ARRA Funds: Stimulating U.S. Energy Policy, One State at a Time

Solar panels on Massachusetts homes have become more common since the utilization of ARRA funds for the State Energy Program.

Remember the massive economic stimulus bill that the U.S. Congress passed in February 2009? The $787 billion package of funds under the American Recovery and Reinvestment Act was intended to re-invigorate America’s depressed economy, and included a $110 billion investment for building the “New Energy Economy.” But with its ever-increasing price tag and expansive goals in the education, health, employment, and energy sectors, it has been difficult to keep track of the actual progress made.

By the summer of 2009, several communities had voiced their disappointment in the stimulus, complaining that they had not yet received adequate funding to begin the slated recovery projects. But as of May 2010, 45 percent of ARRA funds for Energy Efficiency Programs and Smart Grid Investment Grants (SGIG) had finally made their way to the states, and visible results are starting to surface—results that are encouraging for the transition to a low-carbon energy system. (According to the World watch Institute, which has developed a roadmap for a low-carbon economy, the U.S. energy system has enormous potential for such a transition.)

A particularly successful beneficiary of the ARRA funds is the State Energy Program administered by the U.S. Department of Energy. In February 2009, ARRA provided $3.1 billion to the SEP, which was leveraged by state and private funds. The goals of the program are to increase energy efficiency, reduce energy consumption costs, decrease reliance on imported energy, and minimize the environmental impacts of energy production. If met, the goals could create opportunities for green jobs and business and produce a long-lasting and efficient energy system that can help states meet their emissions reduction goals.

In a briefing last week, the Environment and Energy Study Institute hosted a panel of speakers from the energy departments of Massachusetts, New York, Montana, and Hawaii, who discussed positive experiences with ARRA-funded energy projects. Phil Guidance, Commissioner of the Massachusetts Department of Energy Resources, said that the stimulus money helped revive his state’s neglected and underfunded energy efficiency and renewable energy programs. The Massachusetts SEP was allocated $55 million from ARRA and had received 94 percent of the funds as of May 2010. Massachusetts chose to invest the money in two promising renewables projects: a Solar Stimulus Program to retrofit wastewater treatment plants with solar panels, and the Leading by Example Program to improve the energy efficiency of buildings through recycling, waste reduction, and alternative fuels.

The Leading by Example Program has particularly ambitious goals. It hopes to track emission sources to help bring about an 80-percent reduction in greenhouse gases economy-wide by 2050; a goal set by the state’s Global Warming Solutions Act (GWSA). In fact, the ARRA funds seem to have the indirect effect of enhancing the desire to enact and maintain aggressive emissions reduction goals and energy standards. After receiving a majority of ARRA funds for the energy program, Hawaii upped its “green goals,” intending to meet 70 percent of its total energy needs from clean energy by 2020.

Much of ARRA’s success with the State Energy Program lies in the decision to allow states to distribute funds as they see fit. This enables states to craft specific energy programs to meet the needs of their respective economies. Despite the initial skepticism on the merits of ARRA funding, it does seem to be providing a powerful jolt for states to take action. Hopefully the success of ARRA’s investment in state energy programs will spur wider action to improve energy efficiency on a national scale.

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