Monday, February 28, 2011

Solving the Energy Poverty Problem

Originally published at Americans for Energy Leadership | By Natalie Relich

In the age of iPhones, Facebook, and Twitter, we have instant access to information and constant means of communication. It is difficult to imagine life without these luxuries, but they are just that, luxuries. For a large portion of the world these technologies are not only a rarity, but an impossibility, as there is no access to electricity.

1.5 billion people do not have access to electricity; 585 million of them living in Sub-Saharan Africa and 404 million in India. Three billion people, almost half of the world’s population, rely on biomass, such as wood, charcoal, and dung for cooking and heating purposes. Sub-Saharan Africa is an especially dire case. Only 31% of the population has access to electricity and the Sub-Saharan African population (excluding South Africa) of 791 million consumes as much energy annually as New York State, a population of 19.5 million, according to a recent IEA and UNDP report entitled "Energy Poverty: How to Make Modern Energy Access Universal."

These people are living in energy poverty, the ramifications of which extend far beyond heating and cooking. Instead of children - usually young girls - going to school, they have to spend hours collecting firewood to heat their homes and cook. If the children are able to go to school, they can only do school work during daylight hours because they have no light to study by at night.

Energy poverty is one of the least discussed aspects of our current energy challenge, yet it poses serious threats to economies, national security, the environment, and public health throughout the world. It is unacceptable that such a massive social problem exists, yet here in the U.S. we do little to alleviate it. This article seeks raise awareness about energy poverty and to describe the threats posed by it and what is being done to remedy them.

Energy Poverty and Economic Development

From an economic standpoint energy poverty is a serious hindrance to growth. Households and countries as a whole cannot develop economically if a significant portion of the population is living in energy poverty. Time that could be spent working must be spent gathering fuel for cooking and heating. This task usually falls on women, preventing them from pursuing economic opportunities like starting their own business.

People cannot charge cell phones, if they have them, limiting their access to information and markets. They have little access to machinery, so their farming techniques (most of the energy poor live in rural areas) are primitive and inefficient. If businesses or households do have access to electricity, there are often power cuts and blackouts, seriously limiting productivity and efficiency.

Energy Poverty and Health Risks

The use of wood, charcoal, and dung cook stoves poses serious health risks; these risks are some of the most serious health risks in the developing world today. Primitive cook stoves create indoor air pollution because homes are poorly ventilated and the dirty air sits in the home, breathed in by the occupants. The number of deaths from this kind of indoor air pollution currently kills more people each year than malaria or tuberculosis according to the IEA report. The report also estimates that by 2030 the number of premature deaths from household air pollution will be more than the number of deaths from HIV/AIDS, malaria, or tuberculosis, all of which are projected to decline over this period. By 2030 the number of deaths from biomass smoke is estimated to increase to 1.5 million per year, or 4,000 deaths per day.

Energy Poverty and National Security

Economic development and security are inextricably linked. In a post 9/11 world, the security of a nation is no longer guaranteed by a large military; the biggest threat to national security is no longer a strong, well organized military of another country, but rather disconnected, unpredictable networks of extremists. When people have a job, food on their table, and an overall good standard of living, they are less likely to turn to radical groups for change. One of the contributing factors to the recent protests across the Middle East is high unemployment and lack of economic opportunities. Instability in the Middle East or any region that is home to extreme groups is a threat to US security. There are of course many reasons why people turn to extremism and poverty is just one of them, but one cannot overlook this important link.

How to solve the energy poverty problem

Alleviating energy poverty poses numerous problems. Most of the energy poor live in remote rural areas making it difficult and costly to connect to the electrical grid. Some energy poor countries simply do not have the infrastructure or economic means to connect rural inhabitants to the grid.

Environmental and climate change issues also makes dealing with energy poverty a tricky situation, mostly because coal remains the cheapest source of energy for much of the world. If electricity was generated from clean, but more expensive sources like wind and solar, rural inhabitants would likely be unable to afford it. Over a billion people are without electricity, so how do they improve their quality of life without adding huge amounts of greenhouse emissions to the atmosphere?

Because of the difficulty in connecting rural inhabitants to the grid, small-scale, off the grid energy projects currently provide the most feasible way of bringing energy to people in remote areas, but achieving this on a large scale is difficult. Large corporations and governments are the most financially and technically equipped to deal with these issues, but corporations lack incentives to do so. Funding a small scale project in a rural Africa does not yield as much return as funding a large scale renewable energy project in China. For governments, finding funding for such innovative projects has largely proven tricky.

One potential funding source could come from the developed world. Those countries that signed the Kyoto Protocol are required to purchase carbon credits in order to offset their own emissions. This could be done by funding small scale projects that would greatly enhance the quality of life for rural inhabitants, but for now these offsets are most easily achieved by investing in large utility scale projects. There is also much uncertainty associated with these small scale projects because they are in such remote areas and funding these types of projects is a relatively new concept.

The United States is not a signatory of the Kyoto Protocol and therefore not required to offset carbon emissions, however we still fund renewable energy projects in developing countries. In 2009, the Obama administration announced the launch of Climate REDI(Renewable and Efficiency Deployment Initiative) a program to “accelerate deployment of renewable energy and energy efficiency technologies in developing countries.” The initiative created several programs and partnerships as well as funding mechanisms to bring energy efficiency to developing countries. New programs were:

  • “The Solar and LED Energy Access Program will accelerate deployment of affordable solar home systems and LED lanterns to those without access to electricity. This program will yield immediate economic and public health benefits by providing households with low-cost and quality-assured solar alternatives to expensive and polluting kerosene.
  • The Super-efficient Equipment and Appliance Deployment Program will harness the market and convening power of MEF countries to improve efficiency for appliances traded throughout the world.
  • The Scaling-up Renewable Energy Program (S-REP), under the World Bank’s Strategic Climate Fund, will provide policy support and technical assistance to low-income countries developing national renewable energy strategies and underwrite additional capital costs associated with renewable energy investments. Funding through Climate REDI will accelerate the launch of S-REP.

The $350 million pledged for these programs will come from the United States as well as other developed nations.

Despite modest government lead efforts, most small scale energy production in the energy impoverished world is being taken on by nonprofits and local organizations. The NY Times recently ran an article about small scale renewable energy systems and the role they are playing in Sub Saharan Africa. The article discussed one woman and the arduous process she had to go through to charge her cell phone. She relied on a cell phone for “small money transfers, contacting relatives, and checking prices at the nearest market”, but had no electricity and therefore no means of charging her phone.

“Every week, Ms. Ruto walked two miles to hire a motorcycle taxi for the three-hour ride to Mogotio, the nearest town with electricity. There, she dropped off her cellphone at a store that recharges phones for 30 cents. Yet the service was in such demand that she had to leave it behind for three full days before returning.

That wearying routine ended in February when the family sold some animals to buy a small Chinese-made solar power system for about $80. Now balanced precariously atop their tin roof, a lone solar panel provides enough electricity to charge the phone and run four bright overhead lights with switches.

Since Ms. Ruto hooked up the system, her teenagers’ grades have improved because they have light for studying. The toddlers no longer risk burns from the smoky kerosene lamp. And each month, she saves $15 in kerosene and battery costs — and the $20 she used to spend on travel.

In fact, neighbors now pay her 20 cents to charge their phones, although that business may soon evaporate: 63 families in Kiptusuri have recently installed their own solar power systems.”

These small scale solutions are spreading throughout Africa and other parts of the developing world as a result of small businesses and nonprofits. One such organization called E+Co invests in green businesses in developing country to provide them with the capital to implement off the grid energy solutions. E +Co has offices in 20 developing countries and has invested $40 million in various businesses. Some of E+Co’s investments include a $127,000 investment to Ghanaian company, Wilkin Solar, that sells solar powered lanterns to rural and urban homes in Ghana so homes do not have to rely on kerosene and firewood for lighting; a $224,241 investment to an Indian company, Selco India, that has sold small scale solar systems to more than 70,000 households in India, and an equity investment in Chinese company, DLLD, that manufactures mini hydropower systems that are used to generate electricity in rural China.

Energy in Common is another organization working to fight energy poverty by allowing individuals to make micro loans to entrepreneurs in developing countries. Individuals can choose from a list of green entrepreneurs on their website, make a loan to help fund green energy projects, track the progress of the project, and eventually get repaid. This is a sustainable and affordable way for ordinary citizens to become involved in remedying energy poverty.

Solar CITIES is a nonprofit that works in Cairo to install solar-powered hot water systems and biogas reactors in Cairo’s slums. The Charcoal Project works to raise awareness about the dangers associated with using biomass fueled stoves and bring together stakeholders to work towards potential solutions. The Lumina Project, an initiative of the Lawrence Berkeley National Laboratory, works to “enable small companies to innovate more rapidly, advises international organizations how to support these emerging [energy] markets, designing market research and performing market research, and helps students engage in the issue.”

These organizations are doing inspiring work, have noble goals, and continue to make a real impact on the lives of the world's poorest citizens; however, they are small organizations with limited capacity and funds. Small scale projects are for now, the most feasible and economical way of bringing people out of energy poverty, but the projects are just that, small. For the 3 billion people living in energy poverty, this relief is not coming fast enough.

R&D and the Future of Energy Poverty

At AEL, we have frequently written on the need for energy innovation and the role it has to play in America's economic growth, competitiveness, and national security. By investing in energy innovation America can simultaneously fuel its economy and help to alleviate international energy poverty. AEL President Teryn Norris and CEO of the Cleveland Foundation Ronald Richard recently wrote an op-ed entitled "Winning Ohio's Energy Future" that highlights the energy innovation projects occurring in Ohio's private sector and the 35,000 jobs they have created. The article notes that while Ohio's private sector has stimulated innovation and growth, there is also a need for the federal government to do the same:

"If America wants to lead the next great growth industry, it’s imperative that we make a serious national commitment to advanced energy technology. Today, the United States spends more on potato chips than federal energy research and development, and continues to spend billions of tax dollars subsidizing fossil fuels."

The American Energy Innovation Council has issued similar calls for government investment in energy research. The AEIC is a group whose mission is to "foster strong economic growth, create jobs in new industries, and reestablish America’s energy technology leadership through robust, public investments in the development of world-changing energy technologies" and is led by a group of prominent American business leaders such as Microsoft's Bill Gates, the former CEO of Lockheed Martin, Norman Augustine, and the chairman and CEO of General Electric, Jeff Immelt. The AEIC recommends investing $16 billion annually in energy research, increasing funding of the Department of Energy's ARPA-E program to $1 billion, and establishing a New Energy Challenge Program to build large scale pilot projects.

To put $16 billion in perspective, the US currently spends $30 billion in health research and $80 billion in defense research and development. In an op-ed Gates and Holliday wrote for the Washington Post last year, they discussed the US's lack of initiative on energy research, the importance for energy innovation, and why the public sector should be the one to do it:

"But our country is neglecting a field central to our national prospect and security: energy. Although the information technology and pharmaceutical industries spend 5 to 15 percent of their revenue on research and development each year, U.S. companies' spending on energy R&D has averaged only about one-quarter of 1 percent of revenue over the past 15 years...

...We need a vigorous strategy to invent our future and ensure its safety and prosperity. In the realm of energy, as with medicine and national defense, that requires a public commitment. Why can't the private sector do this? What makes energy different from, say, electronics? Three things.

First, there are profound public interests in having more energy options. Our national security, economic health and environment are at issue. These are not primary motivations for private-sector investments, but they merit a public commitment.

Second, the nature of the energy business requires a public commitment. A new generation of television technology might cost $10 million to develop. Because those TVs can be built on existing assembly lines, that risk-reward calculus makes business sense. But a new electric power source can cost several billion dollars to develop and still carry the risk of failure. That investment does not compute for most companies.

Third, the turnover in our power system is very slow. Power plants last 50 years or more, and they are very cheap to run once built, meaning there is little market for new models.

It is understandable, then, why private-sector investments in clean energy technology are so small. Yet, while it may make sense for individual companies to make these choices, accepting the status quo would condemn our country to very bad options. There is vast opportunity in energy. Prices are declining in solar energy and wind, and they could fall further with new technology. There is a critical need for better electricity storage technologies to enable electric vehicles and very-large-scale renewable energy."

Investment into energy R&D would not only help secure America's future, but could also do much for the billions living in energy poverty. As noted earlier, small scale renewable projects provide the best opportunity for alleviating poverty while not adding to greenhouse gas emissions. By driving down the cost of solar cells, wind turbines, and energy storage electrifying rural areas could become not only become a cost effective proposition for governments, but profitable endeavor for private investors. While renewables remain a tough business pitch in much of the developed world, these margins become even smaller in the developing world, with lower electricity prices and increased technical hurdles. Lowering prices and creating more logistically feasible renewable power could also stem off the growing trend of developing nations looking to coal as the basis for electrification.

In Conclusion

Energy poverty is one of the most important and devastating social issues of our time that has been neglected for too long, and bringing half of the world’s population out of energy poverty is an enormous task. Innovative policies are needed to bring energy to people who live away from the grid and financing is needed to implement those solutions. America’s Climate REDI initiative is certainly a step in the right direction as are the efforts of groups like E+Co and Energy in Common. Projects like E+Co and the Energy in Common need continued sources of funding so they can reach the small businesses and local entrepreneurs in energy poor areas who are trying to make a difference.

Ultimately, more public-private investment in these initiatives -- especially those based around energy R&D and technology transfer -- and strategic partnerships between developed and developing countries are needed to truly reach all of those off the grid. Nonprofits and small businesses alone will not be able to bring electricity access to billions of people. Meanwhile, technological innovation is needed to drive down the cost of clean technologies so they are competitive and no longer need international subsidies. New ways of connecting remote rural areas to the grid are needed, and in cases where connection to the grid is impossible, improved storage mechanisms for distributed generation resources would improve electricity access in remote areas.

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Natalie Relich is a Contributor in AEL’s New Energy Leaders Project and her work will be regularly featured on the website. The views expressed are those of the author and do not necessarily reflect the position of AEL.

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Tuesday, February 22, 2011

Senate Democrats' Agenda Aims to Invest in Energy Innovation

Originally posted by Sara Mansur at the Breakthrough Institute

Last week, a group of Senate Democrat leaders unveiled their plan to build off of the innovation-centered budget proposal released by the President two weeks ago, including several important energy innovation investments. Senate Majority Leader Harry Reid introduced the proposal as an effort to simultaneously "create jobs, promote growth and help America win the future by making smart investments in education, innovation and infrastructure while cutting spending to live within our means."

The Senate Democrats' plan to judiciously invest in innovation while cutting wasteful spending stands in sharp contrast to the Continuing Resolution bill passed by the House this weekend. The House bill budget would recklessly cut more than $60 billion from the federal budget to fund the government through FY2011, slashing several important energy innovation initiatives.

Instead, the Senate Democrats' agenda will focus on pushing investments across the energy innovation cycle, from R&D to manufacturing to deployment. Below are some key components of the plan:

R&D Tax Credit: Senate Democrats will seek to make permanent the income tax credit for research and development, which acts as an important incentive for private companies to invest in early-stage R&D.

Establish a Clean Energy Deployment Administration: Senate Democrats will aim to develop a Clean Energy Deployment Administration (CEDA), whose purpose would be to provide financial support to the riskiest clean energy technologies, helping them move from the laboratory to commercialization. Without creative public-private partnerships, these capital-intensive, high-risk technologies are at great risk of getting stuck in the commercialization "valley of death," an innovation fate that can spell doom for the widespread deployment of potentially critical clean energy technologies.

Expand the Build America Bonds Program: Democrats will focus on extending and expanding the Build America Bonds program, which lowers the cost of borrowing for municipalities to support new infrastructure projects and create jobs.

Extend the 48C Advanced Energy Manufacturing Tax Credit: The Senators will aim to further the Advanced Energy Manufacturing Tax Credit, which offers a 30 percent credit for domestic companies to build new clean energy technologies. This tax credit is an effort to boost domestic clean energy manufacturing and compete with China.

These measures, among others, are vital to encouraging American competitiveness in the clean energy sector. By establishing a policy environment conducive to innovation, the US will attract the entrepreneurs, industry, and private capital necessary to encourage a thriving clean energy sector.

The Senators' plan for a selective and targeted approach to clean energy investment will post a much higher return than the House's proposal to carelessly slash programs that are most vital to American growth. Senate Democrats have realized this fact, but it remains to be seen if Senate Republicans can get on board.

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Monday, February 21, 2011

Presidents Day: Winning Our Energy Future with $15 billion for R&D

Today, we have an op-ed published in the Presidents' Day edition of The Plain Dealer, the largest newspaper in Ohio. The op-ed, "Winning Ohio's energy future," arrives one day before President Obama visits Cleveland to promote the administration's "winning the future" agenda and host a business forum on entrepreneurship and innovation.

Co-authored with the CEO of the Cleveland Foundation, one of the country's largest community foundations, we discuss how greater federal investment in clean energy technology innovation -- on the scale of $15 billion annually for R&D -- can unleash economic growth in the Midwest and across America, help recapture our global clean-tech leadership, and drive down the price of low-carbon energy.

Winning Ohio's energy future
The Plain Dealer – Cleveland, OH
Monday, February 21, 2011

By Ronald B. Richard and Teryn Norris

When President Barack Obama visits Cleveland on Tuesday to talk about entrepreneurship and innovation, he will find a city and state where those forces are driving a revolution in clean, green energy – and where a greater federal commitment to energy innovation can secure our national competitiveness.

Northeast Ohio entrepreneurs are building an innovation ecosystem in clean-energy technologies and pushing the region and state into national leadership. NorTech, the regional technology-promoting nonprofit, has pulled together more than 400 public and private partners to create a cluster of advanced-energy innovation. Case Western Reserve University's Great Lakes Energy Institute is conducting cutting-edge research into improvements in power generation, storage and transportation.

All over Ohio, advanced energy is spawning employment: The industry already accounts for more than 35,000 jobs in Ohio -- more than all but three other states. Toledo gave birth to one of the world's largest solar-power companies. Some 90 manufacturers are supplying parts for wind turbines.

And we hope the most visible symbol of Ohio's place in this 21st-century economy will soon sprout from Lake Erie near downtown: a wind-turbine farm that will energize homes and help position our region as a global leader in the freshwater wind-power niche.

But the president and his Cabinet must depart from Cleveland State University with the clear understanding that all of this progress is precarious. Without substantial federal and state investment, leadership and policy change, energy innovation in Ohio and all across the United States will short-circuit.

If America wants to lead the next great growth industry, it's imperative that we make a serious national commitment to advanced energy technology. Today, the United States spends more on potato chips than federal energy research and development, and continues to spend billions of tax dollars subsidizing fossil fuels. The results are clear: Since the 1970s, the United States has failed to cut our dependence on fossil fuels. Meanwhile, China recently announced a plan to invest a whopping $740 billion in its clean-tech industry over the next decade.

Recognizing this challenge, a growing group of business leaders, scientists and economists has settled on a target for increased federal energy R&D: $15 billion, compared to the current level of about $3 billion. The consensus extends from a coalition of business titans including Bill Gates and GE Chairman and CEO Jeffrey Immelt, to dozens of Nobel Prize-winning scientists, to the president's chief technology advisers. This investment, they argue, can drive down the price of low-carbon energy, help regain U.S. clean-tech leadership and spur the development of entirely new industries. The Obama administration's latest budget proposes a $750 million increase in annual energy innovation spending -- a critical first step.

For decades, the Department of Defense has been hugely successful at fostering breakthrough technology. Al Gore didn't invent the Internet, but an organization called the Defense Advanced Research Projects Agency did -- along with the GPS in your phone, speech-translation technology, stealth planes and much more. Today, a new organization modeled after DARPA at the Department of Energy, called ARPA-E, is doing the same for energy technology, and it has already leveraged more than $100 million in private capital. Similar to a venture capital firm, ARPA-E can direct federal energy-research dollars to drive innovation and growth, and eventually pay for itself many times over.

Our nation's track record is indisputable: When the United States wants to lead, we make a national commitment and invest the necessary resources. Since World War II, few policies have enjoyed as much bipartisan support as research and development. President Franklin D. Roosevelt's Manhattan Project created the nuclear power industry; Presidents Dwight Eisenhower's and John Kennedy's post-Sputnik programs sparked the information technology and aerospace revolution; and Reagan's investments in defense technology helped win the Cold War.

Energy innovation won't solve all of America's and Ohio's economic woes, and broader federal support is necessary to spur clean-energy deployment and manufacturing, including a national target for clean-energy production. But public investment in technology innovation was central to making the 20th century the American century, and with bold federal commitment today, the United States might begin achieving the energy revolution we need.

--
Ronald B. Richard is president and CEO of the Cleveland Foundation. Teryn Norris is president and founder of Americans for Energy Leadership, a national energy policy advocacy group.

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Friday, February 18, 2011

House GOP Budget Proposal Slashes Energy Innovation Investments

The House Republican's Continuing Resolution proposal to fund the government through the rest of FY11 would recklessly slash energy innovation investments across federal agencies. The bill, H.R. 1, was introduced last Friday as the GOP's misguided attempt to reduce the deficit, a proposal that would strip highly leveraged dollars from important federal programs, while representing merely a drop in the bucket of the $1.3 trillion federal deficit.

The Continuing Resolution as it stands would slice over two billion dollars from the DOE's budget alone and would have detrimental impacts on the state of American energy innovation. The budget cuts would force the layoffs of scientists and engineers, shrink the capabilities of laboratories and universities to perform the most critical cutting-edge energy research projects, and, by cutting funds for highly-leveraged loan guarantee programs, steer private sector funds away from American entrepreneurs and small businesses looking to demonstrate and deploy their innovative energy technologies on American soil.

The Continuing Resolution proposes cuts of at least 17% as compared to FY10 levels in each of the most innovation-oriented offices in the Department of Energy:

  • The agency which would be hardest hit would be the Advanced Research Projects Agency-Energy (ARPA-E), which funds both the riskiest and most transformative, early-stage energy innovation projects, and would lose a staggering 75% of its budget under H.R. 1.
  • The Office of Science, which funds critical early-stage energy innovation research, would see a 20% decline in its budget. Office of Science devoted 20% of its 2010 budget to energy innovation funding, while supporting additional fundamental physical science research.
  • The Office of Nuclear Energy, which devoted 41% of its funds to energy innovation projects in 2010, would lose 23% of its budget.
  • Meanwhile, the Office of Fossil Energy would see an 11% reduction in its budget. 43% of the office's 2010 budget was devoted to energy innovation efforts.
These are the offices and programs that fund the most critical and innovation energy technology projects, and such broad budget cuts would be detrimental to their operations. As the graph below illustrates, these proposed budgets stand in sharp contrast to President Obama's proposed budget for FY12, which would responsibly ratchet up critical energy innovation investments in each of these offices.

Budget of Selected DOE programs, ($ US)
Screen shot 2011-02-18 at 2.34.26 PM.png









To make matters worse, the budget would cut funding for several of the DOE's loan guarantee programs, which aim to fill the gap left by the private sector in financing the development and deployment of innovative renewable energy and energy efficiency technologies. For instance, the DOE's Advanced Technology Vehicles Manufacturing Loan Program's budget would drop 50%, or by $10 million.

And the Continuing Resolution rescinds all unobligated ARRA funds, effectively stripping away financing for 20 DOE loan guarantee applications that are currently in review, but have not yet been finalized. Further, six innovative energy projects have received conditional loan guarantee commitments from the DOE and secured developer financing, but, because the OMB will not consider loan guarantee funding to be obligated until loans have closed, these projects, too, will be cancelled.

As Rhone Resch of the Solar Industries Association wrote in an open letter to the House,
All of these projects would be cancelled by H.R. 1, not only eliminating the construction jobs associated with these projects, but also impacting the manufacturing orders to our domestic US solar industry... In today's economic climate, these programs are critical to attract investment in nuclear, clean coal and renewable energy projects. Until the financial community witnesses the successful completion of several of these projects, it will continue to charge substantial premiums or not lend to those projects at all.
This Continuing Resolution, if passed, would not just eliminate jobs from the solar industry, or from construction or manufacturing orders, but would eliminate jobs across the energy innovation cycle and across various innovative energy technology sectors. This, in turn, would drive private sector funds away from the American market and towards overseas soils, where governments are recognizing the importance of investing in energy innovation, manufacturing, and markets.

Obama's proposed FY12 demonstrated a clear understanding that budget cuts, while important and necessary, need to be strategic. At a time when other countries are actively investing in energy innovation to remain competitive, the House Continuing Resolution proposal would weaken the engine of American growth - innovation. Far from fiscally responsible, these untargeted and sweeping cuts to energy innovation budgets are short-sighted and will amount to no long term gain for the country, our economy, or the deficit situation.

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President Obama's Budget Would Invest in Energy Innovation

President Obama released his fiscal year 2012 budget proposal this morning, a solid endorsement of the necessity to increase public investment in energy innovation amidst proposals to indiscriminately cut discretionary spending across all federal programs. The President's budget proposal builds off of the innovation-centered economic growth strategy presented in the State of the Union Address last month and the White House Innovation Report released two weeks ago.

On the energy investment front, the budget proposal aims to increase the DOE's budget by 11.8 percent over FY2010's current appropriation levels, or $3.1 billion dollars, a comparatively small increase in an overall budget proposal of $3.7 trillion that proposes reducing the projected deficit by roughly $110 billion per year for the next ten years.

This budget increase is a vital step towards meeting the scale of the energy innovation challenge long-underlined by the Breakthrough Institute and by a general consensus of leading energy innovation experts, think tanks, and policymakers.

However, not all of these increases lie with funding for energy innovation. Using the Energy Innovation Tracker, a tool that compiles federal energy-innovation funding across nine federal agencies for the years 2009-2011, inclusive of ARRA, we've broken out investments in energy innovation (defined in the tracker as Basic Science, RD&D, and Education investments) from general energy investments in measures such as deployment, facility construction, and program management.

To do so, we've calculated the share of total budgets for each of these programs in FY2010 dedicated to energy innovation spending, and have assumed, for discussion's sake, that an equal proportion of each proposed FY2012 program budget is intended for energy innovation spending. The FY2010 budget is used rather than FY2011 budget request, as federal agencies are currently operating with a continuing resolution under FY2010 budget levels. The summary table for a selection of these energy innovation measures is presented below. Please note that these are ballpark figures. For a more extensive discussion of the methodology behind these assumptions, see the bullets at the end of this post.

Selected DOE Program Energy Innovation Budgets, FY2010 and Estimated Proposed FY2012 ($ millions)

EnergyInnovationBudgetTable.png
(click to enlarge)

In addition to these budgetary increases:
  • The Administration is proposing an additional $5 billion investment for the Section 48C Advanced Energy Manufacturing Tax Credit program, which provides a 30% tax credit for energy manufacturing facilities to encourage advanced manufacturing processes.
  • The budget also proposes increasing funding for several of the DOE's loan guarantee programs, aiming to scale-up loan guarantees for the development and deployment of innovative renewable energy and energy efficiency technologies, nuclear power projects, and advanced technology vehicle manufacturing.
  • Budget increases will be funded through the proposed reform of fossil fuel energy spending, through the elimination of tax subsidies for the oil and gas industry and a 45% cut to DOE fossil energy research programs. Hydrogen research and a few other programs also receive targeted reductions in the budget request.
These elements of President Obama's proposed budget are key moves towards the larger energy innovation system reform advocated for by several leading innovation scholars in "Post-Partisan Power", and in "Jumpstarting a Clean Energy Revolution with a National Institutes of Energy" a 2009 report published by the Breakthrough Institute and Third Way.

With these proposed investments across the energy innovation cycle, from research in breakthrough technologies to investments in advanced manufacturing and demonstration of later-stage technologies, the proposal recognizes that public investments in energy innovation are not just critical to the nation's energy future, but also to securing the country's economic prosperity. The proposal adds to a growing chorus of voices on both sides of the political spectrum that recognize that smart, targeted investments, rather than sweeping spending cuts, can be used to spark innovation and overcome the fiscal deficit.

The President's proposed budget is an important first step towards meeting this country's energy innovation imperative. Now, it remains to be seen if the budget proposal is largely symbolic, or if the President is fully committed to making this case to the American public and to winning over conservative policymakers and fiscal hawks who have been reluctant to embrace an innovation-focused strategy for fiscal responsibility and economic renewal.

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*Calculations for share of proposed FY12 budget devoted to energy innovation for the Office of Fossil Energy differed from calculations used for other offices, as the Administration stated throughout the proposed budget its goal of phasing out inefficient fossil fuel subsidies. Thus, it was assumed that the proportion of budget devoted to energy innovation would have increased in the FY12 proposed budget, and this share was calculated by summing: the changes listed in the FY12 proposed budget for the Carbon Capture & Power Systems Programs, the Advanced Energy Systems Programs, and a portion of the FY10 energy innovation budget that was assumed to be unchanged from lack of indication otherwise.
  • The DOE's Office of Science (OS)'s budget is proposed to increase by 9.2 percent from FY2010 appropriation levels to $5.4 billion, mostly to continue funding basic energy research and to fund workforce development programs. However, not all of the Office of Science's funding goes towards energy science research, as the office also is a major funder of the nation's fundamental physical science research. With approximately $1 billion, or 20%, of the Office of Science's FY2010 budget devoted to basic energy science research, $1.1 billion, an increase of $100 million over FY10, of the OS' budget will be devoted to basic energy science through this proposed budget.
  • The Administration is requesting a $550 million for the Advanced Research Projects Agency-Energy (ARPA-E) to continue funding early-stage transformational energy research projects, an increase of $350 million from ARPA-E's original funding of $400 million over two years through the ARRA stimulus package. 88% of ARPA-E's funding through ARRA was apportioned to energy-innovation RD&D, thus about $487 million of this $550 million can be expected to be spent on energy-innovation RD&D through the FY12 proposed budget.
  • The budget proposes an increase in funding for the DOE's Office of Energy Efficiency and Renewable Energy (EERE)'s budget, from $2.2 billion in FY10 to $3.2 billion, to continue funding research, development, demonstration and deployment on renewable energy and energy efficiency technologies. Of EERE's FY10 budget, 48% was spent on energy innovation-related RD&D and training programs, thus we can assume roughly $1.5 billion will be spent to energy-innovation related programs through the FY12 proposed budget.

      o In the vehicle technology realm, the Administration proposes an 93% increase in the DOE EERE's Vehicle Technologies budget to $588 million to advance R&D for innovative transportation technologies. With an 80% dedicated to energy innovation funding in FY2010, we can assume that almost $486 million will be spent on energy innovation related projects in the Vehicle Technologies program through the proposed budget.
  • The Administration is proposing a decrease of 0.6% in the Office of Nuclear Energy's (NE) budget, from $858 million to $853 million. 40% of NE's FY10's budget went towards energy-innovation spending, and resultantly we would expect about $349 million of Obama's proposed Office of Nuclear Energy budget to go towards nuclear energy innovation projects.
      o Amidst growing interest in the Small Modular Reactor (SMR) technology, the FY 2011 DOE budget request was the first to propose a project specifically geared towards supporting RD&D of SMR technologies, a $39 million project through the Reactor Concepts RD&D program. Obama's budget proposes a $125 million budget for the Reactor Concepts R&D program, which will reportedly include R&D on advanced SMR designs.
  • The proposal includes funding to launch three additional Energy Innovation Hubs, to bring the total number of DOE Energy Innovation Hubs to six, two shy of the eight hubs advocated for by the Breakthrough Institute and a coalition of think tanks in a policy report on the reauthorization of the America COMPETES Act. These three new hubs would focus on batteries and energy storage, smart grid technologies and systems, and critical advanced materials. The three original Energy Innovation Hubs received funding of approximately $22 million each in FY2010, and are conducting research in the areas of Energy Efficient Buildings, Fuels from Sunlight, and Modeling and Simulation for Nuclear Reactors.

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Thursday, February 17, 2011

Uncertainty or Definitiveness in Climate Science?

Two new studies, published in Nature (subscription required), find a link between anthropogenic greenhouse gas emissions and extreme weather events. At least, that's what I keep hearing. But something else is happening here, beyond the humans-are-changing-the-climate narrative. Behind the boilerplate conclusions offered by the two studies, and in the context of climate-fueled extreme weather research in general, is an interesting discussion of the value and validity of such specific scientific findings to policymakers and the general public.

As The New York Times reports:

In the first major paper of its kind, the researchers used elaborate computer programs that simulate the climate to analyze whether the rise in severe rainstorms, heavy snowfalls and similar events could be explained by natural variability in the atmosphere. They found that it could not, and that the increase made sense only when the computers factored in the effects of greenhouse gases released by human activities like the burning of fossil fuels.
The two studies each used climate modeling to predict the likelihood of observing discrete precipitation levels that, according to their findings, were impossible without the contribution of human-influenced atmospheric moisture content. The first study (Min, Zhang, Zwiers, and Hegerl) analyzed global rainfall over a fifty-year period (1951-1999) and used climate simulations to calculate the effect of increased GHG levels in the atmosphere on precipitation. The second (Pall, Aina, Stone, Stott, Nozawa, Hilberts, Lohmann, and Allen) established causal relationship, using climate simulations, between emissions and a unique extreme weather event (specifically, a flood in England in 2000).

The context for the two respective papers is important. The conclusion offered by the Min et al. indicates that climate change is both happening and having an effect on macro-scale phenomena, specifically global precipitation preceding extreme weather events. The paper by Pall and colleagues ostensibly asserts that we can identify a climate "fingerprint" in specific extreme weather events, indicting humankind for its increasing frequency.

Joe Romm at Climate Progress used the evidence put forward by these two studies in saying that "key weather events are becoming more extreme — especially deluges, heat waves, and droughts — as climate scientists have long predicted they would if atmospheric concentrations of greenhouse gases kept rising." He is referring here to the conventional wisdom in climate change research that, while we anticipate increasing and intensifying climatological extremes associated with anthropogenic emissions, no single weather event can be attributed to the effects of climate change. Climate Progress (which, incidentally, censored me just last week) seems to have put this conventional wisdom to rest.

Not so fast, say others. Over at his blog, Roger Pielke Jr. provides the following contribution to this discussion:
I have been asked by many people whether these papers mean that we can now attribute some fraction of the global trend in disaster losses to greenhouse gas emissions, or even recent disasters such as in Pakistan and Australia.

I hate to pour cold water on a really good media frenzy, but the answer is "no." Neither paper actually discusses global trends in disasters (one doesn't even discuss floods) or even individual events beyond a single flood event in the UK in 2000.
Pielke notes that the Min et al. paper discusses precipitation only, omitting any data on streamflow or damage. On this, he says,
Precipitation is to flood damage as wind is to windstorm damage. It is not enough to say that it has become windier to make a connection to increased windstorm damage -- you need to show a specific increase in those specific wind events that actually cause damage. There are a lot of days that could be windier with no increase in damage; the same goes for precipitation.
Further, Pielke criticizes the Pall et al. paper for drawing conclusions on extreme weather trends in a study with an overly narrow focus on a single weather event. The data, Pielke suggests, don't add up to such a compelling conclusion as has been reported.

Perhaps the most interesting dynamic at play here is what Pielke referred to as "a really good media frenzy." Andrew Revkin at DotEarth has probably the best compilation of opinion and fact surrounding this story, and he uses these two studies to discuss the interplay between scientists and journalists. Specifically, Revkin reminds us, climate science does not tend to lend itself to soundbites and easy conclusions:
As I wrote recently, there seems to be an inverse relationship between the definitiveness of an assertion and its credibility. This doesn’t mean that everything definitive is wrong (only Joe Romm could find a way to interpret it thus). It means that a reporter, or citizen, confronted with a flat statement on a tough issue would do well to dig a bit deeper.
Reporting on the issues, and making policy in response to them, becomes that much more difficult because of the simplistic diagnostics many of us seek. This is the key trouble with climate science, in my view. Science and journalism very often present us with definitive climate predictions, and when credible non-deniers like Pielke chime in with data-driven skepticism, the zeitgeist of climate change as a whole suffers in the public arena. The trouble with trying to solve the climate crisis by using climate disasters as harbingers is that we have yet to accurately predict in advance or attribute in retrospect any direct culpability to anthropogenic emissions in high-profile weather events. Thus, insofar as climate change is a technical challenge with a technical solution, it is extremely difficult to define the parameters which we seek to address.

These two studies, and the reporting on them, are examples of how messy the arena of public discourse can get without even inviting the flat-earthers who refuse to entertain the notion that climate change might just possibly be a bad thing. It is for this reason primarily that I (taking a cue from Revkin) like to frame the challenges we face as an energy quest, for which the technical challenges posed are far more simple to diagnose, even if they are just as daunting.

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Wednesday, February 09, 2011

The Curious Case of the Texas Wind Industry

By Chris Head | Originally publishes at Americans for Energy Leadership

In January, Cape Wind attained what appeared to be the final permits needed to break ground on the long-awaited wind farm. For the past 10 years, the Massachusetts-based Cape Wind project has faced political and legal pressure from advocacy groups and residents who have lobbied hard against the 130 turbine offshore wind farm. In that same amount of time, almost 10,000 MW of onshore wind capacity has been installed in, of all places, Texas.

By 2010 Texas had become the undisputed leader of wind energy in the United States, a fact that flies in the face of conventional logic. How is a state steeped in oil and gas, and run by climate-change denying politicians, spearheading some of the largest renewable energy developments in the US? The answer could provide some insights into how renewable energy can flourish in states where environmental and climate concerns aren’t necessarily the main drivers of energy policy.

Oil, Money, and Politics

The Texas economy is valued at $1.2 trillion, putting it on roughly the same GDP level as India, Russia, and Spain. The State's economy also produces, and consumes, more electricity than any other state in the country. The vast majority of this electricity comes from fossil fuels, making Texas the largest CO2 emitting state in the United States, which until 2006 was the largest emitter of CO2 in the world.

Fossil fuels are intrinsic to the politics and economy of Texas. According to the EIA, in 2009 Texas was the leading crude oil-producing state in the U.S., and its 27 refineries account for more than ¼ of total U.S. refining capacity. In 2008, the oil and gas industry contributed 16.5% of Texas’ Gross State Product, while employing over 360,000 people.

Oil and natural gas companies such as ConocoPhillips, Exxon-Mobil, and Halliburton are headquartered in Texas, and these companies have enjoyed substantial support from politicians such as Governor Rick Perry, who has been an unapologetic ally of the coal, oil, and natural gas industries throughout his decade-long tenure. Indeed, Governor Perry has long been one of the most prominent anti-environmental politicians in the country. And yet, Governor Perry has overseen one of the greatest renewable energy success stories in the United States.

Wind energy accounted for almost 8% of Texas electricity in 2010, up from 3% in 2007. Texas is home to over 30 grid-scale wind farms (each with a nameplate capacity of at least 120 MW) for a total installed capacity of around 9,700 MW. The EIA reports that this is more than 25% of total installed wind capacity in the United States, and almost three times as much capacity as Iowa, the second-ranked state.

There are multiple reasons why Texas is winning the wind race in the US. True, the state is home to some of the best wind resources in the world. But as the stalled Cape Wind project has shown, strong winds do not necessarily translate to grid-sale renewable energy projects. Political, technical, and regulatory barriers all must be overcome for any significant grid scale renewable electricity rollout. Texas has managed to create a favorable policy environment by streamlining regulatory processes, tapping into rural development concerns, and supporting transmission and distribution projects, all of which allow investors to confidently sink money into utility-scale electricity generation projects.

Along the way, the Texas wind industry is establishing best practices not just for wind, but for all renewable intermittent electricity generation sources. Says Peter Behr of the New York Times,

“the lessons learned from the Texas wind power story are also writing the first chapters for new energy policies that will be required when the climate threat becomes a political reality. Grid operators who want to know how much wind or solar power the grid can handle look first to Texas for answers.”

Texas’ ability to formulate a comprehensive policy framework has been essential to supporting the deployment of grid-scale wind farms. Below are specific aspects to this framework, many of which could be replicated in areas of the country where wind generation rollouts face political and logistical hurdles.

Solving the Transmission Dilemma

The process of developing major transmission and distribution (T&D) projects for renewable electricity generation has proven problematic across the US. The main problem is the inherent paradox in which developers need transmission lines to build wind farms, but investors won’t build transmission lines unless they are confident that these lines will carry electricity. As these concerns started to arise in the early 2000s, the Texas legislature responded with a bill which called for the development of Competitive Renewable Energy Zones, or CREZs. These zones are the optimal areas for an electric transmission infrastructure that can move electricity from wind farms to major demand centers.

In July of 2008, the Public Utilities Commission selected a $4.93 billion transmission package capable of transporting 18,456 MW of new power from West Texas and the Panhandle to metropolitan areas. According to analyst Will Furgeson, “If the CREZ implementation is a successful antidote to transmission constraints, the plan could provide a model that might be duplicated across the nation.” The CREZ bill is an example of comprehensive infrastructure appropriation bill that attempts to solve the transmission dilemma in one fell swoop - compared to the on-again/off-again nature of federal production tax credits - which provides wind investors with greater incentives to sink costs into grid-scale developments. This also appears to be a good investment for taxpayers, as the one-time $5 billion transmission line investment is expected to save Texas consumers more than $3.4 billion a year on electricity costs and more than $1.5 billion a year on fuel costs.

Importance of Renewable Portfolio Standards

In 1999, Texas passed a modest renewable portfolio standard that was tucked into a much larger bill that deregulated the state’s electricity sector. The RPS was met four years ahead of schedule, so in 2005, Governor Perry signed a much more ambitious RPS which called for 5,880 MW of renewable generation by 2015 and 10,000 MW by 2025. Remarkably, this goal will be met over a decade ahead of schedule, as Texas has already reached 9,700 MW of installed wind capacity. According to the Environmental Defense Fund’s Jim Marston, “Wind is working so well that [Texas] doesn’t even have to continue to have mandates.”

At first, volatile fossil fuel prices were arguably the greatest driver for wind energy development, rather than the RPS -in 2000. Wind operators responded to a sudden natural gas price spike by offering long term fixed price contracts to customers, boosting the nascent wind industry.

Regardless of what the spark was, the RPS did push officials to take critical steps to integrate renewable electricity generation into the regulatory structure of state government. Some of the main impediments to the growth of grid-scale renewable energy generation projects are rooted in conflicts between government agencies and private stakeholders over pricing, land-use, grid usage, T&D infrastructure, and permits. With an RPS in place, Texas was obligated to formulate policies which could address those issues. At least 26 states have passed an RPS, which is a good first step to building a comprehensive grid-scale renewable generation policy.

Getting Grid Operators and Regulators on Board

The regulatory landscape in Texas has been just as valuable as the natural landscape in cultivating the most successful wind industry in the US in just a little over 10 years. Texas has a key regulatory advantage over other states in the country in that power providers and utilities operate almost exclusively within Texas borders. By contrast,

federal policy on transmission is hogtied by regional conflicts over who pays for long-distance transmission lines for renewable energy.” Will Furgeson adds, “The lack of oversight from multiple state governments allows for a greater degree of adaptability for the industry. Wind developers can usually expect much shorter project timelines in Texas, due to the state’s permissive regulatory policies and business friendly environment.”

The key player for electricity regulation is ERCOT, the state grid operator, which handles more wind power than any other grid operator in the US. Each day, ERCOT orders the next day’s power for the state based on historic data and weather forecasting tools. ERCOT uses an open access policy for purchasing its electricity from generators, which means they will first purchase and dispatch the lowest cost electricity generation. Since wind turbines use a fuel source that is essentially free, wind operators can produce electricity at a low marginal cost, and thus they can sell power at competitive prices with natural gas, coal, and nuclear generated electricity. Federal production tax credits for wind energy, currently 2.2 cents/kWh, also help lower costs.

Solving the Intermittency Problem

The intermittency challenges facing a grid that gets 8% of its electricity from wind energy are substantial. ERCOT has taken measures to help alleviate intermittency problems and stabilize the grid, notably through its load demand program. Similar to demand-response companies such as EnerNOC, ERCOT signs contracts with major power consumers stipulating that, in the case of a rapid drop in wind-generated power, ERCOT will pay these companies to immediately reduce electricity demand and shift the excess power to the grid within minutes, averting a blackout. ERCOT has also switched from zonal to nodal pricing, a move that improves grid reliability, increases market efficiency, and enables transparency of wholesale energy prices. Nodal pricing improves marketing and operations efficiencies through “more granular pricing and scheduling of energy services,” leading to projected consumer savings of over $5.5 billion over the next decade.

Texas wind generators, regulators, and grid operators are already challenging some long-held assumptions about wind power. For example, grid operators around the world have expressed concern about the supposed cap of 20% electricity from intermittent sources that can be integrated into existing grid systems. Yet, according to an Austin utility manager, the 20% grid intermittency problem “isn’t nearly as intractable as it looked 10 years ago.” Common assumptions regarding intermittent energy sources can be challenged when utilities and power providers have a financial incentive to increase efficiency and cultivate in-house innovation. Other states are already looking to Texas as an example of how to structure their wind industry rollouts.

Turning Local Politics into an Asset Rather Than Liability

Technical and regulatory problems are not the only hurdles which must be overcome for renewable energy generation projects. Local politics and ‘not-in-my-backyard’ arguments are enough to sink promising wind and solar projects, even if such a project is financially and technically feasible.

In many areas of Texas, developers have been able to spread the message that wind farms can provide significant benefits for rural communities, which in turn has helped green-light numerous wind farms. In the dry, arid regions of West Texas and the Panhandle, large ranches that previously supported few crops or little livestock are faced with a new, potentially lucrative option. Some wind developers are willing to pay landowners hundreds of dollars a year for every wind turbine placed on their property. Since a wind turbine only occupies between 3-8% of the area leased by developers (wind turbines must be spread out to operate effectively), a farm or ranch can still be productive with other activities while generating revenue from turbines. In Texas, leases for wind farms are generally granted for 30 – 50 years, which means that landowners can depend on wind turbines to generate income for decades.

According to Clifford Krauss of the New York Times, “it has dawned on many Texans that wind power, whatever its other pros and cons, represents a potent new strategy for rural economic development.” Property values are doubling in some wind-rich counties, and tax revenue from wind developments provide local governments with tangible benefits from renewable energy. The Papalote Creek wind farm on the Gulf Coast is set to top the gas industry as the largest local taxpayer, only 2 years after the project’s completion. It is expected to pay 1/3 of the district’s entire tax bill by 2011.

Wind energy proponents across the country should pay careful attention to the specific stakeholders who will be affected by both generation and transmission projects. While opposition will continue for most large electricity projects, anticipating opposition and working with stakeholders to alleviate their concerns can help mitigate a local political backlash.

Leveraging Environmentalist Pockets in Conservative States

In many parts of Texas, wind energy’s low-carbon characteristics play second fiddle to rural economic development and a diversified energy portfolio. But in some pockets of Texas, clean energy proponents have pushed utilities to integrate clean energy generation into their electricity mix. Austin’s GreenChoice program, for example, allows consumers to pay a premium for renewable-generated electricity. GreenChoice has been the most successful utility sponsored voluntary pricing program in the US for the last 8 years, exemplifying how the purchasing power of environmentally conscious consumers can support renewable energy when such policies might not be feasible at the state level.

In Texas, environmental concerns (especially among urban populations) can effectively be tapped to support clean energy, as some consumers will voluntarily choose renewable premiums for renewable-generated electricity. Similar programs in San Antonio and El Paso are meeting consumer’s demand for clean energy as well.

Conclusion

If renewable electricity generation can thrive in Texas, it can happen anywhere. But implementing major energy generation projects involves more than competitive pricing and a RPS mandate. As Massachusetts has experienced with its Cape Wind project, an environmentally progressive populace means little without the support and facilitation of public utilities, grid operators, and legislatures. Indeed, once the decision has been made to construct a new wind or solar farm, a myriad of challenges remain before such a project actually starts producing electricity. Texas has taken a nuts and bolts approach to developing a comprehensive wind energy policy, addressing such disparate though essential areas such as local politics, publicly funded infrastructure projects, and nodal pricing.

The Texas case also provides hints into the future of renewable energy in conservative and/or rural states, and may help to shift the clean energy dialogue to a more productive route. Overall, looking at clean energy technologies through the lens of an economic driver, rather than costly mandated CO2-reduction measures, adds incentives for a wider variety of stakeholders while providing financial incentives for best practices. As AEL’s Teryn Norris and Daniel Goldfarb recently posted, President Obama adopted a similar strategy in his State of the Union address, calling for significant investments in the clean energy economy while neglecting to mention the word ‘climate.’ Such investments are a popular idea among many folks across the ideological spectrum, which might provide the critical leverage needed for grid-scale renewable energy projects in both red and blue states.

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Chris Head is a Contributor in AEL’s New Energy Leaders Project and his work will be regularly featured on the website. The views expressed are those of the author and do not necessarily reflect the position of AEL.

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Friday, February 04, 2011

Webinar: China and Energy - Innovation, Competitiveness, and Meeting Soaring Demand

On Monday, I appeared on an hour-long webinar hosted by theEnergyCollective.com on China and Energy, diving into questions of energy innovation, competitiveness, and the challenge of meeting China's soaring demand.

Carolyn Bartholomew, a commissioner on the US-China Economic Security and Review Commission joined myself and moderator Marc Gunther to dive into the issues at stake.

We discussed how China can be both the world leader in clean and dirty energy, simultaneously leading the world in the production of clean energy technologies and global contributions to climate-destabilizing carbon dioxide and coal consumption; the economic stakes of the global clean energy race and China's rising prowess in clean tech innovation and production; and the huge scale of energy demand in the rapidly developing nation.

You can give a listen here.

the energy collective


See also: "Rising Tigers, Sleeping Giant" report on global clean tech competitiveness

A Clean Energy Competitiveness Strategy for America

Full Breakthrough Institute archives on Clean Energy Competitiveness

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Nuclear Power in a Post-Partisan Approach to Energy

Originally published by Alex Trembath at Americans for Energy Leadership.

In the wake of cap-and-trade’s defeat, and as we begin a new session of Congress, common ground must be found on policy to renovate America’s energy infrastructure. Now may be the time to explore the possible benefits of renewing America’s once vigorous nuclear power production. Notably absent in recent advances in America’s energy portfolio has been nuclear power. Public safety fears stemming from Chernobyl and Three Mile Island have left nuclear policy in stasis for decades, but as our President aims to launch a new industrial policy and our nation trends towards a new national energy policy, it may be time to revive our commitment to this method of zero-emissions baseload power generation.

Nuclear power is unique among clean energy technologies in that Democrats tend to be more hesitant towards its production than Republicans. Indeed, it has a reputation for its appeal to conservatives -Senators Kerry, Graham and Lieberman included provisions for nuclear technology in their ultimately unsuccessful American Power Act (APA) with the ostensible goal of courting Republican support. The urgency with which Democrats feel we must spark an energy revolution may find a perfect partner with Republicans who support nuclear power. But is there anything more than speculative political evidence towards its bipartisan viability?

If there is one field of the energy sector for which certainty of political will and government policy is essential, it is nuclear power. High up front costs for the private industry, extreme regulatory oversight and public wariness necessitate a committed government partner for private firms investing in nuclear technology. In a new report on the potential for a “nuclear renaissance,” Third Way references the failed cap-and-trade bill, delaying tactics in the House vis-a-vis EPA regulations on CO₂, and the recent election results to emphasize the difficult current political environment for advancing new nuclear policy. The report, “The Future of Nuclear Energy,” makes the case for political certainty:

“It is difficult for energy producers and users to estimate the relative price for nuclear-generated energy compared to fossil fuel alternatives (e.g. natural gas)–an essential consideration in making the major capital investment decision necessary for new energy production that will be in place for decades.”
Are our politicians willing to match the level of certainty that the nuclear industry demands? Lacking a suitable price on carbon that may have been achieved by a cap-and-trade bill removes one primary policy instrument for making nuclear power more cost-competitive with fossil fuels. The impetus on Congress, therefore, will be to shift from demand-side “pull” energy policies (that increase demand for clean tech by raising the price of dirty energy) to supply-side “push” policies, or industrial and innovation policies. Fortunately, there are signals from political and thought leaders that a package of policies may emerge to incentivize alternative energy sources that include nuclear power.

One place to start is the recently deceased American Power Act, addressed above, authored originally by Senators Kerry, Graham and Lieberman. Before its final and disappointing incarnation, the bill included provisions to increase loan guarantees for nuclear power plant construction in addition to other tax incentives. Loan guarantees are probably the most important method of government involvement in new plant construction, given the high capital costs of development. One wonders what the fate of the bill, or a less ambitious set of its provisions, would have been had Republican Senator Graham not abdicated and removed any hope of Republican co-sponsorship.

But that was last year. The changing of the guard in Congress makes this a whole different game, and the once feasible support for nuclear technology on either side of the aisle must be reevaluated. A New York Times piece in the aftermath of the elections forecast a difficult road ahead for nuclear energy policy, but did note Republican support for programs like a waste disposal site and loan guarantees.

Republican support for nuclear energy has roots in the most significant recent energy legislation, the Energy Policy Act of 2005, which passed provisions for nuclear power with wide bipartisan support. Reaching out to Republicans on policies they have supported in the past should be a goal of Democrats who wish to form a foundational debate on moving the policy forward. There are also signals that key Republicans, notably Lindsey Graham and Richard Lugar, would throw their support behind a clean energy standard that includes nuclear and CCS.

Republicans in Congress will find intellectual support from a group that AEL’s Teryn Norris coined “innovation hawks,” among them Steven Hayward, David Brooks and George Will. Will has been particularly outspoken in support of nuclear energy, writing in 2010 that “it is a travesty that the nation that first harnessed nuclear energy has neglected it so long because fads about supposed ‘green energy’ and superstitions about nuclear power’s dangers.”

The extreme reluctance of Republicans to cooperate with Democrats over the last two years is only the first step, as any legislation will have to overcome Democrats’ traditional opposition to nuclear energy. However, here again there is reason for optimism. Barbara Boxer and John Kerry bucked their party’s long-time aversion to nuclear in a precursor bill to APA, and Kerry continued working on the issue during 2010. Jeff Bingaman, in a speech earlier this week, reversed his position on the issue by calling for the inclusion of nuclear energy provisions in a clean energy standard. The Huffington Post reports that “the White House reached out to his committee [Senate Energy] to help develop the clean energy plan through legislation.” This development in itself potentially mitigates two of the largest obstacle standing in the way of progress on comprehensive energy legislation: lack of a bill, and lack of high profile sponsors. Democrats can also direct Section 48C of the American Recovery and Reinvestment Act of 2009 towards nuclear technology, which provides a tax credit for companies that engage in clean tech manufacturing.

Democrats should not give up on their policy goals simply because they no longer enjoy broad majorities in both Houses, and Republicans should not spend all their time holding symbolic repeal votes on the Obama Administration’s accomplishments. The lame-duck votes in December on “Don’t Ask, Don’t Tell,” the tax cut deal and START indicate that at least a few Republicans are willing to work together with Democrats in a divided Congress, and that is precisely what nuclear energy needs moving forward. It will require an agressive push from the White House, and a concerted effort from both parties’ leadership, but the road for forging bipartisan legislation is not an impassable one.

The politician with perhaps the single greatest leverage over the future of nuclear energy is President Obama, and his rhetoric matches the challenge posed by our aging and poisonous energy infrastructure. “This is our generation’s Sputnik moment,” announced Obama recently. Echoing the calls of presidents past, the President used his State of the Union podium to signal a newly invigorated industrialism in the United States. He advocated broadly for renewed investment in infrastructure, education, and technological innovation. And he did so in a room with many more members of the opposition party than at any point during the first half of his term. The eagerness of the President to combine left and right agendas can hopefully match the hyper-partisan bitterness that dominates our political culture, and nuclear power maybe one sector of our economy to benefit from his political leadership.

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Thursday, February 03, 2011

How Nuclear Fits into Obama's Ambitious Goal

By Dan O'Connor | Originally published at Americans for Energy Leadership

The target which President Obama proposed in his State of the Union address – that 80% of the United States’ (US) energy would originate from clean sources by 2035 – sets the bar for near-term clean energy implementation absurdly high. But there is no real disappointment in failing to reach an unreachable goal, so long as significant progress is made toward it. Seemingly, how near the target (or how far off) we land depends on, more so than any other realistic strategy, badly-needed reform in the regulatory and financial systems associated with the nuclear industry.

The energy industry has many technologies and tools for tackling the 80% challenge, but most are small in the face of such a daunting task. Electricity generation from solar photovoltaic cells and wind turbines cannot meet base load demand without breakthroughs in energy storage technology. Solar water-heating systems could be more widely implemented but their collective reduction of natural gas and electric heating would be tiny given the localized and season-dependent solar availability in much of the US.

Optimistically, hydroelectric capacity could be increased by 50% to top out once and for all at about 6% of current national energy production. Fusion technology is further from being economically-viable than it is from being sufficiently-proven in the lab. And while “clean coal” could eventually do its part to reduce carbon-to-energy ratios, a teeth-laden federal clean energy standard would be necessary, very soon, to incentivize the expensive technology’s installation in new or existing coal plants.

To be sure, all of these options should be tried and will improve in time, but the scales on which they currently or could soon operate are too small to have both quick and significant impacts on clean energy numbers. For instance, a recent assessment by Ken Kolk of the American Society of Mechanical Engineers Energy Committee concluded that the 80% target would necessitate installing 1,410,060 2.5-MW wind turbines in tandem with 1,568 500-MW natural gas plants for support during intermittency. That is not going to happen in 25 years, if ever. Granted, this is a high level calculation that makes broad assumptions; it also equates to 784 1,000-MW nuclear plants by 2035, which is infeasible too. But it illustrates the enormity of the task.

The fact that the nuclear industry provides 70% of US carbon-free energy without a new plant built in the last 3 decades, while the renewable sector still only contributes a minority share but has seen 31% growth in generation in the last 3 years, points to nuclear as the appropriately-sized tool for the president’s challenge. But how do we make it happen?

The first move in ramping up clean energy production is to ensure we squeeze as much out of our current nuclear fleet as possible. This means optimizing operations in order to maximize capacity factors, as well as extending reactor-lifetimes from the typical 4 decades out to 6 or even 8. The former approach has been in the works since the first nuclear plant was switched on, and it is nearing its apex. The capacity factors in the nuclear industry, now consistently 90% or greater, are the highest in the energy business.

The latter strategy has more recently been adopted as our reactors close in on their originally-assigned retirement ages. Indeed, reactor retirement is the single biggest threat - not even to our clean energy portfolio’s growth - but to its maintenance. The trends, depicted from left to right in the plot above, project total US nuclear capacity (1) without license renewal, (2) with current renewals, (3) with proposed renewals, (4) with all licenses renewed, from 2010 to 2055.

It is clear that, were our reactors allowed to retire as originally planned, the nuclear industry’s contribution to clean energy production would all but disappear by 2035. Fortunately, some license renewals, which extend a reactor’s lifetime by 20 years, have been approved and others are in line. There is also growing support for 40 rather than 20-year extensions, but “degradation phenomena that affect performance of plants operating for as long as 80 years are not well understood…and further research is needed prior to decisions about further license extensions,” according to “America’s Energy Future” (AEF) published in 2009 by the National Academies. Therefore, even in the best case, in which all licenses are renewed, about 25% of our fleet will be retiring in 2035, making it very unlikely that the US’s clean energy portfolio can grow in that time frame.

This alarming scenario should hurry the construction of new reactors. Though building 784 new plants is an impossible target, the AEF Committee judged that 5 to 9 additional nuclear plants could be brought online by 2020. As espoused in my first article, there is no need to wait around for research breakthroughs; proven reactor technologies are ready to be built now, as China continues to demonstrate.

The AEF Committee predicted that the successful completion of new builds would inspire public confidence in the awakening industry and the construction experience would reduce the duration and cost of subsequent builds. On this “Nuclear Renaissance” track, the Committee concluded that a 73% increase in nuclear energy production is feasible by 2035 (this estimate involves uprating existing plants, building new ones, and retiring some). This result would fall well-short of the measures necessary to meet the president’s target, but it would still represent momentous progress. Without the 5 to 9 plants built by 2020, the track tends toward a “Nuclear Stall,” and the capacity could drop by 14% by 2035.

Two questions naturally arise from these possible scenarios. First, how many reactors are likely to be relicensed? The decision to apply for a license renewal is entirely voluntary and up to the organization which owns or operates the aging plant. In nearly all cases, extending the life of a nuclear plant that is already paid off makes economic sense. The Nuclear Regulatory Commission (NRC) considers and grants the licenses in a process that takes about 30 months. The NRC has already renewed licenses for 34 power plants, is currently reviewing 14 renewal applications, and anticipates 12 more through 2017. This activity is certainly a promising sign, and there is good reason to believe that the majority of plants will eventually be cleared for this 20-year extension. However, looking forward, the NRC should demonstrate urgent concern in the aging fleet and strongly consider the possibility of 80-year reactor lifetimes. Deep research is necessary, as 80-years of material exposure to fission is uncharted territory, but without this option nearly all currently operating reactors will be retired by 2050.

Second, which nuclear track are we actually on, a renaissance or a stall? The NRC can play a crucial role in answering this question as well. At the moment, 17 new license applications and 3 design certifications are pending its approval. Accelerated hiring at the Commission may be necessary were the country to follow the former track; the AEF Committee notes that “the processing of the current surge of applications could cause short-term delays in beginning new plant construction.” However, the expertise required of an NRC employee is considerable and expensive to draw. Moreover, the wealth of experience in reactor operations and design has begun to dwindle and is unlikely to be replenished unless we revitalize the industry soon. In order to streamline the design certification and license application processes (consequently reducing power plant price tags), the NRC should work with companies like General Electric, Westinghouse, and Areva to consider a booklet of standardized plant designs for customers to choose from. Such a project could attract new talent to the Commission and nurture a new brand of engineering leaders able to engender and manage public-private cooperation in the industry.

But of course, which nuclear track we follow is largely controlled by funding issues. The federal loan guarantees program has fallen short because the possibility of accruing a decade’s worth of interest on $10 billion remains too risky for most utilities to swallow, especially when there is cheap electricity to be made with low-cost natural gas.

So, in addition to the regulatory reform proposed above, a well-developed financial-assistance system is needed for the rapid deployment of nuclear power, and a federal clean energy standard may be just the solution. Granted, the idea of a CES has been interpreted differently across energy industry experts, and some designs would help the nuclear industry more than other. A design that would help the industry deal with its financing problems would be as follows: Utilities operating coal, natural gas, and nuclear power plants could be made to allot a certain percentage of revenue generated by carbon-intensive technologies for investing in carbon-free technology. Instead of loans for nuclear power plants, the federal government could match the utility’s carbon-derived investment. Construction could happen once the required cash accumulates, and the utility could slowly pay back the government for its initial investment.

There is plenty of room for brainstorming ways to incentivize clean energy as the federal standard idea picks up steam, and the next few months promise to be active in this regard. As the proposals materialize, it will be important to keep in mind the necessarily public-private nature of the energy-utility sector so we ensure that regulatory reform and financial incentives grow together as one cooperative system. Without the necessary reforms the trajectory of the nuclear industry could prove to be more of a burden than boon on Obama's ambitious goal to produce 80% clean energy by 2035.

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Dan O’Connor is a Policy Fellow in AEL’s New Energy Leaders Project and will be a regular contributor to the website. The views expressed are those of the author and do not necessarily reflect the position of AEL.

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