ACEEE Testifies on Efficiency's Role in Restoring the U.S Economy's Health

WASHINGTON, D.C. — Appearing before Congress' Joint Economic Committee today, the American Council for an Energy-Efficient Economy's (ACEEE) Deputy Director Bill Prindle told the panel that a $7 billion, 5-year policy to increase energy efficiency investment offers the U.S.'s best hope of beating back high natural gas prices, reducing their drag on the economy, and creating new jobs. "Given the benefits—a more than 20% drop in natural gas prices, more than $100 billion in direct economic benefits, and thousands of new jobs—an aggressive federal and state energy efficiency and conservation effort over the next 5 years is perhaps the best investment we could make in the American economy," Prindle told the Committee.

In his testimony, Prindle outlined a four-point initiative for federal and state governments:

1. Increase funding for efficiency deployment programs, including the ENERGY STAR® programs, the weatherization program, and DOE's suite of other deployment programs.
2. Expand public benefits funds for efficiency by adding to the 18 states that collectively spend over $1 billion on public benefits efficiency programs.
3. Create tax incentives for high-efficiency technologies by including efficiency incentives in the tax bill before Congress this week, or through other mechanisms.
4. Conduct a national efficiency and conservation campaign as a partnership effort among DOE efficiency manufacturers, utilities, states, and others.

This effort, which would cost approximately $7 billion over 5 years, represents more than 50% increase in state and federal spending on efficiency. Currently, federal and state agencies and related programs collectively spend about $2.5 billion on efficiency R&D, deployment, and public benefits programs. Prindle also called for longer-term commitments, focused on appliance standards, building energy codes, expanded R&D, efficiency performance standards for utilities, and expanded use of combined heat and power (CHP).

After providing background on energy efficiency's historical contribution to the economy, he portrayed the large remaining potential for cost-effective efficiency investments. Prindle described ACEEE's recent analyses of the natural gas price effects from investments in efficiency and renewable energy, which showed that modest energy savings of about 4% of U.S. gas demand over 5 years, combined with increased use of renewable energy, can cut wholesale natural gas prices by 20% or more.

Prindle then discussed the economic benefits an efficiency initiative would bring. Since gas price increases in recent years have effectively imposed a more than $100 billion "tax" on the American economy, the $100 billion in direct dollar benefits from the efficiency initiative would have an effect analogous to a tax cut. Since the policy investment required to generate these tax cuts would be only $7 billion, it would represent an effective use of public funds. Moreover, this $7 billion investment would create more jobs than comparable investments in supply-side investments, because the sectors stimulated by efficiency investments (such as construction, retail, and services) generate two to five times as many jobs per dollar of investments as investments in supply sectors like mining and utilities.

He concluded by describing why current private markets will not generate the needed level of efficiency investment, and that public policy is thus needed to bridge the gap. Efficiency investment is limited by several barriers in current markets, including the following:

• falling energy intensity, which shrinks the cost of energy per unit of economic activity;
• rising income elasticity of demand, which translates rising personal incomes into increased demand for energy services;
• lack of price transparency, which keeps most consumers confused on the real cost of energy; and
• a host of other market barriers such as lack of information and split incentives between builders and buyers, and landlords and tenants.

Along with this testimony, other key natural gas references are available as well.