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Dr. HAKES. And as I think the line shows in our study between the frozen technology case and the baseline case, we have a lot of technology advances in our baseline study. And we have actually, in our projections, been very optimistic about technologies that aren't even being commercially sold yet. I mean we have sort of predicted that the combined cycle natural gas plant would sort of take over electric generation, even when they weren't being sold extensively commercially. We have seen opportunities for refrigerators where the technology wasn't even commercially available yet. So we have adopted a lot of advanced technology.

But if we had time, I could give you lists of press releases about great, new technologies that are about to hit the market, and then find one sentence 2 years later about how the company had dropped that program. So I think what our analysts do is they look for those technologies that can play a very positive role. They ask a lot of tough questions. They don't accept all of the optimism tha comes from particular industries or from program advocates, and I think they arrive at reasonable estimates. And I think our, certainly, baseline estimates are quite aggressive in adopting new technology. So I feel that that is an important point.

I think where we get into issues of cost and that kind of issue, we need to sit down and compare notes. We feel that all of our work on costs can be fully documented. We feel that our costs on combined heat and power, despite what has been said in some of the other testimony, can be well documented. And we feel that there is sometimes a tendency to underestimate costs when programs are being advocated.

So, that would be, in general, a response to some of the criticisms of our report.

Mr. GARDINER. Mr. Chairman, if I could just say I think our criticism of this report is quite simple.

Chairman CALVERT. Well, Mr. Gardiner, I will get back to you in a minute.

Mr. GARDINER. Well, I just want to be clear that
Chairman CALVERT. I haven't recognized you.

Mr. GARDINER [continuing). We are saying, basically, that the analysis

Chairman CALVERT. Mr. Gardiner.
Mr. GARDINER (continuing). Is incomplete.
Chairman CALVERT. (Chairman Calvert uses gavel.)

I will recognize you at your proper time. I am asking Dr. Hakes some questions.

CREDENCE OF DOE AND EPA CLAIMS OF CARBON SAVINGS Doctor, DOE claims that its programs will save 112 million metric tons of carbon equivalent in 2010, and EPA claims its programs will save 354 million metric tons. What credence would you give these claims?

And, lastly, what trust would you have in an analysis of any firm that receives many millions of dollars annually through the Department of-DOE?

Dr. HAKES. Well, I think that these programs definitely produce positive results. I think where we get into some disagreement is that some of those results are already in our baseline, and some


of them are things that actually are new and save emissions, and some of them actually are quite low-cost programs. So, the fact that there is a potential that they are in the baseline, may not be a terribly big issue.

But, you know, if someone does something voluntarily, a lot of times when you go back and talk with that firm, they will report in interviews to us or GAO or other people, that these are actions that they were planning to take anyway without the voluntary programs. But I don't want to suggest-I think Mr. Gardiner and I would agree, that there aren't plenty of programs where the voluntary program actually does come up with a fairly new idea that the industry may not have thought of.

So, our general approach, as I suggested in responding to the 112 number, is that there is usually a discounting that has to occur to measure the expected impact on the baseline growth of 33 percent.

ARTHUR D. LITTLE, INC. STUDY Chairman CALVERT. You cite that you have entered into the record a report by Arthur D. Little, Inc. It finds that DOE's energy efficiency and renewable energy programs will save 112 million metric tons of carbon in 2010. What peer review process was used by this firm?

Mr. REICHER. Mr. Chairman, this has been a longstanding piece of work with Arthur D. Little since 1994, in which we have asked them to review the potential for energy savings, carbon reductions, cost savings, in our various technology R&D programs in DOE. And what Arthur D. Little does is to convene on its own a whole host of experts in the various technology areas on a yearly basis. And they analyze looking at issues about markets, technology penetrations, cost reductions. They evaluate where they realistically think these technologies are going and come up with the estimates that we were to receive on an annual basis. So it is a very substantial peer review process, and, in fact, I think Dr. Hakes has indicated that they highly respect and value the Arthur D. Little work.

I will say on the issue of the savings in 2010, in the report on page 6, we list the savings in 2 different fashions: both a non-integrated total of 112 and a so-called integrated total of 75 million metric tons. So we are very careful to indicate it in both respects to make sure we take account of potential overlaps in the impasse.

Chairman CALVERT. I-question on the isn't it true that the Arthur D. Little Company is provided with various agreements through DOE contracts totalling over almost $50 million? Mr.

REICHER. The department does technology work with Arthur D. Little, as we do with many, many companies. What Arthur D. Little does in the case of this analytical work is, as I have said, to convene a group of outside experts to review the potential for savings in energy reductions.

I also want to indicate, Mr. Chairman, that we have undertaken this Arthur D. Little work, in part, in response to Government Performance and Results Act, GÞRA, where we have been asked to look more carefully at the results we are getting from our investments, particularly as we formulate our budget. So a combination of-we are quite confident about this A.D. Little work and the independence of the peer review that is being carried out. I think

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Chairman CALVERT. Well, I just was curious because I notice that there is additional sums of money here for various things: fuel cell award projects

Mr. REICHER. Well, let me say on that

Chairman CALVERT (continuing). Receiving National Renewable Energy Laboratory funding. I am just curious that you are certain that there is no implication that this is a totally unbiased report when it is evaluating the benefits of DOE programs?

Mr. REICHER. I am quite confident about it because we have heard very positive things from a variety of people on the outside who have looked at it, including the Energy Information Administration. I would also have to say that most of the dollars that we supply to private industry, in a cost-shared fashion, are supplied on a competitive basis, and those prophecies, I think, ensure a second level of independence in who we select and how we do our work.

So I don't, in fact, Mr. Chairman, have major concerns about the independence of this work.

Chairman CALVERT. My time has expired.
Mr. Costello.
Mr. COSTELLO. Thank you, Mr. Chairman.

ECONOMIC VIABILITY OF ADVANCED COAL PLANTS Dr. Hakes, you indicate that advanced coal plants become economical after 2010, I believe. What factors determine the economic viability of these plants in this timeframe?

Dr. HAKES. Well, basically, for new electric plant construction, you have a competition between coal plants and natural gas plants. Generally, coal is a cheaper fuel than natural gas, but the capital cost to construct a natural gas plant is less, and the operating costs of a natural gas plant are less. So it is anticipated, I think, by most analysts and us, that through the periods that we forecast that, generally, the gas plants will be the plant of choice, simply for economic reasons.

There will still be a substantial amount of coal burned. In fact, in the baseline case, the use of coal goes up because we do have unutilized coal capacity at our existing plants. So there will be more coal burned in the baseline case, but it is more from the greater utilization of existing plants than the building of many new plants.

TAX INCENTIVES FOR ENERGY TECHNOLOGIES Mr. COSTELLO. You talk a lot in your testimony about your written testimony-and you mentioned today about tax incentives and effective ways to partner between Government and industry to develop new energy technologies. And you suggest that we, in the Congress, include incentives for building, transportation, more energy-efficient housing, and so on.

You may recall that back prior to the clean air debate and when the Congress passed the Clean Air Act, that some of us wanted to provide tax incentives to utilities in order to provide and build scrubbers to invest in other technologies as well so that we could use the abundance of coal that we have in this country and burn it cleanly and efficiently.

In your opinion, why has the Department of Energy not pursued tax incentives in order to accomplish these goals?

Dr. HAKES. Well, I want to make clear that EIA is an independent part of the Department of Energy that does not advocate specific policies or tax increases. We are simply available to the Committee or to the Administration to analyze the likely impacts of these.

I think that what was adopted in the Clean Air Act of 1990 was a system in which low-sulfur coal and scrubbers would sort of compete economically. And we do believe, that with the next round of sulfur reduction requirements, that scrubbers will become a more popular option, but I can't oppose or advocate any particular tax system.

There may be others who would be willing to do that.

Mr. COSTELLO. But it is safe to assume, I think, that if we provided tax incentives for utilities to install scrubbers and to use scrubbers on an annual basis, that that would provide an incentive for them to, in fact, install scrubbers and use the abundance of coal that we have.

Is that not

Dr. HAKES. Yes, assuming that the incentives were large enough to create the incentive.

Mr. REICHER. Mr. Costello, if I could, I just want to point out there is one important element of our tax incentive proposal that deals with coal-fired power plants and that is the co-firing incen. tive. This is an incentive to utilities that burn coal to mix that coal with our abundant stocks of biomass and, thereby, allow the generation of electricity from this mixed fuel and cut both traditional pollutants and global warming gases as a result of that use. And we do provide in the proposed incentive a tax credit for that activity.

Mr. COSTELLO. I have a few other questions but we have other members here.

Let me give, Doctor-our Administrator Gardiner, the opportunity to respond to a point that you wanted to make to Dr. Hakes.

EPA CRITICISM OF ELA Mr. GARDINER. Thank you, Mr. Costello.

The point that I wanted to make was fairly simple, that I think our criticism is simply that EIA has looked very narrowly at the Administration's initiative on climate change and looked only at the tax portion.

And if you were to ask me this morning whether I ate a healthy breakfast this morning, and I only talked to you about the cereal I ate and its nutritional value, and I didn't tell you about the nutritional value of the milk that I put on the cereal, or the banana that I ate with it, and the orange juice that I also drank, you wouldn't be getting a complete picture.

And I just want to be clear for the Committee that I think, given EIA's analysis, that you are really only looking at a piece of the Administration's package. You are not going to have a complete picture either, and that is the simple point that I wanted to make.

Mr. COSTELLO. Very good.
Mr. GARDINER. Thank you.

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Mr. COSTELLO. Thank you, Mr. Chairman.
Chairman CALVERT. Mr. Ehlers.
Mr. EHLERS, Thank you, Mr. Chairman.

Very interesting discussion, but I want to raise a number of questions. I wonder, in all our discussion here, if we are not missing a major point. When we are talking just about the CO2 production, we are ignoring the fact that we are burning up an incredible amount of resources very quickly. And the implication that has for our Nation-particularly with the end of cheap oil in a decade or less that has major economic implications for our country. And that may be a better reason for improving our energy efficiency than the rather indeterminant effect of CO2 upon our climate. And I would certainly encourage DOE, at the very least, to put more emphasis on that issue, especially with the popularity of SUV's, and they go in the wrong direction.

Even the power companies are going in the direction of burning more natural gas, and I wonder-I recognize it is a marvelous fuel, clean burning and so forth, but to tell the truth, in the long-term view, natural gas is really too good to burn. It is a stock for a petrochemical industry. It is irreplaceable. It may be a lot easier and less expensive for our Nation, overall, if you look at the long-term view to be putting more emphasis on coal and nuclear at this point and preserving even perhaps by an additional charge on natural gas preserving natural gas for feedstock for the petroleum industry. And these are some of the questions I think should be addressed.

Something else that concerns me is the differences of opinion within the scientific community on the CO2 issue and the result of the increase of CO2. I get approached by a lot of scientists on these issues, and, although the preponderant view is that we are likely to have some global climate change there is very little unanimity on global warming by the way. I never even talk about global warming. I think the evidence is so slim on that. With global climate change, there is more evidence. But even there, there is some very good scientists who say that the research is really wrong; we are going in the wrong direction; we are not taking the right view, and so forth.


One concern that has been expressed is that the difficulty of getting grants to do research, if you are expressing views that CO2 is not having the impact that is politically popular to discuss. And I would certainly appreciate some assurance from everyone here, particularly Dr. Lane, that there is no bias in the awarding of research grants if someone comes in with a proposal that and they have a history of saying there is not much of a problem here.

I do have a specific scientific question, and I will address Dr. Lane, and he can respond to my previous comment as well, and maybe others will want to come in on that. One of the scientific questions is—which I have not been able to condone I just can't get a straight answer from the researchers in the field, and perhaps they don't know.

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