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Testimony of the Alliance to Save Energy
Submitted to the House Appropriations Subcommittee on Foreign Operations
2007 Appropriations for USAID’s Energy Programs
March 31, 2006
This testimony is submitted on behalf of the Alliance to Save Energy, a bipartisan, nonprofit coalition of business, government, environmental, and consumer leaders committed to promoting energy efficiency worldwide. The Alliance urges the subcommittee to take specific actions to strengthen and expand the critical energy-efficiency programs at the U.S. Agency for International Development (USAID), including the provision of significantly greater funding than requested by the Bush Administration. While we recognize and appreciate the many urgent priorities facing appropriators, we also believe that funding for energy efficiency and clean energy programs must be a priority of the Congress and USAID, as energy is the backbone of our global economy, and its environmental “footprint” is one of the key challenges facing the global community.
Founded in 1977 by Sens. Charles Percy and Hubert Humphrey, the Alliance works in the United States and more than a dozen developing countries to improve energy efficiency and provide cost-effective, sustainable solutions to some of the world’s most pressing energy problems. We are joined in our efforts by more than 100 of the nation’s leading private sector companies, utilities, trade associations, research institutions, and nonprofit organizations who lend their enormous technical and market expertise to the Alliance’s global program and policy initiatives.
Energy should be a central component of USAID's sustainable development and poverty reduction efforts. Indeed, energy affects all aspects of the Agency’s global development work, including its programs to address water access, agricultural productivity, maternal and child health, education, and ecosystem degradation. Moreover, none of USAID’s Millennium Development Goals can be met without major improvements in the quality and quantity of energy services in developing countries.
Alarmingly, agency activities and funding to promote energy efficiency and other clean forms of energy in the developing and transitional countries continue to be cut or reprogrammed, jeopardizing decades of work to develop strong energy-efficiency institutions and policies. While a lack of transparency makes it difficult to establish a complete picture of clean energy funding at USAID, overall support for USAID energy programs is trending downward, despite 2006 conference report bill language calling for a $100 million floor on funding for clean-energy and energy-efficiency programs. While USAID has always used a broad definition of energy programs in meeting its congressional requirements, USAID does not appear to be in compliance with the congressional report language. The most recent report on climate change spending from the Office of Management and Budget included $97 million in FY 2004, $78 million in FY 2005, and proposed $64 million in FY 2006 for USAID clean energy spending (category 1).
The bleak funding picture is typified by, but by no means confined to, USAID’s Economic Growth, Agriculture, and Trade Pillar, where the energy team saw an erosion in funding for its energy-efficiency, renewable-energy, and clean-energy objectives from $16 million in FY01 to $7.4 million in FY04, before it ceased to be specified at all. These cuts have hindered the deployment of innovative clean energy solutions in developing countries and limited the U.S. government’s ability to assist countries in the design and implementation of energy efficiency and renewable energy programs. USAID’s bureaus and missions have faced similar reductions in available budgets for energy efficiency. With funding and management focus dissipating, many USAID missions, such as the one in India, have dramatically scaled back mature and successful energy-efficiency programs. Many others, such as those in Mexico, the Philippines, Russia, and Brazil, have been forced to significantly curtail their successful activities.
At a time of record oil prices and unprecedented growth in energy demand worldwide, USAID’s efforts to promote sustainable energy development should be redoubled, not dismantled. We ignore the opportunity to help developing and transition countries address their looming energy crises at the peril of our own energy security. Rampant growth in world energy demand already is impacting global financial markets, and we believe it is reaching a critical stage that will not only impact U.S. foreign policy, but also likely exacerbate civil unrest and environmental degradation in many of the world’s most populous countries. Funding sustainable energy programs that advance energy efficiency is critical to the ultimate success of U.S. efforts to help alleviate poverty, reduce global warming, and improve the quality of life around the world.
The needs are staggering. The Energy Information Administration’s 2005 International Energy Outlook predicts a 57 percent rise in worldwide energy demand in the next quarter century—from 411 quadrillion British thermal units (Btu) in 2002 to 645 quadrillion Btu in 2025. Worldwide electricity generation, a subset of overall energy use, is expected to nearly double during this period, with the biggest jump projected for the most populous countries USAID serves: Mexico, India, Indonesia, and Brazil. According to USAID:
- Two billion people lack access to affordable and reliable energy supplies;
- The health of both humans and ecosystems globally is threatened by high levels of pollution resulting from fossil energy use;
- Dependence on imported fuels will leave many countries vulnerable to disruptions in supply, resulting in dangerous social, economic, and political consequences for U.S. national security;
- Economic growth in many developing nations will accelerate demand for oil to fuel newly purchased automobiles and electricity to power home appliances such as air conditioners and refrigerators, with resulting increases in air pollution from combustion of fossil fuels; and,
- $100 billion per year in government subsidies will go to support inefficient energy sector institutions in developing countries, diverting local government resources away from badly needed investments in infrastructure, health, and education.
The strategic importance to the U.S. of ensuring clean energy development worldwide is clear. Record high oil and natural gas prices threaten our economic growth and clearly demonstrate that our economic health is impacted by soaring global demand and limited energy supplies. Due to the reality of a single, integrated, global petroleum market, USAID’s energy-efficiency programs directly benefit U.S. consumers. By lessening demand for oil abroad while at the same time implementing energy-efficiency programs here at home, we help extend global energy supplies—which in turn will cause downward pressure on prices both domestically and abroad. Quite simply, lowered oil demand in Manila helps truckers in Manhattan.
Security issues, both domestically and among our allies and trading partners, also are tied to global energy development. Reducing global dependence on oil and extending all fuel supplies through energy efficiency not only strengthens U.S. national security, it also helps maintain stability and energy security around the world by ensuring adequate resources at reasonable prices. USAID-funded clean-energy and energy-efficiency initiatives also create the jobs and improve the services required to meet basic human aspirations in developing countries.
USAID initiatives have demonstrated that reasonably priced, clean, and reliable energy supplies play a positive role in the lives of the world’s poorest citizens by reducing respiratory illnesses and improving access to heating, lighting, refrigeration, and clean water. Whether it’s reliable electricity for refrigeration in tropical climates or providing the vital link in the vaccination cold chain, affordable district heating for Russians to keep their homes and schools heated, or the energy needed to pump and clean water to satisfy basic subsistence needs, USAID-funded energy programs help alleviate poverty and improve the quality of life for millions. The agency’s programs also have been instrumental in replicating the broad energy lessons of the United States, such as the importance of integrated resource planning, competition, and proper pricing, as well as disseminating important policy measures such as energy-efficient appliance standards and tax incentives that deliver sustained energy savings.
For these reasons, the Alliance to Save Energy believes that USAID’s shift away from funding and visibility for energy efficiency is misguided. Energy efficiency can help stretch the world’s finite fossil energy resources so that developing countries can enjoy many of the same economic, environmental, and job-creation benefits that the United States has come to enjoy from energy efficiency improvements in our own country. In fact, the Alliance estimates that energy efficiency has become the number one energy resource in the United States, delivering more toward meeting our energy needs in the past 30 years than any other resource, including oil, natural gas, and coal. This efficiency resource is equally plentiful in developing countries, and it is waiting to be “mined,” much like coal has been through the past century.
As an example, one particularly fruitful sector for “mining” energy-efficiency opportunities lies in municipal water supplies. Overall energy costs easily consume more than 20 percent of water utility budgets in the developing world and as much as 30 to 40 percent of gross water utility revenue, proving fertile ground for energy-efficiency technologies and management improvements with rapid paybacks. In Mexico and Brazil, every dollar invested in efficiency improvements in the water sector returns nine dollars in energy cost savings. To capture these savings, USAID provided funding to the Alliance in 2001 to launch an energy-efficiency program entitled Watergy™that provides facility managers with the technical capacity to take advantage of the numerous efficiency opportunities inherent in municipal water systems. Through the Watergy™ programin Fortaleza, Brazil, municipal managers reduced total energy use in the first four years by 88 million kWh after adopting energy-efficiency goals developed by the Alliance, while increasing service connections to 88,000 poor households previously without water—all without using any more water than before. The time it took for this valuable investment to pay for itself: seven months.
In South Africa, the Alliance leveraged USAID funding to develop a leak reduction project in a municipal water supply system that issaving more than 14 million kWh every year, along with $4 million dollars and enough water to fill a medium-sized reservoir—every year. The time for this project to pay for itself was three months. Furthermore, when local municipalities have seen the kinds of paybacks the project enjoys, they have committed their own funding to replicate the project in other townships.
USAID’s support for energy efficiency also has helped provide tangible benefits here at home, leveraging precious development assistance dollars. American companies such as Honeywell, Armstrong Services, Johnson Controls, Inc., Guardian, and Owens Corning have leveraged USAID training and awareness activities in developing countries to enhance the export market for their products while bolstering the economy in these countries. This market for U.S. energy-efficient products and services can only continue to grow. With $10 trillion in private/public sector investment in the global energy sector expected in the next 20 years, energy efficiency will play a vital role in spurring international economic growth and stimulating business opportunities for U.S. industry.
The Alliance urges the subcommittee to consider the following recommendations to ensure continuation of USAID’s important work to promote development through energy efficiency:
- Halt the downward trend in funding for USAID’s energy-efficiency programs, and ensure that USAID meets its 2006 obligation to make $100,000,000 available to directly promote and deploy energy-conservation, energy-efficiency, and renewable and clean-energy technologies, as outlined in the FY06 conference report bill language.
- Help ensure agency action by specifying aggressive funding levels for energy-efficiency and other clean-energy programs, preferably through a specific line item rather than through report language. As described above, USAID’s energy programs have been shrinking even as Congress has directed more funding for energy efficiency, clean energy, and renewable programs to mitigate global climate change.
- Encourage the integration of energy efficiency into the strategic objectives of country and regional missions. Currently, only a small fraction of USAID missions have energy strategic objectives, and almost none have energy-efficiency objectives.
- Broaden the scope of USAID’s efficiency programs by increasing funding in the transportation, industrial, and water sectors for such initiatives. Key energy-efficiency opportunities are being missed in these end-use sectors due to a lack of funds and congressional guidance.
The Alliance to Save Energy appreciates the opportunity to outline the critical role that USAID’s energy-efficiency programs play in meeting the agency’s mission and goals, and we urge the subcommittee to specifically direct USAID to undertake energy-efficiency programs in all energy end-use sectors, as well as to provide increased funding to support such initiatives. As noted above, these programs play a crucial role in supporting sustainable development in the poorest regions of the world, provide high returns on U.S. taxpayer dollars, and help make not only the U.S., but also the world, more energy secure.
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