Opportunities from the American Recovery and Reinvestment Act of 2009

Let’s say someone were to tape some one-hundred dollar bills together to make a string. The string of one-hundred dollar bills allocated to energy funding from the American Recovery and Reinvestment Act of 2009 would go from New York to Hawaii ten times. . . and then some.

Energy efficiency rebates and financial incentives have been available for several years, but the recent changes in funding will provide new opportunities for compressed air and vacuum end-users, distributors, and equipment manufactures. Given the current state of the US economy and the rate of legislative change, understanding and being up-to-date on these opportunities will become vital for surviving the economic down turn. The proverbial cheese has moved and most companies should no longer (at least for the next few years) expect to see capital funded projects unless they are subsidized by energy efficiency funding.

The majority of the $61.8 billion funding in the A.R.R. Act of 2009 will be invested in programs for weatherization assistance, energy star, government buildings, public transportation, smart-grid technology, renewable energy and many others. This article will just focus on the A.R.R. Act of 2009’s impact on rebate and grant funding available to companies that use and sell equipment in the industrial sector for compressed air and vacuum. This article will (1) summarize the A.R.R. Act of 2009; (2) review the past, present and future of energy efficiency grants and rebates; and (3) suggest steps companies can take to benefit from these new opportunities.

The A.R.R. act of 2009 Summary

The purpose of the energy portion of the A.R.R. Act of 2009 is to support jobs, cut energy bills and increase energy independence. What does the A.R.R. Act of 2009 mean for the “Average Joe” manufacturing facility, distributor or equipment manufacture? Essentially it will equal rebates and grants to pay for energy studies (audits) and improved efficiency equipment upgrades (projects or implementations). Out of the total $61.8 billion in energy funding, the funding that can potentially end up in rebates and grants will come from the $16.8 billion that has been allocated to the Department of Energy - EERE (Energy Efficiency and Renewable Energy). The funds for EERE programs and initiatives have just increased nearly ten-fold from $1.7 billion received in fiscal year 2008 to $16.8 billion for 2009. It is important to note that most of the money is designed to go to residential and commercial applications, but a relatively enormous amount of money will become available to the industrial sector (which is over 1/3 of the US energy consumption) primarily through energy reducing utility rebates.

Now of this $16.8 billion for the EERE, the Act stipulates that $3.2 billion will go toward Energy Efficiency and Conservation Block Grants (EECBG). These Block Grants were established in the Energy Independence and Security Act of 2007, but were not previously funded to this magnitude. The act also stipulates that $3.1 billion of EERE funds will go to the State Energy Programs (SEP) for additional grants that do not need to be matched with state funds. The act only allows such grants for states that intend to adopt strict building energy codes and intend to provide utility incentives for energy efficiency measures. The two places you’ll find money for your energy efficiency project:

• EECBG – Energy Efficiency Conservation Block Grants
• SEP – State Energy Programs

On March 26, 2009, the US – DOE announced the exact funding distributions to states, cities, counties and tribal governments of the $3.2 billion for EECBG from the A.R.R. Act of 2009. They also detailed the distribution amounts for the SEP programs. Each individual state, county, city and tribal distribution can be researched at: http://www.energy.gov/recovery/index.htm. The following graphs illustrate the increase from prior funding for these two programs:

It is important to note that in the industrial sector, you will probably not get funding directly from these programs, but indirectly from various state and local channels these programs will fund.

The four metrics that will determine the approval of these projects include energy usage reduction, cost reduction, emission reduction and (the newly required metric of) job creation. Quantification units for the four metrics will vary depending upon the type of study or project, but any company receiving this funding must be prepared to report back measured versus calculated savings.

	"The purpose of the energy portation of the A.R.R. Act of 2009 is to support jobs, cut energy bills and increase energy independence." - Jesse Krivolavek, President, IVS, Inc.

Before one can develop a plan to benefit from the A.R.R. Act of 2009 through energy efficiency funding, it is necessary to understand the past, present and future of energy efficiency rebates and grants.

Energy Efficiency Rebates and grants: Past, Present, and Future

Rebates and Grants in the Past

Many states and utilities have been operating aggressive energy-reduction incentive programs. Most of these programs focused on the residential sector, but commercial and industrial programs have expanded. These programs were primarily focused in regions that have high utility costs (like California, Texas, Florida and the Northeast). But, additional aggressive energy-reducing incentive programs have been active in states that have progressive energy savings goals, environmentally proactive policy makers or have adopted Energy Efficiency Resource Standards (EERS); like the Northwest, Minnesota, Iowa, Wisconsin and Colorado (my apology for any left off this list). Most of the Southeast and the Midwest (as well as some other areas) have had relatively low utility costs and historically have had fewer incentive programs. Where available, these energy-reducing incentive programs have been used as a sales tool by various manufactures and equipment suppliers for justifying the cost of new capital projects through ROI and simple payback calculations. They have also been used by end-user reliability engineers, continuous improvement engineers and project managers to upgrade equipment and invest in new technologies through the same means.

It is also important to note that energy efficiency alliances like the American Council for an Energy-Efficient Economy (ACEEE) have been leaders in guiding energy policy and developing efficiency programs for utility, state and federal entities since as far back as 1980. This means national and regional energy efficiency alliances have and will continue to directly drive the details of the rebate and grant programs for the states and utilities that have underdeveloped programs.

Present Rebates and Grants

We all know the present US economy is scary (especially the manufacturing sector), but the opportunity for energy efficiency rebates and grants has never been greater. With the overall US economy experiencing such massive pain, most manufacturing capital-project budgets are now fractions of what they were during better economic times (if they even exist). So, external funding from energy efficiency incentives will be one of the only drivers for new projects for almost every industry. Unfortunately, many states are not organizationally prepared for the new budgets and the price of energy is going up.

Currently, many individual states and utilities are scrambling to prepare for the huge influx of funding. An example is Texas, which has just been allocated an FY2009 SEP budget of $218,782,000 which is up from $1,858,000 in FY2008. Creating the turmoil is the fear that if the money is not traceably spent on reducing energy, reducing costs, lowering emissions and creating jobs; then it will not be replenished in future budgets (use it wisely or lose it).

Energy costs are currently rising on an annual basis. The latest summarized information on electric costs is available on the Energy Information Administration website (www.eia.doe.gov). The following tables from the EIA illustrate the latest electrical retail pricing trends:

Future of Rebates and Grants

All future energy rebate and grant opportunities will be guided by funding distribution programs, increasing energy prices, efforts towards US energy independence, environmental responsibility and policies based on the threat of global warming. As the requirements from these drivers change, the requirements of the rebates and grants will change.

The distribution of the current funding will be different in each state. Some states will have state, county, or city run rebate and grant programs, while some states will allocate the funding to the utilities for distribution. The states and utility companies that do not currently have large energy efficiency incentive programs, will quickly have to develop programs to ensure the funding is tracked, recorded and eventually reported back to the federal government. This is the channel where funding for industrial sector project s will come.

As energy efficiency money is distributed, regional energy efficiency alliances, end-user energy engineers, energy auditors and suppliers of energy efficient products will be asked to drive new programs for state and utilities that have underdeveloped industrial programs. Many rebates and grants will require energy studies to be completed by non-bias parties in order to qualify for funding. In these cases, the energy auditor cannot benefit from the implementation of any recommendations. Equipment manufacturers, distributors and representatives will not qualify to conduct these specific energy studies and will be well served maintaining relationships with independent auditors. It will also infuse a rapid growth of businesses to meet the independent requirements.

In addition, currently proposed federal legislation for nationalized Energy Efficiency Resource Standards (EERS) are likely to require retail electrical companies to attain 15% in electrical savings. This will be accomplished through energy-reducing incentive programs, grid improvements and renewable energy programs. The US electrical grid (which was initially designed in the 1950s) will require significant changes and updates to accommodate the restructuring of the power generation industry from renewable sources like solar, wind and geothermal. But, the real opportunity for industrial companies will be in the energy-reducing incentive programs.

The final driver in the future of energy efficiency rebates and grants is will be the rate of energy price increases. New proposed carbon emission standards (if nationalized) or “Cap and Trade Programs” could drive up the cost of electricity very quickly, especially for markets served by coal fired power plants. The following is a list of states that rely on coal as their number one source of electricity:

As energy prices increase, opportunities for subsidized energy reducing projects should increase as well and may become vital for large industrial energy consumers.

	"The US electrical grid (which was initially designed in the 1950s) will require significant changes and updates to accommodate the restructuring of the power generation industry from renewable sources like solar, wind and geothermal." - Jesse Krivolavek, President, IVS, Inc.

Five Steps to Prepare for the Rebates and Grants:

The first step is to keep informed on the local funding programs (know your channel). The exact distribution paths have not been decided and because of the rate of change, by the time this article is published new programs and opportunities will be available. Below is a good set of online resources for keeping up to date on energy efficiency opportunities:

US-State Recovery and Reinvestment Map - www.energy.gov/recovery/index.htm
US-DOE-EERE - www.eere.energy.gov
ACEEE - www.aceee.org
DSIRE - www.dsireusa.org

The second step is to develop relationships and a set of contacts within the different tiers of the funding distribution that will provide the rebates and grants for your industrial sector. Examples include state energy offices, state energy programs and local utilities. The more familiar you become with the distribution channel, the easier it will be to comply with funding requirements and application processes. The third step is to contact (and get involved with) your regional energy efficiency alliance. This will compliment the first two steps by helping keep you informed on changes and providing you networking opportunities within the funding distribution channel. The forth step is to internally devise a strategic plan to quickly take advantage of opportunities as they become available. This should include planning energy efficient projects for 2009. Be prepared to implement a project as soon as funding becomes available. The final step is to continue reading Compressed Air Best Practices for updates on the rebate and grant opportunities, as well as examples of successful rebate or grant funded projects.

Conclusion

Hopefully, you have gotten excited about the opportunities presented by the A.R.R Act of 2009 for the companies that use, sell and produce equipment for compressed air and vacuum. This magnitude of assisted funding for energy studies and equipment improvements has never before been available. Although the funding distribution details have yet to be hashed out, the companies that understand the past, present and future of the rebates and grants, and take proactive steps to create energy efficient projects will not only find the missing cheese, but will contribute to US energy independence, environmental responsibility and US jobs.

About the Author:
Jesse Krivolavek is the founder of Independent Vacuum Solutions, Inc. IVS is an energy efficiency solutions company, focused on vacuum technology. Jesse has been providing solutions to the industrial and medical sectors for over ten years. For more information, please visit www.independentvacuumsolutions.com or email Jesse at krivo@vacsolver.com.

Sources:

1. US-DOE Energy Efficiency and Renewable Energy - News, “American Recovery and Reinvestment Act Allots $16.8 Billion for EERE.” 17 February 2009. EERE - News, “State Incentives Database Now Includes Energy Efficiency.” 15 March 2006. EERE - American Recovery and Reinvestment Act, “Overview of the American Reinvestment and Recovery Act of 2009” March 2009.
2. US-DOE Energy Information Administration, “Monthly Flash Estimates of Electric Power Data – Section 7 Month-to-Month Comparisons.” February 2009. Energy Information Administration, “Selected Electric Industry Summary Statistics by State, 2006” February 2009. Energy Information Administration, “Industrial†Sector†Energy†Consumption†Estimates,†2006” February 2009.
3. US-DOE State Energy Alternatives, “Distributed Energy” March 2009.
4. US Energy Information Administration – “Energy Power Monthly - Data Tables. Table 5.3-Average Retail Price of Electricity to Ultimate Customers: Total by End-Use Sector.” 24 March 2009. EIA - Electricity, “Net Generation by State by Type of Producer by Energy Source” 21 January 2009.