[Joint House and Senate Hearing, 110 Congress]
[From the U.S. Government Publishing Office]
S. Hrg. 110-664
EFFICIENCY: THE HIDDEN SECRET TO SOLVING OUR ENERGY CRISIS
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HEARING
before the
JOINT ECONOMIC COMMITTEE
CONGRESS OF THE UNITED STATES
ONE HUNDRED TENTH CONGRESS
SECOND SESSION
__________
JULY 30, 2008
__________
Printed for the use of the Joint Economic Committee
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JOINT ECONOMIC COMMITTEE
[Created pursuant to Sec. 5(a) of Public Law 304, 79th Congress]
SENATE HOUSE OF REPRESENTATIVES
Charles E. Schumer, New York, Carolyn B. Maloney, New York, Vice
Chairman Chair
Edward M. Kennedy, Massachusetts Maurice D. Hinchey, New York
Jeff Bingaman, New Mexico Baron P. Hill, Indiana
Amy Klobuchar, Minnesota Loretta Sanchez, California
Robert P. Casey, Jr., Pennsylvania Elijah E. Cummings, Maryland
Jim Webb, Virginia Lloyd Doggett, Texas
Sam Brownback, Kansas Jim Saxton, New Jersey, Ranking
John E. Sununu, New Hampshire Minority
Jim DeMint, South Carolina Kevin Brady, Texas
Robert F. Bennett, Utah Phil English, Pennsylvania
Ron Paul, Texas
Michael Laskawy, Executive Director
Christopher J. Frenze, Republican Staff Director
C O N T E N T S
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Opening Statement of Members
Page
Statement of Hon. Charles E. Schumer, Chairman, a U.S. Senator
from New York.................................................. 1
Statement of Hon. Carolyn B. Maloney, Vice Chair, a U.S.
Representative from New York................................... 3
Statement of Hon. Sam Brownback, a U.S. Senator from Kansas...... 4
Witnesses
Statement of Ian Bowles, Secretary of Energy and Environmental
Affairs, Commonwealth of Massachusetts, Boston, MA............. 6
Statement of Dan Reicher, Director............................... 8
Statement of Dr. Jonathan Koomey................................. 10
Statement of Mark P. Mills....................................... 11
Submissions for the Record
Prepared statement of Senator Charles E. Schumer................. 26
Prepared statement of Representative Carolyn Maloney............. 29
Prepared statement of Senator Sam Brownback...................... 31
Prepared statement of Ian Bowles................................. 33
Prepared statement of Dan W. Reicher............................. 48
Prepared statement of Jonathan Koomey............................ 60
Prepared statement of Mark P. Mills.............................. 82
EFFICIENCY: THE HIDDEN SECRET TO SOLVING OUR ENERGY CRISIS
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WEDNESDAY, JANUARY 30, 2008
Congress of the United States,
Joint Economic Committee,
Washington, DC.
The committee met at 10:00 a.m., in room 106 of the Dirksen
Senate Office Building, the Honorable Charles E. Schumer
(chairman) presiding.
Senators present: Bingaman, Klobuchar and Brownback.
Representatives present: Maloney and Hinchey.
Staff present: Christina Baumgardner, Tamara Fucile, Nan
Gibson, Colleen Healy, Israel Klein, Michael Laskawy, Ted Boll,
Chris Frenze, Tyler Kurtz, Gordon Brady, Robert O'Quinn, Jeff
Schlagenhauf and Jeff Wrase.
OPENING STATEMENT OF HON. CHARLES E. SCHUMER, CHAIRMAN, A U.S.
SENATOR FROM NEW YORK
Chairman Schumer. The hearing will come to order, and I
want to apologize to my colleagues, the witnesses, and the
audience. I had a bill on the Floor, and I had to speak on it
at 10:00, so I apologize for being late.
I want to thank everybody for coming to our Joint Economic
Committee hearing on energy efficiency. I want to welcome my
colleagues and the Chairman of our Energy Committee, Senator
Bingaman, who has shown great interest in this issue, as in all
of the energy issues.
Now, of course, everywhere we go--Legion Halls, parades,
weddings--the high price of gasoline is one of the very first
things people bring up. In a few short months, families from
New York to Washington State, will also be struggling to pay
their winter heating bills, so it's no wonder that Congress has
held 60 hearings on energy policy so far this year, 20 alone in
July.
Americans across the country are being squeezed. Middle
class families are paying $2,000 more in gasoline costs alone--
double what they spent in 2001.
We had a Committee hearing last month to examine whether
these high prices were a temporary bubble or a new reality for
our economy. At that late June hearing, oil topped $134 a
barrel; it's now $122 a barrel. If there's no oil bubble or if
prices temporarily decline, as they have, and we put off doing
the necessary things we have to do, like investing in
efficiency programs and alternative fuels, we'll be even
further behind than we are now from breaking our foreign oil
dependence.
So, it's clear that demand for energy, especially in
rapidly-developing, large countries, like China and India, is
on the rise, so the reality is, we need to look beyond quick
fixes that will do little for consumers and less to address
this energy crisis.
In the long term, we must address the demand side of the
energy equation. And while I have supported some targeted
drilling in the Gulf of Mexico, I don't believe we can drill
our way out of this crisis, and neither do the American people.
According to a recent poll, 76 percent of Americans said we
should focus on investing in new energy technologies, renewable
fuels, and more efficient vehicles, rather than expanding oil
exploration and drilling.
One of the good things that came out of the oil shock of
the '70s was the dramatic push for energy conservation. Why
don't we do more of that now?
California made tremendous efforts under Governor Jerry
Brown, during that time, to reduce consumption, and they are
now well below the national average in energy usage per capita.
Let me repeat that: California, home of the car, is below
average in terms of energy consumption, and that's simply
because they did smart conservation measures 30 years ago.
One environmentalist said, ``Alternative fuels are the
sizzle, but conservation and efficiency is the steak.'' We're
here to have a nice steak dinner at this hearing.
But to some, conservation has the connotation of
discomfort--using an extra blanket in the winter, easing up on
the air conditioning in the summer--but as our witnesses will
discuss, energy efficiency is actually doing more with less.
We'll learn about the most recent state to implement
landmark energy efficiency and alternative energy programs,
from the Massachusetts Secretary of Energy, Ian Bowles.
But what should we be doing in Washington to address this
problem? We should be requiring utilities to achieve 10-percent
energy savings each year, by helping their customers with
energy efficiency programs, improving energy efficiency in
their own distribution systems, or through credit trading.
We need to require states to update their commercial and
residential building codes to achieve a 30-percent energy
savings by 2015, and 50 percent by 2022, based on the 2006
building code standards. That's an idea that offers big bang
for the buck, because buildings consume a great deal of our
energy and are very inefficient.
By most statistics, heating and cooling buildings consumes
more energy than the gasoline with which we drive our cars, so
we're ignoring this whole area, and it's important.
I want to thank Senator Bingaman. In our Democratic energy
proposal, some of the things that I've been talking about with
building efficiency, he added into his comprehensive plan.
Finally, we should be giving states like Massachusetts the
ability to set higher appliance standards, with the proper
approval from the Department of Energy, to help the Federal
Government and big manufacturers stay ahead of the technology
curve.
Another idea that Dan Reicher addresses prominently in his
testimony and is long overdue, a reinvigorated and beefed up
weatherization program to help millions of Americans consume
less energy, stay warmer in the winter and cooler in the
summer.
Given the recent inability of the Senate to increase
funding for the Low-Income Home Energy Assistance Program that
we all call LIHEAP, in what is predicted to be a terrible
winter heating season, I'm worried that families in New York
and around the country will be choosing between heat and food,
or between heat and healthcare.
This common-sense investment in reducing energy consumption
is an energy hat trick. It helps families to make ends meet,
improves our energy security, and strengthens our economy.
The bottom line is, if you don't encourage energy
efficiency, if you don't invest in alternative energy, and if
you don't tell the big oil companies that they can no longer
run energy policy in America, we will not succeed, plain and
simple.
Our witnesses today are experts in doing more with less,
which is why they will get only 5 minutes to make their opening
statements.
[Laughter.]
But also because we have--and even I took 5 minutes and 22
seconds, and I'm not known for brevity.
[The prepared statement of the Honorable Charles E. Schumer
appears in the Submissions for the Record on page 26.]
Chairman Schumer. Congresswoman Maloney.
OPENING STATEMENT OF HON. CAROLYN B. MALONEY, VICE CHAIR, A
U.S. REPRESENTATIVE FROM NEW YORK
Vice Chair Maloney. Thank you, Chairman Schumer, for
holding this hearing to examine the role that efficiency
measures can play in our energy strategy.
Three years ago, the Republican-controlled Congress passed
energy legislation they said would bring down the cost of
gasoline and end our dependence on foreign oil. Instead, the
price of gasoline has nearly doubled since then.
Whether it's paying over $4 per gallon for gas or milk, due
to soaring fuel costs, Americans are paying a hefty price for
the failure of this Administration to pursue a sensible energy
strategy over the past seven years of this Administration.
We cannot drill our way out of the problem. Meeting the
energy needs of our nation will require a comprehensive
strategy for achieving greater efficiency and investing more in
renewable fuels.
The Democratic-led Congress has already enacted into law,
the first new Fuel Efficiency Standards in over three decades
and made an historic commitment to biofuels grown here at home,
both of which are reducing consumption and saving families
money.
We are building on these steps by encouraging the use of
mass transit, and expanding tax incentives for renewable energy
to spur American innovation and business investment and create
green jobs.
Record energy prices are forcing all of us to rethink the
way we live and commute, and companies are also rethinking the
way they do business. In short, we all need to think outside
the oil barrel.
Today we will hear about the many ways in which families,
businesses, and government can work together to achieve greater
energy efficiencies, which Mr. Reicher has noted is perhaps the
fastest, cleanest, and cheapest way of addressing our energy
challenges.
More flexible workplace policies can also play an important
role. A recent survey by the Society of Human Resources
Management found that 26 percent of businesses are offering
flexible schedules to help employees cope with high gas prices.
Across the nation, local governments are altering work
schedules to save energy and cut costs. Utah's Republican
Governor, John Huntsman, recently announced that most state
employees will be moving to a mandatory four-day work week, to
reduce the state's energy consumption, while also providing
workers with greater flexibility.
A bill I have coauthored with Senator Kennedy, the Working
Families Flexibility Act, would help working families across
the country by putting a process in place for employees to
request a change in their work schedules, and providing job
protection when making that request.
More and more businesses are finding that flexible work
schedules and other family-friendly programs are good for the
bottom line in terms of reducing turnover and increasing
productivity.
What's also coming to light are the ways in which these
policies can help companies and families reduce consumption,
cut energy costs, and ease traffic congestion.
Our nation's continued prosperity depends on meeting the
challenges of our energy needs and bringing relief to American
families. Chairman Schumer, again, I thank you for holding this
hearing and I look forward to our panelists' testimony. Thank
you.
[The prepared statement of the Honorable Carolyn Maloney
appears in the Submissions for the Record on page 29.]
Chairman Schumer. Thank you, Vice Chair Maloney. Senator
Brownback.
OPENING STATEMENT OF HON. SAM BROWNBACK, A U.S. SENATOR FROM
KANSAS
Senator Brownback. Thank you, Mr. Chairman, thank you for
holding the hearing, thank you, witnesses, for being here, and
I look forward to the testimony.
Mr. Chairman, there is much we can do to improve
efficiency, and, doing so, is certainly one part of the
equation, using less, but we must address the supply side of
the equation, as well. And since this is the Joint Economic
Committee, I think it's interesting and appropriate to look at
some of the economics of this, as well.
As a nation, we produce barely half the amount of crude oil
and about the same amount of natural gas as we did in 1970.
Roughly, we consume 25 percent of the world's oil and produce
about three percent of it.
According to BEA, in the first quarter of 2008, our imports
of petroleum products amounted to $451 billion, on an
annualized basis. Tomorrow, when BEA releases its first look at
the second quarter GDP, I suspect we'll see an even higher
number.
I mention this in terms of GDP, because imports are a
subtraction from GDP, and lower GDP, meaning fewer jobs, lower
government revenues, and a larger trade deficit. In the first
five months of this calendar year, had we imported one million
barrels less, just one million barrels of oil less per day, our
trade deficit would have been $14 billion lower over those five
months, and our government deficit would have been lower,
substantially, as well.
The policy that the other side of the aisle is defending
with such zeal, by failing to promote the discovery and
drilling and production of additional domestic oil supplies, is
sending money and jobs outside the United States by the
truckload.
This is wrong and must be stopped. That is what I and my
colleagues on this side of the aisle have been fighting so hard
for over on the Senate floor. It's time we took action and gave
the American people some needed and real relief, and it's time
we started acting like the Senate and start voting on these
issues.
Let's have some votes on these, and let's move forward with
also addressing the supply side and the economic side of this
equation.
I want to close by noting that drilling is not the entire
answer to the entire question. We need a broad-based approach
that continues to encourage the development and use of
alternative sources of energy like biofuels, wind, solar, and
so on, and using less. But we also have to produce more.
We should require that an increasing share of the vehicles
sold in the United States be flexfuel, or alternative fuel
vehicles that can run on ethanol, methanol, or gasoline, and
any combination.
A tripartisan group of Senators has put forward a bill, and
filed an amendment on the Energy Bill as well. But we must also
maximize in an environmentally sensitive manner our existing
resources so we are not sending all of those petroleum dollars
overseas.
To do less would be irresponsible. My colleagues on the
other side of the aisle need to recognize quickly that both
sides of the equation--supply and demand--must be addressed.
Thank you, Mr. Chairman.
[The prepared statement of Senator Sam Brownback appears in
the Submissions for the Record on page 31.]
Chairman Schumer. Thank you, Senator Brownback.
We are now going to go to our witnesses. Because we have
votes coming up we are going to try to move the hearing along.
It is such an important hearing, and I hope people, my
colleagues, will hear about this because it is one of the sort
of, as we called the hearing, The Hidden Secret To Solving Our
Energy Crisis.
That is only a little hyperbolic. It is still hidden, and
it will not solve the energy crisis, but it will do a lot more
than a lot of other things. So now let me introduce our
witnesses and ask them each to--you can each put your entire
statements in the record--to try and keep within that five-
minute limit.
Ian Bowles is Secretary of the Executive Office of
Environmental Affairs in Massachusetts. He oversees the
Commonwealth's six environmental natural resource and energy
regulatory agencies, and has nearly 20 years of both public and
private-sector experience in the energy and environmental
sectors. He served in the Clinton Administration as Associate
Director of the White House Council on Environmental Quality.
Dan Reicher is Director of Climate Change and Energy
Initiatives for Google.org, the arm of Google devoted to making
investments and advancing policy in the areas of climate change
and energy, global development, and global health. He, too, has
20 years of experience in business, government, and
nongovernment organizations. When I heard Mr. Reicher lecture
on energy efficiency, it sort of blew me away and I have been
dedicated to that issue ever since hearing him speak several
years ago.
Jonathan Koomey is Professor at Stanford University. He is
a project scientist at the Lawrence Berkeley National
Laboratory, a consulting professor at Stanford University. For
more than 11 years he led the National Laboratories End-Use
Forecasting Group which analyzes markets for efficient products
and technologies for improving the energy and environmental
aspect of these products, and is author or co-author of 8 books
and 150 articles.
And Mark P. Mills of ICU Technology is the co-founder and
Chairman of that company. He is also a founding partner of
Digital Power Capital, served as a technology advisor for Bank
of America Securities, and is a co-author of the Huber-Mills
Digital Power Report. Under President Reagan he served as staff
consultant to the White House Science Office.
Secretary Bowles, your entire statement will be read in the
record. You may begin.
STATEMENT OF THE HONORABLE IAN BOWLES, SECRETARY OF ENERGY AND
ENVIRONMENTAL AFFAIRS, COMMONWEALTH OF MASSACHUSETTS, BOSTON,
MASSACHUSETTS
Mr. Bowles. Thank you, Mr. Chairman, and other Members of
the Committee. I am delighted to be here.
My main message to you all is that we have, broadly
speaking, built an inefficient delivery system for energy in
the United States and we have rewarded utilities predominantly
for selling power and not necessarily for meeting the load of
their consumer in the least-cost type of way.
We have done a number of things in Massachusetts to address
that, and I will give a summary of those and then be happy to
take your questions.
Massachusetts has long been a leader in this area. We, like
our neighbors in New York and in Connecticut, do not have much
in the way of indigenous fossil supply. So for us we have high
transportation costs and inherently higher energy costs in our
region. That has made some of our efficiency investments
relatively cheaper as compared to the price of power than some
of our other states.
We are just behind New York and Connecticut as the third
most energy efficient state in terms of the economic
productivity we get out from each energy unit that is consumed.
We today face the challenge of greenhouse gas emissions,
record high fuel prices, and other factors that make now the
right time for us to be investing more in energy efficiency.
Governor Patrick, I think, has also seen the economic
opportunity in clean energy technology and made it a major part
of his economic strategy to good effect in Massachusetts.
Historically we have had utility-operated energy efficiency
programs that helped consumers with retrofitting their
appliances, helped in replacing other equipment that is
oftentimes heavy energy users, but historically this has been
capped.
We have said you have a certain amount of money each year
that you can spend on efficiency that the ratepayers provided,
but we have never had a true market where energy efficiency
could compete with power generation to figure out who can meet
the needs of our consumers in the cheapest way. So it is very
simple and a very American concept of having a true energy
market where we are trying to figure out what is the least-cost
way for our consumers to be able to meet their energy needs.
So some sweeping energy legislation that the Governor
signed recently really uncaps sufficiency and puts in place a
system, in wonkie terms called ``least-cost procurement,''
where essentially we require the utilities to go out and buy
energy efficiency that is cheaper than the marginal cost of
buying power.
It is a relatively simple idea that says: Focus on the
least-cost solutions.
Our Public Utility Commission has also just issued a broad
rate decoupling order that essentially breaks the disincentive
the utilities have had. If they get rewarded and their revenues
are tied to how much power they sell, their incentive is
obviously not to have people use less of it because they get
less revenue.
Essentially rate decoupling turns that on its head and said
you, the utilities, and our deregulated power market don't own
any power generation. They should not have any financial
interest in how much they are selling through their wires. They
are just in the wires' business.
So essentially rate decoupling severs that link and puts
them into the efficiency business. I think it is a very
sensible policy driven by cost imperatives.
We have done a variety of other things in Massachusetts
that are relevant to these matters. A new building code.
Several of the other New England States have done this, and
others. We require now greenhouse gas analysis in the context
of state environmental review, our version of NEPA in the
state, and we require our major developers to go through and
analyze their greenhouse gas emissions and look at
opportunities to avoid, minimize, and mitigate those emissions
in their projects.
We have a far-reaching executive order requiring that any
new state buildings be lead-certified plus 20 percent better in
terms of energy efficiency, and have been working away in that
regard.
In terms of federal policy that is relevant, I would echo
the Chairman's remarks about appliance standards. We in New
England are I think shortly going to apply for a waiver on
furnace efficiency, something provided for in your statute.
This is an area to my mind of real federal leadership.
Setting a broad carbon policy for the Nation to my mind
would be very helpful. We in Massachusetts, and many other
states, have been building systems like the Regional Greenhouse
Gas Initiative, but I think we all understand we need a common
currency for pricing carbon across our economy. So we encourage
you in that area.
Model building codes are really focusing on end-use energy
efficiency in buildings.
And then there is an obvious federal role in the technology
piece as well, here, and major economic opportunity for the
Nation.
Acknowledging the comments made by Senator Brownback, I am
happy to talk some about how supply matters in Massachusetts as
well. My main point for you all is that there are cheap
efficiencies that we should be getting simply by aligning the
incentives on our utilities in a smart way that focuses on
cost.
Thank you all very much.
[The prepared statement of Ian Bowles appears in the
Submissions for the Record on page 33.]
Chairman Schumer. Thank you, Secretary Bowles.
Mr. Reicher.
STATEMENT OF THE HONORABLE DAN REICHER, DIRECTOR, CLIMATE AND
ENERGY INITIATIVES, GOOGLE.ORG, MOUNTAIN VIEW, CALIFORNIA
Mr. Reicher. Mr. Chairman, Vice Chair, Ranking Members,
thank you for the opportunity to testify.
Chairman Schumer. If you could turn on your mike, please,
sir?
Mr. Reicher. Thank you for the opportunity to testify.
To meet the critical challenges of the 21st Century,
climate change, energy security, and economic development, we
need a bold new vision for how America generates and uses
electricity.
The core of that vision must be an electricity system that
is clean, efficient, reliable, and secure; one that enables
hundreds of thousands of megawatts of green power, millions of
plug-in vehicles, and tens of millions of energy-smart homes
and businesses.
Dramatically increased energy efficiency is fundamental. By
many measures, it is our fastest, cheapest, and cleanest
opportunity to address our energy challenges, the real low-
hanging fruit in our economy.
From cars and homes to factories and offices we know how to
cost-effectively deliver vast quantities of energy savings
today.
In the 1970s and 1980s we were asked to do less with less,
to lower the thermostat, turn off the lights, don a sweater,
and leave the car in the garage. Energy efficiency takes a
different approach, offering the opportunity to do more with
less, to use energy more productively.
As one energy expert colorfully puts it, all people want is
cold beer and hot showers. We are interested in the results of
energy use, not the energy itself. How much energy we use to
cool the beer and heat the water is a choice we make.
According to a 2007 study by McKinsey, efficiency
opportunities could keep global energy demand growth at less
than one percent per year, or less than half of what is
projected to 2020. This would cut global demand by the
equivalent of 64 million barrels of oil per day, or almost 150
percent of today's energy U.S. energy consumption.
A new McKinsey study makes clear the attractive benefits of
investments in efficiency. Additional global investment of $170
billion annually for the next 13 years would be sufficient to
cut projected global demand by at least half.
These investments would have an annual average rate of
return of 17 percent and would generate annual energy savings
ramping up to $900 billion per year by 2020. And they would
deliver up to half of the reduction in global greenhouse gases
required to cap long-term atmospheric concentrations.
Capturing this vast potential, however, will require a
significant policy push. Aggressive federal policy can increase
investment in energy efficiency.
In my written testimony I outline a number of promising
approaches. Let me briefly highlight four:
First is automobile fuel efficiency. Congress's recent
boost in CAFE is a good step, but we can do better. Existing
technologies, hybrid electric drives, drive-train improvements,
lightweight materials, can today get us to roughly double the
mileage of our current passenger fleet.
An exciting technological development is the recent
emergency of plug-in hybrids which connect to the electric grid
for recharging. Charged at night, they can use lower-cost and
cleaner off-peak electricity. Plugged in during the day, they
can send power back to the grid to meet peak demand.
Google.org has converted several regular hybrids to plug-
ins. In a recent test, our plug-ins achieved as much as 93
miles per gallon on average for all trips, and 115 miles per
gallon for city trips.
In June we cohosted a conference with Brookings to explore
how government can help accelerate their commercialization. At
a minimum we need to increase funding for federal R&D, invest
in the electricity infrastructure to support hybrid plug-ins,
modernize our regulatory system to permit real-time pricing of
power, and provide incentives such as federal tax credits.
The second important federal policy is an energy efficiency
resource standard. The EERS sets efficiency resource targets
for electricity and gas suppliers over a given period of time,
building on policies in nine states.
Texas utilities, for example, now meet a specified
percentage of their load growth needs through efficiency
programs. The EERS is a compelling complement to a national
renewable portfolio standard.
Last year the House adopted a combined RPS/EERS that
allowed up to 4 percent of a 15 percent national renewable
mandate to be met through energy efficiency. Congress should
give strong consideration to this combined approach.
Mr. Chairman, the third policy I want to highlight is low-
income home weatherization. Across the Nation low-income
families this winter will increasingly face the choice between
heating and eating.
Congress continues to debate the traditional fix, LIHEAP,
an absolutely critical but in no way sufficient answer to this
problem. What we need is home weatherization. By upgrading a
home's furnace, sealing leaky ducts, fixing windows, and adding
insulation, we can cut energy bills by 20 to 40 percent in
winter and summer and save even more with efficient appliances
and lighting.
Unfortunately, our national policies have failed to
recognize the benefits of low-income weatherization. While the
Nation has weatherized about 6 million low-income homes since
1976, more than 28 million remain eligible. Congress should
make a national commitment to weatherize at least 1 million
low-income homes each year for the next decade.
The price tag for retrofitting 10 million low-income homes
is relatively modest, about $2 billion annually, with the added
benefit of major greenhouse gas reductions and jobs.
Finally, government-backed financial mechanisms could
significantly increase the deployment of clean energy
technologies, including energy efficiency. Senator Bingaman's
recent bill would encourage banks to make loans for clean-
energy projects by providing a secondary market for their
loans.
Senator Domenici's bill creates a clean-energy investment
bank with authority to invest in eligible clean-energy projects
using a variety of financial tools.
In a recent hearing, I urged both Senators to integrate the
best of their bills to take clean energy to scale.
In conclusion, the Federal Government has a significant
role to play in increasing investment in energy efficiency. By
adopting a forward-thinking set of policies, Congress can
stimulate significant near-term investment in energy efficiency
with major economic, environmental, and security benefits.
Thank you.
[The prepared statement of Dan Reicher appears in the
Submissions for the Record on page 48.]
Chairman Schumer. Thank you, Mr. Reicher.
Dr. Koomey.
STATEMENT OF DR. JONATHAN KOOMEY, PROFESSOR, STANFORD
UNIVERSITY, STANFORD, CALIFORNIA
Dr. Koomey. Thank you, Mr. Chairman, and to the other
members of the Committee for the opportunity to share my views
with you today. To keep the lawyers happy I have to say that
this testimony represents my professional opinion, not that of
the Department of Energy or the Lawrence Berkeley National
Laboratory.
So as Dan mentioned, one of the most important lessons of
the past few decades in energy policy is that improving energy
efficiency is the fastest, cheapest, cleanest way to address
the problems of energy security and climate risks.
Energy supply technologies will also no doubt play an
important role in dealing with these problems, but the history
is clear. Energy efficiency is the most abundant and least
expensive of all the options was have.
So how can we best capture that resource? Now some have
called for an Apollo Project for energy technologies, but I
think a better analogy would be the broader U.S. response after
the Soviet Union launched Sputnik.
That means broad societal mobilization, massive investments
in science and engineering education, substantial increases in
basic and applied research and development, and implementation
efforts on the scale of the Apollo Project.
Now for energy efficiency that means more energy efficiency
standards, that means Energy Star labeling, utility programs,
revenue-neutral fee baits, tax credits, prizes like the
automotive X Prize, business plan competitions like the
California Clean Tech Open, institutional commitments to
efficiency goals as Dan mentioned, institutional procurement of
efficient products; more funding for education and training;
and big increases in energy R&D funding, which has fallen to
historical lows since the 1970s.
But we need more than just technological innovation. People
and institutions also need to evolve to meet the new challenges
with the overarching goal of breaking down barriers to
efficiency and making the more efficient choice always the more
profitable choice.
So I am going to give you an example from some recent work
I have been doing in data centers. These are the high density
computing facilities that power the internet and that help
virtually all modern companies to operate efficiently.
What you find in these facilities is that typically the
people who buy the computers have one budget and the people who
buy the electricity and supply the cooling to the computers
have a separate budget.
And so the people who buy the computers do not have an
incentive to spend even an additional dollar for a more
efficient server because the savings accrue and the savings are
substantial--typically $5 or $10 for every $1 spent on a server
for efficiency--the savings are substantial, and yet they
accrue in someone else's budget.
So the IT folks just will not buy a more efficient server.
So that is an example--I have others that we can talk about in
the question period--that is an example of the kind of
institutional issues that are surmountable, but we need to
figure out how to solve these problems more effectively and
more broadly. Keep in mind that these are the most mission-
critical, the most sophisticated, the most carefully designed
facilities in business today. And even in these facilities we
see these kind of misplaced incentives.
That to me means that it is likely these misplaced
incentives are pervasive throughout the economy.
Great challenge also means great opportunity. The U.S. has
the chance to set a new course, one that combines economic
benefits with improvements in environmental quality. Now is the
time, with oil prices near record highs, and the climate crisis
bearing relentlessly down upon us, to make that new future a
reality.
My testimony, submitted for the record, describes some
specific ideas for how to take up that challenge. Thank you
again for the opportunity to present today.
[The prepared statement of Dr. Jonathan Koomey appears in
the Submissions for the Record on page 60.]
Chairman Schumer. Thank you, Dr. Koomey.
Mr. Mills.
STATEMENT OF MARK P. MILLS, PARTNER, DIGITAL POWER CAPITAL (AN
AFFILIATE OF WEXFORD CAPITAL L.L.C.), ARLINGTON, VIRGINIA
Mr. Mills. Thank you, Mr. Chairman, members of the
Committee, for the opportunity to present some thoughts, high-
level thoughts in my case, on the role of energy efficiency in
the U.S. economy.
I think history will record that we are today on the cusp
of an energy revolution, one involving efficiency, with
implications as deep and far-reaching as the industrial and the
electric revolutions of the previous two centuries.
Each of these previous pivots in history was similarly
anchored in profound changes in the efficiency with which we
could use basic resources, and energy resources in particular.
The emerging efficiency revolution derives directly from
our Nation's collective investment of trillions of dollars in
the intellectual capital and infrastructure of the Silicon and
digital economy. It is not a single device or program or a
solution, but the emergency of an entirely new structural
approach to energy efficiency--what I would call a hybrid
energy economy.
The nature and implications of this paradigm shift are
epitomized by the hybrid electric car which some of the other
witnesses have talked about.
Conventional cars waste gasoline. Stop and go, coasting,
running, unnecessary stops, and generally operating an engine
suboptimally.
You could do manually much of what a hybrid car does
automatically, though it would be rather annoying. You would
turn the engine off every time you do not need it. At every
stop, when you are braking, when you are coasting. You restart
it to accelerate, or cruise.
This kind of behavior would increase urban fuel economy 10
to 50 percent, or you could hybridize the car, which is to wrap
the engine, and the drive shaft with sensors, power
electronics, electric motors, batteries, microprocessors,
software, and high-speed communications, in short all of the
stuff of the digital economy, and then you let all that digital
stuff seamlessly and invisibly juggle the on/off and optimally
operate the constellation of energy-consuming components in
real time, reacting to dynamic conditions in ways you could
never accomplish manually.
Nearly everything in our economy operates like today's
cars--suboptimally. Building and running things in the physical
world is difficult to do optimally. Cars in fact are the
simplest things to fix in this regard, much simpler than
factories, offices, and homes.
Yet, the latter collectively consumes 70 percent of all of
our energy suboptimally. The technologies that enable a hybrid
economy arrive first to serve the information markets--the
data, voice, video. They came first, to put it simplistically,
because data doesn't weigh anything. So pure information
devices just need milliwatts or watts.
To move tons of stuff, and people, and materials, you need
kilowatts and terawatts. This is a much more difficult task and
took longer to do.
The emerging hybrid economy takes America to the next
quantum leap beyond automation, or supply chain management, or
such things as telecommuting and e-commerce. All those energy
saving systems are of course important, but they are just
building blocks to the deeper hybrid economy phenomena that I
am describing.
Over the past 50 years the 20th Century's technology has
doubled the overall efficiency of the U.S. economy. This has
allowed the GDP to increase six-fold with a comparatively
modest two-and-a-half-fold increase in our energy consumption.
The hybrid economy can do this and much more in the future.
One thing to keep in mind is that radical improvements in
energy efficiency produce unexpected and, by and large,
beneficial outcomes.
I mean, Energy efficiency--two specific examples from one
of our witnesses today of course is what made Google possible,
one made Apple possible. Operating at the energy efficiency of
the first computer as a single Google Data Center would consume
the entire electricity supply of New York City.
At the efficiency of early radios, iPhones would be the
size of trunks and served by cell towers the size of the
Washington Monument.
Instead, today we have staggering improvements in computing
and information energy efficiency and there are consequently
thousands of data centers and billions of computers and cell
phones. Both have become ubiquitous industries of their own
with vast, sprawling, and productive infrastructures.
There is every reason to believe that more of the same of
this is in store with the next wave of efficient technologies
emerging in what I would call the hybrid energy economy.
But much of it is unpredictable in both direction and form.
It is because efficiency, like its economic cousin labor
productivity, arises primarily from technology progress that
the challenge--this is an old challenge for the Congress and
for States--the challenge is to find ways to incentivize and
accelerate innovative technology.
How do we encourage markets to adopt near-term innovation
and invest in enabling long-term infrastructure? I would
suggest in both cases money is the most powerful tool.
In the short term, high-cost energy does accelerate near-
term capital investment in more efficient technologies. In the
long term, however, this is where federal funding has a central
role in basic R&D that is essential to fuel the next cycle of
innovation, and frankly to educate the emerging class of energy
innovators.
Thank you, Mr. Chairman, members of the Committee, for the
opportunity to present these thoughts.
[The prepared statement of Mr. Mills appears in the
Submissions for the Record on page 82.]
Chairman Schumer. Thank you, Mr. Mills.
I want to thank all four of our witnesses for excellent
testimony. I am going to yield my time to Chairman Bingaman to
ask questions, and then I will have to step out for a minute
and Vice Chair Maloney will continue the hearing. I will be
back to ask questions at the end rather than at the beginning.
Thank you.
Chairman Bingaman.
Senator Bingaman. Thank you very much, Mr. Chairman, for
having this hearing, and thanks to all the excellent witnesses.
One of the obvious points I guess for people who have
looked at this efficiency issue is that we need to get the
right information to the people who are making decisions at
every stage, or in every part of our economy in order to get
maximum efficiency in the system.
We have a proposal in an amendment that I have offered
related to energy on the speculation bill that is currently
pending in the Senate to establish a requirement that all
vehicles beginning in 2012 have a fuel economy monitoring
device put on them, similar to what you see when you drive a
Prius.
A very similar concept is the smart metering idea with
regard to electricity that allows people to know how much
electricity they are using at any particular time.
I guess, Dr. Koomey, let me start with you. Another example
of one of the issues you were pointing to there about the
incentives being in the wrong place, the people deciding which
computer to buy didn't have any incentive to buy an energy-
efficient computer. Another example which is pretty clear is
the Coca-Cola and the various companies that put in these
vending machines in federal buildings, or any building, who
have very little interest in how much energy they use because
there is no savings to them, obviously. They just plug it into
the wall and the landlord pays the bill.
Do you have any additional insights you could give us as to
how we get this information to people in a way that allows them
to make the right decision, Dr. Koomey?
Dr. Koomey. Thank you, Senator. You raised one of my
favorite examples in the vending machine. Another example is
the cable box. The cable company buys the cable box and you pay
the electric bill to warm your cat and do other important
tasks.
So the question you ask relates to information. My initial
response is: Information is important when the people who are
able to make the decision can take that information and use the
skills that they have to come to the right decision.
But in many cases these choices are small choices. So the
choice of how much electricity your cable box uses, that is a
difficult thing for an ordinary person to investigate. So we
have to think a little bit about the transaction costs
associated with getting people to do the calculation.
Maybe it does not make sense to have the customer do the
calculation. Maybe it makes sense to have an Energy Star label
where EPA and the Department of Energy did the calculation once
already, and then all the customer needs to do is find the
Energy Star label. Or to have an energy efficiency standard,
again.
So I think information is very important, but in some cases
I want to emphasize that sometimes the transaction costs aren't
worth it for individuals to do these kinds of calculations.
There are other tools we can bring to bear to solve the
problem.
Senator Bingaman. You also had a comment in your written
testimony about how we ought to consider directing FERC to tell
us how to go about promoting standardized electronic formats
for utility rates. Could you elaborate on that a little bit?
Dr. Koomey. So one of the problems that big companies face
is that they have facilities in many different states. And the
utility rates for companies particularly are very complicated.
So there's Demand Charges, and Electric Charges, and they vary
by time of day. Unfortunately, most of these rates are only
published on paper nowadays.
So it is very hard for a company to do the comparisons they
need to do to choose to use energy efficiently. The proposal I
made in the testimony was to standardize those formats for the
electronic rates, and have that standardization help companies
like Google design web tools to help these big companies, as
well as small consumers, to compare rates and make the most
efficient choice for them.
So this is again use of information technology, as Mr.
Mills pointed out, use of information technology to do our
energy sums more carefully and come to the more efficient
conclusion at the end of the day.
Senator Bingaman. Secretary Bowles, did you try to address
any of these issues in the recent legislation you adopted in
Massachusetts?
Mr. Bowles. Senator, we did to a degree. Just for your
backdrop, we have in Massachusetts a very high penetration of
real-time meter and real-time pricing of power in the
industrial and commercial areas where peak power is ten times
or more, sometimes much more than that, more expensive than
baseload power. And so companies can get tremendous economics
by moving their load around and avoiding the peak hours.
They do that, and they have responded well. What we have
not seen in our deregulated power market in New England is
really penetration into the retail level. Whereas we have
consumers who have figured out cell phones--you know, we need
to buy 500 minutes to 1000--we do not have those products
available in the retail market, in part because the competitive
energy suppliers just have not seen enough profit potential in
that area to really get into that market.
So one of the barriers is cheap real-time meters. I think
that is an area where the Federal Government could intervene,
to my mind, helpfully.
In direct answer to your question, yes, the Legislature
created a pilot program that will get at some of this. Our
utilities, many of them, have somewhat smart meters for the
purposes of service efficiency, but they aren't in the dynamic
pricing business yet.
So the energy legislation takes a step in that regard, but
it has not been one of the lowest hanging fruit for us as yet
in terms of cost.
Senator Bingaman. Thank you very much, Mr. Chairman.
Mr. Hinchey [presiding]. Senator Bingaman, thank you.
Senator Brownback.
Senator Brownback. Thank you very much, Mr. Chairman,
appreciate that.
What is the Automotive X Prize, Dr. Koomey, that you were
talking about?
Dr. Koomey. So the original X Prize was for space travel.
Senator Brownback. Right.
Dr. Koomey. It was a prize of I think $100 million for the
first----
Senator Brownback. It was $10 million to get up to space
twice within two weeks.
Dr. Koomey. Okay. So the Automotive X Prize is a similar
sort of idea. So it's a large amount of money that is given for
automobiles that reach a certain efficiency target. So it's not
standard----
Senator Brownback. It has not been set yet? It is something
that you're advocating for?
Dr. Koomey. No, it's something that--the same group that
did the X Prize for Space is also doing this for Automotive----
Senator Brownback. And do you have specifics on this?
Dr. Koomey. I do not know the details on this, but the
general idea is that having these kinds of prizes stimulates
innovation because it gets many different teams of engineers to
focus on solving the problem.
Senator Brownback. I agree. I agree. It is just that is the
first I had heard about it, so I was curious about the
specifics on it and I wanted to see if we could do more with
that. Because I find a lot of people, as I am out traveling
around or doing town hall meetings, everybody is talking about
what they are doing.
I was talking about a bio diesel the other day on the phone
at the airport and a guy behind me is listening and said, hey,
I have got a conversion system to take old vegetable oil. I'm
doing this. And I was on a town hall meeting last night and
this guy called in and he said: You know, if you guys would
just license us to drive golf carts around our little town
here, I am already plugging it in. You know, if we can get up
to--it goes everywhere I need to go.
And I thought, well, that is kind of an interesting idea in
a small-town setting. I hope somebody is thinking about doing
that. It is just interesting, the innovation that you are
seeing and that the high prices do stimulate to take place.
This would be I think a good one. I am hoping in the future
we are going to have a plug-in hybrid flexfuel vehicle that
will be the standard model. So you plug it in, do 20 or 30
miles on electricity; it switches over to hybrid, it can do
flexfuel, it can run on ethanol, methanol, gasoline, or any
combination thereof, and that is existing technology that we
could do and really stretch a gallon of gasoline a long ways.
Mr. Mills, I guess that is really along your line of a
hybrid energy economy, which I find very exciting. From a State
like mine with a lot of wind sources, a lot of agricultural
sources, we look at this as okay now this is a chance that we
can really produce in this economy.
Let me ask you, though. You seem to premise your basis on
the key here is to create an investment strategy to do this. Am
I catching that right, or not?
Mr. Mills. The key is to understand how we can accelerate
capital turnover to new technologies. In a sense it is an
investment strategy. Businesses will buy more efficient
equipment when it is in their interest because most of them, in
my experience, are aware of what it costs them to do things,
and particularly these days where they are buying electricity
or oil.
But equipment has sunk costs. It still works well. There's
no capital in it if it's fully depreciated. So having a
decision internally to move to the next generation of
technology, whether you are a manufacturing plant, a commercial
building, is generally literally an investment decision for the
operator.
Senator Brownback. We stimulate that here from tax policy,
tax credits----
Mr. Mills. Accelerated depreciation.
Senator Brownback [continuing]. Subsidization, accelerated
depreciation, research R&D would be the primary route forward?
Mr. Mills. The latter would help long-term technology. I
think one area where probably the whole panel agrees is it is
important to stimulate long-term R&D, which is predominantly a
federal role typically in the long-term science engineering.
But that does not do much for us today, obviously, to get
businesses to change their behavior. Like consumers, you have
to decide to buy a new car. The car you have may be fully paid
for, and you have got zero capital, additional capital cost in
that even though it is inefficient.
Senator Brownback. That is where I think we ought to go. I
read a paper on this one time and it talked about the three
waves of, really, environmental concern, the first wave being
conservation, the second wave being regulation, and the third
wave being an investment strategy.
It sure strikes me that that is the way we could all agree
upon to move on forward with, is that you incentivize the
investment in this. It makes sense for the economy. It makes
sense for the ecology. And it is primarily focused on the
energy end of the equation, which I think would be critical.
One final question, if I could get it in here, is there is
a lot of talk about diffusing energy sourcing. So you have
energy, instead of from big power plants, but in addition to
big power plants you go to diffusing the energy.
What do you think of that (a);(b) if you can do it quickly,
how would you incentivize that?
Mr. Mills. Usually for price mechanisms--you're talking
about distributed energy where there are lots of small power
plants? We make lots of small power plants already. That's our
cars. We make millions and millions of them a year. They are
power plants. They can make electricity.
The distributed energy market is bigger globally in
developing economies largely because they do not have the
economies of scale that we have.
On average it is cheaper to make energy centrally, but in a
high-cost environment there are a lot of folks who will look at
distributed generation. Rooftop solar can make more sense than
utility solar because you are paying for high cost at the point
of use as opposed to competing with a very cheap power at the
point of generation.
So there is certainly room for it. In fact I think we will
have not much choice as a matter of fact.
Mr. Hinchey. Mr. Bowles.
Mr. Bowles. I just wanted to comment on your question,
Senator Brownback, about distributed power. It goes back to the
rate structure point I was making, again that in our system
prior to rate decoupling the utilities had had every reason not
to want to have that distributed power because their revenue is
tied to the power that flows through their wire to your home.
So if you did a big solar array, then they just lose money.
So that is part of the point of, to my mind, the simple things
we can do to have the utilities be in the wires business and
indifferent to whether or not you do solar in your home, or
someone does a combined heat and power unit in a commercial
development. I think that is an important part of the puzzle.
Senator Brownback. Thank you, Chairman.
Mr. Hinchey. Senator Klobuchar.
Senator Klobuchar. Thank you very much, Mr. Chairman. Thank
you to our witnesses. I am sorry I was late. We were trying to
get those energy tax extenders done, as well as some other
things in the transportation area.
I think you all know I come from the State of Minnesota
where we believe in science and the potential for new
technology. We have brought the world everything from the Post-
It Note to the Pacemaker.
We are also very advanced in what we are doing with energy.
We have one of the most aggressive energy portfolio, renewable
energy portfolio standards in the country with the 25 percent
goal with renewable electricity by 2025.
We also have some interesting things with Best Buy and
Super Value and some of our other major companies that are
working in the energy area.
My question first is this idea of the energy efficiency in
the homes. I have noticed, especially Mr. Reicher, if you could
answer this first, that there is just much more interest in our
state now. It is no longer Jimmy Carter going on the TV in a
sweater talking about, in a glum face, what is going to happen.
We have a number of loan programs in our state. We have one
for up to $10,000 you can get a loan to update your homes. But
there is really a low usage rate of this program because people
have to initiate it on their own.
Could you talk a little bit about incentives, and anyone
else can join in, for home owners to make improvements and how
we could better get them involved in this? Because I see this
as part of the key. It is no longer just an environmental
issue; to them it is an economic issue. And if they could get
those meters on their washers and dryers and figure out how to
do it so they could get the information, I think we would be a
lot better off.
Mr. Reicher. It is a great opportunity. Home energy use,
building energy use, is a very significant percentage of our
overall energy use, and we have great opportunities to reduce
it dramatically.
Obviously we have financial incentives right now with
higher energy prices, but that does not get us all that we
need. I think there is a variety of things.
First we have to give people better information. This once
a month paper energy bill we get from our utility just does not
do it. Most people do not understand it. They do not know how
to----
Senator Klobuchar. Like me.
[Laughter.]
Mr. Reicher. Yes.
Senator Klobuchar. Okay.
Mr. Reicher. And so that is the place to start, is just
giving people better information. And that starts with a home
energy audit, which is available increasingly from utilities
and from other providers.
You can go in and get a very good baseline assessment of
what is going on in your house. We even have advanced
technologies now to do that. You can use something called a
Blower Door Test which pressurizes the house and, with an
infrared monitor, you can find everything down to the size of a
pin hole in terms of leaks.
With that you really understand where to go. So that is the
first thing is just setting a baseline so people understand.
Giving them access to real-time information about their
energy use. As we say, let's give them a speedometer, not an
odometer. Let's give them actual real-time usage as you have
increasingly in automobiles. If we had that for our homes, if
you knew at any given moment that your child was up there in
the second-floor bedroom and somehow lots of things were on
that did not need to be on, you could make some adjustments.
Even better----
Senator Klobuchar. So how much would it cost to buy these
things? Would regular people be able to buy them? Would we sell
them at places like Best Buy? Or would the government give some
kind of deal to get them so that we could get people going on
this? That is what I am trying to figure out.
Mr. Reicher. Yes, there are lots of approaches, but one of
the most significant--and I think one that has potentially the
greatest impact--are what we call smart meters. You replace
your simple dome electric and gas meters with something that
has two-way information, can talk to the utility, can send
information to the consumer on a real-time basis that you get
in your laptop.
We have many utilities now in the United States which have
committed to putting in smart meters. Southern California
Edison is going to be installing over 5 million. And that is
the sort of thing that really gets people going.
In terms of Federal incentives, tax credits both to
industry and utilities and to homeowners for installing this
kind of equipment could help a great deal.
Real-time pricing, so that there is some incentive for
example to wash your clothes and dry them at night instead of
during the day. A choice, not a mandate but a choice, because
you knew if you did it would be 50 percent less.
Air conditioners that can actually talk to the utility on
their own. So at any given point you have made a deal with the
utility that you are willing to have your air conditioner
cycled off for 5 or 10 minutes at a time when the temperature
hits X degrees, and you get an extra $25 off your electricity
bill as a result of that.
So there are all sorts of things that can be done that
start with technology, that move from there to federal and
state support. The good news is, this is not rocket science any
longer. We have these technologies available.
Senator Klobuchar. Secretary Bowles.
Mr. Bowles. Yes. I would agree with your comment very much.
We in Massachusetts now, the Governor has been talking about
energy audits, we now have such a backlog of them that we are
not even scheduling them now until November. That is a
phenomenon where we have only given a certain amount of energy
efficiency funding to the utilities to spend until it is gone.
What we have done in restructuring the energy market in
Massachusetts is basically said to the utilities: You can spend
any money on these efficiency investments, including energy
audits, insulation, weather stripping, appliance subsidies,
things like that, until the point that the next investment is
more expensive than power generation.
So as long as it is cheaper than buying the next kilowatt
hour of power, you can make those investments. And any state
can do that. A number of states have. It is, again in wonkie
terms, called ``least-cost procurement,'' but it is basically
the idea of buying the cheapest energy resource.
So state utility commissions can do that. Legislatures can
do that. That is the biggest thing structurally we can do to
really create an energy efficiency marketplace that again
competes on costs. We are not taking about any crazy expensive
things, we are talking about things that are cheaper than power
generation.
With the costs of commodities, natural gas going up so
much, there is a lot more cheap efficiency out there. So at the
end of the wires as a consumer what that means is you have more
people showing up on your doorstep saying, you know, do you
have a 20-year-old refrigerator in your basement that is still
plugged in? Twenty percent of your load could be just that old
refrigerator you forgot about a decade ago. If you unplug it,
it would probably be cheaper for all of us if we just bought
you a small new refrigerator and took that damn thing away. But
there is a variety of things we have not done because we have
not given the utilities really the incentive to focus on saving
money.
Senator Klobuchar. Okay.
Chairman Schumer [presiding]. Congressman Hinchey.
Mr. Hinchey. Thank you very much, Mr. Chairman.
Thank you, gentlemen, very much, for this opportunity to
listen to you and to learn a number of very important things.
We are grateful to you for being here.
The idea of energy efficiency I think is very critical.
Last year the Congress finally passed an energy efficiency bill
which upgraded the CAFE standards, the automobile fuel
efficiency standards, upgraded them to 34 or 35 miles a gallon
by the year 2020.
This was the first time that that was done in 32 years.
That standard was good, but it seems to many of us that a lot
more could be done. A number of us have introduced another bill
last year, which would jack up these CAFE standards to at least
40 miles a gallon by the year 2016, which is I think very
easily achievable.
I would just like to hear your comments on that. What do
you think that we could do in terms of CAFE standards,
automobile efficiency, miles to a gallon, how much? How quickly
do you think that we could accomplish that kind of efficiency?
Mr. Reicher. Congressman Hinchey, I think there is a great
deal that can be done. The great news is that the automobile
companies themselves I think are much more convinced about that
than they have been in the past.
I mentioned in my testimony that at Google we actually
converted several Toyota Priuses and Ford Escapes to be plug-in
vehicles, and we tested those with professional drivers
following Federal data on how consumers actually drive. The
Ford Escape plug-ins got 50 miles per gallon. The plug-in
Priuses got over 90 miles per gallon.
So we know how to do this. This is technology that is
available. So I think it would be fair to revisit the CAFE law
and consider increasing those requirements.
In conjunction with that, I do think we need to also
provide some help with some of the infrastructure that our
utilities are going to need, for example, if we are going to
move to plug-in hybrids. Because I think that is a big
opportunity. So I would encourage you to take a look at that,
as well.
Mr. Hinchey. Thank you. Dr. Koomey.
Dr. Koomey. Congressman, thanks for your question.
One of the issues that I think people need to think about
when they are examining the car efficiency question is the mass
of the vehicle. We have designed vehicles more or less in the
same way for a long time using materials that have changed
somewhat over the last 20 years, but there are a lot of new
materials that we now know are more energy absorbing, lighter,
and allow vehicles to still be a good size but much lighter and
therefore more efficient.
So part of the thinking around this, I agree with Dan that
we need to re-examine where those CAFE standards should go, but
part of that evaluation I think should be kind of whole system
redesign using current materials, current information
technologies, not assuming the way we have always designed cars
is the way they need to be designed going forward.
Mr. Hinchey. Mr. Mills.
Mr. Mills. Congressman, I just first want to thank you.
Your brother has taught a couple of my sons at school locally,
and they----
Mr. Hinchey. He is a great math teacher.
Mr. Mills. He is a great math teacher.
Mr. Hinchey. Thank you.
Mr. Mills. The automotive industry is fascinating. As I
think everybody knows, they have figured out that they might
have to build different kinds of cars in this price climate. I
think the automotive industry believes the price climate is in
this range for awhile.
I just want to answer briefly the question about timing
that you had asked. There are today dozens of car models that
get between 30 and 40 miles per gallon, so consumers have the
ability to buy high efficiency cars today.
It is not like auto makers have not figured out how to make
them. They do exist. In fact, demand for used Honda Civics, I
was reading recently in The Wall Street Journal, are priced at
the same price as new Honda Civics because they are north of 30
miles per gallon on the highway, and you can almost have
yourself paid to buy a Silverado taken off the lot at some GM
dealers.
So some of the market response is already taking place. A
couple of witnesses have noted the auto industry has figured
this out, and in fact ironically enough there is some
remarkable leadership going on in the R&D labs at the auto
industry in my experience through the investment work that I
do.
I would not call it stealth work; they just are not getting
that much credit for it, frankly, from studying changes in car
architecture, or car design, not just hybrids and plug-in
hybrids.
When I first wrote about plug-in hybrids a few years ago in
a Forbes article, the fact-checker called all the major auto
makers and they all said universally to the fact-checker at
Forbes that I was wrong; I was nuts; they were not going to
make them; they were not in the plans.
I think at that time it was not so much they had their head
in the sand. I happen to know from my own intel, if you like,
that they were doing that. They just did not want to signal
where they were in the path in a few cases, particularly in
Toyota's case. They are very secretive about these radical
changes they make in car design.
Mr. Hinchey. Secretary Bowles.
Mr. Bowles. Congressman, I would just say, to endorse what
the others have said about revisiting CAFE. I think it makes
sense for the United States.
The one other element I just would throw into the mix is we
in California and in 14 States have been pursuing a waiver from
the EPA for the CAL LEV standard, which would allow us as
states to decide on one other standard that we could pursue
more aggressively, and I think that is another step that
Congress could step in and override, in my view, the
recalcitrance from the EPA in terms of letting states go
further when they are ready to, and recognizing it is only one
other standard. We are not talking about a myriad of standards.
So that is another thing that Congress could do if they did not
want to touch CAFE right now.
Chairman Schumer. Thank you, Congressman Hinchey. And I
want to thank all of the witnesses once again.
First to Mr. Reicher. I am very interested in the low
income home weatherization program. I am going to put in some
legislation to move it up.
Can you talk a little bit more about the program? Why is it
so uniquely positioned to help reduce energy consumption as
well as U.S. emissions? What can we in Congress do to ensure
the remaining $28 million homes eligible for assistance receive
the weatherization support they need?
There is such bang for the buck, and frankly as you said it
is a permanent solution, whereas LIHEAP is a year-to-year
solution.
Mr. Reicher. Mr. Chairman, it is a great program that has
received very little attention.
Chairman Schumer. Why, do you think?
Mr. Reicher. We have not focused on energy efficiency as--
--
Chairman Schumer. At all.
Mr. Reicher [continuing]. At all. And when we have gotten
into trouble in terms of higher energy prices, the general
reaction in Congress has been, let's put more money into the
Low Income Home Energy Assistance Program, LIHEAP, which is an
important program. It does buy down people's energy bills.
But that is a one-time buy-down. To be candid, it really
gets to a very, very small percentage of the need both in terms
of eligible families and how much it actually helps them.
The great thing about weatherization as a complement to
LIHEAP is that it continues to return savings year after year
after year. Twenty to forty percent improvement in energy
bills, not even taking into account what you can do if you also
improve some of the electricity using appliances in the home.
The great news is, there is an established base of home
weatherization providers all around the United States, scores
of them. They have been added since the 1970s. They have done
roughly 6 million homes. There is a very established process
for doing it that starts with the Home Energy Audit. There's a
standardized set of tools you use for that, a standardized set
of approaches you take to making the changes in the home.
What is exciting now, though, is that there is increasingly
the opportunity to not just have this be federally funded but
there may well be ways to aggregate hundreds or thousands of
homes into a financeable package. I mentioned that in my
testimony.
Chairman Schumer. Right.
Mr. Reicher. Imagine being able to not only have federal
dollars going into this, but also get the private sector to
start investing in these kinds of upgrades.
The problem today is we are only weatherizing on the order
of 100- or 200,000 homes a year. The Energy Department has
actually proposed this year to zero out the weatherization
budget, as you know.
Chairman Schumer. Yes. That is hard to believe, given
everything that has happened.
Mr. Reicher. We should be going the opposite direction. A
million homes a year for the next ten years we would at least
get to a third of what we could do. The job creation is
extraordinary. The climate change impacts are extraordinary. We
would even moderate the price of natural gas.
Chairman Schumer. How long does it--if you weatherize a
home in year one, how long does it stay weatherized? Forever?
Or do some things deteriorate?
Mr. Reicher. Well the savings are over many, many years.
Chairman Schumer. Right. But would you have to re-
weatherize it 20 years from now?
Mr. Reicher. Certain things will still be in effect. You
know, good insulation can last longer than that. Good windows
can last longer than that. Other things, you might have to go
back but normal home maintenance would get you there. But those
first 10, 20, 25 years you really see major savings.
Chairman Schumer. Yep. Mr. Mills, do you disagree with
anything Mr. Reicher said about weatherization? Not about in
general, but just on weatherization?
Mr. Mills. Well, no. I mean, weatherization of homes and
buildings is important. I think that the only thing that I
would be nervous about is the financing structure, just because
it is difficult in practical systems. This has been done before
in many states, to weatherize low-income homes. And utilities
in a variety of states have moved, gas utilities in particular,
to put programs in place.
It turns out, just my experience working with the utilities
over the years, that the old expression the devil is in the
details, it is very difficult to implement these things.
To the point earlier about Minnesota has programs that have
not been taken advantage of, it is hard to incent people to do
these things. And it is hard to force them to do these things.
So it tends to go slower than people expect.
Chairman Schumer. Right. That is probably true. But my
guess is there are millions more who would do it in a New York
minute.
Mr. Mills. I think that my view would be, of the New York
Minute, would be with New York prices it would be a New York
second.
Chairman Schumer. Exactly.
Mr. Mills. I think the big, big push will be because prices
are so high. One winter at $4 or $5 a gallon heating oil,
people get religion very fast.
Chairman Schumer. Right. Just a quick question to, let me
ask Dr. Koomey, Secretary Bowles. My time is running out and we
have a vote, so we are going to have to be quick.
It is hard to give a quick answer, but if you could do one
thing, if we, the Senate, the House, the President, could do
one thing to encourage efficiency right now to help us save
money, reduce oil consumption, reduce prices, what would you
choose?
Secretary Bowles. But you've got to answer quickly.
Mr. Bowles. I'll give you a two part. For this winter,
which will be very cold and we need weatherization, LIHEAP very
badly because people are going to die from this cold winter----
Chairman Schumer. Right.
Mr. Bowles [continuing]. I would do a lot of subsidization
of insulation and weather stripping. That is the biggest short-
term thing.
Long term, I would give the states irresistible incentives
to totally restructure their electricity market as we have done
and California has done.
Chairman Schumer. Right. Dr. Koomey.
Dr. Koomey. I would help the states to adopt decoupling and
profit incentives for energy efficiency because when you make
it profitable for companies to pursue efficiency, they go after
it.
Chairman Schumer. Yes. Your ideas are very interesting, and
you are harnessing the free market to do some good. Now there
are, I do not know if you would call them externalities, but
imperfections in the free market that do not allow it to
happen.
If there were perfect knowledge, the little example you
gave of the IT buyer not caring about efficiency would not
matter--I don't know if it is perfect knowledge. I do not know
what you call it. Yes, it is, perfect knowledge of the CEO at
the top of the company.
Dr. Koomey. And also misplaced incentives.
Chairman Schumer. Right. I want to thank our witnesses. I
know this hearing was a little brief because of the votes and
unfortunate scheduling, but it was a great hearing. This is to
me one of the great frustrations: Energy efficiency is the
steak. It does not get the attention it deserves, and our job
here will be to try to move some of these pieces forward. So
thank all four of you.
The hearing is adjourned.
[Whereupon, at 11:30 a.m., Wednesday, July 30, 2008, the
hearing was adjourned.]
Submissions for the Record
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