Industry. Programs include partnerships to develop more energy-efficient technologies for the most energy-intensive industries and the continuing development of cogeneration systems and elimination of barriers for combined heat and power technologies.

• Electricity Generation. Funding includes continued development for solar energy, biomass power, wind energy, geothermal power, and hydropower; the Renewable Energy Production Incentive, renewable energy demonstration projects; the International Solar Program; improvements for the quality and reliability of power service; distributed generation; hydrogen production and storage; superconducting technology; life extension of nuclear power plants; and development of more efficient coal and natural gas generation.

Carbon Sequestration. This program funds research into the capture and storage of carbon dioxide by enhancing the natural capacity of terrestrial ecosystems and oceans to take up and store carbon dioxide in underground geological structures and the deep

ocean.

Accelerating the adoption of new technologies in the market at lower costs through research, development, and deployment can help reduce carbon emissions and also can contribute positively to the overall quality of life. Support for these activities at historic levels is assumed in the AEO99 reference case. As a result, reductions in these programs would likely lead ELA over time to raise its carbon projections, and new or expanded programs could lead ELA to lower its carbon estimates.

The impacts of research and development funding for new technologies, whether ongoing or incremental, are difficult to quantify in the same manner as the tax incentives. Some of the proposed technologies may only achieve benefits in a long time frame beyond 2020 or may not achieve success at all; however, predicting which technologies will be successful is highly speculative. A direct link cannot be established between levels of funding for research and

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development and specific improvements in the characteristics and availability of energy technologies. In addition, successful development of new technologies may not lead to immediate penetration in the marketplace. Low prices for fossil energy and conventional technologies; unfamiliarity with the benefits, use, and maintenance of new products; and uncertainties concerning the reliability and further development of new technologies are all factors that may slow technology penetration and are barriers that the tax credits are intended to address. However, these limitations do not mean that the impacts of the research, development, and deployment programs could not be substantial over time.

It is also difficult to analyze the impacts of information programs, voluntary initiatives, and partnerships on realized technology development and deployment. Some voluntary programs appear to have achieved some success, such as Energy Star. The benefits of past efforts are difficult to quantify but are generally assumed in the reference case. They are even more difficult to quantify for the future.

This analysis addresses these initiatives by discussing the current state of development of the technologies and the economics of their development and deployment. For several of these programs, the potential impacts are addressed by assuming that program goals are achieved, then deriving the impacts on energy consumption and emissions, or by analyzing the impact of technology improvements based on current levels of research and development.

In AEO99, the baseline assumptions include continuing improvements in technology, consistent with ongoing research and development. The impacts of these improvements can be evaluated by comparing the reference case with a case in which it is assumed that all future equipment choices in the end-use demand sectors are from technologies available in 1999, building shell and industrial plant efficiencies are frozen at 1999 levels, and new fossil generating technologies do not improve beyond 1999. In 2010, energy consumption in this low technology case is 3.7 quadrillion Btu, or 3.3 percent higher, than in the reference case, increasing carbon emissions by 67 million metric tons, or 3.7 percent.

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In the AEO99 reference case projections, natural gas-fired generating plants are expected to dominate new capacity additions over the next 10 to 15 years, although advanced coal plants become economical after 2010. Renewable electricity generation increases in the reference case projections, particularly biomass, wind, and to a lesser extent geothermal generation; however, solar thermal and photovoltaic technologies do not contribute significantly to the electricity grid within the time frame of the analysis, and almost no new hydropower capacity is projected. In the transportation sector, alternative-fueled vehicle sales account for about 9 percent of the light-duty vehicle sales in 2010, with alcohol flex-fuel vehicles and dedicated electric vehicles each accounting for about one-fourth of the market; however, nearly all the penetration of electric vehicles is driven by mandates.

Analysis indicates that some of the programs for the development of renewable technologies may hold promise, as well as some of the programs for buildings if the program goals can be achieved. Stock turnover can slow the penetration of some of the improved technologies, even if successful, so that significant changes in the average stock of equipment may take a long time, which may be complemented by the tax incentives. In addition, some of the technologies may have noneconomic barriers to widespread acceptance. These include unfavorable impressions of the noise, odor, and performance of previous diesel vehicles and limitations on hydropower due to environmental concerns. Some of the CCTI programs may have more longer-term benefits because stock turnover may slow penetration and because some of the research and development programs are likely to achieve success later in or beyond the 2020 horizon of the analysis. For those research, development, deployment programs that are evaluated quantitatively, most of them have increasing impacts on energy consumption and carbon emissions after 2010. These include Partnership for Advanced Technology in Housing (PATH), PNGV, advanced diesel trucks, and ethanol. Assuming the goals of these programs leads to improvements in the technologies which are gradually adopted over the time horizon of the analysis.

This analysis does not necessarily include all costs of technology development and deployment. For example, the full costs of developing and manufacturing new technologies, including costs to

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the private sector, and infrastructure costs are not included. Certain programs are analyzed by assuming the success of program goals or standards that may not necessarily be economic within the time frame of the analysis, leading to additional costs that are not incorporated into a decisionmaking process. However, in addition to reductions in energy consumption, consumer expenditures for energy, and carbon emissions, there may be other benefits to these programs that are not evaluated. Potential ancillary benefits include improvements in air quality due to reductions in criteria pollutants, energy security from lower energy consumption, maintaining U.S. leadership in science and technology, and revenues from the deployment of more advanced technologies to other countries.

Funding for research and development may accelerate the development of more efficient and advanced technologies at lower cost than might otherwise occur. In addition, research and development may tend to improve the characteristics of technologies that have already been developed to some degree. To the extent that continuing development lowers the costs of technologies or improves their efficiencies, reliability, or other attributes, the technologies become more economically competitive and attractive in the market. Ultimately, the success of technology development depends on the products becoming competitive and penetrating into the marketplace.

There are a number of barriers to technology penetration that may account for seemingly slow penetration of technologies that appear cost-effective. Lack of information about new technologies is one barrier which may be overcome with information programs. Subsidies or regulated prices may hold energy prices artificially low and hamper the penetration of technologies. Builders and homeowners or tenants may have different incentives for energy efficiency. It may be difficult for the builder or landlord to recover the additional costs for more expensive, energy-efficient equipment from a buyer or tenant who may not value energy efficiency highly. Conversely, the buyer or tenant who will be paying the energy bills may not readily have the option of making the equipment choices. Even if energy consumers are aware of potential cost savings from a more efficient technology, they may have preferences for other

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equipment characteristics, for example, valuing vehicle size over efficiency. Also, consumers may prefer a relatively short payback period for investments in energy-consuming technologies. Technology penetration can also be slowed by uncertainties about reliability, installation and maintenance, availability of the next generation of the technology, and necessary infrastructure.

Some of these barriers can be addressed by information programs, collaborative efforts for development and diffusion, research and development to improve technologies and reduce costs, and incentives to enhance the cost effectiveness of new technologies. All these initiatives may help to encourage earlier penetration of technologies. Subsequently, the initial penetration may have the additional impact of reducing costs through learning, establishing the infrastructure, and increasing familiarity with new technologies. Finally, equipment standards and other mandates such as renewable portfolio standards can also lead to earlier penetration of new, more advanced technologies; however, standards may not be the most cost-effective methods for encouraging improvements in energy efficiency. The full costs of standards are not evaluated in this analysis.