Energy Efficiency: State Energy Conservation Office (SECO)

ARRA FUNDS FOR ENERGY EFFICIENCY: THE BIG PICTURE
Texas received nearly $800 million in ARRA funding for programs related to weatherization, energy efficiency and on-site renewable energy. These programs focused on creating “green” jobs and transitioning to cleaner forms of energy production. Energy efficiency is an issue of unique importance in Texas because Texas accounts disproportionately for U.S. energy production and consumption.

ARRA funding for energy efficiency went to two state agencies, the State Energy Conservation Office (SECO) and the Texas Department of Housing and Community Affairs (TDHCA). An additional funding stream, the Energy Efficiency and Conservation Block Grant, was distributed directly to large cities and urban counties. These allotment grants are administered directly by the Department of Energy (DOE).[i] This chapter examines the funding streams that went to SECO.

Texas uses the most energy per capita of any state. Energy efficiency will be increasingly important as lawmakers seek to balance the needs of a growing population, energy costs, and health concerns associated with many types of energy generation.

Legislators took a hands-off approach to SECO’s ARRA funding. Although the funding represented a large funding increase for SECO, the agency administered the funds efficiently and effectively through existing programs, including the popular LoanSTAR revolving loan program. Lawmakers could consider requiring SECO to focus on serving disadvantaged populations and priority areas of the state such as those hit by recent natural disasters with remaining ARRA funds and future revolving loans.

HOW THE LEGISLATURE SPENT THE MONEY
The Texas Legislature appropriated SECO’s ARRA funds through the agency’s existing programs. Through an Article 12 rider, legislators directed SECO to prioritize a small amount of the ARRA funds for energy efficiency upgrades to state-owned buildings.

By appropriating the bulk of SECO’s ARRA funds to SECO’s existing State Energy Program, lawmakers allowed SECO to use the funds for the LoanSTAR program, which provides low-interest loans to local governments for energy efficiency projects in publicly owned buildings. Using the one-time ARRA funds for revolving loans ensured that the funds would be used many times over, and that they would be used to leverage local taxpayer investments in energy efficiency.

BACKGROUND ON EXISTING STATE PROGRAMS
SECO’s ARRA funds flowed through the Department of Energy (DOE). Some of SECO’s ARRA funding went to new programs established in the Recovery Act, while other funds went to programs that already existed at the state and federal levels. The backbone of the State Energy Program is SECO’s LoanSTAR energy efficiency loan program.

LoanSTAR
Much of SECO’s ARRA State Energy Program funding went to LoanSTAR, a revolving loan program to public entities that SECO has operated for many years. In the program, SECO makes low-interest loans to public entities for energy efficiency and on-site renewable programs that will save money, with the savings being sufficient to pay back the cost of the loan. Through this program, hundreds of schools, universities, cities and state governmental entities have retrofitted existing buildings and made them more energy efficient.

The awards are structured as low-interest two percent loans of up to $10 million, of which up to $2 million may be used for renewable energy systems. The term of the loan is for 10-years or less; if at least 10% of the project cost contains renewable energy technologies, the term of the loan may qualify for up to a 15-year payback. Thus far, only one of the grants awarded – the Brooks Development Authority -- has included a solar array as part of the loan program.

The lack of monies for solar or other renewable technology point to the more efficient use of loan money for energy efficient technologies like insulation, high efficiency chillers and air conditioners, cool roof technology and energy performance contracting, all of which create more energy savings at a smaller cost than solar. In part because of this situation, SECO created a separate grant program for renewable technology, which can be utilized in concert with the loan program.

Energy Assurance
The Energy Assurance Program (EA) is an ongoing initiative to ensure the resiliency of the electric grids in Texas and the U.S. The Public Utility Commission of Texas and the Texas Railroad Commission provide energy planning and coordination for the Energy Assurance Program in Texas, but it is administered by SECO.[ii]

HOW THE ARRA FUNDS HELPED TEXAS
SECO and the Comptroller of Public Accounts submitted four funding categories to the DOE for approval. In 2009, the DOE approved the State Energy Program.

Energy Building Code Upgrades
One of the requirements attached to ARRA money related to the State Energy Program was that states upgrade their codes to be equivalent to the 2009 IECC, and that within 8 years they confirm that 90 percent of the buildings built to those codes meet the code requirements.[iii] Before ARRA, the Texas Legislature required new buildings in Texas to meet either the energy codes of the 2001 International Residential Code (IRC) or the 2001 International Energy and Conservation Code (IECC). [iv]

In June 2010, SECO updated minimum energy codes to the 2009 IECC for all new buildings, except single-family homes, which were required to meet the energy code of the 2009 IECC. The second provision related to ARRA makes certain that the majority of new buildings comply with the new energy codes.  This provision will be implemented in future years through inspections and surveys of buildings in Texas’s three different climactic zones.

Building Efficiency and Retrofit
 The Building Efficiency and Retrofit program built on SECO’s existing LoanSTAR program. Thus far, through two rounds of funding, some $68,000,000 has been disbursed to a variety of public entities throughout the state. One of the largest, at the Stephen F. Austin University facility in Nacogdoches, will lead to retrofit and conservation measures in 86 buildings on the campus or 92 percent of all university facilities by area on the campus.
 
Transportation Efficiency
The ARRA Transportation Efficiency program was designed to increase transportation efficiency, reduce greenhouse gas emissions, and reduce dependence on foreign oil while creating jobs. Public entities could submit proposals for competitive grants through two projects: alternative fuels (fleet vehicle conversion and purchase) and traffic signal improvement projects.[v] These programs were intended to decrease costs and energy use, electric or fuel, over time. Appendix A contains Texas government entities who received alternative fuel and travel signal grants.

Stimulus Distributed Renewable Energy Technology Program
 The Renewable Energy Grant program was offered to only public entities and buildings, and projects were limited to certain types of onsite renewable energy projects.[vi]  Under the first round of funding, 31 grants were awarded to public entities for nearly $31 million.[vii] An additional 14 entities have been awarded $18 million in additional grants. With a few exceptions for onsite wind towers, awards were mainly for solar PV technology.[viii] These grants have created a boon for some local solar development and installation companies at a time when utilities have been reducing solar rebate programs in the state.

Energy Training Centers
 SECO set aside $6 million of its ARRA State Energy Program funds for training in energy efficiency and renewable energy at educational institutions.[ix] Through January 2011, $4.8 million had been earmarked for 18 different community and technical colleges. While the first two rounds of funding have already occurred, SECO is currently conducting a third round award of approximately $1.1 million.[x] The funds awarded are utilized to purchase equipment needed to train/educate workers in the fields of energy efficiency, transportation efficiency and renewable energy technologies. These funds must used for equipment in courses for credit or certification to train or educate workers in energy sector or green jobs.[xi]

Public Outreach and Education Campaign
 The Public Outreach Campaign is a $5 million commitment to develop a public outreach and education campaign designed to teach Texans about the benefits of energy efficiency, conservation, demand response and renewable energy, as well as information about how to access programs.[xii] As part of this effort, SECO developed a new website, www.texaspowerfulsmart.org. The principle use of the website has been to advertise round two of the energy efficiency appliance rebate program and provide consumers information on ways to save energy through energy efficiency.[xiii]
 
Additionally, SECO established an awards program that highlights Texas businesses that offer energy efficiency and renewable energy products or services. The program, Eureka!, will provide grants of up to $50,000 for small businesses to promote new energy-efficient and renewable energy products and technologies.[xiv] SECO’s third effort is to promote the Texas ENERGY STAR Sales Tax Holiday during Memorial Day Weekend, a tax rebate that will encourage the purchase of energy efficient appliances in May 2011.[xv]

Appliance Rebates
 SECO received millions of dollars in stimulus funds as part of a program designed to encourage the mass purchase of energy efficient appliances as a means to create and save energy. As part of the $300 million Energy Efficient Appliance Rebate Program, SECO dedicated $23.4 million to encourage consumers to purchase such appliances.[xvi]

The first round of rebate sales occurred in April 2010, with mixed results. In December 2010, SECO began a larger but more carefully designed Mail-in Energy Efficient Appliance Rebate Program. Under the Appliance Rebate Program, individuals purchase equipment and then apply for the rebates on a first –come, first-served basis. Approximately $10 million of the remaining $18 million had been distributed by the end of January 2011 through the second round rebate program.[xvii]

Energy Efficiency and Conservation Block Grant Program
 While large cities and urban counties in Texas were eligible to receive $163 million in direct block grants from the federal government, SECO also received $45 million for smaller cities.[xviii] SECO and the Comptroller of Public Accounts made the decision to distribute the grant equitable to all smaller cities and all non-urban counties across all of Texas, disseminating grants of $46,000 and $23,000 for smaller cities and counties.[xix]
  
This decision ensured ARRA money was geographically distributed throughout Texas. As of early February 2011, contracts for $38 million of the $45 million had been distributed or obligated.[xx]

Activities eligible for use of funds include:

  • Building energy audits and retrofits
  • Installation of distributed energy technologies including combined heat and power and district heating and cooling systems
  • Installation of energy-efficient traffic signals and street lighting
  • Installation of renewable energy technologies on government buildings[xxi]

Some ARRA funds went directly to large cities and urban counties through the Energy Efficiency and Conservation Block Grant program[xxii]. Certain cities and counties in Texas were automatically eligible for these funds, but still had to apply and qualify by submitting eligible projects relating to energy efficiency, efficient transportation and renewable energy[xxiii]. SECO played a “marketing” role in these block grants by assisting cities with determining eligibility criteria and offering suggestions on eligible projects.

SECO ARRA Funds Obligated
Subprogram Total BudgetAllocated Total Money Obligated, January 2010
Building Efficiency and Retrofit $134,800,000 $68,930,620
Transportation Efficiency $17,000,000 $16,558,715
Distributed Renewable Energy $53,000,000 $49,012,690
Energy Sector Training Centers $6,000,000 $4,778,865
Public Outreach and Education $5,000,000 $5,000,000
Subtotal, State Energy Program $218,782,000 $144,327,723
Energy Efficient Appliance Rebate Program $23,341,000 $14,276,106.33
State Energy Plan $2,432,068 $2,407,747.41
Energy Efficiency and Conservation Block Grant Program $45,638,100 $39,021,590

Source: SECO ARRA Funds

WHAT HAPPENS WHEN THE MONEY’S GONE?
SECO arguably will never completely exhaust its ARRA funds, because the State Energy Program dollars invested in LoanSTAR can revolve through the loan program as long as there is demand. Many of SECO’s other ARRA programs will continue to provide benefits far into the future because they will generate ongoing energy savings for public and private sector users.

IT AIN’T OVER TILL IT’S OVER
 Federal funds invested in energy efficiency in Texas will pay dividends for the state for years to come. Likewise, funds invested in Energy Assurance and Transportation Efficiency will provide ongoing benefits.

DOE still has ARRA funds remaining that entities in Texas could apply for. As the nation’s most intensive energy user, Texas should avail itself of all the energy efficiency resources possible.

Legislators did not give SECO any direction to ensure that ARRA energy efficiency funds were targeted to populations of particular interest to the state such as economically disadvantaged areas, minority populations, and areas of the state impacted by recent natural disasters. Lawmakers could refine SECO’s programs by requiring that a share of remaining ARRA funds and future revolving loan funds target particular areas of the state or populations.

 
[i] U.S. Department of Energy. Energy Efficiency and Conservation Block Grant Program. Online. Available: http://www1.eere.energy.gov/wip/eecbg.html. Accessed: February 16, 2011.

[ii] State Energy Conservation Office. Energy Assurance Program.Online. Available:http://www.seco.cpa.state.tx.us/arra/ea/index.php. Accessed February 17, 2011.

[iii] US Energy Information Administration. Annual Energy Outlook 2010 with Projections to 2035.Online Available:http://www.eia.doe.gov/oiaf/aeo/otheranalysis/aeo_2010analysispapers/arra.html, accessed February 16th, 2011

[iv] Texas Legislature. Health and Safety Code, Title 5, Section C.Online Available:http://www.statutes.legis.state.tx.us/Docs/HS/htm/HS.388.htm, accessed February 16th, 2011

[v] State Energy Conservation Office. Transportation Efficiency Program. Online Available:http://www.seco.cpa.state.tx.us/arra/sep/transportation/index.php, accessed February 16, 2011

[vi] State Energy Conservation Office. Distributed Renewable Energy Technology Program. Online Available:http://www.seco.cpa.state.tx.us/arra/sep/renewable/, accessed February 16, 2011

[vii] State Energy Conservation Office. Distributed Renewable Energy Technology Program Awards. Online Available:http://www.seco.cpa.state.tx.us/arra/sep/renewable/index.php#awards, accessed February 16, 2011

[viii] State Energy Conservation Office. Distributed Renewable Energy Technology Program. Online Available:http://www.seco.cpa.state.tx.us/arra/sep/renewable/, accessed February 16, 2011

[ix] State Energy Conservation Office. Energy Training Center Grants. Online Available:http://www.seco.cpa.state.tx.us/arra/sep/training/index.php, accessed February 16, 2011

[x] State Energy Conservation Office. Energy Training Center Grant Awards. Online Available:http://www.seco.cpa.state.tx.us/arra/sep/training/estc_awards.php, accessed February 16, 2011

[xi] State Energy Conservation Office. Technical Guidelines: ARRA Special Provisions. Online Available:http://www.seco.cpa.state.tx.us/arra/guidelines/index.php, accessed February 16, 2011

[xii] State Energy Conservation Office. Public Education and Outreach. Online Available:http://www.seco.cpa.state.tx.us/arra/sep/outreach/index.php, accessed February 16, 2011

[xiii] Texas Powerful Smart. texaspowerfulsmart.org. Accessed February 16, 2011.

[xiv] State Energy Conservation Office. Public Education and Outreach .Online Available:http://www.seco.cpa.state.tx.us/arra/sep/outreach/eureka.php, accessed February 16, 2011

[xv] Texas Powerful Smart. Texas ENERGY STAR® Sales Tax Holiday. Online Available:http://www.texaspowerfulsmart.org/incentives/taxfree.php, accessed February 16, 2011

[xvi] State Energy Conservation Office.Energy Efficient Appliance Rebate Program.Online Available:http://www.seco.cpa.state.tx.us/arra/rebate/index.php, accessed February 16, 2011

[xvii] Energy Efficiency Powerful Smart for Texans. New Texas Appliance Mail-In Rebate Program.Online Available:http://www.texaspowerfulsmart.org/rebate/accessed February 16, 2011

[xviii] State Energy Conservation Office. Energy Efficiency and Conservation Block Grant (EECBG) Program. Online. Available: http://www.seco.cpa.state.tx.us/arra/eecbg/index.php, accessed February 16, 2011
[xix] Texas Comptroller of Public Accounts. State Energy Conservation Office. Energy Efficiency and Conservation Block Grant (EECBG) Program.” Online. Available: http://www.seco.cpa.state.tx.us/arra/eecbg/index.php. Accessed: February 17, 2011.

[xx] US Department of Energy; Energy Efficiency and Renewable Energy Office. Energy Efficiency Community Block Gran Allocations.Online Available:http://www1.eere.energy.gov/wip/docs/eecbg_allocation_tx.xls, accessed February 16, 2011

[xxi] Online Available:http://www1.eere.energy.gov/wip/eecbg.html, accessed February 16, 2011

[xxii] U.S. Department of Energy. Energy Efficiency and Conservation Block Grant Program. Online. Available: http://www1.eere.energy.gov/wip/eecbg.html. Accessed: February 16, 2011.

[xxii] Online. Available: http://www.competitivepower.org/article/ercot-2010-grid-operations-and-planning-report, accessed February 16th 2011

[xxiii] U.S. Department of Energy. Energy Efficiency and Conservation Block Grant Program. Online. Available: http://www1.eere.energy.gov/wip/eecbg.html. Accessed: February 16, 2011.

[xxiii] Online. Available: http://www.competitivepower.org/article/ercot-2010-grid-operations-and-planning-report, accessed February 16th 2011