Last week, the Senate Energy and Natural Resources Committee held a hearing to evaluate the Department of Energy’s (DOE) implementation of programs authorized and funded under the stimulus bill. A key focus was weatherization program. Tina Ramos, a CAP special assistant for energy policy, has the story.
The hearing broadly addressed recent criticism of the DOE’s slow initial allocation of funds and implementation of American Recovery and Reinvestment Act (ARRA) programs. In particular, the DOE’s Weatherization Assistance Program (WAP) has recently come under some scrutiny due to its slower than expected deployment of funds and pace of home retrofits in 2009. Critics of WAP are attributing the slow start to bureaucratic red tape, but this paints an incomplete picture of the DOE’s program and undermines why it is and will continue to be effective.
Indeed there are reasons that WAP did not allocate all $5 billion in federal funding awarded under ARRA in the first year of the program. The primary reason is that this was never the plan. The Recovery Act was designed as a two year program, with some faster acting investments that would hit the ground running in year one, and some longer term measures that were smart investments for creating jobs in year two. Weatherization and a number of the other clean energy investments were understood from the start to require an initial period of scaling and ramp up to have their full impact. The DOE’s goal of weatherizing 593,000 homes was carefully set to be accomplished by March 2012, not September 2009 when the Government Accountability Office issued a report on the status of WAP. It should come as no surprise that the impact in year one was modest. The real impact is just getting under way.
Second, the budget for WAP, which amounted to between $200 and $250 million for each of the previous 3 years of the program, increased 20 fold with the injection of ARRA funds last year. Because of the magnitude of the retrofit scale-up that WAP seeks to achieve, it was crucial for the DOE to carefully scale infrastructure to handle the influx of capital and lay the groundwork for ARRA spending, including hiring and training new workers, purchasing equipment, and putting in place the transparency and accountability measures that are central to ARRA. In yesterday’s hearing, Vice-Chair of the National Association of State Energy Officials Malcolm Woolf explained such a measure:
“For illustrative purposes, the vast majority of the states utilize private sector companies to conduct the energy efficiency activities. In the case of an energy service company (ESCO) that has received a contract to undertake energy efficiency upgrades in a school building, the contract generally provides that payments are not made until the work is actually completed or milestones under the contract are satisfied. In general, the ESCO begins hiring upon contract execution and conducts the work. The economy is directly and indirectly impacted. However, the spending or “costing” (in federal parlance) does not occur until the work is completed, the state is satisfied that the work is done properly and then the payment is made. Payments are not generally made up-front in order to protect the public against waste, fraud and abuse. Our ability to enforce the terms of these agreements are greatly enhanced if the state is holding the money, not the contractor. So, while the “costing” figure is low, the work conducted and jobs created is accelerating. We will not waste federal or state dollars by changing these contract terms. However, businesses can add employees and receive financing once the binding contracts are executed, with appropriate performance guarantees.”
Third, when Congress passed ARRA, they included provisions that subjected WAP to the Davis-Bacon requirements for the first time which meant that the Department of Labor had to determine the prevailing wages for weatherization workers in each state. This was a protective measure for a new “industry” meant to stabilize and make equitable wages for workers performing weatherization activities, which required several months to properly establish.
These measures that critics call red tape in reality were provisions, which were designed to put in place a program that not only created jobs, but quality jobs with decent wages. In passing the Recovery Act, Congress realized that they were setting standards for a rapidly expanding industry, and they wanted to set the terms and conditions for long term job growth built on quality work by skilled workers. Scaling up weatherization in this way was prudent, and it means that stimulus funds are setting the stage for a more competitive industry over time. When commenting on the current status of WAP, Cathy Zoi, Assistant Secretary for Energy Efficiency and Renewable Energy, said:
“As a result of the Department’s efforts to address challenges in the program’s implementation – including resolving Davis-Bacon wage determinations in all 50 states and clarifying how states should handle historic preservation – states weatherized more than 125,000 homes by the end of 2009 and are on pace to do at least 250,000 homes this year. In fact, since September 2009, we have tripled the pace of Recovery Act-funded home weatherization.”
The DOE’s program has already put 8,500 people to work in the weatherization effort and was a necessary first step in the effort to scale up energy efficiency and create jobs. The path to retrofitting millions of American homes will require a series of policy initiatives that will build off one another to lay a foundation for a truly robust energy efficiency industry that will create jobs and drive long term economic recovery.
ENR Chairman Senator Jeff Bingaman closed yesterday’s hearing with a final question: what happens when the money is gone? Since the government cannot be expected to maintain such high levels of funding for these types of programs, how do we transition from copious amounts of government funding for energy efficiency and clean energy stimulus programs – which were necessary to drive economic recovery in the right direction in 2008 – to a longer term solution?
A logical next step is a complementary, market-based solution that utilizes existing state programs to deploy capital and stand up a greatly expanded national energy efficiency “industry.” The HOME STAR program, which President Obama announced earlier this week, is just such a program. HOME STAR is a consumer-based program that builds off of and supplements existing markets, making it efficient and easy to implement. It is a cost effective way to create good, high-paying jobs for idled construction workers, boost sales of American-made building materials, and reduce household energy costs for American homeowners.
The public servants and community based professionals that are cutting consumers bills and creating new jobs for construction workers every day, as they administer the Federal low income Weatherization Assistance Program, deserve our praise and support. Moving forward we need to build on their hard work with innovative programs to build the private sector market for energy efficiency through programs like HOME STAR.
Building an energy efficiency industry through an innovative combination of market based and government programs is essential to ensure that the United States does not fall behind the rest of the world in transitioning to a clean energy economy future.