[Senate Hearing 108-]
[From the U.S. Government Publishing Office]



 
      FOREIGN OPERATIONS, EXPORT FINANCING, AND RELATED PROGRAMS 
                  APPROPRIATIONS FOR FISCAL YEAR 2004

                              ----------                              

                                       U.S. Senate,
           Subcommittee of the Committee on Appropriations,
                                                    Washington, DC.

                       NONDEPARTMENTAL WITNESSES

    [Clerk's Note.--The subcommittee was unable to hold hearings on 
nondepartmental witnesses. The statements of those submitting written 
testimony are as follows:

           Prepared Statement of the Alliance to Save Energy

                              INTRODUCTION

    My name is David Nemtzow. I am the president of the Alliance to 
Save Energy, a bi-partisan, non-profit coalition of business, 
government, environmental, and consumer leaders dedicated to improving 
the efficiency with which our economy uses energy. Senators Charles 
Percy and Hubert Humphrey founded the Alliance in 1977. The Alliance is 
chaired by Senator Byron Dorgan (D-ND) and co-chaired by Dean Langford 
the former CEO of Osram Sylvania Inc. Our vice-chairs are Senators 
Susan Collins (R-ME), Jeff Bingaman (D-NM), Jim Jeffords (I-VT) and 
Representative Edward Markey (D-MA). Over 75 companies and 
organizations participate in the Alliance's Associates program and with 
your permission, Mr. Chairman, I would like to include for the record a 
complete list of the Alliance's Board of Directors and Associates. This 
list includes the nation's leading energy efficiency firms, electric 
and gas utilities, and many other companies committed to promoting 
sound energy use.
    The Alliance has a long history of designing and evaluating energy 
efficiency programs in the United States and abroad. We also have a 
history of supporting efforts to promote energy efficiency that rely 
not only on mandatory federal regulations, but on partnerships between 
government and business and between the federal and state governments. 
The Alliance to Save Energy strongly supports the energy efficiency 
programs at the U.S. Agency for International Development (USAID) and 
appreciates the Subcommittee's past support of these valuable 
activities. We believe that USAID plays a vital and unique role in 
supporting efforts to promote the development of sustainable energy 
policies in developing and transitional countries. USAID's funding for 
energy efficiency, renewable energy, and power sector reform not only 
helps to leverage millions of additional dollars in foundation, 
development bankand other federal agency support, but also spurs the 
transfer of energy-efficient technologies and services overseas. By 
working with the private sector to design and implement policies that 
break down barriers to energy efficiency activities, USAID has been 
instrumental in helping the U.S. companies enter new markets and 
further increase sales of their products.
    The Alliance has had a great deal of success developing private-
public partnerships in countries such as Brazil, India, Mexico, 
Ukraine, Serbia, and Ghana, often working with USAID. Our work has 
clearly proven the USAID premise that a strong institutional framework 
for energy efficiency in developing countries creates jobs, reduces 
costs, and protects the environment.
    Unfortunately, despite these successes there is an alarming trend 
in funding for vital energy efficiency program support at USAID. During 
the past few years the clean energy programs, represented first in the 
Office of Energy and now in the Energy Team within the Office of Energy 
and Information Technology, have received a cut in funding--with the 
fiscal year 2004 request ($8 million) cut to 50 percent of the fiscal 
year 2001 ($16 million) funding. Not only are these programs expected 
to continue to provide the technological support and strategic 
leadership to the field, as they have successfully for years. These 
important programs cannot continue their valuable work without 
appropriate funding. We urge Congress to fully fund these programs, in 
fact return these programs to their earlier funding levels so that they 
can do more to improve sustainable energy use around the world.
    In addition, the Global Environment Facility (GEF) plays an 
important role in funding energy efficiency. In addition to increasing 
energy efficiency, GEF resources have helped poor countries and 
countries in transition conserve biological diversity, accelerate the 
adoption of renewable energy technologies, protect international waters 
and eliminate the use of ozone-depleting compounds. Tackling these 
critical global environmental problems is good for America and other 
nations and the Alliance supports its full funding.
   why usaid should promote energy efficiency: u.s. jobs and security
    Energy is absolutely critical to the economic, social and security 
development of nations. Even conservative projections show that--if 
left unchecked--future global energy demand would result in impossibly 
high levels of local and global pollution and far outstrip any 
reasonable amount of investment or supply resources. High global energy 
demand would also mean increased energy prices to American consumers 
and businesses as the U.S. economy competes with others for important 
but limited energy resources, particularly oil. The typical policy 
solution to this problem is to produce more energy, and the world will 
have to produce more. But the option that holds the greatest potential 
for mitigating our long-term global energy problem is energy 
efficiency.
    Without the strong participation of USAID, we will not come close 
to realizing the energy efficiency potential in transitional and 
developing countries. Over the past 30 years, the United States has led 
the world in developing the energy efficiency supply resource--while 
our economy has well more than doubled, our energy use has only 
increased by 27 percent. This is an American success story and USAID is 
critically positioned to work with private companies, NGOs, 
universities and many others to transfer this knowledge to other 
countries so they can use the techniques and technologies we have 
developed to make similar improvements.
    Improving energy efficiency in transitional and developing 
countries benefits the U.S. in several ways. One, it opens up new 
markets around the world for U.S. energy efficiency products and 
technologies. USAID programs have introduced ten of thousands of 
international decision makers to the energy efficiency market. These 
efforts are creating new businesses and jobs in the U.S. Two, it 
improves the lives and economic opportunities of people in impoverished 
countries, lessening the appeal of radicalism and anti-Western 
sentiment. Energy efficiency can provide job opportunities not only in 
the U.S. but in other countries, all the while lowering consumer energy 
costs and enhancing physical comfort. Three, energy efficiency 
mitigates global pollution in a way that actually results in more 
economic benefit than doing nothing at all. Once again, energy 
efficiency's ability to reduce pollution is a business and job winner 
for America.

                 DOMESTIC ENERGY SECURITY STARTS ABROAD

    September 11 and the turmoil in the Middle East remind us of the 
importance of energy reliability and security both domestically and 
among our allies and trading partners. Even as we work to try to ensure 
our economy has adequate, reliable energy supplies, we cannot forget 
that the energy use of other countries directly impacts both the supply 
and price of our energy resources here at home.
    In fact, pondering strategies to guarantee adequate energy supplies 
in the U.S. reminds us how the energy efficiency programs run by USAID 
help protect and enhance the economies and standard of living of 
developing nations around the world. It also reveals how--due to the 
reality of a single integrated global petroleum market--these 
efficiency programs directly benefit U.S. consumers: by lessening 
demand for oil abroad, we are helping to loosen supply and hold down 
price pressures domestically. Quite simply, lowered oil demand in 
Thailand helps truckers in Tucson. Lowered oil use in Madras helps 
drivers in Michigan.
    Consuming countries such as the U.S. will only be able to protect 
our energy-related economic future if we can help lessen demand for oil 
both here and worldwide. USAID's energy efficiency programs do just 
that--and in doing so they help Americans as they help developing and 
transitional nations.
    Some of the most destitute countries, lacking many of the basic 
energy related services USAID can help provide, are the breeding 
grounds for terrorists. By enabling legitimate governments to meet the 
needs of their citizenry through basic energy service such as clean 
water, refrigeration, health care, and lighting, the ensuing economic 
develop can go a long way in keeping potential terrorists in real jobs 
with a hopeful future.

                 THE ROLE OF USAID IN THE ENERGY SECTOR

    Although USAID's energy programs do not often receive the 
visibility of the USAID's more traditional development programs , they 
are crucial to the goal of sustainable development in the developing 
and transitional world. While it is impossible to ignore the pressing 
physical needs of the communities USAID serves, reasonably priced, 
clean, and reliable energy supplies often play an equally important 
role in the lives of the world's needy citizens by reducing respiratory 
illnesses and improving access to heating, lighting, refrigeration, and 
water. Whether it is clean fuel for cooking in India that helps prevent 
some of the estimated half-million deaths per year of women and 
children from atrocious indoor air, electricity for refrigeration in 
tropical climates that provides the vital link for vaccinations, 
affordable heat for Eastern Europe that keeps people from freezing to 
death, or the energy needed to pump and clean water to satisfy the 
basic subsistence needs of the over 2 billion currently unserved 
people, energy plays a very central role in the lives of all the 
world's inhabitants.
    Unfortunately, energy supplies in most of the world's countries are 
not always reliable or safe. Power plant emissions from the combustion 
of poor-quality coal have fouled not only the skies but the lungs of 
millions of Chinese; radiation from the failed Chernobyl nuclear 
reactor in Ukraine has sickened a generation of children; and drought 
conditions in many parts of Africa have left hydropower turbines quiet 
and cities dark. In addition, explosive economic growth in most of the 
developing world, especially Asia, has precipitated a surge in demand 
for energy supplies. Over two billion of the world's people lack access 
to reliable supplies of fuel for cooking or electricity for rudimentary 
lighting and refrigeration, and face even tougher times with large 
fluctuations in oil prices. Residents in some of the developing world's 
largest cities continue to experience rolling electricity brownouts, 
blackouts, and inadequate access to the power grid. These electricity 
shortages lead to constraints on industry and the commercial sector 
that stifle economic growth, limit the potential of U.S. foreign trade, 
and lead to further hardships from unemployment and foregone export 
revenues. Energy efficiency provides an attractive solution to these 
problems. Not only are energy conservation programs in developing 
countries a relatively low-cost alternative to the construction of new 
hydroelectric or fossil fuel plants, they can also reduce the risk of 
electricity shortages and increase the competitiveness of the 
industrial sector. The following are examples of USAID's successes.

Ukraine
    In Ukraine, USAID empowers municipalities and the private sector to 
save energy and provide basic service to members of society most in 
need. Working with the city of Lviv to develop an energy management 
strategy, USAID worked to promote the efficiency of an orphanage and 
school housing many of the Chernobyl victims. Working with U.S. 
companies and local non-profits, the school and orphanage were 
weatherized and had a high efficiency boiler installed. The immediate 
benefit to orphans no longer needing to wear winter coats in classrooms 
and to the school having enough money to buy books was significant. 
However, the more important outcome of the project was the hundreds of 
other schools that have been upgraded or are going to be upgraded based 
on this model and the new Ukrainian companies that participated in this 
project now weatherize buildings all over Ukraine. Simply put, USAID 
helps develop replicable models and the technical capacity to carry 
them out.
    USAID's competitive advantage over other development vehicles in 
the energy efficiency sphere is two-fold. USAID clearly understands the 
role of capacity building as the basis for any sustainable energy 
efficiency program and USAID also recognizes the overwhelming potential 
of the private sector to drive the energy efficiency development 
agenda.

Ghana.
    One of the most successful examples of a national energy 
conservation program has been Ghana's Energy Foundation. With support 
from USAID, that the Energy Foundation has helped reduce the 
inefficient use of energy in most sectors of the economy. The Energy 
Foundation has worked with the industrial sector to perform energy 
audits and implement efficiency projects that have saved Ghanaian 
companies energy and money. In addition, the Energy Foundation helped 
energize the private sector to improve energy efficiency by setting up 
the Ghana Association of Energy Services Companies and Consultants 
(GHAESCO), which has dozens of members actively pursing energy 
efficiency projects. The Energy Foundation has also worked to educate 
consumers through public awareness campaigns and its Green Schools 
program that teaches students how to use energy more efficiently.
    Helping U.S. Companies.--USAID works to help energy efficiency 
companies raise awareness about energy efficiency and encourage 
implementation of cost-effective energy efficiency improvements. USAID 
funded partnership programs with private industry have recorded $35 
worth of sales for every $1 spent. The Alliance has worked with USAID 
on this effort and can report that since 1995, more than 50 energy 
efficiency seminars in countries around the world, including Mexico, 
China, India, Philippines, Portugal, Hungary, and Poland, and Thailand. 
Through these seminars, more than 85 energy efficiency companies have 
passed on their experience and knowledge to more than 4,000 engineers 
and managers from industry, hotels and hospitals, as well as 
representatives from government agencies, and non-profit organizations, 
and trade associations. Energy efficiency companies participating in 
the Alliance's ``Energy Efficiency Industry Partnerships'' seminars 
benefit from the opportunity to develop new project leads and cultivate 
potential distributors and representatives for their products and 
services. As of May 2001, participating companies have reported that, 
as a result of contacts made at the seminars, projects worth $6.2 
million have been completed, with another $9.9 million being considered 
or in the pipeline.
    Mr. Chairman, these are not just small companies, but large 
companies and companies on the verge of expanding and seeing energy 
efficiency as an important market for investment. Armstrong 
International, with facilities in Florida and Michigan, is one of the 
nation's leading manufacturers of energy-efficient industrial steam 
technologies. Historically concentrated in the domestic market, their 
strategic planning indicated that if they wanted to grow product sales 
they needed to expand globally but as a small business, lacked the 
capability. Then, USAID order some steam technologies from Armstrong 
for use in energy efficiency program in Bulgaria. Armstrong contacted 
USAID to find out more and began to take advantage of the market 
introduction opportunities USAID energy efficiency program made 
available to U.S. businesses. Taking advantage of these opportunities 
enabled Armstrong to develop a global presence, greatly expanding the 
scope of their business, creating new jobs.
    There are many companies that have had similar experiences with 
USAID's energy efficiency programs. Honeywell, with key facilities in 
New Jersey, Minnesota and Arizona, is one of the nation's largest 
manufacturers of efficient energy management building controls and 
energy-saving performance contracting services. These two products, 
control systems to reduce energy use and methods to provide financing 
for energy saving upgrades, hold great promise to solve energy waste 
problems in former communist, transitional countries. Honeywell has 
partnered with USAID to provide training and private sector expertise 
to a wide range of USAID sponsored programs and forums. In doing so, 
Honeywell has expanded its business practice throughout the region. For 
instance, by helping USAID provide training in the Kaliningrad Oblast 
on energy efficient district heating control, Honeywell was able to 
meet key officials and was in perfect position to take part in a $5 
million World Bank loan that Kaliningrad secured to upgrade its system.
    In many cases investments in global energy efficiency that the 
United States makes through organizations such as the World Bank would 
be underutilized without the ability of USAID to develop the capacity 
of governments, NGOs and other stakeholders to manage energy use and 
recognize the various benefits of energy efficiency. For example, the 
World Bank gave the first of its kind loan to the Brazilian Energy 
Efficiency Program, PROCEL, solely to promote energy efficiency. For 
approximately two years the money has sat idle in spite of a crippling 
energy and water shortage in Brazil. USAID has been working with PROCEL 
to develop a strategy for utilizing the loan and working with potential 
loan recipients such as municipal water utilities to develop worthy 
energy and water-saving projects. In particular, an energy and water 
management model with the municipal water utility in the city of 
Fortaleza, Brazil was developed with USAID support. In the first year 
of the program, five megawatts of energy were saved in Fortaleza while 
water service was expanded especially in poor areas. The water utility 
still registered a net cost savings, demonstrating that the energy 
savings offset the cost of improving water service to the poor.
    In addition, USAID has developed critical ties with the U.S. energy 
efficiency industry and built the potential of local energy efficiency 
private sector partners. The U.S. Asia Environmental Partnership alone 
has been responsible for transferring over $1 billion worth of goods 
and services to developing countries since 1992. USAID has supported 
the development of Energy Efficiency Business Councils in India, 
Mexico, Ghana and Thailand. These councils combine the resources of 
many smaller companies to jointly promote the benefits of energy 
efficiency to end-users. In many cases energy efficiency companies from 
the United States have lent their expertise to train end users on 
energy efficient technologies, expanding their markets in the process. 
These councils have begun to break down barriers to implementing energy 
efficiency including reducing tariffs on imported energy efficient 
goods.
    These examples clearly demonstrate how USAID's programs serve a 
unique and valuable function in helping policymakers and other 
stakeholders in developing countries adopt sustainable energy practices 
and programs. The Agency's programs have been instrumental not only in 
replicating the broad energy lessons of the United States, such as the 
importance of integrated resource planning, competition, and proper 
pricing, but have also been useful in demonstrating more specific 
policy measures such as energy-efficient appliance standards and model 
building codes. In addition, USAID's activities play a role in 
leveraging the resources of others. USAID's fiscal year 2001 estimates 
show the highly successful private and public leveraging of these 
programs. An internal USAID accounting shows that Clean Energy Programs 
have leveraged over $213.4 million for sustainable energy activities in 
such countries as Brazil, Ghana, Guatemala, India, the Philippines and 
Southern Africa--leveraging grants from foundations and support from 
the private sector, the World Bank and others.

                            RECOMMENDATIONS

    Mr. Chairman, I hope that I have helped to demonstrate that part of 
good governance is found in improving the way in which the world uses 
energy, and USAID's energy efficiency programs assist this endeavor. 
Energy efficiency can enhance international security through global 
governance programs and therefore deserves to garner a significant 
portion of these additional resources.
    The Alliance to Save Energy would like to respectfully recommend 
the Subcommittee take the following actions to best utilize energy 
efficiency at USAID.
    (1) We recommend a significant increase in funding for USAID's 
energy efficiency programs. Key energy efficiency opportunities are 
being missed due to a lack of funds. We recommend an increased funding 
effort in the transportation, industrial, and water sectors. These 
sectors are not only pivotal in any true development model and energy 
efficiency strategy, but they also represent major areas of potential 
U.S. investment and trade.
    (2) We recommend that Congress place a line item in the Foreign 
Operations appropriations bill for the energy efficiency programs 
within the Office of Energy and Information Technology in an effort to 
ensure the survival of these essential programs. Last year, at the 
direction of this Subcommittee, the Senate bill included such a line 
item, however this provision was rejected in Conference committee.
    (3) We recommend targeted support to energy efficiency throughout 
USAID by ensuring that Missions have an energy efficiency goal that 
complements the current goals of the mission. The Bureau for Economic 
Growth, Agriculture and Trade; Europe and Eurasia Bureau; the U.S.-Asia 
Environmental Partnership; and the Asian Bureau all have the capacity 
to do more highly effective energy efficiency activities. In addition, 
more USAID missions have tremendous potential to take on more energy 
efficiency activities. Currently, only about 13 of the more than 70 
USAID missions have energy efficiency strategic objectives even though 
all missions could find clear advantages to incorporating energy 
efficiency into their development strategies.
    (4) USAID programs do not systematically take advantage of energy 
efficiency programs as an element of achieving their strategic 
objectives. For example, efficiency efforts can play a key role in 
promoting economic growth (as described above by trade and investment 
enhancement, business development, and reduced costs); democracy 
(developing energy efficiency NGOs); and social reforms (using 
weatherization targeted to low income households to mitigate opposition 
to energy sector reforms and price increases). This problem is quite 
extreme even in Russia with its extreme weather, where there is a 
complete disconnect between USAID's Russian assistance program and 
energy efficiency.
    (5) Furthermore there is often a failure to incorporate energy 
efficiency into ongoing energy and municipal reform efforts at USAID. 
For example the Europe and Eurasia Bureau has no strategic approach to 
the significant energy and environmental challenges facing municipal 
infrastructure reform in transitional countries. USAID needs to better 
ensure that energy efficiency is an integral component of existing 
efforts (including municipal infrastructure reform; and privatization 
and other reform of heat, water and wastewater companies).

                               CONCLUSION

    Mr. Chairman, USAID's energy programs assist policymakers, non-
governmental organizations, and businesses in developing and transition 
countries use energy efficiently and economically. Just as importantly, 
this work benefits U.S. citizens, energy consumers and businesses by 
enhancing global energy markets. The Alliance respectfully urges the 
Subcommittee to recognize and support the important work USAID is doing 
in the energy sector. In addition, we ask the Subcommittee to provide 
USAID with the funds and other resources to administer and manage their 
energy programs efficiently. Without an effective organization in 
Washington and in the field, programmatic resources will not be used to 
their full advantage.
    In short, vigorous Congressional support for USAID's energy 
programs will help to ensure that countries such as Mexico, India, 
Brazil, and Ghana are not only able to develop their economies in a 
manner that is environmentally sustainable, but to take on additional 
responsibilities to curb greenhouse gas emissions and environmental 
degradation. Also, by reducing waste around the world, the U.S. can 
more easily guarantee its domestic energy supply.
    Thank you again, Mr. Chairman, for the providing the Alliance to 
Save Energy with the opportunity to testify.
                                 ______
                                 
