[House Hearing, 109 Congress]
[From the U.S. Government Publishing Office]


 
                  UNLOCKING AMERICA'S ENERGY RESOURCES: NEXT 
                                   GENERATION


                                    HEARING

                                   BEFORE THE

                    SUBCOMMITTEE ON ENERGY AND AIR QUALITY

                                     OF THE 

                            COMMITTEE ON ENERGY AND 
                                    COMMERCE

                           HOUSE OF REPRESENTATIVES


                           ONE HUNDRED NINTH CONGRESS

                                SECOND SESSION


                                 MAY 18, 2006

                              Serial No. 109-101

        Printed for the use of the Committee on Energy and Commerce

Available via the World Wide Web: http://www.access.gpo.gov/congress/house


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                      COMMITTEE ON ENERGY AND COMMERCE
                         JOE BARTON, Texas, Chairman
RALPH M. HALL, Texas                      JOHN D. DINGELL, Michigan
MICHAEL BILIRAKIS, Florida                  Ranking Member
  Vice Chairman                           HENRY A. WAXMAN, California
FRED UPTON, Michigan                      EDWARD J. MARKEY, 
CLIFF STEARNS, Florida                    Massachusetts
PAUL E. GILLMOR, Ohio                     RICK BOUCHER, Virginia
NATHAN DEAL, Georgia                      EDOLPHUS TOWNS, New York
ED WHITFIELD, Kentucky                    FRANK PALLONE, JR., New Jersey
CHARLIE NORWOOD, Georgia                  SHERROD BROWN, Ohio
BARBARA CUBIN, Wyoming                    BART GORDON, Tennessee
JOHN SHIMKUS, Illinois                    BOBBY L. RUSH, Illinois
HEATHER WILSON, New Mexico                ANNA G. ESHOO, California
JOHN B. SHADEGG, Arizona                  BART STUPAK, Michigan
CHARLES W. "CHIP" PICKERING,  Mississippi ELIOT L. ENGEL, New York
  Vice Chairman                           ALBERT R. WYNN, Maryland
VITO FOSSELLA, New York                   GENE GREEN, Texas
ROY BLUNT, Missouri                       TED STRICKLAND, Ohio
STEVE BUYER, Indiana                      DIANA DEGETTE, Colorado
GEORGE RADANOVICH, California             LOIS CAPPS, California
CHARLES F. BASS, New Hampshire            MIKE DOYLE, Pennsylvania
JOSEPH R. PITTS, Pennsylvania             TOM ALLEN, Maine
MARY BONO, California                     JIM DAVIS, Florida
GREG WALDEN, Oregon                       JAN SCHAKOWSKY, Illinois
LEE TERRY, Nebraska                       HILDA L. SOLIS, California
MIKE FERGUSON, New Jersey                 CHARLES A. GONZALEZ, Texas
MIKE ROGERS, Michigan                     JAY INSLEE, Washington
C.L. "BUTCH" OTTER, Idaho                 TAMMY BALDWIN, Wisconsin
SUE MYRICK, North Carolina                MIKE ROSS, Arkansas                       
JOHN SULLIVAN, Oklahoma
TIM MURPHY, Pennsylvania
MICHAEL C. BURGESS, Texas
MARSHA BLACKBURN, Tennessee               

                      BUD ALBRIGHT, Staff Director
                     DAVID CAVICKE, General Counsel
       REID P. F. STUNTZ, Minority Staff Director and Chief Counsel


                 SUBCOMMITTEE ON ENERGY AND AIR QUALITY
                     RALPH M. HALL, Texas, Chairman
MICHAEL BILIRAKIS, Florida                RICK BOUCHER, Virginia
ED WHITFIELD, Kentucky                      Ranking Member
CHARLIE NORWOOD, Georgia                  MIKE ROSS, Arkansas
BARBARA CUBIN, Wyoming                    HENRY A. WAXMAN, California
JOHN SHIMKUS, Illinois                    EDWARD J. MARKEY, Massachusetts
HEATHER WILSON, New Mexico                ELIOT L. ENGEL, New York
JOHN B. SHADEGG, Arizona                  ALBERT R. WYNN, Maryland
CHARLES W. "CHIP" PICKERING,  Mississippi GENE GREEN, Texas
VITO FOSSELLA, New York                   TED STRICKLAND, Ohio
GEORGE RADANOVICH, California             LOIS CAPPS, California
MARY BONO, California                     MIKE DOYLE, Pennsylvania
GREG WALDEN, Oregon                       TOM ALLEN, Maine
MIKE ROGERS, Michigan                     JIM DAVIS, Florida
C.L. "BUTCH" OTTER, Idaho                 HILDA L. SOLIS, California
JOHN SULLIVAN, Oklahoma                   CHARLES A. GONZALEZ, Texas
TIM MURPHY, Pennsylvania                  JOHN D. DINGELL, Michigan
MICHAEL C. BURGESS, Texas                   (EX OFFICIO)                            
JOE BARTON, Texas
  (EX OFFICIO)

                              CONTENTS


                                                                        Page
Testimony of:
     Arvizu, Dr. Dan E., Director, National Renewable Energy Laboratory	 14
     Yoder, Marvin, Manager, City of Galena, AK	                         21
     Novak, John, Executive Director, Federal and Industry Activities, 
          Environment and Generation Sectors, Electric Power Research 
          Sectors	                                                 46
     Abate, Victor R., Vice President, Renewable Energy, GE Energy	 87
     Hammond, Dr. Troy D., Vice President, Products, Plextronics, Inc.	 93
     Linebarger, Tom, Executive Vice President and President, Power 
          Generation Business, Cummins, Inc.	                         99
     Katzer, Dr. James, Visiting Scholar, Laboratory for Energy 
          and the Environment, Massachusetts Institute of Technology	107
     Cresci, Joseph E., Chairman, Environmental Power Corporation	115

               UNLOCKING AMERICA'S ENERGY RESOURCES: NEXT 
                                GENERATION


                           THURSDAY, MAY 18, 2006

                         HOUSE OF REPRESENTATIVES,
                     COMMITTEE ON ENERGY AND COMMERCE,
                  SUBCOMMITTEE ON ENERGY AND AIR QUALITY,
                                                           Washington, DC.


        The subcommittee met, pursuant to notice, at 10:09 a.m., in 
Room 2322 of the Rayburn House Office Building, Hon. Ralph 
Hall (Chairman) presiding.
	Members present: Representatives Shimkus, Wilson, Bono, 
Otter, Murphy, Burgess, Barton (ex officio), Boucher, Green, 
Capps, and Hall.
	Also present:  Representative Bass.
	Staff present: Kurt Bilas, Counsel; Annie Caputo, Professional 
Staff Member; David McCarthy, Chief Counsel for Energy and 
Environment; Sue Sheridan, Minority Senior Counsel; Bruce 
Harris, Minority Professional Staff Member; and Peter Kielty, 
Legislative Clerk.
        MR. HALL.  I would like to welcome all of our witnesses here 
today for our hearing, entitled "Unlocking America's Energy 
Resources: Next Generation."  Without objection, Mr. Boucher, 
the Chair will proceed pursuant to Committee Rule 4E and 
recognize Members for three minutes for opening statements.  If 
they defer, this time will be added to their opening round of 
questions.
	With electricity generation expected to grow about 50 percent 
by 2030, the need for alternative sources of energy will continue to 
grow.  There are many innovative technologies currently being 
developed that will become part of our generation portfolio and 
take their place along side natural gas, coal, and nuclear.  This 
hearing will give us the opportunity to hear from two panels of 
knowledgeable witnesses about the new technologies and what to 
expect down the road.  It is important that we encourage their 
development now, in order to avoid future strains on the American 
people and American manufacturers.
	We have with us today representatives and experts from the 
wind, solar, coal, and the biomass industries to discuss renewable 
research being funded publicly and privately.  So we also have 
with us a representative from the city of Galena, Alaska, to talk 
about their plans to build the first small nuclear power plant.  I 
would like to thank all of our witnesses for being here today and I 
look forward to your testimony.
	[The prepared statement of Hon. Ralph Hall follows:]

PREPARED STATEMENT OF THE HON. RALPH HALL, CHAIRMAN, 
SUBCOMMITTEE ON ENERGY AND AIR QUALITY

        I'd like to welcome all of our witnesses here today for our 
hearing entitled, "Unlocking America's Energy Resources:  Next 
Generation".  Without objection, the Chair will proceed pursuant 
to Committee Rule 4(e) and recognize Members for 3 minutes for 
opening statements.  If they defer, this time will be added to their 
opening round of questions.
        With electricity generation expected to grow about 50% by 
2030, the need for alternative sources of energy will continue to 
grow.  There are many innovative technologies currently being 
developed that will become part of our generation portfolio and 
take their place alongside natural gas, coal and nuclear.  This 
hearing will give us the opportunity to hear from two panels of 
knowledgeable witnesses about these new technologies, and what 
to expect down the road.  It is important that we encourage their 
development now in order to avoid future strains on the American 
people and American manufacturers.
        We have with us today representatives from the wind, solar, 
coal and biomass industries as well as experts to discuss 
renewables research being funded publicly and privately.  We also 
have with us a representative from the city of Galena, Alaska to 
talk about their plans to build the first small nuclear power plant.
        I'd like to thank our witnesses for being here, and I look 
forward to their testimony.  

        MR. HALL.  The Chair at this time recognizes Mr. Boucher, the 
ranking member.
	MR. BOUCHER.  Thank you very much, Mr. Chairman.  I want 
to commend you for convening today's hearing so that our 
subcommittee can learn about cutting-edge technologies for 
electricity generation.  A number of technologies are now under 
development that will assist in achieving our national goal of a 
balanced electricity generation portfolio and ensure that our 
Nation's growing need for electricity is met in a constructive way.  
I am particularly interested in hearing from our witnesses on their 
assessment of the progress in developing renewable technologies 
such as wind, solar, and biomass.  Commentary on advances that 
are currently underway in nuclear technology and prospects for its 
expanding use will also be welcome.
	I am particularly interested in technological developments with 
regard to electricity generation from coal, our most abundant 
domestic energy resource, with supplies adequate for 250 years.  
Given its domestic availability, it is appropriate that coal constitute 
a major and growing component of our electricity generation fuel 
mix.  New technologies, including integrated gasification 
combined cycle, ultra supercritical pulverized coal combustion, 
and emerging technologies to capture the carbon dioxide emissions 
from coal-fired power plants, all hold great promise for the ability 
to continue to use coal in growing tonnages with very minimal, and 
in some cases, zero emissions.  And testimony from our witnesses 
this morning about their view of the role of coal in our fuel mix for 
the years ahead, would also be very welcome.
	Mr. Chairman, I appreciate your convening this hearing.  I 
think it is certainly timely and I join with you in looking forward to 
the testimony of our witnesses.
	MR. HALL.  Thank you, Mr. Boucher.  Mr. Shimkus of Illinois 
is recognized for an opening statement.
	MR. SHIMKUS.  Thank you, Mr. Chairman.  And there are two 
hearings going on simultaneously, this one and a 
telecommunications subcommittee meeting, so if we are running 
back and forth, those of us who share those responsibilities, excuse 
us.  I think those today are showing they have a great interest in 
electricity generation and all of the players in having a competitive 
open-field market.  I, like my friend and colleague, Mr. Boucher, 
have been singing the praises and return of coal.  And in discussion 
with just average citizens, they think we are just shoveling it out of 
the coal mine and sticking it into a burner and burning that coal 
and creating all of this nasty stuff, whereas, because of regulations 
and rules and new technologies, it is a whole new world.
	I am excited about Peabody's investment in Illinois and the 
Prairie State Energy Campus, which uses a new wet electrostatic 
precipitator.  That is actually going to start removing some 
mercury issues from there.  It is, by definition, one of the cleanest 
coal-generating power plants on the board.  We hope to break 
ground this fall, our first quarter.  And the frustrating thing is, in 
the environmental comparisons that they have to fight against, the 
environmental comparisons have plants that are on the board that 
aren't up and running, that project all of these better environmental 
advantages that we will never see come true because these plants 
are not going to be built.  So I just find that an interesting dilemma, 
when you are trying to move with new technology, proven 
technology, then you have to fight this environment of, well, it is 
not perfect, and trying to reach the perfection is the enemy of the 
good, many times, and these are great, great benefits.  They are 
coming from all different environments.  We are going to hear 
about nuclear power in a smaller package that I am excited about, 
and also the benefits.  I know the President has talked about using 
solar power and the ability to have the shingles assist in a home 
and the like, so I think this is very timely, because economics 101 
is supply and demand.  You have to increase supply and you have 
to address the demand equation and you have to do all of them.  
You know, just cutting demand is not going to address price and 
concerns.  You have to increase supply and you have to address 
demand and competitive choices out there with the standard.  
	So this is a very, very important hearing and we are very 
excited about it.  Mr. Chairman, thank you for this time and I yield 
back.
	MR. HALL.  Thank you.  The Chair recognizes the gentlelady, 
Ms. Capps, for an opening statement.
	MS. CAPPS.  Thank you, Mr. Chairman.  I also am glad that we 
are holding this hearing this morning.  I welcome our witnesses 
and I believe that putting more attention on the potential of 
renewable fuels and alternative energy is something that many 
people have been waiting for, advocating for, for many years.  
Increased use of renewables and alternative energy would clearly 
reduce our dependence on fossil fuels.  And since this country is 
not exactly awash in oil and natural gas, reducing our dependence 
on them would be good, not only for our environment, but also for 
our national security.
	To be honest, however, we have to do more than talk about the 
potential that renewables and alternative energy have for this 
country.  Talking is something we have been doing for a very long 
time, but we have to put into place more funding for programs to 
bring these energy sources to market, and we have to make 
changes in our energy policy to encourage their use.  
Unfortunately, the budget that we just voted upon last night and 
that the President had submitted earlier this year, I believe 
shortchanges our Federal investment in this area.  The overall 
energy efficiency and renewable energy part of the budget would 
actually go down if this President's budget then actually becomes 
enacted in Appropriations.  In fact, under President Bush's 
proposal, I don't even think we are even spending what we spent in 
the last years of the Clinton Administration.
	I would bring to the committee's attention a 2004 CRS report 
that projects the percentage of national energy demand supplied by 
renewables in the year 2030 would only be about 6.7 percent.  It 
was 6 percent in the year 2004, so that isn't showing very much 
progress.  We should be doing much, much more if we are really 
serious about making progress in this area.
	I would also note that this committee missed historic 
opportunities, time and time again, during the repeated 
consideration of so-called comprehensive energy legislation to 
embrace renewable energy.  Mr. Pallone's amendment to establish 
a renewable portfolio standard was repeatedly rejected by the 
Majority party in this committee, and we weren't even allowed to 
have a vote on it on the House floor.  Adoption of that amendment 
would have required that our major utilities slowly increase the 
percentage of energy they derive from renewable sources, like 
solar, geothermal, wind, and biomass.  At least 13 States have 
similar requirements in place, so we know this can be done without 
disrupting electricity production or raising prices.  So while I am 
pleased that the subcommittee is looking at this issue, again, it is 
very disappointing that we seem to be starting over at ground zero.
	Finally, I find it ironic that mere months ago, we passed 
legislation that was touted by its supporters as providing 
comprehensive strategy to deal with our Nation's energy 
challenges; and yet, here we are talking about the need for more 
renewables and alternative energy.  Last week the Majority 
discovered that maybe making our cars more fuel efficient would 
be a good thing.  I feel sort of vindicated in the arguments that 
many of my colleagues on this side and I have been making over 
the years in support of renewables, alternative energy, and 
increased efficiency standards.  I only wish that our proposals had 
carried the day then so that Americans today could be benefiting 
from them.  But that being said, there is no time like the present to 
get started and I thank you for giving us that opportunity today.  I 
yield back.
	MR. HALL.  Thank you, Ms. Capps.  The Chair recognizes the 
gentleman from Texas, Dr. Burgess, for an opening statement.
	MR. BURGESS.  Thank you, Mr. Chairman.  I too want to thank 
you for holding today's hearing.  In my district in north Texas, we 
run the gamut of renewable energy.  There is a company that 
manufactures solar panels in Keller, Texas, and another 
manufactures wind turbines in Gainesville.  I encourage anybody 
who is in the wind turbine business not to buy those cheap 
Brazilian blades.  Those Gainesville blades will hold up a lot 
longer and do you really well.
	The Lake Dallas Independent School District uses geothermal 
energy to heat and cool its schools.  The Wal-Mart in McKinney, 
Texas, which is just outside my district, is one of their two new 
energy efficient stores that uses renewable technologies such as 
solar panels and roof wind turbines in the parking lot, to generate 
electricity for their store.  And in Denton, Texas, under the 
leadership of Mayor Euline Brock, they have constructed the 
world's first renewable biodiesel facility.  The facility is powered 
by the methane gas extracted from the adjacent landfill and has the 
capacity to produce approximately three million gallons of pure 
biodiesel per year.  The City of Denton's use of biodiesel fuel mix 
is expected to reduce emissions by 12 tons per year in the county.  
That is significant because we are under some clean air mandates.  
The opening of this facility demonstrates the City of Denton's 
dedication to cleaning up the air that we breathe.  This is especially 
important in the north Texas region because of the clean air 
mandates we exist under.
	Well, Mr. Chairman, that is why the hearing is so important 
today.  Our economy is growing in north Texas and of course our 
demand for energy is, as well.  As we try to satisfy this demand in 
an environmentally friendly way, affordable renewable fuel 
sources will take on an even greater importance than they do 
already.  Of course, I want to thank the witnesses that are 
appearing here before me.  Since I haven't used all of my time, let 
me just address the renewable portfolio standard, because, in 
Texas, approximately 50 percent of our electricity is generated by 
natural gas and another 38 percent by coal; but Texas has one of 
the most aggressive renewable portfolio standards in the country.  
Texas RPS was increased by the State legislature in 1999, 
requiring that Texas use a total of nearly 3,000 megawatts of 
renewable energy by the year 2009.  But in August of 2005, 
Governor Perry signed a bill which increased that requirement to 
almost 6,000 megawatts by 2009.  The RPS mandate in Texas is a 
phased-in approach that offers flexibility through a renewable 
energy credits training program.  Any company that does not 
satisfy their requirements by directly owning or purchasing 
renewables, may purchase credits to satisfy that requirement.
	Thank you, Mr. Chairman.  I will yield back the balance of my 
time.
	[The prepared statement of Hon. Michael Burgess follows:]

PREPARED STATEMENT OF THE HON. MICHAEL BURGESS, A 
REPRESENTATIVE IN CONGRESS FROM THE STATE OF TEXAS

        Mr. Chairman, 
        Thank you for convening today's hearing.  
        In my district, we run the gamut of renewable energy - there's 
a company that manufactures solar panels in Keller and another 
that manufactures wind turbines in Gainesville.  
        The Lake Dallas Independent School District uses geothermal 
energy to heat and cool their schools.  The Wal-Mart in McKinney, 
which is near both my district and Chairman Barton's, is one of 
two of their new "energy efficient" stores and uses renewable 
technologies such as solar panels on the roof and wind turbines in 
the parking lot to generate electricity for the store.  
        And in Denton, under the leadership of Mayor Euline Brock, 
they have constructed the world's first renewable biodiesel facility.  
The facility is powered by the methane extracted from the adjacent 
City of Denton Landfill and has the capacity to produce 
approximately three million gallons of pure biodiesel per year.  
        The City of Denton's use of a biodiesel fuel mix is expected to 
reduce emissions by twelve tons per year.  The opening of this 
facility opening demonstrates the City of Denton's dedication to 
cleaning up the air we breathe.  This is especially important in the 
North Texas region as we work to comply with Clean Air Act 
requirements.  
        That is why this hearing is so important today.  As our 
economy grows, so too does our demand for energy.  As we try to 
satisfy this demand in a environmentally-friendly way, affordable 
renewable fuel sources will take on an even greater importance 
than they do already.  
        I'd like to thank the witnesses for appearing before us today; I 
am looking forward to hearing your testimony.  

        MR. HALL.  Thank you.  And I note the presence of the 
Chairman of the Energy and Commerce Committee, and being of 
sound mind, I recognize him at this time for as much time as he 
consumes.
	CHAIRMAN BARTON.  Thank you, Chairman Hall, for taking a 
little bit of the load off the full committee in holding this hearing 
today on R&D and the new technologies to provide electricity and 
natural gas for America's future.  I want to thank our witnesses for 
appearing before us today.  We value your input.  Your discussion 
of new energy technologies is of particular interest to me, since I 
began my career as an engineer.
	One way America will be able to secure its energy future is 
through technology.  Our panelists today are on the cutting edge of 
the effort to bring new technologies to market.  Their work is 
helping to secure America's energy future.  There is another 
important component to the work that you are doing today.  Much 
of it is with technologies that have a minimal environmental 
impact.  Clean, safe domestic sources of energy are important to 
develop.  Newer technologies such as wind, solar, biomass, and 
other renewables will help put the United States on the track for a 
clean energy-secure future.  We must not forget, however, the 
more traditional sources of power.  Clean coal, second and third-
generation nuclear power, and distributed generation must all make 
important contributions to our energy future.
	Last year the Congress passed the Energy Policy Act of 2005.  
I am very proud of that bill.  It provides incentives for both 
traditional and new sources of electric power generation.  Through 
the research at our national laboratories, public/private 
partnerships, and private research, the United States is moving 
ahead on developing new sources of energy.  There is another 
benefit to developing these new sources of electricity, in addition 
to the economic and environmental benefits.  It incrementally takes 
the price and demand pressure off of other fossil fuels, like natural 
gas, that are needed for other uses, like chemicals and fertilizer.  
These exciting new technologies will help America conserve its 
nonrenewable resources.
	Of course, developing new technology is not the only thing we 
can and must do to secure our future.  We must unlock our 
domestic energy resources by exploring for energy in the vast 
tracts that today are off limits.  We must also conserve without 
punishing American consumers.  Our auto efficiency reform bill is 
a major step towards that end, as are the many conservation and 
energy efficiency provisions in the Energy Policy Act of 2005.  I 
think we should also adopt more common sense rules and 
processes that will enable us to move energy to consumers faster 
without compromising our environmental standards.  One example 
of that effort is the refinery reform permitting bill that passed this 
committee, or came out of this committee and is expected to be on 
the floor of the House again in the very near future.
	This hearing is important because it allows Congress to see the 
important research being done in this country on energy sources 
and shows us that the best is yet to come.  Thank you again, Mr. 
Chairman, for holding the hearing, and I want to thank our 
witnesses for being here today.  I yield back.
	[The prepared statement of Hon. Joe Barton follows:]

PREPARED STATEMENT OF THE HON. JOE BARTON, CHAIRMAN, 
COMMITTEE ON ENERGY AND COMMERCE

        Thank you, Chairman Hall, for holding this hearing today on 
research and development into new technologies to provide 
electricity and natural gas for America's future.  I also want to 
welcome and thank our excellent panelists for joining us today. We 
value your input.  Your discussion of new energy technologies is 
of particular interest to me since I began my career as an engineer. 
	One way America will be able to secure its energy future is 
through new technology.  Our panelists today are on the cutting 
edge of that work to bring new technologies to market.  Their work 
is helping to secure America's energy future.  And energy security 
means jobs and a better standard of living for all Americans.
	There's another important component to the work you are 
doing - much of it is with technologies that will have a minimal 
environmental impact.  Clean, safe domestic sources of energy are 
important to develop.  Newer technologies such as wind, solar, 
biomass and other renewables will help put the United States on 
track for a clean, energy-secure future.  However, we must not 
forget more traditional sources of power, too - clean coal, nuclear 
and distributed generation must all make important contributions to 
our energy future.  
	Last year, Congress passed the Energy Policy Act of 2005.  I 
am very proud of that bill.  It provided incentives for both 
traditional and new sources of electric power generation.  Through 
research at national labs, public-private partnerships and private 
research, the United States is moving ahead on developing new 
sources of energy.
	There is one other benefit to developing these new sources of 
electricity, in addition to the economic and environmental benefits 
- it incrementally takes the price and demand pressure off of other 
fossil fuels like natural gas that are needed for other uses like 
chemicals and fertilizer.  These exciting new technologies will help 
America conserve its non-renewable resources.
        Of course, developing new technology is not the only thing we 
can and must do to secure America's energy security.  We must 
unlock our domestic energy resources by exploring for energy in 
the vast tracts that today are off-limits.   We must conserve without 
punishing American consumers.  Our auto fuel efficiency reform 
bill is a major step toward that end, as are the many conservation 
and efficiency provisions in the Energy Policy Act of 2005.
	We must also adopt more common sense rules and processes 
that will enable us to move energy to consumers faster without 
compromising our environmental standards.   One example of our 
efforts here is the refinery permitting reform bill that the House 
will pass very soon. 
	This hearing is important because it allows Congress to see the 
important research being done in this country on energy sources 
and shows us that the best is yet to come.  I look forward to what 
the panelists have to say.

	MR. HALL.  I thank the Chairman and note the presence of Mr. 
Bass, the gentleman from New Hampshire.  We will ask 
unanimous consent that he be allowed to attend and to participate 
if he chooses.  Is there objection?  The Chair hears none.  The 
Chair recognizes Mr. Otter, the gentleman from Idaho.
	MR. OTTER.  I may object.  I want to know what he is going to 
say.
	MR. HALL.  Well, I was with him until one o'clock this 
morning and I think he said it all then.  All right, I will recognize 
you, Governor Otter.
	MR. OTTER.  I am going to pass.
	MR. HALL.  We will go to Mr. Green, the gentleman from 
Texas, for an opening statement.
	MR. GREEN.  Thank you, Mr. Chairman.  Obviously, I arrived 
right on time.  I would like to put my statement into the record, but 
I appreciate the--
	MR. HALL.  Without objection.
	MR. GREEN.  I appreciate you calling the hearing and I would 
just like to put a statement into the record.  In a time of high oil 
prices, we know we need to be able to diversify, and my biggest 
concern, Mr. Chairman, and I am glad for this hearing, is that--and 
I only wanted to look to the future in alternatives, but I also wanted 
to get through the next 20 or 25 years, so that is why we need to 
look at hydrocarbons, at least for the short term, until we can get to 
some other alternatives.  So I will put my full statement into the 
record.  Thank you.
[The prepared statement of Hon. Gene Green follows:]

PREPARED STATEMENT OF THE HON. GENE GREEN, A 
REPRESENTATIVE IN CONGRESS FROM THE STATE OF TEXAS

        Mr. Chairman and Ranking Member, thank you for holding 
this hearing. 
        I support diversifying our energy portfolio in any way 
possible-more efficient natural gas, solar power, clean coal, 
nuclear power, wind power, and other renewable sources of 
energy.
        We need to avoid picking favorites, because the economy is 
likely to have a much bigger impact than anything the government 
can do.  
        The only good thing to come out of higher oil prices is an 
increased incentive to use alternative sources of energy for 
transportation.
        While natural gas prices also sky-high relative to their 
historical prices, perhaps we will have a similar incentive to 
produce new alternative electricity technologies as well, such as 
solar power.
        Coal power will continue to offer affordable and reliable power 
in places that are willing to site new coal facilities, like Texas, but 
other areas without coal generation are going to have to pay higher 
prices.
        Natural gas used to be the preferred form of new power, since 
it burns cleanly, but as the Department of Energy has noted, the 
high prices of natural gas are leading people to rethink those 
planned investments.
        We need natural gas in the petrochemical business, where it is 
irreplaceable.  If short-term high natural gas prices lead to more 
coal, nuclear, and alternative energy hopefully natural gas prices 
come down.
        Of course if we really want to improve our natural gas price 
situation and protect the hundreds of thousands of American 
manufacturing jobs at stake, we should support the language in the 
Interior bill which repeals the Congressional moratoria for natural 
gas drilling in the OCS.
        Thank you and I yield back. 

        MR. HALL.  All right, I thank the gentleman.  The Chair 
recognizes the gentlelady from New Mexico, Mrs. Wilson.
	MRS. WILSON.  Thank you, Mr. Chairman.  I also wanted to 
thank you for having this hearing today to learn a little bit more 
about what some of the future might look like as we expand our 
electricity generation and as the demand increases.  We know that 
by 2030, we are going to have a 50 percent increase in demand 
over current levels.  We are going to have to figure out how to 
supply that demand.
	In New Mexico, we do some innovative things.  The third 
largest wind generation project in the world went on line on 
October 1, 2003, out in eastern New Mexico.  And in eastern New 
Mexico and the high plains of eastern New Mexico, we laugh at 
this time of year and say that in New Mexico, at this time of year, 
Arizona is on its way through to Texas and it is all being carried in 
the wind.  It comes one particle at a time in the dust.  But they have 
got 136 turbines there, standing 210 feet high and generating 200 
megawatts of power.  That is about enough power for 94,000 New 
Mexico homes.  And of course Sandia National Laboratories in 
Albuquerque, New Mexico, develops energy technologies, solar 
energy, and new more-efficient solar technologies are emerging 
from those laboratories and into companies, like Advent Solar, that 
are making solar, highly efficient solar cells for the commercial 
market and manufacturing them in Albuquerque.  They are also 
looking at a biomass plant in the east mountains of New Mexico 
and the east mountains of Albuquerque.  That is not only going to 
help restore the watershed, but take the waste from that restoration, 
use it for electricity generation in a cogeneration facility, and the 
heat from the generators will be used to warm a greenhouse that 
employs 70 people full time, where it is otherwise not 
economically viable.
	So there are a lot of important things happening in new ways 
with renewable energy resources, and we are really looking 
forward to looking at this generation of technologies to see where 
America is going to take us.  Thank you, Mr. Chairman.
	MR. HALL.  Does the gentlelady yield back?
	MRS. WILSON.  Yes, sir, I do.
	MR. HALL.  The Chair recognizes Mrs. Bono, the gentlelady 
from California.
	MS. BONO.  Thank you, Mr. Chairman.  I will submit my 
statement for the record.
	[The prepared statement of Hon. Mary Bono follows:]

PREPARED STATEMENT OF THE HON. MARY BONO, A 
REPRESENTATIVE IN CONGRESS FROM THE STATE OF CALIFORNIA

        Mr. Chairman:
        I am very pleased you are holding this hearing today.  Too 
often, Congress is so consumed with the here and now that we 
don't take time to look towards the future. This hearing lets us talk 
about the future.
        While government has a role to play in this debate, it is my 
belief that the private sector, as well as our colleges and 
universities, can and must play a critical role in bringing forth new 
and innovative technologies.
        Too often, states and local communities are dependent on only 
a few sources of energy. As we see in California, when the cost of 
natural gas rises, so too do our cooling bills.  In the California 
desert, the sweltering summer months must be met with plentiful 
and affordable cooling. It is not a luxury but rather a necessity. So 
in order not be wedded to a single large source of generation, I 
believe that we can and should look to diversify.  But our efforts 
should not stop there - we need to look at a diverse portfolio that 
includes alternative sources of clean and efficient energy.
        All of us have read about various forms of renewable sources 
of energy.  Many of these sources, like solar, wind and geothermal, 
are not new to us.  In fact, these sources of energy are thriving in 
California's 45th Congressional District.  But the technologies 
associated with these forms of generation are changing and they 
are changing for the better.  The government's goal should be to 
encourage honing and improving upon these technologies.
        There are also lesser known sources of renewable energy that 
are a bit more cutting edge.  Here, our goal should be to foster the 
growth of promising new resources and then find a way to 
incorporate those into the market.
        It is my hope that this hearing will shed light on both well 
known and lesser known forms of energy that can and should be 
part of our nation's future. I want to know how Congress can play 
a positive role in partnering with others to help create new forms of 
energy that are clean and affordable.
        Thank you and I yield back my time.
	MR. HALL.  All right.  Mr. Bass, do you care to make an 
opening statement?
	MR. BASS.  Mr. Chairman, I appreciate the courtesy.  I will 
pass.
	MR. HALL.  All right, we will get underway with the testimony.  
Dr. Arvizu and Mr. Yoder.  Did I say it right?  Close?
	MR. ARVIZU.  Yes, sir.
	MR. HALL.  For government work, it is pretty good.
	MR. ARVIZU.  Not bad at all.
	MR. HALL.  We want to thank you two gentlemen and the 
others that comprise the second.  Don't judge our respect for you 
and our appreciation for you being here by the empty chairs here, 
because this is hopefully the last day we are going to be in session.  
People have about three or four other committees to go to and have 
a lot of other things going on.  Your testimony will be heard by 
these people in the back row, and they will tell those of us on the 
front row what you said.  So it is very important that you give your 
testimony so that they hear.  It will be taken down by a very 
capable gentleman over here at the end of the table.  It goes into 
the record for all the Members of the Congress to see.  So it is not 
just talking to empty chairs.  But thank you for that.  
Doctor, I recognize you at this time to sum up, if you can, in 4 
or 5 minutes, or whatever you take.  We are not going to gavel you 
down, but be as brief as you can.  That gives us time to ask 
questions.  Thank you, sir.

STATEMENTS OF DAN E. ARVIZU, DIRECTOR, NATIONAL RENEWABLE ENERGY LABORATORY; 
AND MARVIN YODER, MANAGER, CITY OF GALENA, ALASKA, ACCOMPANIED BY PHILIP 
MOOR, DIRECTOR, PROJECT DEVELOPMENT, BURNS & ROE ENTERPRISES, INC.

        MR. ARVIZU.  Thank you, Mr. Chairman and members of the 
committee.  It is indeed a big honor for me to be here.  I appreciate 
the opportunity to talk and provide commentary to this topic of 
great importance, and I do submit my full written statement for the 
record and trust that that will be accepted in its entirety, and I will 
summarize that testimony in my opening remarks.
	Mr. Chairman, I am the Director of the National Renewable 
Energy Laboratory, the Department of Energy's primary lab for 
research and development of renewable energy and energy 
efficiency technology.  Let me begin by noting that it was the first 
energy crisis in 1970 that, while I was an engineering student in 
graduate school, that motivated me to pursue a career in renewable 
energy and I started with the Sandia National Laboratory to do just 
that.  The Nation's attention at that time was on energy similar to 
what it is today.  The good news is the Nation did respond with an 
R&D program that over the years has produced many benefits in 
terms of alternative energy.  I will get to those here in a moment.  
Perhaps the more sobering news is that we have learned in the past 
three decades that the magnitude of the energy challenge is much 
greater and more complex than we imagined, and the consequences 
of inaction are quite significant.  Our Nation needs to produce 
considerable amounts of new energy to serve our citizens and to 
keep our economy going.  At the same time, we need to reduce our 
dependence on oil and continue to import--I am sorry--continue to 
protect our environment, and it is clear to me that significant 
sustained national energy research, development and deployment 
programs are essential across all of our energy options, including 
clean fossil fuel, sustainable nuclear power, and energy efficiency 
and renewable energy.
	The history of the National Renewable Energy Laboratory, 
which I head, has demonstrated that focused research can yield 
valuable new technologies in the near term, with many collective 
benefits.  Consider, for example, that over the past 25 years the 
cost of wind has declined from over 40 cents a kilowatt hour to 
now in the range of 4 to 6 cents a kilowatt hour in good wind sites.  
The cost of electricity from photovoltaics has been reduced by 80 
percent over that same time and today it is in the utility scale at 15 
to 30 cents a kilowatt hour.  And it is because of the progressively 
lower costs in both wind and photovoltaics and other technologies 
that these two have become the fastest growing sources of new 
electricity in the United States and in the world today, and there 
are similar gains in other technologies as well.
	President Bush underscored the need for continuing energy 
research when he visited our laboratory earlier this year.  The 
President's Advanced Energy Initiative calls for a 22 percent 
increase in clean energy research at the Department of Energy, and 
his initiative would expand research in renewable fuels as well as 
solar electricity, and we believe this is a really important new 
development.  The renewable energy industry is real.  Tens of 
billions of dollars worldwide are presently part of that industry.  It 
is rapidly growing and the market growth is spurred by a 
combination of technology advances and public policies.  Further 
development of new renewable energy technologies will create 
many opportunities domestically.  Renewable energy is plentiful 
across every region of our Nation.  Renewable energy technologies 
can be an engine for local economic growth, job creation, and we 
are beginning to see that in a number of States.
	While we clearly need supply side solutions, it is also clear that 
energy efficient solutions are often the most cost-effective way to 
meet future demands.  Energy efficiency should be an ingredient of 
any comprehensive national program.  
For non-hydro renewables such as wind, the technology is 
beginning to mature.  Ten gigawatts, 10,000 megawatts of wind 
are installed in the United States, 60,000 in the world, and there is 
still a need for continued research to eventually eliminate the 
production tax credits that are required to make that market go in 
the United States, and importantly, to make this clean energy 
source more suited to lower wind regimes as well.
	In solar photovoltaics, researchers at our national center are 
part of the President's Solar America Initiative.  They are working 
to bring the cost down of photovoltaics to between 5 and 10 cents a 
kilowatt hour in the next decade.  To get there we have to develop 
more cost-effective manufacturing techniques and advanced 
engineered materials.  We are seeing those in the laboratory today.  
I am very excited to note that we have a couple of examples of 
some of those technologies here on display.  Our troops are using 
solar battery chargers in the field in Iraq today, technology 
developed at our national laboratory.  Additionally, we have thin-
film photovoltaics on plastics that we fly in space presently, and 
this technology will be ubiquitous in the future; technology is 
advancing very rapidly.
	On renewable fuels, we have great opportunity there.  We 
believe that with domestic resources, we can get to 30 percent of 
our current U.S. gasoline consumption to be supplied by biofuels, 
and we think that can be done in a very short period of time, as 
well, with, certainly, competitively priced ethanol from cellulosic 
biomass that the President has put in as his biofuels program.
	Each of these areas I have highlighted suggest that there are 
still challenges that remain and that we need to continue to get the 
cost down for renewable energies and fuels in order to accelerate 
their adoption.  Renewable energy offers us a tremendous 
opportunity, and from my vantage point, the prudence of making 
serious national investments to achieve the full potential of energy 
efficiency and renewable energy is very clear and very compelling.  
Thank you.
	[The prepared statement of Dan E. Arvizu follows:]

PREPARED STATEMENT OF DR. DAN E. ARVIZU, DIRECTOR, 
NATIONAL RENEWABLE  ENERGY LABORATORY

        Mr. Chairman, thank you for this opportunity to discuss the 
important role the next generation of energy resources and 
technologies will play in meeting the critical energy needs of our 
nation.  I am the director of the National Renewable Energy 
Laboratory, the Department of Energy's primary laboratory for 
research and development of renewable energy and energy 
efficiency technologies.   
        Our nation is at a critical juncture. We need to produce 
considerable amounts of new energy to serve our citizens and keep 
our economy growing. At the same time we need to reduce our 
dependence on imported oil and continue to protect our 
environment.
        The fundamental question -- Where will this new energy come 
from? - has no one answer.  The reality is that if we are to solve 
our energy problems, and meet the phenomenal growth in demand 
for energy, we must have an energy portfolio that is at once, both 
smart and diverse.  In my view, it is not a matter of nuclear energy 
versus solar energy, it's not wind power versus new fossil fuel 
technologies.  The answer is that each will have an important place 
at the table - we will need all of these technologies, and more.  
        I cannot predict precisely what our energy landscape will look 
like, say, in 25 years, as technology and markets evolve.  But I can 
say with some confidence that we do need a significant and 
sustained national energy research program to get us there.
        With a vital research and development program working on 
behalf of our nation, I am optimistic that we will be able to supply 
all the energy we need - and develop new industries that help grow 
our economy, and further environmental progress - while doing 
so.  Throughout my career in energy research, I have seen time and 
again just how much a well-directed and properly supported R&D 
effort can accomplish.
        One need look no further than the relatively brief history of our 
research facility in Golden, Colo.  Since our laboratory was 
founded in 1977 (known then as the Solar Energy Research 
Institute) the progress made on so many fronts has been nothing 
short of remarkable.  NREL, along with leading academic 
institutions and corporations throughout the U.S., have 
demonstrated that focused research can yield valuable new 
technologies in the near-term, with many collective benefits for 
society added over the longer term. 
        Consider that over the past 25 years, the cost of wind energy 
has declined from 40 cents per kilowatt-hour to four to six cents a 
kilowatt-hour today.  The cost of electricity from photovoltaic 
technologies has plummeted 80 percent over that same time. These 
progressively lower costs have helped wind and solar energy 
become two of the fastest growing sources of new electricity in the 
U.S. and the world.  Researchers at our laboratory attest to similar 
gains in other energy technologies, ranging from solar thermal 
power, biomass power, geothermal energy, hybrid vehicles and a 
host of advanced energy efficient technologies for industry.
        President Bush laid out a timely and compelling energy vision 
when he came to our laboratory earlier this year.  The President's 
Advanced Energy Initiative calls for a 22 percent increase in clean 
energy research at the Department of Energy.  These proposals 
emphasize research into renewable fuels, as well as renewable 
solar and wind technologies.
        Renewable energy can and should be one of the key players in 
meeting future demand for electricity and transportation fuels. We 
have hugely abundant renewable resources in the United States. 
The solar resource is good in every state, and even Alaska has the 
equivalent solar resource of Germany, which today is the largest 
solar market in the world.  There are enough wind resources - 
concentrated in hilly areas of the country, coastal regions and the 
Great Plains - to meet twice the country's total electricity 
demand. There are major, untapped geothermal resources in the 
West, and you can find vast amounts of useable biomass resources 
in virtually every state.
        Longer term, although hydrogen is often thought of primarily 
as an automotive fuel, its role as an energy carrier will be 
important in the electricity sector. Hydrogen can be produced from 
water using any available source of electricity - fossil, nuclear or 
renewable. This makes it possible to overcome the intermittency of 
wind or solar resources by using them to produce and store 
hydrogen, which can then be used to run a generator on demand.
        The challenge that remains before us is to continue to bring 
down the cost of renewable electricity and fuels in order to 
accelerate their adoption. NREL and its industry and university 
partners have made impressive progress in this area over the past 
three decades but we still have a long way to go before each of the 
renewable technologies realize their full potential and become truly 
cost-competitive with traditional alternatives.
        Our cost-reduction effort has a two-pronged strategy. One 
course is to work diligently on short-term, applied R&D to bring 
down the cost of existing processes and manufacturing methods. 
The other is to continue with mid-term, disruptive technology 
advancement, and long-term, higher-risk and revolutionary basic 
research that industry can't afford on its own, to identify and 
develop the next generation of renewable energy technologies.



        A new, 71,000-square-foot Science & Technology Facility at 
NREL, to be completed this year, will allow us to do even more of 
this "transformational" R&D in solar, basic science and hydrogen 
research. 
        So exactly where are we today?  And, moreover, what remains 
to be done to ensure that we have the most economic, the most 
secure and the most environmentally beneficial energy portfolio in 
the future?
        Surely, while we clearly need supply-side solutions, it is 
equally clear that energy efficiency can be of significant value in 
reducing the demand for power.  The goal may be simple - to use 
energy more intelligently, and not waste it.  But achieving that 
simple goal often requires the same kind of complex and 
sophisticated concepts and technologies that we have come to 
expect on the energy production side of the equation.
        Energy efficient solutions are often the most cost effective way 
to meet future demand and also provide additional non-energy 
benefits, such as improved productivity, increased durability and 
reduced air emissions.
        Buildings account for 70% of the nation's electrical energy use. 
DOE's current research goal is to develop cost effective, grid-
connected Zero Energy Homes by 2020.  A net Zero Energy Home 
produces as much energy as it consumes over the course of year.  
A total of nearly 40,000 energy efficient homes have been 
completed within the Building America program, and individual 
research houses, including the Zero Energy Denver Habitat home, 
are demonstrating the feasibility of reaching the Zero Energy 
Home goals.  Expanded investments in private and public research 
partnerships like DOE's Building America Program, are 
accelerating the adoption of new efficiency and renewable energy 
technologies within the housing and commercial buildings 
industries.
        Energy efficiency technology also is having a tremendous 
impact in the transportation sector.  DOE's Clean Cities program 
has encouraged use of alternative fuels, saving more than a billion 
gallons of oil since its inception.  Gasoline-electric hybrid vehicles 
already are successfully boosting the fuel economy of our nation's 
vehicle fleet, and plug-in hybrids offer the promise of cars that can 
go 100 miles or more on a gallon of gas.
        It is important that energy efficiency, in combination with 
energy supply, be a key ingredient of any comprehensive program 
for national energy research.
        On the energy production side, some of the most dramatic cost 
reductions have been achieved in solar power technology.  In real 
terms, electricity from photovoltaics - or PV, technologies that 
produce electricity directly from sunlight - cost one fifth or less of 
what they did 25 years ago.  Concentrating solar power costs about 
one seventh of what it did then. The price of power from grid-
connected PV systems today ranges from 15 to 32 cents a kilowatt 
hour.  This year industry will ship PV modules capable of 
producing 1.2 gigawatts of power into the world marketplace.  
There is currently 450 megawatts of installed capacity from 
photovoltaics in the U.S.
        Our researchers in the National Center for Photovoltaics at 
NREL are working to bring that cost down to around 4 to 6 cents a 
kilowatt hour by 2025.  To get there, we will have to develop 
better, faster and larger scale manufacturing techniques, and create 
higher efficiency PV panels in the process.  Solar technologies 
have the potential to shift a large proportion of daytime peak loads 
away from natural-gas-fired generators.  And longer term, we 
believe solar nano-structured materials now being explored at 
NREL and elsewhere can revolutionize solar PV.  
        As for wind power, in the best wind regimes, wind-generated 
electricity today costs about 4 to 6 cents/kWh - one-tenth of what 
it did 25 years ago. Our engineers and industry partners at the 
National Wind Technology Center are developing new methods to 
drive that cost down to 3.6 cents a kilowatt hour at low wind-speed 
sites onshore by 2012, and down to 5 cents a kilowatt hour for 
shallow water offshore sites by 2014.
        Wind energy is the most mature of the renewable technologies.  
In some regions, wind power can be the cheapest source of 
electricity. There currently are 10 gigawatts of wind power 
installed in the United States, and 60 gigawatts worldwide.  While 
wind power is well established, and is growing at impressive rates, 
there remains considerable need for new research that will further 
drive down costs, and, importantly, make this clean, renewable 
energy source better suited to areas that have lower average wind 
speeds than the prime areas being developed thus far.
        Our work today is focused on developing efficient, low wind-
speed turbines, advanced power electronics and transferring wind 
technology to off-shore systems. If we continue to develop more 
advanced methods of accurately forecasting and integrating wind 
into the broader electrical generation system, wind energy has the 
potential to contribute up to 20 percent of the nation's electricity.
        There is 10,400 megawatts of biopower generation in the U.S. 
Biopower today costs 8 to 12 cents a kilowatt hour, half of what it 
cost 25 years ago.  Scientists at NREL's National Bioenergy 
Center and other labs are hard at work to lower that figure to 6 to 7 
cents a kWh by 2020.
        Geothermal resources contribute 2,400 megawatts to the 
nation's power needs.  Electricity from geothermal resources costs 
5 to 8 cents a kilowatt hour today - about one-third of the cost 25 
years ago. With the technology improvements we see over the next 
two decades, geothermal power is projected to drop to less than 4 
cents a kilowatt hour by 2025. 
        As for ethanol and other fuels made from biomass, there have 
been significant improvements as well. Whereas the cost of 
producing ethanol was more than $4 a gallon 25 years ago, it can 
be made for $1.20 a gallon today. Our nation currently produces 
about 4 billion gallons of ethanol annually, primarily from corn 
grain. However, corn comprises but a small fraction of biomass 
that can be used to make ethanol. A DOE and USDA study 
suggests that, with aggressive technology developments, biofuels 
could supply some 60 billion gallons per year - 30% of current 
U.S. gasoline consumption - in an environmentally responsible 
manner, and without affecting food production.
        To gain greater use of "homegrown" renewable fuels, we will 
need new technologies that will produce competitively priced 
ethanol from cellulosic biomass, such as agricultural and forestry 
residues, municipal wastes, trees and grasses. New technologies 
like those we are now perfecting at NREL can break those 
cellulosic materials down into sugars and ferment them into fuel.  
The President has set a goal of making cellulosic ethanol cost-
competitive with corn-based ethanol by 2012, and thereby 
reducing future U.S. oil consumption.
        Essential to the success of each of these emerging technologies 
is the need to move from a predominantly centralized model of 
power generation to one that includes flexible, resilient and 
distributed energy systems.  This will require a concerted effort to 
revamp our electricity infrastructure.  By putting in place a more 
modern and flexible electric distribution system, we will be able to 
take full advantage of each new electric generation technology, and 
do so in a way that maximizes their benefits in differing states and 
regions across the country.
        Most renewable power systems are distributed in nature, and 
thereby can enhance reliability of the electricity grid. Distributed 
generation can additionally be used instead of transmission and 
infrastructure expansion, and thus save money for utilities and 
consumers. Calculating the financial value of these benefits from 
renewables can be difficult. Renewable systems typically cost 
more initially, but most have low or no fuel costs, which can go a 
long way toward mitigating price volatility of more conventional 
fuels such as natural gas. We have to be able to put a dollar value 
on these benefits - and we're working on that at NREL.



        Leadership provided by DOE, EPA, and national laboratories 
has helped state agencies encourage the use of renewable energy to 
help meet air quality goals.   Maryland, Texas and New Jersey are 
incorporating energy efficiency and renewable technologies into 
their State Implementation Plan (SIP) planning process.  In Texas 
alone, 4 million megawatt-hours of energy efficiency measures 
have resulted in more than 2,000 tons in NOx emission ozone 
season reductions.  Ozone season NOx reductions achieved 
through energy efficiency and renewable energy measures in New 
Jersey are predicted to improve air quality by almost 900 
tons/season/year by 2012.  Illinois is using air quality improvement 
as a major driver in building 6 megawatt of new wind and 
renewable capacity in the state.
        Having served on the Secretary of Energy's Coal Council for 
six years, and having been involved with nuclear issues throughout 
much of my career, I appreciate the challenges in each of these 
technology areas.  Now, as director of NREL, I can tell you that 
the pathway to reaching the full potential of energy efficiency and 
renewable energy is clear and compelling.
        Renewable energy and energy efficiency technologies can meet 
our nation's growing energy demand, largely without pollution or 
other trade offs. These technologies, however, can only achieve 
their ultimate potential through a significant and sustained national 
effort, focused on technology research, development and 
deployment.
        Thank you.  

	MR. HALL.  Thank you very much.  The chair at this time 
recognizes Mr. Marvin Yoder, Manager of the City of Galena, 
Alaska, and I hope we will hear from him something about your 
city's efforts and discussion to plan to install a small nuclear unit 
for electricity, a generator to replace your diesel generators.  We 
are very interested in that and would like to hear something of that.  
I recognize you to summarize it at this time, and then we will go 
into questions with you later.
        MR. YODER.  Thank you, Mr. Chairman, and subcommittee 
members, for the opportunity to testify here today.  On the board 
here, you do see the layout of the plant and some of the 
components that go into it.  The purpose of my testimony is to, 
one, review with you the urgent needs of Galena, Alaska, and other 
remote Alaska communities; two, emphasize that Galena's first 
concern is to develop a safe energy source for our citizens that is 
clean and cost effective; and three, describe for you the 4S small 
nuclear power plant design, which we believe satisfies our safety 
concerns and is ready for NRC review and licensing.
	Galena is a small town of 700 people on the Yukon River.  
Sixty percent are Alaska natives.  There are no roads to Galena, so 
travel is primarily by air or on the Yukon River in the summer.  
These transportation constraints increase the cost of goods and 
services.  Milk is $10 per gallon, and gas is $4.20 per gallon.  
Another expensive commodity is electricity.  The city operates a 
diesel generator electric plant and annually receives 700,000 
gallons of fuel by barge.  Since 2000, the cost of fuel has increased 
by more than 250 percent.  Fuel is more than 70 percent of our 
generation cost, and electricity has risen to 33 cents per kilowatt 
hour--to three times the national average.  The city is losing its 
largest customer, the U.S. Air Force base through the Base 
Realignment and Closure process.  The Air Force purchased 
approximately 55 percent of our power.  When BRAC is 
implemented, if we don't have any reuse plans, we are going to 
lose that load.  We currently operate a boarding school for 100 
high school students and offer post-secondary training as well.  
Low-cost electricity and heat are vital to the success of any Galena 
reuse plan.
	Because of all of these challenges, the city has been searching 
for an alternative to diesel power for 10 years.  We have 
considered coal, and for the ones who consider that, there is a coal 
bed about 10 miles from the city.  We have considered methane 
gas, solar, wind, and in-stream hydro.  In 2003 we heard of the 4S 
nuclear plant that is buried underground; it is safe and small and 
will last for 30 years.  Built in modules, it will lower the cost of 
electricity by two-thirds, and it can generate excess power to serve 
nearby villages.  In 2003, the Toshiba Corporation, along with 
others, traveled to Galena to discuss the 4S, and my observation is 
that Toshiba was pleased with the prospect of working with the 
community and the community present, though the 4S nuclear 
reactor held some promise to meet our needs.
	In 2004, we worked with the Department of Energy and 
completed a study entitled "Galena Electrical Power: A Situational 
Analysis."  The study compared electric rates and the 
environmental impacts of various electric options.  The 4S was 
determined to be superior to other options on both counts.  The 
report noted that this technology would reduce the greenhouse 
gases of our diesel generators and also mitigate the likelihood of 
diesel fuel barge spill on the Yukon River.  For the first couple of 
years we pursued this goal we seemed to be swimming against the 
current.  In the past few months the current seems to have reversed.  
We are encouraged by several events.  First, in November, 
Mohammed Elbaradel, Director General of the International 
Atomic Energy Agency, suggested there could be hundreds of 4S-
like reactors providing clean electric power and desalinated water 
in locations around the world.  Secondly, we were encouraged 
when President Bush included small power reactors as integral part 
of his GNEP initiative.  Third, we were given seed money from the 
Governor of the State of Alaska and the State legislature to begin a 
white paper process for eventual submittal to the NRC.
	The 4S is a liquid metal reactor, and it is very similar to the 
EBR reactor that was successfully run at the Idaho National Lab 
for decades as an electric generator.  The 4S reactor and the power 
generation equipment are designed to produce 10 megawatts of 
electricity.  The facility is quite small, taking up only half an acre.  
The 4S reactor is designed to be fueled once, producing heat and 
electricity for 30 years.  The citizens of Galena and I want to have 
a safe and secure power source.  As mentioned in my opening 
comments, facility safety is absolutely our first priority, and the 4S 
plant meets or exceeds our expectations in this regard.  In fact, 
tests were run on the EBR-2 that proves that the reactor would 
safely shut down without the need for active safety systems or 
human intervention.  The plant is inherently safe in its passive 
design.  I want to emphasize that the 4S is a technology that is 
ready to deploy today.  Galena has evaluated the alternatives and 
we conclude that the 4S small power facility is the right choice for 
our energy and environmental needs.
	Toshiba and other Japanese companies have developed the 4S 
design to the point where it is ready for NRC licensing.  Other 
Alaska towns are closely following Galena's 4S program because 
of skyrocketing costs threatening their way of life.  Mining 
interests in Alaska and Canada have also contacted us of their 
interest in the potential low-cost, nonpolluting energy source that 
would allow mining and processing of gold and other metals, oil-
bearing sands and shale.  Our Alaska Senators and congressmen 
view the 4S project as being the first of several projects having the 
potential to lower the cost to remote parts of Alaska and the lower 
48, while improving the environment.
	And we are looking for funding to carry this technology 
through the NRC licensing process.  Ultimately, we want a design 
certification and license to construct and operate a 4S plant in 
Galena.  We have visited the Department of Energy to request 
funding and appeal to this committee to help us meet our goals.  
Our immediate needs are for funds to prepare the environmental 
work, which will cost $20 million over 2 years, and we have 
requested the GNEP provide $2.8 million of that to begin 
immediate air, water, and ground data collection necessary for 
environmental analysis.  A 4S small power plant is a source of 
energy that is ready to be built today.  We are a small community 
with a big idea, and we ask for your help in deploying this new 
energy source.
	Thank you, Mr. Chairman, for this opportunity to testify today.  
I request that Galena's entire written testimony be included in the 
hearing record.  In attendance with me is our nuclear engineer, Mr. 
Philip Moor of Burns and Roe Engineering, and we would happy 
to answer your questions.
	[The prepared statement of Marvin Yoder follows:]

PREPARED STATEMENT OF MARVIN YODER, MANAGER, CITY OF 
GALENA, AK

GALENA'S NEED: Safe, clean, reliable, economic, and 
environmentally compatible energy to replace current diesel-
fired electrical production
        o Technology came from the Department of Energy's EBR-2 
reactor at the Idaho National Lab (INL)
        o Not new technology - adaptation of technology that is 
decades old
        o Passively safe (operator can shut off all power and walk 
away)
        o Provides electricity (10 megawatts), heat and hydrogen for 
several thousand people
SOLUTION: Small Nuclear Power Plant 
        o 30 year reliable energy production without refueling
        o Safe, secure underground facility requiring no periodic 
maintenance
        o Simple, passive safety systems
        o Produces electricity, heat and hydrogen
        o Near-term availability - 2010 to 2012 operation
GALENA'S ROLE: Galena an ideal site for first Small 
Nuclear Power Plant
        o First reactor must be in United States to get U.S. NRC 
license
        o Progressive, educated community - representative of rural 
Alaska 
        o Economic growth limited by energy availability/costs
        o 4S is cost competitive in Alaska:    
                ? 4S costs	$60 - $100/MWh (fully amortized)
                ? Alaska diesel cost: $290/MWh
                ? Lower 48 costs: Coal - $33 to $41/MWh +$15 to 
                        $75 for carbon 	Permits
			Gas - $35 to $45/MWh +$10 to $50 
                        for carbon permits
			Large Nuclear - $32 to $50/MWh
        o Transforming technology - hydrogen center of excellence
        o Citizenry involved and willing to undertake a project
        o Initiated Nuclear Regulatory Commission discussions
FEDERAL FUNDING REQUEST:  Nuclear Regulatory 
Commission review
        ? FY07:  $2.8 million - Regulatory analyses ("white papers"); 
Early Site Permit ("ESP"), and Combined Operating and 
Construction License (COL) preparations.
        ? FY08:  $10.0 million to initiate ESP/COL.
        ? FY09:  $7.2 million to complete ESP/COL.


Overview:
        Mr. Chairman and Members of the Subcommittee my name is 
Marvin Yoder.  I am the City Manager for the City of Galena, 
Alaska.  I want to thank you for the opportunity to testify today.
        The purpose of my testimony is to (1) review with you the 
urgent energy needs of Galena, Alaska and other remote Alaska 
communities, (2) to emphasize that Galena's first concern is to 
develop a safe energy source for our citizens, that is clean and 
cost-effective, and (3) describe for you the 4S small nuclear power 
plant design which we believe satisfies our safety concerns and is 
ready for Nuclear Regulatory Commission (NRC) review and 
licensing.

Galena, Alaska:
        Galena is a small community of 700 people, 60% Alaska 
Native, living on the banks of the Yukon River.  There are no 
roads to Galena so travel is primarily by air. 
        Because of our small size it may be difficult to conceptualize 
the fact that Galena is a "hub community".   There are four smaller 
villages in our region that are partially dependent on Galena for 
transportation and health care.
        Freight is moved by air in the winter because the river is frozen 
over; however, the river is open from June through mid-
September, and we do get barge service from Fairbanks in the 
summer.   These transportation constraints increase the cost of 
goods and services.  For instance milk is $10 per gallon and gas is 
$4.20 per gallon.  
        Another expensive commodity is electricity.  The City operates 
the power plant which produces power from diesel generators.  
The power plant annually receives approximately 700,000 gallons 
of fuel from barges on the river.  There is storage for enough fuel 
to operate all winter.
        As everyone knows the cost of fuel is rising dramatically.  
Since 2000 the cost of fuel has increased by more than 250 
percent.  Fuel is more than 70 percent of our generation cost, and 
electricity has risen to 33 cents per kilowatt hour.

Impact of BRAC and follow-on plans:
        The effect of this has been exacerbated by the fact that the City 
is losing our largest customer, the U.S. Air Force base, to the Base 
Realignment and Closure (BRAC) process.  The Air Force 
purchases approximately 55% of our power.  When BRAC 2005 is 
fully implemented the city will lose that load unless a reuse for 
those facilities is found.  Our aim is to utilize the facilities on the 
Air Force property by developing commercial businesses, and to 
expand our educational and trade school program.  Galena 
currently operates a boarding school for 100 high school students 
and also offers post secondary training.  Low cost electricity and 
heat are vital to the success of any Galena reuse plan.
        Because of all these challenges the City has been searching for 
an alternative to diesel power for 10 years.  We have considered 
coal, methane gas, solar, wind and in-stream hydroelectric.  
Galena's situation is preferable to some of the other Alaskan 
remote villages where the cost of utilities is even higher.  There is 
now concern that some of these native villages will be forced to 
close their doors if alternatives to high energy prices are not found.

4S Small Nuclear Power Plant:
        In the summer of 2003 we heard of a "4S" (super-safe, small, 
simple) nuclear power plant  that is buried under ground, is safe, 
small, will last for 30 years, is built in modules, and will lower the 
cost of electricity by two-thirds.  Furthermore, it will generate 
excess power beyond the City's needs that could provide 
additional power to nearby villages.  
        In August of 2003 the Toshiba Corporation along with others 
traveled to Galena to discuss 4S and look at our community.  
Several members of the City Council attended that meeting.  
        My observation is that Toshiba was pleased with the prospect 
of working with the community, and the community members 
present thought the 4S nuclear reactor held some promise to meet 
our power needs.  



Alternative energy sources studied:
        In 2004 we worked with the U.S. Department of Energy to 
complete a study entitled Galena Electric Power - a Situational 
Analysis.  That study compared the electric rate and the 
environmental impacts of various electric power options.   The 4S 
was determined to be superior to the other alternatives on both 
counts.  It was noted in the report that this technology would 
reduce the greenhouse gases of our diesel generators, and also 
mitigate the likelihood of a barge spill of diesel fuel on the Yukon 
River. 
        Based on the results of that study, the Galena City Council, in 
December of 2004, passed a resolution to continue our efforts to 
determine if the 4S plant was suitable for Galena.  In February of 
2005 the City met with the NRC to inform them of our intentions 
to further evaluate the feasibility of installing a 4S plant in Galena.

GNEP:
        For the first two years that we pursued this goal we seemed to 
be swimming against the current.  In past few months the current 
seems to have reversed and we are encouraged by several events.
        First, in November of last year Mohammed Elbaradei, Director 
General of the International Atomic Energy Agency (IAEA), in a 
speech at MIT, suggested that there could be hundreds of small 
reactors with designs like the 4S providing electrical power and 
clean desalinated water in locations around the world.  (It should 
be noted that the 4S is well suited for hydrogen production as 
well.) 
        Second, we were further encouraged when President Bush 
included small power reactors as an integral part of his Global 
Nuclear Energy Partnership (GNEP) initiative.   GNEP contains 
elements that endorse small reactors with a long fuel cycle that are 
proliferation resistant. 
        Third, we were given seed money from the Governor of Alaska 
and State Legislature to begin the "White Paper" process for 
eventual submittal to the NRC.
        And finally, in the past year there have been numerous articles 
published addressing the role that nuclear power may play in 
reducing greenhouse gases, stabilizing the cost of energy, and 
reducing world demand for fossil fuels.  While most of the 
emphasis is on large nuclear facilities we are convinced that small 
nuclear power plants will also play a significant role world-wide.

4S power plant specifics:
        The 4S is a Liquid Metal Reactor (LMR) and is very similar to 
the EBR-2 reactor which was successfully run at the Idaho 
National Lab for decades as an electric generator. The 4S reactor 
and the power generation equipment are designed to produce 10 
megawatts of electricity.  The facility is quite small taking up only 
about one-half acre of land. 
        The 4S reactor is designed to be fueled once, producing heat 
and electricity for 30 years.  In this design all the nuclear heat 
producing equipment is below grade, and contained within 
separate underground structures.  This design prevents access 
without specialized lifting equipment. There is no spent fuel 
storage on site.  Because of its small size and simple design the 
facility can be air cooled during normal operation.  The design also 
uses air cooling for the nuclear equipment after it is shutdown.

Galena's focus on safety:
        The citizens of Galena and I want to have a safe and secure 
power source.  As mentioned in my opening comments, facility 
safety is absolutely our first priority, and the 4S plant meets or 
exceeds our expectations in this regard.  In fact, tests were run on 
EBR-2 that proves that the reactor would safely shutdown without 
the need for active safety systems or human intervention.  The 4S 
plant is inherently safe in its passive design.  I want to emphasize 
that 4S is a technology that is ready to deploy today.  Galena has 
evaluated all the alternatives and we conclude that a 4S small 
nuclear power facility is the right choice for our energy and 
environmental needs.

Nuclear Regulatory Commission review:
        Toshiba and other Japanese companies have developed the 4S 
design to the point where it is ready for NRC licensing.  Work is 
being finalized now to prepare the NRC application documents. 
        Galena has met with the NRC to understand what needs to be 
done to permit a plant like this in the United States.  Our aim is to 
have the 4S facility operational by 2012.  We expect to pursue with 
the NRC an Early Site Permit (ESP) and a Combined Operating 
and Construction License (COL) process for the Galena project.  
We think the permitting will take between 3 and 4 years.  We will 
meet with the NRC again in a few weeks to continue the dialogue.
        With funding from Governor Murkowski and the Alaska State 
Legislature, the City was able to contract with Burns and Roe, Inc 
to prepare a series of White Papers.  (These technical papers will 
provide further education regarding the safety of the 4S plant.)   
Other Alaska towns are closely following Galena's 4S program 
because skyrocketing energy costs are threatening their way of life.  
Mining interests in Alaska and in Canada have also contacted us.  
They are very interested in the potential of a low cost, non-
polluting energy source that would allow mining and processing of 
gold, other metals, oil bearing sands and shale. 
        City leaders have met with our Alaska Senators and 
Congressman and have their support for this project.  They view 
Galena's 4S project as being the first of several projects having the 
potential to bring lower cost energy to remote parts of Alaska and 
the lower 48 states while improving the environment. 

Funding and Design Certification:
        We are looking for funding to carry this technology through 
the NRC licensing process.  Ultimately we want a design 
certification, and a license to construct and operate the 4S plant in 
Galena.  We have visited with the Department of Energy (DOE) to 
request funding, and appeal to this Committee to help us meet our 
goals.  Our immediate needs are for funds to prepare the 
environmental work which will cost $20 million over 2 years.  We 
have requested the GNEP program provide $2.8 million of that 
amount to begin immediate air, water and ground data collection 
necessary for the environmental analysis.  We see the GNEP 
program as a logical source for funding this program and 
encourage your support of Galena's efforts to build this 4S small 
nuclear power plant.   

Conclusion:
        The 4S small nuclear power plant is a "today" energy source 
that is ready to be built.  We are a small community with a big idea 
that wants to build it.  I ask for your help in deploying this new 
energy source.  We are enthusiastic about the opportunity to 
change the cost of living dynamic, and preserve our Native 
Alaskan way of life in our little corner of the world.
        Thank you, Mr. Chairman, for this opportunity to testify today.  
I request that Galena's entire written testimony be included in the 
hearing record.  In attendance with me is our nuclear engineer, 
Philip Moor, of Burns and Roe Engineering.  We would be happy 
to answer your questions.

	MR. HALL.  We thank you very much.  I note the presence of 
the Chairman of Energy and Commerce.  Mr. Chairman, would 
you like to propound any questions to the witnesses?
	CHAIRMAN BARTON.  Well, Mr. Chairman, I have been in 
discussions with Mr. Boucher on the refinery permitting bill, so my 
mind is not focused on new ideas on how to generate electricity.  If 
you will give me about 5 minutes to get focused, then I would 
probably come up with some questions.
	MR. HALL.  All right.
	CHAIRMAN BARTON.  But at this point in time, I would like to 
defer for five minutes.
	MR. HALL.  All right.  Then I will ask a question of Dr. Arvizu.  
Did I say that right that time?
	MR. ARVIZU.  It's Arvizu.
	MR. HALL.  Arvizu.
	MR. ARVIZU.  Yes, sir.
	MR. HALL.  And that is not what I said?
	MR. ARVIZU.  That is close.
	MR. HALL.  Remember, I am the Chairman.
	MR. ARVIZU.  Yes, sir, I will change it tomorrow.
	MR. HALL.  I thank you.  
You mentioned hydrogen that was generated from wind power 
and it's turbine.  It is a method to overcome the fact that wind 
power is intermittent.  Is this cost competitive, and is anyone doing 
this today?
	MR. ARVIZU.  Thank you for the question, Mr. Chairman.  
Actually our local utility is the one that approached us about it.  
They have several fairly major wind farms that they currently 
operate and a couple more that they plan, and they are trying to 
look to the future, because what they would like to be able to do is 
capture that wind energy when there is no, perhaps, peak load 
demand on the system so that they can use it at a later time.  So 
they are looking at hydrogen as an opportunity as a storage 
medium.  Perhaps it could be used for transportation fuel at some 
time in the future, but that is their motivation.  And so they have 
entered a partnership with us at the National Laboratory and we are 
looking at different components to make that cost-effective.  
Today, I would offer that it is not cost-effective, but we believe 
that it can be with additional development.
	MR. HALL.  In your opinion, which of the technologies that you 
have described are ready for deployment now because they are cost 
competitive and available, but are not being deployed to the extent 
that they should be, and what do you think the reluctance may be 
to deploy these technologies?
	MR. ARVIZU.  Well, certainly there are a number of factors that 
offer what I would call barriers to more rapid, accelerated 
deployment.  Many of these technologies I mentioned in my 
remarks are being deployed in various markets where the business 
case can be made and the private sector can create a sustainable 
business opportunity.  So in the case of wind, the technology is far 
enough along now when we have a good wind resource close to a 
load.  You don't have to add new transmission capabilities.  You 
can put wind into the system and essentially it is cost effective 
today.  Photovoltaics, when the solar resource matches your 
demand peak, like in Southern California, where people turn on 
their air conditioners in the afternoon, there is an opportunity there 
to provide energy back into the system at a cost that is very 
competitive with what we pay today.  So there are ways to do that.  
A lot of it has to do with some policies that are in place and also 
some structural things that are part of the infrastructure we have 
today.
	MR. HALL.  You state that there are 10,400 megawatts of 
biopower.  And so for the record, tell us what you mean by 
biopower.
	MR. ARVIZU.  Well, there are two ways that you can use a 
biomass or essentially a biomass resource for electricity 
generation, and many of these are smaller power plants that use 
some form of green waste, everything from yard clippings to some 
of the municipal solid waste kinds of things as well, but much of 
that biomass is also co-fired with coal to reduce the emission 
profiles out of many of the power plants that are out there today.  
So that is the technology that has been in place for some time now 
and it is relatively mature.
	MR. HALL.  Mr. Yoder, tell us just briefly about your city's 
plans to install a nuclear unit for electricity generation, the cost of 
it, and how you are going to finance something like that.  It seems 
like it is a pretty big undertaking.
	MR. YODER.  It is a very large undertaking.  We do realize that 
since it is somewhat of a first of its kind, that there are a lot of 
development costs that will not be there in the future ones, and 
some of that is going to be borne by industry, by the manufacturer, 
by whoever the eventual owner is.  We will probably be a 
purchaser of raw power and our determination will be based on the 
cost of that power, not necessarily on the cost of the overall plant.
	MR. HALL.  What, if any, existing Federal or State rules are 
hindering deployment of the technologies that you have discussed?
	MR. YODER.  The biggest hurdle I think we have to cross is the 
Nuclear Regulatory Commission's rules.  We expect that process, 
the licensing process, to take several years.  Galena, basically as a 
city, is working on the environmental side of it.  We expect the 
manufacturer or, rather, industry, to do most of the licensing for 
the plant itself.  Our focus is on the environmental part of what 
goes in Galena, and both of those have huge components at the 
NRC that will take a considerable length of time.
	MR. HALL.  All right.  My time has expired.  The Chair 
recognizes the gentleman from Virginia.
	MR. BOUCHER.  Well, Mr. Chairman, thank you very much 
and, Mr. Arvizu--
	MR. ARVIZU.  Yes, sir?
	MR. BOUCHER.  --thank you for sharing your knowledge with 
us this morning.  I notice in your testimony that you are talking 
about the potential for a zero energy home by the year 2020, and I 
assume that means that the home would generate as much 
electricity as it consumes, and so this is a home that can live totally 
off the grid.  Is that a fair description of what you have in mind?
	MR. ARVIZU.  It is.  On an annual basis, the amount of energy 
that it would generate would essentially be the same as the amount 
of energy that it consumes on an annual basis, maybe not at the 
same time.  But we actually have a home in Denver that was part 
of the Habitat for Humanity project and we helped design this 
essentially net zero energy home.  It has photovoltaic panels on the 
roof, it has a very tight envelope so that there is very efficient use 
of energy in the home, and we have a single mother with two boys 
that are the occupants and their electricity bills are not zero, but 
that is not because they are consuming energy.  That is normally 
some of the things that the utilities charge for services that they 
otherwise use.
	MR. BOUCHER.  So the home is connected to the grid.
	MR. ARVIZU.  It is.
	MR. BOUCHER.  But it generates as much electricity as it brings 
in, I suppose.
	MR. ARVIZU.  That is correct.
	MR. BOUCHER.  Is it selling excess electricity back into the 
grid?
	MR. ARVIZU.  Precisely.
	MR. BOUCHER.  Yes.  Well, let me ask you this.  With regard to 
a broader deployment of zero energy homes, would there be a role 
for demand response in helping to make that possible?  And I have 
a particular interest in smart meter technology, and I am wondering 
if you can enlighten us about, first of all, the role that demand 
response would play in the creation of a large number of zero 
energy homes, and the extent to which demand response 
technologies, including smart metering technology, is being 
deployed at the present time, and any barriers that you see to 
further deployment of demand response technologies.
	MR. ARVIZU.  A very important question, sir.  I think one of the 
structural issues that will allow us to more rapidly deploy some of 
these distributed resource technologies, such as the ones we are 
talking about, is in fact both time-of-day pricing; and essentially 
smart meters which are meters that can manage that commerce on 
both sides of the meter so that we can begin to allow consumers to 
make choices about how they use energy, based on its value.  And 
if you are at a point in the utility infrastructure where you are at or 
near peak, the cost of supplying that energy is very expensive and 
they pay a lot of money to do that.  So as we are able to relieve that 
load, it displaces new generation, it displaces maintenance and 
operation costs, and at the same time gives the consumer the 
opportunity to manage their own energy needs in a way that can 
provide benefit to them and also to the economy and to the 
environment.
	MR. BOUCHER.  So to what extent are smart meters being 
deployed at the present time?  Do you have a visibility for that?
	MR. ARVIZU.  Well, yes, it is a little frustrating because there 
are not many places where we do have the entire, what I would 
call, package of those types of incentives.  California is the leader.  
They, in fact, have been doing this for some time and I think other 
States are beginning to get on board.  There are other activities 
going on in various forms of maturity across the country.  We 
don't have it in most States and in fact it is a fairly significant 
barrier, even in our own State of Colorado.
	MR. BOUCHER.  Is that a regulatory issue at the State level, or 
is it lack of will on the part of the incumbent utilities to deploy?
	MR. ARVIZU.  Well, I think it probably varies State by State.  
There are a number of different ways in which those policies get 
put in place, and without drawing a conclusion about whose 
responsibility it is, I look at it from the perspective of what can the 
technology offer, and then decisionmakers are in a position to 
know that this kind of a policy will provide this kind of a benefit.  
And to a large extent, we haven't had that level of transparency in 
the past that I think now is beginning to become known to lots of 
people, and all of sudden it becomes, I think, a very important and 
healthy debate in many of the State legislatures.
	MR. BOUCHER.  We included in EPAct 2005 just for your 
information, a provision that requires every State to undertake an 
examination of the merits of demand response and smart meter 
technology, and a potential requirement, State by State, that 
electric utilities offer real demand, real-time pricing so that that 
price signal would be sent and consumers would have a basis to 
choose the time of day in which they consume electricity in greater 
or lesser amounts.  I suppose you haven't really looked around the 
States to see what they are doing with that requirement, have you?
	MR. ARVIZU.  No, sir, I haven't.  I can tell you this, I applaud 
the language in the bill because it is absolutely what is necessary.  I 
think my observations are that many States are still trying to figure 
how they do that and haven't yet come to a conclusion about what 
needs to be done.  But it is something that we ought to really move 
on, I think.
	MR. BOUCHER.  Do you provide information to States on 
request?  Do you have a service that does that?
	MR. ARVIZU.  Yes, sir, we do.
	MR. BOUCHER.  So they can come to you for information?
	MR. ARVIZU.  They certainly can.
	MR. BOUCHER.  All right, thank you, Mr. Arvizu.
	MR. ARVIZU.  Thank you, sir.
	MR. HALL.  All right, the Chair recognizes Mr. Shimkus.
	MR. SHIMKUS.  Thank you, Mr. Chairman, it is great to be here.  
I appreciate your testimony.  Sorry, I had to run downstairs.  That 
is adjourned.  That was a quick hearing and so I get to spend the 
rest of the time up here.  A couple questions that I would like to 
address.  And Dr.--
	MR. ARVIZU.  Arvizu.
	MR. SHIMKUS.  Arvizu.  Do you talk anywhere about 
geothermal?  Do you consider that part of your portfolio?
	MR. ARVIZU.  We do.  Geothermal is a mature technology.  We 
have roughly two gigawatts, 2,000 megawatts of geothermal 
resource that has been tapped and generates electricity.  
Geothermal is still a technology that is not only viable, but can 
provide additional generation for our energy mix.  In the grand 
scheme of things, it is one of the technologies that we need to 
pursue and use when the resources are available.  The research that 
is required to improve that technology allows incremental cost 
reductions, perhaps doesn't have as much of an impact longer term 
as some of the other technologies that are moving on a much more 
rapid curve, but it is still a very important part of our portfolio.
	MR. SHIMKUS.  In my investigation, and especially in your 
discussions about the home, really the geothermal applications, it 
really is related to more home heating, but it then adds more to the 
electricity cost, because you are really recirculating the geothermal 
heating core.  Through the use of more electricity, you can--with 
natural gas concerns and escalating prices, those in the Midwest or 
anywhere that relies on natural gas, there is a great benefit, 
especially with the high price of home heating, but it does really 
then address increase electricity use, which I am very interested in.  
I have actually done a lot of research on the home heating front 
and I think it holds great promise, also.
	MR. ARVIZU.  Yes.  If I may respond, I think it is absolutely 
essential, and I should make a distinction between a geothermal 
resource, which is really things like tapping the geysers in 
California, versus a ground-coupled geothermal pump, we call it, 
which really takes advantage of that thermal gradient in the Earth 
to the atmosphere, to essentially be a sink and a source for heat and 
to reduce our heat load in our homes.
	MR. SHIMKUS.  Cooling load, too, in the summer.
	MR. ARVIZU.  So you can use that thermal gradient.  You can 
use the temperature difference, if you will, for providing benefit to 
the inside of a dwelling.
	MR. SHIMKUS.  Right.
	MR. ARVIZU.  And that is what coupled thermal heat pumps are 
and they are very--
	MR. SHIMKUS.  I am sorry.  Let me get to Mr. Yoder real quick.  
I am a big nuclear power proponent and I am very excited about 
your proposal.  A major question, though, is, what do you plan to 
do with the waste?  And if we don't open Yucca Mountain--we are 
not going to build any more nuclear power plants in this country 
unless we have a place to store the waste.  Your plant is a smaller 
size than most that we deal with, so what are you going to do with 
your waste?
	MR. YODER.  I think that is a technical question.  Mr. Moor is 
here, and he could clearly answer that.
	MR. SHIMKUS.  Is the mic on?
	MR. YODER.  Oh, okay.  Mr. Moor is here from Burns and Roe, 
and he has done a white paper on decommissioning, and I would 
like him to answer that question, if he would.
	MR. MOOR.  This is a very small facility, much smaller than 
the commercial nuclear facilities that we are familiar with.  It is 50 
megawatts versus over a thousand.  The way this facility is 
designed, it has a 30-year core life, so it would be installed once, 
and based on our current construction projection, the spent fuel 
would be ready for repository in 2045.
	MR. SHIMKUS.  A repository.  And where is that repository?
	MR. MOOR.  I am not here to respond to whether there will be a 
Yucca Mountain or a recycling facility, but there will be some 
Federal repository.
	MR. SHIMKUS.  That is what we hope.
	MR. MOOR.  That is what we hope, too.
	MR. SHIMKUS.  So that is an interesting debate.  Senator 
Domenici really did great harm in his comments yesterday.  It is 
critical that Yucca Mountain goes forward and it is critical that we 
move the spent rods off these sites for our nuclear power plants so 
that they can continue to use their plants to generate electricity, and 
I would hope that you would use your connections with some 
senior Members of the Senate to help address the advanced siting 
with the Administration, or the licensing and then the expansion 
and the move forward on Yucca Mountain.  Mr. Chairman, my 
time has expired and I yield back.
	MR. HALL.  I thank the gentleman.  The Chair recognizes Mr. 
Green, the gentleman from Texas.
	MR. GREEN.  Thank you, Mr. Chairman.  I don't have many 
questions and I will yield back the time.  Mr. Yoder, you talked 
about the base closure and your main customer now is the Air 
Force base and you are going to develop that into other uses for 
commercial and educational.  I assume most of your diesel now is 
barged in during the months when the river is not frozen.
	MR. YODER.  Yes, that is correct.
	MR. GREEN.  And I guess most of the equipment, because this 
is a pretty ambitious project and I congratulate you on looking at it, 
I guess that most of the equipment would be barged in to build the 
facility.
	MR. YODER.  Yes.  In fact, one of the early diagrams we had 
from Toshiba showed the whole configuration sitting on a single 
barge and coming in, in whole, so they had considered off-site 
construction and bringing it in on a barge.
	MR. GREEN.  You know, that is interesting because I know of 
an experience in Houston where we will do an expansion for a 
chemical plant, for example, and all of the work will be done and it 
will be towed up the Mississippi River and the Ohio River Valley 
and literally dragged up the river bank and placed in one of the 
chemical facilities there on the Ohio River.  That is really good.  
Dr. Arvizu?
	MR. ARVIZU.  Arvizu.  Yes, sir.
	MR. GREEN.  I appreciate your testimony, especially on wind 
power and I know, coming from Texas, obviously hydrocarbons 
are important, but I know our State is doing some interesting things 
off the coast, both Galveston, Brazoria County, in the Houston 
area, but also just off the coast at South Padre, with windmills.
	MR. ARVIZU.  Yes.
	MR. GREEN.  And it is going to help the State's school 
education fund and there will also be an alternative to put power 
into the grid that we don't use anymore.
	MR. ARVIZU.  Right.
	MR. GREEN.  The biggest concern, though, is the 
environmental side because of our flyways that we have in lots of 
areas, and I don't know if that has been something the Department 
of Energy has addressed, or is that something someone else would, 
on expansion of wind power, because we already have wind power 
in west Texas, with windmills.
	MR. ARVIZU.  Sure.  Yes.
	MR. GREEN.  And has there been any evidence of a loss, 
particular during migrations?
	MR. ARVIZU.  Yes.  Well, it is first of all an issue that the 
Department of Energy is very much focused on.  We look at all the 
environmental footprints that any of the renewable energy 
technologies do represent.  And certainly what we have learned in 
30 years of wind technology development and deployment is that 
you really do need to stay away from migratory bird flight paths, 
because there is an issue that relates to disruption of some of those 
avian issues.  At the same time, I think a lot of these things tend to 
get a lot more press than they are entitled in many respects.  We do 
need to manage those things and it is a matter of risk and reward, 
the benefit that you get from these technologies versus whatever 
risks they might represent.  But in the case of things like the flight 
paths for aircraft and even for the military, on the offshore 
technologies and also the migratory bird paths, we are looking at 
those very, very closely.  There is a number of studies that we fund 
through universities and other organizations to help us provide the 
greatest amount of knowledge and information so that you site and 
you permit these facilities in the places where they are going to 
cause essentially the least disruption, and we believe that this is not 
an insurmountable issue and in fact is one that we have, I think, 
made a great deal of progress on and I think we got our arms 
around that one.
	MR. GREEN.  Well, one of the perforations, I know that our 
offshore drilling is at some of the best fishing in the Gulf of 
Mexico, because typically it is just flat, and once you put a rig out 
there and that is a place where the fish can go and find shade, but a 
lot of sports fishing benefit from that.  That is why the Ships to 
Reefs, and even the Rigs to Reefs Program, is important, at least 
for the western Gulf that we use--
	MR. ARVIZU.  Right.
	MR. GREEN.  --so if you put something in the water and it will 
become a fish habitat, whether you intend to or not.  So thank you, 
Mr. Chairman.
	MR. HALL.  The Chair recognizes the gentlelady from 
California, Mrs. Bono.
	MS. BONO.  Thank you, Mr. Chairman.  My district, the 45th 
District of California, is probably a district you are very familiar 
with.  We have got a lot of wind power, a lot of geothermal, not 
enough solar.  I think the Governor is doing a great effort in 
expanding our solar capabilities, so I am very proud of my district.  
And those of us in California think, with the extremely high cost, 
the crisis that we faced, are on the cutting edge, as you mentioned 
before, perhaps not by choice, but we were forced into it.  But a lot 
us are faced now with policies here in Washington and it seems 
that if we could come up with a policy or something and focus our 
energies on sort of a man-to-the-moon type of mission, we could 
do a great deal.  So in your written testimony you mention that our 
Government needs a sustained energy research program.  Can you 
elaborate on that a little bit?  Are you just supporting your current 
efforts, or do we need to do a lot more and what should we be 
doing and how far?  Dr. Thomas Friedman, in this book, talks 
about the next 10 years, getting completely off of any foreign 
sources of oil.  Can you talk a little bit more about this, please?
	MR. ARVIZU.  Yes, thank you.  And thank you for the 
opportunity to do that.  Actually, Tom Friedman has been out to 
the laboratory, he spent a day taping and he will have some sort of 
documentary that will highlight a number of the technologies that 
we are presently working on.  The reason I talk about a sustained 
effort and the reason that there is still additional opportunity for 
new research and development is that the enormity of the problem 
that we have got to face, and as someone mentioned earlier, the 
projections that over the course of the next several decades, the 
percentage of renewable energy won't increase.  If you just project 
a straight line, that is what the projections would indicate.  My 
very, very informed opinion is that we can do a lot better than that.  
We can begin to think about 40, 50 percent of our new generation, 
mid-century, being supplied by energy efficiency and renewable 
energy technologies, and that is a bold statement.  We need a lot of 
energy.  In order to do that, we need to continue to drive the cost 
down and as I mentioned, the technologies that are in the 
laboratory today will be the technologies that will supply those 
markets.
	I started in this business almost 30 years ago.  The technologies 
that we worked on in the laboratory 30 years ago are the 
commercial products of today.  And as I told the President when he 
visited, it is important that we not take another 30 years to get the 
technologies of today into the marketplace, and that is where I 
think additional R&D on manufacturing processes, on deployment, 
perhaps some policies to supplement that, to increase that 
deployment opportunity and accelerate it, those are the kinds of 
things that will lead us, I think, to that future that I know exists out 
there, if we make a national commitment to make that happen.
	MS. BONO.  Well, I will gladly work with you and fully support 
what you are trying to do.  Yesterday, I and my staff were trying to 
kick this around quite a bit and arbitrarily, I can't assign a figure, 
that in 10 years we will be 100 percent off of foreign sources or 
whatever it would be, and I would truly seek your assistance in 
something like this.  I actually was speaking with the President 
about this as well, and had the opportunity to be with him and a 
venture capitalist and to talk about the very issue, and this venture 
capitalist was saying that they are moving out of the tech industry 
now, into alternative fuels.  Are you seeing that as well?  And I 
know that perhaps that's not your area of expertise as much, but is 
the venture capitalist world going to be a big part of this role, the 
private sector, or does the Government need to be the largest 
player in this?
	MR. ARVIZU.  Well, I am fully convinced that the 
Government's role is to try to mobilize that private sector capital 
and that will certainly manifest itself early in venture funds and 
venture technology kinds of investments.  What we are seeing is a 
rapid growth in clean energy investments and it is in fact growing 
at a very significant rate.  It is over a billion dollars now.  There is 
4 percent of the energy investments now going into clean 
technologies and that is on a very rapid upswing.  So all of the 
indicators that are in the financial markets suggest to us that we are 
at a tipping point, that we are going to have some things move 
quickly and it is a matter of how quickly they will move, 
depending on a variety of factors such as government policies and 
technology development.
	MS. BONO.  I understand, too, a lot of folks in Silicon Valley 
are very excited, very excited about this and I think are very 
willing to push it along.  The first question on that note--I get a lot 
of calls and letters from constituents.  This might seem like a silly 
question, but I get it a lot and I would love for you to answer.  Is 
there really a project to convert water, not to extrapolate the 
hydrogen, but water, somehow, into energy and there is a water-
burning engine out there that we are keeping from the people?  I 
get this a lot.  I don't know if my colleagues do as well, but we do.  
I hear it.  It is when you are in California.  That is northern 
California.
	MR. ARVIZU.  Yes, let me not go into a dissertation about that.  
We frequently get lots of people who are so enthusiastic, that they 
would like to create what we call the perpetual motion machines, 
and there are a number of those things.  No.  There is some really 
great innovation and without speaking specifically to what 
particular technology someone is talking about, I think it is worth 
taking a look at some of these things.  A number of them, the first 
question we ask when we get asked a question like that, and 
certainly feel free to provide those kinds of questions to us and we 
will give you our opinions about things, but we look at, kind of, the 
first law of thermodynamics to make sure that the science hangs 
together and that is kind of the first step that we take.  Frequently, 
that is not the issue for deployment.  The issue is, how do you get 
the technology into the marketplace and the business planning that 
goes with it?  But does the science work?  Does it hang together?  
You know, we can give you an honest opinion about that, an 
informed opinion.  I don't know of any water-based energy 
generators of any kind.  It takes energy to convert materials to 
other forms.  So I don't know of any and we are not hiding 
anything that I am aware of.  So does that put your mind at ease a 
bit?
	MS. BONO.  Thank you.  And it will help for me to say that you 
said that instead of just me.  But also, is there a redundancy within 
the Federal government or too many different areas?  Is money 
going out to too many different places and we should be basically 
concentrating our efforts more?  It sounds like with you.
	MR. ARVIZU.  Well, there is always a trade-off with how 
focused do you get and where do you put your priorities.  I think, 
in the Department of Energy, that is one of the functions that they 
perform, it is to assess for how much investment what benefit do 
we get, and that needs to be a very thoughtful process and it needs 
to be continually updated and evaluated.  So I would say the 
process is more important than the outcomes in this particular case, 
because we do need to focus very precious taxpayer resource 
dollars into these areas.  There is lots of opportunity and there are 
lots of things that we are not doing that we could do if we had 
more money.  But for the most part, I think the Department of 
Energy does a pretty good job in prioritizing things.
	MS. BONO.  Thank you, that is good to know.  I come from a 
family, a very interesting family.  I have a brother who is an 
automotive engineer, another brother who is in the mom and pop 
oil business, a mother who is a chemist and actually worked on the 
Manhattan Project, and my father is a surgeon, so we kick this 
around a lot and I would have to say they are pretty cynical about 
renewables, and so I think I am the black sheep in the family with 
this.  But I will yield back, my time is up, but I do look forward to 
working with you and I would love if you could come by and 
coach me a little bit and give me some ideas.
	MR. ARVIZU.  I would be pleased to do that.
	MS. BONO.  Thank you.
	MR. ARVIZU.  And you are welcome to come to the laboratory.
	MS. BONO.  I actually will do that.  Thank you very much.
	MR. HALL.  I thank the lady and recognize the gentleman from 
Pennsylvania, Mr. Murphy.
	MR. MURPHY.  Thank you, Mr. Chairman, and I thank the 
distinguished panel for being here.  I have a couple of questions on 
some of the aspects of renewable energy, because--and I read 
through your testimony here, but it has to do with how we are on 
the path of energy independence.  First of all, some of the claims I 
hear sometimes is, we really don't need to pursue drilling for more 
oil or explore for more oil in the United States, because we can 
take care of our energy problems with conservation and with the 
renewable energy sources we have in America.  Are we close to 
doing that?  Is there any truth to that at all?
	MR. ARVIZU.  Well, that is a loaded question to some degree.  
Let me try to answer it as honestly as I know how.  I don't believe 
that we are at a point today where we can suggest that renewable 
energy is our total solution, and energy efficiency.  You know, 86 
percent of the world energy consumption is based on a fossil fuel 
of some sort.  The projections are that that will continue for some 
period of time.  It would be, I think, presumptuous to say that we 
can get off of that quickly.  I think eventually, and we are talking 
many, many years, that we can get the lion's share of our energy 
from renewable resources.  It will take a much longer and 
protracted change in how we view energy infrastructure to get 
there.  So as a result, my short answer is I would like to think that 
we can get a large fraction of our energy from renewable energy.
	MR. MURPHY.  Well, let me ask another thing, when it comes 
to ethanol, because you do research on that.  One of the criticisms 
about ethanol we hear is that it takes more oil to make ethanol than 
it really replaces.  Is that true, not true?
	MR. ARVIZU.  The short answer, not true, and I can understand 
why there is a debate about that.  When you talk about corn 
ethanol, what you are really talking about is the fermentation 
process of the corn cobs, if you will, into ethanol.  If you do the 
energy balance on that, based on the best information we have, it is 
about 1.4 units of energy out for every one unit of energy you put 
in and that includes everything that it takes to grow the corn, to 
fertilize, to do the production and all the things with it.
	MR. MURPHY.  Are we improving in the efficiency of that?
	MR. ARVIZU.  Well, the other point that I would like to say is 
also that it is not the focus of the national program.  The national 
program is focused on cellulosic biomass, which is not the food 
part of the plant.  It is the corn stover.  It is the balance of that 
plant.  It is ag waste of all other kinds.  It is forest residues.  And if 
you do the energy balance on those, the energy balance is five or 
six, or perhaps more, to one, five or six units of energy out for 
every unit of energy put in.  And that is where, you know, 90 
percent of the biomass resource that we are talking about for our 
liquid fuel consumption of the future is going to come from.  So it 
is a little bit of a red herring to talk about the energy balance on 
ethanol, from essentially a sugars or a fermentation process.
	MR. MURPHY.  Another area, and we are going to hear a little 
bit later on some of the solar issues, too, from Plextronics.  But 
with regard to the solar cells, you made reference to the prices 
coming down dramatically on those.  How about the--the price is 
going to be coming down, but you still need so much space to have 
enough of those solar panels to provide electricity.  Are we 
improving the efficiency of that as well?
	MR. ARVIZU.  Absolutely.  The efficiency is, in fact, what is so 
exciting to me.  I started, again, in the business 20, 30 years ago 
and we thought about a single material like silicon that we 
typically think about for integrated circuits.  Today's materials are 
a whole new set of really exotic, engineered materials.  We are 
thinking about nanostructures today that get beyond the limitations 
of these bulk materials.  And in fact, we can begin to think about 
efficiencies that are not in the 20 percent range, which is where 
laboratory scales are, the 20 to 30 percent range, we can start to 
think about efficiencies in the 50, 60, perhaps even more, percent 
range and the technology and the physics that go along with that 
being developed in the science programs, in the technology 
development of the national laboratories and universities today.
	MR. MURPHY.  How far are we away from the 50 to 60 percent 
range?
	MR. ARVIZU.  Well, I would offer that we will get there for 
space-type applications, we will get there in the next--in fact, we 
have got a DARPA project right now that we expect to have 50 
percent scales in the next 5 years.  Now those will be very 
expensive and they will be used primarily for specialty 
applications, but the learning we get from that and then taking 
those and putting those into these nano-structured materials is 
probably another decade away beyond that.  But that is the 
technology that will take us to mid-century, to this end point that I 
was talking about earlier, where you get essentially a large fraction 
of our energy mix from things like solar photovoltaics.
	MR. MURPHY.  I thank you very much and I yield back the 
balance of my time, Mr. Chairman.  Thank you.
	MR. HALL.  I thank the gentleman.  I think the Ranking 
Member has other questions he would like to ask at this time.  I ask 
unanimous consent to recognize him, though.  He has used his time 
and we do not have anyone here to give time or to yield to him.  Is 
there objection?  The Chair hears none.  The Chair recognizes Mr. 
Boucher.  All right.  Mr. Otter, the Chair recognizes you.  I 
withdraw the recognition of Mr. Boucher.
	MR. OTTER.  Mr. Chairman, I will yield to Mr. Boucher.
	MR. HALL.  All right, let us get underway now.
	MR. BOUCHER.  All right, thank you, Mr. Chairman.  I just 
have one brief follow-up question and it was actually stimulated by 
Mr. Murphy's question to you about the difference between corn 
as a feedstock for ethanol and cellulosic materials as a feedstock.
	MR. ARVIZU.  Yes.
	MR. BOUCHER.  Let me confess an absence of a lot of 
knowledge about this, which will become readily apparent as I 
propound the question.  I had been told that one of the key 
differences that leads to a favorable energy balance versus what 
some would argue is a negative energy balance with regard to corn, 
and a more favorable balance on the cellulosic side, was the fact 
that, with regard to corn, you have to cultivate the crop every year, 
and that requires a substantial amount of energy input; whereas, 
with some of the cellulosic materials, perhaps all of them, they are 
more or less like perennials, they regenerate naturally.  You don't 
have to expend energy every year in order to replant the crop.  Is 
that a key differentiating factor between the two, or is it more--and 
if it is not that, then what it is?  Why is it that you get a 1.4 to one 
yield with regard to corn, and a five to one yield with regard to 
cellulosic material?  Just explain the factors that differentiate those, 
if you would.
	MR. ARVIZU.  Well, you have been coached properly.  That is a 
good explanation of the primary difference.  The resource in 
cellulosic biomass really comes from two sources.  One is ag 
residue and it is not just corn stover or the leftovers in the crops.  
Typically, those things are plowed back under and so they are 
essentially a waste product.  You need to save about 20 percent of 
that to re-nutrient the soil and to get the consistency back to where 
it needs to be.  But across the agricultural landscape, you have got 
a number of different crops and they are essentially field waste.  
The residue is part of that biomass resource.  The other biomass 
resource is what we might call energy crops.  So when you are 
talking about things like switch grass and a variety of other things 
that you might, on a periodic basis, seed and grow, because they do 
grow naturally, that is really the other aspect of that.  Those two 
sources combined make this broader resource that I was talking 
about earlier that could potentially serve 30 percent of our, you 
know, equivalent gasoline consumption.
	MR. BOUCHER.  Do you have any obvious candidates for the 
kind of feedstock materials on the cellulosic side that would be the 
most sensible for the United States to target as opportunities?
	MR. ARVIZU.  Well, the beauty is that there is really no one 
single crop that is best at this point.  In fact, part of the research is 
to figure out how do you make ethanol very efficiently from 
various kinds of crops, and the beauty of that also is that those 
resources are distributed according to the microclimates across the 
country, and we really don't have to do a lot, other than to take 
advantage of the things that are already in place, forest thinnings 
and a variety of other things.  That would be very valuable, I think, 
in terms of an ecosystem management.
	MR. BOUCHER.  Okay.  Well, thank you very much.
	MR. HALL.  The Chair recognizes the very generous Mr. Otter 
for the remaining time.
	MR. OTTER.  Thank you, Mr. Chairman.  Mr. Arvizu, am I 
saying that right?
	MR. ARVIZU.  Yes, you are.
	MR. OTTER.  Okay.  Mr. Arvizu, mine is Otter, O-t-t-e-r.  Mr. 
Arvizu, you made a statement in your opening statement that made 
me curious.  When you said in a very short period of time, we can 
be independent, what is your short period of time?
	MR. ARVIZU.  Maybe you can help me with where in my 
statement.  It was, in a very short period time, I believe we can get 
the costs of these technologies down to where they can provide a 
great impact into the marketplace.  A lot of it has to do with those 
market forces and the business cases that have to be made and the 
investment that has to be made.  When I say a short period of time, 
I am really talking about in the next 5 to 10 years.
	MR. OTTER.  Okay.
	MR. ARVIZU.  And so we don't have to wait decades.  It can be 
done--
	MR. OTTER.  And a lot of these technologies we are already 
working on, in fact, we have implemented some, haven't we?
	MR. ARVIZU.  Absolutely.
	MR. OTTER.  And we are maybe in the first generation of some 
of those technologies and--
	MR. ARVIZU.  Well stated, yes, sir.
	MR. OTTER.  I want to aid you a little bit in your answer to Mr. 
Boucher about ethanol.
	MR. ARVIZU.  Yes.
	MR. OTTER.  In 1984, prior to coming to Congress, I worked 
for a potato company, oddly enough, in Idaho and we used to 
supply--my company used to supply all the potatoes to the 
McDonald's restaurants.  And so once we endure the lawsuits for 
obesity, we will be able to go forward, I suppose.  But one of the 
things we did in 1984 was, we found out that we had a biofuel and 
it was called potato peelings, and so we built about three and a half 
to four million gallon ethanol plants at the pipeline of the waste 
stream coming out, which normally we fed to cattle.  But we built 
an ethanol plant on the end of each of those pipelines coming out 
of those processing plants.  And so subsequently, we produced six 
to eight million gallons a year of ethanol out of what had been a 
waste stream and we did it economically.  Getting through all of 
the permitting processes and everything was a marathon.  Once we 
finally got to where we needed to go, we were very successful.  I 
am wondering if you think some incentive by the Government 
would aid some of these waste streams that are coming out of the 
processing plants.  All the food that we have today, we process 
about 80 percent of the potatoes now that are grown in Idaho.  I am 
wondering if there is any kind of an idea or a scheme that you 
might have in mind.  Maybe scheme is the wrong word, in these 
days of earmarks.  But are there other sources of ethanol besides 
the switch grass and besides corn, which seems to be the most 
favorable?  I am familiar with Brazil's ability to turn a few 
switches in a sugar plant--
	MR. ARVIZU.  Absolutely.
	MR. OTTER.  --and go from making granulated sugar, or some 
other kind of product, to ethanol, which has made them 
independent.  Have you looked at that side of it?
	MR. ARVIZU.  Well, we looked at a variety of things and so 
many of these things are structural.  You know, when you have a 
waste stream and you are trying to figure out what to do with it, it 
always makes sense to let us figure out if we can convert that into a 
benefit or a revenue stream in some way, and many times that 
works well.  There are structural issues where sometimes you do 
that and you displace somebody else's market for feedstock for 
animals or whatever, and all of a sudden, now there are regulatory 
barriers to making those things economical.  So a lot of what 
Brazil has done and others have done is start with a clean sheet of 
paper and you design in kind of what your outcomes need to be.  A 
biorefinery where you can dial the switch from a food product to 
an energy product makes great sense for them.  If we could do that, 
unfetter ourselves from the regulatory equilibrium that we are in 
now for all the various objectives that we have, we make this 
process a lot more efficient and move much more quickly.  Now 
that is very complex and very complicated to do, and so my job is 
to provide the decision makers, and people like yourself who are in 
a position to try to formulate those policies, with what can the 
technology do, because I believe the technology opportunities are 
much greater than we are allowing them to contribute in terms of 
the overall energy mix, but it requires a policy framework that is 
consistent with the objectives.  And so that is a very, very difficult 
thing to do, but I am bullish that there is an opportunity there.
	MR. OTTER.  I see.  And one other question that I wanted to 
refer to is, making a product is just about half of the business to 
business.  It is distributing it and getting it to market.
	MR. ARVIZU.  Right.
	MR. OTTER.  Because we already have some inherent problems 
with ethanol on early blending, like in pipelines.
	MR. ARVIZU.  Yes, yes.
	MR. OTTER.  Are we still working on technology to figure out 
how we can get that blend as quick as possible and still be able to 
wheel our energy through these pipelines?  That is one part of my 
question.  The other part of my question is the end distribution.  
We have had E-85 in this country now for quite some time, and 
throughout the United States there are only 400 pumps.  There are 
only 400 places to get go it, yet we are encouraging the automobile 
industry to develop cars that can burn E-85.  Now, we had that 
initial problem in the early 1980s to mid-1980s with ethanol.  For 
those of us that were not using MTBE and we chose to use ethanol, 
we didn't know that we were doing the right thing, because we 
didn't know what was going to happen, like in last year's energy 
bill, where we took MTBE out of the equation for environmental 
reasons, which was a smart and an appropriate thing to do.  So 
getting that distribution is important.  Getting it to the marketplace 
so that the consumer can use it is important.
	MR. ARVIZU.  Yes.
	MR. OTTER.  I don't think we can study just the technology.  
We also have to study the matrix of transportation and marketing.
	MR. ARVIZU.  Yes.
	MR. OTTER.  Are you working on that as well?
	MR. ARVIZU.  Yes, sir, we pride ourselves in being what I call 
market relevant.  We need to know what market problem are we 
solving and how does the technology play into that.  Many times it 
is exactly what you said, it is the infrastructure and the distribution.  
So you start trying to look at how can I do that locally rather than 
doing it centrally, so that you don't have to create a whole new 
distribution infrastructure that simply is nonexistent.  So there is a 
blend of those things and we try again to move the technology to 
where its nearest term market opportunity lies.  So we are looking 
at, for instance, on the formulation side, we look at how does 
including ethanol in a blend of fuel, what are the impacts of that?  
What are the impacts on emissions?  What are the impacts on 
performance?  How does the vehicle operate?  What does the 
vehicle have to do in order to accommodate that?  We look at all of 
those things as part of our transportation efficiency prospect, as 
well as on the generation side, how do you make the stuff and 
make it economical.  But your points are very well taken and yes, 
sir, we are working on all of that.
	MR. OTTER.  Thank you, Mr. Chairman, and thank you very 
much for your response.
	MR. HALL.  I thank you, and I presume that you have gone 
through, in your quest for Governor, how to spell potato.  All right, 
Mr. Bass, we recognize you at this time if you have questions.
	MR. BASS.  Thank you, Mr. Chairman.  And I am just 
fascinated, Dr.--
	MR. ARVIZU.  Arvizu.
	MR. BASS.  Arvizu.
	MR. ARVIZU.  May I help you?  It is just a recreational vehicle, 
RV, going to the zoo.
	MR. BASS.  I am unaccustomed--all right.  On the biopower 
issue, I am particularly interested in ethanol derived from cellulose 
and most notably, from my region of the country, wood products.  
I would like to visit your lab some time with a team of people from 
my State who are involved in biology and so forth, and I look 
forward to doing that.  I just want to affirm that you have a robust 
research and development project in the use of bacterias and other 
bugs to convert various substances into ethanol.  Is that a robust 
program, with showing some results, promising results?
	MR. ARVIZU.  Well, the answer is, we would like to make it 
more robust than it is today.  We certainly are working on a 
number of enzymes.  That is the primary organism that takes you 
from a cellulosic fibrous material into a simple sugar that you can 
ferment.
	MR. BASS.  Can you skip the sugar part?
	MR. ARVIZU.  Yes, you can.  In fact--
	MR. BASS.  Is that something you are working on or not?
	MR. ARVIZU.  --there is a project called "Genomes to Life," in 
the Department of Energy.  It is a basic energy science and what 
we are trying to do is perhaps even consider engineering the 
biomass resource so that it creates these enzymes naturally, in the 
wild, so that those--we can do one-step processing and essentially 
move the cost of cellulosic biomass down to as little as 60 cents a 
gallon, which would be phenomenal.  That is kind of the Holy 
Grail.  We believe that the science would allow that, with 
continued support, so we are very bullish on the basic piece as well 
as on the conversion piece now, which I think can solve a more 
immediate problem.
	MR. BASS.  Do you think there are--one of the challenges 
facing development of these enzymes is small versus large, and is 
there any effort underway to examine the possibility of 
establishing small-scale biodigesters that would create either 
methane or ethanol, methane gas, which, as I understand it, is a 
simpler process--
	MR. ARVIZU.  Yes, it is.
	MR. BASS.  --that could burn--I was going to come back for my 
friend from California, Ms. Bono, but I don't think it is appropriate 
with--
	MR. HALL.  Let us move along.
	MR. BASS.  Yes, sir.  I can't even continue.  To develop 
biodigesters that could use wood residues, cardboard, paper, even 
household garbage, to create energy, is this something that you are 
familiar with or aware of?  Is there any potential there?
	MR. ARVIZU.  Well, yes.  You know, the breakthroughs in 
enzyme formulation, if you will, is what I call a very Edisonian 
process.  We had a couple of partners, Novozymes and Genencorp, 
that had a breakthrough, and what they were able to do is to create 
a cocktail of enzymes, we called it.  It was about 25 different 
formulations of things that was just the right formulation to break 
down corn stover into ethanol, into sugars that allow us to put into 
ethanol.  The breakthrough was the cost.  They were able to reduce 
the cost of that set of enzymes down from--well, it was a factor of 
30.  It is like 25 cents a gallon for the actual enzymes.  Science can 
teach us so much about how to engineer these materials rather than 
do what we were doing, which essentially is trial and error.  And 
we did that and we ended up with some fairly significant results.  
You know, everybody kind of applauded and celebrated and said 
how do we use that?  But there is still a lot of science left on 
figuring out how much you engineer that in ways to do precisely 
what you are talking about; is to take different kinds of feedstocks 
and convert them to the same simple six-chain sugars that are very 
easy to ferment, and then it becomes a much easier process.  And 
in fact, the capital equipment to make these production facilities 
would be quite small.
	MR. BASS.  So if I were to bring people out to visit you who 
are interested in this subject, they would learn a lot from the visit, 
do you think?
	MR. ARVIZU.  Well, we would probably learn a lot as well.
	MR. BASS.  You have got plenty of expertise?  Okay.
	MR. ARVIZU.  Yes, absolutely.  And you are all welcome to do 
that.  We learn so much by what people are trying to accomplish 
and then we can figure out how the technology can fit those needs.
	MR. BASS.  Okay, thank you very much.  Thank you, Mr. 
Chairman, for the courtesy.
	MR. HALL.  All right, thank you very much.  I would look to 
the next two witnesses that are going to testify here, and really 
want to thank the two of you for your good testimony, and a good 
service to your country.
	MR. ARVIZU.  Thank you, sir.
	MR. HALL.  It will be of great service as we pursue legislation 
to match the good information that you have given us, and we 
thank you very much.  All right, we thank you, gentlemen.  You 
are in place now and, Mr. Novak, you will go first.  Mr. Abate?  
Did I say it right?
	MR. ABATE.  Abate.
	MR. HALL.  Abate?
	MR. ABATE.  Yes.
	MR. HALL.  Mr. Hammond, Vice President, Products, 
Plextronics, Inc; Mr. Linebarger, Executive VP of Power 
Generation Business; Dr. Katzer, a Visiting Scholar, Laboratory 
for Energy and the Environment; and Mr. Cresci, Chairman, 
Environmental Power Corporation.  We will start off, Mr. Novak, 
with you, and if you can, give us 4, 5, maybe 6 minutes of 
generalization; then we will zero in on the questions we want to 
ask.  I recognize you at this time, sir.  Turn your mic on.

STATEMENTS OF JOHN NOVAK, EXECUTIVE DIRECTOR, FEDERAL AND INDUSTRY ACTIVITIES, 
ENVIRONMENT AND GENERATION SECTORS, ELECTRIC POWER RESEARCH INSTITUTE; 
VICTOR R. ABATE, VICE PRESIDENT, RENEWABLE ENERGY, GE ENERGY; TROY D. HAMMOND, 
VICE PRESIDENT, PRODUCTS, PLEXTRONICS, INC.; TOM LINEBARGER, EXECUTIVE VICE 
PRESIDENT AND PRESIDENT, POWER GENERATION BUSINESS, CUMMINS, INC.; JAMES 
KATZER, VISITING SCHOLAR, LABORATORY FOR ENERGY AND THE ENVIRONMENT, 
MASSACHUSETTS INSTITUTE OF TECHNOLOGY; AND JOSEPH E. CRESCI, 
CHAIRMAN, ENVIRONMENTAL POWER CORPORATION

	MR. NOVAK.  Thank you, Mr. Chairman.  Good morning.  I am 
John Novak, with the Electric Power Research Institute.  EPRI is a 
nonprofit collaborative R&D organization headquartered in Palo 
Alto, California, and we appreciate the opportunity to appear 
before this subcommittee on this important topic.
	Number one: the United States must keep all of its energy 
options open to meet the uncertainties of the future.  For 
electricity, this means building and sustaining a robust portfolio of 
clean, affordable options for the future, and ensuring the continued 
use of the big five: coal, nuclear, gas, renewables, and end-use 
energy efficiency.  R&D can and will make a big difference.  With 
sustained levels of R&D, the cost of these five electricity options 
can be substantially reduced over the next decade.
	Number two: investment decisions being made today about the 
next generation of electricity supply are complicated by four major 
uncertainties, the future cost of CO2, the future price of natural gas, 
spent nuclear fuel storage, and CO2 capture and storage.
	Number three: we believe that prudent investment decisions for 
plants that have to produce electricity for the next 30 to 40 years 
will be increasingly based on the assumption of a carbon-
constrained future.  Whether decisionmakers assume the cost of 
carbon dioxide to be zero as it is today, or $30 per ton or $50 per 
ton, dramatically changes the relative cost of various supply 
options.  We have taken an objective look across all the major 
supply options, using variable costs for carbon dioxide and natural 
gas, and factored in the technical progress that we think is 
achievable over the next 10 years and reached a central conclusion; 
that is, we have an extraordinary opportunity to begin building a 
low-carbon portfolio by 2020.  This portfolio would be insensitive 
to the cost of carbon dioxide, and yet still be affordable.  But R&D 
is needed to achieve the technical progress to begin to put this 
portfolio in place.
	One reason this is so critical is that electricity is going to 
become more important in the future.  We have run scenarios that 
show that electricity growth is relatively unaffected by global 
climate change goals.  Our scenarios show that the tighter the 
limits on carbon dioxide, the greater the percentage of total energy 
comes from electricity.  You can think of it this way: electricity is 
the only practical way to deliver clean energy on a large scale.  
And for those of you who are interested in seeing this picture 
unfold, I would recommend that you watch a presentation by our 
President and CEO, Steve Specker, recently given at Resources for 
the Future and available on the website that I have included in my 
written testimony.
	I would like to briefly mention some of the priorities for 
electricity-based research and development.  For coal-based 
generation, EPRI believes research and development and 
demonstration to be accelerated for both advanced combustion-
based technologies and for gasification technologies, or IGCC.  I 
want to point out that IGCC stands for integrated gasification 
combined cycle.  Some people have the misunderstanding the CC 
stands for carbon or CO2 captured; it does not.  Additional 
processes, equipment, and energy are required to capture the CO2 
from IGCC and to transport and store the CO2 in a geologic 
formation.  We think that CO2 capture for existing and new 
pulverized coal-fired plants needs to be developed and 
demonstrated.  Large-scale, long-term CO2 demonstrations will be 
needed, such as those in FutureGen and ongoing DOE R&D 
programs.  For air emissions, near-term work in mercury control 
and demonstration needs to continue.
	On nuclear power, the long-term future of nuclear energy must 
be built on a solid foundation that is grounded in three current 
ongoing nuclear energy initiatives: continued safe and effective 
operation of our current fleet of reactors, near-term licensing and 
deployment of advanced light water reactors, and licensing and 
construction of a geologic repository at Yucca Mountain.  
Significant R&D needs to exist for the current fleet and the new 
fleet of advanced light water reactors, first, for development of a 
new generation of high reliability, light water reactor fuel with 
much higher burn-up.  Other priorities include R&D in the areas of 
age-related materials degradation, fuel reliability, equipment 
reliability, and other areas.  In the longer term, the United States 
needs to develop a nuclear system having hydrogen production 
capability.  And finally, EPRI supports the long-term goals in the 
Global Nuclear Energy Partnership proposed by the 
Administration.
	Renewable priorities include: integration of large intermittent 
resources, including power electronics, interconnection, 
communication and control of distributed generation; cost-
effective energy storage technology; and demonstration ocean 
renewable wave, tidal, and wind/wave hybrid concept for power 
generation.
	End-use efficiency and demand R&D priorities: development 
of advanced communication infrastructure that links electricity 
consumers with a fully dynamic electricity marketplace; continued 
development of smart end-use devices; and ensure that we have 
regulatory and market structures that support end-use efficiency 
and demand response objectives.  For natural gas, we need to see 
cost reduction in natural gas supply, including the ability to site, 
obtain, and liquefy natural gas.  Distributed generation cost 
reductions and efficiency increase allowed DG to compete on the 
system with larger generation.  And finally, fuel cells will also find 
niche applications and require R&D until they are cost competitive 
with central stations.
	Mr. Chairman, that concludes my testimony.  Thank you.
	[The prepared statement of John Novak follows:]

PREPARED STATEMENT OF JOHN NOVAK, EXECUTIVE DIRECTOR, 
FEDERAL AND INDUSTRY ACTIVITIES, ENVIRONMENT AND 
GENERATION SECTORS, ELECTRIC POWER RESEARCH INSTITUTE

Introduction 
        I am John Novak, Executive Director of Federal and Industry 
Activities for the Environment and Generation Sectors of the 
Electric Power Research Institute.  EPRI is a non-profit, 
collaborative R&D organization headquartered in Palo Alto, 
California.  EPRI appreciates the opportunity to provide testimony 
to the Subcommittee on the next generation of electricity based 
technology.  

Electricity Generation Options
        Each year, the Advisory Council and Board of Directors of the 
Electric Power Research Institute convene a diverse group of 
leaders from industry, academia and government to discuss critical 
issues facing the electricity industry and society. The seminar 
format is designed to air diverse views, to explore common ground 
and, where possible, to develop a new pathway forward.  Last 
year's Summer Seminar was focused on "Making Billion Dollar 
Advanced Generation Investments in an Emission-Limited 
World."  Attached is the background paper for last year's seminar.  
        The paper contains an outlook for generation technology for 
the years 2010 and 2020.   We have updated information from the 
generation technology outlook to reflect more current events and 
trends and have provided some of this updated information in the 
table below.  

Comparative Costs of 2010 Generation Options

Technology
Cost of 
Electricity, 
$/MWh
Key Assumptions
Pulverized Coal
41
Coal price:  $1.50/mmbtu
Nuclear Power
46
Capital Cost:  $1400 - 
$1700 per kW
IGCC without 
carbon capture
47
Coal price:  $1.50/mmbtu
Natural Gas 
Combined Cycle
56
Fuel Cost:  $6/mmbtu
Biomass
62

Wind
75
Capacity Factor: 29%

Comparative Costs of 2020 Generation Options

Technology
Cost of 
Electricity, 
$/MWh
Key Assumptions
Pulverized Coal
64
Coal price:  $1.50/mmbtu
With CO2 capture, 
transport, storage
Nuclear Power
46
Capital Cost:  $1700 per 
kW
IGCC with CO2 
capture
54
Coal price:  $1.50/mmbtu
Natural Gas 
Combined Cycle
52
Fuel Cost:  $6/mmbtu
Biomass
44
New technologies to reduce 
cost
Wind
52
Capacity Factor: 29%; 
substantial technology 
improvement


Key Points
        EPRI would like to make six key points drawn from the 
analysis in the attached paper and from the discussions at the 
summer seminar.
 
        1. The U.S. must keep all of its energy options open to meet 
the uncertainties of the future.  For electricity, this means 
building and sustaining a robust portfolio of clean, 
affordable options for the future - ensuring the continued 
use of the "big five": coal, nuclear, gas, renewables, and 
end-use energy efficiency.
        2. R&D can and will make a big difference.  With sustained 
levels of R&D, the costs of these five electricity options can 
be substantially reduced over the next decade.
        3. Investment decisions being made today about the next 
generation of electricity supply are complicated by four 
major uncertainties:
                a. Future cost of CO2 
                b. Future price of natural gas
                c. Spent nuclear fuel storage
                d. CO2 capture and storage
        4. We believe that prudent investment decisions for plants 
that have to produce electricity for the next 30-40 years will 
be increasingly based on the assumption of a carbon 
constrained future.  Whether decision makers assume the 
future cost of CO2 to be zero as it is today, or $30/ton, or 
$50/ton, dramatically changes the relative cost of the 
various supply options.
        5. We have taken an objective look across all the major supply 
options, using variable costs for CO2 and natural gas, and 
factored in the technical progress that we think is 
achievable over the next 10 years, and reached a central 
conclusion --- That is, we have an extraordinary 
opportunity to put a low-carbon portfolio in place by 2020. 
This means the technology would be ready by 2015, and 
installed by 2020.  This portfolio would be insensitive to 
the cost of CO2, and yet still be affordable.
        6. One reason this is so critical is that electricity is going to 
become more important in the future.  We have run 
scenarios, and invariably, the tighter the limits on CO2, the 
more electricity that's going to be required globally.  You 
can think of it this way -- electricity is only practical way to 
deliver clean energy on a large scale.

        For those of you interested seeing this picture unfold, I would 
recommend that you watch a presentation by our CEO, Steve 
Specker, recently given at Resources for the Future.  The web link 
is http://www.eande.tv/transcripts/?date=040406#transcript 

R&D Priorities
        Following is a summary of EPRI's priorities for electricity 
based R&D in five key areas: coal, nuclear, gas, renewables and 
end-use energy efficiency.  EPRI would be pleased to discuss these 
in greater detail with the Subcommittee.

Coal
Coal Based Generation
        ? EPRI believes RD&D should be accelerated for both 
combustion-based technologies and for gasification 
technology. Three major areas of work need to be emphasized, 
                o 1) Integrated Gasification Combined Cycle work on 
hydrogen turbines, reliability, cost reduction, and 
integration with CO2 ; 
                o 2) very efficient pulverized coal combustion with 
options for CO2 capture and
                o 3) fluidized bed combustion with options for near zero 
pollutant emissions and CO2 capture.  
        ? Related technology deployment to reduce costs (initially 
without CO2 capture until storage is demonstrated) as is being 
done in conjunction with EPRI's CoalFleet for Tomorrowr 
Program and as a result of the EPACT 2005 enactment.

CO2 
? To assure public acceptance, multiple (~5) large scale ( > 1 
MTY), long term CO2  storage demonstrations in different 
geologies and locations will be needed in addition to 
FutureGen and DOE RD&D, to assure that storage is safe and 
effective.
? Post combustion capture for existing and new PC-fired plants 
needs to be developed and demonstrated.

Emissions
? Near-term work in mercury control and demonstration to 
assure that all equipment and coal types can be reliably 
controlled require completion of the field testing program 
currently underway by industry and government 

Gas
? Cost reduction in natural gas supply, including the ability to 
site and obtain LNG, since LNG use is projected to grow 
rapidly.  
? Distributed generation (DG) cost reduction and efficiency 
increases in DG to allow DG to compete on the system with 
larger generation. 
? Fuel Cells and applications which support combined heat and 
power will also find niche applications and require RD&D 
until they are cost competitive with central stations.

Nuclear
? Significant R&D needs exist for the current fleet and the new 
fleet, especially in areas of age-related materials degradation, 
fuel reliability, equipment reliability and obsolescence, plant 
security, cyber security, and low-level waste minimization.  
? Development of a new generation of high reliability LWR fuel 
with much higher burnup that will better utilize uranium 
resources, improve operating flexibility, and significantly 
reduce spent fuel volume and transportation needs, resulting in 
additional improvements in nuclear energy economics.  These 
are mid-term R&D needs whose impact would be considerable 
if accelerated with government investment. 
? In the longer term develop a nuclear system having hydrogen 
production capability.  Many believe that a hydrogen economy 
is essential for revolutionizing transportation, in which case 
the demand for competitive and environmentally responsible 
hydrogen production will greatly increase.  A large-scale, 
economical nuclear source would hasten that future.

Renewables
? Integration of large intermittent resources, including power 
electronics for more effective conversion, smoothing and 
control of renewable resources 
? Interconnection, communication and control of distributed 
generation  
? Incremental, low impact hydropower expansions, advanced 
hydro turbine concepts and performance optimization tools
? Cost-effective energy storage technology for utility T&D 
applications with renewable resources
? Demonstration of ocean renewable wave, tidal and wind-wave 
hybrid concepts for power generation (see also EPRI Ocean 
Energy work) 

End Use Efficiency and Demand Response
? Development of an advanced communications infrastructure 
that links electricity consumers with a fully dynamic electricity 
marketplace.  Information could be exchanged directly with 
smart end-use devices, for example, so consumers would not 
have to make hourly or daily energy choices.  This "prices to 
devices" approach would allow the appliance itself to optimize 
its operation under varying costs and conditions.    
? Ensure we have regulatory and market structures that support 
end-use efficiency and demand response objectives.
? Continue development of smart end-use devices. An essential 
premise of efficiency and demand response strategies (as well 
as of the provisions of the U.S. Energy Policy Act of 2005) is 
an infrastructure of intelligent electricity meters and end-use 
devices capable of two way communication with the electricity 
system.  Many end-use technologies are beginning to evolve, 
through advances in distributed intelligence, from static 
devices to devices with much more dynamic capabilities.  

        The Electric Power Research Institute was established in 
1973 as an independent, nonprofit center for public interest energy 
and environmental research.  EPRI brings together members, 
participants, the Institute's scientists and engineers, and other 
leading experts to work collaboratively on solutions to the 
challenges of electric power. These solutions span nearly every 
area of electricity generation, delivery and use, including health, 
safety, and environment.  EPRI's members represent over 90% of 
the electricity generated in the United States.

Summary of EPRI Testimony - Key Points
1. The U.S. must keep all of its energy options open to meet the 
uncertainties of the future.  For electricity, this means 
building and sustaining a robust portfolio of clean, 
affordable options for the future - ensuring the continued 
use of the "big five": coal, nuclear, gas, renewables, and 
end-use energy efficiency.
2. R&D can and will make a big difference.  With sustained 
levels of R&D, the costs of these five electricity options can 
be substantially reduced over the next decade.
3. Investment decisions being made today about the next 
generation of electricity supply are complicated by four 
major uncertainties:
        a. Future cost of CO2 
        b. Future price of natural gas
        c. Spent nuclear fuel storage
        d. CO2 capture and storage
4. We believe that prudent investment decisions for plants that 
have to produce electricity for the next 30-40 years will be 
increasingly based on the assumption of a carbon 
constrained future.  Whether decision makers assume the 
future cost of CO2 to be zero as it is today, or $30/ton, or 
$50/ton, dramatically changes the relative cost of the various 
supply options.
5. We have taken an objective look across all the major supply 
options, using variable costs for CO2 and natural gas, and 
factored in the technical progress that we think is achievable 
over the next 10 years, and reached a central conclusion --- 
That is, we have an extraordinary opportunity to put a low-
carbon portfolio in place by 2020. This means the 
technology would be ready by 2015, and installed by 2020. 
This portfolio would be insensitive to the cost of CO2, and 
yet still be affordable.
6. One reason this is so critical is that electricity is going to 
become more important in the future.  We have run 
scenarios, and invariably, the tighter the limits on CO2, the 
more electricity that's going to be required globally.  You 
can think of it this way -- electricity is only practical way to 
deliver clean energy on a large scale.

        For those of you interested seeing this picture unfold, I would 
recommend that you watch a presentation by our CEO, Steve 
Specker, recently given at Resources for the Future.  The web link 
is http://www.eande.tv/transcripts/?date=040406#transcript 



	MR. HALL.  I thank you.  We have a vote on the floor and we 
will be in recess until 12:20.
	[Recess.]
	MR. MURPHY.  [Presiding]  All right.  This hearing is back in 
session.  I will be sitting in until Mr. Hall returns.  We are going to 
continue on.  Mr. Novak, you completed your testimony.  We will 
go now to Victor Abate, who is the Vice President of Renewable 
Energy with GE Energy.  Proceed.  Make sure the microphone is 
on and close to you.  Thank you.
MR. ABATE.  Yes.  Mr. Chairman and members of the 
committee, I am Victor Abate, Vice President for Renewable 
Energy at GE Energy.  I appreciate the opportunity to testify today 
on the future of wind power.
	GE is a technology leader in the design and manufacture of 
power-generating systems that operate on a wide variety of fuels.  
In 2002, we added wind energy to our portfolio because we 
recognized the global demand for cleaner and more cost-effective 
renewable power.  We see wind as a viable energy solution capable 
of complimenting the world's energy portfolio, and benefiting 
greatly over time from advances in turbine technology.
	To give you a feel for today's wind turbine technology, picture 
taking a three-bladed rotor the size of a football field, turning it 
vertical and sliding it 30 stories into the air, mounting it on a 100-
ton locomotive that is balancing on a pole and spinning it into the 
wind.  That is analogous to what we do with our 1.5 megawatt 
wind turbine, where this single wind turbine produces enough 
electricity to power more than 500 U.S. homes.
	We see two critical factors driving the economics for wind 
power.  The first is the quality of the wind resource, and the United 
States has abundant high quality wind resources providing us with 
a global economic advantage for the development of wind energy.  
In fact, the U.S. resources are significantly better than other 
countries, like Germany, that actually lead in terms of installed 
wind capacity.  The second is wind turbine technology and its 
ability to efficiently capture energy from the wind.  A critical 
indicator of technology level is illustrated in the wind turbine's 
capacity factor.  The capacity factor is the ratio of energy produced 
versus the maximum nameplate rating of the machine over the 
same period.
	Since 2002, the capacity factor of GE state-of-the-art wind 
turbines has improved from 36 percent to 47 percent, meaning 
more free energy is being captured per turbine, reducing the cost of 
electricity by more than 1 cent a kilowatt hour over this period.  
The capacity factor has improved because of technology 
advancements in wind turbine efficiency, reliability, and 
availability.  Our wind turbines are currently available to generate 
power more than 97 percent of the time, which is up dramatically 
from 85 percent in 2002.  This is the result of advancements in 
turbine design, remote monitoring, and system reliability 
modeling.  Since 1980, the cost of wind-generated electricity has 
dropped by 80 percent as the result of technology advancements.  
Today the cost of electricity from wind power, without any 
incentives, is around 7 cents a kilowatt hour.  While this is clearly 
more expensive than today's mature nuclear and coal technologies, 
it is currently comparable to the cost of electricity generated from 
natural gas at the recent elevated gas price levels.  And it also 
provides a natural hedge against rising fuel costs in the future, as 
wind energy provides us with a fixed cost of electricity.
	The Federal Production Tax Credit provides the necessary 
economic incentive for power producers to generate power from 
wind, and keeps equipment suppliers, such as GE, investing in 
technology advancements, and reducing the cost of wind power.  
GE is investing more than $70 million annually in wind turbine 
R&D, focused at improving turbine performance, and hence wind 
power economics.
	In 2005, the United States installed nearly two and a half 
gigawatts of wind energy, expanding its installed base to over nine 
gigawatts, which now provides enough wind energy to power over 
2.3 million homes.  The United States is well positioned to benefit 
from this ample, clean, and carbon emissions-free domestic 
resource.  We believe wind energy will be an integral part of the 
world energy mix throughout the 21st century.
	Thank you for allowing me to participate in this hearing, and I 
look forward to your questions.
	[The prepared statement of Victor Abate follows:]

PREPARED STATEMENT OF VICTOR ABATE, VICE PRESIDENT, 
RENEWABLE ENERGY, GE ENERGY

        Mr. Chairman and members of the Committee, I am Victor 
Abate, Vice President, Renewable Energy at GE Energy.  I 
appreciate the opportunity to testify today on the future of 
renewable energy.
        GE is a power generation technology leader with leading 
experience in biomass, solar and wind technology.  At GE, we 
believe renewable energy will be an integral part of the world 
energy mix throughout the 21st Century. Today, I'd like to focus 
specifically on the wind industry, but would welcome questions on 
other renewables.  I will address my testimony to three issues:  the 
state of wind technology today; costs associated with wind energy; 
and opportunities to drive costs down in the future through 
continued technology advancement.

Wind Energy and the US Energy Future
        Wind energy can become a significant player in the US energy 
portfolio and is the most commercially viable renewable energy 
resource today.  The industry has recently seen record-breaking 
growth; in 2005, the US installed 2,431 MW of wind energy 
contributing to a total installed base of 9,149 MW, which is 
enough energy to serve 2.3 million homes. Although today's wind 
technology supplies less than 1 percent of US electric generation, 
the total installed base has nearly doubled over the last three years.  
Wind energy is currently being used to generate power in 30 states.
        The two critical factors for success in the wind industry are 1) 
the quality of the wind resource, and 2) advances in wind turbine 
technology.   The US is well positioned in both of these areas.
        When compared to Germany, the country with the world's 
largest wind energy installed base, and other top country wind 
installers, the US has significantly better wind resources.  In fact, 
the American Wind Energy Association (AWEA) claims that 
current US wind resources have the potential to supply up to three 
times the total electricity generated in the US today.



        Tapping the potential of wind as an energy source makes use of 
this abundant, domestic, low to zero carbon emissions resource 
while reducing overall US dependence on imported energy.  For 
example, a 100 MW wind farm in New York State would produce 
the energy equivalent to 590,000 barrels of oil per year and 
displace 260 million pounds of carbon dioxide per year.  
Furthermore, wind is a fixed cost source of electricity which 
hedges rising prices for other energy sources, such as natural gas 
and oil. 
In January, President Bush stated that the US could one day 
generate up to 20 percent of its electricity needs through wind 
technology.  We believe that this vision is achievable through 
continued technology advancement.

Current Wind Energy Technology
        The key measure of the ability to generate electricity from 
wind energy is the turbine's "capacity factor."   Capacity factor is 
defined as the ratio of the actual energy produced by a turbine over 
a time period versus the maximum energy the turbine could 
produce if operated at full nameplate rating over the same time 
period.  For example, a 1 MW unit can produce a maximum of 
168,000 kWh of electricity in one week.  If the turbine actually 
produces 84,000 kWh, it would have a capacity factor of 50% for 
that week.
        The capacity factor for state-of-the-art wind turbines has 
increased substantially since 2002.  As shown on the chart below, 
in 2002, the best-in-class capacity factor of wind turbines was less 
than 36% at a wind speed of 8 meters per second (m/s)(a speed 
which is representative of the quality of US wind resources).  In 
2006, the capacity factor of the best-in-class machines has risen to 
approximately 47%.  As a point of reference, a one-point increase 
in capacity factor over the US wind installed base could produce 
enough electricity to support 90,000 average US households.
        Three key factors influence the turbine capacity factor: blade 
size, turbine efficiency and availability, and the wind resources at 
the site.  Increases in rotor sizes and turbine availability have 
contributed to the significant jump in the capacity factor.
        Since 2002 rotor sizes in similar wind regimes have increased 
by 17% from 70.5 meters to 82.5 meters, thereby increasing the 
energy capture of the turbine by over 35%.   This also benefits 
energy production by allowing the turbine to begin generating 
power at lower wind speeds.
        Availability refers to the percentage of time that a wind turbine 
is ready to generate power.  In 2002, availability of then state-of-
the-art wind turbines was less than 85 percent.  As the result of 
technology advances in remote monitoring, diagnostics and the 
utilization of GE reliability modeling, today's wind turbines have 
availability of more than 97 percent.  A one percent increase in 
availability over the US wind installed base could produce enough 
electricity to support 28,000 average US households.
        Proper siting of wind turbines also is critical to energy 
production and capacity factor.  As shown below, siting the same 
1.5xle unit at an 8 m/s average site versus a 7 m/s average site will 
create a 9 point increase in the capacity factor, from 38% to 47%.



Costs 
        Since 1980, the cost of wind-generated electricity has seen an 
80 percent price reduction as the result of technology 
advancements in availability, efficiency and output.  Today, the 




Cost of Energy for wind, exclusive of any incentives, is 7 
cents/kWh.

        Wind is more competitive when the 1.9-cent per kWh 
production tax credit for wind is applied.  The Federal production 
tax credit provides a necessary economic incentive for power 
producers to generate power from wind.  As illustrated below, the 
role of the production tax credit in stimulating the installation of 
wind generation is clear.  When the wind production tax credit has 
been allowed to expire, new installed capacity has dropped 
dramatically in the following year due to lack of component 
availability.  Therefore, a more stable incentive for wind 
generation can support the long-term investment by suppliers 
needed to assure that manufacturing capability is available for 
critical components.
  


        For example, today we are seeing a supply-constrained 
industry where suppliers are unable to provide key components 
such as blades and gearboxes, limiting the number of wind turbines 
being manufactured. To meet the market demand in 2006 and 
2007, the supply chain needs to make multi-million dollar 
investments in production capacity. However, unless OEMs can 
assure suppliers of a future market, suppliers may not make the 
long-term investments that are necessary.  A predictable incentive 
policy is essential if we are to grow the wind industry in the US.

Wind Technology Advances for the Future
        GE is investing more than $70 million annually in advancing 
wind turbine technology to further lower the cost of electricity.  
These efforts are focused in three key areas: larger and more 
efficient rotors, advanced loads management and enhanced grid 
stabilization.  
        The rotors on wind turbines define the energy capture 
capabilities of the unit.  This energy capture is a function of two 
parameters: rotor diameter and blade efficiency.  Larger rotors 
capture more energy, but typically increase the up tower mass of 
the unit and therefore, increase the weight and cost of the 
supporting structures.  Utilization of higher technology and lighter 
weight material will allow longer blades without increased weight.  
In addition, advances in computer modeling will allow significant 
increases in blade efficiency through increased understanding of 
the complex flow fields around turbine blades.
        The rotor is also a key contributor to the loads characteristics 
of the wind turbine.  Advances in passive and active loads 
management techniques, through advanced controls and materials, 
will allow increases in turbine size without proportional growth in 
weight.
Voltage regulation is key to electrical grid stability.  Wind turbines 
have progressively increased their capability to stay on line during 
grid voltage fluctuations and assist with voltage regulation.  In the 
future, wind turbines will be a vital part of grid voltage 
stabilization through advanced power electronics which will be 
capable of managing grid voltage, even when the wind is not 
blowing.  
        Continued development of low speed wind technologies - an 
important focus of government/industry research and development 
partnerships - will allow the use of wind turbines in lower class 
wind locations that would otherwise not be economically feasible. 

Conclusion
        In conclusion, wind power is a cleaner, viable offset to fossil 
fuel generation.  The U.S. is well positioned to benefit from this 
ample, domestic resource and it is evident that wind can become a 
significant player in the US energy mix through its proven 
technology and strong growth. Predictable incentives, however, are 
still needed to sustain this momentum and drive costs down.
        Thank you for the opportunity to present this testimony.  I look 
forward to your questions.

	MR. MURPHY.  Thank you very much.  And now we are joined 
by Dr. Troy D. Hammond, Vice President of Products with 
Plextronics, a company around Pittsburgh, and we are pleased that 
you could be here and we were able to have you here.  Thank you 
so much for being with us today.  Please proceed.
        MR. HAMMOND.  Well, I wish to thank Chairman Hall and the 
members of the Subcommittee on Energy and Air Quality for the 
opportunity to present and discuss my views regarding new and 
innovative solar technologies.  I have submitted a written copy of 
my testimony for the record and I will summarize it for you today.  
First of all, I commend the Chairman for his leadership in having 
this hearing.  This dialogue is important for America, and I thank 
the subcommittee for addressing the importance of innovation 
related to our current energy challenges.
	My name is Troy Hammond, and I am the Vice President of 
Products for Plextronics, Incorporated, in Pittsburgh, Pennsylvania.  
Plextronics was founded in 2002, as a spinout of Carnegie Mellon 
University.  It was co-founded by Professor Richard McCullough, 
Dean of the Mellon College of Science at Carnegie Mellon 
University, where he continues to play an active role in 
Plextronics.  Our company is the leader of conductive polymer 
research, development, and commercialization.  These conductive 
polymers are a type of plastic material that promises to shepherd in 
a new era of low-cost electronic devices, including polymer 
photovoltaics, or solar cells.
	On January 31, in his State of the Union address, the President 
announced the Advanced Energy Initiative, stating that America's 
energy challenges, including our continued economic and national 
security, can be addressed in part through revolutionary solar 
technology.  The President set out a clear objective for the 
contribution of solar photovoltaic energy to the Nation's energy 
supply; namely, to reduce the cost of solar photovoltaic 
technologies so that they become cost competitive by the year 
2015.  The President has good reason to support solar technology.  
Solar photovoltaic devices directly convert sunlight to electric 
power in a clean, renewable manner, with no direct emissions into 
the atmosphere; however, today's solar technology cannot yet 
deliver cost-competitive power.
	While residential, commercial, and industrial customers pay 
less than 10 to 12 cents per kilowatt hour in their electric bills, 
solar energy costs 25 to 50 cents per kilowatt hour or more 
depending on the technology and the geographical location.  As an 
additional hurdle, the cost of solar technology comes as a large 
capital investment at the time of purchase.  A residential consumer 
buying today's products would pay $10,000 or more for two 
kilowatts peak of solar modules.  Installation and necessary 
electronics increase the total cost to $15,000 to $20,000.  Projected 
price decreases generated from the annual 30 to 40 percent market 
growth in solar have flattened, if not reversed.  The President's 
objective will require a reduction factor of three to five in the 
installed system cost, which will translate into an energy cost of 
below 10 cents per kilowatt hour by the year 2015.  Clearly, if 
America achieves these targets, it will begin changing for the 
global energy industry.
	While some would propose that these goals can be achieved 
through evolutionary development of current technology, even 
advocating tens of billions of dollars of subsidies, we believe 
revolutionary thin-film technologies can unlock the sun's potential.  
Indeed, America's engine of research and invention has been 
making critical progress toward new solar technologies for many 
years.  For example, polymer photovoltaics utilize a novel version 
of plastics that strongly absorb the sun's light and behave like a 
semiconductor, analogous to silicon in the generation of electricity.  
Rather than requiring expensive manufacturing equipment and 
processes, these polymers are turned into inks that can literally be 
printed much like a newspaper is printed.  The total manufacturing 
cost can be as much as a factor of 10, less costly for each square 
foot of solar module.
	Key discoveries in this technology were made domestically.  
Current state-of-the-art polymer solar cells utilize a technology 
invented by Professor McCullough and manufactured by 
Plextronics; to be clear, additional performance improvement is 
required.  Plextronics' scientists have developed a portfolio of new 
polymer technologies that have the potential to double this 
performance and extend the lifetime of the technology.  The focus 
of our technical development activity is the realization of this 
performance potential, and when achieved, broad 
commercialization is possible.
	Federal support at this juncture is critical.  The President's 
2007 Budget proposes a Solar America Initiative, with a funding 
increase of $65 million over Fiscal Year 2006.  Given the impact 
that economic solar energy could have on global energy supply, we 
urge Congress not only to fund this program fully, but also to 
ensure America's leadership in revolutionary new solar 
technologies is accelerated by the Solar America Initiative.  Thank 
you.
	[The prepared statement of Dr. Troy D. Hammond follows:]

PREPARED STATEMENT OF DR. TROY D. HAMMOND, VICE 
PRESIDENT, PRODUCTS, PLEXTRONICS, INC.

        Thank you, Chairman Hall and members of the Subcommittee 
on Energy and Air Quality for the opportunity to present and 
discuss my views regarding new and innovative solar technologies.  
I have submitted a written copy of my testimony for the record and 
will summarize it for you today.  First of all, I commend Chairman 
Hall for his leadership in having this hearing.  This dialogue is 
important for America and I thank your Subcommittee for 
addressing the importance of innovation related to our current 
energy challenges.  
        My name is Troy Hammond and I am the Vice President of 
Products for Plextronics, Inc. in Pittsburgh, Pennsylvania.  
Plextronics was founded in 2002 as a spin-out of Carnegie Mellon 
University and was co-founded by Prof. Richard McCullough, 
Dean of the Mellon College of Science at Carnegie Mellon 
University, where he continues to play an active role in 
Plextronics.  Our company is the leader of conductive polymer 
research, development, and commercialization.  These conductive 
polymers are a type of plastic material that promise to shepherd in 
a new era of low-cost electronic devices including polymer 
photovoltaics, or solar cells. 
        On January 31, in his State of the Union address, The President 
announced the Advanced Energy Initiative stating that America's 
energy challenges, including our continued economic and national 
security, can be addressed in part through revolutionary solar 
technology.  The President set out a clear objective for the 
contribution of solar photovoltaic energy to the nations energy 
supply, namely to reduce the cost of solar photovoltaic 
technologies so that they become cost competitive by 2015.
        The President has good reason to support solar technology.  
Solar photovoltaic devices directly convert sunlight to electric 
power in a clean, renewable manner with no direct emissions into 
the atmosphere.  
        However, today's solar technology cannot yet deliver cost 
competitive power.  While residential, commercial and industrial 
customers pay less than $0.10 - 0.12 per kilowatt-hour in their 
electric bills, solar energy costs $0.25 to $0.50 per kilowatt-hour or 
more depending on the technology and the geographical location.
        As an additional hurdle, the cost of solar technology comes as a 
large capital investment at the time of purchase.  A residential 
consumer buying today's products would pay $10,000 or more for 
2 kilowatts-peak of solar modules.  Installation and necessary 
electronics increase the total cost to $15,000 to $20,000.  Projected 
price decreases from the annual 30-40% market growth have 
flattened if not reversed.  The President's objective will require a 
factor of three to five reduction in the installed system cost, which 
will translate into an energy cost of below $0.10 per kilowatt-hour 
by 2015.
        Clearly, if America achieves these targets, it will be game-
changing for the global energy industry.  While some would 
propose that these goals can be achieved through evolutionary 
development of current technology, even advocating tens of 
billions of dollars of subsidies, we believe revolutionary thin film 
technologies can unlock the sun's potential.  Indeed, America's 
engine of research and invention has been making critical progress 
toward new solar technologies for many years.  
        For example, polymer photovoltaics utilize a novel version of 
plastics that strongly absorb the sun's light and behave like a 
semiconductor, analogous to silicon, in the generation of 
electricity.  Rather than requiring expensive manufacturing 
equipment and processes, these polymers are turned into inks that 
can literally be printed much like a newspaper is printed.  The total 
manufacturing cost can be as much as a factor of ten less costly for 
each square foot of solar module.  
        Key discoveries in this technology were made domestically.  
Current state-of-the-art polymer solar cells utilize a polymer 
technology invented by Prof. McCullough and manufactured by 
Plextronics, yet additional performance improvement is required.  
Plextronics' scientists have developed a portfolio of new polymer 
technologies that have the potential to double this performance and 
extend the lifetime of the technology.  The focus of our technical 
development activity is the realization of this performance 
potential; when achieved, broad commercialization is possible.
        Federal support at this juncture is critical.  The President's 
2007 Budget proposes a Solar America Initiative with a funding 
increase of $65 million over FY06.  Given the impact that 
economic solar energy could have on global energy supply, we 
urge Congress not only to fund this program fully, but also to 
ensure America's leadership in revolutionary, new solar 
technologies is accelerated by the Solar America Initiative.

Summary
1. The President's Charge
        a. Make solar photovoltaic technology cost competitive 
by 2015
        b. Address this energy challenge through revolutionary 
solar technology
2. The Rationale
        a. Direct conversion of solar energy into electricity
        b. Clean, renewable, no emissions
3. The Issue
        a. Today's technology is not cost competitive
        b. $0.25-0.50 or more per kilowatt-hour versus $0.10 or 
less
        c. Large up-front capital costs (e.g. $20,000 for the 
residential consumer)
        d. Evolutionary improvements, even subsidized, won't 
suffice
4. The Opportunity
        a. Thin-film technologies promise revolutionary costs
        b. Polymer photovoltaics can be printed like inks at 5-10x 
lower cost
5. Plextronics, Inc.
        a. Key discoveries by Prof. McCullough; developed by 
Plextronics
        b. Potential to double current performance and enable 
commercialization
6. Federal support is critical, including the Solar America 
Initiative
        a. Fully fund this Initiative
        b. Demand strong focus on revolutionary technologies

	MR. MURPHY.  Thank you, Dr. Hammond.  Our next person 
testifying is Mr. Tom--is it Linebarger?
	MR. LINEBARGER.  Linebarger.
	MR. MURPHY.  Linebarger, Executive Vice President and 
President of Power Generation Business for Cummins.  Thank you.  
You may proceed.
        MR. LINEBARGER.  Thank you, Mr. Chairman, and thank you, 
members of the committee.  It is an honor to be here, and thank 
you for inviting me to testify.  I have a written statement that I 
would like to put in the record, and I also have a brief oral 
testimony.  
        I will, of course, be brief.  My name is Tom Linebarger.  I am 
the President of Cummins Power Generation, and it is a division of 
Cummins, Incorporated.  We supply a wide range of power 
generation equipment, from very small units of four kilowatts or so 
used for recreational uses to large power generators up to 2.7 
megawatts for large industrial loads.  All Cummins Power 
Generation equipment would be generally classified as distributed 
energy, and that is mostly what I want to speak to you about today.
	Like the other witnesses, I think today's hearing is really 
important.  Obviously, reliable and cost-effective energy for the 
long run is among the most important issues facing the country 
today.  It is my belief that we need to capitalize on the full range of 
power generation technologies available in order to provide a 
balanced portfolio of energy, and I think the committee is wise to 
be looking ahead and looking broadly for solutions.
	If I could, I would like to define distributed energy.  
Distributed energy is electricity that is generated near the point of 
use as opposed to a centralized power station, which would then 
send electricity over hundreds of miles, typically, in transmission 
lines.  Most of our power today in the United States, of course, is 
generated by central stations, but already more than 5 percent of 
power is generated in distributed form.  Distributed energy can use 
a wide range of fuels.  Most of the fuels mentioned today can be 
used in distributed form, and our own equipment, for example, can 
use biofuels, coal bed methane, and many other fuels.
	The benefits of distributed energy are many.  I will just 
mention a few here.  First, it is a compliment to the electrical grid.  
It provides more reliability to the grid by providing built-in support 
and also relieving bottlenecks in the grid.  It is quickly deployed 
and flexible in size and location.  I just brought a small model of a 
typical unit that we might supply in an emergency response, and 
we can fit the entire two megawatt unit in the back of a semi truck, 
ready to be installed, and we have used these units to respond to 
many emergencies.  I will mention a few later.  Emergency 
backup, in stationary form, obviously can protect our important 
industries and facilities, and this kind of backup is more and more 
necessary as we see grid failures and other disasters that impact 
our critical facilities.  Distributed energy is environmentally 
friendly and also efficient, and that is increasingly so as we 
improve technologies.
	I would like to just highlight a couple of examples that I am 
familiar with from experience.  Cummins has had a distributed 
energy deployment that I think highlights some of these benefits.  
First, a couple of years ago there was a drought in Mexico, where a 
Mexican utility needed to bring 160 megawatts online, and they 
were shooting to get it online in 45 days.  So using units just like 
this one that I showed here, we were able to get all 160 megawatts 
online and available for homes in the area in actually less than 45 
days.  In fact, we completed the project in 41.  To put up new 
power stations would've taken them certainly more than a year and 
probably more like two years; so very quick and very flexible.
	A similar example would be, today, we provide 72 megawatts 
to First Energy, the utility First Energy, and these units are based 
in New Jersey.  It provides peaking support, which reduces the cost 
of providing energy to consumers in that area by taking off peak 
loads.  And these same units, during the winter, we were able to 
redeploy them to help facilities, after Hurricane Katrina, come 
back online more quickly.  We were able to, again, drive them 
down in trucks like this to provide quick response.  Similarly, in a 
grid-support application, we have 96 megawatts on Long Island 
where LIPA is building a new transmission line, and while that line 
is being built, they will use these distributed energy resources to 
keep their consumers with power.  In the emergency backup 
examples, there are many, but just in the Northeast blackout, for 
example, many of our units were deployed at hospitals, which, 
because they were there, people who were undergoing operations 
when the blackout occurred, those operations were able to 
continue, and obviously those backup units were really important 
to those that were on the operating table.  Refineries were able to 
restart more quickly after Katrina because they had emergency 
backup power ready to go and already deployed.
	As an example of the efficiency and environmental benefits of 
distributed energy, we have one unit that is at Chicago's Museum 
of Science and Industry that allows them to use their unit for 
peaking power.  They also have a combined heat and power 
application where they can use hot water to provide the cafeteria 
and other facilities at the museum with hot water and steam.  And 
while this reduces the cost of energy for them, it also allows them 
to come off the grid at peak times in the summer, and their cost of 
energy is significantly reduced.
	This committee has already recognized, I think, the value of 
distributed energy technologies.  Last year's Energy Policy Act 
authorized $760 million over 3 years for distributed energy 
research and related technologies.  However, I would note that the 
Department of Energy only spent about $60 million last year on 
distributed energy, and this year is asking for significantly less, 
around $30 million.  My concern is that it will have a negative 
impact on research in this area when we are starting to make some 
significant advances in efficiency and cost.
	This committee also adopted an amendment by Congressmen 
Buyer and Boucher on interconnection.  This requires States to 
hold proceedings on developing interconnection standards.  Also, 
Congressmen Terry and Doyle co-chaired the House Distributed 
Energy Caucus, and this caucus takes a lead in developing policies 
to promote and deploy distributed energy.  Congresswoman 
Wilson, who was here earlier, has a long history with 
interconnection issues.  All of these things are helping to get 
distributed energy deployed more widely and more effectively in 
the energy infrastructure.
	However, I still believe that much more needs to be done for 
distributed energy to reach its potential.  There is significant 
technology work that needs to be done for these units to reach their 
maximum efficiency levels, and to expand their use of bio and 
renewable fuels, further improve emissions and air quality, and 
understand their role in the grid more broadly.  And I guess what I 
am asking here is that we make sure the money that has been 
authorized is spent on these critical priorities.
	As an example of the R&D work that the Department of 
Energy can continue to do that would really help is the ARES 
project.  I am familiar with this project because Cummins, along 
with two other industry participants, has been working on this 
ARES project for 5 years now with the Department of Energy.  
This project set out efficiency goals for natural gas generators.  We 
started at a 37 percent efficiency.  We have already been able to 
increase the efficiency to 44 percent, and our target is 50 percent 
on relatively low amounts of funding.  The work needs to continue 
until the goals are achieved because we have made significant 
progress.  In addition, we can identify other similar areas of 
technology that could be funded to provide some of the benefits I 
mentioned earlier.
	Secondly, I think that we need to promote combined heat and 
power as a significant element of distributed energy.  Combining 
heat and power offers efficiencies north of 85 or 90 percent due to 
the use of waste heat.  Unfortunately, CHP is a significantly 
underutilized technology today.  There are a number of barriers 
and risks to implementing these projects, and in order to get more 
projects done, we need to recognize the benefits to the public of 85 
or 90 percent efficiency and provide incentives.  Many more 
projects will get done with relatively small incentives, given how 
close some of the economics are on some of these projects.  Many 
other countries have done similar kind of incentives and have had 
good results in terms of deploying combined heat and power.  I 
offer that the same would be true with landfill gas, which is a good 
renewable source of fuel, but again, because of the risks in some of 
these projects, incentives are needed in order to get more projects 
off the ground.
	Next, in order to help distributed energy to reach its potential, I 
think we need to focus on some of the barriers, and particularly the 
more unreasonable barriers that are preventing implementing 
distributed energy.  Most important in this is interconnection.  On 
the subject of interconnection, I would just like to highlight one 
piece of equipment I brought with me.  This is a master control 
module which we use to hook up our generators onto the grid.  
This allows us to parallel with the grid and ensure that our energy 
can come on and off safely onto the grid.  It protects other users 
that are downstream from the source of power.  It also ensures that 
workers are not injured if they are working on the lines when we 
are generating power.  This module meets the requirements of a 
standard IEEE 1547.  This standard was developed over 5 years by 
a wide range of industry, regulatory, and utility participants.  And 
the Energy Policy Act that I mentioned, the amendment by 
Congressmen Buyer and Boucher required that States at least 
review IEEE 1547 to see how it could be deployed.  Unfortunately, 
States have been relatively slow to adopt the standard and in fact 
have adopted them in a very inconsistent way.  The result is that 
many projects that could benefit from distributed energy do not get 
done because of inconsistent rules, and oftentimes some utility 
participants will require a roomful of relays and cabinets that might 
be $10,000 or $20,000, instead of a $1,000 module that can 
accomplish the same thing.  And again, my recommendation is that 
we try to come up with an interconnection standard that is 
nationally consistent.
	Lastly, I think that it would be wise for us to ensure that critical 
infrastructure is protected throughout the United States.  We know 
that interruptions in the grid are possible and in fact even likely.  
Hurricanes, grid failures like the Northeast blackout, and homeland 
security threats have already demonstrated what can happen when 
we lose grid power.  I think Congress needs to review standby 
requirements for key facilities and industries.  Currently, there are 
very few Federal standards.  There are many, many facilities, of 
course, that do have backup power in place, but too often managers 
of critical infrastructure do not fund the purchase of backup 
equipment, because it is much like buying insurance.  You can 
either pay the money now or you can hope nothing bad happens, 
and if you are lucky, it won't.  Unfortunately, when something bad 
does happen, the public is the one who suffers from not having 
power available.  A few areas that I think deserve focus: petroleum 
refinery and deliver sector, to ensure that there is adequate backup 
power; water and sewage treatment, again, where we have seen 
evidence of not having backup power; communication networks 
and then emergency responders of all types.  Reviewing these 
requirements after emergencies is obviously too late, so we if act 
proactively, we can ensure that our infrastructure is in place.
	Again, I am pleased that you are having this hearing and I 
thank you very much for the honor of testifying today.
	[The prepared statement of Tom Linebarger follows:]

PREPARED STATEMENT OF TOM LINEBARGER, EXECUTIVE VICE 
PRESIDENT AND PRESIDENT, POWER GENERATION BUSINESS, 
CUMMINS, INC.

Introduction
        Cummins Power Generation, a subsidiary of Cummins Inc., is 
a global leader in the production and supply of power generation 
equipment, with specific focus on increasing the availability and 
reliability of environmentally responsible electric power around 
the world.  We deliver cost-effective power solutions for a wide 
variety of customers - commercial and industrial businesses, 
recreational users, emergency responders, government agencies, 
utilities, and homeowners - through our global distribution 
network. 

Background
        Distributed energy (DE) is electrical energy that is produced at 
or near the site where the energy is consumed.  DE is not one 
technology - it can be produced by generator sets using 
conventional fuels like diesel and natural gas and other newer fuels 
like biomass, biodiesel, ethanol, or hydrogen.  DE can also include 
emergent technologies such as fuel cells, wind turbines or solar. 
Installation of DE in the U.S. will result in far-reaching benefits to 
consumers, businesses, industry and our national security.  
Government policies must encourage greater use of DE. 

Benefits of deployment of DE technologies
        The benefits of DE are numerous.  It is energy efficient, it 
bolsters grid reliability, and provides backup power at the point of 
use when the grid fails.  DE is also environmentally sound.  In 
some situations it can also be a source of lower cost power.  DE 
protects some of our nation's critical infrastructure including water 
and sewage treatment, emergency communications equipment, oil 
refineries, nuclear power plants, financial data centers and much 
more.  

What is needed to fully reap benefits of DE
        We believe there are four major policy areas that the 
government should pursue to allow the country to reap the full 
benefits of DE technologies:  increased Federal R&D funding for 
DE technologies; a review of backup power requirements for 
critical infrastructure; tax policies that favor CHP; and national 
uniform interconnection standards.


        Mr. Chairman and Members of the Committee, thank you for 
inviting me to testify.  Today's topic is an important one and I am 
glad to represent the distributed energy point of view.  Today's 
high fuel prices and energy security concerns highlight the 
importance of looking beyond centrally-fired power plants for 
solutions to meet our future electricity needs.
        I am appearing here today in my capacity as President of 
Cummins Power Generation.  Cummins Power Generation, a 
subsidiary of Cummins Inc. (NYSE: CMI), is a global leader in the 
production and supply of power generation equipment, with 
specific focus on increasing the availability and reliability of 
environmentally responsible electric power around the world.  
With over 80 years' experience, we deliver cost-effective power 
solutions for a wide variety of customers - commercial and 
industrial businesses, recreational users, emergency responders, 
government agencies, utilities, and homeowners -- through our 
global distribution network.  Our products include engines, 
alternators, generator sets, and systems including power control 
and power transfer technologies. Our services range from system 
design, project engineering and management, large scale 
temporary power projects, and operation and maintenance 
contracts.  We also operate several small scale power plants 
providing electrical power as well as hot or chilled water derived 
from waste heat.
        Distributed energy (DE) is electrical energy that is produced at 
or near the site where the energy is consumed.  DE is not one 
technology - it can be produced by generator sets using diesel or 
natural gas and increasingly other fuels like biomass, biodiesel, 
ethanol, or hydrogen.  DE can also include emergent technologies 
such as fuel cells, wind turbines or solar.  DE performs a number 
of important roles for power consumers and utilities including: 
emergency standby power to increase reliability, prime power 
where power is unavailable, peaking power to reduce the load on 
the grid at times of peak usage, the opportunity to utilize combined 
heat and power to reduce their total energy costs, and as protection 
against line or substation failure in a distribution grid. 
        It is estimated that there are approximately 160 gigawatts of 
emergency standby power installed in the US.  There are also 
approximately 11 gigawatts of baseload distributed energy and 
another 6.5 gigawatts of distributed energy being used to meet 
utility peaking needs.  It is also worth noting that in the US there 
are approximately 30 gigawatts of combined heat and power plants 
of less than 100 megawatts.  
        While these numbers are impressive, they are far short of the 
potential opportunities for DE.  In one market study at Cummins, 
we estimated an additional market potential of 150 gigawatts for 
combined heat and power (CHP) installations below 100 
megawatts in the commercial and industrial sectors.  We believe 
the market opportunity is larger when you consider opportunities 
to expand the use of other types of DE.  It is worth noting that 
favorable government policies in Europe have allowed DE 
technologies to enjoy far greater success in the marketplace.   DE 
technologies account for approximately 13% of the electricity 
generated in Europe, more than double their penetration in U.S. 
markets.  
        The benefits of DE are numerous.  It is energy efficient, it 
bolsters grid reliability, and provides backup power at the point of 
use when the grid fails.  DE is also environmentally sound.  In 
some situations it can also be a source of lower cost power.  DE 
protects some of our nation's critical infrastructure including water 
and sewage treatment, emergency communications equipment, oil 
refineries, nuclear power plants, financial data centers and much 
more.  
        During emergencies like last year's hurricanes or the Northeast 
blackout of 2003, DE played a critical role in assuring first 
responders could do their jobs and critical facilities like hospitals 
continued to function.  DE assured that communication systems 
continued to operate and that critical information, such as the 
financial data that underpins the banking system, was secure.  It 
kept businesses running and mitigated the economic impact of 
these disasters.  As a result of their investment in DE, many oil 
refineries were also able to continue to operate, gasoline 
distribution centers were able to load fuel into trucks, and gasoline 
was made available to consumers.  Unfortunately, not everyone 
made such investments and there were interruptions in the fuel 
delivery system.
        I would like to highlight a few specific cases of how distributed 
power provided critical support to Cummins customers during 
Hurricane Katrina and the Northeast blackout.
        When any major weather event is predicted for the US, 
Cummins Power Generation and its distributors begin to prepare a 
storm response.  In the case of Hurricane Katrina our response 
involved twice daily conference calls (every day for 9 weeks), to 
organize the marshalling not only of generating assets, but 
technicians, distribution equipment and fuel.  To respond to the 
national emergency, generating equipment was relocated from 
around the country, and from Canada and Mexico.  We estimate 
we deployed in excess of 160MW to the region.  Some of that 
equipment remains in place today.  We are proud of our ability to 
mobilize generating equipment in this manner; however, 
permanent DE installations would have provided better protection 
for the region.
        A hospital that did have emergency DE in place, is Turro 
Infirmary in Kenner, LA.  Turro Infirmary is one of the hospitals in 
the New Orleans area that managed to keep operating during 
Katrina on backup power.  After the storm, the hospital recognized 
the value of having sufficient and reliable emergency power and 
has decided to upgrade its system by replacing generators that were 
over 50 years old with new Cummins Power Generation units so 
that it will continue to be well-prepared for the next emergency. 
        The communications industry has also realized the benefits of 
reliable backup power.  Verizon Wireless installed Cummins 
generators at its cell towers and major switching stations in upstate 
New York.  During the blackout of 2003, while some people stood 
in long lines at pay phones, these generators meant that Verizon 
wireless customers continued to have uninterrupted wireless access 
throughout the emergency.  
        Also during the blackout, Cummins generators enabled New 
York Mayor Michael Bloomberg to respond to the blackout 
because New York City Hall was supported by a Cummins 
emergency standby system keeping the lights on, the computers 
running and building systems operating.  All airports have standby 
generation to power air traffic control systems and runway 
lighting, but at Newark Liberty Airport, a Cummins standby power 
system provided uninterrupted power to the entire airport terminal 
throughout the outage making travelers much more comfortable 
with air conditioning and lighted bathrooms. Water systems and 
sewage treatment facilities stopped working in Detroit, Cleveland 
and several other cities in the affected area, but in Mississauga, 
Ontario, outside of Toronto, a Cummins Power Generation prime 
power system kept the sewage and water system operating for the 
city's 800,000 residents. 
        Beyond emergencies, DE makes important contributions to 
grid reliability.  For example, each summer Cummins places 168 
megawatts of power in the Northeast to help utilities meet their 
seasonal peak. This is made up of two large projects, 72 megawatts 
at FirstEnergy in New Jersey and 96 MW at Long Island Power 
Authority.  
        At FirstEnergy our portable diesel generators are used to 
provide reliability support to the grid.   During peak periods the 
generators are started, relieving constraints and lowering the 
chance of a system failure.  This past fall 40 of those units were 
unhooked from the grid and moved to areas affected by the 
hurricanes. These generators provided emergency power to 
hospitals, like Forest General Hospital in Hattiesburg, MS; water 
systems, like Veolia Water Works in Kenner, LA; and to support 
FEMA operations.  They were recently moved back to First 
Energy to be in place to meet this summer's peaking requirements. 
        The 96 MW's of Cummins generating capacity on Long Island 
provide reliability support to the local power grid to fill a gap 
between electricity supply and demand until new transmission 
capacity can be built to meet the needs of Long Island.  Without 
this support from DE, on peak days, Long Island would have a 
serious electricity shortfall.  Importantly, stringent emission 
control standards were applied to this project.  Each 2 MW 
containerized generator is equipped with state-of-the-art emissions 
control technology designed to meet New York Department of 
Environmental Conservation's stringent air quality standards.   The 
emissions control technologies applied to this site, along with the 
use of ultra-low sulfur fuel, resulted in more than 90% reduction in 
nitrogen oxide, carbon monoxide and particulate matter. The 
control package utilized on the generators reduces emission output 
to levels that are better than EPA Tier III standards.
        Additionally, DE makes important contributions in the area of 
efficiency.  Using DE in combined heat and power configurations 
(CHP) leads to very high efficiencies by using heat normally 
wasted in the electric generation process to do useful work, such as 
heating, air conditioning or serving industrial processes. An 
example of this benefit is a CHP system installed by Cummins at 
American Honda's corporate headquarters in Torrance, California.  
That project is saving the company 30% annually on its total 
campus energy expenditures. In addition to the energy savings, the 
CHP system allows American Honda to demonstrate corporate 
leadership and environmental responsibility.  As the ethanol 
industry in the US continues to develop, it is looking increasingly 
to install CHP plants to support its production facilities.
        One of the areas that could most benefit from distributed power 
technologies is utilizing landfill gas to generate electricity.  
Cummins has installed a landfill gas to energy plant at the Viridor 
Waste Management landfill in Dunbar, Scotland allowing a nearby 
cement plant to obtain a significant portion of its power demand at 
lower costs than can be supplied by the local utility.  The Viridor 
plant not only allows the cement plant to save on its energy costs, 
but harnesses the methane gas produced by the landfill which when 
flared into the atmosphere has about twenty times the greenhouse 
effect of carbon dioxide. This project is also an example of how 
favorable government policies can encourage deployment of these 
highly efficient technologies.  The project was eligible for 
increased revenue in the form of Renewable Obligation 
Certificates, a UK government trading program to encourage 
development of renewable energy projects making the cost of 
power from such sources more competitive. The Certificates allow 
Viridor Waste Management to invest in the environmentally 
friendly waste-to-energy project and supply cheaper electricity to 
the cement plant and still make money on the project.
        The benefits DE provides to our nation's energy infrastructure 
are undeniable.  Those benefits go beyond the individual benefits 
received by the owners or users of the DE asset - but benefit all 
Americans through enhanced reliability, efficiency, and critical 
infrastructure protection.  However, more often than not, Federal 
and state policies treat DE as a burden to the electrical system 
rather than a benefit.  DE technology advancements are also 
limited because of a lack of Federal research and development 
funding.  Further, connecting DE technology to the grid is difficult 
because interconnection requirements are often inconsistent and 
expensive to implement.  In addition, tax policy does not favor 
CHP as it does other clean efficient sources of electricity by giving 
production tax credits for the benefits it provides.  
        The traditional drivers for DE are being magnified by current 
global trends. Higher fuel costs, climate change initiatives and a 
push for environmental stewardship, and homeland security 
concerns all point to the use of increased use of DE to secure and 
ensure the viability of continued energy supply into the future.  
However, unless the US adopts policies that create a favorable 
marketplace for DE, the technologies will continue to struggle and 
much of the electricity generating capacity available in the US will 
not be allowed to feed back on to the grid.   I am concerned that, as 
a result of less favorable policies toward DE, its adoption rate has 
been slowed and this has been to the detriment of our power sector 
and the security of our critical infrastructure.
        What does DE need to reach its full potential?  We believe 
there are four policy areas that the government could adopt to 
allow the country to reap the full benefits of DE technologies:  
increased Federal R&D funding for DE technologies, a review of 
backup power requirements for critical infrastructure, tax policies 
that favor CHP, and national uniform interconnection standards.

Federal Funding for DE R&D
        There are potential technological breakthroughs that could 
have a significant effect on the efficiency, reliability and emissions 
from generators that run on natural gas, biomass and similar fuels.  
Federal funding to ensure that these technologies are developed 
rapidly could have a major positive impact on fuel consumption 
and emissions in the near or medium term.  Federal funding, 
particularly through the Department of Energy, also ensures that 
the best research by all competitors in the field is brought together 
to get results more quickly and to define how DE can contribute 
most effectively to the grid.
        Similarly, federally funded research on fuel cells for power 
generation applications has already resulted in significant 
breakthroughs on this important technology.  However, significant 
work remains to be done before this technology will be able to 
meet the performance and cost targets required for it to have an 
impact in our country.  
        With the progress that has been made to date, it is critical that 
funding not be stopped mid-stream or we will lose the benefits we 
have gained.   These are technologies that can help us fulfill a 
number of our critical priorities:  low cost and reliable energy 
infrastructure: diversifying our fuels to reduce dependence on any 
single fuel; improving the security of our critical infrastructure; 
using more renewable fuels; and improving the efficiency and 
reducing the emissions of our power sources.  Moreover, these 
technologies can contribute to these goals in the near or medium 
term rather than the distant future.  We must continue our research 
focus on DE.
        Last year, this Committee worked to develop the Energy Policy 
Act of 2005 (EPAct).  That legislation authorized $730 million to 
be spent on DE technology and policy development over the next 
three years.  Unfortunately, the Administration has not requested 
funding at any where near that level for FY07.  In FY 2006, DOE 
allocated approximately $60 million for DE work.  For FY 2007, it 
requested only $30 million.  As Congress finishes the FY07 
Appropriations process it should provide additional funding for DE 
research and development.  Without full funding, progress on DE 
will remain limited.  Key programs may be ended short of their 
goals and other programs will not begin at all. 
        One example of the type of work DOE is doing with respect to 
DE is the Advanced Reciprocating Engine Systems (ARES) 
program.  Three engine manufacturers, including Cummins, 
participate in this cost-shared program.  The goal of the program is 
to develop a cleaner, more efficient natural gas reciprocating 
engine.  These engines are workhorses of the industry, used in 
nearly every DE application.  While making these engines more 
efficient doesn't sound as glamorous as technologies using 
unconventional energy sources, if the goals of the ARES program 
are achieved and our estimates of market demand are correct, there 
will be a fuel saving of 491 trillion Btu's of natural gas, NOx 
emissions will be reduced by 170,000 tons, and 26 million tons of 
CO2 will not be emitted into the atmosphere over a ten year 
period.  To make this point another way, for every 10GW of ARES 
products deployed, over 100 trillion Btu's of energy will be saved, 
reducing oil consumption by 17.2 million barrels annually.  We 
think this is an important program and appreciate DOE's continued 
support.  
        ARES is just one of the many programs industry and DOE are 
working on to encourage advancement of DE technologies and 
market penetration of those technologies.  Other important DE 
programs include the Gridwise Architecture Board, DOE Regional 
Application Centers that promote CHP implementation, and 
DOE's Landfill Methane Outreach and Coal Bed Methane 
Outreach Programs that promote the useful and environmentally 
friendly utilization of these waste energy sources nationwide.
        Another area where there is work to be done to advance DE 
technology is on microgrids.  Microgrids are defined as single or 
multiple clean distributed power resources serving multiple 
customer loads (e.g., residential subdivision, mixed-use residential 
and commercial centers, business and industrial parks).  
        Microgrids can provide cost savings and enhanced reliability to 
consumers while simultaneously making the grid more robust to 
outages caused by nature and security breaches.  In the event of 
such disasters, microgrids because of their capability to operate in 
an "island mode" can help restore the power grid more rapidly.
Microgrid research and development has positioned the 
concept for real world application.  R&D is currently funded by 
DOE and the California Energy Commission and is aimed at 
studying the interaction of distributed resources with the grid, 
performance of power electronics, and the seamless transitioning 
of the microgrid when necessary between "island" and "normal" or 
"parallel" operations with the utility grid.  It is imperative that 
funding for such programs be continued and expanded. 
        Internationally, Cummins Power Generation is working to 
develop DE technology that uses a variety of readily-available 
biofuels.  In India, Cummins is working with the Indian Institute of 
Science on technologies that use wood chips, rice husks and 
coconut shells, among others things, to generate electricity in a 
distributed form.  We are using this technology to support rural 
electrification in India.  These small scale systems (20-40KW) 
power entire villages providing new economic opportunities to 
areas that would otherwise be unserved by the grid.  Globally, 
biofuels are becoming an increasingly important source of 
feedstock for power generation.  Increased use of these fuels will 
help dampen growing worldwide demand for petroleum.  These 
international programs highlight the additional research that is 
necessary to enable DE power generation to fully realize the 
benefits of biofuels.

Critical Infrastructure Backup Power Requirements
        Congress should consider expanding the role that DE 
technologies play in assuring our homeland security and in disaster 
relief and recovery.  Last year's hurricanes highlighted the fragility 
of our fuel delivery system.  With much of our oil production and 
refining in the Gulf Coast, the impact of a power outage to these 
key facilities can have ramifications well beyond the region; 
causing fuel supply disruptions in other parts of the country.  In 
recognition of this vulnerability, Homeland Security Secretary 
Chertoff and Energy Secretary Bodman recently sent a letter to the 
oil refining and distribution industry asking them to review their 
current backup generation capabilities and needs and to enhance 
them if necessary.  Other industries are equally vulnerable to 
power supply interruptions.  In an example close to home, lack of 
backup power meant Fairfax County residents had to boil water 
after power was knocked out to the local water system after 
Hurricane Isabel hit the east coast -- even well after power 
restored.  Cleveland residents faced a similar problem after the 
Northeast blackout of 2003. 
        Congress, the Administration and the States should review 
existing backup power requirements in light of today's changing 
requirements and then implement new requirements where there 
are gaps.  We believe Congress should begin to develop a power 
security policy.  Such a policy should include a review of current 
backup power capabilities for critical facilities, and authorization 
for DHS and/or DOE to require key industry sectors to have 
sufficient backup power available. 

Tax Incentives
        We believe tax policies should be adopted to encourage DE, 
and CHP in particular.  Specifically, because distributed energy, 
when used in a CHP application, has significant environmental and 
efficiency benefits, its deployment should be encouraged.  CHP 
systems have an overall energy efficiency level of 85%.  Compare 
this with an average of 34% for central power stations.  One way to 
encourage CHP is through a tax credit and faster depreciation.  
Market penetration of combined heat and power systems would 
increase dramatically with such a credit.   This type of tax credit 
was critical to the development of the wind industry in the US.  We 
believe a similar credit would have a beneficial impact on the 
development of new CHP projects.  During consideration of 
EPAct, production tax credits for CHP were considered but 
ultimately removed during conference.  We believe Congress 
should reconsider adoption of CHP tax credits.

Uniform Interconnection Standards
        In EPAct, Congress passed legislation to require States to 
develop their own interconnection rules.  This was a major step.  
Prior to the legislation many states had no interconnection 
requirements at all.  As a result of the legislation, states are 
beginning to develop interconnection processes, but there is still a 
great deal of variation from state to state and utility to utility.  
Importantly, many of the safety and technical questions about 
interconnection have already been resolved through an industry 
driven process conducted by the Institute of Electrical and 
Electronics Engineers (IEEE).   IEEE 1547 is a technical standard 
for interconnection developed through a consensus process that 
included utilities, DE equipment manufacturers, end-users, and 
state and regional regulators.  
        We believe Congress needs to take another step on the 
development of uniform interconnection standards.  Because each 
state has not adopted IEEE 1547 as written, there remains 
inconsistency in the interconnection process with which those 
seeking to install DE projects must comply.  DE project developers 
are often met with requests for unnecessary protective equipment 
or unreasonable commercial terms that can make an otherwise 
good project uneconomic. Further, a consistent standard would 
speed the interconnection process and lower the costs of DE 
equipment by allowing manufacturers to develop pre-certified 
interconnection equipment.   We believe Congress should require 
the development of a national uniform interconnection standard for 
small generators, which would include the adoption the IEEE 
standard.
        Mr. Chairman, I thank you for holding this hearing.  I think it is 
important for the nation that you fully consider the benefits of DE 
and adopt policies to encourage its continued development and 
deployment.  Again, I thank you for this opportunity to testify.

	MR. HALL.  Mr. Linebarger, thank you.  Dr. Katzer.
        MR. KATZER.  Thank you, Mr. Chairman and members of the 
committee.  Good afternoon.  My name is James Katzer and as the 
Chairman noted earlier, I am a Visiting Scholar at the Laboratory 
for Energy and the Environment at MIT, focusing on the future of 
coal.  I am pleased to be able to testify to you today about the 
aspects of coal-based power generation.  I will focus on generation 
technology and associated emissions, including carbon dioxide 
emissions.  My formal testimony has been submitted for the 
record.
	Coal presents significant challenges in large-scale power 
generation.  At the same time, the United States has 27 percent of 
the total global recoverable coal reserves, enough for 250 years at 
current consumption, as was noted earlier.  Over 50 percent of U.S. 
electricity was generated from coal last year and coal is expected 
to shoulder its share of the demand growth in the future.
	A primary coal-generating technology is pulverized coal 
combustion, PC combustion.  It is a well-established, mature 
technology, generating efficiency increases from about 35 percent 
for low-severity, subcritical units to about 44 percent for high-
severity, ultra-supercritical units.  This efficiency increase reduces 
the coal required per unit of electricity generated by about 25 
percent.  This also means that CO2 emissions are reduced by 25 
percent and other emissions produced are also decreased by about 
25 percent per unit of electricity generated.
	Most PC plants in the United States are subcritical units, the 
bottom of this range.  We have no ultra-supercritical plants.  On 
the other hand, Europe and Japan have built almost a dozen ultra-
supercritical plants over the past decade.  We need to have higher 
efficiency technology available for our changing future, and I will 
comment on this if I have some time at the end.  Application of 
advanced emissions control technology to PC units can reduce PC 
emissions to very low levels.  Further, emissions control 
technology is continuing to evolve and improve, and at this point 
we do not know just when or where the end will be reached.  I 
would say, in general, the issue of PC emissions is not technology 
capability, but breadth of its application.
	Stepping on, integrated gasification combined cycle, IGCC, 
technology is a competitor to PC generation.  Four coal-based 
IGCC demonstrations plants, each between 250 and 300 
megawatts, have been built, each with government assistance, and 
each is operating well.  Two of these are in the United States.  In 
addition, there are about five refinery-based IGCC units, three of 
them at the 500 megawatt level each, that are gasified petroleum 
coke, residua, tars, asphalts, and other residues in refineries to 
produce electricity.  IGCC is well established commercially in the 
refinery setting.  IGCC should also be considered a commercial 
technology in the electricity generating setting, but in this setting it 
is neither well established nor mature.  As such, it is likely to 
undergo significant change as it matures.
	The estimated cost of electricity for PC generation or 
bituminous coal is about 4.8 cents per kilowatt hour.  Under 
similar conditions, an IGCC plant produces electricity for about 
5.1 cents a kilowatt hour, or about three-tenths of a kilowatt hour 
more than the PC unit; thus, today IGCC is not the economic 
choice.  For supercritical PC generation, about 1 cent per kilowatt 
hour, or about 20 percent of the total, is associated with achieving 
high levels of emissions control.  Reducing emissions control by a 
factor of two further, well beyond or well below any permitted 
levels that are being set today in the United States, increases the 
costs an estimated two-tenths of a cent per kilowatt hour, further 
raising that about 5 cents a kilowatt hour for PC.  These added 
emissions costs narrow the gap for IGCC, but do not produce a 
shift in technology choice based on COE.  However, IGCC has a 
potential for order of magnitude criteria emissions reductions 
below PC for 99.5-plus levels of mercury and other toxic metals 
reductions, for much lower water use and stabilize solid waste.  
	MR. HALL.  Begin to wind up, please.
	MR. KATZER.  Yes.  These may become a larger factor in the 
future and may begin to shift the balance toward IGCC.  My 
testimony contains details on CO2 capture.  
The conclusion I would like to come out of this with is, when 
we look at all of this and the role of low rank coals in the United 
States, we conclude that among IGCC, oxygen-fired combustion, 
and air-fired combustion, the three competing technologies, at this 
point, each is in a developing stage, they each have a lot of 
maturity to gain, and it is too early to conclude winners and losers 
at this point in the game.  The challenges to meet our power needs 
and protect air quality and the environment are substantial, but 
coal, teamed with the proper technology, can be part of the 
solution.  I thank you.
	[The prepared statement of James Katzer follows:]

PREPARED STATEMENT OF DR. JAMES KATZER, VISITING SCHOLAR, 
LABORATORY FOR ENERGY AND THE ENVIRONMENT, 
MASSACHUSETTS INSTITUTE OF TECHNOLOGY

        Mr. Chairman and Members of the Subcommittee.  Good 
morning.  My name is James Katzer, and I am a Visiting Scholar in 
the Laboratory for Energy and the Environment of Massachusetts 
Institute of Technology.  For about the last year, I have been 
working with a group of MIT faculty who have been looking at the 
future of coal. I am pleased to have been invited to discuss some 
key aspects related to this work with you today.   I will focus on 
coal-based generation technology and certain associated 
environmental issues, including carbon dioxide emissions and their 
control.  I am submitting my written testimony herewith.
        Coal presents the ideal paradox in power generation.  On one 
hand, it is cheap, abundant, and concentrated typically in countries 
with large human populations and limited oil and gas.  On the 
other hand, its use can have significant environmental impacts, 
requires capital-intensive generating plants, and produces large 
quantities of carbon dioxide.  Both U.S. and global electricity 
demand will continue to grow at a brisk rate, and coal is certain to 
play a major role in meeting this demand growth.  As you are 
aware the U.S. has 27% of the total global recoverable coal 
reserves, enough for about 250 years at current consumption.  Over 
50% of U.S. electricity was generated from coal last year.  
        The primary technology used to generate this electricity is 
pulverized coal (PC) combustion.  It is well-established, mature 
technology that generates most of the world's coal-based 
electricity.  Although the efficiency of generation depends on a 
number of variables, including coal type and properties, plant 
location, etc., the most important efficiency determinant is the 
temperature and pressure of the steam cycle that is used.  I will 
come back to this in a minute.  
        Integrated Gasification Combined Cycle (IGCC) is a 
competitor to PC generation.  Four coal-based IGCC 
demonstration plants, each between 250 and 300 MWe, have been 
built, each with government assistance, and are operating well.  In 
addition, there are about 5 refinery-based IGCC units, three at 500 
MWe each, that are gasifying petroleum coke, or refinery asphalt, 
residua, tars, and other residues to produce electricity.  These units 
often also produce steam and hydrogen for the refinery.  IGCC is 
well established commercially in the refinery setting.  IGCC can 
also be considered commercial in the coal-based electricity 
generation setting, but in this setting it is neither well established 
nor mature.  As such, it is likely to undergo significant change as it 
matures.  Currently, the biggest concern with coal-based IGCC is 
gasifier availability.
        Because a large number of variables, including coal type and 
quality, location, etc, affect generating technology choice, 
operation, and cost, my comments here and my technology 
comparisons will center one point set of conditions.  This includes 
one coal, Illinois #6 coal, a high-sulfur bituminous coal and 
generating plants designed to achieve criteria emissions levels 
somewhat lower than the lowest recent permitted plant levels.  For 
example, the designs that I refer to here achieve 99.4 % sulfur 
removal.  I will first compare these technologies without carbon 
dioxide capture and then compare them with 90% carbon dioxide 
capture.  Plant capital costs are based on recent detailed design 
studies and industrial experience of the last 6 years, which 
represented a relatively stable period.  I have not attempted to 
account for recent cost escalation.  Here I will focus on 
technologies that are either commercial or well on their way to 
becoming commercial. 
        PC Combustion:  The most important variations affecting PC 
generating efficiency is the severity of steam cycle operation:  
subcritical, supercritical, and ulta-supercritical.  Generating 
efficiency is about 35% for subcritical generation, about 38% for 
supercritical generation, and about 44% for ultra-supercritical 
generation.  Increased generating efficiency means less emissions 
per unit of electricity, including less CO2 emissions.  In moving 
from subcritical to ultra-supercritical generation, the coal required 
per unit electricity is reduced by about 22%, which means a 22% 
reduction in CO2 emissions and also reduced criteria emissions.  
Moving from subcritical to supercritical offers about a 10% 
reduction.  Most PC plants in the U.S. are subcritical units.  We 
have no ultra-supercritical plants in operation, under construction, 
or being planned.  One reason is that low coal cost has not 
provided sufficient economic incentive to offset the slightly higher 
capital costs associated with higher steam cycle operating severity.  
On the other hand, Europe and Japan, which have higher coal costs 
and stronger culture supporting high efficiency, have built almost a 
dozen ultra-supercitical units over the last decade.  These units are 
operating as well as subcritical units, but with much higher 
generating efficiency.  The key enabling technology here is 
improved materials to allow operation at higher severity 
conditions.  An expanded U.S. program to advance materials 
development and particularly improved fabrication and repair 
technologies for these materials would advance the potential for 
increased PC generating efficiency for our changing future.
        Another critical issue with PC generation is criteria and other 
emissions.  Application of advanced emissions control 
technologies to PC units can result in extremely low emissions, 
and emissions control technology continues to improve, including 
the potential for high degrees of mercury control.  In general, the 
issue of PC emissions is not a question of technology capability 
but the breadth of its application.  This may not hold for specific 
local situations.
        Using detail design study capital costs, EPRI economic TAG 
guidelines and assumptions and coal at $1.50 per million Btu, the 
estimated cost of electricity (COE) for a subcritical PC is about 4.8 
ï¿½/kWe-h, consistent with recent EPRI estimates [1].  The COE 
decreases slightly (~0.1 ï¿½/kWe-h) from subcritical to ultra-
supercritical generation.  For supercritical generation almost 1 
ï¿½/kWe-h, or about 20%, is associated with achieving emissions 
control to the high design levels assumed here.  Reducing 
emissions by a factor of two further would add an estimated 0.2 
ï¿½/kWe-h increasing the COE to about 5.0 ï¿½/kWe-h.  
        IGCC:  The promise of IGCC has been high generating 
efficiency and extremely low emissions.  There are a number of 
critical options associated with gasification technology and its 
integration into the total plant that affect efficiency and operability.  
Of these, the gasifier type and configuration are the most 
important. Table 1 summarizes the characteristics of gasifier types.  
Entrained-flow gasifiers, which are extremely flexible, are the 
basis of each of the IGCC demonstration units.  Figure 1 shows the 
configuration of an IGCC employing full quench cooling of the 
gasifier exit gases.  This configuration will produce about 35-36 % 
generating efficiency.  Figure 2 illustrates the addition of a radiant 
syngas cooler to raise steam for the steam turbine, which increases 
the electricity output and raises the generating efficiency to 38-39 
%.  Adding convective syngas coolers to recover additional heat as 
steam is also shown in Figure 2.  It can increase the generating 
efficiency to the 39-40 % range.  Existing IGCC demonstration 
units, which employ different practical combinations of these 
options, operate at generating efficiencies from 35.5 % (Polk) to 
40.5 % (HHV) (Puertolanno Spain).  Since IGCC is not yet mature, 
there is still potential for efficiency gain.  However, I do not expect 
to see commercial IGCC generating efficiency exceeding that of 
ultra-supercritical PC in the intermediate time frame.  The 
design/engineering firms and the power industry need to gain 
experience with IGCC to develop better designs and achieve 
improved, more reliable operation.
        Current coal-based IGCC units are permitted for and are 
operating at the same criteria emissions levels as the best PC units.  
An IGCC plant with radiant and convective syngas coolers using 
Illinois #6 coal, operating at 38% efficiency, and achieving high 
levels of criteria emissions control produces electricity for about 
5.1 ï¿½/kWe-h or about  0.3 ï¿½/kWe-h higher than a supercritical PC 
[1, 2].  IGCC would not be the choice based on COE alone, 
independent of gasifier availability concerns.  Requiring high 
levels of mercury removal, reducing criteria pollutants by one half 
from the very low levels that we are already considering and 
including the cost of emissions credits and offsets increases the 
COE for the PC, narrowing the gap, but does not suggest a shift in 
technology choice based on COE.  However, IGCC has the 
potential for order-of-magnitude criteria emissions reductions, 
99.5+ % levels of mercury and other toxic metals removal, much 
lower water consumption, and highly stabilized solid waste 
production.  These may become a larger factor in the future.  To 
achieve these order-of-magnitude criteria emissions reductions is 
expected to increase IGCC COE, but this increase is not expected 
to be large.  Companies considering construction of a new coal-
based generating facility need to bring all these considerations into 
their forward pricing scenarios to help frame the decision of which 
technology to build.
        CO2 Capture:  If it becomes commercial practice, CO2 capture 
will add significantly to the COE, independent of which approach 
is taken.  CO2 capture could also change the choice of technology 
in favor of IGCC, although it is too early in technology 
development to declare this a foregone conclusion.  History 
teaches us that one single technology is almost never the winner in 
every situation.  The options are:  
        ? Capture the CO2 from PC unit flue gas.  In this case, the 
CO2 is at a low concentration and very low partial pressure 
because of the large amount of nitrogen from the 
combustion air.  To capture and recover the CO2  using 
today's amine (MEA) technology requires a lot of energy.   
Energy is also required to compress the CO2 to a 
supercritical liquid.  This large energy consumption reduces 
plant electricity output by almost 25% and reduces 
generating efficiency by about 9 percentage points.  The 
added capital and the efficiency reduction increase the COE 
by about 60% or about 3.0 ï¿½/kWe-h to about 7.7 ï¿½/kWe-h.   
In this situation a 50% reduction in the CO2 capture and 
recovery energy would have a significant impact on PC 
capture economics.  Focused research on this issue is 
clearly warranted. 
        ? Combust coal with oxygen( Oxy-fuel combustion) to 
reduce the amount of nitrogen in the flue gas. This allows 
the flue gas to be compressed directly liquefying the CO2 
without a costly separation step first, significantly reducing 
the energy consumption.  The technology required the 
addition of an air separation unit which consumes 
significant energy and thus would not be used except for 
CO2 capture.  This technology is in early development 
stage, is advancing well, and at this point appears to hold 
significant potential for both new-build capture plants and 
for the retrofitting existing PC plants.  The estimated COE 
for oxy-fuel combustion is about 7.0 ï¿½/kWe-h (includes 
capture and compression to supercritical liquid, but not 
transport of sequestration) or about 0.7 ï¿½/kWe-h less than 
for air-blown PC combustion with capture.  The technology 
requires further development and demonstration along with 
detailed design studies to allow effective evaluation of its 
cost and commercial potential.
        ? Use IGCC, shift the syngas to hydrogen, and capture the 
CO2  before combustion in the gas turbine.  IGCC should 
give the lowest COE increase for CO2 capture because the 
CO2 is at high concentration and high partial pressure, and 
this is what is observed.  The needed technology is all 
commercial, although it has never been fully integrated on 
the scale that it will need to be applied here.   The estimated 
COE is 6.5 ï¿½/kWe-h [1] which is a 1.4 ï¿½/kWe-h increase 
over non-capture IGCC and is about about 1.2 ï¿½/kWe-h less 
than supercritical PC with capture.  Oxy-fuel combustion 
falls in between them  

        Lower Rank Coals:  As Figure 3 shows, moving from 
bituminous coal to sub-bituminous coal and to lignite results in an 
increase in the capital cost for a PC plant and a decrease the 
generating efficiency (increased heat rate).  However, for IGCC, 
these trends are much larger, such that currently demonstrated 
IGCC technologies become more substantially disadvantaged 
relative to PC  for subbituminous coals and lignite.  Note that over 
half of the U.S. recoverable coal reserve is either subbituminous 
coal or lignite.  Thus, there is a substantial need for improved 
IGCC technology performance on lignite, other low rank coals, 
and biomass.  Options include, but are not limited to, improved 
dry-feed injection into the gasifier, coal drying, fluid transport 
reactors and other gasifier configurations.  Development should be 
at the PDU scale before moving to demonstration.  
        A variation on PC combustion is fluid-bed combustion in 
which coal is burned with air in a fluid bed, typically a circulating 
fluid bed (CFB)[2, 3]   CFBs are best suited to low-cost waste fuels 
and low-rank coals.  Crushed coal and limestone are fed into the 
bed, where the limestone undergoes calcination to produce lime 
(CaO) which captures sulfur.  The steam cycle and generating 
efficiencies are similar to PC.  The primary advantage of CFB 
technology is its capability to capture SO2 in the bed, and its 
flexibility to a wide range of coal properties, including low-rank 
coals, high-ash coals and low-volatile coals.  The technology is 
fully commercial, and  several large new lignite-burning CFB units 
have been constructed recently.  CFBs are well suited to co-firing 
biomass [4].
When CO2 capture is considered, the differences among IGCC, 
oxy-fuel PC and air-blown PC become significantly less than 
discussed above for bituminous coal..  In this situation all three of 
the technologies with CO2 capture must be considered to be in the 
early stages of development, and it is simply too early to select one 
of these technologies as the winner vs. the others 

Key Findings:
        ? PC technology, although mature, still offers opportunities 
for improved efficiency and thus reduced coal consumption 
and CO2 emission per unit of electricity generated.  Higher 
efficiency generation is important without CO2 capture but 
also makes CO2 capture less costly.  An expanded program 
to develop and apply new materials for more severe steam 
cycle operation is warranted.
        ? PC emissions control technology has become very effective 
in reducing criteria emissions, but it continues to expand its 
capabilities.  The limit of the technology has not yet been 
reached although increases in extent of required removal 
and addition of new requirements continue to increase the 
PC COE. 
        ? IGCC is commercially demonstrated technology that is not 
yet mature in the power generation arena, although it is 
mature in the refinery arena.  With coal its main challenges 
are gasifier availability and COE.  It has the potential of a 
much smaller environmental footprint than PC technology 
and of markedly lower air emissions.  In the near term, 
these advantages do not drive a change in generating 
technology.
        ? Current commercial IGCC technology is not well suited for 
lower rank coals, of which the U.S. has a large amount.  To 
expand its potential scope to these coals, IGCC technology 
needs to undergo further targeted development. 
        ? The technology systems required to capture CO2 from coal-
based power production are in the early stages of 
development.  Of the three competing systems ( PC with 
CO2 recovery from flue gas, Oxy-fuel combustion with flue 
gas direct compression to liquefy CO2, and IGCC with pre-
combustion CO2 capture) it is too early to choose winners 
because it is not possible to predict how technology 
development and commercial innovation may evolve.  
Further, one technology system may be well suited for 
bituminous coals, whereas another may apply best to low 
rank coals and lignite..

Citations and Notes
        1. Dalton, S., The Future of Coal Generation, in EEI Energy 
Supply Executive Advisory Committee. 2004.
        2. NCC, Opportunities to Expedite the Construction of New Coal-
Based Power Plants. 2004, National Coal Council.
        3. Beer, J.M. The Fluidized Combustion of Coal. in XVIth 
Symposium (Int'l) on Combustion. 1976. MIT, Cambridge: The 
Combustion Institute, Pittsburgh.
        4. Combustion-Engineering. Fluid Bed Combusiotn Technoloogy 
for Lignite.  2005  




 Table 1.  Characteristics of different gasifier types
 



Figure 1.  IGCC Plant with Entrained Flow (GE) Full Quench 
Gasifier



Figure 2.  Heat Recovery Options for Entrained-Flow Gasifier



Figure 3  Effect of Coal Type (Rank) on Capital Cost and Heat 
Rate for PC and IGCC

	MR. HALL.  I thank you and I found it very interesting and have 
some questions for you about it.  Mr. Cresci.
        MR. CRESCI.  Thank you, Mr. Chairman.  Good afternoon to 
you and the members of the subcommittee.  I am Joe Cresci, 
Chairman of the Environmental Power Corporation.  Thank you 
for inviting us to be here today.
	You have already heard a good deal today about the 
importance of renewable energy and the value of the various 
programs that support and encourage renewables.  Therefore, I will 
focus today on our subsidiary, known as Microgy, which is a 
renewable energy source that most people know much less about 
than some of the others.  Microgy develops biogas systems which 
are very efficient at extracting methane-rich biogas from a 
combination of livestock manure and other organic and food 
industry wastes.  Inside Environmental Power, we refer to our 
biogas as RNG, renewable natural gas.  Our RNG is used to 
produce green electric power, thermal energy, or it can be refined 
to pipeline grade methane.
	To date, we have completed or announced projects in 
Wisconsin, California, Texas, and Nebraska.  Microgy, along with 
our Danish licensor, have significantly improved conventional 
anaerobic digestion technology, thereby enabling us to generate 
RNG at volumes and cost, which are commercially attractive.  
Though the SEC rules in competitive considerations do not permit 
us to discuss a lot about cost and pricing matters, I can say that we 
believe our renewable natural gas can be delivered to the pipeline 
at competitive prices with those projected for imported LNG.  At 
the same time, our technology and manure handling process have 
also significantly reduced greenhouse emissions, improved water 
quality, and dramatically reduced odors around animal operations.  
Take notice of the samples of the post-digestive material coming 
from one of our Wisconsin projects and I think you will be 
surprised by it.
	Our newest and largest projects to date are in Texas and we 
will produce pipeline grade RNG.  One is a 10,000 cow system in 
construction is at Huckabay Ridge in Stephenville and another 
soon to enter construction at the Mission Dairy in Hereford, Texas.  
These represent a major technology upgrade and a significant 
financial step forward for us, moving our systems from small local 
operations to systems capable of providing RNG at volumes 
equivalent to a good natural gas well.  Ours, however, is a gas well 
that needs no depletion allowance as long as we have cows and 
other waste being generated.  At the Mission Dairy project, there 
are 24,000 cows permitted for the site.  In addition, there are tens 
of thousands of animals within a 10-mile radius of that site, 
including both dairy and feedlot cattle.  Each 10,000 cows 
represents another potential well site, so to speak.
	With regard to the scale of the market as a whole, we estimate 
that there are more than 150 Huckabay size projects, including 
more than 1,000 individual tanks which would produce in excess 
of 81 trillion cubic feet of renewable natural gas annually.  If you 
add the meat processors, swine farmers, and others, we could add 
the equivalent of 400 to 500 natural gas wells that produce a 
renewable natural gas with no depletion.
	Let me conclude with comments on ethanol in our technology.  
Ethanol and our system are complementary technologies, not 
competitors.  One of our EPC digesters in Wisconsin is already 
partially fueled by by-products of the ethanol production process.  
This increases both the efficiency in the production of ethanol and 
reduces the ethanol production waste.  EPC digesters, more 
importantly, can supply ethanol producers with RNG on site, 
thereby reducing reliance on conventional natural gas and on 
imports of LNG and in some situations, even the infrastructure 
needed for natural gas transport.
	Natural gas now costs about $7 a million BTUs and it takes 
approximately 33,000 BTUs of natural gas to manufacture one 
gallon of ethanol, costing, at today's market, about 23 cents for 
every gallon of ethanol they make.  By providing readily available 
RNG for ethanol producers, we can offer a crucial element that 
will facilitate expansion of ethanol production.
	What are our challenges?  The lack of commercial credit and 
limitations on our own capital financing capabilities mean that the 
development of our biogas technology will be significantly slowed 
if the public portion of the public/private partnership, such as Title 
XVII of the Energy Policy Act of 2005, is unavailable to bridge the 
gap.  Further, our production of RNG is not included in any of the 
numerous incentive programs available to all other alternative 
energy producers.
	As I wrap up, Mr. Chairman, let me say that this committee 
structured the loan guarantee program in Title XVII very well.  
Unfortunately, what we last heard was that the guidelines are still 
at OMB, and the Department of Energy has informed us that 
renewable natural gas from manure and food waste is currently not 
a high priority for them.  We at EPC are advancing with the 
support of accommodative equity markets by picking the low 
hanging fruit in this business.  Our RNG initiatives could move 
forward much more quickly with a private/public partnership, with 
participation at simple parity, and incentive programs that are 
available to other renewable energy producers.  RNG development 
would benefit from a level playing field and from the 
implementation of Title XVII.
	I thank this committee for their time and attention, and I would 
welcome you to visit facilities around the country, particularly in 
Texas, where this fall we plan to start delivering RNG to the 
pipeline.  I would be pleased to take your questions.  But first, I 
would request of this committee that we might submit minor 
revisions to our written testimony, which has already been filed.  It 
was prepared on very short notice, and we have a few little things 
we would like to clean up, if you don't mind.
	[The prepared statement of Joe Cresci follows:]

PREPARED STATEMENT OF JOE CRESCI, CHAIRMAN, 
ENVIRONMENTAL POWER CORPORATION

        The focus of my comments is on one of our subsidiaries, 
Microgy, Inc., headquartered in Golden, Colorado.  We have 
significantly improved conventional anaerobic digestion 
technology, enabling us to generate more methane-rich biogas than 
earlier technologies, thus making agricultural waste-to-energy 
projects more feasible. In our own company, we have begun to 
refer to our biogas as RNG---Renewable Natural Gas.
        Though SEC regulations and competitive considerations do not 
permit me to discuss pricing issues, I am allowed to say that we 
believe our RNG can be competitively priced as compared to 
projected prices for imported LNG.  At the same time, our 
technology and manure handling process also significantly reduces 
greenhouse emissions, improves water quality, and dramatically 
reduces odors around animal operations.
        EPC's future has a place in the fuels world as well. There is 
potential for LNG production as a conventional fuel substitute. But 
perhaps one of the most important areas of potential expansion for 
EPC, and I know it is an important area for this committee, is that 
our EPC digesters can be fueled with the byproducts of ethanol 
production, increasing both efficiency in the production of ethanol 
and reducing the wastes.  
        Ethanol and anaerobic digestion are complementary 
technologies, not competitors.  Ethanol is a liquid fuel source, 
appropriate for gasoline blending and targeted at the automotive 
market.  Biogas, on the other hand, is more appropriate for onsite 
use in heating, electricity generation, and industrial processes, or as 
a source of RNG for delivery via conventional natural gas 
pipelines.
        Our challenges?  The lack of commercial credit and the 
limitations on our capital financing capability, means that the 
development of this biogas technology will be significantly slowed 
if the public portion of the public/private partnership is unavailable 
to "bridge the gap" until competitively priced commercial 
financing becomes available.
        We continue to be hopeful that the Title XVII loan guarantees 
of the Energy Policy Act of 2006 would help expedite this exciting 
partnership with our livestock and food processing partners and 
with our future ethanol operators.  
        With some help with the "D" in "R&D" to more rapidly 
expand this efficient technology," we could move even more 
quickly through the first integration of our multi digester systems, 
which can be used for on-site, dependable systems for agricultural 
and ethanol operations, for sale of renewable gas into the existing 
pipeline system, and for future expansion to LNG applications.


        Good Morning, Mr. Chairman.  I am Joe Cresci, the Chairman 
of the Board of Environmental Power Corporation. EPC was 
founded in 1982. We are headquartered in Portsmouth, New 
Hampshire. Environmental Power has developed generating 
facilities powered by nonconventional fuels and renewable energy 
sources, including hydro-electric and waste coal-fired generation. 
        The focus of my comments this morning is our subsidiary, 
Microgy, Inc., headquartered in Golden, Colorado. Microgy 
develops biogas systems, which are very efficient at extracting 
methane-rich biogas from a combination of livestock manure and 
other organic and food industry wastes. Inside Environmental 
Power, we refer to our biogas as RNG - Renewable Natural Gas.  
Our RNG is used to produce "green" electric power, thermal 
energy, or refined to pipeline-grade methane.  Microgy's biogas 
production system processes waste from livestock manure mixed 
with other organic wastes ranging from ethanol production by-
products to multiple varieties of waste from the food industry. We 
have completed or announced anticipated installations for projects 
in Wisconsin, California, Texas, and Nebraska. 
        Microgy, along with our Danish licensor, has significantly 
improved conventional anaerobic digestion technology, enabling 
us to generate RNG at volumes and costs that is commercially 
attractive.
        Although SEC regulations and competitive considerations do 
not permit me to discuss cost and pricing matters in detail, I can 
say that we believe our RNG will be competitively priced 
compared to projected prices for LNG imports.  At the same time, 
our technology and manure handling processes also significantly 
reduce greenhouse emissions, improve water quality, and 
dramatically reduce odors around animal operations. 
        Microgy's system operates in the thermophilic temperature 
range, which provides faster, more complete digestion and 
accelerates composting, dramatically reducing BOD (biological 
oxygen demand) and virtually eliminating pathogens, while also 
providing more energy and a better by-product material. The 
residual product resulting from this process, of which I've brought 
a sample for you today, makes an animal bedding material, which 
is preferred by our customers because it doesn't carry the potential 
bacteria and pathogens of other products.  As you'll note it looks a 
bit like peat moss, with only a slight earthy odor and a soft texture. 
        Our steel tanks, which resemble farm silos, and our piping are 
built to last, as are the high-tech monitoring and control systems. 
We build, own, and operate our energy systems so farmers can 
farm, while we produce continuous energy output, 24 hours a day, 
7 days a week.
        Why is Microgy's system so efficient?  We have the exclusive, 
perpetual U.S. license to a European technology that has operated 
for over 15 years in small applications and is now being adapted by 
Microgy for the traditionally larger U.S. farms with a broader 
diversity of manure quality.  We believe that, until now, there has 
been no commercial precedent to our systems in scale and 
efficiency.  We can produce pipeline-quality RNG and other 
"mainstream" energy outputs that are marketable in conventional 
energy markets.
        At the same time, our operations provide significant 
greenhouse gas reduction. Our digesters capture the methane 
which is a 21 times more powerful greenhouse gas than CO2, 
which would otherwise be given off by the breakdown of manure, 
equaling an approximately 95% reduction in net greenhouse 
emissions to the atmosphere. We believe that our large multi-
digester projects could generate 30-60,000 tons of CO2 equivalent 
emission offsets annually.
	Our systems provide a number of other environmental benefits. 
They substantially diminish odor from waste at animal feeding 
operations. Manure run-off on farms is currently one of the leading 
water pollution challenges. Our process accelerates the natural, 
existing composting rate.  Since we handle the waste anyway, we 
can more easily direct it to organic fertilizer/compost markets or 
divert it for appropriate alternative disposal. Our high temperatures 
remove pathogens such as e'coli O157:H7 and our scrubbers 
remove toxic gases such as hydrogen sulfide.
        Our initial projects, funded with EPC capital, have 
demonstrated the effectiveness of our technology, and the models 
are scaled to provide significant cost and productivity 
enhancements.
        Our first U.S. installation, which established the commercial 
scale and viability of our process, is at the Five Star Dairy in Elk 
Mound, Wisconsin, and has been operational since June of 2005.  
That first anaerobic digester system is one 750,000 gallon tank 
processing waste from 900 milking cows.  That is on the high side 
of a typical size dairy farm in the north-central part of the United 
States.  That system produces approximately 775 KW of renewable 
energy, the equivalent of electricity for about 600 homes.  The 
biogas produced by this installation is sold wholesale by Five Star 
to Dairyland Power Cooperative, which owns the generator.   
        The Five Star Dairy project produces about 4 to 5 times as 
much methane as conventional anaerobic digesters, such as the 
prevalent plug flow systems and the prevailing lagoon waste 
systems. Five Star sells biogas for Dairyland's use in renewable 
distributed electric generation, capturing an estimated 2,600 
tons/year of greenhouse gases, and providing improved, no-cost 
bedding for dairy cows. 
        We are in the final permitting stages for a project at the Joseph 
Gallo Farms in Atwater, California. Two digester tanks for the 
manure from 3,000 milk cows are projected to generate 130 billion 
BTU's of energy per year, the equivalent of heating 2,200 homes. 
This closed-loop methane recovery from the farm itself is expected 
to replace 1.4 million gallons of purchased propane used in dairy 
and cheese-making processes. Construction of this project, too, is 
likely to be funded by EPC, because no credit is available, thus far. 
We estimate 8,000 tons of CO2 greenhouse emission offsets from 
the Gallo project.
        Our next projects, in construction at Huckabay Ridge in 
Stephenville, Texas, and soon to enter construction at Mission 
Dairy in Hereford, Texas, represent a major technology upgrade 
and a major financial step out, moving our systems from small, 
local operations, to systems capable of providing the equivalent 
gas of a nice sized natural gas well. It is, however, a gas well 
which needs no depletion allowance, as long as we have cows and 
other wastes.
        Huckabay Ridge at Stephenville has a plan for eight 916,000 
gallon digester tanks for 10,000 milk cows. (The rule of thumb is 
one digester for roughly 1,000 cows.) In what we believe is a first 
for biogas, we will be constructing a scrubber plant (not a new 
technology, but a new use for integration in a biogas system) to 
provide pipeline quality gas that can be delivered to the nearby 
existing pipeline grid.  A modest estimate is that we will be able to 
deliver 650,000 MCF of pipeline-grade gas annually, the 
equivalent needs for 11,000 homes or the equivalent of 12,700 
gallons a day of heating oil. As previously stated, that is equivalent 
to a good size natural gas well. I might add there are a total of 
30,000 cows near the Huckabay Ridge project. 
        At the Mission Dairy project recently announced in Hereford, 
Texas, there are 24,000 cows permitted for the site. However, there 
are tens of thousands of animals within a ten-mile radius of that 
site, including dairy and feedlot cows. Each 10,000 cows is another 
potential "well" site, so to speak. 
        We conservatively estimate that we will be able to deliver at 
Mission Dairy our first application of a modular 
design/construction program, where we perfect not only economies 
of scale, but the beginnings of a replicable modular system. The 
component producers can then produce "models," rather than 
"one-offs," and we can then replicate standardized core designs.  
The models would be envisioned to be available in modules of four 
tanks. 
        With regard to the scale of the market as a whole, we estimate 
there are more than 150 Huckabay Ridge-sized projects, including 
more than 1,000 individual tanks, which would result in 81 trillion 
BTU's a year, or 81 million MCF of RNG.   Our modular 
technology would also allow the participation of smaller dairy 
farms, where they could be economically grouped via tank, pipes, 
or other transport systems to central digester sites.
        Pigs are a valuable part of our process as well! Indeed, most of 
the systems based on our technology currently operating in Europe 
operate on swine farms.  The potential swine market in the U.S. 
represents, at full utilization, potentially another 65 trillion BTU's 
a year of natural gas, or 65 million MCF of RNG.
        EPC recently signed a letter of intent with Swift & Company, 
the world's second-largest processor of fresh beef and pork 
products, where we plan to use our technology to extract methane-
rich biogas from the animal wastes, as well as meat processing 
wastes and certain wastewater plant residual streams that would 
otherwise be land filled or land applied. We will be cooperating 
with Swift to look at potential projects at seven other beef and pork 
production facilities throughout North America. We are excited 
about the opportunity to help Swift reduce costs and have a 
positive impact on the environment.  
        If you consider full utilization of wastes from the meat packing 
industry, which includes both their manure and numerous other by-
products, you could potentially add another 5 trillion BTU's a year 
or 5 million MCF of RFG. 
        EPC's future has a place in the fuels world as well. There is 
potential for LNG production as a conventional fuel substitute. But 
perhaps one of the most important areas of potential expansion for 
EPC, and I know it is an important area for this committee, is that 
our EPC digesters are complementary with ethanol production, not 
in competition with it.   Ethanol is a liquid fuel source, appropriate 
for gasoline blending and targeted at the automotive market.  
Biogas, on the other hand, is more appropriate for onsite use in 
heating, electricity generation and industrial processes, or as a 
source of RNG for delivery via conventional natural gas pipelines.  
        EPC digesters can supply ethanol producers with natural gas 
on-site, reducing reliance on imports of conventional natural gas, 
imports of LNG, and even the infrastructure needed for natural gas 
transport.
        Natural gas, which you well know, is subject to wide 
fluctuations in price, and these fluctuations create uncertainty in 
industrial processes that rely on natural gas. This is no less true for 
the production of ethanol, as natural gas is a crucial element in the 
ethanol production process, and fluctuations in the price of natural 
gas are certainly hampering the implementation of ethanol 
production.  Natural gas now costs $7 per mmBTU; it takes 
approximately 33,000 BTU's of natural gas to manufacture one 
gallon of ethanol, costing producers $0.23 for every gallon of 
ethanol they make.  By providing readily available RNG for 
ethanol producers, EPC is offering a crucial ingredient that will 
facilitate the expansion of ethanol production.
        Ethanol production uses corn as well as natural gas to create 
ethanol.  The byproducts of this process, distillers grain and liquid 
stillage, can be used as source materials to be added to the manure 
for the digesters that supply the ethanol plant with RNG.
        One of EPC's facilities in Wisconsin is currently co-digesting 
cow manure with liquid waste (stillage) from a nearby ethanol 
plant.
        Further, if I may quote from RFA's own Ethanol Industry 
Outlook 2006,   "Many estimate the supply of distiller's grains to 
reach 12-14 million metric tons by 2012 as the RFS (Renewable 
Fuels Standard) is fully implemented.  Some believe this level of 
output will make it necessary to find new markets and uses for co-
products."  We believe that our systems can make productive use 
of these co-products to produce gas for the ethanol production 
process.
        There is going to be a huge demand for a reliable, cost-
effective, on-site source of renewable natural gas if the President's 
plan to increase ethanol production to 7.5 billion gallons by 2012 
(from 4 billion gallons in 2006) is realized. To obtain an increase 
in production of 3.5 billion gallons of ethanol, these plants will 
need more natural gas. We estimate this need will essentially 
double the industry's demand for natural gas at the same time that 
domestic and world demand grows. Producing RNG on-site or 
proximate to ethanol plants will help abate their need for purchased 
natural gas and could help stabilize their pricing structure for at 
least the RNG portion of those energy needs. 
        EPC digesters use technology that has been proved successful 
in digesters throughout Europe and at EPC's first three projects in 
the United States.  Unlike renewable energy methods that are 
exotic, but are yet to be fully tested, EPC has technology that is 
ready today.  Our digesters already produce RNG from a diverse 
supply of farm and food wastes.   Our technology is currently 
accommodating waste products from ethanol production. We 
believe that our evolving modular design for the digesters will 
enable rapid deployment at ethanol plants across the country.   
There are currently many ethanol plants under construction, and 
EPC has identified a market for 800 new digesters at these plants, 
bringing the total potential market for digesters to 5,600 
nationwide.
        Our challenges?  The lack of commercial credit and the 
limitations on our capital financing capability, mean that the 
development of this biogas technology will be significantly slowed 
if the public portion of the public/private partnership, such as Title 
XVII of the Energy Policy Act of 2005 (EPACT), is unavailable to 
"bridge the gap."  Further, our production of RNG is not included 
in the numerous incentive programs available to all other 
alternative energy producers.
        I quote from EPACT, "New or significantly improved 
technologies" including "renewable energy systems" and "efficient 
end-use energy technologies" that "Avoid, reduce, or sequester air 
pollutants or anthropogenic emissions of greenhouse gases."
        We are also looking at some of the existing Agriculture 
programs to expedite our work. . I must tell you, Mr. Chairman, 
this Committee structured the loan guarantee program in Title 
XVII very well.  Unfortunately, when we last heard, the guidelines 
were still at OMB. Moreover, DOE has told us that RNG from 
manure and food wastes (biogas) is not currently a high priority.
        Partial early guarantees, such as those this Committee did in 
Title XVII of EPACT, could help us "bridge the financing gap" for 
proving commercial viability! With some help with the "D" in 
"R&D" to more rapidly expand this efficient technology," we 
could move even more quickly through the first integration of our 
multi digester systems, which can be used for on-site, dependable 
systems for agricultural and ethanol operations, for sale of 
renewable gas into the existing pipeline system, and for future 
expansion to LNG applications.
        We at EPC are advancing with the support of accommodative 
equity markets, by picking the low-hanging fruit.  Our RNG 
initiatives could move forward more quickly with a private-public 
partnership and with participation at simple parity in incentive 
programs already available to all other renewable producers.  RNG 
development would benefit from a level playing field and from 
implantation of Title XVII.  It could enable us to extend the market 
place to smaller farms and more distant waste locations that may 
be more costly for us to serve at this time.
        Environmental Power's path to commercial viability is the 
expanded large scale production capabilities of the technology. 
The construction and operation of initial projects to drive costs out 
of system will also provide those modularized templates for future 
projects. Commercial success of initial projects will demonstrate 
the wide range of applications; e.g. electricity, pipeline gas, inside 
the fence, ethanol production, LNG, and other thermal energy 
applications.
        We are very excited about our role of providing our customers 
with dependable, predictable natural gas supplies, of helping 
establish more independence from imported natural gas supplies, 
of a growing potential synergy with ethanol production, and of 
providing sensible, affordable, environmental solutions. Our 
trademark: we are making Energy That Is Beyond RenewableT, 
and moving forward to generating renewable natural gas.
        I thank the Committee for their time and attention, and I would 
welcome you to visit our facilities around the country, particularly 
in Texas, where this fall we plan to start delivering RNG to the 
pipeline.
        I would be pleased to take your questions.

	MR. HALL.  Without objection that will be done, and for 
questions that we may have of the group, and because others who 
are in other committees, we will leave the record open for 
additional questions from members of the committee.  And if you 
could, try to get those back to us in maybe 10 days or 2 weeks.  
Thank you.  Go ahead now, Mr. Cresci.  You have completed?
	MR. CRESCI.  I have completed.  Thank you very much for the 
opportunity to present.
	MR. HALL.  Okay.  Mr. Novak, you gave us a lot of good facts, 
figures, stories, techniques, and things like that.  I think you heard 
Mr. Yoder.  Were you here this morning when Mr. Yoder testified 
about the fact that their city, a little city, I don't know how big the 
city is in Alaska, is going to discuss plans to install a small nuclear 
unit for electricity generation to replace diesel generators.  In your 
comparative cost, your estimate for nuclear remains the same even 
though many in the industry expect that their plants are going to be 
less expensive--the newer plants getting less expensive.  What are 
the facts on that and why is that?
	MR. NOVAK.  Thank you, Mr. Chairman.
	MR. HALL.  And where do they get that?
	MR. NOVAK.  I don't know if this mic--yes, it does work.  We 
were a little bit conservative on the improvements or the reductions 
in cost between 2010 and 2020, and there may be additional cost 
reductions for nuclear out in the future, but we assume that you are 
going to see a lot of standardization in the first-of-the-kind plants 
built due to the MP2020 program that is currently underway in 
DOE.  Those plants will contain a lot of the standard designs, and 
you will get cost savings there.  So we may not see additional cost 
savings in the 10-year period following.
	MR. HALL.  Can you describe what you would call some 
promising energy storage technologies for use with the renewable 
sources?  You want to enlarge on that?
	MR. NOVAK.  Yes.  Some battery systems show some promise, 
and I have got a few listed here that I could provide for the record; 
a nickel metal high drive, redox globe battery systems, and some 
emerging lithium ion technology.  But also, there are existing 
energy storage technologies such as compressed air and pump 
storage that still make a lot more sense economically than some of 
the battery technologies.  But again, those have their own 
challenges with where you would put pump storage in and those 
are some of the environmental considerations.  I would be happy to 
provide more information.
	MR. HALL.  Okay, if you would.  And Mr. Cresci, I think you 
are aware of an ongoing debate in Texas and Oklahoma where 
Superfund laws, namely CERCLA and EPGRA, are being applied 
to animal feeding operations and with litigation that is filed by the 
city of Waco against some surrounding ranches there and litigation 
in Oklahoma.  What impact could this have on your industry and 
how would you be affected?
	MR. CRESCI.  Well, the Waco litigation, I believe, has been 
settled and in fact, does involve a number of the farms that are in 
the Erath County area, which is where the Huckabay Ridge project 
is located.  To answer your question directly, if you were to treat 
hazardous waste treatment or handling as the handling of a 
hazardous waste, it would probably mean that all people in the 
process, at least as I understand the way the Superfund legislation 
was originally set up, would probably have to treat it in that 
manner, and I would think that it would drive the cost of handling 
waste to make any type of energy extraction from that material to 
be uneconomic.
	I don't know of any inherently hazardous materials in animal 
waste and basically, we see waste, animal waste in particular, in 
this case as a resource, and extracting the value from it and having 
an economic value attached to it sufficient to allow it to be 
processed and handled properly, including if, in some instances, 
perhaps, removal from areas; in other instances, digested into 
compost which can be sold or moved into market places requiring 
fertilizers and other materials for growing in other areas.  It seems 
to me that that more than adequately deals with the issues as I 
understand them in terms of over-nutrification.
	MR. HALL.  I know we have had an opportunity to discuss with 
you, your dairy cows around the county.  What are the ways you 
can handle it?  A constituent in my district, in particular, a guy 
named Bo Kilgren, was very interested in chicken waste.  Would 
you enlarge on that?
	MR. CRESCI.  I will, indeed.  Unfortunately, we can't handle 
chicken waste.  It does not really process efficiently through 
anaerobic digestion.  There are, I understand, some other 
technologies that are being talked about for chicken waste, but it 
certainly is a problem.  We would like to have an answer to it 
because it seems to be a large problem.  The waste that we can 
handle mostly are cattle waste; dairy cattle is, obviously, a very 
good source, but also feed cattle and also swine.  Those are the 
ones that are most efficient for us to process.
	MR. HALL.  Okay.  My time is up, but Mr. Boucher, when you 
are ready, if you have any questions.
	MR. BOUCHER.  Mr. Chairman, thank you very much.  Mr. 
Novak, let me begin with you.  You are making a prediction, if I 
read these numbers correctly, that by the year 2010 the cost of 
IGCC will be $47 per megawatt hour.  The natural gas combined 
cycle cost will be $56 per megawatt hours, so IGCC will be 
cheaper at that point by a substantial margin than the natural gas 
combined cycle.  My questions are this.  What are the comparisons 
today between those prices and what assumptions are you making 
about the deployment of IGCC that gets to the cost of $47 per 
megawatt hour from whatever the number is today?
	MR. NOVAK.  Mr. Chairman, the numbers that I presented 
come from an analysis that we did for our summer seminar this 
past August, where we bring chief executives in and the topic was 
"Making Billion Dollar Decisions on New Generation Technology 
in a Carbon Constrained Future."  So what we did was we looked 
at today's technology and tried to come up with estimates of the 
cost of electricity of today's technology that were it to be deployed 
would be on line in a 2010 time period.  So those numbers on a 
cost of electricity basis are really today's technology.  Pulverized 
coal is the lowest cost of electricity basis.
	MR. BOUCHER.  No, I understand.  It is today's technology.  I 
am not quarreling with that, but I mean, I am told that the more 
IGCC units that get deployed for electricity generation purposes, 
the lower the cost of the units becomes and so as you deploy more 
of these, you achieve a lower cost per megawatt hour than the 
current cost, so my questions to you are what today are the cost 
comparisons, if you know, between the natural gas combined 
cycle; it is going to be $56 in 2010, what is it today?  And the 
IGCC, which will be $47 in 2010; what is that today?  Do you 
know the answer to that?
	MR. NOVAK.  I do not.
	MR. BOUCHER.  Okay.  Well, let me just go to the second part 
of it.  In making your prediction that IGCC is going to get to $47, 
which is an attractive number.  I mean, if it gets to that and it is 
cheaper than natural gas combined cycle, we can presume it is 
going to be widely used.  How many units of IGCC have to be 
deployed between now and 2010 to get to this $47 number?  What 
is your assumption?
	MR. NOVAK.  We think that $47 is the current number.  If you 
build a 600 megawatt plant and have it on line in the 2010-2012 
time period, over the lifetime of that plant it is $47 per megawatt 
hour, about 20 percent more than PC.
	MR. BOUCHER.  Dr. Katzer, you are expert in this.  Do you 
agree with that?
	MR. KATZER.  Generally, yes.  The difference between my 
numbers and the EPRI numbers are somewhat in the assumptions 
that we made in calculating the cost of electricity.  I think we are 
using a little higher coal cost.  I think you used $1 a million; we 
used $1.50, which is a little higher than it is on average today.  I 
think those are the differences between our numbers, but our 
deltas, I think, are consistent.  So basically, we don't have any 
differences.  We try to look at what we call the Nth plant, where N 
is a small number, not well defined, but a small number: 5, 6.  That 
gets you out in the range where you have gotten over making 
mistakes, and you ought to be able to do things, design and 
construction-wise efficiently.
	MR. BOUCHER.  Let me ask you this, Dr. Katzer.  We included 
some incentives, tax credits in EPAct 2005 to encourage clean coal 
technology used by electric utilities.  We had IGCC primarily in 
mind at the time that we applied those credits.  I am told by electric 
utilities that they do make a difference in their planning and that 
many are looking very favorably now at IGCC based upon the 
availability of tax credits to help bring down the cost of 
deployment.  In the process of preparing that legislation, we had 
some analysis that suggested, as you have in your testimony, that 
pulverized coal is more economic today than IGCC, but that that 
equation could change and that the more IGCC units were 
deployed, the more that technology is placed in the commercial 
market and refined and the more units that are produced, and just 
because of volume of production, the cost comes down.  
	The time would be reached after about 12 full scale units to 
find the 600 megawatts, at least, per unit.  When you deploy 12 of 
these, the cost differential vanishes and you wind up with, 
essentially, an equal cost of IGCC and pulverized coal.  Now, this 
is IGCC without the carbon capture component, which obviously 
adds another element of cost.  Would you agree that that is 
essentially right and can you also make some kind of prediction 
about the point at which that number of units, whether it is 12 or 
some other number, that equalizes the cost of IGCC and pulverized 
coal is reached?
	MR. KATZER.  I would agree that directionally, that is how 
things happen.  To be able to quantitatively predict how things 
would work out for Unit 6 out to Unit 12 or for Unit 2 to Unit 6 is 
really difficult.  Directionally, that is the correct direction.  The 
other piece of the equation, which is what I tried to address a little 
bit here, is increasing cost of emissions control on PC units.  As 
these permit levels keep going down, the cost keeps coming up and 
that is narrowing the gap between IGCC and PC, so if you look out 
in the future a decade or so, which means you have built several 
plants and you have got a few more in the construction stage, you 
begin to see a point where they look like they are coming to parity 
in terms of cost of electricity generating, yes.
	MR. BOUCHER.  So the basic conclusion is that at some point a 
decade or so down the road, you do achieve parity in cost between 
the two?
	MR. KATZER.  I think that is quite likely, yes.
	MR. BOUCHER.  Okay.  Let me ask this question.  The EPA, as 
you know, has promulgated a new mercury regulation and it is a 
bit of a challenge for some electric utilities to comply with that; an 
element of cost is involved.  Did you factor the cost of retrofitting 
pulverized coal with that or the cost of, if they are planning to use 
new pulverized coal, adding the mercury reduction technology into 
your calculations, because IGCC eliminates mercury, essentially.  I 
think you said 99 plus percent.
	MR. KATZER.  Yes.
	MR. BOUCHER.  And so have you calculated that into your 
assumption that pulverized coal is a cheaper alternative than 
IGCC?
	MR. KATZER.  In the base unit cost, which is 4.8, you only 
capture the mercury that is captured in the process of flue gas 
desulphurization in a particular removal.  Then we have looked 
down the road to increase the reduction of criteria pollutants and 
have added mercury removal in, and that was part of the .2 cents 
per kilowatt hour additional cost that I noted, so that is where we 
put it in.  We did not factor it in as explicit technology application 
today because for about 10 years there will not be a requirement to 
explicitly remove additional mercury.
	MR. BOUCHER.  Okay.  All right, Mr. Chairman, I appreciate 
your indulgence with this.  Thank you very much.
	MR. HALL.  I thank you.  I want to go back and ask Dr. Katzer 
about the coal.  By the way, do you know John McCatta, that is an 
authority writer?
	MR. KATZER.  Yes, yes.  Off-hand, at least.
	MR. HALL.  Okay.
	MR. KATZER.  I met him probably once.
	MR. HALL.  I heard him make a statement about 12 years ago at 
a speech in Dallas that there was enough coal in the mid-section of 
this country, if we could mine it, that would total the output of all 
OPEC nations combined.  Could that be anywhere close to being 
an accurate statement?
	MR. KATZER.  Yes.  There are a lot of assumptions in terms of 
exactly how you are talking about it, but the answer is in large 
measure, we are the Middle East of coal versus they, the Middle 
East of oil.  It is a tremendous resource base we have, we are 
sitting on.
	MR. HALL.  On the technologies that you have capably laid out 
and described, are there any existing Federal or State rules that are 
hindering the deployment of the technologies that you set forth?  
And if so, it may be a hard question to answer right now, but could 
you give me some information in writing on that if it takes some 
research?
	MR. KATZER.  Mr. Chairman, I think I would need to do a little 
research on that.  That piece of the equation is not one in which I 
have a lot of involvement.
	MR. HALL.  I thank you.  And Dr. Murphy had questions that 
he wanted to ask, too, Dr. Hammond.  Could you clarify the 
economic impact you believe cost competitive solar technology 
would have, and what the Government is doing to achieve this 
objective?
	MR. HAMMOND.  Yes, the economic impact of cost-competitive 
solar, if you look at the President's objective of having cost-
competitive solar in 2015 and look at a reasonable build out of that 
solar technology, first of all, you might take a simple analysis and 
just look at the economic value of that solar energy at the total 
kilowatt hours that might be produced and multiply that by an 
average value for electricity.  You would estimate an economic 
value of a few billion dollars for that electricity at that time, that 
that simplistic analysis ignores some critical aspects of solar 
technology that must be looked at and make solar a really 
attractive technology.
	If you imagine the hot summer afternoons when you are 
clicking your air conditioning on full and likewise, our natural gas 
peaking plants are clicking on full, that is exactly coincident with 
the time when you get the maximum resource from deployed solar 
technology.  And so the coincidence of that with the peak end load 
has tremendous additional benefit.  It can relieve strain on the 
transmission and distribution infrastructure at precisely the time 
that it is maxed out.  It would save valuable natural gas resources 
that are being deployed at that time.  So the economic impact, 
while much more complicated to calculate, is multiples of just the 
value of the electric energy itself.  And that doesn't even account 
for the fact that it is a zero emission, which brings substantial 
additional economic benefit.
	What the Government is doing to achieve and capture these 
economic benefits, the most significant recent initiative, of course, 
is the Solar America Initiative.  Under that guise through the 
Department of Energy, an additional $65 million has been 
allocated for Fiscal Year 2007 directly for solar technologies and 
that is an important program that we strongly encourage Congress 
to fully fund, but also to make sure that it gets deployed in a way 
that new revolutionary solar technologies have a chance to benefit 
from that, because it is those technologies that are going to really 
enable that cost competitive deployment.
	At the State level, there are also additional important activities 
going on, including in our State of Pennsylvania, where the 
Governor and the Secretary of the Department of Environmental 
Protection have specifically allocated funds for new solar 
technology development to support Pennsylvania's aggressive 
solar renewable portfolio standard.  So those are a glimpse at some 
of the activities that are going on from the Government's 
perspective to support it.  Our key message would be that the 
opportunity is so significant; there is a significant opportunity for 
Congress to expand and accelerate that support to make sure that 
the United States plays a leadership role in deployment of solar 
technology.
	MR. HALL.  All right.  I thank you for that.  I have other 
questions I would like to ask of Mr. Linebarger.  I am going to ask 
you and they are going to be in the record, and I will ask you to 
give us a written explanation.  What do you think is the greatest 
significant opportunity for DG in the United States?  You might 
answer that.  I think you can do that in one sentence, can't you?
	MR. LINEBARGER.  I sure can, yes.  The biggest significant 
opportunity, I think, is deploying, particularly, the energy efficient 
technologies related to combined heat and power and then 
protecting critical infrastructure would be the two things, I think.
	MR. HALL.  And he says the committee spends a lot of time 
thinking about energy security.  Can you tell me what you mean 
when you say DE has a role in energy security?
	MR. LINEBARGER.  My idea there would be twofold; first, that 
we can use a wide range of renewable fuels, which would reduce 
our dependence on oil; and second, by ensuring that we have 
critical infrastructure ready, we protect ourselves against failures in 
the grid.
	MR. HALL.  All right, we have other questions.  How can DE 
impact the price of electricity on the grid?  I will ask you to answer 
that for the record.  Do you have further questions?
	MR. BOUCHER.  No.
	MR. HALL.  And the reason we are asking to leave this open, 
where we can ask you, is the lack of availability of other members 
of the subcommittee that have questions they want asked.  Those 
that are still here representing them have made notes of those, so 
we will be back in touch with you and I sure do thank you.  You 
have been a good, patient panel.  You have allowed us to leave to 
run over to the Capitol and vote.  I think we voted three or four 
times over there.  We have a committee meeting that is beginning 
at 1:30 that is a markup, so we have to go from here to that, but 
you have your job and you are a very busy man and you have been 
generous with your time, preparing yourself to even be solicited to 
give us information.  We take what you say, the information you 
give us.  We don't have to seek it from you and we write the 
legislation from it, or correct the legislation from it, so you are 
doing a real service to your country.  I know Chairman Barton 
appreciates it, and the staff does, and we thank you very much and 
you are dismissed.
	[Whereupon, at 1:37 p.m., the subcommittee was adjourned.]

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