Energy Policy:

DOE's Kidd, Bayer MaterialScience's Platte discuss efficiency strategies

What challenges and opportunities exist for energy efficiency, sustainability and smart grid development in the United States? During today's E&ETV Event Coverage of a National Press Club Newsmaker panel, government and industry leaders discusses strategic approaches to expanding efficiency and new technologies. Panelists include Richard Kidd, program manager in the Federal Energy Management Program at the Department of Energy; Gregory Reed, director and associate professor of the Power and Energy Initiative at the University of Pittsburgh's Swanson School of Engineering; Paul Platte, head of the EcoCommercial Building Program, NAFTA, at Bayer MaterialScience LLC; and Paul Cody, vice president and general manager of the Electrical Service and Systems Division at Eaton Corp.

Transcript

Frank Maisano: OK, welcome, I'm Frank Maisano from Bracewell & Giuliani, a member of the National Press Club's Newsmaker Committee and host a lot of these Energy Newsmakers, as many of you know.

Today I'm very excited, early in this year, 2010, I still haven't figured out that I have to write '10 yet on my checks and stuff. I'm still in my '09, I'm still writing '09 on everything.

But welcome this early in this glorious new year for what will be one of the major issues that we're going to deal with this year and it's more than just one specific issue, whether it's smart grid or whether it's compressed air storage as we've talked about many times in this forum.

But energy efficiency generally is going to be a major issue this year as we go forward in reducing our carbon footprint.

So today we have a wonderful panel for you and I won't introduce them because I'm going to just turn it over to Tom Gross, who is the Vice Chairman and COO of Eaton Corporation's Electrical Sector and has been working very aggressively in this area.

Tom joined Eaton in 2003 and he's been with them working on these issues, expanding their role in the smart grid in the energy sector as we go forward.

So, let me just turn it over to Tom and we'll go from there, thanks.

Thomas Gross: Thank you, good morning. Well, I'll start by welcoming all our attendees, both the ones here in the room and those of you who are on various lines of communications from around the world.

As introduced, I am Tom Gross, Eaton's Vice Chairman and COO for the Electrical Sector. We're really excited to be here.

We think this event is a unique blend of leaders from the public sector, private sector and, of course, academia who will certainly each share their own views on energy management, but collectively all agree that a much more holistic and strategic approach to energy management is required.

With the opportunities presented to all of us via the American Recovery and Reinvestment Act we believe that now is the time to make the strategic approach to energy management a reality.

And it is simply an imperative, in our mind, that those three forces I mentioned, private, public, and academia, collaborate or we just simply risk squandering this tremendous opportunity in front of us.

Eaton is very proud to be the lead facilitator for this event. Eaton, you may be aware, is a global, diversified power management company with 2008 sales of slightly above $15 billion, all focused on electrical, fluid, and mechanical power management solutions.

These solutions help our customers across the globe make their facilities and their energy systems safer, more reliable, and sustainable.

A quick overview of the format for today, each of the panelists will have approximately 7 minutes to provide their unique views on energy management.

After all four have presented, we'll make some brief closing comments and then we'll open it up for Q&A.

Our four distinguished panelists this morning, allow me to introduce them. On my far right is Paul Platte. Mr. Platte is director of the EcoCommercial Building Program, NAFTA at Bayer MaterialScience LLC.

On my immediate right is Mr. Richard Kidd. Mr. Kidd is the program manager for Federal Energy Management Program at the U.S. Department of Energy.

On my immediate left is Dr. Gregory Reed. Dr. Reed is the director and associate professor, Power and Energy Initiative at the Swanson School of Engineering at the University Of Pittsburgh.

And finally, on my far left, Paul Cody. Mr. Cody is the Vice President and General Manager of Electrical Service and Systems Division of Eaton Corp.

Gentlemen, thank you for being here. I'll now turn the microphone over to our first of four panelists for their opening comments beginning with Mr. Richard Kidd, thank you.

Richard Kidd: Great, good morning everyone. I'd like to thank the Eaton Corporation and National Press Club for giving me a chance to come here this morning and talk about a topic that I care a great deal about.

And this also happens to be my full-time job, so it's great that I care about my work and enjoy coming to work every day to address issues of energy management within the federal government.

As most of you know, the federal government, the agencies of the executive are the largest user of energy in America and that the federal government has had in place an energy management program for over 20 years where the agencies plan and manage investments and make decisions to achieve statutory or executive order of requirements.

This energy management system moved to a new level October 5 when President Obama signed Executive Order 13514, which is in your packets, a copy of which is in your packets.

This executive order makes greenhouse gas reduction integrating metric for energy management throughout the federal government and by integrating all of the activities under one rubric it will drive holistic, whole systems integrated thinking and response.

Briefly, FEMP, Federal Energy Management Program, our job is to save energy for the federal government. We are an in-house consultancy that advises and assists the other federal agencies as they go about making their energy management and investment decisions.

And we can trace our activities to approximately one quarter of the dedicated energy savings projects that have taken place in the last 10 years.

This is a graph that just shows the total energy consumption of the federal government. Buildings are the bottom two colors and vehicles of all types, both civilian and military, represent the top blue band.

As you can see by this, the federal government has reduced its total energy consumption by roughly 25 percent since 1985. Here's how that energy is used.

Approximately 40 percent of the federal government's energy is used in civilian applications, buildings and vehicles, civilian fleets. Sixty percent is used in military/law enforcement activities.

If you take a look, the largest user of building energy is the Department of Defense; the largest user of petroleum is the U.S. Postal Service.

The federal government has over 500,000 buildings. We use more than 1.6 percent of the energy in America, bill approximately $25 billion a year. To put that on scale, the federal government uses as much energy as the entire country of Austria.

To date, the federal agencies have managed their energy in order to comply with various Executive Order or statutory requirements that have been handed down in legislation, EPAC, ESA, various executive orders.

These all remain on the books and the agencies are managing to do things such as improve their energy intensity, increase the amount of renewable power, and reduce petroleum.

The agencies report their progress in these areas and others to FEMP. We give them all a red, yellow, and green scorecard which is presented up through OMB and CEQ to the White House.

Speaking of the White House, on October 5 President Obama signed Executive Order 13514, a couple of very salient features of this executive order.

It makes greenhouse gas reduction the integrating metric for future performance after all current statutory and Executive Order requirements are met.

It requires agencies to develop a strategic sustainability plan and to link that plan to their budget submission. So no longer can planning be aspirational, it has to also be linked to an investment plan.

And I say investment plan because the expectation, I'll show you later, is that most of the things that we do to save energy will save money. So it's not just about meeting a target, it's about saving money for the American taxpayer.

The executive order has a very, very aggressive timeline for the activities that the agencies have to do, develop their greenhouse gas emissions targets, do baselining, plan for their fleets, and develop their strategic sustainability plan.

Speaking of the plan, this is, I think, one of the most important features of the Executive Order. It requires agencies to first baseline established targets and reduce their Scope 1 and 2 greenhouse gas emissions.

Scope 1 is basically the emissions that are generated on site, so a federal power plant, a coal plant. DOE has a coal plant at Savanna River and it's a Scope 1 emission.

Scope 2 is the emissions that are generated by the power which is bought and brought over the fence onto a federal facility. And Scope 3 is all the greenhouse gas emissions in the contracted goods and services, business travel, employee commute.

So Scope 1 and 2 are pretty easy to get your minds around. Scope 3 is very broad and it basically affects all of the federal government's supply chain.

And when you think of the federal government as the largest procurer of goods and services in the country, by the requirement to look at the carbon and energy intensity of our supply chain, we will drive efficiency across all of those organizations that supply goods and services to the federal government.

When we look at greenhouse gases I'm using greenhouse gases and energy almost interchangeably. The reason for that is most of the greenhouse gases that are produced, particularly by the federal government, are produced through the consumption of energy.

And when we try to solve the problem, we say, all right, what is the solution? Well, this is a pretty complicated graph.

What this is it's a marginal abatement cost curve and it shows the technologies that are out there. If a listed technology goes above the line that means it will cost more right now to implement that technology than it will generate in savings.

But if it's below the line, that means that investments in those technologies actually save more money than they cost. The width of the bar indicates the amount of contribution that that technology can make, the overall potential of that technology.

So, if you look at the marginal abatement cost curve you see that there's a whole range of energy efficiency measures below the line, to the left, that we can do right now and thinking of them as an investment, which will save the American taxpayer money.

The other key point when you look at this though is there's no single silver bullet technology. You have to take an integrated solution that matches technology with cost and with the requirements of the agencies.

So, this is a generic cost curve. If you were to do this for the Veterans Administration for example, which runs hospitals, the technologies would look different than for the General Service Administration which runs office buildings.

So, the point is that federal government will start to plan around those technologies that make the most sense and will do so in integrated and comprehensive way.

And what you're going to hear from some of my follow-on panelists is a little bit more about those about those promising technologies that are out there on this curve.

I would encourage you to take a look at the FEMP Web site. We've got a lot of information out there. It's designed for decision-makers at the federal government, but it talks about all the things the federal government is doing from sustainable buildings to fuel-efficient fleets. And with that I'll be followed by Dr. Greg Reed.

Gregory Reed: Thank you, Mr. Kidd, and good morning everyone. It's certainly a pleasure to be here with this distinguished panel on energy management.

I'd like to start by complimenting Richard and the Federal Energy Management Program for really setting an example nationwide for all of us to follow in this area as we work to meet our goals in energy sustainability in the private, public, and academic sectors.

What I'd like to do this morning is talk a little bit about the broad overview of challenges and opportunities that we have in the power and energy sectors where energy management fits in and how we can look strategically at collaboration among industry, government and academia to achieve success in meeting our energies overall goals as we move towards future energy independence in America and sustainability.

First, I'd like to talk a little bit about our power and energy initiative at the University of Pittsburgh. Our initiative is built around three main goals.

The first is to educate the next generation of power and energy engineering professionals. These are students who are in the classroom right now today who I can tell you want to come out and change the world and the energy sector.

With all the challenges that we have, the fact that it is a defining issue in the decades to come of this century provides them many opportunities that they are getting very excited around.

This provides us a unique opportunity to help with work force development, which we'll talk about a little bit more about in a few minutes.

We're also contributing to advanced research initiatives in the power and energy sector. Our program is uniquely built around electric power engineering, nuclear engineering, mining engineering and even petroleum.

Uniquely, we're positioned in such a broad energy space to bring comprehensive solutions to different approaches and one of the unique things that we provide from the University is the position on free thinking of concepts through implementation and the ability, really, to provide open collaboration with partners such as those represented here in industry and in government.

And so we closely collaborate with our industry partners, with government and other key constituents. Our vision is establishing a national and international center of excellence for power and energy engineering.

And the initiative fits in very nicely with the university's threefold mission which is to be a leader in education, a pioneer in research, and a partner in community and economic development.

And in a very short timeframe, over the last couple of years, as we developed these programs, both educational and research, we've been achieving these goals.

One of the things that you look at is to say why develop these programs? Why do we need to look to collaboration? Where is all that's coming from? Part of it is surely a perfect storm environment that is really developed of the last couple of decades in the power and energy sectors.

We're looking continually at increased demand, which continues to be driven by the advancement in our society in higher qualities of life, not just in the United States, but globally.

At the same time, we're facing more regulatory constraints and environmental constraints, we talked already a little bit about global warming, and really unprecedented industry challenges in meeting both the technical solutions to those issues, as well as the political and policy ones.

At the same time, our infrastructure for energy, the power delivery system as an example, is really becoming antiquated. We're working with a system that was designed and developed decades ago that's being asked to operate in a very different market environment today.

So, we need to bring more technology and innovation and it is a sector that has had underinvestment in technology development over the last couple of years.

Couple of that with an aging work force, nearly 50 percent of the entire technical work force in the energy related industries will be eligible for retirement within the next five to 10 years.

So, we have an aging work force population that we need to train to feed the pipeline of innovation and solutions that it's going to take to meet some of the challenges.

As we talk more about some of the challenges there's a long list and I won't go through every one of these in detail, but if you look a little bit at the first few, the increasing penetration of renewable energy, which we need to continue to drive towards in order to reach further levels of sustainability across both our bulk power generation as well as at distributed levels, will continue to advance.

And that's only going to happen with the smart expansion of our electrical delivery in power sector in order to do that to enhance reliability and to increase productivity and efficiency.

At the same time we're developing new concepts around smart grid developments and energy storage technologies. These will all be real game changers and are already becoming game changers in the industry.

We couple those with growth in the transportation/electrification sector needs to develop an expansion of nuclear portfolio, looking at carbon capture and sequestration and the effects that policy and market drivers will have on all of this and we look to areas where we can really, truly make gains.

And one of those is certainly in the area of energy efficiency and energy management through energy demand side management programs, through many of the techniques and technologies and methods that Eaton and Bayer are going to talk about in a little bit.

Couple all of that, again, with the need to bring work force development into these areas. These are all new and emerging things in our energy economy that we have to train the next generation for.

So, how we meet these challenges in the decades ahead will certainly have imperative implications, societally, environmentally, economic and globally as we set a course for future generations.

From the development side, if you look at the confluence of many of these issues, whether it be energy efficiency in building systems, the growth of the vehicle market in the transportation sector, in electricity the expansion of the grid, the integration of more renewables, a lot of it is coming around the smart grid concept and the ability to begin to provide real-time access between end-user and energy provider.

That real-time access to energy usage, to energy patterns, will really help us lead to energy efficiency and it will be what enables some of the technologies that are being developed today that exist today quite frankly from corporations that have been providing advancements in technology, such as Eaton and Bayer.

One example that we're doing at the University of Pittsburgh is building concepts around smart energy environments where we look at commercial and residential environments and look at new, improved ways of not only designing, but actually delivering and utilizing electrical energy.

This is in the form of everything from advances in solid-state lighting to reduce consumption to automation and control in real-time access to even DC power distribution within these environments to increase efficiency.

Uniquely, in the Pittsburgh region, we can help solve some of these challenges through collaboration of a number of regional organizations. We're geographically unique in terms of our position has been a center position to be a national leader in the energy space.

And, if you look at it, part of it is our heritage built on a lot of technology and manufacturing expertise in these sectors. It's the birthplace of nuclear energy.

We have tremendous natural resources such as the Pittsburgh coal seam. Nowhere around the country can you find such a diverse and unique range of capabilities.

So, these companies, Bayer, Eaton included, as well as organizations like the DOE's National Energy Technology Labs, are beginning to collaborate more and more to bring some of the solutions that we need in a very collaborative and strategic manner.

Some of the things that we've been doing at the University of Pittsburgh to bring these organizations together include events that help us to identify what the needs are in industry, not only from an educational point of view, but from a research point of view.

An event that we hold every year in November is our Power and Energy Industry Day, which has grown every year in the last four years and had over 150 participants this year, highlighted by Eaton executive Dave Bucklue's keynote presentation.

We talked to these companies together around themes for research development and we also bring them together with all of our students who are studying in this area, which includes over 200 students right now in our undergraduate and graduate programs, to interact and network with these industry organizations as they seek to plan out their future in this arena.

A great example of that collaboration is what we've established with Eaton Corporation in terms of a partnership in power engineering.

It's structured and managed on several key initiatives, including everything from the development of a brand new state-of-the-art power systems lab that will provide research opportunities and education opportunities for our students and faculty alike, the support of undergraduate design projects and support for a new curriculum.

We're developing and delivering now new curriculum in these emerging areas of smart grids, renewable energy, energy management, and other emerging fields, both at the graduate and undergraduate level.

This leads to research program development, which we're working closely with Eaton on both internally on initiatives important to Eaton's business development needs, but also together with other companies in forming strategies around the American recovery opportunities.

Creating opportunities for regional economic growth, technology development and work force training was really the emphasis of what we based this partnership on and it has proven to be very successful in the early year of its existence.

So, as we look to the future, we must look at comprehensive strategies. As Mr. Kidd already mentioned, there's not going to be one solution. We're going to need a combination of things.

We need to look at it strategically from a technology point of view, but also from a personnel point of view and that's really where we come and at the University, is to provide that technical talent training, the work force development coupled with the research and development in a very open and collaborative environment.

And it's everything from eco-friendly building designs, that you'll hear Bayer talk about in a little bit, to smart grids and smart meter concepts, which are just some of the things that Eaton brings to the table, all the way through to what we're doing at the micro grid level and the bulk transmission level to bring solutions.

And so, at this time, I'd thank you for your attention and turn it over to Mr. Paul Platte from Bayer Corporation, thank you very much.

Paul Platte: Thank you, Greg, and on behalf of Bayer MaterialScience I'd like to thank Eaton for inviting me and Bayer MaterialScience to participate in today's panel discussion.

The topic is one that's very relevant to our business and that's what I'd like to explain in a little bit more detail. Bayer's motto is science for better life.

And by being rated number one in global carbon disclosure leadership last fall I think it shows that we are, in fact, committed to that motto.

Our commitment to innovation, product stewardship, as well as sustainability impacts the products we make, as well as the markets we serve.

In fact, our products touch people's lives, as well as the planet on the whole, in so many ways that sustainable development is really critical for our business success.

And it's the development of sustainable building design and construction solutions that I'd like to talk about today.

I think what you'll see is that Bayer offers many materials solutions to this area, but also I want to be able to address how we feel that only by working openly and seamlessly with organizations such as academia, as well as the government and other industry partners, will we be able to meet the challenges of this particular market.

And that's what I'd like to go into a little bit more right after that. Bayer favors a holistic approach whereby the walls, if you will, of the construction process are broken down and replaced by an open plan, whereby the state-of-the-art building solutions are able to be achieved.

We think this holistic approach can be achieved only by combining the expertise of architects, engineering terms, financing organizations, suppliers from components as well as materials with academia and government working in a collaborative method to be able to deliver the ecological and economic solutions sought by building decision-makers up and down the value chain.

We think with this collaborative approach we're able to address what I call these six Es of building sustainability. It's energy savings, environmentally friendly materials, reduced emissions materials, efficiency in application, ecology as well as economics.

And this is very important because while having sustainable building concepts is the right thing to do as a corporate citizen, it's also the right thing to do to consider it from an economic standpoint from a business perspective.

And we think in this collaborative approach we're able to address the complexity of the value chain of the construction process, we're able to benefit the different parties that are involved in it, as well is to foster the holistic dialogue that we think is necessary to develop these solutions.

And what I'd like to do now is to touch on the next key area for our particular program and that's our material solutions.

What you see here is a conceptual office building that I'd like to use to just showcase some of Bayer MaterialScience's material solutions that meet those six Es that I just spoke about.

Let me give you a quick tour, polycarbonate, in terms of single or multi-wall sheets can be used for glazing, sky lighting, as well as facades that enable day lighting, which in and of itself reduces energy consumption, but also improves the visual comfort of the occupants of the building.

Ceiling systems, based upon our polyurethane raw materials, enable new or existing flat roofs a seamless protective layer that's root resistant, but also reduces the drafts and whereby also improves the energy efficiency of the building.

LED lighting, in and of itself, is energy efficient by reducing the amount of electricity needed to illuminate the building. It also reduces the heat load within the building.

And our polycarbonate is used in LED lenses, as well as housings to provide a lighting system that is robust against indoor and outdoor conditions.

Coating systems, again, based upon our polyurethane raw materials, are characterized by high resistance to aging, as well as low maintenance costs.

And we're able to do this with low solvent, as well as waterborne formulations. Polyurethane in the form of spray or rigid foam can be used for thermal insulation solutions for the roof, walls, as well as the floor.

And it's important to note that the embedded energy to fabricate the foam itself is paid back fiftyfold or more over the life of the building in terms of energy savings.

Photovoltaic elements can also benefit from our products. Our TPU encapsulant film is used to encapsulate photovoltaic cells, but also our polyurethane with pultrusion technology can produce lineals whereby frames for building integrated photovoltaic systems can be produced.

And it's really the combination of these material solutions, together with the holistic and collaborative approach that we at Bayer MaterialScience have devised what we call our EcoCommercial Building Program or ECB for short.

And to walk the talk of that program, but also to showcase the viability of these technologies, we have a series of buildings that showcase this.

We have an operational day care center in Germany, we have an operational office building in Belgium, and under construction is another office building in India.

And over the next couple of months we'll be announcing our plans here in NAFTA, as we roll out our EcoCommercial Building Program within this market.

So, it's really by working in combination with these material solutions as well as academia and the federal government, state government as well as local government, and other industry partners such as Eaton that we think, from an industrial partner, we're able to help bring these solutions to the market that are really critical for our overall business.

And with that I'd like to turn it over to Paul Cody from Eaton.

Paul Cody: OK, thank you, Paul. Good morning everyone, it's a pleasure to be here this morning with all of you on this important and relevant subject.

Before I get into the heart of my discussion I would like to tell you a little bit more of Eaton and our efforts in energy management and sustainability.

Recently Eaton was ranked in the top 10 percent overall, number 43 on Newsweek's inaugural green rankings of the 500 largest companies in America and number three in general industrial category.

And Newsweek ranked Eaton in the top 30 companies for green policies and performance score. The reason for this kind of recognition is simple, we are taking action and we care.

To create a sustainable market transformation, which is what Eaton is doing, requires a shift in behavior and beliefs as well as implementation of technological solutions, which must then be complemented by operating and maintenance strategies that further optimize the combination of people, operations, and technology.

And I'd like to touch briefly on each of those topics. On the people front, we have trained more than 60 LEED accredited professionals across the United States to drive the green building business and educate engineers and contractors on green building strategies.

In addition, we are hiring energy engineers for our newly formed Energy Solutions Business to improve both Eaton's operations, as well as our customers.

In the operations front Eaton was one of the first companies to have a sustainability report as part of our annual report because our executives wanted all stakeholders to know how we are doing against our commitment to reduce greenhouse gases by 18 percent by the year 2012.

And we recently completed an expansion of our electrical group headquarters where we earned LEED Gold certification, a recognition of the energy efficient and environmentally friendly design and construction from the U.S. Green Building Association.

In technology, last year we instituted Eaton's Green Leaf Product Solution Program where a committee follows a strict process of evaluating whether or not our products can use Eaton's Green Leaf logo.

With all of the green washing going on it is important to our reputation that we can backup our claims and we are going even further with some of the our products by completing lifecycle assessments to truly gauge the environmental footprint, both in production and in use of our products.

And most recently we received SMART Gold certification for our uninterruptible power system, the UPS 9395, the most energy-efficient product in its class.

What LEED is to buildings, SMART is to products and we are the first diversified industrial manufacturer to have a product certified.

As much as we are doing the right things ourselves and being recognized for these efforts, our biggest value is what we are doing for our customers and it comes in the form of managing energy.

Today many energy users are using individual technology approaches to manage their energy. Alternative transportation, things including high-speed rail, hybrid truck transportation, and plug-in electric vehicles.

Renewable energy, sources like solar, both building based and utility scale, and wind, hydropower, and geothermal are beginning to spread beyond places like California, Texas, Massachusetts and Pennsylvania.

And the prospects offered by smart grid, with smart meters, smart power distribution, demand response, home automation networks, and plug-in electric vehicles.

But the first step in any organization's efforts to get a grip on energy still remains energy efficiency. And homeowners, commercial building owners, and industrial facilities are tackling specific projects.

Often they are simply doing those energy efficiency projects that have a one to three-year payback, like lighting retrofits and temperature controls.

And although Eaton provides products and services in all of these technologies and strategies, the real value to the customer is when they are combined into a comprehensive, holistic or solutions approach.

According to a cover story in the December 2008 issue of Time magazine, we Americans complain about the cost of our energy, but we still throw away most of it.

Our power plants, for example, waste enough energy to power Japan. Only 4 percent of the energy used to run a typical incandescent bulb produces light.

The rest is frittered away as heat at the plant, over transmission lines or in the bulb itself, which is why you burn your figures when you touch it.

A holistic approach, depicted on the slide here, includes all of the technologies I just mentioned; renewable energy, smart grid technologies, alternative transportation, and energy efficiency projects.

But it begins with energy efficiency as the foundation and is comprehensive, just not low-hanging fruit projects. So what does comprehensive include?

It includes the consideration of the following; definition and understanding of an overall enterprisewide energy management strategy that includes energy goals and objectives; identification of all energy conservation opportunities and the rationalization of these to align with the overall strategy.

Thinking beyond the implementation of individual technologies, but more importantly, how these would be integrated together to provide short and long-term benefits.

And giving consideration to the behavioral, operational, and technological opportunities that include some of the following focus areas; upgrades to central heating and cooling, plants ventilation systems and envelope modifications.

Distributed generation, combined heat and power plants, water reduction and peak shaving or shifting. Improvement to energy, intensive processes that include compressed air and recycling waste systems

and efforts to have the most appropriate energy rate schedule.

So, let's now look at some of the tremendous implications an approach like this might have on residential, commercial, and industrial facilities.

To do this I would like to share a few thoughts that we at Eaton think are paramount from a recent McKinsey study published in July of 2009.

If executed at scale, a holistic approach to energy efficiency would yield gross energy savings worth more than $1.2 trillion, well above the 520 billion needed through 2020 for upfront investment in efficiency measures.

Such a program is estimated to reduce end-use energy consumption in 2020 by roughly 23 percent of projected demand, potentially abating up to 1.1 gigatons of greenhouse gases annually.

What may be even more significant is that the opportunity resides in all types of buildings. Of the 1.2 trillion in gross energy savings, the commercial sector accounts for 25 percent of the end-use efficiency potential, the residential sector accounts for 35 percent and the industrial sector represents the biggest opportunity at 40 percent.

So, with this kind up potential savings for holistic energy savings, the obvious question is why don't we already do more of it?

I believe there are three primary barriers. One, energy efficiency is highly fragmented, spread across more than 100 million locations in billions of devices used in residential, commercial and industrial facilities.

This dispersion ensures that efficiency is the highest priority for virtually no one in an organization. Until recently, at even the most progressive companies no one really had accountability for energy usage or for energy efficiency overall.

And finally, measuring and verifying energy not consumed is, by nature, difficult. In that same December issue of Time magazine, Time magazine referred to energy efficiency as America's untapped energy resource.

And there are three primary elements that we believe and support to access this energy efficiency resource and overcome these barriers.

First, identify methods to provide the significant, upfront funding required by any plan to capture energy efficiency.

It has been estimated that the entire upfront investment of 520 billion could be recovered through a system benefit charge on energy on the order of half a penny per kilowatt hour of electricity and $1.12 for a million Btu of other fuels over 10 years.

This would represent an energy cost increase of about 8 percent per unit basis to the average customer, which would more than be offset by the eventual energy bill savings of 24 percent.

Second, forge greater alignment across utilities, regulators, government agencies, manufacturers and energy consumers.

And third, recognize energy efficiency as a strategic and comprehensive effort. Piecemeal approaches will make little impact and oftentimes harvest only the low-hanging fruit.

Comprehensive approaches will take more discipline, education and patience, but will ultimately offer a much more significant reward.

Energy efficiency is the cornerstone for implementation of other renewable energy solutions and it is imperative that it is completed before or in conjunction with projects like solar and wind. Simply, an inefficient building system wastes renewable energy.

Fortunately, we're seeing examples of this comprehensive approach, both at the federal level through programs like the GSA's High-Performance Green Buildings effort, which is funded with 4.5 billion from the Recovery Act.

The results of this program, GSA's High-Performance Green Buildings use up to 45 percent less energy and 39 percent less water than conventional office buildings.

And we are seeing prudence on a state level, like North Carolina where state energy plan funding will only be provided if a city or municipal government has a strategic energy management plan in place to show how those funds will be part of a comprehensive energy efficiency approach.

But the public sector is simply not enough. In our nation's pursuit of energy independence, national security and the prospect of improved employment, nothing right now stands taller than to take bold steps to formulate constructive ways to unlock the full potential of a comprehensive, holistic energy efficiency strategy.

Frank Maisano: You want to add that? Tom, go ahead.

Tom Tearden: Several years ago there was a national action plan developed on energy efficiency trying to coincide, talk about a holistic approach with utilities and state regulators prioritizing efficiency.

Yet, out of that there's not been any kind of national movement that I am aware of. I might be challenged on this, but I know EPA is doing some things on that, but I've not seen much at the state level in terms of a holistic approach or a national charge for efficiency or a systems benefit charge.

Paul Cody: I can maybe start to address that. In this state of Pennsylvania where we're all represented, they've just enacted a new policy for energy efficiency with some very aggressive programs for both individuals, residential, as well as businesses, both commercial and industrial, in meeting certain energy efficiency goals

I mean certainly a lot of it is going to take not only new methods and strategies and technologies to achieve, it's also going to require a change in behavior.

And where that comes from is really not an easy question to answer. Is it price point? Is it a quality-of-life difference? These are things that will all play into the equation of energy efficiency.

But at least in the state of Pennsylvania a new bill has been enacted to achieve some very aggressive energy efficiency measures.

Tom Tearden: I guess if I could follow up, that kind of proves my point, that it's a state-by-state, utility-by-utility, customer-by-customer approach.

I heard holistic approach a dozen times. I don't know how you get that change at a national level.

Paul Cody: I think maybe Mr. Kidd can comment on this, but I think this is where the Federal Energy Management Program, in its inception now, is providing a tremendous example in a leadership role for all of us to follow.

Richard Kidd: Thank you, with over 2000 utilities in America it is a very difficult challenge to bring everyone together at the table.

There are a number of federal forums where the federal customers work with their local utility, their state, and their community to get a holistic or comprehensive solution in the area of that federal site.

And that has led to tremendous success at various military bases, federal facilities, etc., across the country. But it is not easy. It is a challenge.

But overcoming that challenge will clearly generate a greater amount of benefits than a piecemeal approach. So, in other words the sum of the parts is greater than the whole.

Did I say that right? The sum of the whole is greater than the parts.

Frank Maisano: Anyone else to get that? Go ahead, in the back. And let me just mention also while she's getting back there, we do have callers calling in as well. So, we may jump to a caller in-between if we have to. Go ahead.

Suzanne Watson: My name is Suzanne Watson. I'm with the American Council for an Energy Efficient Economy, a 30-year-old not-for-profit that's been working this area, toiling in this area for a long time.

One of the organizing factors I think that is prevalent now, that's in play now is a national energy efficiency resource standard, an EERS, similar to an RPS, but this is an energy efficiency, a national energy efficiency standard.

This is something that if we all actually got behind could perhaps actually happen. Almost 50 percent of the states in the United States have an EERS in play. So, why not a national standard rally behind?

Frank Maisano: Richard, you want to start with that one?

Richard Kidd: Really, I'm not in the position to address that in terms of national policy. I work with the federal agencies. I think there's clear evidence that having efficiency standards generate benefits.

And we, the Fed, are watching closely the evolving policy debate, but I'm not directly involved in that, so I don't think I can provide an extensive amount of comment.

Frank Maisano: Anyone else want to get that? Go ahead Joan.

Joan Monet: Hi, I'm Joan Monet, I'm a freelancer with a focus on alternative fuel vehicles and this is for anyone who wants to answer it.

I'm interested in hearing more about the smart grid for alternative fuel vehicles, especially electric vehicles and plug-ins.

There's been a lot of hype about those from the auto industry and I haven't heard a lot of discussion about where the energy for the smart grid is going to come from and what a realistic timetable would be. Thanks.

Richard Kidd: I guess I can try and start. When you look at the smart grid there's a lot of different definitions, but a broad one is really creating real-time information access of energy usage patterns of real-time utilization versus what's happening at the production level.

Building smart grid concepts into a transportation sector is really the next evolution of what we're trying to do at the power distribution and transmission levels first.

We don't have an infrastructure, a physical infrastructure around electric vehicles yet. Right now you're going to charge that at your home.

You're not going to be able to do it on the highway or on the interstate.

We can certainly get petro and ethanol there, but we can't get to the massive amounts of electrification recharging leading to storage, eventually to storage, in the vehicle sector until we first figure out how to do this in a more efficient way in what already exists as an infrastructure and one that needs a lot of innovation to it, which is really the power T&D sector.

So, I think from the vehicle side we have a ways to go. Now, within the vehicle, you can look at that as almost a micro grid of smart grid.

And various manufacturers are coming up with all kinds of ways to automate and control and look at how energy is used within the vehicle itself.

Tom Gross: If I could follow up on that. Eaton is involved in a number of technologies at the residential level through the transmission and distribution level at utilities.

One of the research and development projects we are undertaking is electrical vehicle charging application for the home and we are doing the research to understand the requirements of driving home and plugging your vehicle in and when is the best time to do it and how that should be regulated and what intelligence should be used to determine what the best method to do that is.

That is a program that is underway in its early stages at Eaton today.

Frank Maisano: Anyone else? OK, go ahead Jenny.

Jenny Mandel: Thanks, Jenny Mandel with Greenwire. There's some chatter about the commercial building sector having some adjustments similar to what the residential building sector has over the last couple of years.

So, to what extent are the challenges of retrofitting commercial buildings for energy efficiency, how do they correspond to the ones for residential?

We know that making an existing home energy efficient is harder, in many ways, than doing the same for a new building.

So, how does that play out in the commercial sector and to what extent are some of these technologies that we heard about today applicable for retrofitting?

Tom Gross: I can try to address some of that as well. Jenny, the difference between the commercial buildings and the residential buildings, I think you've touched on a lot of similarities.

Whenever you try to retrofit a technology into a system, a house or a commercial building that was not designed to be able to capture or integrate that, you do run into those types of difficulties.

Often, what we're seeing is there is some dismantling that has to happen in order to add it and that ends up affecting the holistic solution of the building in and of itself.

You may reduce floor space. You may reduce ceiling space. You certainly will affect the inner spatial aspects of the building in and of itself.

This is one of the reasons why we're trying to work and to develop a network of which we're bringing architects together with engineering firms and other organizations where we can help integrate how the materials will play out into those particular areas.

But the actual interface with the rest of the building is where we want to rely on the expertise of those that are already there.

Frank Maisano: Go ahead.

Richard Kidd: And if I could just add, I think that's a very important and very pertinent question because roughly 70 percent of the building stock that we're going to have in 2050 we have today.

So, we are not going to get an energy-efficient economy on new buildings. We have to look at existing building stock and that presents a number of very unique and interesting challenges.

The Department of Energy has just announced the start up of the ARPA-E, a dedicated research institute to look at many of these questions that would refer you to some of the press releases on that project.

I think that our partners in the commercial sector are leading a whole array of exciting new technologies, but one thing when we talk about buildings, particularly commercial buildings, and we talk about cost and benefits is a range of studies that say employees, in a green building, are 2 to 16 percent more productive than they were in that previous building, after a retrofit.

And so for most organizations, including the federal government, our single biggest operating expense is salaries.

So, if you can get 2 to 16 percent increase off of your biggest expense, that is valuable and that is something that can be returned as an investment to the organization, be it a public entity or a private entity.

And we shouldn't forget that when we talk about retrofitting existing buildings.

Frank Maisano: Go ahead, Nick.

Nick Giuliano: Hi, thanks everybody. I'm Nick Giuliano. I'm with Carbon Control News. I was hoping to revisit the question from earlier about the need for a carbon price.

Justify to get everybody to sort of weigh in. To what extent is that necessary and what would you all like to see from Congress as the Senate prepares to move with climate and energy legislation?

Does it need to be cap and trade or would a focused energy bill be sort of sufficient to reach some of these goals that we've been talking about today?

Paul Platte: I don't believe from our standpoint in the value chain that we're really in a position to be able to state what would be the proper approach towards it.

We try to approach all of these solutions from an economic standpoint and not ignoring some of the key drivers is certainly critical to that.

For us to be able to set how that approach would happen and what would be the proper approach, I think, would be the wrong thing for us to be doing in the whole value chain, from a material suppliers such as Bayer's standpoint.

Tom Gross: If I could also add, I agree with what Paul said about the economic value of enacting energy efficiency programs and being a steward of the environment and reducing greenhouse gases.

As I stated in my speech that Eaton undertook an objective to reduce greenhouse gases by 18 percent by 2012, that objective started in 2006 and I'm happy to report that we're 80 percent of the way there and gaining on it every year, reducing greenhouse gas emissions year over year.

And, if I can go back to a comment about retrofitting buildings, all of the factories, most of the factories and buildings that Eaton has are existing.

So, a process, we all talked about a holistic approach starting where analysis is done of those facilities to determine who are your biggest energy users and who are your biggest greenhouse gas emitters through an audit process.

Then an infrastructure upgrade and then deployment of discrete technologies used to save energy and reduce greenhouse gases, pulling all that together in an information system and then embedding the energy efficiency culture within a corporation.

So, that has economic and social benefits to society as well as to the business.

Paul Platte: I won't actually add to that other than to say that certainly we are working, I think, nationally to incentivize the growth of new and renewable and alternative forms of energy.

As long as we make it a level, competitive playing field, you know, the markets, the economics will work out where we eventually provide economic growth.

And that's one of the main things and I think it's one of the main elements of the Recovery Act as well.

So, I think, incentives to look at new technologies, whether it's carbon capture and clean coal to address some of the emissions issue from the fossil side or the development of larger scale solar as an example, really getting it to utility scale efficiently, will all, I think, work out in the markets as well.

Richard Kidd: As a career Fed, I can't really comment on the deliberations occurring in Congress or I could comment, but I would have a very short career.

I think a reasonable and unbiased review of all the science and the documentation makes it clear that man-made carbon is causing global warming and that global warming has attendant costs, social costs, all right?

Given that, it is fair and reasonable to place a value on carbon when you make your economic decisions. But even if you don't, even if you value carbon at zero, the energy efficiency improvements generate financial returns and they make sense regardless of your policy position on carbon.

For the federal government we are going forward with a planning process that includes a social cost or actually a social benefit of carbon avoidance, this is a technical term that we can factor into cost benefit analysis.

There was a recently released appliance standards from the Department of Energy's Office of Energy Efficiency and Renewable Energy.

There is documentation there on how we would do that. It works out to about $19 a ton, which within the range of various academic studies places it about a buck fifty to well over $100 a ton.

So 19 is at the lower end of that. So, you can do that and those methodologies exist. The key point is even if you value carbon at zero, energy efficiency makes sense.

Frank Maisano: Sabrina, go ahead, yeah.

Sabrina Eaton: Hi, I'm Sabrina Eaton from the Cleveland Plain Dealer. You know, there's members from Eaton here and Bayer. I mean how industry wide is this focus that you guys are talking about?

And also, is there some sort of federal money for this? I noticed that that says Recovery up there on your web site. Is there recovery money that is dedicated to this?

Gregory Reed: You know, I could start somewhere and one of the places to start, you know, how broad is it?

If you look at what we're doing at the University, the example I gave of our annual event in November to bring industry and the energy space together to not only discuss the issues, but then to formulate comprehensive strategies working together in teaming arrangements on them, we're doing that.

When you look at the collaboration we have with Eaton, I mean it's multifaceted and we have metrics, performance results that we've set and that we're achieving.

We're working to expand that. A great example, Mr. Kidd already mentioned it, ARPA-E has come out with a recent announcement on additional funding now in energy areas, one of them being energy efficiency in building system designs.

We're in a great position right here in this room to put together a very strong regional teaming arrangement, a consortium if you will, along with other regional companies to bring a collaborative proposal to that opportunity.

And this is the concept of the energy hubs that the DOE has been talking about and this is one of the first rollouts of it from ARPA-E.

Richard Kidd: On the federal government side, obviously, as the largest consumer of goods and services in America we have an extensive network of relationships, contractual and otherwise, with the private sector, states, etc.

But within the federal government what we have done is we've established standards for new building construction or major building retrofit that industry is responding to.

And basically, if you have a new building or a major remodel of more than $5 million you have to follow the principles of sustainable design.

And going forward, by the time 2030 gets here every new federal building must be a net zero energy facility. That's in the Executive Order or a congressional statute has it framed somewhat slightly different, which is a zero fossil fuel bill.

So, the federal government owns about 1 1/2 percent of the buildings in America, so that's a pretty significant portion of a very fragmented market.

And so that portion of the market has put down the standard that you've got to have the best of the best when you rebuild or build a new federal building.

And with that, while we have 1 1/2 percent of the building stock, we have 5 percent of the LEED certified buildings in America. So, I just highlight that as an example of federal leadership, which is trying to drive the marketplace that the firms up here and dozens up others work and compete in.

Sabrina Eaton: Is there federal grant money for this or recovery dollars from the Recovery Act?

Richard Kidd: Well, I'm talking principally about the normal standard operation and maintenance and construction funds, but various federal agencies, GSA, which was already mentioned, the Department of the Defense, Veterans Affairs, Department of the Interior, all got Recovery Act funds that they are spending on new building or major retrofit.

And, if you look at the OMB guidance, it's a concise 90 some pages, there's a page in there that says all of these retrofits have to be done to the highest of standards and it outlines what those are based on the building and the cost.

Tom Gross: I would just add to your question that Eaton is involved with dozens of these kinds of discussions.

I mean there's obviously a good reason to focus on buildings, but let's not forget that motors are a huge consumer of electricity and that consumes many more times the cost of the motor in terms of energy.

And so if you look at industrial sectors, there's a need for these same kinds of collaborative arrangements and the players change a little bit, but the issues remain the same. So, we're involved in a number of different versions of this.

Paul Platte: I would just add comment to your original question Sabrina, with regard to the breadth that we're looking at, our program is actually a global program.

And with us, with Bayer MaterialScience and NAFTA, we're entering into that program now. So, from us, from a concern standpoint, we do have operational buildings.

There is the day care center, for instance, is a showcase building that demonstrates what Richard Kidd had responded to about a net zero type of a building.

And for us that's really the technical target for us, is to reduce the energy consumption of the building, maybe through insulation types of systems, to a point where renewable energies can actually support or takeover the full energy requirement there.

So, we're doing it within our organization with some of these demonstration types of buildings, but that's also the approach that we're trying to take within industry itself.

In terms of funds being made available, that is where the ARRA we see as impacting our particular business. That goes to one of the first questions, are there requests coming for this?

And I think that's a role of leadership that the federal government has done, is to provide that type of funding through the ARRA to enable this dialog to begin and then allow us to work through these solutions.

Frank Maisano: OK, let's do one or two more questions. In the back, far in the back.

Robert Thomason: Thank you and greetings. I'm Robert Thomason. I'm an independent journalist. My question is about the relationship of price levels, price spikes, and time frames.

We're seeing more and more price spikes in the energy sector as well as commodities. Had the big one that summer of 2008, but of course there was Katrina before that and then 9/11, the Gulf War or Saddam's invasion of Kuwait.

If these price spikes continue or accelerate what is your confidence level for ramping up your services? You spoke of a 2020 timeframe or McKinsey spoke of a 2020 timeframe, the federal government spoke of a 2030 timeframe for a net zero buildings.

But if the country and the economy faced a serious challenge, how confident do you feel that we could respond more quickly than a 10 year timeframe or a 20 year timeframe? Thank you.

Tom Gross: I'll take a start at that. I believe that over the last several years, certainly in Eaton Corporation, the effort around energy management and sustainability has been ramped up significantly, as evidenced by our own goals of energy reduction and greenhouse gas reduction.

As we do that and as we invest more money in research and development to provide more energy-efficient products, I use the example of the 9395 uninterruptible power system, the technologies develop and we have more engineers and scientists developing technology.

So, I believe that in the market there will be ups and downs, but that the need is there and the industry in general, as evidenced by Bayer and Eaton, have invested and shifted research and development monies to accelerate our efforts in this field.

Paul Platte: And I would add that in my opinion one of the greatest barriers to that speed of response is the education of understanding how to implement the solutions and really understanding what the core problem is.

And I think that that's one of the things that we're able to do here on the onset now, is to begin increasing the awareness of how to resolve the issues, so when those spikes do occur there is an expedited response.

Richard Kidd: I would just add that your question brings out some of the other benefits of energy efficiency and renewable energy is they're an insurance policy against price fluctuations, against grid reliability issues, against natural disasters, many of these other activities.

And so, for the federal government, a number of our agencies, such as the Department of Defense and others, are taking a look at being able to make their installations and bases as energy efficient as possible and to produce enough energy on that base so that they can meet critical national defense, national security and public service needs.

Frank Maisano: Good, well, let me thank everybody for coming today and mention briefly that our panelists will be here for a short time after should you have other follow-up questions and individual questions that you'd want to ask them.

And, once again, thank you for coming and we appreciate your time.

[End of Audio]

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