Testimony of David K. Garman

Assistant Secretary
Energy Efficiency and Renewable Energy
Before the Committee on Energy and Natural Resources United States Senate
"Energy Efficiency and Conservation"

March 11, 2003

Mr. Chairman and Members of the Committee, I appreciate the opportunity to appear today to discuss the Federal programs for energy efficiency and conservation within the purview of the Office of Energy Efficiency and Renewable Energy at the Department of Energy.

An entire chapter of the President's National Energy Policy was devoted to the topic of energy efficiency and conservation. The President has challenged us to continue the progress in improving energy efficiency in vehicles, in manufacturing and other industries, in appliances, in buildings, and in electricity power generation and transmission.

We have made tremendous progress in increasing the efficiency of energy used in our economy over the past 30 years. From 1972 to 2000, the energy used per dollar of GDP produced fell by roughly 40 percent. (In comparison, from 1949 to 1972, energy used per dollar of GDP only fell by about 10%). One-half to two-thirds of this reduction in energy intensity was due to improvements in energy efficiency, with the remaining one-third to one-half related to changes in the structure of the economy. Had our energy intensity remained at 1972 levels, the United States would have used about 171 quads of energy in 2000, rather than 99 quads, with energy efficiency improvements accounting for about 36-48 quads of the savings.

These savings are greater than the increase in energy supply since 1972, totaling about 26 quads, including changes in domestic production of coal (+8.9 quads), natural gas (-2.5 quads), oil (-7.6 quads), nuclear (+7.4 quads), and renewables (+2.2 quads); and increased imports of natural gas (+2.6 quads) and oil (+11.8 quads). Assuming the current average energy price of $6 billion per quad remained the same, these 36-48 quads correspond to savings of roughly $200-300 billion per year. A recent National Academy of Sciences report notes that the EERE programs played a dominant or influential role in three of the technologies the considered to be among the most important energy efficiency innovations since 1978 (low-e glass, advanced refrigerators, and electronic ballasts).

Over the years, the private sector and state and local governments have demonstrated successes at improving energy efficiency on their own or with support from the federal government. I believe this is why the President=s National Energy Plan wisely instructs us to rely on the combined efforts of industry, consumers, and federal, state, and local governments to improve energy efficiency, nationally.

The President's Energy Policy envisions six general strategies to guarantee America's continued growth and prosperity:

First, we will aggressively reduce demand by employing energy efficiency technologies and encourage sound conservation measures as essential components of our energy policy.
Second, we accept the fact that even the most aggressive energy efficiency and conservation programs will not, by themselves bring domestic supply and demand closer into balance. We must also increase energy supply, with special emphasis on domestic supply.
Third, to enhance energy security, we must maintain a diversity of primary energy sources.
Fourth, we must dramatically upgrade our national energy infrastructure to deliver energy from the source to the consumer.
Fifth, we must accomplish these strategies while simultaneously building on our successful record of environmental protection.
And sixth, we realize that our energy challenges will extend beyond 20 years. Therefore, we need to prepare for a future that moves us beyond current thinking about the sources and uses of energy.

The Federal Government, including the Department of Energy, is working to do its part. In my office, we are working to improve energy efficiency in a variety of important areas. For instance:

In partnership with industry, we are making significant investments in research and development toward new energy efficiency products and processes.
We have developed appliance standards that create reasonable but challenging efficiency guidelines for various products.
We have worked to establish consumer awareness programs such as Energy Star that help market, promote, and create a demand for efficient products.
We have established strong partnerships with the states; including financial incentives and federal grant programs to support states and localities.
And we have lead by example in striving to meet energy efficiency targets that Congress has established for federal buildings and transportation fleets.

Today, I will elaborate on a few of our ongoing and new activities that will help promote greater energy efficiency and conservation. Before I begin, I'd like to highlight how the President's Management Agenda has helped us focus our resources and become better stewards of the taxpayers' dollars. For example, the R&D investment criteria help us guide budget decisions to ensure we fund only activities that can provide real public benefits and that the private sector would not undertake without our help. And the budget-performance integration initiative, through the Program Assessment Rating Tool (PART), has helped us to focus on continuing to improve our performance goals, and to identify program planning and management strengths and challenges.

Two years ago, the President's Management Agenda pointed out that Federal government R&D programs in general "do not link information about performance to our decisions about funding. Without this information, decisions about programs tend to be made on the basis of anecdotes, last year's funding level, and the political clout of local interest groups." This year, our funding request is in better alignment with what it will take to achieve our goals.

Promoting Efficiency in Transportation

A top priority of my office is to work to dramatically reduce or eventually even end our Nation's dependence on foreign oil. The centerpiece of this effort is, of course, the FreedomCAR partnership and the President's Hydrogen Fuel Initiative. Because that was a subject of a hearing before this Committee last week I need not repeat my testimony from last week.

As important as we believe hydrogen is for the long term, however, we are still working, in cooperation with other federal agencies, to maintain a robust, and in some areas growing, research and development program in non-hydrogen transportation technologies.

Under the FreedomCAR partnership we have proposed a funding increase in fiscal year 2004 for our hybrid (gasoline-electric and diesel-electric) technology, as well as increases in materials technology. We believe many of these technologies will deliver fuel savings both prior to and after the introduction of fuel cell vehicles, since lightweight materials and hybrid technologies are expected to be incorporated into fuel cell vehicle designs. Therefore, these investments are expected to pay off in the interim, as well as over the long term.

In addition, we had a number of interim strategies in mind as we established specific, measurable performance goals for our program. And our FY 2004 budget is aligned with these goals. For example:

We are working to develop technologies for heavy vehicles by 2006 that will enable reduction of parasitic energy losses, including losses from aerodynamic drag, from 39 percent of total engine output in 1998 to 24 percent;
The 2006 goal for Transportation Materials Technologies R&D activities is to reduce the production cost of carbon fiber from $12 per pound in 1998, to $3 per pound; and
The 2010 goal for Hybrid and Electric Propulsion R&D activities is to reduce the production cost of a high power 25kW battery for use in light vehicles from $3,000 in 1998 to $500, with an intermediate goal of $750 in 2006. Achieving these goals will enable hybrid vehicles to be more cost competitive with conventional vehicles in the marketplace.

Automakers are introducing technologies that have resulted in part from DOE's work in this area. At the recent North American International Auto Show in Detroit, the major U.S. automakers announced that they will have a variety of new hybrid gasoline-electric models entering the market in the 2004 to 2008 timeframe.

Of course, hybrid vehicles are still more expensive compared to conventional vehicles, which is why the President proposed a tax credit for hybrid vehicles in his National Energy Plan, and subsequent to that in his 2004 budget submission. We urge that Congress adopt this important incentive for more efficient vehicles.

Improving energy use in our Federal buildings

The Federal Government is the nation's largest single energy user. We spend almost $8 billion annually on energy costs and operate over 500,000 facilities and almost 600,000 vehicles worldwide. Therefore, our Federal Energy Management Program (FEMP) focuses on energy use in federal government buildings and complexes.

The President's National Energy Policy recognized the role that the Federal government can play in helping make the United State the world leader in energy efficiency in the 21st century by directing that Federal agencies to conserve energy and to reduce energy use during peak hours, particularly in areas where outages are likely.

Federal agencies have already accomplished tremendous success in energy management. In response to Executive Order 13123, between 1985 through 1999, the federal government as a whole reduced its energy use in its buildings by more than 20 percent - thereby reaching its goal for 2000, one year early. The Government also saved more than $1.3 billion in 2001 relative to 1985, in reduced energy bills, much of which can be attributed to energy improvements. But there is still much we can do. Let me highlight a few of the opportunities we have to lead by example.

It is much easier to incorporate and finance energy-saving technology in new construction compared to retrofits. So with every new building we build, we should incorporate smart design and energy efficient and renewable technologies. These buildings will show our commitment to saving energy, saving money, and protecting the environment.

The Federal government's existing building stock offers another opportunity for tremendous energy savings. We provide Federal agencies with access to technical assistance so that agencies can make wise choices as they consider options for retrofitting and upgrading their buildings. In some cases, when cost-effectiveness can be demonstrated, FEMP may recommend private sector financing, through energy savings performance contracts and utility contracts, to pay for these upgrades. FEMP provides agencies with easier access to these unique contracting vehicles. However, alternative financing through Energy Saving Performance Contracting (ESPC) is in jeopardy because the statutory authority will sunset on September 30, 2003 without legislative action.

The Federal government can also make a difference by making smart purchasing decisions. The Federal government spends more than $10 billion each year on energy-using equipment. According to a recent study conducted by Lawrence Berkeley National Laboratory, the Federal government could save at least $120 million in annual energy costs by 2010 just by buying energy efficient products that are readily available.

Executive Order 13221, issued by President Bush in July 2001, offers a compelling example of how, by working with industrial partners, the federal government's purchasing decisions can pull the market for energy efficient products. To help implement E.O. 13221, which requires the federal government to purchase products that use minimal standby power, FEMP initiated negotiations with office product manufacturers. As a result, office product manufacturers are introducing significant design changes that dramatically reduce the standby power of products used by consumers and businesses throughout the world. Through prudent product specifications and purchasing criteria, the federal government is encouraging the development of more energy efficient and renewable energy products and services.

Responding to E.O. 13221 the federal government will save approximately $10 million in annual energy cost savings. U.S. consumers will save approximately $210 million in annual energy costs. The federal government will save electricity equivalent to the amount needed to power approximately 18,000 homes. U.S. consumers will save electricity equivalent to the amount needed to power approximately 270,000 homes. Savings are expected to grow as low standby products become standard in the market.

The Federal Government can also reduce energy use through a continued focus on the supply side of the equation. Federal agencies invest in distributed energy resources to provide power closer to the point of use. These distributed energy technologies include fuel cells, microturbines, and biomass systems, to name a few. Using distributed generation, we increase the available supply, improve reliability, and reduce demand on our constrained power system. Many of these technologies can be used as combined heat and power systems - in other words, they can recapture heat that is otherwise wasted.

And, Mr. Chairman, we are also pursuing significant efforts to increase the energy efficiency of Federal fleet operations. One driver for this is Executive Order 13149, which directs Federal agencies to reduce overall petroleum consumption in fleets by 20 percent by the year 2005. To meet this goal, we are working with other agencies to improve the efficiency of fleet operations, increase the use of alternative fuel, and encourage the purchase of energy efficiency vehicles. Some agencies are ordering advanced technology vehicles such as hybrids. The Administration has also requested that agencies reduce the size of their fleets. While fleets for some agencies performing law enforcement and security activities are expected to increase, these increases will be more than offset by decreases in other agencies' fleets, as agencies begin to manage their fleet resources more efficiently.

Buildings for the Future

Energy use by residential and commercial buildings accounts for over one-third of the Nation's total energy consumption - including two-thirds of the electricity generated in the U.S. - and costs the Nation about $240 billion annually. Improving the energy efficiency of buildings and equipment reduces energy consumption - especially during critical peak demand periods - which also reduces America's vulnerability to energy supply disruptions, energy price spikes and constraints on the Nation's electricity infrastructure. In addition, since energy for buildings also contributes one-third of urban air pollution and roughly a third of our carbon emissions, new energy efficiency technologies can have significant economic and environmental benefits.

With a growing population and increased amenities that require more energy, building energy consumption will grow from 34 to over 40 quadrillion Btu by 2020. Therefore, we are working on technologies needed for new generations of buildings that will be more efficient, comfortable and simpler to operate and maintain. Our office buildings, Federal buildings, homes, and stores can be more self reliant, less vulnerable to outages, adaptable to changing work requirements, and more responsive to users needs. Many could actually produce more energy than they consume by combining highly efficient design with solar, geothermal, and other distributed energy and cogeneration technologies.

Our Building Technologies Program, in partnership with industry, government agencies, universities and national laboratories, develops technologies, techniques and tools to make residential and commercial buildings more energy efficient, productive and affordable. Its portfolio includes improving the energy efficiency of building components and equipment as well as developing highly-efficient, whole-building, system-design techniques. The program also supports the development of building energy efficiency codes and national energy efficiency standards for appliances and building equipment; integrates renewable energy systems into building design and operation; and conducts technology transfer, education and information exchange. The program works to forge consensus on research directions and priorities, and industry-wide codes and standards.

Within our buildings research portfolio we have a new focus in 2003 — solid state lighting — a new technology being developed to advance more efficient lighting systems. Consider the lights that illuminate this room. They are a major consumer of electricity. Nationwide, lighting consumes seven quadrillion BTUs or more in a given year, or 7 percent of all energy usage. Less efficient incandescent bulbs produce large amounts of heat that our climate control systems must manage, so we pay an additional energy penalty.

While modern florescent bulbs with electronic ballasts are more efficient, they remain glass nodules filled with gas not unlike the vacuum tubes of the last generation of electronics. The time has come to take the next step toward solid state lighting. The inorganic light emitting diode is to florescent lamps what transistors were to vacuum tubes, or what the automobile was to the horse-and-buggy. It's a revolutionary technological innovation that promises to change the way we light our homes and businesses.

Appliance Standards Program

Over the last year, the Department undertook a major analysis to respond to the National Energy Policy which directed continued support and expansion of the scope of the program for covered products, setting higher standards where technologically feasible and economically justified. We completed a review of the standards program and identified residential furnaces and boilers, commercial central air conditioners and heat pumps and electric distribution transformers as high priority standards rulemaking activities. Further work in these areas is presently underway.

In addition, the Department identified energy savings opportunities for incandescent reflector lamps, torchieres, commercial refrigerators, vending machines, and ceiling fans and are assessing whether to expand the scope to include any of these products in the program.

Distributed Energy and Electric Reliability Program

Distributed energy involves the use of relatively small-scale and modular energy generation devices installed onsite or near the customer's premise. Electric reliability involves the use of electric energy systems for addressing electricity transmission and distribution problems, including grid congestion, outages, power quality disturbances, and line losses. Technologies include industrial gas turbines, microturbines, reciprocating engines, chillers, desiccants (for humidity control), integrated energy systems and CHP, energy storage devices, utility interconnection equipment, transmission and distribution systems, communication and control systems, and high temperature superconducting materials and equipment.

To address regulatory and institutional barriers to the use of distributed energy and electric reliability technologies, the program conducts analysis, and education, and outreach activities in partnership with industry groups and Federal and State government agencies. The aim is to streamline siting, permitting, and interconnection procedures, accelerate distributed energy project development timetables, and lower installation costs.

The Distributed Energy and Electric Reliability Program works to strengthen America's electric energy infrastructure and provide utilities and consumers with a greater array of energy efficient technology choices for the generation, transmission, distribution, storage, and demand management of electric power and thermal energy.

The program contributes to several national energy and environmental goals. For example, expanding the use of distributed energy and electric reliability technologies upgrades America's aging electric power infrastructure, relieves congestion on transmission and distribution systems, reduces the use and increases the supply of electricity during periods of peak demand, and reduces environmental emissions, including greenhouse gases. The program supports EERE's strategic goal to increase the reliability and efficiency of electricity generation, delivery, and use.

Mr. Chairman, the Grid Study published last year called for the establishment of a new office of Electricity Reliability. We are now in the process of implementing that recommendation, and expect to be able to provide details on the structure and functions of this new office in the months ahead.

Mr. Chairman, I hope I have conveyed some of the elements of our vision of the future and how our programs are working to attain that vision. I will be pleased to answer any questions you may have.