[House Hearing, 113 Congress]
[From the U.S. Government Publishing Office]



 
                       FEDERAL FINANCIAL SUPPORT 
                        FOR ENERGY TECHNOLOGIES:
                      ASSESSING COSTS AND BENEFITS

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

                                HEARING

                               BEFORE THE

                         SUBCOMMITTEE ON ENERGY

              COMMITTEE ON SCIENCE, SPACE, AND TECHNOLOGY
                        HOUSE OF REPRESENTATIVES

                    ONE HUNDRED THIRTEENTH CONGRESS

                             FIRST SESSION

                               __________

                       WEDNESDAY, MARCH 13, 2013

                               __________

                           Serial No. 113-12

                               __________

 Printed for the use of the Committee on Science, Space, and Technology


       Available via the World Wide Web: http://science.house.gov



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              COMMITTEE ON SCIENCE, SPACE, AND TECHNOLOGY

                   HON. LAMAR S. SMITH, Texas, Chair
DANA ROHRABACHER, California         EDDIE BERNICE JOHNSON, Texas
RALPH M. HALL, Texas                 ZOE LOFGREN, California
F. JAMES SENSENBRENNER, JR.,         DANIEL LIPINSKI, Illinois
    Wisconsin                        DONNA F. EDWARDS, Maryland
FRANK D. LUCAS, Oklahoma             FREDERICA S. WILSON, Florida
RANDY NEUGEBAUER, Texas              SUZANNE BONAMICI, Oregon
MICHAEL T. McCAUL, Texas             ERIC SWALWELL, California
PAUL C. BROUN, Georgia               DAN MAFFEI, New York
STEVEN M. PALAZZO, Mississippi       ALAN GRAYSON, Florida
MO BROOKS, Alabama                   JOSEPH KENNEDY III, Massachusetts
RANDY HULTGREN, Illinois             SCOTT PETERS, California
LARRY BUCSHON, Indiana               DEREK KILMER, Washington
STEVE STOCKMAN, Texas                AMI BERA, California
BILL POSEY, Florida                  ELIZABETH ESTY, Connecticut
CYNTHIA LUMMIS, Wyoming              MARC VEASEY, Texas
DAVID SCHWEIKERT, Arizona            JULIA BROWNLEY, California
THOMAS MASSIE, Kentucky              MARK TAKANO, California
KEVIN CRAMER, North Dakota           VACANCY
JIM BRIDENSTINE, Oklahoma
RANDY WEBER, Texas
CHRIS STEWART, Utah
VACANCY
                                 ------                                

                         Subcommittee on Energy

                  HON. CYNTHIA LUMMIS, Wyoming, Chair
RALPH M. HALL, Texas                 ERIC SWALWELL, California
FRANK D. LUCAS, Oklahoma             ALAN GRAYSON, Florida
RANDY NEUGEBAUER, Texas              JOSEPH KENNEDY III, Massachusetts
MICHAEL T. McCAUL, Texas             MARC VEASEY, Texas
RANDY HULTGREN, Illinois             MARK TAKANO, California
THOMAS MASSIE, Kentucky              ZOE LOFGREN, California
KEVIN CRAMER, North Dakota           DANIEL LIPINSKI, Illinois
RANDY WEBER, Texas                   EDDIE BERNICE JOHNSON, Texas
LAMAR S. SMITH, Texas


                            C O N T E N T S

                       Wednesday, March 13, 2013

                                                                   Page
Witness List.....................................................     2

Hearing Charter..................................................     3

                           Opening Statements

Statement by Representative Cynthia Lummis, Chairwoman, 
  Subcommittee on Energy, Committee on Science, Space, and 
  Technology, U.S. House of Representatives......................    13
    Written Statement............................................    14

Statement by Representative Eric Swalwell, Ranking Minority 
  Member, Subcommittee on Energy, Committee on Science, Space, 
  and Technology, U.S. House of Representatives..................    14
    Written Statement............................................    16

                               Witnesses:

Dr. Terry Dinan, Senior Analyst, Congressional Budget Office
    Oral Statement...............................................    17
    Written Statement............................................    20

Ms. Mary Hutzler, Distinguished Senior Fellow, Institute for 
  Energy Research
    Oral Statement...............................................    38
    Written Statement............................................    40

Mr. Malcolm Woolf, Senior Vice President, Policy and Government 
  Affairs, Advanced Energy Economy
    Oral Statement...............................................    59
    Written Statement............................................    61

Discussion.......................................................    69

             Appendix I: Answers to Post-Hearing Questions

Dr. Terry Dinan, Senior Analyst, Congressional Budget Office.....    84

Ms. Mary Hutzler, Distinguished Senior Fellow, Institute for 
  Energy Research................................................    90

Mr. Malcolm Woolf, Senior Vice President, Policy and Government 
  Affairs, Advanced Energy Economy...............................   111

            Appendix II: Additional Material for the Record

``Chinese Solar Approach Faces Test'' from The Wall Street 
  Journal Online Edition, March 6, 2013..........................   120

``Bjorn Lomborg: Green Cars Have a Dirty Little Secret'' from The 
  Wall Street Journal Online Edition, March 11, 2013.............   123

``Inflated Numbers; Erroneous Conclusions: The Navigant Wind Jobs 
  Report'' by Charles J. Cicchetti, Ph.D., March 2013............   125


                       FEDERAL FINANCIAL SUPPORT
                        FOR ENERGY TECHNOLOGIES:
                      ASSESSING COSTS AND BENEFITS

                              ----------                              


                       WEDNESDAY, MARCH 13, 2013

                  House of Representatives,
                                     Subcommittee on Energy
               Committee on Science, Space, and Technology,
                                                    Washington, DC.

    The Subcommittee met, pursuant to call, at 3:50 p.m., in 
Room 2318 of the Rayburn House Office Building, Hon. Cynthia 
Lummis [Chairwoman of the Subcommittee] presiding.

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    Chairwoman Lummis. My name is Cynthia Lummis, and I am the 
Chairman of the Committee. And I would like to welcome our 
Ranking Member and fellow Members of this Committee. This is 
the Energy Subcommittee hearing on ``Federal Financial Support 
for Energy Technologies.'' And the meeting will come to order.
    In front of you are packets containing the written 
testimony, biographies, and truth-in-testimony disclosures for 
today's panel. And now, I recognize myself for a five-minute 
opening statement.
    We are delighted to have you here, and thank you very much 
to our witnesses for joining us.
    Building on our broad examination of America's energy 
outlook a few weeks ago, this is the second of our hearings 
today. We are focusing on the amount and effectiveness of 
various forms of financial support for energy technologies. I 
hope these overview hearings will prove informative and 
valuable, because we will be pivoting next to specific 
legislation activities. So it will happen within our research 
and development jurisdiction, including some oversight 
activities as well.
    The topic of today's hearing is timely, as federal spending 
and budget prioritization are receiving a lot of attention 
today over in the Budget Committee--they are marking up the 
budget--and because of the implementation of the recent 
sequester.
    A central component of the House Republican budget is to 
open more federal lands to energy development. Now, I advocate 
for this, because it will accelerate our path to energy 
independence. It will create jobs. It will contribute greatly 
to deficit reduction and open spaces for future generations.
    Now, we are going to hear today from the Congressional 
Budget Office. Federal energy tax subsidies will total more 
than 16 billion in 2013, up from just five billion in 2005. 
This increase reflects President Obama's interest in rapid 
deployment of green energy technologies.
    January's fiscal cliff deal is a prime example. The White 
House was purportedly absolutely insistent that the package 
extend and expand the Production Tax Credit for renewable 
energy. This extension will cost taxpayers at least $12 billion 
this year. And then in the meantime, we hear some of our 
constituents, and certainly the Administration, are very 
concerned about cuts to areas such as national parks, science, 
oil and gas permitting, and even White House tours. I believe 
that it is worth looking at the Production Tax Credit as an 
example of where we might find some efficiencies.
    Another example is the Alternative Vehicle Tax Credit, 
which provides $7,500 towards the purchase of alternative 
vehicles such as the $40,000 Chevy Volt and the $100,000 Fisker 
Karma. GM reports the average Volt owner earns $170,000 a year. 
And the Karma is even more exclusive. Really, only the rich and 
famous can afford a Karma. And as was recently pointed out, 
electrical vehicles do not reduce carbon emissions 
significantly, so it really does call into question the entire 
justification for spending this money in the first place.
    Whereas, right now, all over the country where there are 
natural gas vehicles, they are running on $.99 per gallon of 
oil equivalent fuel. Now, can you imagine what that would do 
for the cost of living for single moms and hard-working 
taxpayers? So I really think that we need to look at some of 
the other technologies going on out there.
    Government should be working to ensure that Americans have 
access to abundant, affordable, reliable energy and target 
taxpayer resources to fundamental research that could one day 
enable these technologies to compete without expensive 
subsidies or mandates. Doing so would not only help bring 
energy independence and grow our economy, but it would bring 
revenue to the Treasury.
    Again, I want to thank our witnesses for joining us today. 
And I now recognize Ranking Member Swalwell for an opening 
statement.
    [The prepared statement of Mrs. Lummis follows:]

     Prepared Statement of Subcommittee Chairman Cynthia M. Lummis

    Good afternoon and welcome to today's Energy Subcommittee hearing 
on ``Federal Financial Support for Energy Technologies: Assessing the 
Costs and Benefits.''
    Building on our broad examination of ``America's Energy Outlook'' a 
few weeks ago, this is the second stage-setting hearing. We will focus 
today on the amount and effectiveness of various forms of financial 
support for energy technologies. I hope these overview hearing will 
prove informative and valuable as we pivot to specific legislative 
activities within our research- and-development-focused jurisdiction.
    The topic of today's hearing is particularly timely, as federal 
spending and budget prioritization receive extra attention following 
the recent implementation of the budget sequester and release of House 
Republicans' FY 14 budget.
    A central component of the House Republican budget is to open more 
federal lands to energy development. I advocate for this priority 
because it will accelerate our path to energy independence, create 
jobs, contribute greatly to deficit reduction, and can be done while 
conserving our public lands and open space for future generations.
    As we will hear today from the Congressional Budget Office, federal 
energy tax subsidies will total more than $16 billion in 2013, up from 
just $5 billion in 2005. This increase reflects President Obama's 
interest in rapid deployment of green energy technologies.
    January's ``fiscal cliff'' deal is a prime example. The White House 
was reportedly ``absolutely insistent'' that the package extend and 
expand the Production Tax Credit (PTC) for renewable energy. This one-
year extension will cost taxpayers at least $12 billion.
    Meanwhile, the Administration is complaining loudly about cuts to 
areas such as national parks, science, oil and gas permitting, and even 
White House tours.
    Another example is the alternative vehicle tax credit, which 
provides $7,500 toward the purchase of alternative vehicles such as the 
$40,000 Chevy Volt and $100,000 Fisker Karma. GM reports the average 
Volt owner earns $170,000 per year. The Karma is even more exclusive; 
only the rich or famous can afford them. As was pointed out by the 
Journal of Industrial Ecology, electric vehicles do not reduce carbon 
emissions significantly, calling into question the entire justification 
for spending this money in the first place.
    Right now, natural gas vehicles can run on a $.99 per gallon of 
oil-equivalent fuel. Now that price will transform the cost of living 
for single moms and hard-working taxpayers.
    Government should work to ensure that Americans have access to 
abundant, affordable, reliable energy, and target taxpayer resources to 
fundamental research that could one day enable these technologies to 
compete without expensive subsidies or mandates. Doing so would not 
only help bring energy independence and grow our economy, but it would 
bring revenue to the Treasury.
    I thank our witnesses for joining us today and look forward to a 
productive discussion.
    I now recognize Ranking Member Swalwell for an opening statement.

    Mr. Swalwell. Thank you, Chairman Lummis, for holding this 
hearing today. I appreciate the opportunity to discuss the 
range of instruments that government can utilize to affect 
change or maintain the status quo in the energy marketplace.
    My interest in the subject lies firmly in the category of 
effecting change, of working with my colleagues in Congress to 
lead the innovation agenda, and to promote clean energy 
policies that can create made-in-America jobs. For reasons that 
range from establishing U.S. leadership in the booming global 
clean energy market to protecting consumers and domestic 
industries from energy price shocks to protecting our children 
from the shock of a rapidly changing climate, the status quo in 
energy is simply unsustainable.
    I understand that energy legislation is in the works here, 
as the Chairman referenced. I hope that we on the Science 
Committee can work together throughout Congress to craft 
policies that are both forward-leaning and pragmatic and that 
we can take lessons learned from past experiences to right-size 
the role of government in spurring innovation in our energy 
systems.
    To do that, we must first acknowledge that the energy 
marketplace is not a free market. For one, as many of my 
Republican colleagues, I am sure, would likely agree, it is 
heavily regulated at both the state and national level. It is 
also heavily biased towards favoring incumbent technologies 
over investments in new or advanced systems that can deliver 
cleaner, smarter, more sustainable energy to consumers. 
Furthermore, the pathway from idea to scale-up is fraught with 
technical and financial risks that can derail even the most 
resourceful developers.
    The taxpayers want lower-cost, reliable energy with as few 
of the harmful environmental effects and impacts as possible. 
And they increasingly demand more control and more choices in 
the fuels and technologies they use. Until our policies start 
to address the numerous market failures that new concepts face 
and reevaluate them on a regular basis, we will not lay the 
groundwork for a fully competitive energy marketplace in the 
United States.
    These difficulties are only exacerbated when we in 
Washington politicize energy in a manner that does not reflect 
either market realities or society's good. As we see the tired 
arguments over industrial policy reemerge, we would benefit 
from looking at the lengths our global competitors are willing 
to go to capture market share, as well as the past efforts we 
have made in picking the energy winners we have today. But 
bickering over who gets to pick winners and losers simply 
misses the point. And to quote the Ranking Member of this 
Committee, Ranking Member Johnson, from a recent op-ed, ``It is 
a waste of time to argue over the rules of the game that our 
competitors are not even playing.''
    Meanwhile, draconian cuts to the Nation's innovation 
enterprise stand to cripple us even further. Aside from the 
obvious impact that sequestration will have on personnel and 
activities at agencies such as the Department of Energy, 
subjecting stakeholders to such dramatic fluctuations, 
depriving the market of certainty is just a bad way to do 
business. We have a long history in this country of leveraging 
the power of public-private partnerships to achieve ends that 
neither governments nor industry can do on its own. When you 
take one side of that away, you pull the rug out from other big 
initiatives that would benefit us all.
    The people that drive innovation in our economy from the 
national laboratories--and we have two of them in my 
Congressional District--to university students and professors 
and researchers who push the frontiers of knowledge to the 
venture capitalists who put their money on new concepts to the 
industrial firms that scale-up manufacturing and infrastructure 
all know that government has always played a critical role in 
making the U.S. the most dominant economy in the world. In 
fact, our oil, gas, coal, and nuclear sectors are direct 
results of that.
    It is time that we get serious about picking more winners 
and doing whatever it takes from basic and applied research all 
the way to innovative financing and tax instruments to ensure 
that the United States has cleaner, more sustainable, and more 
energy that is affordable for future generations to come.
    With that, I yield back the balance of my time.
    [The prepared statement of Mr. Swalwell follows:]

           Prepared Statement of Ranking Member Eric Swalwell

    Thank you, Chairman Lummis, for holding this hearing today. I 
appreciate the opportunity to discuss the range of instruments that 
government can utilize to affect change or maintain the status quo in 
the energy marketplace.
    My interest in the subject lies firmly in the category of effecting 
change. For reasons that range from establishing U.S. leadership in the 
booming global clean energy market to protecting consumers and domestic 
industries from energy price shocks to protecting our children from the 
shock of a rapidly changing climate, the status quo in energy is simply 
unsustainable.
    I understand that energy legislation is in the works here. I hope 
that we on the Science Committee can work together throughout this 
Congress to craft policies that are both forward-leaning and pragmatic, 
and that we can take lessons learned from past experience to right-size 
the role of government in spurring innovation in our energy systems.
    To do that, we must first acknowledge that the energy marketplace 
is not a ``free'' market. For one, as my Republican friends will likely 
agree, it is heavily regulated at both the state and national levels. 
It is also heavily biased towards favoring incumbent technologies over 
investments in new, more advanced systems that can deliver cleaner, 
smarter, more sustainable energy to consumers. Furthermore, the pathway 
from idea to scale-up is fraught with technical and financial risks 
that can derail even the most resourceful developers.
    The taxpayers want lower-cost, reliable energy with few, if any, 
harmful environmental impacts, and they increasingly demand more 
control and more choices in the fuels and technologies they use. Until 
our policies start to address the numerous market failures that new 
concepts face, and reevaluate them on a regular basis, we will not lay 
the groundwork for a truly competitive energy marketplace in the U.S.
    These difficulties are only exacerbated when we in Washington 
politicize energy in a manner that does not reflect either market 
realities or societal good. As we see the tired arguments over 
industrial policy reemerge, we would benefit from looking at the 
lengths our global competitors are willing to go to to capture market 
share, as well as the past efforts we have made in picking the energy 
``winners'' we have today. But bickering over who gets to pick winners 
and losers simply misses the point. To quote Ranking Member Johnson 
from a recent op-ed, ``It is a waste of time to argue over the rules of 
a game that our competitors aren't even playing.''
    Meanwhile, draconian cuts to the Nation's innovation enterprise 
stand to cripple us even more. Aside from the obvious impact that 
sequestration will have on personnel and activities at agencies such as 
the Department of Energy, subjecting stakeholders to such dramatic 
fluctuations is just a bad way to do business. We have a long history 
in this country of leveraging the power of public-private partnerships 
to achieve ends that neither government nor industry can do on its own. 
When you take one side of that away, you pull the rug out from under 
big initiatives that benefit all of us.
    The people that drive innovation in our economy--from the National 
Lab and university scientists who push the frontiers of knowledge to 
the venture capitalists who put their money on new concepts to the 
industrial firms that scale up manufacturing and infrastructure--all 
know that government has always played a critical role in making the 
U.S. the most dominant economy in the world. In fact, our oil, gas, 
coal and nuclear sectors are a direct result of that. It is time that 
we get serious about picking more winners and doing whatever it takes, 
from basic and applied research all the way to innovative financing and 
tax instruments, to ensure that the U.S. has cleaner, more sustainable, 
and more affordable energy for generations to come.
    With that, I yield back the balance of my time.

    Chairwoman Lummis. Thank you, Mr. Swalwell. Now, if there 
are any Members who wish to submit additional opening 
statements, your statements will be added to the record at this 
point. Anyone? Okay. Thank you very much.
    I would like to recognize the presence of the Full 
Committee Chairman, Lamar Smith, at our hearing. And at this 
time, I would like to introduce our witnesses.
    Our first witness is Dr. Terry Dinan, Senior Analyst at 
CBO. She has a Ph.D. in economics from Ohio State University. 
Welcome.
    Our second witness today is Ms. Mary Hutzler, Distinguished 
Senior Fellow at the Institute for Energy Research. She 
received her M.A. in applied mathematics from the University of 
Maryland. Welcome, Ms. Hutzler.
    And our final witness today is Mr. Malcolm Woolf, Senior 
Vice President and Government Affairs at the Advanced Energy 
Economy. And Mr. Woolf has a law degree and an MPA from 
University of Virginia. Welcome all.
    The witnesses' spoken testimony is limited to five minutes 
each, after which Members of the Committee will have five 
minutes each to ask questions.
    I now recognize Dr. Dinan for five minutes to present her 
testimony.

                 STATEMENT OF DR. TERRY DINAN,

                        SENIOR ANALYST,

                  CONGRESSIONAL BUDGET OFFICE

    Dr. Dinan. Chairman Lummis, Congressman Swalwell, and 
Members of the Subcommittee, thank you for the invitation to 
testify on the financial support that the Federal Government 
provides for the development----
    Chairwoman Lummis. Dr. Dinan, could you pull the mike just 
a little closer to your face----
    Dr. Dinan. Oh, sure.
    Chairwoman Lummis [continuing]. And make sure that red 
light is on as well.
    Dr. Dinan. The light is on.
    Chairwoman Lummis. Okay.
    Dr. Dinan. Does that work now?
    Chairwoman Lummis. Thank you.
    Dr. Dinan. Okay. Thank you for the invitation to testify on 
the financial support that the Federal Government provides for 
the development and production of fuels and energy 
technologies. That support totals almost 20 billion in the 
current fiscal year. Tax preferences account for about 5/6 of 
that amount. Spending programs administered by the Department 
of Energy account for the remaining share.
    I would like to begin by discussing tax preferences, which 
primarily consist of special tax credits or rules that reduce 
the amount of taxes that people or businesses pay. As shown in 
Figure 1, which is now on display, for most years until 2005, 
the largest share of that support went to domestic producers of 
oil and gas. Beginning in 2006, the cost of energy-related tax 
preferences grew substantially. Moreover, an increasing share 
of the cost was aimed at encouraging energy efficiency and the 
use of energy produced from renewable sources, which generally 
cause less environmental damage than producing energy from 
fossil fuels.
    In 2013, as shown in Figure 2, provisions aimed at energy 
efficiency and renewable energy account for about 3/4 of the 
estimated budgetary cost of the Federal energy-related tax 
preferences. That mix reflects changes to the tax system made 
by the American Taxpayer Relief Act of 2012 which extended 
until the end of this calendar year for major preferences aimed 
at increasing energy efficiency and promoting the use of 
renewable sources of energy.
    Under current law, the mix of energy tax preferences will 
look quite different in the future. That is because most of the 
support for energy efficiency and renewable energy comes from 
provisions that have already expired or are scheduled to expire 
at the end of this year. In contrast, most of the support for 
fossil fuels and nuclear power comes from provisions that are 
permanent.
    Next, I would like to turn to the Department of Energy. DOE 
supports energy technologies by making investments in them and 
by subsidizing or guaranteeing loans. As depicted in Figure 3, 
the amount of support has varied over time but has generally 
declined in recent years. Measured in 2013 dollars, DOE's 
support for energy technologies totaled $10.5 billion in 1980 
and is $3.4 billion in 2013. The notable exception to the trend 
in DOE's support is the spike in 2009, which reflects the 
increase in funding provided by the economic stimulus 
legislation.
    In 2013, which is depicted in Figure 4, more than half of 
DOE's support for energy technologies is directed towards 
energy efficiency and renewable energy. Twenty-two percent is 
for nuclear energy, and 15 percent is for fossil fuels. Most of 
the spending in each of those categories goes towards applied 
research and development. The Congress has not appropriated 
funds for subsidy costs of DOE's loan programs since 2011. 
Since appropriations were provided in 2009, DOE's net 
obligations for subsidy costs have totaled about $4 billion. 
That amount supported direct loans of about $9 billion for 
advanced automotive technology projects and loan guarantees of 
about $16 billion for renewable energy projects.
    There are two main economic rationales for the government's 
involvement in energy markets. First, without government 
intervention, households and businesses do not have a financial 
incentive to take into account the environmental damage or 
other costs to the Nation associated with their choices about 
energy production and consumption. The most direct and cost-
effective method for addressing that problem would be to levy a 
tax on energy sources that reflects the environmental costs 
caused by their production and use. Subsidies such as tax 
preferences for favored technologies can accomplish some of the 
same goals but in a less cost-effective way.
    Second, unless the government intervenes, the amount of 
certain types of research and development is likely to be 
inefficiently low from society's perspective. Such 
underinvestment is particularly likely in the early stages of 
developing a technology. Research at that stage can create 
fundamental knowledge that can lead to significant benefits for 
society as a whole, but not necessarily for the firms that 
funded the research. Thus, government funding can be 
beneficial.
    By contrast, DOE's funding of energy technology 
demonstration projects at later stages in the development 
process has been far less cost effective, and DOE has been 
criticized for its management of such projects.
    Thank you for the opportunity to testify. I am happy to 
answer any of your questions.
    [The prepared statement of Dr. Dinan follows:]

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    Chairwoman Lummis. Thank you, Dr. Dinan.
    I would now like to recognize Ms. Hutzler to present her 
testimony.

                 STATEMENT OF MS. MARY HUTZLER,

                  DISTINGUISHED SENIOR FELLOW,

                 INSTITUTE FOR ENERGY RESEARCH

    Ms. Hutzler. Chairman Lummis, Ranking Member Swalwell, and 
Members of the Subcommittee, thank you for the invitation to 
testify.
    The Institute for Energy Research is a nonprofit free-
market think tank that researches global energy trends. Today's 
hearing touches upon one of the Nation's more important policy 
questions: What is the Federal Government's authority to ensure 
a stable, affordable, and reliable energy future; power our 
economy; create jobs; and strengthen our global position?
    Tied to this question are concerns about our Nation's 
fiscal strain, the need for new revenues, and Congress' 
responsibility to eliminate wasteful spending and bringing 
federal budget outlays under control. Similarly, Congress and 
federal regulators must be careful to encourage, rather than 
discourage, the responsible development of America's vast 
energy resources, the majority of which are currently being 
produced on nonfederal lands.
    Recent years have seen a dramatic increase in federal 
energy subsidies, with the largest increases going to renewable 
and end-use subsidies. Between 2007 and 2010, federal energy 
subsidies increased from almost $18 billion to over $37 
billion. Renewable energy subsidies increased by 186 percent, 
with wind receiving a tenfold increase and solar increasing by 
a factor of 6. Biofuel subsidies increased by 66 percent and 
conservation subsidies increased from $369 million in 2007 to 
more than $6.5 billion in 2010. Fossil fuels also received 
increased federal support with coal subsidies increasing to 
$1.3 billion and oil and natural gas subsidies increasing to 
$2.8 billion. Nuclear subsidies increased 46 percent from $1.7 
billion to $2.5 billion. Clearly, Washington has been on a 
spending spree.
    The largest single contributor to this spending was the 
American Recovery and Reinvestment Act of 2009, also known as 
the stimulus bill. By itself, this legislation accounted for 40 
percent of the total subsidy value in 2010 and 77 percent of 
the increase in subsidies from fiscal 2007.
    To put these increases in the proper perspective, it is 
critical to consider the return on investment that the American 
people have received. In other words, how have the subsidies 
for different fuels and technologies compared with production 
levels? Fossil fuels received 19 percent of the subsidies in 
2010 that provided 77 percent of the production. Conversely, 
renewable fuels received 69 percent of the subsidies but 
produced only 11 percent of the country's energy.
    These numbers prove more disconcerting when we look at 
federal spending on subsidies for electricity generation. In 
this sector, renewable energy received 55 percent of the 
subsidies that generated about 10 percent of the electricity, 
mostly from hydroelectric power. Wind was the largest subsidies 
recipient, with 42 percent, yet wind provided only 2.3 percent 
of our electricity needs in 2010.
    Clearly, the fuels and technologies that receive the 
overwhelming share of federal subsidies are not producing the 
largest portion of our energy needs. It is unlikely that this 
trend will change in the foreseeable future, yet the political 
support for renewables continue. IER calculated the federal 
subsidies and support per unit of electricity production from 
government data. According to our calculations, solar received 
over 1,100 times the subsidies coal, oil, and natural gas 
received, while wind was subsidized over 80 times more than 
these conventional fuels. Proponents of increased federal 
subsidies continue to claim that solar and wind are infant 
technologies, yet these technologies are not new. Wind, for 
example, has been used to generate electricity for more than 
125 years.
    Proponents have also used job numbers to demand a 
continuation of subsidies for renewables with the wind industry 
winning another year and more than $12 billion through 
expansion of the Production Tax Credit. Simply put, the lion's 
share of taxpayer dollars is spent on less-reliable energy 
sources that provide negligible benefit to consumers, present 
increased challenges for our electricity grid, and do little to 
diminish our reliance on base-load fuels and fail to support 
the American jobs they purport to create.
    To date, over 50 firms receiving taxpayer dollars are 
either bankrupt or failing financially. Many of these companies 
had or currently have political connections in Washington. Even 
more appalling is the fact that subsidies used to support green 
energy ventures serve only to make high-income consumers pay 
marginally less for expensive luxury items, such as electric 
vehicles, and do nothing to help millions of Americans 
struggling to pay higher energy costs on lower take-home pay.
    The history of subsidies is clear. Washington has a 
terrible track record of picking winners and losers. Subsidies 
take money from taxpayers, do not create the jobs that are 
claimed, and force our energy dependence on government by 
removing the market incentive for companies to make their 
technologies cost-competitive. Subsidies offset private-sector 
financing, waste taxpayer money on projects that would never 
make it off the ground if not for the political connections and 
the funding that these green energy projects receive. If a 
technology is truly competitive, it would make it in the 
marketplace on its own without massive government support.
    Thank you for the opportunity to testify.
    [The prepared statement of Ms. Hutzler follows:]

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    Chairwoman Lummis. Thank you, Ms. Hutzler.
    I now recognize Mr. Woolf to present his testimony. 
Welcome.

                STATEMENT OF MR. MALCOLM WOOLF,

                     SENIOR VICE PRESIDENT,

                  POLICY & GOVERNMENT AFFAIRS,

                    ADVANCED ENERGY ECONOMY

    Mr. Woolf. Thank you, Chairman Lummis, Ranking Member 
Swalwell, and Subcommittee Members. I appreciate the 
opportunity to testify today.
    My name is Malcolm Woolf. I am the Senior Vice President of 
the Advanced Energy Economy. AEE is a national network of 
business leaders whose companies are making the global energy 
system more secure, clean, and affordable. My testimony today 
will focus on two things: first, that new energy technologies 
face a series of structural market barriers to entry that have 
often required federal support to overcome; and secondly, that 
Congress should consider a core set of principles reorienting 
federal financial support to more effectively encourage private 
sector innovation.
    Let me begin by explaining what I mean by advanced energy. 
AEE defines advanced energy broadly to include the best 
available commercial technologies, such as energy efficiency, 
appliances, advanced gas turbines, nuclear power renewable 
technology, alternative vehicles. The business opportunity for 
advanced energy, broadly defined, is huge and growing. A recent 
report commissioned by our sister organization, the Advanced 
Energy Economy Institute, documented that the global advanced 
energy industry was a $1.1 trillion dollar industry today. In 
the United States alone, the advanced energy market was $132 
billion dollars in 2011. So this is a big industry today. It is 
larger than the trucking history.
    Since this hearing is focused on federal financial support 
for energy technologies, it is appropriate to ask the question, 
why is federal support even needed? My answer is simple. Energy 
technologies face a series of structural barriers to entry that 
hinder innovation in the energy markets. Let me highlight three 
examples of these structural barriers.
    First, the market fails to appropriately reward innovations 
that don't directly affect price. Externalities like grid 
reliability, resiliency, energy security, public health--all of 
those externalities are hard to put into the price of 
electricity, so the market systematically undervalues them.
    Secondly, the legal framework for electric and natural gas 
utilities, as well as their long-lived assets, discourages 
innovation in their sector. Why should a utility take a risk on 
investing in unproven innovative technology that regulators may 
not deem worthy of reimbursement when they get the exact same 
rate of return if they invest in well-established existing 
technologies?
    Finally, the Federal Government needs to compensate for the 
chronically low level of private sector energy R&D. The energy 
sector historically invests less than one percent of revenues 
in R&D. In contrast, innovative-intensive industries like 
telecommunications routinely invest over 10 or 20 percent. The 
Federal Government needs to continue to support the development 
of energy technology, but the Advanced Energy Economy 
recognizes the Nation's fiscal realities. To more effectively 
use taxpayer dollars, AEE suggests a fresh approach whereby we 
refocus federal financial outlays on a core public purpose: 
promoting innovation to give the United States energy that is 
secure, clean, and affordable.
    Let me offer for your consideration the following four 
principles:
    First, be targeted. Rather than providing permanent support 
to mature technologies that already have significant market 
penetration, the Federal Government should focus its resources 
on driving innovation to develop, demonstrate, and deploy the 
next generation of technologies.
    Secondly, we should sunset or automatically revise 
provisions when the market-based objectives have been reached. 
No company or technology should be entitled to a permanent 
subsidy. Incentives should remain in place only long enough to 
achieve a measurable market-based goal.
    Third, provide stability and certainty for investors and 
businesses. Clear roles tying federal support to market-based 
metrics rather than a calendar of political deadlines would 
allow the market to drive success.
    Fourth and finally, we need to be technology neutral to 
support all forms of advanced energy. Many of today's energy 
policies were written by Congress with one sector or technology 
in mind. Federal support needs to be applied broadly as 
reasonable to stimulate innovation across all sectors.
    In closing, the four principles I articulated represent a 
common sense approach that would reorient federal financial 
support to more effectively spur innovation. At the same time, 
they represent a significant break from the status quo. I look 
forward to working with the Committee to reform federal energy 
tax policy around these core principles to drive a more secure, 
clean, and affordable energy future.
    Thank you.
    [The prepared statement of Mr. Woolf follows:]

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    Chairwoman Lummis. I would like to thank all of our 
witnesses for being available today and again for your patience 
with the delayed start of this hearing. The Committee rules 
limit questioning to five-minute rounds.
    And we have two Members of this Committee who have 
conflicting committee assignments, so we will be going first to 
Mr. Hultgren of Illinois, and he will be followed by Mr. 
Kennedy of Massachusetts. So the Chairman of our Full Committee 
and the Ranking Member of this Committee have graciously 
offered to defer their questions until later.
    So at this time, I will recognize the gentleman from 
Illinois, Mr. Hultgren, for five minutes.
    Mr. Hultgren. Thank you, Chairwoman Lummis.
    Thank you so much for being here today. This is obviously a 
very important subject during these difficult budget times.
    I want to talk today about priorities. When resources are 
limited, priorities are more important than ever. We have heard 
over and over again from this Administration that there isn't 
enough money to invest in basic research as they cut high-
energy physics, they cut nuclear physics, they cut manned space 
exploration. President Obama shut down the Tevatron in 
Illinois, he canceled the Constellation Program that would 
restore American preeminence in space, and he shifted the focus 
of agency missions away from the pure scientific route to 
instead follow the path of what is politically expedient for 
him and his base. These are truly painful cuts to long-term 
American competitiveness and innovation.
    I have here in my hand a letter to our Governor in Illinois 
from the Deputy Secretary of Energy warning about pending cuts 
and furloughs as a result of the sequester. In the letter, 
President Obama's Administration threatens about 1,750 
furloughs at Fermilab in my district over the sequester, which 
is ironic considering that the sequester would actually be a 
higher level of funding than President Obama's own budget 
proposal for Fermilab. The President wants to see a cut to the 
lab of almost double what the sequester is going to cut. 
Meanwhile, the President has shown no hesitation to squander 
tens of billions of dollars on tax incentives, loan guarantees, 
and directing spending on development and commercialization 
activities. This, to me, is a staggering level of hypocrisy.
    Ms. Hutzler, I wonder; you are a trained scientist, you 
have got an advanced degree in applied mathematics. Would you 
characterize President Obama's shifting of funding from basic 
research to subsidies for the alternative energy industry as 
pro-science?
    Ms. Hutzler. No, I wouldn't because there--I mean picking 
winners and losers by dealing with these subsidies has not been 
a good thing of the government in the past. We have--throughout 
history, we have seen that the government isn't good at picking 
winners and losers. So there are better ways of spending the 
money. And their--you could always put up Washington monuments 
if you want, but you can also figure out other ways to cut your 
budget.
    Mr. Hultgren. Ms. Hutzler, your testimony highlights the 
enormous growth in spending on energy technologies from 2007 
until 2012. Please describe the corresponding growth in energy 
production during this time. Just as a follow-up, DOE figures 
show that solar and wind generation contributed a minimal share 
of current electricity generation. Do you consider the 
significant increase in subsidies to have been effective in 
their oft-stated goal of transforming the Nation's electricity 
portfolio?
    Ms. Hutzler. No, I don't. Renewables did increase their 
share, but as I mentioned in my testimony, that hydropower 
actually contributes the most in terms of the renewable share. 
So while renewables did increase their share, most of the 
change that has occurred has been between coal and natural gas, 
where they have sort of flip-flopped in terms of their share in 
the generating sector.
    I did look at how much increase we got from renewables in 
that five-year period in terms of BTUs. We increased non-hydro-
renewables by about two quadrillion BTUs, but in fact, we 
increased oil and gas by 5.3 quadrillion BTUs. So that is more 
than double when they have gotten a much smaller share of the 
subsidies.
    Mr. Hultgren. Yes, and the DOE figures I saw were that wind 
is about three percent, solar is less than one percent of 
current electricity generation. Well, this is an important 
topic. I know we are running late so I am going to yield back 
the rest of my time and thank the Chairwoman and also think the 
Chairman and the Ranking Member for allowing me to go ahead of 
schedule. So thank you so much.
    I yield back.
    Chairwoman Lummis. I thank the gentleman from Illinois and 
would recognize the gentleman from Massachusetts, Mr. Kennedy, 
for five minutes.
    Mr. Kennedy. Thank you, Madam Chair. Thank you to the 
Ranking Member, to the Chairman as well, and to the witnesses 
here for coming to testify today. Thank you for your time and 
your knowledge.
    I have got a question, just to begin, to Mr. Woolf. You 
cite in the written testimony that you had provided that wind 
energy, for the first time, became the number one source of new 
U.S. electric generating capacity providing 42 percent of all 
new generating capacity. I come from a State and represent a 
district that has a long history of investments in innovation 
and has made a decision to try to be on the forefront of 
emerging clean energy technology, most notably wind energy in 
particular.
    One of the questions that comes up with that is whether--is 
the development of offshore wind farms, both near-shore and for 
some further distances offshore. And I was wondering if, in 
your opinion, if our country actually has the expertise, the 
resources, and the workforce, the infrastructure to compete in 
that industry? And the reason why I ask is there is a local 
project in Massachusetts, a wind project, Cape Wind, which I am 
sure you are familiar with and a project that I actually 
support. The developer just this week indicated that he was 
going to be shifting some of those manufacturing jobs to an 
overseas manufacturer because we didn't have the capacity here 
in the United States to actually build the steel foundations 
necessary for the construction of those turbines. And I just 
wanted to get your opinion as to the state of the industry 
surrounding some of these production issues and what it would 
take in order to get competitive if we aren't already.
    Mr. Woolf. Thank you for your question. And I think it gets 
to the heart of what this Committee is looking at is what kind 
of energy future do we want? Where do we want to be in 30, 40 
years? Because the investment decisions we are making today are 
going to be the plants that are operating in 30, 40 years.
    As I listened to Ms. Hutzler's data, it strikes me as not 
at all surprising that we be investing in innovation in 
technologies where we don't yet have significant production, 
rather than the mature technologies that are already producing. 
I would not expect a correlation between where our investment 
dollars for innovation go and where the existing production 
goes. I think had--if this Nation begins to invest in offshore 
wind technologies, we would be building the supply chain for 
offshore wind so that we can manufacture it in the United 
States. I know that for land-based wind technology, 10, 20 
years ago, much of it was based offshore. Now, more than 75 
percent of it has become onshore, U.S. manufacturing, just like 
car manufacturing.
    As we have built the capacity here, for the first wind 
project offshore, I am not at all surprised, since we are so 
far behind the rest of the globe, that U.S. companies are not 
competitive. As Cape Wind goes forward, as Governor O'Malley 
goes forward in Maryland, I think we will be building that U.S. 
capacity.
    Ms. Hutzler. I would just like to comment on the offshore 
wind subject. It turns out if you take a look at EIA's numbers 
that on a kilowatt-hour basis that offshore wind is more than 
20 times the cost of onshore wind. The--in the State of 
Massachusetts for Cape Wind, they said that they would have to 
start at $.18 per kilowatt hour for Cape Wind and then increase 
that cost three percent a year. The average cost of electricity 
in this Nation is only $.10 per kilowatt hour.
    You take a lot of the European countries that have offshore 
projects; a number of them are in fuel poverty. I think about 
18 percent of the United Kingdom is in fuel poverty. And that 
definition is that more than 10 percent of their income is 
being spent on residential energy. So I think we need to take--
we need to look carefully at these projects.
    Mr. Kennedy. And ma'am, your characterization of the cost 
of Cape Wind is obviously well known and well debated in 
Massachusetts. One of the issues with wind farms, as I have 
come to understand, anyway, is part of the upkeep and 
maintenance of particularly the Cape Wind project that is 
actually built in shallow waters is that over time, that cost 
comes down because you are just paying the upkeep. And in fact, 
the wind is free.
    So I appreciate it and I yield back the balance of my time.
    Ms. Hutzler. But I think there is an issue here, too, that 
we are not that familiar with the maintenance cost to really 
know that. I mean those are pretty much guesses, and once we--
once the technology has been around even in European countries, 
we will find out more about it.
    Mr. Kennedy. And Mr. Woolf, would you like to comment on 
that?
    Mr. Woolf. Sure. Offshore wind has been used in Europe for 
many decades now, so I think we have got a pretty good sense of 
what it takes.
    Mr. Kennedy. Yeah, my five seconds. Thank you, Madam Chair.
    Chairwoman Lummis. Thank you, Mr. Kennedy.
    And now the Chairman will yield five minutes to herself.
    My first question is for Dr. Dinan, and it is about 
eligibility to qualify for the Wind Production Tax Credit. Now, 
in the fiscal cliff deal, there was an extension and 
modification of the Production Tax Credit for one year, even 
though it was supposed to expire at the end of 2012. So it 
provides that any project is eligible that begins construction. 
That is the operative language I am curious about. The 
modification makes eligible any project that begins 
construction by December 31, 2013. The IRS has not yet issued 
guidance as to the definition of ``begin construction.'' But 
based on precedent, projects have expended only five percent of 
the project costs and yet may qualify. So my question is this: 
how does the broad definition of ``beginning construction'' 
impact the estimated costs of the Production Tax Credit?
    Dr. Dinan. Your description of the extension of the 
Production Tax Credit is correct. They now qualify based on 
beginning construction. However, CBO does not estimate the cost 
of that extension, and that would be the Joint Committee on 
Taxation. So it is nothing I can comment on.
    Chairwoman Lummis. If the IRS determines how it is going to 
define ``begins construction,'' will CBO then be able to update 
the estimates?
    Dr. Dinan. No, because CBO estimates the budgetary cost of 
legislation that involves spending, but revenue--the effects of 
changes in revenue are made by--those cost estimates are made 
by the Joint Committee on Taxation, not by the Congressional 
Budget Office.
    Chairwoman Lummis. And will the Joint Committee on Taxation 
update it?
    Dr. Dinan. Yes, they each year estimate the cost of each 
individual provision. And so----
    Chairwoman Lummis. Thank you. Second question, and I also 
want to ask this of Dr. Dinan and Ms. Hutzler. It is regarding 
Section 1603 grants and their ongoing funding. Now, those 
grants, in lieu of credits, allowed wind developers to take a 
cash grant instead of a tax credit. And that program expired in 
December 2011. But projects that had begun construction 
qualified, again, only five percent of capital expenditures 
qualified as having begun construction. And then those payments 
extend even after expiration. So according to CBO, even under 
sequestration, we plan to spend $2.6 billion on 1603 grants in 
FY 2013.
    So, question: I was surprised to learn, Dr. Dinan, from 
your testimony that the Federal Government plans to give $2.6 
billion of cash to wind developers this year alone through the 
expired Section 1603 grants. Can you explain to me why we are 
giving $2.6 billion for a program that expired in 2011?
    Dr. Dinan. The reason for that is that the--to qualify for 
the 1603 grants, it is based on beginning construction prior to 
the expiration date. So renewable generators that were under 
construction prior to the December 31, 2011, qualified, but 
they received the actual grant at the time they begin 
production.
    Chairwoman Lummis. So do you have an estimate of how much 
more cash we will hand out under the expired 1603 program over 
the next few years?
    Dr. Dinan. I do not.
    Chairwoman Lummis. Well, let me ask then, Ms. Hutzler, 
this: Do you think the 1603 program was good policy? How would 
you rank it among other maybe best-to-worst policies when it 
comes to subsidies or tax benefits?
    Ms. Hutzler. Well, as I indicated in my oral testimony, we 
believe at IER in free-market principles. So I am not sure that 
I would prefer any of these different types of subsidies that 
we are talking about. But anything where you have a policy 
where you can start construction but not complete it causes 
problems and distortions in the marketplace. So the change in 
the PTC is a problem because you don't know how many more years 
in the future you are going to have to be paying for it.
    And furthermore, it is going to be hard for even the JTC to 
figure it out because they usually use EIA estimates on 
penetration. But you don't know when--somebody can start 
construction, but you don't know when they are going to 
actually start operating. They may wait until the economy is 
much better. So it could go many years into the future.
    Chairwoman Lummis. I thank the witnesses and yield to the 
Ranking Member, Mr. Swalwell of California.
    Mr. Swalwell. Thank you, Chairman Lummis. And I am actually 
going to yield and ask to come back after Mr. Veasey and your 
next Member goes.
    Chairwoman Lummis. I yield than five minutes to Mr. Veasey.
    Mr. Veasey. Madam Chair, thank you very much. And I wanted 
to ask Ms. Hutzler and Mr. Woolf just some questions about 
intangible drilling costs and depletion write-offs and things 
like that versus the subsidies because, you know, you hear a 
lot about we are picking winners and losers, but where do those 
things in the traditional fossil fuels sector--how do they pair 
up with what is going on as far as wind is concerned?
    Ms. Hutzler. The--well, the issues that you are talking 
about here are the percentage allowance depletion and the 
intangible drilling costs. Both of these are tax deductions. 
And they mostly affect the small, independent producers. These 
are producers that are producing from marginal wells. And these 
deductions are helping them in terms of depreciation, in terms 
of depletion allowance, and in terms of essentially R&D to be 
able to get to the oil or gas out in the marginal wells.
    A good portion of our oil and gas production comes from the 
independents, so we are trying to support this particular 
entity in terms of tax deductions. But these are similar 
deductions that other businesses and manufacturing companies 
are getting in terms of depreciation and in terms of research 
and development. They are not individual things such as the 
Production Tax Credit that one gets.
    Mr. Woolf. Excuse me. From the Advanced Energy Economy's 
perspective, we wouldn't look at it as a credit for one subsidy 
or one technology versus another technology. What we are urging 
Congress to consider is a principled approach whereby we look 
at--the first question is, is innovation needed, or is this a 
mature technology that no longer needs innovation? But if it is 
a technology where we want the country to go, where innovation 
is needed, then the second question is, what is the market-
based goal? Once you establish that market-based goal, you know 
what you are shooting for. You have a vision for the future and 
then it can automatically sunset when you reach that goal.
    I would apply that standard to all technologies, whether it 
is the existing permit and credits that the oil and gas 
industry enjoyed or the one-year extensions that the wind guys 
have to fight for every year. I think we should have a neutral 
approach for all technologies, think about what is our goal, 
and is this an innovation area that we should be investing in?
    Mr. Veasey. Right. Exactly. And, you know, I guess my 
thought--and I would certainly like to hear from you on this--
is that, you know, we talk a lot about being independent from, 
you know, and being able to produce our own energy and trying 
to lessen our dependency on foreign oil. It would just seem 
like, you know, that an investment in wind and in other things, 
I guess the technology that is driving a lot of the 
development, particularly in Texas where I am from, I know that 
many of the independents--when the big companies left those 
fields and the independents came back again, it was because of 
the technology that they used to bring us to the level where we 
are at now to where, you know, now, we are much higher up on 
the scale as far as, you know, producing oil. So does that make 
sense--I guess, really to you, Ms. Hutzler, to invest in both 
of those so we can be more independent as a country?
    Ms. Hutzler. I think it deals with how competitive these 
technologies are. If you take onshore wind, it is 30 percent 
more expensive than the next--than the cheapest-generating 
technology, which is natural gas. And that is probably going to 
continue in the future, because our natural gas prices are 
forecasted to stay fairly low in the future. So it really 
depends on the competitiveness of the technology.
    Mr. Woolf. If I can respond, I would agree that in most 
markets, onshore wind is not cost competitive with natural gas. 
The conclusion, then, I draw from that is it is a sector that 
is ripe for innovation. Already, over the last 20 years, 
onshore wind turbines' cost has come down 74 percent, according 
to Bloomberg New Energy Finance. It is an area where 
technological advances are going very, very quickly, and that 
is the only way you are going to get progress. I am looking up 
at the quote over the Science Committee's dais here, ``Where 
there is no vision, the people perish.'' If we only invest in 
the technologies that are currently competitive, we have no 
vision. We won't make progress.
    Mr. Veasey. Thank you.
    Chairwoman Lummis. I thank the gentleman and now recognize 
our Vice Chairman, the gentleman from Texas, Mr. Weber.
    Mr. Weber. Thank you, Madam Chairman.
    I want to take issue with something you all said earlier 
about investing versus subsidies. My good colleague down on the 
right, Mark Veasey, knows well--did I say that you are on the 
right, Mark? I am sorry. Down at that end of the dais. We will 
do that. I don't need to out you here. He knows well that Texas 
is the leading wind producer in the country, and we are also 
poised to be the leading natural gas producer if not in the 
country, probably the world, hopefully.
    But there is a difference, is there not--and I will address 
this question to Ms. Hutzler and then Mr. Woolf--in invest--
when a company goes out there--and you mentioned the percentage 
depletion allowance specifically--and is it not true, Ms. 
Hutzler, that that is--and I will let you answer the question 
in just a minute--but that is for small companies. And was it 
'75 we did away with that depletion allowance for the major oil 
companies? These are the independent producers you mentioned. 
In essence, they put their money in up front. They invest 
capital and they take the risk. They get manpower and they get 
assets on the ground, and not every hole they drill is going to 
be productive. So they are investing their time and their 
energy and their resources. It makes perfect sense for me to 
give them a tax credit. On the other hand, to come in and give 
a subsidy to assist them so that they might be able to produce 
a product doesn't seem to make sense.
    I would like to go back to something you said, Ms. Hutzler. 
You quoted some figures on coal subsidies, oil subsidies, and 
natural gas subsidies, and billions of dollars, but what I 
didn't hear you quote was the amount of electricity each one 
contributed to the Nation's grid as a result of the tax dollars 
spent. Do you have those figures?
    Ms. Hutzler. I think I mentioned those in my oral, and 
that----
    Mr. Weber. I missed those.
    Ms. Hutzler continuing]. On a per-unit-of-production basis 
that the subsidy for solar I mentioned was over 1,100 times 
more than that for oil, gas, and coal. And also for wind it was 
over 80 times that.
    Mr. Weber. And then it was astounding, if I recall 
correctly, you said the vast majority of the increase came from 
hydroelectric power.
    Ms. Hutzler. Of renewables, yes.
    Mr. Weber. Of renewables, right.
    Ms. Hutzler. Yes. Renewables today supply about 12 percent 
of our electricity, but seven percent of that is hydro.
    Mr. Weber. Right. And, to your knowledge, were we able to 
increase the amount of water coming downstream?
    Ms. Hutzler. The snowfall, the water changes----
    Mr. Weber. So----
    Ms. Hutzler [continuing]. 2011 was a very good year.
    Mr. Weber [continuing]. God was good to us. The best 
increase we got was just from the rainfall and the snow. But 
doesn't it seem fair to you for us to give tax subsidies to a 
hopefully growing technology that has been around a long time 
that does use windmills many, many years ago as opposed to tax 
credits were American entrepreneurs invest their money? Does 
that seem equitable to you?
    Ms. Hutzler. Well, hydro gets very little in terms of 
subsidies.
    Mr. Weber. Right, no, I get that.
    Ms. Hutzler. You know, right.
    Mr. Weber. The wind and solar----
    Ms. Hutzler. Right.
    Mr. Weber. Right. If we had taken the--was it $500 million 
that we gave to Solyndra and paid $1,000 per person on their 
own utility bill for a year, we could have powered the homes of 
half a million Americans. But anyway, does that seem fair to 
you, Ms. Hutzler?
    Ms. Hutzler. No, it doesn't seem fair to me.
    Mr. Weber. How about you, Mr. Woolf?
    Mr. Woolf. If I could respond to your question.
    Mr. Weber. Sure.
    Mr. Woolf. AEE supports both renewables and natural gas 
and, you know, all forms of advanced technologies. I think 
natural gas is an amazing, wonderful American success story. 
Because the Department of Energy invested in assessing the 
technology in the '70s and coming up with directional drilling 
techniques, you know, fracking is now bringing huge sea change 
to the American economy. That is a wonderful thing. That was 
not the case with shale gas in the 1970s. That is why we needed 
the federal role in investing in the innovative technologies. 
Now that we are there, now that we have got those technologies, 
it no longer needs the support.
    For renewable technologies, there is a different market 
barrier. Their market barrier is one of economies of scale. 
When--and so you need--the Production Tax Credit is essential 
for getting them the economies of scale so they can drive down 
their costs and be cost effective. If you are only putting on 
solar or an individual windmill and you are not doing thousands 
and thousands of them, you don't drive down the cost; you will 
never be competitive.
    Mr. Weber. I want to go back to something my colleague, Mr. 
Kennedy, said, and that was something about the wind farm in 
Massachusetts, I think. And really, what we need is 
infrastructure, is it not? We know the technology. We need a 
grid. We need to be able to get--for example, in Texas, we are 
coming up with the wind energy to get to--our grid is the 
challenge. That is the bigger challenge, is it not, more so 
than the technology?
    Mr. Woolf. I think it is all of the above. In certain 
areas, certainly West Texas, the transmission congestion is a 
huge challenge. In other parts of the country, the Northeast, 
they don't have land, they don't have the resources Texas has; 
offshore wind is their resource.
    Mr. Weber. And I yield back. Thank you.
    Chairwoman Lummis. I thank the gentleman and now recognize 
the Ranking Member of our Subcommittee, Mr. Swalwell of 
California.
    Mr. Swalwell. Thank you, Chair.
    And Ms. Hutzler, I have to say I was disappointed in your 
remarks. I thought they were very politically charged. And to 
say that only politically connected folks are the ones that are 
receiving preference in our subsidies, it ignores the facts. 
And it also ignores the role that the States play. And 
individual States in our country themselves give a number of 
tax credits to different industries. For example, there is an 
oil company in Pennsylvania that, in 2012, received $1.65 
billion dollars in tax credits. So it seems that because we 
don't have an energy policy in our country--or at least a 
national energy policy--that the States and the Federal 
Government seem to every Congress or every State Legislature 
will pick which industries will support their regional 
economies or national agenda at the time. But there is nothing 
that seems to be uniform.
    And also to say that the President is not pro-science 
because he supported subsidies, also, I think, doesn't help the 
debate. It just divides us further.
    And, you know, I think, Mr. Woolf, I want you to expand on 
talking about all of the above, because it sounds like we can 
find as many winners as possible when we have an all-of-the-
above approach. And we can also root out the industries that 
aren't going to work, and doesn't that seem like a better way 
to allow us to explore what is going to drive and power our 
energy economy?
    Mr. Woolf. I think that is exactly right. The Nation has a 
tremendous amount of strengths in all our different regions, in 
all our different States. They can all contribute something 
different to our overall energy mix. And that is part of what 
the Advanced Energy Economy brings to the table is we have got 
in our group all different technologies. And what binds them 
together is they all recognize that the energy system of the 
last 100 years is fading away. The model of centralized 
generation distributed on a one-way wire is pre-Internet. You 
know, in this connected world, we have got smart grids, 
distributed generation, demand-side technologies. We no longer 
have the old energy grid. And in order to be competitive in the 
21st century, we need a 21st-century energy system. That is 
going to be driven by innovation and that is what we are 
suggesting that Congress consider with our principles today.
    Mr. Swalwell. And do you see a role for tax credits not 
just for renewables but also for other sources of energy?
    Mr. Woolf. Absolutely. I think we should be applying the 
same standard to all technology where every innovation is 
needed, and then it should sunset and expire once that 
technology is mature and it is no longer needed.
    Ms. Hutzler. I would like to address some of the things 
that you mentioned that I said. First of all, in the terms of 
political cronyism, I didn't come up with the number, but a 
study came up with the number that it was 60 percent. Now, I 
didn't mean that it is 100 percent and my written testimony 
indicates that.
    Furthermore, I wanted to mention about the States. There is 
an example that I have my testimony about a wind farm, 
Shepherds Flat, in Oregon. That wind farm was a $1.9 billion 
project. The amount of subsidies that are allocated to it are 
$1.2 billion. That is 65 percent. The sponsors only put 11 
percent of equity in and their return is 30 percent. Pretty 
amazing. But a good portion of those subsidies are state-
related. And in fact, the authors of the memo, which include 
Summers, Kaine, and Browner, all members of the Administration 
at that time in 2010, indicated that this project would have 
gone on anyway just because of the state subsidies and that the 
federal subsidies weren't needed, that private funding would 
have been provided for the project.
    Mr. Swalwell. But Ms. Hutzler, wouldn't you agree that 
subsidies are being provided industrywide? It is not only 
limited to renewables, that oil and gas also receive subsidies 
and tax credits, and oftentimes, those subsidies and tax 
credits don't have a great return on investment either?
    Ms. Hutzler. As I mentioned before, most of the--what oil 
and gas are getting are tax deductions that are going mainly to 
the independent producers. Other than that, they are also 
manufacturing credits that are got. And the oil and gas 
industry pays less than other manufacturers do in terms of--I 
mean there--the deductions they get is less than what other 
manufacturing companies get. So these aren't apples--these are 
apples and oranges, essentially. We are not comparing the same 
types of subsidies.
    Mr. Swalwell. If it was up to you, would the government 
have any role in subsidies, tax credits, or incentives to solve 
our energy solutions?
    Ms. Hutzler. Well, certainly, right now, we--I think we 
have a bigger problems than trying to figure out how to 
subsidize things that just aren't competitive in the 
marketplace.
    Mr. Swalwell. All right, thank you.
    Thank you, Madam Chair.
    Chairwoman Lummis. I thank the gentleman and now recognize 
for five minutes the Committee Chairman, the gentleman from 
Texas, Mr. Smith.
    Chairman Smith. Thank you, Madam Chair.
    Dr. Dinan, let me ask you a question, and it goes beyond 
your testimony, so if you could just give us an estimate. And 
my question is this: on the Production Tax Credit for wind 
energy that began 21 years ago, 1992, what is the total cost to 
the taxpayer so far of all that Production Tax Credit in those 
21 years, if you know it? If you can only go back five years, 
that would be helpful, too, but I just want to get an estimate 
as to how much it has cost.
    Dr. Dinan. I am sorry, but I only have the estimate for the 
Production Tax Credit for 2013 so----
    Chairman Smith. Okay. As I understand it, just looking at 
it, and what was the estimate for 2013?
    Dr. Dinan. That was $1.7 billion.
    Chairman Smith. Okay. It looks like it has probably been 
more in the last four years. And I wouldn't want to give too 
much of an estimate, but it might well be $10 billion in the 
last several years. Is that possible?
    Dr. Dinan. I just don't have those numbers available.
    Chairman Smith. We will get them, or if you can help us get 
them, that would be great.
    Ms. Hutzler, let me ask a question to you. And this is in 
reference to a chart you mentioned a few minutes ago that I 
just saw about the time you mentioned. The chart is estimated 
leveled cost of new electric-generating technologies in 2017. 
And we put it up on the screen there.
    [Chart]
    Chairman Smith. Looking at this chart, if you look at the 
column four from the right, we see that the cost of--and by the 
way, there are 16 different sources of electricity, 16 
different bars there. Wind offshore is by far the most 
expensive, and in fact, it looks to me like it is three times 
as expensive as wind onshore, which is right to the left of 
that longest bar. That is amazing to me. That is the first time 
I have seen a cost comparison where it is three times as 
expensive offshore as onshore. For the sake of the consumers, 
it seems to me that if we are going to advocate for wind 
turbines, we ought to put them on land onshore rather than 
offshore. Is there something I am missing there, or would you 
agree?
    Ms. Hutzler. I definitely agree with you, but I just also 
want to mention that these numbers are out of date. EIA came up 
with a new set of numbers and solar thermal is actually the 
most expensive now than offshore wind, and it is not a factor 
of three anymore. It is 2.6 times.
    Chairman Smith. Oh, well, I was about to ask you if it was 
in the same order of magnitude, and it sounds like it is. So it 
is 2.6----
    Ms. Hutzler. Yes.
    Chairman Smith [continuing]. Times more expensive offshore 
than onshore?
    Ms. Hutzler. Correct.
    Chairman Smith. Okay. So it makes the same point. I thank 
you for that.
    Mr. Woolf. Mr. Chairman, could I offer a slightly different 
perspective on this chart?
    Chairman Smith. Because of my limited time, if you want to 
be very brief, you can, but I have a question for you and--up 
next as well.
    Mr. Woolf. My only comment is that I would urge the 
Congress to be investigating innovation in the technologies 
where they need it.
    Chairman Smith. That is my next question. Wait a minute. 
Stop right there.
    Mr. Woolf. Beautiful.
    Chairman Smith. Let me address the next question to Ms. 
Hutzler and to you, and it is this: if we want to help these 
two technologies become more competitive, shouldn't we be, in 
fact, I will use the word diverting, perhaps, the money from 
the subsidies into technology into coming up with these 
innovations that will, in fact, make these new technologies 
more cost effective?
    Mr. Woolf. Thank you, Chairman. That is--I think that is 
the right--I think Congress should be looking at a principled 
approach to be looking for all of this. What is our goal? What 
do we want to achieve? And how do we get there?
    Chairman Smith. Right.
    Mr. Woolf. And we should be looking at all the 
technologies, using the same standard. So I think it is 
perfectly appropriate to be looking at the mature technologies, 
getting rid of their subsidies, and therefore, spending scarce 
dollars on the technologies that could really benefit from 
innovation.
    Chairman Smith. That is where we invest not only in the 
future but sometimes in the distant future, but it pays off 
both for the consumer and for the advancement of----
    Mr. Woolf. And that is what fracking has showed us.
    Chairman Smith. Right. Ms. Hutzler.
    Ms. Hutzler. Personally, I don't think we can afford the 
money to do that either. And if you take a look at natural gas 
prices, as I said, EIA only expects them to go up four percent 
in real terms in like the next six years, by 2020.
    Chairman Smith. Okay.
    Ms. Hutzler. These technologies still aren't going to be 
competitive.
    Chairman Smith. By the way, I don't disagree with that 
either. Natural gas is abundant, relatively inexpensive, and 
pretty clean, so we ought to be using more natural gas than we 
are right now as well.
    Thank you all for your testimonies. Thank you, Madam Chair.
    Chairwoman Lummis. I thank the gentleman and now recognize 
the Chairman Emeritus of this Committee, the gentleman from 
Texas, Mr. Hall.
    Mr. Hall. I might yield Mr. Woolf a little more time to 
answer the Chairman here if you need it.
    Mr. Woolf. Thank you. I got a chance to make my comment.
    Mr. Hall. I probably ought to ask Dr. Dinan, but the 
hearing seemed like it is focused primarily on financial 
support for various sources of energy and a lot of other types 
of support that exist. Let me go to Ms. Hutzler. Biofuels, I am 
reading here that biofuels enjoyed various tax credits and 
financial support in 2011. Tax incentives for biofuels cost 
$7.6 billion. Now, how has this support impacted the 
competitiveness and the viability of the biofuels industry if 
it has?
    Ms. Hutzler. Well, it certainly has influenced it, but the 
major subsidy or financial intervention is the renewable fuels 
standard that is mandating a certain amount of production. So, 
for instance, that biofuel subsidy expired at the end of 2011, 
but these mandates are still increasing the amount of biofuels 
that are being produced. And now, we actually even have a 
problem because the amount of gasoline consumption isn't in 
concert with these increases. So in fact, rather than having 10 
percent ethanol added to gasoline, we are actually talking 
about 15 percent now. Of course, ethanol has a lower 
efficiency, and so you get less mileages--mileage in your 
vehicle than you used to.
    Another big issue in terms of the renewable fuel standard 
deal is with the fact that we are making most of it from corn--
actually, all of it right now from corn. That has increased our 
fuel prices. Corn used to sell for $2.50 a bushel. Now, it is 
selling for over $7 a bushel. So all of these mandates, 
subsidies, are causing the American consumer to have higher 
fuel costs.
    Mr. Hall. Well, I would go further, Mrs. Hutzler. You are 
on the role of Renewable Portfolio Standards. I think it was 
announced that wind was the largest source of newly installed 
electricity capacity during 2012, and the wind industry 
regularly touts this growth is a sign of technology's growing 
competitiveness. I don't know about that, but in the recent 
fiscal cliff deal, the Production Tax Credit was extended for 
another year at the cost of $12 billion. Now, my question is, 
is wind cost competitive with the PTC? If not, when if ever is 
it expected to be?
    Ms. Hutzler. I am sorry. I have a hard time seeing it being 
cost competitive in the near future, as I have mentioned before 
in my remarks. The Renewable Portfolio Standard is really 
driving most of the renewables that we are seeing today, 
particularly wind. If you take a look at a graph that I had in 
my written testimony from the Energy Information 
Administration, you will see that the Production Tax Credit 
started in 1992, but we didn't see a lot of wind additions 
until 1999, when taxes put forth their Renewable Portfolio 
Standard. And then, as the other States that have Renewable 
Portfolio Standards added theirs in 2004 to 2007, you start 
seeing the increase in wind.
    Mr. Hall. As you talk about, if individual States are 
mandating the purchase of renewable-generated electricity, then 
I guess my question is, why does the Federal Government still 
have to subsidize it?
    Ms. Hutzler. Frankly, I don't think it does. I think that 
is where we get into these duplicative subsidies that I 
mentioned before with the Shepherds Flat example, where we are 
seeing 65 percent of the project being subsidized.
    Mr. Hall. I may have further questions. If I do and the 
Chair allows them to answer them later, we will send them to 
you. I think we have a vote or something. I yield back my time 
if I have any time left.
    Chairwoman Lummis. Well, I thank the gentleman.
    And I want to compliment the witness for keeping her 
concentration during that series of bells and whistles. That 
can be tremendously distracting.
    Because we have votes that have just been called and we 
have about 12 minutes left to go vote, I do want to wrap up the 
hearing and have just a couple bits of housekeeping to do prior 
to doing so. First of all, I ask unanimous consent to enter 
into the record the following three items: an op-ed that 
appeared in the Wall Street Journal earlier this week written 
by Bjorn Lomborg and entitled ``Green Cars Have a Dirty Little 
Secret,'' an article that appeared in the Wall Street Journal 
last week entitled ``Chinese Solar Approach Faces Test,'' and a 
report by the American Energy Alliance and the National Center 
for Public Policy Research entitled ``Erroneous Numbers, 
Erroneous Conclusions: The Navigant Wind Jobs Report.''
    Without objection, so ordered.
    [The information may be found in Appendix 2.]
    Chairwoman Lummis. I am glad that that was called 
``Erroneous Numbers, Erroneous Conclusions: The Navigant Wind 
Jobs Report.'' I was afraid it was going to say ``Erroneous 
Numbers, Erroneous Conclusions: Republican Pollsters Blow 
November Election.''
    Well, I would like to thank the witnesses for their 
valuable testimony and the Members for their questions. The 
Members of the Committee may have additional questions for you, 
and we will ask you to respond to those in writing. The record 
will remain open for two weeks for additional comments and 
written questions from Members.
    Again, thank you, witnesses for your patience, and Members 
of the Committee. The witnesses are excused, and this hearing 
is adjourned.
    [Whereupon, at 4:57 p.m., the Subcommittee was adjourned.]


                               Appendix 1

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                   Answers to Post-Hearing Questions














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                               Appendix 2

                              ----------                              


                   Additional Material for the Record


  ``Chinese Solar Approach Faces Test'' from The Wall Street Journal 
                     Online Edition, March 6, 2013







``Bjorn Lomborg: Green Cars Have a Dirty Little Secret'' from The Wall 
             Street Journal Online Edition, March 11, 2013





   ``Inflated Numbers; Erroneous Conclusions: The Navigant Wind Jobs 
          Report'' by Charles J. Cicchetti, Ph.D., March 2013




























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