C. Technology Adoption

The Department of Energy has traditionally taken a very passive role in promoting the adoption of technology. This stands in marked contrast to current programs at the Environmental Protection Agency.

For example, EPA is doing far more in its "Green Lights" program to promote the adoption of energy efficient lighting that DOE has ever considered. It is part of an overall pollution prevention program at EPA, and is an example of an outstanding government program. It asks corporations to pledge to relamp with cost-effective efficient lighting. EPA provides some technical assistance and other services.

We recommend that a formal program be begun in DOE to get proven energy efficient technology into the marketplace quicker. The thrust would be different than DOE's current emphasis in its technology transfer program. The latter program emphasizes moving products from the laboratory to early adoption in the marketplace; it is valuable and should continue as a complement to this new initiative.

This new program would emphasize working with the marketing executives in corporations, not researchers. We believe that this would significantly accelerate the pace of market penetration. We believe the program should be authorized at five million dollars annually.

D. Goals and Reporting

In the late 1970s and early 1980s, the government both established voluntary energy efficiency targets for industries and required reporting of energy use through the trade associations. This program was halted in the early 1980s.

Industry has made vast improvements in energy efficiency. But the attitude in the United States towards industrial energy use stands in marked contrast to that of Japan. In Japan, industrial facilities over a certain size are required to have certified trained energy managers. We do not favor adoption of the Japanese model here, but a program similar to that which used to exist for reporting and voluntary goals can have great merit.

In case studies the Alliance did in the early 1980s of 15 firms in energy intensive industries, the energy managers uniformly told us that the goals and reporting requirements were very helpful to them in getting needed projects implemented. Indeed, one manager felt they were responsible for more projects going forward than the then existing tax credit.

The goals and reporting heightens management attention and allows them to compare themselves against industry averages. We are cognizant that this program should not be structured to be burdensome to industry, but believe that substantial improvements can be realized with minimum intrusion.

RESIDENTIAL BUILDINGS

The provisions in Section 3002 are a good attempt to establish a home energy rating system coupled with better mortgage incentives. We believe, however, that they can go further. Although the specifics of the Administration's proposal in this area are not yet clear, they are apparently more ambitious than those in this bill. A. Ratings

We recommend that the bill's guidelines for voluntary rating systems be encouraged for 5 years of development. At the end of 5 years, all homes, both new and older ones, would have to receive a rating prior to sale. The rating would be coupled with information about energy efficient mortgage programs. The administration proposal does not specify the date when this requirement would have to be met. B. Minimum efficiency for Federal mortgages

1. New homes

Within one year, we believe that all new homes should have to meet at least the federal Energy Code of the Council of American Building Officials to be eligible for any federal subsidy insurance or guarantee on the mortgage. The Cranston-Gonzales Affordable Housing Act provides this threshold for all FHA mortgages. We would extend it to other government programs as well, such as VA mortgages.

We also recommend that the bill should require states to review and upgrade their building energy codes, with technical assistance from DOE. A recent Alliance study of the Model Energy Code shows that the majority of states could benefit from such an exercise, saving a total of .2 quad annually when fully implemented.

2. Existing homes

At the end of five year period when all homes, both new and existing, would need a rating prior to sale, we believe that a threshold rating equivalent to at least the

then current version of the Model Energy Code should be established to be eligible for any federal subsidy, insurance or guarantee on the mortgage. The energy efficient mortgage programs would be available for purchasers who wished to improve the efficiency of an older home to be eligible for the federal subsidized or guaranteed mortgage.

DOE's own analysis of the effect of requiring ratings shows that after 10 years in the marketplace, energy efficient mortgage/home energy rating programs can save about 1 quad annually, more than 10 percent of all residential energy demand.

DOE should begin work on model retrofit programs in conjunction with the rating work, and provide technical assistance to the states to implement it.

C. Oil heated homes

There are 12 million homes that still heat with oil in the United States. Often, the oil also supplies the hot water in these homes. These attributes often means that these homeowners do not qualify for targeted utility conservation programs or subsidies to become more efficient in their heating or hot water use. This attribute, coupled with the particular importance of reducing oil use, warrant special attention.

Accordingly, we recommend that a tax credit be given for these homeowners. We would limit it for two years duration. The tax credit would be for replacement of older oil burners with flame retention burners (7 million of the 12 million homes still have the older inefficient burners), and for traditional weatherization measures such as insulation, better windows, or water heating wraps.

APPLIANCE AND EQUIPMENT LABELING AND STANDARDS

A. Lamps and luminaries

Sections 3008 provides a program to label lamps and luminaries. Lamps are already basically labelled, although the program to label luminaries is a good one. We believe, however, that the bill should go further. The Secretary of Energy should be directed to conduct a rulemaking to establish minimum efficiency standards for the major categories of lamps. This rulemaking should be completed within 18 months. The Secretary should also be directed to conduct a rulemaking to consider standards for luminaries, in particular to ensure that they are compatible for compact fluorescent and other high efficiency lighting.

B. Motors and distribution transformers

Section 3009 requires the Secretary to conduct a study and issue a report on the advisability of standards for these products. We recommend that the Secretary instead be required to conduct a rulemaking for these products and be directed to establish efficiency standards for them within 18 months. In the case of motors, the National Electrical Manufacturers Association has a definition of high efficiency for some classifications of motors, and this could be established as the base standard in the legislation itself.

C. Small package commercial air conditioners

We recommend that small package commercial air conditioners be added to the list of products for which the Secretary would define the product class and establish standards for them.

D. Other commercial products

There is one category where we do think it appropriate that the secretary conduct a study of possible labeling and standards, but not at the current time be directed to issue a standard. The office environment in particular is undergoing increased electrification, and "plug-in loads" such as computers, copiers and other equipment is accounting for an increasing percentage of utility load.

The efficiency of these products, from televisions to VCRs to computers, varies greatly. A labeling program, for example, would assist utilities who may want to conduct incentive programs for more efficient equipment. Standards may be found to be warranted in the future.

TITLE IV: RENEWABLE ENERGY

We are pleased that the Chairman recognizes that energy efficiency should be incorporated as part of the current CORECT program. We suggest that Section 4001 be changed so that the training and technical assistance could be provided through any nonprofit institution, not just one "designed solely and specifically to support exports. The current language might exclude nonprofit organizations such as the International Institute For Energy Conservation (IIEC), The Alliance To Save

Energy, and many other nonprofits who are actively undertaking these tasks and working with the efficiency industry.

A. Market assessments

We recommend that a specific task be added for CORECT to provide specific market assessments on targeted countries. This market assessment would include program and policy developments in the foreign country which would impact on the market for efficiency. In a meeting the Alliance and IIEC had with the efficiency industry, they told us this was one of their high priority needs.

B. Report on R&D, Commercialization and Export Assistance

The Secretary should be required to report to the Congress every other year on the foreign government programs in energy efficiency and renewable energy of our major industrialized foreign competitors. The report should detail their R&D funding levels and priorities, and evaluate what types of government assistance is available to manufacturers to assist them commercialize, market, or export their products.

This is a function that need not be assigned to the CORECT program, but we believe it very important that the Department undertake it. It will assist the Congress, the Administration as well as manufacturers better shape program priorities.

TRANSPORTATION

I recognize that the Committee will be holding separate hearings dealing with CAFE and other transportation issues addressed in Title XI of the bill. I merely note that we urge these sections be strong because of the importance of transportation to the overall National Energy Strategy. The committee should consider innovative market mechanisms, such as coupling a gas sipper tax credit with an expanded gas guzzler tax; and ending the inequity of unlimited employer subsidies for free parking but limiting the amount that can be provided for the use of mass transit.

CONCLUSION

I appreciate the invitation of the Committee to testify and would be pleased to work with the staff to develop specific language for the initiatives detailed in this testimony. We hope that the Committee will incorporate these provisions so the efficiency provisions in this bill can truly be labeled as outstanding.

The CHAIRMAN. Thank you very much.

Finally, we have Mr. Scott Sklar, Executive Director of Solar Energy Industries Association.

Senator WALLOP. Mr. Sklar, would you just forgive me, Senator Dole has a meeting of ranking members which I must attend, and I wonder, Mr. Chairman, if I could ask the indulgence of the witnesses if I could address a few questions in writing to them. I have some concerns about the heavy emphasis on least-cost versus the integrated resource planning.

I worry that it just directs us so specifically to certain technologies to the exclusion of other ones. I want to see how we can get out of that bind, because it seems to me, at this moment in time, both are necessary. And I always worry a little bit when we get into lighting and luminaries and other kinds of things that we get so specific in what we write in the legislation that some new technologies are not available because they are either not covered or because they represent something different.

Just the other day I saw something in the Wall Street Journal about a new house lighting source which is a central source that pipes light much as heat is piped. And, I worry that when writing a piece of legislation that one thing will consume so much energy that it doesn't qualify and you do not realize what it does for all the rest of the rooms. This gets me back to the least-cost versus integrated cost.

Your testimony has been interesting, and I am sorry not to be able to develop some of these questions in person. But if you would indulge me, I will try to make them short and to the point.

The CHAIRMAN. Thank you, Senator Wallop.

Mr. Sklar.

STATEMENT OF SCOTT SKLAR, EXECUTIVE DIRECTOR, SOLAR ENERGY INDUSTRIES ASSOCIATION

Mr. SKLAR. I will keep it short, Mr. Chairman. We have sat through a lot of energy strategy hearings before, and I wanted to make four major points to you.

One, that renewable energy technologies have matured beyond the research phase; that over the last decade we have 8,000 megawatts of nonhydro-renewables working today. All of those technologies are under 8 cents a kilowatt hour except photovoltaics, which will be so this decade. And we have 1,000 megawatts displaced from solar water heating in 1.2 million buildings. And that is expanding to industrial process heat. So there has been some significant market penetration.

S. 341 does some things that goes beyond the National Energy Strategy, and that is to make some capital available to increase what Mr. Williams and Mr. Reuger implied was the need to increase awareness of the technology in the real world. That is what we need to do.

Your bill, in developing joint ventures, helps us get some capital to take commercial technology, increase the awareness, and attract some more capital for larger projects. We need to go a little beyond that, (a) in some incentives in your legislation to get the labs to be more responsive in transfer of technology that is sitting there, and (b) to develop other kinds of capital pools so once these joint ventures are in place that are cost-shared by industry, the utilities, State governments, and the Federal Government, that we have a capital pool that can do long-term financing.

If we can bring the plant cost down per month below the fuel cost, utilities will use or access this technology more. You do not need a Ph.D. in economics to understand that, and that is indeed our goal. And the more we can show the domestic market expanse, the more we will be able to track private capital to scale up manufacturing and therefore lower the cost.

I have inserted in my testimony a title-by-title review on some of the bill. It is a good bill to start with, and I want to thank you for it. And I think if we can tweak some of the language, deal with some technology transfer, orient some of the joint ventures to be a little more useful to the industry, and develop some capital pools to follow-up the joint ventures, you will have a very strong piece of legislation that will double the contribution of renewable energy from 9 percent of the total U.S. energy mix to near 20 percent by the end of this decade.

Thank you for your interest in this area.

[The prepared statement of Mr. Sklar follows:]