Budget Release Will Test Administration Response to CEOs' Call to Action on Natural Gas Crisis

WASHINGTON, D.C. — The American Council for an Energy-Efficient Economy (ACEEE) joined industrial leaders today in calling for significant new federal action on energy efficiency. A January 20 letter from 11 chemical industry CEOs challenged President Bush and leaders of Congress to address the unfolding crisis in our nation's "go-to" energy source—natural gas. The letter asserts that "this situation threatens to curtail the current economic recovery in its tracks." It points out that rising gas prices have added $111 billion in costs to the economy since 2002, not only sending home heating bills through the roof, but also destroying thousands of jobs in gas-intensive industries like chemicals and fertilizers.

Analyses of the gas problem generally agree that supply solutions, such as new U.S. drilling, the Alaska gas pipeline, and imported liquefied natural gas (LNG), will take five years or more to come on-line, and that energy efficiency is the most effective near-term solution. The chemical industry CEOs' letter reflects the urgent need for action on saving energy, stating that "we need a concerted national effort to promote greater energy efficiency."

ACEEE's research documents the fact that even relatively small savings through energy efficiency can dramatically reduce prices. Our 2003 study, Impacts of Energy Efficiency and Renewable Energy on Natural Gas Markets, based on the same modeling methods used by the National Petroleum Council (NPC), shows that as little as a 2 percent efficiency improvement in homes, offices, and factories can cut wholesale gas prices by 20 percent. It also shows that saving electricity cuts gas use more than direct gas savings, because so much gas is used in power generation. These efficiency gains would create over $100 billion in economic benefits for the economy, and would help restore jobs in the chemical industry. ACEEE's report can be downloaded for free at http://www.aceee.org/energy/efnatgas-study.htm.

Despite the attention that the gas issue and energy efficiency solutions have received in the last year, little federal action has been taken. The current energy bill, according to the CEOs' letter, is insufficient to meet the natural gas challenge. And given the bill's uncertain political prospects in Congress, the Administration cannot rely on its passage. The 2005 budget presents the closest real opportunity to make a difference; thus, it is the Administration's only direct channel to apply energy efficiency as a solution to the natural gas problem.

ACEEE's Policy Director Bill Prindle agreed with the CEOs: "It's past time to act on the natural gas problem. Beyond agreeing on the need for more energy efficiency, the Administration needs to put its money where its mouth is and increase direct support for energy efficiency in the budget."

For the 2005 budget, ACEEE recommends that:

• The 2005 budget increase energy efficiency funding by 20 percent overall, with emphasis on deployment programs that save natural gas and electricity. The EPA and DOE ENERGY STAR® programs should receive top priority as the Administration's most effective efficiency promotion programs.
• DOE's appliance standards program should receive increased funding and expedited treatment within the department. Its pending rulemakings on residential heating and commercial air conditioning, for example, can have major impacts on gas demand. This program returns more dollars to the economy than any other DOE program.
• DOE should also increase and accelerate its research, development, and deployment (RD&D) programs in
  • new home construction,
  • commercial construction,
  • lighting technology,
  • air conditioning and refrigeration,
  • home heating and cooling (including duct systems),
  • industrial best practices and technical assistance centers, and
  • combined heat and power technology.

These areas offer the greatest gas savings and the best return on the federal dollar.