A Quick Economic Stimulus Package Overview

The following article was featured in AESP’s newsletter yesterday, and we’re running it here with their permission.  It does a good job of answering some of the immediate questions about what the stimulus package means for energy efficiency.  For more information from AESP, contact them at www.aesp.org or  (480) 704-5900.

Energy Efficiency in the American Recovery and Reinvestment Act: What Does it Mean for AESP members?

By: Bill Prindle, ICF International

The federal government is about to spend over $26 billion on energy efficiency. Key elements include:

• State Energy Program (SEP) ($3.1 billion)
• Energy Efficiency Community block grants (EECBG) ($3.2 billion)
• Weatherization Assistance Program (WAP) ($5 billion)
• ENERGY STAR® product rebate program ($300 million)
• Smart Grid ($4.5 billion)
• Federal buildings ($8.1 billion)
• Assisted and Public/Indian housing ($1.25 billion)
• Green Jobs ($600 million—Labor and Department of Energy (DOE)-Office of Electricity)
• Tax incentives—Existing homes, ITC, bonds, grants…and more!

This is more than 25 times the total federal spending on efficiency last year. Almost half of these funds will go to state and local governments through SEP, EECBG, and WAP. State/utility program spending was just over $3 billion in 2008, according the Consortium for Energy Efficiency (CEE). Any way you look at it, this is a huge amount of efficiency funding and multiplies current program spending manifold.

This level of spending creates unprecedented opportunities—and challenges. DOE is creating a special Internal project management organization to expedite grant processing, monitoring, and reporting. State and local governments have already begun planning on rapid deployment of grant funds through “shovel-ready” projects and other channels. Getting the money spent within a two-year timeframe, achieving consistent and high-quality impacts, and reporting results will be challenging. The administration has established the www.recovery.gov Web site to track progress.

This article focuses on the first five programs listed above, as they are likely to have the widest effects in areas where AESP members work. Highlights include:

• SEP—This program has been in place for decades. States have recently had energy office funding in the range of $40-$50 million/yr. The American Recovery and Reinvestment Act (ARRA) funding thus represents about a 60-fold increase for the average State Energy Office (SEO). This will test many SEOs’ capacity to manage programs at this scale, and some may outsource part of their funding. While SEP rules are generally flexible, the bill’s language encourages use of existing programs, including utility Demand Side Management (DSM) programs and public benefits funds. One big catch: Governors must provide the “necessary assurances” that the state will reform utility regulation to encourage energy efficiency and implement advanced building codes.
• Energy Efficiency Community Block Grants— EECBG was authorized in the Energy Independence and Security Act (EISA) energy bill of 2007, but this is the first money appropriated. DOE is working on the grant pipeline, accountability mechanisms, etc. There are relatively few rules on use of funds, though it is expected that some funds will go to public buildings; the U.S. Conference of Mayors has a “shovel-ready” list already developed. EISA language directs 28 percent of the funds to SEO’s ($784 million)—with 16 percent directed to serving smaller communities. AESP members may want to reach out to local governments.
• Weatherization—Another long-standing program, WAP has recently been funded in the range of $250 million annually. The $5 billion in ARRA thus creates a 20-fold ramp-up. WAP rules have been changed to increase eligibility from 150 percent of poverty to 200 percent, to raise the per-home spending limit from $2,500 to $6,500, and to allow states to spend 20 percent instead of 10 percent of funds on training and technical assistance. Planning is already underway in the WAP community; it is recognized that the management and workforce issues are challenging. While some states and utility programs now coordinate with WAP providers; these partnerships could be expanded, and states and utilities can help supplement the WAP workforce. Some states are looking at home builders and other sources for additional capacity.
• ENERGY STAR appliance rebate program—This program was authorized in the Energy Policy Act (EPAct) 2005 Energy Bill, but it was not funded until now. DOE grants money to states, on a 50 percent matching basis, so additional funding sources would be needed. Program operators could partner with states to get supplemental funding through this program. ARRA contains “buy American” provisions which could limit product choices; those issues are not yet resolved.
• Smart Grid—This program channels $4.5 billion through DOE’s Office of Electricity Delivery and Energy Reliability (OE) to “modernize the electric grid”. There not many specifics in the bill, but the term “demand-responsive equipment” was added in conference, opening the door for customer-side demand response equipment as well as advanced metering and other grid modernization technologies. The bill designates $100 million for “worker training” while $6.5 billion was added to Bonneville Power Authority’s and Western Area Power Authority’s borrowing authority for transmission development in the West. Because the funding conduits are less well described, utilities and other AESP members could have opportunities to apply for ARRA funds at OE.

For more information on energy efficiency in the American Recovery and Reinvestment Act, read the Alliance to Save Energy’s summary at http://ase.org/content/article/detail/5388

Additional tax incentive information is available from the Tax Incentives Assistance Project at http://www.energytaxincentives.org/

To purchase a copy of AESP’s Brown Bag on The Stimulus Package: What it Means for Energy Efficiency, contact Claudia Huss at (480) 704-5900.