Pennsylvania is about to receive an unprecedented infusion of funds for investments in energy efficiency, courtesy of the economic recovery package enacted by Congress. Energy efficiency can spur not only job expansion, but also chart a path toward long-term energy savings and urgently needed emissions reductions. All that won't happen automatically, though -- we need strategic policies at the state level to unlock efficiency's potential.
The stimulus legislation will deliver $3.1 billion in grants to state energy programs -- more than $100 million of which will be devoted to Pennsylvania. That can do a lot of good, right away, but to stretch the benefits as far as possible, governors should use these funds to structure a long-term program of investment -- one that will benefit consumers immediately and for years to come. The best way to do that is to invest in the efficiency and functionality of the places in which we live and work: our homes, businesses, schools, hospitals and other structures that make up our built environment.
The U.S. buildings sector accounts for 70 percent of all electricity usage and is responsible for 40 percent of all greenhouse gas emissions. Energy retrofits -- installing better windows and lighting, more insulation and higher-efficiency appliances like water heaters and air conditioners -- greatly reduce energy consumption in existing buildings and provide home and business owners with real relief from exorbitant and volatile energy costs.
Eliminating waste by achieving energy efficiency is by far the cheapest way of producing new energy supply. Achieving efficiency savings cost 3 to 4 cents per kilowatt-hour, compared to 8 to 10 cents per kilowatt-hour for electricity generated from a new power plant. In California, which has three decades of experience running efficiency programs, two dollars of economic benefits are generated for every one invested in energy efficiency.
One approach that has already proven successful in some states is creating incentives to encourage utilities to invest in efficiency. That way, they can reduce the energy used in our homes, businesses, and schools. Sound odd? Think about it again. As it stands now, most utilities' profits depend on how much energy they sell. But consumers want to use less energy, not more. The profit incentive for utilities should reward savings, not sales.
The key to renovating homes, schools and commercial buildings on a large scale is to mobilize utilities that have long-standing customer relationships with building and home owners as well as technical expertise and access to relatively low-cost capital. Nationwide, states from Nevada and Idaho to Massachusetts and New Jersey are creating new business models for their electric and gas utilities to allow ratepayers and utility companies to share in the savings from energy efficiency. Their success can be replicated across the country. Leadership is the main ingredient. Gov. Ed Rendell can provide it here in Pennsylvania and nationally through his capacity as chairman of the National Governors Association.
Last month in Philadelphia, Vice President Joe Biden's Middle-Class Task Force held its first meeting. The focus: green jobs. A timely subject, considering the crisis our building sector is in.
Energy retrofits would create thousands of American jobs when and where we need them most. In February, the national unemployment rate rose to 8.1 percent -- its highest level in a quarter century. According to the Labor Department, the economy shed more than 600,000 jobs for the third straight month, the first time that has happened since 1939.
More than a million contractors are idle, as home and commercial real estate construction has slowed to a crawl. A significant national investment in energy-efficient retrofits can immediately put thousands of craftsmen and laborers back to work and stimulate a robust secondary market in product and equipment sales.
The economic recovery package will provide states with funding that can be used to unlock the benefits of efficiency. Governors who demonstrate vision and leadership will use a portion of their stimulus funds to strengthen state regulatory commissions so that retrofit programs can be continued by utilities, and can continue to generate benefits, long after the stimulus money has been spent.
Mr. Rendell should lead the way in Pennsylvania with rebates to jump-start building efficiency improvements on a grand scale. Make the programs easy for consumers to understand and participate in, and pave the way for the programs to become self-sustaining.
There is no more important energy policy measure that political leaders can and should implement at this moment. Efficiency should be the investment of first resort for energy and the economy. It's imperative that we use these taxpayer dollars wisely.
Reid Detchon is the executive director of the climate and energy program at the United Nations Foundation and the executive director of the Energy Future Coalition , a nonpartisan alliance that seeks to bridge the differences among business, labor, and environmental groups and identify energy policy options with broad political support.