the cost must be competitive. For this latter condition to apply to demonstrations, excess cost will likely need to be bought down with U.S. funding. Also, the lower cost of production in developing countries will need to be used to lower capital expenditures. The developing nations need to become real partners in supplying the hardware as well as the bricks and mortar. One possibility is to use remaining Clean Coal Program funding to provide buy down capital for demonstrating less carbon intensive technology as it is developed. The Clean Coal Program has several hundred million dollars remaining. Why not use these funds on an advanced IGCC in India or China? Could such a proposition be approved by Congress and the Administration? There is some evidence that it might. The Senate Interior Appropriations Subcommittee language for the FY 1998 DOE FE budget is noteworthy: At the same time, fossil fuel use in developing countries is expected to increase 21 DOE needs to put forward some exciting proposals in concert with industry, involving a stream of ever-improving gas and coal technologies that emit less CO2. The costs should be shared so that the risk is shared. Everyone has a stake in making the initiative successful, including the developing countries. But, this effort should not be made just to sell advanced coal technologies. It should be part of an overall strategy to provide attractive choices of low-CO2-emitting and cleaner energy technologies that are cost-effective in the global market. DOE's oil and gas R&D programs are very actively and effectively coupled with all parts of the industry. This collaboration ranges from technology transfer and demonstrations with the independents to very sophisticated work with the service companies and majors on computational science, instrumentation, and materials research. The primary issue is for DOE to walk a careful line as an impartial facilitator and R&D partner without being accused of favoritism or being a competitor. The program needs to be coordinated more closely with DOE ER to effectively support the objective of science and technology leadership, and an advanced research component in the budget has been recommended. Relevant Policy Issues There are two policy issues that the Panel recommends FE address. Portfolio Analysis Recommendation FE has developed a reasonable strategic plan based on its three primary objectives: reducing CO2 emissions and other environmental impacts, reducing oil dependence, and science and technology leadership. Comprehensive portfolio analysis has not kept pace, nor has there been any portfolio analysis across the DOE on these objectives, although one on CQ is in progress. The Change, Resource, Implementation, and Probability (CRIP) data system and associated models provide useful beginning tools for evaluating the oil portfolio. CRIP is a bottom-up project-by-project evaluation of the expected outcomes. It could be easily extended to gas and, with some difficulty, to coal and gas power, and to coal fuels. Ultimately, performance metrics, if chosen wisely, should be comparable to actual results. Validation of these tools is needed. Expectations about R&D success should be fed into the 21 Senate (1997). EIA National Energy Modeling System to obtain estimates of impacts of better technologies on the energy system as a whole. These estimates should provide some indication of the relative importance of R&D investments, or at least it might provide a vehicle for sensitivity analysis. Ultimately portfolio analysis should be given public scrutiny. GRI accomplishes this through a very elaborate slate of advisory committees that scrutinize the portfolio from many points of view. This could be a useful model. Some means of facilitating public comment and feedback, over and above the budgetary process in Congress, needs to be provided. Whatever the difficulties, portfolio analysis against the social objectives of FE programs should be carried out periodically, and it should be integrated into an overall analysis across the DOE. Management Costs- Benchmark Against Other Organizations FE management costs are running at 20 percent or about $69 million in FY 1997. These costs seem high, and, furthermore, the cost per dollar spent on R&D has been increasing over time. FE needs to benchmark its R&D management costs against comparable organizations in DOE, the rest of the Federal government, and certain other organizations, such as EPRI and GRI. Such benchmarking should provide specific ideas for reducing costs. Also, it will permit open discussion of management cost issues across DOE. ENERGY AND ENVIRONMENTAL IMPACT The potential energy and environmental consequences on the United States and the world from successful fossil energy R&D are discussed below. U.S. Impact In this section, estimates are made of the potential impact of successful R&D on two public good challenges to society: reducing CQ emissions and mitigating downside economic risks from oil dependence. Table 4.2 is a spreadsheet for 14 aggregated R&D areas of FE. The information derives from the Panel Portfolio Analysis Questionnaire answered by the DOE staff. The FE staff worked very diligently to provide these answers. Table 4.2 gives summary estimates for the two objectives of CO2 emission reductions and domestic oil and gas production increases estimated for the period from 2010 to 2015; these results are due to better technologies from current and planned DOE R&D programs. They indicate 0.7 million barrels per day (MMbpd) of increased production of oil and 2.6 trillion cu ft (Tcf) of increased gas production per year overall by 2010. These increases are very substantial, although the probability of achieving them is not clear. Calculating the potential carbon emission rate reductions is more complex. Changes in emission rates from better technologies are estimated in Table 4.2. The problem becomes one of estimating the market size and its penetration. To do this, the AEO-97 Reference Case projections for new coal- and gas-generating capacity were used. Then, some heroic guesses were made about technology penetration rates. It was assumed that all new gas power facilities to 2005 were combined cycles with 55 percent efficiency, that the efficiency rose to 60 percent by 2006, and that this improved technology captured 100 percent of the gas electric market until 2010, when 70 percent efficient fuel cell combined cycles begin to penetrate. It was assumed that 25 percent of new capacity between 2011 and 2015 was at 70 percent efficiency and the rest at 60 percent. For coal, it was assumed that advanced pulverized coal technology with 42 percent efficiency would be built exclusively until 2005 when 50 percent efficient technology (advanced IGCC, advanced PFBC, or HIPPS) would be built and would capture 100 percent of new coal between 2006 and 2010. From 2011 to 2015, a 60 percent efficiency Vision 21-type technology would capture 50 percent of the market allotted by ELA to coal. The results are given in Table 4.3. They indicate that the emission reductions could be 167 million metric tons of carbon per year by 2015, with some 86 percent (144 million tons) of this reduction being due to gas technologies and only 14 percent (23 million tons) to coal. The reason is that gas is the favored fuel. Coal does not capture much of the market, and, in fact, the EIA reference scenario may be optimistic relative to coal. Gas could be used to substitute more aggressively for coal in power generation if CO2 emissions need to be curtailed. For example, if an additional 10 Tef of gas were used to repower existing coal plants with 55 percent efficiency combined-cycle gas systems, CO2 emissions could be reduced another 300 million metric tons per year. Such a substitution would depend, in part, on the ability to increase the efficiency of gas use in the economy and to produce it inexpensively from domestic resources. Global Impact Using the reference case scenario of the EIA International Energy Outlook 1996 (Table 21) for electricity, and applying the same comparable efficiency improvements for worldwide applications as were used for the United States, reductions in CO2 emissions from improved coal technologies of about 240 million tpy by 2015 and reductions from improved gas technologies of 150 million tpy were estimated.23 In addition, the increase in renewables use in the Reference Case could account for a CO2 emissions reduction of about 500 million tpy, if renewables were assumed to have substituted for coal. The results indicate that improved coal and gas technologies can make a significant difference. CROSSCUTS Collaborations within DOE and between DOE and other agencies are discussed. Crosscutting DOE DOE energy R&D is organized around energy sources, end-use efficiency, and fundamental research. On the other hand, the energy challenges of the nation and the world do not easily fit in these boxes or stovepipes. FE is immersed in two public-good grand challenges: developing technologies that reduce the cost of climate stabilization and that reduce the cost of future oil price shocks. But these challenges are much broader than FE, and, in fact, they crosscut DOE and beyond. Response to these challenges should be managed comprehensively by DOE, both with respect to portfolio and to technology and science overlap and reinforcement. Currently, they are not. Collaborations across DOE are required and crucial to accomplish the objectives described above in the initiatives on sequestering, methane hydrates, hydrogen, and oil elasticity. In addition, several technology overlaps provide an opportunity for more effective R&D progress, including collaborations with EE on biomass gasification and indirect liquefaction, and on fuel cells. In addition, advanced drilling technologies developed for oil and gas may be useful for other resources, such as geothermal, and, of course, in sequestering. (See Box 6.3.) 22 It should be noted that CO2 savings for gas and coal are calculated relative to the average emission rate (0.246 kgC/kWh) from fossil electric generation in 1995. Thus, calculated savings for gas are due mostly to comparing very efficient gas with very much less efficient systems based mostly on coal. In a sense, this overestimates the impact resulting from technology advances. (See notes to Table 4.3 giving a range of results.) 23 EIA (1996). Efforts are being made to study fuel cell R&D more cooperatively across the country. These efforts involve the National Fuel Cell Program with DOD, the National Aeronautics and Space Administration, EPRI, and GRI. DOE participates with GRI and EPRI on a Fuel Cell Steering Committee to coordinate funding and planning. Still, a more intense interaction between FE, ER, and EE is needed. One of the most important collaborations across DOE is between the energy technology programs and ER. It is essential to the objective of maintaining the science and technology leadership in the global energy markets. What is required is a creative give-and-take between people doing fundamental R&D and those doing applied R&D on the energy technologies themselves. This linkage between ER and the energy technology offices is not as strong as many believe it should be. FE has a mechanism for improving the interaction, and it is being applied for Vision 21. Advanced research money is being used to develop a comprehensive strategy of fundamental and applied R&D to address each component of Vision 21. Such a strategy is the basis for joint planning with ER managers. The ER money is leveraged and vice versa. This example may be a model for the energy technology and ER offices to use. A similar mechanism seems necessary to change the ad hoc interactions to more strategic interactions. Continuous cooperation is time consuming and often frustrating. Managers need incentives to invest the effort, and various schemes might work. (See Chapter 7.) Interagency Collaboration No regular coordination occurs between FE and DOL, particularly between USGS and MMS. Although committees have operated in the past, they seem to have become very inactive. Now there are reasons for FE to reactivate them. The first is CO2 sequestration and the second is gas production from methane hydrates. The Department of the Navy is an important part of the hydrates issue, and the EPA will be important in both. (See sections above on CO2 sequestration and methane hydrates.). Collaboration with U. S. Agency for International Development is needed to pursue joint R&D on Vision 21 technologies with developing coal-intensive countries. |