c.

Private capital has too many other nearer-term opportunities in which to invest, which can return a profit sooner, such as buying an established business similar to its own. The risk involved with this route is very small.

In this environment, a number of United States contractors have been working on various gas heat pump concepts for more than ten years. These programs have been funded by a meager DOE program ($4 million per year) and a parallel effort by the Gas Research Institute. As a result of this effort, about four contractors have promising prototypes operating in laboratory test cells.

IN JANUARY OF THIS YEAR, THE JAPANESE DELIVERED TWELVE GAS HEAT PUMP UNITS TO THE UNITED STATES TO BEGIN FIELD AND MARKET TESTING.

Once again, the Japanese have found a massive market, focused their resources on it, and are attempting to take it over. The Department of Commerce states that over $49 million of Japanese government funds have been spent during the past few years on gas heat pump developments. This amount has been matched or exceeded by industrial contributions. The 650,000 jobs which are involved in an economic unit of $13 billion per year are of interest to the Japanese. There is a bright spot in all this. In order to establish their marketing relationships, as well as service and distribution entities, the Japanese have taken the approach of introducing low-performing, high-maintenance gas heat pumps. The American prototypes operating in laboratories can beat the Japanese candidates, keeping the market and jobs for Americans, if only they are allowed to proceed to their full potential. Under the presently available funding, each American contractor has basically one prototype operating in a single test configuration. Spare parts are rare. In the case of our own company, we cannot pay our program manager on the contract, because it would take too much away from the research dollars.

What the program needs is $20 million per year for the next three years. This amount would allow four leading contractors enough money to operate and develop multiple prototypes, with appropriate spare parts. Under such a program, the contractors could have one prototype for each of the key areas of performance, durability, component development, and systems integration. With this type of effort, the units should be at the point, in three years, where the private sector would make the needed investment to take them to market.

The Government does not have to provide the entire $20 million per year. The Gas Research Institute has indicated it might cost share this effort, and some major portion of the $20 million per year may possibly come from them. I would encourage the Subcommittee to explore this with them.

Mr. Chairman, the gas heat pump situation is critical. The nation's future posture in this market and technology needs this Subcommittee's clear and undivided attention. Regardless of the present budget situation, I would hope that the Subcommittee would find this technology to be one of the highest national priority, and treat it accordingly.

INDUSTRIAL PROGRAMS

Mr. Chairman, over the last ten years, I have testified many times in support of DOE's Industrial Conservation programs. Although my corporation has only a very small vested interest in the Industrial programs, the nation has an enormous stake in their outcome.

I have been closely associated with Industrial Conservation programs since 1975, when, as one of the first executives at the Energy Research and Development Administration (ERDA), I watched the Industrial division formed with competent, dedicated people from industry who could readily understand and work with their industrial counterparts, while on the Government side of the equation.

At the inception, under a Republican administration, this division was chartered with the acceleration to market of promising technologies, of high perceived national benefit, which were 3-10 years from the market and had significant economic or technical barriers to overcome. This strategy was excellent in that it addressed the critical 3-10 year time period, which neither the private sector nor the Government normally addresses, and a payback from these efforts can now be measured. The work done in this Division falls exactly in line with the recommendations of the President's Commission on Industrial Competitiveness.

The Energetics Corporation has recently completed a study which examines the impact of the Industrial Conservation program since its inception. Paraphrasing this report, numerous technology improvements have been developed by this Division, jointly with private industry, and have been put into production and The technologies include:

use.

Numbers of units, based on these improved technologies, are now installed and operating across the United States, resulting in a substantial payback to the Government in terms of national benefits. Figure 3 shows that cumulative appropriations since 1975 of $311,145,000 have resulted in cumulative production cost savings to 1985 of $353,000,000. These benefits continue to

PROGRAM BENEFIT/COST ASPECTS

grow geometrically, as the technologies increase their penetration of the marketplace.

In the past few years, direction from administration policy makers has reduced the effectiveness of the R&D dollars spent in this division. Unfortunately, it has been moved away from that critical 3-10 year time frame and has been ordered into the framework of "long-term, high risk," wherein virtually no one can predict a national benefit with any assurance of its occurrence. With our national situation as it is, and the critical nature of our balance of trade, this division must be refocused at those things which it did an outstanding job of accomplishing, i.e., the acceleration and implementation of those higher risk, high potential benefit items which fall into the 3-10 year timeframe.

The recommendation then, Mr. Chairman, is that the Industrial Conservation programs be strongly preserved in the present budget process with strong language directing the Department to focus these programs on those technologies which are highly beneficial in nature, and which can be implemented in the 3-10 year timeframe.

STIRLING ENGINE PROGRAM

Finally, Mr. Chairman, it is my pleasure to present the successful status of the Automotive Stirling Engine program and to request $8 million for FY87 to complete the present contract. We are also supporting the broad-based Gas Heat Pump program. There is a desperate need for a stronger program to prevent major foreign incursions into this hundred billion dollar American market. In addition, we support the concept of a future multicontractor, broad-based Stirling technology effort in the nation, much as is found supporting both diesel and turbine concepts.

Mr. Chairman, in the Spring of 1981, this Committee had to make a difficult decision as to whether or not to let Stirling engine development continue in this country. We are thankful that you chose to support the Stirling effort, and we hope that you will see that we have, in fact, carried out the Congressional intent to evolve this technology into a variety of potential products with a great deal of promise of national benefit.

In 1978, when the contract first started, Stirling engines were little more than a laboratory curiosity. They were too heavy, unreliable, very expensive, contained rare metals, could not power a vehicle, and the technology base resided in Europe. Since that time, MTI has brought Stirling engines to the point where they are truly being considered as viable options for a whole series of applications from vehicle propulsion to space power.

We are thankful, as well, to the NASA Lewis Research Center which has staunchly supported this program and has made a great many technical contributions leading to the greatly advanced status of the engines today.

The following chart provides a brief description of the present status of Stirling engines compared to their status in 1978: