Obama Presidency

Obama Gets Wisdom of Energy Spending, Congress Does Not

| by NRDC

No one says it better than the President.

"...why would that be a waste of money?"

He is referring to efficiency generally and specifically to federal buildings and home weatherization. He's right. It's not a waste of money. It's a guaranteed return on investment. Apparently, some folks don't like getting a return on their investment, and I‘m glad they aren't investing my money.

Wait, they are. It's our tax money that Congress is investing, and it should be going to our homes being weatherized and reducing the electric bill of every federal building (which we pay). Do you want to keep paying these bills as energy costs escalate, or do you want to put people back to work right now with jobs that will make these buildings more efficient and bring these bills down permanently?

I guess it's not so simple. I am waiting for an answer to the President's question, and all I hear are crickets. I can only hope that clearer heads prevail in what ultimately becomes law.

Enough ranting, on to the specifics.

Weatherization
The Weatherization Assistance Program (WAP) is the largest energy efficiency program in the country and it operates in all 50 states. States weatherize (or retrofit) homes and on average reduce energy consumption by 22 percent. The amount of money used for improvements in each home is limited by statute. Roughly 150,000 homes were weatherized last year and the total number of eligible households is estimated at around 28 million and growing with the price of energy. Many households eligible for WAP are also eligible for fuel assistance, meaning the government pays many of these energy bills.

The House version of the bill funds WAP at $6.2 billion while the Senate version set funding at $2.9 billion. Both versions increase the limit per household so more savings can be achieved.

The lower amount in the Senate version sacrifices many benefits. According to analysis produced for NRDC by the Political Economy Research Institute at the University of Massachusetts - Amherst, the Senate version would create 50,000 jobs while the House version would create an additional 60,000 jobs. The House funding levels should be adopted to make these jobs real.

State Energy Program
The Department of Energy's (DOE) State Energy Program (SEP) is a conduit for funding from the federal government to state energy offices, which conduct the majority of energy efficiency and conservation programs within a state.

The House provided $3.4 billion to SEPs, while the Senate only set aside $500 million. Scaling up these existing efficiency programs at the state level is the fastest way to get the work started. And regardless of whether the state is traditionally aggressive on efficiency or not, there is plenty to do.

In the case of states, the conditions on the funds may be even more important than the specific amount. The House version encourages states to adopt pro-efficiency utility regulatory reforms and more stringent building energy codes. These utility regulatory changes are unbelievably important in getting states and utilities to buy into bringing efficiency to their customers.

If a reasonable number of states adopted these policies, consumers and businesses would save about $135 billion over ten years, and thus create a substantial number of jobs. Global warming pollution would also be reduced by 150 million metric tons of CO2 annually by 2020. These savings come from states adopting the pro-efficiency utility regulatory reforms (this allows them to start efficiency programs) and adopting the most up to date building energy codes. The savings here are huge and making sure this language makes the final bill is very important.

Federal Buildings
The House provided $6 billion to the General Services Administration (GSA) for greening existing buildings and prioritizing energy efficiency. The Senate version cut this total to $2.5 billion.

GSA is basically the federal government's landlord. It owns and leases over 352 million square feet of space. Folks over at GSA have told me that the backlog of projects is so massive that even the larger number would not cover all the needed improvements.

President Obama pledged to reduce energy consumption in existing buildings by 25 percent, and allowing GSA to lead by example is a great start. The bill needs to make sure that efficiency is truly the focus of these improvements to maximize cost savings and job creation.

Green Schools
The biggest difference between the House and Senate bills on green buildings is renovating schools. $14 billion was zeroed out from K-12, while $6 billion was axed from higher education. 25 percent of this money was to be used for efficiency.

Efficiency in schools should be pushed at every level as a cost reduction measure, just like in low income housing and in federal buildings where tax dollars pay the bills. It's just smart investing and the funding here would have helped immensely.

The Senate cut these provisions, but found space for 50 billion in loan guarantees for dirty fuels that won't provide jobs anytime soon. It is much riskier to provide subsidies for capital intensive power plants with skyrocketing costs and environmental consequences than it is to invest in efficiency. This money would be much better spent on renovating schools and bringing those bills down. The House version doesn't have the risky guarantees and uses the money more effectively.

Tax Credit for Home Efficiency Upgrades
Both the House and Senate versions extended the tax credit for home efficiency improvements (25C) through 2010 and increased the credit amount. The Senate version updated the performance criteria for eligibility in the credit, which was too low and would have resulted in wasteful spending. By adopting appropriate performance criteria for windows and adjusting the qualification levels for mechanical equipment, the Senate version cuts the cost to the taxpayers and will save more energy. The Senate version is far better for taxpayers, for economic recovery, and for the environment.

Other Efficiency Policies
The other efficiency policies that are consistent close in both versions are,
• Local Block Grants - Many efficiency projects are best pursued at the local level and these grants will be used for these. Funding will be either $3.5 (House) or $4.2 (Senate) billion.
• Public and Assisted Housing Energy Efficiency - Either $2.5 (House) or $2.25 (Senate) billion will go to the Department of Housing and Urban Development for efficiency improvements. Much like Weatherization and Federal Building Efficiency, this will lower energy bills that are ultimately borne by the taxpayers.
• Qualified Energy Conservation Bond program - Both the House and Senate provide $2.4 billion for this program, which allows states to issue tax credit bonds for conservation and tweaks the language so that the bonds can be used for efficiency retrofits. This will provide a much needed alternative financing source for retrofits locally.
We support the higher funding amounts for efficiency as the most effective stimulus.

Bottom Line
We are talking about a lot of money in the economic recovery bill, and it is much better spent on programs that reduce costs, energy consumption, emissions, and most of all, create jobs. Only efficiency satisfies these conditions.

The House bill is far superior, and the best case scenario would be for Congress to adopt the House provisions in conference (with the exception of the Senate's version of the tax credit for home efficiency upgrades). The biggest potential is in the House conditions on State Energy Grants.

Given that we clearly have a President that gets it, I would describe myself as cautiously optimistic that Congress will do the right thing. We will all just have to wait and see what happens by President's Day.

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