Segment 1 Of 3 Next Hearing Segment(2)
SPEAKERS CONTENTS INSERTS Tables
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71–798PS
2001
THE NATION'S ENERGY FUTURE: ROLE OF
RENEWABLE ENERGY AND ENERGY EFFICIENCY
HEARING
BEFORE THE
COMMITTEE ON SCIENCE
HOUSE OF REPRESENTATIVES
ONE HUNDRED SEVENTH CONGRESS
FIRST SESSION
FEBRUARY 28, 2001
Serial No. 107–24
Printed for the use of the Committee on Science
Available via the World Wide Web: http://www.house.gov/science
COMMITTEE ON SCIENCE
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HON. SHERWOOD L. BOEHLERT, New York, Chairman
LAMAR S. SMITH, Texas
CONSTANCE A. MORELLA, Maryland
CHRISTOPHER SHAYS, Connecticut
CURT WELDON, Pennsylvania
DANA ROHRABACHER, California
JOE BARTON, Texas
KEN CALVERT, California
NICK SMITH, Michigan
ROSCOE G. BARTLETT, Maryland
VERNON J. EHLERS, Michigan
DAVE WELDON, Florida
GIL GUTKNECHT, Minnesota
CHRIS CANNON, Utah
GEORGE R. NETHERCUTT, JR., Washington
FRANK D. LUCAS, Oklahoma
GARY G. MILLER, California
JUDY BIGGERT, Illinois
WAYNE T. GILCHREST, Maryland
W. TODD AKIN, Missouri
TIMOTHY V. JOHNSON, Illinois
MIKE PENCE, Indiana
FELIX J. GRUCCI, JR., New York
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MELISSA A. HART, Pennsylvania
J. RANDY FORBES, Virginia
RALPH M. HALL, Texas
BART GORDON, Tennessee
JERRY F. COSTELLO, Illinois
JAMES A. BARCIA, Michigan
EDDIE BERNICE JOHNSON, Texas
LYNN C. WOOLSEY, California
LYNN N. RIVERS, Michigan
ZOE LOFGREN, California
SHEILA JACKSON LEE, Texas
BOB ETHERIDGE, North Carolina
NICK LAMPSON, Texas
JOHN B. LARSON, Connecticut
MARK UDALL, Colorado
DAVID WU, Oregon
ANTHONY D. WEINER, New York
BRIAN BAIRD, Washington
JOSEPH M. HOEFFEL, Pennsylvania
JOE BACA, California
JIM MATHESON, Utah
STEVE ISRAEL, New York
DENNIS MOORE, Kansas
MICHAEL M. HONDA, California
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C O N T E N T S
February 28, 2001
Witness List
Hearing Charter
Opening Statement by Representative Sherwood L. Boehlert (NY–23), Chairman, Committee on Science, U.S. House of Representatives
Opening Statement by Representative Ralph M. Hall (TX–4), Ranking Member, Committee on Science, U.S. House of Representatives
Opening Statement by Representative Lynn Woolsey (CA–6), Ranking Member, Subcommittee on Energy, Committee on Science, U.S. House of Representatives
Opening Statement by Representative John B. Larson (CT–1), Member, Subcommittee on Energy, Committee on Science, U.S. House of Representatives
Opening Statement by Representative Sheila Jackson Lee (TX–18), Member, Subcommittee on Energy, Committee on Science, U.S. House of Representatives
Panel:
Mary J. Hutzler, Director, Office of Integrated Analysis and Forecasting, Energy Information Administration, U.S. Department of Energy
Oral Statement
Prepared Statement
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Biography
Kenneth K. Humphreys, Senior Staff Engineer, Energy, Science, and Technology Division, Pacific Northwest National Laboratory
Oral Statement
Prepared Statement
Biography
Financial Disclosure
John P. Holdren, Professor, Harvard University; Chair, President's Committee of Advisors on Science and Technology (PCAST), Energy Research and Development Panel
Oral Statement
Prepared Statement
Biography
Financial Disclosure
Joel Darmstadter, Senior Fellow, Energy and Natural Resources Division, Resources for the Future
Oral Statement
Prepared Statement
Biography
Financial Disclosure
Discussion:
Steps to Improve Energy Efficiency and Increase Use of Renewables
Incentives
EIA Assumptions
Education/Information
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Impacts of Energy Conservation/Efficiency
Fossil Fuel Supply and Market Factors
Cellulosic Biomass
Hydrogen/Fuel Cells
Impacts of R&D Funding Cuts
Energy Use Per Capita
Future Oil Costs
Future Natural Gas Prices
Conservation Efficiency and the Effect of Prices
Energy Conservation and Efficiency
Environmentally Damaging Fuels
Significance of Man-Made CO Releases
Hydroelectric Power
More Efficient Computers
Climate Change Theory and Energy Policy
APPENDIX 1: Answers to Post-Hearing Questions Submitted by Members of the Subcommittee on Energy
Mary J. Hutzler, Director, Office of Integrated Analysis and Forecasting, Energy Information Administration, U.S. Department of Energy
Answers to Questions Submitted by Republican Members
Accuracy of EIA's Forecast
Role of Tax Incentives
Factors in Use of Best Available Technology
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EIA Energy Cost Projections
Answers to Questions Submitted by Congressman Lamar Smith (TX–21)
Renewables Ranking
Geothermal Efficiency
Deep Gas Potential
Renewable Percentage of Total Energy Supply
Answers to Questions Submitted by Democratic Members
Projected Household Energy Use
Price Effect on Industry Energy Use
Municipal Solid Waste Gas
Kenneth K. Humphreys, Senior Staff Engineer, Energy, Science, and Technology Division, Pacific Northwest National Laboratory
Answers to Questions Submitted by Republican Members
21st Century Scenarios
Climate Stabilization Scenario
Stabilization Scenario Mix of Fuels
Developing Technology Goals
PNL and EIA Forecasting Compared
Answers to Questions Submitted by Democratic Members
Efficiency Improvement Forecasts
Year 2001 Fuel Mix
Energy Demand Elasticity
Climate Stabilization Scenario
Energy R&D Funding
John P. Holdren, Professor, Harvard University; Chair, President's Committee of Advisors on Science and Technology (PCAST), Energy Research and Development Panel
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Answers to Questions Submitted by Republican Members
Research, Development, and Deployment Priorities
Carbon Dioxide Control
R&D Funding
DOE Program Evaluation
Answers to Questions Submitted by Democratic Members
Evaluation of PCAST Report Based on Present Conditions
Creating Renewable Energy Market Penetration
Increasing Biomass Ethanol Supply
Joel Darmstadter, Senior Fellow, Energy and Natural Resources Division, Resources for the Future
Answers to Questions Submitted by Republican Members
Solar Technologies Markets
Renewable Energy Policies
Answers to Questions Submitted by Democratic Members
The Role of Federal Government R&D
Tax Credits and Portfolio Standards
APPENDIX 2: Additional Material for the Record
Letter from John Kane, Vice President, Nuclear Energy Institute, to Chairman Sherwood Boehlert, Committee on Science
Letter from Dr. Ned R. Sauthoff, President, Institute of Electrical and Electronic Engineers (IEEE)—USA
Energy Efficiency Policy—IEEE Position
Solar and Renewable Electricity—IEEE Position
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Financial Disclosure—IEEE
THE NATION'S ENERGY FUTURE: ROLE OF RENEWABLE ENERGY AND ENERGY EFFICIENCY
WEDNESDAY, FEBRUARY 28, 2001
House of Representatives,
Committee on Science,
Washington, DC.
The Committee met, pursuant to call, at 10:05 a.m., in Room 2318 of the Rayburn House Office Building, Hon. Sherwood L. Boehlert (Chairman of the Committee) presiding.
Committee on Science
U.S. House of Representatives
Washington, DC 20515
Hearing on
The Nation's Energy Future: Role of Renewable Energy and Energy Efficiency
Wednesday, February 28, 2001
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Witness List
Panel
Mary J. Hutzler
Director,
Office of Integrated Analysis and Forecasting,
Energy Information Administration,
U.S. Department of Energy
John P. Holdren
Professor, Harvard University;
Chair, President's Committee of Advisors on Science and Technology (PCAST),
Energy Research and Development Panel
Kenneth K. Humphreys
Senior Staff Engineer,
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Energy, Science, and Technology Division,
Pacific Northwest National Laboratory
Joel Darmstadter
Senior Fellow,
Energy and Natural Resources Division,
Resources for the Future
Section 210 of the Congressional Accountability Act of 1995 applies the rights and protections covered under the Americans with Disabilities Act of 1990 to the United States Congress. Accordingly, the Committee on Science strives to accommodate/meet the needs of those requiring special assistance. If you need special accommodation, please contact the Committee on Science in advance of the scheduled event (three days requested) at (202) 225–6371 or FAX (202) 225–0891.
Should you need Committee materials in alternative formats, please contact the Committee as noted above.
HEARING CHARTER
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COMMITTEE ON SCIENCE
U.S. HOUSE OF REPRESENTATIVES
The Nation's Energy Future: Role of
Renewable Energy and Energy Efficiency
WEDNESDAY, FEBRUARY 28, 2001
10:00 A.M.–12:00 P.M.
2318 RAYBURN HOUSE OFFICE BUILDING
I. Purpose
On Wednesday, February 28, 2001, the Committee on Science will hold a hearing on ''The Nation's Energy Future: Role of Renewable Energy and Energy Efficiency.'' The purpose of the hearing is to address three questions: (1) What are the current and projected near- and mid-term contributions of renewable energy and energy efficiency to the Nation's energy mix? (2) Have renewable energy and energy efficiency performed as expected, and if not, why not? (3) What programs and/or policies are needed to ensure that renewable energy and energy efficiency achieve their potential?
The panel witnesses include: (1) Ms. Mary J. Hutzler, Director, Office of Integrated Analysis and Forecasting, Energy Information Administration, U.S. Department of Energy; (2) Professor John P. Holdren, Harvard University, Chair, President's Committee of Advisors on Science and Technology (PCAST) Energy Research and Development Panel; (3) Mr. Kenneth K. Humphreys, Senior Staff Engineer, Energy, Science and Technology Division, Pacific Northwest National Laboratory; and (4) Mr. Joel Darmstadter, Senior Fellow, Energy and Natural Resources Division, Resources for the Future.
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2. Background
Affordable energy is essential to the Nation's continued prosperity. Volatile world oil markets, soaring natural gas and electricity prices, and energy shortages in a number of parts of the U.S. have replaced the relatively low energy prices enjoyed over most of the past two decades. In addition, there are increasing concerns about the environmental impacts of energy use, particularly with respect to climate change.
Consequently, energy is again on the front burner of the Nation's and the new Administration's agenda. President George W. Bush recently announced the creation of a high-level energy task force headed by Vice President Richard Cheney, and the Congress is expected to begin work on comprehensive energy legislation that will include energy research, development, demonstration, and commercialization measures under the jurisdiction of the Science Committee.
These factors have led to a renewed interest in the role of renewable energy and energy efficiency. Renewable energy-e.g., sunlight, wind, hydro, geothermal, and biomass-offers the promise of clean, abundant energy for many applications, although hydro, particularly large-scale hydro, is controversial in its own right from an environmental perspective. Energy efficiency focuses on ways to use energy more productively, so that fewer energy resources are needed. Energy efficiency-including the use of new and improved technologies, conservation management techniques, financial incentives, regulations, and standards-can be considered an energy alternative to both conventional and renewable energy sources.
Current and Projected U.S. Energy Supply/Demand
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Demand by Sector
According to the Energy Information Administration (EIA), U.S. energy consumption in 1999 totaled 96.1 quadrillion Btu(see footnote 1) (Quads) in four sectors: transportation, residential, commercial, and industrial. As shown in Table 1, EIA's December 2000 Annual Energy Outlook 2001 (AOE2001)(see footnote 2) projects U.S. energy consumption in 2020 to total 127 Quads—a 32.1% increase—for its ''reference case.''(see footnote 3) EIA projections incorporate efficiency standards for new energy-using equipment in buildings, as well as efficiency standards for motors mandated through Federal law.(see footnote 4)
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EIA's AEO2001 reference case provides the following projections by sector:
Transportation sector energy demand is projected to increase 46% from 1999 to 2020. Within that increase, however, the share of gasoline is expected to decline from about 60% to 55%, while the shares of diesel and jet fuels are expected to rise. EIA's projections incorporate expected higher new vehicle efficiencies, which are offset by increases in travel.
Residential sector energy demand is projected to increase 27.5%, with the most rapid growth coming from computer, electronic equipment, and appliances.
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Commercial sector energy demand is projected to increase 33%. Computers and office and telecommunications equipment are expected to account for most of the rise.
Industrial sector energy demand is projected to increase 24%, with increasing use of electricity and natural gas. Non-energy-intensive manufacturing is expected to grow at nearly three times the rate of energy-intensive manufacturing. Cogeneration capacity is projected to increase by 19 billion watts (gigawatts) by 2020.
Demand by Energy Source and Delivery
Table 2 shows how U.S. energy demand is projected to be met by oil, gas, coal, nuclear, renewables, and electricity imports for EIA's AEO2001 baseline case; Table 3 shows in what form energy is to be delivered to consumers; and Table 4 provides a detailed breakdown of U.S. electricity generation by energy source.
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71798f3.eps
EIA's AEO2001 reference case provides the following projections for conventional energy sources:
Between 1999 and 2020, oil demand is projected to grow 33%, led by growth in the transportation sector, which accounts for about 70% of U.S. oil consumption. U.S. crude oil production is expected to decline from about 5.9 million to 5.1 million barrels per day. To make up for declining domestic production and increased demand, oil imports should increase from about 51% to almost 64% of U.S. consumption by 2020. The average world oil price is projected to fluctuate over the period, eventually reaching $22.41 per barrel in 2020.
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Over the same period, U.S. coal consumption is projected to increase 22%, with electricity generation constituting nearly 90% of the demand for coal. The average minemouth price of coal is projected to decline from $16.98 per ton in 1999 to $12.70 per ton in 2020 due to increasing productivity in mining, a shift to lower-cost western production, and competitive pressures on labor costs.
Natural gas demand is projected to grow by 62% by 2020, primarily as a result of rising demand for its use in electricity generation. The average wellhead price of natural gas is projected to fluctuate and reach $3.13 per thousand cubic feet in 2020. Technological improvements in natural gas exploration and production are expected to slow price increases.
Electricity demand is projected to increase 45% and average electricity prices to decline from 6.7 cents to 6.0 cents per kilowatt-hour in 2020. Electricity industry restructuring is expected to contribute to lower prices through reductions in operating, maintenance, administrative, and other costs.
About 393 gigawatts of new generating capacity is expected to be needed by 2020, both to meet growing demand and to replace retiring nuclear plants and fossil-fueled units. Of this new capacity, 92% is projected to be natural gas-fueled combined cycle or combustion turbine technology. The share of natural gas for electricity generation is projected to increase from 16% to 36%, and the share of coal to decrease from 51% to 44% because of industry restructuring. Nuclear's share is also projected to decline almost 40% as nuclear capacity is taken out of service because of operating license expirations. No new nuclear units are expected to become operable by 2020 because natural gas and coal plants are projected to be more economical.
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Renewables
Table 5 shows the AEO2001 projected renewable electricity generation by source. In 2020, about 55% of renewables are used for electricity generation and the rest for dispersed heating and cooling, industrial uses (including cogeneration), and fuel blending.
71798g3.eps
The use of renewable energy technologies for electricity generation is projected to grow slowly in the EIA AEO2001 reference case because of the relatively low costs of fossil fuel-fired units and because of the advantages electricity restructuring confers to less capital-intensive natural gas technologies. States with renewable portfolio standards, which specify a minimum share of generation or sales from renewable sources, contribute to the expected growth. Growth in renewable fuel consumption, including ethanol for gasoline blending, will be primarily as a result of State mandates.
Hydro's share of the electricity supply from renewables is expected to decline to 67% in 2020, compared to 80% in 1999. Although a net 600 megawatts of new hydropower capacity is expected to be added, it does not offset the projected decline in generation from existing facilities, as increasing environmental and other competing needs reduce their average productivity.
Most of the projected growth in renewable electricity generation is expected from biomass, landfill gas, geothermal energy, and wind power. The largest increase is projected for biomass, with cogeneration accounting for more than one-half of the expected growth. Dedicated biomass plants and co-firing in coal plants account for the remainder. Electricity generation from municipal solid waste, including landfill gas, is projected to increase 72% by 2020. No new capacity additions are projected for plants that burn solid waste, but landfill gas capacity is projected to grow by 2.1 gigawatts.
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Geothermal energy capacity is projected to nearly double. Intermittent generation from wind power is expected to increase in the near term as a result of the extension of the Federal production tax credit through 2001 (at 1.7 cents per kilowatt-hour) and by additional State incentives. Total wind capacity is projected to more than double by 2010, but capacity additions are expected to slow after 2010 without additional incentives. High capital costs, lower output per kilowatt, and intermittent availability are among the competitive disadvantages of this technology relative to conventional generating technologies. Grid-connected photovoltaics are projected to add nearly 900 megawatts but should remain small contributors to overall electric power supply. Off-grid photovoltaics, which are not included in the projections, are expected to continue to increase rapidly.
EIA has also produced an AEO2001 ''high renewables case'' that assumes more favorable characteristics for non-hydro renewable energy technologies than in the reference case. These assumptions include: (1) a 24% average reduction in capital costs by 2020 relative to the reference case; (2) lower operations and maintenance costs; (3) increased biomass fuel supplies; and (4) higher capacity factors for solar and wind power plants.
While more rapid technology improvements are projected to increase renewable energy use, the overall lead of fossil-fueled technologies in U.S. electricity supply is not expected to change. Total generation from non-hydro renewables is projected to reach 242 billion kilowatt-hours in 2020, compared with 146 billion in the reference case. About 51 billion kilowatt-hours of the projected difference is from additional intermittent wind capacity and 41 billion is from additional baseload geothermal capacity. Solar central station technologies are projected to remain too expensive, but small-scale photovoltaics are expected to grow more rapidly.
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The projected increase in renewable energy use in the high renewables case reduces fossil fuel use relative to the reference case projection, lowering projected carbon dioxide emissions by 14 million metric tons carbon equivalent. Retail electricity prices are not projected to change significantly from the reference case.
Energy Efficiency
As noted earlier, energy efficiency-including the use of new and improved technologies, conservation management techniques, financial incentives, regulations, and standards—can be considered an energy alternative to both conventional and renewable energy sources.
One measure of energy efficiency's role can be captured by energy intensity, measured as energy use per dollar of gross domestic product (GDP). Between 1970 and 1986, energy intensity declined at an average annual rate of 2.3%—from about 19,000 Btu to 13,000 Btu per dollar—as the economy shifted to less energy-intensive industries and more efficient technologies. Per capita energy use also declined by nearly 4%. During this same period, total U.S. energy consumption grew by about 14%, with increases in the transportation and residential/commercial sectors of 29% and 26%, respectively, and a decrease of nearly 4% in the industrial sector.
Between 1986 and 1999, which had slower price increases—and price declines in some sectors—and growth in more energy-intensive industries, intensity declines moderated to an average of 1.3% per year. Total U.S. energy consumption grew by 19%—almost 6% in the transportation sector, 7% in the residential/commercial sector, and 6.5% in the industrial sector. Per capita energy use also increased by nearly 10%.
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AEO2001 projects energy intensity to decline at an average annual rate of 1.6%—from about 10,900 to 7,700 Btu per dollar in 2020, a drop of nearly 30%—as efficiency gains and structural shifts in the economy offset the expected growth in demand for energy services. GDP is estimated to increase by 86% between 1999 and 2020, compared with a 32% increase in primary energy use. Relatively stable energy prices are expected to slow the decline in energy intensity, as is increased use of electricity-based energy services. When electricity claims a greater share of energy use, consumption of primary energy per dollar of GDP declines at a slower rate, because electricity use contributes both end-use consumption and energy losses to total energy consumption.
Although residential energy consumption is projected to increase by 28% overall between 1999 and 2020, some 75% of this growth is related to increased use of electricity. Under current building codes and appliance standards, however, energy use per square foot is typically lower for new construction than for the existing stock. Building shell efficiency gains are projected to cut space-heating demand by nearly 10% per household in 2020. In addition, a variety of appliances are now subject to minimum efficiency standards, including heat pumps, air conditioners, furnaces, refrigerators, and water heaters. For example, current standards for a typical residential refrigerator limit electricity use to 690 kilowatt-hours per year, and revised standards are expected to reduce consumption by another 30% by 2002. Energy use for refrigeration has declined by 1.8% per year from 1990 to 1997 and is expected to decline by about 2% per year through 2020, as older, less efficient refrigerators are replaced with newer models.
The pace of energy growth in the commercial sector is expected to slow compared to its pace over the past three decades. Energy consumption per square foot is projected to increase by a modest 0.1% annually, with efficiency standards, voluntary government programs aimed at improving efficiency, and other technology improvements expected to balance the effects of a projected increase in demand for electricity-based services and stable or declining fuel prices.
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Since 1970, the use of more energy-efficient technologies, combined with relatively low growth in the energy-intensive industries, has dampened growth in industrial energy consumption. Consequently, total energy use in the sector grew by only 7% between 1978 and 1999 despite a 43% increase in industrial output. These basic trends are expected to continue.
Perhaps the Nation's greatest energy challenge is the transportation sector, which accounts about 70% of U.S. oil consumption and more than can be produced domestically. Transportation is responsible for about a third of U.S. carbon dioxide emissions, and autos, trucks, and buses are one of the largest sources of local and regional air pollution. Although the other demand sectors have greatly reduced their dependence on oil, the transportation sector is still nearly 97% oil dependent and is projected to remain over 95% dependent in 2020. While fuel efficiency standards doubled new car mileage between the mid-1970's and the mid-1980's, fleet averages for personal vehicles have been dropping in recent years as more and more consumers are switching to minivans, light trucks, and sport utility vehicles. In addition, vehicle miles traveled have been increasing, putting additional pressure on oil supplies.
AEO2001 projects advanced technologies-gasoline fuel cells and direct fuel injection, as well as electric hybrids for both gasoline and diesel engines-to boost the average fuel economy of new light-duty vehicles by about 4 miles per gallon (mpg), to 28.0 mpg in 2020. Larger percentage gains in efficiency are expected for freight trucks (from 6.0 mpg in 1999 to 6.9 in 2020). New automobile fuel economy is projected to reach approximately 32.5 mpg by 2020, as a result of advances in fuel-saving technologies, such as advanced drag reduction, variable valve timing, and extension of four valve per cylinder technology to six-cylinder engines, each of which would provide between 7 and 10% higher fuel economy.
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Carbon Dioxide Emissions
AEO2001 projects that energy-related emissions of carbon dioxide—the principal greenhouse gas of concern—will increase from 1,511 million to 2,041 million metric tons carbon equivalent between 1999 and 2020—a total increase of 27% and an average annual increase of 1.4%. This projection includes certain voluntary actions to reduce energy demand and emissions, but does not include future legislative or regulatory actions that might be taken to reduce carbon dioxide emissions.
Bottom Line
The bottom line is that if EIA's AEO2001 reference-case projections of near- and mid-term contributions of renewable energy to the Nation's energy mix prove reasonably accurate, renewables will continue to play a relatively minor role through 2020. Alternatively, the contributions from energy efficiency, as measured by improvements in energy intensity, are much greater. The principal issue facing the Nation is finding the right mix of programs and policies that will ensure that renewable energy and energy efficiency achieve their full potential.
Chairman BOEHLERT. It is a pleasure to welcome you here for the first Science Committee hearing of the 107th Congress. This is the first of three Full Committee hearings we will be having on the Committee's priorities. Next week, we will explore K–12 science and math education, and the following week, we will review the science of climate change. And I was pleased to hear the President deal with our three priorities last night, education, energy, and the environment.
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The President made the case last night that we need a comprehensive energy policy, and today's hearing is designed to start figuring out how to develop a piece of that policy. The premise of this morning's hearing is simple: Everyone agrees that renewable energy and energy efficiency need to be part of a comprehensive energy policy. But there hasn't been much discussion yet of how to draw on the full potential of renewables and efficiency.
This hearing is an effort to open that discussion. To do that, we have invited a Panel of highly regarded government and academic witnesses. We very consciously chose not to invite any advocacy groups to today's hearing—not those from the conventional or renewable energy industries, not those from industry or environmental groups. Those voices are essential to the discussion and will be heard at follow-up hearings, but we wanted to open with experts who could offer a broad overview, unencumbered by a mandate to promote any interest's particular point of view.
This kind of broad conversation is frankly long overdue. Because the real ''energy crisis'' is not the current situation in California or the price spikes in natural gas or heating oil, serious as those problems are. The real problem is that nationally and globally, our energy profile is irresponsible and probably unsustainable, environmentally, economically, and from a national security point of view. We have simply got to figure out a way to depart from the business as usual energy scenarios and do so in a thoughtful, gradual way that strengthens our economy.
In my own Congressional District we have taken small steps in that direction with a new wind farm established in Madison County, with Ford Motor Company and Baker Electromotive assembling electric vehicles for the post office in my home County of Oneida, and with Orion Bus manufacturing hydrogen and CNG buses. But these isolated steps, while important and beneficial to the local economy in my area, hardly amount to a national policy in and of themselves.
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My goal this year, is a shared goal, I might add, is to help develop and implement a national energy policy that starts from the assumption that renewables and, even more significantly, efficiency, are the keys to our energy future. They can't just be an afterthought, a few marginal measures tacked on to a bill to keep ''those folks'' happy. A comprehensive policy has to truly be comprehensive and innovative. Its foundational principle can't be more of the same.
That is why in this Committee we are starting our energy discussions with renewables and efficiency. They are literally not an afterthought. And I look forward to hearing from our witnesses how we can turn our commitment to a truly comprehensive energy policy into a workable, productive, prospering reality. Thank you.
[The prepared statement of Chairman Sherwood Boehlert follows:]
PREPARED STATEMENT OF CHAIRMAN SHERWOOD BOEHLERT
It's a pleasure to welcome you all here for the first Science Committee hearing of the 107th Congress. This is the first of three full Committee hearings we will be having on the Committee's priorities—next week we will explore K–12 science and math education and the following week, we will review the science of climate change. And I was pleased to hear the President deal with our three priorities—education, energy and the environment—in his speech last night.
The President made the case last night that we need a comprehensive energy policy, and today's hearing is designed to start figuring out how to develop a piece of that policy. The premise of this morning's hearing is simple: everyone agrees that renewable energy and energy efficiency need to be part of a comprehensive energy policy. But there hasn't been much discussion yet of how to draw on the full potential of renewables and efficiency.
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This hearing is an effort to open that discussion. To do that, we've invited a panel of highly regarded government and academic witnesses. We very consciously chose not to invite any advocacy groups to today's hearing—not those from the conventional or renewable energy industries, not those from industry or environmental groups. Those voices are essential to the discussion and will be heard at follow-up hearings, but we wanted to open with experts who could offer a broad overview unencumbered by a mandate to promote any interest's particular point of view.
This kind of broad conversation is frankly long overdue. Because the real ''energy crisis'' is not the current situation in California or the price spikes in natural gas or heating oil—serious as those problems are. The real problem is that, nationally and globally, our energy profile is irresponsible and probably unsustainable—environmentally, economically and from a national security point of view. We have simply got to figure out a way to depart from the ''business as usual'' energy scenarios and do so in a thoughtful, gradual way that strengthens our economy.
In my own Congressional District we have taken small steps in that direction—with a new wind farm being established in Madison County and with Ford Motor Co. and Baker Electromotive assembling electric vehicles for the Post Office in Oneida County. But these isolated steps—while important and beneficial to our local economy—hardly amount to a national policy in and of themselves.
My goal this year is to help develop and implement a national energy policy that starts from the assumption that renewables and, even more significantly, efficiency are the keys to our energy future. They can't just be an afterthought—a few marginal measures tacked on to a bill to keep ''those folks'' happy. A comprehensive policy has to truly be comprehensive—and innovative. It's foundational principle can't be ''more of the same.''
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That's why in this Committee we're starting our energy discussions with renewables and efficiency. They are literally not an afterthought. And I look forward to hearing from our witnesses how we can turn our commitment to a truly comprehensive energy policy into a workable, productive, prospering reality. Thank you.
Now, before I turn to the Ranking Member of the Committee, Mr. Hall of Texas, just let me outline how we are going to proceed. For Full Committee hearings like this, the Chair and the Ranking Member will have 5-minute opening statements and then we are going to go directly to the witnesses. The witnesses will each have 5-minute opening statements, but it is the Chair's intent not to be absolutely rigid on that, but we would appreciate if you would respect the basic thrust or objective, literally 5 minutes. Then we will go to the questions and answers.
We thank the witnesses for appearing here today. You are valuable resources for the Committee. And what we are going to try to do is limit and be strict on the time from this side of the podium, because we are not here to hear ourselves talk. We are here to learn what is on the mind of the expert witnesses we call before the Committee. And when we are talking about experts, it is my pleasure now to turn to an expert, the Ranking Minority Member, gentleman from Texas, Mr. Hall.
Mr. HALL. Mr. Chairman, I thank you, and I thank you for your comments and approach. You have a very decent approach to the operation of this Committee and we—it has worked well so far. I consider you, if not the eminent leader of the environmental thrust in this Congress, as one of the major leaders. And, as you know, there was talk about me maybe being the Energy Secretary for a while. It was in the papers. It was a little ridiculous because I can't type or take shorthand or—and would refuse to sit on George Bush's lap.
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But seriously, if I had been selected for that and had I been really stupid enough to trade my 7- and 8-hour days for 20-hour days, I would have come to you and I would have asked you to go to the sensible environmentalists of this country, who are citizens first and care about this country first, though they are a little nutty off here on the environment, like I am a little nutty off on this side about drilling. We have to have somebody like you in the middle that draws us together.
And I would like for you to bring them into our circle, impress upon them that we can kick California around and say you are getting what you had coming to you, and you haven't helped yourself. We can do that so long, but sooner or later we've got to be sensible and cooperative with a fellow state and come to their aid and to their support. This Committee and this Congress have to support California. We can't afford to see them go the way that they are going now and the way that some people hope they will go by letting them, what, freeze and starve in the dark? Well, that is not my attitude and I hope that is not this Committee's attitude.
I think you could talk to them about a place to drill on that North Slope, some areas to drill, like in—on our coastlines, where we don't really think that an offshore rig looks nearly as bad as a troop ship laden with our youngsters fighting for energy in a faraway land when we have energy right here, if we could draw on it. I want to talk with you about that later. I have used, I think, about a minute of my time. I want to yield to the Energy Subcommittee Ranking Minority Member, Lynn Woolsey for the remaining 9 minutes of my time if—I may ask unanimous consent to do that.
[The prepared statement of Ralph M. Hall follows:]
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PREPARED STATEMENT OF CONGRESSMAN RALPH M. HALL
Mr. Chairman and Members of the Committee—
I thank you for holding this hearing today and making energy one of your top priorities. While you and I may differ over some of the details in an energy program, I'm looking forward to working with you as we sort it out.
We each have our constituent interests to represent, and out of the give and take of the legislative process, I know will come an energy program that we can embrace. I won't take any more time today, other than to express my appreciation for your openness and way you intend to run the Committee.
With that, let me yield the remaining time to our distinguished Energy Subcommittee Ranking Minority Member, Lynn Woolsey.
Chairman BOEHLERT. The gentlelady is recognized.
Ms. WOOLSEY. Thank you. Thank you, Mr. Hall, for yielding and for saying some good words about California. And——
Mr. HALL. It was difficult.
Ms. WOOLSEY. Well, all right. And, Mr. Chairman, I want to especially thank you for having this first Full Committee hearing of your chairmanship focused on renewable energy and on energy efficiency. Since you have, and I have read your first—some of your first—speeches said that these first few hearings are designed to highlight the initiatives you want the Committee to make its mark on. As the new Ranking Member of the Energy Subcommittee, I am particularly pleased. And, like you, I believe passionately in the need for renewable energy sources and energy efficiency programs and that we will and must take a lead role in this issue.
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As a Californian, and a member from one of the most environmentally conscious districts in the country, Mr. Hall, hearing about drilling off our coast doesn't sit well at all. But I bring a special interest in expanding the role that renewable energy sources and energy efficiency will play in meeting our future energy needs.
Certainly, the energy shortages that we in California are experiencing are proof enough why Congress must raise the stakes in search of alternatives to conventional electricity generation and to focus on conservation and efficiency. Obviously, we aren't doing enough, and that is what I hope this Panel is going to talk to us about today, what we really need to be doing.
Since passing the National Energy Policy Act in 1992, Congress has generally ignored energy issues. But the power problems in California, as well as the increased natural gas prices and gasoline throughout the country, have pushed energy back to the top of our Nation's agenda. So I am interested in hearing what this panel has to say today. And I would like to know if the panel believes that a major reason for our current energy situation in California is tied, in any way, to a lack of alternative power sources.
I have been told that in the Federal—if the Federal Government, in the mid-'90's, had held California power companies to their commitment to invest in renewable energies, we could now be generating energy for as many as 1.4 million additional residents. And that was a great missed opportunity. So, Mr. Chairman, I am looking forward to hearing from the Panel and working with you and Mr. Hall on putting together an energy policy that really focuses on alternatives, renewables, and energy efficiency. Thank you.
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[The prepared statement of Lynn Woolsey follows.]
PREPARED STATEMENT OF THE HONORABLE LYNN WOOLSEY
Mr. Chairman, I want to especially thank you for having the first full committee hearing of your chairmanship focus on renewable energy and energy efficiency. Since, as you have said, these first few hearings are designed to highlight the initiatives you want the committee to make its mark on—as the new Ranking Member of the Energy Subcommittee, I'm especially pleased! Like you, I believe passionately in the need for renewable energy sources and energy efficiency programs to take a lead role.
As a Californian, and a member from one of the most environmentally conscious districts in the country, I bring a special interest in expanding the role that renewable energy sources and energy efficiency will play in meeting our future energy needs. Certainly, the energy shortages that we in California are experiencing is proof enough why Congress must raise the stakes in search of alternatives to conventional electricity generation and a focus on conservation. Obviously, what we are doing isn't enough.
Since passing the National Energy Policy Act in 1992, Congress has generally ignored energy issues. But the power problems in California, as well as the increased price of natural gas and gasoline throughout the country, have pushed energy back to the top of our nation's agenda. I'm interested to hear from today's panel if a major reason for our current energy situation is tied to a lack of alternative power sources.
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I've been told that if the federal government in the mid-'90s had held California power companies to their commitment to invest in renewable energies, we could now be generating energy for as many as 1.4 million additional residents. What a missed opportunity!
One solution to our energy crisis can be found in R&D and innovative applications of R&D. For too long, demand-side solutions like energy efficiency and conservation were associated with images of personal sacrifice—like turning down the thermostat and having to walk around bundled in sweaters. However, despite the recent energy woos in California, we've been working to find smarter and more innovative ways to use energy efficient technologies and conservation measures.
For example, several Marin County communities—including Mill Valley, San Rafael and Novato—are currently moving forward on plans to install new energy-efficient traffic lights that use 10 to 20 percent of the electricity currently needed. In Sonoma County, the City of Santa Rosa is working on a project to send 11 million gallons of its reclaimed wastewater to the Geysers geothermal plant each day. When completed, the Geysers steam fields will displace 85 megawatts of fossil energy. The Sonoma County transit department is also building a landfill gas conversion facility that allows excess landfill gas to be used as alternative fuel for their buses.
My colleagues, and guests, investments in renewable energy sources, conservation and energy efficiency technologies like these will protect us from more blackouts and skyrocketing energy bills. We must ensure that R&D like that in my district can be borrowed and adapted in other states. I believe that there is an important role for the federal government to encourage research and bring clean, efficient and renewable technologies to market. While federal involvement won't solve our energy problem overnight, a long-term commitment from Congress and this Committee to alternative energy and energy efficiency is a smart way to prevent further energy crisis.
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I look forward to actively working with you Mr. Chairman and Mr. Bartlett to champion more creative ways to enhance research on renewable sources and deployment of new technologies and conservation approaches. Mr. Chairman, it's a great pleasure to know this is a priority for you and this Committee. I pledge to work closely with you and Mr. Bartlett to move a legislative agenda that prominently features these goals.
Thank you.
[The prepared statement of Representative John B. Larson follows:]
PREPARED STATEMENT OF THE HONORABLE JOHN B. LARSON
Mr. Chairman, in 1999, the United States imported an average of nearly 11 million barrels of oil per day from foreign countries to meet our domestic energy needs, totaling nearly 4 billion barrels over the course of the year. Even at 1999's comparatively modest average price of $15 per barrel, that adds up to more than $60 billion spent on foreign oil. With the average price of a barrel of crude oil at $30 last year and with average daily imports remaining roughly the same, America's expenditures to purchase foreign oil increased to more than $120 billion last year.
That is more than twice what the federal government currently spends on education programs, twice what we spend providing veterans benefits, twice what we spend improving the nation's transportation infrastructure and fostering community and regional development, and equal to what we spend on international affairs, general scientific research and development, justice programs, agriculture programs, and natural resource and environmental programs combined.
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I believe we must break this cycle of dependency, and strengthen our economy by turning this level of spending back to domestic sources. The spread and use of new, efficient, energy producing technologies, such as fuel cells, has the opportunity to create a contribution in economic growth and in job creation every bit as significant as the development of the high tech industry during the last decade.
Having introduced legislation in the last Congress to begin addressing these critical issues, I look forward to hearing the testimony and insights of this esteemed panel.
[The prepared statement of Representative Sheila Jackson Lee follows:]
PREPARED STATEMENT OF THE HONORABLE SHEILA JACKSON LEE
Chairman Boehlert and Ranking Member Hall, thank you for this important opportunity to discuss our nation's energy future as it relates to renewable energy and energy efficiency.
This is the first of three hearings to be held by the full committee, which speaks to the level of importance this issue has for the nation. It is proper that the House Science Committee explore the issues of our nation's energy future as our nation ponders its growing need for energy. The United States does need to develop a long term national energy policy, which will be in effect regardless of the changing dynamics of energy supply and demands.
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As you know, I represent the 18th Congressional District of Texas, which is located entirely within the City of Houston and the home of such energy and energy related companies such as Reliant, Enron, Vaalco, Equilon, Motiva, Equiva Trading, Equiva Services, Edge Petroleum Company, Houston Exploration Company, Altra Corporation, and dozens of other exploration, American Rel-Fuel, and Enercon Engineering. This District can claim well-established energy producing companies and suppliers as well as, those engaged in renewable energy exploration and development.
Today, our society is in the midst of major sociological and technical revolutions, which will forever change the way we live and work. We are transitioning from a predominantly industrial economy to an information-centered economy. While our society has an increasingly older and longer living population the world has become increasingly smaller, integrated and interdependent.
As with all change, current national and international transformations present both dangers and opportunities, which must be recognized and seized upon. Thus, the question arises, how do we managed these changes to protect the disadvantaged, disenfranchised and disavowed while improving their situation and destroying barriers to job creation, small business, and new markets?
The cost of doing business globally has increased because of higher oil and natural gas prices. We know that energy is a key component of economic expansion. Today we are faced with several questions which will determine our nation's response to energy: In the new technology based economy will old economy staples like supply and demand of energy have clout in determining economic good times or bad times? How will the changing global economy deal with growing demands for energy and shrinking sources? Are alternative sources of energy or renewable energy viable options for the 21st Century?
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We are here today to discuss the current status of the energy industry, both domestic and international market changes, but most importantly we will discuss how the current energy situation has effected consumers.
Prior to this meeting today, I held a fact-finding hearing in Houston, Texas on October 2 of last year to address the energy crisis and its impact on consumers and businesses in my District. I wanted to listen to what producers, suppliers, and consumers were experiencing due to the current energy crisis in our nation. I wanted to take from that discussion valuable insight that might be helpful to me in encouraging the House leadership to take up legislation that I hope will address many of their concerns.
Issues surrounding the use of renewable sources of energy and our nation's energy future are real. The problems associated with unpredictable weather patterns have been experienced by different regions of our nation's with deadly consequences.
In the summer of 1995, one of the coolest summer's on record over 600 people died the City of Chicago from heat-related causes. There was an unusual weather pattern in the form of an El Niño during that winter and an La Niña during that summer, which led to unusually cold weather in some parts of the nation while at the same time other parts of the nation experienced unusually hot weather. As a result the Cook County medical examiner found that heat was a contributing factor to the deaths of 625, mostly elderly people in the Chicago area.
Unfortunately, the weather has made news in the State of Texas last year, where an historic number of consecutive days over 100 degrees were recorded by dozens of Texas communities. Houston Continental Airport recorded 20 days over 100. The record temperatures last summer also cost lives in the City of Houston and around the state.
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That heat emergency led to my working with all public and private efforts to provide heat relief to the City of Houston's elderly, and very young population, which were at the greatest health risk under the extreme weather conditions. This resulted in the creation of the Houston Heat Relief Team and helped to provide vital services to those who were not being reached due to a disjointed efforts on the part of well meaning groups.
We have seen days like the summer of 2000 before, nearly 30 years ago, the defining events of the 1970s were oil shortages: first in 1973, then again in 1977. At that time waiting in long lines for short supplies, many Americans realized for the first time how central a role energy plays in the good life. . .and how vulnerable some forms of energy are to political vagaries. The origins of this energy crisis can be traced back to OPEC's price increases on oil, responding to President Nixon's new economic policy announcement on August 15, 1971. While that action raised some speculation of energy shortages, American dependence on imported oil continued to grow. The winter of 1972–73 presented the first evidence of serious energy problems. Nixon, adamantly opposed to a national policy of oil conservation, responded to the crisis by encouraging expansion of American domestic production, approving funding for the controversial Alaska pipeline, and incentives for exploration, production, and development of nuclear power as the nation's alternative to fossil fuel energy.
As you are all aware, utility deregulation, environmental policy, and fossil and alternative energy research and development have all been front-line issues during the 106th Congress. In addition, states such as California, Tennessee and Indiana are the proving grounds for the new utility paradigm, where competition will hopefully bring large and small consumers alike, cheaper prices.
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We have all seen the tremendous economic growth experienced by our nation over the last eight years. But this growth has come at the expense of growing energy demands to sustain the tremendous engine of our national economy.
The Clinton Administration's response was to release 30 million barrels of oil from the nation's strategic oil reserve; the release of $400 million in Low-Income Home Energy Assistance Program funds; directed the Environmental Protection Agency to help states identify ways to use different kinds of home heating oil while minimizing environmental consequences and the President directed Federal agencies to make early contractual commitments to purchase heating oil this winter so the wholesalers will have confidence to build inventories in advance. The energy crisis did not end with the Clinton Administration, but continues for states like California who are left to shoulder the burden of energy shortfalls alone.
The Congress and the Bush Administration must do its share to relieve the suffering of Americans due to this energy crisis. The 107th Congress should provide the additional funds to address low income home weatherization funds. The House has since Fiscal Year 1994 under funded our nation's weatherization assistance program.
The current Administration is proposing a $2 TRILLION tax cut plan, but we cannot judge the merits of this proposal with so many questions regarding the future of renewable energy research and development left unanswered by the policy formulation process.
It is my hope that we will provide a good blueprint of our nation's energy needs and its prospects for meeting those needs in this new century.
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Thank you.
Chairman BOEHLERT. Thank you very much. That is a shared objective. And I want to compliment the gentlelady and the distinguished Ranking Member for keeping right on schedule.
Now, it is my pleasure to present our panel for today, consisting of Ms. Mary J. Hutzler, Director, Office of Integrated Analysis and Forecasting, for the Energy Information Administration, U.S. Department of Energy; Mr. Kenneth K. Humphreys, Senior Staff Engineer, Energy, Science and Technology Division, Pacific Northwest National Laboratory; Professor John P. Holdren, Harvard University and Chair, President's Committee of Advisors on Science and Technology Energy Research and Development Panel; and Mr. Joel Darmstadter, Senior Fellow, Energy and Resources Division, Resources for the Future. As has been indicated, you each have 5 minutes, and we would appreciate summarizing your more comprehensive statement and allowing more time for a good interchange between the two. Thank you very much. Ms. Hutzler, you are up first.
STATEMENT OF MARY J. HUTZLER, DIRECTOR, OFFICE OF INTEGRATED ANALYSIS AND FORECASTING, ENERGY INFORMATION ADMINISTRATION (EIA), U.S. DEPARTMENT OF ENERGY
Ms. HUTZLER. Mr. Chairman, and, Members of the Committee, I appreciate the opportunity to appear before you today to discuss renewable energy and energy efficiency in the United States.
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The Energy Information Administration is an autonomous statistical and analytical agency within the Department of Energy. We are charged with providing objective, timely, and relevant data, analysis, and projections for the use of the Department of Energy, other Government agencies, the U.S. Congress, and the public. We do not take positions on policy issues. We produce data and analyses that are meant to help policymakers determine energy policy.
The projections in this testimony are from the Annual Energy Outlook 2001, which provides projections and analysis of domestic energy consumption, supply, and prices. These projections are not meant to be exact predictions of the future. They represent a likely energy future, given technological and demographic trends, current laws and regulations, and consumer behavior.
With respect to our projections for the future, we expect total energy consumption to increase at an average annual rate of 1.3 percent. This is a lower growth rate than we have experienced since 1983, when energy consumption grew at a rate of 1.7 percent per year. We have seen energy consumption decline twice in the past 30 years, in the mid-1970's and in the early 1980's, both occurring due to oil price increases.
The lower energy growth that we are forecasting is partly a result of improved energy intensity, which is the green line on this graph. Energy intensity, measured as energy use per dollar of GDP, has declined since 1970, most notably when energy prices have increased rapidly. Between 1970 and 1986, energy intensity declined at an average rate of 2.3 percent per year, as the economy shifted to less energy-intensive industries and more efficient technologies.
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Without significant price increases and with the growth of more energy-intensive industries, the intensity declines slowed to an average of 1.3 percent per year between 1986 and 1999. Through 2020, we project energy intensity to decline at an average annual rate of 1.6 percent as efficiency gains and structural shifts in the economy offset growth and demand for energy services.
Our Reference Case assumes continued improvements in technology for both energy consumption and production based on historical rates of improvement. To demonstrate the amount of technological improvements that are embedded in the Reference Case, we have represented a case where all future choices will be made from equipment and vehicles available in 2001. This results in an average decline in energy intensity of 1.4 percent per year, compared to the 1.6 percent per year in the Reference Case. In this case, stock efficiencies improve over the forecast when new equipment is chosen to replace equipment that is retired and as the capital stock expands.
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Energy consumption grows at a rate of 1.6 percent per year in this case, which is much closer to the historical rate of 1.7 percent experienced since 1983. If, however, technological improvement occurs at a faster rate than historical levels, we could see aggregate energy intensity decline at a rate of 1.9 percent per year. Such technology improvements could result from increased research and development, but they are not the most optimistic improvements that could occur.
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My next slide shows this for the residential sector. Here I display the 2001 Technology Case and the High Technology Case, but also a Best Available Technology Case. This case assumes that the most energy-efficient technology is always chosen by consumers, regardless of cost. In this case, in the residential sector, energy consumption could be 22 percent lower in 2020, than compared to the Reference Case.
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Consumer choice is probably best demonstrated in the transportation sector, which is our fastest growing end-use sector. Historically, the average efficiency of new automobiles has increased from about 16 miles per gallon in 1975 to 28 miles per gallon in 1986, staying in the 27 to 28 mile-per-gallon range over the next decade. The efficiency of new trucks also improved by about 7 miles per gallon in this time frame.
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While we expect the average new vehicle efficiency to improve by 4 miles per gallon in the forecast, improvements in the average efficiency of the fleet is slowed by stock turnover and consumer choice. The average stock efficiency of all light-duty vehicles is projected to increase by only 1 mile per gallon, reaching 21.5 miles per gallon in 2020. This is due to projected low petroleum prices and higher personal income which increase the demand for larger, more powerful vehicles.
My next figure depicts renewable energy consumption and compares it to consumption of other fuel sources. Renewable energy consumption has increased from 4 quadrillion BTU in 1970 to an estimated 6.6 quadrillion BTU in 1999. We project that it will increase to 8.3 quadrillion BTU in 2020, an average annual growth slightly more than 1 percent from 1999. The share of total energy consumption for renewables we project to stay about 7 percent through 2020. In 2020, about 55 percent of all renewables are used for electricity generation and the rest for dispersed heating and cooling, industrial uses, and fuel blending.
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Electricity generation from renewable sources is projected to increase by 15 percent between 1999 and 2020 in our Reference Case. Renewables decline from a 10b percent share of electricity generation in 1999 to 8b percent in 2020. However, generation from renewables, other than hydroelectricity, is projected to almost double by 2020, increasing from a 2 percent share of total generation today, to a 3 percent share in 2020.
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As can be seen from the chart, most of the projected increase in renewables is expected from biomass, landfill gas, geothermal energy, and wind power. State mandates and other incentives, including Federal production tax credits for wind generation, encourage most of the growth in renewables in the earlier part of the forecast period.
We also evaluate a high renewables case, which is shown on this chart. That case assumes more favorable characteristics for non-hydroelectric renewable generating technologies than in the Reference Case. In this case, generation from non-hydroelectric renewables, other than co-generation, is about doubled that of the Reference Case.
Further penetration of renewables is slowed by the total cost of renewable generation relative to fossil-fired technologies. In this chart, you can see that wind generation in 2020 is about 4.6 cents per kilowatt hour, compared to natural gas combined cycle generation, which is around 3.8 cents per kilowatt hour.
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In conclusion, over the forecast period, we expect total energy intensity to continue to improve at a rate that falls between the rates we have seen over the past 30 years. Increasing demand for energy services is offset to some degree by energy efficiency improvements, some of which occur due to equipment standards. The use of renewable sources of energy is expected to increase, however, at a relatively slow pace, due in part to the relative costs of these technologies compared to fossil-fueled technologies. Thank you, Mr. Chairman, and Members of the Committee. I will be happy to answer any questions you may have.
[The prepared statement of Ms. Hutzler follows:]
PREPARED STATEMENT OF MARY J. HUTZLER, DIRECTOR, OFFICE OF INTEGRATED ANALYSIS AND FORECASTING, ENERGY INFORMATION ADMINISTRATION, U.S. DEPARTMENT OF ENERGY
Mr. Chairman and Members of the Committee:
I appreciate the opportunity to appear before you today to discuss renewable energy and energy efficiency in the United States.
The Energy Information Administration (EIA) is an autonomous statistical and analytical agency within the Department of Energy. We are charged with providing objective, timely, and relevant data, analysis, and projections for the use of the Department of Energy, other government agencies, the U.S. Congress and the public. We do not take positions on policy issues, but we do produce data and analysis reports that are meant to help policy makers determine energy policy. Because we have an element of statutory independence with respect to the analyses that we publish, our views are strictly those of EIA. We do not speak for the Department, nor for any particular point of view with respect to energy policy, and our views should not be construed as representing those of the Department or the Administration. However, EIA's baseline projections on energy trends are widely used by government agencies, the private sector, and academia for their own energy analyses.
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The projections in this testimony are from the Annual Energy Outlook 2001 (AEO2001), published by EIA in December 2000, which provides projections and analysis of domestic energy consumption, supply, prices, and energy-related carbon dioxide emissions through 2020. These projections are not meant to be exact predictions of the future, but represent a likely energy future, given technological and demographic trends, current laws and regulations, and consumer behavior as derived from known data. EIA recognizes that projections of energy markets are highly uncertain, subject to many random events that cannot be foreseen, such as weather, political disruptions, strikes, and technological breakthroughs. In addition to these short-term phenomena, long-term trends in technology development, demographics, economic growth, and energy resources may evolve along a different path than assumed in the AEO2001 reference case. Many of these uncertainties are explored through alternative cases in the AEO2001.
ENERGY CONSUMPTION TO 2020
Total energy consumption is projected to increase from an estimated 96.1 quadrillion British thermal units (Btu) in 1999 to 127.0 quadrillion Btu between 1999 and 2020, an average annual increase of 1.3 percent. Energy consumption in the United States increased from 67.9 quadrillion Btu in 1970 to 81.0 quadrillion Btu in 1979, with a downturn in 1974 and 1975 during the first oil price increase. During the early 1980s, energy consumption again declined to 73.3 quadrillion Btu in 1983, due in part to the second oil price increase. Since 1983, energy consumption has been generally increasing, with an average annual increase of 1.7 percent through 1999.
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Total renewable energy consumption, including ethanol used in gasoline, is projected to increase from 6.7 quadrillion Btu in 1999 to 8.5 quadrillion Btu in 2020, an average annual growth of 1.1 percent (Figure 1). Renewable energy consumption in the United States has increased from 4.1 quadrillion Btu in 1970 and has included primarily hydroelectric power, wood, and waste, with small amounts of geothermal and other renewable sources. The share of total energy consumption that is derived from renewable sources is projected to be 7 percent in 2020, approximately the same share as in 1999. In 2020, about 55 percent of renewables are used for electricity generation and the rest for dispersed heating and cooling, industrial uses (primarily cogeneration), and fuel blending (Figure 2).
The projections incorporate promulgated efficiency standards for new energy-using equipment in buildings, as authorized by the National Appliance Energy Conservation Act of 1987 and periodically updated by the Department of Energy, and for motors, as required by the Energy Policy Act of 1992. Since AEO2001 included only those laws, regulations, and standards in effect as of July 1, 2000, the new standards for residential clothes washers, water heaters, and central air conditioners and heat pumps and commercial heating, cooling, and water heating equipment issued in January 2001 are not included. In addition to the impact of efficiency standards, improvements in efficiency are projected as a result of expected technological improvement and market forces.
Transportation. Transportation energy demand is expected to increase at an average annual rate of 1.8 percent to 38.5 quadrillion Btu in 2020 and is the fastest growing end-use sector. The growth in transportation use is driven by 3.6 percent growth in air travel, the most rapidly increasing transportation mode, and 1.9 percent annual growth in light-duty vehicle travel, the largest component of transportation energy demand, coupled with slow growth in vehicle efficiency.
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Historically, the average efficiency of new automobiles has increased from 15.8 miles per gallon in 1975 to 27.9 miles per gallon in 1986, staying in the 27 to 28 mile range over the next decade (Figure 3). The efficiency of new light trucks, including vans, pickup trucks, and sport utility vehicles, also improved from 13.7 miles per gallon in 1975 to 21.4 miles per gallon in 1986, remaining at about 21 miles per gallon for the next decade. While the average efficiency of all new light-duty vehicles is expected to increase from 24.2 miles per gallon in 1999 to 28.0 miles per gallon in 2020, improvements in the average efficiency of the fleet is slowed by stock turnover (Figure 4). From 1999 to 2020, the average stock efficiency of all light-duty vehicles increases from 20.5 to 21.5 miles per gallon. With fuel efficiency standards for light-duty vehicles assumed to stay at current levels, fuel efficiency is projected to improve at a slower rate through 2020 than it did in the 1980s, due to projected low fuel prices and higher personal income which are expected to increase the demand for larger, more powerful vehicles. Average horsepower for new cars in 2020 is projected to be about 55 percent above the 1999 average, but advanced technologies and materials are expected to keep new vehicle fuel economy from declining.
Advanced technology vehicles, representing automotive technologies that use alternative fuels or require advanced engine technology, are projected to reach nearly 2.7 million vehicle sales (16.7 percent of total projected light-duty vehicle sales) by 2020 (Figure 5). The leading technologies are gasoline hybrid electric vehicles, followed by turbo direct injection diesels, and alcohol flexible-fueled vehicles. The use of renewables in the transportation sector, specifically ethanol, is projected to increase at an average rate of 3.6 percent per year between 1999 to 2020. This represents a doubling of the use of ethanol to 0.24 quadrillion Btu by 2020. Ethanol in the form of E85 is consumed primarily by light-duty flexible-fueled vehicles and dedicated E85 vehicles, but the majority of ethanol is used for gasoline blending, about 87.5 percent in 2020. All alternative fuels are projected to displace about 203,000 barrels of oil equivalent per day by 2020, or 2.1 percent of light-duty vehicle fuel consumption.
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Residential. Residential energy consumption is projected to increase at an average annual rate of 1.2 percent, reaching 24.4 quadrillion Btu in 2020. The growth is led by energy demand for a variety of electricity-using equipment and appliances (Figure 6). Residential electricity use is projected to increase at an annual rate of 1.9 percent. The energy intensity of households, measured as delivered energy consumption per household, was 155 million Btu per household in 1970, generally declining through the 1980s to a low of 102 million Btu per household in 1990 (Figure 7). Delivered energy use per household is expected to increase slightly from 102 to 107 million Btu per household between 1999 and 2020, an average annual increase of 0.2 percent. Primary energy use per household, including all losses associated with the generation and transmission of the electricity used in the sector, increases at a slower rate, 0.1 percent per year, due to the increasing efficiency of electricity generation. Total energy use per household is expected to increase from 184 to 188 million Btu per household between 1999 and 2020, an average annual increase of 0.1 percent. Total energy use per square foot of floorspace is actually projected to slowly decrease at an average annual rate of 0.1 percent between 1999 and 2020, in part due to equipment standards, which help to increase the efficiency of residential appliances (Figure 8). However, it is also expected that new homes will continue to increase in size, consistent with recent trends, leading to the increase in energy consumption per household.
Energy use for space heating, the most energy-intensive end use in the residential sector, grew by 1.8 percent per year from 1990 to 1997. Future growth is expected to be slowed by higher equipment efficiency and tighter building codes. Building shell efficiency gains are projected to cut space heating demand by nearly 10 percent per household in 2020 relative to the demand in 1997.
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A variety of appliances are now subject to minimum efficiency standards, including heat pumps, air conditioners, furnaces, refrigerators, and water heaters. Current standards for a typical residential refrigerator limit electricity use to 690 kilowatthours per year, and revised standards are expected to reduce consumption by another 30 percent by 2002. Energy use for refrigeration has declined by 1.8 percent per year from 1990 to 1997 and is expected to decline by about 2.0 percent per year through 2020, as older, less efficient refrigerators are replaced with newer models.
The ''all other'' category, which includes smaller appliances such as personal computers, dishwashers, clothes washers, and dryers, has grown by 5 percent per year from 1990 to 1997 and now accounts for 30 percent of residential primary energy use. It is projected to account for 40 percent in 2020, as small electric appliances continue to penetrate the market. The promotion of voluntary standards, both within and outside the appliance industry, is expected to forestall even larger increases. Even so, the ''all other'' category is projected to exceed other components of residential demand by 2020.
The AEO2001 reference case projects an increase in the stock efficiency of residential appliances, as stock turnover and technology advances in most end-use services combine to reduce residential energy intensity over time. For most appliances covered by the National Appliance Energy Conservation Act of 1987, the most recent Federal efficiency standards are higher than the 1998 stock, ensuring an increase in stock efficiency (Figure 9) without any additional new standards. Future updates to the Federal standards could have a significant effect on residential energy consumption, but they are not included in the reference case. New efficiency standards for clothes washers, water heaters, central air conditioners, and heat pumps were finalized in January 2001; however, a 60-day review of the standards was ordered in early February.
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For almost all end-use services, technologies now exist that can significantly curtail future energy demand if they are purchased by consumers. The most efficient technologies can provide significant long-run savings in energy bills, but their higher purchase costs tend to restrict their market penetration. For example, condensing technology for natural gas furnaces, which reclaims heat from exhaust gases, can raise efficiency by more than 20 percent over the current standard; and variable-speed scroll compressors for air conditioners and refrigerators can increase their efficiency by 50 percent or more. In contrast, there is little room for efficiency improvements in electric resistance water heaters, because the technology is approaching its thermal limit.
Commercial. Commercial sector energy consumption is projected to increase at an average rate of 1.4 percent annually, to 20.8 quadrillion Btu in 2020. Similar to the residential sector, electricity consumption for telecommunications, computers, office equipment, and other appliances is the fastest growing area, with total commercial electricity demand increasing at an average annual rate of 2.0 percent. Delivered energy consumption per square foot of commercial floorspace was 147 thousand Btu in 1970, declining generally through the next two decades, reaching a low of 118 thousand Btu per square foot in 1992 (Figure 10). In the projections, delivered energy consumption increases from 121 thousand Btu per square foot in 1999 to 129 thousand Btu per square foot in 2020, an average annual increase of 0.3 percent, due in part to growth in office equipment and other electronic devices, although growth is moderated somewhat by equipment standards. Similar to the residential sector, primary energy consumption in the commercial sector is expected to increase at a slower rate of 0.1 percent through 2020, from 249 to 253 thousand Btu per square foot.
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Currently, the combined residential and commercial buildings sectors use about 0.5 quadrillion Btu of renewable energy, primarily wood consumed for residential space heating and secondary heating. This is not expected to change through 2020. Renewable energy is also used in applications such as ground-source heat pumps that use geothermal energy for heating and cooling and photovoltaic (PV) solar systems that generate electricity. The use of geothermal and solar energy in the buildings sectors is projected to grow 2.0 percent per year from 1999 through 2020. The market share for residential ground-source heat pumps is projected to double by 2020 although that share is projected to remain below 1 percent over the forecast horizon. Grid-connected PV solar systems on buildings are projected to comprise over 750 megawatts of distributed generating capacity by 2020, aided in large measure by programs such as Million Solar Roofs that promote growth in the PV market.
Industrial. Industrial energy demand is projected to increase at an average rate of 1.0 percent per year, reaching 43.4 quadrillion Btu in 2020. Total industrial output is expected to grow at an average rate of 2.6 percent per year; however, the fastest growing industrial sector is non-energy-intensive manufacturing with an average annual growth of 3.3 percent. Energy-intensive manufacturing and nonmanufacturing have growth rates of 1.2 and 1.6 percent, respectively. This structural shift in the industrial sector, combined with ongoing efficiency improvements, helps to moderate the increase in industrial energy demand. Industrial energy intensity, measured as consumption per dollar of output, declined sharply following the oil price shocks of 1978–1979, from a high of 10.1 thousand Btu per 1992 dollar of output in 1979 to 8.2 thousand Btu per dollar output in 1987 (Figure 11). Subsequently, the rate of the decline moderated. Over the period 1978 to 1999, industrial primary energy intensity declined at an average rate of 1.4 percent per year. From 1999 to 2020, intensity is projected to decline at a rate of 1.5 percent per year from 7.4 to 5.4 thousand Btu per 1992 dollar of output.
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The share of total industrial output attributed to the energy-intensive industries is projected to fall from 23 percent in 1999 to 17 percent in 2020. Consequently, even if no specific industry experienced a decline in intensity, aggregate industrial intensity would decline. Figure 11 shows projected changes in energy intensity due to structural effects and efficiency effects separately. Over the forecast period, industrial delivered energy intensity is projected to drop by 26 percent, and the changing composition of industrial output alone is projected to result in approximately a 19 percent drop. Thus, two-thirds of the expected change in delivered energy intensity for the sector is attributable to structural shifts and the remainder to changes in energy intensity associated with projected increases in equipment and production efficiencies.
Consumption of biomass byproducts in the pulp and paper, lumber, and food industries accounts for most of the renewable energy consumed in the industrial sector. Biomass consumption is projected to increase from 2.2 quadrillion Btu in 1999 to 3.1 quadrillion Btu in 2020, a 1.7 percent average annual growth rate. Biomass often is used in cogeneration, the simultaneous production of useful thermal energy and electricity. The higher projected availability of biomass leads to additional biomass-based cogeneration capacity, which is projected to increase from an estimated 4.6 gigawatts in 1999 to 7.5 gigawatts in 2020, a 2.3 percent average annual growth rate.
Total Energy Intensity. Total energy intensity, measured as energy use per dollar of gross domestic product (GDP), has declined since 1970, most notably when energy prices have increased rapidly (Figure 12). Between 1970 and 1986, energy intensity declined at an average rate of 2.3 percent per year as the economy shifted to less energy-intensive industries and more efficient technologies. Without significant price increases and with the growth of more energy-intensive industries, intensity declines moderated to an average of 1.3 percent per year between 1986 and 1999. Through 2020, energy intensity is projected to decline at an average rate of 1.6 percent per year as efficiency gains and structural shifts in the economy offset growth in demand for energy services. Energy use per person generally declined from 1970 through the mid-1980s, and then tended to increase as energy prices declined. Per capita energy use is expected to increase slightly through 2020, as efficiency gains only partly offset higher demand for energy services.
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Electricity Generation. During the 1960s, electricity demand grew by more than 7 percent per year, nearly twice the rate of economic growth (Figure 13). In the 1970s and 1980s, however, the ratio of electricity demand growth to economic growth declined to 1.5 and 1.0, respectively. Several factors have contributed to this trend, including increased market saturation of electric appliances, improvements in equipment efficiency and utility investments in demand-side management programs, and more stringent equipment efficiency standards. Throughout the forecast, growth in demand for office equipment and personal computers, among other equipment, is dampened by slowing growth or reductions in demand for space heating and cooling, refrigeration, water heating, and lighting. The continuing saturation of electricity appliances, the availability and adoption of more efficient equipment, and efficiency standards are expected to hold the growth in electricity sales to an average of 1.8 percent per year between 1999 and 2020, compared with 3.0 percent annual growth in GDP.
Generation from both natural gas and coal is projected to increase through 2020 to meet growing demand for electricity and offset the decline in nuclear power expected from retirements of some existing facilities, for which continued operation is not economical compared to the cost of a new generating facility. Coal remains the primary fuel for generation; however, the share of coal generation is expected to decline from 51 to 44 percent between 1999 and 2020. Although coal use for electricity generation is expected to increase, natural gas use is expected to increase at a more rapid rate. Assumptions about electricity industry restructuring, such as higher cost of capital and shorter financial life of plants, tend to favor the less capital-intensive and more efficient natural gas generation technologies. The natural gas share of total generation is expected to increase from 16 to 36 percent between 1999 and 2020. Historically, consumption for electricity generation by fossil-fired generators has increased at an approximately equivalent pace with generation; however, largely due to the expected penetration of natural gas-fired, combined-cycle technologies, fuel consumption is projected to grow at a slower rate than fossil-fired generation as efficiency improves (Figure 14).
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Total grid-connected electricity generation from renewable sources is projected to increase from 389 billion kilowatthours in 1999 to 448 billion kilowatthours in 2020. Renewables decline from a 10.5 percent share of electricity generation in 1999 to 8.5 percent in 2020. Generation from renewables other than hydroelectricity is projected to increase from 77 billion to 146 billion kilowatthours by 2020, increasing slightly from a 2 percent share of total generation in 1999 to a 3 percent share in 2020. Conventional hydroelectricity is expected to decline slightly through 2020, as output from existing facilities declines. Most of the projected increase in renewables is expected from biomass, landfill gas, geothermal energy, and wind power (Figure 15). State mandates and other incentives, including the Federal production tax credit for generation from wind, encourage much of the growth in renewables in the earlier part of the forecast period.
Further penetration of renewables is slowed by the total cost of renewable generation relative to fossil-fired technology. Despite cost reductions that are projected over time, the total cost of wind generation is expected to remain higher than that of either coal or natural gas-fired combined cycle generation through 2020 (Figure 16). However, all nonhydroelectric renewable electricity generation is projected to grow at a faster rate than all conventional energy sources of generation, with the exception of natural gas. If, in reality, future natural gas supplies and prices are different than projected in AEO2001, the expected outlook for renewable sources of energy could be different.
ALTERNATIVE CASES
In order to show the impact of alternative assumptions concerning the key factors driving energy markets, we include a number of alternative cases in AEO2001, including cases with more optimistic assumptions for renewable generating technologies and cases varying the assumptions about the rate of improvement for energy-consuming technologies.
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High Renewables. A high renewables case assumes more favorable characteristics for nonhydroelectric renewable generating technologies than in the reference case, including lower capital, operations and maintenance costs, increased biomass fuel supplies, and higher capacity factors for solar and wind generation. The assumptions in this case approximate the renewable energy technology goals of the U.S. Department of Energy. Under these assumptions, total generation from nonhydroelectric renewables is projected to reach 242 billion kilowatthours in 2020, compared with 146 billion kilowatthours in the reference case, increasing from 2.8 percent of total generation to 4.6 percent (Figure 17).
Alternative Technology. Another alternative case assumes more rapid improvement in new technologies for end-use demand, through lower costs, higher efficiencies, and earlier availability for new technologies, relative to the reference case, as well as more rapid improvement in the costs and efficiencies of advanced fossil-fired and new renewable generating technologies. In the high technology case, aggregate energy intensity is expected to decline at an average rate of 1.9 percent per year from 1999 to 2020, compared with 1.6 percent per year in the reference case (Figure 18). As a result, projected energy demand in 2020 is 8 quadrillion Btu lower than in the reference case, reducing carbon dioxide emissions to 1,875 million metric tons carbon equivalent in 2020, compared to 2,041 million metric tons carbon equivalent in the reference case (Figure 19). Such technology improvements could result from increased research and development, but should not be considered the most optimistic improvements that could occur with a very aggressive program of research and development.
The AEO2001 reference case assumes continued improvements in technology for both energy consumption and production; however, it is possible that technology could develop at a slower rate. In the 2001 technology case, it is assumed that all future equipment choices will be made from the equipment and vehicles available in 2001, with new building shell and industrial plant efficiencies frozen at 2001 levels. New generating technologies are assumed not to improve over time. As a result, the average decline in energy intensity is reduced to 1.4 percent per year from 1.6 percent per year in the reference case. Efficiencies improve over the forecast period as new equipment is chosen to replace older stock and the capital stock expands; however, projected energy demand in 2020 is 6 quadrillion Btu higher than in the reference case, increasing carbon dioxide emissions to 2,157 million metric tons carbon equivalent.
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Figure 20 displays the impact of different assumptions about technology development in the residential sector alone. In the 2001 technology case, 3.1 percent, or 0.8 quadrillion Btu, of additional energy is required in 2020. In the high technology case, 6.0 percent, or 1.5 quadrillion Btu, of energy is saved in 2020 due to the earlier penetration of more efficient technologies. In a best available technology case, it is assumed that the most energy-efficient technology is always chosen in the forecast regardless of cost. Under this assumption, energy consumption in the residential sector is 22.5 percent, or 5.5 quadrillion Btu, lower in 2020 relative to the reference case. In the commercial sector, using similar assumptions, the 2001 technology case requires 2.4 percent, or 0.5 quadrillion Btu, more energy in 2020 than in the reference case (Figure 21). In the high technology case, commercial energy consumption in 2020 is reduced by 3.5 percent, or 0.7 quadrillion Btu, from the reference case, and, in the best available technology case, consumption in 2020 is reduced by 14.1 percent, or 2.9 quadrillion Btu, relative to the reference case.
Energy Policies and Programs. Due to the policy neutrality of EIA, we do not propose or advocate any particular policies and programs. We do note that, in general, there are a wide range of policies that could alter the energy future described in the AEO2001 by encouraging the development and adoption of more energy-efficient and renewable technologies and stimulating production of domestic energy resources. Such policies include, but are not limited to, programs to foster research, development, and deployment of technologies, government-industry partnerships, voluntary programs, tax credits and other financial incentives, and minimum appliance efficiency and renewable standards.
Conclusion. Over the forecast period, we expect total energy intensity to continue to improve, however, at a slower rate than experienced at other periods in the last twenty years. Increasing demand for energy services is offset to some degree by energy efficiency improvements, some of which occur due to equipment standards. The use of renewable sources of energy is expected to increase; however, at a relatively slow pace, due in part to the relative costs of these technologies compared with fossil-fueled technologies. Technology costs or fossil fuel prices that differ from those in the projections could alter the outlook for renewables. These forecasts also incorporate an expectation of efficiency improvements in both demand and supply although different paths for technological development and other incentives could lead to slower or more rapid efficiency gains.
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Thank you, Mr. Chairman and members of the Subcommittee. I will be happy to answer any questions you may have.
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BIOGRAPHY FOR MARY J. HUTZLER
Mary J. Hutzler is the Director of the Office of Integrated Analysis and Forecasting (OIAF) at the Energy Information Administration (EIA) in the Department of Energy (DOE), where she is responsible for EIA's mid- and long-term analysis and forecasting projects and the National Energy Modeling System. She previously held the position of Director of the Electric Power Division, where she was responsible for the Department's electric power statistical information systems and EIA's analysis of electric power issues, including the impact of legislation and regulation on electric power markets. Other EIA positions that Ms. Hutzler held include Chief of the Data Analysis and Forecasting Branch, Coal Division, and Director of the Long-Term Energy Analysis Division. Prior to joining DOE, Ms. Hutzler was with the Logistics Management Institute (LMI), where she worked on military readiness for the Assistant Secretary for Manpower, Reserve Affairs, and Logistics, Department of Defense and on energy models for EIA; and with the Institute for Defense Analysis (IDA), where she developed models for military operations for the Joint Chiefs of Staff. Ms. Hutzler received a B.A. in Mathematics from Adelphi University in 1970, an M.A. in Applied Mathematics from the University of Maryland in 1972, and she has completed her coursework for a Doctor of Science Degree in Operations Research at the George Washington University.
Chairman BOEHLERT. Thank you very much, Ms. Hutzler. And, incidentally, just a warning to all, this is only temporary, this voice of mine, that usually is fuller. Mr. Humphreys.
STATEMENT OF KENNETH K. HUMPHREYS, SENIOR STAFF ENGINEER, ENERGY, SCIENCE AND TECHNOLOGY DIVISION, PACIFIC NORTHWEST NATIONAL LABORATORY
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Mr. HUMPHREYS. Chairman Boehlert, Mr. Hall, and Members of the Committee, I am pleased to be here this morning to speak with you about our long-term energy modeling work. The Committee specifically invited Dr. Jae Edmonds, or a member of his team, at Pacific Northwest National Laboratory, to talk about the long-term energy modeling work we have conducted over the past 20 years. My name is Ken Humphreys. I have a background in energy technology and work closely with Dr. Edmonds at the laboratory.
The modeling framework we use is based on the principle that all technologies, whether they are renewable, energy efficient—energy efficiency, nuclear, or fossil-based, compete in the marketplace based upon price and performance. Thus, market competition ultimately determines the market share that any particular technology enjoys.
Of the emerging long-term energy challenges, we see cost effectively addressing the issue of climate change as the issue that will require the most fundamental transformation of our energy system over the coming century. It is through the lens of cost effectively addressing the issue of climate change that I will discuss a couple of scenarios, a business-as-usual case, a climate constraint case, and the role of energy efficiency in renewables in each. May I have the slides, please?
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This relatively simple figure—slides, please. Okay. This relatively simple figure is based on an extremely complex analysis. The ''Y'' axis shows global carbon emissions. On the ''X'' axis we see time, from now through the year 2090. Three scenarios are shown, each represented by a carbon emissions curve. The only major difference between each of these scenarios is the energy technology portfolio that underlies them.
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The top curve is referred to as a technology freeze scenario. It represents the resulting carbon emissions in the United States and world if we adhere to technology of today to meet our energy demands of the future. The middle curve assumes dramatic enhancements were made to the existing energy infrastructure to increase its energy efficiency, and that technologies we already have in the R&D portfolio are successfully developed and compete in the marketplace as viable technologies. This middle scenario is consistent with what energy modelers refer to as a business-as-usual scenario or a reference case. This scenario assumes that there is no climate constraint influencing our energy system.
The third and bottom curve in this particular chart assumes that we develop an energy infrastructure that puts us on an economically efficient pathway to ultimately stabilize atmospheric concentrations of CO. From this chart, if we only look at the first 30 years, now through 2030, there doesn't appear to be much difference between these scenarios. However, if we look at the balance of the century, the full magnitude of the challenge reveals itself.
As you can see, the technology portfolios we put in play today cast a strong influence over the future. Again, the upper curve, where today's technology will take us; the lower curve, economically efficient pathways that head us toward a stabilized CO concentration.
First, I would like to talk about what fills the gap between the top two scenarios. That is, what are the technologies we need, or are we counting on, just to achieve a business-as-usual future? These are technologies that, I believe, we all know. There is a strong play for renewables. Nuclear power and energy efficiency play an extremely strong role. While these technologies penetrate around the world, let me say a few—provide a few quantitative characteristics for what this means for the United States.
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By 2050, we are expecting a 45 percent improvement in energy efficiency in all end-use sectors—residential, commercial, transportation, and industrial—pretty extraordinary level of improvement. By the year 2100, renewables make up 20 percent of the U.S. energy mix in a business-as-usual future, however, fossil fuels continue to dominate the mix. All these technologies are things that we are counting on just to achieve business-as-usual in the future.
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Now, let me shift my attention to the lower gap. And that is, what closes the gap between business-as-usual and a scenario where we may choose to address climate change. In that gap, is it technologies we know or is it novel technologies? Well, the answer is what fills that gap, some of both. We see large amounts of novel carbon capture technology penetrating the marketplace that helps fossil fuels retain a significant market share.
We also see, in a climate-constrained world, that solar, hydro-efficiency and nuclear play a critical role in filling the gap. But perhaps even more important, their primary contribution comes from just getting us to a business-as-usual future.
In a climate-constrained world, biomass triples its penetration in the lower gap, bringing the total U.S. renewables penetration to approximately 40 percent of the energy mix.
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In summary, we believe that a 50- to 100-year planning horizon is required if we wish to fully understand what technologies are strategic while minimizing long-term costs. In spite of extraordinary gains in energy efficiency, U.S. energy demand will double over this century, and we will ultimately need to meet that demand. Renewables are a vitally—vital, critical component of solving the future energy challenge. It is also important to recognize that there is no silver bullet. Fossil fuels, nuclear, still play a role. So we need to invest in a diverse R&D portfolio. And, finally, we need to increase our focus on technological breakthroughs and effectively managing R&D if we are to have any budget increases related to energy R&D. Thank you.
[The prepared statement of Mr. Humphreys follows:]
PREPARED STATEMENT OF KEN HUMPHREYS
Chairman Boehlert, Mr. Hall, and Members of the Science Committee—I am pleased to be here this morning to speak to the results of our long-term energy modeling work and the role of renewables and energy efficiency in our energy future.
The Committee specifically invited Dr. Jae Edmonds of Pacific Northwest National Laboratory(see footnote 5) to talk about the energy modeling that he and others have been working on over the past 20 years. Dr. Edmonds is in Africa for a long-standing professional commitment with the Intergovernmental Panel on Climate Change. My name is Ken Humphreys. I am an engineer at the laboratory and work closely with Dr. Edmonds as part of his energy modeling team.
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In 1985, Dr. Edmonds of Battelle and Dr. John Reilly, now of M.I.T., published the book entitled: Global Energy. This book crystallized many of the ideas that had developed over the preceding decade following the energy crisis of the 1970's. Dr. Edmonds and Dr. Reilly integrated together the concepts of experts from around the world and developed the theoretical foundation for what was to become our long-term energy model. This model, known as the Edmonds-Reilly-Barns model, is now highly regarded within the global modeling community, academia, and industry. It has been extensively peer reviewed and is used by many organizations around the world. Our current work is supported by a balanced set of government organizations and private organizations from around the world.
This century the energy system will face many new challenges that are not fully accounted for today in our energy R&D portfolio. Of all the challenges, we see cost—effectively addressing climate change as the issue that will require the most dramatic transformation of our energy infrastructure. For the last three years, in cooperation with 14 collaborating research institutions and with the guiding hand of 22 prestigious scholars, industry leaders, and non-governmental organizations, we've used our global energy modeling capability to examine possible energy futures with and without a climate constraint. We've done this for 14 global regions, including the US.
Figure 1 presents estimated global carbon emissions over the coming century for three scenarios. All three scenarios have the same economic and population growth assumptions. That is, the global economy increases more than 7-fold and population nearly doubles. The only major difference between the scenarios is the energy technology portfolio that underlies the scenarios.
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The middle curve is associated with the Intergovernmental Panel on Climate Change ''business-as-usual'' future. It is comparable to ''business-as-usual'' scenarios used by the International Energy Agency, World Energy Commission and others. The upper curve assumes that the world meets increased energy demand over the coming century with existing technology. The point of showing these two curves today is to illustrate the incredible amount of technological change that is assumed to take place in scenarios that many organizations in the energy modeling field frequently refer to as ''business-as-usual''. Some quantitative characteristics associated with the U.S. component of the ''business-as-usual'' scenario (i.e., the middle curve) include:
End-use energy efficiency in all sectors and regions of the world are projected to improve at 1 percent per year. This assumption implies a 45% percent improvement in energy efficiency in all sectors and regions by 2050.
After accounting for these dramatic improvements in energy efficiency, overall energy demand still increases globally by a factor of 5 and in the U.S. by a factor of 2.
By 2100, all renewables make up 20% of the U.S. energy mix, but 80% of U.S. energy needs in 2100 are still supplied by fossil fuels—down from 90% in 1995. Fossil fuels remain the dominant fuel.
The third and bottom curve on this figure represents an economically efficient pathway that ultimately stabilizes atmospheric concentrations of carbon. We choose the goal of ''stabilizing concentrations'' because that is the goal that is set forth in the United Nations Framework Convention on Climate Change, a treaty which the U.S. Senate and 183 other nations have ratified and is now in force as international law.
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Some quantitative characteristics associated with the U.S. component of the ''stabilization'' scenario include:
Energy prices are higher and therefore overall demand for energy somewhat lower.
The most important contribution that energy efficiency, solar, wind, and nuclear make is that they enable us to achieve the dramatic gains already embedded in our ''business-as-usual future''.
Advanced carbon capture and sequestration technologies enable significant amounts of fossil-based fuels to maintain a large market share.
Nuclear technologies penetrate the market heavily internationally, but unless it regains its public acceptance, it does not penetrate the U.S. market.
In a climate-constrained world, large-scale commercial biomass triples in penetration over a ''business-as-usual'' case and is particularly important in the latter part of the century.
In summary,
Over this century, populations will increase 50 to 100% and the global economy will grow seven to ten-fold. This growth will require extraordinary amounts of energy.
Energy efficiency, renewables, nuclear, and fossil technologies all play an extraordinarily important role. When it comes to meeting our future energy needs, but there is no silver bullet. It takes a portfolio of technologies to meet our future energy needs at minimum cost.
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The overall costs of providing for a robust energy future are minimized when a 50- to 100-year time horizon is taken and near-term technology goals are set. On a global basis, a systematic long-term strategy appears to save many trillions of dollars and the U.S. shares directly in these savings.
Current investment in energy research and development do not appear adequate to meet the challenges of the 21st century. However, increasing R&D budgets in the public and private sectors will only help meet the challenges of the 21st century if we simultaneously increase our attention to breakthrough technologies and increase the effectiveness with which we perform R&D.
For reference, attached is the Executive Summary for the initial phase of the Global Energy Technology Strategy Program. A copy of the full report and additional supporting references are available at http://gtsp.battelle.org.
Biography for Kenneth K. Humphreys
Mr. Ken Humphreys is a Senior Staff Engineer at Pacific Northwest National Laboratory.(see footnote 6) He leads project teams that work in partnership with sponsors to create value through the incorporation of sustainability concepts into their business and technology development processes. His work also includes leading a major Laboratory initiative on carbon management technologies covering bio-based products, microtechnology, fuel cells, carbon capture, and sequestration technologies. Mr. Humphreys has fifteen years of experience working in the fields of technology development, environmental management, and energy analysis.
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Mr. Humphreys leads the U.S. Technical Advisory Group for ISO 14048 on life-cycle assessment data. He is a frequent invited speaker on topics related to carbon management, life-cycle assessment, and incorporating sustainability concepts into product design. He was recently recognized by R&D Magazine for leading the team that created one of the Top 100 products of 1998—Software that supports the design of sustainable products and processes.
RELEVANT EXPERIENCE
PEMEX Value Chain Assessment. Mr. Humphreys is the technical lead on a project to characterize the energy, environmental, and economic aspects of twenty major functional operations that are spread across the PEMEX (the Mexican National Oil Company). As part of the project, major feedstocks, products, water, steam, other utilities, and environmental releases at four facilities are being examined to ascertain where improved technology would help add increased value to PEMEX's operations.
Life-Cycle Assessment (LCA) Software Development. Mr. Humphreys was the project manager for several development projects and a commercialization effort that culminated in the release of Life-Cycle AdvantageTM, a software tool that supports the application of life-cycle assessment. The software and its underlying mathematical algorithms were recently recognized by R&D Magazine as one of 1998's Top 100 technological achievements. This highly visible effort included the participation of seven major U.S. industries. The software helps evaluate the energy consumption, water releases, air emissions, and solid waste issues associated with products and processes.
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Energy/Environmental Life-Cycle Assessment (LCA) of 1,4–Butanediol. As part of a R&D effort to develop bio-based routes for producing 1,4–Butanediol, Mr. Humphreys led a study that examined the life-cycle energy and environmental consequences associated with production of 1,4–Butanediol from natural gas-based feedstocks versus corn-based feedstocks. The study addresses air releases, water consumption and use, and solid waste issues associated with the alternative chemical production technologies.
Life-Cycle Assessment (LCA) Handbook for Energy Systems. For the U.S. Department of Energy's (DOE) Office of Planning and Assessment, Mr. Humphreys led the development of a life-cycle assessment methodology for energy systems. The effort emphasized life-cycle inventory assessment (i.e., characterizing water, air releases, energy and solid waste associated with various technologies).
Energy/Product Life-Cycle Assessment (LCA) Symposiums. With the financial sponsorship of DOE and the organizational sponsorship of the American Institute of Chemical Engineers, Mr. Humphreys chaired two symposiums: one on fuel/energy life-cycle assessment and one on product life-cycle assessment. These were the first forums to bring together representatives from the energy and the product LCA peer communities, which had previously operated relatively independently and unaware of each other's activities.
Input to Federal Legislation Addressing Life-Cycle Assessment (LCA). Mr. Humphreys provided technical input for use by Congressional staffers who were preparing the legislation that directly addressed the application of LCA with the Federal Sector and hosted a LCA workshop that included participation by Congressional staff. Leading LCA experts from twenty-two U.S. and international organizations participated in the workshop.
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Advanced Battery Technology Life-Cycle Cost Analysis Project. Mr. Humphreys had the main technical role in this project which involved determining the life-cycle economics of battery storage technologies. This project developed the most extensive reference document available on the life-cycle economics of load-leveling, stand-alone, and electric vehicle systems. The document has received significant visibility within the international advanced battery community.
Aluminum-Air Battery Operating Economics Study. Mr. Humphreys' involvement in this project consisted of determining the costs associated with the operating cycle of an electric vehicle powered by an aluminum-air (Al-air) battery. The effects of state-of-the-art aluminum production techniques, the use of high quality aluminum alloys, and various vehicle service cycles are key parameters that were examined to determine the operating economics and electrical efficiency of the Al-air battery-powered vehicle.
EDUCATION
B.S., Petroleum Engineering (1986), West Virginia University
M.Eng., Engineering Management (1994), Washington State University
SELECTED PUBLICATIONS AND PRESENTATIONS
Shankle, S.A., and K.K. Humphreys. In Press. The Application of Life-Cycle Assessment to Federal Energy Purchases. U.S. Department of Energy. Washington, DC.
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Owen, J.W., K.K. Humphreys, et al. 1997. Life-Cycle Impact Assessment: State of the Art. Society of Environmental Toxicology and Chemistry. Pensacola, Florida.
Humphreys, K.K., M. Placet, and M. Singh. August 1996. ''Life-Cycle Assessment of Electric Vehicles in the United States.'' Intersociety Energy Conversion Engineering Conference. Washington, DC
Evers, D., S.F. Freeman, K.K. Humphreys, et al. June 1996. Streamlined Life-Cycle Assessment of Bio-Derived 1,4–Butanediol versus Petroleum-Derived 1,4–Butanediol. PNL–11213. Pacific Northwest National Laboratory, Richland, Washington.
Freeman, S.F., K.K. Humphreys, et al. June 1996. ''Use of Streamlined Life-Cycle Assessment for Technology R&D Investment Analysis.'' Air and Waste Management Association 89th Annual Meeting & Exhibition. Nashville, Tennessee.
Anderson, R.G., K.K. Humphreys, B.W. Vigon. November 1995. ''Application of Life-Cycle Assessment to Design-for-Environment and Pollution Prevention.'' Seminar on Environmental Management Systems—The Industrial Context. Singapore Ministry for Environment. Singapore.
Humphreys, K.K. February 1994. ''Life-Cycle Assessment: An Industrial Approach to Integrating Energy, the Environment, and Economics.'' PNL–SA–23528. Pacific Northwest Laboratory, Richland, Washington.
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Humphreys, et al. July 1993. A Technical Framework for Life-Cycle Assessments of Energy Systems. Pacific Northwest Laboratory, Richland, Washington.
Tyson, K.S., C.J. Riley, K.K. Humphreys, et al. November 1993. Fuel Cycle Evaluations of Biomass-Ethanol and Reformulated Gasoline. NREL/TP–463–4950. National Renewable Energy Laboratory, Golden, Colorado.
Brown, D.R., K.K. Humphreys, and L.W. Vail. June 1993. Carbon Dioxide Control Costs for Gasification Combined-Cycle Plants in the United States. PNL–SA–22634. Pacific Northwest Laboratory, Richland, Washington.
Placet, M. and K.K. Humphreys. 1991. ''Environmental Tradeoffs Associated with Various Energy Pathways: A Total Energy Cycle Assessment Approach.'' PNL–SA–19619, Pacific Northwest Laboratory, Richland, Washington.
Humphreys, K.K., et al. 1991. System Engineering Cost Analysis Capability: Technical Reference Manual. Pacific Northwest Laboratory, Richland, Washington.
Stiles, D.L. and K.K. Humphreys. 1991. System Engineering Cost Analysis Capability: Cost Data Documentation. Pacific Northwest Laboratory, Richland, Washington.
Humphreys, K.K. and D.R. Brown. 1990. Life-Cycle Cost Comparisons of Advanced Storage Batteries and Fuel Cells for Utility, Stand-Alone, and Electric Vehicle Applications. PNL–7203, Pacific Northwest Laboratory, Richland, Washington.
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Humphreys, K.K. and D.R. Brown. 1990. Cost and Energy Consumption Estimates for the Aluminum-Air Battery Anode Fuel Cycle. PNL–7230, Pacific Northwest Laboratory, Richland, Washington.
Williams, T.A., K.K. Humphreys, et al. 1990. ''Potential Impacts of CO Emissions Standards on the Economics of Central Receiver Power Systems.'' PNL–SA–17245, Pacific Northwest Laboratory, Richland, Washington.
Coomes, E.P., K.K. Humphreys, et al. 1990. ''Space Power Generation and Distribution Program Basis Document. Volume 2: Technical Appendices.'' PNL–7162, Pacific Northwest Laboratory, Richland, Washington.
Humphreys, K.K. and D.R. Brown, 1989. ''The Life-Cycle Cost Notebook: An Encyclopedia of Advanced Battery and Fuel Cell Costs.'' PNL–SA–17308, Pacific Northwest Laboratory, Richland, Washington.
Shay, M.R., D.L. Stiles and K.K. Humphreys (major contributors). 1989. ''Systems Integration Modeling System (SIMS) Exercise: Report on Demonstration of SIMS as a Decision-Support Tool. Scientific Applications International Corporation, McLean, Virginia.
Humphreys, K.K. 1988. Cost Database for Solar Thermal Technologies. Internal DOE Document, Pacific Northwest Laboratory, Richland, Washington.
Humphreys, K.K. 1988. Evaluation of the Routine Nonradiological Risks to Workers and Public in the Waste Management System. Internal DOE Document, Pacific Northwest Laboratory, Richland, Washington.
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Williams, T.A., K.K. Humphreys, et al. 1988. Characterization of the Fixed Mirror Distributed Focus Solar Thermal Concept for Electricity Generation. PNL–6129, Pacific Northwest Laboratory, Richland, Washington.
Humphreys, K.K., and D.R. Brown. 1987. ''Life-Cycle Cost Projections for Utility Load-Leveling Systems''. PNL–SA–14873, Pacific Northwest Laboratory, Richland, Washington.
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Chairman BOEHLERT. Thank you very much, Mr. Humphreys. Dr. Holdren.
STATEMENT OF PROFESSOR JOHN P. HOLDREN, HARVARD UNIVERSITY, AND CHAIR, PRESIDENT'S COMMITTEE OF ADVISORS ON SCIENCE AND TECHNOLOGY (PCAST), ENERGY RESEARCH AND DEVELOPMENT PANEL
Dr. HOLDREN. Mr. Chairman, Members, ladies and gentlemen, I thank you for the opportunity to appear today. My written statement and biography have been submitted for the record. I want to say that the views I am expressing here today are my own, not necessarily those of the organizations I am connected with. In this oral statement, I am going to try to both supplement and summarize the numerology and recommendations in my written statement in 14 brief points, about three points per minute.
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First, our country and the world are entering the 21st century facing a formidable array of energy-related challenges. Those include the provision of affordable and reliable energy supplies sufficient to sustain and expand prosperity. They include limitation of the financial drain, the vulnerability to oil-price shocks, and the potential for armed conflict associated with overdependence on foreign oil. They include reduction of the air pollution burdens from combustion of the fossil fuels that still provide 85 percent of U.S. energy supply and 78 percent of the world's. And they include avoidance of the intolerable degrees of global climate change now understood with increasing confidence and clarity to be the consequence of business-as-usual growth in fossil fuel use in this country and around the world.
Second, the development and deployment of advanced technologies for clean energy supply and for increased energy end-use efficiency, are the keys to meeting all of these challenges.
Third, although the private sector can and will do much of what is required in this domain, government's participation in research and development, in demonstration, and in encouraging selected kinds of deployments is also needed. This is so in large part because the energy challenges I have mentioned are laden with externalities and public goods not reflected in the economic balance sheets of individual firms and consumers.
Fourth, although development and deployment of better technology is a large part of the answer, there is, as Mr. Humphreys has already said, no silver bullet out there, no single silver bullet that can do the whole job. We need to invest in a portfolio of improved energy options, demand side and supply side, short term and long term, sure things and long shots. We need more efficient cars, homes, offices, and factories. We need advanced technologies for finding and harvesting and burning fossil fuels. We need more affordable renewable energy technologies. We need safer and more proliferation-resistant nuclear energy systems, and we need to try to develop fusion.
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Fifth, this having been said, it has to be added that in the end we will not want to utilize every possible way to supply energy or every way to save it. The ratio of benefits to cost will be more favorable for some options than for others, where benefits include expandability and longevity of contribution and costs include environmental impacts and risks, as well as the monetary costs. A major reason for developing better energy options is to be able to reduce reliance on those that are less attractive.
Six, the government's involvement should be strongest where the potential public benefits, not reflected in private returns on investment, are largest. And the government should be most interested of all in options that address more than one of the major challenges at a time, options that can limit oil import dependence and improve air quality and reduce greenhouse gas emissions, for example.
Seventh, on these criteria—and this is the seventh point—energy efficiency options and renewable energy options are particularly deserving of increased government support. They score very high on public benefits, expandability and longevity of potential contributions and simultaneous leverage against multiple challenges.
Eighth, the importance of the efficiency option has been underlined by three decades of compelling experience. My written statement shows that from 1970 to 2000, improvements of the overall efficiency of the U.S. energy system, measured as real GNP divided by primary energy supplied, saved some 2b times more energy than the growth of all sources of supply combined.
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Ninth, as indicated in my written statement—this is the ninth point—the 1997 energy study that I led for the President's Committee of Advisors on Science and Technology concluded that with appropriate investments in energy efficiency R&D and policies favoring deployment of the results, the efficiency improvement performance of the last 30 years could be matched or bettered in the next 30.
Tenth, the growth of renewable energy supplies over the past 30 years has been much less impressive than the growth of the contributions of energy efficiency. While efficiency in the year 2000 was saving 79 quadrillion BTUs per year, compared to what energy requirements would have been in that year under 1970 efficiency levels, renewables in 2000 were supplying only about three quadrillion BTUs per year more than they were supplying in 1970.
Eleventh, the major reason for this limited growth in renewables was cost. Although the costs of many renewable energy technologies fell dramatically in the period, the cost of energy from fossil fuels was so low in the 1990's that most renewables still could not compete in most circumstances. But the cost of energy from renewables continues to fall. And with suitable investments in R&D and accompanying demonstration and deployment programs, it could fall even faster, while the cost of energy from fossil fuels is likely to rise in the decades ahead, and, even more so, if fossil fuels are made to pay, as they ought to be, for their carbon emissions.
Twelfth, the potential contributions from renewables in the decades immediately ahead are substantial. According to the 1997 PCAST study, one particularly promising renewable fuels technology alone, ethanol from cellulosic biomass, could be displacing 2b million barrels a day of oil by 2030. In the electricity sector, the PCAST study estimated that wind energy alone could be supplying as much as 1,100 billion kilowatt hours per year by 2025, nearly twice as much as was coming from natural gas in the year 2000.
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Thirteenth, the energy scenarios developed out to 2020, in the 2001 edition of the Energy Information Administration's Annual Energy Outlook, about which we have already heard this morning, are, as you have seen, considerably less optimistic than the PCAST study was about the potential contributions from energy efficiency improvements and from renewable energy technologies. The reason for that, I believe, is that the EIA study did not consider the possibility of world oil price increases by 2020 above $28 a barrel, or natural gas prices above $3.70 a million BTU, or mine-mouth coal prices above $13 per short ton, where all those prices are in 1999 dollars. And it did not consider the possibility of major policy changes that would have the effect of sharply increasing the incentives for expanding the use of nonfossil fuel options.
Fourteenth, the last point, the 1997 PCAST study recommended—in light of the large potential contributions and high leverage against energy-linked threats to public welfare offered by continuing increases in energy end-use efficiency and expanded use of renewables—it recommended that a substantial fraction of the additional effort in a strengthened Federal R&D portfolio ought to be devoted to those two areas. Of a recommended year 2001 budget of $2.2 billion in as-spent money for all energy supply and energy efficiency R&D, PCAST proposed that $770 million should be going to efficiency and $620 million to renewables, but the actual appropriation in Fiscal Year 2001 totaled only $1.7 billion instead of $2.2, of which $600 million was for efficiency and $375 million for renewables. These shortfalls are unfortunate.
I hope that the arguments presented here today will encourage this Committee to work with the Bush Administration to provide very substantial increases in these appropriations for Fiscal Year 2002. The amounts of money involved are modest. The entire energy supply and energy efficiency R&D budget, recommended by PCAST for Fiscal Year 2002, could be funded with about 2 cents per gallon out of the Federal gasoline tax and the returns to the public welfare would be very large. Thank you very much.
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[The prepared statement of Dr. Holdren follows:]
PREPARED STATEMENT OF JOHN P. HOLDREN
MR. CHAIRMAN, MEMBERS, LADIES AND GENTLEMEN: I am John P. Holdren, a professor at Harvard in both the Kennedy School of Government and the Department of Earth and Planetary Sciences. Since 1996 I have directed the Kennedy School's Program on Science, Technology, and Public Policy, and for 23 years before that I co-led the interdisciplinary graduate program in Energy and Resources at the University of California, Berkeley. Also germane to today's topic, I was a member of President Clinton's Committee of Advisors on Science and Technology (PCAST) and served as chairman of the 1997 PCAST study of ''Federal Energy Research and Development for the Challenges of the 21st Century'' and the 1999 PCAST study of ''Powerful Partnerships: The Federal Role in International Cooperation on Energy Research, Development, Demonstration, and Deployment''. A more complete biographical sketch is appended to this statement. The opinions I will offer here are my own and not necessarily those of any of the organizations with which I am associated. I very much appreciate the opportunity to testify this morning on this timely and important subject.
Introduction
The comprehensive review of U.S. federal energy research and development that I chaired for the White House in 1997 was carried out by a panel of 21 senior individuals from industry, academia, and public-interest organizations. In addition to members with experience and expertise across the full range of energy options—fossil fuels, nuclear fission and fusion, renewable energy sources, and increased end-use efficiency—it included others of senior research, management, and policy-advising experience outside the energy field (including a former chair of the Council of Economic Advisors and a former CEO of Hewlett-Packard), who held no prior brief for increasing federal energy research. The panel concluded (1, p ES–9) that
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Energy-technology improvements, achieved in the United States and then deployed here and elsewhere, could:
lower the monetary costs of supplying energy;
lower its effective costs still further by increasing the efficiency of its end uses;
increase the productivity of U.S. manufacturing;
increase U.S. exports of high-technology energy-supply and energy end-use products and know-how;
reduce over-dependence on oil imports here and in other countries, thus reducing the risk of oil-price shocks and alleviating a potential source of conflict;
diversify the domestic fuel-supply and electricity-supply portfolios to build resilience against the shocks and surprises that an uncertain future is likely to deliver;
reduce the emissions of air pollutants hazardous to human health and to ecosystems;
improve the safety and proliferation-resistance of nuclear-energy operations around the world;
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slow the build-up of heat-trapping gases in the global atmosphere; and
enhance the prospects for environmentally sustainable and politically stabilizing economic development in many of the world's potential trouble spots.
The panel noted that the public benefits of these outcomes, beyond the private benefits to energy firms that invest in achieving them, warrant public investments in energy-technology innovation supplementing the efforts of the private sector; and it argued that the federal government's investments in this category at the time of the review—FY 1997—were ''not commensurate in scope and scale with the energy challenges and opportunities that the twenty-first century will present'', taking into account ''the contributions to energy R&D that can reasonably be expected to be made by the private sector under market conditions similar to today's'' (1, p ES–1). The PCAST panel recommended, accordingly, a substantial strengthening of the federal energy R&D portfolio, ramping up DOE budget authority for R&D on end-use efficiency, fission, fossil, fusion, and renewable-energy options from a total of $1.3 billion in FY 1997 to $2.1 billion in FY 2003 (expressed in constant 1997 dollars). The following table shows the distribution of the proposed increases.
These budget recommendations—putting 85% of the real annual increment in FY 2003 compared to FY 1997 into efficiency and renewables—were unanimous, notwithstanding the diversity of energy (and nonenergy) backgrounds represented on the panel and notwithstanding the history of disagreements among the different energy constituencies about funding priorities. The unanimity on the panel emerged from detailed joint review and discussion of the content of the existing programs, the magnitudes of unaddressed needs and opportunities, the current and likely future role of private industry in each sector, and the size of the public benefits associated with the advances that R&D could bring about. Efficiency and renewables received the bulk of the increment because they scored high on potential public benefits and on R&D needs and opportunities unlikely to be fully addressed by the private sector.(see footnote 7)
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In what follows here, I will discuss, for both the efficiency and the renewables sectors, the opportunities as seen by the PCAST panel, and I will try to explain, in so doing, some of the reasons that PCAST appears to be more optimistic in its stance on renewables and efficiency than the Energy Information Administration is in the forecasts out to 2020 in the latest Annual Energy Outlook (4). At the end, I will offer some observations on measures, beyond R&D, that I believe would be warranted in pursuit of increased contributions from efficiency and renewables and the public benefits that such contributions would bring.
Efficiency
In the period from 1955 to 1970, the energy intensity of the U.S. economy stayed essentially constant, at about 19 quadrillion Btu per trillion 1996 dollars of GDP. From 1970 to 1980, a period marked by the Arab-OPEC-induced oil-price shocks in 1973–74 and 1979, the energy intensity of the economy fell at an average rate of 1.7% per year; and from 1980 to 1985 (at the beginning of which period the real world oil price was nearly six times its 1972 value) it fell 3.5% per year. In the decade from 1985 to 1995, the rate of decline of energy intensity in the United States slowed to about 1.0% per year. From 1995 to 2000, the rate of decline has been 2.7% per year.(see footnote 8)
The improvements since 1970 in the overall energy efficiency of the U.S. economy resulted from a complex and changing mix of increases in the efficiency of energy transport, oil refining, and electricity generation, transmission, and distribution; increases in the technical efficiency of energy end-use in space conditioning, household and commercial appliances, manufacturing, and the transport of passengers and freight; and a transition from a more-energy-intensive to a less-energy-intensive mix of productive activities in the economy.(see footnote 9) From the overall numbers alone, however, it is easy to calculate that if the U.S. economy of the year 2000 had been generated at the energy intensity of economic activity that prevailed in this country in the period from 1955 to 1970, the United States would have used 177 quadrillion Btu of primary energy in 2000 rather than the 98 quadrillion Btu actually used. The rate of reduction of energy intensity of the U.S. economy averaged over the whole 30 years from 1970 to 2000 was 2.0% per year.(see footnote 10) The annual energy savings attributable in the year 2000 to this decline in energy intensity compared to the 1955–1970 value (amounting to 177 – 98 = 79 quadrillion Btu per year) is more than two and a half times larger than the total increase in U.S. energy supply from all sources in the same period (which amounted to 98 – 68 = 30 quadrillion Btu per year).
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The fact that reductions in demand due to reduced energy intensity of economic activity were far larger between 1970 and the present than increases in energy supply goes a long way toward explaining the interest of the PCAST energy panel (and most other analysts of the energy situation) in determining and exploiting the potential for continuing improvements in energy efficiency in the decades ahead. The other pillars underpinning this interest are the economic and environmental attractions of energy-efficiency improvements, across a wide range of circumstances, compared with available means of increasing supply. On this point the 1997 PCAST report stated (1, p ES–15):
Increasing energy efficiency has an extraordinary payoff. It simultaneously saves billions of dollars, reduces oil imports and trade deficits, cuts local and regional air pollution, and cuts emissions of carbon dioxide.
The PCAST study set forth specific goals for a bolstered program of energy-efficiency R&D in the years immediately ahead as follows (1, p ES–15):
Buildings. To fund and carry-out research on equipment, materials, electronic and other related technologies and work in partnership with industry, universities, and state and local governments to enable by 2010: (1) the constructing of 1 million zero-net-energy buildings; and (2) the construction of all new buildings with an average 25 percent increase in energy efficiency as compared to a new building in 1996. Additional longer term research in advanced energy systems and components will enable all new construction to average 70 percent reductions and all renovations to average 50 percent reductions in greenhouse-gas emissions by 2030.
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Industry. By 2005, develop with industry a more than 40 percent efficient microturbine (40 to 300 kW), and introduce a 50 percent efficient microturbine by 2010. By 2005, develop with industry and commercially introduce advanced materials for combustion systems to reduce emissions of nitrogen oxides by 30 to 50 percent while increasing efficiency 5 to 10 percent. By 2010, achieve a more than one-fourth improvement in energy intensity of the major energy-consuming industries (forest products, steel, aluminum, metal casting, chemicals, petroluem refining, and glass) and by 2020 a 20 percent improvement in energy efficiency and emissions of the next generation of these industries.
Transportation. By 2004, develop with industry an 80-mile-per-gallon production prototype passenger car (existing goal of the Partnership for a New Generation of Vehicles C PNGV). By 2005, introduce a 10-mpg heavy truck (Classes 7 and 8) with ultra low emissions and the ability to use different fuels (existing goal); and achieve 13 mpg by 2010. By 2010, have a production prototype of a 100-mpg passenger car with zero equivalent emissions. By 2010, achieve at least a tripling in the fuel economy of Class 1–2 trucks, and double the fuel economy of Class 3–6 trucks.
The report concluded that these efforts ''complemented by sound policy, can help the country increase energy efficiency by a third or more in the next 15 to 20 years.''
An increase of one third over a 15-year period would constitute an average rate of improvement of 2.7% per year, equal to what the United States achieved from 1995 to 2000 and considerably better than the 2.0% per year 1970–2000 average. An increase of a third over a 20-year period would correspond exactly to 2.0% per year. For comparison, the ''reference'' scenario in the Energy Information Administration's 2001 Annual Energy Outlook entails an average rate of reduction of energy intensity between 2000 and 2020 of 1.6% per year, along with real economic growth averaging 3.0% per year (4, p 7).(see footnote 11) It is instructive to consider the difference between the EIA's ''reference'' value of a 1.6% per year decline in energy intensity compared to the lower of the PCAST figures, 2.0% per year (corresponding also to what was actually achieved between 1970 and 2000). When applied to the period 2000–2020 under the ''reference'' economic growth assumption of 3.0% (real) per year, the EIA rate of decline in energy intensity of 1.6% per year yields primary energy use of 129 quadrillion Btu in 2020; a 2.0% per year decline in energy intensity over this period yields primary energy use in 2020 of 119 quadrillion Btu, cutting 10 quadrillion Btu off the increase. If a 2.4% per year decline in energy intensity could be achieved in this period (still not as high as the 2.7% per year actually achieved for 1995–2000), primary energy use in 2020 would be 110 quadrillion Btu, 19 quadrillion Btu below the EIA ''reference'' case.
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Why was PCAST more optimistic about energy-efficiency potential than the most recent EIA Annual Energy Outlook appears to be? It is important to understand, first of all, that neither of these studies is making unconditional predictions. Their scenarios depend on assumptions, variously explicit and implicit, about a variety of factors that will influence rates of economic growth, rates of technological innovation, and the rates of application of available energy-efficiency technologies. The EIA reference case assumes that the world oil price in 2020 will be about $22 per barrel—compared to $17 per barrel in 1999 but $27 per barrel in 2000 (all of these prices in 1999 dollars)—under world oil production of 117 million barrels per day (compared to 76 million barrels per day in 1999) and an OPEC share of this production reaching 49% (up from 40% in 1999). The highest world oil price in 2020 in any of the EIA scenarios is $28 per barrel (1999 dollars). As best I can tell, moreover, the EIA scenarios do not account for the possibility of policies much more aggressive than today's for promoting energy end-use efficiency, nor for any ''future legislative or regulatory actions that might be taken to reduce carbon dioxide emissions'' (5, p 6).
The PCAST study did not develop explicit scenarios about future energy prices and policies, but I believe it fair to say that most if not all of the PCAST panelists would have considered the range of possibilities for the world oil price in 2020 to extend considerably above the figures considered by the EIA. The panel also concluded that ''there is a significant possibility that governments will decide, in light of the perceived risks of greenhouse-gas-induced climate change and the perceived benefits of a mixed prevention/adaptation strategy, that emissions of greenhouse gases from energy systems should be reduced substantially and soon'' (1, p ES–10). And its assessment of what could be achieved in the way of energy-efficiency improvements over the next two to three decades was conditioned on the full implementation of its recommendations for increased federal R&D in this area, as outlined above. The increases in DOE's energy-end-use-efficiency R&D budgets actually achieved since the publication of the PCAST report have fallen considerably below what was recommended, as well be seen in a moment.
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Renewables
What have been the changes in the U.S. energy-supply mix and what has been the role of renewables in this evolving picture? The changes in U.S. primary energy supply from 1970 to 2000 are summarized in Table 2. Table 3 shows, in a similar format, the changes in the electricity-generation sector in the past 10 years. Renewable energy contributed 6.0% of U.S. primary energy in 1970, rising to 7.3% of a larger total in 2000. The renewable share of U.S. electricity generation was 11.6% in 1970, falling to 9.6% of a larger total in 2000. The contribution of non-hydro renewables to electricity generation was 2.0% in 1990, rising to 2.5% in 2000. Clearly, the interest of PCAST and other groups in the prospects for a large contribution from renewables over the next few decades is based—in contrast to the case of energy efficiency—more on hopes for the future than on the experience of the recent past.
The PCAST study noted that the principal obstacle to more substantial deployment of renewable energy options has been the high costs of the energy delivered by these technologies. It found grounds for optimism in the sharp declines in these costs, for a number of the renewable options, over the preceding two decades;(see footnote 12) and it concluded that continued and expanded investments in public- and private-sector R&D on renewables—together with measures to move these technologies along the learning curve through increased purchases under, e.g., renewables portfolios standards—could allow renewable energy technologies to ''become major contributors to U.S. and global energy needs over the next several decades'' (1, p ES–22). The focuses and goals of the expanded Federal effort in R&D on renewables recommended by PCAST were described in its report as follows (1, pp ES–22/23):
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Wind. Reduce by 2005 wind electricity costs to half of today's costs, so that wind power can be widely competitive with fossil-fuel-based electricity in a restructured electric industry, through R&D on a variety of advanced wind turbine concepts and manufacturing technologies.
Photovoltaics (PV): Pursue R&D that would lead to PV systems prices falling from the present price of $6,000/kW to $3,000/kW in 5 years, to $1500/kW by 2010, and to $1,000/kW by 2020. R&D activities should include assisting industry in developing manufacturing technologies, giving greater attention to balance of system issues, and expanding fundamental research on advanced materials.
Solar Thermal Electric Systems. Strengthen ongoing R&D for parabolic dish and heliostat/central receiver technology with high temperature thermal storage, and develop high temperature receivers combined with gas-turbine based power cycles; goals should be to make solar-only power (including baseload solar power) widely competitive with fossil fuel power by 2015.
Biopower. Enable commercialization, within ten years, of advanced energy-efficient power-generating technologies that employ gas turbines and fuel cells integrated with biomass gasifiers, building on past and ongoing R&D for coal in such configurations, and exploiting the advantages of biomass over coal as a feedstock for gasification. These technologies could be widely competitive in many developing country markets and in U.S. markets that use biomass residues or use energy crops in systems that derive coproducts from biomass.
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Geothermal Energy. Continue work on hydrothermal systems, and reactivate R&D on advanced concepts, giving top priority to high-grade hot dry-rock geothermal; this technology offers the long-term potential, with advanced drilling and reservoir exploitation technology, of providing heat and baseload electricity in most areas.
Biofuels. Accelerate core R&D on advanced enzymatic hydrolysis technology for making ethanol from cellulosic feedstocks, with the goal that between 2010 and 2015 ethanol produced from energy crops would be fully competitive with gasoline as a neat fuel, in either internal combustion engine or fuel cell vehicles; coordinate this development with the biopower program so as to co-optimize the production of ethanol from the carbohydrate fractions of the biomass and electricity from the lignin using advanced biopower technology.
Hydrogen. Carry out R&D on hydrogen using and producing technologies; coordinate hydrogen-using technology development with proton-exchange-membrane fuel-cell vehicle development activities in the Departments Energy Efficiency program. Give priority in hydrogen-production R&D to co-optimizing the production of hydrogen from fossil fuels and sequestration of the CO separated out during the production process, in collaboration with the Fossil Energy program.
Hydropower. To sustain and increase over 92,000 MWe of hydro capacity, additional R&D is needed to provide a new generation of turbine technologies that are less damaging to fish and aquatic ecosystems. By deploying such technologies at existing dams and in new low-head, run-of-river applications, as much as an additional 50,000 MWe could be possible by 2030.
The largest hope for near-term growth in the contribution of renewables to the nonelectric sector rests on liquid fuels from biomass. The PCAST study estimated that an aggressive program to produce ethanol from cellulosic biomass could be displacing 2.5 million barrels per day of oil by 2030 and over 3 million barrels per day in 2035. The PCAST report also identified other biofuels options for this time period without attempting to estimate their potential quantitatively. This indicates that the 2.5–3 million barrel per day range by 2030–35 is not an upper limit. The EIA scenarios, by contrast, only show about 125,000 barrels per day of motor-fuel displacement by ethanol in 2020. As in the case of the EIA's relatively modest expectations for energy-efficiency increases over this period, this minimal result for biomass ethanol can be attributed above all to the EIA's assumptions of (a) moderate world oil prices and (b) the absence of aggressive policies to reduce either oil-import dependence or greenhouse-gas emissions.
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The Clinton Administration's initiative on ''Promoting Bio-based Products and Technologies'', announced in August 1999, posed a target of tripling use of energy and products from biomass in the United States by 2010. (This would include the use of biomass for electricity generation and cogeneration, as well as production of high-value chemicals.) Inasmuch as biomass energy use in this country in 1998 was about 3 quadrillion Btu per year, the stated goal implies an addition of 6 quadrillion Btu per year by 2010, equivalent in energy content to almost 3 million barrels per day of crude oil.
In the electricity-generating sector, the EIA's reference scenario for 2020 has coal-fired electricity generation increasing to about 2300 billion kWh from its year—2000 value of 1950 billion kWh, while natural-gas-fired generation increases to nearly 1600 billion kWh from its year—2000 value of 620 billion kWh. Nuclear energy declines to about 570 billion kWh from its year—2000 value of 760 billion kWh, because of retirements of some of the existing nuclear power plants in the absence of replacement by new ones.(see footnote 13) renewable-based electricity generation in aggregate stays roughly constant. The contribution of conventional hydropower stays roughly constant at 300 billion kWh per year, and the nonhydro renewables increase from about 95 billion kWh in 2000 to about 145 billion kWh in 2020. A ''high renewables'' case presented in the EIA study has the nonhydro renewables contribution reaching about 240 billion kWh in 2020 (still barely over 10 percent of coal's contribution in the ''reference'' case), with biomass providing about 110 billion kWh of this, and wind and geothermal about 60 billion kWh each.
Again, these EIA estimates of renewable-electric potential are conservative, in my view, because the EIA study did not consider the possibility of world oil-price increases above $28 per barrel, or natural-gas prices above about $3.70 per million Btu, or minemouth coal prices above about $13 per short ton (all prices in 1999 dollars), or the possibility of major policy changes that would have the effect of sharply increasing the incentives for expanding the use of non-fossil-fuel options. The 1997 PCAST study made some estimates of what might be achievable from renewable-electric options under prices or policies that encouraged these options very strongly, and the resulting figures were far higher than those in the EIA scenario: they included as much as 1100 billion kWh by 2025 from wind systems with storage technologies, similar quantities by 2035 from photovoltaic and solar-thermal-electric systems with storage, 800 TWh by 2035 from biopower, and 1500 TWh by 2050 from hot-dry-rock geothermal. These are described as possibilities, not predictions, but the figures are indicative of very large potential.
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Concluding Observations
The overall technical potential to reduce U.S. oil-import dependence and greenhouse-gas emissions through the use of a wide range of currently available and still to be fully developed energy-efficiency and renewable-energy options is clearly very large.(see footnote 14) The question is how much of this technical potential will be realized in practice, by when. The key to expanded use of the currently available options is incentives. The keys to achieving the potential of the emerging options are, first, research, development, and demonstration; and, second, incentives to help bring about the commercialization and widespread deployment of the innovations that result from research, development, and demonstration.
R&D should be the easiest part of this equation with respect to gaining approval and finding the money, inasmuch as it is so inexpensive. As already noted, total U.S. federal spending in FY 1997 for energy-supply and energy-efficiency R&D totaled only about $1.3 billion, an amount that could be raised by a tax of 1.3 cents per gallon on U.S. gasoline sales. Yet even the modest proposals of PCAST to raise this amount by a bit over 50 percent, in real terms, between FY 1999 and FY 2003 have met with considerably less than total success. The fate of the PCAST recommendations, up until now, is summarized in Table 4 (where the figures are in as-spent rather than constant dollars, for ease of comparison with government budget documents). For the most recent year, the efficiency appropriation is at a respectable 78% of the PCAST recommendation, but the renewables appropriation is only at 60% of the recommended level.
Putting in place an array of price and non-price incentives and other policies that will encourage deployment of energy-efficiency, renewable-energy, and other advanced energy technologies in proportion to their public benefits will be even more difficult. We ought to have, in my view: tighter Corporate Average Fuel Economy standards (or their equivalent in voluntary fuel-economy agreements with auto manufacturers); expanded use of renewable-energy portfolio standards and production tax credits; energy-efficiency standards and labeling programs for energy-using equipment in residential and commercial buildings; and much more. Perhaps most importantly, in my view, the incentives relating to our energy deployments are not likely to be ''right'' until we bite the bullet and implement either a carbon tax or its equivalent in the form of a tradeable carbon-emissions permit system. This will not be politically easy, but growing recognition of the climate-change perils of ''business as usual'' expansion of the use of conventional fossil-fuel technologies, by the United States and by others, will eventually compel taking this step. And we would be better off to take it sooner, rather than later.
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I thank the Committee for the opportunity to put these views before you.
References
(1) President's Committee of Advisors on Science and Technology, Energy Research and Development Panel. Federal Energy Research and Development for the Challenges of the 21st Century. Washington, DC: Government Printing Office. November 1997. http://www.ostp.gov/Energy/index.html.
(2) John P. Holdren. ''U.S. Vulnerability to Oil-price Shocks And Supply Constrictions. . .And How to Reduce It.'' Committee on Governmental Affairs, United States Senate, Oversight Hearings on Recent Oil-Price Increases. March 24, 2000. http://www.senate.gov/?gov—affairs/032400—holdren.htm.
(3) John P. Holdren. ''Improving U.S. Energy Security and Reducing Greenhouse-Gas Emissions: What Role for Nuclear Energy?'' Hearings by the Subcommittee on Energy and Environment, Committee on Science, U.S. House of Representatives. July 25, 2000. http://ksgnotes1.harvard.edu/BCSIA/Library.nsf/pubs/energysecurity
(4) U.S. Department of Energy, Energy Information Administration. Annual Energy Outlook 2001. Washington, DC: Government Printing Office. 2001.
(5) U.S. Department of Energy, Energy Information Administration. Monthly Energy Review. Washington, DC: Government Printing Office. January 2001.
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(6) International Energy Agency. Indicators of Energy Use and Efficiency. Paris: OECD/IEA. 1997.
(7) Joel Darmstadter. The Role of Renewable Resources in U.S. Electricity Generation—Experience and Prospects. Climate Change Issue Brief No. 24. Washington, DC: Resources for the Future. September 2000.
(8) DOE Interlaboratory Working Group on Energy-Efficient and Clean Energy Technologies. Scenarios for a Clean Energy Future. Report ORNL/CON–476, LBNL–44029. Springfield, VA: National Technical Information Service. November 2000.
(9) United Nations Development Programme, United Nations Department of Economic and Social Affairs, and the World Energy Council. Energy and the Challenge of Sustainability. New York: UN Development Programme. September 2000.
Biography for John P. Holdren
John P. Holdren is the Teresa and John Heinz Professor of Environmental Policy and Director of the Program on Science, Technology, and Public Policy in the John F. Kennedy School of Government, and Professor of Environmental Science and Public Policy in the Department of Earth and Planetary Sciences, at Harvard University. He is also a member of the Board of Tutors for Harvard's undergraduate major in Environmental Science and Public Policy; Distinguished Visiting Scientist and Vice Chair of the Board of Trustees at the Woods Hole Research Center; and Professor Emeritus of Energy and Resources at the University of California, Berkeley (where he was co-founder in 1973 of the campus-wide, interdisciplinary, graduate-degree program in Energy and Resources in which he served variously as Vice Chair, Chair, and Chair of Graduate Advisors until 1996).
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He is Chair of the Committee on International Security and Arms Control of the National Academy of Sciences, a member of the Board of the John D. and Catherine T. MacArthur Foundation, and was a member from 1994 to 2001 of President Clinton's Committee of Advisors on Science and Technology (PCAST). He chaired PCAST panels on protection of nuclear-bomb-materials (1995), the U.S. fusion-energy R&D program (1995), U.S. energy R&D strategy (1997), and international cooperation on energy (1999); and in 1996–7 he co-chaired with E. Velikhov the U.S.-Russian Independent Scientific Commission on Plutonium Disposition (reporting to Presidents Clinton and Yeltsin). He also chairs National Academy panels on the spent-fuel standard for plutonium disposition, on the Comprehensive Test Ban Treaty, and on U.S.-India energy cooperation.
He is the author of about 300 articles and reports on plasma physics, fusion energy technology, energy and resource options in industrial and developing countries, global environmental problems, impacts of population growth, and international security and arms control, and he has co-authored and co-edited fifteen books on these topics—including Energy (1971), Human Ecology (1973), Ecoscience (1977), Energy in Transition (1980), Earth and the Human Future (1986), Strategic Defences and the Future of the Arms Race (1987), Building Global Security Through Cooperation (1990), Management and Disposition of Excess Weapons Plutonium (2 vols., 1994 & 1995), The Future of U.S. Nuclear Weapons Policy (1997), and Conversion of Military R&D (1998).
Holdren earned bachelors and masters degrees from M.I.T. in aeronautics and astronautics (1965 and 1966) and the Ph.D. from Stanford University in aeronautics/astronautics and theoretical plasma physics (1970). Before joining the UC Berkeley faculty in 1973, he worked on satellite and missile technology at the Lockheed Corporation, as a plasma physicist at the Lawrence Livermore Laboratory, and as a Senior Research Fellow in the Environmental Quality Laboratory and the Division of Humanities and Social Sciences at the California Institute of Technology.
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He is a member of the National Academy of Sciences and the National Academy of Engineering, and a Fellow of the American Academy of Arts and Sciences, the American Physical Society, the American Association for the Advancement of Science, and the California Academy of Sciences. In 1981 he received one of the first MacArthur Foundation Prize Fellowships; in 1993 he shared the Volvo Environment Prize with Paul Ehrlich; and in 1994 he received the Forum Award of the American Physical Society (''for promoting public understanding of the relation of physics to society''). In December 1995 he delivered the Nobel Peace Prize acceptance lecture on behalf of the Pugwash Conferences on Science and World Affairs, which he served as Chair of the Executive Committee from 1987 to 1997. He received the 1999 Kaul Foundation Award in Science and Environmental Policy, the 2000 Tyler Prize for Environmental Achievement, and the 2001 Heinz Prize in Public Policy.
Dr. Holdren was born in Sewickley, Pennsylvania, and grew up in San Mateo, California. He is married to Dr. Cheryl E. Holdren, a biologist. John and Cheryl live in Falmouth and Cambridge.
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Chairman BOEHLERT. Thank you very much, Dr. Holdren. Mr. Darmstadter.
STATEMENT OF JOEL DARMSTADTER, SENIOR FELLOW, ENERGY AND NATURAL RESOURCES DIVISION, RESOURCES FOR THE FUTURE
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Mr. DARMSTADTER. Mr. Chairman, and Members of the Committee, I appreciate the invitation, of course, to appear at this important hearing. I guess one of the virtues, or at least consequences, of being the last on the panel is that certain of the points in my prepared testimony have been made by some of my colleagues around the table. So I suppose that means that I have no excuse for breaching the time constraint that you have lavished us with. My presentation deals with the use of renewable energy in electricity generation, a key economic activity for which an expanded role for renewables is thought to have particular promise.
Specifically, I want to address three questions. First, what is the emerging and prospective contribution of renewables to electric power production? Secondly, to what extent has that contribution lived up to expectations? And, thirdly, what policy initiatives could promote greater penetration of renewables in electric power production? While my remarks are based on research conducted at Resources for the Future, RFF for short, the views expressed here are entirely my own.
Turning to the current and prospective status of renewables, Table 1, appended to my prepared text, makes it clear, as Mary Hutzler has also indicated earlier, that the relative magnitude of renewables is very small economy-wide and even more negligible in electric power production alone. Nor is this picture likely to change appreciably over the next several decades, according to the most recent analysis of DOE's, Energy Information Administration, EIA, although, as you heard a moment ago, Dr. Holdren challenges the basis for some of those projections. Under EIA's most optimistic conditions, renewable capacity would not exceed around 4 percent of the Nation's aggregate electric-generating capacity by the year 2020.
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A point that I emphasize in my prepared remarks, and perhaps it is an obvious one, is that any such conjecture must be cast within an economic setting that embraces a range of competing technologies and resources, both renewable and nonrenewable.
Next, let me recap the emerging performance of renewables compared to how they were expected to do some 25 years ago. Here the findings of a study at RFF seem quite striking. In terms of real cost, that is cents per kilowatt hour, there has, by and large, been a decline even greater than the proactive renewables constituency of the 1970's anticipated, but, at the same time, market share remains inconsequential, as we have noted.
There isn't much of a paradox here. Through technical improvements, fuel cost declines, although you wouldn't think so this year, and a less inhibiting regulatory environment, conventionally powered electric generation has succeeded in retaining a pretty firm competitive edge. And this is captured by the fact that in 1984, EIA projected nationwide generating costs to increase from about 6 cents a kilowatt hour in 1983 to about 6b cents per kilowatt hour in 1995, all expressed in constant '95 prices. But, in fact, they declined to 3b cents per kilowatt hour, thereby wiping out the concurrent, but still insufficient, decline in wind power costs. Indeed, the cost per kWh, a disadvantage of renewables, may even understate their economic challenge. Thus, wind and solar being weather-dependent, cannot always be dispatched to meet the necessary load.
Still, the renewable experience that I have, you know, summarized here, can't be termed as bleak. The cost reductions, which I have mentioned, which occurred without the benefit of large private investments and without significant output volume that would aid sort of a learning curve experience, they are a genuine accomplishment, which can represent a springboard for future progress.
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The reductions, moreover, are at least partial testimony to the efficacy of public support for renewable energy. And on that public policy issue, the third of my principle themes, my prepared text reviews a number of past and existing policies, investment and production tax credits, R&D support, renewable energy has received in the electric power sector through these initiatives. And if I judge that record accurately, that policy support has not been negligible and it remains nontrivial today.
Whether or not the extent of some of those measures are justified by the environmental virtues of renewables compared to fossil energy, the fact is, that, for example, with respect to wind power, the tax advantages were not large enough to overcome the cost disadvantages of wind power. There are some very vexing issues here. If it is deemed unrealistic to tighten environmental standards on fossil energy, then the alternative of subsidizing renewables for their benign environmental properties also raises concern. For it is an approach that encourages excessive electricity consumption from all sources by underpricing electricity and it encourages a manipulation of damage estimates by different interest groups in support of renewable or of conventional systems.
Let me sum up with the following six observations. Progress on the part of conventional energy systems seems certain to parallel likely developments in renewables. Both could, and probably should, be significant factors in the wide-ranging energy portfolio that we all agree is in the Nation's interest. Third, although the marketplace remains the ultimate arbiter of successful outcomes, the complementary role of government, in representing the broad public interest, is scarcely trivial. Fourth, prudently targeted programs in long-term R&D, with particular stress on the basis research part of that duality, would seem to be particularly on target.
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In such policy initiatives, emphasis should, as far as possible, be put on economically and socially efficient resource use and the overcoming of real market failures, not just market barriers, stemming from high costs. In voicing its rationale for substantial Federal R&D support for renewable energy, the 1997 report by PCAST, the President's Committee of Advisors on Science and Technology, headed by my colleague, Dr. Holdren—that study observed that opportunities exist for important advances in wind-electric systems, photovoltaics, solar-thermal energy systems, biomass-energy technologies for fuel and electricity, geothermal energy, and a range of hydrogen-producing and hydrogen-using technologies, including fuel cells. The increased support for these renewable energy technologies would focus on areas where the expected short-term returns to industry are insufficient to stimulate as much R&D as the public benefits warrant.
And that judgment, I believe, holds true today and deserves the continuing and earnest consideration of Congress. Thank you, Mr. Chairman, and, Members of the Committee.
[The prepared statement of Mr. Darmstadter follows:]
PREPARED STATEMENT OF JOEL DARMSTADTER, SENIOR FELLOW, ENERGY AND NATURAL RESOURCES DIVISION, RESOURCES FOR THE FUTURE(see footnote 15)
THE ROLE OF RENEWABLE RESOURCES IN U.S. ELECTRICITY GENERATION: EXPERIENCE AND PROSPECTS
Interest in renewable energy arises from several concerns. Many renewable energy technologies impose less burden on the environment than emissions from fossil fuel combustion. Persons concerned with long-term scarcity of nonrenewable energy sources like oil and natural gas also see in renewables a means of mitigating that eventuality—though there is more controversy on this point.
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In this presentation, I deal with the use of renewable energy in the country's electric power generation—a key economic activity for which an expanded role for renewables is thought to have particular promise. My focus is on renewables other than hydroelectric power, which is currently the dominant renewable resource, accounting for roughly 10 percent of the nation's electricity generation. As Congress has recognized, hydro is a mature, low-cost technology that raises policy issues different from those raised by other renewable energy sources. Those other sources involve emerging technologies that face barriers which are primarily economic in nature. And large-scale nonelectric applications of renewables are potentially important but more speculative at this time.
I would like to address three questions: (1) What is the emerging and prospective contribution of renewables to electric power production? (2) To what extent has that contribution lived up to expectations? (3) What policy initiatives could promote greater penetration of renewables in electric power generation? While my remarks are based on research conducted at Resources for the Future, the views expressed are entirely my own.
Current and Prospective Status of Renewables
Table 1 provides a broad perspective on how renewables fit into the recent fuel and power picture in the United States. It is immediately apparent that the relative magnitude of renewable energy is very small, economywide, and even more negligible in electric power generation alone. (Outside the electric power sector, the balance of renewables use is concentrated in industrial biomass utilization—much of it in the form of wastes in wood processing and in pulp and paper mills.) Nor is this picture likely to change appreciably over the next several decades, at least if the most recent analysis of the U.S. Department of Energy's Energy Information Administration (EIA) is considered. In its Annual Energy Outlook, released in December 2000, EIA projected that the use of nonhydro renewable energy resource (essentially wind, solar, geothermal, and biomass) would increase by approximately 1% annually to the year 2020 in the ''reference'' case—an exceedingly low rate of growth, considering the low absolute base from which this growth is measured (U.S. DOE 2000). In an alternative ''high renewables'' case using assumptions embodying a less probable but still arguable course of events, EIA projects that nonhydro renewables would grow at about 6.5% annually, with two-thirds of the increment due to expansion of wind power capacity. Still, installed renewable capacity would not exceed 4% of the nation's aggregate electric generating capacity. Moreover, the more one contemplates plausible alternative scenarios for the future of renewable energy, the more one needs to be sure that such conjecture is rooted within an economic setting that comprehends a range of competing technologies and resources, both renewable and nonrenewable. It is in that broader perspective that one's judgment about the prospective role of renewables must be circumspect. I will touch on this caveat again a bit further on.
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A Scorecard on the Performance of Renewables in Recent Years
Despite the optimism regarding the emergence of renewables dating from the energy market upheavals of the 1970s, and notwithstanding considerable policy support over the years (as described below), the reality is sobering: nearly 30 years later, renewable energy systems have not succeeded in emerging as a significant factor in the country's electricity infrastructure. Does this mean that renewable technologies have been such a great disappointment that continuing public policy support is misguided?
As a basis for probing that elusive and surprisingly complex question, several of my colleagues at Resources for the Future and I recently analyzed what went right and what went wrong in the evolution of renewable energy inputs into U.S. electric power generation over the past quarter-century (McVeigh et al. 1999). We evaluated five technologies used to generate electricity: solar photovoltaics, solar thermal, geothermal, wind, and biomass. A principal aim of our study was to see how the actual performance of renewable energy technologies in the 1990s compared with specific goals of cost reduction and market expansion of earlier projections. Many observers (both independent analysts and unabashedly proactive advocates) in the 1970s and 1980s had judged these goals to be attainable with the help of accommodating public policies.
In general, market penetration has been markedly lower than projections from the 1970s and 1980s. However, the cost of renewable technologies has also been lower than projected, even taking into account the seemingly optimistic forecasts of renewable energy advocates. Whereas 1980s wind power projections of generation costs a decade hence assumed roughly a 64% decline, to reach a level of 5.7 cents per kilowatt hour (kwh) by 1995, costs actually declined by an estimated 67% to a level of approximately 5.2 cents/kwh. (Here and in the paragraphs that follow, costs are expressed in constant 1995 prices.) By contrast, although the volume of wind-generated electricity did show steadily rising absolute numbers in the course of the 1990s (from an almost zero level in the 1980s), it remained an inconsequential part of the nation's electricity system. Only at the end of the 1990s and in 2000 did we see signs of some meaningful momentum in wind power capacity expansion.
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One can argue about which of the two measures (market penetration or cost) has greater relevance in evaluating the performance of renewable energy resource programs. To the extent that public sector support was particularly driven by the need for and pursuit of cost reductions, the cost outcome seemed to us particularly important. Indeed, the cost outcome seems quite remarkable, because renewable technologies have not seen the large-scale investment and volume of output that can contribute to significant technological development or economies of scale in production, as many people had anticipated when forming their cost projections. Evidently, the characteristics of several renewable energy systems—high capital intensity, uncertainty about interconnections with the electric grid, variability in availability (the intermittency of wind and sunlight)—that have frequently been viewed as major barriers to economic viability have not precluded significant reductions in the reported cost of producing power. It is likely that the rapid deployment of renewable technologies in areas outside the United States has supported continued technological improvements over the last decade.
The failure of renewables to emerge more prominently in the nation's energy portfolio is intimately linked to the concurrent decline in the cost of conventional generation. Consider that in 1984, the Energy Information Administration projected nationwide electric generation costs to rise from 6.1 cents/kwh in 1983 to 6.4 cents/kwh in 1995; in fact, they declined to 3.6 cents/kwh. That 41% decline, though less in percentage terms than what was achieved by wind power, nonetheless preserved a sufficiently large margin of advantage for conventional over wind power as to foreclose more than a minute niche for the latter. Indeed, because wind and solar generation are dependent on the weather and cannot always be dispatched to meet load, cost-per-kwh comparisons may understate the economic challenge faced by these technologies.
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Several factors have contributed to keeping down the cost of generation from conventional technologies. They include, for example, the emergence of more competitive energy supply markets, productivity improvements in oil and gas exploration and coal production, the successful deregulation of railroads (a major factor in reducing the cost of coal shipping), and technological progress in conventional generation itself (such as gas-fired combined-cycle power plant systems). Notwithstanding the current problems facing California, the ongoing restructuring of the electricity industry also has put downward pressure on cost.
Although changes in the regulation, technology, and market structure of fossil fuels have thus been mostly beneficial for electricity consumers, they have hindered the development of technologies for renewable energy resources, which have had to compete in this changing environment. In other words, supporters of renewables have had to fix their sights on what has so far been a steadily receding target. Nor is that competitive tension likely to abate in the years ahead. Future gas prices will play a critical role in setting the bar for renewables: unlike the situation for other generation technologies, where capital costs are the dominant component in levelized costs of generation, fuel costs drive the cost of power from gas-fired units. With favorable gas price developments, the combined-cycle technology I have mentioned apparently has a good chance of embodying improved technology that could drive real generating costs down by as much as 25% over prevailing levels during the next two decades.
Since discussions of renewable energy frequently refer to experience elsewhere in the world, it may be worth mentioning briefly that few other countries have so far fared much better than the United States in the extent of electricity market penetration by renewables (IEA 1999). A few heavily forested places (for example, Austria and the Nordic countries) have had some success exploiting fuelwood resources—aided, in some cases, by extremely favorable tax treatment and other subsidies. Denmark is developing a notable presence in wind energy. But, as in the United States, competition has not been kind to investment in renewables projects. And not surprisingly, the competitive realities and policy dilemmas that face the United States are precisely those that arise when impediments to renewables are considered elsewhere.
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Policy Choices
Although some might question their adequacy, numerous public policies have been introduced in support of renewable energy over the past quarter-century. Rather than providing an exhaustive account of these measures, I will mention and illustrate four principal ways in which the federal government has sought, or is seeking, to promote the development and use of renewables: various kinds of research and development (R&D) support, the role of the 1978 Public Utility Regulatory Policies Act, the use of other financial incentives, and the prospective role of a ''renewable portfolio standard.'' (A 1998 report from the Energy Information Administration provides additional information about renewables programs [U.S. DOE 1998].) Although federal policies have dominated, states have introduced some significant initiatives as well. In the discussion that follows, I will not try to independently assess how these policies have shaped energy markets. But I will add some brief remarks regarding alternative approaches designed to give renewables a fairer shake in the marketplace.
R&D Support
For various reasons—excessive risks, long time horizons, limits to capturing the returns from successful outcomes, nonmarketability of external benefits—industry is commonly believed to underinvest in basic science and technology. Therefore, a federal role to augment private efforts in advancing basic science and technology is widely accepted. In the case of renewable energy, that role largely involves R&D activities conducted at or supported by the U.S. Department of Energy (DOE) and its national laboratories, such as the National Renewable Energy Laboratory (NREL) in Colorado.
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The U.S. General Accounting Office (GAO) reported in 1999 that for the 20-year period 1978 to 1998, $10.3 billion (in current prices) was thus disbursed (U.S. GAO 1999). Solar photovoltaic technology was the leading beneficiary of this program. Over the 20-year period, photovoltaics received about $2 billion and wind power $1 billion. During fiscal year 1999, the respective funding was $72 million and $35 million. In both cases, GAO sees program objectives having gradually shifted away from fundamental research to enhanced market opportunities, both domestic and international. As just one example of a recent wind power initiative, DOE's Turbine Verification Program has provided for cost sharing with utilities to facilitate the development and deployment of wind turbines.
In critical comments on the GAO analysis (included in the GAO report), DOE questioned GAO's characterization of a programmatic shift emphasizing market potentials. Whether GAO or DOE is more on the mark in this dispute, a chastening point does perhaps emerge. Programs whose start-up rationale puts major stress on precommercialization challenges—basic science, research, and early developmental barriers—may, subtly or not, slide over into terrain dominated by sales prospects. The labels ''research'' and ''development'' are broad enough to allow such slippage.
PURPA
The federal Public Utility Regulatory Policies Act (PURPA) of 1978 was a major instrument that encouraged a shift from conventional energy to renewables. Under this statute, utilities were mandated to purchase power from nonutility producers at prices that were supposed to represent the ''avoided cost'' that utilities would otherwise have had to pay to produce power using conventional resources, such as petroleum; these avoided-cost prices were calculated by regulators within each state. However, numerous beneficiaries of this policy lacked technical expertise in alternative energy production (renewables and certain other innovative categories), and avoided-cost projections in some states overshot actual avoided costs by a wide margin, resulting in significant costs to consumers as utilities passed through the costs of PURPA power. Although PURPA demonstrated that nonutility generation could be accommodated in electricity systems, it is widely judged to have fallen far short of its objectives in promoting real market penetration by renewables.
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Other Financial Assistance
Overlapping with PURPA, and continuing to the present, the federal government has provided significant direct financial benefits to renewable energy producers. Both solar photovoltaics and wind power benefit from investment tax credits, and under the Tax Reform Act of 1986, wind power was accorded a depreciation life of five years—much shorter than the depreciation life of conventional power supply investments. One provision of the Energy Policy Act of 1992 (extended in 1999) provided an inflation-adjusted 1.5 cents/kwh production tax credit for generation from wind and closed-loop biomass plants (by 1999 the credit had increased to 1.7 cents/kwh). Until very recently, these tax advantages were not large enough to overcome the cost disadvantages of wind power.
Renewable Portfolio Standard
A policy position developed by the Clinton administration during 1999 embodies provisions for a so-called renewable portfolio standard (RPS; see U.S. DOE 1999). Its goal is to ensure that some minimum percentage of generation originates with nonhydro renewable energy sources. An RPS target for 2010 called for 7.5% of electricity sales to be based on renewable energy resources. (Separately, bills introduced in the last Congress call for RPS shares ranging from 4% to 20%.) If the RPS were implemented as conceived, the means envisaged for meeting the 7.5% target represent a much more economically efficient route to stimulating renewables-based electricity than PURPA does. That is because RPS incorporates a tradable permit system that encourages renewable power production to take place in the most cost-effective location. In addition, it would impose a ceiling on the increment to overall electric power costs that result from the mandate. The RPS proposed by the Clinton administration would also provide credit for the use of biomass ''cofiring'' at existing coal plants, which does not qualify for the production tax credit. Cofiring could use existing biomass from the agricultural and forest product sectors and also create opportunities for the cultivation of biomass energy crops, overcoming the ''chicken and egg'' problem that arises when new fuels and new plants must be added simultaneously.
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Electricity restructuring programs at the state level have also incorporated some elements to encourage renewables. Competition itself creates an opportunity to market ''green power'' to consumers who are willing to pay a premium to ensure the presence of renewables in their electricity mix. Some states have provided additional subsidies to promote renewables, while others have established their own RPS requirements, generally at levels less ambitious than those proposed by the Clinton administration. It is too early to judge the success of such efforts. One element of uncertainty is that even if these measures result in new investment in renewables generation, it is possible that existing facilities may be prematurely retired because of competitive pressures (Palmer 1999).
Nonrenewables versus Renewables: The ''Level Playing Field'' Issue
The legitimacy of the kinds of policy support I have cited is closely related to the question whether renewables deserve to command a premium price for their favorable environmental properties. That is, with minimal pollutant emissions compared with fossil fuel combustion, is it not entirely proper that they be credited—via a public subsidy or similar financial benefits—for their nonpolluting character? The question is a fair one, but it raises several complicating points. First, to the extent that fossil fuel combustion imposes costs on society not fully governed by the Clean Air Act or other measures, the appropriate course would be to tighten such standards to further reduce these so-called external costs. That, of course, is more of a conceptual than a pragmatic answer, so the next question relates to what might be the second-best approach of rewarding renewables for social damages averted through their use.
The first difficulty here is the determination of the dollar value of such damages, an issue that is complicated and controversial. We can illustrate the problem by referring to estimates from a study conducted several years ago by researchers at Resources for the Future to monetize environmental damage throughout the entire fuel cycle, from resource extraction to final use. (For an analysis and interpretation of some relevant findings emerging from the study, see Krupnick and Burtraw 1996.) Comparing coal with biomass, these researchers found that the former energy source imposed greater social costs. The difference was reckoned at about 7 mills/kwh (that is, 0.7 cents/kwh). However, more than 90% of the differential (about 6.4 mills/kwh) reflected imputed values—however crude—of the impact of increased global warming from fossil fuel use. This imputed value is on the order of $18 per ton of carbon emitted to the atmosphere, well within the range of plausible values derived from existing assessments of global warming risks. Nonetheless, these kinds of calculations are controversial. And the estimates underscore that except for potential benefits from reduced global warming, biomass offers little environmental benefit over coal—certainly not enough relative to the current cost differences in the technologies to justify a major expansion of biomass use. Other renewable technologies certainly have less environmental impact than coal or biomass. However, these technologies also have more substantial cost differences relative to coal or gas technology. For example, as I have already noted, there is still a cost premium for the use of wind power, especially if the nondispatchable nature of wind is taken into account. This complicates the head-to-head comparison of conventional and wind or solar technologies.
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Aside from problems in calculating social cost differences, the approach of subsidizing renewables versus increasing environmental performance from conventional technologies raises other concerns. This approach encourages excessive electricity consumption from all sources by underpricing electricity, and it encourages manipulation of damage estimates by different interest groups in support of renewable or conventional systems.
Concluding Comments
All projections are conditional and inherently uncertain. One of the less uncertain ones, however, is that in support of economic growth, particularly in developing parts of the world, the demand for electricity will increase substantially for many years to come. A growing worldwide electricity market would facilitate scale economies and learning curve experience, and would thereby enhance prospects for greater penetration of renewables. However, progress on the part of more traditional energy systems is sure to parallel further development of renewables, and there is no reason to expect that dynamic state of affairs to flag in the future. Thus, even as the size and technology of wind turbines improve and their costs decline, or as longer-term technological improvements overcome the prevailing limitations of storage and dispatchability that hamper a fuller potential for renewables-based electricity, nonrenewable systems aren't standing still. Efficient gas turbines have recently been the technology of choice for new generating plants (though high gas prices currently temper that enthusiasm), and in most projections gas turbines, in either a single cycle or a combined-cycle configuration, capture the vast majority of capacity additions over the next decade. Fuel cells, other distributed systems of power supply, across-the-board realizable improvements in energy efficiency, and even the emergence of advanced (and publicly acceptable) nuclear technology (even if currently unlikely) are all possibilities to be reckoned with. Each could be a prospective competitor to power systems based on renewable energy sources.
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These considerations argue for retaining a wide range of options in the nation's overall electricity and energy portfolio. Although the marketplace remains the ultimate and dominant arbiter of competitively successful outcomes, the complementary role of government in representing the broad public interest is scarcely trivial. Policies should be sought that, as far as possible, put primary emphasis on economically and socially efficient resource use and the overcoming of real market failures, not just market barriers from high costs. Prudently targeted programs in long-term R&D—with particular stress on the basic research part of that duality—represent an important and legitimate component of such public policy initiatives. In voicing its rationale for substantial federal R&D support for renewable energy, the 1997 study by the President's Committee of Advisers on Science and Technology (PCAST 1997) observed,
Opportunities exist for important advances in wind-electric systems, photovoltaics, solar-thermal energy systems, biomass-energy technologies for fuel and electricity, geothermal energy, and a range of hydrogen-producing and hydrogen-using technologies including fuel cells. . . . [T]he increased support for these renewable-energy technologies would focus on areas where the expected short-term returns to industry are insufficient to stimulate as much R&D as the public benefits warrant.
That judgment, I believe, holds true today and deserves the continuing and earnest consideration of the Congress.
Bibliography
Burtraw, D. 1999. Testimony by Dallas Burtraw of Resources for the Future before the Senate Energy and Water Appropriations Subcommittee, U.S. Congress. September 14. Congressional Record, Daily Digest.
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Darmstadter, J. 2001. The Role of Renewables in U.S. Electric Generation: Experience and Prospects. In M. Toman, ed., Climate Change Economics and Policy: An RFF Anthology, Washington, DC: Resources for the Future, in press. (A shorter and somewhat updated version of that chapter forms the essence of the present testimony.)
IEA (International Energy Agency). 1999. The Evolving Renewable Energy Market. June. IEA Renewable Energy Working Party. Prepared by Novem BV: Sittard, the Netherlands.
Krupnick, A.J., and D. Burtraw. 1996. The Social Costs of Electricity: Do the Numbers Add Up? Resource and Energy Economics 18: 423–66.
McVeigh, J., D. Burtraw, J. Darmstadter, and K. Palmer. 1999. Winner, Loser, or Innocent Victim: Has Renewable Energy Performed as Expected? Research Report No. 7. March. Washington, DC: Renewable Energy Project.
Palmer, K. 1999. Electricity Restructuring: Shortcut or Detour on the Road to Achieving Greenhouse Gas Reductions? Climate Issues Brief No. 18. July. Washington, DC: Resources for the Future.
PCAST (President's Committee of Advisers on Science and Technology). 1997. Federal Energy Research and Development for the Challenges of the Twenty-First Century. Report of the Energy Research and Development Panel, Executive Office of the President. September 10. Washington, DC: U.S. Government Printing Office.
U.S. DOE (Department of Energy). 1999. Supporting Analysis for the Comprehensive Electricity Competition Act. May. Washington, DC: U.S. DOE, Office of Policy. (See especially pp. 5, 22–24, 33, and 34 for details about the renewables portfolio standard.)
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XXX. 1998. Renewable Energy: Issues and Trends 1998. March. Washington, DC: U.S. DOE, Energy Information Administration.
XXX. 2000. Annual Energy Outlook 2001. December. Washington, DC: U.S. DOE, Energy Information Administration.
U.S. GAO (General Accounting Office). 1999. Renewable Energy: DOE's Funding and Markets for Wind Energy and Solar Cell Technologies. Report GAO/RCED–99–130. May. Washington, DC: U.S. GAO.
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BIOGRAPHY FOR JOEL DARMSTADTER
JOEL DARMSTADTER
Resident Consultant/Senior Fellow
Energy and Natural Resources Division
Resources for the Future
Phone: (202) 328–5050
1616 P Street, N.W.
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Fax: (202) 939–3460
Washington, DC 20036–1400
Email: darmstad@rff.org
Education
B.A., Economics, George Washington University, 1950
M.A., Economics, Graduate Faculty, New School for Social Research, 1952
Principal Positions
1966– Research staff, Resources for the Future (Director, Energy and Materials Division, 1984–1988)
1983–1993 Professorial Lecturer, international economics, Johns Hopkins University School of Advanced International Studies
1957–1966 Economist, National Planning Association, Washington, DC
1952–1957 Research assistant with several economic research organizations (1952–55) and active duty, U.S. Army (1955–57)
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Selected Publications
Books
Assessing Surprises and Nonlinearities in Greenhouse Warming (editor and contributor, with Michael Toman) (Resources for the Future, 1993).
Global Development and the Environment: Perspectives on Sustainability (editor and contributor) (Resources for the Future, 1992).
Greenhouse Warming: Abatement and Adaptation (contributor and editor, with Norman J. Rosenberg, William E. Easterling III, and Pierre R. Crosson) (Resources for the Future, 1989).
Energy in America's Future: The Choices Before Us (with Sam H. Schurr, Harry Perry, et al.) (Johns Hopkins/Resources for the Future, 1979).
How Industrial Societies Use Energy: A Comparative Analysis (with Joy Dunkerley and Jack Alterman) (Johns Hopkins/Resources for the Future 1977).
Recent Other Publications
''The Role of Renewables in U.S. Electricity Generation: Experience and Prospects'' and ''The Energy-CO Connection: A Review of Trends and Challenges,'' in M. A. Toman, ed., Climate Change Economics and Policy: An RFF Anthology, Washington, Resources for the Future, in press.
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(with M. K. Macauley, J. N. Fini, et al.) ''Can Power from Space Compete,'' Discussion Paper 00–16, Washington, Resources for the Future, March 2000.
(with J. McVeigh, D. Burtraw, K. Palmer) ''Winner, Loser or Innocent Victim: Has Renewable Energy Performed as Expected?'' Solar Energy, Vol. 68, No. 3, 2000; also appeared as Research Report No. 7, Renewable Energy Project, Washington, March 1999.
XXXXXXXXXX''Renewables From Another Angle,'' Electric Perspectives, Edison Electric Institute, March-April 2000.
''Innovation and Productivity in U.S. Coal Mining,'' in R. D. Simpson, ed., Productivity in Natural Resource Industries: Improvement Through Innovation (Resources for the Future, 1999).
(with D. R. Bohi) ''The Energy Upheavals of the 1970s: Policy Watershed or Aberration?'' in D. l. Feldman, ed., The Energy Crisis: Unresolved Issues and Enduring Legacies (Baltimore: Johns Hopkins University Press, 1996).
''Energy Tax,'' in The Encyclopedia of the Environment (Boston, Houghton Mifflin, 1994).
''Climate Change Impacts on the Energy Sector and Possible Adjustments in the MINK [Missouri, Iowa, Nebraska, Kansas] Region,'' Climatic Change, June 1993.
Review of L. Schipper and S. Meyers, Energy Efficiency and Human Activity in The Energy Journal, Vol. 14, No. 2, 1993.
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(with R. W. Fri) ''Interconnections Between Energy and the Environment: Global Challenges,'' Annual Review of Energy and the Environment, Vol. 17, 1992.
Selected Presentations and Professional Activities
''The Economy-Energy-CO Connection: A Review of Trends and Challenges.'' Paper presented at Greenhouse Gas Technology Conference, Cairns, Australia, 13–16–August 2000.
''The Role of Renewables in U.S. Electricity Generation: Experience and Prospects.'' Paper presented at International BIOCLIMECO Workshop, Graz, Austria, November 19–20, 1999.
Member, National Research Council Panel to Review the U.S. Geological Survey's Energy Resources Program, 1997–98. (Panel's report was published as Meeting U.S. Energy Resource Needs: The Energy Resources Program of the U.S. Geological Survey, National Academy Press, 1999.)
Member, review team evaluating National Institute for Global Environmental Change, sponsored by U.S. DOE, administered by University of California/Davis, 1997.
Member, Committee on Earth Resources, National Research Council, 1994–97.
Organizer, National Research Council Workshop on ''Valuing Natural Capital in Planning for Sustainable Development,'' Woods Hole, MA, July 1993.
Organizer, sessions on natural resources, American Economic Association meeting, Washington, DC, December 1990.
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Organizer, Symposium on Climate Change, AAAS Annual Meeting, New Orleans, LA, February 1990.
Contributing Editor, Environment magazine, 1979–.
Member, Editorial Committee, Annual Review of Energy, 1975–1986.
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Chairman BOEHLERT. Thank you very much, Mr. Darmstadter. You are absolutely right. We have some vexing issues before us. And as Ms. Hutzler completed her testimony, I was reminded of one my favorite reference sources. Woody Allen, who said in his address to graduates, ''We have arrived at the crossroads. One road leads to hopelessness and despair, the other to total extinction. Let us pray that we have the wisdom to choose wisely.''
Just let me—there are a couple of observations before we go to questions. First of all, Mr. Humphreys, I think you can assume that you get a loud no to a technology freeze. I think you can assume that it is totally unacceptable, at least from this Committee's standpoint, that we have business-as-usual. Mr. Holdren, I—Dr. Holdren, I want you to know that I think there is a consensus that we are in agreement with you, that the existing investment in renewables and efficiency is inadequate and we are going to be working diligently to get more resources devoted to those two.
Steps to Improve Energy Efficiency and Increase Use of Renewables
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Let me start with the biggest question of all. What steps can this Committee and Congress, as a whole, take that would be most likely to improve energy efficiency and increase the use of renewables? What steps are most likely to make the current EIA scenarios turn out to be inaccurate? Let us go in reverse order. Mr. Darmstadter.
Mr. DARMSTADTER. I think the—my list would be to, first of all, recognize, as increasing numbers of people are doing, that climate change poses a serious problem, that the underlying cause for that problem is human in nature, not natural cycles, and specifically, the burning, the combustion of fossil fuels. It would seem to me that the first step should be a consideration of some inhibiting—some inhibition on the use of fossil fuels to try to deal—at least to begin to deal with the climate problem. I realize that this is a contentious issue, the idea of carbon taxes, or other caps on emissions, continues to be intensely debated.
But it would seem to me, if we are going to try to reflect the cost of energy production and energy consumption directly on the source that is causing the problem, then it has to be—that the problem has to be attacked at the source. An increase in the cost of fossil fuels will do wonders for energy technologies and other energy resources that are vastly more benign in their impact on the environment.
Chairman BOEHLERT. Dr. Holdren.
Dr. HOLDREN. The first step, as I suggested at the end of my oral statement, in terms of what I hope this Committee would support, would be, as you have just suggested, Mr. Chairman, support for expanded R&D expenditures, both for efficiency and renewables, which represent a tremendous bargain. But I would argue that it is also going to be important to put in place an array of price and nonprice incentives and other policies that will encourage deployment of the energy efficiency renewable energy and other advanced energy technologies in proportion to their public benefits.
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I think in this connection we ought to have tighter corporate average fuel economy standards. I think we ought to have expanded use of renewable energy portfolio standards and production tax credits. I think we ought to have increased use of energy efficiency standards and labeling programs for energy-using equipment in residential and commercial buildings, and a good deal more. I think most importantly—and this builds on what my colleague, Joel Darmstadter, has already said—the incentives relating to our energy deployments are not really going to be right until we bite the bullet and implement either a carbon tax, or its equivalent, in the form of tradable carbon emissions permits. This is not going to be politically easy—I recognize that—although the revenue raised in this way could be offset by reductions in other forms of taxes, which I think would be welcome.
I think that ultimately growing recognition of the climate change perils of business-as-usual expansion of the use of conventional fossil fuel technologies by the United States, and by others, is going to compel taking this step, and I think we would be better off to take it, at least to start getting our toes wet with a modest carbon tax or equivalent emissions trading system, sooner rather than later.
Chairman BOEHLERT. Mr. Humphreys.
Mr. HUMPHREYS. Thank you very much. And obviously, I am very pleased to hear that a technology freeze or even business-as-usual is not a good enough paradigm, that we need to look beyond. So I thank you for that comment.
Since we are very focused in our work on long-term energy modeling, you know, I think one of the things that is ultimately important to decide is what are our long-term goals. And remember that any capital stock that we deploy in the energy system, if we begin developing it now, it is unlikely to be deployed for at least a decade, and once it is in place, it will be in place for as long as 50 years. And so the choices we make now do cast potentially a long shadow over the future. So I would urge longer-term thinking than 2020. Go out further in the future, decide what our objectives are, and then set measurable interim milestones so that we can see if we are making progress.
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The second, I would comment on the issue of carbon taxes. I do ultimately feel, or we feel, that placing a value on carbon is one way to help markets begin to deal with the climate change problem. I would also suggest that there are many ways that value can begin to be placed on carbon, and it doesn't always need to mean an explicit tax. For example, if the Administration and the Congress began to explore credit for companies' early action, when they reduce their CO emissions, that counts toward the future, that places a real market value on carbon.
There are already progressive companies, like Shell and BP, that have set up internal carbon markets. These things can form, and we can start the process in a variety of ways. Ultimately, it is a policy decision whether you want to go to explicit tax or not. Personally, I think at some point in the future we will get there, but there are ways to start now in small steps.
The other thing I would suggest is when it comes to renewable technologies, make sure we are spending our energy R&D on breakthroughs. If we are spending our energy R&D to reduce the cost of the technology by 5 or 10 percent, that is not going to dramatically cause their market share to ultimately increase, if that is the goal you want to achieve. Thank you.
Chairman BOEHLERT. Thank you. Ms. Hutzler, anything you care to add?
Ms. HUTZLER. Yes. In my last chart, in my testimony, I indicated that the costs of renewable technologies are higher than fossil-fired technologies. Fossil technologies have been improving, as well as renewable technologies. And if they improve at a faster rate, or even at the same rate, they are going to be penetrating more than renewable technologies in a Reference-Case scenario.
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Also, there is the issue in efficient technologies, that they are more costly. And consumers generally want their pay-back period to be short while many have pay-back periods of 10 years, so we are not going to see them penetrate. Now, EIA does not take positions on policies, but we have analyzed policy for this Committee and other Committees. For this Committee, we have looked at an analysis of the Kyoto protocol, where we have added on a carbon fee to the delivered cost of fossil fuels. In that case we saw that renewable technologies increased substantially. We had wind at about 50 gigawatts by the year 2020, biomass, about 45 gigawatts, as well as other renewable technologies being much higher than their Reference Case.
Also, in that case, we saw reductions in consumption because of the higher prices to consumers. We have also analyzed cases where we have looked at renewable portfolio standards. Here, too, we get lots of renewable technologies. We also get less demand because renewable technologies does mean that we are going to see higher prices for electricity to the consumer.
Chairman BOEHLERT. Thank you very much. A couple of observations, first, before I turn to Ms. Woolsey. First of all, a carbon tax not only would not be easy, I don't think it is even realistic to think in terms of that in this Congress when we are focusing on less rather than more in terms of taxation. But very much in play are things like CAFE standards, early credit for early action. I am a cosponsor of that bill. CAFE standards—they are all very much in play.
The second observation I would make is the Chair already broke its first rule which is to limit each question here to 5 minutes, but I only asked one question, and it was a broad question. So I think I was granted some leeway in allowing each of the witnesses to answer. With that, I will turn to Ms. Woolsey.
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Ms. WOOLSEY. So you are setting the precedents. Right, Mr. Chairman? If we have an excuse, we can go over. All right. I have an observation that I want to thank you for being here, and because you proved to me why I love being on this Committee. There is no political stuff up there. It is just good brains and I respect you so much.
Now, this Committee possibly could be the Committee in this Congress that could take a long-term approach, in that our Chair says he wants to, the Chair of the Energy Subcommittee also does. And we can do it because, you see, we get elected in 2-year cycles and we try to jam everything that happens in 2 years to prove we have accomplished something. This Committee does have the will to go beyond 2 years and we are going to have fun doing that.
Incentives
Each of you said that you assume there will be greater use of renewables to some degree or another, and if you don't assume it will be used, that there is a need. So it was—I heard that clearly. So now—and I know the Chairman asked this about incentives—but I think we also need to look at our infrastructure and what kind of education program we have out there for the public to make renewables and efficiency alternatives just part of the regular dialogue that the people in this country use and expect and demand. How would you suggest we go about that on this Committee along with what incentives do we need to provide so that it is affordable and that people demand renewable energies? Start with you, Mr. Humphreys.
Mr. HUMPHREYS. I think education is something that is a bit out of my field, being an engineer. However, obviously, I think that one of the things that just communicating the fundamental benefits and the pros and cons of different technologies so that consumers have as much information as possible to make an informed choice.
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Ms. WOOLSEY. Right.
Mr. HUMPHREYS. I mean, I think that is just fundamentally what is needed at all levels.
Ms. WOOLSEY. Okay. Dr. Holdren.
Dr. HOLDREN. Well, I would certainly reinforce that. I think, at a very fundamental level, education is important in terms of people's grasp of the relation between our choices about energy and our economic well-being, our environmental well-being, and our national security. That, I think, is the level at which what I would call education is terribly important.
At the level of specific choices that people make every day about what kind of appliances they are going to buy, what kind of vehicle they are going to buy, and so on, I think information—which is a narrower concept, in a way, than education—is the key. Consumers still don't have all the information they require to make choices that are in their immediate economic interest.
And I would disagree a little bit with Ms. Hutzler about this in relation to energy efficiency. I think energy efficiency options available now on the market very often do deliver the high rates of return, the 2- or 3- or 4-year pay-back times that people want, and people still don't buy them because they don't have the information to enable them to understand that they would reap these returns if they made those investments.
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There are a variety of other kinds of barriers, of course, not just information, that need to be addressed by policy. But I think there is a lot of leverage just in the information area. And that is why I mentioned in my early laundry list of measures, increased use of labeling——
Ms. WOOLSEY. Uh-huh.
Dr. HOLDREN [continuing]. And more creative use of labeling to convey to people exactly what it is they are buying and what it is they are getting.
Ms. WOOLSEY. Thank you. Ms. Hutzler.
Ms. HUTZLER. I would also agree that education programs are important. We have started some of these in terms of the labeling programs that Dr. Holdren mentioned. And they do provide the information of what it would cost a technology if it was there for a longer period of time. But there are other barriers, and Dr. Holdren did mention that there were other barriers. Many people just stay in their homes for a few years and so, therefore, they are more interested in the initial cost rather than the long-term cost of the technology. So these barriers also need to be overcome as well.
Ms. WOOLSEY. Mr. Darmstadter.
Chairman BOEHLERT. Would the gentlelady yield——
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Ms. WOOLSEY. Oh.
Chairman BOEHLERT [continuing]. For just one moment, and I won't take this out of your time.
Ms. WOOLSEY. Sure.
EIA Assumptions
Chairman BOEHLERT. But I thought I heard you accurately saying the assumption made in your EIA report was that the best energy efficiency technology would be chosen regardless of cost. I was just wondering, do you have any support for that? Because there is no indication—and I agree with Dr. Holdren—there is no indication in any great numbers that that is taking place in the marketplace today.
Ms. HUTZLER. That is not what we assume in the Reference Case. That was a special case that I wanted to indicate to you how much better we could do if, in fact, you could get consumers to choose the best technology. But they are not going to because of all these barriers, and one of which can be cost.
Education/Information
Chairman BOEHLERT. Well, just to follow up on that, because efficiency is so very important and one of the main thrusts of this hearing—is there anything that we, in Government, should be doing to encourage more education so that people will know if you buy a certain light bulb that it may cost you ten times as much initially, but you will get 50 times as much efficiency and, therefore, your out-of-pocket cost over the duration, the life duration of that life cycle, would be significantly less? And there is some of this information available out in the marketplace today, but good gosh, you would need to be a Rhodes scholar to understand it.
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Ms. HUTZLER. I always believe that information is useful and it would benefit the public as well as policymakers in terms of determining what they should do. Even having the information, though, you are not going to get all consumers to purchase the most efficient technology because they have other factors that are important to them.
Chairman BOEHLERT. Thank you for yielding.
Ms. WOOLSEY. Oh. You are welcome. Mr. Darmstadter.
Mr. DARMSTADTER. Darmstadter. Yes.
Ms. WOOLSEY. Would you also, when you are talking, talk about the infrastructure that is in place and what we need to do about that?
Mr. DARMSTADTER. Let me first talk a little bit about the education. I would like to broaden, if I may, the concept of education to not merely be limited to K–12, but the broader public discourse that I think could greatly illuminate the kinds of energy technology and environmental issues that we are wrestling with. Climate is still, it seems to me much too much shrouded in political rhetoric and almost, you know, demagogic levels of accusations and retorts.
If, somehow, we could achieve some degree of de-politicization of an issue like climate change, albeit keeping in mind that there remain considerable uncertainties, but also recognizing that there is an emerging degree of consensus. That is not always what one finds in press coverage, in political debate. That would be the first thing.
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I think it also would be useful, as part of this, sort of a broader approach to education, to have the public appreciate a little bit more of what the facts of energy trends have been. We are currently confronted with the skyrocketing natural gas prices, high electricity prices. We tend to forget that, over a period of some 30 years or so, the price of energy has remained essentially constant, if not actually declined, in real terms. To be sure, there have been upheavals, '73, '74, the Iranian Revolution, '79, '80, Persian Gulf, early 1990's, and now. But these, one could at least plausibly argue, are isolated incidents that cost considerable amount of dismay and hurt, but, over the long run, you know, energy prices have remained relatively constant. I don't know whether that is something that the public fully appreciates.
Another, I think, piece of the education debate that could usefully help is how we view this whole question of dependency on foreign sources of oil. We hear a lot about some magical number of 50 percent without being told that there is a price that we may have to pay in order to achieve such a magic target. We could close off all imports and subsist entirely on domestically-produced oil and gas if we were willing to pay the enormous price that it would entail.
And so I think that on energy and environmental matters there is a good deal more that could usefully, you know, sort of illuminate for the benefit of the public and its, you know, representatives by a more open discussion of some of these issues. And I suspect that ANWR might provide an opportunity for some of these issues of dependency, of prices, of the world market, to be part of the debate.
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Ms. WOOLSEY. You are right. Mr. Chairman, I am sure I have used up my time. Thank you.
Chairman BOEHLERT. Thank you very much. Before going to Dr. Bartlett, who chairs the Energy Subcommittee, and incidentally, will be following through on this very subject very diligently, I would like to observe that on March 14, the Committee will have a Full Committee hearing on the Science of Global Climate Change, and so that should be of interest. Now, it is a pleasure to recognize the Chair of the Subcommittee on Energy, Dr. Bartlett.
Impacts of Energy Conservation/Efficiency
Dr. BARTLETT. Thank you very much. Ms. Hutzler, you mentioned in your testimony that twice in recent history, when oil prices went up, consumption went down. How come? Was that conservation or efficiency?
Ms. HUTZLER. In both those cases we had very high oil prices and it was probably a combination of both. Consumers used less energy, as well as buying more efficient vehicles. However, when you saw the lower prices come back into play, consumers changed, as my chart showed you, about energy intensity and energy intensity declined at a much lower rate.
Dr. BARTLETT. It did change. You are right. But I think that although efficiency may have been a part of that, a major part of that was conservation. And I know it is politically incorrect to talk about conservation, but I think history shows us that when prices go up, use goes down and so, I think, conservation is a real thing to talk about.
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In terms of efficiency, in your table on page 12 of your testimony, when you are looking to the future and efficiency of space heating, space cooling, water heating, refrigeration, and lighting, the only one where you show any improvements are refrigeration. Why shouldn't we expect the same kind of improvements in these other areas that we are projecting for refrigeration?
Ms. HUTZLER. In terms of refrigeration, there was technology that was available that could be implemented. This is using different compressors that could really help the refrigeration technology, that is also available to air conditioners, but it is not available to all technologies. So, therefore, you are not going to get as much improvement in some of these other technologies as you saw for refrigeration.
Fossil Fuel Supply and Market Factors
Dr. BARTLETT. Thank you. Mr. Humphreys, you talk about market competitiveness versus cost and what is going to be used. If, in fact, we have a limited supply of fossil fuels, clearly they are not forever. At what point do we recognize that we can't simply rely on market factors? If you are lost in the wilderness and you know that you will be rescued in 7 days, and you have what ordinarily would be 2 days' supply of food, I don't think you would eat it all up in the first 2 days. And to what extent are we about to do that relative to energy?
Mr. HUMPHREYS. Well, I think fossil fuels, in a variety of forms, are certainly very abundant——
Dr. BARTLETT. Coal.
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Mr. HUMPHREYS [continuing]. Around the planet. Coal is——
Dr. BARTLETT. Coal.
Mr. HUMPHREYS [continuing]. Very abundant. I believe that conventional oil and gas reserves are expected to tail down around 2030, however, there are certain other nonconventional sources, like oil shales, perhaps methane hydrates, tar sands——
Dr. BARTLETT. At much higher prices.
Mr. HUMPHREYS. Yes. Agreed. Agreed. And so the way we do—I showed you one scenario today. Typically we look at a range of scenarios with alternative resource backdrops. And we look at a world that relies predominantly on coal with renewables penetrating when they are cost effective. We look at a world where we are able to develop some of these nonconventional oil and gas resources at an increased price. And then in those scenarios, again, fossil and renewables compete against each other. So that is the way we look at it. In terms of market competition, you have an available resource base, as you mentioned, at a particular cost.
It is certainly always the case that you could choose a policy that you want to have higher renewable penetrations in the future, and you could try to pursue that. That is a policy choice that we can inform, but I don't make that judgment.
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Dr. BARTLETT. Yeah. But I am not sure that that is the—that if you would like to have them. If, in fact, fossil fuels, those of high quality, that are readily available, that you don't pay an enormous environmental penalty for using them like you do coal—if you presume that those are limited, then it is not you would like to have a larger penetration of alternatives of renewables, but that you've got to have it. And I just think that the longer you wait, the more difficult that transition is going to be.
Cellulosic Biomass
I would like to ask a question now, before my time runs out, of Dr. Holdren. You mentioned something that is very exciting that I don't think most of our folk know about. And that is the possibility of releasing the glucose from this large, complex cellulose molecule. And, you know, we couldn't heretofore do that. How can we do it now and it represents an enormous potential for our farmers and a big renewable source of energy?
Dr. HOLDREN. Yes. It is true. We discussed this at some length in the PCAST 1997 review of the U.S. energy R&D portfolio and note that recent technological developments in production of ethanol from cellulosic biomass have basically transformed the possibilities that were previously understood. That is why the PCAST report reached the conclusion that if we wanted to pursue that line, we could be getting something in the range of 2b million barrels a day of oil displacement from cellulosic ethanol alone by the year 2030. If one pushed it harder, one could have that much even sooner.
Dr. BARTLETT. Isn't this largely because we have bioengineered a bacterium which can now do for us, but heretofore was only done in the belly of ruminants, where cellulose could be broken down to——
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Dr. HOLDREN. It——
Dr. BARTLETT [continuing]. Glucose and then fermented?
Dr. HOLDREN. This is not my field of expertise, but I think that is a——
Dr. BARTLETT. Yes. I think that was a major breakthrough that we have bioengineered a bacterium which can now split cellulose into the glucose molecules, heretofore that only happened in—largely in——
Dr. HOLDREN. Right.
Dr. BARTLETT [continuing]. Ruminants. It is a very tough molecule to break down. But once you have done that, you now have an enormous potential.
Dr. HOLDREN. Once you have done it, you are——
Dr. BARTLETT. And shredded newspapers can be converted into ethanol. Corn stalks, soybean waste, much of the stuff at the landfill, and old sofa—much of that can now be converted into ethanol with this technology.
Dr. HOLDREN. Of course, we could already convert that stuff into other useable forms——
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Dr. BARTLETT. That is correct. That is correct. But not into ethanol.
Dr. HOLDREN [continuing]. And have been doing so.
Dr. BARTLETT. Thank you for——
Dr. HOLDREN. And if I could add——
Dr. BARTLETT. Yes.
Dr. HOLDREN [continuing]. One thing about the question of running out of fossil fuels, I would reinforce what Mr. Humphreys said, by arguing that, although it is true that fossil fuels are ultimately finite, the fact is that we are running out of environment more rapidly than we are running out of fossil fuels. We are being constrained—not because the amount of stuff in the ground is disappearing so rapidly—that we are going to be in trouble soon. That is true for oil in the Middle East and in Alaska and a number of other places. That stuff will be gone relatively soon. But the ultimate fossil fuel resources are very large. What we are really running out is environment. And we are running out of environment, in part, because we are not pricing it. We are not paying for it in the costs of those fuels that are most damaging to environment.
Chairman BOEHLERT. That is just another reason to be prudent.
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Dr. HOLDREN. Absolutely.
Chairman BOEHLERT. Thank you very much. Mr. Larson.
Mr. LARSON. Thank you, Mr. Chairman. And let me add to the chorus of those who are applauding you for not only this very important hearing, but the sequential order of importance in which you have called hearings for this Committee that relate to renewable energy, efficiency, our climate. And I want to also commend the panelists who are here this morning. And I have written testimony that I would like to submit for the record, but cut right to the chase here.
Hydrogen/Fuel Cells
Mr. LARSON. The discussion on our having to rely on foreign oil, I believe, now has reached the point where the United States is importing more than $120 billion annually in terms of our reliance on foreign oil. Now, that is more than twice what we spend on public education, our transportation infrastructure needs, et cetera. So the concept of avoidance here is very important.
I was intrigued by your testimony. Not only do you all seem to be coming back to climate, which I think is important. And also in your testimony, I believe, Mr. Humphreys, you talked about making sure that we get the best bang for our dollars in the PCAST report. I believe, Mr. Holdren, you guys also talked about both doubling the amount of R&D that is needed. But also specifically, and Mr. Darmstadter, you mentioned hydrogen. I am interested in what you see for fuel cells as an alternative and how you see that as. . .what kind of an investment we should be making in that in terms of a high yield or a high return or efficiency for the dollar—R&D dollar outlay that we might have. Mr. Humphreys, I will start with you and——
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Mr. HUMPHREYS. Well, I think, fuel cells are certainly important just in terms of improving the efficiency with which we deliver power to residential and commercial structures, as well as automotive vehicles. I mean, I think there is a lot to be gained there. One of the other dimensions, I would note, is particularly as you move into a realm where you have a climate-constrained world, moving toward a hydrogen economy is extraordinarily important. Where are you going to get the hydrogen to run that economy? A large part of it is likely going to come from transformation of fossil fuels and probably also transformation of biomass fuels.
One of the things that is going to be important, though, is to have a coupled carbon-capture technology when you transform those fuels so as you make hydrogen you are not just removing carbon from a carbonaceous fuel——
Mr. LARSON. Right.
Mr. HUMPHREYS [continuing]. And then putting it up the stack, so to speak. So extraordinarily important, high-value technology—it is important to start thinking now about carbon-capture technology that couple with fuel-cell technologies.
Mr. LARSON. I believe in your report, Dr. Holdren, you referred to proton exchange membranes and looking at the—Department of Energy, I believe, has been looking into that as well.
Dr. HOLDREN. Yes. We recommended substantial increases in fuel-cell research across a number of kinds of fuel cells. There are various kinds of fuel cells and they are differentially suited for different applications—some optimal for electric power generations, some for vehicle propulsion, some for home use.
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We also recommended substantial increases in research and development on hydrogen production, both in the fossil fuel sector and in the biomass sector. I would endorse everything Mr. Humphreys said. The potential in fuel cells is very substantial. The potential in hydrogen is very substantial. People need to understand, as I know you do, that the hydrogen itself is not a primary energy form. It has to come from somewhere else. And, as Mr. Humphreys said, we will certainly get a lot of it from fossil fuels for some time to come.
In the long run, there are many different ways to get hydrogen. One could get it from fission or fusion. One could get it from renewable energy sources of a variety of kinds. But the great attraction of hydrogen in the fossil fuel sector is precisely this point, that the processes for obtaining the hydrogen suit themselves quite well for grabbing the carbon along the way and making possible the sequestration of that carbon away from the atmosphere. This is another technology that the PCAST report recommended be pushed very hard because it has immense potential. We are not going to change very rapidly a world that gets more than j of its energy from fossil fuels. That isn't going to change overnight. And so we need to look at how to use those fossil fuels in ways that maximize efficiency and minimize environmental harm, and converting some of them to hydrogen and grabbing and sequestering the carbon is a very good way to do that.
Impacts of R&D Funding Cuts
Mr. LARSON. Critical to all of this, of course, is there support for increased R&D funding in these areas, and it is heartening to hear on this Committee, especially knowing the deep interest. What would a cut in this area mean with respect to that?
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Dr. HOLDREN. I think a cut would be a terrible mistake at this point—to cut renewables R&D, to cut efficiency R&D, to cut fossil R&D, or nuclear R&D, any of them. I mean, we made the argument in the PCAST study for a portfolio approach—we argued for the importance of diversity in the Government's efforts in this area. And I think we recommended what I would call a prudent trajectory of strengthening the country's R&D investments across this portfolio. In my view, to fall much below that trajectory, which, alas, has been happening, is a mistake. There have been increases, and they are admirable, but they have not been increases as great as PCAST recommended. And I think the current Administration should be seeking to narrow the gap between what we have got and what PCAST recommended, rather than allowing it to widen.
Chairman BOEHLERT. The gentleman's expanded time has expired.
Mr. LARSON. Thank you.
Chairman BOEHLERT. The Chair now recognizes the Chairman of the Subcommittee on Environment, Technology, and Standards, Dr. Ehlers.
Mr. EHLERS. Thank you, Mr. Chairman. And I am sorry for dashing in and out, but I have two other Committee meetings going on at the same time. The first one—and I want to follow up on a comment of Mr. Holdren—or Dr. Holdren. I appreciate his comments about energy efficiency. Too often, people equate that with freezing in the dark. It doesn't have to be that way. It is—the key is efficiency, not just conservation. And it has always amazed me that many people who admire themselves for being efficient, running their businesses efficiently and so forth, think that energy efficiency is not important. But frankly, there is—that—improving energy efficiency is the quickest and least expensive way of improving our energy supplies and we should do more of it.
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Energy Use Per Capita
Question for Ms. Hutzler. Where is—first of all, on the first graph you showed, I was puzzled in the units you had up, energy use per capita. What are the—what is the unit on there, ordinate, at this point?
Ms. HUTZLER. I think that was quadrillion BTUs of energy consumption per person.
Mr. EHLERS. No. No.
Ms. HUTZLER. Sorry.
Mr. EHLERS. It can't be quadrillion per person.
Ms. HUTZLER. Okay.
Mr. EHLERS. That is quadrillion——
Ms. HUTZLER. I am going to grab that——
Mr. EHLERS. Yeah.
Ms. HUTZLER [continuing]. Graph. Sorry.
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Unidentified SPEAKER. That is a Texan right there.
Mr. EHLERS. Yes.
Ms. HUTZLER. That may be. Oh. I am sorry. That graph—I am sorry. That graph was an index, and I guess we indexed it to—was that 1999—1970. It grew from 1970. I needed to get that graph in front of me. I am sorry.
Mr. EHLERS. It is—but it is what?
Ms. HUTZLER. Show, it shows, from 1970, the percent increase in these numbers over time.
Mr. EHLERS. So it is only an increase or a decrease. That doesn't make—that doesn't——
Ms. HUTZLER. It shows you the decrease or the increase. So essentially we are saying that consumption per capita is increasing in the forecast.
Mr. EHLERS. So you were showing the rate, not the actual increase.
Ms. HUTZLER. Exactly. It was a rate in that graph.
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Mr. EHLERS. It would be nice to see the integral of that too. It is a little difficult sometimes to understand differentials if you don't see the base one. Okay. Another question.
Ms. HUTZLER. Uh-huh.
Mr. EHLERS. The—what is the U.S. energy use per capita compared to other countries? Are we still the largest energy user per capita?
Ms. HUTZLER. Yes. We and Canada are the highest. Other countries are probably fairly—maybe half the amount where we and Canada are, or less.
Future Oil Costs
Mr. EHLERS. All right. Another question. What—you talked about the future use of various fuels. I am particularly interested in fossil fuels, and, at the moment, especially interested in oil because that is where we are encountering great price increases. What—have you done studies in your agency on the future cost of oil and how that is going to impact the economy?
Ms. HUTZLER. We look at a number of cases for oil prices. Our Reference Case has, in real 1999 dollars, about $22 a barrel for oil. We do a High Case and a Low Case. The high case is around $28 or $29 a barrel; the low case is about $15 per barrel.
Mr. EHLERS. Yes. I am talking about the future. What about——
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Ms. HUTZLER. Yes.
Mr. EHLERS.—20 years from now?
Ms. HUTZLER. This is in 2020 in real 1999 dollars. Now, in nominal dollars, that would be different. I think, in nominal dollars, the high case is around $36 a barrel.
Mr. EHLERS. That sounds incredibly optimistic to me.
Ms. HUTZLER. Well, it turns out, if you compare us to other forecasters, we are actually, in the Reference Case, slightly higher than other forecasters the last time they published last year. Also, our High Case essentially is set at what level alternative technologies could come in at. For instance, you can have natural gas-to-liquids technology coming in at around $30 a barrel. Maybe coal-to-liquids technology coming in at $35 a barrel. So if your oil price is sustained for a long period of time to get these other technologies economic, then they can also penetrate the market.
Future Natural Gas Prices
Mr. EHLERS. And what do you forecast as price increases for natural gas in the future?
Ms. HUTZLER. Our Reference Case is natural gas going up to $3.13 in 2020. Now, we see current prices coming down in our current Reference Case in about the year 2004, to our long-term growth case, which was about $2.50 per thousand cubic feet, and then we see it increasing up to about $3.13 as the demand for natural gas increases over time.
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Mr. EHLERS. What—are you making any assumptions about energy use and increases in other nations in your forecast?
Ms. HUTZLER. Yes. For oil, we look at the world balance and we do have higher oil consumption in this year's forecast. But the USGS put out a reassessment of the resource base last June and they had 700 billion barrels more oil in that reassessment. So those two off-balanced each other and we have about the same amount of—well, we have about the same price because of this offset. In terms of natural gas, that is pretty much a domestic North American market. We do import from Canada and we do have liquefied natural gas in our forecast this year.
Mr. EHLERS. I would appreciate it—my time is up. But I would appreciate it if you could send me a summary of some of the questions I raised, documents you have produced that would answer that. I think you are being overly optimistic, frankly, and I think that could be a real disservice to our country if we are not realistic about future energy costs. Thank you.
Conservation Efficiency and the Effect of Prices
Chairman BOEHLERT. Let me add that there is a great deal of interest, obviously, in this subject and a number of Members will have additional questions which we will submit in writing to the panelists and we would appreciate a rather timely response. Mr. Baird.
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Mr. BAIRD. Mr. Chairman, I want to compliment you for hosting—holding this hearing. My comments come out of two recent experiences. One, about a month ago, I had the privilege of visiting the Maldive Islands, where a 3-week long El Niño event raised ocean temperatures to greater than 90 degrees Fahrenheit and caused a 98 percent die off of their coral reefs. Two, in the Pacific Northwest, we have seen extraordinary price increases, and I want to basically focus on two questions.
Energy Conservation and Efficiency
One, as we talk about energy conservation and efficiency, I sure appreciate Mr. Bartlett's earlier comments on conservation. It strikes me that the most efficient, most immediate way in which we can conserve energy is through behavioral change, not technological change. And I wonder if you could comment briefly on any research we have on how to make that happen more quickly, more efficiently. Simple things, like turning down hot water heaters, etcetera, shifting to different lights, seem to me the more immediate way to conserve energy. Could you comment on what we are doing or what we should do in that? And I will leave that open to any of the panelists.
Mr. DARMSTADTER. I just—I will very brief. As we scan the record over the last 30 years, we find that the periods, and they were fairly prolonged periods, during which energy consumption, relative to income or per capita, declined in a meaningful way, were the periods during which prices rose in a meaningful way. The turnabout came—prices kept going up until the early and mid-'80's; consumption went down. Prices turned around after the mid-1980's; consumption went up. There is nothing like substantial changes in price that would concentrate the mind on either consuming more or consuming less. And I think that is probably an axiomatic and probably the first principle with respect to behavioral change in energy use that needs to be kept in mind.
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Mr. BAIRD. Thank you. Other comments on that?
Dr. HOLDREN. Yes. If I could just add to that, I think there is a lot of ambiguity in terms like conservation and terms like efficiency. When some people hear the word conservation, they assume what we are talking about is belt-tightening sacrifice, as Congressman Ehlers said, freezing in the dark. Efficiency has a nicer ring to it. People understand intuitively that efficiency is a good thing and what we mean by it, in general.
When we talk in aggregate terms about energy efficiency, I think all of us here on the Panel are using essentially the same definition, which is the ratio of real economic activity, as measured by real gross national product, to the amount of energy that has to be supplied to generate that economic activity. That measure is not perfect. We know GNP includes some things that don't really measure well-being and fails to include some others that are important to well-being, but it is more or less the best we have got. And by that measure, by the ratio of real GNP to energy, we have made immense improvements over the last 30 years by means that have not entailed sacrifice. What they amount to is making people better off by getting more goods and services out of each gallon of fuel, out of each kilowatt hour of electricity, out of each pound of coal.
And my personal view is that it is going to be more productive and more successful to continue to build on that record of success than to tell people they have to undergo large changes in what they imagine their lifestyle to be about. I think it would be a tactical mistake to say the key to this problem is to get people to turn off the lights. There is some benefit there on the margin where people are lighting rooms that nobody is in, for example, or throwing energy away by heating badly insulated buildings to very high temperatures in the winter. Those sorts of behavioral changes are valuable and they will be brought about through a combination of education and, perhaps, increased energy costs, in part, by starting to reflect the environmental impacts in the monetary prices. But I think efficiency is the handle that is going to bring us the biggest gains.
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Mr. BAIRD. Thank you.
Chairman BOEHLERT. Thank you very much. Mr. Akin.
Environmentally Damaging Fuels
Mr. AKIN. Thank you, Mr. Chairman. I just had a question. One of you used the words environmentally-damaging fuels. Could you elaborate on what the most environmentally damaging fuels are and give us some kind of a list in terms of what you think are better fuels or worse fuels? That would be for anyone and I forgot which one of you used that term, but if you could define it.
Dr. HOLDREN. Well, I am not sure which one of us used it either, but I would rather refer to environmentally damaging technologies. That is, any given fuel—coal, oil, natural gas, uranium, sunlight, biomass—can be used in ways that are damaging to the environment in any number of respects, and they can be used with different technologies in ways that can very substantially reduce that amount of environmental damage.
Among the fuels, I think we all understand, that are very damaging if used in suboptimal technologies, would be coal containing high quantities of sulfur and burned in power plants that have——
Mr. AKINS. Don't have the scrubbers——
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Dr. HOLDREN [continuing]. Ineffective or absent controls for the sulfur for particular matter and so on. In addition, coal, among the conventional fossil fuels, releases the most carbon dioxide per unit of energy contained in the fuel. And, therefore, from the standpoint of greenhouse gases and climate change, coal is a particularly problematic fuel. But with better technology, including technology that can capture and sequester the carbon, those liabilities of coal would become much smaller.
And that is another reason for the recommendations in the PCAST study, and the recommendations by many others, that we should continue to invest in the research and development to improve the technologies. Because we are not stuck with the intrinsic environmental liabilities of fuels. We can use technology to reduce those.
Significance of Man-Made COI RELEASES
Mr. AKINS. So in terms of environmentally damaging fuels, you would say that that wouldn't be a term that you would use. You would say it is more the way the fuel is used and then the side effects of that. A second assumption that seems to have been in some of the comments I have heard—and that is that there is a big problem from the release of CO through man-generated sources. The CO that is being released to our atmosphere, what percent is that released by mankind and how much of that is from just natural sources?
Dr. HOLDREN. The natural carbon cycle is understood to be more or less in balance so that you have a process by which photosynthesis removes carbon dioxide from the atmosphere and decomposition and combustion of the photosynthetic material puts the carbon dioxide back in. Those fluxes, the fluxes of carbon associated with photosynthesis, are in the range of ten times larger than the human addition by combustion of fossil fuels. But the natural flux is more or less in balance.
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And that is why the carbon dioxide content of the atmosphere, the accumulated concentration of carbon dioxide, has been going up. There is absolutely no scientific controversy about the fact that the carbon dioxide content of the atmosphere has gone up by something in the range of 30 percent over the last 200 years. And there is no scientific controversy about the cause of it, namely, that the increased carbon content of the atmosphere is due primarily to human activities.
Mr. AKIN. So what you are saying is that in answer to my question, we are putting a very small amount of the carbon dioxide in the atmosphere in total.
Dr. HOLDREN. No. That is not what I would say. I would say that since the natural flows are in balance, the natural flows are pulling out as much as they are putting in, the fact that humans are adding net in the range of 7 billion tons of carbon per year to the atmosphere, is precisely what is responsible for the fact that the carbon dioxide content of the atmosphere is going up and affecting the climate in so doing.
Mr. AKIN. And I thank you, Mr. Chairman.
Chairman BOEHLERT. Thank you. Mr. Barcia.
Mr. BARCIA. Mr. Chairman, I don't have any comments and I just had some conflicts with the hearing today, but I am glad I made it for part of it.
Chairman BOEHLERT. Because there are some Members that have been here a long time want to get questions in. Mr. Nethercutt.
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Hydroelectric Power
Mr. NETHERCUTT. Thank you, Mr. Chairman. And I am delighted that you would call this hearing today and welcome to all the witnesses. I come from the Pacific Northwest, east side of the State of Washington, where we use hydropower facilities to provide energy. And I am aware—I am informed, I should say, that the Department of Energy has studies that show that there are about 21,000 megawatts of potential hydro capacity at current dams and, of that, 4,300 megawatts can be developed at existing hydro facilities alone. I also am aware that, in looking and listening to your testimony, especially Dr. Holdren, that hydropower provides about 8 percent of domestic energy production around the country.
I also noted that the PCAST called for insignificant amounts of research in this area, of about $3b billion dollars in proposed research, it looks like from 1997 to 2003, only about $48 million was recommended for hydro. I—since—you know, I have come to the preliminary conclusion that that is not enough.
And I am wondering, ladies and gentlemen, if you might have some ideas about how we can encourage this form of use of existing facilities or expand that which we already have, to create greater capacity, since it is renewable, it is clean, it is environmentally friendly, and it seems to me make sense. What is your comment, sir?
Mr. DARMSTADTER. I think hydro is widely recognized to be a mature technology, to be a low-cost technology, and that it is inhibited from being expanded upon for reasons other than its cost or technical level of advancement. But——
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Mr. NETHERCUTT. I read that in your testimony.
Mr. DARMSTADTER. Right.
Mr. NETHERCUTT. What—do you think there is no capability or opportunity to have more efficient turbines, for example, energy-efficient turbines, given the potential out there for greater development of this——
Mr. DARMSTADTER. Are you referring to better turbines in existing hydro facilities or——
Mr. NETHERCUTT. Well, new generations of turbines.
Mr. DARMSTADTER. Well, again, I am not an electrical engineer or a—so I wouldn't want to pass judgment on the feasibility of more advanced turbines.
Mr. NETHERCUTT. Right.
Mr. DARMSTADTER. But I am impressed with the depth of the feeling about damming additional rivers and developing new hydro facilities because of all the other external costs that one associates with hydroelectricity—fish migration, recreational, you know, opportunities, the question of Indian lands, a whole welter of things which, if I read the public mood correctly, constrain really serious consideration of significant expansion of hydroelectric capacity in the Pacific Northwest——
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Mr. NETHERCUTT. Uh-huh.
Mr. DARMSTADTER [continuing]. Notwithstanding the fact that if we ignored those things, additional hydro could probably be produced at 1b cents per kilowatt hour.
Mr. NETHERCUTT. Right. Very cheap. Anybody else care to comment?
Dr. HOLDREN. Yes. If I could add just one thing? PCAST did recommend modest increases——
Mr. NETHERCUTT. Right.
Dr. HOLDREN [continuing]. In Federal research in the hydropower area and they recommended particularly an increase in research on turbines that were both efficient and fish-friendly.
Mr. NETHERCUTT. Yes, sir.
Dr. HOLDREN. And this underlines the point that my colleague was making, that the constraint on expansion of hydropower has not really been deficiencies in the technology as ordinarily understood. The efficiency of hydropower turbines is already very high, so high that there is relatively little gain in pushing further on it. But the impact on fish has been a significant constraint in the public perceptions about and receptivity to expanded use of hydropower. And so PCAST saw that there was some benefit potentially in applying contemporary insights from hydrodynamics to the design of turbines that would retain the existing high efficiency, but would be less destructive to fish populations. That would be a benefit and could contribute to hydropower's——
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Mr. NETHERCUTT. Right.
Dr. HOLDREN [continuing]. Acceptance as a continuing source.
More Efficient Computers
Mr. NETHERCUTT. Right. Let me ask you one other question for the Panel and then I know that we are—time is short here. We are seeing the use in California, Seattle, other parts of the Nation, the high use of computers and a continuous and exploding use of computers that use energy. To what extent do you feel there should be additional research done on how we can enhance greater efficiency of computers, whether it is spray-cooling technology or other potentials out there, given the likelihood that we are going to be using computers in a greater number than we are today? Anybody care to comment?
Dr. HOLDREN. Well, I will take a brief cut at that one. There was actually a recent study at the Lawrence Berkeley National Laboratory about how much information-processing equipment was contributing to the growth of electricity use in the United States. And somewhat surprisingly, the answer was very little. That is, computers basically generate so much GNP per kilowatt hour that they are more a factor in the improvement of that ratio than they are a factor in rising electricity growth. That is not to say that nobody should be paying attention to the efficiency of computers, but they are not a large contributor, at this point, to our electricity demands.
Mr. NETHERCUTT. Thank you, Mr. Chairman.
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Chairman BOEHLERT. Thank you very much, Mr. Nethercutt. Now, here is the situation. We have a series of five votes on the Floor. We have 10 minutes to go. Mr. Rohrabacher will ask his questions and then we will have to adjourn the hearing because you all have schedules that you have to meet and we would—we don't want to keep you over or try to keep you over for at least a half hour for the votes. So Mr. Rohrabacher is recognized.
Climate Change Theory and Energy Policy
Mr. ROHRABACHER. Thank you very much, Mr. Chairman. I appreciate the opportunity that I have to have the full 5 minutes because we are right here at the end. Let me note that I would have preferred to have at least one witness on this Panel that seemed to differ in their points of view when they—you know, when you talk about not having politicization, that just means you should have honest discussion, and we certainly seem to have people who agree with each other today.
Let me say this—I haven't seen so many charts and so much discussion that I don't consider to be accurate, but seemed to be backed up by all these charts, since I read the Global 2000 Report, which, of course, was apocalyptic and proven to be total nonsense.
Most of what I am hearing today, in terms of a demand—go back to Mr.—is it Holders? Is that he—Holdren's—inability to express—acknowledge the fact, even by his own calculation, that 10 times the amount of carbon dioxide going into the atmosphere come from natural sources. My—other statistics that I have heard it is 20 or 25 times the amount of natural sources for this carbon that is going into the air.
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What you are talking about is a—and what we have heard today, Mr. Chairman, is a global climate change theory that is driving energy policy for the United States and it has proven catastrophic to my State of California, and it is going to be proven catastrophic to this country, unless, of course, we are all willing to decline—to decrease our standard of living until we live like Chinese peasants.
We have heard today that the United States, we have something to feel sorry about that we are consuming more energy than any other people. But the fact is, we are consuming less energy per unit of wealth that is produced in our country than just about any other country. Isn't that correct? Does someone have a disagreement with that? The fact is China—yeah, we produce more problem—you know, more gases naturally—these carbon—hydrocarbons than China does, but our people live well and we produce a lot of wealth. China produces a lot more hydrocarbons and so does the Third World.
I would agree with you, those of you who have stressed conservation and energy efficiency. I think that is really important. But—and I think it is also important to clean the air and I think that, yes, it is of concern to—I live in California. I couldn't go out and work in the gym 2 days a week because the air was so polluted. But that is because I am concerned about people's health and not some nonsense—again, unproven global climate change theory driving energy policy is—usually like Global 2000 Report, turns out to be based on nonsense and it ends up creating policies that hurt our people. And in California, the people who are going to be hurt are our poorest people.
And we had the question about hydroelectric dams. Yeah. Last year, I was lobbied—I was lobbied in order to get a water project through to California, that we had to tear down a bunch of hydroelectric dams in northern California. This is at a time when California is on the edge of a major energy crisis.
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Ladies and gentlemen, if we are going to try to be taken seriously, I think that we have got to take a look at these statistics and not look at them through the prism of a global climate change theory or any other type of theory.
And I know that the gentleman talked about politicization of that. What you meant by that, sir, was just people should agree with your view on it. There is an honest disagreement on whether or not humankind is creating the conditions that are leading to any change in the global climate. The fact is that long before mankind came on the scene, there were ice ages where the glaciers retreated and ice ages when the glaciers proceeded, and it had nothing to do with mankind whatsoever.
So, Mr. Chairman, I would hope when this Committee looks at global climate change, that we have a little bit more broad-based Panel than just a group of people who agree with each other. And I would hope that we—I mean, here I am at the very end, and the reason I don't—I sound a little frustrated now, is it has been an hour-and-a-half and I am getting my 5 minutes, but earlier on, before we ever got to any questions, it—and before we ever got to any questions that were adversarial, frankly, there had been a lot of time used that didn't usually happen in hearing like this. So with that, I have expressed some of my frustrations and now I have to run off and vote rather than sit and listen to your answers. And I would like to have a discussion with you on this.
Chairman BOEHLERT. I thank the gentleman.
Mr. ROHRABACHER. Okay.
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Chairman BOEHLERT. And obviously it is evident that there is diversity in Congress and on this Panel. The gentlemen is entitled, as all Members are, to submit any questions he may choose in writing to the panelists, and they have assured us they will respond in a timely manner. Let me also point out that this is not the only hearing that we are going to have on this very important subject. I want to thank all the panelists for being participants in today's hearing and for your cooperation and for acting as resources for the Committee. Thank you. The hearing is adjourned.
[Whereupon, at 11:55 a.m., the Committee was adjourned.]
APPENDIX 1:
Answers to Post-Hearing Questions Submitted by Members of the Subcommittee on Energy
REPUBLICAN MEMBER QUESTIONS
Post-Hearing Questions Submitted to Ms. Mary J. Hutzler, Director, Office of Integrated Analysis and Forecasting, Energy Information Administration, U.S. Department of Energy
Accuracy of EIA's Forecasts
Q1. What is EIA's forecasting track record, i.e., how accurate have past forecasts been and how do your forecasts compare with others, such as those of DRI, WEFA, etc.?
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A1. The forecasts in the Annual Energy Outlook (AEO) should more precisely be characterized as long-term projections. As a longer-term model, the National Energy Modeling System (NEMS) does not take into account a number of short-term fluctuations that may influence future energy markets. These factors include severe deviations from normal weather, fluctuations in economic growth, changes in energy regulations and policies, and stock changes caused by weather deviations, supply disruptions, or infrastructure failures. AEO provides a likely energy future given known technology, economic, and demographic trends and current policies and regulations.
EIA has been providing an evaluation of the projections in the AEO annually since 1996. Each year, the forecast evaluation adds the most recent AEO and the most recent historical year of data. The most significant conclusions are:
Over the last two decades, there have been many significant changes in laws, policies, and regulations that could not have been anticipated or assumed in the projections. These actions have had significant impacts on energy supply, demand, and prices; however, the impacts were not incorporated in the AEO projections until their enactment or effective dates in accordance with the mandate that Energy Information Administration (EIA) remain policy neutral and the practice that AEO projections include only current laws and regulations.
Natural gas has generally been the fuel with the least accurate forecasts of consumption, production, and prices. Natural gas was the last fossil fuel to be deregulated following the strong regulation of energy markets in the 1970s and early 1980s. Even after deregulation, the behavior of natural gas in competitive markets has been difficult to predict.
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Energy prices have been far more difficult to predict than consumption, production, and net imports, and prices have been more typically overestimated than underestimated. More rapid technological improvements, the erosion of the market power of the Organization of Petroleum Exporting Countries in the mid-1980s, excess productive capacity, and market competitiveness are all factors that led to lower energy prices than projected. In the 1980s and 1990s, productivity and technology improvements and the effects of gradual deregulation and changes in industry structure have more than offset the factors that have tended to raise energy prices, such as resource depletion and increasing energy demand.
External factors such as severe weather, economic cycles, and strikes have also had an impact on energy markets; however, these events cannot be anticipated in the mid- to long-term period and are not captured in the models underlying the AEO projections.
Technological improvements in both the production and use of energy have had a significant impact on the price, supply, and consumption of energy. For the most part, earlier AEOs assumed much slower technology development than actually occurred, accounting for some of the deviation between the forecasts and history. This trend was recognized, in part, by this type of retrospective forecast evaluation. Beginning with the Annual Energy Outlook 1994, the projections in the AEO were produced using NEMS. Because NEMS was designed with methodologies to represent technology in a more detailed fashion, there has been an improvement in the capability to represent technological change throughout energy markets. Additional studies on technological improvement have led to more optimistic assumptions in the more recent projections. Also implemented were modeling innovations, such as learning-by-doing, in which experience gained with new generation technologies leads to cost reductions in the model. These enhancements have significantly improved the projection capability within NEMS.
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For each of the variables included in the analysis, the table below shows the average absolute forecast errors, which are computed as the average of all the absolute values of the percentage differences of the projections from actual, for each AEO and for each year in the forecast. The forecasts of consumption, carbon dioxide emissions, production, and gross domestic product have generally been the most accurate, and the forecasts of prices have been the least accurate.
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The forecast evaluation does not specifically address renewable sources of energy; however, in the table below, we compare the projections for renewables in the Annual Energy Outlook 1995 (AEO95) with the most recent data for 2000, extrapolating from the first ten months of the year. The projections for renewable generation were high by about 40 billion kilowatthours, mostly due to lower hydroelectric power than projected. End-use renewable consumption is estimated to be higher than projected. Renewables consumption in the residential sector has been about 0.2 quadrillion Btu below the projections. However, industrial consumption of biomass, which accounts for most of the end-use renewables, is about 0.6 quads more than in AEO95, primarily due to high economic growth.
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In the Annual Energy Outlook 2001 (AEO2001), forecasts from Standard & Poor's DRI (DRI), the WEFA Group (WEFA), and the Gas Research Institute (GRI) are compared to the AEO2001 projections.(see footnote 16) For natural gas, projections are also compared to the National Petroleum Council (NPC) and the American Gas Association (AGA).(see footnote 17) For petroleum, projections are also compared to the Independent Petroleum Association of America.(see footnote 18)
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The table below indicates the average annual growth rates in energy demand across the projections. AEO2001 projects the highest growth rate for primary energy use, due in part to higher projected economic growth. While GRI projects the same growth rate, their projection is only available through 2015. GRI projects the highest electricity demand growth of all the forecasts.
Both AEO2001 and GRI project the highest growth for residential energy demand, and AEO2001 has the highest growth rate for commercial energy demand. GRI projects the most rapid growth for demand in the industrial sector, with AEO2001 approximately in the center of the range. The AEO2001 projects growth in the transportation demand sector slightly below DRI, which has the highest projected growth. GRI and WEFA both have projected considerably lower transportation demand growth, due to much lower growth for light-duty vehicle travel, coupled with much more rapid improvement in vehicle efficiency in the GRI projections.
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As shown in the next table, total electricity sales in AEO2001 are higher in 2020 than in WEFA and DRI, and they are almost identical to GRI in 2015. All forecasts project electricity prices to remain stable or decline. The AEO2001 electricity price projection is the highest in 2020 but is slightly lower than the GRI projection in 2015.
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In 2020, AEO2001 projects the highest natural gas consumption and production of the available forecasts. GRI projects the highest natural gas consumption and production in 2015, while the NPC projection is very similar to that in the AEO2001. AGA projects lower consumption in 2015 relative to AEO2001 but higher production, relying less on imports. In both 2015 and 2020, the natural gas prices in AEO2001 are the highest projections with the exception of NPC.
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In both 2010 and 2020, the AEO2001 projection of total petroleum demand is approximately in the middle of the range of the other available projections. In 2010, AEO2001 has the lowest projection of crude oil production; however, in 2020, AEO2001 projects crude oil production of 5.1 million barrels per day, essentially the same as DRI and WEFA, the two other available projections. In both 2010 and 2020, AEO2001 projects the highest world oil prices.
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In both 2010 and 2020, total coal consumption in AEO2001 is projected to be higher than in the other projections, primarily due to higher coal consumption for electricity generation. As a result, total coal production is also higher in AEO2001. In 2020, projected mine-mouth coal prices are very similar across the projections. In 2015, the projected minemouth price in AEO2001 is essentially the same as in WEFA but higher than in GRI.
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Role of Tax Incentives
Q2. Please comment on the role of tax incentives in promoting renewable energy and energy efficiency. What has worked and what has not worked and why? What are the pros and cons of such incentives?
A2. EIA has addressed the potential impacts of proposed tax incentives, most recently in Analysis of the Climate Change Technology Initiative and Analysis of the Climate Change Technology Initiative: Fiscal Year 2001.(see footnote 19) The timing of tax incentives, their size, and their length are all important to the future penetration of a technology. Also important is whether the action would be undertaken even in the absence of tax incentives. This could happen, for example, if a proposed tax incentive would apply to projects or activities currently under construction.
The duration of the incentive needs to be sufficient that consumers can plan to undertake the additional investments in a reasonable manner. To the extent that tax incentives are intended to encourage technology development and cost reductions, it is important that the incentives be in place long enough to bring about such long-term changes. Where tax incentives are applied to emerging technologies, it is important that the technology be commercially available during the life of the tax incentive. Finally, the size of the tax incentive is also important. Small changes in the cost of new or improved technology are unlikely to affect the economic payback sufficiently to change consumer behavior. The tax incentive must be of sufficient size to overcome competition with alternative technologies. In EIA's analyses of the Climate Change Technology Initiative (CCTI), it was concluded that the proposed tax incentives were not of sufficient duration or size to make much of a significant impact on energy consumption. In the fiscal year 2001 CCTI analysis, energy consumption in 2010 is projected to be reduced by 92.9 trillion Btu, or 0.08 percent, relative to the reference case, as a result of the collection of tax incentives analyzed across the end-use and generation sectors.
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Some tax incentives appear to have been less effective in bringing about a permanent change in renewables penetration. In the early 1980s, shipments of medium-temperature solar thermal collectors (the type used for water heaters) peaked at just under 12 million square feet per year, enough for about 300,000 units. After the 1978 Federal 40 percent residential and 15 percent business energy tax credits for solar collectors expired at the end of 1985, shipments fell to less than 1 million square feet per year, and they have never recovered. A business energy tax credit for solar energy was reinstated at 15 percent for 1986 and phased down to 10 percent by 1992, with the Energy Policy Act of 1992 providing a permanent extension of the tax credit. The credit reinstatement and increasing oil prices after 1986 did not seem to create a rebound of the solar industry. Today, most solar collector shipments (85 percent) are used for heating swimming pool water, which is excluded from the tax credit. In 1997, EIA estimates that roughly 460,000 households (0.5 percent) used solar water heaters to provide some of the energy required to heat the annual load of hot water. Currently, about 9 percent of solar thermal collector shipments are destined for the commercial sector. Only 0.5 percent of all solar thermal collector shipments purchased by the commercial sector are for uses other than heating swimming pools, even with the existing energy tax credit. It appears that these later tax credits have not been effective in encouraging the penetration of solar energy.
Natural gas production from coal seams has grown dramatically since the late 1980s, largely because of tax credits that provide an incentive for the production of high-cost gas supplies. In 1997, 1,090 billion cubic feet, or 6 percent of total U.S. production, came from coal seams, compared with only 41 billion cubic feet in 1988. The tax credit appears to have been successful in encouraging coal seam production and has also contributed to sustained development of natural gas from coal seams by promoting an improved understanding of unconventional gas reservoirs, leading to new and lower cost technologies for its recovery.
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Investment tax credits (ITC) were used in the early 1980s to spur investment in wind power and other renewables. Before its expiration with respect to wind power in 1985, the ITC, along with requirements to purchase renewables in the Public Utility Regulatory Act of 1976, is widely credited with facilitating the California wind power growth of the 1980s, reaching 1.7 gigawatts within the decade. EPACT made the 10 percent ITC permanent for central station solar photovoltaic plants. It appears that these tax credits were successful in encouraging the technologies when most of the higher cost and risk were covered, such as for wind, and were unsuccessful when the technology costs clearly exceeded the market price even with the incentives.
EPACT established a 1.5-cent-per-kilowatthour production tax credit (PTC) for every kilowatthour of production during the first 10 years of operation for all new wind or closed-loop biomass plants entering service by June 30, 1999, which has been extended through December 31, 2001. Less than 115 megawatts of new wind capacity was added through 1997; however, as the original expiration approached more than 160 and 650 megawatts were added in 1998 and 1999, respectively. EIA's Annual Energy Outlook 2001 projects more than 775 megawatts will be added in 2001, and current evidence suggests that actual builds in 2001 may be several hundred megawatts higher, including builds that may be accelerated to qualify for the PTC.
The PTC appears to have contributed to the growth of wind generation and also to improved cost and performance for wind technologies because the PTC covers most or all of the gap between wind power and its next lower cost competitor. However, new wind plants are not appearing where State incentives are absent, suggesting that State mandates have also been a contributing factor. In the analysis of the CCTI, EIA analyzed a proposed extension of the tax credit through 2005, which suggested that nearly all of the wind generation additions would have occurred without the credit. The PTC appears not to have worked for closed-loop biomass because the 1.5-cent tax credit, now 1.7-cents, is insufficient to overcome much higher closed-loop biomass technology costs.
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Tax incentives may play an important role in encouraging the penetration of new, more energy-efficient or renewable technologies. However, the size of the incentive must be sufficient to overcome any price or other disadvantages the technologies may have. Also, the incentive must be in place for a long enough period of time and for the correct time frame to be able to make a significant impact on technology penetration. Another consideration for evaluating the effectiveness of a tax incentive is the extent to which it is subsidizing ongoing activities and projects, thus increasing the marginal cost of the projects stimulated by the tax incentives. Accounting for these factors, tax incentives may contribute to long-term technology development and cost reductions.
Factors in Use of Best Available Technology
Q3. EIA's Annual Energy Outlook 2001 illustrates that energy use in the residential sector could be reduced below 1999 levels in 2020 if the best commercially-available technologies in the reference case were chosen by consumers whenever equipment was purchased. Is the same statement true for the commercial, industrial and transportation sectors? Why do consumers not choose technologies that are closer to the best available?
A3. The Annual Energy Outlook 2001 high technology cases for the residential and commercial sectors assume earlier availability, lower costs, and higher efficiencies for more advanced technologies than in the reference case. The residential and commercial best available technology cases assume that consumers choose the most energy-efficient technologies available in the high technology case, regardless of cost.
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In the commercial sector, delivered energy consumption could be reduced 11 percent in 2020, relative to the reference case, if consumers chose the most energy-efficient technologies available in the high technology case whenever equipment was purchased. Commercial delivered energy consumption in 2020 for this case is projected to be higher than in 1999 by 23 percent; however, commercial delivered energy use per square foot projected for 2020 would be 5 percent below 1999 energy use per square foot indicating that growth in commercial floorspace is expected to exceed efficiency improvements.
AEO2001 does not present a best available technology case for the industrial sector due to the way capital additions are made in that sector. The foremost requirement for incremental capital investment is to enhance output, either quantitatively or qualitatively. While this requirement often results in reduced energy intensity, energy alone is typically not of paramount importance. An underlying assumption in the AEO2001 forecast is that new equipment installed to meet growing demand or to replace retired facilities will be state-of-the-art in terms of productivity.
AEO2001 presents a high technology case for the industrial sector. The high technology case assumes that there will be a more rapid reduction in the state-of-the-art energy efficiency and that this equipment will be added earlier than in the reference case. Delivered industrial energy consumption in the high technology case is projected to be 0.6 quadrillion Btu lower than in the reference case in 2020. In order for industrial energy consumption in 2020 to be the same as in 1999, a result that parallels the result of the residential best available technology case, industrial delivered energy intensity would need to decline at an average rate of 2.5 percent per year, compared with the 1.4 percent annual decline in the AEO2001 reference case. Assuming that industrial intensity decline, delivered industrial consumption in 2020 would be 7.5 quadrillion Btu, or 22 percent, lower than in the AEO2001 reference case. This decline rate would be slower than the average annual decline of 3 percent in the 1979 to 1987 period; however, the AEO2001 projections are based upon relatively modest increases in energy prices and rapid industrial growth, which are opposite to the conditions that prevailed during the 1979 to 1987 period.
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AEO2001 does not present a best available technology case for transportation due to issues of how best available technology choices would impact the choice of vehicle size and class. Using assumptions for light-duty vehicles from Scenarios for a Clean Energy Future,(see footnote 20) we assume that new automobile efficiency reaches 37.5 miles per gallon in 2010, from the Moderate Efficiency Case in the report, ramping up to 61.3 miles per gallon in 2020, the highest available efficiency. The efficiency of new light trucks is assumed to reach 27.1 miles per gallon in 2010 and 33.9 miles per gallon in 2020, from the Advanced Efficiency Case, which represents very optimistic adoption of energy-efficient and weight-reducing technologies. Using these efficiencies for new vehicles and the same stock turnover and travel from AEO2001, light-duty vehicle energy consumption in 2010 is projected to be 17.5 quadrillion Btu compared to 18.5 quadrillion Btu in the AEO2001 reference case. In 2020, light-duty vehicle consumption is projected to be 16.5 quadrillion Btu compared to 21.0 quadrillion Btu in the reference case. Under these assumptions, light-duty vehicle consumption remains above the 1999 level of 14.9 quadrillion Btu.
One reason that consumers do not choose technologies that are closer to the best available is that the most energy-efficient technology may not be the most cost-effective. The incremental investment required for residential consumers to purchase the most efficient technologies is projected to be $185 billion, saving consumers $108 billion in energy expenditures, so consumers do not recover their investment and these purchases are not economical. (Incremental investments and energy expenditure savings are discounted back to 2000 at a 7 percent real discount rate.)
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Many investments in energy efficiency do make economic sense; however, several other factors may be considered when purchasing energy-using equipment. Features other than energy efficiency may be more important to consumers as evidenced by recent trends toward larger, more powerful personal vehicles and larger home entertainment equipment, for example. Builders and owners of leased property often lack incentives to invest in energy-efficient equipment because they are not responsible for paying the energy bills, and the homeowners and tenants may not have the option of choosing more efficient technologies. Since more efficient equipment is typically more expensive, consumers may expect to move before they would realize enough energy savings to recover their investment or may simply want a more immediate payback than that offered by the equipment. Artificially low prices for energy, through regulated prices or fuel price subsidies for example, may hamper the penetration of technologies, because even lower technology costs would be necessary for them to appear cost-effective. In addition, reasons such as uncertainty about future energy prices, lack of information about new technologies and their supporting infrastructure, uncertainty about the timing of newer models or improved technologies, and lack of immediate availability (in the case of a broken water heater or refrigerator) are often cited as barriers to investment in energy-efficient equipment.
EIA Energy Cost Projections
Q4. Did the EIA predict the recent energy price spikes for various energy types-oil, natural gas, and electricity? If not, has the EIA adjusted its forecasts in light of these price spikes, and if so, what are the results?
A4. At the time the projections in the Annual Energy Outlook 2001 were finalized, the projections for the years 2000 and 2001 used the short-term projections from the September 2000 Short-Term Energy Outlook (STEO). At that time, the short-term projections for the average world crude oil price were about $27.60 per barrel in 2000 and $23.80 per barrel in 2001 (1999 dollars). Using the March 2001 Monthly Energy Review and the April 2001 STEO, world oil prices are estimated at $27.12 per barrel for 2000 and $24.54 per barrel for 2001, adjusted to 1999 dollars. So the oil price estimates were reasonably close to what is currently estimated.
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While electricity prices may be high in California, the national average price is not experiencing the same surge. Through November, the average retail price of electricity for 2000 is 6.7 cents per kilowatthour, the same price as for the similar period in 1999. In AEO2001, projections for the average residential price of electricity were 8.1 and 8.0 cents per kilowatthour in 2000 and 2001, respectively, in 1999 dollars. The April STEO estimates the price at 8.1 cents per kilowatthour for both 2000 and 2001, in 1999 dollars.
In AEO2001, the average wellhead price of natural gas was projected to be $3.32 per thousand cubic feet in 2000 and $3.34 per thousand cubic feet in 2001, in 1999 dollars. The price is currently estimated at $3.53 and $4.98 per thousand cubic feet in 2000 and 2001, respectively, in 1999 dollars. While EIA anticipated an increase in natural gas prices for 2000 that was reasonably close, it did not project the magnitude of the increase in 2001, which is partially weather related.
EIA has not made a preliminary estimate of the longer-term impacts of the higher short-term natural gas prices. However, we believe that the natural gas industry will continue to respond to the higher prices as evidenced by higher drilling over the last year, which will eventually lead to lower prices. In 2000, drilling for natural gas in the United States increased by 45 percent over the 1999 level of 10,500 wells, in response to a 66 percent increase in the average natural gas wellhead price from 1999 to 2000. Relative to AEO2001, the higher natural gas prices earlier in the forecast will probably lead to slightly higher capacity additions for coal-fired generating plants, and slightly lower capacity additions for natural gas-fired plants.
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Q5. It is our understanding that California, New York and other states are scaling up their energy efficiency programs in light of recent electricity reliability and other energy problems. Has the EIA adjusted its forecast to account for these recent developments and the continued growth in state and regional energy efficiency programs that is expected?
A5. Since the Annual Energy Outlook 2001 (AEO2001) was prepared last fall there have been no explicit changes to represent these newer programs and until many of the details of the programs are available it will be difficult to assess their potential impact. At this time it is unclear whether the expenditures on these programs reflect new investments in energy efficiency or whether they largely offset decreases in investments that used to be made by utilities. With the advent of deregulation, many States have turned to alternative methods including public benefits charges (also referred to as systems benefits charges) and/or renewable portfolio standards to continue programs that were once part of utility demand-side management programs.
For many years utilities reported expenditures on demand side management (DSM) programs to EIA. In general these expenditures were rising each year until 1993, but since then they have declined precipitously. In 1993, they totaled $3.1 billion (in 1999 dollars), while in 1999, the last year for which final data are available, they had fallen to $1.4 billion, a 55 percent decline. The impacts of these programs have been captured by EIA's surveys and used to develop our projections. In general, our projections show the rate of growth in electricity demand slowing in the future because of improving energy efficiency that is, in part, due to the past DSM investments by utilities and States. However, it is difficult to determine whether the improvements in efficiency are due to general trends or specific programs.
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In both California and New York, public benefits charges have been instituted to fund a variety of programs, including low-income assistance, energy efficiency, peak load reduction, research and development, and renewable development programs. In California, the Governor also recently announced plans for an $828 million energy efficiency and demand reduction program. Of this total, $404 million is incremental funding while $424 million is the funding associated with existing programs. The impacts of the existing $424 million program, which is slightly below what the major California utilities used to spend on DSM programs, should be captured in EIA data and represented in our projections. The AEO2001 projections include estimates of the renewable generating capacity stimulated by California renewable power auctions held prior to August 2000, but do not incorporate the impacts of the November 2000 auction. In New York, the systems benefits charge previously scheduled to end in July 2001, was extended to July 2006 in January 2001, and increased from $78 million to $150 million. While we may not have fully represented the potential impacts of all of the incremental programs in the AEO2001 projections, the general trend towards improving energy efficiency and continued investments in renewables has been incorporated. The programs not incorporated in AEO2001 will be addressed in the Annual Energy Outlook 2002.
QUESTIONS SUBMITTED BY CONGRESSMAN LAMAR SMITH
Renewables Ranking
Q1: Please rank renewable energy resources in order of their greatest potential for future development.
A1: This answer is based on future potential for electricity generation. Although renewable resources are used in other applications (such as ethanol in transportation fuels), their greatest potential is as a source of electricity generation, as an alternative to fossil-based and nuclear technologies.
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There are a number of measures that could be used to rank renewable resources by future potential. EIA's Annual Energy Outlook 2001 projects both capacity and generation for renewable technologies in its reference case, which assumes current laws, regulations, and trends in research and development; and in a High Renewables Case, which is primarily based on cost and performance goals as stated by the Department of Energy's Office of Energy Efficiency and Renewable Energy (EERE).(see footnote 21)
Based on the projected increases in electricity generation in the reference case through 2020, we rank biomass, landfill gas, geothermal, wind, and solar, in order, in terms of their potential for future electricity generation. Hydroelectricity, due to environmental issues, is not expected to increase its contribution to the Nation's generation over this time period. Biomass, which has potential in the areas of cogeneration as a co-firing fuel in some coal-based generating units and in dedicated generating capacity, is projected to increase its generation by about 29 billion kilowatt-hours over the next 20 years. Much of this growth is in the industrial sector as cogeneration due to projected economic growth in the paper and pulp industry. Landfill gas generation, driven in part by the need to reduce methane emissions at landfills, is expected to increase about 16 billion kilowatt-hours through 2020. Geothermal-based generation, which has the capability of meeting baseload demands, grows about 13 billion kilowatt-hours through 2020, but is limited by the concentration of its resources in the Western United States, and the fact that many of those resources are in national parks not conducive to development. Wind, which is the least costly of all of the renewable technologies on a per kilowatt-hour basis, nevertheless is impeded by its intermittence, which reduces its availability for meeting generation requirements. Solar technologies are generally too expensive to show significant penetration over this time frame.
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EIA's High Renewables Case, which assumes lower capital costs and improved operating characteristics primarily based on EERE goals, as well as higher resource availability, shows increased usage of both wind (a 60 billion kilowatt-hour increase from 1999 to 2020) and geothermal (a 53 billion kilowatt-hour increase from 1999 to 2020) under those circumstances, followed by biomass, landfill gas, and solar. Wind's low per-kilowatt-hour cost gives it an advantage in a scenario that favors renewables in comparison to the reference case assumptions. Despite its concentration in the West, geothermal also shows considerable potential in this case, due to its status as a provider of baseload power and its lower per-kilowatt-hour cost compared to biomass.
If the measure of future potential is capacity, the rankings change somewhat. In the AEO2001 reference case, the ranking by capacity additions is biomass (3.7 gigawatts), wind (3.2 gigawatts), landfill gas (2.1 gigawatts), geothermal (1.5 gigawatts), and solar (including distributed applications in buildings) (1.0 gigawatt). Although capacity is not a measure of the contribution of these technologies to meeting demand, it indicates the potential contribution during periods when the resource is available. Because wind and solar are both intermittent resources, however, their utilization rates are limited by the availability of the resource at the time it is needed. In the High Renewables Case, the ranking of technology by increased capacity is wind, geothermal, biomass, landfill gas, and solar.
A final measure of potential is based on the amount of ultimate resources, a concept roughly equivalent to total oil and gas resource estimates. On this basis, wind resources could support hundreds of gigawatts of additional capacity, if issues of system reliability, access to transmission lines, and storage could be solved. Biomass could also fuel multiples of its installed base today once dedicated energy crops become economically viable. Geothermal is limited by its geographic concentration in the West, while landfill gas is dependent on the Nation's solid waste stream and how it is managed. Solar resources, especially in the West, are also plentiful, but the cost of the technology makes it less likely as a significant source of electricity. Finally, hydroelectricity has the potential to add as much as 30 gigawatts of additional capacity; but because of environmental and economic issues surrounding its use, it is generally not considered to be a viable source of new generation.
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Geothermal Efficiency
Q2: Because of its dependability at continuous generation of electrical power, is geothermal the most efficient?
A2: No, geothermal is not usually the most efficient renewable resource, either in energy conversion efficiency or in cost. Although geothermal input heat rates vary tremendously depending upon the specific site, EIA estimates an input heat rate for geothermal at or above 31,000 Btu per kilowatt-hour. In contrast, many fossil-fueled and other technologies offer input heat rates well under 10,000 Btu per kilowatt-hour; for example, advanced natural gas combined cycle plants, at 6,917 Btu per kilowatt-hour, have a thermal efficiency roughly four times higher than geothermal. Biomass gasification features an input heat rate of 8,900 Btu per kilowatt-hour. Geothermal becomes economically attractive only when the cost of extracting useful heat falls below the cost of using the fossil-based or other fuels.
Nor is geothermal usually the least cost per kilowatthour. Except for a few low-cost sites, it is estimated that capital costs for most new capacity would average above $2000 per kilowatt, and with high transmission and operations and maintenance (O&M) costs, few occasions exist at which geothermal can deliver electricity at lower costs than fossil-fueled alternatives. Finally, geothermal is simply not available in most of the country. However, where they are available—such as in California, Nevada, and Oregon—some geothermal resources are a reliable and cost effective renewable source of generation.
Deep Gas Potential
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Q3. Deep gas wells have encountered subsurface temperatures of up to 180oC. What is the potential of deep gas?
A3. The Annual Energy Outlook 2001 (AEO2001) projects that gas production from deep reservoirs greater than 10,000 feet will rise from 1 trillion cubic feet per year in 1999 to 2.7 trillion cubic feet per year by 2020. This projected level of deep gas production would compose approximately 10 percent of total projected United States natural gas production in 2020, up from a 5 percent share in 1999.
Conventionally recoverable deep gas resources not associated with oil reservoirs represent about 116 trillion cubic feet or about 9 percent of the technically recoverable resources in the Lower 48 United States. These resources typically are more expensive to find and develop than shallow resources because of the technical difficulties encountered when drilling at deeper and deeper intervals. Deep gas is harder, riskier, and more expensive to find since the precision of seismic information declines with depth, and the greater risk requires larger (and less common) prospective accumulations to justify an exploratory well. Another obstacle affecting both exploration and development is the higher temperatures experienced as drilling proceeds further into the earth. At certain temperatures, increasingly important electronic applications are no longer able to operate properly. At even higher temperatures, the most durable parts of the drilling apparatus begin to lose their ability to function reliably. Research is being conducted to overcome these obstacles. Examples include efforts to develop smaller electronic devices that can more effectively withstand the heat and pressure experienced at greater depths. More corrosive-resistant alloys are also being developed to render the drilling strings and drillbits less subject to the damaging effects of the extreme conditions encountered at lower levels. These ongoing technological innovations are incorporated in the Annual Energy Outlook by adjusting drilling costs and productivities to reflect the long-term trend of technological progress in this area.
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Renewable Percentage of Total Energy Supply
Q4. What percent of today's energy needs are supplied by renewable energy sources?
A4. In 2000, the United States consumed 7.1 quadrillion Btu of renewable energy, or 7.2 percent of total energy consumption of 98.8 quadrillion Btu. This renewable consumption includes approximately 0.3 quadrillion Btu of net electricity imports generated from hydroelectric or geothermal energy. Primarily due to lower hydroelectric generation, this is a reduction from the 7.5 quadrillion Btu of renewable energy consumed in 1999.
ANSWERS TO QUESTIONS SUBMITTED BY DEMOCRATIC MEMBERS
Projected Household Energy Use
Q1. Given the efficiency gains from 1970 to 1999, what factors account for the projected increase in energy use per household from 102 to 107 million Btu from 1999 to 2020?
Doesn't the addition of new, more energy efficient housing to the Nation's inventory offset the additional electrical load inside the houses?
If you had factored into your projections the new standards adopted by DOE in January of this year, would you still see that slight increase in energy use per household?
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A1. The Annual Energy Outlook projections include increasing efficiency of equipment and tighter shells (windows and insulation). However, the efficiency and shell effects are insufficient to offset other factors causing increases in consumption. In addition to increasing electrical loads, there are two other notable factors contributing to the increase in energy use per household between 1999 and 2020: the increasing size of new construction and weather effects.
The forecast accounts for the trend toward building larger homes resulting in an increasing average size for housing units over the projection period. This trend has persisted for a decade and a half for all Census divisions and for all three housing types (single family, multi-family and mobile homes) based on U.S. Department of Census data (the Characteristics of New Housing reports). The trend toward increasing size has an important effect on energy consumption since delivered residential energy consumption per square foot declines slightly in the reference case from 61.0 thousand Btu per square foot in 1999 to 60.5 in 2020.
Overall, 1999 was somewhat warmer than average. On a national basis, the reduction in the need for heating outweighed the increase in the need for air conditioning, resulting in lower energy consumption than would be expected in a year with ''normal'' weather. Energy use projections for 2001 and beyond are based on ''normal'' weather using 30-year averages. Thus, comparing 2001 with 2020, energy use per household includes comparable weather effects in both years. For these years, per household delivered energy use increases from 105 to 107 million Btu.
If the new standards adopted by DOE in January and revised in April had been included in the projections, energy consumption per household would have still exhibited an increase between 1999 and 2020 from 102 to 104 million Btu per household. Placing the results on a comparable weather basis by comparing the years 2001 and 2020, energy consumption per household would be projected to decline from 105 to 104 million Btu with the new standards in place.
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Price Effect on Industry Energy Usage
Q2. Do you have any estimates of the changes that could be expected in the decline of industry primary energy intensity if you factor in current energy prices?
A2. Current national estimates of electricity and oil prices are reasonably close to those projected in the Annual Energy Outlook 2001 (AEO2001). Only the near-term natural gas prices are significantly higher than projected in AEO2001. EIA has not made a preliminary estimate of the longer-term impacts of the higher short-term natural gas prices. However, the expectation is that earlier in the forecast period, projected industrial energy intensity would be slightly lower than projected in AEO2001 due to the current higher natural gas prices and resulting electricity prices. The industrial energy intensity is expected to be unchanged from the current 2020 projection.
Municipal Solid Waste Gas
Q3. In your high renewables case, is municipal solid waste, that is garbage, included in your definition of biomass? If not, why not?
A3. While municipal solid waste (MSW) is not included in our definition of biomass, it is separately accounted for in all of our forecasts, both the reference case and the High Renewables Case. Under the ''municipal solid waste'' category we assume that existing municipal solid waste mass-burn facilities will continue to operate as currently planned. However, we assume that all new capacity additions under the category ''municipal solid waste'' will be landfill-gas-to-electricity facilities. We do not assume that any new MSW mass-burn facilities will be built over the 20-year forecast horizon, for four reasons: (1) capital costs for MSW mass-burn facilities are very high ($2,723 per kilowatt)(see footnote 22), (2) concerns with air emissions (e.g., dioxins) and solid waste emissions (e.g., heavy metals) from the MSW mass-burn facilities drive community opposition to such facilities, (3) the fees for collecting municipal solid waste, called ''tipping fees'', are not high enough to make MSW mass-burn facilities financially attractive operations (other than in some niche markets), and (4) court decisions(see footnote 23) facilitating interstate transfer of trash now make landfills more attractive and mass-burn facilities less viable. As a result of these factors there are no known plans for additional facilities in the MSW mass-burn category.
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There is potential for growth in the MSW landfill gas category as waste sites and municipalities have to deal with the issues of scarcity of land for locating new landfills, and to address methane emissions from existing landfills. In the AEO2001 reference case, landfill gas capacity is projected to increase 2.1 gigawatts through 2020, with another 0.3 gigawatts projected in the High Renewables Case.
ANSWERS TO QUESTIONS SUBMITTED BY REPUBLICAN MEMBERS
Post-Hearing Questions Submitted to Mr. Kenneth K. Humphreys, Senior Staff Engineer, Energy, Science and Technology Division, Pacific Northwest National Laboratory
21st Century Scenarios
Q1. You state in your testimony that, for the U.S. component of the ''business-as-usual'' scenario'', ''[b]y 2100, all renewables make up 20% of the U.S. energy mix, but 80% of U.S. energy needs in 2100 are still supplied by fossil fuels—down from 90% in 1995. Fossil fuels remain the dominant fuel.'' What is the mix of renewables that comprise that 20%, that is, how much of that is hydro, wind, geothermal, etc.?
A1. First, a few important points about interpreting these results:
The scenarios generated by our energy-economic models are best used to evaluate long-term trends and technological opportunities, particularly when several scenarios (e.g., one with significant technological development and one without) are compared against each other. Predicting precisely absolute fuel prices 30, 50, or a 100 years out is not particularly wise.
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Some variables in the scenarios we typically run become more uncertain as we look far into the future, such as population, economic growth, etc., making relative comparisons between scenarios more appropriate than absolute predictions.
While some uncertainties grow as we look far into the future, it is also true that some variables become more certain. An example would be relative oil prices, which can fluctuate significantly on an annual basis, as we have seen over the last few years; but on a decadal basis are fairly predictable.
Thus, the general trends, rather than precise numbers should be the focus in interpreting these results.
In addition to the factors mentioned above, what our energy future looks like depends upon what energy resources become available at cost-effective prices. Typically, we consider three alternative resource futures, which we term: (1) ''coal bridge to the future'', (2) ''abundant oil and gas'', and (3) ''non-carbon future''. We feel that these three largely capture the extreme cases of energy resource availability. The realized energy future is likely to be some linear combination of our three. When we evaluate a particular scenario, we usually consider multiple energy resource futures to see how this affects the overall results.
Finally, there is no universally agreed to ''business-as-usual'' scenario; therefore, before providing a numerical answer to this question, there are few embedded assumptions in this scenario that need stated:
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As eluded to in the written testimony, but stated more explicitly here, the U.S. business-as-usual scenario assumes that nuclear plants operate the remainder of their lifetime, but are phased out at their end-of-life and not replaced with new nuclear capacity due to lack of public acceptance.
The scenario discussed in the testimony, uses a ''coal bridge to the future'' as an energy resource future, which implies that beyond 2030, as conventional oil and gas supplies become limited, coal is the primary cost-effective, abundant fossil fuel.
Under these constraints, by the end of the century renewables are projected to reach a market penetration of about 20%. Predicting the relative split among the type of renewables within this mix is a highly uncertain proposition, as almost certainly there will be some unanticipated breakthroughs and failures of various renewable technologies. Generally, we can observe that by the end of the century:
Primary energy use has approximately doubled from 1990 levels of 82 exajoules. Thus, for a particular technology to maintain the same market share, it must double in terms of the capacity deployed.
Hydropower will likely see its market share erode from about 4% in 1990, as global hydropower capacity is limited.
Providing that the globe is willing to accept biotechnology and a biotechnology revolution occurs, biomass has significant potential in the future energy mix. Land is not as much of a constraint as water is likely to be. Currently, the interrelationship between water demand and the penetration of BioEnergy into the marketplace is poorly understood by all energy modelers, as it has not been a focus of research.
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Together, solar and wind make up a significant share of the 20% renewable market; however, without inexpensive storage technologies, their market penetration is limited.
We also should be mindful that while a 20% market share for renewables is significant, a breakthrough of extraordinary proportions could increase this share much further.
Finally, one should bear in mind that ''business-as-usual'' scenarios—the jargin used by energy/economic modelers—are really ''innovation-as-usual'' scenarios. That is, it is assumed that technologies like biomass, solar, wind and others will continue to see substantial improvements in their performance. Thus, current public and private research efforts are critical just to achieve ''business-as-usual'' outcomes. If we wish to see greater penetrations of renewable technologies, profoundly bolder technology development must occur.
Climate Stabilization Scenario
Q2. In your U.S. component of the ''stabilization scenario,'' you say that ''[e]nergy prices are higher and therefore overall demand for energy [is] somewhat lower.'' How much higher are the energy prices?
A2. The higher energy prices in a ''stabilization scenario'' are a direct result of the assumption that in a world where society chooses to stabilize atmospheric concentrations of greenhouse gases, in one form or another, the U.S. economic system would place a ''value'' on carbon dioxide. This value could take one of many or a combination of forms (voluntary programs that results in a higher cost to produce energy, CAFE standards on fossil fuel-powered cars, emissions regulations on powerplants, a carbon tax, or one of a myriad of other approaches suggested by analysts and policymakers). We leave the choice of the mechanism up to policymakers and instead focus on the incremental cost that fossil fuels would bear through the mechanisms.
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The value of a ton of carbon will depend on several factors including the target concentration chosen—a concentration of 450 ppmv has significantly higher carbon values than a concentration of 750 ppmv, energy resource availability, and importantly the mix of technology options that is available—the availability of carbon capture and sequestration in all its forms ranging from soils to chemical capture and geologic sequestration could cut costs in more than half.
For a 550 ppmv target, and depending on other assumptions, the value on carbon is approximately $35 (per ton of carbon) in 2020 to $100 in 2050 to more than $300 in 2100. The resultant increase in the price of fossil fuels is a function of the carbon content of the fuel. Consequently, a high-carbon fuel like coal is receives more of an economic burden than natural gas or renewables.
As an example, a stabilization scenario might result in electricity prices 30 to 50% higher over the next century when compared to those in a business-as-usual scenario where we don't act on climate change. While a non-trivial increase, two points should be noted. First, to put this in context, this size of increase over the next century is less than many on the West Coast saw in one year. Therefore, spread over a long-period of time these increases are more easily dealt with by the economy. Second, these costs are not fixed, and bold technological breakthroughs have the potential to reduce the increases.
It is also important to note that some technologies, like carbon capture and geologic sequestration and biotechnology, should they prove-out as technologies, have extraordinary leverage on cost. The existence of a cost-effective option to capture and sequester carbon in geologic formations not only insures the central role of fossil fuels for the remainder of the century, but also dramatically reduces both the marginal and total value of carbon. Technology options that take advantage of near-term sequestration opportunities such as soil carbon sequestration can dramatically affect near-term costs.
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Stabilization Scenario Mix of Fuels
Q3. What is the mix of solar, fossil, nuclear, etc., in your U.S. component of the ''stabilization scenario''?
A3. The mix of fuels in the stabilization scenario changes over time in response to the total energy demand and fuel prices.
Relative to the business-as-usual scenario in question #1:
By 2100, bearing in mind that this scenario assumes non-conventional oil sources, such as oil shales, methane hydrates, and tar sands are not cost-effective, oil use have declined to minimal levels.
Natural gas and coal use remains robust, holding approximately 30% market shares each in an energy market twice as large as today.
Biomass expands dramatically, assuming water demands can be met, also holding approximately a 30% market share.
Biomass, natural gas, and coal all help support a large part of what has become a hydrogen economy.
Solar, Wind, and Hydro hold the balance of the market in the U.S.
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It is worthy to note that in a consistent global scenario, solar, wind, and hydro hold 25% of the energy market; thus, attesting to their value in developing countries. Their deployment overseas helps reduce the overall cost of managing climate change to all countries. Further, while not present in the U.S. under this business-as-usual scenario, nuclear holds more than a 10% market share on a global basis.
If a modified stabilization scenario is run where new nuclear starts are permitted, nuclear provides several percent of total U.S. primary energy demand, including approximately 5% of electricity demand.
It imperative to bear in mind that this scenario is based on a ''coal bridge to the future'' energy resource endowment and an includes technology performance that is similar to that of the IPCC IS92A scenario, and that one could conceivably construct an infinite number of scenarios to obtain any number of outcomes. Therefore, what's important here is not the precise market shares, but that economics will almost certainly drive us toward a mix of fuels (renewable, nuclear, and fossil), all playing an important role in the U.S. energy future. The probability that any single fuel type dominates the global energy future is slim.
Developing Technology Goals
Q4. You state that ''[t]he overall costs of providing for a robust energy future are minimized when a 50 to 100-year time horizon is taken and near-term technology goals are set. On a global basis, a systematic long-term strategy appears to save many trillions of dollars and the U.S. shares directly in these savings.''
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Please elaborate. What are the appropriate ''near-term'' technology goals?
A4. Near-term technology goals must ultimately be set as an outgrowth of dialogue between public and private sectors. While specific goals remain to be developed, it is clear that creating realistic technology and energy system options in a variety of areas that have heretofore received relatively little attention should be a high priority. For example, carbon capture through scrubbing with geologic sequestration, soil carbon capture, fuel cells, commercial biomass and gas hydrates, all have potential to be deployed at scale in the long term, but to date have received only modest attention. For carbon sequestration, development of technologies for monitoring and verification will be a relatively high priority. Biotechnology shows similarly good promise of delivering revolutionary breakthroughs in performance of energy systems.
We should also be extremely mindful that developing some of these technologies (e.g., sequestration or biomass) will take a bolder and more fundamental meshing of basic science and applied engineering, if these technologies are to reach their full potential. Further, these technologies have fundamental social issues associated with them (i.e., stakeholder concerns about deep injection and biotechnology, respectively). We should not assume that R&D models and public-private partnerships of the past are, defacto, the best approach for conducting R&D in the future. We must not only increase R&D investment, but must also reinvent the way we manage some R&D programs, if the investment is to be used effectively.
PNL and EIA Forecasting Compared
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Q5. What the similarities and differences of your forecasting methodology compared to EIA's?
A5. Our models are long-term (until 2100) and global in detail and coverage, and are appropriate for looking at global issues like climate change, and the effects of different policies and scenarios at a global as well as U.S. level. One of our models is a partial equilibrium model; the other is a general equilibrium model. They include non-energy and energy markets (e.g., agriculture and labor markets), which are essential to understand how technologies, particularly such as biomass, penetrate the energy system over time.
The EIA's models are detailed, and short-term (2020) and limited to the U.S. in their scope. They are most appropriate for near-term energy projections.
ANSWERS TO QUESTIONS SUBMITTED BY DEMOCRATIC MEMBERS
Efficiency Improvement Forecasts
Q1. You state in your testimony that ''end-use efficiency in all sections and regions of the world are projected to improve at approximately 1 percent per year.'' How does your end-use efficiency estimate compare with EIA and the PCAST study's estimate?
A1. A clarification is in order here. ''end-use efficiencies in all sectors and regions of the world are assumed to improve at approximately 1 percent per year.'' The improvement level varies by technology type to some degree, but with few exceptions, varies between 0.5 and 1.5%. We used this assumption in the reference case that I used in my testimony, because it is a fairly universal assumption in the energy modeling community and is based on an understanding of how the overall average performance of the technology fleet improves over time. Of course, we have explored a variety of values ranging from as little as zero (no further technology improvement—our worst case scenario) to 2% per year. The reference to ''fleet average'' is important, because in order to manage the U.S. energy system, it is far more important to measure the average efficiency of cars or building stocks than the improvement in the best car or building.
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PCAST uses scenarios that are based on comparable assumptions. EIA is very focused on improvements over the next twenty years. This is a shorter time period than many capital stocks (e.g., powerplants and buildings). EIA also models technologies in great detail making diverse assumptions among various technology types, as such, without a thorough side-by-side analysis, a comparison between our assumptions and EIA's are not possible at this time. However, our expectation is that in aggregate our improvement rates are similar to EIA's.
Year 2001 Fuel Mix
Q2. In your third bullet on page 2 of your testimony you state that by 2100 approximately 80 percent of U.S. energy needs will still be supplied by fossil fuel. Do you have any opinion on what the fossil energy fuel mix might be by then?
A2. Noting first that this ''80%'' figure is associated with a business-as-usual scenario (i.e., a non-climate policy scenario), the split amongst fuel types depends on what is assumed about the accessibility to various fuel resources. As described in the response to one of the preceding questions, we typically consider ''coal bridge to the future'' and an ''abundant oil and gas'' as possible fossil-based energy resource endowments.
If either the ''coal bridge to the future'' or ''abundant oil and gas'' resource endowments is used as a backdrop to the business-as-usual scenario, overall fossil fuel presence is about the same, 80%. Quite literally, in the ''coal bridge to the future'' coal strongly dominates the fuel mix. In the ''abundant oil and gas future'', methane hydrates, oil shales, and tar sands help oil/gas dominate the fuel mix.
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Energy Demand Elasticity
Q3. In general, how does energy demand respond to changes in price? In other words how elastic is energy demand?
A3. As one might expect, higher prices lead to lower energy demand. The price elasticity for energy depends on many factors and remains a matter of some debate even for historical periods (see Bohi, 1981(see footnote 24)). One of the most important determinants of the elasticity of demand for energy is the time period over which consumers respond. If consumers have a long period of time they will tend to be more responsive than if they must adjust immediately. In our long-term (2100) analysis we use long-run price elasticities of demand for U.S. sectors such as buildings and industry, with numerical values near unity. That is for each percentage increase in the price of energy a similar percentage demand reduction will occur. See Edmonds and Reilly (1985)(see footnote 25)
Climate Stabilization Scenario
Q4. In your testimony you describe the U.S. component of your ''energy stabilization'' scenario. Have any changes in world energy prices, shifts in supply or demand, or any other factors since the scenario was developed, caused you to change it significantly?
If so, how?
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A4. The ''stabilization'' scenario is constrained only by a maximum allowable emission trajectory over the next 100 years. The world markets for energy, carbon, fuels, etc., determine the fuel mix necessary to meet regional and global energy demand, subject to the constraints imposed by total allowable emissions and the capital stocks of the different fuels. As such, the model structure or the scenario specification has not been, nor should it be, changed to reflect the issues mentioned in the question, which are shorter term. For example, a short-term price spike in gasoline prices, while disconcerting to a consumer today, is not particularly significant over periods of a decade or longer.
In terms of capturing historical events and trends in prices, the model inputs are calibrated to accurately reflect history.
Energy R&D Funding
Q5. You state in your testimony that current investment in energy R&D does not appear adequate.
How do you view the PCAST funding recommendations?
Are they on target?
A5. The PCAST funding recommendations are a small down payment on what is needed. As noted in the testimony, the business-as-usual scenario assumes some fairly dramatic levels of technology development. This development is significantly spurred by R&D investment. Energy R&D investment has dropped 75% over the past two decades. We must reverse this trend. The PCAST numbers are thus a small down payment that seems to reflect the reality of constrained Federal budgets and the need to be practical, as opposed to an independent evaluation of what is required.
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71798kk.eps
If society chooses to address climate change, we need to be considering a national commitment to double energy R&D, in the public and private sectors, over the next five years. The Global Energy Technology Strategy Project, referred to in my testimony makes a compelling case that new technology can reduce the cost of addressing climate change by trillions of U.S. dollars; thus, while significant near-term increases in R&D may be politically difficult now, they are one of the necessary medicines for what ails us.
ANSWERS TO QUESTIONS SUBMITTED BY REPUBLICAN MEMBERS
Post-Hearing Questions Submitted to Professor John P. Holdren, Harvard University and Chair, President's Committee of Advisors on Science and Technology (PCAST) Energy Research and Development Panel
Research, Development, and Deployment Priorities
Q1. What is appropriate balance among funding for basic research versus applied research versus demonstration? What is this balance in the PCAST recommended funding levels?
A1. The 1997 PCAST study, ''Federal Energy R&D for the Challenges of the 21st Century'', focused primarily and applied energy-technology R&D, and all of its quantitative budget recommendations related to this category. It did not make quantitative recommendations about future funding levels for either DOE's ''basic energy sciences'' activities or for energy-technology demonstration activities. Concerning basic energy sciences, the report did note that the funding level in FY1997 was $640 million compared to $1282 million in applied energy-technology R&D, and it suggested that DOE should consider increasing its basic energy sciences funding in parallel with the increases in applied energy-technology R&D funding proposed for FY1999 through FY2003. Concerning technology demonstration, the PCAST report argued that the government should support demonstrations of technologies with expected public benefits beyond the expected private returns that motivate private investment, but the report did not put a number on this activity. (This was beyond its mandate.) It did say that such a demonstration program should be designed to complement public investments in R&D, that it should be designed to reduce the prices of the targeted technologies to competitive levels, and that it should be limited in cost and duration.
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Q2. How did PCAST derive its funding levels? What were the bases for assigning the various funding levels among the different technologies?
A2. The 21-member PCAST energy R&D panel, which contained individuals from the private, academic, and NGO sectors with experience in the full range of energy options, divided itsefl itself into four task forces—end-use efficiency, fossil, nuclear (containing both fission and fusion), and renewables. Each task force studied intensively (and was intensively briefed by DOE staff) on the existing DOE R&D programs in these areas including reading evaluations of these produced by previous internal and external reviews. The task forces also considered the potentials and opportunities in each of the four areas, in relation to the major energy challenges identified in the study, and it considered the current and likely future patterns of energy R&D investment in the private sector. Each task force then developed a program of proposed Federal R&D in its area, starting from the existing DOE program and making appropriation subtractions from and additions to it, constructed to effectively exploit the opportunities and address the challenges in gaps left by private-sector R&D activities. These gaps relate most importantly to possibilities where the expected returns to society from as a whole from innovation are likely to exceed those that could be reaped by private investors, as well as where there are natural complementarities between the capabilities of the Federal government (as in the national laboratories) and the private sector. The proposals of the four task forces were then extensively debated and modified in discussion in the full committee, where considerations of overall portfolio balance, capacity to address long-term as well as short-term challenges, and likely overall budgetary constraints were brought to bear.
Carbon Dioxide Control
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Q3. In your written testimony, you states that, in your view, ''the incentives relating to our energy deployments are not likely to be 'right' until we bite the bullet and implement either a carbon tax or its equivalent in the form of a tradeable carbon-emissions permit system.''
Q3.1 What level of the carbon tax would you consider appropriate?
A3.1 The appropriate level for a carbon tax depends on how rapidly society wants to bend over the curve of carbon emissions growth, how much it is willing to pay for the abatement of climate-change risks that it buys in this way, and what the costs of low-emitting and zero-emitting energy alternatives turn out to be over time. My position is that the United States should ''get its feet wet'' by starting out with a carbon tax in the range of 10 times lower than the $100–200 per ton figures that feature in the ''scare'' scenarios of some economists. That is, we should start with $10 to $20 per ton of carbon. If applied to today's fuel-use pattern, this would raise U.S. energy costs by $15–30 billion per year, compared to the recent total of about $600 billion per year, thus by 2.5 to 5 percent overall. Part of the money could go to reduce other taxes or for debt reduction, part could go toward relieving the impacts of higher energy costs on our poorest citizens, and part could go for R&D on improved low-emitting and zero-emitting energy options. I believe the incentives generated by this modest level of carbon tax would start to push energy choices in low-emitting directions more rapidly than most people expect, unleashing a lot of cost-minimizing innovation that would make a low-carbon energy future considerably cheaper than most people expect.
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Q3.2 How would a tradeable carbon-emissions permit system be equivalent to a carbon tax?
A3.2 A tradeable permit system in which the permit price equilibrates at the market-clearing level increases the cost of energy choices that emit carbon in a way that looks to producers and consumers just like a carbon tax of the same magnitude. The two approaches differ, however, in the ways in which they would be designed and implemented. A particularly important difference is that, in the case of a tax the society decides up front how much it is going to pay for carbon emissions, per ton, and this decision then leads, through operation of the marketplace, to an overall emissions level, whereas under a tradeable permit scheme, the society decides up front how much carbon it wants to emit and issues permits in this amount, and this decision then leads, through operation of the marketplace, to a price per ton.
R&D Funding
Q4. What is the level of private-sector energy R&D and what should be done to boost that level?
A4. Complete figures on private-sector energy R&D are not available, but it appears that such expenditures in the United States in the mid-to-late 1990s were in the range of 2.5 to 3 billion 1997 dollars per year, and that these expenditures had fallen by about 2 billion 1997 dollars per year since the mid-1980s. (The mid-1990s figure was about twice the Federal government 's expenditures on applied energy-technology R&D, and equal to about 0.5 percent of national expenditures on energy. This makes energy the least R&D-intensive of all high-tech sectors, in which, more typically, firms spend 3–4 percent of sales on R&D.) The private-sector's investments in energy R&D could be increased by expanded tax credits for such R&D, by regulatory and labeling measures that place a higher premium on improved energy efficiency and/or on reduced emissions, or by economic measures (such as a carbon tax or a tradeable-permit scheme) that tend to increase the economic competitiveness of alternative energy technologies.
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DOE Program Evaluation
Q5. In your opinion, which of the Department of Energy (DOE) energy efficiency and renewable programs are better managed than others? What steps should DOE take to improve its management of these programs?
A5. I am not in a position to give a definitive answer to the question as posed. The 1997 PCAST report made a number of recommendations relating to improvements that could be made in DOE's management of its energy R&D programs across the board. These recommendations included increased use of academic-industry advisory panels in reviewing R&D programs, increased use of peer-review in judging proposals for R&D support, and increased coordination across the different sectors of DOE energy research (i.e., fossil, nuclear, renewables, end-use efficiency). It is my understanding that many of these recommendations have, in the meantime, been implemented by the Department. It is also my impression that efficiency and renewables programs were among the better-managed programs in DOE's energy R&D portfolio at the time we conducted our review, but I do not have up-to-date information that would permit a current comparison.
ANSWERS TO QUESTIONS SUBMITTED BY DEMOCRATIC MEMBERS
Evaluation of PCAST Report Based on Present Conditions
Q1. The PCAST study was completed in 1997 and presumably begun in 1996. That was five years ago. From the PCAST Committee's perspective, how much change has occurred in the intervening years in the body of facts and information that the Committee relied on in the preparation of its report?
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Are the changes sufficient to warrant a reassessment of some of the Committee's findings and conclusions?
If so, what are they?
A1. Since the report was completed, the U.S. oil-import bill has more than doubled, natural gas prices have increased, California has been plunged into an electricity crisis born of botched deregulation, and the scientific consensus on the causes and consequences of greenhouse-gas induced global climate change has grown stronger and deeper. Federal energy expenditures on applied energy-technology have increased, but not by as much as the PCAST study recommended. On the whole, these developments tend to strongly reinforce the PCAST conclusion that the country's support for R&D to develop more efficient and affordable alternatives to imported oil and high-emitting conventional fossil-fuel technologies have been and remain incommensurate with the challenges and the opportunities that the country faces in the energy field. Although I cannot speak on this on behalf of a panel that no longer meets as a group, I suspect that if we were to convene again in today's circumstances we would recommend even more substantial increases in some of the areas we examined, including for example technologies for the capture and sequestration of carbon from fossil-fuel use, fuel cells, wind power, unconventional sources of natural gas, and electricity end-use efficiency. It should be noted that a PCAST panel reporting in summer 1999, on the topic of enhancing international cooperation in energy-technology innovation (and with some, but by no means total, overlap in membership with the 1997 group), came up with very similar conclusions and priorities to those in the earlier study, within the context of a mandate to focus on international dimensions of the problems and opportunities.
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Creating Renewable Energy Market Penetration
Q2. You mention in your testimony that renewables portfolio standards could allow renewable energy technologies to contribute to U.S. and global energy needs over the next several decades. What other options should be considered to encourage utilization of renewables?
Would production tax credits be as effective as a renewable portfolio standard?
A2. Renewable energy technologies, most importantly biomass and hydropower, already contribute significantly to U.S. and world energy supplies. The renewable contributions could certainly be increased through the use of renewable portfolio standards (most effectively so with the use of auctions to yield the cost-effective way to provide the designated contribution), as well as through production tax credits (which are far more effective than investment credits). Whether renewable portfolio standards would be more or less effective than production tax credits depends on the details—What is the standard? How big is the tax credit? Carbon taxes or tradeable emission permits could also be very effective at increasing the contribution from renewables, and would be more economically efficient overall at the goal of reducing greenhouse-gas emissions because these approaches would permit selecting, from a wider range of options (including energy-efficiency improvements and advanced energy technologies of all kinds), the mix that would achieve the desired emissions reductions at the lowest overall cost.
Increasing Biomass Ethanol Production
Q3. What biomass materials will be the main components needed to meet the goal of 3 million barrels per day of ethanol by 2035?
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A3. Current U.S. ethanol production of 1 billion gallons per year (equivalent to only about 40,000 barrels of oil per day) comes from corn, but this technology is not economic without substantial Federal subsidy and is not expected to be the basis of a greatly expanded role for ethanol. Instead, the current ethanol R&D program is centered on ethanol production from low-cost cellulosic materials (e.g., various biomass residues in the short term and energy crops such as perennial grasses and short-rotation woody crops grown on excess agricultural lands and/or on land restored from a degraded state in the longer term) using enzymatic hydrolysis.
ANSWERS TO QUESTIONS SUBMITTED BY REPUBLICAN MEMBERS
Post-Hearing Questions Submitted to Mr. Joel Darmstadter, Senior Fellow, Energy and Natural Resources Division, Resources for the Future
Solar Technologies Market
Q1. Which solar technologies have made the most progress in beating past cost projections and which have made the least progress? What are the reasons for these differences?
A1. In the study cited in my prepared testimony (see McVeigh et al.), we surveyed two solar variants—solar thermal and photovoltaics. In terms of forecasts made in the 1970s, photovoltaic costs appear to have recorded the most impressive percentage reduction in capital and generation costs. These reductions stem from efficiency improvements in fabrication of photovoltaic cells as well as in the capture and conversion to electricity of solar radiation. Such improvements are expected to continue. For now, however, photovoltaic generation costs still hover at around 10 cents/kwh. That is roughly the prevailing generation cost of solar thermal generation. We did not study—nor have the competence to study—particular thermal technologies and their problems and prospects. My intuition is that solar thermal systems—being the less daunting of the two systems technologically—may ''plateau'' at a relatively costly level while photovoltaics offer the potential for steady technological improvements that will continue to drive generation costs down. Please take that as the judgment of a non-specialist.
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Q2. To what extent do the solar cost figures take into account balance-of-systems costs, such as energy storage and/or increased redundancy, to compensate for the intermittent nature of some of the technologies?
A2. The solar cost figures embody at least in part the intermittent availability of the resource. Thus, the denominator in the cents/kwh estimate would reflect the relatively low number of yearly hours—say, 2500 or so compared to the 6000 or more associated with a typical base-load fossil plant. For a given level of plant cost, the lower the availability, the higher the generation cost. Even then, the solar generation cost may represent an underestimate in comparison with a base-load facility insofar as it does not capture a charge for capacity that would allow electricity dispatch to meet load. Such capacity might be met in the future as a result of breakthroughs in storage technology, or could conceivably be met today by coupling a combustion turbine to a solar plant, but that is, to my knowledge, rarely an affordable option.
Renewable Energy Policies
Q3. In your written testimony you note that ''[s]ome states have provided additional subsidies to promote renewables, while others have established their own RPS [Renewable Portfolio Standards] requirements, generally at levels less ambitious than those proposed by the Clinton administration. It is too early to judge the success of such efforts. One element of uncertainty is that even if these measures result in new investment in renewables generation, it is possible that existing facilities may be prematurely retired because of competitive pressures.'' Please on elaborate on what you mean when you say that new investment in renewables generation may result in premature retirement of existing facilities?
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A3. While new renewable investments are likely to be governed by deregulated market conditions, some existing facilities—particularly those deployed under PURPA (Public Utility Regulatory Policies Act) avoided cost rules—may find themselves unable to compete in the new milieu. Contracts for utility purchases under PURPA will soon run out, but transactions in the mid-nineties still occurred at prices which, for nonhydro renewables, were nearly three times the then prevailing national average electric generation cost.
Q4. Please elaborate on the statement in your written testimony that ''except for potential benefits of reduced global warming, biomass offers little environmental benefit over coal''?
A4. Although the respective pollutants of the two combustion sources are different—depending on the nature of the biomass resource, particulate matter may be common to both—the benefits of damage avoidance from the two energy sources have been estimated as roughly comparable. (See Krupnick and Burtraw, cited in my prepared testimony.) But evidence on this matter is highly tentative. Moreover, there may be secondary impacts of dedicated biomass combustion—e.g., compromised water quality or land erosion in the case of agricultural feedstocks—that deserve greater attention. Even more basic is the need to differentiate among the variety of organic/biological resources that constitute the generically termed category ''biomass.'' For now, the small amount of biomass in electric generation is almost exclusively accounted for by onsite industrial generation from wood and wood waste products.
Q5. You say in your written testimony that ''[p]olicies should be sought that, as far as possible, put primary emphasis on economically and socially efficient resource use and the overcoming of real market failures, not just market barriers from high costs.''
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What are ''real market failures''?
A5. In an abstract sense, market failures are circumstances that preclude society from realizing the optimal value of its present and (discounted) future level of real income. (The members of ''society'' whose activity or behavior could contribute to such an outcome may be households, producers, or investors.) One prominent example of actual or potential market failure involves the exercise of monopoly power. Another example revolves around the presence of ''externalities'' in market transactions that fail to reflect threats to health, environment, or safety brought about by ''uninternalized,'' pollution-causing energy production or conversion. In broader applicability to energy, externalities could refer to conditions causing private actors or markets to underinvest in a socially desirable amount of basic research, leaving at least part of that task up to government. Such a governmental role does not only have some obvious practical justification but can be defended conceptually in terms of yet one more instance of externality—in this, case, what might be called an ''information externality.'' As stated elsewhere, ''[information] is commonly referred to as a public good in the sense that, once provided, it is often difficult to exclude individuals from sharing in its benefits. This means that the benefits of an additional unit of information to society as a whole exceed the benefits to the individuals paying the cost of providing that unit of information. If decisions regarding the amount of resources devoted to generating information were left entirely to the private sector, the amount of information would be suboptimal.'' (See D.R. Bohi and J. Darmstadter, ''Is National Energy Planning Oversold? Journal of the American Planning Association, Summer 1991, p. 269.) In the light of such a perspective, it seems entirely appropriate, for example, for the federal government to take the lead in developing the parameters for long-term radioactive waste management or for pursuing some of the basic research relating to carbon sequestration, rather than assume that such research initiatives can confidently be left, respectively, to nuclear energy firms or to coal-burning utilities in the expectation that successful outcomes will largely be appropriable.
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ANSWERS TO QUESTIONS SUBMITTED BY DEMOCRATIC MEMBERS
The Role of Federal Government R&D
Q1. Do you have an opinion on the way the federal government structures its R&D activities?
Are there changes that you would recommend be made in the organization, management, or even the goals and objectives of the federal R&D enterprise?
A1. See A2. below.
Q2. How far should federal R&D programs venture from basic research toward commercialization activities?
Do you see a bright line on a continuum between basic research and commercialization beyond which the federal government should not go?
Would your answer be the same for all technologies, or are there exceptions?
A2. Since the above two sets of questions are closely interrelated, I hope I can be permitted the following cross-cutting answer—prefaced, however, by the reminder that the matter of R&D strategy and policy are areas about which my views are those of a non-specialist: (a) It is admittedly facile to note that energy R&D—broadly considered—overlaps numerous federal agencies, including DOE, EPA, NRC, USDA, USGS, to name the most obvious ones. Within DOE, there is—within its far-flung operations—the activities (and comparative advantages) of headquarters personnel and those at the national labs. To the extent that the R&D component of a ''comprehensive'' national energy policy is a legitimate concern, an effort that ensures coherence among the R&D activities of these various entities may be desirable. (b) Notwithstanding the difficulty of making a sharp dichotomy between the research and the developmental parts of federal energy support, the primacy that I believe should be accorded the former deserves to be kept continuously in mind. (The GAO–DOE exchange, cited in the GAO reference in my prepared remarks, points up the issue.) Subsidies or even cost-share programs that target well-established industries like automobile manufacturing or fossil-fuel combustion merit close scrutiny as to whether federal programs are a socially justified complement to, or merely serve to crowd out, private initiative. (c) There are undoubtedly some technologies that warrant a more conspicuous federal role than can be determined by invoking some hard-and-fast divide on the R;D continuum. Consider the possibility of a revived nuclear energy momentum. If such a revival is thought to be something that that should not be excluded from a broad-ranging energy technology portfolio, it is inconceivable that, at least for the time being, the necessary impetus could be largely left to the private sector. (These thoughts are relevant to, and overlap, question Q5 on market failures, posed by the Majority Membership.)
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Tax Credits and Portfolio Standards
Q3. How economically efficient do you believe the current wind production tax credit is?
Should production tax credits be extended to the other renewables, and if so, on the same terms and conditions?
A3. There are two principal reasons to question the virtues of a production tax credit as a preferred vehicle for supporting renewables—wind or otherwise—in order to encourage their greater penetration of energy markets: (a) At the broadest level, to the extent that the benefits of renewables are meant to offset the ''disamenities'' of fossil fuels, it would be more efficient to inhibit use of the latter rather than overstimulate aggregate electricity demand by trying to drive down renewables prices. Constituency pressures don't help achieve a more balanced outcome: traditional energy producers resist the need to internalize yet one more externality; renewables advocates argue entitlement to a fairer shake in the marketplace. I don't minimize the difficulty of dealing with these aspects. (b) Policymakers would need to appraise the technological/economic status of given systems at given intervals as a basis of assessing the need for tax relief: would a 15 cents/kwh system warrant the same 1.7 cents/kwh (or whatever) tax credit as a system producing electricity at, say, 5 cents/kwh? In other words, as technological breakthroughs occur (or fail to occur), the need for the credit—its magnitude and duration—would need to be legislatively reevaluated. Beyond these two aspects, it is worth noting that tax credits are only one of the sources of policy support for renewables. There is R&D support, favorable amortization treatment, and other financial preferences. At the very least, more informed policy choices might be possible if the different instruments of support for different renewable resources could be more readily analyzed and compared.
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Q4. Which approach do you believe is more economically efficient, a renewable portfolio standard or production tax credit?
Which one do you believe would get more renewable generating capacity deployed?
A4. There are two principal reasons to question the virtues of a production tax credit as a preferred vehicle for supporting renewables—wind or otherwise—in order to encourage their greater penetration of energy markets: (a) At the broadest level, to the extent that the benefits of renewables are meant to offset the ''disamenities'' of fossil fuels, it would be more efficient to inhibit use of the latter rather than overstimulate aggregate electricity demand by trying to drive down renewables prices. Constituency pressures don't help achieve a more balanced outcome: traditional energy producers resist the need to internalize yet one more externality; renewables advocates argue entitlement to a fairer shake in the marketplace. I don't minimize the difficulty of dealing with these aspects. (b) Policymakers would need to appraise the technological/economic status of given systems at given intervals as a basis of assessing the need for tax relief: would a 15 cents/kwh system warrant the same 1.7 cents/kwh (or whatever) tax credit as a system producing electricity at, say, 5 cents/kwh? In other words, as technological breakthroughs occur (or fail to occur), the need for the credit—its magnitude and duration—would need to be legislatively reevaluated. Beyond these two aspects, it is worth noting that tax credits are only one of the sources of policy support for renewables. There is R&D support, favorable amortization treatment, and other financial preferences. At the very least, more informed policy choices might be possible if the different instruments of support for different renewable resources could be more readily analyzed and compared.
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APPENDIX 2:
Additional Material for the Record
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Next Hearing Segment(2)
(Footnote 1 return)
One Btu is the amount of heat energy equal to the heat needed to raise the temperature of one pound of water at one atmosphere pressure and at 39.1 F by 1 F. One quadrillion Btu is approximately equivalent to the annual energy consumption of 9.85 million U.S. households.
(Footnote 2 return)
See http://www.eia.doe.gov/oiaf/aeo.html. EIA states that ''[t]he projections in AEO2001 are not statements of what will happen but of what might happen, given the assumptions and methodologies used. The projections are business-as-usual trend forecasts, given known technology, technological and demographic trends, and current laws and regulations. Thus, they provide a policy-neutral reference case that can be used to analyze policy initiatives.''
(Footnote 3 return)
EIA's reference case is based on the results from its National Energy Modeling System (NEMS) and on Federal, State, and local laws and regulations in effect on July 1, 2000. It also assumes, among other things, that long-term U.S. economic growth averages 3.0% per year through 2020. EIA also focuses on four other cases that assume higher and lower economic growth and higher and lower world oil prices than in the reference case.
(Footnote 4 return)
These include those mandated by the National Appliance Energy Conservation Act of 1987 and the Energy Policy Act of 1992, including the refrigerator and fluorescent lamp ballast standards that become effective in July 2001 and April 2005, respectively. These are the only standards that are finalized with effective dates and specific efficiency levels.
(Footnote 5 return)
Pacific Northwest National Laboratory is a Department of Energy multi-program national laboratory operated by Battelle.
(Footnote 6 return)
Operated by Battelle for the U.S. Department of Energy
(Footnote 7 return)
The emphasis on efficiency and renewables in the proposed budget increment and in this testimony is not intended to detract from the importance of government R&D efforts in the other energy sectors. When sectoral shares are computed as percentages of the proposed FY 2003 budget (in constant 1997 dollars) as opposed to shares of the FY 1997-to-FY 2003 increment, they are: efficiency 36.5%, renewables 27.0%, fossil 17.9%, fusion 13.6%, and fission 4.9%. In the PCAST panel's judgment and in mine, all of the government R&D efforts represented by these amounts are essential for a balanced portfolio, taking into consideration the opportunities for—and potential public benefits from—advances in the indicated sectors and the likely pattern of R&D investments by private firms. I discussed the potential and PCAST recommendations in the fossil and nuclear areas in other Congressional testimony last year (2, 3).
(Footnote 8 return)
These figures are derived from Tables 1.1 and 1.5 of the Energy Information Administration's Annual Energy Review for 1999 (5), updated with figures for 2000 from the EIA Monthly Energy Review for January 2001 (6). Year 2000 figures were extrapolated from the January-October 2000 data available in the latter report.
(Footnote 9 return)
The most detailed available analysis of the relative contributions of these factors in the United States and other OECD countries in the post-1970 period is the 1997 International Energy Agency report, Indicators of Energy Use and Efficiency (6). See also the 1997 PCAST report (1).
(Footnote 10 return)
The rate of real GDP growth in the United States from 1970 to 2000 averaged 3.2% per year, while primary energy use grew only 1.2% per year.
(Footnote 11 return)
This report's ''high economic growth'' scenario entails real economic growth at 3.5% per year 2000–2020 and energy intensity declining at 1.8% per year. Its ''low economic growth'' scenario entails real economic growth at 2.5% per year 2000–2020 and energy intensity declining at 1.4% per year.
(Footnote 12 return)
This is consistent with the findings of more recent detailed work at Resources for the Future, which found that the rates of decline in the costs of renewables have generally met or exceeded projections over the past quarter of a century, although their rates of penetration into the energy-supply mix have been lower than expected because of the (largely unexpectedly) low costs of the conventional alternatives in recent years (7).
(Footnote 13 return)
Without license renewals for many of the existing nuclear plants, the decline of nuclear's energy contribution would be even steeper. See (3).
(Footnote 14 return)
In addition to other studies already cited here, notably detailed and compelling analyses of this potential are available in the November 2000 report of the DOE Interlaboratory Working Group on Energy-Efficient and Clean Energy Technologies (8) and, at a global level, the September 2000 report of the United Nations World Energy Assessment (9).
(Footnote 15 return)
Resources for the Future, 1616 P Street, NW, Washington, DC 20036 (e-mail: darmstad@rff.org). Resources for the Future is a non-profit, non-advocacy research and educational organization specializing in problems of natural resources and the environment.
(Footnote 16 return)
Standard & Poor's DRI, U.S. Energy Outlook (Spring/Summer 2000); Gas Research Institute, GRI Baseline Projection of U.S. Energy Supply and Demand, 2000 Edition (January 2000); and The WEFA Group, U.S. Energy Outlook (2000). In April 2000, the Gas Research Institute merged with the Institute of Gas Technology to form the Gas Technology Institute.
(Footnote 17 return)
National Petroleum Council, Natural Gas, Meeting the Challenges of the Nation's Growing Natural Gas Demand (December 1999) and American Gas Association, 1999 AGA–TERA Base Case (December 1999).
(Footnote 18 return)
Independent Petroleum Association of America, IPAA Supply and Demand Committee Long-Run Report (April 2000).
(Footnote 19 return)
Energy Information Administration (EIA), Analysis of the Climate Change Technology Initiative, SR/OIAF/99–01 (Washington, DC, April 1999), www.eia.doe.gov/oiaf/archive/climate99/climaterpt.html and EIA, Analysis of the Climate Change Technology Initiative: Fiscal Year 2001, SR/OIAF/2000–01 (Washington, DC, April 2000), www.eia.doe.gov/oiaf/climate/index.html
(Footnote 20 return)
Office of Energy Efficiency and Renewable Energy, U.S. Department of Energy, Scenarios for a Clean Energy Future, (Washington, DC, November 2000).
(Footnote 21 return)
Renewable Energy Technology Characterizations, EPRI TR–109496, December 1997. This document was jointly prepared by the DOE Office of Energy Efficiency and Renewable Energy, and the Electric Power Research Institute.
(Footnote 22 return)
''Renewable Energy Issues and Trends 2000,'' DOE/EIA–0628 (2000), February 2001, p. 46, Table 3. Landfill-gas-to-electricity facilities have an initial capital cost of $1,395/kW (1999 dollars) [''Assumptions to the Annual Energy Outlook 2001 (AEO2001),'' DOE/EIA–0554 (2001), December 2000, p. 69, Table 43].
(Footnote 23 return)
For example, C&A Carbone, Inc. v. Town of Clarkstown, New York, which overturned restrictions on shipment of municipal waste to landfills rather than to more expensive combustion facilities.
(Footnote 24 return)
Bohi, Douglas R. (1981). Analyzing Demand Behavior: A Study of Energy Elasticities. (Johns Hopkins University Press for Resources for the Future, Baltimore, MD).
(Footnote 25 return)
Edmonds, J., and J. Reilly (1985). Global Energy: Assessing the Future (Oxford University Press, New York).