[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

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

                                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

                              ----------                              

                      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

                              ----------                              


                      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.]

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