Energy Efficiency (Title XII, Subtitle A, Sections 1211 through 1214)

S. 1766 distributes R&D for energy efficiency over six areas: housing, industrial, transportation, distributed generation, Next Generation Lighting, and railroad efficiency. With the exception of the last two items, specific authorization levels are not enumerated. Total proposed authorization for FY 2003 is $810 million, and over the period FY2003 to FY2011, the total authorized is $3.925 billion.

Housing. Subsection (b)(1) states that the “goal of the energy-efficient housing program shall be to develop, in partnership with industry, enabling technologies (including lighting technologies), designs, production methods, and supporting activities that will, by 2010 cut the energy use of new housing by 50 percent, and reduce energy use in existing homes by 30 percent.”

The housing goals of S. 1766 echo those articulated in the Partnership for Advancing Technology in Housing (PATH),⁹a national public-private partnership designed to improve the development, dissemination, and use of new housing technologies. The goal for new housing, a 50 percent reduction, was analyzed previously by EIA.¹⁰ To demonstrate the impact that increased efficiency in the housing sector might have, a case was developed for that study in which 70 percent of all new single-family homes constructed by 2010 were assumed to be 50 percent more energy-efficient in heating and cooling than today’s new homes. By 2020, savings relative to the corresponding Reference Case amounted to 278 trillion Btu of energy, $2.5 billion (1998 dollars) in consumer energy bills, and 5.7 million metric tons of carbon emissions. The High Technology Case in AEO2002, which includes lower costs and earlier availability as well as the PATH goals, projects delivered energy savings of about 970 trillion Btu by 2020 over reference levels of consumption.¹¹

Many technologies exist today that can substantially decrease residential energy use in both new and existing housing. In new construction, the most efficient heating and cooling technologies, combined with advanced windows and increased insulation in walls and ceilings, can cut energy use for space conditioning in new construction by 50 percent in most climates. The cost to achieve these savings, however, curtails widespread adoption of these technologies. For other appliances, such as cooking equipment and miscellaneous electronics, a 50 percent decrease in energy use would be very difficult to achieve, limiting the ability to achieve a total decrease of 50 percent per household. For existing housing, replacement of decades-old equipment with new equipment can achieve a 30 percent energy savings for some appliances; however, as with new housing, certain appliances cannot achieve this percent reduction in energy use, making it difficult to meet the goal outlined in the bill.

Industrial. Subsection (b)(2) specifies a goal of developing, in partnership with industry, “enabling technologies, designs, production methods, and supporting activities that will, by 2010, enable energy intensive industries…to reduce their energy intensity by at least 25 percent.” Industries of the Future, an ongoing Department of Energy (DOE) program, works in partnership with several energy-intensive industries to develop technologies aimed at increasing efficiency. Targeting the same industries as those enumerated in Section 1211, this program also seeks a 25 percent reduction in energy intensity.

Some of the technologies pursued through Industries of the Future are represented in the National Energy Modeling System (NEMS). For example, near-net-shape casting, a major steel industry initiative, is represented in both the AEO2002 Reference Case and the High Technology Case. Advanced aluminum reduction cells¹² and black-liquor gasification,¹³ a technology that could increase electricity production at pulp mills, are both represented in the High Technology Case. The High Technology Case assumes that increased R&D expenditures will accelerate the penetration, or lead to the introduction of these technologies. However, the High Technology Case also considers many other efficiency improvements, so it is difficult to determine the impact of any particular technology in the projections. Compared with the AEO2002 Frozen Technology Case,¹⁴ industrial energy intensity in the High Technology Case is about 3.5 percent lower by 2010.¹⁵ For the specific industries (Table 3), the AEO2002 Reference Case projects declining intensities, ranging from 3 percent (bulk chemicals) to 20 percent (aluminum) by 2010. Consequently, a 25 percent reduction in energy intensity, while possible for one or two industries, seems highly ambitious, even if the critical technologies were developed and deployed.

Transportation. Section 1211 Subsection (b)(3) calls for the development of government and industry partnership programs that will enable dramatic efficiency improvements in highway vehicles. By 2010, these provisions would require a passenger car to achieve 80 miles per gallon (mpg) and a light truck to achieve 60 mpg. By 2010, these provisions would also triple the efficiency (ton-miles per gallon) of medium freight trucks, and double the efficiency of heavy freight trucks.

The light vehicle fuel economy goals defined in this provision echo a recent Federal program. The Partnership for a New Generation of Vehicles (PNGV) was a cooperative research and development program among seven Federal agencies and the United States Council for Automotive Research (USCAR), which comprises DaimlerChrysler, Ford Motor Company, and General Motors Corporation. The program was initiated in 1993 and stated as one of its goals, the tripling of fuel efficiency for midsize cars without sacrificing affordability, performance or safety. In 2000, concept cars were demonstrated to show that the PNGV fuel economy goals could be met without sacrificing other vehicle attributes.¹⁶ Although the concept vehicles achieved the PNGV fuel economy goals, it was reported that the incremental cost of producing these vehicles would exceed $7,500, making them impractical for most consumers.

While the PNGV program made progress in the development of advanced technologies to enable a cost effective tripling of light vehicle fuel economy, the limited focus embodied in R&D programs led to the demise of the program early in 2002. It was replaced by the FreedomCAR program, which maintains a long-term goal of increasing fuel economy through fuel cell technology and adds additional funding to support the development of a hydrogen infrastructure. Without the PNGV program and its mid-term efficiency goals coupled with product development lead times, and the apparent consumer preference for increased vehicle power rather than efficiency, tripling fuel economy from today’s level by 2010 seems highly improbable. Although it is plausible that manufacturers could institute commercial-scale production of such vehicles, it is highly unlikely that all new light vehicles could achieve this goal cost effectively.

The freight truck efficiency goals mirror those outlined in the 21 st Century Truck Program, which establishes cooperative research and development efforts between Federal agencies and industrial partners. The program’s goals are to triple the fuel efficiency of medium trucks and double the fuel efficiency of heavy trucks.¹⁷ The program’s Technology Roadmap anticipates that achieving its goals would require annual Federal government expenditures of $300 million to $350 million for 10 years, with an equal amount from industry.¹⁸ The Technology Roadmap also states that these goals “are aggressive, and there is no certainty that they can be achieved.” (p. 1-2). In part because there is no assurance of the funding levels that may be required, tripling medium truck fuel efficiency and doubling heavy truck fuel efficiency by 2010 appear problematic.

Distributed Generation. Section 1211 of S.1766 states that, “The goals of the energy efficient on-site generation program shall be to help remove environmental and regulatory barriers to on-site-or distributed generation and combined heat and power by developing technologies by 2015 that achieve:” 40 percent efficiency for on-site distributed natural gas-fired technologies, combined heat and power total efficiencies of more than 85 percent, fuel flexibility including hydrogen, biofuels and natural gas, packaged system integration at end user facilities, and increased reliability and stability of the electricity grid.

All of these projects are currently being pursued in DOE’s Distributed Energy Resources (DER) program, and the operational goals are theoretically within reach. The challenge is to implement these programs in places where vertically integrated utilities still operate or where a newly-deregulated market may not be providing proper cost signals.¹⁹ Economically, the beneficiaries of these distributed systems are not limited to the immediate site: utilities may benefit through avoided costs and voltage support, while other consumers may benefit in the form of reduced emissions and delayed or avoided rate increases. Distributed generation technologies are modeled in NEMS, in both the generation sector and the demand sectors. In the generation sector, two distributed technologies compete against central station technologies, where the distributed generators are used to partially offset transmission and distribution costs.²⁰ In the commercial sector, end-use power costs are compared to several distributed generation technologies.²¹ The projected adoption of these systems is a function of how quickly the investment is recovered through savings of purchased electricity and, in the case of combined heat and power, reduced thermal energy requirements. By 2015, AEO2002 projects 27 GW of distributed generation, most of which is forecast in the industrial and electric generator sectors.²² AEO2002 did not assess the efficiency goals (40 percent) or the fuel-flexibility goals for distributed generation.

Next Generation Lighting Initiative. Section 1213 of S. 1766 establishes a Next Generation Lighting Initiative in the Department of Energy to “research, develop, and conduct demonstration activities on advanced solid-state lighting technologies based on white light emitting diodes.” The general objective of the provision is to develop, by 2011, advanced solid-state lighting technologies based on white light emitting diodes that are cost competitive with incandescent and fluorescent lighting technologies in addition to being longer lasting and more energy-efficient. The first specific objective is to develop an inorganic white light emitting diode that has an efficiency of 160 lumens per watt and a 10-year lifetime. The second objective is to develop an organic white light emitting diode with an efficiency of 100 lumens per watt with a 5-year lifetime that illuminates over a full color spectrum; covers large areas over flexible surfaces; and does not contain harmful pollutants typical of fluorescent lamps such as mercury.²³ Section 1213 authorizes $50 million in each Fiscal Year 2003 through 2011 for these activities, totaling $450 million over the period.

Solid-state lighting devices that use light emitting diode (LED) technology are currently used in many applications requiring colored light, such as exit signs, traffic signals, and vehicle brake lights. Recent technological breakthroughs have started to establish solid-state sources of white light; however, additional technology and cost breakthroughs must occur for the goals stated in S.1766 to be achievable. Currently, white LEDs are one third more efficient than incandescent lamps (about 20 lumens per watt compared to 15 lumens per watt) and last at least 10 times as long.²⁴ However, the cost of an LED-based light source is roughly $100 per thousand lumens of light compared to $0.33 per thousand lumens for incandescent lighting. The comparison to fluorescent lighting is even less favorable. Although first costs exceed those of incandescent lighting, standard fluorescent bulbs produce 80 lumens per watt and last 20,000 hours for under $1.00 per thousand lumens, putting the cost and efficiency goals of S.1766 at a severe disadvantage.^25,26

Analysts at Sandia National Laboratories and Agilent Technologies project that the penetration of LEDs into signaling applications will drive continued evolutionary improvements in performance and cost, leading white LEDs to reach an efficiency of 50 lumens per watt in 2010 with costs dropping by at least 10 percent per year to less than $50 per thousand lumens.^27,28 If these improvements are realized, LEDs could compete in some incandescent applications without an additional government R&D program, provided LED “lighting quality” also meets user expectations. However, evolutionary improvements will not meet the objectives of the legislative provision. Nothing short of revolutionary advances in both cost and efficiency would be required for solid state lighting to meet the specific goals of S. 1766 and be competitive in general fluorescent applications.

Solving technical problems related to the materials and processes used to manufacture the semiconductors that make up LEDs is crucial to reducing the cost of LED lamps. In addition, the efficiencies of the green and blue components of LEDs must be improved by factors of 5 to 10 and 2 to 3, respectively, in order to meet the S.1766 goals. Organic light emitting diodes (OLEDs) may be more amenable to inexpensive, large scale processing; however, efficiency, lifetime, brightness, and degradation problems must all be solved for OLEDs to be viable. As is typical for research and development programs, the timing and degree of success in solving these issues is highly uncertain. The competitive success of solid state lighting in general lighting applications and meeting the goals of the S.1766 provision depend not just on solving one particular technical problem, but on major technological breakthroughs affecting both the cost and performance of inorganic and organic white light emitting diodes.

Railroad Efficiency Improvements. Subsection 1214 of S. 1766 establishes a public-private research partnership involving the federal government (DOE, U.S. Department of Transportation, Department of Defense, and the U.S. Environmental Protection Agency), railroad carriers, locomotive manufacturers, and the Association of American Railroads. The goals of the program are broad: “developing and demonstrating locomotive technologies that increase fuel economy, reduce emissions, improve safety, and lower costs.” Authorizations are $60 million for FY2003 and $70 million for FY2004.

The energy efficiency of freight railroads (ton-miles per thousand Btu) increased by 1.9 percent per year during 1989-1999.²⁹ As a result, even though ton-miles increased by 3.5 percent per year over that period, energy consumption increased by only 1.6 percent per year, reaching 520 trillion Btu in 1999. Much of this efficiency improvement may be attributable to industry consolidation. Further significant efficiencies attributable to locomotive improvements are not anticipated.

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