REFERENCES ADL 1997: Arthur D. Little, Inc., Peer Review of Office of Energy Efficiency and Renewable Energy Quality Metrics Estimates, 1997. ASE 1997: Alliance to Save Energy, American Council for an Energy-Efficient Economy, Natural Resources Defense Council, Tellus Institute, Union of Concerned Scientists, Energy Innovations, a Prosperous Path to a Clean Environment, (Washington, DC: Alliance to Save Energy, 1997). Defense Monitor 1993: "Defending America's Economic Interests", The Defense Monitor Vol. XXII, Number 6, 1993, p.7. DOE 1997: U.S. Department of Energy, Interlaboratory Working Group on Energy-Efficient and LowCarbon Technologies, Scenarios of U.S. Carbon Reductions: Potential Impacts of Energy-Efficient and Low-Carbon Technologies to 2010 and Beyond. (Washington, DC: DOE, 1997). EIA 1996: Energy Information Administration, U.S. Department of Energy; Annual Energy Outlook, (Washington, DC: U.S. Government Printing Office, December 1996). EIA 1997: Energy Information Administration, U.S. Department of Energy, 1996 Annual Energy Review, (Washington, DC: U.S. Government Printing Office, July 1997). ITS 1996: Federal Highway Administration, U.S. Department of Transportation. Intelligent Transportation Infrastructure Benefits: Expected and Experiences, (Washington, DC: U.S. DOT, January, 1996). ITS 1996: Federal Highway Administration, U.S. Department of Transportation, Key Findings from the Intelligent Transportation Systems (ITS) Program, (Washington, DC: U.S. DOT, January, 1996). ITS 1997: Federal Highway Administration, Intelligent Transportation Systems, U.S. Department of Transportation, Program Overview and Accomplishments, USDOT webpage, 1997. LBL 1995: Lawrence Berkeley Laboratory. From the Lab to the Marketplace, Making America's Buildings More Energy Efficient, (Berkeley, CA: University of California, March 1995). OP 1996: Office of Policy, U.S. Department of Energy. Success Stories: The Energy Mission in the Marketplace, Part 2 of Department of Energy Report, Corporate R&D in Transition, (Washington, DC: U.S. DOE, March 1996). PNGV 1996: Partnership for a New Generation of Vehicles, PNGV Technical Accomplishments, (Washington, DC: U.S. Council for Automotive Research, 1996). CHAPTER 4 FOSSIL ENERGY ...everything comes back to energy: our global environmental strategies, our national economy, John H. Gibbons, Assistant to the President for Science and Technology Fossil fuels will likely remain the principal energy sources for most of the world, including the United States, well into the middle of the next century. They are plentiful, widely dispersed, and easy to transform, transport, and use. Technologies for extracting and converting fossil fuels continue to improve. In fact, the promise of DOE/industry supported R&D is technology that can lead to continued affordable use of fossil fuels (including coal) even in a greenhouse-constrained society and moderation of oil imports and the cost to the economy of future oil price shocks. MOTIVATION AND CONTEXT Energy systems of the world are largely (75 percent) based on fossil fuels, and the fossil share of the U.S. energy market is projected by the Energy Information Administration (EIA) to increase from 85 percent in 1996 to 88 percent in 2015. The fossil energy industry is huge and represents more than 5 percent of the U. S. gross national product. It provides a mature, well-developed, and very efficient supply, conversion, and distribution system. Although the resources of fossil fuels are finite, continuously advancing technologies maintain them as the principal resources of commercial energy. Fossil energy technologies also continue to improve dramatically with respect to efficiency and environmental performance. Compared to conventional pulverized coal-fired power plants, for example, advanced integrated gasification combined-cycle systems produce almost 30 percent more electricity per unit of CO2 emitted (or the same amount of electricity with 30 percent less CQ emitted), with very low emissions ofSO,, NO,, and particulates. 1 Gibbons (1996). 2 price shocks are rapid increases in world oil prices resulting from supply curtailment as from the oil embargo from 1973 to 1974 or interruptions as from the Iran-Iraq war in 1979. 3 ELA (1997), findings from this document, the 1997 edition of the ELA's "Annual Energy Outlook", are denoted AEO 97 throughout this chapter. *These are also described interchangeably as carbon emissions. Notwithstanding these attractive attributes and progress, major challenges to society are associated with increasing use of fossil fuels principally environmental ones, particularly CO2 emissions, and the vulnerability of the U. S. economy to oil price shocks." These major challenges to society indicate a need for Federal government involvement in R&D, because their mitigation represents public good outcomes only partially addressed by private sector activities. There is simply not sufficient incentive or profit motive for private industry to address such challenges alone, many of which are wholly or partially external to the market. Also, the Federal government is the largest single holder of oil, gas, and coal reserves in the United States, and significant royalties, fees, and taxes are paid by the companies developing, producing, and using these resources. Thus, there is considerable incentive via these monies for doing R&D that leads to the efficient utilization of these resources. Another major factor influencing the different roles of government and industry in R&D is the changing situation in the private sector. Specifically, industry R&D is driven by an ever-intensifying and single-minded focus on increasing returns on high-risk investments through satisfying the needs of the customer. Although the private sector invests much more than the government in fossil R&D (in the range of $1.5 billion per year by the oil and gas industry alone as compared to $365 million in FY 1997 by the DOE Office of Fossil Energy (FE), the private sector R&D is increasingly applied and must compete with other investments. Technologies are as likely to be externally acquired as they are to be developed internally. In the oil and gas industry, R&D is directed at frontier areas such as the deep Gulf of Mexico, the Arctic, and at other parts of the world where returns are high. Domestic mature resources are left to the independent producers who cannot generally afford R&D. For electricity generation, deregulation and restructuring have tended to shift R&D investments from utilities to their vendors. The Electric Power Research Institute (EPRI) has "unbundled" (separated) services to be much more directed at each investor, and the Gas Research Institute (GRI) is moving in a similar direction. With these changes, government investment can ensure that the necessary "public good" R&D is done to address societal issues. The current fossil R&D programs of the Federal government" are addressing both the environmental and oil-price-shock challenges-more or less. The principal R&D objectives of FE were described to the Fossil Task Force and to the Panel as follows: Eliminate environmental impacts as barriers to fossil fuel production and use, while maintaining the availability and affordability of these fuels. This objective includes reducing carbon emissions. Ensure the availability of secure and affordable transportation fuels. A third general objective of DOE is as follows: Maintain U.S. science and technology leadership in energy. Fossil fuel use is still a major contributor to air pollution from both stationary sources, including power plants and industrial processes, as well as mobile sources, i.e., motor vehicles. Regulations proposed recently by the Environmental Protection Agency (EPA) would tighten NO, emission standards to reduce tropospheric ozone from photochemical reaction between NO, and hydrocarbons and would impose emission standards on fine particulates. In addition, other hazardous air pollutants (HAP), such as mercury from coal burning, are a growing concern. * The fossil energy area as defined by the Fossil Task Force includes fossil fuel supply and conversion to electricity and fuels for end uses such as transportation, industrial production, and buildings. The Fossil Task Force's "stovepipe" does not include end use of fossil fuels or electricity, which is covered by the Efficiency Task Force, but it does include the transmission and distribution infrastructure of oil and gas pipelines. [The infrastructure of the electric transmission and distribution system was covered by the Renewables Task Force (see Chapter 6).] The Fossil Task Force did not, however, evaluate R&D on this infrastructure. Pipeline safety falls under the purview of the Department of Transportation, and the Presidential Commission on Critical Infrastructure Protection is evaluating the energy infrastructure, including both pipes and wires, relative to accidental or malicious damage. These objectives are being pursued under conditions of declining budgets, and it is imperative to improve the productivity of R&D both from government and the private sector. FE's response is to put increased emphasis on leveraging its R&D investment with GRI, EPRI, and with industry consortia, and to begin to look for ways to get more for less. This will mean a more science-based technology development, with emphasis on computer simulation and design and with emphasis on testing of components rather than whole-system demonstrations. Obviously, all three objectives have important international consequences. Improved coal and gas power technologies can significantly reduce CO2 emissions globally. Oil and gas production technologies that diversify sources outside of the Middle East can help reduce the probability of a future oil price shock, and sustained domestic production reduces the cost of oil imports to the U.S. economy. Maintaining science and technology leadership improves our chances of being competitive and of providing better choices in the world markets. The objectives seem properly drawn relative to the challenges to society, and many of the changes beginning to take place in DOE programs seem appropriate. In the Findings, Evaluations, Initiatives, and Recommendations section, these programs are evaluated against the objectives, and recommendations are discussed for new initiatives, phasing out programs, and budget changes. Clearly, R&D is necessary, but not sufficient, to advance new technologies to the point of commercialization, which is the ultimate extension of R&D. Commercialization issues are discussed in the Demonstration and Commercialization Issues section. In the Relevant Policy Issues section, some management issues are identified. In the Energy and Environmental Impact section, estimates of the potential impacts of advanced fossil technologies on CO2 emissions and on oil and gas production are discussed. Finally, in the Crosscuts section, projects and issues that crosscut DOE and the government are enumerated. Appendix D is a somewhat more detailed working version of this chapter. FINDINGS, EVALUATIONS, INITIATIVES, AND RECOMMENDATIONS In this section, programs are described and findings, evaluations, initiatives, and recommendations are discussed. Description of DOE FE R&D Program Areas and Principal Findings and Evaluations FE's R&D programs may be divided into three categories: coal and gas power, coal fuels, and oil and gas production and processing. In FY 1997, these programs were funded at $184 million, $16 million, and $70 million, respectively, for a total of $270 million. A more detailed listing of this budget is given in Table 4.1; the "Other" category in Table 4.1, amounting to a total of $95 million in FY 1997, includes predominantly the cost of program management. It also includes environmental restoration, regulatory reviews, plant and equipment, and small amounts for university research and the remnants of the Bureau of Mines. An additional $15 million was obligated in FY 1997 for the Clean Coal Program, a $2.4 billion 20year effort cost-shared with industry to demonstrate advanced coal technologies that reduce emissions. The government fossil-related R&D is concentrated in DOE. Important R&D programs also operate in the Department of the Interior (DOI), namely, the U.S. Geological Survey (USGS), which is concerned with understanding fossil resources, and the Minerals Management Service (MMS), which is concerned with the safety of offshore exploration and production. The combined budgets of these agencies for fossil-related R&D are about $35 million per year or one-tenth of the DOE budget. In this discussion, the focus is on DOE programs, but the roles of USGS and MMS, particularly as they may relate to new initiatives, are included. FE (1997a). Table 4.1: PCAST Proposed Five-Year (1999-2003) Fossil Energy R&D Budget (Millions of Budget Year or As-Spent Dollars) [Note a] COAL POWER GAS POWER COAL FUELS OIL AND GAS PRODUCTION AND PROCESSING INITIATIVES OTHER TOTAL R&D Totals may not be consistent with summation of entries due to rounding; uniform rounding practice was used. *Retrofit environmental research for hazardous air pollutants. "Advanced research with universities and national laboratories. Country-specific low-carbon technologies. 4-4 |