SECTION: CAPITOL HILL HEARING TESTIMONY

LENGTH: 7147 words

COMMITTEE: HOUSE SCIENCE

HEADLINE: TESTIMONY RENEWABLE ENERGY AND ENERGY EFFICIENCY

TESTIMONY-BY: JOHN P. HOLDREN , PROFESSOR AT HARVEST

AFFILIATION: KENNEDY SCHOOL OF GOVERNMENT

BODY:
FEBRUARY 28,2001 ENERGY EFFICIENCY AND RENEWABLE ENERGY IN THE U.S. ENERGY FUTURE TESTIMONY OF JOHN P. HOLDREN FOR THE COMMITTEE ON SCIENCE UNITES STATES HOUSE OF REPRESENTATIVES HEARINGS ON "THE NATION'S ENERGY FUTURE: ROLE OF RENEWABLE ENERGY AND ENERGY EFFICIENCY" MR. CHAIRMAN, MEMBERS, LADIES AND GENTLEMEN: I am John P. Holdren, a professor at Harvard in both the Kennedy School of Government and the Department of Earth and Planetary Sciences. Since 1996 I have directed the Kennedy School's Program on Science, Technology, and Public Policy, and for 23 years before that I co-led the interdisciplinary graduate program in Energy and Resources at the University of California, Berkeley. Also germane to today's topic, I was a member of President Clinton's Committee of Advisors on Science and Technology (PCAST) and served as chairman of the 1997 PCAST study of "Federal Energy Research and Development for the Challenges of the 21st Century" and the 1999 PC A ST study of " Powerful Partnerships: The Federal Role in International Cooperation Oil Energy Research, Development, Demonstration, and Deployment". A more complete biographical sketch is appended to this statement. The opinions I will offer here are my own and not necessarily those of any of the organizations with which I am associated. I very much appreciate the opportunity to testify this morning on this timely and important subject. -Introduction The comprehensive review o f U.S. federal energy research and development that I chaired for the White House in 1997 was carried out by a panel of 21 senior individuals from industry, academia, and public-interest organizations. In addition to members with experience and expertise across the full range of energy options - fossil fuels, nuclear fission and fusion, renewable energy sources, and increased end-use efficiency - it included others of senior research, management, and policy- advising experience outside the energy field (including a former chair of the Council of Economic Advisors and a former CEO of Hewlett-Packard), who held no prior brief for increasing federal energy research. The panel concluded (1, p ES-9) that Energy-technology improvements, achieved in the United States and then deployed here and elsewhere, could: lower the monetary costs of supplying energy; lower its effective costs still further by increasing the efficiency of its end uses: increase the productivity of US. manufacturing; -increase U.S. exports of high-technology energy-supply and energy end-use products and know-how; -reduce over-dependence on oil imports here and in other countries, thus reducing the risk of oil-price shocks and alleviating a potential source of conflict; -diversify the domestic fuel-supply and electricity-supply portfolios to build resilience against the shocks and surprises that an uncertain future is likely to deliver; -reduce the emissions of air pollutants hazardous to human health and to ecosystems; -improve the safety and proliferation-resistance of nuclear- energy" operation around the world: -slow the build-up of heat-trapping gases in the global atmosphere. and enhance the prospects for environmentally sustainable and politically stabilizing economic development in many of the' world's potential trouble spots. The panel noted that the public benefits of these outcomes, beyond the private benefits to energy firms that invest in achieving' them, warrant public investments in energy-technology innovation supplementing the efforts of the private sector; and it argued that the federal government's investments in this category at the time of the review - FY1997 - were "not commensurate in scope and scale with the energy challenges and opportunities that the twenty-first century will present", taking into account "the contributions to energy R&D that can reasonably be expected to be made by the private sector under market conditions similar to today's" (1, p ES-1). The PCAST panel recommended, accordingly, a substantial strengthening of the federal energy R&D portfolio, ramping up DOE budget authority for R&D on end-use efficiency, fission, fossil, fusion, and renewable- energy options from a total of $1.3 billion in FY1997 to $2.1 billion in FY2003 (expressed in constant 1997 dollars). The following table shows the distribution of the proposed increases. Table 1. PCAST-Recommended DOE Budget Authority for Energy- Technology R&D (millions of constant 1997 dollars) Found on hard copy These budget recommendations - putting 85% of the real annual increment in FY2003 compared to FY1997 into efficiency and renewables - were unanimous, notwithstanding the diversity of energy (and nonenergy) backgrounds represented on the panel and notwithstanding the history of disagreements among the different energy constituencies about funding priorities. The unanimity on the panel emerged from detailed joint review and discussion of the content of the existing programs, the magnitudes of unaddressed needs and opportunities, the current and likely future role of private industry in each sector, and the size of the public benefits associated with the advances that R&D could bring about. Efficiency and renewables received the bulk of the increment because they scored high on potential public benefits and oil R&D needs and opportunities unlikely to be fully addressed by the private sector In what follows here, I will discuss, for both the efficiency and the renewables sectors, the opportunities as seen by the PCAST panel, and I will try to explain, in so doing, some of the reasons that PCAST appears to be more optimistic in its stance on renewables and efficiency than the Energy Information Administration is in the forecasts out to 2020 in the latest Annual Energy Outlook (4). At the end, I will offer some observations on measures, beyond R&D, that I believe would be warranted in pursuit of increased contributions from efficiency and renewables and the public benefits that such contributions would bring. Efficiency In the period from 1955 to 1970, the energy intensity of the U.S. economy stayed essentially constant, at about 19 quadrillion Btu per trillion 1996 dollars of GDP. From 1970 to 1980, a period marked by the Arab-OPEC-induced oil-price shocks in 1973-74 and 1979, tile energy intensity of the economy fell at an average rate of 1.7% per year; and from 1980 to 1 985 (at the beginning of which period the real world oil price was nearly six times its 1972 value) it fell 3.5% per year. In the decade from 1985 to 1995, the rate of decline of energy intensity in the United States slowed to about 1.0% per year. From 1995 to 2000, the rate of decline has been 2.7% per year The improvements since 1970 in the overall energy efficiency of the U.S. economy resulted from a complex and changing mix of increases in the efficiency of energy transport, oil refining, and electricity generation, transmission, and distribution; increases in the technical efficiency of energy end-use in space conditioning, household and commercial appliances, manufacturing, and the transport of passengers and freight; and a transition from a more-energy-intensive to a less-energy-intensive mix of productive activities in the economy. From the overall numbers alone, however, it is easy to calculate that if the U.S. economy of the year 2000 had been generated at the energy intensity of economic activity that prevailed in this country in the period from 1955 to 1970, the United States would have used 177 quadrillion Btu of primary energy in 2000 rather than the 98 quadrillion Btu actually used. The rate of reduction of energy intensity of the U.S. economy averaged over the whole 30 years from 1970 to 2000 was 2.0% per year. The annual energy savings attributable in the year 2000 to this decline in energy intensity compared to the 1955-1970 value (amounting to 177 - 98 = 79 quadrillion Btu per year) is more than two and a half times larger than the total increase in U.S. energy supply from all sources in the same period (which amounted to 98 - 68 = 30 quadrillion Btu per year). The fact that reductions in demand due to reduced energy intensity of economic activity were far larger between 1970 and the present than increases in energy supply goes a long way toward explaining the interest of the PCAST energy panel (and most other analysts of tile energy situation) in determining and exploiting the potential for continuing improvements in energy efficiency in the decades ahead. The other pillars underpinning this interest are the economic and environmental attractions of energy-efficiency improvements, across a wide range of circumstances, compared with available means of increasing supply. On this point the 1997 PCAST report stated (1, p ES- 1 5) Increasing energy efficiency has an extraordinary payoff. It simultaneously saves billions of dollars, reduces oil imports and trade deficits, cuts local and regional air pollution, and cuts emissions of carbon dioxide. The PCAST study set forth specific goals for a bolstered program of energy-efficiency R&D ill the years immediately ahead as follows (1, p ES- 1 5): Building. To fund and carry-out research on equipment, materials, electronic and other related technologies and work in partnership with industry, universities, and state and local governments to enable by 2010: (1) the constructing of 1 million zero-net-energy buildings: and (2) /he construction of all new buildings with an average 25-percent increase in energy compared to a new building in 1996. Additional longer term research in advanced energy. systems and components will enable all new construction to average 70 percent reductions and all renovations to average 50 percent reductions in greenhouse-gas emissions by 2030. Industry. By 2005, develop with industry a more than 40-percent efficient microturbine (40 to 300 kW), and introduce a 50-percent efficient microturbine by 2010. By 2005, develop 10111 industry and commercially introduce advanced materials for combustion slysleins to reduce emissions of nitrogen oxides by 30 to 50 percent while increasing efficiency 5 to 10 percent. BY 2010, achieve a more than one-fourth improvement in energy intensity of' the major energy consuming industries (forest products, steel, aluminum, metal casting, chemicals, I)e1rolitem refining, and glass) and by 2020 a 20 percent improvement in energy efficiency and emissions of the next generation of these industries. Transportation By 2004, develop with industry an 80-mile-per- gallon production prototype passenger car (existing goal of the Partnership for a New Generation of Vehicles C PNGV). By 2005, introduce a 10-mpg heavy truck (Classes 7 and 8) with ultra low emissions and the ability to use different fuels (existing goal); and achieve 13 mpg by 201 0. By 201 0, have a production prototype of a 100-mpg passenger car with zero equivalent emissions. By 2010, achieve at least a tripling in the fuel economy of Class 1-2 trucks, and double the fuel economy of Class 3-6 trucks. The report concluded that these efforts " complemented by sound policy, can help the country increase energy efficiency by a third or more in the next 15 to 20 years." An increase of one third over a 15-year period would constitute an average rate of improvement of 2.7% per year, equal to what the United States achieved from 1995 to 2000 and considerably better than the 2.0% per year 1970-2000 average. An increase of a third over a 20-year period would correspond exactly to 2.0% per year. For comparison, the "reference" scenario in the Energy Information Administration's 2001 Annual Energy Outlook entails an average rate of reduction of energy intensity between 2000 and 2020 of 1.6% per veal-, along with real economic growth averaging 3.0% per year (4, p 7).c It is instructive to consider the difference between the EIA's "reference" value of a 1.6% per year decline in energy intensity compared to the lower of the PCAST figures, 2.0% per year (corresponding also to what was actually achieved between 1970 and 2000). When applied to the period 2000- 2020 under the reference" economic growth assumption of 3.0% (real) per year, the EIA rate of decline in energy intensity of 1.6% per year yields primary energy use of 129 quadrillion Btu in 2020; a 2.0% per year decline in energy intensity over this period yields primary energy use in 2020 of 119 quadrillion Btu, cutting 10 quadrillion Btu off the increase. If a 2.4% per year decline in energy intensity could be achieved in this period (still not as high as the 2.7% per year actually achieved for 1995-2000), primary energy use in 2020 would be 110 quadrillion Btu, 19 quadrillion Btu below the EIA "reference" case. Why was PCAST more optimistic about energy-efficiency potential than the most recent EIA Annual Energy Outlook appears to be? It is important to understand, first of all, that neither of these studies is making unconditional predictions. Their scenarios depend on assumptions, variously explicit and implicit, about a variety of factors that will influence rates of economic growth, rates of technological innovation, and the rates of application of available energy-efficiency technologies. The EIA reference case assumes that the world oil price in 2020 will be about $22 per barrel - compared to $17 per barrel in 1999 but $27 per barrel in 2000 (all of these prices in 1999 dollars) - under world oil production of II 7 million barrels per day (compared to 76 million barrels per day in 1999) and an OPEC share of this production reaching 49% (up from 40% in 1999). The highest world oil price in 2020 in any of the EIA scenarios is $28 per barrel (1999 dollars). As best I can tell, moreover, the EIA scenarios do not account for the possibility of policies much more aggressive than today's for promoting energy end-use efficiency, nor for any " future legislative or regulatory actions that might be taken to reduce carbon dioxide emissions" (5, p 6). The PCAST study did not develop explicit scenarios about future energy pi-ices and policies, but I believe it fair to say that most if not all of the PCAST panelists Would have considered the range of possibilities for the world oil price in 2020 to extend considerably above the figures considered by the EIA. The panel also concluded that " there is a significant possibility that governments will decide, in light of- the perceived ' risks of greenhouse-gas-induced climate change and the perceived benefits of a mixed prevention/adaptation strategy, that emissions of greenhouse gases from energy systems should be reduced substantially and soon" (1, p ES-10). And its assessment of what could be achieved in the way of energy-efficiency improvements over the next two to three decades was conditioned on the full implementation of its recommendations for increased federal R&D in this area, as outlined above. The increases in DOE's energy- end-use-efficiency R&D budgets actually achieved since the publication of the PCAST report have fallen considerably below what was recommended, as well be seen in a moment. Renewables What have been the changes in the U.S. energy-supply mix and what has been the role of renewables in this evolving picture? The changes in U.S. primary energy supply frorn 1970 to 2000 are summarized in Table 2. Table 3) shows, in a similar format, the changes in the electricity- generation sector in the past 10 years. Renewable energy contributed 6.0% of U.S. primary energy in 1970, rising to 7.3% of a larger total in 2000. The renewable share of U.S. electricity generation was 11.6% in 1970, falling to 9.6% of a larger total in 2000. The contribution of non-hydro renewables to electricity generation was 2.0% in 1990, rising to 2.5% in 2000. Clearly, the interest of PCAST and other groups in the prospects for a large contribution from renewables over the next few decades is based - in contrast to the case of energy efficiency - more on hopes for the future than on the experience of the recent past. Table 2. Changing Composition of U.S. Primary Energy Supply 1970- 2000 (energy contributions in quads = quadrillions of Btu) Found on hard copy Table 3. Changing Composition of U.S. Net Electricity Generation 1990-2000 (generation figures in TWh = terawatt-hours - billions of kilowatt-hours) Found on hard copy The PCAST study noted that the principal obstacle to more substantial deployment of renewable energy options has been the high costs of the energy delivered by these technologies. It found grounds for optimism in the sharp declines in these costs, for a number of the renewable options, over the preceding two decades; and it concluded that continued and expanded investments in public- and private-sector R&D on renewables - together with measures to move these technologies along the learning curve through increased purchases under, e.g., renewables portfolios standards - could allow renewable energy technologies to " become major contributors to U.S. and global energy needs over the next several decades" (1, p ES-22). The focuses and goals of the expanded Federal effort in R&D on renewables recommeded by PCAST were described in its report as follows (1, pp ES-22/23): Wind. Reduce by 2005 wind electricity costs to half of today's costs, so that wind power can be widely competitive with fossil- fuel-based electricity in a restructured electric industry, through R&D on a variety of advanced wind turbine concepts and manufacturing technologies. Photovoltaics (P V): Pursue R&D that would lead to P V systems prices falling from the present price of $6,0001W to $3,000lkW in 5 years, to $15OOlkW by 2010, and to $1,0001W by, 2020. R&D activities should include assisting industry in developing manufacluring technologies, giving greater attention to balance of system issues, and expanding Jundamenial research on advanced materials. Solar Thermal Electric, Systems. Strengthen ongoing R&D for parabolic dish and heliostat/central receiver technology with high temperature thermal storage, and develop high temperature receivers combined with gas-turbine based power cycles; goals should be to "make solar-only power (including baseload solar power) widely competitive with fossil fuel power by 2015. Biopower. Enable commercialization, within ten years, of advanced energy-efficient power-generating technologies that employ gas turbines and fuel cells integrated with biomass gasifiers, building on past and ongoing R&D for coal in such configurations, and exploiting the advantages of biomass over coal as a feed stock for gasification. These technologies could be widely competitive in many developing country markets and in U.S. markets that use biomass residues or use energy crops in systems that derive coproducts from biomass. Geothermal Energy. Continue work on hydrothermal systems, and reactivate R&D on advanced concepts, giving top priority to high- grade.. hot dry-rock geothermal; this technology offers the long- term potential, with advanced drilling and reservoir exploitation technology, of providing heat and baseload electricity in most areas.. Biofuels. Accelerate core R&D on advanced enzymatic hydrolysis technology for making ethanol from cellulosic feedstocks, with the goal that between 2010 and 2015 ethanol produced from energy crops would be fully competitive with gasoline as a neat fuel, in either internal combustion engine or fuel cell vehicles; coordinate this development with the biopower pro-ram so as to co- optimize the production of ethanol from the carbohydralefractions of the bionluss and electricity from the lignin using advanced biopower technology. Hydrogen. Carry out R&D on hydrogen using and producing technologies; coordinate hydrogen-using technology development with proton-exchange-membrane fuel-cell vehicle development activities in the Departments Energy Efficiency program. Give priority in hydrogen-production R&D to co-optimizing the production of hydrogen from fossil fuels and sequestration of the C02 separated out during the production process, in collaboration with the Fossil Energy program. Hydropower To sustain and increase over 92, 000 MWe of hydro capacity, additional R&D is needed to provide a new generation of turbine technologies that are less damaging, to fish and aquatic ecosystems. By deploying such technologies at existing dams and in new low-head. run-of-river applications, as much as an additional 50, 000 MWe could be possible by 2030. The largest hope for near-term growth in the contribution of renewables to the nonelectric sector rests on liquid fuels from biomass. The PCAST study estimated that an aggressive program to produce ethanol from cellulosic biomass could be displacing 2.5 million barrels per day of oil by 2030 and over 3 million barrels per day in 2035. The PCAST report also identified other biofuels options for this time period without attempting to estimate their potential quantitatively. This indicates-that the 2.5-3 million barrel per day range by 2030-35 is not an upper limit. The EIA scenarios, by contrast, only show about 125,000 barrels per day of motor-fuel displacement by ethanol in 2020. As in the case of the EIA's relatively modest expectations for energy-efficiency increases over this period, this minimal result for biomass ethanol can be attributed above all to the EIA's assumptions of (a) moderate world oil prices and (b) the absence of aggressive policies to reduce either oil-import dependence or greenhouse-gas emissions. The Clinton Administration's initiative on " Promoting Bio-based Products and Technologies", announced in August 1999, posed a target of tripling use of energy and products from biomass in the United States by 2010. (This would include the use of biomass for electricity generation and cogeneration, as well as production of high-value chemicals.) Inasmuch as biomass energy use in this country in 1998 was about 3) quadrillion Btu per year. thc stated goal implies an addition of 6 quadrillion Btu per year by 2010, equivalent in energy content to almost 3 ) million barrels per day of crude oil. In the electricity-generating sector, the EIA's reference scenario for 2020 has coal-fired electricity generation increasing to about 2300 billion kWh from its year-2000 value of 1950 billion kWh, while natural-gas-fired generation increases to nearly 1600 billion kWh from its year-2000 value of 620 billion kWh. Nuclear energy declines to about 570 billion kWh from its year-2000 value of 760 billion kWh, because of retirements of some of the existing nuclear power plants in the absence of replacement by new ones.9 renewable-based electricity generation in aggregate stays roughly constant. The contribution of conventional hydropower stays roughly constant at 300 billion kWh per year, and the nonhydro renewables increase from about 95 billion kWh in 2000 to about 145 billion kWh in 2020. A "high renewables" case presented in the EIA study has the nonhydro renewables contribution reaching about 240 billion kWh in 2020 (still barely over 10 percent of coal's contribution in the " reference" case), with biomass providing about I 1 0 billion kWh of this, and wind and geothermal about 60 billion kWh each. Again, these EIA estimates of renewable-electric potential are conservative, in my view, because the EIA study did not consider the possibility of world oil-price increases above $28 per barrel, or natural-gas prices above about $3.70 per million Btu, or minemouth coal prices above about $13 per short ton (all prices in 1999 dollars), or the possibility of major policy changes that would have the effect of sharply increasing the incentives for expanding the use of non-fossil-fuel options. The 1997 PCAST study made some estimates of what might be achievable from renewable-electric options under prices or policies that encouraged these options very strongly, and the resulting figures were far higher than those in the EIA scenario: they included as much as II 00 billion kWh by 2025 from wind systems with storage technologies, similar quantities by 2035 from photovoltaic and solar-thermal-electric systems with storage, 800 TWh by 2035 from biopower, and 1500 TWh by 2050 from hot-dry-rock geothermal. These are described as possibilities, not predictions, but the figures are indicative of very large potential. Concluding Observations The overall technical potential to reduce U.S. oil-import dependence and grCCnh0L1SC-gL1S emissions through the use of a wide range of currently available and still to be fully developed energy-efficiency and renewable-energy options is clearly very large." The question is how much of this technical potential will be realized in practice, by when. The key to expanded use of the currently available options is incentives. The keys to achieving the potential of the emerging options are, first, research, development, and demonstration; and, second, incentives to help bring about the commercialization and widespread deployment of the innovations that result from research, development, and demonstration. R&D should be the easiest part of this equation with respect to gaining approval and finding the money, inasmuch as it is so inexpensive. As already noted, total U.S. federal spending in FY1997 for energy-supply and energy-efficiency R&D totaled only about $1.3 billion, an amount that could be raised by a tax of 1.3 cents per gallon on U.S. gasoline sales. Yet even the modest proposals of PCAST to raise this amount by a bit over 50 percent, in real terms, between FY1999 and FY2003 have met with considerably less than total success. The fate of the PCAST recommendations, up until now, is summarized in Table 4 (where tile Figures are in as-spent rather than constant dollars, f6r ease of comparison with government budget documents). For the most recent year, the efficiency appropriation is at a respectable 78% of the PCAST recommendation, but the renewables appropriation is only at 60% of the recommended level. Table 4. Federal Energy Technology R&D: Congressional Appropriations, Administration Requests, PCAST Recommendations (as-spent-] Found on hard copy Putting in place an array of price and non-price incentives and other policies that will encourage deployment of energy- efficiency, renewable-energy, and other advanced energy technologies in proportion to their public benefits will be even more difficult. We ought to have, in my view: tighter Corporate Average Fuel Economy standards (or their equivalent in voluntary fuel-economy agreements with auto manufacturers); expanded use of renewable-energy portfolio standards and production tax credits; energy-efficiency standards and labeling programs for energy- using equipment in residential and commercial buildings; and much more. Perhaps most importantly, in my view, the incentives relating to our energy deployments are not likely to be "right" until we bite the bullet and implement either a carbon tax or its equivalent in the form of a tradeable carbon-emissions permit system. This will not be politically easy, but growing recognition of the climate-change perils of " business as usual" expansion of the use of conventional fossil-fuel technologies, by the United States and by others. will eventually compel taking this step. And we would be better off to take it sooner, rather than later. I thank the Committee for the opportunity to put these views before you.

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