[Senate Hearing 110-1142]
[From the U.S. Government Publishing Office]





                                                       S. Hrg. 110-1142

                    ENERGY EFFICIENCY TECHNOLOGIES 
                              AND PROGRAMS

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

                                HEARING

                               before the

          SUBCOMMITTEE ON SCIENCE, TECHNOLOGY, AND INNOVATION

                                 OF THE

                         COMMITTEE ON COMMERCE,
                      SCIENCE, AND TRANSPORTATION
                          UNITED STATES SENATE

                       ONE HUNDRED TENTH CONGRESS

                             FIRST SESSION

                               __________

                             JUNE 21, 2007

                               __________

    Printed for the use of the Committee on Commerce, Science, and 
                             Transportation









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       SENATE COMMITTEE ON COMMERCE, SCIENCE, AND TRANSPORTATION

                       ONE HUNDRED TENTH CONGRESS

                             FIRST SESSION

                   DANIEL K. INOUYE, Hawaii, Chairman
JOHN D. ROCKEFELLER IV, West         TED STEVENS, Alaska, Vice Chairman
    Virginia                         JOHN McCAIN, Arizona
JOHN F. KERRY, Massachusetts         TRENT LOTT, Mississippi
BYRON L. DORGAN, North Dakota        KAY BAILEY HUTCHISON, Texas
BARBARA BOXER, California            OLYMPIA J. SNOWE, Maine
BILL NELSON, Florida                 GORDON H. SMITH, Oregon
MARIA CANTWELL, Washington           JOHN ENSIGN, Nevada
FRANK R. LAUTENBERG, New Jersey      JOHN E. SUNUNU, New Hampshire
MARK PRYOR, Arkansas                 JIM DeMINT, South Carolina
THOMAS R. CARPER, Delaware           DAVID VITTER, Louisiana
CLAIRE McCASKILL, Missouri           JOHN THUNE, South Dakota
AMY KLOBUCHAR, Minnesota
   Margaret L. Cummisky, Democratic Staff Director and Chief Counsel
Lila Harper Helms, Democratic Deputy Staff Director and Policy Director
   Christine D. Kurth, Republican Staff Director, and General Counsel
   Kenneth R. Nahigian, Republican Deputy Staff Director, and Chief 
                                Counsel
                                 ------                                

          SUBCOMMITTEE ON SCIENCE, TECHNOLOGY, AND INNOVATION

JOHN F. KERRY, Massachusetts,        JOHN ENSIGN, Nevada, Ranking
    Chairman                         JOHN McCAIN, Arizona
JOHN D. ROCKEFELLER IV, West         KAY BAILEY HUTCHISON, Texas
    Virginia                         GORDON H. SMITH, Oregon
BYRON L. DORGAN, North Dakota        JOHN E. SUNUNU, New Hampshire
BARBARA BOXER, California            JIM DeMINT, South Carolina
MARIA CANTWELL, Washington           JOHN THUNE, South Dakota
FRANK R. LAUTENBERG, New Jersey
MARK PRYOR, Arkansas
CLAIRE McCASKILL, Missouri
AMY KLOBUCHAR, Minnesota














                            C O N T E N T S

                              ----------                              
                                                                   Page
Hearing held on June 21, 2007....................................     1
Statement of Senator Kerry.......................................     1
Statement of Senator Klobuchar...................................     2

                               Witnesses

Birnbaum, Jay, Senior Vice President and General Counsel, CURRENT 
  Group, LLC.....................................................    35
    Prepared statement...........................................    37
Callahan, Kateri, President, Alliance to Save Energy.............     3
    Prepared statement...........................................     5
Hicks, Tom, Vice President, Leadership in Energy and 
  Environmental Designs (LEED'), U.S. Green Building 
  Council........................................................    41
    Prepared statement...........................................    43
Johnson, Douglas K., Senior Director, Technology Policy and 
  International Affairs, Consumer Electronics Association........    30
    Prepared statement...........................................    32
Krebs, Ph.D., Martha A., Deputy Director, Research and 
  Development, 
  California Energy Commission...................................    20
    Prepared statement...........................................    22
Zimmerman, P.E., Charles R., Vice President, Prototype and New 
  Format Development, Wal-Mart Stores, Inc.......................    16
    Prepared statement...........................................    18

                                Appendix

Hebert, Jack, President and CEO, Cold Climate Housing Research 
  Center, prepared statement.....................................    72
Letter, dated June 29, 2007 to Hon. John F. Kerry and Hon. John 
  Ensign from George Burnes, President and CEO, Smartcool Systems 
  Inc............................................................    61

 
                    ENERGY EFFICIENCY TECHNOLOGIES 
                              AND PROGRAMS

                              ----------                              


                        THURSDAY, JUNE 21, 2007

                               U.S. Senate,
          Subcommittee on Science, Technology, and 
                                        Innovation,
        Committee on Commerce, Science, and Transportation,
                                                    Washington, DC.
    The Subcommittee met, pursuant to notice, at 2:34 p.m. in 
room SR-253, Russell Senate Office Building, Hon. John F. 
Kerry, Chairman of the Subcommittee, presiding.

           OPENING STATEMENT OF HON. JOHN F. KERRY, 
                U.S. SENATOR FROM MASSACHUSETTS

    Senator Kerry. This hearing will come to order. Thank you 
all very much for being here.
    I apologize for being a moment late. We're obviously in the 
middle of a critical debate on energy, and I've been busy 
trying to work on CAFE, so I apologize, we're running a little 
behind.
    This hearing of the Subcommittee is on the issue of energy 
efficiency. As most people who have been focused on the issue 
of global climate change understand, there are three very 
significant ways that you have an opportunity to be able to 
deal with it rapidly, to the best of our knowledge. One is 
through clean coal technology, finding a way to burn coal 
cleanly, carbon-neutrally, either capture or sequester or some 
other technology that may or may not appear. The second is 
alternative and renewable fuels, which we're busy debating on 
the floor of the Senate and otherwise. We're moving in various 
ways towards various ethanols, increasingly cellulosic. But 
also the potential of other alternative sources, as well as 
renewable, that may or may not make up a big difference. And 
the final fastest, cheapest, most efficient, biggest, and most 
immediate grab is energy efficiency. It's staring us in the 
face.
    We waste stunning amounts of our produced energy. We lose 
it through the inefficiency of appliances, through the 
inefficiency of autos, through the inefficiency of products, 
through the problems with some; heating systems, i.e., leaks 
under the ground, and other kinds of systems, such as 
escalators that never stop running, lights that never go off. 
It's just unbelievable how much energy there is to be saved and 
grabbed, and what a significant contribution to global climate 
change doing so would be.
    That's what we're here to talk about today. Today's focus 
is energy efficiency. And it's amazing how many businesses are 
suddenly beginning to see that light bulb come on as they start 
to take advantage of it and improve their bottom line. Lots of 
companies are redesigning their buildings using environmentally 
friendly products. The result is that, if you look at something 
like Texas Instruments, in Dallas, they had a profound sea 
change in what they were able to do, or not do, because they 
were thinking of moving to China. By redesigning their 
building, creating a design that was smaller, lower, not as 
high, with pipes that are straight, not bent everywhere, so 
that it takes less energy to move the fluid through them, and 
by putting in various climate control and other kinds of 
products, they've been saving a net of something like $3 
million a year. And were able to keep the jobs in Dallas, not 
go to China, and continue to contribute to the base of that 
economy.
    There are countless stories like that. My wife was very 
involved in the development of a green building in Pittsburgh. 
She built the first office space that was green, and 
subsequently, the contractor who built it, who had never heard 
of green building, has become a completely green contractor, 
and has now funded a chair--I think it's at the University of 
Pittsburgh or Carnegie Mellon--for green building and they're 
teaching green building. Pittsburgh became the top green city 
in America, replaced by Portland, Oregon, when they grabbed 
onto green building, other places are also going green. They 
now have a convention center in Pittsburgh, it's an entirely 
self-contained building. Green. The only green convention 
center in the United States.
    These are all the possibilities, folks. China is about to 
build, literally, several hundred million green housing units. 
They're looking at ways to do that, and they're turning to 
other places for the technology to do it. There's a huge market 
here. This is opportunity staring us in the face, and that's 
what we want to talk about today.
    I'm delighted to have Mr. Charles Zimmerman, the Vice 
President of Prototype and New Format Development for Wal-Mart 
Stores, Inc.; Ms. Kateri Callahan--I've got to put these on, I 
guess, for this stuff--the President of the Alliance to Save 
Energy; Mr. Tom Hicks, the Vice President of LEED of 
the U.S. Green Building Council; Dr. Martha Krebs, the Deputy 
Director of the Research and Development of the California 
Energy Commission; Mr. Jay Birnbaum, Senior Vice President and 
General Counsel for the CURRENT Group; and Mr. Douglas Johnson, 
the Senior Director of Technology, Policy, and International 
Affairs, for the Consumer Electronics Association.
    Welcome, all of you, and thank you very much for being 
here.
    Let me turn to Senator Klobuchar for her comments.

               STATEMENT OF HON. AMY KLOBUCHAR, 
                  U.S. SENATOR FROM MINNESOTA

    Senator Klobuchar. Well, thank you, Mr. Chairman. Thank you 
for holding this very timely hearing. In fact, I'm going to 
have to leave early to go preside over the Senate, where we're 
continuing to debate the energy bill.
    Thank you for being here on this important topic. I've 
certainly seen more and more interest, in our state. From tiny 
little towns with city councils who have decided to change out 
all their light bulbs, to major governments in Minneapolis and 
our counties that are trying to do everything to make their 
buildings more green.
    I think one of the things that's changed in the last year 
is that people are starting to understand this isn't just about 
environmentalism, but it's also about saving money. I hope 
that's one of the things that you talk about as you go through 
your testimony. I want to thank you for that, and tell you 
that's where my heart is. Set the standards high, because I 
believe when you set those standards high, which we really 
haven't been doing in the last 10 years in Washington, the 
investment will follow, the behavior will change, and we will 
be much better off.
    Thank you very much.
    Senator Kerry. Thank you, Senator Klobuchar. And thanks for 
your leadership and involvement on these issues; much 
appreciated.
    Let's begin and roll down. Let me just warn everybody, we 
do have a ``Chair turns into pumpkin'' problem at about 10 of 
4, because I've got to go down to the State Department and meet 
with the Secretary. I think we can get everything in here and 
have a lot of questions and a good dialogue in that period of 
time.
    So, Ms. Callahan, if you want to start, and we'll go from 
there.

           STATEMENT OF KATERI CALLAHAN, PRESIDENT, 
                    ALLIANCE TO SAVE ENERGY

    Ms. Callahan. First, let me thank you, Mr. Chairman, for 
allowing me to appear today.
    I'm Kateri Callahan. I serve as the President of the 
Alliance to Save Energy. And I'd like to start by thanking you 
for all of your many years of leadership on environmental 
issues, and particularly on energy efficiency.
    We believe, as the Alliance to Save Energy, that we have 
proof that what you said is very true, that energy efficiency 
is the cheapest, the quickest, and the cleanest way to tackle 
what we see as the linked problems of our growing energy 
demand: rising prices and global warming. And we believe we 
have the proof of that.
    We've done studies that show that, over the past 30 years, 
energy efficiency improvements and technologies and public 
policies have contributed and combined to displacing the need 
for about 43 quads of energy. That's about 40 percent of 
today's energy use. And what that means is that energy 
efficiency is actually contributing more to meeting today's 
demand for energy than any other single resource, including 
petroleum. Notwithstanding that current contribution, and 
what's, I think, so important and beautiful, if you will, about 
energy efficiency, is that there is still more, and--that can 
be done, and significantly more as we try to meet the exploding 
growth in energy in a sustainable fashion.
    The McKinsey Global Institute just did a study that showed 
that, through cost-effective, energy efficiency measures, we 
can reduce energy use in our homes by about 36 percent, and 
almost 20 percent in our commercial buildings. And that's very 
important, because, as you most likely know, the buildings in 
the United States contribute about 40 percent of our 
CO2 loadings, and that's a figure that's equivalent 
to India and Japan, the two countries combined, their 
contribution of CO2. So, tackling energy use in 
buildings is important.
    My testimony details a number of efficiency programs and 
polices that we represent. They--we try to look at it, in terms 
of sectoral impact--buildings, transportation--and then the 
utility sector are the ones covered in the testimony that's 
submitted for the record.
    Senator Kerry. Let me just say that everybody's testimony 
will be put in the record, in full. So, if you can each 
summarize, then that way that'll give us more time to----
    Ms. Callahan. Right.
    What we did was to try to build our recommendations around 
our finding that the most effective Federal policy is one that 
combines four elements so that you get a continuous cycle of 
improvement. The first is to invest in research and development 
so you keep the technologies in the pipeline. The second is to 
provide incentives so that you create the initial markets for 
those technologies. The third is public education so you get 
widespread commercialization of the technologies. Then, once 
you have that, you put in place the codes and the appliance 
standards that allow you to set a minimum efficiency or a 
maximum energy allowable use for the commercial projects.
    So, on the first, on research and development, one of the 
things that we're recommending is a commercial buildings 
initiative. That would provide the technologies and the 
knowledge base to allow us to get to carbon-neutral buildings, 
which is a goal that's being embraced by policy leaders and 
leading organizations all across the United States. That 
provision is actually in the Senate energy bill, thanks to 
Senator Dorgan, one of your fellow committee members, and we 
are very pleased with that. We hope that, after authorizing 
such an initiative, it can be appropriated.
    A second key element in the building sector are the 
energy--the model efficiency codes that are established for 
commercial buildings and houses at the Federal level. We have 
sought for, and actually have in the House bill, but not in 
this bill, a directive to DOE to ensure that we get a 30 
percent reduction in our model energy codes, reduction in 
energy use by 2010, and a 50 percent reduction in the new codes 
that we put forward in--by 2030. Again, it's in this--it's in 
the House bill, not in the Senate bill. We're hopeful that 
it'll come out in a final package.
    We also look at Federal energy management. And I know 
that's something that Congress has been very focused on. We 
worked with our Alliance Chairman, Senator Pryor--again, one of 
your fellow members--to develop a set of policies, that would 
create a new paradigm and structure for Federal energy 
management, that we believe will allow the Federal Government 
to meet the aggressive goals you all set in EPAct 2005, and 
that the President put forward in his latest Executive Order. 
Those provisions, again, are put forward as an amendment to the 
energy bill, and we're hoping this Subcommittee will support 
that.
    Appliance standards, which you mentioned, Senator Pryor--or 
Senator Kerry, excuse me--are one of the most important things 
that we've done in this country, in terms of driving 
efficiency. We are proposing a set of recommendations, of 
consensus-based appliance agreements that have been developed 
with the manufacturers and the advocates, but also, and 
importantly, recommendations for DOE to conduct their 
rulemakings in a more timely fashion, in a more--put in place 
more effective standards.
    The appliance standards, just to give you a notion of the 
magnitude of these, the ones that we have in place today are 
displacing the need for about 7 percent of our current 
electricity use. They, by the year 2010, will allow us to not 
emit 65 million metric tons of CO2, and they're 
going to save American consumers and businesses $234 million in 
avoided energy costs. So, they are very effective.
    There are 15 products out there that we've identified for 
which there's no Federal standard. So, there's work that the 
Congress could do here. And we think that if you put in place 
standards on those 15 products, you could save about $54 
billion in avoided energy costs by 2030.
    And finally, we've recommended programs in the utility 
area. The utilities in this country, natural gas and 
electricity utilities, have proven to be a very effective 
deliverer of energy efficiency. And so, we're supporting an 
energy efficiency resource standard that would require 
utilities to implement programs that result in a specified 
amount of energy efficiency, or electricity and natural gas 
savings. They're very much like a renewable portfolio standard, 
so they're market-based and flexible, and a mechanism that will 
allow us really to put energy efficiency on par with other 
generation.
    So, in conclusion, as you look to, perhaps, develop 
legislation on energy efficiency through this Subcommittee or 
other means, we stand ready to help you with that. We've got 
lots of good ideas we'd like to see translated into Federal 
policy. And we believe that, through energy efficiency, you're 
not only going to transform the current energy crisis and 
tackle global climate, but you're also going to have a win-win 
for consumers in terms of money back into their pocketbook and 
the creation of a stronger economy.
    Thank you for your time.
    [The prepared statement of Ms. Callahan follows:]

  Prepared Statement of Kateri Callahan, President, Alliance to Save 
                                 Energy
Introduction
    The Alliance to Save Energy is a bipartisan, nonprofit coalition of 
more than 120 business, government, environmental and consumer leaders. 
The Alliance's mission is to promote energy efficiency worldwide to 
achieve a healthier economy, a cleaner environment, and greater energy 
security. The Alliance, founded in 1977 by Senators Charles Percy and 
Hubert Humphrey, currently enjoys the leadership of Senator Mark Pryor 
as Chairman; Duke Energy CEO Jim Rogers as Co-Chairman; and Senators 
Jeff Bingaman, Byron Dorgan, and Susan Collins along with 
Representatives Ralph Hall, Zach Wamp and Ed Markey, as its Vice 
Chairs. Attached to this testimony are lists of the Alliance's Board of 
Directors and its Associate members.
    The Alliance is pleased to testify at a hearing on energy 
efficiency technologies and programs. At the request of committee 
staff, I will focus on the energy efficiency of buildings, both in 
direct policies and by encouraging utility energy efficiency programs, 
but will also touch on transportation efficiency.
Energy Efficiency: America's Greatest Energy Resource
    Natural gas prices have doubled in the last few years, and gasoline 
and electricity prices also reached all-time highs. Recent energy price 
increases cost American families and businesses over $300 billion each 
year. The President recognized energy security as a major issue in the 
State of the Union message. And the world's scientists recently 
reaffirmed the urgent need to reduce global warming. These problems are 
not going to go away--electricity use in the United States is projected 
to grow by half by 2030. Such growth will lead to higher prices, 
greater volatility, and increasing dependence on foreign natural gas as 
well as foreign oil.
    Energy efficiency is the quickest, cheapest, and cleanest way not 
only to tackle our current energy cost issues, but also to meet the 
anticipated future growth in energy demand in the United States. The 
enormous contribution of energy efficiency to meeting our energy needs 
is achieved with little or no negative impact on our wilderness areas, 
our air quality, or the global climate. Energy efficiency enhances our 
national and energy security by lessening requirements for foreign 
energy sources. Further, energy efficiency is invulnerable to supply 
disruptions; is rarely subject to siting disputes; is available in all 
areas in large or small quantities; and generally costs much less than 
it would to buy additional energy.
    Energy efficiency is the Nation's greatest energy resource--
efficiency now contributes more than any other single energy resource 
to meeting our Nation's energy needs, including oil, natural gas, coal, 
or nuclear power. The Alliance to Save Energy estimates that without 
the energy efficiency gains since 1973 we would now be using at least 
43 quadrillion Btu more energy each year, or 43 percent of our actual 
energy use.



    Much of these savings resulted from Federal energy policies and 
programs like appliance and motor vehicle standards, research and 
development, and the ENERGY STAR program. Federal action for 
energy efficiency has been most effective when it combines four 
elements to create a cycle of improvement: (1) Support for research and 
development on new energy-efficiency technologies, (2) Incentives and 
early adoption to create initial markets for the most advanced products 
and technologies, (3) Public education to spur widespread 
commercialization of efficient options, and (4) Standards and codes to 
set an efficiency floor. This testimony will discuss policies in all 
these areas.
The Potential Impact of Energy Efficiency in Buildings
    Building energy use is a major factor in the linked problems of 
energy prices, energy security, and global warming, and must be a major 
part of their solution. More than one-third of all energy used in the 
United States, and more than two-thirds of electricity, goes to heat, 
cool, and power buildings. Just over half of that is for homes, the 
rest for a wide variety of commercial buildings.
    Great strides have been made in improving the efficiency of 
appliances, heating and cooling systems, equipment, and the building 
envelope (walls, windows, doors, and roofs). At the same time the 
growing size of homes and appliances, and the growth in electronic 
equipment have overwhelmed the efficiency savings.
    An even greater savings potential remains--a recent study by the 
McKinsey Global Institute found that measures that pay for themselves 
in 10 years would save 36 percent of energy use for homes and 19 
percent of energy used for commercial buildings. A 2000 study by 
several national labs estimated that energy-efficiency policies and 
programs could cost-effectively reduce U.S. energy use in residential 
buildings by 20 percent and in commercial buildings by 18 percent over 
a 20-year span, essentially reversing the growth they projected in 
building energy use. The American Institute of Architects has called 
for reducing fossil fuel use in new and renovated buildings by 60 
percent by 2010 and by 100 percent by 2030.
    A combination of several policies and programs have made a real 
impact on saving energy in buildings, including appliance standards, 
building energy codes, labeling programs, tax incentives, and research 
and development of new technologies--I will talk about some of these 
later in the testimony. But one of the most effective approaches has 
been utility energy-efficiency programs, and I will start with these.
Utility Energy-Efficiency Programs
    Why should utilities reduce their sales by helping their customers 
reduce energy consumption? Many utilities have found that helping their 
customers to save a kilowatt-hour of electricity is cheaper and easier 
than generating and delivering that kilowatt-hour. For these utilities 
and their customers energy efficiency is a key energy resource.
    As California found out in 2001, a slight excess of demand for 
electricity over available supply can cause blackouts, massive price 
spikes, and economic turmoil. Small increases in demand have doubled 
retail natural gas prices nationwide over the last few years, resulting 
in plant shutdowns and home foreclosures. Energy-efficiency programs 
are the cheapest, quickest, and cleanest way to respond to these 
challenges. In California in 2001 an aggressive campaign reduced peak 
electricity demand by 10 percent in less than 1 year, and thus helped 
avoid further shortages.
    These demand-side management (DSM) programs use measures such as 
rebates for efficient appliances, commercial lighting retrofits, and 
energy audits to help their customers use less energy. The cost to the 
utility for the energy savings is often around 2-4 cents per kilowatt-
hour (kWh), much less than the cost of generating and delivering 
electricity. Such efficiency investments save consumers money, increase 
consumer comfort, reduce air pollution and global warming, enhance 
economic competitiveness, and promote energy reliability and security.



    Over the last two decades, states worked with regulated utilities 
to avoid the need for about one hundred 300-Megawatt (MW) power plants. 
However, utility spending on DSM programs nationwide was cut almost in 
half as the electricity industry was partially deregulated in the late 
1990s. In the last couple years there has been a resurgence of interest 
in electricity and natural gas energy-efficiency programs, with new 
programs in states such as Georgia and Arkansas, and added funding in 
leaders like California and Vermont. Some states have also chosen to 
run similar demand reduction programs themselves.
Utility Sector Energy-Efficiency Policies
    Recommendation: Fund the Energy Efficiency Pilot Program authorized 
in Section 140 of the Energy Policy Act of 2005, and require states to 
consider adopting policies to promote utility energy-efficiency 
programs.
    Several major new reports have focused in part on the need for new 
policies to promote utility energy-efficiency programs, including:

   The National Action Plan for Energy Efficiency brought 
        together more than 50 organizations, led by the Edison Electric 
        Institute and the National Association of Regulatory Utility 
        Commissioners (NARUC). They seek ``to create a sustainable, 
        aggressive national commitment to energy efficiency through gas 
        and electric utilities, utility regulators, and partner 
        organizations.''

   The Western Governors' Association Clean and Diversified 
        Energy Initiative set an ambitious goal of a 20 percent 
        increase in energy efficiency by 2020 in the West; the Energy 
        Efficiency Task Force Report examines how to achieve it.

   The U.S. Environmental Protection Agency's Clean Energy-
        Environment Guide to Action details many policies and practices 
        states are adopting to manage their energy needs and air 
        quality.

   The Department of Energy, in consultation with NARUC and the 
        National Association of State Energy Officials, as well as the 
        Alliance, issued a report on state and regional policies that 
        promote utility energy-efficiency programs under section 139 of 
        the Energy Policy Act of 2005.

    Together these reports set forth policies needed to help utilities 
create effective energy-efficiency programs. These policies include:
    Adopt energy efficiency goals, requirements, or commitments, with 
reporting on progress and oversight. For example, California conducted 
a study of the potential savings from cost-effective energy-efficiency 
programs in the state, set targets for each of its regulated electric 
and natural gas utilities, required each utility to submit plans to 
meet those targets, and approved $2 billion in funding for the planned 
programs over 3 years.
    Use energy efficiency as a priority resource when planning to meet 
customer needs. As utilities in some regions plan to build the first 
new generating plants and transmission lines in years, they are showing 
more interest in alternatives. For example, Georgia Power in its most 
recent Integrated Resource Planning (IRP) process agreed to initiate 
the first energy-efficiency programs in a decade.
    Provide robust and stable program funding. Funds can be provided as 
part of utility rates or through a small surcharge on utility bills (a 
public benefits fund or system benefits charge). For example, Wisconsin 
recently increased its public benefit fund and protected it from raids 
to pay for state deficits.
    Set rates to incentivize utilities and customers. Typically 
utilities earn more by selling more energy. It is important to 
``decouple'' utility revenues from sales, or to provide utilities with 
performance incentives for effective energy-efficiency programs, in 
order to align utility benefits with customer benefits. For example, 
Northwest Natural, a natural gas utility in Oregon, has a 
``conservation tariff'' that helps it promote energy savings rather 
than sales.
    Carefully evaluate energy-efficiency programs, with measurement and 
verification of energy savings and appropriate cost-effectiveness 
tests, so all stakeholders can rely on the energy savings. For example, 
in Texas savings estimates used to meet the state peak load reduction 
requirements are verified by a contractor to the Public Utility 
Commission of Texas.
    These policies are typically set at a state level, by public 
utility commissions or sometimes by state legislatures. However, as 
there are compelling national interests that cannot easily be addressed 
by individual states, Federal action is needed. While most individual 
states are not large enough to affect the shortage of natural gas that 
has driven up prices, concerted Federal action could have an impact. In 
addition, the grid failures that blackened much of the Midwest and 
Northeast in 2003 showed that reliability issues are not confined 
within state lines.
    As a focus for Federal policy, the energy efficiency resource has 
several advantages:

   It is readily available in all parts of the nation,

   It is available for direct natural gas use as well as for 
        electricity,

   It is cost-effective today, and

   The potential savings are enormous.

    The Senate recognized the potential of utility energy-efficiency 
programs, and the need for a Federal role, in its 2005 energy bill. In 
addition to the required report in Section 139, Section 140 authorized 
$5 million a year for 5 years to create state pilot programs designed 
to achieve 0.75 percent annual reductions in electricity and natural 
gas use. In the Senate version of the bill, Section 141 would have 
required state public utility commissions to consider policies to 
promote utility energy-efficiency programs. The Alliance urges 
appropriation of funds to implement Section 140, which was enacted, and 
thanks the Senate for including funds in its appropriations bill last 
year. We also strongly support enactment of Section 141. But we believe 
more concerted Federal action is needed.
Energy Efficiency Resource Standard
    Recommendation: Enact a Federal energy efficiency resource standard 
for electric and natural gas utility energy-efficiency programs, 
coordinated with any renewable electricity standard.
    Several states are already developing innovative policies to set 
performance standards for utility energy-efficiency programs alongside 
standards for generation from renewable sources.
    Like a renewable electricity standard (RES), an energy efficiency 
resource standard (EERS) is a flexible performance-based and market-
based regulatory mechanism to promote use of cost-effective energy 
efficiency as an energy resource. An EERS requires utilities to 
implement energy-efficiency programs sufficient to save a specified 
amount of electricity or natural gas, such as 0.75 percent of the 
previous year's sales. Note that an EERS is not a requirement that the 
utility's sales decrease in absolute terms or a limit on its sales at 
all; it is a performance requirement for the utility's energy-
efficiency programs.
    An EERS gives utilities broad flexibility about how and where to 
achieve the energy savings. Utilities can meet an EERS through the 
kinds of effective demand reduction programs that have been conducted 
in many states for years. They also may be able to use customer 
combined heat and power, and energy loss reductions in the distribution 
system. They can implement their own programs, hire energy service 
companies or other contractors, or sometimes pay other utilities to 
achieve the savings by buying credits. The program savings are 
independently verified.
    Usually, the costs of the energy-efficiency programs must be 
recovered from energy customers through utility rates, but the savings 
from avoided energy supply are greater than the efficiency cost. It is 
important for states to set rates in a way that utilities are not 
financially penalized for reduced sales due to effective energy-
efficiency programs.
    According to the American Council for an Energy-Efficient Economy, 
a national 0.75 percent EERS would by 2020:

   Save 386 billion kWh of electricity (8 percent of total use) 
        and 3,600 billion cubic feet of natural gas (14 percent) each 
        year.

   Reduce peak electric demand by 124,000 MW (avoiding about 
        400 power plants),

   Save consumers $64 billion (net after investments), and

   Prevent 320 million metric tons of carbon dioxide greenhouse 
        gas emissions each year.

    An EERS and an RES may be used in combination. Renewable and 
efficiency requirements reinforce each other in several ways in the 
states:

   Texas has separate renewable and efficiency requirements. 
        The efficiency targets focus on peak demand--utilities are 
        required to avoid 10 percent of the expected increase in 
        electric peak demand through efficiency programs. They have 
        easily exceeded these targets.

   Connecticut added to its RES a separate tier under which 
        utilities are to save 1 percent of electricity use each year 
        through residential and commercial programs and combined heat 
        and power. Pennsylvania includes energy efficiency with certain 
        other resources in one tier of its alternative energy portfolio 
        standards.

   Hawaii and Nevada added efficiency resources as options in 
        their portfolio standards--with higher overall targets--after 
        utilities claimed to have difficulty meeting renewable targets 
        (Nevada caps the amount efficiency can contribute).

   California has a ``loading order'' that sets efficiency as 
        the preferred resource; once cost-effective efficiency measures 
        have been exhausted, utilities are to use renewable sources, 
        and only then traditional sources. The PUC sets targets for 
        utility energy-efficiency programs based on a study of their 
        potential savings.

    A national EERS should build on these examples and on state 
regulatory expertise but ensure that energy efficiency meets national 
goals.
Appliance Energy-Efficiency Standards
    Recommendations for appliance efficiency standards: Strengthen 
appliance efficiency standards by:

        1. adopting additional standards based on negotiated 
        agreements,

        2. directing DOE regularly to review and update both test 
        methods and standards to keep pace with rapidly changing 
        technology, with accelerated consideration of the products with 
        the greatest energy savings,

        3. clarifying DOE's authority to set standards that best serve 
        the public interest, including regional standards and multiple 
        specifications for a single product,

        4. clarifying that Federal preemption does not apply to 
        products for which there is no Federal standard, and

        5. providing adequate and stable funding for the DOE program.

    Appliance standards have been one of the most effective energy-
efficiency programs. Standards in place today are expected to save 7 
percent of U.S. electricity use and reduce greenhouse gas emissions by 
65 million metric tons by 2010, and are expected to save consumers $234 
billion (this is net savings--after repaying any increased first-cost 
for more efficient appliances). Energy efficiency advocates and states 
have identified at least 15 appliance types with significant energy 
savings opportunities but no Federal efficiency standards at present. 
Adopting efficiency standards for these 15 products alone could save 52 
TWh of electricity and 340 billion cubic feet of natural gas annually 
by 2020, and save consumers $54 billion in energy costs between now and 
2030. Even more could be saved by updating existing Federal standards.
    In recent years the Alliance and other energy-efficiency advocates 
have focused much of our attention on lengthy delays and lack of 
progress at DOE in setting required appliance standards. Due to a 
provision in EPAct 2005--and a lawsuit--last year DOE set an explicit 
schedule for appliance standard rulemakings, which was later adopted in 
a court order. So far, they have met that schedule. However, the two 
new DOE-proposed standards (on distribution transformers and 
residential furnaces) were far weaker than we and many others believe 
is required by Federal law, justified by DOE's own data and analysis, 
and needed in order to meet the energy needs of our Nation.
    We urge you to monitor carefully both DOE's adherence to its 
regulatory schedule and the actual outcome of the rulemaking process. 
In addition, Congress should take additional steps to strengthen the 
Federal appliance standards and testing program and assure that it is 
adequately funded.
    First, since EPAct 2005 we have reached additional consensus 
agreements with product manufacturers on new and updated standards. DOE 
believes it does not have the authority to adopt one of them, for 
residential boilers. In addition, efficiency advocates and industry 
groups are currently in negotiations on several other products. We urge 
Congress to act promptly to enact into law all negotiated agreements 
that are reached.
    Second, at present, there is no requirement for DOE regularly to 
review and update all existing standards and test procedures. The 
existing law does require a limited number of reviews for some 
products, but subsequent reviews are discretionary. In addition, 
Congress should establish a general requirement for periodic review of 
all standards and test procedures every 5 to 8 years, updating them if 
justified, and should provide funding for DOE to maintain this 
schedule. In particular, DOE test methods for a number of products are 
seriously lagging the pace of technology development, thus preventing 
effective standards for those products (examples include tankless water 
heaters, products that use standby power even when turned ``off,'' and 
many appliances with advanced electronic controls). If DOE fails to 
keep its standards up-to-date, Congress should allow states to set 
standards to limit the demands on their energy systems from those 
products.
    In addition, DOE has limited its schedule for setting appliance 
standards to Congressionally-mandated rulemakings with a date certain. 
This narrow approach has delayed consideration of some standards with 
the greatest potential energy savings. For example, DOE has identified 
furnace fans and residential refrigerators as two product standards 
that offer the potential for very large energy savings, but the agency 
has yet to even schedule these rulemakings. Congress should direct DOE 
to begin these two important rulemakings as soon as possible.
    Third, Congress should allow DOE to consider alternative approaches 
in setting appliance standards where these better serve the intent of 
the law: to maximize cost-effective energy savings. We offer several 
examples:

   Congress should explicitly authorize DOE to set regionally-
        appropriate appliance standards for climate-sensitive products 
        such as furnaces, boilers, air conditioners, and heat pumps, 
        since regional weather conditions can significantly affect the 
        feasibility or cost-effectiveness of a given technology or 
        efficiency measure. For example, ``condensing'' furnaces can 
        cut energy losses in half, but may not be cost-effective in 
        warm areas where they are seldom used. A regional furnace 
        standard would save large amounts of natural gas.

   Congress should clarify that DOE may include two or more 
        specifications for different features of the product that all 
        contribute to energy efficiency. One example is the authority 
        for DOE to set standards for air conditioners in terms of both 
        average efficiency, which reduces consumer bills, and 
        performance during the hottest summer days, which provides 
        added benefit by easing the strain on electric utility systems 
        during peak demand periods. A second example is the ability to 
        set efficiency requirements for both direct electricity use and 
        consumption of (heated) water in the case of a dishwasher or 
        clothes washer.

   In addition, expedited procedures for consideration of 
        consensus standards proposed to DOE may speed up adoption of 
        non-controversial standards.

    Finally, Congress should make it clear that Federal law does not 
preempt states from setting their own appliance standards in the 
absence of a Federal standard in place. This principle has generally 
been upheld in interpretation of the Federal appliance standards laws, 
but in some cases it has been argued that the mere authority for DOE to 
set standards should preempt the states, even if DOE fails to exercise 
that authority. If DOE fails to act, or if it establishes a ``no 
standard'' Federal standard, a state should be able to adopt its own 
energy-saving standards for that product.
Building Energy Codes
    One of the most important opportunities for reducing energy use and 
costs is by designing and constructing a new building to be energy-
efficient from the start. Every new building that is not efficient 
represents a lost opportunity--one that will likely be with us for 
another 30-50 years or longer, a time frame that will almost certainly 
see much higher prices and much more intense concern over energy 
supplies, air pollution, and greenhouse gas emissions.
    There is cause for optimism in the growing interest shown by 
builders and developers in green buildings and rating systems such as 
the U.S. Green Building Council's LEED; the bold new policy commitments 
to energy efficiency targets by the American Society of Heating, 
Refrigerating and Air-Conditioning Engineers (ASHRAE), the American 
Institute of Architects, and the U.S. Conference of Mayors; and the 
Federal Government's own commitment (in EPAct 2005) to design new 
Federal buildings to be 30 percent more efficient than current 
practice. But a great deal of work remains to be done. Congress can 
support and encourage these broader initiatives with specific actions 
that take best advantage of Federal leverage in building codes and 
Federal financing for home mortgages.
    Recommendations for assisting state energy-efficient building 
codes:

        1. Congress should direct DOE to support a process of 
        continuous improvement in the model energy codes for both 
        residential and commercial buildings, targeting a 30 percent 
        reduction in new building energy use by 2010 and a 50 percent 
        savings by 2020. States should be required to adopt codes that 
        match these energy savings and to achieve high rates of 
        compliance with their codes.

        2. To make sure that energy codes are not just a paper 
        exercise, Congress should fully fund the programs for state 
        code compliance and training authorized in Section 128 of the 
        Energy Policy Act of 2005.

    Under present law independent organizations (the International Code 
Council and ASHRAE) set national model residential and commercial 
building energy codes. DOE reviews updates in the model building codes 
to determine if the revisions improve energy efficiency. Following that 
determination, each state is required to review and, for commercial 
buildings, update its own building code to meet or exceed the model 
code. However, there is no penalty for a state that fails to comply.
    Two changes are needed. First, DOE should set a goal for continuous 
improvement of the model building codes. Rather than wait passively for 
action by others, DOE should instead take the initiative to engage with 
organizations including ASHRAE and the International Code Council to 
advance the model codes steadily toward specific targets: 30 percent 
efficiency improvement by 2010, for both residential and commercial 
model codes, and at least 50 percent improvement by 2020. ASHRAE has 
already adopted a similar goal, but there is no similar urgency for 
residential buildings, and it is hard to move diverse, consensus-based 
organizations to take ambitious action. DOE support is needed both for 
technical underpinnings and to represent the national interest in 
reduced energy use and greenhouse gas emissions. If the outside 
organizations fail to achieve these goals, then DOE should propose 
modified codes that do.
    Second, we need to encourage state action to update and achieve 
full compliance with the energy codes. States should be required to 
adopt strong codes for residential as well as commercial buildings. And 
they should be required to achieve strong compliance with their codes. 
In a recent review of residential energy code compliance studies from a 
dozen states, compliance rates were found to vary widely, but the 
average was far below 100 percent, and typically closer to 40 to 60 
percent. A number of studies have pointed to the constraints, including 
staff time and expertise, facing many local code enforcement agencies 
in making sure that energy code requirements are met, both at the 
design and permit stage, and in verifying actual construction and 
installation practices on-site.
    Congressional oversight would be helpful here as well. The code 
compliance program authorized under Section 128 of EPAct 2005 is a 
small but important step toward providing an incentive for states to 
adopt and enforce up-to-date energy codes; it should be fully funded. 
In addition, DOE has not made the required determination of energy 
savings on any recent code updates: the 2003, 2004, or 2006 residential 
IECC or the 2001 or 2004 ASHRAE commercial standard.
    Recommendations for Federal standards for manufactured homes and 
buildings funded by the Federal Government:

        1. Congress should require HUD to strengthen the national 
        energy efficiency standards for manufactured housing to the 
        same levels required by the model building code for site-built 
        homes.

        2. Congress should require that federally insured mortgages be 
        available for new homes only if the homes meet or exceed model 
        energy efficiency codes.

        3. Congress should require that all new DOD Privatized Military 
        Housing be designed to meet or exceed the criteria for an 
        ENERGY STAR home.

    About one in 12 new homes in the United States is a manufactured 
housing unit (147 million in 2005). Because these homes are factory-
produced with many standardized components, manufactured housing units 
should be inherently more energy-efficient than their site-built 
counterparts. For example, it is much easier and more cost-effective to 
achieve an air-tight duct system in the factory than on a construction 
site. Instead, manufactured homes are generally much less efficient 
than site-built homes, due to poorly insulated walls and roof, single-
pane windows, and inefficient heating and cooling systems. A 2004 
Pacific Northwest National Laboratory report found that improving the 
energy efficiency of a manufactured home, not even to the current IECC, 
would save an average of $150-$180 per year. The initial cost would be 
about $1,000 to $1,500.
    The Department of Housing and Urban Development, which is 
responsible for adopting the Manufactured Housing Construction and 
Safety Standards (MHCSS), has not updated these standards to keep up 
with changing energy prices and technological advances. As a result, 
the ``HUD-code'' standards are now well below the comparable energy 
efficiency code requirements for new site-built homes. For example, a 
new manufactured home built for Minnesota today is required to have 
only as much wall insulation--and not as much ceiling and floor 
insulation--as a site-built home in Miami.
    Many of these manufactured units are sold to low and moderate 
income families--those who can least afford to pay the rising utility 
bills for gas, electricity, and in some cases propane heating. And 
often taxpayers end up subsidizing the ongoing costs to operate these 
inefficient housing units through the Low-Income Home Energy Assistance 
Program (LIHEAP) or through the Low-Income Weatherization Assistance 
Program, which helps pay for energy-saving retrofits. It is far easier 
and cheaper to make these manufactured homes more efficient in the 
first place.
    To qualify for a federally insured mortgage, a new home should be 
required to meet or exceed the efficiency levels of the model energy 
code. This will assure that Federal taxpayer funds are not used to 
underwrite inefficient new homes with higher utility bills--a different 
kind of hidden, long-term ``mortgage.'' Updated standards would affect 
a lot of housing: a 2003 U.S. Census Bureau survey found, for homes 
constructed in the previous 4 years, 486,000 FHA mortgages, 225,000 VA 
mortgages, 29,000 USDA mortgages, and 38,000 public housing units.
    Current law requires HUD and the Department of Agriculture (USDA) 
to set energy-efficiency standards for public and assisted housing and 
new homes (other than manufactured homes) with federally insured 
mortgages. However, the agencies have never changed the standard from 
the legislated backstop of the 1992 Model Energy Code (the predecessor 
to the IECC) and ASHRAE Standard 90.1-1989.
    In order to move military service members and their families out of 
outdated housing units, Congress authorized the Department of Defense 
(DOD) to enter financial partnerships with builders to construct an 
estimated 185,000 homes using joint funding. DOD is leasing the homes 
for up to 50 years, and will pay the energy bills through utility 
allowances to the military personnel. DOD imposes many standards on 
these units, and energy efficiency criteria are established for some 
projects, but there are no uniform energy standards applied to all 
Privatized Housing projects. If these homes are built to ENERGY 
STAR Homes criteria, each military family--and ultimately the 
Federal taxpayers--will save an average of $300 a year in energy bills. 
The added initial cost of ENERGY STAR homes is about $1,500 
to $3,000.
Buildings Research, Development, and Deployment
    Recommendation for a buildings RD&D program: Establish and fund a 
long-term program to develop and establish in the market net-zero 
energy commercial buildings.
    To create the technology and knowledge base needed to achieve the 
long-term goal of net-zero energy (and ``carbon-neutral'') buildings, 
the Federal Government needs to make a major commitment--in close 
partnership with states, utilities, and the private sector--to a 
comprehensive, multi-year program to transform building technologies 
and practices. This transformation must go well beyond individual 
technical measures to include a design process that integrates 
sustainability from the start, and effective means of managing 
construction and building operation to assure continued high 
performance over the lifetime of the building and systems.
    The need is especially acute in the commercial buildings sector, 
where the challenge of maintaining performance, comfort, occupant 
health, and amenities while radically reducing energy consumption 
without significantly increasing costs is even greater than for smaller 
residential buildings. Yet ``net-zero energy homes'' rather than 
commercial buildings have received the lion's share of funding and 
program attention to date by DOE, utility and state programs, and 
private partnerships.
    Investing \1/10\ of 1 percent of the $135 billion in annual energy 
costs for all U.S. commercial buildings would represent a substantial 
increase over the current Federal efforts by DOE and all other 
agencies. But this is the equivalent of less than 12 hours of energy 
costs for the Nation's commercial building stock--a reasonable price to 
assure that we really have the technologies and practices to cut energy 
use by more than half over the next two decades. To be effective, these 
funds would need to be directed toward a well-orchestrated plan to 
address innovation in technology and practices, strategic and well-
monitored demonstrations of these new methods, and paths to effective 
large-scale deployment in new and existing commercial buildings.
    Such an integrated strategy requires careful preparation and broad 
engagement of the building industry, the design professions, financial 
institutions, government policy-makers, and private owners and 
developers. There is growing interest in sustainable design but the 
industry is fragmented, risk averse, and driven largely by short term 
economic interests. By itself the Federal Government cannot create the 
needed technologies, nor force the market to accept them. But it can 
and should be the catalyst in partnering with industry, states, and 
utilities for these essential steps.
Increasing Energy Efficiency in Federal Facilities
    Recommendations for Federal energy management:

        1. Establish a procedure to implement all cost-effective 
        efficiency improvements in large Federal buildings.

        2. Increase oversight and funding, and modify authority for 
        Energy Savings Performance Contracts.

    The United States Federal Government is the single largest 
consumer, and the single largest waster, of energy in the world. In 
2005 the Federal Government overall used 1.6 quadrillion Btu of 
``primary'' energy (including the fuel used to make the electricity it 
consumed), or 1.6 percent of total energy use in the United States. 
Taxpayers in this country paid $14.5 billion for that energy. Almost 
half of that energy, and more than half of the cost, was for vehicles 
and equipment, primarily for military planes, ships, and land vehicles. 
The rest, 0.9 quadrillion Btu at a cost of $5.6 billion, was for 
heating, cooling, and powering more than 500,000 Federal buildings 
around the country.
    Repeated efforts over the last two decades have resulted in 
dramatic energy and cost savings, but large cost-effective savings 
remain available. Overall Federal primary energy use decreased by 13 
percent from 1985 to 2005, and the Federal energy bill decreased by 25 
percent in real terms, even after the 27 percent jump in fuel prices in 
the United States in 2005. Congress and the president have set even 
more aggressive targets for future savings that could yield well over 
$1 billion in energy cost savings each year from Federal buildings 
alone.
    But these savings will not occur without greater funding and 
oversight. In addition to greater appropriations, the Alliance supports 
a new focus on energy efficiency throughout Federal buildings and 
increased use of Energy Savings Performance Contracts (ESPCs) and 
Utility Energy Service Contracts (UESCs). The Alliance believes that a 
new paradigm and a new structure are needed to ensure that all large 
Federal buildings are made energy-efficient, that improvements are not 
made just when appropriations happen to be available or an energy 
manager happens to be a champion of efficiency. Thus we recommend a 
package of policies that have been introduced in a new bill by Senator 
Pryor, S. 1434:

   All large Federal buildings and facilities should conduct 
        comprehensive energy and water savings evaluations (``energy 
        audits'') to identify and prioritize all economic opportunities 
        for investments to reduce energy and water use. These 
        evaluations should consider both capital investments, such as a 
        new boiler or chiller, and operational improvements, such as 
        checking and adjusting lighting or mechanical system controls.

   Agencies should implement all measures identified in the 
        energy and water evaluations that have a simple payback of 
        fifteen years or less. The calculation of cost savings should 
        consider not only energy and water costs but also reduced costs 
        of building operations, maintenance, repair, and equipment 
        replacement.

   It is critical that the agencies not only make the capital 
        investments but also make sure that the measures work, and keep 
        on working. Start-up commissioning, and periodic 
        recommissioning, are an essential part of all measures to 
        ensure that they work as intended--followed by effective 
        operation, maintenance, and repair as well as measurement and 
        evaluation of savings.

   Sustained oversight is needed to ensure that every agency is 
        implementing these measures. While Congressional action is 
        important, the first level of oversight should be agency self-
        certification through an open web-based tracking system, along 
        with benchmarking of building energy and water use, and reviews 
        in the agency energy scorecards that the Office of Management 
        and Budget already prepares.

   Both the energy-savings evaluations and the measures 
        themselves should be funded through a combination of increased 
        appropriations and private financing through ESPCs and UESCs.

    The Alliance also supports additional modifications to ESPC 
authority to remove a number of arbitrary impediments. First, the 
authority for Federal agencies to enter into ESPCs should be 
permanently extended, to avoid the problems that have occurred with the 
lapse of authority in 2003-2004. Second, energy managers should be able 
to use appropriated funds and financing through ESPCs to fund the same 
project. Third, Congress should end any self-imposed agency caps on the 
duration of ESPC contracts below the statutory limit of 25 years and on 
total obligations under ESPCs.
Energy Efficiency Tax Incentives
    Recommendations for energy-efficiency tax incentives:

        1. Provide long-term extensions, with improvements, of tax 
        incentives for highly efficient new homes, home improvements, 
        commercial buildings, appliances, and vehicles.

        2. Enact a vehicle fuel use ``feebate,'' with incentives for 
        fuel-efficient vehicles paid for by a fee for gas guzzlers, to 
        reduce fuel use in all vehicles.

    The Energy Policy Act of 2005 (EPAct 2005) included important tax 
incentives for highly energy-efficient new homes, improvements to 
existing homes, commercial buildings, heating and cooling equipment, 
appliances, fuel cells, and hybrid and advanced diesel vehicles. These 
incentives for consumers and businesses have the potential to help 
transform markets to embrace energy-efficient technologies and thus to 
help the best buildings, vehicles, and equipment become mainstream.
    Unfortunately, most of the EPAct 2005 incentives were not put in 
place for a long enough period of time to ensure market transformation. 
Most of the incentives were limited to 2 years--expiring on December 
31, 2007. And, while two of the incentives--for commercial buildings 
and new homes--were extended for 1 year and so now are set to expire at 
the end of 2008, this is still not adequate to ensure a meaningful 
impact on the market. A large commercial building initiated when the 
bill was signed in August 2005 will not be finished before the 
commercial buildings deduction was set to expire in December 2007. A 
building initiated now could not be finished before the new expiration 
date in 2008. In order for these tax incentives to be effective in 
creating a market transformation toward greater energy efficiency and 
reductions in energy use they need to be given more time to work. 
Lifting or increasing the caps on the incentives for hybrid vehicles is 
equally important.
    The Alliance also supports a new, performance-based tax credit for 
whole home retrofits that save energy, included in the EXTEND Act, 
which we thank the Chairman for cosponsoring. The credit is on a 
sliding scale based on percentage energy savings, starting with homes 
that are certified as saving 20 percent of energy use. This new 
approach should encourage much greater energy savings by helping 
homeowners find the best measures for their homes and subsequently 
ensuring that the savings are realized from the improvements made. The 
new credit will require an inspection and certification of the energy 
savings in order to establish the level of credit to be received.
    And the Alliance supports a more comprehensive approach to 
incentivizing more fuel-efficient vehicles. A new, innovative approach 
to encouraging efficiency of light-duty cars and trucks is a national 
``feebate'' system. A national feebate would apply a fee or rebate to 
new vehicles based on the expected lifetime fuel use of the vehicle. We 
would recommend that the fee and rebate apply to manufacturers of all 
light-duty passenger vehicles--including SUVs and minivans--but they 
could be determined relative to vehicles in the same class or to 
vehicles of the same size. The fee or rebate would then be proportional 
to the fuel economy, determined relative to a dividing line or 
reference mpg.
    We would recommend setting this dividing line between fees and 
rebates each year such that the total fees would pay for all the 
rebates thereby allowing the program to operate at no cost to the 
government. Under such an arrangement, about half the vehicles would 
receive a rebate, and about half the vehicles would be assessed a fee.
    This would create an incentive for manufacturers to use fuel-
efficient technologies in the vehicles they produce, and hence should 
increase the availability of efficient vehicles, as well as creating an 
incentive for consumers to purchase more efficient vehicles. As fuel 
economies increased, the reference mpg's would be ratcheted up, 
creating an incentive for continual improvement, but never out of line 
with the existing market. This policy has the potential to improve fuel 
economies throughout the passenger vehicle fleet, not just give new 
technologies a foothold in the marketplace.
Transportation
    Given that the transportation sector accounts for two-thirds of 
U.S. oil use and that passenger cars and light trucks consume 40 
percent of that oil, it is critical that we address vehicle fuel 
consumption. There is no shortage of technologies to improve vehicle 
fuel efficiency. Many of these technologies are already in vehicles, 
including electronic controls and ignition, light weight materials, 
improved engine designs. Other technologies are now being pulled ``off 
the shelf'' and increasingly deployed in new vehicles. They include 
(for example):

   Variable Cylinder Management--turns off cylinders when not 
        in use.

   Advanced Drag Reduction--further reduces vehicle air 
        resistance.

   Variable Valve Timing and Lift--optimizes the timing of air 
        intake into the cylinder with the spark ignition.

   Reductions in Engine Friction--using more efficient designs, 
        bearings and coatings that reduce resistance between moving 
        parts.

   Hybrid Drive Trains--internal combustion engine combined 
        with electric motor and regenerative braking.

    While advanced technologies have been, and continue to be, deployed 
in new cars and trucks, we're not getting more miles per gallon (mpg) 
as a result. We are getting more towing capacity, more acceleration, 
more weight, and more space.
    For the last 20 years, the Nation's oil policy has in effect been 
made in America's car showrooms. It is time for the Federal Government 
to provide more guidance in the vehicle marketplace. I have already 
discussed the idea of a vehicle fuel use ``feebate.'' But the most 
important single policy would be a strong increase in Corporate Average 
Fuel Economy Standards.
    Between 1975 and1985, fuel economy standards were used to help 
achieve a 70 percent improvement in new vehicle fuel economy. But since 
the mid-1980s, CAFE standards have been largely unchanged. Worse, old 
testing methods, a loophole for ``trucks'', and credit for ``dual-
fuel'' vehicles that almost always run on gasoline have further 
weakened existing CAFE standards. EIA estimates that the actual fuel 
economy of vehicles is about 20 percent lower than the CAFE standard 
test results suggest. If we are to address the interconnected issues of 
gas prices, oil imports, and climate change, we need to reform and 
significantly increase CAFE standards in order to direct our 
technological ingenuity to saving fuel.
Conclusion
    The Energy Policy Act of 2005 included some important measures to 
reduce building energy use, including new appliance standards and tax 
incentives. But, while helpful, they were not aggressive enough to 
address the critical energy issues facing our Nation. In the last year 
and a half, concern about the linked issues of energy prices, energy 
security, and global warming has only grown. There are measures we 
could and should take, such as consumer education, that would have an 
immediate impact. But polls also show that a large majority of 
Americans are rightly more concerned that Congress find long-term 
energy solutions than that Congress quickly address current prices. 
There is an opportunity now to enact significant energy-efficiency 
measures that will benefit the economy, the environment, and energy 
security for years to come. The buildings being designed and 
constructed today will determine our energy use for decades to come. 
The Alliance urges you to seize the opportunity to reduce energy waste, 
supply shortages, price volatility, pollution, and global warming, to 
transform energy crises into economic opportunities.

    Senator Kerry. Thank you very much, Ms. Callahan. We 
appreciate it.
    Mr. Zimmerman?

            STATEMENT OF CHARLES R. ZIMMERMAN, P.E.,

            VICE PRESIDENT, PROTOTYPE AND NEW FORMAT

               DEVELOPMENT, WAL-MART STORES, INC.

    Mr. Zimmerman. Thank you, Chairman Kerry and distinguished 
members of the Committee.
    My name is Charles Zimmerman, and I'm Vice President of 
Prototype and New Format Development for Wal-Mart Stores. In my 
current role, I'm responsible for the architectural and 
engineering system design for all of our retail facilities.
    On behalf of Wal-Mart and our 1.8 million associates around 
the world, I'd like to thank the Subcommittee for its work on 
this important issue and for holding this hearing today. Wal-
Mart appreciates the opportunity to participate in this 
critical discussion.
    Our company holds a really unique position in the world of 
energy. While there are no firm statistics, it is widely 
understood that Wal-Mart is the largest private purchaser of 
electricity in the world. Since energy is also Wal-Mart's 
second largest operating expense, it should come as no surprise 
that we've been focused on energy efficiency practically since 
the day we were founded.
    Fortunately, our global presence gives us a great 
opportunity for energy efficiency comparisons. As Wal-Mart has 
continued to expand into other countries, our primary mode of 
expansion has been to acquire existing stores in those 
countries; therefore, it is interesting to note that the stores 
we have built in the U.S. are actually more energy efficient 
than those we have acquired in any other country thus far. This 
is even true for stores in countries with much most stringent 
energy regulation and much higher utility rates than the U.S., 
such as the U.K. and Japan.
    In fact, the stores we acquired in the U.K. actually use 
twice the energy, and our stores in Japan, one and a half times 
as much as energy, as our stores in the U.S. This is because 
Wal-Mart has always recognized what many other companies have 
not, and that is that energy is not a noncontrollable expense.
    Since nearly one-third of Wal-Mart's energy is consumed in 
the form of lighting, we have developed, over the last decade, 
what we feel is one of the most energy efficient lighting 
systems in the world. In fact, our installed lighting load in 
one of our newer stores is nearly 50 percent less than the 
baseline requirements established in the Energy Policy Act of 
2005. This truly innovative system results in the fact that 
during daylight hours, our sales floor lighting is either off 
or, at the very least, significantly dimmed. This is possible 
thanks to a sophisticated daylight harvesting system comprised 
of hundreds of skylights per store that are connected to 
sensors and the state-of-the-art control technology. This 
allows our sales floor lighting system to continually modulate 
the amount of energy needed based on the natural light 
available. This system is so dynamic that it even gradually 
ramps the lighting levels up and down as clouds pass over the 
store.
    In our non-sales-floor areas, such as offices, breakrooms, 
and restrooms, lighting is controlled by occupancy sensors that 
turn off the lights when no one is in the space. Even our 
freezer-case lighting has now evolved into an amazing display 
of advanced technology, as it is now comprised of motion-
activated LEDs, or light-emitting diodes. These lights turn 
themselves on as a customer approaches, and then turn 
themselves off as the customer leaves. The result is a lighting 
system where virtually all the lighting in the building is 
dynamic and only ``on'' to the degree that conditions warrant.
    And this is just lighting. Similar dynamic efforts are 
underway with our HVAC and refrigeration systems.
    As efficient and forward-thinking as our energy practices 
have always been, we also have very aggressive goals in our 
sustainability and energy efficiency efforts for the future.
    In October of 2005, we announced plans to reduce the energy 
consumption in our already energy efficient existing buildings 
by another 20 percent by 2012. We also announced plans to 
develop a new store prototype that will increase efficiency 
another 25 to 30 percent by 2009. In an effort to eclipse these 
goals, we currently have over a dozen retrofit initiatives that 
are in some phase of development or implementation. In fact, we 
will retrofit over 1,300 existing stores in the U.S. this year 
alone with either HVAC, refrigeration, or lighting retrofits, 
or a combination of all three. These 1300 retrofits all result 
in paybacks of 2 years or less, and energy savings approaching 
18 percent.
    We are also applying these technologies to our new-store 
program and will open, within the next 12 months, stores that 
meet or exceed our 25 to 30 percent efficiency goal.
    As proud as we are of these accomplishments and 
innovations, we are even more proud to share what we are 
learning with everyone, including our competitors. The best 
thing about the information we are sharing is not--is that it's 
not theory, it is proven, real initiatives with proven, real 
paybacks.
    I am often told by others that until there are new 
technologies, or until there is additional legislation, energy 
efficiency will never achieve mainstream attractiveness. 
Believe me, the technology exists. We're examples of that. Wal-
Mart is not waiting for legislation to cause us--proactively, 
but we would like to encourage Congress to continue to look at 
new incentives that will help others act proactively, as well.
    In conclusion, I'm very proud to work for a company that is 
committed to invest up to $500 million per year to move toward 
our goal of being supplied by 100 percent renewable energy, but 
I am even more proud that they encourage me to proactively 
share our innovations with the world.
    We, at Wal-Mart, applaud Congress in its efforts to 
communicate the necessity and the benefits of energy 
efficiency. We look forward to working with you to effectively 
and constructively address these issues.
    Thank you for your time and allowing me to speak on behalf 
of Wal-Mart on this very important topic.
    Thank you.
    [The prepared statement of Mr. Zimmerman follows:]

   Prepared Statement of Charles R. Zimmerman, P.E., Vice President, 
      Prototype and New Format Development, Wal-Mart Stores, Inc.
    Chairman Kerry, Ranking Member Ensign and distinguished Members of 
the Committee:
    Wal-Mart Stores, Inc., thanks the Subcommittee for its work on this 
important issue and for holding this hearing today, and we appreciate 
the opportunity to participate in this critical discussion.
Background
    Wal-Mart is based in Bentonville, Arkansas. Our company employs 
approximately 1.3 million Associates from all 50 states and 
approximately 1.8 million Associates worldwide. Each week over 176 
million customers worldwide choose to shop at Wal-Mart, which we feel 
reflects the success of our dedication to providing Every Day Low 
Prices to our customers. Wal-Mart does not just operate stores, clubs, 
and distribution centers in communities; we take a proactive stance in 
community involvement on a number of issues.
Purpose of Hearing and Wal-Mart's Role
    The purpose of this hearing is to better understand the 
technologies and practices available today that increase energy 
efficiency and reduce greenhouse gas emissions. Wal-Mart is eager to 
share its information and experiences and we applaud the Committee for 
its interest in this important subject.
Wal-Mart's Policies and Procedures
    Wal-Mart takes a keen interest in the serious risks--and 
opportunities--of global climate change. More than 2 years ago our CEO 
Lee Scott announced that Wal-Mart would make ``sustainability'' an 
organizing principle for the company. In recognizing that climate 
change is among the greatest issues confronting our business, our 
customers, and our communities, he announced three goals for our 
company: to be supplied 100 percent by renewable energy; to create zero 
waste; and to sell products that sustain our resources and the 
environment. Since that time we have acted rapidly to become a cleaner, 
greener and more sustainable company. This past January we announced 
our support of the effort by the companies and organizations of the 
U.S. Climate Action Partnership (US-CAP), and endorsed the group's call 
for strong mandatory national policies and market-based programs for 
greenhouse gas reductions. Wal-Mart looks forward to working with 
Congress and the White House to enact meaningful legislation to slow, 
stop and reverse the growth of greenhouse gas emissions. To be clear, 
we take this position because we believe it is in the best interest of 
our customers, our employees, our stockholders and our Nation to tackle 
this challenge. But we also believe that with the right policies, 
businesses large and small--from Wal-Mart, to our suppliers, to small 
businesses across the country--can save. We believe this because of 
what we are seeing every day as we undertake our aggressive 
sustainability agenda.
    As part of this commitment, we intend to be the most energy 
efficient retailer in the world and we are working hard to achieve this 
commitment.
    While there are no firm statistics, it is widely believed that Wal-
Mart is the largest ``private'' purchaser of electricity in the world. 
In fact, Wal-Mart is widely considered to be the second largest 
purchaser in total energy, second only to the U.S. Government. Energy 
is also Wal-Mart's second largest operating expense. Therefore, it 
should be no surprise that Wal-Mart has been focused on energy 
efficiency practically since it was founded.
    As Wal-Mart has continued to expand into other countries, our 
primary mode of expansion has been to acquire existing stores in those 
countries. The stores we have built in the U.S. are more efficient on 
an ``energy per square foot basis'' than those we have acquired in any 
other country. This is even true for stores in countries with much more 
stringent energy regulations than current U.S. regulations and much 
higher utility rates, such as the UK and Japan.
    Nearly one-third of Wal-Mart's energy is consumed in the form of 
lighting. Recognizing this as an opportunity for responsible business 
practice, we have developed over the last decade, what we feel is, one 
of the most efficient lighting systems in the world. Our installed 
lighting load is more than 40 percent less than the baseline 
requirements established in the Energy Policy Act of 2005.
    During the day, sales floor lighting, in stores built in the last 
decade, is off or significantly dimmed. This is possible thanks to a 
sophisticated daylight harvesting system comprised of hundreds of 
skylights per store that are connected to state-of-the-art sensors and 
control technology. This allows our sales floor lighting system to 
continually modulate the amount of energy needed, based on the natural 
light available. This system is so dynamic that it gradually ramps up 
and down as clouds pass over the store. In our non-sales floor areas 
such as offices, break rooms and restrooms, lighting is controlled by 
occupancy sensors that turn off the lights when no one is in the space. 
Beginning in January, even our freezer case lighting has evolved into 
an amazing display of advanced technology when it became comprised of 
``motion-activated LEDs.'' The lights turn themselves on as a customer 
approaches, and turn themselves off as the customer leaves. The result 
is a 200,000 square-foot building where virtually all of the lighting 
is dynamic and only ``on'' to the degree that conditions warrant.
    From an HVAC and refrigeration standpoint, Wal-Mart has always 
``reclaimed'' or ``recycled'' the waste heat from our refrigeration 
equipment to generate our domestic hot water. We are beginning to take 
this a step further in new stores, testing the concept of heating the 
entire store with the ``waste heat'' generated by this equipment. Wal-
Mart views the ``waste heat'' as a source of energy and we are 
expanding the use of this ``free'' energy source.
    Wal-Mart recognizes the influence and implications of responsible 
energy policy by a large retailer. We strive to continue to decrease 
our footprint on the environment. As efficient and forward-thinking as 
our energy policies already are, we have very aggressive goals in our 
sustainability and energy efficiency efforts for the future.
    In October of 2005, we announced plans to reduce energy consumption 
in our existing energy-efficient buildings by 20 percent over the next 
7 years. We also plan to develop a new store prototype that will 
increase efficiency 25 percent-30 percent over the next 4 years.
    We also plan to retrofit over 400 of our refrigeration systems and 
HVAC systems this year with technologies that will reduce our energy 
consumption by 8 percent and 6 percent respectively and have a payback 
of less than 2 years. Additionally, we have recently approved an 
investment of $25 million to retrofit 500 of our existing stores this 
year with motion activated LED lighting. This never before utilized 
technology will result in an energy reduction of 3 percent and a 
payback of 2 years. Wal-Mart plans to continue using energy retrofit 
efforts to reduce energy consumption; currently over a dozen similar 
initiatives are in some phase of development or implementation.
    In regards to new store prototypes, we opened the first two of our 
newly developed ``higher efficiency'' prototypes earlier this year in 
Kansas City, Missouri, and in Rockton, Illinois. These stores are 
predicted to be 20 percent more efficient than our earlier prototypes. 
By early next year we plan to have met our goal and be opening stores 
that are 27 percent more efficient. Plans are already in development 
for stores that approach and possibly exceed 50 percent efficiency in 
certain climate zones.
    As proud as we are of these accomplishments and innovations, we are 
more proud to share what we are learning with everyone, even our 
competitors.
    Wal-Mart recently opened a new facility in Savannah, Georgia, which 
included the first low-temperature CO2 secondary loop 
refrigeration system ever installed in the United States. At the grand 
opening, we conducted tours of the facility providing detailed 
descriptions of the systems to Target, Food Lion, Publix, Costco, and 
many others since.
    We have recently shared these details on our initiatives and their 
related paybacks at the Department of Energy, Pentagon, Defense Science 
Board, Office of Management and Budget, the National Academy of 
Sciences and even with our retail competitors, Office Depot and Best 
Buy. We also recently shared our story of energy efficiency in Mexico 
City at a meeting of the Commission on Environmental Cooperation. The 
information we are sharing is not theory; it is real initiatives and 
real paybacks.
    Wal-Mart has often been told by others that there need to be new 
technologies, or that there is a need for new legislation before energy 
efficiency becomes something with mainstream attractiveness. While Wal-
Mart is not waiting for legislation to act proactively in the area of 
energy efficiency, we would encourage Congress to continue to look at 
new incentives that will help others to act proactively like Wal-Mart. 
Our experience tells us that there is a tremendous amount of 
opportunity to increase the energy efficiency of our economy, save 
consumers money, and address the serious threat of global climate 
change.
    Wal-Mart takes pride in the fact that it has committed to invest up 
to $500 million dollars per year in innovative, energy saving and 
climate-friendly technologies, but we are even more proud to pro-
actively share our innovations with the world.
Conclusion
    Wal-Mart seeks excellence and responsibility in everything we do. 
We constantly strive to improve our business processes and to enrich 
the communities in which we are located. We at Wal-Mart applaud 
Congress in its efforts to communicate the necessity and the benefits 
of energy efficiency.
    Thank you for inviting Wal-Mart to present testimony on this very 
important topic. We look forward to working with the Committee to 
effectively and constructively address these issues.

    Senator Kerry. Well, thank you for your testimony, Mr. 
Zimmerman. And I'll have more to say about it afterwards, but 
thank you.
    Dr. Krebs?

              STATEMENT OF MARTHA A. KREBS, Ph.D.,

           DEPUTY DIRECTOR, RESEARCH AND DEVELOPMENT,

                  CALIFORNIA ENERGY COMMISSION

    Dr. Krebs. Mr. Chairman, my name is Martha Krebs. I'm the 
Deputy Director for Research and Development at the California 
Energy Commission. It's a pleasure to be here today and discuss 
the experience of the State of California and other--and its 
State agencies to provide advanced energy efficiency 
technologies to Californians.
    There were two critical policy actions taken in the decade 
after the 1973 OPEC oil embargo that has sustained California's 
leadership in energy efficiency.
    First, it established the State's appliance and new-
building standards in 1976 and 1978. As administered and 
updated by the California Energy Commission on a 3-year cycle, 
these standards repeatedly raise the bar for efficiency gains 
and ensure that California's buildings and appliances remain 
the most efficient in the Nation.
    The second critical policy action was decoupling the 
utilities' rates of return from the volumes of electricity or 
natural gas that they sell. Since 1982, the State's investor-
owned utilities use modest regular adjustments to electric and 
gas rates to sever the link between the utilities' financial 
health and the electricity and natural gas volumes that they 
sell. Decoupling helps align the interests of utilities and 
their customers.
    From this period in time, California IOUs began to offer 
and sustain a variety of programs to foster efficiency 
investments by industry and individual customers. They ranged 
from direct subsidies to rebate and buy-down programs. In 
conjunction with these utility programs, and to support the use 
of advanced efficiency technologies, the California Energy 
Commission established additional incentive programs in both 
the efficiency and renewable areas. As a result, California's 
per-capita electricity use has been essentially constant since 
the mid-1970s. At least half of this difference has been shown 
to be due to the success of the State energy efficiency 
policies, the standards, and the utility incentive programs.
    Since 2003, energy efficiency programs in California have 
been guided by the loading order. It places cost-effective 
energy efficiency and demand response at the top of the State's 
procurement--electricity procurement resources, followed by 
renewable energy generation and then cleaner and more efficient 
fossil-fuel generation.
    In 2005, California's Public Utility Commission required 
the State's regulated utilities to fully integrate energy 
efficiency into their resource procurement process. Utilities 
are now required to invest in energy efficiency whenever it is 
cheaper than building new power plants.
    In 2006, California utilities began aggressive programs to 
execute their energy-saving goals. The utilities have budgeted 
more than $2 billion to deliver their energy efficiency 
programs from 2006 through 2008.
    In looking forward to the next procurement order, the next 
3-year cycle, from 2008 to 2010, the PUC is holding workshops, 
this summer, to explore the technical and financial basis for 
even larger efficiency savings in the future, and also as part 
of the response to the Governor's climate action and the 
legislature's climate action program.
    As part of California's utility restructuring legislation, 
in 1996 the legislature created the Public Interest Energy R&D 
Program at the California Energy Commission. Today, the CEC has 
about $80 million annually to support energy R&D, to advance 
new energy technologies. Not much by comparison to the Federal 
program, but very large by comparison to any other State 
program.
    The legislative goals are to help develop and bring to 
market new technologies for efficiency, renewables, as well as 
clean fossil fuel generation, transportation, transmission and 
distribution, and environmental impact. And though my testimony 
does not discuss it, the investments by the Federal Government 
in all of these areas are a huge source of leverage for our 
programs.
    PIER's funding priorities have reflected the goals given to 
us, and about--from 2001 to 2006, 35 percent of our resources 
were spent on efficiency and demand response. We've had a lot 
of results and payoff as a result of that. We've introduced 
nine new lighting technologies, eight heating, ventilation, and 
air-conditioning technologies. We've provided the basis for 14 
code changes in the new 2008 efficiency standards process. And 
we have, along with our utilities, worked to demonstrate our 
new technologies on State university campuses and at private-
sector commercial and industrial sites.
    In industry, we've also focused on our agricultural sector, 
particularly in terms of water use, as well as in our farms and 
our food processing industry. And we've worked with--in the 
information technology and semiconductor businesses in Silicon 
Valley with respect to improving efficiency in data centers and 
server farms.
    We've also worked on new communications technologies that 
allow two-way interaction between utilities and their customers 
to provide demand response in times of critical peaks, 
particularly in California summers.
    We've developed these technologies from the beginning with 
an eye on getting them into the market. We build our projects 
so that we have the right industry players, so that they can 
take it to market after we do the research. User input is 
sought from the beginning. And we work with our utilities in a 
very integrated way so that the emerging technologies that we 
provide to them are--become the basis for the next generation 
of efficiency procurement that they're going to be required to 
deliver by the Public Utility Commission.
    Thank you, Mr. Chairman.
    [The prepared statement of Dr. Krebs follows:]

    Prepared Statement of Martha A. Krebs, Ph.D., Deputy Director, 
         Research and Development, California Energy Commission
    Mr. Chairman, Members of the Subcommittee, my name is Martha Krebs, 
I am the Deputy Director for Research and Development at the California 
Energy Commission. It is a pleasure to appear before you and to discuss 
the experience of the California Energy Commission (CEC) in working 
with the State's Investor Owned Utilities (IOU) to provide advanced 
energy efficiency technologies to California's end-users.
Overview
    In this testimony, I will describe some of the foundational actions 
that California has taken to establish its leadership in electrical 
energy efficiency for more than 30 years. Recent actions in efficiency 
procurement programs as well as climate change policy will assure 
continuing improvements in electrical energy efficiency, thus reducing 
demand in the coming years. Finally I will describe the approach that 
the CEC's Public Interest Energy Research (PIER) program has taken in 
working with the California IOU's and other State agencies to develop 
and help bring to market new efficiency technologies. Much of the 
information in this testimony is based on California Energy Commission 
documents, in particular, the 2005 Integrated Energy Policy Report and 
``Energy Efficiency in California and the United States,'' Chang, 
Rosenfeld, and McAuliffe, which will appear later this year in Climate 
Change Science and Policy. The opinions expressed here are my own; 
while I try to express the policy and accomplishments of California and 
the CEC, it is not an official document.
California's Energy Efficiency has Improved Continuously Over the Last 
        Thirty Years as a Result of Deliberate Policy Action
    There were two critical policy actions taken in the decade after 
the 1973 OPEC Oil Embargo that has sustained California's leadership in 
energy efficiency: Appliance and new building efficiency standards and 
the decoupling of public utility financial returns from the volumes of 
electricity and natural gas sold.
    Standards. California established the state's appliance (Title 20) 
and new-building (Title 24) standards in 1976 and 1978, respectively. 
It was the first state in the Nation to adopt efficiency standards for 
appliances. After other states followed, the Federal standards were 
established in the National Appliance Energy Conservation Act of 1987. 
As administered and developed by the California Energy Commission, 
these standards are regularly updated and strengthened, repeatedly 
raising the bar for efficiency gains and ensuring that California's 
buildings and appliances will remain the most energy efficient in the 
Nation. California's most recently adopted statewide energy efficiency 
standards for buildings and appliances (the 2005 updates are expected 
to save 2,800 MW over the next 10 years (about 5 percent of the 60 GW 
of in-state capacity). The standards updating process takes place over 
a 3-year period that involves open participation by utilities, 
manufacturers and consumer representatives.
    Decoupling. The second critical policy action involved establishing 
an incentive for utility investments in energy efficiency. Under 
traditional utility regulation, a utility's recovery of its 
infrastructure investment costs is tied to how much energy it sells. 
According to this model, energy efficiency results in lower-than-
anticipated sales and thus prevents utilities from fully recovering 
their fixed costs. As a result, traditional regulation deters utilities 
from investing in energy efficiency and instead encourages them to 
increase sales to increase revenues. However, since 1982 (with a brief 
hiatus in the mid-1990s, when ``restructuring'' took resource planning 
responsibilities away from the utilities), California law has required 
the state's investor-owned utilities to use modest regular adjustments 
to electric and gas rates to sever the link between the utilities' 
financial health and the amount of electricity and natural gas they 
sell. This concept, known as ``decoupling,'' removes significant 
regulatory and financial barriers to utility investments in cost-
effective energy efficiency improvements, and helps align the interests 
of utilities and customers.
    From this period on, California IOUs offered a variety of programs 
to foster efficiency investments by industry and individual customers. 
These ranged from direct subsidies to rebate and buy-down programs. To 
support the utilization of advanced technologies in conjunction with 
the utility programs, the CEC was authorized to establish additional 
incentive programs for both efficiency and renewable technologies.
    Results. With concurrent investments in energy efficiency programs 
across the state, California has pursued strong energy efficiency 
programs and policies that have set it apart from the rest of the U.S., 
Figure 1 shows that California's historical energy efficiency policies 
have enabled the state to hold per capita electricity use essentially 
constant, while in the United States as a whole, per capita electricity 
use increased by nearly 50 percent since the mid-1970s.
    Calculations by Commissioner Arthur Rosenfeld and his colleagues 
assume that about one-half of the difference between California and the 
rest of the United States' per capita consumption is due to climate, 
price, and mix of industries, but the other half is due to the success 
of state energy efficiency policies, standards and utility programs 
that promote energy efficient technologies. If California's per capita 
emissions had grown at the same rate as the rest of the country since 
1975, the state would have needed approximately 50 additional medium-
sized (500 MW) power plants.



    Figure 2 shows the annual energy savings from California's energy 
efficiency utility incentive programs and efficiency standards. When 
summed together, the three decades of energy efficiency programs and 
standards have resulted in annual efficiency savings today equivalent 
to approximately 15 percent of California's annual electricity 
consumption, as shown in Figure 2. From CO2 reduction 
perspective, these savings have reduced CO2 emissions from 
the electricity generation sector by nearly 20 percent compared to what 
otherwise might have happened without these programs and standards. 
This equates to an avoidance of CO2 emissions in the state 
as a whole of about 4 percent due to historical energy efficiency 
programs and standards.



    These energy savings, and associated reduction in greenhouse gas 
emissions, have delivered substantial net economic benefits to 
California. The state's efficiency standards, which are designed to be 
cost-effective, accelerate energy savings across the state. The cost of 
utility efficiency programs has averaged two to three cents per kWh 
saved, from the utility perspective. This is less than half the cost of 
the avoided baseload generation--the generation type most often 
displaced by energy efficiency programs--and is about one-sixth of the 
cost of peak generation. Over the last decade alone, these efficiency 
programs have provided net benefits of about $5.3 billion to 
California's customers from foregone electricity purchases. Though 
California is often maligned for its high electricity retail rates 
compared to the rest of the U.S., the state's energy efficiency 
policies have reduced overall energy bills for its residents and 
businesses. Since 1973, on a per capita basis, energy bills in 
California have averaged $100 per year less than U.S. bills.
Energy Efficiency Is a Critical Component of California's Future Energy 
        and Climate Change Response Policies
    The Loading Order and the 2006-08 Efficiency Resource Procurement 
by the Investor Owned Utilities. Since 2003, energy efficiency programs 
in California have been guided by a formal state policy that places 
cost-effective energy efficiency above all other energy resources. The 
Energy Action Plan, which was adopted by the state's energy agencies, 
endorsed by Governor Schwarzenegger, and later updated in 2005, 
establishes a ``loading order'' of preferred energy resources. The 
loading order declares that cost-effective energy efficiency and demand 
response are the state's top priority procurement resources, followed 
by renewable energy generation, and finally cleaner and more efficient 
fossil-fueled generation.
    After examining the potential for cost-effective achievable energy 
efficiency improvements in the state, the California Public Utility 
Commission (CPUC) in 2004 established energy savings targets for the 
Investor Owned Utilities that are the most aggressive in the Nation. 
These targets will more than double the current level of savings over 
the next decade. While other states' energy efficiency efforts deliver 
annual savings ranging from about 0.1 percent to 0.8 percent of their 
electricity use, the annual California targets will ramp up to 1 
percent by 2008.
    Figure 3 illustrates the historical annual energy savings and the 
targeted savings levels, which significantly surpass historical 
reductions. In a few years' time, California's per capita electricity 
consumption should begin to decline. The energy savings targets will 
avoid nearly 5,000 MW of peak demand in the next 10 years, averting the 
construction of a new 500-MW power plant every year. Customers will 
also obtain some relief from rising natural gas bills through the 
tripling of annual gas savings by the end of the decade.
    In 2005, California regulators adopted a new administrative 
structure for the delivery of energy efficiency programs that charges 
the state's regulated utilities with fully integrating energy 
efficiency into their resource procurement process. Utilities are now 
required to invest in energy efficiency whenever it is cheaper than 
building new power plants, and the savings achieved through these 
energy efficiency programs will be subject to independent verification. 
This rigorous evaluation of savings will be essential to ensure that 
the savings have in fact occurred and can be counted upon for resource 
planning purposes, as well as for the state's greenhouse gas emission 
reduction goals.



    In 2006, California utilities began launching aggressive programs 
to execute their energy savings goals. The utilities have budgeted $2 
billion to deliver their energy efficiency programs during the three-
year cycle from 2006 through 2008. This three-year investment will 
return nearly $3 billion in net benefits to California's economy 
through reduced energy bills and the avoided construction of new power 
plants. Moreover, by 2008, these programs will reduce the state's 
annual greenhouse gas emissions by over three million metric tons of 
CO2, which is equivalent to removing about 650,000 cars from 
the roads.
    In looking forward to the next procurement order beyond 2008 as 
well as climate change response requirements, the CPUC is holding 
workshops this summer to explore the technical and financial basis for 
even larger efficiency savings in the future.
    California Climate Action Policy Specifics. In June 2005, Governor 
Schwarzenegger signed Executive Order S-3-04, which established 
aggressive greenhouse gas reduction targets for California: reduce 
greenhouse gas emissions to 2000 levels by 2010; to 1990 levels by 
2020; and to 80 percent below 1990 levels by 2050. The 2020 emissions 
reduction goal was subsequently codified by Assembly Bill (AB) 32, 
California's Global Warming Solutions Act of 2006, which was signed 
into law by the Governor in September 2006.
    Energy efficiency strategies figure prominently in the state's plan 
for meeting the 2010 and 2020 GHG reduction goals. While per capita 
emissions in the utility sector are slowly declining, the state's 
absolute GHG emissions have risen since the mid-1970s due to continuing 
population growth of 1.8 percent per year. Some of the strategies 
identified in this sector involve efficiency efforts already underway 
as discussed above. For example, currently funded programs and existing 
efficiency standards in the electricity and natural gas sectors are 
expected to save 15.8 MmtCO2 in 2020 (about 9 percent of 
what will be needed to meet the state's goal). Other efficiency 
strategies will require additional action. Existing and expanded 
efficiency improvements in the buildings and industry sectors are 
expected to contribute 17 percent of the total greenhouse gas 
reductions needed to meet the state's 2020 goal.
    These contributions to California's emissions reduction goals could 
be even greater, as the greenhouse gas reductions resulting from future 
improvements to the state's building and appliance energy efficiency 
codes and standards have yet to be determined. While transportation is 
the largest source of GHG emissions (41 percent), electricity consumed 
by buildings and industry (including electricity imported from out-of-
state) is the second largest source of California's GHG emissions, 
totaling 108 million metric tons of carbon dioxide equivalent 
(MmtCO2) and accounting for 22 percent (of the state's total 
GHG emissions). Natural gas use in buildings and industry contribute 
another 14 percent of California's GHG emissions.
California's Energy Technology Research and Development Programs Have 
        Emphasized Energy Efficiency
    From its initial establishment in 1975, the California Energy 
Commission has developed and administered incentive programs that 
support the development, demonstration and deployment of advanced 
energy technologies across the spectrum of energy generation and end-
use. The scale of this effort was substantially increased when the 
Public Interest Energy Research Program was created in 1996.
    In 1996 as part of AB 1890 (Chapter 854, Statutes of 1996), 
California's utility restructuring legislation, the legislature 
required that $62.5 million be collected annually from the three 
investor-owned electric utilities and deposited in the Public Interest 
Energy Research and Development Account, to be invested by the 
California Energy Commission for energy-related research, development 
and demonstration (RD&D) efforts that serve the greater public 
interest. Thus, administration of public interest RD&D was shifted from 
California's investor-owned utilities to state government, a major 
change intended to ensure an appropriate role for public interest 
energy research in a newly competitive energy marketplace.
    By 2002 the Federal natural gas public research surcharge 
administered by the Gas Technology Institute was being zeroed out by 
the FERC, California acted to maintain RD&D for its gas utilities. In 
2003, the legislature authorized and the CPUC created the Public 
Interest Natural Gas Research Fund that is administered by the CEC in 
conjunction with its electric PIER funds. This fund is collected from 
California's investor owned natural gas utilities; in FY 2007-08, it 
will provide $18 million for RD&D. Thus the CEC has about $80 million 
annually to support RD&D to advance new energy technologies, the 
largest such research funds among the 50 states.
    The legislature explicitly defined what energy RD&D ``in the public 
interest'' means following three principles; they have guided PIER's 
investments over its first decade of existence:

   Provide environmentally sound, safe, reliable and affordable 
        energy services and products;

   Support RD&D not adequately provided by competitive or 
        regulated energy markets;

   Advance energy science and technology to the benefit of all 
        California's citizens.

    PIER is reauthorized every 5 years. Its 2006 reauthorization took 
place in an atmosphere of high concern and determination to address the 
impacts of climate change. The legislature rearticulated PIER's goals 
with an emphasis on reducing greenhouse gases and having market 
impacts. They also added a new mandate for transportation research 
relevant to both vehicles and fuels that reflects the concern about 
transportation as a major source of greenhouse gases. The remaining 
three goals reflect the continuing importance of the Loading Order 
discussed above. The goals are:

        ``Develop and help bring to market, energy technologies that 
        provide increased environmental benefits, greater system 
        reliability, and lower system costs''

   ``Advanced transportation technologies that reduce air 
        pollution and greenhouse gas emissions beyond applicable 
        standards, and that benefit electricity and natural gas 
        ratepayers.

   ``Increased energy efficiency in buildings, appliances, 
        lighting, and other applications beyond applicable standards, 
        and that benefit electric utility customers.

   ``Advanced electricity generation technologies that exceed 
        applicable standards to increase reductions in greenhouse gas 
        emissions from electricity generation, and that benefit 
        electric utility customers.

   ``Advanced electricity technologies that reduce or eliminate 
        consumption of water or other finite resources, increase use of 
        renewable energy resources, or improve transmission or 
        distribution of electricity generated from renewable energy 
        resources.''

    PIER's funding priorities have reflected these goals. Figure 4 
represents the cumulative PIER investment from 2001-2005. The 
transportation RD&D effort began in FY 2005-06 and is not reflected in 
this figure. The figure indicates the importance that CEC has placed on 
efficiency and demand response as a priority target for Energy RD&D in 
California.



    The CEC RD&D Approach to Efficiency Research. To support the state 
in accomplishing these policies and goals, as well as anticipate future 
needs, the PIER program has defined five strategic objectives that will 
provide California with affordable, comfortable and energy-smart 
choices for daily life and a strong state economy:

        1. Reduce energy cost and improve performance of efficiency 
        end-use systems (residential, commercial, industrial, 
        agricultural). This objective is directly tied to helping the 
        state meet the aggressive efficiency goals, as well as supports 
        the implementation of efficiency as the first option in the 
        loading order.

        2. Develop energy-efficient technologies for unique California 
        conditions and industries. This objective will also help the 
        state meet the aggressive efficiency goals and it will help 
        address issues related to population and economic growth in hot 
        inland areas.

        3. Reduce water use and improve efficiency of alternative water 
        sources, treatment, and delivery. In addition to supporting the 
        efficiency goals, this objective supports the policy to reduce 
        electricity demand related to the water supply.

        4. Develop end-use cost-effective load management and demand 
        response technologies. This objective supports the aggressive 
        peak demand reduction goals and help mitigate the impact of 
        increased peak demand spikes due to the growth in hot inland 
        areas.

        5. Develop knowledge base for future decisionmaking and 
        informed end-use policy relative to electricity. This objective 
        will address the trends, technology gaps, and emerging energy 
        issues to provide policymakers with the knowledge required to 
        develop effective future policy in this area.

    Buildings Efficiency RD&D Approach. The Buildings RD&D effort area 
includes new and existing buildings in both the residential and the 
non-residential sectors. The program seeks to decrease building energy 
use through research that will develop or improve energy efficient 
technologies, strategies, tools, and building performance evaluation 
methods.
    A number of specific issues and technologies have been addressed. 
Customers do not have affordable and effective tools, technologies, 
controls, and strategies to respond to future time dependent price 
structures for electricity. Because affordability is the primary driver 
for building equipment purchase decisions, development of lower first-
cost options for energy efficient products, as well as lower 
operational costs for energy consuming systems, are essential for 
increasing the adoption of energy efficiency measures in California.
    Decisions regarding building components, systems, and operations 
are generally made based on non-energy considerations, but 
understanding and addressing the substantial energy impacts of key non-
energy considerations such as health, safety and productivity are 
critical to improving energy efficiency in California's buildings. The 
existing building sector is so large that efficient replacement 
products, improved operational strategies, and appropriate intervention 
tactics that can reach the existing building market are critical.
    Systems and equipment frequently perform less efficiently than 
predicted due to suboptimal integration of subsystems and components, 
improper installation, poor maintenance, and user's inability to detect 
and diagnose equipment performance degradation, thereby reducing the 
equipment life and increasing energy costs. Technologies, products, 
strategies and business models developed for national markets do not 
adequately address California's unique building energy needs, and do 
not take advantage of state organizations, programs, and initiatives 
which can help facilitate improved building energy efficiency. The 
digital revolution has opened up new, more affordable opportunities for 
energy savings and peak demand management in buildings, but the 
proliferation of entertainment and information systems has also 
significantly increased plug loads.
    The Buildings research effort has paid off in numerous technology 
introductions in the last 3 years:

   Nine new lighting technologies for home, office, and 
        institutional environments using both compact fluorescents and 
        LED technologies.

   Eight commercial Heating, Ventilation and Air Conditioning 
        Technologies.

   Fourteen Code Changes for the 2008 Efficiency Standards 
        Process.

   The UC-CSU Campus Technology Demonstration Program--11 
        technologies on 13 campuses.

    Industry RD&D Approach. The industrial, agriculture and water 
sectors in California use 30 percent of all the electricity consumed 
annually in the state. These sectors--vital to California's economy--
rely on an affordable, reliable and sustained supply of energy. Through 
Research, Development and Demonstration (RD&D), the program seeks to 
improve the energy efficiency of industrial processes, agricultural 
operations, and water and wastewater treatment plants. These sectors 
are also sensitive to the cost, reliability and quality of electric 
power. Therefore, besides improving energy efficiency, the program also 
strives to research, develop, and demonstrate technologies that help 
these sectors deal with cost, power quality and power supply 
reliability issues. The following priorities guide RD&D in this area:

   Industry--California has a substantial industrial base. The 
        energy reliability of these industries is critical not only for 
        California's economy but for the national economy as well. The 
        major industries--such as food processing, electronics and e-
        commerce, petroleum refining and production--all depend on 
        continued low cost and reliable energy.

   Agriculture--Agriculture forms a large segment of 
        California's economy worth $27.2 billion in cash receipts in 
        2000. Agriculture is highly dependent upon electrical energy 
        for irrigation and post-harvest processing. Electrical costs 
        and power reliability are critical for a successful and 
        sustainable agricultural operation. The PIER IAW develops 
        techniques and technologies for advanced irrigation and other 
        load management practices that will help this sector cope 
        better in the current electric market.

   Water--The availability of low-cost clean water is essential 
        to California's economy and continued prosperity. The state 
        transports and treats large volumes of water across the state. 
        Both of these activities rely heavily on electric power. RD&D 
        pursues energy efficiency improvements for processing water for 
        urban, industrial and agricultural consumption and energy-
        efficient wastewater recovery.

    PIER Industry Efficiency RD&D has focused advanced technologies for 
refrigeration and cooling, waste heat recovery, low emission combustion 
technology in the industrial setting, water treatment and recovery 
technologies, process heat production, and efficient data centers/
server farms.
    Demand Response RD&D Approach. Electricity demand in California 
increases most dramatically in the summer, driven by high air 
conditioning loads. The generation system must be able to accommodate 
these high summer peaks, in addition to the demand swings caused by 
weather variability and the economy. Though peak demand periods 
typically occur only between 50-100 hours a year, they impose huge 
burdens on the electric system. One measure of the ``peakiness'' of the 
electric system is load factor, which measures the relationship between 
annual peak in MW and annual consumption in MWh. If peak demand grows 
faster than annual average consumption, the load factor decreases. In 
California in recent years, weather-adjusted load factors have 
decreased as air conditioner loads have increased.
    One problem with meeting peak demand is that most new gas-fired 
power plants are combined cycle designed to run at high load factors 
where they are most efficient and can generate enough revenue to recoup 
investments. Combined-cycle plants also have less capability to ramp up 
and down to meet peak demand than the older steam boiler units, which 
make up the majority of California's fleet of power plants. While some 
utilities have invested in simple-cycle peaking plants that run just a 
few hours each year, most of the state's new power plants are combined-
cycle and are not well matched with swings in system demand.
    Demand response programs help reduce peak demand in two ways. 
First, price-sensitive programs provide customers with the financial 
incentives and metering technology to reduce electric loads when prices 
and electricity demand are high. Second, reliability programs provide 
customers with a non-price signal that clearly shows when system 
resources are strained and demand reduction would be most beneficial. 
Reducing system load before it reaches capacity constraints increases 
the reliability of California's electricity grid. By reducing the need 
for additional system infrastructure or peaking generation, demand 
response also lowers consumer electricity costs over the long term.
    Price-sensitive and reliability programs are both key components of 
demand response. The state has historically relied on reliability 
programs in times of constrained supply, most recently during the 
summer of 2005 in Southern California. Advances in metering and 
communications technologies allow significant improvements to price-
responsive and signal-responsive programs. New metering technology will 
be the primary platform for the state's future demand response 
policies. Both types of programs are being designed to allow customer 
control--a key feature expected to increase participation by providing 
customers with greater choice over impacts on their homes and 
businesses.
    PIER Demand Response RD&D includes research on automated demand 
response technology (AutoDR) for both buildings and selected industrial 
processes. These technologies focus generally on two-way communication 
technologies integrated with energy and process controls to permit 
customers to optimize their work and manufacturing environments while 
responding to the external energy supply and pricing signals from the 
utilities. PIER also supports research that examines alternative 
pricing approaches and mechanisms that can elicit effective demand 
response from electricity consumers. California electricity utilities 
are critical participants in this research.
    Results from 4 years of PIER R&D on AutoDR involving over 40 
different facilities revealed average demand reductions of about 10-15 
percent during three- to six-hour long peak demand response events. 
Representatives from firms as diverse as Albertson's, Target, and Cisco 
report that they believe automating demand response by price signals 
can institutionalize these savings, thereby providing California with 
reliable demand response savings. PG&E plans to install AutoDR 
technologies in 200 large commercial facilities in 2007 to reduce peak 
demand by 15 MW.
PIER Efficiency RD&D Programs Focus on Market Success From the 
        Beginning of Individual Projects; California Utilities are Key 
        Players
    In addressing these issues, maintaining a strong market connection 
is a key goal of the PIER Buildings Program. The PIER Buildings Program 
strives to maintain a strong market connection in various ways 
including:

   Identification of research that is responsive to known 
        market needs.

   Inclusion of market partners on research teams.

   Identification and implementation of market linkages 
        including linkages to the building community, industry, 
        equipment manufacturers, utilities, codes and standards groups, 
        and other implementers of building efficiency market actions.

    A major focus of planning and conducting PIER efficiency research 
is on implementing the research results--we seek market connections 
early in a research project to encourage industry players who will 
adopt the results and achieve market impact. Such connections take on 
many forms, including advisory groups, coordinating groups, and 
industry organizations. Projects are developed with a view toward 
progression from technical verification leading to ultimate 
demonstration in the user's environment. User input is sought from the 
beginning. This approach is represented in Figure 5 below.



    Many Efficiency RD&D projects enlist the support and guidance of an 
Advisory Committee and some larger research programs/projects have a 
Technical Advisory Group (TAG). These advisors are industry 
representatives from a wide range of disciplines, including building 
operation/management, insurance, city building codes, energy research, 
product manufacturing and distribution, and the electric/gas utilities. 
These advisory bodies provide input on market needs; help refine 
project scopes; suggest market adopters; and review research results.
    PIER efficiency research also connects with the market through 
California's Emerging Technology Coordinating Council. The council is a 
collaboration of public agencies involved with administrating 
California utility-ratepayer funded programs for energy related 
research and energy-efficient emerging technologies. The group includes 
representatives from the California Energy Commission, Pacific Gas & 
Electric, Southern California Edison, Southern California Gas, and San 
Diego Gas & Electric.
    The utilities' emerging technology programs as well as their 
incentives and efficiency procurement programs are critical elements of 
the market development and commercialization efforts of the CECs 
Efficiency RD&D program. All of these programs are the result of 
California's progressive commitment to efficiency and its recognition 
that technological advance can change the way we produce and use 
energy. I am pleased to be able to present this information to you.
    This completes my prepared testimony. Thank you.

    Senator Kerry. Thank you very much, Dr. Krebs.
    Mr. Johnson?

       STATEMENT OF DOUGLAS K. JOHNSON, SENIOR DIRECTOR,

          TECHNOLOGY POLICY AND INTERNATIONAL AFFAIRS,

                CONSUMER ELECTRONICS ASSOCIATION

    Mr. Johnson. Thank you, Mr. Chairman.
    CEA represents the innovation industry. Our 2,100 members 
make the products that keep America connected, informed, and 
entertained. Our members drive the U.S. economy and ensure that 
America represents--or remains as the world's innovation 
leader.
    Our members are committed to energy efficiency and 
conservation. Energy efficiency is not just the right thing to 
do, it is good business. Efficient energy use minimizes heat 
generation, the enemy of performance and longevity in our 
products. Many industry trends drive the improving energy 
efficiency of electronics, including convergence, 
miniaturization, portability, and the transition from analog to 
digital technology.
    At CEA, we take a number of concrete steps to promote 
energy efficiency. First, we promote the use of industry 
standards for energy efficiency. Recently, we developed new 
standards for energy use in set-top boxes, and helped devise a 
standard for measuring power use of digital televisions. These 
voluntary programs and standards initiatives deliver more 
energy efficient products to consumers and business.
    In addition, we conduct research studies to ensure that 
policymakers and the public have accurate information. These 
studies analyze the energy use of our products, as well as the 
energy-saving benefits of telecommuting and e-commerce.
    CEA also educates consumers about the energy use of our 
products. CEA's myGreenElectronics.org website presents 
commonsense consumer tips for saving energy, and an energy-use 
calculator which allows consumers to determine how much power 
is required for their electronics. The website also allows 
consumers to search for energy efficient products.
    As part of our educational efforts, we publicly highlight 
green products and technologies at our international trade 
show, the International CES. We also, at that trade show, 
encourage energy conservation through product displays, 
conference sessions, and a prestigious Eco-design Award.
    Finally, we work cooperatively with government agencies to 
promote voluntary, market-oriented programs, such as ENERGY 
STAR. Through ENERGY STAR, our products 
have saved 18.8 billion kilowatt hours of energy and avoided 
emissions equivalent to 3.8 million metric tons of carbon.
    However, despite its success, the ENERGY STAR 
program is threatened by unnecessary regulation at the State 
level. Of particular concern are California mandates for audio 
and video products and external power supplies based on the 
voluntary thresholds established within the ENERGY 
STAR program. While we support California's objective 
of energy conservation, we are very concerned about the 
specific approach.
    ENERGY STAR's success is due, in part, to its 
voluntary nature. Making voluntary specifications mandatory 
will likely discourage participation in the national ENERGY 
STAR program, with unfortunate consequences for 
consumers and manufacturers, as well as energy savings, in 
general.
    In light of these issues and concerns, CEA has urged 
California to withdraw its regulations for consumer audio and 
video products and recognize the success of voluntary programs, 
such as ENERGY STAR, which better support energy 
efficiency in the consumer electronics market.
    In conclusion, this Committee's focus on energy efficiency 
is important and necessary. Electronics are part of the energy-
savings solution. Our products save energy by providing control 
over home heating, cooling, and lighting. They allow 
teleworking and remote access to information and entertainment, 
which save fuel and reduce carbon emissions.
    We urge you to support innovation and consumer-oriented 
initiatives, like ENERGY STAR, which are the keys to 
energy efficiency for the consumer electronics industry.
    We're committed to working with you and my fellow panelists 
toward a greener and more efficient future. I look forward to 
addressing any questions you may have.
    Thank you.
    [The prepared statement of Mr. Johnson follows:]

 Prepared Statement of Douglas K. Johnson, Senior Director, Technology 
   Policy and International Affairs, Consumer Electronics Association
Introduction
    Chairman Kerry, Ranking Member Ensign, and Members of the 
Subcommittee:

    I am pleased to accept your invitation to testify on behalf of the 
Consumer Electronics Association (CEA). CEA is the principal U.S. trade 
association of the $155 billion consumer electronics industry. CEA's 
more than 2,100 members are involved in the design, development, 
manufacturing, distribution and integration of audio, video, in-vehicle 
electronics, wireless and landline communication, information 
technology, home networking, multimedia and accessory products, as well 
as related services that are sold through consumer channels. CEA's 
members include large and small manufacturers as well as many leading 
retailers. CEA also produces the Nation's largest annual trade event, 
the International CES. We commend the Subcommittee for holding this 
hearing on the important issue of energy efficiency and appreciate the 
opportunity to provide the views of our membership.
    Our members design, make and sell the products and services that 
keep us connected, informed and entertained. Our companies drive the 
U.S. economy and ensure that America remains the world's innovation 
leader.
    The hallmarks of our industry are dynamism and rapid change. This 
constant innovation, complemented by voluntary programs and 
initiatives, is the primary driver of improved energy efficiency in our 
industry. In order to meet consumer expectations, it is essential that 
our products use electricity efficiently and effectively. Efficient use 
of energy minimizes heat generation, the prime enemy of component 
performance and longevity. Energy efficiency is also essential to 
minimizing costs associated with design and components, such as heat 
sinks. Beyond improvements in design, there also are ongoing industry 
trends which naturally drive, support and sustain the increasing energy 
efficiency of electronics. These trends include convergence, 
miniaturization, portability and the transition from analog to digital 
technology.
    CEA's members are committed to energy efficiency and conservation.
    For many years, the consumer electronics industry has worked 
cooperatively with government agencies in pursuit of successful 
voluntary, market-oriented programs and initiatives, such as ENERGY 
STAR, which highlight and support energy efficient product 
design and purchasing. To date, the ENERGY STAR program for 
consumer electronics and residential office equipment has saved 18.8 
billion kWh of energy and avoided emissions totaling 3.8 million metric 
tons of carbon equivalent. Recently, consumer electronics manufacturers 
have focused on new industry-led standards at the national, regional 
and international levels that relate to and support energy efficiency. 
Together, these voluntary initiatives have transformed the market and 
delivered more energy efficient electronics to consumers and 
businesses.
    As the consumer electronics industry's principle trade group, CEA 
has taken a comprehensive, multi-faceted approach to addressing energy 
efficiency for our industry sector. Specifically:

    1. CEA conducts research and analysis to ensure that policymakers 
and the public have accurate information.

    Many estimates of consumer electronics energy consumption still 
rely on data developed in the late 1990s. Yet, consumer electronics 
products have changed dramatically over the last decade, and their 
energy consumption characteristics have improved, particularly due to 
innovation as well as the success of the ENERGY STAR program. 
To provide better data to policymakers, CEA commissioned a recently 
completed independent analysis of consumer electronics energy use that 
covered all significant energy-using product categories in our 
industry. This landmark study provides a more refined assessment than 
prior studies, particularly for product usage. The full report, titled 
``Energy Consumption by Consumer Electronics in U.S. Residences,'' is 
available on CEA's website at www.ce.org/energy. Among the findings are 
the following:

   Excluding digital televisions (DTVs), residential consumer 
        electronics consume 11 percent of residential electricity and 4 
        percent of total U.S. electricity;

   Annual residential consumer electronics electricity 
        consumption equals 147 TWh, excluding DTVs;

   There has been dramatic growth in the installed base of 
        products, especially PCs, computer monitors, set-top boxes and 
        DVD players;

   Active-mode power consumption varies with device type and 
        has increased for TVs and PCs but decreased for computer 
        monitors;

   With the exception of complex set-top boxes, standby power 
        consumption has generally decreased, a testament to the 
        effectiveness of the ENERGY STAR program.

    As indicated, the only significant category excluded from this 
study is digital televisions. The existing standard for measuring TV 
energy consumption in on-mode is outdated and inappropriate for 
measuring power consumption for today's digital televisions. To address 
this issue, an international industry standards development committee 
involving a wide variety of private and public sector stakeholders 
recently completed the draft of a new standard that will provide a fair 
measurement of TV energy use across all types of DTV displays. 
Simultaneously, CEA initiated a project to collect TV power consumption 
data using the new international draft standard so that CEA's overall 
energy use study can be updated this summer. The DTV data also will be 
provided to support the ENERGY STAR program, which is 
revising its specification for televisions.
    As noted above, standby power consumption has not decreased for the 
category of set-top boxes, which includes cable and satellite set-top 
devices. Currently, there is no ENERGY STAR program covering 
set-top boxes. CEA believes this product category represents an 
important opportunity for ENERGY STAR, and CEA is working 
with the U.S. Environmental Protection Agency which this spring began 
development of a new ENERGY STAR specification for set-top 
boxes.
    In addition to our energy use analysis, CEA commissioned another 
study, to be completed this week, which examines the energy-saving and 
emissions-reducing benefits of using consumer electronics products for 
telecommuting and e-commerce. Telecommuting reduces energy consumption 
associated with transportation to and from the office and, in some 
cases, a portion of the energy associated with commercial office space. 
The draft final version of this study estimates that telecommuting 
today reduces energy consumption by an amount equivalent to the annual 
electricity consumption of between approximately 0.8 million and 1.1 
million U.S. households.

    2. CEA has been a leader in developing industry standards 
supporting energy efficiency.

    The industry standards setting process is an important forum for 
developing standards relevant to energy efficiency. CEA, an American 
National Standards Institute-accredited standards development 
organization, has developed two voluntary industry standards related to 
energy use in set-top boxes. As noted earlier, CEA and its members also 
have supported the development of a new international industry standard 
for measuring power consumption for today's digital televisions, as the 
current decades-old standard is inappropriate for today's DTVs.

    3. CEA informs consumers about the energy use of consumer 
electronics.

    CEA believes that our industry has a responsibility to inform 
consumers about the energy use of their products. This year, CEA 
launched a new consumer education initiative built on 
myGreenElectronics.org, a comprehensive resource focused on the energy-
conscious and environmentally responsible use of consumer electronics 
at all phases of a product's life cycle. The energy efficiency portion 
of the site presents common-sense consumer tips for saving energy with 
electronics. Additionally, CEA added an energy-use calculator to 
myGreenElectronics.org which allows consumers to calculate and 
understand, in terms of watts and dollars, how much is required on 
average to power their electronic products. Finally, the website 
includes a tool that enables consumers to search for products for which 
energy efficiency is a selling point.

    4. CEA showcases and promotes energy-efficient products.

    CEA has used the International CES as a platform to highlight the 
importance of energy efficiency and conservation, including displays of 
energy efficient products and technologies; conference sessions on 
energy efficiency and public policy; and an eco-design award for 
environmentally-friendly products.
    In addition, CEA organized an energy efficiency product technology 
demonstration on Capitol Hill on May 16, 2007, which highlighted energy 
efficiency and innovation in several product categories, including 
desktop and laptop computers, cable set-top boxes, and televisions.
    The best way to encourage improved energy efficiency in the 
consumer electronics industry is through the ENERGY STAR 
program.
    The market for consumer electronics is dynamic, highly competitive 
and characterized by rapid innovation, significant time-to-market 
pressures, rapid rates of market penetration, and rapid transition from 
one technology to another. Consumer electronics products are vastly 
different by design, function, consumer use and performance than the 
residential, industrial and commercial appliances and electro-
mechanical equipment that have been subject to the U.S. Department of 
Energy standards and rulemaking process.
    Unlike residential, industrial and commercial appliances, which 
tend to be designed for a single purpose, consumer electronics 
typically offer several features and functions and are used in at least 
three ways that distinguish them from appliances. First, people use 
consumer electronics to communicate with one another; they also use 
consumer electronics for entertainment; and, finally, people use 
consumer electronics to receive and store information.
    In light of these characteristics and considerations, the best 
public policy for encouraging and supporting energy efficiency in the 
consumer electronics industry is the ENERGY STAR program. 
This government-industry partnership program, which covers more than a 
dozen major categories of electronics, provides the necessary 
flexibility, market-orientation, competitive incentive and consumer 
recognition that support energy efficiency for our dynamic industry. 
Most importantly, ENERGY STAR has a long and established 
track record of success.
    As a voluntary, consumer-oriented program, ENERGY STAR 
has resulted in significant energy savings and reduced greenhouse gas 
emissions.
    The consumer electronics industry is a strong supporter of the 
voluntary, market-driven and national approach to saving energy 
represented by the Federal ENERGY STAR program 
(www.energystar.gov). This successful government-industry effort, which 
benefits from strong participation by manufacturers, captures a broad 
range of consumer electronics and creates a competitive incentive for 
energy savings. The ENERGY STAR program, coupled with the 
natural trends toward energy efficiency in electronics design, provides 
consumers with the products and features they demand, along with a logo 
recognized by almost two-thirds of consumers.
    ENERGY STAR is clearly the best policy approach to saving 
energy in the consumer electronics sector, and it has resulted in 
significant energy savings and reduced greenhouse gas emissions. As 
noted earlier, the ENERGY STAR program for consumer 
electronics and residential office equipment has saved 18.8 billion kWh 
of energy and avoided emissions totaling 3.8 million metric tons of 
carbon equivalent, according to the U.S. Environmental Protection 
Agency's latest annual report on ENERGY STAR. In addition, 
according to EPA, consumer electronics accounted for 31 percent of 
energy saved by all residential products in the ENERGY STAR 
program. Finally, consumer electronics including computers and monitors 
represent 55 percent or 1.1 billion of the two billion purchases of 
ENERGY STAR products since 1992.
    While continuing to target and reduce power consumption of products 
in low-power standby mode, ENERGY STAR is evolving to address 
active mode power consumption.
    For most of its history with consumer electronics, the ENERGY 
STAR program has focused on reducing standby-mode power 
consumption. Recently, ENERGY STAR has begun to take a more 
holistic view of a product's energy use by considering active-mode 
electricity use as well. The ENERGY STAR specifications for 
computers and imaging equipment take into account both active and 
standby mode power consumption. The revised ENERGY STAR 
specification for televisions as well as the new ENERGY STAR 
specification for set-top boxes also will take into account active mode 
energy use in addition to standby. For these and other consumer 
electronics products, the consideration of active mode power use 
presents new challenges related to operating modes, product features, 
and consumer usage patterns. CEA and its members will continue to work 
closely with EPA to ensure outcomes that achieve energy savings while 
protecting innovation and consumer choice.
    Despite its success, the ENERGY STAR program is 
threatened by unnecessary regulation at the state level.
    In 2005, the California Energy Commission (CEC) imposed 
unprecedented regulations limiting the energy consumption of several 
categories of consumer audio and video products as well as external 
power supplies, also known as AC power adapters, which are used with a 
wide range of consumer and commercial products. We support the CEC's 
focus on energy use, but we are very concerned about the CEC's specific 
approach.
    To support its regulations for consumer audio and video products, 
the CEC relied on outdated and inaccurate information about energy 
consumption which led to erroneous conclusions about cost-effectiveness 
and energy savings. Moreover, for one particular product category not 
yet on the market in the U.S., digital television converter boxes, the 
CEC relied on claims that tens of thousands of units were already in 
the hands of California consumers.
    Of particular concern relevant to ENERGY STAR is that the 
CEC's new mandatory regulations for consumer audio and video products 
and external power supplies are based on the voluntary thresholds 
established within the ENERGY STAR program. Though the ENERGY 
STAR specifications on which the CEC based its regulations 
have been superseded by new ENERGY STAR specifications in 
several cases, they were never intended as nor negotiated to be 
mandatory limits after any set period of time. For external power 
supplies, the CEC's mandatory regulations are identical to the 
voluntary ENERGY STAR specifications for this same category. 
These voluntary criteria for power supplies had just been negotiated by 
ENERGY STAR program representatives and industry several 
months prior to the CEC's action which made them mandatory.
    The success of the ENERGY STAR program is in fact due to 
its voluntary nature. ENERGY STAR program criteria are the 
result of broad industry participation, careful negotiation, and 
recognition of market and technological facts and limitations. Contrary 
to the spirit and purpose of the ENERGY STAR program, the 
California Energy Commission, in its revised Appliance Efficiency 
Regulations, created mandatory regulations based on voluntary 
specifications. The CEC's action threatens to undermine the future 
success of the ENERGY STAR program itself. Once the voluntary 
ENERGY STAR program criteria are viewed as potential 
mandates, uncertainty among manufacturers increases, and the 
negotiations leading to the program criteria would be altered. In a 
recent CEA member survey, more than half of respondents indicated that 
mandatory standards based on ENERGY STAR program criteria 
would discourage future participation in the ENERGY STAR 
program. In this way, the CEC's mandatory standards for consumer audio 
and video products and external power supplies will weaken the national 
ENERGY STAR program, with unfortunate consequences for 
consumers and manufacturers, as well as energy savings in general.
    In light of these issues and concerns, CEA has urged the CEC to 
withdraw its regulations for consumer audio and video products and 
recognize the success of voluntary programs such as ENERGY 
STAR, which better support energy efficiency in the consumer 
electronics market.
Conclusion
    In many ways, electronics are part of an energy savings solution. 
Many home networking products help save energy by providing increased 
control over home heating, cooling and lighting systems. Information 
technology and telecommunications products allow teleworking and remote 
access to information and entertainment content, both of which save 
fuel and reduce greenhouse gas emissions. In addition, electronics are 
key enabling technologies that drive energy efficiency in various other 
industrial sectors such as automobiles and manufacturing.
    This committee's focus on energy efficiency is important and 
necessary. As policymakers consider programs and policies that support 
the efficient use of energy, we urge Congress to support innovation and 
promote consumer-oriented initiatives like ENERGY STAR which 
are the keys to energy efficiency achievements for the consumer 
electronics industry.
    Thank you again for the opportunity to share CEA's position on this 
important public policy issue. I look forward to addressing any 
questions you may have.

    Senator Kerry. Thank you very much, Mr. Johnson.
    Mr. Birnbaum?

 STATEMENT OF JAY BIRNBAUM, SENIOR VICE PRESIDENT AND GENERAL 
                  COUNSEL, CURRENT GROUP, LLC

    Mr. Birnbaum. Good afternoon, Chairman Kerry. Thank you. I 
appreciate the opportunity to talk, this afternoon, about Smart 
Electric Grids.
    CURRENT Group, my company, designs, deploys, and operates 
Smart Electric Grids for electric utilities. Smart Grids are 
crucial for our country's national security, economic stability 
and development, and energy policy, overall.
    Let me talk about what we--what I mean when I refer to 
``smart grid.'' We're not referring just to advanced meters or 
distributed energy or renewable resources, although we are 
talking about all of those items, as well. A ``smart grid,'' in 
particular, is a stable, fully automated, self-healing 
distribution network that alerts the utility company 
immediately when problems arise in the network. It then 
triggers prompt and even automated preventive and proactive 
corrective action by the utility. This improves the utility's 
efficiency, and enables demand-side management and distributed 
energy resources, and increases the overall reliability and 
security of our power supplies.
    If you would indulge me for 1 minute on a technical 
description, what we do when we create a Smart Grid is, we 
install sensors throughout the electric distribution grid, from 
the substation all the way down to an end-user premise. Even 
appliances can be equipped, as some of the previous panelists 
have mentioned, with devices that can help the utility company 
manage those appliances from a demand response standpoint. The 
utility company then can communicate with those devices over a 
high-speed communications system and a high-powered computing 
system. Right now, utility companies really don't know what 
goes on inside their distribution grids between the substation 
and the end-users, and what a Smart Grid enables them to do is 
not only to know what's going on, but to avoid outages, repair 
outages much more quickly when they do occur, and create much 
more efficient distribution technologies.
    The Smart Grid is available today. This is not a technology 
of the future. CURRENT is deploying the Nation's first true 
system-wide Smart Grid in the Dallas/Fort Worth region of 
Texas. When finished, it will cover nearly 2 million homes and 
business. We invite you and the other members of the 
Subcommittee to come see it in Texas; or, if that's a little 
far from your jurisdiction, since we're a Maryland-based 
company, we actually can demonstrate it to you right outside 
the Capitol Beltway. Some members of the Committee staff and 
other members of--staff members within the Congress have 
witnessed this demonstration.
    Because the technology is available today, Mr. Chairman, 
one thing that we would caution Congress about doing is trying 
to legislate Smart Grid technologies in such a way that, 
although well intended, will actually delay deployments. 
Further studies, additional administration-based commissions, 
and even Federal funding, for the most part, aren't necessary 
for advancing Smart Grids. What we need to do is tackle the 
disincentives and regulatory uncertainties that utilities have, 
and address those, hopefully at the Federal level, and create 
incentives for utility companies to actually deploy the 
technology. One area where Federal funding might be necessary 
is in--for significantly rural and other hard-to-serve areas.
    Right now, the peak demand for electricity is projected to 
increase by 19 percent in this country over the next 10 years, 
yet spending for capital improvements is only supposed to 
increase by about 6 percent, and that tends to be more 
disproportionately favored toward generation and transmission, 
not in the local distribution grid. Ten to 20 percent of 
electricity is actually lost, by the time it is generated, 
before it actually reaches the end-user, due to faults and 
inefficiencies in the distribution and transmission systems, 
and a Smart Grid can actually address a lot of these 
inefficiencies.
    We've all seen examples of the vulnerabilities of our local 
distribution networks. The most well known is perhaps the 
August 1993 blackout, but we've had a number of storm-related 
and power-supply related outages. All of our local newspapers 
have examples of problems with reliability utility companies 
have when their grids break down and they don't quite know why, 
or where, those breakdowns are occurring.
    EPRI, the Electric Power Research Institute, estimates that 
power outages and power-quality disruptions cost U.S. 
businesses at least $100 billion a year, 87 percent of which, 
EPRI estimates, could actually be avoided by a Smart Grid. EPRI 
also estimates that reduced CO2 emissions--or 
CO2 emissions could be reduced by as much as 25 
percent, and electric consumption, generally, reduced by as 
much as 10 percent through implementation of a Smart Grid.
    A Smart Grid can make more use out of plug-in vehicles and 
renewable and distributed energy resources. For instance, you 
can plug your car in at night, while the energy prices are at 
its lowest. You can then actually draw electricity from that 
car and all the other cars that are parked during the day while 
energy prices are at their highest, thereby, saving money and 
actually mitigating the need for peak power plants.
    Similarly, with respect to solar or wind or other renewable 
sources of energy that are not available 24 hours a day, 365 
days a year, the utility company can match demand with those 
sources of energy, so you can decide to sign up to a program 
that not only reduces your electric consumption by turning off 
a pool pump or an air-conditioner or a water heater while 
prices are high, but also while green energy sources are not 
available.
    For this reason, we think any renewable portfolio standards 
that Congress adopts should include investments in Smart Grid 
to the same extent as investments in renewables. The greenest 
and the cheapest kilowatt is the one we never have to generate.
    Finally, Mr. Chairman, Federal guidelines are generally 
required, because utility companies, although aware of the 
technology--and certainly the larger utilities have access to 
capital to build Smart Grids--they have a number of regulatory 
disincentives and somewhat skewed economic incentives to build 
distribution plant improvements. And I'd be happy to talk to 
you and the--and your staff, at your convenience, about those 
incentives.
    [The prepared statement of Mr. Birnbaum follows:]

     Prepared Statement of Jay Birnbaum, Senior Vice President and 
                  General Counsel, CURRENT Group, LLC
    Thank you, Chairman Kerry, Ranking Member Ensign, and members of 
the Subcommittee, for the opportunity to testify about Smart Electric 
Grids.
    A Smart Electric Grid enables an electric utility to monitor and 
maintain a more stable, fully automated, self-healing distribution 
network that alerts immediately when problems arise--and then triggers 
prompt, or even automated, corrective action. Smart Grids will 
dramatically improve the efficiency of the Nation's electric 
distribution infrastructure, enable demand-side management and 
distributed energy resources, and increase the reliability and security 
of the Nation's power supplies. Smart Grids are crucial to any 
comprehensive clean-energy policy and have the following capabilities:

   Smart Grid enables electric utilities to--

    --improve efficiency through automated control and load balancing

    --save businesses billions of dollars by preventing, pinpointing 
            and restoring power outages and power disturbances

    --identify and prevent theft and tampering

    --improve diagnostics and predictive maintenance based on rich data 
            streams never before available

    --provide real-time monitoring of electric grid and other critical 
            infrastructure

   Smart Grid helps energy consumers--

    --enhancing demand-side management programs means lower costs, 
            fewer new power plants, and lower emissions

    --enabling real-time pricing and information about energy use gives 
            consumers better control of their bills, lets market forces 
            influence usage patterns, and lowers overall energy costs

   Smart Grid promotes alternative energy sources--

    --provides monitoring and control that optimizes generation 
            portfolios of dispersed renewable sources like wind and 
            solar energy

    --facilitates real-time net metering that enables distributed 
            generation based on accurate market signals

    CURRENT Group, LLC (``CURRENT'') designs, develops and deploys 
Smart Electricity Grids. Specifically, CURRENT deploys a network of 
advanced sensors capable of collecting and monitoring data from the 
substation, transformers, meters and other electric distribution 
devices along the power lines, all connected through a high-speed and 
low-latency communications system and a distributed computing system 
capable of real time analysis and event prediction. The Smart Grid 
increases the efficiency, reliability, safety, and security of the 
electric distribution network and expands the capabilities and benefits 
of demand-side management that can lower consumers' energy bills and 
reduce the need to build more greenhouse-gas emitting generation 
plants.
    To deploy the Smart Grid, CURRENT overlays its state-of-the-art 
technology at points throughout the existing electric distribution 
network. No retrofitting or conditioning of the distribution electric 
grid is required. Once a CURRENT Smart Grid is deployed, it 
can communicate with points anywhere along the distribution grid as 
well as each electric outlet inside homes and businesses. A utility 
therefore can monitor and control capacitor banks, transformers, 
switches, substations and other critical infrastructure, as well as 
manage Demand Response programs for end-users and measure and 
coordinate available distributed and renewable energy sources. CURRENT 
is headquartered in Maryland with offices in Texas, New York, Ohio and 
California.\1\
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    \1\ Further information about CURRENT is available at http://
www.currentgroup.com.
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What are the Efficiency Benefits of the Smart Grid?
    Each year, the Nation's 131 million electricity customers (nearly 
every household and business) pay about $247 billion in electric 
revenues, at an average price of about 7 cents per kilowatt-hour.\2\ 
Demand for electricity is projected to grow 40 percent by 2030, which 
in turn will likely increase prices. That is why Smart Grid is 
crucial--it offers a cost-effective way to increase the amount of 
electricity available through greater efficiency and network 
reliability. In other words, a megawatt saved is even better than a 
megawatt generated because it costs less and because such efficiency-
captured electricity is as at least as clean as solar, wind or other 
renewable energy resources.
---------------------------------------------------------------------------
    \2\ Overview of the Electric Grid, U.S. Department of Energy, 
Office of Electricity Delivery and Energy Reliability, Gridworks 
Program, available at: http://www.energetics.com/gridworks/grid.html.
---------------------------------------------------------------------------
    The strain on the Nation's nearly 100-year old electric 
distribution grids is expected to worsen in coming years as already old 
distribution networks age further and demand for electricity outpaces 
the construction of new facilities. Peak demand for electricity is 
projected to rise by 19 percent nationally over the next decade, but 
capital committed to electric generation, transmission and distribution 
is expected to grow by only 6 percent during the same period.\3\ Yet at 
the same time the Nation looks to meet rising demand, 10 to 20 percent 
of electric energy is lost before it reaches the end-user due to 
network faults or inefficiencies--inefficiencies that can be reduced by 
a Smart Grid.
---------------------------------------------------------------------------
    \3\ The Brattle Group, The Power of Five Percent: How Dynamic 
Pricing Can Save $35 Billion in Electricity Costs, Discussion Paper 
filed with the Maryland Public Service Commission (May 16, 2007) 
(citing North American Electric Reliability Council, 2006 Long Term 
Reliability Assessment).
---------------------------------------------------------------------------
    The Electric Power Research Institute (EPRI) estimates that power 
outages and ``blink of the eye'' power quality disruptions cost U.S. 
businesses at least $100 billion per year.\4\ Smart Grid can 
immediately increase the efficiency of businesses nationwide by 
providing utilities with real-time actionable intelligence about their 
networks that can be used to prevent such costly disruptions.
---------------------------------------------------------------------------
    \4\ http://www.energyfuturecoalition.org/preview.cfm?catID=57 
(citing EPRI estimate).
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What are the Demand Response Benefits of Smart Grid?
    Forty percent of the Nation's energy consumption is used to produce 
the electricity that is essential for economic prosperity and national 
security and electric power generation produces roughly 40 percent of 
the Nation's carbon dioxide emissions. As stated above, increased 
efficiency of existing distribution and consumption equates to making 
additional power available at lower costs and with less environmental 
impact. Such efficiencies reduce the need for constructing new 
generation plants and associated transmission facilities. Smart Grids 
can provide the communications and monitoring necessary to manage and 
optimize a portfolio of distributed and renewable energy resources. 
Indeed, since a Smart Grid is capable of reducing electricity 
consumption up to 10 percent by 2020, leading to a reduction of 25 
percent in CO2, it should be considered a renewable energy 
resource in its own right--after all, the cleanest power of all is 
power you do not have to use due to captured efficiencies.
    The Electric Power Research Institute projects that Smart Grid-
enabled distribution could reduce electrical energy consumption by 5 
percent to 10 percent, carbon dioxide emissions by 13 percent to 25 
percent, and the costs of power-related disturbances to business by 87 
percent.\5\
---------------------------------------------------------------------------
    \5\ See Electric Power Research Institute, Electricity Sector 
Framework for the Future: Achieving the 21st Century Transformation 
(Aug. 2003), page 42 (``EPRI Report''), copy available at: 
http://www.globalregulatorynetwork.org/PDFs/ESFF_volume1.pdf.
---------------------------------------------------------------------------
    A Smart Grid enables electric utilities to increase the efficiency 
of their existing electric distribution networks by enabling utilities 
in real time to collect and analyze power supply and usage data from 
distribution network elements and from millions of end-user devices. A 
Smart Grid can collect such data as often as every minute or ``on 
demand,'' which provides much more information and control than systems 
that allow less frequent reads fewer devices or of only end-user 
devices or distribution elements. A Smart Grid's real-time capability 
allows utilities and end-users to partner in shaving peak loads enough 
to reduce the need for expensive new generation plants. This saves end-
users money and helps to reduce greenhouse gas emissions over time--the 
Electric Power Research Institute (EPRI) has projected that the Smart 
Grid can reduced electricity consumption by up to 10 percent 
(comparable to or more than the supply available from renewables), 
reduce emissions by up to 25 percent and reduce the costs of power-
related disturbances by 87 percent.\6\
---------------------------------------------------------------------------
    \6\ See EPRI Report, page 42.
---------------------------------------------------------------------------
    Many Members of Congress are encouraging use of renewable energy 
resources like wind and solar energy. The Smart Grid can improve the 
value of such renewable resources, which in the case of wind and solar 
are often dependent on the time of year or prevailing conditions that 
can vary throughout any 24 hour period. With Smart Grid, real-time 
information about the availability of renewable-generated power can be 
combined with real-time information about the demand in any given part 
of the grid. For this reason, any Renewable Portfolio Standard (RPS) 
considered by the Congress should treat Smart Grid efficiencies as 
eligible for inclusion in RPS.
    Although we will continue to need new and improved generation 
plants, including those that provide renewable energy resources like 
wind, biomass, and solar, the United States also must maximize the 
efficiency, reliability, security, and safety of the electric 
distribution network. Another benefit of Smart Grid is its ability to 
ensure that plug-in electrical vehicles are truly a clean-energy 
option. Although 70 percent of all cars, trucks, vans and SUVs could be 
powered from the electric grid, the time-sensitive demand response 
enabled by Smart Grid and its ability to measure distributed generation 
sold back into the distribution grid is necessary to maximize the 
environmental and economic benefits of widespread plug-in electric 
vehicle adoption.\7\ Automobiles can be charged during the lowest rate 
periods, say at night, and be used to distribute energy back into the 
grid at high peak times, thereby saving money and mitigating the need 
for peak power plants.
---------------------------------------------------------------------------
    \7\ Pacific Northwest National Laboratory Study, available at: 
http://www.pnl.gov/news/release.asp?id=204 (Dec. 11, 2006).
---------------------------------------------------------------------------
    Encouraging a Smart Grid also will help American companies gain and 
preserve market leadership in what is fast becoming a worldwide market. 
Countries all over the world need a modernized electric grid, and 
companies from the United States can be leaders in this global market. 
Indeed, CURRENT and other American companies already are pursuing such 
international opportunities, which will create high tech jobs here at 
home.
Why must Congress act to encourage Smart Grid?
    Smart Grid is a reality today. For instance, in and around Dallas/
Fort Worth, Texas, CURRENT is presently deploying the Nation's first 
true Smart Grid with Oncor Electric Delivery. This system, which 
ultimately will reach almost two million homes and businesses, is 
already reading advanced meters at 15-minute intervals; conducting 
network monitoring that can detect problems before they cause power 
outages, safety hazards or system quality problems; and providing power 
outage and restoration detection if outages do occur.
    Although CURRENT is deploying the first Smart Grid today, utilities 
in general are slow to embrace new technologies largely because of 
regulatory uncertainty and economic disincentives. Federal action to 
address both of these issues is essential to accelerate Smart Grid 
deployments. Utilities often anticipate that their discretionary 
adoption of new technology may be politically challenged or that cost 
recovery will be denied after the fact. An even greater disincentive 
faces a utility that might seek to create efficiency or encourage lower 
consumption. Under traditional regulatory models, a utility profits by 
selling energy. There is no real incentive for a for-profit entity to 
spend money in order to earn less. As a result, utilities have strong 
regulatory and financial incentives to spend money on more traditional 
items, such as new power generation plants, rather than acquiring new 
technology to make more efficient use of existing power. An added 
aspect of such disincentives is that a utility can earn a much higher 
rate of return on new generation plants than on conservation, so 
utilities accordingly can be expected to spend more on such traditional 
assets.
    As a result of the aging distribution networks, skyrocketing 
demand, the increasing costs of building generation plants, and the 
existing disincentives for change, CURRENT believes Federal legislation 
in this area is essential. We suggest Congress consider various 
incentives for utilities, including grant programs (particularly to 
small utilities that want to adopt Smart Grid), tax incentives, 
accelerated depreciation, financial incentives for energy efficiency 
spending, and inclusion of Smart Grid in any Renewable Portfolio 
Standard. Suggested investment incentives would include the following:

        Renewable Portfolio Standard--since Smart Grid can reduce 
        electricity consumption by up to 10 percent (an amount 
        comparable to renewables), a utility's deployment of a Smart 
        Grid should be included in any Renewable Portfolio Standard.

        Cost Recovery--utilities should have the certainty of knowing 
        that they can include in their rates the actual costs of 
        investing in Smart Grid systems.

        Enhanced Return--utilities should be permitted to earn an 
        enhanced return on their investment in Smart Grid systems, 
        including a return on a portion of their operating and 
        maintenance expenses, to induce utilities to spend on Smart 
        Grid investments.

        Retained Savings--As an alternative to an actual return on 
        operating and maintenance expenses, utilities could be 
        permitted to retain a meaningful portion of the savings 
        resulting from such expenses to the extent they result in 
        efficiencies that otherwise would be passed on to end-users 
        (thereby producing a return on the utility's expenditure).\8\
---------------------------------------------------------------------------
    \8\ This is especially applicable since O&M expenditures to 
implement a Smart Grid will cost the utility, and therefore its rate 
payers, less than if the utility were to capitalize the entire cost of 
building the Smart Grid.

        Obsolete Equipment--A utility should be able to recover the 
        costs of equipment rendered obsolete by its deployment of a 
        Smart Grid system, based on the remaining depreciable life of 
---------------------------------------------------------------------------
        the obsolete equipment.

        Regulatory Reform--States are vital players in the regulation 
        of the Nation's electric infrastructure, but should not be 
        allowed to prohibit or impede a utility's deployment of a Smart 
        Grid system on its distribution facilities.

    Although CURRENT encourages Congress to act now to encourage the 
further and nationwide deployment of the Smart Grid, it is important 
that any legislation first do no harm. CURRENT would like to underscore 
the delays that will result if legislation were to focus too much on 
items that, although well-intended, would in fact delay Smart Grid 
deployments, such as additional studies, demonstration projects, and 
creation of additional agencies. The technology needed for a Smart Grid 
already exists. The savings available from a Smart Grid are also 
demonstrable today. More study is not necessary. What is needed is to 
remove existing regulatory constraints and to create affirmative 
incentives for rapid action. As was the case decades ago when the Rural 
Electrification Act helped to wire the Nation, Congress should act to 
ensure that the benefits of a Smart Grid become available to all 
Americans as swiftly as possible.

    Senator Kerry. I look forward to that. Thank you very much.
    Mr. Hicks, you're the cleanup.

 STATEMENT OF TOM HICKS, VICE PRESIDENT, LEADERSHIP IN ENERGY 
 AND ENVIRONMENTAL DESIGNS (LEED), U.S. GREEN BUILDING COUNCIL

    Mr. Hicks. Thank you.
    My name is Tom Hicks, and I'm the Vice President of LEED, 
which is the nationally recognized green-building rating system 
administered by the U.S. Green Building Council.
    USGBC is a nonprofit coalition of more than 9,500 private, 
nonprofit, and governmental organizations working to transform 
the building design, construction, and operations. Our vision 
is simple, that all buildings achieve sustainability within a 
generation.
    Thank you for your leadership in this area, Senator Kerry, 
and for providing us the opportunity to talk with you today.
    Across the spectrum of green building, new products, new 
services, and new ways of tackling building process are 
emerging, laying the foundation for what stands to be one of 
the greatest market evolutions in history. USGBC helps bring 
these innovations to market quickly, using its role as a market 
educator to provide the knowledge transfer that integrates new 
ideas and technologies into building practice.
    One key venue is USGBC's annual Green Build International 
Expo and Conference, which, last year, attracted 13,000 
professionals, featured almost 1,000 exhibitors, and had 12 
full educational tracks in all aspects of green building, 
setting up the mechanism for ongoing technology and idea-
sharing.
    USGBC also encourages the introduction of new ideas, 
technologies, and scientific advances directly into the LEED 
rating system. Many of these innovations are focused on 
optimizing energy performance. That's critical, because every 
year, buildings are responsible for 39 percent of the U.S. 
CO2 emissions, 70 percent of the U.S. electric--
electricity consumption. They also use 15 trillion gallons of 
water and consume 40 percent of raw materials globally.
    Green buildings are an immediate and measurable path toward 
energy independence and slowing climate change. Green buildings 
use an average of 36 percent less energy than conventional 
buildings, with a corresponding reduction in CO2 
emissions. In fact, if half of all new construction in the U.S. 
were built to that standard, it would be the equivalent of 
taking more than 1 million cars off the road every year.
    Green buildings make sense, both for the environment and 
for the bottom line. Studies show that, on average, LEED 
buildings cost less than 1.5 percent more than conventional 
construction, and that investment is paid back in full within 
the first year, based on energy savings alone.
    But energy savings aren't the only story. Water 
conservation, reductions in construction waste and effective 
storm-water management not only mean savings for the building 
owner, but also reduce the demand on municipal infrastructures.
    In fact, it's the aggregation of practices in the five key 
areas addressed by LEED--energy, water, indoor air quality, 
materials, and site--that deliver true high-performance 
buildings.
    Health and productivity benefits are equally impressive. 
Studies from prestigious organizations, such as Carnegie Mellon 
University, demonstrate that people in green buildings have 40 
percent fewer incidents of colds, flu, and asthma. Patients in 
green hospitals are discharged as much as 2 and a half days 
earlier. And children in green schools score up to 18 percent 
better on test scores.
    The lower operating costs associated with the LEED-
certified buildings are resulting in buildings with higher net 
operating income, and thus, higher asset value than their 
conventional counterparts. Leading institutions, including Bank 
of America, PNC Bank, Goldman Sachs, Citigroup, Wells Fargo, 
and CB Richard Ellis have all embraced LEED.
    Insurance companies, including AIG and Fireman's Fund, now 
offer premium discounts for green buildings. Today, 889 
buildings have been certified, and 6,700 more are in process, 
totaling 1.1 billion square feet. Every business day, $100 
million worth of construction registers with LEED. There are 
LEED projects in every State and in 26 countries, and, 
increasingly, building owners and developers are choosing to 
certify their entire building portfolios.
    The LEED rating system addresses all building types, from 
the individual home to commercial office buildings to large-
scale developments. It also addresses the full building life 
cycle, from construction to operations to renovations.
    As green buildings are integrated into the mainstream, 
costs come down, aggregate benefits go up, and the whole of the 
market is driven to innovation. It is the case study for how 
even a large and fractured industry, one that represents 14.2 
percent of the U.S. GDP, can change itself from the inside out, 
and how environmental achievements can be won side by side, 
with powerful economic results.
    USGBC is committed to our mission, because green buildings 
save energy, reduce CO2 emissions, conserve water, 
improve health, increase productivity, and cost less to operate 
and to maintain. Green buildings are becoming highly prized 
assets and a critically important part of the solution to 
global climate change and energy independence.
    Thank you, again, for the opportunity to address you today. 
We look forward to working with you to accelerate 
transformation of the built environment to sustainability.
    Thank you.
    [The prepared statement of Mr. Hicks follows:]

 Prepared Statement of Tom Hicks, Vice President, Leadership in Energy 
   and Environmental Design (LEED'), U.S. Green Building 
                                Council
    Thank you for providing the U.S. Green Building Council (USGBC) 
with the opportunity to testify on the benefits of green buildings. We 
commend Chairman Kerry for his leadership in this critical area.
    My name is Tom Hicks, and I am USGBC's Vice President of LEED, 
USGBC's green building rating system that has become the leading 
national rating system for evaluating and certifying green buildings. 
It is a privilege to talk with you about the role of the Council and 
the LEED' (Leadership in Energy and Environmental Design) 
Green Building Rating SystemTM in addressing the urgent 
challenge of energy efficiency and climate change, and the many far-
reaching benefits of green building.
The Impact of the Built Environment
    Buildings are an essential element of the solution to the energy, 
resource, and climate issues our country is facing.
    Buildings have a lifespan of 50-100 years, throughout which they 
continually consume energy, water, and natural resources, thereby 
generating significant CO2 emissions. In fact, buildings are 
responsible for 39 percent of U.S. CO2 emissions per year. 
If the U.S. built half of its new commercial buildings to use 50 
percent less energy, it would save over 6 million metric tons of 
CO2 annually, for the entire life of the buildings--the 
equivalent of taking more than 1 million cars off the road every year.
    In addition, buildings annually account for 39 percent of U.S. 
primary energy use; 70 percent of U. S electricity consumption; use 
12.2 percent of all potable water, or 15 trillion gallons per year; and 
consume 40 percent of raw materials globally (3 billion tons annually). 
The EPA estimates that 136 million tons of building-related 
construction and demolition debris are generated in the U.S. in a 
single year. (By way of comparison, the U.S. creates 209.7 million tons 
of municipal solid waste per year.)
    Green buildings are a significant part of the solution to the 
problems of energy dependence and climate change. The average LEED 
certified building uses 32 percent less electricity, 26 percent less 
natural gas and 36 percent less total energy than a conventional 
building. LEED certified buildings in the U.S. are, in aggregate, 
reducing CO2 emissions by 150,000 metric tons each year, 
which equates to taking 30,000 passenger cars off the road.
    Of the various strategies that have been proposed, building green 
is one of the most effective for meeting the challenges of energy 
consumption and climate change. The technology to make substantial 
reductions in energy use and CO2 emissions in buildings 
already exists; modest investments in energy-saving and other climate-
friendly technologies can yield buildings and communities that are 
significantly more environmentally responsible, more profitable, and 
healthier places to live and work.
    By addressing the whole building, from construction materials to 
cleaning supplies, LEED generates opportunities to reduce emissions and 
environmental impact throughout the supply chain and the complete 
building lifecycle. Sixty five percent of the credits in the LEED 
Rating System reduce the CO2 footprint of the building. The 
avenues by which LEED mitigates climate change include:
Energy
    LEED awards credits for reducing energy use in buildings through 
such means as installing energy efficient heating and cooling systems; 
using renewable power (e.g., daylight, solar heating, wind energy); 
requiring building commissioning; and purchasing green power.
Water
    On average, a LEED certified building uses 30 percent less water 
than a conventional building, which translates to more than 1 million 
gallons of water saved per year. Reducing the amount of water that 
needs to be conveyed to and treated by municipal wastewater treatment 
facilities also reduces pumping and process energy required by these 
systems. LEED also promotes on-site treatment of storm water to 
minimize the burden on municipal treatment systems.
Materials
    LEED buildings use fewer materials and generate less waste through 
measures such as reusing existing building structures whenever 
possible; developing a construction waste management plan; salvaging 
materials; using materials with recycled content; using local 
materials; and implementing an on-site recycling plan. Reduced 
materials consumption lowers the overall embodied energy of the 
building, which has a direct impact on the building's carbon footprint.
Transit- and Density-Oriented Development
    LEED buildings earn credits for being located near public 
transportation. LEED also rewards car pooling; using hybrid or electric 
cars; and bicycling or walking instead of driving. In addition to the 
emissions produced by the cars themselves, the infrastructure required 
to support vehicle travel increases the consumption of land and non-
renewable resources, alters storm water flow and absorbs heat energy, 
which exacerbates the heat island effect.
Green Building Trends and Market Transformation
    Just a few years ago, green building was the domain of a vanguard 
of innovative practitioners. Today, green building is being rapidly 
adopted into the mainstream of building practice in both the 
residential and commercial sectors. McGraw-Hill Construction forecasts 
that the combined annual commercial and residential green building 
markets will total $62 billion by 2010.
    USGBC's LEED Green Building Rating System serves as an essential, 
proven tool for enabling this market transformation. Equally as 
important as recognizing leading practice through third-party 
certification, LEED has given the community of building design, 
construction, and management professionals a concise framework for 
best-practices in high-performance green building design and 
operations.
    To date, there have been 889 LEED-certified buildings worldwide, 
with the majority in the United States. In addition, more than 6,700 
commercial building projects have enrolled with USGBC, and are pursuing 
certification. In total, 1.1 billion square feet of construction space 
is being built to meet LEED, and that figure grows daily.
    The growth is manifest in USGBC's green building professional 
accreditation program as well. Since the program's launch in 2002, more 
than 36,000 professionals from all disciplines have become LEED 
Accredited Professionals (LEED APs).
    The LEED Rating System was originally developed for new commercial 
construction projects, and the rapid uptake of the program demonstrated 
that the market needed additional tools to address different building 
types and lifecycle phases. USGBC released rating systems for the 
operations and maintenance and commercial interiors markets in 2006, 
and is currently pilot-testing rating systems for homes and 
neighborhood developments. Already, more than 6,000 homes and 200 
builders are participating in the LEED for Homes pilot test; nearly 200 
homes have been certified to date. LEED for Neighborhood Development, 
which integrates principles of smart growth, urbanism, and green 
building at the neighborhood level, is also being pilot-tested. More 
than 350 projects have enrolled for consideration for the pilot. USGBC 
recently launched LEED for Schools, and is completing rating systems 
for healthcare facilities, retail, labs, and campuses.
    In addition, USGBC is currently piloting a new LEED program for 
portfolio performance that meets the needs of large owners of 
commercial real estate who are seeking to green their entire real 
estate portfolios. This innovative approach provides cost-effective 
solutions to improve building performance across entire companies and 
organizations. The goal is to facilitate immediate and measurable 
achievements that will contribute to long-term sustainability. The 
portfolio program focuses on the permanent integration of green 
building and operational measures into standard business practice. 
USGBC is working with 26 market leaders as a part of the pilot, 
including American University, Bank of America, California State 
University--Los Angeles, Cushman & Wakefield, Emory University, HSBC, 
N.A. , PNC Bank, State of California Department of General Services., 
Syracuse University, Thomas Properties Group, Transwestern, University 
of California at Merced, University of California at Santa Barbara, 
University of Florida, and USAA Real Estate Company.
Green Building and Innovation
    Across the spectrum of green building, new products, new services 
and new ways of tackling building process are emerging, laying the 
foundation for what stands to be one of the greatest market evolutions 
in history. USGBC takes seriously its role in helping these innovations 
come to market quickly, and uses its role as market educator to provide 
the support and visibility these kinds of advances deserve. One key 
venue is UGBC's annual Greenbuild International Expo and Conference, 
which last year attracted more than 13,000 attendees, featured almost 
1,000 exhibitors, and 12 full educational tracks in all aspects of 
green building, setting up the mechanism for ongoing technology and 
idea sharing.
    USGBC also encourages the introduction of new ideas and scientific 
advances directly into the LEED rating system through Innovation in 
Design credits, which can be introduced and tested by individual 
project teams before being put out for public comment and balloted 
through the consensus membership process.
    Green building technologies touch every element of green building 
design--from site selection, to water and energy efficiency and 
management, to indoor environmental quality, to recycling of 
construction waste.
    Many of these innovations are focused on optimizing energy 
performance, and reduce environmental impacts associated with excessive 
energy use. The fluorescent lamp, for example, saves three-quarters of 
a ton of carbon dioxide and 15 lbs of sulfur dioxide. It also saves $30 
to $50 over the life of the bulb because it uses 75 percent less energy 
and lasts 10 times as long.
    ENERGY STAR has been a significant catalyst for the 
development of energy efficient appliances for office buildings, 
ranging from computers and copiers to printers and water coolers. All 
save on the amount of electricity used, reducing the demand for energy.
    Green buildings have also been a significant driver for renewable 
energy resources, by encouraging on-site renewable energy in order to 
reduce environmental impacts associated with fossil fuel energy use. 
Some of the innovations in this area include:

   Biomass, where plant material is converted to heat energy in 
        a boiler or gasifier to generate electricity. The heat is 
        converted to mechanical energy in a steam turbine, gas turbine 
        or an internal combustion engine, and the mechanical device 
        drives a generator that produces electricity. Current biomass 
        technology produces heat in a direct-fired configuration. 
        Biomass gasifiers are under development and are being 
        introduced to the marketplace.

   Photovoltaics (PVs) are composite materials that convert 
        sunlight directly into electrical power. In recent years, the 
        efficiency of the cells has increase and the cost has dropped. 
        As a result Building-Integrated Photovoltaics (BIPVs) are 
        increasingly incorporated into building elements such as the 
        roof, cladding or window systems. They generate direct current 
        electricity, which must be converted to alternating current 
        before it can be used in mainstream building systems.

   Wind energy, where wind is converted into electricity via 
        large rotors, has gained a lot of attention in buildings. 
        Advances in the wind energy market include the development of a 
        vertical-axis wind turbine which relies on simplicity of design 
        and advanced blade configuration to create a potentially low-
        cost, efficient power system.

   Green roofs, where a roof of a building that is partially or 
        completely covered with vegetation and soil, or a growing 
        medium, planted over a waterproofing membrane. It provides 
        amenity space for building users, reduces heating loads on 
        buildings, cleans air, reduces storm water runoff and increases 
        roof life span.

    Research has shown that electrical lighting makes up a significant 
portion of energy use in buildings, especially commercial buildings. 
Re-designing new buildings to optimize the use of natural light or 
``daylighting'' to replace electrical lighting in areas such as 
atriums, hallways, cafeterias, and playrooms can have a significant 
impact on energy reduction.
    Electrochromic or ``smart'' windows save energy by controlling the 
amount of solar heat that passes through the window glass. For example, 
in winter, they lighten to allow heat to pass through the glass but not 
back out, reducing the amount of energy needed for home heating. In 
summer, they darken without blocking visible light to reduce the amount 
of heat coming into the home and decrease cooling costs. Electrochromic 
windows darken or lighten by a chemical reaction that is set off by a 
small voltage (you can run an entire house on the voltage required to 
run one traditional light bulb).
    Although they can technically be classified as electrochromic 
materials, the new reflective hydrides that are being developed for 
windows behave in a noticeably different way. Instead of absorbing 
light, they reflect it. Thin-film solar cell material made of nickel-
magnesium alloy is able to switch back and forth from a transparent to 
a reflective state. The switch can be powered by electrochromic or 
hydrogen and oxygen gases (gas-chromic technology). Furthermore, this 
material has the potential to be even more energy efficient than other 
electrochromic materials.
    High-performance, whole-building design methods integrate passive 
solar, energy efficiency and renewable technologies to reduce building 
energy consumption. Many buildings use passive solar to offset 
significant electrical loads, such as replacing electrical lighting 
with natural light or ``daylighting'' and reducing heating and cooling 
loads by storing heat and cool air in building materials such as brick. 
Low-cost solar hot water systems can significantly contribute to 
reaching the goal of cost-effective energy savings greater than 50 
percent in most climates.
    On the horizon, there is great promise for inexpensive highly 
efficient nanocomposite materials for solar energy conversion and 
thermoelectric materials that can transform heat directly into 
electrical energy.
    It is clear that new technologies are transforming not just what we 
do but how we do it, reinventing the building industry and driving 
market transformation.
Costs and Benefits of Green Building Using LEED
    Projects enroll in LEED by registering their intent with USGBC and 
paying a fee of $450. Project certification fees are approximately 
$0.03 per square foot, and average about $4,500.
    According to third-party studies published and updated by Capital E 
and by Davis Langdon in the past 24 months, the average total 
additional cost for using LEED on a project (including professional 
fees, materials, and systems) is 1.5 percent or less. That cost is 
typically repaid in the first 10 months of building operation based on 
energy savings alone.
    For example, according to U.S. Banker Magazine, the greening of the 
Bank of America Tower, being constructed in Manhattan, is adding less 
than 2 percent of its projected cost. The project expects to recoup any 
investments through reduced electricity usage and water-saving 
techniques.
    Harvard Business Review cites the DPR building in Sacramento, 
California, as having invested 1.4 percent upfront additional costs to 
implement green measures. The project is expected to more than make up 
the investment by generating over $400,000 in operations savings.
About the U.S. Green Building Council
    The U.S. Green Building Council (USGBC) is a nonprofit membership 
organization with a vision of sustainable buildings and communities 
within a generation. Our 9,500 member organizations and 92,000 active 
individual volunteers include leading corporations and real estate 
developers, architects, engineers, builders, schools and universities, 
nonprofits, trade associations and government agencies at the Federal, 
state and local levels. Green buildings save energy, reduce 
CO2 emissions, conserve water, improve health, increase 
productivity, cost less to operate and maintain, and increasingly cost 
no more to build than conventional structures. Because of these 
benefits, they are becoming highly prized assets for companies, 
communities and individuals nationwide.
    As the developer and administrator of the LEED' 
(Leadership in Energy and Environmental Design) Green Building Rating 
SystemTM, USGBC is a leader in green building and green 
development. Founded in 1993, USGBC is a 501(c)(3) nonprofit 
organization, an ANSI-accredited standards developer and a newly active 
participant in ISO technical working groups. The organization is 
governed by a diverse, 31-member Board of Directors that is elected by 
the USGBC membership. Volunteer committees representing users, service 
providers, manufacturers, and other stakeholders steward and develop 
all USGBC programs, including the LEED rating system, through well-
documented consensus processes. Seventy local USGBC Chapters and 
Affiliates throughout the U.S. provide educational programming to local 
communities.
    A staff of more than 85 professionals administers an extensive 
roster of educational and informational programs that support the LEED 
Rating System in addition to broad-based support of green building. 
USGBC's LEED Professional Accreditation program, workshops, green 
building publications, and the annual Greenbuild conference provide 
green building education for professionals and consumers worldwide.
About the LEED' Green Building Rating SystemTM
    LEED is the nationally recognized benchmark for the design, 
construction, and operations of high-performance green buildings. Since 
2001, LEED has provided building owners and operators with design and 
measurement tools with the reliability and integrity they need to have 
an immediate, quantifiable impact on their buildings' performance.
    LEED is a voluntary standards and certification program, and was 
developed to promote leadership in the building industry by providing 
an objective, verifiable definition of ``green.'' LEED is a flexible 
tool that can be applied to any building type and any building 
lifecycle phase, including new commercial construction; existing 
building operations and maintenance; interior renovations; speculative 
development; commercial interiors; homes; neighborhoods; schools; 
healthcare facilities; labs; and retail establishments.
    LEED promotes a whole-building approach to sustainability by 
recognizing performance in five key areas, with an additional category 
to recognize innovation: sustainable site development, water savings, 
energy efficiency, materials and resources and indoor environmental 
quality. Each category includes certain minimum standards 
(``prerequisites'') that all projects must meet, followed by additional 
credits that are earned by incorporating green design and construction 
techniques. Four progressive levels of LEED certification--Certified, 
Silver, Gold and Platinum--are awarded based on the number of credits 
achieved. USGBC provides independent, third-party verification that a 
building meets these high performance standards.
    USGBC member committees develop the LEED Rating System via a robust 
consensus process that enables USGBC to incorporate constantly evolving 
practices and technologies. The key elements of the process, which 
USGBC has refined over more than a decade of leadership experience, 
include a balanced and transparent committee structure; Technical 
Advisory Groups to ensure scientific consistency and rigor; 
opportunities for stakeholder comment and review; member ballot of new 
rating systems and substantive improvements to existing rating systems; 
and a fair and open appeals process. Details about the LEED development 
process are publicly available on the USGBC website, www.usgbc.org.
    USGBC is continuing to advance the market with the next evolution 
of LEED, which will harmonize and align LEED rating systems and 
versions, as well as incorporate recent advances in science and 
technology. Congruent with this effort, USGBC is introducing a 
continuous improvement process into LEED, which will create a more 
flexible and adaptive program and will allow USGBC to respond 
seamlessly to the market's evolving needs. Particular focus areas 
include technical and scientific innovations that will improve building 
performance; the applicability of LEED to the marketplace, in order to 
speed market transformation; and the customer experience, to ensure 
that LEED is an effective tool for the people and organizations using 
it.
    The inclusion of Life Cycle Analysis (LCA) is an important step in 
the technical development of LEED. USGBC's Life Cycle Assessment 
working group has developed initial recommendations for incorporating 
Life Cycle Assessment (LCA) of building materials as part of the 
continuous improvement of LEED.
    LCA holistically evaluates the environmental impact of a product 
throughout its life cycle: from the extraction or harvesting of raw 
materials through processing, manufacture, installation, use, and 
ultimate disposal or recycling. USGBC's long term objective is to make 
LCA a credible component of integrated design, thereby ensuring that 
the environmental performance of the whole building takes into account 
the complete building life cycle.
    In 2006, citing the qualities outlined above, the U.S. General 
Services Administration submitted a report to Congress concluding that 
LEED is the ``most credible'' of five different rating systems 
evaluated. The GSA currently requires its new buildings to achieve LEED 
certification.
    Building projects are enrolled in the LEED program by registering 
their intent with USGBC through LEED Online. After the building is 
constructed, the project teams submit proof-of-performance in the form 
of online documentation through LEED Online. LEED Online was developed 
through a partnership with Adobe Systems Inc.
    Expert certification teams review and verify project documentation, 
and award LEED Certified, Silver, Gold, or Platinum certification based 
on the number of credits the project achieves based on a sliding scale.
LEED and the Government
    Governments at all levels have been highly influential in the 
growth of green building, both by requiring LEED for their own 
buildings and by creating incentives for LEED for the private sector. 
From the Department of Energy's support for the initial development of 
LEED, to the Federal Energy Policy Act of 2005, to the many cities and 
states that have adopted LEED, the public sector has demonstrated 
considerable vision and leadership in the transformation of the built 
environment. Currently, 12 Federal agencies, 22 states and 85 local 
governments have made policy commitments to use or encourage LEED.
    The Federal Government has been a particularly strong supporter of 
USGBC and LEED. The U.S. Department of Energy enabled the development 
of LEED with a $500,000 grant in 1997, and has also provided USGBC with 
$130,000 in grants to support the Greenbuild Conference and Expo. Staff 
from the national laboratories, FEMP and other program areas have 
actively shared their expertise to develop and refine LEED. USGBC has 
also collaborated with DOE's Office of Energy Efficiency and Renewable 
Energy with Building Green on the High Performance Buildings Data base.
    The U.S. General Services Administration--which is the Nation's 
largest landlord--requires its new buildings and major renovation 
projects to achieve LEED certification. As mentioned previously, GSA 
also submitted a report to Congress affirming that LEED ``continues to 
be the most appropriate and credible sustainable building rating system 
available for evaluation of GSA projects.'' In particular, GSA noted 
that LEED applies to all GSA project types; that it tracks the 
quantifiable aspects of building performance; that LEED is verified by 
trained professionals and has a well-defined system for incorporating 
updates; and that it is the most widely used rating system in the U.S. 
market.
    Government leadership will continue to be essential to the 
advancement of green building. USGBC supports targeted, viable 
government initiatives that facilitate market transformation, 
including:

   The creation of an Office of High-Performance Green 
        Buildings within the U.S. General Services Administration to 
        coordinate green building research, information dissemination 
        and other activities, as provided by S. 506, the High-
        Performance Green Buildings Act of 2007.

   The expansion of the Office Director's duties that would 
        facilitate: metering, sub-metering and continuous commissioning 
        of Federal buildings in order to measure energy use and to 
        ensure that building systems are delivering the efficiencies 
        for which they are designed; agency reports on their 
        CO2 reductions using the existing energy targets 
        required by Federal law; establishment of green building 
        education and training programs for Federal agency staff in 
        order to ensure that the capability exists to achieve agency 
        sustainable building goals.
Research
    In a March 2007 report, USGBC found that research related to high-
performance green building practices and technologies amounts to only 
0.2 percent of all federally funded research. At an average of $193 
million per year from 2002 to 2005, research spending is equal to just 
0.02 percent of the estimated value of annual U.S. building 
construction. These funding levels are not commensurate with the level 
of impact that the built environment has on our Nation's economy, 
environment and quality of life. USGBC recommends that total annual 
Federal funding equate to 0.1 percent of annual construction value, $1 
billion.
    Furthermore, USGBC has identified the following eight research 
program areas toward which such funding should be applied: Life Cycle 
Assessment of Construction Materials; Building Envelope and HVAC 
Strategies; Lighting Quality; Transportation-Related Impacts of 
Buildings; Performance Metrics and Evaluation; Information Technology 
and Design Process Innovation; Indoor Environmental Quality; and 
Potable Water Use Reduction in Buildings.
High Performance Schools
    In the U.S., more than 55 million students and more than 5 million 
faculty, staff, and administrators spend their days in school 
buildings. These buildings represent the largest construction sector in 
the U.S.--$80 billion in 2006-2008--which means that greening school 
buildings is a significant opportunity to make a major impact on human, 
environmental, and economic health.
    Most important, children in green schools are healthier and more 
productive. Design features including attention to acoustical and 
visual quality, daylighting, and color have a profound impact on 
children's ability to learn. Green schools also have superior indoor 
air quality and thermal comfort, and expose children to fewer chemicals 
and environmental toxins--which has been linked to lower asthma rates, 
fewer allergies, and reduced sick days.
    Green schools cost less to operate and greatly reduce water and 
energy use, which generates significant financial savings. According to 
a recent study by Capital E, if all new school construction and school 
renovations went green starting today, energy savings alone would total 
$20 billion over the next 10 years. On average, a green school saves 
$100,000 per year--enough to hire two new teachers, buy 500 new 
computers, or purchase 5,000 new textbooks. The minimal increase in 
upfront costs--on average less than $3 per square foot-is paid back in 
the first year of operations based on energy savings alone.
    To further this effort, USGBC supports Federal authorization and 
funding of K-12 green school demonstration projects in targeted school 
districts throughout the country. Such a directive must also include a 
requirement that the buildings are constructed so that they can serve 
the students as teaching tools on green building design, construction 
and operation.
Conclusion
    The U.S. Green Building Council is a coalition of leaders from 
every sector of the building industry working to transform the way 
buildings and communities are designed, built, and operated through 
market-based tools. USGBC's LEED' (Leadership in Energy and 
Environmental Design) Green Building Rating SystemTM has 
become a nationally accepted benchmark for high-performance green 
buildings.
    In just 7 years, LEED has had a significant, positive impact on the 
building marketplace. LEED was created to establish a common standard 
of measurement for what constitutes a ``green'' building, and provides 
independent third-party validation of a building's green features. LEED 
provides building owners and operators with the tools they need to make 
an immediate and measurable impact on their buildings' health and 
performance, which is why more than 1.1 billion square feet of 
construction space is being built to LEED standards. The impact is 
growing: Every business day $100 million worth of construction 
registers with LEED; 50 people attend a USGBC training course; 20 
people become LEED Accredited Professionals and four organizations join 
USGBC as members.
    Green building is essential to environmental, economic, and human 
health. Annually, buildings account for 39 percent of U.S. primary 
energy use; 70 percent of U.S. energy consumption; use 12.2 percent of 
all potable water, or 15 trillion gallons per year; and consume 40 
percent of raw materials globally (3 billion tons annually). The EPA 
estimates that 136 million tons of building-related construction and 
demolition debris is generated in the U.S. in a single year.
    Buildings are an essential part of the solution to mitigating 
climate change and establishing energy independence. The average LEED 
certified building uses 32 percent less electricity, 26 percent less 
natural gas, and 36 percent less total energy than a conventional 
building. LEED certified buildings in the U.S. are in aggregate 
reducing CO2 emissions by 150,000 metric tons each year, 
which equates to 30,000 passenger cars not driven. Building green is a 
highly effective strategy for meeting the challenges ahead of us. The 
technology to make substantial reductions in energy use and 
CO2 emissions in buildings already exists, which means that 
modest investments in energy-saving and other climate-friendly 
technologies can yield buildings and communities that are significantly 
more environmentally responsible, more profitable, and healthier places 
to live and work.
    Federal, state, and local governments have been instrumental in the 
growth of green building, both by adopting green building themselves 
and by encouraging it in the private sector. The government's continued 
leadership will be essential to ongoing advancements in this area. 
Significant opportunities exist in increasing Federal funding for green 
building research and in Federal support for the design and 
construction of green schools.
    Thank you again for the opportunity to present the views of the 
U.S. Green Building Council. We look forward to working with you to 
facilitate the transformation of the built environment to 
sustainability.

    Senator Kerry. Thank you, Mr. Hicks.
    Thank you, all of you. I think we've got a really 
interesting cross-section here, between those who are sort of 
pushing on an industry to change something, those who represent 
an industry that is changing something, those who are providing 
some of the public leadership, as well as some who are 
designing systems. And you can see the cross-section of the 
ways in which a whole bunch of people get pulled into a 
terrific economic enterprise. At the table, I think, there's a 
living example of the upside of all this.
    Mr. Hicks, first of all, congratulations to LEED. The 
numbers of people that I am increasingly meeting around the 
country, somebody will brag to me, ``Wow, you know, we're a 
LEED platinum building,''. Right here in Washington we've got 
the Sidwell Friends School. I've met several members of the 
Board of Trustees who come up and make a point of bragging on 
the school and what they've achieved in this building. And, 
likewise, I was visiting Biogen, up in Cambridge, Kendall 
Square has a superb building. It's won awards. The sun comes 
up, and the blinds open up more. It's computer-driven. And as 
the sun moves, then the blinds change. The creativity is 
enormous. I think you folks have had a good chunk of helping 
people to be aware.
    Let me understand what you're doing to make sure that 
everybody who touches a building is beginning to become aware 
of you. How do you do that? What's your outreach, and what do 
you need to, sort of, raise the level of awareness even more?
    Mr. Hicks. Thank you. Well, I believe what we're seeing is 
just a representation of what's going on in society today and 
across--not only in this country, but across the globe, in--
just an interest in protecting our resources. I think what 
we're doing, and what LEED encourages, is really an integrated 
approach to the design, the construction, and the operations of 
buildings. And so, that really, necessarily, includes people 
from around the building, those that are not just designing the 
building, the architects and the engineers, but also those who 
are occupying the building, who are paying the bills. And in 
the current paradigm, that really doesn't exist, where it's 
really those----
    Senator Kerry. So, what do you do to reach them? How do you 
proactively go out and make sure people are aware of these 
standards and of the possibilities?
    Mr. Hicks. Well, I think it's--there's a tremendous amount 
of outreach that we have through our chapter network. There are 
70 chapters that are members of the U.S. Green Building 
Council, and it's--through those efforts, there's a lot of 
advocacy that's been done on the local level to try----
    Senator Kerry. What's your budget, annually?
    Mr. Hicks. Annually, this coming year we're going to be 
about $40 million.
    Senator Kerry. Where does that money come from?
    Mr. Hicks. We have money that comes from our 9,500 member 
organizations that are part of the USGBC, through our 
educational programs, through our professional accreditation, 
and through our certification of LEED.
    In terms of support, where we could use the most help, I 
think, from the Federal Government, is really in research. If 
you look at the federally funded research, about $1 to $2 of 
every $10,000 is used in green buildings, or in building 
research, and we'd like to see that be closer to $1 in $1,000 
or $1 billion per year because of the impacts that buildings 
have on our society.
    Senator Kerry. Well, it's a good idea. What are you able to 
say to people is the average cost to a current homeowner of 
purchasing a LEED-certified building? What's the projected 
payback for that person?
    Mr. Hicks. It's going to follow very similar to what we're 
seeing on the commercial side, as well, which is typically 
within a year. In fact, on the commercial-building side, we're 
seeing it within 10 months, that that cost premium is being 
paid for, and that's just with the energy savings alone, that 
doesn't account for the water savings and the waste cost 
savings that might accompany that.
    Senator Kerry. So, obviously it depends on the size of the 
home and the amount----
    Mr. Hicks. Absolutely.
    Senator Kerry.--but that's a pretty good payback time, 10 
months.
    Mr. Hicks. Absolutely. And I think what we're seeing today 
is that green buildings and green homes are being built for not 
a penny more. I think the market's maturing, and has learned 
how to deliver green buildings.
    Senator Kerry. What are the biggest barriers that you find 
are keeping prospective builders and developers from planning a 
more energy efficient building? As you go out there, what 
frustrates you?
    Mr. Hicks. I think it's--what's most frustrating is 
actually perceptions. I think it's that people get to 
understand the true costs and the real benefits that come--the 
immediate and measurable results that come from green 
buildings--I think, just kind of getting past that barrier of 
perceptions. People, necessarily, think that because it has all 
these wonderful qualities and delivers all these wonderful 
results, ``Oh, it must cost more.'' But that, in fact, is not 
the case. And studies--recent studies are showing that, again, 
buildings are being built to green, to LEED standards, for not 
a penny more.
    Senator Kerry. Are you finding that the various 
associations, building trades, architects, et cetera, are 
proactively now beginning to say, ``Tell us more about this,'' 
or, ``How do we join in this effort?''
    Mr. Hicks. Without a doubt. The Alliance to Save Energy is 
one. And BOMA, IFMA, ASHRAE, AIA have all been part of--we've 
been actively engaged with all of those folks to promulgate 
sustainability into their membership and into their agendas, as 
well.
    Senator Kerry. And are you satisfied with the pace, at this 
point?
    Mr. Hicks. The pace is--been incredible. And--but, at the 
same time, we can, and have to, do more. And I think, you know, 
my--what I do every day is look at how we can increase the 
capacity and scale to meet--not only meet the demand that we 
see today, but meet the demand that we're going to see 6 months 
from now and a year from now, because it's growing by the day.
    Senator Kerry. Well, it's an exciting prospect, and we wish 
you well with it, obviously.
    Mr. Birnbaum, what, for a consumer who hears you talk about 
a ``smart grid,'' it sounds, kind of, ``Whoa, that's out of my 
league. How do I tap into that? What do I do?'' How do you, 
begin to put that down into the grassroots, if you will, so 
that people can understand what their role is and what's 
available to them?
    Mr. Birnbaum. A good question, Senator.
    The Smart Grid itself is something that the utility company 
obviously has to deploy before you and I, as consumers, can 
take advantage of it. When we talk to consumer advocacy groups, 
for instance, what we talk about are the savings that consumers 
can experience. The money, whether it's a business, can save, 
that we can save by signing up to demand response programs----
    Senator Kerry. But do you need to get a whole bunch of 
homes in one community all to take part? Or could one home sign 
up and benefit?
    Mr. Birnbaum. You'd want to--obviously, the larger the 
scale, the better. The way we approach----
    Senator Kerry. Is your business plan one that is built on 
that scale? I would assume----
    Mr. Birnbaum. Yes. In fact, our business model is based 
upon doing business, first and foremost, with the electric 
utility itself. So, when the utility decides to develop--deploy 
a Smart Grid across its entire footprint, everyone benefits, 
whether--whether they choose to or not, they will benefit.
    Senator Kerry. How do you cost something like that out? Is 
it per home? Per kilowatt hour? How do you do it?
    Mr. Birnbaum. It's usually per home, per meter, per square 
mile. It varies, depending on whether it's rural, suburban, 
urban, the utilities' cost structure. What we tend to do is, we 
have sophisticated business models, and we work with the 
utility company to plug in their costs and the potential 
savings, to show them how they can benefit.
    Senator Kerry. What kind of technology does a home consumer 
have to invest in to make this happen?
    Mr. Birnbaum. Very little. The technologies that, I think, 
Dr. Krebs was talking about, essentially demand response or 
digital load control switches, a device that you put on your 
water heater or your air-conditioner, and you can basically 
have that attached--the utility company could come attach 
that--and you don't need to do anything else. You would sign up 
for a program, give them the ability to reduce load at certain 
times during the day.
    Senator Kerry. Do you have estimates for the amount of 
reduction in electricity produced in Texas or elsewhere where 
you've deployed?
    Mr. Birnbaum. As far as what we expect or what we have----
    Senator Kerry. What you have achieved.
    Mr. Birnbaum. It's still--the deployment is in its infancy. 
We started deploying the technology last fall, so, at this 
point, no, but we're--we have real, live examples of outages 
that have been avoided, efficiencies that have been created by 
detecting things going on in the network, that clearly go on in 
every utility every day, but the utility company has no way of 
knowing about it until eventually it resulted in an outage, 
where somebody called and said, ``I've lost power.''
    Senator Kerry. In the six policy recommendations for 
incentivizing the Smart Grid, is there one that's the most 
important? Where would you say, and what would have the most 
impact on the Smart Grid?
    Mr. Birnbaum. Well, probably in the area of decoupling and 
cost recovery, in general. Utility companies----
    Senator Kerry. You mean the billing structure.
    Mr. Birnbaum. Yes. Yes.
    Senator Kerry. You need to have the company be able to say, 
get rid of this incentive to actually use more electricity.
    Mr. Birnbaum. Correct. What--utility companies look at a 
capital expenditure and say, ``Well, if I do that, I want to be 
absolutely certain the utility commission in my state is going 
to approve that, so I can get a rate of return. Otherwise, we 
spend money''----
    Senator Kerry. Sure.
    Mr. Birnbaum. --``and create efficiencies, and don't get a 
return.'' So, that sort of regulatory certainty is probably the 
most important thing that----
    Senator Kerry. Is there something we could do to more 
rapidly encourage the embrace of this?
    Mr. Birnbaum. Absolutely. Just 2 years ago, Congress 
adopted, under PURPA, amendments that drove the states toward 
advanced metering technologies. A number of states have had 
advanced metering system proceedings. The same thing can be 
true of Smart Grid. I think encouragement and requirements that 
States either--encouraging States to have their utilities 
adopt, or prohibiting States from taking policies that would 
impede utilities from adopting Smart Grid, probably are the 
most helpful things we can get at the Federal level.
    Senator Kerry. Mr. Johnson, all of us have wrestled with 
consumer home electronics, et cetera. Some of us still have 
VCRs that flash, and we don't know how to stop them.
    [Laughter.]
    Senator Kerry. I gather that, notwithstanding the increases 
that you've talked about, and the benefit of some of the cable 
boxes and so forth that are more effective now, apparently 
electricity usage by consumer electronics, when it's either 
idle or off, still cost an estimated $3.2 billion a year to the 
American consumer. So, what do we do to further decrease this? 
I mean, that seems like a pretty big grab that a lot of 
families would love to have back.
    Mr. Johnson. Sure. Thank you, Senator.
    I'd like to, of course, know more about what's behind that 
number. It's a number that I've not heard before. But what I 
can say about standby power in the consumer electronics 
industry is--it is a good news story, really--that ENERGY 
STAR has focused on this for many years, starting in 
1992, and now, today, addresses all major product categories in 
our industry with a program that, again, attempts to drive down 
standby power consumption in various product categories over 
time. And it's done a terrific job.
    There's one category--you did mention cable set-top boxes--
ENERGY STAR recently launched a new specification 
development program for set-top boxes, specifically. So, we 
believe this is an important category for ENERGY STAR 
to focus on.
    But, really, standby power is a good news story. Our--the 
research that I mentioned in our testimony has shown that, over 
time, standby power consumption has gone down for almost all 
major categories of electronics. And, again, the remaining 
ones, set-top boxes, is now the focus of ENERGY STAR.
    Consumer electronics use approximately 11 percent of 
household energy, or household electricity; 2.6 percent is 
attributable to standby power. So, three-quarters of the time, 
roughly, we're talking about active-mode power consumption; oh, 
and one-quarter of the time, standby mode. So, it's about that 
proportion for consumer electronics.
    Senator Kerry. We'd be happy to give you the documentation 
on the figures. They come from a number of different 
observations made by groups that are concerned about this. But 
is there a specific technology or some specific areas that we 
could encourage greater R&D in, or deployment in, that would 
more rapidly have an impact on this?
    Mr. Johnson. Well, again, this is----
    Senator Kerry. I mean, an awful lot of Americans don't have 
a clue that some appliance they've bought is plugged in, but 
not on, but still drawing power.
    Mr. Johnson. Sure. Some----
    Senator Kerry. A lot of people are paying for something 
they're not using, and there must be some more effective 
technology, at this point to combat this. Barring harm that can 
be done to some particular kinds of appliances because they 
needs to remain in a warm-bulb status or something. I notice 
most printers, for instance, take time to warm up. You turn 
them on cold. But you leave them on, and they're drawing 
unnecessary power sometimes for weeks on end.
    Mr. Johnson. Let me highlight a couple of things regarding 
standby power.
    First of all, as I mentioned, it's been reduced in many 
categories. What remains does serve a purpose. And some 
products----
    Senator Kerry. So, you're saying we can't go any further?
    Mr. Johnson. I'm saying--you can always go further, but 
it's a question of tradeoffs and how quickly. Standby power 
serves to enable remote controls, it serves to enable program 
guides in some products, it enables a quick startup of your 
television, for example. So, there are important consumer 
benefits or features that consumers want in products, that do 
require a little bit of standby. So, again, the effort is to 
drive it as low as possible, but maintain those features that 
consumers want. And many printers I'm aware of, many--much--
many products in the office equipment category are ENERGY 
STAR compliant, and do, when they're not being used, 
go back to a very low standby power mode.
    Senator Kerry. One of the things that you talk about is the 
lack of information on energy savings opportunities, sort of 
the back door to what I've just been talking about here. And 
you highlight, obviously, the upside, the ENERGY STAR 
program. And I think it's a good program, a very, very 
important program, personally. It's done a lot of good. But I 
think it could do a lot more good. And the question that ought 
to be asked is, why are we seeing data showing that only 57 
percent of the American public recognizes the ENERGY 
STAR logo as a program that's aimed at energy 
efficiency? We've got a real barrier in consumer-awareness 
limits in this area. And my question is, what recommendations 
would you make to us that are within our grasp, or to the 
American consumer, for decreasing their energy inefficiency, 
and increasing their efficiency?
    Mr. Johnson. I'm glad you mentioned that. Consumer 
education and the recognition of an energy--ENERGY 
STAR is really important. And, on one hand, it 
requires funding and focus; on the other hand, I think it 
requires partnership. CEA has been focused on consumer 
education by providing, at the beginning of last summer, 
energy-saving tips for electronics. We noticed that a number of 
utilities in State energy offices just did not have enough 
energy-saving tips related to electronics and ENERGY 
STAR. So, we've tried to support and complement that 
with our own tips. We've developed a website that gets the 
message out about ENERGY STAR, where to find products 
that are ENERGY STAR compliant, and also what to do 
with those products to help save energy. There are, I think, 
ways to bolster the ENERGY STAR label, and 
recognition of it. You mentioned it's about 57 percent. I think 
our research showed it's around 60, but it's somewhere in 
there. But, I think, through EPA's efforts and the private 
sector's, we can drive that up further for electronics by 
leveraging what we've done online and what many retailers are 
doing in the store.
    Senator Kerry. Well, we certainly want to work on it, and 
we'd love your cooperation and ideas, and we might try to 
figure out how we might augment this in a very significant way. 
When we talk about grabbing back energy, there's a big 
educational challenge for all of us. I think we ought to 
design, and think about what we can do here, to stimulate that 
in ways that we have done it in the drug field, we've done it 
in the health field in certain things, like smoking. There are 
different areas where we've proven pretty effective at it, and 
had a major impact on behavior. I think that this needs to be 
plus-upped significantly, and we ought to work together to 
think about how we're going to do that.
    I see Ms. Callahan is nodding in assent, and we'll work 
with all of you to try to do that.
    Dr. Krebs, you know, we're all watching California, 
obviously, with great interest, and we congratulate you and 
others on the very exciting and interesting choices that you 
all have been making out there. Can you share with me, expand 
if you will, on the decoupling of the financial returns of a 
public utility and its sales, of that mechanism. That's been 
key, I gather, to your ability to be able to get the Commission 
to move forward. It's always struck me as bizarre that we have 
this reverse social policy in place, where, all over the 
country, a lot of places reward consumers for being wasteful.
    Dr. Krebs. This is not my area of expertise. I have come to 
recognize the importance of it as I have been working in 
California. There is a--there is a report that, I believe, was 
released sometime last year, the National Action Plan for 
Energy Efficiency, which did a detailed study of decoupling 
under different circumstances for different kinds of utilities, 
where the states' different economies are taken into account. 
California had the particular benefit that, when it made this 
choice, it was a state with a growing economy, and so that--the 
impacts, the costs of the change, were minimized, and the 
social benefits that are available wherever you do it--in every 
kind of a utility in every kind of a State economy, there are 
social benefits to the states, overall--but there are sometimes 
costs. And, in particular, in California we had the fortunate 
situation where we had a growing economy, no history to move 
around, and so, we reaped general benefits, not just the social 
benefits. But it was hugely important, because the utilities, 
prior to this decision on the part of the Public Utility 
Commission, and, subsequently, the legislature, were--
basically, conservation meant you sold less electricity, you 
sold less natural gas, and, as a consequence, your return on 
investment was based on what you sold. When you basically said, 
``You will get so much for providing connection to electricity, 
and then so much for--you know, a certain percentage for what 
you--for the volume you sold, but not all of your rate of 
return,'' it basically allowed them to use some of their funds 
for encouraging efficiency. And I think that, as the Senate and 
the House look at a national approach to decoupling, you need 
to take into account these regional issues. But I think that 
plan, in particular, demonstrated the different circumstances 
that different kinds of utilities might face, but the overall 
social benefit.
    Senator Kerry. In your written testimony, you observed that 
the, I think the California research budget's about 28 million 
bucks. Is that right?
    Dr. Krebs. Eighty million.
    Senator Kerry. Eighty million.
    Dr. Krebs. Yes.
    Senator Kerry. That's a fund you have that supports 
research, development, and demonstration.
    Dr. Krebs. That's correct. And it----
    Senator Kerry. But 35 percent of that is allocated to 
efficiency and demand research, response research.
    Dr. Krebs. Yes.
    Senator Kerry. A smaller amount goes specifically to the 
efficiency/demand side, is what I'm saying----
    Dr. Krebs. That's----
    Senator Kerry.--the whole fund.
    Dr. Krebs. That's correct.
    Senator Kerry. OK. The Federal research budget, that's 
about 5 percent of the Federal research budget--which is $520 
million, is given to this whole idea of projected increase in 
electricity demand predicted over the next 20-30 years. Do you 
think we need to do more?
    Dr. Krebs. Yes.
    Senator Kerry. How much more?
    Dr. Krebs. Well, there have--we work----
    Senator Kerry. What would be an appropriate funding level 
for national energy efficiency research, in your judgment?
    Dr. Krebs. I would say at least double that. We've been 
working with colleagues at the Lawrence Berkeley National 
Laboratory, which is funded by DOE, and they're looking at 
incentives for the commercial building sector that probably are 
in excess of a billion dollars.
    Senator Kerry. Mr. Zimmerman, thank you for being here, and 
congratulations to Wal-Mart for being smart. We all know 
they're smart in retail, but I guess this is sort of a sideline 
of retail, in the sense that it augments the bottom line; but 
it's not exactly selling a product, it's being efficient in the 
management of your operation. And you saw, long ago, how 
critical that would be.
    Can you talk about the new prototype stores that are going 
to be more efficient than those that have been opened before? 
Can you just say, quickly, what technologies and innovations 
are currently available that other people ought to look?
    Mr. Zimmerman. LED lighting is probably the single biggest. 
We made our first application last year with LED lighting, and 
we are aggressively pursuing--it's in every new store that we 
build today, and actually will be retrofitted into 500 existing 
stores this year, and then next year. But it's just one 
application. We're working with GE and Philips and other 
entities, looking at how the entire sales floor can be lit with 
LED.
    Senator Kerry. And what kind of capital cost does it take 
to create this progressive lighting, I cite that all the time 
when I talk to people about this, in terms of hotels, where you 
come----
    Mr. Zimmerman. Right.
    Senator Kerry.--out of your room, and in the hall--it's 
dark, and, the minute you move, it lights up; and, 
progressively, as you move down the hall, it gets darker behind 
you and lighter where you're going.
    Mr. Zimmerman. Right. In our specific application, it's 
about $50,000 per store. So, the 500 stores are--is a $25 
million capital outlay. But it's immediate positive cash-flow, 
and it's 2-year paybacks on today's----
    Senator Kerry. Two-year payback.
    Mr. Zimmerman.--LED prices. Two-year payback on today's LED 
prices.
    Senator Kerry. Which will obviously go down.
    Mr. Zimmerman. This time next year, it'll be 12 months or 
less.
    Senator Kerry. Well, I hope every establishment does this. 
This is the kind of information, Mr. Hicks, we've got to get 
out there. People have got to be aware of this. No new building 
should be designed anywhere in America that doesn't take 
advantage of these kinds of things.
    Mr. Zimmerman. Right. Two weeks ago, at GE's Ecoimagination 
celebration in L.A., Jeff Immelt said there are 16 other 
companies lined up to purchase this actual application that we 
developed with GE, but, until they get their new assembly line 
on in July, they can't deliver the product. But it--the news is 
picking up speed. I mean, 2-year paybacks, that's a hard 
investment to beat.
    Senator Kerry. So, what, in your opinion, has limited the 
adoption of this technology by competitors and other large 
retailers?
    Mr. Zimmerman. Absolutely, first cost. I mean, even with 
the great payback, everything we're doing has an initial first 
cost. And it's because we're starting at a much more aggressive 
base than maybe some of Mr. Hicks' other entities he works 
with. But we have a first cost on all of these things. But, 
again, everything we're doing today, from a retrofit 
standpoint, has a 2-year or less payback, so it's an easy 
decision.
    Senator Kerry. What, when you say ``easy decision,'' do we 
need to take--you've done it without an incentive, and you've 
done it on your own. I'm trying to think about some kind of 
government incentive. On the other hand, the faster a lot of 
people start to embrace, the better off we're all going to be. 
What would you recommend to us, in terms of getting it out 
there more broadly?
    Mr. Zimmerman. You know, incentives would motivate some, 
but I think just the example of others--and, you know, you--a 
Wal-Mart as an example; a U.S. Capitol, as an example--you 
know, it's one of my bad habits, but I counted the incandescent 
lamps in this building--or in this room alone, and there are 
100 of them, and they're new incandescent lamps. They could 
have been compact fluorescents behind these frosted glasses. 
And this time of year, with the tens of millions of high school 
students and college students visiting our Nation's Capitol and 
seeing the most energy inefficient buildings they can find in 
the country, this ought to be another place to be an example, 
other than just the Wal-Mart stores of the world.
    Senator Kerry. It is, and it will be, and Nancy Pelosi and 
Harry Reid beat you to the punch by about 2 hours.
    [Laughter.]
    Mr. Zimmerman. Right. We met with Dan Beard yesterday, and 
we're going to help him with what we know----
    Senator Kerry. They did big things out there. We've been 
pushing this for some time. In my office, I've got a whole 
bunch of the new lighting. It tends to be brighter but, 
nevertheless, makes savings. The bottom line is, you're 
absolutely correct, and the entire footprint of this building 
has to change, and it's going to be, very rapidly, now, as we 
get this energy bill out of here, as will a whole bunch of 
fleet purchasing and other kinds of procurement policies and 
practices within the entire Federal Government building 
establishment. So, I think, you know, people have finally 
caught on to that.
    Mr. Zimmerman. Right.
    Senator Kerry. There's a big sea change in the offing here.
    I've got to run, in a moment here, and I apologize for 
that, but Ms. Callahan, where do you think, beyond the comments 
that Mr. Zimmerman, on the building side, where in your 
judgment, should we be putting our emphasis to augment what you 
and others have been so engaged in at the grassroots level?
    Ms. Callahan. Well, a couple of things, if I can do 
cleanup, as the last one, and make comments on some of the 
things made. I said, in my written testimony, we think a 
commercial buildings initiative, funded by the Federal 
Government, in partnership with all the folks we're working 
with, the American Institutes of Architects, the labs, the U.S. 
Green Buildings Council, is something that needs to be done. 
And the order of magnitude that Dr. Krebs mentioned, it's 
large. We think about a $2 billion program, but if you look at 
it over an annual basis, you're looking at an investment of no 
more than 12 hours of our building stock energy cost. It's one-
tenth of 1 percent of what we spend in this country each year 
on energy costs in buildings. So, I think that's a very 
important place.
    You mentioned public education. The Alliance does a lot of 
work with the Departments of Energy, EPA, and in concert with 
groups and businesses from around the country, folks like Wal-
Mart, and we haven't been able to capture the kind of money 
that's necessary to do the commercialization transformation 
that we're discussing here. For example, last year we cobbled 
together a million dollars, and the studies that we did on 
that--to give consumers savings tips around the home, whether 
it's consumer products or in the car or on the roads. But that 
million dollars got us $140 million--or 140 million--140 
million impressions, excuse me. So, if you think about what we 
could do if the Federal Government actually put appropriations 
to the authorizations that you all had in EPAct 2005--you 
authorized a $400 million consumer education and outreach 
program on efficiency--if you just put some of that money to 
it, we can go far. And I'll give you an example. In New York, 
you cited the ENERGY STAR label about 67 percent, I 
think you said--or----
    Senator Kerry. Fifty-seven.
    Ms. Callahan. What? Fifty-seven? Fifty-seven percent. If 
you go to New York, where we've worked with the State and done 
very aggressive consumer education and outreach, that number is 
80+ percent recognition, and people are--that are surveyed--are 
saying they're using the ENERGY STAR--not just 
understanding what it is, but using it as a purchasing tool. 
So, it's there. That can be done.
    Appliance standards, I mentioned we're trying to negotiate 
something right now with the lighting manufacturers. A single 
standard to get the cheap, inefficient, incandescent bulbs off 
the market, the 25-cent bulbs off the market in the next 
decade, that could represent the energy savings of all the 
appliance standards we've put in place between 1987 and 2000. 
So, those are just a few of the things. And I think----
    Senator Kerry. Those are great.
    Ms. Callahan.--that's the areas--you know, it's--it is, 
it's R&D, public education, incentives, and then the standards. 
That's the four areas.
    Senator Kerry. Well, those are great, and they're 
important. I'm going to make sure that each of my colleagues 
gets a summary memo of today's hearing, because I think it's 
really important for them to be aware of the breadth and scope 
of possibilities here.
    I think if everybody in America could hear this kind of 
thing, and be more aware of it, we would make huge leaps. The 
key here is, really, how do you, in this multimedia 
unbelievable sort of cacophony of entertainment news that we 
all live with, get people to pay attention long enough to 
realize they can save some money and make some money? So, 
hopefully, we can get there.
    I think one of the things, frankly, that ought to be part 
of it, the President's request for 2008 has $1.236 billion in 
support of the Department of Energy's Efficiency and Renewable 
Energy Programs. That's a 16.5 percent decrease, folks, from 
last year's appropriations. It's 1 percent less than 2005. So, 
it's downward, downward, downward. The total budget for the 
Department of Energy is $24.3 billion. I just don't believe, 
and I think every one of you agree with me, that a $1.2 billion 
investment in energy efficiency is adequate for this country, 
given where we are, what we're losing in energy inefficiency. 
We're paying much more than that in inefficiency. We could turn 
that around in a year or two, with major efforts.
    When you look at the rise in electricity purchases that are 
predicted, and you couple that to the pulverized-coal-fired 
problem, in terms of the current trend line of what provides 
that rise, we've got a serious issue. So, this is a big, big 
deal, and I can assure you I'm going to spend a lot of time, 
have been already, and will continue to just keep this right in 
the face of our colleagues in each of the committees that I'm 
on.
    We had a little setback today on the tax portion of the 
energy bill. But, ultimately, we'll get something through 
that's going to make sense. There were a lot of good incentives 
in there, and we're going to try, in the next days, to tie down 
some important things. We also have the DOD authorization 
coming up. There are some important defense initiatives we can 
take on savings, and so forth. There's almost no bill now that 
comes in front of us where we don't have an opportunity to try 
to make a difference.
    So, keep doing what you're doing, and keep us informed of 
what you think we can do to be more effective in helping you, 
as well as showing initiative on our own.
    I'm greatly appreciative to you for taking time to be here 
today. Thank you very, very much.
    With that, we stand adjourned. Thank you.
    [Whereupon, at 3:49 p.m., the hearing was adjourned.]
                            A P P E N D I X

                                    Smartcool Systems, Inc.
                               Vancouver, BC, Canada, June 29, 2007
Hon. John F. Kerry,
Chairman,

Hon. John Ensign,
Ranking Member,
Subcommittee on Science, Technology, and Innovation,
Committee on Commerce, Science, and Transportation,
U.S. Senate
Washington, DC.

Re: Hearing on Energy Efficient Technologies and Programs--Written 
    Statement

Dear Chairman Kerry:

    Thank you for the opportunity to present our written statement on 
the topic of ``Energy Efficient Technologies and Programs'' following 
last week's hearing to you, Ranking Member Ensign, and the 
distinguished Members of the Committee. Our company, Smartcool Systems 
Inc., an advanced global energy solutions company, specializes in 
energy and cost reduction technologies specific to air conditioning and 
refrigeration compressors for commercial and retail businesses.
    Therefore, it is with enthusiasm that we share our experiences with 
the Committee by submitting for the record the attached paper titled 
``Electrical Energy Reduction in Refrigeration and Air Conditioning.'' 
We will be presenting at the 2007 Energex Conference in Singapore on 
November 27 to 30, 2007 to an international audience of energy and 
environmental sector leaders and stakeholders. It is our aim to provide 
the Committee with further insight on the technological advances taking 
place specific to meeting the challenges of reducing electricity use 
among air conditioning and refrigeration systems.
    Important factors to take away from the presentation include:

   According to the U.S. Department of Energy, the second 
        largest use for electricity is cooling (air conditioning and 
        refrigeration) at 15 percent. The challenge with air 
        conditioning and refrigeration has been to develop energy 
        reduction systems that are cost effective and less complex to 
        install.

   In air conditioning and refrigeration systems, the 
        compressor is the largest consumer of electricity, consuming 
        about 70 percent in most cases. Reducing the amount of time the 
        compressor runs will substantially reduce the amount of energy 
        used.

   Smartcool Systems Inc.'s technology, the Energy Savings 
        Module (ESM)TM, reduces electricity consumption 
        (kwh) and maximum demand (Kw/KVA) of compressors by improving 
        their performance and maintaining temperature control. The 
        ESMTM is not a controller. Instead, it is a 
        supplement, or an interface, designed to work with existing 
        equipment.

   Through ``Compressor Optimization'' the ESMTM 
        reduces compressor running time by up to 30 percent with no 
        affect on temperature conditions. Other technologies will 
        impact the temperature. The ESMTM's copyrighted 
        software also manages the suction pressure of the refrigeration 
        or air conditioning system, allowing it to cool more 
        efficiently.

   The U.S. Department of Energy's Oakridge National Labs 
        conducted tests of the ESMTM in 2004. The results 
        indicated a reduction of compressor kWh usage of 11.8 percent 
        for the total test period, and 18.1 percent for the high load 
        test period.

   The ESMTM is utilized globally by leading 
        corporations in commercial, retail, and food service 
        industries. For one corporation, the ESMTM 
        demonstrated an overall reduction in electricity use of 30 
        percent, resulting in a ROI of 33 percent over 36 months. The 
        ESMTM's performance is easily measured and 
        verifiable.

   Currently it is estimated that globally the 
        ESMTM's are reducing electricity use each year by 
        213,000 Mwh and Greenhouse Gas emissions by 255,000 tons. This 
        is enough electricity to supply a city with a population of 
        250,000 people.

    Chairman Kerry, we contend that support from governments around the 
world, with the United States taking the lead, is needed to assist in 
the acceptance and implementation of green technologies like the 
ESMTM. We look forward to working with you, and 
the Committee, to address this and the many challenges facing us so 
that we all can benefit from green technology.
    Thank you.
            Respectfully submitted,
                                             George Burnes,
                                                 President and CEO,
                                                 Smartcool Systems Inc.
                                 ______
                                 

   Electrical Energy Reduction in Refrigeration and Air Conditioning

Ken Landymore, Director of Operations and George Burnes, President and 
                      CEO, Smartcool Systems Inc.

1. Introduction
    In the coming decades, actions to limit greenhouse gas emissions 
could affect patterns of energy use around the world and alter the 
level and composition of energy-related carbon dioxide emissions by 
energy source.
    Carbon dioxide is one of the most prevalent greenhouse gases in the 
atmosphere. Anthropogenic (human-caused) emissions of carbon dioxide 
result primarily from the combustion of fossil fuels for energy, and as 
a result world energy use has emerged at the center of the climate 
change debate.
2. Carbon Dioxide Emissions
    The U.S. Energy Information Authority \1\ projects that world 
carbon dioxide emissions will increase from 25,028 million metric tons 
in 2003 to 33,663 million metric tons in 2015 and 43,676 million metric 
tons in 2030. Much of the growth occurring in Asia (see Figure 1 & 2).
---------------------------------------------------------------------------
    \1\ Energy Information Administration Office of Integrated Analysis 
& Forecasting (2006) International Energy Outlook 2006.



    When most people consider carbon dioxide emissions, they think of 
large factories, forms of transportation and burning both man made and 
through forest fires.
    Most people would be surprised to learn that electricity actually 
causes more carbon dioxide emissions than all other anthropogenic 
sources;
    According to the Energy Industry Administration \2\ in the United 
States, electricity generates 39 percent of the total anthropogenic 
carbon dioxide emissions.
---------------------------------------------------------------------------
    \2\ Energy Information Administration Office of Integrated Analysis 
& Forecasting (2006) Annual Energy Outlook 2006.



    These emissions are expected to grow by almost 45 percent over the 
next 25 years and grow to 42 percent of the total carbon dioxide 
emissions.
3. Greenhouse Gas Reduction
    In order to reduce the production of greenhouse gases, it is 
reasonable to assume that we should focus on the reduction of emissions 
in both electricity and transportation.
    As most people are aware, the result of continuing and increasing 
pressure from geo-political events, environmental lobby groups and 
governments around the world is an accelerating global demand to reduce 
the dependence on fossil-fueled electricity. International treaties 
such as the ``Kyoto Accord'' have resulted in many countries formally 
committing to significantly reduce greenhouse gas emissions. Even 
countries such as the United States that have not formally signed onto 
the ``Kyoto Accord'' have introduced their own plans to aggressively 
reduce ``greenhouse gas'' emissions. Recent geo-political instability 
in major fossil fuel-producing regions has only served to increase 
public demand to reduce dependence on fossil-fueled electricity.
4. Energy Usage
    What makes this a bigger challenge than most would think is that 
our dependence on energy is increasing. World energy consumption \3\ is 
projected to increase by 71 percent from 2003 to 2030. Fossil fuels 
continue to supply much of the energy used worldwide, and oil remains 
the dominant energy source.
---------------------------------------------------------------------------
    \3\ Energy Information Administration Office of Integrated Analysis 
& Forecasting (2006) International Energy Outlook 2006.



    Trends in end-use sector energy consumption can vary widely, 
according to the level and pace of economic development in a given 
region. On a worldwide basis, energy demand in the industrial sector 
grows most rapidly, at an average rate of 2.4 percent per year. Slower 
growth is projected for the buildings sectors: residential energy use 
rises by an average of 1.7 percent per year and commercial energy use 
by 1.8 percent per year from 2003 to 2030 for the world as a whole.



    All of this is surprising when you consider the efforts to reduce 
greenhouse gases will require the reduction of emissions caused by 
them.
5. Electricity Use Reduction
    There are two ways to reduce the emissions caused by electricity. 
The first would be to use more renewable energy sources like wind and 
solar power. The second is to reduce the amount of electricity we are 
using around the world.
    According to the U.S. Department of Energy \4\, the largest single 
use for electricity is lighting (27 percent) followed by cooling 
(refrigeration and air conditioning) at 15 percent. In countries with 
higher ambient temperatures, the usage in air conditioning will be 
significantly higher, likely coming much closer to the percentage 
represented by lighting in the U.S.
---------------------------------------------------------------------------
    \4\ Energy Information Administration Office of Integrated Analysis 
& Forecasting (2006) Annual Energy Outlook 2006.



    There has been a great deal of development in the lighting field to 
reduce energy, however, in the area of A/C and Refrigeration, most of 
the development has resulted in expensive and complex systems requiring 
highly skilled installers and programmers. The cost of these systems 
prohibited the installation by most small to medium consumers and even 
larger businesses have been challenged to justify the expense.
6. Air Conditioning and Refrigeration Challenge
    In air conditioning and refrigeration systems, the compressor is 
the largest consumer of electricity, in most cases consuming about 70 
percent of the total electricity. Reducing the amount of time the 
compressor runs will substantially reduce the amount of energy used.
    The refrigeration cycle is dynamic and changing. From the time the 
compressor commences to run until it stops, the suction pressure, 
evaporator temperature, the rate of heat exchange, refrigerant flow, 
and many other factors are continuously changing. The total efficiency 
of the system changes through the entire life cycle.
    The majority of modern controls concentrate on the conditioned 
space temperature, the chilled water temperature or suction pressure. 
The compressors are switched on in a response to call for cooling and 
will operate until that demand for cooling is satisfied. To avoid 
rapidly and repeatedly switching the compressors on and off (short 
cycling) which will cause damage to the compressors, the control bands 
are usually set with a minimum differential of approximately 4 PSI or 
5+ F. In many cases the compressor control differential is greater than 
this.



    The compressors capacity to remove heat is directly proportional to 
the operating temperature. That is, the higher the controlled 
temperature, the higher the suction temperature (evaporator 
temperature), the faster the rate of heat removal.
    For example,\5\ Figure 8 shows the compressor cooling capacity at 
each 1.8 degree of suction temperature to reduce the temperature from 
50+ to 41+.
---------------------------------------------------------------------------
    \5\ Sydney Seaworld Study conducted by the University of 
Technology, Sydney.



    When the compressor first starts at the high limit point it will be 
operating at maximum efficiency with a high suction pressure. As the 
conditioned space temperature is reduced, the suction pressure reduces 
and compressor capacity is reduced. Therefore each degree of 
temperature reduction takes a longer period of time and uses 
substantially more electricity.



    Looking at the example in Table 1,\6\ Reducing from 50+ to 48.2+ 
takes only 6.6 minutes and 1.84 kWh.
---------------------------------------------------------------------------
    \6\ Sydney Seaworld Study conducted by the University of 
Technology, Sydney.
---------------------------------------------------------------------------
    Reducing from 42.8+ to 41+ takes 14.4 minutes and 3.57 kWh.
    The last 1.8 degree of pull down used almost twice the energy and 
time.
    This example uses only a  4.5+ F suction temperature 
differential. Even with this small control band there is a significant 
difference in energy consumption between the first one point eight-
degree reduction and the last one point eight-degree reduction.
    Figure 9 \7\ illustrates the percentage of energy used per degree. 
The last degree of pull down used 28 percent of the total energy for 
the cycle.
---------------------------------------------------------------------------
    \7\ Sydney Seaworld Study conducted by the University of 
Technology, Sydney.



    Eliminating the last 1.8 degrees, that is start at 50 +F and stop 
at 42.8 +F providing a differential of 7.2 +F, reduces energy 
consumption by 28 percent. Unfortunately this increases the mid-point 
temperature from 45.5 +F to 47.3 +F.
7. Air Conditioning and Refrigeration Solution
    Smartcool Systems Inc. is an advanced energy conservation solutions 
company that specializes in energy and cost reduction technologies for 
commercial and retail businesses. The company's wholly owned 
subsidiary, Smartcool International Inc., is the owner, developer, 
manufacturer and worldwide distributor of the Energy Saving Module 
(ESM)TM.
    The Energy Saving Module System 4000TM is designed 
specifically to reduce the electricity consumption (kwh) and maximum 
demand (Kw/KVA) of refrigeration and air conditioning compressors by 
improving their performance and maintaining temperature control.
    The Energy Saving ModulesTM are designed to interface 
with all types and makes of air conditioning and refrigeration 
controllers from the simple thermostat single condensing systems to the 
most sophisticated computer based multiple compressor parallel systems.
    The Energy Savings Module System 4000TM is not a 
controller. It is a supplement to the existing system--designed to work 
with the existing A/C and Refrigeration equipment along with current 
control methodology--to reduce the consumption of energy. When a call 
for cooling comes from the existing control the ESM 4000TM 
takes over to determine when and for how long each compressor or 
unloader will run.
    Because the primary control is not replaced, at any time, the ESM 
4000TM can be put into bypass and the system returns to 
operating exactly as it was prior to the installation. This is an 
important distinction for system repairs and/or troubleshooting.
    The ESM System 4000TM enables the compressor to maximize 
the rate of heat removal by optimizing the natural physical properties 
of the compressor operating cycle. This process, known as ``Compressor 
Optimization'' can reduce compressor running time by up to 30 percent 
with no affect on the temperature conditions.



    Figure 10 demonstrates how the ESMTM has no appreciable 
impact on the controlled space temperature. Many other technologies 
like floating setpoint will impact the temperature.
    Through the use of copyright software, the ESMTM manages 
the suction pressure of the refrigeration or air conditioning system in 
order to cool more efficiently. This is illustrated in figure 11.



    By controlling the suction temperature or pressure over a narrow 
band, it is possible to maximize the compressor performance, increase 
cooling capacity by as much as 30 percent and achieving compressor 
optimization.



    Having two modes, the ESM System 4000TM can operate in 
Simplex for single compressor applications and in Multiplex for multi-
compressor parallel racks and packaged units. Additionally, through our 
intelligent interface module, even the most complex chiller packages 
can benefit from the implementation of the ESMTM.
    In March 1998, the Los Angeles Department of Water & Power 
conducted a study of the Smartcool product in a live field test. The 
results were that: the average kWh saving, for comparable days, is in 
the range of 20 to 24 percent; the unit is capable of reducing the 
operating time of the compressors of the refrigeration system, which 
reduces the energy consumption of the compressors and saves electric 
billing dollars; and the compressors were turned on and turned off more 
often during the ``ON'' time when the unit is in saving mode. The 
number of cycles per hour was registered at 3 to 4 cycles per hour, 
which is in the safe range of cycles for a compressor.
    Oakridge National Labs which is part of the U.S. Department of 
Energy conducted several studies of the ESMTM during 2004. 
The results were indicated to be the reduction of compressor kWh usage 
of 11.87 percent for total test period and 18.1 percent for high load 
test period.
    Smartcool's services are utilised by some of the worlds leading 
corporations particularly in the commercial, retail and food service 
areas.



    A test initiated by Tesco UK \8\ where two stores were tested for a 
4-week period, resulted in between 17 and 21 percent energy reduction 
Tesco concluded that: the ESMTM has again proven substantial 
energy savings under test conditions and will deliver a return on 
investment well within the 3 year limit set; these savings provide 
substantial financial and environmental benefits to Tesco; and all 
savings have been made without detrimental effect to plant operating 
criteria.
---------------------------------------------------------------------------
    \8\ Steven Martin (2003) Report On The Performance Of The Energy 
Saving Module For Tesco Express At Maida Vale & Fulham.
---------------------------------------------------------------------------
    Similarly, Telstra, the Australian telephone company commissioned a 
test \9\ on their central office locations. The results were that: the 
evaluation clearly demonstrated an overall reduction in electricity 
consumption of 30 percent when the Energy Saving Module System 
4000TM was operating; this reduction resulted in a straight-
line return on investment of 33 percent or 36 months; and the total 
number of compressor starts increased by only 3 per day when the 
ESMTM was on, however the compressor running time was 
reduced by 36 percent. The benefits of the reduced compressor running 
would exceed any adverse effect of the increased starts. Telstra stated 
that this evaluation has comprehensively shown the ESM System 
4000TM to be a cost effective and reliable energy management 
tool whose performance can be easily measured and verified.
---------------------------------------------------------------------------
    \9\ Transfield Services (2002) ESM Evaluation--Dalley Street 
Telephone Exchange--September 2002.
---------------------------------------------------------------------------
    Since 1992, over 25,000 Energy Saving ModulesTM have 
been sold or installed worldwide. In that time, Smartcool products have 
reduced electricity consumption by 1.2 million Mwh, eliminating over 
1.4 million tons of greenhouse gas emissions.
    Currently it is estimated that worldwide the Energy Saving 
ModulesTM are reducing electricity use each year by 213,000 
Mwh and Greenhouse Gas emissions by 255,000 Tons. This is enough 
electricity to supply a city with a population of 250,000 people.
8. What Is Needed?
    For the Kyoto accord and other greenhouse gas emission reduction 
initiatives to work, it is important for a number of areas to focus on 
both clean power alternatives and reducing the reliance and use of 
existing power sources.
    Support from governments around the world is needed to assist in 
the acceptance and implementation of technologies like the ESM 
4000TM. This could come in the form of grants, funding, and 
low interest loans to Companies who adopt these technologies. 
Additionally, legislation that enforces business and residential to 
reduce their power usage will ensure we can meet the aggressive targets 
we are committed to.
    Secondly, the Utilities that provide these power services must also 
embrace technologies such as these. Many of the U.S. Utilities provide 
rebates to Customers who install these technologies. This improves the 
return on investment for the Customer, but also reduces the cost of 
infrastructure that the utility would otherwise be required to build. 
This may also be another source for low interest loans to Companies who 
install these.
    Additionally, industry must embrace these technologies. With a 
strong return on investment of between 24 and 36 months, there exists a 
strong financial business case for these products. More importantly, 
the strong environmental case needs to be accepted as the 
responsibility of all Companies and citizens of the world.
    Ultimately, it will take all of us to meet the need for reduction 
of fossil-fuel energy dependence.
References
    [1] Energy Information Administration Office of Integrated Analysis 
& Forecasting (2006) International Energy Outlook 2006.
    [2] Energy Information Administration Office of Integrated Analysis 
& Forecasting (2006) Annual Energy Outlook 2006.
    [3] Sydney Seaworld Study conducted by the University of 
Technology, Sydney.
    [4] Transfield Services (2002) ESM Evaluation--Dalley Street 
Telephone Exchange--September 2002.
    [5] Steven Martin (2003) Report On The Performance Of The Energy 
Saving Module For Tesco Express At Maida Vale & Fulham.
                                 ______
                                 
         Prepared Statement of Jack Hebert, President and CEO, 
                  Cold Climate Housing Research Center
Introduction
    I would like to thank Chairman Inouye, Vice Chairman Stevens, 
Subcommittee Chairman Kerry, Ranking Member Ensign, and the Members of 
the Subcommittee on Science, Technology, and Innovation for the 
opportunity to address the issue of energy efficient technology and 
programs. I apologize that I was not able to present this in person but 
my schedule would not allow it.
    Although there is not a firm consensus on the exact figures, there 
is agreement between builders and researchers that buildings account 
for a significant amount of the United States energy consumption. The 
energy usage is divided almost equally between residential buildings 
and commercial buildings (Source: Annual Energy Review 2003. DOE/EIA-
0384 (2003). Energy Information Administration, U.S. Department of 
Energy, September 2003.)
    With proper planning, most developments and buildings today can be 
designed to use much less energy at little additional cost. Attention 
to siting, building form, glass properties and location, material 
selection and the incorporation of natural heating, cooling, 
ventilation, and day-lighting are among the strategies available to 
achieve this end. Through the application of the most current research, 
the energy needed by a building, a development or a community, can be 
supplied or supplemented by renewable sources such as solar, 
photovoltaic, wind, biomass, and other viable sources. All of these 
strategies incorporate energy efficiency and conservation to produce 
the most effectively-sustainable buildings and homes for the Nation and 
beyond.
    In Alaska, energy efficiency is important for our very economic 
viability and survival, especially in our homes and buildings. To that 
end, the Cold Climate Housing Research Center (CCHRC) is currently 
engaged in research, demonstration projects, and in product testing and 
development to provide healthy, durable housing that is affordable and 
energy efficient--in a word, sustainable. Our research has made clear 
those areas where the Federal Government can help support the research 
in the development of building technologies that use much less energy 
in the near term, with the goal of our Nation's building stock being 
more efficient in construction and operation. It should also be noted 
that Alaska's needs are indicative of the needs for energy systems in 
many under-developed regions of the world. Systems deployed 
successfully in Alaska will have applications in many parts of the 
world, opening new markets for innovative American businesses. 
Additionally, experience with new technologies in remote Alaska 
settings will be applicable for growing the use of distributed-
generation technologies in the lower 48 states' power grid.
    If U.S. building energy usage is halved or even approaches zero in 
the foreseeable future, this will have a major impact on national 
energy security and the sustainability of our communities--not to 
mention the fuel bills of home and business owners! In this effort, 
CCHRC is leading by example. Our new Building and Infrastructure 
Research and Testing Facility (RTF) is designed to use 60 percent less 
energy than a conventional building of comparable size and function in 
Fairbanks, Alaska. CCHRC is also working to reduce fossil fuel use even 
further by using bio-fuels and solar energy systems.
    Included here are six aspects of work that CCHRC is doing to reduce 
energy usage in Alaska and recommendations for how the Federal 
Government can further that work:
I. Private Sector Collaboration--CCHRC Examples
    In 1999, the Alaska State Home Building Association, representing 
over 1,000 building industry members, and itself a member of the 
National Association of Home Builders, recognized the need to conduct 
research, test, and develop materials and technologies appropriate to 
northern climates. To this end, the members committed to the creation 
of the Cold Climate Housing Research Center, a 501(c)(3) nonprofit 
entity, whose mission is: promoting and advancing the development of 
healthy, durable and sustainable shelter for Alaskans and circumpolar 
people through applied research. Four years after its start, the CCHRC 
Board of Directors authorized construction of a facility to house the 
testing and product development labs needed to accomplish its mission. 
The charge is clear: research, test, and develop, if necessary, the 
materials and technologies to provide healthy, durable, and 
economically sound housing for the people of Alaska and other northern 
locales.
    CCHRC's nonprofit status allows it to establish collaborations with 
both private and public sector partners. CCHRC is located on the campus 
of America's only Arctic university, the University of Alaska Fairbanks 
(UAF) where the newly-constructed Research and Testing Facility (RTF) 
is housed. CCHRC works with UAF faculty and staff to develop joint 
research proposals. Major funding comes from state and Federal agencies 
that collaborate with many private sector donors who contribute 
materials, products, labor, and funds to support the goals of the RTF. 
CCHRC is also developing relationships with industry partners to help 
further guide and support the product testing and development programs 
at the RTF.
    Some examples of the collaboration with private sector partners in 
product testing include:

   HVAC digital control systems--Siemens Building Technologies.

   Insulation--DuPont, Johns Manville, Thermo-Kool, Western 
        Insulfoam, Vertex.

   Ventilation--Venmar, Lifebreath, Fantech, Solutions to 
        Healthy Breathing.

   Heating--Weil-McLain, Viesmann, Monitor, Stone Castle 
        Masonry.

   Windows--Capitol Glass/Northerm Window.

   Building materials--Spenard Builders Supply, Mannington 
        Commercial, Rivers Wood Products.

   Data collection and display--GW Scientific, Campbell 
        Scientific.

    CCHRC also has cooperative agreements with such other nonprofit 
agencies as:

   Golden Valley Electric Cooperative--demonstration of 
        alternative energy systems and conservation strategies and 
        technologies.

   Interior Alaska Building Association--outreach and 
        continuing education.

   Alaska Building Science Network--outreach, education, and 
        training.

   Cooperative Extension Service, UAF--outreach, education, and 
        sustainability.

   Audubon International--outreach and community 
        sustainability.

CCHRC Recommends
    Cooperative programs involving private sector partners need 
increased funding by the Federal Government. Programs such as the 
Partnership for Advancing Technology in Housing (PATH), Partnerships 
for Home Energy Efficiency (PHEE), The Small Business Innovation 
Research (SBIR) and the National Science Foundation's Partnerships for 
Innovation (PFI), Building America, Healthy Homes, Weatherization, and 
others, benefit from private sector partnerships because they have the 
ability to leverage government funding into grounded projects that 
address real private sector needs.
II. National Security, Global Warming, Sustainability, and Energy
    To meet growing energy needs, the U.S. imports an ever-increasing 
percentage of its energy supply, in the form of gas and oil, each year. 
This creates an unsustainable and unstable situation for national 
security, environmental concerns, and economic needs. It places U.S. 
energy security in the hands of other nations, fuels concerns over 
climate change, and may contribute to the increase in dramatic weather 
events with significant costs in terms of human life and public and 
private funds. The U.S. does not have enough reserves of its own to 
reverse the Nation's supply shortages by simply increasing domestic 
production. Development of economically and environmentally sustainable 
energy efficiency programs and alternative sources of energy is 
critical and will require a significant investment. One way to reduce 
energy consumption in the built environment is through efficiency and 
conservation, which takes committing large amounts of both public and 
private resources.
    CCHRC has undertaken several initiatives to address this situation:

   CCHRC Research and Testing Facility is designed to lead by 
        example using 60 percent less energy than a comparable building 
        and showcasing several strategies for energy efficiency, 
        conservation, and alternatives.

   Audubon International has designated CCHRC as the Alaska 
        Center for Sustainable Community Development.

   With the North-North Network and UAF, CCHRC is working on a 
        Sustainability Initiative to increase the sustainability of the 
        UAF campus and to begin an interdisciplinary curriculum in 
        northern sustainable design at UAF.

   With partners at the Alaska Housing Finance Corporation 
        (AHFC) and the Canadian Mortgage & Housing Corporation (CMHC), 
        CCHRC is planning a Forum on Sustainable Northern Shelter to be 
        held in Fairbanks this October.

   With the Cooperative Extension Service at UAF, CCHRC is 
        committed to finding solutions to community sustainability in 
        rural Alaska, especially housing and related systems.

   With the Alaska Housing Finance Corporation and the Alaska 
        State Home Builders Association, CCHRC has begun the process of 
        recasting the Alaska Building Energy Efficiency Standard in 
        terms of the International Energy Conservation Code with the 
        intent that it might be addressed by a statewide building code 
        review.

CCHRC Recommends
    The Federal Government, through programs at U.S. Department of 
Energy, the U.S. Environmental Protection Agency, the National Science 
Foundation, and the U.S. Department of Housing and Urban Development 
must initiate programs aimed at energy independence. Part of this 
effort must: (a) target energy use reduction through increased 
efficiency and conservation in homes and other buildings, and (b) 
develop environmentally-sound energy sources for buildings and 
communities. Partnerships that involve the private sector, along with 
universities and state agencies, are particularly well-suited to 
contribute real solutions. National support for transformative 
processes already underway by groups such as the National Association 
of Home Builders (NAHB) and the many state and local groups focused on 
green building will be essential.
III. Demonstration Projects--The RTF Example
    The CCHRC Building and Infrastructure Research and Testing Facility 
(RTF) on the University of Alaska Fairbanks campus is designed with 
transparency in mind. CCHRC encourages public tours of the building and 
visits to its website to demonstrate how it operates. CCHRC wants to 
show:

   how much energy from each source is being utilized,

   how efficiently and cleanly the energy is consumed,

   the different ways to heat and cool the building,

   the better ways to filter indoor air,

   how wall and window systems are performing,

   that the lighting strategy is providing maximum daylight and 
        using minimum electricity,

   that the water system is collecting rainwater, recycling 
        grey water and storing storm water on our green roof; and

   How the building is interacting with the permafrost and 
        ground water beneath it.

    Over 400 sensors are embedded in and beneath the building to 
monitor its operation and performance. In addition to housing research, 
testing and product development, the building itself is a multitude of 
research and testing projects.
    Demonstration projects such as this are important to lay the 
foundation for change. The public needs to see that efficient 
strategies exist and that they work. Essentially, people need to be 
able to ``kick the tires'' before they will ``buy'' new ways to design 
communities, get to work and play, and build and live in homes and 
office buildings that consume much less energy.
    CCHRC has an agreement with Golden Valley Electric Cooperative to 
demonstrate alternative energy systems, such as solar, wind, bio-fuel, 
and hybrid systems at the RTF. The Fairbanks North Star Borough is also 
funding a project in the facility to demonstrate the use of several 
clean-burning, wood-fired heating appliances with the goal of making 
the building produce more energy than it uses.
    The success of the RTF as a demonstration project is remarkable. 
CCHRC has had so many requests for public tours that it has had to set 
up a regular public tour schedules on Thursday afternoons. CCHRC has 
had a steady interest from UAF faculty and students in proposing joint 
research projects. CCHRC has also had many requests to test products, 
even though it is not yet set up to do so. Finally, CCHRC fields 
frequent calls from future homeowners seeking advice about a piece of 
equipment or a certain approach to building. Obviously, there is 
substantial public interest in building better shelter.
CCHRC Recommends
    Demonstration projects are important elements to facilitate change 
for efficiency in the building community. Even if the technology is 
well proven to scientists and engineers, it is still crucial to educate 
builders and owners about better ways to design and construct 
buildings. The Federal Government must vigorously fund and support 
state and local efforts to demonstrate products and technologies that 
can make this change happen.
IV. Alternative Energy Projects at CCHRC
    One of CCHRC's important goals is to test, develop, and demonstrate 
alternative energy solutions. Some of the technologies are built into 
the RTF and some await future funding to be implemented. However, some 
alternative energy projects are already underway or are on the drawing 
board and they include:
    Masonry Heater Project: The first thing one sees when entering the 
RTF is a beautiful, natural rock fireplace called a masonry heater. It 
has an enclosed firebox, like a woodstove with a glass door, and a 
massive rock edifice like an old-fashioned fireplace. The flue does 
not, however, go straight up the chimney as it would in a stove or 
fireplace; rather, it is convoluted throughout the masonry so that the 
heat of the fire can be transferred to the rock and brick. In this way, 
one hot fire per day can provide enough constant radiant heat to warm 
an average house throughout the cold Fairbanks winter. This technology 
was first developed in China and Greece long ago and was widely used in 
15th century northern Europe. Because the fire is so hot (reaching 
2,000 degrees F) it burns very cleanly compared to a conventional wood 
stove or fireplace. The RTF heater is instrumented so that CCHRC can 
document its efficiency and emissions levels. The heater's massive size 
and associated cost are drawbacks to widespread use of masonry heaters 
in homes, yet CCHRC plans to work toward developing lower cost versions 
as options for people who want to burn wood in the most efficient and 
environmentally sound manner.
    Wood Energy Project: The wild land fires in the interior of Alaska 
pose both a challenge and an opportunity. A primary way to reduce the 
risk to settlements in and adjacent to these vast forested regions is 
to reduce the fire fuel-load by clearing fire breaks around individual 
structures as well as along entire ridge lines. This presents an 
opportunity to develop local economic enterprises utilizing the bio-
fuel that otherwise would be wasted. If a sufficiently robust industry 
can be developed using this ``waste wood,'' it could help fund the 
continued creation of firebreaks around the vulnerable areas of the 
Fairbanks North Star Borough.
    The Fairbanks North Star Borough has funded a project to research, 
develop and test a variety of wood-burning technologies and products 
that could be the basis for local enterprises. These technologies range 
over a wide scale of complexity and size from ordinary wood stoves and 
pellet stoves to masonry heaters and village-scale combined heat and 
power units. Perhaps the most compelling need is to develop the 
technology for building combined heat and power (CHP) generators in 
villages in rural Alaska where the price of fuel oil and electricity is 
threatening their very existence. This project will evaluate the 
technological options for providing the fuel source, processing it, and 
feeding it into a CHP boiler. CCHRC will provide some of these critical 
evaluations, testing and demonstration links in establishing new and 
sustainable local enterprises. In addition the project will develop and 
test the cleanest wood burning technologies available so as to minimize 
the impact on the urban air shed in Fairbanks.
    Solar-Thermal Demonstration Project: Utilizing the sun to heat 
domestic hot water is practical in Fairbanks, Alaska for about 8 months 
out of the year. Solar-heated domestic water systems have reasonable 
payback periods even though they are only usable for part of the year. 
They also may allow oil-fired boilers to be shut down for several 
months, thereby eliminating the worst period of standby losses. These 
systems are particularly well suited for visitor industry facilities 
that only operate seasonally.
    CCHRC plans to test evacuated-tube and flat plate solar hot water 
collectors and integrate this system into its Viesmann Boiler domestic 
hot water system. CCHRC collaborated with the Golden Valley Electric 
Association and the Cooperative Extension Service to offer a technical 
training class in the installation of solar hot water collection 
systems which featured hands-on training to install these systems in 
the RTF. The system will be instrumented so that performance and cost-
effectiveness can be demonstrated in an on-going manner to a broader 
audience via the Internet.
    Solar Photovoltaic Hybrid Demonstration Project: The Cold Climate 
Housing Research Center has proposed to partner with British Petroleum 
(BP) and Alaska Native corporations on a project to develop a 
sustainable solar power system that works in circumpolar regions. The 
project will be based at CCHRC's Research and Testing Facility. The 
``Beyond Petroleum''--Integrating Solar Energy in Rural Alaskan 
Communities Research Project will benefit many communities in the 
circumpolar regions. Many rural circumpolar communities face ever-
increasing energy costs due to being off the grid and the rising costs 
of fuel transport. The RTF is a perfect site for testing northern solar 
power systems and developing Alaskan expertise in solar system design, 
installation and maintenance to benefit Alaskan villages. The Fairbanks 
climate offers the full range of weather conditions for cold climate 
testing and performance evaluation of products, systems and techniques.
    The purpose of this project is to design, install, and operate a 
micro-hybrid power system. It will consist of 15 KW of PV solar panels, 
battery banks, AC and DC coupled inverters with capability to tie into 
the GVEA grid, and a back-up generator. A web-based data acquisition 
component will be incorporated allowing researchers to share results. 
The system will feature: (a) testing of several different solar/micro-
grid configurations, (b) the potential to incorporate other energy 
technologies (bio-diesel, fuel cells, bio-mass etc.), (c) robust data 
collection, and (d) education, research and outreach components, 
including an interactive ``Solar on the Web'' feature.
CCHRC Recommends
    These critical research, development, and demonstration projects 
usually involve, in one way or another, the donation of equipment, 
materials, and labor from private sector partners. This important 
private sector contribution should be encouraged by offering tax 
incentives. Congress should consider tax incentives that would 
encourage more investment by private sector partners that work on 
projects to shift away from fossil fuels to alternative, 
environmentally sound energy sources. By utilizing private sector 
partners in this way, the burden of developing and expanding critical 
research in efficiency programs is not shouldered solely by industry or 
government alone.
    A strong Federal and state partnership to develop and demonstrate 
new energy-saving, energy-generation and transmission technologies is 
clearly warranted. Such an investment would not only serve Alaska's 
residents, but also help to develop a market for American technologies 
by inviting the developing world to see how America is solving its 
energy needs for its rural and remote regions. Alaska could easily 
become America's showcase for distributed power generating 
technologies.
V. DOE Building America in Alaska
    CCHRC was funded by two grants under the Department of Energy's 
Building America program. Some of CCHRC's work began with funding from 
the second grant and has been carried forward with funds from Alaska 
Housing Finance Corporation. These grants have led to important 
advances in basic envelope design in Alaskan residential construction, 
which is called the Residential Exterior Membrane Outside-insulation 
Technique (REMOTE), or REMOTE technique.
    Building America in Alaska I: CCHRC, the U.S. Department of Energy, 
and Alaska Housing Finance Corporation (AHFC) formed a Federal/state/
industry partnership to implement the Building America program in 
Alaska. A Building America in Alaska (BAA) team of building industry 
professionals from across the state worked with cold climate experts 
from the Building Science Consortium. The primary goal of this project 
was to develop plans for energy efficient, durable, healthy, and cost 
effective homes that are affordable to moderate-income Alaskans. The 
team designed a single-family residential home with modifications for 
each of three major climatic regions/environments found in Alaska. 
Building America home, using the CCHRC design or Building America 
technology, were constructed by Bee Construction in North Pole 
(Interior) and blu-Spruce Construction in Juneau (Southeast) and sold 
shortly at or near completion. The performance target for these homes 
is Five Star Plus, or the highest level of efficiency.
    A Final Report was delivered to AHFC October 30, 2001, and included 
the building design, material list, construction costs, and performance 
testing and energy modeling of the finished homes. CCHRC staff worked 
with the Fairbanks Chapter of Habitat for Humanity to utilize the 
Building America design and technology in other projects. The Builders 
Guide: Cold Climates, developed through the Building America program, 
was reviewed by the Alaska team and CCHRC staff, and updates were 
recommended, compiled, and delivered to the Building Science 
Consortium.
    Building America in Alaska II: CCHRC's second grant from the 
Department of Energy was awarded for a State Energy Program Special 
Project to continue work on the Building America in Alaska program. The 
goals were: (1) to develop builder's education courses on BAA 
approaches to residential construction and to continue education and 
promotion of Building America techniques to the Alaskan home building 
industry; (2) to test and monitor the Building America houses 
constructed in Alaska in 2001 and assess their performance; and (3) to 
develop a Building America strategy to address the cold, wet climate of 
Southeast Alaska which includes construction of a test module for 
checking wall panels for moisture, durability and energy efficiency. 
Within this project, the CCHRC Mobile Test Lab (MTL) was constructed in 
North Pole and shipped to Juneau in January 2003. Students of 
Construction Technology at the University of Alaska SE built and 
monitored various wall systems in the test module for a year. The wall 
built with the REMOTE technique out performed other wall sections in 
terms of drying. The MTL was later re-fitted with new wall panels, new 
equipment, and continues to be monitored under funding from AHFC.
    REMOTE Wall: The REMOTE technique combines an outside insulation 
wall envelope system with more conventional roof and foundation 
envelopes to maximize the benefits of both systems. An impermeable 
membrane is attached to the exterior of the wall's sheathing with foam 
insulation exterior to that. This membrane is then tied to an interior 
vapor barrier for the roof and foundation of the structure. The benefit 
of this system is that condensation within the building envelope is 
eliminated along with all the associated moisture problems. Nine wall 
systems were tested in Juneau utilizing the Mobile Test Lab. Of the 
nine walls tested, the best performing wall was the REMOTE wall. The 
REMOTE wall offered the most reliable results to the drying of built-in 
moisture and had the lowest recorded moisture content in the sheathing, 
framing and bottom plate at the conclusion of the testing. During 
intentional wetting experiments in which moisture was introduced to the 
wall cavity, the empty cavities dried in days, the fiberglass filled 
cavities dried in weeks, and the foam-filled cavities did not dry 
during the experiment. This shows that the fundamental design where all 
of the insulation is on the outside of the wall is the most robust for 
eliminating moisture problems.
    In September 2005, the Tlingit-Haida Regional Housing Authority 
(THRHA) received an award in recognition for its development and 
application of innovative approaches and best practices in housing and 
community development at the U.S. Department of Housing and Urban 
Development's (HUD) National Indian Housing Summit. The work involved 
an application of the REMOTE wall. THRHA was one of six housing 
organizations from around the country to receive one of the prestigious 
awards. In addition, THRHA was recognized for its partnerships with 
CCHRC, the University of Alaska Southeast Construction Technology 
Department, and Southeast Alaska Building Industry Association for 
exploring new building techniques and materials suitable to Southeast 
Alaska's climate.
CCHRC Recommends
    The U.S. Department of Energy's Building America program has been 
very important for developing and demonstrating improved building 
techniques. Greater focus should be given to energy efficiency and 
conservation in buildings within this program. The program should also 
be expanded with funding to ensure its availability in all of the 
states with a regional structure, primarily so that applications can be 
considered in the context of the local region. Building America has 
been very successful nationwide and has been embraced by NAHB and the 
homebuilding industry.
VI. HUD Healthy Homes and DOE Weatherization
    CCHRC, the Alaska Housing Finance Corporation, University of Alaska 
Fairbanks and Anchorage, and State of Alaska Weatherization agencies in 
Fairbanks and Anchorage partnered on the Healthy Homes in Alaska 
Project which studied the connection between indoor air quality (IAQ) 
and asthma in children. CCHRC has also done several other projects on 
IAQ and ventilation issues, including the mold survey and wildfire 
smoke remediation studies described below. All of these studies are 
more fully reported at http://www.cchrc.org/completed.html. There is an 
essential connection between the development of energy efficient 
buildings and ventilation: as we insulate and tighten up buildings to 
prevent heat loss or entry, it becomes increasingly important to 
provide intentional, mechanical ventilation to supply fresh air and to 
control the build-up of moisture in the buildings. The ventilation 
system must be optimized to use the minimum amount of energy and 
materials consistent with the air exchange requirements. Finally, 
outdoor air is not necessarily ``fresh,'' so it is often important to 
filter the incoming and re-circulated air to obtain the best, healthy 
indoor air quality.
    The Healthy Homes in Alaska Project: This project was designed to 
test whether or not improving the indoor environmental quality of homes 
for children with asthma might improve their health. Only children who 
lived in low-income homes were eligible, and the parent or guardian of 
the child was required to own the home. Another goal of this project 
was to increase the capacity of the Low-income Weatherization Program 
to remove possible respiratory hazards in the homes of low-income 
people who have children with asthma or other upper respiratory 
diseases. The Healthy Homes in Alaska project was conducted in two 
areas in the state. Fairbanks is Alaska's second largest city and is 
located in the Interior. Hooper Bay is a larger bush community of 1,014 
residents on the Bering Sea coastline. These communities were selected 
because they have residents with diagnosed asthma, have an involved 
health provider in the region, and are generally representative of 
conditions and housing stock throughout the state. The project provided 
indoor air quality assessment, health screenings of affected children, 
and housing remediation to selected homes. We identified and studied a 
total of 36 homes: 10 eligible participants in the Fairbanks area, 9 
participants in Hooper Bay, and 8 and 9 control homes in Fairbanks and 
Hooper Bay, respectively. The remediation in the control homes 
consisted of the standard weatherization items such as improving 
insulation, replacing windows and doors, sealing air leaks, as well as 
providing some safety items such as smoke and CO detectors. In the 
participants houses the weatherization protocol was augmented by items 
designed to remove possible asthma triggers such as moldy window sills, 
bedding, or furniture. Some changes in the home were made to prevent 
the moisture and temperature conditions that lead to the growth of mold 
such as adding cloths dryers, installing shelving and bed frames to 
improve air circulation by the walls and floors, and installing quiet 
bath and kitchen fans to remove moist air from the house. 
Qualitatively, the clients in the healthy homes reported improved 
comfort and health as well as reduced energy bills. While the 
quantitative results of this study were based on a small number of 
research subjects, and asthma is a disease with multiple causes, there 
are some interesting suggestive results: (1) It is possible that the 
homes of children with asthma have higher levels of indoor air 
pollution than the homes of similar people without asthma; and (2) The 
remediation may have helped to improve the pulmonary function tests and 
the IgE levels of asthmatic children, although the numbers from this 
small a study were not sufficient to reach statistical significance.
    Mold and Mildew Survey: The prevalence of mold in Alaska Native 
housing is a significant health issue. CCHRC documented over 1,700 
residences with mold problems in a survey funded by HUD. See http://
www.cchrc.org/completed.html#mold. These instances varied from mild 
mildew around windows, in kitchens, or in bathrooms to severe mold 
development requiring the destruction of the building. CCHRC has been 
funded by the Alaska Housing Finance Corporation to provide consulting 
services to Alaska Native housing authorities on these and other issues 
including the development of low-cost ventilation systems as adequate 
ventilation is one of the keys to maintaining a healthy, mold-free 
home.
    Remediation of Wildfire Smoke in Fairbanks Homes: For over 2 weeks 
in the summer of 2004, fires around interior Alaska raised the outdoor 
particulate level significantly over EPA's fine particle standard for 
PM2.5 of 65mg/m3. The actual figure exceeded 
1,000mg/m3 during part of that period. This study 
demonstrated a 76-92 percent improvement of indoor air quality, 
depending on method of remediation. See http://www.cchrc.org/
FANTECH.pdf. Indoor air was tested in houses pressurized with filtered 
outdoor air, as well as in non-pressurized houses in which the air was 
re-circulated and filtered. Although residents of all houses rated the 
improvements from ``better'' to ``very significant,'' the percentage 
reduction in fine particulates was greatest in pressurized houses. This 
study has implications for builders in areas in which air quality can 
be hazardous to health, no matter the cause.
CCHRC Recommends
    The DOE Weatherization programs provide a significant improvement 
in the older housing stock, reducing the annual gas heating bills by an 
average of 32 percent (see http://www1.eere.energy.gov/office_eere/
pdfs/wap_fs.pdf). As CCHRC develops more strategies for retrofitting 
older houses, the lessons learned by the weatherization agencies across 
the Nation will be increasingly important to incorporate. Improvements 
in the health of children and adults with asthma and other respiratory 
conditions can also be made with the development and application of 
appropriate ventilation and filtration standards.
    In addition to the work of CCHRC, we are acutely aware of the 
national focus on energy consumption of buildings, green building and 
the need for incentives to promote sustainable building practices. 
These issues have gained significant prominence in national public 
policy forums.
Energy Consumption and Efficiency
    Energy efficiency is the primary focus for many builders and home 
buyers. While many figures are being thrown around these days, the 
Energy Information Administration (EIA) estimates that buildings 
accounted for 39.4 percent of total U.S. energy consumption in 2002. 
Residential buildings accounted for 54.6 percent of that total, while 
commercial buildings accounted for the other 45.4 percent (Annual 
Energy Review 2003, DOE/EIA-0384 (2003)--for heating, cooling and 
electric appliances. Builders know that building with energy 
conservation in mind is both practical and profitable.
    Recently, a number of groups, including the U.S. Conference of 
Mayors, have joined with the American Institute of Architects (AIA) to 
support the Architecture 2030 Challenge, which suggests that buildings 
are the major source of demand for energy and materials and, 
incidentally, produce greenhouse gases. The Challenge includes the 
goals of:

   All new buildings must be designed to use 50 percent less 
        fossil fuels.

   An equal amount of existing building area must be renovated 
        annually to use 50 percent of the amount of fossil fuel they 
        are currently consuming; and

   All new buildings must be carbon-neutral by 2030 i.e., uses 
        no fossil fuels and emits no greenhouse gases in operation).

    A more detailed look at data provided by the EIA reveals that the 
2030 challenge has arbitrarily derived the number of ``half'' of energy 
consumption and greenhouse gases by combining two categories for which 
the EIA reports and creating a new ``buildings'' category. Based on 
EIA's 2000 Annual Energy Review, adding the categories of 
``Commercial,'' ``Residential,'' and a portion of the ``Industry'' 
categories, the 2030 challenge arrives at a number of 48 percent. This 
estimate reflects a portion of the industrial sector that is attributed 
to buildings because of heating, cooling, etc., but how the AIA arrive 
at the actual percentage is open to question.
    Older homes, for which present-day builders and architects bear 
little responsibility, account for a very large share of residential 
energy consumption. Single family and multifamily units built in the 
decade before the Residential Energy Consumption Survey (RECS) of 2001 
account for only 2.5 percent of total energy consumption in the U.S. 
Even if each of the new homes built over the 1991-2001 period consumed 
zero energy, it would only have reduced total consumption in the U.S. 
by 2.5 percent. Finally, more than half of total residential energy 
consumption consists of energy lost between generation and 
consumption--that is, energy lost in the process of producing and 
transmitting electricity, rather than energy actually used in 
residential structures. This fact illustrates the importance of 
developing energy producing systems within the structures themselves.
ENERGY STAR and Green Building
    ENERGY STAR is the most prominent of the many voluntary 
programs builders utilize and was the very first program endorsed by 
the National Association of Home Builders (NAHB). ENERGY STAR 
homes meet specific energy efficiency guidelines established by the 
U.S. Environmental Protection Agency that achieve notable energy 
savings above the current energy standards. To date, more than a half-
million above-code ENERGY STAR homes have been built.
    ENERGY STAR also serves as a resource and efficiency 
benchmark and as an integration point for NAHB's own Model Green Home 
Building Guidelines. Since the 1990s, NAHB has been preparing for the 
evolution of green building into the main stream. Green building means 
energy efficiency, water and resource conservation, sustainable or 
recycled products, and indoor air quality all incorporated into the 
everyday process of home building.
    Published in 2005, NAHB's Model Green Home Building Guidelines 
(Guidelines) were developed through an extensive year-long review of 
existing programs and industry best practices within an open, 
consensus-based process involving more than 60 industry stakeholders--
including builders, researchers, manufacturers, environmentalists, and 
government agencies. The NAHB Research Center, an American National 
Standards Institute (ANSI)-accredited standards developing 
organization, co-developed the Guidelines with NAHB. Due to broad 
acceptance by local home builder associations, the Guidelines will 
undergo formal consideration procedures to become the ANSI-accredited 
standard and serve as an official ``industry standard practice.''
    The Guidelines embody the flexibility that builders need to achieve 
efficiency and conservation goals without meeting costly national or 
state-wide mandates. Local adoption of the Guidelines allows builders 
to more appropriately address regional and local environmental 
concerns, properly assess life-cycle costs based on local building 
codes and climate zones, and encourage innovation to meet higher and 
broader energy efficiency objectives. Simply, there is no one-size-
fits-all green building standard. Alaska, North Dakota, Florida, and 
Maine all have different efficiency needs and requirements based on 
their climate and builders need the flexibility of a program like the 
Guidelines to reach those goals.
    One popular green building standard that is being considered as a 
requirement throughout the country, particularly at the state and local 
level, is the Leadership in Energy and Environmental Design (LEED), 
sponsored by the U.S. Green Building Council (USGBC). Due to its 
success at mandating LEED-NC programs for many government facilities, 
USGBC is currently offering a pilot program, LEED-H for homes, to 
further encourage the penetration of the LEED brand into the private 
sector.
    While many state and local governing bodies have mandated the use 
of LEED, some local leaders, e.g., in Boston, have recognized an 
important fact that many builders also recognize: the LEED-H program is 
costly, requires many mandatory provisions, offers little flexibility, 
and contains extensive implementation fees that could cost a builder, 
and ultimately the public, from $12,000 to $15,000 extra per home. A 
close analysis of NAHB's Model Green Home Guidelines and USGBC's LEED-H 
for homes is attached.
    Overall, at a time when housing needs the most innovation and most 
resources spent on achieving resource and energy efficiency, builders 
should not be forced to use those resources for certification and 
implementation fees just to comply with costly mandates for programs 
like LEED-H. Builders need many options and methods for achieving 
strides in energy efficiency and will be sidelined with requirements, 
for LEED or otherwise, by any government--state, local, or Federal.
Tax Incentives for Energy Efficient Housing
    Finally, another crucial way to encourage energy efficiency in 
housing is by extending and expanding tax incentives that passed as 
part of the Energy Policy Act of 2005. Unlike spending programs or one-
size-fits-all rules, tax provisions allow market participants--
builders, homeowners, and homebuyers--to marry the energy incentives 
with market-determined supply and demand.
    For example, the newly established New Energy Efficient Home Credit 
(Section 45L of the Internal Revenue Code) provides a $2,000 tax credit 
for the construction and sale of a new home which reduces energy use by 
50 percent or more. This program provides benefits to home buyers and 
communities by facilitating the construction of new property that takes 
advantage of the latest technology--and in a manner that will work in 
the marketplace. Rules that simply eliminate the market for new homes 
or other property through unreasonable restrictions do not encourage 
the adoption of energy efficient property. In fact, they do the 
opposite. They encourage retention of older, less efficient property.
    Other examples of new energy tax incentives are the energy 
efficient commercial building deduction (Section 179D), the existing 
homes tax credit (Section 25C), and the solar credit for residential 
property (Section 25D).
    Congress could improve the efficiency of these programs by making 
them permanent. Presently, these tax incentives are scheduled to expire 
over the 2007 and 2008 period. This limited duration reduces the 
effectiveness of these programs as home building in many cases takes 
months or even a year or more to complete.
Conclusion
    A directed national effort must be initiated immediately to address 
the global issue of unsustainable energy consumption and its many 
effects. Buildings, land development and related infrastructure, 
including electrical generation, transportation, water and wastewater 
systems are major factors to consider. Applied research and 
demonstration projects are very necessary components for identifying 
and developing technologies and strategies that will move toward 
effective solutions. The direction the Nation takes is dependent on the 
quality and application of that research. Through a collaborative 
approach involving industry and the marketplace, financial incentives, 
Federal and state regulatory agencies, and most importantly each 
individual's commitment, we can make a positive change. The United 
States must lead this effort by example to the rest of the world. This 
is an opportunity for the Nation to come together. For the first time 
there is general agreement about the impacts of unrestrained energy use 
and a real concern for the future. This issue can galvanize us as a 
nation around a common goal for the common good. CCHRC and the building 
and research communities of Alaska are prepared to embrace that 
movement. It is our hope that we can be a valuable part of that 
solution.

                                  
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