOE--played a great role in
understanding the potential for the makeover. The results of
phase 1 of this process are eye-opening; the National Action
Plan report envisioned taking effective efficiency programs
currently underway in this country, and expanding them to all
50 States. Such an ideal model could result in savings that top
$20 billion annually, along with a deferral of as many as 40
new 500 megawatt power plants over the next 10 to 15 years.
Even though historically utilities have offered a variety of
low-saving programs to customers, collectively if you added it
all up you could power 74,000,000 average-sized homes for each
year. It is clearly not enough; however, I believe that even
with the recognition that we need to do more, a genuine
paradigm shift must occur if we're to realize the full and
total potential of this resource. This shift must occur on
three fronts. First: in the way State regulators treat the
business of energy efficiency. Second: in the way utilities
develop and deliver efficiency programs. Third: in the way
consumers learn to manage their energy use.
Energy efficiency is an actual source of supply. I call it
the fifth fuel. It is as important as any power plant generated
by coal, nuclear, natural gas or renewables. Wise energy use
programs can deliver at a cost below that of a nuclear power
plant and in less time. Energy efficiency is also the basic
building block to cost-effectively help utilities meet their
greenhouse gas reduction goals, but treating efficiency as a
generation resource means that we also need to treat it as a
business resource. I recently challenged the Duke team to add
600 megawatts of energy savings in the Carolinas on top of the
700 megawatts already committed. These savings will help us
shut down the older coal units. If we can put saving energy on
the same level playing field as generating energy, then we will
witness a significant growth in this sustainable resource.
EEI is already examining ways of making energy-saving
business models for consumers and investors. We expect to issue
a report later this year evaluating several business and
regulatory models. There is no one method appropriate for all
utilities or all States. We believe this report will form what
we hope is a beginning of a robust dialog with utility
regulators. Duke is investigating its own ``Sav-A-Watt'' model
to address energy and environmental savings in one efficiency
package. We believe that this prototype coupled with new
technology deployment carries the potential of transforming our
business so we can provide--and this is an important point--
customers with universal access to energy efficiency, and with
that the paradigm shift begins to occur. Utilities can increase
their offers of sustainable energy savings and consumers will
broaden their knowledge of how to ``Sav-A-Watt.''
Congress can help us meet these objectives and assure that
energy efficiency produces a meaningful imprint on our society.
Already begun from programs authorized by the Energy Policy Act
of 2005, it is imperative that Congress fund all energy
efficiency initiatives. In addition, tax incentives should be
re- examined and reauthorized. Congress must address building
codes because buildings consume--and my number's a little
different than the gentleman before--approximately 68 percent
of the electricity produced in the United States, and that's
according to DOE.
Finally Congress can help to further technology advances.
Modernization of the electric grid from advanced distribution
transformers to advance meters must be deployed to help us
achieve energy use reductions. These meters and grid
technologies reduce energy losses. Incentives to advance the
application of these technologies can further the goal of
avoiding new power plants. I believe that through the proper
architecture the potential for energy savings will bring with
it a transformation of how we meet the needs of an increasingly
electrified economy. In closing, I ask you to consider what I
think should be an expanded mission for electric utilities, and
that is the ability to offer all of our customers universal
access to a broad range of energy savings programs and
services. Getting the regulatory framework right means that we
can help customers make wise choices. Utilities can deliver
those wise energy choices from solar panels to advanced heating
and cooling equipment to examining advanced lighting
techniques. As utilities we're in the best position to help
consumers ``Sav-A-Watt'', and only then can we adequately
provide this fifth fuel to all. Thank you all very much, and I
welcome your questions.
[The prepared statement of Mr. Rogers follows:]
Prepared Statement of James E. Rogers, Chairman, CEO and President,
Duke Energy Corporation, Charlotte, NC and Chairman, Edison Electric
Institute
Good afternoon. My name is Jim Rogers and I am Chairman, CEO and
President of Duke Energy. Duke serves approximately 3.9 million
customers in five states: North Carolina, South Carolina, Ohio, Indiana
and Kentucky. We have 37,000 megawatts of generation, which is supplied
by coal, nuclear, natural gas and hydropower.
I am here on behalf of Duke Energy as well as the Edison Electric
Institute (EEO, where I currently serve as Chairman. EEI is the
association of U.S. shareholder-owned electric utilities and industry
affiliates and associates worldwide.
I want to thank you for inviting me to speak today on a topic which
I believe is central to achieving this country's environmental, energy
security and technology goals--energy efficiency.
As the leader of a large power company, I believe it is my duty to
both shareholders and customers to understand not only the basics of
meeting energy demand but also to delve into the future and understand
all of the pressures that will lead me to make the right economic
decisions today. Expectations for electricity growth and impending
environmental trends all play a fundamental role in the delivery of
electricity to our customers.
Despite the fact that electricity remains a value compared to other
essentials, electricity bills are rising. Fuel costs and purchased
power have driven a large part of those incremental price increases--
accounting for roughly 95 percent of total operations and maintenance
expenditures on an industry-wide basis. But those are not the only cost
pressures facing the industry. Environmental controls, particularly in
coal-centric regions of the country, are driving up costs. At the same
time, America's appetite for electricity is growing. A recent Consumer
Electronics Association study revealed that the number of electronics
products per household has doubled since 1997. We might love plasma
televisions, but we need to recognize that they also love electricity!
Growing demand brings with it an essential need for new power plants
and transmission lines.
As part of my own effort to examine, understand and help customers
manage all of these trends, I agreed to co-chair the National Action
Plan on Energy Efficiency--supported by the Environmental Protection
Agency (EPA) and the Department of Energy (DOE).
As co-chair with Diane Munns, then a Member of the Iowa Utilities
Commission and President of the National Association of Regulatory
Utility Commissioners, we worked with a Leadership Group representing
over fifty utilities, utility commissions, state energy offices,
consumer and environmental advocates. The resulting National Action
Plan outlines benefits and opportunities for energy efficiency as well
as the barriers to overcome if we are to make energy efficiency a top
priority.
The first phase of this multi-year effort identified numerous
examples of successful energy efficiency programs as well as the
potential for energy savings across the U.S. In addition, more than 80
organizations announced public commitments to advance their own energy
efficiency activities.
The NAPEE report suggested, for instance, that if the dollars spent
and the megawatts saved in some areas of the country were broadened to
the country as a whole, savings could top $20 billion annually while
deferring 20,000 MW--the equivalent of 40 new 500 MW power plants over
the next 10 to 15 years.
These figures are illustrative, of course, and are not to suggest
that every utility and every state can achieve the same level of energy
savings. But let me provide you with just a few interesting examples of
successful programs in various parts of the country.
Black Hills Power, serving customers in South Dakota, Montana and
Wyoming, offers homeowners a program that helps them monitor and
control major electric appliances during periods of peak demand.
Puget Sound Energy's programs, which include cash rebates for the
purchase of Energy Star appliances, are on track to save 279 MW between
2006 and 2015. That is more than the company saved between 1980 and
2004.
Southern California Edison's comprehensive portfolio of energy
efficiency programs for 2006 through 2008 will produce a 3 percent
average bill reduction by 2010 and 888 MW of demand savings, as well as
the commensurate environmental benefits. This will occur for a cost of
less than 4.1 cents per kWh.
Historically, utilities have offered a variety of programs to help
customers manage their electric bills. According to DOE and the Energy
Information Administration (EIA), electric utilities collectively spent
over $30 billion on demand-side management or efficiency programs
between 1989 and 2005, resulting in a savings of more than 796 billion
kWh. Those savings alone could power nearly 74 million average size
U.S. homes for one year.
DEVELOPING A NEW VISION
While those numbers are impressive, the industry recognizes that we
can achieve much more. But, I believe that a genuine paradigm shift is
necessary if we are to realize the full potential of this resource.
That shift must occur in the way regulators treat the business of
energy efficiency, in the way utilities develop and deliver programs,
and in the way in which we appeal to consumers to manage their energy
use.
Another huge accomplishment emanating from the NAPEE process was
the recognition by this broad group of utility commissioners, customers
and consumer groups that sound business practices can remove barriers
for enhancing utility investments in energy efficiency.
Energy efficiency should be considered a fuel choice--the ``fifth
fuel'' if you will in addition to traditional generation resources of
coal, nuclear, natural gas and renewables.
Efficiency programs can deliver at a lower cost than new power
plants, we can deploy them faster than new power plants and they can
provide savings over relatively short periods of one to three years, as
well as over the longer term.
From an environmental perspective, we should view energy efficiency
as a basic building block in reducing the industry's emissions profile.
In 2004 alone, efficiency programs in place saved more than 29 million
metric tons of carbon equivalent greenhouse gas emissions.
From a state's perspective, energy efficiency can be a key to
economic development activities. Greater efficiency investments can
build jobs and improve state economies. These programs can also create
long lasting infrastructure changes to buildings, and property
improvement delivering long-term economic value.
And finally, energy efficiency brings with it its own energy
security benefits. Again, according to the NAPEE report, by reducing
the level of U.S. per capita energy consumption, we also decrease the
vulnerability to the economy and individual consumers from potential
energy price disruptions erupting from natural disasters or escalating
prices of imported fuel. The less electricity used, the less impacted
consumers are by fuel cost increases. And despite the fact that natural
gas for the most part is a domestic resource, it increasingly is tied
to the cost of foreign oil and will be supplemented in the future by
imports of liquefied natural gas.
But if we are to treat efficiency as a resource, we must consider
it a resource from a business perspective as well.
For instance, I recently directed my staff to expand Duke Energy's
efficiency program in the Carolinas to reach a goal of saving an
additional 600 MW of energy beyond the 700 MW already committed.
However, that action is not without its own concerns. These energy
savings will enable Duke to shut down several older coal plants in our
region, resulting in significant environmental benefits. But, under our
current regulatory model, the program also will result in significant
lost revenue.
Eliminating power plants, while adding new ways of saving energy,
without a plan for placing energy efficiency into the traditional
utility business model can make expanding programs a tough sell.
However, we can change the utility regulatory paradigm to put saving
energy on the same level playing field as generating energy.
I believe that there are energy saving business models that work
for customers and for utility investors. Edison Electric Institute is
in the final stages of a study analyzing various ways of ensuring that
energy efficiency can stand alone as a business. These models would
work for utilities in both regulated and unregulated states. While no
one version may work for every utility and every state, a variety of
models exist that can and must be explored if we are going to achieve
energy efficiency goals that will make meaningful imprints on our
society. Once completed, this document will be a useful tool for
exploring enhanced efficiency programs with our state public service
commissions.
Some of these prototypes include methods of sharing energy savings
with consumers and shareholders; others simply treat energy efficiency
like any other expenditure such as power plants or other infrastructure
improvements. Duke, in fact, is exploring its own ``Sav-A-Watt'' model,
which addresses the energy and environmental savings achieved via
efficiency programs in one package.
Customers win because new plants are avoided, environmental
benefits are expanded and creative methods of providing sustainable
efficiency programs mean savings on monthly bills. We believe this
model, coupled with new technology deployment, has the potential to
transform our business and enable us to give our customers universal
access to energy efficiency.
This paradigm shift at the regulatory level will open up a host of
opportunities to reshape how utilities offer efficiency to consumers.
Without the threat of a lost revenue stream, utilities can develop
programs that they take to consumers, instead of waiting for consumers
to sign up to generic offerings. That in itself can go a long way in
broadening wise energy use patterns.
I do not believe that Congress can or should dictate a specific
model to states. However, speaking for Duke, I think that Congress can
examine methods of ensuring that states consider these new regulatory
frameworks to ensure that efficiency measures are sustainable over the
long term. I am certain that there are other options of encouraging
this transformation, but I must again emphasize that making efficiency
a business is critical if we are to realize its true potential.
THE ROLE OF CONGRESS
Congress did make huge strides in advancing energy efficiency when
it passed the Energy Policy Act of 2005 (EPAct). We encourage the
Committee to review the progress of EPAct 2005 and ensure funding for
all energy efficiency provisions.
Congress can also play an essential role in furthering efficiency
through a variety of additional mechanisms.
Strict building codes, utilizing energy efficiency models, alone
can go a long way toward achieving real energy savings in the same way
that appliance efficiency standards have broadened the reach and
potential for savings to consumers. According to the Department of
Energy, buildings consume approximately 37% of the energy and 68% of
the electricity produced in the U.S. annually.
SC Johnson recently designed its new headquarters building in
Racine, Wisconsin, and studies project that its gross annual energy
consumption will be approximately 60% less then the average for
similarly sized buildings. This reduced energy consumption will save
the company nearly $100,000 per year. Imagine translating similar
savings to every new building in the country.
Congress can address that potential through building code
requirements and essential tax incentives for buildings and appliances.
Additionally, many other tax incentives provided for in EPAct 2005
are set to expire at the end of this year. Yet, incentives for
commercial buildings are still awaiting final rules. And, while some
EPAct 2005 incentives are set too low to effectively influence consumer
buying decisions, others are too high. The industry would like to work
with this Committee and its Members who also sit on the Finance
Committee to review the variety of tax incentives earmarked for
efficiency programs and suggest methods to adjust and expand them
appropriately.
Congress can also play a role in furthering technology advances.
Modernization of the electric grid is a significant element of the
efficiency picture. From advancing more efficient distribution
transformers to accelerating the development of advanced metering
technologies, the electric industry has identified these and other
technology advances as essential tools in the efficiency kit. These new
meters in many ways are more similar to computers than the electro-
mechanical machines utilities historically deployed.
Smart grids can expand information exchange between customers and
their utility while also supporting demand-side measures such as real
time pricing. Imagine a day when smart technologies and appliances will
be able to make decisions about when to operate and could even
``learn'' how to combine efficiency, cost, comfort and convenience for
customers. Duke likes to refer to these new technology advances as the
``Utility of the Future.''
Yet the depreciation rates for smart meters are 20 years--the same
rate for distribution property. Reducing that rate to 5 years, while
also exploring additional methods of funding this important
technological transformation will hasten the transition to an efficient
future.
The technology revolution is no longer limited to traditional
utility delivery systems. Our industry is supporting additional
Congressional funding to research and bring closer to deployment
technology to make plug-in hybrid vehicles a reality. Plug-ins not only
enhance energy security options, they offer the potential to utilities
as a way of evening out demand. Imagine a future when these vehicles
can charge at night while demand is lower, and send electricity back to
the grid during the day when demand is high, offering yet another
source of offsetting the need for new power plants.
And those overseeing the budget process can ensure that programs
such as Energy Star, which help provide the tools for increased
efficiency, and a consumer efficiency education campaign authorized in
the Energy Policy Act receive the funds to make them work.
I believe that through the proper architecture, the potential for
energy savings will bring with it a transformation in how we continue
to meet the needs of an increasingly electrified economy. The industry
has embarked on this journey to build the utility of the future and
with your help, we can achieve this goal sooner rather than later. I
don't believe we can wait. The combination of environmental pressures,
new technologies on the horizon and rising electric prices are each
chapters in a story describing how we can harness the power of a watt
that is saved. I hope that Congress will take this opportunity to
expand on the work begun in EPAct 2005 to find valuable mechanisms that
encourage and expand energy efficiency for decades to come.
In closing, I believe that electric utilities should have an
expanded mission. We should be able to provide our customers with
universal access to a broad range of energy efficiency services and
technologies. As we work to get the regulatory framework ``right'', we
will be in the best position to cost effectively Sav-A-Watt. Only then
will utilities adequately be able to provide this fifth fuel to all.
Senator Dorgan. Mr. Rogers, thank you very much for being
with us today. Our final witness today is Kateri Callahan, and
Kateri is president of the Alliance to Save Energy. As I
indicated earlier, that's an organization of which all of us
are very familiar, and we appreciate your being here. We
appreciate the work the Alliance has done over all these years.
You may proceed.
STATEMENT OF KATERI CALLAHAN, PRESIDENT, THE ALLIANCE TO SAVE
ENERGY
Ms. Callahan. Well thank you, Mr. Chairman, and I would
like to start by thanking you and Senator Bingaman for all your
years of service--not just as board members which you currently
serve on for the Alliance, but also your past chairmanship. I'd
also like to note that the gentleman to my right, Jim Rogers,
is the current industry co-chair of the Alliance to Save
Energy, and we appreciate his leadership as well.
As we've heard today buildings are a major factor in the
linked problems of energy prices, national security, and global
warming, and we've made very great strides in the last 30 years
in making that built environment more efficient. But there's a
study that's been done by the National Labs that suggest that
we still have an opportunity to reduce U.S. energy use in
residences and in commercial buildings by about 20 percent over
the next 20-year time span. This is important because what that
means is, we could essentially reverse the growth and demand
for energy from that sector of our economy. We believe there
are several important areas where the Congress and Federal
Government can help to ensure we meet this very important goal,
but in the interest of time I'm going to summarize my 20-plus
pages of testimony and recommendations and just highlight a few
of those in three areas. First, recommendations for building
codes; second, utility efficiency programs--and Jim did a good
job of covering that, so I don't have a lot to add there; and
finally, the appliance standards. One of the most important
opportunities for reducing energy use and cost is to design and
construct the buildings the right way to begin with, and that's
something Mr. Stewart alluded to earlier.
As we've heard today there are key decisionmakers in that
sector that are making bold commitments to energy efficiency in
buildings. We think that the Congress can support and encourage
those initiatives with a few specific actions. First, we would
like Congress to direct DOE to establish a national goal for
continuous improvement in model-building codes. We're
suggesting something that's not as aggressive as AIA has in
place, but a target of 30 percent improvement in efficiency
within 10 years, and another further 50 percent improvement
within a 10- to 15-year horizon for both homes and commercial
buildings.
Second, while maybe not in the jurisdiction of this
committee, we would ask Congress to require HUD to immediately
strengthen the energy-efficiency standards for manufactured
housing, which is largely bought by those that can least afford
to pay high energy bills. The HUD code is so antiquated that a
manufactured home in North Dakota or Minnesota or Alaska only
has to meet the insulation requirements for a home built in
Miami, Florida.
Third, the Federal Government is embarking on a military
housing program that going to result in construction of about
185,000 homes for military servicemen and women and there are
currently no uniform energy standards for those homes. We would
like Congress to require that such privatized housing units be
built to be Energy Star home criteria.
Finally, the Federal Government we believe needs to
substantially increase its financial commitment to creating the
technologies and the knowledge that will allow us to get to net
zero energy buildings in the future. If we invested just the
equivalent of 12 hours of commercial building energy cost in
this country, we would generate $135 million, and we think we
could meet a goal with that of getting to carbon neutral
buildings in the near future, which is what every one of us is
striving for here today.
In the utility industry arena, they have proven to be a
very important key, as you know, to driving energy efficiency.
Many utilities, as Jim alluded to, have found that it's
actually more cost-effective to help their customers to save a
kilowatt hour than it is to actually generate and deliver that
kilowatt hour to their customers. A very important mechanism is
demand-side management program or DSM programs. Over the last
two decades we've saved the equivalent of 100 power plants by
putting in place DSM programs. The bad news is that the
investment in demand-side management programs waned when they
deregulated--or began to deregulate--the utility industry, and
still today we have a recovered investment up to the level of
the mid-1990's.
To help drive greater utility investment in these programs,
we would ask that this committee work with the appropriators to
fund the $25 million program authorized in EPAct to create
utility State pilot programs that have attached to them an
annual reduction in electricity and natural gas use. We also
urge this committee to explore establishment of a Federal
energy efficiency resource standard or an EERS, which would
require electric and natural gas utilities to implement energy
efficiency programs to achieve a specified amount of reduction
in electricity or natural gas. We want these to be flexible to
reward utilities in meeting standards. Programs have been set
up in some of the States that achieve these energy efficiency
reform and performance standards, most notably in Texas.
Finally, in the area of appliance standards, these have proven
to be one of our country's most effective tools in delivering
energy efficiency, yet they're not fully tapped.
Right now, thanks to the standards that you all have put in
place, by 2010 we will save $234 billion in avoided energy
costs. We have a couple of specific requests for the Congress
in this area. One is to make sure that you monitor carefully
DOE's rulemaking process on the overdue standards that are in
the hopper now, and future products, to ensure that they issue
the strongest standards that are cost-effective and that they
do so in a timely manner. Second, we would like you to look at
adequately funding and updating the Federal appliance standards
and testing program. Finally, as we work with manufacturers to
develop consensus standards, we hope that as we bring those
forward to you later in the year, that you will be able to
expeditiously enact those into law so we can get to the energy
savings that they promise as soon as possible.
So, in conclusion, we've made important strides in the
building sector, but much more is required, and we believe with
the policies and tools that we've recommended in our testimony,
and are highlighted today, that working with you we can get to
a point where we can essentially reverse the growth in energy
demand in the built environment in the years ahead. Thank you.
[The prepared statement of Ms. Callahan follows:]
Prepared Statement of Kateri Callahan, President, The Alliance to Save
Energy
BUILDING ENERGY EFFICIENCY AND UTILITY ENERGY-EFFICIENCY PROGRAMS
INTRODUCTION
The Alliance to Save Energy is a bipartisan, nonprofit coalition of
more than 100 business, government, environmental and consumer leaders.
The Alliance's mission is to promote energy efficiency worldwide to
achieve a healthier economy, a cleaner environment, and greater energy
security. The Alliance, founded in 1977 by Senators Charles Percy and
Hubert Humphrey, currently enjoys the leadership of Senator Mark Pryor
as Chairman; Duke Energy CEO Jim Rogers as Co-Chairman; and Senators
Jeff Bingaman, Byron Dorgan, and Susan Collins along with
Representatives Ralph Hall, Zach Wamp and Ed Markey, as its Vice-
Chairs. Attached to this testimony are lists of the Alliance's Board of
Directors and its Associate members.
The Alliance is pleased to testify at a hearing on policies and
programs to improve the energy efficiency of buildings, in particular
by encouraging utility energy-efficiency programs.
THE POTENTIAL IMPACT OF ENERGY EFFICIENCY IN BUILDINGS
Natural gas prices have doubled in the last few years, and
electricity prices also reached all-time highs. Including gasoline as
well, recent energy price increases cost American families and
businesses over $300 billion each year. The president recognized energy
security as a major issue in the State of the Union message. And the
world's scientists just reaffirmed the urgent need to reduce global
warming. These problems are not going to go away--electricity use in
the United States is projected to grow by half by 2030. Such growth
will lead to higher prices, greater volatility, and increasing
dependence on foreign natural gas as well as foreign oil.
Building energy use is a major factor in these linked problems of
energy prices, energy security, and global warming, and must be a major
part of their solution. More than one-third of all energy used in the
United States, and more than two-thirds of electricity, goes to heat,
cool, and power buildings. Just over half of that is for homes, the
rest for a wide variety of commercial buildings.
Great strides have been made in improving the efficiency of
appliances, heating and cooling systems, equipment, and the building
envelope (walls, windows, doors, and roofs). At the same time the
growing size of homes and appliances, and the growth in electronic
equipment have overwhelmed the efficiency savings. An even greater
savings potential remains--a 2000 study by several national labs
estimated that energy-efficiency policies and programs could cost-
effectively reduce U.S. energy use in residential buildings by 20
percent and in commercial buildings by 18 percent over a 20-year span,
essentially reversing the growth they projected in building energy use.
A combination of several policies and programs have made a real
impact on saving energy in buildings, including appliance standards,
building energy codes, labeling programs, tax incentives, and research
and development of new technologies--I will talk about some of these
later in the testimony. But one of the most effective approaches has
been utility energy-efficiency programs, and I will start with these.
UTILITY ENERGY-EFFICIENCY PROGRAMS
Why should utilities reduce their sales by helping their customers
reduce energy consumption? Many utilities have found that helping their
customers to save a kilowatt-hour of electricity is cheaper and easier
than generating and delivering that kilowatt-hour. Energy efficiency is
a key energy resource.
As California found out in 2001, a slight excess of demand for
electricity over available supply can cause blackouts, massive price
spikes, and economic turmoil. Small increases in demand have doubled
retail natural gas prices nationwide over the last few years, resulting
in plant shutdowns and home foreclosures. Energy-efficiency programs
are the cheapest, quickest, and cleanest way to respond to these
challenges. In California an aggressive campaign reduced peak
electricity demand by 10% in less than one year, and thus helped avoid
further shortages.
These demand-side management (DSM) programs use measures such as
rebates for efficient appliances, commercial lighting retrofits, and
energy audits to help their customers use less energy. The cost to the
utility for the energy savings is often around 2-4 cents per kilowatt-
hour (kWh), much less than the cost of generating and delivering
electricity. Such efficiency investments save consumers money, increase
consumer comfort, reduce air pollution and global warming, enhance
economic competitiveness, and promote energy reliability and security.
Over the last two decades, states worked with regulated utilities
to avoid the need for about one hundred 300-Megawatt (MW) power plants.
However, utility spending on DSM programs nationwide was cut almost in
half as the electricity industry was partially deregulated in the late
1990's. In the last couple years there has been a resurgence of
interest in electricity and natural gas energy-efficiency programs,
with new programs in states such as Georgia and Arkansas, and added
funding in leaders like California and Vermont. Some states have also
chosen to run similar demand reduction programs themselves.*
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* Graphic has been retained in committee files.
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UTILITY SECTOR ENERGY-EFFICIENCY POLICIES
Recommendation.--Fund the Energy Efficiency Pilot Program
authorized in Section 140 of the Energy Policy Act of 2005, and require
states to consider adopting policies to promote utility energy-
efficiency programs.
Several major new reports have focused in part on the need for new
policies to promote utility energy-efficiency programs, including:
The National Action Plan for Energy Efficiency brought
together more than 50 organizations, co-led by Jim Rogers, who
joins me on this panel. They seek ``to create a sustainable,
aggressive national commitment to energy efficiency through gas
and electric utilities, utility regulators, and partner
organizations.''
The Western Governors' Association Clean and Diversified
Energy Initiative set an ambitious goal of a 20 percent
increase in energy efficiency by 2020 in the West; the Energy
Efficiency Task Force Report examines how to achieve it.
The U.S. Environmental Protection Agency's Clean Energy-
Environment Guide to Action details many policies and practices
states are adopting to manage their energy needs and air
quality.
The Department of Energy, under section 139 of the Energy
Policy Act of 2005, was supposed to issue a report last August
on state and regional policies that promote utility energy-
efficiency programs, in consultation with the National
Association of Regulatory Utility Commissioners and the
National Association of State Energy Officials.
Together these reports set forth policies needed to help utilities
create effective energy-efficiency programs. These policies include:
Adopt energy efficiency goals, requirements, or commitments, with
reporting on progress and oversight. For example, California conducted
a study of the potential savings from cost-effective energy-efficiency
programs in the state, set targets for each of its regulated electric
and natural gas utilities, required each utility to submit plans to
meet those targets, and approved $2 billion in funding for the planned
programs over three years.
Use energy efficiency as a priority resource when planning to meet
customer needs. As utilities in some regions plan to build the first
new generating plants and transmission lines in years, they are showing
more interest in alternatives. For example, Georgia Power in its most
recent Integrated Resource Planning (IRP) process agreed to initiate
the first energy-efficiency programs in a decade.
Provide robust and stable program funding. Funds can be provided as
part of utility rates or through a small surcharge on utility bills (a
public benefits fund or system benefits charge). For example, Wisconsin
recently increased its public benefit fund and protected it from raids
to pay for state deficits.
Set rates to incentivize utilities and customers. Typically
utilities earn more by selling more energy. It is important to
``decouple'' utility revenues from sales, or to provide utilities with
performance incentives for effective energy-efficiency programs, in
order to align utility benefits with customer benefits. For example,
Northwest Natural, a natural gas utility in Oregon, has a
``conservation tariff' that helps it promote energy savings rather than
sales.
Carefully evaluate energy-efficiency programs, with measurement and
verification of energy savings and appropriate cost-effectiveness
tests, so all stakeholders can rely on the energy savings. For example,
in Texas savings estimates used to meet the state peak load reduction
requirements are verified by a contractor to the Public Utility
Commission of Texas.
These policies are typically set at a state level, by public
utility commissions or sometimes by state legislatures. However, as
there are compelling national interests that cannot easily be addressed
by individual states, federal action is needed. While most individual
states are not large enough to affect the shortage of natural gas that
has driven up prices, concerted federal action could have an impact. In
addition, the grid failures that blackened much of the Midwest and
Northeast in 2003 showed that reliability issues are not confined
within state lines.
As a focus for federal policy, the energy efficiency resource has
several advantages:
It is readily available in all parts of the nation,
It is available for direct natural gas use as well as for
electricity,
It is cost-effective today, and
The potential savings are enormous.
The Senate recognized the potential of utility energy-efficiency
programs, and the need for a federal role, in its 2005 energy bill. In
addition to the required report in Section 139, Section 140 authorized
$5 million a year for five years to create state pilot programs
designed to achieve 0.75% annual reductions in electricity and natural
gas use. In the Senate version of the bill, Section 141 would have
required state public utility commissions to consider policies to
promote utility energy-efficiency programs. The Alliance urges
appropriation of funds to implement Section 140, which was enacted, and
thanks the Senate for including funds in its appropriations bill last
year. We also strongly support enactment of Section 141. But we believe
more concerted federal action is needed.
ENERGY EFFICIENCY RESOURCE STANDARD
Recommendation.--Enact a federal energy efficiency resource
standard for electric and natural gas utility energy-efficiency
programs, coordinated with any renewable electricity standard.
Several states are already developing innovative policies to set
performance standards for utility energy-efficiency programs alongside
standards for generation from renewable sources.
Like a renewable portfolio standard (RPS), an energy efficiency
resource standard (EERS) is a flexible performance-based and market-
based regulatory mechanism to promote use of cost-effective energy
efficiency as an energy resource. An EERS requires utilities to
implement energy-efficiency programs sufficient to save a specified
amount of electricity or natural gas, such as 0.75 percent of the
previous year's sales. Note that an EERS is not a requirement that the
utility's sales decrease in absolute terms or a limit on its sales at
all; it is a performance requirement for the utility's energy-
efficiency programs.
An EERS gives utilities broad flexibility about how and where to
achieve the energy savings. Utilities can meet an EERS through the
kinds of effective demand reduction programs that have been conducted
in many states for years. They can implement their own programs, hire
energy service companies or other contractors, or pay other utilities
to achieve the savings by buying credits. The program savings are
independently verified. Usually, the costs of the energy-efficiency
programs must be recovered from energy customers through utility rates,
but the savings from avoided energy supply are greater than the
efficiency cost.
According to the American Council for an Energy-Efficient Economy,
a national 0.75% EERS would by 2020:
Save 386 billion kWh of electricity (8 percent of total use)
and 3600 billion cubic feet of natural gas (14%) each year,
Reduce peak electric demand by 124,000 MW (avoiding about
400 power plants),
Save consumers $64 billion (net after investments), and
Prevent 320 million metric tons of carbon dioxide greenhouse
gas emissions each year.
An EERS and an RPS may be used in combination. Renewable and
efficiency requirements reinforce each other in several ways in the
states:
Texas has separate renewable and efficiency requirements.
The efficiency targets focus on peak demand--utilities are
required to avoid 10% of the expected increase in electric peak
demand through efficiency programs. They have easily exceeded
these targets.
Connecticut added to its RPS a separate tier under which
utilities are to save 1 percent of electricity use each year
through residential and commercial programs and combined heat
and power. Pennsylvania includes energy efficiency with certain
other resources in one tier of its alternative energy portfolio
standards.
Hawaii and Nevada added efficiency resources as options in
their portfolio standards--with higher overall targets--after
utilities claimed to have difficulty meeting renewable targets
(Nevada caps the amount efficiency can contribute).
California has a ``loading order'' that sets efficiency as
the preferred resource; once cost-effective efficiency measures
have been exhausted, utilities are to use renewable sources,
and only then traditional sources. The PUC sets targets for
utility energy-efficiency programs based on a study of their
potential savings.
While there are many ways to structure an EERS, here is one
approach. The EERS would apply to utilities that distribute either
electricity or natural gas. Distribution utilities are regulated even
in restructured markets. A size cutoff excludes very small utilities.
The EERS would have savings targets that ramp up to require new
electricity savings each year equivalent to 0.75% of utility sales, and
natural gas savings equivalent to 0.5% of sales. The best state energy-
efficiency programs currently meet these targets.
Utilities would be allowed to achieve the required savings through
a combination of customer energy-efficiency programs, customer combined
heat and power, and reducing energy losses in the distribution system.
Utilities also could be allowed to buy credits from other utilities,
other companies with similar energy-efficiency programs, or the
government. Any funds the government collects could then be reserved
for state energy-efficiency programs.
The Department of Energy (DOE) would be required to issue
regulations on eligible measures and on how to count the savings.
States would be given the option to verify and enforce compliance or to
have DOE assure compliance. Funding for the required programs would be
generated from a small surcharge on utility bills, under state
regulation. Under this proposed approach, it will be most important for
states to set rates in a way that utilities are not financially
penalized for reduced sales due to effective energy-efficiency
programs.
APPLIANCE ENERGY-EFFICIENCY STANDARDS
Recommendations for appliance efficiency standards.--Strengthen
appliance efficiency standards by:
(1) adopting additional standards based on negotiated
agreements,
(2) directing DOE regularly to review and update both test
methods and standards to keep pace with rapidly changing
technology, with accelerated consideration of the products with
the greatest energy savings,
(3) clarifying DOE's authority to set standards that best
serve the public interest, including multiple specifications
for a single product, and regional standards,
(4) clarifying that federal preemption does not apply to
products for which there is no federal standard, and
(5) providing adequate and stable funding for the DOE
program.
Appliance standards have been one of the most effective energy-
efficiency programs. Standards in place today are expected to save 7
percent of U.S. electricity use and reduce greenhouse gas emissions by
65 million metric tons by 2010, and are expected to save consumers $234
billion (this is net savings--after repaying any increased first-cost
for more efficient appliances). Energy efficiency advocates and states
have identified at least 15 appliance types with significant energy
savings opportunities but no federal efficiency standards at present.
Adopting efficiency standards for these 15 products alone could save 52
TWh of electricity and 340 billion cubic feet of natural gas annually
by 2020, and save consumers $54 billion in energy costs between now and
2030. Even more could be saved by updating existing federal standards.
In recent years the Alliance and other energy-efficiency advocates
have focused much of our attention on lengthy delays and lack of
progress at DOE in setting required appliance standards. Due to a
provision in EPAct 2005--and a lawsuit--last year DOE set an explicit
schedule for appliance standard rulemakings, which was later adopted in
a court order. So far, they have met that schedule. However, the two
new DOE-proposed standards (on distribution transformers and
residential furnaces) were far weaker than we and many others believe
is required by federal law, justified by DOE's own data and analysis,
and needed in order to meet the energy needs of our nation.
We urge you to monitor carefully both DOE's adherence to its
regulatory schedule and the actual outcome of the rulemaking process.
In addition, Congress should take additional steps to strengthen the
federal appliance standards and testing program and assure that it is
adequately funded.
First, since EPAct 2005 we have reached additional consensus
agreements with product manufacturers on new and updated standards. DOE
believes it does not have the authority to adopt one of them, for
residential boilers. In addition, efficiency advocates and industry
groups are currently in negotiations on several other products. We urge
Congress to act promptly to enact into law all negotiated agreements
that are reached.
Second, at present, there is no requirement for DOE regularly to
review and update all existing standards and test procedures. The
existing law does require a limited number of reviews for some
products, but subsequent reviews are discretionary. In addition,
Congress should establish a general requirement for periodic review of
all standards and test procedures every 5 to 7 years, updating them if
justified, and should provide funding for DOE to maintain this
schedule. In particular, DOE test methods for a number of products are
seriously lagging the pace of technology development, thus preventing
effective standards for those products (examples include tankless water
heaters, products that use standby power even when turned ``off,'' and
many appliances with advanced electronic controls). If DOE fails to
keep its standards up-to-date, Congress should consider allowing states
to act to limit the demands on their energy systems from those
products.
In addition, DOE has limited its schedule for setting appliance
standards to congressionally mandated rulemakings with a date certain.
This narrow approach has delayed consideration of some standards with
the greatest potential energy savings. For example, DOE has identified
furnace fans and residential refrigerators as two product standards
that offer the potential for very large energy savings, but the agency
has yet to even schedule these rulemakings. Congress should direct DOE
to begin these two important rulemakings as soon as possible and to
complete them no later than 2011.
Third, Congress should allow DOE to consider alternative approaches
in setting appliance standards where these better serve the intent of
the law: to maximize cost-effective energy savings. We offer several
examples:
DOE has taken a very narrow view of the statutory language
regarding standards it can set. Congress should clarify that
DOE may include two or more specifications for different
features of the product that all contribute to energy
efficiency. One example is the authority for DOE to set
standards for air conditioners in terms of both average
efficiency, which reduces consumer bills, and performance
during the hottest summer days, which provides added benefit by
easing the strain on electric utility systems during peak
demand periods. A second example is the ability to set
efficiency requirements for both direct electricity use and
consumption of (heated) water in the case of a dishwasher or
clothes washer.
Congress should explicitly authorize DOE to set regionally-
appropriate appliance standards for climate-sensitive products
such as furnaces, boilers, air conditioners, and heat pumps,
since regional weather conditions can significantly affect the
feasibility or cost-effectiveness of a given technology or
efficiency measure. In addition, in northern states colder
inlet water temperatures can greatly reduce the capacity (but
not the efficiency) of certain classes of water heaters, and
also affect the cost-effectiveness of some efficiency measures.
The implications of these regional factors for truly comparable
water heater ratings should be studied by DOE.
In addition, expedited procedures for consideration of
consensus standards proposed to DOE may speed up adoption of
non-controversial standards.
Finally, Congress should make it clear that federal law does not
preempt states from setting their own appliance standards, in the
absence of a federal standard in place. This principle has generally
been upheld in interpretation of the federal appliance standards laws,
but in some cases it has been argued that the mere authority for DOE to
set standards should preempt the states, even if DOE fails to exercise
that authority. If DOE fails to act, or if it establishes a ``no
standard'' federal standard, a state should be able to adopt its own
energy-saving standards for that product.
BUILDING ENERGY CODES
One of the most important opportunities for reducing energy use and
costs is by designing and constructing a new building to be energy-
efficient from the start. Every new building that is not efficient
represents a lost opportunity--one that will likely be with us for
another 30-50 years or longer, a time frame that will almost certainly
see much higher prices and much more intense concern over energy
supplies, air pollution, and greenhouse gas emissions.
There is cause for optimism in the growing interest shown by
builders and developers in green buildings and rating systems such as
the U.S. Green Building Council's LEED; the bold new policy commitments
to energy efficiency targets by the American Society of Heating,
Refrigerating and Air-Conditioning Engineers (ASHRAE), the American
Institute of Architects, and the U.S. Conference of Mayors; and the
federal government's own commitment (in EPAct 2005) to design new
federal buildings to be 30% more efficient than current practice. But a
great deal of work remains to be done. Congress can support and
encourage these broader initiatives with specific actions that take
best advantage of federal leverage in building codes and federal
financing for home mortgages.
Recommendations for assisting state energy-efficient building
codes.--
(1) Congress should direct DOE to support a process of
continuous improvement in the model energy codes for both
residential and commercial buildings, targeting a 30 percent
reduction in new building energy use beginning in 5 years and
50 percent savings within 10-15 years.
(2) To make sure that energy codes are not just a paper
exercise, Congress should fully fund the programs for state
code compliance and training authorized in Section 128 of the
Energy Policy Act of 2005.
Present law requires that DOE review any updates in residential or
commercial model building codes, to determine if the revision improves
energy efficiency. Following that determination, each state is required
to review and, for commercial buildings, update its own building code
to meet or exceed the model code. However, there is no penalty for a
state that fails to comply.
Two changes are needed. First, DOE should set a goal for continuous
improvement of the model building codes. Rather than wait passively for
action by others, DOE should instead take the initiative to engage with
organizations such as ASHRAE and the International Code Council to
advance the model codes steadily toward specific targets: 30 percent
efficiency improvement beginning in 5 years, for both residential and
commercial model codes, and at least 50 percent improvement in 10-15
years or less. ASHRAE has already adopted a similar goal, but there is
no similar urgency for residential buildings, and it is hard to move
diverse, consensus-based organizations to take ambitious action. DOE
support is needed both for technical underpinnings and to represent the
national interest in reduced energy use and greenhouse gas emissions.
Second, the federal government should adopt stronger incentives to
assure state action in updating and achieving full compliance with the
energy codes. States should be required to adopt strong codes for
residential as well as commercial buildings. And in a recent review of
residential energy code compliance studies from a dozen states,
compliance rates were found to vary widely, but the average was far
below 100 percent, and typically closer to 40 to 60 percent. A number
of studies have pointed to the constraints, including staff time and
expertise, facing many local code enforcement agencies in making sure
that energy code requirements are met, both at the design and permit
stage, and in verifying actual construction and installation practices
on-site.
The code compliance program authorized under Section 128 of EPAct
2005 is a small but important step toward providing an incentive for
states to adopt and enforce up-to-date energy codes; it should be fully
funded. In addition, DOE has not made the required determination of
energy savings on any recent code updates: the 2003, 2004, or 2006
residential IECC or the 2001 or 2004 ASHRAE commercial standard.
Congressional oversight is needed to ensure DOE meets its important
duty.
Recommendations for federal standards for manufactured homes and
buildings funded by the federal government.--
(1) Congress should require HUD to strengthen the national
energy efficiency standards for manufactured housing to the
same levels required by the model building code for site-built
homes.
(2) Congress should require that federally insured mortgages
be available only for homes that meet or exceed model energy
efficiency codes.
(3) Congress should require that all DoD Privatized Military
Housing not yet constructed be designed to meet or exceed the
current efficiency levels for an Energy Star home.
About one in 12 new homes in the United States is a manufactured
housing unit (147 million in 2005). Because these homes are factory-
produced with many standardized components, manufactured housing units
should be inherently more energy-efficient than their site-built
counterparts. For example, it is much easier and more cost-effective to
achieve an air-tight duct system in the factory than on a construction
site. Instead, manufactured homes are generally much less efficient
than site-built homes, due to poorly insulated walls and roof, single-
pane windows, and inefficient heating and cooling systems. A 2004
Pacific Northwest National Laboratory report found that improving the
energy efficiency of a manufactured home, not even to the current IECC,
would save an average of $150-$180 per year. The initial cost would be
about $1,000 to $1,500.
Congress directed that the manufactured housing efficiency
standards be based on life-cycle cost analysis, but HUD, which is
responsible for adopting the Manufactured Housing Construction and
Safety Standards (MHCSS), has not updated these standards to keep up
with changing energy prices and advances in energy-saving materials and
equipment. As a result, the ``HUD-code'' standards are now well below
the comparable energy efficiency code requirements for new site-built
homes. For example, a new manufactured home built for Minnesota today
is required to have only as much wall insulation as a site-built home
in Miami--and the ceiling and floor insulation levels required by HUD
code for that Minnesota manufactured home wouldn't even meet the site-
built model code requirements for Miami.
Many of these manufactured units are sold to low and moderate
income families--those who can least afford to pay the rising utility
bills for gas, electricity, and in some cases propane heating. And
often taxpayers end up subsidizing the ongoing costs to operate these
inefficient housing units through the Low-Income Home Energy Assistance
Program (LIHEAP) or through the Low-Income Weatherization Assistance
Program, which helps pay for energy-saving retrofits. It is far easier
and cheaper to make these manufactured homes more efficient in the
first place.
To qualify for a federally insured mortgage, a new home should be
required to meet or exceed the efficiency levels of the model energy
code (currently the 2006 IECC). This will assure that federal taxpayer
funds are not used to underwrite inefficient new homes with higher
utility bills--a different kind of hidden, long-term ``mortgage.''
Updated standards would affect a lot of housing: a 2003 U.S. Census
Bureau survey found, for homes constructed in the previous four years,
486,000 FHA mortgages, 225,000 VA mortgages, 29,000 USDA mortgages, and
38,000 public housing units.
Current law requires HUD and the Department of Agriculture (USDA)
to set energy-efficiency standards for:
Public and assisted housing,
New homes (other than manufactured homes) with mortgages
insured by the Veterans Administration and Federal Housing
Administration, and
New single-family homes with mortgages insured, guaranteed
or made by USDA.
However, the agencies have never changed the standard from the
legislated backstop of the 1992 Model Energy Code (the predecessor to
the IECC) and ASHRAE Standard 90.1-1989. EPAct 2005 only required
public and assisted housing with HOPE VI grants to meet the 2003 IECC.
In order to move military service members and their families out of
outdated housing units, Congress authorized the Department of Defense
(DoD) to enter financial partnerships with builders to construct an
estimated 185,000 homes using joint funding. DoD is leasing the homes
for up to 50 years, and will pay the energy bills through utility
allowances to the military personnel. DoD imposes many standards on
these units, and energy efficiency criteria are established for some
projects, but there are no uniform energy standards applied to all
Privatized Housing projects.
If these homes are built to ENERGY STAR Homes criteria, each
military family--and ultimately the federal taxpayers--will save an
average of $300 a year in energy bills. The added initial cost of
Energy Star homes is about $1,500 to $3,000.
energy efficiency tax incentives
Recommendation for energy-efficiency tax incentives.--Provide long-
term extensions, with improvements, of tax incentives for highly
efficient new homes, home improvements, commercial buildings, and
appliances.
Other important measures to save electricity and natural gas are
outside the jurisdiction of this committee. But the Alliance will not
let an opportunity go by to emphasize the importance of extending and
building on the tax incentives for energy-efficient new homes, home
improvements and heating and cooling equipment, commercial buildings,
and appliances that were in EPAct 2005. These incentives have great
potential to transform markets for energy-efficient technologies, but
they are in effect for too short a time. A large commercial building
initiated when the bill was signed last August will not be finished
before the commercial buildings deduction was set to expire in
December, 2007. While it was extended late last year, a building
initiated now could not be finished before the new expiration date in
2008. The Alliance strongly supports long-term extensions of the tax
incentives, with some improvements that have been worked out with other
stakeholders--notably a performance-based incentive for whole-home
energy-efficiency retrofits that picks up where the current home
improvements credit leaves off.
INCREASING ENERGY EFFICIENCY IN FEDERAL FACILITIES
When working to address inefficient energy use, the federal
government needs to look no further than its own buildings to start
reducing wasteful energy consumption. The Alliance to Save Energy
estimates that the federal government wastes one billion dollars a year
in its buildings alone through inefficient energy use. This occurs
despite long-standing executive orders and federal legislation. The
problem is three-fold:
The federal agencies do not have sufficient appropriations
to make the necessary upgrades to reduce building energy use.
Because of this historical problem, the unique Energy Savings
Performance Contracts (ESPC) were created. With an ESPC, a
federal agency can contract with a private energy service
company to have the facility efficiency improved without any
up-front cost to the federal taxpayer because the contractor
pays the initial cost and is repaid out of guaranteed energy
savings provided by the improvements. Unfortunately, this
program authority lapsed in 2003-2004, and, while now
reinstated, agencies are not taking full advantage of these
contracts, leaving needed improvements lingering.
The federal agencies do not have adequate oversight and
pressure to meet their statutory energy saving goals. While the
federal agencies are required by law to reduce their energy
use, they are not held to task by the White House or by
Congress. The missions of the agency are always paramount;
however, a concerted commitment from the President and his
cabinet is needed so that the agencies will place enough focus
and priority on achieving energy savings in their facilities.
The Department of Energy's Federal Energy Management Program
(FEMP) is the primary resource for federal agencies to turn to
for technical guidance and assistance with energy improvements.
Unfortunately, the FEMP program continues to receive funding
cuts although its mission and responsibilities were increased
in EPAct 2005. Congress and the administration need to
recognize the benefits of FEMP and provide the much needed
funding increases.
TECHNOLOGIES AND INTEGRATED SYSTEMS FOR LOW-ENERGY, HIGH-PERFORMANCE
BUILDINGS
Recommendation for a buildings RD&D program.--Establish and fund a
program to develop and establish in the market net-zero energy
buildings, with an emphasis on commercial buildings.
To create the technology and knowledge base needed to achieve the
long-term goal of net-zero energy (``carbon-neutral'') buildings, the
federal government needs to make a substantially greater commitment--in
close partnership with states, utilities, and the private sector--to a
comprehensive, multi-year program to transform building technologies
and practices. This transformation must go well beyond individual
technical measures to include a design process that integrates
sustainability from the start, and effective means of managing
construction and building operation to assure continued high
performance over the lifetime of the building and systems.
The need is especially acute in the commercial buildings sector,
where the challenge of maintaining performance, comfort, occupant
health, and amenities while radically reducing energy consumption or
significantly increasing costs is even greater than for smaller
residential buildings. Yet it is ``net-zero energy homes'' rather than
commercial buildings which have received the lion's share of funding
and program attention to date by DOE, utility and state programs, and
private partnerships.
Investing 1/10 of one percent of the $135 billion in annual energy
costs for all U.S. commercial buildings would represent a substantial
increase over the current federal efforts by DOE and all other
agencies. But this is the equivalent of less than a half-day (12 hours)
of energy costs for the nation's commercial building stock--a
reasonable price to assure that we really have the technology to cut
energy use by more than half over the next two decades. To be
effective, these funds would need to be directed toward a well-
orchestrated plan to address innovation in technology and practices,
strategic and well-monitored demonstrations of these new methods, and
paths to effective large-scale deployment in new and existing
commercial buildings.
Such an integrated strategy requires careful preparation and broad
engagement of the building industry, the design professions, financial
institutions, government policy-makers, and private owners and
developers. There is growing interest in sustainable design but the
industry is fragmented, risk averse, and driven largely by short term
economic interests. By itself the federal government cannot create the
needed technologies, nor force the market to accept them. But it can
and should be the catalyst in partnering with industry, states, and
utilities for these essential steps.
CONCLUSION
The Energy Policy Act of 2005 included some important measures to
reduce building energy use, including new appliance standards and tax
incentives. But, while helpful, they were not aggressive enough to
address the critical energy issues facing our nation. In the last year
and a half, concern about the linked issues of energy prices, energy
security, and global warming has only grown. There are measures we
could and should take, such as consumer education, that would have an
immediate impact. But polls also show that a large majority of
Americans are rightly more concerned that Congress find long-term
energy solutions than that Congress quickly address current prices.
There is an opportunity now to enact significant energy-efficiency
measures that will benefit the economy, the environment, and energy
security for years to come. The buildings being designed and
constructed today will determine our energy use for decades to come.
The Alliance urges you to seize the opportunity to reduce energy waste,
supply shortages, price volatility, pollution, and global warming, to
transform energy crises into economic opportunities.
Senator Dorgan. Ms. Callahan, thank you very much. I know
that the Chairman of the full committee, Senator Bingaman, has
to leave so I want to call on him for questions first, so that
he's able to ask them prior to his departure.
The Chairman. Thank you very much, Mr. Chairman. I thank
all the witnesses for the excellent testimony.
Let me ask Jim Rogers if I could, just about something that
Kateri has in her testimony here. You say in your written
testimony that we should set rates to incentivize utilities and
customers, and then you go on to say typically utilities earn
more by selling more energy. It's important to decouple utility
revenues from sales or to provide utilities with performance
incentives for effective energy efficiency programs, in order
to align utility benefits with customer benefits. For example
Northwest Natural, a natural gas utility in Oregon, has a
conservation tariff that helps it promote energy savings rather
than sales.
It seems to me that utilities are in the best position to
encourage and help consumers to save energy, and one of our big
problems is this exact one here, which is that for utilities to
do that under the current rates that are in place in most
States, it's a way of cutting their revenue. We have got to
figure out a way to deal with that. I wonder what you think
Congress or the Federal Government or any of us could do, to
encourage these rates to be rewritten, so that there's a
coincidence of interest between the utility and the consumer in
saving energy.
Mr. Rogers. Thank you, Senator. There are several ways to
approach this. First of all, California's the only State that's
actually decoupled earnings from sales on the electric side.
There's been a movement across the country with gas
distribution companies to do the decoupling. I think that has
occurred in seven to eight States. In fact, in Ohio and North
Carolina for the gas distribution companies they have
considered that, so decoupling is one way. I think there are
many ways for this to happen and from a congressional
standpoint, I think it would be very important to encourage the
States--specifically the State utilities who have the primary
jurisdiction over this--to address the regulatory model and ask
them to report back to Congress after a specified period of
time and report on how they are addressing the issue. It's
primarily tied up and related to the charter of electric
utility within the State.
I firmly believe, as I said in my testimony, that utilities
have a relationship with the customer. They have a lower cost
of capital than most of their customers. They're used to
payback periods of 15, 20 and 30 years--most businesses require
paybacks of 3 to 5 years--and most importantly, they're in a
position to be able to provide universal access to energy
efficiency whether you're rich or poor, or on fixed income, low
income, whether you are a big business or a small business. I
think it's critical that utilities provide that universal
access in the same way they provide access to electricity
today. The way I think about it is that we get paid for
producing megawatts, so we should also get paid for creating
``Sav-A Watts''. I think that we can get that done, but it's in
the State utility commissions where it has to get done, and I
think that would lead to a significant increase in energy
efficiency.
The last thing I would say, and I think is important, I
just learned the other night having dinner with my energy
efficiency team. They said that mainly energy prices, when they
survey customers, are in back of mind, not top of mind. To get
customers to make choices about energy efficiency, you often
have to move it to top of mind, and because cell phone bills
and cable bills are usually much higher than electric bills,
it's hard to move it to top of mind, but one of my team said
something that was really eye-opening to me. He said maybe what
we ought to do is push it further to back of mind, and the
thought here is to change our concept of standard service.
Today to go to a green tariff, or use energy efficiency
programs, customers have to elect into it. Maybe to change the
paradigm is that our standard service becomes the green service
and the one with the devices to control their energy and they
have to default out of that standard service into what today is
our standard service, so just that change could translate into
dramatic change in the utilization of new technology in the
energy efficiency area.
The Chairman. Since I've got 1 second left, right, or I did
when I started to talk: let me just ask what's your reaction to
this energy efficiency resource standard idea? Should we be
adopting a Federal energy efficiency resource standard as
Kateri recommends?
Mr. Rogers. I think it's a good idea but it wouldn't be the
first thing I would focus on. I think within the concept of
renewable portfolio standards because different parts of the
country have different generation mixes, I think an energy
efficiency requirement, not so much a requirement, because a
requirement said in itself are difficult. Some parts of the
country are growing 6 percent; other parts are growing at 1
percent; some are having decline in demand. I think the
important thing is to get it right at the State level and then
make sure at any national portfolio standard, we include
conservation as something that you could do to hit your goals.
Then over time Kateri's idea ought to be reviewed and analyzed
and looked at closer, but I think it's a series of things that
need to get done, and my only difference with Kateri's is the
order.
Ms. Callahan. Senator, can I take 1 second of your time to
add something? It was too difficult to try and summarize in the
statements, but we were asking that you explore energy
efficiency resource performance standards. I also just want to
say that to be something you look at, renewable portfolios
standards, as Jim mentioned. We'd like to see energy efficiency
to be considered as one of those resources that allow you to
comply. That is an approach that has been taken by a number of
different States--probably most notably Pennsylvania and
Nevada--but that is something that we would like you to
consider as you may move forward with an RPS.
The Chairman. Thank you.
Senator Dorgan. Senator Bingaman, thank you and thank you
for joining us today.
Senator Murkowski.
Senator Murkowski. Thank you, Mr. Chairman. I appreciate
the testimony of all of you here today. I think it's been very,
very helpful and very interesting.
You mentioned, Mr. Rogers, in order to bring it to front of
mind, you have to pull it back up. Well, I can say in Alaska,
we're paying $4 a gallon. Actually, I was talking to a
constituent this afternoon and I've got some villages up north
that weren't able to get the diesel into their communities this
winter because of low rivers, and they're paying $8-plus. It's
a tough winter for them out there, so it's definitely front and
center in their minds, but it brings me to the issue of cost.
We all want to think we are being more efficient but boy, that
expensive hot water heater or the technology I have to put in,
it doesn't make any difference if it's in a commercial building
or into a residential building, it really does come down to the
cost aspect.
Mr. Stewart, I want to start off with you. You had some
very interesting statistics, and I think some very ambitious
goals as to how we get there, but you do acknowledge that we've
got an impediment to energy efficiency based on the perceived
cost. How do we let people know that you might be paying up
front but your savings overall--as we saw with Wal-Mart--can be
recouped, and in relatively short order? How much counseling,
if you will, do you give to those in both the private and
public sector to encourage the right move?
Mr. Stewart. Thank you, Senator. That really is one of the
biggest impediments we do have. What we find is that most
clients for the policies--and it's prevalent in the private
sector, as it's typical mandated in the governmental sectors--
differentiate between capital expenditures and operations and
maintenance budgets. So while we're working with the design
team to initially build the building, the first cost issues and
then the long-term tail of 30-,
40-, 50-year life of the building and its energy use doesn't
come into play. The folks who are overseeing the production to
the building up front aren't really paying attention and often
times the folks who will be running the building aren't at the
table with us as we're doing the design work. So, I think that
one of the educational things that we all need to undertake is
to understand it's that long-term life of the building, not the
little part that we do up front and the design exercise, that
has the biggest impact.
Senator Murkowski. Mr. Zimmerman, from Wal-Mart's
perspective, you've looked at that long-term picture, and as a
company you've made a decision that you're going to invest up
front to save later. You mention that you were giving tours to
some of the other companies in the business. Is it you being a
leader that's making a difference, or are we still going to be
struggling with the reality that the capital construction costs
just don't allow for this new technology to come into play?
Mr. Zimmerman. You know I'd like to say that the message is
getting out there, but I'm not quite sure it is. A lot of the
people, as Mr. Stewart mentioned, involved in the core
business, the facility managers, the energy managers, they know
that these investments result in immediate positive cash-flow.
I've actually had them come to me, like from some of our retail
competitors, and say, ``Would you share your message with our
CEO, because we can't convince them.'' So the message is
getting to one level of the organizations, but not necessarily
to the other. But these paybacks are so phenomenal, it's just
mind-boggling that it isn't catching on quicker than it should.
Senator Murkowski. And how do we do it at the residential
level? Mr. Hebert and Mr. Christianson, from two different
States--here both northern States--where are you struggling
with this? How do we convince the consumer who's either
building a new home or looking to do some remodeling that
they're going to be saving money here, Jack?
Mr. Hebert. We have a little different situation in Alaska
because as I believe we're different than the rest of the
Nation. Most of our electric companies are cooperatives owned
by the members, so in our case the electric cooperative--rather
than build a new power plant because of increased consumption--
it's a better investment for them to have incentives to the
builders and the homeowners to use less energy. For instance,
Golden Valley Electric in Fairbanks has a program called
Builder Sense''. You get a credit; your customer will get a
credit off of their future electric bills for any electric
fixture that's put in that is highly energy efficient, as
simple as a fluorescent rather than an incandescent light. It's
$25 dollars a fixture. So in the end when you sell that home to
your customer, they don't have an electric bill for a couple of
years.
The other piece that Golden Valley Electric is doing is
they have a program that we call SNAP. It was developed by a
green power group of citizens--sustainable, natural alternative
power--and we're trying to embed these systems into the house
so that the house is actually producing electricity when it
can. For example, on the photovoltaic side, even though there's
3 months of the year where our photovoltaic energy isn't high,
if you embed photovoltaic systems in the house, you can sell
back the energy for a credit to the electric cooperatives, so
that in the months that you don't produce electricity you get
that credited back. It's this cooperation thing.
Senator Murkowski. My time is up, but Mr. Christianson, did
you want to add anything?
Mr. Christianson. Just very briefly, I mentioned that that
obviously is a key issue, especially with new housing
construction. I have friends actually building a house right
now, and they did decide to put a ground source heat pump
system into their home, even though the capital cost was
significantly higher than a regular high efficiency gas system.
They plan on staying in that house for a length of time, and
they'll see the payback on that over the time that they're in
the home. What we are doing is trying to work closely with the
utility companies in the State to provide an educational
program to prospective homeowners.
Senator Murkowski. Thank you. Mr. Chairman.
Senator Dorgan. Senator Murkowski, thank you very much.
First of all, let me thank all of you. I think you've all
contributed to an interesting discussion about the issue of
efficiency. Efficiency is always regulated, or generally
speaking ``regulated'' is something of lesser importance than
production and some of the other enterprises, but I think
you've brought an interesting perspective to us.
A couple of things, Mr. Zimmerman. Your testimony is very
interesting, and what your testimony seemed to say is that it
made good business sense to do what you're doing. You talked
about a payback of less than 2 years. If that is the experience
of your business, why is that not the experience of all
business who might look at these issues--to say it's a very
quick payback in our business with respect to energy efficiency
methodology?
Mr. Zimmerman. Well, as I talked to a lot of our
competitors, they know within the facilities group, the
engineering groups, that those paybacks are achievable; they
just have a very hard time freeing up the first cost capital
from their senior executives. It's just the fact that most
building enterprises are so focused on first cost the paybacks
just really don't enter into the discussion, unfortunately.
Senator Dorgan. You're showing them how but you're not
loaning them the money.
[Laughter.]
Mr. Zimmerman. But we are sharing with them the vendors
we're using, and the real-life experiences, to hopefully convey
that this isn't just theory.
Senator Dorgan. But I think the point you've made today is
a very important point. If in fact there is a relatively short-
term payback for these efficiency strategies and technologies,
there ought to be ways for us to tip the balance, even with
just some minor incentives. A number of us have disagreements
with the marketing strategies of Wal-Mart--you're familiar with
all that national debate--but there's no question that Wal-Mart
is an unbelievable merchandiser and a very savvy business
competitor. If you, with that savvy judgment, can take a look
at efficiency and say, ``This makes good business sense for us.
This not only justifies the investment. This compels the
investment because of the short-term payback,'' it ought to be
a lesson for others in terms of what they can do and what they
should do, looking at efficiency. So your message today is very
helpful.
Mr. Zimmerman. Well, Mr. Rogers and Edison Electric
Institute had me as their speaker to their major customer
forum, I think it was called, where the La Quinta's, the
Marriott's, the Walgreen's--all of those major users were
there. That's where I was approached by so many of them saying
if only our CEO's could hear this message.
Senator Dorgan. Let me ask Mr. Rogers a question, because
in some ways it's counterintuitive. I think you've already
answered the question, but I want you to answer it again.
Here's a company that makes money presumably with every
kilowatt hour of electricity you sell. Why is it in your
interest to suggest people use less or purchase less from you?
Mr. Rogers. Well, I think there are a couple of reasons
that make sense. When we look at the growth and demand in this
country, the demand for electricity is going to be up 50
percent--some are projecting by 2030. When we look at this
tremendous growth and demand, you have to have the mindset that
energy efficiency is a fifth fuel. You need to use it, and when
we do our planning to meet that demand, we use it as a fifth
fuel. But I think this discussion that I've been listening to
really makes the point that that is the business we should be
in. For instance, if you have 3 million customers, then you
have the capability to put a device in a refrigerator and turn
it off for 2 hours for the peak time or to recycle an air
conditioner for 2, 3 hours, and you can do that across your
system. It would have a dramatic impact on the amount of power
you would need during that peak period. That's an example of
getting major buy-in by all the residential customers, because
the peakiest part of our load is residential. You talk about
making investments, it's a natural thing. Our company has a
capital program where we'll spend over $10 billion in the next
3 years.
For us to invest that money in energy efficiency
investments, in homes and in businesses, is an extension of
what we do today. I think that if we get the rules right and we
go down that road, when somebody has discretionary income of
$300--will they go put a device in their refrigerator or will
they put a device to recycle their air conditioning? Probably
not, but if we as a supplier are prepared to spend that $300
and put those devices in, I think that's where our role with
our customer can make a difference.
I also have found in our customer surveys that our
customers are happier and more satisfied with us when we're
also delivering ways for them to reduce their usage. So to stay
in business, you need customers that are satisfied with what
you're doing. This natural extension of what we do today will
translate into more satisfied consumers in the future, and will
help us achieve national goals, both energy and environmental
goals.
Senator Dorgan. So there's actually--and I don't say this
in a pejorative way--but there's actually a commercial side to
efficiency from your standpoint. There are technologies that
you can market to customers.
Let me ask you a question about the future. Is there a
future in which at some point a customer, any customer of
yours, perhaps can take a look at what is the temperature in
these three rooms? I left the lights on in these two rooms and
using a computer, turn the temperature down in those areas of
the home, those zones and turn the lights off? There was a
little company in Fargo, North Dakota called Beathome.com--and
they were so successful, of course, they were purchased by
another company--but the point of it was, that they use sensors
in a home in a very sophisticated way to maintain the electric
usage and the HVAC system. I was really impressed. I have no
idea what it costs, but my guess is that at some point in the
future virtually every home will give every homeowner an
opportunity to go to a computer anywhere and turn down the
temperature in their home. Is that something that you see?
Mr. Rogers. That technology is available, actually. There's
a little company in California called DUS that is developing
the sensors that can be used to help pick up and send the
signal. The other thing that's going on, in addition to this
development technology: we've changed how we think about our
meters. We view our meters as really computers, and in a sense
they have the ability to do two-way communication--whether it's
through the internet or through the broadband over the power
line. So the sooner we can create these communication channels,
the better able you would be able to control your energy use.
Senator Dorgan. Thank you. Mr. Christianson, the President
has recommended some budget cuts in the programs you talked
about, especially in your State Energy Program--the SEP--and
the weatherization program. You're involved in both of those.
Also there are budget cuts in LIHEAP, which is a different
program to help low income folks. I assume that your
organization for whom you testify today is not supportive of
those budget cuts in weatherization and the State Energy
Programs. Is that a correct assumption?
Mr. Christianson. That would be correct, yes.
Senator Dorgan. And why do you not support the budget cuts?
Mr. Christianson. Well, we feel that with both programs
again we've used those programs as kind of the foundation of
our efficiency efforts in our State. We leverage a great deal
of other money through those programs and we've done a variety
of very innovative and successful efficiency efforts with
those. The weatherization program: we weatherized about 1,300
homes per year in North Dakota, and obviously with our climate
there for those low-income residents that's extremely
important.
Senator Dorgan. But it is a contribution to efficiency. I
mean I've been to the sites where weatherization is taking
place. It seems to me to be an enormous contribution to
efficiency.
Mr. Christianson. Absolutely.
Senator Dorgan. And finally, Mr. Stewart, help me
understand something. Carbon neutrality by 2030: how would we
achieve carbon neutrality as long as we--and this is a very
fundamental question, you probably think why on earth would he
ask it--have to heat all these buildings?
Mr. Stewart. We begin to look at the sources of energy,
Senator, and start to utilize not only what we can do with the
design of a building, its placement, its orientation, the way
its constructed, but also we have some of our members who are
beginning to work at designing into the building energy sources
that don't rely on fossil fuels, designing new photovoltaic
systems. Technologies now exist where rather than panels,
vision glass can be used. We're also at the point where we're
integrating wind turbines and other things like that, so the
opportunities exist with emerging technologies.
Senator Dorgan. It sounds like we have to rehabilitate our
buzzers here.
[Laughter.]
Senator Dorgan. Thank you again for your testimony, Mr.
Stewart. I think the perspective from the architects of our
country is a very important perspective, and you offer those
who are producing buildings expertise on technology on how to
reduce the cost of heating and cooling and providing
electricity to those buildings. We appreciate that perspective.
Senator Murkowski.
Senator Murkowski. Just a follow up on that. I had a
meeting with several Alaskan architects last week and they were
talking about some of the things we can do with construction,
but they also reminded me of just the little day-to-day things.
I keep my Blackberry charger plugged into the wall, and then
when I want to charge my Blackberry I plug it in. But while
it's sitting there in the wall, it's sucking juice. It's the
little things we don't even think about. So we all need to
further our education efforts.
Jeff, I wanted to give you an opportunity to just brag a
little bit on the cold climate housing facility that we have up
north, because we do have those sensors built in that will tell
you--well, you tell them--what goes in within the individual
rooms. It's pretty amazing.
Mr. Hebert. Well we're working with a small company called
Siemens----
[Laughter.]
Mr. Hebert [continuing]. And they're a partner in this
building. We are doing everything from measuring the occupant
load by the amount of respiration to measuring the outside air
quality. We have a lot of outdoor air quality issues related to
smoke and wild fires: one hundred times what is considered
healthy air, we had 2 years ago, outside in our natural
environment. So in any case, this system is measuring
everything from outside air to inside air to the ambient light,
as was explained before, so that when the room isn't occupied
or the ambient light is high enough, it goes down.
We also want to develop nanosensors that can be embedded in
the building itself to tell what's going on. Where we'd like to
go eventually--as we all know cars are complicated: we used to
all work on them, but now you basically have a computer that
plugs in to see what's wrong. In a home there's a lot of issues
with not just indoor air quality but the efficiency of your
boiler, if you're building up any kind of moisture in the
walls, these kinds of things. Nanosensors can go to a central
computer--again, expensive now, but on a mass scale wouldn't
be--so you would basically sign up for a service. This computer
would dial the service company when your boiler needed to be
tuned so it was at maximum efficiency. If the systems weren't
working in the house, you'd know those kinds of things. These
are the kinds of things that are possible with research that
will have huge impacts. So if you're using too much energy and
there's nobody in the house, the house doesn't have to be
operating all its systems. We all know that, and it could
automatically shut down. These are just some of the things that
we're doing.
Senator Murkowski. It's pretty amazing. I just wanted to
give you an opportunity to speak to that. I have one last
question and I'll just deliver it to all of you. There's been a
repeated reference to the Energy Policy Act of 2005 and all the
good things that were contained in it, but I think that we
recognize that there are many aspects of it that either have
not been funded or perhaps been underfunded.
The question is: do we need to be providing more incentives
in other areas, or do we just need to adequately and
appropriately fund those things that we have authorized under
EPAct?
Ms. Callahan. I'll take a stab at that. First, I want to
invite Senator Dorgan over to our new offices, because we can
control the lighting from all of our individual computers tops.
So you can come see how it works, if you like. I think that the
threshold industry issue, funding the programs authorized,
there's a critical need there. The funding for the Department
of Energy's energy efficiency programs has seen a real fall of
over one-third since 2002. The authorities would create new
programs and make existing programs more robust, so for our
part that is an essential first ingredient.
Also extending the tax incentives that are there for
homeowners to improve their homes--new home construction, new
commercial building construction--those are just imperative.
You mentioned getting to consumers. There is a $450 million
program for education and outreach to consumers that is
authorized in the Energy Policy Act and not one dime been
appropriated, so that's--starting there is a very, very good
first start.
Senator Murkowski. Anybody else?
Mr. Stewart. I would just add support for the tax credit
extension and increase. Both of those options are things we're
talking about with various Members of Congress now.
Senator Murkowski. Good, I appreciate it, thank you.
Senator Dorgan. Senator Murkowski, thank you. One last
question to Ms. Callahan. The alliance has been at the
forefront for pushing efficiency standards for appliances for a
long, long time. I know some looked at that with raised
eyebrows, thinking, ``This is sort of the edgy extreme--why on
earth should we impose regulations on those that are producing
air conditioners?'' and all the sort of things that we expect,
when these proposals are made. Tell us if you would, at this
point since a substantial amount of progress has been made in
respect to refrigerators and HVACs, and a lot of appliances
have dramatically improved standards: is there any other low-
hanging fruit with respect to appliance efficiency?
Ms. Callahan. That's the beauty, we think, of energy
efficiency. It's the gift that keeps on giving. The advocates
have identified about 15 products that if we were to put in
place standards on those, or update standards that are just
old, we could save the equivalent of $54 billion by, I think,
the year is 2030, in avoided energy costs. So there is a lot
that can be done. We are working with the other energy
advocates right now and appliance manufacturers to try to
negotiate standards. Then we can deliver appliance standards to
the Congress and say, ``Look, the manufacturers have agreed--
they can meet these standards if imposed by `X' date,'' and
have those modified so we can shorten the regulatory process to
get them in place. So the simple answer is yes. There are a lot
of products and we keep inventing new products, large-screen
plasma TVs, things like that, where we're going to have to
continue to update and invent new standards.
Senator Dorgan. But some consider that government
interference, right? I mean, I remember the SEER 13 debate on
air conditioners.
Ms. Callahan. I think that's true. My hope is that we're
gaining a growing awareness that these can be done in a way
that manufacturers can accept them. One of the things on which
we're working with the manufacturers right now, Senator, is to
try and look at a package. That is not only just standards, but
it's early tax incentives, to help them make the changes that
they need in their product line-up and their manufacturing to
actually get us those. So we are really trying to work
collaboratively. These are the basics, in a sense; we're not
going to do any worse then this. There are a lot of programs to
try to get above the standard level, whether it's Energy Star
or tax incentives, and we advocate those as well. It seems to
make manufacturers more receptive to allowing efficiency
standards to be put in place.
Senator Dorgan. And so the technology exists in many cases
to improve efficiency but the balancing act is between
technology and cost in some cases, correct?
Ms. Callahan. That's absolutely right, Senator.
Senator Dorgan. Let me ask you, if you would--just as a
last point of this committee--describe for all those who may
not know the Energy Star program.
Ms. Callahan. Well the Energy Star program is a voluntary
program. It's managed by EPA and DOE and certifies products as
being more energy-efficient than the standard models on the
marketplace. It's available on a number of different products.
Actually there are Energy Star labels now for new construction
of new homes. There are Energy Star performance guidelines for
existing homes. So it really is a program that is a voluntary
labeling program that lets consumers, if you will, know through
a label that they're buying the most efficient energy product
available on the marketplace in that category.
Senator Dorgan. Thank you very much, and I think it's a
very successful model. Let me thank all of you. Often the issue
of efficiency becomes an orphan in the debate on energy.
There's so many other things that are the sexy items of
discussion on energy policy, that efficiency is often ignored,
but it should not be. Mr. Rogers you describe it as a fifth
fuel, which is probably an appropriate description today. I
think all of you have brought really interesting information to
the committee, and as we work through these issues, that
information will be a part of our progress in trying to
approach how to better achieve a greater energy efficiency in
this country. Thank you very much. This hearing is adjourned.
[Whereupon, at 3:50 p.m., the hearing was adjourned.]
APPENDIX
Additional Material Submitted for the Record
----------
Statement of Stephen R. Yurek, President, Air-Conditioning and
Refrigeration Institute (ARI)
Thank you for the opportunity to testify before the Committee
regarding efforts to improve the energy efficiency of buildings. My
name is Stephen R. Yurek, and I am the President of the Air-
Conditioning and Refrigeration Institute, or ARI. ARI is the trade
association representing manufacturers of more than 90 percent of North
American produced central air conditioning, and commercial air
conditioning and refrigeration equipment. Today, I am speaking on
behalf of the U.S. air conditioning and refrigeration industry to
express our support for federal tax policy that will accelerate the
changeout of older, inefficient commercial heating and cooling
equipment with newer more efficient products that employ the latest
energy efficiency technology.
Currently, the federal tax code for the depreciation-holding period
for commercial heating, ventilation, air conditioning, and
refrigeration (HVACR) equipment is 39 years. ARI would appreciate the
committee's support for a legislative proposal to modify the federal
tax code for HVACR equipment to reduce the depreciation period to 20
years as a meaningful way to improve the energy efficiency of
buildings. This change would contribute significantly to the
improvement of the environment by reducing energy demand and
eliminating the use of CFC refrigerants, while at the same time
reducing energy costs for building owners. Specifically:
Accelerated replacement of HVACR equipment is projected to
save 137 trillion Btus per year, enough to power 1.4 million
houses in America. It would also reduce carbon dioxide
emissions by 95 million metric tons by 2015, approximately the
equivalent of the CO2 emissions released by
approximately 16.5 million passenger vehicles.
Reducing the depreciation period for HVACR systems would
provide an incentive for building owners to upgrade to more
efficient equipment by allowing them to expense more of the
cost of the system each year. By replacing the building's
existing HVACR units, building owners and managers could lower
energy costs and reduce energy demand. For example, today's
chillers are 35 to 40 percent more efficient than chillers
installed 20 years ago.
Accelerated depreciation would provide an incentive for the
replacement of over 35,000 CFC-based chillers still in use as
of January 1, 2004. New uses of CFC refrigerants have been
banned in the United States due to their impact on the
stratospheric ozone layer.
The U.S. air conditioning and refrigeration industry employs
more than 150,000 workers and contributes $17 billion annually
to the U.S. economy. The HVACR industry exports $4.7 billion in
products annually, providing an industry trade surplus of more
than $2.1 billion. Lowering the depreciation period would
encourage building owners to invest in new systems, thereby
creating business for American manufacturers and contractors.
Representative Peter Hoekstra has introduced legislation H.R. 345
in the United States House of Representatives, H.R. 1241 that would
modify the tax code for this equipment. This legislation has received
significant bi-partisan support, with members of both parties
applauding the environmental benefits of removing CFC refrigerants,
increasing efficiency, and reducing electricity demand. The 200 member
companies of ARI urge the Senate to consider supporting similar
legislation to promote protection of the environment while improving
the overall energy efficiency of buildings.
Thank you for the opportunity to provide testimony. I would welcome
any questions the Committee might have regarding the impact of this
legislative proposal.
______
Statement of Peter A. Darbee, Chairman, CEO and President, PG&E
Corporation
Chairman Dorgan, Senator Murkowski, and Members of the Committee, I
am pleased and honored to submit this testimony representing my
company, PG&E Corporation.
PG&E Corporation is an energy holding company headquartered in San
Francisco, California and is the parent company of Pacific Gas and
Electric Company. Pacific Gas and Electric Company is California's
largest utility, providing electric and natural gas service to more
than 15 million people throughout northern and central California. PG&E
is a recognized leader in energy efficiency and has among the cleanest
electric delivery mix of any utility in the country.
PG&E Corporation is a member of the U.S. Climate Action
Partnership, also known as U.S. CAP, which is a coalition of leading
businesses and environmental nongovernmental organizations (NGOs),
including Alcoa, BP America, Inc., Caterpillar Inc., Duke Energy,
DuPont, Environmental Defense, FPL Group, General Electric, Lehman
Brothers, Natural Resources Defense Council, Pew Center on Global
Climate Change, PG&E Corporation, PNM Resources, and World Resources
Institute. U. S. CAP has come together based on a shared understanding
that climate change is an urgent issue, and that the United States both
has a responsibility and opportunity to act now, act aggressively, and
enact policies to stabilize and reduce greenhouse gas emissions,
enhance energy security, and create economic opportunity by developing
and deploying new technologies.
U.S. CAP has recommended a set of public policy principles and a
legislative framework for Congress and the Administration, which will
accomplish these goals. We developed this framework and these
recommendations by putting the tough issues on the table. We challenged
each other with hard questions. We debated. And we came together to
move forward in those areas of common ground. This is difficult to do.
It takes tenacity. And most of all, it takes mutual respect, humility,
patience, compromise and a willingness to take the long-term view.
The members of U.S. CAP are committed to working with Congress and
the Administration to do the same. I believe that this dialogue will
help to forge the kind of understanding needed to tackle these
challenging issues.
THE CHALLENGE
As the head of a major energy company--and also as an American and
a great believer in our nation's unique place in the world--I believe
the United States has a responsibility to be at the forefront of
addressing global climate change.
If you look at U.S. greenhouse gas emissions compared with other
nations, the level of emissions from sources in the U.S. is vastly
disproportionate to our population. Our emissions are higher than those
of China and India combined, where the population is more than 2.5
billion people.
If you look at our wealth and prosperity relative to other nations,
it's clear that we can afford to make a difference.
And, if you look at our tremendous capacity for innovation, it's
clear that we have the human capital to develop the solutions. By
signaling to the market that we're serious about making progress on
clean energy, we can stimulate investment and engage our best and
brightest minds in this effort.
The longer we wait, the costlier the solutions will likely become.
On the other hand, by acting now, we preserve valuable response
options. We narrow the uncertainties. And we avoid the economic and
social dislocation of drastic changes later.
DEVELOPING A RESPONSE
So, in the face of this challenge, where do we start? U.S. CAP has
provided a roadmap for developing the kind of comprehensive approach
that will be necessary to address global warming. At the core of the
recommendations is a national, mandatory, market-based approach to
reducing greenhouse gas emissions--a so-called ``cap and trade''
program--that establishes clear short-, medium-, and long-term goals
and unleashes the power of the market to get the job done. In addition,
U.S. CAP identifies action that should be pursued aggressively in
advance of the implementation of a national cap-and-trade program,
including a full court press on energy efficiency.
Taking this approach will create clarity for business; create
consistency, by avoiding a state-by-state patchwork of emissions
trading markets; create focus for a comprehensive national energy
strategy; and allow us to begin to change the U.S. emission trajectory
today.
OVERVIEW OF U.S. CAP RECOMMENDATIONS
U.S. CAP provides recommendations on all the major components of
legislation that could be developed to address this challenge, and many
of these recommendations are focused on making the U.S. economy more
energy efficient than it is today. In brief, these recommendations
include the following:
Policies and measures to facilitate the development and
deployment of advanced transportation, power generation, and
energy efficient technologies;
Cost control measures, including the use of greenhouse gas
emissions offsets, banking, borrowing, a strategic allowance
reserve, and preferred allowance allocations;
Inventory and registry so that we can identify both the most
energy-intensive parts of our economy and where the most cost-
effective reductions can be achieved;
Credit for early action, to both recognize actions already
taken and encourage others to step up today; and
Sector-specific policies and measures, to complement an
economically sound cap-and-trade system to create additional
incentives to invest in low-GHG approaches in key sectors,
including energy efficiency. These measures will be
particularly necessary where near-term price signals are
insufficient to deploy existing energy-efficient technologies
or other market and regulatory barriers exist that impede their
introduction or utilization.
In addition to outlining these major recommendations from U.S. CAP,
I would also like to spend a little time addressing three key elements
that provide the foundation for many of the recommendations--the
importance of improving energy efficiency, the need to develop a
``smart grid'' for delivery of electric power to consumers, and the
important role that decisions on electric power generation and fuel
diversity play in the climate change equation.
ENERGY EFFICIENCY
A recent McKinsey study said that, through energy-efficiency, we
could reduce the growth rate of worldwide energy consumption by more
than 50 percent over the next 15 years. And McKinsey said we can do
this using the technology we have available today.
A major step toward unleashing this opportunity in the U.S. would
be federal action making it easier for utilities to actively advocate
energy efficiency. PG&E has been doing this for three decades. Our
energy efficiency programs, both electric and natural gas, have already
prevented 125 million tons of greenhouse gas emissions. These programs
also helped California escape the need to build 24 additional large
power plants, and they've saved customers more than $9 billion.
And we are doing even more. Between 2006 and the end of 2008, we
will invest an additional $1 billion in energy efficiency, avoid the
need for another 600 megawatts (MW) of electric power, and save
customers another $1 billion. In fact, in 2006, we exceeded our targets
and saved more than 160 MW of power and 10 million therms of natural
gas.
The reason we can do this is that, under state law, our revenues
are set at a fixed level by regulators. We collect what we need to run
the business and provide a fair return to investors. Any overruns go
back to customers. Any shortfalls are recovered later. This is known as
``decoupling'' and it means our financial health doesn't depend on
selling more energy. So it eliminates the financial disincentives that
otherwise stand in the way of encouraging customers to use less of our
products. Experience shows that this empowers utilities to become some
of the most effective advocates for energy efficiency. This is
especially true when you package this policy with incentives for
utilities. Utilities should be provided an opportunity to earn a return
on investments that save energy, just as they do when they invest in a
new power plant, and that earnings opportunity should be tied directly
to how well utilities help customers reduce their bills.
A number of states are already moving in this direction. U.S. CAP
recommends that Congress bring all 50 states on board by either
incorporating this policy into federal law or taking steps to strongly
encourage states to do so. We also need stronger energy efficiency
codes for whole buildings, equipment and appliances. PG&E has worked
for decades to help both state and federal authorities set better
energy efficiency standards. Progress at the federal level has lagged
recently, however, and we urgently need to reinvigorate it. And
finally, it may be necessary to provide incentives for entities to go
even further to seek energy savings.
Aggressive standards and incentive programs are a big reason that
per capita energy usage in California has remained flat over the past
30 years, while the rest of the nation has increased its per capita
usage by 50 percent. During this time, California was the epicenter of
the hi-tech and bio-tech revolutions--with many of the market leaders
being energy efficiency pioneers themselves. Raising the bar at the
national level will lead to new investment in next-generation energy
efficient technologies and spark growth opportunities in other sectors.
For example, recognizing the intense and persistent energy use of
computing equipment, airflow management, and power conditioning systems
in data centers, PG&E worked with Sun Microsystems to develop an
incentive program for energy-efficient servers, garnering attention
from a growing number of other major computing equipment manufacturers,
who are also qualifying their premium performance equipment for
incentive programs.
PG&E also announced the first-ever utility financial incentive
program to support virtualization projects in data centers.
Virtualization technology enables customers to consolidate their data
centers and thereby significantly reduce their energy use. One major
software firm, for example, was able to consolidate workloads from 230
servers onto just 13, representing an energy cost savings of more than
$100,000 per year. This same company is now creating a new product
based on this approach.
Many regions across the U.S. are experiencing new demands for
electric infrastructure as data center operators construct new
facilities. Data centers can use up to 100 times the energy per square
foot of typical office space, so efficiency opportunities are
significant. We are now working to expand the gains we've made, by
leading a coalition of U.S. utilities to capture energy efficiency in
data centers. Participants include the Northwest Energy Efficiency
Alliance, TXU Energy, the New York State Energy Research and
Development Authority, and NSTAR.
Our efforts do not stop in the U.S. We recognize that climate
change is a global problem requiring a global solution. And, while we
do not believe that U.S. action should be contingent upon global
action, we do recognize that in order to make progress, all major
emitting economies will need to contribute equitably. That is why PG&E
is working cooperatively with the Natural Resources Defense Council,
the State of California, and others as part of the U.S.-China Energy
Efficiency Alliance. The Alliance works to exchange information and
facilitate technology deployment, ultimately helping China reduce the
energy intensity of its economy and providing economic opportunity and
advantage to those that supply these energy efficient technologies and
facilitate best-practice programs. A climate program therefore must
build off of efforts like this and the Asia-Pacific Partnership in the
near term, and create additional international linkages going forward.
And, finally, we are supporting the development and deployment of
new energy efficient technologies and call on Congress to do the same.
We implemented several emerging technologies projects in 2006,
including integrated daylighting in schools and automated demand
response controls. These projects set the stage for significant energy
savings in the future and for creating economic opportunities for
manufacturers and vendors.
In our state and for our company, energy efficiency is the ``first
energy resource.'' That is, before we look to add generation, we see
what we can do to reduce demand. I believe the U.S. should make energy
efficiency the nation's first resource as well, and U.S. CAP's
recommendations will go a long way toward achieving that.
SMART GRID
Maximizing the potential for energy efficiency, as well as
distributed generation and some advanced transportation technologies,
will require a ``smarter'' energy grid, one that provides for two-way
communication between energy consumers and energy providers. PG&E is
installing 10 million Smart MetersTM throughout our service
area to provide the infrastructure that will eventually support these
technologies and offer new capabilities. Tax incentives and reform
measures will be needed to advance these efforts nationally.
One example of a technology which would benefit from a ``smart''
grid is plug-in hybrid vehicles (PHEVs). Vehicle-to-grid technologies
have the benefit of reducing oil use, enhancing the power grid, and
reducing greenhouse gas emissions. For example, when the cars are not
in use, energy from the batteries could be uploaded back to the system,
reducing the need for peak power generation. This is important, because
peak power often comes from the least efficient and least clean
resources on the grid. And, PHEVs facilitate more efficient use of the
electric grid, as these vehicles will mainly charge at night, when
demand is otherwise low. And, in our state, this is also when some of
our lowest emitting resources are powering the electric system.
POWER GENERATION AND FUEL DIVERSITY
In addition to using energy more efficiently and reducing demand,
and implementing ``smart grid'' strategies, a significant emphasis and
focus of any greenhouse gas reduction program must be on ensuring an
affordable, reliable, and diverse supply of electricity from low-
greenhouse gas (GHG) emitting sources. As with energy efficiency, the
latest research suggests we can be doing a lot more with what we have
available today.
For example, currently, the U.S. is getting about 9 percent of its
electricity from renewable sources. Excluding hydroelectricity, that
figure is a little more than 2 percent. A number of states have set
targets for increasing the supply of renewable energy. In California,
our target is to deliver 20 percent of our energy from renewable
sources by the year 2010, excluding large hydroelectric sources. PG&E
is on track to meet this goal.
But the federal government can make a tremendous contribution here.
One major positive step would be the extension of production and
investment tax incentives for renewable energy sources for more than
one year at a time. This would provide much-needed certainty for
investors, reduce the cost of technology development, and encourage
fuller deployment.
Washington can also play a leading role in researching and
developing next-generation renewable power sources. I'm particularly
intrigued by solar thermal technology. PG&E is also exploring the
possibility of tidal and wave power off the coast of California. And,
the sooner we can develop a good understanding of their viability, and
their relative costs and benefits, the sooner we will be in a position
to move forward.
It's also critical that we implement policies and initiatives to
facilitate the development and deployment of lower GHG-emitting
conventional power sources. A strong place to start would be increasing
the efficiency of natural gas fired turbines. And, I personally believe
we need to facilitate development of both new supplies and new
infrastructure. For example, biogas from methane digesters is an
opportunity we are pursuing to supplement natural gas supplies for our
customers. Again, federal investment and policies that support efforts
in these areas would be very positive.
We are also hearing the beginnings of a national conversation about
the future of nuclear power in our country. The advantages of nuclear
power in a carbon-constrained world are considerable and must be
acknowledged. But nuclear power also faces considerable challenges that
must be addressed. It is an option that should be on the table.
Finally, we must address the issues surrounding the use of coal.
About 40 states rely heavily on coal for their electric power and,
nationally, the electricity mix is currently more than 50 percent coal.
So it is critical that we accelerate efforts to deploy advanced coal
technologies that have the capability to cost-effectively capture and
store carbon dioxide. Right now, carbon capture and storage technology
is expensive and questions remain. I am cautiously optimistic that the
challenges facing this important fuel source can be addressed. And the
federal government can help us get the answers we need more quickly and
help drive down cost. Policy makers should fund at least three large-
scale development and demonstration programs, to account for a
diversity of locations, coal types, and storage formations. The U.S.
should also establish the rules as soon as possible for how carbon
dioxide must be captured, transported, and stored. Without these rules,
it will be difficult for investments to be made on the scale necessary
to achieve our GHG reduction targets.
THE TIME IS NOW
Our country has a historic opportunity to change the way we produce
and use energy in ways that will lower the treat of climate change and
improve our environment. The optimist in me is certain that we're going
to achieve this goal over the course of the next generation. But the
realist in me knows that we can't take this outcome for granted.
Achieving it will be a very substantial challenge. And that is why we
have to come together as pragmatic, responsible participants in this
effort.
On behalf of PG&E, I want to thank you for the opportunity to
submit this testimony. I appreciate the commitment of this Committee to
addressing these critical issues and I pledge my cooperation and
support as this Committee and Congress moves forward.
Thank you.