[Senate Hearing 115-36]
[From the U.S. Government Publishing Office]









                                                         S. Hrg. 115-36

 COST REDUCTIONS IN EMERGING ENERGY TECHNOLOGIES WITH A SPECIFIC FOCUS 
        ON HOW RECENT TRENDS MAY AFFECT TODAY'S ENERGY LANDSCAPE

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

                                HEARING

                               BEFORE THE

                              COMMITTEE ON
                      ENERGY AND NATURAL RESOURCES
                          UNITED STATES SENATE

                     ONE HUNDRED FIFTEENTH CONGRESS

                             FIRST SESSION

                               __________

                              JUNE 8, 2017

                               __________



[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]









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



        Available via the World Wide Web: http://www.govinfo.gov




                                   ______

                         U.S. GOVERNMENT PUBLISHING OFFICE 

25-977                         WASHINGTON : 2018 




















               COMMITTEE ON ENERGY AND NATURAL RESOURCES

                    LISA MURKOWSKI, Alaska, Chairman
JOHN BARRASSO, Wyoming               MARIA CANTWELL, Washington
JAMES E. RISCH, Idaho                RON WYDEN, Oregon
MIKE LEE, Utah                       BERNARD SANDERS, Vermont
JEFF FLAKE, Arizona                  DEBBIE STABENOW, Michigan
STEVE DAINES, Montana                AL FRANKEN, Minnesota
CORY GARDNER, Colorado               JOE MANCHIN III, West Virginia
LAMAR ALEXANDER, Tennessee           MARTIN HEINRICH, New Mexico
JOHN HOEVEN, North Dakota            MAZIE K. HIRONO, Hawaii
BILL CASSIDY, Louisiana              ANGUS S. KING, JR., Maine
ROB PORTMAN, Ohio                    TAMMY DUCKWORTH, Illinois
LUTHER STRANGE, Alabama              CATHERINE CORTEZ MASTO, Nevada
                      Colin Hayes, Staff Director
                Patrick J. McCormick III, Chief Counsel
             Dr. Benjamin Reinke, Professional Staff Member
               Chester Carson, Professional Staff Member
           Angela Becker-Dippmann, Democratic Staff Director
                Sam E. Fowler, Democratic Chief Counsel
           Scott McKee, Democratic Professional Staff Member
          Brie Van Cleve, Democratic Professional Staff Member
          
          
          
          
          
          
          
          
          
          
          
          
          
          
          
          
          
          
          
          
          
          
          
          
          
                            C O N T E N T S

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                           OPENING STATEMENTS

                                                                   Page
Murkowski, Hon. Lisa, Chairman and a U.S. Senator from Alaska....     1
Cantwell, Hon. Maria, Ranking Member and a U.S. Senator from 
  Washington.....................................................     3

                               WITNESSES

Donge, Lily, Principal, Business Renewables Center, Rocky 
  Mountain Institute.............................................    10
Greeson, David, Vice President, Development, NRG Energy, Inc.....    15
Merritt, Greg, Vice President, Marketing and Public Affairs, 
  Cree, Inc......................................................    25
Simonton, Steve, Vice President, Drilling & Completion 
  Operations, Cimarex Energy Co..................................    30
Vare, Russell, Manager, Business Development, Mercedes-Benz 
  Energy Americas, LLC...........................................    34
Yates, Kevin, President, Energy Management Division, Siemens USA.    38

          ALPHABETICAL LISTING AND APPENDIX MATERIAL SUBMITTED

Cantwell, Hon. Maria:
    Opening Statement............................................     3
    Written Statement............................................     5
Donge, Lily:
    Opening Statement............................................    10
    Written Testimony............................................    13
    Responses to Questions for the Record........................    58
Greeson, David:
    Opening Statement............................................    15
    Written Testimony............................................    17
    Responses to Questions for the Record........................    65
Merritt, Greg:
    Opening Statement............................................    25
    Written Testimony............................................    27
    Responses to Questions for the Record........................    67
Murkowski, Hon. Lisa:
    Opening Statement............................................     1
Simonton, Steve:
    Opening Statement............................................    30
    Written Testimony............................................    32
    Responses to Questions for the Record........................    69
Vare, Russell:
    Opening Statement............................................    34
    Written Testimony............................................    36
    Responses to Questions for the Record........................    71
Yates, Kevin:
    Opening Statement............................................    38
    Written Testimony............................................    40
    Responses to Questions for the Record........................    75  
 
 COST REDUCTIONS IN EMERGING ENERGY TECHNOLOGIES WITH A SPECIFIC FOCUS 
        ON HOW RECENT TRENDS MAY AFFECT TODAY'S ENERGY LANDSCAPE

                              ----------                              


                         THURSDAY, JUNE 8, 2017

                                       U.S. Senate,
                 Committee on Energy and Natural Resources,
                                                    Washington, DC.
    The Committee met, pursuant to notice, at 10:08 a.m. in 
Room SD-366, Dirksen Senate Office Building, Hon. Lisa 
Murkowski, Chairman of the Committee, presiding.

  OPENING STATEMENT OF HON. LISA MURKOWSKI, U.S. SENATOR FROM 
                             ALASKA

    The Chairman. Good morning, everyone. The Committee will 
come to order. This is an oversight hearing to consider cost 
trends in emerging energy technologies. I appreciate everyone 
being here this morning. It is kind of quiet on this side of 
the dais. I think that if we had suggested that this was the 
overflow room for the Senate Intelligence Committee, we might 
have a bigger crowd out there.
    [Laughter.]
    But I do recognize and appreciate that the conversation 
that you will have with us this morning is one that I think 
should generate a level of excitement, an opportunity, 
particularly for young people, as they think about our energy 
future and how they can be participants in it. So I appreciate 
the fact that you are here this morning.
    This hearing is meant to provide us with a better 
understanding of what is happening in the energy marketplace, 
how federal energy policies may be affecting those changes and 
what more we can do to keep energy affordable. A stronger grasp 
of what is happening will help us develop what to expect going 
forward and the best ways for the Federal Government to be 
involved as we continue our policymaking efforts.
    The big story in recent years has been sustained and 
historically low prices for electricity rates and consumers at 
the pump, and this has been driven by technological innovation 
in the oil and gas industry which has dramatically expanded our 
nation's energy supply and more recently by decreases in the 
cost of production.
    The cost of renewable energy has also decreased 
drastically. According to the Department of Energy (DOE), the 
cost of wind turbines decreased by 27 percent from 2009 to 
2015, and the cost of installing solar panels decreased by 60 
percent over the past decade. These technologies are challenged 
because of their intermittent nature, but the cost of energy 
storage technologies are coming down as well and we recognize 
the great potential there.
    Although much work still needs to be done to commercialize 
the array of storage options that will be needed for our grid 
in the future, the decrease in lithium-ion battery prices is a 
big first step. According to McKinsey and Company, the cost of 
lithium-ion batteries per kilowatt-hour has dropped by 77 
percent since 2010.
    That drop is also making new vehicle technologies more 
competitive. Hybrids and electric vehicles rely on high-
capacity lithium-ion batteries to operate, and those batteries 
need to be less expensive for those vehicles to be directly 
cost competitive with traditional combustion-powered vehicles. 
This is occurring right now even as traditional vehicles are 
increasing efficiency through the adoption of lightweight 
materials and advanced manufacturing techniques.
    Although less well-known, the semiconductor industry might 
be the most impressive story to date when it comes to 
decreasing costs. Semiconductors are the base of all of our 
electronic technologies and costs per transistor have continued 
to decrease at a rapid rate, including three orders of 
magnitude over the past decade alone. New devices can now be 
used in more extreme environments and are more energy 
efficient, and this has led to drastic decreases in LED prices 
for consumers, leading to further decreases in energy 
consumption and costs for consumers.
    The innovation taking place right now is good news for our 
energy future, particularly in my state of Alaska, where we pay 
far more for electricity than the average U.S. consumer. In 
some of our smaller, more remote communities, we see as much as 
$1.00 per kilowatt-hour paid by our families. That is simply 
not sustainable.
    We have dozens of communities that are not connected to the 
main grid, and actually that is not quite an accurate 
statement. When you have 80 percent of your communities in the 
state that are not connected by a road, think about what that 
means then for any kind of an energy grid. When we talk 
microgrids in Alaska, they are micro microgrids. We recognize 
that more often than not, when we are looking at how we power 
our communities, we rely on diesel generation. That is equally 
not sustainable. So new and more affordable technologies offer 
tremendous promise for us.
    Today is also a good opportunity for us to consider whether 
federal policies are keeping up with the changes we are seeing 
in the energy industry. As you have heard the two of us say 
here, it has been a full decade now since the last major energy 
bill was signed into law. We are well overdue to update and 
modernize so many of our energy policies.
    So I intend that this hearing will be the first in a series 
that we will hold in Congress with a focus on innovation. My 
hope is that it will both set the stage and serve as a jumping 
off point so that we can develop meaningful policy that 
continues to drive cost reductions and promote affordable 
energy for the American people.
    I will note that Senator Cantwell and I will be heading to 
Senator Cantwell's state tomorrow, where we will have an 
opportunity to look at some of the high-tech, cutting-edge 
developments when it comes to efficiencies and to energy. I am 
really excited about the day tomorrow. On Saturday, we will 
have a field hearing up in a small fishing community, Cordova, 
Alaska, where we will have a chance to take a look at how 
microgrids are helping us with our energy.
    I am so proud of the work this Committee is doing and very 
proud of my partnership with my Ranking Member.
    Senator Cantwell, I now turn it over to you.

               STATEMENT OF HON. MARIA CANTWELL, 
                  U.S. SENATOR FROM WASHINGTON

    Senator Cantwell. Thank you, Madam Chair, and thanks for 
scheduling this hearing. Maybe we are the alternative hearing, 
both in energy alternatives as well as to other things that are 
happening here in the Senate today. But it is an important 
hearing, as you mentioned, to examine how energy technologies 
and recent trends are helping to change the landscape, and 
particularly how new technologies are helping us drive down the 
cost of energy.
    Obviously, we have seen a revolutionizing way in which 
consumers consume and how businesses generate energy, and this 
has affected millions of Americans, certainly in creating new 
jobs. According to the International Energy Agency, global 
spending on all renewable resources totaled $313 billion in 
2015. And although the investment level has been relatively 
flat, the annual amount of renewable energy capacity installed 
has increased 33 percent since 2011, and it is because it costs 
less to buy more.
    So global energy efficiency investment has reached $221 
billion, and of that, the amount of energy efficiency 
investments in the building sector, including appliances, 
lighting, was $118 billion in 2015. This gives America a 
leadership and entrepreneurial position on these important 
sectors.
    Renewable electricity investments in the U.S. were nearly 
$40 billion in 2015. Wind and solar power now account for more 
new domestic electric generation than any other source, and 
those investments translate into jobs. The U.S. wind industry 
supports over 100,000 jobs. The American wind power added jobs 
nine times faster than the overall economy. So we are where we 
are today with over 370,000 workers in the solar industry, and 
one out of every 50 new jobs in the United States in 2016 was 
created by the solar industry.
    So the fact that we have seen such incredible job growth--
we are here to discuss this morning what we need to do to make 
sure we continue that. There are 2.2 million Americans employed 
in whole or in part in the design, installation and 
manufacturing of energy efficiency products and services, and 
these trends are expected to continue. According to the 
International Energy Agency, global investment in renewable 
energy will total $4.2 trillion over the period of 2015 to 
2030, and around $8 trillion in energy efficiency including $3 
trillion in building efficiency. That is why it is so important 
we look at these issues.
    Now, I know I have heard Secretary Pruitt on numerous shows 
these past few days talking about why we are not committing to 
further global climate reductions and saying that we will leave 
it up to the private sector, but I am pretty sure it was not 
the private sector that did all the R&D that we needed to do on 
solar chemical equations to help us get a solar industry, nor 
did they have all the incentives that we passed as far as 
renewable energy tax credits. I am not sure they would have 
complied with the fuel efficiency standards that we were also 
able to pass in a big package giving consumers more fuel-
efficient automobiles.
    That is what our businesses know. That is why companies 
like Amazon and Microsoft and REI and so many others wanted to 
remain part of a climate agreement. That is because they know 
that these investments in emerging energy technologies help us 
drive down costs.
    Wind capacity has tripled in the United States since 2008 
with enough to power 17 million U.S. homes, and that is more 
homes than in California and Texas combined. That is thanks to 
the prices reaching all-time lows and power purchase agreements 
for wind have fallen from rates of up to $0.07 per kilowatt to 
$0.02 per kilowatt in certain regions.
    So these efficiencies are mattering to consumers and to 
businesses, and the drastic drop in the cost of utility scale 
solar PV has dropped more than 64 percent since 2008 and has 
been able to grow sufficient to power 2.1 million American 
homes. At the same time, a 54 percent reduction in the 
distributed solar PV cost has resulted in more than one million 
units being installed in American homes.
    So all of these things, Madam Chairman, are important 
public policies that we have helped to drive, and I am sure 
today's discussion will help us drive more. I think I am going 
to stop there and just reiterate what your comments were, and 
submit the rest of my very detailed statement on statistics 
about the changes in energy for the record.
    But I wanted to reiterate tomorrow we will be at the 
Bullitt Center in Seattle, which is the most energy-efficient 
building on the entire planet. Obviously we will have a 
discussion with those who are driving policies for more types 
of development like that and to understand how smart buildings 
and smart grids can help, on a distributed basis, all of our 
communities to keep moving forward. So we are very excited 
about that.
    Obviously we are going to have a chance to also talk about 
cybersecurity and making sure that as we get a more distributed 
grid, how we also protect our consumers and businesses from 
that as well. So I very much look forward to it. Someone told 
me that maybe it is the Copper River Salmon Run, but I don't 
even know that you and I will get to enjoy that, but we will be 
close by for the Copper River Salmon Run in Cordova.
    Thank you.
    [The prepared statement of Senator Cantwell follows:]  
    
    
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    The Chairman. Thank you, Senator Cantwell. I am very much 
looking forward to both parts of our energy tour tomorrow.
    I thank you all for being here this morning. I appreciate 
your contributions at different levels, and this morning we 
will hear from each of you. I would ask that you try to limit 
your comments to about five minutes. Your full statements will 
be incorporated as part of the record, but then I hope we will 
have a good opportunity for dialogue after the conclusion of 
your initial remarks.
    We will begin this morning with Ms. Lily Donge, who is the 
Principal at the Business Renewables Center for the Rocky 
Mountain Institute.
    Mr. David Greeson is with us this morning. He is the 
Project Lead at Petra Nova and the Vice President of 
Development at NRG Energy.
    Mr. Greg Merritt is with us, and he is the Vice President 
of Marketing and Public Affairs for Cree, Incorporated. 
Welcome.
    Mr. Steve Simonton is the Vice President for Drilling and 
Completion at Cimarex Energy Company. Welcome.
    Mr. Russell Vare is the Manager for Business Development at 
Mercedes-Benz Energy Americas.
    Finally, Mr. Kevin Yates is also with us, and he is the 
President for Energy Management at Siemens USA.
    Again, welcome to each of you.
    Ms. Donge, if you want to begin with your comments, then we 
will just proceed down the line after that.

STATEMENT OF LILY DONGE, PRINCIPAL, BUSINESS RENEWABLES CENTER, 
                    ROCKY MOUNTAIN INSTITUTE

    Ms. Donge. Thank you. Good morning, Chairman Murkowski, 
Ranking Member Cantwell, and members of the Committee. Thank 
you for inviting me to share the views of the Rocky Mountain 
Institute and its Business Renewables Center.
    My name is Lily Donge, and I am Principal at the Rocky 
Mountain Institute where I help lead the Business Renewables 
Center (BRC). The BRC is a membership-based organization that 
helps streamline and accelerate corporate purchasing of large 
large-scale offsite wind and solar energy. The BRC currently 
works with over 200 companies both on the buyer and the 
developer side. BRC's corporate membership includes companies 
like Amazon, Walmart, Owens Corning, FedEx, and GM.
    The BRC provides an independent collaborative platform for 
companies to come together to understand and improve the market 
for purchasing renewable energy. We keep track of these deals, 
nearly 40 companies announcing transactions for over 7.5 
gigawatts of wind and solar projects across North America since 
2012. BRC members account for about 93 percent of this.
    Corporate renewable procurement is a big trend and here to 
stay. The new business reality is that corporate America wants 
to take back control of its electricity supply. They are asking 
for choice of technology, cost-competitive economics, 
transparency, and new renewable projects to be added to the 
grid.
    According to what we hear from market participants, we know 
a lot more is on the way this year. As we track these deals in 
North America, three things to note. First, 2017 is already 
outpacing 2016, and we're at one gigawatt. Second, the Fortune 
500 dominate these deals; they represent two-thirds of the 
companies, three-fourths of the deals and the megawatts. The 
third trend is the newcomers. Since January 2016, 11 of the 18 
companies are first-time buyers, like Lockheed Martin, 
Anheuser-Busch InBev, and Johnson & Johnson.
    Diversification also extends to the supply side. During the 
same timeframe, out of 21 developers we have welcomed 10 
developers closing in on their first major corporate deal. We 
also have dozens of financiers, law firms and consulting firms 
creating an intermediary network and a transactioning market 
like never before.
    Sustainability commitments is a major driver for these 
buyers. Sixty-six percent of Fortune 100 and 40 percent of 
Fortune 500 have public sustainability commitments. In 
conversations with BRC members, it is also clear that most of 
these companies would not seriously consider renewable energy 
investment if costs were not competitive.
    It is not just a matter of cost, it is also a matter of 
speed of delivery. Energy efficiency is more cost effective, 
but it takes longer to deliver on climate goals, which are 
necessary and urgent for these companies.
    Large-scale renewable deals allow companies to make 
material progress on their sustainability targets quickly. It 
is a combination both of speed and reasonable affordability. We 
are finding out that power purchase agreements in wind are in 
the low twenties and solar in the south in the low thirties and 
high twenties in the dollar-per-megawatt-hours range.
    Because companies care about economics and cost, my team is 
rolling out a fair-value tool next week so that companies can 
understand the economics of a wind and solar project at over 
4,300 grid connection nodes across seven electricity markets. 
With projects in 19 different states, BRC companies are making 
decisions based on market opportunity. In fact, for companies 
that want power operations in your states with clean energy, 
open-market conditions are a key factor in their decision-
making process of where to purchase. They care about 
transparency, where they can create new and additional jobs and 
community impacts.
    Now what is true in these market and state levels is true 
at the country level. If the policy environment is unfavorable, 
multinational companies will not choose to procure complex 
renewable deals.
    As President Trump moves to exit the Paris Climate 
Agreement, the United States faces fewer leadership 
opportunities in the clean energy industry that has seen much 
more demand, not less, from the most significant multinational 
companies around the world. The cost curves for renewable 
technologies continue to point downwards, and without the 
United States' leadership, companies will naturally seek out 
more vibrant and growing markets.
    For us at the Rocky Mountain Institute, the next frontier 
are batteries, as Senator Cantwell had noted, high-voltage 
lines, IT for DER (distributed energy resources), smart 
buildings, EVs, and we even have an effort to link blockchains 
to the Ultra-C [ph] system to track electrons.
    All of these moving forces will need the right market 
conditions, but also the right policy conditions. We look 
forward to a Senate that supports market forces to create a 
clean, prosperous and secure future. Again, I would like to 
thank the Committee for the opportunity to testify here today.
    [The prepared statement of Ms. Donge follows:] 
    
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    The Chairman. Thank you, Ms. Donge.
    Mr. Greeson.

 STATEMENT OF DAVID GREESON, VICE PRESIDENT, DEVELOPMENT, NRG 
                          ENERGY, INC.

    Mr. Greeson. Thank you, Chairman Murkowski and Ranking 
Member Cantwell and Committee members. My name is David 
Greeson. I am Vice President of Development for NRG Energy. As 
you may know, NRG is a Fortune 250 company dual headquartered 
in both Princeton, New Jersey, and Houston, Texas.
    We are one of the largest power generators in the United 
States with almost 50,000 megawatts of conventional natural 
gas, coal and nuclear power, and in renewables we're one of the 
largest owner-operators of solar technologies in the United 
States, and we have wind generation in 13 states.
    We also directly serve about three million retail 
customers. I am based in our Houston office, where I have spent 
the last seven years developing and bringing online the world's 
largest carbon capture system attached to a power plant. The 
project is called Petra Nova, and I'm happy to report that it 
came in on time and on budget.
    As I appear before you today, the project is online and 
capturing 5,000 tons of CO2 per day that is being injected into 
an oilfield. That same oilfield before Petra Nova was nearly 
played out and was producing less than 300 barrels per day. I'm 
pleased to announce to you today that with only five months of 
injecting CO2, this oilfield is now producing 3,400 barrels per 
day, a more than 10X increase in production.
    It's important to have some context into how we had to 
think about this project. NRG is a competitive company, not a 
utility. That means that the Petra Nova project, like all NRG 
assets, needs to be profitable in a competitive energy market. 
We don't rely on rate base, where customers are locked into 
paying the costs no matter what. Rather, NRG bears the risk of 
a successful project. So for the Petra Nova project, we not 
only had to design the carbon capture system to be profitable, 
but we also had to ensure that the host coal unit that the 
carbon capture system is attached to did not increase the cost 
of electricity or change the way it's dispatched in the market 
so that it could remain competitive.
    We accomplished these goals with a lot of creative 
thinking. For example, instead of taking steam and electricity 
from the power plant to run the carbon capture system, we 
installed a combined heat and power system that was tailored 
just for our needs, and therefore was a lot more efficient than 
extraction steam and power. In the end, these creative 
solutions and others allowed us to simultaneously reduce the 
carbon emissions of the coal plant while preserving the cost 
competitiveness of that unit in the market, and all of this was 
at no risk to electric consumers in Texas.
    But with that as a backdrop, I'd like to talk about the 
specifics of the finances. The Petra Nova project was a $1 
billion project funded 55 percent by private capital 
contributions, 25 percent from loans by Japanese government 
export agencies and a 20 percent grant from the U.S. Government 
under the Clean Coal Power Initiative managed by DOE's National 
Energy Technology Laboratory in Morgantown, West Virginia.
    I'd like to say thank you to you and the members of 
Congress for this grant. I can't tell you how important this 
grant was to the success of this project. Especially early on 
in the project, even though the dollars weren't big, they're 
the riskiest dollars you spend on any endeavor like this, and 
so I just wanted to say thanks.
    My written testimony has more details about the project, 
and I'll refer you to those for a more in-depth explanation.
    So why do this at all? Well, consider the fact that because 
of the Petra Nova project, we did two really good things. 
First, we've reduced the emissions of a coal-fired power plant 
to be the same as a gas-fired power plant. Second, we're 
producing U.S. crude to supply domestic demand.
    In the near-term, carbon capture economics will continue to 
be challenging. The volatility of the price of oil and the 
upfront capital costs are the two biggest challenges. That's 
why I'd like to thank the members of this Committee who have 
supported the 45Q CCS tax credit. This program, if extended, 
would help the Petra Nova project and future CCS projects 
through those two tough challenges. The industry is working on 
bringing down costs. The government support of this low carbon 
domestic energy source, just like wind and solar, is essential 
for success.
    There are new technologies on the horizon. Membranes show a 
lot of promise, and there are more effective formulations of 
aiming scrubbing systems that are now moving out of the 
laboratory and into field tests. So with your continued 
support, carbon capture can be on a trajectory for being 
competitive on its own.
    Thank you, and I look forward to answering your questions.
    [The prepared statement of Mr. Greeson follows:] 
    
    
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    The Chairman. Thank you, Mr. Greeson.
    Mr. Merritt, welcome.

STATEMENT OF GREG MERRITT, VICE PRESIDENT, MARKETING AND PUBLIC 
                      AFFAIRS, CREE, INC.

    Mr. Merritt. Good morning. I would like to thank Chairman 
Murkowski and Ranking Member Cantwell and the rest of the 
Committee for the invitation to speak with you this morning.
    Cree, Inc., is a leading U.S.-based developer and 
manufacturer of LEDs, LED lighting systems, and also advanced 
power and wireless semiconductors. We are headquartered in 
Durham, North Carolina. We also have facilities in Wisconsin, 
Arkansas and California and have about 6,300 employees 
worldwide. Since our founding 30 years ago, Cree has been 
focused on innovation, pushing the boundaries of technology in 
order to enable people to do more while they consume less 
energy.
    So let's talk a little bit about LED technology. Cree 
introduced the first LED technology that met the stringent 
requirements of what we call general illumination, or you might 
think of it as white lighting in spaces, in about 2006. This 
enabled the first commercially viable LED lighting products 
beginning in 2007.
    I would like to point out that, importantly, our focus has 
always been on efficiency, but also on the quality of the light 
that's provided by these products. If we don't meet people's 
expectations for the appearance of light and the quality of 
light, they won't adopt it. I think we very clearly focused on 
not repeating the failures of the compact fluorescent bulb, 
which people didn't adopt because they didn't like the way it 
looked.
    These early products were relatively expensive compared to 
the products they were intended to replace, and even though 
they paid for themselves through energy and maintenance 
savings, adoption was more limited. Payback periods were often 
seen in three to five years, sometimes even as high as seven to 
nine years in some applications. I would contrast that to the 
fact that most commercial organizations are looking for returns 
on their investment in 18 to 24 months.
    Therefore, to make the economics work and to drive and 
increase adoption we went back to the lab, effectively to 
invent new technology to not only reduce the cost but also to 
improve the performance. This invention and innovation was 
required at multiple levels throughout an LED system. However, 
the LEDs themselves had the greatest initial impact. Through 
innovation and technical advancement, we have been able to 
increase the performance of LEDs by over four times since 2006, 
and we're not finished yet.
    So how does this work? A higher performance LED which is 
more efficient and, in fact, smaller, enables us to generate 
more light and use less power. That results in reduced cost 
throughout the system: smaller power supplies, smaller heat 
sinks, et cetera.
    In addition to the product innovations, which are 
important, adoption was also aided by utility incentive 
programs that were available throughout the country, and also 
the associated energy efficiency certifications that go along 
with those. Think ENERGY STAR. Those rebate programs were 
available to reduce the initial first cost of what I had 
already mentioned were expensive products.
    I would also like to point out that in the consumer market, 
ENERGY STAR served a very important role by offering consumers 
confidence to buy what was a new technology for them. 
Essentially, people trust the ENERGY STAR brand when they see 
it on the shelf.
    I would also like to point out the role that the Department 
of Energy played in helping to get LED technology to market in 
volume. Because of these continued innovations, we can now see 
certain LED streetlights that are available for under $100 that 
use 70 percent less energy than the technology they're 
replacing and pay for themselves in less than two years.
    In the consumer market, LED bulbs are available that pay 
for themselves in around six months and then last another two 
decades under normal usage, saving an average of over $150 a 
bulb.
    I would also like to point out an area we see of real 
promise, and that is of going beyond individual product 
efficiency to look at systems efficiency. In our case, this 
means intelligent lighting systems. These systems use 
integrated sensors to sense occupancy and ambient light. 
Combine that with communications, you may have heard of it 
referred to as the Internet of Things, and software data 
analytics in order to reduce the energy used by lighting 
systems by over 80 percent. What's more important is we can 
actually go beyond just making the lighting more efficient to 
make the buildings themselves more efficient, the people in 
them more productive, and, in fact, the organizations more 
profitable.
    Thank you for your attention.
    [The prepared statement of Mr. Merritt follows:]  
    
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    The Chairman. Thank you, Mr. Merritt.
    Mr. Simonton.

    STATEMENT OF STEVE SIMONTON, VICE PRESIDENT, DRILLING & 
           COMPLETION OPERATIONS, CIMAREX ENERGY CO.

    Mr. Simonton. Chairman Murkowski and Ranking Member 
Cantwell, members of the Committee, it's an honor to be with 
you this morning. My name is Steve Simonton. I'm the Vice 
President of Drilling and Completion Operations for Cimarex 
Energy Co., a publicly-traded oil and gas exploration company 
with operations primarily in Oklahoma, Texas and New Mexico.
    The majority of our current activity is in the Permian 
Basin of West Texas, New Mexico and the Anadarko Basin in 
Western Oklahoma. We pride ourselves on having strong technical 
teams with a common goal of adding shareholder value through 
drilling and production. Simply stated, our business strategy 
is to maximize our cash flow from producing oil and gas 
properties and effectively redeploy the cash flow in drilling 
projects to grow the company.
    In order to be competitive and ultimately be successful in 
our business strategy, it is imperative that we stay ahead of 
the technologies that continue to evolve in our industry. Over 
the last decade, our industry has made tremendous advancements 
to improve the productivity of the wells we drill.
    Years ago, we drilled vertical wells into the earth to 
extract oil and gas from rock intervals which were, in general, 
20 to 300 feet thick. These ``vertical completions'' only 
allowed us to extract the oil and gas from the vertical section 
of the interval we contacted. With the evolution of horizontal 
drilling technology, we are now able to drill the vertical 
section of the well down to the rock interval we are targeting, 
and then drill horizontally out into the interval, thereby 
contacting up to 10,000 feet of rock section from which to 
produce.
    With more of the rock interval now contacted, producing 
rates from horizontal wells are multiples of those in vertical 
producing wells from the same rock interval while producing--
reducing impacts to landowners, wildlife and other surface 
resources. Horizontal drilling now dominates the U.S. oil and 
gas industry landscape. Today, approximately 85 percent of 
North America's active drilling rigs are drilling horizontal 
wells, opening a new window of opportunity for the industry.
    With more rock interval now encountered in horizontal wells 
came the advancements in completion technology, mostly derived 
from empirical testing. Surprisingly enough, the industry 
downturn allowed industry participants to try many experiments 
which otherwise would have been too costly to attempt prior to 
the downturn. Low commodity prices resulted in lower cost of 
services. With lower costs for service came lower costs to 
experiment, especially in the completion or frac design of 
horizontal wells. The experimentation proved larger and larger 
frac designs would more efficiently contact horizontal rock 
interval and further improve well productivity. As a result, 
although today's total cost to drill and complete a well may be 
just at or below before the downturn, we are completing better 
and better wells, allowing us to drill economic wells and 
compete in today's low oil and gas price environment.
    Our industry has made tremendous advancements over the 
years. My world is drilling and completing these wells, and I 
have over 40 years of oilfield experience. I want to share just 
a few of the technological advancements that have allowed us to 
more efficiently drill and complete our wells. With these 
examples, I'll just be scratching the surface on advancements 
our industry has made, but hopefully will leave you with a 
flavor of the technology gains the industry has accomplished.
    Modern drilling rig design has played a large role in our 
ability to drill wells faster. The rig designs enhance safe 
drilling operations, allow for a digital data acquisition of 
all drilling parameters, and are fit-for-purpose to drill 
horizontal wells. They have the capability to ``walk or skid'' 
from well to well on multi-well pads to accelerate project 
timelines and lower mobilization costs.
    Data gathering and communication technology has allowed us 
to make tremendous strides to drill our wells faster. Downhole 
rotary steering tool technology now allows us to ``point and 
steer'' the downhole drilling tools from the surface using 
real-time data. Technology gains in drill bit material and 
cutter design have resulted in faster drilling with longer run 
times for the bits we use to drill our wells. The bottom line 
is reduced time to drill equates to reduced cost.
    We are utilizing technologies to understand the oil and gas 
reservoir rock we are penetrating to optimize our completion 
design. Digital data obtained from fiber-optic recording tools 
provide us with real-time temperature and acoustic information 
to evaluate the effectiveness of frac operations and completion 
designs. With this data, we have the means to recalibrate our 
completion design with a goal of maximizing well productivity.
    Resources once considered out of reach are now the targets 
of the ``Unconventional Revolution.'' Because of advancement in 
technology, in our view, this revolution is uniquely American. 
Through technology, creative trial and error and perseverance, 
the U.S. oil and gas industry has been able to change forever 
the landscape of our industry.
    And with that, I would welcome any questions.
    [The prepared statement of Mr. Simonton follows:]  
    
    
    
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    The Chairman. Thank you, Mr. Simonton. I had an opportunity 
just last week to take a couple members of this Committee, 
along with Secretary Zinke, to Alaska's North Slope where we 
viewed much of what you have just discussed with regards to the 
technology. So seeing it firsthand is pretty impressive.
    Mr. Vare, welcome to the Committee.

   STATEMENT OF RUSSELL VARE, MANAGER, BUSINESS DEVELOPMENT, 
               MERCEDES-BENZ ENERGY AMERICAS, LLC

    Mr. Vare. Thank you. Good morning, Chairman Murkowski, 
Ranking Member Cantwell, and members of the Committee. Thank 
you for the opportunity to participate in today's meeting. My 
name is Russell Vare and I'm Manager of Business Development 
for Mercedes-Benz Energy Americas, headquartered in Sunnyvale, 
California. I appreciate the Committee's interest in how 
innovation is advancing new energy technologies to help drive 
down costs.
    As a major global automaker, our parent company, Daimler, 
plans to continue our leadership in innovation by adopting a 
strategic framework called CASE, which stands for Connected, 
Autonomous, Shared & Service, and Electric. Our new vehicles 
and services will focus on connectivity, autonomous driving, 
flexible use, and electric drive systems.
    So we're taking a holistic approach to electrification of 
transportation during this truly fundamental shift in the 
automotive industry. We will have ten plug-in hybrid models 
available in 2018, and ten all-electric models available in 
2022.
    Beyond electrifying our cars, vans, buses, and trucks, we 
are investing in electric mobility solutions beyond the 
vehicle, including stationary energy storage, shared mobility 
services, and electric vehicle charging infrastructure. 
Globally, we are investing around $10 billion euros in our 
technological competence and new electric fleet.
    Mercedes-Benz Energy was established last year to directly 
support the electrification strategy behind CASE, providing 
innovative energy storage and EV charging solutions for homes, 
businesses and utilities to manage resources more efficiently 
and sustainably.
    What we are doing is unique to others in the automotive 
space. We recognize the value of electric vehicles that they 
can have on the grid, and we're using the same automotive grade 
battery technology used in Mercedes-Benz electric plug-in 
hybrids and electric vehicles for stationary storage 
applications. Mercedes-Benz stationary energy storage systems 
can optimize solar consumption, reduce expensive peak electric 
loads, provide back-up power, and offer a variety of other grid 
services, such as frequency regulation, transmission and 
distribution deferral, renewable integration and other 
ancillary services.
    Just three weeks ago, we launched our home energy storage 
solution in the U.S. with the Utah-based residential solar 
company, Vivint Solar, to bring clean energy solutions to 
American homes.
    We are excited by the growing demand for clean energy 
technology. In 2016, revenue from the U.S. energy storage 
market surged by 54 percent from the previous year to reach 
$427 million. By 2022, the U.S. energy storage market is 
expected to be worth $3.2 billion.
    One of the major drivers of this growth is the rapid 
decline in battery prices. As also mentioned earlier this 
morning, since 2010 the price of lithium-ion batteries fell 
roughly 80 percent, from more than $1,000 a kilowatt-hour down 
to $227 a kilowatt-hour at the end of 2016. We are driving this 
price reduction by increasing scale production. Two weeks ago 
we announced the expansion of our battery factory in Kamenz, 
Germany, to 80,000 square meters to produce more electric 
vehicle batteries at scale.
    In addition to the decreasing prices, advancement in 
battery efficiency is rapidly improving. From 2012 to 2016, 
we've seen a 64 percent improvement in cell energy density. 
Such economic and technological improvements will lead to 
faster and greater adoption of electric vehicles and energy 
storage into our transition to a clean energy economy.
    According to Bloomberg New Energy Finance, between 2020 and 
2030, electric vehicles will become cheaper to own than cars 
with internal combustion engines, and this matches our internal 
predictions as well.
    We are strongly committed to innovating electric drive 
technology for further cost reductions on vehicles and 
batteries. And we're also committed to continue to work with 
agencies at national, regional, and city levels to support 
electrification of our transportation systems.
    So thank you for the opportunity to participate in today's 
hearing. I'm happy to answer any questions.
    [The prepared statement of Mr. Vare follows:]  
    
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    The Chairman. Thank you. I appreciate that update.
    Mr. Yates, welcome.

    STATEMENT OF KEVIN YATES, PRESIDENT, ENERGY MANAGEMENT 
                     DIVISION, SIEMENS USA

    Mr. Yates. Thank you, Chairman Murkowski and Ranking Member 
Cantwell and members of the Committee. I'm Kevin Yates, 
President of Siemens Energy Management Division here in the 
U.S., and it is a privilege to testify today on behalf of 
Siemens' 50,000 employees in the U.S. represented in all 50 
states.
    In the past 15 years, Siemens has invested $40 billion in 
the U.S., and we invest $1 billion annually in U.S.-based 
research and development. So while we're a global company, we 
are proud to say that we're U.S. local, setting a high 
expectation for advancing critical technology in the fields of 
energy, health care, mobility and manufacturing efficiency.
    Specific to the energy space, since our first day in the 
U.S. more than 160 years ago, Siemens has been inventing, 
optimizing and reengineering machines capable of generating 
electrical energy at all levels. One might conclude that our 
DNA has a foundation of electrifying the world. It's because of 
this deep-rooted foundation in electrification that we continue 
to invest in innovation around power generation, transmission 
and distribution.
    I would like to spend my opening remarks this morning to 
share a few examples of technology that enable the development 
of not only a reliable and an affordable electrical 
infrastructure, but also a sustainable future.
    First, Siemens offers wind and solar solutions for various 
operating environments. In fact, in Alaska we are proud to 
provide technology that enabled the Cold Climate Housing 
Research Center to be fueled almost exclusively by solar 
energy. In Iowa and Kansas today, Siemens Gamesa Renewable 
Energy designs and manufactures equipment that make wind energy 
production more efficient, innovation that has had a U.S. 
influence and a contribution which has enabled wind production 
to be very competitive.
    Now while wind and solar generation offer advantages in 
terms of sustainability, they do present new challenges, two 
specifically. How do we efficiently transmit renewable 
generation to consumers? And how do we manage the intermittency 
of renewable energy?
    Siemens is responding to this challenge as well by 
advancing transmission technology to move electrical energy 
across vast distances while using software to effectively plan 
assets and help manage intermittency. In fact, next year we 
expect to start work on a new transmission line that will carry 
wind energy from Texas into the Southeast U.S. And this project 
will not only provide sustainable generation to reach 
consumers, but it will inject about $4 billion into the 
economies of the two states that that wind energy crosses, 
Louisiana and Mississippi.
    Third, Siemens is involved in another key trend in the 
electrification landscape, distributed energy resources. You 
might think about this as the other end of the spectrum. This 
is where energy is now being generated on a much smaller scale 
and in much closer proximity to the consumer. In these cases, 
Siemens is working with cities, manufacturers, hospitals and 
universities alike to help them build a more reliable and 
efficient electrical infrastructure.
    And finally, Siemens is focused on modernizing our grid. 
Our nation's power grid is one of the most complex, massive 
machines the world has ever seen. In fact, someone once said 
that our utility grid is the great enabler. I happen to agree 
with this perspective, but the grid, the great enabler, is aged 
and needs to be renewed, rebuilt, rewired, but also made more 
intelligent. Whether we're talking about large-scale renewable 
generation or localized, distributed small power, Siemens is 
focused on helping our customers manage these assets in a more 
reliable and efficient manner through automation and software.
    As an example, we recently celebrated a successful 
microgrid installation of a low carbon community at a Native 
American reservation in California. The project not only helped 
the reservation solve an issue of regular brownouts, but our 
software has enabled the connection of four different types of 
electricity generation--
including solar and storage technology--with a result to save 
the community $200,000 per year in energy costs, reduce CO2 
emissions by 150 tons per year and increase tribal clean energy 
jobs by 10 percent.
    So I'll just close with this final point. At Siemens, we 
work closely with our customers in a wide variety of industries 
to develop new technologies that help move the industry forward 
without losing focus on the next big advancement. A critical 
component of what enables us to do this in the U.S. is a 
culture of innovation at work in this country. We think of it 
as an energy ecosystem, and we do believe in an energy future 
that is affordable, reliable, and sustainable, but the 
ecosystem transcends any one entity.
    We look forward to helping foster a more collaborative 
energy ecosystem of the future. Thank you for your time. And I 
look forward to your questions.
    [The prepared statement of Mr. Yates follows:]  
    
    
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    The Chairman. Thank you, Mr. Yates, and thank all of you. 
This has been a very interesting hearing this morning, and I 
appreciate what each of you is contributing. My husband and I 
just put solar on our home here in Washington, DC, rooftop 
solar, and we actually argue over who gets to open the bill 
each month now to see what it is that we are, quote, 
``saving.'' But it has been an eye-opener for us as a family.
    I would invite my colleagues to come to my office upstairs 
on the fifth floor here. Just yesterday, we installed our own 
little, we call it a ``grow tower.'' It is comprised of several 
orange buckets from Home Depot, and we have hydroponic lettuce 
growing in it with a small circulating pump. It is a system 
that costs about $200 overall. We are utilizing some LED lights 
to really help demonstrate what it is that we can grow. We 
encourage everyone in the office to have a little bit of fresh 
salad every day.
    What we are trying to demonstrate is that even in a cold 
and a dark remote place we can, as Alaskans, grow some healthy 
things in a space that is very, very limited utilizing the 
efficiencies that we have with these LED light strips. So I 
think about the different things that individuals can do to 
spark that imagination. It is kind of fun on top of it all.
    I would like to take my questions to you this morning to a 
higher level instead of what we, as individuals, are doing. Let 
me just ask generally to each of you, because you all bring a 
different perspective here. I mentioned in my opening that we 
really have not updated our energy policies around here for 
about a decade now. Can you give me some examples of where we 
have either impeded the progress in the areas that we are 
seeking to develop these enhanced efficiencies, or our 
opportunities, or reduce our costs? Or, if you can't think of 
those areas where the Federal Government has been in the way, 
can you provide us some examples where technical assistance or 
funding from DOE or from the Federal Government has made the 
difference?
    I think, Mr. Greeson, you mentioned in your comments a 20 
percent grant from DOE, a very specific example of how that 
financing helped kick your project over. So I am throwing this 
out to each of you because I think it is important for us to 
understand what, from the federal perspective, we can be doing 
more of or less of to help these opportunities advance. I do 
not care who starts.
    Ms. Donge.
    Ms. Donge. Thank you. Just two very specific points, when 
it comes to corporate renewables and what the buyers are 
thinking, are definitely the PTC and ITC extensions. It is not 
necessarily that the tax credits are helpful, it is the 
certainty of when they phase out, so that planning and OEMs can 
ensure their capital costs meet the demands of the developers. 
That's one example. Then the second example is the DOE's 
SunShot Initiative, which has reached its goal a few years 
ahead of time--reached its goal this January--of reducing costs 
to $1.00 per kilowatt-hour. I think that's a very significant 
way to, technical way, to prove that the cost reductions can go 
further for these technologies.
    Thank you.
    The Chairman. Others? Mr. Yates?
    Mr. Yates. Yes, ma'am. Thank you. A two-part answer to the 
question. The first would be as we look at the implementation 
of even further renewable assets, the key is going to be 
connecting those generation sources with consumers. And 
sometimes that crosses state utility types of jurisdictions, 
and so the permitting process, and how we can make that more 
expedient, more streamlined is, I think, a key opportunity.
    And then the second comment that I would make is we 
absolutely--we have a great relationship with renewable--some 
of the national labs. And one specific example, we worked with 
a renewable energy lab on some e-car charging technology to 
help automate that there in Colorado, working with an auto 
manufacturer and a utility. And so, I think a collaborative 
environment and a collaborative ecosystem is key to continuing 
to move our energy sector forward.
    The Chairman. Good. Anybody else? Mr. Simonton?
    Mr. Simonton. Thank you. As far as the Federal Government 
impeding our progress, I would say, and second, the regulatory 
turnaround is what really is impeding us, and trying to 
schedule all of our drilling and completion permits in the 
federal acreage that we operate in. It's not the expectation of 
the federal requirements, and we're certainly willing and able 
to do that, but it's absolutely the turnaround is delayed by 
many, many months. And I think there is an understaffing issue 
that the regulatory body is having in the different regions 
that we operate.
    The Chairman. Good. I appreciate that.
    Mr. Vare?
    Mr. Vare. I would say that I don't see anything that's been 
in the way, but as energy storage is a new technology, right 
now the federal Investment Tax Credit for solar does have some 
applications to energy storage, which is good, but I would just 
suggest for any future energy policy that was created, that 
energy storage fits into renewables as in the way that it can 
help with distributed generation.
    The Chairman. Great.
    Mr. Merritt, you get to wrap up the question.
    Mr. Merritt. Yes. So I would like to point out three key 
areas I think are important for the role the Federal Government 
plays. One is, and I mentioned this earlier, early R&D funding 
and support for projects that have long lead-times and 
potentially high levels of risk. These are projects that often 
won't be undertaken at the same scale or perhaps as soon if 
private industry does not have the support of federal research 
dollars. I think the role of the Federal Government in terms of 
demonstrations and trial projects and, in fact, early adoption 
is also a very key role. It does a few things. It validates the 
technology in the marketplace. It also provides early revenue 
for those companies that are trying to justify continued 
investment. And then lastly, I would mention the certifications 
and standards to encourage adoption, such as what's happened in 
the ENERGY STAR program are important.
    I would highlight going forward, I would mention systems 
efficiencies and the potentially very large gains that are 
available there. I think the government, the Federal 
Government, can have a very key role there in terms of 
demonstration and trial activities. Thank you.
    The Chairman. Great. Thank you.
    Senator Cantwell.
    Senator Cantwell. Thank you, Madam Chair.
    Mr. Yates, not to put you on the spot, but I actually think 
everybody here talked about various aspects that the government 
is involved in, technology and R&D, but are we the leaders? You 
are a global company. Is the United States the leader in 
renewable energy?
    Mr. Yates. I would say the United States is absolutely at 
the forefront, and I would go and point to the advances that 
we've made in the wind energy market as an example. Some of the 
numbers that you and the Chairman cited earlier today, as well 
as some of my colleagues on the panel have cited, the 
tremendous improvements in production costs, and that is a 
direct result of the investments that we've made both 
domestically here in the U.S. in our own wind energy facilities 
as well as abroad. So I think we absolutely have the 
environment to continue to do that, and we look forward to 
working both with the Administration and with Congress as well 
as the Department of Energy on ways to continue that evolution 
in the wind and renewable markets.
    Senator Cantwell. So now would not be the time to pull your 
punch on the leadership.
    Mr. Yates. As far as the Administration goes, I mean, from 
our standpoint, we have a corporate sustainability target to be 
carbon-neutral by 2030, Siemens Global.
    Senator Cantwell. Yes. I am not even talking about Paris. I 
am just talking about maybe, more specifically, the Office of 
Energy Efficiency and Renewable Energy (EERE), the President 
suggesting a 70 percent cut.
    Mr. Yates. Well, again, we would be interested in moving 
technology forward, and I would say that we see the Department 
of Energy as a key part of that. It's not the only part of that 
moving forward, but we would ask that Congress and the 
Department of Energy reach out to the private sector and engage 
in public-private partnerships that could help continue to 
advance technology.
    Senator Cantwell. So if we want to keep being a leader, we 
need to keep our investments in R&D and deployment going.
    Mr. Yates. We need to keep fostering environments where we 
have collaborative partnerships with the Federal Government and 
the state governments as a part of that but also reaching into 
the private sector to do that.
    Senator Cantwell. What do you think on grid development--
from the context of how big that opportunity is if we were the 
pioneers in the next phases of that grid technology--how big is 
the opportunity around the globe for that kind of technology?
    Mr. Yates. I don't know that I would specifically say that 
I know what the opportunity is from a dollars and cents 
standpoint. What I would say is that geographically across the 
globe there are different types of energy challenges. And at 
Siemens, we focus on not only innovation here in the U.S., but 
how we can take that abroad. And to get on a global scale, I 
think technologies are going to be developed in different 
regions of the world that are applicable. But I think creating 
an environment in the U.S. where we continue to innovate energy 
infrastructure not only is going to help us domestically but 
give us a platform to take technology global.
    Senator Cantwell. I would agree. The United States has a 
huge opportunity for other parts of the world that are so 
energy inefficient and whose grids are so elementary to take 
and create the smart grid and smart building platform for the 
future and really capitalize on those jobs and investments.
    I wanted to point out, Madam Chair, I think we are getting 
a letter today from all the former leaders of the Office of 
Energy Efficiency and Renewable Energy--from the Clinton 
Administration, Obama Administration, both Bush 
Administrations--saying not to gut the EERE office. And so 
certainly I know one of the things that has been highlighted 
here are all the great ways in which that agency has been 
working with so many of these partners here. We definitely want 
to bolster that organization. Thank you, Madam Chair.
    The Chairman. Thank you, Senator Cantwell.
    Senator Hirono.
    Senator Hirono. Thank you, Madam Chair, and thank all of 
you for your testimony.
    I am glad that Senator Cantwell has focused on EERE, the 
Department of Energy's Office of Energy Efficiency and 
Renewable Energy, and the huge cuts that the President's budget 
reflects on that program. And as I observed Secretary Perry, 
during his nomination hearing, the Department of Energy has 
been a key supporter of Hawaii's efforts to transition from 
importing oil to renewable energy, including a goal of 100 
percent renewable electricity by 2045.
    This is a question that maybe Mr. Merritt could respond to. 
Can you comment on the importance of public investments and 
clean energy technology and what the impacts could be of the 
major funding cuts to DOE, in the case of EERE, a two-thirds 
cut, on the pace of clean energy technology innovation and 
working with a state like Hawaii to move us off reliance on 
fossil fuels?
    Mr. Merritt. Surely. So I think, as I mentioned earlier, 
there are a couple of key roles that EERE and the Department of 
Energy play. One is early R&D funding. You know, in our case, I 
would argue R&D technology have moved beyond the point where 
it's now past the tipping point and is fully self-sufficient.
    However, what I would point to would be the next generation 
of technologies which are going to be required for us to 
achieve the goals you highlighted. The early long lead-time 
investment and perhaps higher-risk investment that's required 
for these technologies absolutely requires, or if not requires, 
benefits from public funding and public support. Would it 
happen anyway? Potentially, but it would take longer, and it 
would not be as powerful.
    Senator Hirono. I would agree with that. I think that that 
is a rather tactful response because in the area of moving 
toward clean energy and energy self-sufficiency, tax credits 
and other kinds of support that governments at both the state 
and federal levels have been very much relied upon, which takes 
me to the question relating to energy storage.
    This is for Mr. Vare. You mentioned that your company just 
launched a home energy storage service in the U.S. with a Utah-
based residential solar company. Many people in Hawaii see 
energy storage as potentially a big help in reaching our goal 
of 100 percent renewable electricity by 2045. What are your 
company's forecasts for the long-term cost savings for 
customers installing residential storage systems? And how is 
your company reaching out to residential customers to explain 
the potential benefits to them of energy storage?
    Mr. Vare. Yeah, we absolutely see Hawaii as one of the 
leaders in renewable energy integration and see the residential 
home storage market as one of our key markets that we're 
focusing on.
    In terms of the cost savings per customer, we would need to 
look--we look individually at that customer's utility rate 
structure, so it's hard to give a specific number, but we do 
see a financial benefit and we are planning with Vivint Solar, 
as you mentioned, to launch in Hawaii. There are some specific 
requirements for the Hawaiian market for zero net export that 
we're looking to be able to have our systems function there, 
so----
    Senator Hirono. It sounds as though you are already 
interacting with folks in Hawaii?
    Mr. Vare. Absolutely, yes.
    Senator Hirono. That is good to know. And, of course, you 
mentioned that you would like energy storage to be part of 
discussion around investment tax credits.
    Mr. Vare. Correct.
    Senator Hirono. As you know, there are bills to do that.
    Mr. Vare. Correct.
    Senator Hirono. I am certainly supportive because when you 
are talking about intermittent energy, storage is a huge part 
of how we can actually bring all of that online.
    Again for you, since 2006 Hawaii has cut its annual use of 
petroleum by 41 percent, or 22 million barrels, while renewable 
energy grew from 9.5 percent of the electricity market in 2010 
to 26.6 percent in 2016. I would like to see a similar 
transition in the transportation sector because we are 
focusing, in Hawaii particularly, on the electricity sector. 
What policies do you recommend to accelerate the transition to 
electric vehicles that you referred to in your testimony?
    Mr. Vare. I believe the electric vehicle charging 
infrastructure support would be a key policy, and where 
Mercedes-Benz Energy fits within Daimler is, how can we support 
this vehicle electrification? So for the residential energy 
storage, we see that as the customer purchases an electric car, 
as they have solar in their home, they have residential battery 
storage, that they can efficiently manage the energy at their 
home. So in order to help increase that transition to full 
electrification at the home, they need the electric car, and I 
think that more EV charging infrastructure would help make that 
decision easier to transition to electric drive.
    Senator Hirono. Thank you.
    Thank you, Madam Chair.
    The Chairman. Thank you. We have some really great projects 
going on in some of our smaller communities. Our capital city 
in Alaska--Juneau--is on an island, primarily powered by--the 
energy is generated by hydropower. We are looking to do some 
interesting things with distributed heat generation. And when 
you think about the opportunity for islanded communities, 
whether it is a state like Hawaii or communities like Juneau, 
they are just perfectly brilliant prototypes for doing some of 
what we are talking about, particularly in areas where you are 
a renewable energy base.
    The island of Kodiak is about 98 percent renewable between 
its wind, its hydro and the storage capacity that they have 
there. And when you think about that island community, it is 
our second largest community in terms of the volume of seafood 
that comes in. You have a processing industry that is a pretty 
big consumer. You can look at these small towns and say, well, 
anybody can make success happen, but when you think about the 
demand during the season, it is pretty high.
    We are demonstrating significant progress as we look to the 
energy assets that are there rather than trying to bring 
things--although you know, we would like to do more with our 
natural gas to share with Hawaii. But the reality is the more 
that you can use what is around you, whether it is these 
villages like Kongiganak that take a little wind and combine it 
with some other interesting applications and figure out ways to 
get off diesel-powered generation, these are some breakthrough 
innovations that we are seeing. It is not on large scale, but 
if you can prove it out in high-cost places like Alaska and 
Hawaii, I think we just have extraordinary potential.
    Mr. Merritt, you mentioned intelligent lighting. As I look 
to some of the real cost drivers in our villages, again, these 
are communities that are not connected by roads, everything has 
to be flown in. When you think about anything that needs to be 
frozen in a grocery store, you have the expense of the freezer, 
and you are running it by diesel, but you also have the cost of 
that little grocery store. If you have the technologies that 
recognize that the light does not need to be on in that display 
case or the light does not need to be on in the refrigeration 
unit, these small little operators save money and thus are able 
to help, in a little way, reduce the cost to the consumer when 
it comes to the goods that are provided to them.
    I think about some of these lighting applications that we 
have out there, again, where you have streetlights that are 
using outdated and inefficient lighting, the incremental gains 
that we can make in just the lighting application I think is 
really quite considerable in these remote, high-cost areas.
    I wanted to ask just a couple more questions, and then I 
will let everyone kind of throw into the conversation anything 
that you had hoped to get on the table but were perhaps not 
asked.
    Mr. Simonton, you described a lot of the technological 
innovations. I mentioned that we had an opportunity up north a 
couple weeks ago to see for ourselves and really get a better 
understanding of where the industry is headed, how you can use 
the digital data that is really helping us be smarter, quicker 
and more efficient. But as we see those efficiencies, what does 
that do to the workforce? Does this mean that there is a 
different requirement for this skilled worker? Instead of the 
roughneck that we all, or those of us that come from oil-
producing states, called the guys that were making it happen, 
is it now the computer technicians? Are we seeing that we need 
fewer workers out in the oilfield? What are you seeing?
    Mr. Simonton. Yes, thank you. The innovation of technology 
in the oil and gas industry has certainly accelerated the whole 
process across the board. One of the things, for instance, the 
drilling rigs that we have today are modern drilling rigs that 
are all computerized, and what we find is the younger 
generation of employees are acclimated to this technology. They 
grow up with the technology, so it really is an easy 
acclimation and a process for them to develop.
    As far as, are we needing fewer and fewer employees in the 
industry? I would tell you in my career today the complexity of 
the type of wells that we drill is requiring more personnel, 
more people on location, more than ever in my career. So I 
would say that we're an accelerated industry, things are 
getting faster. The investment for the unit of hydrocarbon that 
we find, we're finding more and able to produce more 
efficiently more hydrocarbons per dollar of investment.
    So I think quite to the contrary, we're actually a fast-
paced and faster-paced industry with a young workforce that is 
acclimated to the technology, and they're thriving.
    The Chairman. Great.
    Mr. Greeson, as you discussed, the innovation that you are 
advancing with the Petra Nova project and all that we are 
seeing with that commercialized CCS project, have you been 
working with other groups who are interested in pursuing this 
technology either here in the United States or abroad? Are you 
kind of working on your own or are others viewing this as a 
future opportunity?
    Mr. Greeson. Thank you, Chairman. We are seeing worldwide 
interest. I hosted the Australian Energy Minister on a tour of 
the facility about three weeks ago. I just returned this week 
from spending time in India, who is interested in CCS EOR, 
enhanced oil recovery. I think the last total was we've hosted 
eight international delegations on tours of the facility to see 
how we were able to achieve this project on time, on budget and 
get the commercial structure set so that oil pays for 
everything we did and electric customers don't have to pay for 
reducing carbon emissions.
    The Chairman. Great.
    Mr. Yates, as we are considering the opportunities and the 
challenges that we face in developing some of these really 
small microgrids and bigger expansions, you mentioned the 
involvement with the Cold Climate Housing Research Center in 
Fairbanks and what you had done to help facilitate the solar 
generation there. What do we need to be doing to structure 
partnerships between 
industry, between our communities, our universities, the 
Department of Energy and our national labs to build out more 
when it comes to the innovation that we might see within this 
space of microgrids?
    Mr. Yates. Thank you, Chairman. I believe that, as you 
rightfully pointed out in your question, there is a partnership 
aspect to it. And I would point to the best case that I would 
give you is this project that I mentioned earlier in my opening 
remarks, the Blue Lake Rancheria project out of Northern 
California where we had a Native American reservation that was 
dealing with brownouts on a regular basis. They were at the end 
of a large utility transmission and distribution grid. And it 
wasn't just about dealing with the brownouts, it was also--once 
we started to talk partnerships with the local university, the 
utility, the tribe itself, and some other technology partners--
it was really about, how do we give them energy independence 
but also do it in an affordable way? And the answer to that and 
to many of the questions that we've talked about is software.
    And so I think that whether we're talking about the 
integration of 200 megawatts of wind and transmitting it 250 
miles to a core consumer base, or we're talking about a very 
small microgrid with 10,000 metered customers, the enabler of 
both of those and many of these challenges is technology 
specifically around software. I think the key is, how do we 
create an environment where all the parties come to the table 
with a common goal to not only implement these renewable energy 
technologies or the various types of energy-generation 
technologies, but do it in the most reliable, affordable and 
sustainable way?
    The Chairman. Your comments remind me that in many parts of 
my state, and you get into areas of whether it is Africa or 
other parts of the world, where the biggest complicating factor 
here is that we don't have that broadband capacity. That 
software that is so necessary to allow us to really capitalize 
on this, we cannot make work yet. So we are filling in the gaps 
in Alaska, we are making some headway there. That is not our 
problem here in this Committee, that is Commerce, but it does 
remind me how connected this all is and how important it is 
that we have that level of access when it comes to our ability 
to communicate.
    Mr. Vare, I want to ask you a question because you 
mentioned how the reduction in costs that we are seeing with 
the lithium-ion batteries has really helped to advance movement 
within the electric vehicles and the home energy storage 
systems. We recognize that is significant. Is it all about 
cost? Is that what the consumer wants to see? That is what my 
husband wants to see, I will tell you. But how much of it is 
just an awareness and understanding and just kind of some of 
the human behavior that we need to change in order to move to 
some of these different approaches?
    Mr. Vare. I think that some of it still is about cost, so 
when we hear these numbers of battery price declines, it's easy 
to think that it's cost competitive. But, for example, an 
energy storage system has power, electronics, energy management 
software. So as a system, it's still expensive and it's still a 
new market. So I think there is still further justification for 
incentives and cost declines that are needed.
    For maybe on the electric vehicle side, I think that there 
is this maybe a mental shift or paradigm shift that needs to 
happen. We're still at one percent. We've been growing every 
month in terms of electric vehicle sales in this country, but 
it's still one percent market share in terms of new vehicle 
sales. So there is, I think, an additional maybe mindset shift 
needed there to help transition people to electric drive.
    The Chairman. Okay. Last chance for anyone to add for the 
good of the order any comments that you may want the Committee 
to be aware of.
    [No response.]
    All right. You are all happy. We are happy. I am pleased 
that you were with us this morning.
    Again, I do not think the Committee attendance this morning 
is at all reflective of an interest in this subject. It is, let 
us just say, an interesting day here in the United States 
Senate, and there is a lot going on. Know that the Committee 
members will have an opportunity to review everything that has 
been presented here as well as, again, your full statements. I 
would imagine that Committee members will be submitting 
questions to you for the record so that we can have further 
information as to that.
    I thank you for being here this morning, making the trip 
and for all of your contribution. I think we are making a 
difference, and that is a good thing for the country.
    With that, we stand adjourned.
    [Whereupon, at 11:25 a.m., the hearing was adjourned.]

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