[Senate Hearing 112-253]
[From the U.S. Government Publishing Office]
S. Hrg. 112-253
RENEWABLES AND DOE ADMINISTRATIVE IMPROVEMENT ACT
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HEARING
before the
COMMITTEE ON
ENERGY AND NATURAL RESOURCES
UNITED STATES SENATE
ONE HUNDRED TWELFTH CONGRESS
FIRST SESSION
TO
RECEIVE TESTIMONY ON: S. 1160, THE DEPARTMENT OF ENERGY ADMINISTRATIVE
IMPROVEMENT ACT OF 2011; S. 1108, THE 10 MILLION SOLAR ROOFS ACT OF
2011; AND S. 1142, THE GEOTHERMAL EXPLORATION AND TECHNOLOGY ACT OF
2011
__________
JULY 12, 2011
Printed for the use of the
Committee on Energy and Natural Resources
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COMMITTEE ON ENERGY AND NATURAL RESOURCES
JEFF BINGAMAN, New Mexico, Chairman
RON WYDEN, Oregon LISA MURKOWSKI, Alaska
TIM JOHNSON, South Dakota JOHN BARRASSO, Wyoming
MARY L. LANDRIEU, Louisiana JAMES E. RISCH, Idaho
MARIA CANTWELL, Washington MIKE LEE, Utah
BERNARD SANDERS, Vermont RAND PAUL, Kentucky
DEBBIE STABENOW, Michigan DANIEL COATS, Indiana
MARK UDALL, Colorado ROB PORTMAN, Ohio
JEANNE SHAHEEN, New Hampshire JOHN HOEVEN, North Dakota
AL FRANKEN, Minnesota DEAN HELLER, Nevada
JOE MANCHIN, III, West Virginia BOB CORKER, Tennessee
CHRISTOPHER A. COONS, Delaware
Robert M. Simon, Staff Director
Sam E. Fowler, Chief Counsel
McKie Campbell, Republican Staff Director
Karen K. Billups, Republican Chief Counsel
C O N T E N T S
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STATEMENTS
Page
Bingaman, Hon. Jeff, U.S. Senator From New Mexico................ 1
Chalk, Steven G., Deputy Assistant Secretary for Renewable
Energy, Office of Energy Efficiency and Renewable Energy,
Department of Energy........................................... 3
Dougherty, Douglas A., President and CEO, The Geothermal Exchange
Organization................................................... 13
Gordon, Holly, Vice President, Legislative & Regulatory Affairs,
SunRun, Inc.................................................... 16
Sanders, Hon. Bernard, U.S. Senator From Vermont................. 1
APPENDIXES
Appendix I
Responses to additional questions................................ 29
Appendix II
Additional material submitted for the record..................... 37
RENEWABLES AND DOE ADMINISTRATIVE IMPROVEMENT ACT
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TUESDAY, JULY 12, 2011
U.S. Senate,
Committee on Energy and Natural Resources,
Washington, DC.
The committee met, pursuant to notice, at 10 a.m. in room
SD-366, Dirksen Senate Office Building, Hon. Jeff Bingaman,
chairman, presiding.
OPENING STATEMENT OF HON. JEFF BINGAMAN, U.S. SENATOR FROM NEW
MEXICO
The Chairman. OK, why don't we go ahead and get started.
I'm told that Senator Murkowski is on her way, but asks us to
proceed in her absence. So we will do that.
The purpose of our hearing today is to receive testimony on
3 bills: S. 1108, the 10 Million Solar Roofs Act of 2011,
introduced by Senator Sanders. I will call on him to make any
statement he would like here in just a moment. I have co-
sponsored this bill, and Senator Boozman has as well.
The second bill is S. 1142, the Geothermal Exploration and
Technology Act of 2011. This was introduced by Senator Tester
with Senator Murkowski and Senator Reed as co-sponsors.
The third is S. 1160, the Department of Energy
Administrative Improvement Act of 2011. This was introduced by
myself and Senator Murkowski. S. 1060 was part of the larger
energy bill that we reported out of our committee in the last
Congress.
There are 2 panels. First we will hear from the Department
of Energy with regard to their viewpoint on all 3 bills; and
second we will hear from 2 experts who will be testifying on S.
1108 and S. 1142, respectively. So we look forward to the
hearing, look forward to the witnesses' testimony.
Senator Sanders, did you wish to make any opening comments
before we call on the witnesses?
STATEMENT OF HON. BERNARD SANDERS, U.S. SENATOR FROM VERMONT
Senator Sanders. I did, and thank you very much, Mr.
Chairman, for the opportunity, for including the 10 Million
Solar Roofs Act in today's hearing. I was proud to introduce
this legislation with Senator Boozman and very much appreciate
the chairman's support as an original co-sponsor.
This bipartisan bill will lower the cost of solar energy
for families and businesses and set strong goals for American
solar energy production. There is no question but that we have
made dramatic progress in cutting the cost of manufacturing
solar panels by 72 percent since 1985, and that is one of the
reasons why solar, the solar industry, is exploding in this
country. They saw as I understand it, Mr. Chairman, something
like a 64 percent increase in their sales just last year alone.
On the other hand, we have not made the same kind of
progress on so-called ``soft'' costs of installing solar. It's
one thing to lower the costs in producing and manufacturing
solar, another thing in terms of installing, and that includes
permitting and inspection fees. These fees account for up to 20
percent of the price of solar and are equivalent to a $1
billion tax on solar over the next 5 years.
We can do better. In Germany, solar energy is 40 percent
cheaper, thanks in part to a simpler permitting process. In
Vermont, I'm happy to say we have just passed legislation this
year to streamline solar permitting and eliminate fees. I think
it's going to lower the cost in Vermont and we'd like to see
that all over America.
Secretary Chu's Sunshot Initiative sets a goal of reducing
permitting-related costs by up to 88 percent to make solar
cost-competitive with fossil fuels without any subsidies--that
is the long-term goal--by 2020. That's an ambitious goal that I
believe we can reach. Our bill will help achieve that goal by
providing modest competitive grants to local governments who
commit to cut unnecessary red tape and reduce permitting costs.
Communities that succeed will be eligible for DOE certification
as solar-friendly cities and towns, helping them attract solar
business.
The grants, which are fully offset, help streamline the
permitting process by: simplifying and standardizing permit
forms and creating online permit applications; funding training
for inspectors to help make the process more efficient; and
providing modest funds for community solar projects to pilot
new permitting processes.
Our bill also sets a goal, of 10 million solar rooftops by
the end of the decade. We need this ambitious vision to compete
for solar energy jobs. Germany installed solar in 1 million
homes in the past 2 years alone. China has doubled its solar
energy target to 50 gigawatts by 2020, the equivalent of 50
nuclear plants.
The bipartisan 10 Million Solar Roofs Act, supported by the
Solar Energy Industries Association and the National League of
Cities, will help us lower the cost of solar and create jobs,
and I look forward to working with my colleagues to achieve
broad support for this bill in committee.
Mr. Chairman, thank you very much.
Senator Menendez. Thank you very much.
Our first panel is Mr. Steven Chalk, who is the Deputy
Assistant Secretary in the Office of Energy Efficiency and
Renewable Energy at the Department of Energy. He is a frequent
testifier to our committee. We welcome him back.
Mr. Chalk, who don't you go right ahead and give us the
views of the Department of Energy on these 3 bills.
STATEMENT OF STEVEN G. CHALK, DEPUTY ASSISTANT SECRETARY FOR
RENEWABLE ENERGY, OFFICE OF ENERGY EFFICIENCY AND RENEWABLE
ENERGY, DEPARTMENT OF ENERGY
Mr. Chalk. OK, thank you, Senator Bingaman and other
members of the committee. Thanks for the opportunity to discuss
the Department of Energy's solar and geothermal energy
programs. Today I'm also pleased to discuss the Department's
perspective and answer questions on the Department of Energy
Administrative Improvement Act, S. 1160, as well as the 10
Million Solar Roofs Act of 2011, S. 1108, and the Geothermal
Exploration and Technology Act of 2011, S. 1142.
Now, the Administration is still reviewing these bills, so
we don't have a formal position on any of them at this time. On
solar technology, we thank the committee and the sponsors of
this legislation for your strong leadership on solar
technologies over the years. The Department has set an
ambitious goal for solar energy with the Sunshot Initiative
that Senator Sanders mentioned. Our goal is to reduce the cost
of solar energy systems by 75 percent, so they're cost-
competitive with other forms of energy without subsidies before
the end of the decade. Under Sunshot, the Department will
support research across the development pipeline from basic
photovoltaics--or PV--cell technologies, to manufacturing
scale-up, to total system development.
Reducing the total installed cost of utility-scale solar
electricity to roughly 6 cents per kilowatt hour without
subsidies will result in rapid, large-scale adoption of solar
electricity across the United States. Reaching this goal will
help reestablish American technological leadership, improve the
Nation's energy security, and strengthen U.S. economic
competitiveness in the global clean energy race.
Sunshot takes a unique approach to developing solar energy.
Historically, our investments have been on achieving
incremental efficiency improvements to modules, solar arrays,
and so forth. Sunshot also focuses on reducing the installed
cost of the entire system as a whole. For instance, in addition
to investing in improvements in cell technology and
manufacturing, Sunshot also focuses on the steps to reduce
balance of system hardware costs, installation labor and
permitting costs, which all account for about 40 percent of the
total installed system price of solar electricity today. This
includes efforts to streamline and digitize local permitting
processes and to develop codes and standards that ensure high
performance over the approximately 20- to 30-year lifetime of
residential solar products.
The proposed legislation, S. 1108, employs a bottom-up
approach so that local teams can identify approaches that are
best suited for them. The bottom-up approach, coupled with a
preference for applicants that have partnered on a regional
basis with States, public utility commissions, other
stakeholders, could allow not just for local, but also for
regional variability, while increasing the speed and scale of
installation across a large geographic area. This approach
could also allow States to expand existing State programs that
have been effective in promoting rooftop solar installations.
On geothermal technology, the Department is committed to
developing and deploying a portfolio of innovative technologies
for clean domestic geothermal generation. Geothermal energy is
a renewable baseload energy resource with a small environmental
footprint and emits little or no greenhouse gas emissions.
Despite geothermal's enormous potential, in 2010 only 15
megawatts of new geothermal power generation was added to the
grid in the United States. There are 2 principal barriers
facing the geothermal industry: the high cost and risk of
exploration, and that most of the identified hydrothermal
resources have already been developed.
Currently, drilling costs represent approximately 40
percent of the geothermal project development costs. The
financing costs for the drilling phase are significantly higher
than the financing costs for plant construction. We look
forward to working with the committee to identify the
opportunities to bring down these costs and risks and better
utilize our domestic geothermal resources.
Finally, on S. 1160, the Department of Energy
Administrative Improvement Act proposes a variety of changes
intended to improve the administration of the Department of
Energy. These changes address five key areas: multi-year budget
submissions, modification of the department's other transaction
authority; expanded direct hire and critical pay authority;
protection and disclosure of transaction information; and
reemployment of civilian retirees.
While the department does not have a position on S. 1160 at
this time, we're happy to work with the committee to identify
opportunities to enhance the administration of the Department's
activities.
I thank the committee for its continued support for the
Department of Energy and I'm happy to answer any questions the
committee may have related to the 3 bills under discussion
today.
[The prepared statement of Mr. Chalk follows:]
Prepared Statement of Steven G. Chalk, Deputy Assistant Secretary for
Renewable Energy, Office of Energy Efficiency and Renewable Energy,
Department of Energy
Chairman Bingaman, Ranking Member Murkowski and Members of the
Committee, thank you for the opportunity to discuss the Department of
Energy's (DOE's) solar and geothermal energy programs. Today, I am
pleased to discuss the Department's perspective and answer questions
related to the Department of Energy Administrative Improvement Act (S.
1160), the 10 Million Solar Roofs Act of 2011 (S. 1108) and the
Geothermal Exploration and Technology Act of 2011 (S. 1142). However,
the Administration is still reviewing these bills and we do not have a
position on any of them at this time.
SOLAR TECHNOLOGY
We thank the committee and the sponsors of this legislation for
your strong leadership on solar technologies over the years. The
Department has set an ambitious goal for solar energy with the SunShot
Initiative (SunShot)--to reduce the total costs of solar energy systems
by about 75 percent so that they are cost competitive with other forms
of energy without subsidies before the end of the decade. In 2012,
under SunShot, the Department will support solar research across the
development pipeline, from basic photovoltaic (PV) cell technologies to
manufacturing scale-up to total system development.
Reducing the total installed cost for utility-scale solar
electricity to roughly 6 cents per kilowatt hour without subsidies will
result in rapid, large-scale adoption of solar electricity across the
United States. Reaching this goal will help re-establish American
technological leadership, improve the nation's energy security, and
strengthen U.S. economic competitiveness in the global clean energy
race.
SunShot takes a unique approach to developing solar energy.
Historically, solar investments focused on achieving incremental
efficiency improvements to solar cells and arrays. SunShot focuses on
reducing the installed cost of the system as a whole, including non-
technical barriers. In addition to investing in improvements in cell
technologies and manufacturing, the SunShot Initiative also focuses on
steps to reduce installation and permitting costs, which account for 40
percent of the total installed system price of solar electricity.\1\
This includes efforts to streamline and digitize local permitting
processes and to develop codes and standards that ensure high
performance over the approximately 20-year lifetime of residential
solar products. Decreasing the installed cost of solar is one of the
key goals of SunShot.
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\1\ http://www1.eere.energy.gov/solar/sunshot/pdfs/
dpw_white_paper.pdf
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As the United States is the world's largest consumer of electricity
and, at the same time, has the largest solar resource of any
industrialized country, SunShot is well-positioned to help the Nation
realize the significant benefits from the wide-scale use of solar
energy. Sunshot underscores solar energy's benefits to the United
States and will have multiple positive impacts for the country,
including:
Achieving solar energy cost parity with baseload energy
rates. Attaining a total installed system cost of utility solar
equivalent to the wholesale cost of electricity from fossil
fuels ($0.06 per kWh) would likely result in rapid and large-
scale adoption of solar electricity across the United States
Increasing solar photovoltaic market share. As recently as
1995, the United States manufactured 43 percent of the world's
PV materials, whereas today our manufacturers are only
responsible for 6 percent.\2\ Expanding the use of solar will
help boost the U.S. solar manufacturing industry while driving
innovation and providing long lasting, domestic jobs to support
global PV demand that will represent a multibillion dollar
industry
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\2\ PV News (2/1993, 3/2001, 3/2006) and Navigant Consulting (2/
2011)
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Reducing greenhouse gas emissions--Solar technologies have
the potential to significantly reduce the amount of
conventional fossil-based electricity generation necessary,
which in turn would reduce the amount of greenhouse gases
emitted into the atmosphere.
Recently, as part of ongoing Market Transformation activities, DOE
announced a Funding Opportunity Announcement (FOA) which we are calling
the ``Race to the Rooftop'' to help standardize, streamline and
digitize the permitting process, while improving interconnection and
net metering standards, increasing access to financing, and updating
planning and zoning codes. This national competition engaging teams of
local and state governments along with utilities, installers, and
nongovernment organizations, will help standardize processes, cut
upfront fees and paperwork, and reduce the overall costs associated
with permitting and installation, making it easier and cheaper for
homeowners, businesses, and their local communities to deploy solar
energy. The standardization and uniformity of local permitting efforts
under the ``Race to the Rooftop'' are similar to the challenge grant
provision in the 10 Million Solar Roofs Act, which calls for applicants
to develop best practices for solar permitting.
The proposed legislation, S. 1108, employs a bottom-up approach so
that local teams can identify approaches best-suited for them. A
bottom-up approach, coupled with a preference for applicants that have
partnered with states, public utility commissions, or other
stakeholders, could allow for local and regional variability while
still increasing the speed and scale of installation across large
geographic areas. This approach could also allow states to expand
existing state programs that have been effective in promoting rooftop
solar installations.
GEOTHERMAL TECHNOLOGY
The Department is committed to developing and deploying a portfolio
of innovative technologies for clean, domestic geothermal power
generation. Geothermal energy is a baseload energy resource with a
small environmental footprint and emits little to no greenhouse gases.
Despite geothermal's enormous potential, in 2010, only 15 MW of new
geothermal power generation was added to the grid in the United States.
There are two principal barriers facing the geothermal industry: the
high cost and risk of exploration and most of the identified
hydrothermal resources have already been developed.
Drilling costs represent approximately 42 percent of geothermal
project development costs, and financing costs are significantly higher
for exploratory drilling than for plant construction.\3\ Removing the
obstacles to exploratory drilling is vitally important to increasing
our geothermal power generation capacity. In many cases, geothermal
resources have no surface expression, leaving our nation's hydrothermal
potential--estimated at 30 GWe by the U.S. Geological Survey--untapped
and inaccessible. Exploratory drilling could also identify resources
for enhanced geothermal systems (EGS), which have the potential to
produce 16,000 GWe of power in a wide range of geographic areas
throughout the U.S.\4\
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\3\ http://www.nrel.gov/applying_technologies/pdfs/46022.pdf
\4\ Augustine, Young, and Anderson, Updated U.S. Geothermal Supply
Curve, National Renewable Energy Laboratory and US Department of
Energy, February, 2010, http://www.nrel.gov/docs/fy10osti/47458.pdf
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Under the American Recovery and Reinvestment Act of 2009 (Recovery
Act), DOE invested $97.3 million in 24 hydrothermal exploration
projects, at which 34 exploration wells are planned. It is expected
that from these wells, 400 MW of new resources will be confirmed by
2014.
DOE is also funding seven EGS demonstrations. At Desert Peak,
Nevada, the initial stages of reservoir stimulation were successfully
completed--a critical milestone in creating an enhanced geothermal
reservoir.
DOE supports projects in low temperature geothermal resources as
well. For example, DOE is working with industry to develop and field
test a variable phase turbine which has the potential to generate 30
percent more power from low temperature geothermal resources than
current power conversion technologies, at a lower cost.
DOE's National Geothermal Data System (NGDS) effort is a
distributed information system for data sharing in its second year of
development, which will enable the availability of comprehensive and
accurate data to facilitate geothermal development. The NGDS is
scheduled to be fully operational in August 2014, at which time it will
make geothermal data from major geothermal centers, DOE-funded
geothermal projects and state geological surveys or universities
publicly available.\5\
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\5\ NGDS data sources include: DOE Geothermal Data Repository
(Boise State University); Energy & Geoscience Institute (University of
Utah); Geo-Heat Center (Oregon Institute of Technology); Stanford
Geothermal Program (Stanford University); Great Basin Science Sample
and Records Library y (University of Nevada, Reno); SMU Geothermal
Laboratory (Southern Methodist University); and state geological
surveys represented by Arizona Geological Survey and the American
Association of State Geologists (AASG).
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Geothermal heat pumps (GHPs) for building applications also face
barriers impeding greater marketplace adoption: high initial cost
associated with the installation of the ground loop heat-exchanger,
lack of consumer knowledge in GHP benefits, and limitations in GHP
design and business planning infrastructure. DOE is developing a
roadmap that will serve to strategically direct activities in
geothermal heat pumps.
Through the Recovery Act, DOE currently funds 26 projects deploying
geothermal heat pumps. $24M of the $58M Recovery Act funds allocated to
GHPs have been spent in 15 states in both new and retrofit
applications. Two projects are completed and several more are already
providing data for performance analysis. The Recovery Act projects
incorporate innovative business and financial strategies and/or GHP
technologies and applications designed to overcome the initial cost
premium that has prevented GHPs from being directly cost-competitive
with other HVAC technologies, and from gaining wider marketplace
acceptance.
DOE currently has projects in many of the areas identified for
further RD&D and commercial application in S. 1142, including district
heating and cooling at large institutions, use of hot water in shaft
mines, combined GHP-solar PV and desiccant projects, and use of carbon
dioxide as a refrigerant fluid for heat exchange.
The Department is also addressing other obstacles to geothermal
development such as delays in the siting and permitting process which
increase overall project costs and could further strain economics.
Currently, it takes approximately seven years for a new geothermal
project to move from exploration to power generation.
While the Administration is still reviewing the bill, there are
serious technical concerns that would need to be addressed. Any new
program should be consistent with applicable laws, and structured to
mitigate risks and costs to the taxpayer.
S.1160--DEPARTMENT OF ENERGY ADMINISTRATIVE IMPROVEMENT ACT
S.1160 proposes a variety of changes intended to improve the
administration of the Department of Energy. The Department is still
reviewing this bill and does not have a position on it at this time.
However, I will address Sections 4, 6, and 7 as they relate to the
Department's current authority.
Section 4
Section 4 of S.1160 concerns the administration of the Department's
``Other Transactions'' (OT) Authority. Section 4 is similar in many
respects to DOE's current OT Authority, which is codified at Section
646(g) of the DOE Organization Act (42 U.S.C. 7256(g)). However, there
are some important differences.
Currently, the Department has two kinds of OT Authority: Research
OT Authority and Prototype OT Authority. Research OT Authority is used
to carry out a public purpose of support or stimulation (e.g., RD&D
projects). By contrast, Prototype OT Authority is used for the
preacquisition development of technology prototypes. Such prototypes
are used to evaluate the technical or manufacturing feasibility or
utility to DOE's mission of a particular technology, process, concept,
end item, or system.
Section 4 provides DOE with permanent and independent OT Authority
similar to the authority Congress provided the Defense Department in
1991. However, the precise scope of DOE's OT Authority is left
undefined in S.1160.
Additionally, Section 4 of S.1160 requires the Secretary to
determine that ``the use of a standard contract, grant, or cooperative
agreement for the project is not feasible or appropriate'' before the
Department's OT Authority can be used. Section 4 restricts the
delegation of this authority to officials ``appointed by the President
and confirmed by the Senate.''
Section 6 and 7
Section 6 of S.1160 provides the Secretary with direct hire
authority for ``highly qualified scientists, engineers, or critical
technical personnel'' for two years following the enactment of the Act.
Similarly, Section 7 provides the Secretary with special hiring and pay
authority for persons with ``expertise in an extremely high level in a
scientific or technical field.'' The Secretary's authority under
Section 7 is permanent, but not more than 40 persons may be hired under
this authority at any time.
Sections 6 and 7 are analogous to Sections 621(b) and (d) of the
DOE Organization Act (42 U.S.C. Sec. 7231(b)-(d)). Section 621(b),
which expired after four years, allowed the Secretary to appoint 311
scientific, engineering, and administrative personnel without regard to
civil service laws and to fix their compensation at ``super grades''
(formerly GS-18, now Executive Level IV). Section 621(d), which is
still in effect, authorizes the Secretary to appoint 200 scientific,
engineering, professional, and administrative staff without regard to
civil service laws, but subject to a GS-18 pay cap (now Executive Level
IV).
Additionally, Congress granted the Department's ARPA-E program
special hiring authority. The Director of ARPA-E has the authority to
make appointments of scientific, engineering, and professional
personnel ``without regard to the civil service laws,'' ``fix the basic
pay of such personnel'' up to Level II of the Executive Schedule, and
provide ``additional payments'' up to a certain cap.
CONCLUSION
In conclusion, I would like to again thank this Committee for its
leadership in supporting both solar and geothermal energy technologies.
It is important to tap valuable assets like solar and geothermal
energy to continue growing our economy to expand the Nation's clean
energy portfolio and energy security.
I would be pleased to address any questions the Committee might
have.
The Chairman. Let me start with some questions. I guess the
first question would be on this Sunshot Initiative that you've
talked about and the idea that you have or the main purpose of
it as I understand from your testimony is to standardize and
bring uniformity to permitting for the installation of solar
panels. How do you see that relating to the bill that we're
talking about today, that Senator Sanders has introduced? What
concrete steps are you planning to take to bring about that
standardization and uniformity in the way that these solar
installations are permitted?
Mr. Chalk. The steps that we plan to take are very, very
consistent with the bill as written. Let me explain a little
bit about the problems we're trying to solve here. These soft
costs as SunRun will testify later today--amount to
approximately 33 percent of the costs of a solar installation.
So it's not just the hardware, the module, and the
installation, but going through the local jurisdiction for
permitting--and in the United States, there are 18,000 local
jurisdictions. They have land use laws, zoning ordinances.
There are over 5,000 utilities with different interconnection
and net metering standards.
So we're trying to harmonize local standards as much as
possible. Rather than having a top-down approach where the
Federal Government sets these standards, we want to set them on
a regional basis. So we now have out a solicitation to do just
that, covering permitting and interconnection. We're looking
for transparency, consistency, and most above all expediency in
permitting solar installations. The solicitation also covers
net metering standards. We actually have a third party that's
going to grade the regions on how well they do net metering and
how well they have standardized processes for interconnection.
Financing options are another soft cost, because other than
self-financing there are other ways to finance solar energy
through third parties, but they have legal issues associated
with them. Then finally, planning and zoning are also soft
costs. So through this solicitation----
The Chairman. Let me ask, on the solicitation, who are you
soliciting and what are you soliciting them to do?
Mr. Chalk. We're soliciting local governments to team with
public utility commissions, State governments, perhaps
utilities, all to work together in various regions to come up
with streamlined digitized web-based processes for siting and
permitting and interconnection, so we can speed that up and
reduce the cost, which approximately 33 percent today, given
some references, to under the Sunshot Initiative, those costs
would fall to about 10 percent of the total cost.
The Chairman. But that's not in any way insisting that
anyone standardize their planning process or make it uniform
with anyone else's planning process, the way I'm understanding
you.
Mr. Chalk. Not initially. In the first phase we're asking
each region to develop best practices. When we get to phase 2,
we'll start sharing those best practices and perhaps we'll have
some harmony nationally. Perhaps it will be specific examples
that are going to drive different standards. But we hope to
have large metropolitan areas harmonized, so that the solar
developers in that area know with certainty what's expected of
them when they're trying to site and install a solar
installation, so they're not having to deal, as I said, with
thousands of different jurisdictions.
The Chairman. Let me switch and ask a question on this
geothermal heat pump issue. One of the concerns I have had is
that whenever we have a hearing related to geothermal it's
always about how much, how many megawatts of energy we're able
to produce from geothermal sources, and it's all focused on
power generation from geothermal sources.
As I understand, in many countries geothermal heat pumps
have been used as a way to essentially lower the amount of
natural gas having to be used for regular building heating and
cooling, and that to me seems like a much greater potential or
opportunity for us with geothermal heat pumps than constantly
focusing on how we can generate more power with large
geothermal projects.
So I don't know--to what extent are you folks in the
Department of Energy focused on expanding the use of geothermal
heat pumps in residences and commercial facilities?
Mr. Chalk. Under the Recovery Act, we were fortunate to
invest about $62 million in geothermal heat pumps. We have
approximately 35 demonstrations going on right now, most of
which are for very large buildings: universities, prisons,
local governments. We are now collecting data which we hope to
use to increase consumer awareness, because geothermal heat
pumps can achieve about 50 to 60 percent energy savings. So
it's a way of saving natural gas. It's also very cost effective
for propane or fuel oil, which you tend to get in remote areas.
Our program looks at it as building technology, so we're
weighing various options. Ground source heat pumps are one
option. We're also looking at improving air source heat pumps,
which can be very cost competitive. With ground source heat
pumps, the challenge is, like many efficiency and renewable
technologies, their up-front costs which sometimes can be 3
times those of an air source heat pump that's more readily
available.
One of the challenges with geothermal is retrofitting the
building to make it compatible. If a person's heat pump breaks
down or they need heating or cooling though, they want it in a
matter of days or sometimes hours. But geothermal heat pumps
are a very good application for large commercial buildings,
like universities, or new construction.
First cost and the cost of drilling equipment is really a
challenge with ground source heat pumps. So we need to do
additional research to lower that cost.
The Chairman. Senator Sanders.
Senator Sanders. Mr. Chairman, thank you.
Mr. Chalk, thank you for the work you're doing, and please
convey my appreciation to Secretary Chu for the outstanding
work that you guys are doing in this whole area.
Mr. Chairman, I wanted to mention just something to you.
Yesterday, yesterday we did an event in Burlington, Vermont,
and we highlighted five energy programs around the State. Let
me give you an example of what's happening and what the
potential is. A low-income school in Burlington, Vermont,
called the Bond School, as a result of energy efficiency and
geothermal--and soon they're going to add solar--they have cut
their fuel bills by 75 percent, 75 percent in a cold weather
State. That is not insignificant.
A few blocks away on the other side of town, we have a
college called Champlain College which has invested heavily in
geothermal. It is a huge success story, significant reduction
in their fuel bills.
In terms of solar, in the southern part of our State we
have a company called Ivek, a manufacturing company, Mr.
Chairman, a manufacturer, 60 employees. As a result of the
installation of PV, they are producing 90 percent of the
electricity they require in a manufacturing facility.
So we are seeing in Vermont--and I suspect that same story
is being told all over the country, about major, major
breakthroughs in sustainable energy. I applaud the Department
of Energy very much for the work that they are doing.
Mr. Chalk, I was very impressed by your remark that you
thought within a reasonably short period of time, if we get
legislation passed like this 10 Million Solar Roofs, which will
cut back on the cost of permitting, that you think we can get
solar down to 6 cents a kilowatt? Is that what you were saying?
Mr. Chalk. The levelized cost of energy of a dollar a watt,
which is our goal, is equivalent to 6 cents per kilowatt hour,
which is really competitive with conventional baseload energy
generation from coal.
Senator Sanders. Just out of curiosity, if I wanted to
build a new nuclear power plant, which I don't, but if I did,
how much would that cost me, do you think, comparatively
speaking?
Mr. Chalk. That's outside of my expertise, but we feel we
need to compete with conventional alternatives that are there
now.
Senator Sanders. Let me just say for the record, I believe
that's about half. We think the new nuclear might be 10 or 12
cents and we're talking about 6 cents. So the potential here is
enormous.
Let me just ask you, Mr. Chalk. I understand that the DOE
is currently under the Sunshot Initiative aiming to pilot some
best practices on solar permitting through the Rooftop Solar
Challenge. In your view, would the authorization provided in 10
Million Solar Rooftops Act for competitive grants help scale up
local government adoption of these best practices on
permitting?
Mr. Chalk. Absolutely it does. Again, our solicitation is
very, very consistent with this legislation. We believe that if
we don't address local government permitting practices, we will
not achieve the Sunshot goals. It's more about the module and
the power electronics. It's also about what we call soft costs.
So we have to address this. It has not really been addressed in
the DOE program to date.
Senator Sanders. I know this is something Secretary Chu has
often talked about, is that correct?
Mr. Chalk. Yes.
Senator Sanders. Mr. Chalk, as you know, this legislation
incorporates the goals of the Sunshot Initiative to reduce
solar energy costs. Can you speak to how we get from where we
are today with solar installation costs ranging from what I
understand is about $4 per watt for commercial systems to 5.50
or $6 per watt for residential to the Secretary's goal of a
dollar per watt by 2020 and how permitting reforms can play a
role in that process?
Mr. Chalk. Yes. Overall, no matter what application we're
talking about, whether it's utility, which costs a dollar a
watt because it's on a large scale of 20 or 40 megawatts, or
commercial or residential, we need to decrease the cost by 75
percent. So we've developed a road map that divides up what
we're going to do in the module area, in the power electronics
area, and in the balance of system.
The balance of system is not just the soft costs of
permitting and siting and so forth, it's also the mounting,
it's developing a method to install solar technologies at scale
to really reduce costs. The scale is really what's going to
allow you to get to our goals.
We have a road map in each of these 3 key areas and we have
solicitations out now asking folks from industry and academia
for proposals to address each of these areas. Each of these
areas has very concrete metrics to measure progress,
milestones. Everything is in a metric of a dollar per watt,
even some of these soft costs, where we have goals for what
goes on in siting and permitting. When we ask for proposals
from these regions, they're going to have to give us a score
sheet of where they are now in terms of dollar per watt and
then where they think they can be in 2 or 3 years.
So all of this is very, very hard driven toward this dollar
a watt goal for utility systems.
Senator Sanders. Mr. Chairman, thank you very much.
Mr. Chalk, thank you.
The Chairman. Thank you.
Senator Franken.
Senator Franken. Thank you, Mr. Chairman.
A couple of questions that I was going to ask, really the
chairman at least broached, on trying to get solar information-
sharing so that municipal authorities don't have to sort of
reinvent the wheel every time. I understand that DOE plans to
do this through the Sunshot Initiative. I can go into more
detail on that.
Is there going to be a national common application for--
developed to streamline all of this?
Mr. Chalk. That would be ideal, but recognizing that each
jurisdiction or region may be different, it may be best for 90
percent of it to be standard. There's a balance between asking
the regions to request the information that they need to make
their decisions and the Federal Government as making top-down
decisions.
So we'll hopefully have something nationwide that's
automated and web-based, so that we're not filling out forms
and things like that.
Senator Franken. The streamlining of the process.
Mr. Chalk. Right, streamlining. But it'll be up to the
jurisdictions to decide how much they want to adopt best
practices from other regions.
Senator Franken. Following up also on the chairman's
question about geothermal pumps, in Minnesota we don't have
geothermal resources for these large-scale geothermal projects
that the chairman was referring to, that you guys were talking
about. But we use geothermal in the ways that you then start
talking about, which is like for residential and for larger
facilities. I think you mentioned prisons and other,
manufacturing or schools and stuff.
There's a company called ECONAR in Minnesota that's been at
it for years and I visited them a while ago and they're doing
very good business in residential. It made me think about
something that I saw in southern Minnesota. There's a company
called McQuay and they make air conditioners and they're one of
the biggest air conditioner companies in the world. They're
doing the air conditioners for the World Trade Center. This is
in Faribault, Minnesota.
You brought up the up-front costs on geothermal as a
problem. But you said that it saves an incredible amount on the
use of propane or whatever is used, so that there's a savings
once the up-front costs are paid. What McQuay does is they make
these incredibly efficient air conditioner units and, because
they're such a big and creditworthy company, they borrow money
from banks, they lend the money to the commercial buildings
that they're selling to or whatever they are. Then that company
uses the loan to buy the unit from McQuay, put people to work
installing the thing, building the thing. It's like jobs. These
units pay for themselves in 3 to 5 years.
So the company pays back the loan it took and pays it off
in 3 to 5 years and the rest is gravy, and it's gravy, gravy,
gravy. It's win-win-win.
Now, what I'm wondering is is there a model like this, with
$2 trillion sitting on the sidelines that we hear about all the
time, is there a model to be right now making sure that we are
investing in things like geothermal and investing in these
things that we have a proven, have a proven return on
investment, where we can not spend Federal money, but we can
leverage private money to have companies make their buildings,
their commercial factories, their institutions, more energy
efficient, get people working making these systems, installing
these systems, pay for it with the energy savings, have a win-
win-win situation?
Has there been any effort to try to find a model, not like
this McQuay model, so that we are making America more efficient
and we are getting people working and it's paying for itself?
Mr. Chalk. I mentioned the high up-front costs. What I
wasn't very clear about was--and you made this point--over a
life cycle, these things pay for themselves in 5 years, 8
years. Sometimes it may be up to 20 depending on the climate.
It's very climate-sensitive in this case with ground-source
heat pumps and it's very sensitive to the price that you're
paying for electricity.
But they do pay for themselves, if you look at a life cycle
cost basis. There are government instruments like loan
guarantees that people could utilize if they could show they
had the orders. They could also go to a bank and get that
financing.
What we're doing in our building efficiency sector right
now--not specifically for geothermal heat pumps, but we're
looking to find those private models for activities like
weatherization where we're trying to increase home efficiency.
If you aggregate enough orders--weatherizing a whole
neighborhood for example--it will help you get to the necessary
scale. We're experimenting right now with those models in the
building efficiency area, which could include ground source
heat pumps, but they're not exclusively geared toward ground
source heat pumps. They would be geared toward insulation,
higher efficiency HVAC equipment across the board, hot water
systems and so forth.
But we're doing that in our buildings program right now,
and I expect over the next 12 months that we're going to have a
lot of data to share with people. Most of these programs are
very, very highly leveraged with the private sector, so we're
trying to do the pilot so the industry can stand up itself.
Senator Franken. My time is up. But I guess what I'm saying
is, in this budget climate, if we can find ways to duplicate
the model I'm talking about, in which there's absolutely no
Federal money being spent, none, zero, zip, and yet people
being put to work and energy being saved, that would be
wonderful.
The Chairman. All right. Mr. Chalk, thank you very much. We
appreciate your testimony and we will go on to the second
panel.
Mr. Chalk. OK, thank you.
The Chairman. The second panel is made up of 2 witnesses:
Mr. Douglas Dougherty, who is the President and CEO of the
Geothermal Exchange Organization in Springfield, Illinois; and
Ms. Holly Gordon, who is Vice President of Legislative and
Regulatory Affairs with SunRun Inc. in San Francisco. We very
much appreciate both of them being here.
Mr. Dougherty, why don't you go ahead and give us the main
points that you think we should understand. We will include
your full statement in the record as if read, but give us your
views, and then we'll call on Ms. Gordon.
STATEMENT OF DOUGLAS A. DOUGHERTY, PRESIDENT AND CEO, THE
GEOTHERMAL EXCHANGE ORGANIZATION
Mr. Dougherty. Good morning. I am Doug Dougherty, President
and CEO of the Geothermal Exchange Organization, a nonprofit
trade association representing the U.S. geothermal heat pump
industry. On behalf of GEO and our more than 200 members, I
would like to thank Chairman Bingaman, Ranking Member
Murkowski, and the other distinguished members of the committee
for the opportunity to share our views on S. 1142, the
Geothermal Exploration and Technology Act.
GEO strongly supports S. 1142 and its many provisions to
expand the use of geothermal energy. We are especially
interested in those that deal with geothermal heating and
cooling technologies. A geothermal heat pump is a 50-State
clean, renewable energy technology that uses solar energy
stored just below the Earth's surface to heat and cool
residential and commercial buildings and to provide hot water.
Let me briefly describe how the technology works. Unlike
conventional systems that use the outside air to take and
release heat, geothermal heat pumps transfer heat from and to
the ground. They do that through closed loops of fluid-filled
plastic pipes buried either horizontally or vertically in the
ground below the frost line, where the temperature is
consistently between 40 to 75 degrees year-round.
While a conventional air source heat pump struggles to
scavenge heat from freezing winter air or dump it into the
summer swelter, the ground source heat pump utilizes the
constant temperature for fluid circulating through its loop in
the ground. Once installed, the ground loop lasts indefinitely
and the inside unit has a life span of greater than 20 years.
Geothermal heat pumps use 20 to 50 percent less electricity
than conventional heating or cooling systems and, according to
the Environmental Protection Agency, they can reduce energy
consumption and corresponding emissions by 44 to 72 percent
compared to traditional heating and cooling equipment.
Geothermal heat pumps are a fully scaleable technology.
They are effective in residential homes and commercial
buildings. The largest project in the country is currently
under way at Ball State University in Indiana, where more than
4,000 bore holes will host ground loops to heat and cool 45
buildings for an annual energy savings of $2 million per year.
Despite the well documented energy efficiency, our industry
is still relatively nascent, with less than 5 percent market
penetration for new construction. GEO agrees with Senators
Tester and Murkowski that geothermal heat pumps can make a
significant contribution to the use of renewable energy, but
are under-represented in research, development, demonstration,
and commercialization.
The primary barriers to expanding the industry include: a
lack of consumer awareness; high initial cost, primarily due to
the installation of the underground loop; a need for more
qualified design and installation professionals; a need for
builders, developers, realtors, lenders, and appraisers to
value energy savings; and a lack of a home at DOE.
GEO is pleased that the geothermal heat pump effort
specified in S. 1142 will focus on cost, a key barrier to wider
geothermal heat pump installations, and we agree that the
research should be directed at improving ground loop efficiency
through more efficient heat transfer fluids and thermal grouts,
better loop design, and improved variable pumping rates,
reducing ground loop installation costs through improved
drilling techniques and equipment, exploring innovative uses of
wastewater and mine water for geothermal systems, demonstrating
the viability of large-scale commercial and residential
neighborhood projects, and integrating geothermal with solar
systems to balance loads and to store energy.
The Geothermal Exploration and Technology Act will help
drive down the cost of installing geothermal heat pumps. It
will also fuel a U.S.-based industry that generates thousands
of jobs. The installation of ground loops create well-paid jobs
not found in the conventional heating, ventilation, and air
conditioning industry. We estimate that expanding our industry
by ten times to create one million installations per year by
2017 would create more than 100,000 new well-paying jobs.
S. 1142 will help us reach this goal by making geothermal
heat pumps more affordable and further demonstrating the
efficiency of the technology in large-scale projects. GEO
strongly urges the committee to support this legislation.
We also hope to work with the committee to address the
other barriers that have limited the growth of our industry,
particularly the lack of a home for our industry at the
Department of Energy. Over the years we have been moved from
one program to another within the Office of Energy Efficiency
and Renewable Energy. We believe that it's important for the
Department to have a dedicated staff to promote geothermal heat
pumps and to provide technical assistance to other agencies
such as the Environmental Protection Agency, the Department of
Department of Defense, the Department of Education, the
National Park Service, and the General Services Administration
that are all considering geothermal heat pump projects.
Thank you for the opportunity to testify this morning, Mr.
Chairman.
[The prepared statement of Dougherty follows:]
Prepared Statement of Douglas A. Dougherty, President and CEO, The
Geothermal Exchange Organization
Good morning. I am Doug Dougherty, President and CEO of the
Geothermal Exchange Organization, a non-profit trade association
representing the U.S. geothermal heat pump industry.
On behalf of GEO and our more than 200 members, I would like to
thank Chairman Bingaman, Ranking Member Murkowski, and the other
distinguished members of the Committee for the opportunity to share our
views on S. 1142, the Geothermal Exploration and Technology Act.
GEO strongly supports S. 1142 and its many provisions to expand the
use of geothermal energy. We are especially interested in those that
deal with geothermal heating and cooling technologies.
A geothermal heat pump is a 50-State, clean, renewable energy
technology that uses solar energy stored just below the earth's surface
to heat and cool residential and commercial buildings and to provide
hot water.
Let me briefly describe how the technology works. Unlike
conventional systems that use the outside air to take and release heat,
geothermal heat pumps transfer heat from and to the ground. They do
that through closed loops of fluid filled, plastic pipes buried either
horizontally or vertically in the ground below the frost line where the
temperature is consistently between 40 to 75 degrees year round. While
a conventional air source heat pump struggles to scavenge heat from
freezing winter air or dump it into the summer swelter, the ground
source heat pump utilizes that constant temperature for fluid
circulating through its loop in the ground. Once installed, the ground
loop lasts indefinitely and the inside unit has a lifespan of greater
than 20 years.
Geothermal heat pumps use 25 to 50 percent less electricity than
conventional heating or cooling systems, and according to the
Environmental Protection Agency, they can reduce energy consumption--
and corresponding emissions--by 44 to 72 percent compared to
traditional heating and cooling equipment.
Geothermal heat pumps are a fully scalable technology. They are
effective in residential homes and commercial buildings. The largest
project in the country is currently underway at Ball State University
in Indiana, where more than 4,000 boreholes will host ground loops to
heat and cool 45 buildings, for annual energy savings of $2 million per
year.
Despite the well-documented energy efficiency, our industry is
still relatively nascent, with less than a five-percent market
penetration for new construction. GEO agrees with Senators Tester and
Murkowski that geothermal heat pumps can make a significant
contribution to the use of renewable energy but are underrepresented in
research, development, demonstration, and commercialization.
The primary barriers to expanding the industry include: lack of
consumer awareness; high initial cost, primarily due to the
installation of the underground loop; need for more qualified design
and installation professionals; need for builders, developers,
realtors, lenders, and appraisers to value energy savings; and lack of
a ``home'' at DOE.
GEO is pleased that the geothermal heat pump efforts specified in
S. 1142 will focus on cost, a key barrier to wider geothermal heat pump
installations. We agree that research should be directed at:
Improving ground loop efficiency through more efficient heat
transfer fluids and thermal grouts, better loop design, and
improved variable pumping rates;
Reducing ground loop installation cost through improved
drilling techniques and equipment;
Exploring innovative uses of wastewater and mine water for
geothermal systems;
Demonstrating the viability of large-scale commercial and
residential neighborhood projects; and,
Integrating geothermal with solar systems to balance loads
and to store energy.
The Geothermal Exploration and Technology Act will help drive down
the cost of installing geothermal heat pumps. It will also fuel a U.S.-
based industry that generates thousands of jobs. The installation of
the ground loop creates well-paid jobs not found in the conventional
heating, ventilation, and air conditioning industry. We estimate that
expanding our industry 10 times--to a million installations per year--
by 2017 would create more than 100,000 jobs.
S. 1142 will help us reach this goal by making geothermal heat
pumps more affordable and further demonstrating the efficiency of the
technology in large scale projects. GEO strongly urges the Committee to
support this legislation.
We also hope to work with the Committee to address the other
barriers that have limited the growth of our industry, particularly the
lack of a home for our industry at the Department of Energy. Over the
years, we have been moved from one program to another within the Office
of Energy Efficiency and Renewable Energy. We believe it is important
for the Department to have dedicated staff to promote geothermal heat
pumps and to provide technical assistance to other agencies such as the
Environmental Protection Agency, Department of Defense, Department of
Education, National Park Service, and the General Services
Administration that are considering geothermal heat pump projects.
Thank you again for the opportunity to testify this morning.
The Chairman. Thank you very much.
Ms. Gordon, please go ahead.
STATEMENT OF HOLLY GORDON, VICE PRESIDENT, LEGISLATIVE &
REGULATORY AFFAIRS, SUNRUN, INC.
Ms. Gordon. Chairman Bingaman, Ranking Member Murkowski,
and members of the committee: I appreciate the opportunity to
testify on behalf of SunRun in support of the 10 Million Solar
Roofs Act of 2011, also known as S. 1108. As the fastest
growing company in the United States residential solar
industry, SunRun applauds the bill's aims to reduce
installation costs of residential solar systems by reducing
soft costs associated with wide variations in local permitting
processes.
A recent study authored by SunRun and other solar industry
leaders shows permitting costs at the local level are
equivalent to a $1 billion tax on the solar industry over the
next 5 years. SunRun believes that the bill's provisions
represent the most efficient way to mitigate unnecessary costs,
cut through the red tape, and give solar the ability to fairly
compete with other energy technologies on the open market.
SunRun is the largest owner of residential solar in the
United States, with over 11,000 customers and operations in 9
States as of today. This morning we announced our launch in the
Maryland market. We're very excited to be in the D.C. Metro
area and we are actively looking at a number of additional
States.
SunRun offers a solar power service, typically referred to
as a lease or power purchase agreement, known as a PPA, which
allows homeowners to get solar energy without a big up-front
investment and pay for the energy as it is produced. SunRun
monitors, maintains, and insures the solar system for no
additional cost to the homeowner. We currently invest a million
dollars a day in solar energy systems and install 3 megawatts
per month.
However, SunRun's ability to enter new markets, increase
investment dollars, and offer competitive long-term rates for
clean solar energy is dependent on reducing the cost of solar
installations. While a number of factors have dramatically
reduced the cost of solar projects, there are still many costs
associated with purchasing and installing residential solar
systems.
The cost of residential solar systems can range from
$15,000 to upwards of $60,000. This includes fees for panels,
construction, interconnection, and permitting, which vary
widely among States and municipalities. SunRun has found that,
while panel prices have come down significantly over the last 5
years, permitting costs have stayed high.
Germany, France, and Japan have all eliminated permitting
fees for residential solar installs and have costs up to 40
percent lower than the United States. If we could reduce these
permitting costs, the price homeowners would have to pay for
solar products like SunRun's would correspondingly drop and the
size of the addressable market for such products would
proportionately increase.
SunRun commissioned AECOM, an independent third party, to
analyze the fiscal impacts on State and local governments and
the economic impacts on State and regional economies that a
streamlined permitting regime would provide. While the study is
not yet complete, preliminary numbers show that in California
alone a streamlined planning regime would add over 130,000
residential solar systems, equal to approximately 730
megawatts, resulting in 4,000 new jobs between 2012 and 2020.
The bulk of these permitting costs come from local
processes and variations in local processes, not from the
electrical code itself. Inefficient local processes waste time
and money and local variation forces installers to spend time
and money customizing plans for each jurisdiction. According to
the Solar American Board for Codes and Standards, or Solar
ABCs, standardizing this process makes sense because most
installations share many similarities of design that allow for
a nationally standardized, expedited permit process.
However, jurisdictions often design cumbersome processes to
account for the minority of complicated installations that
require more in-depth review. A streamlined, consistent process
for basic installations, like the common application for
college admissions, eliminate waste and variability across
jurisdictions.
The Department of Energy is funding development of these
standards through the Solar ABCs to allow jurisdictions to
streamline permitting for most installations while following
code and maintaining safety. This simplified process, combined
with process improvements such as imposing fair fees, allowing
for email submission, and providing faster turnaround and less
inspection waiting time, will help reduce unnecessary costs and
delays.
The Department of Energy has also taken a first step in
addressing local regulatory barriers. The Sunshot Initiative's
Rooftop Solar Challenge will gather examples of best practices
for local permitting.
S. 1108 enables the critical second phase of establishing
industry best practices by authorizing a scaleable program to
focus on streamlining and standardizing local permitting
processes across more communities.
In closing if our goal is to increase the deployment of
solar installations by decreasing costs and eventually
achieving grid parity, we believe that reducing unnecessary red
tape and costs associated with local permitting represents the
lowest hanging fruit in our efforts to get there.
Germany currently holds a 40 percent cost advantage over
the U.S. for solar installations and it's clear that the U.S.
permitting costs are the major driver of that difference. In
discussions with experts on the permitting process, there does
not seem to be a specific technical or policy reason why
jurisdictions cannot agree to the same procedures. Permitting
costs are immune from price reduction activities that the solar
industry is driving, such as making technology advances and
installation practice improvements, and therefore should be a
top priority for our government.
Thank you for the opportunity to discuss this bill with the
committee today and I look forward to answering any questions
you may have.
[The prepared statement of Ms. Gordon follows:]
Prepared Statement of Holly Gordon, Vice President, Legislative &
Regulatory Affairs, SunRun, Inc.
Chairman Bingaman, Ranking Member Murkowski, and Members of the
Committee, I appreciate the opportunity to testify before the Committee
on behalf of SunRun, Inc., in support of the 10 Million Solar Roofs Act
of 2011, S. 1108. As the fastest growing company in the residential
solar industry in the United States, SunRun would first like to applaud
the bill's aim to reduce installation costs of residential solar
systems by reducing ``soft costs'' associated with wide variations in
local permitting processes. As documented in a study authored by SunRun
and other leaders in the solar industry, and covered by major media
outlets around the country, permitting costs at the local level are
equivalent to a $1 billion tax on the solar industry over the next five
years. (The report and several articles about the report are attached
at the end of this testimony).* SunRun believes that the provisions
included in this bill represent the most efficient way to mitigate
these unnecessary costs, cut through the red tape, and give solar the
ability to fairly compete with other energy technologies on the open
market.
---------------------------------------------------------------------------
* Documents have been retained in committee files.
---------------------------------------------------------------------------
SunRun is the largest owner of residential solar in the United
States with over 11,000 customers and operations in Arizona,
California, Colorado, Hawaii, Massachusetts, New Jersey, Oregon, and
Pennsylvania. We are actively considering launching operations in a
number of other states. SunRun offers a solar power service typically
referred to as a lease or Power Purchase Agreement (PPA), which allows
homeowners to get solar energy without a big upfront investment, and
pay for the energy as it is produced. SunRun monitors, maintains and
insures the solar system for no additional cost to the homeowner.
SunRun currently invests $1 million per day in solar energy systems and
installs 3 MW per month. However, SunRun's ability to enter new
markets, increase the investment dollars, and offer competitive long-
term rates for clean solar energy is dependent on reducing the cost of
solar installations.
While decreasing panel prices, efficiencies in the installation
process, and creative financing structures like SunRun's have already
dramatically reduced the cost of solar projects, purchasing and
installing solar systems on residential roofs still requires high
upfront costs. Even with existing federal and state incentive programs,
the cost for residential solar systems can range from $15,000 to
upwards of $60,000. These costs are attributed to the cost of panels
and other hardware components, constructions costs, interconnection
fees, and permitting fees, which vary widely from state-to-state and
municipality-to-municipality, as well as marketing costs. In the study
referenced above, and released earlier this year, SunRun found that
while panel prices have come down significantly over the last 5 years,
permitting costs have stagnated. In 2007, local permitting and
inspection added 13% to what a homeowner would spend on panels, today
they add 33% and within a few years, they will add 50%. Other countries
like Germany, France, and Japan have eliminated permitting fees for
residential solar installs and have installation costs up to 40% lower
than the United States.
The average ``turnkey price'' per watt to install residential solar
is the baseline metric SunRun uses to assess the financial impact of
permitting. The higher the turnkey price, the greater the electricity
rate (measured in kilowatt hours (kwhs)) PPA providers, such as SunRun,
must charge its customers. High turnkey prices limit the size of the
solar market because solar companies are best able to sell to
homeowners when the price for clean energy is at or below their current
utility rate. The residential solar industry's addressable market grows
or shrinks based on the relationship between the turnkey prices, as
expressed in a cents-per-kwh rate, and the cost of traditional utility
electricity. A reduction in the permitting cost component of the
turnkey price will increase the number of economically viable solar
homeowners and the amount of savings each homeowner will realize from
investing in a solar system.
As a growing solar company, SunRun cannot understate the positive
economic impact of this increase in the number of economically viable
solar homeowners and savings achieved by the homeowner through
investment in solar. SunRun commissioned AECOM,\1\ an independent third
party, to analyze the fiscal impacts on state and local governments and
the economic impacts on state and regional economies that a streamlined
permitting regime would provide. While the study is not yet
complete,\2\ AECOM provided a draft indicating that in California
alone, a streamlined permitting regime would add over 130,000
residential solar systems (approximately 730 MW), resulting in 4,000
new jobs between 2012-2020. In addition, the study will analyze fiscal
impacts such as additional sales, property, and payroll tax revenue to
state and local governments as well as other direct, indirect, and
induced economic effects.
---------------------------------------------------------------------------
\1\ www.aecom.com
\2\ We anticipate the study to be complete before the end of July,
2011 and will submit it as part of the record for S. 1108.
---------------------------------------------------------------------------
The bulk of these permitting costs come from local processes and
variation in local processes, not from the electrical code itself.
Inefficient local processes waste time and money, and local variation
forces installers to spend time and money customizing plans for each
jurisdiction. According to the Solar America Board for Codes and
Standards (Solar ABCs), an organization funded by the Department of
Energy (DOE), standardizing this process makes sense because most
installations are relatively similar and ``share many similarities of
design... that allow for a nationally standardized expedited permit
process.'' However, jurisdictions often design cumbersome processes to
account for the minority of complicated installations that require more
in-depth review.
A streamlined, consistent process for basic installations, like the
``Common Application'' for college admissions, will eliminate waste and
variability across jurisdictions. DOE has already funded development of
these standards through the Solar ABCs to allow jurisdictions to
streamline permitting for most installations while following code and
maintaining safety. Jurisdictions can use this process to simplify the
structural and electrical review of a small PV system project and
minimize the need for detailed engineering studies and unnecessary
delays. In addition, jurisdictions can make process improvements, such
as imposing fair fees, allowing for email submission, and providing
faster turnaround and less time waiting on site for inspections, to
reduce unnecessary cost and delay.
In addition, DOE has taken a first step to gather examples of best
practices for local permitting through the DOE SunShot Initiative's
Rooftop Solar Challenge. The Rooftop Solar Challenge will be collecting
examples of best practices from over 25 local and regional entities in
order to give the industry a better understanding of the permitting
landscape. This effort represents DOE's first phase in addressing local
regulatory barriers, and the ``Ten Million Solar Roofs Act of 2011''
enables the critical second phase of establishing industry best
practices by authorizing a scalable program to focus on streamlining
and standardizing local permitting processes for solar installations
across many more communities.
In closing, if our goal is to increase the deployment of solar
installations by decreasing costs and eventually achieving grid parity,
we believe that reducing the unnecessary red tape and costs associated
with local permitting represents the lowest hanging fruit in our effort
to get there. Germany currently holds a 40% cost advantage to the U.S.
for solar installation costs, and it is clear that permitting costs in
the U.S. are a major driver of that difference. In discussions with
experts on the permitting process, there does not seem to be a specific
technical or policy reason why jurisdictions cannot agree to the same
procedures. Permitting costs are immune from price reduction activities
that the solar industry is driving (such as making technology advances
and installation practice improvements), and therefore should be a top
priority for our government.
Thank you for the opportunity to discuss this bill with the
Committee today, and I look forward to answering any questions you may
have.
The Chairman. Thank you very much.
Mr. Dougherty, let me ask you first, and this demonstrates
my ignorance of what I'm asking about here. But you point out
in your testimony that the Department of Energy ought to do
more to provide technical assistance to other agencies, such as
the Energy Protection Agency, Department of Defense, Department
of Education, National Park Service, GSA, that are considering
geothermal heat pump projects.
One of the successes, I think, that we've been able to
legislate over the last decade or so is the provisions for
energy-saving performance contracts. A lot of government
agencies enter into those energy-saving performance contracts
in a way that works for the taxpayer, works for the agency,
works for the private sector that does the installation.
Are you using energy-saving performance contracts? Are
developers coming in, members of your association, and doing
this kind of geothermal heat pump installation through energy-
saving performance contracts for Federal agencies?
Mr. Dougherty. Mr. Chairman, I don't know specifically the
answer to that question. I'd be happy to research it with my
members. I do know I have several members that have done
Department of Defense retrofits of existing facilities with
geothermal heat pumps, but I don't know if it was under that
contract that you referred to. But I'd be happy to research
that and get back to staff.
The Chairman. How extensive is the use of this technology
by the Department of Defense, for example, or by the National
Park Service, for example?
Mr. Dougherty. It's growing. I would like to use the
example of the educational institutions that Senator Sanders
referred to. We have hundreds of examples of schools that have
retrofitted with geothermal heat pumps, and we're currently
working with the Department of Energy and the Environmental
Protection Agency on a new initiative called a Green Ribbon
School Initiative, recognizing those schools that put in energy
efficiency equipment and technologies and, furthermore, put the
teaching of energy efficiency and renewables into the
curriculum within that school. We support that. We're working
with them on a national webinar that will be broadcast in the
fall to all school administrators across the country
highlighting the benefits of retrofitting a school with
geothermal heat pumps.
The other example is many schools that were built in the
1950s and 1960s do not have air conditioning, and we've got
examples of schools that retrofitted a school and now they can
heat and cool their building for summer school, all year round
classes, less than what it was just to heat the building. So as
those are adopted school by school, we're seeing a real
initiative by the Department of Education to promote
retrofitting schools with geothermal heat pumps.
The Chairman. OK. Now, does the Department of Education
have a specific program with dedicated funding to do this
promotion, or is this just having press conferences and urging
people to do it?
Mr. Dougherty. No, I think it's a credible program. I don't
believe there's any money involved, but what it is, it's an
awareness program for school administrators that are looking to
save money, because if you can reduce the energy cost of the
school building, the thermal load of that building, that's
extra dollars to be put into the education of those children
through computers and teacher salaries and hiring new people.
So I think it's very important for school administrators to
understand the newer technologies. My point would be that if
the Department of Education were to contact the Department of
Energy, I don't know that the Department of Energy actually has
the resources and the references and the documentation that can
prove what we're saying in terms of the data that we have
internally within the industry. I don't know that the
Department of Energy has that dedicated staff to be able to
articulate the benefits of installing that technology in a
school building.
The Chairman. Ms. Gordon, let me ask you a question. I
guess I'm concerned, after hearing Mr. Chalk's testimony, that
we're encouraging local entities to develop these permitting
processes and get up to speed and find ways to streamline, and
then the second stage is going to be focusing on standardizing
that. It seems to me that we might have the stages backward,
that it would make more sense to put in place some
standardization before we get everybody too far down the road
developing their systems in this area.
Am I missing something there? It just strikes me we're
likely to have a lot of ownership on the part of all of these
entities and governmental entities around the country that have
developed their permitting processes, and then we're coming in
during the second stage and saying: OK, now we want you to do
it in a standardized way that we've determined makes more
sense.
What's your reaction to that?
Ms. Gordon. First I think there actually is a program in
place already to standardize these systems. The Solar America
Board for Codes and Standards, the Solar ABCs that I mentioned
in my testimony, has already put together a pretty robust
document to streamline permitting for small systems. So that is
really in place and we applaud the Department of Energy for
working with the Solar ABCs on that.
So that is actually already in place, and what we're
suggesting is that local jurisdictions look to that document
and build off of that. The funding opportunity that the
Department of Energy has put out I view as a pilot program that
has seed money to start the process of adopting the Solar ABCs,
and that S. 1108 would scale that process.
I think standardizing how permit applications are done and
how permitting is done is just one piece of the process. So
there are many things that are troubling about the permitting
process right now. The first problem is that you have
inspection windows that potentially are 8 hours during the day.
So I should back up just a moment. While the reason why
SunRun got involved in this permitting issue is because we went
to our local installers--we have 30 installers across our nine
States. Last year, we asked them, what is the one thing that we
can help you do on a high-level policy issue to help you bring
down the installation costs?
SunRun finances solar energy systems. We own those systems
and the homeowner pays for the electricity per kilowatt hour
per month. So we're solving the up-front cost. In fact, what
Senator Franken was asking about earlier from the geothermal
industry's perspective, the solar industry is actually doing
that right now. Private industry is investing dollars in
business models that allow for a low up-front down, where the
homeowner doesn't have to have 30 or $40,000 to buy a solar
system. They can put a low amount down, pay per kilowatt hour
per month. That's what SunRun's business model and our
competitors' offer.
So in order to compete with traditional utility rates, we
need to be able to offer a kilowatt hour rate that is at least
equal to or lower than that kilowatt hour rate, and there are
many markets in the country where we won't be able to do that
unless we're able to reduce those soft costs.
So when we asked our installers, how can we reduce that
kilowatt hour rate, they said, please work on permitting.
Universally, everyone answered that question, please work on
permitting. So that's why we put this report together and how
we learned that this is not something the industry can take on
on its own. It really is a local jurisdiction issue.
In talking with some of our installers, some of the stories
that they told me were pretty surprising. Verango, which is one
of our largest solar installers in southern California, has 24
employees out of their 400, so well over 5 percent of their
employee base, works on permitting and inspection by
themselves. That's all they do. They have 4 what they call
``permit runners.'' Those people drive from place to place
every day dropping off and picking up permit applications. They
have 20 inspection sitters. Those people drive every day to one
homeowner's house and sit outside of that house because the
homeowner's at work and wait for an inspector to show up. They
can't inspect more than one system in a day.
So I think, aside from standardizing the permitting
process, you could also streamline by having shorter inspection
windows, 2 hours at a time. The inspection only takes 15
minutes right now. You could have on-line permitting
applications that wouldn't require these permit runners to
drive all over their local jurisdictions to pick them up.
So there are a number of different things that can happen
to streamline the process.
The Chairman. Thank you very much.
Senator Murkowski, why don't you go ahead with any opening
statement you'd like to make and also any questions, and then
we'll go to Senator Sanders and Senator Franken.
Senator Murkowski. Thank you, Mr. Chairman. I do have an
opening statement, but in the interest of time and deference to
our witnesses I'll just ask that it be submitted as part of the
record.
I've been attending an Arctic energy conference this
morning and I apologize for not being here for the full
hearing. But at that conference, obviously, one of the issues
of great interest when you're talking about Arctic energy is
geothermal. Iceland generates about 80 percent of their energy
as a Nation from geothermal. I was told this morning that $35 a
month is what a typical home in Iceland is paying for their
heating costs with geothermal. If we could only get to a place
like that, it would give us so much more hope as an Arctic
nation. We are an Arctic Nation, even though it's 100 degrees
out there this morning. But thanks to my State, we are one and
we're going to figure out how we can capitalize on some of our
energy options, geothermal, solar, certainly.
[The prepared statement of Senator Murkowski follows:]
Prepared Statement of Hon. Lisa Murkowski, U.S. Senator From Alaska
Mr. Chairman: Thank you for scheduling this hearing. Let me talk
first about a bill that Sen. Tester introduced, a former member of this
panel, and that I have co-sponsored, the Geothermal Exploration and
Technology Act of 2011.
In both 2005 and 2007, this panel took steps to aid research to
expand geothermal energy production nationwide. We provided aid for
research, encouraged work on low-temperature technology and provided
tax incentives. I In 2007, we pushed to encourage the Department to
further enhanced geothermal system technology--a step that should make
geothermal energy economic and accessible for large portions of the
nation.
We also set up a high-cost geothermal grant program under Sec. 625
of EISA, that unfortunately DOE has yet to really implement. But that
is an issue for another day.
This bill closes most of the remaining gaps the nation's strategy
for helping geothermal energy expand from the roughly 2.2 gigawatts
that it produces today, to the up to 100 gigawatts of electricity that
M-I-T has suggested could be possible in coming decades.
The bill sets up a revolving loan program to help overcome the
costs of high-risk geothermal exploration wells--the biggest cost and
risk in geothermal development. It's a sliding scale cost-share formula
that should incentivize developers while protecting U.S. taxpayers from
long-term losses, as developers will have to put significant ``skin''
in all such projects.
The bill of special interest in Alaska and other hydrocarbon-
producing states will allow for co-leasing of geothermal production at
the time that permits are issued for drilling of oil and gas wells.
That will make it easier for companies to generate the estimated 11,000
megawatts of power that could come from tapping the hot water co-
produced in oil production through the use of generally low-temperature
geothermal technology. An Alaska developer, a pioneer in low-
temperature development at Chena, Alaska, Bernie Karl, proved the
efficiency of such systems just last year as a result of a DOE grant.
And this bill provides substantial aid to spur investment in
geothermal heat pumps and the direct use of geothermal energy to heat
and cool buildings in large-scale applications. That provision is
really the piece that has been less emphasized so far by DOE in its
geothermal development program and will be helped most by this bill.
This bill at likely little additional cost should help geothermal
energy continue to expand its market share and help the U.S.--the world
leader in geothermal energy production--continue in the lead in
development of geothermal technology. I thank Sen. Tester and his staff
for developing the bill and I suspect we will hear testimony supporting
its passage today.
We are also considering today S. 1108, the 10 Million Solar Roofs
Act of 2011. A bill by the same name was considered by this Committee
last Congress, but I understand this bill is substantially different as
it mainly addresses permitting barriers, which add a considerable
amount to the cost for a homeowner to install solar energy. I'm
interested to hear what our witnesses have to say about the proposals
contained within the bill.
I am also pleased to join with the Chairman in introducing S. 1160,
the Department of Energy Administrative Improvement Act of 2011. This
bill would provide the Department with greater flexibility in its
hiring and transactions authorities in order to ensure the government
has the ability to bring on board the best and brightest talent
available. It also would require a five-year budgetary outlook from the
Department of Energy to give Congress greater insight into the purpose
and progress of Departmental programs. I am hopeful these provisions
will help make the Department of Energy more effective in its missions
and will get the most mileage out of the taxpayers' dollar.
I thank all of our witnesses for taking the time to prepare
testimony and appear today.
Senator Murkowski. Mr. Dougherty, I wanted to ask you a
question about geothermal heat pumps and the costs associated
with them. In your written testimony, you talk about the
importance of funding research to help cut the costs that are
associated with the thermal pump and the installation, and the
need to improve the drilling techniques and improve the
efficiency of the heat transfer.
Can you speak about any promising areas that we can be
looking to that can help to reduce some of these costs, and are
we close to solutions in how we can advance the research to see
some of these breakthroughs?
Mr. Dougherty. Yes, I thank you, Ranking Member Murkowski.
In my testimony I talked about what DOE is doing pursuant to
the bill in terms of looking at greater efficiencies on the up-
front costs from a drilling perspective, better heat transfers
in fluids, better loop design, better drilling techniques,
better drilling equipment. There is a lot of research to be
done, I believe, in lowering that up-front cost.
So we applaud S. 1142 for asking the DOE to spend more
resources on that research in terms of lowering that up-front
cost, due in large part to the installation of the loop.
Senator Murkowski. So we just need more research? We're not
on the verge of breaking into something new here?
Mr. Dougherty. No. Unfortunately, the technology, it's
incremental improvements, and there's no real, we don't
believe, anything on the horizon that's going to transform the
way this technology works.
Senator Murkowski. Let me ask you about Alaska and the
possibility, the physics of using geothermal heat pumps in
colder climate locations. Just last week there was an article
from the University of Alaska that said that geothermal heat
pumps could be economic for use even in northern Alaska, even
in areas where they have incidence of permafrost.
Can you speak to that application?
Mr. Dougherty. Yes. I'll answer it this way. I believe the
market is very nascent in Alaska in terms of geothermal heat
pump installations. But we do have statistics for Canada
installations, Canadian installations, and it's pretty
prevalent in Canada. I think a lot of their geology and a lot
of their temperatures are the same as Alaska.
I think if you use vertical drill bore holes and you can
get below the frost line, the technology does work. The
paybacks may be a little longer on a new home or a retrofit,
but the technology is proven to work in very cold temperature
climates. Sweden is one of the leading installers of geothermal
heat pumps for buildings. We're at 5 percent market penetration
for geothermal heat pumps. Sweden is at 90 percent market
penetration. So it is a proven technology in cold climates.
Senator Murkowski. Mr. Chairman, I have a series of
questions that I had for the first panel that I'll also be
submitting for the record, if they can take them at that time.
Thank you to the witnesses.
The Chairman. Thank you.
Senator Sanders.
Senator Sanders. Thank you very much, Mr. Chairman.
It's just very exciting to hear from both Ms. Gordon and
Mr. Dougherty about the potential of transforming our energy
system in a cost-effective way.
Let me start off with Ms. Gordon, if I might. You touched
on this issue, but I'll maybe get into it at a little bit
deeper level. You do business now, your company does business,
in nine States, but no doubt you have some familiarity with
what's going on in the other 41 States. On a day to day basis,
what is the permitting process like for a company like yours,
that wants to help, say, homeowners install solar? What is it
like?
Ms. Gordon. Yes, I did talk about that a little bit, but I
can go into some further detail. Some of the examples that
Verengo Solar gave to us were, they have these inspector
sitters and permit runners that are a large part of their
employee base, and it really impacts the customer experience.
So when you have an inspection that's supposed to occur and the
inspector doesn't show up, or they're supposed to come in the
morning and they don't come until the afternoon, it's----
Senator Sanders. Let me just ask you this. I want solar in
my rooftop. I go to work, right? Can't be home. This is already
a major impediment, is it not?
Ms. Gordon. It shouldn't be, but in some places it is. The
solar installer should be able to go to your home, wait for the
inspector to show up, ideally within a 2-hour window, and have
the inspection done within 15 minutes. However, for example, in
southern California right now some cities are coming out to do
a solar inspection and wanting to know if there's a smoke
detector in the home. If the homeowner isn't home when that
inspection occurs, they can't--the installer can't get into the
home to determine whether there's a smoke detector there are
not, which is really unrelated to whether or not you have a
solar system on your home.
Senator Sanders. Your company's report on solar permitting,
which was endorsed by a number of solar energy companies,
including groSolar in Vermont, indicates that countries like
Germany can install solar energy at prices 40 percent lower
than we do here in the U.S., thanks in part to simpler and less
expensive permitting processes. If we achieve solar permit
reforms as this legislation attempts to do, what will that mean
for the average homeowner who wants to install solar panels in
terms of lower costs and less hassle?
Ms. Gordon. Certainly. So the dollars per watt in Germany
is about $3.50 per watt and it's about $5.50 on average in the
United States. Streamlining permitting could reduce that
dollars per watt by about 38 cents, just streamlining
permitting inspection, and that will unlock other parts of the
soft costs that go into that installation. For example,
customer acquisition, marketing, sales, telling your neighbors
that you had a good experience so that your neighbors will get
solar. If you're frustrated, you're not going to tell your
neighbor that they should do this. You want it to be a good
experience for that customer, and that's going to help us
unlock those soft costs, those stubborn soft costs that have
been hard to bring down.
Senator Sanders. Thank you.
Let me ask, Mr. Dougherty, a question. As I mentioned
earlier, even in my State, a cold weather State, we are
beginning, beginning, to see an increased utilization of
geothermal with, as I understand it, some good success. What is
the potential? If we got our act together, people--and we had a
conference, you may know, just over a year ago for precisely
the purpose of educating people and builders about the
potential of geothermal. We had a couple of hundred people out
to that conference.
But if we got our act together as a Nation, what do you see
the potential of geothermal for residential and business
buildings?
Mr. Dougherty. I think 2 things would happen. In my
testimony I talked about growing our industry from 100,000
residential units to a million by 2017, and we estimate that
that would create 100,000 new jobs, both at the manufacturing
plants of the geothermal heat pumps, at the component
manufacturers that are mostly domestic in terms of pumps and
fans and coils that go into the machine, but also that job-
creating aspect that we have that no other part of the HVAC
industry has, which is the installation of the loop. So you
have the manufacturers of the pipe, the manufacturers of the
grout, the manufacturers of the drilling equipment.
So we estimate that just by going from a tenfold increase
to a million units a year of the 6 to 7 million that are done
on an annual basis now, and we only have 100,000--if we can get
to a million, we'll create 100,000 new jobs by 2017.
Senator Sanders. What about reductions in greenhouse gas
emissions?
Mr. Dougherty. We would have a tremendous impact on
lowering the carbon footprint of those homes and nationally as
a Nation in terms of carbon footprint. The other thing is it's
lowering the demand for additional generation. Because we
significantly reduce the amount of kilowatt energy used in the
summer, we are deferring the need for new construction of power
plants. So we estimate that if we can put in a million
geothermal heat pumps, we will shave the need--shave peak and
reduce the need for additional capacity significantly, and
reducing the strain on the transmission grid.
Senator Sanders. Let me ask you this. Ms. Gordon, in terms
of solar, referred to the permitting processes as a major
obstacle for us to lower costs. What are the obstacles--I think
if the average person heard what you have to say they'd see
this as a win-win-win situation. What would you say are the
major obstacles right now in terms of going forward in a very
aggressive way with geothermal?
Mr. Dougherty. I think consumer awareness is No. 1.
Senator Sanders. People just don't know about it?
Mr. Dougherty. People just don't know. There also is this I
think misimpression of the up-front cost. I think Mr. Chalk
mentioned 3 times. That is debatable. I in fact am retrofitting
my home as we speak with a geothermal heat pump----
Senator Sanders. If I'm building an average size home in
Vermont right now, in English how much is it going to cost me
to put in geothermal?
Mr. Dougherty. Probably double. So if you were looking at a
$10,000 conventional system, high efficiency gas furnace, a
high efficiency air conditioning unit, probably $10,000 for an
average home. This would probably cost you 18 to $20,000.
Senator Sanders. What are my savings over a 10-year period?
Mr. Dougherty. But if you put that, you put the extra cost,
that $10,000, into your 30-year mortgage, your energy savings
are greater than your debt service, so the day you walk into
your new home it's positive cash-flow.
Senator Sanders. Is one of the impediments, getting back to
Senator Franken's point, helping people come up with that
additional $10,000?
Mr. Dougherty. Correct. We're working with the electric
utility industry. We believe they're the players that can
really help in terms of deferring the up-front costs with
something called on-bill financing. If you can lend money to
the homeowner and have that debt service put on your electric
bill, your energy savings are greater than that debt service
added to your electric bill.
We think it's a no-brainer for electric utilities to----
Senator Sanders. It's true for geothermal. It's true for
solar. It's true for wind. This is I think one of the great
impediments that we face, getting that up-front money and
paying it back with reduced fuel costs.
Mr. Dougherty. Absolutely, Senator.
Senator Sanders. Thank you very much, Mr. Chairman.
The Chairman. Senator Franken.
Senator Franken. I like this on-bill financing. I take note
of this about the need for--or getting rid of the need for
excess, for building new utilities. That's an important thing.
For lower carbon footprint.
We had a hearing in here the other day about the forest
fires in the Southwest and it was very clear the expense of
that. The testimony was that climate change was adding to the
intensity of these fires and the costs. So when we're really
talking about cost savings, we've got to talk about the whole
picture here.
First of all, I just want to applaud the chair and the
ranking member for focusing on streamlining the administration
of the department in S. 1160. I want to thank you both for
doing that.
Also, I want to applaud Ms. Gordon and SunRun for finding a
way to finance this and for owning this and finding a way of
creating more solar energy in this country in a way where you
find a financing model where it doesn't cost the government
money, but private industry is doing it. That's what I'm
looking for here. So I really like this electric utility on-
bill financing. I think that's brilliant and I want to pursue
that.
$35 a month for heating in Iceland. Now, Iceland I believe
is a cold climate country, judging by the name. I'm not great
with geography, but ``Iceland.''
I think I want to tell a little bit of a story, and I
hope--so I go to this place ECONAR. This is like a couple years
ago. It was while I'm running. I'm going on a green jobs tour.
I talk to the guy who started the company. It's a geothermal
company and they do the coils and the pumps. They do the heat
pumps. They do the whole system.
He told me that he had just believed in geothermal for
years and years and years. You've talked about getting the
message out to folks and people not knowing about this. It just
wasn't going anywhere, and he was making these heat pumps in
Appleton, Minnesota, and he just had been doing this for years.
Finally it's starting to take off a little bit, and he gets
this offer from this company in Indiana to buy him out. This is
like his payday. Finally, after years and years of doing this,
it's his payday.
So he's going to sell it to this company in Indiana, but
the guy in Indiana wants to take the business in Appleton,
Minnesota, and take it to Indiana. So he's driving out to
Appleton to tell the people who work in the factory there, I'm
sorry, I'm selling it to this business in Indiana.
On the way--he's telling me this story in his office in Elk
River. On the way he just says: No, I'm not going to do this,
I'm not going to do it. So he goes there and he tells them: I'm
not selling the company.
So he's telling me this story and he said: So I kept the
company. So while he's telling me this story, every once in a
while this bell goes off. I'm sitting there and this bell goes
off. Finally, I just go: What are those bells? He says: Oh,
that's every time I sell a system a bell goes off. He's doing
fabulously, and he made the right decision.
This is the right decision for our country. I want to thank
you guys for being in the business that you're in and finding
ways that we can be saving electricity, saving greenhouse gas
production, and finding ways to finance these that aren't--it
isn't about the government spending money. It's about, if
anything, us facilitating how the private sector can be
financing us with these $2 trillion sitting on the bench
famously. We're always talking about this money sitting on the
bench.
The utilities, you're so right--and, Mr. Chairman, I think
that if we can find a way when we finally get to a clean energy
standard or a renewable energy standard that we can reward
utilities for lending money for all kinds of things, for solar,
for geothermal, for more efficient units, air conditioning
units, etcetera, that you reward the utilities, that the
efficiency that they're creating through their own financing
can be represented in this energy standard and rewarded, so
that the financing is coming from the private sector, that we
will be doing a great thing for the country and for future
generations.
So I want to just thank you both, and I want to thank the
chair and the ranking member, who I'll thank her personally,
for the bill, for 1160 on increasing the efficiency of the
administration of the Department.
Thank you.
The Chairman. Thank you very much.
Thank you both for your excellent testimony. I think it's
been useful and we hope we can move ahead with these various
bills.
Mr. Dougherty. Thank you, Mr. Chairman.
The Chairman. So that will conclude our hearing.
[Whereupon, at 11:11 a.m., the hearing was adjourned.]
APPENDIXES
----------
Appendix I
Responses to Additional Questions
----------
Responses of Steven G. Chalk to Questions From Senator Bingaman
Question 1. The Advanced Research Projects Agency--Energy or ARPA-E
was given exempt hiring authority similar to that in S. 1160 to quickly
hire scientific and technical personnel similar to DARPA, has the
Department found this authority useful to date?
Answer. While ARPA-E has only existed for three years, to date,
this hiring authority has been very useful within ARPA-E. ARPA-E has a
unique R&D model within DOE and was set up to be a lean and agile
organization. ARPA-E has used its hiring authority to quickly hire
scientific, engineering, and professional personnel pursuant to its
statute, including people to serve limited terms as Program Directors
and Fellows. The hiring authority helps quickly recruit some of the
best technical/professional talent in multiple energy research fields.
Further, limited terms also lead to a sense of urgency and efficiency
to effectively execute new programs.
Question 2. The Nuclear Regulatory Commission has authority to
rehire retired personnel who are receiving their retirement annuity--
can you please explain how the Department would use the re-hire
authority as described in S. 1160 for retirees?
Answer. The Nuclear Regulatory Commission was granted the authority
to rehire retirees in situations where there is exceptional difficulty
in recruiting or retaining qualified employees or when a temporary
emergency hiring need exists. Under S. 1160, and as required therein,
the Department of Energy would limit the rehiring of retired personnel
to only those positions that are necessary to carry out a critical
function of the Department and for which it has encountered exceptional
difficulty in recruiting suitably qualified candidates. In addition,
the appointments would be limited to a maximum of four years.
Currently, the Department has been delegated the authority to
rehire reemployed annuitants for a limited period of time (not exceed
1040 hours over one year).
As its technical and scientific workforce ages and retires, the
Department is losing valuable experience and knowledge. The recent
budget restrictions and the impact on Federal salaries, awards, and
benefits are already beginning to decrease retention of experienced,
senior-level employees. Individuals, who in the past may have continued
their Federal employment, are finding it more advantageous to retire
and are leaving at a faster rate than anticipated. This is resulting in
gaps in locating highly qualified individuals to assume the most
specialized positions in science, nuclear engineering and safety,
energy efficiency, renewable energy, environmental management, and
other critical mission areas of the Department. Recruitment efforts for
these positions can frequently take longer than six months as the
positions are sufficiently specialized that longer announcement periods
and more proactive recruitment efforts are needed. Recently, one
position in the Office of Energy Efficiency and Renewable Energy's
Geothermal Technologies office was advertised three times over one year
before suitably qualified candidates were found. It is not unusual for
positions in the Office of Science to be routinely advertised for three
months or more to locate fusion, genomic science research, high energy
physics, or other scarce scientific applicants.
Question 3. The Department currently has Other Transactions
Authority based on that used by the Department of Defense in title 10
of the U.S. Code. Can you please explain how the modifications proposed
in S. 1160 would be helpful to the Department?
Answer. [No response received at the time the hearing went to
press.]
Question 4. S. 1160 proposes a section titled ``Critical Pay
Authority'' based upon similar authority used by NASA to hire highly
qualified scientific and technical personnel for up to 4 years. Can you
please explain how the Department would use this authority?
Answer. Many potential candidates from academia and private
industry have salaries that are significantly greater than the current
cap of $179,700 for Senior Executive Service position. It is not
unusual for candidates with salaries of $250K to $450K who also enjoy
stock options and large bonuses to apply for the Department's
positions. Most decline our offer when they learn that the top salary
and relocation bonuses may only equate to half of their salary.
To ensure that their programs are attracting candidates with
cutting edge technical knowledge and expertise, some managers are
utilizing offers of Intergovernmental Personnel Assignments (IPA) to
individuals from academia. The IPA authority permits a much higher pay
rate--usually equivalent to their current salary--which makes the
assignments more attractive to the highly qualified candidates.
However, IPAs are very temporary in nature. Individuals who accept IPAs
come to the Department through a short-term leave of absence from their
employer. As result, they usually return to their employer within 1 or
2 years. This can create volatile skills gaps in critical mission
areas.
Responses of Steven G. Chalk to Questions From Senator Murkowski
S. 1160
Question 1. Could you provide some examples of how greater
flexibility in hiring and transactions authority, such as S. 1160
provides, would benefit the Department of Energy?
Answer. The Department needs greater flexibility to attract and
recruit a highly skilled and technical workforce in the science,
nuclear engineering and safety, energy efficiency, renewable energy,
and other critical mission areas of the Department. Under current
requirements of Title 5, United States Code, recruitment actions must
follow very specific competitive procedures. Although we have cut our
time to hire in half, this process can still take up to three months
and in critical specialties it can take longer. The direct hire
flexibility would allow the Department to quickly extend job offers to
these highly skilled individuals who often have competing or more
lucrative job offers, yet have a strong desire to work for the
Department. Under the American Recovery and Reinvestment Act, the
Department was authorized with direct hire authority for positions
supporting electricity delivery and energy reliability. This was very
useful in quickly obtaining the critical skills necessary for the
Department to execute its responsibility under the Act.
Question 2. Section 3 of 1160 requires the Department of Energy to
implement a 5-year estimate of program content as part of the annual
budget request. Does the Department of energy already prepare future
year's estimates in preparing for the budget request, and if so, how
many years out?
Answer. For internal planning purposes only, the Department does
prepare estimates for five years into the future as part of developing
the current year budget request.
Question 3. Section 5 of S. 1160 allows the government to protect
against the public release of results from cooperative research and
development agreements for five years. Given that some portion of the
research and development programs are funded by U.S. taxpayer dollars,
what is the justification for not publicly releasing the results when
they are available?
Answer. Section 5 of S. 1160 provides the Secretary with the
ability to protect certain data generated under transactions with DOE--
including grants, contracts and cooperative agreements--from public
disclosure. The data subject to protection would be protected from
disclosure under the Freedom of Information Act as if it had been
developed using private funds. The period of protection for such data
is not to exceed five years. This provision would more broadly apply
the data protection authority already provided in statutes such as the
Energy Policy Act of 1992 (EPAct 1992) and the Stevenson-Wydler
Technology Innovation Act of 1980 (Stevenson-Wydler), which are both
limited to certain programs and applications. The limited period of
data protection strikes a balance between two of the Department's
missions. First, the Department is generally required by statute to
disseminate the results of research it funds, subject to applicable
law. Second, the Department seeks to facilitate commercialization of
those research results. Commercialization, when successful, can
increase the U.S. domestic manufacturing capacity, provide jobs to
American workers, and advance the state of the art in economically
critical energy technologies.
Data developed under Department-funded research often provides
companies with some of the most commercially valuable assets arising
from those efforts. To commercialize these results effectively, those
who enter into transactions with the Department may need a limited
period of exclusivity during which they can pursue those endeavors. The
need for such a limited period was recognized and codified in
Stevenson-Wydler. Section 12(c)(7) of Stevenson-Wydler (15 U.S.C. 3710a
(c)(7)) states that data generated under a cooperative research and
development agreement (CRADA) may be protected against dissemination
for a period of up to five years.
Congress recognized that providing a limited period for data
protection would also benefit the Department's R&D financial assistance
recipients, such as grantees, and applied the same data protections
found in Stevenson-Wydler to those recipients in EPAct 1992, in Section
3001(d). However, even when data is protected from disclosure for a
limited period, DOE typically requires some level of data (e.g.
performance data) to be available for immediate dissemination.
The statutes allow for protection for up to five years, or, as in
the case of S. 1160, for a period ``not to exceed 5 years.'' These
provisions provide the Secretary with the discretion to limit data
protection even further, to a shorter time limit, or even requiring all
data to be disseminated immediately. They are flexible so that the
Department may consider individual programs and even individual
financial assistance awards on a caseby-case basis to determine how the
needs for wide dissemination versus protection to enhance
commercialization may best be balanced.
ON S. 1108
Question 4. This committee has been focusing on the issue of
overlap and duplication amongst federal authorities. How is S. 1108
different from The Rooftop Solar Challenge that just started at DOE?
Would it make more sense to amend the Solar Technologies Program if we
want it done differently, or to make sure that funds are appropriated
for this purpose, instead of passing a new law?
Answer. Phase 1 of the Rooftop Solar Challenge is an initiative
launched by DOE in June 2011 to make PV more accessible and affordable
for residents and businesses by emphasizing streamlined and
standardized permitting processes. With this first phase, DOE has
committed up to $12.5 million total for up to 25 teams from across the
country. DOE has required that teams represent minimum populations of
500,000, so the Challenge can reasonably be expected to impact at least
12.5 million residents. The funding opportunity is currently open, with
applications due August 31, 2011.
Phase 1 of the Rooftop Solar Challenge represents a first step in
streamlining and standardizing permitting processes to drive down the
non-hardware Balance of Systems costs for installed rooftop PV. S. 1108
describes a more widespread effort.
Reaching an ambitious 10 million solar rooftops target, such as
that set out in S. 1108, would likely require jurisdictions across the
country to draw upon lessons learned in Phase 1 of the Challenge and
significantly scale them. It would also likely require jurisdictions to
go further than they will in Phase 1.
Question 5. When do you expect we will get some significant
feedback from localities as a result of the Rooftop Solar Challenge?
How will the Department use the information gained from various
localities?
Answer. Awardees under the Rooftop Solar Challenge will complete a
market assessment at the beginning of their project, and then again a
year later at the completion of their period of performance. This
market assessment will identify the status of the region/locality with
regard to PV permitting and interconnection processes, net metering and
interconnection standards, PV financing options, and planning and
zoning restrictions. DOE will use the initial market assessments to
identify the range of existing policies and practices and refine our
estimates of the cost reductions and increase in solar deployment that
can be achieved through improving and standardizing practices.
DOE expects to make awards under this Challenge by the end of
calendar year 2011, and expects to have qualitative and quantitative
evidence of the progress of each of the awardees by the end of their
period of performance 12 months later, at the end of calendar year
2012. DOE will use the information from this second round of market
assessments to evaluate the impact this Challenge has had on PV market
development in the first year, and determine how best to allocate
funding in future years to achieve additional reductions in PV system
costs and increases in market penetration.
Throughout the Challenge, DOE will share the best practices
developed by each team with the other participating teams, and with
thousands more local jurisdictions through a national outreach effort.
This will enable local and state governments to leapfrog the complexity
common in immature solar markets and move directly to implementation of
more efficient, low-cost permitting practices.
Question 6. Have there been any statewide initiatives to streamline
solar permitting processes? If so, how have these fared?
Answer. Several states have made efforts to simplify solar
permitting processes for small-scale systems. Three examples of states
that took very different approaches are:
1) In October 2010, Oregon adopted a statewide Solar
Installation Specialty Code, which specifies the building and
electrical standards with which PV installations in the state
must comply. The code eliminates the requirement for structural
engineering for most PV systems, significantly reducing the
time and complexity of the permitting process. It also provides
a standard permitting fee calculation methodology. This
standard statewide code reduces the inter-jurisdiction
variability in permitting processes, which reduces PV system
costs by simplifying business processes for solar installers.
2) In May 2011, Vermont adopted a statewide PV system
registration process under which customers complete a system
registration form and submit it to the state Public Service
Board. The Board and any relevant parties have 10 days to
express concerns with the installation. If the customer does
not hear from the Board within 10 days, the customer is granted
the right to proceed with the installation and interconnection
of the system. This is perhaps the simplest PV permitting
process enacted in any state, and is scheduled to take effect
in January 2012. Vermont has several unusual characteristics
that enable Vermont to implement such a unique permitting
process. Characteristics such as:
--No local inspections: With the exception of Burlington, local
jurisdictions do not have electrical inspectors and do not
conduct inspections of electrical projects on private
properties.
--Centralized interconnection approvals: Unlike most states, the
state utility regulatory authority (VT Public Service
Board) is responsible for approving all interconnections of
generating facilities, whether a 2 kW residential system or
a nuclear reactor. This authority supersedes both utility
and local jurisdiction approval (except for the Burlington
electrical inspector).
--Low registration volumes: In a small state like Vermont, where
the population is 620,000, and only 623 PV installations
are currently installed, the PSB is equipped to process the
relatively low volume of registrations.
3) In June 2011, Colorado enacted the Fair Permit Act, which
caps permit fees and clarifies that local and state agencies
must clearly identify all solar-related fees and taxes for
customers. Prior to this Act, a study showed that permit fees
in Colorado were as high as $2,000 for a residential system.
The Act capped fees at $500 for residential systems and $1,000
for commercial systems under 2 MW. This Act has the potential
to be easily replicated in other states.
DOE's Rooftop Solar Challenge is designed to build on the best
practices developed by states and localities and accelerate the further
development and implementation of these practices across the U.S. By
coordinating efforts at the national level, DOE can help states and
local jurisdictions learn from each other while still ensuring that the
policies implemented are locally appropriate.
S. 1142
Question 7. Issues from testimony: In the key comment from your
testimony, you say the Administration is still reviewing the bill (S.
1142), but that there are ``serious technical concerns that would need
to be addressed.'' Could you please discuss those technical problems?
It would also be helpful if you would suggest any potential fixes if
there are any. What are you specifically saying are the problems with
the bill?
Answer. There are aspects to the proposal that are inconsistent
with the requirements of the Federal Credit Reform Act of 1990 (FCRA).
While the Administration is still reviewing this proposal, any new
program should be designed consistent with Federal credit policies, to
ensure efficient and effective use of Federal support, and to protect
taxpayers from undue cost and risk.
Question 8. Loan guarantee program: Could you address the
Department's view of the direct loan program for high-risk geothermal
exploration wells called for in the bill? Do you have any estimates
internally for how many high-risk wells might be drilled in a year, if
the program is implemented, now much aid the Department on average
might be asked to provide, and how much federal loan funds might be
outstanding before repayments begin and the program's revolving loan
fund process is fully implemented? What, in the Department's view, is
the definition for high-risk well? Your testimony largely ignored the
loan program; can you talk about het Department's willingness to see a
new program set up?
Answer. The Administration is still reviewing this proposal, and
its implications for furthering geothermal exploration, including
potential costs to the Government. Any new legislation should be
designed consistent with the Federal Credit Reform Act and Federal
credit policies, to ensure efficient and effective use of Federal
support, and to protect taxpayers from undue cost and risk. Revolving
fund credit programs are inconsistent with the FCRA, and can lead to
inefficient funding mechanisms, where the available support is more
reliant on the performance of initial awards than on the form and
amount of assistance needed to meet the policy goal.
Past DOE-sponsored programs, such as the Geothermal Resource
Exploration and Definition project (GRED), have helped confirm new
resources. Under the program, drilling was supported at 26 different
sites and seven of those sites now support geothermal power plants. It
is possible that the data developed under GRED can still be used to
support power plant development (either conventional or EGS), so the
benefits of this work may continue well into the future.
In DOE's view, all exploratory geothermal drilling is ``high risk''
because success rates for the initial wells range from 25% to 50%. The
success rate will be lower for undiscovered hydrothermal or
``greenfield'' development and on the higher end for sites where some
preliminary drilling has already occurred. The number of exploratory
geothermal wells drilled in a year is likely to be limited by the
following additional factors: 1) the small size of the industry (less
than 10 developers); 2) limited availability of drill rigs; 3) the fact
that most of the currently identified resources have already been
developed; and 4) the time needed for permitting requirements.
Question 9. Co-Energy production from oil and gas wells: This bill
includes a provision to allow for co-leasing of geothermal production
with approved applications to drill and gas wells. I know this is
probably not a purely DOE area and in some respects more a question for
the BLM that handles petroleum leasing on shore, but can you say how
much time and money should be saved for applicants by co-leasing and is
this a useful policy change to increase geothermal electricity
production from the waste water produced in oil and gas extraction?
Answer. Co-leasing could save time and reduce costs associated with
leasing. As BLM handles geothermal leasing and would implement those
provisions of the bill, BLM is in the best position to estimate time
and money savings from a non-competitive geothermal leasing process.
Question 10. Geothermal Heat Pumps: Can you talk a bit more than
your prepared testimony about how the geothermal heat pump provisions
in the bill mesh with current Department efforts to promote geothermal
heat pump technology? Does this bill that directs the Secretary to
establish a program to improve heat pump applications and direct use of
geothermal, especially in large-scale applications, tie into the
Department's existing research and development plans for geothermal?
Does it dovetail well? If not, is there anything that should be changed
in the bill?
Answer. The Department is in the process of determining the role of
geothermal heat pumps in its research and development plans. Under the
American Recovery and Reinvestment Act of 2009 (Recovery Act), the
Department invested more than $60 million in geothermal heat pump
demonstration and deployment projects. These projects incorporate
strategies to overcome the first-cost premium that has prevented
geothermal heat pumps from gaining wider marketplace acceptance. The
Department expects that information and lessons learned from those
projects will encourage wider market acceptance of geothermal heat
pumps for residential and industrial buildings. The information will
also be used to determine the role of geothermal heat pumps in the
Building Technologies Program's roadmap. It may also be used to help
define a geothermal heat pump roadmap establishing a set of high-
priority research and development (R&D) activities.
Direct use geothermal is not a major focus in the Department's
research and development portfolio. Under the Recovery Act, the
Department invested in three direct use geothermal projects--a
greenhouse operation and fish farm in Canby, California; a tilapia
business in Paisley, Oregon; and district heating in Klamath Falls,
Oregon. However, the Department can have the most impact on the role of
geothermal energy in our nation's clean energy supply by reducing the
cost of baseload geothermal energy so that it is competitive with other
energy sources. Therefore, the emphasis of our Geothermal Technologies
Program is on overcoming the technical challenges associated with
supplying geothermal energy to the grid rather than on highly
localized, distributed generation geothermal technologies.
Question 11. General Cost Question: Obviously S. 1142 hasn't been
scored yet by CBO. I have my guesses what it will cost to adequately
implement the provisions in the bill, but I would be interested in
hearing if the Department has come up with any estimates for what this
bill would cost to implement initially? How would it affect the
existing geothermal office budget, which I know is getting for $38
million for FY11, about $6 million cut from last year?
Answer. The proposal is still under review by the Administration.
The Department can have the most impact on the role of geothermal
energy in our nation's clean energy supply by reducing the cost of
baseload geothermal energy so that it is competitive with other energy
sources. Therefore, the emphasis of the Department's Geothermal
Technologies Program is on research and development of technologies
that improve performance and lower cost.
______
Response of Douglas A. Dougherty to Question From Senator Murkowski
MINE WATER
Question 1. In your testimony you talk about exploring innovative
uses of wastewater and mine water to fuel geothermal systems. Coming
from Alaska where we do have underground mines, that point interested
me. Could you talk more about how geothermal heat pump technology can
work with processed mine water and what are its future potentials?
Answer. To best answer the question, I will refer you to a
presentation done by the National Energy Technology Laboratory (NTEL)
of DOE in 2007. The presentation explains how mine water can be used as
the heat exchange for geothermal heat pump technology. Using mine water
can significantly reduce the upfront cost of installing a geothermal
heat pump by decreasing the need for an extended loop. The NTEL refers
to the exploitation of geothermal energy from underground mine pools as
an ``unconventional application'' and in need of further research.
Specifically NTEL identifies several areas of the application in need
of further research: water quality and the effects of corrosion and
scaling; use of a secondary heat exchanger; legal issues involving mine
water ownership and the return of water back into the mine; lowering
the costs of wells and improving pumping costs; and most importantly,
the need to demonstrate the technology. To GEO's knowledge, DOE has not
undertaken any of these research items relating to the use of mine
water for geothermal heat pump technology and it is why I testified in
support of S.1142 on this particular issue. The link to the NTEL report
can be found at: http://www.netl.doe.gov/energy-analyses/pubs/
EUEC_07_Ackman.pdf
Thank you for the opportunity to testify in support of S.1142 and
to provide additional clarity on why GEO believes it important for the
DOE to spend greater resources on the research and development of
geothermal heat pump technology.
______
Responses of Holly Gordon to Questions From Senator Murkowski
Question 1. This committee has been focusing on the issue of
overlap and duplication amongst federal authorities. How is S. 1108
different from The Rooftop Solar Challenge that recently started at
DOE? Would it make more sense to amend the Solar Energy Technologies
Program if we want it done differently, or to make sure that funds are
appropriated for this purpose, instead of passing a new law?
Answer. As I indicated in my testimony, there is no second phase
funding identified in the Rooftop Solar Challenge. S. 1108 would
provide the necessary funding to take the best practices identified in
phase 1 of the Rooftop Solar Challenge and implement these best
practices in phase 2 to spread those improvements to other
jurisdictions in the region. DOE is limiting the regional coalitions to
25 groups to undertake phase 1 of the Challenge and split the $12.5
million in funding. The majority of jurisdictions will be watching
closely to gauge whether the federal initiative is real or symbolic and
whether they too will have to improve. Putting the phase 2 funding into
legislation in the form proposed in S. 1108 solidifies the federal
commitment to reducing soft costs by incentivizing local bureaucratic
reform related to soft cost reduction. This message will sharply reduce
inertia related to participating in the initial phase of the Challenge
and get all cities prepared to embrace the phase 2 reform. Leaving
phase 2 funding ambiguous and uncertain will taint and slow phase 1
efforts.
To put this in business terms, the Challenge is a research and
development project aimed at ways to reduce soft costs. The funding
from S. 1108 will go toward bringing what's developed in the Challenge
to the mainstream market.
The economic benefit of this effort is substantial and the reason
we asked AECOM to assess the California market. Just using the direct
savings of $.38 per watt from streamlined permitting will result in an
18% growth of economic output over 9 years, and an additional 4,000
jobs in California alone. The reason permitting reform accelerates the
economic impact is because the pricing reduction it generates grows the
market by lowering costs for customers where solar simply wasn't
economicially viable and creating greater savings for those customers
for which solar already made sense. As I explain in response to
question 2 below, the cost reduction from permitting is just the tip of
the potential soft cost savings which will result from permitting
reform. For these reasons, the AECOM numbers are understated. Lastly
while the AECOM report assessment was limited to California, each state
will get a similar economic boost. The specific benefit will vary by
state and be based on its particular tax treatment for equipment sales,
corporate and personal income tax, property tax rules and rates, and
taxation generated by increased customer spending from utility savings.
Question 2. In your testimony you mention that while solar panel
prices have come down significantly over the last 5 years, permitting
costs have stagnated. In 2007, local permitting and inspection added
13% to the installation, today they add 33% and within a few years, you
are predicting that they will add 50%. Is this rising percentage a
result of the proliferation of residential solar use? That is, are
these increased costs a result of successful growth in the industry?
Answer. The increases in the percentages of permitting as compared
to the total cost shows that permitting costs will become an
increasingly larger part of the total costs as the hard costs are
reduced. The permitting costs are stubborn and are unlikely to go down
as they are impervious to the market forces that are currently causing
hard costs reductions. Permitting effectively bars installers from
reducing other soft costs and getting even greater reductions through
efficiencies of scale. That is to say, if we can solve the permitting
issues, installers can attack other inefficiencies related to
operational deployment, costs to convert sales, capital expenses,
etc... Without permitting reform, permitting costs will continue to
grow as a percentage of total costs, as will activities that make up
the remaining soft costs.
Question 3. Have there been any statewide initiatives to streamline
solar permitting processes? If so, how have these fared?
Answer. There are a few states that have statewide initiatives
related to permitting, such as Oregon, Vermont and Colorado. While
Vermont's process is low cost and significantly streamlined it is
unlikely to be replicable in other states. Vermont's permitting
structure is very different from other states in that there are limited
permitting activities performed locally. This makes it relatively easy
to reform the process through legislation impacting the state agencies
involved in permitting. Colorado undertook legislation that capped
fees, which is a good step, but does not impact consistency,
complexity, or submittal, review and timing of approval of
applications--components that impact installer's operational costs. In
Oregon, they have some consistency in state level codes and processes,
which is a good start. Unfortunately, Oregon has not experienced
significant enough volume to test these processes to see if they make a
significant operational difference under load. Most states in which we
operate believe code implementation is inherently local and the state
must incentivize, instead of legislate, the solution. We believe the
Rooftop Solar Challenge will result in taking the best examples of what
works well and generating reasons why deploying these practices is
appropriate. S. 1108 would fund that deployment.
Finally, replicating the German cost structure, which has little to
no soft costs, should be the policy objective and we applaud DOE for
recognizing this goal in the SunShot Initiative. German soft costs are
only a fraction of those in the U.S., while the hard costs are
generally equivalent. Once widespread permitting reform is implemented
the market can independently attack the other soft costs significantly
lowering the cost barrier to residential solar deployment.
Appendix II
Additional Material Submitted for the Record
----------
Geothermal Energy Association,
Washington, DC, July 5, 2011.
Hon. John Tester,
U.S. Senate, Washington, DC.
Dear Senator Tester,
Thank you for introducing S 1142, the Geothermal Exploration and
Technology Act of 2011 along with Senators Reid and Murkowski. This is
important legislation for the future of geothermal energy.
Geothermal electrical generation is base load renewable power that
uses the heat of the earth to create electricity. The U.S. Geological
Survey has estimated that the geothermal industry has the potential to
produce as much as 89,000 Megawatts of electricity in the United State
using readily available conventional geothermal technology. This
represents nearly a 30-fold increase from today's geothermal generation
levels. But this tremendous potential for additional clean, baseload
renewable energy is not being realized because today's economics do not
support exploratory geothermal drilling to discover and unlock the
potential of new geothermal areas. Exploratory drilling includes
drilling to identify, prove and develop an untapped geothermal resource
in order to construct a geothermal generation facility.
Geothermal exploration is simply too risky for conventional
financing sources. A geothermal exploratory well typically costs $5 to
$8 million to drill, and may not be usable if it does not encounter
proper conditions. There are no sources of debt capital available for
this type of exploratory drilling; therefore this drilling has to be
done with limited equity capital. Even once a resource has been
identified, it is not unusual for development wells to prove
unproductive.
Senate bill S. 1142 proposes a new federal loan program to promote
exploratory geothermal drilling and promote mapping and development of
the nation's substantial untapped geothermal potential. GEA is strongly
supportive of S. 1142, and applauds the sponsors for taking the
initiative to introduce this legislation. The economic obstacles to
geothermal exploration are substantial and an effective program to
promote exploratory drilling is critical to the long-term growth of
geothermal energy in the United States. A successful national
geothermal exploration initiative could unlock tens of thousands of
megawatts of undeveloped power potential.
Again, thank you for introducing S 1142, and we look forward to it
receiving further consideration by Congress.
Sincerely,
Karl Gawell,
Executive Director.
______
Metropolitan Washington Council of Governments,
Climate, Energy and Environment Policy Committee,
Washington, DC, July 27, 2011.
Hon. Jeff Bingaman,
Chairman, Committee on Energy and Natural Resources, U.S. Senate, 204
Dirksen Senate Building, Washington, DC.
RE: Support Amended S 1108 10 Million Solar Roofs Act of 2011
Dear Senator Bingaman:
On behalf of the Climate, Energy and Environment Policy Committee
of the Metropolitan Washington Council of Governments (COG), I am
writing to urge you to support S 1108 10 Million Solar Roofs Act of
2011, with an extension of the technologies that the program considers
for permitting and regulation streamlining to include other clean
energy technologies. This bill and its established competitive grant
program would remove numerous barriers to adoption of domestic energy
options and create incentives for market development that will reduce
the cost of domestic clean energy.
COG is dedicated to increasing the adoption of solar and other
clean energy technology solutions. COG's Climate and Energy Action
Workplan has a goal of 10,000 solar roofs in the region by the end of
2012. At the end of 2010 there were over 1,000 solar roofs installed in
the Washington region for a capacity just under 10 megawatts (MW). COG
members Arlington and Loudoun Counties have community energy plans that
call for over 260 MW of solar installations by 2040. The region is
working with EPA's Green Power Partnership to conduct a cooperative
solar procurement which could develop 30-40 MW of solar generation. The
COG region is committed to solar power as a solution to reducing the
region's dependence on foreign energy sources.
COG's Integrated Community Energy Taskforce is considering the use
of other clean energy technologies such as district energy, combined
heat and power and microgrids, in addition to solar power. These
technologies face similar zoning, permitting and regulatory hurdles
that will slow adoption. We believe this proposed grant program could
be used to reduce the hurdles to adopting a variety of solutions that
will work together to increase the production and reliability of
domestic clean energy.
Local governments are an integral piece in the adoption of these
technologies because of their control of permitting and zoning
requirements, as well as influence over groups such as homeowners
associations. A grant program that would encourage streamlining the
regulatory and permitting processes for clean energy technologies
across regions, states and the nation would help achieve market
certainty and catalyze market growth, just as the Energy Efficiency and
Conservation Block Grant Program helped to stimulate the widespread
adoption of energy efficiency and renewable energy technologies.
We urge you to support an amended S 1108 10 Million Solar Roofs Act
of 2011 and lessen the burden of regulatory and permitting barriers to
implementing and developing the market for a variety of clean energy
solutions that will increase our nation's energy independence.
Thank you for giving this your consideration.
Sincerely,
Jay Fisette,
Chair.
______
Ormat Technologies, Inc.,
Reno, NV.
Hon. John Tester,
U.S. Senate, Washington, DC.
Dear Senator Tester,
On behalf of Ormat Technologies, Inc., I thank you for your
interest in our views on S 1142, the Geothermal Exploration and
Technology Act of 2011.
Ormat Technologies is a world leader in the geothermal power plant
sector. The company has four decades of experience and is responsible
for the development of over 1,000 MW of geothermal generation
throughout the world and over 400 MW of generation in the United
States. Important to this bill is that Ormat is engaged in the largest
effort undertaken by a single company, within the last 20 years, to
categorize, map, sample and drill Greenfield prospects in the US making
it quite knowledgeable on the issues facing exploratory drilling risks.
Geothermal electrical generation is a base load renewable power
that uses the heat of the earth to create electricity. The U.S.
Geological Survey has estimated that the geothermal industry has the
potential to produce as much as 89,000 Megawatts of electricity in the
United State using readily available conventional geothermal
technology. This represents nearly a 30-fold increase from today's
geothermal generation levels. But this tremendous potential for
additional clean, baseload renewable energy is not being realized in
part because today's economics do not support exploratory geothermal
drilling to discover and unlock the potential of new geothermal areas.
Exploratory drilling includes drilling to identify, prove, and
develop untapped geothermal resources in order to construct a
geothermal generation facility. Geothermal exploration is simply too
risky for conventional financing sources. A geothermal exploratory well
typically costs $5 to $8 million to drill, and may not be usable if it
does not encounter proper conditions. In addition, even if it did
encounter the commercially viable resource, it will take many years
before it can generate revenues that will service a loan. There are no
sources of debt capital available for this type of exploratory
drilling; therefore this drilling has to be done with limited equity
capital.
Senate bill S. 1142 proposes a new federal loan program to promote
exploratory geothermal drilling and promote mapping and development of
the nation's substantial untapped geothermal potential. Ormat is
supportive of S. 1142, and applauds the sponsors for taking the
initiative to introduce this legislation. The economic obstacles to
geothermal exploration are substantial and an effective program to
promote exploratory drilling is critical to the long-term growth of the
geothermal sector in the United States. A successful national
geothermal exploration initiative will be the first and necessary step
in unlocking tens of thousands of megawatts of undeveloped power
potential.
Thank you for your attention to this important legislative effort.
Best Regards,
Paul A. Thomsen,
Director.
______
Terra-Gen Power, LLC,
Bethesda, MD, July 19, 2011.
Hon. Jeff Bingaman,
Chairman, U.S. Senate, Committee on Energy and Natural Resources, 304
Dirksen Senate Office Building, Washington, DC.
Dear Chairman Bingaman,
I am writing on behalf of Terra Gen Power, one the nation's leading
renewable energy companies, to convey our strong support for S.1142,
the Geothermal Exploration and Technology Act of 2011. I respectfully
request that this letter be including in the record of the Energy
Committee's hearing on this important bill.
As you know, geothermal electrical generation is base load
renewable power that uses the heat of the earth to create electricity.
The U.S. Geological Survey has estimated that the geothermal industry
has the potential to produce as much as 89,000 Megawatts of electricity
in the United State using readily available conventional geothermal
technology. This represents nearly a 30-fold increase from today's
geothermal generation levels. But this tremendous potential for
additional clean, baseload renewable energy is not being realized
because today's economics do not support exploratory geothermal
drilling to discover and unlock the potential of new geothermal areas.
Exploratory drilling includes drilling to identify, prove and develop
an untapped geothermal resource in order to construct a geothermal
generation facility.
Senate bill S. 1142 proposes a new federal loan program to promote
exploratory geothermal drilling along with the mapping and development
of the nation's substantial untapped geothermal potential. Terra Gen
Power is strongly supportive of S. 1142, and applauds the bill's
sponsors for taking the initiative to introduce this legislation. The
economic obstacles to geothermal exploration are substantial and an
effective program to promote exploratory drilling is critical to the
long-term growth of geothermal energy in the United States. A
successful national geothermal exploration initiative could unlock tens
of thousands of megawatts of undeveloped power potential.
S 1142 provides a helpful framework for reducing the risks and
costs associated with mapping and developing the nation's geothermal
resources. However there are two important areas where the measure can
be improved.
First, if the program is to be successful in promoting
geothermal exploration, developers will need certainty in
advance of the level of cost and risk share that DOE will
assume under the program. Such certainty is essential in order
to secure the needed financing to develop a project,
particularly with regard to the terms for repayment if a well
proves to be unproductive. Where possible, loans should be
forgiven when a well cannot be commercially developed.
Second, the program should be designed and implemented to
maximize the development of the nation's geothermal resources
and the number of new geothermal megawatts added to the grid.
Most specifically, this means that the ``preference'' provision
in section 2(d)(2) should be rewritten to include a preference
for ``projects likely to lead to successful new geothermal
development'' instead of the current preference for
``previously unexplored, underexplored, or unproven geothermal
resources in a variety of geological and geographic settings.''
Improving the success rate to fully develop and prove a
geothermal field will help ensure that program funds are able
to bring more renewable megawatts to the grid, be fully repaid,
and go further to support more projects.
Also, while authorization of this new initiative is an important
step, it is of course essential that sufficient funds are appropriated
for this program to be effective.
Thank you for your attention to this important legislative effort.
Please feel free to have your staff contact me for any additional
information. I can be reached at 202?486?1103 or via email at
[email protected].
Sincerely,
Gregory S. Wetstone,
Vice President for Governmental Affairs.
______
GEO,
Washington, DC, June 6, 2011.
Hon. Jon Tester,
U.S. Senator, 724 Hart Senate Office Building, Washington, DC.
Dear Senator Tester:
On behalf of the Geothermal Exchange Organization, a non-profit
trade association representing the interest of the geothermal heat pump
industry, I am writing to thank you for your leadership on energy
efficiency issues.
We strongly support the legislation you recently introduced with
Senators Murkowski and Reid that, among other things, authorizes a new
program to help develop innovative technologies to enhance the use of
geothermal heat pumps in commercial applications. Your legislation will
help address some of the key barriers in our industry, including
reducing the cost of installing the geothermal ground loop and
integrating geothermal heat pumps with other building systems.
Thank you again for your leadership. We also want to express our
gratitude to your staff, particularly Stephenne Harding. We look
forward to continuing to work with you to promote this legislation as
well as other initiatives to improve the efficiency of residential and
commercial buildings.
Sincerely,
Douglas Dougherty,
President and CEO.
______
Southern Methodist University,
Geothermal Laboratory,
Huffington Department of Earth Sciences,
Dallas, TX, July 1, 2011.
Hon. Jon Tester,
U.S. Senate, 724 Hart Senate Office Building, Washington, DC.
Dear Senator Tester,
The SMU Geothermal Laboratory is pleased to write this letter in
support of Senate Bill S 1142, the Geothermal Exploration and
Technology Act of 2011 you recently introduced with co-sponsors Harry
Reid and Lisa Murkowski amending the Energy Independence and Security
Act of 2007. In particular, Section 4 of the bill, which addresses the
Facilitation of Coproduction of Geothermal Energy on Oil and Gas
Leases, will be very helpful towards removing one of the key barriers
to entry for this clean, renewable energy source.
In Texas, we have several hundred thousand oil and gas wells, many
of which are no longer producing hydrocarbons at an economically viable
rate. Every year more wells are `plugged and abandoned' to be never
used again. Our country's environment benefits from using even a small
percentage of oil and gas wells as a source for geothermal electricity
generation and your support of this bill will help make that possible.
Geothermal energy is one of the few renewable energy sources that
are always available, independent of the weather conditions. To develop
this resource requires an understanding of both the business model and
the geologic structures involved. The existing infrastructure of the
oil and gas industry affords us the opportunity to leverage that
investment and combine geothermal energy production with hydrocarbon
and waste heat production. It presents an opportunity for the oil and
gas industry to be part of a clean energy solution, rather than a
source of pollution. The interest from the business community is
evidenced by the successful SMU conferences `Geothermal Energy
Associated with Oil & Gas Development,' which draw enthusiastic
support. Even with the low price of natural gas, the number of oil &
gas industry attendees increased from prior conferences. Additional
information on our most recent conference in June 2011, including
copies of the presentations, is available at: http://smu.edu/
geothermal/Oil&Gas/GeothermalEnergyUtilization.htm
conclusion
The next five years will be crucial to gain enough momentum to
establish a geothermal industry. There are currently over 200,000
active wells in Texas alone, representing 200,000 potential sources of
cost-competitive, renewable, base-load, and clean energy in just our
one state. We have a window of opportunity to leverage our country's
investment in the oil and gas industry while the economic forces,
political pressures, and available technology are aligned towards a
common goal of renewable energy. Additional resources of time and
dollars would be well spent on exploiting America's geothermal energy
potential. We encourage the full Senate to vote in support of S 1142.
Sincerely,
David D. Blackwell, PhD,
W. B. Hamilton Professor of Geophysics.
Maria Richards,
SMU Geothermal Laboratory Coordinator.
______
National Ground Water Association,
Westerville, OH, June 28, 2011.
Hon. Jon Tester,
U.S. Senate, 724 Hart Senate Office Building, Washington DC.
Dear Senator Tester:
The National Ground Water Association (NGWA) thanks you for your
leadership on energy issues as evidenced by the introduction of S.
1142. NGWA strongly supports the bill and geothermal heat pump
technology as a step toward energy Independence, reduced costs for
consumers, and jobs for American manufacturers and installers.
We appreciate your efforts and those of Senators Murkowski and Reid
to ensure the United States maintains a leadership position in
geothermal heat pump technology. The bill's focus on enhancing
research, development, demonstration and commercial application of
geothermal heat pumps and the direcfuse of geothermal energy while
maintaining environmental protections will help address the nation's
energy needs in a sustainable manner.
NGWA is a nonprofit professional society and trade association. Our
12,000 members from a11 50 states include some of the country's leading
public and private sector groundwater scientists, engineers, drilling
contractors, manufacturers, and suppliers of groundwater related
products and services. The groundwater industry has multiple roles in
assisting in energy production--from drilling to water resource
assessment and water management. Thank you again for your leadership.
Sincerely yours,
Kevin B. McCray, CAE,
Executive Director.
______
Web site link to access the ``Economic and Fiscal Impact Analysis
of Solar Permitting Reform'' and ``Economic and Fiscal Impact Analysis
of Solar Permitting Reform--Executive Summary'' reports: http://
www.sunrunhome.com/uploads/media_items/aecom-executive-
summary.original.pdf