[House Hearing, 108 Congress]
[From the U.S. Government Publishing Office]



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

=======================================================================

                                HEARING

                               BEFORE THE

                         SUBCOMMITTEE ON ENERGY

                          COMMITTEE ON SCIENCE
                        HOUSE OF REPRESENTATIVES

                      ONE HUNDRED EIGHTH CONGRESS

                             SECOND SESSION

                               __________

                              MAY 19, 2004

                               __________

                           Serial No. 108-59

                               __________

            Printed for the use of the Committee on Science


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


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                                 ______

                          COMMITTEE ON SCIENCE

             HON. SHERWOOD L. BOEHLERT, New York, Chairman
RALPH M. HALL, Texas                 BART GORDON, Tennessee
LAMAR S. SMITH, Texas                JERRY F. COSTELLO, Illinois
CURT WELDON, Pennsylvania            EDDIE BERNICE JOHNSON, Texas
DANA ROHRABACHER, California         LYNN C. WOOLSEY, California
KEN CALVERT, California              NICK LAMPSON, Texas
NICK SMITH, Michigan                 JOHN B. LARSON, Connecticut
ROSCOE G. BARTLETT, Maryland         MARK UDALL, Colorado
VERNON J. EHLERS, Michigan           DAVID WU, Oregon
GIL GUTKNECHT, Minnesota             MICHAEL M. HONDA, California
GEORGE R. NETHERCUTT, JR.,           BRAD MILLER, North Carolina
    Washington                       LINCOLN DAVIS, Tennessee
FRANK D. LUCAS, Oklahoma             SHEILA JACKSON LEE, Texas
JUDY BIGGERT, Illinois               ZOE LOFGREN, California
WAYNE T. GILCHREST, Maryland         BRAD SHERMAN, California
W. TODD AKIN, Missouri               BRIAN BAIRD, Washington
TIMOTHY V. JOHNSON, Illinois         DENNIS MOORE, Kansas
MELISSA A. HART, Pennsylvania        ANTHONY D. WEINER, New York
J. RANDY FORBES, Virginia            JIM MATHESON, Utah
PHIL GINGREY, Georgia                DENNIS A. CARDOZA, California
ROB BISHOP, Utah                     VACANCY
MICHAEL C. BURGESS, Texas            VACANCY
JO BONNER, Alabama                   VACANCY
TOM FEENEY, Florida
RANDY NEUGEBAUER, Texas
VACANCY
                                 ------                                

                         Subcommittee on Energy

                     JUDY BIGGERT, Illinois, Chair
RALPH M. HALL, Texas                 JOHN B. LARSON, Connecticut
CURT WELDON, Pennsylvania            NICK LAMPSON, Texas
ROSCOE G. BARTLETT, Maryland         JERRY F. COSTELLO, Illinois
VERNON J. EHLERS, Michigan           LYNN C. WOOLSEY, California
GEORGE R. NETHERCUTT, JR.,           DAVID WU, Oregon
    Washington                       MICHAEL M. HONDA, California
W. TODD AKIN, Missouri               BRAD MILLER, North Carolina
MELISSA A. HART, Pennsylvania        LINCOLN DAVIS, Tennessee
PHIL GINGREY, Georgia                BART GORDON, Tennessee
JO BONNER, Alabama
SHERWOOD L. BOEHLERT, New York
               KEVIN CARROLL Subcommittee Staff Director
         TINA M. KAARSBERG Republican Professional Staff Member
           CHARLES COOKE Democratic Professional Staff Member
                    JENNIFER BARKER Staff Assistant
                   KATHRYN CLAY Chairwoman's Designee


                            C O N T E N T S

                              May 19, 2004

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

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

                           Opening Statements

Statement by Representative Judy Biggert, Chairman, Subcommittee 
  on Energy, Committee on Science, U.S. House of Representatives.    11
    Written Statement............................................    12

Statement by Representative John B. Larson, Ranking Minority 
  Member, Subcommittee on Energy, Committee on Science, U.S. 
  House of Representatives.......................................    13
    Written Statement............................................    14

Statement by Representative Sherwood L. Boehlert, Chairman, 
  Committee on Science, U.S. House of Representatives............    16

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

Statement by Representative Brad Miller, Member, Subcommittee on 
  Energy, Committee on Science, U.S. House of Representatives....    15

                               Witnesses:

Mr. Steven M. Nadel, Executive Director, American Council for an 
  Energy-Efficient Economy
    Oral Statement...............................................    17
    Written Statement............................................    19
    Biography....................................................    27
    Financial Disclosure.........................................    30

Mr. Paul Konove, President, Carolina County Builders of Chatham 
  County, Inc.
    Oral Statement...............................................    32
    Written Statement............................................    33
    Biography....................................................    41

Ms. Vivian E. Loftness, Head, School of Architecture, Carnegie-
  Mellon University
    Oral Statement...............................................    41
    Written Statement............................................    44
    Biography....................................................    56
    Financial Disclosure.........................................    57

Mr. John B. Carberry, Director, Environmental Technologies, 
  DuPont Central Research & Development
    Oral Statement...............................................    58
    Written Statement............................................    59
    Biography....................................................    61

Mr. Peter R. Smith, President, New York State Energy Research and 
  Development Authority, New York State
    Oral Statement...............................................    62
    Written Statement............................................    64
    Biography....................................................    66

Mr. Daniel L. Sosland, Executive Director, Environment Northeast
    Oral Statement...............................................    67
    Written Statement............................................    69

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

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

                              ----------                              


                        WEDNESDAY, MAY 19, 2004

                  House of Representatives,
                            Subcommittee on Energy,
                                      Committee on Science,
                                                    Washington, DC.

    The Subcommittee met, pursuant to call, at 10:06 a.m., in 
Room 2318 of the Rayburn House Office Building, Hon. Judy 
Biggert [Chairman of the Subcommittee] presiding.


                            hearing charter

                         SUBCOMMITTEE ON ENERGY

                          COMMITTEE ON SCIENCE

                     U.S. HOUSE OF REPRESENTATIVES

                      The Impact of Federal Energy

                        Efficiency and Renewable

                          Energy R&D Programs

                        wednesday, may 19, 2004
                         10:00 a.m.-12:00 p.m.
                   2318 rayburn house office building

1. Purpose

    On Wednesday, May 19, 2004, the Subcommittee on Energy of the U.S. 
House of Representatives' Committee on Science will hold a hearing to 
examine the potential contribution of energy efficiency and renewable 
energy to the Nation's energy needs. The hearing will focus on the 
contributions of the renewable energy and efficiency R&D programs at 
the Department of Energy.

2. Witnesses

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

Mr. Paul Konove is President of Carolina Country Builders of Chatham 
County Inc., a company that specializes in custom solar home design and 
construction.

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

Mr. John B. Carberry is Director of Environmental Technology for the 
DuPont Company in Wilmington, Delaware. His responsibilities include 
leading DuPont's efforts to find and use affordable renewable energy 
and energy efficiency technologies.

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

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

3. Overarching Questions

    The hearing will address the following overarching questions:

          What are the likely U.S. energy needs for the coming 
        decades? What is the potential for energy efficiency and 
        renewable energy to help meet those needs?

          What are the public benefits of energy efficiency and 
        renewable energy, and what is the proper role for the Federal 
        Government in helping to reap those benefits?

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

4. Overview

    Over the past two decades, the U.S. has become increasingly 
dependent on foreign sources of energy, particularly oil and natural 
gas. The U.S. imported 27 percent of its energy (61 percent of its 
petroleum, of which 70 percent is used for transportation) in 2001. 
Assuming that current conditions continue into the future, often 
referred to as a ``business-as-usual'' scenario, imports are projected 
to grow to 39 percent of total energy use, and 76 percent of petroleum 
use by 2025.\1\ As the country looks to reduce its dependence on 
imported energy, there are four potential options: increase the 
Nation's energy efficiency, increase the domestic production of fossil 
fuels, increase the use of nuclear power, and increase the use of 
renewable energy. All of these options face unique challenges to 
provide the 136 quadrillion BTUs the United States is projected to use 
in 2025. In fact, it is likely that only a combination of approaches 
will yield enough energy to sustain economic growth.
---------------------------------------------------------------------------
    \1\ Annual Energy Outlook 2004, p. 133. Energy Information 
Administration.
---------------------------------------------------------------------------
    Most experts agree that if the United States is going to reduce its 
dependence on imported energy, renewable energy and energy efficiency 
will need to meet an increasing percentage of energy demand in the 
United States over the next 20 years. This is particularly true in the 
near-term since energy efficiency improvements can reduce demand more 
quickly than longer-term development of new sources of nuclear or 
fossil-based energy can expand supply. Many of the additional public 
benefits attributable to energy efficiency and renewable energy, such 
as reduced emissions and better peak-load management, are not reflected 
in their price to consumers.
    Energy efficiency is better management of processes, equipment, 
personnel, and other resources to reduce energy use. For example, by 
actively managing their energy-intensive industrial processes, the 
DuPont Company has kept energy use constant since 1990, while 
production has increased by 40 percent over the same period. Although 
accelerated efficiency improvements could make a significant impact on 
demand, there will still be a need for new sources of energy. To meet 
the growth in demand, the U.S. will require a mix of energy sources, 
including renewable energy resources. Renewable energy sources such as 
wind and solar power are competitive in some markets--particularly 
sunny or windy areas, regions with high energy costs, or specific niche 
applications--but some expert suggest, that with additional technology 
improvements, wind and solar power could be cost-competitive in nearly 
all regions of the country.

Market Barriers
    There are significant market barriers to the wider use of energy 
efficiency and renewable energy to reduce overall demand and substitute 
for imported energy. Conventional energy technologies have a head start 
in terms of experience and existing infrastructure, and end-users who 
might invest in renewable energy and energy efficiency technology do 
not always realize the full benefits of their investments under current 
market structures. A familiar example is the landlord-tenant problem, 
where the landlord who pays for efficiency upgrades does not receive 
the benefits of the investment; savings go to the occupants of a 
building who pay the energy bills.
    When electricity consumers do improve their end-use efficiency, 
results can be dramatic. In fact, upgrading the energy efficiency of 
existing facilities is often less expensive than installing new 
generating and transmission capacity. According to experts, efficiency 
improvements often produce co-benefits. More efficient lighting, for 
example, can reduce cooling costs and improve productivity. Including 
the savings from reduced energy costs and co-benefits, efficiency 
improvements can actually provide a return of up to four cents per 
kilowatt-hour ( cents/kWh). Even without co-benefits, lighting, 
refrigeration, and space heating improvements typically cost between 0-
3  cents/kWh, well below the average cost of electric power. 
Additionally, there are numerous public benefits from these kinds of 
improvements. Avoided emissions, reduced infrastructure requirements, 
reduced sensitivity to fuel-price volatility, and reduced physical 
disturbances to the energy system, are benefits to the public that are 
generally not included in the costs borne by consumers.
    For renewable energy, the primary barrier is cost. Renewable energy 
is also relatively immature compared to other energy technologies. 
Immature technologies tend to fall in cost faster than conventional 
technology because manufacturers have less knowledge and experience 
working with them. Therefore federal R&D investments and production 
incentives can have a large impact on immature technologies, by helping 
manufacturers reduce costs. For example, Figure 1 shows federal support 
for photovoltaics R&D and the cost reductions in photovoltaic solar 
modules that occurred over the same period of time, although it is 
difficult to isolate the impacts of federal spending from other 
factors. Similar cost reductions over time are seen for other renewable 
energy technologies.




    Another barrier to accelerated market penetration of renewable 
energy resources is the fact that their lower environmental impact is 
not reflected in the price of energy. Although the economic value of 
the environmental impacts of energy use is difficult to quantify, some 
estimates of the full cost of energy technologies calculate the total 
costs of renewable energy as lower than the total current cost of 
conventional technologies.\2\
---------------------------------------------------------------------------
    \2\ ``Electricity Generation and Environmental Externalities: Case 
Studies September 1995,'' p. 44, Energy Information Administration.
---------------------------------------------------------------------------
    Another benefit of energy efficiency and renewable energy is their 
capacity to reduce the peak demand for electricity and natural gas. By 
displacing the usage of peak generation plants (which are typically the 
most expensive to operate, the least efficient, and have higher 
emissions) the use of energy efficiency and renewable energy 
technologies can lower the price of electricity and natural gas for all 
consumers, whether or not they directly purchase renewable power or an 
energy efficient appliance. Both the National Petroleum Council and the 
American Council for an Energy Efficient Economy have cited energy 
efficiency as a key step in reducing natural gas prices in the short-
term, and reducing price volatility in the longer-term.

R&D Funding
    Energy efficiency program funding has varied over the years, 
peaking, along with energy prices, in the early 1980s. Recently, 
efficiency R&D programs have been flat-funded at best, with efficiency 
R&D programs cut by 10 percent ($63 million) in the President's Fiscal 
Year 2005 (FY05) budget request. These funding cuts are proposed even 
though energy efficiency R&D funding has been shown to be highly cost-
effective. In response to a Congressional request to examine the 
effectiveness of DOE's energy efficiency programs, a National Academy 
of Sciences study estimated that for every dollar spent on all 
efficiency programs between 1978 and 2000 more than four dollars of 
economic benefits were realized. For example, the Academy estimated 
that the benefits from efficient lighting research returned $5.3 
billion to the public in the form of lower energy bills, while the cost 
of this research was only $2.5 million, including $755,000 paid by 
industry. Renewable energy has fared better, increasing by five percent 
in the FY05 request, although the largest increase is requested for the 
hydrogen and fuel cell programs.




5. Background

Energy Efficiency
    Historically, energy efficiency improvements have reduced the need 
for more energy production. Energy intensity (energy consumed per unit 
of output) has improved by an average of one to two percent per year in 
the U.S. The International Energy Association (IEA) estimates that 
without the improvements made since 1973 in processing and using 
energy, world energy use in the year 2000 would have been 50 percent 
higher--in the U.S. this would be approximately 50 quadrillion BTUs 
(quads). When a concerted effort is made to improve energy efficiency, 
reductions in demand can be even larger. Several states have 
implemented their own programs, with excellent results. New York State 
reduced energy intensity by average 2.7 percent per year from 1977-
1999, and some states have realized annual efficiency improvements 
greater than three percent. Federal facilities spent $6 billion less in 
2001 than they did in 1985 (in constant 2001 dollars), and used 31 
percent less energy, in part due to improved energy efficiency.
    Energy efficiency improvements can be realized relatively quickly, 
since there are no delays for siting and construction. In several state 
programs, utilities have discovered that paying customers to reduce 
demand is less expensive than building new generation equipment. On a 
cost per kilowatt-hour basis, efficiency improvements are often the 
least expensive form of ``new generation.''

Renewable Energy
    Renewable energy generation currently represents a small fraction 
of the energy portfolio in the U.S., but it is growing rapidly. As 
Figure 2 shows, at the turn of the last century, oil and gas had 
limited market shares, but were able to dominate the market within 
fifty years. Wind and solar photovoltaics have the fastest growth rates 
in the electricity industry worldwide, with wind generation rates 
growing at roughly 35 percent per year, and photovoltaics growing at 25 
percent per year. Japan is leading the pack by installing 219 Mega-
Watts (MW) of solar photovoltaic generating capacity in 2003 alone.




    There are also signs in Europe that renewables can supply a large 
fraction of electrical power. In some regions of Spain and Germany, and 
all of Denmark, wind supplies more than 10 percent of the electricity 
demand throughout the year, and in some states in Germany wind provides 
over 50 percent of local electricity needs for certain months.
    As a consequence of aggressive government programs to support wind 
and solar power technology development and deployment, the Japanese and 
European manufacturers' market shares of wind and solar power 
generation equipment have increased dramatically, while the U.S. 
manufacturers' market share has declined. Japan's share of the world 
solar photovoltaics market went from 26 percent to 49 over eight years 
from 1995 to 2003, while U.S. share of the world market went from 45 
percent in 1996 to 12 percent in 2003. Similar declines in the U.S. 
share of the world market for wind equipment can be seen, with the 
majority of the increases captured by European manufacturers.

Current Activities
    Despite the barriers, numerous companies, individuals and 
government entities have invested in efficiency improvements and 
renewable energy and have seen large returns. Dupont has kept energy 
use constant since 1990, while production has grown 40 percent, for a 
savings of $1.5 billion. This type of success has been replicated in 
other companies and industrial sectors, with large corporations such as 
BP (the international energy firm), IBM, Kimberly-Clark and others 
setting efficiency as a high-priority goal for improving profitability. 
In the buildings sector, efforts by the joint Environmental Protection 
Agency (EPA)-Department of Energy (DOE) EnergyStar program and 
voluntary standards released by the Green Building Council, an 
independent non-governmental organization, have contributed to growth 
in the high-efficiency buildings market. These efforts have also 
expanded the market for on-site renewable generation.
    State governments have also taken an active role in promoting 
efficiency and renewables. In response to calls for conservation during 
the electricity crisis of 2000 and 2001, consumers' efficiency efforts 
produced a 10 percent reduction in demand in less than a year. 
California is currently promoting demand response and energy efficiency 
technologies to meet demand before considering new fossil generation. 
More generally, several states with strong efficiency programs were 
able to reduce energy intensity by more than three percent per year 
from 1977-1999.
    The Federal Government has several current activities aimed at 
increasing the use of highly efficient and renewable technologies. 
These include the R&D in the Office of Energy Efficiency and Renewable 
Energy (EERE) at DOE, with a funding request of $919 million in 2005. 
This amount represents a proposed decrease in the FY 2005 budget 
request, by 10 percent ($63 million) versus current spending. Renewable 
energy has fared better, increasing by five percent in the 2005 budget 
request, although the largest increase was for the hydrogen and fuel 
cell programs. As Table 1 shows, non-hydrogen research in EERE would 
decline by 10 percent under the Administration's request.
    The Federal Government has also set efficiency standards for 
several appliances in recent years, which have resulted in large 
reductions in demand. The benefits have been significant, reducing 
residential heating, cooling and refrigeration energy use by 25 
percent, 60 percent, and 75 percent respectively.\3\ Four pending 
standards are expected to save consumers $10 billion in energy costs by 
2010.\4\ Federal tax incentives for electricity produced from wind are 
credited by experts with boosting the market share of wind generation, 
although the wind production tax credit expired on December 31, 2003. 
Incentives for wind and other renewable generation, as well as credits 
for highly efficient technologies, are included in several legislative 
proposals, including H.R. 6, the Energy Policy Act of 2003.
---------------------------------------------------------------------------
    \3\ Rosenfeld, Arthur H., Pat McAuliffe, and John Wilson. ``Energy 
Efficiency and Climate Change.'' Encyclopedia on Energy, edit. Cutler 
Cleveland, Academic Press, Esevier Science, 2004.
    \4\ Loftness, V. ``Improving Building Energy Efficiency in the 
U.S.: Technologies and Policies for 2010 to 2050,'' proceedings of The 
10-50 Solution: Technologies and Policies for a Low-Carbon Future. Pew 
Center on Global Climate Change and the National Commission on Energy 
Policy.
---------------------------------------------------------------------------
    The Federal Government has also attempted to lead by example in the 
marketplace. Federal purchases of renewable energy totaled 362 gigawatt 
hours (GWh) in 2001, with a goal of 2.5 percent of electricity use by 
2005, or 1,384 GWh. By an Executive Order issued in 1999, which the 
Bush Administration has continued to implement, federal buildings are 
required to improve their energy efficiency by 30 percent by 2005, and 
35 percent by 2010 compared with baseline energy use in 1985. By 
creating a market for energy efficient and renewable technologies, the 
government can use its purchasing power to lower the technology 
adoption costs for other consumers.

Potential
    If all states promoted energy efficiency as successfully as the 
five best states, the reduction in energy intensity (defined as unit of 
production per unit of energy consumed) would be 2.4 percent per year, 
a 50 percent improvement over current annual projections.\5\ If this 
level could be sustained, the savings in 2020 would be the equivalent 
of 3.4 billion barrels of oil.
---------------------------------------------------------------------------
    \5\ The Energy Information Administration is the most commonly 
cited source for domestic energy demand projections. All of its base 
projections, to ensure consistency, assume no changes in policy. The 
projections also do not account for variations in R&D spending.




    Some of the most impressive benefits come from the combination of 
renewables and efficiency. High efficiency homes with solar power 
systems on the roof are allowing the creation of homes with near zero 
energy bills. Some of the larger home-building firms are offering high 
efficiency and ``zero-energy'' homes, even creating planned communities 
of entirely Energy-Star homes, which are high-efficiency homes 
certified by the EPA.
    The primary goal of the renewables programs at DOE is to reduce 
costs so that renewable technologies can be competitive in the market 
without further government subsidies. Wind technology is already 
competitive in areas with the highest wind speed, but further 
reductions are needed to make wind a viable power source in lower wind 
speed regions.

6. Questions for the Witnesses

Questions for Mr. Steve Nadel:

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

        2.  What are the impacts of increased energy efficiency and 
        renewable energy on the natural gas market?

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

        4.  What would be the most cost-effective way for the Federal 
        Government to encourage the use of energy efficiency and 
        renewable energy technologies?

Questions for Mr. Paul Konove:

        1.  What are the key technology improvements that can result in 
        cost-effective energy savings in today's homes and buildings? 
        Are there renewable energy technologies that can be utilized in 
        new construction in cost-effective manner?

        2.  What has your experience been with constructing high 
        efficiency buildings? What have been the successes, and the 
        challenges?

        3.  What areas of energy efficiency and renewable energy 
        technologies need research to improve their operation or cost-
        effectiveness? What technologies are ready for the marketplace 
        but need improved technology transfer to be widely adopted?

        4.  How do energy efficiency improvements in new construction 
        differ from retrofitting older buildings? Given that about half 
        the housing we expect to have in the year 2025 has not yet been 
        built, what contribution can improved technologies make toward 
        reducing the energy demands of the future housing stock?

Questions for Ms. Vivian Loftness:

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

        2.  The Energy Information Administration predicts that energy 
        demand will grow from about 100 quadrillion BTUs (quads) in 
        2000 to 136 quads in 2025. Taken together, what portion of the 
        36 percent projected growth in energy demand to 2025 would be 
        attributed to buildings? What proportion of that demand could 
        be met by efficiency investments?

        3.  What are the greatest opportunities that have not yet been 
        fully explored in federally-sponsored energy efficiency 
        research? Given historical results, what would you estimate the 
        economic rate of return to R&D funding to be?

Questions for Mr. John B. Carberry:

        1.  Which federal energy efficiency and renewable energy 
        programs has DuPont found to be successful? What benefits has 
        DuPont seen from these efforts?

        2.  What motivated DuPont to invest in energy efficiency and 
        renewable technology? What federal programs and regulations 
        encouraged or hampered that investment? How should the Federal 
        Government improve its efforts?

        3.  What is the potential for further efficiency improvements 
        at DuPont? In your opinion, what are the potential impacts of 
        efficiency improvements and the use of renewable resources in 
        the industrial sector on national energy demand? How replicable 
        are the gains made at DuPont? Are any of the improvements 
        considered proprietary? If so, do you license them?

        4.  How can efficiency improvements and the use of renewable 
        energy throughout the economy affect natural gas prices in the 
        U.S.? How have increased natural gas prices affected DuPont's 
        decisions about plant location?

Questions for Mr. Peter Smith:

        1.  Why did Governor Pataki feel that it was important to make 
        a commitment to improving New York's energy efficiency, and to 
        increasing the use of renewable energy? What benefits has New 
        York State seen from these efforts? How much did the programs 
        cost?

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

        3.  What are the potential synergies between State and federal 
        efforts? Are these areas being fully exploited? How can federal 
        efforts be improved? Are there any state policies that should 
        be adopted at the federal level?

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

Questions for Mr. Daniel L. Sosland:

        1.  Why did the Connecticut Legislature feel that it was 
        important to make such a strong commitment to energy efficiency 
        standards, and to increasing the use of renewable energy? What 
        benefits do you expect to see from these efforts? How much are 
        the programs projected to cost?

        2.  How does the State of Connecticut measure the effectiveness 
        of its investments in energy efficiency and renewable energy 
        technologies? Does the State of Connecticut involve industry 
        research in its efforts, and if so how is industry involved? Is 
        industry required to share research costs?

        3.  What are the potential synergies between State and federal 
        efforts? Are these areas being fully exploited? How can federal 
        efforts be improved? Are there any State policies that should 
        be adopted at the federal level? What are other states doing to 
        promote energy efficiency and renewable energy?

        4.  What are technology opportunities that have not yet been 
        fully explored in federally-sponsored energy efficiency 
        research?
    Chairman Biggert. This is a meeting of the Science 
Subcommittee on Energy. I want to welcome everyone here to 
today's hearing to assess the impact and direction of federal 
energy efficiency and renewable energy research and 
development.
    This hearing couldn't be more timely. Just this week, the 
average nationwide price of a gallon of gasoline rose above $2 
for the first time ever.
    This really should come as no surprise. It was three years 
ago this month that President Bush released his National Energy 
Policy in response to volatile and rising energy prices: three 
years ago. Two of the eight chapters of that policy document 
were dedicated to energy efficiency and renewable energy.
    And three times in the last three years the House passed 
comprehensive energy legislation that greatly expands our use 
of energy efficiency and renewable energy to meet our growing 
energy challenges. The same, however, can not be said of the 
Senate, which hasn't even been able to take an up-or-down vote 
on the energy bill conference report, because of procedural 
obstacles.
    As a result, we have yet to benefit from a comprehensive 
energy policy. The United States still imports from foreign 
sources almost 60 percent of the oil we consume. Even if we 
increase foreign imports of oil or dip into the Strategic 
Petroleum Reserve, as some have suggested, we have no way to 
turn that oil into gasoline or diesel fuel or to get it where 
it is needed most. We still have static pipeline capacity. We 
haven't built a large refinery in about 20 years, and we have 
half as many refineries as we did 30 years ago. Those 
refineries are operating at almost 100 percent capacity.
    And that is just gasoline. I haven't even mentioned 
electricity or natural gas. In every case, the bottom line is 
this: we simply can not meet today's energy needs with 
yesterday's energy infrastructure. No pun intended, but we are 
virtually in the dark ages when it comes to energy 
infrastructure. Unless we begin to address some of these 
fundamental problems, we are going to experience high and 
volatile energy prices every year, well into perpetuity.
    One of the best, most effective ways to address such 
seemingly insurmountable challenges is through the use of 
technology: energy efficiency and renewable energy 
technologies.
    In terms of energy efficiency, we are talking about 
technologies that deliver more goods and services for the same 
amount of energy. In our homes, that means loads of clean 
laundry or more bags of chilled groceries without increasing 
the amount of energy that we use. For our industry, that means 
increased production without increased energy consumption. For 
all of us, reducing energy use means lowering our energy costs, 
reducing our emissions of pollutants and greenhouse gases, and 
increasing our energy security. In this way, energy efficiency 
is a very powerful idea.
    In terms of renewable energy, we are talking about 
technologies that allow us to derive energy from sources that 
can be replenished. During the last decade, renewable energy 
contributed substantially to the growth in U.S. energy 
production, outpacing all fuel sources, except for nuclear 
energy. Despite this progress, renewable energy still only 
accounts for two percent of our electric generating capacity 
today. In other words, we still have a long way to go.
    Renewable energy is a growing, global industry, and our 
international competitors are taking renewable energy R&D very 
seriously. Government investments in renewable energy 
technologies in Europe and Japan have meant growing market 
shares for wind and solar power generation equipment for those 
countries while the U.S. market share is declining. As a 
nation, we can't afford to sit on the sidelines.
    Americans want affordable energy and a clean and safe 
environment, and yet, because we have ignored technology, we 
act as though those two are mutually exclusive. That is not 
true of some of the witnesses we will hear from today. They 
recognize the multiple benefits of energy efficiency and 
renewable energy technologies. They invested in the necessary 
R&D, some independently, some in partnership with the Federal 
Government, but in all cases, they have success stories to tell 
and insights to share as we assess the impact of federal energy 
efficiency and renewable energy R&D programs.
    We must continue to invest in these R&D programs if we are 
to encourage the development and rapid deployment of energy 
efficiency and renewable energy technologies, but we must do 
more than that. We must take stock of where we have been and 
where we are. More importantly, we must figure out where we 
want to go and determine if existing federal R&D programs can 
get us there. I know this distinguished panel assembled here 
will help us to accomplish this today.
    [The prepared statement of Chairman Biggert follows:]

              Prepared Statement of Chairman Judy Biggert

    I want to welcome everyone to today's hearing to assess the impact 
and direction of federal energy efficiency and renewable energy 
research and development (R&D).
    This hearing couldn't be more timely. Just this week, the average 
nationwide price of a gallon of gasoline rose above $2 for the first 
time ever.
    This really should come as no surprise. It was three years ago this 
month that President Bush released his national energy policy in 
response to volatile and rising energy prices--three years ago. Two of 
the eight chapters of that policy document were dedicated to energy 
efficiency and renewable energy.
    And three times in the last three years the House passed 
comprehensive energy legislation that greatly expands our use of energy 
efficiency and renewable energy to meet our growing energy challenges. 
The same, however, can not be said of the Senate, which hasn't even 
been able to take an up-or-down vote on the energy bill conference 
report because of procedural obstacles.
    As a result, we have yet to benefit from a comprehensive energy 
policy. The United States still imports from foreign sources almost 60 
percent of the oil we consume. Even if we increase foreign imports of 
oil or dip into the Strategic Petroleum Reserve, as some have 
suggested, we have no way to turn that oil into gasoline or diesel 
fuel, or get it to where it is needed most. We still have static 
pipeline capacity. We haven't built a large refinery in about 20 years, 
and we have half as many refineries as we did 30 years ago. Those 
refineries are operating at almost 100 percent capacity.
    And that's just gasoline. I haven't even mentioned electricity or 
natural gas. In every case, the bottom line is this: we simply cannot 
meet today's energy needs with yesterday's energy infrastructure. No 
pun intended, but we're virtually in the dark ages when it comes to 
energy infrastructure. Unless we begin to address some of these 
fundamental problems, we're going to experience high and volatile 
energy prices every year--well into perpetuity.
    One of the best, most effective ways to address such seemingly 
insurmountable challenges is through the use of technology--energy 
efficiency and renewable energy technologies.
    In terms of energy efficiency, we are talking about technologies 
that deliver more goods and services for the same amount of energy. In 
our homes, that means more loads of clean laundry, or more bags of 
chilled groceries, without increasing the amount of energy we use. For 
our industry, that means increased production without increased energy 
consumption. For all of us, reducing energy use means lowering our 
energy costs, reducing our emissions of pollutants and greenhouse 
gases, and increasing our energy security. In this way, energy 
efficiency is a very powerful idea.
    In terms of renewable energy, we are talking about technologies 
that allow us to derive energy from sources that can be replenished. 
During the last decade, renewable energy contributed substantially to 
the growth in U.S. energy production, out-pacing all fuel sources 
except for nuclear energy. Despite this progress, renewable energy 
still only accounts for two percent of our electric generating capacity 
today. In other words, we still have a long way to go.
    Renewable energy is a growing, global industry, and our 
international competitors are taking renewable energy R&D very 
seriously. Government investments in renewable energy technologies in 
Europe and Japan have meant growing market shares for wind and solar 
power generation equipment for those countries, while the U.S. market 
share is declining. As a nation, we can't afford to sit on the 
sidelines.
    Americans want affordable energy and a clean and safe environment, 
and yet, because we've ignored technology, we act as though the two are 
mutually exclusive. That's not true of some of the witnesses we will 
hear from today. They recognized the multiple benefits of energy 
efficiency and renewable energy technologies. They invested in the 
necessary R&D, some independently, some in partnership with the Federal 
Government. But in all cases, they have success stories to tell, and 
insights to share as we assess the impact of federal energy efficiency 
and renewable energy R&D programs.
    We must continue to invest in these R&D programs if we are to 
encourage the development and rapid deployment of energy efficiency and 
renewable energy technologies. But we must do more than that. We must 
take stock of where we've been and where we are. More importantly, we 
must figure out where we want to go, and determine if existing federal 
R&D programs can get us there. I know the distinguished panel assembled 
here will help us accomplish this today.

    Chairman Biggert. Before we start with the witnesses, I 
would like first to turn to the Subcommittee's distinguished 
Ranking Member, Mr. Larson, for his opening statement.
    Mr. Larson. Thank you, Madame Chair. I would also like to 
thank our distinguished panelists for taking time out from 
their busy schedules to join with us today. I know many of you 
have traveled a long way to be with us, and we want you to know 
how much we appreciate that.
    I would also like to associate myself with the remarks of 
our distinguished Chair, but especially when it comes to 
addressing federal R&D policy and energy efficiency and 
renewable energy. I believe we often fail to look for insight 
and information from outside the beltway. From officials in the 
Administration, from economists and advocacy groups, there is 
never a shortage of people here willing to help Congress 
understand this issue, and most often on a national, if not a 
global scale.
    When it comes to putting these policies and technologies 
into action, it helps to look at those doing this work at the 
state level. This is not only where we see the results and 
benefits of innovation and clean energy, this is where we 
should look for new directions in federal research, 
development, and demonstration.
    Many of us in Congress today come from state legislative 
backgrounds, and I believe it was Judge Brandise who said that 
states are the laboratories for democracy. I also believe that 
they are great laboratories where scientific thought and 
experiment and pilots take place. And I commend the Chairman 
again because of our need to continually look at this. We are 
fortunate today to have assembled the diverse group on this 
panel of experts who have come to us with genuine hands-on 
expertise in the field of energy efficiency and renewable 
energy. Though we may ask them to speculate on America's future 
energy needs, our panelists are not theorists. In their own 
way, each works firsthand at implementing clean energy policies 
and technological innovation.
    I would specifically like to take this opportunity to 
introduce one of the witnesses in particular, Mr. Dan Sosland 
who is the Executive Director of Environmental Northeast, a 
non-profit environmental research and advocacy organization 
located in my District. While his efforts have had profound 
effects on energy efficiency and renewable energy policy in 
Connecticut, results from Mr. Sosland's work through 
Environment Northeast can be seen throughout the region. Dan, 
thank you so much for joining us today.
    Now my State of Connecticut is severely capacity 
constrained in terms of electricity production. Mr. Sosland 
will testify, Southwest Connecticut is on the Federal Energy 
Regulatory Commission's top ten list of congested areas in the 
country. And we know that construction of new fossil fuel or 
nuclear power plants is not the only answer to our problems. It 
is crucial that areas like ours around the country discover new 
ways to produce power while conserving energy and reducing 
emissions.
    The United States Department of Energy has invested 
billions in the last 25 years on energy efficiency and 
renewable energy research and development. And in many ways, 
their efforts have paid off. The technologies developed at the 
national labs and through partnerships with industry have had 
untold benefits in the last two decades. However, I believe the 
question we are trying to get at today is how do the people 
making energy policy and technical decisions utilize what has 
been learned in these two decades of federal energy efficiency 
and renewable energy research.
    And that is why you are here. And again, we would like to 
thank you so much for taking time from your busy schedules to 
join us and share your expertise.
    [The prepared statement of Mr. Larson follows:]

          Prepared Statement of Representative John B. Larson

    Thank you Madame Chairman. I would also thank our distinguished 
panelists for taking time out of their schedules to join us today. Many 
of you have traveled a long way to be with us and we appreciate that.
    When it comes to addressing federal R&D policy in energy efficiency 
and renewable energy, we often fail to look for insight and information 
from outside the traditional Washington, D.C. sources. From officials 
in the Administration, economists, and advocacy groups there is never a 
shortage of people here willing to help Congress understand this issue, 
and most often on a national, if not global, scale.
    But when it comes to putting these policies and technologies into 
action, it helps to look at those doing this work at the State, local 
and industry level. This is not only where we see the results and 
benefits of innovation in clean energy; this is where we should look 
for new directions in federal research, development and demonstration.
    We are fortunate today to have assembled a diverse panel of experts 
who come to us with genuine hands-on experience in the field of energy 
efficiency and renewable energy. Though we may ask them to speculate on 
America's future energy needs, our panelists are not theorists. In 
their own way, each one works firsthand at implementing clean energy 
policies and technological innovation.
    I would like to take this opportunity to introduce one of the 
witnesses, in particular. Mr. Dan Sosland is the Executive Director of 
Environment Northeast, a non-profit environmental research and advocacy 
organization located in my district of Hartford, Connecticut. While his 
efforts have had profound effects on energy efficiency and renewable 
energy policy in Connecticut, results from Mr. Sosland's work through 
Environment Northeast can be seen throughout the region. Thank you for 
joining us today.
    My State of Connecticut is severely capacity-constrained in terms 
of electricity production. As Mr. Sosland will testify, Southwest 
Connecticut is on the Federal Energy Regulatory Commission's top ten 
list of congested areas in the country. We know the construction of new 
fossil fuel or nuclear power plants is not the only answer to our 
problems. It's crucial that areas like ours around the country discover 
new ways to produce power while conserving energy and reducing 
emissions.
    The U.S. Department of Energy has invested billions in the last 
twenty-five years on energy efficiency and renewable energy research 
and development, and in many ways their efforts have paid off. The 
technologies developed at the National Labs and through partnerships 
with industry have had untold benefits in the last two decades. 
However, I believe the question we are trying to get at today is, ``How 
do the people making energy policy and technical decisions utilize what 
has been learned in these two decades of federal energy efficiency and 
renewable energy research?''
    I look forward to the testimony of our panel. Thank you Madame 
Chairman and I yield back the balance of my time.

    Chairman Biggert. Thank you, Mr. Larson.
    [The prepared statement of Mr. Costello follows:]

         Prepared Statement of Representative Jerry F. Costello

    Good morning. I want to thank the witnesses for appearing before 
our committee to discuss the potential contributions of energy 
efficiency and renewable energy to the Nation's energy needs.
    Our nation needs a modern, sound energy system so that Americans 
will continue to enjoy the benefits of more efficient, available, and 
affordable energy. Constituents have told me that they are frustrated 
with rising gas prices and electricity rates. Families have felt 
pinched at the pump at a time when the state economy is depressed. One 
thing we know is that it is time to decrease our dependence on foreign 
sources of oil, especially sources in the Middle East. We must find new 
ways to produce cheaper and cleaner energy.
    In addition to further developing the technology to burn coal as 
cleanly as possible which directly affects and benefit the economy of 
Southern Illinois in my district, I believe non-fossil energy sources 
including ethanol, solar power, and wind energy are extremely important 
initiatives. As such, I am displeased renewable energy resources remain 
flat, decreased, or were eliminated and believe we should dedicate more 
resources toward these programs.
    Finally, I am interested in federal energy programs in federal 
buildings and what actions the Federal Government is taking to be a 
leader in energy conservation and innovation.
    I welcome our witnesses and look forward to their testimony.

    Chairman Biggert. I would now like to welcome the 
witnesses. And starting from my left, Mr. Steven Nadel is the 
Executive Director of the American Council for an Energy 
Efficient Economy, a non-profit research organization that 
works on programs and policies to advance energy efficient 
technologies and services. Welcome. And I would now yield to 
the distinguished Member from North Carolina, Mr. Miller, to 
introduce Mr. Konove.
    Mr. Miller. Thank you, Madame Chair.
    I am very pleased to introduce Paul Konove, the President 
of Carolina Country Builders based in Pittsboro, North 
Carolina, which is in Chatham County, which is not in my 
District, but is certainly near my District. It is split 
between David Price's District and Bob Etheridge's District.
    Carolina Country Builders Mr. Konove founded in 1985. The 
focus is on custom solar home design and construction. Mr. 
Konove is a former Chair of the North Carolina Solar Energy 
Association, which is now known as North Carolina Sustainable 
Energy Association. He was also one of the founders of the 
North Carolina Solar Center at North Carolina State University, 
which is in my District. He was also one of the founders of the 
Chatham Homebuilders Association and has participated in the 
National Renewable Energy Laboratories Exemplary Homes program. 
He has chaired and helped with several North Carolina 
Sustainable Energy Association's solar home tours throughout 
North Carolina. He is a distinguished guest of this panel, 
Madame Chair, and I am very proud to introduce him.
    Chairman Biggert. Thank you very much, Mr. Miller.
    Next on our panel, we have Ms. Vivian Loftness. She is Head 
of the School of Architecture at Carnegie Mellon University. 
Her design and consulting work has led to the design and 
construction of numerous energy-conserving buildings here and 
abroad. Welcome. And Mr. John Carberry is the Director of 
Environmental Technologies for the DuPont Company in 
Wilmington, Delaware. His responsibilities include leading 
DuPont's efforts to find and use affordable renewable energy 
and energy efficiency technologies. Welcome to you, Mr. 
Carberry.
    I now yield to the very distinguished Chairman of the 
Science Committee from New York, Chairman Boehlert, to 
introduce Mr. Smith.
    Chairman Boehlert. I thank you, Madame Chair. And if I may 
take a moment just before the introduction. I would like to 
once again thank Mr. Miller. It seems every time this 
subcommittee or Full Committee has a hearing, we always have a 
witness from North Carolina. Mr. Miller, thank you, and I thank 
the Tar Heel State.
    Secondly, I want to compliment you, Madame Chair, and the 
Ranking Member and every Member of the Subcommittee for the 
time and effort and thoughtful deliberation you are putting in 
to this subject matter. It is critically important, and you 
know it is crowding off the front page, hopefully, some of the 
news from abroad and making us focus more on the problems here 
at home. And there are some people coming up with instant 
remedies like releasing the oil from the national stockpile, 
which is foolhardy and short-sited. It might have an impact of 
a penny or two per gallon of gasoline on the price at the pump, 
but it would make us vulnerable in the times of national 
emergency, so the President wisely has resisted that.
    And let me compliment, Mr. Larson, on your party's 
presumptive nominee. He, too, has rejected that idea. What we 
have to do--you know, people say where there is a will, there 
is a way. Well, we have got the way, and the way comes from 
this Science Committee. We have got to develop the will in the 
minds of the American people. There are a lot of things we can 
do, like increasing CAFE standards, which should be a no-
brainer. We have got the technology. It can be done. It should 
be done retroactively. As more investment comes from this 
committee and we direct it to renewable energy sources, we are 
doing a great deal in regard to our effective and responsible 
response to the challenges facing America. And to the credit of 
the President, he is trying to give this Nation an energy 
policy. I know we all might have some disagreement on certain 
segments of it, but we don't have an energy policy. Shame on us 
as the most technologically advanced nation in the world. We 
darn well better get one. And I think we all have to work 
together.
    That leads me to introducing our next witness, Mr. Peter 
Smith, who is the President of the New York State Energy and 
Research and Development Authority. We affectionately refer to 
it by its acronym up in New York, NYSERDA. Mr. Smith has been 
with NYSERDA since 1995, and he started as Program Director for 
Energy Analysis. In addition to working for the great state of 
New York, pardon my pride, but you can understand it, Mr. Smith 
was also educated in the Empire State at Lemoyne College in 
Syracuse, and he has a masters in public administration. And I 
am particularly anxious to hear not only what all of the 
witnesses will tell us, but from Mr. Smith, because I think of 
the great leadership of the governor of the State of New York, 
who has made it a goal for New York State to be 25 percent 
dependent, at a minimum, on renewable energy by the year 2010. 
That is a worthy goal. So Mr. Smith, any light you can shed on 
that will be helpful to all of us.
    I thank you for letting me indulge the Subcommittee. It is 
an important hearing. It should be packed. There should be a 
lot of media here, but the media is more interested in other 
things that, perhaps, have a little more sex appeal but not 
nearly as much general appeal and direction. Thank you.
    Chairman Biggert. Thank you very much, Mr. Chairman.
    Finally, let me just mention again, our last panelist is 
Mr. Daniel Sosland, Executive Director of Environment 
Northeast.
    And with that, as our witnesses may know, and if you don't, 
we limit spoken testimony to five minutes each, after which the 
Members of the Energy Subcommittee will have five minutes each 
to ask questions, so even if you don't get all of your 
testimony in, it usually comes up in the questions. So welcome 
to you all.
    And we will begin with Mr. Nadel.
    I think you might need to turn on your mike or pull it 
closer.

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

    Mr. Nadel. Thank you. How is that?
    Thank you, Madame Chair.
    As you noted, I represent the American Council for an 
Energy-Efficient Economy. We are a non-profit research 
organization formed in 1980 to serve as a bridge between the 
technical and program and policy making communities, to help 
bring information from one community to another so that we can 
make progress in terms of energy efficiency.
    As you noted, Madame Chair, energy prices are up 
dramatically. You mentioned some of the oil and gasoline 
prices, but also natural gas prices have been dramatically 
higher for the past year, and electricity and coal prices are 
also climbing. All of these different energy markets are 
linked. Unfortunately, most economists are predicting that 
these relatively high prices will be with us for the long-term. 
Energy supplies have tightened. Our economy is growing. The 
world economy is growing in places like China, which is now 
becoming a major oil importer. As you mentioned, refinery 
capacity is tight. For all of these reasons, the--we can't 
really expect cheap energy to continue. We may expect some 
modest price reduction from the very peaks, but ultimately, 
these prices are going to be determined by world markets, be it 
the price of liquefied natural gas, in terms of the natural gas 
markets, and likewise the world price of oil as determined as 
much by countries like China and India as it is by the United 
States. I think we need to be prepared for higher prices than 
we have had in the past decade.
    Fortunately, as you noted, energy efficiency and renewable 
energy can do a lot to help blunt the impact of these higher 
prices. Obviously, efficiency reduces energy bills: people use 
less, they pay less. In addition, efficiency helps actually 
reduce the price of these energy commodities. The markets are 
so tight now that if you loosen demand a little bit, then the 
price goes somewhat down. We did a study last year working with 
Energy and Environmental Analysis, the same contractor that the 
National Petroleum Council used, looking at the impacts of 
energy efficiency and renewable energy on natural gas prices. 
We found that the markets are so tight that if we were to do a 
medium level of energy efficiency and renewable energy, two 
percent savings in the first year, getting up to five percent 
total savings after five years, natural gas prices would 
decline by about 20 percent. We are just at that steep of a 
part of the demand curve.
    Fortunately, this energy efficiency has done a lot in the 
past. It is not just an idea, but it has, in fact, been proven 
over the past 29 years. If you look at energy use now compared 
to back in 1973, energy use is basically the same now, despite 
the fact that our economy has grown by more than 75 percent. If 
it wasn't for efficiency, we would now be spending nearly $500 
billion more on energy purchases each year. So we can thank 
efficiency for a lot of what we have accomplished of late, but 
there is a lot more to be done.
    We looked at a variety of different studies on what could 
be achieved from additional energy efficiency renewable energy. 
Most of these studies conclude that we can save at least 
another 20 percent from cost-effective energy-efficient 
technologies by 2020. That ranges in studies by the national 
labs to studies by various states, including, I know, New York 
has recently done a study to that effect. Many different 
studies were done. Utilities have found similar things. 20 
percent savings by 2020 seems very achievable.
    In addition, renewable energy can save quite a bit. A study 
by the Union of Concerned Scientists estimated that by 2020 we 
can get about 10 percent of our energy use from renewable 
energy. That, in part, is based on the fact that energy 
efficiency reduces energy consumption and therefore renewables, 
as a percentage, goes up.
    In my written testimony, I provide a number of different 
suggestions on different policy measures that can be 
implemented to help improve energy efficiency and therefore 
help address some of the energy price and other problems that 
we have been discussing.
    Since the title of this hearing is on research and 
development, I will concentrate, in my closing minutes, on just 
those aspects. Bear with me a second.
    Back in 2001, the National Research Council did a study 
looking at DOE's Energy Efficiency Programs. They concluded 
that just six projects have saved consumers and businesses 
about $30 billion, more than compensating for the total cost of 
all of the R&D programs many times over. Similarly, the 
President's Council of Advisors on Science and Technology 
concluded that R&D investments in energy efficiency are the 
most cost-effective way to simultaneously reduce the risks of 
climate change, oil import interruption, and local air 
pollution and improve the productivity of the economy. They 
recommended that energy--federal energy efficiency R&D and 
renewable energy expenditures be doubled over a five-year 
period and concluded that this would provide $40 in net 
economic benefits for each federal dollar invested.
    Unfortunately, we are concerned that energy efficiency 
budgets R&D budgets are actually declining now. The latest 
proposal is for a modest decline in these budgets, not for the 
increase that the PCAST panel supported. We would urge this 
committee to weigh in with your--the Appropriations Committee 
to try to restore those cuts and maybe even have a modest 
increase, if at all possible.
    Likewise, we are concerned that so many resources are going 
to fuel cells and into hydrogen. These are promising 
technologies, but they are also very high-risk. And what we are 
hearing from people in Federal Government and in the research 
agencies is that a lot of other programs are being starved for 
funds as a result. We need a balanced portfolio, not just 
investing in a few high-risk investments, just like a stock 
investor, you know, will have a balanced portfolio, and won't 
just put it into one or two hot tips. We need to do the same 
with our R&D dollars.
    The final thing I wanted to mention is we have--a lot of 
focus tends to be on energy efficiency technologies, you know, 
better LED lights, fuel cells, and those are very important, 
but there is also a lot of opportunity from better energy 
efficiency practices, how we engineer things, how we maintain 
things. And while a lot of this happens at the local level, the 
Federal Government can be critical in helping to develop things 
like software, optimization tools, conducting the research to 
help demonstrate to building owners the benefits of these 
optimization techniques that I would urge the Committee to pay 
attention to these energy-saving practices as well as to the 
technologies.
    Thank you very much.
    [The prepared statement of Mr. Nadel follows:]

                 Prepared Statement of Steven M. Nadel

    Thank you for the opportunity to speak with the Subcommittee this 
morning. My name is Steven Nadel, and I am Executive Director of the 
American Council for an Energy-Efficient Economy (ACEEE). ACEEE is a 
national nonprofit organization dedicated to advancing energy 
efficiency for economic prosperity and a cleaner environment. 
Established in 1980 to build bridges among the very different worlds of 
energy efficiency technology research, state and national policy-
makers, and energy consumers, ACEEE conducts research, publishes 
reports, holds conferences, and provides information to policy-makers 
around the country and the world.
    I have been asked by Chairman Biggert to speak with you today about 
three subjects: (1) a brief overview of expert opinions on today's 
energy situation and projections for the next 20 years; (2) the 
potential contribution of energy efficiency and renewable energy for 
meeting future national energy needs, and the impact increased 
efficiency would have on natural gas markets;and (3) federal and State 
policies that have been successful in encouraging efficiency and 
renewable energy, with an emphasis on research and development (R&D) 
programs, the subject of today's hearing.
    As you are aware, energy price and supply are front-page issues 
today. Gasoline prices have hit record levels this month, following on 
the heels of record natural gas prices. Economic and energy experts 
from Chairman Greenspan on down are now saying that these higher prices 
are expected to stay high for years to come, as rising energy demand 
outstrips national and world supply systems. Clearly, there has never 
been a stronger imperative for a new commitment to energy efficiency as 
part of a balanced energy policy.
    Fortunately, there is a large potential for cost-effective energy 
savings. Many recent studies indicate that cost-effective energy-
efficient technologies and practices could reduce U.S. energy use by 20 
percent or more. Recent research by ACEEE on natural gas markets 
indicates that even achieving a fraction of these savings would reduce 
natural gas prices by about 20 percent--markets are so tight now that 
even modest demand reductions would have substantial price effects.
    In order to realize these opportunities, we recommend five key 
policy initiatives:

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

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

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

        4.  Expand and update federal equipment efficiency standards.

        5.  Expand federal R&D and deployment programs.

    Regarding energy efficiency research, development, and deployment 
(RD&D) in the United States, our research indicates that a renewed 
commitment to efficiency RD&D is critical to the Nation's economic 
future and to meeting the environmental challenges we face in air 
quality and global climate change. We are concerned, however, that 
declining federal funding for efficiency RD&D in recent years dims the 
prospects for economic recovery and falls far short of the level needed 
to respond to the climate challenge. In fact, the overall downward 
trend in efficiency RD&D may be approaching the point where basic U.S. 
infrastructure for producing new energy efficiency technologies will be 
crippled.
    In the balance of my testimony, I will expand on each of these 
points.

The Current Energy Situation

    As you are aware, energy price and supply are front-page issues 
today. Gasoline prices have hit their highest levels in more than a 
decade, following on the heels of record natural gas prices. Economic 
and energy experts from Chairman Greenspan on down are now saying that 
these higher prices are expected to stay high for years to come, as 
rising energy demand outstrips national and world supply systems. These 
higher fuel prices are also spilling over into the electricity sector. 
Coal prices are up sharply this year; and since coal and natural gas 
together generate two-thirds of U.S. electricity, spot markets for 
electricity are up as well.
    More specifically, according to the Energy Information 
Administration, retail gasoline prices averaged $1.94 per gallon on May 
10, 2004, an increase of $0.10 per gallon relative to a week earlier 
and an increase of $0.45 per gallon relative to a year earlier.\1\ 
Crude oil closed at a record high of $41.38 a barrel in the New York 
exchange last Friday (May 14). According to industry experts, these 
high prices are caused by rising demand (due in particular to economic 
growth in China, India, and the United States) and tight supplies, 
particularly for refined products and ``sweet crude'' (low sulfur crude 
oil that can be more easily refined than higher sulfur crude). A ``risk 
premium'' associated with violence and uncertainty in the Middle East 
is also a factor.\2\
---------------------------------------------------------------------------
    \1\ http://tonto.eia.doe.gov/oog/info/gdu/gasdiesel.asp
    \2\ Banerjee, Neela, 2004, ``Tight Oil Supply Won't Ease Soon,'' 
New York Times, May 16, p. 1.
---------------------------------------------------------------------------
    The big question is how long these high prices will last. Experts 
agree that there is great uncertainty regarding future prices, with 
future prices determined by such factors as demand for oil 
(particularly in key markets such as China and the United States), the 
supply of sweet crude, the construction of new refineries (particularly 
refineries that can process the higher sulfur crude that comes from 
Saudi Arabia), OPEC pricing policies and the degree to which these 
policies are followed by OPEC and non-OPEC members, and whether there 
are significant supply interruptions, such as in the Middle East or 
Venezuela. The Energy Information Administration is probably at the 
optimistic end of the spectrum of opinion, saying that ``[o]il price 
declines are expected in 2005 as Iraqi oil production continues to 
increase and inventories are rebuilt toward more normal levels.'' \3\ 
However, other experts are much less sanguine. For example, speaking at 
a luncheon at the Petroleum Club in Midland Texas, T. Boone Pickens, 
the West Texas oilman and financial speculator, predicted that oil 
prices will never fall below $30 per barrel again. ``I think you'll see 
$50 a barrel before you see $30,'' he concluded.\4\
---------------------------------------------------------------------------
    \3\ EIA, 2004, Short-Term Energy Outlook--May 2004, http://
www.eia.doe.gov/emeu/steo/pub/contents.html
    \4\ Romero, Simon, 2004, ``Why the Saudis May Not Rescue Oil 
Markets This Time,'' New York Times, May 16, Section 3, p. 5.
---------------------------------------------------------------------------
    Natural gas prices are also very much in the news. Wholesale 
natural gas prices have been fluctuating around an average of $5-6 per 
thousand cubic feet (commonly abbreviated mcf) for the past year at the 
key Henry hub distribution point,\5\ up from the $2-3 level that 
prevailed for much of the last decade. As a result, prices charged to 
consumers, businesses, and power plant operators are up substantially. 
EIA has recently projected that ``[n]atural gas spot prices (composites 
for producing area hubs) are likely to average about $5.80 per thousand 
cubic feet (mcf) this year.'' \6\
---------------------------------------------------------------------------
    \5\ Oilnergy, 2004, http://www.oilnergy.com/1gnymex.htm. Spot 
prices for the past year have varied from a low of $4.50 to a high of 
almost $7.30 per mcf.
    \6\ See note #3.
---------------------------------------------------------------------------
    Again, there is great uncertainty about future prices. EIA's last 
long-term forecast, published in January 2004, projects that natural 
gas wellhead prices (which are slightly lower than prices at 
transportation hubs) will decline to below $4 per thousand cubic feet 
by 2010, and will then gradually rise to the $4-5 range by 2015 and 
stay in that range over the 2015-2025 period.\7\ Independent forecasts, 
such as Energy and Environmental Analysis' widely respected projection, 
see similar prices in the 2015-2020 period, largely driven by world 
liquefied natural gas (LNG) prices. For the next few years, its 
forecasts are higher than the EIA forecast, projecting annual average 
hub prices rising from $5.46 this year to $6.13 in 2006, before 
declining to the $4.50-5.00 range towards the end of the decade.\8\ 
Some analysts are more bullish on prices over the next few years. 
Andrew Weissman, publisher of Energy Business Watch, stated earlier 
this month that the ``supply/demand balance in the U.S. market is 
deteriorating rapidly, and that a substantial further price adjustment 
will be required to bring the market back into equilibrium.'' He 
suggests that recent ``good luck'' with mild weather has kept us from 
realizing how tight markets really are. He is projecting prices above 
$7.00 per mcf for at least the next year or so.\9\
---------------------------------------------------------------------------
    \7\ EIA, 2004, Annual Energy Outlook 2004, DOE/EIA-0383 (2004), p. 
153, Washington, DC: U.S. Energy Information Administration.
    \8\ EEA, 2004, EEA Natural Gas Forecast April 2004, Arlington, Va.: 
Energy and Environment Analysis Inc.
    \9\ Weissman, Andrew, 2004, ``Macro Level Trends,'' Energy Pulse, 
May 5. http://www.energypulse.net/centers/article/
article-print.cfm?a-id=715
---------------------------------------------------------------------------
    Volatility and price increases in oil and natural gas markets are 
in turn affecting other energy sources. For example, natural gas use 
for generating electricity has been growing rapidly in recent years, 
and thus natural gas prices have a significant impact on electricity 
prices. Due largely to natural gas price increases, on a national 
average basis, electricity prices rose modestly in 2003.\10\ With 
retail prices still regulated in many states, the effect of natural gas 
prices on electricity prices has been blunted. However, in deregulated 
markets such as New Jersey and Texas we are seeing 10-20 percent 
electricity price increases due to rising fuel prices, and customers in 
some states such as Maryland and Virginia are likely to see similar 
increases as price controls come off over the next year or so.
---------------------------------------------------------------------------
    \10\ http://www.eia.doe.gov/cneaf/electricity/epm/
table5-6-a.html
---------------------------------------------------------------------------
    With natural gas prices higher, coal is becoming more attractive, 
and EIA projects a 4.7 percent increase in coal prices this year.\11\ 
However, this includes coal under long-term contracts. Looking just at 
spot prices, according to Reuters, spot prices for northern and central 
Appalachian coal last Friday (May 14th) were $58 per ton--more than 
twice the price last August.\12\ With coal demand up, railroads are 
beginning to experience rolling stock availability problems, which 
appear to be responsible for some of the recent increases in new coal 
contract prices. Coal reserves are large, so future prices for using 
coal, while somewhat dependent on prices of competing fuel, will 
probably be more affected by future air pollution regulations and the 
availability of rail infrastructure to deliver greater volumes to 
users. In the short-term, some utilities are concerned that they may 
exceed their emissions allowance for coal power plants as they run 
those plants more. This situation may result in generators asking state 
environmental regulators for waivers of allowances to avoid having to 
shut the plants down later in the year if electric demand remains high. 
In the longer-term, the President's ``Clear Skies'' proposal calls for 
gradual tightening of emissions regulations relative to current levels. 
Other legislative proposals call for more substantial emissions 
declines. The end result is that the cost of coal as an energy source 
will go up too, but it is hard to project by how much until Congress 
chooses which regulatory approach it will take.
---------------------------------------------------------------------------
    \11\ See note #3.
    \12\ Reuters, 2004, ``High Coal Price Could Bring Summer Energy 
Crunch,'' May 14.
---------------------------------------------------------------------------
    Overall, the clear trend is that energy prices are rising. Most 
experts are projecting higher prices in the future than in the past--
the only question is how much higher. If we're lucky, prices will be 
only modestly higher. But there's also a good chance prices will be 
substantially higher, providing a considerable drag on our economy, 
particularly hurting energy-intensive industries such as chemicals, 
fertilizers, and trucking. Fortunately, prices are determined by the 
balance between supply and demand. Accelerated efforts to improve 
energy efficiency would have a significant impact on prices, while also 
providing substantial environmental and economic benefits. In the next 
section of my testimony, I will discuss how energy efficiency is a 
critical part of the balanced energy policy that is needed to address 
these trends.

The Role of Energy Efficiency

Energy Efficiency's Historic Contributions
    Energy efficiency is a quiet but effective energy resource, 
contributing substantially to our nation's economic growth and 
increased standard of living over the past 30 years. Energy efficiency 
improvements since 1973 accounted for approximately 25 quadrillion BTUs 
in 2002, which is about 26 percent of U.S. energy use and more energy 
than we now get annually from coal, natural gas, or domestic oil 
sources. Consider these facts which are based primarily on data 
published by the federal Energy Information Administration:

          Total primary energy use per capita in the United 
        States in 2002 was almost identical to that in 1973. Over the 
        same 29-year period, economic output (GDP) per capita increased 
        74 percent.

          National energy intensity (energy use per unit of 
        GDP) fell 43 percent between 1973 and 2001. About 60 percent of 
        this decline is attributable to real energy efficiency 
        improvements and about 40 percent is due to structural changes 
        in the economy and fuel switching.\13\
---------------------------------------------------------------------------
    \13\ Murtishaw, S. and L. Schipper, 2001, Untangling Recent Trends 
in U.S. Energy Use, Washington, D.C.: U.S. Environmental Protection 
Agency.

          If the United States had not dramatically reduced its 
        energy intensity over the past 29 years, consumers and 
        businesses would have spent at least $430 billion more on 
---------------------------------------------------------------------------
        energy purchases in 2002.

          Between 1996 and 2002, GDP increased 21 percent while 
        primary energy use increased just two percent. Imagine how much 
        worse our energy problems would be today if energy use had 
        increased 10 or 20 percent during 1996-2002!

    Clearly, improvements in energy efficiency are essential to a 
healthy economy. Efficiency keeps energy demand growth down to 
sustainable levels. If demand grows too fast, supply systems cannot 
keep up, raising energy prices and possibly creating shortages, which 
hobble the economy. This effect is true whether the energy comes from 
fossil, nuclear, or renewable sources. There will always be limits on 
the materials, land, and capital needed to develop supply 
infrastructure; there is thus no ``silver bullet'' energy source or 
supply system that obviates the need for efficiency. Efficiency has 
been and will continue to be the keystone of a sustainable energy 
economy.
Energy Efficiency's Future Potential
    Even though the United States is much more energy efficient today 
than it was 25 years ago, there is still enormous potential for 
additional cost-effective energy savings. Some newer energy efficiency 
measures have barely begun to be adopted. Other efficiency measures 
could be developed and commercialized in coming years, with proper 
support:

          The Department of Energy's national laboratories 
        estimate that increasing energy efficiency throughout the 
        economy could cut national energy use by 10 percent or more in 
        2010 and about 20 percent in 2020, with net economic benefits 
        for consumers and businesses.\14\
---------------------------------------------------------------------------
    \14\ Interlaboratory Working Group, 2000, Scenarios for a Clean 
Energy Future, Washington, D.C.: Interlaboratory Working Group on 
Energy-Efficient and Clean-Energy Technologies, U.S. Department of 
Energy, Office of Energy Efficiency and Renewable Energy.

          ACEEE, in our Smart Energy Policies report, estimates 
        that adopting a comprehensive set of policies for advancing 
        energy efficiency could lower national energy use from EIA 
        projections by as much as 11 percent in 2010 and 26 percent in 
        2020.\15\
---------------------------------------------------------------------------
    \15\ Nadel, Steven and Howard Geller, 2001, Smart Energy Policies: 
Saving Money and Reducing Pollutant Emissions through Greater Energy 
Efficiency, Report E012, Washington, D.C.: American Council for an 
Energy-Efficient Economy.

          Another recent ACEEE paper examined and synthesized 
        the results of a dozen recent studies on the technical, 
        economic, and achievable potential for additional energy 
        savings in the United States. The review found that most 
        studies agree that there is a cost-effective opportunity to 
        reduce U.S. electricity and natural gas use by 20 percent or 
        more.\16\
---------------------------------------------------------------------------
    \16\ Nadel, S., A. Shipley, and R.N. Elliott, 2004, ``The 
Technical, Economic, and Achievable Potential for Energy Efficiency in 
the United States--A Meta-Analysis of Recent Studies,'' In Proceedings 
of the 2004 ACEEE Summer Study on Energy Efficiency in Buildings 
(forthcoming). Washington, D.C.: American Council for an Energy-
Efficient Economy.

          The opportunity for saving energy is also illustrated 
        by experience in California in 2001. Prior to 2001, California 
        was already one of the most efficient states in terms of energy 
        use per unit gross state product (ranking 5th in 1997 out of 50 
        states\17\ ). But in response to pressing electricity problems, 
        California homeowners and businesses reduced energy use by 6.7 
        percent in the summer of 2001 relative to the year before 
        (after adjusting for economic growth and weather),\18\ with 
        savings costing an average of three cents per kWh,\19\ far less 
        than the typical retail or even wholesale price of electricity.
---------------------------------------------------------------------------
    \17\ Geller, Howard and Toru Kubo, 2000, National and State Energy 
Use and Carbon Emissions Trends, Washington, D.C.: American Council for 
an Energy-Efficient Economy.
    \18\ California Energy Commission, 2001, Emergency Conservation and 
Supply Response 2001, Report P700-01-005F, Sacramento, Calif.
    \19\ Global Energy Partners, 2003, California Summary Study of 2001 
Energy Efficiency Programs, Final Report. Lafayette, Calif.

    These estimates are generally based on already commercialized 
technologies. Substantial additional energy can be saved from 
technologies and practices now being developed by private companies, 
and through federal and state R&D programs. For example, ACEEE is now 
completing a study that identifies dozens of promising emerging 
technologies for use in buildings.\20\ A previous ACEEE study 
identified many emerging technologies that offer promise for cost-
effective energy savings in the industrial sector.\21\
---------------------------------------------------------------------------
    \20\ Sachs, Harvey et al., 2004, Emerging Energy-Saving 
Technologies and Practices for the Buildings Sector (forthcoming), 
Report A042, Washington, D.C.: American Council for an Energy-Efficient 
Economy.
    \21\ Martin, Nathan et al., 2000, Emerging Energy-Efficient 
Industrial Technologies, Report IE003, Washington, D.C.: American 
Council for an Energy-Efficient Economy.
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Renewable Energy Technology
    ACEEE concentrates its work on energy-efficient technologies and 
practices. While we are not renewable energy experts, I was asked to 
comment briefly on the potential for renewable energy in the United 
States. Recent estimates on renewable energy potential have been made 
by both EIA and the Union of Concerned Scientists (UCS). EIA estimates 
that non-hydro renewables accounted for about 3.3 quadrillion BTUs of 
energy consumption in 2002, which was about 3.3 percent of total U.S. 
energy consumption that year. In its Reference Case, EIA projects that 
non-hydro renewables will increase to 5.7 quads in 2020, which is about 
4.4 percent of estimated consumption in that year.\22\ In contrast, UCS 
estimates that with appropriate policy support, non-hydro renewables 
can increase to 10.6 quads by 2020. When energy efficiency is factored 
into the equation (efficiency reduces consumption), UCS estimates that 
non-hydro renewables can meet 10.3 percent of U.S. energy needs in 
2020, more than double the level estimated by EIA.\23\
---------------------------------------------------------------------------
    \22\ See note #7.
    \23\ Clemmer, Steve et al., 2001, Clean Energy Blueprint, 
Cambridge, Mass.: Union of Concerned Scientists.
---------------------------------------------------------------------------

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

    In 2003, ACEEE and Energy and Environmental Analysis, Inc. 
conducted an analysis to investigate the impact of energy efficiency 
and renewable energy on natural gas prices. The analysis looked at 
increased levels of energy efficiency and renewable energy investment, 
resulting in energy savings of about two percent in one year and a 
total of five percent over five years. These investments are cost 
effective with a benefit cost ratio of 3.4.
    By reducing demand for electricity and natural gas, especially 
during peak periods, and increasing the share of renewable energy, the 
study found that natural gas prices will both be reduced and be made 
less volatile. Specifically, we found that in just 12 months, 
nationwide efforts at this scale could reduce wholesale natural gas 
prices by 20 percent and save consumers $15 billion per year in retail 
gas and electric power costs. As efficiency investments continue over 
the following four years, this level of gas price reduction can be 
maintained. It is worth noting that changes in just one state or region 
can result in smaller though still significant price reductions in the 
immediate region as well as more modest reductions in the Nation as a 
whole. Nationwide efficiency and renewable energy efforts would result 
in energy bill savings to residential, commercial, and industrial 
consumers exceeding $104 billion and require an investment of slightly 
more than $30 billion over five years.\24\
---------------------------------------------------------------------------
    \24\ Elliott, R. Neal et al., 2003, Natural Gas Price Effects of 
Energy Efficiency and Renewable Energy Practices and Policies, Report 
E032, Washington, D.C.: American Council for an Energy-Efficient 
Economy.
---------------------------------------------------------------------------
    This analysis was based on forecasts from almost a year ago. We 
have seen little change in demand and in fact markets have grown 
tighter so price effects would likely be even greater were we to rerun 
the analysis today.

Policies to Encourage Energy Efficiency

    From our research, there are several key policies that can do much 
to help achieve the large available cost-effective efficiency 
improvements discussed above. In our 2001 report entitled Smart Energy 
Policies: Saving Money and Reducing Pollutant Emissions Through Greater 
Energy Efficiency, we discuss nine policies that will help the United 
States to achieve these energy savings.\25\ In this testimony, I will 
briefly summarize several of the most important of these policies.
---------------------------------------------------------------------------
    \25\ See note #15.

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

    The fuel economy of the U.S. passenger cars has declined nearly 
every year since 1987. In 2003, the average passenger vehicle sold had 
an EPA composite (lab) fuel economy of 24.2 miles per gallon (MPG), 
down from 25.9 in 1987.\26\ Since 1987, federal fuel economy 
regulations have remained essentially unchanged, and SUVs and other 
light trucks have increased dramatically in sales. Fuel economy 
improvements in the United States and other countries in the 1970s and 
1980s substantially reduced demand relative to previously predicted 
levels, contributing to an excess of supply relative to demand and 
reducing world oil prices. A renewed commitment to fuel economy could 
save large amounts of energy and money, reduce U.S. dependence on 
imports from unstable regions of the world, and provide downward 
pressure on oil prices. However, discussions about changing U.S. fuel 
economy regulations have been highly controversial. There is a need for 
creative solutions in order to raise average passenger vehicle fuel 
economy to at least 30 mpg, and preferably to 40 mpg or more.
---------------------------------------------------------------------------
    \26\ EPA, 2004, Light-Duty Automotive Technology and Fuel Economy 
Trends: 1975 Through 2004, EPA420-R-04-001, Washington, D.C.: U.S. 
Environmental Protection Agency.

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

    In many states, utility regulators and legislatures have 
established ``demand side management programs'' under which utilities 
and/or state governments encourage customers to reduce energy use and 
peak demand through information, technical assistance, and financial 
incentive programs. Currently, such programs exist in more than 20 
states, with total annual program funding of more than $1 billion 
nationwide.\27\ These programs can be marketed and refined to reflect 
state-specific markets and needs. However, some states have very modest 
programs and other states have no programs at all. States should be 
encouraged to expand or start such programs. Such encouragement can 
take the form of matching federal programs and/or requirements to 
achieve a minimum level of energy and peak savings each year (the 
latter based on legislation passed in Texas and signed by then Governor 
Bush\28\ ). Senator Jeffords has introduced federal legislation along 
these lines to encourage such state programs.\29\
---------------------------------------------------------------------------
    \27\ York, Dan and Martin Kushler, 2002, State Scorecard on Utility 
Public Benefits Energy Efficiency Programs: An Update, Report U023, 
Washington, D.C.: American Council for an Energy-Efficient Economy.
    \28\ Described in Kushler, Martin, Dan York, and Patti Witte, 2004, 
Five Years In: An Examination of the First Half-Decade of Public 
Benefits Energy Efficiency Policies, Report U042, Washington, D.C.: 
American Council for an Energy-Efficient Economy.
    \29\ S. 1754, the Electric Reliability Security Act.

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

    Several programs now exist to encourage large companies to make and 
implement commitments to improve energy efficiency and reduce emissions 
of greenhouse gases, including EPA's Climate Savers program and DOE's 
Climate Vision. However, commitments to date have been modest, in part 
because there is little incentive or technical assistance for firms to 
participate and in part because rules to track savings (and give credit 
for these savings in future emissions trading schemes) have not been 
sufficiently developed.\30\ Existing programs should be substantially 
expanded, and DOE and EPA given: (a) resources to assist industrial 
customers to participate; and (b) a directive to develop appropriate 
regulations so that firms can track and receive credit for the 
reductions they achieve.
---------------------------------------------------------------------------
    \30\ Elliott, R. Neal, 2003, Industrial Voluntary Agreements in 
Context, Report IE033, Washington, D.C.: American Council for an 
Energy-Efficient Economy.

---------------------------------------------------------------------------
4.  Expand and update federal equipment efficiency standards.

    One of the Federal Government's most successful energy efficiency 
programs has been minimum-efficiency standards on appliances and other 
energy-consuming equipment. The initial legislation was passed by 
Congress and signed by President Reagan in 1987; the program was 
substantially expanded by Congress in 1993 and signed by the first 
President Bush. As of 2000, the appliance and equipment efficiency 
standards program had reduced U.S. electricity use more than two 
percent and saved consumers about $50 billion. Standards already set 
will increase annual savings approximately three-fold by 2020. Updating 
existing standards and setting new standards on additional products 
would increase 2020 savings by an additional 60 percent.\31\ Several 
new consensus standards are included in pending energy legislation 
passed by the House and Senate. DOE is working on revising other 
standards, but has been making very slow progress. Congress should 
complete action on the energy efficiency title in the pending energy 
bill and should encourage DOE to speed up now-pending standards rule-
makings.
---------------------------------------------------------------------------
    \31\ Kubo, Toru, Harvey Sachs, and Steven Nadel, 2001, 
Opportunities for New Appliance and Equipment Efficiency Standards: 
Energy and Economic Savings Beyond Current Standards Programs, Report 
A016, Washington, D.C.: American Council for an Energy-Efficient 
Economy.

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5.  Expand federal R&D and deployment programs.

    R&D programs at DOE and at the state level help to develop new 
technologies, so that there continue to be substantial opportunities to 
improve energy efficiency in the future. We elaborate further on the 
need to expand federal R&D efforts in the section below. In addition, 
federal efforts to deploy energy-saving technologies and practices 
should also be expanded. For example, the EPA/DOE ENERGY STAR program 
has been very effective in achieving energy savings and emissions 
reductions. We recommend that this program be doubled in size over the 
next few years. Likewise, state building codes also achieve substantial 
energy savings. DOE provides important technical assistance and grants 
to the states for this work--we also recommend that these programs be 
doubled as well.

Savings from these Policies

    Overall, we estimate that full pursuit of these five policies will 
reduce U.S. annual energy use by about 27 quadrillion BTUs by 2020, a 
21 percent reduction relative to the EIA Reference Case forecast. These 
policies will result in discounted net economic benefits to consumers 
and businesses of more than $500 billion (1999 $) and will reduce U.S. 
carbon emissions by more than 400 million metric tones in 2020, a 20 
percent reduction relative to the EIA Reference Case. In addition, by 
making the United States a leader again in energy efficiency, we will 
be well positioned to provide efficient goods and services in world 
markets and will be less dependent on imports from unstable regions of 
the world.

The Key Role of Federal RD&D

    To realize efficiency's benefits for the economy and the 
environment, the efficiency technology ``pipeline'' must continue to 
flow. Efficiency technologies, especially those developed through U.S. 
Department of Energy RD&D, have produced enormous benefits over the 
past three decades. A National Research Council study issued in 2001 
quantified the economic benefits of just six Department of Energy-
funded technologies at about $30 billion, based on an R&D investment of 
about $400 million.\32\ This reinforced the earlier recommendations of 
the President's Committee of Advisors on Science and Technology 
(PCAST):
---------------------------------------------------------------------------
    \32\ National Research Council, 2001, Energy Research at DOE: Was 
It Worth It? Washington, D.C.: National Academy Press.

         R&D investments in energy efficiency are the most cost-
        effective way to simultaneously reduce the risks of climate 
        change, oil import interruption, and local air pollution, and 
        to improve the productivity of the economy.\33\
---------------------------------------------------------------------------
    \33\ President's Committee of Advisors on Science and Technology, 
1997, Federal Energy Research and Development for the Challenges of the 
Twenty-First Century, Washington, D.C.: President's Committee of 
Advisors on Science and Technology.

    The PCAST report recommended that DOE's efficiency budget be 
doubled over a five-year period. It projected that so doing would 
return $40 in net economic benefits for every federal dollar invested.
    This committee is aware of the broader concerns about the decline 
of science and technology funding in America. Recent reports bring into 
dramatic relief the consequences of failing to maintain a robust RD&D 
infrastructure for the Nation's key technologies.\34\ Not the least of 
these is the decline in competitiveness of U.S. industry, especially in 
the emerging technology markets that represent future economic 
opportunities. The United States spends less per dollar of GDP than our 
OECD competitors like Japan and Germany.\35\ It's not surprising, 
therefore, that non-U.S. firms dominate markets for key efficiency and 
renewable technologies such as lighting, hybrid vehicles, industrial 
automation and machine tools, solar photovoltaics, and wind power. 
Without a renewed commitment to federal RD&D, U.S. firms will continue 
to lose ground in these markets, and the American economy and American 
consumers will be worse off.
---------------------------------------------------------------------------
    \34\ See, for example, Broad, William, 2004, ``U.S. Is Losing its 
Dominance in the Sciences,'' New York Times, May 3. p. 1.
    \35\ ACEEE, 2002, ``Energy Efficiency Research, Development, and 
Deployment: Why Is Federal Support Necessary?'' Washington, D.C.: 
American Council for an Energy-Efficient Economy.
---------------------------------------------------------------------------
    In order to work towards the R&D objectives recommended by PCAST, 
ACEEE recommends that:

          The Administration should use the authorization 
        levels in the pending energy bill as guidelines for its energy 
        efficiency RD&D requests for the FY 2006-2010 budget requests. 
        These authorizations would allow funding to rise by about 50 
        percent above current levels. While this is only half of the 
        PCAST recommendation, it would represent a significant new 
        commitment to these vital technologies.

          The Committee should commission a study on the state 
        of energy efficiency RD&D infrastructure in the United States. 
        This study should examine the history of RD&D since the 1970s, 
        covering federal, State, and private industry funding. It 
        should describe the RD&D infrastructure as it has evolved over 
        time and as it stands today. It should compare and contract 
        U.S. RD&D to that of other OECD nations. It should also assess 
        the current adequacy of RD&D infrastructure and funding levels, 
        and make recommendations for changes needed to improve the 
        United States' position on this key issue.

          The Committee should commission a study of emerging 
        energy technologies that will improve U.S. energy efficiency. 
        This study should include a review of current federal, State, 
        and private industry RD&D programs, identify and assess 
        candidate technologies, project potential energy savings, and 
        recommend a set of RD&D priorities to the Department of Energy 
        and other affected agencies. Such a study should look at 
        energy-saving practices as well as energy-saving technologies. 
        In our recent work, we have found that R&D on practices (e.g., 
        best practice optimization techniques and software) can be just 
        as important as R&D on technologies. Also, in developing 
        research priorities, a balanced portfolio should be assembled. 
        We are concerned, for example, that R&D on fuel cells and 
        hydrogen are squeezing out important research on nearer-term 
        technology options such as improved hybrid vehicles. A balanced 
        portfolio is needed, just as investment professionals recommend 
        a mix of investments rather than putting all investment dollars 
        into a few high-risk gambles.

          The Committee should review the state and practice of 
        energy analysis in the Federal Government. This includes a 
        review of the macro-economic models and other analysis tools 
        used by the Energy Information Administration and other federal 
        agencies that do quantitative analysis of energy policy issues. 
        Our experience is that these models are frequently unable to 
        model the effects of energy technologies' effects on markets in 
        a ``bottom up'' fashion, and thus frequently underestimate the 
        potential economic benefits of energy efficiency RD&D and other 
        policy initiatives. Based on this review, the Committee should 
        make recommendations to the appropriate agencies for improving 
        their analytical processes and tools to better capture the 
        benefits of energy efficiency and other technologies.

    In conclusion, it is apparent that energy markets are becoming 
increasingly volatile and that energy prices are increasing. The amount 
of the increase is highly uncertain, but accelerated efforts to pursue 
energy efficiency would save consumers and businesses money and have a 
moderating impact on prices. There is much that policy-makers can do to 
increase energy efficiency, including expanding federal RD&D programs 
in order to keep developing new energy-saving technologies and 
practices. Such efforts will reduce energy bills, moderate energy 
prices, help protect the environment, and keep the U.S. competitive in 
the world economy.
    ACEEE appreciates the opportunity to share our thoughts with you on 
these important issues, and we look forward to working with the 
Committee on them in the future.

                     Biography for Steven M. Nadel

EXPERIENCE

American Council for an Energy-Efficient Economy, Washington, D.C., 
1989-present. Executive Director (2001-present); Deputy Director (1993-
2000); Senior Associate (1989-1992). Manage a non-profit research 
organization devoted to promoting energy efficiency through research 
and advocacy. Directed the Buildings/Equipment and Utilities programs 
for many years. Major activities include:

          Responsible for overall management of the 
        organization including supervising program directors, fund-
        raising, overseeing administrative systems, and working with 
        the Board of Directors.

          Directed Buildings and Equipment Program for many 
        years including work on appliance and equipment efficiency 
        standards, building codes, and market transformation programs. 
        Led successful effort to incorporate lamp, motor and HVAC 
        standards and luminaire and office equipment labeling in the 
        federal Energy Policy Act of 1992. Led efforts to adopt 
        additional efficiency standards that passed the U.S. House of 
        Representatives and the U.S. Senate in 2003. Played a leading 
        role in initiating market transformation programs promoting 
        high-efficiency refrigerators, clothes washers, residential and 
        commercial air conditioners, and commercial packaged 
        refrigeration systems. Continue to play a major role on U.S. 
        efficiency standards and market transformation programs.

          Directed Utilities Program for many years and 
        continue to play active role. Led path-breaking studies on 
        lessons learned from utility DSM programs (including 
        residential and commercial lighting programs) and on the 
        ``achievable potential'' from these programs. Currently active 
        in the development of public benefit programs and policies in 
        several states and in the development and implementation of 
        programs to promote advanced lighting, HVAC and refrigeration 
        technologies.

          Supervise Industry Program and led or assisted in 
        numerous studies. Co-authored a book for program and policy 
        planners on ``Energy-Efficient Motor Systems.''

          Lead and assist with projects to promote energy 
        efficiency in developing countries including work in China, 
        Thailand, India, and Egypt. Spent a year in China working on 
        projects to promote utility integrated resource planning (IRP) 
        and demand-side management (DSM) and to improve the efficiency 
        of refrigerators, air conditioners, motors and lighting 
        equipment in China. Co-wrote manual on IRP/DSM for Chinese 
        utilities and made a series of presentations in China. Led 
        development of Project Brief and Project Document for an $8 
        million GEF grant for the China Green Lights program. Continue 
        to advise on project implementation. Led development of a $1.5 
        million UNIDO/UN Foundation project to improve optimization of 
        motor systems in Shanghai and Jiangsu province. Currently 
        coordinate evaluation of this project. Assisting China National 
        Institute of Standardization to develop priorities for new 
        efficiency standards and labels. Technical lead on project 
        assisting Thai government to develop minimum efficiency 
        standards, labels and incentives for eight products.

          Led or assisted on numerous research projects, 
        leading to over 100 published papers.

New England Power Service Company, Westborough, MA, 1987-89. Senior 
Analyst (1988-89). Analyst (1987-88). Planned and evaluated energy 
conservation programs for a major electric utility. Supervised research 
assistants and consultants.

          Responsible for program evaluation and market 
        research for the Company's commercial and industrial (C&I) 
        lighting programs, new construction programs, stand-by 
        generation program, large C&I shared savings program and 
        residential water heater rebate program. Evaluation work 
        included energy savings, cost-benefit and process evaluations. 
        Market research included mail and phone surveys, focus groups 
        and market data analysis.

          Coordinated a collaborative planning process on 
        commercial and industrial programs involving Company employees, 
        the Conservation Law Foundation, and other interested outside 
        parties.

University of Massachusetts at Boston, 1988-89. Adjunct Professor. 
Taught undergraduate course entitled ``Energy Trends.''

Massachusetts Audubon Society, Lincoln, MA, 1983-87. Staff Energy 
Scientist and Energy Priority Coordinator. Responsible for coordinating 
energy programs for a statewide environmental organization.

          Coordinated planning for the Energy Transition 
        Priority, one of the Society's three major priorities for the 
        1980's.

          Directed research projects including projects to: 
        evaluate the fuel savings achieved by the statewide low income 
        Weatherization Assistance Program; estimate the costs and 
        benefits of appliance efficiency standards in Massachusetts; 
        and monitor the performance of innovative solar energy systems.

          Prepared educational materials including a widely 
        distributed series of consumer handbooks. Provided technical 
        training on energy conservation and solar energy issues to 
        community groups. Directed technical training for regional 
        operators of a statewide, residential, energy conservation loan 
        program.

          Participated in public policy forums. Testified on 
        energy issues before the Massachusetts legislature and state 
        regulatory bodies. Member of official state boards dealing with 
        the energy sections of the Massachusetts building code, the 
        Residential Conservation Service, and urea-formaldehyde foam 
        insulation.

          Wrote and administered grants.

Independent Consultant, New Haven, CT, 1982-1983. Responsible for 
coordinating projects for several clients with an emphasis on energy 
conservation in multi-family housing.

          Evaluated the Hartford Heating Plant Efficiency Loan 
        Program--a program for improving heating systems in multi-
        family housing.

          Coordinated and authored an analysis on the impact of 
        energy prices on housing abandonment and condominium conversion 
        in Hartford, CT.

Wesleyan University, Middletown, CT, 1982. Teaching Associate. Taught 
undergraduate course entitled ``Energy Policy: Conflicting Values, 
Difficult Choices.''

Home Maintenance Corporation, New Haven, CT, 1979-1981. Energy 
Coordinator. Responsible for energy conservation, alternative energy, 
energy planning and energy instruction programs for a non-profit 
community group working in the Upper Hill, New Haven's poorest 
neighborhood.

          Developed a ``one stop shop'' energy conservation 
        program. Set up energy audit and financial counseling 
        procedures, and trained and supervised workers in them.

          Helped develop and implement procedures for 
        integrating energy conservation work into the organization's 
        housing rehabilitation activities.

Congressman Morris Udall, Washington, D.C. Summer, 1975. Intern. 
Researched and wrote on land use issues.

EDUCATION

M.S. in Energy Management, New York Institute of Technology, Dec., 
1985. Program combined engineering, energy management and business 
administration classes. Thesis on low income weatherization programs.

M.A. in Environmental Studies, Wesleyan University, Jan., 1980. Thesis 
on energy use, conservation and supply in urban areas.

B.A. in Government, magna cum laude, Wesleyan University, May, 1979.

Energy Engineering, Rensselaer Polytechnic Institute. Graduate course 
work in energy conversion systems, thermodynamics and heating, 
ventilating and air conditioning analysis.

PROFESSIONAL AFFILIATIONS

American Society of Heating, Refrigeration and Air Conditioning 
        Engineers--member of SSPC 90.1 for many years (Energy-Efficient 
        Design of New Commercial Buildings).

Northeast Energy Efficiency Partnerships--member Board of Directors, 
        Chair of Program Committee.

New Buildings Institute--member Board of Directors and Treasurer.



    Chairman Biggert. Thank you very much.
    And now Mr. Konove is recognized.

   STATEMENT OF MR. PAUL KONOVE, PRESIDENT, CAROLINA COUNTY 
                BUILDERS OF CHATHAM COUNTY, INC.

    Mr. Konove. Yes. Good morning, Madame Chairman and Members 
of the Subcommittee. Thank you for inviting me to present my 
views on the potential of the home-building sector in meeting 
our nation's energy challenges. My name is Paul Konove, and I 
am from Pittsboro, North Carolina. I am honored to be here on 
behalf of my company and on behalf of the Sustainable Buildings 
Industry Council.
    SBIC's mission is to advance the design affordability, 
energy performance, and environmental soundness of buildings 
nationwide. My company designs and builds custom homes in 
central North Carolina, as was said earlier, in the Raleigh, 
Durham, Chapel Hill area. Nearly all of my firm's homes rely on 
passive solar design. The homes and additions we have completed 
utilize a variety of architectural styles and a variety of 
budgets. In my experience, I can tell you that sustainable 
buildings offer enormous potential for addressing our nation's 
energy needs. I agree with SBIC's position that a new 
coordinated U.S. buildings program with coherent long-term, 
non-partisan research, development, and deployment programs on 
the national level is necessary to achieve better buildings and 
housings nationwide.
    I am going to give you my perspective as a homebuilder and 
the perspective of SBIC on the questions that you have asked of 
us.
    In my opinion, there are a number of building strategies 
that improve the performance of the houses that we build today 
because of improvements in technology, and many of them are 
cost-effective now. In brief, there are products for 
foundations, exterior walls, and windows, to name a few, that 
are utilizing innovative new technologies and now allow for 
much greater building efficiency. Depending upon why and how 
these products are used, they may be cost-competitive with 
conventional products. Fluorescent lighting, both fixtures and 
lights, are now more available and more affordable than just a 
few years ago. And there are numerous energy-efficient 
appliances available on the market, and the Energy Stock 
program is helping customers identify these products.
    If solar access and proper orientation are provided, I 
believe passive solar design and solar hot water technologies 
are cost-effective today. Passive solar design can provide 
space heating in winter and space cooling in summer. Also, 
building analysis tools, such as Energy-10 software designing 
low-energy buildings, helps us make cost-effective design 
decisions. Solar water heating systems, when included in a 
mortgage, will have a net positive impact on monthly payments. 
The first home in which I consciously incorporated a whole 
building framework was completed in 1991. The result was a home 
that included passive solar design and many other features. My 
company continues to use this whole building approach, and, 
when possible, we have worked to incorporate new products and 
strategies when the opportunities allow. I have learned that 
the potential for incorporating energy-efficient and renewable 
energy strategies in new homes is not limited by the design 
style or construction--excuse me, design style or the project 
cost. If whole building strategies are not incorporated into 
the design and construction planning, they will be difficult to 
include at a later date and will likely cost more at the end of 
the overall project. An integrated approach to design is the 
most important way to ensure a high-performance and cost-
effective building.
    When I participated in the Exemplary Home Program, I 
learned that our homes' solar designs substantially minimized 
our need for air conditioning in the hot North Carolina summer. 
The barriers to passive solar, solar water heating, and 
photovoltaics, I believe, are not technical but rather a lack 
of awareness by builders and customers. There is still a need, 
though, for materials research and development and mass 
production to reduce the cost of photovoltaics. SBIC has also 
cited an urgent need for R&D in the area of building 
performance, monitoring, and verification. Many of the energy-
efficient renewable technologies that my company and others 
around the country are building are very cost-effective today, 
I believe.
    I postponed an appointment for this morning with a 
developer planning a large project in the county where I live. 
We were to discuss how these whole building ideas might be 
applied to the development they are planning. I believe his 
interest resulted from attending educational activities in my 
area and the opportunity to meet someone experienced with the 
whole building approach. But this type of contact is not the 
norm for most builders in the country.
    For an industry as important to the Nation's economy as 
construction, there should be a coordinated federal strategy 
for integrating energy efficient and renewable technology into 
our building methods. Cooperative Extension Service for years 
has provided this type of reliable information and training for 
our nation's farmers. One could argue that the construction 
industry should be supported in a similar fashion in order to 
remain strong and advanced technologically. Residential 
buildings represent approximately 20 percent of all U.S. energy 
consumption. Heating and cooling consume the most energy in 
buildings. We can cut energy consumption of our homes 
dramatically if we, as a country, set our minds to achieving 
this goal.
    Madame Chairman and Members of the Subcommittee, thank you 
very much, and I look forward to answering any other questions.
    [The prepared statement of Mr. Konove follows:]

                   Prepared Statement of Paul Konove

Madam Chairman and Members of the Subcommittee:

    Thank you for conducting this important hearing and for inviting me 
to present my views on the potential of the building sector--and of 
energy efficient, sustainable single-family homes in particular--in 
meeting our nation's energy challenges. My name is Paul Konove, and I 
started Carolina Country Builders in 1985 in Pittsboro, North Carolina. 
I am honored to be here today on behalf of my company and also on 
behalf of the Sustainable Buildings Industry Council, also known as 
SBIC, an organization I first joined in the early '90s. The Council's 
mission is to advance the design, affordability, energy performance, 
and environmental soundness of residential, commercial, and 
institutional buildings nationwide. I am also a member of the National 
Association of Home Builders and my local home builders association.
    This morning I will discuss the opportunities I see for the 
buildings sector--and home building in particular--to be part of a 
national strategy toward energy independence. From my experience as a 
home builder, my training as a mechanical engineer, and my involvement 
in the solar building industry over the last 19 years, I can tell you 
that sustainable buildings offer enormous potential for addressing our 
nation's energy needs. Moreover, they can contribute significantly 
toward solving other critical issues: housing affordability, water 
quality and supply, environmental protection, economic strength, and 
the health and safety of the American people. It is essential that 
builders and designers, government program administrators, and policy-
makers understand the importance of integrating energy efficient 
building technologies and renewable energy technologies if we are to 
achieve this goal for the buildings sector.
    My company designs and builds custom homes in a two-county area 
that is part of the Triangle Region of North Carolina, which is the 
area around the cities of Raleigh, Durham, and Chapel Hill. My firm 
focuses mainly on new solar homes, although periodically we have built 
additions to existing homes. Nearly 100 percent of the new homes and 
more than 75 percent of the additions we have built rely on passive 
solar design, which I will address later. The homes have many different 
architectural styles, and the project budgets are diverse. Besides my 
design and construction work, I have been involved in solar energy 
education and training activities in North Carolina. To keep my 
business on the leading edge, I strive to be aware of national 
activities and building trends related to energy efficiency, renewable 
energy and sustainability. As a small-volume builder, I am 
representative of many U.S. home-building companies. According to the 
National Association of Home Builders, 68 percent of their members have 
four or fewer employees, and 15 percent of their members build 10 or 
fewer houses per year.
    Madam Chairman, you asked me to respond to some specific and 
important questions about energy efficiency and renewable energy 
technologies in buildings. I am eager to give you my perspective as a 
home builder, and I am also proud to provide SBIC's perspective on 
these questions, a perspective resulting from a quarter-century of 
research and development of policy positions, publications, technical 
training, and other resources on ``low energy,'' sustainable buildings.
    Because of the complexity of building a home, as a builder it is 
easy to focus only on the immediate task at hand rather than the big 
picture of the entire project. But for nearly fifteen years, there has 
been a growing understanding from building scientists and others in the 
construction profession that the design and construction of a home 
needs to be addressed as a complete system. Therefore, I would like to 
address your questions in the context of a ``whole building'' approach 
to design and construction. Many architects, builders, home owners, 
commercial building owners, and policy makers are adopting a more 
holistic view of building design. Instead of viewing a building as a 
collection of discrete parts, they know that their home, school, or 
office building will perform better if it is designed as a system of 
interrelated parts. Of course, these parts must also perform well, and 
this is where R&D on specific technologies is also important. But it is 
how we put these technologies together that I believe, SBIC believes, 
and these forward-thinking architects, builders, owners, and policy-
makers believe, is what will truly advance the performance of buildings 
in the United States and enable the building sector to live up to its 
potential in meeting our energy needs, environmental challenges, and 
goals for affordable, comfortable, and healthful homes and buildings.
    As defined in the Renewable Energy Policy Project (REPP) Research 
Report of September 1998, Putting it Together: Whole Buildings and a 
Whole Buildings Policy, ``The whole buildings concept represents a 
method of siting, design, equipment and material selection, financing, 
construction, and long-term operation that takes into account the 
systems nature of buildings and user requirements. It treats the 
overall building as an integrated system of interacting components. 
Thus it is more performance-based than prescriptive.''
    As one of SBIC's workshop instructors puts it, there is no magic 
bullet that will make a building energy-efficient, cost effective, 
sustainable, comfortable, and healthful. There is no single product, 
material, or technology that will suddenly make the building perform 
well for those who breathe the air inside or pay the utility bills. 
While building product manufacturers are making amazing strides in the 
energy and environmental performance of their products, what is 
essential is how all the building components work together. Components 
should be carefully considered before the designer makes one sketch, 
and they should be selected based on how they will interact with the 
other building components. These decisions should be based on goals for 
the project/home that the owners and designers establish in the 
earliest stages of programming and design. If these components are not 
chosen early on, it will be difficult, more costly, or perhaps 
impossible to complete a building that is energy efficient and/or that 
has superior indoor air quality and other ``high performance'' 
features.
    The Sustainable Buildings Industry Council is one of the few (if 
not the only) organizations that brings many different buildings-
related trade associations, architectural/engineering firms, utilities, 
consultants, product manufacturers, academic institutions, and builders 
together under one umbrella in order to advance the knowledge and 
create the user friendly tools that help designers and builders make 
complex decisions.

The Federal Government's Role in Buildings R&D

    The building construction industry is highly fragmented, with 
hundreds of thousands of architects, engineers, contractors, 
subcontractors and construction workers, as well as a complex system of 
real estate investors, financiers, and owners. No one builder has more 
than five percent of the market (Builder magazine, 2000). The industry 
is both structurally incapable and economically unmotivated to take 
responsibility for the required level of whole building research and 
strategic coordination that can yield major economic and environmental 
benefits.
    SBIC believes that a new, coordinated U.S. Buildings Program can 
bring together isolated building research programs throughout the 
government, integrate the full range of advanced building components 
developed by individual companies and organizations, disseminate the 
results of building science research conducted by government labs, and 
concentrate the efforts of diverse segments of the building industry. 
The program should consolidate various federal energy efficiency, solar 
and renewable technologies, and all other building-related programs 
into a single, integrated effort with a strong, clear vision of high-
performance buildings in America's future. Only a coherent, long-term, 
nonpartisan research, development and deployment program on the 
national level can achieve the necessary next step in achieving better 
buildings and houses nationwide. As articulated in the REPP report,

A robust U.S. Buildings Program:

          Is based on a whole building approach

          Provides sufficient long-term resources for 
        professional training and public education

          Funds collaborative, fundamental, and applied 
        research on building energy performance

          Partners with industry to stimulate demand for high-
        performance buildings through public awareness

          Supports development of prediction and verification 
        tools for measuring building energy performance, cost 
        effectiveness, environmental soundness, and other important 
        attributes.

Industry-Government Collaboration

    Industry needs to inform and contribute to this effort. Programs 
that foster industry-government collaboration are making great strides. 
The Department of Housing and Urban Development's Partnership in 
Advancing Technology in Housing, also known as ``PATH,'' helps builders 
and consumers understand and adopt new housing technologies that help 
them attain various goals, including energy efficiency 
(www.pathnet.org). The U.S. Department of Energy's Building America 
program is teaching production builders how to build sustainably, cost 
effectively, and profitably. The DOE Zero-Energy Buildings program, 
also known as ``ZEB,'' was established to fund projects that provide 
builders with new and innovative ideas on how to minimize residential 
energy consumption and use more renewable energy to power a home. The 
National Association of Home Builders Research Center worked with a 
builder who designed a home that is capable of achieving net-zero 
energy consumption. The Tucson Zero Energy Home was modeled with the 
energy analysis tool, ENERGY-10, and features active solar space and 
water heating, energy-saving fluorescent lighting, low-flow plumbing 
fixtures, Energy Star rated appliances, a high efficiency air 
conditioner, radiant barrier roof decking, windows that minimize solar 
heat gain, and air admittance plumbing vents, among other energy 
efficient features. Because ZEB is one of the few federal programs that 
focuses on building integration, we were alarmed when it looked like it 
would get lost in the budget battle. Ironically, it fell through the 
cracks between the jurisdictions of the Appropriations Committee's 
Energy and Water Subcommittee, which funds DOE's solar programs, and 
the Interior Subcommittee, which funds DOE's buildings (energy 
conservation) programs.
    And now to your specific questions. . .

1a.  What are the key technology improvements that can result in cost-
effective savings in today's homes and buildings?

    In my opinion, there are a number of strategies, made possible by 
improvements in technology, that improve the performance of houses we 
build today. Many are cost effective now. Here are some that are 
included in SBIC's Green Building Guidelines: Meeting the Demand for 
Low-Energy Resource-Efficient Homes (4th Edition).

1) Community and Site Planning
    This is not a technology, but it sets the stage for the rest of the 
project: Proper orientation of homes and of streets and lot layouts in 
a development are critical for achieving optimal solar access and 
encouraging the use of site-generated solar energy. In addition, 
incorporating sustainability principles in community and site planning, 
such as increasing density, locating new development on infill sites to 
be near schools, shopping, and public transportation, and clustering 
homes and buildings to reduce infrastructure and preserve undeveloped 
land, helps to protect our nation's valuable natural resources.

2) Renewable Energy
    If solar access and proper orientation are provided, passive solar 
design and solar hot water technologies are cost effective today. 
Building analysis tools such as Designing Low-Energy Buildings with 
ENERGY-10 software have been helpful in determining how much passive 
solar design to incorporate into various projects. I have found these 
analysis tools are also helpful when discussing design, materials, and 
cost issues with my clients. Potentially complex issues can be 
presented in easy to read, graphical format.

3) Building Envelope
    Air infiltration control has become a critical issue in housing. 
There have been technological improvements in recent years in the 
quality and longevity of caulks and sealant products used for this 
work. This work is not expensive and allows HVAC systems to be sized 
smaller (or ``right-sized''), which balances out extra costs spent on 
tightening up a home. HVAC systems have been improved as well. We now 
have variable speed fans and much more efficient systems than even just 
a few years ago. Foundations, exterior walls, and windows are utilizing 
innovative new technologies that now allow for much greater building 
efficiency. Examples of these products are structural insulated panels 
(or SIPs), also known as stress skin panels, and insulating concrete 
forms (or ICFs) for exterior walls, and windows with high-performance 
glazing. Depending on why and how these products are used, they may be 
cost competitive with conventional products. I believe they are all 
poised for more widespread integration into the construction industry.

4) Energy Efficiency
    Installing ductwork within the envelope of the home, insulating it 
sufficiently, and making it tight are excellent energy saving 
techniques. A blower door test and a duct blaster test have been 
developed to determine the quality of the installation and extent of 
air leakage. These test methods, plus more highly efficient equipment, 
help ensure that consumers are getting what they are paying for.
    Compact fluorescent lighting (both fixtures and lights) are now 
more available at affordable prices, even at large building material 
retailers. There are numerous energy efficient appliances available on 
the market, and the Energy Star program is helping consumers identify 
these products. I recommend to clients that they investigate these 
products.
    Manufacturers of traditional and innovative building products, many 
of whom are members of SBIC (http://www.sbicouncil.org/about/
members.html), are meeting the needs of sustainable building designers. 
These designers are creating buildings that save energy and provide 
comfort and health for their occupants, because they are integrating 
excellent products early in the design process. They are also using 
energy analysis tools to ensure cost effective design. For efficient 
buildings to become the norm, however, designers and builders must be 
able to estimate whole building performance confidently. Designers must 
have verification and demonstration that the individual products and 
systems have been combined and installed with a whole building approach 
and are cost effective across a variety of climates and building types, 
in both new construction and retrofits.

1b.  Are there renewable energy technologies that can be utilized in 
new construction in a cost-effective manner?

    Passive solar design, which utilizes the local climate 
characteristic, allows the building itself to collect, store, and 
distribute energy from the sun and can provide space heating in the 
winter and space cooling in the summer. Those trained to apply passive 
solar design strategies can do this without adding to the design costs, 
and this design significantly reduces the need for purchased energy 
from nonrenewable sources. Passive solar homes have been built across 
the United States for more than 30 years.
    Solar water heaters installed in new homes can provide about 50 
percent of the hot water needs of a typical family, and, if included in 
the mortgage, can have a net positive impact on the monthly payments. 
Solar water heaters are a mature technology and are widely used 
throughout the United States.
    Photovoltaic systems installed in new, energy efficient houses can 
provide a portion or all of the electrical energy. This may even be 
considered a cost effective technology if it's included in the mortgage 
(in states that have financial incentives) and/or if a portion of the 
power generated is sold back to the utility company (for example, 
during the day when the home's energy needs are minimal).

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

    The first home in which I consciously incorporated this whole 
building framework was completed in 1991. I participated with the 
architect and the owner as a member of the design team. The result was 
a home that included the following features:

          Passive solar design

          Advanced framing

          High insulation levels and minimization of air 
        infiltration

          Efficient heating and air conditioning equipment

          Low-flow plumbing fixtures

          Efficient lighting through extensive use of compact 
        fluorescents and energy efficient appliances

          Recycling center

          Materials that were chosen for longevity and minimal 
        off-gassing

          Preparation for the installation of solar hot water 
        in the near future (since at that time North Carolina's solar 
        energy tax credits discouraged more than one completed solar 
        system per year).

    Since that project, Carolina Country Builders has continued to use 
these strategies and to incorporate new products and strategies as much 
as possible, all with an awareness of the impact on the design and cost 
of the project.

2b.  What have been the successes and the challenges?

    An important thing I have learned from my experience is that the 
potential of energy efficiency and renewable energy strategies is not 
limited by design style or project cost. Another is that if these 
strategies are not incorporated into the planning process for both 
design and construction, they will be difficult to include at a later 
date, and will likely be more costly than if included from the 
beginning. One of the surprising things I learned about building 
passive solar homes resulted from my participation in the National 
Renewable Energy Laboratory's Exemplary Homes Program. Our own home was 
monitored for a year under that program. The results convinced us that 
passive solar design kept us warm in our cold winters and contributed 
in substantial ways to keeping us comfortable even in the hot central 
North Carolina summers. It was not the temperature but the humidity 
that caused the air conditioning system to run. Because we used SBIC's 
design guidelines when designing our home, we also have better natural 
ventilation and substantial cost savings on summer electricity bills. 
The rule of thumb is that seven percent of the home's floor area should 
contain operable windows. Since most of the new housing will be built 
in the South (according to NAHB State and Metro Building Permits, March 
2004 ``Building Permit Activity for 2003''), I believe this is an 
important lesson to share with others.
    Through the years, I have had both employee and subcontractor 
turnover. I am continually pleased to find people who are interested in 
working on and learning about the homes I build. But when I have to 
change subcontractors or find new employees, I have only a few to 
choose from who have the skills I require. Otherwise, I have to do on-
site training.
    Although this changes over time, one of my frustrations is that new 
products or techniques that are available in one portion of the country 
are not available in my location. I believe the reason for this is the 
lack of demand, which comes from a lack of awareness or training about 
the benefits and cost effectiveness of these strategies.

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

    Passive solar, solar water heating, and photovoltaics are all ready 
for greater use. The biggest barriers are not technical in nature, but 
rather involve a lack of simplified design tools and awareness by both 
builders and customers. Volume production of solar water heaters would 
result in economies of scale, which I believe would create significant 
market growth. The next version of ENERGY-10 will be such a tool--
combining energy efficiency, passive solar design, solar hot water, and 
PV in the same fast and accurate software package. The renewable energy 
portfolio standards that are becoming widely used in some states to 
encourage greater use of renewable energy often do not pertain to 
design strategies such as passive solar and technology such as solar 
hot water systems. Those policies should be expanded to include these 
strategies and technologies, as that will significantly open new 
markets.
    There are probably many areas of energy efficiency and renewable 
energy that need research, but I am only familiar with a few. One is 
advanced thermal storage (or plasterboard with integral phase change 
storage), which could enhance performance of passive solar homes while 
allowing builders to continue using conventional construction methods. 
I am aware that there is some work in the area of advanced electrically 
sensitive or switchable glazings that would reduce heat loss in winter 
and reduce heat gains in summer.
    There is still a need for materials research, development and 
deployment and volume production to reduce the cost of photovoltaics. 
Lower cost inverters and lower cost battery storage will allow 
photovoltaic systems to provide stand-by emergency power, which is an 
especially valuable capability in terms of energy independence and 
building security systems.
    SBIC believes there is an urgent need for research, development, 
and deployment (RD&D) in monitoring and verifying of building 
performance. As noted in the REPP report, and this remains true today, 
we must continue to invest in software tools that are fast, inexpensive 
to use, and accurate, and that permit easy analysis of building 
envelope and component alternatives, including the effects of their 
interactions. It is also important that the software gives design 
guidance, setting priorities on strategies that, in interaction with 
other approaches, deliver the highest or most cost effective return for 
the package. ENERGY-10 is good, but it needs further development, such 
as the inclusion of PV as a design option, which has been planned for 
nearly five years. These tools must be supplemented by objective, well-
documented case studies and demonstrations to validate computer models, 
provide monitored data on actual building cost and performance, and 
give confidence to both consumers and lending institutions.

3b.  What technologies are ready for the marketplace but need improved 
technology transfer to be widely adopted?

    Many of the energy efficient and renewable technologies my company 
and other builders around the country are using are cost effective 
today, but they are not widely used because builders are busy 
responding to their clients and do not have time to learn about new 
technologies. For an industry as important to the Nation's economy as 
construction, there should be a coordinated strategy for educating and 
training those in the construction industry about these technologies 
and building methods. Achieving the integration of these methods into 
standard building practices will enable construction companies to be 
more profitable, provide consumers with more disposable income by 
saving on their utility bills, and help the national economy by keeping 
the construction industry strong.
    Prior to being asked to testify today, I had an appointment 
scheduled this morning with a representative of a California-based 
developer planning to build a large mixed-use community in the county 
where I live. He is an active member of our local home builders 
association, an organization where we have had numerous educational 
presentations on green building products and strategies over the last 
two years. He asked to learn more about green building and how it might 
be applied in the developments they are planning, both local and 
otherwise. My point in mentioning this meeting relates to my 
perspective on deployment methods of energy efficiency and renewable 
energy for the construction industry. I would suggest that his interest 
was the result of continued local educational activity and the 
opportunity to come in contact with someone he thinks of as 
knowledgeable. There is a model for this type of technology transfer 
that has supported a vital member of our nation's economy for many 
years: The agriculture industry's cooperative extension service 
provides reliable information and training for our nation's farmers. 
Another model is the Manufacturing Extension Center program, which was 
established by the U.S. Trade and Competitiveness Act of 1988. I would 
think that the construction industry could benefit in a similar 
fashion.
    SBIC has developed a number of programs to disseminate information 
to builders, consumers (Green Building Guidelines and seminars), K-12 
school board members and administrators (High Performance School 
Buildings Research and Strategy Guide and workshops), federal project 
managers (workshops on Low-Energy, Sustainable, Secure Building Design 
for Federal Managers), and designers of small commercial buildings 
(Designing Low-Energy Buildings with ENERGY-10 workshops). The Council 
has conducted hundreds of training activities, but this meets a 
fraction of the need. Those who procure buildings need to know how to 
ask for high performance, and building designers need to learn how to 
deliver it. Individual, community, state, and federal building 
decision-makers must be introduced to the benefits of whole building 
concepts, and architects, engineers, and building operators must be 
trained to understand how to pursue their trades in the context of 
whole building performance. At the very least, this will require the 
introduction and widespread dissemination of user-friendly whole 
building design tools that can lead owners and designers to sound 
decisions based on accurate simulations. Again, because of the 
fractured nature of the buildings industry, there is an important role 
for the Federal Government in developing software tools that no one 
group could develop alone and in providing education, training, and 
technology transfer programs that will help stimulate a transformation 
of the marketplace. It is also appropriate for the Federal Government 
to stimulate consumer demand for whole building designs that integrate 
efficiency and renewable energy sources.

4a.  How do energy efficiency improvements in new construction differ 
from retrofitting older buildings?

    In my opinion, all the energy efficiency strategies available to 
new homes can be used for existing homes, although some of the 
products, techniques, and/or their cost effectiveness may change. 
Renewable energy strategies are different. If the existing structure is 
not oriented correctly to take advantage of sun angles, it may or may 
not be feasible. Proper orientation for solar roof panels ensures 
optimal cost effectiveness and aesthetics. In recent years we have been 
installing more solar hot water systems on homes because of changes in 
the North Carolina tax law that allows for multiple systems to be 
completed within the same year. I am currently building a passive solar 
home where we will be installing both solar hot water and a two 
kilowatt photovoltaic system. I look forward to building a net zero 
energy home, but most builders are not yet ready for this. Their homes 
are not energy efficient enough to justify and support a renewable 
energy system. Here's an analogy: When doctors plan a heart transplant, 
they make sure that the body is in good enough health to receive the 
new heart. We should likewise have our housing in good health so that 
we can integrate renewable energy systems and build cost effective net 
zero energy homes.
    With new construction, owners might have an ability to select a 
site that provides excellent solar access, and designers often have the 
ability to properly orient the building on the site. Existing 
structures may have existing conditions that are difficult or 
impossible to change.

4b.  Given that about half the housing we expect to have in the year 
2025 has not yet been built, what contribution can improved 
technologies make toward reducing the energy demands of the future 
housing stock?

    Applying no-cost and low-cost design principles can lower the 
energy consumption of the future housing stock by 30 to 50 percent. By 
applying a whole building approach in the design and development of 
homes, we can realize improved comfort, water-efficiency savings, 
improved indoor environmental quality, and material efficiency. As 
stated in SBIC's Green Building Guidelines, a publication created by 
home builders for home builders, the millions of homes built every year 
require a combination of wood, concrete, glass, metal, and other 
products. These residential buildings consume approximately 20 percent 
of America's energy every year thereafter in the form of energy 
consumption and maintenance needs. It is not necessary for our homes to 
be so energy and resource intensive.
    There is enormous potential for savings in the home building 
sector. Buildings account for 36 percent of total U.S. energy 
consumption and two-thirds of the electricity used. Residential 
buildings represent approximately 55 percent of that. Heating and 
cooling consume the most energy in buildings. In residential buildings, 
water heating and refrigeration are the next biggest energy consumers, 
accounting for 24 percent of the energy consumed. (Energy Research at 
DOE: Was It Worth It? Energy Efficiency and Fossil Energy Research 1978 
to 2000, http://books.nap.edu/books/0309074487/html/24.html 2001)
    Currently, there are approximately 100 million residential 
buildings in the United States (EIA, 1996). The annual rates of growth 
and replacement of this building stock have been approximately two 
percent for residential buildings over the last 20 years (EIA, 1997). 
Thus, approximately two million new residential buildings and 200,000 
commercial buildings have been constructed each year. (Energy Research 
at DOE: Was It Worth It? Energy Efficiency and Fossil Energy Research 
1978 to 2000, http://books.nap.edu/books/0309074487/html/24.html 2001)
    Wind, solar, biomass, and geothermal power, although growing, still 
supply only a tiny fraction of U.S. energy needs. In January 2000, 
however, the U.S. DOE's National Renewable Energy Laboratory released a 
report which said that the domestic PV industry could provide up to 15 
percent of ``new U.S. peak electricity capacity expected to be required 
in 2020.'' In 2002, shipments of solar PV cells and modules expanded by 
15 percent, to around 112 megawatts, according to EIA's Renewable 
Energy Annual 2002. The average unit price of PV cells decreased in 
2002 by 14 percent, to $2.12 per peak megawatt. Solar thermal collector 
manufacturing rose modestly in 2002, consistent with the general 
pattern seen since 1992 (except for a sharp rise between 2000 and 
2001). Total shipments of solar thermal collectors rose four percent, 
to 11.7 million square feet. (US DOE Energy Information 
Administration--Country Analysis Briefs--USA http://www.eia.doe.gov/
emeu/cabs/usa.html as of April 2004).
    Sustainable building design benefits the environment. The United 
States, with the world's largest economy, is also the world's largest 
single source of human-caused greenhouse gas emissions. Quantitatively, 
the most important of these is carbon dioxide, which is released into 
the atmosphere when fossil fuels (i.e., oil, coal, natural gas) are 
burned. Current projections indicate that U.S. emissions of carbon 
dioxide will reach 5,985 million metric tons in 2005, an increase of 
1,083 million metric tons from the 4,902 million metric tons emitted in 
1990, and around one-fourth of total world energy-related carbon 
emissions. (US DOE Energy Information Administration--Country Analysis 
Briefs--USA http://www.eia.doe.gov/emeu/cabs/usa.html as of April 
2004).
    Sustainable design makes homes more affordable. The average 
household spends six percent of its gross annual income on energy. For 
a low income household, this number is 12 percent. (Department of 
Health and Human Services FY 2000 Home Energy Data, http://
www.acf.dhhs.gov/programs/liheap/notebook.htm).
    Sustainable building design is important to our nation's economic 
health. Single-family and multifamily construction, plus remodeling, 
account for about 15 percent of the Nation's total economic activity. 
During economic recoveries, housing's impact on the economy is even 
greater, accounting for up to one-third of the change in the gross 
domestic product. (NAHB 2004 Housing Facts and Figures, www.nahb.org). 
According to a report in April 2004 by researchers at the University of 
California at Berkeley, renewable energy promotes U.S. job growth 
better than investment in fossil fuels. The report states that 
investing in renewable energy such as solar, wind, and the use of 
municipal and agricultural waste for fuel would produce more American 
jobs than a comparable investment in the fossil fuel energy sources in 
place today. ``Across a broad range of scenarios, the renewable energy 
sector generates more jobs per average megawatt of power installed, and 
per unit of energy produced, than the fossil fuel-based energy 
sector,'' the report concludes. In terms of net employment, the report 
states that ``all states of the Union stand to gain from the 
implementation of a portfolio of clean energy policies at the federal 
level.'' (http://www.eurekalert.org/pub-releases/2004-04/
uoc-rep041304.php April 2004)
    Sustainable building design is important to human health. According 
to the U.S. EPA, indoor air levels of many pollutants may be two to 
five times, and occasionally more than 100 times, higher than outdoor 
levels. Indoor air pollutants are of particular concern because most 
people spend as much as 90 percent of their time indoors. Children are 
especially vulnerable because of their small size and early stage of 
growth. Common sources can include burning kerosene, wood or oil, 
smoking tobacco products, releases from household cleaners, pesticides, 
building materials, and radon. (http://www.epa.gov/air/concerns/)

    Madam Chairman and Members of the Subcommittee, I want to thank you 
for this opportunity to share my views and SBIC's perspective on 
sustainable building design. There is no doubt that buildings can be 
part of the solution to our energy challenges. I look forward to 
answering your questions and to continuing this dialogue.

                       Biography for Paul Konove

    Paul Konove is the President of Carolina Country Builders, a 
design/build firm based in Pittsboro, NC. He graduated a BS in 
Mechanical Engineering in 1971.
    Carolina Country Builders was founded in 1985. The work of the 
company focuses mainly on new custom solar home design and 
construction. The company builds homes primarily on large lots from 
$150,000 to under $600,000. In 1986-87 Konove, chaired the N.C. Solar 
Energy Association (NCSEA--now the N.C. Sustainable Energy Association) 
and assisting in founding the N.C. Solar Center (established at N.C. 
State University). Konove also assisted in founding the Chatham Home 
Builders Association in Chatham County, N. C. From 1993-97 Carolina 
Country Builders participated in the National Renewable Energy 
Laboratory's Exemplary Homes Program. Konove has both chaired and 
assisted in organizing numerous NCSEA solar home tours in the Triangle 
region of North Carolina and in 2003 initiated the expansion of the 
tour to North Carolina's first coordinated statewide green home 
building tour.
    Integral to Konove's work over the years are educational 
presentations that encourage the practical and affordable use of 
renewable energy, with a focus on passive solar energy and more 
recently green building strategies. Participants of these training 
sessions typically include builders, architects, engineers, and 
consumers. Over the years, these activities have occurred at National 
conferences, around North Carolina and at local community events.

AWARDS

``Special Recognition for Energy Innovation'' awarded by U.S. 
        Department of Energy Technology Transfer--1984

Custom Home of the Year Award for Best Environmental Design from Custom 
        Builder (The Magazine for Builders of Premier Homes)--1992

Solar Hall of Fame Award for recognition of his ``many years of 
        outstanding effort as a designer, builder, community organizer, 
        educator and advocate of solar energy and green building'' by 
        the North Carolina Sustainable Energy Association--2003

PRESENTATIONS/SEMINARS

``The Greening of America's Homes''--2004 NAHB National Green Building 
        Conference, Austin, Texas

``Green Building Opportunities & Techniques''--21st Century Building 
        Expo & Conference, N.C. Home Builders Association, Charlotte, 
        NC 2004

``Green Building Design & Construction'' at NCSEA portion of 2003 ASES 
        National Green Building Tour

``Green Building Guidelines''--Boone, N.C. for the NC Solar Center--
        2003

Solar Home Building Course--N.C. Solar Center--2001

Solar Design and Construction seminar presentation at NCSEA portion of 
        ASES National Tour of Solar Homes

         ``All you ever wanted to know about thermal mass for solar 
        homes''--2000

         ``Passive Solar Design Rules of Thumb''--1998

Builders Forum for the American Solar Energy Society (ASES) Annual 
        Conference, Minneapolis, Minn.--1995

    Chairman Biggert. Thank you very much.
    Ms. Loftness, you are recognized for five minutes.

     STATEMENT OF MS. VIVIAN E. LOFTNESS, HEAD, SCHOOL OF 
            ARCHITECTURE, CARNEGIE MELLON UNIVERSITY

    Ms. Loftness. I am going to use visuals. As a trained 
architect, there is nothing better than visuals to communicate 
an idea, although I have lost my own visuals. Oh, there.
    [Slide.]
    I am representing a handful of universities across this 
country that have graduate level master of science and Ph.D. 
programs in building research. And indirectly through my 
positions, I represent the American Institute of Architects 
Committee on the Environment, as well as the U.S. Green 
Building Council, where I serve on the board.
    I am going to try to rapidly go through some key points 
that I think are critical to this debate. One is that buildings 
consumer over 35 percent of U.S. energy and over 60 percent of 
U.S. electricity, and they are an extremely tiny portion of the 
U.S. R&D budget. Two is that U.S., through that energy 
consumption, also consume a significant amount of water as well 
as in the building processes themselves in materials, and they 
create over 30 to 40 percent of U.S. pollution and waste. The 
energy consumption story is rising in almost all sectors, but 
it is rising the most rapidly in buildings and in 
transportation related to building land use.
    There is significant potential for impact in a broad range 
of building attributes, from lighting, to cooling, to power, to 
heating, to land use, and to material selection. And I would 
like to highlight five technologies that have a major impact. 
Number one, appliance and equipment energy standards and 
innovations have saved between 50 and 75 percent of the energy 
use while increasing functionality and, in fact, increasing our 
export opportunities. And these include ballasts and lamps and 
refrigerators, and air conditioners, and controls. Much of this 
has been supported through federal funding at Department of 
Energy and the national labs. And as was mentioned before, we 
are looking at things that multiply from one to 20,000 times 
the benefits from the costs.
    If you look at the impact of standards, we need to 
understand that these kinds of standards did not, in fact, 
inhibit industry. They actually promoted innovation and 
development, and again, export technology. Not looking only at 
refrigerators, but the impact of central air conditioners and 
gas furnaces, there is much more work to be done at the federal 
level for a number of other technologies that we have no 
started because of lack of resources in energy efficiency 
research and development.
    Cool roofs, number two, cool community developments. We 
have cooling loads that are about six percent of total U.S. 
energy use. 10 percent of that can be addressed through cool 
roof introduction, which would also reduce our peak load 
demands by five percent. These are technologies that can be 
introduced at the natural cycle of replacement of roofs. We 
don't have to go through massive new investments. We are 
looking at innovation, and it has the potential to reduce storm 
runoff problems that are pervasive in the U.S. as well as 
reducing smog.
    Daylight. If we start to count daylight and natural 
ventilation as renewables, which I think we should, we will be 
way past the 10 percent by 2010. I think we are making a big 
mistake not to include them, because we are actually 
diminishing the number of daylit buildings and we are 
diminishing the number of naturally ventilated buildings as we 
pursue renovations across this country. We have the potential 
to reduce lighting demands by 30 to 60 percent through 
effective daylighting and cooling demands between 40 and 75 
percent, something that is being actively pursued in Europe 
today. High rises can also be naturally ventilated and daylit. 
There are many examples, not so many in this country.
    The health potential of natural ventilation, work has been 
going on through federal funding at Lawrence Burkin National 
Laboratories as showing that the impact of improving 
ventilation rates, of which natural ventilation is a key 
attribute, are also reducing flu and absenteeism by nine to 20 
percent.
    Classrooms that are daylit have 10 to 25 percent higher 
student test scores. Offices that are daylit have improved 
productivity scores--productivity gains as well as reduction in 
sick building symptoms, and of course, 30 percent energy 
savings pervasively, even in deep section office buildings 
using perimeter daylight effectively. We, at our research 
center, have been trying to collect these data sets to, in 
fact, put the proof sets into a robust life cycle calculator, 
and we can see productivity gains between 0.4 percent and 18 
percent, which certainly more than compensates for any of the 
costs that might be associated with daylighting. Energy, again, 
is eight to 75 percent energy savings. They usually won't drive 
the innovation, but they are the positive impacts of doing 
that.
    Number four, on-site energy generation and energy cascades 
will increase generation efficiencies from 30 to 70 percent, 
start to put distributive power plants in campuses, not just 
academic campuses, but corporate campuses and hospital 
campuses, and you can start to see the benefits of using the 
waste heat and generations of cascaded energy efficiencies.
    We need to understand that the problem is not just in the 
end--or in the generation side where almost all of DOE 
investment is in new forms of generation. There is a microcosm 
that is going in the efficiency side of this equation, and 
there is also a significant portion of this, which is 
transmission losses, that could easily be addressed on the 
efficiency side of the equation.
    Number five, transportation energy efficiency. I realize it 
is not the purview of this committee, but it is critically 
related to the way in which buildings are being developed in 
this country, and we have got to address land use conditions. 
We need to look at mixed use versus single use zoning. We need 
to look at pedestrianized environments where you have live, 
work, walk communities, and we have to understand that there 
needs to be more than one mode of transportation between our 
daily lives destinations. I work in this environment. It is a 
mixed use, and there are multiple modes of transport. I hope it 
will not decay as a result of lack of land use policies.
    Okay. The last three points. We need to enact policy. The 
market will not take care of it. Utility programs and the U.S. 
Green Building Council's LEED program leadership in energy 
environmental design as well as building standards and 
appliance standards have had a magnificent impact on energy 
efficiency, and we need to continue to promote those programs. 
We need to look at energy efficiency and renewables as a supply 
source, not as a demand, in order to get a balanced portfolio, 
as was mentioned, in these types of supplies. If you look at 
refrigerator energy efficiency alone, the impact that those 
innovations and standards have had is equivalent to our 
hydropower at this point in time, and far greater than the 
Three Gorges Dam. And keep in mind that a lot of the Three 
Gorges Dam is going to go into refrigerators and air 
conditioners and China.
    And finally, we need to invest in building research. You 
are starving our academic institutions. We have probably 200 
Ph.D. students total in this country looking at building energy 
efficiency and renewables compared to the thousands and 
thousands that are looking at a whole host of research agendas, 
and that is because there is no federal funding, and it is a 
very fragmented industry with no industrial support that will 
make sure that those Ph.D. programs can generate the next 
generation of buildings.
    And just to close, this is where I work, a research 
laboratory, Carnegie Mellon.
    Thank you, Madame Chairman.
    [The prepared statement of Ms. Loftness follows:]

                Prepared Statement of Vivian E. Loftness

    The building sector is the biggest `player' in the energy use 
equation and can have the greatest impact on maximizing energy supply 
and minimizing energy demand while providing measurable gains for 
productivity, health and the environment. The U.S. Green Building 
Council has summarized the energy and environmental importance of this 
sector of the economy: Commercial and residential buildings use 65.2 
percent of total U.S. electricity and over 36 percent of total U.S. 
primary energy. Buildings use 40 percent of the raw materials globally 
and 12 percent of the potable water in the United States. Building 
activity in the U.S. also contributes over 136 million tons of 
construction and demolition waste (2.8 lbs/person/day), and 30 percent 
of U.S. greenhouse gas emissions (USGBC 2001).
    An evaluation and international comparison of the energy load 
breakdowns in residential and commercial buildings reveal substantial 
opportunities for energy efficiency in the building sector. While it is 
not possible to give a comprehensive list of these opportunities, this 
testimony will illustrate the potential impacts of five specific 
directions for building energy efficiency in the next 25 years: 
appliance innovations, cool communities, daylight and natural 
ventilation, energy cascades, and smart land-use planning.
    In December 2002, the European Union adopted the Directive on 
Energy Efficiency of Buildings with the goal of cost-effective energy 
savings of 22 percent by 2010. The U.S. needs to enact parallel efforts 
to ensure that the long-term implications of decision-making in the 
built environment contribute positively to our energy, carbon and 
pollution mitigation, and quality of life goals. With the right 
policies, incentives, and research, building energy efficiency and 
renewables can have a 20-50 percent impact on building energy use by 
2010, and a 75 percent impact by 2050, outpacing both the industrial 
and transportation sectors in national energy gains.

1.0 The Significance of Building Energy Use

    The building sector is the biggest `player' in the energy use 
equation and can have the greatest impact on maximizing energy supply 
and minimizing energy demand while providing measurable gains for 
productivity, health and the environment (Figure 1, 1997 
Interlaboratory working group). The U.S. Green Building Council has 
summarized the energy and environmental importance of this sector of 
the economy: Commercial and residential buildings use 65.2 percent of 
total U.S. electricity and over 36 percent of total U.S. primary 
energy. Buildings use 40 percent of the raw materials globally and 12 
percent of the potable water in the United States. Building activity in 
the U.S. also contributes over 136 million tons of construction and 
demolition waste (2.8 lbs/person/day), and 30 percent of U.S. 
greenhouse gas emissions (USGBC, 2001).




    Illustrating the scale of the impact that building energy 
efficiency can have on national goals--if improved standards for 
residential refrigerator efficiencies had not been introduced in 1975, 
over 40 GW of additional power plant generation would have been needed 
in 2001, producing 32 million tons of carbon (MTC). Of equal 
importance, EER standards for commercial rooftop air conditioners have 
avoided 135 GW of peak electricity load with associated carbon savings 
of over 100 MTC (Rosenfeld et al., 2004).
    The building sector currently receives the least federal attention 
for research and development, despite its large potential for 
addressing climate change through: reducing primary energy requirements 
and emissions, replacing fuel sources with non-carbon based 
alternatives, and supporting effective sequestration of carbon in the 
built environment.

2.0 Five specific directions in building energy efficiency

    An evaluation and international comparison of the energy load 
breakdowns in residential and commercial buildings reveal substantial 
opportunities for energy efficiency in the building sector. While it is 
not possible to give a comprehensive list of these opportunities, the 
following paragraphs illustrate the potential impacts of four specific 
directions for building energy efficiency in both the 2010 and 2050 
time horizons.

2.1 Appliance and equipment energy standards and innovations
    The introduction of California and then national standards for 
equipment and appliance efficiency has had a major impact on national 
energy use, reducing energy consumption for heating, cooling and 
refrigeration demands by 25 percent, 60 percent and 75 percent 
respectively (Figure 2a, Rosenfeld et al., 2004). The direct 
relationship of appliance electricity demand and CO2 
production illustrates the value of these energy savings in addressing 
climate change. The impact of both R&D and standards has enabled 
refrigerator size and amenities to increase while overall energy use is 
reduced (Figure 2b, Rosenfeld, 2004). Four pending appliance standards 
(clothes washers, fluorescent light ballasts, water heaters and central 
air conditioners) are projected to save consumers $10 billion in energy 
costs, improve functionality, and reduce cumulative emissions by as 
much as 22 MTC through 2010 (U.S. Climate Action Report, 2002). The 
natural replacement cycle of just four building technologies--ballasts, 
lamps, windows and refrigerator/freezers--with high performance 
alternatives would save 190 billion kWh of power demand (and 52MTC) by 
2010, with an additional 130 billion kWh (and 35MTC) and 0.3Mbod saved 
by 2050. There are few engineering obstacles and significant export 
growth potential in expanding appliance and equipment energy efficiency 
standards to cover the full range of existing and new equipment being 
introduced in residential and commercial buildings.

2.2 Shading, Cool Roofs and Cool Development
    Six percent of all U.S. energy is used in cooling residential and 
commercial buildings (Figure 3, Koomey, 1996), at an annual cost of $40 
billion, and peak power demands of 250 GW. A 5+F rise in 
neighborhood temperatures--from excessive absorption of solar energy in 
our increasingly impervious built environment (due to increases in 
roads, parking lots and roofs)--considerably increases cooling loads. 
On a national level, the creation of ``cool communities'' with white 
roofs, pervious paving, and shade trees would yield a 10 percent 
reduction in annual cooling loads, and a five percent reduction in peak 
cooling loads (Rosenfeld et al., 2003). Moreover, CO2 would 
be sequestered more effectively by urban trees than an equivalent 
number of new `forest' trees, and urban flooding would be greatly 
reduced. In addition to the visible enhancement of our physical 
environment, cool community planning would yield a 6-8 percent 
reduction in smog with commensurate gains in the health of our 
citizens. Given the cycle time of roof replacements and tree growth 
rates, immediate federal and state policies and incentives are needed 
to realize the benefits of ``cool communities'' by 2020.

2.3 Daylighting and Natural Ventilation
    Over 10 percent of all U.S. energy is used for lighting buildings, 
much of this during the daytime when daylight is abundant. In 
combination with the six percent of all U.S. energy used for cooling 
buildings in summer and winter, there is significant argument for the 
environmental benefits of windows for daylighting and natural 
ventilation. Given the dominant number of existing buildings--schools, 
hospitals, offices, manufacturing facilities--originally designed for 
effective daylighting and natural ventilation, the erosion of natural 
conditioning is a serious energy cost to the Nation. Effective 
daylighting can yield 30-60 percent reductions in annual lighting 
energy consumption, with average energy savings for introducing 
daylight dimming technologies in existing building at over 30 percent 
(Loftness, 2002). Emerging mixed-mode HVAC systems, that interactively 
support natural ventilation or air conditioning, are demonstrating 40-
75 percent reductions in annual HVAC energy consumption for cooling. 
The effective use of natural conditioning with well designed windows, 
window controls, and mechanical and lighting system interfaces, 
promises to yield major energy efficiency gains of up to five percent 
of all U.S. energy use, reduce risk in power outages, and provide 
measurable productivity, health and quality of life gains (Figures 4 
and 5).

2.4 On-site generation, the `Building as Power Plant'
    There are two major arguments for distributed energy systems, 
particularly the development of on-site energy generation that uses 
neighborhoods and campuses to ensure system efficiencies. First, U.S. 
transmission and distribution losses alone totaled 201TWh in 2002, or 
55MTC per year. Second, the reject energy from power generation is a 
prime resource for building energy loads through co-generation of 
steam, chilled water via absorption chillers, desiccant conditioning, 
and hot water demands. This co-generation of power and building 
conditioning dramatically improves power generation efficiencies, from 
averages of 30 percent to well over 70 percent (WADE, 2002). Add to 
this distributed renewable energy sources such as photovoltaic, solar 
thermal, fuel cells, micro-turbines or biomass, and buildings can 
actually become power plants--generating more power than they consume 
(Hartkopf, 2002). The U.S. has a limited program in distributed energy 
systems, with too small a federal investment in combined heat and power 
technology to support research of CHP linked to renewable sources or 
CHP fully integrated with buildings and campuses. By 2050, each new 
building completed should be a net energy exporter--a building as power 
plant--with a diversity of renewable fuel sources as input (hydrogen, 
geothermal, solar thermal, solar electric, wind) and a building 
conditioning cascade that eliminates generation losses (Figure 6).

2.5 Land-use and urban growth boundaries
    Sprawl and the commensurate abandonment of existing buildings and 
infrastructures is a serious environmental cost to the Nation. A 
significant portion of the 20 percent growth in transportation energy 
use in the past ten years is due to increased mileage in single 
occupancy vehicles--the automobile travel that stitches together the 
increasingly distributed activities in our daily lives. While fuel 
efficiency in automobiles will make an impact on this energy and 
environmental expense, land use innovation will have a far greater 
impact on both of these factors, as well as health and quality of life. 
The impact of urban growth boundaries in both Portland and Seattle has 
been remarkable, with significant investment in infill construction to 
maximize the utilization of existing infrastructures. Moreover, these 
cities have emerged as a mecca for young professionals searching for 
the dynamic, interactive life styles that are only offered in 
pedestrian, mixed-use neighborhoods. Dr. Richard Jackson of the Center 
for Disease Control in Atlanta has begun to link a number of chronic 
ailments in children--depression, obesity and others--to the isolated 
nature of single use zoning, neighborhoods where kids must be driven to 
every venue. For 2050, visionaries such as Malcolm Wells and Peter 
Calthorpe (references) would argue for completely new environmentally 
balanced approaches to land use and development: Landscapes that are 
natural storm water and waste processors, urban growth boundaries to 
maximize use of existing infrastructures and support pedestrianization, 
concrete budgets and tree canopy standards--a vision for the future 
with dramatically reduced cooling, transportation, and water demands as 
well as improvements in environment, health and quality of life.

3.0  Actions for building energy efficiency and inter-related benefits

    In addition to the obvious benefits of reduced energy demand, 
dramatically accelerated national investments and policies focused on 
building energy efficiency will contribute to:

          Reduced unnecessary annual energy consumption (Figure 
        2)

          Reduced emissions and climate change impacts (Figure 
        3)

          Increased peak power capacitance and reliability 
        (Figures 6 and 7)

          Improved health, human safety and security

          Improved productivity (Figures 4 and 5)

          Improved quality of life

          Increased exports--products and services

          Setting a proven example for emerging nations with 
        growing demands

    With regards to mitigating against climate change, Greg Kats argues 
in a study of the costs and financial benefits of green buildings ``The 
vast majority of the world's climate change scientists have concluded 
that anthropogenic emissions--principally from burning fossil fuels--
are the root cause of global warming. The U.S. is responsible for about 
22 percent of global greenhouse gas emissions. Of this 22 percent, the 
U.S. building sector is responsible for about 35 percent of U.S. 
CO2 emissions, the dominant global warming gas'' (Kats, 
2003). In addition to energy efficiency gains, building and 
infrastructure revitalization can have a major impact on reducing urban 
sprawl and the consequent rapid increases in transportation energy use 
and emissions from single occupancy vehicles. The critical actions 
needed to advance building energy efficiency to meet both readily 
achievable goals in the short-term as well as visionary goals in 2050 
and beyond include changes in policy, investment and research at the 
federal, State and industrial level.

3.1  Policy--the market will not take care of it
    Energy is cheap, especially if the externalities of pollution, 
risk, and health are considered. Consumers do not see energy as a large 
enough component of their disposable income to evaluate the ROI of 
energy efficiency in the built environment. Deregulation has already 
reduced the efforts of major utilities to pursue demand side management 
and weatherization, programs that will have to be picked up by the 
already budget constrained States. At the same time, power 
unreliability concerns may lead residential and commercial building 
owners to purchase inefficient and polluting standby power rather than 
consider the significant opportunity to invest in energy efficiency. 
The contributions of buildings to the discharge of four primary 
pollutants--NOX, SOX, CO2, and particulates--should be fully 
recognized in the cost of building energy, to catalyze owners and 
occupants to pursue more environmentally responsible buildings and 
building use patterns.
    Federal and State energy efficiency standards as well as tax 
incentives are critical. A remarkable example of environmental gain 
through policy, especially in today's under-regulated, under-
incentivized market, has been the introduction of Leadership in 
Environmental and Energy Design (LEED) by the U.S. Green Building 
Council. The LEED rating utilizes certification to establish a 
building's environmental sustainability level related to: sustainable 
sites, water efficiency, energy and atmosphere, materials and 
resources, indoor environmental quality and innovation in design 
practices. LEED goals have been adopted by a growing number of major 
building decision makers in the public and private sector impacting an 
estimated three percent of new construction with over 50 percent energy 
efficiency savings--gains that should be widely adopted.

3.2 Balancing Investment in Supply and Demand
    Given the major energy excesses in the built environment, reducing 
demand must be seen as a major energy source. Investments in ``mining'' 
this new energy supply will: yield greater economic benefit for a 
broader array of industries; provide significant gains in reducing 
environmental pollution; and ensure a longevity to this ``supply'' that 
few other sources can ensure. Unfortunately, the continued federal 
dollars going into R&D for energy supply outweigh R&D dollars for 
energy demand six to one (DOE/CR-0059, 1999), even though the ROI of 
energy efficiency dramatically exceeds the ROI of creating new sources. 
For example, the modest national investments (of around $3M per 
program) by DOE in R&D for energy efficient ballasts, low-E windows, 
and refrigerator standards, reaped national benefits of $9,000, $7,000 
and $23,000 per dollar invested (Rosenfeld, 2004).

3.3 Building Research--An unrecognized federal mandate
    Investing in building energy efficiency as a new energy ``supply'' 
would dramatically surpass production from new oil supplies and power 
plant investments, as well as offer sustained ``sources'' of energy 
that do not generate greenhouse gases. Yet the combined budgets for 
building research across the Federal Government is less than two 
percent of federally funded R&D, in no way commensurate with the 
importance of the built environment to our economy and quality of life 
(Loftness/NSF, 2000). Given this paucity of research support, there are 
only a handful of university Ph.D. programs focused on energy 
efficiency and environmental quality in the built environment, compared 
to many dozens of universities with federally funded research related 
to nano-technology and information security for example. Given that the 
building sector is 20 percent of the U.S. economy, over 35 percent of 
U.S. energy use and associated environmental quality, and significantly 
linked to the health and competitiveness of our nation, the federal 
sector must move beyond today's marginal funding of research in the 
built environment.

4.0 Conclusions

    Energy efficiency in buildings represents a major untapped resource 
for our energy demands and resultant mitigation of climate change. 
Standards and removal of market barriers can lead to significant 
reductions in energy use from key buildings technologies through their 
natural replacement cycle. A 1997 study undertaken by all five national 
laboratories determined that building energy efficiency could achieve 
230MTC of the 400MTC savings needed by 2010 to meet U.S. targets under 
the Kyoto Protocol. With the addition of innovative combined cooling, 
heat and power technologies, a further 170MTC could be achieved, fully 
meeting 2010 goals through the building sector alone. Over the longer-
term, expanded building R&D budgets, industry and university based 
research, and continuing national policies that focus on building 
energy efficiency, could trigger dramatic improvements in energy and 
environmental quality in the built environment. Moreover, these 
investments would ensure ancillary benefits including revitalization of 
existing buildings and infrastructures, measurable gains in health and 
productivity, and a positive influence on energy efficient growth in 
the built environment of developing nations.
    In December 2002, the EU adopted the Directive on Energy Efficiency 
of Buildings with the goal of cost-effective energy savings of 22 
percent by 2010 through four basic actions (Bowie & Jahn, 2003):

        1.  General framework for calculation of the integrated 
        performance of buildings.

        2.  Setting of minimum standards in new and existing buildings.

        3.  Energy certification of buildings.

        4.  Inspection and assessment of heating and cooling 
        installations.

    The U.S. needs to enact parallel efforts to ensure that the long-
term implications of decision-making in the built environment 
contribute to our energy, carbon and pollution mitigation, and quality 
of life goals. With the right policies, incentives and research, 
building energy efficiency can have a 20-50 percent impact on building 
energy use by 2010, and a 75 percent impact by 2050, outpacing both the 
industrial and transportation sectors in national energy savings.

5.0 References

Bowie, Randall and Anette Jahn, ``European Union--The new Directive on 
        the energy performance of buildings--Moving closer to Kyoto,'' 
        Directive 2002/91/EC, Official Journal of the European 
        Communities L1/65, 16th Dec. 2002.
Calthorpe, Peter, William Fulton, and Robert Fishman, The Regional 
        City, Island Press January 2001, ISBN: 1559637846.
DOE Energy Consumption Series ``Measuring Energy Efficiency in the 
        United States' Economy: A Beginning.'' U.S. DOE, Energy 
        Information Administration, October 1995.
EIA, Annual Energy Review 2002. U.S. DOE, Energy Information 
        Administration.
Hartkopf et al., ``Building as Power Plant,'' The Austin Papers, 
        Building Green, Inc. 2002, ISBN 1-929884-10-9.
Interlaboratory Working Group 1997. Scenarios of U.S. Carbon 
        Reductions: Potential Impacts of Energy Technologies by 2010 
        and Beyond. ORNL CON 444. www.ornl.gov/ORNL/Energy--Eff/
        labweb.htm
Jochem, Eberhard & Bernard Aebischer. ``Energy End-Use Efficiency in 
        Western Europe.'' 1999-2000.
Kats, Greg, Leon Alevantis, Adam Berman, Evan Mills, Jeff Perlman. 
        ``The Costs and Financial Benefits of Green Buildings: A Report 
        to California's Sustainable Building Task Force.'' Oct. 2003.
Koomey, Jonathan G. ``Trends in Carbon Emissions from U.S. Residential 
        and Commercial Buildings: Implications for Policy Priorities.'' 
        Proceedings for the Climate Change Analysis Workshop, 6-7 June 
        1996.
Koomey, Jonathan and Richard E. Brown. ``The Role of Building 
        Technologies in Reducing and Controlling Peak Electricity 
        Demand.'' September 2002.
Loftness, Vivian. ``E-Vision: Energy, Productivity and the Critical 
        Role of the Built Environment.'' RAND/DOE E-Vision Workshop 
        Proceedings, Oct. 11-13, 2000.
Loftness, V. and V. Harktopf, ``Building Investment Decision Support 
        (BIDS): Cost-Benefit Tool to Promote High Performance 
        Components, Flexible Infrastructures and Systems Integration 
        for Sustainable Commercial Buildings and Productive 
        Organizations,'' The Austin Papers, Building Green, Inc. 2002, 
        ISBN 1-929884-10-9.
Rosenfeld, Arthur H., Joseph H. Romm, Hashem Akbari, Alan C. Lloyd. 
        ``Painting the Town White--and Green.'' http://eande.lbl.gov/
        HeatIsland/PUBS/PAINTING/
Rosenfeld, Arthur H., Pat McAuliffe, and John Wilson. ``Energy 
        Efficiency and Climate Change.'' Encyclopedia on Energy, edit. 
        Cutler Cleveland, Academic Press, Elsevier Science, 2004.
Rosenfeld, Arthur H. ``Improving Energy Efficiency 2-3 percent/ year to 
        Save Money and Avoid Global Warming.'' Sessler Symposium, LBNL. 
        15 March 2003.
Rosenfeld, Arthur H. ``The Art of Energy Efficiency: Protecting the 
        Environment with Better Technology.'' Annual Review Energy 
        Environment 1999. 24:33-82.
WADE, World Alliance for Decentralized Energy. ``The Real Benefits of 
        Decentralized Energy,'' 2002 report; www.localpower.org
Wells, Malcolm, Recovering America, A More Gentle Way to Build, 2001, 
        Amazon.com or http://www.malcolmwells.com/books.html#print

        
        
                    Biography for Vivian E. Loftness
    University Professor and Head, School of Architecture, Carnegie 
Mellon University; Senior Researcher, Center for Building Performance 
and Diagnostics

    Vivian E. Loftness is an international sustainability and building 
performance consultant for commercial and residential building design. 
She has edited and written a wide range of publications on advanced 
building systems, energy, climate and regionalism in architecture, as 
well as design for performance in the workplace of the future. In 2002, 
she was named Educator of the Year by the American Institute of 
Architecture Students.
    Over the past ten years, Vivian Loftness has pursued advanced 
architectural research on the performance of a range of building types, 
from museums to high tech offices, and the innovative building delivery 
processes necessary for improving quality in building performance. 
Supported by a university-building industry partnership, the Advanced 
Building Systems Integration Consortium, she is a key contributor to 
the development of the Intelligent Workplace--a living laboratory of 
commercial building innovations for performance, along with authoring a 
range of publications on international advances in the workplace.
    In the Center for Building Performance at Carnegie Mellon, Ms. 
Loftness has been actively researching and designing high performance 
office environments with DOE, DOD, Department of State, GSA, NSF and 
major building industries such as Steelcase and Johnson Controls. She 
has served on five National Academy of Science panels as well as being 
a member of the Academy's Board on Infrastructure and the Constructed 
Environment. Her work has influenced both national policy and building 
projects, including the Adaptable Workplace Lab at the U.S. General 
Services Administration and the Laboratory for Cognition at Electricity 
de France.
    Vivian Loftness has a Bachelor of Science and a Master's of 
Architecture from MIT, is on the National Board of the USGBC, AIACOTE, 
and DOE FEMAC. She is a Fellow of the American Institute of Architects 
and is a registered architect.



    Chairman Biggert. Thank you very much, Ms. Loftness.
    Mr. Carberry, you are recognized.

  STATEMENT OF MR. JOHN B. CARBERRY, DIRECTOR, ENVIRONMENTAL 
      TECHNOLOGIES, DUPONT CENTRAL RESEARCH & DEVELOPMENT

    Mr. Carberry. Good morning, Madame Chairman, Mr. Larson, 
and Members of the Committee. I am John Carberry, Director of 
Environmental Technology for DuPont.
    DuPont's vision is for sustainable growth while continually 
reducing our environmental footprint. Energy efficiency, 
renewable energy, and renewable raw materials are part of that 
vision. I will address our experiences, our views of federal 
programs that have proven helpful, and how efficiency and 
renewable energy can help address high natural gas prices.
    The Consumer Federation of America estimated that these 
high prices have cost consumers an extra $80 billion over the 
last three years and no discussion of U.S. energy policy can 
ignore this issue. DuPont has focused on energy efficiency for 
many years. In addition, DuPont determined that the science 
regarding global climate change justified rational action, and 
we established aggressive voluntary reduction goals.
    Energy efficiency and renewable energy contributed 
significantly to the 65 percent reduction of greenhouse gas 
emissions that we have achieved. From 1973 to 1992, we 
decreased our unit energy consumption by almost 40 percent. 
During the '90s, we held our energy use flat while increasing 
our production over 35 percent. We have modernized on-site 
power generation systems, including extensive use of highly 
efficient co-generation. We increased operating capacity and up 
time of our existing plants. We also increased yield, which 
reduces energy use and waste generation.
    We have made major gains through process changes and, in 
smaller ways, through improved efficiency in lighting, pumps, 
and steam. We estimate that since 1990, we have saved almost $2 
billion in energy costs versus the business-as-usual case. We 
make products that help others become more energy efficient. 
Our Tyvek building wrap, which hopefully all of you see as you 
have seen new construction, reduces energy use in one year by 
an amount equal to about 10 to 20 times the energy it took to 
produce the Tyvek. Our engineering plastics help to make cars 
lighter and more fuel efficient, and DuPont fuel cell 
technologies are helping to create the next generation of high-
efficiency, low-emission power sources.
    We have set a goal of 10 percent of our energy by 2010 from 
renewable energy. We are at about four percent and are hard at 
work on projects involving biomass and landfill gas that could 
yield another four percent.
    Partnerships with government agencies have proven to be 
effective. We are engaged with DOE to develop an integrated, 
corn-based biorefinery, a technology to more efficiently 
convert corn into ethanol and bio-based raw material called 
PDO. Bio-based PDO is for DuPont's bio-based Sarona fiber, 
which won the President's Green Chemistry Challenge Award 
recently. We collaborated with both the Department of Energy 
and the National Institute of Standards and Technology on fuel 
cell and superconductivity. Under DOE's Vision 2020 program, we 
identified criteria for the successful development of biomass 
energy.
    Beyond just DuPont's operation, energy efficiency measures 
across the economy have significant impacts. With natural gas 
supplies tight, demand reductions can help reduce price 
pressures and volatility. Congress can expand programs in home 
weatherization, building codes, energy efficient appliances, 
distributed generation, and incentives for renewable energy. 
While energy efficiency and renewable energy by themselves are 
not sufficient to close the supply-demand gap, they are clearly 
an important part of a much-needed national policy for natural 
gas.
    In closing, let me thank you for inviting me. We believe 
that energy efficiency and renewable energy have a significant 
role to play. Congress needs to ensure that important programs, 
such as DOE's EERE programs and NIST's ATP program, are 
adequately funded to help us advance these technologies. In 
addition, and perhaps more importantly, the U.S. urgently needs 
a clear, national policy to address the runaway price of 
natural gas, a policy that combines measures such as efficiency 
and renewables to reduce demand, along with improved 
infrastructure, as the Chair already noted, additional 
liquefied natural gas import, alternative fuels, such as clean 
coal, and environmentally responsible domestic natural gas 
production. I would be happy to ask any--to respond to any 
questions.
    Thank you.
    [The prepared statement of Mr. Carberry follows:]

                 Prepared Statement of John B. Carberry

    Good morning Madame Chairman, Mr. Larson, and Members of the 
Committee. My name is John Carberry, and I am Director of Environmental 
Technologies for DuPont Central Research & Development. Among my 
responsibilities is the technology evaluation to support DuPont's 
energy efficiency and renewable energy activities. Over its 202 year 
history DuPont has brought science to bear to address human and 
environmental needs. Our vision is Sustainable growth; increasing 
shareholder and societal value while decreasing our environmental 
footprint. This is a global vision, implemented in the 70 countries in 
which we operate and in many more countries in which we sell products, 
many of which help others operate more efficiently. Efficient use of 
energy, and the use of renewable energy and renewable raw materials are 
part of that vision. I applaud you for holding this hearing. It is 
particularly relevant at a time when over-reliance on a single fuel, 
natural gas, is causing unstable and high natural gas prices that are 
having significant economic repercussions throughout the entire U.S. 
economy, as noted by Federal Reserve Chairman Alan Greenspan in his 
prior Congressional testimony.
    In my remarks I will address our experiences with energy efficiency 
and renewable energy, the business value of efficient use of energy, 
our views of federal programs that have proven helpful in these areas, 
and how efficiency and renewable energy can help in addressing high US 
natural gas prices. Natural gas prices in the U.S. are currently at, 
and are projected to remain at, two to three times historical levels. 
The Consumer Federation of America recently estimated that over the 
last three years these high U.S. natural gas prices have cost consumers 
an extra $80 billion. No discussion of energy policy in the U.S. can 
ignore this issue. These sustained high prices are fundamentally the 
result of a supply-demand imbalance. Government policies are a 
significant part of the cause, and changes in those policies are 
necessary to address this serious problem.
    DuPont has focused on energy efficiency for many years, for both 
economic and environmental reasons, consistent with our Sustainable 
Growth vision. Many of our operations are energy intensive, with energy 
representing a significant element of manufacturing cost. In addition, 
in the early 1990s DuPont determined that the science regarding global 
climate change was sufficient to justify action. We recognized that our 
emissions contributed to the situation, and we established aggressive 
voluntary greenhouse gas reduction goals for DuPont. Increasing our 
energy efficiency and enhancing our use of renewable energy sources has 
contributed significantly to the 65 percent global reduction in DuPont 
greenhouse gas emissions that we have achieved, and continues to do so. 
Other reductions, slightly more than half, came from actions on non-
CO2 gases.
    From 1973 to 1992, we decreased our energy consumption per pound of 
product produced by almost 40 percent. During the 1990s we held our 
energy use flat on a global basis while increasing our production by 
over 35 percent. We achieved this in a number of ways, both large and 
small. We have made changes to our overall portfolio to emphasize 
energy efficient operations. We have modernized our on-site power 
generation systems, including extensive use of co-generation, also 
called combined heat and power. This combined production of electricity 
and steam is up to twice as efficient and has much lower emissions than 
typical electric utility power generation. We have also increased the 
final product yield at our plants, meaning we convert more of our raw 
materials to final product, reducing energy use and waste generation. 
In addition, we have increased plant utilization--plants are more 
energy efficient when they run at a consistent high rate. We have made 
gains in numerous smaller ways as well, improving energy efficiency in 
everything from lighting and pumps to how steam is managed on our 
sites. Many of these improvements are transferable to other 
manufacturing plants, and we have widely shared our experiences with 
others.
    Allow me to illustrate with a few examples. At one plant we made 
changes to product packaging that reduced our energy usage 30 percent 
and improved our packaging. We installed highly efficient large-scale 
co-generation facilities at several plants, including at our Victoria 
and Sabine, Texas sites. I would note that the current and projected 
high U.S. natural gas prices make further investment in co-generation 
uneconomical.
    These reductions in energy use have returned significant business 
value to DuPont--we estimate that since 1990 we have saved almost $2 
billion in energy costs by our more efficient use of energy versus the 
``business-as-usual'' case. Those savings continue. That is genuine 
business value from better energy stewardship, and it contributes to 
our substantial global reductions in air emissions, including 
greenhouse gases.
    We also create products that help others become more energy 
efficient. For example, our Tyvek Housewrap, used in both residential 
and commercial applications, in one year reduces energy use by an 
amount equal to 10-20 times the energy it took to produce the Tyvek. 
Our engineering plastics help to make cars lighter weight and therefore 
more fuel efficient, and DuPont fuel cell technologies are helping to 
create the next generation of high efficiency low emitting power 
sources for applications ranging from portable CD players to cars to 
community power generating stations. Despite these substantial gains, 
we continue to pursue energy efficiency aggressively. Throughout this 
decade our goal is to continue to hold energy use flat, even as we 
pursue aggressive growth. These gains will largely derive from 
additional incremental measures; most of the larger scale ``low hanging 
fruit'' has been picked. Certainly co-generation offers additional 
opportunities, but as I have already noted the sustained high domestic 
natural gas prices are posing a barrier in that regard. Energy 
efficiency and renewable energy sources are also the primary routes for 
us to continue to make progress in greenhouse gas reductions.
    In addition to our efforts at energy efficiency, we have also set 
significant public goals for our use of renewable energy, targeting to 
secure 10 percent of our global energy needs by 2010 from renewable 
sources at competitive pricing. Our renewable energy goals are 
consistent with our sustainable growth efforts, including a desire to 
reduce our dependence on depletable resources, further reduce our 
greenhouse gas emissions and to explore potential new markets. Getting 
to 10 percent will not be easy. We are currently getting over four 
percent of our energy from renewable sources, and are hard at work on 
projects involving biomass and landfill gas, both great substitutes for 
natural gas, that could yield another four percent. At one site, a 
landfill gas project could reduce that site's natural gas needs by 
almost 40 percent. We are exploring opportunities to utilize biomass in 
our on-site power generation, and are working on enhancing the 
fundamentals of photovoltaic technologies to reduce the cost of energy 
generated from the sun.
    Partnerships with government agencies have proven helpful and 
effective in many of these endeavors. We are engaged in very productive 
partnerships with DOE, including a matching grant program to develop an 
Integrated Corn Based Biorefinery, a mouthful of a term that basically 
means that we are developing technology to more efficiently convert 
corn into ethanol and a bio-based raw material called PDO commonly used 
in the chemical industry. Of particular note is the goal of converting 
not just the corn grain itself, but also the corn husks and stalks, 
which currently are just left in the fields, to ethanol. This would 
increase farmers' revenues significantly. Also of note, the bio-based 
PDO will provide a raw material for DuPont's bio-based Sarona fiber, 
for which DuPont was awarded the President's Green Chemistry Challenge 
Award last year. This is consistent with our goals of not only 
enhancing our use of bio-based energy but also the use of bio-based raw 
materials in our operations. We also have fruitful collaborations with 
both the Department of Energy and the National Institute of Standards 
and Technology's Advanced Technology Program on fuel cell and 
superconductivity related programs. Under DOE's Vision 2020 program, 
and working with the Green Power Market Development Group, convened by 
the World Resources Institute and consisting of 12 major U.S. 
companies, we identified criteria for the successful development of 
biomass derived renewable energy that allowed the Group to solicit and 
evaluate commercial biomass proposals. In another initiative with DOE's 
Office of Innovative Technology we are developing a tool that will help 
site engineers quickly estimate energy efficiency opportunities so that 
decisions on priorities and allocation of resources can be made. I 
would note that we are concerned about inadequate funding for several 
of these programs in current budget requests.
    Let me now address the benefits of energy efficiency and renewable 
energy beyond DuPont's operations. Aggressive energy efficiency 
measures across the U.S. economy, including the industrial, commercial 
and residential sectors, can have significant beneficial economic 
impacts. Not only the entity reducing its energy use benefits, but more 
broadly this can have significant beneficial effects on high U.S. 
natural gas prices. Peak electricity generation, and increasingly base 
load generation as well, is largely natural gas fired in the U.S. 
Reductions in electricity demand driven by increased energy efficiency 
will cause the utility sector to decrease their demand for natural gas. 
In an environment of tight natural gas supplies, this demand reduction 
can help to ease upward price pressures and price volatility for 
natural gas. Estimates by the American Council for an Energy Efficient 
Economy of the effects of energy efficiency programs on the demand for 
natural gas suggest the impact on natural gas demand could be 
significant. Certainly the experience in California several years ago 
showed that electricity demand could be substantially reduced rather 
quickly with concerted effort. The U.S. could productively expand 
programs in areas such as home weatherization, enhanced building codes, 
more energy efficient appliances and distributed generation. In 
addition, programs to incentivize the expanded use of renewables in 
electricity generation can also serve to reduce natural gas demand. 
While energy efficiency and renewable energy by themselves are not 
sufficient to close the supply-demand gap for natural gas and bring 
prices back to Earth, they are clearly an important part of a much 
needed national policy for natural gas, along with environmentally 
responsible additional natural gas supply and a diversity of fuels for 
the electric generating sector.
    In closing, let me again thank you for holding this hearing and 
providing me the opportunity to share our experiences. We believe that 
energy efficiency and renewable energy sources have a significant role 
to play in America's energy mix. Congress needs to ensure that 
important programs, such as DOE's EERE programs and NIST's ATP program, 
are adequately funded to help us advance these technologies. In 
addition, and perhaps more importantly, the U.S. urgently needs a clear 
national policy to address the runaway price of natural gas, a policy 
that combines measures such as efficiency and renewables to reduce 
demand for natural gas, improved infrastructure, additional liquefied 
natural gas imports, alternative fuels such as clean coal, and 
environmentally responsible natural gas production.

                     Biography for John B. Carberry

    John B. Carberry is Director of Environmental Technology for the 
DuPont Company in Wilmington, Delaware where he has been employed since 
1965. He is responsible for recommendations on technical programs for 
DuPont based on an analysis of environmental issues. Since 1988, he has 
led this function in a transition to increasingly emphasize waste 
prevention and product stewardship while maintaining excellence in 
treatment. His major responsibilities have included leading the DuPont 
focus on the impact of energy costs, finding and using affordable 
renewable energy, providing technical analysis and recommendations for 
the DuPont energy goals, leading a team that provides guidance on 
avoiding persistent and bioaccumulative chemicals and works with the 
EPA on science based targeting, and leading the team that 
commercialized the revolutionary ``zero emissions, negligible 
inventory'' methylisocyanate (MIC) process.
    Mr. Carberry is Chair of the National Academy Committee on the 
Destruction of the Non-Stockpile Chemical Weapons, a founding member of 
the Green Power Market Development Group and of the Vision2020 Steering 
Committee, and a member of the NAE Committees on; Technologies for 
Sequestering CO2, and Metrics for Documenting Progress in 
Global Change Research. Since 1990, John has presented 30 lectures on 
environmental issues at 18 universities, given invited presentations at 
63 public conferences worldwide and provided 21 literature interviews, 
or contributions. He holds a B.ChE. and an M.E. in Chemical Engineering 
from Cornell University and an MBA from the University of Delaware.
    Mr. Carberry is a U.S. citizen, born May 1, 1941. He lives in 
Newark, DE with his wife Sandra. They have two married children and two 
grandchildren who live nearby.

    Chairman Biggert. Thank you very much, Mr. Carberry.
    Mr. Smith, you are recognized for five minutes.

  STATEMENT OF MR. PETER R. SMITH, PRESIDENT, NEW YORK STATE 
   ENERGY RESEARCH AND DEVELOPMENT AUTHORITY, NEW YORK STATE

    Mr. Smith. Madame Chairman, Chairman Boehlert, 
distinguished Members of the Subcommittee, thank you for the 
opportunity to testify today about Governor George E. Pataki's 
energy efficiency initiatives.
    Governor Pataki is both passionate and committed to 
pursuing energy efficiency to benefit the state's energy 
consumers, the environment, and the reliability of our energy 
systems. Energy efficiency is cleaner than renewable resources 
and cheaper than coal. Maximizing energy efficiency in all 
sectors of the state's economy is the first step and the lowest 
cost alternative to improving the state's and the Nation's 
energy security and reliability.
    New York imports about 85 percent of its energy needs and 
spends about $38 billion on energy of which approximately 1/2 
flows out of the state. Those expenditures represent money 
spent by New Yorkers outside of New York, and more than likely, 
in politically volatile regions of the world. New York's 
efforts have the benefit of reducing our dependence on imported 
oil and creating and retaining jobs in New York's economy.
    With regard to new renewable resources, New York is 
building the renewable infrastructure through production 
incentives: training for installers and repair personnel, 
supporting new technology with financial and technical 
assistance, and fostering the development of the biofuels 
industry. For example, more than 41 megawatts of new wind 
generation is in operation and being sold in New York. 
Recently, the New York State Public Service Commission 
certificated the first stage, a 300 megawatt wind farm in 
central New York, which will be the largest wind farm east of 
the Mississippi. Additionally, the Governor asked the New York 
State Public Service Commission to convene a regulatory 
proceeding on New York's potential for instituting a renewable 
portfolio standard that Chairman Boehlert noted will be 25 
percent of New York's energy bought in 10 years.
    With regard to energy efficiency, New York's public 
authorities, including the New York State Energy Research and 
Development Authority, the New York Power Authority, and the 
Long Island Power Authority invest nearly $290 million annually 
on energy efficiency, renewable energy technologies, low-income 
programs, and research and development. These programs create 
jobs in manufacturings of new technologies as well as 
installing and servicing equipment. For example, today in New 
York, there are more than 150 companies throughout the state in 
the energy efficiency business. That is up from just over a 
handful in 1998 when we started what we call the New York 
Energy $mart program.
    Our programs operate on a principle of providing matching 
funds through co-funding. New York is also the first state in 
the Nation to have a ``green building'' tax credit. We 
recognize that building green is not just good policy, it is 
good business. The benefits New York has accrued today from 
programs operated by NYSERDA, the New York Power Authority, and 
LIPA include annual customer utility bill reductions of over 
$140 million, a net reduction of electricity use of more than 
1,000 gigawatt hours, as well as substantial annual emission 
reductions. In addition, the dollars invested in New York 
caused the creation of approximately 3,000 jobs across the 
state.
    Governor Pataki's commitment to energy efficiency and 
renewable technology is further evidenced by the requirements 
of Executive Order 111, which he issued in 2001. The Order 
calls for a 35 percent reduction of energy consumption in 
state-owned facilities. The Order also mandates the purchase of 
renewable power. Another program we have is New York's Energy 
Investment program, or State EnVest, which assists state 
agencies and authorities in identifying energy efficiency 
opportunities in their facilities and then leveraging the 
savings to secure third-party, tax-exempt, lease-purchase 
financing. The program is supported by competitively procured, 
master-finance-arrangement and requires no out-of-pocket 
expenditures or on-balance sheet debt.
    We also evaluate New York's programs. Evaluation of our New 
York Energy $mart program is conducted jointly by competitively 
selected, independent, third-party contractors and NYSERDA 
evaluation staff. Our evaluation efforts have demonstrated that 
we leverage $3 of private sector capitol for every dollar of 
public benefit funds awarded. The key to the success of our 
program is changing consumer and business attitudes and 
behaviors when making energy-related decisions. Part of our New 
York Energy $mart program is creating sustainable changes in 
markets.
    There are potential synergies between state and federal 
efforts that are best exemplified by the EPA-DOE Energy Star 
program. Setting a program platform at the federal level and 
then allowing the state to act as an implementation partner is 
a perfect example of a productive federal-state relationship. 
States have the natural delivery systems to help transform 
markets for energy efficiency. Cooperation and coordination is 
also vital to the success of any federal-state partnership. The 
states need to be involved fully with the implementation of 
federal initiatives within their borders. Setting uniform 
standards creates a level playing field for businesses that 
operate in multiple states.
    Much like our efforts under the State EnVest program, a 
federal initiative could be coordinated to create a master 
financing structure, which will allow for advertising the 
benefits of energy efficient improvements over time. In New 
York, we believe that energy efficiency and renewable resource 
development is good for the environment, good for the economy, 
and most importantly, good for energy security reliability. The 
$mart money is on energy efficiency, which is why in New York 
we call our program New York Energy $mart.
    Madame Chairman and distinguished Members of the 
Subcommittee, thank you for the opportunity. I look forward to 
taking any questions you may have. Thank you, Mr. Boehlert.
    [The prepared statement of Mr. Smith follows:]

                  Prepared Statement of Peter R. Smith

    Madam Chairman and distinguished Members of the Subcommittee; thank 
you very much for the opportunity to testify today about Governor 
George E. Pataki's energy efficiency initiatives in New York State.
    Governor Pataki is both passionate and committed to pursuing energy 
efficiency to benefit the State's energy consumers, the environment, 
and the reliability of our energy systems. Energy efficiency is cleaner 
than renewable resources and cheaper than coal. Air emissions are 
avoided, and the dollars saved by the customer are free to be spent 
elsewhere within the State's economy. Maximizing energy efficiency in 
all sectors of the State's economy is the first step, and lowest cost 
alternative, to improving the State's and the Nation's energy security 
and reliability.
    The Governor's commitment to energy efficiency and clean, renewable 
energy technologies are driven by the goals of increasing 
sustainability, reliability, energy security, economic growth, and 
protection of our environment. New York imports more than 85 percent of 
its energy needs and spends about $38 billion dollars annually on 
energy, of which approximately one-half flows out of the State to pay 
for imported energy. Those expenditures represent money spent by New 
Yorkers outside of New York, and more than likely in politically 
volatile regions of the world. New York's efforts to promote energy 
efficiency and renewable technology have the benefit of reducing our 
dependence on imported oil, and creating and retaining jobs in the New 
York economy. New York's efforts acknowledge that we must begin with 
the here and now--more efficient energy use means less harm to the 
environment, and greater economic growth.

Renewable Resources

    New York is building the renewable infrastructure through 
production incentives for wind generation, training for photovoltaic 
installers and repair personnel, supporting digester technology with 
financial and technical assistance for the agricultural community, and 
fostering the development of the biofuels industry. As well as 
encouraging the use of distributed generation through combined heat and 
power applications and fuel cell technology. The Governor has set the 
stage for a growth industry with tremendous energy and economic 
potential.
    For example, more than 41 MW of new wind generation is in operation 
and being sold in New York thanks to a public/private partnership under 
the New York Energy $martsm Program. Recently, the NYS Public Service 
Commission certificated the first stage of a 300 MW wind farm on the 
Tug Hill Plateau in Central NY. The Flat Rock Wind Project will be the 
largest wind farm east of the Mississippi.
    In addition, the Governor asked the New York State Public Service 
Commission to convene a regulatory proceeding on New York's potential 
for instituting a Renewable Portfolio Standard (RPS) in an effort to 
ensure that 25 percent of New York's electricity is purchased from 
renewable sources over the next decade.

Energy Efficiency

    New York's public authorities including, the New York State Energy 
Research and Development Authority under the New York Energy $martsm 
Program, as well as the Programs funded by the New York Power 
Authority, and the Long Island Power Authority, invest nearly $290 
million annually on energy efficiency, renewable energy technologies, 
low-income programs, and research and development. The New York Energy 
$martsm Program is funded through a System Benefits Charge on the 
transmission and distribution of electric energy for the State's 
investor-owned utility company customers.
    There are jobs created directly in manufacturing, as well as to 
install and service equipment. There are jobs created by companies 
saving money on their energy bills. For example, today in New York 
there are more than 150 companies throughout the state in the energy 
efficiency business. That is up from a handful in 1998 when we started 
the New York Energy $martsm Program.
    Industry partners are essential to helping identify the problems 
faced by energy consumers, craft viable solutions, and secure the 
financial commitment to install the appropriate technologies. New 
York's public benefit programs offer technical assistance and financial 
incentives that prompt building owners, managers, and related 
professionals to leverage their own capital in an effort to make the 
project a reality. Our programs operate on the principle of matching 
funds through co-funding whereby the assistance we provide stimulates 
the project toward implementation, but does not simply provide funding 
for projects that would have taken place without the availability of 
the program. Many of our efforts are aimed at transforming the 
marketplace to value the multiple benefits of energy efficiency by 
spurring customer demand and establishing a competent professional 
infrastructure to provide ``green'' products and services.
    New York is the first State in the Nation to have a ``green 
building'' tax credit. We recognized that building green is not just 
good policy, but good business.
    The benefits New York has accrued to date from the New York Energy 
$martsm Program and the programs operated by NYPA and LIPA, include 
annual customer utility bill reductions of more than $140 million, a 
net reduction of electricity use of more than 1,000 Gwh, the enabling 
of 41.5 MW of Wind generation capacity, and 300 KW installed 
photovoltaic capacity; as well as annual emission reductions of NOX by 
1,000 tons, SO2 of 1,600 tons and CO2 reductions 
of 1.3 million tons. In addition to the energy and environmental 
savings the program dollars invested has caused the net creation of 
approximately 3,000 jobs across the state.
    As an example of our efforts, Hudson Valley Community College, 
outside of Albany, NY is now operating independently of the electric 
grid by reclaiming the methane gas from a nearby landfill. The gas is 
used to fire a combined heat and power system that provides electricity 
while using the waste heat for winter thermal load and summer cooling, 
coupled with energy efficiency improvements throughout the campus.

Leadership by Example

    Governor Pataki's commitment to energy efficiency and renewable 
technology is further evidenced by the requirements of Executive Order 
No. 111 which he executed in 2001. The Order calls for a 35 percent 
reduction of energy consumption in State owned facilities, from 1990 
levels, by 2010. The Order also mandates the purchase of renewable 
power. Initially 10 percent of the State facilities' energy purchases 
must be made from renewable power sources by 2005, and ultimately 20 
percent by 2010.
    New York's Energy Investment Program, or State EnVest is further 
evidence of Governor Pataki's leadership by example with State 
facilities. State EnVest assists State agencies and authorities in 
identifying energy efficiency opportunities in their facilities and 
then leveraging the savings to secure third-party tax-exempt lease 
purchase financing. The annual energy savings potential is identified 
throughout the facility and is then amortized over a repayment period 
to cover principle and interest. The program is supported by a 
competitively procured Master Finance arrangement, and requires no out-
of-pocket expenditures or on-balance sheet debt.

Program Evaluation and Metrics

    To ensure that our programs meet our expectations for participation 
levels and meet our established energy and dollar savings goals, we 
have fully integrated a formal evaluation effort with program design 
and delivery--the first State in the country to do this.
    Evaluation of the New York Energy $martsm Program is conducted 
jointly by competitively selected, independent third-party contractors 
and NYSERDA evaluation staff. Our efforts stress the importance of 
measuring and verifying program outcome impacts as an integral part of 
determining the success of our programs. Our delivery approach for 
energy efficiency and renewable energy development is predicated on 
establishing public and private partnerships. As such, our evaluation 
efforts have shown a three-to-one ratio of private sector capital 
investment to public sector dollars. The commitment of the energy 
services industry, renewable energy developers, building construction 
professionals, appliance manufacturers, distributors and dealers, as 
well as research institutions are an invaluable component in all of our 
program initiatives. We have evaluation plans in place to document and 
measure the progress of each of the programs in our portfolio within 
this broader context.
    Key to the success of our programs is changing consumer and 
business attitudes and behaviors when making energy-related decisions. 
Creating sustainable changes in markets supporting the purchase of 
energy-efficient products and appliances bearing the ENERGY STAR label 
and ENERGY STAR buildings, along with helping grow an energy services 
industry, improving the State's housing stock, and creating training 
and certification programs for photovoltaic installers and building 
operators and auditors are also directly attributed to the program 
efforts as documented by the evaluation findings.

Federal/State Cooperation

    The potential synergies between State and federal efforts are best 
exemplified by the EPA/DOE Energy Star Program. Setting a program 
platform at the federal level and then allowing the State's to act as 
an implementation partner is a perfect example of a productive federal/
State relationship. As long as there is an effective mechanism for 
feedback, the relationship works very well. The State's have the 
knowledge necessary to reach the appropriate customer base, and 
understand any regional nuances related to effective implementation.
    The coordination of effort is vital to the success of the federal/
State partnership. The State's need to be fully involved with the 
implementation of federal initiatives within their borders. Setting 
standards on the federal level creates an even playing field for 
businesses that operate in multiple states. Individual States can act 
as proving grounds for federal initiatives, and help assess the 
potential for replicability among other States. Ground level deployment 
is most effective when managed by the individual States.
    State and federal efforts need to be coordinated to create a 
financial model for amortizing the benefits of energy efficiency 
improvements just as you would any other capital investment. This 
approach allows the building owner or operator the opportunity to 
leverage the energy efficiency potential of their facility as a method 
to finance improvements. The annualized energy savings can service the 
principle and interest burden over an amortization period driven 
entirely by the level of savings achieved. This approach requires no up 
front funds, and can be structured as off balance sheet debt.
    Energy efficiency and renewable resource development is good for 
the environment, good for economic growth, and most importantly, good 
for energy security. The smart money is on energy efficiency, which is 
why in New York we call our program New York Energy $martsm.
    Madam Chairman, and distinguished Members of the Subcommittee, 
thank you for the opportunity to testify today. I would be happy to 
take any questions you may have.

                      Biography for Peter R. Smith

    Peter R. Smith was appointed President of the New York State Energy 
Research and Development Authority by the NYSERDA Board of Directors on 
January 26, 2004.
    Prior to his appointment, Mr. Smith served for nearly one year as 
Acting President as well as serving as Vice President for Programs at 
the Authority since 2000. As Vice President for Programs, he oversaw 
delivery of the Authority's energy efficiency, energy analysis, 
economic development, research & development, residential, nuclear 
waste, and bond financing programs. Mr. Smith joined NYSERDA in 1995 as 
Program Director for Energy Analysis. He also represented NYSERDA's 
Chairman on the New York State Board on Electric Generation Siting and 
Environment.
    Peter is responsible for the overall management of the Authority 
which is a public benefit corporation of the State of New York with 
assets of more than $330 million. NYSERDA is also the third party 
administrator of New York's five year $750 million public benefits 
program which was created as part of the State's move to electric 
competition. As administrator, NYSERDA operates over 30 programs under 
the umbrella of New York Energy $martsm.
    As President he also serves the State of New York as Chairman of 
the Energy Planning Board; and as a member of the State Environmental 
Board, the Water Resources Planning Council, and the Disaster 
Preparedness Commission. He is the State's liaison officer to the U.S. 
Nuclear Regulatory Commission and represents New York State on the 
National Low-Level Radioactive Waste Forum.
    Mr. Smith is also active on the national energy scene. He was 
appointed by the Secretary of the U.S. Department of Energy (U.S. DOE) 
to the State Energy Advisory Board (STEAB) which provides programmatic 
and policy guidance to U.S. DOE's Office of Energy Efficiency and 
Renewable Energy. He also is a member of the Board of the American 
Council for an Energy-Efficient Economy (ACEEE). Mr. Smith serves on 
the Board of the National Association of State Energy Officials 
(NASEO), and is NASEO's representative on the U.S. DOE/U.S. 
Environmental Protection Agency-sponsored National Council on 
Competition and the Electric Industry.
    Peter has more than 26 years of experience in analyzing and 
studying energy and environmental issues and problems. He holds a 
Master's Degree in Public Administration from the Nelson A. Rockefeller 
School of Public Affairs and Policy, State University of New York at 
Albany, and a Bachelor of Arts in History from LeMoyne College in 
Syracuse, New York.

    Chairman Biggert. Thank you very much, Mr. Smith.
    Mr. Sosland, you may proceed.

    STATEMENT OF MR. DANIEL L. SOSLAND, EXECUTIVE DIRECTOR, 
                     ENVIRONMENT NORTHEAST

    Mr. Sosland. Thank you, Madame Chair and Members of the 
Committee. My name is Dan Sosland. I am the Director of 
Environment Northeast. As Congressman Larson generously noted, 
we work at the state level to promote sound energy and climate 
change policies. I very much appreciate the opportunity to 
testify today on what I believe is one of the most pressing and 
critical issues facing the country. And I want to focus on the 
state of Connecticut and what it is actually doing to capture 
the benefits that many of the witnesses have testified to 
today.
    In 2000, like many states in the Northeast, Connecticut 
restructured its electric utility system. At the time, and 
these issues continue, and they are familiar to us all, 
Connecticut was grappling with the problems of high energy 
costs, antiquated power plants, system reliability, and poor 
air quality issues. In enacting its Electric Restructuring Act, 
Connecticut chose to take some steps to make the system more 
efficient and less polluting. It built on a history of energy 
efficiency programs by creating a new Conservation and Load 
Management Fund. It also created a new Clean Energy Fund to 
invest in the technologies of the future. Those two funds 
combined put Connecticut as the state with the highest per 
capita spending on conservation and renewables in the country. 
It took other steps, such as adopting a Renewable Portfolio 
Standard to promote clean energy in the marketplace.
    I find it interesting, though, that--to note that much of 
the impetus for these policies came from environmental 
advocates like myself. There were critics of these provisions 
that suggested these funds were too large, that the money could 
not be spent well, would be wasted. These were surcharges and 
taxes. But over the course of the last four years since 2000, 
the Conservation and Load Management Fund has proven that it is 
providing substantial benefits to this State. The programs it 
offers are, in fact, oversubscribed, particularly programs in 
the business sector, commercial and industrial customers. They 
are often locked out of programs by April or May of the 
calendar year, so demands on the fund are actually much larger 
than what the resources can provide. Skeptics at the time from 
different walks of life are not among the fund's largest 
boosters.
    As Congressman Larson noted, FERC, the Federal Energy 
Regulatory Commission, has rated Southwest Connecticut, the 
portion around Stanford, roughly, up to New Haven, as one of 
the Nation's top ten congested areas for electricity. Public 
utility commissioners and regulators in Connecticut and 
legislators have now recognized that energy efficiency and 
other steps, like distributed resources and clean energy, are 
among the best tools at relieving stress on the transmission 
system and certainly, perhaps--well, not perhaps, but certainly 
the lowest cost tool to do that.
    Individual businesses that participate in the programs 
extol the value of these efforts to improve productivity at 
their businesses and, in many cases, retain or expand jobs. The 
lesson learned in Connecticut is that there is enormous 
potential for energy efficiency that we know how to capture, 
and that it is a low-cost way, not only for environmental 
improvement, but for economic stimulus.
    The programs offered are comprehensive. They are designed 
to provide services for residential, commercial, and industrial 
customers, as well as government entities. They are developed 
under a stakeholder board, a conservation board, which combines 
business, environmental, and consumer interests in developing 
the policies under which the spending occurs. The programs are 
administered and delivered by the two distribution utilities in 
the state. These programs were recently evaluated by an 
independent consultant and against their peers and ranked, I am 
very proud to say, first in delivering a bang for the buck.
    The programs range from providing incentives for the 
purchases of efficient products, like lighting and air 
conditioners, to services and designing new buildings, major 
renovation, and construction. Special programs are offered for 
low-income customers. There is a new R&D program that has been 
very effective, and there are even two building centers, called 
smart living centers, in the State, one near Hartford, one near 
New Haven, that people can drive in from the road, and see the 
products that are--that they can purchase. They have design 
assistance for architects and builders. These programs are 
screened through a rigorous cost-effectiveness test that is 
required by statute. Every dollar spent is required to provide 
more than a dollar in benefits.
    And the programs are specifically designed to overcome the 
market barriers that--many of which are identified in the 
hearing charter. These include a lack of information for 
customers, product or service unavailability, split incentives.
    So what are the impacts? Over the last 10 years of 
efficiency programs in Connecticut, about 800 megawatts of 
power plant capacity has been avoided. That is about the size 
of a medium nuclear power plant. Consumers have saved over $1 
billion that they would otherwise have paid in energy costs. In 
the last four years alone, enough energy has been saved to 
power 1.8 million homes for a year.
    More importantly, and I think this is a very important 
point, the programs reduced the total amount of energy needed 
to meet the electricity needs of the state. The studies shown 
by the conservation board show that the growth in demand for 
electricity has been reduced from 1.7 percent every year to 0.6 
percent. And on the margin, what that means is that there is an 
80 percent reduction in the need to build new capacity to meet 
the electricity demands of the state.
    On price, there have been studies that have shown that for 
peak pricing, conservation efforts in New England have reduced 
the cost of pricing for hot summer days, when demand is 
greatest, by millions of dollars. The conservation board has 
undertaken a fairly comprehensive study of the potential for 
conservation in Connecticut. This report will be released soon, 
and it concludes that capturing the maximum cost effective 
potential will save $1.9 billion over the next 10 years, that 
is $1.9 billion that would be spent on energy on customer bills 
that will not be spent, will avoid 900 megawatts, again, 
another nuclear power plant, and will be done at an average 
cost of 1.4 cents a kilowatt hour. We can actually level, and 
in some cases, decrease the growth in demand for electricity. 
And the impact for economic productivity that that means is 
enormous.
    Connecticut has taken other steps as well. A few days ago, 
Governor Rowland signed into law a bill that requires--sets 
minimum energy efficiency standards for eight products to be 
sold in the state. I also think it is very important that the 
system operator in New England, for the first time, and we 
believe the first time for any system operator, has included 
efficiency as a measure to mitigate the problems, the potential 
brownouts and blackouts that can occur in the summertime in a 
congested area like Southwest Connecticut. Efficiency bids of 
four to 10 megawatts are going to be provided to help meet that 
emergency situation.
    I realize I am out of time, but I would like to mention a 
few things on renewables. The state is taking very active 
efforts to promote increased renewable energy. Governor Rowland 
has followed Governor Pataki's lead, has called for the state 
to lead by example and purchase 20 percent of electricity from 
clean sources by 2010, 50 percent by 2020, and 100 percent by 
2050, that is following a recommendation from stakeholders 
involved in the climate process, bipartisan support for that, 
improving the portfolio standard, offering customers new 
options to buy green power and efficiency services, supporting 
the Clean Energy Fund's efforts to invest in fuel cells and 
other technologies.
    There is a great deal that we can do here, a great deal of 
synergy between federal and state programs. We have some 
suggestions on that, and I would look forward to providing more 
information in the future.
    Thank you.
    [The prepared statement of Mr. Sosland follows:]

                Prepared Statement of Daniel L. Sosland

Mr. Chairman and Members of the Committee:

    My name is Daniel L. Sosland. I am the Executive Director of 
Environment Northeast (ENE), an environmental advocacy and research 
organization based in Connecticut and Maine. ENE works at the state 
level to promote sound energy and climate mitigation policies. Thank 
you for the opportunity to testify today on the potential for energy 
efficiency and renewable energy. My testimony will focus on the impact 
and potential for energy efficiency in Connecticut with some references 
to the rest of New England and the opportunities for a growing role for 
clean energy.

Why did Connecticut make a commitment to energy efficiency and 
                    renewables?

    In 2000, like many states in the Northeast, Connecticut chose to 
restructure its electric utility system. Connecticut was grappling with 
a series of issues: high energy costs, antiquated power plants, system 
reliability and poor air quality. In enacting its Electric 
Restructuring Act, Connecticut also sought to make its electric system 
more efficient and less polluting by:

          establishing an $86 million a year fund to provide 
        programs for commercial, industrial and residential customers. 
        This fund built on a 10 year history in the state of developing 
        sound programs that cost-effectively invested ratepayer funds 
        to make Connecticut homes, businesses and government more 
        efficient.

          creating a new Clean Energy Fund, collecting up to 
        $30 million annually, to invest in bringing new clean energy 
        technologies to the marketplace. The combined funds made 
        Connecticut the state with the highest per capita spending on 
        energy efficiency and renewable energy development.

          including provisions to require purchases of clean 
        energy by electricity suppliers through a Renewable Portfolio 
        Standard.

    Much of the impetus for these provisions came from environmental 
advocates like those of us at Environment Northeast. Critics of these 
provisions suggested that the energy efficiency funds could not be 
spent because the opportunities did not exist. They complained about 
added costs as well.
    In fact, as the state Conservation and Load Management Fund (C&LM 
Fund) has progressed, the programs it supports are oversubscribed. 
Demands on the funds are huge--as are the benefits. Skeptics from 
different walks of life now recognize and support this effort--indeed 
some of the most skeptical entities are now among the fund's biggest 
boosters. Regulators see the value of these investments for reducing 
consumer costs and addressing the state's constrained electric system. 
The environmental benefits are valued as a cost-effective way to help 
improve the state's poor air quality, which, among other things, is a 
significant constraint on economic growth. Individual businesses extol 
the value of the programs to their ability to lower energy costs, 
improve productivity and in many cases retain or expand jobs. In the 
recently completed state climate change stakeholder process, energy 
efficiency and renewable policies received unanimous support from 
business, state and academic interests. The lesson learned in 
Connecticut is that there is enormous potential for energy efficiency. 
Efficiency is a low cost way not only for environmental improvement, 
but for economic stimulus. It is a tool ready and available to reduce 
energy costs and help business be more productive. This lesson is now 
influencing new approaches to pursuing energy efficiency, including, in 
a nationally significant precedent, the regional system grid operator, 
ISO-New England.

What are the benefits of energy efficiency and how is it captured in 
                    Connecticut?

    Energy efficiency reduces the energy used by customer end-use 
devices and systems, without affecting the level of service and without 
loss of amenities. It is not turning out the lights. Electric energy 
savings and peak load reductions are achieved by substituting 
technically more advanced equipment and processes to produce the same 
or an improved level of end-use service with less electricity. All 
programs must meet cost-effectiveness tests so that they produce net 
savings over time. Connecticut sought to obtain these benefits:

          Reduce load, peak demand & energy use

          Provide direct cost savings to consumers and 
        businesses

          Lower market prices for all consumers by mitigating 
        peak demand costs

          Mitigate market and fuel price volatility

          Reduce security risks and interruptions

          Improve air quality and allow room for economic 
        growth

          Substitute local jobs for fuel purchases

          Mitigate climate change.

    Connecticut captures these benefits through several approaches.

Ratepayer Funded Conservation and Load Management Programs

    The Conservation and Load Management Fund (C&LM) offers a 
comprehensive array of programs tailored to residential, commercial, 
industrial and governmental customers. The programs are designed under 
the guidance of a stakeholder board, the Energy Conservation Management 
Board (ECMB), representing business, environmental and consumer 
interests, and administered by the two distribution utilities--The 
Connecticut Light and Power Company and The United Illuminating 
Company.
    Programs range from incentives for purchasing efficient products 
like lighting and air conditioners to assistance in making planned new 
construction and major renovation projects more energy efficient. 
Special programs are offered to low income customers. Connecticut has 
also developed an effective RD&D program with a portion of the funds.
    The programs are screened through a rigorous cost-effectiveness 
test that is required by statute. Every dollar collected is required to 
provide more than a dollar in benefits to the electric system. The 
cost-benefit test compares the benefits of the efficiency measure to 
the costs. In many cases, the benefit to cost ratios exceed three. New 
commercial and industrial construction programs produce benefit to cost 
ratios in the 4-6 range. Connecticut uses two tests: the ``electric 
system test'' and the ``total resource test.'' The electric system test 
compares the present value of future program electric savings to 
present conservation fund expenditures. The total resource test 
compares the present value of future electric system and other customer 
savings (from other fuels or benefits) to the total of the conservation 
expenditures and customer costs necessary to implement the programs. 
Programs are regularly evaluated for their quantitative effectiveness.
    The programs are designed to address and overcome market barriers 
for consumers and market participants, such as:

          Lack of information or search costs, hassle and 
        transaction costs, performance uncertainties, market response 
        uncertainties, asymmetric information and opportunism,

          Product or service unavailability, organizational 
        practices or customs,

          Split incentives, inseparability of product features, 
        irreversibility, the failure of market prices to reflect the 
        time-differentiated nature of demand and energy use, and the 
        failure of market prices to reflect the full cost of energy to 
        society

          Significant institutional barriers as well, including 
        developing market rules focused on supply resources or on 
        shorter-term demand response.

    Programs seek to leverage their financial resources by focusing on 
``market timing'' events--decision points when consumers enter the 
market to purchase products or design buildings. When a consumer is 
ready to purchase a motor, lighting or build an addition, the programs 
seek to induce the purchase or design of efficient products by paying 
all or a substantial portion of the incremental cost of the efficiency 
measures. This approach seeks to avoid the problem of lost 
opportunities: once a product is purchased, it will remain in use for 
its lifetime. When a building is built, it will stand for 30 years or 
more. By capturing the opportunities when they occur, the programs seek 
to ensure that they are not lost for the useful lives of the equipment 
or structures.

Types of Measures Installed

    Technologies installed range from lighting and cooling systems, to 
building envelopes, motors and design changes to plant facilities. For 
example, in commercial buildings, some of the biggest savings occur 
from installing lighting systems (lamps, ballasts and controls can save 
up to 50 percent of lighting load); updating HVAC (heating, ventilation 
and air conditioning) systems; replacing inefficient office equipment 
and testing and sealing air ducts. Reductions from 15-50 percent will 
occur with these changes with payback periods ranging from less than 
one to five years typically. The cost of the effective measures is less 
than three cents/kwh.
    Two program examples--both have won ACEEE Exemplary Program Awards:

        1.  Custom Services: Vendors approach fund managers with 
        specific projects in mind and the program offers incentives to 
        cover the incremental cost of upgraded efficiency measures.

        2.  RD&D: Provides funds for innovative electric efficiency and 
        distributed resources for projects that have not been 
        commercially proven. Funded projects include fuel cell 
        manufacturing technology and residential heat pump clothes 
        dryer. Projects are screened and evaluated by a stakeholder 
        group of industry, environmental and business members. DOE is 
        represented on this board and has contributed towards various 
        projects. Industry shares in cost through co-pay requirements.

What are the Fund's Results?

    Since the early 1990s, the investments from the state's 
conservation programs have avoided the need for another 800 MW of power 
plant capacity--nearly the size of a major nuclear power plant. 
Consumers saved $1 billion in avoided energy costs--money better used 
for other purposes. Over the course of the four years from 2000-2003, 
enough electricity was saved to power 1.8 million Connecticut homes 
with electricity for a year.




    Numerous testimonials exist showing how businesses saved money, 
increased productivity and in many cases were able to hire more 
employees.
    Importantly, these programs are reducing the total amount of energy 
needed to meet the demands of the state--a measure of the increase in 
efficiency and productivity these programs can provide. Studies for the 
ECMB show that the programs reduce the state's annual growth in 
capacity demand from 1.7 percent to 0.6 percent--an 80 percent 
reduction. In a state facing severe congestion in its transmission 
system, efficiency has become a major tool in managing stress on the 
wires. And because of the statutory cost-effectiveness requirement, for 
every $1 spent the fund produces $4 in benefits in the form of lower 
energy costs to homeowners and businesses.
    Another important effect of energy conservation in a deregulated 
market is that it can have a dramatic effect on peak pricing. The 
following chart is from a study by the Massachusetts Department of 
Energy Resources. It shows that 115 MW of energy efficiency load 
reductions avoided about $6.7 million in additional costs on the spot 
market on a hot summer day with high peak demand. (06/07/99)




Future Potential

    The ECMB has undertaken a study of the cost-effective energy 
efficiency potential in Connecticut for the future. This report will be 
released soon. It concludes that capturing the maximum cost-effective 
potential--not theoretical potential, but what can actually be obtained 
at low cost with existing technology--will produce the following 
economic benefits:

          $1.9 billion in savings over 10 years in the form of 
        avoided energy costs

          $2.8 billion in benefits less $900 million in costs 
        (present value)

          900 MW avoided capacity

          4,466 GWh avoided energy consumption by 2012: enough 
        energy to power 600,000 homes

          an average cost of 1.4 cents/kwh.

    This graph shows projected trends under three scenarios: no 
conservation, existing programs and capturing the additional cost-
effective potential. This chart indicated that Connecticut can actually 
achieve level growth in demand--a measure of the amount of efficiency 
that can be obtained in the system.




Appliance and Equipment Energy Efficiency Standards

    Just over a week ago, Gov. Rowland signed legislation to require 
minimum efficiency standards for eight commonly purchased products in 
Connecticut which are not covered by federal standards. By 2010, these 
standards will reduce annual electricity demand in Connecticut by 225 
gigawatt-hours, equivalent to the electricity consumption of 37,500 
households. These reductions mean that:

          Annual electricity demand in Connecticut will be 
        reduced by 65 megawatts by 2010 and by 126 megawatts by 2020.

          Annual greenhouse gas emissions will be reduced by 
        66,000 metric tons, which is the equivalent of removing 50,000 
        cars from the road.

          By 2010, Connecticut consumers and businesses will 
        save $40 million on their electricity bills, savings that grow 
        to $435 million by 2020.

    These benefits will increase the overall economic productivity in 
the state.

ISO New England and Congestion

    Southwest Connecticut--Fairfield County, Stamford and Bridgeport--
has been identified by FERC as one of the top 10 congested areas in the 
country. Each summer, ISO-New England, the grid operator, prepares for 
summer emergency peaks by inviting bids for resources to mitigate the 
problem. This year for the first time, and we understand for the first 
time for any grid operator, ISO added efficiency installations as one 
of the means to address this need in addition to paying customers to 
reduce their load or installing emergency generators. Approximately 4-
10 MW of efficiency improvements were selected to relieve summer 
congestion. Unlike the other approaches, efficiency produces no 
incremental emissions and continues to provide savings beyond the 
period covered by the auction. We hope that this trend of treating 
efficiency on a level playing field will continue not only in 
Connecticut and New England but around the Nation.

Climate Change Solutions: Efficiency as Low Cost Approach

    Connecticut has also adopted a bipartisan approach to addressing 
the challenges of climate change. Through an intensive nine-month 
process, stakeholders representing more than 30 business, academic, 
state agency and environmental interests, including Environment 
Northeast, met to examine ways Connecticut could reduce its emissions 
of warming gases. In the modeling upon which that process relied for 
information, energy efficiency measures stood out as the most economic 
way to meet greenhouse gas targets. Energy efficiency measures not only 
produce large emissions reductions, but because they make energy 
consumption more productive, they provide economic stimulus and offer 
opportunities for services and manufacturing.

Next Step in Efficiency: Pursue All Fuels Approach including Natural 
                    Gas, Oil and Electricity

    Tremendous potential exists to develop programs that capture 
efficiencies across fuel types. If an energy efficiency vendor can 
treat all fuels in a facility at the same time--i.e., reducing heating 
requirements in a building using oil or gas as the fuel when 
implementing lighting and other electric efficiency measures--the fuel 
savings would be large and at lower cost. Environment Northeast has 
developed information on the benefits of a state program for natural 
gas and oil efficiency. We estimate programs to invest in natural gas 
and oil efficiency would produce benefit to cost ratios of 
approximately 3.0 and 4.0, respectively. Those are indicators of the 
enormous potential in these areas for lower consumer costs and reduced 
fuel consumption.

Renewable Energy Potential

    Connecticut has also recognized the importance of spurring market 
development of clean energy sources. The benefits to the state include:

          The need to diversify its fuel sources and avoid over 
        reliance on natural gas--and the corresponding value in 
        reducing exposure to market price volatility

          The need to find effective ways to improve 
        Connecticut's poor air quality

          The opportunity to create jobs from new industries of 
        the future.

    The state is pursuing the goal of increasing renewable energy 
through several mechanisms:

          State leading by example: Recently, Governor Rowland 
        endorsed a recommendation from a state stakeholder process to 
        purchase 20 percent of the state's electricity from clean 
        energy sources by 2010, 50 percent by 2020 and 100 percent by 
        2050. This goal, which has bipartisan support in the state, 
        reflects growing recognition that clean energy sources are 
        needed to improve air quality. But it also recognizes the value 
        in diversifying the state's energy mix. Currently, only one 
        percent of the state's electricity comes from clean sources. 
        Connecticut's dependence on natural gas as a major power plant 
        fuel is growing. In the past, over reliance on oil and nuclear 
        power has left the state vulnerable to price hikes and 
        reliability problems.

          Renewable Portfolio Standard: State law requires that 
        sellers of electricity obtain minimum percentages of their 
        power from a defined set of clean energy options.\1\ These 
        percentages ratchet up to seven percent of the cleanest sources 
        by 2010 and an additional 10 percent in other renewable 
        sources.
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    \1\ Clean energy sources eligible under the Renewable Portfolio 
Standard are defined in Conn. Gen. Stat.  16-1(a) as follows:

(26) ``Class I renewable energy source'' means (A) energy derived from 
solar power, wind power, a fuel cell, methane gas from landfills, ocean 
thermal power, wave or tidal power, low emission advanced renewable 
energy conversion technologies, a run-of-the-river hydropower facility 
provided such facility has a generating capacity of not more than five 
megawatts, does not cause an appreciable change in the river flow, and 
began operation after the effective date of this section, or a biomass 
facility, including, but not limited to, a biomass gasification plant 
that utilizes land clearing debris, tree stumps or other biomass that 
regenerates or the use of which will not result in a depletion of 
resources, provided such biomass is cultivated and harvested in a 
sustainable manner and the average emission rate for such facility is 
equal to or less than .075 pounds of nitrogen oxides per million BTU of 
heat input for the previous calendar quarter, except that energy 
derived from a biomass facility with a capacity of less than five 
hundred kilowatts that began construction before July 1, 2003, may be 
considered a Class I renewable energy source, provided such biomass is 
cultivated and harvested in a sustainable manner, or (B) any electrical 
generation, including distributed generation, generated from a Class I 
---------------------------------------------------------------------------
renewable energy source.

(27) ``Class II renewable energy source'' means energy derived from a 
trash-to-energy facility, a biomass facility that began operation 
before July 1, 1998, provided the average emission rate for such 
facility is equal to or less than .2 pounds of nitrogen oxides per 
million BTU of heat input for the previous calendar quarter, or a run-
of-the-river hydropower facility provided such facility has a 
generating capacity of not more than five megawatts, does not cause an 
appreciable change in the river flow, and began operation prior to the 
effective date of this section.

          Clean Energy Utility Offers: Connecticut is currently 
        developing the rules for a ``green power'' option for its 
        utility customers. This will provide consumers an easy check 
        off system to choose clean power and efficiency offers from 
        selected market players. These offers should be in place by the 
        fall.

          Clean Energy Fund. The state created the Clean Energy 
        Fund in 2000 to invest in renewable energy companies and 
        technologies. Seen as an industry of the future with employment 
        potential, the CCEF has focused on the state's fuel cell 
        industry as well as investments in other clean power resources.

Federal/State Synergies and Considerations

    Current federal efforts have not accorded energy efficiency the 
primary policy emphasis which it deserves. One example is the 
development of appliance efficiency standards by the Department of 
Energy, which appears to be stalled. The only significant action has 
been an effort to roll back an air conditioning standard approved by 
the previous administration, which was forestalled by a federal court 
ruling on a suit instituted by several states, including Connecticut. 
As a result, states have been compelled to take the lead with respect 
to products not covered by federal standards, as discussed above. 
States cannot, however, increase standards for the many products now 
covered by federal standards, even if technological advances warrant 
improvement. Obviously, it would be far better for DOE to actively 
pursue opportunities to develop higher national standards where 
appropriate and cost-effective. Reasonable standards save energy cost-
effectively without the need for devoting State and federal program 
funds to incentives and marketing activities.
    An example of positive federal-state synergy is the relationship of 
the federally funded industrial productivity centers and CL&P's Prime 
program. Prime provides productivity audits to achieve greater 
manufacturing efficiencies through more efficient, streamlined 
processes and waste minimization. It works closely with ConnSTEP, a 
manufacturing resource center for Connecticut which is sponsored by the 
Commerce Department's Manufacturing Extension Partnerships and the 
State Department of Economic Development. ConnSTEP also works in 
partnership with the DOE sponsored Industrial Assessment Center at the 
University of Massachusetts to conduct full facility assessments 
focusing on conserving energy, reducing pollution, increasing 
productivity, and reducing costs. The assessments identify energy 
conservation measures, provide recommendations and estimated costs for 
implementation, and specify payback periods. ConnSTEP reports that four 
assessments conducted in Connecticut manufacturing companies during the 
past year have identified savings of $588,000 in process improvements; 
4,153,200 kWh in electrical energy savings; 63,679 MMBtu in natural gas 
savings and 7.8 million gallons in process water savings. These 
programs have had considerable success in meeting process productivity 
and energy efficiency needs in a coordinated manner.
    The Energy Star program has also been a valuable ally for state 
efficiency efforts. EPA has built a credible and well known brand with 
Energy Star and it has become a powerful force for efficiency. The 
Northeast Energy Efficiency Partnership has developed regional efforts 
to promote Energy Star products through advertising, customer 
incentives, buydowns for manufacturers and distributors and other 
techniques. The combination of the Energy Star brand and coordinated 
activity by utility and state conservation programs has produced 
substantial increases in the purchase of efficient appliances and 
equipment.
    The following are a few suggestions for improving the federal role 
in promoting energy efficiency.

          Allow efficiency delivery services and programs to 
        qualify for federal funding. It is program delivery that 
        produces actual energy savings.

          Work with a wider group of stakeholders in the states 
        to determine DOE priorities. Federal outreach efforts tend to 
        focus on utilities, other large corporations and state 
        agencies. Consider expanding this outreach to consumer, 
        environmental, low-income and community groups for input on 
        their priorities and perspectives.

          Establish stronger requirements for regional grid 
        organizations to include efficiency improvements as an integral 
        part of their planning and investments.

Additional Opportunities for Federally Sponsored Technology Research

    There are a broad range of opportunities to improve the efficiency 
of equipment and structures. The following are a few that have been 
suggested by experts in the field.

          More research is needed on installation procedures, 
        tune-up methods and outside air access for commercial air 
        conditioning equipment. The opportunities to reduce summer peak 
        loads are enormous, but the problems are difficult.

          Advanced evaporative cooling technologies could be 
        widely used, but require additional development and testing.

          Daylighting controls and office plug load controls 
        are well along in development, but need more monitoring and 
        analysis to be perfected.

          Heat-pump water heaters present an opportunity for 
        very substantial savings, but have yet to be developed to 
        commercial viability.

          Advanced commercial package refrigeration 
        technologies (coolers, ice makers, etc.) also need development 
        support.

          Promote RD&D on technologies that would further 
        market potential. For example, on-site clean distributed 
        generation combined with efficiency would produce projects that 
        could (i) resize energy load requirements at a customer 
        facility and then (ii) install on-site clean generation to meet 
        load requirements.

                               Discussion

    Chairman Biggert. Thank you very much.
    And now we will turn to questions. Each Member will have 
five minutes to ask questions. And I will yield the first time 
to the distinguished Chairman, Mr. Boehlert, for five minutes.
    Chairman Boehlert. Let the record show that that is the 
first time she has ever yielded to me.
    Thank you very much, Madame Chair.
    You all know that we are in difficult times with respect to 
the budget for a whole variety of reasons far removed from this 
committee room. If it was up to us, we would up the numbers in 
just about every single important area of science, and--but it 
is not up to us exclusively. We have things like Iraq and 
Homeland Security. And you know, the budget calls for a 10 
percent cut in energy efficiency R&D at DOE. We are trying to 
restore as much of that as we can. What would be the impact of 
a 10 percent cut, number one? And what do we lose in the 
process? Sometimes, we are shortsighted. We just talk about, 
well, do you cut 10 percent this year and--but we fail to 
recognize that the 10 percent that is cut this year may result 
in a loss of 20 percent increase in benefits next year, et 
cetera. So could you quickly, panel members, individually 
comment on that?
    Mr. Nadel. I can add a couple of things. I think a 10 
percent cut would mean several programs would have to be 
canceled, other programs would be stretched out. But as you 
kind of eluded to, it could also have devastating impacts in 
terms of staffing. I have heard from some of the national labs, 
for example, that if they don't get funds restored, they are 
going to have to lay off certain staff, and then there won't be 
the ability to restart those programs in the future. So a lot 
of this is long-term staff and we are losing a valuable 
resource in terms of continuing this work.
    Chairman Boehlert. But if anyone can guesstimate, a 10 
percent cut now results in a loss of 20 or 30 percent. If you 
could quantify it in some way. In other words, I am trying, to 
the best of my ability, to convince decision-makers outside 
this committee that it is very shortsighted and shame on us. 
How about you, Mr. Konove?
    Mr. Konove. As a builder in my local area, it would also be 
difficult to, I think, come up with a percentage and a number, 
although I would agree with what Mr. Nadel was saying. But I 
think the important thing to consider is how to coordinate the 
programs that do exist. There might be some efficiencies that 
you find there. There are HUD programs. There are Department of 
Energy programs. And from my perspective in the field, there is 
not necessarily a lot of communication between those happening, 
and so to try to have some more impact on the local level, 
having those coordinated whether in a particular U.S. buildings 
program, as SBIC has proposed, or some other entity would be 
very helpful with the limited funds that we do have.
    Chairman Boehlert. Ms. Loftness.
    Ms. Loftness. It is a tough question. I guess, working on 
the basis that the programs that have existed have had 
multipliers of somewhere between 5,000, 10,000, and 20,000 to 
one, maybe that gives some impact of what those 10 percent cuts 
are doing to the multiplying factor of energy efficiency.
    Chairman Boehlert. That is music to my ears, and this is 
unfair, because you are just getting the question. Give some 
thought to it after, and would you mind sharing with the 
Committee some of your thoughts on it? Because, you know, 
sometimes you have to spend money to make money, and a modest 
expenditure, restoring all or part of that cut, I think, would 
produce handsome dividends for the future. But it is tough to 
quantify. It is sort of a gut reaction, so whatever you can 
share with us----
    Ms. Loftness. And just one more comment. Almost every 
energy efficiency strategy you come up with has at least a 10-
year, and in many cases, a 50-year life. So we are looking at 
things that are very long-term consequences for the Nation and 
its energy use.
    Chairman Boehlert. Yes. Mr. Carberry.
    Mr. Carberry. I guess I would follow-up with that. My 
experience is when you make cuts like that, you destroy 
momentum, and momentum takes three, four, five, or 10 years to 
build and cash in, so if you make a cut like that, the 
probability that it would have a multiplier of 10 to one is 
pretty serious.
    Chairman Boehlert. Mr. Smith, any thoughts?
    Mr. Smith. Mr. Boehlert, when we look across the board and 
we look at, for instance, what I am familiar with, the federal 
funds that come to the states, particularly the state energy 
programs, a 10 percent cut, we just did an exercise for the 
Office of Management and Budget to understand the dollar--how 
much dollars spent in federal funds, what it leverages out in 
the states, and it leverages about eight or nine to one. For 
every dollar, federal dollar that comes to the states through 
the state energy program, they can leverage those dollars eight 
or nine to one. So if you look at a 10 percent cut, and that is 
about a $50 million program, that is the only one I am really 
very familiar with, then we are looking at multipliers of that. 
We are looking at nine or ten times that cut to the states. And 
I think the states are aware we deliver those programs to the 
people.
    Chairman Boehlert. Thank you.
    Mr. Sosland.
    Mr. Sosland. Well, I would just note that--I would just 
start from the premise that we are not spending enough money on 
energy efficiency and renewable development. Anyway, I know 
that----
    Chairman Boehlert. That is the premise we start from.
    Mr. Sosland. Right. And, you know, it is frustrating, 
because we can identify with the data from the states and the 
different organizations and businesses how much the savings 
that can occur, the job creation that can occur, and the 
productivity increases that can occur, those all get lost when 
there is an inadequate budget, whether it is the spending level 
that you are trying to restore or, you know, the 10 percent cut 
only makes it that much worse. We are losing opportunities 
every day that will last 10, 20, 30 years, and we really can't 
afford that, given our current energy situation.
    Chairman Boehlert. Well, I would ask all of you, and thank 
you for those answers, to give it some thought as you leave 
this room and if you can do anything that would--skip the 
verbiage, but as much as possible, a written response, try to 
quantify the impact of a cut of this magnitude in terms of lost 
opportunities for benefit in the near-term. You have got to 
spend money to make money. That is an old adage, and I believe 
here is an area where we spend the necessary money, we make it 
back many fold.
    So Madame Chair, I really appreciate that. If you have a 
second round, I want you all to be thinking of this, 
microgeneration, I would like to discuss that, probably with 
Ms. Loftness and Mr. Smith.
    Chairman Biggert. Thank you.
    And the Ranking Member from Connecticut, Mr. Larson, is 
recognized for five minutes.
    Mr. Larson. Thank you very much, Madame Chairman. I also 
hope we have a second round so I can talk about the hydrogen 
economy, but I want to follow up on Mr. Boehlert's line of 
questioning as well. And with a plea on your part, probably 
some of the most effective lobbying we have seen was from the 
Union of Concerned Scientists. And inasmuch as some of our 
major governmental institutions have become paralyzed by their 
own inertia, I think what it takes to move this Nation is, in 
fact, people like yourselves who have the expertise, who have 
the knowledge, and who have the data to come forward and 
through a unifying effort, demonstrate to the public, as you 
have in your testimony, the solid foundation and basis on which 
these are value-added areas whose multiplying effect only 
benefits us both in the short- and the long-term, and oh, by 
the way, our cuts only further impair your ability.
    Throughout the testimony, you mentioned a couple of things, 
and if you would just comment on them, again, the starvation 
that is going on that you talked about, what that does in terms 
of impeding students and the future of this country in terms of 
attracting people to these areas of science, engineering, and 
math and what we see going on by contrast in other countries 
where we used to be numero uno, how we are losing out while 
other countries are gaining.
    Mr. Smith, if you would follow up on your financing idea 
that you talked about in terms of the Federal Government. If 
you would elaborate more on that in--as part of this question 
as well, I would appreciate that. And collectively, starting 
with Mr. Sosland, if you would be able to address this issue of 
what it is, do you think, in renewables that we would need to 
do to reduce the dependency on foreign supplies by 20 percent--
25 percent. What are some of the most immediate things that we 
could do to achieve those goals?
    So if you could answer those for me, I would greatly 
appreciate it.
    Mr. Sosland. Well, I think there are programs in place at 
the state level that are--have a lot of promise and are 
underfunded. And if we could find a way to support and 
continue--leverage these investments, as some of us have 
mentioned, into R&D, fuel cells. I mean, I am a big believer in 
the hydrogen economy, actually, but I am a believer in doing 
demonstration projects that prove the market credibility of 
technologies. And one area that I think has tremendous promise 
that is totally underfunded is the area of going into 
businesses and investing in efficiency, doing a demonstration 
where you downsize the load of the facility whether it is an 
office building or a manufacturing facility, and then you put 
on-site generation that is clean, that is maybe not completely 
accepted in the marketplace yet, but is viable, you meet some 
of that load with this cleaner on-site technology. And you 
combine the two, and you show the business community, and you 
show the world that these can happen. We almost had projects 
like that underway in Connecticut with, for example, a credit 
card company that needs reliable power. There was a facility in 
Connecticut that provides backup services for ATM machines in 
Connecticut and New York. If that goes down, the dollar cost in 
insurance is in the millions of dollars per minute. Providing a 
way to better size the load for that facility, put in 
microturbines, to put in fuel cells, even though they are 
expensive now, downsize with the efficiency investments, show 
what can be done at a working, real facility, I think those are 
the kinds of projects that I think would provide----
    Mr. Larson. Those are great examples.
    Mr. Smith, how about the finance example you were talking 
about?
    Mr. Smith. Thank you. Thank you, Mr. Larson.
    We--in New York, we use what we call our State EnVest 
program. And we are working with public buildings, because 
states have to lead by example. Public authorities have to lead 
by example. So what we find is that there is a lack of a 
capitol out there for energy service companies to come into 
state buildings to take the initiative. So what we did was did 
a master lease arrangement. We did a master financing that 
makes a pool of money available to energy service companies to 
access tax exempt financing, municipal lease financing, and 
then they are able to go into the state agencies and to the 
public authorities and to the localities to undertake energy 
efficiency initiatives in those buildings, in those operations, 
no cost to the state agency, no cost to the budget, and then it 
is--and allows them to take those----
    Mr. Larson. How much money from the Federal Government 
could--would you--would assist that pool? I assume if the 
Federal Government gave more money, you could expand the----
    Mr. Smith. Right. In New York, we are doing about $125 
million. Our first charge of money was $125 million. We have 
allocated, right now, about $90 million of that for state 
authorities and some. And what--if we are talking at a federal 
level, the--recently the super--that authorization lapsed in 
September, and that would be a mechanism in order to undertake 
it, and we are probably talking about 10 or 20 times more money 
to----
    Mr. Larson. So it is something that other states could 
replicate as well if----
    Mr. Smith. Certainly. Certainly.
    Mr. Larson. Ms. Loftness.
    Ms. Loftness. Yes, let me thank you for asking the question 
about universities. I think the--if there is a 10 percent cut 
at the Department of Energy, I think that the first thing that 
would go is any funding that goes out to the universities in an 
effort to keep the labs vital, which they should absolutely be. 
It is the last piece in the chain. Having said that, I think 
there is a tremendous synergy that we are not taking advantage 
of. The National Science Foundation and the National Institute 
of Health are the largest funders of university-level research 
and Ph.D. programs, and they do not have a line in their 
mandate on either of them that focuses on buildings and 
building environment and energy issues. And even a line in 
their mandate would totally transform the opportunity to 
actually seek funding from the National Science Foundation and 
the National Institute of Health.
    Let me add to that that the issue of homeland security has 
a lot of synergies with environmental quality. And energy 
efficiency and homeland security actually do have an alliance 
that has not, in fact, been spelled out in any of the mandates 
relative to homeland security, which is beginning to fund 
university-level efforts and, of course, a number of issues 
related to the war and star wars are beginning to actually 
shift focus at university campuses. And somewhere we have to 
decide what it is we want to export as a Nation, and I would 
think environmental quality is a wonderful thing to export.
    Mr. Larson. I see my time has run out, but I hope during a 
second round I will be able to get back to the other panelists 
and I have another----
    Chairman Biggert. Thank you very much.
    And--when--years ago, and this is a long time ago, my 
husband and I went to Europe on $5 a day, so you know how long 
ago it was, that book, ``Europe on $5 a Day.'' But we stayed in 
these funny little hotels that had a lot of staircases. And at 
night, when you would come home, you would push a little 
button, and the lights would light up on the stairway, but you 
had to make it to the next landing before the lights went off, 
and if you didn't, then you were looking all around to find the 
lights. And to me, I know it seemed like a great idea how 
energy conscious they were over there. And I always wondered 
why we never had anything like that. We seem to be, you know, 
the big spenders on energy. And we have talked about a lot of 
topics here today, and you made a lot of valuable 
recommendations on how the Federal Government can improve its 
efforts on efficiency and maybe find a way to light those--you 
know, to have something like the lights and renewable energy, 
but as we have been talking about, this is a very tough budget 
year, and I think we are not going to be--very unlikely that we 
can fund a lot of the great ideas that you have given us. So if 
each of you, and I think that Mr. Sosland has already addressed 
this question, if you can name the one item that will give the 
most bang for the buck, as you have said, Mr. Sosland, in other 
words the most budget efficient, if you will, and I would like 
you to start--and very briefly, as short as you can.
    Mr. Nadel.
    Mr. Nadel. Okay. Thank you.
    Probably the single area that gives the most bang for the 
buck is the federal Appliance and Equipment Efficiency 
Standards program that Ms. Loftness talked about. In that case, 
we are talking benefit to cost ratio of thousands to one. 
Relatively modest costs. The programs is scheduled in the 
budget to take, I think it was a $1 million hit or $2 million 
hit, that will really restrict the ability to develop new 
standards. A couple of more million dollars, then we are 
talking, you know, thousands of megawatts of additional 
savings. So that is probably the single biggest bang for the 
buck.
    Chairman Biggert. Thank you.
    Mr. Konove.
    Mr. Konove. From my perspective with the home building 
industry, I would look, again, at coordinating programs that 
you have in process now, but also with the perspective of 
including industry. People that are associated with home 
building or construction industries are on the verge of getting 
involved in a tremendous way through the green building 
movement that is coming. And they are starting to really get 
active in terms of their products and their education. But a 
coordinated effort similar to the manufacturing extension 
centers where it is working with business and industry to get 
the word out and to get the training out could be helpful.
    Chairman Biggert. Thank you.
    Ms. Loftness.
    Ms. Loftness. This one is really tough to come up with one.
    I guess my feeling would be that voluntary standards 
adopted both at a federal level and in partnership with various 
states are going to have, and have had, a major impact, so LEED 
standards or equivalent standards for federal and state level 
buildings.
    Chairman Biggert. Thank you.
    Mr. Carberry.
    Mr. Carberry. I guess number one would be working on the 
programs that take the price and price volatility out of the 
natural gas supply. The volatility is the largest impediment to 
investment because of the uncertainty that it drives. And so 
therefore, looking at those issues, there is an excellent 
report, the National Petroleum Council's recent report on this 
issue, and I recommend that as an opportunity.
    Chairman Biggert. Thank you.
    Mr. Smith.
    Mr. Smith. Okay. I will say I agree with Mr. Nadel that 
appliance efficiency and building standards and codes are very, 
very important. One would be to continue the money for the 
state energy offices. I am blessed in New York to have a lot of 
public benefit funds. There are many states where the federal 
funding is crucial for delivering those programs to people that 
need them. That would--I would underline that continued funding 
for the state energy program is important for that delivery 
mechanism.
    Chairman Biggert. Mr. Sosland, would you like to add 
anything or----
    Mr. Sosland. I agree with everyone.
    Chairman Biggert. Okay.
    I think I have time for just one more question, and that is 
to Mr. Carberry. I was impressed with DuPont's future goal to 
continue to keep its energy use constant while dramatically 
increasing production. What would be the impact on natural gas 
demand if DuPont's energy efficiency and renewable technology 
investments were replicated throughout the industry?
    Mr. Carberry. I guess the first thing I might point out is 
that if you look at the national statistics, industry is the 
only sector that has managed to keep their energy demand 
relatively flat for the last 10 years. And of course, that is 
because, as large industry, you know, they see the dollars in a 
concentrated form and put engineers, like me, working on the 
problem. The gains are in the order of a reduction of 30 or 40 
percent from the business-as-usual case. I would say that most 
of our experience is that you can get that first 10 percent 
fairly quickly and the rest of it gets good and hard, but since 
1990, for instance, I would say that our business-as-usual case 
would put us 40 percent higher than where we are right now. So, 
you know, assuming that the others that haven't done that could 
achieve the same gains, those are very, very large gains. And 
there is no one magic answer, either. It is a little bit like a 
winning football team. Man, you have got to have them all.
    Chairman Biggert. So if the impact on natural gas demand, 
if the Federal Government then made a strong push for the 
energy efficiency and renewable energy throughout the country, 
the gains would even----
    Mr. Carberry. That could be very--that could be even more 
dramatic, because natural gas is at the margin. It is used 
heavily by the electrical power industry for variable demand 
and increasingly for baseload. So if those efficiencies started 
rolling through the entire economy, and I believe one of the 
speakers previously already made that point, the leverage would 
be even greater. And I think we saw that experience in 
California.
    Chairman Biggert. Thank you.
    Mr. Miller, from North Carolina, is recognized for five 
minutes.
    Mr. Miller. Thank you, Madame Chair.
    Mr. Konove, I had a question about a North Carolina program 
that I think is relatively recent, the North Carolina Green 
Energy program. Could you describe that program, how it works, 
and although I think it is a little early to say how well it is 
working, how well it appears to be working in the first few 
months?
    Mr. Konove. I believe you are talking about the green 
building program that is getting underway with the North 
Carolina Solar Center?
    Mr. Miller. No, actually, this----
    Mr. Konove. Oh, the Green Power program?
    Mr. Miller. Right, the Green Power program.
    Mr. Konove. Okay. Well, I am purchasing green power myself. 
The Green Power program is a statewide program in North 
Carolina, allowing consumers to purchase, through their utility 
bills, green power for the promotion of the utilities and the 
state to build renewable energy development. And from my 
understanding, I mean, it is starting to reach the people. It 
has really just gotten off of the ground in the last couple of 
months, but it is a way that consumers are enabled to--or to 
take power into their own hands to purchase renewable energy 
systems. And we are starting out with just a limited supply 
within the state, and we are going to be monitored by a third-
party system. And within a year or two, they are going to 
confirm how much renewable energy generation has been added to 
the system in North Carolina, and I am looking forward to it 
improving our capabilities quite a bit.
    Mr. Miller. Thank you.
    My second question, not specifically to Mr. Konove, and I 
think it may come close to duplicating some earlier questions, 
particularly Mr. Larson's questions earlier, most of the talk 
about energy conservation and competition has focused on the 
effective energy cost. But is there also an international 
market for conservation technologies, alternative energy 
technologies, and how are we doing in that market? Are we 
competitive in the international market? And I don't know which 
one of you is most appropriate to answer that. Mr. Konove, 
since you are from North Carolina, though, I would love to have 
your opinion on any topic you would----
    Mr. Konove. Thank you, Mr. Miller. I will certainly add 
something. I am sure that most of the other panelists can add 
as well.
    Clearly, there is tremendous potential for energy 
efficiency and renewable energy in the world. And many of the 
other countries around the world are actually taking a greater 
advantage in reaching into this market at a faster rate than we 
are, I believe. And we are probably missing that capability, 
and so I think there is clearly a need for more investment in 
technology and spreading the products that we do have around 
the world. I think right now, from my perspective in home 
building, energy efficiency technology and renewable energy 
technology, on one level, we can use whatever we have now and 
tremendously increase the benefits of our housing. We can 
easily get 30 to 50 percent improvement in the housing that we 
build and can, with a little bit of work, get up to a higher 
percentage. And that--those technologies could clearly be 
exported to other countries around the world, but I don't 
believe we are taking advantage of it as nearly as we could.
    Mr. Carberry. If I could, I would like to--Mr. Miller, I 
actually lived and worked in North Carolina for a little while 
at our Wilmington, North Carolina plant. Would that entitle me 
to speak on this subject?
    Mr. Miller. Not quite the same entitlement, but still, yes.
    Mr. Carberry. I think the United States had a dramatic 
opportunity and a significant lead in some of these 
technologies, particularly photovoltaics and wind power. 
Unfortunately, we have been overtaken and passed by, among 
others, the Germans, particularly the Germans. And one of the 
main reasons is that the German program is one of steady 
progress, and the United States program has been, 
unfortunately, hindered by an on again, off again support. And 
on again, off again support is very damaging to investment, as 
well you can imagine, because investment horizons are long and, 
therefore, if support comes and leaves, the business goes 
someplace else. And the Germans have passed us in both capacity 
and technology. And I think that lack of support is a 
significant issue.
    Ms. Loftness. If I could add to that, at this point, when 
you look at the rapid growth in China and the amount of 
construction that goes on in China, America is exporting 
expertise to that environment but not actually exporting as 
much technology as they could, because our technologies are not 
competitive, as was eluded to. And it looks as if in a number 
of arenas, China is going to be the major source of some of the 
most environmentally innovative, including absorption chillers 
and a number of different technologies that we will--we are not 
investing in and they are. So I think it is a major export--
missed opportunity, and we need to actually set these targets 
as industrial innovation targets so that we not only improve 
the environmental efficiency here in the States, but we also 
have something that we can export as we start to decline in 
some of the technological advances.
    Chairman Biggert. Thank you, Mr. Miller.
    The gentleman from Georgia, Mr. Gingrey, is recognized for 
five minutes.
    Mr. Gingrey. Thank you, Madame Chairman.
    Going back to the Chairman's question and in talking about 
her experience in Europe on $5 a day an how she was going up 
the stairs in one of those pincionnes or whatever they are 
called, late at night and if you didn't get to the first 
landing quickly, all of a sudden the lights--in this country if 
you did that, of course, you probably would run the risk of 
falling down those stairs and breaking your leg and then there 
would be a class action lawsuit and all of this other stuff. 
And I couldn't help but think about this place here, if--you 
know, God forbid, those of us who sometimes like to work late 
at night, you come in the building and you get to walk up the 
escalators, because they turn them off, clearly to save a 
little energy, and I really experienced that, Madame Chairman, 
this weekend. I was flying back from Michigan and I got to 
Atlanta at about one o'clock in the morning. And all of the 
trams were shut down, and I had the pleasure of walking two 
miles with three bags on my back to finally get to my car. And 
I thought, now this is a heck of a way to save energy, but I 
understand what you say in these many rolling blackouts, if you 
will, and there are some problems with that, because I almost 
had a heart attack getting to my car, because of this energy 
efficiency.
    I wanted to ask a question, though, of Mr. Nadel. In your 
testimony, you gave a fairly broad estimate for the future of 
natural gas prices. I think you said $4 per cubic thousand up 
to, possibly, $7 per thousand cubic feet of natural gas. In 
your opinion, how likely is the extreme case of $7 per thousand 
cubic feet, and would you--would increased use of energy 
efficiency and renewable energy technologies, would it reduce 
the likelihood of very high natural gas prices in the future? 
And you know, what is the extreme?
    Mr. Nadel. Okay. In terms of $7 per thousand cubic feet of 
natural gas, it is a distinct possibility. I--you know, a 20 
percent chance, 30 percent chance, something along those lines. 
The markets are extremely tight.
    To answer your second question, energy efficiency and 
renewable energy can make a big difference. Our study last 
year, using the same models as the National Petroleum Council, 
found that medium levels of efficiency renewables could cut 
costs by--gas prices by 20 percent. So if it was $7, that is 
$1.40 off of it. So there are pretty significant impacts.
    Mr. Gingrey. Anybody else want to respond to that? I think 
we have got a little bit more time before my five minutes 
expire.
    Mr. Carberry. We have got a divided opinion here, but I 
believe we have already seen $7, and I believe the futures are 
already well north of $6 and maybe going even higher than that, 
so $7 is more a reality next summer than a projection almost, 
it would seem. So I think we are going to be there. The real 
issue is probably the--is again probably the volatility. 
Everything you look at in terms of natural gas prices say that 
there is a lot of technology that if the natural gas prices are 
going to be north of, and you can pick any number, $4, $4.50, 
$5, there are a lot of breakpoints in there, reliably, there 
would be a lot of investment put on the ground. The problem is, 
the investment usually runs $2 billion for this or that, and so 
people have to have a lot of certainty around it. We need 
stability, and that is probably the most important--volatility 
is hurting us more than the average price practically.
    Ms. Loftness. If I could maybe sort of respond to the first 
half of your comment, which is that energy efficiency is sort 
of paralleled with a reduced quality of life or sort of things 
that sort of compromise the sort of quality of life, I think 
there are certainly a group of energy efficiency strategies 
that would, in fact, reduce service, but the large quantity of 
energy efficient strategies that we are talking about will 
actually improve the quality of life. I mean, you could take 
the light fixtures in this room and make this a far more 
beautiful historic room and cut the energy load here by 
probably down to 10 percent of what you see with equal light 
levels. And so there are things that we should and could be 
doing that will enhance the quality of life, better windows 
improve thermal comfort for senior citizens and housing. So I 
think it is important not to think of efficiency as a loss but 
as, actually, a gain.
    Mr. Gingrey. You know, and this comment I made is somewhat 
tongue and cheek, and I meant to be humorous, but really it is 
kind of serious because, as the Chairman mentioned, I mean this 
is years ago when she and her husband were on this trip and 
back--they were doing things. And in this country, of course, 
we are so burdened by rules and regulations, that is why on the 
Floor of the House yesterday the bill of regulatory reform was 
so important, and then we talk about losing jobs and 
outsourcing and all of that. We can't compete with some of 
these other countries in regard to wages. We know that, but 
they are killing us, because they are not burdened by all of 
these rules and regulations and things that would really 
prevent just like she was talking about to be able to do things 
like that for fear--God forbid, you know, you go out of 
business because of a product liability lawsuit or whatever 
just because you are trying to do something that makes sense.
    Mr. Smith. Can I respond to that, the stairwell incident? 
There is a company in New York that NYSERDA has invested in 
that has dimmable ballasts, dimmable fluorescent lamps that go 
in stairwells, and they dim down when there is no one in the 
stairwell. As soon as someone appears in the stairwell, they 
come to full light. They are cost effective. We are 
demonstrating them right now in multi-family housing in New 
York City. It is a start-up company. And this is the kind of 
technology we can export to the world and we should look at as 
opportunities, wherever you are on the climate change thing, it 
is opportunities like this to export our technology and our 
know-how to the world. And I think we have answers, and I 
agree, efficiency isn't freezing in the dark, it is making--it 
is using all of the energy you want but in the most efficient 
manner.
    Chairman Biggert. Thank you.
    The gentlewoman from California, Ms. Woolsey, is 
recognized.
    Ms. Woolsey. Thank you.
    First of all, I would like to thank our Chairwoman and our 
Ranking Member and the six panelists for a magnificent hearing. 
This has been great.
    And then I want to ask a very broad question that you won't 
want to answer, but then I do have a question. And my question 
is how stupid are we? I mean, we are not only not investing in 
R&D, we are cutting R&D for efficiency and renewables when our 
very security in this country depends upon being independent of 
foreign fuel, when our environment depends upon green 
technologies, not just ours, the world's, when new technology, 
green technology could actually be the answer to what the 
economy needs in this country, but we are letting other 
countries take these technologies that ought to be ours and 
benefit from them. And I--actually, I have introduced H.R. 1343 
called the Renewable Energy and Energy Efficiency Act, which 
sets a goal for our nation that at least 20 percent of energy 
produced domestically will be energy efficient by the year 
2020, and it calls for new investments in renewable energy and 
energy efficiency R&D. It establishes competitive grants to 
help bring new commercial technologies in these areas to 
market. And in the overall, this bill is an opportunity to help 
craft responsible energy policy by ensuring our national 
security through more diverse energy sources. I have eight co-
sponsors on it, seven of them are Democrats from this 
committee.
    And so my question to you--I am really frustrated by this, 
obviously. And I haven't worked this part of the--my bill, so I 
would have more if I was working it, believe me. But I want to 
know where the grass roots are. Where are the groups in this 
country that need to put pressure on Members of Congress to 
make us do the right thing, because you are all wonderful, but 
you are one person each. We need lobby efforts from our 
Districts, from your industries, your groups. We need it. We 
need it badly, and we need to be told, ``Do the right thing or 
you are going to get booted out of office.'' So my question is 
where are these people?
    From you, yes, Mr. Sosland?
    Mr. Sosland. Well, I appreciate your comments and many of 
the comments here. It is terrific to work in this field and see 
the interest from this subcommittee. I don't work in 
Washington. We work at the state level and state capitals, and 
there are so many groups. There is so much information. ACEEE, 
Steven Nadel's group, has a tremendous amount of material and 
information. The national environmental organizations have it. 
There are trade associations, energy efficiency service 
companies. They are all out there, and it--I don't have an 
answer to you other than to say, you know, maybe you can talk 
to the foundation community about the grant programs, but we 
know what the answers are. We have the data from the states. We 
have it from NYSERDA. We have it from Connecticut. We have it 
from California, and----
    Ms. Woolsey. Yeah, I know that. I have it in my own 
District, believe me.
    Mr. Sosland. Right. And we need to find a way to get that 
information to resonate.
    Ms. Woolsey. Okay.
    Mr. Sosland. And I think we now--I think that the topics 
that we are talking about are now answers to problems that are 
on the radar screen: energy security, energy independence. 
Framing the question that way may help somewhat. The groups are 
around. Maybe they need to be more visible, but I think it is--
--
    Ms. Woolsey. Well, they do, and that is my question to you, 
because we all know--I mean, obviously, we know what we should 
be doing. We are not doing it. And it is going to come from 
outside pressures.
    Ms. Loftness, you----
    Ms. Loftness. You are absolutely right to chastise us, in a 
sense, because----
    Ms. Woolsey. Well, not you.
    Ms. Loftness. Well, no, I mean us in terms of a broader 
constituency for these goals who have not actually made this--
or been able to put the amount of, sort of, lobbying effort and 
advocacy effort in Washington. Just as an anecdote that might 
be pertinent to this, what--all of the deans of the engineering 
schools all across the country come to lobby Congress once a 
year. And they all fly in from all over, and they all fly on 
the same airplanes and so, all of the--well, anyway, another 
story. But I--they come to lobby for the National Science 
Foundation and the importance of engineering--higher level 
education and engineering. And I think they have had an impact. 
And why the environmental universities in all disciplines, be 
it policy, engineering, science, architecture, why we are not 
coming to make that same pitch is a weakness on our part and 
something that we should be addressing.
    Ms. Woolsey. And you should be bragging as you come about 
what you are accomplishing.
    Mr. Konove. I would also encourage all of us, you all, too, 
to make it personal. I think if you go home to your Districts 
and on the questionnaires that we--as citizens that we receive 
from you all periodically were to simply ask the questions or 
meetings to ask the questions, you are going to find that no 
matter which side of the table that people are on or whatever 
the economic situations, if you ask them about energy 
efficiency technologies and renewables in language that they 
can understand and provide them the--do they want this or do 
they not, you are going to find that an amazing number of 
people want the capability to make these changes. And----
    Ms. Woolsey. Well, let----
    Mr. Konove.--a lot of these people can not come to 
Washington to make themselves known.
    Ms. Woolsey. Well, actually, in my--I represent the two 
counties north of the Golden Gate Bridge north of San 
Francisco. We have a--I could go on and--I could sit here for 
five minutes and tell you what is happening in my District. 
They get it. Hence they elected me.
    Mr. Nadel. Okay. I totally agree with you that in this 
country we are very much fixated on the short-term, be it here 
in Congress, be it at different companies around the country, 
and they don't realize that this is a very long-term effort 
that we need to address. A couple of thoughts, one the fact 
that energy prices are getting higher or are certainly getting 
increased attention. If the predictions that these will be 
sustained prove true, then I think there will be a 
significantly higher voter interest in these topics. Second, 
the increasing reliance on oil imports, given all of the 
concerns about the Middle East, I think that will also 
gradually increase interest and attention. Our oil imports are 
only going up, not down. Third, I think a lot of it is going to 
depend on the unions, the private companies who are 
increasingly less competitive than they used to be. I know 
Representative Boehlert was talking about fuel economy. I mean, 
I am very concerned that the U.S. manufacturers have their 
heads in the sand, that they are maximizing profits through the 
next couple of years, but when we have sustained high oil 
prices, that they don't have the hybrids, they don't have the 
advanced diesels and that they are going to be at a major 
competitive disadvantage. Toyota has now passed Ford to be the 
world's number two car company. My guess is within the next 10 
years, they are going to pass GM and become number one. Our 
companies need to take a longer-term view and innovate in order 
to stay competitive.
    Ms. Woolsey. Be smart.
    Oh, and just a comment, but on the oil import. Some of the 
responses around here would be to drill off our coasts, and 
that, too, is short-term thinking.
    Thank you, Madame Chairman.
    Chairman Biggert. Thank you for your comments. You always 
tell it like it is, right?
    Ms. Woolsey. I am known for that.
    Chairman Biggert. I did have the opportunity to hold a 
field hearing with Ms. Woolsey in her District, and it was in a 
building. Now this was about alternative fuels, and it was in a 
building that was absolutely spectacular.
    Ms. Woolsey. Right.
    Chairman Biggert. Solar. Everything that you could think of 
as far as energy----
    Ms. Woolsey. Building materials from----
    Chairman Biggert. The works. In my first question--in 
response to my first question, all of you listed outreach 
activities or appliance standards as the most cost-effective 
ways to improve energy efficiency. In our comprehensive energy 
bill, we do have a lot of the appliance standards, tax credits, 
and all of those things, and a lot of this is for the consumer 
to help with the effort. And it is kind of discouraging that I 
think, you know, people don't really--a lot of people don't do 
that, and Mr. Konove talks about his buildings and how if you 
were building something that you can put in all of these 
things, particularly in new construction is much more difficult 
than old construction. Now I happen to live in the tear-down 
capital of the world right now, and that is Hinsdale, Illinois, 
so we are getting an awful lot of tear-downs and new buildings, 
but I don't see a lot of these efficiencies, the use of solar, 
the kind of roof and everything. How do we get the developers 
and the builders and the person that wants to build the 
building to do this? And even with Ms. Loftness, with your--the 
type of building that you--the commercial building that you are 
talking about, what can we do as the government? What can you 
do? And what can we do just in a broad, general education 
program of people in this country and how important this is to 
face us right now?
    Mr. Smith.
    Mr. Smith. In New York, in our New York Energy Smart 
program, we decided that we had to raise consumer awareness. 
And so what we did was we had to spend money in media. And what 
we got is we got the spokesman, Steve Toms, from ``This Old 
House,'' was our spokesperson for energy efficiency. So we went 
on to the television ads. We bought time on radios. And what we 
found was if we educated consumers and we did a lot of media 
advertising, I could see a bump in our website, and I could 
also see that people wanted this--if they understood, because 
it is complex--we spend more on a cell phone in a year than we 
spend on energy. And so people had to understand what they 
could do, so we used media, but then we backed it up with 
certified contractors, who we would arm them with information. 
We would arm them with technologies so they could do a very 
good job at your house, and then we would guarantee those 
savings. And we would back it up with low-interest financing, 
and then roll it out across the state. And it came, you know--
home performance with Energy Star. We partnered with the DOE 
and EPA, and we took the Energy Star label. And we pushed the 
Energy Star label very hard. And so we have a home performance 
Energy Star, we have assisted homes for working folks, and we 
give them a greater incentive to do this. But we coupled 
educating contractors with media, with program details, and by 
making very comprehensive programs that touch all of the 
sectors of the economy. It is a tough thing to do. It has taken 
us three or four years. We are getting some traction now. We 
are having a lot of responses. $2 per gallon of gasoline helps 
a lot as well.
    Chairman Biggert. Yes, Mr. Sosland.
    Mr. Sosland. I just wanted to make the point that--to 
underscore, awareness is very important, but once awareness 
exists, there then has to be a method of implementing the 
request. If a consumer is educated, they are requesting a 
building design, and the architect needs to be able to respond. 
The builder needs to be able to respond. They need to know how 
to--because too often, and the data shows this, the reaction is 
you don't really want to do that. It is too expensive. So the 
premise of a lot of these programs that work is you combine 
awareness--whether it is through an audit program or an 
advertising program--with the tools to then implement it, an 
incentive program that provides the building and architectural 
services, and educates the architects. Those kind of very nuts 
and bolts activities are what are required, really, to move it 
and make it a--make the request something that is real. And I 
think that the place to look is those mechanisms.
    Chairman Biggert. Ms. Loftness.
    Ms. Loftness. I would like to add one more dimension to 
creating the consumer demand. I think the link between health 
and energy has not been clearly drawn, and I think there is a 
real need for that level of research. It does take--it is 
typically multi-year research. It is typically the kind of 
research that NIH and NIEH do extremely well. I think once you 
realize how critically linked these are, including things such 
as air quality, as well as daylight in buildings, you will 
start to see a push from the health side, especially relative 
to the kids in schools.
    Chairman Biggert. Mr. Carberry.
    Mr. Carberry. Well, I don't claim to be an expert in this 
area, but based on the students that I have worked with, it 
seems to me we never seem to work on this problem until we work 
with college students, and that is too late. And in the 
discussions that I have had with high school level science 
teachers, the level of science and economics taught at the high 
school and maybe even at the grade school level is fairly 
inadequate compared to what the needs of our society are. And I 
really think that part of our reason for our grass roots 
problem there is that we have let that get watered down, for 
whatever reason, and so it is very hard to then teach to an 
emerging adult population that doesn't have the background. We 
ought to work on that problem.
    Chairman Biggert. I would agree, and I also have a bill on 
financial literacy, and I know that--and have been working on 
research and development and trying to--and Mr.--Dr. Ehlers 
will probably talk about that. That is his project, too. But 
also just trying to find more young people to go into the 
sciences. And I think every time I go out to a school and talk 
to the students and tell them how important this is, and 
particularly, you know, half of the population that seems to 
think by seventh and eighth grade that they shouldn't be an 
engineer or they shouldn't be a scientist, so----
    Mr. Nadel.
    Mr. Nadel. Okay. I wanted to add that one very important 
vehicle for reaching the consumers in business is to move one 
step up in the supply chain. It is working with the builders, 
it is the architects, it is the engineers who in turn would 
work with these customers. But there is a lot of need for 
research on how best to identify the benefits so that these 
people can then sell efficiency or renewable energy to their 
customers. There is a need for improved training techniques to 
train the builders, train the architects on these advanced 
techniques, because they are the ones who are working with all 
of these customers, so I see that as a very critical federal 
need to help develop those materials that could be used to 
educate these key audiences.
    Chairman Biggert. So there should not be a shift in 
research and development? That still is a very important factor 
in all of this?
    Mr. Nadel. Right, but some of that research and development 
is research on what are the benefits and how best to sell 
them----
    Chairman Biggert. Okay.
    Mr. Nadel.--how--the software, et cetera, so that they can 
move into the field.
    Chairman Biggert. Okay. And then Mr. Konove, since you have 
done the building, is there still a huge discrepancy in the 
cost? If we have--from, like, the energy bill, if it ever 
passes, with the tax incentives for a lot of these things, is 
there still some--we need to do that in order to convince the 
consumer, or are the consumers going to wake up and say, you 
know, ``This is really important to--for the world,'' really, 
and our air quality, our water quality, everything that we take 
advantage of this research and build this type of house. Or 
will they say, ``No, I can't do it, because it is too 
expensive.''
    Mr. Konove. I think it is clearly what everybody else has 
said. It needs to be the communication and the education of 
everyone so that they can understand what the situation is.
    Chairman Biggert. I was just wondering if you have run into 
that with people in North Carolina.
    Mr. Konove. Well, what I was going to add was if you 
communicate and educate then people can understand and make 
those judgments of what is affordable with themselves, because 
it is so different with--because there are so many different 
situations in terms of the costs or the technologies that are 
involved. But I would add that the education that needs to be 
done on the--whether it be media level that--or a statewide 
level is that the people that are trained to be able to help or 
to be the resource people, in a large state, it needs to be 
more than just a statewide, even media effort, because even in 
North Carolina, which is not as large as some of the Midwestern 
states, you go to the east and you go to the west, and if the 
media or the resource person is centrally located, the other 
people still are not reached, and so that is another component 
that needs to be clearly taken into account.
    Chairman Biggert. Thank you.
    Quickly, Mr. Carberry.
    Mr. Carberry. I just realized, you know, there may be an 
opportunity here in the suppliers of energy efficient 
equipment. One of the things that struck me is when I was in 
California you could buy a highly efficient, long-life light 
bulb in practically any drug store at a reasonable price. In 
the state of Delaware, you could search high and low and not be 
able to buy that same darn bulb, and it drives me crazy. All 
right. Why? All right. Because there has clearly got to be a 
market for those. I don't know how to research that, but 
something ought to be done about it. I had the same experience 
when I tried to replace my air conditioner. My 20-year supplier 
of air conditioners told me he didn't have any air conditioners 
because he didn't have any cheap, residential air conditions. 
And in the end, he could have sold me, and did, a much better 
air conditioner, a highly efficient air conditioner, and if he 
had done the return on investment calculation or somebody had 
helped him, he would have realized the darn thing was worth, 
like, 15 or 18 percent on your money, and that is not a bad 
investment.
    So there is an opportunity here for training, I guess, 
suppliers, key suppliers in key areas. I am not sure exactly 
how to get at it and certainly not in two minutes, so----
    Chairman Biggert. Thank you. Thank you very much.
    Mr. Larson.
    Mr. Larson. That is where I am going to start with my line 
of questioning, because I think that this is something for Lou 
Dobbs to go along with outsourcing that he ought to focus on. 
But it does get to cut to the chase with respect to the 
problem, which is investment in research and development, which 
all of you have eloquently addressed. How do we overcome the 
hurdle, however, when we are wed to a system, and we will start 
with Mr. Carberry, where, you know, your corporation is geared 
towards its performance based on quarterly returns, not on 
long-term investment and planning, and this is systemic? Now 
that brings value added to our economy, and it is something, 
you know, we don't want to--we are not looking to mess that up, 
but I think that that points out, in dramatic fashion, all of 
the more need for research and development on the part of the 
government for the government to step forward. It also 
coincides with something that individuals like to receive, 
which is a tax break. I have never met an individual in society 
that doesn't like a tax break. And so when you look at research 
and development and it comes square up against investment 
return on the stocks that you have invested in or getting a tax 
cut back from your government, the public seems all too 
willing, again, I believe because of the lack of understanding 
of the value added, that these investments would bring. Would 
you comment on that, starting with Mr. Carberry, and then I 
will go quickly to my next question?
    Mr. Carberry. Okay. The--yes, the investment barrier is a 
serious one. Probably the most serious one we face right now is 
cogeneration. It is one of the most efficient energy generation 
forms, but that gets you to natural gas, combined cycle 
cogeneration, and the high price and high variability of the 
cost of natural gas is discouraging that kind of investment 
right now. So there is again a case where investment is damaged 
by a volatile price situation.
    Mr. Larson. So let me ask you, as a follow-up, let us say, 
for example, that the Federal Government were to project out 
and say as we look out and we see that with respect to future 
building use, but specifically in the area of federal, 
municipal, and state buildings, i.e., school buildings we will 
take for an example, where we both have to look at buildings 
that will be energy efficient and cost effective into the 
future, and then look at the mode of transportation, whether it 
be by bus or fleets of automobiles that every municipality, 
every state, and every federal agency has to purchase, should 
the Federal Government step forward and say, ``We are mandating 
that by X year that we have hybrids to get us back and forth to 
work, that our buildings meet the standards and the scrutiny 
and we are providing the research and development dollars to 
achieve those goals and the money is funded to states and 
municipalities so that they can invest to achieve those goals, 
but here is the goal.'' If we don't have a benchmark, we are 
never going to get there. We are just going to end up chasing 
our tail. How would all of you respond to that?
    Mr. Carberry. Rational building and transportation stand 
rational, gradual, certain, orderly----
    Mr. Larson. What is gradual?
    Mr. Carberry. I don't know. You know, you would have to 
take each one and work on it----
    Mr. Larson. Okay.
    Mr. Carberry.--obviously, but you know, you can't go for 20 
percent next year and then stop. But those kind of standards in 
transportation and housing and all--and appliances, all of 
those kinds of standards, national standards, are a very, very 
strong driver.
    Mr. Larson. Ms. Loftness.
    Ms. Loftness. Yeah, I would like to add to that. I think 
when you look at individual appliances, standards are 
absolutely the way to go, because you can--and at least 
labeling standards, which help the consumer understand the 
difference between two things that are sitting side by side. 
And I--it helps to drive very, very quickly higher performance 
technologies. Tax breaks also to industry as well as consumers 
is a major driver, and in fact, the reason that I think we are 
seeing wind power and PB power take off in Europe far faster 
than here is because of long-term commitments in terms of both 
purchasing those power sources in the federal--in the public 
sector as well as in providing tax breaks.
    I do think that it is important not necessarily to try to 
mandate in a building sector a single technology, because there 
is such a wide range of issues, I mean, even transportation 
choices that exist in school systems around this country, and 
one of the reasons why some of the building standards are 
allowing you to look at a portfolio of choices. And when you 
hit a LEED silver, you are simply committing to a certain level 
of investments across an ensuite of environmental and energy 
efficiency----
    Mr. Larson. So you would recommend a portfolio for states 
that they could choose from?
    Ms. Loftness. That they can choose from, so that they can 
customize it to the age of the building, the location, and--but 
we are all making progress together against a set of goals.
    Mr. Larson. Mr. Nadel.
    Mr. Nadel. Yes. I would say the emphasis should be on how 
do we encourage the states and the utilities to offer programs 
at the more state and regional levels. They are the ones who 
understand the local markets that can work with the local 
media, et cetera. It is very hard to do that from the federal 
level. I know we have done a bunch of work on the federal tax 
incentives, and we certainly support them, but they are a 
relatively blunt instrument, because you have to--well, 
relatively simply for the Department of Treasury and the IRS to 
work with it, you sometimes lose some of the nuances that are 
needed. So I would tend to try to encourage things that a 
program that Texas adopted under then Governor Bush where, as 
part of the utility restructuring, they mandated that all of 
the utilities operate energy efficiency programs to reduce load 
growth by at least 10 percent. There is a lot of flexibility 
for the utilities to modify that to suit their local needs. 
They just have a goal they need to meet. I know Senator 
Jefferds has introduced a bill at the national level to set up 
a similar type of program. Likewise, there have been proposals 
for some of the federal matching funding for states programs. 
You have heard from Pete Smith about the New York program, from 
Dan Sosland about the Connecticut program. Could there be some 
type of federal carrot to encourage states to match those funds 
and run these types of programs at the more local level?
    Mr. Larson. Mr. Sosland.
    Mr. Sosland. Well, I--you know, there are various success 
stories to build future policy off of. The wind production tax 
credit has been very important for the wind industry. And it 
was--it looked like it might not go forward, they were quite 
upset. So tax incentives work. I think of a paper company that 
I had worked with on its efficiency. And we identify tremendous 
potential in linking pumps, old pumps, motors, just, you know, 
all of the hardware. Internally, they had a return investment 
commitment and a mandate from their corporate headquarters. So 
their efficiency investments competed against any other 
investment they would make in the facility. So they were 
looking at paper improvement and not doing efficiency. But if 
you understand how the business has to operate and there were a 
tax credit specifically to improve the efficiency in the 
facility, something like that might work.
    Another example, though, is--relates to what we are talking 
about, commercial clothes washers, efficient clothes washers. 
The market penetration of those has increased where there have 
been utility programs designed to promote those and overcome 
market barriers. This idea of overcoming market barriers at the 
state level is very, very critical to market penetration of 
efficient technologies and products.
    Mr. Larson. That is why we need your fund, right, Mr. 
Smith?
    Mr. Smith. Yes, sir. I think from the New York perspective, 
I am a large state, and we spend a lot of money in public 
benefit funds, and we invest about $50 million a year in R&D 
for energy and environmental products around New York State. 
One example in what Mr. Carberry talked about is a combined 
heat and power applications. We have done about 115 projects 
across New York State using combined heat and power generation. 
A very good example that is in my testimony is Hudson Valley 
Community College whereby we are using landfill gas to take the 
college off of the electricity grid to run it through some 
engines, and it--so the college is totally energy independent 
now. We have done a very extensive energy efficiency program at 
the college. They use the leftover heat in the summertime to 
run air conditioning. They use the leftover heat in the 
wintertime to heat the buildings. It is cost-effective. It will 
help them get a handle on their energy costs so that they don't 
have to raise tuition for those kids coming to community 
colleges. It is making smart investments, and it is looking at 
the opportunities for those investments.
    Mr. Larson. And I did, again, want to acknowledge that you 
are from North Carolina and extend my condolences for the 
University of Connecticut's drubbing of Duke and just pass that 
on. Unfortunately, Mr. Miller isn't here to hear that, but----
    Chairman Biggert. But he will.
    Mr. Konove. And my hearing is a little deficit now, too.
    But no, what I would suggest is whether--you know, similar 
to the LEED program that has really encouraged institutional 
buildings and government buildings around the country to really 
improve their capabilities, something like that could 
essentially happen with any product that uses energy, whether 
it is pumps or lights or controls or gears. If there are 
incentives within those industries or awards or some type of 
program to be recognized for having the most efficient line of 
lights or the most efficient line of pumps, it may not cost 
much money to do that, but it could provide marketing 
capabilities for those industries to say we have this line of 
efficient devices. And that could be anything across our 
country. But that kind of an effort is not occurring at this 
point in time, that I am aware of.
    Chairman Biggert. Thank you.
    The gentleman from Michigan, Dr. Ehlers, is recognized.
    Mr. Ehlers. Thank you, Madame Chair.
    I am sorry that I missed part of it. This is one of my 
favorite topics, but I have three Committee meetings going on 
simultaneously. But I find it just fascinating listening to the 
discussion since I have gotten back, because I have been in 
this discussion so many times. And it is a national puzzle. But 
I think there are some answers. First of all, people do not 
understand energy. The average person, in fact, including some 
very sharp businessmen, does not understand energy. This led, 
in the '70s, when people first began to be really concerned 
about energy consumption, led to a bunch of scheisters getting 
out there, ripping off the public, and reinforcing the public's 
concern that there is really no good solution.
    The--but there is also an attitude, even among hardheaded 
business folks, that somehow even though efficiency is the 
hallmark of success of a company or a corporation, we want to 
be more efficient, because it means greater productivity, et 
cetera. But yet when it applies to energy, energy efficiency is 
somehow linked to the idea of longhaired, fuzzy-headed, knee-
jerk liberals and therefore can't be any good. And so they tend 
to overlook some really good opportunities to conserve energy 
in their operations, because they just discard--out of hand. 
And I think it is again because of a lack of understanding 
energy. And I--as a physicist, it seems to me the crucial 
factor is they--it is because they can't see energy. There is a 
physical quantity, but you can not see it. You can't feel it. 
You can't measure it easily. And the only real measure is the 
price at the gas pump or the utility bill at the end of the 
month.
    I have given a number of speeches and written some articles 
entitled, ``I Wish Energy Were Purple,'' and I just project 
what people's behavior would be if they could see energy, if, 
in fact, it were purple and they were driving down the road in 
their Toyota Prius, and as it came by there was just a little 
bit of purple around it, and then an SUV came by in such a 
cloud of purple you could hardly make it out. People would 
quickly change their behavior. Or if they drove home and saw 
purple oozing out of the house around the windows, they would 
change their behavior. But it is not there, and that has--we 
have to communicate to the public in some meaningful way what 
energy is and how you can detect it and how you can measure it.
    That leads me to a question about the Department of Energy. 
First of all, I think they should have a much bigger role in 
this. They should recognize the problem and more resources. 
Someone mentioned during their testimony the agriculture 
extension services, and I happen to think that that is one of 
the greatest things that we have. When I was in the state 
legislature in Michigan, Michigan State University, land grant 
university, they would develop something in the labs one year 
and farmers had it in the field the next day. In your field of 
energies, when I was at Berkeley, we had a great building 
energy facility, still there, and I have traced it since I left 
there. It takes roughly 20 years from the time they discover 
something until carpenters are actually using it in the field. 
That is incredible. And if you ask why, the Federal Government 
spends $440 million per year on agricultural extension service. 
I doubt if they spend $1 million on energy extension service. 
And so we have got a lot of work to do there, especially in 
DOE.
    Something else, this is leading to a question. I am almost 
finished with my sermon. The question is on the energy 
modeling, I think, Mr. Nadel, you mentioned some concern about 
the energy modeling that the Department of Energy uses. I have 
heard other criticisms of it. And by that, I assume you mean 
the economic energy model. And I am interested in comments from 
others, particularly Mr. Smith, because you have had to deal 
with this issue in New York. Are the energy models used by DOE 
useful to you or not useful? Have you developed any of your own 
within your organization that you find more useful? And I am 
not really trying to put you on the spot here, but I think this 
is a major problem that we should look at.
    Mr. Smith. Well, I will take the first shot at this. We do 
use the Energy Information Administration's model, but we 
customize them for New York State, because they are too coarse 
for our use, and they are also--they don't reflect what goes on 
within the state. So we do use those models, but we customize 
them for New York State. We also use our own modeling systems. 
We also design our own modeling system, because we find that we 
want--you know, a model only gives you a roadmap and what we 
want to see is more of the hills and the valleys and the 
nuances. So we have very extensive econometric models that look 
at specifically the factors and influence New York State's 
economy that influence on New York State's energy systems and 
the interplay between those systems. So on a very high level, 
DOE's models are useful in that I customize them and do other 
greater modeling capabilities in the State to reflect what I 
need, to reflect what the Governor needs and his folks.
    Mr. Ehlers. Mr. Carberry, let me ask you about one aspect 
of this. Energy modeling is complex, I will be the first to 
admit it, but I think too many aspects are left out. Just as an 
example, I have often believed that--or often made the 
statement that natural gas is too good to burn, an incredibly 
good petrochemical feedstock, and I think we should not be 
burning it to produce electricity when we have very good 
alternative means for doing that. I am interested in your 
perspective as--coming from a corporation that makes extensive 
use of natural gas as a petrochemical feedstock, at least I 
assume they do. I don't think that that is entered into the 
models at all, that value. If we burn up all of the natural gas 
or we have to import LNG at great costs, what impact does that 
have on the economy? What impact does that have on your 
country? And should that be factored into the energy models?
    Mr. Carberry. Well, it is--it has an enormous impact on the 
economy, and in fact, probably the best example to offer of 
that is that most of the high value--the high volume, low value 
petrochemicals have been eroded from this country and gone to 
places like Saudi Arabia, for instance, methanol, which is a 
basic building block because of their low price for natural gas 
as a feedstock. So yes, the damage of burning natural gas as a 
fuel spilling over into the damage as a feedstock, it is an 
enormously important feedstock to us, and that damage is very 
significant. There are numerous examples of it causing U.S. 
production capacity to move off shore to places where natural 
gas is cheaper as a feedstock. So anything that we do that 
reduces the demand for natural gas helps our industry that is 
based on--our chemical industry that is based on natural gas. 
And much of the U.S. chemical industry is more based on natural 
gas than the European chemical industry, which is a little more 
petroleum based. So it is a very cogent observation, Mr. 
Ehlers.
    Mr. Ehlers. Well, basically, our energy modeling or energy 
policy is resulting in more jobs going abroad in this 
particular field?
    Mr. Carberry. To the extent that it drives up the price of 
natural gas, yes.
    Mr. Ehlers. Right. Okay.
    Any other comments from any of you on this issue?
    Mr. Konove. Yes. In terms of energy modeling for homes and 
small buildings, there is some software available to us today, 
one of which is Energy-10, but you know, it still needs more 
work, and we need, as builders and designers, something that we 
can use that is work--that works fast and is accurate so that 
we can verify what the designs that we are working with, how 
they will perform. We need to verify how the--how they are 
working prior to doing the actual construction. And I 
understand that the Energy-10 program also was about to--you 
know, it is jumps and starts, in terms of financing, was about 
to start to include a photovoltaic portion, and so there are 
some things in our area that we could use more work on but have 
been very helpful, and they are very easy to use in terms of 
providing initial analysis at the beginning of the design and 
then further on helping to refine the design as we go on.
    Mr. Ehlers. Ms. Loftness.
    Ms. Loftness. Yes, if I could add to that, in terms of 
simulation tools, I mean, certainly the investment that the 
Federal Government has put in simulation tools has been well 
spent. There are innumerable number of projects and certainly 
academic programs that are based upon the use of Energy-10 and 
DOE-2 and other software that is critical to our understanding 
of energy flows. Having said that, there are weaknesses in 
those tools, and the hardest ones are really the passive 
technologies, really simulating the impact of daylight, really 
understanding the impact of natural ventilation as a 
conditioning system, understanding the importance of time lag 
or heavy masonry in dry climates, desert climates, where we are 
building with abundance but typically with very lightweight 
buildings that don't take advantage of the day-night 
temperature swing. So a lot of those performance simulation 
characteristics are much harder to simulate because they are 
dynamic. They can't be done with a static calculation, and so 
there are tools there that are--that really would be extremely 
beneficial, especially as decisions are being made in new 
construction and those environments.
    Mr. Ehlers. Mr. Nadel.
    Mr. Nadel. I would agree that there are many useful 
modeling tools coming out of DOE. The DOE-2 model, for example, 
is one of the six technologies that the National Research 
Council focused on and so that is producing billions of dollars 
worth of benefits. But in terms of the overall modeling of the 
entire U.S. economy, what they call the National Energy 
Modeling System, that definitely needs some work. We find that 
when we try to do efficiency and renewable energy, it just 
doesn't have the handles, if you will, to manipulate. We often 
have to do spreadsheet analyses separate from that, and then in 
order to develop one or two key inputs that they have. So it is 
very difficult to do efficiency and renewable energy policies.
    Also, they tend to be very static. This committee works on 
R&D and new technologies. The models tend to emphasize existing 
technologies, existing relationships, and don't assume that the 
world continues to innovate. We need much more dynamic modeling 
to really be able to take the long-term view and best model 
appropriate programs and policies.
    Mr. Ehlers. All right. Just let me finish with one quick 
comment. I still remember a friend of mine who went to visit a 
building development in Colorado, in Denver, because the 
builder had advertised ``energy efficient buildings''. And in 
fact, he had tried to make them energy efficient. But he 
noticed that the builder had put Styrofoam insulation on the 
outside of the concrete foundation up to ground level, but not 
above it. My friend asked him, and he said, ``Well, you don't 
need it there. You know. It is--you just need it below 
ground,'' which is exactly the opposite. Simply not 
understanding energy flow and insulation.
    I apologize for taking so much time, Madame Chair.
    Chairman Biggert. Thank you very much, Mr. Ehlers.
    Well, this concludes our hearing, so without objection, all 
written testimony will be included in the record or entered 
into the record. And Members may submit additional questions in 
writing. I hope that the panel will answer these questions in 
writing.
    And with that, I would like to thank the panel for your 
excellent testimony, your expertise in this subject. And it has 
been an outstanding panel, so again, thank you very much, all 
of you.
    And with that, the Science Subcommittee on Energy is 
adjourned.
    [Whereupon, at 12:12 p.m., the Subcommittee was adjourned.]
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