Economic Impacts of Recovery Act Funding for the State Energy Program

The SEP is the only federally funded, state-based program administered by the U.S. Department of Energy that provides resources directly to states for energy efficiency and renewable energy. ARRA directed $3.1 billion to the SEP in February 2009; this funding is leveraged by state and private funds. The goals established for the SEP under ARRA are to (1) increase energy efficiency to reduce energy costs and consumption for consumers, businesses and government; (2) reduce reliance on imported energy; (3) improve the reliability of electricity and fuel supply and the delivery of energy services; and (4) reduce the impacts of energy production and use on the environment.

On July 7, 2010, the Environmental and Energy Study Institute (EESI) held a briefing on how state governments have used funding from the American Recovery and Reinvestment Act of 2009 (ARRA) to expand the State Energy Program (SEP). State officials discussed how ARRA dollars have helped them create local jobs, fund innovative energy programs, and reduce energy bills for consumers.

• The American Recovery and Reinvestment Act (ARRA) directed $3.1 billion to the State Energy Program (SEP) and to date $2.5 billion has cleared federal approval for fund allocation. States are leveraging this funding; for every $1 of federal money, states and private sources contribute $10.71.
• Measuring the SEP’s progress by the amount of money spent is a poor metric. A better metric is to look at how much of the ARRA funds have been obligated to approved projects, since that is the point at which projects begin and jobs are created. This process was likened to a home owner putting a deposit down for a home improvement project but waiting until the work is complete before paying the contractor.
• The panel agreed that ARRA funding has been very helpful because it allowed their states to ramp up energy efficiency and renewable energy projects which had languished without adequate funds.
• Part of ARRA’s success in creating successful and sustainable projects was the decision to allow states to allocate the money themselves. Each state is different, with different demographics, geography, industry and infrastructure, so they each need unique approaches to project designs and fund allocation.
• The Massachusetts SEP was allocated $55 million by ARRA and it has obligated 94 percent of the funds to date. Two programs Massachusetts chose to fund were the Solar Stimulus Program, in which wastewater treatment plants are retrofitted and equipped with solar panels, and the Leading by Example Program, which improves the energy efficiency of state buildings and supports recycling, water conservation, waste reduction, green buildings, and alternative fuels.
• Montana was allocated $26 million and has put that money toward renewable energy loans, energy development and demonstration grants, recycling grants, information and outreach activities, and revolving loan and financing programs.
• New York was allocated $123 million, much of which is invested in local governments, schools, hospitals, and non-profit organizations. The state has focused on reducing the cost of doing business in the state, creating renewable energy programs, and appliance rebate programs.
• Hawaii was allocated $26 million and has used the funds to support previously existing initiatives, the most ambitious of which is Hawaii’s goal to meet 70 percent of its total energy needs from clean energy by 2020. The state has emphasized renewable energy projects, like solar water heaters, and energy appliance rebate programs. Almost all of Hawaii’s funds have been obligated.
• ARRA funds for the SEP must be obligated by the Department of Energy to the states by September 2010 and spending must be complete by April 2012.