[Senate Hearing 110-570]
[From the U.S. Government Publishing Office]



                                                        S. Hrg. 110-570
 
                         ELECTRICITY GENERATION

=======================================================================

                                HEARING

                               before the

                              COMMITTEE ON
                      ENERGY AND NATURAL RESOURCES
                          UNITED STATES SENATE

                       ONE HUNDRED TENTH CONGRESS

                             SECOND SESSION

                                   TO

 CONSIDER THE VALUE AND EXAMINE THE PROGRESS OF ELECTRICITY GENERATION 
                     FROM CONCENTRATING SOLAR POWER

                               __________

                     ALBUQUERQUE, NM, JULY 2, 2008


                       Printed for the use of the
               Committee on Energy and Natural Resources


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               COMMITTEE ON ENERGY AND NATURAL RESOURCES

                  JEFF BINGAMAN, New Mexico, Chairman

DANIEL K. AKAKA, Hawaii              PETE V. DOMENICI, New Mexico
BYRON L. DORGAN, North Dakota        LARRY E. CRAIG, Idaho
RON WYDEN, Oregon                    LISA MURKOWSKI, Alaska
TIM JOHNSON, South Dakota            RICHARD BURR, North Carolina
MARY L. LANDRIEU, Louisiana          JIM DeMINT, South Carolina
MARIA CANTWELL, Washington           BOB CORKER, Tennessee
KEN SALAZAR, Colorado                JOHN BARRASSO, Wyoming
ROBERT MENENDEZ, New Jersey          JEFF SESSIONS, Alabama
BLANCHE L. LINCOLN, Arkansas         GORDON H. SMITH, Oregon
BERNARD SANDERS, Vermont             JIM BUNNING, Kentucky
JON TESTER, Montana                  MEL MARTINEZ, Florida

                    Robert M. Simon, Staff Director
                      Sam E. Fowler, Chief Counsel
              Frank Macchiarola, Republican Staff Director
             Judith K. Pensabene, Republican Chief Counsel


                            C O N T E N T S

                              ----------                              

                               STATEMENTS

                                                                   Page

Andraka, Charles E., Sandia National Laboratories, Albuquerque, 
  NM.............................................................    12
Bingaman, Hon. Jeff, U.S. Senator From New Mexico................     1
Daly, Michael, Mesa del Sol, Albuquerque, NM.....................    28
Domenici, Hon. Pete V., U.S. Senator From New Mexico.............     2
Marker, Alex, Research Fellow, Schott North America, Inc., 
  Elmsford, NY...................................................    31
Morse, Frederick H., Senior Advisor, U.S. Operations, Abengoa 
  Solar, Inc.....................................................    23
Nelson, Greg, Director, Utility Services, PNM Resources, 
  Albuquerque, NM................................................     7
Sanders, Hon. Bernard, U.S. Senator From Vermont.................     5
Wan, Fong, Vice President, Energy Procurement, Pacific Gas & 
  Electric Company, San Francisco, CA............................    39

                                APPENDIX

Responses to additional questions................................    59


                         ELECTRICITY GENERATION

                              ----------                              


                        WEDNESDAY, JULY 2, 2008

                                       U.S. Senate,
                 Committee on Energy and Natural Resources,
                                                   Albuquerque, NM.
    The committee met, pursuant to notice, at 10:09 a.m. at the 
International Programs Building, Sandia Science & Technology 
Park, 10600 Research Road SE, Albuquerque, New Mexico, Hon. 
Jeff Bingaman, chairman, presiding.

OPENING STATEMENT OF HON. JEFF BINGAMAN, U.S. SENATOR FROM NEW 
                             MEXICO

    The Chairman. OK. Why don't we go ahead and get started? 
This is a hearing of the Senate Energy and Natural Resources 
Committee that I am privileged to chair; Senator Domenici is 
the ranking member and Senator Sanders is a loyal member of our 
committee as well.
    Let me just give a short statement and then call on Pete to 
make his statement, and Senator Sanders to make his. Then we 
will jump into the witnesses.
    This is a hearing on a particularly important issue at this 
point in our history. I think a lot of the focus related to 
energy nationally is on the price of oil, and that is 
understandable. We are all worried about that, obviously, and 
we have tried to do some things with regard to that that we are 
still trying to add to in Washington.
    Today we are focused on the issue of generation of 
electricity. For years, in fact, since 1978, the Federal 
Government has been trying to encourage the use of renewable 
resources for electricity generation. The frank truth is we 
haven't made much progress. Currently, about 3 percent of our 
electricity comes from non-hydro power renewables.
    I think recently wind generation has been growing at a 
rapid rate, and over the last 2 years, it has been the fastest-
growing source of new generation, which is encouraging. But 
that still leaves it with a very small share of our generation 
mix. Other technologies, renewable technologies have lagged 
behind.
    Concentrating solar power, which is the subject of this 
hearing, has been pointed to as the next inheritor of the 
mantle that wind now wears. The primary reason that wind power 
has outdone other renewables is that it is cheaper than other 
technologies. It is about 8 to 9 cents per kilowatt hour, which 
is about the same as natural gas. Many in the industry believe 
that concentrating solar power could reach that price range 
within 5 to 10 years simply from the economies of scale that 
could come from installing a great deal of this capacity.
    CSP, or concentrating solar power, has some real advantages 
over wind. The biggest is that it is less intermittent. In 
parts of the country where the solar resource is best, such as 
New Mexico, it is much more predictable than wind. It also may 
allow for easier storage of energy since it can use heat 
storage and does not depend on further development of battery 
technologies. That makes it more responsive to the actual needs 
of the users of electricity.
    There are many reasons for us to pursue the goal of greater 
deployment of concentrating solar power as well as other 
renewable technologies. The Federal Government obviously has a 
significant role to play here. One issue that I know is on the 
minds of many here is the tax credits that we need to be 
extending in Washington, and I know there is going to be a 
continued push to get that done in the next month or two.
    I believe, myself, that we should also enact a renewable 
electricity standard that would require utilities to acquire a 
set percentage of their electricity from renewables, and of 
course, we have that in New Mexico at the State level.
    Another issue confronting all renewable generators is the 
inadequacy of the transmission system to carry the electricity 
that could be produced. We had a hearing on that issue a couple 
of weeks ago in Washington, and I hope that that hearing leads 
to some productive solutions on that score.
    I wanted particularly to congratulate the utilities--Public 
Service Company of New Mexico, El Paso Electric, Xcel Energy, 
and Tri-State--for their announcement this week of a request 
for proposal for concentrating solar power generators to supply 
citizens here in New Mexico.
    When we get to the witnesses, we are going to call on Greg 
Nelson from PNM to give us an overview of that proposed project 
and the reasons why they have chosen this technology to pursue. 
We have a panel of very distinguished witnesses today, and I 
look forward very much to their testimony.
    Let me now call on Senator Domenici for his comments, and 
then on Senator Sanders.

   STATEMENT OF HON. PETE V. DOMENICI, U.S. SENATOR FROM NEW 
                             MEXICO

    Senator Domenici. Thank you very much, Mr. Chairman.
    Might I first say how much we appreciate Senator Sanders 
being with us? Since you didn't welcome him, don't mind if I 
do.
    [Laughter.]
    The Chairman. You go right ahead, and I am well following 
you.
    Senator Domenici. I wanted to tell him how different things 
are here than in your State. This is a much, much different 
State. But we know that you love what you have, and we want you 
to come here and learn about ours so you can love our State. 
Then all these things that Jeff needs in years to come when I 
won't be there, you will be voting ``aye'' every time.
    Senator Sanders. Every time----
    [Laughter.]
    Senator Domenici. If you don't, he will remind you of the 
pleasantries of today and of the cordiality of New Mexicans. 
Let me say to everybody here, you know, I don't know why--no 
reason at all--but he and I have become friends.
    [Laughter.]
    Senator Domenici. We actually go out of our way to shake 
hands on the floor of the Senate, and that is kind of nice. We 
smile at each other and almost act like we are long-lost 
friends. That couldn't be because, you know, I am so much older 
than him, we couldn't be long-lost friends. But I do want to 
say that I not only appreciate you being here, but I very much 
appreciate the hard work you do. Whether I agree with you 
ideologically on whatever it is, I am a fan of your hard work.
    Let me say I have a prepared statement that this wonderful 
staff of mine has prepared. But I think Senator Bingaman 
covered it. So if you don't mind, I am just going to put it in 
the record with your permission, Mr. Chairman.
    The Chairman. Very good. Included.
    [The prepared statement of Senator Domenici follows:]

    Prepared Statement of Hon. Pete V. Domenici, U.S. Senator From 
                               New Mexico

    Thank you, Mr. Chairman, for calling this hearing on an issue of 
enormous potential--Concentrating Solar Power. I am pleased to be back 
here at Sandia today and I'd like to welcome Senator Sanders from 
Vermont to our great state.
    According to the Energy Department, ``more energy from sunlight 
strikes the Earth in one hour than all the energy consumed by human 
activity on the planet in one year.'' I find that remarkable--just one 
hour of sunlight contains more energy than is used worldwide for an 
entire year. New Mexico is truly blessed to have this abundant, carbon-
free source of energy--if we can harness it.
    There is no question that America needs to become less reliant on 
foreign sources of energy. Over the last several weeks, I have been 
telling Americans that we are on the verge of economic destruction if 
we do not address the high price of gasoline.
    I believe that we need to increase American production of oil by 
opening up new areas for exploration as soon as possible. But this oil 
production in the near term will provide us with a bridge to a clean 
energy future. On the other side of that bridge is an economy driven by 
clean energy technology like solar panels.
    The good news it that our government has already invested literally 
billions of dollars for research and development of renewable 
technologies like wind, biomass and solar. In fact, for solar alone, 
we've spent more than $4 billion. And there are billions more to come 
for all forms of alternative energy.
    One of the most important issues facing the solar industry right 
now is that tax credits that we passed in a bipartisan manner to help 
spur development are set to expire. It is of critical importance that 
they be extended--as soon as possible.
    Congress has passed tax credits for renewable energy six times 
since 1992. Unfortunately, the Majority in the House of Representatives 
has decided to change the way we pass these credits by requiring that 
they be ``offset'' by tax increases on other industries.
    Requiring ``offsets'' to provide tax credits for renewable energy 
makes little sense, particularly in light of a new study released by 
General Electric that shows that the renewable energy tax credits 
already pay for themselves. By spurring the growth of a new, clean 
technology industry, the renewable energy tax credits provide the 
government revenues from the projects' income, vendors' profits, and 
workers' wages.
    In addition, Congress has never before required offsets for 
renewable energy tax credits. By setting a precedent that from now on, 
offsets will be required, the Majority is putting the renewable 
industry in the difficult position of having to fight for tax increases 
every single year. I believe that this is a bad precedent to set.
    The Albuquerque Journal echoed this sentiment in a recent Op-Ed 
calling on Congress to move forward on a bipartisan bill. The Senate 
has already done so by approving the Cantwell/Ensign energy tax package 
by an overwhelming vote of 88-8. It is my hope that the House Majority 
will drop their objections to passing a clean extension of renewable 
energy tax credits and pass this bipartisan package as soon as 
possible.
    Thank you, Chairman Bingaman, for convening this morning's hearing. 
Our impressive panel of witnesses are involved in all aspects of the 
solar industry--from performing the R&D work, to manufacturing plant 
receivers, to building the CSP plants, and finally, to purchasing the 
resulting electricity. I thank you all for being here today and I look 
forward to your testimony.

    Senator Domenici. I just want to say thanks to all you 
witnesses who are lined up here. I know you have something to 
contribute, and we want to hear it.
    I, myself, in preparing for this hearing, was a little bit 
aghast by the Spanish company. In their notebook, they had 
prepared a trend line of how long it takes from starting a 
plant to building one. I was quite amazed, and I hope you will 
tell us all about that.
    I hope that isn't the national standard. I read your notes. 
It takes 6 to 8 years from the time you get ready to do one of 
these until you break ground. That is almost as long as a 
nuclear power plant, and I don't think they are quite as 
complicated. But perhaps I am missing something.
    The other point I wanted to make is that it doesn't sound 
possible, but, you know, the Sandia National Laboratory was 
working on this kind of solar energy early in my Senate career. 
I mean, it was like 30 years ago we used to go out and look at 
the troughs, which is one kind of concentrated solar, and they 
would show us what the shortcomings were. Then they would solve 
those, and there would be another one.
    But I continue to be amazed at not you, Sandia, but just at 
America, how long it takes to go from the research to the 
development to the actual application. Let me just say I don't 
think we can afford 10, 15 years on big energy projects that 
substitute even directly or indirectly for crude oil.
    I don't think we can sit by and let those projects take 8, 
10, 15 years to reach fruition because I believe the dependence 
on crude oil is real, and we can't get out from under it, no 
matter how hard we try, for a long, long time. That is a 
destructive thing. It is destroying our economy. This huge 
amount of money we send overseas is unbearable for the great 
country called America.
    We won't stand to spend half a trillion a year for 10 years 
while we wait around for some substitute. Can't happen. We 
can't let it happen. Even your great project won't be around. 
But as it is, we aren't going to have the resources hanging on 
for so long. So I am very concerned about how long it takes for 
alternative energy development.
    Last, but not least, I do know, without the testimony, that 
we must have a tax credit, the 30 percent that you all know we 
need, for the kind of solar we are talking about. I know some 
people blame us Republicans, and we Republicans blame them.
    [Laughter.]
    Senator Domenici. What we really have to do is we have to 
decide who is going to give. I don't know who is going to give 
yet and how long it will take. But we act one way based on what 
we think is a good rationale, and the Democrats--because of the 
House, Democrats in the Senate act another way, and we don't 
get anywhere.
    But I will tell you, I support it. So don't put me in an 
``anti'' position. I support it wholeheartedly. I don't know 
how to get around the problem unless Senator Bingaman and I 
decided that we might come up with a bipartisan substitute, and 
maybe we will. I don't know. We might try when we get back. If 
we did, it would go. It would pass. But we haven't been able to 
do that yet.
    So please understand you can blame whomever you blame, but 
I have a good answer for why I can't vote for the way it is 
being done, and he has a great answer for why they are voting 
the way they are. We both want it done, and we voted 88 to 8 at 
the last vote for you. So you know it is bipartisan.
    With that, thanks for calling the hearing, Senator 
Bingaman.
    The Chairman. Thank you very much.
    Let me just say a few words of welcome and introduction.
    [Laughter.]
    The Chairman. This hearing really is being held at the 
urging of Senator Sanders. He has been urging me now for 
several months to have a hearing on concentrating solar power. 
I suggested we do it out here in Albuquerque, which he was very 
agreeable to, but that somewhat explains his presence here. He 
is a great advocate for all renewable energy sources. In 
particular, this very much, I think, as his own statement will 
indicate, he is very much aware of the potential of this 
particular technology.
    So, Senator Sanders, thanks for being here.

  STATEMENT OF HON. BERNARD SANDERS, U.S. SENATOR FROM VERMONT

    Senator Sanders. Senator Bingaman, thank you very much for 
welcoming me here. Senator Domenici, thank you very much for 
your kind words.
    I just want to tell the people of New Mexico that you have 
two great Senators. At this particular pivotal moment in 
American history regarding energy, we are all fortunate to have 
Senator Bingaman in the chair.
    I can also tell you that while Senator Domenici and I 
certainly have differences of opinion, there is nobody in the 
Senate, I think, who is more respected and better liked than 
Senator Domenici. I just want to thank you for your years of 
service not only to the people of the State, but to the entire 
country. Thank you, Pete.
    This is an extraordinarily important hearing and an 
extraordinarily important moment in American history. I don't 
want to renew the debates that are taking place in Washington. 
I happen to believe global warming is real. It is of enormous 
consequences to this planet. If we do not get our act together, 
our children and grandchildren will be living on a planet with 
a significantly inferior quality of life.
    What we are already witnessing is increased droughts, 
flooding, severe weather disturbances, the CIA and the 
intelligence agencies telling us that as water disappears, as 
food land disappears, there is going to be increased 
international conflict and war. I think we have no alternative 
but to move aggressively and boldly in addressing this 
international crisis. I want to see this great country once 
again be a leader in the world in going forward in terms of 
energy efficiency and sustainable energy as we do it.
    So the bad news is we have a very serious problem. But 
there is good news out there, and the good news is that we know 
how to address this crisis.
    The other very good news is that it is not just 
intellectual knowledge. We now have the technology to do that 
as a result of extraordinarily good scientific work, including 
the work done here at Sandia, and engineering work done all 
over our country. The tools that we need are moving forward 
aggressively, in my view, in energy efficiency, an area my 
State has done a very, very good job, and moved forward in such 
sustainable energies as solar, wind, geothermal, biomass.
    I happen to believe that solar, especially concentrated 
solar, has extraordinary potential to produce huge amounts of 
electricity, and we are right in the middle--right here in New 
Mexico, Nevada--right in the middle of the area that has the 
capacity to do that. There are scientists and, I expect, people 
who will be testifying today who will tell us that within a 
reasonably short period right here in the Southwest, we could 
produce 15 to 20 percent of the electricity that we need in the 
country. In years to come, we can do even more than that. That 
is extraordinary.
    Second of all, in terms of the cost of this electricity, 
what even the folks at Sandia are telling us that the more 
electricity we produce, the more we learn about this 
technology, the cost will go down. It will be competitive or 
maybe even be more competitive than other fuels that we are 
using today.
    Third, as we clean up our environment, as we begin to 
reverse global warming through concentrated solar, through 
photovoltaic technology, through wind, through geothermal, 
through biomass, we are also going to create millions of good-
paying jobs. Sometimes I get a little bit tired, the Senators 
and I hear folks are saying, well, the world is coming to an 
end, you know? It is going to be a great economic disaster.
    As we move forward in new technologies, I believe 
absolutely the opposite. I believe there is enormous economic 
potential not just for the Southwest, but all over this country 
in creating good-paying jobs. I want to thank Senator Bingaman, 
Senator Domenici. On the energy committee, we have made some 
progress in the recent energy bill. But we have a long way to 
go. We do. But that was a good bill. It was a bipartisan 
effort, and we have made some progress.
    Let me just, if I might, Mr. Chairman, voice one note of 
concern before we hear from our very distinguished panelists. 
Some of you may have heard that the Bureau of Land Management 
recently announced a moratorium on accepting new applications 
for concentrated solar plants. I think that that is very 
unfortunate. I will do everything that I can to rescind that 
edict.
    Right now, there are approximately 150 applications that 
the BLM people are currently processing. To the best of my 
knowledge, not one application has yet been accepted. The 
reason that I hear, if you can believe it in the midst of this 
grave crisis of global warming, as I understand it, we have two 
people who are processing these claims. Two people.
    So here we are, trying to reverse global warming, create 
millions of good-paying jobs, we have got a bottleneck with two 
people presumably working very hard. We have got about a $3 
trillion budget. I think we can afford a few more people to 
process these claims, and we will be trying to do just that.
    So I am excited about this hearing. In Washington, we all 
hear a lot about nuclear, and Senator Domenici and I may have 
some disagreements on that. We hear about carbon sequestration, 
and I have my doubts about that. We are not hearing enough 
about the potential of solar in general and concentrated solar 
in particular.
    I think this is the most exciting, sustainable, energy 
concept that we have out there, huge potential. So I thank you 
very much, Mr. Chairman, for holding this hearing and look 
forward to hearing from our distinguished panelists.
    The Chairman. Thank you very much.
    I think, since this may take us a little time to get 
through all the witnesses, I am going to take off my jacket. I 
urge all the witnesses or panel members to do the same, so that 
we don't get too hot around here.
    The beginning of this hearing is going to be Greg Nelson, 
who is with PNM. He is the person who is in charge of this 
recent proposal that has come out for a request for proposal. I 
asked if he would go first before the other witnesses and sort 
of frame the issue and indicate to us what has led PNM and the 
other utilities to this point of looking at this particular 
technology, this concentrating solar power technology and what 
they anticipate going forward with this.
    So, Greg, thank you very much for being here on short 
notice. Please go ahead and give us an overview on this, and 
then we will call on each witness.
    Our normal practice here in the committee is to give each 
witness 5 or 6 minutes to summarize the main points they think 
we need to know. We will include any statements you would like 
in the record in full, but I think that is the most useful 
thing. Then after we hear from all witnesses, we can ask some 
questions.
    So, Greg, go ahead.

   STATEMENT OF GREG NELSON, DIRECTOR, UTILITY SERVICES, PNM 
                   RESOURCES, ALBUQUERQUE, NM

    Mr. Nelson. Thank you, Senator.
    Senators, it is a pleasure and an honor for me to be here 
today to represent PNM, Public Service Company of New Mexico, 
to talk about our plans for solar power. We firmly believe that 
solar power is very important not only to our company, to our 
State, but also to the citizens of the United States.
    With that, I would like to tell you a little bit about our 
RFP and the process that led us to issuing this RFP. Back mid-
year of last year, we initiated a multi-utility study with the 
Electricity Power Research Institute as the project manager for 
that effort. EPRI engaged solar energy experts, engineering 
firms in the likes of Black & Veatch and Nexant, to support 
that effort.
    We also had several Federal partners in that project that 
included the Department of Energy, Sandia National Labs, and 
NREL. We also engaged a State partner in terms of the New 
Mexico Energy, Minerals, and Natural Resources Department, and 
we also included environmental stakeholders in the process.
    The multi-utility study, as I said, was headed up by EPRI 
with PNM as the initiating partner. Other utilities involved in 
that process were Xcel Energy and their affiliate SPS, El Paso 
Electric, Tri-State's Generating and Transmission, San Diego 
Gas and Electric, and Southern California Edison. The purpose 
of the study was to identify the most commercially viable solar 
technology for a central station solar plant located here in 
New Mexico.
    After an exhaustive study, the conclusion was that based on 
the status of the technology, solar trough was the most 
applicable technology and a technology that was cost effective 
enough to move forward with a large project. Secondary issues 
related to the study included appropriate siting criteria, 
looking at water constraints, as well as transmission 
constraints.
    Based on the results of that study, four utilities decided 
to move forward with a central station RFP. Those four 
utilities were PNM, SPS Xcel, El Paso Electric, and Tri-State. 
We have joined together because we believe, one, it is the 
right thing to do. The sum total of the four utilities 
represent the vast majority of the electric users here in the 
State. We believe that joining together for a large central 
station facility makes economic sense. It helps bring down the 
cost of the plant and, therefore, the cost to each of our 
customers.
    We, this week, issued an RFP for a facility in the range of 
211 gigawatt hours to 375 gigawatt hours. That range is 
equivalent to a facility without storage of approximately 110 
megawatts up to 195 megawatts. With 6 hours of storage, we 
expect that would go from 65 megawatts to 120 megawatts.
    Criteria that we have in place is that the facility must be 
located in New Mexico. We believe, according to NREL data, that 
we have the second-best solar resource in the Nation, and we 
want to take advantage of that for our customers and for the 
citizens of New Mexico. We issued the RFP, like I said, this 
Monday. We are giving respondents a couple of months to respond 
to it.
    We hope to have a PPA, a power purchase agreement, 
negotiated and in place by the end of this year, and we hope to 
have a facility online by the end of 2011. That will not only 
help us meet our renewable energy RPS requirement, it will also 
help us bring clean energy to the citizens of New Mexico.
    Senator Domenici. What will be ready by 2011?
    Mr. Nelson. We hope by the end of 2011 that we will 
actually have a plant online and generating.
    Senator Domenici. Delivering?
    Mr. Nelson. Delivering power to our customers. Yes, sir. 
Fully commercial by the beginning of 2012.
    The Chairman. Very good. Did you have any more detail you 
want to give us at this point?
    Mr. Nelson. I would be happy to open it up to questions. 
But we are putting it out on an energy purpose or on an energy 
basis, where we will be purchasing the energy off of that 
project along with the renewable energy certificates that go 
with it.
    The Chairman. Are you requiring as part of the RFP--one 
question that occurred to me--that the 6 hours of storage be 
built into the unit so that there will be storage capacity?
    Mr. Nelson. The RFP was formulated to be as flexible as 
possible to the vendors, looking for them to come up with 
creative ways to bring down the cost of energy as much as 
possible. We believe storage plays a large role in that. We 
have encouraged the RFP bidders to propose storage in there, to 
come up with a cost-effective level. But we do encourage them 
to look up to 6 hours of storage associated with the project.
    The Chairman. Pete, did you have a question?
    Senator Domenici. Yes. What is the nature of the property 
upon which the central plant would be located?
    Mr. Nelson. We did not specify properties, although we have 
had a number of interested stakeholders offer up their property 
for the siting of this facility. Again, we wanted to leave that 
up to the bidders, again, to give them the flexibility to come 
in with the most cost-effective project they can.
    Senator Domenici. Do you know in advance, having researched 
it, whether there will be right of way problems or right of way 
necessities that are going to have to be met?
    Mr. Nelson. The right of way challenges we expect to face 
will vary depending on the location proposed. As I am sure you 
are aware, right of way and transmission constraints here in 
New Mexico are very significant. So there are certain parts of 
the State that are tougher to get the power back from than 
others. When I say ``get the power back,'' I am talking to 
basically our load center, which here in New Mexico consists of 
the Albuquerque/Santa Fe area.
    Senator Domenici. Mr. Chairman, I am sure that given time 
we will be inquiring, but not today. We don't have enough 
preparation, but I think it is good that you brought them. It 
makes the hearing much more relevant because we are right in 
the middle of an event of significance to us. Thank you for 
that.
    The Chairman. Bernie, did you have some questions?
    Senator Sanders. I did. Mr. Nelson, did I hear you say that 
you thought, if things go the way you wanted, you could break 
ground inline and be producing electricity in 2011?
    Mr. Nelson. We hope to, if all goes well with our engaged 
partner--and we look at the ultimate person that we sign the 
PPA with as being a true partner in the development of 
renewable energy. We hope to break ground in the 2009, early 
2010 timeframe and have the project online by end of 2011, 
worst case early 2012.
    Senator Sanders. One of the exciting attributes of 
concentrated solar is the speed. In fact, I think Senator 
Domenici pointed out, purposely so, it is not a complicated 
technology. In fact, the generation aspect is traditional. It 
is what they do with coal and gas. The speed at which one can 
move these things, given the crisis that we face as a Nation, 
is one of the attributes of solar power. I think you have 
indicated that?
    Mr. Nelson. Yes, sir. As you may be aware, a number of the 
large solar firms have done solar prospecting here in the State 
and identified sites, have supply chains set up. So we expect 
that construction should take, for a facility of this size, on 
the order of a year and a half timeframe. So that, with their 
site lined up, with their supply chain in place, we believe 
that the 2011 timeframe is a reasonable timeframe.
    The Chairman. Thank you very much for being here and giving 
us that overview. Congratulations on moving ahead with this. I 
think it is a great project.
    [The prepared statement of Mr. Nelson follows:]

  Prepared Statement of Greg Nelson, Director, Utility Services, PNM 
                       Resources, Albuquerque, NM

                              INTRODUCTION

    Good morning Chairman Bingaman, Senator Domenici, Senator Sanders, 
and distinguished Members of the Committee on Energy and Natural 
Resources. Thank you for inviting me here today. I am Greg Nelson, 
Director of Utility Services for PNM Resources.
    PNM Resources is an energy holding company based in Albuquerque, 
N.M., with consolidated operating revenues of $2.4 billion. Our 
electric generation is primarily a mix of coal, nuclear, wind and 
natural gas. Through its utility and energy service subsidiaries, PNM 
Resources supplies electricity to 738,000 homes and businesses in New 
Mexico and Texas, natural gas to 470,000 customers in New Mexico, and 
electricity to numerous wholesale customers throughout the southwest. 
Its utility subsidiaries are PNM, TNMP and First Choice Power, a 
deregulated competitive retail electric provider in Texas. In November 
2006, we announced a Joint Venture with Cascade Investments for the 
purpose of long-term investment in both wholesale and retail 
electricity sales, electricity generation and energy trading.
    PNM Resources is committed to diversifying our generation. As 
Director of Utility Services, one of my main responsibilities is to 
oversee renewable generation, including wind, biomass, and most 
importantly for this hearing, solar, from inception to commercial 
viability for PNM Resources.

                                 SOLAR

    According to the National Renewable Energy Laboratory, New Mexico 
is one of the best solar resource capability in the nation. We firmly 
believe solar power is not only important to our company and to our 
state, but also to the US.
    In 2007, we initiated a multi-utility study that included Xcel 
Energy, El Paso Electric Company, Tri-State Generating and Transmission 
Association, San Diego Gas and Electric, and Southern California 
Edison. Leading this study was the Electric Power Research Institute, 
who engaged solar experts and engineering firms in the likes of Nexant 
and Black and Veatch. We had several federal partners in the project, 
including the Department of Energy, Sandia National Laboratories, and 
the National Renewable Energy Laboratory. We also engaged the New 
Mexico Energy and Natural Resources department and environmental 
stakeholders including Western Resource Advocates and the Coalition for 
Clean and Affordable Energy.
    The purpose of this study was to identify the most commercially 
viable solar technology for a central station solar plant located 
within New Mexico in the 2011 to 2012 timeframe. It was determined 
after an exhaustive study that, based on the status of current 
technology, solar thermal parabolic trough is the most applicable and 
cost efficient technology for a large project in this timeframe.
    Based on these results four utilities, PNM, Xcel Energy through 
their affiliate Southwestern Public Service Company, El Paso Electric, 
and Tri-State Generating and Transmission Association moved forward 
with a central station parabolic trough Request For Proposal (RFP). The 
sum total of these four utilities represents the vast majority of the 
electric users in New Mexico. We believe that joining together for a 
large central station facility makes economic sense; thus bringing down 
the total cost of the plant for each utility, and subsequently lowering 
the cost of providing solar energy to each of our customers.
    On June 30 we issued an RFP for a facility located within New 
Mexico in the range of 211 gigawatt hours to 375 gigawatt hours. That 
range is roughly equivalent to capacity of 110 to 195 megawatts for a 
facility without storage, and from 65 to 125 megawatts for a facility 
with six hours of thermal storage. We are expecting to enter into an 
energy only contract, i.e. no capacity payments, in which we also 
receive all renewable attributes.
    We believe storage will play a large role in any future solar 
facility. Consequently, we have encouraged the RFP bidders to propose 
up to six hours of storage, but allow bid flexibility for cost 
effectiveness.
    Our goal is to have a Power Purchase Agreement negotiated and in 
place by the end of 2008 and a solar facility commercially available by 
the end of 2011.

                               CONCLUSION

    Thank you for your time and consideration. I would be pleased to 
answer any questions you might have and I look forward to being of 
service in any way I can to this Committee.
Footnote
    The issue of time of use (TOU) rates was raised during the question 
and answer session. PNM does not currently have TOU rates for 
residential customers, whose usage typically drives utilities' peak 
loads. TOU rates are intended to pass real time pricing signals through 
to consumers, which allows them to make energy consumption decisions. 
Generation is typically dispatched on an economic basis meaning that 
cheaper sources of generation are initially utilized followed by 
increasingly more expensive sources. This translates to higher costs of 
energy during high usage periods. Consequently, TOU rates financially 
incent lower usage during these high cost times. Renewable energy 
resources that harness the sun's power typically align well with 
utilities' seasonal and daily load shapes, meaning that there is good 
correlation between solar availability and high use time periods. Solar 
plants produce the most energy during the summer months when energy 
demand is the highest, and less in the fall, winter and spring when 
energy demand is lower. With the implementation of TOU rates, the cost 
of solar generation will be compared with the higher cost generation 
that is online during high use times, thus making generation from solar 
resources more attractive.

    The Chairman. Yes, Senator Domenici.
    Senator Domenici. Could I just, for the record, make an 
observation about right of way? I think people might wonder if 
you and I worked awful hard to put together the Energy Policy 
Act, which includes a major section on right of way, how we get 
right of ways, when right of ways have run into a stone wall, 
so as to speak. You hear and I hear from some that we shouldn't 
have done that, that we shouldn't have provided a way to break 
the stalemate.
    I want to say that those who think that Republicans ought 
to be against eminent domain when you run into a wall, I was 
heavily in favor of the right of way that we put in. You can 
attest to that, and I still am. If there are any of you up here 
who are going to be complaining that we shouldn't have done 
that, I want you to know that the more you complain, the more I 
am for changing it.
    But I am for changing it to make it stronger because I 
think it is ridiculous for us to be holding up major projects 
because we have some ideological bent that States must control. 
We are in a crisis. We have got a big plant like this, and you 
have to cross State lines, and you have to find a right of way. 
I hope our section, which is really not very tough--we were 
pretty generous because we didn't want the bill to get killed 
on the floor of the Senate.
    So, it is there. It is no question that the commission has 
the ultimate authority, and I am sure you are aware of that. 
You would probably vote for it again if we had it again, 
wouldn't you?
    Senator Sanders. I think the point that you are making is 
everybody--you know, we can complain and moan and groan, but if 
we are going to go forward, we need to take bold action. That, 
by the way, is true with wind as well. In my State, I have to 
tell you, there is overall sentiment for wind. But people say, 
hey, we don't want to look at wind turbines.
    Sorry. If we are serious about breaking our dependency on 
foreign oil, we are all going to have to do something maybe 
that we are not 100 percent for.
    Senator Domenici [continuing]. It may save time.
    The Chairman. OK. Let me just briefly introduce the rest of 
our witnesses here.
    Charles Andraka is with Sandia National Labs. We appreciate 
you being here. He is going to give us an overview of this 
technology and how it compares with others.
    Fred Morse is with Abengoa Solar, headquartered out of 
Spain, I believe, but very much sort of a leading provider in 
this area.
    Mike Daly is right here with Mesa del Sol and is going to 
talk about their efforts to create solar power capability here 
at Mesa del Sol.
    Alex Marker is with Schott Solar, which, of course, is in 
the process of building their production or manufacturing 
facility in Mesa del Sol, and we are very excited about that. 
He is going to talk about what they see as the prospects for 
concentrating solar.
    Fong Wan is representing Pacific Gas and Electric, and they 
have been a leader in the use of solar energy technology. He is 
here from San Francisco. So we really appreciate him coming 
very much.
    Mr. Andraka, why don't you start off and give us 5 or 6 
minutes? Then we will just go down the line and hear from all 
of you, and then we will have questions.

STATEMENT OF CHARLES E. ANDRAKA, SANDIA NATIONAL LABORATORIES, 
                        ALBUQUERQUE, NM

    Mr. Andraka. Thank you. Good morning, Senators.
    My name is Charles Andraka. I am a distinguished member of 
technical staff at Sandia National Labs, and I have worked as 
an engineer in concentrating solar power, or CSP, for the last 
23 years.
    CSP, as you know, uses mirrors to concentrate sunlight to 
create an intense heat to drive a conventional engine or 
turbine. Why CSP? First of all, CSP is highly scalable. It is 
built with glass and steel, similar to our automotive and 
building industries. CSP makes grid-ready AC power because of 
the rotating machinery involved.
    CSP is proven technology with over 400 megawatts of CSP 
deployed and operating in the Southwest United States at this 
point. CSP can incorporate storage. This allows smoothing of 
short-term transients as well as shifting the peak to match 
utility needs.
    CSP can be hybridized to burn natural gas or other fossil 
fuels for firming capacity. CSP is efficient with a world 
record efficiency of 31.25 percent conversion of sunlight to 
grid-ready electricity in a commercial installation.
    I want to talk about the potential for CSP or why CSP now, 
why the big interest? First, the Southwest U.S. has an 
incredible resource. We like to call this ``the Saudi Arabia of 
solar energy.'' We have identified in easily reachable 
resources nearly 7 terawatts of generating capacity. That is 
about 7 times the current electric-generating capacity in the 
entire country.
    The second area is the renewable portfolio standards, 
particularly in the Southwest United States. There is a large 
amount of solar needed to meet these standards, and the ramp-up 
rate can be met with CSP technology as part of a renewables 
portfolio. This would be combined with wind, PV, geothermal, 
and hydro.
    Third is the current public interest in CSP. This is driven 
by the current energy situation as well as concerns about 
global warming.
    Finally, the DOE laboratories' development over the last 
few decades has led to an unprecedented technology readiness 
for deployment of these plants. This has led to a current 
publicly announced deployment plans of 3 to 4 gigawatts of 
power, and that is equivalent to 6 to 8 new coal plants. Many 
more plants are in the initial planning stages.
    I want to talk a little about the barriers to CSP 
deployment. The first is financial risk. As you know, these are 
large capital expenses rather than fuel costs distributed over 
the life of the plant. So there is financial risk up front, and 
there is technology uncertainty, particularly with the towers 
and dishes. The troughs have less of that uncertainty because 
of the deployed projects. The ramp-up to manufacturing at a 
high rate is needed to reduce the cost. So there is that 
chicken and egg syndrome.
    The second barrier is taxation policy. The capital expenses 
on these plants tend to be taxed as property. California, as 
well as other States, waives the property tax on these systems 
and is leading the way in this area. The longstanding 10 
percent ITC and other considerations level the taxation on an 
energy basis with conventional power generation. However, the 
30 percent ITC would help overcome some of the initial 
financial risk.
    The bottom line on the taxation policy is we need long-term 
financial policy stability for these plants to go forth. You 
have already mentioned the time it takes to permit. If the ITCs 
run out during that time, it is hard to get financing for these 
plants.
    The third area has already been mentioned, and that is 
transmission capacity. This is the greatest consideration we 
are facing when siting new plants. We find we are not in the 
energy generation business, we are in the transmission business 
when we are trying to site these plants. The capacity of a 
current transmission grid is much smaller than the plants that 
are proposed and on the books at this point.
    Senator Domenici. What is that?
    Mr. Andraka. The capacity of the existing transmission grid 
is much smaller than the plants that are already on the books, 
these 3 to 4 gigawatts worth of plants.
    Finally, the final barrier is the approval processes. The 
Federal, State, local, and utility processes are often 
cumbersome. There is nothing in place for the current onslaught 
of solar plants. The codes and standards need development. The 
local authorities are scrambling, trying to find a consistent 
code to apply to these plants because there is nothing out 
there like this.
    I want to talk a little about the laboratory role. The 
laboratories play a critical role in facilitating the rollout 
of the concentrating solar power technologies into the 
marketplace. We are working hand in hand with industry right 
now. We also continue to play a critical role in the 
development of advanced systems with lower costs and higher 
performance.
    We see a three-prong approach for laboratory involvement. A 
key effort right now is commercial development support, where 
we leverage the incredible laboratory experience to assist the 
commercial companies technically.
    The second area is supply chain development, where we need 
to identify and exploit synergistic supply chains, such as the 
automotive industry. Along with supply chain development is 
supply chain development of personnel. We need to increase our 
involvement with universities and increase our internship 
programs.
    A third area that the labs need to be involved in is 
revitalization of advanced development of CSP technologies. 
This leads to new technologies with step cost reductions, not 
just the manufacturing quantities. We need to do, as the 
laboratories of things industry doesn't even know they need 
yet. We have a significant track record over the last decade of 
identifying those areas, developing technologies, and those 
technologies are now being used by industry.
    In summary, CSP has the potential to meet a large fraction 
of our energy needs in a portfolio with other leading 
renewables. The easy-to-reach resources in the Southwest are 
capable of 7 times the current generating capacity of the 
United States. CSP leverages existing U.S. manufacturing 
capabilities. Current market drivers have led to unprecedented 
interest in CSP.
    Deployment acceleration requires improvements in taxation, 
regulatory, and approval processes and policies. The support of 
the national laboratories has been and will continue to be 
crucial to the success of commercial CSP projects. Continued 
industry support, supply chain development, advanced technology 
research, and stable policies will allow us, as a Nation, to 
take advantage of the tremendous energy resource identified in 
our own backyard.
    Thank you.
    [The prepared statement of Mr. Andraka follows:]

Prepared Statement of Charles E. Andraka, Sandia National Laboratories, 
                            Albuquerque, NM

                              INTRODUCTION

    Concentrating Solar Power (CSP) describes a suite of solar 
technologies that use mirrors and thermodynamic processes to develop 
grid-ready electricity. Mirrors on tracking structures concentrate 
sunlight, producing high temperatures, which then drive conventional or 
novel engine cycles that in turn drive a generator to develop 
electricity. CSP technologies do not depend on strategic or high-tech 
materials, but rather are based fundamentally on glass and steel 
structures. The collected energy can be stored as thermal energy--an 
inherent advantage of CSP over photovoltaic solar and wind electrical 
generation. While CSP technologies are not as recognizable as 
photovoltaic power (PV) technologies, there are nearly 450 MW of CSP 
generation currently operating in California and Nevada, with 
additional planned deployments of over 3000 MW in the Southwest United 
States.
    CSP has the potential to supply a large fraction of the energy 
needs of the United States, although prime generation sites exist 
primarily in the Southwest. Working in conjunction with other renewable 
resources established in other parts of the country, and with 
improvements to the grid infrastructure, the future of CSP in the 
nation's energy portfolio is indeed bright. The current cost of 
electricity generation by CSP trough plants is about $0.16/kWh. Other 
CSP technologies may produce lower cost electricity due to higher 
system efficiencies. With further technology development and increased 
deployment, the cost of CSP-generated electricity projected in several 
studies to reach $0.06/kWh. In addition, the high-temperature 
capabilities of CSP make possible highly efficient chemical processes 
that can lead to solar fuels production.
    The DOE national laboratories, specifically Sandia National 
Laboratories and the National Renewable Energy Laboratory (NREL), have 
played a crucial role in existing CSP deployments, and we continue to 
work closely with industry to optimize and improve the designs and 
plans for upcoming deployments. The historical and ongoing technical 
achievements at the laboratories have been and will continue to be a 
cornerstone of successful cost reduction, performance enhancement, and 
deployment success. Key laboratory-developed technologies are deployed 
to the field by industry. The test capabilities at Sandia are unmatched 
worldwide, and provide a great resource to industry partners.

                            CSP DESCRIPTION

    CSP converts the sun's energy into heat and then uses that heat to 
power an engine-generator unit. The sunlight is concentrated with 
mirrors--similar to concentration by a magnifying glass. The resulting 
heat is intense enough to create steam to drive a conventional turbine 
or to heat a working fluid in a smaller engine, similar to burning 
gasoline in an automotive engine. CSP technologies are large-scale, 
providing utility-scale generation of power, with near-term planned 
plant sizes ranging from 100 to 1000 MW. (A typical coal or nuclear 
plant may be 500-2000 MW.) CSP consists of three basic technologies: 
(1) parabolic troughs, (2) power towers, and (3) dish-engine systems. 
Each of these technologies uses a parabolic array of mirrors, on 
different scales, to create intense heat.
    CSP is already being deployed, with 384 MW of capacity in nine 
plants in California and a new 64 MW plant in Nevada. Combined, these 
plants represent more than 140 plant-years of commercial operation. The 
national laboratories have continued to develop the CSP technology and 
have also helped improve the deployed plants. In 1998, the nine plants 
in California increased their rated capacity from 354 MW to 384, in 
part because of performance and operations and maintenance improvements 
pioneered by the laboratories. Over the last two decades, new 
deployments have been limited by the relatively low cost of electricity 
generation by natural gas. The recent dramatic increases in fuel cost, 
coupled with the Renewable Portfolio Standards (RPSs) in some states, 
have driven renewed interest in CSP deployment. The addition of the 30% 
Investment Tax Credit (ITC), as opposed to the 10% level, offsets some 
of the financial risks inherent in initial scaled-up deployments.
    A key advantage of CSP is dispatchability (that is, the ability of 
a generating unit to increase or decrease generation, or to be brought 
on line or shut down at the request of a utility's system operator). 
Because the energy conversion process is a thermal action, the solar 
input can be supplemented in two ways. The first is through thermal 
storage, in which a working fluid is stored hot and then used when 
needed to drive the turbine. This process is very efficient, with over 
98% recovery. The second is that systems can be ``hybridized''.where an 
alternate fuel such as natural gas can be burned to supplement the 
solar collection. This method is not as desirable as storage, but it 
does present an option that photovoltaic and wind energy sources do not 
provide.
    A second advantage of CSP is the inherent ``low tech'' of the 
materials involved. The collection structures are typically steel or 
aluminum, with glass reflector surfaces. The resulting structures have 
been likened to ``a funny-looking car.'' Indeed, several industry 
partners who work with Sandia have already leveraged the manufacturing 
capabilities of the Detroit-area automotive companies, as well as other 
basic American manufacturing companies.

                        TECHNOLOGY DESCRIPTIONS

Parabolic Troughs
    The parabolic trough system is a line-focus mirror array, as 
opposed to a point focus system. At the focal line, a specialized tube 
carrying a working fluid (such as a thermal oil or a molten salt) is 
heated. The working fluid reaches temperatures in the range of 500C. 
The collected heat can then be stored or directly passed through a heat 
exchanger to generate steam for a conventional turbine.
    This technology is the most widely deployed CSP approach, and 
existing deployments help in obtaining funding and approvals for new 
installations. The state-of-the-art systems are solar-only (no 
storage), with an annual efficiency in the 12-14% range and a peak 
efficiency of about 16-18%. Typical plants in the past were sized under 
50 MW due to power purchase agreement limitations. The newest plant, in 
Nevada, is a 64 MW installation. Proposed plants for Arizona are as 
large as 280 MW with storage. The larger size plants bring down the 
cost of the electricity generated through economies of scale.
    Current trough research includes thermal storage development and 
testing, higher temperatures (which leads to higher performance), and 
lower cost designs. Key laboratory optical modeling and systems 
development approaches are helping industry to reduce costs without 
reducing performance.
    One key component of trough systems is the receiver tube, a glass 
and metal structure that includes some laboratory-developed sealing 
technology. The Schott Solar Company is planning to build a plant in 
Albuquerque to fabricate this critical component.

Dish Engine Systems
    Dish-engine systems consist of a tracking dish that concentrates 
sunlight to a single point, and a heat engine at that point which 
converts the intense heat to electricity through a rotating shaft and 
generator. Current designs center on a Stirling cycle engine, which is 
similar in many respects to automotive engines. Dish systems currently 
range from 3 to 25 kW capacity each, although larger systems are 
envisioned by some companies. Most companies currently developing dish 
systems intend to deploy fields of dishes, with aggregated capacities 
up to 1000 MW (for example, 40,000 25 kW dishes in one field). This 
deployment approach is seen as key to cost reduction.
    Because of the point focus at each dish, the dish system is capable 
of very high temperature operation, typically in the 800C range 
(glowing red to orange). These high temperatures lead to very high 
system efficiencies for conversion of sunlight to grid-ready 
electricity. The current world record solar conversion efficiency is 
31.25%, held by the Stirling Energy Systems 25 kW Dish-Stirling system 
located at Sandia National Laboratories. The annual efficiency of such 
a system is in the range of 22-25%.
    Stirling Energy Systems has announced two large power purchase 
agreements in California. The first is with Southern California Edison 
for the energy from a plant with 20,000 dishes producing 500 MW, with 
potential expansion to 850 MW. The second is with San Diego Gas and 
Electric for the energy from a 12,000-dish system producing 300 MW, 
with possible expansion to 36,000 dishes and 900 MW. With recent 
investment, the prognosis for successful deployment is very good.
    Current efforts in dish-engine deployment center on cost reduction 
and large-scale manufacturing. The role of the national laboratories in 
this effort is in technology transfer and design support. In 
particular, as non-solar entities are engaged to provide manufactured 
parts and systems, Sandia's experience is leveraged to be sure that 
solar performance is not compromised. Additional development is 
centered on alternate engine advancement that could lead to lower 
operation and maintenance costs. The large number of dishes deployed in 
single locations help ramp up the production rates, which also leads to 
lower costs.

Power Towers
    The power tower is also a point-focus technology that allows for 
higher temperatures than those in trough systems. In the tower system, 
a field of steerable mirrors reflects the sun's energy to a large point 
at the top of a tower, where a working fluid is heated and then either 
stored or directly used to drive a conventional turbine. A commercial 
power tower is likely to be sized in the range of 100 MW electrical 
output, although both smaller and larger plants have been proposed.
    Tower systems can directly generate steam at the receiver location 
to drive a turbine. Such plants, on a 10 MW scale, have been 
demonstrated in Spain, where they have achieved annual efficiencies in 
the 12% range. A second approach is to heat a molten salt working fluid 
to a higher temperature, then store this hot salt until the generation 
of electricity is needed. A small-scale pilot plant, operated in the 
1990s, demonstrated the feasibility of this approach. Larger molten 
salt plants are expected to lead to 18-20% annual efficiency. The 
higher temperatures of the tower systems make the possibility of 
thermal storage more economically feasible than with trough systems.
    Although no US power tower plants are currently in production or 
deployment, several US companies have recently announced plans to 
pursue and develop various power tower technologies. Additional 
research and development will concentrate on cost reduction of the 
tracking mirror systems (development which is likely to support all the 
CSP technologies) and on the development of robust, efficient receiver 
assemblies.

Storage
    Thermal storage of energy is unique to the CSP technologies, and it 
represents a significant advantage over other intermittent renewable 
technologies such as wind and photovoltaics. The large-scale storage of 
thermal energy is highly efficient, with over 98% recovery of stored 
energy. (Compare this to the battery storage of electricity, typically 
in the 60-70% range.) In addition, the storage containment equipment 
and fluids are quite cost effective compared to batteries, and they are 
more environmentally benign.
    The thermal storage uncouples the collection and generation phases 
of the CSP cycle. Energy can be collected throughout the day, with 
actual generation of electricity deferred until needed (for example, 
evening peak periods). With enough storage, CSP technologies will be 
able to provide baseload (continuous, around-the-clock) power 
generation in the future. In the shorter term, storage can firm up 
capacity during peak parts of the day as well as shift the generation 
to better match the utility's needs. Some utilities (for example, 
Arizona Public Service) have indicated they will not consider solar 
technologies without storage, as their peak period extends well into 
the evening. Other utilities do not see the need for storage in the 
immediate future, but begin to see the need as renewables reach toward 
20% of the regional generating capacity. The use of substantial storage 
will allow CSP to provide greater than 20% penetration in the electric 
generation arena.
    Trough and tower technologies are well suited to molten salt 
storage, a technology demonstrated in the 1990s on the Solar 2 pilot 
plant in Barstow, California at a 10 MW electric generation level. The 
demonstrated systems used a nitrate salt (which is essentially 
fertilizer) to collect and store the heat. Sandia National Laboratories 
is presently examining salts with the potential for a lower melting 
point (reduces parasitic loads and losses) and a higher operating 
temperature (improves total system efficiency). Sandia is also testing 
components and materials for durability in long-term exposure to the 
salt working fluids.

                           DEVELOPMENT NEEDS

    The current public interest, high energy prices, and state 
renewable portfolio standards are driving unprecedented interest in CSP 
technologies. Deployment proposals and plans, as well as private 
investment in solar technologies, have grown exponentially over the 
past few years. More than 3000 MW of known Power Purchase Agreements 
(PPAs) are now on the books, with many more reported to be in progress. 
These deployments are investor-driven, so risk must be minimized to 
support return on investment. The national laboratories are continuing 
to play a key role in technology deployment and personnel training. The 
accumulated knowledge and experience in the laboratories is being 
leveraged through partnerships, Cooperative Research and Development 
Agreements (CRADAs), and other mechanisms. This leveraging helps the 
commercial sector deploy effective technologies and minimize the waste 
of capital investment. However, the laboratories also need to revive a 
research and development role that will develop next-generation systems 
with the potential to meet long-term cost targets.
    Support and development needs lie in three key areas. First, 
continued technical support of near-term commercial deployments is 
needed to leverage the DOE investment in CSP development. Second, 
supply chain development is necessary to bring US industry capabilities 
to bear on this key strategic resource. Third, the laboratories must 
continue advanced development, leading the CSP technologies to more 
cost-effective solutions that bring us to mainstream power generation.
    Industry technical support has been and continues to be the 
cornerstone of the laboratory involvement with CSP. Tools, methods, and 
technologies developed at the laboratories are directly responsible for 
the feasibility of the proposed deployments, as well as for ongoing 
improvements of operational systems in the field. The CSP personnel 
base at the laboratories has been very stable when compared to other 
missions of the laboratories, providing a continuity and experience 
base unmatched anywhere in the world. We have demonstrated an ability 
to provide significant value to industry partners during design, 
development, testing, and qualification phases of these technologies. 
However, there are limited ``experts'' in the solar field, so the rapid 
expansion of CSP firms has led to a severe shortage of engineers with 
solar experience. Working hand-in-hand with the laboratories has proven 
a viable method to add to the ``solar expert'' ranks. Sandia National 
Laboratories has also made use of its expertise in other areas of the 
laboratory, including manufacturing, failure analysis, materials 
research, Supervisory Control and Data Acquisition (SCADA) system and 
controls development, information security, and systems engineering. 
With the large planned deployments, this aspect of CSP development is 
reactive to industry needs.
    Supply chain development provides for a transition of US 
manufacturing capabilities to these new technologies. The CSP 
technologies are presented to potential cross-cutting suppliers to 
develop a manufacturing resource for use across the CSP spectrum. This 
approach allows the leveraging of existing US nonsolar suppliers, 
particularly in the automotive sector, rather than reinventing the 
manufacturing wheel. This approach has proven successful in several 
areas for the Stirling Energy Systems team. The engine is being 
``productionized'' by a Detroit engine production firm. Very 
significant enhancements have been proposed that will reduce the cost 
of the engine, increase reliability, and improve the performance 
potential. There are unique capabilities in American industry, 
developed for other sectors, which will impact all areas of the CSP 
designs. Supply chain development also includes development of solar 
engineers through development of university programs and curricula. 
This aspect of CSP development must be cooperative with industry to 
leverage both laboratory and industry experience.
    The laboratories must revitalize a thrust in advanced development 
for CSP technologies. Rapid deployment and substantial private 
investment make the CSP industry partners focused on near-term sales 
and deployments. Thus the laboratories must continue to develop next-
generation systems, components, and tools. Industry is neither able to 
take on the risk of advanced development nor the distraction it would 
inject into the deployment process. Although industry has proposed 
approaches that will initiate large deployments, laboratory technology 
breakthroughs will lead to cost reductions that will make CSP 
technologies cost-competitive with conventional fossil-fuel power 
generation. The laboratories need to focus on development of disruptive 
technologies that will impact the cost and performance of CSP systems. 
Increases in system performance (efficiency) will directly impact 
electricity generation costs because the majority of the cost in these 
systems is in the collection apparatus (steel and glass). The 
laboratories must be proactive in the development of advanced 
technologies.
    The laboratories have often developed new approaches that industry 
did not anticipate. These approaches often become part of the baseline 
technology that industry is prepared to deploy. Sandia has developed 
closed-loop tracking sensors and algorithms that substantially reduced 
the assembly accuracy requirements of dish systems. Rather than 
``perfect'' installations, the closed-loop sensors and algorithms allow 
the system to learn and adapt to any imperfections, resulting in a 
substantial reduction in installation costs. Sandia-developed mirror 
facets have a substantially higher accuracy than prior ``commercial 
grade'' facets, and for about the same price. This development has 
changed the entire design paradigm for point-focus systems, as the 
improved performance has a substantial effect on the cost of 
electricity generated. These improvements are now entering the 
parabolic trough arena as well: Sandia-developed heat pipe receivers 
demonstrated a 20% improvement in system performance on one Dish-
Stirling system. Further development is expected to bring this 
disruptive technology to the market. Systems models, tools, and 
development hardware have led to a better and more realistic 
understanding of system performance and costs. Spin-off technology and 
algorithms from Sandia's Advanced Dish Development System (ADDS) are 
being incorporated into the near-commercial products of Stirling Energy 
Systems, Infinia Corporation, and Eurodish. Sandia's new ``TOP'' 
(Theoretical Overlay Photographic) alignment system for troughs has 
demonstrated the benefit of optical alignment of existing trough 
plants, and it provides a tool to economically perform the alignment.
    The high temperatures possible with the point focus systems (dishes 
and towers) make possible high-temperature chemical processes for the 
development of transportation fuels. Several processes have been 
proposed and are under development for splitting water using high-
temperature processes, creating a reliable and cost-effective stream of 
hydrogen. Similar processes can be used to split CO2 into CO 
and O2. The CO can then be easily combined with hydrogen to 
create liquid fuels, which can then be distributed using the existing 
fuels infrastructure. The CO2 could be supplied from 
sequestration at coal plants or, in the long run, through atmospheric 
scrubbing.

                          CSP MARKET POTENTIAL

    CSP technologies are enjoying unprecedented interest and 
development, both in the US and worldwide. This interest is driven by a 
variety of factors creating something of a ``perfect storm.'' Respected 
US and international companies are entering the CSP field, and 
significant private investment is flowing into CSP. In the US, there is 
significant solar resource in the Southwest states, primarily in areas 
with otherwise undesirable land.

Market Drivers
    A variety of drivers have led to the current unprecedented 
commercial interest in CSP. The first is the Renewable Portfolio 
Standards (RPSs), primarily in the Southwest states, that mandate 
certain significant percentages of electricity generation must come 
from renewables. Although wind power has made significant deployments 
driven by the RPSs, utilities particularly like solar because of the 
match of the generation profile to the load profile. Therefore, as 
renewables have started to provide a notable fraction of the energy in 
some regions, the utilities have desired to balance wind generation 
with solar generation.
    The second driver is the rapid and recent increases in fuel costs 
for conventional power generation. This factor is particularly 
applicable to natural gas plants, which were installed as ``peakers'' 
when natural gas was abundant and cheap just a few years ago. Currently 
the costs of CSP generation are very competitive with peak natural gas 
generation, even at relatively small deployment levels.
    Third, the cost of all energy, especially gasoline, has driven 
public sentiment and support for solar energy. Not only is solar seen 
as a stable, US-grown energy source, but it is also ``green,'' 
satisfying additional public sentiment concerning global warming and 
greenhouse gasses. The extraordinary public interest is demonstrated to 
me each day as I field numerous calls from the media and private 
citizens.
    Finally, the investment by DOE and private industry over the last 
20-30 years has provided a level of technology readiness suitable for 
significant investment in large deployments. Although technical and 
financial risk is still apparent, the technical risk has been reduced 
through the laboratory and cooperative projects, demonstrations, and 
technology development. Modern design, manufacturing, and analysis 
tools applied to CSP allow rapid movement from concept to feasible 
hardware while reducing costs and risk.

Solar Resource
    Presently, CSP technologies require approximately 6 acres per MW of 
installed capacity, compared to non-tracking PV at nearly twice that 
requirement. This translates to a 500 MW plant using about 5 square 
miles of desert land. CSP technologies require ``direct normal 
insolation,'' which is a measure of the brightness of the light coming 
directly from the sun, rather then reflected off clouds and sky. 
Therefore, CSP technologies work best in clear, dry environments like 
the Southwest United States. Figure 1* shows the tremendous resource 
available in the southwest states of New Mexico, Arizona, California, 
and Nevada, with some areas in Colorado. Obviously not all of this land 
is available for CSP deployments.
---------------------------------------------------------------------------
    * Figures 1-4 have been retained in committee files.
---------------------------------------------------------------------------
    An NREL study filtered this data to exclude land already in use, 
environmentally and culturally sensitive land, and land with 
significant slopes. The remaining lands were only considered when 
contiguous areas were greater than 10 km\2\ (or 4 mi\2\) and a solar 
resource over 6.75 kwh/m\2\/day. Figure 2 shows the filtered data. If 
the minimum direct normal considered is 6.0 kWh/m\2\/day, a still very 
good resource, considerable additional land becomes available, 
particularly in the State of Utah.
    Although the vast majority of prime land has been filtered out, 
there are still more than 53,000 mi2 of land available for CSP 
projects. Table 1 shows a breakdown of potential land, filtered as 
noted, on a state-by-state basis. This analysis shows an available 
resource that is 7 times larger than the total nameplate generating 
capacity of the US electric grid. These data and maps are available 
from the Renewable Resources Data Center at NREL. 



CSP Cost
    Renewable resources are best compared on the basis of ``Levelized 
Energy Cost'' (LEC). This is the present value of the total cost of 
building and operating a generating plant over its entire economic 
life, which is then spread across all the energy generated during the 
life of the plant, resulting in an average cost per kWh of energy 
produced in present-day dollars. CSP plants do not have ongoing fuel 
costs, which represent a significant fraction of the LEC of electricity 
from conventional fueled plants. However, the CSP plants are highly 
capital intensive, essentially buying 20-30 years of fuel up front in 
the form of collection equipment. Therefore, the LEC of CSP energy is 
highly dependent on financing and tax structures, as well as the rate 
of production of the equipment being fielded. The value of CSP is 
impacted by the cost, but also by environmental considerations that may 
or may not have a financial value, such as carbon footprint. Policies 
in this area can impact the value of CSP substantially. The cost of 
conventional generation is influenced by the current high cost of 
fuels, which also helps the relative value of CSP.
    Figure 3 shows the anticipated LEC reduction for CSP projects 
compared to the cumulative deployment of CSP projects. This projection 
is taken from the Western Governors' Association (WGA) Solar Task Force 
Summary Report of January 2006.\1\ This model uses a trough plant with 
6 hours of thermal storage as a surrogate for all CSP technologies, and 
includes continuation of the ITC. Significant reductions in cost are 
expected through manufacturing improvements resulting from the sheer 
volume of deployed concentrators. However, significant supporting 
policy and financial assumptions are included as noted in the figure.
---------------------------------------------------------------------------
    \1\ Report available at: http://www.nrel.gov/csp/troughnet/pdfs/
kearney_wga_overview.pdf.
---------------------------------------------------------------------------
    Private industry is leading the way on current deployments. As 
expected, the exact terms of the contracts with the utilities are 
closely held secrets, so it is difficult to obtain accurate current 
costs of CSP generation. However, the 2003 Sergeant and Lundy report is 
an excellent resource on the prognosis for cost reduction of trough and 
tower systems.\2\
---------------------------------------------------------------------------
    \2\ Sergeant and Lundy LLC Consulting Group, ``Assessment of 
Parabolic Trough and Power Tower Solar Technology Cost and Performance 
Forecasts'', Chicago, IL: NREL/SL-5641, October 2003.
---------------------------------------------------------------------------
    This report is scheduled to be updated to include modern technology 
improvements and financial considerations, and extended to include the 
dish-engine systems.
    The current LEC for trough plants is estimated at $0.16/kWh. 
Industry experts have indicated that near-term deployments can be 
expected to produce an LEC in the $0.12/kWh range (DOE semi-annual 
review conference, Austin TX, April 2008). Further technological 
developments and very large deployments are needed to reach the 
predicted $0.06/kWh range. Several trough manufacturers have also 
indicated that the near-term deployments planned are highly dependent 
on a stable ITC policy.
    The contract price for Stirling Energy Systems dish-system 
electricity is also a closely protected corporate secret. However, if 
one reviews current policy in California, it is clear that the base 
price for these near-term plants is likely at or below $0.10/kWh.\3\ 
The high efficiency of the dish-engine technologies makes $0.06/kWh a 
feasible target. Again, the LEC is strongly impacted through large 
deployments leading to highly automated manufacturing. In addition, 
successful early deployments will lead to more favorable financing 
terms for later deployments, similar to the pattern seen in trough 
deployments.
---------------------------------------------------------------------------
    \3\ California CPUC Resolution E-4118 Adopting the 2007 MPR (Market 
Price Referent), 4 October 2007. Document available at: http://
docs.cpuc.ca.gov/published/Final_resolution/73594.htm.
---------------------------------------------------------------------------
    No large tower projects in the US are far enough advanced to 
evaluate modern costs. However, the Sergeant and Lundy report indicates 
that towers can reach the range of $0.055/kWh. Towers have the inherent 
advantage of simple storage combined with higher temperatures than 
troughs, leading to higher efficiency and therefore lower cost.
    The current energy environment is encouraging substantial interest 
in CSP. More than 3000 MW of deployment has been announced in the 
Southwest United States, and additional large deployments are in the 
planning and exploratory stages. Table 2 lists the publicly announced 
deployments planed for the Southwest US. In the near term, we expect an 
ITC extension would facilitate these deployments and accelerate the 
cumulative deployment of CSP in the United States. 



    Figure 4 shows the expected impact of ITC extensions on the near-
term deployment of CSP technologies, based on NREL projections 
published in the 2008-2012 Multi-Year Program Plan.\4\ These plants 
take a number of years for design and development, permitting, and 
financing. Thus the importance of a stable, long-term taxation and 
credit policy cannot be stressed enough.
---------------------------------------------------------------------------
    \4\ Department of Energy Solar Energy Technologies Program, Multi 
Year Program Plan, 2008-2012, April 2008. Plan available at: http://
www1.eere.energy.gov/solar/pdfs/solar_program_mypp_2008-2012.pdf.
---------------------------------------------------------------------------
    In summary, the cost of CSP is likely to be competitive with 
conventional generation processes. The cost reductions will come 
through a combination of technology improvement (performance 
improvement), design for manufacture (cost reduction through design), 
volume manufacturing (cost reduction through automation and stable 
factory orders), favorable financing (through investor confidence) and 
equitable taxation (recognition that the capital investment is 
comparable to fuel investment in a conventional plant). In the short 
term, the ITC will promote deployment to accomplish these cost 
reductions.

Market Barriers
    While we enjoy an unprecedented renewal of interest in CSP, there 
remain several market barriers. If these barriers can be addressed, CSP 
deployments will accelerate more rapidly, moving the balance of our 
energy infrastructure toward a sustainable domestic resource.
    The first barrier is financial risk. CSP plants are not consumer 
items; rather they are very large industrial complexes. The up-front 
cost is high, and it is paid back over long periods of successful 
operation. The lack of large deployments, particularly in dishes and 
towers, leads to uncertainty and therefore a higher cost for financing 
these projects. As plants are deployed, the financial risk is reduced, 
and the cost of financing is proportionally reduced. The current very 
high interest in troughs in part results from the ability to finance 
these projects based on the success of the over 400 MW in the Southwest 
United States. This is one area where the ITC can significantly reduce 
the cost of the plant to offset the high cost of financing due to the 
perceived risk.
    Similarly, taxation policies impact the financial feasibility of 
CSP plants. The high amount of capitalization results in a significant 
tax burden when compared to conventional-fuel power plants. A state 
policy to exempt these plants from property taxes will help level the 
playing field, making CSP competitive with conventional technologies.
    As we work with companies in planning large deployments, we find 
that available transmission capacity is a much larger consideration 
than land cost. Despite high public interest in renewable energy, the 
public tends to be very opposed to new transmission capacity. A good 
example is the Sunrise Powerlink, proposed by San Diego Gas and 
Electric. Current transmission capacity can handle the introduction of 
the 300 MW Stirling Energy Systems dish-engine power plant in the 
Imperial Valley. However, the proposed extensions will need the Sunrise 
Powerlink, which is currently opposed by several activist groups. 
Beyond California, if we anticipate the Southwest United States 
supplying CSP-generated power to large portions of the country, 
substantial changes to the nation's electrical grid will need to be 
considered. Any new large-scale transmission lines will also face 
challenges in ensuring minimal environmental impact.
    Many of the proposed plants are on federal government land, 
primarily BLM land. The permitting process for these lands, though 
necessary to protect various national interests, is a cumbersome and 
slow process. The shear size of these plants, several square miles 
each, presents unique environmental approval challenges that must be 
considered in detail. Streamlined permitting and approval processes for 
lands in the ``CSP hotspot'' could accelerate development and 
deployment.
    BLM recently announced a two-year freeze on new solar projects on 
BLM land while they study environmental impacts.\5\ This freeze forces 
the consideration of environmental impacts to be performed in series 
with other site considerations, rather than in parallel, effectively 
delaying new installations by another two years. A coordinated federal 
streamlined permitting process could significantly shorten the process 
leading to deployment, rather than the current patchwork approval 
process that adds significant delays.
---------------------------------------------------------------------------
    \5\ Frosch, Dan. ``Citing Need for Assessment, U.S. Freezes Solar 
Energy Projects,'' New York Times, 27 June 2008. http://
www.nytimes.com/2008/06/27/us/27solar.html
---------------------------------------------------------------------------
    Beyond the land-use permitting, site development and planning takes 
years in order to meet many state and local requirements. The 
technologies are substantially different than conventional technologies 
from a utility perspective. This is particularly true with systems that 
do not incorporate storage. Large intermittent sources have not been 
previously addressed by the utilities, so there is substantial 
uncertainty. There are no applicable codes and interconnect standards 
for such systems. All these significant technical and policy issues 
slow the approval process and add financial uncertainty to the project 
developer. We need sustainable energy policies, economic conditions, 
and permitting processes that motivate private investment in new 
technology deployment.

                              CONCLUSIONS

    CSP has the potential to meet a very large fraction of our nation's 
energy needs, starting with grid-based electricity and expanding to 
transportation fuels production. The resource available in the 
Southwest United States on easily useable land is nearly 7 TW, or 7 
times the current electrical generation capacity of the US. Cost-
effective and efficient storage sets CSP technologies apart from key 
intermittent renewables of photovoltaic solar and wind. This is 
especially important as intermittent renewables begin to generate 
significant fractions of our national energy supply.
    CSP leverages existing US manufacturing capabilities. The 
fundamental building blocks of CSP are glass and steel, materials 
common to the automotive and building industries.
    Current market drivers--including global climate change, high fuel 
prices, and technology readiness--have led to unprecedented interest in 
CSP technologies. A number of US and International companies are poised 
to deploy large CSP plants in the Southwest United States.
    Significant deployment acceleration requires policy improvements, 
including a stable taxation and regulatory environment and streamlined 
land use and interconnect approvals and policies.
    The support of the national laboratories has been crucial to the 
technical success of CSP projects, and the laboratories' role will not 
diminish with the advent of large deployments. The partnerships 
developed between the laboratories and industry have been extremely 
valuable in the feasibility and success of new CSP deployments. 
Although the technical support of the deployments is critical, the 
laboratories also need to promote supply chain development leading to 
cost reduction, and they need to enhance long-term research and 
development of disruptive and advanced technologies that will 
dramatically impact the cost and performance of future plants.
    Continued industry support, supply chain development, advanced 
technology research, and stable policies will allow us as a nation to 
take advantage of this tremendous energy resource identified in our own 
backyard.

    The Chairman. Thank you very much. Appreciate that.
    Mr. Morse, go ahead and give us your view from Abengoa.

     STATEMENT OF FREDERICK H. MORSE, SENIOR ADVISOR, U.S. 
                OPERATIONS, ABENGOA SOLAR, INC.

    Mr. Morse. Senators, thank you very much for inviting me to 
speak to you today on this very promising technology, CSP.
    My company, Abengoa Solar, which has its U.S. headquarters 
in Denver, designs, builds, owns, and operates CSP plants 
around the world and would love to do the same in the United 
States.
    As you mentioned, Americans are very concerned about their 
future. Energy prices are going up to unexpected levels, fears 
of recession, job losses, climate change issues. This CSP 
technology, as you have all acknowledged, is right in front of 
us, and it could be part of an energy, economic, and 
environmental solution. I think it should play a major role in 
our energy portfolio.
    Charles mentioned what CSP is. I won't comment on that. But 
I will say it is bursting at the seams to come out on the 
Southwest utility market. Over a dozen companies are spending 
their own money to develop this technology without a Federal 
penny. Eight of them have signed contracts for over 4,500 
megawatts, signed contracts. That could be instead of 4 to 6 
coal plants or gas plants. These 4,500 megawatts could power 
over a million homes.
    The utilities--and we just heard from PNM there, and we 
will hear from PG&E--they want to add CSP to their mix now, not 
tomorrow--now. The resource potential of the Southwest, your 
State and others, dwarfs the Pacific Northwest hydro resource. 
If it were oil, we would be racing to develop this. It can play 
a major role for the Southwest and the United States.
    I can't resist. So I have to say there is one thing that 
stands in the way, and that is the immediate 8-year extension 
of the ITC. I will comment why. If that doesn't occur, New 
Mexico will lose. I think the facility that we heard about 
today will not get built. The Southwest will lose, and America 
definitely will lose. Without the 8-year extension, this 
industry will be stopped dead in its tracks.
    With the extension of the ITC, I will state that there are 
no major barriers--there are problems--no major barriers for 
CSP to enter the utility market. Of course, there are other 
things the Federal Government can do--help with transmission, 
BLM we heard, siting issues, R&D support. Those are all in my 
written testimony.
    The contracts signed to date, those 4,500 megawatts, are 
over $20 billion of investment. The investors are ready. They 
are ready to make the investment. But without the ITC, they 
cannot and they will not.
    You asked about how long it takes to build a plant. I think 
building the plant, a year and a half is a good number. But 
permitting the plant could take another year or a year and a 
half. You have to win a contract with, say, PNM and negotiate 
that. You have to have a little pushing because the banks will 
say what happens on the day you start the plant up if the 
transformer blows and you need to buy another one? So that is 
the reason for the 8-year extension.
    The economic benefits from unleashing CSP are impressive. 
Every dollar of tax credit will be multiplied many times by the 
investment to the $20 billion I mentioned--purchases from 
suppliers, wages from new jobs, and the flow through commerce 
associated. Those contracts on the books, none of which will 
happen--none of them will happen. My company has one, and we 
can't get it financed without the ITC--is 25,000 construction 
jobs. The manufacturing jobs, like the Schott plant and others, 
will all happen with the ITC.
    I am going to close with an example. We negotiated a 
project with Arizona Public Service for a 280-megawatt plant 
with 6 hours of storage. This plant will deliver energy well 
past sunset while the peak is still there. It will power 70,000 
homes. It is carbon free. It is on figure 6 in my written 
testimony. APS sees this as the first of many. If they can't 
get this plant built, they will go back to natural gas, I 
predict.
    So America has an enormous domestic resource. It is ours. 
It is carbon free, and it is forever. We have to develop it 
because it creates jobs that cannot ever be exported, and the 
resource adds security of supply with diversity and so on. But 
we are risking that.
    So my last word is CSP industry is ready with its money. 
Wall Street is ready with its money. The States are ready with 
their subsidies. All that is missing, I am sorry to say, is the 
Federal extension of the ITC, and I hope maybe you two can find 
a way to work out a deal. But if not, the industry is going to 
be severely hurt.
    Thank you very much.
    [The prepared statement of Mr. Morse follows:]

    Prepared Statement of Frederick H. Morse, Senior Advisor, U.S. 
                    Operations, Abengoa Solar, Inc.

    Senators Bingaman, Domenici and Sanders, thank you for inviting me 
to speak to you today about one of America's most promising renewable 
energy technologies--Concentrating Solar Power, or CSP. My company, 
Abengoa Solar, develops, builds, owns and operates CSP plants around 
the world and is also planning trying to do this in the United States.
    Americans are deeply concerned over their future, with oil and 
natural gas prices rising to unexpected levels, with fears of a 
recession and loss of jobs, with reports that the concentration of 
carbon dioxide in the atmosphere continues to increase, threatening 
many adverse consequences. Importantly, the EPA has identified 
electricity generation from fossil fuels as the single largest source 
of domestic CO2 emissions.
    But there is an exciting clean energy technology right in front of 
us that can become part of the solution to America's energy, economic 
and environmental challenges. The solution is Concentrating Solar Power 
and it can and should be a part of our national energy portfolio going 
forward.
    CSP refers to a family of technologies that convert the sun's 
thermal energy into steam to generate electricity with zero carbon 
emissions. Some CSP technologies concentrate the sun and convert it 
directly into electricity via an engine or photovoltaics located at the 
focal point. Figure 1* shows the major CSP technologies.
---------------------------------------------------------------------------
    * Figures 1-6 have been retained in committee files.
---------------------------------------------------------------------------
    CSP is most cost effective at utility scale (hundreds of MW) and 
some CSP technologies can provide electricity, on demand, when it is 
needed, and some can even produce electricity well into the night to 
meet summer peak demand. Some CSP technologies are commercially 
available and have been working reliably for over 20 years in the 
Mojave Desert, where they have not failed to meet a single hour of peak 
demand since they came on line--with the help of favorable tax 
policies. Figure 2 shows the output from a portion of the 354 MW CSP 
Plant.
    It can be seen that when combined with natural gas to firm the 
output, these plants had an on-peak capacity factor of over 100% every 
year of their operation. Most current CSP plants now firm their output 
using thermal storage to become ``pure'' solar plants. Utilities are 
familiar with CSP and wish to add it to their energy mix. Not tomorrow, 
but today.
    CSP is a power system straining to burst onto the southwest utility 
scene. Well over a dozen companies are developing CSP plants using 
private--not Federal--funds, and eight have signed contracts with 
utilities which total over 4,500 MW--equivalent to 4 large coal or 
natural gas plants that will not have to be built. These 4,500 MW of 
CSP plants will be able to power over one million homes. Because CSP 
has attributes that utilities prefer (generates steam, comes in large 
sizes and is dispatchable), more utility contracts are certain as the 
cost of CSP declines relative to fossil-fuel generation.
    The solar-rich Southwest can look forward to the day when a solar-
powered plant, not natural gas-fired or coal-fired generation, will be 
a utility's first choice--irrespective of whether or not renewable 
energy mandates exist. Because the CSP resource potential in the 
Southwest exceeds the hydro potential of the Pacific Northwest, CSP can 
become a major driver of the economy of southwestern U.S. and play a 
major role in meeting the region's future energy needs and 
environmental targets.
    As the rays from the sun enter the earth's atmosphere, a portion 
are scattered and absorbed by the moisture and particulates in the 
atmosphere while some reach the surface directly. The unscattered 
portion is called Direct Normal Insolation. Because CSP technologies 
can only use the direct radiation, it is essential to know where the 
level of that radiation is highest as that will be the best place to 
locate a CSP plant, assuming the site meets other requirements. The 
National Renewable Energy Laboratory has, over the past years, used 
satellite date to map the solar resource in the United States. Figure 3 
shows the distribution of Direct Normal Insolation in the southwestern 
U.S. The darker the color, the higher the solar radiation and the 
better for locating a CSP plant.
    NREL then used GIS methodologies to filter out places where a CSP 
plant could or should not be sited, such as cities, waterways, 
environmentally sensitive areas, and mountains and slopes greater than 
1 %. The resulting map is shown in Figure 4.
    While most of the areas with high direct normal solar radiation 
have been removed, what remains are the ``sweet spots'' for CSP in the 
United States. The remaining areas represent the upper limit because 
additional environmental restrictions may exist or be placed on their 
use for CSP plants. Figure 5 shows the area and potential for CSP 
generation on the areas shown in Figure 4.
    It can be seen that there is ample land and potential in the 
southwest to provide as much electricity as is needed and desired. And 
the technology to use this resource, CSP, exists and is poised to enter 
the utility market in large amounts.
    However, one federal legislative action is essential if this new 
wave of solar power plants is to happen: the immediate 8 year extension 
of the 30% federal Investment Tax Credit or ITC. Without an 8 year 
extension, this rapid growth of Concentrating Solar Power will not 
occur and New Mexico loses, the southwest loses and America loses. Even 
the 4,500 MW of signed contracts will be voided since their pricing is 
contingent on the long-term availability of the ITC. Without an eight 
year extension of the ITC now, the CSP industry will be stopped dead in 
its tracks. Only the U.S. Congress can extend the ITC, and this is 
something that has proved surprisingly difficult.
    Why must the ITC be extended now? Because during the time since the 
power purchase contracts for the 4,500MWs of CSP plants have been 
signed, the price of steel has increased dramatically and similar 
increases have been noted in the other commodities used for CSP plants. 
Until the ITC is passed, financing is not possible and therefore it is 
not possible to purchase the components needed to build the CSP plant. 
Furthermore, the financial markets continue to be troubled, making debt 
financing more difficult and costly. The longer CSP projects have to 
wait, the more difficult it will be to adhere to the terms of existing 
contracts and to finance these projects.
    Aside from the extension of the ITC, there are no major barriers 
facing CSP. If the eight-year extension is enacted, CSP will burst onto 
the utility market. Of course there are other things that the Federal 
government could assist the CSP industry with. For example, the BLM 
should adopt a friendlier land policy for CSP, a process that is has 
begun, thanks to an impetus provided by EPAct.2005 The BLM is now 
identifying large tracks of federal land that are well suited for 
siting CSP plants and will perform generic environmental studies. This 
process needs to move along rapidly and with input from the CSP 
industry, and needs to be adequately supported by the Congress. The 
Federal government should provide stronger leadership in transmission, 
as the lack of new transmission lines is affecting needed electricity 
growth in many parts of the Nation. This same inattention affects 
concentrating solar power as prime CSP areas lack connection to the 
growing load centers in the southwest. Furthermore, the long time it 
takes to build such lines will limit the rate and extent of the growth 
of CSP in the market, underscoring the need for greater action in this 
area. Finally, the CSP R&D program at DOE has been underfunded for many 
years and that needs to be corrected to support the innovation needed 
to help bring the cost of CSP electricity down.
    The ITC could be thought of as a switch that if turned to ON and 
left ON for eight years, it will open the CSP market and trigger the 
building of CSP plants. The contracts signed to date with the utilities 
will require an investment of around $20 billion, all private sector 
dollars. And the investment community is ready to provide the needed 
debt and equity to finance CSP plants, but only if the ITC is extended 
for at least eight years.
    The reason for the minimum of eight years is because of the long 
time it takes to complete the many essential steps to build a large 
power plant. These steps begin with finding and gaining control of a 
suitable site, obtaining regulatory approval on the power purchase 
agreement, completing the permitting process necessary to begin 
construction of the plant, building the plant and allowing some time 
for delays in any of these steps. This process is described in a 
presentation made at a briefing on 16 May 2008, at the request of 
Senator Sanders office.
    CSP plants being bid today would be built in the 2012 and 2013 time 
period. If developers are to achieve cost reductions from 2 or 3 
utility procurement cycles, only an eight year extension is effective.
    The power point presentation titled ``Why does it take so long to 
build a CSP plant'' is attached to provide additional information on 
the steps and time needed to bring a CSP plant into commercial 
operation.*
---------------------------------------------------------------------------
    * Presentation has been retained in committee files.
---------------------------------------------------------------------------
    The economic benefits from the unleashing of CSP are impressive. 
Every dollar of tax credit claimed by the ITC will be multiplied many 
times over in terms of the private capital investment, purchases from 
suppliers, wages for new jobs, and local and regional flow-through 
commerce. The job creation is significant. Approximately 25,000 
construction jobs are associated with the 4,500 MW under contract. In 
addition, the building of new factories and assembly facilities for the 
main components will add more jobs and offer products for export to 
help our balance of trade. As natural gas is displaced by CSP, 
CO2 emissions are reduced and, in time, its clean energy 
could be available for plug-in hybrid cars, thereby helping to reduce 
our dependence on foreign oil.
    The following analyses provide additional details on the economic 
benefits form both CSP plants and related manufacturing:

   ``Economic, Energy, and Environmental Benefits of 
        Concentrating Solar Power in California.'' April 2006 by L. 
        Stoddard, J. Abiecunas, and R. O'Connell Black & Veatch
   ``New Mexico Concentrating Solar Plant Feasibility Study.'' 
        February 9, 2005 Prepared for the New Mexico Energy, Minerals 
        and Natural Resources Department by the University of New 
        Mexico Bureau of Business and Economic Research and Black and 
        Veatch. The study may be found at: http://
        www.emnrd.state.nm.us/ECMD/RenewableEnergy/documents/
        NMCSPdraft-final-rpt-02-05. pdf
   ``The Potential Economic Impact of Constructing and 
        Operating Solar Power Generation Facilities in Nevada: Draft 
        Preliminary Report.'' July 8, 2003 by R. Keith Schwer and Mary 
        Riddel of the Center for Business and Economic Research 
        University of Nevada, Las Vegas

    I want to close with a specific example of CSP's potential:

          If the ITC is extended, Abengoa Solar will build the 280MW 
        Solana CSP plant in Arizona that is now under contract. Under 
        this contract, the energy will be sold to Arizona Public 
        Service, powering over 70,000 homes with carbon-free energy. 
        The schematic in Figure 6 below shows the Solana CSP plant. 
        This plant will create 2,000 construction jobs and about 85 
        permanent jobs in a town with 68% of its population living 
        below the poverty level. And this plant is likely to the first 
        of many that APS will build to meet its growing demand for new 
        electricity. However, Solana will not be built unless the ITC 
        is extended soon. Instead, APS will likely turn to natural gas, 
        adding to the climate change issues associated with fossil fuel 
        generation. I attach for the record, a letter sent to Senator 
        Cantwell, explaining why Solana can not be built unless the ITC 
        is extended now.

    American cannot afford to ignore one of its greatest domestic 
energy resources, especially if it is carbon free and can never be 
depleted. America cannot afford to ignore developing that energy 
resource, especially if it will create jobs that can not be exported. 
American cannot afford to ignore that resource, especially if it adds 
to security of supply and to the reliability of its energy system. But 
we risk doing just that.
    CSP developers are investing their money to develop CSP projects, 
Wall Street is ready to provide debt and equity, the states have 
invested in CSP with their incentives--the missing and critical 
investment is that of the federal government via the ITC. Please extend 
it now.
    Thank you for your attention. I would be pleased to answer your 
questions.
                Attachment.--Letter to Senator Cantwell
                                                       APS,
                                             Abengoa Solar,
                                                     June 25, 2008.
Hon. Maria Cantwell,
511 Dirksen Senate Office Building, Washington, DC.
    Dear Senator Cantwell, Thank you for your long standing support for 
the commercial solar power industry. Two months ago, you and Senator 
Ensign successfully amended the Senate's housing stimulus bill to 
include language that extended several alternative energy tax 
incentives, most notably I.R.C. Section 48's Investment Tax Credit for 
solar investment. The vote, 88-8, clearly demonstrated the support for 
incentives for alternative energy. Your strong leadership on this issue 
is greatly appreciated.
    This letter is in response to your request for information from 
Abengoa Solar about the impact of the failure to enact an eight-year 
extension of the 30% investment tax credit (ITC) for solar property 
would have on the proposed Solana plant to be built near Gila Bend, 
Arizona. The Solana plant is a 280 MW Concentrating Solar Power (CSP) 
plant that is scheduled to be brought on-line in 2011. Abengoa Solar, 
Inc, a U.S. corporation, will own and operate this plant. It will 
require over $1 billion in capital investment, will create about 2,000 
construction jobs and about 85 full time jobs to run the plant once it 
is built. In addition, if Solana were to be built, Abengoa Solar would 
also build an industrial mirror factory that would create some 150 jobs 
in the Southwest.
    The output from this plant will be purchased by Arizona Public 
Service (APS) under a Purchase Power Agreement and will provide the new 
capacity needed to meet the state's growing demand and to respond to 
its requirements for clean energy generation. This plant will use 
thermal energy storage to allow the plant to continue operation for six 
hours after the sun has set, allowing APS to meet the summer cooling 
demand well into the evening hours.
    Because the Solana plant is a partnership between APS and Abengoa 
Solar, both companies are responding to your request.
    A long-term extension of the 30% solar ITC is needed to allow 
Abengoa Solar to provide the electricity at a price that APS is able to 
pay. If Congress fails to enact an 8-year extension of the ITC in the 
coming weeks, the simple answer is that banks and equity investors will 
be unable to provide financing for this plant and it will not be built. 
In the absence of a long-term extension of the ITC, APS would more than 
likely rely upon a natural gas fired plant to meet the demand that 
could otherwise be met with clean, solar power from Solana.
    The delay and failure to pass the extension of the ITC has other 
consequences. Since the price for the electricity from the Solana Plant 
was fixed several months ago, the price of steel has increased by over 
30%. As this plant will use as much steel as would be needed to build a 
second Golden Gate bridge, this also risks the economic viability of 
the plant. Further delay will only exacerbate this situation. To be 
very clear, if the ITC is not extended soon, the Solana project will 
not be built because the financing will not be there. The same fate is 
very likely for the almost 4,000 MW of other CSP plants with signed 
contracts, based on the availability of the 30% ITC. The total loss of 
investment is close to $20 billion and the loss in related jobs is well 
over 20,000.
    Additionally, we need to be clear that the Solana plant is 
relatively far along in the development process and that many of the 
other proposed CSP plants that together represent our national hopes 
for utility-scale CSP are further back in the development process and 
will require the proposed eight years to qualify for the project 
financing.
    We have followed each of the back and forth efforts by the House 
and the Senate to extend energy tax incentives. You know that the 
American public is watching this as the price of fossil fuel supplies 
continue to rise and they want to see a long-term national vision that 
will transition us towards sustainable clean energy. The failure of 
Congress to find a way to pass this extension is jeopardizing U.S. jobs 
and economic activity. We hope some compromise can be found that would 
allow this extension to pass very soon so Solana can be built and its 
benefits to the economy and environment can be realized.
            Sincerely,
                                            Santiago Seage,
                                                CEO, Abengoa Solar.
                                                Don Brandt,
                                       CEO, Arizona Public Service.

    The Chairman. Thank you very much.
    Mr. Daly, go right ahead. Tell us Mesa del Sol's 
involvement in all of this.

    STATEMENT OF MICHAEL DALY, MESA DEL SOL, ALBUQUERQUE, NM

    Mr. Daly. Thank you, Mr. Chairman, Senators. It is an honor 
to be here today.
    My name is Michael Daly. I am with Forest City, a national 
developer, and we are developing a project called Mesa del Sol. 
I am here really to speak on behalf of economic development 
primarily because I think we have got a good pulse on what is 
going on.
    When we came to New Mexico about 3 or 4 years ago, our 
first job was to create high-paying jobs for New Mexicans. We 
wanted to build a sustainable community with some affordable 
housing and also concentrate on creating a community of 
continuing learning. We think the solar industry has created a 
unique opportunity here in New Mexico, which could be mirrored 
in other southwestern areas.
    We started with a design. All of our buildings are LEED 
certified. We are doing Energy Star on the housing, and we are 
doing some unique water-harvesting ideas. But with the help of 
Sandia--and I look at my colleague Chuck, who taught us what 
concentrated solar was 3 years ago in his lab, and they have 
been a tremendous resource--we have gone further.
    We are working with the labs on creating the first smart 
grid at Mesa del Sol, so houses can actually follow up or down 
their electricity depending upon time of day and peak 
generation needs. We are looking forward to having about a 40-
house nanogrid at Mesa del Sol smart houses as a demonstration 
project. We have 38,000 houses we can leverage over time to 
roll on a very aggressive program.
    We are also working with Bob Galvin and the labs on a 
perfect energy circuit at PNM and looking at transmission and 
how we run our switches to create a more efficient system. Now 
the base electric cost for Mesa del Sol is $180 million. It 
costs $280 million for the perfect system. It is not that we 
are going to spend the extra $100 million, but we can provide 
for the future, and PNM has been very helpful with that.
    But probably most important, we have learned with the 
Sandia people and through the delegation as well as those in 
the State is that Mesa del Sol has an ideal site for a 
concentrating solar site, which we hope to respond to the 
upcoming PNM RFP.
    That is actually controlled by DOE. It is a 1-by-5-mile 
buffer that we have been working with DOE and the base on, as 
adjacent to the base and part of the load center. So we will be 
responding to the concentrating solar RFP, hopefully with a 
development partner. We are talking to some today. We think it 
is terrific to have that model project here in Albuquerque. It 
works economically, and it is the best site for PNM.
    But on the economic development front, what we did 3 years 
ago when we came here is we started to canvass solar companies. 
We went to trade shows. We went to sites, and we really 
searched out--and my colleague Dr. Marker and I had dinner and 
a lunch in Colorado 3.5 years ago talking about Schott, which 
was really the beginning of that deal.
    The solar industry is a terrific industry for jobs. They 
are high-paying jobs. New Mexico is well suited for it. They 
have got the university. They have got the labs, and there is a 
natural propensity to do that type of research.
    I will say it started with Advent Solar, which the 
delegates were very helpful with, which we appreciate, which is 
up producing solar modules itself in an 87,000 square foot 
facility here. That is 300 jobs.
    I want to take a moment to note that the biggest problem is 
solar engineers, and we are working with a project at UNM to 
try and get some engineering programs. Forest City has 
currently endowed a chair in digital and film media. We are 
going to endow a chair and work with Schott to create education 
programs for solar engineers. So I think that cornerstone of 
educating engineers to create the solar is really important so 
that my colleagues, for all of us to get the students to do 
this technology.
    The Schott Glass was literally the shot heard around the 
world. After the Schott Glass deal, our inquiries from solar 
companies went from approximately 1 a month to 10 to 15 a 
month. It is interesting in terms of where the economy is, our 
inquiries and our canvassing relative to actual industries that 
are expanding has really compressed in the past 2 months, but 
the solar business is going crazy.
    Mirror companies, receivership companies, balance 
assistance, photovoltaic companies are all looking in the 
Southwest and looking to expand. But a lot of them are hesitant 
to make major commitments. I am pleased Schott has made the 
commitment to make a plant until the ITC has passed.
    So we are looking forward to continuing the economic 
development. We are looking forward to creating our cost. The 
Sandia lab is important, and university education is important.
    Fred has mentioned some economics, but I just wanted to 
give you some broad-brush things. About 0.1 percent of our 
electric is generated by solar nationally today.
    Senator Domenici. One tenth of 1 percent?
    Mr. Daly. One tenth of 1 percent. So it is a relatively 
small amount of our power.
    Senator Domenici. That is both the kind that we are talking 
about today and the other kind?
    Mr. Daly. PV.
    Senator Domenici. All kinds of solar?
    Mr. Daly. All kinds of solar. So it is a miniscule amount. 
To the extent that we went to 2 percent of our power, or 
approximately 6,600 megawatts, which is close to what is on the 
books right now, we would create more than 1,000 permanent 
jobs, 25,000 construction jobs.
    The real rollout that I find important is the Schott 
factory could generate enough receiverships for that, or 
Schott's competitors, that is another 1,400 permanents jobs. 
For the mirror company that has got to come here to do the 
manufacturing, that is another 1,400 jobs.
    You know, with a multiplier effect, that winds up being 
40,000 jobs that could be created by just doing this 5,000 
megawatts of electricity, which is a tremendous economic boost 
not just in New Mexico, but nationally. There are photovoltaic 
companies in Vermont, in Boston, in Massachusetts, all over the 
United States that are waiting for this to expand.
    The total construction dollars to create this 5,000 
megawatts is about $40 billion in construction, which really 
would just multiply through our economy. That is a why we 
should do it from an economic development point of view. We 
would certainly be proud to have at Mesa del Sol a 600-acre 
concentrating solar plant that is located adjacent to the base 
of the research facility. We think it would be a tremendous 
coup as the radiation values are there.
    What do we need to do? Everyone has talked about the ITC 
credit. I would like to mention something, which is a unique 
opportunity for DOE to get involved. DOE currently consumes 15 
megawatts of electricity a day, has a 15-megawatt load here. 
But when you go to DOE, they are hamstrung, from a policy point 
of view, that they can't enter into a long-term power purchase 
agreement. So they, themselves, cannot enter into and 
facilitate a renewable power contract for 30 years because they 
are hamstrung with the current procurement rules.
    Secondarily, their proxy for what they can purchase that 
power for is today's fuel prices with no adjustments into the 
future. So I find it an opportunity as much as a detriment to 
have DOE take a leadership role in here and perhaps in the 
energy bill create ways that the Federal Government, DOE, can 
be like the utility company and agree to pay a premium.
    While the power is maybe priced at 6 or 7 cents a kilowatt 
hour now, perhaps it would have to be 13 or 14 cents a kilowatt 
hour, which is detrimental for the military budget. Whereas 
DOE, they are the model of--as we were saying, I think it would 
be good if they took it on themselves. The load is right here, 
and there is a possibility of them participating as well, as 
well as other major military installations in this solar belt.
    Education. I think creating centers of excellence and 
getting funding for specific photovoltaic programs at our 
universities, our resource institutions is terrific.
    Ultimately, I have to say, as a developer, as an 
entrepreneur who wants to see things happen, there is an 
instance--as Fred mentioned, there is a problem getting 
permitting. The DOE controls one of the many sites in New 
Mexico to make one of these solar facilities a reality. It 
would be a shame if DOE was actually the impediment in creating 
a longer schedule versus being the facilitator to make one of 
these things going.
    I do want to say that I appreciate the delegation's 
offices. I have visited them several times. We wouldn't be as 
far in both education and knowing what we have to do, and some 
of these things are already in the works, but I wanted to say 
these are things that can really facilitate solar jobs, which 
is our main mission.
    Thank you.
    [The prepared statement of Mr. Daly follows:]

   Prepared Statement of Michael Daly, Mesa del Sol, Albuquerque, NM
                 mesa del sol concentrated solar plant

   Site control of a 1200 acre flat site adjacent to Mesa del 
        Sol.
   With a 800 megawatt generation projected deficit, PNM has 
        authorized a feasibility study which will examine the 
        feasibility of building a concentrated solar plant in New 
        Mexico by 2011.
   PNM has established a joint venture with EPRI to investigate 
        developing a plant.
   Last year New Mexico State Legislature put in place 
        significant incentives which will subsidize the cost of 
        producing electricity via a concentrated solar trough plant.
   Sandia Labs is the leading concentrated solar trough 
        research institution in the United States and is located 
        immediately adjacent to the Mesa del Sol site.
   Mesa del Sol is part of the largest load center in the state 
        and transmission to the grid is readily available on site.
   Schott Glass, as a new employer in New Mexico, is a leader 
        in receiver tube technology
   Mesa Del Sol has Among the best solar Resources in the 
        United States.
   The Mesa Del Sol project would have minimal Environmental 
        Impacts
   Kirkland Air Force Base could buy green power from the 
        plant.

    The Chairman. Thank you very much.
    Dr. Marker, tell us your perspective from Schott Solar.

    STATEMENT OF ALEX MARKER, RESEARCH FELLOW, SCHOTT NORTH 
                  AMERICA, INC., ELMSFORD, NY

    Mr. Marker. Senators, thank you for the opportunity to 
speak with you today about concentrating solar power and the 
vital role CSP can play in securing America's energy 
independence, creating jobs right here in New Mexico, and how 
CSP can become an economic engine, driving sustainable growth.
    In just 1 hour's time, the amount of energy that the Sun 
shines upon the Earth's surface exceeds the energy consumption 
of all mankind in an entire year. In the 5 minutes I will be 
speaking with you today, the Sun shining upon the United States 
alone contains enough energy to satisfy Americans' power demand 
for an entire month. Nowhere is that potential greater than 
right here in the desert Southwest and especially in New 
Mexico.
    CSP is a proven technology. The SEGS plants in the Mojave 
Desert have been operating for more than 20 years providing 350 
megawatts of power, generating clean electricity to hundreds of 
thousands of homes in California. Just last year, 6-megawatt 
Nevada Solar One facility went online producing clean 
electricity for Nevada.
    There are plenty of high-value resources available right 
here in New Mexico for CSP generation. In fact, the entire 
State's electrical needs could be satisfied by the Sun. Energy 
can be even exported to other regions.
    But all of this is at risk without a firm commitment from 
the Federal Government in the form of effective policy and 
long-term extension of the investment tax credit. The U.S. is a 
sleeping giant when it comes to solar energy. By extending the 
investment tax credit, this giant will awaken.
    According to independent analysis, there are approximately 
4,000 megawatts of CS power plants currently in planning or 
development stage. That is 4,000 megawatts that will most 
likely never be built without a long-term extension of the ITC. 
The industry needs the Federal Government's support to make CSP 
power generation competitive with that of traditional 
generation technology.
    What does effective Federal policy translate to? For one 
thing, the increase in solar energy adoption means an increase 
in jobs. It is forecast that if the ITC is extended, 62,000 
manufacturing and distribution jobs will be created in the 
solar industry directly as a result of increased adoption of 
renewable energy. Many of these jobs in the CSP arena.
    On top of that, there will be an increased demand for 
electricians, plumbers, engineers, potentially thousands of new 
jobs created each year. This is job growth for Americans by 
Americans for an industry that will benefit America.
    The company I represent, Schott Solar, is in the 
construction phase of a large manufacturing facility in 
Albuquerque. This plant will employ 1,500 people in the 
production of photovoltaics and receivers for the CSP power 
plants. Over the long term, Schott's investment in New Mexico 
will reach $500 million, and the economic impact is forecast to 
exceed $1 billion.
    This is just what one company is doing in one community. 
There are other companies undertaking similar large projects 
from Michigan to Oregon and many more that are ready to do so 
once a clear commitment from the U.S. Government is established 
in the form of a long-term investment tax credit.
    If the renewable energy tax credit expires, the impact next 
year will be more than 100,000 jobs either lost or not created, 
according to Navigant Consulting. Additionally, there will be 
more than $20 billion worth of investments that won't be made, 
and there is no doubt that this money and those jobs won't go 
overseas.
    Renewable energy is domestic energy. Domestic energy not 
only means jobs for Americans, but it means reducing our 
greenhouse emissions. It is something Americans want. According 
to a recent poll, 94 percent of Americans say that it is 
important for the United States to develop and use solar 
energy. Almost 80 percent feel that the Federal Government 
should make development of solar energy a major priority 
through actions such as extending the ITC.
    We have an opportunity today to address the challenge of 
global warming while growing our economy. All we need to do is 
harness the power of the Sun, and to do that, we need your 
support. Distinguished members of the Senate Energy and Natural 
Resources Committee, we sincerely thank you for your time and 
your consideration in this important matter.
    [The prepared statement of Mr. Marker follows:]

   Prepared Statement of Alex Marker, Research Fellow, Schott North 
                      America, Inc., Elmsford, NY

                                SUMMARY

   Concentrated Solar Power (CSP) represents a proven and 
        reliable technology.
   Solar energy is relevant for almost every country in the 
        world, especially the United States, where conversion of only 
        2.5% of the nation's usable area into solar farms would satisfy 
        the entire nation's energy needs.
   Investment in solar will lead to the creation of hundreds of 
        thousands of jobs (UC Berkeley).
   Energy produced from the sun by CSP benefits from stability 
        in costs, as there are no commodity priced raw material 
        requirements for fuel, only minimal (3 cent kW/h) operating 
        costs.
   By 2050, solar power could end U.S. dependence on foreign 
        oil and slash greenhouse gas emissions (Scientific American).
   With the necessary investments, energy produced by the sun 
        could become cost competitive with fossil-fuel based 
        technologies by 2020 (NREL).
   The United States has the opportunity today to address the 
        challenge of global warming while creating jobs and growing the 
        economy.

           A PROVEN RESOURCE WITH ALMOST LIMITLESS POTENTIAL

    In just one hour's time, the amount of energy that the sun shines 
upon the earth's surface exceeds the energy consumption of all of 
mankind in an entire year. In the time it takes you to read this 
document, the sun shining upon the US alone contains enough energy to 
satisfy America's power demands for several months. Energy from the sun 
is an integral part of a renewable energy portfolio. A portfolio that 
would strengthen our nation's economy, secure our energy independence, 
and provide clean energy to meet the ever increasing demand.
    That potential is greatest in the desert southwest, and especially 
New Mexico.
    The idea of harnessing the power of the sun is not new. Documents 
dating back to Archimedes have shown theories on how this can be 
accomplished. Yet it hasn't been until recently that major strides have 
been made on mass-producing solar technology, and not until the last 
few years that technological innovations have been made to dramatically 
reduce costs.

                        CONCENTRATED SOLAR POWER

    Concentrated Solar Power (CSP) plants are utility-scale power 
plants that generally produce greater than 50 MW of power, enough to 
supply the energy needs of thousands of homes. In one variation of CSP, 
called parabolic trough, hundreds of trough-shaped parabolic mirrors 
are continuously adjusted to face the sun. These parabolic mirrors 
concentrate the sun's thermal energy onto receivers, located along the 
mirrors' focal points.
    The concentrated solar radiation increases the temperature of the 
thermo-oil Heat Transfer Fluid (HTF), flowing through the receivers, to 
approximately 750 F. This super-hot fluid is then used to turn water 
into steam, which drives a turbine, generating electricity. The 
capacity of these power plants is well suited for utility-scale power 
generation as the plant's peak efficiency matches peak demand 
requirements placed on the grid.

            RELIABLE AND PROVEN CLEAN ELECTRICITY GENERATION

    Over the decades, solar technologies have been reliably providing 
clean energy to tens of thousands of Americans. Photovoltaics have been 
in production for 50 years, and SEGS in the Mojave Desert, a CSP 
parabolic trough power plant, have been operating for more than 20 
years, providing 350 mega watts of power per year. Just last year the 
Nevada Solar One facility went online producing 64 mega watts of clean 
power.

                  UNITED STATES--A ``SLEEPING GIANT''

    The U.S. has at least 250,000 square miles of land in the Southwest 
alone that are suitable for constructing solar power plants, and that 
land receives more than 4,500 quadrillion British Thermal Units (BTU) 
of solar radiation a year. Converting only 2.5% of that radiation into 
electricity would match the nation's total energy consumption in 2006.
    According to the American Solar Energy Society: ``Generation from 
CSP technologies, especially those that can be augmented with thermal 
storage or hybridized with natural gas, is well matched with southwest 
load profiles, which tend to peak in the late afternoon and early 
evening.''
    ``States with suitably high solar radiation for CSP plants include 
Arizona, California, Colorado, Nevada, New Mexico, Texas and Utah. Even 
if we consider only the high-value resources, nearly 7,000 GW of solar 
generation capacity exist in the U.S. Southwest.'' (Jan. 2007)
    According to independent analysis, resource calculations show that 
just seven states in the U.S. Southwest could provide more than 7 
million MW of solar generating capacity--roughly 10 times the total 
U.S. generating capacity from all sources today.
    The following chart shows available resources in the desert 
Southwest (considering grade of less than 1 degree, and other necessary 
land conditions. 



    The DESERTEC model, which has been developed to supply solar energy 
to Europe, provides a realistic model in exporting energy. In the 
Desertec model, energy would be generated in Northern Africa and 
Southern Spain and then shipped to Northern Europe. A similar model can 
be adapted and applied to the Southwest of the United States, where 
states like Nevada and New Mexico export solar energy to northern areas 
of the U.S. and Canada.
    A key stumbling block in the US however, is in transmitting the 
energy produced in the Southwest to other regions. The need for a 
national ``smart grid'' is seen as essential in creating a network of 
energy produced by renewable energy. Even without the proliferation of 
renewables, many experts are in agreement that the nation must 
implement a ``smart grid''--as evidenced by the California rolling 
black-outs, the NorthEastern blackout of 2004, and the South Florida 
blackout of 2008.
    In a December, 2007 a report issued by Emerging Energy Research 
titled ``Wind Power Strategies in the US 2007-2015'' stated: ``CSP 
production in the US and Spain expected to reach 7500MW by 2020 enough 
to power 6.75 million homes''
    ``CSP is the fastest growing utility-scale renewable energy 
alternative after wind power, with up to $20 billion expected to be 
invested in CSP over the next five years.''
    The long-term potential for solar technologies is even higher, as 
represented by the following chart (figure 2)* from the Solar 
Wirtschaft (Germany).
---------------------------------------------------------------------------
    * All figures have been retained in committee files.
---------------------------------------------------------------------------
    Advantages of solar energy production are numerous. In addition to 
no carbon emissions, harnessing the energy from the sun pulls energy 
from a never-ending resource. The costs are fixed, and energy prices 
remain stable as there is no reliance on a fossil fuel. Solar is a 
complimentary technology to other forms of renewable energy, such as 
wind and biomass.

        MIDTERM: WHAT DOES IT TAKE TO MAKE CSP COST COMPETITIVE

    Many view solar technology to be cost-prohibitive, while this was 
true 20, even 10 years ago, thanks to innovations and improvements in 
efficiency from industry, the cost per kW/h is steadily decreasing. It 
is only through continued government support however, that the industry 
will continue to make investments in research and development, which 
will further reduce costs and bring them in line with electricity 
generation from traditional fossil-fuels.
    A chart (figure 3) for CSP technologies again shows parity within 
the next decade with key productivity sources in economy of scale, 
increase of efficiency and the development of storage technologies. 
Funding is again assumed for eight years through the extension of the 
ITC.
    Currently in the United States power from renewable energy sources 
accounts for less than 6.5% of the US energy consumption, of which 
solar is 1 %. However the US is showing one of the biggest growth rates 
with CAGR (compounded annual growth rate) of 36% from 2006--2011.
    In a conservative market scenario, the overall US PV market will 
reach 900 MW in 2012. Through an aggressive market scenario, the US 
market can more than triple, to almost 3GW of installed capacity by 
2012. The aggressive scenario assumes a long-term (8 year) extension of 
the investment tax credit. This extension will allow for sustained 
manufacturing capacity expansion, as evidenced by companies like 
SCHOTT, who is investing $500 Million in a solar technology production 
facility in Albuquerque, NM. Strong demand growth must continue with 
minor supply excesses causing large price declines in line with unit 
subsidy rate declines. The 3GW market in the US compares to a 7.6GW 
world market.

                         ENERGY COST STABILITY

    With oil prices currently exceeding $140/barrel (6/30/08), and 
energy prices correlating with the price of oil, the need for fixed-
price energy solutions is more important than ever. Solar represents 
fixed cost power generation. With more widespread deployment of CSP, 
through economies of scale and technological improvements, the costs of 
CSP power generation will continue to decrease. Currently, the cost to 
operate a CSP power plant is approximately 3 cents per kilowatt hour 

(NOT INCLUDING THE COST OF AMORTIZING THE CONSTRUCTION OF THE 

facility).
    The following chart (figure 4)--labeled Exhibit 1-1, shows CSP 
deployment as it relates to the cost of natural gas.
            effective legislation will push csp development
Investment tax credit
    There are key steps the Federal government can take to create a 
favorable climate for the deployment of CSP. First and foremost, a 
long-term renewal of the Federal Investment tax credit (ITC) is seen as 
an essential first step. Although the overall cost of the ITC extension 
is variable based on the amount of solar actually installed, 
independent analysis (GE Capital) has stated that the solar component 
(including PV) will most likely not exceed 2 billion USD over the 8 
years. When compared with the job creation and the billions of dollars 
in investment by private industry, the payback on the 2 billion should 
not be difficult to recoup.
    The following chart (Figure 5), labeled exhibit 1-16, shows how the 
ITC, along with other (global) legislation will spur development and 
deployment of CSP.

Federal Renewable Portfolio Standard (RPS)
    Many states, including New Mexico, have enacted Renewable Portfolio 
Standards (RPS') which state that by a certain time, a certain 
percentage of electricity either generated--or consumed--in a State 
must come from renewable sources. Some even go further down by 
mandating a renewable mix where a certain percentage must come from 
solar. The Federal government could enact similar legislation, which 
would signal to the CSP industry a clear commitment, which would enable 
long-term investment. As a comparison, states with RPS' currently have 
80% of the renewable energy projects in the pipeline compared to 20% of 
non RPS states (according to EER).

Feed in Tariffs (FIT)
    A current stumbling block for the development of CSP is in 
negotiating power purchase agreements (PPA's) with utilities, who buy 
the renewable energy and then distribute it to customers. The FIT 
model, originally developed in the US, and successful deployed in both 
Germany and Spain (see case-study following) would create a Federal 
incentive to purchase energy from renewable sources. Since CSP is a 
utility-scale generator, this would ease the constraints of the 
utilities who are under pressure to deliver power to the end customer 
at competitive rates, but also are obligated, in many areas to purchase 
energy from renewable sources (from the RPS).
    A national FIT is seen as one of the most effective means of 
rapidly growing the renewable energy market in the US.

Easing Land Management Restrictions
    There is a current moratorium placed on new solar projects on 
Federal lands as the environmental impact of CSP power plants is 
currently being studied. While the industry understands and recognizes 
the importance of such studies, stopping all projects while 
commissioning an environmental impact studies is perhaps too far 
reaching. A compromise should be developed that strikes a balance 
between renewable energy and stewardship for the environment.

Transmission
    Since CSP is currently not installed on a widespread basis, and the 
energy produced is therefore consumed in local regions--due to the 
extraordinary potential of the technology, a time will come when 
transmitting the energy to other regions will become necessary. In this 
regard, the Federal government can support utilities in creating a 
``smart grid'' that will enable such transmission over the network of 
utility owned transmission lines.

                NATIONAL, BI-PARTISAN SUPPORT FOR SOLAR

    A recent (June, 2008) study conducted by the independent polling 
firm Kelton Research, demonstrated the tremendous support solar energy 
has across America. 94% of Americans, representing individuals across 
all political affiliations and geographic regions, support the 
development and use of solar power. Additionally, approximately 75% of 
Americans support the extension of the ITC and almost 80% feel that 
solar should be a ``major priority'' of the Federal government. When 
asked which one energy source they would develop if they were 
president, most respondents chose solar over any other type of energy 
generation.

               TECHNOLOGICAL BREAKTHROUGHS ON THE HORIZON

    When speaking about electricity generation, you're speaking in 
costs. The cheaper the generation, the more widespread it will become. 
Critics of solar state that the energy produced is not cost-competitive 
with current methods, and it only works during the day.
    Through support from the Federal government, private industry, will 
most likely overcome key technical hurdles in the technology, which 
will further reduce costs. Currently, the Heat Transfer Fluid (HTF) 
breaks down if it exceeds approximately 750 degrees Fahrenheit. If a 
suitable replacement can be developed the potential exists to heat the 
fluid to higher temperatures, improving the efficiency.
    Additionally, in Spain, the first CSP plants that utilize molten 
salt storage units are currently being deployed. By storing the heat 
generated during the day, CSP plants could become a 24/7 operation 
without the need of a natural gas feed back-up.
    Other advancements in the technology can be made through advanced 
coatings on the receivers, lighter and cheaper materials used in 
construction of the parabolic trough mirrors, and other areas of the 
power blocks. These advancements can be made if the CSP industry knows 
that a market will exist to deploy and utilize the technology that can 
be developed.

          CASE STUDY: A MODEL FOR ECONOMIC DEVELOPMENT--SPAIN

    After an early start as a world leader in solar energy, the United 
States lags behind several countries in both solar energy development 
and deployment. However, global warming and rising prices for fossil 
fuel are causing the United States to consider how it can regain world 
leadership in the generation of solar energy. Overseas best practices 
offer proven models for how the U.S. can increase solar energy 
production. One of the leading examples may be found in Spain, where 
the government has undertaken aggressive initiatives that have made 
that country one of the world's solar power leaders. Not only have 
these initiatives helped increase the amount of solar energy generated 
in the country, but they have spurred the development of Spain's solar 
power industry as well proving to be an economic stimulus and creating 
jobs.
    There are some obvious reasons for Spain's leadership in solar 
power. For one thing, solar energy generation is simply the 
exploitation of one of the country's most abundant natural resources. 
As British and Scandinavian sun worshippers can attest, Spain enjoys 
more sunlight than any country in Europe. Yet, in many ways, this 
resource remained untapped until 2004, when the Spanish government 
issued Royal Decree 436, which made sweeping reforms to solar energy 
policy, creating a new system for renewable energy development and 
deployment, with its own regulatory framework.
    The decree ended a regime of small steps toward promoting the use 
of solar power and instead initiated the adoption of bold policies that 
would strongly encourage the deployment of solar energy. These policies 
included grid connection and tariff reform, promotion of large-scale 
concentrated solar power (CSP) plants and later, solar panel mandates 
for new and renovated buildings. Their initial goal was ambitious--30 
percent of the nation's electricity to be supplied by renewable energy 
sources by 2010.

                            GRID CONNECTION

    Grid-connection is critical to the development of renewable energy 
anywhere. In Britain, for example, the Labour government refuses to 
remove obstacles to grid-connection, and solar energy development lags. 
Without some form of guaranteed grid access, it is difficult for 
companies other than the grid owners to develop large-scale solar power 
plants, severely limiting the number of companies who can enter the 
market.
    In 2004, the Spanish government removed the economic barriers to 
grid-connection for renewable energy sources. With this single measure, 
large-scale solar power plants were guaranteed access to the 
electricity grid and a market was created for the solar energy 
generated at these plants.

                          ECONOMIC INCENTIVES

    Spain has made economic incentives, particularly feed-in tariffs, a 
key feature of its solar energy program. In 2002, Spain became the 
first European country to adopt a feed-in tariff of 12 euro cents for 
every kilowatt-hour supplied to the grid. In order to further 
accelerate the development of solar power the government passed a 
decree in 2004 that almost doubled the feed-in tariff for solar energy 
kilowatt hours, to 23 euro cents, and guaranteed these rates for 25 
years. Instantly, large-scale photovoltaic and CSP generation were 
transformed into profitable business propositions as the 23 euro cents 
per KWh tariff was made specifically applicable to 100 KW to 50 MW 
plants. To keep the ball rolling, in 2007, the subsidies were raised 
yet again to 27 euro cents per KWh.
    When combined with grid connectivity, these economic incentives 
made the development of solar energy in Spain practical. Planning and 
construction of solar generating plants in Spain accelerated, creating 
jobs and stimulating the economy.

                            LARGE SCALE CSP

    Though CSP is less well known than PV, since the 1980s CSP plants 
have reliably and cost-effectively generated large amounts of clean 
energy in California's Mojave Desert. Recognizing the tremendous 
potential that CSP offers geographic areas located in the world's 
sunbelt, Spanish policy essentially makes CSP fully equal to PV 
technology. With large areas that receive strong amounts of direct 
sunlight, Spain is very well suited for the development of CSP plants.
    At the end of this year Spain plans to start operation of its first 
commercial CSP plants. The first plant, Andasol 1, will be the first 
commercial parabolic trough CSP plant in Europe. It will have a half-
million square meter collector field and will be capable of supplying 
electricity to as many as 50,000 homes. This plant is the world's first 
to include thermal storage technologies that allow the plant to produce 
power at night. It does this by storing up to seven hours of energy in 
hot molten salt reservoirs. The heat in these reservoirs can be tapped 
to generate electricity after the sun goes down. Ultimately, this 
technology could enable solar plants to operate around the clock.
    The Andasol plants are only the beginning. As of early 2008, five 
other Spanish CSP projects were underway, with a total expected 
capacity of 190 MW. Spain's tremendous CSP potential recently led my 
company, SCHOTT, to invest approximately $28 million in a new parabolic 
trough CSP receiver production facility in Spain.

             SOLAR MANDATES FOR NEW AND RENOVATED BUILDINGS

    In addition to opening up the grid, providing aggressive tariffs to 
solar power generators and encouraging the development of both PV and 
large-scale CSP, Spain has undertaken another step towards a solar 
energy future. A new policy, introduced in 2006, mandates that all new 
and renovated buildings include either solar water heating systems or 
PV arrays. New homes must have solar heating systems capable of 
providing from 30 to 70 percent of their hot water, with the specific 
requirements to be determined by the building's location and expected 
water usage. These panels will not generate electricity, but they will 
help cut the demand for electrical power significantly. For non-
residential buildings, such as hospitals and shopping malls, the 
standard is different. They are required to have PV panels that 
generate a portion of their electricity. The Environmental and Housing 
Ministries expect these mandates to bring energy savings of 30 to 40 
percent for each building, and reduce carbon dioxide emissions by 40 to 
55 percent.
    In 2004 the Spanish government set a goal of 400 installed MW of PV 
and 500 MW of CSP by 2010. Currently, it seems likely that Spain will 
easily exceed these goals before 2010. By 2007, about 600 total MW of 
solar generating capacity were installed, with more projects under 
construction and scheduled for completion in 2008 and 2009. In fact, 
four of the 13 largest PV power plants in the world are in Spain. Two 
plants in Jumilla and Beneixama each produce 20 MW and each deploys 
more than 100,000 PV panels. The two other plants are a 13.8 MW 
facility in Salamanca and a 12.7 MW operation in Lobosilla.

                     LESSONS FOR THE UNITED STATES

    The Spanish experience offers important lessons for the United 
States, and especially the American Southwest, given that its climate 
is similar to that of Spain. The first and most important lesson is 
that without bold long-term policies, solar energy generation will only 
grow in fits and starts. Unfortunately, U.S. federal solar energy 
policy legislation has been short-term, with incentives periodically 
allowed to lapse, providing developers with no certainty that these 
incentives will be renewed or changed. This deters investment, and does 
not persuade the public that Congress and the Administration are 
serious about renewable energy policy.
    Solar power plants--like any power plants--are major commitments, 
expected to be operational for at least 30 years. These kinds of 
investments require long-term federal energy policies.
    For example, the U.S. tax credit now applies to a range of 
renewable energy projects and affords a 1.9 cents per kilowatt-hour 
benefit for the first 10 years of operation for a renewable-energy 
facility. It also lapses at the end of 2008. So projects--solar, wind 
and other renewables--languish while their developers await 
Congressional action.
    The U.S. could benefit from adopting other aspects of Spain's solar 
energy policy. If the U.S. instituted a national grid connection 
policy, developers would be better able to overcome the obstacles 
inherent to a federal system with multiple jurisdictions. Currently, 
these bureaucratic roadblocks slow down or completely stall the 
development of many large-scale solar energy projects. In addition, the 
U.S. could further spur solar energy development by mandating the 
installation of solar energy in residential or commercial buildings.
    The United States, and especially its desert Southwest, possesses 
great potential for rapid solar expansion if policies akin to those of 
Spain are adopted. Many government officials, utility executives and 
citizens in the American Southwest already recognize this, and are 
taking action to develop the region's abundant solar resources, despite 
federal inaction. The Western Governors Association has set an 
ambitious goal of generating no less than 8,000 solar MW by 2015, and 
has recommended many regulatory and other public policy changes to 
promote solar and other renewable energy development. Early this year, 
Arizona Public Service announced plans to build the 280 MW Solana 
Generating Station near Phoenix.
    Another lesson the U.S. can learn from Spain is that strong support 
for solar power provides many economic benefits. For instance, Spain's 
Ministry of Industry estimates that the solar and other renewable 
energy industries will create 200,000 new jobs by 2010.
    The United States has found itself behind in the deployment of 
important technologies before, and found ways to catch up and secure 
world leadership. However, if our country adopts renewable energy 
policies similar to Spain, we can catch up just as we did with other 
technologies. And catching up will not just help the U.S. move beyond 
the use of fossil fuels and reduce its greenhouse gas emissions. 
Despite not having solar energy policies as aggressive as Spain's, the 
Solar Energy Industries Association (SEIA) estimates that 314 megawatts 
of new solar were installed in the U.S. in 2007, contributing $2 
billion to the U.S. economy and creating 6,000 new jobs.

                   SOLAR ENERGY AS AN ECONOMIC ENGINE

    Solar energy is domestic energy. The economic engine created by a 
powerful solar energy policy is multi-faceted. The most powerful 
component of the strengthening in the economy is in job creation. The 
University of California Berkley estimates ``green jobs'' will reach 
one million in the United States by 2020. These are high-wage 
manufacturing and professional jobs. In addition, there are a host of 
associated industries, such as plumbers and electricians that will also 
benefit.
    It's forecasted that if the ITC is extended, 62,000 manufacturing 
and distribution jobs will be created--directly as a result of 
increased adoption of renewable energy in the first year of the 
extension.
    This is job growth for Americans, by Americans, for an industry 
that will benefit America.
    In addition to job creation, there are other economic benefits. 
Consumers will be able to combat volatile energy prices. Utilities will 
finally have a power infrastructure that can meet peak demand. 
Distributed solar can stabilize grids and offset expensive 
infrastructure upgrades. By 2020, the cost of generating solar power is 
forecast to become cost -competitive with fossil fuel energy 
production.
    As an example, SCHOTT Solar, the company I represent, is in the 
construction phase of a large manufacturing facility in Albuquerque, 
NM. This plant will employ 1,500 people in the production of 
photovoltaics and receivers for CSP power plants. Over the long-term 
SCHOTT's investment in New Mexico will reach $500 million and the 
economic impact is forecast to exceed $1 Billion. But this growth will 
only happen if effective legislation is passed.
    That's just what one company is doing in one community. There are 
other companies undertaking similar large projects, and many more that 
are ready to do so, once a clear commitment from the US government is 
established in the form of a long-term Investment tax credit. If the 
renewable energy credits expire, the impact next year would be more 
than 116,000 jobs either lost or not created according to SEIA and 
Navigant Consulting. Additionally, there will be more than $20 billion 
worth of investments that won't be made. And no doubt that that money, 
and those jobs, would go overseas. Considering the current economic 
climate of the country, these job losses, and investments moving 
overseas would be detrimental to the overall health of the nation's 
economy.

               SOLAR AS A COMPONENT OF NATIONAL SECURITY

    Currently the United States is reliant upon politically unstable 
regions of the world for much of its energy. According to the Energy 
Information Agency, two-thirds of the petroleum and 20% of the natural 
gas consumed in the United States is imported from other countries, and 
U.S. production of both is dropping while consumption continues to 
rise.
    By installing solar powered power plants and the necessary 
infrastructure to transmit energy across the nation, states in the 
desert southwest could become an exporter of energy, helping economies 
in the region grow. Increasing energy consumption from renewable energy 
will stabilize energy costs and minimize wild fluctuations on the 
economy caused by volatile energy prices.
    According to a study published in Scientific American (January, 
2008) by 2050, solar power could end U.S. dependence on foreign oil and 
slash greenhouse gas emissions.
    With sun shining all across the world, every country can develop 
solar energy as a means to create energy independence. Already, through 
solar, rural villages in South East Asia are benefiting from having 
electricity for the first time. Solar is scalable and deployable.

                      SUMMARY AND RECOMMENDATIONS

    Renewable energy, specifically solar, represents tremendous 
potential for the United States. Through effective legislation, the 
United States can develop an industry with proven successes in Germany, 
Japan, and Spain. An industry that has the potential to create up to a 
million jobs domestically, reduce the country's dependence on foreign 
energy supplies, improve the environment for future generations.

   With the eight year extension of the Investment tax credit 
        (ITC), an additional 62,000 jobs will be created. Up to a 
        million will be clean-energy employed in the sector by 2020 
        according to UC Berkeley.
   By fostering developing of renewable energy, and 
        specifically solar, costs will become competitive with fossil 
        fuel based technologies by 2020.
   With the development of a National grid connection policy, 
        solar project developers would be better able to overcome the 
        obstacles inherent to a federal system with multiple 
        jurisdictions. Currently, these bureaucratic roadblocks slow 
        down or completely stall the development of many large-scale 
        solar energy projects.
   With multiple GW of installed solar capacity, the US will be 
        reducing its growing dependence on foreign energy source, which 
        often come from politically unstable regions of the world.
   Strong support for solar will enable the industry to 
        continue to make technological advances, including thermal 
        storage, which extends the operating hours of solar power 
        plants beyond daylight hours.
   CSP is a proven, reliable technology with a tremendous 
        potential.

    [Appendix documents have been retained in committee files.]

    The Chairman. Thank you very much.
    Mr. Wan, representing Pacific Gas & Electric, thank you for 
coming, and we look forward to your testimony.

  STATEMENT OF FONG WAN, VICE PRESIDENT, ENERGY PROCUREMENT, 
       PACIFIC GAS & ELECTRIC COMPANY, SAN FRANCISCO, CA

    Mr. Wan. Senators, thank you for the opportunity to be here 
today and for this committee's leadership and commitment to 
advancing a clean energy future for the Nation.
    My name is Fong Wan. As part of my role as Vice President 
of Energy Procurement at PG&E, I have the responsibility for 
overseeing the purchases of renewable energy.
    PG&E has a long and accomplished track record on clean 
energy. We have contracted with about 40 renewable suppliers in 
the last 5 years. We are one of the Nation's largest buyers of 
renewable energy. Due to the large economy we serve, which is 
about 1 out of every 20 Americans, we have been fortunate to 
have the opportunity to meet with developers and technologies 
from all over the world.
    We are committed to expanding our renewable supplies on an 
unprecedented basis. This includes a very sizable commitment to 
CSP. We have already contracted with four large solar thermal 
suppliers of various technologies that we can get into later. 
This amounts to about 1,700 megawatts. When these resources 
come online, they will represent enough power to meet almost 10 
percent of our peak summer needs.
    Moreover, we have stated a strong desire to pursuing even 
more opportunities in this area. That is because of this 
energy-producing availability at a time when our customers need 
it most and its relative cost effectiveness compared with many 
other renewable options. You have to take into consideration 
the time of the generation of CSP as well as theoretical 
potential. By National Renewable Energy Labs' estimate, CSP 
could, in theory, produce 7 times the energy needed to serve 
California.
    I also want to provide our latest observation on 
photovoltaics. PV are making a strong and great progress for 
utility-scale applications. We also hope to be in a position to 
announce several contracts for utility-scale PV applications as 
well.
    But given these advantages, it is reasonable to ask why the 
Nation is not seeing greater progress on renewables. As someone 
with daily experience in today's renewable energy marketplace, 
I would like to point out a few barriers. It is important to 
underscore that the Federal Government is uniquely positioned 
to help the country push past these obstacles.
    The first is economics. Despite falling costs, CSP cannot 
yet compete on price with electricity produced by natural gas. 
We are confident that will change as the economies of scale are 
achieved and technology is refined. But in the interim, Federal 
production and investment tax credits are absolutely essential 
for continued progress.
    Past experience shows a smart use of tax incentives makes 
tremendous difference in the pace and extended innovation and 
deployment of new renewable projects. The Federal Government 
should extend the PTC and ITC. It should also remove the ITC 
exclusion for regulating utilities. Utilities represent a 
significant source of potential new cost-effective capital 
investment. We should remove this handicap that effectively 
sidelines well-capitalized, motivated investors.
    The lifetime of the extension is also critical. We believe 
the minimum commitment should be 8 years, as you have heard 
earlier. An 8-year extension would send a critical market 
signal. It would provide the assurance investors need to spur 
long-term R&D and allow the transmission to be built for large-
scale CSP projects.
    Without a longer term extension, we are deeply worried that 
developers will slam on the breaks and projects will be 
delayed, stopped, or prices will increase by as much as 30 
percent to our customers. We, therefore, urge Congress to take 
action as soon as possible on the legislation it has before it.
    Another significant challenge in bringing renewables online 
faster is transmission. Without new lines, we cannot get power 
from remote locations to the customer. Yet siting new 
transmission has become extraordinarily difficult. Mr. 
Chairman, you were exactly right when you recently said we need 
to be sure that first rules for planning, siting, pricing, 
interconnection, and openness of access are adequate.
    Right now, it is not uncommon for a project to be stopped 
by a single stakeholder, and actions by some Federal agencies 
can also have major ramifications. We support BLM's desire for 
a comprehensive approach to solar projects in the Mojave Desert 
and throughout the West. We also appreciate BLM's commitment to 
continue to process those applications which already have been 
accepted. However, we hope that future CSP projects are not 
further complicated by the deferral on new applications.
    A third challenge is integrating these intermittent 
renewable resources into our overall supply. One key is 
developing storage technology. We applaud Congress for 
including energy storage R&D program in legislation this year.
    To summarize, in this time of high energy prices, a weak 
economy, and heightened focus on security, the Federal 
Government is uniquely positioned to provide clarity of vision 
and foster stable growth in this critical sector of the energy 
market. We encourage policymakers to address the challenges 
outlined, and we look forward to working with you to do so.
    Thank you very much.
    [The prepared statement of Mr. Wan follows:]

  Prepared Statement of Fong Wan, Vice President, Energy Procurement, 
           Pacific Gas & Electric Company, San Francisco, CA

    Chairman Bingaman, Ranking Member Domenici, and Members of the 
Committee, I am very pleased to appear before you this morning on 
behalf of Pacific Gas and Electric Company to offer my views on the 
important role of concentrated solar power (CSP) as a clean, renewable 
source of energy. My name is Fong Wan and as part of my role as Vice 
President of Energy Procurement for PG&E, I have the responsibility for 
overseeing all of our renewable power procurement. At a time of 
historically high energy prices, increasing concerns over climate 
change and U.S. energy security, I commend the Committee for its 
leadership in addressing this important topic and for the continued 
commitment to and support for alternative energy that Chairman 
Bingaman, Ranking Member Domenici and others on this Committee have 
demonstrated over the years. The Energy Policy Act of 2005 and the 
Energy Independence and Security Act of 2007 have both helped to 
advance alternative energy, improve the overall energy efficiency of 
our economy and begin to dismantle barriers to ushering in a new energy 
paradigm for the 21st century.
    Pacific Gas and Electric Company, headquartered in San Francisco, 
California, is one of the largest natural gas and electric power 
utility companies in the United States. The company provides natural 
gas and electric service to approximately 15 million people throughout 
a 70,000-square-mile service area in northern and central California. 
PG&E proudly delivers some of the nation's cleanest energy to our 
customers. On average, more than half of the electricity we deliver to 
customers comes from sources that emit no carbon dioxide, or 
CO2, and an increasing amount comes from renewable sources 
of energy. In 2007, approximately 12 percent of our electric delivery 
mix was comprised of California-eligible renewable resources.\1\
---------------------------------------------------------------------------
    \1\ As defined in Senate Bill 1078, which created California's 
renewable portfolio standard, an eligible renewable resource includes 
geothermal facilities, hydroelectric facilities with a capacity rating 
of 30 MW or less, biomass, selected municipal solid waste facilities, 
solar facilities and wind facilities.
---------------------------------------------------------------------------
    PG&E is actively pursuing renewable generation resources on behalf 
of our customers for several reasons, including the following: first, 
it is what our customers consistently tell us they want; second, it 
furthers our efforts to meet the California renewable portfolio 
standard, which requires that 20 percent of our electric power be 
derived from renewable energy sources by 2010, a policy goal that PG&E 
strongly supports; and third, it allows us to better manage our future 
cost risk, on behalf of customers and shareholders, by taking volatile 
and rising fuel prices out of the cost equation for this portion of our 
generation.
    PG&E has announced several contracts with wind, geothermal, biogas 
and solar developers. Solar thermal energy, the subject of today's 
hearing, is an especially attractive renewable power source because it 
is available when power is needed most in California--during the peak 
mid-day summer period. PG&E has entered into four solar thermal power 
procurement contracts totaling up to 1,737 megawatts of power, enough 
capacity to supply almost 10 percent of our peak summer needs. These 
include a contract with Ausra for a 177-megawatt facility in San Louis 
Obispo County, CA, a contract with Solel for a 553 megawatt facility in 
San Bernardino County, CA, and a contract with Brightsource Energy for 
500 megawatts from facilities in San Bernardino County with an option 
for another 400 megawatts.\2\
---------------------------------------------------------------------------
    \2\ The fourth contract is with San Joaquin Solar for 106.8 MW in 
Fresno County, CA.
---------------------------------------------------------------------------
    We believe the potential for solar thermal technology, as well as 
other solar power technologies, is significant--and we are not alone. 
For example, a study prepared by the National Renewable Energy 
Laboratory (NREL) on the potential for concentrated solar power, or 
CSP, in California and the rest of the Southwest U.S. indicated that 
CSP in California could produce upwards of seven times the energy 
needed to serve the state. NREL also suggests that costs for CSP 
technologies could decline significantly, from approximately 16 cents 
per kilowatt-hour on average today, to approximately 8 cents per 
kilowatt-hour in 2015. The halving of the cost of this energy in seven 
years is premised on an assumption that at least 4,000 MW of CSP will 
be built by then--not just contracted for--to achieve ``learning 
curve'' benefits. For a comparison to another major energy technology 
development effort, cost estimates for advanced coal power generation 
with carbon capture and storage are on the order of 11 cents per 
kilowatt-hour.
    We are also impressed by the progress being made in reducing the 
cost of photovoltaic technology and look forward to a healthy 
competition between CSP and utility-scale photovoltaics to meet the 
peak electric needs of California customers. We expect to announce a 
number of large, utility-scale photovoltaic projects in the near 
future. We think the competition between the two solar technologies 
will help our customers over time by bringing the cost of solar energy 
down.
    As we move forward aggressively to deploy these renewable, clean, 
domestic energy resources, we recognize that challenges remain to fully 
realizing their potential in California, and across the nation. I will 
use the balance of my remarks to outline some of the challenges we see.

          A. Extension of Incentives is Essential

                  As noted, while the cost of solar is anticipated to 
                decline over time, competitive electric power pricing 
                is perhaps the biggest current obstacle to more rapid 
                and widespread deployment of solar and other 
                renewables. Still a nascent industry in the U.S., solar 
                has yet to reach economies-of-scale that will bring 
                down the per-unit production cost to levels competitive 
                with natural gas-fired plants.
                  One of the most important tools needed until the 
                prices become competitive is the Investment Tax Credit 
                (ITC). As a major buyer of renewable energy, Pacific 
                Gas and Electric Co. is concerned that without proper 
                tax incentives, there will be a significant slowdown in 
                the development and construction of solar and other new 
                renewable energy projects and technologies going 
                forward, making it extremely difficult to meet the 
                economies-of-scale required to drive down cost. An 
                example of this phenomenon can be seen in the wind 
                technology development experience. The expiration of 
                the Production Tax Credit (PTC) in 2004, which is a key 
                incentive for wind power projects, caused a 77 percent 
                drop in installed wind capacity that year relative to 
                one year prior, 2003. By comparison, in 2007, with the 
                PTC in place, the wind industry enjoyed its best year 
                ever when developers installed more than 5,000 
                megawatts of new generating capacity, more than twice 
                the previous record. The ITC is expected to have a 
                similar effect on the solar industry. The tremendous 
                spurt of innovation, development and associated 
                economic activity we have seen with solar, and in the 
                renewable energy sector generally, could be squelched 
                if these tax credits are not extended. Needless to say, 
                the loss of this economic activity would occur just 
                when the national economy, buffeted by the housing 
                collapse and record energy prices, needs all the 
                support it can get.
                  The federal government can therefore make a 
                tremendous contribution by extending the ITC and PTC, 
                as proposed in H.R. 6049, and removing the regulated 
                utility exclusion associated with the ITC, as regulated 
                utilities are in a position to provide financing for 
                these capital-intensive projects. We believe the 8-year 
                extension for the ITC included in the recent Senate 
                package is the minimum amount of time necessary to 
                reduce financial uncertainty, spur longer-term 
                technology development and encourage fuller deployment 
                of these projects. Given the long investment lead-times 
                for CSP, an extension of 8 years would send a critical 
                signal to investors to commit to these projects. In the 
                absence of a long-term extension of the ITC, we are 
                very concerned that the projects currently under 
                development may be delayed, stopped, or priced in a way 
                that will raise costs to electricity consumers by up to 
                30 percent. We therefore urge Congress to pass the 
                provisions contained in H.R. 6049 as soon as possible, 
                so that the solar and other renewable industries can 
                have the certainty they need to make investments, 
                create jobs, and make a positive contribution to 
                meeting the nation's energy needs in an 
                environmentally-sound and sustainable manner.

          B. The Transmission Challenge

                  Another significant challenge we face in bringing 
                renewable energy resources online faster is 
                transmission. In California, for example, most large-
                scale concentrated solar power generating facilities 
                are sited in remote desert locations, far away from the 
                areas where the electricity is needed most. While 
                siting in these areas may avoid some, but not all, 
                issues associated with major power plant project 
                siting, if we can't get the power to the customer, it's 
                just a different kind of stranded asset. In fact, 
                Senate Majority Leader Reid noted in his statement on 
                June 17th before this Committee that the West alone 
                will need approximately 7,500 miles of new transmission 
                lines over the next decade to significantly expand 
                renewable energy production.
                  Transmission siting is a multi-stakeholder process 
                that is increasingly complicated in the case of 
                interstate lines, due to multi-state regulatory 
                requirements, myriad diverse stakeholder interests, and 
                a lack of deference to a lead federal agency. It is not 
                uncommon for a company to be far into the siting 
                process and have a single stakeholder raise an 
                objection which can stop the project's momentum `in its 
                tracks.' And actions by some federal resource agencies 
                can also have major ramifications. We support the 
                Bureau of Land Management's (BLM) desire for a 
                comprehensive approach to solar projects in the Mojave 
                Desert region and the west, and we appreciate BLM's 
                commitment to continue to process those applications 
                which have already been accepted. However, we hope that 
                future CSP projects are not further complicated by the 
                moratorium on new applications.''
                  Mr. Chairman, I couldn't agree more with your 
                statement at the June 17th Committee when you said, 
                ``[t]o get transmission built to carry renewable 
                electricity, it's important to make sure that the 
                transmission system in general is working well. We need 
                to be sure that FERC's rules for planning, siting, 
                pricing, interconnection and openness of access are 
                adequate.''

          C. Integrating Intermittent Power Supplies

                  A third challenge we face is the ability to integrate 
                an increasing amount of intermittent power resources 
                into our generation portfolio. Solar is much easier to 
                accommodate than wind in this regard, but it still 
                poses challenges. A solution to this challenge lies in 
                the ability ultimately to store excess power from these 
                power projects, so that it is available when the 
                project is not producing power--for example, on cloudy 
                days or at night--and thereby smooth out the `ups and 
                downs' that are otherwise associated with intermittent 
                power generation. Congress showed great foresight by 
                including a thermal energy storage research and 
                development program in Section 602 of The Energy 
                Independence and Security Act of 2007, and hopefully 
                this program will lead to improvements in the cost and 
                effectiveness of such technologies.

                            THE PATH FORWARD

    At PG&E, we are working cooperatively with policymakers, 
regulators, others in our industry and myriad stakeholders to help 
tackle these challenges. For example, California's utilities are 
working closely with state and federal agencies on the Renewable Energy 
Transmission Initiative to identify areas that will require 
transmission investments to bring on new solar and other renewable 
energy supplies. We are working in a broad coalition, consisting of 
more than 300 organizations to help support and advance the energy tax 
provisions contained in H.R. 6049. We are working to identify and 
support emerging renewable technologies, like CSP, biogas, and wave 
technology, to help bring down costs and integrate these technologies 
into the electric power and natural gas systems. And, we are investing 
more than a billion dollars in advanced meters to upgrade our electric 
grid to make it a dynamic, ``smart'' system that will allow us to 
optimize its performance and better integrate these new, clean 
technologies, including advanced transportation technologies like plug-
in electric vehicles.
    In these uncertain times of rising energy prices, a weakening 
economy, and increasing national security risks from dependence on 
foreign oil, the federal government is well positioned to bring 
certainty to the energy market through sound policies that send the 
right long term signals that will spur the innovation, development, and 
deployment of renewable, clean, domestic energy resources that are so 
desperately needed. The opportunity to expand the renewable power 
industry can only be accomplished by addressing the challenges facing 
it in an integrated, strategic fashion that blends incentives, 
standards, public sector investment, and other key mechanisms such as a 
price and market for carbon, a major step that will allow renewables to 
compete against the real costs of conventional sources of electric 
power generation.
    On behalf of PG&E, I want to thank you for the opportunity to 
appear before the Committee today and I look forward to answering your 
questions. Thank you.

    The Chairman. Thank you all very much for the good 
testimony.
    Let me just start and ask a few questions, and then we will 
sort of take 5-minute rounds here and go back and forth on 
questions.
    One issue that I am not real clear in my mind on is how you 
accomplish the storage requirement that we are all talking 
about here. I think, Mr. Morse, you said that the proposal or 
the project that you are doing with Arizona Public Service 
involves 6 hours of storage. I think that is what Mr. Nelson 
indicated they would like to see as well.
    I don't know if you would like to explain how that storage 
is accomplished, or Mr. Andraka, if you would like to explain 
it? One of you who understands a little more of the technology 
involved, I would be anxious to hear it.
    Mr. Morse. Let me take a stab at it. Imagine that you like 
coffee and you want coffee in your office at night, and you 
can't boil the water in your office. So what do you do? You 
boil more water in the daytime. You put it in a thermos, and 
you use it at night.
    A CSP plant has an oil that runs through the plant that 
gets heated up to 700, 750 degrees Fahrenheit, and that hot oil 
makes the steam that runs the generator. If you expand the size 
of the solar field, then some of that collected energy goes not 
to make steam and run the plant in the daytime, but it goes 
into large, very large tanks of a fluid that has the heat 
capacity that can hold that high temperature.
    Then at night, when the Sun goes down, you just run that 
fluid through a steam generator, make steam and run the power 
plant. So it is basically two large thermos bottles, one with 
hot oil that then runs and makes steam and then is collected in 
another tank, which is then heated up the next day.
    The Chairman. Very good. This will allow you to extend the 
production of electricity for about 6 hours after the Sun goes 
down?
    Mr. Morse. Correct. You could do it for 8 hours or 10 
hours. You could run it around the clock. It is all the 
economics of the utility's needs. But it is feasible to make 
CSP a base load option if the economics made sense.
    The Chairman. I think one of you indicated that by putting 
this additional storage capacity in, you do bring down the cost 
of the electricity per kilowatt hour. Is that the expectation?
    Mr. Nelson. Yes, sir. We believe, based on the EPRI study, 
that the inclusion of storage has the opportunity to reduce the 
overall cost of the process. In addition to helping us address 
peak load needs in the evening, there is also some 
opportunities to allow that plant to startup earlier in the 
morning.
    So, for instance, if you were hitting a winter peak early 
in the morning, that plant could be up and running and 
generating electricity even before the Sun generates enough 
heat to generate electricity. So it serves a couple of our 
needs in terms of peak load.
    The Chairman. OK. Yes, go ahead.
    Mr. Andraka. Senator, the labs are also working on advanced 
storage technologies. The technology that Dr. Morse talked 
about where you heat the oil and that, in turn, heats the 
storage fluid, we would like to extend that where you can 
directly heat the storage fluid in the field.
    The issue there is the storage fluid right now freezes at 
about 200 degrees C. We have got new formulations we are 
working on that will stay liquid to a lower temperature so you 
don't have freeze issues in the field.
    Mostly, we talked about trough systems today. An advanced 
technology is a tower system, where you are directly heating 
the salt in the receiver at a central point rather than 
throughout the field. So it gets rid of this distribution 
problem. We see storage as an inherent solution in towers as 
well as troughs.
    One of the issues that also has to be addressed with 
storage is the contracts with the utilities that, in some 
cases, are regulated by the State that pay a certain amount at 
time of day. The storage increases the value of the electricity 
for the utility when they need it, but they need to be able to 
pass that value to the provider since we are looking at 
independent providers.
    The Chairman. OK, let me ask one other question that is a 
little different from that.
    Mike, you were talking there about--or maybe you weren't 
discussing it, but my understanding is that you are working on 
trying to develop an agreement with Kirtland Air Force Base on 
a power purchase agreement, something that would use power that 
might be produced at Mesa del Sol. Could you explain how that 
would work, how it would fit into the various other things we 
are talking about today?
    Mr. Daly. Mr. Chairman, currently it is my belief that the 
base provides power to its tenants, which includes Sandia Labs, 
and that base negotiates a multi-year contract with WAPA, who 
acts as agent throughout, and both provide renewable power as 
well as traditional power on the wholesale market.
    That contract might be--it is difficult to say what the 
renewable would be, but was 6 cents a kilowatt hour. It might 
be 7 or 8 cents going forward because of the increases. If DOE, 
as a tenant, decided that they wanted to take a portion of 
their load, 30 or 40 megawatts out of the total of 50 with the 
military being the balance, they are constricted for two 
reasons.
    The first reason is they can't enter into a contract by law 
for more than 5 or possibly 10--there has been a recent event. 
It might be 10 years now power purchase agreement.
    The second is that the proxy or the pricing under the OMB 
is that they have to match the lowest bid. Concentrated solar 
will never be the lowest bid today. But over that 30-year 
period if you have an extension of the power purchase 
agreement, or even 10, if you took into consideration an 
increase projected of fossil fuel cost, then they would be able 
to enter into that contract.
    So there is a real OMB constraint and a contractual 
constraint preventing the biggest proponent of concentrated 
solar from actually being a buyer of concentrated solar for 
their own needs. This base and possibly other military 
installations have unique loads that really don't go down at 
night, too.
    So we have actually worked a little bit on trying to 
straighten this out as a long-term possibility for DOE. But now 
that PNM has gotten the bulk of their requirement with the 
other utilities to 111 to 120 megawatts, we have a big enough 
plant. The original thought was that PNM's requirement wasn't 
big enough, and we would marry the DOE requirement and the PNM 
requirement to get the plant big enough because you have to do 
at least 120 megawatts.
    I think long term it is both a policy and an opportunity. 
It is a great opportunity beyond having an additional generator 
backing up the entire installation here, which you could throw 
a switch and say they get the power first.
    The Chairman. OK. Senator Domenici, go right ahead.
    Senator Domenici. Mr. Chairman, I want to tell you I don't 
know how long you intend to continue, but I have no objection 
to your continuing if I am absent. I can't be here beyond 
11:30. So that is 10 minutes, and you understand why. It has to 
do with my being present tomorrow.
    Let me say that I have the cost of electricity by source 
per kilowatt hour, and I just want to make it a part of the 
record so it will be without a doubt.
    We are getting there in terms of the solar we are talking 
about, the solar CSP. Obviously, we have got a ways to go, but 
I believe we will become more and more competitive if we get 
this--we can break it loose where it is not such an isolated 
job, but rather a contemplated and well-organized part of every 
utility that contemplates expanding so that they look at this 
first.
    Not mandatory because we don't want to do that. But they 
look at it, and it is doable when we haven't put obstructions 
in. So I would like that to be in there.
    Second, I did want to call to your attention, Mr. Chairman 
and this group of witnesses and our visiting Senator, the 
Albuquerque Journal seems to have gotten the understanding on 
what is going on. They have written about three editorials here 
in a row that impressed me with their understanding of the 
problem we have with crude oil dependency, which is slightly 
different than most people understand.
    You know, we can't get out of oil for a long time because 
we can't get rid of our cars and our trucks. We are going to 
try, but that dependency is going to be there for a long time 
just because of the transportation and transportation users in 
place. You couldn't load up all the cars and put them out in 
the ocean on barges and ship them out, then we would leave an 
America that was dead on its toes.
    It may be 30 or 40 years until dependence. That is 
terrible. I must say that every hearing I am going to be at, I 
am going to talk about a completely different view of our crude 
oil dependency. I think it is destruction we are talking about. 
It is destroying the economy--look--$500 billion a year to 
other countries for our crude oil is not an issue of, ``Well, 
it is not too bad.'' The point of it is the whole economy is 
suffering, and we don't quite know why, and that is it.
    The reason our economy is in terrible shape is because of 
this. We are sending too much of our lucre, too much of our 
would-be equity, too much of our money to others just for this 
one thing.
    Now, what I am concerned about, Mr. Chairman, and you are 
going to be there a long time to try to organize, I think we 
have a lot of institutions in this country that aren't onboard 
as partners in trying to get where we ought to go.
    For instance, there is a lead editorial here, ``Killing 
Energy Options Will Leave Us In The Dark.'' It is about a $400 
million investment that was going to take place of the kind you 
were talking about, Mr. Daly. It was going to be made in 
California, and it is about to die because the transmission 
line to make it operational is 23 miles long and must cross a 
State park.
    There was a group who loves the State park so much that 
they have killed the project by saying you can't cross our 
park. We all are environmentalists. Maybe you on the record 
more than I. You more, but we all are.
    But we have to have the environmentalists join up, too. 
They have to be concerned about the problems we are concerned 
about. This plant in this editorial must proceed. I am going to 
bring it up and have our committee find out why we stopped a 
$400 million solar plant with a 2-mile transmission line.
    I don't see how that could hurt a State park unless there 
was a big cable right over a picnic area. You know, this is a 
big park. So, I just want to make that case and put that in the 
record, Mr. Chairman.
    The Chairman. We will be glad to have all of that in the 
record.
    Senator Domenici. Second, I would like for you all to know 
that the Bureau of Land Management is called a lot of things, 
and they are unable to do a lot of things we all want them to 
do. In this case, they are in the midst of a real argument, and 
we have to help them, I think.
    They need some policy advice. They are left there with 
hundreds of applications, and they don't have a lot of help 
because they are not used to 100, 200 applications for a great 
big solar plant on BLM land. We don't want them to be the 
killer, right? We want them to be facilitators. But we have got 
to find out how they can help.
    Did any of you run into this, just specifically, the BLM 
problem? Or is--yes?
    Mr. Morse. I could make one comment that I think is 
relevant and that is causing a lot of the problems. There are 
three types of projects. There are real projects, a signed 
power purchase agreement with a commercial operation date--
2012, 2011. Those plants have to be built, and if they want BLM 
land, their applications should be considered immediately.
    Then there are projects that are maybe. Somebody applies 
for land for something that is still in their mind. They don't 
have a power purchase agreement. That is a real problem because 
you can fill up the queue with that.
    Then there are the speculators. Let us just be honest about 
it. There are people with money who say that land is going to 
be worth something, I will put in an application. It is like 
grazing land without a cow. I think those are parts of the 
problem, and I think BLM overreacted.
    Senator Domenici. OK. Let me just say I have been informed, 
and that is what this whispering was, they have changed their 
policy. So, maybe we had an impact and maybe we didn't. Your 
concern on the BLM is no longer there----
    Senator Sanders. Do I understand that you are just telling 
us that they have lifted? They are not going to pose a 
moratorium. All right. We have some good news, good news.
    Senator Domenici. That is good news, and I don't know how 
they are going to handle the vote. But anyway, I am grateful 
and that is nice that you called this meeting. That probably 
caused it.
    [Laughter.]
    Senator Domenici. My last point, Dr. Marker, I have never 
had a chance to thank you for your decision to come here. We 
are really glad to have you.
    We hope that we have put in place the policies that will 
make your business thrive because that will be good for the 
country. In this case, we have got a winner. You win. The 
country wins. We win. So let us hope it happens.
    But I would say to my friend, the chairman, there is 
probably not any better testimony than yours and yours, Mr. 
Daly--Marker and Daly--to support the proposition for the tax 
credit that we are looking for, that we want an 8-year 
extension. It is not the tax credit. What is it called? The 
investment tax credit.
    There is probably not a better record than yours that 
clearly states that we don't have to worry about paying for 
this ITC. It is more than paying itself with growth that you 
are talking about.
    Now I know my friend, Senator Bingaman, who I have great 
respect for his understanding and rationale, and he will answer 
that we are going in debt and how much more can we put on our 
grandchildren? I know all about that. I did that budget for 28 
years for the Senate, and I did two of those balanced budgets, 
you know?
    But, look, the point is we already have a policy of some 
sorts that will put this tax in place without an offset because 
it pays for itself. Look, you are telling us in your testimony 
that that is really true.
    Anyway, I want to put this editorial in the record to 
remind us that transportation issues are important, and I want 
to close by saying to all of you we put into national law, you 
know, this business that I told you about in my opening remarks 
when you run into a wall, you pull it, take it away from the 
group that is arguing. You take it up with the secretary, and 
he sends it over to the commission, and they decide. We are 
catching all kinds of flak that we shouldn't be infringing upon 
these rights.
    I want to tell you that that galls me. When I read in this 
Journal editorial that you are holding up a $400 million 
project in the State of California because an environmental 
group won't allow a 23-mile pipeline, I think the 
environmentalists have to join us. We need them.
    But anyway, I think this hearing ought to be one that ends 
up saying right away this is very important, and we urge 
Americans to act like Americans on some of these issues and get 
rid of the parochialism of their cause and let it get in there 
and get solved, or the same thing is going to happen with 
nuclear.
    I don't know if you are for it or not, but Senator 
Bingaman, at least he and I put in place what nuclear needs, 
just like we put in place what you need. Nuclear is going to 
come forward, and it is going to run into just what you are 
saying. We don't have enough trained people. We don't have 
enough engineers.
    I never heard of solar engineers. But if that is a new 
doctorate or you have one? That is you?
    [Laughter.]
    Mr. Andraka. There is one.
    Senator Domenici. One. Where did you get trained?
    Mr. Andraka. Virginia Tech.
    Senator Domenici. Virginia Tech. Do they give you a degree 
in solar?
    Mr. Andraka. Mechanical.
    Senator Domenici. Oh.
    Mr. Andraka. I have become a solar engineer.
    Senator Domenici. You can become that from mechanical. OK, 
well, that is what you are urging. You are going to get a seat 
in mechanical. How much does it cost to put one of those chairs 
in?
    Mr. Daly. Too much.
    [Laughter.]
    Senator Domenici. I don't know. You are making a lot of 
money. You have got the best land deal anybody ever got.
    [Laughter.]
    Senator Domenici. I mean, I know your chairman. What is his 
name?
    Mr. Daly. My chairman is Albert Ratner.
    Senator Domenici. Yes, he is great. Whenever you worry 
about me not being on your side, you send him over.
    Mr. Daly. I do. I do.
    Senator Domenici. He is terrific. He is terrific. I 
understand him when he says he knows how to invest, and let him 
do that and we do some other things. I am all for it.
    Mr. Daly. Thank you, Senator.
    Senator Domenici. Anyway, you have got to be in this 
business--if you are going to run that big piece of land, you 
have got to be urging that people join together, right?
    Mr. Daly. Correct, Senator.
    Senator Domenici. Get some of their concerns, private 
concerns to join the cause.
    Mr. Daly. Correct. I think the point there is no one person 
that can solve this. It is a collaborative effort with the 
utility, the States, and also the PRC has got some things they 
have to do to really allow us to do this.
    Also the consumers have to recognize that green is going to 
cost them a little bit, too. It might be 25 cents a month on 
their electric bill, but we have got to get over that and go 
forward with it.
    Senator Domenici. With that, Senator, Mr. Chairman, I am 
going to leave. I will let all these wonderful New Mexicans and 
you solve the rest of the problem.
    The Chairman. Senator Sanders and I will solve the problem 
and report back to you.
    [Laughter.]
    Senator Domenici. You won't even need anything from me. Get 
it done.
    The Chairman. All right. OK. Thanks for being here.
    Bernie, why don't you go ahead with your questions?
    Senator Sanders. OK. First of all, it is, in fact, very 
good news, I think, to hear from the BLM that they have 
withdrawn their proposal to establish a moratorium on new 
applications. Maybe it is coincidental that it may have 
something to do with this hearing, but we are delighted that 
that is the result.
    But one point that I want to make, and I want to ask the 
panelists about that, is while we are delighted with the BLM's 
decision today, what I hear is that they have just a very few 
staff people who are trying to process these claims.
    So all of you are talking about the need to reverse global 
warming, to create hundreds of thousands of new jobs, to make 
ourselves energy independent, and every one of you is saying 
that concentrated solar is going to be an important part of 
that process, and we have a bottleneck with two guys who are 
sitting there trying to process all of these applications.
    So I am going to ask you a rather silly question, but do 
you think we should substantially increase the staffing at BLM 
so that they can process these applications in a far more 
vigorous way?
    Mr. Morse, do you want to start on that one?
    Mr. Morse. Of course.
    Senator Sanders. Mr. Wan.
    Mr. Wan. Absolutely.
    Senator Sanders. You agree. Dr. Marker, do you agree with 
that? All right. OK.
    One of the concerns that we have, and maybe one of you may 
want to go into it, I believe there are 130 applications in the 
pipeline. My understanding, and correct me if I am wrong, is 
not one of them has been approved yet. Is that----
    Mr. Morse. That is what my understand is.
    Senator Sanders. OK. So all of you are in agreement that we 
should substantially increase the staffing at the BLM to 
process these things.
    Mr. Morse. I would also add I think that it is a complex 
issue. There are land management plans that have to be revised.
    I will say that BLM is being very positive. They are trying 
to identify zones in the West that are ideal for solar energy. 
They are working with the environmentalists to make sure there 
are no wildlife corridors. They are going to do a programmatic 
environmental impact study. So they are trying to do the right 
thing, but they are understaffed. Certainly, more people would 
help, and they probably could use some other policy support 
along the way.
    Senator Sanders. Mr. Chairman, the other question that I 
wanted to explore is the comparative cost of solar. By the way, 
yesterday I was in Nevada, and it is very hot in Nevada. You 
know that. I am from Vermont. I didn't know that. But 110 
degrees is very hot.
    [Laughter.]
    The Chairman. That is why we are in New Mexico.
    Senator Sanders. You are right. I know that you have been 
talking, Mr. Daly, about working with your local base here. I 
was at Nellis Air Force Base, and I want to say that they have 
installed in a very rapid time, in about a 6-month period, not 
a concentrated solar plant, but it is the largest photovoltaic 
in the world.
    It came in on budget. I think they did it in 6 months' 
time. It is producing more electricity than they anticipated. 
It is going quite well, and they have the capacity to produce 
even more. It was very nice to see a very positive relationship 
between the Air Force and the private sector and the 
environmental community. That is a very good omen, I think, for 
the military in general.
    Let me quote--well, not quote, but my understanding, Mr. 
Andraka, is that according to a 2008 Sandia National Labs 
presentation, our costs for concentrated solar are projected to 
drop to 8 to 10 cents per kilowatt hour when capacity exceeds 
3,000 megawatts. Is that your understanding?
    Mr. Andraka. Yes, that is correct. That is based on a study 
done for the Western Governors Association, which also goes 
back to the Sergeant and Lundy report. DOE right now is funding 
an update to that Sergeant and Lundy report that will include 
dishes and update the cost estimates for troughs and towers.
    Senator Sanders. Now tell me what I am missing here, but 
that sounds to me to be pretty reasonably priced electricity. 
The other point is that if you look at it over a 25-year 
period, it is not going to go up a whole lot, we don't think--
unless Exxon buys the Sun or something.
    [Laughter.]
    Senator Sanders. That it is not going to go up too much. Is 
that right?
    Mr. Andraka. The cost in a given plant will only go up with 
the labor----
    Senator Sanders. Right.
    Mr. Andraka [continuing]. Once the plant is put in place. 
Obviously, the plant depends on the cost of commodities, such 
as glass----
    Senator Sanders. But my point is, and I think PG&E--and we 
talked about that as well, with Mr. Darby to help us, is that 
if you look at 8 to 10 cents a kilowatt hour, and you sign a 
25-year purchase agreement, 25 years later, 10 or 11, whatever 
it may be, that is going to be pretty cheap electricity.
    Am I missing something, or is that correct, Mr. Andraka?
    Mr. Andraka. That is correct. Usually these contracts will 
have some inflation escalator built in, but we see the cost of 
natural gas going up a lot more rapidly.
    Now in the last decade or so, the cost of natural gas was 
seen as cheap as far as we could see it, and that has been one 
of the impediments to rolling out----
    Senator Sanders. Right. But compared to the volatility of 
gas or oil, the Sun is going to be reasonably stable?
    Mr. Andraka. Yes. Yes.
    Senator Sanders. Mr. Wan.
    Mr. Wan. I think I would like to offer that even with 
conventional power plants, as they are facing the increased 
costs, there are still cost of raw materials, of the concrete. 
The conventional power plants are facing an increase of roughly 
20 percent in cost. I would expect renewable generation, 
including CSP, to be facing that type of cost pressure.
    Senator Sanders. For construction?
    Mr. Wan. For construction, absolutely. That is without the 
impact of natural gas prices. Once it is in, it is minimal 
replacements on the mirrors as well as the tubes, and you are 
absolutely right.
    Senator Sanders. Maybe Mr. Morse or anybody else would want 
to comment? I mean, there are a lot of things and you have said 
it all about why we should be moving forward in an aggressive 
manner for concentrated solar. But cost may, in years to come, 
be one of the reasons. It may be a very competitive product.
    Mr. Morse.
    Mr. Morse. In fact, Arizona Public Service, when asked why 
are they spending a little more for CSP today, the answer was 
it is a fixed price. It will never rise. They have no idea what 
natural gas will cost next year, 5 years, 10 years, if we will 
be able to burn it. It is a hedge against that.
    Not only is the price fixed, when the debt is paid, there 
is no fuel cost--unless Exxon buys the Sun. If there is no fuel 
cost, it is a few cents a kilowatt hour. It becomes a clean 
cash cow. It is like a hydro plant that is paid for, but it is 
clean. Any utility that owns one of these, like PG&E, will be 
very happy that they have it.
    So it is a very sound investment. The fact that it is a 
little costly now, that is what the ITC is helping to deal 
with. But as an investment, it is the most prudent investment 
that the country can make, and a lot of renewables have this 
same factor. They don't have a fuel price issue.
    Mr. Wan. I would like to just offer a few numbers to 
illustrate the point. For example, if a natural gas combined-
cycle power plant today is producing energy at roughly 10 
cents, probably 40 percent of that is from the fixed cost of 
construction or maintenance, and the other 60 percent or so 
will be coming from the price of natural gas.
    So Mr. Morse's point earlier, that 6 cents could be quite 
volatile in the future, and in his example, if CSP cost more 
than 10 cents today, but you are essentially locking in that 
number. Maybe it would be 11 or 12 cents. But you are far 
safer, from a portfolio management perspective, to have some 
CSP in your portfolio.
    Senator Sanders. Mr. Chairman, may I ask----
    The Chairman. Sure.
    Senator Sanders. OK. We have been focusing, appropriately 
enough, on the huge potential of concentrated solar. When I was 
at Nellis, I was also impressed by the use of photovoltaic. So 
we talked to some people in the Energy Department a couple of 
months ago who surprised me by saying that they expect 
photovoltaic costs to also go down very substantially in the 
coming years and for people to install them on their rooftops.
    California has had good success, New Jersey. Germany 
certainly has gone off the wall on this. What do you guys see 
as the potential of photovoltaics in the energy mix in this 
country?
    Mr. Wan. As I mentioned earlier, we are in the final stages 
of negotiations with several of the PV developers, including 
the one at Nellis. The numbers they have all asserted to us are 
surprisingly low. We have thought for quite a while that CSP 
would be the future without any question, and I think PV is 
going to give CSP a run for the money. I think that is 
ultimately in the best interest of our consumers, for all 
Americans, as you have more competing industries and 
technologies to bring down the cost.
    I think the key to photovoltaic today is not necessarily 
the efficiency of the panels or cells or to bring the cost 
down. It is actually the worldwide logistics of parts as well 
as the installation. That is why you see large-scale 
installation such as at Nellis.
    Senator Sanders. The beauty of PVs is that while in the 
Northeast we are not going to be installing in the near future 
concentrated solar, we can be heavily utilizing PVs.
    I mean, Germany is not an optimal location for solar 
exposure. It is nowhere near what it is here, for example. But 
New Jersey and other States, and we are trying to do this in 
Vermont, is to expand the use of PVs.
    So you see great potential there as well?
    Mr. Wan. We see great potential. We are very hopeful.
    Senator Sanders. Yes, Mr. Nelson.
    Mr. Nelson. Senator, I would like to give you our 
perspective on that. We actually are going to have another 
renewable energy RFP go out in the August timeframe. With that, 
it is going to be more of a general renewables RFP that we 
expect will include proposals related to PV, to biomass, to 
geothermal. We believe that PV plays a significant role in the 
renewable energy mix.
    At this point in time, we believe that is more of a 
distributed role. Not just distributed in terms of rooftops, 
but megawatt scale located throughout the system to support 
distribution and that sort of thing. We are not yet, at this 
point in time, convinced that hundreds of megawatts in a single 
location is the most appropriate use for PV due to the large 
ramp rate associated with that when cloud cover comes over.
    Senator Sanders. Mr. Andraka.
    Mr. Andraka. I would like to echo the comments of Mr. Wan 
on the photovoltaics. One of the barriers is the interconnects, 
the field installation. One of the areas the laboratories are 
working on is modular systems, where you have got the PV built 
into a module and combined with an inverter. So it is an AC 
module that bolts into place to simplify and reduce the cost of 
the field installations.
    Senator Sanders. Mr. Chairman, thank you very much.
    The Chairman. Thank you very much.
    Let me ask one issue that is always at the forefront here 
in the Southwest and New Mexico is water. Is there a 
significant issue of water usage in connection with a CSP 
facility like the one you are doing in Arizona or like the one 
PNM is proposing to do here?
    Mr. Morse. It is all a problem of the French. Mr. Cugnot 
burdened us with the need if you have a heat engine, a steam 
turbine, you have to cool. You have to condense the fluid. A 
CSP plant, a trough plant or a power tower, is the same as any 
conventional plant. Coal, nuclear, doesn't matter. So we use 
the same amount of cooling water per megawatt.
    We could go to completely dry cooling, air cooling. The 
cost would go up about 10 percent, and the performance, worst 
of all, would go down. During the hottest peak time, we would 
lose more performance. The solution that a lot of CSP 
developers are looking into is hybrid cooling, where we do dry 
cooling except during the very peak time, the hottest time, 
when we use a little bit of cooling water.
    So I think that if the Southwest wants to have its future 
plants without water cooling, it can be done, and it is a 
matter of both a little cost and a little performance.
    The Chairman. Yes? Mr. Nelson, do you have a point of view 
on that?
    Mr. Nelson. Yes, sir. I would point out that our RFP 
actually requires that the vendors propose both dry and hybrid 
cooling options. We allow them to propose a wet cooling option 
as well, but we believe that the dry or hybrid is probably the 
way we need to go because of sustainability reasons. Water is a 
significant resource for us.
    The Chairman. On this issue about the cost per kilowatt 
hour, as I understand, one of these concentrated solar 
operations--concentrating solar power plants, one of the great 
advantages is that it is producing the power when you are at 
your peak as far as demand. At least in the summer when people 
are using their air conditioners, you have got the most power 
going into the grid at that time.
    How does that factor in? First, tell me if that is true as 
one of the advantages that concentrated solar has over wind 
power, for example. You just can't predict when the wind will 
blow.
    Second, how does that relate to this cost per kilowatt hour 
issue? Because you have real-time pricing being factored in by 
Public Utility Commission, where you are charging a higher 
price per kilowatt hour during the peak periods, and you are 
producing this power even if it is more expensive during peak 
periods. How does all that fit together?
    Mr. Nelson. We currently in New Mexico do not have peak or 
time of day pricing here, although that is certainly an option 
for the future. Solar power, however, does more closely meet 
our peak than wind power does, although it is not a perfect 
match. That is why we believe storage has the option to get us 
through our true peak, which is generally when people are 
coming home at the end of the day, turning on their air 
conditioning, turning on the TVs, the computers, the stoves, 
and that sort of thing.
    So storage can help us get from that 5 o'clock to 8 o'clock 
at night type peak. But solar does match it much better than 
wind. What we know here in New Mexico is we have a great wind 
resource. However, the windy days are rarely the very, very hot 
days here in New Mexico.
    We generally see our greatest wind resource in what we call 
the shoulder months, the springs, the falls. At nighttime, 
where our load demand is significantly less. So, again, from 
that perspective, solar better matches our peak.
    The Chairman. Yes.
    Mr. Andraka. We do see quite a diversity in the load 
profiles. For example, the Phoenix area, the peak extends maybe 
to 8 o'clock or 9 o'clock at night, and their request for 
proposals specifically require storage, and the plant that Dr. 
Morse proposes includes 6 hours of storage because of that 
requirement.
    At the same time, the Southern California plants are not 
requiring storage. Their peak is a closer match to solar, still 
not a perfect match. But they also have significant wind 
resources, and those wind resources really start picking up 
every evening with the breezes off the ocean. So, in 
California, we see a portfolio of renewables in meeting that 
need.
    Now as the solar resources are exploited and become a much 
greater portion of the grid, I think we will see more and more 
in California the need for storage, at least for the 
intermittency as used, if not the shifting.
    The Chairman. OK. Yes, Mr. Wan.
    Mr. Wan. Getting back to your question on the pricing, what 
you were hearing earlier is the average price. In California, 
we do pay a time of the day, time of the use value pricing. So 
that means if you are producing at the peak of the day, you can 
get up to 150 percent of that price that you heard earlier.
    Similarly, if you are producing like wind in the middle of 
the night, you may get a lot less than that pricing. CSPs, we 
find, are critically dependent on the higher pricing for the 
power they produce over the peak of the day.
    The Chairman. So you think that the time of day pricing 
that you have in California makes a lot of sense as you go to 
something like more power production from solar?
    Mr. Wan. Absolutely.
    The Chairman. Right.
    Mr. Wan. Absolutely. Appropriately also pays the other 
technology less when they are not producing at the right time.
    The Chairman. Mike, did you have a comment?
    Mr. Daly. I just think, as I am listening--I can't speak 
for the other colleagues here--the not having a strong research 
program in solar storage, while it has been implemented in two 
or three situations in a solar tower, is the Achilles heel of 
the solar--concentrated solar business because if we can't 
store it, then we have to build gas plants to back it up 
anyway, and you are double-building capacity, which is going to 
hurt the rate bearer.
    So as you look at research dollars, the solar storage 
really makes a big difference in this business. Then the second 
step is getting the local PRC to start doing time of day 
pricing so you start having market-driven consumption, which 
will add to the efficiency. But that is more of a local issue.
    But storage is really important, and while it has been 
implemented, it is not widespread proven technology. It is a 
credit risk, and it is expensive to do it.
    The Chairman. Senator Sanders, do you have other questions? 
Go ahead.
    Senator Sanders. Just maybe one more, Mr. Chairman. To 
reiterate, I think this has been a very productive hearing, and 
I want to thank you for calling it and all of the panelists for 
being here.
    My last question has to do with your views on a national 
renewable portfolio standard. My understanding is that New 
Mexico is moving to 20 percent by the year 2020, Nevada 15 
percent by the year 2013. Other States have gone forward more 
or less significantly. We tried, and we lost by one vote, was 
it?
    The Chairman. It was close, yes.
    Senator Sanders. One or two votes. It was 15 percent, I 
think, right?
    The Chairman. It was 15 percent, right. By 2020.
    Senator Sanders. Right, 15 percent by 2020. What impact 
would a national renewable portfolio standard have on the solar 
industry?
    Mr. Andraka.
    Mr. Andraka. As we mentioned earlier, the primary resource 
is in the Southwest United States. So I think our States would 
be at a distinct advantage in taking advantage of the solar 
resource. Your meeting a few weeks ago on transmission 
capability needs to also look at transmission across the 
country, totally different grid technology to bring this 
resource to other parts of the country.
    Senator Sanders. We have got a lot of work to do on that.
    Mr. Andraka. Yes.
    Senator Sanders. Yes, Mr. Wan.
    Mr. Wan. PG&E has been a long supporter of the adoption of 
a national renewable strategy. We believe it should be 
uniformly applied. I think the most important part is that a 
national RPS policy will actually accelerate development and 
bring down the cost with greater scale and just move us so much 
faster and so much closer to the clean energy world that we 
would like to see.
    Mr. Morse. I would like to add a word of caution, however. 
I think the word ``portfolio'' has to be looked at carefully. 
It could be a wind standard very easily because it could go to 
the lowest cost, and at the moment, that is the lowest cost. 
But the value for the utilities has to be considered.
    So I think, No. 1, it should not harm what may be more 
aggressive State RPSs or RPIs, whatever the plural is. I know 
that there is hesitancy about carve-outs, but a lot of solo 
ones exist because they had a percent had to be solar. I know 
that that is a contentious issue. But I think if you do have a 
national portfolio standard, please be very sensitive to how it 
will be implemented.
    For the life of me, I never understood States who pass a 
State RPS for generation without thinking a bit about 
transmission or enough about transmission. So think about if 
you were to require X percent new generation from renewables, 
how on earth is that going to get to the load centers?
    Senator Sanders. Thank you, Mr. Chairman.
    The Chairman. All right. Thank you all very much. Thanks 
for your testimony. I think it has been very useful. We will 
take all this information and try to put it to good use.
    Thank you. That will conclude our hearing.
    [Whereupon, at 11:59 a.m., the hearing was adjourned.]


                                APPENDIX

                   Responses to Additional Questions

                              ----------                              

      Responses of Michael Daly to Questions From Senator Domenici
    Question 1. I understand the DOD will be contracting for this 
power. Now that they can enter into 10 year contracts for renewable 
energy instead of just 5 years, will the Defense Department extend its 
contract with Mesa del Sol?
    Answer. We met with DOD in New Mexico for the past 2 days. They are 
hesitant to pay a premium for concentrated solar, i.e. greater than 9 
cents per kilowatt hour. They have agreed to work with us and the City 
of Albuquerque to look into developing a plant possibly in conjunction 
with the PNM RFP. It is our position to combine the load of the base 
and the New Mexico utility companies which will result in the lowest 
possible costs for solar thermal. While a longer contract is 
preferable, 10 years would be sufficient.
    Question 2. How are you handling the project's thermal storage?
    Is there room to expand at your site between Sandia and Kirkland 
AFB?
    Answer. We are proposing 3 hours of solar thermal which is 
consistent with the PNM RFP. The entire site between Mesa del Sol and 
Kirkland AFB is approximately 2,700 acres which is more than sufficient 
to accommodate an excess of 400 MW of concentrated solar. We are 
proposing to start at the northerly end of the site and development to 
the south. To the extent the full site was developed, we would have to 
coordinate with the Base to make sure we wouldn't impact the rocket 
sled or other Sandia missions.

                              TRANSMISSION

    Question 3. In the 2005 Energy Policy Act, Congress sought to 
address the critical issue of transmission siting through the National 
Interest Electric Transmission Corridor process. Even though these 
provisions haven't been fully implemented, and no line has been sited 
pursuant to EPAct, the NIETC process has proven controversial. Still, 
everyone here today has highlighted the critical need to bring more 
transmission on line to transport these renewable resources to load. 
Just this past weekend, the Albuquerque Journal ran an Op-Ed 
criticizing environmental groups--who want the ``green'' power but not 
the infrastructure that goes with it--for opposing needed transmission 
lines.
    What more should Congress do in this important area? Some have 
called for Congress to provide FERC with exclusive jurisdiction to site 
new transmission for a renewable project. Please comment.
    Answer. Where transmission corridors are required to promote 
renewable energy and there are not other economically viable paths, 
FERC should have power condemnation after conducting public hearings.

                                  ITC

    Question 4. One of the most important issues facing the solar 
industry today is that the tax credits we passed in a bipartisan manner 
are set to expire. We must enact a long-term ITC extension as soon as 
possible. However, for the first time in the renewable tax credit 
history, the House Majority is insisting that the tax credits be 
``offset'' by tax increases on other industries.
    Many of you have submitted testimony highlighting the tremendous 
economic boost the ITC provides the solar industry. According to Dr. 
Marker from SHOTT, solar capacity additions in 2007 contributed $2 
billion to the U.S. economy, creating 6,000 new jobs. And, it's 
forecasted that if the ITC is extended, 62,000 manufacturing and 
distribution jobs will be created.
    Do you agree that these tax credits ``pay for themselves'' and 
therefore don't need to be paid for by raising taxes on other 
industries? Is the renewable industry concerned that this new ``pay 
for'' requirement can set a troubling precedent in that offsets will be 
required each time the existing tax credits expire?
    Answer. The ITC should be extended to 8 years at a minimum, offsets 
should not be required to pay for the ITC as an impact on the economy 
will more than pay for any tax credits extended.

                        SOLAR RESOURCE POTENTIAL

    Question 5. We currently have just over 400 MW of CSP installed 
capacity in this country, at a rate of about 16 cents per kilowatt-
hour. A recent study suggests that solar energy could grow to 10% of 
the nation's power by 2025. Do you agree with that assessment? If so, 
what percentage will CSP contribute as opposed to Photovoltaic? Also, 
how long will it take to get solar power costs on parity with 
conventional power sources?
    Answer. I agree with the assessment. We believe that CSP's will 
represent the majority of the grid scale solar generation and that 
photovoltaic is better suited to distribute energy primarily due to the 
fact that there does not seem to be a short term solution to storage 
for photovoltaic's vs. concentrated solar which has commercially viable 
options that can carry a plant's generation capacity through peak 
demands in many markets.
                                 ______
                                 
   Responses of Frederick H. Morse to Questions From Senator Domenici

    Question 1. I understand that you have a new 280 mw trough CSP 
project under development in Arizona and that this project will have a 
thermal storage component. How much cost does that add to the plant? 
Does the addition of storage capacity improve the project's economics 
since you'll be able to increase power generation over a longer period 
of time? Why didn't the recent Nevada CSP plant include thermal 
storage?
    Answer. The addition of six full load hours of thermal energy 
storage at the 280 MW Solana plant will increase the capital cost by 
approximately 15-20%. However, by adding thermal energy storage, the 
cost of the electricity generated by this plant will decrease and the 
value of that electrify to Arizona Public Service increases 
significantly because it can be used when it is most needed. I do not 
know why Nevada Solar One did not use thermal energy storage but 
perhaps the utility wanted a peaker and did not value enough the 
ability to shift the electricity generation to other times.
    Question 2. The site location for the Abengoa plant is located near 
an existing transmission line. Would you be able to proceed with this 
project absent that line?
    Answer. No, not at this location. If we were to site Solana at 
another location in order to access transmission, we would need to 
determine if the added cost of wheeling or additional interconnection 
would make the project uneconomic.
    Question 3. Do you expect your plant to take the typical 7-8 years 
to be completed? How long did the recent NV plant take to come on-line?
    Answer. Solana is now expected to come on line in 2012, provided 
that the ITC is extended very soon. I do not know the time it took for 
Nevada Solar One to come on line.

                              TRANSMISSION

    Question 4. In the 2005 Energy Policy Act, Congress sought to 
address the critical issue of transmission siting through the National 
Interest Electric Transmission Corridor process. Even though these 
provisions haven't been fully implemented, and no line has been sited 
pursuant to EPAct, the NIETC process has proven controversial. Still, 
everyone here today has highlighted the critical need to bring more 
transmission on line to transport these renewable resources to load. 
Just this past weekend, the Albuquerque Journal ran an Op-Ed 
criticizing environmental groups--who want the ``green'' power but not 
the infrastructure that goes with it--for opposing needed transmission 
lines.
    What more should Congress do in this important area? Some have 
called for Congress to provide FERC with exclusive jurisdiction to site 
new transmission for a renewable project. Please comment.
    Answer. More transmission is absolutely essential for moving 
renewable energy generated electricity to load centers. Its absence 
will certainly limit how much renewable energy can be developed. There 
is a clear need for some way to deal with the conflict over who can 
decide what lines get built and where. However, concerns about 
reliability and economics militate against granting renewable suppliers 
such a mandate. Additionally, the Energy Policy Act of 1992 prohibits 
discriminatory use of the transmission system and therefore requires 
all generation resources equal access and use of the transmission grid.
    The transmission system needs to be designed to integrate all 
sources of generation, in addition to renewable resources, into the 
entire system and managed as a whole, to be efficient and maintain 
reliability. To achieve a high level of penetration of renewable 
resources in an area, such as CSP, it must be able to interact with 
other areas to maintain the required real-time load-generation balance. 
That interaction requires sufficient transmission capacity between the 
areas, and this consideration alone will require expanding the system.
    If giving FERC exclusive jurisdiction to site new transmission for 
renewable envy projects can withstand the likely challenge by the 
states, then this should be very helpful. For CSP, perhaps FERC's 
jurisdiction could be limited to siting new transmission from the solar 
zones that are under study by the BLM, the Western Governors' 
Association and the California Renewable Energy Transmission Initiative 
and to projects above a minimum size, say 250 MW.

                                  ITC

    Question 5. One of the most important issues facing the solar 
industry today is that the tax credits we passed in a bipartisan manner 
are set to expire. We must enact a long-term ITC extension as soon as 
possible. However, for the first time in the renewable tax credit 
history, the House Majority is insisting that the tax credits be 
``offset'' by tax increases on other industries.
    Many of you have submitted testimony highlighting the tremendous 
economic boost the ITC provides the solar industry. According to Dr. 
Marker from SHOTT, solar capacity additions in 2007 contributed $2 
billion to the U.S. economy, creating 6,000 new jobs. And, it's 
forecasted that if the ITC is extended, 62,000 manufacturing and 
distribution jobs will be created.
    Do you agree that these tax credits ``pay for themselves'' and 
therefore don't need to be paid for by raising taxes on other 
industries? Is the renewable industry concerned that this new ``pay 
for'' requirement can set a troubling precedent in that offsets will be 
required each time the existing tax credits expire?
    Answer. I am well aware of the opposing views on if and how the ITC 
extension should be paid for however I am not in a position to comment 
on that. Solar energy has become another engine of the US economy and 
the extension of the ITC will allow solar to continue creating more 
jobs, contributing to economic growth and helping to reduce carbon 
emissions. Failure to find a way to extend the ITC now will result in 
the loss of over 25,000 jobs and the loss of the economic benefits of 
about $18 billion in investment in the 4, 800 MW of CSP plants now 
under contract but not financeable without the eight year extension of 
the ITC. And this at a time when America is trying to stop the loss of 
jobs and address serious energy concerns. I hope that a way can be 
found to pass the renewable energy tax credit extensions. To stop solar 
in its tracks seems like the wrong outcome for America.

                        SOLAR RESOURCE POTENTIAL

    Question 6. We currently have just over 400 MW of CSP installed 
capacity in this country, at a rate of about 16 cents per kilowatt-
hour. A recent study suggests that solar energy could grow to 10% of 
the nation's power by 2025. Do you agree with that assessment? If so, 
what percentage will CSP contribute as opposed to Photovoltaic? Also, 
how long will it take to get solar power costs on parity with 
conventional power sources?
    Answer. A study done by NREL estimates that CSP could provide 
nearly 120, 000 MW of capacity by 2050. Although this represents only 
about 6.8% of the nation's power, it would be a significant percentage 
of the power needed by the Southwest. The NREL analysis assumed all CSP 
power stayed within one state from where it was generated. This 
assumption exemplifies the fact that the growth of CSP power is limited 
by transmission. If DC transmission were available to move power from 
the SW to the East, CSP's potential would be greatly expanded. From a 
national perspective, solar power could be particularly beneficial to 
the eastern half of the country because the sun shines in the West 
throughout the East's evening high demand period. Because PV can 
produce electricity throughout the country, its potential could be 
higher than that of CSP. Regarding the time it will take for solar 
power to achieve parity with conventional sources, I believe that if 
the ITC is extended for eight years, CSP will be cost competitive with 
convention power by the end of those eight years. However, both CSP and 
conventional power will increase due to increased commodity prices.
                                 ______
                                 
   Responses of Charles E. Andraka to Questions From Senator Domenici

    Question 1. According to Sandia, it is possible to lower the CSP 
costs from today's 16 cents per kwH, to 12 cents in the near-term and 
even 6 cents in the long-term. How long do you estimate it will be 
before CSP drops to 12 cents? 6 cents?
    Answer. The cost reductions for CSP technology, as for any emerging 
power system, are largely dependent on deployment. The costs to which 
you refer are from a 2003 report done by the DOE for the National 
Research Council,\1\ commonly referred to as the ``Sergeant and Lundy 
Report.'' While the costs of all technologies, especially fossil-
fuelbased, have increased in the interim, this study reports that the 
cost reductions for trough and tower systems will result about equally 
from three sources: deployment, learning-curve cost reductions related 
to financing; and R&D of new components. The study indicates that cost 
reductions as low as 10 cents could be achieved with as little as 3 to 
5 GW of deployment of CSP systems. (Note: there are currently 4 GW of 
CSP projects planned for deployment in the southwest.) The lower end of 
the scale, in the 6 cent range, requires aggressive technical 
advancement as well as deployment, as stated in the Sergeant and Lundy 
report:
---------------------------------------------------------------------------
    \1\ Assessment of Parabolic Trough and Power Tower Solar Technology 
Cost and Performance Forecasts, prepared for the Department of Energy 
and National Renewable Energy Laboratory, SL-5641, May 2003.

          The specific values will depend on total capacity of various 
        technologies deployed and the extent of R&D program success. In 
        the technically aggressive cases for troughs / towers, the S&L 
        analysis found that cost reductions were due to volume 
        production (26%/28%), plant scale-up (20%/48%), and 
---------------------------------------------------------------------------
        technological advance (54%/24%).

    The net of these aggressive reductions reaches the 6 cent range. 
The original Sergeant & Lundy study is currently being updated and new 
number should be available late in the Fall. It should also be noted 
that the 6 cent range was seen in 2003 as the level needed to be 
competitive with conventional fossil technologies. The current market 
conditions will likely raise this competition level closer to 10 cents.
    While it is not possible to say exactly when the cost of CSP 
systems will drop below 12 cents per kWhr, it was reported that a 
recent large US trough project was bid at 14 cents per kWhr.
    Question 2. To date, there are no Power Tower CSP projects in this 
country, although an 11 MW project just came on-line in Spain. What are 
the advantages/disadvantages to this technology? Why aren't we seeing 
any Power Tower projects developed in the U.S.?
    Answer. An 11 MW power tower project was built in Spain because of 
the favorable CSP incentive structure that will pay 47 UScents/kWhr for 
power from CSP; because a large company (Abengoa Solar) recognized a 
worldwide business development opportunity; and because of an 
additional government subsidy for the project.
    As noted in the Sargent & Lundy report, the power tower has a 
longer-term cost advantage relative to solar trough systems. This is 
largely due to the fact that a power tower is a higher efficiency 
system and can more readily integrate thermal storage, thereby 
improving the capacity factor (yearly hours of operation) and potential 
value to the utilities.
    So far we have not seen the deployment of power towers in the U.S. 
because of the perceived technical and financial risks. Due to the 
large initial capital investment needed for these projects, it has been 
difficult to obtain power purchase agreements and financing for higher 
risk projects. However, there is one power purchase agreement for a 
power tower in California between Pacific Gas & Electric and 
BrightSource energy. At least two other companies, eSolar and Solar 
Reserve, are actively developing projects in the southwest U.S.
    The fact remains that we must find a way to enable the deployment 
of higher-risk, technologies at the utility-scale of solar power.
    Question 3. I understand that Sandia is studying the new 64 MW CSP 
project in Nevada. What are you learning from that project? Why didn't 
that project include a thermal storage component?
    Answer. The Nevada Solar 1 project was funded by private industry. 
Sandia is familiar with the technology and has worked with the 
developer, Solargenix, in the past but we do not have access to the 
data on the operation of the plant.
    This system does not include thermal storage for two reasons: the 
utility, Nevada Power, did not value thermal storage to increase the 
capacity factor of the plant and they wanted the lowest cost solar 
option.
    It should be noted that, even though two trough plants with storage 
are under construction in Spain, thermal energy storage for trough 
systems is not well established and some utilities and financial 
institutions consider it to be a higher risk technology. The announced 
280 MW trough plant for the Phoenix area also includes thermal storage. 
While extending troughs to include storage is a current area of intense 
DOE and industry research, the potential for storage in towers appears 
to be much greater. This is because of the higher temperatures inherent 
in tower systems, which leads to less storage volume for a given level 
of storage. In addition, current storage proposals for troughs have a 
separate storage medium, requiring an expensive heat exchanger, whereas 
towers store the energy in the operating fluid (salt). We expect that 
current DOE development will support an increase in the number of 
plants, both towers and troughs, that incorporate thermal storage.
    Question 4. Currently, a CSP project requires approximately 5 acres 
of land per megawatt. Is there room for improvement?
    Answer. There is a small difference in the area required for a 
trough, a tower, and dish/Stirling systems. The size of the solar field 
for all three of the technologies is driven by shading issues in the 
morning and evening, as well as mid-day in the winter when the sun is 
lower in the sky. Any reduction in the area required for the 
concentrators will be incremental because it depends on the fundamental 
optics of concentrating sunlight. The plant concentrator area could be 
reduced by tradeoffs that the developer would make between energy 
production at certain times of year and plant foot print.

                              TRANSMISSION

    Question 5. In the 2005 Energy Policy Act, Congress sought to 
address the critical issue of transmission siting through the National 
Interest Electric Transmission Corridor process. Even though these 
provisions haven't been fully implemented, and no line has been sited 
pursuant to EPAct, the NIETC process has proven controversial. Still, 
everyone here today has highlighted the critical need to bring more 
transmission on line to transport these renewable resources to load. 
Just this past weekend, the Albuquerque Journal ran an Op-Ed 
criticizing environmental groups--who want the ``green'' power but not 
the infrastructure that goes with it--for opposing needed transmission 
lines.
    What more should Congress do in this important area? Some have 
called for Congress to provide FERC with exclusive jurisdiction to site 
new transmission for a renewable project. Please comment.
    Answer. There are two approaches to address the nations growing 
electricity demand, through centralized generation and through 
distributed generation. Centralized generation includes coal, nuclear, 
wind farms, concentrated solar power plants, photovoltaic arrays, 
geothermal energy and other generation sources that produce electricity 
on the megawatt through gigawatt scale. Most of this centralized 
generation connects to the grid at the transmission or subtransmission 
voltage level. Much of the available renewable resources exist in 
locations where transmission is not available to transport the energy 
to the loads. In this case, new transmission lines are needed to make 
large quantities of renewable power available where it is greatly 
needed. The 2006 National Electric Transmission Congestion Study 
identified critical congestion areas based on current and projected 
growth. There are many barriers to get the needed transmission sited 
and installed including regulatory, cost recovery, and technical 
issues. Giving FERC exclusive jurisdiction in siting new transmission 
for renewables does not solve the problem about who pays for new 
transmission. A technical challenge that has not been addressed with 
the high penetration of renewables is grid stability. Utilities are now 
running into problems with maintaining frequency stability with large 
amounts of intermittent generation such as wind and solar. This is 
primarily due to the fact that currently deployed versions of these 
renewable resources are not dispatchable, in other words we only have 
wind energy when the wind blows and photovoltaic energy when the sun 
shines. This is unlike fossil, nuclear, and geothermal generation that 
we can dispatch as needed because we have control of the fuel source at 
the generation plant as needed. Utilities have compensated by running 
dispatchable fossil generators as ``spinning reserve'' to compensate 
for renewable intermittency, which is not always cost effective. There 
is concern that increasing the penetration of renewables on the 
electric grid will increase stability problems. A key technology that 
will enable the dispatchability of renewables and help alleviate the 
stability problem is energy storage. Significant additional research is 
needed in this area. Concentrating solar power is one renewable 
technology that can incorporate storage technology through molten salt.
    The second approach to meeting the nations growing electricity 
demand is through the use of more distributed generation. This includes 
rooftop photovoltaic panels, photovoltaic arrays at distribution 
voltages, distributed wind, fuel cells, and other small generation 
resources that can be placed at or very near the load. This approach is 
attractive for remote load sites and where new transmission is not a 
viable option. There are numerous challenges that have been identified 
by increasing the penetration of renewables at the distribution level 
through the DOE Renewable Systems Interconnection (RSI) initiative . 
This set of studies completed in December 2007 outline the challenges 
for distributed photovoltaics in the categories of 1)Distributed PV 
System Technology Development, 2)Advanced Distribution Systems, 
3)System Level Test and Demonstration, 4)Distributed Renewable Energy 
System Analysis, 4) Solar Resource Assessment, 6)Codes, Standards, and 
Regulatory Implementation. However, these studies only identify some of 
the problems and funding is not in place to address the identified 
challenges. While these studies focus on distributed photovoltaics, the 
concepts are applicable to most renewables.
    In summary, transmission siting is just one element of the 
renewable interconnection challenge. Further research in renewable 
systems interconnection is needed to address the technology needs, 
codes and standards, business models, and regulatory issues to assure 
that we maintain a secure and reliable electric grid as we increase the 
penetration of renewables in the US.

                                  ITC

    Question 6. One of the most important issues facing the solar 
industry today is that the tax credits we passed in a bipartisan manner 
are set to expire. We must enact a long-term ITC extension as soon as 
possible. However, for the first time in the renewable tax credit 
history, the House Majority is insisting that the tax credits be 
``offset'' by tax increases on other industries.
    Many of you have submitted testimony highlighting the tremendous 
economic boost the ITC provides the solar industry. According to Dr. 
Marker from SHOTT, solar capacity additions in 2007 contributed $2 
billion to the U.S. economy, creating 6,000 new jobs. And, it's 
forecasted that if the ITC is extended, 62,000 manufacturing and 
distribution jobs will be created.
    Do you agree that these tax credits ``pay for themselves'' and 
therefore don't need to be paid for by raising taxes on other 
industries? Is the renewable industry concerned that this new ``pay 
for'' requirement can set a troubling precedent in that offsets will be 
required each time the existing tax credits expire.
    Answer. We do not have the data to document the net ``value'' of 
the Investment Tax Credit. However, analysis for states in the 
southwest has shown that the development of CSP projects has a positive 
value to state and local economies over the lifetimes of the projects. 
Specific examples have been sited in several reports.\2\ \3\ \4\
---------------------------------------------------------------------------
    \2\ The Economic Impact of Concentrating Solar Power in New Mexico, 
The University of New Mexico, Bureau of Business and Economic Research, 
December 2004.
    \3\ The Potential Economic Impact of Constructing and Operating 
Solar Power Generation Facilities in Nevada, Final Report, R. Keith 
Schwer and Mary Riddel, Center for Business and Economic Research, 
University of Nevada, Las Vegas, July 2003
    \4\ Economic, Energy, and Environmental Benefits of Concentrating 
Solar Power in California, Deliverable 3 Final Report, Black and 
Veatch, Prepared for National Renewable Energy Laboratory Under 
Subcontract AEK-5-55036, September 2005
---------------------------------------------------------------------------
                        SOLAR RESOURCE POTENTIAL

    Question 7. We currently have just over 400 MW of CSP installed 
capacity in this country, at a rate of about 16 cents per kilowatt-
hour. A recent study suggests that solar energy could grow to 10% of 
the nation's power by 2025. Do you agree with that assessment? If so, 
what percentage will CSP contribute as opposed to Photovoltaic? Also, 
how long will it take to get solar power costs on parity with 
conventional power sources?
    Answer. With the sustained incentive of the 30% ITC through 2017, 
the study results presented at the hearing predicts a deployment of 22 
GW by 2025.\5\ If the ITC were extended through 2025, the total 
deployment could be 40 GW as predicted by the same methodology 
presented in this reference. To reach 10% of the current U. S. grid 
capacity or about 100 GW by 2025 would require more aggressive 
incentives, significant streamlining of approval processes, and 
aggressive expansion of transmission capabilities.
---------------------------------------------------------------------------
    \5\ Department of Energy Solar Energy Technologies Program, Multi 
Year Program Plan, 2008-2012, April 2008. Plan available at: http://
www1.eere.energy.gov/solar/pdfs/solar_program_mypp_2008-2012.pdf.
---------------------------------------------------------------------------
    CSP and photovoltaics are primarily focused on different market 
sectors. CSP is focused on the wholesale, utility-scale power market 
and photovoltaics are currently being applied to the ``higher value'' 
distributed, retail power market. The very large CSP installations are 
centrally sited, permitted, and maintained, but compete at utility 
generation rates. The bulk of current PV installations are distributed, 
either at the rooftop level or in relatively small power plants, are 
sited, permitted, and maintained by the owners, and compete financially 
on the customer side of the meter (retail pricing). The deployment 
scenarios and incentives are very different to reflect the needs and 
unique characteristics of these two markets. U. S. deployment of 
photovoltaics is predicted to be 20 to 25 GW by 2025 in the 
photovoltaics roadmap.\6\ If the cost of photovoltaics falls as some 
think it may, it is possible that in the future PV may also compete in 
the utility-scale markets, as it currently does in Spain.
---------------------------------------------------------------------------
    \6\ Solar Electric Power, The U.S. Photovoltaic Industry Roadmap, 
May 2001, available at http://photovoltaics.sandia.gov/docs/PDF/
PV_Road_Map.pdf
---------------------------------------------------------------------------
    Even with the increase in the cost of commodities, CSP costs are 
projected to continue to decrease. The current cost of conventional 
pulverized coal power continues to increase with anecdotal costs 
indicated to be in the 5 to 7 cents/kWhr range. More importantly, 
uncertainty over future carbon regulation is resulting in the 
cancellation of orders for new pulverized coal plants. Carbon capture 
is projected to increase the cost of coal by an additional 5.4 cents/
kwhr,\7\ perhaps more if gasification technology is utilized. This 
means that the gap between the cost of generating a kWhr of electricity 
using pulverized coal and CSP and other sources of renewable 
electricity is growing smaller. As discussed during the testimony, once 
a solar plant is installed, the cost of electricity generated is 
relatively stable over the life of the plant, while conventional 
technology energy costs are highly dependent upon the cost of fuel.
---------------------------------------------------------------------------
    \7\ Reducing U. S. Greenhouse Gas Emissions: How Much at What 
Cost?, U. S. Greenhouse Gas Mapping Initiative, Executive Report, 
December 2007. (aka, the McKinsey Report)
---------------------------------------------------------------------------
                                 ______
                                 
      Responses of Alex Marker to Questions From Senator Domenici

    Question 1. You testified that eventually, solar storage could 
produce electricity 24/7 without the need for natural gas back-up. 
Currently, our solar storage capabilities are about 6 hours. When do 
you envision a 24/7 CSP plant?
    Answer. It is technically possible to continuously operate a CSP 
trough plant based on technology available today. However it may not be 
economically competitive with baseload power generation. Many utility 
companies have a need for cost competitive peak power, which is what's 
driving demand for CSP technology.
    CSP power plants, with thermal storage on the order of six hours, 
will provide utilities peaking capability that extends into the evening 
hours. With proper Federal incentives and policy, CSP can be 
competitive with other technologies for providing peak power, with the 
ultimate goal of continuous cost-competitive power generation. A long-
term extension of the ITC will spur this research and will drive 
innovation.
    Question 2. When your manufacturing plant comes on-line next 
Spring, how many megawatts of solar collectors will you be able to 
produce on an annual basis?
    Answer. SCHOTT Solar anticipates having several production lines to 
manufacture receivers for parabolic trough concentrated solar power 
(CSP) plants. Each one of these lines will produce enough receivers 
capable of producing between 100MW and 200MW of annual power. Initial 
plans call for the facility to have two receiver production lines.
    The broad range in output from each line is variable due to where 
the receivers are installed, and the overall size and efficiency of the 
projects they will be integrated into.
    The facility is being designed with future expansion in mind, to 
accommodate the anticipated rapid growth of the utility-scale CSP 
market. SCHOTT Solar's further growth in Albuquerque is contingent upon 
worldwide market demand.

                              TRANSMISSION

    Question 3. In the 2005 Energy Policy Act, Congress sought to 
address the critical issue of transmission siting through the National 
Interest Electric Transmission Corridor process. Even though these 
provisions haven't been fully implemented, and no line has been sited 
pursuant to EPAct, the NIETC process has proven controversial. Still, 
everyone here today has highlighted the critical need to bring more 
transmission on line to transport these renewable resources to load. 
Just this past weekend, the Albuquerque Journal ran an Op-Ed 
criticizing environmental groups--who want the ``green'' power but not 
the infrastructure that goes with it--for opposing needed transmission 
lines.
    What more should Congress do in this important area? Some have 
called for Congress to provide FERC with exclusive jurisdiction to site 
new transmission for a renewable project. Please comment.
    Answer. An expanded transmission grid is absolutely essential for 
moving renewable energy to customers. The current transmission grid was 
built decades ago to connect traditional fossil fuel generation with 
the load centers. Any carbon-free energy paradigm will require new 
transmission lines to once again connect customers with their desired 
power source--this time, solar, wind and other clean energy resources.
    The lack of investment in our transmission grid will limit how much 
renewable energy can be delivered, and therefore developed. As you 
heard at the committee's June 17 hearing on transmission challenges, 
there is a clear need to deal with the problems around building new 
transmission lines.
    One solution might be to give FERC exclusive jurisdiction to site 
new transmission lines, similar to its authority to site natural gas 
pipelines. Another solution may be multi-state regional cooperation, 
where public utility commissions, utilities and project developers 
could pool resources and expertise to propose new transmission lines to 
the benefit of all involved.
    There are currently several cooperative efforts going on in the 
West--the Western Governors' Association Western Renewable Energy Zone 
initiative and California's Renewable Energy Transmission Initiative--
which seek to both identify areas rich in renewable resources and the 
transmission necessary to move that power to end-use customers.

                                  ITC

    Question 4. One of the most important issues facing the solar 
industry today is that the tax credits we passed in a bipartisan manner 
are set to expire. We must enact a long-term ITC extension as soon as 
possible. However, for the first time in the renewable tax credit 
history, the House Majority is insisting that the tax credits be 
``offset'' by tax increases on other industries.
    Many of you have submitted testimony highlighting the tremendous 
economic boost the ITC provides the solar industry. According to Dr. 
Marker from SHOTT, solar capacity additions in 2007 contributed $2 
billion to the U.S. economy, creating 6,000 new jobs. And, it's 
forecasted that if the ITC is extended, 62,000 manufacturing and 
distribution jobs will be created.
    Do you agree that these tax credits ``pay for themselves'' and 
therefore don't need to be paid for by raising taxes on other 
industries? Is the renewable industry concerned that this new ``pay 
for'' requirement can set a troubling precedent in that offsets will be 
required each time the existing tax credits expire?
    Answer. SCHOTT Solar (``the company'') strongly believes that a 
long-term (8-year) extension of the ITC is an essential component in 
developing a long-term, sustainable market for solar energy in the 
United States. The company has not engaged in analyzing the financial 
impact of an extension of an ITC beyond the effects it will have on 
SCHOTT Solar's immediate business.
    A study recently prepared by GE Energy Financial Services (June 
2008) concluded that the ITC would `` pay for itself'' through 
continued investment and employment numbers.
    It should be considered, and cautioned, that although the ITC is 
one of the most important factors in developing the solar market in the 
United States, it is not the only factor. Market development may not 
grow as forecasted.
    Regarding setting a precedent for renewing the ITC--the market will 
rapidly develop, and consequently change, between now and when the ITC 
(if extended for the long-term) will be set to expire. SCHOTT Solar 
trusts in the Federal government to make an informed, and appropriate 
decision relating to extensions of the ITC, based on market analysis 
available at that time.

                        SOLAR RESOURCE POTENTIAL

    Question 5. We currently have just over 400 MW of CSP installed 
capacity in this country, at a rate of about 16 cents per kilowatt-
hour. A recent study suggests that solar energy could grow to 10% of 
the nation's power by 2025. Do you agree with that assessment? If so, 
what percentage will CSP contribute as opposed to Photovoltaic? Also, 
how long will it take to get solar power costs on parity with 
conventional power sources?
    Answer. The potential of solar energy is almost limitless, 
especially in the Southwest of the United States, where, if just 2.5% 
of the usable land were converted into CSP power plants, it would 
satisfy the entire nation's energy needs (at 2006 usage).
    Before directly answering the question, it should be noted that the 
16 cents per kilowatt-hour is an aggregated figured based upon the 
``first generation'' of parabolic trough CSP plants (SEGS). Costs will 
continue to decrease through technological developments, economies of 
scale in constructing the sites, and improvements in transmission. At 
Acciona Energy's ``Nevada Solar One '' facility in Boulder City, NV, it 
is estimated that the cost to generate electricity from the facility is 
fixed at 3 cents per kilowatt hour (not inclusive of amortizing the 
cost of constructing the facility).

                               ENERGY MIX

    Whether or not the nation will be able to consume 10% of its energy 
from solar powered sources, is contingent upon the speed and ease in 
which large-scale solar facilities will be allowed to set-up, operate, 
and provide power to the grid. A long-term extension of the ITC is a 
key component in allowing this rapid market development. A Federal 
Renewable Portfolio Standard (RPS) would motivate utilities to buy and 
consume renewable energy. Streamlining and standardizing grid 
connection and transmission will also create a powerful climate for the 
rapid growth of CSP.

                        PERCENTAGE OF CSP VS. PV

    CSP and PV are complementary technologies (much like wind and solar 
are complementary). PV is mainly used for distributive power 
generation, where the power produced is consumed at that location. With 
only a handful of notable exceptions, PV installations generally do not 
exceed 1MW in capacity.
    CSP, however, is a utility-scale, central station technology where 
installations generally achieve production exceeding 50MW capacity. 
Although it is possible to construct and operate smaller scale CSP 
power plants, through economies of scale, they are not cost-
competitive.
    Due to the sheer size of CSP power plants, as well as the speed in 
which they're able to be constructed (for reference, Accciona Energy's 
Nevada Solar One was producing power a year after ground was first 
broken), and no foreseen raw material supply constraints, under the 
right climate--tremendous CSP growth is possible. As a point of 
reference, there are currently 4, 000 MW of CSP projects currently in 
the planning / permitting stage. With a clear signal of support from 
the Federal government in this clean, fixed cost, domestically produced 
energy source--many of these projects will shift from planning to 
construction and many more will enter the planning stage.
    It is difficult to assign an exact figure for PV growth over the 
eight year term of an ITC extension, as the nature of projects are 
generally much smaller. One can look at PV manufacturing capacity 
(which is rapidly developing) but it is unknown how much PV will be 
imported from overseas, and conversely, how much will be exported from 
the U.S. It is for this reason, that I apologize I am unable to provide 
the committee with an exact answer to this question.

                             CLOSING REMARK

    Distinguished committee members, on behalf of the solar industry, 
and SCHOTT Solar, we appreciate your continued efforts to focus on the 
promise and possibility of solar energy. The benefits of the technology 
are numerous, not only from an environmental standpoint, but also as an 
economic engine. Solar energy has tremendous support across the 
country. 94% of Americans, in a recent poll, stated it is important for 
the U.S. to develop and use solar energy, and approximately 75% of 
Americans favor a long-term extension of the ITC. This is an issue we 
all agree on.
    The United States and New Mexico stand to reap a tremendous 
economic benefit from a long-term extension of the ITC. There is no 
reason why New Mexico can not take a global lead in renewable energy.
    In twenty years I am confident that, when flying across the desert 
Southwest, a glimmer of light will catch my eye from a parabolic 
mirror, focusing the sun's energy on a receiver, which will be 
providing clean, reliable, fixed cost energy across the U.S. And I will 
think back to this time, and the hard work we are all undertaking.
    It is through your leadership and guidance that the United States 
will return to its position as a clean energy leader.
                                 ______
                                 
       Responses of Fong Wang to Questions From Senator Domenici

    Question 1. You testified that last year, approximately 12% of 
PG&E's electric delivery mix was comprised of renewable resources. How 
much of this is comprised by solar? How much wind have you added to 
meet California's RPS requirement? Are you on target to meet the 
State's goal of 33% of renewable energy by 2022? Isn't there an 
initiative to raise this goal even further, to 50%?
    Answer. In 2007, the breakout of PG&E's 12 percent California-
eligible\1\ renewable electricity delivery mix was as follows: solar, 
less than 1 percent; wind, 15 percent; California-eligible small 
hydroelectric, 21 percent; geothermal, 30 percent, and biomass and 
waste, 34 percent. (Note: the distributed solar installed by PG&E's 
customers does not count for PG&E's RPS requirement.)
---------------------------------------------------------------------------
    \1\ As defined in California Senate Bill 1078, which created 
California's renewable portfolio standard, an eligible renewable 
resource includes geothermal facilities, hydroelectric facilities with 
a capacity rating of 30 MW or less, biomass, selected municipal solid 
waste facilities, solar facilities and wind facilities.
---------------------------------------------------------------------------
    Since the California RPS was created in 2002, PG&E has signed 39 
contracts for 2,612 MW (up to 3,195 MW if all options are exercised). 
The amount of wind and other resources added are as follows: 



    A 33 percent renewable energy standard has been proposed by the 
California Air Resources Board (CARB) as a key pillar to driving down 
greenhouse gas emissions in California. PG&E is reviewing that option 
and looking forward to working with the CARE and other interested 
parties going forward. We are committed to being a constructive part of 
California's drive to increase its use of renewable resources. We do 
believe, however, that as these requirements are debated and 
established, policy makers should carefully consider and must ensure 
that:

          1. Appropriate tax and financial incentives are available,
          2. Sufficient transmission has been built or approved to 
        deliver newly developed renewable energy to customers,
          3. Consensus is reached on the maximum price customers should 
        be expected to pay for renewable energy, and
          4. Reliability isn't jeopardized by over-reliance on 
        intermittent energy resources.

    We are confident these issues will be addressed, as they are 
necessary to ensure the viability and success of RPS requirements.
    We do not support the current ballot proposal in California to 
raise the RPS level to 50%, and have joined a coalition with 
environmental groups, organized labor, and renewable energy producers 
to oppose this well-intended, but poorly drafted ballot initiative. We 
would recommend that you contact the coalition Californians Against 
Another Costly Energy Scheme (www.noprop7.com) for further information 
on this matter as it has been authorized to speak on behalf of all of 
its members.
    Question 2. I understand that PG&E is working through California's 
Renewable Energy Transmission Initiative. Please elaborate. Are you 
working on any interstate transmission policies or are you 
concentrating wholly intrastate?
    Answer. PG&E is an active participant in California's Renewable 
Energy Transmission Initiative, or ``RETI.'' In addition to California, 
the footprint of the RETI analysis includes British Columbia, 
Washington, Oregon, Nevada, Arizona and Baja Mexico. This process will 
identify renewable resource areas that are well-suited for major new 
transmission investments, as well as specific transmission projects to 
access the identified areas. RETI is being developed in phases with the 
first phase focused on identifying the most promising renewable 
resource areas and the second phase focused on identifying conceptual 
transmission plans necessary to gain access to these areas. The 
initiative is modeled on the approach used in the Tehachapi area in 
California and also on the work done by ERGOT in Texas. The current 
scope of the first phase to identify renewable resource areas includes 
areas outside California. We recommend that federal legislation avoid 
creating conflicts with RETI and any other similar state-led 
initiatives in this area. Federal policies related to these efforts 
include interconnection policies that govern the process for 
interconnection studies and cost allocation for constructing any 
necessary transmission upgrades to support renewable development. 
Federal land use policies will also be a key issue in the ultimate 
development of the renewable resource areas and the associated 
transmission necessary to access those resources. Some of the lead 
federal agencies are participating in the RETI process. The extent to 
which the land use policies of these agencies align with the goals of 
RETI has not yet been specifically determined.
    PG&E is also supporting the Western Electricity Coordinating 
Council Transmission Expansion Planning and Policy Committee workgroups 
that are identifying interstate transmission options for supporting 
various renewable energy development scenarios in the West.
    Question 3. How are you dealing with the transmission necessary to 
transport your solar energy?
    Answer. PG&E and other California-based investor owned utilities 
have executed agreements to purchase power from a number of solar 
energy projects, however, the identification of the transmission method 
of service for these projects have been delayed due to the large number 
of generation projects in the CAISO interconnection queue. PG&E is 
actively participating in an effort by the CAISO to address its 
generation interconnection process with the aim of providing a clear 
path to interconnecting renewable resources in California. PG&E and the 
CAISO have also identified a major transmission upgrade opportunity to 
address reliability needs, improve access to energy storage facilities 
and improve access to renewable resources in southern California. The 
project does not specifically require interconnection of solar energy 
resources but is part of transmission expansion plans to access and 
integrate renewable resources in California.
    Question 4. In the 2005 Energy Policy Act, Congress sought to 
address the critical issue of transmission siting through the National 
Interest Electric Transmission Corridor process. Even though these 
provisions haven't been fully implemented, and no line has been sited 
pursuant to EPAct, the NIETC process has proven controversial. Still, 
everyone here today has highlighted the critical need to bring more 
transmission on line to transport these renewable resources to load. 
Just this past weekend, the Albuquerque Journal ran an Op-Ed 
criticizing environmental groups--who want the ``green'' power but not 
the infrastructure that goes with it--for opposing needed transmission 
lines.
    What more should Congress do in this important area? Some have 
called for Congress to provide FERC with exclusive jurisdiction to site 
new transmission for a renewable project. Please comment.
    Answer. In California, PG&E has strongly supported efforts at the 
California Public Utility Commission (CPUC) and the California 
Independent System Operator (CAISO) intended to provide California 
utilities with the tools they need to proactively plan and develop 
transmission facilities for renewable sources of electricity. These 
efforts include the development of a category of needed transmission 
projects under the CAISO tariff for renewable trunk lines, as well as 
``backstop'' cost recovery proposals at the CPUC intended to encourage 
utilities to exercise their right under FERC interconnection policy to 
provide up-front funding for RPS-related network upgrades where doing 
so makes sense for customers and the state's RPS goals.
    Planning for and expansion of transmission is appropriately 
performed by transmission owners working in conjunction with 
appropriate state or regional transmission system operators. The 
application of FERC backstop siting authority should be consistent with 
state and regional planning efforts to develop and maintain coordinated 
transmission planning processes.
    The states are generally best suited to address local and state 
issues concerning the siting and design and environmental review of 
state projects. However, PG&E sees FERC's backstop siting authority as 
a potential useful mechanism for ensuring the efficient processing of 
transmission corridors when states have not acted.
    Specifically, in cases where local interests may prevent 
transmission facilities from being sited and the state has withheld 
approval, FERC involvement can be useful in moving the process along. 
For example, FERC's backstop siting authority may be most appropriate 
for interstate corridors with significant congestion, and where 
proposed interstate projects require approvals by multiple states with 
potentially conflicting objectives.
    Question 5. One of the most important issues facing the solar 
industry today is that the tax credits we passed in a bipartisan manner 
are set to expire. We must enact a long-term ITC extension as soon as 
possible. However, for the first time in the renewable tax credit 
history, the House Majority is insisting that the tax credits be 
``offset'' by tax increases on other industries.
    Many of you have submitted testimony highlighting the tremendous 
economic boost the ITC provides the solar industry. According to Dr. 
Marker from SHOTT, solar capacity additions in 2007 contributed $2 
billion to the U.S. economy, creating 6,000 new jobs. And, it's 
forecasted that if the ITC is extended, 62,000 manufacturing and 
distribution jobs will be created.
    Do you agree that these tax credits ``pay for themselves'' and 
therefore don't need to be paid for by raising taxes on other 
industries? Is the renewable industry concerned that this new ``pay 
for'' requirement can set a troubling precedent in that offsets will be 
required each time the existing tax credits expire?
    Answer. PG&E supports establishing long-term tax credits, and the 
market certainty that provides, such as the 8-year extension proposed 
in recent federal legislation. This will enable the solar industry to 
obtain the continued financial investment necessary to see these multi-
year projects through from design, to construction, and to operation. 
This long-term tax credit approach will also enable the industry to 
establish a sufficient manufacturing base to achieve the economies of 
scale necessary to reduce costs and ultimately minimize the need for 
such subsidies. Conversely, the potential of this industry will be 
delayed or not be realized in an environment characterized by year-to-
year extensions, and the market uncertainty created by such annual 
legislative processes.
    Question 6. We currently have just over 400 MW of CSP installed 
capacity in this country, at a rate of about 16 cents per kilowatt-
hour. A recent study suggests that solar energy could grow to 10% of 
the nation's power by 2025. Do you agree with that assessment? If so, 
what percentage will CSP contribute as opposed to Photovoltaic? Also, 
how long will it take to get solar power costs on parity with 
conventional power sources?
    Answer. The study cited, ``Utility Solar Assessment (USA) Study, 
Reaching Ten Percent Solar by 2025'', projects that solar PV would 
provide 8 percent and CSP would provide 2 percent of total U.S. 
electricity. It would require an installation of 255 GW of solar by 
2025 at a Compound Annual Growth Rate of 33 percent for PV and 28% for 
CSP.
    The amounts projected are achievable, but to reach those values by 
2025 would require 100 percent of the many assumptions to happen 
perfectly and on schedule. Experience tells us that rarely does that 
happen. We would expect the actual process to take somewhat longer.
    Achieving grid parity between solar and local utility rates will be 
affected by several factors, including, among others, utility rate 
design, solar insolation in a given area, increases in fossil fuel 
costs, and carbon costs. It is expected that grid parity will be 
reached prior to the 2025 reference date, possibly as early as 2015 in 
some areas.

                                    

      
