[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

                               __________

    Printed for the use of the Committee on Commerce, Science, and 
                             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

                              ----------                              
                                                                   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

                              ----------                              


                        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:
---------------------------------------------------------------------------
    \*\ The information referred to has been retained in Committee 
files.

   Extension of the geothermal production tax credit and 
---------------------------------------------------------------------------
        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.
---------------------------------------------------------------------------
    \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.
---------------------------------------------------------------------------
    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\
---------------------------------------------------------------------------
    \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
---------------------------------------------------------------------------
    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\
---------------------------------------------------------------------------
    \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\
---------------------------------------------------------------------------
    \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.
---------------------------------------------------------------------------
    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\
---------------------------------------------------------------------------
    \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.
---------------------------------------------------------------------------
    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 
---------------------------------------------------------------------------
        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\
---------------------------------------------------------------------------
    \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\
---------------------------------------------------------------------------
    \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.
---------------------------------------------------------------------------
    \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.]

                                  
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