[Senate Hearing 115-700]
[From the U.S. Government Publishing Office]
S. Hrg. 115-700
ENERGY AND INTERNATIONAL DEVELOPMENT
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HEARING
BEFORE THE
SUBCOMMITTEE ON MULTILATERAL
INTERNATIONAL DEVELOPMENT,
MULTILATERAL INSTITUTIONS, AND
INTERNATIONAL ECONOMIC, ENERGY,
AND ENVIRONMENTAL POLICY
OF THE
COMMITTEE ON FOREIGN RELATIONS
UNITED STATES SENATE
ONE HUNDRED FIFTEENTH CONGRESS
FIRST SESSION
__________
NOVEMBER 1, 2017
__________
Printed for the use of the Committee on Foreign Relations
[GRAPHIC NOT AVAILABLE IN TIFF FORMAT]
Available via the World Wide Web:
http://www.govinfo.gov
__________
U.S. GOVERNMENT PUBLISHING OFFICE
37-105 PDF WASHINGTON : 2019
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COMMITTEE ON FOREIGN RELATIONS
BOB CORKER, Tennessee, Chairman
JAMES E. RISCH, Idaho BENJAMIN L. CARDIN, Maryland
MARCO RUBIO, Florida ROBERT MENENDEZ, New Jersey
RON JOHNSON, Wisconsin JEANNE SHAHEEN, New Hampshire
JEFF FLAKE, Arizona CHRISTOPHER A. COONS, Delaware
CORY GARDNER, Colorado TOM UDALL, New Mexico
TODD, YOUNG, Indiana CHRISTOPHER MURPHY, Connecticut
JOHN BARRASSO, Wyoming TIM KAINE, Virginia
JOHNNY ISAKSON, Georgia EDWARD J. MARKEY, Massachusetts
ROB PORTMAN, Ohio JEFF MERKLEY, Oregon
RAND PAUL, Kentucky CORY A. BOOKER, New Jersey
Todd Womack, Staff Director
Jessica Lewis, Democratic Staff Director
John Dutton, Chief Clerk
SUBCOMMITTEE ON MULTILATERAL INTERNATIONAL DEVELOPMENT,
MULTILATERAL INSTITUTIONS, AND INTERNATIONAL ECONOMIC,
ENERGY, AND ENVIRONMENTAL POLICY
TODD YOUNG, Indiana, Chairman
JEFF FLAKE, Arizona JEFF MERKLEY, Oregon
CORY GARDNER, Colorado TOM UDALL, New Mexico
JOHN BARRASSO, Wyoming CHRISTOPHER A. COONS, Delaware
ROB PORTMAN, Ohio EDWARD J. MARKEY, Massachusetts
(ii)
C O N T E N T S
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Page
Young, Hon. Todd, U.S. Senator from Indiana...................... 1
Merkley, Hon. Jeff, U.S. Senator from Oregon..................... 2
Kyte, Rachel, Chief Executive Officer and Special Representative
of the United Nations Secretary-General, Sustainable Energy for
All, Washington, District of Columbia.......................... 4
Prepared statement........................................... 6
Moss, Dr. Todd, Senior Fellow, The Center for Global Development;
nonresident scholar at The Center for Energy Studies, Rice
University's Baker Institute, Bethesda, Maryland............... 13
Prepared statement........................................... 15
Talocchi, Joao, Program Director, Purpose Climate Lab, New York,
New York....................................................... 18
Prepared statement........................................... 20
Mitchell, Paul, President and Chief Executive officer, Energy
Systems Network, Indianapolis, Indiana......................... 24
Prepared statement........................................... 25
(iii)
ENERGY AND INTERNATIONAL DEVELOPMENT
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WEDNESDAY, NOVEMBER 1, 2017
U.S. Senate,
Subcommittee on Multilateral International
Development, Multilateral Institutions, and
International Economic, Energy, and Environmental
Policy,
Committee on Foreign Relations,
Washington, DC.
The subcommittee met, pursuant to notice, at 2:35 p.m. in
Room SD-419, Dirksen Senate Office Building, Hon. Todd Young,
chairman of the subcommittee, presiding.
Present: Senators Young [presiding], Barrasso, and Merkley.
OPENING STATEMENT OF HON. TODD YOUNG,
U.S. SENATOR FROM INDIANA
Senator Young. Good afternoon. This meeting of the Senate
Foreign Relations Subcommittee on Multilateral International
Development, Multilateral Institutions, and International
Economic, Energy, and Environmental Policy will come to order.
The purpose of today's meeting is to receive testimony
related to energy and international development. Today's
meeting will be divided into two panels.
The first panel consists of Ms. Rachel Kyte, Special
Representative of the United Nations Secretary-General for
Sustainable Energy for All and Chief Executive Officer of
Sustainable Energy for All. Ms. Kyte is appearing voluntarily
today as a courtesy to brief the committee, and we are honored
to have you here today, Ms. Kyte.
Following this panel, we will convene a second panel with
three witnesses. They include Dr. Todd Moss. He is Senior
Fellow at the Center for Global Development at Rice
University's Baker Institute. And Mr. Joao Talocchi. No, I did
not practice that beforehand. He is Program Director at the
Purpose Climate Lab. And finally, I would like to welcome a
fellow Hoosier, Mr. Paul Mitchell. Paul is the President and
Chief Executive Officer of the Energy Systems Network based in
the great City of Indianapolis, Indiana.
On behalf of the subcommittee, I welcome each of you.
As I said, the purpose of today's meeting is to discuss the
intersection between energy and international development. But
before we begin, I would like to offer a few observations to
frame that discussion.
Earlier this year, I co-chaired a bipartisan Center for
Strategic and International Studies task force. The topic of
that task force was reforming and reorganizing U.S. foreign
assistance, focusing on increasing the efficiency and
effectiveness of U.S. development efforts overseas.
Now, my starting point for that task force and my starting
point for today's hearing is that U.S. international
development is not an end in and of itself. Development,
rather, is a tool or a means to do good while promoting
America's security and economic interests. Our country has seen
that poverty, instability, and governance vacuums often create
opportunities for our enemies. They generate threats to
Americans and compel more costly military interventions later,
more costly in terms of lives and treasure.
Benjamin Franklin is often quoted as saying that an ounce
of prevention is worth a pound of cure. That is why I have been
and will continue to be a strong supporter of U.S.
international development efforts.
But that does not mean we should reflexively accept all
U.S. international development programs as they currently
exist. On the contrary, Congress must constantly scrutinize and
reassess U.S. international development programs, asking tough
questions on behalf of the taxpayers' international interests.
We must ensure these programs are optimally designed and
implemented.
Now, when I ask some of these questions and survey U.S.
international development programs, a few key points emerge.
Let me quickly highlight just three of them.
First, it is difficult to overstate the importance of
energy in international development. It was Dr. Moss who stated
in his prepared testimony, ``mass electrification can be
catalytic for reducing poverty and deprivation while generating
growth and prosperity. It can also generate revenue for
governments in the developing world, enabling them to address
challenges within their borders more effectively with less
foreign assistance. After all, we should seek to transition and
enable recipients of U.S. foreign assistance, not perpetuate
dependence.''
Second, there have to be significant changes in the energy
sector in the developing world that must guide our efforts. In
addition to the fracking revolution and the increasing
importance of natural gas, we also see many exciting
innovations related to alternative energy and public-private
partnerships. U.S. international development efforts should
reflect and harness these developments.
That is one of the reasons why I am so excited to have Paul
Mitchell here from Indiana's Energy Systems Network. The
Federal Government and our international partners can benefit
from some of the cutting-edge development that Indiana's Energy
Systems Network has achieved. They have already done much
internationally, and I am confident they can do more.
We also see there is enormous projected population growth
in Africa, and we must help our partners there create jobs. As
Dr. Moss states in his prepared testimony, ``power is
absolutely essential to creating the tens of millions of new
jobs that Africa needs every year.'' He continues, ``there is
no scenario where Africa is stable and thriving without a rapid
expansion of the power sector.'' I agree.
Finally, as I have researched this issue, I have been
impressed, once again, with the goodness and generosity of the
American people. We see many American companies, individuals,
and cooperatives doing good abroad when it comes to energy and
international development.
I would cite as an example Indiana Electric Cooperatives.
They have a project known as Project Indiana. And as part of
this effort, according to IEC, dozens of Hoosiers have traveled
repeatedly to Guatemala at their own expense to install 61
miles of electric lines there in five villages. All 38 electric
distribution cooperatives, and the two generation and
transmission cooperatives, in my home State of Indiana have
been involved in this impressive effort. More than 3,100
Guatemalans now have power for the first time as a result of
these efforts. Churches, schools, and a health clinic now have
power, improving the lives of Guatemalans and generating
durable goodwill for the United States. This is just one
example of Americans at their best.
With those observations in mind, I would now like to turn
to Ranking Member Merkley for his opening statement. Senator
Merkley?
STATEMENT OF HON. JEFF MERKLEY,
U.S. SENATOR FROM OREGON
Senator Merkley. Thank you very much, Mr. Chairman, and I
sure appreciate our experts coming to share their insights with
us today.
As those who are focused on international development know,
many people around the world lack access to electricity and
clean and reliable sources of fuel for cooking, for home
heating, and for transportation. It is now 2017. We think of
ourselves in a very modern era. And yet, one out of six
individuals around the globe does not have access to
electricity. 600 million of these individuals live in sub-
Saharan Africa, another 300 million in India.
Access to clean and renewable energy in developing
countries can provide affordable and reliable energy but also
significantly impact local poverty and provide public health
benefits.
As a result of technological innovation, we have seen the
price of solar and wind energy drop dramatically, as has the
cost of battery storage. This means that communities that lack
access to electricity now have an affordable option to gain
access by building micro-grids--smaller, self-contained grids
that can meet the needs of the isolated community more quickly
and affordably than waiting for an electric utility to make
significant investments to expand the electric grid to the
community. Decentralized grids powered by local renewable
energy sources usually have far lower initial capital
investment requirements. Not only that, but economically few
things bring greater opportunities for impoverished communities
to develop small business and other economic activity than
providing electricity access.
For developing countries without universal or widespread
access to reliable energy and electric grids, there are
opportunities to bring these communities into the 21st century
with more resilient, more economically viable, cleaner energy
sources. Electricity can provide lights for schools and homes.
It can power machines for small businesses. It is a linchpin
for participating in the modern economy. Electricity can also
provide the opportunity for micro-enterprises that I have seen
both in India, and in Africa, for example, when an individual
has a small solar panel that charges a battery, and then they
use that to charge cell phones for others, creating such a
small business.
But electricity is not the whole story. There are twice as
many individuals, as compared to those who lack electricity,
who lack access to clean fuel for cooking food, and instead use
wood or charcoal for cooking even when cooking indoors. These
fuels can cause enormous indoor air pollution, causing an
estimated 4 million premature deaths annually and contributing
to a wide range of illnesses, including pneumonia, low birth
weight in children, lung cancer, blindness, and heart disease.
Women and children often bear a disproportionate share of these
health impacts because it is common in many countries that they
spend more hours indoors.
The good news is that there are clean and affordable fuel
options for cooking as well, and I hope we will hear more about
that today.
There are clear benefits to billions of people around the
world to getting access to clean, affordable, sustainable
sources of energy. But we should keep in mind that this
transformation has significant benefits for us here at home.
America is safer when we are able to make progress in
addressing the root poverty issues that increase the
possibility of radicalization and extremism. Bringing new
sources of energy to underserved communities can also reduce
conflicts among countries or ethnic groups fighting over
limited resources. Investment in energy development, which has
such immediate impacts on people's lives, promotes trust and
good faith between developing communities and the broader
international community.
And on the jobs front, as I believe our witnesses will
attest today, our investment in bringing renewable, sustainable
energy to developing communities is a win-win, creating new job
opportunities in the countries where we are working to provide
access while providing markets for U.S.-based businesses that
produce technology to support sustainable energy solutions.
I really am looking forward to the testimony today.
Sustainable energy access is transforming development in many
parts of the world, and we need to understand it, promote it,
and benefit from it here at home in terms of security as well.
Thank you.
Senator Young. Well, I thank our ranking member.
And, Ms. Kyte, once again thank you for appearing before
the subcommittee. Your full written statement will be included
in the record, and I welcome you to summarize your written
statement in about 5 minutes, please.
STATEMENT OF RACHEL KYTE, CHIEF EXECUTIVE OFFICER AND SPECIAL
REPRESENTATIVE OF THE UNITED NATIONS SECRETARY-GENERAL,
SUSTAINABLE ENERGY FOR ALL, WASHINGTON, DC
Ms. Kyte. Chairman Young, Ranking Member Merkley, I
appreciate the invitation to brief you today. Thank you very
much, other members of the subcommittee.
In 2015, the international community agreed to a set of
sustainable development goals. Sustainable Development Goal 7
is to secure affordable, reliable, sustainable, and modern
energy for all by 2030. Its targets include a doubling of the
rate of improvement in energy efficiency, doubling of the
amount of renewable energy in the mix, and universal access to
sustainable energy.
Of course, later in 2015, the Paris Agreement on climate
change put the energy transition at the forefront of a time-
sensitive economic transformation to cleaner and more inclusive
sustainable growth. Then, to meet the SDG and the Paris
Agreement, the energy transition must embrace three drivers:
decarbonization, decentralization, and digitalization.
Included in this energy transition is delivering
electricity to over a billion people that currently lack
access, and to do so over the course of the next 13 years.
Twenty countries in Africa and Asia represent 80 percent of
that challenge. In these countries, domestic and international
public and private finance--the commitments that are made
average just under half of the estimated needs in the period
2013 to 2014. So that is $19.4 billion compared to $52 billion.
This finance has targeted critical support for economic and
industrial growth. However, only $6 billion of that has focused
on connecting residential consumers. Nearly two-thirds of this
finance was in India, the Philippines, and Bangladesh. Eleven
of the twenty highest impact countries, all of whom are in
Africa, each saw less than a billion dollars of investment a
year.
Decentralized electricity systems could provide near-term,
low-cost electricity to millions of rural consumers but face
policy and regulatory uncertainty that constrains growth.
Seventy percent of Africa's least electrified nations where
access is below twenty percent have barely begun to establish
an enabling environment for access. Electrification plans that
help define the boundaries between centralized systems and
decentralized services are generally lacking.
Now, countries in Asia with a strong policy framework, such
as India and Bangladesh, have seen correspondingly high rates
of electricity access. They do well across policies for grids,
mini-grids, and standalone systems, suggesting that these
efforts are complementary.
By 2030, the International Energy Agency suggests on a
business-as-usual basis, 89 percent of the 674 million people
who will still be without access will be in Africa. Some
countries, such as Kenya have announced plans to close the
electricity gap well ahead of 2030. It is possible to estimate
the dividend in economic and development terms of achieving
access to electricity as a priority. Benefits include
significant savings in energy expenditures, as well as
additional study time for children at home. With advances and
dropping prices of distributed renewable technologies and with
evidence of the benefits of connection, the question before
countries with electricity access gaps and the international
community is why wait for the grid to arrive.
Electricity represents one part of the energy needs of
those without access. Clean cooking represents a significant
added challenge. Just over 3 billion people lack access to
clean fuels for cooking. Under a business-as-usual projection,
2.3 billion people in Asia and Africa will remain without
access by 2030. Current detectable financing flows for clean
cooking are very low against an estimated need of just over $4
billion a year. Stronger emphasis is needed on creating big
markets for clean fuels in addition to investments in clean
cooking technologies and funding for research and development.
Use of traditional biomass, wood, charcoal, and animal dung, is
devastating to human health and a driver of deforestation. The
WHO estimates that over 4 million people die prematurely from
illness attributable to household air pollution from cooking
with solid fuels every year. Transitioning to cleaner fuels,
including ethanol, LPG, and natural gas, will require long-term
industry building.
These comments have been primarily focused on challenges in
securing universal energy access. The good news, gentlemen, is
that advances in technology, financing and business models and
a focus on demand side efficiency in products and services mean
that we can achieve the goal. However, it will require a shift
in mindset from supporting centralized energy systems to more
integrated systems with a greater share of renewables. The U.S.
has been engaged in these efforts for many years. Its continued
engagement at a time of advances in technology and business
models and with an international focus on sustainable
development could reap real rewards.
I would be very happy to answer any questions you may have.
Thank you.
[Ms. Kyte's prepared statement follows:]
Prepared Statement of Rachel Kyte
Chairman Young, Ranking Member Merkley, distinguished members of
the subcommittee, I appreciate the invitation to brief you today.
In 2015, the international community agreed a set of Sustainable
Development Goals (SDGs). Sustainable Development Goal 7 is to secure
``affordable, reliable, sustainable and modern energy for all by
2030''. Its targets include a doubling of the rate of improvement in
energy efficiency, a doubling of the amount of renewable energy in the
energy mix and universal access to ``sustainable energy''. Later in
2015, the Paris Agreement on climate change put the energy transition
at the forefront of a time sensitive economic transformation to cleaner
and more inclusive sustainable growth. To meet the goals of the SDG and
the Paris Agreement, the energy transition will embrace three drivers:
decarbonization, decentralization, and digitalization
Included in the energy transition is delivering electricity to over
1 billion people that currently lack access, in the coming 13 years.\1\
Twenty countries in Africa and Asia represent 80 percent of this
challenge.\2\ In these countries, domestic and international, public
and private finance commitments averaged just under half of what
estimated needs are in the period 2013-14,\3\ ($19.4 billion compared
to an annual estimate need of $52 billion).\4\ This finance targeted
critical support for economic and industrial growth, however only $6
billion focused on connecting residential consumers. Nearly two-thirds
of this finance was for India, the Philippines and Bangladesh. Eleven
of the twenty highest impact countries, all in Africa, each saw less
than a billion dollars a year of investment.
---------------------------------------------------------------------------
\1\ IEA and World Bank, 2017. Global Tracking Framework 2017 (GTF)
http://gtf.esmap.org/
\2\ Those countries are Angola, Bangladesh, Burkina Faso, Chad,
Democratic Republic of the Congo, Ethiopia, India, Kenya, Democratic
People's Republic of Korea, Madagascar, Malawi, Mali, Mozambique,
Myanmar, Niger, Nigeria, South Sudan, Sudan, Tanzania and Uganda.
\3\ SEforALL. 2017. Energizing Finance: Scaling and Refining
Finance in Countries with Large Energy Access Gaps.
\4\ IEA, 2017. World Energy Outlook Special Report, Energy Access
Outlook, 2017.
---------------------------------------------------------------------------
Decentralized electricity systems could provide near-term, low-cost
electricity to millions of rural consumers, but face policy and
regulatory uncertainty that constrains growth. Seventy percent of
Africa's least electrified nations--where access is below 20 percent--
have barely begun to establish an enabling environment for access.
Electrification plans that help define boundaries between centralized
and decentralized services are generally lacking. Only one percent--
$200 million a year--in financing commitments in these 20 countries
over 2013-14 focused on decentralized energy.
Countries in Asia with a strong policy framework, such as India and
Bangladesh,\5\ see corresponding high rates of electricity access. They
do well across policies for grids, mini-grids, and stand-alone systems,
suggesting these efforts are complementary.
---------------------------------------------------------------------------
\5\ World Bank, 2017. Regulatory Indicators for Sustainable Energy:
A Global Scorecard for Policy Makers. http://RISE.worldbank.org.--India
and Bangladesh score 84 and 68 percent, respectively, in the Regulatory
Indicators for Sustainable Energy compared to 33 percent on average in
Africa
---------------------------------------------------------------------------
By 2030, the International Energy Agency (IEA) suggests that on a
business as usual basis 89 percent of the 674 million people still
without access (missing the Sustainable Development Goal) will be in
Africa.\6\ Some countries, such as Kenya and Bangladesh, have announced
plans to close the electricity gap well ahead of 2030. It is possible
to estimate the ``dividend'' in economic and development terms of
achieving access to electricity early. \7\ Benefits include significant
savings to authorities and households from savings in energy
expenditure as well as additional study time. With advances and
dropping prices of distributed renewable technologies and with evidence
of the benefits of connection, the question before countries with
electricity access gaps and the international community is why wait for
the grid to arrive and why push access down the priority list of
investments needed.\8\
---------------------------------------------------------------------------
\6\ IEA, 2017. World Energy Outlook Special Report, Energy Access
Outlook, 2017.
\7\ SEforALL, Power for All and ODI. 2017. Why Wait? Seizing the
Energy Access Dividend (forthcoming).
\8\ The Energizing Finance reports recommend that to drive the
energy transition, at the required pace, African governments, bilateral
and multi-lateral financiers should consider urgently developing a
shared vision and targeted work program to deliver SDG 7 that embraces
energy access goals, enabling policies, utility participation, and
financing. Integrated policy and regulation that embraces centralized
and decentralized electricity solutions can increase market certainty,
reduce the risk of stranded assets, decrease the risk profile of
decentralized investments, and provide confidence to private investors.
Complementary measures are required to enable access for the most
vulnerable people who are beyond the reach of conventional markets.
SEforALL. 2017. Energizing Finance: Scaling and Refining Finance in
Countries with Large Energy Access Gaps.
---------------------------------------------------------------------------
Electricity represents one part of the energy needs of those
without access or little access. Clean cooking presents a significant
added challenge. Just over 3 billion people lack access to clean fuels
for cooking and stoves.\9\ Under a business as usual projection, 2.3
billion people in Asia and Africa are projected to remain without
access in 2030.\10\ Current detectable financing flows for clean
cooking is very low against estimated needs of $4.4 billion per
year.\11\ Stronger emphasis is needed on creating big markets for clean
fuels, in addition to the current often small-scale projects on clean
cooking technologies. Funding for research and development and
innovation in cooking technologies is also needed. Use of traditional
biomass (wood, charcoal and animal dung) is devastating to human health
and a driver of deforestation--this land degradation removes the carbon
sink capacity of many countries. The World Health Organization
estimates that over 4 million people die prematurely from illness
attributable to household air pollution from cooking with solid fuels
every year. Transitioning to cleaner fuels-including ethanol, LPG and
natural gas-will require long-term, ``industry-building'' initiatives,
which must begin immediately to meet the 2030 goals.
---------------------------------------------------------------------------
\9\ IEA and World Bank, 2017. Global Tracking Framework 2017 (GTF)
http://gtf.esmap.org/
\10\ IEA, 2017. World Energy Outlook Special Report, Energy Access
Outlook, 2017.
\11\ SEforALL. 2017. Energizing Finance: Scaling and Refining
Finance in Countries with Large Energy Access Gaps.
---------------------------------------------------------------------------
These comments have been primarily focused on challenges in
securing universal energy access. The good news is that advances in
technology, financing and business models and a focus on demand side
efficiency in products and services, mean that we can achieve the goal
and do so cleanly. However, it will require a shift in mindset from
supporting energy systems that have been centralized, to ones that are
integrated, with a greater mix of fuel sources, including more
renewables. Securing access to reliable and affordable energy services
delivers other economic, political and social benefits. The United
States has been engaged in these efforts for many years. Its continued
engagement, at a time of technology and business model advances and
international focus on sustainable development, could reap real
rewards.
I am ready to answer any questions you may have. Thank you.
Senator Young. Well, thank you for your excellent
testimony, Ms. Kyte. I know each of us up here have a number of
follow-up questions for you.
Here today, as well as at greater length in your written
testimony, you discussed the importance of the development of a
strong policy framework, creating a policy environment that
will facilitate a greater rate of uptake of electricity
solutions, thus providing a higher rate of electricity access
to citizens. India and Bangladesh you have cited as examples of
countries that have developed this strong policy framework.
Could you discuss the importance of that relationship
between the policy framework on one hand and electricity access
on the other and perhaps outline what a strong policy framework
related to electrification looks like?
Ms. Kyte. Thank you very much.
I think perhaps then to a Senate subcommittee, it is
important to say that policy does matter. And what we see is
where a strong policy environment is put in place, speed and
scale of improvement is possible. That is not to say that there
are not good things happening in many, many different
countries, but the speed and scale relates to the policy
environment.
We have been able, through pioneering work by the World
Bank Group and others, to provide a sort of benchmarkable set
of indicators around the regulatory environment for energy
efficiency, for increasing the renewable penetration in the
mix, which is important for decarbonizing the electricity
system, and then also for policies which would lend themselves
to speeding up access.
When it comes to access, which was the subject of my
briefing, you hear what we see is that the traditional
regulatory environment, the traditional incentive is around the
performance of the grid. And that needs to continue to be a
focus of policy in terms of the levels of subsidy, the kind of
price, the reliability of the grid, et cetera.
But when we are looking at closing the access gap, those
countries that are moving towards supporting a more integrated
system, which means allowing off-grid systems to operate
alongside grid systems, as well as allowing for a level playing
field between energy sources, renewable as well as fossil fuel
and other traditional sources, that in that circumstance, then
we see a quicker closing of the energy access gap.
Some countries, the ones that we name, have also focused on
the regulatory environment and what a rural electrification
agency would look like. And I am happy to submit, perhaps in
writing, more detail around that.
But I think that we do see that where you put access as a
priority, you understand that efficiency will drive
productivity throughout the economy and you wish to have a more
modern energy mix that supports those initiatives is having an
impact on closing the access gap more quickly.
Senator Young. Thank you, Ms. Kyte.
In your prepared statement, you also discussed the health
effects of using certain fuels, specifically biomass, for
cooking. You said a World Health Organization report,
indicating that over 4 million people die prematurely every
year from illness attributable to household air pollution from
cooking with biomass and solid fuels generally.
In their statement that I entered into the record, the UN
Development Program said that almost 3 billion people lack
access to clean cooking fuel, depending on traditional biomass
to meet their energy needs instead.
So, first of all, to make sure I understand this
correctly--I have absorbed it from your reading--biomass is
preferable to some of these solid fuels or biomass is one of
the fuels that leads to adverse health effects among the
populations.
Ms. Kyte. It is an excellent question, Mr. Chairman.
A traditional biomass, so the burning of wood or charcoal
or cakes made from animal dung or a combination of those, is
highly detrimental to health. It has heavy particulate matter.
Senator Young. So that is all under the heading of biomass.
What kind of specific R&D and innovation do we need to
address this health and development issue?
Ms. Kyte. So the R&D that is needed is over the improvement
of the performance of cook stoves so that if you were to use
some form of biomass, you would have much less emissions as a
result of that. And there is a metric for understanding how
good they have to be in order to not have any health impact.
And then I think that there is also work to be done on building
out markets for LPG, ethanol, and gas, as well as eventually
solar induction stoves. But for those who are using biomass, we
need more R&D into the actual performance of the stoves that
burn that.
Senator Young. Ms. Kyte, my time is running short here, and
I want to make sure I pass it on to the ranking member.
Before I do, I would be remiss if I did not reiterate that
Mr. Paul Mitchell from Energy Systems Network from my home
State is testifying on the second panel. Have you had an
opportunity to read his written testimony?
Ms. Kyte. I have. I have, sir.
Senator Young. Well, thank you for doing that. And it
strikes me that ESN has made some great progress on various
projects that just might support your efforts at Sustainable
Energy for All. Would you consider coming to Indiana and
visiting with Energy Systems Network? This was not a trap.
[Laughter.]
Senator Young. But I would be grateful for your strong
consideration, ideally your public commitment here and now.
Ms. Kyte. Mr. Chairman, it is an extremely kind and
generous offer. I read with interest the testimony. We have a
lot to talk about, and I would be delighted to take you up on
that offer. Thank you.
Senator Young. Thank you.
Senator Merkley?
Senator Merkley. Thank you very much. It is so much
appreciated--your testimony and the work that you are engaged
in, a very important role in the world.
And you mentioned policy and regulatory uncertainty. And
one of the things that I have heard often is simply the access
to lower interest financing as a significant hurdle. For
example, at one point in a conversation with the power minister
in India, he was relaying--this is now outdated--but that he
wanted to reach two-thirds of the 300 million folks in India
without electricity with coal-powered plants and a third with
renewable. And I asked what was driving the separation between
those two, and he said it was the very high interest rate on
the renewable energy projects, which I think he pegged at about
15 percent.
What kind of work are we seeing in the international
community to provide affordable financing for renewable energy
electricity?
Ms. Kyte. Thank you, Senator Merkley, for the question.
There are many, many layers to a full answer to that, but I
think that increasingly countries are addressing the investment
climate to make sure that there is a consistency in the way in
which they both set the regulatory environment but also then
encourage effective pricing and encourage state-owned banks, in
the case of India, as well as commercial banks and other
lenders to be able to be part of the energy transition. Since
the quote that you gave me, India has been able to auction for
power, grid-connected solar power, at very, very competitive
prices and now believes that solar power is cheaper than coal
without subsidy. And so the question really for India is the
exposure of their state-owned banks to the coal sector, as well
as to stimulate both commercial and state-owned banks and
international investors into their renewable industry.
What we see in smaller projects around the world, in
particular in Africa, is the lack of availability to well-
priced, long-term debt and perhaps a lack of awareness within
the banking sector in some of the developing countries around
the future for off-grid renewable energy, and that is something
that a number of development partners are starting to address.
Senator Merkley. I was really struck by just the transition
in this single year between April and June driven, I think, by
decisions in India related to that dropping price. Was that
about 3 cents per kilowatt in those auctions?
Ms. Kyte. Yes.
Senator Merkley. I would not mind having more of that in
Oregon.
Ms. Kyte. I am happy to provide the detail on that.
Senator Merkley. Thank you. That would be very helpful.
And part of your presentation was labeled ``Dropping
Prices--Why wait for the grid?'' I think that part was about
prices dropping in micro-grid technology, which I have seen
everything from the household panel to the small village
system. What are you seeing evolve between the marketplace and
those settings that are far from grid connections?
Ms. Kyte. Thank you.
Well, Senator, I think the best figure comes from Bloomberg
New Energy Finance, and the framing that they give is that the
price of solar PV has fallen by more than 70 percent in just a
few years, and the price of storage is also falling. And then
you have, therefore, a market of products and services that can
work off that solar PV. And so what you now have is the
opportunity to introduce technology in standalone or solar home
systems or in micro-grids and mini-grids at a reasonable price
into remote rural communities as well as into the peri-open
communities of cities.
That does not mean to say that it is easy to get the
financing for these kinds of projects, but the actual price of
the hardware has meant that all kinds of business models are
now evolving around the provision of those kinds of services.
And so rather than just even 5 years ago when this goal seemed
to be extremely aspirational, it now seems to be one that if we
can align the finance with the right policy environment and
with the entrepreneurs and the backing that they need, that
this is actually achievable.
Senator Merkley. One thing that I saw was a very innovative
strategy where individuals, instead of buying the system, they
buy time on the system, and then when that time runs out, they
can go buy more time. Meanwhile, they may have been able to
sell electricity to other individuals for small televisions or
for cell phones, et cetera to have made that. That seems to
have tackled both the challenge of theft because you cannot
operate it without the code and a more affordable financing
direction.
I will close by mentioning that for some reason Cottage
Grove, Oregon, has become a center for efficient wood stoves to
developing countries around the world. One company, InStove,
specializing in institutional cooking stoves and another,
Aprovecho Research Center, specializing in family-based
cooking. And they both have designed these stoves so that they
squeeze every last ounce of energy out of the combustion of
wood, but even if it is done indoors, which it generally is
not, they burn so efficiently that they have far less
byproducts in terms of indoor potential pollution. But those
Oregon stoves are now all around the world, and I am very happy
to see that development.
Senator Young. Ms. Kyte, I appreciate your answers to those
questions.
We have been joined by Senator Barrasso, a valued member of
the subcommittee. Would you like to ask some questions?
Senator Barrasso. Thank you very much, Mr. Chairman.
I appreciate you being here. I serve on both the Energy
Committee, as well as the Environmental and Public Works
Committee, and I am very interested in this and was here to
hear your entire testimony. I appreciate it. I had the chance
to review the written testimony as well.
Last year in the Environment and Public Works Committee, we
had the President of the Center for Industrial Progress, Mr.
Alex Epstein, come in. He has written a book about the moral
case for fossil fuels. He states that you cannot be a
humanitarian and condemn the energy humanity needs. Climate-
related deaths are way down, including in under-developed
countries. Our technologies and our wealth have given poorer
countries better, cheaper everything, materials for building
buildings, medicine, food for drought relief. He goes on. The
scientific and medical discoveries that we have made in the
time that has been bought with fossil fuel-powered, labor-
saving machines benefit everyone around the world and that to
oppose fossil fuels, he says, is ultimately to oppose the
under-developed world.
Now, I believe, Ms. Kyte, that the United States should be
working with countries to promote an all-of-the-above energy
strategy. The United States policy should focus on making it
easier and more affordable for these nations to achieve access
to electricity, not harder and not more expensive.
And it appears that the United Nations and affiliated
organizations and multilateral institutions are placing
restrictions and prohibitions on the use of traditional energy
sources such as coal and oil and natural gas.
So I would ask if you could describe the programs at the
United Nations which actually support traditional energy
resource development as a way to help underdeveloped nations
grow their way out of poverty and improve the quality of life
for the people who live there.
Ms. Kyte. Senator Barrasso, thank you so much for your
question and for your long-held commitments to this issue.
Thank you.
So as international organizations, we are guided by the
decisions of our member states. And so for the first time I
think after many decades of discussion, the agreement in 2015,
which was unanimous, and then the almost unanimous agreement in
the Paris Climate Agreement really frames the energy issue
around reliability, affordability, and access to modern energy
services. And there is a need to change the mix of those energy
services if we are mindful of the concerns around the impact
that warming of the climate is producing.
But on reliability and affordability, most member states of
the United Nations--or most countries in the world--are
struggling with how to produce that, and that means that we
have a responsibility to look at the effective management of an
energy service which will provide services for everybody. That
means shifting perhaps to more resilient energy systems that
use off-grid and grid. It means modernizing the grid using
digital technology. And it means being much more productive
with the use of energy now. And I think there is a real
revolution there. It is something that the United States has
led on in the past.
And it means counting in the cost of the impact of poor air
quality. And this is what is driving most countries. So whether
it is China or India or the capital city of my home state, so
London in the United Kingdom, or whether it is Lagos in
Nigeria, what is driving policy is the need for clean air
because that is going to attract competitive companies. That is
going to protect children and future generations.
And so I think that what we are seeing is a drop in price
of renewables because of technological advance, and we are also
seeing a choice that people want to make, if it can be
affordable and reliable, towards cleaner energy sources because
they cannot afford to have choked cities and an economic
development that is being slowed for that reason.
So I think that the kinds of requests we are getting from
member states are about help us with a transition for reliable,
affordable, and cleaner energy because we do not see a pathway
to sustained economic growth if we have the kind of air quality
that we are beginning to experience now.
Senator Barrasso. It just seemed interesting in some of my
trips to Africa and being in some of the townships in South
Africa, I know there are areas where there are people
desperately looking for any sort of energy. And the cell phone
has done remarkable information in terms of helping with making
sure people were taking the HIV medication and helping with the
mothers to mothers program. But the problem that they are
dealing with is there seems to be a lack of any energy, as we
have heard the testimony--the billion people around the world.
So my concerns in terms of restrictions that are being
placed on funding and things is that instead of regulating and
placing impossible restrictions on underdeveloped energy
sectors of developing nations, we should be encouraging growth
so that these countries can compete in the international
marketplace, create jobs, alleviate poverty. There are so many
things that we can do. And it just seems that we want to all
make energy as clean as we can, as fast as we can, but in ways
that make this energy available. And if there are resources
that can do it now, I think it is hard when we put additional
restrictions and limit the kinds of energy that they can use
because you talked about the dung that is burned compared to
what we have used to advantage this nation, that we ought to be
able to have that used elsewhere as well.
Thank you, Mr. Chairman. My time has expired.
Senator Young. Well, thank you, Senator. I appreciate your
bringing that important component to this overall conversation.
I think that definitely needs to factor into our policymaking
as well.
So thank you, Ms. Kyte, once again for your testimony here
today.
This concludes the first panel, and we are going to take a
few minutes for the second panel's witnesses to get situated.
[Pause.]
Senator Young. Everyone looks situated, and we are running
against the clock. So I thought we would proceed. I call back
into order this subcommittee.
And I would like to welcome again Dr. Todd Moss, Senior
Fellow at The Center for Global Development and at Rice
University's Baker Institute; Mr. Joao Talocchi, Program
Director at the Purpose Climate Lab; and Mr. Paul Mitchell,
President and CEO of Energy Systems Network.
Your full written statements will be entered into the
record. I welcome you to summarize your statement in about 5
minutes or less, please. Let us go in the order I welcomed you.
Dr. Moss, your testimony, please.
STATEMENT OF DR. TODD MOSS, SENIOR FELLOW, THE CENTER FOR
GLOBAL DEVELOPMENT; NONRESIDENT SCHOLAR AT THE CENTER FOR
ENERGY STUDIES, RICE UNIVERSITY'S BAKER INSTITUTE, BETHESDA,
MARYLAND
Dr. Moss. Great. Thank you, Chairman Young, Ranking Member
Merkley, and other members of the subcommittee.
I proudly served in the State Department under Secretary
Condoleezza Rice and continue to work closely on U.S. energy
and development policies at the nonpartisan Center for Global
Development and at Rice University.
I have three brief points today, and I will conclude with
three brief recommendations.
Point number one, helping our allies build modern energy
systems directly serves U.S. economic, national security,
diplomatic, and development interests. Energy statecraft is a
valuable lever for transforming our relationships with emerging
nations and promoting the full array of U.S. interests around
the world especially in Africa, an increasingly important
region. Africa's ambitions are not just for lights and phone
chargers but for the modern energy infrastructure that every
country needs to benefit from the global economy and to create
jobs for their growing populations.
Our own country's experience shows that mass
electrification can be catalytic for reducing poverty while
generating growth and prosperity. Africa is vastly underpowered
today. My refrigerator uses more electricity than nine people
in Ethiopia. And these gaps are only going to widen as people
grow richer and their energy demands expand.
Now, for the United States, the potential economic up side
is tremendous. Closing Africa's power gap would help to unleash
the massive consumer and investment potential of a continent
that is already home to more than a billion people, and it is
bursting with creative and entrepreneurial talent.
Conversely, the security down side of failure is
frightening. There is simply no scenario where Africa is stable
and thriving without a dramatic expansion of the power sector.
And electricity will be one of the driving determinants whether
the continent becomes a source of economic dynamism or a source
of dangerous security threats.
A prime example here is Nigeria. Africa's largest economy
could be a major destination for U.S. investment and a robust
engine for global growth. Nigeria is also a critical U.S.
partner in our fight against nearly every transnational threat
we face such as terrorism, criminal networks, and disease.
Now, sometime in the next 25 years, Nigeria's population
will be larger than ours. Yet, while we have about 1,000
gigawatts of electricity generation capacity, Nigeria today has
about four. If we help Nigeria build a modern energy system, we
will help a critical ally and generate opportunities for
American companies. If we ignore Nigeria's energy future,
either China fills the vacuum or Nigeria fails and becomes a
hotbed of dangerous threats.
Point number two, Power Africa has made an extremely
promising start. So far, Power Africa is right on track to meet
its goals of 30 gigawatts of new generation capacity and 60
million new connections.
To be very clear, Power Africa is not using U.S. taxpayer
funds to build power plants in foreign countries. It is instead
deploying technical advisors and other tools to unlock the
potential of the private sector. A core component of Power
Africa is the Overseas Private Investment Corporation. Now,
OPIC makes commercial loans to specific high-value projects
where private credit is unavailable. This does not cost U.S.
taxpayers as OPIC is profitable and returns money into the U.S.
Treasury every year. So Power Africa is succeeding, but it must
be sustained and it could be even better at little to no
additional cost.
Point three is that in energy, big is still beautiful.
Small-scale distributed power systems are definitely going to
reach many, many poor people, but African economies will still
require large-scale power plants and a modern grid. If you are
poor and live today without any electricity, then getting a
solar lantern or a small home system is a remarkable step up.
However, three caveats to this.
One is that small home systems are really just the very
first step on a long energy ladder. The global definition of
rural modern energy access is just 50 kilowatt hours per person
per year. This is what an average American consumes in about a
day and a half. It is barely enough to power light bulbs or
charge a cell phone. And 50 kilowatt hours is not an end goal.
It is just a very, very first step. And it is really kind of
crazy to call this modern energy access.
The second caveat is that electricity for development is
not just about reaching homes. Reaching homes is important, but
it is also about powering industry and commerce. No matter how
many lanterns are delivered, Africa's growing cities and
industrial zones will require large-scale power for job
creation and economic growth.
And the third point is that all-of-the-above, which we
heard Senator Barrasso mention, is not just an American
approach. Every country exploits its own endowments to meet the
energy needs of its people. Yes, solar, wind, geothermal, and
hydro will all play an important role in Africa's future energy
mix. Yet, natural gas will be part of the solution too. In
Ghana, Nigeria, Kenya, Tanzania, Mozambique, Cote d'Ivoire,
Senegal, and others, it is simply untenable to expect these
countries to produce natural gas and export all of it to Asia
and Europe while their people still need power. Now, we can
either help these allies build smart infrastructure with modern
American technology or we can cede this space to others.
Let me conclude briefly with three ways to make Power
Africa even more effective in supporting U.S. interests and how
Congress can help.
One, Congress should insist that the administration
continue Power Africa and fulfill the goals of the bipartisan
Electrify Africa Act.
Two, the very modest Power Africa team based at USAID must
be fully funded. Their valuable work paves the way for private
investment.
And three, Congress should work with the administration to
turn OPIC into the U.S. Development Finance Corporation, a
full-service development finance institution worthy of the
United States and built for the energy statecraft of the 21st
century.
[Dr. Moss's prepared statement follows:]
Prepared Statement of Dr. Todd J. Moss
Thank you Chairman Young, Ranking Member Merkley, and other members
of the subcommittee. I appreciate the opportunity to highlight how the
United States can better utilize energy policy to pursue our objectives
in sub-Saharan Africa, a region of growing economic and national
security importance. I proudly served in the State Department under
Secretary Condoleezza Rice and continue to work closely on U.S. energy
and development policies as a Senior Fellow at the nonpartisan Center
for Global Development and at Rice University's Baker Institute.
I have three points today and will conclude with three brief
recommendations. My three main points are:
1. Helping our allies build modern energy systems directly serves U.S.
economic, national security, diplomatic, and development
interests.
2. Power Africa, using U.S. tools and expertise to unlock private
investment in the power sector, has made a very promising
start. But Power Africa must be sustained--and could be even
better at little to no additional cost.
3. Small-scale distributed power is going to reach many poor people,
but to grow their economies, create jobs, and meet escalating
demand, African countries will still require largescale power
plants and a modern grid. In energy, big can be beautiful too.
First, helping our allies build modern energy systems directly
serves U.S. economic, national security, diplomatic, and development
interests. The old version of energy statecraft was the Carter
Doctrine, which asserted the right to use military force to protect the
flow of oil from the Middle East. Today's global energy marketplace is
wholly different and requires a new approach by the United States. The
fracking revolution and rise of natural gas has dramatically changed
the geostrategic balance. Similarly, promoting energy access is a
valuable new lever for transforming our relationships with emerging
nations in sub-Saharan Africa and promoting the full array of U.S.
interests in that increasingly important region.\1\
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\1\ Bazilian, Morgan, Benjamin Sovacool, and Todd Moss.
``Rethinking Energy Statecraft: United States Foreign Policy and the
Changing Geopolitics of Energy.'' Global Policy 8, no. 3 (September
2017): 422-25.
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Our own experience here in the United States shows that mass
electrification can be catalytic for reducing poverty and deprivation
while generating growth and prosperity. Africa is vastly underpowered
today and the gaps are only going to widen. Africans already use far
less energy than their income level would predict.\2\ My refrigerator
uses the same amount of electricity each year as nine people in
Ethiopia.\3\ As people grow richer, demand for energy expands as people
can afford higher power appliances and move into higher-value jobs that
require modern power.
---------------------------------------------------------------------------
\2\ Moss, Todd, and Gailyn Portelance. ``Do African Countries
Consume Less (or More) Electricity than Their Income Levels Suggest?''
Center for Global Development, May 31, 2017.
\3\ Moss, Todd, and Madeleine Gleave. ``Seven Graphics that Explain
Energy Poverty and How the US Can Do Much More'' Center for Global
Development, February 18, 2014.
---------------------------------------------------------------------------
All African countries aspire to what we take for granted:
affordable 24/7 electricity that is mostly hidden but fundamental to
the way we live, work, communicate, and travel. For African governments
building modern energy systems to deliver on the ambitions of their
citizens, they understandably seek active U.S. engagement to help them
connect with investors and advanced technology. These ambitions are not
just for lights and a phone charger, but for the modern energy
infrastructure that every country needs to benefit from the global
economy and to create jobs for their growing populations.
Why should the U.S. even care about Africa's unmet energy demand?
The economic upside is tremendous. Data show very clearly that lack of
power for African businesses is among the very top constraints to
economic growth.\4\ Resolving Africa's power gap would help to unleash
the massive consumer and investment potential of a continent that is
already home to more than a billion people and is bursting with
creative and entrepreneurial talent.
---------------------------------------------------------------------------
\4\ Ramachandran, Vijaya, Alan Gelb, and Manju Kedia Shah. Africa's
Private Sector: What's Wrong with the Business Environment and What to
Do About It. Washington, DC: Center for Global Development, 2009.
---------------------------------------------------------------------------
Conversely, the security downside of failure is frightening. Power
is absolutely essential to creating the tens of millions of new jobs
that Africa needs every year. There is no scenario where Africa is
stable and thriving without a rapid expansion of the power sector. It's
not too strong to say that the continent will either become a source of
new economic dynamism or a source of instability and threats--and that
electricity will be one of the driving determinants.
A good example of the upside opportunities and the downsides risks
is Nigeria, Africa's largest economy and most populous nation. Nigeria
is an unavoidable American partner in our fight against nearly every
transnational threat we face: terrorism, disease, criminal networks,
and trafficking in drugs, guns, and people. With a population
approaching 200 million, Nigeria is also a major investment and trading
partner that we would be unwise to ignore.
To give you some perspective, in about 25 years, Nigeria's
population will surpass the population of the United States. We
currently have about 1,000 GW of electricity generation capacity in the
U.S, a number that the Department of Energy expects to rise to about
1,200 GW by 2040. Today, Nigeria has 4 GW. If we help Nigeria build a
modern energy system that meets its economic and human development
needs, we will help a critical ally, support its path to better
governance, and generate tremendous opportunities for American
companies. Choosing to overlook Nigeria's energy needs leaves only two
scenarios: China fills the vacuum or Nigeria disintegrates and becomes
an epicenter of dangerous threats.
Second, Power Africa has made a very promising start, but must be
sustained--and could be even better at little to no additional cost.
The initiative, launched in 2013 in specific response to ally requests
for U.S. assistance, aims to boost generation by 30 GW and to connect
60 million new homes and businesses by 2030. The effort is backed by
Congress through the Electrify Africa Act, which passed in 2016 with
strong bipartisan support.
So far, Power Africa is right on track to meet these goals.\5\
Importantly, Power Africa has used a suite of public policy tools to
convene, catalyze, and cajole private investment in the power sector.
To be very clear, Power Africa is not using U.S. taxpayer funds to
build power plants in foreign countries. It is instead deploying
technical advisors and other tools to unlock the potential of the
private sector. The limited public sector funding that is being
deployed is largely from the Overseas Private Investment Corporation
(OPIC), which makes commercial loans to specific high-value projects
where private credit is unavailable. This does not cost U.S. taxpayers,
as OPIC is profitable and returns money into the U.S. Treasury every
year.
---------------------------------------------------------------------------
\5\ Power Africa Annual Report August 2017. Washington, DC: United
States Agency for International Development, 2017. Moss, Todd.
``Grading Power Africa.'' Brief. Washington, DC: Center for Global
Development, 2016.
---------------------------------------------------------------------------
Third, small-scale distributed power solutions are going to reach
many poor people, but African economies will still require large-scale
power plants and a modern grid. The notion of universal energy access
is a worthy goal and one that can be reached in our lifetime. If you
live today without any electricity, then getting your first solar
lantern or a small solar home system is a huge step up. However, there
are important caveats:
Small solutions are just the first step on a long energy ladder.
The International Energy Agency currently considers a rural
person to have ``modern access'' at just 50 kWh per person per
year. It is what an average American consumes in a day and a
half--barely enough to power a light bulb or charge a cell
phone. No person will ever be satisfied with this much power,
and it is absurd to call this modern energy access.\6\
Expecting Africans to stay at a very low level of energy
consumption is to expect them to remain in poverty.
---------------------------------------------------------------------------
\6\ More Than a Lightbulb: Five Recommendations to Make Modern
Energy Access Meaningful for People and Prosperity. Report of the
Energy Access Targets Working Group. Washington, DC: Center for Global
Development, 2016.
---------------------------------------------------------------------------
Getting energy to poor people in their homes is important, but the
major development benefits come from energy for industry and
commerce. In a typical economy, the vast majority of
electricity is used by industry and commerce, not households.
No matter how many lanterns are delivered, Africa's growing
cities and industrial zones will require large-scale power for
job creation and economic growth.
``All of the above'' is not just an American approach. Every
country exploits is own endowments to meet the energy needs of
its people. Solar, wind, and hydro will all play an important
role in Africa's future energy mix. Yet many countries will
still need to use their own natural gas as part of their energy
solution. Countries already producing natural gas include
Ghana, Nigeria, Kenya, Tanzania, Mozambique, Cote d'Ivoire,
Republic of the Congo, Angola, and Senegal. It is untenable to
expect these nations to produce natural gas and export it all
to Asia or Europe while their people need power. We can either
help these countries build infrastructure smartly and with
modern American technology or we can cede this space to others.
Allow me to conclude briefly with three ways to make Power Africa
even more effective in supporting U.S. interests--and how Congress can
help.
1. The administration should vigorously embrace the goals and tools of
Power Africa with the continued support and encouragement of
Congress. This requires a clear statement that Power Africa
will continue and that the bipartisan Electrify Africa Act will
be fulfilled.
2. The modest Power Africa team based at USAID must be fully funded.
Their work covers a range of technical support, data
collection, and other activities that pave the way, as it
should, for private investment to do the bulk of the heavy
lifting. USAID requires resources to do this job.
3. OPIC could do much more with additional flexibility and
capabilities. At no additional cost to American taxpayers, OPIC
could easily do two or three times the volumes of power deals
in Africa if Congress provided multiyear authorization, equity
authority, and allowed OPIC to invest a small portion of its
profits in expanding its deal teams. Even better, Congress
could work with the administration to turn OPIC into the United
States Development Finance Corporation (USDFC), a full-service
development finance institution worthy of the United States,
and built for the energy statecraft of the 21st Century.\7\
---------------------------------------------------------------------------
\7\ Leo, Ben, and Todd Moss. ``Bringing US Development Finance into
the 21st Century: Proposal for a Self-Sustaining, Full-Service USDFC.''
Policy Paper. Washington, DC: Center for Global Development, 2015.
---------------------------------------------------------------------------
Thank you.
Senator Young. Thank you, Dr. Moss.
Mr. Talocchi?
STATEMENT OF JOAO TALOCCHI, PROGRAM DIRECTOR, PURPOSE CLIMATE
LAB, NEW YORK, NEW YORK
Mr. Talocchi. Chairman Young, Ranking Member Merkley,
members of the committee, thank you for inviting me to testify
on the important issue of energy access in emerging economies.
I was once in a community in the Amazon that was not
connected to the grid when the diesel generator was turned on.
Putting aside the less than optimal way that diesel was stored
and handled, I was struck by one thing, and that was the noise.
I asked a villager if it bothered him, and his answer was, ``A
little, but the worst part is we cannot hear the snakes.'' As
it happened, a kid had been bitten a few weeks before.
Senators, providing energy access to the 1.2 billion people
around the world that lack access to electricity is a
fundamental step to improve their social and economic
conditions and that of their countries. But to do so, we need
to focus on the best solutions, those that are fast to deploy,
affordable, safe, and effective.
To address this need, policymakers face two distinct
options that are complementary, though: extend infrastructure
of a centralized electricity grid or provide local renewable
energy solutions. To date, the primary approach to solve this
problem has been to increase grid connectivity, but progress
has been slow and the number of underserved households is
expected to decline by only a few percentage points over the
next few years.
The problem is that it makes little economic sense to
extend and maintain the grid for long distances over rivers and
across mountains with costs at the tens of thousands of dollars
per mile just to sell underpriced electricity to a few houses.
Utilities found this. Even if the grids reach these remote
places, the utilities need to wait for subsidies that are slow
to come. Or they need to spend money to send people to collect
money from villagers that either cannot or do not want to pay
because the electricity services are poor and power cuts are
constant. As populations grow, this all-or-nothing grid-based
approach will continue to leave millions in the dark.
Decentralized renewable energy systems, especially those
with storage capacity, are a much smarter solution. These
technologies like solar, wind, hydro, and biomass can operate
in multiple configurations from a simple individual or home
systems to more complex local mini-grids or even as
complementary regional grids. They can work for a few hours or
provide 24/7 power.
Renewable energy technologies are independent and resilient
relying on locally available and usually free fuels, the sun,
wind, and water, and do not depend on supply chains or power
lines that cost a lot and can be disrupted by various factors
as conflict or natural disasters. Just think about Puerto Rico.
But some will say many governments tried to install solar
power before, and those experiments failed. I myself have seen
many solar panels from the 1980s serving as doors to chicken
coups in remote communities. The technology is not to blame.
The problem was the approach. Public agencies tried to install
the systems and they just left. The first time something went
wrong and no one came back to fix it, that was the end of it.
Many governments are learning that lesson and, instead of
doing it themselves, are working to create enabling
environments for small and medium local enterprises. These
enterprises can build deep rural distribution networks for
renewable energy solutions as well as customers' trust. Because
their returns depend on neither products working well or the
sale of electricity, they are bound to offer guarantees, after-
sale support, and perform repairs.
Decentralized renewable energy for energy access needs to
be a business. This is already starting to happen. Because of
renewable energy solutions are scalable. It is possible to
reach communities in weeks instead of years and to do that in
economical terms offering enough power at a price that can be
afforded and that makes business sense for all involved.
This is a shift from the all-or-nothing approach based on
grid connections. It creates a new model based on entry level
power and the concept of an energy ladder. Communities can use
their new sources of energy to keep small businesses open a bit
later. They can store products in refrigerators and access
communication and banking services.
Decentralized renewable solutions are being used for
irrigation with solar water pumps and also grinding, milling,
husking, drying, smoking, expelling oils, powering tools and so
on. These are economic activities that provide income. I have
met a woodworker in the Amazon who tripled his output just
because he had access to energy. In turn, people can afford
more electricity and energy systems can be scaled up.
Beyond making existing jobs more efficient, renewable
energy solutions create local permanent jobs for maintenance,
payment and collection, and after-sale support just as
examples.
Energy access for rural communities strengthens local
economies and job creations. It is a win-win-win for all. This
is a new space and sharp reductions in the cost of generation,
storage technologies are helping it grow quickly. The United
States can play an important role in supporting it through
technology, innovation, and finance. We can continue wait
decades for the grid to reach these 1.2 billion people, but the
smarter option is to create the conditions for markets to
deliver energy access through decentralized renewable energy
which can happen in a much shorter term. The benefits of jobs,
resiliency, reduced air and water pollution, avoided climate
change emissions, increased school performance, and new
opportunities for social and economic development cannot be
ignored or delayed.
Thank you.
[Mr. Talocchi's prepared statement follows:]
Prepared Statement of Joao Talocchi
Introduction:
Chairman Young, Ranking Member Merkley, members of the committee.
Thank you for inviting me to testify on the important issue of energy
access in emerging economies.
For the past 3 years I've directed campaigns at the Purpose Climate
Lab, an initiative incubated by Purpose Campaigns and focused on
accelerating the adoption of low carbon solutions through public
engagement, communications and the coordination of collaborations among
stakeholders. Working with a variety of stakeholders including social
and environmental NGOs, local governments, the private sector, faith
groups, celebrities and the UN, I have lead campaigns that mobilized
and engaged more than three million people over the last two years and
resulted in the adoption of renewable energy and clean transport
policies. These campaigns simultaneously harness the reach and power of
digital engagement platforms while fostering the deep connections
created by innovative partnerships, offline activations and the
influence of traditional media. The campaigns are developed using the
best available knowledge, provided by scientific reports; technical
reports developed by organizations specialized in the development and
implementation of low carbon solutions and continuous interactions with
multiple stakeholders collaborating towards similar goals.
Before Purpose, I held a variety of roles across at Greenpeace,
including positions with the climate, energy and forest campaigns in
the Brazil, International and United States offices. In addition to
plan and implement multiple public campaigns, I worked with teams to
commission a study that measured the hidden external cost of coal in
South Africa and compared them to the potential for renewable energy
investments. The results of this study will be referenced in my
testimony.
I also directed the Amazonas State Climate Change Center, within
the Sustainable Development Secretariat from the state of Amazonas, in
Brazil. There, I lead the implementation of the state's climate change
law, the development of the state's environmental services policies,
supported pilot projects for renewable energy access in remote
communities and created and the state's energy council.
Context:
Providing energy access to the 1.2 billion people around the world
that lack access to electricity is a fundamental step to improve the
social and economic conditions of these people, their countries and the
world. No country has developed without access to reliable and
affordable energy services.
How and when this done will have a direct impact over all of the 17
United Nations Sustainable Development Goals. It is unreasonable to
consider that its possible to eliminate poverty, improve nutrition,
ensure quality education, empower women and promote sustained economic
growth without energy.
It is also unreasonable to consider that its possible to ensure
sustainable management of water, to make human settlements resilient,
to protect ecosystems and to combat climate change if that energy is
the result of exploring and burning fossil fuels. Especially, but not
only because of fossil fuel's role in exacerbating the potential risks
of climate change, which is predicted to have severe negative impacts
on food and water resources, ecosystems, economic growth, population
dynamics and health, undermining and often reversing gains made through
development.
One reason for this is fossil fuels have been around for decades,
but have still failed to deliver energy to about one sixth of the
world's population.
Another reason is the use of fossil fuels results in numerous
negative externalities, such as long-term water pollution, the
destruction of arable lands and crops, air pollution and climate
change. I was part of the development of a scientific study in South
Africa, entitled The external cost of coal-fired power generation: the
case of Kusile. It showed that making consumers pay for the true cost
of coal-fired electricity generation would add between 237 percent and
459 percent to the tariff.
Another key finding was that it would be possible to develop no
less than 5 times the generation capacity of a specific proposed coal
power plant, if only 30 percent of its external costs were used to fund
renewable electricity generation. Despite these findings, this coal
power plant, Kusile, is now under construction, with the support of 806
million dollars from the Export-Import Bank of the United States. The
potential for it to increase energy access to under served communities
remains to be seen.
Communities without access to electricity often approach it one of
two ways. In most cases, they rely on diesel generators, which usually
only operate for a limited number of hours a day. The costs of fuel and
maintenance are often too high for communities, unless the cost of
diesel is highly subsidized. In the Brazilian Amazon, I've heard the
communities complain about the smoke, the fluctuating costs, the
storage problems, the supply chains and the noise that diesel
generators create. The latter point is curious but important. When you
are in a poorly lit community in the forest, silence is an important
ally, as noises can indicate the presence of thieves, snakes, jaguars
or other risks.
But for many communities, light comes from kerosene lamps. In this
case, fires that burn entire houses and indoor air pollution are ever-
present threats. These lamps don't produce enough light for kids to
study at night and the streets remain dark, which creates security
problems. In India, for example, Kerosene is heavily subsidized, with
costs reaching U$5.1 billion in financial year 2013/2014, although the
government seems to be aiming to put an end to it.
For the past 3 years, I've been directing projects throughout the
Indian states of Uttar Pradesh and neighboring Bihar, with combined
populations approaching the size of the U.S. These are states in a
region that houses many of India's thermal power plants and some of the
world's most polluted cities in terms of air quality, and where fewer
than half of rural households have power connections.
The lack of energy access for many in India is not only about
building more power plants or access to fuel. India is a power surplus
nation with significant electric power generation capacity idling for
want of demand. The state-run coal mining company is the world's
largest.
The problem is supplying rural homes with electricity from the grid
isn't economical at this point. It makes little economic sense to
extend and maintain the grid for long distances, over rivers and across
mountains, with costs at the tens of thousands of dollars per mile,
just to sell under priced electricity to a few houses. On top of that,
technical losses and power thefts make grid power even less attractive.
But the suggestion of extending the grid makes political sense. In
countries and regions where many people have no access to energy,
political power and electrical power are closely linked.
The promise of abundant, free or heavily subsidized electricity is
a great way to secure votes. Election after election, from local seats
to the highest elected positions, candidates talk about how they will
be the ones that will finally bring power to these communities. This
could be positive if it resulted in the electrification of poorer rural
households and communities that are usually forgotten after election
cycles. But despite progress, rates of electrification in the countries
with the largest populations currently without electricity are barely,
if at all, keeping pace with population growth.
Repeated again and again, the promise of abundant free or cheap
power, which national grids can theoretically deliver, becomes a dream.
It's no surprise that many villagers, especially older ones, will
resist the suggestion of paying for some electricity from local
renewable systems. But the constant power cuts from the grid,
especially to rural villages, as part of load shedding and the falling
cost of and advances in standalone renewable generation are making
individuals optimistic about the potential for the technology to
provide a solution for rural electrification.
On top of asking only for what has been promised, this demand for
grid electricity is also grounded in negative past experiences with
renewables. In previous decades, many governments have tried to
electrify houses and communities using off-grid renewable energy, with
varying levels of success.
In many places, solar systems were installed, with no cost to the
consumers, but also no maintenance and support offered by the
government. The lifetime of those systems was only as long as its first
malfunction. I've seen solar panels from the 80s serving as chicken
coops' doors in the Brazilian Amazon.
I want to stress that this does not mean decentralized renewable
energy systems are not a solution. They are the best solution to will
deliver energy access to remote and rural communities in the short
term.
Decentralized renewable energy solutions as the best solution for
energy access:
Decentralized renewable energy systems, especially those with
storage capacity, can provide electricity for lighting, communications
and productive activities. These technologies--solar, wind, hydro,
biomass or biogas--can operate in multiple configurations--from
individual and home systems to local mini-grids or as a complement to
centralized energy generation systems. They are resilient and
independent, relying on locally available fuels that are many times
free--the sun, wind and water--and don't depend on supply chains or
power lines that can be disrupted by various factors, as conflict or
natural disasters.
After Hurricane Maria destroyed the power grid in Puerto Rico, Elon
Musk from Tesla offered to rebuild the country's grid with solar power
and battery storage, as has been done in smaller islands, as Kauai and
the American Samoa. It can happen in Puerto Rico because there is no
``scalability limit,'' as he put it.
This is a key feature of decentralized renewable solutions, as
solar power. Because they are scalable, it's possible to reach
communities in weeks instead of years, and to do that in economical
terms, offering enough power at a price that they can afford and that
makes business sense for all involved. This can put an end to the ``all
or nothing'' approach based on grid connections and creates entry-level
power. Simple solutions such as solar lanterns or solar home systems
form the basis of an energy ladder in which individuals and communities
have the option to scale up as income and technological development
allows.
Communities can use the new source of energy to keep small
businesses open late, store products in refrigerators and use
communications and banking services, for example.
Decentralized renewable energy is being used for irrigation,
grinding, milling, husking, drying, smocking, expelling oils, powering
tools and so on. It increases the efficiency of economic activity and
thus income. In turn, people can afford more electricity. It also
allows kids to study after dark, providing billions of additional hours
of study. Schools can have lights, fans, communication and
refrigerators and stay open late. In the Brazilian Amazon, a local
school started to offer adult education at night, after the community
was connected to a solar micro grid.
These benefits could be created by any source of electricity, but
because decentralized renewable energy, including storage capacity, can
be deployed in a very short time, they become much more immediate,
tangible and logical. On top of eliminating the costs of fuels, being,
scalable and resilient, renewable energy powered systems also improve
health through the displacement of indoor air pollution, produce no or
low noise levels and reduce greenhouse gas emissions.
The problem with attempts for renewable energy from past decades
were not technology based. It was the price--it was still too
expensive--and the approach.
On costs--in India, an average small solar home system, that can
provide power for a few lights, radio and charge phones, is priced
below US$65. If micro-financed, it can simply replace the costs of
kerosene. And the Indian solar photovoltaic power tariff has fallen to
U$3.8 per KWh in May 2017, which is lower than any other type of new
power generation in the country. Those prices will only continue to
fall.
On approach--governments should not be responsible for maintaining
and operating distributed renewable energy systems in remote areas.
Instead, they need to create enabling environments for small and medium
local enterprises, which can build deep rural distribution networks and
customer trust. Distributed renewable energy for energy access needs to
be a business.
A market led approach means that final consumers will have to pay
for electricity, but it also forces providers to guarantee its supply,
which means they'll service the systems when they stop working. In
addition, it opens up a lot of room for innovation and collaboration.
This enabling environment requires policy stability and clarity.
For example, because there is little clarity on where the grid is going
next in India, many businesses in the space are afraid to install a
solar system in a community, just to have that community connected to
the grid in a year or two. Government's are addressing this by creating
``exit policies'' where they would either buy the electricity through
the new grid, or purchase the entire system. Policies that specify
minimum technical standards will help remove cheap but ineffective
products from the market and improve competition. Finally, tenders that
allow smaller and new players to become empaneled and serve communities
as part of government programs can also play a role.
When I supported the installation of a solar micro-grid in a
community in the Amazon in 2012, we quickly realized the need for
social innovation, as some of the women bought electric hair
straighteners and blow-dryers that demanded too much power and caused
the system to shut down. There was a community meeting where a local
protocol was created, setting rules that limited the times when people
could use certain appliances. This kind of innovation is still used in
communities today, although technology can now help solve the problem,
with smart meters and pay-as-you-go systems--where people buy energy in
advance, similar to putting credits on your phone, available.
Pay-as-you-go innovations and remote controlled smart meters will
also reduce the risk and burden of collecting payments on a regular
basis, which in many cases is done through regular visits to the
communities. This is a real risk and has real impacts on the capacity
of enterprises, especially new ones, to operate. Banks and other
financial institutions are wary of their business models, based on high
up-front costs and slim profit margins. Access to finance and
affordable capital are some of the main challenges faced by companies
trying to offer distributed renewable energy solutions. International
investment from multilateral institutions, developed and developing
countries play a key role in supporting energy access, though efforts
need to be scaled up. National governments can also be a significant
source of finance for electricity by drawing from their own budgets and
facilitating private investments. Innovation and market diversification
is a real need of the sector and companies are filling those gaps.
For example, many companies are looking to develop strong
relationships with banks and micro-finance institutions in order to
ensure access to finance for the consumer, who can decide to pay for
systems upfront, on installments or as they go. Companies are also
aware that while the consumers of today are concerned with lighting and
mobile charging, the consumers of tomorrow will want more fans, TVs and
other appliances, and are diversifying their portfolios and offerings.
Distributed renewable energy solutions are also a source of
employment and income generation for people in these remote areas. When
I supported the installation of solar microgrids in Amazon communities,
the company involved trained two of the villagers to perform regular
maintenance and fix simple problems. These villagers were then engaged
in the installation of other systems. Where companies operate in large,
remote areas, this will be the most economical way of offering after
sales support and a great opportunity to build trust with local
consumers and strengthen the local economy.
On a larger scale, the work done by hundreds of groups--from civil
society, academia, business and government--to develop and promote
renewable energy around the world is producing very positive results.
Grid connected renewable energy already represents the majority of
investments in new electricity generation capacity, especially in the
countries with the largest populations without energy access. This is
very positive. It creates economies of scale, reduces costs,
consolidates new players and creates jobs. It also facilitates policy
development and proves that renewable energy is a real source of
electricity.
The Purpose Climate Lab work on energy access
The large potential and multiple benefits of distributed renewable
energy solutions for energy access are the core reason why the Purpose
Climate Lab has promoted it as a solution and worked to close some of
the gaps that remain ahead of implementation, especially in India but
also in Kenya.
This work has been focused on creating awareness that renewable
technologies are not too expensive, too high tech or too limiting for
rural communities, in order to reduce communities' initial resistance
and increase demand. Another objective is to secure stable and clear
policies to allow market players to fulfill their potential. This work
is happening through broad communication campaigns, the engagement with
hundreds of local, national and international organizations and local
government agencies. One of our approaches is to facilitate
partnerships between micro-financial institutions, service and
technology providers and local governments to accelerate the adoption
of what we call ``smokeless villages,'' where energy for cooking and
electricity will come from clean sources.
Conclusion
While government efforts are expected to increase grid
connectivity, in India and in other countries where large populations
still have no access to energy, progress has been slow and the number
of underserved households is expected to decline by only a few
percentage points over the next few years.
Governments must decide if they want to keep their rural and remote
communities waiting for the promise of grid connected power that will
take decades to be fulfilled or to provide readily available,
affordable, real electricity from decentralized renewable solutions.
These are not trade-offs, as decentralized renewable energy solutions
can be integrated to complement centralized energy generation systems.
If these governments opt for prioritizing the extension of the
grid, the trend of focusing on new renewable energy generation capacity
must be continued. Financial and economic indicators, as well as the
imperative to mitigate climate change, reduce air and water pollution
and create new jobs mean this is the natural path forward. But the
smarter option is to create the conditions for markets to deliver
energy access through decentralized renewable energy, which can happen
in the short term. The benefits of jobs, reduced air and water
pollution and climate change emissions, resiliency, increased school
performance and opportunities for social and economic development
cannot be ignored or delayed.
Senator Young. Thank you, Mr. Talocchi.
Mr. Mitchell?
STATEMENT OF PAUL MITCHELL, PRESIDENT AND CHIEF EXECUTIVE
OFFICER, ENERGY SYSTEMS NETWORK, INDIANAPOLIS, INDIANA
Mr. Mitchell. Chairman Young, Ranking Member Merkley, thank
you for the opportunity to appear before your subcommittee
today to testify and update you on the many technology
innovations that are taking place in the great State of Indiana
and how they are directly applicable to international
development.
We have been able to achieve significant innovations as a
result of our collaboration with industry, academia, and
government institutions. We have facilitated many successful
public-private partnership ventures, and I am proud of the role
that ESN has played in making this possible.
Energy Systems Network, or ESN, is an Indiana-based
nonprofit consortium working to build an energy ecosystem that
integrates all aspects of the energy landscape from generation
and distribution to transportation and infrastructure. Founded
in 2009 by a group of leading energy and transportation CEOs
and with strong support from then-Governor of Indiana Mitch
Daniels, ESN's mission is to leverage our network to develop
integrated energy solutions that increase quality of life for
today and tomorrow. Our collective focus is to reduce costs,
emissions, and waste, influence policy, and advance
technological innovation. To date, the public-private
partnerships we have led have resulted in investment of more
than $700 million in the State of Indiana.
ESN projects have brought together dozens of global and
Fortune 500 companies, numerous startups and scale-up firms,
leading research universities, and federal labs with a common
purpose: to accelerate the pace of energy technology innovation
and adoption using the State of Indiana as a launching pad for
solutions that will benefit the world.
Let me give you just a few examples of some of our
successes.
The Development of BlueIndy, the largest electric car
sharing system in North America with more than 300 electric
vehicles and 500 charging stations across the City of
Indianapolis offering low-cost, sustainable transportation to
thousands of Hoosiers.
The founding of the Battery Innovation Center, a $20
million world-class energy storage, research, testing, and
prototype manufacturing lab in rural Green County, Indiana just
outside of Naval Surface Warfare Center Crane building, a first
of its kind mobile micro-grid in 2010 powered by renewable
biomass and solar energy capable of supplying forward remote-
operating bases with a sustainable energy supply using their
own waste.
Or partnering most recently with the Indiana Housing and
Community Development Authority to build six net-zero
affordable housing developments with integrated transportation
options for residents.
One of our founding principles is that no one company or
institution has all the tools to solve our energy challenges.
Solutions require a collaborative approach that cuts across
traditional industry boundaries. Solutions require us to work
together with a range of corporate, academic, and government
partners. This type of approach to address the many challenges
associated with international development also works perfectly.
It is the power of public-private partnerships and the
collaboration that drives them which is best able to solve the
complex and varied challenges of energy in international
development.
While ESN is based in Indiana, we ensure that our projects
are scalable well beyond the Hoosier State. In order to drive
scalability, we partner with companies that are working around
the world, and we reach out to nations to find ways for our
best practices to be adopted abroad. ESN has formed
partnerships with companies and institutions, with countries,
most notably Japan, China, France. We have also worked to do
outreach in less developed nations like the Republic of
Georgia.
ESN's engagement around the world has taught us that energy
solutions are truly global in nature. We have learned that
sustainable and cost-effective and environmentally responsible
energy solutions that we have helped deliver to Hoosiers can
work in other countries too, including those, as we have heard
about, that are struggling to develop modern energy
infrastructure and supply.
For example, the increased adoption of distributed energy
resources, which includes, of course, renewables but also
small-scale fossil fuel plants, which are often coupled with
energy storage, offer a revolutionary new approach to scaling
the modern energy supply.
Or the rapidly increasing adoption of transportation
electrification, which can trace its roots back to the State of
Indiana where General Motors developed the first modern
electric vehicle in the late 1990s. Today, electric vehicles
are becoming commonplace and nearly every major manufacturer of
light-duty passenger cars to heavy-duty trucks and buses are
rolling out electric products.
ESN with our many partners are playing an important role in
facilitating these dynamics. We are leveraging Indiana as a
proving ground for the innovative technologies, business
models, and regulatory policies that will support this
transformation. Our more than half a billion dollars in
successful public-private partnerships are proof that
collaboration is working, and the ability to share these best
practices with other nations is a logical step for ESN and one
that our partners are eager to pursue with the support of this
committee.
Thank you, Chairman Young and Ranking Member Merkley. I
again welcome this opportunity to update you on what ESN has
done at the intersection of energy and international
development and look forward to answering any questions you may
have.
[Mr. Mitchell's prepared statement follows:]
Prepared Statement of Paul J. Mitchell
about energy systems network
Overview
Energy Systems Network (ESN) is a not-for-profit based in
Indianapolis that is building an energy ecosystem which integrates all
aspects of the energy landscape: energy generation, distribution, the
built environment, and transportation. ESN's mission is to leverage our
network of corporate and institutional partners and global thought
leaders to develop integrated energy solutions that increase quality of
life for today and tomorrow. Our collective focus is to: reduce costs,
emissions and waste; influence policy; and advance technological
innovation.
Launched in 2009, ESN has since implemented several collaborative
projects and public private partnerships resulting in over $700 million
invested. Our partner organizations include representatives from
industry (including a dozen Global and Fortune 500 companies), leading
research universities, federal labs, non-profits and government
agencies. These partners are active in a diversity of industries
including transportation, energy generation, transmission and
distribution, equipment manufacturing, real estate development,
information technology, and many others. Our facilitation of
collaboration across traditional industry boundaries allows for
innovation of new energy technology and accelerates commercialization
and market adoption.
ESN also provides a range of services to support innovation
including market studies, technology evaluation, project development
and management, formation of joint ventures, brainstorming workshops,
and research efforts.
ESN's Approach
ESN has developed the Path to Sustainability, a framework which
guides our approach to project development and implementation. The
framework consists of the following elements:
People and Place: Each project starts with the customer/consumer in
mind. Our goal is to use energy systems solutions to improve
quality of life to individuals, organizations, and geographic
locations.
Policy: Once the customer and objectives are defined, ESN works
directly with regulators, government agencies, and policymakers
to build support for, or remove barriers to, project
implementation.
Finance: A wide range of creative financing models using public and
private funding sources are leveraged to implement our
projects.
Assets: Financing is used to support the deployment of ``assets,''
which refers to all hardware, software, systems, and other
tangible resources that are required to deliver integrated
energy-related system solutions.
Total Cost of Ownership (TCO): We take a holistic approach to
calculating the return on investment that our projects
generate. By taking into consideration all possible costs of
owning and maintaining the equipment or service, in addition to
upfront capital costs, ESN provides TCO data to justify
sustainable business models and solutions.
Partnerships
Since its founding, ESN has built upon its network of partner
organizations--representing industry, academia, government agencies,
non-profits, and others--to continue collaboration and broaden
engagement to achieve the most innovative energy solutions. Past and
current partners on ESN projects include, but are not limited to, the
following:
A123 Systems
AECOM
Allison Transmission
Altairnano
Battery Innovation Center
Bollore Group
Cummins Inc.
Delphi Automotive
Duke Energy
EnerDel
Hunt Construction
IBM
Indiana Economic Development Corporation
Indiana Housing and Community Development Authority
Indianapolis Power & Light
ITOCHU Corporation
Ivy Tech Community College
LHP Engineering Solutions
MISO
Naval Surface Warfare Center Crane
Nissan
Purdue University
Rocky Mountain Institute
SAIC
Simon Property Group
Sumitomo Electric
Toshiba
Toyota
Underwriters Laboratories (UL)
Vectren Corporation
Wanxiang Group
_______________________________________________________________________
Leadership--Board of Directors and Technical Advisory Council
ESN has engaged executive leadership representation on its Board of
Directors, which includes Fortune 500 companies, academia, non-profits,
and others. Current and past Board members include the following:
John Bear, President and CEO--MISO
Carl Chapman, Chairman, President and CEO--Vectren Corporation
Mitch Daniels, Jr., President--Purdue University
Doug Esamann, Executive Vice President of Energy Solutions; Midwest and
Florida Regions--Duke Energy
David Glass, Chief Executive Officer--LHP Engineering Solutions
David Johnson, President and CEO--Central Indiana Corporate Partnership
and BioCrossroads
Eizo Kobayashi, Chairman--ITOCHU Corporation
Tom Linebarger, Chairman & CEO--Cummins Inc.
General Gene Renuart, Commander of North American Aerospace Defense
Command and U.S. Northern Command (retired)
Thomas Snyder, President Emeritus--Ivy Tech Community College
_______________________________________________________________________
Previous Board Members
Hisao Tanaka, former CEO of Toshiba
Amory Lovins, Chief Scientist at Rocky Mountain Institute
John Kelly, Chief Technology Officer at IBM
Jeff Owens, former Chief Technology Officer at Delphi
Jim Rogers, former President and CEO of Duke Energy
France Cordova, former President of Purdue University
_______________________________________________________________________
ESN has also gathered some of the greatest technical experts in
advanced energy technologies to form a Technical Advisory Council (TAC)
that helps direct and advise on ESN's current and new project
activities. Current and past TAC members include the following:
Koji Abe, General Manager, Corporate Development Department--ITOCHU
Corporation
Dr. Dan Hirleman, Chief Corporate and Global Partnerships Officer--
Purdue University
Gary Johansen, Executive Director of Engineering for High Horsepower--
Cummins Inc.
Alec Proudfoot, Engineering Consultant--Proudfoot Design, Google
Michael Rowand, Director of Technology Development--Duke Energy
John Waters, Chief Technology Officer--Energy Systems Network Previous
TAC Members
Dr. John Wall, former Chief Technology Officer--Cummins Inc.
Dr. James Lyons, Chief Technologist--Novus Energy Partners
David Mohler, former Chief Technology Officer--Duke Energy
_______________________________________________________________________
Among ESN's portfolio of activities, there are four primary areas
of work that fully demonstrate our strengths in public-private
partnership development and implementation. ESN's most long-standing
programs are centered around transportation electrification, through an
initiative named Project Plug-IN. Additionally, ESN incubated and
launched the Battery Innovation Center (BIC) in southern Indiana
outside Naval Surface Warfare Center (NSWC) Crane. We have led a number
of microgrid system projects including MicroGreen, a first-of-its-kind
mobile microgrid. Finally, ESN's most recent program is called Moving
Forward, which is a partnership with the Indiana Housing and Community
Development Authority (IHCDA) to develop net-zero energy efficient
affordable housing with integrated multimodal transportation options
for low- to moderate income families.
Project Plug-IN
What began as one of the largest initial demonstration projects of
plug-in vehicles in the nation in 2010 has evolved into supporting more
than $100 million invested in transportation electrification in
Indiana. The first step in Project Plug-IN was an early adopters pilot
in 2010 to introduce the first plug-in electric vehicles (PEV) in the
state of Indiana. This resulted in more than 125 vehicles and nearly
200 charging stations deployed to support government and corporate
fleets as well as private citizens across central Indiana. This pilot
also led to one of the first time-of-use rates for PEV charging in the
nation approved by the Indiana Utility Regulatory Commission. After our
completion of the early adopters pilot, ESN engaged with the City of
Indianapolis in 2013 to become the first city in the nation to announce
conversion of its entire fleet to non-oil sources (i.e. electric,
natural gas, and biofuels) by 2025. As a first step toward this goal,
ESN worked with the City of Indianapolis to deploy 225 plug-in vehicles
into its municipal fleet, representing the largest PEV fleet of any
city in the nation.
ESN continued its partnership with the City of Indianapolis in
2014-2015 to establish a largest-in-the-nation all-electric car sharing
program in Indianapolis with Bollore Group of France. BlueIndy launched
publicly in 2015 as the largest all-electric car sharing program in
North America and operates more than 300 shared electric vehicles with
more than 500 charging points located across the city. More than 50,000
trips have been taken in the first 18 months of operations and there
are plans to grow the system to as many as 500 cars and 1,000 charging
points. This project represents a public-private partnership with
nearly $10 million pledged by the City and local utility company and
more than $40 million from Bollore Group.
ESN has also consulted with the city's public transportation
corporation, IndyGo, to help select electric bus suppliers and
technology options to include in the city's bus fleet, as well as
provide our transportation electrification expertise to support the
deployment of the nation's first electric Bus Rapid Transit (eBRT)
line, the Redline, that consists of a 13.6-mile route through the heart
of the city. Today, IndyGo operates 21 electric buses--more than any
city in the nation.
Battery Innovation Center
ESN launched the Battery Innovation Center in 2013 to accelerate
the advanced energy storage market by linking manufacturers, government
agencies and research labs, academia, and Fortune 500 companies.
The $20 million R&D and prototype manufacturing facility is located
next to NSWC Crane, which houses a U.S. Department of Defense center of
excellence in battery development and power electronics.
The BIC's proven capabilities attracted the attention of
Underwriters Laboratories (UL), which made the BIC its Battery & Energy
Storage Technology (BEST) Test Center. The BIC also serves as a U.S.
Department of Commerce Proof of Concept Center and the first MESA
Standards Alliance interoperability and testing center in the world.
To date, the BIC has contracted with more than 65 companies for a
wide range of battery and energy systems development, testing and
validation, or engineering services. This list includes large companies
(Rolls Royce, SAIC, Cummins, Duke Energy, AES, GE, NEC, etc.) as well
as emerging startups (BrightVolt, SiNode Systems, Black Diamond
Structures, Pellion, etc.) and government labs and research
institutions (NSWC Crane, Penn State University, Purdue University,
Argonne Labs, etc.)
MicroGreen
In 2010, ESN launched a public-private partnership among
technology, utility, and defense industry partners to develop a first
of its kinds mobile renewable microgrid to provide scalable power to
forward operating bases in remote locations without access to reliable
power and who face dangers associated with delivery of diesel fuel. The
project brought together a number of companies and institutions
operating in the state of Indiana who worked together to design and
build the MicroGreen solution.
Partners included SAIC, Cummins, EnerDel, Duke Energy, and NSWC
Crane. Funding for MicroGreen came from a $1.5 million grant from the
U.S. Department of Energy and was matched with more than $3 million in
private investment. In 2011, a prototype mobile microgrid system was
completed that was capable of providing one megawatt of power using a
combination of biomass, solar, and energy storage. The product was
fielded and tested at Naval Support Activity Crane. System integrator
SAIC used the IP and learnings to support a range of future projects
for the U.S. Department of Defense and commercial customers.
Moving Forward Program
According to the U.S. Department of Housing and Urban Development,
the budgeting rule of thumb for housing and transportation is 30
percent and 15 percent, respectively. That means that families usually
spend nearly half of their income on these two necessities, and many
spend more. For many families, covering these costs is a significant
hardship. Current public subsidies, where applicable, do not consider
the total cost of ownership (TCO) for either the home or the vehicle,
such as utility costs, fuel, maintenance, and energy usage.
Moving Forward is a program that was developed between ESN and the
Indiana Housing and Community Development Authority (IHCDA) in 2015 to
address this challenge of affordable housing and transportation. Moving
Forward approaches housing and transportation simultaneously to reveal
additional solutions and efficiencies not typically seen when these
topics are treated separately.
The program is an innovative, first-of-its-kind program to address
the challenge of providing sustainable, integrated affordable housing
and transportation. The program uses ESN's systems approach to create
affordable sustainable housing that increases the quality of life for
tenants, while decreasing the cost of living and transportation for
low- to moderate income individuals and families. Using existing
federal tax credits, IHCDA provides funding to support two affordable
housing developments per year that integrate energy efficiency, the
built environment, and transportation. The developers and their teams,
selected by IHCDA, participate in ESN's Innovation Workshop, a
charrette-style brainstorming workshop which brings together an
impressive collection of subject matter experts in built environment,
transportation, systems integration, energy efficiency and supply,
policy, finance, and poverty alleviation together to create two high-
level designs. Developers then identify their own sites within Indiana
and design their full-scale development plan.
Because the challenges of affordable housing and transportation are
not specific to the state of Indiana, the Moving Forward program is one
that can be replicated in other states with the same low-income housing
tax credit programs as well as in other countries in which creating
cross-efficiencies through a systems approach would result in cost
savings and improved quality of life outcomes. This public-private
partnership already has four net-zero housing developments with
integrated multimodal transportation options for tenants in progress
across the state, with two more beginning the process in November 2017.
When completed these developments will house more than 200 low income
families in six cities across the Indiana.
esn international engagement
U.S.-China Advanced Vehicle Technology Summit, 2010
One successful example of our work to use energy technology to act
as a bridge for international development was the U.S.-China Advanced
Technology Vehicle Summit, held in 2010 in Indianapolis. The event
brought together the largest ever delegation of automotive industry
executives from China with a number of U.S. automotive technology
supplier CEOs to discuss how the emergence of new hybrid and electric
vehicle solutions developed in the U.S., including many from Indiana,
could help China accelerate its adoption of cleaner vehicles. The
summit hosted approximately 300 participants, including a number of
government, institutional and corporate leaders including, among
others:
Mitch Daniels, Jr., Governor of Indiana
Chao Wang, Assistant Minister, Ministry of Commerce, Republic of China
David Sandalow, Assistant Secretary for Policy and International
Affairs at U.S. Department of Energy
President France Cordova, Purdue University
_______________________________________________________________________
CEOs and senior executives from a number of U.S. and Chinese
automotive companies, including:
Allison Transmission
Cummins
Delphi
Remy International
BYD
China FAW Group Corporation
Dongfeng Motor Corporation
Geely Automotive Holdings Limited
SAIC
_______________________________________________________________________
Several memoranda of understanding (MOUs) were signed at the event
between U.S. and Chinese companies, establishing international
collaborative partnerships for advanced vehicle technology development
and strategic cooperation. The signed MOUs include the following:
MOU of Two-Way Investment Promotion Cooperation: Investment Promotion
Agency of the MOFCOM of China, Indiana Economic Development Corporation
MOU on Cooperation: China Chamber of Commerce for Import and Export of
Machinery and Electronic Products (CCCME), ESN, China Association of
Automobile Manufacturers (CAAM)
Electric Vehicle Battery Joint Venture: Wanxiang Group, Ener1 Group
Agreement on Strategic Cooperation on Vehicle Energy Efficiency and
Environmental Issues: Guangxi LiuGong Machinery Company, Cummins Inc.
Agreement on Strategic Cooperation on Research of Vehicle Energy
Efficiency and Environmental Issues: Zhengzhou Yutong Group, Cummins
Inc.
_______________________________________________________________________
esn and international development
There are a number of ways in which ESN has impacted international
development directly and indirectly though our projects and our diverse
network of partners. Furthermore, there are several projects we have
led which could be scaled internationally in ways that would support a
variety of development goals and objectives including energy access,
sustainable and efficient energy supply, energy security, improved
quality of life, and economic development. One of our founding
principles is that no one company or institution has all the tools to
solve our energy challenges. Solutions require a collaborative approach
that cuts across traditional industry boundaries and leverages a range
of corporate, academic, and government partners. This same guiding
principle is directly analogous to addressing challenges of
international development. It is the power of public-private
partnerships and the collaboration that drives them, which is best able
to address the complex and varied challenges of international
development.
While ESN is based in Indiana and implements most of our work in
the state, we ensure that our projects are scalable well beyond the
Hoosier state. In order to drive scalability, we work to bring in
partner companies that are working around the world and we reach out to
other nations to find ways for our learnings to be adopted abroad. ESN
has formed partnerships with companies and institutions in a number of
countries including Japan, China, and France; we have also conducted
outreach and engagement in the Republic of Georgia. Many of our past
and present board member companies like Cummins, ITOCHU, Toshiba,
Delphi, and IBM are active in nearly every corner of the world.
ESN's outreach and engagement around the world has taught us that
energy solutions are truly global in nature. Many of the same
challenges that we face bring sustainable, cost effective, and
environmentally responsible energy solutions to the citizens of Indiana
are present in most countries around the world, including those that
are still struggling to develop modern energy infrastructure and
supply. For example, the emergence of the increased adoption of
distributed energy resources (DER)--such as renewables (solar, wind,
biomass) as well as smaller scale fossil fuel plants, often coupled
with energy storage in the form of advanced batteries--offers a
revolutionary new approach to scaling modern energy supply. This
approach moves away from a dependence on traditional centralized power
plants with miles of transmission and distribution infrastructure
needed to reach customers. Instead, energy supply is located closer to
the demand and can be scaled up or down faster and with less cost over
time. This DER approach is supported by advancements in controls
systems that allow for microgrids to operate independently or link
together in a broader system. Most traditional energy companies,
including all of our ESN partners, are embracing this new approach to
energy development and including it in their current and future systems
buildout or upgrade plans.
A second revolutionary movement impacting the energy industry is
the rapidly increasing adoption of transportation electrification. The
development of hybrid and electric vehicles can trace their roots back
to the state of Indiana. Indiana was the home of the General Motors
Delco Remy Propulsion Division which developed the first modern
electric vehicle, the EV1. The hybrid and electric powertrain
technology from this effort preceded Toyota's famed hybrid Prius
program. Later, the learnings of the EV1, developed largely in Indiana,
resulted in the launch of the first hybrid bus system by Allison
Transmission of Indianapolis. Today electric vehicles are becoming
commonplace and nearly every major vehicle manufacturer for both light
duty passenger cars to medium- and heavy-duty trucks and buses are
rolling out electric products. Indiana's own Cummins, a global leader
in diesel engines for more than a century, recently announced that it
will be selling an all-electric powertrain into the market for trucks
and buses by 2019. The trend toward more electric vehicles can, if
managed correctly, perfectly complement the adoption of a DER approach
to energy generation and distribution. This is because electric
vehicles can charge and eventually, with improved technology, discharge
into DER microgrid or networks in a way that supports the overall
energy efficiency of the system. The electric vehicles, and
specifically the batteries in the vehicles, in a sense become another
distributed resource integrated into the network. This can be
especially important in developing countries where the development of a
DER network can support new forms of lower cost and lower emissions
transportation, and where the alternative of building a traditional
central power plan in addition to a supply chain for gasoline or petrol
can be very expensive and take years to reach remote villages or
communities.
The intersection of the DER and transportation electrification
revolutions as well as other energy systems innovations are happening
today through the work of ESN and our partners. We are leveraging
Indiana as a launching pad for the innovative technologies, business
models, and regulatory policies that will support its adoption. Our
many successful public-private partnerships--including, but not limited
to, the deployment of the largest electric car sharing network, the
first mobile microgrids powered by renewable energy, development of
advanced battery and energy storage solutions, and building of six net-
zero affordable housing developments with integrated transit--are
examples that our collaboration is working. The ability to share these
learnings and models with other nations is a logical next step, and one
that ESN and our partners are eager to pursue with the guidance and
support of this committee.
Senator Young. Well, thank you, Mr. Mitchell. And thank you
again to each of you for your insightful comments.
Before we proceed to questions, I would like to address one
administrative item. Andrew Herscowitz, the Power Africa
Coordinator for USAID, as well as Joe Scheuer, Director with
the United Nations Development Program, Bureau for Policy and
Program Support, have submitted written statements to the
subcommittee. With unanimous consent, I would like to include
them both in the record.
Senator Merkley. Consent.
[The material referred to above was not made available in
time to be included in this hearing transcript.]
Senator Young. Dr. Moss, in your testimony you state that
the, ``fracking revolution and rise of natural gas has
dramatically changed the geopolitical balance.'' Can you
describe in more detail these broad developments and what their
significance is and most importantly how U.S. policy should
address them?
Dr. Moss. Yes. If we think about the intersection of energy
and U.S. foreign policy, a lot of people are still stuck in the
Carter doctrine era where we just think about oil resources,
making sure that the oil can flow, and it kind of stops there.
But today we are looking at an incredibly dynamic global energy
marketplace where the role of the United States is both a
supplier and buyer. And in sub-Saharan Africa in particular,
energy is such in high demand both economically and
diplomatically that this is a new lever for the United States
to help build alliances, to help support our partners and to
help our allies become more capable to deal with a whole
panoply of issues.
You know, Power Africa was not cooked up in the basement of
some government building. Power Africa came out of a long
series of consultations with African allies where they said we
really want American partnership in the power sector. And that
is what I mean. It is a new global energy statecraft where
helping countries build energy systems is in our interest.
Senator Young. Mr. Mitchell, Indiana has such a fine
history of innovation. You spoke to some of the things we have
done in the energy and transportation space. What do you see as
the most promising R&D and innovation initiatives in the energy
field right now? And what role is ESN playing in some of those
cutting-edge areas?
Mr. Mitchell. Well, you know, there is such a rich
diversity of R&D and tech transfer going on it is hard to speak
to that in a short period of time. But let me talk about two
areas where I see a lot of interest in investment.
The first one is energy storage, and we have heard about
that quite a bit today I think from each of the speakers. The
energy and transportation industries have been looking for a
low-cost, scalable way to store electricity for decades. And it
seems we are finally reaching the tipping point where the
family of lithium-ion battery technology could provide a viable
solution. Costs are coming down at rates once thought
impossible. But it is still an expensive technology, and it has
a ways to go.
In Indiana, we invested in launching something called the
Battery Innovation Center that I spoke to earlier. And this lab
really brings together industry, academia, and government
institutions, and we are working with 65 companies from big
corporations like GE and Duke Energy and Rolls Royce to
promising startups like BrightVolt and SiNode. And what we are
seeing is a number of game-changing innovations in the energy
storage space from the coupling of batteries into really large
grid storage systems that would look like a large data center
all the way down to taking nano-materials and putting them on a
small, flexible battery that fits into a medical device. Within
the very near term, battery technology is going to be so
ubiquitous you are going to see it on virtually--if you are not
already, seeing it on every car, every airplane, every
Internet-connected device, every drone, and every good system
around the world. So this is a really important area of
innovation.
Senator Young. Are there things we should be doing from
your vantage point here at the federal level to scale up some
of these existing technologies, to catalyze new ones,
especially as it relates to our international development
efforts?
Mr. Mitchell. Yes. I mean, I think one of the issues we
have is that we certainly do not want to give up the battery
industry to Asia. China is investing huge sums in building a
number of large factories called giga-factories for battery
technology. And I think there needs to be a concerted effort in
the U.S. to make sure that U.S. innovation continues to play a
leadership role in that space.
I think another area where we need to play a bigger role is
something the previous panelist spoke to in terms of our
innovation in unconventional oil and gas production. We have
unleashed an amazing innovation in that type of fracking and
that type of production. We are now producing volumes at prices
and in locations once thought impossible of oil, gas, and non-
liquid gases. And I think we have got to help other countries
in unlocking that same potential in their markets and to use
exports of oil and gas as a tool for U.S. interests around the
world.
Senator Young. Senator Merkley?
Senator Merkley. Thank you very much. All of you brought
different perspectives to bear and expertise. Much appreciated.
Mr. Talocchi, as you talked about the variety of ways you
can address the challenge of energy with micro-grids, you
mentioned things such as irrigation, milling, drying, smoking,
anyway small-scale--I do not know if you can quite call it
manufacturing but small-scale energy applications. Can those be
achieved with village-level grids?
Mr. Talocchi. Thank you for the question, Senator.
Some of those technologies are already nascently connected
to the power generation as, for example, solar water pumps.
With village-scale grids, it will all depend on the scale of
the grid. So it depends on where you are on the energy ladder
and the capacity of both the company that is there to make the
initial investment but also capacity of the villagers to pay
for that electricity. So some of that can be definitely
achieved with the technology. It is there. It just needs to be
built in the right size for those activities.
Senator Merkley. Let me reframe the question a little bit.
I have seen in villages in a variety of places fairly quick
adoption of small solar panels that provide enough energy for
communications, including very low energy television screens,
cell phones, LED lights to study by or to cook by at night. But
I have not seen much adoption for kind of day-to-day tasks done
in the village in terms of husking, drying, grinding, milling,
and so forth.
Are you starting to see that now in your broader exposure
to what is going on?
Mr. Talocchi. Yes. And I was part of that in the Amazon
when we installed grids there and we supported the supply
chains of fish with refrigerators. So that was a big step so
people could store fish, keep it there, and only transport it
back to markets when they had better opportunities or volumes.
In India, there are opportunities. Husking, for example, is
happening with the support of biomass. So you have micro-grids
there built using not necessarily only solar technology but
hydro and biomass and that then can be scaled to support the
activities. And it is a win-win because they have the fuel
right there.
Senator Merkley. So one of the things I have often heard as
a critique of distributed solar is that you cannot essentially
enable there to be manufacturing activities. And I think that
is fair. Large energy demands, especially ones that require a
lot of heat. But in an economy, normally those are done in
centralized urban areas anyway because of the networks of
transportation. So you do not really put a factory that takes--
even if you have electricity, you do not put it in a village
far out somewhere.
But you mentioned that there is another advantage, which is
eliminating power line disruption. And it took me back to a
situation in West Africa where power lines would go up, and
then they would disappear because of copper theft. Is that
still a problem with the effort to expand grids?
Mr. Talocchi. I do not know if the power lines are a
problem. I know that in Brazil we have seen a lot of
politicians promise access to energy during campaigns, and if
elected, they would sometimes bring the light poles and then
nothing would happen. And then 4 years later, they would run
again, and maybe the cables would be connected but not
necessarily the electricity. So the grid was kind of a choke
point that was used and not to supply electricity but to
achieve votes.
Senator Merkley. And you mentioned in your written
statement how the sociology changes as people become used to
what is possible. And for example, maybe it was the Amazon
community you referred to where women started buying hair
dryers, and that proved incompatible and had to drive a
community discussion.
Mr. Talocchi. Yes. So one of the systems we installed--we
quickly realized that because, of course, we were dealing with
a limited supply of electricity, you needed people to be
responsible with the amount of electricity that they would use.
So, yes, some of the women in the village got hair
straighteners or blow dryers, and those systems made the solar
grid shut down. That was sorted with a community meeting, but
now smarter grids, remote controlled grids, and pay-as-you-go
systems would probably solve that through the technology side.
Senator Merkley. Wind can also produce very low-cost
energy, but you tend to see a lot more solar. Why is that?
Mr. Talocchi. Sorry?
Senator Merkley. Wind can also produce very low-cost
energy, but in terms of micro-grids, at least what I have seen,
there is a lot more solar. Why is that?
Mr. Talocchi. I think, one, there is less data on the
availability of wind in remote communities they need to
measure, and the initial capital investment for a wind turbine
is higher than for solar. And also it is much more complicated
to fix and repair, and there are not enough suppliers in the
market that can offer that technology.
Senator Merkley. Thank you.
Senator Young. Thank you, Senator Merkley.
Dr. Moss, would you like to reply to Senator Merkley's line
of questioning, please?
Dr. Moss. I think the hair dryer example is pretty telling
in that we are talking about, very often in many cases, very,
very low power systems where you have to have a village meeting
to coordinate who is going to use a hair dryer when. You know,
this is something that we absolutely take for granted in the
United States.
And I think it is worth thinking a little bit about the
scale of power we are talking about. So there is no such thing
in the world as a rich country that is a low-power economy. It
does not exist. In the United States, we use about 13,000
kilowatt hours per person. Nigeria is at 150. So the gaps are
so tremendous that we really need--you know, all-of-the-above
is usually used in the context of fuels mix. It is also in
terms of delivery systems. So, absolutely, rural isolated
communities, should not have to wait for the grid. They are
absolutely going to use decentralized systems, and those
systems are getting better and cheaper every day. It is
actually a super exciting time to be working in the energy
field, but the big cities, the big industrial zones are, I do
not think in our lifetime, going to be running on small
systems. So we are going to need all-of-the-above in every way
possible.
Senator Young. Is this why you make the point that many
countries are still going to need their own natural gas as part
of their energy mix moving forward and that we have an interest
in helping those countries, a point Mr. Mitchell made, exploit
their natural resources?
Dr. Moss. Absolutely. I mean, many of the countries that
have the greatest unmet power needs are producing natural gas,
and there is no question whether they are going to produce it
or not. It is a question of whether they are going to export
all of it to richer markets or whether a small portion of it
will be used for power generation at home. And that is where
initiatives like Power Africa can be very helpful because you
have got to deal with a lot of policy issues around the grid,
around the utilities, around the pricing structure to get a
complicated power deal in place.
Senator Merkley. Well, how can we improve that? You
indicated that there are some improvements that could be made
over at OPIC. In fact, you said that we could easily do two or
three times the volume of power deals in Africa. That would be
a lot more deals. But Congress is going to have to take some
specific steps. What are those steps?
Dr. Moss. Well, with OPIC specifically, OPIC is a very high
performing agency that was built in the Nixon administration
and it is still living with rules from the Nixon
administration. So there are things like multiyear
authorization, the authority to take equity positions, which is
very important in certain kinds of deals, the ability to just
invest in its own teams to have enough staff to handle the
deals, and a number of other ways that would not cost American
taxpayers money. Ideally, a super-sized OPIC would actually
even generate greater profits and save taxpayers even more. So
that is really the crux of turning OPIC into a bigger, better
institution.
Senator Young. Thank you.
Mr. Mitchell, ESN has been involved in a number of public-
private partnerships with respect to energy and transportation.
You have some sense of when those public-private partnerships
make sense and when they do not. Tell me. In what instances
should government play a large role? When should the private
sector play a larger role, and when is there an opportunity for
a blending, if you can give me some general rules of some rules
to go on in this area?
Mr. Mitchell. Public-private partnerships are really at the
center of what we do at Energy Systems Network. And so we have
got a lot of experience in this area.
What I would say is in almost every instance, successful
public-private partnerships are industry-led and are driven by
industry funding. I think if you look at the Power Africa
experience and the ability to leverage a lot of private
capital, that is going to be the fastest way to succeed. You
absolutely need a joint partnership and collaboration between
government and industry, but if you cannot get industry to the
table, if you cannot get them to risk their own capital and to
put money into projects, the challenge is when that public
money starts to dry up or the priorities move somewhere else,
the projects kind of end. We heard about that earlier where
maybe some solar panels were put in but then never fully
exploited. And so you have got to find ways to bring private
innovation and private capital to the table.
And I actually think one of the things that is holding that
back is a lack of awareness. In my experience, a lot of the
companies that are doing the most innovative things in Indiana
or the United States are small to medium-sized businesses, and
many of those companies view international development projects
as something that is reserved for the large multinational
corporations or large global NGOs when the reality is if we
could find ways to connect and learn more about what is going
on in the Hoosier State but also other States and connect those
to business partners overseas, some of these development goals
are going to happen on their own.
Senator Young. Are there specific steps that we as
policymakers can take, to your mind, so that U.S. companies can
compete more successfully for U.S. Government projects, for
multilateral development projects, or other contracts that are
out there?
Mr. Mitchell. So one step--it seems simple enough, but it
may be one of the most important--is awareness. It is finding a
way to get the USAIDs, the Millennium Challenge Corporations,
the OPICs, and others out into the States interacting with
organizations like mine, Energy Systems Network, and others so
we are even aware that these programs are available because,
again, I think a lot of companies in the U.S. think of this as
something that is happening somewhere else that they do not
have available to them. So outreach and engagement.
The other thing I would say that would be important is a
lot more business-to-business partnerships that are driven
between States or regions and provinces or communities
overseas, so not necessarily nation state to nation state. But
we have seen a lot of successful partnerships come from sister
city relationships between Indianapolis or Indiana and
communities overseas.
Senator Young. Thank you, Mr. Mitchell.
Senator Merkley?
Senator Merkley. Thank you.
Mr. Mitchell, you talked both about renewable but also
about oil and gas development. And one of the circumstances we
face is that the level of carbon pollution driving climate
disruption has risen substantially, and the rate of pollution
has increased almost threefold between 1960 and now. That is,
we are polluting the air at a three times faster rate now than
we were decades ago. And we are seeing the impact in many ways.
The point was brought home to us most dramatically by the
energy contained in the recent set of hurricanes. And while it
is often noted that any single hurricane is hard to attribute
directly to the warming of the ocean, the warming ocean does in
most cases--most scientists would acknowledge--creates greater
power in a hurricane, a greater punch. We were hit pretty hard.
As you wrestle with advocating for energy systems around
the world and we have this particular global challenge, how do
you weigh that in your decision on how we should proceed?
Mr. Mitchell. Let me say that every project that we have
led at ESN has had a net positive impact on reducing carbon
emissions, but those have not been the primary driver or the
primary goal of the project itself. The primary goal has always
been technology innovation.
I am glad you are asking me this question because one of
the things I think that we need to recognize is the phenomenon
of distributed energy resources, which is a term we have heard
a lot today, is not limited to renewables. In the United States
and specifically in Indiana, what distributed energy resources
means is having the generation closer to the demand source. And
so that includes, of course, renewables and things like energy
storage to help balance those renewables. But it also includes
in many cases distributed fossil generation plants, usually
smaller-scale natural gas combined cycle plants that are far
more efficient, have a much lower CO2 impact than, say, large
baseload coal plants of the past. And I really think that if
you are going to achieve this combination of energy access but
also abundance, which is necessary for economic growth,
serious, long-term economic growth, you have to blend
distributed energy in the form of renewables with combined
cycle natural gas, usually smaller-scale systems, and this new
phenomenon of energy storage. That trifecta gives you the
reliable power source that you need that is also scalable to
support the kinds of economic development growth opportunities
that can allow a manufacturing site to be in a more rural
location.
Senator Merkley. And, Mr. Talocchi, we have seen the impact
on economic development in some cases flowing from carbon
pollution both in terms of fisheries, droughts affecting
farming, hurricanes destroying significant areas. As you ponder
our energy choices, how do you weigh into your decisions the
observable impacts of carbon pollution?
Mr. Talocchi. I think that when we look at the development
goals that we have ahead of us--the UN has 17 of them--climate
change, if it happens as predicted and as the models that are
most accepted say it will, it will impact our ability to meet
each one of those goals, all 17 of them.
So our understanding is that we need to prioritize and
continue to invest in renewable energy at all scales. We
believe it is possible to achieve the same kind of energy
access in abundance through renewable energy technologies
paired with, of course, storage technologies and even
accelerate that to the transport sector. You see the
governments of China and India making commitments to go 100
percent electric on the transport. Of course, that is going to
increase electricity demand. And those commitments must now be
paired with commitments to also increase the amount of
renewable energy generation and capacity so when we get to
stages where all the vehicles are being electrified, that
electricity is also clean.
We believe it is doable. It is happening. Governments
around the world are already adopting that vision. Forty-eight
of the world's least developed countries, known as the Climate
Vulnerable Forum, have made a commitment to go 100 percent
renewable, and now we need to find ways to support them in
getting there.
Senator Merkley. Thank you.
Senator Young. Dr. Moss, you know, I hear a lot of these
public pronouncements by countries in international forums, and
sometimes I wonder whether or not they are genuine, thoughtful,
believable commitments or, if instead, they are public
relations, or maybe a little bit of both. So we just heard
about a pledge by--was it 40 countries, sir? What are your
thoughts about that, Dr. Moss? Are we really moving that boldly
into a new frontier where that will be possible, 100 percent
renewable?
Dr. Moss. International fora--governments make certain
commitments all the time. Some of them are real; many of them
are not. I would be surprised if we would see 48 countries go
entirely renewable. The countries that have very, very high
proportions of renewable--it is mostly large hydro, which also
faces significant challenges. There is still a lot of hydro
potential in sub-Saharan Africa. So we could see a lot more of
that. So that is certainly one option.
When I hear talking about the poorest, most vulnerable
countries of the world and how they are going to lead on this,
it is true. They are going to have a much higher renewables
mix. These are a lot of tropical countries with a lot of wind
and solar resources. But these are also the poorest countries
in the world, and these bright lights that are shining on us
right now--95 percent of the power in Washington, D.C. comes
from coal, gas, and nuclear. And so there is more than a whiff
of hypocrisy when we are trying to restrict finance for the
world's poorest countries to use their own resources in ways
that we are already doing especially since these countries are
not the ones causing the emissions in the first place.
Senator Young. Well, thank you, and I would request that in
the future, when you answer, do not be so politically correct.
Just tell us what you mean. [Laughter.]
Senator Young. Thank you, Dr. Moss.
Dr. Moss, could you and Mr. Mitchell address the following?
We know many U.S. companies work in the international energy
sector, but their interests are not always aligned with our
government. How can we in the U.S. Government better leverage
the efforts of U.S. firms in developing resources in certain
countries to actually promote U.S. policies?
Mr. Mitchell. Let me give you an example of a company that
I have worked with closely, Cummins, and they are an Indiana-
based company and they are active around the world. And one of
the things they sell is diesel and natural gas gen sets that
are used for providing remote power, in some cases all the way
up to multi-megawatt power systems.
And so I think to the point that was made earlier, you need
to have an all-of-the-above approach. You need to make sure
that you are engaging with the companies that are involved in
the natural gas and the oil and gas industries in the United
States and think about what role they can play in this broader
solution of access and abundance.
What can we do to get companies more directly involved or
make sure we are all swimming in the same direction? A lot of
it goes back to information sharing in forums and engagement.
The other thing is to ensure that there are ways that
companies can co-invest in these projects and that they are not
restricted in terms of regulatory or financial restrictions on
how they can invest in overseas development projects. Some of
that has to do with some of the tax issues of getting money
invested overseas and bringing the profits back and so on and
so forth, which I know we are trying to work on and folks are
working on right now. I mean, those are the kinds of things
that you can do.
But definitely the key is to get more companies involved
and I think strategically to get more small to medium-sized
businesses involved.
Senator Young. Dr. Moss?
Dr. Moss. The United States--we do not have China's model.
We are not using our companies to directly implement our
foreign policy, and I do not think that we should.
I do think, though, that the United States--the way our
companies operate overseas helps to set a higher bar in terms
of behavior, in terms of transparency. I think the Foreign
Corrupt Practices Act is one of the most important things that
the United States brings to the world because, A, it helps
protect our companies from poor corporate governance and
misbehavior in certain circumstances, but it also raises the
bar for everybody else and helps to create a more level playing
field and promote good corporate governance and good governance
in the countries in which they operate. That is one of the
greatest things that we can do.
Senator Young. Senator Merkley?
Senator Merkley. Dr. Moss, I believe you have written some
about the challenge of energy-rich, fossil-rich countries
facing the energy curse, that is, that the value of these
resources is so high, they drive an enormous amount of
corruption, make decision-making on behalf of the country
benefiting from those resources extremely difficult. Advocates
sometimes end up dead.
Equatorial Guinea has a per capita income of $20,000.
Enviable for a developing country around the world. But the
majority of the population of that country lives on less than
$2 a day. Any thoughts or insights on how we address that?
Dr. Moss. Yes. Well, thank you for that question. I mean,
this is one of the biggest challenges that a lot of countries
face, and we collectively as the development community have
some answers but they are not very satisfactory. It seems to
work best in countries that have strong institutions that are
relatively democratic and that deliver services for their
people. But this is kind of akin to telling an insomniac that
you have diagnosed their problem and they need more sleep. It
is true but it is not very helpful.
So one of the things that I have been working on--I
actually wrote a book with colleagues at the Center for Global
Development in 2015--is if there are lessons we could learn
actually from the U.S. State of Alaska which, as you know,
provides a dividend to every State resident every year. Now,
that was the genius of Governor Jay Hammond back in the early
1980s, and he did that not because Alaskans were poor, but he
wanted every Alaskan to feel it in their pocketbook to pay
attention to what the politicians were doing with their money,
with their natural resources. So we did a book called ``Oil to
Cash,'' which explores the possibility of using citizen
dividends in resource-rich countries to try to ignite greater
public interest in how resources are used and to see if we can
create a positive dynamic rather than the negative dynamic
that, as you rightly point out, we have seen in places like
Equatorial Guinea.
Senator Merkley. Any success?
Dr. Moss. So there are a lot of countries that have become
wealthy and successful from natural resources. We live in one.
Canada, Australia. These are resource-rich countries that have
managed to avoid the resource curse. There are a lot of
countries on the other side that are not doing well.
You know, one of my favorite countries that I have already
spoken about, Nigeria, is still struggling with this. I do
think things are getting a lot better. Nigeria now reports on
all of their oil income, where it is going. We now have a
better idea of how it is being spent. But it is a long process.
It is a very political process.
And I do think we are seeing some progress with countries
experimenting with cash dividends in very specific cases, but
we have not seen the full Alaska model replicated anywhere else
yet.
Senator Merkley. So I will just close my comments by saying
I would encourage you to be careful with charges of hypocrisy.
It is kind of a below-the-belt shot. There are many parts of
the developing world that are deeply afflicted by changing
climate suffering significant starvation. We have seen that
starvation trigger tribal wars and significant chaos. In Syria,
we saw the collapse of the village economy help drive the civil
war that led to the mess that we have been dealing with for
years and will for many years to come. Many fishing
communities, island communities, are extremely worried about
rising sea levels and salt water infiltration of fresh water
sources, and many of them have fisheries that are driven by
coral reefs that are dying. So these are very important issues
in global economic development. And I want to try to steer away
from doubting the sincerity or integrity of the conversation.
Senator Young. Well, thank you, Senator Merkley.
I want to accept some measure of responsibility. I sort of
led into my question with Dr. Moss by admitting that
occasionally I have some skepticism when these international
pledges are made. But I am grateful for our constructive
relationship. I understand the depth of conviction you have
about the importance of these issues. He has played a very
important leadership role in these issues, and I am still
learning from you. So thank you very much.
I am going to ask one final question of Dr. Moss. Because
Power Africa has been such an important model not just for the
United States but really for the world with respect to
electrification and energy development, what best practices
have we seen with Power Africa that might potentially be
applied to other sectors of international development?
Dr. Moss. Thank you for that question.
Let me just briefly just take the opportunity to clarify. I
absolutely believe that developing countries are being
tremendously impacted by climate change. I believe that it is
real. The issue is that Tuvalu did not contribute one bit to
the Global Climate Change Challenge. That came from Europe, the
United States, and other rich countries. The countries that
suffer the most are those least responsible for those problems.
That was merely my point.
Power Africa I think has actually done--yes?
Senator Young. Senator Merkley, do you have any follow-up
there? I just want to make sure everyone is good at the end of
this hearing. We want to continue to do some good together.
Senator Merkley. I think that point is accurate. In April,
when I was meeting with India's power minister and we were
discussing the challenge of financing renewable energy, he
indicated it was somewhat irritating to have this conversation
with Americans who for 150 years were burning the coal and the
oil that created a lot of this problem. And I acknowledge it.
That is an accurate representation of our energy history.
And I said we can wrestle with that, but looking forward,
what does a single kilowatt of new coal energy cost? And the
answer is about 7 cents. And what was the cost of a new
kilowatt of solar energy? The answer is about 3 to 4 cents. And
I said, so how do we work together to help take advantage of
the changing economics for renewable energy? And I said, and by
the way, there is a big difference between what is outside your
window and you could not see in New Delhi 200 yards down the
road because of the--it was not just it comprises your sight.
It is the fact that people breathing that is having enormous
health consequences. And so there is a huge bonus on top of the
fact that solar is cheaper.
And 3 months later, the power minister who told me at that
meeting he was going to build 40 new power plants in a 2-year
period, announced a couple months later that they were
canceling those plants and were doubling down on their strategy
with renewable energy. And I think that is part of the
conversation around the world.
Senator Young. Dr. Moss?
Dr. Moss. Thank you, Chairman.
So I think Power Africa--you know, I was skeptical that
Power Africa, which at times is wrangling 12 federal agencies
to cooperate around a small set of projects, that that would
work. I think they have done an admirable job doing it. But I
do think that Power Africa is kind of the exception that proves
the rule that you need a presidential initiative, you need a
special coordinator to kind of make all of our agencies
cooperate. So I am actually quite skeptical that we can
replicate this many times over because it is such a heavy lift
and it is such a deliberate effort.
I do think that it is absolutely worth continuing, but I
would not like to see us try to have a Power Asia, a Water
Latin America, all of those efforts. I think that would be an
interagency nightmare.
Senator Young. Well, thank you. We are now officially out
of time. So I want to thank each of you for appearing before us
today.
We are going to leave the record open for additional
questions until 5:00 p.m. on Friday.
Thank you again to everyone in attendance, as well as our
witnesses and most especially to my ranking member, Senator
Merkley.
This hearing is officially adjourned.
[Whereupon, at 4:20 p.m., the hearing was adjourned.]
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