SPEAKERS CONTENTS INSERTS
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H.R. 2407, THE FEDERAL PHOTOVOLTAIC UTILIZATION ACT
ECONOMIC DEVELOPMENT, PUBLIC BUILDINGS AND EMERGENCY MANAGEMENT
TRANSPORTATION AND INFRASTRUCTURE
HOUSE OF REPRESENTATIVES
ONE HUNDRED SEVENTH CONGRESS
Page 2 PREV PAGE TOP OF DOCFIRST SESSION
AUGUST 1, 2001
Printed for the use of the
Committee on Transportation and Infrastructure
COMMITTEE ON TRANSPORTATION AND INFRASTRUCTURE
DON YOUNG, Alaska, Chairman
THOMAS E. PETRI, Wisconsin, Vice-Chair
SHERWOOD L. BOEHLERT, New York
HOWARD COBLE, North Carolina
JOHN J. DUNCAN, Jr., Tennessee
WAYNE T. GILCHREST, Maryland
STEPHEN HORN, California
JOHN L. MICA, Florida
JACK QUINN, New York
VERNON J. EHLERS, Michigan
SPENCER BACHUS, Alabama
STEVEN C. LaTOURETTE, Ohio
Page 3 PREV PAGE TOP OF DOCSUE W. KELLY, New York
RICHARD H. BAKER, Louisiana
ROBERT W. NEY, Ohio
JOHN R. THUNE, South Dakota
FRANK A. LoBIONDO, New Jersey
JERRY MORAN, Kansas
RICHARD W. POMBO, California
JIM DeMINT, South Carolina
DOUG BEREUTER, Nebraska
MICHAEL K. SIMPSON, Idaho
JOHNNY ISAKSON, Georgia
ROBIN HAYES, North Carolina
ROB SIMMONS, Connecticut
MIKE ROGERS, Michigan
SHELLEY MOORE CAPITO, West Virginia
MARK STEVEN KIRK, Illinois
HENRY E. BROWN, Jr., South Carolina
TIMOTHY V. JOHNSON, Illinois
BRIAN D. KERNS, Indiana
DENNIS R. REHBERG, Montana
TODD RUSSELL PLATTS, Pennsylvania
MIKE FERGUSON, New Jersey
SAM GRAVES, Missouri
C.L. (BUTCH) OTTER, Idaho
MARK R. KENNEDY, Minnesota
Page 4 PREV PAGE TOP OF DOCJOHN ABNEY CULBERSON, Texas
BILL SHUSTER, Pennsylvania
JOHN BOOZMAN, Arkansas
JOHN SULLIVAN, Oklahoma
JAMES L. OBERSTAR, Minnesota
NICK J. RAHALL II, West Virginia
ROBERT A. BORSKI, Pennsylvania
WILLIAM O. LIPINSKI, Illinois
PETER A. DeFAZIO, Oregon
BOB CLEMENT, Tennessee
JERRY F. COSTELLO, Illinois
ELEANOR HOLMES NORTON, District of Columbia
JERROLD NADLER, New York
ROBERT MENENDEZ, New Jersey
CORRINE BROWN, Florida
JAMES A. BARCIA, Michigan
BOB FILNER, California
EDDIE BERNICE JOHNSON, Texas
FRANK MASCARA, Pennsylvania
GENE TAYLOR, Mississippi
JUANITA MILLENDER-MCDONALD, California
ELIJAH E. CUMMINGS, Maryland
EARL BLUMENAUER, Oregon
MAX SANDLIN, Texas
ELLEN O. TAUSCHER, California
Page 5 PREV PAGE TOP OF DOCBILL PASCRELL, Jr., New Jersey
LEONARD L. BOSWELL, Iowa
JAMES P. McGOVERN, Massachusetts
TIM HOLDEN, Pennsylvania
NICK LAMPSON, Texas
JOHN ELIAS BALDACCI, Maine
MARION BERRY, Arkansas
BRIAN BAIRD, Washington
SHELLEY BERKLEY, Nevada
BRAD CARSON, Oklahoma
JIM MATHESON, Utah
MICHAEL M. HONDA, California
RICK LARSEN, Washington
Subcommittee on Economic Development, Public Buildings and Emergency Management
STEVEN C. LaTOURETTE, Ohio, Chairman
ROBERT W. NEY, Ohio
Page 6 PREV PAGE TOP OF DOCMIKE ROGERS, Michigan
SHELLEY MOORE CAPITO, West Virginia, Vice-Chair
JOHN SULLIVAN, Oklahoma
DON YOUNG, Alaska
JERRY F. COSTELLO, Illinois
MARION BERRY, Arkansas
ELEANOR HOLMES NORTON, District of Columbia
JAMES A. BARCIA, Michigan
JAMES L. OBERSTAR, Minnesota
Emblem, Erik, Executive Director, National Energy Management Institute
Ewing, Mark, Director, Energy Center of Expertise, U.S. General Services Administration
Garman, David K., Assistant Secretary, Energy Efficiency and Renewable Energy, U.S. Department of Energy, accompanied by James Rannels, Director, Office of Solar Energies Technology, U.S. Department of Energy
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Hamer, Glenn, Executive Director, Solar Energy Industries Association
Leyden, Thomas, Vice President, Powerlight Corporation, and President, New Jersey Solar Energy Industries Association
Moravec, F. Joseph, Commissioner, Public Building Service, U.S. General Services Administration
PREPARED STATEMENTS SUBMITTED BY MEMBERS OF CONGRESS
Costello, Hon. Jerry, of Illinois
Oberstar, Hon. James L., of Minnesota
PREPARED STATEMENTS SUBMITTED BY WITNESSES
Garman, David K
Moravec, F. Joseph
SUBMISSION FOR THE RECORD
Page 8 PREV PAGE TOP OF DOC Rannels, James, Director, Office of Solar Energies Technology, U.S. Department of Energy, report
H.R. 2407, THE FEDERAL PHOTOVOLTAIC UTILIZATION ACT
Wednesday, August 1, 2001
House of Representatives, Committee on Transportation and Infrastructure, Subcommittee on Economic Development, Public Buildings and Emergency Management, Washington, D.C.
The subcommittee met, pursuant to call, at 10:00 a.m. in room 2167, Rayburn House Office Building, Hon. Steven C. LaTourette, [chairman of the subcommittee] presiding.
Mr. LATOURETTE. The Subcommittee will come to order.
I want to welcome the members of the Subcommittee to this very important hearing.
Before we begin, Mr. Moravec, at the last hearing we had with GSA, we didn't receive your testimony in a timely fashion. It makes our job tougher. We made a couple of phone calls up there yesterday, and I understand we received your testimony late last night.
I'm not casting aspersions at you, because I don't think you write it down, but it does make the staff's job a little more difficult, and it makes the hearing not as meaningful as it could be if we knew what it was that the hearing was going to be about, at least what the agency was going to testify ahead of time.
With that said, the business of the Subcommittee today is a hearing on H.R. 2407, a bill that would amend the Public Buildings Act of 1959. The bill provides for the acquisition of photovoltaic solar electric cells by the Government for use in Federal buildings. Specifically, the bill permits the Administrator of the GSA to establish a photovoltaic energy commercialization program for the procurement and installation of photovoltaic solar cells in new and existing Federal buildings. The intent of the bill is to facilitate growth in the photovoltaic industry, to make the technology more affordable for general public use, to reduce the fossil fuel consumption, to assist the Government to better attain the 20,000 solar systems in Federal buildings goal in the Million Roofs Initiative from 1997, and to stimulate the use of life cycle costing in the Federal Government concerning Federal buildings.
Page 9 PREV PAGE TOP OF DOC The bill also authorizes a considerable amount of money, $210 million annually for five years, for the Government to purchase photovoltaic technology to be used in Federal buildings. That is a considerable expenditure for the Government for a narrowly focused program within a larger program of additional viable options for renewable energy, including the use of hydrogen power fuel cells.
In 1839, the French experimental physicist Edward Becquerel discovered the photovoltaic effect while experimenting with an electrolytic cell made up of two metal electrodes placed in an electricity conducting solution in which generation increased when exposed to light. Since that discovery, photoconductivity and the photovoltaic effect have been slowly evolving into affordable, present-day applications for generating solar electricity. This includes the first American Charles Fritz' description of the first solar cells made from selenium wafers in 1883, Albert Einstein's 1904 paper on photoelectric, which later won the 1921 Nobel prize, and in 1956 RCA labs worked to develop photovoltaic cells for the proposed orbiting Earth satellites. And a year later in 1958, the Explorer III, Vanguard II and Sputnik III satellites were photovoltaic powered and launched.
In 1961, the United Nations held a conference on solar energy in the developing world. The first photovoltaic residence, Solar I, was built by the University of Delaware in 1973. Volkswagen began testing photovoltaic cells mounted in the roofs of Dasher station wagons in 1982. And in 1999, photovoltaic modules supplied electricity to the Brightling Orbiter III balloon during its non-stop trip around the world.
Photovoltaic technology is a semi-conductor based technology that converts light energy into electricity. It doesn't involve any moving parts, doesn't consume any natural resources, and it doesn't create any pollution. As I mentioned before, the technology's applications are broad and varied, including the use on satellites, calculators and wrist watches, in commercial office buildings and in residential communities for a number of different functions. And in third world countries, where traditional power lines and electricity are unavailable.
Page 10 PREV PAGE TOP OF DOC Today, 200,000 homes depend on photovoltaic technology for electricity. For photovoltaic modules to provide electricity to the entire United States, about one-fourth of the amount of land covered by our Nation's roadways would need to be covered with photovoltaic modules. I would certainly be interested to learn today the cost of producing the amount of voltaic solar cells, that would be approximately one-fourth of the 3,945,872 miles of roadway. Maybe one of the witnesses today might share with us the cost to produce 986,468 miles of PV cells.
Addressing cost issues, H.R. 2407 stimulates the use of life cycle costing by the Federal Government for photovoltaic systems. The cost of larger photovoltaic systems is measured in a levelized cost per kilowatt hour. As I understand it, this means the costs are spread out over the lifetime of the system and then divided by the power output. That seemingly makes the cost of photovoltaic technology more effective.
There's a constituent back in my district, a retiree who worked for NASA, and is now starting to develop high intensity sun concentrator systems to help lower the cost of production of the photovoltaic systems. Silicon is a major component in the development of these systems. And silicon, for the semiconductor industry, is now a $7 billion a year industry.
Again, I'm very much looking forward to hearing from our witnesses today. I think that this hearing comes on an unusually good and coincidental day for the Congress, as the President's energy package is now being debated or will shortly be debated on the House Floor. And I believe included in his energy proposal are a number of things relating to solar energy.
I want to commend the Ranking Member of the full Committee who's with us here today, Mr. Oberstar. This is his piece of legislation that we are receiving comments on today. And it's not just his piece of legislation now, but energy is something that's in vogue and we're going to talk about. My understanding is that this is an initiative that he's been pushing since 1977. The one thing that I've learned about Mr. Oberstar in my seven years is, it doesn't surprise me that he has a great memory of the history and traditions of the House and the country, he is also sort of clairvoyant when it comes to what we're going to need in the future. And I commend him for not only his bill, but his constant contributions to the Congress.
Page 11 PREV PAGE TOP OF DOC With that said, I want to yield to our distinguished Ranking Member of the Subcommittee, Mr. Costello.
Mr. COSTELLO. Mr. Chairman, thank you. Let me compliment you on the history of this technology. You must have stayed up late last night going through the history of PV.
Mr. LATOURETTE. I just wanted to beat Mr. Oberstar in terms of the history.
Mr. COSTELLO. Mr. Chairman, I thank you for calling the hearing today. And of course, this legislation, as you indicated, was introduced by Mr. Oberstar not only in this session of Congress, but as you noted, he introduced similar legislation almost 25 years ago in June of 1977. That legislation became, it passed the Congress and became part of our energy policy at that time. But unfortunately, it was not funded by the Reagan Administration.
Mr. Chairman, I have an opening statement, and I would ask unanimous consent that we insert the statement into the record.
Mr. LATOURETTE. Without objection.
Mr. COSTELLO. And I, too, would like to make note of the fact that, as of 6:00 or 7:00 o'clock last night, we were waiting on testimony from the Administration on today's hearing. I would just like to say that it makes our job very difficult, and this is not the first time this has happened. I think we excused it the first time, because we knew that this is a new Administration. But we are seven months into this Administration. If we are going to be effective in holding these hearings, it's important to us and to our staff to receive the testimony.
So I would make note for the record and hope that in future hearings, the Administration would do better.
Page 12 PREV PAGE TOP OF DOC Let me also say that I would hope that, I don't know what the testimony will be of the Administration this morning, but I would hope that the Administration is here to join in support of this legislation. It has been brought up by Mr. Oberstar in an appropriate, timely manner as we today begin to debate the energy policy that the Bush Administration has put forth for the Congress. I think it's important legislation and I think it would bring a great service and great improvement to the GSA if in fact we adopted this legislation and implemented it.
With that, Mr. Chairman, I would defer to the author of the legislation, and give him the balance of my time and whatever other time you would be willing to give. Thank you.
Mr. LATOURETTE. The Ranking Member of the full Committee, the author of the legislation, for whatever time you want to consume.
Mr. OBERSTAR. Thank you very much, Mr. Chairman, and Ranking Member. I appreciate your very kind remarks, both of you. I've been very deeply touched by your thoughtfulness.
I too am quite impressed with Mr. LaTourette having beat me to the punch on the history of photovoltaics. I'll drop that part of my testimony, you all will be spared. But it is an excellent summary of the evolution of photovoltaics.
I also appreciate the cooperation of the Chairman of the Full Committee with whom I discussed this matter only once, and that was sufficient to suggest that at the appropriate time, we have a hearing on this bill. He said it would be done. And that is in the great bipartisan tradition of this Committee, that's why we really accomplish so much, because we do work together on issues.
There will be debate on the House Floor today over the Energy Bill. Both sides will agree that we need to reduce our dependence on fossil fuels. There will be disagreements on how to go about it. But I believe that this legislation, that this approach to stimulating production of photovoltaic cells can make an enormous contribution to energy independence. In fact, had it been carried out as I envisioned in 1977, as the Chairman alluded, and Mr. Costello as well, had it been funded, or had the funding provided in the last Carter Administration budget been allowed to go forward in the Reagan Administration, we would be talking about photovoltaic cells in the range of less than 10 cents a kilowatt hour. Because we would have stimulated an industry that would have caused production costs to go down, that's really what it's all about. Photovoltaics very simply convert light energy into electricity. They reduce reliance on fossil fuels. They have significant benefits over diesel generators, over primary batteries and even over conventional utility power lines.
Page 13 PREV PAGE TOP OF DOC Photovoltaic systems are very reliable, they have no moving parts, they don't break down. They're used in satellites. No maintenance. If we can run satellites, if our entire space program depends on this source of energy, what about us on Earth? Why not here? Shorter power lines, than are necessary for power brought in from the grid, transmission and distribution costs and upgrades are a minimum. And the potential is just boundless.
I was greatly astonished at the amount of research that has been done in the years since I first was very active on this issue. One of our witnesses today, Mr. Rannels, provided me with an extensive presentation on the availability and the use of and practicality of photovoltaics. But with these two remarkable twists: 1 percent, photovoltaics arrayed in 1 percent of the Mojave Desert would produce all the electricity California needs to meet its expected shortfall, 1 percent.
In a 100 by 100 mile square area, in the Southwestern United States, photovoltaic panels arrayed could produce all the electricity for the entire United States. Astonishing. Why are we sitting here wondering what to do, whether to go ahead with it?
It was in this very Subcommittee, Mr. Chairman, I think I related this story to you as we were proceeding to a vote on the Floor yesterday, I was asked as a second term member, in those days that was a big deal, there were lots of second termers and not so many of us many termers, but the then-Chairman of this Subcommittee, Tino Roncollier, had to be out of town and asked me to chair a hearing, which was going to be on solar energy applications within the Federal Government.
Among the witnesses was the Sheet Metal Workers Union who had commissioned a study, a two-year study of the use of solar energy in public and private buildings. It was a two-volume work that showed that the application of photovoltaics to Federal buildings, as well as the private sector, would create 137,000 jobs just among Sheet Metal Workers Union members. An astonishing number. We were headed into a recession, trying to create jobs. This is away to do it and do something good for the country. And we're still reeling from the Arab oil embargo and trying to get a national energy policy, which is being worked on. I thought, let's do it.
Page 14 PREV PAGE TOP OF DOC In the course of drafting the legislation, with the help of photovoltaic engineers, we learned that putting arrays on the Rayburn Building in 1977 would produce all the electricity needed to run all the lights, all the then electric typewriters and everything except perhaps the elevators, and pump energy back into the Pepco grid. Congress could make money selling power back to Pepco.
So I introduced a bill that provided for $175 million a year for the Federal Government to acquire, as we have done in many other situations, acquire the technology, create the market, generate the production, and reduce the costs from more than $1, I think the actual number is somewhere closer to $1.75 a kilowatt hour down to less than $1, hopefully getting it over 10 years now to less than 50 cents.
Well, Senator Humphrey heard about my proposal, he introduced the bill in the Senate. Together we got it into the Carter energy package. It was in the Carter energy budget and Jimmy Carter lost in the 1980 election. The Reagan Administration didn't think that was an appropriate thing to do, they zeroed out the entire alternative energy budget and this whole thing lay fallow. There weren't very many opportunities to revive it.
Then along came the Clinton Administration and President Clinton announced his Million Solar Roofs Initiative. Well, 20,000 solar energy systems could be installed on Federal Buildings over a 10 or 12 year period. That's the kind of idea that I think the Government should do.
Now, we have, this is like so many things that we do in the United States, we invent the technology and then it lies fallow. And some other country, notably Japan or Germany, picks it up, perfects it and sells it back to us as they've done with VCRs and TVs and video cameras and automobiles and goodness knows what else. Well, I don't want that to happen to us again and again.
In the intervening years, the solar industry didn't just fold its hands and go away. With the help of the Federal Government in the last decade, the cost has gone down to 20 cents a kilowatt hour. And more reductions can be expected.
Page 15 PREV PAGE TOP OF DOC Sales are increasing at a dramatic rate, 25 percent a year, and we've become an exporter of photovoltaics, 70 percent of U.S. production going to export sales. Yet we have, with 20 percent of the world market, we are behind Germany and Japan. And if we don't move ahead, they'll pretty soon be selling it to us, just like they do with computer chips and other things.
Now, this modest amount of money, $210 million a year over the next five years, to buy some 18,000 photovoltaic systems, of course we can negotiate around that number. And I know there will be criticism from the panel, from the Administration policy, that this is not a dependable source, because we have to rely on general revenue dollars and appropriated funds. So does every other program in the Federal Government, except for the Aviation Trust Fund and the Highway Trust Fund and Social Security Trust Fund. If we want to create a trust fund for solar power, I'll be happy to do it. We'll just buy a revenue source.
But we come back to the point, if photovoltaics are so important for the space program, and like the space program that justifies its very existence by telling America all these great spinoffs that come from shooting people and satellites into outer space, let us continue doing this and marvel you with all these great things, but not photovoltaics? Every satellite circling the Earth uses photovoltaic power.
Now, there are large scale purchases by the Federal Government of many products to serve the Federal Government, but also create a market and reduce the cost of that product. GSA, using its FTS 2000 telecommunications contract, promoted advancements and enhancements in telecommunications. In the early days of computer chips, with great promise and great excitement, but they were all very expensive, NASA and DOD bought computer chips in huge amounts, reduced their costs.
I've been around here long enough to remember all of those initiatives. So I see this opportunity, with great excitement, it's so reasonable, so practical I just don't understand why this Administration, in the context of its energy program, isn't knocking the doors down to put this piece of technology into place. It uses, as the Chairman said, silicon chips. Silicon is another word for sand. Sand, silica, is the most abundant mineral on the face of the Earth. We're not using a rare, scarce, depletable source.
Page 16 PREV PAGE TOP OF DOC Now, there's gallium and there are other products that are used in the course of creating these chips to create the resistance and the conductivity. But the point is, it's readily available. It works. There are trucks rolling across America and in Australia with solar panels on their roof to generate the refrigeration units. Practical, sensible, realistic.
In Desert Storm, the military equipped our forces, advance spotter units, with radio and a battery pack that consisted of a panel that folded up to about 8 by 12 inches. They unfolded it to a 4 foot panel, put it out in the sun, hooked it up to the radio and did their work. If it's good enough for the military, good enough for Desert Storm, it ought to be good enough for every Federal building in America.
Let us proceed with the witnesses. I will reserve my enthusiasm for later moments, and again, thank you very much for the time that it takes, Mr. Chairman, to hold this hearing, and Mr. Ranking Member, thank you very, very much,.
Mr. LATOURETTE. I thank the gentleman for his very informative statement. I now want to ask unanimous consent that each of the witnesses' from both panels full statement be included in the record.
Mr. COSTELLO. Without objection.
Mr. LATOURETTE. Thank you. So ordered.
I now want to call the Government experts panel. We have with us the Commission of Public Building Service, Joe Moravec; the Director of Energy Center of Expertise in the General Services Administration, Mark Ewing; and Assistant Secretary of Energy Efficiency and Renewable Energy of the Department of Energy, Mr. David Garman, who is accompanied by Mr. James Rannels, who is the Director of the Office of Solar Energies Technology, U.S. Department of Energy.
It is our intention that we proceed in the way that we introduced you. And then we'll entertain questions from those members who are present.
Page 17 PREV PAGE TOP OF DOC So Mr. Moravec, welcome again, and we look forward to hearing from you.
TESTIMONY OF F. JOSEPH MORAVEC, COMMISSIONER, PUBLIC BUILDING SERVICE, U.S. GENERAL SERVICES ADMINISTRATION; MARK EWING, DIRECTOR, ENERGY CENTER OF EXPERTISE, U.S. GENERAL SERVICES ADMINISTRATION; AND DAVID K. GARMAN, ASSISTANT SECRETARY, ENERGY EFFICIENCY AND RENEWABLE ENERGY, U.S. DEPARTMENT OF ENERGY, ACCOMPANIED BY JAMES RANNELS, DIRECTOR, OFFICE OF SOLAR ENERGIES TECHNOLOGY, U.S. DEPARTMENT OF ENERGY
Mr. MORAVEC. Thank you, Mr. Chairman.
Before giving my testimony, I would like to on behalf of GSA plead guilty as charged to not delivering our testimony in a timely manner. There is no excuse, and I pledge to you we will make every effort in the future to avoid a recurrence.
Mr. LATOURETTE. We appreciate that very much. As you know from your vast experience in a variety of fields, you can do a better job when you're prepared. We'd like to be prepared, and I know it looks like we're not always prepared, even when we are, but we like to be prepared.
Mr. MORAVEC. Absolutely, and we certainly don't want to do anything to make your job more difficult.
Mr. Chairman and members of the Subcommittee, thank you for this opportunity to testify on H.R. 2407. This measure relates to the improvement of energy efficiency through the use of photovoltaic systems.
As you are aware, the Federal Government is the country's largest energy user, with an annual utility bill totaling almost $8 billion in its over 500,000 facilities and almost 600,000 vehicles worldwide. While GSA's property management responsibilities represent only a small portion of this inventory, we have considerable experience in administering real property. Like other agencies, our mission is to be the Government's landlord.
Page 18 PREV PAGE TOP OF DOC As Commissioner of Public Buildings at GSA, I am very concerned about providing excellent space to our Federal customers while keeping an eye on the bottom line. Maximizing the energy efficiency of GSA's buildings allows us to do just that. Today I will explain the benefits of energy efficiency from a business perspective and how photovoltaic technology might impact GSA operations.
Today's Federal facility managers are facing a myriad of choices and challenges when procuring and managing energy in their buildings. Electric utility deregulation, changing Federal energy goals, new project financing tools, evolving choices in energy efficiency products and renewable power options, to name but a few. All this with budgets, of course, tighter than ever.
GSA pursues every energy efficiency not only because of Federal mandates, but because it provides significant returns to our business. What we have found is that by incorporating strategic energy management into our business plan, GSA not only helps to protect the environment, it helps to build a more sustainable business. In fact, detailed analysis of financial performance over time suggests that building owners who have made significant energy efficient upgrades have higher operating margins than companies that have not embraced energy efficiency.
Although the value of energy efficiency begins, of course, as cost savings, it increases the building's value by producing a higher net operating margin on rent. EPA estimates that utility costs make up nearly one-third of a typical office building's operating expenses. By reducing utility costs, we increase the net asset value of Federal buildings when figured by capitalizing net operating income, which is a common measure of real property value.
Since 1990, GSA has invested about $309 million in line item energy retrofit funding in our building inventory. This includes placing lighting, motors, chillers, boilers, drives, automated building operating systems, applying reflective film on glass and other similar measures. We've also promoted a sustainable design as a central part of building a new building.
Page 19 PREV PAGE TOP OF DOC These actions are paying us a valuable dividend. Consider this: in 1985, the Public Building Service paid $259 million for utilities. In fiscal year 2000, GSA has reduced energy consumption in BTUs per gross square foot by 20.6 percent. With inflation factored in, had we not reduced our energy consumption, our current utility bill of $250 million would have been closer to $338 million.
As I'm sure you all know, the utility industry is experiencing significant price volatility. There are many reasons for this, all of which are out of our control. What is in our control is how we consume this energy, and in some cases, what competitive costs we pay for this energy.
As the Government's landlord, GSA is in a unique position to develop and offer utility energy management services that in many cases set the standard for the rest of the Federal Government. Our Federal customers look to GSA to help them procure utilities that are both cost effective and environmentally responsible, and to assist them in managing their energy usage.
GSA has enjoyed great success in competing for electricity and natural gas in deregulated environments. For example, in Maryland and the District of Columbia, GSA's contract purchase will realize savings of nearly $6 billion over 25 months by aggregating its electricity requirements with other agencies and competing in the deregulated marketplace.
However, there are every greater savings available in a deregulated electricity market, should the Federal Government take full advantage of distribute generation technology. Emerging deregulated marketplace power marketers, who are the new electricity sales people, prefer to have customers with stable power requirements that do not fluctuate, or in the case of office buildings, avoid peaking at mid-day.
In this environment, a building's electricity consumption profile becomes extremely important in terms of attracting best value price. This presents a significant challenge to GSA, as we must operate our buildings on a 9:00 to 5:00 schedule.
Page 20 PREV PAGE TOP OF DOC Therefore, distribute technologies that reduce a building's peak demand while still allowing us to operate, become increasingly cost effective in a competitive power marketplace.
In reaction to this new reality, GSA developed a deregulation strategy that shifts investment away from technologies that simply reduce energy consumption and towards technologies that improve a building's load profile, while still reducing energy consumption. As I stated earlier, technologies that do both are generally described as distributive technologies. Photovoltaic energy systems falls into this category.
However, due to limited funding and the erratic deregulation requirement, we have not implemented our strategy as widely as we would have liked to date. We have installed several solar installations that my colleague Mark Ewing will be testifying on. But the return on investment is not at this point compelling.
GSA supports the use of alternative energy sources and encourages the development of cost effective technology. However, with respect to H.R. 2407, the Energy Department advises that the President's national energy plan provides for an alternative approach that results in more photovoltaic installations at less cost.
Further, the Department of Energy is the responsible lead agency, and we would defer to them in a leadership role on this issue. GSA, as I'm certain all other agencies are, stands of course ready to support energy conservation through all viable technologies, including photovoltaic as included in the President's plan.
In conclusion, let me end my testimony by thanking you again for the opportunity to comment on H.R. 2407 from a business perspective. I would be pleased to answer any questions any of the members of the Subcommittee might have.
Mr. LATOURETTE. Thank you very much.
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Mr. EWING. Good morning, Mr. Chairman and members of the Subcommittee. My name is Mark Ewing, and I'm the Director of GSA's Energy Center of Expertise. I'm responsible for coordinating the activities of GSA's 11 regional offices with respect to energy efficiency and energy procurement, as well as managing the staff located throughout the Nation.
Thank you for this opportunity to testify on H.R. 2407. The mission of the GSA's Energy Center of Expertise is to manage utility costs by promoting optimal energy use while protecting the environment and ensuring a quality work space for our clients. We promote responsible asset management through energy and water conservation projects. We reduce the cost of Government operation. We provide Government-wide and industry leadership by promoting energy efficiency and renewable energy in Federal work places through various contracting mechanisms.
The Energy Center is responsible for setting goals for the GSA energy program, tracking energy costs and consumption, communicating building performance to others and recommending strategies to achieve these performance levels. The Energy Center provides three distinct programs to help GSA manage energy and impact the bottom line.
The first one, GSA's National Center for Utilities Management, specializes in providing Federal facilities with natural gas and energy management services. They negotiate effective gas commodity and transportation rates for individual facilities, administer resource procurement and validate gas company invoices. The driving mission of this unit is to develop innovative, cost effective solutions in an evolving natural gas market.
Second, GSA's Public Utilities Office provides leadership within the Federal Government with regard to developing contracting vehicles that enable Federal agencies to procure utility services at the lowest cost and greatest value in both a regulated and deregulated environment. Services cover the procurement of electricity, natural gas, water and sewage, with current emphasis on preparing the Government for electric utility restructuring and the risks inherent in the restructured electric market.
Page 22 PREV PAGE TOP OF DOC The last program, GSA's National Energy and Water Management Center, is responsible for tracking utility use and cost data in all GSA's buildings nationwide. The Center's staff reviews and processes approximately 5,500 utility bills a month. The Center performs utility rate reviews to identify erroneous utility billings and payments and ensures that GSA's buildings are on the most economical regulated rates available.
As part of our effort to implement Executive Order 13-123, GSA is providing leadership in the area of grid-based renewable power purchases. For some buildings, GSA will purchase some 7,600,000 kilowatt hours of renewable power in the Boston and Philadelphia areas during fiscal year 2001. In addition, GSA has procured renewable power for various facilities throughout the Nation and for the National Park Service's Liberty Bell Pavilion.
GSA also provides Federal agencies with an option of purchasing renewable power in every deregulated power procurement. In implementing the Million Solar Roof Initiative in 1997, GSA incorporated photovoltaic technology into the building operation.
Photovoltaic solar electric systems have several benefits. Chief among these is that the fuel, sunlight, is free and therefore not subject to the price volatility of other energy commodities. Solar also tends to peak in its output right at the time when the grid needs the power most and consequently, when it is worth the most.
Solar systems are reliable and virtually maintenance free with no moving parts. However, as you will see shortly, in a few examples, they are not cost effective.
In February 2000 GSA installed a 30 kilowatt photovoltaic array on 4,000 square feet of rooftop at the Jack Williams Federal Building in Boston. The array's final cost was approximately $13,000 per kilowatt installed, or approximately $390,000. Annual utility cost savings will be approximately $3,000.
In September 2000, GSA completed installation of a 100 kilowatt photovoltaic array in Suitland, Maryland, at the Suitland Federal Facility. The array is made up of some 2,800 solar panels that took four months to install. A roadside kiosk was installed to educate employees and visitors about the energy produced and the primary benefits of the project. The approximate cost to install the solar array was $10,000 per kilowatt, or $1 million. Annual savings in utility costs will be approximately $57,000.
Page 23 PREV PAGE TOP OF DOC In late 2000, GSA completed installation of a 10 kilowatt photovoltaic array on a roof of the Metcalfe Federal Building in Chicago. The installed cost of the project was once again $10,000 per kilowatt, or $100,000. The array consists of 86 solar panels that are seasonally adjustable in order to follow the angle of the sun's rays. The estimated annual savings is $1,000.
The largest impediment to widespread installation of photovoltaic systems, however, is the high up-front costs. That is why it is important that photovoltaic be utilized within the context of the overall national energy plan. As Commissioner Moravec stated, the Department of Energy has advised that the President's energy plan provides for a practical and cost effective program which includes utilization of various energy sources, including photovoltaic.
That concludes my statement here today, Mr. Chairman. I would be pleased to answer any questions the Subcommittee might have.
Mr. LATOURETTE. Mr. Ewing, we thank you very much.
Mr. GARMAN. Thank you, Mr. Chairman, for the opportunity to present testimony on H.R. 2407.
The Department of Energy supports the advancement of photovoltaic technology and the greater use of renewable energy in our Federal facilities. The key barrier to the broad application of photovoltaic or PV is its high cost. Of course, price is not the sole consideration that should be considered. The benefits of solar photovoltaic electricity include absence of emissions, freedom from fluctuating fuel prices, the matching of power produced with summer peak demand, low maintenance demands, modularity, versatility and reliability.
The President's National Energy Policy supports PV through its recommendation that Congress adopt a 15 percent tax credit for residential solar energy up to a maximum of $2,000. The Administration is also working with Congress to address other barriers to PV installations, including the lack of uniform interconnection standards and net metering arrangements in many areas of the country.
Page 24 PREV PAGE TOP OF DOC Our strategy for getting more PV into the market is actually a four-pronged effort. First, we will continue our research and development efforts to bring down the costs of PV. Second, we urge that Congress approve a residential tax credit as proposed by the President.
Third, we're working with Congress to address the interconnection and net metering issues that act as barriers to PV and other distributed forms of generation. And fourth, we're working to promote life cycle costing and Federal purchasing and to incorporate energy saving design strategies in the design and construction of new Federal buildings.
To illustrate how interconnection and net metering can assist the economics of PV, consider the example of the solar home displayed on the Mall earlier this year. This home is now located in nearby Loudoun County, Virginia, where some degree of interconnection and net metering are available. After the Virginia electricity market is fully restructured, the owner of the home, Alden Hathaway, plans to sell his excess solar electricity back to the green power provider who will market this power at a premium price.
Alden will benefit from the positive cash flow that helps offset his higher initial investment in PV, the local electric co-op will benefit because it will have a clean source of peak power that can be resold at a premium price, and we will all benefit from the fact that the additional increment of peak power produced by Alden's photovoltaics will not have to be generated by an emitting power plant.
In an effort to address the interconnection issues, we've been supporting efforts by the Institute of Electrical and Electronic Engineers to develop technical interconnection standards. We're also on record in support of net metering.
We commend Representative Oberstar for his efforts to promote PV, but have concerns about H.R. 2407 that prevent us from supporting it in its current form. H.R. 2407 would authorize over $1.3 billion in pursuit of the deployment of 150 megawatts or more of solar electricity, subject, of course, to annual appropriations. Manufacturers offering solar energy systems would find it difficult to anticipate actual appropriations levels, and subsequent demand, thus they would face difficulty planning capital expenditures to ensure that enough systems would be available in the marketplace.
Page 25 PREV PAGE TOP OF DOC A residential solar tax credit, on the other hand, is not subject to the uncertainty of the appropriations process, and would send a strong and clear signal to the market, and it would do so at a lower cost to the Treasury.
We also have other initiatives underway to promote Federal purchases of renewable energy. Last month, Secretary Abraham announced that the Department of Energy, through BPA, would sign pre-development agreements for seven new windpower projects to provide an additional 830 megawatts of generating capacity in the West. This would represent a 20 percent increase in the Nation's wind power capacity.
We're also working to make renewable energy purchases for ourselves and customers of our Power Marketing Administration. We hope to make a difference in the construction of new Federal facilities. The Department of Energy, through its Federal Energy Management Program, or FEMP, are working to assist our Federal colleagues to incorporate whole building energy efficient design and life cycle costing early in the planning stages of new Federal facilities.
We're even hoping one day to make net zero energy buildings a reality by leveraging the possibilities provided by PV, combined heat and power, microturbines, fuel cells and advanced storage systems. We hope to work with this Subcommittee in investigating these ideas and others that we might employ to increase Federal use of clean energy resources, distributed generation and energy efficient designs.
Thanks for inviting us to testify at the hearing, and I'd be pleased to answer any questions you might have, either this morning or in the future.
Mr. LATOURETTE. Thank you very much, Mr. Garman. It's my understanding Mr. Rannels doesn't have a statement, but he's here to assist with any questions you might have.
Mr. GARMAN. Yes.
Page 26 PREV PAGE TOP OF DOC Mr. LATOURETTE. I attended a briefing by your boss, the Secretary of Energy, this morning. He talked about the terms that are beyond me, but quads, something about quads, we have 98 quads, we're going to need 175 quads and so on.
The central piece of the Administration's energy policy that the Congress will be discussing today, or one of the central pieces is that one, we have to stop our dependence on foreign sources of energy and two, that this increase that we're going to experience in energy needs over the next 20 years can't just be made up from traditional going out and getting more. We're also going to have to expand conservation and also look at renewables. Specifically, the Secretary indicated that out of the increased energy needs this country will experience over the next 20 years, it is the Administration's hope that 63 percent of that can be achieved by getting things like better light bulbs and unplugging your cell phone charger and also looking at increasing our utilization of renewable sources.
That's one of the reasons I think I'm happy that we're having this hearing today. There seems to be a unanimous theme. And Mr. Moravec, I wrote down that you indicated the return on investment on photovoltaic is not compelling. As I listened to Mr. Ewing's observation of the facility in Chicago and Suitland, it occurs to me that that's right, if you just look at those numbers.
But when I listened to Mr. Oberstar talk a little earlier, I got the feeling, I thought what he was saying was that if somebody had listened to him back in 1977, that perhaps the cost that we would experience now by implementing this technology wouldn't be what you face. My simple understanding of it is that the unit cost for photovoltaic is about 20 cents and whereas you can buy electricity off the grid for about 6 cents or 4 cents, or if you have a great deal going on with deregulation, it can be even less than that.
And so I think we all understand, on any given budget year, that it's probably not the best deal in town to install it. But let me ask you, Mr. Garman, I think there was a great piece of the President's initiative that there's a 15 percent residential tax credit, and I also understood your observation that that tax credit sends a signal to the people that are turning sand into photovoltaic that there's going to be a demand in the residential housing market for some level that they can manufacture.
Page 27 PREV PAGE TOP OF DOC What if we combine the good work that the President is attempting to do with the work that our friend Mr. Oberstar is attempting to do? If we in fact adopted his proposal and also had the President's residential tax credit for the use of solar, understanding still that maybe if I'm the guy that's making the panels, I say, will the Congress appropriate the whole $210 million? I don't know. But they know that the Government is at least committed to utilizing these photovoltaic cells in existing or new construction buildings.
Don't you think the combination of the two might help stimulate the market and do some of the things Mr. Oberstar was thinking of back in 1977?
Mr. GARMAN. I think we've seen in our experience that when there is a process in place, the Sacramento Municipal Utility District, for instance, has a process in place where they are guaranteeing volume purchases of photovoltaics. Through the combination of a program offered through the California Energy Commission to residential consumers, they can, in fact, buy down the costs, and the costs have been bought down to as little as $5,100 per kilowatt.
The issue comes in the allocation of resources. If you want to inspire the production of photovoltaics, are Federal buildings the best place to do it? I would submit that if I were given additional resources for a photovoltaic program, I might array them somewhat differently than Federal buildings. I might put them--photovoltaics really shine in off-grid applications.
For instance, the Navajo Indian Reservation has a number of families, in fact, the majority of families, who live off-grid and don't have the benefit of reliable sources of electricity. Were I given new and additional resources to provide photovoltaics, I would probably want to deploy them and urge the Congress to deploy them on Indian reservations, to allow people who don't have electricity now at any cost to be able to enjoy it in the future.
Mr. LATOURETTE. Okay. The other thing, when you were talking about the fellow who has the home that he might be able to, when you came to see me yesterday, this whole concept of net metering is fascinating to me. As I understand it, if I'm here at work today and I leave the lights off, there's still going to be some electricity consumed by the refrigerator and some of the things that I have running in my house.
Page 28 PREV PAGE TOP OF DOC But the concept that on a bright, sunny day, would you just for the purposes of the record, it's my understanding if the sun's out, I'm not only not using electricity or the photovoltaic cells will be powering the things that need to be powered, but if there's excess because it's a sunny day and I don't happen to have all the TVs on, we're actually shipping electricity back into the system, is that right?
Mr. GARMAN. That's right. That's why we think that interconnection and net metering is a very, very important component, particularly in the residential context. Because as you point out, if you're away at work, and the solar cells on the roof of your home or deployed in your yard are still generating electricity, and that electricity generated beyond the requirements of your home can be put back onto the grid, in essence, having your meter spin backwards is the very simplest application of net metering.
More advanced applications, though, that might be possible in a future deregulated and restructured market, you know, solar electricity, green electricity is a premium product. Electricity produced at peak times of day is a premium product. Our current electricity system has thus far shielded the consumer from benefitting, all electricity costs the same thing.
But the commodity is really different. Electricity produced at 3:00 in the morning is something very different than electricity produced at 4:00 in the afternoon. If we get to a freer market where solar produced electricity can be valued in the marketplace as fully representative of the benefits that it brings to the table, then people are willing to pay more for it. If you've got that situation, a homeowner might actually be able to sell electricity back to the grid at a higher price than he's paying for base-load electricity.
That's the kind of advanced net metering concept we'd like to get to some day.
Mr. LATOURETTE. And I know that this fellow that had his house on the Mall is working on that, too. How far along is that technology? When do you think we could see a commercial application?
Page 29 PREV PAGE TOP OF DOC Mr. GARMAN. We believe we'll have a technical interconnection standard, which is designed to eliminate the technical issues evolved with hooking up, by the end of the year. The other issue is how will States adopt this standard, the Federal Energy Regulatory Commission will also play a role on interstate movements in transmission.
Twenty-two States, it is my understanding, have already adopted some form of interconnection in net metering. So that process is underway. We hope to encourage it, see it continue and make this alternative more widely available in the marketplace.
Mr. LATOURETTE. When I was a prosecuting attorney, before I came here, we used to have some people that would take the cover off the meters and spin them backwards, but that wasn't permitted at that time.
Mr. GARMAN. It's not permitted today, either.
Mr. LATOURETTE. It's now my pleasure to yield to Mr. Costello.
Mr. COSTELLO. Mr. Moravec, let me ask just a few questions before I yield to Mr. Oberstar.
I'm trying to figure out, in your testimony you indicate that you were deferring to the DOE on this issue. And as you know, this legislation would authorize you as the Commissioner to implement this technology with all Federal buildings under the GSA's jurisdiction. So I'm trying to figure out why you're deferring to DOE on the issue.
I guess coupled with that, to follow up, one is, why are you deferring to DOE? And secondly, in your testimony, you indicate that since 1990, GSA has invested $309 million in line item energy retrofit projects. And I'm wondering, one, if you were deferring to DOE on this legislation and this technology, does GSA have a policy of deferring to DOE on all energy saving technology that you have implemented in the $309 million that has been in the line items since 1990?
Page 30 PREV PAGE TOP OF DOC Mr. MORAVEC. With reference to our deferring to DOE, no offense to my colleague, Mr. Ewing, who's regarded as our energy czar, we are simply acknowledging their superior technical expertise in this area, as the branch of the Administration that deals specifically with energy and energy policy. It's a matter of courtesy in deferring to them because of their superior knowledge in these matters.
Mr. COSTELLO. And the follow-up question, do you always defer to DOE when it comes to trying to accomplish energy efficiency in GSA buildings?
Mr. MORAVEC. I don't know that we always do. I will tell you that we are subject, as I'm sure you know, to post Executive orders and regulations regarding energy and energy consumption in Federal buildings. We try to the utmost extent to comply with the Executive orders and regulations. I'm sure we consult periodically with the Department of Energy. I don't know that we always defer to them on every matter.
Mr. COSTELLO. I guess that Mr. Ewing would, the same question to you.
Mr. EWING. The second part?
Mr. COSTELLO. Yes.
Mr. EWING. Well, they have a Federal energy management program that provides leadership and guidance, basically develops and implements a lot of the Executive order requirements through an interagency task force. So we participate on the task force and the working groups.
Mr. COSTELLO. Let me ask another question, Mr. Ewing. In your testimony you indicate that the solar systems are not cost effective. I'm wondering if you can tell us how does GSA determine the cost of installation and how the cost of production is calculated, as well. Is this uniform throughout the Federal Government?
Mr. EWING. Yes. The National Institute of Standards and Technology developed life cycle cost accounting methodology for the Department of Energy. That was required in at least the Energy Policy Act of 1992. Every agency uses that methodology for calculating the cost effectiveness of energy projects.
Page 31 PREV PAGE TOP OF DOC And when I say it's not cost effective, that's because in my knowledge, in that methodology, you are comparing alternatives. Let's say in the case of producing energy, a diesel generator versus some other technologies, including PV, are all alternatives that are compared against each other in life cycle costs.
But in order to compare them, you'd have to set a term limit. So my understanding is that NIST has established a 20 year life period for all those technologies to be compared with each other. But typically, PV exceeds that 20 year period. And that's whysure, it's cost effective, you will make the money back eventually. But when you're comparing it to other alternatives, then that's where the problem is.
Mr. COSTELLO. Have you ever calculated beyond a 20 year life cycle to, for instance, 30 year life cycle, for the technology?
Mr. EWING. Sure.
Mr. COSTELLO. And how does it come out?
Mr. EWING. You mean compared to other things?
Mr. COSTELLO. Yes.
Mr. EWING. No, I'm sorry, we have not.
Mr. COSTELLO. What is your general view, as the energy expert, I think the Commissioner referred to you within the GSA, of the technology?
Mr. EWING. I think it's a technology with tremendous potential. GSA would love to use the technology. It's just that using life cycle cost accounting it does not always make the criteria.
Mr. COSTELLO. Before I defer to Mr. Oberstar, let me just ask the question, you know, I think the Ranking Member Mr. Oberstar makes a good point when he says in his opening statement that if it's good enough for NASA, if it's good enough for the military, it ought to be good enough for GSA and for our Federal buildings. I wonder if you just have a general reply to that?
Page 32 PREV PAGE TOP OF DOC Mr. EWING. Well, what does it cost to put a satellite in space? I don't know. It's very expensive compared to what it costs to put up a Federal building.
Mr. COSTELLO. You're not suggesting that when we put a satellite in space that a large portion of the cost is this technology, are you?
Mr. EWING. No. It's just, that is their only option to power the unit, some type of PV.
Mr. COSTELLO. Mr. Chairman, I will yield back the balance of my time.
Mr. LATOURETTE. I thank you.
Mr. OBERSTAR. Thank you. I appreciate this panel's testimony. It's great to have this lineup of careerists and people who really care about their work and who have contributed very, very substantially.
Mr. Chairman, I would like to ask unanimous consent that an excellent summary of the applications of solar panels prepared by the Office of Solar Energy Technologies be included in our hearing record.
Mr. LATOURETTE. Without objection.
Mr. OBERSTAR. Among these displays is of course that reference that I made to the use of 1 percent of the Mojave Desert and a 100 by 100 mile area in the Southwest to produce solar power. The Department of Energy, as it should, conducted a competition to design a sun wall on its building that faces the south. It was built for another agency of Government, Department of Energy moved in there at the insistence of President Carter, who kicked the Corps of Engineers out of it.
They came up with this wonderful design, unfortunately it was never implemented. But it's still there, and I hope some day they will proceed. There is, here we are, USDA, right here in Washington, D.C., for those who think that putting these solar panels on Federal buildings is not a great idea, the USDA's doing it. GSA's doing it in Boston, Fort Dix, New Jersey, Fort Carson, U.S. Army base in Colorado, good enough for them. Ought to be good enough for elsewhere.
Page 33 PREV PAGE TOP OF DOC The FEMA, I had FEMA in here in my office over the last several years. They said they were using solar for disaster relief. No fuel to transport, produces power where it's needed, if power is blown out, they set up solar panels.
Do you remember Hurricane Andrew, Mr. Chairman? Blew through Florida, knocked everything out, this is Miami. The only thing left standing where folks could gather for light was a solar powered light bulb. Look at it. It's an eye test for those of you who are sitting out in the audience.
But this was the only thing left. As thought nature said, we're going to take everything else you, man, have done, and we're going to leave only that which nature provides, a solar powered streetlight. It was working.
NOAA uses solar panels for its weather buoys. The U.S. Forest Service, up in my part of the country, uses solar panels for a variety of applications, including lightning strikes, to monitor lightning strikes, monitor weather conditions, we monitor moisture. The National Park Services uses it, the Federal Highway Administration and State departments of transportation use solar panels on highway signaling devices, to notify oncoming traffic of construction, or also to tell you how fast you are going, to warn people to slow down a little bit.
The point I want to make is that yes, when you consider all these costs and all this investment, oh, how difficult all this is going to be, Government has a different role. Government doesn't just to have to put on the green eyeshade and be the accountant. Government is to be the leader.
We had a debate we had on the House Floor on Monday, late into the evening, over two hours, I think it was, or nearly two hours, on the manned space program, an amendment to reduce that funding. Those who were advocating for manned space flight talked about vision, horizons, new ideas, stimulating the mind of man. That's what we're supposed to do here.
Page 34 PREV PAGE TOP OF DOC Let's not just plod along. Tax credits are a great idea. You know, we tried it, it was President Ford who proposed to stimulate the economy, my first term in Congress, a $50 tax credit for everybody in America to stimulate the economy. I called up Lampert Lumber Yard in Chisholm, Minnesota, my home town, and said, what can I buy for $50? What can I buy that will give me a $50 tax credit?
They went out in the yard, looked around and came back and said, well, Jim, we can get you a double hung window, the old kind. Of course, it will cost you about $50 to get it installed.
Mr. OBERSTAR. A little later, President Reagan came along, and he wanted a $100 tax credit to stimulate the economy. So I called up Lampert Lumber again and said, what can I get for $100? They said, well, we can get you a screen door. Not too many, and the economy wasn't stimulated by the $50, it wasn't stimulated by the $100. By the time you spend all that money to get the tax credit, it doesn't work.
This proposal's limited to residential. What about commercial and industrial? Much bigger use, much bigger consumers of electricity. Has that been considered?
Mr. GARMAN. Quite possibly, but actually, residential buildings or residential and commercial buildings are about a third of our electricity use. So we think, particularly in the residential context, because the residences are often vacant and not being used during that peak period of time, that provides more solar electricity than can be put on the grid and made available to others.
Mr. OBERSTAR. One of the things that stands out in the GSA testimony is that the power companies like to have customers that don't require mid-day peaking, or requirements that do not fluctuate. Mid-day is the best time for photovoltaics. And they are pretty steady, they store that electricity in batteries, and it's a very steady flow all through the rest of the day.
Page 35 PREV PAGE TOP OF DOC Do you have some cost estimates, Mr. Garman, about the Administration's tax credit, up to a maximum of $2,000?
Mr. GARMAN. Yes. The Treasury Department has estimated it to cost $140 million over the years 2002 to 2009. That assumption assumes that 70,000 homeowners take full advantage of the tax credit. And sizing, making a rational educated guess on what size system that homeowner might buy, based on that $2,000 credit, we figure about a two and a half kilowatt system.
Mr. OBERSTAR. What do you think the average homeowner cost, overall cost?
Mr. GARMAN. Well, I have here, and actually this is brand new from Green Mountain Energy, who is providing home solar costs in the California area, their costs for a two kilowatt size is $21,000. The California Energy Commission buys down or provides an $8,070 subsidy, so that the final cost to the homeowner is about $13,000.
So that's roughly what a home installation costs, $13,000 to $21,000, depending on the degree of subsidy that's made available to it.
Mr. OBERSTAR. Make you a deal. You take my idea of outfitting all the Federal buildings with photovoltaics, and I'll take your idea for the residential homeowners, and all of America will benefit from it. Well, not you. You've been sent here with a message from OMB.
Mr. OBERSTAR. I know, I've been around long enough to understand what the ball game is here. They gave you a message and said, here, peddle this up on Capitol Hill, see if you can hoodwink them andyou know, I know. It just drives me crazy. I'm glad GSA is finally, after being harangued for a long time by Congress, considering life cycle costs. Is that the fundamental approach now, Mr. Moravec, to consideration of options in public buildings?
Page 36 PREV PAGE TOP OF DOC Mr. MORAVEC. The implementation of new technologies, yes, sir, in terms of getting a return on our investment.
Mr. OBERSTAR. GSA finally has saidI shouldn't say GSA finally, it's OMB that's always driving this, with the green eyeshade crowd down there, they never change. From Administration to Administration, Mr. Chairman, I swear to God, if Castro came in, they'd all wear fatigues.
Mr. OBERSTAR. They never change. And they drive these decisions. And the careerists at GSA have always said, we ought to do life cycle costing instead of buying the cheapest piece of equipment that breaks down within five years and we have to spend millions to repair it. Go ahead.
Mr. MORAVEC. Congressman Oberstar, I would like to say in defense of GSA that we have used funds available to us to experiment with distributive technologies, including of course PV. And for two reasons, one is we wanted to see whether it worked, initially, we wanted to have the experience of testing the technology. But also, we accept your challenge, it is Government's role to show leadership in these areas. We don't disagree with that, and we take that responsibility very seriously.
And we are still installing photovoltaic panels on new Federal buildings. I was in Denver last week, touring the new courthouse that's under construction there. We have solar panels that are going to be incorporated into the roof of that building which will produce 2 and a half percent of the total power needs of that 15 story building.
Mr. OBERSTAR. Terrific. Congratulations. In making that decision, did you coordinate and consult with the Department of Energy, GSA?
Mr. EWING. I think we just designated that building as a showcase building, and made a determination that we were going to demonstrate a variety of sustainable technologies, including PV.
Page 37 PREV PAGE TOP OF DOC Mr. OBERSTAR. Napoleon said, [phrase spoken in French], the more things change, the more they are the same. In the hearings in 1977, National Park Service testified about a wonderful solar application they did in a building in Colorado, a regional office. And I asked, did you talk to the Department of Energy and get ideas about doing this? Oh, no, we just thought it was a good idea, something that we think Government ought to do.
There's no coordination among Government. Here we are, 20 years later, and you just thought it was a good idea, didn't talk to the Energy Department, they didn't apparently talk to you. How much coordination is there with the Department of Energy and other branches of Government?
Mr. GARMAN. I'm not sure that's precisely the case. We do, through our Federal Energy Management Program, or FEMP, run a program, in fact, one of the first things I did as Assistant Secretary was go to Kansas City and address 600 or so Federal procurement officers from all branches and all agencies of the Government and to deliver the message that the first thing we ''just do'' is be energy efficient, and we also must comply with our orders under the Executive orders to purchase and utilize renewable energy resources.
Mr. OBERSTAR. Did you talk to them about solar?
Mr. GARMAN. Absolutely. Because our vision is to incorporate these designs in the buildings at the outset, such as the Denver building. Because incorporating energy savings designs as a first order is the cheapest thing to do. Use less energy, regardless of that source. That's the most important thing. And then use daylighting rather than fluorescent lighting, and do a whole host of design characteristics that you incorporate in the whole building design. And in that whole building design very often photovoltaic has a very important role to play, when it's designed from the outset.
That's a vision that I think through our FEMP program, and with our GSA partners, is a vision that we share.
Page 38 PREV PAGE TOP OF DOC Mr. OBERSTAR. Congratulations, that's wonderful. You're off to a good start. We need to keep it up, we need to go further, we need to make Government the leader in alternative energy systems. It's going to take everything. New production, new developments, alternative energy, biomass, conservation, all of these things, so that we don't have to depend on those supertankers coming from the Middle East or elsewhere in OPEC, on which our life systems depend.
If we can reduce energy, or electric energy consumption, by use of photovoltaics and other solar applications, that will make available that much electricity for other uses that may be of higher value than lighting buildings and lighting homes, providing electricity for office building operations.
During the energy crisis of the 1970s, I recall so well that the Energy Department said that, natural gas is far too valuable to burn. We need it for plastics, we need it for a whole host of pharmaceutical applications, for chemical production. Don't burn it. Use it for all these other applications, which have higher value added results.
And that hasn't changed today. I think we need to do that.
Well, Mr. Chairman, I'm sorry, I'm beating a dead horse here. I've made my point. I think our panel is with us in heart, and with me, at any rate, in heart on this thing. Let's just vote on the bill, move it out and get it enacted.
Mr. LATOURETTE. I thank the gentleman very much.
Gentlemen, before we let you go, Mr. Costello has indicated to me he has a couple more questions. We'll let him ask those, then we'll excuse you with our thanks.
Mr. COSTELLO. Mr. Chairman, thank you.
Just for the record, quickly, Mr. Garman, you mention in your testimony that DOE is working in the R&D area to bring down the cost of PV technology. Can you tell us how you're doing that?
Page 39 PREV PAGE TOP OF DOC Mr. GARMAN. Yes, and I would like to offer an open invitation to any member, if you find yourself in the Denver area, we'd love you to stop by the National Renewable Energy Laboratory in Golden, where you can see first hand some of the work that's been done on both polycrystalline and thin film photovoltaics to try to make them more efficient.
A lot of it is in the area of materials technology, where we're looking at different applications of materials, different ways of layering them in the thin film, and different manufacturing techniques to try to bring down the costs or improve the efficiency, because in improving the efficiency, you also bring down the cost of your material inputs, and lower cost.
And it's something that can't be easily described in words, it's something that you should see. We would love to host any of you, were you to be anywhere in the area, we'd love you to see our work at National Renewable Energy Lab.
Mr. COSTELLO. You also indicate that you're working with the Congress in this regard as well. How are you doing that?
Mr. GARMAN. We have, I think I've been up before committees of Congress some six times, and I was only sworn in on May 31st, in the context of comprehensive energy legislation. Net metering and interconnection standards, again, transforming our electricity system. Mr. Oberstar made an excellent point about the fact that a small area in the Mojave Desert could be used to generate a lot of power.
But the problem is getting that power where it needs to be. Right now, our electricity infrastructure is not up to the task. Our electricity infrastructure is also not up to the task of differentiating the values of different kinds of electricity produced at different times of the day. The consumer is insulated from price values, or price signals that tell them the difference between base load energy and peaking energy. The consumer doesn't ever get that price signal. A modern, new transformed electricity system that would provide that price signal would make solar, because of its nature as a peak producer, very, very competitive.
Page 40 PREV PAGE TOP OF DOC So those are the sorts of things. If we fix the transportation system, if we transform our electricity system, one, that allows price signals to reach consumers, one that values the commodity of electricity based on when it's produced, then we'll go a long way, I believe, in promoting the development and use and utilization of more renewable energy.
Mr. COSTELLO. Mr. Moravec, final question. Mr. Garman indicated that DOE is working with OMB to incorporate energy savings strategies in design and construction of new Federal buildings. I wonder how OMB treated energy savings proposals associated with the DOT headquarters building?
Mr. MORAVEC. They gave us credit, they gave us credit in the scoring process for incorporating those technologies.
Mr. COSTELLO. Do you recall what the credit was?
Mr. MORAVEC. It was in the millions of dollars. I can't remember.
Mr. COSTELLO. I would ask, if you would, to supply that to the Committee, if you will, what the OMB credits were for the DOT building.
Mr. Chairman, I have no further questions, and I thank you for allowing me the time for a second round, and thank our witnesses for being here today.
Mr. LATOURETTE. It's my pleasure. Mr. Oberstar, is there anything else?
Mr. OBERSTAR. Just two points. One, Mr. Garman, have you taken a position on district heating and cooling systems, and what is that?
Mr. GARMAN. Combined heat and power systems, I think it's notable that the President, when he unveiled this national energy policy, he did it all in Minnesota
Mr. OBERSTAR. On the doorstep of the best district heating and cooling system in America.
Page 41 PREV PAGE TOP OF DOC Mr. GARMAN. Exactly. And when you can use combined heat and power, let me back up. I don't want to take much time, but a traditional, centrally located power plant has a conversion efficiency of about 33 percent. That's a lot of energy wasted to generate electricity. When you can use that combined heat and power aspect to generate more electricity or heat for a district heating system, you can push that number up to 70 percent efficiency. That's a very, you know, that's a terrific thing to try to do.
So in those applications, we're very supportive of the full utilization. In fact, it's a recommendation in the NEP, the National Energy Policy
Mr. OBERSTAR. It is part of the President's policy?
Mr. GARMAN. Yes, sir, to advance and promote the total system efficiency of our energy delivery systems. We think combined heat and power is a very important way to do that.
Mr. OBERSTAR. Well, it should be part of the plan, because the President lives in the most prestigious district heating-cooling system in America, the White House. Not many people know that. But it is. And in my district, in our mining country, we had whole communities that for decades didn't have chimneys, didn't know what a chimney was. Because they had co-generation, they had municipal power plants that provided most cases steam, in some cases hot water, as a byproduct of the electric generation, to heat the homes. We weren't so concerned about cooling. We had plenty of that, 30 below zero weather.
But the district heating-cooling systems, unfortunately, when fuel oil came in as a major energy source, it competed with the district systems as towns grew, and it was costly to put in the distribution systems. And ultimately, there's only two communities now that have still their district heating and cooling systems, and they wouldn't trade them for the world.
Thank you very much.
Mr. LATOURETTE. I thank the gentleman.
Page 42 PREV PAGE TOP OF DOC We thank you all very much for coming. Mr. Costello mentioned the Department of Transportation building, and Mr. Moravec, if you'd relay to Administrator Perry, I think the Subcommittee and the full Committee was pretty happy when we saw the white smoke come out of the chimney at OMB and that project move forward. So we thank you for your effort in that regard, and we thank all of you for coming today.
The second panel that the Subcommittee will hear from today are members of the solar energy industry and National Energy Management Institute. We're pleased to welcome Mr. Glen Hamer, who's the Executive Director of the Solar Energy Industries Association; Mr. Thomas Leyden, who is the Vice President with PowerLight; and Mr. Erik Emblem, who is the Executive Director of the National Energy Management Institute.
And as was the case with the first panel, your complete observations and statements will be made part of the permanent record of this hearing, and again, we'll proceed in the order in which you were introduced. Mr. Hamer, welcome, and we'd love to hear from you.
TESTIMONY OF GLENN HAMER, EXECUTIVE DIRECTOR, SOLAR ENERGY INDUSTRIES ASSOCIATION; THOMAS LEYDEN, VICE PRESIDENT, POWERLIGHT CORPORATION, AND PRESIDENT, NEW JERSEY SOLAR ENERGY INDUSTRIES ASSOCIATION; AND ERIK EMBLEM, EXECUTIVE DIRECTOR, NATIONAL ENERGY MANAGEMENT INSTITUTE
Mr. HAMER. Thank you, Mr. Chairman. I appreciate your leadership and the leadership of the Ranking Member in calling this hearing, and of course the solar hero of the millennium, Mr. Oberstar, for his work and his dedication on this.
Mr. LATOURETTE. Is that the last millennium or the new millennium?
Mr. HAMER. We'll give him both. I think the bill would truly be that dramatic in terms of what it would do to the photovoltaic industry if it's enacted as Mr. Oberstar intends. And rather than read through my prepared remarks, I would rather spend my limited time responding to the stimulating discussion that just took place.
Page 43 PREV PAGE TOP OF DOC There is a very important discussion that did take place on this idea of life cycle costs. I wish I had my PV powered calculator with me, but in one of the examples that Mr. Ewing presents, and I refer to the photovoltaic array in Maryland, it suggests that the annual savings in utility costs will approximately be $57,000. If you have more complete, more accurate life cycle costs, most PV arrays last well over 20 years, over 30 years, some over 40 years. Most are warranted over 30 years. I compare that to my Palm Pilot, which is three months. And it's pretty impressive.
But if you multiply about $60,000 times 30, we're at about $1.8 million. It appears that the cost of that piece of equipment was about a million. And that's not even factoring in some other things that I think are important for GSA to factor in, such as the fact that there are no emissions. There should be a value to that. There should be a value that it's not, for example, a diesel generator, which we know has very negative environmental effects.
There should also be some extra points awarded for the fact that it will take load off the grid at the right time, during the peak time. That I don't believe is factored into GSA's cost estimates. We should also factor in the fact that this technology will create high tech, high wage jobs.
In the three States represented by the members of Congress, we have a plant in Ohio for solar that will one day be capable of producing 100 megawatts of solar photovoltaic material a year. That's enough to power basically 100,000 homes. In Illinois, we have quite a bit of work going on. The mayor of Chicago is a leader in this area, and Spire Corporation has been very active, and some of our other corporations have been very active in putting solar up in Chicago. And in Minnesota, all of these road signs that we see all over the country, all over the world, there's a Minnesota company that is the lead in that.
So as the Congress looks at this legislation and looks at some of the testimony that we've already heard, I would urge this Committee to consider what we can really do in terms of, if we moved Mr. Oberstar's legislation 25 years ago, there's no doubt that the cost would be dramatically lower today, which would make these projects even more attractive than they are.
Page 44 PREV PAGE TOP OF DOC One of the three examples that Mr. Ewing presented, if my math is correct, and of course I'm not factoring in the fact that if you had a million dollars, what the value of that money would be over 30 years, but if you take a rough estimate, it seems like that's pretty cost effective to me. And also the discussion of what we can do over at the Department of Energy's building, which is not the most attractive building on the face of the Earth. According to the document that the Department of Energy has put out, the energy cost savings on that, for a 100 kilowatt display, could be between $30,000 and $50,000 a year, total cost about a million.
Again, cost effective, attractive, and there's a number of other things. Yes, the residential solar tax credit is important, no doubt about it. We believe that that will help stimulate the industry. And Mr. Oberstar and Mr. Costello also brought up a very good point, that we need to expand the tax credit available to businesses, because that's where a lot of the large scale installations occur.
And yes, net metering and interconnection is incredibly important. It should be as easy to hook up a solar panel in Ohio as it is in Virginia. This idea of having 50 different State standards, that used to be the case with the phone system. Right now, the standard is basically ready to go where you should be able to plug and play a solar array in any State in this country. We're encouraged that the Administration wants to work to that.
But in closing, let me just say, we're very fortunate that this bill falls under the jurisdiction of this Committee. This is the Committee responsible for building the world's safest, most advanced highway system. I think we could use the leadership of this Committee in the area of our energy policy debate. Because I believe this Committee could pave the way to a much more independent, clean, energy security future for this country.
I appreciate the opportunity to testify this morning.
Mr. LATOURETTE. We thank you very much.
Page 45 PREV PAGE TOP OF DOC
Mr. LEYDEN. Thank you, Mr. Chairman, Mr. Ranking Member, members of the Committee.
My name is Tom Leyden, I'm Vice President of PowerLight Corp. I'm also President of the New Jersey Solar Industries Association.
PowerLight is a private company based in San Francisco. We have offices around the country and three international offices. We were founded in 1991, we've been profitable for the last five years, we've been doubling in growth the last four years, we're a $30 million company today. I head up the east coast operation of PowerLight out of New Jersey, and also work on the expansion of PowerLight into Europe, where by the way, the governments are heavily supportive of this technology.
PowerLight is a leading developer of commercial PV systems. We manufacturer proprietary products and we install large commercial systems, mostly on flat roof. We've installed PV systems on Federal buildings, on State buildings, schools, apartment houses, museums, hotels, warehouses, you name it. This is private sector business.
Our customers include the GSA, EPA, WAPA, GPU, Detroit Edison, Arizona Public Service, Johnson and Johnson, Neutrogena, Fetzer Vineyards and the Mauna Lani Resort hotel. We'll be installing a system down at NIST, actually, in the next couple of weeks, a 30 kilowatt system that I'll invite you all to come down and see when we do the ribbon cutting.
By the way, the installed cost of that system is about $6,000 per kilowatt. That's different than the numbers we've been hearing in this testimony.
Just to give you an idea, one of our customers, Adventist Pharmaceutical, they believe that with all the benefits of this photovoltaic technology, that if you could have a break-even, it's worth doing. So what we do is we give them a return on an investment that's much better than a break-even, somewhere between 10 and 15 percent. That's how we do our business.
Page 46 PREV PAGE TOP OF DOC We build megawatts of projects right now, and our mission is to do gigawatts. We believe PV can be a mainstream energy source. Now, that doesn't mean it does all the energy, has all the energy requirement we need in this country. It means that it can play a very important role in our energy mix.
There are many cost effective applications, that's what we concentrate on. Our business is based on return on investment to our customers.
This bill is not asking for a subsidy, it's not asking for charity. This bill is about the Federal Government making sound investments in its own building. It's making an investment in domestic energy production and gives solar energy a large, predictable market. In rough numbers, this bill would install approximately 200 megawatts of PV. That's a nice size power plant. Of course, it would be distributed around the country, and that's one of its greatest benefits.
These systems would save the Government, according to my calculations, about $2 billion over their life cycle. Now, life cycle of these systems is much greater than 20 years, as has already been mentioned. The warranty on the modules alone is 25 years. So you really need to think a little bit differently than some of the other people have indicated here.
It's a perfect hedge against future price spikes. You know exactly what the cost of this energy is for the next 30 years: zero. It would reduce pollutants by almost 25 billion tons, through this bill, a significant reduction of emissions, by this bill. It would reduce the strain on the distribution system, it would increase the reliability of the grid, it would produce power at peak demand times. It would create good, high paying jobs, and it would further accelerate the growth of the solar industry. My internet friends out in California call that a good value proposition.
All in all, it's a pretty good deal for the taxpayers. It's an excellent investment for our Federal Government.
Page 47 PREV PAGE TOP OF DOC Now, if you're asking us in the private sector, people that pay their rent in this business, and I've been in it since 1980, I can tell you what I think is the most valuable thing that the Federal Government can do, and it's got four legs. One is procurement, and that's what's addressed in this issue, a large, sustained market in the Federal Government would significantly help this industry. We would know the business is there, we would increase our investments, we would come up with applications that make sense for this technology.
Second, net metering, you have to fully understand what net metering means. There are tremendous obstacles to putting power into the grid in our country. Every utility has their own net metering standard. And beyond residential, we believe there ought to be a commercial net metering standard as well, very much like they just passed in California, where there's a 1 megawatt net metering law.
It also eliminates the cost of interconnection and standby charges. Those are obstacles that prevent us from putting systems in.
I'll give you an example, a high school, big flat roof, plenty of area for a photovoltaic system. What happens in the summer time when the building's not operating? You're not using that energy, so what do you do with it? Under today's standards, we cannot do anything with that energy. So those systems don't get put in.
If we were able to sell it back into the grid at the cost the utility sells to that building, we would be able to put those systems in. That's a very practical thing that the Federal Government can do to help us have a standard across the country and eliminate obstacles.
Tax credits, we believe tax credits on a residential market will help. But we also believe that you'll get the biggest bang for the buck if you take the existing investment tax credit and add to it, 15 percent, 20 percent of what it is now. That will give you tremendous bang to the buck, because with that additional tax credit, we will install gigawatts, believe me.
Page 48 PREV PAGE TOP OF DOC And fourth, R&D. The Federal Government's been rather timid in its approach to R&D for photovoltaics. And I believe that a greater approach would help the industry.
So those are the four things. I commend Mr. Oberstar for his vision. I agree with him. I have been talking about these same issues for 20 years. Why are we talking about the same thing we did 20 years ago? Why didn't we act then?
What it means is we need to act now. Let's implement this bill. Let's deal with the net metering issue, tax credit, other things we can do to spur the industry along.
I believe the Federal Government needs to lead on these things. It has a role to lead in it, as Mr. Oberstar suggests. And I believe that the American people are waiting for Government to lead. Thank you.
Mr. LATOURETTE. I than you very much.
Mr. Emblem, we'd love to hear from you.
Mr. EMBLEM. Good morning, Mr. Chairman, distinguished members of the Committee, Congressman Oberstar. It's a pleasure to be here today representing the industry that almost 30 years ago met with Congressman Oberstar, the sheet metal workers and the heating ventilation air conditioning contractors.
I'm Executive Director of the National Energy Management Institute, referred to as NEMI. NEMI is a not for profit joint labor management corporation created in 1981 by the Sheet Metal Workers International Association and the Sheet Metal and Air Conditioning Contractors National Association. The Sheet Metal Workers represents over 150,000 workers throughout the United States and Canada, and the Sheet Metal and Air Conditioning Contractors Association represents over 4,000 contractors throughout the United States and Canada.
Together we fund and provide training materials to 160 different training centers throughout both countries.
Page 49 PREV PAGE TOP OF DOC NEMI's mission is to identify and explore emerging markets and commercial opportunities for skilled employment in the areas of indoor energy, indoor air quality and energy management related, the systems in buildings. Within the building and construction trades industry, NEMI is a leader in the development of innovative technologies. NEMI and the Sheet Metal Workers have a long history with solar energy.
NEMI was founded in the 1980s to provide training in energy audits, energy conservation technologies and solar applications and solar installation. Several of the sheet metal local training centers have installed solar collector panels that supply a portion of the energy for the heat and water energy for their training technicians and the installation of modular building systems that incorporate photovoltaic technology.
Through our pension fund investments, Sheet Metal Workers were involved in the ownership and operation of a photovoltaic manufacturing facility for many years, which currently does have a trust, Congressman Oberstar, for photovoltaic energy. I'd be happy to talk to you about that.
Mr. Chairman, within then United States, there are some five million commercial and public buildings and 90 million residential structures. Together these buildings account for 35 percent of the Nation's energy consumption, a great portion derived from fossil fuels. By 2003, we expect $88 billion a year will be spent in construction and operations of the heating, venting and air conditioning systems alone, the largest source of energy consumption in any one building.
Although large strides have been taken to improve the efficiency of energy used in both public and private buildings, overall energy requirements continue to rise and future needs clearly cannot be met by conservation or efficiency improvements alone. New, clean, secure sources of energy supply must be developed. We believe direct conversion of solar energy plays a crucial role in addressing long term energy supply for our buildings.
Page 50 PREV PAGE TOP OF DOC However, we also believe that for the next several decades, solar energy must be a part of a balanced approach to energy supply that includes all present forms and sources of energy. We believe reliance on foreign sources is a threat to national security as well as a drain on domestic economy. We believe that secure, indigenous sources of energy supply should be developed to reduce our dependence on foreign sources. And solar photovoltaic energy is a key part of that available mix.
To promote the use of photovoltaic energy and to stimulate the commercialization of technology further, we would suggest that this or other legislation be extended to include tax credits for businesses and homeowners that install photovoltaic energy sources. This legislation would provide a foundation for broader commercialization and utilization of a clean and secure energy source for the future.
We believe that a broader market and operating experience offered through this initiative will provide a foundation for a much broader application of this environmentally friendly and abundant energy source. We believe that ultimately, solar energy will play an important role in supplying the energy needs of our Nation. For the next several decades, however, we should consider and exploit all available forms of energy. We should do so in a responsible manner, in a manner that does not endanger our national security or the economy or degrade the environment.
I'd like to thank you for allowing me to address you today, and I'd be happy to answer questions.
Mr. LATOURETTE. Mr. Emblem, we thank you very much, and thank all of you for your testimony here today.
Mr. Leyden, in your observations, you indicated you do a lot of business in Europe, and made the observation that the European governments in those countries where you're involved are heavily supportive. Could you describe the nature of that heavy support?
Page 51 PREV PAGE TOP OF DOC Mr. LEYDEN. I don't want to embarrass the United States Government, but in Germany, as an example, which is now about 40 percent of the world market in photovoltaic systems, the government last year instituted a law that has the utilities buy kilowatt hours from PV generation at 48 cents a kilowatt hour for 20 years. So it's a good environment for building commercial PV projects. That's why we're heading over there.
There are other governments doing similar things. Buy-downs is one form of assistance to the industry, buy down the capital costs, which of course is everything in PV. Or you provide additional credit for production per kilowatt hour.
Mr. LATOURETTE. Anybody besides Germany that you can think of?
Mr. LEYDEN. The Netherlands has a strong program, Switzerland, Luxembourg, Spain, Italy, they're the main countries right now that are supporting this.
Mr. LATOURETTE. There seems to be, and I understand sort of the amortization discussion that was going on before, the life cycle of 20 years versus 25 years versus 30 years and how you get to different figures. There was also an article in the Washington Post that talked about folks that have a home in Chevy Chase where they installed a system. And I think it was in response to Mr. Oberstar's question, somebody was asking one of the gentlemen in the previous panel the cost of installation for a residential system that seems to be, even if you take in the subsidies, the tax credits, the rebates that you might get from your electric utility company, there seems to be a divergence in, I think, the last fellow said it would cost $21,000, and you begin to factor other things in. We've seen figures that show markedlywhat does it cost? If Mr. Costello and I wanted to install this thing in our house, what does it cost?
Mr. LEYDEN. A residential system is normally somewhere between $8 and $12 per watt installed cost. That's the gross cost. If there are tax credits, buy-downs, there are other costs involved. So if you have a 1,000 watt system, a kilowatt system, it runs $8,000. A typical home has somewhere between a 1 and 3 kilowatt system.
Page 52 PREV PAGE TOP OF DOC On a commercial basis, it's very different, because you get large scale systems and you get some economy of scale, particularly with the technology that our company promotes. But you get systems installed between $5.50 and $8.00 a watt.
Mr. LATOURETTE. The other thing that struck me, as I was reading this article, it talks about the fact that they have 27 panels, at 2 by 3 feet long, then they had a certain cost. When they then figured out what you could power with those 27 panels, that array, I think it was two refrigerators and 80 energy efficient light bulbs.
The question then becomes one of scale, I guess. If that's what these folks in Chevy Chase then use, regardless of the cost, when you take that to commercial applications, if you had a 300,000 square foot Federal building, which is sort of the scope and some of the things in Mr. Oberstar's bill, what size array would you need to have to make that worthwhile?
Mr. LEYDEN. Well, typically, we don't try to power the entire building. What we try to do is lop off the most expensive energy, which is peak demand time. So our systems typically handle somewhere between 10 and 30 percent of the energy of that building. That's the most cost effective range, so that's the target right now.
When you're talking about homes, some people go off grid, they have to have 100 percent of their energy from PV. In commercial, we're not doing that. We're just replacing electrons with PV electrons versus utility. And we're lopping off the most expensive electricity.
That's the role right now, in today's deregulated market, that is the role, reducing heavy demand charges. That's also the benefit to the utilities.
Mr. LATOURETTE. And you say your goal and target is 10 to 30 percent of that?
Mr. LEYDEN. Well, typically that's what we do right now.
Page 53 PREV PAGE TOP OF DOC Mr. LATOURETTE. Then lastly, Mr. Hamer, I made a note when you were chatting about the Department of Energy building being ugly, and this is something that's not only cost effective and attractive, and it occurred to me we might be able to get our costs down if we sold it to the folks at the National Endowment for the Arts as art.
Mr. LATOURETTE. Perhaps we could receive some additional funding sources that we hadn't thought of.
I would like to yield to Mr. Costello.
Mr. COSTELLO. Mr. Chairman, thank you.
Mr. Leyden, did I understand you to say that Germany has 40 percent of the market now?
Mr. LEYDEN. Twenty.
Mr. COSTELLO. Twenty percent, okay. Just for the record, Mr. Hamer, how large is your organization? How many solar manufacturers and national distributors are there?
Mr. HAMER. The National Solar Energy Industries Association, we represent about 60 charter member companies. But we also have about 10 to 12 State chapters, such as the New Jersey chapter, which encompasses over 500 companies. We basically represent all the major manufacturers of solar photovoltaic equipment.
Mr. COSTELLO. You, Mr. Leyden, mentioned some of the incentives offered by other governments. One you mentioned in your testimony, Mr. Hamer, is that the United States is still a leader in the technology. How far behind are Germany and Japan and other countries?
Mr. HAMER. Well, they're not very far behind. Perhaps I should have said, we're one of the leaders. Germany and Japan, because of the aggressive incentives that have been enacted there in recent years, have seen a dramatic increase in their market share.
Page 54 PREV PAGE TOP OF DOC I believe that right now, the United States, and I wish that our good friend Mr. Rannels was here at this point, I believe the United States now is about 30 percent or so of the total market. I think one reason why some other governments have been very aggressive is when we think about the future and we think about what's going on with Kyoto and some of the other efforts to reduce greenhouse gases and other emissions, it's clear that solar, even if the United States stays away, I don't even want to get into that debate, but even if the United States stays out of it, it's clear that there's going to be a very healthy world market for these types of clean energy technologies. Other governments recognize that these are high growth industries.
In the United States right now, we have manufacturing plants in Michigan, Ohio and California, in Maryland and Virginia and New Jersey and Arizona. But if we don't do certain things, such as what Mr. Oberstar proposes, I'd better brush up on my German and learn Japanese. Because the industry, these high tech, high wage jobs are not going to remain in this country.
Mr. LATOURETTE. You heard the last panel testify that PV right now, the PV systems are not cost effective. I wonder if all three of you may want to comment on that. That's my final question.
Mr. HAMER. Mr. Costello, I just received a note that the U.S. market share is 26 percent. So I just would like that included in the record.
As to the issue of the cost effectiveness of PV, it certainly will be a whole heck of a lot more cost effective if we implement the correct Government policies, if the Federal Government takes an active lead. But I would submit, even under the current system, where you take a look at the numbers that Mr. Ewing provided, under certain situations, if you have appropriate life cycle cost analyses, it's cost effective today.
If these numbers are accurate, and if the warranty on a PV array is 25 years, why are we limiting it to 20 years? Why aren't we putting any sort of bonus in there for emissions? Why aren't we taking into account that these are peak shavers? That's when power is most expensive, that's when PV does its best work.
Page 55 PREV PAGE TOP OF DOC So from this hearing, I think it is a very interesting issue of how can we more appropriately factor in all these costs. It might go a long way in changing some of Mr. Ewing's analysis.
Mr. LEYDEN. For the Federal buildings life cycle costing is important, and bringing in all these other factors and benefits of the system, that's really key. In the private sector, we deal with cost effectiveness every day with our customers. The systems are not cost effective unless we have additional assistance in buying down the cost of the system or having some kind of production credit.
Now, that's not done for charity, either. That's done because there are societal benefits to this technology. So we believe proper tax policy by the Federal Government will help industry and make our systems cost effective. We deal with private sector businesses and they buy the system based on its cost effectiveness. When you get a 12 percent, 15 percent return on investment, that's a pretty good investment.
Mr. LATOURETTE. I thank you.
Mr. OBERSTAR. Thank you, Mr. Chairman.
I expected trumpets to blare and lights to go on and heavens to open at the end of this panel's testimony, it was so refreshing and wonderful. Let me thank you, Mr. Hamer, for your designation. Let me also nominate you for, what is this position, Assistant Secretary for Energy Efficiency and Renewable Energy at the Department of Energy. We need you over there.
Mr. OBERSTAR. This is just so refreshing and encouraging. I'm delighted with your testimony, and enlightened by the new information you have brought to the process.
Page 56 PREV PAGE TOP OF DOC We heard in the first panel, Mr. Garman talk about the Administration's proposal for tax credit, which is a way of stimulating consumption. In your experience, Mr. Leyden, in the business arena, of the available instruments of policy, which does more for the marketplace, means that stimulate production by reducing cost of the product, or stimulating consumption of whatever the product cost is in the marketplace?
Mr. LEYDEN. Either will work. Frankly it's easier for us in the market to sell our systems if we have a production generation buy-down. That would be a tax credit, that would be a buy-down that some of the utilities offer. It's very easy, it's identifiable, you can wrap your arms around it, we can explain it to our customers. The system will cost this, the buy-down is this, this is your net cost, this is your return on investment.
Mr. OBERSTAR. Let me take an idea from another arena in our Committee, in the railroad sector. Mr. Houghton and I and 120 some co-sponsors have advocated, set forth legislation to create a fund from which public entities, private entities can borrow to build high speed rail systems in already studied and recommended corridors. The purchaser of the bonds would get a tax credit from the Federal Government. The entity, whether it would be Amtrak or some alternative private operator of high speed rail system, would get the money they need to invest in and operate the system.
Would a concept like that work for photovoltaics?
Mr. LEYDEN. Yes, it would. We're building projects, you have a pro forma, you have a cost, and you have all your other benefits that are in the system. Then what the costs are financing is one of the costs. If we could reduce the cost of financing, stretch out the term, then these systems would become more cost effective and easier for us to sell.
Mr. OBERSTAR. And we're talking about first time costs, that is installation?
Page 57 PREV PAGE TOP OF DOC Mr. LEYDEN. We have a one time cost in PV. There is virtually no maintenance. It lasts for 30, 40, who knows how many years, it hasn't been around long enough for that. If you can stretch out the payments on that system through financing, particularly through some creative financing, then the numbers work better.
Mr. OBERSTAR. What maintenance is required of photovoltaic panels?
Mr. LEYDEN. There's virtually no maintenance. These are solid state, no moving parts. The most robust part of the system is the photovoltaic module. The only weak spot, if you would call it weak, is the inverter, which is an electronic component, that can fail and will fail over time. But there's a 5 year warranty on these inverters, they have a 15 year design life. They may hiccup periodically, but the maintenance involved, there's virtually none.
Mr. OBERSTAR. Terrific. Plus, there are the societal benefits, as you, Mr. Leyden and Mr. Hamer, have cited already. We heard Mr. Garman talk about price signals, kind of a fancy new term that I haven't heard before, you look at it as, what's it going to cost me to do this. If we only look at the first cost, it might be prohibitive. But that is where the role of Government comes in, to look at the long term benefit to all of society. And we'd like to achieve the lowest first cost, but also the lowest operating cost. That building is going to be there for years.
They're going to do a new Department of Transportation building over in the Southeast Federal Center. I think it's a great idea. We ought to design that right now with solar panels. That building is going to be there as long as we have a transportation system in America. Think of the enormous cost savings.
And what better signal for the Department of Transportation, the sector of the U.S. that consumes 40 percent of all the energy in our country?
Page 58 PREV PAGE TOP OF DOC Mr. Emblem, have you and the Sheet Metal Workers Union updated that study I cited earlier about the number of jobs that would be created with installation of photovoltaics and other solar applications?
Mr. EMBLEM. Since the initial study that we did in the late 1970s, we've done two additional studies that also segued into the effects of the energy management systems and the cause of indoor air quality problems in buildings, which also went to that. The numbers stand pretty consistent, over 100,000 new jobs created through the advancement of the photovoltaic and solar industry.
I think that another societal benefit that Mr. Leyden touched upon is schools. In summers, the schools are shut down, and one of the epidemics you see in schools today is the rise in air quality problems when school starts. Asthma is returned to epidemic states because the systems are shut down in the summer time. One of the reasons they're shut down is the second largest budget item that school systems have is energy. So they shut them down to conserve energy in the summer time, which causes problems with molds and spores growing in the buildings, because the ventilation systems aren't running.
So there is another benefit to putting solar, and applying it to schools, to keep these systems running efficiently and to cut back on indoor air quality and health problems for students.
Mr. OBERSTAR. I thought that was a brilliant suggestion, and I'm glad you reminded me of it. I made note on it, I think that was just a terrific suggestion, to expand on that notion.
Well, the bells have rung for a vote. Mr. Chairman, I'm very grateful for the time that you and the staff have devoted to establishing this hearing, and sitting through it all. Mr. Costello, thank you very much for your support and participation. I'm particularly grateful to Susan Brita for resurrecting my work of 20 some years ago and dusting it off and putting new polish on it and bringing it forward, to the Sheet Metal Workers Union, who first stimulated my excitement about this idea and who are still with us.
Page 59 PREV PAGE TOP OF DOC I'm very sorry the Rules Committee did not make an order, my proposal for an amendment on the energy bill. No sweat for me giving a shot at it, but they chose not to. I hope we can move this bill, Mr. Chairman. I would urge you to pray on it over the August recess and think about it. As you soak up the sun and whatever you accomplish, remember that on your skin and my skin it produces cancer. On photovoltaic cells, it produces energy, and a great deal of good for America.
Mr. LATOURETTE. I thank the distinguished Ranking Member very much.
Gentlemen, I thank you very much for your excellent testimony, and this hearing is adjourned.
[Whereupon, at 12:00 noon, the subcommittee was adjourned.]