[Senate Hearing 110-842]
[From the U.S. Government Publishing Office]
S. Hrg. 110-842
ENERGY INNOVATION
=======================================================================
HEARING
before the
SUBCOMMITTEE ON SCIENCE, TECHNOLOGY,
AND INNOVATION
OF THE
COMMITTEE ON COMMERCE,
SCIENCE, AND TRANSPORTATION
UNITED STATES SENATE
ONE HUNDRED TENTH CONGRESS
FIRST SESSION
__________
MARCH 20, 2007
__________
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Transportation
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SENATE COMMITTEE ON COMMERCE, SCIENCE, AND TRANSPORTATION
ONE HUNDRED TENTH CONGRESS
FIRST SESSION
DANIEL K. INOUYE, Hawaii, Chairman
JOHN D. ROCKEFELLER IV, West TED STEVENS, Alaska, Vice Chairman
Virginia JOHN McCAIN, Arizona
JOHN F. KERRY, Massachusetts TRENT LOTT, Mississippi
BYRON L. DORGAN, North Dakota KAY BAILEY HUTCHISON, Texas
BARBARA BOXER, California OLYMPIA J. SNOWE, Maine
BILL NELSON, Florida GORDON H. SMITH, Oregon
MARIA CANTWELL, Washington JOHN ENSIGN, Nevada
FRANK R. LAUTENBERG, New Jersey JOHN E. SUNUNU, New Hampshire
MARK PRYOR, Arkansas JIM DeMINT, South Carolina
THOMAS R. CARPER, Delaware DAVID VITTER, Louisiana
CLAIRE McCASKILL, Missouri JOHN THUNE, South Dakota
AMY KLOBUCHAR, Minnesota
Margaret L. Cummisky, Democratic Staff Director and Chief Counsel
Lila Harper Helms, Democratic Deputy Staff Director and Policy Director
Margaret Spring, Democratic General Counsel
Lisa J. Sutherland, Republican Staff Director
Christine D. Kurth, Republican Deputy Staff Director
Kenneth R. Nahigian, Republican Chief Counsel
SUBCOMMITTEE ON SCIENCE, TECHNOLOGY, AND INNOVATION
JOHN F. KERRY, Massachusetts, JOHN ENSIGN, Nevada, Ranking
Chairman JOHN McCAIN, Arizona
JOHN D. ROCKEFELLER IV, West KAY BAILEY HUTCHISON, Texas
Virginia GORDON H. SMITH, Oregon
BYRON L. DORGAN, North Dakota JOHN E. SUNUNU, New Hampshire
BARBARA BOXER, California JIM DeMINT, South Carolina
MARIA CANTWELL, Washington JOHN THUNE, South Dakota
MARK PRYOR, Arkansas
CLAIRE McCASKILL, Missouri
AMY KLOBUCHAR, Minnesota
C O N T E N T S
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Page
Hearing held on March 20, 2007................................... 1
Statement of Senator Ensign...................................... 3
Statement of Senator Kerry....................................... 1
Statement of Senator Klobuchar................................... 5
Statement of Senator Stevens..................................... 4
Prepared statement........................................... 4
Witnesses
Eckhart, Michael T., President, American Council On Renewable
Energy (ACORE)................................................. 21
Prepared statement........................................... 23
Katzer, Dr. James R., The Laboratory for Energy and the
Environment, Massachusetts Institute of Technology (MIT)....... 38
Prepared statement........................................... 40
Preli, Dr. Frank, Vice President of Engineering, UTC Power....... 16
Prepared statement........................................... 18
Prindle, William, Acting Executive Director, American Council for
an Energy-Efficient Economy (ACEEE)............................ 6
Prepared statement........................................... 8
Sridhar, K.R., Principal Co-Founder/CEO, Bloom Energy............ 34
Prepared statement........................................... 36
ENERGY INNOVATION
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TUESDAY, MARCH 20, 2007
U.S. Senate,
Subcommittee on Science, Technology, and Innovation,
Committee on Commerce, Science, and Transportation,
Washington, DC.
The Subcommittee met, pursuant to notice, at 2:38 p.m. in
room SR-253, Russell Senate Office Building, Hon. John F.
Kerry, Chairman of the Subcommittee, presiding.
OPENING STATEMENT OF HON. JOHN F. KERRY,
U.S. SENATOR FROM MASSACHUSETTS
Senator Kerry. This hearing will come to order. I apologize
to all for being a moment late. We had a caucus meeting that
went a little bit long, and I apologize.
Thank you all, witnesses, for being here. I'll introduce
you in a few minutes.
This is an ongoing part of a series of hearings that both
this Committee, as well as a number of other committees, are
focusing on to try to really pinpoint what we can and can't do
with respect to the increasingly pressing issue of global
climate change.
I just had an opportunity to share some thoughts in our
caucus, where had a brief discussion about it. But I've been
involved in this for a long time now. When I was Lieutenant
Governor, we dealt with the acid rain issue, with then Governor
John Sununu, of New Hampshire, and Dick Celeste, of Ohio. And
we actually put together the first cap-and-trade, that's where
we developed it, and subsequently put it into the Clean Air Act
in 1990. We found that were able to reduce emissions at a
faster rate and less cost than anybody had predicted. The
industry came in and said, ``Oh, God, don't do this to us. It's
going to cost $8 billion and take X number of years.'' And we
said to the environmental community, ``No, it won't. It's going
to cost $4 billion, and we can do it in half that time.'' Well,
guess what? It cost less than that, and we did it in less time.
Why? Because no one ever factors in, or has an ability
completely to factor in, what happens when you start down the
technology road. And once we start down that road, one thing
leads to the next, and cost goes down and a whole bunch of
market forces set into play which aren't there originally,
because you, in effect, create these markets.
This issue is long overdue for this Congress to respond to
it. There are over 450 mayors in our Nation who are taking
steps today, Mayor Rocky Anderson, Salt Lake City, the mayors
out in Portland and in other parts of our country. The evidence
is overwhelming, the science.
I met with a number of scientists, a few nights ago, who
were gathered in Washington as board members of the Heinz
Center, and to listen to these people--Ed Miles, Bob Corell,
others known publicly--talk about their increased sense of
urgency--the evidence is overwhelming of what is happening, not
just in the temperature increases themselves, but in the
impacts: Alaska, Senator Stevens' state, where the permafrost
is melting, where fishermen are having greater trouble going
out and doing their fishing, where the white spruce are
infected by beetles, 4 million acres worth of it, because they
used to die in the cold and it's not that cold. And you can go
anywhere and see these impacts. The glaciers in the mountains
and the ocean edges disappearing, increased impact on rainfall,
evaporation, the species movement, mitigation, and so forth.
I'm not going to run through all of that right now, except to
say that, when I hear Jim Hansen, a renowned climatologist,
say, ``You've got a 10-year window to respond,'' and when I
hear a group of these scientists say that the evidence is more
rapidly showing things they predicted at a greater rate, and at
a greater quantity, you'd better stop and listen. And that's
what this Congress needs to do.
Now, one of the interesting things that's happening is, a
lot of companies are responding themselves. You have USCAP, you
have a bunch of the top corporations who have come together,
saying, ``We need a carbonwide cap in our economy.'' You have
major corporations, like IBM and GE and Alcoa and others, who
have reduced their emissions, some as much as 65 percent, and
saved hundreds of millions of dollars, $621 million in one
case, almost a billion dollars in another case. So, there's
money to be made here.
There are three very significant--and only three--major
ways to deal with global climate change. One is through energy
efficiencies. And that's what you're here to help us understand
today. Two is through alternative and renewable fuels. And,
again, we're going to discuss that today. The third is through
clean coal technology. I talked, just the other day, with the
president of AEP, who tells me the next two plants they're
building, one in Ohio and one in West Virginia, will be built
with IGCC technology, integrated gasification combined cycle
technology, which General Electric, incidentally, has just
recently said they will stand behind, in terms of the liability
on the technology itself. So, having backed up the technology,
they've freed a company to feel comfortable to move forward to
implement it. This means this is within grasp. We don't have to
sit here and panic about loss of jobs; in fact, we will create
more jobs.
And, in the end, I believe--you know, we've all heard of a
twofer, where you do one thing, and you get something for it--
this is a fivefer, because if you do it, you not only live up
to your global climate-change responsibilities, you get better
health for your citizens, cleaner air, cleaner water, you
restore fisheries, you revitalize our economy with a whole
group of new jobs and new technologies, which grow our economy.
And, guess what? You provide America with greater energy
security and greater security overall. Those are big wins.
And so, my hope is that this committee can contribute
significantly to this dialogue, and that we can make some
significant progress in this field.
Senator Ensign?
STATEMENT OF HON. JOHN ENSIGN,
U.S. SENATOR FROM NEVADA
Senator Ensign. Thank you, Mr. Chairman. Thank you for
holding this hearing.
I was proud to chair this Subcommittee's first hearing on
alternative energy technologies. At that hearing we heard some
great testimony about some of the new, exciting technologies
that have the potential to help the United States satisfy its
energy demand while facilitating reduced greenhouse gas
emissions.
Dr. Sridhar, I want to welcome you back to our
subcommittee. I have visited your company and have seen some of
the exciting things that you are doing out in California. I
would also like to welcome the other entrepreneurs at the
witness table. I think that there are some incredibly exciting
developments out there in the private sector, including some
that are in the early stages of development.
I agree with the Chairman that this is an important part of
our developing economy. We often hear about the high-tech world
and this is certainly a big part of the high-tech world. The
high-tech world is demanding more energy these days, and more
reliable energy. At the same time, we are so dependent these
days on foreign oil and fossil fuels. I believe there exists a
great opportunity at this moment in history. People are
concerned about climate change, increasing greenhouse gas
emissions and clean air. At the same time, these concerns are
combining with the concern about the United States' strategic
position in the world and our dependence on some of the world's
``bad actors'' to fulfill our need for energy.
When we use some of the foreign sources of oil in the
world, we make people who are not exactly our friends
wealthier. Innovative energy solutions are what we need to make
us less dependent on foreign sources of energy and, at the same
time, address environmental concerns.
My own State is in a unique position. Between geothermal,
solar, and wind, we have some great opportunities for renewable
energy that I think could be developed. I'm very much a free-
market thinker. I do not believe that the government should be
in the business of picking winners and losers, but I also
believe that we have subsidized many of our oil concerns with
our military. I think that the government can play a role in
encouraging some of these fledgling technologies, and then
stepping back to allow the market to determine their viability.
By doing so, I believe that the outcome can be very valuable to
our country in the long term.
Next month, Nevada Solar One, the world's third-largest
solar plant, is scheduled to start generating power. This plant
will develop enough energy to power approximately 48,000 homes
in Nevada. It's not enough to supply Las Vegas or Reno, but it
is certainly very encouraging to see that solar power is
becoming an important part of Nevada's energy portfolio. We
also have huge amounts of geothermal energy in Nevada, I
believe we are second in the country, as a State, for
geothermal energy for power production. Nevada also has great
potential for wind energy, specifically in eastern Nevada.
However, the transmission lines needed to use that power do not
exist. There are many issues that need to be addressed in order
to achieve energy innovation and independence. The bottom line,
however, is that I'm glad that this subcommittee has been
taking the lead on addressing this issue, and I'm glad that the
witnesses present today are helping to move the country
forward. I agree with you, Mr. Chairman, that this is, overall,
going to have a very positive effect on the economy and the
types of jobs and the types of technology that will move this
country forward.
I appreciate you holding this hearing today, and I'm really
looking forward to hearing from the witnesses.
Senator Kerry. Thank you, Senator.
Senator Stevens?
STATEMENT OF HON. TED STEVENS,
U.S. SENATOR FROM ALASKA
Senator Stevens. Well, Mr. Chairman, I'd like to ask you to
put my statement in the record.
I would like to point out, though, that we have some very
interesting things going on in our state. And I'd like for you
to come up sometime and see the development at Chena Hot
Springs. I think one of the witnesses will be talking about
that today. That's a very interesting way to harness geothermal
resources.
We also have a plant that's being run now on fish oil, the
waste from--really, from a processing operation. There are many
things we can do to meet some of these challenges, and I look
forward to working with you on it.
[The prepared statement of Senator Stevens follows:]
Prepared Statement of Hon. Ted Stevens, U.S. Senator from Alaska
Mr. Chairman, thank you for holding this hearing on energy
innovation. This country's growing demand for energy is an issue that
is important for us all.
Our country needs a new energy paradigm. The 21st Century will be
the proving ground for our commitment to achieve both energy
independence and new, clean fuels. Our current energy challenges will
be solved by a combination of energy initiatives, increased domestic
production of petroleum, and the development of alternative sources of
energy. These are all part of the broader solution and we must find the
appropriate balance between them.
The future holds a staggering list of possibilities for new energy
technologies. In my state alone, we are looking at harnessing ocean and
tidal energy and utilizing wood waste to produce ethanol. Some of our
fishermen are currently using fish oil to power their operations and
Chena Hot Springs, outside Fairbanks, has harnessed energy from
geothermal resources to power their resort.
However, renewable and alternative sources of energy are expensive
and it will take time for them to become realistic and affordable
options.
I look forward to hearing from the witnesses today as they discuss
a wide spectrum of emerging ideas and technologies.
Senator Kerry. Thank you very much, Senator. Well, we
really look forward to your input, which will be very critical
to moving the Senate. So, we're delighted to have you involved
in it.
Senator Klobuchar?
STATEMENT OF HON. AMY KLOBUCHAR,
U.S. SENATOR FROM MINNESOTA
Senator Klobuchar. Thank you, Senator Kerry. And thank you
for doing this hearing.
I was listening to Senator Stevens talking about fish oil.
I decided that sounded more glamorous than our work we're doing
with poultry litter. But there is clearly----
[Laughter.]
Senator Klobuchar.--a lot of exciting things going on.
Senator Stevens. That's a new name for it, I'm sure.
[Laughter.]
Senator Klobuchar. Very nice.
There are a lot of exciting things going on across the
country. I'm proud to be on the Agriculture Committee, the
environmental committee, and this committee. So, on all three
of those Committees, we're focused on climate change. And I
will say that, in addition this being such an important issue
for jobs, I think that if we don't move ahead with this
technology, we're going to lose out on this economic
opportunity to other countries that are going to move more
quickly than we do, if we don't move ahead.
Earlier this year, our State passed a new law that's
considered the Nation's most aggressive standard for promoting
renewable energy in electricity production with a portfolio
standard. It's a ``25 x '25'' standard, by the year 2025, the
State's energy companies are required to generate 25 percent of
their electricity from renewable sources. For Xcel Energy,
which is our largest provider, they must reach 30 percent by
2030, and they were part of this agreement, as well, as well as
our Republican Governor and the Democratic-controlled two
bodies of the State legislature. It was a complete bipartisan
effort. And I hope we will see similar bipartisan work going on
in the U.S. Senate.
The reason that it's so important in our State is, as
Senator Ensign talked about, we're seeing just great economic
opportunity here in our State. We're seeing it with wind. We
have so many wind turbines right now in southeastern Minnesota
that they've opened up a bed and breakfast. So, if you're
looking for a romantic weekend, Mr. Eckhart, you can come
down--the whole deal--the package deal is, you spend the night
in the bed and breakfast, and you wake up in the morning and
look at a wind turbine. That's it.
[Laughter.]
Senator Klobuchar. So, anyway, we're doing a lot with wind.
We're obviously doing a lot----
Senator Kerry. And then you go out and clean up the kitty
litter.
[Laughter.]
Senator Klobuchar. We're doing a lot in the area of
agriculture, and I want to move ahead to the next frontier,
which is cellulosic ethanol, and we're trying to develop
something as part of our agriculture bill, which focuses funds
on the development of the next stage of ethanol, which will be
better with carbon, obviously, and be--contribute to--help with
the climate-change issue.
We've always considered environmental stewardship a way of
life in our State, and we want to do something to make a
difference and take action. So, I thank you for being here. As
I mentioned, to you when I came up ahead of time, I am going to
preside over the Senate, which we do often as freshman
Senators, but I will submit my questions in writing. They deal,
as we discussed, a lot with the wind, the transmission issues,
and perhaps you'll touch on that in your testimony and I can
hear about it later.
So, thank you so much, all of you, for being here.
Senator Kerry. Senator, thank you. Thanks very much for
your interest in these issues, and we're delighted to have
Minnesota represented in this effort. And we know you've been a
leader. I remember seeing some of the wind operations out
there, and you've been great leaders on this.
Well, we look forward to your testimony. If we could try to
hold the testimonies to a summary of about 5 minutes, it'll
give us more time to interact. Your full statements will be put
in the record as if read in full.
Mr. Bill Prindle, the Acting Executive Director, American
Council for an Energy-Efficient Economy--thank you, Bill, for
being here. Michael Eckhart, President of the American Council
on Renewable Energy; Dr. Francis Preli, Jr., Vice President of
Engineering, UTC Power, from Connecticut; K. R. Sridhar, Chief
Executive Officer of Bloom Energy, Sunnyvale; and Dr. James
Katzer, MIT Laboratory for Energy and the Environment, who's
doing some really terrific breakthrough stuff on this, from
Cambridge. We're delighted to have you all here. Thank you.
You want to lead off, Bill? We'll just run right down the--
--
STATEMENT OF WILLIAM PRINDLE, ACTING EXECUTIVE
DIRECTOR, AMERICAN COUNCIL FOR AN ENERGY-
EFFICIENT ECONOMY (ACEEE)
Mr. Prindle. Yes, thank you, Mr. Chairman, Members of the
Committee. It's a pleasure to be here today.
ACEEE is a nonprofit research and advocacy organization
formed in 1980 by leading researchers who decided that there
was really no way for people to understand what energy
efficiency is, in toto, because it's composed of so many small
scattered devices throughout the economy. So, our job for the
last 25 years has been to try to articulate, What is this thing
we call energy efficiency, and how does it contribute to our
economy, and what kind of policies do we need to move it
forward?
And as we've come to term ``efficiency'' lately, we call it
the ``first fuel'' in the race for clean and secure energy,
because, when you think about it, we have to slow down energy-
demand growth; otherwise, none of the clean sources that we
want to develop, be they clean coal or renewables, will be able
to keep up with rising energy demand.
We also have begun to demonstrate how much of a force
energy efficiency is in the economy today. Over the last 30
years, we've cut our energy use per dollar of gross domestic
product in half, and what that means is that most of the growth
in energy services--the lighting and the heating and the other
things we want to do with energy--has actually been served by
energy efficiency, not by electricity or gas or oil. And so,
that's been a key point.
But a lot of people still misunderstand efficiency. A lot
of people think of energy efficiency as turning off the lights
or not driving to the drugstore or just doing with less, when,
in fact, the record in the last 30 years shows that efficiency
is about investing in advanced and accelerated technology, and
doing the same or more than you used to do, with less energy
input.
And what we've also begun to find out is that the energy-
using infrastructure in our economy is actually larger, when
you add it up, than the energy supply infrastructure. So, if we
look at the economy in a recent year, we'll find maybe $100
billion worth of investment in powerplants, pipelines, LNG
terminals, you name it. It's about $100 billion. When we look
at the Energy Star products program that the Federal Government
sponsors, products sold under that logo total over $100 billion
in sales in a single year. And that's only about a third of
those markets--so, those energy equipment markets are actually
over $300 billion. And so, our economy actually spends more
money on the use of energy than it does on energy supply; and
yet, we don't see that because energy efficiency is hidden
under the hood of the car or in the back of the refrigerator or
up above the ceiling, where the light fixture is, and we just
don't see that. And yet, it's contributing this huge value to
the economy.
The potential remains very large. We've just done a number
of major studies ourselves. States like Florida and Texas,
where the potential for major growth and efficiency in
renewables could meet just about all of the new energy service
needs over the next 15 years. But to do that, we have to
accelerate the pace of innovation, we have to accelerate the
rate of efficiency and of progress on the renewable side. And
so, that means both technology, and it means policy support.
And so, I want to highlight just three areas where we see
innovation happening today, to give you a flavor for what's
going on.
Last Wednesday, we attended a National Press Club press
conference with Philips Lighting Company to announce a 10-year
initiative to shift the lighting market in the United States so
that residential light bulbs will use 90 percent less energy in
10 years. And, given Dr. Hansen's admonitions that we need to
make some shifts in the next 10 years, I thought that was a
meaningful commitment on the part of companies like Philips.
And so, we expect the other lighting companies to join in this
and for the lighting market to start to shift much more
rapidly.
One of our closest allies is Dow Chemical Company, which,
over the last 10 years, has cut its energy use per pound of
product by 20 percent through technology innovation. They have
just announced a new commitment to cut their energy use per
pound by another 25 percent by 2015 by accelerating their
innovation. It's not just their internal operations. They make
building insulation, they make advanced materials for lighter
weight and stronger vehicles, so they're actually contributing
to the efficiency solution on the demand side, as well.
And--you know, and yet we still need policy action, because
the markets--while the markets are working, they're not
accelerating innovation fast enough across all the broad areas
we need to attack.
So, one of the things that the Commerce Committee could do
is to get some of the infrastructure restored, and that
includes things like restoring some of the Census surveys. The
M-series, for example, that collects information on how much
equipment is sold, was discontinued as of 2003. That's an
infrastructure loss that we can't afford. On the R&D side, we
need to start restoring funding. We need new policies to save
oil. We support the ``Ten-in-Ten'' fuel economy bill that
several of the Committee members have been behind. We need to
set energy efficiency targets for utilities, the way Governor
Pawlenty did. And, in fact, in Nevada, the State has a combined
renewable and energy efficiency target for utilities. So, more
and more States are going that way.
And, of course, appliance efficiency standards are quietly
saving more and more energy. We have three products in
consensus agreements now that could go into legislation today.
And on the lighting side, we may have another one in 3 weeks,
tax incentives and so on.
I'll stop now, because I know my time is quickly running
out, but I just wanted to hit a few of the high points and I'll
stop and turn the mike over to the next witness.
Thank you.
[The prepared statement of Mr. Prindle follows:]
Prepared Statement of William Prindle, Acting Executive Director,
American Council for an Energy-Efficient Economy (ACEEE)
Introduction
ACEEE is a nonprofit organization dedicated to increasing energy
efficiency as a means of promoting both economic prosperity and
environmental protection. We were founded in 1980 and have contributed
in key ways to energy legislation adopted during the past 25 years,
including the Energy Policy Acts of 2005 and 1992 and the National
Appliance Energy Conservation Act of 1987. I have testified before the
Senate several times and appreciate the opportunity to do so before the
Subcommittee.
Energy Efficiency as the Engine of Economic Prosperity
Energy efficiency improvements have contributed a great deal to our
Nation's economic growth and increased standard of living over the past
30 years. Energy efficiency improvements since 1973 accounted for
approximately 50 quadrillion BTUs in 2003, which is more than half of
U.S. energy use and nearly as much energy as we now get annually from
domestic coal, natural gas, and oil sources combined. \1\ Thus, energy
efficiency can rightfully be called our country's largest energy
source. If the United States had not dramatically reduced its energy
intensity over the past 30 years, consumers and businesses would have
spent about $650 billion more on energy purchases in 2006.
Energy efficiency is measured not just in abstract terms like
declining energy intensity, but also in concrete terms like product
sales, job creation, and capital investment. ACEEE estimates that in
2006, total investment in energy supply systems, from pipelines to
powerplants, totaled about $100 billion. But Americans also invest in
energy-using technologies: energy-efficient products bearing the
Federal Energy Star label accounted for some $101 billion in sales last
year, in a range of home and business products like home appliance,
home electronics, heating and cooling systems, office equipment,
lighting, and windows. These are large markets: our data show that, for
example, that Americans buy some 11 million refrigerators, 64 million
residential windows, 150 million pieces of office equipment, and about
1.5 billion light bulbs. We estimate that Energy Star products account
for only about \1/3\ of these markets in the aggregate, totaling some
330 million products, so one could project that total sales in these
markets may be in the range of $300 billion annually. This suggests
that, in rough terms, the U.S. economy spends perhaps three times as
much per year on energy end-use technology as it does on energy supply
technologies.
Moreover, the Energy Star data does not include investments in the
160,000 Energy Star new homes sold in 2005, or the high-efficiency
commercial and industrial technologies, vehicles, combined heat and
power systems, and others that would increase the size of the
``efficiency economy'' still further. While our analysis in this area
continues, and we have not come to detailed conclusions on this topic,
the data we have developed so far indicates that the demand side of the
economy is very large in comparison with the supply side, and that
efficiency investments in the aggregate account conservatively for over
$100 billion.
These data help to erase a persistent misconception, which often
occurs as an unstated assumption in many analyses, that energy
efficiency is an economic ``brake'', that it involved reducing economic
output or slowing economic growth. This misconception tends to stem
from confusing energy efficiency with energy conservation. Conservation
means reducing our consumption of energy services, whereas efficiency
means consuming the same level of energy services with reduced
consumption of energy commodities. This distinction between energy
services and energy commodities is important. It is energy services we
want--cold beverages, hot showers, well-lit rooms, comfortable living
spaces, information services--and we are typically indifferent as to
how much of which kinds of energy commodities supply those services.
Energy conservation, cutting back on the level of energy service,
can in theory have an economic ``brake'' effect, if there is no shift
of technology or spending of energy savings on other goods. But
conservation usually occurs during times of rising energy prices, so
the total economic output of the energy sector may continue to rise,
and consumers may spend energy savings on other goods. Efficiency, on
the other hand, involves technology investment to replace less-
efficient products and systems. These investments create an economic
stimulus with ripple effects through the economy, and our macroeconomic
analyses show that efficiency investments tend to produce greater net
economic benefits, in the form of increased output, income, and
employment, than do investments in supply-side technologies.
We estimate that energy efficiency has provided some 75 percent of
the growth in energy services from the 1970s to the present. While
efficiency is often invisible--today's refrigerators look and perform
the same or better than 30 years, ago, but use \1/3\ the energy--it is
nonetheless measurable. And even though it is distributed in millions
of individual buildings, vehicles, and devices, it has been and
continues to be an effective engine of economic growth for the United
States.
How Big is the Efficiency Resource?
Even though we spend large amounts on efficient technology today,
and the United States is thus much more energy-efficient than it was 30
years ago, there is still enormous potential for additional cost-
effective energy savings. Some newer energy efficiency technologies
have barely begun to be adopted. Other efficiency measures could be
developed and commercialized rapidly in coming years, with policy and
program support. For example, in a study from 2000, the Department of
Energy's national laboratories estimate that increasing energy
efficiency throughout the economy could cut national energy use by 10
percent or more in 2010 and about 20 percent in 2020, with net economic
benefits for consumers and businesses.\2\ Studies for many regions of
the country have found similar if not even greater opportunities for
cost-effective energy savings.\3\
ACEEE recently completed major studies of the energy efficiency and
renewable energy resource potential in the states of Texas and Florida.
These studies showed and efficiency and renewables can meet all of the
growth in energy service needs, even in such fast-growing states, over
the next 15 years or more. The figures below summarize these results.
While public and private investment are needed to develop them, these
resources provide better returns to the economy than conventional
energy supply investments.
It should be noted that the efficiency potential analyses discussed
here are inherently quite conservative. They are based on technologies
that are established in the market today, and on today's energy prices
and technology costs. They are thus very conservative in the sense that
new technologies, higher energy prices, and lower technology costs may
well justify much greater estimates of efficiency potential. In the
1970s, for example, electricity growth rates were in the range of 3.5
percent per year. In that era, there was little of the high-efficiency
technology we have today: examples include refrigerators that use \1/3\
the energy of similar 1970s models; air conditioners that are twice as
efficient; light bulbs that save \3/4\ the energy used by incandescent
bulbs; LCD computer monitors that use \1/4\ the energy of CRT monitors;
and the list goes on. Because of such technology advances, the Energy
Information's 2007 Annual Energy Outlook projects that electricity
demand will grow by only 1.5 percent annually through 2030, less than
half of 1970s projections.
McKinsey Global Institute recently completed an analysis of global
energy demand, and the potential for energy efficiency and related
energy productivity gains to reduce current reference forecasts for
energy demand growth. The study found that energy demand growth can be
reduced by more than half by economically-viable technologies driven by
public policies. It also found that in the U.S., energy consumption
need not grow at all through 2030 if the cost-effective productivity
improvements were realized in all sectors.\4\
The Case for Accelerated Policy Action on Efficiency
Policies are Needed to Overcome Market Barriers
Regardless of the size of energy efficiency's aggregate potential,
or of the cost-effectiveness of such investments, a variety of market
barriers keep these technologies from being implemented. These barriers
fall in two main categories: (1) principal-agent or ``split incentive''
barriers, in which, for example, home builders must invest added
capital in efficient homes, but receive none of the energy savings
benefits; and (2) transaction costs, which stem from inability of
average consumers or businesses to make ``economically optimum''
decisions in time-and-information-limited real world conditions. A
study ACEEE conducted for the International Energy Agency covering five
countries found that half or more of the energy used in major home and
business energy end-use markets are affected by the principal-agent
barrier alone.\5\
In addition, basic forces in the economy work against the tendency
of higher energy prices to moderate energy demand. This principle of
``price elasticity of demand'', while economically correct, is
countered by ``income elasticity of demand'', under which rising
incomes cause consumers to be less affected by rising prices. A large
segment of our population continues to buy low-mileage, high prices
vehicles, with little concern for fuel costs. For less-affluent
consumers, ``cross-elasticities'' come into play, which cause them to
keep using energy as an essential service, but to cut back on other
goods to balance their budgets. Economists have documented the slowing
of retail sales in response to rising energy prices. Both the income
elasticity and cross-elasticity effects suggest that energy prices
alone won't balance our energy markets, and we need stronger energy
policies if we want to stabilize energy markets without damaging our
economy.
Reasons to Accelerate the Energy Efficiency Engine
Recent developments in our energy markets indicate that the U.S.
needs to accelerate efforts to implement energy efficiency
improvements:
Oil, gasoline, natural gas and coal prices have risen
substantially in recent years. For example, residential natural
gas prices have more than doubled since 2000, and retail
gasoline prices are up by similar proportions. Even America's
cheapest fuel, coal, has seen price inflation: Powder River
Basin coal has more than doubled in price since 2003. Energy
efficiency can reduce demand for these fuels, reducing upward
price pressure and also reducing fuel-price volatility, making
it easier for businesses to plan their investments.
A recent ACEEE analysis found that natural gas markets are
so tight that if we could reduce gas demand by as little as 4
percent over the next 5 years, we could reduce wholesale
natural gas prices by more than 20 percent.\6\ This analysis
was conducted by Energy and Environmental Analysis, Inc. using
their North American Gas Market Model, the same analysis firm
and computer model that was employed by DOE and the National
Petroleum Council for their 2003 study on U.S. natural gas
markets.\7\ These savings would put over $100 billion back into
the U.S. economy. Moreover, this investment would help bring
back U.S. manufacturing jobs that have been lost to high gas
prices and also help relieve the crushing burden of natural gas
costs experienced by many households, including low-income
households. Importantly, much of the gas savings in this
analysis comes from electricity efficiency measures, because
much of the marginal electric load is met by natural-gas fired
power plants.
The U.S. is growing increasingly dependent on imported oil,
with imports accounting for more than 60 percent of U.S. oil
consumption in 2006, of which more than 40 percent came from
OPEC countries.\8\ The U.S. Energy Information Administration
estimates that imports will account for 68 percent of U.S. oil
use in 2020.\9\ While moderate amounts of new oil are available
in hard-to-reach areas of the U.S., much greater amounts of oil
are available by increasing the efficiency with which we use
oil. A January 2006 report by ACEEE found that the U.S. can
reduce oil use by as much as 5.3 million barrels per day in
2020 through improved efficiency, including more than 2 million
barrels per day in industry, buildings, heavy duty vehicles and
airplanes.\10\ In other words, there are substantial energy
savings outside of the highly contentious area of light-duty
vehicle fuel economy. These 5.3 million barrels per day of oil
savings are nearly as much as we presently import from OPEC
(OPEC imports were 5.5 million barrels per day in 2005).\11\
Energy efficiency can slow the growth in oil use, allowing a
larger portion of our needs to be met from sources in the U.S.
and friendly countries.
Economists have increasingly raised concerns that the U.S.
economy is slowing and that robust growth rates we have had in
recent years will not be sustained. Energy efficiency
investments can spur economic growth; they often have financial
returns of 30 percent or more, helping to reduce operating
costs and improve profitability. In addition, by reducing
operating costs, efficiency investments free up funds to spend
on other goods and services, creating what economists call the
``multiplier effect'', and helping the economy broadly. This
stimulates new economic activity and job growth in the U.S.,
whereas most of every dollar we spend on oil flows overseas. A
1997 study found that due to this effect, an aggressive set of
efficiency policies could add about 770,000 jobs to the U.S.
economy by 2010.\12\
Overall, the U.S. has ample supplies of electricity at
present, but demand is growing and several regions are
projecting a need for new capacity in the next few years in
order to keep reserve margins adequate.\13\ Energy efficiency
resource policies can slow growth rates, postponing the date
additional capacity will be needed.
Greenhouse gas emissions continue to increase. Early signs
of the impact of these changes are becoming apparent in Alaska
and other Arctic regions.\14\ And several recent papers have
identified a link between warmer ocean temperatures and
increased hurricane intensity.\15\, \16\ The
Intergovernmental Panel on Climate Change's 2007 report \17\
documents more conclusively than ever that human activity is
affecting the global climate, and that the environmental and
economic consequences of inaction may be severe. Energy
efficiency is the most cost-effective way to reduce these
emissions, as efficiency investments generally pay for
themselves with energy savings, providing negative-cost
emissions reductions. The term ``negative-cost'' means that,
because such efficiency investments produce net economic
benefits, they achieve emission reductions at a net savings for
the economy. This important point has been missed in much of
the climate policy analysis modeling performed to date. Too
many economic models are incapable of characterizing the real
economic effects of efficiency investments, and so forecast
inaccurate economic costs from climate policies. Fortunately,
this kind of flawed policy analysis is beginning to be
corrected. For example, a May 2006 study just released by ACEEE
found that the Regional Greenhouse Gas Initiative (RGGI--the
planned cap and trade system for greenhouse gases in the
northeastern U.S.) can have a small but positive impact on the
regional economy provided increased energy-efficiency programs
are a key part of implementation efforts.\18\
Energy efficiency also draws broad popular support. For example, in
a March 2005 Gallup Poll, 61 percent of respondents said the U.S.
should emphasize ``more conservation'' versus only 28 percent who said
we should emphasize production (an additional 6.5 percent volunteered
``both'').\19\ In an earlier May 2001 Gallup poll, when read a list of
11 actions to deal with the energy situation, the top four actions
(supported by 85-91 percent of respondents) were ``invest in new
sources of energy,'' `'mandate more energy-efficient appliances,''
``mandate more energy-efficient new buildings,'' and ``mandate more
energy-efficient cars.'' Options for increasing energy supply and
delivery generally received significantly less support.\20\
The Role of Innovation in Advancing Energy Efficiency
Technological innovation in energy efficiency, as is true of many
facets of the U.S. economy, relies on a stream of innovations. ACEEE
reviews emerging technologies in the buildings, industry, and
transportation sectors, and periodically publishes reports on leading
technologies. A summary of, and hyperlinks to, ACEEE reports on these
technologies in the buildings sector can be found at the following
World Wide Web address: http://www.aceee.org/emertech/
buildings.htm#reports.
Our most recent buildings-sector technology assessment examines 72
emerging technologies in detail. While this testimony is too short for
a full discussion of all of these innovations, I would like to use one
technology--the residential incandescent light bulb--as an emblematic
example. In our 2004 emerging technologies report, we examined several
lighting technologies, including compact fluorescent fixtures, halogen
lighting, and light-emitting diode (LED) lighting. All of these show
promise as alternatives to the incandescent light bulb that has been
the most common form of residential electric lighting for more than a
century. It still accounts for more than 90 percent of total
residential lighting sales in the U.S.
On March 14, 2007, ACEEE and other organizations announced a new
coalition effort, initiated by Philips Lighting Company, that will
fundamentally change the U.S. home lighting market in 10 years. By
setting new high-performance targets for typical lighting applications,
we expect to reduce residential lighting consumption by as much as 90
percent. While such standards are technology-neutral, based on our
emerging technologies analysis we expect that compact fluorescents,
halogens, and LEDs will all play a role in this transformation.
The residential light bulb was the first universal electricity end-
use application when the electricity industry first developed in the
19th Century. Its main role in those early years was to create a
universal, electric lighting energy service technology. Until the
advent of the electric light bulb, lighting energy services were met by
kerosene, whale oil, and of course paraffin (which we use as candles).
Electric lights were the first in a long line of electricity-powered
end use technologies that enabled the development of our modern power
grid, and that drove much of our economic growth in the 20th Century.
In the 21st Century, however, we have a different imperative. Our
electricity grid is built; to sustain economic growth while protecting
our environment, we must cut waste from the energy-services side of the
grid while cutting pollution from the generation side. Last week's
lighting coalition announcement is one significant shift among many
that must be achieved on the energy services side. Our technology
studies and potential analyses show that such shifts toward energy-
efficient technology can occur in many other end-uses.
Philips' new lighting initiative is representative of the kinds of
innovation we are seeing in the buildings sector. In the industrial
sector, companies like Dow Chemical are achieving dramatic gains in
energy efficiency and carbon emission reductions. From 1995 to 2005,
Dow reduced the energy consumed per pound of product by 20 percent. In
2006, the company announced a new commitment to reduce its energy used
per pound of product by another 25 percent by 2015. This requires
continuous innovation, in end-use technology, in the application of
combined heat and power systems, in process improvement, and in
operation and maintenance practices.
Program and Policy Initiatives Needed to Realize Efficiency Potential
The Energy Policy Act of 2005 (EPAct 2005) made some useful
progress on energy efficiency. Particularly notable were sections that
established new consensus Federal efficiency standards on 16 products
and that created energy efficiency tax incentives. ACEEE estimates that
the energy efficiency sections of EPAct 2005 will reduce U.S. energy
use by about 1.8 quadrillion BTU (``quads'') in 2020, reducing
projected U.S. energy use in 2020 by 1.5 percent. Of these savings,
more than 75 percent will come from equipment efficiency standards and
energy-efficiency tax incentives.\21\
EPAct 2005, however, did not address several key energy efficiency
issues. And since 2005, America's energy challenges have increased. We
therefore recommend that Congress take further action to stimulate
energy efficiency innovation.
Energy Market and Technology Data Collection
One of the core functions and responsibilities of the Federal
Government is to collect information on market activity, so that
businesses, researchers, and policymakers have the fundamental
information they need to understand markets and plan for future
initiatives. The Commerce Department through its Census and other
activities, and the Department of Energy through its Energy Information
Administration surveys, are two of the key sources of information
needed to keep up with developments in energy markets. We have seen
disturbing trends in both agencies, with key surveys being cut back in
comprehensive and in frequency, and in some cases dropped altogether.
We urge the Committee to investigate this issue and seek to restore
this key information infrastructure. Cutting back on energy market
surveys is like cutting back on the U.S. Geological Survey, on whose
information the energy supply industries depend for energy resource
information; we need to continue and expand, not curtail, government
efforts in this area.
For specific examples, we are concerned about the loss of the M-
series surveys in the Census Bureau. These surveys collect essential
information on product shipments, without which it is not possible to
track the trends that indicate which technologies are penetrating the
market. In addition, last year's discontinuation of the Vehicle
Inventory and Use Survey was a tremendous disservice to the cause of
heavy-duty truck efficiency, and indeed to the understanding of and
planning for the trucking industry generally. The VIUS, conducted every
5 years, is the only source of national data on the number, size, fuel
economy and driving patterns of the U.S. truck stock. It should be
reinstated as soon as possible, before the Commerce Department's
institutional capability disappears. The next VIUS was to have occurred
in 2007.
Research, Development, Demonstration, and Deployment (RDD&D)
Many of the energy efficiency technologies we see emerging today
were created with Federal RDD&D support--these include Energy Star
windows, compact fluorescent and LED light bulbs, and high-efficiency
refrigerator technology. EPAct authorized significant increases in
efficiency RDD&D; however, budget requests for efficiency RDD&D have
declined by about one-third since FY 2002. These cuts are beginning to
cripple our research infrastructure, by laying off senior personnel
with irreplaceable technology expertise and research experience, and in
some cases discontinuing entire research programs. If the U.S. wants to
continue its record of innovation in the energy area, and wants to be
an effective competitor in global markets.
We were encouraged to see the Senate Budget Committee allocate $1.6
billion for energy efficiency and renewable energy programs at the
Department of Energy. This represents more than a $300 million, 25
percent increase over the administration's FY 2008 budget request. In
our House Energy and Water Development Appropriations Subcommittee
testimony, we recommended increases in 16 priority efficiency programs
for a total increase of $217 million above the request. We hope the
Senate appropriations process will follow these recommendations, and
thus begin to rebuild the RDD&D infrastructure the U.S. needs to get
ahead of the curve on the next generation of energy efficiency
innovations.
Policies to Save Oil
Most notably missing from EPAct were significant provisions to
reduce oil use or to accelerate energy efficiency investment in the
electricity and natural gas industries. We recommend that Congress make
these high priorities in its upcoming deliberations on energy policy.
Fuel economy in the vehicle fleet must be improved, either through
Federal fuel economy standards, tax incentives, or RD&D policies. Our
analysis projects that more than 5 million barrels of oil per day, some
25 percent of current U.S. consumption, could be saved cost-effectively
by 2025.
ACEEE supports the ``Ten-in-Ten'' fuel economy bill sponsored by
several Commerce Committee members that would raise the average fuel
economy of light-duty vehicles to 35 mpg by 2018. This target is
achievable and necessary to allow the transportation sector to meet its
responsibility to address climate and energy security goals.
There are companion policies that should be explored as well. On
the consumer side, a feebate policy would ensure, in the face of
volatile fuel prices, consistent consumer interest in the fuel economy
of the vehicles that they buy and help to align consumer demands with
requirements of manufacturers as fuel economy increases are phased in
over the next decade.
Energy Efficiency Resource Standards for Utilities
We also recommend that Congress enact Energy Efficiency Resource
Standards (EERS) for electric and gas utilities. EERS is a simple
policy approach that sets overall performance targets for utility
efficiency efforts and provides flexibility in compliance. Several
states have implemented EERS, beginning with Texas in its 1999
electricity restructuring legislation.\22\ It is somewhat analogous to
the Renewable Portfolio Standards (RPS) the Senate has passed twice in
this decade. In fact, EERS and RPS are quite complementary. Our
preliminary analysis shows that the most recent Senate RPS bill,
combined with the EERS in a current discussion draft, could begin to
reduce carbon emissions in the U.S. electric power sector by 2020.
EERS laws and regulations are now in operation in several states
and countries. Texas's law requires electric utilities to offset 10
percent of their demand growth through end-use energy efficiency.
Utilities in Texas have already exceeded their targets, and there is
legislation to raise them. Hawaii and Nevada recently expanded their
renewable portfolio standards to include energy efficiency. Connecticut
and California have both established energy savings targets for utility
energy efficiency programs (Connecticut by law and California by
regulation) while Vermont has specific savings goals for the nonprofit
organization that runs statewide programs. Pennsylvania's new Advanced
Energy Portfolio Standard includes end-use efficiency among other clean
energy resources. Colorado's largest utility has energy savings goals
as part of a settlement agreement approved by the Public Service
Commission. And Illinois and New Jersey are planning to begin programs
soon. EERS-like programs have been working well in Italy, the United
Kingdom, France, and the Flemish region of Belgium.
Appliance and Equipment Efficiency Standards
Appliance and equipment efficiency standards are another proven
policy for accelerating innovation in energy efficiency. Standards
already in place will save Americans over $200 billion in net economic
benefits through 2030. There are several consensus agreements for new
standards that could be included in legislation in this session of
Congress. We will work with the energy committees on these issues.
ACEEE, affected industries, and other stakeholders have a long
history of negotiating consensus agreements on new efficiency
standards. Many of these agreements were incorporated into the Energy
Policy Acts of 1992 and 2005. ACEEE is now talking with stakeholders
about standards on additional products and has agreements on several
new standards. We are working with energy committee staff to include
these new consensus standards in legislation this year.
Products which may lend themselves to consensus standards include
the following:
Reflector lamps
Pool heaters
Metal halide luminaires
Bottle-type drinking water dispensers
Portable electric spas (hot tubs)
Single-voltage external AC to DC and AC to AC power supplies
Commercial hot-food holding cabinets
Walk-in refrigerators and freezers
Energy Efficiency Tax Incentives
We also recommend that the EPAct tax incentives for energy
efficiency technologies be extended beyond their current expiration
dates, which were truncated by the EPAct conferees at the last minute.
The EXTEND Act (S. 822) was recently introduced in the Senate to
achieve this end, while also refining some specific provisions. We
support the EXTEND Act as part of a consensus among a wide range of
stakeholders
While they are not included in the EXTEND Act, Hybrid tax credits
in EPAct 2005 should be extended and expanded to ensure the continued
growth of the hybrid market. Incentives for heavy-duty hybrids should
be revisited and extended as well. Interest in heavy-duty hybrids is
high among users, and as is the potential for fuel savings.
Conclusion
Energy efficiency is the ``first fuel'' for America's energy
policy. Energy efficiency has saved consumers and businesses trillions
of dollars in the past two decades, but these efforts should be
accelerated in order to:
Wean America from its addiction to oil and so enhance our
national security;
Help American consumers and businesses cope with high energy
bills;
Bring balance to America's energy markets by softening
energy prices;
Strengthen our economy by generating American jobs and
capital investment; and
Start to meet the global warming challenge by moderating
carbon dioxide emissions.
This concludes my testimony. Thank you for the opportunity to
present these views.
ENDNOTES
\1\ Specifically, national energy intensity (energy use per unit of
GDP) fell 46 percent between 1973 and 2003. About 60 percent of this
decline is attributable to real energy efficiency improvements and
about 40 percent is due to structural changes in the economy and fuel
switching.
\2\ Interlaboratory Working Group, 2000, Scenarios for a Clean
Energy Future. Washington, D.C.: Interlaboratory Working Group on
Energy-Efficient and Clean-Energy Technologies, U.S. Department of
Energy, Office of Energy Efficiency and Renewable Energy.
\3\ For a summary of many of these studies, see Nadel, Shipley and
Elliott, 2004, The Technical, Economic and Achievable Potential for
Energy-Efficiency in the U.S.--A Meta-Analysis of Recent Studies.
Washington, D.C.: American Council for an Energy-Efficient Economy.
\4\ http://www.mckinsey.com/mgi/publications/Global_Energy_Demand/
index.asp. We note that this is a proprietary, copyrighted analysis.
The limited review in this testimony comes from information shared with
the National Petroleum Council.
\5\ Prindle et al. 2007. Quantifying the Effects of Market Failures
in the End-Use of Energy. American Council for an Energy-Efficient
Economy (forthcoming International Energy Agency publication)
\6\ Elliott and Shipley, 2005, Impacts of Energy Efficiency and
Renewable Energy on Natural Gas Markets: Updated and Expanded Analysis.
http://www.aceee.org/pubs/e052full.pdf. Washington, D.C.: American
Council for an Energy-Efficient Economy.
\7\ National Petroleum Commission. 2003, Balancing Natural Gas
Policy--Fueling the Demands of a Growing Economy: Volume I Summary of
Findings and Recommendations. Washington, D.C.: U.S. Department of
Energy.
\8\ Energy Information Administration, 2006, Monthly Energy Review
May 2006. Washington, DC: U.S. Dept. of Energy.
\9\ Energy Information Administration, 2006, Annual Energy Outlook.
Washington, D.C.: U.S. Department of Energy.
\10\ Elliott, Langer and Nadel, 2006, Reducing Oil Use Through
Energy Efficiency: Opportunities Beyond Cars and Light Trucks.
Washington, DC:. American Council for an Energy-Efficient Economy.
\11\ See note #9.
\12\ Alliance to Save Energy et al., 1997, Energy Innovations: A
Prosperous Path to a Clean Environment. Washington, DC: American
Council for an Energy-Efficient Economy.
\13\ North American Electric Reliability Council, 2006, 2006 Long-
Term Reliability Assessment: The Reliability of Bulk Electric Systems
in North America. Princeton, N.J.: North American Electric Reliability
Council.
\14\ Hassol, 2004, Impacts of a Warming Arctic: Arctic Climate
Impact Assessment. http://www.acia.uaf.edu. Cambridge University Press.
\15\ Webster, Holland, Curry and Chang, 2005, ``Changes in Tropical
Cyclone Number, Duration, and Intensity in a Warming Environment.''
Science, 309, 16 September, 1844-1846.
\16\ Emanuel, 2005, ``Increasing Destructiveness of Tropical
Cyclones over the Past 30 Years.'' Nature, 436, 4 August, 686-688.
\17\ Intergovernmental Panel on Climate Change. Climate Change
2007: The Fourth Assessment Report (AR4). United Nations Environment
Program, 2007.
\18\ Prindle, Shipley and Elliott, 2006, Energy Efficiency's Role
in a Carbon Cap-and-Trade System: Modeling Results from the Regional
Greenhouse Gas Initiative. Washington, DC: American Council for an
Energy-Efficient Economy.
\19\ Gallop, 2005, ``Gallop Poll Social Series--The Environment.''
Princeton, N.J.: The Gallop Organization.
\20\ Moore, David, 2001, ``Energy Crisis: Americans Lean toward
Conservation over Production.'' Princeton, N.J.: The Gallup
Organization.
\21\ Nadel, Prindle and Brooks, 2006, ``The Energy Policy Act of
2005: Energy Efficiency Provisions and Implications for Future Policy
Efforts'' in Proceedings of the 2006 ACEEE Summer Study on Energy-
Efficiency in Buildings. Washington, DC: American Council for an
Energy-Efficient Economy.
\22\ Nadel, Steven. 2006. Energy Efficiency and Resource Standards:
Experience and Recommendations. American Council for an Energy-
Efficient Economy, Report No. E063.
Senator Kerry. Thank you very much.
Dr. Preli?
STATEMENT OF DR. FRANK PRELI,
VICE PRESIDENT OF ENGINEERING, UTC POWER
Dr. Preli. Thank you very much. I'm Frank Preli, Vice
President of Engineering for UTC Power.
UTC Power is a business unit of United Technologies
Corporation. It's a world leader in commercial stationary fuel-
cell development and deployment, but we also develop other
innovative products. And, at the Committee's request today, I
will focus my remarks on our PureCycle' geothermal
system.
This is an innovative, low-temperature geothermal energy
system being used for the first time for power production in
the State of Alaska. It operates at 165+ F, which is the
lowest-temperature geothermal resource ever used for commercial
power production.
Our Nation's faced with air-quality and global climate-
change challenges, ever increasing fuel costs, and a desire to
be less dependent on unstable and foreign energy sources.
Geothermal energy offers a renewable, continuously available,
largely untapped domestic resource. Although the U.S. leads the
world with 2800 megawatts of geothermal energy production, this
represents only .5 percent of the current U.S. demand for
electricity. It's estimated that, with effective Federal and
State support, as much as 20 percent of the U.S. power needs
could be met by geothermal energy by 2030.
The PureCycle' system is based on a closed-loop
process that uses geothermal water to generate 225 kilowatts of
electrical power. Think of an air conditioner that uses
electricity to generate cooling. The PureCycle'
geothermal system reverses this process and uses heat to
produce electricity. The system is simply driven by an
evaporation process. It's entirely enclosed, so there are no
emissions produced. The only byproduct is the electricity. And
the fuel, hot water, is a renewable resource.
Thanks to a partnership between UTC Power, Chena Hot
Springs Resort, the U.S. Department of Energy, and various
Alaska authorities, Alaska was added, last year, to the list of
States generating electricity from geothermal energy. The power
system uses geothermal water at 165+ F. And this is actually a
very exciting breakthrough, because previously it was assumed
that the geothermal fluids needed to be at least 225+ F for
economic power production, and this has a big impact on how
much of the United States is now available, or will be
available, for geothermal power production.
The Chena Hot Springs Resort is owned by Bernie and Connie
Karl, a visionary couple who are committed to a sustainable
community that is entirely self-sufficient for energy, for
food, and for fuel. The resort operates independent of the grid
and pays 30 cents per kilowatt hour for electricity, and, with
the new geothermal system, they're saving $1,000 per day and
eliminating the need for diesel fuel for their power source.
This eliminates harmful emissions and also eliminates the need
for the logistical transport of fuels over the rough terrain.
They have two PureCycle' systems operating today,
and they've logged 5,400 hours, and the availability is over 92
percent.
This project won two awards last year, a U.S. Environmental
Protection Agency and a Department of Energy 2006 National
Green Power Award for Onsite Generation, and also Power
Engineering magazine named it ``The Renewable Sustainable
Energy Project of the Year.''
So, simply put, the PureCycle' technology could
result in significant new domestic and continuously available
renewable energy resources, not in just Alaska, but across the
country. For example, there are more than 500,000 oil and gas
wells in the U.S., many of which are unprofitable. Geothermal
hot water is abundant at many oil and gas well sites, and could
be used to produce a renewable source of electrical power and
extend the life of many of these assets.
But it's unfortunate that the Federal Government is
proposing to eliminate all R&D funding for geothermal at a time
when there are exciting innovative developments emerging. The
rationale given is that the technology is mature and represents
a resource with limited value, since it's confined only to the
Western States. But, as our Chena project demonstrates, low-
temperature geothermal energy production is a developing
technology that enables a much broader geographic reach. This
can eventually satisfy a significant portion of our growing
energy needs, but appropriate government policies must be
adopted and implemented.
Attached to my testimony is a position paper that outlines
key industry recommendations, including extension of the
geothermal production incentive, robust funding for DOE's
geothermal research program, incentives for geothermal
exploration, and a comprehensive nationwide geothermal resource
assessment. With your help, we can translate the potential of
geothermal energy into a reality.
So, thank you for this opportunity to testify, and I'd be
pleased to answer any questions.
Thank you.
[The prepared statement of Dr. Preli follows:]
Prepared Statement of Dr. Frank Preli,
Vice President of Engineering, UTC Power
Good afternoon. I am Frank Preli, Vice President of Engineering for
UTC Power. I joined United Technologies Corporation in 1978 and have
been with UTC Power since 1998. I am responsible for leading a group of
approximately 250 engineers and scientists engaged in research and
product development for UTC Power. Our work includes development of
Proton Exchange Membrane (PEM), Phosphoric Acid (PAFC) and Solid Oxide
(SOFC) fuel cell technology to serve commercial and transportation
markets. We also develop integrated combined cooling, heating and power
systems and organic Rankine cycle-based heat recovery systems for
geothermal and waste heat applications.
Company Background
UTC Power, a business unit of United Technologies Corporation, is a
world leader in commercial stationary fuel cell development and
deployment. UTC Power also develops other innovative power systems for
the distributed energy market. At the Committee's request, I will focus
my remarks today on the latest addition to our portfolio of clean,
efficient, reliable technology solutions--namely, the
PureCycle' power system. This is an innovative low-
temperature geothermal energy system that represents the first use of
geothermal energy for power production in the state of Alaska and the
lowest temperature geothermal resource ever used for commercial power
production in the world. The technology currently is being demonstrated
at the Chena Hot Springs resort 60 miles from Fairbanks, Alaska and 35
miles off the power grid.
Summary
Geothermal energy addresses many of our national concerns, but its
potential is largely untapped. UTC Power's PureCycle' system
represents an innovative advancement in geothermal energy production
and is operating successfully today in Alaska as part of a
demonstration effort. This geothermal energy breakthrough offers the
possibility of tapping into significant U.S. geothermal reserves for a
domestic, renewable, continuously available source of power to meet our
growing energy demands. Congressional action is needed, however, if the
U.S. is to translate this potential into reality.
Geothermal Energy Addresses Many National Concerns, But Huge
Potential is Largely Untapped
Our Nation is faced with air quality and global climate change
challenges, ever-increasing fuel costs and a desire to be less
dependent on energy sources from politically unstable areas of the
world. The United States is blessed with an abundance of geothermal
energy resources that offer a renewable, continuously available,
largely untapped domestic resource. The country generates 2,800 MWe of
geothermal energy for power production in California, Nevada, Utah and
Hawaii and another 2,400 MWe is under development. While estimates
vary, the Geothermal Energy Association indicates that with effective
Federal and state support, as much as 20 percent of U.S. power needs
could be met by geothermal energy sources by 2030. The National
Renewable Energy Laboratory's report ``Geothermal: The Energy Under Our
Feet'' concludes: ``Domestic resources are equivalent to a 30,000-year
energy supply at our current rate for the United States.'' The study
also notes: ``New low-temperature electric generation technology may
greatly expand the geothermal resources that can be developed
economically today.''
Chena Hot Springs Resort Puts Geothermal on the Map in Alaska
Thanks to a partnership between UTC Power, Chena Hot Springs
Resort, the U.S. Department of Energy, Alaska Energy Authority, Alaska
Industrial Development and Export Authority and the Denali Commission,
Alaska was added last year to the list of states using geothermal
resources for power production. The system operates on 165+ F (74+ C)
geothermal water and by varying the refrigerant can use hydro thermal
resources up to 300+ F (149+ C). This is an exciting breakthrough since
previously experts had assumed that geothermal fluids needed to be at
least 225+ F (107+ C) for economic power generation. It is also
significant since a large portion of the estimated known U.S.
geothermal resources are expected to be in the low to moderate
temperature range, including a large number of deposits associated with
oil and gas wells that are currently not economically viable and
therefore non-productive.
Alaska has some of the highest energy costs in the country for
electric grid connected power and even higher costs for those off the
grid. The Chena Hot Springs Resort, which operates independent of the
grid, pays 30 cents per kilowatt hour (kWh) for electricity. When fully
optimized and fully implemented, we expect the UTC Power
PureCycle' system can reduce this cost to 5-7 cents per kWh,
thus saving the owners $1,000 per day in fuel costs and eliminating the
need for diesel fuel-burning generators and their harmful emissions.
The system was commissioned in August 2006 and provides power for
the resort's on-site electrical needs. Two PureCycle' 225 kW
units are operational at Chena today and together have logged 5,400
hours of experience with 100 percent reliability after the initial 500-
hour commissioning shakedown and greater than 99.2 percent reliability
overall.
The visionary owners of the resort, Bernie and Connie Karl, are
committed to a sustainable community that is entirely self-sufficient
in terms of energy, food and fuel. Their dedication is evidenced by on-
site renewable power sources that secure their energy independence
while benefiting the environment.
We are working closely with Alaskan authorities regarding further
development of and enhancements to this technology. There is
significant potential to deploy PureCycle' systems at
Alaska's more than 200 rural villages that currently depend on diesel
generators with fuel being shipped by air or water. This results in
high costs, logistics issues and dirty, loud power generation that is
inconsistent with native cultural values.
Description of PureCycle technology
The PureCycle' system is the product of a UTC
brainstorming session in 2000 focused on opportunities for organic
growth. It is based on organic Rankine cycle (ORC) technology--a closed
loop process that in this case uses geothermal water to generate 225 kW
of electrical power. Think of an air conditioner that uses electricity
to generate cooling. The PureCycle' system reverses this
process and uses heat to produce electricity. The system is driven by a
simple evaporation process and is entirely enclosed, which means it
produces no emissions. The only byproduct is electricity, and the
fuel--hot water--is a free renewable resource. In fact, after the heat
is extracted for power, the water is returned to the earth for
reheating, resulting in the ultimate recycling loop.
Innovative Features and Awards
The PureCycle' system reflects a number of key
innovations and breakthroughs. As mentioned previously, the Chena
project is the world's lowest temperature geothermal resource being
used for commercial power production and represents the first time
geothermal energy has been used to produce electricity in Alaska.
On the technical side, the PureCycle' system capitalizes
on an advanced aero dynamic design that results in 85 percent
efficiency from a radial inflow turbine derived from a Carrier Corp.
compressor. Carrier Corp. is a sister UTC company and a world leader in
air conditioning and refrigeration technology. The geothermal system is
also unique in its ability to match the turbine design to working fluid
properties, thus allowing the equipment to operate on a range of low to
moderate temperature energy resources and enhancing its flexibility to
meet customer requirements.
While the PureCycle' system and its application to the
geothermal energy market are new, the product draws upon decades of UTC
innovation, operating experience and real-world expertise. Key
components of the system are derived from Carrier Corp. and 90 percent
of the PureCycle system is based on UTC high-volume, off-the-shelf
components that enhance the value proposition to our customers.
The Chena project has attracted world-wide attention and won two
awards last year--a U.S. Environmental Protection Agency and Department
of Energy 2006 National Green Power Award for on-site generation and
Power Engineering magazine named it Renewable/Sustainable Energy
Project of the Year.
What Is the Significance of Low Temperature Geothermal Energy?
Previously, geothermal energy for power production has been
concentrated in only four Western U.S. states. The ability to use small
power units at lower temperature geothermal resources will make
distributed generation much more viable in many different regions of
the country. Simply put, PureCycle' technology could result
in significant new domestic, continuously available renewable energy
resources--not just in Alaska, but across the country. The capability
to operate with a low temperature resource allows the UTC
PureCycle' System to utilize existing lower temperature
wells and to bottom higher temperature geothermal flash plants and many
existing ORC binary power plants.
In addition, there are more than 500,000 oil and gas wells in the
US, many of which are unprofitable. The use of geothermal hot water,
which is abundant at many oil and gas well sites, to produce a
renewable source of electrical power could extend the life of many of
these assets. This would result in significant environmental, energy
efficiency, climate change, economic and other benefits associated with
the development of geothermal oil and gas electrical power.
Recommended Actions
It is unfortunate that at this moment in time when there are
exciting innovative developments in the world of geothermal technology,
the Federal Government is cutting off research and development funding.
The rationale given is that the technology is mature and represents a
resource with limited value since it is confined to only a few Western
states.
My message to you today is that we have only scratched the surface
regarding our Nation's geothermal energy potential. We have not
exhausted the R&D possibilities and this is not a resource that is
limited to only a few Western states. As I've indicated in my
testimony, there are advances in low-temperature geothermal energy
alone that prove otherwise.
The National Research Council report ``Renewable Power Pathways''
recognized the importance of geothermal energy and stated: ``In light
of the significant advantages of geothermal energy as a resource for
power generation, it may be undervalued in DOE's renewable energy
portfolio.''
My testimony has focused on only one element of the geothermal
opportunity--low-temperature resources. There are a variety of other
research needs, including cost-shared partnerships to enhance the
performance of existing successful systems, increase the size of the
units and demonstrate benefits for the oil and gas market. We also need
continued Federal funding for public/private partnerships for
exploration, resource identification and drilling. We need more up-to-
date survey information. The most recent U.S. Geological Survey for
geothermal energy was conducted in 1979. This survey used techniques
that are outdated today and was based on technology available 30 years
ago. It did not consider low to moderate temperature resources since
there was no technology available at the time that could utilize these
resources in a cost-effective manner.
As our Chena project demonstrates, far from being a mature
technology with limited geographic reach, geothermal energy has the
potential to satisfy a significant portion of our growing energy needs
with a renewable, continuously available domestic resource. But
appropriate government policies must be adopted and implemented to make
this a reality. Congress can help to ensure we realize the full
potential of geothermal energy. Attached to my testimony is a position
paper by the Geothermal Energy Association * that outlines
key industry recommendations and action items including:
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\*\ The information referred to has been retained in Committee
files.
Extension of the geothermal production tax credit and
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revised ``placed in service'' rules.
Robust funding for DOE's Geothermal Research Program.
Incentives for geothermal exploration.
Comprehensive nationwide geothermal resources assessment.
Thank you for the opportunity to testify and I would be pleased to
answer your questions.
Attachment--Achieving a 20 percent National Geothermal Goal
The United States, as the world's largest producer of geothermal
electricity, generates an average of 16 billion kilowatt hours of
energy per year. While substantial, U.S. geothermal power is still only
a fraction of the known potential. Today, roughly sixty new geothermal
energy projects are under development in over a dozen states that will
double current geothermal power production. With effective Federal and
state support, recent reports indicate that as much as 20 percent of
U.S. power needs could be met by geothermal energy sources by 2030.
To achieve this, the Administration and Congress should adopt the
following National Geothermal Goals for Federal agencies: Characterize
the entire hydrothermal resource base by 2010; sustain double digit
annual growth in geothermal power, direct use and heat pump
applications; demonstrate state-of-the-art energy production from the
full range of geothermal resources; achieve new power or commercial
heat production in at least 25 states; and, develop the tools and
techniques to build an engineered geothermal system (EGS) power plant
by 2015.
To support these goals and accelerate the production and
development of energy from our geothermal resources, the following
priority actions are needed:
Revise the Section 45 Production Tax Credit (PTC) to support
sustained geothermal power development. The PTC timeframe is too short
for most geothermal projects to be completed by the current placed in
service deadline. To achieve sustained geothermal development, Congress
should immediately amend the law to allow facilities under construction
by the placed in service date of the law to qualify, and extend the
placed in service deadline by at least 5 years, to January 1, 2014,
before its expiration.
Fund a strong and effective DOE Geothermal Research Program that
prioritizes the discovery and definition of geothermal resources;
expands GRED funding; develops new exploration technologies; supports
state-based programs to expand knowledge of the resource base and its
potential applications; improves drilling technology; demonstrates
geothermal applications in presently non-commercial settings; and
develops and demonstrates of Enhanced Geothermal Systems techniques.
DOE's geothermal program should be expanded to meet today's challenges
and funded at $75 million annually.
Provide incentives for geothermal exploration through renewed DOE
cost-shared funding and other measures. Ninety percent of geothermal
resources are hidden, having no surface manifestations. Exploration is
therefore essential to expand production, but exploration is expensive
and risky. Cost-shared support for exploration drilling has been
provided through DOE's Geothermal Resource Exploration and Definition
(GRED) program. GRED should be continued and expanded, with at least
one-half of DOE's effort supporting exploration, and an exploration tax
credit should be established.
Expand and accelerate geothermal initiatives on the public lands.
USGS should conduct a comprehensive nationwide geothermal resource
assessment that examines the full range of geothermal resources and
technologies; USGS should collect and make available to the public
geologic and geophysical data to support exploration activities; BLM's
Programmatic Environmental Impact Statement (PEIS) should be completed
as a top priority; planning, leasing and permitting activities on BLM
and National Forest lands should be adequately funded and conducted
promptly. Appropriations (and dedicated funding) of $25 million
annually should be provided for these agency efforts.
Senator Kerry. Thank you very much, Dr. Preli, very
interesting.
Mr. Eckhart?
STATEMENT OF MICHAEL T. ECKHART, PRESIDENT, AMERICAN COUNCIL ON
RENEWABLE ENERGY (ACORE)
Mr. Eckhart. Good afternoon, Chairman Kerry and Ranking
Member Ensign. It's an honor to be here.
My name is Mike Eckhart, I'm President of the American
Council on Renewable Energy, ACORE. We're a 501(c)(3) nonprofit
based here in Washington, founded just 5 years ago to bring all
the renewable energy industries together in one tent. We have
400 members now, gaining about one per day, growing rapidly,
including companies, utilities, banks, law firms, financiers;
even government agencies--DOE, EPA--are dues-paying members of
our group.
Our mission is to bring all these organizations together on
behalf of renewable energy, as a whole. Our focus is to bring
renewable energy into the mainstream, which is the reverse of
trying to bring the mainstream to renewable energy. As the
founding philosophy, we're for renewable energy and against
nothing. We're just for renewable energy.
We were honored, at our most recent national policy
conference, held in the Cannon Caucus Room, to have 18 of the
agencies, nonprofits, and trade associations all give their
outlook on renewable energy. And I have that for you in this
book, which was just published, and you can review each of the
positions briefly in 2-page summaries.
I'll summarize the entire thing, including a consensus
outlook we've gone on to do.
In wind power, the American Wind Energy Association
concludes that it's feasible and affordable to run wind power
up to 20 percent of our national electricity supply. But we
need, and deserve to have, more stable--and I know you already
know this--long-term commitment of public policy to build
toward that potential and to create a successful wind power
industry. And this is the point I wish to make today. The fact
is that nine out of ten of the world's largest wind turbine
manufacturers are non-U.S. companies. Non-U.S. companies. And
all of them are building wind turbine manufacturing plants in
China this year, not in the U.S. This is a direct result of the
instability and uncertainty in the U.S. wind power market that
is due to the 2-year sunset provision in the production tax
credit, turning the market on and off. The PTC should have a 5-
year rolling commitment, looking forward, so industry knows
that--what the public policies are for its long-term
investments.
In solar energy, it's somewhat similar. We see booming
markets in Japan, Germany, Spain, and other countries. We need
a booming market here. It can happen, and we can stabilize--if
we can stabilize the investment tax credit to a longer-standing
commitment. The solar energy industry's association believes
there are over 100 gigawatts of solar power capacity that can
be online by 2016, and as much as 150 gigawatts by 2025, with
the stabilization of policy. And, here again, we have to look
at jobs. Public policy must be stable to create an industry. We
need to think about these jobs. In the ten of the ten largest
solar cell manufacturers in the world, all ten are non-U.S.
companies, and we need to recognize the state of the industry
and bring it back to the U.S. We've lost our lead. We invented
this technology, but we don't lead this as a manufacturing
industry, and we need to bring it back here through stable,
firm policies.
In geothermal--and I'm sure Mr. Preli will enjoy my
comments here--it is my opinion that geothermal energy is the
huge missed opportunity in renewable energy. I believe it is
perhaps the greatest engineering challenge ever faced by
mankind, greater than going to the Moon, to reach down into the
center of the Earth and bring up that heat so that we can
replace all the coal-fired powerplants that simply boil water,
which we can do with geothermal heat. We can replace this, and
we can run the world economy on geothermal energy plus solar
energy.
In biofuels, we have the immediate opportunity, and we are
acting well. We look at this and see the feasibility of getting
to 30 percent of our motor fuel supply by biofuels. The
combination of corn-based ethanol, cellulosic ethanol, and
biodiesel offers us a path to reducing these oil imports and
creating an industry here in rural America.
Looking ahead, we see that renewable energy can be 20
percent of our energy supply in 2020, 25 percent in 2025, and
30 percent in 2030. This can be--we can supply the incremental
gain in energy requirements of the U.S. through renewable
energy and begin to address climate change in a meaningful way.
What we offer is a recommendation on the kinds of public
policy we need to make this happen.
We need resolve. We should act with decisiveness in favor
of renewable energy, and not try to just produce more of any
form of energy. We must make a choice.
We must be comprehensive, in that the national strategy
must accommodate the differences, not the similarities--the
regional differences in renewable energy resources, economics,
and culture.
We must address the competitiveness of this situation, as I
mentioned, with the companies and the jobs. We must get the
jobs that go along with renewable energy.
We have to base it on technology. Our recommendation is to
increase the RD&D budget tenfold--not 10 percent, but tenfold--
including geothermal, at $100 million a year--$100 billion a
year or more, in geothermal alone, to achieve its potential.
And, last, we need stability. And we've said this, and I
know it's been repeated here on the Hill many times in the past
month. But it is true. Stability of policy is what Wall Street
needs to make the long-term commitments to build this market
and this industry.
These guiding principles will lead us, and the country, to
success. I thank the Senate for the honor and privilege of
testifying here today.
Thank you very much.
[The prepared statement of Mr. Eckhart follows:]
Prepared Statement of Michael T. Eckhart, President,
American Council On Renewable Energy (ACORE)
This is the testimony of Michael Thomas Eckhart, President of the
American Council On Renewable Energy (ACORE), a 501(c)(3) nonprofit
organization founded in 2001 and based in Washington, D.C.
Introduction to ACORE
ACORE has grown rapidly and presently has over 400 organizational
members including technology suppliers; energy marketing companies;
utility companies; end users, colleges and universities; law firms,
consulting firms and other professional services firms; financial firms
such as investors, lenders, and insurance; nonprofit groups and
environmental organizations; trade associations (including all of the
national trade associations in renewable energy); and government
agencies at the Federal, state and local levels.
ACORE's mission is to bring together all of the organizations
necessary to make renewable energy successful in our country. Our focus
is to bring renewable energy into the mainstream of our American
economy and lifestyle. As a founding philosophy that distinguishes
ACORE, we are ``for renewable energy'' without being against anything.
ACORE convenes the renewable energy community in three major
conferences each year--a trade show in Las Vegas, a high-level finance
conference in New York City, and a national policy forum here in
Washington, D.C.
In the most recent national policy conference on November 30, 2006,
entitled ``Phase II of Renewable Energy in America: Market Forecasts
and Policy Requirements'' we were honored to have 18 major agencies,
associations, and nonprofit organizations give their outlook on
renewable energy in America, now published in a report of the same
title, which I enter into the record. The organizations included the
following:
Nonprofit and Academic Institutions:
American Council on Renewable Energy
American Solar Energy Society
Apollo Alliance
Energy Future Coalition
The Renewable and Appropriate Energy Laboratory, University
of California at Berkeley
Worldwatch Institute
Trade Associations:
American Wind Energy Association
Biomass Coordinating Council
Geothermal Energy Association
National Hydropower Association
National Biodiesel Board
Ocean Energy Council
Renewable Fuels Association
Solar Energy Industries Association
U.S. Combined Heat & Power Association
Government Agencies and Research Institutes:
U.S. Department of Energy
Electric Power Research Institute
Energy Information Administration
National Renewable Energy Laboratory
Western Governors' Association
ACORE then asked the participating organizations to form a working
group, to develop a consensus outlook. This work was conducted from
mid-December to mid-February 2007, and is currently being published.
ACORE is pleased to present the text of the to-be-published 2007
Consensus Outlook on Renewable Energy in America as part of my
testimony today, in the following sections. The non-profit
organizations, academic organizations, and trade associations endorse
this consensus outlook--this is the first time in the industry's 30-
year history that a consensus has been reached. The government agencies
and research institutes acknowledge that their outlooks were included
but of necessity cannot and do not endorse the report.
Meeting America's Energy Needs
Renewable energy could contribute dramatically to meeting America's
energy needs, providing up to 550 gigawatts (GW) of new electricity
generating capacity by 2025. That amount is equal to roughly half of
total U.S. generating capacity today, and--according to projections
from the U.S. Energy Information Administration (EIA)--represents
substantially more than the additional electric power generating
capacity needed by 2025. Moreover, with only a 3 percent share of the
U.S. transportation fuels market, there is room for the biofuels
industry to grow significantly. The Department of Energy's Advanced
Energy Initiative calls for replacing 30 percent of our current
gasoline consumption with biofuels by 2030.
Renewable energy can meet the immediate needs of the U.S. while
helping us achieve our economic, security, and environmental goals.
America needs to scale up renewable energy use now for the following
reasons.
America needs secure energy supplies. The U.S. imports
almost 60 percent of its oil and is faced with an aging
electric grid dependent on centralized power production. In
addition, EIA predicts that imports of liquefied natural gas
will increase seven-fold over 2005 levels by 2030. Renewable
energy sources are domestic resources, and can include
distributed and smaller-scale generation, providing significant
security advantages for the entire portfolio of power and fuel
supply.
America needs to address climate change. Scientists have
shown the connection between climate change and extreme weather
patterns, species extinction, desertification, and ecological
damage. They are warning us that the time to act is now. Along
with energy efficiency, renewable energy can be one of the
major solutions to climate change, and can begin to make a
difference immediately.
America needs a cleaner environment. Renewable energy will
allow the U.S. economy to continue growing while meeting
environmental caps and other standards. More renewable energy
will mean less pollution, improved public health, protected
natural systems, and lower consumption of scarce water
resources than the conventional energy path.
America needs large-scale, economic energy supplies.
Renewable energy can make a substantial contribution, supplying
on the order of 25 percent of our energy needs by 2025, given
the right policies and conditions.
America needs energy at predictable costs. Volatility in oil
and natural gas markets creates disruptions to the economy.
Renewable energy can offer long-term, fixed price supplies and
the certainty of future costs.
America needs to grow industry and create jobs. Pursuing a
renewable energy strategy could create $700 billion of economic
activity and 5 million jobs by 2025--good jobs in the high-
tech, engineering, construction, installation, agricultural and
service sectors that can boost economies in both rural and
manufacturing areas.\1\ The world market is also hungry for
clean energy technologies. The U.S. should take advantage of
the opportunity to develop new export potential while building
the 21st Century's sustainable economy.
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\1\ English et al. (2006). 25 percent Renewable Energy for the
United States by 2025: Agricultural and Economic Impacts. University of
Tennessee at Knoxville. Available at: http://www.agpolicy.org/ppap/
REPORT percent2025x25.pdf
America needs to be competitive in the global marketplace.
The U.S. has some of the largest renewable resources of any
country in the world. Many renewable technologies were
developed in the U.S., but lost essential support. Now, our
inconsistent policies threaten to sacrifice tremendous
opportunities for economic development and export. If America
wishes to lead in the development of today's most promising
energy sources, our country must provide the essential policy
environment for private sector investment and growth of
renewable energy in our domestic market.
How Renewable Energy Can Meet America's Needs
To meet America's energy needs we must consider how energy is
consumed in our economy. There are four broad energy-use sectors:
industrial, commercial, residential, and transportation. The major
applications are electricity production, heating, and transportation
fuels. Here is how renewable energy serves these needs.
An energy source for America's electric utilities--The
estimates presented in this report suggest a potential for more
than 550 GW of new renewable electricity generation capacity by
the year 2025, which is substantially more than the new
capacity needed by that date. This capacity will come from all
of the renewable technologies: wind, geothermal, solar, water,
and biomass power.
Distributed applications--Increasingly, end users of all
kinds are generating their own electricity and managing their
thermal energy uses with an eye toward greater energy
efficiency. Many methods--such as Industrial Efficiency, Green
Buildings, Climate-Neutral Campuses, and Zero-Energy Homes--
include a combination of efficiency and renewable energy.
Examples of distributed applications of renewable energy
include: building-mounted solar PV; solar heating and cooling;
geothermal energy used in a home or greenhouse; biomass or wind
energy on a ranch or farm; combined heat and power at an
industrial facility using biomass fuels; and recycled energy at
power generationsites.
Transportation fuels--Analyses conducted for the Energy
Future Coalition have supported the feasibility of having
biofuels supply 25 percent of our transportation energy needs
by 2025. The package of available transportation fuels includes
ethanol, biobutanol, biodiesel, bio-based diesel fuels, and a
variety of other bio-based transportation fuels. These fuels
can be used to power aircraft and watercraft as well as trucks
and automobiles.
Production of electricity and hydrogen for transportation--
In addition to biofuels, there is substantial potential for
renewable energy sources to meet transportation needs through
hydrogen production and adoption of transportation technologies
using renewable electricity, such as plug-in hybrids, electric
vehicles, and mass transit.
Public Policy to Meet America's Needs
America needs coordinated, sustained Federal and state policies
that expand renewable energy markets, promote and deploy new
technology, and appropriately provide opportunities to encourage
renewable energy use in each of the market sectors and applications
mentioned above. Other countries, such as Germany, Spain, and Japan,
have succeeded in building successful renewable energy industries by
directing their incentive programs to the end-use markets while
continuing support for research and development of new and improved
technologies. The U.S. can do the same, if we establish similar long-
term, market-oriented policies to ``pull through'' the new
technologies.
Outlook on Each Renewable Energy Technology
During the successful ``Phase I'' period of renewable energy
development that occurred from about 1975 to 2000, the focus was solely
on research, development and demonstration (RD&D) of the many new
technologies. Now, as the U.S. shifts into Phase II strategies for
putting the technologies into use at scale, we face new challenges.
Research and demonstration should be expanded, but at the same time,
there is an increasing need to focus on deployment and market
incentives. Expanding renewable energy will require support for the
full range of renewable technologies, recognizing their many
differences as well as their common foundation as sustainable
technologies.
Up to 550 GW of new renewable power capacity could be available by
2025, assuming development of biomass, geothermal, hydro, solar, and
wind projects as envisioned by the industry groups that participated in
ACORE's National Policy Conference ``Renewable Energy in America: Phase
II Market Forecasts and Policy Requirements'' in November 2006. (See
Figure 1, below.)
The following offers a summary outlook on each key renewable energy
technology.
Wind Power
Wind power is providing increasing capacity to electricity markets
around the world. The American Wind Energy Association (AWEA) concludes
that it is feasible and affordable to increase wind capacity to supply
20 percent of this Nation's electricity by 2030. AWEA envisions that
active ``community wind'' projects as well as small distributed wind
applications will supplement large utility-scale projects. Offshore
wind is expected to begin as early as 2010, and to increase thereafter.
This outlook foresees 340 GW of new wind capacity by 2030. Using an
average growth rate, this would result in 163 GW of new wind capacity
by the year 2025.\2\
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\2\ These capacity numbers were estimated using an increasing, then
steady installation growth rate.
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Achieving this level of wind power will require new transmission
capacity to transmit power from areas with wind resources to regional
power markets where the demand exists. Continued research and
development also will be needed to achieve improved efficiencies and
economies of scale in wind turbine technology to serve lower-wind
regions and offshore locations.
Solar Heat and Power
Solar energy is an abundant renewable resource across America, and
can become a significant source of new generating capacity in a
relatively short timeframe. The rapid scale-up of solar energy markets
has been demonstrated in Japan, Germany, Spain, and other countries.
The outlook for solar energy in the U.S. envisions 110 GW of new
solar power capacity by 2016, resulting from a 67 percent compound
annual growth rate. After a rapid growth through 2015, the solar market
is foreseen to stabilize with 5 GW of photovoltaic (PV) and 1 GW of
concentrating solar power (CSP) added annually from 2016-2025,
resulting in total solar capacity additions of 164 GW in 2025.\3\
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\3\ Solar Industry Outlook, presentation to ``Renewable Energy in
America: Phase II Market Forecasts and Policy Requirements,'' November
29-30, 2006. http://www.acore.org/programs/06policy_presentations.php
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The Solar Energy Industries Association (SEIA) envisions this
scenario based on robust growth in PV installations on residential
rooftops and other locations as well as larger, utility-scale CSP
plants. Furthermore, solar water heating is expected to take off as it
has in other countries that have embraced renewable energy.
This robust scenario requires a long-term incentive plan to
encourage manufacturing and power plant development, financing, and
increased industry growth. Additionally, this scenario requires that
units can be interconnected as installed without additional utility or
permitting costs, that net metering applies nationwide at retail rates,
and that continued cost reductions be realized through continued
manufacturing scale-up and economies of scale.
Continued research and development will be required to maintain the
pace of achievements in improved conversion efficiencies, focusing both
on current processes and manufacturing methods as well as developing
nano-structured materials for the next generation of PV technology. For
CSP, new transmission capacity will be required to transmit power from
areas with rich solar resources to regional power markets where the
demand exists. Policies that offer rewards or incentives for the
adoption of technologies like solar water and space heating are also
needed.
Water Power
The water power technologies expected to contribute to this outlook
are conventional hydropower, hydrokinetic power, and ocean energy which
includes wave, current, tidal, marine biomass, and Ocean Thermal Energy
Conversion (OTEC) power.
Conventional hydropower is already the leading source of renewable
electric power capacity at over 75 percent of all renewable energy
sites. Its quick, reliable load-following capability and seasonal
capacity can enhance the performance of other renewables by balancing
variability in resources. In addition, the potential for power
generation from ocean currents and tidal flow is tremendous. Plus, the
new field of hydrokinetic power offers a wide range of distributed
power generation options. Utilizing all the water power technologies,
there is the potential to add 23 GW of capacity by 2025.\4\
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\4\ Hydropower Industry Outlook, presentation to ``Renewable Energy
in America: Phase II Market Forecasts and Policy Requirements,''
November 29-30, 2006. http://www.acore.org/programs/
06policy_presentations.php
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There are still other areas of growth that have yet to be assessed,
such as additions of capacity on man-made waterways (e.g., conduit
power). Advanced research, development, and demonstration are necessary
to support this growth for both improvements of conventional systems
and development of new technologies. Incentives for commercialization
will be needed for early hydrokinetic and ocean power technologies.
Geothermal Heat and Power
Geothermal energy is poised to expand rapidly. The Geothermal
Energy Association (GEA) cites the 62 new geothermal energy projects in
development as evidence of the industry's most dramatic wave of
expansion since the 1980s. Geothermal's status as a baseload energy
source--one that is available 24 hours a day, 7 days a week--makes it a
particularly appealing option for utilities.
Geothermal resources could contribute 100 GW of new capacity by
2025, tapping both identified resources and new discoveries in
hydrothermal sites, co-production from oil and gas wells, and deep
resources and engineered geothermal systems (EGS). Furthermore,
geothermal energy for direct uses and heat pumps could provide
significant additional energy not included in this total if policies
support their growth.
The outlook for 100 GW of new geothermal capacity by 2025 assumes
development of 20 GW from the hydrothermal resource base, development
of 70 GW from co-production and geo-pressured resources, and 10 GW of
deep geothermal sources and EGS systems.\5\
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\5\ Geothermal----
i. Geothermal Industry Outlook, presentation to ``Renewable Energy
in America: Phase II Market Forecasts and Policy Requirements,''
November 29-30, 2006. http://www.acore.org/programs/
06policy_presentations.php
ii. ``Geothermal--the Energy Under Our Feet,'' Bruce D. Green and
R. Gerald Nix, National Renewable Energy Laboratory, November 2006,
Technical Report NREL/TP-840-40665.
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This scenario requires: long-term extension of the production tax
credit; continued prioritization of expedited leasing and permitting
decisions; expanded support for exploration and characterization of the
resource base; support for development and demonstration of geo-
pressured resources and co-production; and, continued development of
the full range of geothermal resource and power technologies working
toward the development and deployment of engineered geothermal systems.
Biomass and Bio-based Products
According to the U.S. Combined Heat and Power Association (USCHPA),
biomass power projects could see a ten-fold increase from the current
installed base of 10 GW. This increase would result in 100 GW of new
biomass capacity by 2025.\6\
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\6\ Biomass----
i. Resource Dynamics Corporation, Opportunity Fuels and Combined
Heat and Power: A Market Assessment, August 2006, prepared for U.S.
Department of Energy and Oak Ridge National Laboratory.
ii. Larson and Raymond, ``Commercializing Black Liquor and Biomass
Gasifier/Gas Turbine Technology'', TAPPI Journal, 1997.
iii. Biomass R&D Technical Advisory Committee, Vision For Bioenergy
and Biobased Products in the United States, March 2006.
iv. Western Governor's Association, Clean and Diversified Energy
Initiative, Biomass Task Force Report, January 2006.
v. Energy Information Administration, Form 860 ``Annual Electric
Generator Report,'' 2005.
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Growth is expected to take place in wholesale power generation as
well as distributed production in pulp and paper mills, commercial and
industrial facilities, and solid waste conversion to energy. Continued
growth in farm, landfill, and wastewater treatment power projects will
supplement this growth. A substantial portion of this new capacity
would come from combined heat and power applications, where thermal
energy that would otherwise be wasted is applied for productive uses,
resulting in very high (up to 85 percent) efficiencies.
Due to the localized nature of fuel availability and thermal loads,
the majority of new biomass power projects will be at distributed
facilities near demand centers. In these applications, local energy
resources will be used to fuel local development. Like other load-
sited, distributed renewable projects, these biomass applications
benefit the grid by alleviating congestion, freeing up capacity, and
deferring expensive system upgrades.
Just over one-third of new capacity will require access to the
transmission system. New transmission capacity will be required to
transmit power from wholesale power generators in areas rich with
biomass resources to regional power markets where demand exists.
Research and development will be required to achieve improved
biomass conversion technology with lower capital costs, targeting both
gasification and pyrolysis approaches.
The demand for biomass created by new biomass power and biofuel
production would be many times greater than current levels; it is
assumed that sufficient resources will be available to support these
demands at economic prices. Recent studies suggest that resources will
be sufficient.
Biofuels
New biomass power and biofuel production will greatly increase
demand for biomass resources. However, recent studies by the National
Renewable Energy Laboratory, the University of Tennessee, and Oak Ridge
National Laboratory indicate that the U.S. agriculture and forestry
industries have the potential to produce enough biomass resources to
supplant 30 percent-40 percent of current U.S. petroleum products while
meeting food, feed, fiber and export needs.
DOE has set a goal of ``30 percent by 2030,'' and will publish a
study that will examine market, policy, and technology changes required
for the U.S. biofuels market to replace 30 percent of current levels of
gasoline consumption by the year 2030.\7\ This is an aggressive but
achievable goal that will require policy commitment and technology
advances. The key components of the biofuels opportunity are ethanol,
biodiesel, and bio-based diesel fuels.
---------------------------------------------------------------------------
\7\ U.S. DOE is studying the feasibility of a rapid scale-up, and
will publish a ``30 percent by 2030'' study that will examine market,
policy, and technology changes required for the U.S. biofuels market to
replace 30 percent of current levels of gasoline consumption by the
year 2030.
Ethanol fuel--The U.S. produced 4.9 billion gallons of
ethanol in 2006. Today, 111 ethanol plants in 19 states have
the capacity to produce 5.4 billion gallons of ethanol. As of
January 2007, an additional 78 plants are under construction,
combined with seven expansions, which will increase industry
capacity by 6.1 billion gallons. By the first quarter of 2009,
the industry's annual production capacity is estimated to reach
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11.6 billion gallons per year.
This rapid growth can continue if the U.S. maintains and extends
existing tax incentives for all ethanol blends, expands tax
incentives for ethanol refueling infrastructure, and creates
new consumer-based tax incentives to encourage flexible fuel
vehicles and the purchase of ethanol. Such growth will also
require the U.S. to build upon the industry's advancements in
technologies to reduce energy consumption, improve biorefinery
efficiency, develop new co-products, and--of crucial
importance--move toward commercial deployment of cellulosic
ethanol.
Biodiesel fuels--The National Biodiesel Board (NBB) reports
that U.S. production is on track to increase from 25 million
gallons in 2004 to 226 million gallons in 2006. The number of
plants has increased from 22 in 2004 to 85 in January 2007,
with another 65 under construction. The industry envisions that
biodiesel blends will displace 5 percent of the diesel fuel
market by 2015.
Technology is rapidly emerging to produce bio-based diesel fuels
from a variety of feedstocks, including woody biomass and
municipal and organic wastes. By U.S. law, these fuels are
classified separately from biodiesel. Currently, there are no
long-range forecasts for these bio-based fuels. However,
several might be commercial before the end of 2010.
Bio-based Products
In addition to fuels, bio-based products could include solvents,
cleaners, lubricants, greases, panels for cars and trucks, agricultural
products, pharmaceuticals, inks and paints. Essentially, almost
anything made from petrochemicals can be produced from some form of
biomass, displacing usage of some level of petrochemicals.
Renewable Energy Stored in Hydrogen for Transportation
In addition to biofuels, there is substantial potential for
renewable energy sources to meet transportation needs. The hundreds of
gigawatts of renewable power potentially available could supply
electric vehicles or charge the batteries of plug-in hybrids, power
electric mass transit systems, and support hydrogen production through
electrolysis for use with fuel cells. Together, the potential for
renewable power to displace liquid transportation fuels is substantial.
Public Policy for Technology Research, Development, and
Commercialization
Why haven't renewable technologies achieved their potential? A
fundamental problem with the development and deployment of renewable
technologies has been the uncertainty of government policy. Support for
both research-push and market-pull policies has been constrained by
short-term commitments, which are destabilizing to industrial growth.
If renewable energy is to be developed to its full potential,
decades of under-investment in energy research and dissemination must
end. Figure 2 shows the continuing reductions in funding that this
sector has received.
Source: Kammen, D. M. and G. F. Nemet (2005) `Reversing the
incredible shrinking energy budget'', Issues in Science and Technology,
Fall, 84-88.
Renewable Energy Market Outlook and Challenges
The assessments and analyses presented at the Phase II Conference
offered valuable information about the outlook for renewable energy in
the United States. Together, they form a picture of what a business-as-
usual (base case) future might look like if no policy changes are
implemented, and of the potential for a more aggressive renewable
energy strategy (mid-range and higher potential cases). This section
summarizes the range of sensitivity of the renewable energy outlook to
public policy.
Business-As-Usual Outlook
The Energy Information Agency (EIA) presented the reference case
from the Annual Energy Outlook 2007, assuming ``all current standards,
laws, and regulations remain as currently enacted.'' Under this
scenario, total U.S. primary energy consumption is expected to increase
from 100 quadrillion Btu (quads) in 2005 to 131 quads in 2030.
During this period, the share of renewable electricity generation
is forecast to remain constant at 9 percent, while coal is expected to
increase its share of electric power generation from 50 percent in 2005
to 57 percent in 2030. Ethanol use is expected to increase from 4
billion gallons in 2005 to 14.6 billion gallons in 2030, or about 8
percent of total gasoline consumption by volume--far short of what is
needed. Even with currently available renewable energy technologies,
this forecast is not consistent with an energy strategy that embraces
sustainability, climate stabilization and a healthier environment. This
official base case clearly indicates that without substantial change in
policy, renewable energy is not expected to significantly increase its
share of the U.S. energy market.
Mid-Range Outlook
There have been several ``mid-range'' conclusions, based on modest
changes or extensions of policy and the assumption of conditions that
are favorable to renewables.
The Western Governors' Association (WGA) conducted a two-year study
of clean energy technologies in the region. WGA concluded that, in just
the Western States, renewable energy could contribute upwards of 68,000
MW (68 GW) by 2020. In addition, the Electric Power Research Institute
(EPRI) ran an analysis that emphasized the value in a ``balanced
generation portfolio'' and included a CO2 cost, beginning in
2015. This analysis estimates that electricity from new renewable
resources (excluding hydropower) can reach 13 percent of demand by
2030.
The WGA estimate and EPRI ``balanced generation portfolio''
estimate appear to present a more aggressive strategy than the base
case scenarios. However, compared to the assessments of the renewable
industry and others, these would have to be considered mid-range
potentials.
High Potential Outlook
Together, the renewable power estimates described in Section 3
present a dramatic picture of what would be possible under an
aggressive renewable energy scenario. Additional renewable capacity
could reach 550 GW by 2025. This is potentially more than the new,
additional electric power generating capacity needed by that date
according to EIA. Each technology has a different operating
characteristic and capacity factor, so GWs do not necessarily add.
EPRI looked at a more aggressive strategy with both high natural
gas prices and high CO2 costs. This case, dubbed the
``double whammy,'' shows further growth of new renewables in the
electric supply sector. The results, excluding geothermal and
hydropower power, show a renewable contribution to electricity of 16
percent by 2030, and as much as 25 percent by 2050.
The outlook for renewable fuels is equally robust. Biodiesel is
growing fast. The National Biodiesel Board (NBB) has estimated that
biodiesel could displace 5 percent of petroleum diesel in a near- to
mid-term timeframe. The Renewable Fuels Association (RFA) has presented
an overall outlook for its sector, noting the dramatic growth in the
industry today. This growth is expected to be sustained, with ethanol
reaching 14 to 15 billion gallons in the mid-term future. But this is
not the full potential of the resource. RFA asserts that 30 percent of
motor fuel could come from renewable sources by 2030, which would be 60
billion gallons of annual production. In addition, the advent of plug-
in hybrid vehicles and other electricity-based transportation systems
and technologies would allow renewable power to contribute to
displacing the need for imported oil.
Support from Leading Organizations
A growing trend is emerging in American leadership. Many leading
national campaigns and organizations support an aggressive shift to
increasing the use of renewable energy. Although the details may vary,
the goals are the same: creating jobs and economic growth, improving
energy security, cleaning the environment, and stemming global warming.
Time after time, when serious, credible experts assess the potential
for renewable energy, they reach independent conclusions that are
consistent with the transition to greater levels of renewable energy:
20% by 2020: The Union of Concerned Scientists (UCS)' call
for a national renewable portfolio standard--resulting in
180,000 MW (180 GW) of renewable power by 2020--shows that
natural gas prices would decrease, creating a net benefit to
the economy.\8\
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\8\ Statement of Alan Nogee, Director, Union of Concerned
Scientists Clean Energy Program, before the U.S. House Committee on
Energy and Commerce, Subcommittee on Energy and Air Quality, February
16, 2005. http://www.ucsusa.org/clean--energy/renewable_energy_basics/
renewable-energy-and-electricity-testimony-2005.html
25% by 2025: The 25 x `25 Initiative, supported by the
Energy Future Coalition (EFC), commissioned a report by the
University of Tennessee which shows that 25 percent renewable
energy by 2025 is affordable and achievable and will create 3-5
million new jobs and spur $700 billion in economic activity.\9\
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\9\ English et al. (2006). 25 percent Renewable Energy for the
United States by 2025: Agricultural and Economic Impacts. University of
Tennessee at Knoxville. Available at: http://www.agpolicy.org/ppap/
REPORT percent2025x25.pdf
Over 30 percent by 2030: For its recently released report,
``Tackling Climate Change in the U.S.'',\10\ the American Solar
Energy Society (ASES) asked experts in efficiency and each
renewable technology ``to come up with their best estimates of
what their technology could do [by 2030] . . . with an
aggressive climate-driven scenario in mind'' (ASES, p.12).
Independent assessments of the potential for CSP, PV, wind,
biomass, and geothermal technologies came up with a combined
contribution to the U.S. electricity grid of 2,208 Terawatt
hours/year by 2030, about 40 percent of the EIA's projected
demand for electricity under a ``business as usual'' scenario
(i.e., not accounting for energy efficiency improvements). The
potential contribution from energy efficiency is even greater.
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\10\ Tackling Climate Change in the U.S.: Potential Carbon
Emissions Reductions from Energy Efficiency and Renewable Energy by
2030. Charles F. Kutscher, Editor. American Solar Energy Society,
January 2007. 180 pp. Searchable pdf at www.ases.org/climatechange.
Many of these campaigns, as well as the Apollo Alliance's outlook
for 3 million jobs from clean energy solutions, are also supported by
diverse coalitions which include business, labor unions, production
agriculture, religious groups, conservation and environmental
organizations, public health advocates, and local, state, and
nationally elected officials.
Future Success in Each Technology
Achieving the high-potential scenarios will depend on progress made
to advance each technology's performance, lower its cost, and overcome
challenges of market acceptance at scale. Identifying and overcoming
the various obstacles for each technology and end use sector should be
a priority for Federal and state policies. None of the known
impediments to achieving our goals appear insurmountable if there is
the political will to support renewable energy. Here are some examples.
Wind power--The challenges include: improved access to
transmission; long-term production tax credit (PTC) extension;
new state or national renewables portfolio standards (RPS) and
effective implementation of existing RPS; continued research
support; development of an off-shore regime in supportive
manner; continued priority on Federal lands; and recognition of
bird/bat mitigation success.
Solar energy--The challenges include: local covenant
restrictions; consistent and effective net metering polices at
the state and Federal levels; silicon availability and price;
new state or national RPS and effective implementation of
existing RPS; research and support for reduced balance of
systems cost; infrastructure development; competition with
foreign markets; inclusion in state and Federal renewable laws;
modification of the investment tax credit to remove the cap and
extend multiple (8-10) years; and other factors.
Water power--The challenges include: regulatory streamlining
and resolving licensing issues for the new technologies (ocean,
tidal, and instream power); research and development support
for both the next generation of conventional hydropower
equipment and the new technologies; long term extension of the
Section 45 PTC and inclusion of ocean, tidal and instream
projects, equitable treatment in state RPS efforts; and
transmission support.
Geothermal energy--The challenges include: long-term PTC
extension; new state or national RPS and effective
implementation of existing RPS; restoration of DOE Research
Program; support for exploratory drilling program and
characterization of the U.S. hydrothermal resource base;
demonstration of geopressured and oil field co-production;
consistent work toward Enhanced Geothermal Systems
demonstration; funding and prioritization of public land
leasing and permitting; and inclusion in state renewable
initiatives.
Biomass power--The challenges include: extension of the
biomass PTC, and the inclusion of a thermal credit to promote
high efficiency combined heat and power applications; new state
or national RPS and effective implementation of existing RPS;
access to sustainable supply of feedstock, including from
public lands; inclusion in state renewable efforts without
excessive restrictions; continued research support; credits for
other attributes (pollutant and criteria pollutant reductions,
greenhouse gas emissions reductions, and recovered thermal
energy) and, in the case of distributed biomass applications,
recognition of grid benefits in tariff design and cost
allocation; inclusion of landfill gas and appropriate municipal
solid waste (MSW) technologies as creditable renewable energy
systems; and reasonable interconnection standards.
Biofuels--The challenges include: deploying first-of-a-kind
biorefinery technology; increasing cellulosic biofuels
research, development, deployment, and commercialization
funding; expanding and modernizing fueling infrastructure; and
increasing the number of flexible-fuel vehicles on the road.
Market Drivers
It must be recognized that achieving any scenario is subject to
significant uncertainties in key market drivers. Important factors
include the following.
Volatility in oil and gas prices
Pace and scale of action on climate change
Extent of technology breakthroughs
Policies/opportunities abroad
This section has presented a sense of the range of possible future
outcomes for renewable energy in the U.S. Within the context of
marketplace uncertainties, the major determinant of future market share
for renewable energy is public policy.
EIA's low/base-case scenarios assume no change in policy, and the
resulting renewable development is minimal.
Mid-range scenarios assume a continuation of the positive
policies that are in place, plus market conditions favorable to
renewables.
The high-potential scenarios require favorable market
conditions and a sustained commitment of public policy to see
renewable energy scaled up to higher levels of contribution to
U.S. energy supplies.
America's renewable energy industries are ready to take the U.S. in
a new direction. Now the right public policies are needed to help chart
this route.
Benefits of Renewable Energy for the U.S. and the World
When the high-potential scenarios that are described in Sections 3
and 4 are achieved, resulting benefits to the U.S. and the world will
include increased energy supply, improved national security, better
health, reduced risk of climate change and environmental impacts, and
greater economic prosperity.
Energy supply--The consensus outlook calls for 20 percent of
U.S. electric power supply by 2020 based on the UCS proposal
for a national RPS, 25 percent of U.S. energy supply by 2025
based on the EFC proposal for energy from rural America, and 30
percent or more of U.S. energy supply by 2030 implied by the
ASES assessment of climate change mitigation.
National security--The reduction of imported energy provides
a more secure future. We can reduce imported oil from 60
percent today to a much lower level, and preclude the importing
of natural gas via liquefied natural gas (LNG). Energy
independence has long been a ``top priority,'' but for the past
30 years has proved an elusive goal. If we can tap the
potential of our domestic renewable energy resources, we can
make real progress toward achieving true energy independence.
Environment and health--A renewable energy future is an
environmentally sound future with cleaner air, cleaner and more
abundant water, lower chemical contamination, improved human
health, and a safer environment for our children and
grandchildren. A key benefit that is often overlooked is the
fact that renewable energy reduces our consumption of
increasingly scarce clean water supplies.
Climate change--As America turns to address global climate
change, we find ourselves facing an enormous problem of
potentially unprecedented impact. By capturing the potential of
renewable energy and improving energy efficiency, we can
drastically reduce greenhouse gas emissions and make the U.S. a
world leader in mitigating the risks of climate change.
Economic prosperity--Renewable energy is domestic energy and
can be deployed using U.S. technology, capital and labor. With
biofuels, we support companies and jobs in the Midwest instead
of the Middle East. With renewable power, we employ U.S.
workers to install U.S. technology and deliver U.S. services.
The Apollo Alliance and other organizations estimate that
renewable development can result in as many as 3 million U.S.
jobs. All renewable energy technologies are ``New Wealth
Industries'' with major economic multipliers, as the
technologies are manufactured domestically and their products
move to consumers through a variety of processes.
Guiding Principles for Public Policy
The potential for renewable development, according to this
consensus outlook, is much greater than previously published. The
potential for renewable energy development is enormous, and is ready to
be tapped. The sustainable solution is renewable energy and energy
efficiency. But we must start now.
What kinds of public policy are needed for renewable energy to
thrive? In summary, as a vision of renewable energy in America, the
following are principles on which to base public policy.
Resolve--We should act with decisiveness in favor of
renewable energy and other energy technologies that support our
national goals for security, growth, environment, climate, and
jobs.
Comprehensiveness--We need a comprehensive national
renewable energy strategy that addresses the full range of
technological and market issues, reflects the regional
diversity of renewable energy resource economics and
opportunities, and helps and rewards state and local
governments for bold and effective coordinated action.
Competitiveness--We should continue to utilize the
competitive market as the most powerful driver of change, and
increase U.S. competitiveness on renewable energy in the global
marketplace.
Integration--Our energy policies should address both the
challenges of oil dependence and of global warming in an
integrated way.
Results-oriented--We need to build the infrastructure of a
more sustainable society, including but not limited to:
Electric Power Generation: We should support long-term
incentives and other policies to catalyze investment in new
renewable power for all technologies and both central
station and distributed generation.
Electric Transmission: We should build a modernized
transmission system, similar to our national highway
system, which links our domestic renewable energy sources
with the cities and other demand centers.
Electric Distribution: We should enhance electric
distribution systems to allow optimal utilization of on-
site distributed renewable technologies at the point of
energy use.
Renewable Fuels: We should support investment both in
next-generation biofuels technology and the infrastructure
to bring it to market.
Energy Efficiency: We need to recognize that energy
efficiency and renewable energy work together and offer
many of the same fundamental benefits--environmental
cleanliness, domestic resources, security, and platforms
for economic growth--justifying policies that encourage
more efficient buildings, industrial processes, and
vehicles, as well as power generation using combined heat
and power.
Technology--The U.S. needs a tenfold increase in budget for
an accelerated national R&D program that balances near-term
needs with investments in longer-term research and science that
will produce the next generation of technologies, and that
returns the U.S. to global leadership on these technologies.
Stability--There is an overarching need for long-term and
stable policy commitments that allow industry, the financial
sector, and individual Americans to make long-term investments
in factories, bio-refineries, renewable power plants, and more
efficient buildings and homes. Stability and long-term
commitment are the new watchwords for renewable energy policy.
These guiding principles will allow our country to successfully
transition toward a scale-up of the use of renewable resources to power
and fuel America. This is a bold joint statement on the potential that
the U.S. has before it, to seek solutions and make them a reality. It
should be now clear that renewable energy has the potential to provide
a substantial share of America's energy needs--beginning immediately.
Senator Kerry. We thank you, Mr. Eckhart. Thank you very
much.
Dr. Sridhar?
STATEMENT OF K. R. SRIDHAR,
PRINCIPAL CO-FOUNDER/CEO, BLOOM ENERGY
Dr. Sridhar. Thank you, Chairman Kerry, Ranking Member
Ensign, Senator Stevens. It's an honor to have this opportunity
to share my views on energy innovations, obviously a topic that
I am extremely passionate about.
My name is K. R. Sridhar, and I'm the Principal Co-Founder
and CEO of Bloom Energy, a California-based fuel-cell company.
As an entrepreneur, I am here to talk to you about the ability
of technology innovations to have a disruptive impact on the
energy crisis that we are facing. The global energy crisis that
we are facing, is also the biggest market opportunity of the
century, and disruptive technologies are the ones that are
going to help us achieve energy security, reliability, and
abundance without compromising either the environment or the
pocketbook.
I'm also here to tell you that it's absolutely essential,
from a global perspective, that we generate more energy, not
less, as we move forward. Why is that important? Because
there's a direct correlation between energy consumption and
economic growth. There is also a direct correlation between
energy consumption and quality of life. This country was
founded on the basic principle that every generation will have
a better life, moving forward, than the previous generation. We
also built our superpower status by exporting technologies that
offered a better life for citizens of the world.
Imagine if you had told the Internet pioneers that they had
to live with the low-speed dialup modems and could not have had
more bandwidth. Do you think we would have had the
revolutionary changes we have witnessed over the decade? I
think not.
Now I think the time has come for the same thing to happen
for energy. We must find and attack the biggest problems, and
not shy away from them. For example, most of the media
attention is focused on the energy crisis surrounding
transportation, but we know that roughly two-thirds of our
CO2 emissions as well as energy consumption--comes
from stationary applications. Within the stationary power
space, we have focused on conservation and consumption, but
transmission and distribution inefficiencies, and the
inefficiencies of large-scale powerplants, are things that we
have not addressed. And it's also clear, from a report from the
Edison Institute, that several hundred billion dollars need to
be spent in order to stabilize the grid to make up for the
expanding needs we have, as well as to bring it to the
reliability that we would be looking for.
So, all these point to a great market opportunity, which is
distributed generation. Distributed generation refers to energy
generation at the point of use, as an alternative to
centralized power generation with transmission and distribution
infrastructure.
We have seen distributed technologies revolutionize other
fields. If you take computing, mainframe computing, evolved to
PDAs, laptops, and computers. What has that done to the whole
industry to increase access and to make that a lot more
efficient? Look at telecom. The land lines with the centralized
infrastructure is giving way to the mobile market. What has
that done to telecom? The same thing will happen globally to
energy when we go to distributed generation.
Senator Kerry. When go to what?
Dr. Sridhar. When we go to distributed generation, being
able to generate at the point of use. OK?
And that is the single biggest opportunity, not just in
this country for expansion, but in, also, the developing world,
where they don't have the capital to put in the infrastructure.
They will leapfrog, similar to them leapfrogging from not
having phones to having mobile phones.
That brings me to my company, Bloom Energy. Senator Ensign
especially asked me to give an update since my last June
appearance of what we have done so far.
By leveraging breakthrough innovations in material
sciences, we have some of the most efficient energy generators
providing significantly reduced operating costs, and
dramatically lower greenhouse emission gases. And we do it at
the point of use. It is a distributed generation technology of
fuel cells.
Our company has been around for just under 5 years,
completely venture-backed. And, in this time, we have made
tremendous strides using Silicon Valley volume manufacturing
knowhow, Silicon Valley's rapid business-building experience,
as well as topnotch fuel cell expertise.
Since I last testified, we had our first deployed systems
celebrate their one-year anniversary in the field. Those first
systems have demonstrated grid caliber reliability and
availability. We have demonstrated an ability to run our
systems on multiple fuels, including storable fuels for
military applications and renewable fuels, like ethanol. It
goes to the point that Mr. Eckhart made about how it needs to
be regionalized and thought about that way.
And we also have an ability to store large amounts of
transmitted electricity locally, and then to be able to use it
efficiently when we need to use it. When we go into some of the
other technologies, like solar and wind, one of the biggest
issues is energy storage.
So, in terms of where we need to go, what are we looking
for? We need to cross the proverbial chasm that startups need
to cross, of taking a technology that's just been developed and
getting it into commercialization.
Here, we would ask for the Government to specifically focus
on four things.
The first thing is consume. The U.S. Government is the
single largest consumer of energy. Be an early adopter and a
leader. Set performance standards. Be technology agnostic. And
if any technology meets those performance standards, consume.
Number two, create long-term policy. I think people have
talked about it. One plus one plus one in incentives is not
equal to three. And we need long-term policy.
Third, Level the playing field for us. I think Senator
Ensign mentioned what has happened to the legacy industries,
and how much money we are already spending for those legacy
industries. We are not asking for a handout, we are asking for
a level playing field in the market, fairness.
And, most importantly, be technology agnostic. In your
policies sometimes advertently winners and losers are picked. A
very good example will be the investment tax credit. In the
last energy bill, there was no cap on the investment tax credit
for solar, but for fuel cells there was a $1,000 per kW
investment cap. It must be the marketplace that picks winners
and losers, and not policy.
So, that's our request. Again, we think that this is the
greatest opportunity and technology innovations will make great
strides.
Thank you.
[The prepared statement of Dr. Sridhar follows:]
Prepared Statement of K. R. Sridhar,
Principal Co-Founder/CEO, Bloom Energy
Thank you Chairman Kerry, Ranking Member Ensign, and Members of the
Subcommittee for the honor and opportunity to speak with you today and
share my views on energy innovations . . . a topic that I am passionate
about.
My name is K. R. Sridhar and I am the Principal Co-Founder and CEO
of Bloom Energy, a California-based fuel cell company intent on making
a revolutionary change in America's energy future.
You have asked me to come before you today and share my thoughts on
how technological innovations in the energy industry can help address
our global energy crisis and also to provide you an update on the
progress Bloom Energy has made since my last testimony before this
Committee in June 2006.
I am here to state my view that the global energy crisis is also
the biggest market opportunity of this century and that disruptive
technological innovations will allow us to achieve energy security,
reliability, and abundance without compromising the environment or the
pocketbook. I am also here to tell you that it is absolutely essential
that we find ways to generate more energy not less, as we move forward.
Why? Because there is a direct correlation between energy
consumption, economic growth, and quality of life.
This country was founded upon the principle that each generation
can have a better life than the generation before it. We built this
Nation into a superpower by exporting technologies that offered a
better life to all citizens of the world.
Will we now deny the next generation their energy consumption and
all of the benefits it brings? Can we deny developing nations like
China or India their chance for economic growth and improved quality of
life?
Imagine if we had told the Internet pioneers that they had to live
with low speed dial-up modems and that they couldn't have more
bandwidth. Do you think we would have had the revolutionary changes
we've witnessed over the last decade?
We must find a way to consume all of the energy we need to fuel
economic growth without environmental, or geopolitical consequences and
this can only be achieved with disruptive technological innovations.
But the key is for innovation to find and attack the biggest
problems and not to mask or shy away from them.
For example . . . most of the media attention surrounding our
energy crisis focuses on transportation. Much of the public is
convinced that our gas guzzling SUVs are the biggest culprits and that
hybrid vehicles and ethanol fuel are all that's required to solve our
problems. In fact the reality is that almost two-thirds of our energy
consumption and two-thirds of our harmful CO2 emissions come
from stationary applications.
Even within the stationary power space, the emphasis tends to be on
conservation and consumption, while much of the risk, cost, and waste
comes from the aging transmission and distribution infrastructure and
the inefficiencies associated with large centralized power plants.
According to the Edison Electric Institute, approximately $200 billion
will need to be spent in the next 10 years to expand, upgrade, and
modernize the antiquated grid transmission and distribution
infrastructure just to keep up with demand and prevent significant
outages like the northeast blackout of 2003.
All of this makes it clear that one of the greatest areas of
opportunity for energy innovation is in distributed generation.
Distributed generation refers to energy generation at the point of
consumption. As a clean alternative to central power plants and their
transmission lines, on-site generation capabilities improve reliability
and quality, conserve capital, and reduce operating costs by
eliminating transmission infrastructure.
We've seen distributed technologies revolutionize other industries.
Computing evolved from centralized mainframe computers to distributed
servers, laptops and PDAs. Telephony evolved from centralized wired-
line infrastructure to wireless mobile. It is inevitable for the same
thing to happen to energy, but before widespread adoption will occur,
distributed generation technologies must first evolve to a point where
they are clean, affordable, and dependable.
Which brings me to my company, Bloom Energy.
At Bloom Energy our mission is to make clean reliable energy
affordable. Our on-site power generation systems utilize an innovative
fuel cell technology with roots in NASA's Mars program. By leveraging
breakthrough innovations in materials science, Bloom Energy systems are
among the most efficient energy generators; providing for significantly
reduced operating costs and dramatically lower greenhouse gas
emissions. By generating power where it is consumed, Bloom Energy
offers increased electrical reliability and improved energy security.
Our company has been around for just under 5 years and in that time
we've made tremendous strides by combining top-notch fuel cell
expertise with Silicon Valley volume manufacturing know-how and rapid
business-building experience.
Since I last testified before this Subcommittee;
We've had our first deployed systems pass their 1 year
anniversary in the field at the University of Tennessee
Chattanooga. Those first systems have demonstrated grid-caliber
reliability.
We've demonstrated an ability to run our systems on multiple
fuels including storable fuels for military applications and
renewable fuels like ethanol.
We've more than doubled our staff.
We've ramped our system production by almost 10.
We've seen our product costs decline by almost 10.
And, perhaps most excitingly,
We've seen customer interest skyrocket. Not just
environmentalists, but also mainstream corporate America,
utilities, and independent system operators are all very
interested in our technology.
While these are exciting milestones for our young company and
extremely positive for the fuel cell industry, there are still
challenges remaining to mature our product, and to compete with legacy
technologies.
This is where the Federal Government can help. Specifically, let me
focus on four key areas.
First, consume.--As the single largest consumer of energy in the
country, the Federal Government needs to be an early adopter and
leading consumer for viable new energy technologies. Congress should
establish a merit-based procurement law for Federal agencies to deploy
new technologies that meet a minimum set of performance criteria.
Second, create and continue long-term policy incentives.--Thanks to
a combination of government programs, consumer interest in new energy
technologies is growing, but stable, long term and predictable
incentives are critical to translate this interest into action.
Third, level the playing field with old incumbent technologies.--
According to the Governmental Accountability Office, between 1968 and
2000, the U.S. petroleum industry alone received between $134.9 and
$149.6 billion in incentives. If just a fraction of that were applied
to clean new energy technologies today, imagine what we could do.
And finally, adopt a position of technology neutrality.--Many
Federal incentives specify eligible technologies and exclude others.
The rationale for these inclusions or exclusions is not always merit-
based. For example the current Federal investment tax credit applies to
commercial installations of both solar and fuel cells, but the fuel
cell credit is capped while there is no cap for solar. This
discriminatory fuel cell cap has the unintended consequence of
hindering commercialization of promising new technologies.
I believe that the marketplace, not Federal policy, should pick
technology winners and losers. To the greatest extent possible, Federal
policy should establish a level playing field that enables all
promising energy technologies to compete on their merits.
If we can accomplish this we will have successfully converted one
of the greatest crisis facing our Nation and world into one of the
greatest opportunities. One that fuels economic and job growth,
encourages students to pursue math and sciences, fosters innovation,
and ensures competitiveness.
I am optimistic. Together the Federal Government and
entrepreneurial innovators can reshape our energy landscape. We can
make energy affordable, accessible, abundant, sustainable, and secure.
The dream is poised to become a reality.
Thank you!
Senator Kerry. Thank you very much. Appreciate that.
Dr. Katzer?
STATEMENT OF DR. JAMES R. KATZER, THE LABORATORY
FOR ENERGY AND THE ENVIRONMENT, MASSACHUSETTS
INSTITUTE OF TECHNOLOGY (MIT)
Dr. Katzer. Thank you. Senator Kerry, Members of the
Subcommittee, my name is Jim Katzer, and I am a visiting
scholar at MIT. For the last 2 years, I've been working with a
group of MIT faculty, looking into the future of coal. I will
focus on technology and costs associated with the capture and
geological sequestration of carbon dioxide from coal-based
power generation today. This is referred to as CCS. Please note
that all costs are from a point set of estimates and will vary
with plant design and operating parameters, with location, and
with coal, but we think that the differences are broadly
indicative.
Coal represents a paradox in power generation. On one hand,
it is cheap and in countries with large populations and limited
oil and gas supplies; on the other hand, it can cause
significant environmental impacts and produces large quantities
of carbon dioxide. The U.S. has 27 percent of the global
recoverable coal reserves, and, last year, over 50 percent of
our electricity was generated from coal. Coal is certain to
play a major role in meeting electricity demand growth out into
the future.
The primary technology for electricity generation from coal
today is pulverized coal, PC, combustion. It is a well
established, mature technology. A new plant today can generate
electricity for about 4.8 cents per kilowatt hour. Capturing
CO2 from this type of plant increases the cost of
the electricity by about 3 cents per kilowatt hour. The capture
technology is not new, but is used today to a smaller scale.
There is a high probability that innovation will reduce this
cost significantly as we would move into its application on a
larger scale.
IGCC--as Senator Kerry has noted--is a recent competitor to
PC. For a new IGCC plant, the projected cost of electricity is
about 5.1 cents per kilowatt hour under our conditions. Cost
and gasifier availability with IGCC are issues. With
gasification, CO2 capture is easier, and, therefore,
less expensive. The increase in the cost of electricity is
about 1.4 cents per kilowatt hour for IGCC, versus 3 for PC.
Thus, the COE, cost of electricity, for IGCC with capture is
less than for PC with CO2 capture. These numbers
will depend on coal type and on plant location. The
technologies used in the ICC approach are all commercial, but
there is room for innovation, and this--I am certain--will
happen with operational experience, supported by R&D.
A third option for CO2 capture and power
generation is to utilize pure oxygen in coal combustion to
reduce the cost of CO2 capture. This technology is
in early development stages in Europe, and there are no evident
technological problems to its progressing smoothly forward. The
cost of electricity for this approach appears to be between the
other two. There is lots of room for innovation here.
All three approaches are close enough in cost that no one
can be ruled out today, particularly when considering the
broadly different coal types that we have in the U.S. Thus, we
should not pick winners, because it is not possible to predict
how technology development and commercial innovation may
evolve.
Once captured and compressed, the CO2 is
transported by pipeline for deep injection for geologic
sequestration. These are the last two steps in CCS. The good
news is that the U.S. appears to have enough geologic storage
capacity to deploy CCS on a large scale for a long time.
Furthermore, CCS can typically be done on a fairly local basis.
Although there are a large range of questions related to
geologic CO2 sequestration, they all appear to be
resolvable with the appropriate work. Importantly, there are no
problems that appear irresolvable related to geologic CO2
sequestration. In fact, it appears that CO2
sequestration is likely to be safe, effective, and competitive
with other options on an economic basis.
Now let me look at the costs. If we start with IGCC for
power generation, we said the cost was about 5.1 cents per
kilowatt hour, without capture. Capture adds about 1.4 cents
per kilowatt hour to that. Pipeline transport should add less
than .2 cents per kilowatt hour to that. And the drilling and
associated costs for injection of the CO2, the
sequestration step, should add something of order 0.6 cents per
kilowatt hour to the cost. The total added cost for CCS is,
therefore, about 2.3 cents per kilowatt hour, or about a 50-
percent increase in the cost of the electricity at the plant
gate, the bus-bar cost. This puts the total cost of electricity
at about 7.3 cents for IGCC from bituminous coals.
There are no economic show stoppers here associated with
CCS, as you can see. And the technology is all known. This
would put coal-based power generation, with extremely low air
emissions and 90-percent CO2 reduction, in the same
range as wind power, which, in the U.S., averages between 6 and
10 cents a kilowatt hour. However, these costs will most likely
come down, due to innovation, when CCS begins to be applied
commercially.
How do we make CCS an acceptable reality that can be
smoothly applied and considered to be a robust technology
commercially? We first need to demonstrate the integrated CCS
system for the major generation technologies, integrated with
CO2 sequestration, in several different geologies.
This would require three or four major CCS demonstration
projects in the U.S., combined with appropriate R&D support.
These need to be started quickly and moved ahead aggressively.
Enabling CCS is critical to the use of our domestic coal
supply in an environmentally positive manner, as we will need
to do. Establishing a commercial, innovative CCS technology
base in the U.S. would provide U.S. industry with technology
marketing opportunities to the rest of the world.
I thank you for the opportunity to present this material
this afternoon.
[The prepared statement of Dr. Katzer follows:]
Prepared Statement of Dr. James R. Katzer, The Laboratory for Energy
and the Environment, Massachusetts Institute of Technology (MIT)
Senator Kerry and Members of the Subcommittee. Good afternoon. My
name is James Katzer, and I am a Visiting Scholar in the Laboratory for
Energy and the Environment of Massachusetts Institute of Technology.
For about the last 2 years, I have been working with a group of MIT
faculty who have been looking at the future of coal. I am pleased to
have been invited to discuss key aspects of this work with you today. I
will focus on coal-based power generation technology combined with the
capture and sequestration of carbon dioxide emissions. I am submitting
my written testimony herewith.
Coal presents the ideal paradox in power generation. On one hand,
it is cheap, abundant, and concentrated typically in countries with
large human populations and limited oil and gas. On the other hand, its
use can have significant environmental impacts, requires capital-
intensive generating plants, and produces large quantities of carbon
dioxide. Both U.S. and global electricity demand will continue to grow
at a brisk rate, and coal is certain to play a major role in meeting
this demand growth. The U.S. has 27 percent of the total global
recoverable coal reserves, enough for about 250 years at current
consumption. Over 50 percent of U.S. electricity was generated from
coal last year. Figure 1 shows the projected growth in coal consumption
for the recent EIA forecast under business as usual. It is inevitable
that we will see increased coal consumption and CO2
emissions there from.
It is important to understand the magnitude of commercial CO2
capture and sequestration associated with power generation because its
scale offers unique challenges and opportunities in the research,
development and demonstration arena. A single 1000 MWe coal-based power
plant emits between 5 and 8 million tonnes of CO2 per year,
or about 130,000 bbls per day of supercritical liquid CO2.
This would become 200 to 300 million tonnes of CO2 over the
40 year life of the plant and require a reservoir storage volume of
about 1.5 billion bbls of liquid CO2.
Generation Without and With CO2 Capture
The primary technology used to generate electricity from coal today
is pulverized coal (PC) combustion. It is well-established, mature
technology. The efficiency of generation depends on a number of design
and operating variables, on coal type and properties, and on plant
location. New plant designs have significantly higher operating
efficiencies than the current fleet average, but the limit for the near
term is probably being reached.
Integrated Gasification Combined Cycle (IGCC) is a competitor to PC
generation. Four coal-based IGCC demonstration plants, each between 250
and 300 MWe, have been built, each with government assistance, and are
operating well. In addition, there are 5 refinery-based IGCC units, two
at 500 MWe each, which are gasifying petroleum coke, or refinery
asphalt, residua, tars, and other residues to produce electricity.
These units often also produce steam and hydrogen for the refinery.
IGCC is well-established commercially in the refinery setting. IGCC can
also be considered commercial in the coal-based electricity generation
setting, but in this setting it is neither well-established nor mature.
As such, it is likely to undergo significant change as it matures.
Currently, a major concern with coal-based IGCC is gasifier
availability.
Because a large number of variables, including coal type and
quality, location, etc, affect generating technology choice, operation,
and cost, the technology comparisons here center on one point-set of
conditions. This includes one coal, Illinois #6 coal, a high-sulfur
bituminous coal and generating units designed to achieve criteria
emissions levels somewhat lower than the lowest recent permitted plant
levels. For example, the designs used here achieve 99.4 percent
SOx and 99.9+ percent particulate removal. These
technologies are first compared without CO2 capture and then
with 90 percent CO2 capture. Plant capital costs are based
on detailed design studies between 2000 and 2004, and on industrial
experience during that period. This was a period of relative cost
stability. No attempt has been made to account for recent cost
escalations in materials, engineering, and construction costs. These
have been substantial. However, the important issue here is the
relative numbers among and between the various technologies, and these
are probably best based on the 2000 to 2004 period. Here the focus is
on technologies that are either commercial or well on their way to
becoming commercial.
PC Combustion: PC generating efficiency is about 35 percent for
subcritical generation, about 38 percent for supercritical generation,
and about 44 percent for ultra-supercritical generation. Increased
generating efficiency means less emissions per unit of electricity,
including less CO2 emissions. In moving from subcritical to
ultra-supercritical generation, the coal required per unit electricity
is reduced by about 22 percent, which means a 22 percent reduction in
CO2 emissions and also reduced criteria emissions. Most PC
units in the U.S. are subcritical. We have no ultra-supercritical
plants in operation, or under construction. On the other hand, Europe
and Japan, which have higher coal costs and stronger culture supporting
high efficiency, have built almost a dozen ultra-supercitical units
over the last decade. These units are operating as well as subcritical
units, but with much higher generating efficiency. The key enabling
technology here is improved materials to allow operation at higher
severity conditions. An expanded U.S. program to advance materials
development and particularly improved fabrication and repair
technologies for these materials would advance the potential for
increased PC generating efficiency for our changing future.
Application of advanced emissions control technologies to PC units
can produce extremely low emissions, and emissions control technology
continues to improve, including the potential for high degrees of
mercury control. In general, the issue of PC emissions is not a
question of technology capability but the breadth of its application.
For Illinois #6 coal at $1.50 per million Btu and detailed design
study capital costs using EPRI economic TAG guidelines and assumptions,
the estimated cost of electricity (COE) for a supercritical PC is about
4.75 cents/kWe-h. \1\, \2\ Table 2 summarizes
the performance and cost parameters for the several generating
technologies. For supercritical generation about 1 cents/kWe-h, or
about 20 percent, is associated with going from no emissions control to
the high level of emissions control used here. Reducing emissions by a
factor of two further would add an estimated 0.2 cents/
kWe-h increasing the COE to about 5.0 cents/
kWe-h.
IGCC: The promise of IGCC has been high generating efficiency and
extremely low emissions. There are a number of critical options
associated with gasification technology and its integration into the
total plant that affect efficiency and operability. Of these, the
gasifier type and configuration are the most important. Table 1
summarizes the characteristics of gasifier types. Entrained-flow
gasifiers, which are extremely flexible, are the basis of each of the
IGCC demonstration units. Figure 2 shows the configuration of an IGCC
employing full quench cooling of the gasifier exit gases. This
configuration with high quality coals will produce about 35-36 percent
generating efficiency. Figure 3 illustrates the addition of a radiant
syngas cooler to raise steam for the steam turbine, which increases the
electricity output and raises the generating efficiency to 38-39
percent. Adding convective syngas coolers to recover additional heat as
steam is also shown in Figure 3. It can increase the generating
efficiency to the 39-40 percent range. Existing IGCC demonstration
units, which employ different practical combinations of these options,
operate at generating efficiencies from 35.5 percent (Polk) to 40
percent (HHV) (Wabash, U.S. & Puertolanno, Spain). IGCC is not yet
mature, and there is still potential for efficiency gain. However,
commercial IGCC generating efficiency is unlikely to exceed that of
ultra-supercritical PC in the intermediate timeframe. The design/
engineering firms and the power industry need to gain experience with
IGCC to develop better designs and achieve improved, more reliable
operation. Furthermore, gasifier designs for lower rank coals
(subbituminous coal and lignite) are not well established, and costs
seem to be relatively significantly higher for these coals than for PC
units.
An IGCC unit with radiant and convective syngas coolers using
Illinois #6 coal, operating at 38 percent efficiency, and achieving
high levels of criteria emissions control produces electricity for
about 5.1 cents/kWe-h (Table 2) or about 0.3 cents/
kWe-h higher than a supercritical PC. \2\, \3\
IGCC would not be the choice based on COE alone, independent of
gasifier availability concerns. Requiring high levels of mercury
removal, reducing criteria pollutants by one half from the very low
levels that we are already considering and including the cost of
emissions credits and offsets increases the COE for the PC, narrowing
the gap, but does not suggest a shift in technology choice based on COE
in the absence of CO2 capture. However, IGCC has the
potential for order-of-magnitude criteria emissions reductions, 99.5+
percent levels of mercury and other toxic metals removal, lower water
consumption, and highly stabilized solid waste production. These may
become a larger factor in the future. Achieving these order-of-
magnitude criteria emissions reductions is expected to increase IGCC
COE, but this increase is not expected to be large. Companies
considering construction of a new coal-based generating facility need
to bring all these considerations into their forward pricing scenarios
to help frame the decision of which technology to build. CO2
will probably be an added consideration shortly.
CO2 Capture: CO2 capture will add
significantly to the COE, independent of which approach is taken.
Today, CO2 capture would appear to change the choice of
technology in favor of IGCC for high rank coals. For lower rank coals
this choice may not be so clear, particularly as the PC CO2
capture technology improves. Thus, it is too early to declare IGCC the
winner for all situations at this time. History teaches us that one
single technology is almost never the winner in every situation. The
options are:
Capture the CO2 from PC unit flue gas. In this
case, the CO2 is at a low concentration and low
partial pressure because of the large amount of nitrogen from
the combustion air. To capture and recover the CO2
using today's amine (MEA) technology requires a lot of energy.
Energy is also required to compress the CO2 to a
supercritical liquid. This large energy consumption reduces
plant electricity output by almost 25 percent and reduces
generating efficiency by about 9 percentage points. The added
capital and the efficiency reduction increase the COE by about
60 percent or about 3.0 cents/kWe-h to about 7.7
cents/kWe-h \1\ (Table 2). In this situation a
marked reduction in the CO2 capture and recovery
energy would have a significant impact on PC capture economics.
Focused research on this issue is clearly warranted.
Combust coal with oxygen (Oxy-fuel combustion) to reduce the
amount of nitrogen in the flue gas. This allows the flue gas to
be compressed directly liquefying the CO2 without a
costly separation step first, reducing energy consumption.
However, the technology requires the addition of an air
separation unit which consumes significant energy substantially
offsetting the energy gains achieved by eliminating the
CO2 separation step. This technology is in early
development stage, is advancing well, and at this point appears
to hold significant potential for both new-build capture plants
and for the retrofitting existing PC plants. The estimated COE
for oxy-fuel combustion is about 7.0 cents/kWe-h,
\1\ includes compression to supercritical liquid, but not
transport or sequestration. This is about 0.7 cents/
kWe-h less than for air-blown PC combustion with
capture. The technology requires further development and
demonstration along with detailed design studies to allow
effective evaluation of its cost and commercial potential.
Use IGCC, shift the syngas to hydrogen, and capture the
CO2 before combustion in the gas turbine. IGCC
should give the lowest COE increase for CO2 capture
because the CO2 is at high concentration and high
partial pressure, and this is what design studies show. The
needed technologies are all commercial in refineries and
natural gas processing plants, although they have never been
fully integrated on the scale that it will need to be applied
here. For Illinois #6 coal, the estimated COE is 6.5 cents/
kWe-h \1\, \2\ which is a 1.4 cents/
kWe-h increase over non-capture IGCC and is about
1.2 cents/kWe-h less than supercritical PC with
capture. Oxy-fuel combustion falls in between these two.
However, an IGCC unit designed for power generation without
CO2 capture is significantly different from one
designed for power generation with CO2 capture.
Retrofitting the former to a capture unit is not
straightforwardly simple.
Lower Rank Coals: As Figure 3 shows, moving from bituminous
coal to sub-bituminous coal and to lignite results in an
increase in the capital cost for a PC plant and a decrease the
generating efficiency (increased heat rate). However, for IGCC,
these trends are significantly larger, such that currently-
demonstrated IGCC technologies become more substantially
disadvantaged relative to PC for subbituminous coals and
lignite without CO2 capture, and their advantage
with CO2 capture is eroded somewhat. Over half of
the U.S. recoverable coal reserve is either subbituminous coal
or lignite. Thus, there is a substantial need for improved IGCC
technology performance on lignite, other low rank coals, and
biomass. Options include, but are not limited to, improved dry-
feed injection into the gasifier, coal drying, fluid transport
reactors and other gasifier configurations. Development should
be at the PDU scale before moving to demonstration.
Thus, when CO2 capture is considered, the differences
among IGCC, oxy-fuel PC and air-blown PC become significantly less than
discussed above for bituminous coal. In this situation all three of the
technologies with CO2 capture must be considered to be in
the early stages of development, and it is simply too early to select
one of these technologies as the winner vs. the others
CO2 Transport and Sequestration
Capture and compression of CO2 to a supercritical
liquid-like fluid was considered above. Next, CO2 transport
by pipeline and injection for geologic sequestration are considered.
For more details on the geological aspects of sequestration, refer to
the recent testimony of Dr. Julio Friedmann before the House Energy
Committee, Energy and Air Quality Subcommittee Hearing, March 6, 2007
\4\ and the recent MIT Coal Report. \1\
The good news is that the U.S. appears to have enough geological
storage capacity to deploy CO2 Capture and Sequestration
(CCS) at a large scale for a long time. The best projected storage
sites are deep saline aquifers which can hold large volumes of
CO2. Further, many of these potential geologic storage areas
are under sites with large coal-fired coal plants and where additional
coal plants are expected to be built. This suggests that transporting
CO2 long distances, via pipeline will not be required, but
that sequestration will be within a reasonable distance from a power
plant capturing it. Further, pipeline transport of CO2 is
well established; there are about 3,000 miles of dedicated CO2
pipelines used for commercial CO2-EOR projects today in the
U.S. The cost of transport is also well understood and predictable.
Figure 4 illustrates what a potential CCS power plant project, with
appropriate siting might look like. For a good reservoir the radius
around the plant for sequestration may be less than 25 miles. Longer
transport distances to use CO2 for EOR may occur in some
cases, but because of the scale of CCS, it is expected to be a
relatively small contribution to CO2 sequestration, although
the oil recovered from CO2-EOR would add value to the
project, offsetting some of the cost.
Today, there are three commercial projects using CO2
storage (Sleipner in Norway, In Salah in Algeria, and Weyburn in
Canada) each injecting over a million tonnes of CO2 per
year. Sleipner has been injecting CO2 into a deep saline
aquifer under the North Sea for 7 years. Other projects are planned,
including FutureGEN.
Although there are a large range of questions related to
sequestration, they all appear to be resolvable with the appropriate
work. Importantly, there do not appear to be any irresolvable open
technical issues related to geologic CO2 sequestration. In
fact, it appears that geologic CO2 sequestration is likely
to be safe, effective, and competitive with other options on an
economic basis. CCS is actionable almost immediately and can be
sustained for many years while our energy base undergoes transition to
new carbon-free technologies. CCS is one method of reducing CO2
emissions growth from coal-based power generation or even reducing
total coal-based CO2 emissions over time while maintaining
the contribution of coal, a cheap, domestic energy source, can make in
providing a substantial portion of our base-load power.
Table 3 summarizes estimated costs for CCS as applied to Illinois
#6 coal-based power generation. Costs are given in $ per tonne of
CO2 and in cents/kWe-h. The capture and
compression costs vary with coal type and with generating technology.
When they are added to the COE generation without CO2
capture, the result is the COE for generation with CO2
capture. The higher capture cost for PC generation is evident, compared
with IGCC.
The cost of transport and injection will vary with site (location)
and with reservoir properties. Transport costs for the configuration in
Figure 5 could be from less than a $ per tonne to several $ per tonne;
$2/tonne was chosen. Estimated sequestration costs including drilling
the needed wells and the CO2 injection operation range from
$5 to $8 per tonne CO2; $7/tonne was chosen. The table shows
how these costs translate to cents/kWe-h, assuming the same
site (Figure 5). PC transport and sequestratrion costs are marginally
higher because more CO2 is involved. However, in both cases
the transport and sequestration cost is less than 0.9 cents/
kWe-h. In overview, for PC generation with Illinois #6 coal
the cost of CCS is about 3.8 cents/kWe-h; for IGCC the cost
is about 2.3 cents/kWe-h. Each step in CCS adds cost, but
there are no economic show stoppers present. For IGCC, CCS increases
the bus bar cost of electricity by about 50 percent. These costs will
most likely come down significantly when CCS begins to become practiced
industrially. The innovative spirit of industrial practitioners and
competitive pressures will bring a lot of innovation to every step in
CCS. However, this will not happen until there is a real need to
practice it commercially. It is important to note that to achieve
today's best emissions performance (99.9+ percent PM reduction, 99.4+
percent SOx reduction and 95+ percent NOx reduction) adds
about 1 cents/kWe-h to the cost of electricity generation
with no emissions control. This area has seen a tremendous improvement
in performance and in cost reductions since these technologies began to
be applied. The same can be expected for CCS. This area offers the U.S.
a chance to develop technologies that can be marketed to the rest of
the world.
The remaining issue with respect to CCS is the establishment of a
monitoring, regulatory, legal, and permitting framework under which
this can be done in a business-like context. This can be done along
with demonstrating the full-scale, integrated operation of CCS. This
will require an effective Research, Development and Demonstration
program aggressively applied to 3-4 demonstration projects. These
projects should apply different CO2 generation and capture
technologies and involve sequestration of CO2 in different
geologies at the rate of 1 million tonnes CO2 per year for
several years.
Summary
Considering CO2 capture and sequestration from coal-
based power generation, there are no apparent irresolvable technical
problems in the entire CCS chain from coal-in to power-out and CO2
in geologic storage. There do not appear to be any economic show
stoppers in the chain either, although at the current time it appears
that applying CO2 capture and sequestration will increase
the bus bar cost of electricity by about 50 percent. Today, this would
put coal-based power generation with extremely low air emissions (99.9+
percent reductions) and 90+ percent CO2 emissions reduction
in the same cost range of wind power (range 6-10 cents/
kWe-h in the U.S.). However, to make CCS an accepted reality
that can be smoothly applied, it is necessary to demonstrate the
integrated CCS system for the major generation technologies with
CO2 sequestration in several different geologies. This
requires three or four major demonstration projects in the U.S.
combined with appropriate R&D to support them. These need to be moved
forward aggressively.
With respect to the generation and capture part of the CCS chain,
the technology systems to capture CO2 from coal-based power
production are all available, but they require further development and
integrated demonstration. Of the three competing systems (PC with
CO2 recovery from flue gas, Oxy-fuel combustion with flue
gas direct compression, and IGCC with pre-combustion CO2
capture) it is too early to choose winners because it is not possible
to predict how technology development and commercial innovation may
evolve. Further, one technology system may be well suited for
bituminous coals, whereas another may apply best to low rank coals and
lignite.
With respect to sequestration, there is enough technical knowledge
today to select safe and effective storage sites for large volumes of
CO2 storage over extended time periods. However, national
deployment of commercial CCS involves technical challenges and concerns
due to the operational scale that is required. The aggressive research,
development, and demonstration program recommended here could resolve
both the technical and legal issues within 10 years and provide the
foundation for a legal and regulatory framework to protect the public
without undue burden to industry.
In the program recommended above the generation and capture, and
the sequestration demonstration components should be integrated
together as much as possible to facilitate learning for actual CCS as
it will need to be applied commercially. This program could be viewed
as an insurance policy that the U.S. is investing in so that the
technologies and legal/permitting framework are available when needed.
Further, as this moves into commercial practice it is expected that
innovations and cost reductions will occur. Enabling CCS is critical to
the use our domestic coal supply in an environmentally positive manner,
as we will need to do. Establishing a commercial, innovative CCS
technology base in the U.S. should provide marketing opportunities to
the rest of the world.
Thank you again for the opportunity to present this material to you
and your Committee. We face many energy challenges in the future, and I
firmly believe CCS will help us meet them.
Citations and Notes
\1\ MIT, The Future of Coal; Options in a Carbon-Constrained World.
2007, MIT: Cambridge.
\2\ Dalton, S., The Future of Coal Generation, in EEI Energy Supply
Executive Advisory Committee. 2004.
\3\ NCC, Opportunities to Expedite the Construction of New Coal-
Based Power Plants. 2004, National Coal Council.
\4\ Friedmann, J., Technical Feasibility of Rapid Deployment of
Geological Carbon Sequestration, in House Energy and Commerce
Committee, Energy and Air Quality Sub-Committee. 2007: Washington, DC.
Senator Kerry. Well, we thank you. And let me follow right
up with you, Doctor Katzer.
Why don't I take a 6-minute round, and we'll sort of go
round and come back and--since there are only three of us, we
can sort of open it up a bit.
So, how do we do that? You recommend, sort of, getting--
I've heard this discussion about quickly getting, maybe, ten
demo projects out there, whatever number, make it happen. Is
this something you're suggesting that we should give an
incentive to the private sector to do? Is this something we
should do? Should it be a joint venture? What's your sense of
the structure?
Dr. Katzer. Well, first, the demonstration projects
themselves, we think, should be run by some form of pseudo
private/public company, a new quasi-government CCS corporation,
that would do them; they should not be handled or managed by
DOE. There is a significant amount of R&D associated with these
that is needed and that would need to be integrated with them.
DOE should be primarily responsible for this, and the DOE
budget would need to be increased significantly and focused on
these areas.
I think there's no problem identifying what needs to be
done and moving it forward; I think that is fairly easy. I
think moving forward aggressively is going to be one of the
major challenges that the Senate must address.
Senator Kerry. And why is that? Why is it so hard to move
forward aggressively?
Dr. Katzer. We have not set firm policies and time tables,
politically.
Senator Kerry. Do you think it's urgent that we move
forward aggressively?
Dr. Katzer. It is extremely urgent that we move forward
agressively.
Senator Kerry. Then why is it so hard?
Dr. Katzer. By doing what we recommend the U.S. is
essentially buying an insurance policy so that it has technical
options it can use down the road when it decides it needs to.
And if you don't do that, you simply push everything back. I
will simply note that FutureGen was probably hatched in 2002.
It was proposed formally in 2003. It's now 2007, and to the
best of my knowledge a gasifier has not been chosen yet. Thus,
all the details of what it's going to look like are really not
on the table yet so that serious engineering work cannot be
completed. It's proposed to start up, I think, in 2011. And if
you then have 4 years of operations for learnings, you're now
out to 2015. This is the urgency issue you need to address.
Senator Kerry. Well, so, how does AEP decide it's going to
go ahead and do the IGCC, which is effectively a 20- to 30-
percent premium--I mean, it's an add-on, but they're willing to
accept that. They're going out into the marketplace, and the
consumers are going to just, you know, share the cost.
Dr. Katzer. Yes, and they've gotten the utility commissions
to agree that that's permissible.
Senator Kerry. Correct.
Dr. Katzer. And the driver for them was to do a very
detailed risk analysis to say, ``Things will change, CO2
is going to become an issue that we'll have to deal with, and
we need to begin to move down that learning path.''
Senator Kerry. Well, they're right about that, correct?
Dr. Katzer. I would suggest they are, yes.
Senator Kerry. Therefore, what's the formula for getting
everybody else to buy in? Is it a mandate from the Federal
Government? Is it----
Dr. Katzer. I think it's not a mandate.
Senator Kerry.--incentive?
Dr. Katzer. What is needed is a clear signal of what the
policies are going to be. And we've heard, several times here
today already, that industry needs a clear signal of what
policies are going to be, or what they are, and then these
policies need to be in place for an extended period of time,
and not change under pressure.
Senator Kerry. Is the clearest----
Dr. Katzer. This provides a basis so that they can plan.
Senator Kerry. Is the clearest and most effective signal an
economywide tradable cap?
Dr. Katzer. That would work.
Senator Kerry. Isn't that a pretty effective signal?
Dr. Katzer. That is a pretty effective signal.
Senator Kerry. Aren't a whole bunch of companies already
spontaneously----
Dr. Katzer. A relatively large and wide-ranging number of
companies have made recommendations that the U.S. establish an
effective carbon policy.
Senator Kerry.--adopting that?
Dr. Katzer. They are recommending a move in the direction
of putting some kind of price on carbon, yes.
Senator Kerry. What do they know that we don't? Or are they
accepting something that we won't?
Dr. Katzer. I think they're accepting something that
ultimately Congress, Senate and the House, will have to come to
grips with, yes.
Senator Kerry. With respect to--Mr. Eckhart, I--or--yes--
renewables, these ten companies. In the 1970s--1979, I
remember, when President Carter initiated the first round of,
sort of, response to oil crisis, Congress made a very
significant commitment to incentives for renewables and
alternatives. And, in fact, a lot of tenured professors left
their positions and went out to Colorado and became, you know,
participants at the laboratory. And then, lo and behold,
President Reagan appeared, and they cut the guts out of those
subsidies. At that point in time, we were the world's leader in
photovoltaics and alternatives renewables, were we not?
Mr. Eckhart. We were.
Senator Kerry. And, as a consequence of that loss of
Government commitment to the effort, that lead shifted to Japan
and Germany, did it not?
Mr. Eckhart. And for other reasons, yes.
Senator Kerry. What were the other reasons?
Mr. Eckhart. Well, in 1979--incidentally, I personally did
a complete survey of the solar cell industry in the United
States, personally visited every company, and I can report to
you that last year I looked up that study, and only one company
listed in that study--and that was the national study in 1979--
is still in existence in its own name. One. Inspire
Corporation, up in Boston, by the way.
Senator Kerry. And what does that tell you?
Mr. Eckhart. Well, what happened was, we adopted, in our
country, a philosophy that the Government role is to fund R&D
and put technology on the shelf, and then, somehow, someone
else will take it from there. But other--what happened is,
other governments around the world didn't have that philosophy.
They adopted the philosophy that they would pick up on our
technology investment and incentivize their markets to buy it,
which caused companies to go into business to sell it. And so,
when Germany put their renewable energy law with the feed-in
tariff in place to pay for electricity from solar energy into
the market, it allowed German companies to sprout up, and they
created an industry on our technologies.
Senator Kerry. And it's fair----
Mr. Eckhart. And that's what happened.
Senator Kerry.--it's fair to say that in the 1990s, when
the Soviet Union disappeared and the former Eastern Bloc
countries suddenly came into their own, as they looked at the
devastation around them from the communist management, if you
want to call it that, of their environment, they turned to
Germany and Japan for the technologies to clean up the Danube
and the various, you know, communities. So, we lost a lot of
jobs, in the end, both ways.
Mr. Eckhart. We did. And we----
Senator Kerry. We lost them on the front end and the back
end, did we not? Is there a lesson in that for where we ought
to be now?
Mr. Eckhart. Yes, there is.
Senator Kerry. What's that?
Mr. Eckhart. This is a worldwide competitive industry
sprouting up, as we speak. And it is taking root in the
countries where the governments are encouraging markets to take
place; that is, to adopt the technologies. And if we sit back
and just fund R&D, and don't work with the American people to
adopt these technologies, we will not enjoy the companies, the
industry, and the jobs that come along with that. It's our
choice.
And we have to choose right now, because we're in--for
example, in wind power, there have been two rounds of building
factories. The first round happened in Denmark, Germany, Spain,
India, where the markets were. The local companies built up,
and they went public, and they're very big right now. The
second round is happening this year, in China, because they
have a government rule of 70-percent local content. To sell a
wind turbine, you must make 70 percent of it in China. Every
Western company has to build a factory in China to play in that
market. So, all the money available to build factories is, this
year, going to China. We've missed round one, and we've missed
round two. We must get round three, which is the next wave of
factories. We must get it, or we will not have a true wind
industry here. With all those jobs. We're talking about well
over 100,000 jobs around the world went to other countries. The
same thing in PV.
And you mentioned the Soviet Union and Germany. Today in
Germany, there's a U.S. company, venture-capital-backed, that
just went public on the NASDAQ. They have a lot of capital.
They're building their new factory. Where? East Germany. Why?
Because the West German incentives to build factories in East
Germany are so lucrative that the German Government is, in
effect, paying the full cost of the factory just to employ
people.
Other governments aren't playing by our rules, and we have
to look globally as to what the industry is into, and do the
right thing here in this country.
Senator Kerry. Last question before I cede to Senator
Ensign.
Can you tell us what the state-of-the-art is, at this
point, with respect to deepwater turbine--deepwater wind?
Mr. Eckhart. That's--that is the area where R&D is needed
in wind, making those--you mean placing offshore wind in deep
water.
Senator Kerry. In deeper than 50 feet, yes, if you're
looking for offshore, so you don't run into the NIMBY issues
and so forth.
Mr. Eckhart. That--just to go offshore approximately
doubles the cost of the machinery and the cost of the----
Senator Kerry. How technically developed is that ability to
place deepwater towers? I gather they've got some kind of a
weighted balance system or something. Are you familiar with it?
Mr. Eckhart. I am. And it is the area that deserves a lot
of R&D investment right now, and it should be cost-shared
between the wind turbine companies and the Government----
Senator Kerry. Thank you----
Mr. Eckhart.--50/50.
Senator Kerry.--very much.
Senator Ensign?
Senator Ensign. Thanks, Mr. Chairman.
Dr. Sridhar, I want to explore with you and with some of
the other witnesses, the part of your testimony about not
having the Government pick the winners and losers. There is a
delicate balance here. The innovation process begins with basic
research. I know that all of us believe that the Federal
Government plays a very vital role for us is in supporting
basic research. The delicate balance is then to provide the
proper incentives for bringing the technologies that result
from basic research to the marketplace without government
picking the winners and losers. The Government is not very good
at picking the winners and losers. the market, not the
government, should determine . . . which are the better
technologies out there. I would like a few comments, starting
with you, Dr. Sridhar and Dr. Katzer, and then Mr. Eckhart and
the other witnesses on the delicate balance between the
important role government should play in supporting basic
research while not picking winners and losers in the technology
field.
Dr. Sridhar. OK. So, on fundamental R&D, I think the
Government has a huge role to play. This is, like you said, a
multifold win; it's not just in developing technology, it
creates the next generation of scientists, engineers, it
stimulates math education, science education, technology
education. This is where the future of the country is. Funding
that kind of R&D in national labs, in universities, it's a
great place. Funding that kind of R&D in industries is a bad
decision, because we're taking taxpayer money and giving it to
corporations, and our incentive is already very large in the
marketplace. It's a $1.6 to $2 trillion market. Companies
already have plenty of incentives to develop energy solutions.
Last year, close to $3 billion worth of venture capital
money in this country went into clean tech. And that number is
increasing. So, private equity dollars will pick the companies
to incubate, based on those technologies. And they will bring
it to a point--there's plenty of venture capital involved, and
they have a much better track record--if we go back to the last
three decades, time and again, they have a very good track
record of figuring out how to bring the best R&D into a place
where the technology is demonstrated.
Senator Kerry. Can you just square that, if you don't mind,
with what Mr. Eckhart just said, about the experience of the--
putting it on the shelf and then we just left it, and everybody
else took it?
Dr. Sridhar. Yes. So, if you look a few years ago, the
total amount of venture capital money in this business was next
to nothing. When my company, 5 years ago, was funded on
SandHill Road, we were probably the only energy company that
was funded. Last year, 2006, $3 billion was invested in green
tech. So, that train has already left the station. So, his
comment is extremely valid for the 1970s, not so today, because
of the market opportunity.
Now--did I answer your question? OK. Now, if we go forward,
what happens? The venture capitalists are in the business of
taking a company to demonstrate that it can do something. But,
in the early marketplace, when your volumes are low and when
your cost is high, and you need some amount of acceptance and
some level of risk-taking on the offtaker side, those early
adopters. This is where the Government plays a very big role.
This is where those other governments that Mr. Eckhart talked
about have been in the forefront, and we have not been doing as
good a job, if you take Japan and Germany and other countries
as an example.
So, what is happening is, even these venture-backed
companies, as they try to expand manufacturing, as they try to
go into the first markets to make themselves viable,to cross
the chasm, they're finding it a lot easier to do that offshore
than they are out here, which would be a terrible shame,
because this is the greatest job-creation opportunity and
economic opportunity of the 21st Century.
Senator Ensign. I'm a little confused, and I think the
Chairman might have been, as well, in reconciling--the other
countries are giving incentives. Aren't they picking the
winners and losers, then? We are trying to set policy to--this
is that delicate balance that I'm talking about--incentivize
new technologies, but not pick the winners and losers. ``What
do we need to do differently?'' I guess is the bottom line.
Dr. Sridhar. Absolutely. If you set a performance standard
that basically says, if you're buying power generators for
powering Federal buildings, you're not going to say, ``I want
your geothermal, I want wind, I want fuel cells, I want
solar.'' You're going to say, ``Up to a certain percentage of
what we are going to buy, we are going to buy as long as it
meets this efficiency metric, it meets this emission metric,
and it is indigenous, you know, in terms of fuel for energy
security, and we would prefer a U.S.-based company.'' Once you
do that, whether literally it's a monkey sitting in a box
pedaling a wheel to get you the electrons, or something else,
you're not picking it. The market is going to pick that winner
or loser. OK? So, that is----
Dr. Katzer.--that is the differentiation between what those
other countries are doing and what we are doing.
Senator Ensign. Similar to setting----
Dr. Sridhar.--and what we----
Senator Ensign.--like Nevada set an RPS standard of 15
percent.
Dr. Sridhar. Absolutely.
Senator Ensign. They didn't choose the winners and losers,
they just set the standard, and then it's up to the power
company and others to come up with the technologies in the
marketplace to satisfy that standard.
Dr. Sridhar. Absolutely. And I think the market is very
efficient at doing that in this country. And the other thing
that I would add to that would be to say that--don't even set
it like the CAFE standards, where the number is fixed. Pick a
number, have a certain percentage that needs to be met. If it
is easily met by Q3 of the year, raise the bar. If it is not
easily met, lower the bar. But keep raising the bar. This is
how this country is going to stay competitive.
Senator Ensign. Dr. Katzer, could you address this from an
academic standpoint? In your testimony, you talked more about
one particular industry, based on electricity generation from
coal; I think it's because we have so much coal in the United
States. But any thoughts on what Dr. Sridhar's been talking
about?
Dr. Katzer. Yes. But maybe from a little different
perspective.
What we were looking at here, and what I was speaking
about, is an area where we have, say, three different competing
power generation technologies with CCS. They each are composed
of proven commercial components, most of which, but not all,
have been integrated together and have been demonstrated.
They've never really all been put together in the form that's
needed and at the scale that's needed to be applied in power
generation. And if you take one high quality coal, for
instance, bituminous coal, for CO2 capture there's a
clear technology leader right now. It may or may not continue
to be the clear leader for the future with CO2
capture. That's IGCC. But if you move to subbituminous coal,
Powder River Basin, or lignite, or move up into Montana, the
disadvantages which IGCC begins to suffer relative to PCC
narrows the gap so that there is very little difference between
the two. And, in that case, you don't want to be picking one
technology versus another. You really would like to play them
all off against each other. And you can be certain--for certain
regions or for certain coals one technology may be the winner;
for other coals and different parts of the country, another
technology may be the winner. And then there's a third large
factor, the innovation that will come along from getting the
creative juices of industry and competition really flowing when
they begin to do CCS on a commercial basis. With this you just
cannot predict what will happen. You need some way to allow all
of those technologies to play out in the marketplace, and that
will be the most efficient approach.
If I could add one other point to this. There is an
important Government role in all this and that is to continue
R&D in support of these technologies, as well as to fund R&D
for new ideas, and new technologies that could, in fact, upset
the applecart. But to wait for those new technologies that
could upset the applecart to come along is something in this
area we think is a bad idea. We don't think there's time to do.
Senator Ensign. Well----
Dr. Katzer. For instance they may not appear; and we will
gain a lot of innovation and cost reductions by moving on the
other technologies.
Senator Ensign.--I'd love the rest of you to be able to
respond.
Senator Kerry. Go ahead.
Senator Ensign. I think I may have gone over my time.
Senator Kerry. Go ahead. Go ahead.
Senator Ensign. Thank you, Mr. Chairman. Can the other
witnesses on the panel quickly comment?
Dr. Preli. Yes, I'd like to comment on the--on two things.
First is the role of Government. In the basic R&D phase, I
think the Government has a lot to say about that. But even in
the next phase, which is the development of applications, we
like the 50/50 kind of arrangement, where you're still
exploring a technology, and yet you're trying to find out what
it would be good for. At that point, companies like ours are
willing to invest large sums of money to do product
development. So, in the third phase, once the products are in
development, we think the role of the Government is to help
provide incentives to get it out into the marketplace.
Then, when the industry can stand on its own, the role of
the Government becomes simply codes, standards, regulations,
and things like that. So, we believe that Government and
industry have a cooperative arrangement throughout the
development lifecycle, with most of the effort by Government in
the beginning, most by industry at the end. But it's a
continuum. One other comment I'd like to----
Senator Ensign. Bit how do we choose which one of those
products to fund along the way?
Dr. Preli. Right.
Senator Ensign.--you know, wind, solar,----
Dr. Preli. I think what you do is----
Senator Ensign.--clean coal, which one of those products?
Dr. Preli.--you cast--you cast a very wide net, and you
manage a portfolio of technologies. As those become more or
less promising, you let some fall by the wayside and encourage
others, the ones that are showing true benefit in the
application phase. And I think it's--if you look at it from a
portfolio management mindset, then you can more easily decide
which ones to put more money in, less money. Even the ones you
put some less money in, though, the time will come where
perhaps a breakthrough makes them far more attractive.
One other point I would like to make. I studied the
Japanese a lot, in both solar and fuel cells. I think what
you'll find is, the difference between them and us is that they
have long-term planning and incentive situations that start
high and go low. And so, I think you'll find that they've been
very successful with this, with solar, and it looks like they
may be successful with small fuel cells, where they are
fielding, now, thousands of units per year, while in the U.S.
we're limited to virtually none.
Senator Ensign. Let me just point one quick thing out in
all of this that I want to give the panel and those of us
policymakers up here. I remember when everybody was just
starting to use PCs frequently, and France decided that
everybody was going to have basically the same system. They got
way ahead of the rest of the world, and people were saying,
``Look what France is doing. They're going to be ahead of us.''
And people were saying, ``We should be doing the same thing.''
Well, within a year or two, France all of a sudden made this
huge investment, because the government decided it picked the
winners and losers, and France ended up way behind as a result.
What if Japan is making the wrong choices? Isn't the market
more efficient at picking the winners and losers? This is the
balance that I'm talking about. At what point in that
development, then, does the market become more efficient than
the Government?
Dr. Preli. Well, I think the market is very, very
efficient, and that's why we have--all of our laptops are
Japanese batteries, and our hybrid cars are Japanese, and now
the Americans are starting to catch up. And our photovoltaic
cells are Japanese and German. I think what they do is, they
tend to stick with----
Senator Kerry. Sounds like a recommendation----
Dr. Preli.--it longer.
Senator Kerry.--to listen to the Japanese.
[Laughter.]
Dr. Preli. And if you look at the roots of all of those
technologies, they were born in America.
Senator Ensign. Go ahead, Mr. Eckhart.
Mr. Eckhart. Oh. I would add a comment. I think we're at
the beginning of a threshold of a whole different era of public
policy, and it would be this, that every energy-generation
machine produces two things: energy in some useful form, and
pollution in some form. And what we haven't done, because we've
presumed away how we pay for energy, we're not valuing those
two things. And I think, with our sophistication, going
forward, if we monetize both the energy benefit and the
environmental benefits of what we're buying, then we're neutral
to technology. Let the technologies compete. In other words, a
coal-fired power plant produces a very reliable output of
electricity in very dependable, measurable quality; it also
produces two-thirds pollution. A solar energy device produces a
different kind of electricity, and a very different pollution
profile. If we can learn to monetize those--all those
variables, then--and we set public policy on the buying of
energy as to its reliability, its quality, and so on, and as to
its pollution, we monetize all these things and set public
policy on that, then let industry compete for what we're
buying. You know, coal will have its place if we want--if we're
prizing reliability and bulk power generation and base load.
It's going to win some of the marketplace. But solar is going
to win if we monetize that nonpollution factor. This is what
Germany, I think, is pointing toward. But I wouldn't copy them
either. I think there's an opportunity for the U.S. to create a
policy regime here for the long term that heads us toward
dealing with climate change and the environment and economic
growth, all together.
Senator Kerry. So, what happens if you don't have a long
term, when your leading climatologist tells you you've got a
10-year window, and you have a margin of about .5 degrees
centigrade that is allowable for a continued increase in
temperature, and perhaps, you know, 90 parts per million of
atmospheric greenhouse gas addition? Don't you have to move
more rapidly? Don't we, as public people, have a moral
responsibility to say, ``We've got to meet this goal and make
some choices''?
Mr. Eckhart. I have spoken with Al Gore and other people
about the 10 years, and that's a political motivator, that we
get moving fast. I would prefer that we say that the train has
already left the station and we have to act yesterday.
Everything we do, or don't do, depends on how severe the
problem gets.
Senator Kerry. But let me continue on that, because I want
to pick up on what Senator Ensign is saying. Look, I've--in all
the years I've been here, I've always advocated not picking
winners and losers. In every policy we've tried to adopt, we
haven't tried to pick a winner or loser. But there is a
distinction between, quote, ``picking a winner or loser'' in a
particular technology in a particular field and making a clear
policy judgment that carbon producing, fossil fuel burning is
not what we want, and we have to have clean and/or alternative.
Now, that's not picking a winner or--in a sense, it's picking a
winner or loser, in a macro term. We've got to do that. I don't
think we have any choice but to do that. You said to monetize--
it would be great if we could monetize it. The best way that I
can of monetizing it is to have a carbon cap. That effectively
monetizes it, doesn't it?
Mr. Eckhart. Exactly.
Senator Kerry. Doesn't it?
Mr. Eckhart. It does.
Senator Kerry. And it does it fairly simply. We're not
sitting there actually establishing the price, per se. It's
going to happen in the marketplace. But we're at least
beginning to establish some cost to the downside of what we're
doing. Heretofore, we've had phony pricing of goods.
Mr. Eckhart. Exactly.
Senator Kerry. Goods are priced, but they don't reflect the
real cost to any of us, because the citizen is picking up the
back-end cleanup, the cancer, the hospitalization, the asthma,
all the rest of it. That's the cost. So, somehow you've got to
find a way to get the real cost in there. And then the
marketplace can go to work and say, ``Well, that's not really
worthwhile.'' But, in that regard, it seems to me, solar, in
macro terms, and the alternative renewable, and wind, are the
only things we know of to really--and geothermal--we ought to
embrace with some major tax credit or some kind of policy that
says, ``You choose if you want solar or if you want wind or if
you want this.'' But, in macro terms, we ought to be directing
the policy and creating a framework for those choices,
shouldn't we? I'd like everybody to answer that. Is anybody
opposed to that?
Mr. Prindle. I could offer an opinion on that, Senator When
we look at the policy picture and we look at the carbon
imperative, particularly, the good thing about carbon, from a
policy point of view, is that it tells you how good you have to
do in the energy market, because it tells you what the
trajectory has to be of carbon emissions. And so, that helps us
decide, ``Well, we've got to accelerate energy efficiency at
least this rate, we've got to accelerate renewable development
at at least comparable rate in order to hit some kind of carbon
target.'' And so, in a sense, the carbon imperative, I think,
has given us a performance target for energy markets, overall.
And, you know, from the energy efficiency point of view, we
think cap-and-trade is a good overall framework, and yet energy
efficiency occurs down at the customer end-use level. And so,
if you set it--if you set the cap at the power-plant level, you
can't actually claim that end-use efficiency savings is a
carbon credit, because it's not a direct carbon emission
reduction. And so, there are some things you have to do around
the edges----
Senator Kerry. Sure.
Mr. Prindle.--applying standards and so on.
Senator Kerry. Which is why you have to have a fairly
significant----
Mr. Prindle. Right.
Senator Kerry.--energy efficiency component. And I think
most of the bill----
Mr. Prindle. Right.
Senator Kerry.--Senator Snowe and I have a bill, and there
are a couple of others out there, they all embrace that kind of
efficiency----
Mr. Prindle. So, it's a kind of a hybrid. You need carbon
cap-and-trade as a----
Senator Kerry. I understand. It's not----
Mr. Prindle.--framework----
Senator Kerry.--the whole deal.
Mr. Prindle. Right.
Senator Kerry. Believe me, I understand. It's not the whole
deal.
Mr. Prindle. Right.
Senator Ensign. Mr. Chairman, could I add one----
Senator Kerry. Sure.
Senator Ensign.--thing to your----
Senator Kerry. Yes.
Senator Ensign.--question that maybe the witness----
Senator Kerry. Absolutely.
Senator Ensign.--could address? Because I haven't heard it
today, and it at least needs to be discussed, although that's a
little dangerous coming from Nevada, but it's nuclear power.
Nuclear power, obviously, has certain negative aspects, as far
as my State's concerned, but it at least needs to be part of
the discussion.
Mr. Prindle. Well, I'll just add that. We don't take a
position on particular supply technologies, but what we do look
at is the capability of energy markets to deliver resources
under today's conditions. And what we see is that it's just
tougher than ever to bring power plants, to bring LNG
facilities, to bring pipelines and transmission lines into
service. There are capital problems, siting problems,
permitting, and so on. And so, the markets are really
constrained. And so, from that point of view, we view energy
efficiency as the first fuel, in that it buys enough time to
bring--whether it's nuclear, clean coal, renewables, even
natural gas--to market. In any of those cases, you're going
to--we're going to need to moderate demand growth to have a
chance to catch up with where demand growth has been taking us.
Senator Kerry. Do the rest of you want to--go ahead.
Dr. Sridhar. Senator, I think you've heard this stated many
times before, but it's worth stating again. For this particular
problem, there is no one single silver bullet as the solution.
And, for that reason, I don't think there is one single policy
that's going to solve the problem either. So, from a cap-and-
trade perspective, it does two things. At the end of the day,
that increases cost. And when cost goes up, in a way it
addresses the conservation issue, because you don't waste
something that's expensive. So businesses are going to react to
that from that perspective, of making sure that they use it,
but they don't waste it.
Now the thing that we've got to be extremely aware of,
which is what you're going after, which is the global warming
issue----
Senator Kerry. Can I just say, Doctor----
Dr. Sridhar. Yes.
Senator Kerry.--it doesn't necessarily--I mean, there's a
capital cost, but, in fact, a lot of companies, by doing the
efficiency piece, are reducing the emissions, effectively
meeting a cap, and lowering cost.
Dr. Sridhar. Absolutely.
Senator Kerry. Saving money.
Dr. Sridhar. Absolutely. So, what I'm trying to say is,
that's the low-hanging fruit that's going to get you the first
fraction of what you're looking for. But I'm going past that--
--
Senator Kerry. Ultimately, you get into a----
Dr. Sridhar. Yes.
Senator Kerry.--demand curve that goes----
Dr. Sridhar. Yes. Yes.
Senator Kerry. I understand that.
Dr. Sridhar. I'm trying to go past that, you know, because
that, alone, is not going to solve the global warming----
Senator Kerry. And that's where the technology has to save
us.
Dr. Sridhar. So there are two things. Number one, when we
do that, it also buys us the moral right in a global platform
to say, ``We, as the largest consumer of energy, are doing
something about it,'' so now we can speak to the world with a
moral authority, saying, ``We are putting our money where our
mouth is, we are putting our policy where our mouth is.'' So, I
think, from that perspective, it's very good.
But that leads to the important thing that global warming
is really a global problem, and the CO2 knows no
boundaries, and it does not require a visa to get into this
country. So, we are going to have the same CO2 that
comes from anywhere else. And therein, finding technologies
that can create clean energy at equal or lower cost, and not
have to pay for green, has to happen. And the history of
technology suggests that it always happens. So, while we are
doing things on cap-and-trade and anything else, I think a very
robust parallel process of figuring out where the next
breakthrough is going to come, technologically, is extremely
important.
You asked the question, because there's a time clock
ticking on this, Do we pick winners and losers here? Well, it's
extremely difficult for the Federal Government to do what a
venture capital model would do. The venture capital model says,
you know, ``Internet security is extremely important. I don't
know what's going to succeed or not. I'm going to invest in 15
companies.''
Senator Kerry. Sure.
Dr. Sridhar. ``Maybe two of them will succeed, other 13
fail. I don't care.''
Senator Kerry. Well, I agree. But, you see, where we're
missing each other is--we have no disagreement of that. I'm not
trying to come into the field of Internet security and say,
``Let's pick this.'' But I am trying to say Internet security
is important.
Effectively, what I'm saying here is, I mean, everything
that I've read on this, we--I mean, solar is big-time free,
renewable, clean, it's about 30 cents--30-plus-cents a kilowatt
now. If we were to get that down in half or more, we'd begin
to, you know, become competitive, you know, it would be out
there more.
Two, wind. We know that wind is a big future potential
resource, but there's only about 6 percent of the country has
an availability to put in place, but that's pretty significant.
It's a big growth piece. It's going to be part of the mix,
correct? So, we've got two pieces we know are clearly going to
be part of the mix.
Geothermal, unclear as to how we do what you're talking
about, but clear that it's there--great, renewable, free, so
forth and so on, except for the capital cost of getting at it,
obviously--we ought to embrace.
I mean, beyond that--and then, the question was raised by
the Senator, on nuclear--I think there is going to be some
pressure on nuclear. But Wall Street is going to decide that
one, because the economics of it aren't great yet. And then,
you have the proliferation and waste issues that just remain
monumental. So, I don't think it's going to be the big embraced
vision of the future, but it's going to be part of the mix. I
think there are 160-plus plants that are currently in design,
globally. I think there are some--I forget the number here in
the United States--pretty significant number right here, maybe
40 or--I can't remember exactly the number. But there are
fairly decent number of plants that are going to be built here.
What we can't allow to happen--we just can't allow it to
happen--is having China build one pulverized coal-powered plant
per week. Can't do it. And until TXU cut a deal, we didn't have
any ability to go in and begin to say it. We still, I don't
think, are where we need to be with that, because we're still
going to build, apparently, three plants, and not according to
the IGCC or other standards. So, we're going to have to take
the lead here in order to leverage China or other countries.
And that's why I think the Government has a responsibility,
because of the short window, to pick the biggies that are out
there and create some sort of incentive for your venture
capital and others to go rushing in, and you'll decide which
one of these is really going to ultimately work.
But what's the matter with--if you have a 10-year window
and the urgency we have and the size of the problem we have to
overcome--with creating that framework? Is there some problem
with that?
Dr. Sridhar. Absolutely no problem. As long as you base it
on performance standard and say, like you said, wind, solar,
anybody can compete with that and win; and whoever comes to the
table with the best-value proposition wins.
Senator Kerry. Yes, Mr. Eckhart?
Mr. Eckhart. Senator, I think there's a combination of two
things that will get you what I think you want, which is the
cap-and-trade, to get us moving on carbon; and second is to
move toward performance-based incentives, the monetization of
environmental benefits. That combination will both force action
with the carbon cap-and-trade, providing a business
environment, and, second, shift the incentives toward buying
the benefit, not pushing technology. If we're buying the
benefit, if we're putting public money on buying clean energy,
no-polluting energy, rather than on pushing individual
technologies, then the Government is out of the business
completely of picking technology winners and is, instead,
encouraging the country to shift toward a cleaner, lower-carbon
environment. That combination of performance-based incentives
and the carbon cap-and-trade, I think, will rocket this thing
forward, if we can just do those two things.
Senator Kerry. Well, that's good--that's a good thought.
With respect--I mean, would you go anywhere, other than
those that I mentioned, in terms of what you put into the pot
of those incentives you're creating?
Dr. Preli. Well, I think if you're performance-based on
your incentives----
Senator Kerry. Well, let me give you an example. For
instance, there are--there's an increasing awareness of the
potential tension in overly encouraging ethanol, for instance,
corn-based at least, and so forth, in terms of land use, water
use, energy use, and the production thereof, and so forth. How
do we handle that, in your judgment, if you're going to
encourage renewables? Are you going to let the market decide
that, or should we be guiding that somehow, in terms of good ag
policy, as well as good environmental policy?
Dr. Preli. Well, I think it's--that's a matter of setting
the ground rules. So, if you're careful about your well-to-
usage analysis, then you will be able to determine the
environmental impact; cellulosic ethanol versus corn ethanol,
for example.
Senator Kerry. We're not there with cellulosic ethanol.
Dr. Preli. And I think that's exactly the point, is that
you would make a decision on, How far do you want to go with
corn-based ethanol, and how much effort do you want to put into
the other technologies that might have a much bigger impact?
So--and you can get to the decision, I think, rather easily by
looking at CO2 production along the value stream.
And you can evaluate the other technologies in exactly the same
way. I think what you'll find is that there are some near-term
things you can do that help a little, but you probably should
do them, and you should also be investing in some of these
longer-term things that will get you to the amounts of CO2
reduction you need. And DOE has mapped that out, last fall, in
their climate change report. The amount of CO2
reductions are--the volume is staggering. And no technology
that exists today really can practically accommodate those. So,
a lot more needs to be done to make current technologies far
more efficient, and even to develop new technologies.
Senator Kerry. Of?
Dr. Preli. Energy production with a smaller CO2
footprint.
Senator Kerry. OK. Energy production, generally, with a
smaller footprint.
Dr. Preli. That's right.
Senator Kerry. Your Chena--``Cheena'' or ``Chayna''?
Dr. Preli. ``Cheena.''
Senator Kerry.--Chena Hot Springs Resort operation, is it
30 cents a kilowatt hour?
Dr. Preli. They pay 30 cents a kilowatt hour if they're
firing up diesel generators to produce the electricity. They
pay about 7 cents a kilowatt hour with the geothermal.
Senator Kerry. Gotcha. OK. I was curious about that. Is UTC
involved in other kinds of research, other than the cell? The--
--
Dr. Preli. Sure. We have a big focus on co-generation
equipment, which is point-of-use heating, cooling, power, all
from one system. And that's something you can do very easily.
We can use microturbines, we can use reciprocating engines on
natural gas, we can use fuel cells. And those systems all can
get you from a 30-percent-or-so efficiency all the way up to 80
to 85 percent, because you're using a lot more of the input
energy. So, distributed generation is a real good way, in the
short term, to dramatically reduce energy use.
Senator Kerry. Well, that's been something that we've
long--in the electricity deregulation, we sort of pushed for
that concept.
Dr. Preli. That's right. And the Government really can help
by making it easier to do these co-gen----
Senator Kerry. Right.
Dr. Preli.--the amount of work to site a co-gen
application--even though the benefits are tremendous, the
amount of work to do that, with the current rules and
regulations, is sometimes ominous.
Senator Kerry. Right.
Dr. Preli. Or onerous.
Senator Kerry. Dr.--yes.
Dr. Sridhar. Can I add to Dr. Preli's comment? If you're
building refrigerators, the way it exists today in the DG
market is for every county, every zip code will have to custom
make it for a certain local law. We need uniform
interconnectivity standards. And that doesn't exist in the DG
field. And that's a huge----
Senator Kerry. In the--which field?
Dr. Sridhar. In the distributed generation field.
Senator Kerry. I see. Yes.
Dr. Sridhar. So, that's an important policy issue.
Senator Kerry. Fair enough.
Mr. Prindle. We did a study of state distributed
generation, interconnection policies, as well as the utility
rate policies that go along with them, because when you try to
bring a facility--interconnect it into the grid, you have to
pay for studies, fees, permits, time delays. And then,
utilities will often charge you, well, some would say,
predatory rates for standby or supplemental power, to make the
project essentially uneconomic. And some States do better than
others. I'm happy to say Massachusetts is one of the better
ones. But there are some States that have a ways to go in
modernizing their interconnection policies. And in the Energy
Policy Act, there was a limit as to how much federalism could
move on imposing those on state utility commissions.
Dr. Katzer. I want to make a couple of relevant comments.
Senator Kerry. Dr. Katzer--yes.
Dr. Katzer. Yes, Senator Kerry. I want to make two
comments. In our forward modeling that was part of this study,
and that focused on how to stabilize CO2
concentrations, it is clear that first off you need all of the
above. And, in fact, energy conservation and efficiency is the
biggest piece of the wedge as it comes out. Biomass and
renewables are also large. And you need CCS, which is where we
spend most of our focus on coal to power, and other products
such as fuels and petrochemicals.
Senator Kerry. CCS being, carbon capture and sequestration.
Dr. Katzer. Yes, carbon capture and sequestration.
CCS can be applied to other stationary emissions of
CO2. But that was not a focus of our study, but much
of the same technology and many of the same issues apply.
Senator Kerry. Besides IGCC, didn't you talk about an
alternative methodology?
Dr. Sridhar. Pulverized coal.
Dr. Katzer. Yes, pulverized coal, with CO2
capture added at the back end of the future gas train.
Senator Kerry. At the back end.
Dr. Katzer. And oxy-fuel, which allows compression of the
whole flue gas directly without CO2 separation.
Senator Kerry. Right.
Dr. Katzer. Oxy-fuel reduces the cost of capture without
having to do any separation. We need all of these technologies
to supply your energy demand and to meet constraints on
CO2.
The other piece of this, though, is, that our energy and
emissions modeling involved the world as a whole; that is a
global model. If you now look at the world as it really is,
you've got China with over a billion people doing what it is
doing, as you mentioned. You've got India with another 1.1
billion people, and the economy's growing rapidly. With China,
we've seen what has happened, since coal is their primary
resource, and they're just using it in enormous quantities.
They've doubled their amount in the last 10 years.
Senator Kerry. I know.
Dr. Katzer. That is a few years.
Senator Kerry. I know.
Dr. Katzer. India, coming along. I think, you know, if we
can establish an effective, lower-cost way to capture and
sequester carbon, that is CO2, from coal, we have a
bargaining position to deal internationally with these
countries, and to get them on the train somehow.
Senator Kerry. I couldn't agree----
Dr. Katzer. If we don't do it, we have no bargaining
leverage.
Senator Kerry.--with you more.
Dr. Katzer. And to establish bargaining position we have to
do it fast; we have to establish the technology and get on the
innovation curve.
Senator Kerry. If we don't do it----
Dr. Katzer.--If we don't, we're losing our technology
position in the world.
Senator Kerry.--it's ``Katie''----
Dr. Katzer.--Technology and political leverage.
Senator Kerry.--``bar the door.'' I totally agree with you.
That's the urgency of this.
Yes, Mr. Eckhart?
Mr. Eckhart. Senator, back to the 10-year issue or starting
yesterday. The reality is--and nothing against other longer-
term questions, but the reality is--and I would submit that the
only strategies to deal with these problems in the next 10
years, and to have any impact in the next 10 years, is, number
one, energy efficiency; number two, renewables. That's the
whole deal, in the short term, to actually begin to impact. And
I would recommend a plan that I know you know well, which is
the California Action Plan, that mandates that the utilities
there, and the energy companies, must maximize on efficiency
first, must then fill out, completely, their growth with
renewables, and only turn to fossil fuel generation if those
two can't be done.
Senator Kerry. Well, we passed a--you know, we passed a
renewable portfolio standard in the Senate. It was lower than
what I wanted. I heard your--in your testimony, you talked
about 2020. I proposed 2020 as part of the campaign in 2004. I
thought it should be a national standard, 3 years ago, that we
needed to have a goal of 20 percent renewables by the year
2020. It was achievable, and based on the California
experience. They were already at 13 and 14 percent, 3 years
ago. And, you know, they've been leading the way on this.
So, we are going to--I've talked to Jeff Bingaman, and
we're working on this. I think--we're going to go for 15
percent, at least, renewable portfolio standard this year, and
try and get it in place, and we'll put a national standard in
place. So, we need that. But I have to tell you, I'm not sure
that either of those two are going to be enough without, you
know, some sort of an urgent leverage with respect to the
China/India piece. And it may be that, with respect to China
and India--I mean, if you can't push the curve fast enough on,
you know, CCS and on one of these technologies to deal with it,
you may have to wind up suggesting to them that we--everybody
help them build a nuclear plant. I hate to say that. But I--but
right now my preference would be to do that than build the coal
plant, because it's that dangerous. I mean, that's really--if
you don't get IGCC in place. Now, can we? I think, yes. I do
not believe--I'm told that, for every dollar spent on
alternative renewable, geothermal, et cetera, you get a much
better return than you're ever going to get in a nuclear plant.
So, clearly the nuclear doesn't have to be the choice. And
preference shouldn't be, because we haven't worked out a
sufficient proliferation regime or a sufficient waste regime.
But these are--these issues can't be left dwindling very--
you know, few folks--you know, to be speaking about it,
nationally and publicly--the governments have got to sit down
and start to really move on this, negotiate it. And,
regrettably, we've got one that still thinks the Earth is flat,
so it's a problem.
Dr. Sridhar. Senator, the problem with India and China is,
even if we had to resort to nuclear, that cannot be the only
option, because you would need one new nuclear power plant in
construction started every 2 weeks----
Senator Kerry. Correct. And you won't get there----
Dr. Sridhar.--every 2 weeks.
Senator Kerry.--fast enough. In addition, I think----
Dr. Sridhar. Yes.
Senator Kerry.--you also have major fuel problems----
Dr. Sridhar. Yes.
Senator Kerry.--because you don't have enough----
Dr. Sridhar. Yes. We don't----
Senator Kerry.--fuel, in the long run.
Dr. Sridhar. So, that can be ``a'' solution, but not the
``only''----
Senator Kerry. Right.
Dr. Sridhar.--solution.
Senator Kerry. A piece of it. No, I'm not suggesting it's
the--ultimately, you've got to get into the clean and
alternative. I understand. I was just talking short term.
Mr. Eckhart. I'd like to agree with your comments on China.
We were there recently, and many times in dealing with them,
and I recently said they're--you know, they've made a
commitment to 15-percent renewables by 2020, and we coined a
phrase there that we're not going to deal with the problem
until China commits to being 15 percent nonrenewables by 2020.
If they're 85 percent nonrenewables, we have the problem you
pointed out, the 1,000 megawatts a week of coal-fired power,
which will live in infamy forever.
I'd like to add, on the RPS, the national RPS, the
possibility that you would consider a national RPS that
encourages every State of the Union to have an RPS of some
level, even if it's 0.1 percent, but that every State shall
have an RPS of some kind. Even in the South, they have plenty
of ag waste, biomass, that they could have some participation.
And that would be a solution I have not heard discussed.
And, second, you might add to that----
Senator Kerry. As opposed to a national standard?
Mr. Eckhart. Well, maybe the national standard is to have
a----
Senator Kerry. If we have a national standard, every
State's going to effectively have to meet it.
Mr. Eckhart. Well, if it--well, a national goal is
certainly argumentative, but if the Federal Government simply
required that every State have a standard, and then created a
trading system to trade the renewable energy certificates
between the States, so that Wall Street could monetize that,
create a futures market, and then we're monetizing
environmental benefit----
Senator Kerry. That's an interesting idea. It's a
possibility. Sure.
Mr. Eckhart. Appreciate it if you could take that up or--
maybe----
Senator Kerry. Yes.
Mr. Eckhart.--with the staff, later.
Senator Kerry. We will. Appreciate that.
Well, listen, I thank you all. It's--this is the challenge,
I'll tell you. If you want to pick the domestic challenge--
sure, we've got budget issues and Medicare, Medicaid,
healthcare, you name it, but they're going to pale beside the
consequences of this.
And if you look at the--you know, you read the Stern Report
and other analyses, it is clear that the cost of not doing
anything is 5 to 20 times the cost of doing something. And when
you look at the 1-percent-of-GDP prediction about potential
cost, this becomes sort of a no-brainer. I mean, it--we've got
to get going.
So, I appreciate your testimony today. It's been very, very
helpful. We appreciate your work. We will follow up with you.
There are going to be further hearings, and we're going to
continue to push this pretty intensely around here.
Thank you.
We stand adjourned.
[Whereupon, at 4:15 p.m., the Subcommittee was adjourned.]