[Senate Hearing 111-35]
[From the U.S. Government Publishing Office]
S. Hrg. 111-35
INDUSTRIAL ENERGY EFFICIENCY
=======================================================================
HEARING
before the
COMMITTEE ON
ENERGY AND NATURAL RESOURCES
UNITED STATES SENATE
ONE HUNDRED ELEVENTH CONGRESS
FIRST SESSION
TO
EXAMINE DRAFT LEGISLATION REGARDING STRENGTHENING AMERICAN
MANUFACTURING THROUGH IMPROVED INDUSTRIAL ENERGY EFFICIENCY
__________
MARCH 26, 2009
Printed for the use of the
Committee on Energy and Natural Resources
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U.S. GOVERNMENT PRINTING OFFICE
50-432 PDF WASHINGTON : 2009
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Washington, DC 20402-0001
COMMITTEE ON ENERGY AND NATURAL RESOURCES
JEFF BINGAMAN, New Mexico, Chairman
BYRON L. DORGAN, North Dakota LISA MURKOWSKI, Alaska
RON WYDEN, Oregon RICHARD BURR, North Carolina
TIM JOHNSON, South Dakota JOHN BARRASSO, Wyoming
MARY L. LANDRIEU, Louisiana SAM BROWNBACK, Kansas
MARIA CANTWELL, Washington JAMES E. RISCH, Idaho
ROBERT MENENDEZ, New Jersey JOHN McCAIN, Arizona
BLANCHE L. LINCOLN, Arkansas ROBERT F. BENNETT, Utah
BERNARD SANDERS, Vermont JIM BUNNING, Kentucky
EVAN BAYH, Indiana JEFF SESSIONS, Alabama
DEBBIE STABENOW, Michigan BOB CORKER, Tennessee
MARK UDALL, Colorado
JEANNE SHAHEEN, New Hampshire
Robert M. Simon, Staff Director
Sam E. Fowler, Chief Counsel
McKie Campbell, Republican Staff Director
Karen K. Billups, Republican Chief Counsel
C O N T E N T S
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STATEMENTS
Page
Bingaman, Hon. Jeff, U.S. Senator From New Mexico................ 1
Elliott, R. Neal, Ph.D., P.E., Associate Director for Research,
American Council for an Energy-Efficient Economy............... 9
Harper, Stephen, Global Director, Environment and Energy Policy,
Intel Corporation.............................................. 30
Metts, Jeff, President, Dowding Machine, Eaton Rapids, MI........ 35
Murkowski, Hon. Lisa, U.S. Senator From Alaska................... 2
Rodgers, David, Director for Strategic Planning and Analysis,
Office of Energy Efficiency and Renewable Energy, Department of
Energy......................................................... 4
Savitz, Maxine, Ph.D., Honeywell, Inc. (Ret.), Los Angeles, CA... 18
Stabenow, Hon. Debbie, U.S. Senator From Michigan................ 3
Zepponi, David, President, Northwest Food Processors Association,
Portland, OR................................................... 23
APPENDIXES
Appendix I
Responses to additional questions................................ 57
Appendix II
Additional material submitted for the record..................... 73
INDUSTRIAL ENERGY EFFICIENCY
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THURSDAY, MARCH 26, 2009
U.S. Senate,
Committee on Energy and Natural Resources,
Washington, DC.
The committee met, pursuant to notice, at 9:34 a.m. in room
SD-366, Dirksen Senate Office Building, Hon. Jeff Bingaman,
chairman, presiding.
OPENING STATEMENT OF HON. JEFF BINGAMAN, U.S. SENATOR FROM NEW
MEXICO
The Chairman. Why don't we go ahead and get started. I'm
advised that Senator Murkowski is on her way and will be here
fairly soon.
But we have a couple of other Senators here. Why don't I
start with a short opening statement. Then we'll introduce the
witnesses.
Good morning. Let me welcome everyone to this hearing. It's
a hearing on S. 661.
This is a bill that many of us on this committee are co-
sponsoring--Senator Murkowski, Senator Stabenow, Senator Bayh,
Senator Snowe, Senator Collins, Senator Brown, Senator Pryor,
Senator Kerry and Senator Schumer. The purpose of the bill is
to strengthen American manufacturing through improving
industrial energy efficiency.
Today our country is struggling with some of the toughest
economic challenges we've seen, at least in my lifetime. Our
manufacturing employment has hit a 63 year low. We've lost more
than 1.3 million jobs in the last year and in this area.
It's not just employment that our country is losing. The
industrial foundation upon which the Nation's wealth has been
built is also eroding. We are losing technical expertise and
the skilled and inventive work force that go with these jobs.
We're losing the opportunity to grow our economy and the
ability to compete on a global scale.
At the same time we're facing long-term energy climate and
competitiveness challenges that go even beyond the economic
hurdles that we face today. Our industrial sector consumes a
third of our total energy use, produces a third of our
greenhouse gas emissions. Our competitors overseas are
capturing and manufacturing the advanced energy technologies
that were developed here in this country.
However we have an opportunity today to renew and to
transform our industrial base to better compete globally
through superior technical capabilities and product value while
also reducing our dependence on carbon based fuels, reducing
greenhouse gas emissions and increasing our productivity. The
manufacturing sector represents one of the most widespread and
lowest cost opportunities for energy efficiency in greenhouse
gas emission reductions. The tremendous growth in renewable
energy and energy efficiency offers an opportunity for the U.S.
to increase domestic production of advance energy technologies
recapturing the clean energy market.
The legislation that we are focused on today is entitled
``Restoring America's Manufacturing Leadership through Energy
Efficiency Act of 2009.'' That's a short title.
[Laughter.]
The Chairman. It takes the first steps in achieving this
transformation by focusing on improving the energy productivity
of our industry. Through providing financing mechanisms for
manufacturers to implement cost competitive, energy efficient
equipment and processes and through establishing public/private
partnerships with industry to map out where advanced American
manufacturing is headed to develop and deploy the breakthrough
processes in technologies that will take us there. The bill
will help renew our Nation's industrial base into one that is
more productive and less reliant on fuels of the past.
We have a distinguished and well qualified panel of
witnesses today. Before I introduce the panel, let me first--
Senator Murkowski has just arrived here. Would you like a few
minutes to get your bearings before we turn to you?
Senator Murkowski. I'm totally beared here.
[Laughter.]
The Chairman. You've got your bearings. Ok, let me defer to
Senator Murkowski for any opening statement she would like to
make.
STATEMENT OF HON. LISA MURKOWSKI, U.S. SENATOR
FROM ALASKA
Senator Murkowski. Thank you, Mr. Chairman. I do appreciate
the hearing today. S. 661, the Industrial Energy Efficiency
Improvement Act is a good bill because I think it really looks
toward the future of manufacturing here in the United States.
That's a good thing for us all.
Over the last few decades our global competitors have
improved their productivity and have captured high value
manufacturing capabilities and in products that were invented
here in the United States. That ought to charge us all up. If
we started it here why are we not continuing with that level of
manufacturing? I think that's one of the things that we want to
focus on with this bill.
I think this bill will help to revive and strengthen our
industrial competitiveness, restore our status as a
manufacturing leader. A major focus of the bill is to improve
the energy efficiency in energy productivity within the
industrial sectors. We should always be working to find ways to
get as much or more output from the same or less amounts of
energy.
To this end within this bill we established the public/
private partnerships that will develop and deploy new
technologies and processes. These partnerships will help ensure
the commercialization of these new technologies. So it's
something that, Mr. Chairman, I'm pleased that we are including
in our energy bill as we move forward.
I think it is an important part of our energy discussion.
I'm pleased to have the witnesses before us this morning.
The Chairman. Thank you very much. Senator Stabenow
suggested one of our witnesses today. Let me defer to her to
introduce him. Then I'll introduce the rest of the panel.
STATEMENT OF HON. DEBBIE STABENOW, U.S. SENATOR FROM MICHIGAN
Senator Stabenow. Thank you very much, Mr. Chairman, not
only for this distinguished panel. I'm very pleased to be
introducing one of our witnesses, but also for your consistent
advocacy for manufacturing within renewable energy, alternative
energy. I very much appreciate coming from the great State of
Michigan and a great manufacturing State that you understand
the importance of supporting manufacturing and our ranking
member as well. Senator Murkowski, thank you very much for
those comments.
Mr. Jeff Metts is president of Dowding Machining, a
manufacturing company in Eaton Rapids near Lansing, my home,
just south of me. He is also representing MAG, a partner with
Dowding. I see MAG President Roger Cope sitting right behind
him, who is also here. We welcome you.
These gentlemen epitomize the opportunity that our
manufacturers have to make a situation in our country today
work for us as it relates to our new energy manufacturing.
Together they have developed a revolutionary manufacturing
process to produce wind turbines. If successful, if funding can
be obtained, this will develop to full scale wind turbine
manufacturing in the United States.
While a wind turbine has over 8,000 parts. I've said this
more than once, every single one of those can be made in
Michigan. This means a lot of jobs.
Currently 70 percent of all the jobs that are created
through wind power come from manufacturing. So this is
absolutely critical. Companies like Dowding and MAG, true green
job employers, are an example that we can meet our energy goals
and create substantial numbers of jobs.
However in this credit crisis we have to make sure they
have the financial support to get their innovations and jobs
developed and get them off the ground. So Mr. Chairman, I look
forward to the hearing. I know that our energy policy and
climate change policy will work for jobs if we do this right
and focus on manufacturing.
I would finally just say, Mr. Metts, I really appreciate
your enthusiasm. It's contagious. Your business plan is an
excellent example of the great opportunities we have for
advanced manufacturing in Michigan and across the country.
Thank you.
The Chairman. Thank you very much. Let me just see if
Senator Udall had any opening comment he wanted to make before
I introduce the rest of the panel.
Senator Udall. I'm eager to hear the panel, Mr. Chairman.
The Chairman. Alright. Let me introduce them.
David Rodgers, who is a regular testifier here. He is the
director for Strategic Planning and Analysis in the Office of
Energy Efficiency and Renewable Energy in the Department of
Energy. Thank you for being here.
Neal Elliott is associate director for research with the
American Council for an Energy-Efficient Economy. Thank you
very much for being here.
Dr. Savitz is a Ph.D. from Los Angeles, California. We
appreciate your testifying today.
David Zepponi is the president of Northwest Food Processors
Association. Thank you for coming.
Stephen Harper is the global director for Environment and
Energy Policy for Intel. Thank you very much for being here.
Why don't we get started with Mr. Rodgers and hear the
Department of Energy's perspective. If each of you could take 5
or 6 minutes and give us your main points you think we need to
understand. We will include everyone's written statement in the
record in full. But we would like to know the main points so
that we can ask you some questions about them.
Mr. Rodgers.
STATEMENT OF DAVID RODGERS, DIRECTOR FOR STRATEGIC PLANNING AND
ANALYSIS, OFFICE OF ENERGY EFFICIENCY AND RENEWABLE ENERGY,
DEPARTMENT OF ENERGY
Mr. Rodgers. Thank you, Mr. Chairman, Ranking Member
Murkowski, members of the committee. It's a tremendous
opportunity to appear before you today as you consider the
Restoring America's Manufacturing Leadership through Energy
Efficiency Act of 2009. While the administration has not
finished its review of this bill and has yet to take a formal
position, I'm pleased to answer your questions and provide
comments on the cutting edge research and development
activities at the Department of Energy's Industrial
Technologies Program.
As you've mentioned, the manufacturing sector is central to
the health and vitality of America's economy, contributing more
than 12 percent of our Gross Domestic Product in 2007. The
sector directly employs more than 13 million people and
supports millions more jobs in other sectors of the economy.
Although capital is tight right now in the current economic
environment, there could be no better time for industry to
invest in energy efficiency improvements that lower production
costs, improve productivity, improve competitiveness, and
promote job retention here in the United States.
With worldwide industrial energy use projected to increase
55 percent by the year 2030 from 2005 levels, there will be a
global market for energy technology solutions. We believe that
this new market presents enormous economic opportunities for
America's workers and scientists. Our Industrial Technologies
Program relies on collaborative partnerships to reduce energy
use and carbon emissions in some of our most energy intensive
industries. We have built long-standing partnerships with core
industries that convert raw materials into the essential
building blocks for U.S. manufacturing such as steel and
chemicals.
When we make energy efficiency advances in these
industries, they have a cascading effect throughout the
economy. For example, chemicals are the building blocks of many
products that meet our fundamental needs for food, shelter, and
health. They're also essential to advance computing,
telecommunications, and transportation. In addition to these
core industries, we're also advancing technologies in the
industries of the future such as information and communication
technologies, helping make data centers more efficient.
Through our Save Energy Now program, the Department
provides training and delivers energy savings that benefit U.S.
manufacturing plants today. For example, our energy experts use
specialized energy assessment tools and technical software to
train plant staff in accurately identifying potential
efficiency improvements. These tools are used by the
Department's university based, Industrial Assessment Centers to
help reduce energy consumption across the industrial sector.
Our Industrial Assessment Centers send teams of engineering
faculty and students from 26 participating universities to
local plants who need assessments. These teams perform detailed
analyses to produce specific recommendations with related cost
estimates, performance and pay back times. These Industrial
Assessment Centers also serve as a training ground for the next
generation of energy savvy engineers and provide a launching
pad for many students into green jobs. Since 1977, over 2,500
alumni of the Department's Industrial Assessment Centers have
gone on to careers in the energy industry.
The Save Energy Now program has completed over 2,000
assessments at plants across the country with identified energy
savings of more than $1 billion. Energy savings of more than
$190 million have already been implemented on the ground. We've
also identified potential emissions reductions of carbon
dioxide of more than ten million metric tons.
The Department and its partners are bridging the gap
between mission-oriented science and applied research that
leads to energy innovations in the marketplace by competitively
awarding cost shared funding to collaborative research teams.
Since the inception of our program, we've commercialized dozens
and dozens of technologies, saving more than five quadrillion
BTUs of energy, and earning more than 48 R and D 100 awards.
For example, as this committee has recognized, the application
of innovative, energy efficiency technologies such as combined
heat and power represents a promising near term energy option
for the industrial sector that combines environmental
improvements and economic viability with improved
competitiveness.
In December 2008, our Oak Ridge National Laboratory
released a report that describes how combined heat and power,
with the appropriate market and policy incentives, could supply
up to 20 percent of U.S. electric generating capacity and could
potentially reduce the increases in our carbon dioxide
emissions by 60 percent by the year 2030. We've distributed a
copy of this report to the committee. We look forward to
discussing those topics with you.
We believe the industrial sector has made significant
advancements toward the application of more efficient energy
practices over the last several years. But many barriers
remain. As has been mentioned, the tight capital markets make
it difficult for industry to invest in energy efficiency. In
many cases we need to increase the awareness of the energy
efficiency technologies among the private sector, which can
benefit from its implementation.
However, we feel that challenges can be addressed by the
energy efficiency innovation in the industrial sector, as has
already been demonstrated. We believe that this legislation can
help us further leverage our partnership with industry,
universities, and the National Laboratories. We will continue
to champion collaboration that propels science from the
laboratory into the marketplace and helps meet our Nation's
environmental energy and economic challenges.
Thank you again for the opportunity to appear before you
today. I'm happy to answer any questions.
[The prepared statement of Mr. Rodgers follows:]
Prepared Statement of David Rodgers, Director for Strategic Planning
and Analysis, Office of Energy Efficiency and Renewable Energy,
Department of Energy
Mr. Chairman, Ranking Member Murkowski, members of the Committee,
thank you for the opportunity to appear before you today as you
consider the Industrial Energy Efficiency Improvement Act of 2009.
While the Administration has not finished its review of this bill and
has yet to take a formal position, I am pleased to offer some
preliminary comments on the cutting-edge research and development
activities under the Department of Energy's (DOE) Industrial
Technologies Program (ITP). ITP collaborates with industry, academia,
and the national laboratories to develop the next-generation technology
solutions to industry's critical energy and carbon challenges.
Many types of energy efficiency improvements offer industry the
fastest, lowest risk, most economical way to lower greenhouse emissions
and reduce energy use. Improvements in energy efficiency can be made
today, with significant benefits: the McKinsey Global Institute
identified energy savings sufficient to cut world-wide consumption
growth in half using only existing technologies that offer at least a
10 percent internal rate of return.\1\
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\1\ McKinsey Global Institute, ``Curbing Global Energy Demand
Growth,'' May 2007.
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the importance of industry
The manufacturing sector is central to the health and vitality of
America's economy, contributing 12 percent to U.S. gross domestic
product (GDP) in 2007. The sector directly employed 13.3 million people
in 2007 and supports millions more jobs in other sectors of the
economy.\2\ Internationally, the United States produces nearly one
quarter of the world's manufacturing output, and in terms of collective
economic output,\3\ U.S. manufacturers rank first in the world, though
it is unclear to what extent the recent economic downturn has impacted
these statistics.
---------------------------------------------------------------------------
\2\ Bureau of Economic Analysis (applies both to GDP percentage and
jobs), http://www.bea.gov/industry/gpotables/
gpo_action.cfm?anon=91793&table_id=23975&format_type=0, http://
factfinder.census.gov/servlet/IBQTable?_bm=y&-geo_id=&-
ds_name=EC0700CADV1&-_lang=en. Note: Indirect manufacturing support
jobs removed for 13.3 million. Total is actually 14 million.
\3\ United Nations Industrial Development Organization, http://
www.unido.org/fileadmin/user_media/Publications/IDR/2009/
IDR_2009_print.PDF; Industrial Development Report 2009, http://
www.uschina.org/public/documents/2009/us_manufacturing.pdf.
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To fuel the furnaces and power the engines of American factories,
U.S. industry consumed 32.3 quads of energy in 2007--nearly a third of
all U.S. energy consumption.\4\ U.S. industry alone uses more energy
than the total energy used by any other G8 nation and about half of the
total energy used by China. U.S. industry is also responsible for
significant greenhouse gas emissions, producing an estimated 1,640
million metric tons of carbon dioxide from energy consumption in
2007.\5\
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\4\ Energy Information Administration, Annual Energy Review 2007,
http://www.eia.doe.gov/aer/pdf/aer.pdf.
\5\ Energy Information Administration, Emissions of Greenhouse
Gases in the United States 2007, http://www.eia.doe.gov/oiaf/1605/
ggrpt/pdf/0573(2007).pdf.
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Over the last several decades, U.S. industry has committed to using
energy more efficiently. Although capital is tight in the current
economic environment, the Department is partnering with industry to
continue to invest in industrial energy efficiency. By lowering
production costs, energy efficiency contributes to productivity,
competitiveness, and job retention. For the long term, early action on
carbon mitigation may provide a competitive advantage for some
industrial companies under carbon cap-and-trade policy. With worldwide
industrial energy use projected to increase 55 percent by 2030\6\ (from
2005 levels), a global market for energy technology solutions is
rapidly emerging. This new market presents enormous economic
opportunities for American workers and scientists. U.S. industry and
the American research community have the commitment, talent, and skill
to lead the world in implementing energy efficiency and industrial
technology innovation.
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\6\ Energy Information Administration, International Energy Outlook
2008. http://www.eia.doe.gov/oiaf/ieo/pdf/0484(2008).pdf.
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doe's industrial technologies program strategy
The Department of Energy's Industrial Technologies Program relies
on robust, collaborative partnerships to reduce energy use and carbon
emissions in some of the most energy-intensive industries. The
Department has built long-standing partnerships with many core
industries that convert raw materials into the essential building
blocks for U.S. manufacturing, such as steel and chemicals. Energy
efficiency advances in these industries have a cascading effect
throughout the economy. For example, chemicals are the building blocks
of many products that meet our fundamental needs for food, shelter, and
health; they're also essential to advanced computing,
telecommunications, biotechnology, transportation, and more.
Each of our partner industries has developed a broad vision for the
future and developed technology roadmaps that lay out clear pathways
and priorities for research and development (R&D). Many of the
priorities involve costly, complex research on basic energy-intensive
processes that are integral to an entire industry--not the type of
research that individual companies are willing to undertake alone. The
Department brings together collaborative teams that share the costs and
risks of research and draw on the diverse strengths of industry,
academia, and the National Laboratories to solve these technological
challenges for today and for the future.
doe helps industry save energy now through outreach and deployment
Through its Save Energy Now program DOE provides training and
delivers energy savings that benefit U.S. manufacturing plants today.
Our energy experts use specialized energy assessment tools and software
to train plant staff in accurately identifying efficiency gains in
common plant systems such as steam and heat generation, pumping, motor
and fans, and compressed air systems. These tools are used by the
Department's university-based Industrial Assessment Centers (IACs)
energy experts on manufacturing facilities to help meet the goal in the
Energy Independence and Security Act of 2007 of 25-percent reduction in
industrial energy intensity by 2017 (2007 baseline). Companies
nationwide can participate in no-cost energy assessments and access DOE
resources to reduce unnecessary expenditures and boost productivity
through improved energy efficiency. In addition, the Department's IACs
also send teams of engineering faculty and students from 26
participating universities to local plants requesting assessments.
These teams perform detailed analyses to produce specific
recommendations with related cost estimates, performance and payback
times. Just as importantly, the IACs serve as a training ground for the
next-generation of energy-savvy engineers and provide a launching pad
for many students into ``green collar'' energy efficiency jobs.
As of March 2, 2009, Save Energy Now has completed over 2,000
assessments with 1,873 plants reporting:\7\
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\7\ Save Energy Now Results, Industrial Technologies Program, DOE,
http://apps1.eere.energy.gov/industry/saveenergynow/partners/
results.cfm.
Potential energy cost savings of more than $1.2 billion, of
which industry has already implemented more than 15 percent,
achieving energy cost savings of more than $190 million
Potential natural gas savings of 131 trillion Btus
Total potential reduction in carbon dioxide emissions of
10.3 million metric tons.
doe and partners developing next-generation energy technologies
DOE and its partners are bridging the divide between mission-
oriented science and the applied research that leads to energy
innovations in the marketplace. Collaboration among world-class
scientists from industry, academia, and the Department of Energy's
National Laboratories is fundamental to technology development success.
Technological innovation drives economic growth, but such innovation
requires sound science to serve as the springboard for market
prosperity. With these realities in mind, the Department competitively
awards cost-shared funding to collaborative research teams--and
industry's active participation on these teams helps ensure that the
technologies meet real-world criteria (e.g., effective operation in
harsh industrial environments), ultimately accelerating technology
commercialization.
A history of leveraging these partnerships has enabled DOE to
transform innovative science into cutting-edge commercial products that
improve American productivity, enhance domestic manufacturing
competitiveness, and reduce national energy consumption. Since the
inception of the Department's Industrial Technologies Program, DOE and
its partners have successfully:\8\
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\8\ Impacts: Industrial Technologies Program: Summary of Program
Results for CY2006 http://www1.eere.energy.gov/industry/about/pdfs/
impacts2006_full_report.pdf.
Commercialized many technologies, 104 of which are currently
being followed in industrial markets to track their energy
impacts
Saved 5.6 quadrillion Btus of energy
Achieved emissions reductions of 103 Million Metric Tons of
Carbon Equivalent (MMCTe)
Earned 48 R&D 100 Awards between 1991 and 2008 with our
partners in the National Laboratories and universities
representing over half of the awardees.
Technological change has long been one of the most profound forces
spurring productivity growth in the United States. The development of
next-generation products, services, and ways of doing business are
central to America's long-term prosperity. Today, the Department is
forging even stronger partnerships with the National Laboratories,
academia, and industry to address the Nation's energy and climate
challenges. Nanotechnology and Combined Heat and Power represent two
especially promising areas in which DOE and its partners are working to
positively impact the energy intensity, carbon management, and
competitiveness of American industry.
near-term and next-generation industrial technology examples
Combined Heat and Power (CHP) solutions represent a promising near-
term energy option that combines environmental effectiveness with
economic viability and improved competitiveness. After years of success
in this arena, DOE and its partners are poised to take CHP's potential
to the next level. With targeted development and deployment efforts,
the United States has the potential to save energy, reduce carbon
emissions, create high-quality ``green'' jobs, improve the Nation's
energy security, and stimulate economic growth (see Figure 2).\9\ The
Department's CHP partnerships have already yielded impressive returns.
In December of 2008, Oak Ridge National Laboratory released a report
detailing the enormous promise CHP continues to hold. The report,
Combined Heat and Power: Effective Energy Solutions for a Sustainable
Future, suggests that with market and policy incentives, CHP could
potentially (and cost effectively) reduce the projected increase in
U.S. carbon dioxide emissions by 60 percent by 2030.\10\
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\9\ This level of market penetration would require significant
market and policy incentives. A complete analysis of the cost of these
incentives for comparison to the above potential benefits has not been
completed.
\10\ Combined Heat and Power: Effective Energy Solutions for a
Sustainable Future, Oak Ridge National Laboratory, December 2008,
http://www1.eere.energy.gov/industry/distributedenergy/pdfs/
chp_report_12-08.pdf
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20 % of U.S. Electricity Generating Capacity 240,900 MW
------------------------------------------------------------------------
Annual Energy Savings 5.3 Quads
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Annual CO2 Reduction 848 MMT
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Annual Carbon Reduction 231 MMT
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Cumulative Jobs Created Through 2030 1 million
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Figure 2. ORNL Report identifies potential benefits that could occur if
20% of electrical capacity was CHP by 2030.
The Department is also working to transform nanotechnology science
into real-world solutions for industrial nanomanufacturing. As part of
the National Nanotechnology Initiative (NNI) established in 2001, DOE
worked with industry experts to identify priority needs and
opportunities and worked with the National Laboratories to initiate
DOE's first call for nanomanufacturing projects. Projects were judged
by a diverse team of university, government, business, and consulting
nanotechnology experts before the Department ultimately selected 20
projects from 8 DOE National Laboratories.
In concert with its other initiatives, DOE is providing energy
technology and deployment solutions that meet industry's critical needs
today and deliver the next-generation and transformational technologies
that will support America's industrial leadership in the decades ahead.
challenges and opportunities
While the industrial sector has made significant advancements
toward more energy efficient practices, a number of barriers remain,
such as tight capital markets. In addition, industrial energy
efficiency at times suffers from a lack of awareness among the very
private sector interests that stand to benefit from its implementation.
This situation hampers sound energy management and technology
investment policy from becoming implemented. Many of the benefits that
industry would enjoy from improved energy management would also provide
public benefits, such as reduced emissions of pollutants and greenhouse
gases.
However, many of these challenges can be addressed by the type of
innovation that the industrial sector has already demonstrated. DOE's
Industrial Technologies Program and its partners have already broken
ground on the next generation of energy technology in areas such as
nanomanufacturing; and cultivating new industries of the future, such
as those manufacturing wind turbines, solar panels, and advanced
batteries, can contribute to energy security and economic development.
By further leveraging its partnerships with industry, universities, and
the National Laboratories, the Department will continue to champion
collaboration that propels science from the laboratory into the
marketplace and helps to meet the Nation's environmental, energy, and
economic challenges.
Thank you again for the opportunity to appear before you today. I
am happy to answer any questions.
The Chairman. Thank you very much.
Dr. Elliott.
STATEMENT OF R. NEAL ELLIOTT, PH.D., P.E., ASSOCIATE DIRECTOR
FOR RESEARCH, AMERICAN COUNCIL FOR AN ENERGY-EFFICIENT ECONOMY
Mr. Elliott. Mr. Chairman, Senator Murkowski and members of
the committee, thank you for the opportunity to be here today.
The ACEEE is a non-profit organization dedicated to advancing
energy efficiency to promote both economic prosperity and
environmental protection.
I've been involved in the manufacturing area for now over
30 years, the last 16 of those as the Founding Director of the
Industrial program at ACEEE. As you noted the manufacturing
sector remains a very important part of the U.S. economy. While
many people now talk about us moving into a post industrial
economy, the reality is the United States is now still over a
fifth of the global manufacturing capacity. As the chairman
mentioned accounts for about a third of the energy consumption
in the United States today.
Prior to the current economic downturn our analysis
indicated that the manufacturing sector was poised to enter a
period of major reinvestment in capacity expansion. As recently
as the third quarter of last year, we saw many sectors of the
U.S. manufacturing industry in a state of full capacity
utilization. When the economic downturn occurred obviously we
saw that drop. We now are in a period of unprecedented--we
almost are now describing it as hibernation for the
manufacturing sector with many plants just attempting to
survive through the economic downturn.
The drop has occurred very, very rapidly. But we also
anticipate that once the economy recovers that the demand is
likely to recover very rapidly as well for the manufacturing
sector. When that recovery occurs the manufacturing sector will
need to make major new investments in manufacturing capacity to
enhance its global competitiveness.
We, based on our conversations with manufacturing over the
last 15 years have identified 5 key categories of what we will
call infrastructure that are necessary to improve the energy
efficiency of the manufacturing sector and its global
competitiveness.
Those are new technologies, products and processes.
The access to industry specific technical expertise.
Access to assessment and training services for workers.
The availability of a trained and capable workforce ranging
from equipment operators, plant floor operators, all the way to
senior engineers and management.
Finally, as David Rodgers had mentioned, access to capital
needed to make those investments.
At this point we don't see the industry making the
investments today. However, one of the things that I think is
important to remember is it takes time to make an investment in
the manufacturing sector. We basically turn a switch and we go
out and buy a light bulb.
Changing out major process elements in the manufacturing
sector which is where the big opportunities are can take 3 to 5
years to plan and schedule and bring all the pieces of
equipment together. So what we do today is going to affect
what's going to happen over the next 5 years. As Senator
Murkowski had indicated though, we have not been investing in
the manufacturing sector here in the United States over the
last 15 years.
At the same time our competitors globally have been making
major investments and that puts us at a competitive
disadvantage in this country. Today the industrial technology
program with the Department of Energy is the only remaining
Federal resource for the manufacturing sector in terms of their
competitiveness and energy efficiency. While the program has
experienced significant budget cuts and staffing reductions
over the last 15 years, the program is continuing to be able to
make major contributions to U.S. manufacturing as Mr. Rodgers
had indicated.
What we need to do now is begin to rebuild the Department
and rebuild that program in particular and bring its staffing
up to the levels. Senator, you and your colleagues, we'd like
to commend you for the introduction of the Restoring America's
Manufacturing Leadership through Energy Efficiency Act because
we think this is probably the most important piece of
manufacturing energy legislation we've seen in the past 15
years in the United States.
We think there are many important provisions in the bill
that will get the DOE industrial program back on track. We hope
get the Federal Government reengaged in support of the
manufacturing sector. We would like to note two provisions.
The Industrial Research and Assessment Center provision
that is in the Act is a very important addition. As David
Rodgers had indicated, the Industrial Assessment Center program
is a long running program that has been very successful and
contributed many, much to the industrial sector. We think the
program is poised to be able to expand significantly from its
current levels.
We think the provisions that are set forward in the Act
would do that in a way that is sensitive to the elements that
have made the program successful over the many years. We'd like
to also endorse the creation of the Industrial Technology
Steering Committee. We think it's important that the program is
responsive to the needs of the manufacturing sector.
In the last few years, we've seen that close relationship
that existed in prior years between the manufacturing companies
and the program has diminished. We are pleased to see a
direction and a return to that. We've certainly heard
indications of that from staff at DOE and so we appreciate
that.
So it's my pleasure to endorse this bill. We'd like to
express our appreciation to you, Senator Murkowski and to the
other members who've been supportive of this bill. We think
this is an important bill and look forward to working with the
committee and the Department on its enactment and
implementation. Thank you.
[The prepared statement of Mr. Elliott follows:]
Prepared Statement of R. Neal Elliott, Ph.D., P.E., Associate Director
for Research, American Council for an Energy-Efficient Economy
summary
Thank you for the opportunity to testify in support of the
Restoring America's Manufacturing Leadership through Energy Efficiency
Act of 2009. ACEEE feels that this bill represents an important
complement to existing law. The timing of this bill is particularly
important, as our country needs to prepare now if we are to be ready to
seize a once-in-a-generation opportunity to influence the energy
efficiency and sustainability of the manufacturing sector once it
emerges from the current economic downturn. The manufacturing sector
and its contributions to the nation's economy and jobs have been
ignored for far too many years, and it is important that this neglect
be reversed. This bill will make significant progress if all of its
provisions are enacted and funded.
Manufacturing continues to represent an important component of the
United States economy, accounting for about 14 percent of gross
domestic product. The manufacturing sector was responsible for almost a
third of national energy consumption in 2007. According to the National
Association of Manufacturers, the U.S. share of global manufacturing
output has remained constant at between 20 and 23 percent over the past
decade, in spite of perceptions that U.S. manufacturing has been in
rapid decline. In fact, economic data have shown that up until the
recent economic downturn, U.S. manufacturing was increasingly healthy,
having recovered from the energy price shocks of the first half of this
decade. ACEEE's analysis released last summer suggested the
manufacturing sector was poised to enter a period new capacity
investments as the economy approached full utilization of existing
capacity.
Beginning in the second quarter of 2008, however, manufacturing
output in the U.S. began to decline as the economy began to slow, with
all industries experiencing a sharp drop in production as demand for
manufactured goods dropped precipitously in the last quarter of 2008.
These firms are now hibernating in an attempt to survive the economic
winter. They need the cash to preserve their manufacturing capacity and
to retain the trained workforce necessary for a future return to
operation when demand for manufactured goods recovers.
When the economy recovers, the manufacturing sector will find
itself in need of significant investments in new manufacturing
capacity, and will face the need for a trained workforce. This renewed
investment in expanded and modernized manufacturing capacity will
represent a unique opportunity not seen in over a generation. To
accomplish this, however, the necessary infrastructure to support a
more sustainable industrial base must be built now, before industry is
fully ready to invest. This infrastructure will take several years to
implement fully, but it will be needed in order for manufacturing
companies to modernize, especially since we have underinvested in this
infrastructure over the past decade. ACEEE research indicates that this
infrastructure falls into five key categories:
1. New technologies, products and processes
2. Access to industry-specific technical expertise
3. Access to assessment and training services for workers
4. Availability of a trained and capable workforce, ranging
from operators to senior engineering and management
5. Access to capital to make needed investments
The coming economic recovery will likely occur quite rapidly, since
inventories are being drawn down. Once demand for manufactured goods
recovers, industry will need to rapidly return to production. Firms
will then need to invest in new capacity to meet increased market
demands. This situation dictates that now is the time to invest in new
sustainable capacity for these key resources and not wait till the
recovery actually begins. If we are not prepared, we run the risk of
locking in less efficient capacity for decades or losing manufacturing
capacity and jobs to other parts of the world.
Over the past 15 years, federal policy makers have largely ignored
the manufacturing sector at best, and actively worked to undermine the
programs intended to serve this sector at worst. This neglect has
occurred all while the sector has experienced an unprecedented series
of challenges: the globalization of markets, energy price instabilities
and global competition for resources, including both feedstocks and
trained workforce. Over the past decade, ITP has experienced
significant reductions in funding and the attrition of experienced
staff, seriously compromising its efficacy with funding for industry-
specific research declining 84% since 2001, leaving the pipeline for
new technologies and innovative practices empty. Concurrently, clarity
of the program's goals and mission has been lost due to lack of senior
leadership within the agency and in the prior administration. In spite
of these challenges, the program has achieved continued success.
ACEEE commends Senator Bingaman and his colleagues for introducing
the Restoring America's Manufacturing Leadership through Energy
Efficiency Act of 2009 (S. 661). We feel this bill changes course on
support for manufacturing, and complements the industry-specific
research and development activities authorized in EISA Sec. 452,
beginning to address many of the infrastructure needs we have
identified for the support of greater energy efficiency and economic
competitiveness of the U.S. manufacturing sector.
The Industrial Energy Efficiency Grant Program (Sec. 2),
Small Business Loans (Sec. 5), and Innovation in Industry
Grants (Sec. 7) all address the most pressing current challenge
facing manufacturing industries: a lack of access to capital.
By providing available credit, these provisions support
manufacturers who want to make investments in energy efficiency
and capacity to manufacture innovative, new technologies.
The Coordination of Research and Development of Energy
Efficient Technologies for Industry (Sec. 3), Energy-Efficient
Technologies Assessment (Sec. 4), Industry-Specific Roadmaps
(Sec. 5) and Study of Advanced Energy Technology Manufacturing
Capabilities (Sec. 8), are all excellent complements to the
industry-specific research activities authorized by EISA Sec.
452, enabling the research needed to put new technologies,
products and processes into the market to keep U.S.
manufacturing efficient and competitive.
ACEEE is particularly excited to see the inclusion of the
Industrial Research and Assessment Centers (Sec. 5) provision.
This proposal expands and enhances the aforementioned
Industrial Assessment Center (IAC) program. The 26 university-
based IACs play the role of providing access to expertise for
small and medium-sized manufacturing facilities while also
providing invaluable experience to students who participate in
the plant assessments and supporting their faculty's interest
in manufacturing energy efficiency. The proposals in this
section expand and enhance the IAC program while maintaining
the elements that have made the program so successful over its
33 year history. By expanding the number of centers, the
benefits of assessments will become available to many
industrial facilities not currently located near an existing
IAC, and the number of graduates from the centers will increase
significantly, helping to meet the trained workforce needs that
have been identified by manufacturers as a key challenge facing
the manufacturing sector.
We also endorse the creation of an Industrial Technologies
Steering Committee (Sec. 9) for U.S. Department of Energy's
Industrial Technology Program. The past effectiveness of the
program was in large part a result of its strong working
relationship with private manufacturing companies that allowed
the program's activities to be tailored to address the actual
technology and market needs of industry, enabling manufacturers
to become more efficient and competitive. Over the past eight
years, we have seen this close coordination erode, and we feel
that the creation of this committee will help reverse this
trend.
Thank you again for the opportunity to testify in support of this
bill, and we look forward to working with the committee to see that it
is passed expeditiously. The manufacturing sector needs the
infrastructure that is enabled by this bill more now than ever before.
introduction
My name is Neal Elliott, and I am the Associate Director for
Research of the American Council for an Energy-Efficient Economy
(ACEEE), a nonprofit organization dedicated to increasing energy
efficiency to promote both economic prosperity and environmental
protection. I have worked actively on manufacturing energy efficiency
issues for over 30 years, the past 16 as the founding director of the
Industrial Energy Efficiency Program at ACEEE. ACEEE's Industrial
Program is the leading manufacturing energy policy research program in
Washington's public interest community, working closely with
manufacturing companies, trade associations, state and federal
agencies, other nonprofits and publicly funded industrial energy
efficiency programs across the country. Because of our wide range of
contacts, we play a unique convening role, bringing together diverse
groups to help develop policy and program proposals that address the
needs of the manufacturing sector for improved energy productivity,
cost-effective environmental compliance and greater competitiveness in
a global marketplace, while addressing the environmental and economic
challenges facing our country as a whole.
Manufacturing continues to represent an important component of the
United States economy, accounting for about 14 percent of gross
domestic product.\1\ The manufacturing sector was responsible for
almost a third of national energy consumption in 2007.\2\ According to
the National Association of Manufacturers, the U.S. share of global
manufacturing output has remained constant at between 20 and 23 percent
over the past decade, in spite of perceptions that U.S. manufacturing
has been in rapid decline. In fact, economic data have shown that up
until the recent economic downturn, U.S. manufacturing was increasingly
healthy, having recovered from the energy price shocks of the first
half of this decade. ACEEE's analysis released last summer suggested
the manufacturing sector was poised to enter a period new capacity
investments as the economy approached full utilization of existing
capacity.\3\
---------------------------------------------------------------------------
\1\ N.D. Swartz, ``Rapid Declines ion Manufacturing Spread Global
Anxiety,'' N.Y Times, March 20, 2009, http://www.nytimes.com/2009/03/
20/business/worldbusiness/20shrink.html.
\2\ Energy Information Administration, Annual Energy Outlook 2009
Early Release, December 2008, http://www.eia.doe.gov/oiaf/aeo/
index.html.
\3\ R.N. Elliott, A.M. Shipley and V. McKinney, Trends in
Industrial Investment Decision Making, August 2008, http://aceee.org/
pubs/ie081.pdf.
---------------------------------------------------------------------------
impact of economic downturn
Beginning in the second quarter of 2008, however, manufacturing
output in the U.S. began to decline as the economy began to slow, as
can be seen in Figure 1.* Initially the downturn hit the building and
automotive-related manufacturing industries, with some energy-intensive
primary manufacturing industries such as steel and chemicals continuing
to experience robust production. This picture changed dramatically
during the fourth quarter of 2008, when almost all industries
experienced a sharp drop in production as demand for manufactured goods
dropped precipitously. As Figure 1 shows, this manufacturing crisis is
global, and U.S. manufacturers are actually fairing far better than the
rest of the world.\4\
---------------------------------------------------------------------------
* Figures 1-2 have been retained in committee files.
\4\ Swartz, op cit.
---------------------------------------------------------------------------
ACEEE's recent conversations with companies and trade associations
across the entire range of manufacturing industries indicate that firms
are now in survival mode, conserving cash in hopes of weathering the
current economic downturn. Without demand for manufactured products,
companies are shutting down plants to minimize the rate at which they
use their cash. It may be useful to think of these firms as hibernating
in an attempt to survive an economic winter, with cash reserves
analogous to stored calories. They need the cash to preserve their
manufacturing capacity and to retain the trained workforce necessary
for a future return to operation. They are hoarding their reserves so
that when the economic ``spring'' comes, companies are ready to emerge
to take advantage of a resurgent demand for manufactured goods.
Unfortunately, firms that don't have sufficient reserves may not be
able to survive this economic winter, and unlike in more prosperous
times, the manufacturing capacity of the failed firms will often not be
acquired by healthy competitors and will instead be lost.
Some may ask why industry does not invest in energy efficiency now
since their plants are shut down and staff are not otherwise occupied.
The reality is that if plants shut down, firms stop generating cash
flow, and in the current economic environment, no one knows when
consumer demand for manufactured goods will return. Because of this
uncertainty, most firms are in no position to invest.
When the economy recovers, the manufacturing sector will find
itself in even greater need of investment in new manufacturing
capacity, and will face the need for a trained workforce as identified
in ACEEE's 2008 study.\5\ This renewed investment in expanded and
modernized manufacturing capacity will represent a unique opportunity
not seen in over a generation. This will be the opportunity to rebuild
the U.S. industrial base into a more efficient, productive and
sustainable sector that will allow it to be competitive in a resource-
and carbon-constrained global market. To accomplish this, however, the
necessary infrastructure to support a more sustainable industrial base
must be built now, before industry is fully ready to invest. This
infrastructure will take several years to implement fully, but it will
be needed in order for manufacturing companies to modernize, especially
since we have underinvested in this infrastructure over the past
decade.
---------------------------------------------------------------------------
\5\ Elliott, et al., op. cit.
---------------------------------------------------------------------------
Over the past sixteen years, ACEEE has built an understanding of
the manufacturing sector's needs to invest in a more sustainable
future. Industry indicates that its needs from the public sector fall
into five key categories:
1. New technologies, products and processes
2. Access to industry-specific technical expertise
3. Access to assessment and training services for workers
4. Availability of a trained and capable workforce, ranging
from operators to senior engineering and management
5. Access to capital to make needed investments
The coming economic recovery will likely occur quite rapidly, since
inventories are being drawn down. Once demand for manufactured goods
recovers, industry will need to rapidly return to production. Firms
will then need to invest in new capacity to meet increased market
demands. This situation dictates that now is the time to invest in new
sustainable capacity for these key resources and not wait till the
recovery actually begins. If we are not prepared, we run the risks of
locking in less efficient capacity for decades or losing manufacturing
capacity and jobs to other parts of the world.
awareness of and support for the manufacturing sector
Much of the manufacturing sector is largely invisible to outsiders.
This is due to the interconnected nature of the sector and its supply
chains. ACEEE estimates that five out of six business transactions
occur as business-to-business transactions in these interconnected
supply chains while only 15% of the total transactions occur with end-
users.
There exists a misperception that the U.S. is a ``post-industrial''
country. Over the past 15 years, federal policy makers have largely
ignored the manufacturing sector at best, and actively worked to
undermine the programs intended to serve this sector at worst. This has
occurred all while the sector has experienced an unprecedented series
of challenges: the globalization of markets, energy price instabilities
and global competition for resources, including both feedstocks and
trained workforce. Funding for manufacturing programs by the federal
government has fallen dramatically, with the Advanced Technology
Program at the National Institute of Standards and Technology now
effectively eliminated and the highly successful industrial programs at
U.S. Department of Energy (DOE) now shadows of what they were a decade
ago.
DOE's Industrial Technologies Program (ITP) represents one of the
only remaining federal programs focused on meeting the technology and
energy needs of the manufacturing sector in the United States. The
program has achieved an impressive track record, offering some of the
most effective federal energy efficiency programs available, and
recognized by the National Academies as one of the most effective
federally funded technology and process application programs.\6\
---------------------------------------------------------------------------
\6\ National Research Council, Energy Research at DOE: Was It Worth
It? Energy Efficiency and Fossil Energy Research 1978 to 2000, 2001,
http://www.nap.edu/catalog/10165.html, and Prospective Evaluation of
Applied Energy Research and Development at DOE (Phase Two), 2007,
http://www.nap.edu/catalog/11806.html.
---------------------------------------------------------------------------
Over the past decade, ITP has experienced significant reductions in
funding (see Figure 2) and the attrition of experienced staff,
seriously compromising its efficacy. In particular, the funding for
industry-specific research has declined 84% since 2001, leaving the
pipeline for new technologies and innovative practices empty.
Concurrently, clarity of the program's goals and mission has been lost
due to lack of senior leadership within the agency and in the prior
administration. In spite of these challenges, the program has achieved
continued success with Save Energy Now (SEN)--its response to the
natural gas crisis triggered by Hurricanes Katrina and Rita--and with
long-running efforts such as the industry co-funded research and
education initiatives under the Industries of the Future (IOF) and the
Industrial Assessment Centers (IAC) programs. As can be seen in Figure
2, SEN and other deployment-related activities have grown to take a
larger share of the program's budget in recent years, though they still
are only funded at about half of their 1999 funding levels at a time
they are most needed in the US.
One of the under-appreciated successes of ITP has been the
synergies between the IAC, IOF and SEN programs. The IAC program has
been among the most successful of these federal programs, and has
operated continuously since 1976. The program contributes to three
goals:
1. It provides energy assessment to small and medium-sized
manufacturing facilities, many of which do not have internal
energy management capability, by sending in teams of
engineering students and faculty from 26 universities across
the country;
2. It provides hands-on training for engineering students in
manufacturing engineering and energy efficiency, creating an
important pool of trained energy engineers who are in demand by
manufacturing companies, energy programs and energy consulting
firms; and
3. It provides a source of support for university professors-
who serve as IAC directors-to focus on manufacturing energy
engineering, developing courses and research programs that
reach many more students beyond just those who are part of the
IACs.
Many of the IAC directors are also principle investigators on IOF
research projects, further supporting their manufacturing engineering
academic programs, and providing important support for graduate
students who can fill the ranks of future research positions in
academia and industry. These directors also represent an important pool
of certified experts in manufacturing energy efficiency, as they hone
their research in their roles managing both IAC-and sometimes SEN-
assessments. These three programs combined provide the only significant
source of federal support for manufacturing-focused energy engineering
at the university level.
recent developments and needed action
In the past few years, we have seen a growing awareness of the
imperative to address the needs of the manufacturing sector. The 110th
Congress stepped up and passed an important legislative provision to
re-engage government to meet the needs of the manufacturing sector.
Sec. 452 of the Energy Independence and Security Act of 2007 (EISA)
reauthorized and expanded the industry-specific research and
development activities of ITP and reauthorized the IAC program, though
funding under this new authorization is only just beginning to flow to
DOE.
The new Administration and Congress have continued to show support
for the manufacturing sector. We are encouraged to hear that Secretary
Chu has increased funding for fiscal year 2009 to $90 million under the
recent omnibus budget act, and that he has directed that $50 million of
the funding authorized by the American Recovery and Restoration Act of
2009 to DOE be used to support existing, unfunded research commitments.
We hope that the Secretary and the Obama Administration will
continue this renewed support for ITP, and provide DOE the leadership
necessary to rebuild the program and its staff so that it can meet the
current needs of our domestic manufacturers. ACEEE suggests several
important areas that should receive attention:
Coordination--ITP should better coordinate with other market
players to develop the most useful programs and deploy them in
an effective way.
--Major stakeholders (e.g. manufacturing companies and trade
associations, electric and natural gas utilities and state
energy offices) and other internal ITP programs (e.g.
Distributed Energy Resource activities that have recently
returned to ITP from DOE's Office of Electricity) should be
integrated with the existing manufacturing R&D and
deployment activities of the program (e.g. IACs and
industry-specific research projects);
--In the past, a Federal Advisory Committee, representing key
stakeholders, reviewed program plans and advised ITP on
strategic directions. This advice helped the program adapt
to the changing needs of the manufacturing sector--
something that has been lost in recent years. This FAC
should be reinstated.
--Internal programs should strive to meet the strategic goals of
ITP and the Office of Energy Efficiency and Renewable
Energy (EERE). One area where this is crucial is the
Distributed Energy Resources (DER) activities. This program
has several components, many of which do not focus on
industrial technologies. While ACEEE does not think this is
a problem, we feel that more resources should be given to
industrial waste energy recovery and combined heat and
power (CHP) application work, as authorized by EISA Sec.
451.
Fluidity and Flexibility--ITP should recognize that program
goals must be aligned with the goals of the changing
manufacturing sector, and should embrace change when a specific
need arises. The current SEN program is a good example of how
this flexibility might occur. This program was a successful ad-
hoc response to the natural gas crisis precipitated by the
hurricanes of 2005. As such, it temporarily diverted resources
from other ITP areas to quickly address a pressing unmet need.
It was never intended to be a sustained initiative, so it was
never given a dedicated funding stream. It has therefore been
difficult for the program to transition to a more sustainable
model, though its existing model has been very effective. The
flexibility leveraged to create SEN was not matched with an
internal flexibility of budget to allow for the identification
and support of programs that prove themselves worthy. It will
be important to retaining ITP's ability to be fluid and
flexible will be important, so the program can respond to other
crises as it did to the natural gas crisis. However, developing
a structure that allows proven programs to grow and mature is
also necessary. ITP's Superior Energy Performance initiative,
focused on standardizing energy management, energy assessment,
and measurement and verification methodologies, is another
example of ITP responding appropriately to the manufacturing
sector's needs.
Staffing--ITP is understaffed, and the current mix of skills
does not reflect the range of activities the program needs
future, long-term success. In particular, the existing staff is
predominately focused on research management, while many of the
needs are in the areas of communication, market analysis,
environmental and utility regulation/policy, project financing,
and project implementation. It will be important to bring in
fresh staff from the private sector to complement the existing
staff, and to acquire a staff with the suite of skills needed
for an effective program.
provisions in the proposed legislation
ACEEE commends Senator Bingaman and his colleagues for introducing
the Restoring America's Manufacturing Leadership through Energy
Efficiency Act of 2009 (S. 661). We feel this bill complements the
industry-specific research and development activities authorized in
EISA Sec. 452, and it will begin to address many of the needs we have
identified for the support of greater energy efficiency and economic
competitiveness of the U.S. manufacturing sector. In this section, I
will discuss how ACEEE sees the provisions of the Act responding to the
needs of manufacturing sector and enhancing the effectiveness of the
operation of ITP at DOE.
The Industrial Energy Efficiency Grant Program (Sec. 2), Small
Business Loans (Sec. 5), and Innovation in Industry Grants (Sec. 7) all
address the current challenge facing manufacturing industries: a lack
of access to capital. The energy efficiency grant program in particular
will address the most pressing hurdle of lack of available credit
currently facing manufacturers who want to make investments in energy
efficiency and capacity to manufacture innovative, new technologies. By
using existing commercial and state funding entities in a timely
manner, this provision avoids the delays that have, in the past,
affected lending programs administered directly by DOE. The one
potential shortcoming of this provision may be that its benefits for
larger manufacturing firms will be limited because of the relative
modest size of the funding for the provision. These firms are currently
experiencing challenges to their access to capital, so expanding this
provision so that larger firms can benefit would be ideal, at least for
the next few year until credit markets return to normal.
The other funding provisions in the Act will address a longstanding
challenge of access to capital for innovative and small businesses.
These companies are important sources of innovation that can transform
the future of manufacturing by providing new technologies, processes,
and products that address consumers' needs--some of which they don't
even realize that they can benefit from, such as solid-state lighting
and advanced sensors and controls that will facilitate the Smart Grid.
We hope that Congress will pass this provision and appropriate funding
for its enactment.
The Coordination of Research and Development of Energy Efficient
Technologies for Industry (Sec. 3), Energy-Efficient Technologies
Assessment (Sec. 4), Industry-Specific Roadmaps (Sec. 5) and Study of
Advanced Energy Technology Manufacturing Capabilities (Sec. 8), are all
excellent complements to the industry-specific research activities
authorized by EISA Sec. 452. While some of these provisions were in
place when the IOF program was robustly funded a decade ago, ITP has
always been less effective at coordinating with other agencies and
outside parties in its research activities. Directing external
coordination by the program will provide an important incentive to
reach out to other groups.
We are particularly excited to see the inclusion of the Industrial
Research and Assessment Centers (Sec. 5) provision. This proposal
expands and enhances the aforementioned Industrial Assessment Center
(IAC) program. As noted earlier, the 26 university-based IACs play the
role of providing access to expertise for small and medium-sized
manufacturing facilities while also providing invaluable experience to
students who participate in the plant assessments and supporting their
faculty's interest in manufacturing energy efficiency. The proposals in
this section expand and enhance the IAC program while maintaining the
elements that have made the program so successful over its 33 year
history. By expanding the number of centers, the benefits of
assessments will become available to many industrial facilities not
currently located near an existing IAC, and the number of graduates
from the centers will increase significantly, helping to meet the
trained workforce needs that have been identified by manufacturers as a
key challenge facing the manufacturing sector. This workforce
development aspect of the program is further enhanced by establishing
an internship program for students at the centers. Industrial firms
have indicated to ACEEE that they would enthusiastically provide co-
funding for these internships to assist in meeting current workforce
needs and in attracting new talent to their firms.
Among the enhancements to the existing IAC program is the
establishment of Centers of Excellence (CoE), which would receive
additional funding to develop in-depth expertise that the current
program does not provide. This provision encourages each CoE to support
other IACs so that more customers across the county can benefit from
industry-specific expertise. The inclusion of an explicit requirement
and provision of resources to the CoE for greater coordination with
other manufacturing energy efficiency activities in the centers'
service regions provides an opportunity for coordinated follow-up and
implementation assistance for energy efficiency and productivity
opportunities identified by the centers' assessments. Further, the
provision that the Small Business Administration would give preference
to projects identified by the centers would help address the barrier of
access to capital that challenges many smaller manufacturing firms.
With respect to DOE's operation of ITP, we endorse the creation of
an Industrial Technologies Steering Committee (Sec. 9) for ITP. The
past effectiveness of the program was in large part a result of its
strong working relationship with private manufacturing companies. These
relationships allow the program's activities to be tailored to address
the actual technology and market needs of industry, enabling
manufacturers to become more efficient and competitive. Over the past
eight years, we have seen this close communication erode, and we feel
that the creation of this committee will address indications from
current ITP leadership of their interest to better coordinate with
their customer base.
additional recommendations
The provisions in this act add important new elements to the ITP
program and provide a renewed focus to the program's activities. For
this program to be most effective, it needs better data on
manufacturing economic activity and energy use. The primary source of
economic information has been the Census of Manufacturing and the
Annual Survey of Manufacturing, both prepared by the Census Bureau.
These important data sources have seen their depth and the speed with
which they are released adversely impacted by significant budget cuts
at the Bureau. Similarly, the Manufacturing Energy Consumption Survey
issued by the Energy Information Administration has, due to budget
cuts, seen its sample size and depth of questions shrink, its frequency
reduced to every four years, and its preparation time drag out such
that we are currently waiting for the release of the 2006 data. These
two agencies need more resources so that more in-depth and timely data
can be made available to inform ITP program operators and policymakers
how best to meet the energy needs of the manufacturing sector.
conclusion
Thank you for the opportunity to testify in support of the
Restoring America's Manufacturing Leadership through Energy Efficiency
Act of 2009. ACEEE feels that this bill represents an important
complement to existing law. The timing of this bill is particularly
important, as our country needs to prepare now if we are to be ready to
seize a once-in-a-generation opportunity to influence the energy
efficiency and sustainability of the manufacturing sector once it
emerges from the current economic downturn. The manufacturing sector
and its contributions to the nation's economy and jobs have been
ignored for far too many years, and it is important that this neglect
be reversed. This bill will make significant progress if all of its
provisions are enacted and funded. We encourage Congress to pass this
bill expeditiously. ACEEE stands ready to assist the Committee and
Congress in addressing any questions or concerns with respect to this
legislation.
The Chairman. Thank you very much.
Dr. Savitz, go right ahead.
STATEMENT OF MAXINE SAVITZ, PH.D., HONEYWELL, INC. (RET.), LOS
ANGELES, CA
Ms. Savitz. Good morning. I'm pleased to be here, Mr.
Chairman, Senator Murkowski and other members of the committee.
I retired from Honeywell several years ago and prior to that
joining them 20 years ago, I was in Washington at the
Department of Energy and its predecessor agencies.
It's a pleasure that to see you introduce this bill and the
emphasis on energy efficiency that is long needed. I also would
like to submit for the record in addition to my testimony a
recent peer review of the Department of Energy's industrial
technology program which I co-chaired.* I will give you some
summary of some of our results from that review and they tie
directly into the legislation that you are supporting.
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* Report has been retained in committee files.
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In that panel we found that they effectively use their
resources to achieve significant results despite a continuing
decline in the budget. Up until recently the budget in 2008 was
$65 million down from $100 million in fiscal year 2002. They
had achieved several successes.
They were also looking at some potentially transformative
technologies such as nano-technology. They've had several
innovative energy efficient technologies enter the marketplace
in the aluminum industry, the steel industry, the metal casting
industry, heavy users of energy. The technology delivery
program which Dave Rodgers and Mr. Elliott also mentioned was
particularly praised by the committee and it's a strategic
investment in manpower as well as infrastructure by getting
these undergraduates involved in assessments and also helping
small and medium size business.
The panel observed that the program has strong stakeholder
support in both the R and D and the technology needs. We heard
from customers in our deliberations on their program. There has
been some concern. There's always been good cost sharing. But
there's been concern recently as a result of the declining
budget, industry less willing to participate not knowing
whether their programs were going to be continued.
We also want to give the industrial program praise for
collecting very good metrics on what has been the result of
their programs. How many have entered into the marketplace?
What kind of energy is being saved? Probably do one of the best
examples of that in the Department.
We had a number of recommendations for making the program
more effective. One is the current goal is to reduce energy
efficiency 25 percent in 10 years in helping industry. We
thought that was unrealistic given that the budgets are too low
to achieve that goal. So either the budgets need to be
increased or the goals need to be revisited.
Goals should be expanded not only to look at energy
efficiency but greenhouse gas emissions. These are things that
are also in your bill which we're pleased to see. Within DOE
itself there's a common problem of the budget and the goals
being consistent.
There is some very good R and D at the early stage, but for
the heavy energy users of industry they were really at the last
stages of development and demonstration. There needs to be a
more full pipeline of applied research and demonstration for
the heavy energy users. There's a cross cutting initiative for
heat processing materials and like. Those are very good, but
they don't substitute for working directly with industry doing
no road maps.
We feel that they needed to expand their expertise in the
policy area. Both in regard to climate change with interfacing
with utilities who can be a very good deliverer of the
technologies and also financing. Again these are issues that
are addressed in your bill which really will make the
industrial program a much broader and more balanced program.
Portfolio maps should be developed to assist in project
selection and build a robust program. They'll be both technical
and market. Show the benefits of the program, the timeframe,
the total cost and then a strong connection between the R and D
programs and the technology delivery programs.
The technology delivery programs have an opportunity to
identify what are some of the longer term research needs that
the industry needs that they could then enter cost share
programs with. It's also an opportunity for the people who are
going out to give the assessments to tell about the DOE's
results. It can work both ways.
We're pleased that the legislation incorporated many of our
recommendations. Regular assessments, including greenhouse gas,
road mapping of specific industries, financial mechanisms to
help provide the capital needed, interactions with other
programs within DOE and the formation of an advisory group,
which Dr. Elliott also mentioned.
I'll mention a couple of the sections that we'd like to see
some expansion on, particularly in the financial institutions.
Utilities have been very active in many states at providing
audits and incentives to the industrial sector. They could also
be a source of funding for them, so to consider them in section
two.
Looking at the comparison of the U.S. technology adoption
rates with those in Europe, Japan and other countries, it would
also be useful to find out if they're different. Why are they
different? Is it because of pricing policies, economic
policies, other, age of equipment and the like and not just
reporting? We want to endorse the fact that appropriate to have
the National Academy to evaluate the critical manufacturing
capabilities and supply chain to capture the development of
advanced energy technologies in the United States.
Then would like you to consider adding a data section for
the fact that EIA collects data on manufacturing. It used to be
done every 4 years. It is now done only every 3 years.
People need that data on how is energy used. What
technologies are being used? In order to develop policies and
see how the country is progressing.
There needs a sustained level of a balanced Federal program
both as a portfolio of R and D and policies and strongly
endorse this legislation that along with EISA will go a long
way to providing that. Thank you.
[The prepared statement of Ms. Savitz follows:]
Prepared Statement of Maxine Savitz, Ph.D., Honeywell, Inc. (Ret.), Los
Angeles, CA, and James L. Wolf, Energy & Environmental Consultant and
Former Executive Director, Alliance to Save Energy
We are pleased to present our views on S. 661, Restoring America's
Manufacturing Leadership through Energy Efficiency Act of 2009,
legislation proposed to strengthen American manufacturing through
improved industrial energy efficiency. The U.S. industrial sector is
composed of a diverse set of businesses, products and processes with a
broad range of opportunities for improved energy efficiency. In 2008,
industry accounted for 33 percent of energy used in the U.S. and 28
percent of carbon dioxide emissions. (Energy Information
Administration, Annual Energy Outlook 2008) If we are to achieve our
national economic, energy, environmental and security goals, U.S.
industrial energy use needs to be addressed by federal policy and
programs in a sustained effort.
While industry does respond to price signals for their investments,
and there are somewhat less market barriers than in many other sectors,
federal policy and programs are needed to address the many barriers
that still exist. In today's financial climate, industry does not have
the available capital to invest in developing and testing new
technologies--or even deploying all the known proven existing
technologies--that will increase their energy productivity.
Opportunities are being missed to simultaneously address environmental
and climate concerns, to make our industry more productive in hard
economic times, as well as to make the nation more secure. The proposed
legislation takes major steps to rectify these problems, and we have
suggestions for refinements to it.
Prior to commenting on some of the specific suggestions of the
legislation, we will summarize the findings and recommendations of a
recent peer review of the Department of Energy (DOE) Industrial
Technology Program (ITP), which we co-chaired. Attached for the record
is a copy of the peer review report.*
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* Report has been retained in committee files.
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The DOE Office of Energy Efficiency and Renewable Energy (EERE)
requires each program to conduct periodic peer reviews to enhance EERE
program planning. The EERE ITP program held a corporate peer review in
Washington, DC on October 28-30, 2008. The purpose of the peer review
was to evaluate the program's effectiveness, management, productivity
and relevance to EERE programmatic goals. An independent panel of ten
experts from industry, academia, and government provided comments on
the ITP mission and goals, program areas, and management.
The review panel found that ITP effectively uses its resources to
achieve significant results, despite its recent continually declining
budget. The program had a budget of $65 million in FY 2008, down from
$100 million in FY 2002. The program has achieved several key successes
in R&D and is working on some potentially transformative technologies
in areas such as nanotechnology. There have been several innovative,
energy-efficiency technologies that have entered or are nearly ready to
enter the market, including the Isothermal Melting (aluminum), Mesabi
Nugget next generation cokeless ironmaking process (steel) and Lost
Foam Casting (metal casting).
The ITP program was praised by the panel for its involvement in
developing transformational technologies that could have a very large
impact on the future of manufacturing. ITP's new emphasis on supply
chains was considered a wise strategic direction. The panel felt that
the program would find even more opportunities in the near term as U.S.
industrial competitiveness becomes more critical.
The Technology Delivery program was found to be deserving of high
praise. Through its Save Energy Now (SEN) initiative, Technology
Delivery conducts a plant assessment program that helps manufacturing
facilities save an average of $1.l million, or 8 percent of their
energy costs. The reviewers were impressed that the initiative had been
so productive and generated such good results in such a short period of
time. It was striking that even ``sophisticated'' large energy users,
including some on the review panel, found the program to be very
valuable. The panel also praised the ITP university--based Industrial
Assessment Centers (IAC), which train undergraduate students and offer
technical assistance to small-and medium-sized plants. The IAC is a
strategic investment in manpower as well as infrastructure and noted
the program's importance in training the future workforce and
developing the next generation of industrial professionals.
The review panel observed ITP's strong stakeholder support in both
the R&D and Technology Delivery areas. Partnerships with companies and
trade associations have produced several industry-specific technology
roadmaps that identify top research needs and priorities. These
roadmaps have helped ITP set an R&D agenda that fits industry's needs
and produces technologies that are eventually adopted by industry. The
program's cost-sharing with industry is also good, although the
continued funding uncertainty in the future that has been the hallmark
of the past several years makes it more difficult to involve industry
partners. We are pleased that the Energy Independence and Security Act
(EISA) did authorize higher funding levels and we understand that some
of the EERE R&D stimulus money will be used by ITP.
The review panel also noted that ITP maintains a convincing metrics
collection process to document its achievements. Reviewers noted that
ITP's metrics and evaluation are some of the ``best in class'' in the
federal government because they measure achievements with a high level
of detail and precision. The program's ``Impacts'' report is very good.
It does take resources to make this commitment and the panel encouraged
ITP to continue the effort. Their work on both retrospective impacts
and prospective benefits should be more widely shared with policy
makers as well as industry.
The review panel made a number of recommendations to ITP for
addressing its weaknesses, which included specific suggestions on
refining the program strategy and goals:
The review panel found that the credibility of ITP's goals
were suspect given its current budget. For example, the panel
found that ITP's budget is too small for its stated mission of
helping to reduce industry's energy intensity by 25 percent
over ten years. To achieve such a goal would require both new
and improved technologies with high returns for industry
adoption and utilization in this short time frame. More funding
and an articulated long term commitment to the program are
needed from the Administration and Congress to achieve the
current goals. ITP's goals should be expanded to include a
specific connection to climate change and carbon emissions, and
improving industry's use of alternative feedstocks in addition
to fuel flexibility. Goals should be achievable within the
budget allocated and they need to be updated on a regular
basis, at least every two years, to be consistent with the
budgets and progress made on projects.
ITP needs to undertake more early stage R&D projects to
improve the availability of projects across timeframes for
implementation by industry. The pipeline of R&D projects
appears to be running dry, particularly in the industry
specific areas.
Industry-specific R&D needs to be emphasized and budgets
increased. While the cross-cutting energy intensive industrial
work is commendable, it is not an adequate substitute for
industry specific R&D. A clearer rationale for how the programs
are balanced and complement each other to meet overall ITP
program goals is required.
ITP would benefit from increasing its policy expertise at
the federal and state levels, which will help achieve its
mission and engage new stakeholder groups, utilities, states
and other entities. In particular, ITP needs to strengthen its
outreach to utilities to help industry overcome barriers to
implement energy efficiency projects and new technologies. ITP
has begun building partnerships with utilities, but also needs
to strengthen its ties with public service commissions and
states that are resistant to utility ``decoupling'' of revenues
from profits and other load-reducing strategies. Understanding
the policy issues and a careful outreach strategy will help ITP
communicate with these entities, advance the program's mission
and present industry with options to reduce energy intensity.
ITP should develop a strategy to assist industry identify
financing opportunities for the adoption of technology.
Portfolio maps that reflect risk (technical and market),
benefit, total projected cost and timeframe need to be
developed to assist in project selection, better present and
explain the overall program and justify the need for any
portfolio balancing decisions to meet program goals.
The panel also recommended that ITP establish a stronger
connection between its Technology Delivery and R&D programs.
The Save Energy Now (SEN) program could provide feedback on
some of the industry longer term R&D needs and the auditors in
both SEN and IAC could inform the industry managers about the
technologies ITP is developing or has developed.
We are pleased that the legislation being discussed today has
incorporated many of the peer committee recommendations mentioned
above. These include regular assessments including greenhouse gas
emissions in addition to energy efficiency, road-mapping of specific
industries, financial mechanisms, interaction with other programs in
DOE, and the formation of an advisory group.
The following are suggestions to consider for modifications to the
proposed legislation:
Sec. 2 (h) (2) (B) (ii), we recommend adding utilities after
financial institutions. Although they could be considered as
``other provider of loan capital'', utilities in some states
such as California have been proactive in providing financing
for energy efficiency. They could participate as funders or co-
funders.
Sec. 3: We suggest adding a sentence requiring a brief
letter or report be sent to Congress every other year on the
efforts of coordination and results. This will help prompt more
consistent coordination.
Sec. 4 (b): As part of the report, we recommend there be an
assessment of how much energy intensity and greenhouse gas
emissions could be reduced at different budget levels for ITP.
For example, if the budget of ITP were to double, what would be
the impact on energy intensity and greenhouse gas emissions in
2020? The report should state at a minimum what could
realistically be accomplished regarding energy intensity and
greenhouse gas reductions at the current budget level. This
recommendation is derived from the IPT Peer Review report which
found that the current goals are not consistent with the
budget.
The report in Section 4 (b) (4) on comparison of U.S.
technology adoption rates with those in the European Union,
Japan, and other appropriate countries, should include ``an
assessment of the reasons for any differences in adoption rates
considering at a minimum both economic (including price) and
policy reasons in the U.S. and countries considered.''
Understanding the reasons for any differences in adoption rates
can help formulate better policy.
Sec. 8 (b) Since the National Academy report is due to the
Congress within two years from enactment, add a phrase ``within
60 days of enactment of the act'' the Secretary enters into the
agreement with the Academy. Getting the study underway promptly
will allow sufficient time for a rigorous study to be
conducted. Also, add a phrase that the Academy shall decide
which industries to focus on and supply chains to be analyzed
so that not all industries are expected to be analyzed and the
study can be of sufficient depth.
Adding a new Section on data gathering. More detailed data,
and data collected more frequently, are needed to better assess
the status and prospects for energy efficiency and greenhouse
gas emission reductions. The Energy Information Administration
(EIA) publishes and analyzes data about energy use in the U.S.
An important part of that portfolio is the Manufacturing Energy
Consumption Survey (MECS). The public products of the survey
include data, by industry and region of total energy use, types
of energy (coal, electricity, natural gas, LPG, residual fuel
oil, other fuels etc.), the cost of energy and technological
features of industry related to current and potential pattern
of energy use. Based on the data, the EIA produces critical
analyses that address issues such as demand within specific
industries for different forms of energy. These in turn allow
for projections of energy use and the impact of energy price
changes on manufacturing output and employment in the U.S.
Timely collection and publication of consistent, comprehensive
surveys are necessary to understanding trends in energy use and
the impact of existing and proposed public policies.
Between 1978 and 1981, the EIA funded the Annual Survey of
Manufacturers, which included information on industrial energy
consumption. The survey was discontinued in 1981 due to budget
reductions. MECS started in 1985 and was repeated every three
years up to 1994, when it was put on a four-year schedule for
1998, 2002, and 2006. Information about the 2006 Survey is
still not available. Thus, the detailed information currently
available about energy use in industry and emissions of carbon
dioxide is over seven years old, missing a period of dramatic
changes in energy technology and industry structure in the U.S.
We suggest adding a section that ``EIA conduct MECS on a three year
schedule. It should be coordinated with any GHG reporting
requirement that is established pursuant to statute or
regulatory authority.''
In the near term, the U.S. industrial sector can improve its energy
efficiency and reduce its greenhouse gas emissions through the adoption
of cost-effective energy efficient technologies and processes. In the
longer term, the development and implementation of additional
technologies and processes will further improve its efficiency,
environmental performance, productivity and competitiveness. The
targeted greenhouse gas emission reductions being considered in many
pieces of proposed legislation can only be met with the nation and
industry greatly accelerating its rate of adoption of existing energy
efficient technologies and deploying very rapidly new ones that are
developed.
There needs to be a sustained level of effort of a Federal
research, development, demonstration and deployment program with a
balanced portfolio and appropriate policies. This proposed legislation,
along with EISA will make progress toward reaching these goals. We
strongly endorse it and look forward to continue to work with you and
your staff.
The Chairman. Thank you very much.
Mr. Zepponi, go right ahead.
STATEMENT OF DAVID ZEPPONI, PRESIDENT, NORTHWEST FOOD
PROCESSORS ASSOCIATION, PORTLAND, OR
Mr. Zepponi. Good morning, Mr. Chairman and members of the
committee. Thank you for inviting me to testify before this
committee today. My name is David Zepponi. I'm the President of
the Northwest Food Processors Association. I would like to
submit my testimony for the record and provide the committee
with a summary now.
Established in 1914, NWFPA is a regional trade association
representing food processing industry in Idaho, Oregon and
Washington. NWFPA members comprise the third largest
manufacturing employment sector in the Northwest and add value
over $20 billion to our economic value in the region's economy.
NWFPA welcomes this opportunity to provide testimony on the
Restoring America's Manufacturing Leadership through Energy
Efficiency Act of 2009. We believe that the programs and
resources provided by this legislation will promote significant
improvement of energy efficiency by industry, contribute to
reductions in greenhouse gas and assure the U.S. industries
remain competitive in a global environment.
My testimony today provides an outline of the approach
NWFPA used to establish the energy efficiency goal and the plan
to achieve that goal. I will also tell you why we believe this
proposed legislation will help food processors and other
industries implement energy efficiency in their activities.
NWFPA's energy efficiency of goal.
The food processing industry is facing dramatic changes
forcing critical strategic adjustments in the way business is
conducted. In response to these forces NWFPA established the
Northwest Food Processor's Cluster initiative with the goal to
reposition the three State food processing industry to compete
globally through dramatically increased innovation in
productivity. The key concept is local competitors working
together along with cluster partners, Federal and State
agencies, the National Laboratories, educators and suppliers,
toward a common goal.
In May 2008, NWFPA invited Doug Kaempf, Program Manager of
the Industrial Technologies Program of DOE to attend our annual
executive business summit. We asked him to discuss how we could
collaborate to achieve energy objectives of our member
companies. The food processing industry is the second largest
user of energy in the Northwest behind the pulp and paper
industry.
Mr. Kaempf and the ITP challenged the food processors to
adopt an aggressive approach to energy savings. We decided to
use energy efficiency as our focal point to improve the
industry's competitiveness. NWFPA, ITP and the Northwest Energy
Efficiency Alliance developed a strategy to meet the challenge.
Last fall NWFPA member executives established the following
audacious and aggressive goal to accelerate the implementation
of energy efficiency strategies to reduce member wide energy
intensity by 25 percent in 10 years and through innovation and
new technologies and new resources achieve a reduction of 50
percent in 20 years. Food processing executives recognize that
the most effective way to manage energy costs, reduce
greenhouse gas emission and at the same time increase
productivity and economic growth was through greater
implementation of energy efficiency.
Energy needed to be viewed beyond a line item in the
operational cost. Energy must be viewed as a holistic
management opportunity. Subsequently food processors and the
cluster partners participated in a workshop to identify the key
technologies and actions, research, partnerships and resources
that could be integrated into the NWFPA energy road map.
Most recently on February 17, 2009, NWFPA and the U.S.
Department of Energy signed a memorandum of understanding to
work collaboratively to achieve these goals. The MOU sets the
foundation for a partnership to identify and pursue a diverse
range of opportunities for energy efficiency within the
Northwest food processing industry. ITP has been an important
NWFPA partner for many years. In fact in 2003, we received a
modest grant from the industries of the future to begin our
entire program.
Another example of an affiliation that will help us to
achieve our goal is with the Northwest Energy Efficiency
Alliance. In 2005 Northwest Food Processors Association has
been partnering with NEEA on their industrial initiative which
focuses on making energy efficiency an integral part of both
corporate and plant business practices. Thirty Northwest Food
Processor Association member companies are participating in
NEEA's continuous energy improvement program. We're
implementing energy management strategies and energy efficiency
measures that are achieving significant results.
Restoring America's Manufacturing Leadership through Energy
Efficiency Act of 2009, S. 661 is critical because it supports
ITP's industrial efficiency efforts and provides a framework
for the industry and its partners with ITP. As I have just
indicated these partnerships are critical for industry to
achieve a meaningful reductions in energy intensity. NWFPA
thanks Chairman Bingaman, Senator Murkowski and the co-sponsors
for introducing this bill and for recognizing the importance of
energy efficiency for the competitiveness of U.S. industries.
A couple of sections. Industrial energy efficiency grant
program, NWFPA supports the creation of a revolving loan
program to provide funds to the industrial manufacturers for
implementation of commercially available energy efficient
technologies and processes. The lack of capital and resources
are significant barriers to implementation particularly for a
small- and medium-sized manufacturing companies.
Many States and Federal energy programs provide tax
incentives for implementation of energy efficiency programs.
But they aren't being used. We noticed that we did an
assessment through the Innovation Productivity Center and
evaluated 20 years of ITP funded industrial assessment center
audits. Only about 30 percent of the recommendations were
actually implemented.
The industry specific road maps. Earlier I outlined our
process to establish a goal and develop an energy road map. We
believe that the road map process is critical to:
One, coalesce the industry around a goal.
Two, to identify energy efficiency opportunities within the
context of business operations and strategies.
Three, to expand the range of partners in the processes,
our cluster partners.
Four, creating critical public/private partnerships that
will result in collaborative and actual plans.
The industry research and assessment centers. NWFPA
supports the concept of the industrial research and assessment
centers as institutions of higher education as provided by the
Energy Independence Acts of 2007 and establishing Centers of
Excellence as provided in this bill.
Innovation and industry grants. NWFPA supports inclusion of
Federal funding for State industry partnerships to develop,
demonstrate and commercialize new technologies or processes to
achieve NWFPA's industry wide goal of an additional 25 percent
increment reduction in energy intensity by 2029. A lack of
prompt funding is a primary barrier to development and
demonstration of new innovation technologies and processes are
essential for us to achieve our goal.
In conclusion NWFPA is very supportive of S. 661 because
our experience indicates that the programs and resources
provided by this legislation will promote significant
implementation of energy efficiency by industry, will assure
industry and its partners have the resources to achieve these
ends and will ensure that U.S. industries remain competitive in
a global marketplace.
Mr. Chairman, thank you for the opportunity. I'm happy to
answer questions.
[The prepared statement of Mr. Zepponi follows:]
Prepared Statement of David Zepponi, President, Northwest Food
Processors Association, Portland, OR
introduction
My name is David Zepponi and I am the President of Northwest Food
Processors Association (NWFPA). Established in 1914, NWFPA is a
regional trade association representing the food processing industry in
Idaho, Oregon, and Washington. NWFPA members range in size from mom and
pops to multinationals, although most are medium-size companies. NWFPA
members comprise the third largest manufacturing employment sector in
the Northwest and add over $20 billion of economic value to the
region's economy.
NWFPA focuses on issues facing the food processing industry
including food safety and security, environment, transportation,
productivity, innovation and energy. Our mission is to serve as an
advocate for the common interests of our members and a resource to
enhance the industry's competitive capabilities.
NWFPA welcomes this opportunity to provide testimony on the
Restoring America's Manufacturing Leadership through Energy Efficiency
Act of 2009 (S.661). In fact, we are extremely pleased that this bill
has been introduced. We believe that the programs and resources
provided by this legislation will promote significant implementation of
energy efficiency by industry, contribute to reductions in greenhouse
gas emissions, and assure that US industries remain competitive in the
global marketplace.
Today, I will discuss the importance of energy efficiency to food
processors and how NWFPA's collaboration with its key partners led to
the setting of an aggressive energy efficiency goal. I will also tell
you why we believe the proposed legislation provides an approach that
will help food processors and U.S. industries implement energy
efficiency.
nwfpa's energy efficiency goal
The food processing industry is facing dramatic changes, forcing
critical strategic adjustments in the way business is conducted.
Changes in market, consumer demands, environmental regulation, energy
supply, security, trade practices coupled with increasing costs of
energy, commodities, transportation, labor, water treatment and
regulatory compliance are squeezing profit margins and increasing the
cost of the food supply for American consumers. In response to these
forces, NWFPA established the Northwest Food Processors Cluster
Initiative with the goal to reposition the three-state food processing
industry to compete globally through dramatically increased innovation
and productivity.
Products of this effort include the Northwest Food Processors
Association's 2006 Cluster Assessment and Roadmap and establishment of
the Northwest Food Processors Innovation Productivity Center. The
Cluster Initiative spurred the industry to embrace the concept of local
competitors working collectively along with other cluster partners--the
federal government, the states, suppliers, educators, and regional and
local agencies--sharing ideas and actions to improve the position of
the cluster to compete in the global marketplace.
Energy and the environment were identified as strategic issues by
the Cluster Assessment. Significant energy price increases, climate
change, greenhouse gas emissions regulations, and water issues have
brought additional challenges for food processors. Again, NWFPA looked
to a collaborative approach to guide the industry through these
challenges and assure a sustainable and competitive food processing
industry.
In May 2008, NWFPA invited Doug Kaempf, Program Manager of the
Industrial Technologies Program of the US Department of Energy (US DOE)
to attend NWFPA's annual Executive Business Summit to talk to food
processing executives about how we could collaborate to achieve the
energy objectives of our organizations. The food processing industry is
the second largest user of energy in the Northwest, after the pulp and
paper industry. Doug challenged the food processors to adopt an
aggressive approach to energy savings.
Over the summer, NWFPA, DOE Industrial Technology Program and the
Northwest Energy Efficiency Alliance (NEEA) worked on a strategy to
meet Doug's challenge. In October, 2008, NWFPA member executives
gathered at the NWFPA Energy Vision Workshop and created the following
energy vision and goals for the industry:
NWFPA Energy Vision.--To enhance the competitiveness and
economic growth of NWFPA members through development and
implementation of a sustainable energy strategy to increase
energy productivity and promote innovation.
NWFPA Energy Goal.--To accelerate the implementation of
energy efficiency strategies to reduce member-wide energy
intensity (energy use per unit of output) by 25% in 10 years
and through innovation, new technologies and new resources
achieve a total reduction of 50% in 20 years.
Food processing executives recognized that the most effective way
to manage energy costs, reduce greenhouse gas emissions, and at the
same time increase the productivity and economic growth of NWFPA
members was through greater implementation of energy efficiency. Energy
needed to be viewed beyond line-item operational costs and more as a
holistic management opportunity.
NWFPA, ITP and NEEA continued joint efforts and in December 2008,
NWFPA members, state energy offices, energy utilities, educators,
suppliers and other partners convened at the NWFPA Energy Roadmap
Workshop. The objective of the workshop was to identify the key
technologies and actions, research, partnerships and resources that
could be integrated into a ``roadmap'' to help the industry reach its
goals. Facilitated breakout sessions of workshop participants resulted
in over 500 energy efficiency ideas. NWFPA staff and Innovation
Productivity Center staff analyzed these ideas and are preparing the
NWFPA Energy Roadmap document. Key areas of focus have been identified
and highest priority projects have been developed and are ready for
implementation.
On February 17, 2009, as evidence of commitment and support of
NWFPA's energy efficiency goals, NWFPA and US DOE signed a Memorandum
of Understanding (MOU) to work collaboratively to achieve the goals.
The MOU was also signed by the Bonneville Power Administration, Pacific
Northwest National Lab, Idaho National Lab and several individual NWFPA
member companies who were present for the signing ceremony. The MOU
sets the foundation for a partnership to identify and pursue a diverse
range of opportunities for energy efficiency within the Northwest food
processing industry. A copy of the MOU has been provided with this
testimony.*
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* Document has been retained in committee files.
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ITP has been an important partner in coalescing NWFPA's energy
efforts into a vision and roadmap. ITP was also instrumental in the
original launch of NWFPA's energy efficiency efforts in 2003. With a
very small grant from ITP's Industries of the Future, bridge funds were
available for NWFPA to hire an energy staff person and develop the
foundations of our energy program. With another very small US DOE grant
in 2005, and with the assistance from ITP staff, NWFPA developed a web-
based Energy Portal to provide food-processing specific information on
energy efficiency best practices and emerging technologies. In
addition, training seminars and a national energy efficiency satellite
teleconference were conducted and energy assessment software and
process control technology specifications were developed.
NWFPA now has the most significant and effective energy efficiency
program of any trade association in the U.S. In 2007, the American
Council for an Energy-Efficient Economy (ACEEE) recognized NWFPA's
efforts with an Energy Efficiency Champion of the Year Award.
I'd like to highlight a few of NWFPA's energy programs and
projects:
Water and wastewater discharge are ongoing challenges for
food processors and many processors are significant users of
water. Water supply and availability are becoming major
concerns and climate change impacts add uncertainty. Wastewater
is considered a key environmental concern and many food
processors must treat wastewater prior to discharge.
The energy costs of wastewater treatment can be significant.
NWFPA is addressing these issues in a variety of ways.
Since 2005, NWFPA has been partnering with the Northwest
Energy Efficiency Alliance (NEEA) on NEEA's Industrial
Initiative, which focuses on making energy efficiency an
integral part of both corporate and plant business practices.
Thirty NWFPA-member companies are participating in NEEA's
Continuous Energy Improvement Program and are implementing
energy management strategies and energy efficiency measures
that are achieving significant energy savings.
Since 2004, NWFPA has been working with Glen Lewis, formerly
of Del Monte Foods, to develop an energy management software
program we call the Green Energy Management System or GEMS.
GEMS provides real-time tracking of water, air, gas,
electricity and steam use and associated costs as well as
resource use per unit of production and associated greenhouse
gas emissions. NWFPA and NEEA are completing a pilot study of
GEMS implementation in food processing plants in the Northwest
and we are about to take GEMS member-wide.
A NWFPA associate has just completed a case study on the
integration of energy and environmental management technologies
at the wastewater operations of a major food processor in
California. The case study was sponsored and funded by the
California Energy Commission, Public Interest Energy Research
(PIER) program and Lawrence Berkeley National Laboratory-Demand
Research Center. The objective was to integrate and maximize
demand response opportunities, energy efficiency, and reduce
carbon emissions while meeting wastewater environmental
regulations.
A significant amount of energy is used to run motors and
pumps for aeration and aspiration systems in food processing,
municipal, and other industrial wastewater lagoons. These
systems maintain dissolved oxygen levels that are required for
microbiological degradation of waste, odor control, and water
discharge. To assure regulatory compliance, most systems run
continuously--24/7/365.
When an energy tracking system (GEMS) was integrated with
real time dissolved oxygen (DO) measurements, it showed that
more energy was being used than was necessary to maintain DO
levels. Further, when this monitoring information was coupled
with weather and temperature data (DO is reduced with high
temperatures), operations could be fine-tuned to achieve even
more significant reductions in energy use. These significant
reductions in energy use also produced significant, real-time,
measureable reductions in CO2 emissions.
Energy efficient-wastewater treatment is a top priority for
food processors. NWFPA and its partner, NEEA, plan to conduct a
pilot study of this technology at food processing plants in the
Northwest.
NWFPA is currently working with the Gas Technology Institute
on the field demonstration of a new ultra-efficient industrial
boiler technology at a food processing plant in the Northwest.
This ``Super Boiler'' has a 95% fuel to steam efficiency (about
20% more efficient than standard technology), results in huge
savings in natural gas, as well as significant reductions in
NOx and greenhouse gas emissions.
I will discuss additional activities and programs of NWFPA as they
relate to specific sections of the proposed legislation.
restoring america's manufacturing leadership through energy efficiency
act of 2009
The proposed legislation is critical because it supports ITP's
industrial energy efficiency efforts and provides a framework for
industry partnerships with ITP. As I have just indicated, these
partnerships are instrumental to assisting industry achieve significant
reductions in energy intensity.
NWFPA thanks Chairman Bingaman, Senator Murkowski and the co-
sponsors for introducing this bill and for recognizing the importance
of energy efficiency to the competitiveness of U.S. industries. We are
very pleased at how consistent this bill is with NWFPA members'
objectives, and with our approach to achieving industrial energy
efficiency, which has evolved through our experience pursuing energy
efficiency through partnerships and collaboration. In the sections
below, we comment on several of the bill's provisions and also
recommend some additional provisions that we believe will assure
program and project success.
Section 2. Industrial Energy Efficiency Grant Program
NWFPA supports the creation of a revolving loan program to provide
funds to industrial manufacturers for implementation of commercially
available energy efficient technologies and processes. Lack of capital
and resources are significant barriers to implementation, particularly
for small to medium-sized companies. For these companies, capital is in
short-supply, especially during this economic down-turn. Energy
efficiency capital projects must compete with all other business
priorities and obligations.
Many state and federal energy programs provide tax incentives for
implementation of energy efficiency technologies and processes.
However, interviews with NWFPA member food processors conducted by both
NWFPA and NEEA indicate that while tax incentives do promote
implementation, many companies are not able to use these incentives
because they just don't have the up-front funds to install the energy
efficiency technology. NWFPA's Innovation Productivity Center
evaluation of 20 years of ITP-funded Industrial Assessment Center
audits in the Northwest reveals that only about 30% of the energy
efficiency opportunities identified by these audits are implemented. We
found that lack of up-front funds is key to these lost opportunities.
The proposed loan program will help remove such barriers to energy
efficiency implementation.
Section 4. Energy Efficient Technologies Assessment
NWFPA appreciates the inclusion of food processing in the list of
industries for which assessments of commercially available energy
efficient technologies will be specifically conducted. NWFPA's goal to
achieve a 25% reduction in energy intensity in 10 years is to be
accomplished through the implementation of commercially available
energy efficient technologies.
In 2005, with US DOE support, NWFPA developed an inventory of
existing energy efficiency technologies for food processing for posting
on our web-based Energy Portal. This inventory proved to be an
excellent resource for our members and, as indicated by our site visit
tracking, was extensively used by others as well. However, NWFPA has
not had the resources to update this inventory. From our experience, we
know that the assessments conducted under this provision of the bill
will meet an important need for food processing as well as other U.S.
industries.
Section 5. Future of Industry Program
NWFPA was delighted to discover the approach that we have been
developing in collaboration with ITP, NEEA and our other cluster
partners has essentially been included as Section 5 of the bill. This
approach has worked extremely well for Northwest food processors and
has produced a solid goal and pathway to achieve that goal. NWFPA
welcomes the opportunity to serve as a model for f the Energy Roadmap
approach to be used with food processors in other regions of the
country as well as with other industries.
Industry-specific Road Maps
NWFPA established a road map process and is currently developing an
industry-wide road map document for its members in Idaho, Oregon, and
Washington. Just as provided in this bill, NWFPA's road map identifies
near-, mid-, and long-term targets of opportunity and provides
actionable public/private plans to achieve the roadmap goals. Likewise,
NWFPA has designed studies to determine the baseline energy intensity
of the industry, its greenhouse gas emissions levels, and process and
sub-process operating costs and opportunities.
We believe the road map process is critical to (1) coalescing
industry support around the goals; (2) identifying energy efficiency
opportunities within the context of business operations and strategies;
(3) expanding the range of identified opportunities by allowing cluster
partner input; and, (4) creating critical public/private partnerships
that will result in collaborative actionable plans.
Industrial Research and Assessment Centers
NWFPA generally supports the concept of industrial research and
assessment centers at institutions of higher education as provided by
the Energy Independence and Security Act of 2007 and the establishment
of Centers of Excellence as provided in this bill. We believe this will
provide important educational opportunities, training, experience and
financial support for students and researchers. However, we believe
that industry input and participation is critical to the ultimate
success of these Centers.
Our experience with such centers in areas other than energy
efficiency has shown that the products of research conducted in a
vacuum, absent industry input, do not meet industry needs and are
difficult to incorporate into industry processes and business planning.
Often, the research focuses on the institution's or the researcher's
interests and not on industry's needs. Thus, little of this research
produces value to industry.
To assure that the recommendations of the Centers of Excellence and
Industrial Research and Assessment Centers result in implementable and
implemented energy efficiency technologies and strategies, the input of
and coordination with industry must be incorporated throughout this
subsection.
Section 6. Sustainable Manufacturing Initiative
NWFPA supports inclusion of a Sustainable Manufacturing Initiative
in this bill. We believe that sustainability is a key principal of
smart business management and that energy efficiency is a key element
of sustainability. A sustainable strategy will contribute to industry's
competitive advantage. NWFPA and the Innovation Productivity Center are
developing a sustainability template and metrics for use by the NWFPA
membership to implement sustainable practices. These metrics include
energy, greenhouse gas emissions, water and waste.
NWFPA applauds the establishment of a joint industry-government
partnership program to conduct research and development of new
sustainable manufacturing and industrial technologies and processes.
Section 7. Innovation in Industry Grants
NWFPA supports inclusion of federal funding for State-industry
partnerships to develop, demonstrate, and commercialize new
technologies or processes. To achieve NWFPA's industry-wide goal of an
additional 25% increment reduction in energy intensity by 2029, the
industry is relying on implementation of innovative energy technologies
and processes. Therefore, innovation is a priority element of NWFPA's
Energy Roadmap. Our Innovation Productivity Center has established a
Technology Transfer/Commercialization Initiative and an Advisory Task
Force made up of food processors. Working with the states and the USDOE
national laboratories, we have identified a number of promising
innovative technologies. Several projects have been developed and a few
demonstrations are currently underway.
Lack of funding is the primary barrier to development and
demonstration of new innovative technologies and processes. Most food
processors lack sufficient resources for research and development,
especially in areas outside new product R & D. Federal funds are
critical to moving technologies and processes forward.
NWFPA suggests that provisions be added to this section to include
industry-USDOE national laboratory partnerships. The national
laboratories have developed a wealth of technologies and processes
that, with further development in partnership with industry, could
produce innovative energy efficient applications for many industries.
Our Innovation Productivity Center and Advisory Task Force are
exploring opportunities with Pacific Northwest National Lab and Idaho
National Lab, as well as seeking funding for RD & D projects with these
organizations.
Section 9. Industrial Technologies Steering Committee
NWFPA supports the establishment of an advisory steering committee
and would be pleased to participate and contribute recommendations and
lessons learned.
conclusion
In conclusion, NWFPA is very supportive of S. 661 because our
experience indicates that the programs and resources provided by this
legislation will promote significant implementation of energy
efficiency by industry, will assure industry and its partners have the
resources to achieve these ends, and will assure that US industries
remain competitive in the global marketplace.
Again, Mr. Chairman, thank you for this opportunity.
The Chairman. Thank you very much.
Mr. Harper, go right ahead.
STATEMENT OF STEPHEN HARPER, GLOBAL DIRECTOR, ENVIRONMENT AND
ENERGY POLICY, INTEL CORPORATION
Mr. Harper. Yes. Thank you, Chairman Bingaman, Senator
Murkowski and Senators. I'm here representing both Intel
Corporation.
I direct our Global Energy and Environmental Policy
activities. But I'm also here as co-chair of a new group called
the Digital Energy Solutions Campaign which I'll talk about
shortly. We think that this program, the bill, S. 661 can play
a big role in helping to improve the efficiency, the energy
efficiency of industry as well as the competitiveness.
First a few words about Intel. We're a fairly well known
company. We're the largest semiconductor manufacturer in the
world.
Our industry is now the second largest exporting industry
in the U.S. after airlines. Intel is a very big part of that
overall picture. Within the U.S. we have major manufacturing
operations in New Mexico, Oregon, Arizona, and Massachusetts.
We have research and development in other facilities in a
number of other States around the country.
Our presence in the U.S. is obviously very significant.
While about 75 and almost close to 80 percent going forward of
our revenue is a gain from the sale of products overseas. More
than half of our employees live and work in the United States.
This historical investment continues today. Our chairman,
rather our CEO, Paul Otellini, just announced here in
Washington a $7 billion, 2-year investment in retrofitting our
existing facilities. Particularly in Oregon, New Mexico, and
Arizona with the latest production equipment to continue down
the road of Moore's Law to make smaller and smaller chips and
more energy efficient chips to boot.
At a time when many, if not most companies in our industry
are offshoring, many of them are outsourcing. We've actually
made the commitment to increase our presence in the United
States and increase our manufacturing presence. In fact if you
look at the total value, about three quarters of all of our
microprocessors are made here in the United States.
We spent a good deal of time looking at the energy consumed
in our manufacturing process and by our products as they're
used out in the marketplace. It turns out there's quite a bit
more energy used in the use of the product than the
manufacturing of the product. But we still spend about $225
million here in the U.S. every year on energy. About $200
million of that is electricity alone.
So, you know, it's part of our ongoing effort to try and
improve our competitiveness. We look at our energy expenditures
seriously and look for ways to reduce them.
We've had since 2001 what we call a cross functional team.
Every company has its terminology. That's looked very
thoroughly across the company for what we also call ``best
known methods'' for reducing energy efficiency because we like
to find good ideas and then replicate them throughout our
manufacturing process in what we call copy exactly.
We've undertaken a number of projects. Since 2001 we've
invested more than $23 million in projects specifically focused
on energy efficiency. The return on that has been in excess of
$50 million, but I must say that we've made a much bigger
amount of investment in our manufacturing infrastructure in the
U.S. and globally that's had energy efficiency as an element.
Because we try to design energy efficiency into everything we
do.
We've also had a fruitful recent relationship with the
industrial technology program and one of the reasons why we
support the strengthening of that program under S. 661. Working
with DOE we've had four energy audits completed at our U.S.
facilities. We're currently undertaking an assessment of which
of the improvements we've identified in those audits we're
going to implement. Scheduling those is part of our engineering
activity. But it's been very good, very fruitful experience
over the last 3 years.
It's also convinced us, this experience with the ITP, that
the funding and research and development programs that S. 661
would either expand or create are really critical in terms of
the competitiveness particularly of small- and medium-sized
companies. We're a big company. We have lots of staff.
We can analyze these projects. We can self fund the
projects. We don't have to go out of the capital market for the
most part. But that's a fairly unusual situation.
Small- and medium-sized companies typically don't have the
expertise to go look for these advantages or benefits. We do.
So S. 661 will be very useful there.
I think the Centers of Excellence Program actually will
also be one of the more beneficial aspects of S. 661. In fact
in our industry we've created Centers of Excellence working
with DOD and DOE in other respects to focus on what we call
precompetitive research in the semiconductor manufacturing
technology. Some of that has big energy efficiency component
through SEMATECH and the Semiconductor Research Corporation
which are cross industry platforms.
I think there'd be a great opportunity in the future for
SEMATECH and the SRC to work with DOE through the programs, the
Center of Excellence Program. I think the industry road mapping
idea is a great one because in our industry we're often
breaking up against the boundaries of physics. We have industry
road maps for all kinds of things that are precompetitive.
We've had experience with the value of that going forward.
I'd like to just finish quickly by saying that I think the
element of this bill that focuses on climate change and looking
for technologies will help us create the breakthrough
technologies that are going to be necessary to meet the
challenge of climate change are especially valuable. In that
regard we have created a group called the Digital Energy
Solutions Campaign. It's a bunch of IT companies, ACEEE, the
Alliance to Save Energy, a number of other environmental groups
and energy groups. We've actually had some very fruitful
meetings with David Rodgers and his staff.
Going forward we very much would like to tell the story and
get the story of the role of IT in improving energy efficiency
and providing climate solutions. We'd like that story
incorporated in some of the work that's done under the programs
in this bill assuming the bill passes.
Thank you and I'd be glad to answer any questions.
[The prepared statement of Mr. Harper follows:]
Prepared Statement of Stephen Harper, Global Director, Environment and
Energy Policy, Intel Corporation
Thank you, Chairman Bingaman and Senators, for the opportunity to
participate in this hearing considering S 661, the recently introduced
``Restoring America's Manufacturing Leadership through Energy
Efficiency Act of 2009.'' My name is Stephen Harper. I serve as the
Global Director of Environment and Energy Policy for the Intel
Corporation. I also am the co-Chairman of the Digital Energy Solutions
Campaign (DESC), a newly-formed coalition of companies, associations,
and environmental and energy NGOs dedicated to supporting the role of
information and communications technology (ICT) as part of the solution
set in addressing our nation's energy and climate change challenges. I
am here today to speak in support of the ideas embedded in S 661 and to
relate Intel's own experience in working to improve its own energy
efficiency.
First, a few words about Intel. We are the world's largest
semiconductor manufacturer. The semiconductor industry is the second-
leading exporting industry in the US, with Intel a major part of that
picture. Within the US, we have a major manufacturing presence in New
Mexico, Oregon, Arizona and Massachusetts.
Our presence in the US is significant. While we generate
approximately 75% of our revenue from abroad, more than half of our
employees live and work in the US. Our historical investment in the US
continues today. Our CEO, Paul Otellini, recently made an important
announcement here in Washington, namely that we will be spending
approximately $7 billion over the next two years to equip our
manufacturing facilities in New Mexico, Arizona, and Oregon for our
next-generation 32nm manufacturing technology. Making microchips is an
expensive process. At a time when many other companies in our industry
are off-shoring, out-sourcing, or both, Intel has made a significant
commitment to manufacturing here at home. In fact, nearly three-
quarters of our microprocessor manufacturing is done in the US.
We have spent a good deal of time analyzing the energy it takes to
make our products and the energy those products consume as they are
embedded in computers and other IT equipment. While we continue to turn
out ever more efficient silicon products (measured on a work performed
per unit of energy consumed basis), it turns out that the use of our
products consumes more energy than does manufacturing those products.
Nonetheless, our US energy bill is approximately $225 million, with
approximately $200 million of that amount spent on electricity.
Increasing our efficiency--both to reduce our environmental footprint
and to reduce our costs--is a priority for us.
We have done a lot in recent years to reduce our direct energy
footprint. Since 2001 we have had a world-wide cross-functional team
charged with identifying and implementing a wide variety of retrofit
energy efficiency projects and sharing so-called ``best known methods''
(BKMs) throughout the company. Among the types of projects we have
undertaken are heat recovery on our facility boilers, installation of
smart controls on lighting and facility heating ventilation and air
conditioning (HVAC) systems, and using computerized building management
systems to operate facilities in their most efficient range. In
addition, we have worked closely with the suppliers who manufacture our
fab ``tools,'' the typically very expensive machines that run the
different parts of the semiconductor manufacturing process, to maximize
their energy efficiency. Overall, since 2001, Intel has invested more
than $23 million in hundreds of energy efficiency projects, saving more
than $50 million.
In addition to our focus on improving the energy efficiency of our
existing facilities, efficiency also is a priority in the design of our
new production facilities globally. For example, Intel's most recent
new US fab in Chandler, Arizona has been certified under the ``LEED''
program administered by the US Green Buildings Council.
Internationally, we have obtained LEED certification for design center
in Israel and are pursuing LEED-certification for our new chip-set fab
in Dalian, China.
Intel's facility energy efficiency team has had a fruitful
relationship with the US Department of Energy, including the Industrial
Technologies Program (ITP), a program which would be strengthened by S
661. Under the ITP, DOE has completed four energy efficiency savings
assessments (ESA) audits at Intel sites in New Mexico, Arizona, and
Oregon, with the earliest completed in 2006. These audits focused on
the efficiency of pumping systems, compressed air systems and fan
systems, and were conducted by DOE contractors. These audits produced a
number of potential efficiency projects that currently are being
evaluated against our internal criteria for capital investments. In
addition to these audits, the ITP makes available to Intel a variety of
programs, models and other analytical tools for our use.
Our experience with DOE's industrial energy efficiency programs has
convinced us of the importance of the funding and research and
development programs that would be authorized or expanded by S 661.
While Intel has benefitted from working with DOE's ITP, the potential
benefits of additional grant funding and the expansion of the
Industrial Research and Assessment Centers would especially benefit
smaller- and medium-sized industrial companies which, collectively,
comprise the bulk of US manufacturing. Smaller companies often do not
have the internal resources to identify and seize many of the available
energy efficiency opportunities and stand to benefit significantly.
We particularly like the concept of creating Centers of Excellence
within the Industrial Research and Assessment Centers. We would welcome
the creation of such a center focused on energy efficiency in
semiconductor manufacturing. This would create potential opportunities
for collaboration with SEMATECH and the Semiconductor Research
Corporation, our industry's leading platforms for path-finding research
partnerships.
One concern we have entails funding. Although the recently-passed
``American Recovery and Reinvestment Act of 2009''--the stimulus
package--included funding for a number of excellent energy efficiency
and renewable energy initiatives, advancing industrial energy
efficiency received little support. Moreover, there were several
excellent provisions of the Energy Independence and Security Act of
2007 (EISA) that did not get funded. So we urge Congress to ``complete
the circuit'' that would be started by S 661 and provide the funding to
make these programs work.
In addition, while we understand that the focus of S 661 is on
creating and supporting ``advanced technologies,'' there are some
``ready to go'' technologies that Congress should support as well. A
good example is combined heat and power (CHP). EISA provided grant-
making authority for CHP projects, a program that never got funded.
Other features of S 661--including additional support for the
Future of Industry Program and creating the Innovation in Industry
Grants--should help create the technological leap-frog that will be
required to address our climate challenge. While estimates vary
somewhat, increasingly scientists and politicians alike are converging
on a goal of reducing global carbon emissions by something like 80
percent by 2050. Achieving that level of deep emissions reductions will
require development of breakthrough technologies. That will require
government support and the type of public/private partnerships the bill
provides.
Going forward, concerns about climate change will make these types
of programs even more important to the competitiveness of US
manufacturing. Whatever form it takes--cap-and-trade, carbon tax or
regulation under the existing Clean Air Act--the US will have a Federal
climate policy in the foreseeable future. While Europe already has a
program in place, and while some developing countries are likely to
undertake some form of climate change commitment as part of the current
post-Kyoto Protocol negotiations, it is clear that passage of a US
program will create an un-level ``playing field'' for those US
companies that compete with other enterprises in the developing world.
That clearly will be the case for Intel and the US semiconductor
industry. I do not say that as a critique of the US implementing its
own program--Intel in fact supports a Federal climate program. It is
simply a fact of economic reality. Domestic climate regulations will
impose manufacturing costs that competitors in the developing world
will not face, at least to the same extent, in the immediate future.
But increasing the energy efficiency of manufacturing can help re-
level the industrial playing field. The 2007 McKinsey report,
``Reducing US Greenhouse Gas Emissions: How Much At What Cost?'',
documents that energy efficiency in many different manifestations is
generally the least expensive way for companies and economies to reduce
their climate emissions. Indeed, as the McKinsey report indicates, and
Intel's own experience validates, investments in energy efficiency
often create positive economic returns independent of their effect on
climate emissions.
Many of the societal wealth-creating energy efficiency options
analyzed in the McKinsey study entail some form of information and
communications technology (ICT). Subsequent studies have fleshed-out
the contribution ICT can make to improve energy efficiency and reduce
climate emissions. Most recently, The Climate Group, a leading
environmental NGO, released two successive ``Smart 2020'' reports. The
most recent--``Smart 2020: Enabling the Low Carbon Economy in the
Information Age: US Report Addendum''--estimates that ICT could reduce
US climate emissions by 22% by 2020. This is a huge number compared to
other available options.
What's missing? What is standing in the way of our realizing this
significant potential? The answer is ``smart'' public policies--
policies that enable, encourage, and expand the energy, environmental
and economic role of ICT. Smart policies are needed to overcome a
number of market failures and other barriers to realizing the full
energy efficiency potential.
Intel is leading the way in trying to close the policy gap. We have
joined with technology leaders like AT&T, Dell, EMC, HP, Infineon
Technologies, Microsoft, National Semiconductor, Nokia, Philips
Electronics North America, Sony, Sun Microsystems, Telvent, Texas
Instruments and Verizon to form the Digital Energy Solutions Campaign
(DESC). Non-governmental organization affiliated with DESC include the
Alliance to Save Energy, the American Council on an Energy-Efficient
Economy (ACEEE), the Energy Future Coalition, The Climate Group, the
GridWise Alliance, the Intelligent Transportation Society of America
(ITSA), the Technology CEO Council, and the Telework Coalition.
Additional affiliates include the Technology CEO Council, the
Semiconductor Industry Association, the Information Technology Industry
Council and TechNet.
The mission of DESC is to expand policymakers' understanding of the
role of ICT in improving the energy efficiency of the broader economy.
The coalition is committed to advancing public policies that promote
the use of ICT solutions as a means of solving our nation's energy
challenge, spur innovation and economic opportunity, and contribute to
practical strategies for mitigating climate change. By ``ICT
solutions,'' DESC means the full suite of hardware, software, and
broadband technologies that can increase the energy efficiency of
society.
What does DESC have to do with the programs authorized and expanded
in the proposed S 661? Intel believes that these programs create a
number of potentially powerful leverage points for applying ICT to
advance industrial energy efficiency, realizing the potential
identified in the Smart 2020 reports and elsewhere. I think I can speak
for my colleagues in the DESC endeavor in saying we would welcome the
chance to work with DOE to make this happen should S 661 be enacted.
Thank you again for this opportunity.
The Chairman. Thank you very much.
Mr. Metts, go right ahead.
STATEMENT OF JEFF METTS, PRESIDENT, DOWDING MACHINE, EATON
RAPIDS, MI
Mr. Metts. Thank you for inviting me, Mr. Chairman. Thank
you, Senator Stabenow for your comments. I appreciate yours,
Senator Murkowski.
I heard you all speak and what you want to accomplish here.
It gives me goose bumps because I know I'm here to bring
solutions. Real solutions that we can make things happen, make/
create jobs, create new technologies and drive it right now.
I know what it's like now to be on deck in the major
leagues also. So this is a unique experience.
When you come from Michigan jobs are important. I mean,
we're at 12 percent unemployment. Every day when we get up as a
manufacturer we think about how do we become world class? How
do we get better?
It's nothing that ever leaves. It never will change. It is
what it is. We compete around the world with the best minds you
can imagine. We have some of the best minds in the world right
here in Michigan to be able to do these things.
We looked at the renewable energy program about 2 or 3
years ago. We started thinking how do we get involved in this?
We think it is something that's going to go somewhere. It can
create jobs, create opportunity for us.
We looked at what was happening in that marketplace. When
you come to renewable energy and the types of volumes that you
talk about here, you can begin to think totally different from
a manufacturing sector. I think that they came to the country
so far and they've tried to do things on a, we're going to make
one. We're going to make 10. We're going to make 50. We're
going to make 1,000.
So you're manufacturing processes have been set up around
that. We saw where we could make dramatic changes and bring
automotive type technology to this industry. That's where it
has to go.
The President has asked for 20 percent renewable energy by
2025. I don't think we can meet it with the technology we have
today. I don't think we can meet it with what we have in place
today.
Last year we produced 4,000 turbines in this country. The
problems in trying to produce 4,000 turbines for these
manufacturers or assemblers was huge. Some of them had to carry
up to 90 days worth of inventory because they couldn't get
parts in, the quality issues that were taking place. To carry
that kind of an inventory at those types of product is not how
you want to do this business.
The President's goal wants to 10,000 of these a year. If we
can't do it well at 4, we've got to find a way to do it well at
10. We think we've come up with some of those solutions. By the
innovative technologies that have already been here from
automotive industries. We're being able to make those
technology transfers into this type of equipment.
I don't think people realize what we're talking about here.
Most parts that you make you can pick up and put them on
something. Pick them up and take them off.
These parts weigh 20 tons. So it's not an easy thing to
just say we're going to take this technology forward or we're
going to do this type of thing. We're not set up to do that.
When you buy a machine that can handle those kinds of
parts, you already have it full of work. You're not out looking
for work to put on it. So when somebody comes in and says we're
going to add all of this work into this country. Where are you
going to put it?
So we began to look at those processes and how do we take
this and make this transfer? I've got some charts behind me or
some pictures behind me that can show some of the things that
can bring you up to speed on really what it is in the
manufacturing process that makes this difference. One of the
most common ones is a hub. This is where the blades attach to
that spin and make the power.
Today's technology, a hub, is manufactured with basically
legacy equipment. This equipment has been around since World
War II. There's 120 holes on each side of this that have to be
machined. To pick this up and to turn it or to turn it on a
turntable or to move it or whatever it becomes a real process
in trying to do.
We approached one of the larger wind manufacturing
companies in the world. We said we'd like to bid on your hub
business. We think we can do it better than anybody. They said,
please try.
We think we're the best in the world. We can do a hub in 24
hours. We approached MAG and we said, we think that we see this
opportunity. We want to do it.
We want to go forward. How do we bring this process from
the process of the legacy type process? I can do one-one
machine, one part in 24 hours. If I want to do 100 of them, I
have to have 100 machines if I have to do this in 24 hours.
We came up with a concept that we can take 24-hour
machining process and bring it down to 3\1/2\ hours. I can take
50 percent of the cost out of this part. I can begin to drive
wind turbines technologies where kilowatt hours begin to reduce
dramatically because of the cost of what's taking place in
these turbines.
There are four major parts in a turbine that we're
attacking. I've just brought one today because it gets kind of
long when I go through all of them. But these are very large
parts. They're very difficult to do. The capacity is not here
to get these done.
We can solve this issue and in solving this issue because
these jobs, this capacity is not here. It creates jobs. This is
something new. It has to be done. We're going to invent a new
industry. We can become world class in this basically
overnight.
This will be the standard throughout the world. When
somebody tells me that they are the best at 24 hours on this
part and I can say I can reduce it to 3\1/2\. This is American
technology. This is American ingenuity and thinking. This is
what we do well.
I love this country. It's an honor to be a part of this
process and to transfer what we're doing to you is very, very
important today.
The bottlenecks that are in this area have got to be dealt
with. This is, I think if you look at what people, at what the
European manufacturers have tried to do by coming to this
country. They looked at what's available. What kind of machines
are available?
When you do a part that's this large, you normally might do
50 or 100 of them a year, maybe 200 a year. That is a big job.
But these companies are coming to you saying we want 1,000 a
year. Where do you put this work? Where does the work go that
was already on that machine? It has to go somewhere else.
Wow. I'm out of time.
Blades, we saw a huge problem. The blade manufacturer
today, the best blade technology in the world is handmade boat
technology. It's as old as plastic boats.
It's laid up by hand. Blade problems are becoming an issue.
Blades have gone from 70 feet to 150 feet to 180 feet and
they've now put up blades that are 400 feet long. The weight
that comes on these blades that lays on the nose of that
turbine is causing problems with the gears, the augers and all
inside internal things.
We have come up with a process. This shows these guys
putting this on by hand. They're laying down this fiberglass
and putting the resin on by hand with a scraper.
We need to move this along. Just to give you one example of
what's happening. Suzlon just set aside $139 million to fix
blades that are already in the field for John Deere. It's in
this country.
One of the companies we work with has to touch every single
blade that they work with, de-lamination, splits, cracks,
coming apart. So we said, how do we? We went back to MAG, who
has made the wings for Air Bus and they work on the F22.
They're very, very strong in this carbon fiber industry.
They're moving us in too.
We can take this technology. We already know how to do this
and transfer this right into this blade technology. We can
automate and make it the world's best process out there. This
is a machine type. You can see the difference as we show you of
laying this out by hand where we do it all through C and C.
One of the things that makes processes good, it makes you
world class. It makes you better and brings in quality and
reduce costs and brings up delivery is that I have a stable
process that's the same every single time. That's what I can do
with this type of machinery.
The blades are going to give me 10 percent more energy
efficiency, 30 percent less weight, superior strength, all of
these problems that you're seeing in this type. If I can go to
Suzlon and say, guess what we no longer have to pay out $139
million in warranty costs because you've got blades cracking.
I'm going to get their attention.
We can make smart blades. We can put sensors all along this
thing that says there's stresses on this or this is happening
to it. We can read it in real time. We can look at it every 10
minutes. We can look at every 10 days. We can look at it every
10 months and know the condition of that blade.
That blade can begin to speak back to us. We can put de-
icing on these blades so that we don't have ice throws and
things like this. We can take this technology and begin to move
it forward. We can move this technology into the automotive
sector.
I know I'm out of time. I'm sorry. But we can build so many
jobs and so much opportunity through the things that we're
going to do that are going to transfer into other units and
other ways of doing things that aren't being done today.
We're like Japan after World War II that we can look back
and they can see the United States how we do things. They can
say those are the problems they could have. We're not going to
carry over those problems into this. We're going to start
afresh and anew. We have that opportunity right now.
I'm sorry that I've gone so long. But I appreciate you
allowing me to speak today.
[The prepared statement of Mr. Metts follows:]
Prepared Statement of Jeff Metts, President, Dowding Machine,
Eaton Rapids, MI
Mr. Chairman, my name is Jeff Metts and I serve as President of
Dowding Machining, a manufacturing company founded in 1965 and located
in the great state of Michigan. On behalf my colleagues at Dowding/MAG,
thank you for holding this hearing today to discuss a path forward in
the new energy economy and the role that wind manufacturers can play in
building a world class industry through a needed transformation of the
American industrial base. We are particularly grateful to Senator
Stabenow for helping make possible our participation today, and I want
to recognize the assistance of her staff.
In 1962, President Kennedy stood before a stadium full of students
at Rice University. He described to them a vision; that the United
States would begin a project to reach the Moon. I know he did not tell
them it would cost more than the Panama Canal. I am also sure the
President had no idea the technology advances and discoveries would
touch every area of human life. Nobody could know what technology would
be birthed from his reaching this unimaginable goal.
To the students, it must have seemed impossible, we had only gone
162 miles into space. The President told them we would go 240,000 miles
from the Earth, in a 300-foot spaceship that had not yet been invented,
made from metals that had not yet been discovered. Guided by a system
that had not yet been developed, land them on the Moon and then return
them safely to the Earth, and do it before the end of the decade.
He also said to accomplish this ``We must be bold''. Kennedy
changed the world and our lives, forever. We are once again at a
turning point in our Nation's history, we can and will change the lives
of our children and grandchildren, and once again, we must be bold.
The United States may be in the perfect storm. Though it is a time
of great trial, it is also a time of unparalleled opportunity. This
economic downturn has put job creation on the mind of every citizen in
this America. Today, this nation is in need of solutions that empower
entrepreneurs and create new employment opportunities in our
communities.
We are confident, as Americans, we can solve this crisis better
than anyone in the world. This nation will respond with the same
innovation, ingenuity and excellence that put America in space. As part
of our recovery effort, the President is calling for 20% of our energy
needs to come from renewable sources by 2025. As a business owner, as a
citizen, I am here today to support the effort to grow the renewable
energy industry.
As never before, there is now a public will to wean ourselves from
foreign oil. ``Green'' has become as common a word as the ``Hot Dog''.
As the nation searches for solutions and employment opportunities, the
President has answered, and as part of the recovery plan, is calling
for 20% of our energy needs to come from renewable sources by 2025. For
once, we have immediate answers that seriously address the issues of
less oil and the growth of our carbon footprint; that answer is
renewable clean energy. Within that solution is the by-product of the
creation of good high paying jobs.
We are here with solutions, but like everyone else, we have a
similar problem, there are no funds available. Our core business is off
50%; we have gone from 250 employees to 147 in 6 months. We are not
just positioning ourselves to ride out this storm. We are not quitters!
We are not depressed or hunkered down waiting for this economy to turn
around.
We have invested millions of dollars into an idea that is now
exploding into technology advances that are providing us a competitive
edge in global clean energy markets. However, the current economic
conditions make tax abatements, guaranteed loans and bank financing an
unusable formula to leverage private investments. We are asking for
grant money that will allow a real opportunity for unprecedented
success in this industry.
American innovators have designed energy technologies that will be
the envy of the world. We will create tens of thousands of high paying
permanent jobs here in the U.S. and deliver hope that there is a future
with immediate employment opportunities and real solutions in renewable
energy. Buildings will be built, employees will be hired, machines will
be constructed and the spin-off from these technologies will create
thousands of jobs in industries that haven't been invented yet.
With a lack of oil and gas resources, Europe has been far in front
of the U.S. in renewable energy for decades. In spite of our late
start, we have become the world's largest installers of wind turbines
in just a few short years. However, to meet the President's aggressive
agenda, we will need to make fundamental changes in manufacturing
processes. The United States installed approximately 4,000 wind
turbines in 2008. During this same period, the European OEMs found it
difficult to maintain supply flow to meet demand. In order to reach the
goal of 20% renewable energy production by 2025, we need to increase
the number of turbines installed from 4,000 to over 10,000 annually.
Current production rates and serious quality issues must be addressed
or we will fall short of the President's goal.
Because demand is outrunning production, the European manufacturers
are getting components from overseas. It is not the best choice, by any
means, for delivery, cost or quality. The United States has some of the
best engineering and manufacturing minds in the world. These
individuals have cut their teeth in the most fertile, advanced
engineering market in the world, the automotive industry. The material
advances we are introducing to energy components can only help
revitalize the ailing auto companies. Bringing them into the future of
strong, light weight and low cost components. These advancements can
help reduce that industry's tooling costs by 70%.
These ideas will catapult the United States into this new energy
market and immediately make us the energy standard in this major global
market. Is there anything as powerful as the scientist, the engineer,
and the entrepreneur all focused on the same motivation and goal? It is
critical that we energize and involve them in this equation.
Dowding Machining entered the renewable market two years ago; we
quickly identified the problems in the supply chain and began
transferring the automotive production model into wind energy. The U.S.
suppliers seemed unwilling to consider anything outside of the current
European model, even though it utilized sixty-year-old technology. The
United States is in a position much like Germany and Japan after World
War II. We have the opportunity to develop a new industry with advanced
engineering technologies. We knew we could lower cost and improve
quality and increase throughput by moving beyond legacy methods and
developing state of the art machines and processes.
The size of these structures has grown dramatically, from Kilowatt
outputs to now Megawatt. Machines have also grown to accommodate these
significantly larger parts. The skill level of the worker is also at a
high level. Michigan and the automotive community are ripe with a
workforce able to easily step in and make wind turbine production parts
utilizing world class automotive standards. The average wind turbine
contains over 8,500 separate components. With volumes approaching
10,000 units a year, it only makes sense to adapt automotive and
aerospace technologies to the manufacturing process of these parts.
Dowding Industries has been in manufacturing since 1965. We have
re-invented ourselves several times over the years as the economic
conditions and part processes changed. We made a conscious decision 10
years ago to find parts that would continue to be manufactured in the
United States. We developed customers like Caterpillar, Cummins Engine,
Borg Warner and others. Two years ago we invested 10 million dollars in
a facility dedicated to renewable energy. We immediately advanced the
thought process on manufacturing large components and brought it to an
automotive mindset.
We chose MAG as our exclusive machine tool supplier. We chose them
because of their understanding of the large machine tool business and
the character of the company. Now we have partnered with MAG, the
largest builder in America and third largest in the world for machine
tool development. We are jointly designing specialized machinery for
the wind turbine market. Dowding/MAG of Michigan has an incredible,
game-changing opportunity to become the first in the world to introduce
advanced manufacturing techniques to the fabrication of wind turbine
components.
Our plan to modernize the machining of metal components will
decrease machine time of wind turbine hubs from 24 hours to 3 hours and
20 minutes, this 70% reduction in machining time will cut the cost of
production up to 50%. We are developing this technology in the four
largest components, weighing from 10,000lbs to 40,000lbs, and expect
similar improvements in all four machining processes. Machining
capacity and quality issues for these large components are a major
constraint for this industry. This is a real solution that advances the
U.S. and positions us to export this ``made in America'' competitive
technology around the world.
Our second area of improvement is the manufacture of the turbine
blades. Blade failures have increased dramatically as turbines have
increased in size. Until recently, turbine blades were 90 feet in
length. Today, many blades will exceed 150' and offshore installations
are expected to grow to 200' and beyond. A recent article on Suzlon, an
Indian wind turbine manufacturer, states they will set aside $139
million for warranty payouts on cracked blades which resulted in a 46%
drop in stock share price this year. These type of failures are
devastating to the growth of this industry. The technology advancement
we are proposing, will eliminate these issues.
Blade manufacturing today is as old as the fiberglass boat
business. All over the world these blades are made by hand. The use of
hand layup methods has resulted in extensive field failures. Blades are
separating (de-bonding) at the adhesive joint due to improper
application of adhesive. Misalignment of blade skins and delaminating
between layers of the fiberglass composite are major failure modes.
This is not a world class process and demands efficiency and
improvement. This ``hand made'' process is currently the most advanced
technology available world wide, until now.
Continuous fiber materials as used in aerospace designs provide
significant improvements in strength and durability. These high
performance materials cannot be applied by hand. The key technology
enabler that allowed today's aircraft builders to change from aluminum
and metal structures to composites lies in the ability to precisely
align a continuous fiber to meet structural load requirements. Once
again, this cannot be done by hand.
We are developing a fully automated process. This process will
introduce the same carbon fiber technology used in the manufacture of
modern aircraft. MAG pioneered the continuous carbon fiber placement
technology and as a result of twenty-five years of research and
development, they now lead the world in the aerospace composites
market.
MAG machines are currently used to manufacture many different
components in the aircraft industry. For example, the majority of the
Boeing 787 fuselage, a major section of the A380 fuselage, portions of
the F-35, the A400M, the C-17, the F-18 E/F, the Eurofighter, the V-22,
the F-22, the Ariane 5, and the A350, among others.
Weight has become a major issue, affecting not only blade life and
efficiency but also the ability of the structure to remain intact under
increased stresses. The high weight of currently manufactured blades
will shorten the useful life of yaw gears and other components. Repairs
to wind turbines in the field are an extremely expensive proposition.
We feel we can reduce the blade weight factor by 30%. This dramatically
changes the life cycle cost of the entire turbine and lowers Kilowatt
per hour cost.
Our blade manufacturing technology will give us the flexibility to
incorporate innovative design architecture such as the ``Twist Bend
Coupling'' (TBC) that can improve the turbine wind capture efficiency
up to 10% over today's blade capability. We will embed part health
monitoring sensor technology, giving the turbine OEM and the wind farm
operator real time feedback on blade stress currently being
experienced. This same technology can also enable ``Smart Turbine''
feedback which allows the turbine to react to adverse spikes in the
operating environment, such as high wind gusts. The ability to
incorporate de-icing technology is enabled through the utilization of
our advanced manufacturing techniques.
The United States can and must be the birthplace of the lightest,
strongest, lowest cost and most efficient wind turbine components in
the world. These technology advancements will drive costs down, drive
energy output up, improve quality, public safety and create excellent
high paying American jobs.
It will take 10 to 14 blade plants to meet the 20% renewable energy
goal. Each plant will create 1,400 jobs plus an additional 1,400
construction jobs, if new plants are built. The four machine metal
components will need 9 to 12 facilities, each creating 150 jobs. We can
manufacture the other 8,494 components in the existing automotive
supply base already in place in the United States.
But, all of these technology upgrades, all of the advancements
lowering cost per Kilowatt hour, all of the warranty cost reductions,
all of the productivity advances, all of the capacity advances, all of
the thousands of high paying jobs, will remain just an idea if grant
funding can not be acquired. The realization that the United States can
become the world standard in wind turbine technology, outpacing the
closest competitor by a decade of advances, again will remain just an
idea if grant funding can not be acquired. For this to succeed we need
the help of the government. NASA would have never happened without
Federal dollars leading the way. Our military superiority would not
exist if not for government intervention. The US will remain stagnant
and follow other nations in the advancement of clean energy technology
if additional federal funding is not quickly approved to leverage our
technical and manufacturing capabilities. We have the drive, the
ability, the technology and the passion to see this through.
We appreciate your time and support in our nation's search for
solutions. We are poised to assume the role that manufacturers can play
in re-building a world class industry through a needed transformation
of the American industrial base. We believe we can bring relief to
Michigan, a state which unfortunately has been at the leading edge of
the economic calamity ravaging our nation.
[Attached graphics have been retained in committee files.]
The Chairman. Thank you very much. That's very, very useful
testimony from all of you. It's great to see your enthusiasm as
Senator Stabenow indicated when she introduced you that you
think we can make real progress here. That's what we're about.
Let me just, before I start questions, just indicate Alicia
Jackson is the person here on our staff who has done all the
work on developing this. She deserves great credit for that.
Let me ask a few questions starting with David Rodgers. I
don't know if you're far enough into the new administration to
really speak with a great deal of authority as to what is
planned ahead. But a major thrust of this legislation is to
dramatically increase the emphasis in this area, upgrade
staffing, increase staffing, upgrade the funding, have a
broader mix of skill sets that we make available here.
Is that in the plans of the Department at this point or is
it just too early in the administration to say with any
conviction what's planned?
Mr. Rodgers. Thank you, Mr. Chairman. We still are at a
very early stage. As you know Secretary Chu still has a very
slim team supporting him.
But I think what we can tell you is that this is going to
be a very important area. The Secretary has identified
investments in energy efficiency as one of his top priorities.
Bridging the linkages between basic science and applied R & D
to develop new energy efficiency technologies will be a
priority.
You're going to see investments of the Recovery Act funding
going into industrial efficiency technologies. So I think that
the signals and the direction are very consistent with what you
are proposing.
The Chairman. Let me ask on international comparisons. I
mean we are competing. Our manufacturing sector is competing
with manufacturers worldwide. My impression is that we have
given less attention to this issue of energy efficiency in
manufacturing than some that we compete against and that we are
behind some other countries in this regard.
I guess I'd ask anyone on the panel whether or not that
impression is accurate. Then second, what explains that? I mean
is this something that the government has been asleep at the
switch or is industry been asleep at the switch or why are our
manufacturers behind the curve on giving attention to the
problem?
Dr. Savitz, maybe you could start out.
Ms. Savitz. Yes. I think you can compare the steel
industry, the energy used to produce a ton of steel here verses
say, Japan or Korea or Germany. They are more efficient than we
are.
We've improved our----
The Chairman. Are they just marginally more efficient or
substantially more?
Ms. Savitz. Ten to 15 percent. But we've increased. We've
been closing that gap better over time.
Part of it was that a lot of their steel mills aren't much
newer. We've been taking and retrofitting our mills. When we do
retrofit them we do put in energy efficient equipment, just as
Mr. Harper talked about what Intel has been doing in theirs.
U.S. steel industry has a goal, 40 percent reduction in
energy use from 2003 and by 2025. So it's a matter of what
natural resources. We also tend to make a lot more of our steel
from scrap which is more efficient than started pure from iron
ore. So that has helped us.
So I think if you look at each industry in general as we've
turned over our capital stock in the industry we are getting
more efficient and closing that gap between the two. I think
it's good that your bill, as I mentioned, has that comparison.
We can then see is it matter of price of energy is higher in
other countries than here until recently. That drives how you
make your decisions.
Then are there other policies and finances. I think part of
your bill will be able to find that out and make the changes.
The Chairman. Mr. Harper.
Mr. Harper. Yes, a couple of comparisons. When we set about
to create the digital energy solutions campaign, which is
primarily focused in the U.S. but we've also got some
activities in India and China and Japan and potentially in
Europe as well. You know, just focusing on knowledge of and
appreciation of the role of IT embedded in other technologies,
embedded in other industry's products because that's what I
know the best.
There is a much greater appreciation of that in Europe and
Japan than in the United States. I think a lot of it has to do
with energy prices. Those two governments are much farther
along in developing public policies to support IT as an
infrastructural item in an energy efficiency strategy.
But even in China where I spend some of my time, you know
the Chinese economy is generally speaking much less efficient
than even the U.S. economy. But probably for that reason and
because of energy security concerns and air pollution and a lot
of other factors the Chinese government is tremendously focused
on the energy efficiency and driving the energy efficiency of
their industries as a competitive differentiator through
programs like the top 1,000 program that we've been somewhat
involved in. So, you know, they reached out to us.
They've reached out to a largely American dominated,
Japanese dominated industry and asked for help in incorporating
the ICT component of their energy efficiency activities. You
know I think this bill and there obviously are a lot of fine
programs already in existence to build on. But I think we do
have lessons to learn from other countries, even as to say
China which is less energy efficient than we are.
The Chairman. Why don't you go ahead Mr. Zepponi and then
my time will be up here. It already is. Go ahead.
Mr. Zepponi. I'll just be very brief then. Food processors
and I'd say this is true about manufacturing. Energy efficiency
has two components. One is its productivity and productivity
improvement. I think that American manufacturers and especially
food processors have really focused in and honed in on leaning
out their processes.
But innovation is also a critical part of remaining
competitive and looking to the future and an investment in
innovation, innovative processes, in the manufacturing of new
products, especially in an industry group like ours, food
processing, a basic industry in the United States. We have
focused our attentions on productivity improvements and
improving and reducing waste.
The issue that we need to be looking at right now is an
investment in innovation so that we can continue to improve
over the long term. This is about sustainability of our
industries, not just focusing on reducing and reducing and
reducing and leaning it out. We're investing.
The Chairman. Alright.
Senator Murkowski.
Senator Murkowski. Thank you, Mr. Chairman. Boy, Mr. Metts,
I love your enthusiasm. You know, we can demonstrate to the
rest of the world that we take the ideas that you have taken
and used to build your competitive manufacturing strength. Then
we're going to come back and do it twice as good. I appreciate
that.
Mr. Rodgers, I want to ask you very briefly about nuclear
manufacturing. At one point in time we did pretty well here in
this country. Now I think we look to Japan, quite honestly, for
most of the component parts within that industry.
Is there anything that you see encouraging that would
suggest we might/may see a resurgence in the manufacturing of
certain parts when it comes to the nuclear industry?
Mr. Rodgers. I appreciate that. I think you've identified a
critical issue that applies not only in nuclear, but in many of
our other sectors where we have lost expertise overseas. We do
not make enough of the technologies that we need here,
batteries, biofuels, nuclear. These are all great examples.
We would like to rebuild that workforce. We would like to
extend the connections between basic science and applied
science. I think that the policies that the Congress is
establishing that point us toward emphasizing manufacturing are
going to be critical to that.
Senator Murkowski [presiding]. I appreciate that. Let me
ask a question. I'll direct it to all of you.
We had a hearing a few weeks ago looking at the nexus
between water and our renewable energy sources and a
recognition that with some generation of energy. Solar is one
example. We actually use more water than we are able to create.
These are in parts of the country, where we have real issues
with water.
Talk to me a little bit about the nexus of water to energy
efficiency as it relates to the manufacturing. Dr. Savitz, I
don't know whether that was addressed in the report that you
prepared. Mr. Zepponi, I'd be curious to know within food
processing how big of an issue is this?
I'm trying to understand how we, when we look to the
accounting for energy efficiency are we also making sure that
we're not over utilizing another one of our resources, very
precious water. Who wants to answer first?
Dr. Savitz.
Ms. Savitz. my report did not address water specifically.
But what we did do is in our recommendations suggest that DOE
look at portfolio mapping consider a greenhouse gas emissions
and also other resources, water being one of them depending on
the manufacturing process. As you get more efficient in any
process the water you should decrease.
I think we'll turn to food processing which does use a fair
amount of water.
Mr. Zepponi. Thank you very much for the question. It's a
wonderful question. I think it's quintessential to our industry
the nexus between energy efficiency and the use of water.
Food processing and I'll extend that to agriculture, uses a
lot of water. I'm going to use the term use as opposed to
actually consuming that water. We don't consume as much as you
would think. But we do use a lot.
It's important. There's an indirect component and a direct
component of water use. Of course you put water in products to
move the product along, put it in the jars. That's a very small
part of it.
But in the area of waste water treatment for example, when
the product comes off of the line we use a lot of water in the
processing of our products. We reuse that by pumping it into a
system, aerating it. We have systems in place that are these
huge pumps that move that product around, the water around.
Now we re-characterized a few years ago, actually I was
part of legislation in Washington State that re-characterized
that stream from waste water to actually it's not waste water.
It's just nutrient water. It's water that we can use in the
fields again.
So we take that water and move it into the fields. That
process actually helps us to re-grow and grow our products. So
we're looking at the use of moving the water around. We're
using variable frequency drive motors. We've replaced some of
the single drive motors that we've had in the plants. That's a
huge savings to us.
We're looking at a super boiler for example. This super
boiler has new technologies that actually captures the
condensate of water in the boiler process. We use a lot of
steam in a plant. Actually captures that condensate and reuses
it more efficiently.
So when you look at energy the biggest place, the most
important place for energy efficiency is going to be in the
movement of our water in our systems and actually application
and distribution of that water throughout the plant.
Senator Murkowski. Can I ask you, Mr. Rodgers. Within the
Department then as you look to those energy efficient
technologies, do you take into consideration water use as
opposed to consumption?
Mr. Rodgers. Yes, it is a very important part of our
analysis. In general, energy efficiency is going to improve
water utilization both directly and indirectly. In fact, when
you reduce electricity consumption through energy efficiency
you can directly save water at utility generation facilities.
We have compiled a road map on the use of water and the nexus
between water and energy. I'd be happy to provide that for the
record.
Senator Murkowski. I'd appreciate that. Thank you. Thank
you, Mr. Chairman.
[The information referred to follows:]
The roadmap for the energy and water nexus has not yet been
released. However, as soon as it is released we will be sure to provide
it to the Committee.
The Chairman [presiding]. Thank you very much.
Senator Stabenow.
Senator Stabenow. Thank you, Mr. Chairman. If I might just
add my opinion, Mr. Chairman to your very important question
about where we are in terms of what's happened in terms of our
country or other private sector. I would just share one example
where in the area of batteries, which we're not talking about
specifically this morning but where every other country in the
world decided a number of years ago, decade or more ago, to
focus on public funding for battery technology for automobiles.
So we see Japan and China and Korea and Germany has a great
battery alliance. You go on and on and we chose not to do that
and instead left all the innovation to industry in this
country. Competing against the country's investments around the
world which certainly has put us at a disadvantage in terms of
where battery cells come from right now.
So the good news is, is we've put $2 billion into the
recovery package. This committee has been at the forefront of
supporting the efforts to the loan programs and so on. So
hopefully we can begin to get some of that back. But we, I
believe our companies have been competing against countries.
Hopefully now with the right policies we can change that.
Thank you to all of you again. Mr. Metts, I wanted to ask a
question related to your comments about the auto industry and
wind industry. The fact that your engineering experiences from
the auto industry have transferred into what you are now doing.
I wondered if you could talk a little bit more about how the
two industries relate and whether the auto industry could
benefit from the new technologies that you're developing in
wind turbines?
Mr. Metts. It's interesting you asked that because exactly
where we came from in this large machining, you know, I think
people think that these kinds of things are all around the
country. They're not. Michigan, Ohio, Indiana, Pennsylvania,
we're set up to do this kind of work.
We had a company that was an automotive company that went
out of business and we hired all of their machinists. Excuse
me, not all of them, we hired everyone that could handle our
machines because we bought these large machines. They're, I
mean, there's 106 feet long, this machine. It manufactures and
makes parts as big as the center of this room.
You don't just turn that over to anybody and that
technology that they worked in for many, many years was a
direct link. We hired the whole group of them.
We didn't have to go through the learning curve of them
learning how to do this process. They moved right in. On the
other side when we come into this carbon fiber technology.
When we put factories together like on Mound Road we've got
a factory that we'd like to do this in. As they come in, all
the automotive companies will come see what's going on. It's
too big. When you start making something that's 150 feet long
out of carbon fiber, they want to know what does it do? Can we
do it here? Can we do it there?
MAG is, right now, working with companies in Europe on this
type of technology. It needs to be brought here. You're
absolutely right there are so many of these technologies we
think about here and somebody else does them. We need to do
them.
The types of things that we're talking about right now are
game changing. They're not just small improvements. These are
game changing improvements. We will be the standard around the
world overnight.
So those technologies will come in. Yet we've got some
great ideas that we'd like to talk to them about. How do you do
that transfer?
With 8,500 part numbers in these turbines, automotive has a
hard time letting go of automotive. But once you convince them
to let go of automotive. This is the same technologies you're
using. It's cutting metal. It's working with plastics.
It's the same things you're putting in an automobile. It
may be a little bit bigger. But this transfer is direct. We can
put many, many people back to work in Michigan that are looking
for another avenue to go in.
Senator Stabenow. Thank you. When you're talking about
other countries, I know one of the things that we've worked on
with the recovery plan was a manufacturing credit which the
chairman led and was pleased to partner in. In our efforts to
get a 30 percent manufacturing credit on the books, this bill
that we have in front of us will address financing through a
clean energy fund which we're also putting into the budget
resolution.
I have that committee happening as well. I have to leave to
go to in a moment. But I'm wondering if you might talk about,
from a financing standpoint, why it's so important to have
these mechanisms in place in order for manufacturers to be able
to get the capital they need and be able to do what you're
talking about.
Mr. Metts. You can't get funding today. We can talk about
this for hours. You just can't get it.
If I go to the bank and ask them for the kind of funding
that I need right now they're going to ask me to take a drug
test. It just isn't working. Where do you go do this? How do
you get the funding for the original set up?
It's like McDonald's. How do you make the first one? You've
got to get the first one. Now we can go back to that market and
copy this and copy this and copy this. But it's creating that
first one.
I'm telling you we have international pressure on who is
going to be first. Don't think that people aren't sitting
around desks and offices with these kind of volumes looking at
it and thinking they're not.
We're going to put 300 mega watts in this country. They're
going to 600 mega watts in China, Europe and this country. Giga
watts, excuse me, a little bit bigger. That's a lot of
turbines. That's in just wind.
So the funding availability, it's almost like an automotive
company saying we want to make a minor change to an automobile.
It takes $150 million to do that. But look what you get from
that. Look what comes out of that.
For us to go find that funding is not available and to go
and sell that technology, if you're working on loans, it takes
it out of the marketplace. We have to look at this as how do we
set up this process, No. 1? How do we get it in place that
allows us to sell this in the marketplace? The second, the
third, the fourth, the fifth, I know I can get private money
that will want to do this.
This is the first one is going to be the tough one. That's
where we need your help. We need to find rent money to do this.
Senator Stabenow. Thanks very much. Thank you, Mr.
Chairman.
The Chairman. Senator Udall.
Senator Udall. Thank you, Mr. Chairman. I'm going to
express an opinion. But as the saying goes, I want to be clear
that the opinion I'm about to express does not represent the
views of the ranking member or necessarily the chairman.
But when I hear Mr. Metts and others speak here about the
supply chain potential it strikes me that this is the reason
once again to seriously consider a renewable electricity
standard for the country. Even if your State doesn't have
abundant wind or sun, it may have abundant biomass. It may have
abundant manufacturing capability and it will lift all of us.
So thank you for indulging me with that point of view.
If I might I'd like to turn to Mr. Harper for a question on
a different, but it's a related topic I believe and that's
energy use by the Federal Government, specifically in regards
to IT, information technology. From what I've learned despite
this committee's efforts and despite the administration's
commitment to energy efficiency I keep hearing comments that
the CIO is the Chief Information Officers, who make decisions
about IT purchases, may still not consider energy efficiency
and therefore the long term energy costs in their procurement
decisions.
Why don't they do this? It's my belief that it's because
the energy cost of their systems aren't their responsibility.
They get no carrot. There's no stick, no impact at all from
these energy costs.
I think to make real progress in this the CIOs will need to
have some mix of accountability and responsibility for the
energy costs of their systems. Would you comment and what are
your views on this? If others on the panel would like to
comment as well. I'd like to hear what they have to say.
Mr. Harper. Thank you, Senator. I should say at the outset
that I'm not an expert on the procurement process. But I have
seen it a little bit up close and personal as a former Federal
employee and a contractor at one point to the Federal
Government. It's an imperfect process.
I actually think in the case of IT and the energy component
of IT that the situation isn't all that different in the
Federal Government than it is in the private sector. You know,
the focus today is mostly on the data center. The data center
means different things in different agencies.
It can be everything from a closet that serves a few
offices, you know, with a couple of servers to, you know, the
more traditional industrial scale data center that people
generally have in mind. Just like in the private sector we
found in the Federal Government, State governments as well, the
CIO is responsible for specifying what equipment he or she
needs and managing that equipment. Reliability is king when it
comes to data centers.
But they're typically not the ones who pay or see the
electricity bill. So, I mean, this is a classic market failure
that you see all over the economy when it comes to energy
efficiency. It's why, for example, we believe you need some
minimum appliance standards and other kinds of requirements
like that even if you have a price for carbon or you have some
other market pricing signal. You've got to somehow get around
these barriers.
I don't know exactly how you fix that in the Federal
Government. I think in the private sector, I think
increasingly, just CFOs being aware of this issue and being
able to connect, you know and look under the rock so to speak
as to where this expense is coming from and see the potential
is key. You know, part of it is procuring more efficient
servers. Our industry is turning out much more energy efficient
technology, generation on generation.
But with the data centers, again, where much of the energy
is consumed it's not just about the individual pieces of
equipment. It's about the architecture of the structure. It's
how the equipment is cooled. You know, it's a systems issue.
But somehow getting, closing the link between the CFO or
the finance side of an agency and the IT side of the agency,
whatever you could do would be helpful there.
Senator Udall. Mr. Zepponi.
Mr. Zepponi. I thank you very much for the question. Supply
chain management is an absolutely critical part of energy
efficiency. I mentioned in the testimony that management has a
tremendous opportunity to approach energy efficiency as the
metric in which to develop management systems to improve the
entire production operations, including the supply chain.
In food processing it's particularly important because
we're carrying around bulky products and we need from the
agricultural, from the farm, all the way through the system to
Walmart. It's particularly important for us to pay attention to
that supply chain. What we're really talking about is a change
management question. It's not an engineering question. This is
a change management question.
When we signed on to the memorandum of understanding with
the Department of Energy and the National Laboratories what we
were saying is that these executives signed this document that
said we make a commitment in our organizations to improve
energy efficiency. They have made a commitment to improve
energy intensity by 25 percent in 10 years and 50 percent with
the investment of innovation technologies over the next 20
years. That's what you need.
You need to have top-down leadership and then training and
process and empowerment within the organizations along with the
other partners, with the private/public/quasi public entities
in our regions to make this come to bear. That's how we're
going to improve energy efficiency.
Senator Udall. Mr. Chairman, are we going to have another
round?
The Chairman. We sure can. Yes.
Senator Udall. That would be prudent.
The Chairman. Let me ask a couple questions. See if Senator
Murkowski has questions and then go back to you here.
I wanted to ask Mr. Rodgers this issue about having this
goal of a 25 percent improvement, a reduction in energy
intensity in the next 10 years. That seems to be something
everyone is sort of aware of that. Dr. Savitz, as I understand
it, in the report that she just co-authored. They've concluded
that that's not going to happen given the amount of resources
we're committed in this area, given the way things are now
proceeding.
Mr. Zepponi, I guess your organization has independently
endorsed the same objective for your organization. I'm just
wondering how real is this? I mean we give a lot of speeches
around the Congress here about how we're going to reduce energy
dependence on foreign oil and all that by X amount, by such and
such a date.
Then there's when you get behind it and ask. I mean this
happened in last couple, 3 years. I mean we see these
statements coming out of the administration.
I remember writing letters to Secretary Bodman and saying
is there anybody who has a plan for how we get from here to
achievement of this goal or is this just sort of a thrown out
number? Do you have any ideas? Is there any plan for getting
this 25 percent reduction in energy intensity in 10 years?
Mr. Rodgers. Thank you very much, Senator. I think Dr.
Savitz did summarize this very appropriately. Unless we have
the right mixture of appropriations that leads to research and
development and new technologies in the pipeline, unless we
have the right combination of market-based policies and
government policies, it's unlikely that our industrial partners
can reach that goal.
We do, however, have road maps for specific industrial
sectors that show the capability, the potential to achieve the
goals. We're working very hard to do that. We are signing up
CEOs who want to make a commitment as indicated to achieve
these goals.
So I think the opportunity is there. I think you're taking
a very important step by identifying the additional pieces that
we need in terms of authorization, but the other pieces will
also be needed.
The Chairman. To the extent that changes in policy are
required then Congress is required to weigh in on that. I
certainly hope you'll advise us as to what those are so we
don't wind up passing this bill and then coming back and having
another hearing in 5 years or something. People say if you just
would adopt the right policies we could do these things.
Mr. Rodgers. Yes, sir.
The Chairman. I don't know. Mr. Zepponi, do you have a
real, in addition to having endorsed this ambitious goal of 25
percent reduction in energy intensity in 10 years, 50 percent
in 20 years, do you have a plan to get there or is this just
sort of a notional idea in your organization?
Mr. Zepponi. Mr. Chairman, again, I appreciate this
question because yes, indeed we do have a plan. It's in the
development stages. I think it's going to, we're going to adopt
it.
But before we agree to the 25 percent reduction in 10
years, we actually did some background research. our staff felt
that 20 percent was clearly reasonable just by using new
technologies. Now remember the food processing industry has
been around for a long time.
There are many areas where we can improve. We have re-
torques that are the canning equipment that have been in place
for 25, 30 years with very little improvement because they've
been depreciated. They stay in place.
When you compare that project change, if you will, to, you
know, the energy efficiency gains that you'll get in replacing
that piece of equipment to developing a new market for example
or another capital investment internally it becomes a bit of a
challenge. But we do have a plan. We have identified projects
and processes.
It's important to note that we feel that many of the
advances we can get in energy efficiency are going to be in
process improvements, the supply chain improvements that we
discussed briefly earlier as well as using technologies. many
of those new technologies are not new to other industries. For
example we have rapid battery recharge in our forklifts. this
is an important new technology that we're using.
That was technology that was developed in the airline
industry in order to allow those planes to be up in the air
more frequently. They developed it because they had huge assets
at hand. We took that technology and put it into our cold
storage and in our warehousing facilities in order to make sure
that we don't have to have these huge fleets creating this huge
overhead for our company. So we're using those technologies
from other industries that are out there we just need to bring
them over into the industry.
So we think we can do it. We do need to have an
institution. We need to have an organization like an NWFPA that
represents the industry and pulls them all together so that we
have a cluster that's working toward that end. Thank you.
The Chairman. Dr. Elliott, did you want to make a comment?
Dr. Elliott. Yes, sir. Thank you, Senator Bingaman. One of
the things I think that's important to understand is the issue
of investment. We have not been investing in our manufacturing
sector. You've heard this sort of all up and down.
We're still using technologies we were using in factories
that have been around for decades to manufacture products out
there. We have stated the art of manufacturing in this country
that is efficient. Dr. Savitz mentioned that in the steel
industry.
Some of the steel mills that are being constructed today
are among the most efficient in the world. The problem we've
got is again, this is depreciated. We're going to continue to
run that plant until there is some incentive that is brought by
the policy to basically make those new investments.
Part of this actually has a hangover from the investments
in the 1950s and 1960s and 1970s and when we changed the tax
policies to discourage the investment in capital assets, we've
seen a major reduction in that. In many cases we're just living
off the depreciation of those investments in the past.
What I think we need to do is go into a new period of
investment if we want to change the future of the energy and
competitiveness of the manufacturing sector.
The Chairman. Very good.
Senator Murkowski.
Senator Murkowski. Thank you, Mr. Chairman. Not a question,
just a comment to follow up. Several of you, at least several
of you have mentioned the fiscal environment that we're in.
This is a time of tight credit markets.
Dr. Elliott you point out that you haven't had the
investment over a period of time. I think we recognize that we
might be able to enhance budgets a little. We certainly can
look at tax policies that encourage the manufacturing or re-
growth of manufacturing in this country, which is key to us.
But I think we have gotten a little pragmatic about where
we are right now and the fact that the capital markets are not
conducive to doing what we're trying to do and meet these
aggressive goals. I'm not suggesting that we pull back. But I
think the Chairman's questions are very important.
There has to be a level of pragmatism about where we are.
Our financial markets are not where we want them to be right
now. But I appreciate the comments and the testimony from all
the witnesses today.
The Chairman. Senator Udall.
Senator Udall. Thank you, Mr. Chairman. Again, I want to
acknowledge the panel. The time you took to come to Washington
and share a lot of good news and a lot of exciting potential.
Dr. Savitz, I wanted to direct a question to you and also
extend an invitation to the rest of the panel to respond once I
share my question with you. It's important, of course, that we
focus on improving end use efficiency which is the amount of
energy that a product or a device consumes to produce heat,
light or some other benefit. But I think there's some other
efficiencies as well that we could focus on improving. I'm
particularly thinking of distributed generation and storage
technology.
This could save manufacturers and residential and
commercial buildings and other end users the need to purchase
energy at peak load times. It could also help the grid, I
think, be more secure and more stable. You mentioned in your
report a few recommendations. If you wanted to elaborate I'd
like you to do so and then extend the invitation to the rest of
the panel.
I would note that, for example, it has come to my attention
there's a company in Colorado that and I'm not an engineer.
I'll show you that very quickly when I describe what they do.
But in effect at night when base load power sometimes goes
wanting, but certainly there isn't a demand for peak power,
they will freeze 500 gallon tanks of water which then during
the daytime heat are used to cool buildings by the use of
small, very efficient electric motors as opposed to the
compressors and pumps and all that goes into a full scale air
conditioning system.
It's an exciting product and exciting concept. One that I
want to see driven more into the marketplace. Would you comment
and others.
Dr. Savitz. Yes, I mean there are lots of technologies that
like that. The whole distributed energy combined heat and power
just can raise the efficiency from, you know a 35 percent
turbine or to 70, 80 percent because you take that heat and you
recover it either for your water which can be used for an
industry process. It can be used for the heating in a
McDonald's to do their cooking and their cleaning or you can
use it for commercial buildings, as you say.
That's a lot. I mean these are opportunities. Sometimes the
distributed energy market at the smaller systems, these are in
the hundreds of kilowatts rather than mega watts.
There's a disincentive if you have to hook up the utility.
They make it as hard so that you need those standards and you
need, you know, interconnects. In some way to buy back the
power.
So this is type of thing that needs to be addressed across
all of the sectors to really encourage more combined heat and
power. That will make them economical for companies to do it.
We've had the experience of Honeywell, very good micro
turbines, but can't have different standards in every State to
do that.
Senator Udall. You are describing a variation of the net
metering debate, I believe. Is that accurate?
Ms. Savitz. That is feeding power in. But the whole net
metering and I think some of the states are experimenting, just
like you say. If you generate your use of power off peak your
rates will be lower and so there's an incentive along that way.
This is actually being able to hook the equipment up.
Renewables will have some of the same problem. As you get
smaller systems to connect into the grid you want to make sure
that they're not disincentives and have some standardization. I
think the looking at grid activities that the Stimulus package
puts in and that the DOE is taking more aggressively should
help that.
Senator Udall. Dr. Elliott and then we'll go to Mr. Harper.
Mr. Elliott. Thank you, Senator. This is something near and
dear to my heart.
Senator Udall. Good.
Mr. Elliott. As the founding Director--founding President
of the U.S. Combined Heat and Power Association a dozen or more
years ago. So this is, as I said, something near and dear to my
heart. I think this is an important thing to look at. One of
the things that is the opportunity, as Dr. Savitz said, is to
look at the efficiencies we can get through distributed energy.
What is does is really require us to rethink the model of
our electric utility system out there. Today we have a grid
where we have generation, transmission, distribution and
consumption. What we need to do is rethink that where we can
have generation distributed near the point of use.
We take the grid and the grid becomes a leveling system,
the net metering idea. You take when you need. You give back
when you have more than you have.
I think that's one of the things that really is potentially
very exciting about the whole smart grid concept. One of the
problems that we have at ACEEE with the smart grid is it's
currently looking at making the existing grid smart. What we
think we need to do is also think about how do we make the
existing grid smart so that both the power can flow from the
generator to the consumer, but if you have distributed
resources where the power can flow back.
This is really important for intermittent resources like
many renewables. So we need to think about how we use
technology. To my colleague from Intel, one of the things
that's important to understand is smart is going to be very
important because information and communication technologies
are the technologies that are really going to be able to
transform our energy use.
Many of the technologies we're looking at in food products,
in the wind turbine manufacturing or any of the sectors that I
work with. The most important thing that has transformed
manufacturing in this country and globally has been the
application of what we call sensors and controls. It's
intelligence.
Bringing smarts to the manufacturing plant because that new
manufacturing plant, using CNC controls, using PLC systems,
using the adjustable speed drives. That's really where the
technology and intelligence are going to allow us to work
smarter and work more efficiently. Part of that clearly is
going to be that distributed aspect.
Senator Udall. Has not the IT network itself undergone this
same evolution?
Mr. Elliott. Absolutely.
Senator Udall. So there's an analog here that we and we
know better where every bit and byte is. We can also begin to
know where every electron is and where every wasted BTU is and
put them to work in a real time way.
Mr. Elliott. You are absolutely correct, Senator. I think
what we want to do is when we smarten the grid we want to look
to the experience that you mentioned with ICT. Because what we
want to do is move from a grid that Thomas Edison would have
been very comfortable with a century ago to a grid that is much
more analogous to the internet.
Senator Udall. Mr. Harper, did you want to comment?
Mr. Harper. Yes. I mean----
Senator Udall. I think the terminal bill should be for a
little longer.
Mr. Harper. This is right down the alley of our digital
energy group. You know, we were basically created to increase
the awareness of the role of ICT as part of a solution set for
energy efficiency in climate. There's been a lot of focus, I
mean going back to your original question, Senator.
There's been a lot of focus in improving the energy
efficiency of individual devices. Energy Star program is the
best example of that. There's been tremendous progress in terms
of the amount of work per unit of energy input that a
microprocessor now exhibits compared to 5, 10, 15 years ago.
But there's a much bigger leverage in--that's what we call
the micro story. There's a much bigger leverage to be had in
the so-called macro story. ACEEE did a report a little over a
year, 15, 16 months ago that showed on average in the U.S.
economy for every additional kilowatt hour consumed by a new
ICT device everything from sensors to servers an average of ten
kilowatt hours was saved in the broader economy through the
energy productivity services of ICT.
A lot of that, I mean, some of that is computers. But a lot
of that is sensors and variable speed motors and you know, the
equipment that the IT is embedded in. There's a much greater
appreciation, as I alluded to earlier.
In Japan for example where industry and the government have
something called the Green IT Promotion Council. Which is both
trying to improve the energy efficiency of the IT devices, but
also trying to embed more intelligence, more smarts in the grid
and in other parts of the Japanese industry and economy to
further improve the overall energy efficiency. There's a huge
amount of gain to be had there.
The last thing I'll say is McKinsey did a report that's
fairly famous showing the marginal cost of abating carbon
emissions for different things you could do. You know, some are
very expensive like carbon capture and storage. Some are
actually cheap, free or save or create wealth for society.
Most of the things on the curve that were either free or
created wealth were energy efficiency activities or energy
efficiency policies. A lot of those had an IT component. Again,
it's not in my industry. It's the stuff my industry makes
embedded in, you know, industries represented at this table
that's the real story.
Senator Udall. Thank you. I know others wanted to respond.
I think my time is probably expired. But I----
The Chairman. Go ahead if anyone else has----
Senator Udall. I know Mr. Rodgers looked like----
Mr. Rodgers. Senator, I think the technologies you
described for distributed generation are really a win-win for
industry and the utilities. Rightfully so--as this committee
has looked at our power policy, which is set primarily at the
State and local level--the focus has been on consumers building
efficiency and encouraging utilities to promote efficiency.
Too often industrial and manufacturing needs for power
policy reform are neglected. I think distributed generation is
the answer to how our manufacturing sector can help the utility
sector promote energy efficiency. I think it's a very important
area. I thank you for identifying that.
Senator Udall. Mr. Metts, you had the last word last round.
Do you want to have it again?
Mr. Metts. Oh, dear. It's interesting the conversations
because we see it. We're using it.
You know when I was a kid if you got 70,000 miles out of
your engine you felt pretty good. Today you'll drive it for
300,000. This is all technology improvements and CNC type
machine processes.
You know we look today at what we want to do. If I told you
in most of your manufacturing processes you're going to get a
10-percent improvement. You'd jump up and down. That's a huge
improvement.
Because of technologies we can now take what is old boat
manufacturing for a blade, bring it into. For instance, we
think that we're pretty strong when we have a five axis machine
which means I can operate that machine head on five different
axes. What we're talking about machines that have 50 axes that
operate.
I mean this is stuff that humans can't even--it has to be
done with this type of intelligence. But it's allowed us to
move from a hand laid fiberglass now to a machine laid,
perfectly laid, perfectly done, sensored system that gives us a
10-percent improvement in energy production. These are the type
of technology advancements that need to get here.
They're not being done around the world. We don't take a
step forward. We take a leap forward in world technology. We
become the standard that needs to come here to get this done
around the world.
I'm tired of chasing the Japanese and the Germans. I want
someone to chase us for a while.
Senator Udall. We all are. We want them to eat our--instead
of having our lunch eaten. We want to eat their lunch.
[Laughter.]
Senator Udall. But thank you. I would note too the
important role that aerospace and aeronautics have played in
the development of some of these materials and these processes.
It speaks to the need to have a robust investment in those
areas. I say that as a former chair in the House side of the
Space and Aeronautics Subcommittee and a big proponent of NASA.
But thank you all for being here. Two quick comments. In
the sense I hear the potential for almost a self firming role
that the grid could play. We hear a lot about, Mr. Chairman
that the need to firm solar and wind and other renewables. But
if you have a grid that's this smart you actually add that
capacity, I think in that regard.
Again I want to thank the panelists. It's been very
crucial. In the end we want to make energy efficiency the
sexiest thing around, don't we?
We're still looking to make that case in a way. But
Americans are frugal. We also can be profit good at the same
time, but I think there's a way to make the sale here
particularly when we see the advantages and the outcomes and
the profit and the wealth creation that will evolve from all of
this.
Finally this is what we need to support the chairman and
the ranking member is a very comprehensive approach on a new
grid system and that will be a key part of the bill that we
send to the floor.
The Chairman. Thank you all. I think it's been very useful
testimony. We will take it to heart and try to make some
improvements on the legislation that we're moving ahead with. I
appreciate your coming to testify today. That will conclude our
hearing.
[Whereupon, at 11:17 a.m. the hearing was adjourned.]
APPENDIXES
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Appendix I
Responses to Additional Questions
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Responses of R. Neal Elliott to Questions From Senator Bingaman
Thank you for the opportunity to testify and to respond to your
questions. I would like to offer one clarification and amplification to
my testimony. I neglected to mention the industrial efforts that have
been ongoing at the Environmental Protection Agency (EPA) in the policy
and voluntary programs offices. These activities, which have also
experience funding constraints represent important parts of an overall
government response to energy efficiency and sustainability of our
manufacturing sector and should be receiving additional funding, as
well as the activities at Commerce and Energy.
I look forward to the opportunity to respond to any addition
questions or amplifications that the committee may have.
Question 1. Dr. Elliot, in your testimony you state that the
pipeline of R&D projects is running dry. What do you see as the
immediate steps that should be taken to refill this pipeline? Are there
specific industries that we should be focusing on?
Answer. The Department has already taken an important first step by
allocating $50 million of American Recovery and Restoration Act of 2009
(ARRA) funding to existing, unfunded research agreements. It is
important that funding continue to be provided for research in future
as was envisioned by the provisions in Sec. 452 of the Independence and
Security Act of 2007 (EISA). The industries that have existing
cooperative research agreements with DOE's Industrial Technology
Program (ITP) represent the first place that funding should be directed
because they have the research roadmaps in place that can make best use
of the funding immediately. Other industries can be added as funding
becomes available and the industries can be engaged by the Department.
Question 2. Dr. Elliot, what industries do you believe have the
most to gain from energy efficiency improvements? What industries will
need technological breakthroughs to reach significant energy savings
and greenhouse gas reduction targets?
Answer. The energy-intensive industries that the ITP program has
historically worked with represent among the biggest opportunities for
energy efficiency, and could the ones that will be most adversely
impacted by climate policies. There are a few energy intensive
industries that have not historically participated in the ITP program,
including petroleum refining, cement and food processing that might
also benefit from support from the ITP program. As was noted at the
hearing, food products has begun to receive attention from the Program
at the regional level, which ACEEE believes is the appropriate point of
engagement because of the diversity of the food products industry
between regions. With respect to the other two industries, I know that
ITP has reached out to these industries in the past, but has not found
them disinterested. The EPA Energy Star Manufacturing program has been
more successful in engaging them, which suggests that different
industries may require different program approaches to meet their
needs.
Question 3. In your opinion, what do believe are the biggest
roadblocks to achieving significant increases in industrial energy
efficiency? What does this bill do or not do that could help remove
some of those roadblocks?
Answer. The most significant challenge to making major increases in
industrial energy efficiency is our aging industrial infrastructure.
Much of our existing infrastructure was built before the 1980s, and is
now nearing the end of it technical life. Many of our economic
competitors have encouraged investment over the past decade in their
manufacturing sectors so their more-modern manufacturing infrastructure
provides them an energy efficiency and productivity advantage over our
domestic industry. While we can make important incremental improvements
in our existing infrastructure, we will never be able to realize the
efficiency opportunities that would results from rebuilding our
manufacturing using the most current and efficient technologies and
practices. As an example of this vintaging challenge, the average
industrial boiler is over 50 years old with an efficiency of less than
70%, while the advanced ``super boiler'' is approaching 90%, as are the
most current combined heat and power (CHP) systems.
The challenge for domestic manufacturing is that they need to be
assured that they will have a robust marketplace for their products in
the coming decades since the investments in new infrastructure is paid
back over decades not quarters. Certainly the current financial crisis
has impacted their ability to invest by removing demand for
manufactured goods as well as access to capital. In the short-run the
access to financing provide by S. 661 will provide an important bridge
until the financial markets can recover, and provides the workforce and
net technologies that represent critical building block for the new
infrastructure. What is needed in addition is a change in investment
policies that encourages the replacement of existing vintage
manufacturing capacity with new state of the art capacity. This
investment can occur at both new ``green-field'' and existing ``brown-
field'' sites.
Question 4. S. 661 directs DOE to complete an assessment of
industrial energy efficiency technologies that are not widely
implemented within the U.S. and to compare adoption rates to those of
other countries. Could you speak to the main reasons that certain
technologies are widespread in industry elsewhere, but not within the
U.S.? Is it simply a matter of higher energy prices in other countries?
Answer. The proposed global assessment of available manufacturing
technologies represents an important contribution to the discussion of
how to make our domestic manufacturers more efficient and competitive.
The reasons that these technologies are not more fully implemented are
complex, and to some extent industry specific. Among the major reasons
however are the vintaging of our manufacturing capacity as discussed
above, where the manufacturing stock of many our economic competitors
is much more modern and has been better able to implement the most
current technologies.. This aging infrastructure is complicated by
volatile energy prices, particularly for natural gas in this country
that make energy savings investments difficult to commit to. While
energy efficiency investments do reduce the exposure of companies to
energy price volatility, uncertainty discourages investments by
industry for the long-term when companies must consider whether they
will continue operate a particular domestic facility or shift
production to another, more modern domestic or foreign facility. This
lack of investment is not so much motivated by higher energy prices in
other countries, but rather more stable prices.
Question 5. It is clear that if the U.S. is going to be committed
to reducing its energy consumption and meeting greenhouse gas reduction
targets, industry will have to play a large role in meeting those
goals. What is the level of effort that we are going to need to
transform our industry to use less energy and reduce emissions, while
increasing its competitiveness? How far does S. 661 go in meeting these
goals? And what other steps are needed?
Answer. As is noted in my response to question 3, a rebuilding of
the domestic manufacturing infrastructure will be critical to achieving
our climate goals as well as insuring the long-term health of the
manufacturing sector. As noted, S. 661 begins to assemble the critical
building blocks that are necessary to effect this change. Climate
legislation may represent the second part of the puzzle by creating the
mechanisms necessary to start our manufacturing sector on an investment
path that will provide us with a manufacturing infrastructure for a
21st century world where energy productivity and sustainability will be
needed to compete globally while meeting our ambitious climate goals.
It is important to remember that we will need a healthy manufacturing
sector to produce the sustainable energy products and materials that we
will need to improve global energy efficiency and empower our next
generation of energy supply technologies including renewable, clean-
fossil fuel and nuclear.
Response of R. Neal Elliott to Question From Senator Lincoln
Question 6. I appreciate your optimistic outlook for the
manufacturing sector and agree that we should be forward-thinking about
this industry's recovery and use this economic downturn as an
opportunity for improvement. You state in your testimony that a more
sustainable industrial base must be built now, but at the same time we
recognize that credit is limited. How do you believe that the access to
capital granted in this manufacturing efficiency legislation will help
incentivize the kind of growth you would like to see occur? How do you
think that this legislation will help eliminate the uncertainty that is
currently preventing firms from investing in energy efficiency?
Answer. I feel that the access to funding provided by this
legislation represents a bridge for manufacturing until the private
financing market recovers. What ultimately will be needed are
complementary measures to those provided in S. 661 that develop new
technology and human capital develop that will encourage large, long-
term investments in our manufacturing sector that will ensure its
economic competitiveness in a carbon constrained global economy.
Responses of R. Neal Elliott to Questions From Senator Murkowski
Question 7. Please describe whether water conservation and less
energy intensive water measures should be funded through the Department
of the Energy, in particular programs that promote energy efficiency.
Answer. Water efficiency is a critical aspect of industrial energy
efficiency for a number of reasons. Water is increasing the most
limited resource that is required for the manufacturing sector, and
competitions between manufacturing, power generation, agriculture and
domestic consumption. Manufacturing water efficiency has the potential
to reduce water use by both greater water efficiency in manufacturing
processes and by reducing demand for electricity associated with water
and wastewater treatment, which further reduces demand for water in the
power generation sector. It is thus important that ITP consider water
efficiency as an important category of energy efficiency measures.
Question 8. Is there a cost-effectiveness methodology for water
measures comparable to that employed for the consideration of other
energy efficiency measures?
Answer. As noted in my response to question 7, the estimation of
the impacts from water efficiency and energy efficiency are somewhat
more complex than for straight energy efficiency. My colleagues at
Lawrence Berkeley National Laboratory (LBNL) have done some work on
exploring this water-energy ``nexus'' that the ITP program can draw
upon.
Question 9. Please describe the programs and measures currently in
place that are likely to save water and energy.
Answer. The ITP program has had a low-level effort on manufacturing
water efficiency for several years. A more concerted focus on this
topic would likely yield significant benefits. At this point the
technical leadership in this area has come from state efforts in New
York and California in concern with the national labs that could be
leveraged to build a more robust national effort. Similarly, on-going,
low-level efforts at EPA could complement the efforts from DOE.
Question 10. Please describe opportunities that you have pursued to
save energy or water. Such measures could include, conserving water;
switching to less energy-intensive water sources, or increasing the
energy efficiency of current water deliver or treatment processes.
Answer. Several years ago, ACEEE lead a road-mapping exercise
funded by a range of interests including, CEC, EPA and NYSERDA to
identify opportunities for cooperation and coordination between the
energy efficiency and water communities. These efforts have lost much
of their momentum as other water related issues such as security of
water supply have attracted the attention of the experts. The primary
focus of these efforts have devolved into a focus on the energy
efficiency of wastewater treatment, focusing particularly on pump
system efficiency, rather than on the overall water-energy nexus.
Question 11. Please describe briefly how, in your opinion, this
bill best improves upon the industrial sector and how it will work
toward our overall goal of being more energy efficient.
Answer. As noted in my testimony, ACEEE feels that S. 661 provides
important new strategic direction to the ITP program, address some of
the existing short-comings in existing program authorization that have
existed for decades, and provide important new focus on what is needed
by the manufacturing sector to position itself for responding to
opportunities for new investment that are likely to present themselves
in coming years. What this bill does not do is remove the structural
disincentives to investment in new manufacturing capacity as was
discussed in my response to question 3.
Question 12. You cite numbers from the National Association of
Manufacturers that the U.S. share of global manufacturing output has
remained constant over the past decade. Why is there a perception that
U.S. manufacturing has been in decline?
Answer. Over the past three decades we have seen a dramatic
expansion of the share of the U.S. GDP coming from finance. Until 1985,
finance never accounted for more than 16% of the corporate profits. By
2007 the finance accounted for more than 41%. As a result of the rapid
increase in finance activity, the relative share of domestic activity
from manufacturing decreased, even as the actual level of activity in
manufacturing remained relatively constant. In addition, as labor
productivity in manufactured increased dramatically over the same
period, the share of the workforce employed by manufacturing declined
even as production increased.
Question 13. You testified that clarity of the DOE's Industrial
Technologies Program's goals and missions have been lost due to lack of
senior leadership. How can this framework be restored?
Answer. We already have seen a shift in the leadership and its
willingness to allocate both ARRA funds and FY 2009 funding to ITP is
an important first step. I feel that the re-establishment of an
external advisory committee for the program as is proposed in S. 661
will also be an important step in institutionalizing a new direction
for the program, as will regular oversight by the Committee.
______
Responses of David Zepponi to Questions From Senator Bingaman
Question 1. In your opinion, what do you believe are the biggest
roadblocks to achieving significant increases in industrial energy
efficiency? What does this bill do or not do that could help remove
some of these roadblocks?
Answer. I believe the single biggest roadblock to achieving
significant increases in industrial energy efficiency is the economics
of implementing energy efficiency. Access to capital, the cost of
capital, and risk tolerance influence a company's willingness to invest
in energy efficiency measures. Investments in energy efficiency need to
come close to the payback thresholds or hurdle rates of other projects
and priorities competing for scarce capital. Thus, many companies will
only invest in energy efficiency measures that have a payback period of
one to one-and-a-half years.
To achieve significant increases in industrial energy efficiency,
this economic roadblock must be overcome, which means we need to impact
the economics of energy efficiency. The best solution is to provide
financial incentives that improve the economics of investment in energy
efficiency. Incentives could take several forms and a portfolio
approach, rather than one-size-fits-all, would allow companies to
select those that best fit their individual circumstances. This
portfolio could include grants, loans, and tax credits which will all
favorably impact the economics of energy efficiency by reducing the
cost to industry. Further, companies should be able to combine
incentives to further improve economics.
Section 2 of S.661 creates a revolving loan program for
implementation of commercially available energy efficiency technologies
and processes. We believe this loan program could help remove the
economic roadblock for many companies. For some companies, up-front
funding is critical and will make the difference whether energy
efficiency is implemented or not.
For many more companies, tax incentives provide the impetus to
overcome the economic hurdle. The potential savings from the tax credit
are included in the project cost calculations, reducing overall project
costs and/or payback periods. S.661 does not include a recommendation
for a tax credit program. We would like to see the Senate Energy and
Natural Resources Committee work with the committee of jurisdiction on
tax incentives for industrial energy efficiency. I believe federal tax
credits for industrial energy efficiency would provide needed incentive
to significantly increase industrial energy efficiency. Federal tax
credits are available for renewable energy and vehicles but not for
industrial energy efficiency. A program that NWFPA members have found
to work very well is Oregon's Business Energy Tax Credit (BETC), which
provides a 35% tax credit for industrial energy efficiency. An increase
of this credit to 50% is currently being considered by the Oregon
legislature.
Some have suggested that the way to promote energy efficiency would
be to dramatically increase the cost of energy. This would improve the
economics of energy efficiency investments. But, it would also have
more immediate and adverse impacts on company economics that I believe
would result in production cut-backs and employee lay-offs at best and
at worst a substantial number of plant closures. Limited capital would
not be spent on energy efficiency. This approach of increased energy
prices would cause U.S. manufacturers to become less competitive and
would not result in increased energy efficiency.
Lack of corporate-level understanding and awareness of the benefits
of energy efficiency and support for implementation of energy
efficiency projects in their plants is another key roadblock. NWFPA's
experience has shown that without corporate-level commitment, energy
efficiency is not implemented or sustained. Further, when energy
efficiency is seen as an end unto itself, other business needs often
take priority. The fact is that implementation of energy efficiency can
improve plant productivity, product quality, reliability and safety and
reduce greenhouse gas emissions. I believe a company's commitment to
energy efficiency is a good indicator of the ``health'' of the company.
The issue is then, how do we convince corporate executives that energy
efficiency makes good business sense?
Education and outreach targeted at industry executives will be key
to overcoming this roadblock. We have found that communications among
industry executives are most influential. S.661 sets up a framework
within which an executive education and outreach program could be
developed and implemented.
A third roadblock is shortage of trained technical personnel that
focus on energy efficiency. The cause of this shortage is two-fold.
First, skilled and knowledgeable workers are in short supply. Fewer
students are graduating with engineering degrees and fewer engineering
students are attracted to manufacturing. In addition, skilled operators
and maintenance workers are necessary to keep plants operating
efficiently. Plants have become automated and equipment is now driven
by electronic systems and advanced technologies that require advanced
skills. Too few technical programs and too few trained workers are
available to supply industry's needs.
The second cause is that even if skilled and knowledgeable
personnel are available, most personnel at manufacturing plants are
busy maintaining production. Few plants have the financial resources to
devote personnel to energy efficiency. Energy efficiency becomes a low
priority in the hierarchy of plant production concerns. We have found
that when personnel are designated to address energy efficiency, energy
savings are achieved and sustained.
The funding provided in S.661 for the internship programs of the
Industrial Assessment Centers will provide a pool of trained engineers
in industrial energy efficiency that will become available for
employment by industry. It will also directly expose students to
manufacturers and the manufacturing industry. The expansion of the
Industrial Assessment Centers is also critical. These centers provide
the technical resources that many small to medium-sized companies
cannot provide through their own personnel for the reasons I discussed
above. Continued support for existing Industrial Technologies Program
energy efficiency training and information and technical resources is
also critical.
Question 2. S.661 directs DOE to complete an assessment of
industrial energy efficiency technologies that are not widely
implemented within the U.S. and to compare adoption rates to those of
other countries. Could you speak to the main reasons that certain
technologies are widespread in industry elsewhere, but not within the
U.S.? Is it simply a matter of higher energy prices in other countries?
Answer. Higher energy prices in other countries clearly have been a
factor in broad implementation of energy efficiency technologies. It is
not the only factor, however. Other countries have been more highly
regulated. However, government subsidies, incentives and programs to
promote industrial energy efficiency have been more readily available
in other countries for quite some time. The roadblocks I discussed in
my response to question number one are key factors. Cultural
differences are another factor. For example, in Europe, low grade heat
(100-120 F) produced by industrial plants is typically recovered to
provide heating for residential housing. Such opportunities are not
available in the U.S. because most Americans prefer not to live next to
industrial plants.
Question 3. It is clear that if the U.S. is going to be committed
to reducing its energy consumption and meeting greenhouse gas reduction
targets, industry will have to play a larger role in meeting those
goals. What level of effort are we going to need to transform our
industry to use less energy and reduce emissions, while increasing its
competitiveness? How far does S.661 go in meeting those goals? And what
other steps are needed?
Answer. A considerable level of effort will be needed to transform
industry to use less energy and reduce emissions, while increasing
competitiveness. The global playing field is not level. Environmental
and other regulations, employee wages, healthcare costs, and production
costs may be significantly lower in other countries. The result for
U.S. companies is lower prices for American goods and reduced profit
margins. Available capital will be allocated to the most critical
needs.
Many individual companies have adopted energy efficiency goals and
implemented programs. However, to transform industry, industry-wide
approaches and aggressive steps to overcome the economic roadblocks I
discussed in my response to question number one must be taken.
Government financial and technical assistance to support these efforts
is crucial.
NWFPA has the most significant energy efficiency initiative of any
trade association in the U.S. In January of this year, our members
adopted an industry-wide goal to reduce energy intensity by 25% in 10
years. It took us five years of intensive effort and an important
partnership with the Northwest Energy Efficiency Alliance (NEEA) to
bring us to this point. The roadblocks I discussed earlier are very
real. Although Northwest food processors have come a long way as an
industry, we will need assistance to achieve our energy intensity goal.
Section 5 of S.661 calls for research to establish an industry-
specific road map process. NWFPA, with the support of NEEA and U.S.
Department of Energy completed a road map process and is currently
preparing a road map document that includes actionable plans to achieve
our energy intensity goal. Northwest food processors are unique in that
they have the NWFPA organization as the focus for development of an
energy efficiency goal and road map. Most industries lack this
infrastructure. The road map process, coupled with financial and
technical support, could provide the necessary infrastructure to move
regional industry sectors in this direction and contribute to
transformation.
In addition, to transform industry, industry leaders and executives
must be committed to energy efficiency. They must recognize that energy
efficiency makes good business sense. The roadmap process also could be
an opportunity for outreach to and networking among industry leaders.
Responses of David Zepponi to Questions From Senator Murkowski
Question 4. Please describe whether water conservation and less
energy intensive water measures should be funded through the Department
of Energy, in particular programs that promote energy efficiency.
Answer. I understand that the Environmental Protection Agency's
Energy Star program includes some information on water/energy
efficiency improvements and technologies and that the EPA also has
water conservation programs. Significant water savings can be realized
as a result of energy efficiency efforts. The Alliance to Save Energy
coined the term ``watergy'' to describe the strong link between water
and energy in municipal water systems. I think this term could be
applied to food processing systems as well, since many food processors
use very large amounts of water (100s of millions of gallons) in their
processing.
I think it makes sense to fund industrial water conservation
through the U.S. Department of Energy. The major water uses in food
processing are for washing, conveying (using a moving stream of water
instead of a conveyer belt), blanching or cooking, and cooling the raw
material. High temperature and/or high pressure water is also used in
cleaning and sanitation of equipment and facilities as well as product.
Motors, pumps and boilers are used to heat or distribute this water.
And, since motors, pumps and boilers are the major energy users in the
processing facility, they are the prime targets for energy efficiency.
Actions and technologies that will increase energy efficiency will also
increase water efficiency. A water efficiency program could very easily
be incorporated into an energy efficiency program since the skills,
knowledge and solutions are essentially the same.
Question 5. Is there a cost-effectiveness methodology for water
measures comparable to that employed for the consideration of other
energy efficiency programs?
Answer. Yes, the methodology is essentially the same, a cost-
benefit analysis and an estimated payback period for implementing
efficiency. An additional cost consideration for water is the cost for
its disposal. In most food processing plants (non-beverage processors),
water is used in the process but not consumed. Therefore, this
``process-water'' must be disposed. Many Northwest food processors
discharge their process water to publicly operated treatment works.
Others pre-treat and land apply the process water, while others treat
and discharge directly to waterways. All of these disposal methods are
regulated and include stringent conditions, permit fees, and penalties
for noncompliance.
Question 6. Please describe the programs and measures currently in
place that are likely to save water and energy.
Answer. Clearly, programs and measures that focus on the big energy
users--motors, pumps and boilers--are likely to save water and energy.
The U.S. Department of Energy's Industrial Technologies Program has
information, training and online software tools for motors, pumps,
boilers and other key systems.
Question 7. Please describe opportunities that you have pursued to
save energy or water. Such measures could include, conserving water;
switching to less-energy intensive water sources, or increasing the
energy efficiency of current water delivery or treatment processes.
Please describe briefly how, in your opinion, this bill best improves
upon the industrial sector and how it will work toward our overall goal
of being more energy efficient.
Answer. The following are a few of the broad categories of measures
that our members have pursued to save energy and/or water:
a. Optimize operation and maintenance--this can have a
radical impact on energy and water savings.
b. Install energy efficient motors--applies to both energy
and water (motors run pumps).
c. Install efficient pumps (about 75% of the life-time cost
of a pump is energy).
d. Optimize compressed air systems (right-sized compressors,
right-sized air pressure, and repair all leaks).
e. Optimize water systems (right-sized pumps, right-sized
pressure, and repair all leaks).
f. Optimize refrigeration systems (optimize compressor,
evaporator and condenser efficiencies, repair all leaks, reduce
refrigeration loads through building insulation and efficient
lighting).
g. Optimize energy systems (power factor improvements, gear
boxes, reduce transformer and cable losses).
h. Utilize heat recovery devices whenever possible (e.g., use
waste heat to heat water or reuse hot water).
i. Optimize boiler systems (insulate, reuse steam condensate
and boiler blow-down water, reuse hot water where feasible).
j. Use of high efficiency boiler technology (NWFPA is working
with US Department of Energy and the Gas Technology Institute
on demonstrations of this new technology in our member plants).
k. Use of direct fire heat sources where practical (e.g.,
using natural gas to directly heat a dryer instead of using
natural gas to heat water to produce steam to heat the dryer,
which is much less efficient).
l. Use metering and automation controls to adjust scheduling
and operations to optimize systems and to meet compliance or
operational targets.
m. Use cooling towers to recycle non-contact cooling water.
n. Make energy efficiency and water efficiency criteria when
purchasing new equipment.
o. Develop and implement a continuous energy improvement
plan.
In addition, NWFPA is currently working with Portland General
Electric to develop an Energy and Water Efficiency seminar for food
processors that will stress the synergy between energy efficiency and
water efficiency and present measures and technologies that apply to
both.
In my opinion, S661 best improves upon the industrial sector and
promotes energy efficiency by providing information and technical
support as well as financial support for the industrial sector.
Question 8. Please describe recent and proposed changes to federal
law that are likely to impact the way your members conduct their
business.
Answer. National subsidies and tax credits for corn ethanol
production have adversely impacted many food processors. Diversion of
cropland and corn for ethanol production has increased the cost of raw
product to food processors. This has reduced profit margins and
increased food costs to consumers.
The legislative directive to the Environmental Protection Agency to
develop a greenhouse gas reporting rule has resulted in a lengthy and
detailed proposed rule, which was published on April 10. NWFPA is
currently reviewing the rule and assessing its impacts to our members.
The rule will impose new record-keeping, data collection and reporting
requirements on food processors that could be extremely costly and
resource intensive. As I pointed out in my response to question number
one, lack of personnel is a roadblock to energy efficiency. Personnel
will need to be allocated to this reporting, since it will be a
mandatory requirement.
National emissions caps and an emissions trading mechanism could
have significant impacts on NWFPA members. We believe that such a
system could result in significant increases in energy prices and
competitive disadvantages to U.S. manufacturing. If not properly
structured with safeguards against manipulation, this market could also
produce economic winners and losers.
NWFPA supports efforts to reduce greenhouse gas emissions levels.
We believe the focus must be on measureable and attainable carbon
reduction strategies, such as increased energy efficiency and energy
conservation that will provide real results and benefits. We advise
that other strategies to reduce greenhouse gas emissions, such as cap
and trade or carbon taxes be thoroughly evaluated for their costs,
benefits, and unintended consequences.
Question 9. Please describe the financing you believe is needed to
meet your goal to reduce member-wide energy intensity by 25% in 10
years.
Answer. At this point, we don't have an estimate for the cost to
achieve the 25% reduction goal. We are only beginning to investigate
the actions and technologies that would be required to achieve our
goal. We have begun a project, which will be completed this summer, to
determine our current member-wide energy intensity. This will be the
baseline against which we will reduce our intensity. We will then have
an energy intensity target (25% below the baseline) upon which we can
design a long-term energy efficiency implementation plan. We are also
developing a project to conduct an energy audit at every member plant,
which will produce a list of energy efficiency opportunities for each
plant. These opportunities will be incorporated into the implementation
plan. At this time, we will have good data to use in determining the
cost to achieve the energy intensity goal.
What I do know with certainty is that it will be very costly. I
have heard from some energy managers at plants that costs to implement
this level of energy efficiency could cost on average at least as much
as the annual cost of energy. Depending on the intensity of individual
energy use, the costs could be considerably higher. Costs could be in
the hundreds of thousands or millions of dollars. This is why federal
financial assistance in the form of loans, grants, tax incentives, etc.
is so critical if industry is to achieve significant levels of energy
efficiency and improve global competitiveness at the same time.
Question 10. Please further elaborate on the different ways your
members have addressed the energy costs associated with waste-water
treatment.
Answer. The following are a few of the broad categories of measures
that our members have pursued to reduce energy costs associated with
wastewater (process-water) treatment.
a. Install meters and monitors on wastewater treatment
systems and set control limits and alarms when limits are
exceeded. Members are exploring more sophisticated automated
systems, including the system I described in my testimony
currently studied by the California Energy Commission.
b. Use land application of wastewater for organic waste
treatment, rather than waste treatment systems that require
pumping and aeration. This approach reuses the nutrients in the
discharge to fertilize the land and avoids use of commercial
fertilizer which requires a lot of energy to produce.
c. Use anaerobic digesters with biogas recovery to obtain
energy benefits.
d. Minimize waste; separate low and high strength waste
streams.
e. Recover waste materials and reprocess into a valuable
product.
f. Reduce amount of water used in cleaning (hi pressure-low
flow hoses with correct spray nozzles and automatic shut off
when not in use).
g. Reuse process water where feasible.
Question 11. Are there ways to assure regulatory compliance without
having to run your systems continuously for waste, odor and water
discharge?
Answer. I want to stress that for NWFPA members, environmental and
safety compliance is not optional. It is of the highest priority. If a
plant does not have the means to monitor and control on a real-time
basis, it will operate systems continuously to assure compliance.
Metering, monitoring and control systems allow processors to
optimize treatment system performance and efficiency while at the same
time complying with regulatory standards. A basic, inexpensive
monitoring system will indicate when conditions may exceed compliance
and sounds an alarm or sends a message to an operator who must take
action or it triggers a shut-off valve. A relatively expensive system,
which includes meters, monitors, telemetry and controls not only
monitors for compliance, but operates the treatment system in such a
way that maximizes energy and water efficiencies, while maintaining
compliance.
______
Responses of Maxine Savitz to Questions From Senator Bingaman
Question 1. Dr. Savitz, in your testimony you state that to achieve
a goal of 25% saving in 10 years will require both new and improved
technologies with high rates of return for industry adoption. What
specific areas of technology development do you believe have the most
promise for yielding high returns and achieving widespread industry
adoption?
Answer. Most of the gains would occur in pulp and paper, iron and
steel, cement, chemicals and petroleum refining. The pulp and paper
industry could use more waste heat for drying, advanced water-removal
technologies; advanced filtration methods; high-efficiency pulping
technology, and modern line kilns. Promising technologies for iron and
steel are advances in electric arc furnaces (EAF) melting, blast
furnace slag heat recovery, integration of refining functions, and heat
capture from EAF waste gas. In cement, major energy savings would
require a significant upgrade to an advanced dry-kiln process.
Efficiency could also be enhanced with advanced control systems,
combustion improvements, indirect firing and optimization of certain
components. In the chemicals and petroleum industry, technologies for
improving energy efficiency include high temperature reactors,
corrosion resistant metal and ceramic lined reactors, and sophisticated
process controls.
A set of cross-cutting technologies exist that could improved
energy efficiency in a wide range of industrial applications. Most
important is the increased implementation of combined heat and power
(CHP). The implementation of CHP is not as much a technology
development issue as one of deployment, although some technology
development could be performed. Other cross cutting technologies are
steam and process heating technologies that can improve quality and
reduce waste, separation processes that are based on membranes and
other porous materials, advanced materials that resist corrosion,
degradation and deformation at high temperatures; controls and
automation; and sensor technology that reduces waste by improving
control.
Question 2. Dr. Savitz, in your testimony you state that the
pipeline of R&D projects is running dry. What do you see as the
immediate steps that should be taken to refill this pipeline? Are there
specific industries that we should be focusing on?
Answer. The ITP program should update the technology roadmaps in
partnership with industry. These would be used to identify top industry
needs and R&D priorities. ITP could then use these updated roadmaps as
input to issue solicitations for industry-specific R&D projects. The
portfolio could be balanced with projects that are in various stages of
development. In addition to aluminum, chemical, forest products, iron
and steel, and metal steel, which ITP is currently focusing on, they
should consider a program with the cement industry as it is a heavy
user of energy and also large emitter of green house gases. They should
also approach the petroleum refining industry to see if they are
interested in participating in a collaborative program.
Question 3. Dr. Savitz, what industries do you believe have the
most to gain from energy efficiency improvements? What industries will
need technological breakthroughs to reach significant energy savings
and greenhouse gas reduction targets.
Answer. The industries mentioned in answer to question one have the
most to gain from energy efficient improvements. Technologies mentioned
in answer one, both for specific technologies and cross-cutting are
important to be developed and demonstrated. An area that is not
receiving much attention in the current ITP program, as mentioned in
our peer review report, are alternative feedstocks that would be very
useful for the chemical industry. A program on the use of distressed/
non traditional carbon based feedstocks or syngas would be appropriate
to investigate. This might also have applicability in the biofuels
area.
Question 4. In your opinion, what do you believe are the biggest
roadblocks to achieving significant increases in industrial energy
efficiency? What does this bill do or not do that could help remove
some of those roadblocks?
Answer. Industry does respond to energy price signals for their
investments, but energy investments compete with many other industry
investment opportunities that are often of higher priority to
management. In today's financial climate industry does not have the
available capital to invest in developing and testing new
technologies--or even deploying all the known proven existing
technologies--that will increase their energy productivity. Other
barriers to deployment include the technical risks of adopting a new
industrial technology; perceived risk of downtime with a new
technology; lack of specialized knowledge about energy efficient
technologies; and unfavorable fiscal policies as reflected in the tax
code. Energy is still not perceived as critical to competitive
processes in some industries. Energy is only one of the many challenges
that they face.
The bill provides financing mechanisms for industry by establishing
DOE grants to community/lender partnerships for regional loan programs
for manufacturers and links DOE assessments to SBA loans. It also
provides expansion of the Industrial Assessment Centers (IAC), which
provide audits to small and medium sized manufacturers. The bill does
not address issues regarding tax policies such as depreciation rules
that often require firms to depreciate energy efficiency investments
over a longer period of time than other investments.
Question 5. S.661 directs DOE to complete an assessment of
industrial energy efficiency technologies that are not widely
implemented within the U.S. and to compare adoption rates to those of
other countries. Could you speak to the main reasons that certain
technologies are widespread in industry elsewhere, but not within the
U.S.? Is it simply a matter of higher energy prices in other countries?
Answer. In our written testimony, we suggested that Section 4 (b)
(4) which requires a comparison of U.S. technology adoption rates with
those of the European Union, Japan, and others include ``an assessment
of the reasons for any differences in adoption rates considering at a
minimum both economic (including price) and policy reasons in the U.S.
and countries considered.''
Question 6. It is clear that if the U.S. is going to be committed
to reducing its energy consumption and meeting greenhouse gas reduction
targets, industry will have to play a large role in meeting those
goals. What is the level of effort that we are going to need to
transform out industry to use less energy and reduce emissions, while
increasing its competitiveness? How far does S. 661 go in meeting these
goals? What other steps are needed?
Answer. Competitiveness includes many factors--from energy costs to
labor costs, to tax policy, to proximity to raw materials and markets.
S. 661 does a very good job from the energy perspective, but that is
only one part of the overall competitive picture. There needs to be a
comprehensive approach to ensure that manufacturing jobs will stay here
and new ones be placed here. We do not want to import all of our
technologies.
Responses of Maxine Savitz to Questions From Senator Murkowski
Question 7. Please describe briefly how, in your opinion, this bill
best improves upon the industrial sector and how it will work toward
our overall goal of being more energy efficient.
Answer. The best improvements are the financing mechanisms for
industry with the loans and grants program and the expansion of the
IAC, which in addition to providing information through audits to small
and medium sized businesses provides training for the workforce. The
technology assessments required with give attention to energy
efficiency and greenhouse gas emissions will provide a good baseline on
what technologies are actually being implemented and needed.
Question 8. In addition to the Industrial Technology Program, are
there other Federal programs pursuing similar goals to develop more
efficient technologies within the industrial sector?
Answer. There are two other Federal programs which are
complimentary to DOE's program and focus on deployment. The
Manufacturing Extension Program at NIST, which could include energy
improvements in their technical assistance, and the EPA Energy Star for
industry program.
Question 9. Please describe innovative technologies that have moved
from the concept stage to commercialization. What are the major
impediments of getting to the commercialization of a new technology?
Answer. Some examples of R&D successes from the ITP program include
the Mesabi Nugget next generation cokeless ironmaking process for
steel, Lost Foam Casting for metal casting, advanced reciprocating
engines for CHP currently in demonstration, and wireless sensors for
process control. The impediments are discussed in answer 4.
Question 10. It appears that the Industrial Assessment Centers
provide a quick return on investment to industrial users through their
reviews and the corresponding actions taken by the users to improve
their efficiencies. Please describe the typical rate of return of the
Save Energy Now (SEN Initiative).
Answer. We do not know the answer to this question. DOE might be
able to supply the answer.
Question 11. Please describe the work that you are undertaking to
strengthen your outreach to utilities to help industry overcome
barriers to implement energy efficiency projects and new technologies.
Answer. DOE is best suited to respond to this question. The Peer
Review Final Report that we co-chaired recommended that DOE increase
its efforts with the utilities to assist industry in obtaining
financing through utility programs and encouraging appropriate policies
with utilities to increase implementation of energy efficient
technologies in industry such as decoupling.
______
Responses of Stephen Harper to Questions From Senator Bingaman
Question 1. In your opinion, what do believe are the biggest
roadblocks to achieving significant increases in industrial energy
efficiency? What does this bill do or not do that could help remove
some of those roadblocks?
Answer. Information, or the lack thereof, is along with financing
among the biggest roadblocks. Financing ideally will be addressed
through the steps currently being taken to shore up our banking system.
This bill addresses this in a number of ways, including establishing a
joint industry-government manufacturing partnership program and
expanding the regional Industrial Assessment Centers program.
Question 2. S. 661 directs DOE to complete an assessment of
industrial energy efficiency technologies that are not widely
implemented within the U.S. and to compare adoption rates to those of
other countries. Could you speak to the main reasons that certain
technologies are widespread in industry elsewhere, but not within the
U.S.? Is it simply a matter of higher energy prices in other countries?
Answer. I am not an expert in this arena, but I suspect that energy
prices play a significant role in technology adoption rates. New
technologies in the energy and environmental field are adopted
typically because they are required by government mandates or are
incented via government subsidies or via energy prices.
Question 3. It is clear that if the U.S. is going to be committed
to reducing its energy consumption and meeting greenhouse gas reduction
targets, industry will have to play a large role in meeting those
goals. What is the level of effort that we are going to need to
transform our industry to use less energy and reduce emissions, while
increasing its competitiveness? How far does S. 661 go in meeting these
goals? And what other steps are needed?
Answer. Two things will be required by industry: First, adoption of
existing technology to make efficiency gains in the short run. Second,
a more radical transformation of technology in the future to
dramatically reduce industrial energy demand. This bill addresses the
former by expanding the public private partnership program and
expanding the regional IAC program. The longer-term need is addressed
through the industry roadmapping provision and the Industrial
Innovation Grants program. In addition, it would engage the National
Academies of Science to asses the critical manufacturing needs for
development of advanced energy technologies.
Responses of Stephen Harper to Questions From Senator Murkowski
Question 4. Please describe whether water conservation and less
energy intensive water measures should be funded through the Department
of the Energy, in particular programs that promote energy efficiency.
Answer. No expertise or views on this issue.
Question 5. Is there a cost-effectiveness methodology for water
measures comparable to that employed for the consideration of other
energy efficiency measures?
Answer. No expertise or views on this issue.
Question 6. Please describe the programs and measures currently in
place that are likely to save water and energy.
Answer. Intel has a long standing program with funds dedicated to
energy conservation projects across the company. We continuously
evaluate energy conservation opportunities at all of our facilities and
fund a large number of them every year. As a result, the amount of
energy we use per unit of product produced has decreased 20% since
2002.
Question 7. Please describe opportunities that you have pursued to
save energy or water. Such measures could include, conserving water;
switching to less energy-intensive water sources, or increasing the
energy efficiency of current water deliver or treatment processes.
Answer. We have used a wide range of measures to conserve energy,
including recovering and reusing heat from combustion systems,
implementing smart controls on large equipment and systems, utilizing
building management systems to maintain equipment in its most efficient
operating range and requiring efficiency improvements in new process
manufacturing equipment.
Question 8. Please describe briefly how, in your opinion, this bill
best improves upon the industrial sector and how it will work toward
our overall goal of being more energy efficient.
Answer. See responses to Questions 1-3.
Question 9. Please elaborate on your relationship with DOE's
Industrial Technologies Program (ITP) and how Intel has benefitted from
the relationship, and also why it is important for smaller companies to
have an opportunity to engage in the Program.
Answer. Intel's facility energy efficiency team has had a fruitful
relationship with the US Department of Energy, including the Industrial
Technologies Program (ITP), a program which would be strengthened by S
661. Under the ITP, DOE has completed four energy efficiency savings
assessments (ESA) audits at Intel sites in New Mexico, Arizona, and
Oregon, with the earliest completed in 2006. These audits focused on
the efficiency of pumping systems, compressed air systems and fan
systems, and were conducted by DOE contractors. These audits produced a
number of potential efficiency projects that currently are being
evaluated against our internal criteria for capital investments. In
addition to these audits, the ITP makes available to Intel a variety of
programs, models and other analytical tools for our use
Our experience with DOE's industrial energy efficiency programs has
convinced us of the importance of the funding and research and
development programs that would be authorized or expanded by S 661.
While Intel has benefitted from working with DOE's ITP, the potential
benefits of additional grant funding and the expansion of the
Industrial Research and Assessment Centers would especially benefit
smaller-and medium-sized industrial companies which, collectively,
comprise the bulk of US manufacturing. Smaller companies often do not
have the internal resources to identify and seize many of the available
energy efficiency opportunities and stand to benefit significantly.
Question 10. You mentioned in your testimony that you use
``computerized building management systems to operate facilities in
their most efficient range.'' Can you talk a little more about the
whole-building approach that you take in your facilities?
Answer. I was referring not so much to Intel's practices
specifically but rather to the well-document capabilities of
information and communications technology (ICT), applied to improve the
energy management of buildings and industrial processes.
______
Responses of Jeff Metts to Questions From Senator Bingaman
Question 1a. In your opinion, what do believe are the biggest
roadblocks to achieving significant increases in industrial energy
efficiency?
Answer. The biggest roadblock to significant increases in
industrial energy efficiency is concentrated in the cost of renewable
energy, particularly wind power. The demand in the United States for
wind turbines up until now has been relatively low. Subsequently there
was not much need for the Wind Turbine Industry to focus efforts on
advancing the manufacturing processes. Processing of wind turbine
blades and large component machining has been, and still is, dominated
by European manufactures. The United States has a unique opportunity to
advance current technology far into the future by adapting aerospace
and automotive materials and techniques. Many blade manufacturers still
employ fiberglass boat hull manufacturing technologies. Simply put,
current methods are not precise or robust enough to withstand today's
demand for a larger and heavier blade. This outdated technology
consumes extensive amounts of time and labor. Further, it is outdated
and inadequate, especially in consideration of U.S. capabilities in
development today.
With volume projections on the rise today, the current
manufacturing supply base and its capabilities will not be scalable in
the timeframe required to meet the United States goal of 20% energy
reliance from wind energy by the year 2030. The issue accelerates
dramatically, if the President's goals of 25% by 2025 are to be
attained. Therefore newer, quicker and less expensive methods must be
developed to meet this demand. Blade technology must be advanced to
support required production rates. Increased blade length and weight
have become additional negative factors that must be addressed.
There are two primary manufacturing roadblocks:
Wind turbine blade designs--Today's blade designs use lower
strength to weight materials and have limited regard to whether
the blade can be manufactured consistently and to the geometry
intent of the design. By focusing on the blade design itself,
Dowding/MAG's objective is to target a design that reduces
weight, improves performance and maximizes manufacturability.
With such a blade design the turbine OEM's can begin to rethink
all design parameters associated with gearboxes, bearings, hubs
and even tower designs. Many of these internal components are
designed to operate effectively with yesterday's heavy blades
at very high cost.
Manual Manufacturing processes--The manual processes
employed today yield limited consistency, varying quality and
high cost, unreliable blades. Warranty cost for OEM's is a
major issue. Blade failures in the field are one of the biggest
problems plaguing the industry today. Many failures can be
traced directly back to either the design or manufacture of the
blade. Today's highly manual, inconsistent processes are
resulting in a 10%-15% reduction in the energy output of a wind
turbine system. The varying results of this process increase
true lifecycle cost, and present a very different price per
blade than originally expected. These inefficiencies deliver an
elevated turbine cost and an increase in cost per Kilowatt-hour
to the public.
Question 1b. What does this bill do or not do that could help
remove some of those roadblocks?
Answer. This bill targets the single biggest roadblock to advancing
the industry, which is R&D funding. These types of funds are currently
unavailable to private industry to make the necessary advances. By
making these investments, the United States will accelerate by several
years, a normally slow incremental improvement process. At the same
time it will set the stage for United States based companies to
participate at a leadership level in the world's alternative energy
markets.
Specifically, this bill provides the opportunity for US industry to
take the initiative to create revolutionary blade and machine tool
designs that enhance and improve manufacturability. These technologies
will lower cost, reduce warranty issues, provide higher efficiency
performance and, show exceptional durability in the field. Most
importantly, the United States will become a showcase to the world for
wind turbine manufacturing.
Heavy emphasis will be placed on optimizing and automating
manufacturing processes that will significantly reduce human
error and will provide a level of consistency on the
manufacturing floor. The manufacturing machinery and processes
will support higher performance blades. In addition, the actual
geometry of the blade will be optimized, which will provide as
much as 10-15% performance improvements in the output
efficiency of the wind tower.
The new blade design would take full advantage of uni-
directional materials, like those used in composite aerospace
structural parts. Applying new materials will result in
lighter, stronger, more durable blades and provide an
opportunity for the rest of the wind turbine system, including
the hub, tower, and gearbox, to be optimized for the lighter
more efficient blades. Ultimately, this will reduce the cost to
the consumer.
It is the Dowding/MAG objective to use this project as an
opportunity to bring together a strong team of key individual
contributors and industry players, with the intent of revolutionizing
portions of this industry in under two years. Ultimately, over the next
five years, re-engineer the entire turbine, utilizing modern
technologies and improving output. This will result in lower energy
costs, competitive with other existing sources. We are assembling a
strong and experienced manufacturing team, which will utilize the
funding from this bill to optimize blade design and machine processes.
We will develop manufacturing systems to certify a new blade design, as
well as lowing cost and improving throughput in machining of the large
components. The players include but are not limited to the following:
Dowding Industries--a major US Manufacturer that provides
machining services, assembly and manufacturing operations
expertise to spearhead the physical manufacturing facility
which will be located in Michigan.
MAG Industrial Automation Systems--a major US Manufacturing
Solutions company with proven experience combining machine tool
expertise, Aerospace composites knowledge/implementation,
automation expertise and manufacturing process/assembly
optimization.
Dr. Kyle Wetzel, a PHD Aerospace Engineering major wind
industry credentialed blade designer with over 25 years of
experience designing airfoils and turbine blades for many of
the major OEM's including GE, MFG,
We have a short list of US based Turbine OEM's that we are
approaching one by one to join our team to help us realize our
longer term objectives. Ultimately the design of blades, hubs,
gear boxes, bearings, etc. all have complementary impact on
each other in realizing the long term goal of developing leap
frog advances in wind turbine performance, efficiency, weight
reduction and longevity.
We have worked with one U.S. manufacturer, GE, for many
years implementing carbon fiber composites in aircraft engine
components, so they would be well suited as a team contributor
to provide credentialed carbon fiber designers to work with
Kyle Wetzel and our staff of carbon fiber application engineers
to optimize the usage of conventional blade materials with that
of aerospace carbon fiber materials to achieve a revolutionary
breakthrough in blade design.
The funding provided by this bill will kick off the proposed
Dowding/MAG initiative which has both short term and long term vision.
Of course we need to tackle the short term increase in demand for wind
turbine components and the limiting equipment/processes required to
manufacture the components. However, long term we need to focus on the
overall efficiency, weight and reliability of the wind turbine as a
whole.
Short Term (12-24 months)--As explained above, our short
term focus is to launch development programs to bring
incremental improvements that can be implemented immediately in
current wind turbine installations. These improvements include
a unique machine tool platform design which will greatly reduce
the machining times of large wind turbine bearings, gearbox
components, blade hubs, etc. and to optimize the manufacturing
processes of blades by strategically adding automation,
material design improvements and increased local US based blade
production.
Long Term (2-5 years)--We are working to bring a major U.S.
OEM (focus on GE but there are other U.S. manufacturers) with
the objective of cross-pollinating our years of aerospace know-
how with the experience of wind turbine blade designers in
order to take advantage of the lighter weight, stronger
materials of aerospace without increasing the cost of a blade
set. Ultimately, these advances in blade efficiency, weight
reduction and performance will allow for the optimization of
turbine components to reduce cost, weight and installation
costs. All of these factors will result in lower energy costs.
Question 2. S. 661 directs DOE to complete an assessment of
industrial energy efficiency technologies that are not widely
implemented within the U.S. and to compare adoption rates to those of
other countries. Could you speak to the main reasons that certain
technologies are widespread in industry elsewhere, but not within the
U.S.? Is it simply a matter of higher energy prices in other countries?
Answer. During the early 1970's when the United Sates was
experiencing its first energy crisis brought on by a shortage of fossil
fuels. This resulted in a heavy reliance on fuel supplied by the Arab
nations. The US government invested in a wind energy program through
NASA to enhance the development of wind turbine technology. The result
was NASA developing the worlds first 3.5 MW wind turbine. As the years
went by and the energy crisis subsided, this program was forgotten by
most, with the exception of one group of people; the Danish Government.
As a result, today Denmark is a global leader in wind technology and
production supplying around half the worlds wind turbines.
However, we believe that the project described in this bill is not
being duplicated today anywhere in the world. Spain recognizes the
importance of wind turbine manufacturing and the government is
supporting Gamesa, and to MTorres, in developing an automated
manufacturing processes. These two companies have recently issued
releases to the general press about working together to develop future
wind turbine systems. Funding provided by the Spanish Government has
enabled Gamesa to partner with MTorres and greatly accelerate their
development process.
Today's blades are being produced primarily by hand with minimum
capital investment. Hand layup, while not capital intensive, does not
produce defect free blades, nor does it provide a platform to optimize
manufacturing efficiencies. Lowest cost material selection fits
naturally with today's blade's design and manufacturing processes. This
combination of design, process and materials yields a seemingly low
cost blade at the expense of quality and durability. These quality
problems are now being realized in field failures and increased
warranty expense.
Conversely, in the aerospace industry field failures can be
catastrophic and designers are willing to buy the highest strength to
weight materials. The benefits of these advanced materials can only be
realized through highly accurate automated manufacturing process. Our
process would take a total cost of ownership perspective, like those of
the machine tool or aircraft industry, and apply that perspective from
the earliest stages of design through final manufacture. Most of these
material and manufacturing advances become exponentially more important
as you look at the ramp up in demand for wind turbines now and in the
future.
Question 3a. It is clear that if the U.S. is going to be committed
to reducing its energy consumption and meeting greenhouse gas reduction
targets, industry will have to play a large role in meeting those
goals. What is the level of effort that we are going to need to
transform our industry to use less energy and reduce emissions, while
increasing its competitiveness?
Answer. There are three aspects that must be focused upon by the
United States government to effectively make huge advancements in
energy consumption reductions in an acceptable amount of time:
Industrial Consumers--incentives must be focused at the
source of energy consumption, the industrial users of energy.
Incentives can be focused on the US manufacturing base to
promote the acquisition of more energy efficient manufacturing
equipment and equipment updates. Tight capital markets and
global competition are slowing this improvement in energy
efficiency.
Manufacturers--This bill provides incentives which will spur
development of manufacturing capacity and will enhance
technology advancement. Wind power generator components tend to
be large in nature, thereby requiring investment in large
equipment to machine them. Incentives to acquire these larger
machines could create more capacity, reduce costs, accelerate
development of new manufacturing methods and improve the U.S.
competitive position globally.
Utilities--incentives must also be directed to the utilities
to drive them toward the use of alternative energies and away
from fossil fuel based energy production.
The level of effort needs to be significantly greater than
initiative programs of the past and should be targeted at companies
where the impact will be more immediate, yet long lasting. As we have
pointed out, industrial consumers, manufacturers and utilities must all
be given an economic incentive they cannot ignore.
Question 3b. How far does S. 661 go in meeting these goals? And
what other steps are needed?
Answer. S.661 Provides a very valid foundation to support new
materials and manufacturing techniques that can be implemented in the
wind energy market. Boeing revolutionized commercial aircraft design by
designing an aircraft from ground up that took full advantage of high
strength to weight, unidirectional composite materials and the latest
manufacturing processes and equipment. Only by taking a total systems
approach and leveraging all aspects of implementing composite
materials, were the benefits realized to create a revolutionary product
that now has sales exceeding all previous new aircraft model
introductions. S.661 provides the foundation for a similar revolution
in wind turbine system design, manufacture and performance, by
introducing new materials, design and manufacturing equipment to the
wind market.
Response of Jeff Metts to Question From Senator Lincoln
Question 4. In my home state of Arkansas, I am proud that even
though wind energy potential is limited, we are contributing to the
supply chain for wind energy by manufacturing the blades and turbines
for future wind farms. I am interested in your statement that ``the
U.S. can and must be the birthplace of the lightest, strongest, lowest
cost and most efficient wind turbine components in the world.'' I agree
that these advancements in technology will help bring the costs down,
and energy input up while also increasing the number of jobs. What
steps do you believe that Congress should take that would help the U.S.
to set the world standard in wind turbine technology?
Answer. Suggestions:
1. Establish recurring funding source for ongoing research
and development so that further reaching manufacturing
technologies and materials can be developed over the course of
several years. (This one may already be in place via the
national labs. If so would there be any benefit of having a
source to review and allocate money to non redundant projects
to foster some competition amongst emerging technologies and
corresponding projects.)
2. Strongly support the United States imitative to obtain a
20% reliance on wind energy by the year 2030. Provide federal
funding to entice states to adapt mandates from local power and
utility companies to purchase a greater percentage of their
energy from renewable sources such as wind energy.
3. Commercialize wind turbine certification to create
competition.
4. Provide incentives to re-blade current wind turbines in
the field with new significantly improved blades that increase
efficiency of older, disabled or damaged units.
5. Recognize the importance of manufacturing automation by
establishing a Composite Automation Research and Development
Center near a major automation solutions provider, so that
manufacturing technologies can be developed under leadership of
experienced automation systems designers. Such a center could
allow cross pollination of ideas and solutions applied from a
variety of disparate industries.
______
[Responses to the following questions were not received at
the time the hearing went to press:]
Questions for David Rodgers From Senator Bingaman
Question 1. Mr. Rodgers, in testimony given at the hearing, it was
stated that DOE has allowed its industry specific R&D pipeline to run
dry. This is particularly concerning given the energy, climate and
competitiveness challenges that our industry is currently facing, and
the technological improvements and breakthroughs that will be necessary
for our industry to meet these challenges. Do you share this view, and
what steps is the Department taking to ensure that this pipeline is
quickly refilled?
Question 2. Mr. Rodgers, both Dr. Savitz and Dr. Elliott mention in
their testimony the need for better manufacturing data. Specifically,
both Dr. Savitz and Dr. Elliott call-out EIA's Manufacturing Energy
Consumption Survey (MECS), of which the most recent 2006 survey still
has not been released. What has been the delay in releasing the 206
survey, and do you know when this 2006 survey will be released? Does
the Department support the recommendation to conduct the survey on a
three year schedule? (as opposed to the current 4 year schedule?)
Question 3. Mr. Rogers, in recent years the industrial technologies
program has expanded beyond its focus on traditional energy intensive
industries to new industries including food processing and data
centers. What other `emerging' industries are fertile ground for energy
efficiency improvements?
Question 4. Mr. Rogers, as Mr. Metts has described, the wind
industry is ripe with opportunities for both technological improvements
in manufacturing technology as well as technical improvements in the
turbine components themselves. Has DOE considered applying the
capabilities of the industrial technologies program to its Wind Energy
Program? (S. 661 instructs the Sec. of Energy to establish R&D
partnerships between the Industrial Technologies Program and other DOE
R&D programs.)
Question 5. Mr. Rogers, as Mr. Harper has just described for Intel,
there is a significant amount of overlap between buildings energy
efficiency and industrial energy efficiency. How does the Department,
as it moves forward, plan to leverage and combine the expertise of the
both the building technologies program and the industrial technologies
program to achieve the greater energy savings?
Question 6. In your opinion, what do believe are the biggest
roadblocks to achieving significant increases in industrial energy
efficiency? What does this bill do or not do that could help remove
some of those roadblocks?
Question 7. S. 661 directs DOE to complete an assessment of
industrial energy efficiency technologies that are not widely
implemented within the U.S. and to compare adoption rates to those of
other countries. Could you speak to the main reasons that certain
technologies are widespread in industry elsewhere, but not within the
U.S.? Is it simply a matter of higher energy prices in other countries?
Question 8. It is clear that if the U.S. is going to be committed
to reducing its energy consumption and meeting greenhouse gas reduction
targets, industry will have to play a large role in meeting those
goals. What is the level of effort that we are going to need to
transform our industry to use less energy and reduce emissions, while
increasing its competitiveness? How far does S. 661 go in meeting these
goals? And what other steps are needed?
Questions for David Rodgers From Senator Lincoln
Question 9. The Restoring America's Manufacturing Leadership
Through Energy Efficiency Act of 2009 seeks to improve and encourage
energy efficiency in our manufacturing sector. In my state of Arkansas,
I have several oil refiners who have all made positive strides in the
area of energy efficiency in their refinery operations. I am interested
in making certain that these independent refiners are eligible for any
grants and other benefits that will provide incentives to continue and
expand the energy efficient work they have already done.
Question 10. Is it your understanding that refiners, as part of an
energy intensive industry, will be able to take advantage of these
opportunities through the manufacturing efficiency legislation? How do
you see oil refineries fitting into our overall transition from an old
energy economy to a new energy economy?
Questions for David Rodgers From Senator Murkowski
Question 11. Please describe whether water conservation and less
energy intensive water measures should be funded through the Department
of the Energy, in particular programs that promote energy efficiency.
Question 12. Is there a cost-effectiveness methodology for water
measures comparable to that employed for the consideration of other
energy efficiency measures?
Question 13. Please describe the programs and measures currently in
place that are likely to save water and energy.
Question 14. Please describe opportunities that you have pursued to
save energy or water. Such measures could include, conserving water;
switching to less energy-intensive water sources, or increasing the
energy efficiency of current water deliver or treatment processes.
Question 15. Please describe briefly how, in your opinion, this
bill best improves upon the industrial sector and how it will work
toward our overall goal of being more energy efficient.
Question 16. ACEEE testified that the Industrial Technologies
Program is understaffed and that the current mix of skills does not
reflect the range of activities the program needs for long-term
success. What would you do to address this situation?
Appendix II
Additional Material Submitted for the Record
----------
Statement of the American Forest & Paper Association
introduction
The American Forest & Paper Association (AF&PA) appreciates this
opportunity to comment on the Restoring America's Manufacturing
Leadership through Energy Efficiency Act of 2009 (S. 661). AF&PA is the
national trade association of the forest products industry,
representing pulp, paper, packaging and wood products manufacturers,
and forest landowners. Our companies make products essential for
everyday life from renewable and recyclable resources that sustain the
environment. The forest products industry accounts for approximately 6
percent of the total U.S. manufacturing GDP, putting it on par with the
automotive and plastics industries. Industry companies produce about
$200 billion in products annually and employ more than 1 million people
earning $54 billion in annual payroll. The industry is among the top 10
manufacturing sector employers in 48 states.
af&pa members' energy profile and greenhouse gas reductions\1\
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\1\ AF&PA member performance metrics are from 2008 AF&PA
Environmental, Health & Safety (EHS) Verification Program Biennial
Report, 2008 (http://www.afandpa.org/Content/NavigationMenu/
Environment_and_Recycling/Environment,_Health_and_Safety/AF&P
A_EHSReport08_final5web.pdf. Industry statistics on cogeneration are
from: 2007 energy cogeneration data from the Energy Information Agency
(http://www.eia.doe.gov/cneaf/electricity/page/eia906_920.html.)
---------------------------------------------------------------------------
Overall Efficiency
AF&PA members have steadily increased their energy efficiency,
while also increasing reliance on carbon-neutral renewable biomass
power, and reducing fossil fuel use. Overall, total energy use per ton
of production at member pulp and paper mills has decreased by 26.6
percent since 1972, and by 11 percent between 1990 and 2006.
Combined Heat and Power
One of the ways in which members have increased their efficiency is
through the use of combined heat and power (CHP), which is the practice
of using exhaust steam from electrical generators for heat in
manufacturing processes or for space heating. Based on U.S. Department
of Energy (DOE) data from 2007, the forest products industry is a
leader in the use of CHP-generated energy--99 percent of the
electricity generated on-site at pulp and paper mills and 95 percent of
the electricity generated on-site at wood products facilities was co-
generated. The forest products industry represents one third of the
industrial CHP-generated energy in the U.S.
Renewable Biomass Energy
The forest products industry also is the leading producer and user
of renewable biomass energy in the U.S. In fact, the energy we produce
from biomass exceeds the total energy produced from solar, wind, and
geothermal sources combined. Sixty-five percent of the energy used at
AF&PA member paper and wood products facilities is generated from
carbon-neutral renewable biomass.
Fossil Fuel and Purchased Energy
Our increasing efficiency and greater reliance on biomass energy
has enabled AF&PA members to significantly reduce the use of fossil
fuel and purchased energy, much of which also is generated from fossil
fuel. From 1972 to 2006, the fossil fuel component of the AF&PA member
mill energy mix decreased by over 55 percent, and the use of both
fossil fuel and purchased energy has decreased by 56 percent.
Greenhouse Gas (GHG) Reductions
Our commitments to energy efficiency, CHP, renewable biomass
energy, and other actions have enabled AF&PA members to achieve
significant reductions in GHG emissions. Since 2001, working together
AF&PA members voluntarily reduced their carbon dioxide (CO2)
emissions intensity by 13 percent. From 2000 to 2006, our members
collectively reduced their direct greenhouse gas emissions 34 percent.
Approximately half of this reduction can be attributed to improvements
in greenhouse gas emissions, such as efficiency improvements or reduced
fossil fuel use, and half can be attributed to decreases in production
and changes in the baseline from the year 2000.
U.S. Forest Products Industry Competitiveness Pressures
AF&PA applauds the Committee for considering legislation to restore
U.S. manufacturing leadership through energy efficiency. U.S. forest
products manufacturers face significant competition from global
competitors. U.S. imports of forest products have grown for the most
part at a faster rate than American exports. These competitive
pressures make the U.S. forest products industry (especially the pulp
and paper sector) acutely aware of the cost of energy, which, despite
our overall reductions in energy use, remains our third highest
manufacturing cost. Because the U.S. forest products industry operates
in a highly competitive global market, we cannot pass on higher energy
costs to consumers and still remain competitive; we strongly support
policies to enable us to reduce those costs through energy efficiency
improvements.
The recent downturn in the nation's economy, especially the housing
market, has only compounded these challenges:
The declining economy has reduced the demand for consumer
goods and advertising products, and therefore their associated
packaging and paper products. Production of paper and
paperboard packaging plunged 18% percent from January 2008 to
January of this year and preliminary data suggest that the
February decline was equally sharp.
Housing starts slumped to a seasonally-adjusted annual rate
of 540,000 units during the December-February period, their
lowest three-month level since the government began collecting
new starts data back in 1959.
Since early 2006, the industry has lost 190,000 jobs--15
percent of its workforce. Many paper and wood products
facilities are in rural areas where they are the economic hub
of their communities.
policies to improve manufacturing energy efficiency over the short and
long term
U.S. manufacturing competitiveness challenges have both short and
long term components, and we support S. 661 including provisions that
address both time horizons. Many of the provisions of S. 661 are
directed at restoring U.S. manufacturing leadership in the long term,
through a variety of programs, including a joint industry-government
partnership program to conduct research and development of new
industrial technologies that maximize system energy efficiency. The
forest products industry is currently participating in just such a
partnership through the Agenda 2020 Technology Alliance, a Special
Project of AF&PA. We anticipate that Agenda 2020 will submit their own
comments on the bill.
Our comments below suggest ways in which S. 661 could be revised to
more effectively amplify the industry's energy efficiency and improve
its competitiveness in the short term. As the statistics above
demonstrate, the need for short term action to increase efficiency and
competiveness and help retain jobs is particularly urgent. In addition
to the devastating impact on industry employment, the other hallmark of
the current economic downturn is the virtual elimination of available
capital for the kinds of energy efficiency projects contemplated by S.
661.
Congress recognized the need to provide funding on an urgent basis
in the recentlypassed American Recovery and Reinvestment Act, which
provides DOE with $16.8 billion for energy and conservation, including
$3.2 billion for the Conservation Block Grants (EECBG) program and $3.1
billion for State Energy Programs. While some of these funds can and
will be used by DOE and States to finance energy efficiency projects at
industrial facilities, the Stimulus Bill did not include funding
specifically targeted for that purpose. S. 661 can fill that need.
Section 2 would establish a new Industrial Energy Efficient Grant
Program, under which DOE would make grants to eligible lenders to
provide loans for commercial and industrial manufacturers to implement
commercially available technologies or processes to improve energy
efficiency. The emphasis on commercially available technologies and
processes is important, as many AF&PA members have undertaken the
analysis needed to identify energy efficiency projects that could be
implemented rapidly, but for funding barriers. However, the economic
condition of the industry makes loans a less effective vehicle to
finance such products. Instead, grants to industry facilities would
greatly facilitate the ability of AF&PA members to take advantage of
the program and implement energy efficiency projects.
The program also would provide a funding priority to partnerships
that include a power producer or distributor. It has been AF&PA's
experience that these entities are not always the most cooperative
partners in advancing energy efficiency projects, and we believe the
program would be more effective without this requirement. Instead,
priority should be placed on projects that have been identified through
the DOE Save Energy Now Assessment program. That program provides DOE
resources to undertake comprehensive facility energy assessments and
recommend specific measures and projected energy savings for the
facilities assessed. Over 100 forest products industry facilities have
had assessments under this program, including several in 2009\2\.
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\2\ http://apps1.eere.energy.gov/industry/saveenergynow/partners/
by_industry_list.cfm/industry=Forest%20Products
---------------------------------------------------------------------------
We note that Section 7 of S. 661 would create an ``Innovation in
Industry Grants'' program which would provide funding to State-industry
partnerships to develop new technologies or processes for energy
efficiency, pollution reduction and increased competitiveness. Funding
is limited to $500,000 per grant. This program was not designed to
fulfill the need we have identified above to provide grants for energy
efficiency projects in that it is directed at new technologies and each
grant cannot exceed $500,000. Nonetheless, a similar grant program
without these limitations would more effectively allow the industry to
implement energy efficiency projects and improve competitiveness.
We thank the Committee for considering legislation on this critical
need for the forest products industry. We look forward to working with
the Committee as the legislation is developed. Also, we recognize that
the industry may face significant policy approaches in the near future
that may further challenge our competitiveness. Such approaches, such
as cap-and-trade legislation, are not the objective of this
legislation. It should be noted that this legislation should not be
viewed as a way by which to mitigate the negative impact of some
potential legislation on the forest products industry.
______
Capstone Turbine Corporation,
Chatsworth, CA, March 25, 2009.
Hon. Jeff Bingaman,
Chairman, Energy and Natural Resources Committee, U.S. Senate, 304
Dirksen Senate Building, Washington, DC.
Dear Chairman Bingaman: On behalf of Capstone Turbine Corporation,
I would like to thank the Committee for inviting us to submit testimony
in support of the ``Restoring America's Manufacturing Leadership
through Energy Efficiency Act of 2009.'' This is an important bill with
noble and necessary aspirations to support the manufacture of clean and
efficient technologies here in the United States.
Capstone Turbine Corporation is a prime example of the type of
innovative American manufacturer of clean, efficient technology that
this bill seeks to promote. We hold nearly a hundred technology patents
on our microturbines. The Capstone microturbine is an ultra low
emission, energy efficient power generator that can be installed in a
variety of applications. These applications include combined heat and
power systems, commonly known as CHP, where the exhaust heat is
captured and utilized by the customer. Similarly, exhaust heat can be
utilized in an absorption chiller to provide air conditioning or
chilled water to a facility, in what is known as combined cooling heat
and power, or CCHP. Our microturbines can power batteries in a hybrid
electric vehicle, to deliver improved energy efficiency and reduced
emissions for buses. In the oil and gas industry, microturbines use
flare gas to provide electricity to offshore platforms and provide
remote power to pipelines and pumping stations by using associated
gases. Microturbines have the capability to run off of renewable fuels
such as methane gas, biogas, and biodiesel, allowing us to lower
emissions and use waste fuels at landfills, wastewater treatment
facilities, and food and agricultural production facilities.
Founded in 1988, Capstone Turbine Corporation spent a decade
devoted to the development of microturbine technology. We began
commercial production of our first thirty kilowatt microturbine, in
1998. Over the past decade we have worked to gain acceptance for our
products in the marketplace while increasing our production capacity.
In 2000, Capstone went public and was listed on the NASDAQ, ticker
symbol CPST. We are now the world leader in microturbines with over
4,000 units shipped and twenty million operating hours across the
fleet. Seeking to expand our target market, in 2008 Capstone developed
a two-hundred kilowatt microturbine and a one megawatt package, thereby
increasing our addressable market to $4.5 billion annually. The value
we provide to our customers is reliability, low maintenance because of
our patented air bearing design, low emissions, and high efficiency.
Capstone employs approximately two hundred people in its primary
facilities in California and at its sales and service centers
worldwide. The employees at our manufacturing and engineering
facilities in California are the green collar workers that our country
must foster and replicate if the United States is to be competitive in
the new economy. All of our microturbines are manufactured in the
United States by Capstone employees. We are dedicated to growing our
business through the sale of our existing product line and through the
development of new and even more efficient technologies in the future.
The Capstone microturbine is so clean that it is certified by the
California Air Resources Board to meet its strict emission
requirements--the only combustion technology outside of fuel cells to
earn this certification. Despite our accomplishments in producing the
cleanest possible technology, we are not resting on our laurels. Our
research and development efforts are geared towards constant
improvement so that we can provide our customers the cleanest, most
reliable and efficient turbines available.
Capstone is a wholehearted supporter of the Department of Energy
Industrial Technologies Program. Our company has been the beneficiary
of the DOE's efforts to identify technologies that will improve the
energy, environmental, and financial performance of power systems for
manufacturing, processing, and other commercial applications. Our new
two-hundred kilowatt microturbine, ``the C200'', was developed in part
with support from the DOE under the Advanced Microturbine Systems
(AMTS) program. The objectives of that program were to achieve outputs
in the two-hundred kilowatt range with electrical efficiency of forty
percent and nitrogen oxide (NOx) emissions less than seven parts per
million by volume (ppmv). The resulting designs were to be durable and
cost effective. The AMTS program awarded grants to five companies,
including Capstone. At the conclusion of this program, only Capstone
was able to complete a full microturbine design and bring it into
commercial production. Demand for the 0200 has been extremely high both
in the United States and abroad.
Additional DOE support was provided to Capstone to complete a
commercial microturbine design that meets the stringent California Air
Resources Board emissions requirements. Our C65 sixty-five kilowatt
microturbine has been able to achieve NOx levels as low as four ppmv.
The DOE also supported Capstone, and others, to develop packaged
cooling, heating and power systems for buildings. This resulted in
collaboration between Capstone and United Technologies using a
specially designed double-effect absorption chiller from UTC's Carrier
division. These integrated packages have proven to be commercially
successful, and have been installed in many visible projects--including
a 1MW addition to the Ronald Reagan Presidential Library to house its
Air Force One exhibit.
Our company's customer list is varied across industries and the
country. Here are just a few examples that provide an insight into how
Capstone microturbine technology is helping to create a cleaner, more
efficient economy:
In our home state of California, sixteen of our sixty five
kilowatt microturbines provide electricity to the Ronald Reagan
Presidential Library. The waste heat from the turbines runs
through an absorption chiller to provide air conditioning to
the Air Force One Pavilion. Installing this CCHP system
eliminated the need to construct an additional power line to
the site and saves the facility over $300,000 per year in
utility bills.
In Michigan, at the Dulk Dairy in Ravenna, the biogas from
cow manure powers a microtubine that creates clean onsite power
while the heat is used in the farm's processes. This dairy
project and others like it help farmers become cleaner, more
efficient, and more productive.
DesignLine , North Carolina-based company packages our
microturbines into hybrid electric buses. New York City has
just decided to purchase ninety of these hybrid buses after
successful beta testing. The bus's microturbine can run on
diesel, biodiesel, or compressed natural gas, and is much more
energy efficient and produces significantly less emissions than
a traditional bus.
In Oregon, a microturbine CHP plant provides electricity and
hot water to the I,EED Platinum Oregon Health and Science
University building. The CHP system helped OHSU to receive all
ten LEED energy points. The building is a showcase on how our
technology can interact with other clean and efficient
technologies, such as solar energy.
In New Mexico, fifteen of our units provide remote power to
a booster station on an oil pipeline near Ramon, where there is
no grid power. The reliability of our technology was the
motivation for this customer. Microturbines provide primary
power at pumping stations across New Mexico and in other oil
and gas producing states.
In Alaska and the Gulf of Mexico, Capstone has installed
dozens of microturbines on offshore oil and gas platforms,
where they produce clean electricity from gases that are
typically flared and wasted. Producing power from fuel onsite
reduces the need to transport diesel fuel to the platforms,
while providing reliability to their operations in harsh
weather conditions.
In New York City, we have several microturbine CHP plants
located on rooftops and setbacks of skyscraper office
buildings. The electricity produced from these systems
drastically reduces tenants' energy prices while providing
secure power through any sort of blackout. The exhaust heat
captured by the system provides heat and in some cases air
conditioning to the building.
Our continued success is not guaranteed, and it has often been a
bumpy road to get to this point. The growth of companies like Capstone
depends on enlightened policy from government like the legislation
being considered today. We strongly support this bill and urge the
Congress in the months ahead to fight on the side of the emerging
innovative, green economy in America. The approach to climate change
and renewable energy should balance the desire to cut carbon emissions
with the realization that fossil fuels can be used cleanly and
efficiently. Energy efficiency is a key weapon in the double-pronged
fight against climate change and the economic challenges we face today.
In particular, it is critical that increasing our nation's combined
heat and power assets be a priority of forthcoming energy legislation.
Adding CHP will increase energy efficiency, lower emissions, bolster
energy efficiency, create jobs, and increase economic competitiveness.
Again, on behalf of the 200 green employees at Capstone, I thank
you for this opportunity to provide testimony on this important
legislation.
Sincerely,
Darren R. Jamison,
President and CEO.