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Chairman CALVERT. Thank you for your testimony. Mr. Reicher. STATEMENT OF THE HONORABLE DAN W. REICHER, ASSIST

ANT SECRETARY FOR ENERGY EFFICIENCY AND RENEW. ABLE ENERGY, U.S. DEPARTMENT OF ENERGY

Mr. REICHER. Thank you, Mr. Chairman and members of the Committee. I am pleased to be here for the first time and look forward to working with all of you as we move forward.

I'm also pleased to present the Department of Energy's Fiscal Year 1999 budget for the Office of Energy Efficiency and Renewable Energy. As the 21st Century approaches, our Nation faces tremendous energy economic and environmental challenges. Over the next few years, we will witness the complete restructuring of our electricity industry. We will implement strict new federal and state air requirements. We will respond to global climate change, and we will encounter an increasingly volatile global energy market. In the face of these challenges, we must invest in energy efficiency technologies to make better use of conventional energy sources while we make investments in key new energy supply technologies.

In its review of the National Energy R&D portfolio, the President's council of advisors in science and technology concluded that energy efficiency and

renewables produce near-term and rapidly expanding public benefits including cleaner air, reduced dependence on imported oil, and lower costs to households to businesses. The Committee reported that R&D investments in efficiency have contributed to efficiency improvements that save U.S. consumers approximately $170 billion per year. Crediting DOE with remarkable gains in technology performance and cost reductions, the Committee targeted energy efficiency and renewables for the greatest increases

in funding. The Fiscal Year 1999 budget for energy efficiency and renewable energy programs calls for increases to support cost shared research, development, and pre-commercial deployment of clean, efficient, and cost effective energy technology. These programs target federal resources in key areas that provide critical national benefits; stimulate complimentary private investments, and leverage market forces.

Our budget responds to five significant drivers that exist today: energy security, economic competitiveness, environmental quality, global climate change, and electric utility restructuring. Given historical precedence and future oil market trends that project significant increases in oil imports from the Persian Gulf, the United States has a critical interest in diminishing the Nation's reliance on foreign oil to improved efficiency and use of indigenous renewables.

Our research and development programs help to maintain America's technological expertise and competitiveness advantage here at home and abroad. The World Bank has estimated that over the next 5 decades developing countries will require 5 million megawatts of new electricity capacity compared to the world's total installed capacity today of 3 million megawatts. This represents tremendous potential for our energy industry.

Efficiency and renewable technologies also offer cost effective alternatives to traditional end of the stack air pollution control technologies. By developing technologies that improve energy efficiency and industry buildings and transportation, our programs are concurrently developing ways to reduce energy related air pollutants. Increased investments in R&D for energy efficiency and renewable technologies can also substantially reduce greenhouse gas emissions while generating cost savings, cleaner air, and other benefits the various studies report can exceed the cost of emissions reductions.

And, finally, utility restructuring presents a real opportunity to reduce energy costs, advance the use of energy efficiency and renewable technology, and provide affordable services to customers.

I think this program has a remarkable record of success that demonstrates the worthiness of your investments. In transportation, we have supported developed of clean and efficient technologies that have been incorporated into over 50 vehicles currently in the marketplace. We supported the development of 104 energy savings technologies in industry that have saved energy intensive industries in this country $1.8 billion since 1985.

In the buildings area, our technologies have led to tremendous consumer savings. Since 1978, advanced windows, electronic light ballasts, and efficient refrigerator compressor, an advanced burner for oil furnaces and building energy software alone have saved consumers more than $30 billion. These savings are more than 3 times the entire energy efficiency R&D budget over the past 20 years, and our support of renewable technology has helped generate nearly $1 billion in U.S. renewable sales and bring renewable technology costs down on average about 80 percent since 1980.

Our budget for Fiscal Year 1999 calls for a $1.2 billion investment. Let me highlight just a few key examples from our request. In industrial technologies, the request of $166 million supports ongoing R&D with a number of energy intensive industries to increase their energy and resource efficiency. With the help of energy efficiency technologies, these industries could save over $10 billion in energy costs by the Year 2010. We've signed partnership agreements and are developing detailed technology plans with the metal casting, glass, aluminum, forest products, steel, and chemical industries, and this past Monday, we entered into a new partnership with the agriculture industry to develop renewable bio products which are everyday consumer items ranging from paints and plastics to carpets and car parts made from agricultural crops and wastes. An increase in our budget for this program will also allow us to support a new partnership with the mining industry which consumes a large proportion of energy and industry as well.

In transportation, our request calls for $293 million to expand work in advanced automobiles technologies, heavy vehicle and biofuel energy systems. In 1999, the partnership for a new generation of vehicles will focus resources on critical technologies needed to make the next advances towards an energy efficient, 80-mile per gallon, 6-passenger automobile. Detroit's recent unveiling of innovative fuel efficient concept vehicles demonstrates that we have set feasible goals in this program, but it also highlights how far we have to go to meet them.

And as part of our work in advanced heavy vehicle technology, we will conduct preliminary design, analysis, and testing of effi

cient diesel engines for sport utility vehicles and pick-up trucks to raise their efficiency as well. Industry will fund a significant share of R&D costs for these efforts.

Our request in 1999 for building technologies, state and community programs calls for $317 million including a $46 million increase for technology R&D. The request will help us reach our goal of reducing-building energy use in our country by over 6 percent annually by 2010 compared to today's level of use.

In 1999, we're proposing $8 million for a competitive solicitation for cost shared R&D on a wide range of building technologies, and among a number of R&D efforts in 1999, we will complete our cost shared R&D partnership on a pre-production prototype refrigerator freezer that uses 50 percent less electricity than currently required by federal standards.

And, finally, in the utilities area, the Fiscal Year 1999 request of $321 million supports our work with electric power providers and related industries to develop a broad range of renewable energy technologies that will result in at least a doubling of U.S. nonhydroelectric renewable generating capacity by 2010.

These R&D efforts have really paid off in these particular areas. In the area of superconductivity, we have supported the development of two breakthrough fabrication methods that will lead to the next generation of cost competitive commercial wires and associated devices with significantly higher carrying capacities. And in 1999 we will work to develop superior photo voltaic cells that when with concentrators could achieve a world record of 32 percent conversion efficiency.

Chairman CALVERT. If the gentleman would suspend for a moment. If you could

Mr. REICHER. I'm about to wrap up.
Chairman CALVERT. Good.

Mr. REICHER. I wanted just finally touch on an important point you raised, Mr. Chairman, which is management of these programs. I am implementing a number of management initiatives in this energy efficiency and renewable energy program to respond to concerns about management of the program. We are increasing the level of competition in selecting contractors. We are developing technology road maps in collaboration with our partners for a greater number of our programs to better focus our investments. We're developing both a clearer budget and a more open budgeting process, and, finally, we are focusing on program evaluation and terminating programs that don't measure up. To cite a few examples, we are concluding our work with the petroleum refinery industry as well as research on sterling engines, fly wheels, ultra capacitors, and gas turbines for vehicle applications. Thank you, Mr. Chairman, and I look forward to your questions.

[The prepared statement and attachments of Mr. Reicher follow:]

Statement of Dan Reicher
Assistant Secretary for Energy Efficiency and Renewable Energy

Department of Energy

Before the
Subcommittee on Energy and Environment

Committee on Science

February 25, 1998

INTRODUCTION

Mr. Chairman and members of the subcommittee, I am pleased to have the opportunity to appear before you today to present the Department of Energy's Fiscal Year 1999 budget request for the Office of Energy Efficiency and Renewable Energy (EERE).

As the 21st century approaches, our nation faces tremendous energy, economic, and environmental challenges. Over the next few years, we will witness the complete restructuring of U.S. electricity markets; we will confront the challenge of global climate change; we will implement sweeping new federal and state clean air requirements, and we will encounter an increasingly volatile global energy market. In the face of these challenges, our goal must be to develop a diverse set of energy sources and use them efficiently. The plain fact is that 93% of the energy we consume today comes from fossil and nuclear fuel. So we must use energy efficiency technologies to make better use of conventional energy sources while we make investments in new energy supply technologies.

The FY 1999 budget request for EERE calls for increases to support research, development, and deployment of clean, efficient, and cost-effective energy technologies. Support of these efforts will result in cost savings to energy consumers, enhanced industrial competitiveness, less dependence on oil, a healthier environment, and a balanced portfolio of energy options. To ensure market acceptance of these technologies and responsible investment of taxpayer dollars, EERE relies on cost-shared partnerships with the nation's industries and utilities. Our work with states and localities, including weatherization assistance to low-income families, will also play a key role in reducing U.S. energy consumption and advancing clean energy.

In its 1997 review of the national energy R&D portfolio, the President's Committee of Advisors on Science and Technology recommended expansion of a number of national energy R&D programs and targeted energy efficiency and renewable energy programs for the greatest increases in funding. Crediting DOE with remarkable gains in technology performance and cost reductions, the Committee noted that energy efficiency and renewable energy technologies produce near-term and rapidly expanding public benefits, including air emissions reductions, reduced dependence on imported oil, and lower costs to households and firms. The Committee reported that R&D investments in energy efficiency have contributed to efficiency improvements that save U.S. consumers approximately $170 billion each year. Renewable energy (including hydropower) provides enough electricity to power 40 million homes in the U.S. .

Another 1997 study by five DOE national laboratories recognized that energy efficiency and

renewable energy technologies offer tremendous potential for cost-effective reduction of greenhouse gas emissions. In his State of the Union address, President Clinton announced a $6 billion national investment in energy research and development and tax incentives to confront climate change. In this budget request, we propose programs that make a down-payment on the President's commitment, while simultaneously achieving other benefits.

EERE programs are designed to improve the fuel economy and environmental performance of automobiles and other vehicles; increase the productivity of the nation's most energy-intensive and polluting industries; improve the energy efficiency, comfort and cost of operating our buildings; and improve the performance and cost-effectiveness of renewable energy technologies. We also work to save taxpayer dollars by deploying energy efficient and renewable energy technologies in Federal buildings and operations throughout the country.

These programs target federal resources in key areas that provide critical national benefits, stimulate complementary private investments and leverage market forces. They respond to five significant drivers:

Energy Security;
Economic Competitiveness;
Environmental Quality,
Electric Utility Restructuring, and
Global Climate Change

Energy Security During the past 23 years, three major disruptions in the world oil market have shaken the global economy. In 1996, U.S. net oil imports accounted for approximately 45 percent of domestic petroleum consumption. By 2020, U.S. net oil imports are expected to grow to over 65 percent of domestic petroleum consumption, with Persian Gulf nations accounting for over 65 percent of the world's oil exports. And as the current Iraq situation illustrates, the Gulf continues to be one of the most volatile regions of the world. In 2020, U.S. net annual expenditures for imported crude oil and petroleum products are projected to exceed $130 billion in current dollars. Given historical precedents and future oil market trends, the United States has a critical interest in diminishing the nation's reliance on oil through improved efficiency and use of indigenous renewable energy sources. EERE's efforts to implement a smart energy policy recognize this security concern and work to reduce U.S. dependence on foreign oil. As a related benefit, EERE's work on efficiency and renewable energy reduces the U.S. trade deficit by reducing costly energy imports.

Economic Competitiveness In addition to reducing the nation's vulnerability to disruptions in energy supplies, EERE's research and development efforts advance U.S. economic interests. Carried out in partnership with industry, national laboratories, and universities, EERE's research and development programs are designed to maintain America's technological expertise and competitive advantage in the global market. A smart energy policy, as promoted by EERE's programs, strengthens the

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