Energy & Environment

Energy Efficiency: The Stimulus Windfall

New Mexico's energy conservation and management division has about $2 million to spend in a typical year. So when Joanna Prukop heard about the $41 million of...
by | October 31, 2009

New Mexico's energy conservation and management division has about $2 million to spend in a typical year. So when Joanna Prukop heard about the $41 million of stimulus funding headed her way--a 20-fold increase--she had to catch her breath. Prukop runs the state energy department, and normally employs 15 people to administer energy-efficiency programs. But with the deluge of federal dollars, she may have to hire as many as seven new employees, including one just to track new projects. "We're a relatively small program," says Prukop. "We need the manpower."

Around the country, energy managers are ramping up to meet the goals of the American Recovery and Reinvestment Act. The law set aside some $11 billion for state and local energy-efficiency projects, along with hundreds of millions of dollars in tax credits, appliance rebates and competitive grant programs. All in all, it's the nation's biggest single investment ever in energy efficiency. And most of it is in the hands of people like Prukop--managers who have been running small and largely unnoticed energy programs that now are suddenly awash in money.

The numbers are staggering. Consider the weatherization program, a little-known 30-year-old initiative that reduces energy bills for low-income people by insulating their homes and installing new windows. In Washington State, federal weatherization dollars are increasing from $4.5 million to $49 million. That's nothing compared with Texas, where funding will go from $13 million to more than $300 million. The Texas program, which has been weatherizing 3,700 homes a year, is set to upgrade 40,000 homes by 2012. David Terry, executive director of the National Association of State Energy Officials, says energy conservation and management was already high on the priority list in most states. "They just never imagined they'd have the funds available."

Now, the funds are available, and in quantities states and localities never imagined. For energy officials, that makes these times exciting but also challenging. The stimulus law mandates that they spend their sudden windfall quickly, while meeting rigorous new reporting requirements. Meanwhile, they want to make sure they pick the projects that get the biggest bang for the buck, both in terms of job creation and energy savings. And they're looking for ways to leverage one-time funding into a long-term resource. The last thing they want to happen, once the stimulus runs dry, is to see their programs return to the bureaucratic backwaters.

Most of the stimulus money for state and local governments is allocated by a formula based on population. The funds are divided into three pots. About $5 billion is going to the weatherization program. Another $3.1 billion is going to state energy offices, mostly to retrofit public buildings and industrial facilities. And $3.2 billion is going to the Conservation and Energy Efficiency Block Grant, a program for local governments that was created, but not funded, by the federal Energy Act of 2007.

The scale of it all is too much for the usual channels employed to distribute such monies. For example, states typically funnel weatherization dollars to "community action agencies," local nonprofits that do the actual work. To handle its influx of money, Texas not only doubled the number of nonprofit providers from 33 to 66--it also expanded beyond the community action network to allocate some of the funds directly to big cities such as Dallas. "They have capacity to administer large programs in a timely and efficient manner," says Gordon Anderson, a spokesman for the Texas Department of Housing and Community Affairs.

In other cases, the stimulus is speeding up projects that were already in the pipeline. Massachusetts, for example, is spending $15 million on retrofitting university facilities, transit agencies and state office buildings to be more energy efficient. "We had a four-year timeline," says Vivek Mohta, director of energy markets at the Massachusetts Department of Energy Resources. "But with the stimulus, we will be able to initiate those projects within 18 to 24 months." Likewise, Seattle is using a portion of its $6 million block grant to pilot-test a program that performs home energy audits and loans homeowners money for upgrades. The project was in the works before stimulus money entered the picture, says Amanda Eichel, the city's climate protection adviser, "but we didn't have a funding source."

One thing almost every state is doing is identifying its biggest energy hogs and steering money toward retrofitting them. In New Mexico, Prukop says, one of the biggest culprits is prisons, which are set to get about $2.5 million. Another easy fix is to replace incandescent traffic lights around the state with LED technology. A $5 million investment in 8,000 traffic lights will improve their efficiency by 80 percent and create huge cost savings for municipalities, Prukop says. Wisconsin, a heavy manufacturing state, is targeting many of its dollars to increasing efficiency at power-hungry industrial sites, such as food-processing and paper-manufacturing plants.

Like many states, Wisconsin is looking for ways to keep the money flowing after the stimulus spigot shuts off. In a move encouraged by the U.S. Department of Energy, Wisconsin is investing its initial $27 million allocation for building upgrades into a revolving loan fund. Companies bidding on the industrial efficiency projects are awarded loans under a competitive process. The plan is expected to leverage $3 in private investment for every public dollar put in. "Hopefully, everyone will pay the money back," says David Jenkins of the Wisconsin Office of Energy Independence. "Because we want something enduring from this."

While the energy-efficiency parts of the stimulus have not generated much controversy, they have created a few headaches. One holdup has come from the federal Davis-Bacon Act. That law requires that the local "prevailing wage" be paid for public works projects. Previous weatherization programs were exempt from Davis-Bacon rules, but the stimulus changed that. Many states were left waiting into the fall for the U.S. Department of Labor to develop new wage classifications before they felt comfortable hiring people to do the weatherization work.

The federal mandate to spend the money quickly but to track every dime has also complicated things. That's true in all aspects of the stimulus plan, but it's especially difficult for the energy offices because they generally were so lightly staffed to begin with. "It is particularly challenging when you combine the substantial growth in investment with new and very strict processes to ensure historic levels of accountability, oversight and transparency," says Massachusetts' Vivek Mohta.

The National Environmental Policy Act, or NEPA, is something else states and localities have to steer around. In Scottsdale, Arizona, senior environmental coordinator Larry Person says one criteria project managers used to rank energy-efficiency proposals was whether they would require lengthy environmental assessments under NEPA. "Quite frankly, one of the biggest challenges of the stimulus is all the reporting," Person says. "Programs that didn't have NEPA heaped on top tended to rise to the top of the priority list."

The result in Scottsdale was an effort to keep projects simple. The city is investing its $2.4 million block grant in LED traffic lights, two high-efficiency air blowers for its water-treatment plant, and energy audits for city facilities, small businesses and residences. These sorts of things may not be as sexy as large-scale wind farms and solar installations. But the energy savings are well documented and Person says the projects lived up to one of the key tenets of the stimulus: They were "shovel-ready."

As the money flows, however, questions remain as to whether small energy offices can make it all happen. Wisconsin's David Jenkins wasn't able to staff up for the stimulus. But he says his people are motivated by the rare chance to help both the environment and the economy. "Our agencies realize we have hundreds of thousands of people unemployed in this state and we have to make this work."


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