Congress’ Energy Policy Act and its Affect on the Insulation Industry

Kara Saul Rinaldi

September 1, 2005

After more than 4 years of debate, the Congress of the United States sent a comprehensive energy bill to President Bush in late July 2005 stating that the Alliance to Save Energy estimates will save approximately 2 quadrillion Btu a year by 2020, reducing the anticipated growth in energy use by about 8 percent by that time. The energy bill also includes about $2.1 billion in tax incentives for efficiency and conservation measures.

The energy bill provides a number of building tax incentives that offer great benefits to the insulation industry—credits for builders of energy-saving homes, for example. For commercial buildings, there is a tax deduction of up to $1.80 per square foot for buildings designed to use 50 percent less energy than required by the 2001 American Society of Heating, Refrigerating and Air-Conditioning Engineers Inc. (ASHRAE) 90.1 model commercial code. All of these incentives are available for 2 years, beginning in 2006.

In an effort to support states that update their building codes, the energy bill authorizes a $25 million-per-year (2006 to 2010) federal fund to support states that have up-to-date building energy codes in achieving high rates of compliance. The bill also updates the 2003 International Energy Conservation Code model energy code standards for public housing funded by Hope VI grants.

Another benefit to the insulation industry is the many provisions that update standards and targets for federal buildings—the biggest single electricity consumer. To assist the federal government in an effort to lead by example, the bill provides a 10-year reauthorization of federal agencies to enter into Energy Savings Performance Contracts (ESPCs) with private companies. Under an ESPC, updates to a federal building (from insulation to boiler retrofit) are paid out of the utility savings.

For industrial users, the energy bill authorizes the U.S. Department of Energy to enter into voluntary agreements with industrial companies to reduce their energy intensity by at least 2.5 percent each year for 10 years and to publicize their achievements.

Overall, the energy bill includes a number of important energy-savings provisions that could result in greater use of insulation in the building and industrial sectors.