[Senate Hearing 115-495]
[From the U.S. Government Publishing Office]


                                                     S. Hrg. 115-495

                     THE DOMESTIC AND GLOBAL ENERGY
                    OUTLOOK FROM THE PERSPECTIVE OF
                    THE INTERNATIONAL ENERGY AGENCY

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

                                HEARING

                               BEFORE THE

                              COMMITTEE ON
                      ENERGY AND NATURAL RESOURCES
                          UNITED STATES SENATE

                     ONE HUNDRED FIFTEENTH CONGRESS

                             SECOND SESSION

                               __________

                            JANUARY 16, 2018

                               __________


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               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                JOE MANCHIN III, West Virginia
CORY GARDNER, Colorado               MARTIN HEINRICH, New Mexico
LAMAR ALEXANDER, Tennessee           MAZIE K. HIRONO, Hawaii
JOHN HOEVEN, North Dakota            ANGUS S. KING, JR., Maine
BILL CASSIDY, Louisiana              TAMMY DUCKWORTH, Illinois
ROB PORTMAN, Ohio                    CATHERINE CORTEZ MASTO, Nevada
SHELLEY MOORE CAPITO, West Virginia  TINA SMITH, Minnesota

                      Brian Hughes, Staff Director
                Patrick J. McCormick III, Chief Counsel
  Brianne Miller, Senior Professional Staff Member and Energy Policy 
                                Advisor
             Mary Louise Wagner, Democratic Staff Director
                Sam E. Fowler, Democratic Chief Counsel
           Scott McKee, Democratic Professional Staff Member
                           
                           
                           
                           C O N T E N T S

                              ----------                              

                           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.....................................................     2

                                WITNESS

Birol, Dr. Fatih, Executive Director, International Energy Agency     4

          ALPHABETICAL LISTING AND APPENDIX MATERIAL SUBMITTED

Birol, Dr. Fatih:
    Opening Statement............................................     4
    Written Testimony............................................     9
    Responses to Questions for the Record........................    32
Cantwell, Hon. Maria:
    Opening Statement............................................     2
Murkowski, Hon. Lisa:
    Opening Statement............................................     1

 
                     THE DOMESTIC AND GLOBAL ENERGY.
                    OUTLOOK FROM THE PERSPECTIVE OF
                    THE INTERNATIONAL ENERGY AGENCY

                              ----------                              


                       TUESDAY, JANUARY 16, 2018

                                       U.S. Senate,
                 Committee on Energy and Natural Resources,
                                                    Washington, DC.
    The Committee met, pursuant to notice, at 10:10 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 as we begin our first hearing in what promises to 
be a very busy 2018.
    I would like to provide specific welcome this morning to 
our new member, Senator Smith. It is good to have you as part 
of the Committee. I think you will find that this is a 
committee that does good work. We like to focus on policy, and 
we like to do things in a bipartisan way every now and again. I 
am looking forward to starting the new year off on that good 
foot.
    We do not have Senator Capito with us this morning, but she 
is also returning to our Committee, and I look forward to 
welcoming her and her ongoing contributions.
    We do have a lot on our agenda today. Our broad bipartisan 
Energy and Natural Resources bill, again, we are looking 
forward to continuing that as the year progresses, as well as 
our efforts to increase our nation's mineral security, our need 
for a wildfire funding fix paired with forestry management 
reforms, park maintenance backlog, energy innovation, electric 
reliability, islands and territories. We have a wide range of 
public lands legislation. Those are just a few of the things 
that we have on deck for this new year.
    We are probably going to have a lighter attendance this 
morning. I think many members are still returning to Washington 
ahead of this evening's vote. But I truly thank you, Dr. Birol, 
for your attendance this morning.
    I think, as I mentioned to you, we look to the 
International Energy Agency (IEA) for its guidance, for its 
forecast, for better understanding of what is happening around 
the world. And so, you being here this morning to help set the 
stage for the year and provide your agency's perspective on the 
domestic and global energy outlook is greatly, greatly 
appreciated.
    The good work done by the IEA helps to identify market 
trends and provides valuable information to guide policy 
decisions, both here in the United States and around the world. 
IEA's insight and analysis helps us move our policies in the 
right direction. In turn, our work helps the IEA with its core 
mission--promoting energy security, cooperation, and stable 
markets.
    We cannot emphasize too strongly how significantly the role 
of the United States has evolved in recent years. As Dr. Birol 
notes in his prepared statement, ``The United States has become 
the undisputed global oil and gas leader.''
    During my time here on the Committee, both as Ranking 
Member and as Chair, we have gone from discussing the needs to 
site LNG import terminals all along our coasts to now 
expediting LNG export terminals. And we have gone from 
lamenting our reliance on foreign oil and the steep price of 
that oil, to the United States being the world's swing producer 
in an era of abundant energy.
    Technology innovation and the shale revolution have led the 
way and the Administration is working hard to reduce barriers 
to energy development. Allowing for increased exploration and 
production in the United States, as we did at the end of last 
year with the opening of Alaska's 1002 Area, will provide for 
our long-term security and allow us to extend our influence in 
world markets.
    At the same time, we know that these markets are cyclical 
and that prices could rise substantially in the future if we do 
not take proactive steps to spur investment and supply. Just 
last March, the IEA warned that global oil supply could lag 
after 2020 if new investments are not made in the near-term. 
That is a warning for all of us. I know the IEA has continued 
to conduct significant research on this matter and I look 
forward to delving a little bit deeper into that this morning.
    Although the IEA was established on the premise of 
cooperative oil security, the agency has also evolved and 
expanded its mission to cover a wide range of energy-related 
topics. These include energy efficiency, the digitalization of 
energy, and one that I am particularly interested in and that 
is the cost reduction in renewable technologies which portend 
major shifts in how we generate and use energy.
    Our Committee has examined these topics largely through a 
domestic lens. So today we have the benefit, again, of an 
international perspective, a broader view that ties together 
world trends and events. We certainly look forward to it.
    Again, Dr. Birol, thank you for taking time this morning to 
come and testify. We know that your schedule is very, very busy 
when you travel from Paris and we appreciate your willingness 
to share your expertise and the work of the IEA with our 
Committee.
    With that, I turn to Senator Cantwell for her opening 
comments.

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

    Senator Cantwell. Thank you, Madam Chair and thank you for 
scheduling today's hearing, although, I think I did suggest at 
one point in time we visit Dr. Birol instead.
    The Chairman. Yes, we will work on that.
    Senator Cantwell. But we were not able to do that.
    But I so appreciate him being here today and for the 
discussion on the IEA's primary focus on increasing energy 
security for its member nations and I appreciate its continued 
focus on expanding the definition of energy security as well 
because energy security means more than just oil and gas 
flowing in and out and across borders.
    It also means protecting critical infrastructure from both 
physical attacks and the cybersecurity attacks that have been 
much the subject of a lot of the past Administration's focus on 
the Quadrennial Energy Review and what we need to do to upgrade 
that and upgrade the security of our nation. We must take 
action to protect our critical infrastructure from 
cybersecurity attacks and ensure the security of energy. Our 
grid and energy networks are under constant cyberattack. From 
2012 to 2016 reported cyber incidents against U.S. critical 
infrastructure more than doubled.
    Now that our vulnerabilities have been exposed by various 
attempts, including Russians, to hack into our electricity 
grid, the cyber threat is no longer just a threat. We have been 
hacked and we must take additional steps to protect our energy 
infrastructure.
    I very much appreciate the Chair, last year, traveling to 
the Pacific Northwest to see some of the latest and greatest, 
both technologies and approaches to cybersecurity. She and I 
have worked on legislation that we passed out of the United 
States Senate. We are just hopeful that sometime our colleagues 
in the House will make this a priority and move forward on 
working on a bicameral basis on cybersecurity since its 
infrastructure is so important.
    Obviously, diversifying our energy mix is another key part 
of the energy security puzzle and security means minimizing the 
potential consequences of climate impact which threatens our 
well-being at home and around the world as well. Investing in 
renewable energies and moving away from fossil fuels and moving 
into energy efficiency and ways to help drive down costs--we 
have seen great examples of the fact that the energy savings 
from energy efficiency is a continuous flow of investment into 
business that makes them even more competitive which then 
allows them to stay ahead on a competitive basis.
    So those numbers on energy efficiency, as we look at 
everything from the Bullitt Foundation building to a focus on 
how to make more of these developments worldwide--very, very 
exciting technology that we are very proud of from the Pacific 
Northwest.
    According to the IEA's World Energy Outlook, renewable 
energy will make up two-thirds of the global investment in 
electricity as they become the cheapest sources in new 
generation. The IEA finds that the costs of new solar PV have 
come down 70 percent, wind by 25 percent and battery costs by 
40 percent.
    Energy efficiency, as I just mentioned, is also a key on 
the energy security side. The total energy use would have more 
than doubled, according to IEA, without energy efficiency. So 
this has been saving us in so many ways. As you noted, I think 
it is one-third the cost to save a kilowatt than to develop it. 
It is so important that we continue that.
    While we are discussing so-called energy dominance and 
energy security, I hope we will hear a lot less about just 
these exporting issues. Although, again, we worked hard here on 
the Committee to come up with strategies that clarify what our 
national policies were on that and focus on what we can do to 
drive the cost of energy. Whoever has the most cost-effective 
energy solutions is going to continue to win in the 
marketplace.
    I look forward to hearing your comments on that today. And 
again, thank you for being here.
    The Chairman. Thank you, Senator Cantwell.
    Dr. Birol, welcome, again, to the Committee.
    For those who are not familiar with Dr. Birol, he took 
office as IEA Executive Director in September 2015 after 20 
years with the agency itself. Previously, Dr. Birol held the 
position of Chief Economist with responsibility for directing 
the flagship World Energy Outlook publication. He has been the 
founder and the Chair of the IEA Energy Business Council. He 
has a whole series of accolades and awards that have been 
conferred upon him over the years.
    Again, Dr. Birol, we appreciate the insight that you will 
provide for us and the good work of your team at the 
International Energy Agency. We welcome you, and we invite your 
comments this morning.
    Typically we ask those who are testifying before the 
Committee to try to limit their comments to five minutes, but 
because you are the sole panelist before us, I welcome your 
extended remarks and then we will have an opportunity to query 
you with regards to other issues.
    Thank you and good morning.

STATEMENT OF DR. FATIH BIROL, EXECUTIVE DIRECTOR, INTERNATIONAL 
                         ENERGY AGENCY

    Dr. Birol. Madam Chair, Ranking Member Cantwell, 
distinguished members of the Committee, thank you very much for 
the opportunity to appear before you today and present the 
International Energy Agency's outlook for global energy 
markets.
    Let me also join Madam Chair to wish everybody a Happy New 
Year.
    For the International Energy Agency, 2017 was a very 
successful year, a year of growth and continued success. One of 
the highlights of our successful year, 2017, was that in 
November our ministers across the world came together to do a 
bit of business and to discuss the global energy issues, 
challenges, how they see the challenges in different countries 
and to provide guidance to International Energy Agency. And I 
would like to, here, thank the U.S. Government, especially 
Secretary Perry, for his personal engagement to our Ministerial 
meeting.
    There were also several businesses joining our meeting, at 
least part of it. Several CEOs from the United States joined 
us, CEO of Exxon Mobil, CEO of General Electric, CEO of Dow 
Chemicals and also other CEOs, Shell, Total Energy, renewable 
companies across the world. We had a wonderful ministerial 
meeting with a very good discussion and I would like to reflect 
some of the discussions to you today.
    Before going to some of our thoughts and findings, I would 
like to, just very briefly, Madam Chair, if I may, tell you 
what the IEA is all about. We were founded in 1974 in the wake 
of an oil crisis, basically by Mr. Henry Kissinger, himself and 
several other statesmen across the world, and we are now 43 
years old. The motivation of the IEA was oil security, to look 
after the oil security issues, providing an oil security 
mechanism across the world. But throughout these years our 
mandate has evolved, as Madam Chair mentioned. We look at the 
oil, gas, renewables and energy efficiency and alignment issues 
and investments and we look at all the technologies. IEA is a 
unique organization which looks at all the technologies and 
their implications for the markets and our well-being.
    We have several member governments in all the continents 
and energy, Madam Chair, is a very hot topic in many 
governments, in many countries. So we try to bring some factual 
information for the governments, for the decision-makers, to 
discuss, to debate and come up with, hopefully, good solutions 
for the countries and for their citizens.
    Now, to provide a basis for our discussion, I would like to 
tell you how we see the global energy markets in the next years 
to come, and I will highlight four major trends which will 
affect all of us. I would like to say that countries--even the 
United States, one of the most important energy countries in 
the world--even the United States is not an energy island. What 
happens in other countries affects all of us and what happens 
in the United States, as I will show in a minute, will affect 
everybody else.
    So, therefore, these four major trends, or pillars we call 
them, will affect all of us in the next years to come given the 
size of these changes and also the speed of those changes I 
think it is important for all of us to take note of them. What 
are these four major upheavals which are going to transform our 
energy markets and some of the definitions, discussion, we used 
to know, but perhaps we need to change now?
    Number one, Madam Chair mentioned, the United States is set 
to become the undisputed leader of oil and gas production for 
many years to come with huge implications. This is number one.
    Number two, the cost of renewable energies is going down so 
significantly that they are becoming the first choice of new 
power plants in several countries across the world. And these 
choices are not necessarily driven by the environmental 
concerns only, but only for the cost concerns because they are 
becoming very cheap. When I say renewables, this is mainly 
solar and wind. This is number two.
    Number three, China. China recently changed its economic 
policy, namely moving from being an industrial workshop, 
workhouse, manufacturer, slowly but surely, to a lighter 
economy and with the new motto, ``making the skies of China 
blue again,'' China is moving in the direction of clean energy, 
which will have major implications for all of us given the 
sheer size of the Chinese energy markets. When I say clean 
energy, this is gas, renewables, nuclear power and others.
    Fourth, and the last, upheaval is that within the energy 
system, we use energy, the share of electricity is growing very 
strongly. Electricity consumption is growing much faster than 
oil and gas and coal, everything else, and our lives, our 
social lives, our economic lives, are becoming much more 
connected and electricity has a critical role.
    So, these are the four major upheavals that we see as very 
important. If I can elaborate on them a bit. I'll put you in 
the U.S., perhaps the most important one to the end of these 
four important upheavals starting with the clean energy 
technologies.
    As Senator Cantwell mentioned, the cost of solar PV fell 
down substantially. In the beginning, several countries, 
especially European countries, subsidized the solar. But now, 
after emerging countries, especially China, pushed the solar PV 
and there is a concept in the economy, learning by doing. The 
more you do something, the better you do it and the cheaper you 
do it and the cost of solar is now going to very, very low 
levels.
    The second, wind. The cost of wind is also going to go 
down. It's going down and in addition to the industrial 
countries, major growth of renewables is coming from today, 
emerging countries, especially China and India are the leaders. 
China is, today, the number one country in terms of solar and 
number one country in terms of wind, worldwide.
    And when we look at the future we see that the cost of 
solar and wind continue to decline and they are going to 
compete very soon, without the subsidies and competing with the 
traditional sources of electricity. This is something important 
and why China and others are pushing solar. It is not 
necessarily, as some people may think, for a primary reason is 
not climate change. The primary reason is because it is cheap 
and the second is that another environmental issue, especially 
in China and in India is the city--local pollution in the 
cities. To reduce the local pollution, those countries are 
pushing solar and wind substantially and they are becoming 
cheaper and cheaper.
    We are seeing a big growth of solar and wind in the next 
years to come. And if I can give you one number--the forecast, 
only in 2016, of the old power plants built in the world, solar 
alone was more than 50 percent--solar; other 50 percent--other 
renewables, plus coal, plus oil, plus gas, plus nuclear put 
together, 50 percent. The other 50 percent, solar capacity 
alone. So this is something that we need to take into 
consideration.
    I should also mention that the renewables, especially solar 
and wind, also has a shortcoming--namely, they are very much 
bound to the weather conditions. In India, when the family 
comes home in the evening from work, the first thing they do is 
turn on the air conditioner, turn on the television, when there 
is no sun, when the sun sets. So it is difficult to, it is not 
very easy I should say, to match when there is sun and when the 
electricity market is very high. And there are some 
technologies that we are working, and others are working on 
that. But to sum up, clean energy technologies are coming and 
coming strongly and cheaper.
    Another point is on electricity. As I said, electricity is 
going very strongly everywhere. The electricity consumption 
grows two times faster than the overall energy consumption. As 
our lives are becoming more and more of the electrical 
advances, industrial processes are becoming more and more 
electrified and the cooling needs, air conditioners, are 
becoming a major driver across the world.
    This is important to note and, therefore, what kind of 
power plants we're going to build is a key question and at the 
same time since electricity will be more used, will be more 
dominant in our social and economic lives, the electricity 
security becomes a critical issue.
    In the case of electricity supply disruption, our entire 
economic, social life and the communication processes will be 
paralyzed. So therefore, it is an area that the International 
Energy Agency is working on, the issue of electricity security.
    Third, China. Third upheaval. China is, today, the largest 
energy consumer of the world by far, and last year at the 
Chinese Communist Party Congress, President Xi said, ``we want 
to make the skies of China blue again.'' Once again pushing the 
Chinese energy prospect into cleaner direction--lots of support 
for renewable energies, lots of support for energy efficiency, 
lots of support for natural gas and electric vehicles.
    China is, today, in terms of coal markets, to give the 
size--half of the coal in the world is used in China; the other 
half, everybody else put together. And China, today, is putting 
a cap on the coal consumption in order to limit the pollution 
in the cities, basically.
    And China is, with the new policy, replacing coal with 
renewables, but also with natural gas. And if I may come back 
to what I said in the beginning, that no country is an energy 
island. China is poised to going from coal to gas in a very 
short period of time and it is a major LNG imports of China. 
And it is out of that, within one year of time, the LNG process 
in Asia Pacific jumped from $6.00 to $11.00, almost double, 
because of China's new policy. So this will affect everybody, 
exporters and others. China is going to be the largest oil 
consumer very soon, overtaking the United States.
    Another area which I would like to bring to your attention 
is the nuclear power and China. China, today, is the country 
which is the most engaged with the nuclear power industry, and 
we see that more than one third of all nuclear power plants 
under construction today will be in China. And looking at 
what's happening in the United States, our numbers show that in 
10 years of time Chinese nuclear capacity will overtake the 
United States, and China will be number one and the United 
States will be number two in terms of nuclear capacity, if the 
current policies do not change.
    But, in general, China's policies are changing. Ten years 
ago, we may remember as a result of the Chinese boom, there was 
an impact on the oil markets, coal markets, emissions. Now 
another China and other policies on clean energy, electric 
energy, and this will also affect the energy markets.
    My final point, Madam Chair, is about the United States--
the fourth and perhaps another critical, as we call it, big-
time nation of the energy markets. What we say is that as a 
result of the shale revolution, the U.S. is becoming the 
undisputed leader of oil and gas production worldwide.
    In terms of oil, oil production is going very strongly and 
will continue to grow. All of our expectations are in that 
direction and we think that this growth is unprecedented--the 
size of the growth and the pace of the growth. We have seen 
such a big growth in the history of oil only once when in the 
four and a half decades ago Saudi Arabia expanded their very 
famous Ghawar oil field. It's the biggest oil field in the 
world.
    In terms of natural gas, the United States, again, is out 
of shale gas increasing its production strongly and going to 
bring a lot of LNG to the markets. And we expect the U.S. will 
be the largest LNG exporter of the world in the year 2020.
    Both of these developments have implications for the 
prices, for energy security worldwide, trade, investments and, 
of course, for the U.S. economy. This is definitely good news 
for the U.S. economy, both in the developments on the gas and 
the oil side. And our projections show that this leadership of 
the United States, in terms of oil and gas, will continue for 
many years to come, especially if it is combined with the right 
domestic policies at home.
    So these are the four major upheavals we see, Madam Chair, 
namely the cost of renewables are going down substantially and 
they will be a mainstream fuel. They have been considered as a 
``romantic fuel'' in the past and they are not anymore, so they 
are mainstream fuel now. Second, we see that electricity is 
becoming a very important fuel in our society now, in our 
economic lives, in our social lives with a lot of efficiency 
gains, but also bring a lot of challenges, especially in the 
context of the electricity security picture. Third, China is 
changing up its energy policies going from a coal-based, heavy 
industry economy slowly but surely to clean energy technologies 
and making more and more use of natural gas. And fourth, 
perhaps the most important, the United States is becoming the 
undisputed leader of oil and gas for the years to come.
    So I would like to finish my words, Madam Chair, that the 
International Energy Agency is following the developments in 
the United States and across the world. We are talking with all 
the governments around the world, and we are trying to bring 
the best advice based on effects, analysis and data. And we 
are, today and anytime, at your disposal to answer your 
questions and requests.
    Thank you very much.
    [The prepared statement of Dr. Birol follows:]
    [GRAPHICS NOT AVAILABLE IN TIFF FORMAT]
    
    The Chairman. Thank you, Dr. Birol.
    A great deal to think about here this morning and, again, 
to understand how the United States has assumed this role, as 
you say, to be the undisputed leader, certainly when it comes 
to oil and gas, but recognizing the nature of how we got there 
and how quickly we have assumed this position.
    It is certainly something to consider, but also recognizing 
what you have shared with us, the role that China is playing 
and how that, too, will not only impact energy production and 
consumption around the world but, more specifically, to us here 
in the United States.
    You have mentioned with regards to oil and gas production 
here in the United States that this is good news for the U.S. 
economy and for our trade especially, and I am quoting you 
here, ``especially if combined with the right domestic 
policies.'' When you make that statement are you referring to 
tax policies, are you referring to energy policies? Is it a 
combination of all of that? If you can go just a little bit 
more into that I'd be curious.
    Dr. Birol. Of course.
    Now the United States is a very fortunate country because 
you have oil, gas, renewable energy resources and you have a 
very innovative business here. So by the improvement of the 
technology you will get more and more oil and gas from the 
existing resources, if the right incentives are provided to the 
industry. This is number one. Number two, I believe the U.S. 
has huge potential to make more use of renewable energies, 
solar and wind especially, and I was very happy to see that the 
current support for the renewable energy policies are 
continuing in a strong way.
    The Chairman. The Production Tax Credits?
    Dr. Birol. Exactly.
    Third, there is one concept in the United States which is 
very important--the independence, energy independence. And that 
independence is based on two factors: one is increasing the 
production a lot, domestic production; and second, keeping the 
consumption at a certain level and not to waste energy, mainly 
energy efficiency.
    So, I think, when I mentioned domestic energy policies, I 
believe in addition to the supply side policies, production 
side policies have to increase oil and gas. We must also put 
emphasis on using energy efficiently so that we don't waste 
energy but have the same results and the same productivity from 
the system.
    So all in all I think the U.S. energy system is going in 
the right direction, a lot of resources, but domestic policies 
need to help them.
    The Chairman. I appreciate that.
    Let me ask you a question specific to the Arctic. I focus a 
lot in these spaces and not just the U.S. Arctic, but the 
Arctic broader. Last year I had an opportunity to visit the 
Melkoya LNG facility in Hammerfest, Norway, where a significant 
amount of natural gas is processed and shipped to Europe. Of 
course, over in Russia we are seeing that on the Yamal 
Peninsula and elsewhere as they are exporting their LNG across 
the world, including to China.
    What role do you see the energy resources from the Arctic, 
whether it be oil, whether it be gas--and this is not just 
looking at the United States but the bigger energy picture--
specifically coming from these Arctic northern countries?
    Dr. Birol. Thank you very much.
    We have huge deposits of oil and gas in the Arctic region 
across the world. There are two challenges there. The one 
challenge is the economic challenge--and then we have a lot of 
shale oil, whether or not they will be able to get the 
investors. And second, some of the Arctic resources may pose 
environmental questions. These are the two issues.
    Moving from there, I would put oil and gas differently. In 
terms of oil, it's actually a huge U.S. Geological Survey. We 
have huge deposits and if you look at, especially, the ANWR 
area, the Arctic National Wildlife Refuge Area, we see that 
there is a very important attractiveness there--namely, the 
availability of the TransAlaska pipeline which is underutilized 
today substantially. And you have the chances of, if the 
production was to take place, we have the chances or the 
possibility of transporting it in a very easy way. This is 
definitely an advantage.
    The challenge, however, is that in terms of oil again the 
economic attractiveness in the current price and the plan of 
the shale oil context and therefore, we think that with the 
current context, it will be difficult to believe that a 
substantial amount of oil production will be coming from that 
region before 2030, unless we see some surprises in the 
markets. Having said that, if significant resources and the 
production comes from there, this would be good news for the 
economy and employment in Alaska.
    Coming to LNG, it's a different story. The gas in the very 
region and we know that to unlock the oil we have an issue of 
the infrastructure here and the main bottleneck, I believe, is 
the infrastructure--building the pipelines here and the LNG 
plants--but I see here significant marketing chances, 
especially for Asia, also given the geographical advantage.
    If I may bring it to the point I said a few minutes ago, 
Madam Chair, today China is moving in the direction of gas. 
They are going to import a lot of LNG to replace their coal, 
basically, and I see that there's a lot of opportunity in China 
and Japan.
    I often visit Japan and meet with the Japanese government, 
Madam Chair. You may well know that they are thankful to you 
after Fukushima, bringing LNG to the Japanese government when 
they were in a very, very difficult situation. And as you know, 
Japanese people, they never forget this good gesture coming 
from your government.
    So, to sum up, I see from an LNG point of view, significant 
chances to provide gas to a gas-hungry Asian region.
    The Chairman. Very good. Thank you very much.
    Senator Cantwell.
    Senator Cantwell. Thank you, Madam Chair.
    On that point, I think that the Chair would note that I 
have, many times, suggested to her that that should be a good 
focus for Alaska, natural gas, as opposed to the more recent 
discussion on the ANWR.
    As you point out, China being the huge market opportunity 
for the future poses--with a shift in policy, as you clearly 
noted, to a bluer sky--being the largest market opportunity for 
the U.S.
    I wanted to ask you about what policies on that clean 
energy front do you think we need to continue to focus on here 
that would help us in looking at Asia more as a market for U.S. 
leadership?
    I say that both on the energy efficiency side and the 
nuclear policy side. Energy efficiency in the context of, I 
think you have stated well, we are saving so much and we need 
to continue to move forward. I look at it as everything from 
the efficiencies that we have achieved within our region to 
some of the technologies that are now being used in other 
countries. For example, I think one of our Northwest companies 
has provided metered energy in South Africa so that they can 
just buy the power that it takes to turn the lights on when the 
kids come home from school.
    So energy efficiency is making our businesses competitive 
and it is also reaching the marketplace. What else do we need 
to be doing to focus on energy efficiency and other export 
policies on the clean side?
    Dr. Birol. Thank you very much.
    Now first of all, the U.S. is becoming an exporter, gas 
exporter, to China and Asia in general--I mention China but I 
should have mentioned another country which is very important 
in the region and growing very strongly, which is India. India 
is also very important because their economic growth is very 
strong and they have a very, in my view, wise, sound energy 
policy. And both of these countries use gas at the minimum 
level. Globally, their share of gas in the global energy mix is 
about 25 percent and in both these countries it is less than or 
around five percent only. So there's a big gap between the 
world average and them.
    And they, both of them, both of these countries are facing 
major challenges in terms of environment--namely, local 
pollution in the cities. And this is an issue for, in many 
countries, both of these countries and others, a reason for 
social unrest, in fact.
    So one solution to that is replacing coal by natural gas 
and that will get the gas markets--when you see that the U.S. 
is coming very strongly, in terms of LNG exporter, being an LNG 
exporter.
    And this is good news for everybody, to be honest with you 
because, I should say almost everybody except for the 12 
traditional pipeline exporters in Europe because the U.S. is 
also providing alternative to Europeans vis-a-vis the major 
established pipeline exporters and making the hands of 
Europeans stronger in terms of their negotiations of the price 
with the pipeline exporters when they make new contracts. Even 
if they don't import one BCM of U.S. gas, the fact that they 
can import U.S. gas is a very strong card in their hands.
    Coming to China, I think----
    Senator Cantwell. And on that point, could you just 
elaborate on the Russians as well because aren't they trying to 
play in this marketplace?
    Dr. Birol. Yes, in fact the Russian government, as a result 
of the U.S. shale boom. The Russian government is less stronger 
when it comes to the contract negotiations with the European 
customers because if the European customers negotiate and try 
to bring the price down, if the Russians would say no, then 
there's an option, which is the U.S. gas coming there.
    So in the past, in the district there was only one shop in 
Europe which is Russia. They need to go and buy the gas from 
that shop. Now, there is another shop open which is the United 
States. They, the Europeans, can choose which one is cheaper, 
which one has the better conditions, which one provides better 
opportunity for the energy and maybe, in some country's cases, 
the security and foreign policy.
    So U.S. gas is providing an alternative to Europeans vis-a-
vis the Russian gas. And this is, I think, very important both 
in terms of energy security, but also the competitiveness of 
the gas and the contracts in Europe.
    It is out of that many European countries really negotiate 
success with their existing contracts and bring the price of 
gas down as it is out of the new opportunities coming from the 
United States and elsewhere.
    In terms of China and India, huge opportunity for U.S. gas. 
It is going to, in the next five years, be a big amount of LNG 
coming from the United States, and I am sure Asian region will 
be the primary destination for the U.S. LNG.
    And there's a huge opportunity to make money for the U.S. 
and for those countries to diversify their energy system and 
make gas part of the energy system and make it much more 
flexible. And for the Europeans, diversify the source of 
imports and provide, again, minimizing the economic, social 
and, maybe, political risks.
    Senator Cantwell. Well, I see my time has expired, but I 
thank you, Dr. Birol, for elaborating. I think what some people 
may not fully understand about what the Russian issues are, as 
it relates to Europe and to us and to why some of these things 
are so important, people in the Administration and conflicts 
and everything else.
    So I thank you for that.
    I wanted to thank my colleague and welcome her to the 
Committee. I failed to do that in my opening remarks. I am 
going to turn my portion over to her in the next round and let 
her continue on my behalf.
    Thank you so much for your testimony, and I so appreciate 
Senator Smith joining our Committee, along with our returning 
colleague from West Virginia, so it will be great to have her 
back. This must be a record number of women on the Committee, 
so that's a good thing.
    Thank you, Madam Chair.
    The Chairman. Thank you, Senator Cantwell.
    Let's go to Senator Cassidy.
    Senator Cassidy. Hey, sir. Thank you. Great testimony. I am 
intrigued by the electrification of transportation, if you 
will.
    But let me ask you to comment on this. Yesterday, the CEO 
of Fiat Chrysler was quoted saying, ``I don't know of a 
business that is making money selling electric vehicles, unless 
selling at a very, very high end of the spectrum.'' And this 
was made at the Detroit Auto Show.
    How do you, kind of, position that versus your very bullish 
statement that within a relatively short period of time we are 
basically going to transition to a primarily, or almost 
equally, electric car marketplace? Your thoughts?
    Dr. Birol. Thank you very much, Senator.
    I think the electric cars, the number of electric cars will 
grow, but our numbers show that even two decades from now the 
biggest chunk of the cars we are running will be the existing 
internal combustion engines, the traditional cars. But electric 
cars will grow, especially in some regions. For example, in 
Europe there is a lot of incentive and subsidy for the electric 
cars. In China, lots of support for electric cars. And with the 
declining cost of batteries for electric cars, plus the very 
generous government subsidies in some countries, we see that 
the electric cars are increasing substantially.
    Having said that, some people say, you say that electric 
cars will increase, but at the same time you think that there 
is a need for oil. How does it combine? It isn't following, Mr. 
Senator. The cars are not the biggest part of the oil demand 
growth. Oil demand growth today in the world is driven by 
trucks, jets, ships and, most importantly, the petrochemical 
industry. Even if there would be a lot of electric cars coming 
into markets, running in the streets of the world, we will 
still see that there is a need for new oil production.
    Senator Cassidy. Let me ask you this then.
    Dr. Birol. Of course.
    Senator Cassidy. There has been a move afoot to transition 
diesel vehicles, boats or trucks, to natural gas-powered 
vehicles. Do you see that impacting what you just said or will 
oil continue to dominate?
    Dr. Birol. Oil will continue to dominate, but as long as 
the cost of gas remains low or moderate we see, especially in 
the long-haul trucks, there's a big chance of substitution of 
oil by natural gas. And also, not only for trucks, but also for 
the ships.
    Senator Cassidy. Now, you say a big opportunity, but you 
have made specific projections regarding the percent of 
electric vehicles with a number. Have you done a similar 
analysis of what will be the rate of conversion of long-haul 
vehicles or barges or towboats to natural gas?
    Dr. Birol. Yeah, it was the expectation that they will 
increase at least three times compared to today, but still the 
big portion will be coming from the oil products.
    Senator Cassidy. Okay.
    Dr. Birol. Namely, diesel.
    Senator Cassidy. Now, I don't have it here in your 
testimony--you speak of the ``sustained'' model which I--or 
something such as that, with the word ``sustained'' in there--
and I gather that would be compatible with a low-carbon 
mandate. The degree to which we achieve that, to what degree is 
that conversion of coal to natural gas or nuclear, and to what 
degree is that the deployment of renewables?
    Dr. Birol. If I can give a very few headline figures. We 
have different scenarios. One is with the current policies, 
where do we go? The other one, as you mentioned, sustainable, 
to keeping a close eye on the environment, especially climate 
change. In all of them natural gas does increase. Natural gas 
is a winner, increasing, it is a role in all of them. 
Renewables are growing very strongly in all of them, especially 
with the sustained one, especially for solar and wind.
    And coal will be depending on whether or not we can use 
coal in a cleaner way, especially in the context of carbon 
capture and storage. This is, for me, an extremely critical 
technology and this is an area that I mentioned at our 
ministerial meeting, Secretary Perry and myself run a 
ministerial session on carbon capture and storage.
    Senator Cassidy. But let me ask, continuing on natural gas 
and renewables, in your current policy and the sustained 
policy, what is the relative growth of renewables and not only 
the relative growth, but by 2040 what is the percentage of the 
international energy mix that would be held by either the 
renewables or the natural gas?
    Dr. Birol. The share of natural gas will stay as it is now, 
about 20 percent, but the volume is going to increase.
    In terms of renewable generation, it will grow also 
substantially, electricity coming mainly from solar and wind, 
but coal will be a significant loser unless we can make use of 
carbon capture and storage technologies.
    One particular technology, again, is nuclear power. Nuclear 
power is a technology which can produce electricity without 
giving any emissions, but this will be also depending on the 
policies of the governments, whether or not they would like, to 
see nuclear play a more important role in the region.
    Senator Cassidy. Thank you.
    I am over. I yield back.
    The Chairman. Senator Smith.
    Senator Smith. Thank you, Madam Chair.
    I am really so pleased to be here and be a part of this 
Committee and I must say, as a former resident of Alaska and 
actually a person who worked on the TransAlaska pipeline when 
it was first being constructed, this has always been a matter 
of great interest to me. So I am very pleased to be here.
    Dr. Birol, it is very interesting to have a chance to visit 
with you and I am quite struck by your conversation about the 
transformation that we are seeing around the world in advancing 
renewables and also energy efficiency.
    In Minnesota, my state, this has been a focus of our energy 
policy, a bipartisan focus of our energy policy and today we 
get about 21 percent of our energy from renewables and are well 
on our way to hitting our goal of 25 percent which, I think, 
could be even higher. And this means jobs for Minnesota, 57,000 
clean-energy jobs in Minnesota. So I think a lot about the 
benefits of this kind of strategy.
    You know, also, my business background has taught me that 
diversification contributes to risk management and to security. 
And so, I am quite interested to hear you talk a little bit 
more about how more affordable renewables and energy efficiency 
contributes to our overall energy security which is, sort of, 
the primary focus of the IEA.
    Dr. Birol. Thank you very much, Senator Smith.
    Now, this is huge oil, gas, coal, renewable sources and it 
is very important that we make the most out of it in: A, a 
cost-effective manner; B, secure energy; and C, along in a 
sustainable manner. I think this is important, these three 
important parameters. We see a growing chance of the U.S. 
making more use of renewable energies as their costs are coming 
down. And as Madam Chair mentioned, after the tax reform we see 
that the incentives, the support for the renewables, are still 
there.
    One area that we need to, in my view, pay attention to is 
the efficiency. When we say U.S. will soon not need to import 
any single barrel of oil, this is for two reasons. One is the 
biggest access of the shale oil boom which is extremely 
important and it's a big success story of the U.S. Government, 
U.S. industry, the shale oil boom production will go. And the 
second is that, in my view, the CAFE standards. The CAFE 
standards in the United States keep the gasoline diesel 
consumption for cars and other vehicles at a certain level and 
save oil at home. If you didn't have the efficiency standards 
we would use more oil at home; therefore, the import needs will 
be higher.
    Therefore, in addition to oil, gas, nuclear, I see that 
there is also a role for renewables and energy efficiency so we 
have a diverse and sustainable mix for the U.S. Government, for 
the U.S. energy sector, which should make the economy also very 
strong and resilient.
    Senator Smith. Thank you.
    Let me just ask you. Where are we headed in terms of 
overall cost reductions for renewables?
    Dr. Birol. I think we expect that around the year 2020 most 
of the renewables in the world may not need any more subsidy. 
They can be competitive with the traditional sources of energy, 
unlike 10, 15 years ago. Ten, 15 years ago in order to compete 
with natural gas, with coal, with the others, they needed to 
get a lot of subsidies and sometime soon, in five years or so, 
we may see in many countries, most countries I should say, 
especially for solar and onshore wind, we may not need 
subsidies. Maybe for offshore wind, we need a longer time 
horizon, but the main message is they are becoming cheaper and 
cheaper. They are becoming the mainstream fuel in many 
countries.
    Senator Smith. Thank you.
    Dr. Birol. Thank you.
    Senator Smith. Thank you, Madam Chair.
    The Chairman. Thank you, Senator Smith.
    I have so many things.
    [Laughter.]
    Boy, this is fascinating this morning. I so thank you.
    As you know, a couple years ago we reversed a 40-year 
policy that we had here in the United States that banned the 
export of oil. We were successful in lifting that in December 
2015 and there was some speculation at the time that not much 
would change in terms of the volume of oil that is exported 
from the United States due to the price of oil, the need for 
infrastructure improvements and other global supply factors.
    We have not necessarily seen that. We have not seen the 
price impacts. We have not seen the supply shortages that some 
claimed. Can you discuss how the export of U.S. oil has changed 
the world dynamic?
    You referenced earlier in response to the question from 
Senator Cantwell, how with more LNG that the United States has 
put on the global market, how that has impacted not only 
Europe, Russia, but can you speak to the role that we are 
playing in the world energy markets now that we are able to 
export?
    Dr. Birol. Of course, Madam Chair.
    So December 2015 you took this, in my view, very good 
decision to----
    The Chairman. Thank you.
    Dr. Birol. ----lift the U.S. oil export ban because as we 
look at the global energy security, and I just say--very 
positive contribution to global energy security.
    So it came and 2016 was a year that the U.S. oil industry 
had a difficult year because the low prices, low oil prices, 
for that year we have seen the exports were just under 600,000 
barrels per day.
    But 2017, last year, we saw an increase in the exports--it 
was about one million barrels per day most of the time; but 
certain weeks, about two million barrels per day--a significant 
contribution.
    The important area here is that not only the size but the 
quality of the oil is very important that you are exporting. It 
is light and sweet, the quality which is very much in demand 
and, therefore, it can be used in many countries. Again, one of 
the major buyers is China today.
    So looking at the years from now, 600,000, one million 
barrels per day in 2017, with the increasing U.S. oil 
production and increasing global oil markets, we expect U.S. 
crude oil exports will play an important role, even though we 
are not there compared to natural gas, LNG, but it makes also a 
significant and important contribution both in terms of size 
and in terms of good quality.
    The Chairman. Interesting. When you think about where we 
have been historically with world conflict that comes about 
because of the virtual advantage that some nations have when it 
comes to energy resource, whether it is the Middle East, or 
other parts of the world.
    Well, you have given us, kind of, a new view of where we 
are going with energy and energy worldwide, all that is coming 
on with regards to renewables. This means that countries that 
might not have fossil fuels at their disposal have other ways 
that they, too, can achieve their own level of energy 
production.
    When we think about the potential hot spots for conflict 
that comes about over energy--we have had presentations here in 
this Committee, in the years that I have served on the 
Committee, and it always seems to have been focused around who 
has the capacity when it comes to those sources of fossil 
fuels.
    Do you see this changing now that the broader world energy 
portfolio is a greater mix, whether it is what you are saying 
China is looking to with regards to nuclear, the price 
competitiveness and the advent as renewables are truly becoming 
more viable solutions?
    How do you see things changing or am I over-simplifying 
things with my example and we still have the same, kind of, 
historical energy hot spots?
    Dr. Birol. An extremely important issue, Madam Chair, if I 
may say so.
    Now there are two important changes happening in terms of 
geopolitics of energy. One of them is the coming of 
renewables--it is important. It is for some countries more 
important than others. But if I may, the renewables we are 
using mainly for electricity generation; but for 
transportation, for home heating, for industry, we still use a 
lot of gas, natural gas; in some countries, coal; in some 
countries, electricity and others.
    Therefore, the renewables changing the geopolitics of 
energy in a big way is not something I would agree. It makes a 
small dent, but it is not going to change the geopolitics of 
energy which is centered on oil and gas currently.
    But the second change on the geopolitics of energy in the 
world is coming from the United States. This change, the 
geopolitics of energy, the U.S. coming as a major oil and gas 
country, being a major exporter, changes a lot of thinking, 
changes a lot of issues. Let me give you one example. Several 
years ago, the United States was importing a lot of oil from 
Middle East. Very soon, or perhaps nowadays, it is zero or 
close to zero. This is something very important. Another thing, 
U.S. is competing with Russia for European gas markets. The 
U.S. today is exporting gas to Poland, for example, whereas 
Russia--it has changed the dynamics significantly there.
    And from a U.S. perspective, I am sure Secretary Tillerson, 
in the international negotiations with his counterparts, is 
sitting on his chair much more comfortably compared to his 
predecessors representing a country with a lot of oil and gas 
potential.
    Having said that, if I had to pinpoint one vulnerability in 
our world in terms of oil and gas it is the following. Many 
countries in the Middle East and also some major Eastern 
European countries, their economies are single-product 
economies--oil, in some cases, gas. When the price of these 
commodities goes down or as we just discussed with Senator 
Cassidy here, in the very near future if the electric cars one 
day become a major, major part of transportation, they may 
seriously suffer their economies and they are not prepared for 
that.
    Their entire economy and social life is based on oil 
revenues. This is a major vulnerability, especially today when 
the oil prices will be, we expect, more and more volatile and 
technology may have big surprises.
    Therefore, at the International Energy Agency we are going 
to focus in our next energy outlook on the vulnerabilities of 
these countries and if you are Chair, Madam Chair, I will be 
very happy to come and report to you which countries, which 
vulnerabilities and what measures can be taken there.
    But once again, geopolitics of energy has been redefined as 
a result of the developments in the United States in big times, 
but also in the introduction of renewable energies in some 
countries.
    The Chairman. Very interesting. Thank you for that.
    Senator Smith.
    Senator Smith. Thank you, Madam Chair.
    Dr. Birol, I was really interested in the information in 
your report about how global energy usage we expect to increase 
by, I think it is 30 percent by 2040, which is the equivalent 
to adding another China and India to global demand. Also, I 
remember reading that yet there are still significant portions 
of the world where people do not have access to electricity at 
all. So there is, sort of, this dramatic kind of dichotomy in 
terms of where people are.
    I would like to hear your views on what countries can do to 
take advantage of this growth in demand, I mean, from a 
competitiveness perspective, position themselves and their 
economies. This relates, I think, to what you were just talking 
about. What countries can do to position themselves and their 
economies so that, literally, the trillions of dollars that are 
going to be invested in technology that, you know, the 
countries can be well-positioned to be competitive in that 
arena.
    Dr. Birol. Thank you very much.
    So when we look at the investment trends in the next years 
to come, we see huge investment opportunities, especially in 
the electricity generation and transmission and distribution. 
Asia and sub-Saharan Africa are key areas for investment 
opportunities. And here, of course, as you implied, the U.S. 
companies can play a very important role, both in terms of 
building the power plants, providing capital and also providing 
leadership in those countries.
    Having said that, those countries, especially in China, 
India, and African countries, they have their own energy 
policies, they have their own targets. And when I look at those 
policies, they are geared at having energy at the lowest 
possible cost, keeping an eye on the environment and also 
diversification of the energy, as you rightly mentioned. I 
think those countries would welcome the investment 
opportunities from the U.S. and elsewhere if the investments 
are in line with these three goals, namely the energy security, 
affordability of energy and at the same time the environmental 
production. And many U.S. companies are already working in 
those countries, but the demand for energy projects are huge 
across the world, huge infrastructure needs, especially in Asia 
and Africa.
    Senator Smith. And what about this question of research and 
technology and innovation? How do you see that in terms of how 
we can encourage that kind of innovation and research on new 
technologies?
    Dr. Birol. We made an analysis of how much the governments 
and the private sector is putting money in research and 
development in new technologies, clean technologies. To be 
honest with you, despite all of the discussions and rhetoric in 
the last five years, in real terms, there was almost no 
increase in the R&D in clean energy technologies across the 
world.
    What surprised me also is when we're talking about, we 
think about the R&D, the research and developments in clean 
energy, I personally thought before the analysis the bulk of 
R&D is coming from the private sector and less from the 
governments, but our analysis just showed the opposite. The 
bulk of R&D for clean energy comes from the governments, 80 
percent, and 20 percent coming from the private sector.
    So there's a need for the private sector to be a bit more a 
part of the game to push the clean energy technologies and, 
therefore, energy efficiencies.
    Senator Smith. Great.
    Dr. Birol. Thank you.
    Senator Smith. Thank you, Madam Chair.
    The Chairman. Thank you, Senator Smith.
    Let me just follow up on that just to make sure I 
understood. Your statement that the R&D in clean energy around 
the world----
    Dr. Birol. Around the world.
    The Chairman. The vast majority of the funding, 80 percent, 
comes from government, 20 percent from industry?
    Dr. Birol. Exactly.
    The Chairman. That is worldwide. What about here in the 
United States? Is that breakdown still about the same, about an 
80/20, that we are not seeing the R&D in clean technology 
development?
    Dr. Birol. I need to come back to you for that, Madam 
Chair, but worldwide it was, for me, surprising as well.
    The Chairman. Yes, that is.
    Dr. Birol. Because I thought when I read the interviews of 
the business leaders and so on, I thought the biggest part was 
coming from the industry and less from the public, but public 
was the main driver of the R&D in clean energy.
    The Chairman. Well, that is very interesting. If you learn 
otherwise and particularly on the U.S. side, I would be curious 
to know about that because that is not what typically we would 
think.
    You have referenced energy security many times here and we 
think about the security that comes with abundance of supply 
and how we can provide security that way. You have also 
referenced the electrification that we are seeing around the 
world.
    You highlight in your testimony the increasing 
digitalization of power systems and, again, that can assist 
with levels of efficiency that, I think, is important. But I 
think we also recognize that with these opportunities it can 
bring challenges, certainly, when it comes to the issue of 
cybersecurity. You haven't really mentioned the role that plays 
with these interconnected energy systems. Can you just speak a 
little bit as to how you think digitalization provides levels 
of benefit but also vulnerabilities?
    Dr. Birol. In fact, it's an area that we just started to 
work, Madam Chair, very important because digitalization and 
energy, they are becoming more and more involved when we 
certainly made the report and Dave Turk, the former U.S. 
government official who recently joined our organization, was 
leading that work.
    What we have seen is that digitalization provides a lot of 
benefits by increasing the efficiency of our systems. We save a 
lot of money, we save a lot of activity, and we need to build, 
for example, less power plants than otherwise would be needed 
as it is out of digitalization, that we are reducing the demand 
and improving our power systems. This is very good; this is 
something that will continue. It would help us to make, for 
example, the most out of the renewable energies as well.
    I mentioned there is a mismatch between when the sun and 
wind are available and when the electricity demand is the 
highest. So digitalization will help to adjust this mismatch as 
well.
    Now this is very good that our energy systems, our economic 
systems are becoming more and more digital, more and more 
interconnected to different devices, but this also raises the 
issue of cybersecurity as the surface attack is becoming much 
bigger in terms of the unexpected assumptions.
    So it is an area that we are working with our governments, 
how we can increase the resilience of our electricity systems 
in order to minimize such attacks. What kind of measures, 
regulatory and technical measures, need to be taken in order to 
minimize the undesired effects of digitalization in terms of 
making our systems more vulnerable?
    This is a serious issue with the electrification and 
digitalization of our electric systems, Madam.
    The Chairman. It is something that we focus a lot on here 
because as we work to enhance our systems and truly make them 
more efficient, make them more cost-competitive, you realize 
that you are also building in another level of vulnerability, 
if you will.
    One more area of vulnerability that I want to bring up and 
I speak to a lot here in this Committee. Some years ago, when 
we were more reliant on other nations for our sources of oil, 
we talked about that vulnerability. And it was not only energy 
vulnerability, but vulnerability from a security perspective, 
national security perspective. Well, as you have pointed out, 
we are in a much better situation now, certainly, with regards 
to oil and natural gas and that undisputed position that you 
now refer to around the world coming from the United States.
    But there is another area where I see a growing 
vulnerability on others and that is as it relates to our 
critical minerals and our resources, the resources that we need 
to help build out, whether it is wind turbines, whether it is 
the lithium for the lithium ion batteries. The reality that 
whether it is lithium, graphite, cobalt or nickel, these are 
what will allow us to help build out the battery, the storage 
capacity, that when we are talking about electrification moving 
to EV, electric vehicles, we have to have these sources.
    I view that as a bottleneck, a potential bottleneck that 
will allow us to make this transition or move to these other 
areas that you have referenced--you referred to them as 
upheavals with what we are seeing with renewables. Can you 
speak a little bit about that aspect of vulnerability and where 
you see the direction or the trend here?
    Dr. Birol. Another excellent point, Madam Chair, if I may 
say so.
    With the traditional fuel sources, oil and gas, the energy 
security is, more or less, well understood and mechanisms are 
there for oil and gas. We--IEA--have been working many, many 
years, and especially for natural gas, with the G7 meeting in 
Japan. We were asked by Prime Minister Abe to look after the 
gas security issue, which we are doing and electricity sector, 
I mention to you, very important, cybersecurity, we are working 
on that.
    Yet, another security issue, indirectly, but also very 
important in terms of energy is the raw materials for the clean 
energy technologies. This goes from aluminum to copper, copper 
to lead, to lithium, manganese and it happens that, again, like 
the issue of the traditional sources several years ago, these 
are consumpted at only a few number of countries. And again 
here, concentration of the resources, some of them are in Latin 
America, some American countries here, Chile, Peru, Bolivia. 
But China happens to be a country with a lot of reserves in 
that context.
    So, it is, when we're talking about the clean energy 
technologies, this is very good. This is good for the 
environment, good for the domestic production, but one has to, 
perhaps, go one step further to think about where those raw 
materials will come from and what kind of security mechanisms 
we can develop in order to, I guess, if some undesired problems 
arise, as the raw materials of those technologies are 
consumpted in a few number of countries. It's very important.
    The Chairman. Does IEA, not concentrate necessarily, but do 
you factor in these vulnerabilities as you look to your world 
forecasts?
    Dr. Birol. We mainly look at the vulnerabilities in terms 
of energy sources: oil, gas, electricity and renewables; but 
these are also an important area and it needs further 
attention.
    The Chairman. Thank you. I appreciate that.
    Senator Smith, further questions?
    Senator Smith. I do not have any further questions. I would 
just like to thank you very much.
    Thank you very much, Dr. Birol, for your comments. This is 
quite interesting and I am very happy to be a part of this 
Committee.
    The Chairman. Well, we are delighted that you are a part of 
the Committee.
    I have one final question for you, Dr. Birol, before we 
conclude. And again, I thank you for your time this morning.
    I have long maintained that nuclear in this country and 
part of our energy portfolio is significant, important, and we 
have seen the United States and our role with nuclear, in my 
view, slack off in recent years. We have one remaining 
construction project in nuclear, the Vogtle Plant in Georgia, 
but you have indicated in your comments here this morning that 
China is coming on in a quite considerable and a substantial 
way.
    We have the traditional nuclear in the global marketplace. 
We also have the role of advanced nuclear. I think we are 
seeing some positive signs coming out recently in terms of 
these emerging technologies and how they might factor in to the 
energy marketplace. But can you just share with the Committee 
your view of how nuclear here in the United States factors in 
these out years, whether it be traditional nuclear or the 
advanced nuclear opportunities?
    Dr. Birol. Thank you very much, Madam Chair.
    I think nuclear is a technology worldwide which can provide 
electricity, uninterrupted without emitting carbon emissions, 
but after Fukushima it became a challenge in many countries to 
be near nuclear power plants.
    The challenge is not only there, the challenge is also in 
the financing part of the equation to be near nuclear power 
plants and even in some countries, like in the United States, 
where electricity demand is low, where the gas prices are low, 
where the renewables are growing, to find even getting 
electricity generation from nuclear is a big challenge, unless 
governments don't take any measures.
    So for the new builds, in my view, it will be very 
difficult to go with the traditional nuclear power plants. 
Small, modular reactors can provide the opportunity to address 
the project management risks and the financing problems. So 
this can be a solution.
    If I go from, and I believe nuclear can play in the U.S. 
and in the countries where it is accepted, can play an 
important role for energy security and, also for the 
environmental issues, can make a positive contribution.
    There is one more issue globally. As I said, as you also 
mentioned, in the U.S. we are building one, only, nuclear power 
plant. In Europe, the situation is similar, in Japan it is 
similar.
    These countries were the main nuclear technology exporters 
until recently. But since they don't build any nuclear power 
plants they are forgetting how to build it and China and Russia 
are building a lot of nuclear power plants and they will not 
only build nuclear power plants at home, but they may well be 
the countries who are exporting the nuclear technology to other 
countries which is either important from not only from energy 
perspective but from other perspectives as well. So we have to 
look at the nuclear also, perhaps, from that angle as well that 
the established nuclear technology exporters such as U.S. and 
Europeans and others are facing a strong challenge from China 
and Russia for the other countries to build nuclear power 
plants.
    The Chairman. When you think about where nuclear has 
dominated and, again, here in the United States and Europe, 
certainly in Japan, that reversal in a very, very short order, 
really, in terms of the energy spectrum worldwide. And now 
moving that over to China and Russia where we had not seen that 
much of a significant presence. It is really, kind of, an 
interesting phenomenon that it has moved as quickly and as, I 
would say, dramatically, as it has in terms of moving the 
energy portfolios around.
    I wonder whether--and I am just talking off the top of my 
head here--but I wonder if an increased role and presence in 
Russia, in China particularly, will promote or spur the United 
States to renew its efforts within the nuclear space or whether 
we continue to cede and take a back seat.
    It is not something that I think has been good. I greatly 
appreciate the role that nuclear plays in providing for not 
only a reliable power source, but a clean power source. And I 
regret that we are losing the skilled workforce, the level of 
leadership that we have played, not only from the production 
perspective, but how we then export the technologies and the 
smart people that come behind them.
    Do you think that we change or with low natural gas prices, 
we just continue in the direction that we are?
    Dr. Birol. I think natural gas is, of course, very good. It 
is cheap. Renewables are also getting cheaper. But in my view 
having a diversification and nuclear, the position of nuclear 
in the U.S. is a strong one, to keep that position is wise 
policy. I wouldn't let it go.
    The Chairman. No.
    Dr. Birol. But, of course, up to your government that they, 
yourself, to proceed a policy, but it will be regrettable, in 
my view. The United States has been one of the leaders of 
nuclear technology for years and years. Industry has been 
developed in this country in 1980's. To give it up, that 
position, may not be the best way, in my personal view.
    The Chairman. Do you see Europe going back to more nuclear 
or is that an irreversible direction?
    Dr. Birol. I think in many countries, irreversible 
direction, but I think Japan is going back slowly to nuclear 
power, but the biggest development is coming from China and 
India. More than 90 percent of the new nuclear power plants 
coming in the future in the next years will come from China and 
India. And the Russians are building in Europe as well, several 
nuclear power plants. As by building a lot of nuclear power 
plants, they bring the costs down and making it cheaper, 
accessible to emerging countries.
    So it is, in my view, an energy issue, but maybe not only.
    The Chairman. One last question.
    I said that my last one was going to be nuclear, but you 
prompted another and that is in regards to India.
    Dr. Birol. Yes.
    The Chairman. You have focused a lot of your comments today 
on the role that China is playing in the world energy markets. 
Will India move more toward natural gas, toward coal, toward 
nuclear? Where do you see their energy portfolio?
    Dr. Birol. I think India chooses a policy which is all-of-
the-technologies type of policy, and they are pushing, 
especially, natural gas strongly and, once again, to replace 
coal. But coal is also growing because in India, Senator Smith 
mentioned, people having no access to electricity in India, 
almost 200 million people have no access to electricity. They 
have to build some power plants from coal, but also more and 
more natural gas, renewable energy and nuclear. They are 
pushing in all fronts.
    And to be very frank, the Modi government is pursuing an 
energy policy which is very good for their people because in a 
very short period of time, almost 11 years, they are bringing 
electricity to about 500 million people. It's a big, big, big 
achievement. And they are using gas. They are using coal. They 
are using renewables. All of those technologies, much more 
diverse and I expect the share of gas will increase 
significantly in India in the next years to come.
    The Chairman. Well, very interesting. I will look forward 
to learning more from this report that you referenced earlier 
that will focus on those nations that perhaps have greater 
vulnerabilities because they are more reliant on a single 
energy resource, either for production or for their consumption 
and what that means.
    It is interesting to hear that with India it truly is one 
of those all-of-the-above approaches to energy.
    Dr. Birol. Exactly.
    The Chairman. I truly appreciate what you have shared with 
the Committee. It is always good, it is very important for us 
to understand what is happening with the global energy and the 
trends out there.
    As one who has been a strong proponent of U.S. energy 
production, certainly within oil and gas, it makes me feel 
pretty good, actually, to hear you say that of the four 
upheavals that you have referenced, the first one is the U.S. 
being a leader in oil and gas production.
    As I say, just in the few years that I have been here in 
the Senate and serving on this Committee, we have gone from a 
perspective of discussion about LNG import terminals to now 
export terminals, to a vulnerability and a reliance for our oil 
on countries that we do not like and they do not like us and 
now we are truly in the driver's seat. So that is significant.
    But I think it also is very important for this Committee to 
hear very clearly the other areas that you have identified: the 
cost of renewables are moving quickly, and the direction that 
is being taken and the advances in solar and wind, the fact 
that they are getting to that point where they can stand on 
their own and be cost-competitive, that factors in mightily in 
terms of the direction that we move from a policy perspective.
    And paying attention to what is happening in the world, the 
leadership of China. It has been very easy for us to say that 
China is the big polluter out there, but when they are 
advancing policies that are really keyed in on cleaner energy 
and energy sources and whether that is, again, importing LNG 
that may come from a place like Alaska or from elsewhere, but 
to recognize their leadership in nuclear. And then also, your 
fourth point about the share of electricity growing faster than 
the other sectors and the implications that portends.
    So a lot to think about as we begin the new year, but thank 
you for your insight, for your guidance. We look forward to 
learning more from you about these very important geopolitical 
issues in the energy space. You have been most helpful. You 
have been generous with your time. We wish you safe travels 
back when you return to France.
    Thank you very much.
    Dr. Birol. Thank you very much, Madam Chair.
    The Chairman. Thank you.
    With that, the Committee stands adjourned.
    [Whereupon, at 11:40 a.m. the hearing was adjourned.]

                      APPENDIX MATERIAL SUBMITTED

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