Obama's budget good for energy efficiency

President Obama’s 2013 budget caused a lot of smiles this week among energy efficiency advocates – even if it is more of a wish list than anything else. Obama calls for about $1.2 billion in spending for energy efficiency.

What’s this mean to the energy efficiency industry?

Kateri Callahan, president of the Alliance to Save Energy, says that Obama’s budget represents a dramatic increase from current efficiency spending. And while the sector won’t receive that kind of money in the final budget, it still should do well, given that the starting point is so high in a time when many budget items begin with cuts.

“The administration’s vigorous support for energy efficiency at this stage of the game should help ensure that we get funding almost as robust as we have currently,” she said.

It’s not easy figuring exactly how much the federal government spends on efficiency now, since funding is spread out over several programs and sometimes infused into budgets for defense, science, agriculture, environment and commerce.

By ASE’s count Congress appropriated $811 million in 2012 for energy efficiency programs in DOE’s Office of Energy Efficiency and Renewable Energy (EERE), and $50 million for Energy Star at the Environmental Protection Agency.

In all, Obama increases the Department of Energy budget by 3.2%,  bringing it to $27.2 billion for 2013. He allots $2.3 billion for both the efficiency and renewable energy programs in EERE, and maintains Energy Star spending at the same level. Funding for  high-risk research increases 27% and for manufacturing advancement 150%. Obama offers an 80% increase in programs that cut energy use in buildings and factories. He also continues to press Congress to pass the HomeStar bill to reduce household energy use.

Raising spending might sound alarms, given the US deficit. However, spending on efficiency actually decreases society’s energy expenses. Energy efficiency cost about 1.6 to 3.3 cents/kWh for utilities in 14 states studied by the American Council for an Energy Efficient Economy. Had those utilities built power plants rather than conserved energy, they would have paid 6 to 14 cents/kWh.

“The President clearly recognizes that energy efficiency is a critical component of our economic future and is the fastest, cleanest and cheapest way to meet growing energy needs,” said Terry Singer, executive director of the National Association of Energy Service Companies.

Obama also cuts $4 billion in fossil fuel subsidies. This is significant because subsidies tend to depress fossil fuel prices and encouage more consumption. The International Energy Agency has been strongly pushing for the kind of fossil fuel subsidy cuts Obama proposed. Here are some of the reasons IEA gives  in a report issued late last year.

• Fossil fuel subsidies worldwide totaled $409 billion in 2010, up $110 billion from the previous year
• Without reforms, the subsidies will reach $660 billion or 0.7% of world GDP by 2020
• Poor people don’t benefit from these subsidies. Only 8% of the $409 billion went to the poorest 20%.
• Phasing out fossil fuel subsidies by 2020 would decrease energy consumption by 4.1%

Obama’s tried before to make the fossil fuel cuts, and chances are they are more wish than real, much like the dramatic increases in energy efficiency spending. But the budget news is not all ‘if wishes were horses.’ It signals a general support for energy efficiency at the top of US government. Coupled with the aggressive energy efficiency policies in many states, Obama’s budget suggests a strong year ahead for the energy efficiency industry.