Ted StevensSenatorMr. Chairman, thank you for holding this hearing on energy innovation. This country’s growing demand for energy is an issue that is important for us all. Our country needs a new energy paradigm. The 21st century will be the proving ground for our commitment to achieve both energy independence and new, clean fuels. Our current energy challenges will be solved by a combination of energy initiatives, increased domestic production of petroleum, and the development of alternative sources of energy. These are all part of the broader solution and we must find the appropriate balance between them.The future holds a staggering list of possibilities for new energy technologies. In my state alone, we are looking at harnessing ocean and tidal energy and utilizing wood waste to produce ethanol. Some of our fishermen are currently using fish oil to power their operations and Chena Hot Springs, outside Fairbanks, has harnessed energy from geothermal resources to power their resort.However, renewable and alternative sources of energy are expensive and it will take time for them to become realistic and affordable options. I look forward to hearing from the witnesses today as they discuss a wide spectrum of emerging ideas and technologies.
John EnsignSenatorI would like to thank Chairman Kerry for holding a hearing on this important issue.In 2005, the United States consumed almost 21 million barrels of crude oil and refined products per day. Approximately 60 percent of this oil was imported from other countries. Today, almost half of our oil imports come from OPEC nations, including Saudi Arabia, Venezuela, and Nigeria. Oil supply disruptions pose a threat to our economy and our national security, and that threat is compounded by the United States’ reliance on foreign sources of oil.Over the past two years, world oil prices have increased substantially relative to historical levels, and American consumers have paid the price. Crude oil prices hovered between $15 and $25 per barrel from the mid-1980s until 2002. Now, however, crude oil prices are approximately $60 per barrel.Last June, I was pleased to chair this Subcommittee’s first hearing on alternative energy technologies. At that hearing, we heard about several different emerging technologies that have the potential to help the United States satisfy its energy demand while facilitating reduced greenhouse gas emissions.I remain dedicated to the idea that as the United States explores how best to address its expanding energy needs and related environmental concerns, an examination of various breakthrough-energy technologies is very important. Among those technologies are fuel cells, clean coal technology, geothermal power, solar power, and other forms of renewable power.As a Nevadan, I am particularly interested in the developments in solar energy and geothermal energy. We get a lot of sun back in Nevada, and we also have a lot of desert. It would be a tremendous benefit to all the residents of my state if we could utilize the natural powers of the sun and the earth to satisfy energy needs without emitting any greenhouse gases.Meaningful progress is already being made. Next month, Nevada Solar One, the world’s third-largest solar plant, is scheduled to start generating power. The plant will produce enough energy to supply power to approximately 48,000 homes. While this may not be enough to power all of Las Vegas or Reno, it is very encouraging to see that solar power is becoming an important part of Nevada’s energy portfolio.It is also encouraging to see that Nevada is one of four states currently generating electric power from geothermal energy. The United States is the world’s largest producer of geothermal electricity, generating an average of 16 billion kilowatt hours of energy per year.Several other states are following Nevada’s lead and the new low-temperature geothermal technology being developed by companies like UTC Power has the potential to enable as many as 27 states to generate electrical power using geothermal energy.It is important to keep in mind that the technologies discussed at today’s hearing are not the only alternative energy technologies being developed; however, they offer promising examples of the progress that has already been made, and the progress which can be made in the energy field in the future.In addition, we must assess the best ways to become more efficient with all forms of energy. And this assessment should be done in a global context. As developing nations like China and India face expanding energy demand, and as they explore solutions for their energy needs, the United States must make sure that it remains the innovation leader in this sector.As I have said before in several of this Subcommittee’s hearings, innovation is the key to the future global competitiveness of the United States. Innovation in the field of energy technologies is particularly important in ensuring our Nation’s future economic strength, environmental health, and national security.
Witness Panel 1
Mr. Bill PrindleActing Executive DirectorAmerican Council for an Energy-Efficient EconomyTestimony of William PrindleActing Executive DirectorAmerican Council for an Energy-Efficient Economy (ACEEE)Before the Senate Committee on Commerce, Science, and TransportationScience, Technology, and Innovation SubcommitteeHearing on Energy InnovationsMarch 20, 2007SummaryEnergy efficiency is the “first fuel” in America=s energy policy. Efficiency investment, as the cornerstone of a sound energy policy, must now be accelerated in order to:
Efficiency is the Engine of Economic ProsperityThe U.S. economy uses half as much energy to produce a dollar of output today as we used in the 1970s. In this context, efficiency is contributing more resource value to the economy than any single energy supply commodity, and has enabled our economy to weather the energy price storms of the last several years. For the near term, efficiency is our only realistic resource and policy choice for meeting these challenges. For the longer term, we will need to accelerate efficiency gains even further as traditional resources become more expensive and scarce.But what is energy efficiency? More than a concept, efficiency accounts for a very large segment of the U.S. economy. ACEEE estimates that in 2006, total investment in energy supply systems, from pipelines to powerplants, totaled about $100 billion. But Americans also invest in energy demand technologies: energy-efficient products bearing the federal Energy Star label accounted for some $101 billion last year, in a range of home and business products. Since Energy Star products account for only about 1/3 of these markets in the aggregate, total revenues are likely in the range of $300 billion annually. And the Energy Star data does not include investments in high-efficiency commercial and industrial technologies, vehicles, combined heat and power systems, and others that would increase the size of the “efficiency economy” still further.Accelerated Innovation is Needed to Meet 21st Century Energy ChallengesOn March 14, ACEEE joined with Philips Lighting Company and other groups in a 10-year initiative to improve the efficiency of the common light bulb by fourfold or more, saving consumers almost $20 billion in electric bills in 2016 while cutting carbon emissions by up to 140 million tons. This is symbolic of the kind of technology innovation that can transform our energy economy more completely than anything we have seen to date.Energy efficiency is the essential common element in any policy approach to the unprecedented energy challenges of the 21st century. We must moderate demand growth to enable clean and secure energy sources to wean us from depreciating and dirty sources. This means doubling the rate of progress in energy productivity, through through smart energy policies that use a sound mix of regulation and incentives to overcome large and persistent barriers to energy efficiency investment. Effective policies including energy data collection and reporting, research, development, demonstration and deployment, vehicle fuel economy policies, energy efficiency resource standards for utilities, appliance and equipment efficiency standards, and tax incentives.IntroductionACEEE is a nonprofit organization dedicated to increasing energy efficiency as a means of promoting both economic prosperity and environmental protection. We were founded in 1980 and have contributed in key ways to energy legislation adopted during the past 25 years, including the Energy Policy Acts of 2005 and 1992 and the National Appliance Energy Conservation Act of 1987. I have testified before the Senate several times and appreciate the opportunity to do so before the Subcommittee.Energy Efficiency as the Engine of Economic ProsperityEnergy efficiency improvements have contributed a great deal to our nation=s economic growth and increased standard of living over the past 30 years. Energy efficiency improvements since 1973 accounted for approximately 50 quadrillion Btu=s in 2003, which is more than half of U.S. energy use and nearly as much energy as we now get annually from domestic coal, natural gas, and oil sources combined. Thus, energy efficiency can rightfully be called our country’s largest energy source. If the United States had not dramatically reduced its energy intensity over the past 30 years, consumers and businesses would have spent about $650 billion more on energy purchases in 2006.Energy efficiency is measured not just in abstract terms like declining energy intensity, but also in concrete terms like product sales, job creation, and capital investment. ACEEE estimates that in 2006, total investment in energy supply systems, from pipelines to powerplants, totaled about $100 billion. But Americans also invest in energy-using technologies: energy-efficient products bearing the federal Energy Star label accounted for some $101 billion in sales last year, in a range of home and business products like home appliance, home electronics, heating and cooling systems, office equipment, lighting, and windows. These are large markets: our data show that, for example, that Americans buy some 11 million refrigerators, 64 million residential windows, 150 million pieces of office equipment, and about 1.5 billion light bulbs. We estimate that Energy Star products account for only about 1/3 of these markets in the aggregate, totaling some 330 million products, so one could project that total sales in these markets may be in the range of $300 billion annually. This suggests that, in rough terms, the U.S. economy spends perhaps three times as much per year on energy end-use technology as it does on energy supply technologies.Moreover, the Energy Star data does not include investments in the 160,000 Energy Star new homes sold in 2005, or the high-efficiency commercial and industrial technologies, vehicles, combined heat and power systems, and others that would increase the size of the “efficiency economy” still further. While our analysis in this area continues, and we have not come to detailed conclusions on this topic, the data we have developed so far indicates that the demand side of the economy is very large in comparison with the supply side, and that efficiency investments in the aggregate account conservatively for over $100 billion.These data help to erase a persistent misconception, which often occurs as an unstated assumption in many analyses, that energy efficiency is an economic “brake”, that it involved reducing economic output or slowing economic growth. This misconception tends to stem from confusing energy efficiency with energy conservation. Conservation means reducing our consumption of energy services, whereas efficiency means consuming the same level of energy services with reduced consumption of energy commodities. This distinction between energy services and energy commodities is important. It is energy services we want—cold beverages, hot showers, well-lit rooms, comfortable living spaces, information services—and we are typically indifferent as to how much of which kinds of energy commodities supply those services.Energy conservation, cutting back on the level of energy service, can in theory have an economic “brake” effect, if there is no shift of technology or spending of energy savings on other goods. But conservation usually occurs during times of rising energy prices, so the total economic output of the energy sector may continue to rise, and consumers may spend energy savings on other goods. Efficiency, on the other hand, involves technology investment to replace less-efficient products and systems. These investments create an economic stimulus with ripple effects through the economy, and our macroeconomic analyses show that efficiency investments tend to produce greater net economic benefits, in the form of increased output, income, and employment, than do investments in supply-side technologies.We estimate that energy efficiency has provided some 75% of the growth in energy services from the 1970s to the present. While efficiency is often invisible—today’s refrigerators look and perform the same or better than 30 years, ago, but use 1/3 the energy—it is nonetheless measurable. And even though it is distributed in millions of individual buildings, vehicles, and devices, it has been and continues to be an effective engine of economic growth for the United States.How Big is the Efficiency Resource?Even though we spend large amounts on efficient technology today, and the United States is thus much more energy-efficient than it was 30 years ago, there is still enormous potential for additional cost-effective energy savings. Some newer energy efficiency technologies have barely begun to be adopted. Other efficiency measures could be developed and commercialized rapidly in coming years, with policy and program support. For example, in a study from 2000, the Department of Energy=s national laboratories estimate that increasing energy efficiency throughout the economy could cut national energy use by 10 percent or more in 2010 and about 20 percent in 2020, with net economic benefits for consumers and businesses. Studies for many regions of the country have found similar if not even greater opportunities for cost-effective energy savings.ACEEE recently completed major studies of the energy efficiency and renewable energy resource potential in the states of Texas and Florida. These studies showed and efficiency and renewables can meet all of the growth in energy service needs, even in such fast-growing states, over the next 15 years or more. The figures below summarize these results. While public and private investment are needed to develop them, these resources provide better returns to the economy than conventional energy supply investments.Share of Florida’s Future Electricity Needs that Can Be Met with Energy Efficiency and Renewable EnergyShare of Texas’ Future Electricity Needs That Can Be Met with Efficiency and Renewables ResourcesIt should be noted that the efficiency potential analyses discussed here are inherently quite conservative. They are based on technologies that are established in the market today, and on today’s energy prices and technology costs. They are thus very conservative in the sense that new technologies, higher energy prices, and lower technology costs may well justify much greater estimates of efficiency potential. In the 1970s, for example, electricity growth rates were in the range of 3.5% per year. In that era, there was little of the high-efficiency technology we have today: examples include refrigerators that use 1/3 the energy of similar 1970s models; air conditioners that are twice as efficient; light bulbs that save ¾ the energy used by incandescent bulbs; LCD computer monitors that use ¼ the energy of CRT monitors; and the list goes on. Because of such technology advances, the Energy Information’s 2007 Annual Energy Outlook projects that electricity demand will grow by only 1.5% annually through 2030, less than half of 1970s projections.McKinsey Global Institute recently completed an analysis of global energy demand, and the potential for energy efficiency and related energy productivity gains to reduce current reference forecasts for energy demand growth. The study found that energy demand growth can be reduced by more than half by economically-viable technologies driven by public policies. It also found that in the U.S., energy consumption need not grow at all through 2030 if the cost-effective productivity improvements were realized in all sectors.The Case for Accelerated Policy Action on EfficiencyPolicies are Needed to Overcome Market BarriersRegardless of the size of energy efficiency’s aggregate potential, or of the cost-effectiveness of such investments, a variety of market barriers keep these technologies from being implemented. These barriers fall in two main categories: (1) principal-agent or “split incentive” barriers, in which, for example, home builders must invest added capital in efficient homes, but receive none of the energy savings benefits; and (2) transaction costs, which stem from inability of average consumers or businesses to make “economically optimum” decisions in time-and-information-limited real world conditions. A study ACEEE conducted for the International Energy Agency covering five countries found that half or more of the energy used in major home and business energy end-use markets are affected by the principal-agent barrier alone.In addition, basic forces in the economy work against the tendency of higher energy prices to moderate energy demand. This principle of “price elasticity of demand”, while economically correct, is countered by “income elasticity of demand”, under which rising incomes cause consumers to be less affected by rising prices. A large segment of our population continues to buy low-mileage, high prices vehicles, with little concern for fuel costs. For less-affluent consumers, “cross-elasticities” come into play, which cause them to keep using energy as an essential service, but to cut back on other goods to balance their budgets. Economists have documented the slowing of retail sales in response to rising energy prices. Both the income elasticity and cross-elasticity effects suggest that energy prices alone won’t balance our energy markets, and we need stronger energy policies if we want to stabilize energy markets without damaging our economy.Reasons to Accelerate the Energy Efficiency EngineRecent developments in our energy markets indicate that the U.S. needs to accelerate efforts to implement energy efficiency improvements:
- Wean America from its addiction to oil and so enhance our national security;
- Help American consumers and businesses cope with high energy bills;
- Bring balance to America’s energy markets by softening energy prices;
- Strengthen our economy by generating American jobs and capital investment; and
- Start to meet the global warming challenge by moderating carbon dioxide emissions.
Energy efficiency also draws broad popular support. For example, in a March 2005 Gallup Poll, 61% of respondents said the U.S. should emphasize Amore conservation@ versus only 28% who said we should emphasize production (an additional 6.5% volunteered “both”). In an earlier May 2001 Gallup poll, when read a list of 11 actions to deal with the energy situation, the top four actions (supported by 85–91% of respondents) were “invest in new sources of energy,” ”mandate more energy-efficient appliances,” “mandate more energy-efficient new buildings,” and “mandate more energy-efficient cars.” Options for increasing energy supply and delivery generally received significantly less support.The Role of Innovation in Advancing Energy EfficiencyTechnological innovation in energy efficiency, as is true of many facets of the U.S. economy, relies on a stream of innovations. ACEEE reviews emerging technologies in the buildings, industry, and transportation sectors, and periodically publishes reports on leading technologies. A summary of, and hyperlinks to, ACEEE reports on these technologies in the buildings sector can be found at the following World Wide Web address: http://www.aceee.org/emertech/buildings.htm#reports.Our most recent buildings-sector technology assessment examines 72 emerging technologies in detail. While this testimony is too short for a full discussion of all of these innovations, I would like to use one technology—the residential incandescent light bulb—as an emblematic example. In our 2004 emerging technologies report, we examined several lighting technologies, including compact fluorescent fixtures, halogen lighting, and light-emitting diode (LED) lighting. All of these show promise as alternatives to the incandescent light bulb that has been the most common form of residential electric lighting for more than a century. It still accounts for more than 90% of total residential lighting sales in the U.S.On March 14, 2007, ACEEE and other organizations announced a new coalition effort, initiated by Philips Lighting Company, that will fundamentally change the U.S. home lighting market in 10 years. By setting new high-performance targets for typical lighting applications, we expect to reduce residential lighting consumption by as much as 90%. While such standards are technology-neutral, based on our emerging technologies analysis we expect that compact fluorescents, halogens, and LEDs will all play a role in this transformation.The residential light bulb was the first universal electricity end-use application when the electricity industry first developed in the 19th century. Its main role in those early years was to create a universal, electric lighting energy service technology. Until the advent of the electric light bulb, lighting energy services were met by kerosene, whale oil, and of course paraffin (which we use as candles). Electric lights were the first in a long line of electricity-powered end use technologies that enabled the development of our modern power grid, and that drove much of our economic growth in the 20th century.In the 21st, century, however, we have a different imperative. Our electricity grid is built; to sustain economic growth while protecting our environment, we must cut waste from the energy-services side of the grid while cutting pollution from the generation side. Last week’s lighting coalition announcement is one significant shift among many that must be achieved on the energy services side. Our technology studies and potential analyses show that such shifts toward energy-efficient technology can occur in many other end-uses.Philips’ new lighting initiative is representative of the kinds of innovation we are seeing in the buildings sector. In the industrial sector, companies like Dow Chemical are achieving dramatic gains in energy efficiency and carbon emission reductions. From 1995 to 2005, Dow reduced the energy consumed per pound of product by 20%. In 2006, the company announced a new commitment to reduce its energy used per pound of product by another 25% by 2015. This requires continuous innovation, in end-use technology, in the application of combined heat and power systems, in process improvement, and in operation and maintenance practices.Program and Policy Initiatives Needed to Realize Efficiency PotentialThe Energy Policy Act of 2005 (EPAct 2005) made some useful progress on energy efficiency. Particularly notable were sections that established new consensus federal efficiency standards on 16 products and that created energy efficiency tax incentives. ACEEE estimates that the energy efficiency sections of EPAct 2005 will reduce U.S. energy use by about 1.8 quadrillion Btu (“quads”) in 2020, reducing projected U.S. energy use in 2020 by 1.5%. Of these savings, more than 75% will come from equipment efficiency standards and energy-efficiency tax incentives.EPAct 2005, however, did not address several key energy efficiency issues. And since 2005, America’s energy challenges have increased. We therefore recommend that Congress take further action to stimulate energy efficiency innovation.Energy Market and Technology Data CollectionOne of the core functions and responsibilities of the federal government is to collect information on market activity, so that businesses, researchers, and policymakers have the fundamental information they need to understand markets and plan for future initiatives. The Commerce Department through its Census and other activities, and the Department of Energy through its Energy Information Administration surveys, are two of the key sources of information needed to keep up with developments in energy markets. We have seen disturbing trends in both agencies, with key surveys being cut back in comprehensive and in frequency, and in some cases dropped altogether.We urge the Committee to investigate this issue and seek to restore this key information infrastructure. Cutting back on energy market surveys is like cutting back on the U.S. Geological Survey, on whose information the energy supply industries depend for energy resource information; we need to continue and expand, not curtail, government efforts in this area.For specific examples, we are concerned about the loss of the M-series surveys in the Census Bureau. These surveys collect essential information on product shipments, without which it is not possible to track the trends that indicate which technologies are penetrating the market. In addition, last year’s discontinuation of the Vehicle Inventory and Use Survey was a tremendous disservice to the cause of heavy-duty truck efficiency, and indeed to the understanding of and planning for the trucking industry generally. The VIUS, conducted every five years, is the only source of national data on the number, size, fuel economy and driving patterns of the U.S. truck stock. It should be reinstated as soon as possible, before the Commerce Department’s institutional capability disappears. The next VIUS was to have occurred in 2007.Research, Development, Demonstration, and Deployment (RDD&D)Many of the energy efficiency technologies we see emerging today were created with federal RDD&D support—these include Energy Star windows, compact fluorescent and LED light bulbs, and high-efficiency refrigerator technology. EPAct authorized significant increases in efficiency RDD&D; however, budget requests for efficiency RDD&D have declined by about one-third since FY 2002. These cuts are beginning to cripple our research infrastructure, by laying off senior personnel with irreplaceable technology expertise and research experience, and in some cases discontinuing entire research programs. If the U.S. wants to continue its record of innovation in the energy area, and wants to be an effective competitor in global markets.We were encouraged to see the Senate Budget Committee allocate $1.6 billion for energy efficiency and renewable energy programs at the Department of Energy. This represents more than a $300 million, 25% increase over the administration’s FY 2008 budget request. In our House Energy and Water Development Appropriations Subcommittee testimony, we recommended increases in 16 priority efficiency programs for a total increase of $217 million above the request. We hope the Senate appropriations process will follow these recommendations, and thus begin to rebuild the RDD&D infrastructure the U.S. needs to get ahead of the curve on the next generation of energy efficiency innovations.Policies to Save OilMost notably missing from EPAct were significant provisions to reduce oil use or to accelerate energy efficiency investment in the electricity and natural gas industries. We recommend that Congress make these high priorities in its upcoming deliberations on energy policy. Fuel economy in the vehicle fleet must be improved, either through federal fuel economy standards, tax incentives, or RD&D policies. Our analysis projects that more than 5 million barrels of oil per day, some 25% of current U.S. consumption, could be saved cost-effectively by 2025.ACEEE supports the “Ten-in-Ten” fuel economy bill sponsored by several Commerce Committee members that would raise the average fuel economy of light-duty vehicles to 35 mpg by 2018. This target is achievable and necessary to allow the transportation sector to meet its responsibility to address climate and energy security goals.There are companion policies that should be explored as well. On the consumer side, a feebate policy would ensure, in the face of volatile fuel prices, consistent consumer interest in the fuel economy of the vehicles that they buy and help to align consumer demands with requirements of manufacturers as fuel economy increases are phased in over the next decade.Energy Efficiency Resource Standards for UtilitiesWe also recommend that Congress enact Energy Efficiency Resource Standards (EERS) for electric and gas utilities. EERS is a simple policy approach that sets overall performance targets for utility efficiency efforts and provides flexibility in compliance. Several states have implemented EERS, beginning with Texas in its 1999 electricity restructuring legislation. It is somewhat analogous to the Renewable Portfolio Standards (RPS) the Senate has passed twice in this decade. In fact, EERS and RPS are quite complementary. Our preliminary analysis shows that the most recent Senate RPS bill, combined with the EERS in a current discussion draft, could begin to reduce carbon emissions in the U.S. electric power sector by 2020.EERS laws and regulations are now in operation in several states and countries. Texas’s law requires electric utilities to offset 10% of their demand growth through end-use energy efficiency. Utilities in Texas have already exceeded their targets, and there is legislation to raise them. Hawaii and Nevada recently expanded their renewable portfolio standards to include energy efficiency. Connecticut and California have both established energy savings targets for utility energy efficiency programs (Connecticut by law and California by regulation) while Vermont has specific savings goals for the nonprofit organization that runs statewide programs. Pennsylvania’s new Advanced Energy Portfolio Standard includes end-use efficiency among other clean energy resources. Colorado’s largest utility has energy savings goals as part of a settlement agreement approved by the Public Service Commission. And Illinois and New Jersey are planning to begin programs soon. EERS-like programs have been working well in Italy, the United Kingdom, France, and the Flemish region of Belgium.Appliance and Equipment Efficiency StandardsAppliance and equipment efficiency standards are another proven policy for accelerating innovation in energy efficiency. Standards already in place will save Americans over $200 billion in net economic benefits through 2030. There are several consensus agreements for new standards that could be included in legislation in this session of Congress. We will work with the energy committees on these issues.ACEEE, affected industries, and other stakeholders have a long history of negotiating consensus agreements on new efficiency standards. Many of these agreements were incorporated into the Energy Policy Acts of 1992 and 2005. ACEEE is now talking with stakeholders about standards on additional products and has agreements on several new standards. We are working with energy committee staff to include these new consensus standards in legislation this year.Products which may lend themselves to consensus standards include the following:
- Oil, gasoline, natural gas and coal prices have risen substantially in recent years. For example, residential natural gas prices have more than doubled since 2000, and retail gasoline prices are up by similar proportions. Even America’s cheapest fuel, coal, has seen price inflation: Powder River Basin coal has more than doubled in price since 2003. Energy efficiency can reduce demand for these fuels, reducing upward price pressure and also reducing fuel-price volatility, making it easier for businesses to plan their investments.
- A recent ACEEE analysis found that natural gas markets are so tight that if we could reduce gas demand by as little as 4% over the next five years, we could reduce wholesale natural gas prices by more than 20%. This analysis was conducted by Energy and Environmental Analysis, Inc. using their North American Gas Market Model, the same analysis firm and computer model that was employed by DOE and the National Petroleum Council for their 2003 study on U.S. natural gas markets. These savings would put over $100 billion back into the U.S. economy. Moreover, this investment would help bring back U.S. manufacturing jobs that have been lost to high gas prices and also help relieve the crushing burden of natural gas costs experienced by many households, including low-income households. Importantly, much of the gas savings in this analysis comes from electricity efficiency measures, because much of the marginal electric load is met by natural-gas fired power plants.
- The U.S. is growing increasingly dependent on imported oil, with imports accounting for more than 60% of U.S. oil consumption in 2006, of which more than 40% came from OPEC countries. The U.S. Energy Information Administration estimates that imports will account for 68% of U.S. oil use in 2020. While moderate amounts of new oil are available in hard-to-reach areas of the U.S., much greater amounts of oil are available by increasing the efficiency with which we use oil. A January 2006 report by ACEEE found that the U.S. can reduce oil use by as much as 5.3 million barrels per day in 2020 through improved efficiency, including more than 2 million barrels per day in industry, buildings, heavy duty vehicles and airplanes. In other words, there are substantial energy savings outside of the highly contentious area of light-duty vehicle fuel economy. These 5.3 million barrels per day of oil savings are nearly as much as we presently import from OPEC (OPEC imports were 5.5 million barrels per day in 2005). Energy efficiency can slow the growth in oil use, allowing a larger portion of our needs to be met from sources in the U.S. and friendly countries.
- Economists have increasingly raised concerns that the U.S. economy is slowing and that robust growth rates we have had in recent years will not be sustained. Energy efficiency investments can spur economic growth; they often have financial returns of 30% or more, helping to reduce operating costs and improve profitability. In addition, by reducing operating costs, efficiency investments free up funds to spend on other goods and services, creating what economists call the Amultiplier effect@, and helping the economy broadly. This stimulates new economic activity and job growth in the U.S., whereas most of every dollar we spend on oil flows overseas. A 1997 study found that due to this effect, an aggressive set of efficiency policies could add about 770,000 jobs to the U.S. economy by 2010.
- Overall, the U.S. has ample supplies of electricity at present, but demand is growing and several regions are projecting a need for new capacity in the next few years in order to keep reserve margins adequate. Energy efficiency resource policies can slow growth rates, postponing the date additional capacity will be needed.
- Greenhouse gas emissions continue to increase. Early signs of the impact of these changes are becoming apparent in Alaska and other Artic regions. And several recent papers have identified a link between warmer ocean temperatures and increased hurricane intensity., The Intergovernmental Panel on Climate Change’s 2007 report documents more conclusively than ever that human activity is affecting the global climate, and that the environmental and economic consequences of inaction may be severe. Energy efficiency is the most cost-effective way to reduce these emissions, as efficiency investments generally pay for themselves with energy savings, providing negative-cost emissions reductions. The term “negative-cost” means that, because such efficiency investments produce net economic benefits, they achieve emission reductions at a net savings for the economy. This important point has been missed in much of the climate policy analysis modeling performed to date. Too many economic models are incapable of characterizing the real economic effects of efficiency investments, and so forecast inaccurate economic costs from climate policies. Fortunately, this kind of flawed policy analysis is beginning to be corrected. For example, a May 2006 study just released by ACEEE found that the Regional Greenhouse Gas Initiative (RGGI – the planned cap and trade system for greenhouse gases in the northeastern U.S.) can have a small but positive impact on the regional economy provided increased energy-efficiency programs are a key part of implementation efforts.
Energy Efficiency Tax IncentivesWe also recommend that the EPAct tax incentives for energy efficiency technologies be extended beyond their current expiration dates, which were truncated by the EPAct conferees at the last minute. The EXTEND Act (S.822) was recently introduced in the Senate to achieve this end, while also refining some specific provisions. We support the EXTEND Act as part of a consensus among a wide range of stakeholdersWhile they are not included in the EXTEND Act, Hybrid tax credits in EPAct 2005 should be extended and expanded to ensure the continued growth of the hybrid market. Incentives for heavy-duty hybrids should be revisited and extended as well. Interest in heavy-duty hybrids is high among users, and as is the potential for fuel savings.ConclusionEnergy efficiency is the “first fuel” for America=s energy policy. Energy efficiency has saved consumers and businesses trillions of dollars in the past two decades, but these efforts should be accelerated in order to:
- Reflector lamps
- Pool heaters
- Metal halide luminaires
- Bottle-type drinking water dispensers
- Portable electric spas (hot tubs)
- Single-voltage external AC to DC and AC to AC power supplies
- Commercial hot-food holding cabinets
- Walk-in refrigerators and freezers.
This concludes my testimony. Thank you for the opportunity to present these views.
- Wean America from its addiction to oil and so enhance our national security;
- Help American consumers and businesses cope with high energy bills;
- Bring balance to America’s energy markets by softening energy prices;
- Strengthen our economy by generating American jobs and capital investment; and
- Start to meet the global warming challenge by moderating carbon dioxide emissions.
 Specifically, national energy intensity (energy use per unit of GDP) fell 46 percent between 1973 and 2003. About 60% of this decline is attributable to real energy efficiency improvements and about 40% is due to structural changes in the economy and fuel switching. Interlaboratory Working Group, 2000, Scenarios for a Clean Energy Future. Washington, D.C.: Interlaboratory Working Group on Energy-Efficient and Clean-Energy Technologies, U.S. Department of Energy, Office of Energy Efficiency and Renewable Energy. For a summary of many of these studies, see Nadel, Shipley and Elliott, 2004, The Technical, Economic and Achievable Potential for Energy-Efficiency in the U.S. – A Meta-Analysis of Recent Studies. Washington, D.C.: American Council for an Energy-Efficient Economy. http://www.mckinsey.com/mgi/publications/Global_Energy_Demand/index.asp. We note that this is a proprietary, copyrighted analysis. The limited review in this testimony comes from information shared with the National Petroleum Council. Prindle et al. 2007. Quantifying the Effects of Market Failures in the End-Use of Energy. American Council for an Energy-Efficient Economy (forthcoming International Energy Agency publication) Elliott and Shipley, 2005, Impacts of Energy Efficiency and Renewable Energy on Natural Gas Markets: Updated and Expanded Analysis. http://www.aceee.org/pubs/e052full.pdf. Washington, D.C.: American Council for an Energy-Efficient Economy. National Petroleum Commission. 2003, Balancing Natural Gas Policy—Fueling the Demands of a Growing Economy: Volume I Summary of Findings and Recommendations. Washington, D.C.: U.S. Department of Energy. Energy Information Administration, 2006, Monthly Energy Review May 2006. Washington, DC: U.S. Dept. of Energy. Energy Information Administration, 2006, Annual Energy Outlook. Washington, D.C.: U.S. Department of Energy. Elliott, Langer and Nadel, 2006, Reducing Oil Use Through Energy Efficiency: Opportunities Beyond Cars and Light Trucks. Washington, DC:. American Council for an Energy-Efficient Economy. See note #9. Alliance to Save Energy et al., 1997, Energy Innovations: A Prosperous Path to a Clean Environment. Washington, DC: American Council for an Energy-Efficient Economy. North American Electric Reliability Council, 2006, 2006 Long-Term Reliability Assessment: The Reliability of Bulk Electric Systems in North America. Princeton, N.J.: North American Electric Reliability Council. Webster, Holland, Curry and Chang, 2005, “Changes in Tropical Cyclone Number, Duration, and Intensity in a Warming Environment.” Science, 309, 16 September, 1844–1846. Emanuel, 2005, “Increasing Destructiveness of Tropical Cyclones over the Past 30 Years.” Nature, 436, 4 August, 686–688. Intergovernmental Panel on Climate Change. Climate Change 2007: The Fourth Assessment Report (AR4). United Nations Environment Program, 2007. Prindle, Shipley and Elliott, 2006, Energy Efficiency’s Role in a Carbon Cap-and-Trade System: Modeling Results from the Regional Greenhouse Gas Initiative. Washington, DC: American Council for an Energy-Efficient Economy. Gallop, 2005, “Gallop Poll Social Series—The Environment.” Princeton, N.J.: The Gallop Organization. Moore, David, 2001, AEnergy Crisis: Americans Lean toward Conservation over Production.@ Princeton, N.J.: The Gallup Organization. Nadel, Prindle and Brooks, 2006, “The Energy Policy Act of 2005: Energy Efficiency Provisions and Implications for Future Policy Efforts” in Proceedings of the 2006 ACEEE Summer Study on Energy-Efficiency in Buildings. Washington, DC: American Council for an Energy-Efficient Economy. Nadel, Steven. 2006. Energy Efficiency and Resource Standards: Experience and Recommendations. American Council for an Energy-Efficient Economy, Report No. E063.
Mr. Michael EckhartPresidentAmerican Council on Renewable Energy
Dr. Jim KatzerVisiting ScholarMassachusetts Institute of Technology Laboratory for Energy and the EnvironmentCoal-Based Power Generation with CO2 Capture and SequestrationComments made to the Senate CommitteeOn Commerce, Science, and TransportationScience, Energy, and Innovation SubcommitteeMarch 20, 2007James R. KatzerThe Laboratory for Energy and the EnvironmentMassachusetts Institute of TechnologySenator Kerry and Members of the Subcommittee. Good afternoon. My name is James Katzer, and I am a Visiting Scholar in the Laboratory for Energy and the Environment of Massachusetts Institute of Technology. For about the last two years, I have been working with a group of MIT faculty who have been looking at the future of coal. I am pleased to have been invited to discuss key aspects of this work with you today. I will focus on coal-based power generation technology combined with the capture and sequestration of carbon dioxide emissions. I am submitting my written testimony herewith.Coal presents the ideal paradox in power generation. On one hand, it is cheap, abundant, and concentrated typically in countries with large human populations and limited oil and gas. On the other hand, its use can have significant environmental impacts, requires capital-intensive generating plants, and produces large quantities of carbon dioxide. Both U.S. and global electricity demand will continue to grow at a brisk rate, and coal is certain to play a major role in meeting this demand growth. The U.S. has 27% of the total global recoverable coal reserves, enough for about 250 years at current consumption. Over 50% of U.S. electricity was generated from coal last year. Figure 1 shows the projected growth in coal consumption for the recent EIA forecast under business as usual. It is inevitable that we will see increased coal consumption and CO2 emissions there from.It is important to understand the magnitude of commercial CO2 capture and sequestration associated with power generation because its scale offers unique challenges and opportunities in the research, development and demonstration arena. A single 1000 MWe coal-based power plant emits between 5 and 8 million tonnes of CO2 per year, or about 130,000 bbls per day of supercritical liquid CO2. This would become 200 to 300 million tonnes of CO2 over the 40 year life of the plant and require a reservoir storage volume of about 1.5 billion bbls of liquid CO2.Generation Without and With CO2 CaptureThe primary technology used to generate electricity from coal today is pulverized coal (PC) combustion. It is well-established, mature technology. The efficiency of generation depends on a number of design and operating variables, on coal type and properties, and on plant location. New plant designs have significantly higher operating efficiencies than the current fleet average, but the limit for the near term is probably being reached.Integrated Gasification Combined Cycle (IGCC) is a competitor to PC generation. Four coal-based IGCC demonstration plants, each between 250 and 300 MWe, have been built, each with government assistance, and are operating well. In addition, there are 5 refinery-based IGCC units, two at 500 MWe each, which are gasifying petroleum coke, or refinery asphalt, residua, tars, and other residues to produce electricity. These units often also produce steam and hydrogen for the refinery. IGCC is well-established commercially in the refinery setting. IGCC can also be considered commercial in the coal-based electricity generation setting, but in this setting it is neither well-established nor mature. As such, it is likely to undergo significant change as it matures. Currently, a major concern with coal-based IGCC is gasifier availability.Because a large number of variables, including coal type and quality, location, etc, affect generating technology choice, operation, and cost, the technology comparisons here center on one point-set of conditions. This includes one coal, Illinois #6 coal, a high-sulfur bituminous coal and generating units designed to achieve criteria emissions levels somewhat lower than the lowest recent permitted plant levels. For example, the designs used here achieve 99.4 % SOx and 99.9+ % particulate removal. These technologies are first compared without CO2 capture and then with 90% CO2 capture. Plant capital costs are based on detailed design studies between 2000 and 2004, and on industrial experience during that period. This was a period of relative cost stability. No attempt has been made to account for recent cost escalations in materials, engineering, and construction costs. These have been substantial. However, the important issue here is the relative numbers among and between the various technologies, and these are probably best based on the 2000 to 2004 period. Here the focus is on technologies that are either commercial or well on their way to becoming commercial.PC Combustion: PC generating efficiency is about 35% for subcritical generation, about 38% for supercritical generation, and about 44% for ultra-supercritical generation. Increased generating efficiency means less emissions per unit of electricity, including less CO2 emissions. In moving from subcritical to ultra-supercritical generation, the coal required per unit electricity is reduced by about 22%, which means a 22% reduction in CO2 emissions and also reduced criteria emissions. Most PC units in the U.S. are subcritical. We have no ultra-supercritical plants in operation, or under construction. On the other hand, Europe and Japan, which have higher coal costs and stronger culture supporting high efficiency, have built almost a dozen ultra-supercitical units over the last decade. These units are operating as well as subcritical units, but with much higher generating efficiency. The key enabling technology here is improved materials to allow operation at higher severity conditions. An expanded U.S. program to advance materials development and particularly improved fabrication and repair technologies for these materials would advance the potential for increased PC generating efficiency for our changing future.Application of advanced emissions control technologies to PC units can produce extremely low emissions, and emissions control technology continues to improve, including the potential for high degrees of mercury control. In general, the issue of PC emissions is not a question of technology capability but the breadth of its application.For Illinois #6 coal at $1.50 per million Btu and detailed design study capital costs using EPRI economic TAG guidelines and assumptions, the estimated cost of electricity (COE) for a supercritical PC is about 4.75 ¢/kWe-h  . Table 2 summarizes the performance and cost parameters for the several generating technologies. For supercritical generation about 1 ¢/kWe-h, or about 20%, is associated with going from no emissions control to the high level of emissions control used here. Reducing emissions by a factor of two further would add an estimated 0.2 ¢/kWe-h increasing the COE to about 5.0 ¢/kWe-h.IGCC: The promise of IGCC has been high generating efficiency and extremely low emissions. There are a number of critical options associated with gasification technology and its integration into the total plant that affect efficiency and operability. Of these, the gasifier type and configuration are the most important. Table 1 summarizes the characteristics of gasifier types. Entrained-flow gasifiers, which are extremely flexible, are the basis of each of the IGCC demonstration units. Figure 2 shows the configuration of an IGCC employing full quench cooling of the gasifier exit gases. This configuration with high quality coals will produce about 35-36 % generating efficiency. Figure 3 illustrates the addition of a radiant syngas cooler to raise steam for the steam turbine, which increases the electricity output and raises the generating efficiency to 38-39 %. Adding convective syngas coolers to recover additional heat as steam is also shown in Figure 3. It can increase the generating efficiency to the 39-40 % range. Existing IGCC demonstration units, which employ different practical combinations of these options, operate at generating efficiencies from 35.5 % (Polk) to 40 % (HHV) (Wabash, U. S. & Puertolanno, Spain). IGCC is not yet mature, and there is still potential for efficiency gain. However, commercial IGCC generating efficiency is unlikely to exceed that of ultra-supercritical PC in the intermediate time frame. The design/engineering firms and the power industry need to gain experience with IGCC to develop better designs and achieve improved, more reliable operation. Furthermore, gasifier designs for lower rank coals (subbituminous coal and lignite) are not well established, and costs seem to be relatively significantly higher for these coals than for PC units.An IGCC unit with radiant and convective syngas coolers using Illinois #6 coal, operating at 38% efficiency, and achieving high levels of criteria emissions control produces electricity for about 5.1 ¢/kWe-h (Table 2) or about 0.3 ¢/kWe-h higher than a supercritical PC [2, 3]. IGCC would not be the choice based on COE alone, independent of gasifier availability concerns. Requiring high levels of mercury removal, reducing criteria pollutants by one half from the very low levels that we are already considering and including the cost of emissions credits and offsets increases the COE for the PC, narrowing the gap, but does not suggest a shift in technology choice based on COE in the absence of CO2 capture. However, IGCC has the potential for order-of-magnitude criteria emissions reductions, 99.5+ % levels of mercury and other toxic metals removal, lower water consumption, and highly stabilized solid waste production. These may become a larger factor in the future. Achieving these order-of-magnitude criteria emissions reductions is expected to increase IGCC COE, but this increase is not expected to be large. Companies considering construction of a new coal-based generating facility need to bring all these considerations into their forward pricing scenarios to help frame the decision of which technology to build. CO2 will probably be an added consideration shortly.CO2 Capture: CO2 capture will add significantly to the COE, independent of which approach is taken. Today, CO2 capture would appear to change the choice of technology in favor of IGCC for high rank coals. For lower rank coals this choice may not be so clear, particularly as the PC CO2 capture technology improves. Thus, it is too early to declare IGCC the winner for all situations at this time. History teaches us that one single technology is almost never the winner in every situation. The options are:· Capture the CO2 from PC unit flue gas. In this case, the CO2 is at a low concentration and low partial pressure because of the large amount of nitrogen from the combustion air. To capture and recover the CO2 using today’s amine (MEA) technology requires a lot of energy. Energy is also required to compress the CO2 to a supercritical liquid. This large energy consumption reduces plant electricity output by almost 25% and reduces generating efficiency by about 9 percentage points. The added capital and the efficiency reduction increase the COE by about 60% or about 3.0 ¢/kWe-h to about 7.7 ¢/kWe-h (Table 2). In this situation a marked reduction in the CO2 capture and recovery energy would have a significant impact on PC capture economics. Focused research on this issue is clearly warranted.· Combust coal with oxygen( Oxy-fuel combustion) to reduce the amount of nitrogen in the flue gas. This allows the flue gas to be compressed directly liquefying the CO2 without a costly separation step first, reducing energy consumption. However, the technology requires the addition of an air separation unit which consumes significant energy substantially offsetting the energy gains achieved by eliminating the CO2 separation step. This technology is in early development stage, is advancing well, and at this point appears to hold significant potential for both new-build capture plants and for the retrofitting existing PC plants. The estimated COE for oxy-fuel combustion is about 7.0 ¢/kWe-h, includes compression to supercritical liquid, but not transport or sequestration. This is about 0.7 ¢/kWe-h less than for air-blown PC combustion with capture. The technology requires further development and demonstration along with detailed design studies to allow effective evaluation of its cost and commercial potential.· Use IGCC, shift the syngas to hydrogen, and capture the CO2 before combustion in the gas turbine. IGCC should give the lowest COE increase for CO2 capture because the CO2 is at high concentration and high partial pressure, and this is what design studies show. The needed technologies are all commercial in refineries and natural gas processing plants, although they have never been fully integrated on the scale that it will need to be applied here. For Illinois #6 coal, the estimated COE is 6.5 ¢/kWe-h [1, 2] which is a 1.4 ¢/kWe-h increase over non-capture IGCC and is about 1.2 ¢/kWe-h less than supercritical PC with capture. Oxy-fuel combustion falls in between these two. However, an IGCC unit designed for power generation without CO2 capture is significantly different from one designed for power generation with CO2 capture. Retrofitting the former to a capture unit is not straightforwardly simple.Lower Rank Coals: As Figure 3 shows, moving from bituminous coal to sub-bituminous coal and to lignite results in an increase in the capital cost for a PC plant and a decrease the generating efficiency (increased heat rate). However, for IGCC, these trends are significantly larger, such that currently-demonstrated IGCC technologies become more substantially disadvantaged relative to PC for subbituminous coals and lignite without CO2 capture, and their advantage with CO2 capture is eroded somewhat. Over half of the U.S. recoverable coal reserve is either subbituminous coal or lignite. Thus, there is a substantial need for improved IGCC technology performance on lignite, other low rank coals, and biomass. Options include, but are not limited to, improved dry-feed injection into the gasifier, coal drying, fluid transport reactors and other gasifier configurations. Development should be at the PDU scale before moving to demonstration.Thus, when CO2 capture is considered, the differences among IGCC, oxy-fuel PC and air-blown PC become significantly less than discussed above for bituminous coal.. In this situation all three of the technologies with CO2 capture must be considered to be in the early stages of development, and it is simply too early to select one of these technologies as the winner vs. the othersCO2 Transport and SequestrationCapture and compression of CO2 to a supercritical liquid-like fluid was considered above. Next, CO2 transport by pipeline and injection for geologic sequestration are considered. For more details on the geological aspects of sequestration, refer to the recent testimony of Dr. Julio Friedmann before the House Energy Committee, Energy and Air Quality Sub-committee Hearing, March 6, 2007 and the recent MIT Coal Report.The good news is that the U.S. appears to have enough geological storage capacity to deploy CO2 Capture and Sequestration (CCS) at a large scale for a long time. The best projected storage sites are deep saline aquifers which can hold large volumes of CO2. Further, many of these potential geologic storage areas are under sites with large coal-fired coal plants and where additional coal plants are expected to be built. This suggests that transporting CO2 long distances, via pipeline will not be required, but that sequestration will be within a reasonable distance from a power plant capturing it. Further, pipeline transport of CO2 is well established; there are about 3,000 miles of dedicated CO2 pipelines used for commercial CO2-EOR projects today in the U.S. The cost of transport is also well understood and predictable.Figure 4 illustrates what a potential CCS power plant project, with appropriate siting might look like. For a good reservoir the radius around the plant for sequestration may be less than 25 miles. Longer transport distances to use CO2 for EOR may occur in some cases, but because of the scale of CCS, it is expected to be a relatively small contribution to CO2 sequestration, although the oil recovered from CO2-EOR would add value to the project, offsetting some of the cost.Today, there are three commercial projects using CO2 storage (Sleipner in Norway, In Salah in Algeria, and Weyburn in Canada) each injecting over a million tonnes of CO2 per year. Sleipner has been injecting CO2 into a deep saline aquifer under the North Sea for seven years. Other projects are planned, including FutureGEN.Although there are a large range of questions related to sequestration, they all appear to be resolvable with the appropriate work. Importantly, there do not appear to be any irresolvable open technical issues related to geologic CO2 sequestration. In fact, it appears that geologic CO2 sequestration is likely to be safe, effective, and competitive with other options on an economic basis. CCS is actionable almost immediately and can be sustained for many years while our energy base undergoes transition to new carbon-free technologies. CCS is one method of reducing CO2 emissions growth from coal-based power generation or even reducing total coal-based CO2 emissions over time while maintaining the contribution of coal, a cheap, domestic energy source, can make in providing a substantial portion of our base-load power.Table 3 summarizes estimated costs for CCS as applied to Illinois #6 coal-based power generation. Costs are given in $ per tonne of CO2 and in ¢/kWe-h. The capture and compression costs vary with coal type and with generating technology. When they are added to the COE generation without CO2 capture, the result is the COE for generation with CO2 capture. The higher capture cost for PC generation is evident, compared with IGCC.The cost of transport and injection will vary with site (location) and with reservoir properties. Transport costs for the configuration in Figure 5 could be from less than a $ per tonne to several $ per tonne; $2/tonne was chosen. Estimated sequestration costs including drilling the needed wells and the CO2 injection operation range from $5 to $8 per tonne CO2; $7/tonne was chosen. The table shows how these costs translate to ¢/kWe-h, assuming the same site (Figure 5). PC transport and sequestratrion costs are marginally higher because more CO2 is involved. However, in both cases the transport and sequestration cost is less than 0.9 ¢/kWe-h. In overview, for PC generation with Illinois #6 coal the cost of CCS is about 3.8 ¢/kWe-h; for IGCC the cost is about 2.3 ¢/kWe-h. Each step in CCS adds cost, but there are no economic show stoppers present. For IGCC, CCS increases the bus bar cost of electricity by about 50%. These costs will most likely come down significantly when CCS begins to become practiced industrially. The innovative spirit of industrial practitioners and competitive pressures will bring a lot of innovation to every step in CCS. However, this will not happen until there is a real need to practice it commercially. It is important to note that to achieve today’s best emissions performance (99.9+% PM reduction, 99.4+% SOx reduction and 95+% NOx reduction) adds about 1 ¢/kWe-h to the cost of electricity generation with no emissions control. This area has seen a tremendous improvement in performance and in cost reductions since these technologies began to be applied. The same can be expected for CCS. This area offers the U.S. a chance to develop technologies that can be marketed to the rest of the world.The remaining issue with respect to CCS is the establishment of a monitoring, regulatory, legal, and permitting framework under which this can be done in a business-like context. This can be done along with demonstrating the full-scale, integrated operation of CCS. This will require an effective Research, Development and Demonstration program aggressively applied to 3 -4 demonstration projects. These projects should apply different CO2 generation and capture technologies and involve sequestration of CO2 in different geologies at the rate of 1 million tonnes CO2 per year for several years.SummaryConsidering CO2 capture and sequestration from coal-based power generation, there are no apparent irresolvable technical problems in the entire CCS chain from coal-in to power-out and CO2 in geologic storage. There do not appear to be any economic show stoppers in the chain either, although at the current time it appears that applying CO2 capture and sequestration will increase the bus bar cost of electricity by about 50 %. Today, this would put coal-based power generation with extremely low air emissions (99.9+ % reductions) and 90+ % CO2 emissions reduction in the same cost range of wind power (range 6-10 ¢/kWe-h in the U.S.). However, to make CCS an accepted reality that can be smoothly applied, it is necessary to demonstrate the integrated CCS system for the major generation technologies with CO2 sequestration in several different geologies. This requires three or four major demonstration projects in the U.S. combined with appropriate R&D to support them. These need to be moved forward aggressively.With respect to the generation and capture part of the CCS chain, the technology systems to capture CO2 from coal-based power production are all available, but they require further development and integrated demonstration. Of the three competing systems (PC with CO2 recovery from flue gas, Oxy-fuel combustion with flue gas direct compression, and IGCC with pre-combustion CO2 capture) it is too early to choose winners because it is not possible to predict how technology development and commercial innovation may evolve. Further, one technology system may be well suited for bituminous coals, whereas another may apply best to low rank coals and lignite.With respect to sequestration, there is enough technical knowledge today to select safe and effective storage sites for large volumes of CO2 storage over extended time periods. However, national deployment of commercial CCS involves technical challenges and concerns due to the operational scale that is required. The aggressive research, development, and demonstration program recommended here could resolve both the technical and legal issues within 10 years and provide the foundation for a legal and regulatory framework to protect the public without undue burden to industry.In the program recommended above the generation and capture, and the sequestration demonstration components should be integrated together as much as possible to facilitate learning for actual CCS as it will need to be applied commercially. This program could be viewed as an insurance policy that the U.S. is investing in so that the technologies and legal/permitting framework are available when needed. Further, as this moves into commercial practice it is expected that innovations and cost reductions will occur. Enabling CCS is critical to the use our domestic coal supply in an environmentally positive manner, as we will need to do. Establishing a commercial, innovative CCS technology base in the U.S. should provide marketing opportunities to the rest of the world.Thank you again for the opportunity to present this material to you and your committee. We face many energy challenges in the future, and I firmly believe CCS will help us meet them.Citations and Notes1. MIT, The Future of Coal; Options in a Carbon-Constrained World. 2007, MIT: Cambridge.2. Dalton, S., The Future of Coal Generation, in EEI Energy Supply Executive Advisory Committee. 2004.3. NCC, Opportunities to Expedite the Construction of New Coal-Based Power Plants. 2004, National Coal Council.4. Friedmann, J., Technical Feasibility of Rapid Deployment of Geological Carbon Sequestration, in House Energy and Commerce Committee, Energy and Air Quality Sub-Committee. 2007: Washington, DC.
Dr. K.R. SridharChief Executive OfficerBloom Energy
Dr. Francis R. Preli, Jr.Vice President of EngineeringUTC Power, LLCTestimony byDr. Frank PreliVice President of EngineeringUTC PowerSenate Commerce, Science and Transportation CommitteeSubcommittee on Science, Technology and InnovationMarch 20, 2007“Energy Innovations”Good afternoon. I am Frank Preli, Vice President of Engineering for UTC Power. I joined United Technologies Corporation in 1978 and have been with UTC Power since 1998. I am responsible for leading a group of approximately 250 engineers and scientists engaged in research and product development for UTC Power. Our work includes development of Proton Exchange Membrane (PEM), Phosphoric Acid (PAFC) and Solid Oxide (SOFC) fuel cell technology to serve commercial and transportation markets. We also develop integrated combined cooling, heating and power systems and organic Rankine cycle-based heat recovery systems for geothermal and waste heat applications.Company BackgroundUTC Power, a business unit of United Technologies Corporation, is a world leader in commercial stationary fuel cell development and deployment. UTC Power also develops other innovative power systems for the distributed energy market. At the Committee’s request, I will focus my remarks today on the latest addition to our portfolio of clean, efficient, reliable technology solutions – namely, the PureCycle® power system. This is an innovative low-temperature geothermal energy system that represents the first use of geothermal energy for power production in the state of Alaska and the lowest temperature geothermal resource ever used for commercial power production in the world. The technology currently is being demonstrated at the Chena Hot Springs resort 60 miles from Fairbanks, Alaska and 35 miles off the power grid.SummaryGeothermal energy addresses many of our national concerns, but its potential is largely untapped. UTC Power’s PureCycle® system represents an innovative advancement in geothermal energy production and is operating successfully today in Alaska as part of a demonstration effort. This geothermal energy breakthrough offers the possibility of tapping into significant U.S. geothermal reserves for a domestic, renewable, continuously available source of power to meet our growing energy demands. Congressional action is needed, however, if the U.S. is to translate this potential into reality.Geothermal Energy Addresses Many National Concerns, But Huge Potential is Largely UntappedOur nation is faced with air quality and global climate change challenges, ever- increasing fuel costs and a desire to be less dependent on energy sources from politically unstable areas of the world. The United States is blessed with an abundance of geothermal energy resources that offer a renewable, continuously available, largely untapped domestic resource. The country generates 2,800 MWe of geothermal energy for power production in California, Nevada, Utah and Hawaii and another 2,400 MWe is under development. While estimates vary, the Geothermal Energy Association indicates that with effective federal and state support, as much as 20 percent of U.S. power needs could be met by geothermal energy sources by 2030. The National Renewable Energy Laboratory’s report “Geothermal: The Energy Under Our Feet” concludes: “Domestic resources are equivalent to a 30,000-year energy supply at our current rate for the United States.” The study also notes: “New low-temperature electric generation technology may greatly expand the geothermal resources that can be developed economically today.”Chena Hot Springs Resort Puts Geothermal on the Map in AlaskaThanks to a partnership between UTC Power, Chena Hot Springs Resort, the U.S. Department of Energy, Alaska Energy Authority, Alaska Industrial Development and Export Authority and the Denali Commission, Alaska was added last year to the list of states using geothermal resources for power production. The system operates on 165º F (74º C) geothermal water and by varying the refrigerant can use hydro thermal resources up to 300º F (149º C). This is an exciting breakthrough since previously experts had assumed that geothermal fluids needed to be at least 225º F (107º C) for economic power generation. It is also significant since a large portion of the estimated known U.S. geothermal resources are expected to be in the low to moderate temperature range, including a large number of deposits associated with oil and gas wells that are currently not economically viable and therefore non-productive.Alaska has some of the highest energy costs in the country for electric grid connected power and even higher costs for those off the grid. The Chena Hot Springs Resort, which operates independent of the grid, pays 30 cents per kilowatt hour (kWh) for electricity. When fully optimized and fully implemented, we expect the UTC Power PureCycle® system can reduce this cost to 5-7 cents per kWh, thus saving the owners $1,000 per day in fuel costs and eliminating the need for diesel fuel-burning generators and their harmful emissions.The system was commissioned in August 2006 and provides power for the resort’s on-site electrical needs. Two PureCycle® 225 kW units are operational at Chena today and together have logged 5,400 hours of experience with 100% reliability after the initial 500- hour commissioning shakedown and greater than 99.2% reliability overall.The visionary owners of the resort, Bernie and Connie Karl, are committed to a sustainable community that is entirely self- sufficient in terms of energy, food and fuel. Their dedication is evidenced by on-site renewable power sources that secure their energy independence while benefiting the environment.We are working closely with Alaskan authorities regarding further development of and enhancements to this technology. There is significant potential to deploy PureCycle® systems at Alaska’s more than 200 rural villages that currently depend on diesel generators with fuel being shipped by air or water. This results in high costs, logistics issues and dirty, loud power generation that is inconsistent with native cultural values.Description of PureCycle technologyThe PureCycle® system is the product of a UTC brainstorming session in 2000 focused on opportunities for organic growth. It is based on organic Rankine cycle (ORC) technology - a closed loop process that in this case uses geothermal water to generate 225 kW of electrical power. Think of an air conditioner that uses electricity to generate cooling. The PureCycle® system reverses this process and uses heat to produce electricity. The system is driven by a simple evaporation process and is entirely enclosed, which means it produces no emissions. The only byproduct is electricity, and the fuel – hot water – is a free renewable resource. In fact, after the heat is extracted for power, the water is returned to the earth for reheating, resulting in the ultimate recycling loop.Innovative Features and AwardsThe PureCycle® system reflects a number of key innovations and breakthroughs. As mentioned previously, the Chena project is the world’s lowest temperature geothermal resource being used for commercial power production and represents the first time geothermal energy has been used to produce electricity in Alaska.On the technical side, the PureCycle® system capitalizes on an advanced aero dynamic design that results in 85 percent efficiency from a radial inflow turbine derived from a Carrier Corp. compressor. Carrier Corp. is a sister UTC company and a world leader in air conditioning and refrigeration technology. The geothermal system is also unique in its ability to match the turbine design to working fluid properties, thus allowing the equipment to operate on a range of low to moderate temperature energy resources and enhancing its flexibility to meet customer requirements.While the PureCycle® system and its application to the geothermal energy market are new, the product draws upon decades of UTC innovation, operating experience and real-world expertise. Key components of the system are derived from Carrier Corp. and 90 percent of the PureCycle system is based on UTC high-volume, off-the-shelf components that enhance the value proposition to our customers.The Chena project has attracted world-wide attention and won two awards last year –a U.S. Environmental Protection Agency and Department of Energy 2006 National Green Power Award for on-site generation and Power Engineering magazine named it Renewable/Sustainable Energy Project of the Year.What is the significance of low temperature geothermal energy?Previously, geothermal energy for power production has been concentrated in only four Western U.S. states. The ability to use small power units at lower temperature geothermal resources will make distributed generation much more viable in many different regions of the country. Simply put, PureCycle® technology could result in significant new domestic, continuously available renewable energy resources - not just in Alaska, but across the country. The capability to operate with a low temperature resource allows the UTC PureCycle® System to utilize existing lower temperature wells and to bottom higher temperature geothermal flash plants and many existing ORC binary power plants.In addition, there are more than 500,000 oil and gas wells in the US, many of which are unprofitable. The use of geothermal hot water, which is abundant at many oil and gas well sites, to produce a renewable source of electrical power could extend the life of many of these assets. This would result in significant environmental, energy efficiency, climate change, economic and other benefits associated with the development of geothermal oil and gas electrical power.Recommended ActionsIt is unfortunate that at this moment in time when there are exciting innovative developments in the world of geothermal technology, the federal government is cutting off research and development funding. The rationale given is that the technology is mature and represents a resource with limited value since it is confined to only a few Western states.My message to you today is that we have only scratched the surface regarding our nation’s geothermal energy potential. We have not exhausted the R&D possibilities and this is not a resource that is limited to only a few Western states. As I’ve indicated in my testimony, there are advances in low-temperature geothermal energy alone that prove otherwise.The National Research Council report “Renewable Power Pathways” recognized the importance of geothermal energy and stated: “In light of the significant advantages of geothermal energy as a resource for power generation, it may be undervalued in DOE’s renewable energy portfolio.”My testimony has focused on only one element of the geothermal opportunity – low- temperature resources. There are a variety of other research needs, including cost- shared partnerships to enhance the performance of existing successful systems, increase the size of the units and demonstrate benefits for the oil and gas market. We also need continued federal funding for public/private partnerships for exploration, resource identification and drilling. We need more up-to-date survey information. The most recent U.S. Geological Survey for geothermal energy was conducted in 1979. This survey used techniques that are outdated today and was based on technology available 30 years ago. It did not consider low to moderate temperature resources since there was no technology available at the time that could utilize these resources in a cost-effective manner.As our Chena project demonstrates, far from being a mature technology with limited geographic reach, geothermal energy has the potential to satisfy a significant portion of our growing energy needs with a renewable, continuously available domestic resource. But appropriate government policies must be adopted and implemented to make this a reality. Congress can help to ensure we realize the full potential of geothermal energy. Attached to my testimony is a position paper by the Geothermal Energy Association that outlines key industry recommendations and action items including:· Extension of the geothermal production tax credit and revised “placed in service” rules.· Robust funding for DOE’s Geothermal Research Program· Incentives for geothermal exploration· Comprehensive nationwide geothermal resources assessment.Thank you for the opportunity to testify and I would be pleased to answer your questions.
Achieving a 20% National Geothermal GoalThe United States, as the world's largest producer of geothermal electricity, generates an average of 16 billion kilowatt hours of energy per year. While substantial, U.S. geothermal power is still only a fraction of the known potential. Today, roughly sixty new geothermal energy projects are under development in over a dozen states that will double current geothermal power production. With effective federal and state support, recent reports indicate that as much as 20% of US power needs could be met by geothermal energy sources by 2030.To achieve this, the Administration and Congress should adopt the following National Geothermal Goals for federal agencies: Characterize the entire hydrothermal resource base by 2010; sustain double digit annual growth in geothermal power, direct use and heat pump applications; demonstrate state-of-the-art energy production from the full range of geothermal resources; achieve new power or commercial heat production in at least 25 states; and, develop the tools and techniques to build an engineered geothermal system (EGS) power plant by 2015.To support these goals and accelerate the production and development of energy from our geothermal resources, the following priority actions are needed:Revise the Section 45 Production Tax Credit (PTC) to support sustained geothermal power development. The PTC timeframe is too short for most geothermal projects to be completed by the current placed in service deadline. To achieve sustained geothermal development, Congress should immediately amend the law to allow facilities under construction by the placed in service date of the law to qualify, and extend the placed in service deadline by at least 5 years, to January 1, 2014, before its expiration.Fund a strong and effective DOE Geothermal Research Program that prioritizes the discovery and definition of geothermal resources; expands GRED funding; develops new exploration technologies; supports state-based programs to expand knowledge of the resource base and its potential applications; improves drilling technology; demonstrates geothermal applications in presently non-commercial settings; and develops and demonstrates of Enhanced Geothermal Systems techniques. DOE’s geothermal program should be expanded to meet today’s challenges and funded at $75 million annually.Provide incentives for geothermal exploration through renewed DOE cost-shared funding and other measures. Ninety percent of geothermal resources are hidden, having no surface manifestations. Exploration is therefore essential to expand production, but exploration is expensive and risky. Cost-shared support for exploration drilling has been provided through DOE’s Geothermal Resource Exploration and Definition (GRED) program. GRED should be continued and expanded, with at least one-half of DOE’s effort supporting exploration, and an exploration tax credit should be established.Expand and accelerate geothermal initiatives on the public lands. USGS should conduct a comprehensive nationwide geothermal resource assessment that examines the full range of geothermal resources and technologies; USGS should collect and make available to the public geologic and geophysical data to support exploration activities; BLM’s Programmatic Environmental Impact Statement (PEIS) should be completed as a top priority; planning, leasing and permitting activities on BLM and National Forest lands should be adequately funded and conducted promptly. Appropriations (and dedicated funding) of $25 million annually should be provided for these agency efforts.