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American Energy Security and Innovation: An Assessment of Private-Sector Successes and Opportunities in Energy Efficient Technologies

This document is the transcript from a House Subcommittee on Energy and Power hearing held on February 26, 2013 regarding private sector successes and opportunities in energy efficient technologies. The hearing included testimony from two Senators and five witnesses representing the Department of Energy, energy efficiency organizations, and energy companies. The purpose of the hearing was to assess the status of the energy efficiency industry and explore policy options to further promote energy efficient technologies and innovation.

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American Energy Security and Innovation: An Assessment of Private-Sector Successes and Opportunities in Energy Efficient Technologies

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AMERICAN ENERGY SECURITY AND INNOVATION:

AN
ASSESSMENT
OF
PRIVATE-SECTOR
SUCCESSES AND OPPORTUNITIES IN ENERGY
EFFICIENT TECHNOLOGIES

HEARING
BEFORE THE

SUBCOMMITTEE ON ENERGY AND POWER

OF THE

COMMITTEE ON ENERGY AND

COMMERCE
HOUSE OF REPRESENTATIVES
ONE HUNDRED THIRTEENTH CONGRESS
FIRST SESSION

TUESDAY, FEBRUARY 26, 2013

Serial No. 1138

(
Printed for the use of the Committee on Energy and Commerce
energycommerce.house.gov
U.S. GOVERNMENT PRINTING OFFICE
WASHINGTON

79891

2013

For sale by the Superintendent of Documents, U.S. Government Printing Office

Internet: bookstore.gpo.gov Phone: toll free (866) 5121800; DC area (202) 5121800
Fax: (202) 5122104 Mail: Stop IDCC, Washington, DC 204020001

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COMMITTEE ON ENERGY AND COMMERCE

FRED UPTON, Michigan
Chairman
RALPH M. HALL, Texas
HENRY A. WAXMAN, California
JOE BARTON, Texas
Ranking Member
Chairman Emeritus
JOHN D. DINGELL, Michigan
ED WHITFIELD, Kentucky
Chairman Emeritus
JOHN SHIMKUS, Illinois
EDWARD J. MARKEY, Massachusetts
JOSEPH R. PITTS, Pennsylvania
FRANK PALLONE, JR., New Jersey
BOBBY L. RUSH, Illinois
GREG WALDEN, Oregon
ANNA G. ESHOO, California
LEE TERRY, Nebraska
ELIOT L. ENGEL, New York
MIKE ROGERS, Michigan
GENE GREEN, Texas
TIM MURPHY, Pennsylvania
DIANA DEGETTE, Colorado
MICHAEL C. BURGESS, Texas
LOIS CAPPS, California
MARSHA BLACKBURN, Tennessee
MICHAEL F. DOYLE, Pennsylvania
Vice Chairman
JANICE D. SCHAKOWSKY, Illinois
PHIL GINGREY, Georgia
ANTHONY D. WEINER, New York
STEVE SCALISE, Louisiana
JIM MATHESON, Utah
ROBERT E. LATTA, Ohio
CATHY MCMORRIS RODGERS, Washington G.K. BUTTERFIELD, North Carolina
GREGG HARPER, Mississippi
JOHN BARROW, Georgia
LEONARD LANCE, New Jersey
DORIS O. MATSUI, California
BILL CASSIDY, Louisiana
DONNA M. CHRISTENSEN, Virgin Islands
BRETT GUTHRIE, Kentucky
KATHY CASTOR, Florida
PETE OLSON, Texas
JOHN P. SARBANES, Maryland
DAVID B. MCKINLEY, West Virginia
JERRY MCNERNEY, California
BRUCE L. BRALEY, Iowa
CORY GARDNER, Colorado
PETER WELCH, Vermont
MIKE POMPEO, Kansas
BEN RAY LUJAN, New Mexico
ADAM KINZINGER, Illinois
PAUL TONKO, New York
H. MORGAN GRIFFITH, Virginia
GUS M. BILIRAKIS, Florida
BILL JOHNSON, Missouri
BILLY LONG, Missouri
RENEE L. ELLMERS, North Carolina

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CHRIS

SUBCOMMITTEE

ENERGY

AND

POWER

ED WHITFIELD, Kentucky
Chairman
STEVE SCALISE, Louisiana
BOBBY L. RUSH, Illinois
Vice Chairman
Ranking Member
JOHN SHIMKUS, Illinois
JERRY MCNERNEY, California
PAUL TONKO, New York
JOSEPH R. PITTS, Pennsylvania
EDWARD J. MARKEY, Massachusetts
LEE TERRY, Nebraska
ELIOT L. ENGEL, New York
MICHAEL C. BURGESS, Texas
GENE GREEN, Texas
ROBERT E. LATTA, Ohio
CATHY MCMORRIS RODGERS, Washington LOIS CAPPS, California
BILL CASSIDY, Louisiana
MICHAEL F. DOYLE, Pennsylvania
PETE OLSON, Texas
JOHN BARROW, Georgia
DAVID B. MCKINLEY, West Virginia
DORIS O. MATSUI, California
CORY GARDNER, Colorado
DONNA M. CHRISTENSEN, Virgin Islands
MIKE POMPEO, Kansas
KATHY CASTOR, Florida
ADAM KINZINGER, Illinois
JOHN D. DINGELL, Michigan
H. MORGAN GRIFFITH, Virginia
HENRY A. WAXMAN, California (ex officio)
JOE BARTON, Texas
FRED UPTON, Michigan (ex officio)

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CONTENTS
Page

Hon. Ed Whitfield, a Representative in Congress from the Commonwealth

of Kentucky, opening statement .........................................................................
Prepared statement ..........................................................................................
Hon. Bobby L. Rush, a Representative in Congress from the State of Illinois,
opening statement ................................................................................................
Prepared statement ..........................................................................................
Hon. Fred Upton, a Representative in Congress from the State of Michigan,
opening statement ................................................................................................
Prepared statement ..........................................................................................
Hon. Henry A. Waxman, a Representative in Congress from the State of
California, opening statement .............................................................................
Prepared statement ..........................................................................................
Hon. John D. Dingell, a Representative in Congress from the State of Michigan, prepared statement ......................................................................................

1
2
3
4
5
5
7
8
214

WITNESSES
Hon. Lisa Murkowski, A United States Senator from the State of Alaska,
Ranking Member, Senate Energy and Natural Resources Committee ............
Prepared statement ..........................................................................................
Hon. Jeanne Shaheen, A United States Senator from the State of New Hampshire .......................................................................................................................
Prepared statement ..........................................................................................
Kathleen Hogan, Deputy Assistant Secretary for Energy Efficiency, Office
of Energy Efficiency and Renewable Energy, U.S. Department of Energy .....
Prepared statement ..........................................................................................
Answers to submitted questions ......................................................................
Kevin C. Kosisko, Vice President Service, North America, ABB, Inc., on
Behalf of National Electrical Manufacturers Association and Industrial Energy Efficiency Coalition ......................................................................................
Prepared statement ..........................................................................................
Britta MacIntosh, Vice President, Business Development, NORESCO, on Behalf of Federal Performance Contracting Coalition ..........................................
Prepared statement ..........................................................................................
James Crouse, Executive Vice President of Sales and Marketing, Capstone
Turbine Corporation, on Behalf of U.S. Combined Heat and Power Association ........................................................................................................................
Prepared statement ..........................................................................................
Helen A. Burt, Senior Vice President and Chief Customer Officer, Pacific
Gas and Electric Company ..................................................................................
Prepared statement ..........................................................................................
R. Neal Elliott, Associate Director of Research, American Council for an
Energy-Efficient Economy ...................................................................................
Prepared statement ..........................................................................................
Ted Gayer, Co-Director, Economic Studies and Joseph A. Pechman Senior
Fellow, The Brookings Institute .........................................................................
Prepared statement ..........................................................................................

9
12
14
17
21
23
279
51
54
95
97
102
104
114
116
127
129
144
146

SUBMITTED MATERIAL
Press release from cable companies, submitted by Mr. Shimkus ........................
Report entitled, Doubling U.S. Energy Productivity by 2030, by the Alliance
Commission on National Energy Efficiency Policy, submitted by Mr.
Kinzinger ..............................................................................................................
Statement of Arkema, Inc., submitted by Mr. Whitfield ......................................

216
219
253

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VI
Page

Statement of The Pew Charitible Trusts, submitted by Mr. Whitfield ...............

Statement of The Alliance for Industrial Efficiency, submitted by Mr.
Whitfield ...............................................................................................................
Statement of the American Chemistry Council, submitted by Mr. Whitfield ....
Statement of the Heat is Power Association, submitted by Mr. Whitfield .........

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261
265
270

CHRIS

AMERICAN ENERGY SECURITY AND INNOVATION: AN ASSESSMENT OF PRIVATE-SECTOR

SUCCESSES AND OPPORTUNITIES IN ENERGY EFFICIENT TECHNOLOGIES
TUESDAY, FEBRUARY 26, 2013

HOUSE OF REPRESENTATIVES,
SUBCOMMITTEE ON ENERGY AND POWER,
COMMITTEE ON ENERGY AND COMMERCE,
Washington, DC.
The subcommittee met, pursuant to call, at 10:08 a.m., in room
2123 of the Rayburn House Office Building, Hon. Ed Whitfield
(chairman of the subcommittee) presiding.
Members present: Representatives Whitfield, Scalise, Shimkus,
Pitts, Terry, Burgess, Cassidy, Olson, McKinley, Gardner, Pompeo,
Kinzinger, Griffith, Upton (ex officio), Rush, McNerney, Tonko,
Capps, Barrow, Matsui, Castor, Welch, and Waxman (ex officio).
Staff present: Nick Abraham, Legislative Clerk; Gary Andres,
Staff Director; Charlotte Baker, Press Secretary; Mike Bloomquist,
General Counsel; Matt Bravo, Professional Staff Member; Allison
Busbee, Policy Coordinator, Energy and Power; Patrick Currier,
Counsel, Energy and Power; Carolyn Ferguson, Staff Assistant;
Tom Hassenboehler, Chief Counsel, Energy and Power; Heidi King,
Chief Economist; Ben Lieberman, Counsel, Energy and Power; Gib
Mullan, Chief Counsel, Commerce, Manufacturing, and Trade;
Mary Neumayr, Senior Energy Counsel; Andrew Powaleny, Deputy
Press Secretary; Chris Sarley, Policy Coordinator, Environment
and Economy; Lyn Walker, Coordinator, Admin/Human Resources;
Jeff Baran, Democratic Senior Counsel; Phil Barnett, Democratic
Staff Director; Greg Dotson, Democratic Staff Director, Energy and
Environment; Caitlin Haberman, Democratic Policy Analyst; and
Alexandra Teitz, Democratic Senior Counsel, Environment and
Economy.
OPENING STATEMENT OF HON. ED WHITFIELD, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF KENTUCKY

Mr. WHITFIELD. Good morning, and I would like to call this hearing to order this morning. I will recognize myself for an opening
statement.
Anyone who focuses on energy issues, I believe, has been amazed
at recent discoveries of resources that make it possible for America
to be energy independent, both generating electricity and producing
fuel for transportation purposes. Certainly, supply and demand affects price and if we can control price, we can be more competitive
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2
in the global marketplace, strengthen our economy, and create jobs.
That is certainly a goal to which we all aspire.
Now, we have had several hearings about supply in this subcommittee, and today, we are going to focus on demand, and specifically, energy efficiency. In fact, todays hearing is entitled
American Energy Security and Innovation: An Assessment of Private-Sector Successes and Opportunities in Energy Efficient Technologies. Just as we have been successful in finding additional resources for energy production, we have also made great strides in
energy efficiency, and we can do even more.
History teaches us that nothing is more efficient than the free
market. The only thing you need to spur than improve energy efficiency is profit-seeking companies responding rationally to high energy bills. Any company that doesnt use energy as wisely as possible will lose ground to a competitor that does. This is why free
economies are the most efficient and have the lowest energy inputs
per units of gross domestic product when you contrast that particularly with centrally-planned economies, which are certainly not as
efficient.
We all understand that government has a very important role to
play and has contributed much in this area, such as utilizing the
latest advances to improve efficiency in federal buildings, and in
conducting energy efficiency research. And all of us are fans of the
energy savings performance contract program over at DOE, and it
continues to do a great job, and we look forward to making sure
that it continues to make that kind of contribution.
We have a great panel of witnesses today. We have three panels,
and on the first panel, we are very fortunate to have two United
States senators. We have Senator Lisa Murkowski of Alaska, who
has been a leader in the energy sector. Senator, we really appreciate your taking time to be with us today. And Senator Shaheen
of New Hampshire was given a speaking engagement this morning,
and she is on her way, and it is not seldom that we have two senators over here, so we are always going to pay particular attention
to what they say, because as they say, the House and the Senate
need to work closely together on all these issues. So we are excited
about the witnesses this morning, and I will introduce the three
panels as we come to them.
[The prepared statement of Mr. Whitfield follows:]
PREPARED

STATEMENT OF

HON. ED WHITFIELD

Energy prices are a function of supply and demand, and high prices are a clear
sign that supply is struggling to keep up with demand. That is why expanding domestic energy supplies is a big part of the solution to the nations energy challenges
and one that this subcommittee will continue to address. But this mornings hearing
will focus on the demand side of the energy equation, and specifically private sector
efforts to develop and utilize innovative technologies and processes to reduce waste
and cut costs.
History teaches us that nothing is more efficient than the free market. The only
thing you need to spur innovations that improve energy efficiency is profit-seeking
companies responding rationally to high energy bills. Any company that doesnt use
energy as wisely as possible will lose ground to a competitor that does. This is why
free economies are the most efficient and have the lowest energy inputs per unit
of gross domestic product. Contrast that with centrally planned economies which are
among the least efficient.
These private sector innovations can take the form of energy efficient technologies
like combined heat and power systems. They can also take the form of novel instru-

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3
ments like energy savings performance contracts. We will discuss both kinds of innovations today.
The benefits of energy efficiency are something that both Republicans and Democrats can agree upon. They are also something that both the House and the Senate
can agree upon, which is why I am pleased that Senators Lisa Murkowski and
Jeanne Shaheen are joining us to discuss energy efficiency efforts underway in the
Senate. Those of us in the House are always ready to learn from the worlds greatest
deliberative body.
Some make the mistake of thinking that efficiency only happens as a result of
federal regulations or other mandates. But the stories we will hear from our private
sector witnesses demonstrate otherwise. Utilities, manufacturers, commercial property owners and others are continually developing clever new ways to save on their
energy costs, and are not waiting for orders from Washington DC.
In fact, government policy can sometimes get in the way of energy efficiency. For
example, a provision included in the Energy Independence and Security Act of 2007
mandates the elimination of all fossil fuel-generated energy use in new and modified
federal buildings by the year 2030. This federal mandate potentially restricts the
adoption of high-efficiency technologies such as natural gas combined heat and
power and waste heat recovery systems in federal facilities. We need to reconsider
any and all federal impediments to energy efficiency.
On the other hand, there is a constructive role for the government to play, such
as utilizing the latest advances to improve efficiency in federal buildings, and in
conducting energy efficiency research. We need to steer government efforts in a positive direction.
Necessity is the mother of invention, and the necessity brought on by expensive
energy, tight budgets, and the pressures of global competition has fostered some
great private sector advances in efficiency. I look forward to learning more about
these exciting developments and yield back the balance of my time.

Mr. WHITFIELD. And with that, Mr. Rush, I would recognize you
for an opening statement.
OPENING STATEMENT OF HON. BOBBY L. RUSH, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF ILLINOIS

Mr. RUSH. I want to thank you, Mr. Chairman, for holding todays hearing on the successes and opportunities in energy efficiency technology. It is my sincere hope that after hearing from todays panel of witnesses, members on both sides of the aisle will
be able to come together and move their countrys energy policy forward by working to enact common sense energy efficiency legislation.
Mr. Chairman, I remain optimistic that this subcommittee may
return to the days of enacting bipartisan and comprehensive energy policy like we did most recently in 05 and 07. I believe that
the area of energy efficiency may, in fact, be the opportunity for us
to do so.
The story of energy efficiency is one that is filled with success
stories that I really hope propel our Nation forward by making us
more independent and more secure, while also reducing the cost of
energy, both in our pocketbooks and its impact on the environment.
According to a recent ACCC study, U.S. energy consumption in
2010 was less than half of what it would have been without the energy efficiency improvements made since 1970.
Mr. Chairman, while todays hearing focuses on the progress
made in the private sector, let us not forget that it was the leadership of State and Federal Government activities that paved the
way for many of these energy efficiency successes. DOE rulemaking
spurred dozens of national efficiency standards for appliances and
equipment since 1987. ACCCEEE, rather, found that these existing standards will provide net savings of $1.1 trillion through 2035,

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4
while also reducing carbon pollution by the equivalent amount of
taking approximately 118 coal-fired power plants offline by that
same year. In fact, in 2010, overall U.S. energy use was 7 percent
less than it would have been without these extendingexisting,
rather, standards.
However, Mr. Chairman, it is important to note that the ACEEE
also found, and I quote, The prospect for future improvements is
large. In fact, the report estimates that additional energy efficiency efforts could reduce U.S. energy use by 42 to 59 percent over
current projections, which will create over one million jobs and increase U.S. GDP by $100 to $200 million by the year 2050.
So, Mr. Chairman, it is important that the Federal Government
does not abdicate its responsibility, its leadership role, of promoting, of encouraging, of enticing interested stakeholders to continue with the progress that has already been made in energy efficiency technologies so that we may keep moving forward, moving
our Nation forward. We have a rich and strong legacy to stand on,
Mr. Chairman, and let us not abandon the work that has already
been done. Energy efficiency has been the low-hanging fruit that
may, indeed, as I said earlier, bring both sides together in a legislative manner while also making our Nation safer, more secure, and
more attentive to the impacts of climate change.
Mr. Chairman, I look forward to hearing from these outstanding
members of the other body, our Nations leaders, and I look forward to this hearing. And with that, I yield back the balance of my
time.
[The prepared statement of Mr. Rush follows:]
PREPARED

STATEMENT OF

HON. BOBBY L. RUSH

Thank you, Mr. Chairman, for holding todays hearing on the successes and opportunities in energy efficient technologies.
Mr. Chairman, it is my sincere hope that after hearing from todays panel of witnesses, members from both sides of the aisle will be able to come together and move
the countrys energy policy forward by working to enact commonsense energy efficiency legislation.
I remain optimistic that this subcommittee may return to the days of enacting bipartisan and comprehensive energy policy, like we did most recently in 2005 and
2007, and I believe the area of energy efficiency may, in fact, provide us with an
opportunity to do so.
Mr. Chairman, the story of energy efficiency is one that is filled with success stories that have really helped propel our country forward by making us more independent and secure, while also reducing the cost of energy, both in our pocketbooks
and its impact to our environment.
According to a recent American Council for an Energy-Efficient Economy
(ACEEE) study, U.S. energy consumption in 2010 was less than half of what it
would have been without the energy efficiency improvements made since 1970.
Mr. Chairman, while todays hearing focuses on the progress made in the private
sector let us not forget that it was the leadership of state and federal government
that paved the way for many of these energy efficiency successes.
Department of Energy (DOE) rulemakings spurred dozens of national energy efficiency standards for appliances and equipment since 1987.
ACEEE found that these existing standards will provide net savings of $1.1 trillion through 2035, while also reducing carbon pollution by the equivalent amount
of taking approximately 118 coal-fired power plants offline by that same year.
In fact, in 2010, overall U.S. electricity use was 7% lower than it would have been
without these existing standards.
However, Mr. Chairman, it is important to note that the ACEEE study also found
that the prospect for future improvements is large.

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5
In fact, the report estimates that additional energy efficiency efforts could reduce
U.S. energy use by 4259% over current projections, which would create over a million jobs and increase U.S. GDP by $100200 billion by the year 2050.
So, Mr. Chairman, it is important that the federal government does not abdicate
its leadership role or responsibility of promoting, encouraging, and enticing interested stakeholders to continue with the progress that has already been made in energy efficiency technologies so that we keep moving the nation forward.
Energy efficiency has proven to be the low-hanging fruit that may indeed bring
both sides together, legislatively, while also making our country safer, more secure,
and more attentive to the impacts of climate change.
So I look forward to hearing from todays panel of expert witnesses on the successes and opportunities in energy efficiency technologies, and with that I yield back
the balance of my time.

Mr. WHITFIELD. Well thank you, Mr. Rush.

At this time, I recognize the chairman of the full committee, Mr.
Upton, for a 5-minute opening statement.
OPENING STATEMENT OF HON. FRED UPTON, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF MICHIGAN

Mr. UPTON. Well thank you, Mr. Chairman. I want to thank both
of our senators for being here. Thanks for crossing the Capitol this
morning to provide your perspective on energy efficiency innovation. Energy efficiency is not only a bipartisan issue, but as your
presence here today demonstrates, there is bicameral interest as
well.
You know, for an economy to thrive, it does need energy. In fact,
increased energy consumption is often a harbinger of economic
growth, a very good thing by any measure. When we talk about energy efficiency, I believe our goal is to maintain and enhance our
economic growth by finding ways to maximize the ways that we
use energy, to get the most bang for the buck. Energy efficiency
measures are some of the simplest and most affordable ways to address U.S. energy demand. The U.S. has steadily improved its energy productivity as a result of advances in technology driven by
private sector innovation. Reducing waste and consuming less energy are common sense strategies to cut costs, which is why the industrial and manufacturing sectors have undertaken significant efforts to improve efficiency and reap the resulting economic benefits.
But significant energy efficiency opportunities remain, and we will
hear about some of those opportunities, as well as the challenges,
from our distinguished panelists today.
We have got to remember that as the sequester takes center
stage this week, that the Federal Government is the Nations largest user of energy, and sensibly utilizing energy-saving techniques
can significantly reduce the amount of taxpayer dollars spent on
federal energy costs.
So on behalf of all of our colleagues, I welcome both of you here,
and yield the balance of my time to Mr. Gardner.
[The prepared statement of Mr. Upton follows:]
PREPARED

STATEMENT OF

HON. FRED UPTON

I want to welcome Senator Murkowski and Senator Shaheenthank you for

crossing the Capitol this morning to provide your perspectives on energy efficiency
innovation. Energy efficiency is not only a bipartisan issue, but as your presence
here today demonstrates, there is bicameral interest as well.

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For an economy to thrive, it needs energy. In fact, increased energy consumption
is often a harbinger of economic growtha very good thing by any measure. When
we talk about energy efficiency, I believe our goal is to maintain and enhance our
economic growth by finding ways to maximize the ways we use energyto get the
most bang for the buck. Energy efficiency measures are some of the simplest and
most affordable ways to address U.S. energy demand. The U.S. has steadily improved its energy productivity as a result of advances in technology driven by private sector innovation. Reducing waste and consuming less energy are commonsense
strategies to cut costs, which is why the industrial and manufacturing sectors have
undertaken significant efforts to improve efficiency and reap the resulting economic
benefits.
But significant energy efficiency opportunities remain, and we will hear about
some of those opportunitiesas well as the challengesfrom our distinguished panelists today. We must also remember, as the sequester takes center stage this week,
that the federal government is the nations largest user of energy, and sensibly utilizing energy savings techniques can significantly reduce the amount of taxpayer
dollars spent on federal energy costs.
On behalf of all my colleagues on the Energy and Commerce Committee, I want
to again thank Senators Murkowski and Shaheenand all of our panelistsfor taking the time to be with us today, and we look forward to working together on these
issues in the 113th Congress.

Mr. GARDNER. Thank you, Mr. Chairman, and thank you, Chairman Whitfield and Ranking Member Rush, thank you for holding
this hearing today. Over the past 2 years, I have become increasingly more interested in this topic of energy efficiency, and look forward to hearing our witnesss testimony this morning.
There is a lot more that the Federal Government in particular
could be doing to become more energy efficient, since we truly are
the largest energy consumer in the Nation. That is why I have
partnered with Mr. Welch of Vermont, who also serves on this committee, to form a caucus solely focused on advancing energy efficiency in a way that helps the environment and the taxpayer. Our
caucus focuses on performance contracting, whether they be energy
savings performance contracts, or utility energy service contracts.
ESPCs and UESCs allow private companies to perform energy upgrades by taking on all the risks associated with those improvements. The company only gets paid when the monetary savings
materialize. They are a win-win for government and the taxpayer,
creating private sector jobs along the way.
I truly believe that energy efficiency is an issue that Republicans
and Democrats can come together on, as we have done in Colorado.
And during times when this city can seem so partisan to the rest
of the country, I think we should jump at this opportunity to do
so. I will point out, however, that there is one minor impediment
to moving forward with ESPCs, and in the way that many of us
in this room would like to do so. While OMB does not score ESPCs,
CBO does. Even though it saves money, it has no appropriated dollars with it. It is unfortunately restricting our ability to utilize a
tool that makes complete sense during an economic downturn, and
during a time when the Federal Government is trying to find a way
to save money.
I look forward to working with everyone on this issue, and the
others in this room as we discuss what we can do to encourage energy efficiency here in Congress.
Thank you, Mr. Chairman. I yield the remainder of my time.

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Mr. WHITFIELD. Well thank you, Mr. Gardner, and at this time,
I recognize the ranking member of the full committee, the gentleman from California, Mr. Waxman, for 5 minutes.
OPENING STATEMENT OF HON. HENRY A. WAXMAN, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF CALIFORNIA

Mr. WAXMAN. Thank you, Mr. Chairman.

At its heart, energy efficiency is about reducing waste. Doing
more with less. This frees up energy supplies, saves money, and reduces dangerous carbon pollution.
Energy efficiency is good for consumers, good for business, good
for our economy and job creation, and good for fighting dangerous
climate change.
A recent report from the International Energy Agency highlights
the critical role of energy efficiency in slowing dangerous climate
change. IEA concluded that if the world does not take action to reduce carbon pollution by 2017, then the energy infrastructure existing at that time will make it impossible to limit warming to 2 degrees Celsius. In other words, we have just 4 years to take serious
actions to reduce carbon pollution, or we will be locked into a path
forward that will lead to devastating climate change. But if we invest now in energy efficiency, we can give ourselves more time.
According to the IEA, the rapid deployment of energy efficiency
measures would give the world at least 5 additional years to develop long-term solutions. IEA also found that there are huge efficiency opportunities available. Cost effective energy efficiency
measures using technology available today could reduce expected
future energy use by over 40 percent. These measures, of course,
would save consumers and businesses over $11 trillion through
2050. Two-thirds of the potential energy efficiency savings remain
untapped.
Existing efficiency standards will provide net savings of over $1
trillion through 2035, while reducing annual carbon emissions by
470 million metric tons. That is equivalent to the annual emissions
from over 100 coal-fired power plants. Without these existing
standards, a typical households electricity use would be about 35
percent higher.
Buildings account for about 40 percent of our total energy consumption, and there is a lot we can do to make them more efficient.
Tools for improving efficiency include building efficiency codes, performance goals, information disclosure, technical support, innovative financing approaches, and reduction of market barriers.
We are going to hear today from two very distinguished members
of the Senate. Senator Shaheen worked together with Senator
Portman on a bipartisan bill that includes many good ideas. Senator Murkowski in the last Congress worked with Senator Bingaman on a package of consensus energy efficiency standards. We
should build on both of these bipartisan efforts.
We need to be ambitious. Study after study has identified a myriad of ways we could save energy, save money, and reduce dangerous carbon pollution.
I look forward to hearing the testimony from our two senators
and other witnesses today, and working on a bipartisan basis to do

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something that I think is in the best interest of the American people. Yield back the balance of my time.
[The prepared statement of Mr. Waxman follows:]
PREPARED

STATEMENT OF

HON. HENRY A. WAXMAN

At its heart, energy efficiency is about reducing waste. Doing more with less. This
frees up energy supplies, saves money, and reduces dangerous carbon pollution.
Energy efficiency is good for consumers, good for businesses, good for our economy
and job creation, and good for fighting dangerous climate change.
A recent report from the International Energy Agency (IEA) highlights the critical
role of energy efficiency in slowing dangerous climate change. IEA concluded that
if the world does not take action to reduce carbon pollution by 2017, then the energy
infrastructure existing at that time will make it impossible to limit warming to 2
degrees Celsius. In other words, we have just four years to take serious actions to
reduce carbon pollution, or we will be locked into a path forward that will lead to
devastating climate change. But if we invest now in energy efficiency, we can give
ourselves more time.
According to the IEA, the rapid deployment of energy efficiency measures would
give the world at least five additional years to develop long-term solutions. IEA also
found that there are huge efficiency opportunities available. Cost effective energy
efficiency measures using technology available today could reduce expected future
energy use by over 40%. These measures, of course, would save consumers and businesses over $11 trillion through 2050. Two-thirds of the potential energy efficiency
savings remain untapped.
Existing efficiency standards will provide net savings of over $1 trillion through
2035 while reducing annual carbon emissions by 470 million metric tons. Thats
equivalent to the annual emissions from over 100 coal-fired power plants. Without
these existing standards, the typical households electricity use would be about 35%
higher.
Buildings account for about 40% of our total energy consumption, and there is a
lot we could do to make them more efficient. Tools for improving energy efficiency
include building efficiency codes, performance goals, information disclosure, technical support, innovative financing approaches, and reduction of market barriers.
We are going to hear today from two very distinguished members of the Senate.
Senator Shaheen worked together with Senator Portman on a bipartisan bill that
includes many good ideas. Senator Murkowski in the last Congress worked with
Senator Bingaman on a package of consensus energy efficiency standards. We
should build on both of these bipartisan efforts.
We need to be ambitious. Study after study has identified a myriad of ways we
could save energy, save money, and reduce dangerous carbon pollution.
I look forward to hearing the testimony from our two Senators and our other witnesses today, and working on a bipartisan basis to do something that I think is in
the best interest of the American people.

Mr. WHITFIELD. Thank you, Mr. Waxman, and that concludes the
opening statements, so it is my pleasure now to introduce our first
panel of witnesses. They have already been introduced, but I will
do it again. We have Senator Lisa Murkowski, a U.S. Senator from
Alaska, who is the ranking member of the Senate Energy and Natural Resources Committee, and we have the Honorable Jeanne
Shaheen, U.S. Senator from New Hampshire, and as has already
been stated, both of you all have worked on these issues and in a
very bipartisan way, and so we welcome you to this committee. It
is my understanding that when you finish your opening statements, that you both have some other responsibilities, so we will
not be asking you any questions, but do look forward to your testimony, and Senator Murkowski, I will start with you and recognize
you for 5 minutes.

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Mr. WHITFIELD. Well Senator Shaheen, thanks very much, and
once again, I want to thank both of you for coming over. We look
forward to continuing a dialogue and working with members of the
Senate in coming up with some solutions to these problems, and we
look forward to working with you in the future. So thank you very
much, and good luck in getting back over to the Senate.
Senator MURKOWSKI. That is the hardest part of our job.
Mr. WHITFIELD. At this time, I would like to call up the witness
on the second panel, and that is the Honorable Dr. Kathleen
Hogan, who is the Deputy Assistant Secretary for Energy Efficiency, the Office of Energy Efficiency and Renewable Energy, at
the Department of Energy. So Dr. Hogan, if you would please step
forward?
Dr. Hogan, welcome. Thanks so much for taking time to join us
this morning. Before I introduce you, I just want to make one comment. You know, we have these hearings and we really value the
testimony that is provided to the committee, and we do have a rule
that we try to follow, being able to receive the testimony 2 days
prior to the hearing, and unfortunately, we received yours last
night around 7:00 p.m. I know that you have a very busy schedule,
but I hope that in the future if you all testify here, that you might
be able to get here a few days early on this testimony so we have
an opportunity to really look at it.
But thank you for being with us today. We do look forward to
your testimony and your expertise, and I will recognize you for 5
minutes for your opening statement.
STATEMENT OF HON. DR. KATHLEEN HOGAN, DEPUTY ASSISTANT SECRETARY FOR ENERGY EFFICIENCY, OFFICE OF ENERGY EFFICIENCY AND RENEWABLE ENERGY, U.S. DEPARTMENT OF ENERGY

Dr. HOGAN. Thank you, Chairman Whitfield, Ranking Member

Rush, and members of the subcommittee for inviting me to testify
today on behalf of the Department of Energy. As noted by many
that have spoken already, energy efficiency is a large, untapped resource in the United States. It offers important benefits for the
country, improved competitiveness, billions in consumer savings:
growth in domestic jobs, greater reliability of our energy systems,
and reduced reliance on foreign oil, as well as environmental benefits.
This years State of the Union address included a goal to cut energy wasted by our homes and businesses by half over the next 20
years, and to double our energy productivity. The Department of
Energys energy efficiency portfolio is making important contributions towards these goals, including helping to ensure the longterm competitiveness of the United States, though much more
needs to be done. We can start by looking at our homes and buildings. They consume about 40 percent of U.S. energy at a cost of
about $400 billion a year, and there are many savings opportunities. DOE R&D has advanced new technologies, lighting, heating
and cooling systems, windows that offer significant savings. Our
work with leading home builders offers new homes with 50 percent
savings over typical homes, as well as good indoor air quality and
durability. We are working with organizations, and a number of

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them, on home upgrade programs to address the large number of
existing homes, most built before modern codes, and these programs offer savings of 15 to 30 percent. We have recently reached
the major milestone of weatherizing more than a million low income homes since 2009, helping these families save hundreds of
dollars each year. We have also partnered with over 100 commercial, industrial, and public sector organizations representing billions of building square feet, and $2 billion in financing. They have
taken the Presidents Better Buildings Challenge, with a goal of
saving 20 percent or more on their energy bills by 2020, and then
showcasing for others how to do it. Our minimum energy conservation standards that we implement now span more than 60 categories of appliances and equipment, and are currently saving consumers and businesses tens of billions of dollars each year. And as
we have heard a lot of discussion this morning, as the Nations single largest user of energy, the Federal Government does continue
to lead by example. We have reached large energy savings, water
savings, and renewable energy goals, and are on target to meet the
Presidents challenge to implement $2 billion in performance-based
contracts by December 2013, investments, as we have heard, that
will reduce our energy use at no cost to the taxpayer.
Turning to manufacturing, we are working on next generation
technologies, processes, and materials that offer substantial improvements in efficiency, and which will position U.S. competitively
for the future. In the State of the Union address, President Obama
called for a network of manufacturing institutes that would help
address cross-cutting challenges and help accelerate progress
across the country. DOE is a partner in these efforts, for example,
through a new pilot effort on additive manufacturing in Youngstown, Ohio, and we have recently announced a new energy innovation hub on critical materials at Ames Laboratory to develop solutions to domestic shortages of rare earth materials and other materials critical to U.S. energy security. We also have a strong track
record with combined heat and power, which now has new market
opportunities with lower cost natural gas, and we are supporting
the Presidents goal of 40 new gigawatts by 2020.
Finally, DOE manages a diverse transportation research portfolio
that spans many technologies and addresses light duty passenger
cars to heavy duty trucks. Building on past DOE research successes, the President has launched the EV Everywhere Grand
Challenge to spur American innovation and to make electric vehicles more affordable and convenient to own and drive than todays
gasoline-powered vehicles within the next 10 years. Electric vehicles do offer the potential for $1 a gallon gasoline equivalent, as
well as a number of consumer conveniences, and the U.S. needs to
continue to lead in this marketplace.
So we are pleased to be part of meeting these challenges and contributing to a more secure, resilient, and competitive energy economy. We look forward to see what more we can do together with
you, and thank you again for the opportunity to be here today. I
am happy to answer any questions.
[The prepared statement of Dr. Hogan follows:]

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We have Mr. James Crouse, Executive Vice President of Sales and
Marketing, Capstone Turbine Corporation, who is testifying on behalf of the U.S. Combined Heat and Power Association. We have
Ms. Ellen Burt, Senior VP and Chief Customer Officer, Pacific Gas
and Electric Company. We have Mr. Neal Elliott, Associate Director for Research, American Council for Energy Efficient Economy,
and we have Mr. Ted Gayer, Co-Director, Economic Studies and Joseph Pechman Senior Fellow at the Brookings Institution.
So I would like to welcome all of the members of this panel.
Thank you for your patience, and thanks for agreeing to join us
today to give us your views, thoughts, and expertise on this important subject. As you know, each one of you will be given 5 minutes
for your opening statement, and I would remind you to just be sure
that your microphone is on. You will notice a couple of boxes on
the table in whichwhen it is green, it means talk. When it is red,
it means stop, but we frequently go over, sobut anyway, welcome
and we will begin with you, Mr. Kosisko.
Mr. KOSISKO. Kosisko.
Mr. WHITFIELD. Kosisko. We will begin with you, and you are
recognized for 5 minutes.
STATEMENTS OF KEVIN C. KOSISKO, VICE PRESIDENT SERVICE, NORTH AMERICA, ABB, INC., ON BEHALF OF NATIONAL
ELECTRICAL MANUFACTURERS ASSOCIATION AND INDUSTRIAL ENERGY EFFICIENCY COALITION; BRITTA MACINTOSH, VICE PRESIDENT, BUSINESS DEVELOPMENT,
NORESCO, ON BEHALF OF FEDERAL PERFORMANCE CONTRACTING COALITION; JAMES CROUSE, EXECUTIVE VICE
PRESIDENT OF SALES AND MARKETING, CAPSTONE TURBINE CORPORATION, ON BEHALF OF U.S. COMBINED HEAT
AND POWER ASSOCIATION; HELEN A. BURT, SENIOR VICE
PRESIDENT AND CHIEF CUSTOMER OFFICER, PACIFIC GAS
AND ELECTRIC COMPANY; R. NEAL ELLIOTT, ASSOCIATE DIRECTOR OF RESEARCH, AMERICAN COUNCIL FOR AN ENERGY-EFFICIENT ECONOMY; AND TED GAYER, CODIRECTOR, ECONOMIC STUDIES AND JOSEPH A. PECHMAN SENIOR
FELLOW, THE BROOKINGS INSTITUTE
STATEMENT OF KEVIN C. KOSISKO

CHRIS

79891.162

95
Mr. WHITFIELD. Thank you. It will be included in the record.
Ms. MacIntosh, you are recognized for 5 minutes.
STATEMENT OF BRITTA MACINTOSH

Ms. MACINTOSH. Good afternoon, Chairman Whitfield and members of the subcommittee.
Mr. WHITFIELD. Is your microphone on?
Ms. MACINTOSH. Yes, sir. Can you hear me now?
I am Britta MacIntosh, Vice President of Business Development
for NORESCO, one of the largest energy service companies in the
United States. NORESCO is part of UTC Climate, Controls and Security Systems, a unit of United Technologies Corporation, a leading provider to the aerospace and building systems industry worldwide. Thank you for the opportunity to appear to youbefore you
today on behalf of the Federal Performance Contracting Coalition.
The FPCC is a coalition of energy services companies that, like
NORESCO, implement projects that reduce federal spending on energy and maintenance using private sector funding. Our work is
conducted using energy savings performance contracts, or
ESPCs
Mr. RUSH. Would you please speak into the mike?
Ms. MACINTOSH. Our work is conducted using energy savings
performance contracts, or ESPCs. Since the 1990s, ESPC projects
have reduced waste in federal utility bills. Across the industry,
more than 570 comprehensive energy projects have been implemented by 25 federal agencies, creating $13 billion in guaranteed
energy cost savings, and eliminating over 32 trillion BTUs of annual energy demand. By using performance-based contracting to
upgrade facility infrastructure, we deliver energy and maintenance
savings to government and private sector entities. Performancebased contracting means our companys compensation is tied to the
realization of savings for the projects we install. In other words, if
we dont perform, we dont get paid. At NORESCO, our projects
have delivered more than $3 billion in facility improvements at
more than 2,000 sites.
An ESPC redirects inefficient spending on energy into needed infrastructure improvements that conserve energy and dollars. Under
an ESPC, energy services companies engineer and install upgrades
for outdated and inefficient equipment financed by the energy services company and at no upfront cost to the government. An agency
will repay the government over timethe company over time with
funds saved on utility costs. The projected energy savings are guaranteed upfront by the company and are measured and verified during the contract period. At no time does the government pay more
than it would have paid for utilities, had it not entered into an
ESPC.
In 2010, for example, NORESCO, working together with the architect for the Capitol, modernized the heating, cooling, water, temperature control, and lighting systems here in the Rayburn Building, and then also in the other House office buildings. This project
has cut Congresss energy and water bills by more than $3.2 million annually.
The Federal Government is the Nations largest energy consumer, costing taxpayers over $7 billion annually. An aggressive

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government-wide effort to eliminate energy waste in buildings
could easily cut that number by 20 percent or more.
Despite the opportunity to better steward the taxpayers investments in public facilities, several difficult obstacles stand in the
way. I would like to talk about three of those.
First, there is a lack of compliance with existing congressional
mandates. In 2010, Congress directed agencies to audit their facilities to identify energy and water projects that would pay for themselves within 10 years or less. Currently, it is not clear where agencies stand on this audit process, because those comprehensive reports requested by Congress have not yet been delivered. Even less
clear is where agencies stand on implementing the energy savings
measures these audits have also identified. This information is critical to understanding how much taxpayer money is being wasted
through inaction and inattention.
Second, there is a lack of an apples to apples comparison between the use of appropriations and private sector investment to
provide agencies and Congress with the information needed to
make good decisions. Oak Ridge National Laboratory has outlined
in multiple studies that facilities which use appropriated funds to
replace outdated equipment failed to properly budget for the ongoing maintenance of the new equipment. ESPCs require the provision of ongoing maintenance and savings verification to ensure that
long-term persistence of savings and proper operation of the equipment is achieved. In 2007, Congress also directed agencies to implement a uniform approach to maintenance and savings
verification to ensure that the government realizes the promised
savings from any efficiency upgrades, although most agencies have
appeared to ignore this direction for appropriated projects. We recommend that you ask how agenciesthat you ask agencies how
and when this simple requirement will be implemented for all efficiency projects, regardless of how they are funded.
Third, the current approval process for ESPC contracts is excessive, with multiple redundant layers of review in many agencies.
Officials with limited knowledge of the facility, project, or recommended technologies are often required to review and sign off on
projects before they can proceed. Congress should push agencies to
streamline their review process, allowing more projects to begin
generating savings more quickly.
In order to confirm that we are making true progress toward
meeting our Nations energy and efficiency goals, Congress needs
to completeneeds complete information about available energy
savings opportunities at our agencys facilities, each agencys plans
for implementation, and full transparency and accountability on all
spending related to efficiency projects. We recommend that you
take appropriate steps to ensure that prior congressional direction
on these items is acted upon.
Thank you again for your time and attention. I will be glad to
answer any questions that you have.
[The prepared statement of Ms. MacIntosh follows:]

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102
Mr. WHITFIELD. Thank you, Ms. MacIntosh.
Mr. Crouse, you are recognized for 5 minutes.
STATEMENT OF JAMES CROUSE

Mr. CROUSE. Can you hear me?

Thank you. Chairman Whitfield, Ranking Member Rush, and
distinguished members of the committee, my name is Jim Crouse
and I am the Executive Vice President of Sales and Marketing for
Capstone Turbine Corporation.
Capstone is the worlds leading producer of low emission microturbine systems. A microturbine is a small, fuel-flexible, typically
sized 1 megawatt and below, and can be best described as a jet engine in a filing cabinet sized box. Other forms of combined heat and
power, or CHP, we are able to provide either base load or backup
power to deficiencies exponentially greater than the grid.
I am delighted to be here today to testify on behalf of the U.S.
Combined Heat and Power Association. USCHPA is a non-profit
trade association formed in 1999 to promote deployment of CHP
systems in the United States through education and advocacy.
I am going to speak today about the opportunity for natural gasfired CHP and the barriers to greater deployment of CHP that policy makers can address.
Currently, there are 82 gigawatts, or about 7 percent of all U.S.
generating capacity produced by CHP systems. The technical potential for additional CHP from existing sites in the U.S. is approximately 130 gigawatts, or 12 percent of the U.S. generation capacity. This is readily available capacity, provided policies are established to support further CHP deployment. Access to low cost
U.S. natural gas resources makes supporting CHP a no-brainer,
and is an easy route to lower emissions across the United States.
Microturbines and other CHP systems are used by customers
throughout the world in a variety of applications. Just to name a
few examples, they can be used in onshore and offshore oil and gas
sites, like the many transmission sites in Mr. McKinleys district,
offshore platform in Mr. Scalises district, military applications like
the one at MacDill Air Force Base, offices like our government office project in Mr. Olsens district, multi-unit residential buildings,
hospitals, like the VA hospital in Mr. Dingells district, schools and
universities likeschool in Ms. Cappss district, factories like
American River Packaging in Ms. Matsuis district, hotels and
other commercial sites like Proctors theater in Mr. Tonkos district,
and wastewater treatment plants, like the plants in Mr. Griffiths
district and Ms. McMorris Rodgerss district.
As referenced in my prepared remarks, CHP generally and Capstone specifically offers customers reliable off grid power that as
witnessed during Superstorm Sandy provides critical power and
thermal energy to hospitals, nursing homes, shelters, and data centers.
Despite these opportunities, our company and the CHP industry
continue to encounter numerous regulatory economic barriers that
prevent greater deployment. There are pragmatic, cost effective solutions that policy makers can champion to mitigate these issues.
To begin, we would like to see greater top level leadership from
the government. While the recent Executive Order calling for 40

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gigawatts of new CHP is helpful, we would be better served if the
government were to lead by example through increased procurement of CHP to meet federal energy efficiency goals. Additionally,
as the EPA implements Boiler MACT, CHP should be strongly encouraged as a compliance strategy for those currently burning coal
or oil. As part of this process, facility managers faced with compliance can seek site-specific technical and cost information from the
DOEs clean energy assistance centers. Similarly, we hope States
will look to EPAs guidance on output-based emission regulations,
which unlike input based standards, recognize both efficiency and
pollution prevention benefits of CHP. Output-based standards encourage cost effective long-term pollution prevention through efficiency. Likewise, we were glad to hear FERC proposed reforms to
small generator air connections. Interconnection continues to be a
barrier, but we continue to work with our friends in the utility industry to demonstrate the benefits that CHP provides for the grid
and for consumers as a clean, reliable, distributor resource. In addition, both States and utilities should include CHP in their energy
planning policies. The CHP industry is eager to be an active stakeholder and support a fair, interconnected standards in CHP rates.
Finally, we note that there are several technologies that currently benefit from government support through various levels of
an investment tax credit. We believe the lack of parity in support
levels for decentralized and renewable energy technologies blur the
marketplace. We support parity in the treatment of various types
of clean energy sources, and would encourage a focus on performance-based measures to best spur market competition.
To wrap up, let me highlight again the opportunity exists today
to generate clean, reliable power through CHP systems at existing
industrial commercial sites across the United States using U.S.
natural gas. We appreciate your help in overcoming these barriers
that exist to greater deployment of our innovative U.S.-made technology.
Thank you for the opportunity to testify at todays hearing, and
I look forward to answering any questions you may have.
[The prepared statement of Mr. Crouse follows:]

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114
Mr. WHITFIELD. Thank you, Mr. Crouse.
Ms. Burt, you are recognized for 5 minutes.
STATEMENT OF HELEN A. BURT

Ms. BURT. Thank you. Good afternoon, Chairman Whitfield,

Ranking Member Rush. Let me begin by thanking you and members of the committee for this opportunity to testify today. I am
Helen Burt, Chief Customer Officer for Pacific Gas and Electric
Company.
PG&E is one of Americas largest combined gas and electric utilities. We serve about 15 million people in northern and central California, and over the last 30-plus years, together with the State of
California, we have helped customers achieve extraordinary benefits when it comes to energy productivity.
For us, these efforts are about being smarter when it comes to
using energy. They are not about making do with less. They are
about doing more with the energy we consume, helping customers
get the most value of their energy dollars. Working as partners,
utilities and our State policy makers have been able to support and
encourage innovation and adoption of new technologies, and we
have developed the most successful customer energy efficiency programs in the country.
Sometimes we are working with the end use customers like
homeowners or small business owners. Other times we are moving
further up the value chain, working directly with manufacturers,
distributors, retailers, and contractors. The point is, we take a comprehensive approach and the results reflect that.
If you look just at PG&E since our programs began some 30-odd
years ago, the customer savings have been more than $20 billion.
We have also avoided the need to build more than 25 power plants,
saving all our customers money and providing tremendous environmental benefits.
What is remarkable is that the potential gains look even greater
today, thanks to the growing intersection between IT and energy.
Technologies like SmartMeters are creating huge new opportunities. By enabling two-way communications on the grid, they are
opening the door for wider adoption of advanced technologies like
electric vehicles, smart thermostats, and other energy management
tools. But most significantly, they are giving people more control
over their energy bills. PG&E customers can now get near real
time information on their energy usage. Last year, we were able to
create an online tool called the Green Button, which allows them
to download that data. They can then use various apps to help
them understand and then come up with options to achieve savings.
As significant as the potential is to achieve further gains, we
need the right policies. These include constructive tax policies, support for research, development, and deployment, supportive regulatory and rate structures, codes and standards, and programs that
empower consumers and help companies share best practices. As
you and others in Congress consider ways to help drive further
progress, I would to highlight several areas where our experience
shows you can have the greatest impact.

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One is encouraging regulatory approaches that incent utilities to
pursue efficiency. Many utilities still face strong disincentives,
changing this one key to success. At PG&E, we now treat energy
efficiency projects as a resource, just like we do new traditional
generation facilities.
Another area is improving regulatory consistency. Programs
work best when everyone can operate from a consistent set of policies that they can count on for longer periods of time. That way,
they can make multi-year commitments to support commercialization and deployment efforts.
We also recommend encouraging consistent and clear methods
for measuring and verifying the results of energy efficiency
projects.
A third area is encouraging public-private cooperation between
utilities and government. For example, PG&E manages energy efficiency turnkey projects for federal customers through our Utility
Energy Services Contracts Program. One effort now underway at
the NASA Ames Research Center is expected to save more than
$1.5 million annually in water and energy costs. Nationally, UESC
projects are saving taxpayers roughly $400 million a year. We
should continue to encourage these efforts.
Finally, a fourth area is building codes and appliance standards.
These provide a foundation for other energy efficiency efforts, and
drive new technologies, programs, and practices.
Our hope is to work collaboratively with many members of this
committee, who are already exchanging good policy ideas around
energy productivity. New ideas and approaches will evolve just as
quickly as the technology around us. As PG&E in California has
demonstrated, energy efficiency can save money, spur innovation,
provide consumers with more choices, and make our economy more
productive and benefit the environment.
Thank you again for this opportunity. I look forward to answering your questions.
[The prepared statement of Ms. Burt follows:]

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127
Mr. WHITFIELD. Thank you.
Mr. Elliott, you are recognized for 5 minutes.
STATEMENT OF R. NEAL ELLIOTT

Mr. ELLIOTT. Thank you, Chairman Whitfield, Ranking Member

Rush, members of the committee. I appreciate the opportunity to
speak today. My name is Neal Elliott. I am the Associate Director
for Research at the American Council for an Energy Efficient Economy, frequently called ACEEE. We are a private, nonprofit, nonmember research institute based here in Washington, D.C.
As Ranking Member Rush said in his opening remarks, ACEEE
has looked at the impact of energy efficiency on the U.S. economy
and found it to be a significant contributor to economic growth over
the last 40 years. In particular, I would note that as has been
noted by many of the witnesses so far today, energy efficiency represents the least cost energy resource in the U.S. economy, and a
recent analysis suggests that in 2010 it contributed about half as
much as all of the conventional resources to the U.S. economy.
I mentioned in my written testimony five areas that we think the
committee should consider for action in the coming Congress, and
wanted to focus three of those in my oral remarks.
The first, which is has come up several times, is appliance standards, and I wanted to mention that since 1987, with the passage
of the EPCA, Energy Policy Conservation Act, energy standards
have saved 3.4 quads of energy and that the standards that are in
place today are projected to save $1.1 trillion through 2035.
We have many other standards that are currently in development, and I wanted to bring to the attention of the committee that
one of the important ways that these are being developed now is
through a negotiated process in which the energy efficiency advocates, peoplestakeholders such as PG&E and other utilities, and
the manufacturers come together to develop consensus proposal.
The Energy Policy Act of 2005 enabled DOE to accept those consensus standards directly into rule and we have begun to see that
move forward in the process. There are a number of negotiations
that are currently underway. In the past, these negotiations have
been enacted as part of the federal energy legislation, and we hope
the committee will consider several of the provisions that are currently under development, as they look at legislation. This is a very
efficient and effective way to bring consensus between the manufacturers and stakeholders, and move the market forward together.
Second issue I wanted to raise to the committee is building codes.
As has been noted, buildings consume approximately 40 percent of
the energy in the U.S. economy, and codes represent the easiest
and most cost effective way for consumers to benefit from energy
efficiency. It is important that we continue to revise and look at
best practices that exist in terms of building codes, but it is also
equally important that we focus on the implementation of the
building codes in the marketplace. A building code on the books
means nothing if the builders out there in the market are actually
not implementing it, and we would encourage DOE to work with
State and local governments to build the capacity, both within the
enforcement side of this, but also work with the contracting com-

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munity and building community out there to implement the codes
so that the energy efficiency benefits are available to all customers.
Finally, the last area I wanted to speak about is manufacturing.
U.S. manufacturing sector is poised for a major expansion and reinvestment, and until recently, has not received a lot of attention at
the federal level. In particular, we would recommend three things
the Department shouldthe committee should consider.
First, we think it is important that the DOEs manufacturing
program be reenergized. There has been a lack of leadership for
over a decade there, and we think there is some opportunities for
it to move forward. Specifically, we would recommend that the Department be directed to establish an industrial steering committee
to ensure a strong working relationship exists between manufacturers, the Department, and other stakeholders, and that that partnership should work to leverage private sector funding. In the past,
this program R&D area has been among the most successful R&D
efforts in the entire Federal Government, and was able to leverage
$3 in private sector funding for every $1 that was spent by the
Federal Government.
Second, we think it is important to maintain a balance between
your term R&D, long-term R&D, and deployment, and all of these
need to be targeted in cooperation with the manufacturers so that
we receive maximum efficiency.
Finally, I wanted to mention the idea of smart manufacturing.
This isas we look, we have already mentioned intelligence in the
marketplace. We think manufacturing will benefit from that and
encourage you to direct the Department to initiate a smart manufacturing program to explore those resources.
Thank you for the opportunity to present, and I look forward to
questions. Thank you.
[The prepared statement of Mr. Elliott follows:]

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143

144
Mr. WHITFIELD. Well thank you, Mr. Elliott, and Mr. Gayer of
the Brookings Institution, you are recognized for 5 minutes.
STATEMENT OF TED GAYER

Mr. GAYER. Great, thank you. Chairman Whitfield, Ranking

Member Rush, and members of the subcommittee, thank you very
much for the opportunity to appear here today. My comments will
cover the market incentives for energy efficiency innovation, the
most cost effective means of reducing pollution stemming from energy use, and the limitations and problems associated with government energy efficiency mandates.
First on market incentives. I believe that market prices are good
at conveying information about the strength of consumer demand
for a good, and the scarcity of supply for that good, allowing for a
balancing of buyers and sellers interest. In the market for appliances, prices reflect how consumers value features such as energy
efficiency and convenience. If the price of energy increases, consumers are willing to pay more for more efficient appliances, providing a clear incentive to suppliers to respond. The importance of
energy prices for the bottom line of consumers and businesses provides a strong incentive for producers to provide the innovative energy efficient products we see arriving on the market today, and
these market incentives account for the preponderance of energy efficiency gains that have been mentioned in this hearing today.
In addition to providing incentives for energy efficiency, another
important benefit of the market process is that consumers with different preferences can find products that best suit their needs. It
is important to remember that there is no uniformly right amount
of energy efficiency for any given product. However, market prices
can provide misleading signals, to the extent that they do not account for the pollution costs stemming from energy use. In other
words, the price that shows up on ones electric bill accounts for the
private cost of energy, but it does not include any environmental
additional environmental damages that impact others due to ones
energy use. Economists refer to these latter costs as negative
externalities. The best approach to addressing this problem is for
the government to price these costs directly. Consumers and businesses would then face the full cost of energy use and markets
would respond through some combination of new technologies, alternative fuels, and conservation.
There are a number of reasons why this market-oriented approach of setting a price on pollution is more cost-effective than
regulations such as energy efficiency mandates. First, the one-sizefits-all energy efficiency mandates ignore the substantial diversity
of preferences, financial resources, and personal situations that
consumers and businesses must align in order to make their decisions. Second, energy efficiency mandates do not promote conservation. For example, an energy efficiency standard for air conditioners increases the incentive to run the air conditioners longer.
Third, energy efficiency standards must squeeze energy reductions
out of new products only, and can even create incentives for consumers and businesses to retain older, and thus less energy-efficient, products.

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In recent work I did with Kip Viscusi of Vanderbilt University,
we examined a number of recent government regulations that mandate energy efficiency standards for vehicles and appliances. Despite the fact that these regulations frequently are touted as pollution-reducing initiatives, by the agencies own estimates, they confirm that the environmental benefits tend to be quite small and are
often outweighed by the costs that they estimate.
In order to justify these regulations, the agencies assert that consumers and firms are making incorrect purchase choices and that
they therefore benefit if product choices are restricted to those that
meet the agencies mandated standards. Dismissing consumer preferences outright in this way is a significant departure from the
well-established principles for conducting cost-benefit analyses,
both in the economics literature, and I would add, by the Administrations Office of Management and Budget.
By claiming regulatory benefits from the correction of so-called
consumer irrationality, agencies are shifting regulatory priorities
from the important goal of reducing the harm individuals impose
on others, through pollution, towards the nebulous and unsupported goal of reducing harm individuals cause to themselves by
purchasing purportedly uneconomic products. This shift from environmental protection to consumer protection results in a host of
costly regulations that are far less effective than a government policy that simply sets a price on pollution. It is important to emphasize that these costs are real and that they harm economic wellbeing. Raising the costs of consumer products and products used by
businesses through government mandates does not lead to economic growth or job creation. It also establishes a dangerous precedent: If agencies can justify regulations on the unsubstantiated
premise that consumers and businesses, but not the regulators, are
irrational, then they can justify the expansive use of regulatory
powers to control and constrain virtually all choices consumers and
businesses make.
To summarize, I believe that markets generally work well to provide incentives for energy efficiency and to satisfy consumers diverse tastes. To the extent that prices fail to incorporate the environmental cost of energy use, the most sensible government response is to price the pollution costs directly, and then allow consumers and businesses to respond to the higher prices. Regulations
and mandates are inferior policies, but still may be better than
doing nothing if the benefits exceed the costs. Unfortunately, by the
agencies own estimates, many of these mandates lead to minimal
environmental benefits that are far less than the costs that they
estimate themselves. In an effort to justify these regulations, the
agencies have deviated from well-established economic principles
by asserting that consumers and businesses benefit from government mandates that restrict choice. The evidence for this view, I
believe, is weak, and assuming that citizens are not capable of
making sensible decisions that affect their own pocketbooks is not
the right way to advance the important goal of enhancing the quality of our environment.
Thank you very much.
[The prepared statement of Mr. Gayer follows:]

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214
some sort of simple standardization for these sorts of contracts for
the utility services contracts, I think that would benefit both sides.
Mr. KINZINGER. That sounds great, perfect time, too. I yield back.
Mr. WHITFIELD. Thank you, Mr. Kinzinger.
At this time, I recognize the gentleman from Illinois for an additional question.
Mr. RUSH. Ms. Burt, I do have one quick question. I am very impressed with what PG&E is doing in California, and are there similar programs that you are aware of in Illinois or Chicago, in terms
of your training programs?
Ms. BURT. Thank you, Congressman. I am just not that wellversed in Illinois. I am very, very well-versed in California, but not
in Illinois.
Mr. WHITFIELD. Thank you all very much, and before we conclude, I am just asking unanimous consent that the following materials and statements be entered into the record from Arkema Corporation, the American Chemistry Council, the Alliance for Industrial Efficiency, Heat is Power Association, and Pew Charitable
Trust.
Without objection, I would enter these into the record.
[The information appears at the conclusion of the hearing.]
Mr. WHITFIELD. Thank you all once again for your time and traveling to come to Washington. We appreciate your testimony and we
look forward to working with all of you, and hope the next time we
have a hearing on efficiency, which we will soon, that we will have
just as many people stay throughout the entire hearing.
So thank you all very much, and with that, the hearing is adjourned and the record will be open for 10 days.
[Whereupon, at 1:36 p.m., the subcommittee was adjourned.]
[Material submitted for inclusion in the record follows:]
PREPARED

STATEMENT OF

HON. JOHN D. DINGELL

Mr. Chairman, energy efficiency is one of the simpler ways for us to achieve energy independence and security. By making the vehicles, appliances, and buildings
we use every day more efficient, we can get more bang for our energy buck.
Recently, the cable industry announced new efficiency standards for the cable
boxes we use to watch and record our favorite shows. These improvements will result in half of the energy currently consumed and estimates are that the new efficiencies will cut consumers electricity bills by approximately $1.5 billion. To speed
up efficiency improvements for existing boxes, the industry will release a software
update that will immediately result in energy savings of 20 to 30 percent on current
devices.
The cable industry is to be commended on this forward thinking to adopt practices
that can take effect now and drastically improve efficiency moving forward. As our
country looks to new sources of energy such as fossil, nuclear, and renewable, we
must also look for the low-hanging fruit that help us address this issue.
In addition to this innovative thinking by industry, I also believe that industry
must continue to work with regulators because good energy policy and good economic policy go hand in hand. By collaborating with industry and consumer groups,
the Federal government can develop standards that can be cost-effective for both industry and consumers while maintaining our energy security.
There was a time, not too long ago, when we could work on a bipartisan basis
to develop ways for American companies to compete and innovate. The Energy Independence and Security Act of 2007 was probably the most recent example of that
bipartisanship. It was signed into law by President Bush and supported by many
members of this committee on both sides of the aisle including the chairmen of this
subcommittee and of the full committee.
We cannot pretend that industry does not have good intentions or that Federal
regulations are the root of all economic problems. We must all work together if want

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to find the best solutions to invest in our future and secure our energy independence
and security.

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302

303

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