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CLEAN ENERGY: FROM RHETORIC TO REALITY

Christine A. Ervin
Assistant Secretary for Energy Efficiency and Renewable Energy
Alliance for Energy Efficiency Conference VI
Charlottesville, Virginia
April 30, 1996

Thank you. Congratulations to Carrier for sponsoring one of the most engaging and informative energy efficiency events of the year - The Alliance for Energy Efficiency Conference. And many thanks for inviting me to be part of it.

Last year, I talked about what was perhaps the biggest unreported environmental story in the nation today: the apparently well-guarded secret that energy efficiency technologies prevent pollution on a grand scale, increase labor and economic productivity, and help protect our national security. Well, the so-called "secret" is slowly getting out. But few people may know that clean energy received one of the deepest cuts of all environmental programs in the 1996 budget: a whopping thirty percent cut from FY 1995 levels.

How can we reconcile this setback to one of America's great success stories at a time when our competitors are investing more and more in these technologies? At a time when much of the Beltway rhetoric calls for making investments that will protect our children's future? At a time when the rhetoric calls for easing the regulatory burdens of America's businesses? How is it that the rhetoric accompanying these cuts is so out of step with reality?

Let us start to cut through the rhetoric by getting past the labels we all wear. Like mine: federal bureaucrat. According to the game of rhetoric, that must mean that:

Now that you have my disclaimer, let's proceed to explore this paradox between rhetoric and reality.

Let me start by telling you about a most unusual Congressman - Dr. Vernon Ehlers. First

Dr. Ehlers is a physicist - one of just a handful of scientists in the new Congress. Second, he is a Republican who supports and votes for a clean environment. And he is a strong advocate for energy efficiency and renewable energy. It is the same Vern Ehlers who summed up our dilemma so very nicely: "If BTUs were purple, energy would be the number one issue in America."

Unfortunately, BTUs are not purple. And so those of us responsible for energy programs spend a good deal of time trying to add pigment to one of the most elusive yet powerful forces in our lives. Energy. We are driven by the stark reality that the choices we make over the next year or so on energy programs will have a dramatic impact on the quality of life we experience in the 21st century.

What explains the lack of "pigment" - this apparent ambivalence about energy?

How can this be? What is wrong with this picture? Well, I have several theories. Let me share just two with you.

The first is that behind every lawyer is a neoclassical economist. The kind that evidently took dozens of classes on market theory but none on market imperfections. You know, the classes where theory meets the road - and becomes roadkill for many public goods. Economist Herman Daly calls it the invisible foot of the marketplace. And that is why I am fond of telling economist jokes every chance I get. Like this one that I have enjoyed for many months now.

How many Chicago economists does it take to change a light bulb?

Answer 1: None. The darkness will cause it to change by itself.

Answer 2: None. If it really needed changing, market forces would have

caused it to happen.

Answer 3: None. If the government would just leave it alone, it would

screw itself in.

You can assume anything you want, but it won't change reality. We need more economists to talk about theory in practice - not just theory for theory's sake.

So I come back to my question. How can we explain to the public how important these technologies are to the future of the country?

The statistics are persuasive.

20%-30% while social returns - including energy and environmental benefits - are 50% or higher.

And yet, despite these concrete benefits, the federal government's investment in R&D has declined steadily over the last decade. In constant 1996 dollars, our investment has dropped 23% since 1987. Federal investment in energy R&D has dropped 77% since 1978. Again, in constant 1996 dollars, our efficiency and renewable energy budget is only 51% of what it was in 1980.

Why? Not because the private sector is investing more. In the 1980s, corporate R&D grew at a healthy rate of 7% each year. Since 1992, it has stagnated, sliding six-tenths of a percent each year. In 1995, real company R&D fell for the third consecutive year - the first time this has happened in more than 40 years.

The slide is even worse for energy-related R&D. Private sector expenditures for energy R&D fell 33% in real terms from 1983 and 1993.

This downward slide apparently is driven by corporate downsizing and the financial pressures of global competition. Yet it is occurring at a time when the last oil war is still fresh in our memories; when our oil imports are at record levels; and when a huge market for clean energy technologies beckons worldwide, waiting like a ripe plum to be picked by that good old American genius for invention: promises of new exports, new U.S. industries, good new American jobs. America's research engine seems to be stalling.

Why? Perhaps it's because the benefits of R&D remain an abstraction to most stockholders and voters and to many of our elected leaders. R&D deals, by definition, with products that haven't yet reached the marketplace. The benefits of an R&D investment today are always in the future - always a promise.

If Congress attempts to cut social security payments for today's elderly citizens, or Medicare benefits, the backlash is instant. People know that something good and immediate is being taken away. The same with tax increases. People often oppose them because the impact on their incomes is here and now. But the benefits of R&D are more distant. Today's R&D helps tomorrow's income, tomorrow's jobs, tomorrow's energy security. Not here and now but sometime off in the future.

Perhaps it would be useful, then, to try and capture the effect of previous R&D in our world today. Travel with me in our imagination to a world without the Department of Energy's clean energy programs.

You wake up on April 30, 1996 in the same house, same neighborhood - same spouse, kids, and dog. But something is different. What is it? It's cold. Your 1700 square-foot house in California no longer costs about $700 a year to heat and cool thanks to the building codes adopted by the state energy office, no energy-efficient refrigerator, Carrier furnace or contemporary insulation. Your utility bill is $2700 a year - just like in 1975 - $2000 more each year than today - an extra $165 a month. That's enough to pay for your television, VCR and CD, plus eating out expenses each and every year - but the Department of Energy never existed to help bring you those savings. So you turn the thermostat way down at night - and it gets cold.

You get up to make coffee, turn on the kitchen fluorescent and you immediately notice its flicker hum, and that it turns your skin an ugly color. No electronic ballast and advanced lighting from the DOE. No soft glows. Certainly no compact fluorescent.

You get ready for work and go out to the car. But what a car. It looks like a 1968 Buick - gets 13 miles to the gallon because the Department of Energy wasn't there to help develop the CAFE rules that produced an average of 25 miles to the gallon in our real world. The difference of 12 miles to the gallon means we didn't save 1.5 billion barrels of oil - the equivalent of 150 Exxon Valdez tankers or half the entire amount in the Alaska Wildlife Refuge. That means you have to refuel twice as often and pay twice as much for gasoline as today. Another $1,000 or so down the drain.

You get to the office and scan the paper - noticing a distinct lack of articles about the California zero emission mandate for electric cars. That's because we hadn't been working on batteries for twenty years or electric drive-trains or power-management systems. California hasn't even thought about requiring two percent of new sales to be electrics.

The fact is that the Department of Energy has been working with inventors, and universities, and laboratories, and businesses to create a wide range of technologies that affect everything from our utility bill to the safety of plane parts, to the pollution from diesel buses. But how much did we spend? Was it cost-effective? Let us just say that the U.S. General Accounting Office agreed with our estimates that Americans have saved more than just two technologies - a buildings software program and refrigerator compressors - than from the cumulative appropriations for all our programs since 1978.

That $8 billion in savings is tangible enough. Now let us slip forward in time and catch a glimpse of the world 20 years from now if we stay the course and invest in tomorrow. You wake up on April 30, 2015 in the same house, same neighborhood. But something is different. The house is filled with light, sound, heat, and the coffee pot - because the system-wide controls have been pre-programmed to respond to your wake-up alarm. Soft lights are on. Many of the plaster walls have been replaced by walls of glass that have PV built into them or have electro-chromatic glazing you can adjust to let in or block light. Room temperature is always perfect. Your utility bills are next to nothing because the Building America Program which was starting to develop the next generation housing in the late 1990s is a nationwide success: houses are 50% more efficient, more comfortable, and less expensive to build - not more. Building materials are cleaner and routinely recycled.

You scan the news on your video screen and see an E-Mail from your utility broker that some residential kilowatt hours are available from a new viomass plantation. That reminds you to check the household energy profile to see how much money you made from your PV roof shingles which sent power into the grid most of last week. Bad news is that you only got two cents per kilowatt hour on the spot market. Every time the utility brings another superconducting transmission line into service - the kind that carry 1,000 times the amount of electricity in a normal wire - the rates go through the floor. But then, you own shares there too - so one way or another, you're making money with your clean energy portfolio.

Good thing your company followed Dutch Shell Oil's forecast in 1995 that renewables were going to provide 50% of the worlds' electricity generation by 2040. Because your oil company had the vision to diversify heavily into renewable and energy efficiency technologies.

I could go on to talk about the office of the future, the car of the future, the industrial plant of the future. But suffice it to say that our whole concept of generating pollution has changed in this new world. Pollution is no longer considered an inevitable byproduct but an avoidable, unacceptable and uneconomic practice. Corporate leaders, like Carrier, have helped bring about this revolution.

Unrealistic? Not at all - if we stay the course. If we develop clean technologies that will allow us to reconcile economic prosperity with environmental quality in a greatly expanding world population. We can see the blossoming in communities across the country. Communities like Haymount which you will tour tomorrow with John Clark. And our new Center of Excellence for Sustainable Development in Golden, Colorado can testify to more.

In just the first 60 days, the Center already had more than 9,000 "hits" on the Web site from across the U.S., and from Japan, South Korea, Slovakia, South Africa, Hungary, Greece, Malaysia, Israel, the Russian Federation, and Chile. The Center is helping EPA design a national policy for relocating communities away from Superfund sites. It is providing technical assistance to the city of Atlanta, which is planning a town meeting at the end of May on sustainable development. It has a request for help from Ogden, Utah where a military base closing is opening an 1100 acre site for redevelopment. It has helped launch a statewide program in Colorado. It has additional requests from Baltimore, Kansas City and Denver, and the States of Florida, Arkansas and Iowa.

The need is there. Community interest is there. So let me return to my line of questioning: why are we cutting into the seed corn for future prosperity?

That brings me to my second theory. Maybe we're simply asking the wrong questions or we don't understand the questions! Listen to some examples from some actual courtroom testimony. (As Dave Barry would say, I'm not making these up.)

Q: Were you acquainted with the deceased?

A: Yes sir.

Q: Before or after he died?

Q: Could you see him from where you were standing?

A: I could see his head.

Q: And where was his head?

A: Just above his shoulders.

Q: What is your name?

A: Ernestine McDowell

Q: And what is your marriage status?

A: Fair.

Let us try framing the right questions that will get past the rhetoric and help us prepare for the 21st century:

Does the production and use of energy cause more environmental damage than any other economic activity? Yes. Is there unprecedented scientific consensus that the risk of climate change is too serious to ignore and can be largely mitigated through clean technologies? Yes. Are technologies available and under development that would dramatically reduce pollution and carbon emissions? Yes. Do these technologies also save money, boost labor productivity, create jobs and strengthen our competitiveness? Yes. Does the public strongly support these technologies? Yes.

Then, should the federal government continue to invest in these technologies as high priorities? A resounding yes.

There. Straightforward, linear thinking. Good grist for bipartisan, voter-supported energy policy. Now let us move on with it.

And what if we don't? Well, there have been some spectacular misses in the past when decision-makers and leaders got it wrong. Like when Western Union dismissed the telephone as a "toy" in the last century and proceeded to strike a deal that cut the company out of one of the most important technologies of the 20th century. Or when Lee Le Forest, father of the radio, said "While theoretically and technically television may be feasible, commercially and financially I consider it an impossibility - a development of which we need waste little time dreaming." It was not too long ago that the president of a major computer company in this country dismissed the role of personal computers.

To the skeptics today, I say that the future is a place we create. It does not just happen to us. We are responsible for the choices we make that help shape the future our children inherit.

We can readily see the pressures of the next century looming about us - environmental, economic, demographic, and social. And we can readily see that energy efficiency and renewable energy technologies are rapidly proving to be capable of contributing heavily to the solutions needed. The choices we make in the world of federal budgets may not make headlines today but they will have great reverberations in the years ahead. Let us get beyond the rhetoric and make the right choices.

Thank you.

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