STATEMENT OF REP. CLAUDINE SCHNEIDER BEFORE THE SUBCOMMITTEE ON ENERGY RESEARCH AND DEVELOPMENT OF THE.. SENATE COMMITTTEE ON ENERGY AND NATURAL RESOURCES REGARDING THE DEPARTMENT OF ENERGY'S FY87 CONSERVATION BUDGET March 17, 1986 Mr. Chairman, Thank you for the opportunity to speak to the Subcommittee this afternoon regarding the Department of Energy's Fiscal Year 1987 Conservation budget. As a member of the House Subcommittee on Energy Development and Applications, which authorizes DOE's conservation budget, I am deeply disturbed by DOE's proposal to eliminate two-thirds of federal energy efficiency R&D programs, and completely eliminate the state and local energy conservation programs. These proposals come fast upon the expiration of the conservation tax credits. This means that out of the roughly $40 to $50 billion per year in federal tax and budget energy subsidies, energy efficiency will receive a mere $70 million. Clearly the federal government is distorting the marketplace. Such actions are not consistent with DOE's National Energy Policy Plan that calls for efficiency as a cornerstone of federal energy policy. Rep. Claudine Schneider March 17, 1986 As you may know, energy efficiency now provides one-fifth of U.S. energy services (based on improvements since the 1973 Arab oil embargo). These investments in raising the efficiency of millions of buildings, vehicles, appliances, commercial equipment and manufacturing processes have saved the American economy $1,50 billion per years in energy savings by requiring 25% less energy. to produce a dollar of Gross National Product. - Efficiency measures have also displaced the equivalent of 13 million barrels of oil per day three times today's foreign oil imports. They are the key reason for the collapse of OPEC's power and world oil prices. If we hadn't had these energy efficiency improvements, then what? Well, the U.S. would be importing four times as much oil as it does; oil prices would still be very high, OPEC would still be in control, inflation rates would be high, the trade deficit would be horrendous, and the U.S. and its allies would be extremely vulnerable to any MidEast oil disruption. In light of efficiency's incredible success in improving economic productivity and enhancing national security it is hard to fathom DOE's zealous budget cutting of these programs in a proposed budget that increases $600 million to $12.8 billion! Clearly it is not because this nation has run out of efficiency investment opportunities. The U.S. continues to consume as much as 75% more energy per unit of GNP than foreign competitors such as Japan and France. According to both government and independent analyses, cost-effective efficiency investments could trim an additional $150 billion per year off of Rep. Claudine Schneider March 17, 1986 Page 3 the nation's nearly half trillion dollar annual energy bill. This proves to be the case in spite of the collapse in world oil prices. Most notably because oil prices are largely decoupled from electricity prices. As the attached chart shows, oil fuel expenses represent only 2.7% of the total price of electricity. Non-fuel expenses, mainly capital, constitute fully 75% of the price of electricity. Even if the average cost of oil to utilities were to drop 50%, the average retail price per kilowatt-hour would decline by only about 1/10th of a cent. The savings are insignificant in comparison to the rate shock caused by electricity prices from newly completed nuclear powerplants coming in at two to four times today's national average price of 7¢/kwh. It's important to recognize that the oil price hikes in the 1970s primarily spawned fuel-saving efficiency improvements. Now, in the 1980s, we are witnessing solid state electronic advancements spawning an enormous pool of electricity-saving opportunities that "deliver" electricity services at two to ten times cheaper than building powerplants. Take U.S. buildings, for example, which consume $100 billion per year in electricity--representing three-fourths of electric industry revenues. Efficiency investments with relatively fast paybacks can save $50 billion of that sum. Comparable percentage savings are available in U.S. manufacturing and industrial facilities, where electricity represents 40% of their total energy consumption. Rep. Claudine Schneider March 17, 1986 Page 4 Some of these savings will be secured as a result of past federal energy efficiency R&D programs. According to a recent report by the American Council for an Energy Efficient Economy and the Energy Conservation Coalition, the taxpayers have been handsomely rewarded for their investment in this research. In seven case studies, $16 million of R&D will save U.S. consumers $68 billion over the next 25 years. The report also points out that the U.S. is receding from federal support for energy efficiency R&D while our foreign trade competitors are maintaining or increasing their R&D efforts. The U.S. ranks fifth in funding levels behind the U.K., France, Japan and Germany. Mr. Chairman I would like to request that the ACEEE report be submitted in the record along with my written testimony. This failure to maintain adequate federal funding for efficiency R&D is a very serious problem. As the President's Commission on Industrial Competitiveness noted in its 1985 report, Global Competition: The New Reality, the U.S. has lost not only large market shares in the auto, steel, rubber and primary metal industries, but has also lost shares in seven of the 10 high technology markets; and energy efficiency products are among these fast-growing high technology markets. One electricity-consuming product after another is being totally renovated with high technology design improvements and solid state electronic devices. Japan, the leader, is about to extend its assault on U.S. manufacturers of motors, lighting systems, heat pumps, air conditioners, photovoltaics, and Rep. Claudine Schneider March 17, 1986 industrial processes, just as Japan captured a major segment of the U.S. auto market with high efficiency models. To protect U.S. domestic markets and improve our global competitive position, we should be pursuing national energy policies that help to cut in half the 12% of GNP that pays for energy. Federal energy efficiency R&D also contributes to underlying policy goals of a lower budget deficit. A burgeoning natonal debt means higher interest rates, which threaten to stifle economic growth by competing with the private sector for available capital. But the federal deficit is not the only drain on investment capital. Although the U.S. energy sector accounts for about 12% of GNP, it represented 40% of total investment in plant and equipment expenditures, for all sectors, in 1982. Increased efficiency, several times cheaper than traditional supply, can make a significant contribution to the objective of increased capital availability and lower inflation rates that are underlying goals of the Gramm-Rudman legislation. Hundreds of billions of dollars of capital would be freed-up for spurring non-energy business expansion and job creation, and for repairing America's deteriorating infrastructure of bridges, roads, sewers and water lines. The second point to be made about the oil price collapse is one of national security importance. There is no assurance the oil price collapse will sustain itself. The U.S. Energy |