the world. EIA projects additions of 800 megawatts of new wind capacity in the U.S. in 1999 alone - an expansion that would not have been possible without DOE research and development efforts. With regard to photovoltaics, the DOE will accelerate R&D of the next generation photovoltaic cells; increase manufacturing R&D; increase research in buildings-integrated applications; and fund efforts to develop new, unconventional technologies. The complementary Million Solar Roofs initiative seeks to encourage the installation of one million solar systems by 2010, which would reduce carbon emissions equivalent to the annual emissions from 850,000 cars. The DOE has received initial commitments for over half a million solar rooftop installations to date. Biomass represents a tremendous renewable resource whose use can help strengthen our energy security, protect the environment, and enhance our rural economy. The DOE is testing and demonstrating biomass co-firing with coal, supporting advanced technologies for biomass gasification using paper industry by-products; developing low-cost ethanol production technologies from waste and energy crops, and developing and testing high-yield, low-cost biomass feedstocks. In addition, we are exploring technologies that will enable co-production of a variety of products - electricity, fuels and chemicals - from a variety of domestically grown biomass inputs. The DOE will also continue developing a next-generation wind turbine able that can produce power at a cost as low as 2.5 cents per kilowatt-hour in good wind regions, with a goal of having such turbines commercially available from U.S. manufacturers in 2002 or 2003. The DOE will also accelerate R&D on critical wind turbine components, and accelerate testing and field validation. Geothermal energy is one of the more cost-effective renewable energy sources today, with a levelized cost of about 3.5 cents/kWh in good steam resources. Continued improvement is necessary to stay competitive with conventional power sources, however. DOE's research program addresses efficiency of steam use (to make lower-temperature reservoirs economical), improved drilling instrumentation to cut costs and control fracturing, and improved methods of reservoir exploration and characterization. Research and development will continue on other important renewable energy and related technologies including fish-friendly hydropower turbines, low-cost hydrogen production and storage and superconducting wire technology. The latter two technologies hold the promise of enormous savings in the 2020 time frame. Fossil Energy Technologies The FY 2000 CCTI budget request proposes $27 million, an increase of $9 million over the FY 1999 enacted level, for DOE fossil energy power production programs. An additional, much larger segment of the fossil energy R&D budget - including advanced coal and natural gas generation technologies - is supportive of the CCTI, but not considered an integral element. In addition, $10 million of fossil energy funding is included in the carbon sequestration activities section discussed below. DOE's Vision 21 initiative funds research aimed at finding ways to use coal and gas with efficiencies well beyond what is possible with today's technologies. Development of higher-efficiency power-generation technologies will reduce the amount of carbon produced per kilowatt-hour generated. In addition, both the Integrated Gasification Combined Cycle (IGCC) and certain fuel cell technologies can produce a concentrated carbon dioxide waste stream that requires minimal processing prior to reuse or sequestration. These breakthrough technologies are expected to take a decade or more to reach practical application, although important efficiency-enhancing spinoffs are likely to emerge from this program over the next several years. Nuclear Energy Technologies The FY 2000 CCTI budget request proposes $5 million, an increase of $5 million over the FY 1999 enacted level, for DOE's new Nuclear Energy Plant Optimization (NEPO) program. An additional, larger segment of the nuclear energy R&D budget is supportive of the CCTI. The Nuclear Energy Plant Optimization is a new initiative proposed for fiscal year 2000, to cooperate with industry to develop key technologies that can help assure the long term viability of our nation's existing 104 nuclear power plants. During the first part of the next century, while efforts continue to reduce the costs of renewables and advanced fossil energy technologies, existing nuclear power plants are essential to meeting demand for capacity and also for meeting our existing emission laws and international goals on controlling greenhouse gas emissions. R&D under NEPO will investigate reactor materials degradation and how to prevent or repair it, further improve nuclear plant capacity factors, and develop methods of retrofitting current technology into older reactors to improve their reliability and safety. Carbon Sequestration The FY 2000 budget request proposes $30 million, an increase of $16 million over the FY 1999 enacted level, for DOE carbon capture and sequestration programs in the Offices of Science and Fossil Energy. The purpose of these programs is to develop and demonstrate technically, economically and ecologically sound methods to capture, rense and dispose of carbon dioxide. The program will include research into the feasibility of capturing and storing carbon dioxide in underground geological structures and in the deep ocean. The success of these programs could lead to sustained use of fossil fuels without significantly increasing greenhouse gas emissions. Science The DOE Office of Science also has several efforts that are directly supportive of the CCTI and provide the knowledge base for the development of advanced technologies to reduce greenhouse gas emissions. These efforts support the PNGV in the materials and combustion 57-713 99-2 areas, electricity generation efficiency by increasing the efficiency of electric motors and generators with better magnets, increasing efficiency in the transmission of electricity through work on superconductors; and reducing energy consumption in manufacturing with improved sensors, controls, and processes. Much of this research program will provide the knowledge base needed to increase the use of renewable energy and advanced fossil energy technologies as well as carbon capture and sequestration. THE EIA ANALYSIS OF THE CLIMATE CHANGE TECHNOLOGY INITIATIVE The Energy Information Administration has provided a first step in analyzing the President's Climate Change Technology Initiative. However, as noted above, its numerous shortcomings make it of little use in assessing the value of the overall initiative. Details on the most severe shortcomings are provided below. First, the analysis is quite incomplete. While the title of the study is “Analysis of the Climate Change Technology Initiative," as the report states, it only attempts to assess the potential benefits of the tax incentives component of the CCTI. The EIA does not estimate the benefits of the technology RD&D programs within the CCTI. This is a severe shortcoming because the various components of the initiative - tax incentives, technology R&D and technology deployment programs are designed to work synergistically. For example, combined heat and power (CHP) technologies, which have an extreme large potential, are supported by the CCTI in three ways: R&D to reduce costs, tax incentives to encourage widespread use, and deployment programs to remove substantial market barriers. Analysis of a single CHP action (the tax incentive) - as in the EIA analysis - will yield a much lower estimate of potential than the analysis of all complementary CHP actions. Such complementarity occurs throughout the initiative, and thus analysis of the tax incentives alone gives a very conservative estimate of the potential of the CCTI. Second, the analysis is an incomplete treatment of the CCTI in another way. It does not consider eight of the nine components of the President's climate strategy, which are designed to interact with the CCTI tax incentives and RD&D initiatives to stimulate and create savings. These climate strategy components are designed to be a mutually reinforcing package and analysis of individual pieces will also likely yield a conservative estimate of its potential. Third, the EIA analysis of the selected CCTI actions is largely limited to simply changing cost assumptions directly due to the tax incentives. The study presumes that purchasing behavior is largely driven by only one factor- cost. In fact, consumers make most purchases on the basis of multiple factors - including total value, status, concern for the environment, comfort, freedom from dependency, reliability, etc. The tax incentive affects only one factor in this choice and may turn out to be part of a larger deployment effort for these technologies. Fourth, the tax incentive analysis addresses only the immediate effects of the incentives and ignores the possibility of subsequent effects. The Administration designed the incentive package specifically to create or expand markets for key efficiency and clean energy technologies. The whole purpose was to "prime the pump" for these technologies - through increased sales to early adopters, greater market experience, higher production levels and greater awareness so that when the incentives expired, the technologies would be accepted into the marketplace. Limiting the analysis to only the immediate effects during the time when the tax incentives are in effect is inappropriate, because the subsequent effects in terms of market transformation and economies of scale could be substantially greater than the immediate effects. For example, extension of the wind production tax credit could greatly increase utility experience with wind power technology and provide incentives for U.S. wind technology companies to expand production capacity. These changes would have impacts lasting much longer than the five year tax incentive period and could result in substantially higher wind investments after 2005 than would have been the case without the extension of the credit. It should be noted that one reason that the EIA estimates are low is the relatively short term nature and low levels of the tax credits. As the EIA study states, "tax credits of longer duration or higher value could encourage greater penetration of the technologies by making them more economically competitive to consumers." Finally, the analysis acknowledges, but does not attempt to quantify, the substantial other benefits of these programs (e.g., reduced air pollution and decreased dependence on foreign oil). Some of these benefits are quantified in the Arthur D. Little report cited above. In the simplest analysis, if we do not invest responsibly as a nation in key technologies while nations such as Japan and Germany provide major support for everything from advanced autos to solar panels, the U.S. could lose its leadership in science and technology. We could be importers of these advanced technologies and miss the huge opportunities in the future global markets for clean energy and environmental technologies. CONCLUSION Mr. Chairman and Members of the Subcommittee, I believe that the Climate Change Technology Initiative is a wise investment for the nation - one that will substantially help the U.S. meet the energy and environmental challenges of the 21" century. This carefully defined technology portfolio will reduce greenhouse gas emissions, cut oil imports, help to resolve local air pollution problems and save businesses and consumers billions of dollars. For the sake of our nation's future, it should be well funded Because of its numerous analytic shortcomings, the EIA analysis provides an insufficient basis for assessment of this critical initiative. CIMENTO ENERY Department of Energy Dan W. Reicher was nominated by President Clinton and confirmed by the U.S. Senate as Assistant Secretary of Energy for Energy Efficiency and Renewable Energy in 1997. Prior to this position he was Senior Policy Advisor to Secretary of Energy Federico Peña (1997), Chief of Staff of the Department of Energy (1996-1997), Acting Assistant Secretary of Energy for Policy (1995-96), Deputy Chief of Staff and Counselor to Energy Secretary Hazel R. O'Leary (1993-95) and Special Assistant to Secretary O'Leary (1993). Mr. Reicher was a member of the Clinton-Gore Transition Team (1992-93). From 1985 to 1992 he was a Senior Attorney with the Natural Resources Defense Council. Mr. Reicher has more than 20 years of experience with environmental and energy policy and law. He was a staff member of President Carter's Commission on the Accident at Three Mile Island and worked in the Hazardous Waste Section of the U.S. Justice Department. He was an Assistant Attorney General in Massachusetts where he focused on environmental and energy matters and a law clerk to federal District Court Judge David Nelson in Boston. Mr. Reicher also served as a member of the National Academy of Sciences Board on Radioactive Waste Management and an adjunct professor of environmental law at the University of Maryland Law School. At DOE, Mr. Reicher has been engaged in policy development and implementation in many areas, including energy efficiency, renewable energy, climate change, electric utility restructuring, clean air, environmental cleanup, nuclear waste management, contract reform, privatization, fossil energy, nuclear power, nuclear nonproliferation, and land conservation. In the international arena, he has been involved with the Department's extensive energy, environmental and national security work in Russia, India and with the International Atomic Energy Agency. Mr. Reicher's work at the Natural Resources Defense Council focused primarily on the Department of Energy's environmental, energy and defense programs. He enforced federal environmental laws at the Department's facilities and worked to enact legislation to improve DOE's environmental performance and increase U.S. energy diversity. Mr. Reicher is a graduate of Stanford Law School and Dartmouth College and also studied at Harvard's Kennedy School of Government. Mr. Reicher's articles have appeared in such publications as the New York Times, the Bulletin of the Atomic Scientists, and the Stanford Law Review. He co-edited a book entitled Controlling the Atom in the 21st Century (Westview Press) and wrote a chapter for the environmental law treatise Sustainable Environmental Law (West Publishing). In 1985, Mr. Reicher was a member of the first expedition on record to kayak the Yangtze |