[Senate Hearing 107-144]
[From the U.S. Government Publishing Office]
S. Hrg. 107-144 (Pt. 2)
NATIONAL ENERGY ISSUES
=======================================================================
HEARING
before the
COMMITTEE ON
ENERGY AND NATURAL RESOURCES
UNITED STATES SENATE
ONE HUNDRED SEVENTH CONGRESS
FIRST SESSION
TO RECEIVE TESTIMONY ON LEGISLATIVE PROPOSALS RELATED TO ENERGY
EFFICIENCY, INCLUDING S. 352, THE ENERGY EMERGENCY RESPONSE ACT OF
2001; TITLE XIII OF S. 597, THE COMPREHENSIVE AND BALANCED ENERGY
POLICY ACT OF 2001; SECTION 602-606 OF S. 388, THE NATIONAL ENERGY
SECURITY ACT OF 2001; S. 95, THE FEDERAL ENERGY BANK ACT, AND S.J. RES.
15, PROVIDING FOR CONGRESSIONAL DISAPPROVAL OF THE RULE SUBMITTED BY
THE DEPARTMENT OF ENERGY RELATING TO THE POSTPONEMENT OF THE EFFECTIVE
DATE OF ENERGY CONSERVATION STANDARDS FOR CENTRAL AIR CONDITIONERS
TO RECEIVE TESTIMONY ON LEGISLATIVE PROPOSALS RELATED TO REDUCING THE
DEMAND FOR PETROLEUM PRODUCTS IN THE LIGHT DUTY VEHICLE SECTOR
__________
JULY 13, 2001
JULY 17, 2001
JULY 18, 2001
__________
PART 2
Printed for the use of the
Committee on Energy and Natural Resources
__________
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COMMITTEE ON ENERGY AND NATURAL RESOURCES
JEFF BINGAMAN, New Mexico, Chairman
DANIEL K. AKAKA, Hawaii FRANK H. MURKOWSKI, Alaska
BYRON L. DORGAN, North Dakota PETE V. DOMENICI, New Mexico
BOB GRAHAM, Florida DON NICKLES, Oklahoma
RON WYDEN, Oregon LARRY E. CRAIG, Idaho
TIM JOHNSON, South Dakota BEN NIGHTHORSE CAMPBELL, Colorado
MARY L. LANDRIEU, Louisiana CRAIG THOMAS, Wyoming
EVAN BAYH, Indiana RICHARD C. SHELBY, Alabama
DIANNE FEINSTEIN, California CONRAD BURNS, Montana
CHARLES E. SCHUMER, New York JON KYL, Arizona
MARIA CANTWELL, Washington CHUCK HAGEL, Nebraska
THOMAS R. CARPER, Delaware GORDON SMITH, Oregon
Robert M. Simon, Staff Director
Sam E. Fowler, Chief Counsel
Brian P. Malnak, Republican Staff Director
James P. Beirne, Republican Chief Counsel
Deborah Estes, Counsel
Shirley Neff, Staff Economist
Bryan Hannegan, Staff Scientist
C O N T E N T S
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Page
Hearings:
July 13, 2001................................................ 1
July 17, 2001................................................ 75
July 18, 2001................................................ 141
STATEMENTS
July 13, 2001
Bingaman, Hon. Jeff, U.S. Senator from New Mexico................ 1
Burns, Hon. Conrad, U.S. Senator from Montana.................... 16
Emblem, Erik, Administrator, National Energy Management
Institute, Alexandria, VA...................................... 29
Garman, David K., Assistant Secretary, Energy Efficiency and
Renewable Energy, Department of Energy......................... 4
Manoogian, Mary Ann, Director, Governor's Office of Energy and
Community Services, Concord, NH................................ 20
Murkowski, Hon. Frank H., U.S. Senator from Alaska............... 2
Nadel, Steven, Executive Director, American Council for an
Energy-Efficient Economy....................................... 41
O'Hagan, Dr. Malcolm, President, National Electrical
Manufacturers Association, Rosslyn, VA......................... 63
Parks, David, President, Goodman Manufacturing Company, Houston,
TX............................................................. 58
Rees, Clifford, Jr., President, Air Conditioning and
Refrigeration Institute, Arlington, VA......................... 51
Wagner, Mark F., Director, Federal Government Relations, Johnson
Controls, Inc., on behalf of the Federal Performance
Contracting Coalition.......................................... 33
July 17, 2001
Akaka, Hon. Daniel K., U.S. Senator from Hawaii.................. 130
Bingaman, Hon. Jeff, U.S. Senator from New Mexico................ 75
Carper, Hon. Thomas R., U.S. Senator from Delaware............... 133
Dana, Gregory, Vice President, Environmental Affairs, Alliance of
Automobile Manufacturers....................................... 104
Feinstein, Hon. Dianne, U.S. Senator from California............. 92
Gibbens, Charles, Automotive Fleet Manager, on behalf of National
Association of Fleet Administrators............................ 94
Hagel, Hon. Chuck, U.S. Senator from Nebraska.................... 90
Johnson, Hon. Tim, U.S. Senator from South Dakota................ 87
Kolodziej, Richard R., President, Natural Gas Vehicle Coalition.. 109
Marshall, Gary, Vice Chairman, National Ethanol Vehicle Coalition 117
McCormick, Dr. J. Byron, Ph.D., Director, Global Alternative
Propulsion Center, General Motors Corporation.................. 99
McNutt, Barry D., Senior Policy Analyst, Office of Domestic
Policy and International Affairs, Department of Energy......... 78
Murkowski, Hon. Frank H., U.S. Senator from Alaska............... 76
Shelton, L. Robert, Executive Director, National Highway Traffic
Safety Administrator, Department of Transportation............. 81
Zeltmann, Eugene, Co-Chairman, Electric Vehicle Association of
the Americas................................................... 121
July 18, 2001
Bingaman, Hon. Jeff, U.S. Senator from New Mexico................ 141
Blake, Francis, Deputy Secretary, Department of Energy........... 146
Bouchard, Jacques, Director, French Atomic Energy Commission,
Nuclear Energy Division, Paris, France......................... 212
Burns, Hon. Conrad, U.S. Senator from Montana.................... 145
Carper, Hon. Thomas R., U.S. Senator from Delaware............... 146
Choppin, Dr. Gregory R., Florida State University, Department of
Chemistry, Tallahassee, FL..................................... 214
Cochran, Thomas B., Ph.D., Director, Nuclear Program Natural
Resources Defense Council...................................... 203
Corradini, Dr. Michael L., University of Wisconsin, Madison, WI.. 193
Domenici, Hon. Pete V., U.S. Senator from New Mexico............. 142
Fri, Bob, Chairman, Committee on Benefits of DOE R&D on Energy
Efficiency and Fossil Energy................................... 182
Holdren, Dr. John P., Professor, Harvard University, Cambridge,
MA............................................................. 157
Hubbard, Dr. H.M., The Pacific Center for High Technology
Research (Retired), Lee's Summit, MO........................... 187
Moniz, Ernest J., Professor of Physics, Massachusetts Institute
of Technology.................................................. 172
Murkowski, Hon. Frank H., U.S. Senator from Alaska............... 144
Richardson, Dr. Robert C., Physics Professor and Vice Provost for
Research, Cornell University................................... 170
APPENDIXES
Appendix I
Responses to additional questions................................ 229
Appendix II
Additional material submitted for the record..................... 245
NATIONAL ENERGY ISSUES
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FRIDAY, JULY 13, 2001
U.S. Senate,
Committee on Energy and Natural Resources,
Washington, DC.
The committee met, pursuant to notice, at 9:35 a.m. in room
SD-366, Dirksen Senate Office Building, Hon. Jeff Bingaman,
chairman, presiding.
OPENING STATEMENT OF HON. JEFF BINGAMAN,
U.S. SENATOR FROM NEW MEXICO
The Chairman. The hearing will come to order. Today's
hearing will focus on proposals to expand existing programs to
assist low income consumers to meet their energy needs and to
weatherize their homes, also programs to encourage State energy
plans and activities and proposals to improve the energy
efficiency of buildings, particularly Federal buildings,
appliances, and industry.
Yesterday we took testimony on a number of oil and gas
supply issues. We will continue the efficiency theme next
Tuesday with a hearing on vehicle issues, discussing energy
research and development on Wednesday and renewables,
distributed power technologies, and hydroelectric relicensing
on Thursday, so as we move forward toward a markup of a
balanced and comprehensive energy bill, I believe we are trying
to have hearings that reflect that same balance of the array of
energy options we have before us.
Increasing the efficient use of energy is the single most
effective and least-cost policy for both the short term and the
long term. Energy efficiency can reduce the demand for tight
energy supplies and can reduce the upward pressure on energy
prices. Energy efficiency allows us to maintain the same
economic productivity and quality of life with less energy
input, and efficiency helps us reduce pollution and
environmental impacts associated with energy production and
use.
There are some interesting statistics that the Alliance to
Save Energy, a group that I have been associated with for many
years, has come up with. Their analysis shows that energy
efficiency provided the Nation with 27 quadrillion Btu's, or
quads, or about 22 percent of U.S. energy consumption in 1999.
This made energy efficiency the second leading source of energy
in 1999, trailing oil consumption, which was 38 quads, but
contributing more than natural gas (22 quads), coal (22 quads),
nuclear (8 quads), and hydro (4 quads).
We have some excellent witnesses today, including the
Assistant Secretary Garman, who is, of course, well-known and
respected by all of us on this committee, so I will stop my
remarks and defer to Senator Murkowski, Secretary Garman's
former boss.
STATEMENT OF HON. FRANK H. MURKOWSKI, U.S. SENATOR
FROM ALASKA
Senator Murkowski. Thank you, Senator Bingaman. Although I
think you and I both know that we usually work for our people,
they seem to lay out our schedule and dictate the terms and
conditions under which we come in, and I understand that it was
your staff that set the hearing on Friday, as opposed to the
usual procedure, but you have got a good crowd here, and
obviously the Senate Energy Committee is working on Friday. The
halls are a little hollow out there, but that is all right.
I am pleased to join you here this morning. It seems like
only yesterday that we were here, and we were here yesterday.
[Laughter.]
Senator Murkowski. In any event, we are going to hear from
a number of witnesses, as you have already outlined. I want you
to know I support the measures to improve the energy efficiency
and assist those low income families that are facing high
energy bills in this country, but in addition to addressing the
symptoms of our energy crisis, high energy bills, I am firmly
committed to the belief that we must commit ourselves to
solving the underlying crisis.
I stand certainly ready to work with you to move an energy
bill to the full Senate for consideration, hopefully prior to
the August recess, and I hope that we can collectively impress
upon the Majority Leader the need to schedule time for the
Senate floor. I would hope that we could have consideration for
a comprehensive measure no later than the beginning of the week
of July 30.
I recognize there are other priorities as well. In any
event, we will seek to make sure that any energy bill that
leaves this committee will have a balanced approach to our
energy security needs. Obviously, that includes increased
supply of conventional fuels, energy efficiency, using more
technology, and expanded use of alternative fuels and
renewables.
One of the things that I am rather interested in--evidently
the second panel is going to focus on the debate for standards
for central air conditioners and heat pumps. What has been lost
in the debate is that, as I understand, the new Department of
Energy standard will still increase energy efficiency by about
20 percent, which certainly is encouraging. The administration
has proposed a 12-SEER standard, standing for the seasonal
energy efficiency ratio. Secretary Abraham recently noted that
the new air conditioning standard will save enough electricity
by 2030 to light all U.S. homes for more than 2 years. I do not
know how much Alaska is going to contribute to that, but
nevertheless, we will survive. We will make up for it some
other way, perhaps chopping wood, but at the same time the 12-
SEER standard will be affordable for consumers, provide a wide
array of manufacturers' models to meet consumer needs.
The same is not true of the 30-percent increase proposed by
the former administration's 13 SEER standard. The 13-SEER
standard would have eliminated 84 percent of new air
conditioner models and 66 percent of new heat pump models,
which is a rather interesting comparison. In many instances,
the installation of larger indoor coils required to meet the
13-SEER standard would increase cost to consumers by many
hundreds of thousands of dollars.
I gather that the Justice Department found that the 13-SEER
standard would impose disproportionate impacts on low income
families, the same low income families that we are trying to
help with the increased LIHEAP and weatherization funding. It
would also drive many small manufacturers out of business,
reduce consumer choice and competition. Perhaps this is just a
plan to create additional demand for even more increases in
LIHEAP and weatherization funding, but I do not want to make
that inference. I will just refer to it.
Clearly, the administration made the right decision to opt
for a 12-SEER standard, reasonable cost-effectiveness with real
benefits. I hope we can move beyond the inconsistencies on the
issue designed perhaps for finger-pointing--and perhaps get on
with the business of making the right choices for the American
people: choices of balanced economic and environmental
concerns, and our need for energy to grow in the next decade.
I hope that we can act quickly on a comprehensive package,
and I would certainly like, again, to reiterate since 1973 the
economy has grown 126 percent but our energy has only grown 30
percent. Clearly, advanced technology, American can-do spirit
and ingenuity, have helped us to make great advances in
efficiency, but even with these improvements we can expect that
over the next 20 years, oil consumption will increase by one-
third. There is no other way to move America. Electricity
demand will increase by 45 percent, and natural gas consumption
will increase by 50 percent.
Incidentally, I would like to thank my colleague, who was a
floor manager late last night when Mr. Griles was voted by a
voice vote, and there happened to be three Republicans there
and two Democrats, and so it was a close vote, but he is out,
and he is confirmed, so we are very pleased. I think it has
been 53 days, but nevertheless perseverance does pay off, if
you have got enough perseverance.
In any event, I was propounding here on some realizations
that oil consumption is going to increase by a third,
electricity demand will increase by 45 percent, natural gas
consumption will increase by 50 percent.
Now, these are real figures from real people who I think
call it as it is. Efficiency and conservation are crucial parts
of a balanced, comprehensive energy plan. They are cornerstones
of a bipartisan plan that we have worked on as well as the
President's plan, but many believe efficiency is the only
answer to future energy demand. As these numbers indicate, it
is clearly not enough to rely on efficiency alone to power our
economic progress. Efforts to increase domestic energy
production must go hand-in-hand with efficiency and
conservation in order to turn this crisis around.
I would conclude with two thoughts. The standard of living
in this country is based on the assumption that we are going to
have an affordable and plentiful supply of energy. If we do
not, that standard of living is going to change, and the
economy is going to change, and our national security interests
are going to change.
I am very pleased to see Hon. David Garman here. I have a
list of questions for him that were submitted by Alan
Steinbeck, and so when we get through with your presentation
this morning, then you can expect to have Alan--I guess it is
called getting even, but in any event, welcome.
[Laughter.]
The Chairman. Secretary Garman, why don't you go right
ahead, please.
STATEMENT OF DAVID K. GARMAN, ASSISTANT SECRETARY, ENERGY
EFFICIENCY AND RENEWABLE ENERGY, DEPARTMENT OF ENERGY
Mr. Garman. Thank you, Mr. Chairman. Mr. Chairman and
members of the committee, thank you for the opportunity to
testify on a variety of legislative measures related to the
improvement of energy efficiency. Energy efficiency is a very
important part of the administration's overall energy policy.
The national energy policy document released May 16
dedicates an entire chapter to the subject of energy
efficiency, and another entire chapter to the importance of
renewable energy. Moreover, 54 of the national energy policy's
105 recommendations relate directly or indirectly to the
importance of increasing our energy efficiency or increasing
our use of clean, renewable energy.
I have a chart or two that I would like to use to
illustrate the manner in which we intend to approach our goal
of increasing system efficiency. The first chart looks at
electricity flow, which represents about a third of our total
energy use. As the energy inputs on the left flow toward end
uses on the right, you can see graphically how efficiency loss
is resulting from conversion, transmission, and distribution of
energy.
If we were to increase end-use efficiency--the next chart,
please--by 20 percent, therefore saving the equivalent of 2.1
quads of end-use energy, we would actually save 6.7 quads of
energy input at the powerplant due to conversion losses in
distribution and generation. This illustrates why increasing
end-use efficiency is very important, but it is also why a
focus on end use should not constitute the sum total of our
efforts.
If we can employ technologies that increase end use
efficiency and supply efficiency by 20 percent, then we could
save 14.7 quads of energy inputs resulting in lower cost and
fewer emissions. That is something, Mr. Chairman, your
committee clearly recognizes, as evidenced by your hearings
today and those scheduled for next week. Although today's focus
is on end-use efficiency, next week's hearing will look beyond
that to distributed generation and other technologies that can
make our overall efficiency much better.
I commend you for this approach, which is in agreement with
the approach embodied in the President's national energy
policy. We are launching a new analytical effort at the
Department of Energy to better understand and track trends in
energy intensity. Surprisingly, while DOE has done this in the
past on a one-time basis, it has never done this in a sustained
and systematic manner.
We envision that this effort can contribute to national
goals for energy efficiency improvements, and the sorts of
improvements that could be made possible through technology and
cooperative efforts with industry, State, consumers, local
governments, utilities, and others. We are doing this, again,
in direct response to the recommendation in the national energy
policy that we make energy efficiency a national priority.
With respect to the specific provisions in legislation
before the committee today, I would note that they are all
well-intentioned, and with some modifications the
administration is likely to be in a position to support many of
them if they are part of a balanced, comprehensive approach
that also addresses supply and infrastructure issues contained
in the national energy policy document. My written testimony
goes into specific detail on the measures before the committee,
but in the small time I have got I would like to highlight just
a few.
First of all, weatherization. The President has proposed
$1.4 billion in additional funding for weatherization over the
next 10 years. We urge that Congress adopt this increase, and
appreciate the efforts of several on this committee who are
working to ensure that the President's budget request in this
area are fully met.
With respect to the State energy program, the President's
budget request for the current fiscal year was $38 million,
equal to the 2001 level. We are pleased that both the House and
Senate committees fully funded this request in their Interior
appropriations bills, and share the view embodied in
legislation proposed by both the chairman and the ranking
member that we can do more in this area.
On the subject of energy-efficient schools, we believe
there are substantial opportunities in increasing energy
efficiency in schools, and we are working through our existing
programs such as the rebuild America energy-smart schools
campaign and a host of other works performed by States under
the State energy program. We would like to work with you as you
consider additional steps.
With respect to the Federal energy management program, or
FEMP, we recognize that the Federal Government is the country's
largest energy user, spending almost $8 billion annually on
energy costs. We operate 500,000 facilities and almost 600,000
vehicles worldwide. President Bush in a May 3 directive to
Federal agencies asked that immediate steps be taken to reduce
energy use, particularly peak demand in supply-constrained
areas such as California.
Our efforts to promote energy efficiency in the Federal
realm, however, will not be a short-term effort driven only by
current concerns about energy supply. Instead, we would like to
work with you to build a new culture of energy savings that
pervades the way the Federal Government procures buildings,
appliances, vehicles, and all of the other items we purchase.
I will stop with that overview and submit to any questions
you might have. Thank you, Mr. Chairman.
[The prepared statement of Mr. Garman follows:]
Prepared Statement of David K. Garman, Assistant Secretary, Energy
Efficiency and Renewable Energy, Department of Energy
Mr. Chairman and members of the Committee, thank you for this
opportunity to testify on S. 352; Title XIII of S. 597; Sections 602-
606 of S. 388; S. 95; and S.J. Res. 15. These measures, of course, all
relate to the improvement of energy efficiency.
Energy efficiency is an important part of the Administration's
overall energy policy. The National Energy Policy (NEP) document
released May 16 dedicates an entire chapter to energy efficiency, and
another chapter to the subject of renewable energy. Moreover, 54 of the
NEP's 105 recommendations relate directly or indirectly to the
importance of increasing our energy efficiency or increasing our use of
clean, renewable energy.
When thinking about efficiency, it is useful to consider the nature
of our energy systems. The charts on display (see attached) * look at
electricity flow, which represents about a third of our total energy
use. If we were to increase end-use efficiency by 20%, thereby saving
the equivalent of 2.1 quadrillion BTUs (quads) of end-use energy, we
would actually save 6.7 quads of energy inputs at the power plant due
to conversion losses in generation and the losses associated with
transmission and distribution. This illustrates why increasing end-use
efficiency is very important . . . but why it should not constitute the
sum total of our efforts. If we can employ technologies that increase
end-use efficiency and supply efficiency by 20%, then we could save
14.7 quads of energy inputs, resulting in lower costs and fewer
emissions.
---------------------------------------------------------------------------
* The charts have been retained in committee files.
---------------------------------------------------------------------------
This is something that your Committee recognizes, Mr. Chairman, as
evidenced by your hearings today and those scheduled for next week.
Although today's focus is on achieving end-use efficiency, next week
the hearings will look beyond end-use savings to the removal of
barriers to distributed generation and other technologies that can help
us make our overall energy generation, transmission and distribution
systems more efficient. I commend you for this approach, which is in
close agreement with the approach embodied in the President's National
Energy Policy.
Today, I want to take this opportunity to announce that we are
launching a new analytical effort at the Department of Energy to better
understand and track trends in national energy intensity. Surprisingly,
while DOE has done this on a one-time basis, it has never done this in
a sustained and systematic manner. We envision that this effort can
eventually contribute to national goals for energy efficiency
improvements made possible through technological advances and
cooperative efforts with industry, state and local governments,
consumers, utilities, and others. We are doing this in direct response
to the recommendation in the National Energy Policy that energy
efficiency be pursued as a national priority.
With respect to the specific provisions in legislation before the
Committee today, I would note that they are all well intentioned, and
with some modifications, the Administration is likely to be in a
position to support many of them if they are part of a balanced,
comprehensive approach that also addresses supply and infrastructure
issues contained in the National Energy Policy document.
However, I must add an important note of caution. It is, of course,
relatively easy to authorize new funding, but relatively difficult to
appropriate it. The most generous of the bills before us would
authorize $500 million annually for weatherization, $230 million
annually for energy efficient schools, $125 million annually for State
Energy Programs, and would require an expenditure of roughly $180
million in appropriated funds to create an Energy Bank to finance
energy savings measures in federal agencies. That adds up to well above
a billion dollars. The comparable level of appropriated funding in my
office's 2001 budget was $153 million for weatherization and $38
million for State Energy Programs, or about $191 million. (I am not
including the $3.4 billion that would be authorized under one of the
bills for Low Income Home Energy Assistance Program, as that is not one
of DOE's programs.) As we work together in the weeks and months ahead
to determine the appropriate authorization levels for these programs, I
urge that there be some linkage between the authorized levels and a
realistic expectation of the eventual appropriations that will follow.
We also urge Congress to adopt the President's proposal to use $1.2b of
ANWR bonus bids to fund R&D projects on solar power, wind energy,
biomass power and fuels, geothermal energy and other alternative energy
technologies.
WEATHERIZATION ASSISTANCE
The Weatherization Assistance Program provides services to eligible
low-income persons, with emphasis on elderly persons, persons with
disabilities and children. States (including the District of Columbia)
voluntarily participate. Up to an average of $2500 per dwelling unit
may be spent for purchase and installation of eligible weatherization
materials, and energy audits are used to ensure that the measures
employed in a given home are cost-effective.
The Weatherization Assistance Program has reduced the heating and
cooling costs of low-income households by weatherizing more than 5
million homes since the program's inception in 1976. The President has
proposed $1.4 billion in additional funding for weatherization over the
next ten years. The President's budget for FY 2002 proposed a $120
million increase from $153 million to $273 million, which will
weatherize 123,000 homes--an increase of at least 48,000 homes over the
number weatherized in the prior fiscal year. In its markup of the
Interior and Related Agencies appropriations bill, the Senate
Appropriations Committee, has provided only half the President's
requested increase $60 million to bring the program to a level of $213
million. We hope that this shortfall will be addressed on the Floor.
We support an authorization level that accommodates the President's
requests for increases in this program. Our recommended ramp-up of the
program anticipates spending levels for the program as outlined in the
table below.
($ in millions)
----------------------------------------------------------------------------------------------------------------
Fiscal year WAP base Initiative WAP total
----------------------------------------------------------------------------------------------------------------
2002.............................................................. $153 $120.0 $273.0
2003.............................................................. $153 $124.1 $277.1
2004.............................................................. $153 $128.2 $281.2
2005.............................................................. $153 $132.2 $285.6
2006.............................................................. $153 $137.1 $290.1
2007.............................................................. $153 $141.7 $294.7
2008.............................................................. $153 $146.5 $299.5
2009.............................................................. $153 $151.4 $304.4
2010.............................................................. $153 $156.6 $309.6
2011.............................................................. $153 $161.8 $314.8
----------------------------------------------------------------------------------------------------------------
10 Year Total................................................. $1,530 $1,400 $2,930
----------------------------------------------------------------------------------------------------------------
Section 422 of the Energy Policy and Conservation Act statute
authorizes ``sums as may be necessary'' for the Weatherization
Assistance Program. Section 3 of S. 352 (Bingaman) would increase the
weatherization program authorization to $310 million for each of the
fiscal years through 2005.
Section 603 of S. 389 (Murkowski) would also increase the program
authorization levels to $250 million in FY 2002; ramping up to $500
million in FY 2005. We note that the authorization levels in S. 389 for
FY 2002 would fall $23 million short of the President's request. Unless
modified, we would be unable to support this provision. Section 603 of
S. 389 would also expand the eligibility of low-income households from
125% of the poverty level to 150% of the poverty level. We are not
certain that this change is needed since states may, under current law,
elect to use LIHEAP eligibility criteria in administering the DOE
weatherization program. The LIHEAP eligibility criteria gives states
the option of using the 150% poverty level figure or a figure of 60% of
a state's median income as a basis of eligibility.
STATE ENERGY PROGRAM
States voluntarily participate in the State Energy Program (SEP) by
submitting grant applications with energy plans to DOE. States are
required to contribute 20% matching contributions, and SEP funds are
used to finance a variety of projects, including building codes
updates, installing eligible energy conservation measures, encouraging
the use of clean fuel vehicles, and developing energy emergency plans.
The President's budget request for FY 2002 for State Energy Program
funding was $38 million, equal to the FY 2001 level. We are pleased
that the Senate Committee fully funded his request in the Interior
appropriations bill.
Section 3 of S. 352 (Bingaman) would change the authorization
levels for State Energy Conservation Grants from ``such sums as may be
necessary'' to $75 million annually for fiscal years 2001-2005.
Section 604 of S. 389 (Murkowski) would also increase authorization
levels for State Energy Conservation Grants compared to past practice
in Congressional appropriations. S. 389 also appears to change the
State Plan approval cycle from once a year to once every three years, a
change that would streamline program administration at both the Federal
and State levels. Finally, the Murkowski provision would appear to
establish a goal of 25% improvement in a state's energy efficiency by
2010 (against a 1990 baseline).
This is probably an appropriate place to comment on the use of
numerical goals in statutory language. Goals that are clearly defined
and measurable can be quite useful. In the case of energy savings goals
expressed under the Federal Energy Management Program (FEMP), the goals
are expressed in terms of energy use per square foot of building space.
This is a goal we can measure, understand, and pursue.
Unfortunately, the existing goal in section 364 of the Energy
Policy and Conservation Act that S. 389 would amend has never been
clearly defined. Is it per capita energy intensity? Is it energy use
per unit of economic production? Should the goal be attributable to the
actions of a State Energy Program, or should it also measure energy
efficiency gains that occur as a consequence of market forces or
structural changes in the economy? If the intent is to establish a goal
that State Energy Programs can attribute to their activities, we can
safely predict that you will hear the view from Governors and State
Energy Officials that a 25% goal is unrealistic without substantial
increases in appropriated funding.
I cannot tell you today what we believe the funding levels should
be in subsequent fiscal years, as this is a component of both our
ongoing 2003 budget formulation and a top-to-bottom strategic funding
and performance review that is now underway for each of the 31 programs
in my office.
ENERGY EFFICIENT SCHOOLS
Section 602 of the S. 389 (Murkowski) establishes an Energy
Efficient Schools Program in the Department of Energy. Section 1302 of
S. 597 (Bingaman) establishes a program within the Department of
Education to promote energy efficient schools.
My office has several existing programs that speak to this issue.
Through the ``Rebuild America'' Energy Smart Schools campaign, my
office provides technical assistance for design and financing as well
as conservation technology. We also do work in areas of alternative
fuel school transportation and a number of supply side management
strategies such as micro-cogeneration, combined heat and power,
renewable energy and alternative fuel sources. A great deal of what we
do is applicable to schools, about $2-3 million worth of our work is
directed specifically to schools, not including school-related
expenditures under the State Energy Program.
State Energy Programs can already use existing resources to promote
energy efficient schools, and of course those efforts must be cost-
shared. We view cost sharing with our state partners as a good way to
leverage federal resources and ensure that they are directed where they
will do the most good. Therefore, it is our preference to use the
existing State Energy Programs to promote energy-efficient schools
rather than authorizing a new program whose chances of receiving
significant funding from the appropriators are unclear. As funds are
available, they should be directed to existing programs that can
achieve the desired goals we share.
If legislation is deemed necessary to provide greater federal
emphasis on promoting energy-efficient schools, we recommend that the
Department of Energy lead the effort in concert with the State Energy
Offices. We do not believe that a Department of Education administered
grant program as proposed in S. 597 would fully leverage the advantages
that could be achieved through coordination with our existing energy
efficiency programs and the ongoing efforts of the State Energy
Offices.
FEDERAL ENERGY MANAGEMENT PROGRAM (FEMP) PROVISIONS
The Federal Government is the country's largest energy user,
spending almost $8 billion annually on energy costs. We operate over
500,000 facilities and almost 600,000 vehicles worldwide. The
President's National Energy Plan calls on Federal agencies to conserve
energy and to reduce energy use during peak hours in areas where
outages are likely. Since 1985, the federal government as a whole
reduced energy use in its buildings by more than 20 percent in 1999
thereby achieving its year 2000 goal one year early. Our most recent
figures for FY 2000 places our reduction at 22% over the 1985 baseline.
This represents a $2.2 billion energy savings, expressed in year 2000
dollars.
President Bush, in a May 3rd directive to Federal Agencies, asked
that immediate steps be taken to reduce energy use, particularly peak
demand in supply-constrained areas such as California. Agencies
achieved some important results, including participation in a load
reduction exercise on May 24th. During that exercise, 114 Federal
facilities, representing 20 different agencies and roughly 80% of the
federal load in California, demonstrated reductions in peak demand
approaching 10%. To reduce overall demand in California, we have
dispatched teams to 25 of the larger sites in California to identify
the immediate no-cost/low cost opportunities for reducing demand. These
teams are at work now, and we have asked them to report by July 31.
These efforts are important for practical reasons. But they are
also important for symbolic ones. We can tell America it must use
energy more efficiently . . . but if we fail to lead by example, we
undermine our message.
It is our hope that energy efficiency in the federal realm will not
be a short-term effort driven by current concerns about energy supply.
Instead, we would like to work with you to build a new culture of
energy savings that pervades the way that the Federal Government
procures buildings, appliances, vehicles, and all of the other items we
purchase.
Whenever the federal government builds a new building, we should
strive to design and build it to achieve the ``Energy Star''
certification. When existing federal buildings are modernized, we
should incorporate the energy and water conservation efforts that are
cost effective over the life cycle of the facility.
Recently in Kansas City, DOE hosted a Federal Energy Management
conference where hundreds of federal procurement officials, building
engineers, and program managers gathered to learn the latest approaches
to saving energy and money for the taxpayer. We are working to develop
that new culture of energy savings among federal government procurement
and buildings officials because it makes sense for the taxpayer and it
is good for the environment. As an additional benefit, we also find
that our workers prefer to work in a building that incorporates the
latest energy savings technologies.
One of the keys to successful implementation of federal energy
savings measures is through the use of Energy Savings Performance
Contracts and Utility Energy Savings Contracts. These financed
approaches are being employed to finance energy savings measures
without using appropriated dollars. To date, Federal agencies have
already leveraged more than $1.3 billion in private sector investment
for projects that replace inefficient building systems with state-of-
the-art equipment.
The Federal government can also make a difference by making smart
purchasing decisions. The Federal government spends more than $10
billion each year on energy-using equipment. The joint DOE/EPA ENERGY
STAR program identifies energy efficient products so that
all consumers, including Federal purchasers, can make informed
decisions that save energy and money.
So we applaud the effort to address federal energy use in section 4
of S. 352 (Bingaman) and sections 605 and 606 of S. 389 (Murkowski),
and would like to work with you to fashion a workable approach in this
area. With respect to specific comments, I would offer the following:
Section 4 of S. 352 (Bingaman) would require federal agencies to
undertake a comprehensive review of all practicable measures to
conserve energy, water, or employ renewable energy resources and to
implement measures to achieve 50% of the potential savings within 180
days. Candidly, a comprehensive review of all practicable measures that
we could employ in 500,000 federal buildings, followed by the
implementation of steps to achieve 50% of identified potential savings,
could simply not be done in 180 days. Moreover, sufficient funds have
not been provided for this purpose. Our challenge is to change the
acquisition planning efforts, and we believe that will be a long-term
effort.
S. 389 (Murkowski) would require agencies to reduce energy use per
gross square foot by 30% by 2010 and 50% by 2020 relative to a 1990
baseline. The current goals, contained in the National Energy
Conservation and Production Act, the Energy Policy Act, and Executive
Order 13123 are to reduce energy use per gross square foot by 20% in
2000, 30% by 2005, and 35% by 2010 relative to a 1985 baseline. S. 389
represents an acceleration of these targets and a shifting of the
baseline. Thus, it is a very ambitious goal. We believe we might be
able to support such a goal were it contained in comprehensive
legislation that also addresses the supply and infrastructure issues
identified in the National Energy Policy document.
As mentioned earlier, Energy Savings Performance Contracts (ESPCs)
are an important tool federal managers can use to achieve their energy
savings goals. S. 389 (Murkowski) would extend authority for ESPCs five
years, and S. 352 (Bingaman) would repeal the sunset provision
entirely. At this time, we can support a five year extension of
existing authority for ESPC's to allow us to further quantify the
benefits they provide.
S. 389 (Murkowski) would allow utility contracts, which are
preferred -source energy savings contracts entered into between federal
facilities and the utilities that serve them, to increase from a
maximum 10-year term to a maximum 25-year term. This is in line with
the 25-year terms allowed ESPCs. However, 25-year ESPC contracts
contain performance guarantees as well as provisions to ensure
measurement and verification of energy savings. We would like to
continue to work with you to ensure that any expansion of utility
contracting includes assurances of guaranteed energy savings.
S. 352 (Bingaman) would allow ESPCs to be used for water
conservation measures and for replacement facilities. The
Administration has concerns regarding the use of ESPCs for replacement
facilities. However, provided that it is included in comprehensive
legislation that also addresses the supply and infrastructure issues
identified in the Administration's National Energy Policy, we could
support the use of ESPCs to conserve water, although we have some
technical suggestions that we would like to work out with your staff.
ENERGY BANK PROVISIONS
Both S. 95 (Kohl) and section 1301 of S. 597 (Bingaman) would
create an ``energy bank'' to help in the funding of federal energy
management projects. This is a well-intentioned effort, but I am
concerned about the practical applications of this particular language.
particularly when we haven't yet fully taken full advantage of the
opportunities afforded by ESPCs and ``super ESPCs.''
S. 95 and section 1301 of S. 597 would capitalize the energy bank
by collecting 5% of the utility budgets of federal agencies, or roughly
$180 million per year. Sharply higher energy prices have already
stressed the operations and management (O&M) budgets of many federal
agencies in the near term. Requiring agencies to capitalize a new
energy bank in the near term, during these times of high energy prices,
even if they might produce savings over the long term, would create
operational hardships and impair the ability of federal agencies to
fulfill their missions.
Moreover, the language of S. 95 and section 1301 of S. 597 is
directed at projects with relatively short payback periods of three and
seven years. Thus, the Energy Bank projects might ``cherry pick'' the
energy-savings opportunities and actually result in fewer comprehensive
energy savings projects.
We need to make sure we take full advantage of the opportunities
afforded by ESPCs and Super ESPCs before we experiment with a new tool
that could inadvertently result in fewer energy savings projects
overall.
AIR CONDITIONING STANDARD
Finally, Mr. Chairman, I will comment on Senate Joint Resolution 15
(Boxer), a resolution of disapproval related to energy efficiency
standards for residential air conditioners and heat pumps.
The purpose of S.J. Res. 15 is to force the Department of Energy to
adopt new residential air conditioning and heat pump efficiency
standards at the 13 SEER (Seasonal Energy Efficiency Ratio) performance
level . . . a performance level that represents a 30% improvement over
the current standard. We oppose this resolution.
The current efficiency standard is 10 SEER for split air
conditioning and heat pump systems and 9.7 SEER for single-package
systems. Today, 78% of air conditioning and heat pump sales are at the
10 SEER performance level. Many consumers choose to purchase higher-
performing air conditioners and heat pumps, and in some areas of the
country this makes very good sense.
However, as a minimum, national standard, to be in effect for
virtually all central air conditioners and heat pumps in all areas of
the country, the Department of Energy intends to propose a 12 SEER
performance level that represents a 20% improvement over the current
standard.
It should be noted that the current Administration reviewed and
adopted, without change, efficiency standards covering washing
machines, water heaters, and commercial heating and cooling systems.
Only in the case of residential air conditioners and heat pumps are we
proposing any variation from the prior Administration.
We do not take this action lightly. In the current political
atmosphere, the convenient and popular approach would have been to
simply accept the 13 SEER standard. Our forthcoming supplemental notice
of proposal will explain our reasons for withdrawing the 13 SEER
standard and for proposing a 12 SEER standard as the maximum
technologically feasible level that is economically justified.
With that, Mr. Chairman, let me say that I look forward to working
with you and your staff on legislation to promote energy efficiency in
the weeks and months ahead. I am pleased to answer any questions the
Committee may have.
The Chairman. Well, thank you, and thanks for your
relatively brief summary of things. We encourage that from all
witnesses.
Let me just ask first, one of the statements contained in
your testimony that you repeated here gives me a little
concern. It says that the administration is prepared to support
more ambitious goals for the Federal Government related to
energy use, and then you add this qualifier of saying, if it is
contained in comprehensive legislation that also addresses
supply and infrastructure issues.
Now, we intend to do all that, but it sounds as though you
think it is sort of, you will agree to go along with
improvements in energy efficiency if we agree to do these other
things that you want done, otherwise you will not. Am I reading
something in there that is not intended to be there, I hope?
Mr. Garman. No, sir, not precisely. What we are trying to
stress is the importance of a balanced approach. It is because
of the nature of the energy debate.
I think it would be easy for us to go down the road, work
together in this effort--candidly, some of the supply issues
are not as politically popular as some of the demand issues,
and if we were to get down to the end of the road where we were
at a Rose Garden signing ceremony on an energy bill, and that
bill was not a balanced bill, then we would have, I think,
failed in our effort to really try to deliver a balanced
package, and it might be, frankly, misleading to members of the
public if they thought we had passed a bill that would
accomplish goals and deliver us from our supply constraints
when, in fact, it would not.
The Chairman. Well, I certainly agree with your objective
of getting a balanced, comprehensive effort, and including
efforts to increase supply, as well as improve efficiency.
I just do not want us to be into a quid pro quo kind of a
situation where we are not willing to agree to something on the
efficiency side unless someone else will agree to something we
want in a way of opening ANWR, or something to that effect. I
think that would be very destructive of an effort toward
getting a comprehensive bill, and I just wanted to flag that.
The Federal Energy Management Program you refer to in the
budget that we got, recommended fairly severe cuts in that.
What is the position of the administration at this point?
Frankly, I am concerned. The bill we passed in the Senate
yesterday did not have the funding it should have had for that.
I cosponsored a bill with Senator Cantwell, an amendment
with her that was intended to address that, and we were not
able to get the support we needed to go ahead, but what is your
view on the proper level of funding to support the Federal
Energy Management Program?
Mr. Garman. Let me address that also, in the context of
making an overarching observation about the budget and the
process we have gone through in both energy efficiency and
renewable energy. Of course, the new administration had to
submit a budget covering these items on or about February 27 or
so without the benefit of the guidance that was contained in
the national energy policy document. That document, of course,
came out May 16.
At the same time, the document asked us to undertake a
strategic review of all of our programs, including FEMP,
beginning with a pretty significant public outreach effort at
the outset. We learned during that process, and we heard from
stakeholders and the public about the importance of some of
these programs. We also internally were beginning our strategic
review.
What you have seen in statements of administration position
about both the Energy and Water Development and Interior
appropriations document that contain these programs is that we
believe that the increases that Congress has provided in these
programs over and above what we asked for indeed may be
consistent with the President's objectives, so we have watched
and interacted with Congress as it has increased funding for
some of these programs, including FEMP, over what we had asked
for, and we believe that these are consistent with
administration objectives.
The Chairman. So you do not have a problem with the
increases that Congress has adopted so far.
Mr. Garman. As the overall number, no. We would like to
reserve the right, if you will, to quibble with you on issues
of priority and funding priorities within that overarching
level, but that is a correct characterization, yes, sir.
The Chairman. With regard to this residential air
conditioning rule, that was one of the first items related to
energy efficiency that the administration dealt with, or at
least one of the first ones I became aware of, and I was
concerned. I believe I spoke to Secretary Abraham about this
and urged that they stick with the more stringent rule that the
Clinton administration had adopted, rather than backing off of
that.
The decision was made by this administration to back off
and require less of an improvement in residential air
conditioning than the previous administration had intended to
require. How do you explain that? I mean, particularly at a
time when we are in the middle of a hot summer, and we are told
that the biggest drain, or the biggest burden we are carrying
in trying to keep the lights on in a place like California is
the electricity being used in air conditioners. Why would we
not want the highest possible level of efficiency in air
conditioners?
Mr. Garman. The quick answer, and I will start with that,
is that the law prescribes us to look at a number of factors.
Energy efficiency is one of them, but it is not the only
factor, nor is it the absolute factor.
I think it is important to start with the recognition that
the incoming administration reviewed and adopted without change
efficiency standards covering washing machines, covering water
heaters, and covering commercial heating and cooling systems.
Only in the case of residential air conditioners and heat
pumps are we proposing any variation from the prior
administration, and the reason we did that is, we showed
through our analysis, and in fact it was the same analysis used
in the prior administration, that the 13-SEER standard would
represent an unreasonable burden on consumers, a majority of
the consumers, under the 13-SEER, under our analysis would
suffer increased life cycle cost. In other words, they would
not get a payback for the up-front investment for the higher
cost of the equipment.
Based on that, and also based on concerns expressed by the
Department of Justice, and borne up by our own analysis about
the impacts on the industry, the 13-SEER would have the effect
of accelerating the consolidation of the industry, already an
industry where 97 percent of the business is controlled by
seven large manufacturers. We do not think the consolidation of
the industry over the long-term would be good for competition,
good for consumers, or good for technological advancements
leading to energy efficiency.
So that is just, I guess an overview of some of our
thinking that is leading us to propose that 12 is probably the
correct number.
The Chairman. Now, what is the status? You have not yet
promulgated a rule at 12, is that right?
Mr. Garman. That is correct.
The Chairman. You are still looking at it?
Mr. Garman. Yes, sir.
The Chairman. I did submit some suggestions to Secretary
Abraham and some figures that I would like also to get to you,
which indicate to us that the decision was made by your
administration here to back off of the more stringent standard
that was based on the average cost of electricity in 1996, and
that if you look instead at the cost of electricity at peak
periods, that the standard that was adopted or agreed to by the
previous administration is clearly a better choice.
If you could look at those figures and maybe get back to
us, and give us some response to that, because I do not think
it is just a question of how good is good enough. I think that
there are some substantial savings overall that can be realized
if we were to stick with the more stringent standard.
Mr. Garman. I can, in fact, in a broad-brush way address
some of those issues now, if you care to, or we can do it
later, whatever your preference is.
The Chairman. All right. Well, I am told my time has
expired. Let me ask Senator Murkowski to go ahead with his
questions at this point. Maybe we will come back.
Senator Murkowski. Thank you, Senator. I am curious, in
your chart relative to energy loss, you indicate 33 quads of
input, and generating loss of 22, is there technology available
to reduce the tremendous loss associated with this, and why are
we not making more progress there?
Mr. Garman. Part of it has to do with just the nature of
the way that our electricity system evolved. We have a
centralized grid system, with centralized plants, and many of
those plants, say, a coal plant, will have a conversion
efficiency--in other words, convert the energy content of the
coal, converting that to electricity--and lose two-thirds of
the energy potential in that process.
That is the large arrow, the conversion loss, as you see,
going off at the top. You have those kinds of conversion
efficiencies in many plants. A typical coal plant will have a
conversion efficiency of around 35 percent. When you get into
combined cycle natural gas, you start to approach 60 percent,
so you are doing better there. When you start to look at
combined heat and power, and distributed generation, you start
to get towards 70 or more percent.
Senator Murkowski. What is nuclear?
Mr. Garman. Nuclear, I do not have a precise number on
that, but it still suffers a conversion deficiency issue, but
nuclear is a little different in that one of the things you are
concerned about in the efficiency loss is the burning of fossil
fuels, and we are less concerned about efficiency losses in the
nuclear context, because it is emission-free.
Senator Murkowski. I would like to pick up on a point
Senator Bingaman made relative to your generalization of the
effort to work towards a comprehensive bill, and it is
certainly my position, and I think it reflects on the
responsibility of this committee to not make this mistake we
made in 1992, not that this committee made the mistake, but the
Senate basically made the mistake, and I am going to refer to
this chart behind me which Joe is going to hold up, and Senator
Bingaman has seen it time and time again, but it reflects
reality.
And a little history relative to what we did in 1992, when
Senator Bennett Johnson was chairman of the committee, we
passed efforts to increase domestic production, reduce
dependence on foreign oil, expedite infrastructure, develop
alternatives, encourage renewables, promote conservation, and
increase LIHEAP and weatherization, and I think we funded about
$6 billion for renewables and alternatives.
These all passed in this committee, but this is what we got
on the floor: We got a little bit of funding for renewables and
alternative fuels, energy efficiency, and LIHEAP, but we did
not reflect the realities associated with why things are
different now, and the next chart which Joe will run over and
get will show you why things are different.
The reason things are different this time is, we did not
act in 1992 from the standpoint of the responsibility of the
Congress, and now our foreign oil dependence is up 56 percent,
and it was, what, 37 percent in 1973, when we had the Arab oil
embargo. The Department of Energy says we will be in the low
sixties by the year 2010. What does that mean to the national
security of this country?
Natural gas prices have soared as high as $10. We have seen
no new nuclear plants in 10 years or more, no new gasoline
refineries in nearly 20 years, no new coal-fired plants since
1995, and now we are faced with the reality that our
transmission capacity, whether it be gas or electric, is
inadequate.
And when we talk about how we are going to correct this,
and you talk about a comprehensive bill, and we talk about the
merits of ANWR, instead of just dismissing it, which was
generalized yesterday, or suggesting that, well, we are not
going to do it if you have this, there is as much justification
for encouraging the merits of what ANWR can contribute as
opposed to what ANWR offers as a distraction from the
standpoint of the environmental community.
So I hope as we develop a comprehensive bill we can
recognize the objective here, and the objective is a balanced,
comprehensive bill that provides relief for a number of the
shortages associated with the fact that we do have a crisis,
and we are going to have to do what is good for America, and
good for Americans, not necessarily for one segment of the
environmental community that has jumped on this issue as a
major source of funding and a major source of membership.
As you know, I feel very strongly about that, and we are
going to be pursuing that in this committee, and we are going
to be discussing the merits, as opposed to superficial
discussion on it.
I want to also reflect on another question relative to the
anticipated proceeds of the bonus bid associated with the sale
of Federal leases in ANWR. I think the estimate is somewhere in
the area of $1.2 billion, and the administration's proposal is
to use those funds for research and development for renewables,
alternatives and so forth.
Now, in your opinion, using these funds for renewables,
efficiencies, alternatives, you know, we all talk about energy
in general, but we really do not separate energy. We have two
types of energy. We have energy that develops electric
generation, and that is nuclear, it is coal, it is hydro, but
America and the world moves on oil, and unfortunately we do not
have much relief in the foreseeable future. We have fuel cells,
and things coming on, but the reality indicates that hydrogen
is a way off.
We had in my office the other day a little hydrogen
exhibit, and the uniqueness of it was that it worked, but it
worked as a consequence of an electric fan being plugged in, so
if you did not have the electric fan plugged in I am not sure
what would happen. I suppose we would be looking at a
stationary hydrogen plant.
But can you tell us from the standpoint of any significant
replacement for oil what we might look towards, and is there
any estimate of a time sequence where, say, we could look to 15
to 20, 25 percent of our transportation being dependent on
something other than oil, or kerosene, or derivatives, that
move our ships and our planes and our trucks?
Mr. Garman. Well, the way we are approaching this problem
is looking at the oil replacement issue as requiring really an
R&D portfolio of both short-term and long-term technologies.
Oil is a tricky problem in part because of the infrastructure.
Clearly, there are things we can do in the short term with
respect to hybrid gasoline-electric cars, and some other
technologies that can serve as a bridge to fuel cells and the
eventual hydrogen, so-called hydrogen economy.
There are also some things we could do in the area of
bioenergy with biologically based fuels such as ethanol, or
derivatives of ethanol that might form a basis for a
transportation fuel, again in the near term, as we keep our eye
on the long-term prospective, which is really hydrogen over the
long term.
The difficult part, of course, is going to be cost. We
estimate that a fuel cell in a car, to compete with the
internal combustion engine, is to going to have to come down to
the price of around $50 to $100 per kilowatt. Right now those
costs are in the neighborhood of $3,000 or $4,000 per kilowatt,
and so our R&D effort is driven at bringing down those costs to
make that technology more affordable and bring it into the
marketplace, but it is going to be an effort that spans, we
think, decades.
Senator Murkowski. Is it the process of converting to
hydrogen that is the cost? Is there some mechanical process
that is extremely complex?
Mr. Garman. Creating hydrogen is not difficult. It is more
expensive right now because of the energy you have to input
into the process of separating the hydrogen from the natural
gas, but it is also using that hydrogen effectively.
Transporting it is an issue. It is corrosive, it is flammable,
it has other issues that are tricky to deal with, so you have
to have a portfolio approach to your research and development
that tries to deal not only with the creation of hydrogen, but
the transportation, distribution, and the final end use of the
hydrogen.
Also, hydrogen compared to oil does not have the same kind
of energy density. You just do not have the same kind of Btus
in any given volume of hydrogen that you have in a hydrocarbon.
That is another thing we have to come to grips with.
Senator Murkowski. Would you say as a rule of thumb,
relative to how much we could relieve our dependence on oil,
you said a couple of decades before we probably develop a
replacement. I would assume, then, that the next 10 years or so
we are still going to be pretty much 75 percent dependent on
oil for the movement of America, or thereabouts?
Mr. Garman. As a transportation fuel, unless we can find
dramatic new ways to integrate more bio-based fuels, ethanols
or similar derivatives into the system, then yes, we will
continue to be dependent on oil and fossil fuels for the
foreseeable future.
Senator Murkowski. Thank you.
The Chairman. Senator Burns.
Senator Burns. Thank you, Mr. Chairman, and thank you for
this hearing today, and I would ask that my full statement be
made a part of the record
[The prepared statement of Senator Burns follows:]
Prepared Statement of Hon. Conrad Burns, U.S. Senator From Montana
Mr. Chairman, thank you for calling this important hearing today on
energy efficiency and energy assistance programs. LIHEAP, the
Weatherization Assistance Program, and the Federal Energy Management
Program are all very important initiatives. I look forward to hearing
our witnesses testify today.
Energy conservation and efficiency must be a part of a national
strategy and the United States has come a long way on this already.
Since 1973, the U.S. economy has grown nearly five times faster than
energy use. Had we continued to use energy as intensively as in 1970,
the U.S. would have consumed about 177 quadrillion Btus of energy last
year, compared to about 99 quadrillion Btus actually consumed. The
federal government has also made strong advancements in its energy
consumption reductions. Largely by installing energy efficient
technologies, the federal government has reduced its energy use by
about 30 percent from 1990 levels.
The backbone of America, our farmers and ranchers, have done their
part to reduce energy as well. Our farmers have reduced their energy
use by 41 percent from 1977-1998, while agricultural output grew by
about 40 percent over the same period.
What angers me now is that those same farmers are now forced to pay
higher prices for irrigation, oil, gas, propane, and electric prices
because we have had too many elected officials close off resources and
create environmental regulations that hinder new electrical generation.
I applaud President Bush for his proposal to double funding for the
Weatherization Assistance Program. I applaud President Bush, Chairman
Bingaman, and Ranking Member Murkowski's commitment to provide strong
funding increases for the Low Income Home Energy Assistance Program
(LIHEAP). But I stare in amazement at my colleagues in the U.S.
Congress who can vote against allowing oil and gas drilling in areas
where it can clearly be done in an environmentally sensitive manner,
and still complain about high energy prices.
The figures show how much progress this nation has seen when it
comes to conservation. The recent energy crisis shows that conservation
alone has not been enough. I say again that I proudly support LIHEAP
and the increases for the Weatherization Assistance Programs. However,
I think the issues before us today go back to pure philosophical
differences. Allowing Americans to increase the energy supply for this
country will lower prices for senior citizens and others on fixed
incomes. Some members would rather fight every attempt to increase
supply, and hold those same seniors and people on fixed incomes under
their control and make them dependent on every check from Washington,
DC.
It is very clear that we have before us a mandate to conserve more
energy, to become more energy efficient. Though we have made many
gains, we can do much more. Aside from what we must do to increase
energy supply, and what we can do to increase conservation; working on
increased funding for LIHEAP and Weatherization Assistance are two
things we must do to bring immediate assistance to senior citizens and
folks on fixed incomes.
I am confident that this committee will build the consensus to pass
legislation needed to address our nations most pressing needs.
Senator Burns. I want to pick up on a question that the
ranking member made this morning about the efficiency of
transmitting electricity in our transmission lines.
I visited with a couple of companies that are doing a lot
of work on their research on that, and particularly one company
has made some real advances as far as making our present-day
transmission lines more efficient, and not finding the drop-off
that we have had in the past--it is not quite ready yet, but I
think it will be ready very soon--about some demonstrations,
working with the Department of Energy, I would assume, and
working also with private transmission companies in order to
see that happen, and also we have legislation now.
I would ask that the Energy Department, or maybe this
committee, look at our grid across the Nation. I have long said
that we cannot really take advantage of electrical efficiencies
unless we have a national grid where we can transfer power
almost on a moment's notice, as compared with how we do it
today.
We have a tie in Miles City, Montana that does not allow us
to move East or West, or West to East, on the northern tier of
States, and that tie is at Miles City, Montana. I have
legislation now that would address that situation to where it
will bring us to a national grid, rather than to regional
grids, and to seek out those areas where we have some
inefficiencies.
But I also want to reiterate the concerns we have in
agriculture. Agriculture was asked to make their efficiencies
in the use of energy on their farms and ranches across this
country, were asked to do that some time ago, and they have
made great strides. In fact, the number is phenomenal on what
we have done as far as efficiency on irrigation, on how we
power our equipment, everything that we have, and you have got
to remember that we are energy-dependent on our farms and
ranches, because we can produce the product.
It takes energy to do that, but it also takes the energy to
move that product, that food and fiber to market, so we are hit
every way that we can be hit as far as energy is concerned, and
I think they have done their share of tightening their belt.
But what angers me now most, we are now forced to pay more
for our transportation fuels and our electricity, which relates
to our cost of irrigation, our cost of transportation, oil and
gas, even our natural gas that, of course, increased the price
of our fertilizers, because it is a base of fertilizer. It
comes out from natural gas, our electrical prices, and yet we
find that we are being closed off on certain avenues to
increase production so that we might operate.
Weatherization is important, I know, and the LIHEAP program
is important, but they do not get us to the point where we can
actually produce food and fiber for this country.
I just stared in amazement--yesterday was a good example of
that, that vote yesterday on Klamath Falls, and it was
indicative of a mind set that we are going to put a sucker fish
before farmers because right now that we are finally finding
out that there is a flaw in the Endangered Species Act that is
going to be very, very costly to this country, and what we have
witnessed in the Klamath Falls area is just the tip of the
iceberg, and we have to allow new production somewhere in this
country, and make it available to people.
Figures show that--I support LIHEAP, but if you look at
it--it is still people on fixed incomes are elderly, are
dependent on a government check so they can heat their houses,
and fundamentally, that is wrong, is to be reliant on the
Government to prop up, or to really subsidize the energy
companies, because they have their cost of production, and they
are tightened down with supplies, and of course the marketplace
is going to drive the price.
So mine is not a question, but I would ask Mr. Garman
whether these companies--there are two companies primarily in
the area of transmission that can increase the efficiency of
our transmission--can sit down and visit with him one day and
let us try, if we need more research dollars, some R&D dollars
in order to take a look at that, I think it is time we looked
at it, and I think it is also a time that we take a look at our
grids and our transmission abilities across this country,
because we are running into it in the Northwest, with the BPA,
and everybody on this committee is familiar with that.
But I think the general public--you know, I am still amazed
that way last February, that a poll taken that said 54 percent
of the people that live in California do not think they have a
shortage problem. They filled out that poll in the dark. I have
got to believe that. In other words, they just will not face
reality that it is going to take more energy--our population is
more. We do more with electricity now than ever before.
I work in communications issues. The Internet servers,
everything we touch now, we use electricity, a lot more
electricity, maybe not in the industrial area, but I mean, our
residential and home use of electricity has just--the demand
for it has just gone up dramatically because of the things we
do in our homes that we did not used to do in our homes and
residences.
So Mr. Chairman, thank you for this hearing, but I think
those are the areas. When we really know how this grid works,
and the efficiency of it, and the technologies out there in
transmission, then I think we can start readdressing the
problems of transmission of electricity.
Thank you, Mr. Chairman.
Mr. Garman. I wonder if I could just amplify on one or two
remarks that you made, particularly with respect to the
efficiency of transmission. We at the Department are trying to
partner with some of the very people you are speaking about,
and increasing the efficiency of our transmission system.
Today, under the streets of Detroit, we have a test of a high-
temperature superconducting transmission wire, if you will,
cable, if you will, that is increasing the throughput and
reducing the losses associated with transmission.
We are also working on ways to manage the grid through
computer algorithms, and some other types of approaches to
doing it.
We are also looking at new technologies in distribution
transformers and other components of the grid to increase their
efficiency, and, of course, as we will talk about next week, we
are looking at distributed generation.
You know, you can look at the grid from a top-down
approach, but you can also look at it from the bottom up. If we
can put smaller distributed generation from the bottom up, we
also increase efficiency and reliability. We put the source
closer to the user so you have less of a loss. You can address
peak issues, you can address reliability issues.
The bottom line, I guess, with the time I have got, is that
there is no one silver bullet to addressing these energy
problems. We cannot say efficiency is going to do it. We cannot
say supply is going to do it. We have to have a pretty broad
approach, and if Americans are waiting for the magic technology
that is going to solve all of our energy problems, then it is
my observation that that technology does not exist. We are
going to have to do a lot of relatively small things extremely
well.
Senator Burns. Well, I agree with you, and I have heard the
chairman of this committee, Mr. Bingaman, say that very thing.
It has to be a hand-in-glove situation, a cooperative
situation, and especially, just to give you a case in Montana,
we can really produce a lot of electricity because we have got
the coal and we have got a very, very cheap way, low-cost way
of producing electricity.
Now, I can get that to my farmers, but we are not the only
State in agriculture. We have got Iowa and the bread basket of
this great country that also are feeling the effects of this
energy crunch at the agricultural production level, and I guess
I worry about that as much as anybody does, because I still
think the basic purpose of this country is the production of
food and fiber for our people.
We cannot put that on the back burner, because I do not
know what the first thing you do when you get up in the
morning, but I know the second thing you do is, you eat, and
you have got a lot of options, the first thing, but that second
one you do not, and I worry about that, and the efficiency, and
the way we can get food and fiber to our people.
And then an attitude, an attitude that we can do, so it has
to be a mix. I agree with my chairman wholeheartedly, it has to
be a mix. It cannot be just one single thing, production or
efficiency.
Thank you, Mr. Chairman.
The Chairman. Thank you very much. We have two additional
panels with a total of eight witnesses, and with that in mind
let me thank Secretary Garman very much for being here, and we
will continue to talk with you and seek your advice as we move
ahead. Thank you very much.
Mr. Garman. Thank you, Mr. Chairman.
The Chairman. Will the second panel please come forward. We
have Ms. Mary Ann Manoogian, director of the Governor's Office
of Energy and Community Services in New Hampshire, Ms. Joanne
Choate, the LIHEAP manager for the State Housing Authority in
Maine, Mr. Erik Emblem, the administrator with the National
Energy Management Institute here in Virginia, and Mr. Mark
Wagner, director of government relations with Johnson Controls.
Thank you all very much for being here. Why don't we go
right across, starting on the left here and just go across, and
each of you, we will include your full statement in the record
as if read, but if you could summarize the main points that you
wish to make to us, we would be anxious to hear those, and then
we will have some questions.
Ms. Manoogian.
STATEMENT OF MARY ANN MANOOGIAN, DIRECTOR, GOVERNOR'S OFFICE OF
ENERGY AND COMMUNITY SERVICES, CONCORD, NH
Ms. Manoogian. Thank you, Mr. Chairman, members of the
committee. My name is Mary Ann Manoogian. I am pleased to
testify today on behalf of the National Association of State
Energy Officials, known as NASEO. I serve as director of the
Governor's Office of Energy and Community Services in New
Hampshire, where my responsibilities include the oversight of
the State Energy Program, known as SEP, the Low Income
Weatherization Program, and the Low Income Home Energy
Assistance Program, also referred to as LIHEAP.
As you know, NASEO represents 49 of the State energy
offices, as well as the territories and the District of
Columbia. NASEO's overall objective is to support balanced
national energy policies, and to provide State perspectives on
energy issues. NASEO members operate energy programs involving
all sectors of the economy and all types of energy sources.
As you move forward in addressing our Nation's energy
policy needs, we are pleased to provide input on a nonpartisan
basis to both the Senate and the House, as well as the
administration, and my written testimony elaborates further on
NASEO's support of S. 352, the Energy Emergency Response Act of
2001. I would like to, however, highlight the importance for
NASEO of the programs we support with respect to the increased
authorization for the State energy program to $75 million, the
base LIHEAP grant to $3.4 billion a year, and the
weatherization program to $310 million per year.
This would be a 4-year authorization, which is a more
efficient way for the States to be able to operate these
federally funded programs. The State Energy Program, the
Weatherization and LIHEAP programs are all deserving of
bipartisan support and generally we have received such support
in the past.
Recently, I understand S. 352 was added to the Senate-
passed bankruptcy reform bill. Provisions similar to S. 352 are
included in Senator Murkowski's comprehensive bill, and I
understand that if the committee were to begin the final
drafting process for S. 352 by starting with provisions common
to both Mr. Murkowski's bill and S. 352, that S. 352 would be
included in its entirety, and that is a measure that we would
support.
As you may know already, SEP activities touch on every
sector of the economy. The State energy offices work with
residential consumers, the small business sector,
manufacturing, industry, agricultural interests, our public
schools and hospitals, and nonprofit entities, et cetera. SEP
has documented the ability to leverage at least $4 in private
sector funds for every Federal dollar that is spent, and that
does not even include the State contribution.
Unlike other energy programs funded by the U.S. Department
of Energy, SEP is tailored to acknowledge State-by-State and
regional differences, including diverse priorities and, in
fact, in my written testimony I have been able to provide you
with some examples of SEP activities going on in various States
throughout the country, and I would encourage you to review
that if possible.
I would, however, like to highlight a program that was
initiated by NASEO and included Louisiana, Alaska, New Mexico,
Oklahoma, Colorado, Wyoming, and Montana, and the project was
to increase the energy efficiency of marginal oil wells.
I have provided a copy of NASEO's publication entitled
Dashboard Guide to Energy Efficiency in the Oilfield to the
committee. Ironically, many scoffed when NASEO began to work on
this project, questioning why energy producers would want
energy efficiency. Our efforts revealed that the highest cost
of energy production is in removing it from the ground, higher
than the associated equipment costs, and labor cost. A producer
with marginal wells needs every little bit of savings he or she
can put their hands on.
As a result of implementation of the recommendations
contained in NASEO's guide, a marginal well can expect to cut
its lifting or production cost by $1 per barrel with little or
no investment of additional funds.
I would also like to call to your attention the value of
the weatherization program, which is vital to addressing the
disproportionate energy burdens that low-income citizens face.
In addition to the meaningful energy conservation measures that
help reduce energy bills, the program also addresses important
health and safety measures of many families and vulnerable
elderly and disabled persons.
The weatherization program has been an essential long-term
program that complements the critical short-term assistance
provided by the LIHEAP program. One of the reasons that the
program has been so effective is due to the fact that the
delivery network responsible for implementing the cost-saving
weatherization measures are highly skilled. In addition,
weatherization program energy auditors play a key role in
helping low income households respond to our present energy
crisis while addressing their long-term needs as well.
So the issue of the weatherization program is not in
producing meaningful results. It has already been proven
through a report with Oak Ridge National Laboratory. The issue
is that the program does not have sufficient funding to meet
the demands of our most vulnerable residents.
For instance, in my State of New Hampshire, using both DOE
funds and available LIHEAP funds last year, out of the
approximately 7,493 New Hampshire fuel assistance recipients
who requested weatherization of services, New Hampshire was
able to complete 526 weatherization jobs, only 7 percent of the
requests. Low income households know the value of energy
conservation. They just do not have the means to get there. The
weatherization provides the support to help them reduce their
energy bills.
NASEO strongly supports the authorization provided in
Chairman Bingaman's bill and Senator Murkowski's bill. What I
would like to say also is that if we are serious about dealing
with our energy problems, substantial increased funding for
weatherization would enable our States to plan for energy
emergencies and, when possible, take preemptive action to avoid
an energy crisis by promoting energy efficiencies.
NASEO urges the committee to move forward not only on the
authorized funding levels but also to support a funding level
at least equal to the House-passed Interior Appropriations bill
during conference, and although I have restricted my testimony
to the State energy and weatherization programs, I would be
rather remiss, as someone who is responsible for the oversight
of the LIHEAP program in our State as well, to not underscore
the importance and value of that program.
This past year, our State had an 18-percent increase from
the number of households served by LIHEAP, and at a funding
level that is currently being discussed. What we know is that
my office will have a harsh reality of having to deny
assistance to more than 11,000 elderly, disabled, and working
poor households in the upcoming winter season. What I can tell
you is that as I am sitting here spewing these figures and
numbers out to you, I also have the benefit, as being the
director of a State agency, of telling you the value of these
programs that have been implemented, and I am reminded of a
story of the woman who is an employee at a well-known
department chain and she never expected to be needing LIHEAP
assistance.
This past year she was one of the 3,848 requests that we
received for emergency assistance, meaning she was in a
dangerous situation of being with no heat, or low heat
situation, and being out of heat in the middle of winter in New
Hampshire is a serious issue. Had it not been for the LIHEAP
program, she would not have made it through the winter months
with her disability, and be able to support and keep her
disabled son warm in her home. She was trying to do the best
she could. She tried to do whatever she could do to provide for
her son, and she was working full-time. It just was not enough
to pay for the heating costs.
Thank you. I appreciate your support, and we look forward
to working with the committee.
[The prepared statement of Ms. Manoogian follows:]
Prepared Statement of Mary Ann Manoogian, Director, Governor's Office
of Energy and Community Services, Concord, NH
Mr. Chairman, members of the Committee, my name is Mary Ann
Manoogian, and I am pleased to testify today on behalf of the National
Association of State Energy Officials (NASEO). I will be discussing our
views on S. 352, introduced on February 15, 2001, and supported by a
wide range of Senators. I serve as Director of the Governor's Office of
Energy and Community Services in New Hampshire, where I am responsible
for the oversight of the State Energy Program, the Low-Income
Weatherization Program and the Low-Income Home Energy Assistance
Program (LIHEAP).
NASEO represents forty-nine of the state energy offices, as well as
the territories and the District of Columbia. NASEO's overall objective
is to support balanced national energy policies and to provide state
perspectives on energy issues. NASEO members operate energy programs
involving all sectors of the economy and all types of energy resources.
The state energy officials are also generally our Governors' energy
policy advisors, frequently called upon to advise our Governors and
legislators on policy, programmatic, regulatory and legislative options
to address our energy situation. As you move forward in addressing our
Nation's energy policy needs, we are pleased to provide input on a non-
partisan basis to both the Senate and the House, as well as the
Administration.
S. 352, the Energy Emergency Response Act of 2001, would increase
authorizations for: 1) the State Energy Program (SEP) to $75 million;
2) base LIHEAP to $3.4 billion per year; and 3) the Weatherization
Program to $310 million. This would be a four-year authorization, which
is a more efficient way to operate these federally funded programs. The
bill would also encourage expanded use of energy efficiency and
renewable energy measures in federal buildings, permit expanded use of
energy savings performance contracts in federal buildings, eliminate
the ``sunset'' provision for energy savings performance contracts and
expand federal energy efficiency performance contracts to include water
efficiency. In light of the current energy needs of the country, these
provisions provide a common sense approach to the challenges before us.
These programs save money, save energy, and in many instances reduce
air pollution, combat climate change and leverage enormous amounts of
non-federal investment for meaningful projects that actually help
people.
The State Energy Program, Weatherization and LIHEAP are all
deserving of bi-partisan support, and have generally received such
support in the past. Recently, S. 352 was added to the Senate-passed
bankruptcy reform bill. Provisions similar to S. 352 are included in
Senator Murkowski's comprehensive bill (Sections 601, 603-604). I
understand that if the Committee were to begin the final drafting
process for S. 352 by starting with provisions common to both Mr.
Murkowski's bill and S. 352; S. 352 would be included in its entirety.
Our experience has taught us that, the State Energy Program,
Weatherization, and LIHEAP are critical components of a balanced
national energy policy. These programs are both under-valued and under-
funded. We applaud you for initiating a comprehensive look at energy
programs and policy. We are also encouraged by the Administration's
decision to conduct a complete review of the energy efficiency and
renewable energy program of the U.S. Department of Energy. Assistant
Secretary Garman is to be commended for his work in conducting these
reviews. If the analysis is intended to focus on measures of success:
energy saved, money saved, leverage of other resources, new
technologies deployed, research and development stimulated, SEP would
be a huge winner. It offers a balanced approach that recognizes the
value of efficiency improvements and encourages development of both
supply-side and demand-side resources is responsible and necessary.
STATE ENERGY PROGRAM
SEP is the major state-federal partnership program in the energy
area. While it makes up a small portion of overall funding for state
energy activities, it is a critical nucleus for many of the states. For
example, SEP funds are used to prepare for and respond to energy
emergencies and supply disruptions. State energy offices have used
these funds to help states effectively respond to these challenges,
ranging from western electricity problems to Midwestern natural gas and
gasoline price spikes, historically low inventory levels and multiple
other problems across the country over the last few driving and heating
seasons.
SEP activities touch on every sector of the economy. The state
energy offices work with low-income Americans, the small business
sector, manufacturing industry, agricultural interests, our public
schools and hospitals, non-profit entities, and so on. SEP has
documented a leverage of at least $4 in private sector funds for every
federal dollar, not even including the state contribution. Unlike other
energy programs funded by the U.S. Department of Energy, SEP is
tailored to acknowledge state-by-state and regional differences;
including diverse priorities.
Examples of innovative projects, funded in part by SEP, include the
following:
New Mexico--Assisted the community of Los Alamos in its rebuilding
efforts after the Cerro Grande fire. Provided technical assistance and
information at several forums to enhance awareness of the benefits of
using renewable resources and applying energy efficiency measures in
new construction. Sponsored a two-day workshop, ``Passive Solar Design
Strategies and the Energy-10 Program,'' October 2000, at the Los Alamos
branch of the University of New Mexico (UNM).
Hawaii--The Hawaii energy office operates one of the most
comprehensive energy emergency programs in the nation. The threat of
typhoons and tsunamis pose a great risk to its citizens. Consequently,
the energy office is constantly updating their energy emergency
planning and conducting simulations that involve federal, state, and
private sector representatives from the 5 big islands and even from the
mainland. Hawaii's expertise in the area of energy emergency planning
is recognized nationwide and, consequently, members of the state's
energy office staff have made numerous presentations and even assisted
in writing other state energy emergency plans.
North Dakota--The North Dakota State Buildings Energy Conservation
Program provides grant funding to state institutions and agencies for
the installation and implementation of energy efficiency measures.
Energy audits are required to identify potential energy conservation
measures, respective costs, energy savings and payback periods.
Awards have been made to many of the state-supported colleges and
universities to match federal energy conservation funds. In addition,
grants have gone to projects at the Capitol complex, the State
Penitentiary, Department of Transportation buildings, and many others.
Florida--Florida's Energy Office is involved in a number of
efficiency and renewable energy activities. One of the most promising
activities is in the area of building code development and upgrades.
Primarily as a result of Hurricane Andrew, not to mention a number of
relatively minor hurricanes since Andrew, the energy office has been
working with members of the insurance and home building community to
develop building codes that will enable new homes in Florida to
withstand stronger winds and coastal flooding while reducing energy
usage in the residential and commercial sector. These codes are near
the implementation stage and a number of states are watching this
process closely.
Oregon--The State of Oregon has some of the most progressive
efficiency programs in the nation. One of the most successful
efficiency programs is in fact a tax rebate program. The state allows
tax rebates on specified commercial business investments in efficiency.
Once again, this is a program that is being watched closely by other
states, particularly, those with peak electricity capacity problems,
which are paying attention to the demand side energy savings resulting
from the implementation of tax incentives.
South Dakota--Electricity generated from wind turbines is proving
to be a big winner in the Green Power arena. Cost-effective and
environmentally sound, wind energy is expected to see tremendous growth
over the next decade. South Dakota recently completed a wind farm
project that is the subject of a great deal of national attention. The
October 2000, conference on wind power in South Dakota was one of the
most successful wind energy conferences to date.
Louisiana, Alaska, New Mexico, Oklahoma, Colorado, Wyoming, and
Montana were all participants in a project undertaken by NASEO designed
to increase the energy efficiency of marginal oil wells. I have several
copies of NASEO's publication entitled, Dashboard Guide to Energy
Efficiency in the Oil Field, which I will leave with the Committee.
Many scoffed when NASEO began to work on this project questioning
why energy producers would want assistance in energy efficiency. Our
efforts revealed that the highest cost of oil production is in removing
it from the ground--higher than the associated equipment costs and
labor costs. A producer with marginal wells needs every little bit of
savings he or she can put their hands on. As a result of implementation
of the recommendations contained in NASEO's guide, a marginal well can
expect to cut its lifting or production costs by $1 per barrel with
little or no investment of additional funds.
Idaho--The State of Idaho has developed a CD that informs farmers,
based upon soil and climate conditions, exactly when to apply
irrigation to fields. Idaho also operates a successful low-interest
loan program for residential, commercial, agricultural, government, and
schools projects. To date, 1,973 loans totaling $13,338,371 have been
issued. These loans generate $3,800,919 in annual savings.
Indiana and Kentucky--Like our colleagues in Hawaii, the State of
Indiana and Commonwealth of Kentucky operate exemplary energy emergency
programs. The states are recognized throughout the Midwest for their
work with the propane industry at mitigating the impacts of supply
disruptions. On July 25, they will be hosting a regional meeting for
the propane industry and major consumers to discuss current and
anticipated propane issues.
Illinois--Most recently, staff completed the oversight of the
implementation of $20 million in energy-efficiency capital improvements
through Energy Performance Contracting arrangements in seven state-
owned facilities. This pilot initiative is demonstrating the cost
effectiveness of utilizing energy performance contracts in state
buildings. In the first two years after implementation the pilot
initiative is producing energy savings averaging greater than 27
percent of the $9.4 million utility cost of the facilities and is
generating over $2.6 million in annual savings at the seven
participating state agency and university facilities.
Like Illinois, my own state of New Hampshire uses SEP funds to
support an ambitious performance contracting program. In 1998, Governor
Shaheen launched the Building Energy Conservation Initiative, which
when completed will save the state $6-$8 million annually in energy
costs. The program is surveying 500 state buildings for energy and
resource conservation opportunities and then using guaranteed energy
savings as the equity to secure financing for building upgrades. Over
the next several years, the State of New Hampshire will reduce its
energy consumption by as much as 33 million kWh annually and carbon
dioxide greenhouse emissions by 132,300 tons each year without
incurring any capital expenses. In this example, SEP funds support a
program that leverages as much as $25 million in financing.
In addition to the project identified above, New Hampshire, due to
Governor Shaheen's leadership and the support of SEP funds, has also
reached businesses, public housing projects, schools and municipalities
through our Renewable Energy Technology Grants Program, which provided
funding for renewable energy demonstration projects at 27 schools,
science centers, museums and affordable housing developments across the
state. SEP funds have also been instrumental in the success of our
Rebuild New Hampshire Program enabling us to conduct public workshops
on energy efficiency, and environmentally sound new technologies to
more than 90 school districts, public housing agencies, cities and
towns in the last two years.
The value of SEP throughout the nation is that it permits
innovation over a wide variety of energy activities. The statutory
language, which was substantially broadened in the State Energy
Efficiency Programs Improvement Act of 1990, encourages states to take
any action to improve efficiency, promote technology transfer and
assist all types of energy consumers.
The approach the states are taking to energy is to encourage
economic development, increase the deployment of new technology, while
increasing affordability for homeowners and improving the work
environment for employees. This involves helping businesses reduce
operating costs, enhancing productivity and reducing energy demand,
while providing significant environmental benefits. One of the many
roles of state energy offices is to achieve these goals within the
framework of SEP. The work of these offices includes installation of
cost-effective energy efficient technologies in public school
buildings, building code upgrades, implementation of tax credits for
energy efficient retrofits, promotion of transportation efficiency
(telecommuting, ridesharing), alternative transportation fuels,
operation of public benefits programs through restructuring, etc. Our
offices promote the use of energy service performance contracts that
utilize private financing to conduct energy efficiency programs. This
has become a $1-$1.5 billion/year business.
Another critical activity, which has become increasingly important,
is the effort to coordinate energy and environmental programs, policies
and regulations. A series of state pilot efforts are underway
throughout the country. For example, in my region state and local
energy and environmental officials are working to develop technical
standards for distributed generation so that our environmental programs
and our energy programs do not conflict. We have found that approaching
these activities together, early on, tends to reduce cost and increase
the ability of the private sector to implement energy projects.
Finally, a program not subject to this authorization hearing but
one we urge continued support for is the SEP Special Projects. This
program provides leveraged funds on a competitive basis for state
energy office-initiated projects with business, industry and the public
such as the highly successful Industries of the Future Program. I
personally know that in my state of New Hampshire, Industries of the
Future would not exist without SEP Special Project Funds. In the 18
months since New Hampshire launched our Industries of the Future
program, the partnership between state and federal government and
private industry has enabled 51 New Hampshire businesses to find high-
tech ways to cut their energy use, saving them money on their energy
bills and protecting our environment. One example is a paper mill in
the southwestern part of the state that is investing in cutting-edge
energy efficient technologies. This investment will save this company,
which employs 260 people and produces 100 tons a day of specialty paper
products, about $500,000 a year on its electricity bills.
We also urge the Committee to strongly endorse the schools energy
efficiency program included in both Chairman Bingaman's (Section 1302)
and Senator Murkowski's bill (Section 602). Representatives Mark Udall
and Sherwood Boehlert first introduced H.R. 1129, which would initiate
a new era in implementing energy efficiency projects for hard-pressed
schools. This would be a good substitute for the Institutional
Conservation Program (ICP) that is no longer is operation. It would
encourage both public and private financing of school projects. We can
all agree that not enough funding is going to our schools, and
certainly wasteful, one-time energy costs do nothing to provide
education to our children--we can and should implement this program. It
will require authorization and we would urge that the program be
implemented by the U.S. Department of Energy.
LOW-INCOME WEATHERIZATION PROGRAM
The Weatherization Program is vital to addressing the
disproportionate energy burdens that low-income citizens face. In
addition to the meaningful energy conservation measures that help
reduce energy bills, the program also addresses important health and
safety measures of many families and vulnerable elderly and disabled
persons.
It has been an essential long-term program that complements the
critical, short-term assistance provided by the LIHEAP program. In
general, households that are poor use a dramatically higher percentage
of annual income on heating and cooling than the average American
family. While 4-5% of annual income is spent on all energy bills for
the average American household, the households that are poor spend more
than 20% on energy annually, depending upon the fuel source and
location.
The Weatherization Program has proven that it is effective and
works for these low-income households. According to an Oak Ridge
National Laboratory study conducted in the past few years, the average
home saves over 20% on energy costs after Weatherization is completed.
Obviously the recent increases in energy costs have created an even
greater amount of energy savings. Keep in mind, too, that the work done
by Weatherization specialists is permanent, providing a lasting savings
over time, a savings that increases as energy costs increase. It is a
gift that keeps on giving.
One of the reasons the program has been so effective is that these
specialists, the local delivery network responsible for implementing
the cost-saving weatherization measures, are highly skilled. In
addition, Weatherization Program energy auditors play a key role in
helping low-income individuals respond to our present energy crisis
while addressing the long-term needs as well. In addition to the energy
savings produced, the Weatherization Program also positively impacts
the health and safety of the numerous lives that are affected by the
program, helping to keep families warmer, dryer, and healthier.
So the issue is not whether the program is producing meaningful
results. The issue is that the program does not have sufficient funding
to meet the demands of our most vulnerable residents. For instance in
New Hampshire, using both DOE funds and available LIHEAP funds last
year, out of the approximate 7,493 New Hampshire Fuel Assistance
recipients who requested weatherization services, New Hampshire was
able to complete 526 weatherization jobs, only 7% of the requests.
BUDGET/APPROPRIATIONS ISSUES
While we strongly support the authorization provided in Chairman
Bingaman's bill (S. 352) and Senator Murkowski's bill (Section 603-
604), we are aware that an authorization does not mean appropriators
will listen. The House Interior and Related Agencies Appropriations
Subcommittee provided a $24 million increase for SEP to $62 million and
a $96 million increase for Weatherization to $249 million. These
funding levels were included in the House-passed bill. Unfortunately,
on June 28, the Senate Appropriations Committee provided only a $60
million increase for Weatherization to $213 million and a $0 increase
for SEP. These are well below the proposed authorized levels and
inadequate for the need. If we were serious about dealing with our
energy problems, substantially increased funding for SEP and
Weatherization would enable states to plan for energy emergencies and,
when possible, take preemptive action to help avoid an energy crisis by
promoting energy efficiencies.
The President, during the campaign proposed a doubling of
Weatherization and SEP to $306 million and $76 million respectively:
``Double the funding for the Weatherization Program and State Energy
Program.'' (See Energy Issues, at 11). By the time of the Budget
submission, the proposed SEP doubling was wiped out and Weatherization
was proposed to increase by $120 million. I would point out that while
other DOE energy efficiency programs have increased since the early
1980's, the combined SEP/ICP program peaked at $178 million in FY'81,
while Weatherization peaked at $245 million in FY'83. These are in
nominal dollars. These programs need to be substantially funded to
enable states to continue to serve our communities while building upon
meaningful public/private partnerships particularly during a time of
fluctuating energy costs and volatile markets.
NASEO urges the Committee to move forward not only on the
authorized funding levels, but also to support a funding level at least
equal to the House-passed Interior Appropriations bill during
conference.
CONCLUSION
Today, I have restricted my testimony to the State Energy and
Weatherization Programs. However, I would like to note that we strongly
support LIHEAP and recognize it has a critical, life-saving role to
play. For the LIHEAP program, approximately one-half of the states are
either out of funds or have very low balances. I also know that New
Hampshire is not unique and that many states experienced a significant
increase in the number of LIHEAP households served this past program
year. In New Hampshire, the number of households served on the program
increased by 18% from the prior year. At level funding, my office is
confronted with the harsh reality of having to deny assistance to more
than 11,000 elderly, disabled and working poor households in the
upcoming winter season. Consequently, we desperately need a base
funding of $3.4 billion for LIHEAP.
While we are available to discuss other programs, we urge the
Committee to support: 1) expanded appliance energy efficiency
standards; 2) expanded use and increased funding for the EPA/DOE Energy
Star Program; 3) Rebuild America, a DOE program that works with the
states to promote energy efficiency in buildings; and 4) increased
funding for international market development. We can certainly support
targeted tax credits in the energy area, including energy efficiency
tax credits for new and existing homes of the type recommended by
Chairman Bingaman, Senators Feinstein/Bob Smith and Representative
Weller. While each approach is slightly different we should work hard
to develop a reasonable compromise.
We look forward to working with the Committee. Thank you for the
opportunity to appear before you today.
The Chairman. Thank you very much.
Ms. Choate, why don't you go right ahead.
STATEMENT OF JOANNE CHOATE, LIHEAP MANAGER, MAINE STATE HOUSING
AUTHORITY, ENERGY AND HOUSING SERVICES, AUGUSTA, ME, ON BEHALF
OF THE NATIONAL ENERGY ASSISTANCE DIRECTOR'S ASSOCIATION
Ms. Choate. Thank you. My name is Joanne Choate. I serve as
manager of the LIHEAP program for low-income home energy
assistance for the Maine State Housing Authority, as well as
the vice chair of NEADA, the National Energy Assistant
Directors Association. I am honored, at the request of the
committee, to testify today on behalf of NEADA, which
represents the State Directors of LIHEAP. We support the
development and implementation of programs to help low income
households afford the cost of home energy.
Maine is a small New England State with long, cold winters,
and we are one of the poorest States in New England. During the
last winter heating season, heating oil prices rose sharply to
$1.56 per gallon, bringing the average cost per household to
$1,000 or more. While the average household spends about 4 to 5
percent of their income on home energy cost, for the low income
the total can reach as high as 20 percent.
Without LIHEAP assistance, many of Maine's poorest
households would have had to choose between staying warm and
other vital household necessities such as food or medicine.
Fortunately, LIHEAP was there this year to help over 60,000
households in the State of Maine during the winter months. Many
letters come across my desk, and I have brought a few to share
with you today that I will leave after my testimony.
From grateful recipients, an elderly recipient of northern
Maine, wrote, ``thank you very much for fuel assistance. It is,
indeed, a much-needed help. I am 82 years old, in poor health,
and nearly desperate, with so many bills pushing for payment.''
A mother wrote, ``I want to take this opportunity to sincerely
and humbly thank you for your assistance that you approved for
my children and I. Things had been looking very bleak. Thank
you for the ray of sunshine.''
The elderly and the family with small children represent
two of the most vulnerable groups in the rising energy costs.
About 73 percent of LIHEAP funds in Maine are allocated to
assist these groups. In light of the recent rise in energy
prices, we have to ask, is LIHEAP funding adequate?
Unfortunately, the answer is no. In spite of the fact that
Federal funding was increased from $1.1 billion to $1.4
billion, in addition to $855 million in emergency funds, it is
still not enough to meet the need.
The total number of households receiving assistance this
year totaled 4.9 million, an increase of almost 1.1 million
from the previous year. Still, on average the States were only
serving about 17 percent of the eligible households. In my home
State of Maine the total households receiving assistance
increased by 32 percent this year, while the additional funds
went a long way to helping address the needs this winter,
unfortunately it was not enough.
As a result of the rising prices, energy bills for the
average households increased at least $400 to $500. Many
households, not only in Maine but throughout the Nation, were
not able to pay these bills. As a result, the States reported
significant increases in arrears and shut-offs.
A key indicator for the need for additional assistance is
the number of households applying for emergency assistance.
Since last year, the number has increased by 400 percent. These
are households that exhausted all of their resources as well as
their regular LIHEAP benefits and could not afford to purchase
any additional fuel.
The average annual income for a LIHEAP recipient in Maine
is $10,262, and for an elderly household that applied this year
the annual income was $7,200. The average cost of home heating
was around $1,000 or more. About 30 percent of the average
recipient's annual income is spent on home energy.
We are also experiencing an increase in the number of
households that have not applied for assistance before. 67
percent of these households in Maine are frail, elderly
households that applied this year. These are proud people who
have always paid their taxes, and have never before asked for
government assistance.
NEADA did a survey of many utilities across the country and
found that they are experiencing significant increases in bad
debt. For example, the District of Columbia reported $6.6
million in natural gas arrearages by over 14,000 households.
Georgia reported approximately $147 million in arrearages owed
by 479,000 households, and Louisiana reported $32.9 million in
arrearages owed by about 76,000 households.
We can expect that the problem of arrearages and shutoffs
will get worse as the summer cooling season progresses,
especially in Southern and Western States, and to a lesser
degree in the Northeast. 28 States and the District of Columbia
are now out of funds and no longer able to provide households
with assistance to cover summer cooling bills and avert
shutoffs.
S. 352 would play a significant role in helping to address
the needs for additional funds. By increasing the authorization
to LIHEAP to $3.4 billion, it would send a signal to the
Appropriations Committee that additional funding is necessary
to address the needs that low income households face with their
winter heating and summer cooling bills.
With the additional money, we would increase outreach
efforts to provide funds to underserved populations, take
advantage of prepurchase and other payment arrangements to
reduce the cost of home energy, and provide higher grant levels
to offset the impact of higher prices on poor families.
NEADA would also like to recommend that the committee
consider an increase in the set-aside for training and
technical assistance funds. Currently, the law limits the
Federal Program Office from using more than $300,000 for these
purposes. The amount is not sufficient to meet the growing
needs to develop new and innovative methods for managing
program funds, collecting data for program design and
evaluation, and provide training to program managers. We would
recommend that training and technical assistance be increased
to $750,000.
Mr. Chairman, we are also pleased to see the increased
support provided in S. 352 for the State energy program and
weatherization assistance. Across the Nation, LIHEAP works in
close partnership with these two programs in helping to target
assistance to those most in need. The State Energy Program
plays an essential role in implementing energy programs at the
State and local levels for all sectors of the economy and
weatherization assistance delivers energy efficiency services
to low income households to help reduce their energy bills.
Taken together, the increased funding for LIHEAP, the
weatherization assistance program, and the State energy program
contained in S. 352 will go a long way in helping to meet the
energy needs of low income households.
Thank you for this opportunity to testify.
The Chairman. Thank you very much.
Erik, why don't you go right ahead. We are glad you are
here, too.
STATEMENT OF ERIK EMBLEM, ADMINISTRATOR, NATIONAL ENERGY
MANAGEMENT INSTITUTE, ALEXANDRIA, VA
Mr. Emblem. Thank you, Mr. Chairman. My name is Erik
Emblem. I am the executive director and administrator of the
National Energy Management Institute, and I am enjoying
testifying before this most distinguished committee today.
NEMI is a not-for-profit joint labor management corporation
created in 1981 by the Sheet Metalworkers International
Association and the Sheet Metal and Air Conditioning
Contractors National Association. Our mission is to identify
emerging markets, employment, and commercial opportunities in
the energy management, heating, ventilating, and air
conditioning industry.
Towards these ends, we develop and sponsor energy
management and HVAC research information and education training
programs. In this respect, NEMI sponsors and funds training,
education, and provides instructional equipment for over 160
training centers in the United States and Canada. We produce
educational material to ensure that sheet metal workers and
sheet metal contractors are on the cutting edge of the energy
management and HVAC industry.
Within the industry, NEMI is considered the leader in
research and development in new HVAC technologies and markets.
Within the United States, there are some 5 million commercial
and public buildings, 90 million residential structures, and
together these buildings account for 35 percent of the Nation's
energy consumption.
Most are affected by energy management building technology
and indoor air quality issues. By 2003, we expect that $88
billion per year will be spent on the construction and
operation of heating, ventilation, and air conditioning systems
alone. A consensus has developed within the professional energy
management building technology and indoor air quality community
that there is a need for a central organization to initiate,
coordinate, and manage a number of important air quality and
energy management functions that are currently not being
fulfilled by either private industry or Government.
In this respect, there exists an incomplete understanding
and appreciation for the multidimensional nature and
relationships of energy management and indoor quality, on
public health employment and productivity and energy
consumption within buildings. Reliable data on these
relationships are incomplete, and major information gaps exist
on the adverse occupational and environmental health effects of
poor indoor air quality.
Moreover, serious information gaps exist on questions
concerning assessments of existing and emerging building
technologies, employment and training and productivity,
commercial market development for the new and improved building
technologies, the science of constructing new buildings, and
retrofitting older ones, public and consumer awareness of
energy management issues, and the state of professional
education and training in the emerging energy management and
indoor air quality industries.
The challenge, therefore, is to explore the feasibility and
efficacy of a national center to gather, develop, pilot,
evaluate, distribute data and information on the ways by which
the Nation can improve its indoor air quality and at the same
time achieve optimum levels of energy efficiency in its
commercial and public buildings, industrial facilities, and
residential housing units.
The goal of such a center is to combine the economics of
building performance for the fundamental functional needs of
occupants with the need for more energy-efficient use to
achieve a public benefit for the improved health, energy,
security, employment, and productivity. Existing data and
information on energy efficiency and indoor air quality are
suggestive, with serious implications for employment, business,
public health, and the environment, the economy and energy
consumption.
One of the major problems is, there is no structural
mechanism to clearly organize and understand the various
aspects of these issues and what effect they have on American
society and the economy. In January 2000, NEMI was invited to
submit a proposal jointly to the Environmental Protection
Agency and the U.S. Department of Energy to undertake an
initial assessment of the energy management and indoor air
quality issues and the possible needs for a national center on
energy management, building technology, and indoor air quality.
Under NEMI's direction, a white paper was prepared and
distributed on the specific conclusions and recommendations of
the conferees. Mr. Chairman, I have a copy of that white paper
with me, and I would like to submit it for the record.*
---------------------------------------------------------------------------
* Retained in committee files.
---------------------------------------------------------------------------
The Chairman. We would be glad to have it included.
Mr. Emblem. Generally, the conference concluded that, given
the fragmented state of energy management and indoor air
quality issues, the logical next step would be to develop a
comprehensive strategic plan exploring the feasibility of a
national center for energy management and building
technologies.
If I may, Mr. Chairman, deviate slightly from the written
record, I am here today to express my concern that this problem
may be exacerbated by the renewed efforts to reduce energy use
in buildings. NEMI and its sponsors have been involved in
energy management and indoor air quality in buildings since the
energy crisis years of the late seventies, and we have seen
many mistakes made. We have taken a leadership position in the
building construction industry towards resolving the conflicts
and barriers of efficient and healthy buildings.
We believe there is both a compelling need and broad
support for a national center for energy management and
building technologies to support, coordinate commercialization,
public education, training in public technologies and building
technologies that will provide buildings that are both energy
efficient and healthy. We believe that the center should be
supported under this legislation.
With that, I thank you for the opportunity to testify.
[The prepared statement of Mr. Emblem follows:]
Prepared Statement of Erik Emblem, Administrator, National Energy
Management Institute, Alexandria, VA
Mr. Chairman, Members of the Committee.
My name is Erik Emblem, and I am the Administrator of the National
Energy Management Institute (NEMI). Thank you for inviting us to
testify before you on proposed national energy legislation.
NEMI is a not-for-profit, joint labor-management corporation
created in 1981 by the Sheet Metal Workers'' International Association
(SMWIA) and the Sheet Metal and Air Conditioning National Association
(SMACNA).
Our mission is to identify emerging markets, employment and
commercial opportunities in the energy management and heating,
ventilation and air conditioning (HVAC) industry. Towards these ends
NEMI develops and sponsors energy management and HVAC research,
information, education and training programs.
In this respect, NEMI sponsors and funds training and education
programs and provides instructional equipment for over 160 training
centers in the United States and Canada. We produce educational
material to ensure SMWIA and SMACNA members are on the cutting edge of
the energy management and HVAC industry. Within the industry NEMI is
also considered the leader in the research and development of new HVAC
technologies and markets.
THE CHALLENGE
Within the United States there are some 5 million commercial and
public buildings and 90 million residential structures. Together these
buildings account for 35% of the Nation's energy consumption, and most
are affected by energy management, building technology and indoor air
quality issues. By 2003, we expect that $88 billion per year will be
spent on construction and operations of heating, ventilation and air
conditioning (HVAC) systems alone.
A consensus has developed within the professional energy
management, building technology and indoor air quality community that
there is a need for a central organization to initiate, coordinate and
manage a number of important indoor air quality and energy management
functions that are currently not being fulfilled by either private
industry or government.
In this respect, there exists an incomplete understanding and
appreciation for the multi-dimensional nature and relationships of
energy management and indoor air quality on public health, employment
and productivity, and energy consumption within buildings.
Reliable data on these relationships are incomplete and major
information gaps exist on the adverse occupational and environmental
health effects of poor indoor air quality. There is even less of an
understanding of the relationships between improved indoor air quality,
on the one hand, and energy efficiency, on the other. Indeed, one of
the major policy questions that has yet to be addressed is ``What are
the energy costs associated with improved indoor air quality, and are
there potential building technology solutions to reduce energy
consumption and, at the same time, improve air quality?''
Moreover, serious information gaps exist on questions concerning
assessments of existing and emerging building technologies; employment,
training and productivity; commercial market development for new and
improved building technologies; the science of constructing new
buildings and retrofitting older ones; public and consumer awareness of
energy management issues; and the state of professional education and
training in the emerging energy management and indoor air quality
industries.
The challenge therefore is to explore the feasibility of a national
center to gather, develop, pilot, evaluate, and distribute data and
information on ways by which the nation can improve its indoor air
quality and at the same time achieve an optimum level of energy
efficiency in its commercial and public buildings, industrial
facilities; and residential housing units.
The goal of such a center is to combine the economics of building
performance for the functional needs of occupants with the need for
more efficient energy use to achieve a public benefit of improved
health, energy security, employment and productivity.
STATEMENT OF PROBLEM
Existing data and information on energy efficiency and indoor air
quality are suggestive with serious implications for employment,
business, public health and the environment, the economy and energy
consumption. One of the major problems is that there is no structural
mechanism to clearly organize and understand the various impacts these
issues have on the American society and economy.
Data available in the literature indicate the scope and nature of
the problem, and include:
Some 50 million American workers are adversely affected by
poor indoor air quality in commercial buildings. (Dorgan 1997,
Woods 1989, Fisk 2000)
The annual health care cost associated with poor indoor air
quality in commercial buildings has been estimated at $8
billion. (Dorgan 2000, Woods 1989, Fisk 2000)
The cost of productivity losses resulting from poor indoor
air quality in commercial buildings--due to absenteeism, short
work days, reduced worker output and lethargy--has been
estimated at $40-$80 billion annually. (Dorgan 2000, Woods
1989, Fisk 2000)
About 50% to 80% of commercial buildings have been estimated
to not consistently achieve compliance with standards for
acceptable indoor air quality. (Dorgan 2000, Woods 1989, Fisk
2000, NIOSH 1998)
A study commissioned by NEMI found that only 20% of
commercial buildings in the United States could be classified
as ``healthy''; another 40% were found to be ``generally
healthy; with the remaining 40% classified as ``unhealthy'';
unhealthy being defined as a building where a significant
number (20% or more) of the occupants reported an indoor air
quality-related symptom. (Dorgan 1997, 2000)
Approximately 25% of the $6 billion annual energy
consumption by American schools are lost because of inefficient
heating, cooling, ventilation, and lighting systems. (GAO 1996)
Some 15 million children attend American schools with
substandard heating, ventilation and air conditioning (HVAC)
systems. (GAO 1996)
About 80% of the building stock that will be available in 25
years are in place today and will require rehabilitation and
HVAC retrofit construction. (Woods 1998)
INITIAL ASSESSMENT
In January 2000, NEMI was invited to submit a proposal jointly to
the Environmental Protection Agency (EPA) and the Department of Energy
(DOE) to undertake an initial assessment of energy management and
indoor air quality issues, and the possible need for a national center
on energy management, building technologies and indoor air quality.
The vehicle by which the initial assessment was conducted was a
two-day conference attended by a small group of nationally recognized
authorities on energy management and indoor air quality, representing
business, labor, academia, government and the professional engineering
and public health communities. The conference was held on September 13-
14, 2000 in Alexandria, VA.
The focus of the conference was on six related subject areas
including energy management and indoor air quality research, technology
assessment and application, employment and training, commercial market
development, public and professional education, and public policy.
Under NEMI's direction, a ``White Paper'' was prepared and
distributed on the specific conclusions and recommendations of the
conferees.
Mr. Chairman, I have a copy of that White Paper with me and ask
that it be made a part of this hearing record.
Generally, the conference concluded that given the fragmented state
of energy management and indoor air quality issues, a logical next step
would be to develop a comprehensive strategic plan exploring the
feasibility of a national center for energy management and building
technologies.
NEMI is currently in the process of initiating such a strategic
plan with its partners; the Sheet Metal and Air Conditioning
Contractors National Association (SMACNA) and The Sheet Metal Workers
International Association (SMWIA).
the consortium of interests
For your information, Mr. Chairman, SMACNA represents some 4,000
contractors engaged in the installation and maintenance of energy
management and HVAC equipment and systems in the industrial,
commercial, institutional and residential markets. By 2003, it is
estimated that the annual HVAC market in the United States will
approach $88 billion.
SMWIA represents some 150,0000 members employed in the manufacture,
installation and maintenance of energy management and HVAC equipment
and systems. SMWIA members are highly skilled in the energy management
and HVAC field and are products of apprenticeship training programs
developed by the International Training Institute. Like NEMI, SMACNA
and the SMWIA created the International Training Institute, which is a
joint labor-management-training program dedicated to improving the
employment skills of its members to meet new technological demands.
CONCLUSION
Mr. Chairman, NEMI and its partners have been in the energy
management business for quite some time. As I indicated, we are the
acknowledged leaders in our industry. After nearly two years of
intensive study, we have come to the conclusion that in order to
adequately meet the growing demand for energy security on the one hand,
and safe and healthy buildings on the other, that a national center
must be established to undertake and disseminate the kind of research
and analysis required to achieve more energy efficient and more healthy
buildings.
Thank you, and I would be happy to answer any questions you may
have.
The Chairman. Thank you very much for your testimony.
Mr. Wagner, why don't you go right ahead.
STATEMENT OF MARK F. WAGNER, DIRECTOR, FEDERAL GOVERNMENT
RELATIONS, JOHNSON CONTROLS, INC., ON BEHALF OF THE FEDERAL
PERFORMANCE CONTRACTING COALITION
Mr. Wagner. Thank you, Mr. Chairman. My company is Johnson
Controls, but I am also here testifying on behalf of the
Federal Performance Contracting Coalition. We are a group of
energy service companies who upgrade Federal facilities. We do
this by installing, designing, and servicing energy-efficient
equipment such as monitoring control systems, heating
ventilation systems, lighting, so that Federal buildings can be
more energy-efficient.
Mr. Chairman, last month, when you attended the energy
efficiency forum sponsored by Johnson Controls and the U.S.
Energy Association, you said energy efficiency is a bipartisan
issue, and we could not agree with you more. You also talked
about energy-saving performance contracting at Federal
facilities, which is where I would like to concentrate my
remarks.
Assistant Secretary Garman mentioned that the Federal
Government is the largest consumer of energy in the country,
and that is true. We are spending billions in heating those
500,000 buildings in the Federal inventory. This year, the
Federal Government's energy electric bill is going to be higher
than ever, just as it is for many consumers. The Department of
Defense alone, their overbudget, or unanticipated electric bill
is $500 million this fiscal year. That is where energy savings
performance contracting comes in.
As you know, you can see from the chart, energy service
companies privately finance the investment of energy efficient
equipment with no up-front cost to the Government. The building
owner, the Government, then pays for those retrofits for this
new equipment over time.
The Chairman. Can you just turn that thing a little bit?
There is a big glare on it, so we cannot see it. That is
better, thanks.
Mr. Wagner. The energy service company guarantees those
savings. That means the Government does not pay more for
utility costs than they would have paid under the ESPC, and
they get the new equipment after the investment is paid off.
The Government gets all the subsequent savings. It is truly a
win-win situation. Energy service companies are helping Federal
agencies all over the country do this.
One new project that we just installed is at the Denver
Federal Center, where we upgraded 27 buildings. This entire
project will save the Government $450,000 per year in energy
and operational cost, while reducing more than 6.6 million
pounds of harmful emissions.
There is a number of ESPC examples at Federal facilities. I
am proud to say one of the first ones ever was in New Mexico at
Los Alamos, where that ESPC is still saving the Government over
$2 million a year, and has a 40-percent reduction in emissions,
and so this is truly a great program, but it can be even
better, and I would like to quickly mention six quick, specific
legislative proposals to comment on. First of all, we support
expanding authority of ESPC's to include water in addition to
energy.
Currently, water projects are not really allowed under
civilian agency ESPC programs. Consequently, many Federal
facilities miss out on tremendous potential cost savings, and
water resources continue to be wasted. In contrast, water
savings have been allowed at defense facilities, because they
are authorized under a different statute.
You can see from the Fort Polk project that we did at an
Army military base the benefit of combining energy and water
savings. When you change out and you save hot water as well and
you can take those water savings you are much better able to
finance projects and put together much more comprehensive
projects. At non-defense facilities like veterans' hospitals,
water savings often cannot get approved, and many Federal
agencies could benefit by such change.
Second, we advocate removing the sunset provision for
ESPC's and grant permanent authority for this great program,
because they are a proven, reliable method to save energy for
the Federal Government.
Third, the FPCC also supports expanding the ESPC authority
for replacement authorities. Having this could open up new
opportunities for energy savings. However, it could mean
developing some projects where we do not have a lot of
experience. I might suggest that the committee think about
developing some pilot projects in this area, or authorizing
some. This could do a number of interesting things.
First, we could get off the ground quickly with some pilot
projects where there is opportunities already identified
without waiting for the Department to implement regulations and
policy, which might take months, or maybe even longer.
Second, we would get some lessons learned from those pilot
projects that could help develop regulations, and then third,
during those pilot projects we could inventory them to find out
where else we could do these types of projects. That is just a
suggestion.
Fourth, the FPCC supports high performance school programs,
insofar as grant funding could be used to help defray some of
the contracting costs for ESPC.
Fifth, the Federal Procurement Contracting Coalition
strongly opposes any effort to extend the utility financed
contracts currently beyond their 10-year time frame.
ESPC contractors are required to guarantee their savings.
In other words, if the savings do not materialize, we do not
get paid, and we are required to perform measurement and
verification methods. Unfortunately, under those utility
projects they do not have to do that, so if there is any
extension, we would encourage extending those requirements to
utility contracts.
Finally, we support the concept of an energy efficiency
bank, or source of Federal funds that could be used to
implement energy efficiency projects at facilities. Financing
projects with ESPCs may not be the appropriate tool in every
instance, and over the years there has been a lack of Federal
funds to do projects directly rather than financing. The
committee may also wish to consider making these funds
available to buy down the ESPC projects that have longer terms,
or to help make renewable energy projects more feasible under
ESPC.
On behalf of the FPCC, I appreciate the opportunity to
speak before you today and provide testimony. Thank you, Mr.
Chairman.
[The prepared statement of Mr. Wagner follows:]
Prepared Statement of Mark. F. Wagner, Director, Federal Government
Relations, Johnson Controls, Inc.
Mr. Chairman and members of the Subcommittee, thank you for
inviting me to address the various legislative proposals related to
energy efficiency. I am Mark Wagner, Director of Federal Government
Relations for Johnson Controls, Inc. and am testifying today on behalf
of the Federal Performance Contracting Coalition (FPCC), a group of
Energy Savings Performance Contractors who upgrade federal facilities.
I would like to concentrate my remarks on proposals that affect private
sector financing of energy improvements in Federal government
facilities.
Johnson Controls is a global market leader in facility services and
control systems. Since the 1880s when Warren Johnson invented the
thermostat, Johnson Controls has been working with government
facilities, schools, hospitals and commercial buildings to help create
comfortable, productive and safe building environments that are energy
efficient.
Like other energy service companies that are members of the FPCC,
we design, install and service new energy efficient equipment, such as
monitoring and control systems, HVAC systems, chillers and lighting, so
that buildings use less energy. Included in our service offering is
energy savings performance contracting (ESPC) which I will discuss in
more detail later.
According to the U.S. Department of Energy, there are some 4.5
million existing commercial buildings involving 55 billion square feet
of space. These buildings consume 30-40% of all energy and use 60% of
all electricity. It's estimated these facilities use 20-40% more energy
than necessary.
The largest single consumer of energy in the United States is the
federal government, spending $4 billion a year for its 500,000
buildings. According to the Department of Energy, the federal
government has over three billion square feet of floor space, located
in all climates. High-rise offices, research laboratories, aircraft
hangars, libraries, hospitals, tourist areas, parks, and prisons must
all be considered. In total they consume over 60 billion kilowatt-hours
of electricity each year.
This year, the federal government's electric bill will be even
higher, just as it is for many consumers. For the Department of Defense
alone, its unanticipated energy bill for this year is expected to be
$500 million.
Immediate conservation measures such as turning up the thermostats
this summer and shutting down escalators are only temporary solutions,
saving energy today but doing nothing about the problem tomorrow. True
energy efficiency is achieved--not by fiddling with the thermostat, but
by retrofitting existing building with energy efficient equipment.
That is where Energy Savings Performance Contracting (ESPC) comes
in.
Under an ESPC, an energy services company like Johnson Controls,
Honeywell, Duke Solution, Sempra Energy Services, NORESCO and others,
privately finance the investment of installing energy efficient
equipment with no up-front costs to the customer. The investment
includes identifying building energy requirements and acquiring,
installing, operating, and maintaining the energy-efficient equipment.
The building owner pays for these retrofits and new equipment over time
with dollars saved on energy and maintenance bills. The energy service
company guarantees the savings. This means the government agency does
not pay any more for utility costs than they would have paid without
the ESPC and the new equipment. After the investment is paid off, the
building owner gets all the subsequent savings. It's a win-win
situation.
Energy service companies are helping federal agencies all over the
country save energy through ESPCs. For example, Johnson Controls,
entered into an ESPC with the Denver Federal Center to upgrade 27
buildings. New chillers, building controls and lighting are being
installed, and we are re-commissioning an existing solar domestic hot
water heating system. The entire project will save $450,000 per year in
energy and operational costs for the next 11 years while reducing more
than 6.6 million pounds of carbon dioxide emissions. As mentioned,
other ESPC companies are making similar improvements to federal
facilities all around the country--and at a cost to the government
customer of only contracting and auditing.
Other good examples of federal ESPCs are at:
Los Alamos National Lab in New Mexico, saving $2.3 million
annually;
Army National Training Center at Fort Irwin, California,
saving $169,000 per year;
Veterans Affairs Medical Centers in San Francisco and Salt
Lake City, each saving $500,000 per year.
ESPC is a great tool for the federal government. But it can be even
better. I would like to outline several provisions included in pending
legislation under this Committee's jurisdiction that enhance the
program and save more energy and tax dollars.
1. Expand the Authority of ESPCs to Include Water, in Addition to
Energy
Currently water saving projects are not allowed under civilian
agency ESPC programs. Consequently, many federal facilities miss out on
tremendous potential cost savings and water resources continue to be
wasted by the government. DOE General Counsel has ruled that water
savings are limited under the statute governing ESPCs at civilian
agencies (42 USC 8287).
In contrast, water savings have been allowed for years at DOD
facilities. A different defense statute, (Title 10, Sections 2865 &
2866) authorizes ESPCs for DOD facilities and it allows water savings.
When the Defense Department originally passed Section 2865, it quickly
realized that water savings were not allowed under the legislation. One
year later Congress, through the Armed Services Committees, approved
DOD's request to add water cost savings to ESPC under Section 2866.
The Army's Fort Polk in Louisiana is a great example of an ESPC
project which combines both energy and water savings. The project
includes:
Replacing bathroom equipment (toilets, flush valves,
showerheads and faucets) with water conserving models in the
barracks.
Water Savings: 42 million gallons of water annually
Energy Savings: 43,500 therms of natural gas annually
Replacing all 450 washers and dryers on base with new
horizontal axis washers that use half the water and clean just
as well.
Energy Savings: 46,000 therms of natural gas and 135,000 kWh
of electricity
Water Savings: 14.4 million gallons of water and sewerage
annually
Installing hot water loop controls brining water temperature
up only when needed.
Energy Savings: 517,000 therms annually
In total this project is saving Fort Polk over $500,000 per year in
energy, water and operational costs.
At non-defense sites like Veterans Hospitals, water savings often
cannot get approved. Many federal agencies could benefit greatly from a
change in the ESPC authority to allow water savings, such as the
provision included in section 7 of S. 352.
2. Remove the Sunset ESPC Contractual Authority as Provided by S. 352
ESPCs are a proven, reliable method to save energy, reduce
operations and maintenance costs, provide new equipment for federal
agencies and reduce pollution. Why would the federal government want to
stop?
Unless the statute is again extended, current authority for federal
agencies to enter into ESPCs will expire in 2003. Certainly another
four-year extension could be granted for the program as provided by S.
388, but we would advocate removing the sunset provision completely and
provide permanent authority for ESPCs. Experience has shown that when
the sunset date approaches, some agencies become concerned and
reluctant to begin developing projects for fear the authority may not
last. Removing the sunset provisions would solve that problem.
3. Allow Replacement Facilities To Be Eligible for Federal ESPCs as
Provided by
S. 352 and S. 388
The Federal Performance Contracting Coalition also supports
expanding ESPC authority programs to allow them to be applied to
replacement facilities. Having this new authority could open up new
opportunities for energy savings. However, it would mean developing
some projects for which there is little or no experience either in the
government or commercial arena.
The Committee may want to consider authorizing several pilot
projects. This would have numerous advantages, including:
Several projects that already have been identified could
begin immediately, without waiting for the Department of Energy
to spend months or longer developing regulations and policy
governing the implementation of this new authority.
Government and industry would quickly gain from the lessons
learned at these sites, which could then aid in writing better
regulations and policy for broader authority.
While the pilot projects are being developed, the Department
of Energy could identify other federal buildings that could be
candidates for projects and determine the magnitude of the
potential.
4. High Performance Schools Program in Section 1302 of S. 597
The FPCC supports this legislation insofar as the grant funding for
school facility improvements can be used for the contracting costs of
Energy Savings Performance Contracts.
5. Oppose Extending Utility Contracts to 25 Years Without Safeguards
The Federal Procurement Contracting Coalition strongly opposes any
efforts to extend the term of utility financed contracts beyond their
current 10-year time frame without requiring a guarantee of energy
savings, a measurement and verification of those savings and a
reporting requirement to Congress. When Congress passed the Energy
Policy Act of 1992 providing authority for ESPC, it wisely required
certain safeguards. Congress demanded that if agencies were allowed to
commit future unappropriated dollars to pay for energy-financed
contracts, the dollar savings would have to pay for the cost of the
contract. To ensure that result, ESPC contractors are required to:
1. Guarantee the energy savings. In other words, if the
savings don't materialize we don't get paid.
2. Perform annual measurement and verification, which is the
method to prove the savings are real.
Unfortunately, utility financed contracts currently do not have
these same requirements and safeguards. But they should.
Our position is also consistent with separate memorandums (June
1999) from the DOE General Counsel and from the GSA Assistant
Commissioner of the Office of Financial and Information Systems. Both
memos call for guarantee of savings and measurement and verification
for utility financed energy contracts. However, it is not clear that
these requirements have been enforced consistently for utility
contracts.
6. Federal Energy Efficiency Bank
We support the concept of an energy efficiency bank or source of
federal funds that could be used to implement energy efficiency
projects at federal facilities. Financing projects with an ESPC may not
be the appropriate tool in every instance. Over the years there has
been a lack of federal dollars to directly pay for worthwhile energy
efficiency projects. The committee may also wish to consider making
funds from the bank available to ``buy down'' ESPC projects that have
long terms or help make renewable energy measures more affordable under
ESPCs.
On behalf of the FPCC, I also want to mention two ``congressional
actions'' that can assist in helping the Federal government get the
maximum out of the ESPC process.
First, the Department of Energy's Federal Energy Management Program
(FEMP) provides technical assistance for many of these projects. Their
appropriated funding must continue at a robust level. This assistance
is critical to helping federal agencies implement ESPC projects.
Second, congressional oversight could make all the difference in
assuring that federal agencies are indeed taking advantage of the
energy savings provided by ESPCs. A few years ago, a hearing on ESPCs
by the Veterans Affairs Oversight Subcommittee sparked a dramatic
increase in projects at VA Medical Centers. The Subcommittee asked the
Department of Veterans Affairs to provide quarterly reports on ESPCs
being implemented at medical centers throughout the country. Similar
oversight could be very helpful in getting agencies to use these
innovative types of energy efficiency and infrastructure improvement
contracts. In other words, we should stop asking agencies, ``Where can
you do an ESPC'' and begin asking, ``Why aren't you using them
everywhere?''
Thank you for the opportunity to testify today and I would be happy
to answer any questions.
The Chairman. Well, thank you, thank all of you very much
for your testimony here. Let me just ask a few questions.
Ms. Manoogian and Ms. Choate, maybe you could both respond
to this. One of the differences that exist in our pending bills
here is that in the proposal to increase the LIHEAP funding for
the future we have two different ways we are proposing to do
it. I have proposed in the bill that I have introduced to
increase the base program more, and not really increase the
emergency contingency fund authorization.
Senator Murkowski's proposal was to increase the emergency
level. Is there a preference on the part of LIHEAP
administrators as to how this authorization ought to be
accomplished, this increased authorization? Do either of you
have a point of view on that?
Ms. Manoogian. It would be preferable to have the base
funding increased, only because, for example, it provides us
with an opportunity to be able to establish what is necessary
to operate the program for the program year. Instead of raising
the contingency funds, then it is on an emergency basis, so it
does not provide a meaningful tool to be able to identify what
should your eligibility criteria be for an upcoming season,
what should your benefit level be set at.
I know that in the past 2 years we have relied heavily upon
emergency funds to help us get through the winter season and
avert any type of catastrophes for our households. The problem
has been, it has been a crisis management approach, and it is
after the fact, so our preference would be that the base level
be increased and not just emergency contingency funds.
The Chairman. Ms. Choate, did you have a point of view?
Ms. Choate. I agree with Mary Ann that the base funding
would be useful for the same reasons, not only that many States
try to make plans in advance, such as Maine. We would borrow
the money to start our program early to lock in prices in the
summer months, where the Federal funds are not received until
October, and we cannot do that if we do not know what the base
funding is going to be, or how much it will be, so it would
make a difference.
The Chairman. The administration has proposed to direct a
portion of Federal oil and gas royalties to the LIHEAP program
during times of high oil and gas prices. Do either of you have
a point of view on that proposal?
Ms. Manoogian. Not specifically, and I do not know the
details of the proposal. My only concern, again, is with
respect to--is that it makes the program much more vulnerable
and volatile to what is going to happen, the amount of funds
received from the royalties, in addition to, it is not clear to
me if it is, again, going to be able to enable us to do the
important and necessary program management that Ms. Choate and
I have already identified.
The Chairman. Erik, let me ask you, obviously, in trying to
move toward a more energy-efficient economy, one of the real
obvious requirements which you are working on is this business
of having an adequate workforce, a workforce that is adequately
trained in how to do that. To what extent do you see that as a
real bottleneck for getting from here to where we need to be?
I mean, is the problem that we have not adopted the right
policies at the Federal level, or do we really have a shortage
of people in the field all around this country who are trained
to put in place the energy efficiency measures that we all
think make sense?
Mr. Emblem. Mr. Chairman, the answer is yes to all three.
We have had policies in the past that have exacerbated the
problem, and we also have the issue of getting a workforce of
trained individuals who are trained to implement these new
technologies, and this energy-efficient equipment that is
needed to properly ventilate the buildings.
We also deal with the Government and regulatory issues.
After the energy crisis of the seventies, the ventilation rates
for buildings were reduced by 67 percent. In 1970, they were 50
cfm per person. They were reduced to 5 cfm per person, and now
they are back up to 20 cfm per person, but in the lag time,
these buildings have been designed around changes in government
regulations and government standards where we have to have
people now that are able to go back into these buildings and
assure that the proper ventilation rates and air conditioning
is obtained, and it is through training.
The Chairman. Mr. Wagner, let me ask you about, at the
current time, there is an executive order that requires a
certain level of energy efficiency to be built into new Federal
energy, or Federal construction projects, is that right?
Mr. Wagner. Yes, sir, and there is also a requirement to
have sustainable type designs in buildings, yes, sir.
The Chairman. How effective is that requirement, the way it
is presently operated?
Mr. Wagner. It is effective, because oftentimes designers
try. The problem is, sometimes there is a limit in terms of
funding, in terms of the building, so you have a push and pull
in terms of the type of things that you can implement in a
building up front when you design it, but those requirements
are definitely there.
The Chairman. Do you think there is a genuine effort by
architects and others who are proceeding to construct new
Federal buildings to build this in?
Mr. Wagner. I think that there is a number of new ways of
approaching buildings. We have seen it in the commercial sector
a lot. I think it takes a lot of innovation that you do not see
everywhere, but I think there are tremendous examples of
buildings where you can build this in at a first cost, and it
does not cost as much as you think it might.
The Chairman. And does that extend in this area of schools?
We give a lot of speeches about how we want energy-efficient
schools. Is there really anything in place Nation-wide that
causes that planning and thinking to be built in as new schools
are designed?
Mr. Wagner. Well, there is probably nothing real
comprehensive, because most of those designs are at the local
level.
The Department of Energy does have some good school
programs providing that type of assistance and guidance in
that. The other thing we have got to think about is, we have
got a huge inventory of schools out there, many old, that
probably--well, we can concentrate on the few new ones being
built, and many of them are--there are a lot of older buildings
out there that are wasting 20 to 40 percent of the energy out
there, and concentrating on trying to retrofit those for not
only the indoor environment but also the energy savings I think
is probably really where much of the focus needs to be.
The Chairman. What role do you see this committee or the
Federal Government playing in causing that to happen? I am
persuaded that we are way behind in adequate school
construction in this country, and that there is going to have
to be a very substantial increase in that effort over the next
decade or so. How do we ensure that that construction be
designed and accomplished in a way that makes sense?
Mr. Wagner. Well, I think if there is Federal funding that
has been discussed in the past, that might be available to
localities for school construction, or to assist in school
construction, we may want to think about requiring that certain
standards of efficiency are met, as opposed to providing
assistance and say, build whatever type of building you want, I
think, because it will continue to cost you in operation and
maintenance cost throughout the future, and waste money in the
future, so if you build them right the first time, that is
extremely important.
The Chairman. All right. Well, I think this is all useful
testimony. We need to digest it all and try to understand it,
and hopefully get it reflected in the legislation that we try
to enact here. Thank you very much.
Let us take a 5-minute break, and then we will have the
next panel.
[Recess.]
The Chairman. Why don't we go ahead here. This is our third
and final panel, and we are very glad to have them here. First,
we have Mr. Steven Nadel, who is the executive director of the
American Council for an Energy Efficient Economy here in
Washington, thank you for being here. Mr. Clifford Rees,
president of the Air Conditioning and Refrigeration Institute
in Arlington, Virginia. We appreciate you being here.
Mr. David Parks, president of Goodman Manufacturing Company
in Houston, Texas--thank you for being here--and Dr. Malcolm
O'Hagan, who is the president of the National Electrical
Manufacturers Association in Rosslyn. Why don't you go ahead,
and we will just go across in that order, if that works to
everyone's satisfaction.
STATEMENT OF STEVEN NADEL, EXECUTIVE DIRECTOR, AMERICAN COUNCIL
FOR AN ENERGY-EFFICIENT ECONOMY
Mr. Nadel. Thank you, Mr. Chairman. As you said, I am here
representing the American Council for an Energy-Efficient
Economy. We are a nonprofit organization dedicated to
increasing energy efficiency as a means for both promoting
economic prosperity and protecting the environment. I
appreciate the opportunity to appear before this committee
today.
In specific, I have been asked by committee staff to talk
about the Federal efficiency standards program. Federal
appliance and equipment efficiency standards were first adopted
in 1987 because many market barriers inhibit the purchase of
efficient appliances in the unregulated market. These barriers
include rush purchases, when the existing appliance breaks
down, and purchases by builders and landlords, who pay for the
initial cost but do not pay operating costs.
Standards remove inefficient products from the market, but
still leave consumers with a full range of products and
services to choose among. These standards are one of the
Federal Government's most effective energy-saving programs.
They are already reducing peak electric demand by the
equivalent of more than 200 powerplants, reducing consumer
bills by about $9 billion annually.
In order to provide additional cost-effective savings under
this program, we recommend that Congress extends the standards
program to several additional products. Congressional action is
needed, because in many cases DOE lacks the authority to set
new standards.
Congress should take three specific actions. First, under
current law, DOE has authority to adopt new standards on
consumer products. The same authority should be extended to
commercial products, since many of the best opportunities for
new standards are in the commercial sector.
Second, Congress should direct DOE to set standards on
several products with large opportunities for energy savings,
or for which additional technical work is needed before
specific efficiency standards can be set. Products that fall
into this category include residential ceiling fans, a
residential furnace and heat pump circulation fans, and
refrigerated vending machines.
I would note that this provision is now included in
legislation that passed the House Energy and Commerce
subcommittee yesterday.
Third, Congress should set standards on specific products
in cases where standards already developed by States, as well
as current voluntary standards such as Energy Star standards,
FEM standards, and industry standards provide a sufficient
foundation for Federal action.
By adopting standards directly, instead of calling for a
multiyear DOE rulemaking, Congress speeds up the date that
savings begin to accrue. Also, direct congressional adoption
frees up DOE resources for those products for which DOE data
collection and analysis are truly needed. Products that fall
into this category are distribution transformers, commercial
refrigerators, exit signs, traffic lights, floor lighting
fixtures for residences, ice-makers, commercial unit heaters,
and consumer electronic equipment, and my written testimony
provides written recommendations along these lines.
Consumer electronic equipment merits a little further
discussion. This equipment is the source of the energy-wasting
vampires that President Bush discussed in his June 28 remarks
at the Department of Energy. This equipment continuously uses
electricity, even when switched off.
President Bush has directed that Federal agencies only
purchase equipment with standby power use of 1 watt or less. By
adopting minimum efficiency standards at this same level, we
can move these savings beyond the Federal Government to other
users, and drive a stake through the heart of this energy
waste.
Analysis by my organization indicates that adopting
reasonable and cost-effective standards on these products will
reduce U.S. electric use in 2020 by about 5 percent of
projected residential and commercial use, and will reduce peak
electrical demand by the equivalent of about 40 to 50
powerplants. We estimate that the benefits of these standards
will be about five times greater than the cost, highly, highly
cost-effective.
In addition to new standards, I wanted to briefly mention
two other issues. First, there has been a lot of controversy
during the last 6 months about the new standard for residential
air conditioners and heat pumps. We strongly support the SEER
13 standard that was published in the Federal Register in
January. The distance between a SEER 12 and a SEER 13 standard
amounts to about 18,000 megawatts over the next 3 decades,
equivalent to the production of 60 new powerplants.
By our calculations, based on current electricity price
structures and reasonable estimates of the cost of a SEER 13
unit, the simple payback to the consumer to go from SEER 12 to
SEER 13 is only about 3.8 years. It is quite cost-effective to
consumers. As you noted in your initial remarks, part of the
reason DOE came up with much higher numbers is, they are using
1996 summer electricity prices.
There has been a lot of changes in electricity markets over
the last 5 years, and summer prices are higher. Winter prices
may be lower, but summer prices are higher, and this needs to
be reflected in the DOE analysis. Also, as I believe the
representative from Goodman Manufacturing will report, that as
this new equipment moves from a niche product to a mass-
produced product, cost should come down significantly relative
to current cost, and therefore DOE has overestimated the cost.
With reasonable cost estimates, with reasonable estimates of
the electricity price, this SEER 13 standard is clearly cost-
effective for American consumers.
Second, I wanted to note that DOE is many years behind the
congressionally set schedule for revising some of the current
efficiency standards. DOE does an annual process to set
priorities for new rulemakings. We recommend that after DOE
completes this process, in September or October of this year,
that this committee schedule an oversight hearing to review
DOE's standards plans for 2002. Such an oversight hearing
should explore options for picking up the pace so that these
rulemakings can be completed in a more timely manner, and
perhaps also explore ways to have the rulemakings be a little
bit less controversial.
In conclusion, I want to note that according to our
analyses, expanded appliance and equipment efficiency standards
are one of the most effective policies Congress could adopt
this year to reduce U.S. energy use over the next 2 decades.
The only other policies that we have analyzed with greater
potential energy savings are CAFE standards on passenger
vehicles and the utility sector systems benefit fund.
Efficiency standards can make a significant contribution
towards bringing U.S. energy supply and demand into better
balance, thereby improving the long-term reliability of our
electric grid, also helping our environment, our rural economy,
and individual consumer pocketbooks. Thank you very much.
[The prepared statement of Mr. Nadel follows:]
Prepared Statement of Steven Nadel, Executive Director, American
Council for an Energy-Efficient Economy
INTRODUCTION
ACEEE is a non-profit organization dedicated to increasing energy
efficiency as a means for both promoting economic prosperity and
protecting the environment. We were founded in 1980 and have
contributed in key ways to energy legislation adopted during the past
20 years, including the Energy Policy Act of 1992 and the National
Appliance Energy Conservation Act of 1987. I appreciate the opportunity
to appear before this Committee. Specifically I have been asked to
discuss the federal appliance and equipment standards program.
THE FEDERAL STANDARDS PROGRAM
Federal appliance and equipment efficiency standards were signed
into law by President Reagan in 1987 and expanded under President
Reagan in 1988 and President Bush in 1992. Minimum efficiency standards
were adopted in order to address market failures, replace a patchwork
of state standards, save consumers money, and reduce energy use and
peak electrical demand. Among the market failures addressed by
standards are lack of consumer awareness, rush purchases when an
existing appliance breaks down, and purchases by builders and landlords
who do not pay appliance operating costs and hence have no financial
incentive to value efficiency. Standards remove inefficient products
from the market but still leave consumers with a full range of products
and features to choose among. Since adoption, standards have sharply
cut the energy use of major energy using appliances and equipment while
not interfering with manufacturers' ability to offer excellent
performance and a wide array of features. For example, the typical
refrigerator manufactured today uses less than half the energy of an
average 1987 model, but is bigger and offers more features.
Appliance and equipment standards are clearly one of the federal
government's most effective energy-saving programs. In 2000, standards
on refrigerators and many other products reduced U.S. electricity use
by 2.5% and total U.S. energy use by 1.3%, including displacing the
need for 70,300 MW of generating capacity (the equivalent of 234 power
plants, 300 MW each). These standards reduced consumer energy bills in
2000 by approximately $9 billion with energy bill savings far exceeding
any increase in product cost. Consumer energy bill savings to date
total about $50 billion with a typical benefit-cost ratio of more than
3:1. By 2020, standards already enacted will save 4.3 quads per year
(3.5% of projected U.S. energy use), and reduce peak electric demand by
120,000 MW (more than a 10% reduction).\1\
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\1\ Geller, Kubo, and Nadel. 2001. Overall Savings from Federal
Appliance and Equipment Efficiency Standards. Washington, D.C.:
American Council for an Energy-Efficient Economy.
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APPLIANCE STANDARDS IN THE ADMINISTRATION ENERGY PLAN
The Bush/Cheney National Energy Policy devotes half-page to the
federal standards program and notes that these ``standards will
stimulate energy savings that benefit the consumer, and reduce fossil
fuel consumption, thus reducing air emissions.'' The Plan then
recommends that the Secretary of Energy: (1) ``support [the] appliance
standards program for covered products, setting higher standards where
technologically feasible and economically justified;'' and (2) ``expand
the scope of the appliance standard program, setting standards for
additional appliances where technologically feasible and economically
justified.''
SUMMARY OF ACEEE RECOMMENDATIONS
In order to provide additional cost-effective savings under this
program, we recommend three actions:
1. Congress should enact new efficiency standards for products now
or soon to be covered by state efficiency standards and by several
voluntary standards programs.
2. The Bush Administration should permit a SEER 13 efficiency
standard for residential central air conditioners and heat pumps to
proceed.
3. DOE, with adequate funding and encouragement from the Congress,
should complete Congressionally-mandated rulemakings in a timely
manner.
In the balance of this testimony I will elaborate on these three
recommendations.
opportunities for new products to cover under the standards program
The most recent federal legislation on standards, the Energy Policy
Act, was passed in 1992. Since then there have been many technical and
programmatic developments that make it possible and desirable to extend
the federal standards program to additional products. These
developments include work on new standards by several states,
development of Energy Star specifications for many efficient products,
and additional research on the amount of energy used for different
energy end-uses. In particular, for the past year, the California
Energy Commission (CEC) has undertaken a rulemaking to develop new
standards for several products not currently covered by the federal
standards program.
Based on the work of the CEC and others, we recommend that the
federal standards program be extended to cover eleven additional
products. These products fall into two general categories: (1) eight
products for which sufficient technical information is available for
Congress to enact specific new standards; and (2) three products for
which the U.S. Department of Energy (DOE) needs to conduct additional
research before specific standards can be set. In our opinion, where
possible, Congressional action is preferable to DOE action, since a DOE
rulemaking takes at least three years, and often far longer (DOE is
still working on several rulemakings called for in the 1992 Energy
Policy Act). Furthermore, for the majority of the standards in both
categories, Congressional action is needed because under current laws,
DOE is only authorized to extend the standards program to ``consumer
products'' and many of the opportunities for new standards involve
products used by businesses and not consumers. In the paragraphs below,
I briefly describe the eleven products which should be covered under
the standards program. I list products in approximate order of likely
energy savings.
Torchiere lighting fixtures. Torchieres are portable lighting
fixtures that aim light upward and bounce it off the ceiling to provide
indirect lighting. In recent years they have become ubiquitous in
American homes and apartments due to their high light levels and low
purchase price. However, these products are major energy hogs, and can
be fire hazards as well (more than 400 fires have been traced to
halogen torchieres). The typical product consumes 300 Watts or more of
power. Much more efficient torchieres based on high-output compact
fluorescent designs use less than 100 Watts and provide the same or
equal light output without creating a potential fire hazard. The simple
payback for these more efficient units is typically less than two years
(simple payback is the number of years for operating cost savings to
offset the incremental cost of the efficiency improvements). The CEC
has developed minimum efficiency standards for these products that cap
energy use at 190 Watts and include other important technical
details.\2\ These same standards should be adopted nationally.
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\2\ California Energy Commission. ``Appliance Efficiency
Regulations (draft of April 2001).'' Sacramento, CA.
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Furnace and heat pump fans. The efficiency of residential furnaces
and heat pumps is covered by current federal standards, but these
standards don't include the energy consumed by the blower used to
circulate conditioned air around the home. The typical furnace fan uses
800-1000 kWh per year, but more efficient fans now on the market use
less than 300 kWh, a saving of more than 60%.\3\ In high volume mass
production the more efficient fans should cost on the order of $100
more than a conventional fan, resulting in a simple payback to the
homeowner of less than three years.\4\ Additional technical work is
needed to decide how best to set a fan power limit (i.e., these limits
need to take account of the heating capacity and airflow of the
system), so responsibility for setting the standard should be delegated
to DOE.
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\3\ GAMA. October 2000 Consumers' Directory of Certified Efficiency
Ratings. Arlington, VA: Gas Appliance Manufacturers Association.
\4\ Kubo. Sachs and Nadel. 2001. Opportunities for New Appliance
and Equipment Efficiency Standards: Energy and Economic Savings Beyond
NAECA and EPAct (draft). Washington, DC: American Council for an
Energy-Efficient Economy.
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Electronic equipment and power supplies. Many types of electronic
equipment used in the home continuously use small amounts of power,
even when they are turned off. Examples include TVs, VCRs, microwave
ovens, and many rechargeable products. Aggregated over the many hours
in a year and the number of products in place in a typical home, this
``standby'' power use amounts to about 5% of electricity use in a
typical home according to analyses by Lawrence Berkeley National
Laboratory and others.\5\ More efficient power supplies and other
technical improvements can reduce this standby power use by an average
of about 75% in the vast majority of cases, at a typical cost of no
more than a couple of dollars per product.\6\ For some of these
products, the Energy Star program awards special labels to identify
power-stingy designs. We recommend that Congress adopt a standby power
limit of one watt for all of these products, but to allow DOE to set
looser standards where manufacturers can demonstrate that a one watt
limit is not technically feasible or economically justified.
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\5\ Rainer, Greenberg and Meier. 1996. ``You Won't Find These Leaks
with a Blower Door: The Latest in `Leaking Electricity' in Homes.'' In
Proceedings 1996 ACEEE Summer Study on Energy Efficiency in Buildings.
Pp. 1.187-1.191. Washington, DC: American Council for an Energy-
Efficient Economy.
\6\ Kubo et al. See note 4.
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Commercial unit heaters. Unit heaters are used in open commercial
and industrial spaces to provide heating. The typical system has a
seasonal efficiency of about 63%, whereas systems with power or
induced-draft burners typically have seasonal efficiencies of about
82%. The more efficient systems reduce energy use an average of 23%,
and have a simple payback of about two years.\7\ Due to the impact of
federal standards, residential heating systems now predominantly use
power or induced-draft burners and DOE has just adopted new regulations
for commercial furnaces that require similar improvements.\8\ We
recommend that Congress adopt requirements for unit heaters the same as
those just adopted by DOE for commercial furnaces.
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\7\ Calculations by ACEEE from incremental cost and energy savings
estimates in Krauss, Hewett, and Lobenstein. 1992. Commercial Gas Space
Heating Equipment: Opportunities to Increase Energy Efficiency.
Minneapolis, MN: Center for Energy and the Urban Environment.
\8\ DOE. 2001. ``Energy Efficiency Program for Commercial and
Industrial Equipment: Efficiency Standards for Commercial Heating, Air
Conditioning and Water Heating Equipment; Final Rule.'' Federal
Register (66)9, Jan. 1 2, pp. 3336-3356.
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Ceiling fans. Large ``Casablanca style'' ceiling fans are used in
many homes to circulate air around the room and help occupants feel
more comfortable. However, most of these fans have inefficient motors
and blade designs, not to mention inefficient lighting systems (many of
these fans also include lights). A major manufacturer has recently
introduced an improved design that reduces energy use by 40%. The
incremental cost of this efficient model relative to standard models
with similar features is about $20, resulting in a simple payback to
the consumer of about 3\1/2\ years.\9\ The Energy Star program is
launching a program this fall for residential ceiling fans that will
require better blade/motor designs and more efficient lighting.\10\ DOE
should be directed to review the new Energy Star specification and set
minimum efficiency standards that build upon this specification.
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\9\ E Source Tech News--5/15/01.
\10\ Ecos Consulting. 2001. ``Final Draft Energy Star
Specification for Residential Ceiling Fans. June.
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Distribution transformers. Distribution transformers are used in
many commercial and industrial buildings to reduce voltage from line
voltage to voltages used to power building systems. These systems are
typically purchased on the basis of first costs, leaving significant
opportunities for cost-effective energy savings. The National
Electrical Manufacturers Association (NEMA) has developed a recommended
standard that reduces the energy losses associated with this equipment
by an average of about one-third, with the added cost of the more
efficient equipment paying back in about three years.\11\ Massachusetts
and Minnesota have adopted the NEMA standard as a mandatory standard
and California and New York are now in similar adoption processes. DOE
was instructed in the Energy Policy Act of 1992 to develop standards
for these products but nine years later this process is still dragging
on. We recommend that Congress adopt the NEMA standard, thereby saving
the time and expense of continuing the DOE rulemaking process.
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\11\ Barnes, Das, McConnell, and Van Dyke. 1997. Supplement to the
`Determination Analysis'' and Analysis of the NEMA Efficiency Standard
for Distribution Transformers. Oak Ridge, TN: Oak Ridge National
Laboratory.
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Vending machines. Vending machines are primarily purchased by
beverage distributors and placed in a variety of locations at no cost
to the property owner. However, the property owner does pay for the
electricity to operate these machines. Since the purchaser does not pay
operating costs, there is little incentive to purchase efficient
machines and most vending machines are inefficient as a result. A study
by Arthur D. Little Company for DOE estimated that the energy use of
vending machines can be reduced by 44-51% using measures with an
average simple payback of 2.4-3.2 years.\12\ However, there is
insufficient information on the energy use of the full range of
machines sold today, so further data collection is needed before
standards can be set. The CEC is now planning to collect this data. DOE
should be directed to set new standards based on this data and its own
technical and economic analyses.
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\12\ Arthur D. Little Co. 1996. Energy Savings Potential for
Commercial Refrigeration Equipment. Washington, DC: U.S. Dept. of
Energy.
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Commercial refrigerators and freezers. Federal standards currently
cover residential refrigerators and freezers but do not cover the
larger commercial units used in restaurants, hotels, hospitals and
other commercial applications. Research by Arthur D. Little Company for
DOE found that the energy use of typical commercial refrigerators and
freezers can be reduced by 45-55% using improvements with an average
simple payback to the user of just over 2 years.\13\ The California
Energy Commission (CEC) has developed minimum efficiency standards for
these products based on the energy use of the average product on the
market today.\14\ These same standards should be adopted as national
standards.
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\13\ Ibid.
\14\ CEC 2001. See note 2.
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Traffic lights. Like exit signs, most traffic lights use
incandescent bulbs, but new ``light emitting diode'' (LED) are now
available that reduce energy use about 90% and have additional
maintenance and safety benefits Unlike incandescent lamps, the LED
lights operate for many years without bulb changes, and when LEDs age,
they just get dimmer until they are replaced, avoiding the safety
problems that can happen when a lamp in a traffic light burns out.\15\
The Energy Star program has established an energy and safety
performance specification for the more-efficient traffic signals.\16\
California is in the process of adopting this specification as a
mandatory minimum performance standard.\17\ A similar standard should
be adopted at the national level. Such a standard should apply to red
and green lights, since these account for the vast majority of traffic
light energy use, and have the most favorable economics (typically
simple payback periods of 1-4 years, depending on the application).\18\
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\15\ Kubo et al. 2001. See note 4.
\16\ EPA. ``Energy Star Program Requirements for Traffic Signals.''
Washington, DC: U.S. Environmental Protection Agency. Also, CEC 2001
(see note 2).
\17\ CEC 2001. See note 2.
\18\ Kubo et al. 2001. See note 4.
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Exit signs. Many exit signs use incandescent bulbs (40 Watts is
typical), and since they are continuously illuminated, typically cost
around $30 per year to operate. New exit sign designs use LEDs and
consume on the order of 3 Watts, reducing energy use by more than 90%
relative to an incandescent sign. The simple payback for using LED
signs instead of incandescent signs is generally less than two years.
In addition, the LED signs do not require periodic bulb changes,
resulting in substantial maintenance cost savings.\19\ As with traffic
lights, there is an Energy Star specification that California is now
adopting as a mandatory state standard.\20\ A similar national standard
should be adopted.
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\19\ Kubo et al. 2001. See note 4.
\20\ EPA. ``Energy Star Program Requirements for Exit Signs.''
Washington, DC: U.S. Environmental Protection Agency.
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Ice-makers. Ice-makers are commonly used in hotels, motels,
restaurants and hospitals to produce ice in large quantities. Ice-
makers use a substantial amount of energy in order to freeze water, and
then keep the ice cold. Products now on the market vary substantially
in efficiency, with the most efficient products typically using about
30% less energy than the least efficient. Relative to the least
efficient machines, the most efficient ones typically have a simple
payback of one year or less.\21\ The Federal Energy Management Program
(FEMP) has developed a specification that identifies the top performing
units on the market today for each product category (features and
size).\22\ This specification should be adopted as a national standard.
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\21\ Kubo, Nadel and Suozzo. 2000. ``Commercial Packaged
Refrigeration: An Untapped Lode for Energy Efficiency. In Proceedings
2000 ACEEE Summer Study on Energy Efficiency in Buildings. Pp. 3.203-
3.218. Washington, DC: American Council for an Energy-Efficient
Economy.
\22\ FEMP. Commercial Ice-Maker Efficiency Recommendation.
Washington, DC: Federal Energy Management Program, U.S. Dept. of
Energy.
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Energy and economic savings. My organization, ACEEE, is now
completing an analysis of the energy and economic savings from adopting
standards on these products. Our preliminary results indicate that
these standards will save approximately 73 billion kWh of electricity
in 2010 and 164 billion kWh in 2020. The savings in 2020 amount to
about 5% of projected residential and commercial electricity use in
that year, and reduce peak electrical demand by the equivalent of 40-50
power plants (300 MW each). In addition, the unit heater standard by
itself will reduce commercial building gas consumption by about 3% in
2020, a remarkable achievement for a product with annual sales of only
about 1/4 million units. These standards will also result in
substantial economic savings to consumers and businesses. Our
preliminary analysis indicates that for products purchased through
2020, discounted net benefits (benefits minus costs) will total about
$80 billion, with a benefit-cost ratio of more than 5:1. Furthermore,
as noted in the Administration National Energy Policy, the energy
savings will reduce air pollutant emissions. We estimate that these
standards will reduce carbon emissions by more than 20 million metric
tonnes (MMT) in 2020, which can be a useful component of U.S. efforts
to reduce greenhouse gas emissions. Standards will also result in
significant reductions in SO2, NOX, and mercury
emissions, thereby helping power companies to meet new standards that
might be set in near-term amendments to the Clean Air Act.
NEW STANDARDS FOR RESIDENTIAL CENTRAL AIR CONDITIONERS AND HEAT PUMPS
When Congress passed the National Appliance Energy Conservation Act
of 1987, it established initial efficiency standards for residential
central air conditioners and heat pumps and called for DOE to set
revised standards no later than January 1, 1994. The rulemaking
formally began in September 1993 and a final rule was published in
January 2001 in the closing days of the Clinton Administration. This
final rule was the result of more than seven years of effort, but was
seven years behind schedule. In our opinion, while this rule fell short
in several respects,\23\ it was a reasonable one. This rule established
a new minimum efficiency standard of SEER 13, effective January 2006
(SEER is the Seasonal Energy Efficiency Ratio, a measure of average
unit efficiency over the full cooling season). There are now more than
600 distinct models on the market that meet this standard, including
models from most manufacturers. We estimate that a SEER 13 standard
will cost the consumer an average of about $170,\24\ but that the more
efficient models will reduce electricity bills by an average of about
$50 per year, resulting in a simple payback to the consumer of about
3\1/2\ years. Furthermore, this rule is an important part of efforts to
avert future electric reliability problems. This rule will reduce peak
electric demand by about 57,000 MW over the next three decades,
averting the need for about 190 new 300-MW power plants.\25\
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\23\ The rule fails to address two very important issues: high
temperature performance (which affects utility peak loads) and the
ability to maintain high efficiency across a broad range of outdoor
temperatures and installation conditions. There are straightforward
solutions to both of these issues, but unfortunately these were not
included in the final rule.
\24\ DOE estimates the incremental cost at about $340, but we
reduce the DOE estimate by 50% to account for DOE's long history of
overestimating incremental costs for new appliance standards (see note
35).
\25\ Our peak demand estimates are different from DOE's because DOE
used only two field studies to estimate peak--demand savings, including
one that is inconsistent with all other available data. ACEEE used five
studies from various regions of the country.
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Unfortunately, in April 2001, the Administration announced that it
will soon propose rolling back the standard from SEER 13 to SEER
12.\26\ We believe this action is misguided and may well be illegal.
This action is misguided because it will substantially reduce the
energy, peak demand, and economic savings achieved by the new standard.
This decision is also misguided because it relies on several
unreasonable analysis assumptions, assumptions which need to be
corrected if DOE is going to proceed with a new rule. This decision is
probably illegal because it ignores a Congressional directive in NAECA
as well as several Court decisions.
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\26\ DOE. 2001. ``DOE to Propose New 20% Increase in Energy
Efficiency Standards for Residential Air Conditioners and Heat Pumps.''
Press Release, April 13. Washington, DC: U.S. Dept. of Energy.
---------------------------------------------------------------------------
The difference in energy, peak demand and financial savings between
SEER 12 and SEER 13 is very substantial. According to analyses by
ACEEE, relative to a SEER 12 standard, a SEER 13 standard will:
Reduce peak demand by 13,000 MW by 2020 and 18,000 MW by
2030, the equivalent of 43 and 60 new power plants respectively
(300 MW each);
Increase energy savings by 45% or more;
Reduce consumer electric bills by more than $18 billion over
the next 30 years;
Have a typical simple payback period to the consumer of less
than four years.\27\
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\27\ This estimate is based on DOE's estimate of the cost
difference between a SEER 12 and 13 unit, reduced by 50% (see note 24)
divided by annual operating cost savings of $19 which reflects a 2.5
cents/kWh summer electricity price differential not included in the DOE
analysis.
DOE estimates that a SEER 13 split air conditioner will cost the
average consumer $122 more than a SEER 12 unit, which is 5% more than a
SEER 12 unit. While we believe that DOE has overestimated the price
increase, even the DOE cost estimate is small relative to the benefits
I have just described.
In recent statements before Congress, Administration officials have
defended the Administration's decision to propose a SEER 12 standard,
arguing that this decision was based on analyses by career staff that
showed that low-income consumers would be disadvantaged by a SEER 13
standards, that a SEER 13 standard could increase the use of electric
resistance heat, and that a SEER 13 standard would adversely affect
competition. However, such statements ignore the fact that only 21% of
low-income households have central air conditioners in their homes and
the majority of low-income households rent and do not own their
homes.\28\ Renters will benefit from standards, for without standards
most landlords will purchase a low-price unit for their tenants. For
these and other reasons, many low-income advocacy organizations support
the SEER 13 standard.\29\ If the Administration is truly concerned
about low-income households, it should set up a program to help low-
income households replace their present air conditioners (recall that
the difference between SEER 12 and 13 is only $122) rather than
weakening standards for all American households.
---------------------------------------------------------------------------
\28\ EIA. A Look at Residential Energy Consumption 1997.
Washington, DC: Energy Information Administration, U.S. Dept. of
Energy.
\29\ Organizations that have written letters in support of the SEER
13 standard include the Consumer Federation of America, National
Consumers League, and several low-income weatherization agencies.
---------------------------------------------------------------------------
Similarly, the Administration alleges that the difference in price
between a SEER 12 and SEER 13 split heat pump ($188) will cause many
households to switch from heat pumps to electric resistance heat,
despite the fact that electric resistance heat will approximately
double heating bills relative to use of a heat pump (such a doubling
will increase average annual heating bills by about $350,\30\ making
for a very poor return on the first cost savings).
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\30\ The average annual cost for space heating for homes with heat
pumps was $352 in 1993 (EIA. Household Energy Consumption and
Expenditures, 1993. Washington, DC: Energy Information Administration,
U.S. Dept. of Energy).
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And with regard to competition, concerns about impacts on
competition are contained in a Department of Justice (DoJ) letter, but
this letter does not provide an explanation for these concerns nor does
it state how DoJ arrived at its concerns.\31\ We do know that DoJ staff
interviewed many manufacturers, but DoJ did not to our knowledge
interview efficiency advocates, state government officials, or other
interested parties. Thus, the DoJ process is a ``black box'' and a
potentially biased process. DoJ needs a broader and better documented
process for its concerns to receive the same weight as other data in
this rulemaking that have been publically-vetted and documented.
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\31\ Nannes, John. Letter to Eric Fygi, Acting General Counsel,
DOE, dated April 5, 2001. Washington, DC: U.S. Dept. of Justice.
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From material published by DOE, concerns about impacts on
manufacturers and competition primarily relate to the fact that many
manufacturers make much of their profits on ``high-end'' units with
extra features and above average efficiency. The concern is that a
minimum standard at SEER 13 will make it hard to differentiate a higher
efficiency unit for high-end sales. We disagree for two reasons. First,
with new compressors, new heat exchangers, and other technical
improvements it is possible to produce reasonably-priced SEER 14 and
SEER 15 units. For example, just this week Amana announced a full line
of SEER 15 units that use single-speed compressors (single-speed
compressors are less expensive than the multi-speed compressors that
many other manufactures use to achieve SEER 15).\32\ Second, we believe
it is possible for manufacturers to develop and successfully market
value-added SEER 13 and SEER 14 units that perform better in the field
than baseline SEER 13 units. Due to common installation problems as
well as optimization of many air conditioner designs for a single test
temperature, many air conditioners perform at a lower efficiency in the
field than in a laboratory. My organization is now working with
utilities, federal, state and regional organizations, and some
manufacturers to develop a voluntary program to promote ``robust'' air
conditioners that warrant a price premium because they perform better
in the field.\33\ It is products like these that will allow
manufacturers to continue to sell high-end products and continue to
earn the profits they depend on.
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\32\ Schultz, Matt, Product Manager, Amana Heating and Air
Conditioning. Email dated July 9, 2001.
\33\ Sachs. 2001. ``Draft Prospectus: Sustained High Performance
Central Air Conditioners and Heat Pumps: Delivering Energy Efficiency
in Use.'' Washington, DC: American Council for an Energy-Efficient
Economy.
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Statements by DOE officials also ignore several major errors in the
DOE analysis. First, the DOE analysis is based on summer 1996
electricity prices, adjusted downward for assumed long-term declines in
electricity prices. In reality, as wholesale markets and many retail
markets have restructured, electricity pricing is increasingly based on
season of use (and often time of use as well). A December 2000 analysis
of U.S. wholesale electricity prices in 1998-2000 by Synapse Energy
Economics found that electricity prices in the summer afternoons and
evenings when air conditioners are primarily used are 2-9 cents per kWh
higher than the 1996 prices used by DOE.\34\ Second, the DOE analysis
is based on today's technologies for achieving improved efficiencies.
New technology developments and continuing productivity improvements
will bring these costs down by 2006 when the new standard goes into
effect, just as they substantially reduced the costs of the current
SEER 10 standard relative to prior DOE and industry projections.\35\ If
DOE is going to reassess the central air conditioner standard, it needs
to correct these analysis errors before proceeding.
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\34\ Woolf, Biewald, Allen, White and Johnston. 2000. Marginal
Price Assumptions for Estimating Customer Benefits of Air Conditioner
Efficiency Standards. Cambridge, MA: Synapse Energy Economics.
\35\ In 1982, DOE estimated that the incremental cost to raise air
conditioner efficiency to SEER 10 would be $349 (DOE, 1982, Consumer
Products Efficiency Standards, Engineering Analysis Document). U.S.
Census Bureau data shows that when the SEER 10 standard took effect,
air conditioner prices did not go up at all (Current Industrial
Reports, Refrigeration, Air Conditioning, and Warm Air Heating
Equipment). Interestingly, the Air Conditioning and Refrigeration
Institute (the industry trade association) was even farther off the
mark; in the early 1980's they estimated that the incremental cost of a
SEER 10 unit would be $762 (as cited in CEC. 1984. ``Staff Report on
Proposed Revision of Appliance Efficiency Standards for Central Air
Conditioners Under 65,000 Btu/Hour, P400-84-015. Sacramento, CA:
California Energy Commission).
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The Administration's attempt to roll back the air conditioner
standard also ignores clear language in NAECA that new standards cannot
be set that are weaker than previous standards, and several court
decisions that a new Administration faces a high burden of proof before
it can roll back final rules of a previous Administration. When
Congress passed NAECA it was concerned about administrative roll-backs
of standard levels and added a specific provision that ``The Secretary
may not prescribe any amended standard which increases the maximum
allowable energy use, or decreases the minimum required energy
efficiency of a covered product.'' The Bush Administration's proposal
to roll back the air conditioner standard violates this provision. The
Bush Administration proposal also is based on very limited technical
arguments, and will probably have trouble getting past the Supreme
Court decision that ``an agency changing its course by rescinding a
rule is obligated to supply a reasoned basis for the change beyond that
which may be required when an agency does not act in the first
instance.'' \36\ Finally, all of the actions to date to roll back the
standard have been made without any opportunity for public comment,
which appears to be in violation of the Administrative Procedures Act.
Several state attorney generals and environmental, consumer and low-
income advocacy organizations recently brought suit challenging these
actions.\37\ Given the energy problems facing the U.S., it would be far
more productive to put resources into developing and implementing new
policies to save energy, rather than using large amounts of resources
to pursue a legally-questionable action that will increase energy use.
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\36\ Motor Vehicle Manufacturers Association v. State Farm Mutual
Ins Co. et al., 463 U.S. 29 (1983).
\37\ State of New York and State of Connecticut, Petitioners
against Spencer Abraham. June 18, 2001. ``Petition for Review.'' New
York, NY: U.S. District Count, Southern District of New York. Also, a
similar suit was filed the same day by Natural Resources Defense
Council, Consumer Federation of America, and Public Utility Law
Project.
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At today's hearing the President of the Air Conditioning and
Refrigeration Institute (ARI) will also testify. Based on past ARI
statements, in addition to some of the some arguments DOE is making, he
is likely to argue that DOE underestimated the installation costs of
meeting a new air conditioner standard, that a SEER 13 standard would
be particularly burdensome in manufactured housing, that a SEER 13
standard would eliminate approximately 85% of current units from the
market, and that a SEER 13 standard will raise unemployment.\38\ In our
opinion, most of these allegations are wrong and others are half-
truths. Specifically:
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\38\ ARI. ``ARI Asks DOE to Increase Efficiency by Fairer 20
Percent,'' press release. April 6, 2001. Arlington, VA: Air
Conditioning and Refrigeration Institute.
DOE's analysis does consider installation costs. While some
SEER 13 units are significantly larger than current units,
others are not. For example, Goodman Manufacturing's SEER 13
units are only about three inches larger than basic units. The
size of the unit depends on the technologies that a
manufacturer uses to improve efficiency, and some of these
technologies do not increase unit size.
DOE's final rule specifically treats ``space constrained
products,'' such as units for manufactured housing, as a
separate product class. Required efficiency levels for this
special class have yet to be decided.
Manufacturers are correct that a substantial majority of
current products do not meet the SEER 13 standard. However, an
even higher percentage of then-current products did not meet
the SEER 10 standard when it was enacted and manufacturers had
little difficultly meeting that standard.\39\
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\39\ In 1986, when NAECA was negotiated, probably less than 10% of
then-current models met the 1992/93 NAECA standards. ARI data from 1984
(in ``ARI Comparative Study of Energy Efficiency Ratios'') indicate
that 6.8% of unitary air conditioner shipments had a SEER of 10 or more
while only 4.8% of heat pumps exceeded a SEER of 10. We do not have
1986 data, but during the mid-1980s, SEER grew only modestly, hence our
estimate that less than 10% of models in 1986 had a SEER of 10 or more.
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A SEER 13 standard will increase employment, not reduce it.
According to DOE's analysis, employment in the industry will
modestly increase since SEER 13 units require more materials
and labor than SEER 10 units.\40\ An old DOE analysis does find
that overall national employment will modestly decline with a
SEER 13 standard due to the impacts of higher air conditioner
costs on consumer purchases,\41\ but that analysis was based on
very high estimates of the extra cost to produce SEER 13 units.
DOE has substantially decreased its cost estimates but did not
revise the national employment analysis before publishing the
SEER 13 final rule.
---------------------------------------------------------------------------
\40\ DOE. 2000. Technical Support Document: Energy Efficiency
Standards for Consumer Products: Residential Central Air Conditioners
and Heat Pumps. Oct. Washington, DC: U.S. Dept. of Energy.
\41\ Ibid.
Senator Barbara Boxer has introduced a resolution (S.J. Res. 15)
calling for Congressional disapproval of the rule submitted by DOE
relating to the postponement of the effective date of central air
conditioner standards under the terms of the Congressional Review Act
of 1995. We thank Senator Boxer for introducing this resolution and for
bringing attention to this important issue. We recommend that this
Committee should do all it can to encourage the Administration to drop
its rollback proposal.
revisions to other current standards
Under existing legislation, DOE is supposed to review and revise
existing appliance and equipment efficiency standards every five years.
Unfortunately, DOE is very far behind in this process. For example, DOE
is just now starting a proceeding to revise the residential furnace
standard, a proceeding that under current legislation should have been
completed by Jan. 1, 1994. Similarly, DOE has not yet started the
revision process for dishwashers, even though that process should have
been completed in 1996. And I discussed earlier, DOE is still working
on a rulemaking for distribution transformers that was originally
called for in the Energy Policy Act of 1992. There is a need to work
through this backlog which will require improved management at DOE as
well as increased annual appropriations.
According to our analysis, if DOE can complete the major scheduled
rules, substantial energy and financial savings will result. Our
analysis includes development of new standards on commercial air
conditioners, dishwashers, commercial boilers, and reflector lamps over
the next few years, and further revisions to refrigerator, water
heater, and residential air conditioner standards in the longer term.
We estimate that in 2020 these standard revisions can save 53 billion
kWh of electricity and 187 trillion Btu's of natural gas. The
electricity and gas savings together will reduce consumer energy bills
by more than $4 billion annually by 2020.
Under DOE's appliance standards ``Process Improvement Rule''
priorities are set in the summer for rulemakings for the new fiscal
year. With the change in Administration, this annual process is
modestly delayed but is scheduled to begin soon. We recommend that
after this annual process is completed in September or October, that
this Committee schedule an oversite hearing to review DOE plans for
standards rulemakings in 2002, including any new rulemakings that may
be called for under comprehensive energy legislation that will likely
be pending at that time. Such an oversite hearing should explore
options for ``picking up the pace'' so that rulemakings can be
completed in a more timely manner, and perhaps also with less
controversy than some of the recent rulemakings.
CONCLUSION
Appliance and equipment efficiency standards have been one of the
federal government's most effective energy-saving policies. These
standards have also provided substantial net economic benefits to
consumers and businesses and contributed to reduced emissions of air
pollutants. It has been nearly a decade since the scope of the
appliance and equipment standards program has changed. Based on state
and voluntary standards developed over this past decade, Congress
should expand the scope of the standards program to include 11
additional products. These additional standards will reduce energy use
in the residential and commercial sectors by about 5% in 2020, reduce
peak electrical demand by the equivalent of 40-50 new power plants, and
result in net savings to consumers and businesses of more than $80
billion. The standards we recommend are primarily based on state and
voluntary standards that are either now in effect or that are expected
to be finalized in the next month or so. These state and voluntary
standards have not been controversial. Hopefully these same standards
can also be adopted at the national level without controversy. To the
extent issues arise, ACEEE stands ready to provide technical
information and to negotiate in good faith with affected trade
organizations, similar to the role we played prior to the adoption of
standards legislation in 1987, 1988, and 1992.
With the savings from standards on new products, plus savings from
existing standards (including the SEER 13 air conditioner standard) and
from new standards now being considered by DOE, U.S. electricity use in
2020 will be reduced by more than 10% relative to what use would be
without the federal standards program. While these savings will not
solve U.S. energy problems, they will make a significant contribution
towards bringing U.S. energy supply and demand into better balance,
helping our environment, our economy, and our pocketbooks.
That concludes my testimony. Thank you for the opportunity to
present these views.
The Chairman. Thank you very much.
Mr. Rees, go right ahead.
STATEMENT OF CLIFFORD REES, JR., PRESIDENT, AIR CONDITIONING
AND REFRIGERATION INSTITUTE, ARLINGTON, VA
Mr. Rees. Mr. Chairman, thank you very much for the
opportunity to appear before the committee today. As you
mentioned, I represent the Air Conditioning and Refrigeration
Institute, or ARI, a national trade association of over 240
manufacturers who produce over 90 percent of North American-
produced central air conditioners and commercial refrigeration
products. I am here today to voice our support for the
Department of Energy's proposed 20-percent increase in the SEER
standards for central air conditioners and heat pumps.
The industry has worked diligently over the last 20 years
to improve the energy efficiency of residential air
conditioners and heat pumps. We are proud that we have been
able to provide our customers with equipment that is at least
40 percent more efficient than 20 years ago. Concurrently, the
industry is making a seamless transition to nonozone-depleting
refrigerants, and has introduced new compressor technologies,
while continuing to offer the consumer affordable choices for
their comfort, for their health and safety.
As you know, the current SEER standard is 10, and has been
since it was initially set in 1992. For the past few years, DOE
has conducted rulemaking procedures to determine new, more
rigorous, and minimum standards for the industry to meet. I
congratulate the U.S. Senate for encouraging the development of
the Department of Energy's process improvement rule, which has
created a balanced, rational, inclusive approach to rulemaking.
I commend the Department's staff for their openness and
diligence throughout the process, and their fairness in meeting
the economically justified and technologically feasible
standard set forth in the National Appliance Energy
Conservation Act. Parenthetically, let me add that whoever the
ultimate decisionmaker is in setting the standard, the
decisionmaker would benefit greatly from analyzing carefully
over $2 million of DOE analyses, including those done by
independent contractors, which were developed during the
residential air conditioner and heat pump rulemaking.
During the rulemaking, the overwhelming majority of the
air-conditioning industry, indeed, 237 of ARI's 240 members,
came to support, I will admit, however, in some cases
reluctantly, a 20-percent increase in the standard, and that is
to say, a 12-SEER.
I say reluctantly only because even a 20-percent increase
will carry with it significant burdens in cost, and impact on
consumers and considerable redesign and retooling cost in the
industry. I want to assure the chairman, however, that while
this appears to be a split within my own membership in my
association, in fact we are unanimous in supporting the goal of
improved conservation and energy efficiency. The split is a
difference of opinion about how best to go about attaining that
goal.
I do not want to spend my time today speaking to you about
the last-minute effort in January at DOE to impose a 30-percent
increase in the standard, and I am not here to tell you that a
13-SEER minimum standard cannot be implemented by the industry.
Obviously, air conditioners with a 13-SEER are manufactured and
sold today. So are 14's, 15's, and 16's. They cost a lot more
to make, and we are very proud of these products, but they are,
in fact, more expensive, yet they are made and sold to the
fortunate few who can afford them and to those who believe they
will recoup the added cost through energy savings.
This latter group lives predominantly in the Southern tier
of the United States, primarily Florida, Texas, Arizona, and
southern California. Frankly, if the industry had only its
immediate self-interest in mind, it would rally behind the 13-
SEER standard and take the money and run, but the short-term
monetary boon to the industry from 13-SEER standard would be
outweighed by the impact on the industry's customers, on jobs,
and ultimately on the industry.
I want to summarize briefly what a 30-percent increase in
the SEER standard would mean to consumers, to jobs and, in the
long run, the industry. First, as the map of the United States
attached * to my testimony clearly demonstrates, there will be
no meaningful economic payback for the overwhelming majority in
this country. 75 percent of consumers purchasing of 13-SEER
will incur a net cost.
---------------------------------------------------------------------------
* Attachments have been retained in committee files.
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In other words, at the end of the lifetime of the product
the savings and operating costs will not be sufficient to
offset the incremental first cost of the product. The situation
is even worse for low-income consumers. 83 percent of them will
not benefit from the 13-SEER standard. In effect, the 13-SEER
only makes clear economic sense in the tip of Florida and the
tip of Texas. This simply makes no sense as a national policy.
Indeed, it is economically dangerous to consumers and
industry alike, and runs counter to our mutual goal of energy
conservation, and there could be a significant health risk to
senior citizens and lower income families who rely upon
affordable air conditioning today not just for their comfort
but for their health and for their safety.
Second, the increased cost to the consumer going from a 10-
SEER product to a 13-SEER product will be over $700. In what I
believe to be an incredibly, and in fact what is an incredibly
price-sensitive market, I believe that the average consumer who
still has a choice could very well make the choice of repairing
and keeping the old equipment, which is quite often and could
be even as low as a 6-SEER, but even with 9-SEER equipment
retaining that old equipment is less energy-efficient, and it
runs counter to our mutual goal, and God forbid that those who
rely upon air conditioning not just for their comfort but for
health and safety, but would make the decision that they could
not afford to replace the equipment at all.
The increased cost of a 13-SEER minimum standard will have
a disproportionate impact on lower income homeowners and the
elderly. It is simply inaccurate to suggest that those in low
income brackets do not purchase homes and therefore would be
unaffected by the cost of a 13-SEER standard. There are 13
million homeowners with incomes below $21,000. There are 34.8
million with incomes below $52,000, and $52,000 may sound like
a lot of money, but if you are trying to house, feed, clothe,
and education children, this additional cost without the return
on the investment is a significant burden.
For older Americans, there is a significant burden as well.
Half the households headed by persons 65 and older live on less
than $37,000 annually.
Third, there are 9 million manufactured homes in this
country. Most often, there is simply insufficient physical
space to fit the indoor coil of a 13-SEER air conditioner with
a cooling capacity of three times and up in the standard 20-
inch wide by 22-inch deep alcove or closet used to store the
heating and cooling equipment in manufactured homes. Many of
these homes are now built in two or three sections with cooling
loads of as much as 5 tons. These manufactured houses will
require extensive retrofits in addition to the added cost of
the 13-SEER equipment.
Contrary to the belief of some, air conditioners made for
manufactured houses are conventional products and are, in fact,
covered by the rule. They are not part of the space-constrained
products exempted from this rule by DOE. Retrofitting these
homes would require significant costly modifications.
Fourth, a 13-SEER would eliminate 84 percent of all new
central air-conditioning models in the market today. For some
manufacturers, 100 percent of all their air conditioner product
lines will not satisfy the 13-SEER standard.
And fifth, according to DOE, thousands of jobs will be lost
between the years 2006 and 2030 if a 13-SEER minimum standard
is adopted.
Consequently, here is what the 12-SEER standard achieves: a
20-percent increase in current efficiency standards, affordable
air conditioning for Americans, preservation of jobs in the
United States, and preservation of competition in the industry.
Our belief in the fairness and value of the 12-SEER is
shared by others. In fact, the Department of Justice expressed
a concern that a 30-percent increase in the standard to a 13-
SEER would have anticompetitive implications for the industry.
Additionally, because thousands of jobs would be lost between
2006 and 2030, the Small Business Administration opposed a 13-
SEER standard and supported a 12-SEER.
Of significance, the Air Conditioning Contractors of
America, representing top air conditioning and refrigeration
contractors in this country, who best understand the dynamics
of the marketplace, believe that the 12-SEER represents the
best, fairest approach to increasing energy efficiency and
achieving the greatest energy conservation. The Manufactured
Housing Institute has voiced its concern regarding the 13-SEER
because of the higher cost to residents of millions of homes.
The National Association of Homebuilders opposes the 13-SEER
standard, cautioning that each $1,000 added to the cost of new
homes disqualifies up to $400,000 buyers.
And finally, and perhaps most significantly, even the DOE
staff did not support a 13-SEER during last year's rulemaking,
believing a 12-SEER to be in the Nation's best interest.
Additionally, there are alternative means to achieving the
increased energy efficiencies desired without imposing the
hardships of a 30-percent increase on consumers. Our studies
reveal that poor installation and servicing of air conditioning
equipment can result in up to a 40-percent loss in energy
efficiency.
As a result, the entire industry, contractors, wholesalers
and manufacturers, banded together several years ago to develop
the North American technician excellence program to voluntarily
improve technician training, require certification for
technicians, and improve the installed performance of our
equipment through better installation and servicing.
Wholesaler and contractor associations provide much of the
training, distribution, and administration of the testing.
Manufacturers, except for one, have provided over $6 million to
date for the development and management of this independent
nonprofit association, similar to what the automobile industry
did some 20 years ago.
Even if only 25 percent successful, when added to the
enhanced consumer awareness of the benefits of periodic checkup
and maintenance contracts, and the 12-SEER, the energy savings
would exceed that of a mandated 13-SEER without having citizens
bear the cost burden.
Finally, Mr. Chairman, by 2030 the 12-SEER standard would
save 3 quads of energy at a cost to the Nation of $1 billion.
Increasing the SEER an additional 10 percent increases the cost
to the Nation to $4 billion.
In summary, we support the 20-percent increase in the SEER
standards because it is fair, balanced, and economically
justifiable. It meets our energy conservation needs without
punishing those in working families, senior citizens, and the
vast majority of the country who will never recover in energy
savings the increased cost of a 13-SEER product. A 12-SEER
product is beneficial to both consumers and industry, and
represents a significant additional contribution to the
Nation's goal of conserving our energy supplies. I appreciate
the chairman's indulgence and my time, and I would be pleased
to answer any questions, sir.
[The statement of Mr. Rees follows:]
Prepared Statement of Clifford Rees, Jr., President, Air Conditioning
and Refrigeration Institute, Arlington, VA
Thank you Mr. Chairman for the opportunity to appear before the
Committee today. I represent the Air-Conditioning & Refrigeration
Institute (ARI), a national trade association that represents the
manufacturers of over 90% of North American-produced central air
conditioners and commercial refrigeration equipment. I am here to voice
our support for the Department of Energy's (DOE) proposed 20% increase
in the Seasonal Energy Efficiency Ratio (SEER) standards for central
air conditioners and heat pumps.
The industry has worked diligently over the last 20 years to
improve the energy efficiency of residential central air conditioners
and heat pumps. We are proud that we have been able to provide our
customers with equipment that is at least 40% more efficient than 20
years ago. Concurrently, the industry effected a seamless transition to
non-ozone depleting refrigerants, and introduced new compressor
technologies, while continuing to offer the consumer affordable choices
for their comfort, health and safety.
As you know, the current SEER standard is set at 10 SEER, and has
been since it was initially set in 1992. For the past few years, DOE
has conducted rulemaking procedures to determine new, more rigorous
minimum standards for the industry to meet. I congratulate the U.S.
Senate for encouraging the development of the Department of Energy's
Process Improvement Rule, which has created a balanced, rational,
inclusive approach to rulemaking. I commend the Department of Energy
staff for their openness and diligence throughout the process, and
their fairness in meeting the ``economically justified and
technologically feasible'' standard set forth in the National Appliance
Energy Conservation Act. Parenthetically, let me add that whoever the
ultimate decision maker in setting this standard is--whether it be
Congress or DOE--the decision maker would benefit greatly from
analyzing carefully over $2 million of DOE analyses--including those
done by independent contractors which were developed during the
residential air-conditioner and heat pump rulemaking. During the rule-
making, the overwhelming majority of the air conditioning industry--
indeed 237 out of ARI's 240 members--came to support (I will admit, in
some cases, somewhat reluctantly) a 20% increase in the standard, that
is to say a 12 SEER. I say reluctantly only because even a 20% increase
will carry with it significant burdens in cost and impact on consumers.
I do not want to spend my brief time today speaking to you about
the last minute effort in January at DOE to attempt to impose a 30%
increase in the standard to a 13 SEER. And I am not here to tell you
that a 13 SEER minimum standard could not be implemented by the
industry. Obviously, air conditioners with a 13 SEER are manufactured
and sold today. So are 14's, 15's and 16's. We like those products.
But, they are more expensive--and for good reason. They cost a lot more
to make. Yet they are made and sold today to the fortunate few who can
afford them and to those who believe they will recoup the added cost
through energy savings. This latter group lives predominantly in the
southern tier states, primarily in Florida, Texas, Arizona and Southern
California. Frankly, if the industry had only its immediate self
interest in mind, it would rally behind a 13 SEER standard and take the
money and run. But the short-term monetary boon to the industry from a
13 SEER standard would be outweighed by the impact on consumers, jobs,
and ultimately, in the long term, the industry.
I do want to summarize briefly what a 30% increase in the SEER
standard would mean to consumers, to jobs and, in the long run, to the
industry:
First, as the map of the United States attached to my testimony
clearly demonstrates, there will be no meaningful economic payback for
the overwhelming majority of the country. Seventy five percent (75%) of
consumers purchasing a 13 SEER will incur a net cost. In other words,
at the end of the lifetime of the product, the savings in operating
cost will not be sufficient to offset the incremental first cost of the
product. The situation is even worse for low-income consumers--83% will
not benefit from a 13 SEER standard.
In effect, a 13 SEER only makes clear economic sense in the tip of
Florida and the tip of Texas. It simply makes no sense as a national
policy. Indeed, it is economically dangerous to consumers and industry
alike, and runs counter to our mutual goal of energy conservation. And,
there could be significant increased health risks to senior citizens
and lower income families who rely on affordable air conditioning today
not just for their comfort, but for their health and safety.
Second, the increased cost to the consumer going from a 10 SEER
product to a 13 SEER product will be over $700.00.
In what is an incredibly price-sensitive marketplace, what
do you think the average consumer will do when confronted with
that? Probably exactly what you or I would do . . . keep the
old one . . . which is likely to be a 6 to 9 SEER product
manufactured in the 1980's. This is less energy efficient.
Keeping older equipment operating longer runs counter to our
mutual goal of energy conservation.
The increased costs of a 13 SEER minimum standard will have
a disproportionate impact on lower income homeowners and the
elderly. It is simply inaccurate to suggest that those in low
income brackets do not purchase homes and therefore would be
unaffected by the costs of a 13 SEER minimum standard. There
are 13.2 million homeowners with incomes below $21,920.00 per
year; another 9.8 million--or 23 million total--with incomes
below $35,072; and an additional 11.8 million--or 34.8 million
total--with incomes below $52,608 according to the National Low
Income Housing Coalition. $52,000 may sound like a lot of
money, but if you are trying to house, feed, clothe and educate
children, this additional cost--without a return on the
investment--is a significant burden.
For older Americans, there is a significant burden too. Half
of the households headed by persons 65 and older live on less
than $37,000 annually.
Third, there are 9 million manufactured homes. The 13 SEER standard
will not allow sufficient physical space to fit the indoor coil of air
conditioners with a cooling capacity of 3 tons and up in the standard
2" wide x 22" deep alcove or closet used to store the heating and
cooling equipment in manufactured houses. Many of these homes are now
built in 2 or 3 sections, with cooling loads of as much as 5 tons.
These manufactured houses will require expensive retrofits in addition
to the added cost of the 13 SEER equipment. Contrary to the belief of
some, air conditioners made for manufactured houses are conventional
products and are, in fact, covered by the rule. They are not part of
the ``space-constrained'' products exempted from this rule by DOE.
Retrofitting these homes would require significant, costly
modifications to house the larger 13 SEER equipment in addition to the
greater cost of the 13 SEER equipment. The 13 SEER standard will have a
significant impact on manufacturers selling to this market.
Fourth, a 13 SEER would eliminate 84% of all new central air
conditioning models in the market today and 86% of all new heat pumps,
at a cost of $350 million to the industry for redesign and retooling.
For some small manufacturers, 100% of all their air conditioner product
lines will not satisfy the 13 SEER standard.
Fifth, according to DOE, thousands of jobs will be lost between the
years 2006 and 2030 if a 13 SEER minimum standard is adopted.
Accordingly, the U.S. Small Business Administration supports the 20%
increase in the SEER standard and opposes a 13 SEER minimum standard.
By contrast, here is what a 12 SEER standard achieves:
(1) A 20% increase over current energy efficiency standards;
(2) Affordable air conditioning for many more Americans;
(3) Preservation of jobs in the United States; and
(4) Preservation of competition in the industry.
Our belief in the fairness and value of the 12 SEER is shared by
others. In fact, the Department of Justice expressed concerns that a
30% increase in a standard to a 13 SEER will have anti-competitive
implications for the industry. Additionally, because of the thousands
of jobs which would be lost, between 2006 and 2030, the Small Business
Administration opposed a 13 SEER standard and supported a 12 SEER. Of
significance, the Air Conditioning Contractors of America (ACCA),
representing top air conditioning and refrigeration contractors in this
country, who understand the dynamics of the marketplace best of all,
believes the 12 SEER represents the best, fairest approach to
increasing energy efficiency and attaining the greatest energy
conservation. The Manufactured Housing Institute has voiced its concern
regarding a 13 SEER because of the higher costs to residents of 9
million homes, mostly occupied by families on limited incomes. The
National Association of Home Builders opposes a 13 SEER standard,
cautioning that each $1,000 added to the cost of new homes disqualifies
400,000 buyers. And finally, and perhaps most significantly, even the
DOE staff did not support a 13 SEER during last year's rule-making,
believing a 12 SEER to be in the nation's best interest.
Additionally, there are alternative means to achieve the increased
energy efficiencies desired, without imposing the hardships of a 13
SEER minimum on the consumers. ARI studies reveal that poor
installation and servicing of air conditioning equipment results in up
to a 40% loss in energy efficiency. Consequently, the entire industry--
contractors, wholesalers and manufacturers--banded together several
years ago to develop North American Technician Excellence (NATE) to
voluntarily improve technician training, require certification for
technicians and improve the installed performance of our equipment
through better installation and servicing. Wholesaler and contractor
associations provide much of the training, distributing and
administering of the certification testing. Manufacturers--except for
one--have provided over $6 million dollars to date for the development
and management of this independent non-profit association similar to
what the automobile industry did with Automotive Service Excellence
(ASE) over 20 years ago. Even if only 25% successful, when added to
enhanced consumer awareness of the benefits of periodic checkup
maintenance contracts, and the 12 SEER, the energy savings would exceed
that of a mandated 13 SEER without having the citizens bear the cost
burden.
Finally, by 2030, the 12 SEER standard would save 3 quads of energy
at a cost to the nation of $1 billion dollars. Increasing the SEER an
additional 10% increases the cost to the nation to $4 billion dollars.
In summary, ARI supports a 20% increase in the SEER standards
because it is fair, balanced, and economically justifiable. It meets
our energy efficiency needs without punishing those in working
families, senior citizens, and the vast majority of the country that
will never recover in energy savings the increased costs of a 13 SEER
product. A 12 SEER product is beneficial to both consumers and
industry, and represents a significant additional contribution to the
nation's goal of conserving our energy supplies.
I would be pleased to answer any questions the Committee may have.
The Chairman. Thank you for your testimony.
Mr. Parks.
STATEMENT OF DAVID PARKS, PRESIDENT, GOODMAN MANUFACTURING
COMPANY, HOUSTON, TX
Mr. Parks. Mr. Chairman, thank you for your invitation to
testify here today. As you stated, my name is David Parks. I am
president of Goodman Manufacturing in Houston, Texas. I have
worked both on the supply side and the demand side of this
equation.
Let me start by giving you a brief background of our
company. Goodman is the second largest residential heating and
air conditioning manufacturer in the Nation. We produce a
complete line of residential and light commercial air
conditioning and heating products with facilities in Houston,
Texas, as well as Fayetteville, Tennessee, and Dayton,
Tennessee. Name brands sold by Goodman include Amana, Goodman,
GmC, and Janitrol.
The three major messages I would like to bring to the
committee today, first of all, in America we are struggling to
meet energy demand. Secondly, there are actions we can take
towards solving these problems. By strengthening energy
efficiency standards to the 13-SEER, we can avoid the need for
more powerplants and also lower the bills of consumers across
the Nation.
Lastly, this debate contains several misconceptions.
Stronger 13-SEER standards do not limit the consumer's choices,
they do not impose unreasonable costs, and they do not hurt low
income families.
Let me expand on these points further. At the time when our
Nation is struggling to meet increased energy demands, it is
clear we must embrace the most effect energy efficiency
measures available for consumer products. In the State of
Texas, air-conditioning represents more than 50 percent of a
homeowner's electric costs. The use of more efficient energy
appliances, specifically air-conditioners and heat pumps, will
significantly reduce energy consumption, cut utility costs for
consumers, and improve air quality by reducing the number of
pollutants emitted from our fossil fuel electric power
generating facilities.
Looking to the DOE's own data, it indicates that moving
from a 13 standard, up from the current 10 level standard, will
avoid the need for the equivalent of 53 new 400-megawatt
powerplants by the year 2030. As you heard earlier in
testimony, the ACEEE has estimated this number would actually
be up to 41,000 megawatts, which is equivalent to 100 new
powerplants.
Goodman strongly recommends raising the minimum efficiency
standard for air-conditioners to 13-SEER. Given the tremendous
benefit associated with the 13-SEER standard, Goodman believes
that the DOE decision to roll back the original standard to the
newly proposed standard of 12-SEER lacks merit. In our opinion,
the DOE appears to be basing its decision on several
misconceptions surrounding this 13-SEER.
First is the claim that not all manufacturers have
capabilities to produce the more efficient equipment, thus
limiting choice. In fact, the 13-SEER technology has been
available to both large and small manufacturers for
approximately 15 years. Based on the Air-Conditioning and
Refrigeration Institute data, virtually all manufacturers
produce 13-SEER equipment today. The chart to my right lists
those companies.
In reality, the only difference between a 10-SEER, a 12-
SEER, and a 13-SEER is a little more copper and a little more
aluminum used in manufacturing coils. Given the fact that these
units have equivalent technologies, at Goodman we run all of
our equipment through the same facilities and same assembly
lines.
The second misconception is that the 13-SEER standard would
cost consumers substantially more money than the proposed 12-
SEER standard. This is not true. According to DOE, the average
difference in cost between a 13-SEER and a 12-SEER is
approximately $122. Since a 13-SEER is 8 percent more efficient
than a 12, consumers will save more on their electric bills
each and every month for the life of the unit. Thus, over an
average life of a unit, the savings will easily cover the cost.
Moreover, Goodman is confident, with the implementation of
the 13-SEER standard the market will drive down prices and make
more efficient equipment even more affordable for all
consumers. How do we know this? From experience.
In 1992, when the Government implemented efficiency
standards at the 10-SEER, the cost of 10-SEER air-conditioning
dropped dramatically across the Nation. The reason for this
change is simple. Once the standard is set, more sales of that
type of unit will occur, and more volume is manufactured,
thereby allowing the manufacturers to run their plants more
efficiently and pass the savings on to the consumers.
Since most consumers tend to purchase at the minimum
standard, it is critically important to establish the standard
at the correct level, the 13-SEER. This would allow for the
most efficient equipment to be available at an affordable
price.
Some believe that this slight increase in cost will deter
consumers from purchasing more efficient units. We believe the
opposite is true. When considering the purchase of a unit, the
cost difference between a 12 and a 13 is negligible. In any
case, the additional cost of the 13 would only take a few years
to recoup longer than the 12, according to DOE's Nation-wide
analysis, and payback analysis occurs much faster in higher
cooling zones. This is true even based upon the outdated
electric cost used in this analysis. After that time, the
consumer will profit continuously from the more efficient 13-
SEER.
Critics of the 13-SEER have routinely expressed that this
standard will negatively impact lower income families and the
elderly. This, too, is a misconception. The Census Bureau has
determined that most low-income families with central air-
conditioning rent their home.
It is an assessment that this benefit from the energy
savings and lower electricity bills associated with a 13,
without bearing the up-front costs, would actually enhance low-
income families' purchasing power for other needed items. For
these low income families who must purchase central air-
conditioning, the incremental costs of improved efficiency will
be made up through lower utility bills.
Goodman has a marketing philosophy of selling in volume,
and the incremental cost to the manufacturer to produce 13-SEER
is only about $100. We feel the most efficient technology
should be made available to people of all income levels at
affordable prices. Unfortunately, not all manufacturers have
the same marketing philosophy. Instead, some manufacturers may
be seeking protection of higher profit margins on their more
efficient equipment, as a 13-SEER standard would force all
manufacturers to be truly competitive and provide all consumers
with the most affordable energy technology for air conditioners
today.
We believe there are actions that Congress can and should
take to address the unfortunate decision by the DOE to roll
back the higher standards. In fact, the 13-SEER standard we
believe would be more consistent with the President's effort to
promote energy efficiency and conservation.
To provide long-term solutions to meet our energy and
environmental goals, we need a national energy policy that
promotes efficiency, conservation, and new supply technologies.
Goodman urges Congress to focus attention on improving
efficiency standards for these products.
In conclusion, the most important message I bring, I feel,
is that we are struggling to meet demand, there is a solution
to this, and we strongly suggest that we strengthen energy
standards for 13-SEER. If we act now, we can avoid the need for
additional powerplants and reduce energy costs for all
consumers, including the elderly and low-income families.
Again, thank you for the opportunity to appear before you
today. I have submitted my comments for the record, and am
pleased to answer any questions.
[The statement of Mr. Parks follows:]
Prepared Statement of David Parks, President, Goodman Manufacturing
Company, Houston, TX
Goodman is the world's largest privately held air conditioning,
heating and appliance manufacturer and the second largest manufacturer
here in the United States. Founded in 1975 by the late Harold Goodman,
Goodman remains entirely family-owned. We produce a complete line of
residential and commercial air conditioning and heating equipment with
facilities in Houston, Texas as well as Dayton and Fayetteville,
Tennessee. Name brands sold by Goodman include Amana ,
Goodman , GmC , Janitrol , Caloric
and Modern Maid .
At a time when our nation is struggling to meet increasing energy
demand it seems clear that we must embrace the most effective energy
efficiency measures available today for consumer products, including
household appliances. Electricity used for heating and cooling accounts
for the bulk of total electricity use in U.S. households. In the state
of Texas, air conditioning represents more than 50 percent of a home's
electricity cost.\1\ The use of more energy-efficient appliances,
specifically air conditioners and heat pumps, will provide a
significantly reduced energy consumption, cut utility costs for
consumers, and decrease the amount of harmful pollutants emitted in the
environment.
---------------------------------------------------------------------------
\1\ Public Utility Commission Release, ``PUC Urges Energy
Conservation Hotter Temperatures Create Higher Demand for
Electricity'', 7/31/99.
---------------------------------------------------------------------------
The simplest method for reaching these three goals is raising the
minimum standard for air conditioners to a level of 13 SEER (seasonal
energy efficiency ratio) from the current level of 10 SEER.
Looking to the future, the Department of Energy's (DOE's) own data
indicates that moving to a 13 SEER standard from the 10 SEER level will
avoid the need for the equivalent of 53 new 400 megawatt power plants
by 2030 \2\ (Attachment A). Other organizations such as the American
Council for an Energy-Efficient Economy (ACEEE) estimate that DOE's
analysis is extremely conservative and does not attribute the correct
portion of peak demand to air conditioning use. In fact, ACEEE
estimates indicate that 41,500 megawatts of energy would be saved which
is equivalent to 103 new 400-megawatt power plants would be avoided by
2030.\3\ Increased air conditioner efficiency would help provide both a
short and long-term solution to energy shortages.
---------------------------------------------------------------------------
\2\ DOE Press Release, 1/18/01 and 4/13/01.
\3\ American Council for an Energy-Efficient Economy (ACEEE)
Website.
---------------------------------------------------------------------------
Accordingly Goodman recommends raising the minimum efficiency
standard for residential air conditioners to 13 SEER. Higher efficiency
units save consumers more money on their monthly electricity bills and
reduce harmful pollutants in the environment.
Goodman has conducted studies showing that more efficient air
conditioners reduce power plant emissions because each unit requires
less electricity to operate. Research also shows that the deployment
and use of high efficiency air conditioners significantly reduces air
pollutant emissions including nitrogen oxides (NOX), sulfur
dioxide (SO2) and greenhouse gases from fossil-fueled
electric power plants.
Given the tremendous benefits associated with the 13 SEER standard,
Goodman believes that the Department of Energy's (DOE's) decision to
rollback the original standard of 13 SEER to a newly proposed standard
of 12 SEER lacks merit. In our opinion, DOE appears to be basing its
decision on several misconceptions surrounding the 13 SEER standard.
Let me explain.
The first of these misconceptions by DOE is that not all
manufacturers have the capability to produce the more efficient
equipment, thus limiting consumer choice. In fact, the 13 SEER
technology has been available to both large and small manufacturers for
approximately 15 years. As you can see from this list (Attachment B)
generated based on Air Conditioning and Refrigeration Institute data,
virtually all manufacturers are able to and do produce 13 SEER
equipment today. In reality, the only difference between a 10 SEER
unit, a 12 SEER unit and a 13 SEER unit is a little more copper and
aluminum used in manufacturing different sized evaporator coils. A 12
SEER unit has a slightly larger coil than a 10 SEER unit, a 13 SEER
unit slightly more than a 12 SEER unit. Given the fact that the units
have equivalent technologies, at Goodman we run all of our equipment
down the same assembly line.
You will also note that what are considered to be small
manufacturers are included in the list. Goettl Air Conditioning, a
small manufacturer based in Arizona, supports the stronger standard.
With respect to small manufactures of specialty products for markets
like manufactured housing, where space constraints limit efficiency
with conventional technology, DOE has said that the final rule would be
open to exemptions. Here is a case where an exemption would make sense.
A second misconception has been that the 13 SEER standard would
cost consumers substantially more money than the proposed 12 SEER
standard. This is not true. According to the DOE, the average
difference in cost between a 13 SEER unit and a 12 SEER unit is
approximately $122.\4\ The difference in costs for Goodman units is
comparable to this estimate (Attachment C). Since a 13 SEER unit is 8
percent more efficient than a 12 SEER unit, consumers will save more on
their electric bills each and every month for the life of the unit.
Thus, over the life of a home cooling unit, the savings will easily
cover the increase in cost, between a 12 SEER unit and a 13 SEER unit.
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\4\ Department of Energy Press Release, 4/13/2001.
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Moreover, Goodman is confident that with the implementation of a 13
SEER standard, the market will drive prices down and make the more
efficient equipment even more affordable for all consumers. How do we
know this? From experience. In 1992, when the government implemented
the efficiency standard at 10 SEER , the cost of the 10 SEER air
conditioning unit dropped dramatically across the nation. The reason
for the change in price is simple. Once the standard is set, more sales
of that type of unit will occur and more volume is manufactured,
thereby allowing the manufacturers to run their plant more efficiently
and pass the savings on to the consumer.
Some believe that this slight increase in cost would deter a
consumer from purchasing a more efficient unit. However, we believe
that when considering the purchase of a unit that is between 2000 and
5000 dollars, the difference in cost between a 12 SEER unit and a 13
SEER unit is negligible and, in any case, the additional cost of the 13
SEER unit would only take 1.2 years \5\ longer to recoup according to
DOE. After that time, the consumer will profit continuously from the
more efficient unit. It should be noted, however, that DOE's payback
estimates took into account significantly reduced electricity prices of
only 7.42 cents per kilowatt hour. Whereas today the nation is facing
increasing energy costs greater than previously estimated.
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\5\ Department of Energy Press Release, 4/13/2001.
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In fact, the Public Utility Commission (PUC) of Texas issued a news
release on June 20, 2001 stating that customers may face higher
electricity bills this summer than last summer because of higher
natural gas costs. The release went on to state that utilities surveyed
by the PUC indicate a statewide average increase of approximately 18
percent this summer over last for a typical household. Some customers
can expect electric bills to increase as much as one-third this summer
compared to last summer for the same amount of electricity. Thus taking
updated energy cost information into account would yield shorter pay
back periods of the more efficient equipment for consumers. It should
also be noted that on November 16, 2000, the PUC of Texas sent former
Secretary of Energy Bill Richardson a letter supporting the 13 SEER
standard.\6\
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\6\ PUCT letter of support, 11/16/00.
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A third misconception has been that there is an enormous difference
in the size of the units and a tremendously higher related cost for
installation. It is clear that an increased efficiency standard will be
established at least at a level of 12 over the current 10 SEER
standard. When the decision is made to adopt the 12 SEER standard, the
unit size will be slightly bigger and will require some structural
modifications to install the indoor portion of the system including
ductwork during installation of the unit. Once we acknowledge that
there will be a standard that will likely require some structural
modification, one must compare the 12 SEER unit to the 13 SEER unit.
The difference between our 13 SEER and 12 SEER external equipment is
only 3-5 inches in height. The internal equipment size for the 12 and
13 are similar, and there is almost no difference in the installation
costs associated with a 13 SEER unit and a 12 SEER unit.
In addition, critics of the 13 SEER standard have routinely
expressed that the 13 SEER standard will negatively impact lower income
families and the elderly. This too is a misconception. The Census
Bureau has determined that most low-income families with central air
conditioning rent their homes.\7\ It is our assessment that they would
benefit from the energy savings and lower electricity bills associated
with a 13 SEER unit without bearing the actual up front equipment
costs. For those low-income families who must purchase a central air
conditioning unit, the incremental cost of improved efficiency will be
made up through lower utility bills.
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\7\ Bureau of the Census, Annual Demographic Survey, March
Supplement, 2001.
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Finally, in our opinion, Goodman has a marketing philosophy of
selling in volume. The incremental cost to the manufacturer to produce
a 13 SEER unit is only about a $100 and we feel that the most efficient
technology should be available to people of all income levels at an
affordable price. Unfortunately, not all manufacturers have this same
marketing philosophy. Instead some manufacturers may be seeking
protection of higher profit margins on their more efficient equipment.
A 13 SEER standard would force all manufacturers to be truly price
competitive and provide all consumers with the most affordable energy
efficient technology for air conditioners that is available today.
CONCLUSIONS
In conclusion, Goodman is a supporter of the 13 SEER standard
because we believe it is a cost-effective way to reduce energy use,
lower high energy costs for the consumer over the long-term and reduce
emissions of harmful pollutants from power generating facilities.
Goodman has been and will continue to support a higher energy
efficiency standard as the ``right thing to do'' for the consumer, the
environment, energy conservation and the industry. We believe that
there are actions Congress can and should take to address the
unfortunate decision by the Department of Energy to roll back the
higher standard for central air conditioners and heat pumps to only a
20 percent increase in efficiency. In fact the 13 SEER standard would
be more consistent with the President's effort to promote energy
efficiency and conservation.
In addition to the air conditioner standard itself, it is also
important to support both financial incentives and programs that
promote the use of more efficient equipment. To this end, Goodman has
been supportive of increasing efficiency requirements for the
EnergyStar Program as well as providing incentives to consumers that
use high efficiency appliances including air conditioners. Goodman has
been supportive of legislation such as S. 207, ``The Building
Incentives Act'', where the message can be reinforced that energy
efficiency is a good investment for consumers, building owners and
tenants, and the nation as a whole. These combined efforts provide
incentives for higher levels of energy efficiency than would otherwise
occur.
To provide longer-term solutions, we desperately need a national
energy policy that promotes energy efficiency, conservation, and new
supply technologies. Goodman urges Congress to continue to focus
attention on improving appliance efficiency standards for air
conditioning and heating products.
The Chairman. Thank you very much for your testimony.
Dr. O'Hagan, why don't you go ahead.
STATEMENT OF DR. MALCOLM O'HAGAN, PRESIDENT, NATIONAL
ELECTRICAL MANUFACTURERS ASSOCIATION, ROSSLYN, VA
Dr. O'Hagan. Good morning, Mr. Chairman. My name is Malcolm
O'Hagan. I am president of the National Electrical
Manufacturers Association. On behalf of the 450 members of NEMA
who manufacture all of the products in the electricity supply
chain from the generator to the light bulb, I thank you for
this opportunity to share with this committee the good news on
energy-efficient technologies.
The President's energy report estimated that we could save
the equivalent of 600 300-megawatt powerplants through the
deployment of energy-efficient technologies and conservation
measures. We agree, and that is a lot of energy.
How is it possible to realize these savings? Let me offer a
few examples. Lighting and HVAC upgrades in commercial
buildings can cut energy consumption by up to 40 percent while
saving $1 per square foot in electricity cost. This, Mr.
Chairman, has been documented in a publication of 1,000
upgrades, and I would like to submit this, with your
permission, for the record.*
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* The publication has been retained in committee files.
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The Chairman. We would be glad to have it. Thank you.
Dr. O'Hagan. Commercial buildings account for 22 percent of
electricity consumption. Transformers that meet NEMA TP-1
efficiency levels can greatly reduce power losses in getting
electricity from the generating station to the outlet. NEMA
Premium efficiency motors, combined with industrial control
systems, can substantially reduce energy consumption in steel
mills, water treatment plants, irrigation systems, and myriad
other industrial applications which account for 51 percent of
electricity consumption.
Solutions exist to significantly cut transmission and
distribution line losses, which currently account for 8 to 10
percent of production.
Mr. Chairman, the technology exists. NEMA members offer it,
but that is not enough. The technology must be used. With
efficient products unfortunately comes higher first costs,
presenting an economic barrier. Consequently, there are three
additional requirements to stimulate greater use of more
efficient technologies.
First, we need economic incentives to drive technology
solutions, and let me stress that it is not enough to
substitute high efficiency products and normal replacement
times. We need to provide incentive for accelerated
replacement. This is how the immediate and big savings will be
realized.
Second, we need the Government to lead by example, not by
fiat. For example, all government buildings should be upgraded
to meet Energy Star building requirements as soon as possible,
and all government procurements should be based on industry
consensus standards for energy efficiency.
Third, and finally, we need the Government to spearhead a
massive education campaign to promote the use of energy-
efficient technologies.
Our specific comments on the legislation under
consideration today are as follows. With respect to Federal
building energy efficiency, we agree with the proposals in S.
597 and S. 388 that would impose new energy efficiency
requirements on Federal buildings and require agencies to
undertake a review of and implement practical energy and water
conservation and renewable energy measures. These goals should
be met, and reviews undertaken by emphasizing a systems
approach, not merely component change-outs.
In addressing these proposals, we urge the committee to
consider NEMA's specific recommendations as detailed in our
written testimony for upgrading the Federal building energy
code and requiring Energy Star rating for all Federal
buildings.
In upgrading Federal facilities, the Government should
procure only products that meet or exceed NEMA Premium
efficiency levels for motors, NEMA TP-1 efficiency levels for
transformers, and ASHRAE 90.1-1999 efficiency levels for
lighting and HVAC systems.
I would like to point out that the State of Wisconsin now
requires the use of TP-1 transformers in all State buildings. I
would also like to note that the NEMA Premium efficiency levels
for motors exceed the efficiency levels mandated by the Federal
Government under the Energy Policy Act, and applied to more
categories of motors. Recently, NEMA, with the support of DOE,
the utilities, the Edison Electric Institute, and others,
launched a major program to promote the use of NEMA Premium
efficiency motors in the marketplace.
In connection with financing for Federal energy efficiency
programs, whether through the proposed Federal Energy Bank or
through energy-saving performance contracts, we have two
recommendations. First, as we have stated before, the projects
that take a systems approach should have priority for
assistance.
Second, we support the 7-year-or-better payback period set
forth in your legislation S. 597. It should be noted that
comprehensive upgrade programs with correspondingly higher
first cost but greater savings in the longer run may be ruled
out by shorter payback periods. Programs targeting schools for
energy efficiency improvement should also emphasize the systems
approach that combine advanced controls with energy-efficient
technologies to achieve the maximum benefits.
NEMA believes greater attention needs to be paid to
increasing energy efficiency and the industrial sector, which
accounts for 51 percent of electricity consumption. To this
end, the proposal in S. 597 to encourage voluntary commitments
to reducing industrial energy intensity is most welcome.
NEMA supports the low income home energy assistance,
weatherization, and State energy programs. With respect to the
weatherization program, we would suggest the committee consider
including electricity efficiency retrofits as an eligible
measure to permit the upgrading of air conditioners and water
heaters, which will have long-term energy savings benefits.
California has adopted a similar approach, and we would
recommend it at the Federal level as well.
Finally, with respect to energy efficiency standards, NEMA
believes that it is critical that the Department of Energy
fully adhere to all aspects of the Process Improvement Rule,
which has three basic principles--one is technology
feasibility, economic justification, and significant energy
savings--and that it adhere to all aspects of its process
improvement rule in every standards-related activity.
In our written testimony, we expand on these comments, and
we stand ready to provide the committee with whatever
additional information would be helpful to its deliberations.
Mr. Chairman, we thank you very much for the opportunity to
testify this morning.
[The statement of Dr. O'Hagan follows:]
Prepared Statement of Dr. Malcolm O'Hagan, President, National
Electrical Manufacturers Association, Rosslyn, VA
INTRODUCTION
Good morning Senator Bingaman, Senator Murkowski and members of the
Committee on Energy and Natural Resources. I am Dr. Malcolm O'Hagan and
I am President of the National Electrical Manufacturers Association
(NEMA). NEMA, celebrating its 75th anniversary, is the leading trade
association in the United States representing the interests of
electroindustry manufacturers. Founded in 1926 and headquartered near
Washington, D.C., our 450 member companies manufacture products used in
the generation, transmission and distribution, control, and end-use of
electricity. Annual shipments of these products total $100 billion.
NEMA welcomes the opportunity to offer testimony on the energy
efficiency legislative proposals pending before the Committee. My
testimony today will focus on the following four main areas:
1. The role of NEMA products and services to achieve energy
efficiency and conservation in helping to meet out national energy
needs;
2. The federal government's role in promoting conservation and
efficiency and the use of new technologies and innovative practices
that use energy more efficiently.
3. The barriers to the widespread application of energy efficient
practices and technologies; and
4. Our recommendations to encourage the greater use of energy
efficient technologies.
The issues of energy efficiency and conservation are crucial
aspects of the energy policy debate and your attention to these matters
is applauded by the 450 NEMA member companies. We have also been
encouraged by the work of the Administration and its recommendations,
as incorporated in the National Energy Policy Plan. NEMA has reviewed
the President's recommendations, and I have attached our findings for
your reference.* NEMA has also reviewed many other energy legislative
proposals, including those that are the subject of today's hearing.
NEMA is very encouraged about the prospects for a comprehensive,
balanced and bipartisan national energy policy, and we are committed to
supporting the development of that policy in every way possible.
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* Attachments to this statement have been retained in committee
files.
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NEMA ELECTRICAL ENERGY AND ENERGY EFFICIENCY POLICY PRINCIPLES
NEMA has crafted a set of electrical energy and energy efficiency
principles for your guidance and consideration as you and your
colleagues proceed on a comprehensive national energy policy. I have
included the principles for your reference, but let me take this
opportunity to highlight the three main points from our principles:
A comprehensive electrical energy policy should rely on
affordable, proven technology to address energy supply and
demand;
Second, it is critical to understand that energy efficiency
and conservation don't mean sacrifice and reduced access, but
rather doing more with existing capacity by achieving reduction
in energy usage through the use of more efficient products and
systems; and
Third, market-based incentives and solutions should be the
primary vehicle to enhance energy efficiency and conservation.
However, NEMA acknowledges that, on a case-by-case basis, there
is value in other interventions such as targeted government
research and development, incentives and standards.
With regard to energy efficiency issues, NEMA specifically proposes
the following concepts as guidelines:
NEMA believes energy efficiency is a national concern that
should be driven by market forces to achieve energy efficiency
and conservation. The litmus test for efficient products and
control systems is technological feasibility, economic
justification, energy savings and commercial availability.
NEMA acknowledges the key role the federal government should
play in fostering public use of energy efficient products and
systems. Specifically, NEMA believes that the federal
government should promote user education on energy efficiency;
support energy efficient upgrades through programs such as the
Federal Energy Management Program, encourage performance-based
incentives in the private sector; and promote the use of
economically sound energy efficient products and systems.
NEMA MEMBER COMPANY PRODUCTS AND SERVICES ACHIEVE ENERGY EFFICIENCY
AND CONSERVATION
NEMA recognizes that a comprehensive national energy policy
requires a mix of conservation and production, and the promotion of new
technologies that promise greater efficiency and environmental
protection. NEMA member products are at all stages of the electrical
energy process, from generators, transformers, wire and cable, to
lighting, motors, and switches at the consumer and end-user points. As
an intriguing example of how technology can save energy, NEMA
manufacturers have developed technology and products for Intelligent
Transportation Systems (ITS), a project under the auspices of the
Department of Transportation. This project is a highly cost-effective
means of reducing transportation fuels consumption, associated air
pollution, and also reduces the non-productive time workers spend
commuting. As you will see in our recommendations, these and other NEMA
products serve to make the system work better and faster without
compromising availability. NEMA members are able to do this by taking
the best of industry technology and standardizing those products so
that they are available globally, delivered locally, competitively
priced, able to perform predictably and are safe and environmentally
sound.
Industry experts estimate that the energy to run buildings in the
United States costs about $70 billion a year. NEMA products can be
found in a wide variety of projects and applications, and such
technology has the potential to reduce energy costs 40 percent and save
businesses $28 billion per year. A recent study in the trade journal
Energy User News found that upgrades and retrofits of lighting, HVAC,
motors and drives, and building automation can achieve energy savings
of between $1.00 and $1.50 per square foot of floor space, especially
when the project involves a combination of each eletrotechnology
element. Moreover, the payback periods are attractive with the return
on investment and energy savings lasting the entire span of the
products, usually 10-20 years. As testimony to these findings, energy
efficient products helped a government agency overhaul their lighting
system as a result of a mandated relighting program. The agency
installed energy saving occupancy sensors as well as new electronic
ballasts, T-8 lamps and specular reflectors in 1.5 million square feet
of working space. The effort has translated into an annual savings of
$399,057.
NEMA member companies also provide energy efficient technologies to
help industrial energy users make the most of the electricity they
consume. For instance, in Indiana, the Alcoa North American Extrusions
aluminum extrusion plant reviewed eight areas for efficiency upgrades
under the auspices of the Department of Energy's Office of Industrial
Technology program. From motors and pumping systems to compressed air
and variable speed drive systems, the review revealed that in a payback
period of a little over one year, Alcoa could realize a potential
annual savings of $1.9 million with an initial capital requirement of
$2.3 million. NEMA member companies provided the motors, systems and
services to help Alcoa meet its goal in Indiana and at other Alcoa
plants around the United States. In Baton Rouge, Louisiana, ExxonMobil
Corporation realized an annual savings of one million dollars and an
annual energy savings of 43 million Btu with a cost payback of four
million dollars over four years at its chemical plant. ExxonMobil
modernized the plant control systems to recover these substantial
savings. NEMA member company Thermadyne, a California-based
manufacturer of inverter-type welding machines, recently found that
welding machine power consumption can be reduced between 20% and 50%
from the older transformer based designs. At Disney World in Florida,
the complex used a metering company that identified ways to make
hydraulic equipment run for shorter periods of time, time the operation
of compressed air motors, and drop electricity consumption in a chiller
plant by an amazing 28 percent. NEMA TP-1 quality transformers
(manufactured by, among others, Square D) helped the Johnson & Johnson
facility in New Jersey realize such significant energy savings that the
corporation changed their purchasing specification to require nothing
but Square D TP-1 Transformers (or its equivalent) in any future
transformer purchases.
NEMA company technologies can also make a significant contribution
in improving the efficiency of electricity transmission and
distribution. About 10% of the electricity generated is lost in
inefficiencies in transmission and distribution. During peak load
periods the losses are higher. The losses have a retail value of about
$25 billion per year. Transmission line losses (70% of the transmission
losses) may be reduced by, for example, upgrading conductors,
increasing voltage, improving the power factor, or using high voltage
DC transmission.
Finally, NEMA-member software products, such as ABB Energy
Interactive's Energy Profiler OnlineTM, facilitate energy
load management for commercial and industrial customers, and are being
used in California today to manage a variety of mandatory and voluntary
utility load curtailment programs necessitated by California's current
energy crisis. NEMA member companies have a track record of achieving
energy cost savings and stand ready to help the nation continue to
improve upon its strong record of achieving energy efficiency goals.
THE FEDERAL GOVERNMENT'S ROLE IN PROMOTING ENERGY EFFICIENCY
As mentioned earlier, NEMA acknowledges the key role the federal
government should play in fostering public use of energy efficient
products and systems. Industry appreciates those government programs
that educate and inform business and the consumer about energy
efficiency. Specifically, NEMA believes that the federal government
should promote user education on energy efficiency; support energy
efficient upgrades through programs such as the Federal Energy
Management Program, the Department of Energy's Office of Industrial
Technology, Building, Technology State and Community programs, and
aspects of the Energy Star program; and promote the use of economically
sound energy efficient products and systems.
I have communicated with NEMA manufacturers about a variety of
federal government programs. They recognize the value of several energy
efficiency programs. In the motors and industrial controls area, the
Department of Energy Office of Industrial Technology Best Practices
program works to promote those industry practices that promote
efficiency. The Motor Challenge program adds credibility to efficiency
messages and broadens the communications efforts beyond industry. In
the lighting area, industry appreciates the ``LightRight'' and the
``Vision 2020'' programs. These and other programs, such as the Federal
Energy Management Program, all serve to help American consumers and
businesses use energy more efficiently and effectively.
NEMA believes that the federal government can set the standard--and
a good example--for energy efficiency by starting with the public's own
facilities. In this regard, the cooperative Department of Energy and
Environmental Protection Agency Energy Star Buildings Program has made
significant advances in improving the efficiency of commercial
buildings. However, the vast majority of Federal facilities have not
yet achieved the Energy Star rating, a classification given only to the
top 25% of buildings in terms of watts used per square foot. Therefore,
NEMA recommends that existing Federal buildings be upgraded to meet the
Energy Star Building Program requirements.
A program to require energy efficient upgrades of building systems
in existing Federal buildings offers the potential for significant
energy savings. As the President and Congress have recognized, the
Federal government is a major consumer of electrical energy. NEMA
proposes that, with respect to existing buildings, an upgrade program
should riot require adherence to a rigid standard, but rather should
provide flexibility to agencies to adopt the most efficient systems
that meet their needs. For new construction or buildings that undergo
major renovation/remodeling, it is appropriate to require adherence to
the most current consensus energy efficiency standards, which are
contained in ASHRAE/IESNA 90.1-1999. The Federal government should move
promptly to update Federal building energy codes, and to facilitate
action by the States to update their building codes consistent with the
latest update to the ASHRAE/IESNA standards.
The Federal government also has important regulatory
responsibilities, particularly in the area of energy efficiency
standards for appliances and other consumer products. In setting such
standards, the Department of Energy must fully adhere to the provisions
of the so-called ``Process Improvement Rule.'' By way of background, in
July 1996, the Department of Energy published an interpretive rule
setting forth procedures for the consideration of new or revised energy
conservation standards for consumer products (see 61 Fed. Reg. 36973
(July 15, 1996)). The ``process improvement'' rule was produced with
the input of all stakeholders in the appliance and consumer products
efficiency standards program. Designed to remedy shortcomings in the
standards process utilized by the Department of Energy, the process
improvement rule is intended to encourage consensus on energy
efficiency standards. To this end, the rule language includes a series
of rebuttable presumptions, agreed to by all sectors of industry and
the energy efficiency community, which provide a basis for mutual
understanding and cooperation in the development of consensus
standards.
The process improvement rule incorporates critical principles for
every stage of the energy efficiency standards setting process. Careful
observance of these requirements is essential for any standards program
to be effectively implemented. However, as good and practical as this
rule is, it is not a binding requirement on the Department of Energy.
NEMA manufacturers--and all of the regulated community--require
additional assurance that there will be careful adherence to all
aspects of the process improvement rule in all future standards setting
rulemakings for consumer, commercial and industrial products. Greater
certainty will be provided if the process improvement rule is formally
incorporated into the Department of Energy's regulations governing the
establishment of energy efficiency standards.
The Federal government should also take the lead in the acquisition
of energy efficient products. For example, an opportunity is presented
for the government to take advantage of consensus standards developed
by industry to increase energy efficiency in equipment including
electric motors and distribution transformers. These two standards,
NEMA PremiumTM for electric motors and NEMA TP-1 for
distribution transformers, offer significant energy savings. Government
should recognize these industry-led efforts to increase energy
efficiency and provide for the most rapid possible integration of
technologies meeting the latest efficiency standards into Federal
facilities. Increasing the deployment of these technologies throughout
the Federal government offers a ready means to significantly reduce
energy consumption.
BARRIERS TO THE WIDESPREAD APPLICATION OF ENERGY EFFICIENT PRACTICES
AND TECHNOLOGIES
While much good has been done to promote energy efficiency, there
remains work to be finished. NEMA believes the primary barriers to
investing in energy efficient technology include: (1) the cost of
investment in energy efficient technologies and whom should receive the
financial benefit of the energy efficient investment; (2) the lack of
awareness of a systems and controls based approach for energy efficient
cost effectiveness; (3) and issues surrounding codes and standards.
Currently, the federal tax code does not fully encourage an
investor to make energy efficient investments, upgrades or retrofits to
facilities. To that end, NEMA recognizes the efforts to encourage the
private sector use of energy efficient products and systems through a
variety of tax incentives included in S. 596, S. 389 and other pending
measures. While NEMA has not taken a position on the wide variety of
incentive proposals currently being considered, we would generally
emphasize the need to explore and promote those incentives that make
the maximum use of energy efficient products and systems and delivers
the incentive to the individual or entity that makes the investment.
NEMA believes that energy efficiency should be evaluated and
rewarded on a energy savings and systems basis. When creating
incentives, the beneficiary of the cost incentive should be the
investor in the equipment. Very simply put, if a building owner makes
the capital investment, that owner should get the benefit. As a result
the energy savings benefit can get passed on down the line in the form
of savings to electricity consumers through lower bills.
While the technology exists to achieve broad cost savings through
energy efficient devices and controls, there is a lack of awareness of
the benefits of a systems and control based approach. This is opposed
to a piecemeal component approach, to achieve the maximum level of cost
effective energy efficiency. To that end, NEMA proposes that the
federal government move from strictly encouraging products or
components, to promoting the implementation of systems and controls to
efficiently manage energy on a wider basis. For example, California
recently enacted legislation that would provide energy efficient
upgrades for lighting systems. California recognized the large
efficiency gains that would be realized by encompassing lighting
controls, occupancy sensors, and luminaries added to any upgrade.
Similar efficiency gains can be achieved at the commercial level with
industrial and automated controls.
Industry and government both strive to achieve the best
performance. But for too long, the hopeful and anticipated approaches
of both camps have been belied by the unintended consequences of
mandated standards. Voluntary, consensus-driven codes and standards
will achieve the greatest level of cooperation and distribution of
energy efficient technology in the marketplace. Already, the
marketplace recognizes industry-driven standards to achieve efficient
products. In particular, the NEMA PremiumTM Motor program
recognizes efficient motors above the standards contained in current
law. The same can be said for distribution transformer consensus
standards represented by NEMA TP-1. Industry believes that industry
consensus building codes can be a valuable part of ensuring that
cooperative goals are achieved and efficiency gained.
RECOMMENDATIONS TO ENABLE THE GREATER USE OF ENERGY EFFICIENT
TECHNOLOGIES
NEMA believes that technological solutions combined with industry
consensus and proven results will lead to enhanced energy efficiency.
This formula is made even stronger if the cooperative efforts of
industry and policymakers are joined. To that end, NEMA proposes the
following reforms to further enhance energy efficiency and conservation
as part of a comprehensive national energy policy.
Motors
The NEMA PremiumTM motor program is a collaborative
effort with the Department of Energy, motor manufacturers and electric
utilities. It is an excellent model of how voluntary industry standards
can improve efficiency thereby providing a benefit to consumers and the
environment. It has broad support, as reflected in the recent
endorsement from the Consortium for Energy Efficiency.
The NEMA PremiumTM motor program expands high efficiency
motors standards beyond current requirements. The program covers a
broader range of motors than do minimum Federal energy efficiency
standards (up to 500 horsepower, whereas Federal standards apply only
up to 200 hp), and it is a more exacting standard. In fact, Department
of Energy analyses shows that the NEMA PremiumTM motor
program, including commercial and agricultural applications, would save
5,800 gigawatt hours of electricity and prevent the release of nearly
80 million metric tons of carbon into the atmosphere in the next ten
years. Electric-motor-driven equipment consumes about 60% of all the
electricity produced in the country, according to the Department of
Energy.
The NEMA PremiumTM motor program has real-life impact.
The Cummins Engine Company's Columbus Engine Plant in Columbus, Indiana
retrofitted energy efficient motors on to existing machining and
transfer lines and installed the most efficient motors available onto
the new lines. Cummins saw a 2.75 percent reduction in total energy
costs for the Columbus plant and was hailed by company executives as a
significant savings. The Department of Energy's Office of Industrial
Technologies indicated that if every plant in the United States
integrated motor system upgrades to the extent that Cummins did,
American industry would save an estimated one billion dollars annually
in energy costs. This would be the equivalent of the amount of
electricity supplied to the State of New York for three months.
President Clinton issued Executive Order 13123, which seeks to
encourage the acquisition of energy efficient products by the federal
government. In addition, programs such as the Federal Procurement
Challenge encourage agencies to buy energy efficient products. However,
while the Executive Order and the Federal Procurement Challenge have
resulted in many efficient upgrades, many agency heads have not had
their feet held to the fire to comply with such orders. Many
opportunities still exist in Federal agency and Congressional offices
to achieve energy efficiency.
NEMA, therefore, recommends that the Federal government be required
to purchase motors based on the NEMA PremiumTM motor
standard. Doing so would enable all new equipment acquisitions to be
based on current energy efficiency standards with the dual result of
energy savings to the government and widespread market penetration of
the most highly efficient technologies in energy-intensive equipment.
It would also serve as a valuable demonstration of energy efficient
savings to the private sector.
Distribution Transformers
In 1996, the Transformers Products Section of NEMA developed
voluntary energy efficiency standards for distribution transformers.
Distribution transformers help move electricity on the grid and reduce
loss. The basic efficiency standard, known as NEMA TP-1, and the
associated test and labeling standards (TP-2. and TP-3, respectively)
have gained widespread acceptance as the industry norm for energy
efficient transformers.
As another excellent example of industry led consensus standard
making, if TP-1 were used nationwide, NEMA estimates an energy savings
would be in the range of 2-3 quads over a 30-year period. This is an
average energy savings of between 5 and 10 billion kilowatt-hours per
year. By using NEMA Standard TP-1, the energy used by low-voltage
transformers can be cut by one-third, and by twenty-five percent for
medium voltage transformers. Better yet, the payback period for such
transformer investments is relatively short--only three to five years.
With these demonstrated savings in mind, NEMA recommends that the
federal government should be required to use NEMA TP-1 transformers in
its purchase specifications and be required to replace failed
transformers with new units meeting TP-1 efficiencies. Acquisition of
distribution transformers that meet the NEMA TP-1 standard will improve
distribution transformer efficiency over the low first cost
transformers that are typically selected for government procurement.
Further, the Department of Energy's current rulemaking to consider
energy efficiency standards for distribution transformers should use
NEMA TP-1 as a benchmark for standards discussions.
Building Efficiency
Energy efficient buildings achieve some of the greatest cost
savings when it comes to energy efficiency. There is, perhaps, no
better example to demonstrate these savings than energy efficient
lighting systems.
NEMA believes that lighting efficiency can be summed up in the
following way: Efficient lighting means turning the lights off when
your done, and using lighting at levels to complete the task at hand.
NEMA manufacturers make products to do just that from systems and
controls to draw the greatest light using the least amount of
electricity all the while employing technologies to shut the lights off
when no one is around.
The Department of Energy estimates that technologies developed
during the past 10 years can help us cut lighting costs 30% to 60%.
Lighting accounts for 20% to 25% of all electricity consumed in the
United States. The cost savings distinction is even greater when
looking at residences and business. An average household dedicates 5%
to 10% of its energy budget to lighting, while commercial
establishments consume 20% to 40% of their total energy just for
lighting.
NEMA advocates a system approach to upgrading lighting efficiency
in commercial buildings and, where feasible, residential housing. In a
typical residential or commercial lighting installation, 50% or more of
the energy is wasted by obsolete equipment, inadequate maintenance, or
inefficient use. Where it is feasible, a systems approach is best, but
components are just as important. Improved lighting quality makes
visual tasks easier and saves 50% or more on energy costs. A dramatic
example of how energy use for lighting can be reduced while improving
the quality of lighting is the Jefferson Memorial relighting project.
The energy use will be reduced from a current 126,000 watts to 16,000
watts, while dramatically improving the visual impact of this majestic
monument, its inscriptions, and the magnificent statute of Thomas
Jefferson.
That is why NEMA proposes the Federal government update its federal
building energy code to the latest model building code for energy
efficiency in commercial and multifamily high rise residential
buildings. A new Federal code for energy efficiency in new commercial
and multifamily high rise residential buildings will become effective
in October of this year. However, this code is based on a 1989 ASHRAE/
IESNA Standard. The Department should move expeditiously to update the
Federal code to reflect ASHRAE/IESNA Standard 90.1-1999. This would
avoid a time consuming regulatory process to adopt the latest ASHRAE/
IESNA update, which was itself developed through a consensus process
involving a consortium representing the full range of interests in
building sector energy efficiency, including the Department of Energy.
For existing buildings, NEMA recommends that all Federal agencies
should be required to implement a program to evaluate the building
systems of existing facilities constructed prior to 1996, using the
whole building approach and Energy Star building evaluation criteria.
This evaluation need not be required for facilities which have
completed building system energy efficiency upgrades within the
preceding 5 years, or which have attained the Energy Star Building
Rating. Upon completion of such evaluations, agencies should be
required to make all building system upgrades necessary to enable the
building to attain the Energy Star Building Rating within 2 years after
such upgrades are identified.
Similarly, the Department should move expeditiously to issue a
formal determination that the latest revision to ASHRAE/IESNA Standard
90.1 will improve energy efficiency in commercial buildings. The
Department of Energy has already performed a quantitative analysis and
a detailed textual analysis of the estimated differences between the
1989 and 1999 editions of Standard 90-1. No further analysis should be
necessary for the Secretary to determine that the update will improve
energy efficiency in commercial buildings. The issuance of this
determination would trigger actions by the states, which have primary
building code enforcement responsibility, to update state building
codes accordingly. Any acceleration in the upgrading of state building
codes to meet ASHRAE/IESNA Standard 90.1-1999 will increase energy
savings.
COMMENTS ON LEGISLATIVE PROPOSALS
NEMA offers the following comments for the Committee's
consideration with respect to the specific legislative proposals under
consideration at this hearing.
Federal Energy Bank (S. 95; Section 1301 of S. 597)
As discussed above, NEMA recognizes the extent to which cost
barriers stand in the way of the deployment of energy efficient
technologies. The concept of a Federal Energy Bank has been offered as
one potential mechanism for making additional resources available to
Federal agencies to support energy efficiency projects that might not
otherwise be undertaken. While NEMA takes no position at this time on
the underlying proposal for a Federal Energy Bank, we are encouraged
that S. 597 in subsection 1301(d)((2)(D) recognizes the need to
encourage projects with a payback period longer than the three year
payback included in S. 95 as introduced.
In many cases, the greatest energy efficiency savings can be
obtained through a systems approach, which features upgrades to energy
consuming systems rather than mere change out of specific components. A
payback period of at least 5 years is important to encourage such
conversions, which typically have greater up-front costs, but which
will produce increased energy savings over the lifetime of the
building. For example, in many cases, lighting change outs are done on
a component basis, whereas a systems approach to lighting upgrades can
have achieve far greater efficiencies. Deploying electronic ballasts in
combination with T8 lamps improves efficiency, but maximum efficiency
gains will be achieved if lighting controls are also included. The
addition of lighting controls, such as occupancy sensors, can save
another 20% to 40% of energy usage. And when making changes designed to
increase the energy efficiency of lighting, it often pays to redesign
the building's entire lighting system, improving lighting quality, and
saving even more on energy costs. But such a valuable project may not
be feasible if a strict three year payback period is required.
Incentives for Energy Efficient Schools (Section 1302 of S. 597;
Section 602 of S. 388)
As discussed above, while energy efficient devices and controls are
available, there is sometimes inadequate recognition of the benefits of
a systems approach that integrates advanced controls with energy
efficient technologies to achieve the maximum benefits. High
performance/energy efficient school buildings should be evaluated on a
systems basis, and the enumerated criteria in the legislation for
defining a high performance or energy efficient building should
explicitly reference the adoption of systems approaches wherever
feasible to maximize energy savings.
Voluntary Commitments to Reduce Industrial Energy Intensity (Section
1303 of
S. 597)
Greater attention must be focused on the reduction of energy use in
the industrial and commercial sectors. The potential for energy savings
is significant, but cost barriers and lack of information too often
prevent the adoption of new energy efficiency technologies and systems
in industrial facilities and businesses of all sizes. NEMA encourages
the Committee to explore additional means of supporting the deployment
of highly efficient new technologies through programs targeted
specifically to the industrial sector. Consideration might be given,
for example, to a program modeled on the highly successful
Weatherization Assistance Program but targeted to small businesses.
Low Income Home Energy Assistance Program (Section 601 of S. 388,
Section 3(a) of S. 352)
NEMA supports the LIHEAP program.
Weatherization Assistance Program (Section 603 of S. 388, Section 3(b)
of S. 352)
The Weatherization Assistance Program has been an important element
in the nation's effort to assure that the burdens of high energy costs
do not fall disproportionately hard on those least able to afford them.
Including electricity efficiency retrofits as an element of the
Weatherization program would have long term benefits for residents and
property owners. For example, the State of California has recently made
upgrades to major systems, such as the installation of high efficiency
air conditioners and high efficiency water heaters, as well as other
efficient technologies, including set-back thermostats, eligible for
the State's residential upgrade program. Taking a similar approach at
the Federal level could significantly increase the long term benefits
of the Weatherization program. With the likelihood that substantially
increased funding will be provided for the Weatherization program in
forthcoming fiscal years, the eligibility of more capital-intensive
measures should be fully considered.
State Energy Program (Section 604 of S. 388, Section 3(c) of S. 352)
NEMA supports the concept of updating the State energy efficiency
goals. As with the Federal government, state energy efficiency plans
should not be limited to encouraging certain energy efficient products
or components, but rather should focus on promoting the implementation
of systems and controls that will enable more efficient energy
management. States should also make special outreach to the commercial
and industrial sector to reach the untapped energy conservation
potential of those sectors.
Energy Saving Performance Contracts (Section 605 of S. 388, Sections 5-
7 of S. 352)
As with other efficiency upgrade programs, energy savings
performance contracts should emphasize a system approach to achieve
maximum energy savings, in lieu of simply providing for the change out
of components. NEMA has no specific comments at this time on proposals
to amend the authority for Federal energy saving performance contracts.
Federal Energy Efficiency Requirement (Section 606 of S. 388, Section 4
of S. 352)
NEMA agrees that it is time to impose new energy efficiency
requirements on Federal buildings, as proposed in section 606 of S.
388. Further, NEMA endorses the principle behind section 4 of S. 352,
which would require agencies to undertake a review of all practicable
energy and water conservation and renewable energy measures and to
implement measures to achieve at least 50% of the potential savings
identified by such a review. With respect to both of these proposals,
NEMA again urges that the Federal government emphasize the
implementation of systems approaches, not merely component replacement,
to achieve energy reduction requirements, along with the adoption of
new technology, such as NEMA PremiumTM motors and
distribution transformers that comply with the NEMA TP-1 standard,
wherever possible.
S.J. Res. 15, Air Conditioner Standards Rule
NEMA was not involved in the development of the air conditioner
standards rule. With respect to the issuance of energy efficiency
standards generally, as discussed above, NEMA believes that it is
critical that the Department of Energy fully adhere to all aspects of
the ``Process Improvement Rule'' in every standards-related activity.
CONCLUSION
In conclusion, let me reiterate the three points I began with
today. A comprehensive electrical energy policy should rely on
affordable, proven technology to address energy supply and demand.
Second, it is critical to understand that energy efficiency and
conservation don't mean sacrifice and reduced access, but rather doing
more with existing capacity by achieving reduction in energy usage
through the use of more efficient products and systems. Third, market-
based solutions should be the primary vehicle to enhance energy
efficiency and conservation. I thank the Committee and I am happy to
answer your questions.
The Chairman. Thank you very much, and thank all of you for
your testimony. Let me just ask a very few questions here.
Dr. O'Hagan, you recommend that all Federal buildings be
upgraded to meet the Energy Star building program requirements.
How do these requirements mesh with Executive Order 13123, the
requirement there that agencies reduce energy consumption by 30
percent in 2005, by 35 percent in 2010? Is there a meshing of
those two requirements on Federal agencies and Federal
facilities?
Dr. O'Hagan. It is my understanding, Mr. Chairman, that the
program is based on the old ASHRAE standard, and one of our
recommendations is that the code and the standard for Energy
Star buildings be upgraded to the 1999 version, which has
higher efficiency levels, and using that, the goals would be
accomplished.
The Chairman. I see, so you believe if they upgrade the
standards in this Energy Star building program, that these
objectives set out in the executive order will be achieved?
Dr. O'Hagan. Yes, Mr. Chairman.
The Chairman. I guess, Mr. Parks, what occurred to me in
hearing your testimony and reading it here, and trying to
compare what you were saying to what Mr. Rees is saying, as Mr.
Rees described things, the vast majority of the industry is in
favor of the 12 standard rather than the 13 standard and your
company--and you have come out strongly in favor of the 13. Do
you consider yourself an outsider, or are there other companies
with your point of view on this that just are not being heard
from, or how do you explain your position relative to the
industry position more generally, as Mr. Rees has described it?
Mr. Parks. I think a couple of things. Mr. Rees did
indicate that, as a group, we are all in favor of higher energy
efficiency standards. There is no question about that.
Ourselves along with two smaller other manufacturers have come
out in favor of the 13-SEER simply because we really believe it
is the right thing to do.
Our company has had a history, in our opinion, of doing the
right things. We have built the business over 20 years to
become the second largest in our industry in the United States,
and we have done it by providing a value, affordable product to
consumers, giving them highly reliable, affordable products
that meet their needs.
We sincerely believe that what would happen if the standard
were set at 13 SEER, that all manufacturers, as I indicated in
my testimony, would step up much as what occurred in 1992, when
the standard was set back in 1987, when, in fact, the standard
was set at 10. The same arguments were propagated at that point
that there would be $700 of price difference on the new, higher
efficiency products. However, that simply was not the case.
The Chairman. Setting the higher standard then causes the
volume to increase and the price per unit come down?
Mr. Parks. That is correct.
The Chairman. That is your view?
Mr. Parks. That is correct.
The Chairman. This is a personal aside here, but we are
doing some remodeling on a home we own out in New Mexico, and I
told the contractor to be sure and put all compact fluorescent
light bulbs in so we could save some energy, and he came back
and said, well, that is $40 per light bulb as compared to $3 or
$4 if you go with the regular kind.
Now, why hasn't the same thing that you just predict in the
air-conditioning area occurred in that area? Why hasn't the
price of those come down to some kind of reasonable level?
Mr. Parks. I think historically, where there are standards
that must be met, people will purchase at the minimum standard
level. There has been a pattern of that demonstrated and so,
given a situation where there is no, essentially, regulatory
requirement or mandate to purchase those types of high-
efficiency light bulbs, there is not a payback in the
consumer's mind. Also, the amount of energy used by a light
bulb is minuscule compared to what is used for an air-
conditioning product.
The Chairman. Mr. Nadel, you agree that the price will come
down substantially for this higher efficiency air conditioner
if it is mandated, is that your view as well?
Mr. Nadel. Yes, it is, and that is based on past
experience. Before the SEER-10 standard was set, the ARI
members estimated it would cost more than $700 in extra cost.
DOE estimated it would cost--I cannot remember the exact
figures, something like $340 extra. If you look at the U.S.
Census Bureau data, in fact, the cost in 1992 did not go up at
all, so when manufacturers sharpen their pencils, when the
market share increases from the current roughly 5 percent for
SEER-13 up to 100 percent, there will be dramatic cost
reductions.
The Chairman. This Energy Star labeling program that EPA
and now DOE are both involved in, how effective is it? Is there
something we should be doing to strengthen that program?
Mr. Nadel, do you have a view as to whether there ought to
be some statutory change that would strengthen or expand that
program, or do you think it is working just the way it ought
to?
Mr. Nadel. I think the program is working very well.
However, I think it will help some to actually establish a
statutory base for the program. Now, there is no official
statutory basis. There is general directives to DOE and EPA to
improve energy efficiency, reduce pollution, but not a specific
directive.
I do know in the bill that the House Energy & Commerce
Subcommittee reported out yesterday there are some specific
provisions authorizing Energy Star and giving some directives
to the programs that I think will be helpful.
The Chairman. Dr. O'Hagan, did you have a view on that?
Dr. O'Hagan. Yes, Mr. Chairman. We think that is a very
good program as it applies to consumer products, and I think
the focus ought to be kept in that area, and also Energy Star
buildings. We do not think it is valuable, however, in the
industrial area. It has been proposed to be extended, for
example, to motors.
We think that the NEMA Premium program which has been
launched by the industry and has even higher standards than the
Federal standards is a preferred approach, but certainly, as
far as consumer products and commercial buildings is concerned,
it is an excellent program. It also leads to the point, Mr.
Chairman, and also to the question of the light bulbs that you
mentioned, the need that we pointed out for education, and for
people to understand the economics.
It is very hard for a consumer to pay $15 for a compact
fluorescent when they can get an incandescent lamp for 50
cents, and that is a pretty hard sell without a real
understanding of the long-term benefits of making that
purchase, so it is for that reason that we think a lot of
emphasis needs to be put in educating the public as to the
benefits of energy-efficient products.
The Chairman. Well, I think all of this testimony is very
useful, and I appreciate you all being here, and we will try to
learn from it as we put a bill together.
Thank you very much. The hearing is adjourned.
[Whereupon, at 11:50 a.m., the hearing was recessed, to be
reconvened on July 17, 2001.]
NATIONAL ENERGY ISSUES
----------
TUESDAY, JULY 17, 2001
U.S. Senate,
Committee on Energy and Natural Resources,
Washington, DC.
The committee met, pursuant to notice, at 9:38 a.m. in room
SD-106, Dirksen Senate Office Building, Hon. Jeff Bingaman,
chairman, presiding.
OPENING STATEMENT OF HON. JEFF BINGAMAN,
U.S. SENATOR FROM NEW MEXICO
The Chairman. The purpose of today's hearing is to consider
proposals to reduce the demand for petroleum products in the
light duty vehicle sector. The committee has held several
hearings on the subject of gasoline supply and price. Most
recently was a field hearing in South Dakota chaired by Senator
Johnson on renewable fuels. Today we are shifting the focus to
the demand side of the equation.
Although this committee does not have direct jurisdiction
over vehicle fuel efficiency standards, it does have
jurisdiction over research and development, over alternative
fuels, and over overall energy policy. Several bills which have
been referred to this committee propose strategies to reduce
gasoline consumption, either through fuel diversification or
increased efficiency. We have asked witnesses to review and
comment on some of those bills. S. 597, S. 388, S. 883, S.
1053, and S. 1006 are the ones that I currently am aware of.
Witnesses should feel free to comment on any other measures
referred to this or any other committee.
The New York Times this morning reported on a draft of the
National Academy of Sciences report on improving vehicle
efficiency. According to that article in the Times, the report,
which was requested by Congress last year, will find ``fuel
economy of new vehicles, especially sport utility vehicles and
pickup trucks, could be raised by as much as 10 to 11 miles per
gallon over the next 6 to 10 years, with the extra cost offset
by savings on gasoline.''
The panel preparing this report did not include anyone from
the environmental community. Yet the findings seem to be fairly
consistent with a recent study by the Union of Concerned
Scientists. We will have an opportunity this morning to explore
the types of technologies that can be deployed in the near term
and in the future to achieve greater efficiency.
The Times story also follows up on the issue of sales of
flexible fuel vehicles that can use either gasoline or ethanol
to meet current fuel economy targets. Close to a million of
these vehicles, mostly trucks and SUV's, are currently being
manufactured. Yet very few actually burn ethanol.
The committee has been a strong proponent of the use of
alternative fuels. In fact, alternative fuel vehicles were a
major focus of the Energy Policy Act, the last major
legislation, energy legislation, passed by the Congress.
Unfortunately, the goals of EPAct with respect to alternative
fuels have not been met, in part due to the lack of available
refueling infrastructure, but also due to the disincentive to
use the alternative fuels inherent in flexible fuel vehicles.
The goals of fuel diversification remain as valid today as
they were 10 years ago. We will hear from some of the witnesses
this morning on what we can do to increase the use of those
fuels. There are numerous reasons we need to be serious about
reducing our reliance on petroleum products, from energy
security and economics to the global environment, and I hope
the hearing will help give the committee guidance on how we can
develop policies to both achieve greater efficiency and also
greater fuel diversity in the vehicle sector.
Senator Murkowski.
STATEMENT OF HON. FRANK H. MURKOWSKI, U.S. SENATOR
FROM ALASKA
Senator Murkowski. Good morning, Senator Bingaman.
Again, I think it is important that we have these continued
hearings. Starting off the new week, we have had I think some
21 weeks have gone by since we submitted in general the broad
comprehensive energy bills, your bill and my bill before the
committee. CAFE standards are high on everybody's agenda and
you mentioned the article in the New York Times. It is rather
misleading in the sense that one can assume it says that the
panel urges higher fuel efficiency for automobiles as a final
document.
There is a letter that has gone out from Mr. Bill
Colgazier, Executive Officer of the National Research Council
of the National Academy of Science, July 16, concerning this
draft report, and his indication is that: ``We believe it is
critical for readers to understand that this document is not a
final Research Council report. It does not carry the weight of
a final peer reviewed study. Further, the study of the National
Research Council undergoes significant changes during an
anonymous peer review process. Moreover, in the case of this
particular study the study committee will be meeting July 17
and 18 to address comments made about the draft. More than 300
comments have been received to date. More are anticipated.
Therefore, it is important to understand that the study at this
stage is still a work in progress.
``Once the committee has responded to review comments and
documented its changes, the Academy's report review committee
will determine whether the committee has been responsive to the
review's comments. The final work is expected to be issued on
July 31.''
So I think we should reflect on the reality that this is
still a draft, that the New York Times report does not
necessarily reflect the final comments expected from the
National Academy of Sciences on CAFE standards.
You know, we have seen comments of many people that suggest
that all we need to do to address our energy crisis is to
initiate CAFE standards. We have seen over a period of time the
reality that our cars are getting more fuel efficient, but this
has not shown up in the faulty measure of automobile
performance, that is miles per gallon. We have got a couple of
charts here that I would like to have in evidence.
The fact is that manufacturers have maintained fuel economy
despite consumers' demand for performance. If you look at the
scale, this is EPA's 2000 fuel economy trend reports and it is
a rather complicated chart: weight, miles per gallon, manual,
and zero to 60, in a time sequence. As shown on the right, the
point is if we had kept cars of the 1980's and made the same
improvements in vehicle technologies, fuel economy would have
been well over 35 miles per gallon. But instead of choosing
fuel economy--and I use the word ``choosing'' because I think
it is appropriate--the American people by their own free will
seem to have chosen vehicles with improved performance.
It should not be the prerogative of this Congress in my
opinion, or any radical environmental groups, the deprive the
public of their choice. The automakers simply respond to the
needs of their consumers and make the vehicles that people seem
to want to buy.
Now, that is the faulty logic of CAFE standards. You cannot
regulate consumer behavior without trampling to some extent on
individual freedoms and passenger safety. Automakers can make
all the fuel efficient vehicles they can, but if no one buys
them what have we accomplished? I think the indications are
that of the ten most fuel efficient automobiles made in the
United States today, they only constitute one-and-one-half of
one percent of the automobile sales.
Now, what does that say for America? Well, I think you can
draw your own conclusions, but that is not what motivates the
purchaser. So the question is at what point do we dictate this?
Now, perhaps we should work to produce more vehicles running on
alternative fuels or new technologies like fuel cells, vehicles
that provide all of the performance characteristics consumers
demand in the form that they can recognize, and provide them
with tax incentives if that is necessary to choose these new
technologies over established vehicle technologies.
The energy bill that we have introduced, S. 389, contains
these incentives as put forth by Senator Hatch and a number of
others. I think this is the right way to proceed.
Let us not be fooled into thinking that we need only
tighten CAFE standards to solve our energy problems. We should
instead focus on getting advanced vehicle technologies to
market and into the hands of consumers. As we will hear from
our third panel, exciting opportunities await us in the area of
replacing gasoline with natural gas, ethanol, and electric
vehicles. But there is a critical lack of refueling facilities.
As we know, you just cannot drive up anywhere and fill up your
tank, and there is not a mass market for these vehicles as yet.
Perhaps it is worth asking whether maybe we have been
keeping score of the wrong scorecard. The focus on miles per
gallon of gasoline puts alternative fuels certainly at a
disadvantage and certainly overlooks and ignores their
potential. Perhaps it is time for a new metric that directly
addresses the goal of reducing dependence, as an example, on
foreign oil, one that would promote finding another alternative
to gasoline.
So I hope that our witnesses will also reflect and comment
on the negative impact of CAFE standards on alternative fuels
and their development, and ask whether there is a better way to
provide for fuel diversity in our transportation sector.
Reducing our needs for gasoline would reduce our dangerous
dependence on imported oil and provide energy security to a
greater degree for Americans. Energy security means job
security, it means economic security, it means our American
standard of living.
We should be careful to foster this fuel diversity in a way
which does not stifle innovation and technological development.
We look forward to the suggestions on how we might do this as
part of a comprehensive energy plan.
Thank you, Mr. Chairman, and thanks for holding the chart
so still for so long.
The Chairman. Thank you very much.
Why don't we start with our first panel. We have Mr. Barry
McNutt, who is the Senior Policy Analyst with the Office of
Domestic Policy and International Affairs in the U.S.
Department of Energy; and Mr. Robert Shelton, who is the
Executive Director of the National Highway Traffic Safety
Administration. Mr. McNutt, why don't you go right ahead.
STATEMENT OF BARRY D. McNUTT, SENIOR POLICY ANALYST, OFFICE OF
DOMESTIC POLICY AND INTERNATIONAL AFFAIRS, DEPARTMENT OF ENERGY
Mr. McNutt. Mr. Chairman, members of the committee, good
morning. Thank you for the opportunity to be here. As you said,
my name is Barry McNutt. I am a Senior Policy Analyst with the
Energy Department's Office of Policy and International Affairs.
I have a brief oral statement I would like to make and I
request that my written testimony be included as part of the
record of this hearing.
The topic of this hearing, reducing demand for petroleum
products in the light duty vehicle sector, is a problem that we
have worked on for a long time, starting with the Energy Policy
and Conservation Act in 1975 and running most recently to the
President's National Energy Policy and the Department's ongoing
vehicle efficiency, alternative fuels, and renewable fuels
efforts.
That we have worked on this goal of reducing petroleum
demand, almost three-quarters of which is in the transportation
sector, for more than 25 years, we have passed numerous pieces
of legislation, and we have a variety of ongoing programs I
think is certainly telling as to how difficult the problem is.
We have a limited number of options to reduce petroleum
demand in any significant way in the light duty vehicle sector.
Clearly, improving vehicle fuel economy has to be part of any
serious effort to address that goal. We have the technology to
make significant progress without sacrificing other attributes
that are important to consumers. The challenge we face is
getting this technology into vehicles to deliver increased
miles per gallon for consumers at a reasonable price.
With regard to alternative fuels as a pathway to reduce
petroleum use in light duty vehicles, the challenge seems to be
even greater. We have worked hard for more than a decade since
the passage of the Alternative Motor Fuels Act in 1988,
followed by the Energy Policy Act as was mentioned in 1992, to
implement a variety of programs to increase the use of
alternative fuels in highway vehicles. We have done this with
both energy and clean air goals in mind.
While a large number of alternative fuel capable vehicles
are being produced, little real progress has been made in
developing a commercially viable alternative fuels market.
There are a lot of reasons for this, but the fundamental
reality is that the conventional petroleum fuel system enjoys
enormous powers of incumbency, has great and increasing
investments in infrastructure, and is making impressive
advances in producing cleaner petroleum-based fuels.
If we want the next decade to end differently than the past
vis-a-vis a competitive alternative fuels market, significant
technology and policy changes would be required.
The expanded use of non-petroleum components in gasoline
and potentially diesel fuel is one area where notable progress
has been made in the past decade. Oxygenates in gasoline like
ethanol and MTBE now represent about 5 percent of the volume of
the gasoline pool. While their use is not without controversy,
and I am painfully familiar with that controversy, these
replacement fuels, as they are characterized in the Energy
Policy Act, bring added volume and improved air quality
characteristics to the gasoline pool.
Similar replacement fuels such as gas-derived liquids or
biofuels for blending with diesel fuel may become available and
may become economically competitive. Together all these actions
can help reduce the growth in petroleum product demand from
light duty vehicle. Nevertheless we are for the foreseeable
future likely to see growing gasoline and diesel fuel demand.
Addressing this reality requires we focus on increasing our
capability to produce cleaner conventional petroleum-based
fuels at the same time we work to increase fuel efficiency and
increase the use of alternative and renewable fuels.
That is the end of my prepared remarks and I will be glad
to address any questions the committee may have. Thank you.
[The prepared statement of Mr. McNutt follows:]
Prepared Statement of Barry D. McNutt, Senior Policy Analyst, Office of
Domestic Policy and International Affairs, Department of Energy
Mr. Chairman and Members of the Committee, I welcome the
opportunity to testify before you today on various legislative
proposals currently pending before the Committee: S. 388, S. 597, S.
883, S. 1006, and S. 1053 as they relate to reducing petroleum use in
light duty vehicles.
First, I would like to thank the Chairman and Members of the
Committee for your leadership and commitment in addressing the nation's
energy issues. The Department applauds the Committee's efforts in
moving ahead to shape comprehensive long-term energy legislation and
look forward to working with you to find areas of common ground between
the Congress and President Bush's policy proposals outlined in the
National Energy Policy (NEP). Mr. Chairman, we are confident that our
best efforts will move us toward a consensus and commitment to action.
Today, the U.S. transportation sector consumes over 13 million
barrels a day of petroleum products and almost 60 percent of that is in
our light duty vehicles--the passenger cars, light trucks and sport
utility vehicles we all drive. Almost all of the fuel used by these
vehicles is gasoline and we produce less, even with domestic refineries
operating at maximum capacity, than we consume. The imbalance between
our gasoline demand and domestic production is made up with imports,
which this summer have averaged almost three quarters of a million
barrels a day. Light duty vehicle fuel use estimated to increase over
one third by the year 2020, despite an assumed 15 percent increase in
new vehicle efficiency. Almost all of this fuel will be gasoline and
over two million barrels a day of imported gasoline is estimated to be
needed in 2020.
We recognize that we need to do more to decrease petroleum product
demand in the transportation sector and to increase U.S. refining
capacity to make the clean gasoline and diesel fuel that our light duty
vehicles will need. However, people who say that the President's energy
policy does not focus sufficient attention on conservation simply
haven't reviewed the basics of the Policy. It is important to note that
more than 50 percent of the National Energy Policy focuses on energy
efficiency, encouraging, in the light duty vehicle area, the
development of fuel efficient vehicles, consumer attention to energy
efficiency and greater use of alternative fuels. However, action on
reducing demand alone will not be sufficient. You either have to accept
an ever-widening gap between demand and domestic supply, with all the
negative consequences that entails, or you also have to begin thinking
about how we increase our own supply of clean vehicle fuels.
To address these challenges, the President's National Energy Policy
has adopted an approach that is comprehensive and strikes a balance
among our priorities.
First, our policy balances the need for increased supplies of
energy with the need to accelerate conservation efforts by utilizing
cutting edge technology. For example, increased utilization of advanced
vehicle materials, hybrid drive-train technology and new, clean direct
injection engine designs can provide significant efficiency
improvements in light duty vehicle efficiency without sacrificing other
attributes. The challenge we face is getting this technology into the
vehicles for consumers at a reasonable price. The Administration looks
forward to working with Congress to determine the best way to achieve
this goal.
Second, we believe energy security dictates more focus on the
system that provides the clean petroleum products that serve our
transportation needs. We have an enormous and complex transportation
fuels refining, distribution and storage system in this country that,
while significantly dependent on imported oil, does give us the broad
mix of petroleum products needed to meet current demand and support
energy security. Unfortunately, that system is having difficulty
keeping up with growing demand and a product slate that is shifting
towards greater demand for middle distillates. At the same time, new
environmental requirements for ever cleaner products will require even
greater investment. We need to spend more attention to improving and
increasing that clean product capacity, and we need to redress the
governmental policies that inhibit that.
Third, our policy appropriately balances our essential requirements
for traditional sources of transportation fuels with the need for
renewable and alternative fuel sources. It also recommends tax
incentives for the use of certain renewables and advanced technology
vehicles and more focused research on next-generation sources like
hydrogen, through fuel cells.
The President's energy policy also harmonizes growth in domestic
energy production with environmental protection. This commitment to
conservation and environmental protection is not an afterthought; it is
a commitment woven throughout. Transportation fuels production without
regard to the environment is simply not an option.
We support this balanced approach with a number of specific
recommended actions. The Administration can carry out many of these
recommendations on its own, either through executive orders or agency-
directed actions. We are moving ahead to implement proposals as quickly
as possible. One day after the release of our National Energy Policy,
the President issued two executive orders directing Federal agencies to
accelerate approval of energy-related projects and directing Federal
agencies to consider the effects of proposed regulations on energy
supply, distribution or use. Both of these executive orders will affect
fuels regulations and refinery operation critical to an adequate supply
of transportation fuel.
Moreover, where appropriate, Federal agencies, including the
Department of Energy, are directed to take a variety of actions to
reduce and diversify vehicle fuel use. Under existing Executive Order
13149, Federal fleets have to reduce petroleum consumption by 20
percent by 2005, using improved efficiency, reduced vehicle use and
alternative fuels. This reduction in fuel use is equivalent to
increasing the fuel economy of all the vehicles in the federal fleet by
6 mpg. This is a significantly greater savings than that which would be
required by section 704 of S. 597. The Executive Order, however, gives
federal fleet managers a choice of how they achieve the savings; they
are not limited to buying only higher fuel economy new vehicles.
Some of the recommendations contained in the National Energy Policy
report that relate to vehicle fuel use and production require
legislative action and we can find several areas for concurrence with
proposed legislation. For example, reauthorization of the Spark
Matsunaga Hydrogen Research, Development and Demonstration Act of 1990,
similar to what is called for by S. 1053, is supported in the NEP.
However, we are concerned that legislative proposals that mandate use
of specific technologies or fuels on a rigid timetable are not a good
way to get us to our goals. Success of the technology development,
adequacy of the fuel supply, or cost-effectiveness cannot be assured by
legislation. Our goal should be to create the technology base and
policy context in which the market can make cost-effective choices that
respect our environmental goals and move us towards our energy security
goals.
We all recognize energy as a critical challenge. We recognize that
the efficiency and fuel diversity of our light duty vehicle fleet can
be improved. We also recognize that parts of our petroleum product
supply and delivery system need enhancement or modernization. And we
all recognize that conservation and stewardship must go hand in hand
with achieving these objectives. This Committee has a long and proud
tradition of developing bipartisan energy legislation. The
Administration recognizes that all major energy bills have been
bipartisan in nature and looks forward to working closely together with
you to develop bipartisan energy legislation.
In closing, let me say, Mr. Chairman, that I believe the Department
of Energy is particularly well suited to make a serious contribution to
finding solutions to the energy challenges we will face over the next
twenty years. The Department is the single largest supporter of basic
research in the physical sciences and manages major programs in basic
energy science, high energy and nuclear physics, fusion energy
sciences, environmental research, and advanced scientific computing
research. In different ways, each of these areas will play a role in
providing greater energy security for the American people. As the
policy report notes, ``The President's goal of reliable, affordable and
environmentally sound energy supplies will not be reached overnight. It
will call forth innovations in science, research and engineering. It
will require time and the best efforts of leaders in both political
parties.''
Mr. Chairman, this concludes my testimony and I would be happy to
answer any questions the Committee may have at this time.
The Chairman Thank you very much.
Mr. Shelton.
STATEMENT OF L. ROBERT SHELTON, EXECUTIVE DIRECTOR, NATIONAL
HIGHWAY TRAFFIC SAFETY ADMINISTRATION, DEPARTMENT OF
TRANSPORTATION
Mr. Shelton. Thank you, Mr. Chairman. On behalf of the U.S.
Department of Transportation, I welcome the opportunity to
contribute to the committee's consideration of measures to
reduce the demand for petroleum products in the light duty
vehicle sector. This is a matter of importance to the economy
and to our national energy security.
As its principal contribution to energy conservation in the
light duty vehicle fleet, the Department administers the
Corporate Average Fuel Economy program. Enacted in 1975 in
response to the energy crisis caused by the 1973 to 1974 oil
embargo, the CAFE program requires motor vehicle manufacturers
to ensure that their new vehicle fleets meet a specified
average level of fuel economy in each model year.
The CAFE standard for passenger cars is set by statute at
27.5 miles per gallon, whereas the CAFE standard for light
trucks is set by the Department by regulation for each model
year. The light truck CAFE standard has been frozen at the
model year 1996 level of 20.7 miles per gallon by provisions in
the Department's annual appropriations acts.
The early years of the CAFE program were marked by
significant improvements in fuel economy as public demand for
energy efficient vehicles during the late 1970's and the early
1980's continued to be strong. Since the mid-1980's, however,
gasoline prices have typically been stable or declining and
consumer demand has tended to favor vehicle utility, safety,
and performance over fuel economy, with the result that the
fuel efficiency level of the passenger car fleet has leveled
off. At the same time, the arrival of new types of passenger
vehicles, such as minivans and sport utility vehicles, has
attracted buyers away from passenger cars into these less fuel
efficient models.
The result is that the average fuel economy for the new
light duty vehicle fleet as a whole has declined from an all-
time high of 26.2 miles per gallon in model year 1987 to 24.5
miles per gallon for this model year. This decline means that
today's fleet is using more petroleum, an increasing percentage
of which is imported, than it would have if fuel efficiency had
continued to improve beyond the early years of the CAFE
program.
It is in this context that we must re-examine the CAFE
program and other conservation measures. The Department
welcomes lifting the restrictions on CAFE rulemaking Congress
has imposed since fiscal 1996 to permit the Department to once
again engage in rulemaking that will set the fuel economy
standard for the light truck fleet.
In a July 10 letter to the appropriations committees,
Secretary Mineta urged them to consider legislation that would
remove the restriction before the end of this fiscal year so
that the Department would not need to wait until the start of
the new fiscal year, but could begin work right away.
Whenever the Department is free the go forward with
rulemaking in the CAFE program, our rulemaking will be fully
informed by the National Academy of Sciences report expected
later this month, despite today's New York Times article, and
our work will be consistent with the President's national
energy policy considerations. We will have to overcome the
effects of the 6-year freeze. The Department has not been able
to collect data or conduct any analyses that will be needed to
establish the statutorily required determination that a
specified fuel economy level is a maximum feasible level.
We believe that responsibly crafted CAFE standards under
existing law should increase fuel economy without negatively
impacting the automobile industry. As you know, the President's
national energy policy report recommends the that standards
should be based on sound science and should consider passenger
safety, economic concerns, and the impacts on both domestic and
non-domestic manufacturers.
It is clear that there are many points of view about the
best means to improve the fuel economy of the light duty
vehicle fleet, as illustrated by the continuing debate in the
Congress on whether to legislate higher CAFE standards or to
require specific reductions in fuel consumption by certain
segments of the fleet, such as light trucks. We are listening
to these debates with interest because they offer an
opportunity to explore alternative means of conserving
petroleum.
To achieve a specified CAFE level, a manufacturer must
produce fuel efficient vehicles that the public will buy. If
demand for fuel efficient vehicles slackens, whether because
fuel prices decline or because consumer preferences change,
manufacturers may need to provide incentives, such as rebates
or lower prices, to meet required CAFE levels. If other cost
effective measures can be devised to increase consumer demand
for fuel efficient vehicles, those measures should be examined.
In fact, the President's national energy policy report
recommends that the Secretary of Transportation evaluate
market-based approaches to increasing new motor vehicle fuel
economy.
We want to assure the committee that the Department will
carry out its responsibilities under the CAFE law to the best
of its ability, with the goal of improving fleet fuel economy,
producing benefits to the economy, and to our national energy
security.
This concludes my statement. I will be pleased to answer
your questions.
The Chairman. Thank you very much.
Let me start and ask a few questions about the process from
here on as you see it. You referred to this, Mr. Shelton, in
your comments already. But you are currently prohibited, the
Department of Transportation is prohibited, from proceeding
with any kind of analysis or investigation to determine what an
appropriate fuel efficiency standard might be.
Mr. Shelton. Yes, we are, Mr. Chairman, yes.
The Chairman. Secretary Mineta has asked the appropriations
committees of the two Houses to go ahead and relieve him of
that prohibition so that he can get on with developing a new
standard, is that right?
Mr. Shelton. Yes, sir. He sent a letter up last week asking
the Department to be relieved of that prohibition.
The Chairman. So if he were relieved of that in the next
couple of weeks, what is the time frame for getting from where
we are today to an actual new standard being implemented by the
Department of Transportation?
Mr. Shelton. We have established standards for light trucks
through model year 2003. We are required by statute to set
standards at least 18 months in advance of a model year. So we
have to set standards for model years 2004 and later light
trucks and model year 2004 would start approximately October 1,
2003, so we have to set the standard for 2004 18 months
earlier, which would be approximately April 1, 2002.
If the freeze were lifted, the Department would start right
now on establishing light truck standards for at least 2004. We
would need to get a standard in place for model year 2004 light
trucks by April 1, so we would proceed to getting that
rulemaking done, and that rulemaking might encompass model
years also beyond 2004. We have that option.
The Chairman. Did you see the article this morning in the
New York Times that both Senator Murkowski and I referred to?
Mr. Shelton. Yes, sir, I did, Mr. Chairman.
The Chairman. Did you have any perspective you could give
us on this issue of sales of flexible fuel vehicles that can be
either gasoline or ethanol? I gather that the draft report, and
it is still just a draft, but that it is critical of the whole
notion for what they cite as the fact that very few of these
vehicles actually burn ethanol. Even though they may be capable
of using either fuel, they do not in fact wind up burning
ethanol.
Is that something that your Department has looked at, or do
you have any view on that?
Mr. Shelton. We are looking at that right now, sir. Under
the 1988 Alternative Motor Fuels Act, manufacturers are given
CAFE incentives to produce vehicles that will run on both
gasoline and alcohol, and manufacturers have produced over one
million of these vehicles to date. Very few of them actually do
operate, though, on the alternative fuels, and a big problem is
the infrastructure is not out there. There are very few ethanol
refueling stations in this country.
We are actually completing a report to the Congress in
conjunction with the Department of Energy and the Environmental
Protection Agency which is going to address this program and
how it has--and the effects of this program since it has been
established.
The Chairman. Just to sort of finish this line of questions
to you, as you see it, given the current authority that the
Department of Transportation has to set these standards, if
Congress were to back off of the prohibition on you proceeding
in this area is there other legislative action that you also
think would be useful?
We have various bills pending here in the Senate and in the
House which actually set higher vehicle fuel efficiency
standards and do not just leave it to your rulemaking to do
that. What is your position on those?
Mr. Shelton. We have not taken any position on the
legislative proposals. We have taken the position that we think
the National Academy of Sciences report should be completed. We
would like an opportunity to review that report before making
recommendations as to what policy changes or legislative
changes might be necessary to address CAFE.
The Chairman. You cannot advise Congress as to what to
enact or whether to enact anything in this area until you see
that final report, is that your position?
Mr. Shelton. We think it is very important that we all see
that final report, Mr. Chairman. The Congress appropriated a
million dollars for that report. The report was reported by the
Congress and by the Department of Transportation. It is a very
significant piece of work, piece of analysis, in looking at the
program.
We expect to have that report by the end of July and we
think it should be considered very thoughtfully and thoroughly
before we take further action.
The Chairman. My time is up.
Senator Murkowski.
Senator Murkowski. Thank you, Senator Bingaman.
We have been aware that the Department of Transportation
was asked to put policies in place to limit fuel use in the
light duty vehicle sector, and it is in some of the bills that
are before us here. I am curious to know what policies and
measures specifically you believe should be considered. I think
among them there was the fuel use proposal to have as a goal 5
percent below the 2000 levels by 2008 or thereabouts, and I
think that time frame would be 5 to 7 years to accomplish that.
Could you comment on any of these policies, and also
comment on the effect of timeliness, how immediate would some
of these likely be, what effect they might have on gasoline
supplies, on prices, and so forth?
Mr. Shelton. As to the first question, Senator, I think we
really think it is important to get the National Academy of
Sciences report before deciding whether we need legislative
authority in this area. With regard to the second part of the
question, clearly auto manufacturers face lead times in their
product plans and if the goal is to influence those product
plans significantly without causing undue negative effects on
their plans they would need some lead time before they could
start raising vehicle fuel economy.
Senator Murkowski. When we talk about lead time, what are
you talking about? Be a little more specific on policies. What
policies? I know you are saying let us wait for the National
Academy of Sciences, but for the benefit of the committee here
can you share a few of the policies here? Are we looking at 5
to 7 years as lead time?
Mr. Shelton. Typically, sir, it would take 2, 3, 4,
probably 3 or 4, model years before a manufacturer could make
substantial changes in his product plans other than say
restricting sales of planned products. So any legislation or
other program which would require a substantial increase in
fuel economy, for example, in the near term that was not
considered in the manufacturer's product plans could be
disruptive to those plans.
Senator Murkowski. Well, how about policy specific
recommendations? What policies?
Mr. Shelton. There are a number of policies that have been
proposed, such as the one you mentioned, which is simply to cap
gasoline consumption at some level in the future. Typically we
would have to work back to figure out what sort of new vehicle
CAFE level that implied and then you would have to consider the
manufacturer's ability to get to that CAFE level and whether it
was achievable in that time frame.
Senator Murkowski. Well, since we are talking about unknown
time frames, I am often a little perturbed. We talk about the
merits of opening ANWR and the time it would take to make a
determination. These things all take time, whether you are
talking about changing policies or significant changes in
engineering or prospects of opening up an oil field. The bottom
line is what the contribution is.
Would the Department of Transportation also consider
highway policies, mass transit, alternative fuels?
Mr. Shelton. Yes, absolutely. We look at energy consumption
in its totality that transportation uses to look at effective
means to reduce that consumption. For example, we are looking
at congestion mitigation as part of the President's national
energy policy.
Senator Murkowski. Now, with the development of engineering
standards and weight and safety and the buying habits of the
public, how do you explain how the ten most fuel efficient cars
only constitute 1.5 percent of the automobile sales in this
country? I mean, is there a problem with those cars? Is it
buying habit? Is it safety? Is it weight? Is it performance?
Mr. Shelton. I think clearly when CAFE standards are
established you have to consider whether people will buy those
vehicles. As you point out, many very fuel efficient vehicles
are only sold in very small numbers, which implies that they do
not meet the needs of many members of the public. When we set
fuel economy standards, we are required by Congress to consider
the economic practicability of achieving those levels, which
includes the manufacturers' ability to afford to make these
changes, but also whether consumers will buy those vehicles in
quantities.
Senator Murkowski. Do not leave me hanging there.
Technically, you are talking about cost, you are talking about
acceptability, you are talking about safety. I assume the
higher up you go in demanding an SUV that will achieve what the
automobiles currently are set at, what is it, 27 or
thereabouts, you are talking about potentially a substantial
change in the weight of that vehicle potentially. Are you
talking about a significant breakthrough in an engine that will
give you that kind of mileage? Then you are talking about
potential higher costs as you achieve that squeeze.
Is this just a process of a compromise of all the various
considerations that go into achieving higher standards?
Mr. Shelton. I am not sure it is a compromise, Senator. We
have to consider all these factors certainly. In the short run,
for example, if you were trying to raise SUV fuel economy by a
large amount in a very few model years, the nearest, the most
readily available approaches to do that are to sell more
smaller SUV's and fewer large ones, which would certainly
impact consumers that want larger SUV's, or perhaps they would
have to sell less powerful SUV's, which would also have better
fuel economy, which again may undermine other consumers' demand
for such vehicles.
So they are all certainly considerations when you set CAFE
standards. You have to consider whether the manufacturers can
sell those vehicles. If you set a CAFE level which demands that
manufacturers produce vehicles that are not going to be sold,
then there will not be fuel savings.
Senator Murkowski. The last question. Why are not the
public buying the most fuel efficient automobiles today? Why do
those ten automobiles--either you, Mr. McNutt, or you, Mr.
Shelton, tell us why they are not buying them? Clearly there is
an incentive to buy them.
Mr. Shelton. Clearly those vehicles have incentives to buy
them, in that they are often inexpensive and they do not use a
lot of gas. That is an incentive to buy them. But obviously,
for the great majority of consumers those vehicles do not meet
their needs. They do not have perhaps sufficient room,
sufficient power, whatever else they need when they buy a new
vehicle. Those vehicles are not meeting their needs.
Senator Murkowski. That begs the question. If there is a
need, fill it. Evidently you cannot fill that need because of
technological challenges; is that what you are telling us?
Mr. Shelton. In the longer term, it is easy to meet that
need, because technologies become available to increase fuel
economy without affecting the utility of the vehicle.
Senator Murkowski. Mr. McNutt, do you want to try it?
Mr. McNutt. We have had a decade of very low gasoline
prices up until the last two summers and that has certainly
affected consumers' interest in fuel efficiency per se and the
tradeoffs they are willing to make. I think as Mr. Shelton
says, you can change the fuel economy attributes of both small
vehicles, the ones you are referring to, and the larger
vehicles over time with technology, and so there is a time
tradeoff in terms of how quickly you can do this.
The manufacturers look at consumer demand, look at the
competitive playing field that they are operating in, what the
other manufacturers are going to do, and they have to operate
within that competitive playing field. Today as things now
stand, both because of policy and the market, there is not an
incentive to make those improvements in the fuel efficiency of
the other vehicles.
So over time both the market can change, the policy can
change, and the technology can change. We are now at a place
where the vehicles that are being offered were designed and
brought to market in the end of the 1990's when gasoline was at
historic nominal low prices and I think the vehicles being
offered are reflective of that. Over time that can change if
the framework changes.
I think really that is what we are getting at. The question
you were asking is what is that time frame for change, and one
has to respect both the design lead times that manufacturers
face. I think Mr. Shelton said that 2004 would probably be the
first model year you could seriously look at any sort of
standard for light trucks, and I think as a practical matter
changing the fuel efficiency of those vehicles is really a 2005
or later proposition.
The Chairman. Thank you.
Senator Johnson.
STATEMENT OF HON. TIM JOHNSON, U.S. SENATOR
FROM SOUTH DAKOTA
Senator Johnson. Thank you, Mr. Chairman.
I want to ask consent to submit a full opening statement
for the record.
The Chairman. We will include that in the record.
[The prepared statement of Senator Johnson follows:]
Prepared Statement of Hon. Tim Johnson, U.S. Senator From South Dakota
Mr. Chairman, thank you for holding this important hearing. I am
pleased that we are holding a hearing on renewable fuels and fuel
efficiency in the light duty vehicle sector. This hearing is timely,
since it follows the field hearing that I chaired in Sioux Falls, SD on
July 6 on S. 1006, the Rewewable Fuels for Energy Security Act, which I
have introduced with my colleague, Sen. Chuck Hagel. S. 1006 is also
one of the bills that will be discussed at today's hearing and I am
grateful that the Chairman has placed it on the agenda.
As you all know, there has been a great deal of discussion this
year about the nation's energy situation. The increasing volatility in
gasoline and diesel prices have affected all of us and left us grasping
to determine the reasons for the changes. Tightness in oil refining
capacity has been a major factor, as has the re-emergence of OPEC as a
force in world oil markets. Those factors, in combination with high
natural gas prices this past winter and the recent electricity problems
in California and the West, have refocused attention on the need for
energy policies that ensure long term planning, fuel diversity and a
focus on new technologies.
I expect to spend the next few months working with the Chairman and
other members of the Committee to develop an energy strategy to
mitigate the boom-bust cycles in energy markets. I believe a number of
factors have come together to create a rare opportunity to shift our
economy to greater reliance on renewable, domestic energy sources and
away from the volatility of the world oil market.
To this end, S. 1006 would ensure future growth for ethanol and
biodiesel through the creation of a new, renewable fuels content
standard in all motor fuel produced and used in the U.S. Senator Hagel
and I will push for our legislation to establish an aggressive growth
pattern for ethanol and biodiesel production and use in the United
States.
Today, ethanol comprises less than one percent of all
transportation fuel in the U.S. My bill would require all motor fuels
sold in the U.S. to be comprised of a certain quantity of renewable
fuel (ethanol from corn, ethanol from biomass, and biodiesel). By 2008,
2% of all transportation fuel in the U.S. would be from renewable
fuels, increasing to 5% by 2016. I believe those are realistic targets.
The Bush Administration recently affirmed its support for ethanol
when it denied California's request to evade the oxygen requirement for
reformulated gasoline (RFG) as required under the Clean Air Act. The
Administration clearly recognizes that ethanol has important clean air
benefits, without the dangers of groundwater contamination posed by
MTBE. I applaud this decision to enforce the Clean Air Act and ensure
clean fuels have a major role in the market.
Based on current projections, construction of new plants will
generate $900 million in capital investment and tens of thousand of
construction jobs to rural communities. For corn farmers, the price of
corn is expected to rise between 20-30 cents per bushel.
Combine this with the provisions of our bill and the potential
economic impact for rural economies is tremendous. Today, three ethanol
plants in South Dakota produce nearly 30 million gallons per year. The
production in South Dakota alone could grow substantially, with at
least 3,000 farmers owning ethanol plants and producing 200 million
gallons of ethanol per year or more.
An important but under emphasized fuel is biodiesel. We all know
that soybean prices are hovering near historic lows. Biodiesel
production is small, but has been growing steadily. With the new EPA
rules requiring dramatically lower amounts of sulfur in diesel fuel by
2007, the market prospects for biodiesel, an intrinsically low sulfur
fuel, are very bright. The increased usage of biodiesel would help to
meet the goals of S. 1006 and would be beneficial for the nation.
It is important the Congress take a serious look at these issues
beyond just the economic impact for my region of the country. Bio-based
fuels offer multiple benefits--from climate change to improving our
trade balance. By increasing biofuels production, we can also reduce
the need for new refineries and pipelines.
Moreover, we need to find solutions to increase fuel efficiency for
vehicles. The energy crisis of the 1970's moved us away from larger,
gas-guzzling vehicles, to more efficient, energy-friendly vehicles.
Even the SUVs of today get better mileage than many of the vehicles 30
years ago. But the recent swings in gas prices make it clear that we
need to take a serious look at new technologies and look at ways to
improve the gas efficiency of our vehicles.
The Senate plans to proceed with comprehensive energy legislation
this session of Congress. In my view, a substantive bill that improves
the nation's energy security can only be enacted if we work in a
bipartisan manner. The problems and difficulties that our state and the
nation face are too important to be bogged down in partisan rhetoric. I
will work together with my colleagues to see that we produce policies
to remedy real problems and real energy concerns for the nation. In my
view, a viable renewable fuels component would go a long way towards
making this happen. With your help and input, I believe we can make
that happen.
Senator Johnson. And also to thank you for authorizing a
field hearing that I chaired in Sioux Falls, South Dakota, July
6 dealing with alternative fuels, with particular focus on S.
1006, the Renewable Fuels for Energy Security Act, which my
good friend Senator Hagel and I have co-sponsored. The thrust
of our legislation is to create a new renewable fuels content
standard in all motor fuel produced and used in the United
States. We would move the current consumption of alternative
fuel, chiefly ethanol and biodiesel, from less than one percent
of all transportation fuel today to an increase to 2 percent by
2008 and 5 percent by 2016.
Now, I believe that one of the issues that needs to be
clarified, at least in the mind of the public, is when we talk
about consuming ethanol we are not necessarily talking about
the dual use technology changes that were required in Federal
legislation. That involves burning 85 percent ethanol, E-85.
That does require some technology changes in the vehicles.
Unfortunately, the problem has not been with E-85, the problem
has been with the access to E-85 and I think the public
awareness that these vehicles in fact are able to consume that
kind of fuel.
I think E-85 has great promise. But that is a separate
issue. The fact is that vehicles manufactured today with no
technology changes are capable of burning up to about 10
percent ethanol. Now, Senator Hagel and I are suggesting around
a 5 percent use by the year 2016. I believe this is an
achievable kind of level.
I would suggest that my friend from Alaska I think made a
good point when he talked about CAFE standards, that perhaps we
ought to be also focusing a bit on not only mileage, but on
displacement of petroleum consumption, which is again a
function of greater ethanol and alternative fuel usage. Now, I
do not think it is an either/or situation. I think we need to
be examining improved CAFE standards, but I think we also need
to keep in mind the possibility of significant displacement of
petroleum consumption through alternative fuels, particularly
when this does not require, necessarily require the kind of
major technology changes in the vehicle industry that the E-85
requires.
I think we ought to continue to pursue dual use fuel
involving E-85, but clearly we have our work cut out for us in
terms of the chicken and egg problem of availability of that
fuel throughout the country. That is something that it seems to
me that the Department of Transportation is going to have to
work on, rather than simply giving up on dual use fuels
technology, to keep in mind that the problem is not with the
fuel, the problem is with the access to the fuel and the
information needed.
The question I would suggest for Mr. Shelton in particular,
I would guess, is do you agree that the displacement of
petroleum usage is a key policy goal along with better gasoline
mileage of American motor vehicles?
Mr. Shelton. Yes. The idea is to reduce petroleum
consumption. You can reduce petroleum consumption by raising
fuel economy or you can reduce petroleum consumption by
displacing it with alternative fuels.
Senator Johnson. Or you can do both.
Mr. Shelton. Or you can do both.
Senator Johnson. That is what I would suggest maybe where
we need to end up in this debate.
Mr. Shelton. Yes. I was not trying to suggest it was an
either/or. Absolutely, you should do both.
Senator Johnson. One of the benefits, it would seem to me,
of increased ramping up--and Senator Hagel and I are certainly
looking at a long window of time. We are trying to be realistic
about this. But it would seem to me that one of the benefits of
increasing displacement of petroleum with alternative fuel is
that it is a regime that can be begun now rather than later. It
is not something that we have to wait ten years for in order to
accomplish.
Would you share that view?
Mr. Shelton. Yes, sir, it certainly can be achieved in a
shorter duration, absolutely.
Senator Johnson. Is it your observation that existing
automobile technology is very capable of burning blends up to
10 percent ethanol without significant changes?
Mr. Shelton. I am not entirely current on that, Senator,
but that was my understanding based on historical knowledge,
that typically a vehicle can burn up to 10 percent ethanol
without modification.
Senator Johnson. And blends of biodiesel as well, which is
a soybean-based fuel?
Mr. Shelton. I have to defer to Mr. McNutt on that.
Senator Johnson. Mr. McNutt.
Mr. McNutt. We have very little experience in the biodiesel
side. The auto industry's view about ethanol is a proper
blended ethanol, which is the language they use, at 10 percent
has certainly been acceptable, and it is what we have in the
marketplace now.
The question about biodiesel I think, clearly it can be
used. At what levels, what kind of equipment modification, if
any, I think is something we are learning about now. So it is
not a technological obstacle. It is learning how to do it
properly.
Senator Johnson. I would share with you the testimony from
the supervisor of the Black Hills National Forest, of all
people, who showed up for our hearing in Sioux Falls, who
indicated that they have gone now to biodiesel in their Forest
Service vehicles. It is a cleaner burning, easily used fuel,
and this again is a technology that exists now, the potential
for consumption is here now.
My time is up. I thank the chairman.
The Chairman. Thank you very much.
Senator Hagel.
STATEMENT OF HON. CHUCK HAGEL, U.S. SENATOR
FROM NEBRASKA
Senator Hagel. Mr. Chairman, thank you. I too have a
statement that I would like to ask to be included in the
record. Included in that statement, Mr. Chairman, is a thank
you to you and to our chairman emeritus for your continued
commitment to working on this issue, which I believe energy in
itself and the wholeness of it is I believe the most pressing
issue facing the future of this country. So thank you.
[The prepared statement of Senator Hagel follows:]
Prepared Statement of Hon. Chuck Hagel, U.S. Senator From Nebraska
I want to thank Chairman Bingaman for continuing these important
hearings on energy policy.
Someday, technology will deliver new and diverse sources of energy.
But in today's world and for the near future, fossil fuels power
America. The 180 million gasoline and diesel-powered vehicles on
America's roads are not going to be replaced overnight. With that in
mind, the increased use of alternative fuels, including ethanol and
biodiesel, can have an immediate and significant impact on reducing our
dependence on foreign oil.
The Renewable Fuels for Energy Security Act (S. 1006) that Senator
Johnson and I introduced would ensure a one percent market share for
fuels derived from renewable resources by 2008, a three percent market
share by 2011, and a five percent market share by 2016--a ten-fold
increase from today. A three percent market share for U.S. produced
renewable fuel would replace between 500,000 to 600,000 barrels of
crude oil a day, roughly the amount we now purchase from Iraq.
Renewable fuels like ethanol and biodiesel afford us the
opportunity to develop energy, environmental and economic policies that
work together. They can help us improve air quality, strengthen our
national security, reduce our trade deficit, and decrease U.S.
dependence on foreign oil.
Our nation needs a broader, deeper and more diverse energy
portfolio--one that ensures we have clean, reliable and affordable
domestic sources of energy. Expanding the market for renewable fuels is
only part of the solution, but it is an important part. We must push
harder for renewable fuels as a significant addition to any new energy
policy that comes out of this Committee.
Thank you, Mr. Chairman.
Senator Hagel. Picking up on where Senator Johnson was
going, his explanation and questions regarding our renewable
fuels bill, which we think has some merit. Mr. McNutt, I
understand yesterday that a senior representative from the
White House, Mr. Melman, who you may or may not know, but just
to inform you who he is, he is the Director of the Political
Office at the White House, which you might want to get
acquainted with him. He probably will have something to do with
where all of this eventually winds up.
He told the National Corn Growers that the President was
focusing on renewable sources of energy, and I believe that is
a quote from Mr. Melman. What do you think he means by that?
Mr. McNutt. I will not be presumptuous. I do not know what
his remarks were, but I can speak about what the Department is
doing. Obviously, renewable energy includes what we are doing
today with grain-based alcohols, soy-based diesel fuels, and
longer term with cellulosic-based alcohol. All three of those
fall into the category, in this light duty fuel context, motor
fuel context, of renewables. Obviously, the renewable spectrum
when you get to power production is much broader than that.
Senator Hagel. Do you think he is talking about ethanol,
biodiesel, some of the things that Senator Johnson talked
about?
Mr. McNutt. Again, I do not know----
Senator Hagel. Hard to tell, is it not?
Mr. McNutt [continuing]. What Mr. Melman was talking about,
but in terms of when the Department speaks about renewables in
the motor fuel area we certainly talk about ethanol from
various sources and soy-based material for blending with diesel
fuel.
Senator Hagel. You think that is something we should
continue to explore?
Mr. McNutt. Yes, we are. We have active programs in those
areas. Ethanol use in gasoline is growing. I noticed a press
release from the Renewable Fuel Association yesterday reporting
the tenth consecutive month of growth in output of ethanol
production in the United States to over 100,000 barrels a day.
So it is a growing industry, a growing utilization, and we are
all pursuing that.
Senator Hagel. In your testimony as well as Mr. Shelton's,
both of you recognized the obvious, that we have talked a bit
about this morning, that is the growing dependence on foreign
source oil, which I do not think anyone feels particularly
comfortable about that. It is something that we do need to
address. The President is addressing it. This panel is
addressing it. The Congress will continue to address it.
We have not done a very good job with it over the last few
years. Many of you remember, as I do, in the 1970's when we
were about 36 percent dependent on foreign sources of oil at
the height of the Arab oil embargo and we thought essentially
our geopolitical, strategic, economic, energy policy had come
apart. Now we are getting close to double that number. So we
all have to take some responsibility for deferring the tough
decisions in this business.
But the question is, if that is a concern of all of us, how
do you best believe we can deal with that? Renewable sources
are a part of that. My numbers along with Senator Johnson's
show rather conservatively from, as a matter of fact from your
Department and others, that if you get to a 3 percent standard
of renewable fuels in our transportation fuel inventory that
you are now saving at the rate of about 600,000 barrels of
foreign source oil a day. I believe that is somewhere in the
range of what we import from Iraq.
Now, you may quibble with those numbers, but they are not
mine. They are the Department of Energy's and others. But that
is beside the point.
So do you believe renewable fuels play a role--can play a
more significant role--if we do more than we are doing now to
increase those uses and those standards versus other options?
Mr. McNutt. The National Energy Policy is looking at a
variety of ways of reducing the foreign oil dependence,
including obviously greater domestic production of oil. How the
various things play against each other depends on your
assessment of them. You talked about 3 percent of motor fuels
pool, which on a direct calculation is like 300,000 barrels a
day. I understand we do not need to quibble about whether it is
300,000 or 600,000 barrels a day.
I think renewables' real advantage does not lie in oil
displacement per se, but lies in the very fact that, one, it is
renewable and has benefits in other areas. More specifically,
as I mentioned in my opening statement, we have had success, as
Senator Johnson was noting, in bringing what I call blend
stocks into the gasoline stream because we do not have an
infrastructure limitation. So that is a second advantage of
pursuing that route, which is you do not have to build
infrastructure, you can use more of them tomorrow, as we are
seeing.
So you have certain expanded environmental advantages for
renewables as they are being used now in gasoline. You have
blending advantages and the lack of infrastructure. You also
add to the quality of the gasoline pool if they are blended
correctly. So to me, I think we have to look at the full value
of those renewables, not just their displacement value, because
in the end game we are using, will be using in the time you are
talking about, 20 million barrels a day of oil, and whether
300,000 or 500,000 is the important number, the important thing
about renewables is their ultimate benefits.
Senator Hagel. Thank you.
Mr. Chairman, thank you.
The Chairman. Thank you.
Senator Feinstein.
STATEMENT OF HON. DIANNE FEINSTEIN, U.S. SENATOR
FROM CALIFORNIA
Senator Feinstein. Thanks very much, Mr. Chairman.
Mr. McNutt and Mr. Shelton, welcome. For the last three
Congresses I have been trying to work on fuel efficiency
standards. I joined Senator Dick Bryan of Nevada and Senator
Gorton of Washington to try to move fuel efficiency standards
for SUV's and light trucks, and I saw how very difficult it
was. We finally got the study from the National Academy of
Sciences, which was a kind of big deal, if you will.
Well, to make a long story short, in this Congress Senator
Olympia Snowe, Senator Schumer, Senator Collins and I have
introduced legislation which over the next 6 years would bring
the fuel efficiency standards for light trucks and SUV's in
compliance with sedans. So it would be a third every 2 years
for 6 years. This saves about a million barrels of oil a day.
It prevents 240 million tons of carbon dioxide, the largest
global warming gas, from entering the atmosphere a year, and it
cuts down on oil imports about 10 percent.
Additionally, it would save the consumer anywhere from $300
to $600 a year buying gasoline. To me, it sounds like a no-
brainer.
Now, the one question was is it really doable. I went and
had the opportunity to speak to the National Academy of
Sciences when they were meeting here and then afterwards some
representatives from the automobile companies talked to me and
said: Oh, we cannot do this, we are very resistant to it,
etcetera, etcetera. Then I got very worried because I heard
that the National Academy's panel had no environmentalists, was
apt to be very pro-automobile company.
Well, this morning I saw the New York Times and my heart
just jumped with delight, because what the draft report
apparently said was that these standards are eminently doable,
they are eminently meetable, and they probably can be done by
different uses of existing technology. So I was just delighted.
If that is the draft report, hopefully the Academy will back
the draft report. I do not know whether they will or they will
not.
As you know, the House has taken some minimum baby steps
forward. So as I look at this issue and as I watch the
administration and Secretary--excuse me--Vice President
Cheney's comments, I see the administration changing. As a
matter of fact, I asked them whether they would support
increased fuel efficiency standards--I do not mean to make you
gentlemen uncomfortable--increased fuel efficiency standards
and the response I got was: Well, we want to see the Academy's
report first.
Hopefully that report will be forthcoming very shortly, and
hopefully we will be able to move this legislation. But what I
wanted to ask you about was, as part of this legislation
Federal fleets would have to reduce petroleum consumption and
we would increase the fuel economy of new vehicles in the
Federal fleet on the following schedule. Two years after the
enactment of the bill, the average fuel economy of the new
vehicles comprising the Federal fleet must be 3 miles higher
than the baseline average fuel economy for that class, and 2
years after the enactment the average fuel economy after that
must be 6 miles per gallon higher than the baseline.
My question to you is that, since the Federal Government
purchases about 1 percent of all new vehicles, State vehicles
make up another .65 percent and usually follow Federal
standards, this can make a big difference. Would your
Department be supportive of moving the Federal fleet in this
direction?
Mr. Shelton. Thank you, Senator. As you noted, the
administration has taken the position that it wants to wait
until the National Academy of Sciences study is completed
before making policy recommendations on whether we need to
change CAFE or pursue legislative changes. We, like you, are
eagerly awaiting that report, which we expect to have by the
end of this month.
So at this point I honestly do not know the answer to your
question. I do not know what the average fuel economy is of the
Federal fleet. I have to check with the General Services
Administration. So I am not sure how feasible they view it as
to substantially increase the fuel economy of those vehicles.
Senator Feinstein. I got my answer. Thank you very much.
Thank you, Mr. Chairman.
The Chairman. Thank you very much.
We have two additional panels here and I would propose that
we go ahead and proceed to the second panel. In fact, it is
just suggested that we combine the next two panels and just ask
all six witnesses to come forward, please.
Thank you both very much for your testimony.
Mr. McNutt. Thank you.
The Chairman. Well, thank you all very much for coming
today. Let me just introduce the witnesses just starting on the
left-hand side here going across. I do not know if that is the
logical way to do it, but let me just do it that way. From the
left, Mr. Charles Gibbens, who is automotive fleet manager, on
behalf of National Association of Fleet Administrators; next is
Mr. McCormick, Byron McCormick, the director of Global
Alternative Propulsion Center, the Global Alternative
Propulsion Center, General Motors Corporation. Thank you for
being here.
Next, Mr. Greg Dana, who is the vice president for
environmental affairs with the Alliance of Automobile
Manufacturers. Mr. Rich Kolodziej--is that about right?
Mr. Kolodziej. Fairly close.
The Chairman. Why do you not tell me what is right.
Mr. Kolodziej. It is ``KOE-Loe-JAY.''
The Chairman. ``KOE-Loe-JAY.''
Who is president of the Natural Gas Vehicle Coalition. Mr.
Gary Marshall, who is vice president of the National Ethanol
Vehicle Coalition; Mr. Eugene Zeltmann, who is the co-chairman
of the Electric Vehicle Association of the Americas. Thank you
all very much. Why do we not just start and each of you take 5
or 6 minutes and summarize your testimony. We will include in
the record your full testimony and then we will have some
questions.
Mr. Gibbens.
STATEMENT OF CHARLES GIBBENS, AUTOMOTIVE FLEET MANAGER, ON
BEHALF OF NATIONAL ASSOCIATION OF FLEET ADMINISTRATORS
Mr. Gibbens. Thank you, Mr. Chairman. The National
Association of Fleet Administrators, or NAFA, appreciates the
opportunity to testify at this hearing and share with the
committee the perspective of fleet managers on strategies that
you might consider for reducing demand for petroleum products
in the light duty vehicle sector. NAFA is the association of
professional fleet managers. Our 2,000 members manage more than
3 million cars, vans, and trucks for corporations and
government agencies.
As already noted, I am Charles Gibbens, the automotive
fleet manager for the county of Henrico, Virginia, and I manage
a diverse fleet of about 2,500 vehicles.
Reducing petroleum demand in the light duty vehicle sector
was a goal of the Energy Policy Act of 1992 and one of the
objectives of EPAct was that fleet mandates would jump-start
the market for alternative fuel vehicles, stimulate AFE use by
the general public, and result in a 10 percent replacement of
petroleum by 2000 and 30 percent by 2010. Federal, State and
fuel provider fleets are mandated to purchase AFVs when
replacing light duty vehicles.
The law provides for an exemption process if either
vehicles or refueling facilities are not available. Since 1992
fleet managers have faced the challenge of how to comply with
the EPAct mandate. Fleet managers have been consistent in their
message that any plan to move vehicles to alternative fuels
will not be successful until the costs and operational issues
are comparable with gasoline and diesel vehicles.
Despite the optimism of many, AFVs are still costly, are
not available in sufficient model lines, lack the requisite
refueling infrastructure, and do not meet the operating needs
of most fleets. At this moment, despite the best efforts and
limited accomplishments, the economic and the operational
situation is not promising for the majority of fleets or for
the general public. These very practical real world conditions
may explain why even the Federal Government has so consistently
failed to meet its own mandate for AFV acquisition and
operation.
It seems clear from the experiences of the Federal fleet,
fuel provider fleets and State fleets that fleets by themselves
will not make any significant reduction in the Nation's use of
fossil fuels. This is in part because of inherent limitations
in existing AFV models, alternative fuels, refueling
infrastructure, technology and costs.
Mandates, however, were only part of the EPAct strategy. It
was anticipated that the mandated fleets would provide the
critical mass for the vehicle manufacturers and the fuel
providers. In turn, the vehicle manufacturers and fuel
providers would reach economies of scale necessary for
substantial penetration of the light duty vehicle sector. It is
important to point out that EPAct mandated AFV purchases, but
only if the appropriate vehicles and fuels were readily
available. It was of course never the intent that the mandated
fleet would either build its own vehicles or build its own
refueling facilities. In fact, the act provided specific
exemptions if either the vehicles or the fuel were not
available.
It was assumed that AFVs would generate the refueling
infrastructure because the alternative fuel would be more cost
effective. Unfortunately, this is not always the case. Just
last week, the fleet manager for the city of St. Louis,
Missouri, refueled his dedicated CNG pickup at a cost of about
$1.38 per gallon gasoline equivalent, when the city was only
paying 98 cents per gallon for a gallon of gasoline after
exemption for State and Federal tax.
As a viable public policy, EPAct has failed. The
marketplace has not risen to the challenge to address the
economic barriers. Some are blaming fleet managers for EPAct's
failure. The blame the fleet manager for failing to convince a
mayor, a governor, a CEO that sound economics would be to
acquire vehicles that cost more, are more expensive to operate,
travel fewer miles, have limited cargo space, and can easily be
refueled.
The General Accounting Office has identified the real
reasons for the failure of EPAct. In a February 2000 report,
GAO found that the goals of the act were not being met
``principally because alternative fuel vehicles have
significant economic disadvantages compared to conventional
gasoline vehicles.'' The report continues: ``Fundamental
economic impediments, such as the relatively low price of
gasoline, the lack of refueling stations for alternative fuels,
and the additional cost to purchase these vehicles, explain
much of why both mandated fleets and the general public are
disinclined to acquire alternative fuel vehicles and use
alternative fuels.''
The Department of Energy concurs with this GAO assessment.
According to DOE's section 506 technical policy analysis:
``Fleet AFV use by itself will be insufficient to achieve large
alternative fuel market share. Alternative fuel use by EPAct-
covered fleets, even with the contingent mandates for private
and local government fleets, is unlikely to provide more than
about 1.5 percent replacement fuel use.''
The committee has an unenviable task. The simplest option
would be to fix EPAct, declare victory, and revisit the
failures in another 9 years. This simple option responds to
those who would urge you to focus on the mandates without real
concern for petroleum reduction. The alternative is to think
outside of the box and consider a bolder strategy that includes
efficiency, conservation, and use of both alternative fuels and
alternative technologies.
The Nation's energy situation seems to dictate a bold
public policy. Accordingly, fleet managers recommend the
following: One, amend EPAct to allow additional compliance
options. This would include full credit for use of biodiesel,
hybrid electric vehicles, and neighborhood electric vehicles.
This fall 75 percent of new State vehicles and 90 percent of
fuel provider vehicles must be AFVs, but these fleets may not
get credit for hybrid electric vehicles or full credit for the
use of biodiesel.
Two, amend EPAct to provide credit for installing refueling
infrastructure as included in S. 388.
Three, strengthen voluntary programs such as DOE's Clean
Cities program that focus on niche markets where fuels such as
natural gas are most efficient.
Four, encourage the use of and remove obstacles to the use
of other renewable energy-based fuels and fuel blends, such as
biodiesel and blends of biodiesel.
Five, resist any further mandates on State fleets or fuel
provider fleets. Again, as noted, squeezing every drop of
petroleum from these fleets by the year 2010 would result in
only about a 1 percent reduction in petroleum use.
Six, because refueling infrastructure is such a problem,
focus on those strategies that take advantage of the existing
liquid refueling infrastructure. Specifically, grant incentives
for the development of hybrid electric vehicles and the use of
renewable fuels.
Seven, provide significant economic incentives via grant
programs and tax incentives. For example, pass and fund section
705 of S. 388, which establishes a grant program for local
governments for covering the incremental costs of qualified
alternative fuel vehicles. It authorizes $100 million for each
fiscal year 2002 through 2006 and limits individual grant
awards to no more than $1 million.
Also, many fleet managers support the intent of S. 760, the
CLEAR ACT, which is a tax issue and is outside the jurisdiction
of this committee. The CLEAR ACT would potentially help
overcome the economic barriers facing vehicles, fuels, and
refueling infrastructure. The CLEAR ACT, however, in its
present form is of little benefit to government or nonprofit
fleets. We are hopeful that this can be corrected before any
House or Senate markup. If not corrected, NAFA questions
whether Congress should pass the legislation.
In closing, the challenge for the Senate Energy Committee
is to think outside the box. Some will urge you to take the
easy course of action, that is to force government agencies and
companies to buy AFVs and use the fuels regardless of cost and
regardless of the public policy benefit. Mandates have proven
to be counterproductive. Too much time and resources have been
spent by DOE, other Federal and State agencies, fleets, fuel
providers, and manufacturers to make mandates work, all hoping
that mandates will be the silver bullet. Too much has been
spent for too little gain.
Thank you again for this opportunity to participate and I
would be most happy to answer any of your questions.
[The prepared statement of Mr. Gibbens follows:]
Prepared Statement of Charles Gibbens, Automotive Fleet Manager, on
Behalf of National Association of Fleet Administrators
The National Association of Fleet Administrators, Inc. (NAFA)
appreciates the opportunity to testify at this hearing and share with
the Committee the perspective of fleet managers on strategies that you
might consider for reducing demand for petroleum products in the light-
duty vehicle sector.
NAFA is the association of professional fleet managers. Our 2,000
members manage more than 3 million cars, vans, and trucks for
corporations and government agencies.
I am Charles Gibbens, the Automotive Fleet Manager for the County
of Henrico Virginia. I manage a diverse fleet of about 2,500 vehicles.
Reducing petroleum demand in the light-duty vehicle sector was a
goal of the Energy Policy Act of 1992 (EPACT). One of the objectives of
EPACT was that fleet mandates would jump-start the market for
alternative fuel vehicles (AFVs), stimulate AFV use by the general
public and result in a 10 percent replacement of petroleum by 2000 and
30 percent by 2010.
Federal, state, and fuel provider fleets are mandated to purchase
AFVs when replacing light-duty vehicles. For model year 2002, the
acquisition for state and fuel provider fleets is 75 percent and 90
percent, respectively. The law applies to fleets in metropolitan areas
with populations of more than 250,000. The law provides for an
exemption process if either vehicles or refueling facilities are not
available.
Since 1992, fleet managers have faced the challenge of how to
comply with the EPACT mandates. Fleet managers have been consistent in
their message that any plan to move vehicles to alternative fuels will
not be successful until the costs and operational issues are comparable
with gasoline and diesel vehicles. Despite the optimism of many--AFVs
are still costly, are not available in sufficient model lines, lack the
requisite refueling infrastructure and do not meet the operating needs
of most fleets.
There has been some progress. There have been anecdotal successes
attributed to fleet use of AFVs. Unfortunately, for every anecdote of
success there are also anecdotes of dissatisfaction, frustration and
failure. Many fleet managers, who are successfully using AFVs today in
a specific niche segment of their fleets, have clearly stated that they
will not be able to expand AFV use in other segments of their fleets
because of overriding operational or expense barriers.
On the positive side, vehicle manufacturers are beginning to make
AFVs in a wider variety of vehicle types. On the negative side,
however, many fuels are much less available than had been predicted and
promised. Since 1992, methanol has disappeared from the marketplace and
the natural gas industry has abandoned plans to build a public
refueling infrastructure. Some of the more promising projects, such as
CNG in Atlanta for the Olympics and CNG and propane on the Pennsylvania
Turnpike, have failed.
At this moment, despite the best efforts and limited
accomplishments, the economic and the operational situation is not
promising for the majority of fleets or for the general public. These
very practical, real--world conditions may explain why even the Federal
Government has so consistently failed to meet its own mandate for AFV
acquisition and operation.
It seems clear from the experiences of the federal fleet, fuel
provider fleets, and state fleets that fleets by themselves will not
make any significant reduction in the nation's use of fossil fuels.
This is in part because of inherent limitations in existing AFV models,
alternative fuels, refueling infrastructure, technology and costs.
Mandates, however, were only part of the EPACT strategy. It was
anticipated that mandated fleets would provide the critical mass for
the vehicle manufacturers and the fuel providers. In turn, the vehicle
manufacturers and fuel providers would reach economies of scale
necessary for a substantial penetration of the light-duty vehicle
sector.
It is important to point out that AFV purchases were mandated by
EPACT, but only if the appropriate vehicles and fuels were available.
It was, of course, never the intent that a mandated fleet would either
build its own vehicles or build its own fueling facilities. In fact,
the Act provided specific exemptions if either the vehicles or the fuel
were not available.
It was assumed that AFVs would generate the refueling
infrastructure because the alternative fuel would be more cost
effective. Unfortunately, this is not always the case. Just last week,
the fleet manager for the city of St. Louis refueled his dedicated CNG
pickup at $1.38/GGE when the City was only paying $0.98 for a gallon of
gasoline after exemption for Federal and State taxes.
St. Louis is a good example. The city is not currently subject to
any mandate, but the fleet manager has been an alternative fuel
advocate for many years. Yet, as he says, ``We've tried almost
everything and can't find any vehicle-fuel combination that comes close
to break even on cost or on a lifecycle-cost basis not to mention the
range/cargo space hits.''
As a viable public policy, EPACT has failed. The marketplace has
not risen to the challenge to address the economic barriers. Some are
blaming fleet mangers for EPACT's failure. They blame the fleet manager
for failing to convince a Mayor, a Governor, or a CEO that sound
economics would be to acquire vehicles that cost more, are more
expensive to operate, travel fewer miles, have limited cargo space, and
can't be easily be refueled.
The General Accounting Office has identified the real reasons for
the failure of EPACT. In a February 2000 report, GAO found that the
goals of the Act were not being met ``principally because alternative
fuel vehicles have significant economic disadvantages compared to
conventional gasoline vehicles.'' The report continued, ``Fundamental
economic impediments--such as the relatively low price of gasoline, the
lack of refueling stations for alternative fuels, and the additional
cost to purchase these vehicles--explain much of why both mandated
fleets and the general public are disinclined to acquire alternative
fuel vehicles and use alternative fuels.''
More importantly the GAO told the Senate Finance Committee just
last week that ``alternative fuels and vehicles have not made much of a
dent in the conventional fuel and vehicle dominance in the U.S. vehicle
fleet.'' According to GAO's February 2000 report, ``If federal
agencies, state governments, and alternative fuel providers fully
complied with the act's mandates, the vehicles in their fleets would
replace less than 1 percent of petroleum fuels in 2010.''
The Department of Energy concurs with the GAO assessment. According
to DOE's Section 506 Technical Policy Analysis: ``Fleet AFV use by
itself will be insufficient to achieve large alternative fuel market
share. Alternative fuel use by EPACT covered fleets, even with the
contingent mandates for private and local government fleets, is
unlikely to provide no more than about 1.5 percent replacement fuel use
. . .''
recommendation for reducing petroleum use in the light-duty sector
The Committee has an unenviable task. The simplest option would be
to ``fix'' EPACT, declare victory, and revisit the failures in another
nine years. This simple option responds to those who would urge you to
focus on the mandates without real concern for petroleum reduction.
The alternative is to think outside of the box and consider a
bolder strategy that includes efficiency, conservation and use of both
alternative fuels and alternative technologies. The nation's energy
situation seems to dictate a bold public policy.
Fleet managers recommend the following:
Amend EPACT to allow additional compliance options. This
would include full credit for use of biodiesel, hybrid electric
vehicles and neighborhood electric vehicles. This fall 75% of
new state vehicles and 90% of fuel provider vehicles must be
AFVs, but fleets may not get credit for hybrid electric
vehicles or full credit for the use of biodiesel.
Amend EPACT to provide credit for installing refueling
infrastructure, as included in Senate Bill 388.
Strengthen voluntary programs, such as DOE's Clean Cities
Program, that focus on niche markets where fuels such as
natural gas are most efficient.
Encourage the use of and remove obstacles to the use of other
renewable energy-based fuels and fuel blends such as biodiesel
and blends of biodiesel.
Resist any further mandates on state fleets or fuel provider
fleets. Again, as GAO noted squeezing every drop of petroleum
from these fleets by 2010 would result in only a 1% reduction
in petroleum use.
Because refueling infrastructure is such a problem, focus on
strategies that take advantage of the existing liquid fuel
refueling infrastructure. Specifically, grant incentives for
the development of hybrid electric vehicles and use of
renewable fuels.
Provide significant economic incentives via grant programs
and tax incentives.
For example, pass and fund SEC. 705 of Senate Bill
388, which establishes a grant program for local
governments for covering the incremental cost of
qualified alternative fuel vehicles. It authorizes $100
million for each of fiscal years 2002 through 2006, and
limits individual grant awards to no more than $1
million.
Also, many fleet managers support the intent of
Senate Bill 760, the CLEAR Act which is a tax issue and
outside the jurisdiction of this Committee. The CLEAR
Act could potentially help overcome the economic
barriers facing vehicles, fuels and refueling
infrastructure. The CLEAR Act, however, in its present
form, is of little benefit to government or nonprofit
fleets. We are hopeful that this can be corrected
before any House or Senate markup. If not corrected,
NAFA questions whether Congress should pass the
legislation.
The challenge for the Senate Energy Committee will be to think
outside the box. Some will urge you to take the easiest course of
action, that is to force government agencies and companies to buy AFVs
and use the fuels regardless of cost and regardless of the public
policy benefit. Mandates have proven to be counterproductive. Too much
time and resources have been spent by DOE, other federal and state
agencies, fleets, fuel providers and manufacturers to make mandates
work, all hoping that mandates will be the silver bullet. Too much has
been spent for too little gain.
Thank you again for the opportunity to participate. I will be happy
to answer any questions.
The Chairman. Thank you.
Dr. McCormick, why don't you go right ahead.
STATEMENT OF DR. J. BYRON McCORMICK, PH.D., DIRECTOR, GLOBAL
ALTERNATIVE PROPULSION CENTER, GENERAL MOTORS CORPORATION
Dr. McCormick. I want to thank the members of the committee
for the opportunity today to speak about General Motors' fuel
cell initiative. I am Byron McCormick and I am responsible for
GM's fuel cell program.
Based on the recent rate of progress in fuel cell
technology, we are on the threshold of an historic opportunity.
Instead of the historical evolution of technology by
incremental improvements, we now see our way to bold technology
advances that will fundamentally change personal transportation
for the new century.
Fuel cell vehicles running on hydrogen fuel are the
ultimate environmentally friendly vehicles because the only
emission is water. Fuel cell vehicles are more than twice as
efficient as internal combustion engines, have no pollutant
emissions, and are quiet.
Fuel cell vehicles promise two additional benefits; First,
fuel cell vehicles will be supported by a broadly available,
cost effective hydrogen refueling infrastructure. Such an
infrastructure by its very nature would provide a single
enduring framework for the evolutionary shift for personal
transportation from petroleum to a mix of energy sources
including renewables.
Secondly, the development of this technology will create
more environmentally compatible distributed power generation
possibilities. Power on today's electric grid could be
supplemented by the generating capacity of cars in every
driveway. For example, if only one out of 25 cars in California
today was a fuel cell vehicle their generating capacity would
exceed that of the electric grid in place today.
Recognizing the potential of fuel cells, approximately 4
years ago GM leadership decided to take some rather bold action
and consolidated our programs and accelerated them greatly. We
did this based on the notion that there are over six billion
people in the world today, most of these people are young, they
are globally aware, web-connected, and residing in emerging
economies.
Secondly, we recognized that only 12 percent of the world's
population have access to automobiles today. Therefore, a
breakthrough in energy efficiency and emissions would
absolutely be required to meet the demands of the future in a
sustainable, high quality environment.
So our vision is as follows. We see fuel cells as the
automotive power source for the future and we see hydrogen as
the long-term fuel. Now, since we have talked a fair amount
today about renewables and infrastructure, let me expand on the
hydrogen infrastructure for a moment. The creation of a new
robust, readily available hydrogen refueling network for these
vehicles is clearly necessary.
Hydrogen in the infrastructure could be derived from a mix
of sources, including hydrocarbons as well as any source of
electricity. In the first case, hydrogen is extracted from
petroleum, natural gas, and renewable hydrocarbons such as
ethanol via reformers or fuel processors which catalytically
decompose the hydrocarbons into hydrogen and carbon dioxide.
Hydrogen can also be extracted from water using
electrolysis, which uses electricity to dissociate the water.
Electricity could come from conventional powerplants, renewable
powerplants such as hydro, solar, wind, and geothermal sources.
In this way, hydrogen fuel allows a transition for
transportation from a reliance on petroleum to a robust
diversity of energy sources including renewable energy.
The blending of these energy sources is seamless to the
driver of the vehicle. He sees only hydrogen fuel and not
whether it came from petroleum, natural gas, nuclear, or
renewable.
To give you an idea of the rate of progress towards that
vision, in the last 4 years the size and weight of our fuel
cell stack technology has decreased by approximately a factor
of ten. In the past year our gasoline fuel processor
technology, which strips hydrogen from gasoline, has decreased
by a size factor of three.
Like today's gasoline cars, fuel cell vehicles must be able
to handle a tremendous environmental range of conditions. We
are now able to start fuel cells from freezing at minus 40
degrees C. in substantially less than a minute and our Hydrogen
1 demonstration fuel cell vehicle covered over 800 miles in one
day in the Arizona heat, setting 15 performance and durability
records earlier this summer.
This progress is rapid and encouraging, but we are not
there yet. We have not yet developed the full automotive
performance levels, including reliability, durability, safety,
and full compatibility to harsh weather extremes, including the
ability to withstand all environmental and in-use abuse that
automobiles and trucks are subjected to every day worldwide.
Achieving full automotive performance and affordability
targets is key to customer acceptance and enthusiasm. These
targets require huge investments that can only be responsibly
made if we believe that the hydrogen infrastructure will be
there to allow us to introduce fuel cell vehicles to the
public. On the other hand, selective demonstration vehicles or
captive fleet tests will not suffice to encourage major timely
investment by energy producers in that hydrogen infrastructure.
Potential creators of the hydrogen infrastructure will not
invest until they see a rapid expansion of hydrogen fuel cell
vehicles, and even then there is an economic burden of
supporting that infrastructure during the long period of
transition from today's gasoline-powered fleets. Stewardship of
this transition requires a carefully thought out plan which
allows the automotive manufacturers, their materials and
component suppliers, and potential hydrogen fuel providers and
government regulatory bodies to progress hand in hand. This
careful coordination must also take into account the technical,
financial, and environmental realities that a successful
transition requires.
As a closing thought, I believe that fuel cells and
hydrogen-based transportation are the future. The pace of
technical progress is accelerating and we cannot be left behind
sitting on the sidelines. Now is the time for the U.S.
Government and U.S. industry to create a partnership that can
lead the world in the change to this vision.
Thank you and I look forward to responding to your
questions.
[The prepared statement of Dr. McCormick follows:]
Prepared Statement of Dr. J. Byron McCormick, Ph.D., Director, Global
Alternative Propulsion Center, General Motors Corporation
I appreciate the opportunity to be here today to testify on behalf
of General Motors. I am Byron McCormick, the Director of GM's Global
Alternative Propulsion Center. I head the team that is developing fuel
cells to power vehicles that people will want to drive and buy.
This is an exciting time in the automotive industry and for General
Motors. Technology is clearly changing the way we live our lives for
the better, and there's more to come. The subject today is fuel cell
technology. This technology, when fully developed and deployed, will
not only deliver revolutionary vehicles, but will change the way we
think about the automobile and our environment.
We are on the threshold of an historic opportunity. Instead of the
historical evolution of technology by incremental improvements, we now
see our way to bold technology advances that will fundamentally change
personal transportation for the new century. These advances have the
potential to lead to the creation of commercially viable zero-emission,
fuel-efficient fuel-cell vehicles with the functionality that Americans
expect. Not only will fuel cells essentially remove the auto from the
environmental equation by reducing tailpipe emissions to only water
vapor and potentially shifting vehicles to renewable fuels--they will
also offer the performance required for every type of vehicle: heavy
duty commercial, sport utilities, trucks, mass transit or cars.
Fuel-cell vehicles running on hydrogen fuel are the ultimate
environmentally friendly vehicles because the only emission is water.
The fuel cell supplies electricity to an electric motor that powers the
wheels. The fuel cell produces electricity by stripping electrons from
hydrogen that travels through a membrane to combine with oxygen to form
water. Fuel-cell vehicles are more than twice as energy efficient as
the internal combustion engine, have no pollutant emissions, and are
quiet.
Beyond the advantages for vehicles, fuel cells in vehicles promise
two additional benefits. First, once fully integrated into our daily
lives, fuel-cell vehicles will be supported by a broadly available,
cost-effective hydrogen-refueling infrastructure. Such an
infrastructure by its very nature would provide an evolutionary shift
of personal transportation from petroleum to a mix of energy sources
including renewables.
Secondly, the development of this technology will create new more
environmentally compatible distributed electric power generation
possibilities. The automobile will have the potential to provide
electrical power to homes and worksites. Power on today's electrical
grid could be supplemented by the generating capacity of cars in every
driveway. For example, if only one out of every 25 cars in California
today was a fuel-cell vehicle, their generating capacity would exceed
that of the utility grid. A typical mid-size fuel-cell vehicle would
produce 50 to 75 kilowatts of electrical power, where a typical
household may use 7 to 10 kilowatts at peak load.
Like any advancement that has the promise to completely change the
dominant technology, fuel cell development is a major, costly,
technical endeavor, which--if aggressively undertaken and sustained--
should allow significant implementation in the 10 to 20 year timeframe.
Our rate of progress today is very rapid. With an uninterrupted focus,
our technological momentum should make this fuel cell vision possible.
It is clear that we are in an intense global competition for
leadership in this race to establish and commercialize fuel cell
technologies. Toyota, Honda, Daimler, Ford, Volkswagen, Nissan, PSA,
Hyndai, GM and others all have large programs. In Japan the Kyogikai,
which are companies operating under government auspices, is developing
a program for the implementation of fuel cell technology. Now is the
time for the U.S. government and U.S. industry to create a partnership
that can lead the world in the charge to achieve this vision.
Before I talk specifics, I should note for the record that the
opportunity we are discussing today would not be possible without the
long-term support of the Senators from New Mexico and the support of
ERDA and then the DOE. The fledgling ``fuel cells for transportation
program'' at Los Alamos National Laboratories--which I initiated, then
headed from the mid 1970's through the 1980's--along with PEM fuel cell
technology provided the technical spark for the recent worldwide
explosion of PEM fuel cell activities.
Recognizing this potential, approximately four years ago at General
Motors fuel cell activities were consolidated and accelerated. We were
given one mandate by our management: Take the automobile out of the
environmental debate. Regardless of whether the environmental debate is
focused on air quality, climate, or overall sustainability, GM
leadership recognizes that global conditions inspire bold, thoughtful
action.
1. There are over 6 billion people in the world today with over 10
billion expected later this century. Most of these people are young,
globally aware, web-connected, and residing in emerging economies with
escalating demand for personal transportation.
2. Only 12 percent of the world's population has automobiles today.
Therefore a breakthrough in energy efficiency and emissions will be
required to meet the demands of the future in a sustainable high-
quality environment.
Our vision is as follows:
1. We see fuel cells as the long-term power source. The GM global
fuel cell program seeks to create affordable, full-performance, fuel-
cell-powered vehicles that meet customer preferences and demands and
emit only water vapor from their tailpipes. Such vehicles would be 50
to 100 percent more energy efficient than today's vehicles depending on
design and drive cycle.
2. We see hydrogen as the long-term fuel. The creation of a robust,
readily available hydrogen-refueling network for those vehicles will be
accessible through refueling stations, as gasoline is dispensed today.
Hydrogen in the infrastructure could be derived from a mix of sources
including: 1) hydrocarbons; and 2) from any source of electricity.
In the first case, hydrogen is extracted from petroleum, natural
gas and renewable hydrocarbons, such as ethanol, via ``reformers'' or
fuel processors, which catalytically decompose the hydrocarbons into
hydrogen and carbon dioxide.
Hydrogen can also be extracted from water using electrolysis, which
uses electricity to dissociate water. Electricity would come from
conventional power plants or renewable power such as hydro, solar, wind
and geothermal sources. In this way hydrogen fuel allows a transition
of transportation from reliance on petroleum to a robust diversity of
energy sources including renewable energy. The blending of these energy
sources is seamless to the driver of a vehicle; he sees only hydrogen
fuel, not whether it came from petroleum, natural gas, nuclear or
renewable energy.
There are three major challenges that we need to overcome to make
this hydrogen economy a reality:
First, we need continued significant development in on-board
hydrogen storage. Using hydrogen in a vehicle requires a completely new
type of fuel tank. The challenge is to find a lightweight, compact tank
that stores enough hydrogen at modest pressure for a lengthy drive.
Last month we took a major step toward clearing this hurdle. GM is
acquiring a substantial minority ownership in QUANTUM Technologies.
They are the industry leader in automotive hydrogen storage. QUANTUM
Technologies has achieved performance that could allow us to introduce
a fuel-cell vehicle in the future that will have a range equal to
today's vehicles.
But we should not limit ourselves to partnerships between private
companies. We need the government to partner with us on fundamental,
long-term research and development as well. And not just on storage of
hydrogen, but a full portfolio of technologies.
And that includes our second major challenge to a hydrogen economy
developing clean and efficient methods of producing hydrogen. There are
many substances from which hydrogen can be released, but it takes
energy to do it. Eventually, we want to use a method that is renewable,
and that has no adverse environmental impact. We're working closely
with energy suppliers to investigate the best solutions.
The third challenge we have to overcome is developing business
models for the deployment of a hydrogen infrastructure, and piloting
technologies to support it. To address this GM joined with General
Hydrogen's Geoffrey Ballard to announce last month a 25-year alliance
between our companies.
As for the reality of this vision, we at GM have invested
aggressively in what are called ``enabling'' technologies: fuel cells,
reformers, electrolyzers and automotive electric propulsion. Our
commitment is clear in the significance of our investment--over $100
million annually for several years to date, and growing. The
acceleration has been spurred on by rapid technical progress.
To give you an idea of that rate of progress, in the last 4 years
the size and weight of our fuel cell stack for a given power has
decreased by a factor of 10. In the past year, our gasoline fuel
processor has decreased in size by a factor of 3.
Like today's gasoline cars, fuel-cell vehicles must be able to
handle a tremendous range of environmental conditions. We are now able
to start fuel cells from freezing--minus 40 deg.C--in substantially
less than a minute, and our Hydrogen One demonstration fuel-cell
vehicle covered over 800 miles in one day in the Arizona heat, setting
15 performance and durability records earlier this summer.
These milestones represent remarkable progress. Our rate of
progress encourages us, but it is crucial to recognize that the race
for fuel cell development is a marathon, not a sprint. No one should
overlook that there remain major technical obstacles that must be
conquered before these vehicles can be brought to market and can become
commercially successful.
Let me be clear about the progress represented by fuel cell
demonstration vehicles. The progress is rapid and encouraging, but we
are not there yet. No one has achieved full automotive performance
levels including reliability, durability, safety and full capability in
harsh weather extremes including the ability to withstand all
environment and in-use abuse that automobiles and trucks worldwide are
subjected to every day. We must achieve these goals and affordability
before this technology will be considered an option by our customers.
Achieving full automotive performance and affordability targets is
key to customer acceptance and enthusiasm. These targets require huge
investments that can only be responsibly made if we believe the
infrastructure will be there to allow us to introduce fuel-cell
vehicles to the public. Government policy today must drive the
development of the hydrogen economy by accelerated R&D in hydrogen
storage, pilot scale distribution networks and refueling stations and
incentives for their proliferation.
Selective demonstration vehicles or captive fleet tests will not
suffice to encourage major timely investment by the energy producers
and the full automotive supply base before a hydrogen infrastructure is
seen to be evolving. Nor will potential creators of the hydrogen
infrastructure invest until they see a rapid expansion of hydrogen
fuel-cell vehicles and even then, there is the economic burden of
supporting that infrastructure during the long period of transition
from today's gasoline-powered fleet.
Stewardship of this transition requires a carefully thought out
plan which allows the automotive manufacturers, their material and
component suppliers, the hydrogen fuel providers and governmental
regulatory bodies to progress hand-in-hand. This careful coordination
must also take into account the technical, financial and environmental
realities that a successful transition requires.
This is the basis on which a government-industry partnership must
be based.
In General Motors, the magnitude of our fuel cell investment
creates an intense business dilemma--the choice between using our
resources to meet the expanding funding needs to achieve a
revolutionary vision at the expense of short-term focused initiatives,
or to fund the aggressive pursuit of more incrementally focused
initiatives.
To a large degree, the outcome of that internal debate will depend
on the development of a long-term, stable set of governmental policies
and initiatives upon which we can properly balance the investment of
our finite financial and technical resources.
As a closing thought, I believe that fuel cells and hydrogen-based
transportation are the future. The pace of technical progress is
accelerating. We cannot be left behind or sitting on the sidelines. Now
is the time for the U.S. government and U.S. industry to create a
partnership that can lead the world in the charge to achieve this
vision.
Thank you.
I look forward to responding to your questions.
The Chairman. Thank you very much.
Mr. Dana, why don't you go right ahead.
STATEMENT OF GREGORY DANA, VICE PRESIDENT, ENVIRONMENTAL
AFFAIRS, ALLIANCE OF AUTOMOBILE MANUFACTURERS
Mr. Dana. Mr. Chairman and members of the committee: On
behalf of the 13 members of the Alliance of Automobile
Manufacturers, it is a pleasure to be here today to provide the
committee with our position on the role of cars and light
trucks in our national energy policy.
Today I would like to make three basic points: First,
existing energy policies are not delivering anticipated
results. That is why we are sitting here today.
Second, to be successful we must maintain consumer focus,
because consumers determine fuel economy every day through
their purchasing decisions on dealers' lots.
Third, with your help, we can increase the fuel economy of
the fleet and meet consumer demands by accelerating the
introduction of advanced technology fuel efficient vehicles.
Let me expand on these points. We are a mobile society.
Today transportation accounts for nearly two-thirds of all oil
consumption and it is almost 97 percent dependent on petroleum.
Automakers are working to increase fuel efficiency. Auto
manufacturers have consistently increased the fuel efficiency
of their models since the 1970's. According to EPA data, fuel
efficiency has increased steadily at nearly 2 percent a year on
average from 1975 to 2001 for both cars and light trucks. This
fuel efficiency is a measure of how effectively a vehicle uses
energy from fuel.
While car and light truck fuel efficiency continue to
increase, their combined fuel economy has stabilized, for one
reason: Consumers are in the driver's seat when it comes to
determining fuel economy. This is the demand side of the
equation.
Today, you are in the role of policymakers, but you are
also consumers. Like millions of consumers nationwide, you may
also value advanced safety features, passenger room, towing
capacity, cargo carrying capacity, utility, comfort and
performance. In fact, most consumers want it all. In surveys,
consumers indicate they want greater fuel economy, but in their
purchases they do not want to sacrifice size, safety, cargo
room, acceleration, or other vehicle attributes to get it.
Today, manufacturers offer more than 50 models with fuel
efficiency ratings above 30 miles per gallon. We also offer
vehicles that achieve 40 miles per gallon or greater, but these
highly fuel efficient vehicles account for less than 2 percent
of sales.
The auto industry strongly believes that technology will
allow us to address energy conservation goals and still provide
consumers with vehicles that meet their family and business
needs. That is why we support the alternative fuel and advanced
technology provisions in Vice President Cheney's national
energy policy.
We also support the tax credit provisions in Senator
Hatch's bill, S. 760, the Clean, Efficient Automobiles
Resulting from Advanced Car Technologies, or the CLEAR ACT of
2001. The CLEAR ACT would provide tax incentives for fuel
cells, hybrid electric vehicles, battery electric vehicles, and
dedicated alternative fuel vehicles, along with alternative
fuel and alternative fuel infrastructure tax incentives.
We are working on slight modifications to the hybrid
electric vehicle tax credits and we would like to see the tax
credits for the introduction of advanced lean burn technology.
The CLEAR ACT is timely legislation. New technologies have
set the stage for transforming the auto industry. Today you can
purchase alternative fuel vehicles from subcompacts to SUV's to
pickups. Alliance members are developing and introducing hybrid
electric cars, SUV's and pickups that can increase city fuel
economy by up to 200 percent. Automakers are working on the
next generation of lean burn technology to ensure compliance
with new, more stringent emission standards, and major
manufacturers are investing hundreds of millions of dollars in
research and development to bring fuel cell vehicles to market
within 5 to 10 years.
Mr. Chairman, we support consumer tax credits for a limited
time, 6 years, and we support extending the tax credit for fuel
cells to 10 years. These credits will accelerate the market
penetration of highly fuel efficient vehicles. As a result,
manufacturers can increase production and lower costs for
consumers. Consumers will have more fuel efficient vehicles
with the attributes they desire and policymakers will see
increases in fuel economy.
In conclusion, as we go forward we must maintain consumer
focus and tax credits will accelerate the market penetration of
highly fuel efficient vehicles that consumers will buy.
Thank you, Mr. Chairman. I would be happy to answer any
questions.
[The prepared statement of Mr. Dana follows:]
Prepared Statement of Gregory Dana, Vice President, Environmental
Affairs, Alliance of Automobile Manufacturers
Mr. Chairman, thank you for the opportunity to testify before your
Committee regarding energy policy issues. My name is Gregory Dana and I
am Vice President, Environmental Affairs of the Alliance of Automobile
Manufacturers, a trade association of 13 car and light-truck
manufacturers. Our member companies include BMW of North America, Inc.,
DaimlerChrysler Corporation, Fiat, Ford Motor Company, General Motors
Corporation, Isuzu Motors of America, Mazda, Mitsubishi, Nissan North
America, Porsche, Toyota Motor North America, Volkswagen of America,
and Volvo.
Alliance member companies have more than 620,000 employees in the
United States, with more than 250 manufacturing facilities in 35
states. Overall, a recent University of Michigan study found that the
entire automobile industry creates more than 6.6 million direct and
spin-off jobs in all 50 states and produces almost $243 billion in
payroll compensation annually.
The Alliance supports efforts to create an effective energy policy
based on broad, market-oriented principles. Policies that promote
research development and deployment of advanced technologies and
provide customer based incentives to accelerate demand of these
advanced technologies set the foundation. This focus on bringing
advanced technologies to market leverages the intense competition of
the automobile manufacturers worldwide. Incentives will help consumers
overcome the initial cost barriers of advanced technologies during
early market introduction and increase demand, bringing more energy
efficient vehicles into the marketplace.
Congress needs to consider new approaches for the 21st century. The
Alliance and its 13 member companies believe that the best approach for
improved fuel efficiency is to aggressively promote the development of
advanced technologies--through cooperative, public/private research
programs and competitive development--and incentives to help pull the
technologies into the marketplace as rapidly as possible. We know that
advanced technologies with the potential for major fuel economy gains
are possible. As a nation, we need to get these technologies on the
road as soon as possible in an effort to reach the national energy
goals as fast and as efficiently as we can.
The Alliance is pleased that Vice President Cheney's National
Energy Policy report recommends and supports a tax credit for advanced
technology vehicles (ATVs). Specifically, it proposes a tax credit for
consumers who purchase a new hybrid or fuel cell vehicle between 2002
and 2007. In addition, the report supported the broader use of
alternative fuel and alternative vehicles. This is consistent with the
Alliance's position of supporting enactment of tax credits for
consumers to help offset the initial higher costs of advanced
technology and alternative fuel vehicles until more advancements and
greater volumes make them less expensive to produce and purchase.
Senate legislation that has been crafted to spur the sale of
advanced technology fuel-efficient vehicles is included in S. 389,
introduced by Senator Murkowski. This legislation would (1) provide tax
credits for the purchase of alternative fuel and hybrid vehicles, (2)
modify the existing tax credit for electric vehicles, (3) extend the
dual fuel CAFE credit, (4) provide a business tax credit for
alternative fuels sold at retail, (5) extend for three years the tax
deduction for alternative fuel refueling property and add a new
deduction for this property, (6) allow states to open HOV lanes to
alternative fuel vehicles, (7) allow DOE to provide equivalent
alternative fuel vehicle credits to fleets or persons that invest in
alternative fuel refueling infrastructure, (8) establish a federal
grant program for local governments addressing the incremental cots of
qualified alternative fuel vehicles, and (9) require federal agencies
to increase the fuel efficiency of newly purchased federal vehicles.
Many of the provisions in S. 389 are included in S. 760 introduced
by Senator Hatch and others. The Alliance is in general support of S.
760, but would like to see some minor, technical changes made to the
hybrid-electric vehicle section of the bill and would also support the
inclusion of tax credits for advanced lean burn technology. The
Alliance believes that the overall concepts and provisions found in S.
760 are the right approach and would benefit American consumers.
The bill would ensure that advanced technology is used to improve
fuel economy. Performance incentives tied to improved fuel economy are
incorporated into the legislation in order for a vehicle to be eligible
for the tax credits. These performance incentives are added to a base
credit that is provided for introducing the technologies into the
marketplace.
Specifically, S. 760 has a number of important provisions
addressing various types of advanced technologies. These include:
Fuel Cell Vehicles
The most promising long-term technology offers breakthrough fuel
economy improvements, zero emissions and a shift away from petroleum-
based fuels. A $4,000 base credit is included along with performance
based fuel economy incentives of up to an additional $4,000. The credit
is available for 10 years to accelerate introduction--extremely low
volume production is expected to begin in the 2005-2007 timeframe.
Hybrid Vehicles
Electronics that integrate electric drive with an internal
combustion engine offer near term improvements in fuel economy. A
credit of up to $1,000 for the amount of electric drive power is
included along with up to $3,000 depending upon fuel economy
performance. The credit is available for 6 years to accelerate consumer
demand as these vehicles become available in the market and set the
stage for sustainable growth. To be eligible for the credit, hybrid
vehicles must meet or beat the average emission level for light duty
vehicles.
Dedicated Alternative Fuel Vehicles
Vehicles capable of running solely on alternative fuels, such as
natural gas, LPG, and LNG, promote energy diversity and significant
emission reductions. A base credit of up to $2,500 is included with an
additional $1,500 for vehicles certified to ``Super Ultra Low
Emission'' standards (SULEV).
Battery Electric Vehicles
Vehicles that utilize stored energy from ``plug-in'' rechargeable
batteries offer zero emissions. A base credit of $4,000 is included
(similar to the fuel cell--both have full electric drive systems) and
an incremental $2,000 is available for vehicles with extended range or
payload capabilities.
Alternative Fuel Incentives
Alternative fuels such as natural gas, LNG, LPG, hydrogen, B100
(biomass) and methanol are primarily used in alternative fueled
vehicles and fuel cell vehicles. To encourage the installation of
distribution points to support these vehicle applications, a credit of
$0.50 for every gallon of gas equivalent is provided to the retail
distributor. This credit is available for 6 years and will support the
distribution of these fuels as vehicle volume grows and may be passed
on to the consumer by the retail outlet. Note that ethanol is not
included in these provisions due to the existing ethanol credit.
Alternative Fuel Infrastructure
Complementary to the credit for the fuel itself, the existing
$100,000 tax deduction for infrastructure is extended for 10 years and
a credit for actual costs up to $30,000 for the installation cost of
alternative fuel sites available to the public is included. One of the
key hurdles to overcome in commercializing alternative fuel vehicles is
the lack of fueling infrastructure. For nearly a century,
infrastructure has focused primarily on gasoline and diesel products.
These infrastructure and fuel incentives will help the distributors
overcome the costs to establish the alternative fuel outlets and
support distributors during initial lower sales volumes as the number
of alternative fuel vehicles increases.
To reiterate, the way to improve vehicle and fleet fuel economy,
one that is in tune with consumer preferences, is to encourage the
development and purchase of advanced technology vehicles (ATVs).
Consumers are in the driver's seat and most independent surveys show
that Americans place a high priority on performance, safety, space and
other issues with fuel economy ranking much lower even with today's gas
prices. ATVs hold great promise for increases in fuel efficiency
without sacrificing the other vehicle attributes consumers desire. Just
as important, the technology is transparent to the customer.
Member companies of the Alliance have invested billions of dollars
in research and development of more fuel-efficient vehicles. Automobile
companies around the globe have dedicated substantial resources to
bringing cutting-edge technologies--electric, fuel cell, and hybrid
electric vehicles as well as alternative fuel vehicles and powertrain
improvements--to the marketplace. These investments will play a huge
role in meeting our nation's energy and environmental goals.
These advanced technology vehicles are more expensive than their
gasoline counterparts during early market introduction. As I mentioned
earlier, the Alliance is supportive of Congressional legislation that
would provide for personal and business end-user tax incentives for the
purchase of advanced technology and alternative fuel vehicles. Make no
mistake: across the board, tax credits will not completely cover the
incremental costs of new advanced technology. However, it will make
consumers more comfortable with accepting the technology and begin to
change purchasing behavior. In short, tax credits will help bridge the
gap towards winning broad acceptance among the public leading to
greater volume and sales figures throughout the entire vehicle fleet.
This type of incentive will help ``jump start'' market penetration and
support broad energy efficiency and diversity goals.
Some of the discussion today has centered on the vehicles of the
automobile manufacturers. But it is important not to forget about a
vital component for any vehicle--the fuel upon which it operates. As
automakers looking at the competing regulatory challenges for our
products--fuel efficiency, safety and emissions--and attempting to move
forward with advanced technologies, we must have the best possible and
cleanest fuels. EPA has begun to address gasoline quality but it needs
to get even cleaner. This is important because gasoline will remain the
prevalent fuel for years to come and may eventually be used for fuel
cell technology.
Beyond gasoline, the auto industry is working with a variety of
suppliers of alternative fuels. In fact, the industry already offers
more than 25 vehicles powered by alternative fuels. More than 1 million
of these vehicles are on the road today and more are coming. Today, we
find vehicles that use:
Natural gas, which reduces carbon monoxide emissions by 65
to 90 percent;
Ethanol, which produces fewer organic and toxic emissions
than gasoline with the longer term potential to substantially
reduce greenhouse gases;
Liquefied petroleum gas (propane), the most prevalent of the
alternative fuels, which saves about 60% VOC emissions; and
For the future, hydrogen, which has the potential to emit
nearly zero pollutants.
The Alliance has submitted comments to the DOT in support of an
extension of the dual fuel vehicle incentives through 2008. Current law
provides CAFE credits--up to 1.2 mpg--for manufacturers that produce
vehicles with dual fuel capability. These vehicles can operate on
either gasoline or domestically produced alternative and renewable
fuels, such as ethanol. However, the dual fuel credits end in model
year 2004 unless extended via rulemaking by the National Highway
Traffic Safety Administration. The Alliance believes an extension is
important so that these vehicles continue to be produced in high volume
to help encourage the expansion of the refueling infrastructure and
giving consumers an alternative to gasoline.
In addition to alternative fuels, companies are constantly
evaluating fuel-efficient technologies used in other countries to see
if they can be made to comply with regulatory requirements in the
United States. One such technology is diesel engines, using lean-burn
technology, which have gained wide acceptance in Europe and other
countries. Automakers have been developing a new generation of highly
fuel-efficient clean diesel vehicles using turbocharged direct
injection engines as a way to significantly increase fuel economy and
reduce greenhouse gas emissions. However, their use in the U.S. must be
enabled by significantly cleaner diesel fuel.
Earlier this year, EPA promulgated its heavy-duty diesel rule that
the Alliance supports, as far as it goes. The rule reduces the amount
of sulfur in the fuel. Low sulfur diesel fuel is necessary to enable
the new clean diesel technology to be used in future cars and light
trucks. Providing cleaner fuels, including lowering sulfur levels in
gasoline and diesel fuel, will provide emission benefits in existing
on-road vehicles. Sulfur contaminates emissions control equipment, such
as catalytic converters. Efforts to reduce sulfur content will provide
environmental benefits and allow vehicles to operate more efficiently.
Unless there are assurances that fuels will be available, companies
will not invest in new clean diesel technologies.
As you can tell, the automobile companies--from the top executives
to the lab engineers--are constantly competing for the next
breakthrough innovation. If I can leave one message with the Committee
today, it is to stress that all manufacturers have advanced technology
programs to improve vehicle fuel efficiency, lower emissions and
increase motor vehicle safety. These are not ``pie in the sky''
concepts on a drawing board. In fact, many companies have advanced
technology vehicles in the marketplace right now or have announced
production plans for the near future. That's why now is the perfect
time for the enactment of tax credits to help spur consumers to
purchase these new vehicles which years of research and development
have made possible.
Thank you for the opportunity to testify before the Committee
today. I would be happy to answer any questions you may have.
The Chairman. Thank you very much.
Mr. Kolodziej.
STATEMENT OF RICHARD R. KOLODZIEJ, PRESIDENT,
NATURAL GAS VEHICLE COALITION
Mr. Kolodziej. Excellent.
The Natural Gas Vehicle Coalition appreciates the
opportunity to be here this morning to discuss our views on the
actions that Congress can and should take to reduce America's
use of foreign oil by accelerating the purchase and use of
alternative fuel vehicles. The Natural Gas Vehicle Coalition is
a national organization with more than 180 member companies
ranging from natural gas utilities to major automobile
manufacturers to other equipment and service providers to
environmental organizations and government organizations.
Mr. Chairman, it is vitally important that we increase the
use of non-petroleum alternative motor fuels, especially
natural gas, because doing so would help address at least two
important national public policy priorities simultaneously.
First is the issue that we have already talked about,
dependence on foreign oil. Natural gas vehicles contribute
directly to reducing our dependence on foreign oil. The U.S.
imports significantly more petroleum today than it did in 1992
when the Energy Policy Act was passed, and that is just not
good public policy. It is not good for the country.
The only way to break free of that reliance on petroleum
fuels is to increase the use of non-petroleum alternative
fuels. Efforts to increase fuel efficiency, while laudable and
important and we have got to do that, will not by themselves
improve energy security. A gasoline or diesel vehicle that gets
60 or even 80 miles per gallon is still 100 percent dependent
on petroleum.
The second way America benefits from increased use of NGVs
is the environment. Compared to similar gasoline vehicles, NGVs
produce far less carbon monoxide and volatile organic compounds
and nitrogen oxides. They even produce 20 percent less
greenhouse gases. Meanwhile, heavy duty vehicles are not
necessarily the focus of this session today, but heavy duty
vehicles produce far less NOX and up to 90 percent
less particulates than a comparable diesel vehicle. In fact,
heavy duty natural gas vehicles already meet the particulate
levels called for in EPA's emissions standards that do not even
go into effect until 2007. They also produce significantly less
air toxics, which may in fact become the air quality issue of
this decade.
Today, there are over 100,000 natural gas vehicles on
America's roads. There are over a million and a half worldwide,
and the vehicles in America displace more than 100 million
gallons of gasoline a year. The United States produces the best
and the cleanest NGVs in the world and right now we have more
alternative fuel vehicle models available than ever before. We
have made great progress, but we have a long way to go.
Consumers continue, as you have heard, to be hesitant to
buy these vehicles because of the additional costs involved and
the lack of a fueling infrastructure. Both these problems would
be resolved if vehicle demand reached a critical mass. If we
reach the critical mass, we get economies of scale for the
manufacturers. If we get economies of scale for the
manufacturers, we would come down on our costs.
Because of the substantial public benefits that NGVs offer,
Congress could and should take steps to make this overall
improvement happen, and in our written testimony we have
indicated a number of recommendations. The single most
important step would be the passage of the CLEAR ACT, S. 760. I
loved hearing all those positive things earlier about S. 760.
The CLEAR ACT would be a meaningful tax program, tax incentive
program, that would provide a market-driven, non-regulatory
approach to the purchase and use of alternative fuel vehicles.
Now, we recognize that the CLEAR ACT is not within the
jurisdiction of this committee. However, we believe that it is
crucial that the energy policymakers on this committee send a
clear and unambiguous message that enactment into law of the
provisions of the CLEAR ACT is a critical part of our national
energy strategy and is in the best interest of the country.
The NGV Coalition also believes that the Energy Policy Act
must be restructured. While that law has had a big impact on
getting automakers to produce alternative fuel vehicle models,
as was mentioned earlier, it has not achieved anywhere near the
petroleum replacement goals envisioned. In our written
testimony we indicate a program, a number of specific
recommendations that would build on the positive achievements
of EPAct, increase the amount of alternative fuel used and
therefore foreign oil displaced, and increase the amount of
flexibility available to the covered fleets to help them more
effectively comply with the law.
A third area is R&D. Federally sponsored NGV R&D has been
critical to the NGV industry's technical advancements, and the
industry has worked closely with the Department of Energy to
develop a comprehensive 5-year NGV R&D strategic plan.
Unfortunately, the Department has never requested sufficient
funds to implement the Federal Government's part of that plan,
instead focusing, we believe disproportionately, on funding
diesel and gasoline projects.
We urge the committee to instruct DOE to substantially
expand the NGV program to bring it into line with the 5-year
plan we have jointly developed, especially with respect to
natural gas as a fuel for hybrid vehicles and as a hydrogen
source for fuel cells.
Mr. Chairman, that concludes my remarks. Our written
comments include other recommendations concerning programs that
would help further the use of alternative motor fuels and I
look forward to working with you and the committee on
implementing this program.
[The prepared statement of Mr. Kolodziej follows:]
Prepared Statement of Richard R. Kolodziej, President, Natural Gas
Vehicle Coalition
INTRODUCTION
Mr. Chairman and Members of the Committee, the Natural Gas Vehicle
Coalition (NGVC) appreciates the opportunity to discuss our views on
the actions Congress can and should take to reduce America's use of
foreign oil by accelerating the purchase and use of alternative fuel
vehicles. My name is Rich Kolodziej, and I am President of the NGVC.
The NGVC is a national organization dedicated to the development of a
growing, sustainable and profitable natural gas vehicle market. The
NGVC represents more than 180 natural gas companies, equipment
manufacturers and service providers, as well as environmental groups
and government organizations.
Reducing the use of petroleum by increasing the use of non-
petroleum alternative motor fuels should be among the highest policy
priorities of the federal government for at least two fundamental
reasons. First, the lack of stability and competition in oil markets
and the continued growth in oil imports demonstrate beyond doubt that
it is time to get serious about reducing our reliance on oil imports.
The oil producing nations are in a monopoly position, and we are held
hostage to their decisions about production levels. American consumers
must be provided a choice.
Second, too many Americans live in urban areas with poor air
quality. It is estimated that more than 100 million Americans live in
areas that are not in compliance with national ambient air quality
standards. The result has been an alarming increase in the incidence of
asthma and other respiratory ailments in children and the elderly.
Increasing the use of alternative fuel vehicles--especially natural gas
vehicles--helps address both these policy priorities simultaneously.
Now is the time to take action. Today, there are more alternative
fuel vehicles (AFVs) in operation and models available than at any time
before. Domestic natural gas is readily available. State and local
governments across the country are adopting legislative incentives that
will help pave the way toward more AFVs. In addition to the
introduction of these vehicles, federal, state and local incentives
also have encouraged increased investment in alternative fuel
infrastructure. However, no one state or group of states alone can
significantly alter the direction of any major national industry, such
as the motor vehicle industry.
Therefore, while the future for alternative fuel transportation
technologies appears bright, much more must be done at the national
level if we are to significantly reduce this country's reliance on
imported oil, improve our air quality and develop profitable
alternative fuel vehicle markets. Since consumers continue to be
hesitant to buy many AFVs because of the costs involved and the lack of
infrastructure, Congress needs to expand incentives for all alternative
fuels, including measures that will bring down the cost of acquiring
AFVs and purchasing alternative fuels. Congress also should adopt
incentives that support the expansion of the alternative fuel
infrastructure and reduce the incremental costs involved.
1. THE NEED TO REDUCE OUR DEPENDENCE ON FOREIGN OIL IS GREATER THAN
EVER
The U.S. imports significantly more petroleum today than it did in
1992 when the Energy Policy Act (EPAct) was enacted. Net imports are up
more than 2.8 million barrels a day while domestic production has
declined by nearly 1.3 million barrels a day. The combination of lower
domestic production and increased demand means that oil imports also
make up a larger share of total oil consumed in the US. In 1992, crude
oil imports made up approximately 45 percent of domestic supply. Last
year, crude oil imports accounted for 59 percent of total supply. The
Energy Information Administration's (EIA) 2001 Annual Energy Outlook
forecasts that oil imports will approach 61 percent of total supply
this year. EIA's long-term forecast has oil imports making up 69
percent of U.S. supply by 2010, and more than 71 percent by 2020.
Persian Gulf and OPEC member countries supply an important part of
U.S. crude oil and petroleum imports. The EIA reports that in 1999 the
U.S. relied on OPEC members to provide approximately 46 percent of
imported petroleum; Persian Gulf states alone provided approximately 23
percent of total imports. While EIA's long-term forecast shows OPEC
continuing to provide about 46 percent of U.S. petroleum demand in
2020, the forecast shows Persian Gulf exports becoming a much more
significant part of OPEC exports to the US, rising from 39 percent to
50 percent.
OPEC and Persian Gulf exports also make up a major component of
world oil supply. OPEC members currently provide about 40 percent of
worldwide supply. OPEC's share of the world oil market is expected to
reach 51 percent by 2020, according to EIA's forecast. Persian Gulf oil
is even more key to world oil supplies. Persian Gulf exports in
particular are of concern since this region has generally been unstable
and continues to be the source of geopolitical conflicts.
Of particular concern is Iraq, which continues to be the wild card
in international oil markets. Iraqi currently has an oil production
capacity of 3.0 million barrels of oil per day. This represents nearly
four percent of world oil production. This is a significant volume of
oil and its removal from international markets at a time when reserve
stocks are low could significantly affect world oil prices. Over the
next two decades, the EIA projects that Iraq will more than double its
oil production, ensuring that it continues to be an important player in
international oil markets.
The recent curtailment of world oil production by OPEC members
demonstrates the serious consequences of even small disruptions in the
supply of oil to international markets, and proves that OPEC is capable
of acting cohesively to control international oil markets. It is
precisely because of their growing market power that they have been
able to affect world oil prices. As recent events demonstrate, the
economic effect of supply disruptions is not limited to any one region
but rather reverberates across international commodity markets. The
notion that the U.S. can increase its energy security by reducing its
overall reliance on OPEC oil simply is not true. Disruptions of oil
supplies from the Persian Gulf and from OPEC members will still result
in much higher prices being paid for oil imports regardless of their
country of origin. In addition, while the market share for petroleum in
the America's residential, commercial, industrial and power generation
markets has declined substantially over the past 25 years, petroleum
still has a virtual monopoly in our transportation sector.
An additional concern is the growing demand for oil by developing
nations. It is estimated that by 2020 demand for oil worldwide will
increase by over 50 percent. Much of this will occur because of
economic expansion and growing vehicle populations in developing
nations, especially China. This increased demand is expected to place
significant upward pressure on world oil prices.
U.S. reliance on foreign oil has a significant impact on our
economy. Petroleum imports result in fewer dollars spent at home and
more sent overseas. Payments for imported petroleum jumped from $60
billion in 1999 to more than $100 billion in 2000, according to EIA.
2. EPACT'S PETROLEUM DISPLACEMENT GOALS HAVE NOT BEEN ACHIEVED
To combat our reliance on oil imports, EPAct set a national goal of
replacing 10 and 30 percent of the petroleum used in light duty
vehicles with non-petroleum alternative fuels by 2000 and 2010,
respectively. EPAct was intended to create a viable alternative fuels
market. Its goal was to reduce U.S. petroleum and crude oil imports and
increase energy security by promoting reliance on domestic fuels.
A report released last year by the U.S. General Accounting (GAO)
indicates that unfortunately today, even after almost nine years of
EPAct implementation, alternative fuel use accounts for a very small
amount of overall motor fuel demand. According to the 1998 figures
compiled by the GAO, total alternative fuel use--including the
oxygenated blending stocks for gasoline--accounts for less than 4
percent of all highway gasoline use. This is far short of the EPAct
goal of 10 percent displacement by 2000. The amount of alternative fuel
that is used in AFVs is even less. GAO reports that alternative fuel
use in AFVs displaced only about 334 million gallons of gasoline or
less than 0.3 percent of total gasoline consumption. The vast majority
of the remaining amounts of non-petroleum fuel used in the country are
comprised of MTBE or ethanol that is added to gasoline to meet the
reformulated gasoline requirements of the Clean Air Act.
3. THE TRANSPORTATION SECTOR: THE KEY TO ENERGY SECURITY
Concerns about energy security and the transportation sector's
reliance on petroleum motor fuels led to the passage of EPAct. While
the effort to increase alternative fuel use and to reduce the
transportation sector's reliance on petroleum motor fuels has been
disappointing, EPAct has nevertheless resulted in a number of positive
developments. Today, the type and number of alternative fuel vehicles
being sold, as well as the number of alternative fuel stations, has
grown. The U.S. is the world leader in the field of alternative fuel
vehicles and fueling infrastructure. The U.S. automakers should be
commended for their impressive array of low polluting, AFVs. Yet, still
more must be done.
Since the 1970s, all major energy-consuming sectors other than
transportation have significantly reduced their dependence on
petroleum. Today, the transportation sector remains almost totally
dependent on petroleum motor fuels. The U.S. transportation sector is
responsible for more than two-thirds of all petroleum consumption and
an astonishing 15 percent of world oil demand. The only way to break
free of the reliance on petroleum fuels is to increase the use of
alternative fuels. Efforts to increase fuel efficiency in gasoline and
diesel vehicles are laudable and must be a continuing part of a
national energy strategy. However, increased fuel efficiency for
gasoline and diesel vehicles alone will not improve our country's
energy security. Improving fuel efficiency will simply slow-down the
current growth in oil consumption. Fuel efficiency does not provide
energy consumers with options for fueling their vehicles. A gasoline or
diesel vehicle that gets 60 or even 80 miles per gallon is still 100
percent reliant on petroleum supplies.
Increasing the use of alternative fuels will provide consumers with
real options when it comes to supply disruptions or price hikes. We
cannot wait for the next supply disruption or price spike to create the
necessary fueling infrastructure. Those efforts must begin now. Given
the significant amount of energy consumed by the domestic
transportation sector, a strong U.S. market for alternative fuels would
put downward pressure on international oil prices. In addition, exports
of U.S. alternative fuels technologies would not only bolster our own
economy but would further reduce world-wide dependence on foreign oil,
further lessening the market power of certain oil exporting nations.
News of growing international interest in alternative fuels increases
daily. Countries such as Argentina, China, Chile, Egypt, India and
Mexico increasingly are looking at alternative fuels to combat air
pollution and reduce oil imports.
4. THE CURRENT NATURAL GAS VEHICLE MARKET
There are more than 100,000 natural gas vehicles in-use today.
These vehicles are owned and operated by the federal government, local
and state governments, and, increasingly, private fleets. These
vehicles include passenger cars, light duty trucks, school buses,
transit buses, refuse haulers, and many other types of vehicles. It is
important to note that nearly all of the new NGVs placed in-service
today are produced by original equipment manufacturers (OEMs). Such
well-known companies as DaimlerChrysler, Ford Motor Company, General
Motors, Honda, Toyota, Blue Bird, and Freightliner are manufacturing
these vehicles. Nearly every manufacturer of transit buses now offers a
line-up of natural gas buses. In addition, heavy-duty natural gas
engines are now available from Caterpillar, Cummins, Detroit Diesel,
John Deere and Mack.
While the number of NGVs in-use is still small in terms of the
overall vehicle population, it is growing. Since 1992, the number of
NGVs in-use has increased four-fold. More impressive, the total amount
of fuel consumed by these vehicles has increased more than six-fold.
Today, NGVs displace more than 100 million gallons of gasoline a year,
representing about 27 percent of all alternative fuel that is consumed
in alternative fuel vehicles.
5. THE ENVIRONMENTAL BENEFITS OF NATURAL GAS VEHICLES
Natural gas is one of the cleanest alternative fuels. When compared
to average petroleum vehicles, NGVs reduce exhaust emissions of carbon
monoxide (CO) by 50%, non-methane organic gas (NMHC) by 88% and
nitrogen oxides (NOX) by 66%, and produce 20% fewer
greenhouse gases. NGVs have been certified to be substantially cleaner
than traditionally fueled vehicles. Several models already meet or
exceed California's ultra-low emissions vehicle (ULEV) and super ultra-
low emissions vehicle (SULEV) standards.
Heavy-duty vehicles powered by natural gas generally reduce
emissions of particulate matter by 90 percent and NOX by
more than 50 percent. Natural gas engines also produce significantly
less air toxic emissions. Regulatory agencies across the country
increasingly are looking to natural gas engines to displace diesel
engines as an effective strategy for reducing pollution. For example,
officials in California have decided that natural gas or other
alternative fuels should power most new government-owned heavy-duty
vehicles. In addition, many transit agencies around the country have
decided to exclusively rely on natural gas buses when purchasing new
buses for their fleets.
The Honda Civic GX illustrates the excellent emissions attributes
that natural gas has as a vehicle fuel. Even though they have been
working with natural gas for only a few years, Honda has been able to
achieve truly remarkable results with the Civic GX. In fact, the
natural gas Honda GX, which is certified as SULEV, is the cleanest
internal combustion engine powered vehicle ever commercially produced,
producing far less pollution than Honda's other low-polluting vehicles,
including their hybrid electric vehicle. Initially, regulators had
difficulty even measuring the emissions from the Honda GX. A gasoline
vehicle certified to just the minimum current federal standards emits
nearly 194 times more pollution than the dedicated natural gas Honda
Civic GX. Vehicles produced by the DaimlerChrysler, Ford and General
Motors also have met some of the most demanding emission standards in
existence. For example, a one-mile trip to the corner grocery store and
back in an average pickup truck emits as much smog forming hydrocarbons
as is emitted by the Ford F-250 NGV in a 247 mile trip.
More immediately, natural gas vehicles can provide critical
emission reductions today. The recently announced EPA heavy-duty
emission standards will not be fully implemented until 2010. Natural
gas heavy-duty vehicles already meet the particulate matter levels
called for in the proposed rules and are years ahead of diesel engines
in terms of reducing NOX emissions. In addition, there are
many uncertainties concerning the timing of EPA's proposed rules.
Industry has indicated that they intend to fight the standards,
especially the sulfur reductions for diesel fuel. It is possible that
the emission benefits of the proposed rule will not be available until
some time after 2010. In the meantime, natural gas vehicles are
available now and they can deliver superior emissions performance with
the added advantage of petroleum displacement.
6. THE FUTURE OF THE NATURAL GAS VEHICLE MARKET
The prospects for increased natural gas use for centrally fueled
and other high fuel use fleet operations, such as taxicabs, refuse
haulers, school and transit buses, airport shuttles and over-the-road
trucks, are very good. The NGV industry has generally chosen to focus
on high fuel use fleets and heavy-duty vehicles because their fuel
consumption and refueling patterns make them the best choice for early
introduction of alternative fuels. Initially, suppliers of natural gas
are looking for customers that will use sufficient amounts of fuel to
justify the capital investment in retail and private fueling. Another
advantage of focusing on high fuel use fleets and operators of heavy-
duty vehicles is that replacing these vehicles with alternative fuels
provides the greatest amount of emission reductions.
While NGVs are commercially available, they generally cost more
than their gasoline or petroleum counterparts. Light-duty NGVs for
example, generally cost $3,500 to $5,000 more; heavy-duty NGVs cost
from $25,000-$50,000 more. However, as more vehicles are sold,
economies of scale will lower the incremental cost of NGVs. The
Department of Energy estimates that light-duty NGVs will cost
approximately $800 more than comparable gasoline models when mass-
produced. Unfortunately, we are still far from seeing the economies of
scale that will result from mass production. For example, Ford Motor
Company produced over 100,000 Crown Victoria Sedans last year. Of
these, only 1,000 were natural gas-powered.
Some people have questioned the continued need for alternative fuel
vehicles, particularly since the U.S. EPA announced plans to make
gasoline and diesel fueled vehicles of all sizes much cleaner. While
there is no question that conventionally fueled vehicles have gotten
cleaner and will continue to do so, natural gas vehicles too can
continue to become cleaner. Alternative fuel vehicles will continue to
be necessary to offset the increased number of vehicles and increased
growth in vehicle miles traveled projected by the U.S. Department of
Transportation.
Many experts also believe that eventually hydrogen-based fuel cell
vehicles will replace the internal combustion engine. It is important
to understand that natural gas provides an excellent pathway to a
hydrogen transportation future since natural gas can be used to supply
the needed hydrogen for fuel cell vehicles. (In fact, almost all
stationary fuel cells currently in commercial use derive their hydrogen
from natural gas.) As the demand for hydrogen grows, natural gas could
be converted into hydrogen at distribution centers or at refueling
stations and supplied to hydrogen vehicles. The natural gas
infrastructure that is in place today (including the existing
pipelines, fueling stations, fuel storage systems and garages and
maintenance facilities retrofitted to safely handle a gaseous fuel like
natural gas) can be used to support the hydrogen future. In addition,
because of the growing NGV market, there are an increasing number of
mechanics, inspectors and other transportation professionals that are
becoming familiar with servicing gaseous fuel vehicles. It is difficult
to imagine how the nation could transition from a petroleum-based
transportation system directly to a hydrogen system. Therefore, natural
gas is not just an excellent pathway to a hydrogen transportation
future; it may just be the only way to transition to that future.
It also should be kept in mind that it will be decades before fuel
cell vehicles could become a substantial percentage of the U.S. vehicle
population. Internal combustion engines, whether used in traditional
vehicles or hybrid electric vehicles, will continue to power most
vehicles for the foreseeable future. Natural gas vehicles will always
be cleaner than comparable gasoline or diesel vehicles using the same
technology, including hybrid electric technology.
RECOMMENDATIONS
There are a number of policies and programs that the federal
government could and should put in place to accelerate the purchase and
use of alternative fuel vehicles. Some are refinements of existing
programs; some are new. Many fall within the purview of the U.S.
Department of Energy or Environmental Protection Agency. However, all
require congressional leadership in terms of continued authorizations
and/or appropriations. The NGVC recommends that Congress support the
following policies and programs:
a. Financial Incentives
Support the CLEAR ACT. In April, Senators Hatch and Rockefeller
introduced S. 760, a bipartisan bill titled Clean Efficient Automobiles
Resulting from Advanced Car Technologies (CLEAR ACT). That bill
currently has 11 cosponsors. A companion bill, H.R. 1864, was
introduced in the House in May. S. 760 would provide meaningful tax
incentives for the purchase of alternative fuel and advanced technology
(fuel cell and hybrid) vehicles, the use of alternative fuels, and
investments in alternative fuel infrastructure. These proposals are
market-driven non-regulatory approaches to promoting AFVs and their
use. A credit against income taxes is provided for individuals and
businesses for the acquisition of alternative fuel vehicles. The amount
of the credit depends on the environmental benefits the vehicle
provides. A credit against income taxes also is provided to retail
sellers nationwide for the sale of alternative motor fuels. We
recognize that the CLEAR ACT is not in the jurisdiction of this
Committee. However, we believe that it is critical that the energy
policymakers on the Energy Committee send a clear and unambiguous
message that enactment into law of the provisions the CLEAR ACT is a
critical part of a national energy strategy and in the best interest of
the country.
Provide More Funding to State and Local Government Fleets. State
and local government fleets are increasingly turning to alternative
fuel vehicles as a strategy to help bring their communities into
compliance with National Ambient Air Quality Standards. (Indeed, 75
percent of covered state government fleets are required by EPAct to be
capable of operating on alternative fuels.) Because of the financial
pressure of other priorities, this transition to AFVs is proceeding
slower than it could or should be. Congress should provide state and
local governments matching funds for AFV acquisition for their fleets,
with a higher level of matching for states that commit to a higher
percentage of AFVs in the state's fleet than required by EPAct.
Congress also should increase funding for the Department of
Energy's Clean Cities Initiative. Over 80 cities across the country
have established Clean Cities coalitions, which are public/private
partnerships dedicated to in the increased use of AFVs. The Clean
Cities program has been extraordinarily successful, and its efforts
should be recognized and encouraged.
Fund Local Government Model AFV Demonstration Projects. Last month,
Rep. Sherwood Boehlert (R-NY), chairman of the House Science Committee,
introduced the ``Alternative Fuel Vehicle Acceleration Act'' (H.R.
2326). The bill would establish a nationwide alternative fuel vehicle
energy demonstration and commercial application competitive grant
program by providing $200 million in federal grants to up to 15
communities. The grants could be used to deploy AFVs and connect them
to existing transportation systems to help create AFV intermodal
networks. Rep. Boehlert plans to include H.R. 2326 in the energy
package being developed by the House Science Committee. The Energy
Committee should consider similar legislation.
Support the Green School Bus Program. Recent studies indicate that
children riding on older school buses are exposed to potentially
dangerous levels of emissions. We join with the Union of Concerned
Scientists to urge passage of legislation to provide school districts
with funding to replace diesel school buses with alternative fuel
buses, especially older school buses that may not meet today's safety
standards.
b. Research, Development and Demonstration (RD&D)
Expand Funding for NGV RD&D. NGVs are good, but they can be made
better. Significant R&D is still needed to (1) improve engine
efficiency, (2) further reduce engine emissions, (3) reduce the cost
and improve the reliability of fueling infrastructure, and (4)
demonstrate natural gas systems in new applications. The Energy
Committee should direct DOE to substantially expand its NGV RD&D
program to bring it in line with the new Five-Year NGV RD&D Plan
developed jointly by the NGV industry and DOE.
Include NGVs in Advanced Automotive Technology R&D. As discussed
above, from the perspective of energy security and the environment,
natural gas is a superior fuel to gasoline and diesel for hybrids and
fuel cells. Therefore, natural gas could and should play a very
important role in the deployment of advanced automotive technologies
such as hybrid electric and fuel cell vehicles. Existing federal
advanced vehicle programs, however, have focused on liquid (primarily,
petroleum-based) fuels for these vehicles. The Energy Committee should
instruct DOE to include gaseous fuels in its advanced technology
vehicle program.
c. Restructure EPAct
EPAct includes specific goals for petroleum reduction through the
use of non-petroleum alternative motor fuels. To help achieve these
goals, the Act requires alternative fuel provider fleets, the federal
fleet and state government-owned fleets to acquire light duty AFVs. The
law allows these fleets to meet up to one-half of their AFV purchase
requirements through the use of biodiesel. Each 450 gallons of
biodiesel used (2,250 gallons of B-20) by a fleet equals one AFV. As
discussed above, EPAct's success in encouraging OEMs to bring AFVs to
the market stands in stark contrast, however, to its success in
actually helping to displace petroleum with alternative fuels. Fuel
provider fleets and the federal fleet are required to operate their
AFVs on alternative fuel, but only if such fuel is reasonably
available. Many fleets have met their EPAct requirements by acquiring
flex-fuel vehicles (vehicles that can operate either on alternative
fuel or conventional petroleum fuel), and then operating them on
gasoline. Consequently, according to the recent General Accounting
Office study discussed above, very little petroleum actually has been
displaced through the use of alternative fuels in AFVs owned by these
fleets. Congress should make the following modifications to EPAct to
increase its effectiveness in reducing the use of petroleum:
i. Create an Optional EPAct Compliance Alternative. Some state
government and fuel provider fleets have expressed a desire for greater
flexibility in meeting the AFV acquisition requirements. Congress
should modify EPAct to provide state government and fuel provider
fleets with an optional approach to meeting their EPAct requirements
that offers them substantially greater flexibility. In exchange, the
program would ask them to accept a voluntary commitment to actually
reducing their use of petroleum fuel. Under this program, state
government and fuel provider fleets would have the option to continue
to meet EPAct requirements as they have in the past (i.e., by acquiring
AFVs, meeting up to one-half their requirements through the use of
biodiesel and, for fuel provider fleets, using alternative fuel where
available). However, this proposal also would provide them the option
of opting out of the vehicle acquisition and fuel use requirements by
agreeing to reduce a percentage of the petroleum they use in their
fleet operations. This percentage would be equal to the amount of
petroleum that would be displaced if all AFVs they own and would be
required to acquire under EPAct if they remained subject to the vehicle
acquisition requirements operated on alternative fuel exclusively. The
Department of Energy would be required to issue rules regarding the
calculation of this amount.
If a fleet elects this option, all actions it takes to reduce
petroleum consumption would be counted under the rules DOE must issue.
These actions could include:
the use of biodiesel (every gallon of biodiesel used would
count),
the use of hybrid electric vehicles and neighborhood
electric vehicles (based on the amount of petroleum displaced
compared to a conventional vehicle in the same weight class),
the actual use of alternative fuel in all their vehicles,
including light-, medium- and heavy duty vehicles and
the amount of fuel displaced as a result of substantial
contributions they make to getting other fleets or persons to
reduce petroleum consumption.
This flexible approach would result in meaningful petroleum
displacement, provide incentives for acquisition of AFVs, hybrid
vehicles and neighborhood electric vehicles and encourage increased use
of biodiesel. Since the option is voluntary, it would not constitute an
unfunded mandate.
ii. Credit for the acquisition of heavy-duty vehicles. Congress
should permit fleets covered by EPAct to count dedicated medium and
heavy-duty vehicles they acquire toward their EPAct requirements.
iii. Enforcement. Congress should direct DOE to send a report to
the Senate Energy and Natural Resources and House Energy and Commerce
Committees within 90 days of the date of enactment regarding compliance
with EPAct requirements by federal, state and fuel provider fleets. DOE
should be instructed to detail the efforts it has made to enforce the
requirements of the Act, as well as to promote the use of alternative
fuels by these fleets. DOE also should be required to publish the
report in the Federal Register as well as to publish enforcement
actions under EPAct.
d. Other
Accelerate Mobile-to-Stationary Credit Trading. Under current
Environmental Protection Agency (EPA) regulations (open market trading
guidance and the Federal NOX Budget Trading program), the
use of mobile emission credits to offset stationary source emissions is
either prohibited or discouraged by overly bureaucratic requirements.
Where used, the process has been extremely burdensome. Congress should
direct EPA to develop regulations to encourage and facilitate mobile to
stationary source emissions trading, and to update its Mobile Emissions
Model to include natural gas vehicles and other low-polluting
technologies. EPA should be instructed to develop methodologies for
ensuring that mobile source emission reductions are real and
verifiable, and move expeditiously to ensure that mobile reduction
credits are part of its regulatory programs.
CONCLUSION
On behalf of the Natural Gas Vehicle Coalition, I appreciate the
opportunity to provide our views on these critical issues. It is clear
that the U.S. must take steps to lessen its dependence on foreign oil.
Natural gas vehicles can help to significantly reduce dependence on
foreign oil. It also is clear that America's urban areas must reduce
their levels of air pollution. Natural gas vehicles are the cleanest
vehicles commercially available today and will continue to be tomorrow.
The U.S. currently has the best technology in the world for using
alternative transportation fuels. It is critical for the U.S. to
capitalize on this technological edge and begin to move alternative
fuels into the marketplace. Government incentives continue to be
necessary to make this happen. With government incentives and
leadership, the private sector can greatly expand the market for
alternative transportation fuels.
The Chairman. Thank you very much.
Mr. Marshall.
STATEMENT OF GARY MARSHALL, VICE CHAIRMAN,
NATIONAL ETHANOL VEHICLE COALITION
Mr. Marshall. Good morning, Mr. Chairman.
The Chairman. Good morning.
Mr. Marshall. Glad to be here today. I want to talk with
you a little bit about the National Ethanol Vehicle Coalition,
which is the primary advocacy group for the use of E-85, or 85
percent ethanol, as a form of alternative transportation fuel.
The NEVC is comprised of a number of different members,
including the 26 members of the Governors Ethanol Coalition,
the National Corn Growers Association, several State corn
growers associations, which I actually work for the Missouri
Corn Growers Association, as well as several automobile
manufacturers, ethanol companies, and others.
We are primarily interested in E-85 as an alternative fuel
source, but we are obviously very supportive of the use of
ethanol as E-10. We have other advocacy groups out there
working on E-10 and certainly we are very supportive of efforts
such as S. 1006, the Renewable Fuels Act. But we are going to
focus our remarks today on E-85, and obviously the biggest
challenge that we have had, as people have been talking about
all morning, has been the development of infrastructure to fuel
automobiles with E-85, 85 percent ethanol. We are hoping that
we can help today to integrate E-85 into a broad-based national
energy strategy.
Today, most of the ethanol produced in the United States
comes from corn. But as ethanol demand increases, we are going
to see ethanol produced from a number of different feedstocks,
including agricultural wastes, wood waste, and even municipal
solid waste. We support and advocate all of these different
forms of feedstocks, including biomass, agricultural waste, and
feed grains.
Briefly, the automakers have made significant investments
to bring E-85 compatible vehicles to the marketplace at no
additional cost to consumers. By the conclusion of market year
2001 there will be approximately 1.9 million flexible fuel
vehicles on the Nation's highways capable of consuming more
than 1.5 billion gallons of ethanol annually if the
infrastructure was available. The number of these vehicles
continues to increase. We are going to see more this year, more
introduced next year.
Different styles of vehicles will be compatible to use
alternative fuels, like E-85. These vehicles can run on 85
percent ethanol, they can run on 10 percent ethanol, they can
run on conventional gasoline. So if you do not have access to
the 85 percent ethanol, you can use something else if you are
traveling away.
Again, the problem has been finding the infrastructure,
putting the infrastructure together to produce E-85. We can use
the existing infrastructure to deliver it. The gasoline tanks,
we have to have a dedicated tank for the E-85, but the pumps,
just like we see in many of the filling stations across the
country today, we can utilize those directly for E-85. So there
is an additional cost of putting in the different tanks and so
forth, but the infrastructure could be made available
relatively easily. It just has not been completed to this point
in time.
Now, just for a couple of brief interesting comments. If
these 1.9 million flexible fuel vehicles were able to use E-85
as its primary fuel source, we would displace 34 million
barrels of imported petroleum, use an additional 530 million
bushels of corn, generate an additional $3 billion in farm
income, develop a marketplace for the production of ethanol
from biomass and waste materials, significantly reduce the
emissions of non-methane hydrocarbons, carbon monoxide, and air
toxics, implement a reduction of more than 4.3 million tons per
year of greenhouse gas emissions, and help establish a long-
term sustainable alternative domestic transportation fuel.
As more of these automobiles come on line, obviously we
believe there is no other form of transportation fuel that
provides the broad range of environmental and economic benefits
to the Nation as does E-85. But as I have been saying,
obviously there are impediments to achieving those results.
Lack of infrastructure--today we have only about 200 public E-
85 fueling stations in the United States.
Ethanol contains less energy on a Btu basis than does
gasoline and even with the existing blenders tax credit a
gallon of gasoline equivalent E-85 often exceeds the cost of
unleaded gasoline.
The automakers have been criticized for producing flexible
fuel vehicles that do not operate on alternative fuels, but we
can change that with help. The Alternative Motor Fuel Act of
1988 provided credits to the automakers to encourage the
production of these alternative fuel vehicles and these
credits, while limited, have assisted the automakers in
achieving the corporate average fuel economy standards proposed
and provided for by law.
They have been criticized, again, for not taking advantage,
or for taking advantage of the CAFE credits provided by
Congress and that little of the alternative fuels have been
used. The automakers have only been doing what has been
available to them. The incentives were there for the production
of the vehicles. The incentives have not been there for the use
of the fuels. Congress obviously intended that these incentives
be used to initiate and promote the production of the vehicles.
Now we need these same types of things for the fuel.
I would like to offer a very general set of conclusions and
recommendations that the committee might want to consider. No.
1, all forms of alternative fuels be products produced in North
America and promote national energy security.
No. 2, E-85 and biodiesel are the only alternative fuels
that can significantly reduce emissions of greenhouse gases.
No. 3, E-85 and biodiesel are the only forms of renewable
transportation fuels available in a liquid form that could use
the Nation's existing fuel delivery system.
No. 4, renewable fuel production can be a cornerstone for
important economic development and job creation across the
country.
We do support the development of a national energy
strategy. You may want to consider a couple of other ideas. It
might be appropriate to establish something like a national
alternative fuel trust fund, where we could help provide
incentives for the use of alternative fuels. The development of
a financial mechanism that would provide gasoline gallon
equivalency to all forms of alternative transportation fuels,
so that the motoring public would not be faced with reductions
in fuel mileage when utilizing alternative fuels. The
establishment of new incentives or the extension of existing
incentives available to the automakers to assist in offsetting
the cost of producing the alternative fuel vehicles.
Implementation of incentives to fuel providers across the
Nation that would potentially change their existing paradigm
from being a petroleum-based company to an energy-based company
or a transportation fuel-based company.
So with that, Mr. Chairman, I would like to thank you for
the opportunity to provide these remarks. I would be happy to
answer any questions that you might have.
[The prepared statement of Mr. Marshall follows:]
Prepared Statement of Gary Marshall, Vice Chairman, National Ethanol
Vehicle Coalition
Good morning Mr. Chairman, members of the Committee, ladies and
gentlemen. My name is Gary Marshall and I serve as the CEO of the
Missouri Corn Growers Association, which has offices in Jefferson City,
MO. I am here today representing the National Ethanol Vehicle Coalition
in which I also serve as the Vice-Chairman of the organization. Thank
you for the opportunity to appear before the Committee and discuss the
use of 85 % ethanol or E85, as a form of alternative transportation
fuel. My comments will be very brief to allow the Committee an
opportunity to ask any questions that you may have.
The National Ethanol Vehicle Coalition is composed of state and
local organizations, state and local elected officials, third-part
stakeholders, ethanol producers, vehicle manufacturers, and
agricultural interests. Our members include:
The 26 members of the Governors' Ethanol Coalition
National Corn Growers Association and several state
affiliates including:
Missouri Corn Growers Association
Colorado Corn Growers Association
Kansas Corn Growers Association
Maryland Corn Growers Association
General Motors Corporation
Ford Motor Company
DaimlerChrysler
Ethanol Management Corporation
Corn Plus
Nebraska Ethanol Board
BC International, and others
The National Ethanol Vehicle Coalition (NEVC) is the nation's
primary advocacy group promoting the use of 85% ethanol as a form of
alternative transportation fuel. We do not engage in the debate and
discussions regarding the use of ethanol as a form of oxygenate or fuel
blend, however, it is important to note that we do support and advocate
all uses of ethanol. Our focus is on high-level blends of ethanol and
the opportunity that E85 has to supplement the existing use of ethanol
and not supplant the use of E10.
The NEVC and a broad range of project partners have been involved
with the establishment of the E85 fueling infrastructure for the past
several years, and are seeking to integrate E85 into a broad based
national energy strategy. Today, most ethanol is produced from corn and
other agricultural crops. As ethanol demand increases, future
production will expand from grain based feedstocks to the use of
agricultural wastes, wood wastes and even municipal solid waste. It is
important to note that the NEVC supports and advocates the production
of ethanol from all forms of feedstock's, including biomass,
agricultural waste, and feed grains.
U.S. automakers have made significant investments to bring E85-
compatible vehicles to the marketplace at no additional cost to the
consumer. By the conclusion of Model Year 2001, there will be
approximately 1.9 million flexible fuel vehicles on the nation's
highways--capable of consuming more than 1.5 billion gallons of ethanol
annually-if the infrastructure were available. The number of these
vehicles will continue to increase as production of new E85 flexible
fuel vehicle models are introduced. A flexible fuel vehicle is designed
to operate on either gasoline or E85. There are no separate fueling
tanks, no switches to flip, and if E85 is unavailable and fuel is
needed, gasoline is introduced into the same filling tube and mixed
into the same tank.
Please allow me a moment to outline the impact that the use of an
additional 1.5 billion gallons of ethanol would have beyond today's 1.8
billion gallons of ethanol being utilized as a fuel oxygenate and
octane enhancer.
If each of these 1.9 million flexible fuel vehicles would use E85
as its primary fuel, the impact would be to:
Displace approximately 34 million barrels of imported
petroleum;
Use of an additional 528 million bushels of corn to produce
ethanol (from the 2 billion bushel surplus);
Generation of an additional $3 billion in farm income;
Development of a marketplace for the production of ethanol
from biomass and waste materials;
Significantly reduce the emissions of non-methane
hydrocarbons, carbon monoxide, and air toxics;
Implement a reduction of more than 4.3 million tons per year
of greenhouse gas emissions; and,
The establishment of a long-term sustainable, alternative
domestic transportation fuel.
The source materials for the preceding calculations will be
provided to your staff.
These benefits could be realized today as the technology is
available, the vehicles are on the street, and more vehicle models are
being offered annually. There is no form of transportation fuel that
provides the broad range of environmental and economic benefits to the
nation, as does the use of E85.
Clearly there are impediments to achieving the aforementioned
results, including:
A lack of infrastructure to fuel the vehicles. Approximately
200 public E85 fueling stations are currently in place across
the nation.
Ethanol contains less energy on a BTU basis than does
gasoline, and even with the existing blenders credit, the cost
of a ``gasoline gallon equivalent'' of E85 exceeds unleaded
gasoline.
The automakers are being criticized for producing flexible
fuel vehicles that do not operate on alternative fuels and
debate is pending to reduce or eliminate the CAFE Credits
provided for the production of these vehicles.
The Alternative Motor Fuel Act of 1988 provided credits to
automakers to encourage the production of alternative fuel vehicles.
These credits, while limited, can assist an automaker in achieving the
Corporate Average Fuel Economy standards provided by law. The
automakers have been criticized by both the press and the environmental
community for taking advantage of these CAFE Credits that were provided
by the Congress, in that little alternative fuels are being used. I
submit that the automakers have only used an incentive that was
provided and promoted the United States Congress, which clearly
intended these incentives to be used to initiate and promote the
production of alternative fuel vehicles. The weakness of the
Alternative Motor Fuel Act of 1988 was that the Act did not address the
infrastructure needed to fuel these vehicles. It is our position that
the automakers are being unfairly targeted and that it is appropriate
to remember that General Motors, DaimlerChrysler, and Ford Motor
Company are in the business of manufacturing motor vehicles, not
selling or marketing transportation fuels.
In order to allow adequate opportunity for questions, I will close
by offering only a short and very general set of conclusions and
recommendations that the Committee may wish to consider to bring
alternative fuels into the nation's mainstream.
The Committee may wish to consider that:
All forms of alternative fuels are products of North America
and they will all promote national energy security.
E85 and biodiesel are the only alternative fuels that can
significantly reduce the emissions of greenhouse gases.
E85 and biodiesel are the only forms of ``renewable
transportation fuels'' available in a liquid form that could
use the nation's existing fuel delivery system.
Renewable fuel production can be a cornerstone for important
economic development and job creation across the nation.
Many, many legislative proposal have been and are being considered
in this session of Congress. While time does not allow for us to
comment on the details of these numerous bills, the NEVC does support
the development of a national energy strategy. As you and the Congress
deliberate, you may wish to consider the following options to implement
a national energy strategy.
It may be appropriate to establish a ``National Alternative
Fuel Trust Fund'' that is used to promote the use of all forms
of alternative transportation fuels. Such trust fund could
potentially be financed by major emitters of greenhouse gases
that could contribute to this fund in lieu of making costly and
inefficient modifications to manufacturing processes that would
otherwise reduce such emissions.
Development of a financial mechanism that would provide
``gasoline gallon equivalency'' to all forms of alternative
transportation fuels so that the motoring public would not be
faced with reductions in fuel mileage when using alternative
fuels.
Establishment of new incentives or the extension of existing
incentives available to the automakers to assist in offsetting
the cost of producing alternative fuel vehicles.
Implementation of incentives to fuel providers across the
nation that would potentially change their existing paradigm
from that of a ``petroleum company'' to that of a
``transportation fuel'' company.
Thank you for allowing the National Ethanol Vehicle Coalition to
provide these comments today. We would like to ensure the Committee
that we are available to provide assistance at your convenience and we
look forward to working with the Committee and Congress in development
of programs to promote all forms of alternative transportation fuels.
The Chairman. Thank you very much.
Mr. Zeltmann, why don't you go ahead.
STATEMENT OF EUGENE ZELTMANN, CO-CHAIRMAN, ELECTRIC VEHICLE
ASSOCIATION OF THE AMERICAS
Mr. Zeltmann. Good morning, Mr. Chairman and members of the
committee. I am Gene Zeltmann, President and Chief Operating
Officer of the New York Power Authority. The Power Authority is
America's largest State-owned public power enterprise,
operating ten generating facilities and more than 1400 circuit
miles of transmission lines in New York State.
I appear today as co-chairman of the Electric Vehicles
Association of the Americas, whose membership includes
international vehicle and component manufacturers, energy
providers, and technology developers. I thank you for this
opportunity to discuss the role of the Federal Government in
reducing the use of petroleum in the light duty vehicle sector.
EVAA believes that reducing dependence on foreign oil
demands that we transition the country's biggest consumer of
this commodity, the transportation sector, to use of other
fuels. Electricity is an attractive alternative. It is clean,
efficient, relatively affordable, and is produced domestically
from a variety of feedstocks. Use of electricity can greatly
enhance our energy security since today the U.S. electric
generation base is about 3 percent oil.
EVAA encourages the development and use of several electric
transportation modes, including vehicles powered solely by
batteries, fuel cell vehicles, where the electricity of course
is generated on board, and finally hybrid electric vehicles
that rely upon a small internal combustion engine operating in
conjunction with an electric motor.
Mr. Chairman, my written statement details the benefits of
using electric transportation and describes the challenges we
face in commercializing these technologies. I will use my time
this morning to highlight actions that the Government might
take to assist in the transition of our transportation network
to alternative fuels.
New York State has moved boldly to promote electric and
other means of clean fuel transportation, exemplifying the role
that EVAA and its members believe that government should fill.
Under the leadership of Governor George Pitaki, generous State
incentives for purchase of vehicles have been enacted. A State
environmental bond is providing financial support for clean
fuel buses and fleet vehicles. The Governor has directed the
State fleet, which already includes some 700 clean fuel
vehicles, to operate solely on such fuels by the end of this
decade.
The Power Authority is assisting in this paradigm shift by
deploying more than 200 electric vehicles for use by our
customers and employees. We have initiated all-electric
commuter programs and supported the acquisition of several
hundred hybrid electric buses. Importantly, we are facilitating
the conversion of 500 U.S. postal vans to electricity.
With respect to the Federal Government's role, let me say
first that EVAA supports tax incentives as the single most
effective means of jump starting the market for ethanol and
other clean fuel vehicles. EVAA supports the inclusion of such
incentives as a critical component to an effective national
energy policy.
With respect to other matters within the jurisdiction of
this committee, EVAA supports and urges the inclusion of
several specific items in comprehensive energy legislation.
First, a primary factor in the current high price of electric
vehicles is the battery. Advanced batteries used to power
hybrid electric vehicles are expensive, due largely to the
materials, like nickel, cadmium, perhaps lithium, used in their
manufacture. Increasing volume will assist somewhat in lowering
the price, but automotive manufacturers believe the batteries
will remain too expensive to allow for an affordable EV even at
mass production.
A second use subsequent to service in the vehicle is
feasible because EV electric battery packs retain about 80
percent of their rated capacity at the end of the useful life
in a vehicle. Studies indicate that such batteries could be
used effectively in stationary applications, like electricity
storage and load leveling. We ask that the committee authorize
a 3-year program so that electric utilities and other
interested parties could cost-share with DOE in demonstrating
the effectiveness and benefits of using spent EV battery packs
in stationary applications.
Second, the chairman of the House Sciences Committee,
Sherwood Boehlert, has introduced legislation to create a
program that would demonstrate a variety of electric and other
alternative fuel technologies in cities across the country.
This forward-thinking proposal will assist in creating seamless
intermodal transportation systems in urban environments that
are fueled exclusively by clean alternatives like electricity.
Chairman Boehlert plans to include his bill as part of the
Science Committee's energy package and we urge this committee
to consider incorporating this proposal in comprehensive energy
legislation as well.
Third, we ask that you examine the Energy Policy Act of
1992, those provisions that require governments and so-called
fuel provider fleets, like electric and natural gas utilities
to acquire clean fuel vehicles. The current program failed to
meet the EPAct goal of reducing transportation sector petroleum
use by 10 percent by the year 2000. EVAA has been working with
other alternate fuel groups as well as representatives of
government and commercial fleets to identify modifications to
existing law.
We seek flexibility in meeting the requirements of existing
law in order to better ensure that EPAct's future petroleum
displacement goal is indeed achieved.
Finally, as we have heard this morning, hydrogen could
become the fuel of choice in this century. Our interest in
hydrogen is simple. It is the fuel required to power fuel cell
vehicles. The committee will consider the reauthorization of
existing hydrogen R&D legislation. As the committee considers
questions about hydrogen, about fuel cell development, about
the energy needed to power our mobile society, we urge you to
find ways to establish public and private partnerships to
jointly address these technological changes. The Federal
Government can play a significant role in assuring that the
vast amounts of human, technical, and financial resources now
being spent on hydrogen and fuel cell development is optimized
through integrated, cooperative programs and policies.
As you examine existing law and create a new energy policy,
we urge you to include the programs, policies, and incentives
that I have outlined today to encourage the development and use
of electric modes of transportation.
That concludes my remarks, Mr. Chairman. I thank you again
for the opportunity to appear and I will be happy to try to
answer any questions.
[The prepared statement of Mr. Zeltmann follows:]
Prepared Statement of Eugene Zeltmann, Co-Chairman, Electric Vehicle
Association of the Americas
INTRODUCTION AND OVERVIEW OF STATEMENT
This testimony is submitted on behalf of the Electric Vehicle
Association of the Americas (EVAA), a national non-profit organization
that advocates the use of electric transportation technologies,
including battery, hybrid and fuel cell electric vehicles, as a means
of addressing national energy security, energy efficiency and air
quality goals. Members of the organization include international
automotive and other equipment manufacturers, energy providers,
national associations and government entities. (A complete membership
roster is attached to, and made a part of, this testimony.)
EVAA applauds the Energy Committee's investigation to determine
means by which the federal government might cause, or help to cause, a
reduction in the use of petroleum by the light duty vehicle sector. A
critical key to reducing U.S. dependence on foreign oil is to
transition the transportation sector--particularly the light duty
vehicle segment--to use of alternatives to gasoline and diesel fuels,
like electricity and/or hydrogen. U.S. petroleum demand is projected to
grow from 19.5 million barrels per day in 1999 to 25.8 million in
2020--led by growth in the transportation sector, which accounts for
about 70 percent of current U.S. petroleum consumption. And the
consumption of energy by the transportation sector is growing at an
alarming rate. By 2020, the Energy Information Administration (EIA)
predicts that total energy demand for transportation in the U.S. will
be 38.5 quadrillion Btu, compared with only 26.4 quadrillion Btu in
1999.
Electric transportation technologies present our nation with an
important means for reducing our dependency on foreign petroleum and
increasing the diversity of fuels relied upon in the transportation
sector. This testimony highlights:
the important national benefits accruing from the widespread
adoption of electric transportation technologies into our
transportation network;
discusses the current technological, market-entry and
infrastructure challenges to such widespread deployment of
electric transportation technologies; and
outlines federal policies and programs that EVAA's members
believe are critical to assuring that electric transportation
technologies can be a significant segment of the U.S.
transportation sector in the 21st century.
benefits of electric transportation technologies
There is a family of electric transportation technologies being
developed and/or commercialized. EVAA defines an electric vehicle as
any technology that employs an electric drive system to power the
vehicles. Electric transportation technologies under development and/or
commercially available today include battery electric vehicles (BEVs),
hybrid electric vehicles (HEVs) that use both an electric motor and an
internal combustion engine, and fuel cell electric vehicles (FCEVs).
Each of these technology categories offer significant energy security
and environmental benefits, and together represent the cleanest, most
advanced alternatives to conventional vehicles on the road or under
development.
Battery Electric Vehicles
Battery electric vehicles (BEVs) charged off the Nation's electric
utility grid use ``fuel'' created from a variety of feedstocks, from
wind to nuclear. Importantly, petroleum represents a diminimus fuel
feedstock for electricity production in the U.S. Less than 3% of the
current U.S. generation base relies on petroleum. Electricity is a
domestically produced, relatively stably priced fuel that affords us
``fuel diversity'' for the transportation sector. Further, the primary
charging for BEVs is expected to occur overnight, when electricity
demand is at its lowest, allowing for widespread adoption of the
technology without adding new capacity.
In addition to significant energy security benefits, BEVs offer the
opportunity for continued personal mobility without degradation to the
environment. Nearly 100 cities across the U.S. fail to meet federal air
quality standards, and approximately 62 million people live in counties
where monitored data show unhealthy air for one or more of the six
principal pollutants [carbon monoxide (CO), lead (Pb), nitrogen dioxide
(NO2), ozone (O3), particulate matter (PM), and
sulfur dioxide (SO2)]. For many urban areas, electric
transportation can be a particularly important means to substantially
reduce emissions of mobile source pollutants, including volatile
organic compounds and oxides of nitrogen that are the precursors of
smog. Battery electric cars and buses are truly ``zero emission''
transportation modes. They produce no tailpipe emissions and generate
insignificant, ancillary emissions during operations. They also have
the added benefit of mitigating noise pollution and using energy more
efficiently than conventional modes.
Hybrid Electric Vehicles
Hybrid electric vehicles, which combine the benefits of electric
power with conventional gas-powered engines, can significantly improve
the efficiency and environmental performance of vehicles, thereby
reducing fuel use and contributing to improved air quality. HEVs on
America's roadways today evidence the tremendous advantages that this
technology provides. The Toyota Prius has a stated fuel economy of 67
mpg, and a California environmental rating of ``SULEV'', or ``Super
Ultra Low Emission Vehicle,'' with only about 1/2 of the carbon dioxide
and 1/10 of the nitrogen oxide emissions associated with a comparable,
gasoline powered vehicles; the Honda Insight is rated at 70+ mpg and
meets California's ``ULEV'' emissions rating. All international auto
manufacturers have announced plans to bring hybrid electric vehicles to
the market place in the coming years.
Fuel Cell Electric Vehicles
Fuel cell electric vehicles (FCEVs), which harness the chemical
energy of hydrogen and oxygen to generate electricity, have the
potential to change the way we think about energy. Fuel cells are more
efficient than other technologies that rely on direct combustion, and
they produce zero, or near zero emissions. When fueled directly by
hydrogen, the only by-product of a fuel cell electric vehicle is water.
Like electricity, hydrogen does not occur naturally in a usable
form on Earth; it must be generated or produced by consuming fuels or
other forms of energy. Yet, also like electricity, multiple feed stocks
can be used, creating fuel diversity and thereby enhancing national
energy security. Fuel processors ``on-board'' a vehicle can produce
hydrogen from natural gas, methanol, ethanol, gasoline, or diesel.
``Off-board'' processors can use all of these feedstocks and can also
make hydrogen from the electrolysis of water.
CHALLENGES TO WIDESPREAD ADOPTION OF ELECTRIC TRANSPORTATION
TECHNOLOGIES
Despite the significant societal benefits accruing from their use,
years of research and development by companies and governments across
the globe, and mandates for commercialization of such vehicles,
electric transportation technologies have not yet become a meaningful
part of the U.S. transportation network. Since 1996, a total of only
4,339 battery electric vehicles have been leased and/or sold in the
U.S. And, while sales of HEVs are growing quickly, there still have
been only 17,773 put into service to date. In addition to these light
duty automotive offerings, there have been about 200 electric and
hybrid-electric buses and over 6,000 low-speed, battery electric
vehicles placed into service.
While the sum of all of these vehicles--which is less than 30,000
as compared to 1999 vehicle sales in the U.S. of 16.5 million--may be
insignificant statistically, they represent an enormous step toward
development of a long-term and sustainable market for such vehicles in
the U.S. The technology--with respect to battery and hybrid electric
vehicles--is proven and maturing; customer reception to the vehicles
has been tremendous and sales have been constrained more by product
availability than by demand; and incentives to encourage consumer
purchase are in place and/or being considered by government at all
levels. However, more must be done if these vehicles are to become an
integral part of our transportation network.
Costs for immature and low-volume technologies will be higher than
those of comparable, conventional vehicles. Until a supplier base can
be built, the technology matured and volume production established, the
incremental costs of electric transportation technologies must be
addressed in order to assure consumer acceptance. Fortunately, battery,
hybrid and fuel cell vehicles share a number of subsystems (e.g., power
electronics, motors, regenerative brakes). Therefore establishing a
supplier base for battery electric vehicles, for example, can help to
lower the costs of early commercial fuel cell vehicles when they are
brought forward.
Infrastructure support systems, from re-fueling and charging to
service and maintenance, must be put in place to support the convenient
and safe operation of electric transportation technologies. Deploying
the infrastructure systems--particularly those to support a hydrogen-
based economy represents a vast and expensive undertaking.
Building markets for electric transportation will require consumer
awareness and experience with the technology to establish confidence in
the products.
Finally, with respect to fuel cell electric vehicles, there is a
continuing need for research and development of the subsystems and
components that will allow industry to bring forward a consumer-
attractive FCEV.
ROLE FOR GOVERNMENT IN OVERCOMING THE TECHNOLOGY AND MARKET CHALLENGES
TO ELECTRIC TRANSPORTATION TECHNOLOGIES
Consumer Tax Incentives
Targeted tax incentives can be an effective means by which
government can help assure that electric drive technologies are
successfully introduced into the marketplace. EVAA members believe that
such incentives should be limited in their scope and duration, and
available now and in the immediate future as these new and dramatically
different technologies are introduced to consumers.
EVAA supports the inclusion of tax incentives for electric and
other alternative fuel vehicles (AFVs) as part of any national energy
plan. Such incentives can help drive the biggest consumer of
petroleum--the transportation sector--toward use of cleaner,
domestically produced alternatives. We recommend that the Committee
consider incorporating the principles of the ``Clean Efficient
Automobiles Resulting from Advanced Car Technologies Act'' (``CLEAR
ACT''), S. 760, in any comprehensive energy bill that it may report.
The CLEAR ACT, introduced by Senators Jeffords, Hatch, Rockefeller and
others, would set the stage for a consumer-based and technology driven
transformation of the transportation sector. All major vehicle
manufacturers are poised to bring battery, hybrid and/or fuel cell
electric cars and buses to the market. Federal tax incentives, as
called for in the CLEAR ACT, would allow the technology to spread
quickly by lowering purchases prices and encouraging deployment of
supporting infrastructure.
We believe a very important feature of the CLEAR ACT is its
recognition that vehicles which provide the greatest societal benefits
in terms of environmental and efficiency performance are deserving of
the most generous benefits. Also, the CLEAR ACT recognizes that fuel
cell electric vehicles will be entering, the market later than other
electric and alternative fuel vehicles, and has provided for incentives
for this category of technology to continue for a longer period of time
to ensure that the market has matured sufficiently before the
incentives expire.
Federal Program to Introduce Advanced Vehicle Technologies to U.S.
Cities
Cities and communities plagued with poor air quality and traffic
congestion stand to be the greatest beneficiaries of the successful
commercialization of electric and other alternative fuel vehicles; yet,
to date, the technologies are largely unknown and ``untried''.
Deploying electric transportation technologies, from battery-powered
bikes to fuel cell electric buses, can result in the clean and
efficient transport of people and goods in the urban environment.
Legislation that has been introduced in the House of
Representatives and is being considered for inclusion in that chamber's
national energy plan creates a federal program to support the
introduction of electric and other alternative fuel vehicles in linked
transportation systems in up to 15 cities in the U.S. Introduced by the
Chairman of the House Science Committee, Sherwood Boehlert (R-NY), H.R.
2326, the ``AFV Acceleration Act of 2001,'' provides $200 million in
federal cost-share funding to help communities deploy clean, efficient
modes of transportation and to build the infrastructure that can assure
the subsequent widespread adoption of these technologies. Creating
these models of efficient and clean transportation will allow for
transit operators, public officials and the citizens who experience the
benefits of the technology in their daily lives to gain the experience
and confidence necessary to transition to these radically new
technologies.
EVAA encourages this Committee to consider including the AFV
Acceleration program, as envisioned in H.R. 2326, in any national
energy package it may develop. Forming partnerships and alliances
between governments at the local, state and federal levels, and
leveraging federal dollars with those of industry and other levels of
government, is an effective means of introducing and deploying
alternative fuel vehicles to communities and citizens across the
country.
Federal Program to Assist in Making Advanced EV Batteries Economically
Viable
In addition to consumers' lack of familiarity with electric
vehicles, other challenges to market penetration of the initial series
of electric vehicles are high purchase prices and limited range.
Manufacturers currently are not producing greater numbers of EVs,
having reached conclusions that the costs are too high and the market
too limited. The cycle of high costs and limited sales is broken only
if costs are reduced and/or volume is increased dramatically. One of
the primary contributors to the high costs of EVs is the advanced
battery necessary to provide the minimum range deemed acceptable to
consumers. While it is estimated that prices for batteries begin to
fall when the volume reaches 10,000 packs (i.e., enough to power 10,000
EVs) per year, auto manufacturers believe that volume alone cannot
address the prohibitive costs of advanced technology batteries
necessary to create consumer demand for EVs because the materials
needed for such batteries (e.g., nickel) are expensive.
To assure volume sales of EVs, a dramatic reduction in the cost of
batteries is required. An innovative approach to addressing this issue
may be to ``extend'' the life--or value--of the batteries beyond
vehicular use. Once the batteries have been ``used'' in a vehicle,
there is an opportunity to refurbish, then ``re-use'' the batteries in
a stationary application. For example, electric utilities could ``re-
use'' EV battery packs in peak shaving, transmission deferral, back-up
power and transmission quality improvement applications. If
successfully demonstrated for secondary, stationary-use applications,
the effective price of battery systems are projected to make EVs more
competitive.
Preliminary studies have shown that if a secondary market is
created that pays $100 to $200/kWh for EV batteries, the costs of such
batteries for use in the first application (i.e., the vehicle) could be
reduced to $100 to $150/kWh--the price point where auto manufacturers
believe is necessary to assure an affordable EV. Combining the value
for using the battery in both a vehicle and then later a stationary
application likely would cover the cost of producing the battery pack,
even at low volume (estimated at $400/kWh).
EVAA encourages this Committee to consider establishing a program
within the Department of Energy to assist industry in demonstrating
that ``spent'' EV batteries can be cost-effective and high-performing
in secondary, stationary applications as part of any national energy
package it develops. The program should be designed to demonstrate up
to 1,000 kWh of ``used'' batteries (approximately 33 vehicle battery
packs) in a minimum of 10 stationary use applications. These ``used''
batteries would demonstrate electric utility stand-by, peak-shaving and
transmission quality improvements and would help to validate the value
of ``used'' batteries as a means to store electricity for purposes
beyond use in EVs.
Providing Flexibility in Compliance with EPACT Fleet Requirements
EVAA requests that this Committee examine the existing provisions
of the Energy Policy Act of 1992 (EPACT), P.L. 102-486, that require
state and federal governments and the providers of alternative fuels
(e.g., electric utilities, natural gas utilities, and other producers/
suppliers of fuels defined as alternatives to gasoline under the Act)
to convert their vehicle fleets to alternative fuel vehicles. The
rationale of building volume and market demand through government
fleets and the fleets of those in the business of producing, supplying
and/or selling alternative fuels is sound, though the execution of the
program to date has not achieved the goals of the ACT, namely to
replace 10% of the petroleum used in the light duty vehicle sector by
2000, and fully 30% by the year 2010.
While committed to building a long-term, self-sustaining market for
electric vehicles, EVAA's electric utility members have found
compliance with the existing EPACT alternative fuel providers' program
difficult given the limited availability, high initial purchase price
and limited performance of electric vehicles. These alternative fuel
providers, as well as others struggling to meet the dictates of the
DOE-administered program, are looking for flexibility in the program
and recognition for actions taken that can help to develop the markets
for electric and alternative fuel vehicles. For example, some electric
utilities who are unable to incorporate so-called ``full function'' EVs
due to limited availability, have begun to purchase and deploy low-
speed electric vehicles to replace the duty cycle of a conventional
vehicle; others have made investments in EV charging infrastructure to
help encourage the market; and still others have begun to deploy
hybrid-electric vehicles to help build demand in that segment and
thereby ``drive-down'' the costs of components that are shared with
battery and fuel cell electric vehicles. These actions, EVAA believes,
should be recognized under the EPACT alternative fuel providers'
program.
EVAA is working in partnership with other alternative fuel interest
groups, representatives of the federal government, and commercial fleet
representatives to craft a set of modifications to the EPACT
alternative fuel vehicle programs that will create flexibility in
meeting the goals of the law, while assuring that the goals of the
existing law, i.e., displacement of petroleum use in the transportation
sector, can be achieved. It is the hope of the working group that
agreement might be reached, and that we might provide this Committee
with a set of suggested modifications to EPACT for consideration as
part of any comprehensive energy legislation that may be developed.
Integrating Federal Hydrogen and Fuel Cell Development Efforts
The world's major automobile and heavy duty vehicle manufacturers
who are engaged in efforts to commercialize fuel cell vehicles all face
the same technically challenging issue: How can hydrogen be provided to
the fuel cell that will power the vehicles? Whether hydrogen is
produced elsewhere and then stored onboard the fuel cell vehicle or is
produced on the vehicle by use of an onboard fuel processor, hydrogen
is a key enabler to the success of these vehicles. And, not only can
hydrogen fuel much of tomorrow's transportation systems, but its
versatility could provide the clean energy needed to satisfy our
electric as well as our mechanical and thermal energy needs--powering
office buildings, homes, industrial complexes and shopping malls.
The reality of the marketplace is that the role of hydrogen in the
transportation sector, and to a large extent in the stationary
applications sector, is coupled closely with fuel cell development.
While hydrogen R&D is essential in its own right, the success of fuel
cells is very dependent upon the success of hydrogen production,
storage, transportation and use. The recently released report of the
National Energy Policy Development Group, led by Vice President Cheney,
specifically recommended that the President direct the Secretary of
Energy to focus R&D efforts on integrating current programs regarding
hydrogen, fuel cells and distributed energy.
As this Committee considers reauthorization of the Hydrogen Future
Act of 1996--separately or as part of a comprehensive energy package--
EVAA asks that the reauthorizing legislation recognize the need to
integrate on-going hydrogen, fuel cell and distributed energy research
and development programs and to consider specific mechanisms and
programs to insure that coordination is achieved in government and
industry efforts to pursue both hydrogen and fuel cell development. One
means for organizing public and private partnerships to address the
technical challenges might be to undertake a very significant, large-
scale demonstration that invites, under one tent, today's leading fuel
cell and hydrogen participants to focus on maturing the technologies
and deploying the infrastructure that will allow us to move to this
renewable and clean energy resource as quickly as possible. An example
of such a collaborative undertaking can be found in the California Fuel
Cell Partnership (CaFCP), which includes participation by the federal
government, and is organized to comprehend the infrastructure
requirements within the state of California to support use of fuel cell
electric vehicles.
Conclusion
Electric transportation technologies, whether powered by batteries,
fuel cells or a combination of batteries and an internal combustion
engine, collectively represent our transportation future. Transitioning
to electric drive systems ensures continued mobility without reliance
on insecure and often costly sources of foreign oil, and importantly,
without degradation to the environment. Federal partnerships--whether
in the form of consumer tax incentives, cost-share for research,
development and demonstration, and/or assistance in deployment--to
assist industry in bringing electric transportation technologies to the
marketplace is a wise and cost-effective investment in our future
energy security and in our citizens' quality of life. EVAA encourages
this Committee to consider the industry's recommendations for programs
and policies made within this statement as national energy legislation
is crafted.
The Chairman. Well, thank you very much.
Let me ask a few questions, first about the hybrid electric
vehicles that are now on the market and that everyone
indicates, each of the manufacturers indicate, they are
developing for sale in the next few years. Is there something
inherent in the construction of a hybrid electric vehicle that
requires it to be more, significantly more expensive than a
regular internal combustion engine-driven vehicle, or is it
just a question of getting the volume up to a sufficient level
that the price comes down? What is the answer to that?
Mr. Dana. Mr. Chairman, in a hybrid electric vehicle what
you have is a conventional engine along with electric motors to
drive the wheels and a small battery pack. So you are
essentially running two propulsion systems, which is why you
have an added cost for a hybrid electric vehicle. Some of those
parts in volume production we think can be thrifted somewhat.
We do not know if we can ever get completely down to a
conventional vehicle, even at volume, with a hybrid, but
certainly there are some cost economies that will come.
The Chairman. When will there be U.S. manufacturer-produced
hybrid vehicles on the market other than the Toyota and the
Honda vehicle that are already on the market?
Mr. Dana. I believe Ford has announced that their Escape
SUV will have a hybrid system in the 2003 model year. I know
that GM is working on a Silverado pickup with a hybrid system,
and Daimler Chrysler has announced a Durango that would be a
hybrid. I believe those are 2004 model year, if I remember
correctly.
The Chairman. Am I right that hydrogen-powered automobiles
also all contain an electric motor, that the hydrogen powers
the electric motor, so it is essentially a hybrid electric
vehicle driven by hydrogen instead of by gasoline? Is that an
accurate description or not, Mr. McCormick?
Dr. McCormick. You can certainly run hydrogen through
internal combustion engines and some companies are looking at
that, as are we. But the solution we are talking about with
fuel cells allows us to get rid of the engine and transmission
and replace it with a fuel cell that produces the electricity,
and then you have the electric motors to drive the car.
The Chairman. But the electric motor has to be there in any
fuel cell-driven vehicle?
Dr. McCormick. Absolutely, yes. So it is basically an
electric vehicle with a fuel cell instead of batteries.
The Chairman. It seems to me that whether the source of the
power, the fuel used, is hydrogen through a fuel cell or is
gasoline through an internal combustion engine or natural gas
through a natural gas-powered combustion, adding the electric
engine or the electric motor dramatically improves the
efficiency of the vehicle. Am I right about that? Any of you
have thoughts about that?
Mr. Dana. Well, in a couple of ways. As Dr. McCormick says,
they are seeing efficiencies twice as great in a fuel cell
vehicle as a conventional vehicle just from the type of system
that is used to drive it. In the hybrids that are being
developed today, you get much greater efficiencies, mainly
because you actually turn the engine off at idle and actually
not use the engine at some times while the batteries and motors
run the vehicle. So that is part of the greater efficiency of
the hybrids. Actually, at idle you most of the time shut the
engine off and do not use it.
The Chairman. Mr. Zeltmann, you had a comment?
Mr. Zeltmann. I had a thought, if I may. The beauty of what
we are talking about with the hydrogen is it is a way to
capture perhaps alternate forms of power generation such as
solar or wind power or hydrogen power, because as you
electrolyze the water and then capture the hydrogen and then
use that to power the fuel cell-operated vehicle, for example,
you in fact are able to get yourself away from dependence upon
petroleum products imported from overseas.
Now, that gets to the point that we have heard earlier this
morning about the need for infrastructure for the hydrogen
storage and transportation and the safety that is required with
it. But the facts are that you have the ability to use green
power generation forms in producing the hydrogen, which is an
attractive alternative that might be considered as you go
forward in these deliberations.
The Chairman. Mr. Kolodziej.
Mr. Kolodziej. Mr. Chairman, one of the confusions out
there is that people refer to hybrid electric vehicles, they
frequently just assume that means a gasoline or diesel engine
that is driving it. If the focus is on displacing foreign oil,
then I think we need to also look at alternative fuel engines
to drive the hybrid vehicle in which you get 100 percent
displacement.
There is a lot, right now a lot of work being done through
DOE and also in the private sector on large-scale buses,
trucks, hybrid, natural gas engines and vehicles. With respect
to hydrogen, the key is where do you get the hydrogen from. It
is great to have a vehicle, but if you do not have a hydrogen
source where do you go?
Right now all the stationary fuel cells in the world as far
as I know of that are in commercial operation get their
hydrogen from natural gas. In addition most of the hydrogen
that is commercially available is produced from natural gas and
then shipped around in containers. Our strong belief is that a
natural gas vehicle system now is blazing the trail and setting
the stage for a hydrogen infrastructure. You have natural gas
going to the filling station and then converted at the filling
station into hydrogen and put on the vehicle. What you need for
hydrogen is gaseous fuel storage, gaseous metering, gaseous
dispensing. We are doing all that. You need mechanics that
understand how to deal with gaseous fuel. You need buildings
that are instrumented with sensors and whatever to handle
gaseous fuel since it is lighter than air and it does not sit
in the air, as opposed to petroleum fuels. We are doing that.
You need a public that is comfortable dealing with gaseous
fuels in their vehicle. We are doing that.
So the more we are successful, the easier it will be to
transition to a hydrogen future. We strongly believe that the
only way you get there, to a hydrogen future, is through
another gaseous fuel, in this case natural gas.
The Chairman. Thank you.
My time is up. Senator Hagel.
Senator Hagel. Mr. Chairman, thank you. I am going to have
to leave to get to another meeting, but I wanted to say that,
first, I very much appreciate this panel coming before us this
morning. This panel represents the future for our energy
transportation technologies, fuels, vehicles, and our questions
and concerns and problems that we have regarding this universe
are going to be found in your testimony.
There are pieces of that that you have all in your
organizations you represent have put a lot of time into, and we
will continue to work through the developments of each of your
technologies and thoughts and ideas and innovations.
So, Mr. Chairman, I want to thank you again and this panel
in particular for sharing your thoughts and expertise.
The Chairman. Thank you very much.
Senator Akaka, you came and left. Did you want to go, or
should Senator Carper, either one of you?
STATEMENT OF HON. DANIEL K. AKAKA, U.S. SENATOR
FROM HAWAII
Senator Akaka. Thank you very much, Mr. Chairman. Thank
you, and at this time I want to add my welcome to the panel
before the committee.
I would like to comment on S. 1053, a bill that
reauthorizes the Hydrogen Future Act enacted in 1986. It
directs the Department of Energy to continue to research and
develop hydrogen technologies. The bill is important to the
Nation because hydrogen has the potential to free our Nation
from imported oil and provide a clean and abundant energy
source.
I have had an abiding interest in hydrogen as an energy
source and have championed its advancement for a long time. The
Hydrogen Future Act is a legacy of my friend and predecessor in
the Senate, Senator Sparky Matsunaga. He was the first to focus
attention on hydrogen by sponsoring hydrogen research
legislation. The Matsunaga Hydrogen Act, as the legislation
became known, was designed to accelerate development of
hydrogen technologies.
As a result of Senator Matsunaga's vision, the Department
of Energy has been conducting research that will advance
technologies for cost effective production, storage, and
utilization of hydrogen. I am convinced that in the next few
decades, hydrogen will join electricity as one of our Nation's
primary energy carriers, and hydrogen will ultimately be
produced from renewable sources.
Technical and institutional challenges and barriers to
wider use of hydrogen are being surmounted at an accelerating
pace on a global scale. Iceland is making a strong bid to
become the world's first hydrogen-based economy. In the United
States, I am pleased that the State of Hawaii has enacted
legislation that would facilitate a public-private partnership
for promoting hydrogen as an energy source. In California, the
State's zero emissions vehicle requirements favor early
introduction of hydrogen-powered vehicle.
Despite the progress, many challenges remain for hydrogen.
Production costs remain high. Attractive low-cost storage
technologies are not available and the infrastructure is
inadequate. We need to address these barriers if we are to
enjoy the fruits of an efficient and environmentally friendly
energy source. An aggressive research, development, and
demonstration program can help overcome many of these problems.
Mr. Chairman, I hope the committee will move quickly on
this bill and I look forward to asking questions to the panel.
Hydrogen storage--this is my question--storage, transport, and
distribution systems are critical to advancing widespread use
of hydrogen for energy. Currently, the infrastructure needed
for this purpose does not exist. Dr. McCormick smiles.
Any of the panel members may respond to this. I have a
three-part question for you. Is there a role for the Federal
sector to help speed infrastructure development? What is the
general time frame envisioned for the Nation to have a
substantial hydrogen infrastructure? Third, what are the most
critical barriers to the development of the hydrogen
infrastructure for vehicular applications?
As I mentioned his name, maybe I should ask Dr. McCormick
first.
Dr. McCormick. Thank you, Senator. First of all, as I noted
in my written comments, both fuel cells and hydrogen storage
and the reason we are here today really derive from previous
investments and previous support by members of this committee
for the Department of Energy programs. So I think that clearly
as the first element of it we should continue the basic
research on advanced hydrogen storage technologies and basic
fuel cell technologies.
The second role for the Federal sector, and it is one that
will have to evolve over some time, and it really relates to
the barriers, and that is that in order for people to place a
hydrogen infrastructure in place there needs to be a consistent
set of policies over an extended period of time to allow it to
happen. I would ask you to recall that 60 percent of the
gasoline dealers, the dispensers of gasoline to our cars, are
small business people. They cannot afford to be flip-flopped
around, nor can they afford to do five or six different
options. Their economics just purely will not allow it.
So consequently, I think there is a role in the Federal
sector for developing consistent long-term policies that focus
towards and direct us towards the hydrogen solution and fuel
cells as well, because I think our payoff, as we have talked
about earlier today, is huge. We have the payoff of displacing
petroleum, and the really nice thing about the hydrogen
economy--and I really like your notion of energy carriers. I
believe there will be two, electricity and hydrogen. The
advantage of both of them is they can be made from any source,
and hydrogen is the logical one for cars. So I think it is a
very logical approach.
With respect to storage, we are making tremendous progress.
We are working with technologies now in the compressed area
which will put the vehicles out and have compatible range with
the current generation of vehicles. We are working on
electrolyzer technology, which I alluded to earlier today,
which will decompose water from electricity to make hydrogen,
but it will deliver that hydrogen directly at pressure. That is
very important because if you need an efficient system you do
not want to put an extra compressor in there cost and
efficiency-wise.
I think we are making tremendous progress, but I believe
that we would like a breakthrough. We would like something
beyond compressed, we would like something beyond liquid. We
are investing worldwide in a number of different technologies,
but I think it is one that could yield to some good fundamental
science. So I would urge again very solid funding at national
laboratories, universities, research organizations to do that.
Relative to the time frame, that is a tough one because
from our viewpoint we believe that we are going to break down
the technical barriers for the fuel cell hydrogen vehicle
within this decade. Our rate of progress is astounding, and I
say that as somebody who has tracked the technology for a long
time and I cannot believe how it is moving worldwide.
But the time frame then really becomes one of dealing with
the barriers to put in the infrastructure, and there it does
become economic and policy-driven. So from my viewpoint, I
think we have the opportunity to begin to see a major
transition by the end of this decade. I think in order to do
that we have to start getting consistent policies and
consistent themes that focus around that issue so there is not
confusion and then start working in an orderly fashion to do
large demonstrations where we can understand what the flaws are
and move it forward and demonstrate the safety, and ultimately
put in place tax incentives, etcetera, for all of the people
that have to be involved in doing this. That is, the small
business people who have to put in the distributors, the people
who would generate the hydrogen from a multiplicity of sources,
as we heard today.
So I think that the real barrier is going to be that
infrastructure, and there we need policy.
The Chairman. Thank you very much.
Senator Carper.
STATEMENT OF HON. THOMAS R. CARPER, U.S. SENATOR
FROM DELAWARE
Senator Carper. Mr. Gibbens, I missed your testimony. I
apologize for arriving late. Take just a minute and hit me with
some of the most important things you said, please.
Mr. Gibbens. Well, I think the most important thing is that
any of the mandates, either on the current mandated fleets or
on the proposed government or private fleet, simply will not
give you the petroleum reduction that was envisioned in EPAct.
Studies have indicated that all those fleets, if they fully
complied, would only give about a 1.5 percent reduction. As
much as we would like to comply, there are significant
barriers, cost barriers in the acquisition of the vehicles,
disposal of the vehicles, the kinds of vehicles, alternative
fuel vehicles that might be available to meet our operational
needs, and probably most significant, as everybody has
mentioned here, is if I choose a particular alternative fuel
type vehicle where do I get the fuel? In other words, where is
the fuel infrastructure? Unless I choose to fund that, which is
very expensive, the marketplace is just simply not there for us
to pick any particular type of alternative fuel vehicle and
then be guaranteed a place that I can go refuel that vehicle.
So those are the major points in my presentation.
Senator Carper. Thank you.
Dr. McCormick, about a year and a half ago I was in
Michigan for a wedding and I happened to spend some time
visiting with Rick Wagner. He said: We are having an auto show
in Detroit right about now. It was January 2000. He said: If
you want to go, we will try to arrange it to get you in. I had
about an hour or so and I went to the auto show.
Among the things I saw there was a GM concept vehicle. I am
trying to remember the name of it. I think it started with a
``P''.
Dr. McCormick. Precept.
Senator Carper. Precept, yes. Precept, which I think was
expected to be available for purchase maybe in 2004. I seem to
recall that it is expected to realize 70 or 80 miles a gallon.
It was a hybrid. I was excited about it at the time, thought
about it often since then. Whatever happened to Precept?
Dr. McCormick. Well, let us go through the history of
Precept. It is a derivative of our PNGV program and it did
achieve those remarkable mileages. I might add that we did a
mockup fuel cell version which had fuel economies of over 100
miles per gallon as well. That was not intended to be a for-
sale vehicle. It had a lot of very advanced technologies in it,
many, many patents. But I think very rapidly you will see those
begin to transition into more conventional cars. I agree with
you it was an astounding car, and now we are trying to move the
technologies as quickly as we can into our base vehicles.
Senator Carper. You might be right, and a year and a half
ago maybe there was no notion or interest at all in making that
a vehicle widely available for distribution. That sure was not
my understanding at the time, it really was not.
Let me just ask--I am a guy who believes in buying domestic
cars. We buy Ford, Chryslers, GM in our home. A little over a
year ago a woman pulled up to my office, when I was Governor of
Delaware, pulled up to our office and said: I bought a new car.
I said: What did you get? She said: I bought a Toyota. After I
chastised her, she said: Well, it is a Toyota, it gets
exceptional gas mileage. She said: Come take a look at it.
I did. It is their hybrid, and I was struck by the fact
that it is actually a reasonably attractive vehicle, that the
size of the battery pack was not all that great, it is four-
door and reasonable trunk space. The cost was I think maybe
$20,000, which I am told that Toyota takes about a $10,000 loss
on each vehicle they sell. I think they are building about
20,000 of them this year. What I am told, they are selling
basically all that they make.
I think Honda has a hybrid out as well. But I am concerned.
Here we are, the United States, leader of the free world,
leader of the world, and we have got Toyota and Honda out there
not just building these cars, but actually taking them to
market and selling them in numbers which I think with Honda, I
think they are going to expand their hybrids to not only go
into the--what is their hybrid called?
Mr. Zeltmann. Honda Insight.
Senator Carper. Yes, Honda Insight. I hear they may be
taking it to the Civic, putting it as a powerplant in some of
the Civics, within a year or so. I am just troubled by the fact
that--this goes back to my excitement with the Precept. I said,
well, 2004 is a lot of time to wait for the Precept, but it is
better than not at all. Yet we have got the folks from Honda
and the people from Toyota with vehicles on the road, not in
huge numbers but significant numbers, but in numbers that are
going to grow rather substantially, getting 50, 60 miles per
gallon, and we are looking forward to a vehicle in model year
2003, maybe 2004.
Why are they ahead of us? I do not mean to be
argumentative. It is just troubling to me.
Dr. McCormick. I feel I need to respond. I do not believe
they are ahead of us. First of all, we did the EV-1 and drove
the electric propulsion. We were the people that really broke
the ground for a lot of this, and from that we learned a lot,
one of which is for these vehicles to sell you have to bring
them in at a very reasonable price. Also, we learned from the
electric vehicle that we needed something other than an
electric battery or we would not be able to sell them in
quantity.
We are developing the technology very aggressively and are
bringing out a variety of vehicles in the 2004 time frame. They
are focused particularly on the heavy duty vehicles, the
trucks, because those are the vehicles that consume the most
fuel and that is the place where we can get the most benefit in
terms of imported petroleum.
You correctly noted--and I would note that we have a deep
partnership with Toyota, so we understand propulsion with
them--that both of those two vehicle types are subsidized. So
it is a matter of how much do you want to lose in putting those
vehicles out there versus what you can learn. We actually
believe that our 2004 pickup truck is actually a sound
financial and business plan and will actually make money, and
that is the key to these things. If you want them to be
sustainable, you have to have the right product that consumers
will buy and actually make money.
So I think you will see these vehicles out there. We also
have our Paradigm system coming about at that time, which will
go across mid-sized vehicles. So I think we are right report
with them. These early vehicles are matters of how much money
are you willing to lose.
Mr. Dana. Senator, may I make one point also?
Senator Carper. Yes, please.
Mr. Dana. The Precept, which is one of, as Dr. McCormick
said, of the PNGV program, the manufacturers of PNGV focused on
diesel hybrids. Right now EPA has put out a final rule that
would clean up diesel fuel by 2006. That rule is in litigation,
and there are also emissions standards----
Senator Carper. What are you saying, that rule is in
litigation?
Mr. Dana. Yes, it is. EPA has also set emissions standards
for 2004 and later vehicles where the ability of a diesel
engine to meet those standards is somewhat questionable. It
really depends upon this clean fuel that is being put out
there. So in some ways I think it is fair to say that
manufacturers who are looking at diesel have some roadblocks in
the future years in terms of do you really want to commit to
large volume production until these things are cleared up and
what is going to happen in that future.
Senator Carper. Thank you.
Is my understanding about Honda putting the hybrid
propulsion system in Civics, is that correct? Are they going to
do that?
Mr. Dana. That has been announced in the press.
Senator Carper. Do you think they are doing it to lose
money?
Dr. McCormick. Well, at the end of the day let us see what
they price it at and how many of them they sell. Again, we did
not do the EV-1 to lose money either, but it is a tough
proposition. You have got to see what the consumer is willing
to pay.
Mr. Kolodziej. Senator.
Senator Carper. Yes, please.
Mr. Kolodziej. Honda is a very smart company and it makes
sense for them to do whatever they are doing. So if they are
putting it in the Civic it makes sense somehow economically for
them.
The other important point for you is to keep in mind that
the cleanest internal combustion vehicle ever commercially
produced is being made right now in Ohio. It is a Honda. It is
a Honda Civic GX natural gas vehicle. But every one of them are
made in Ohio.
Senator Carper. Marysville?
Mr. Kolodziej. I believe it is Marysville.
Senator Carper. Dr. McCormick, you talked about the truck
that they are going to introduce the hybrid in. That was model
year 2004. Any idea what the gas mileage would be without the
hybrid?
Dr. McCormick. I do not remember the exact numbers. That is
about, over the drive cycles that we look at, that is about a
15 percent improvement in the fuel economy of that vehicle.
Senator Carper. Roughly what would its fuel economy be
without the hybrid?
Dr. McCormick. I do not know that I remember that off the
top of my head.
Senator Carper. Well, let us just say it is 16 miles per
gallon. Let us say it is 20, let us say it is 20. 15 percent
would go from 20 to 23 miles per gallon, right. I know there is
a good explanation as to why that is better, to make that 3
miles per gallon jump in a vehicle. What would you sell, half a
million of them, 250,000?
Dr. McCormick. We are expecting the number to be somewhat
smaller because of the premium.
Senator Carper. Because of?
Dr. McCormick. We are expecting the number of vehicles to
be sold to be smaller than that because of the premium price
for it. We are going to find out.
Senator Carper. Just refresh me again on why are we better
off as a country to realize a 3 miles per gallon increase in
the efficiency of that pickup truck as opposed to a Precept
that would get twice the gas mileage?
Dr. McCormick. I do not think we are. I think we want to
get to twice the gas mileage, which is again why I am
advocating fuel cells.
Senator Carper. But in the near term. We realize and I
applaud what you are doing in fuel cells and I think it is
exciting, I am anxious to get there, anxious for us to adopt a
policy that is supportive. But in the meantime, we are stuck
with what we have. In the meantime, we have the potential for
some of the alternative vehicles and fuels that we have talked
about, and in the meantime we have this hybrid technology.
I am intrigued to see somebody out there, Honda, thinks
that they are onto something, and they are going to start
expanding, not just into that one vehicle, but into maybe
others. What I am having a hard time understanding--and I
certainly do not mean to be picking on you, but I am having a
hard time understanding why we are better off increasing the
efficiency and one vehicle go from 20 to 23--and I have had the
same conversation with my friends from Daimler Chrysler about
the Durango, which is built in my State.
Why are we better off going from 20 to 23 and why do we not
find some vehicles that we could come closer to the Precept as
well? Is it the fear that nobody will buy them?
Dr. McCormick. Well, two comments. First of all, I want to
make sure that you are clear that we are also bringing out a
mid-sized car using the Paradigm system in that time frame. So
it is not just the truck that we are looking at.
But when you look at where the fuel is actually used, it
turns out when you do the mathematics, actually sit down and do
the calculation, a similar improvement on a high fuel usage car
net gives you less fuel imported than a similar improvement on
a higher mileage car percentage-wise.
Senator Carper. I asked you earlier how many pickups you
thought you would make with the hybrid system in them and I
think you said probably fewer than 250,000 per year.
Dr. McCormick. We are not sure quite what that number is,
but we are being conservative going forward to make the
business case for it.
Senator Carper. Let us just assume for the moment that it
is 200,000. Let me see if I can do any math in my head still at
this advanced age. But if you have 200,000 vehicles that you
sell and you get an increase in mileage of 3 miles per gallon,
that would be what, 600,000. If you could sell, gosh, 20,000
vehicles that got an extra 30 miles per gallon, the savings
would be the same. Am I missing something there?
Dr. McCormick. Yes. You have to look at miles driven and
total miles used per year. So across a 10,000 mile annual drive
something that gets 20 miles per gallon uses a lot more fuel
and so consequently a small improvement in that really affects
the bottom line amount of fuel. Remember, the people drive the
same number of miles per year and so you get a disproportionate
gain in the total fuel used.
Senator Carper. Let me just carry out my example earlier.
The same situation, 200,000 pickup trucks, 3 miles, increased
miles per gallon. If we were able to--let us see. If you were
able to build and sell 40,000 vehicles, 40,000 vehicles like a
Precept, but even not nearly as good as a Precept, but if you
were able to sell 40,000 vehicles that were only driven half as
much, only half as much, but got an extra 30 miles per gallon,
you would be at a break-even.
Is part of what is not being said here that the reason why
it makes sense to put them on the SUV's and the trucks is
because that is where we make money when we build vehicles? We
do not make money, if you are Chrysler, they do not make money
selling Neons. They make money selling Jeeps.
I do not know if you folks make much money on your
Cavalier. You make money on your Tahoe. In terms of being able
to do this in a way that makes sense for your company, trying
to understand the logic and rationale for going with the trucks
and the SUV's is in order for the free enterprise system to
work and for you to make money doing this stuff you have got to
put it into vehicles, because there is extra cost, you vehicle
got to put them into vehicles that you can sell at a markup and
will cover your costs.
Is that part of it?
Mr. Kolodziej. Senator, this is not my area, but I just
cannot keep my mouth shut. The issue is fuel displacement. If
you have got a vehicle that is getting 30 miles per gallon and
mom and pop buys them, mom and pop is driving 12,000 miles a
year using, what, 400 gallons, 400 gallons. Now, you have got a
duty cycle on a pickup truck, you might be putting 60,000 miles
on that vehicle at 20 miles to the gallon. That vehicle is
using 3,000 gallons.
If you can increase the fuel efficiency on that vehicle 15
percent, you have got an increase of a lot. If you doubled it
from mom and pop--you are actually getting more fuel
displacement by going after the heavier duty vehicles. Even
though it looks like a smaller number, because of the duty
cycles you can get a bigger impact. A class A truck might go
120,000 miles a year at 6 miles or 4 miles a gallon. So if you
can get a small percentage increase improvement there, you can
have a big impact on the total fuel use.
As to the financial strategy, Byron, you want to answer
your financial strategy?
Dr. McCormick. Let me expand on that. Actually we have
introduced hybrid buses and it turns out that if you did
13,000, a very small number, 13,000 hybrid bus propulsion
systems in the United States, that would be equivalent to a
half a million Prius's in terms of fuel displaced. So I think
the calculation that Rich talked about is very key and what you
want to do is calculate how many gallons of fuel does a vehicle
use per year and then how much can I improve that, and you find
out that the average consumer driving an SUV, a bigger truck,
consumes so much fuel that a percentage improvement there is
very, very, very effective.
Senator Carper. What I want to do is sit down with pen and
paper and my calculator and run some numbers, not at a hearing
but afterwards. Tom Davis was by, who runs your truck
operation, last week and I spent some time with him. He talked
about the buses. It is very promising, very promising, and I am
encouraged by what you are doing there and hope that maybe in a
later round of questioning if we have that that I can pursue
that with you. Thank you.
The Chairman. If you had another question, why do you not
go ahead.
Senator Carper. Mr. Chairman, I have got enough questions
here to keep us here for 2 days.
The Chairman. Well, maybe you should visit with some of the
witnesses after the hearing, then, because we are about to
adjourn the hearing. I think everyone----
Senator Carper. Could I ask one more, then?
The Chairman. Sure.
Senator Carper. Thanks very much.
In Delaware we raise--we build more cars, trucks, vans,
automotive vehicles than any other State per capita. We also
raise more chickens per capita than any other State. We raise
more soybeans in Sussex County, Delaware, than any county in
America, and we are real interested in trying to find ways to
take the oil from soybeans and to turn it into a product that
can be mixed maybe with diesel fuel and come up with something
that is fuel efficient, good for the environment, and that
helps commodity prices for soybeans as well.
We are finding when we tested it in our DELDOT vehicles in
Delaware for the last year, year and a half or so, and we find
it does pretty well with respect to fuel efficiency. We find
that it actually smells pretty good. It smells like french
fries. But we find that on the emissions side the only area
that it lets us down is on NOX. The NOX
emissions are a little bit higher.
I do not know who was testifying earlier, maybe it was Mr.
Marshall, talking about ethanol and trying to encourage people
to buy ethanol. But as I listened to you I think I heard you
say that for folks to use ethanol to power their vehicles it
costs a little bit more, the fuel efficiency is not quite as
good, and it is harder to find, it is less convenient for the
consumers, which probably explains why we do not use as much of
it. If it costs more, it is less efficient, and it is harder to
find, that would discourage me from using it, and that is from
a guy where we raise a lot of corn and a lot of soybeans.
Mr. Marshall. Senator, part of the problem is we can build
an automobile that runs on almost any fuel, but the problem is
with the infrastructure, the availability of fuel. The
different fuels that are out there, none of them are quite as
easily available as gasoline, which we have used for many, many
years. That is part of the problem we have been talking about,
all of us, about the infrastructure development that is
necessary.
Senator Carper. Go ahead, Mr. Marshall. Go ahead and make a
comment, and then I will jump in.
Mr. Marshall. You hit on a number of points. The key point
is providing the incentives to utilize the product. Ethanol can
compete very well with compressed natural gas, propane, or
anything else provided the incentives are on a gasoline
equivalent basis and the energy is as well. The big problem has
been availability. Where we have been able to go in and
specifically target areas around the country--Chicago, Denver,
and some of the other places--and look at alternative fuels
there, we have been able to provide it through some of the
existing infrastructure and it is working very, very well. All
we need to do is expand the program.
Ethanol and E-85 is kind of in its infancy as compared to
some of the other alternative fuels, but certainly, provided
the opportunity, we have a lot of promise and a lot of
potential to move forward.
Senator Carper. Mr. Chairman, I think we have got all these
gas stations around the country and they are on our block.
Pretty much wherever we live, it is not too far to get to a gas
station and we can buy the gasoline that we need for our cars,
trucks, and vans. If we want to buy ethanol or soy diesel, if
you want to buy some kind of natural gas--I am actually a
Governor who used to have a vehicle that was powered by natural
gas, a combination of natural gas and gasoline, so I believe in
that stuff. But it was hard to find. I think we had three
stations in all of Delaware where you could get the stuff, so
it was not all that convenient.
But part of the--and we do not expect GM or Chrysler or
Ford or anybody to build vehicles that nobody is going to buy.
We do not expect them to build vehicles that they are going to
lose money on, at least for long.
But this infrastructure, they put their fingers on a big
one, and that is that this infrastructure, whether it is
hydrogen or gasoline or alternative fuels or ethanol, unless we
can somehow get our arms around that one and deal with it we
are not going to be successful in this area.
The other thing, if we were on a committee where we
actually got to write tax bills, tax legislation, and we could
put in place all these incentives, I think we could probably do
that pretty well. Unfortunately, that is not our job. But we
get to work with the folks who are in that business and
hopefully we will have some success in moving them along.
The last thing I would say is at the port of Wilmington we
bring in, export GM products, and we are grateful for that
business. We do a fair amount of business with Ford, some day
maybe with Chrysler. We also do a lot of business with
Volkswagen, and I visit with the folks up at Auburn Hills from
time to time at Volkswagen America.
They say: You know, back in Europe we do great things with
diesel. We get terrific fuel performance with diesel, 40, 50
miles per gallon, even better than that. They said they
question why in America we do not do more with diesel. I said,
well, it has something to do with the emissions. Someone talked
earlier about I think it is the 2006 time target date.
Just take a minute, somebody who is familiar with the
emissions problem that we have with diesel. Why are we unable
to make as effective use of diesel today in the twenty first
century as they are doing over in Europe?
Mr. Dana. That is something that we hope to be able to do,
Senator. What has happened is diesel has always been used in
Europe at a fairly substantial rate in the passenger automobile
fleet, so a lot of the technological development has been
driven in Europe. We now have very, very efficient diesels.
Most people in this country do not realize you can build a
diesel that is quiet, clean, no black smoke, and is very
comfortable to ride in because the diesel penetration in any
kind of light duty vehicle in this market is very, very small.
The problem I mentioned earlier, we see diesel as one of
the potential tools the industry has to improve fuel efficiency
of the vehicle fleet, but because of the conundrum of the
existing emissions standards for 2004 and later and the clean
fuel that is supposed to be coming in 2006, I think it is
difficult for a manufacturer to commit resources with an unsure
future.
If we can see a future out there that says this will be
viable for the long term, I think they will make the
commitment, the dollar commitment to make that technology
available. Clearly, there have been very big advances in diesel
technology and with the clean fuel we think they can meet most
of the emissions standards that are being proposed.
Senator Carper. The interesting thing, Mr. Chairman, about
the diesel alternative is that the infrastructure is there. In
most places where you buy gasoline, a lot of those places you
can buy diesel as well. If we could figure out how to hit our
emissions targets, that would certainly appear to have a fair
amount of promise.
I have gone too long. Thank you for your patience. To our
witnesses, especially Dr. Mccormick, thank you very, very much
for being here and sharing your thoughts. I appreciate the
chance to come back to you later on with follow-up. Thank you.
The Chairman. Well, thank you all very much. I think it has
been very useful testimony, and we will adjourn the hearing.
[Whereupon, at 11:58 a.m., the hearing was recessed, to be
reconvened on July 18, 2001.]
NATIONAL ENERGY ISSUES
----------
WEDNESDAY, JULY 18, 2001
U.S. Senate,
Committee on Energy and Natural Resources,
Washington, DC.
The committee met, pursuant to notice, at 9:30 a.m. in room
SD-366, Dirksen Senate Office Building, Hon. Jeff Bingaman,
chairman, presiding.
OPENING STATEMENT OF HON. JEFF BINGAMAN,
U.S. SENATOR FROM NEW MEXICO
The Chairman. We will now begin the legislative hearing we
have scheduled this morning on research and development
provisions of the various energy-related bills that have been
introduced and referred to this committee. These bills include
the Democratic and the Republican energy policy bills, numerous
other specific bills, most of which have bipartisan co-
sponsorship.
Energy research and development attracts broad bipartisan
support in Congress precisely because most members believe that
advancing our understanding of energy, science and technology
is crucial to being able to meet the energy challenges of today
and tomorrow. Our domestic energy, security, and our future
economic prosperity depend upon our ability to use research and
development to increase the efficiency of our energy use while
at the same time producing the energy that we need more cleanly
and economically. Given that reality, it was most unfortunate
that the administration earlier this year decided in the
context of their budget proposal to make substantial cuts in
energy research and development in areas such as renewables and
energy efficiency. While barely holding steady the funding on
basic energy science, Congress has since rejected these cuts by
broad bipartisan majorities, both in the interior
appropriations bill and in the energy and water development
appropriations bill that is now on the Senate floor.
The Department of Energy is one of the most important
science research agencies in the Federal Government. Its
overall civilian research and development budget in energy,
which is $4.8 billion in fiscal year 2001, is greater than that
of the National Science Foundation, which was $3.4 billion. The
Department of Energy operates unique scientific facilities that
scientists supported by other Federal agencies use to carry out
their research. For some scientific disciplines, the Department
of Energy is nearly the sole source of Federal support. As we
move forward in drafting energy legislation, it is crucial, in
my view, that we increase both the size and effectiveness of
the Department of Energy's research and development budget. We
need to focus both on increasing support as well as increasing
the effectiveness of that program.
Both Senator Murkowski and I have introduced bills that
exceed the administration's budget in energy research and
development. I hope that in the days and weeks ahead, both the
administration and the Congress will embrace a vision of the
importance of energy research and development that is
consistent with its scientific promise and the need for new
energy technologies and the views of the American people.
Before I start with our witnesses, let me call on Senator
Murkowski for any comments he has.
[A prepared statement from Senator Domenici follows:]
Prepared Statement of Hon. Pete V. Domenici, U.S. Senator
From New Mexico
Mr. Chairman, thank you for holding this hearing today on energy-
related research and development issues. I appreciate that your goal is
to develop comprehensive legislation later this month. As we do this,
the guidance in the President's National Energy Policy should be
carefully followed.
It's certainly important that the Senate act quickly on the
National Energy Policy in order to move ahead with its important
recommendations. There should be no question that the nation is
experiencing an energy crisis, and we need prompt action to improve the
current situation. The actions outlined in the Policy will dramatically
improve our long-term energy outlook.
There is no single ``silver bullet'' that will address our nation's
thirst for clean, reliable, reasonably priced, energy sources. That's
why the National Energy Policy carefully reinforced the importance of
many energy options. Energy is far too important to our economic and
military security to rely on any small subset of the available options.
As your hearing is being held, we're debating the Energy and Water
Development Appropriations bill for Fiscal Year 2002. That bill
determines the funding levels for many of the programs being discussed
here today. I'm very proud that this bill makes immense progress in
funding a diverse set of energy sources and significantly advances the
agenda of the National Energy Policy. For example, that bill funds
renewable programs at $435 million, even more than proposed in Senator
Bingaman's energy bill.
Despite the breadth of the Energy and Water bill, I'm going to
focus my comments today on nuclear energy, which now provides about 22
percent of our electricity from 103 nuclear reactors. The operating
costs of nuclear energy are among the lowest of any source. That's why
I, and 18 of my colleagues, have joined together to back Senate bill S.
472, devoted to insuring that nuclear energy remains a strong
contributor in our national energy mix.
Nuclear energy is essentially emission free. We avoided the
emission of 167 million tons of carbon last year or more than 2 billion
tons since the 1970's. In 1999, nuclear power plants provided about
half of the total carbon reductions achieved by U.S. industry under the
federal voluntary reporting program. The inescapable fact is that
nuclear energy is making an immense contribution to the environmental
health of our nation.
We can learn much from the French performance. France generates 76%
of its electricity from nuclear. That helps them achieve spectacular
results for minimal emissions of carbon dioxide. Their emissions per
dollar of GDP are almost 3 times lower than ours. I look forward to the
testimony of Mr. Jacques Bouchard from the French CEA to learn first-
hand about their experiences.
Unfortunately, when it comes to nuclear energy, we're living on our
past global leadership. Most of the technologies that drive the world's
nuclear energy systems originated here. Much of our early leadership
derived from our requirements for a nuclear navy; that work enabled
many of the civilian aspects of nuclear power. Federal actions are
required now to insure that nuclear energy continues its vital
contributions.
S. 472 has many features, and only some of them are included in
today's hearing. One provision would designate an Assistant Secretary
to lead the Department's nuclear energy and science programs. To me,
it's not appropriate to have Assistant Secretaries leading all the
other major energy categories except nuclear.
Several of the provisions in S. 472 authorize important nuclear
energy programs--programs which have been included within past Energy
and Water Development bills. The Senate is now in final debate on the
Fiscal Year 2002 version of this bill which would significantly
increase funding for the Nuclear Energy Research Initiative, the
Nuclear Energy Plant Optimization, and the Nuclear Energy Technology
Program, and almost double funding for university programs.
The bill includes key provisions to improve the ability of our
uranium mining industry to compete in the future through research on
improved technologies that will have less environmental impact.
The hearing today also covers research toward new Generation IV
plants. Technology to build these plants is close at hand. This bill
not only supports research and development on these plants, it also
helps develop the regulatory framework within the NRC that must be in
place before they can be licensed.
Generation IV plants would:
be cost competitive with natural gas;
have significantly improved safety features with the goal of
passive safety systems that would be immune to human errors;
have reduced generation of spent fuel and nuclear waste; and
have improved resistance to any possible proliferation.
Many of the Generation IV concepts would involve small modular
plants. With such plants, we should be able to dramatically cut the
time required for bringing a plant on line, and do it for far less
capital investment than the current very large plants. Small Generation
IV plants may be useful in developing countries, where they could help
these nations increase their standard of living without compromising
clean air.
In addition, we're considering Titles IV and V of S. 472 today.
These Titles are devoted to exploring improved strategies for
management of spent fuel. They establish an Office to manage research
on these key questions. These studies would involve work on
reprocessing and transmutation. I'm particularly looking forward to the
views of our distinguished witnesses on these subjects today.
Let me emphasize, Mr. Chairman, that I used the phrase ``spent
fuel'' rather than ``waste'' to refer to the materials coming out of
our reactors. Right now our national policy calls for disposing of
those materials as waste in a future repository. But we need to
remember that these materials still contain 95 percent of their initial
energy content.
I've been concerned for years that it highly debatable for us to
decide that future generations will have no need for this rich energy
source. With improved management strategies, possibly involving
reprocessing and transmutation, we can recycle that material for
possible later use, recover far more of the energy, and dramatically
reduce the toxicity and volume of the materials that are finally
declared to be waste.
My speech at Harvard in 1997, which helped start the rebirth of
interest in nuclear energy, was the first time I publicly questioned
President Carter's decision to ban reprocessing. I believe that was a
serious step backward for our country. I'd like to repeat some of the
words from that speech:
In 1977, President Carter halted all U.S. efforts to
reprocess spent nuclear fuel and develop mixed-oxide fuel
(MOX) for our civilian reactors on the grounds that
the plutonium could be diverted and eventually transformed into
bombs. He argued that the United States should halt its
reprocessing program as an example to other countries in the
hope that they would follow suit.
The premise of the decision was wrong. Other countries do not
follow the example of the United States if we make a decision
that other countries view as economically or technically
unsound. France, Great Britain, Japan, and Russia all now have
MOX fuel programs.
This failure to address an incorrect premise has harmed our
efforts to deal with spent nuclear fuel and the disposition of
excess weapons material, as well as our ability to influence
international reactor issues.
In closing, Mr. Chairman, my S. 472 was designed to enable nuclear
energy to be a viable option for our nation's electricity needs. It
would help ensure that future generations continue to enjoy clean,
safe, reasonably priced, reliable electricity from nuclear energy.
STATEMENT OF HON. FRANK H. MURKOWSKI, U.S. SENATOR
FROM ALASKA
Senator Murkowski. Thank you very much, Senator Bingaman. I
want to thank you for holding the hearing today. We both have
been long time supporters of energy research and development,
whether it be fossil or nuclear, renewable or energy
efficiency, and through the development of advanced energy
technologies, I think we both agree we can avoid the false
choices between energy and the environment. We want to make our
decisions on sound science. I've said that time and time again,
but I think it is most appropriate to reflect on this. So
often, you know, we are expected to have the knowledge and
background to make a decision. We have to make decisions. We
vote yes or no. We can't vote maybe, so we have to depend on
people who are willing to put their reputations as experts
behind their recommendations. Otherwise, you're going to get
what you would expect from pretty much a public forum. You can
get expressions and motions but not sound science. In any
event, what we are looking for today, through the development
of advanced energy technologies, is to try and avoid those
false choices. A choice that radical environmentalists from
time to time seem very eager to force upon the American
people--again without the science.
Nowhere is the value of advanced energy technology more on
display certainly in exploration than my State of Alaska, where
one only needs to contemplate the rigors of 70, 80, 100, 120
below zero working conditions in areas of permafrost where we
have been able to maintain footprints that are extraordinarily
compact. Ice roads, 3D seismic, all new technologies that
reduce the disturbance on the tundra. Directional drilling, it
has been indicated by the engineers that they could drill in
this room and come out at Gate 8 at Reagan Airport. They have
that degree of accuracy. R&D funded by the Department of Energy
and industry has made it all possible and this will yield more
benefits in the future. Energy R&D will give us the
technologies of tomorrow that will provide a clean, safe and
affordable energy supply. Cleaner fossil fuels, safe next-
generation nuclear power, affordable renewable energy
technology, energy efficient technologies that will allow us to
do more with less.
We have to keep in mind that we just can't throw money at
it. Money alone is not the answer. We must ensure that our R&D
programs are oriented in the right direction with concrete
goals and objectives and checks and balances. We can all
justify more expenditure, but we have got to have measurements
and successes. We must fund a portfolio of priority options
just as you would invest in a portfolio of stocks to hedge your
bets. And, most importantly, we must be ready to take on some
risks--some high risks, high reward for breakthrough
technologies. That is how they come about. An R&D program
without some failure is not pushing the envelope hard enough,
in my opinion. I know the National Academy of Science will have
much to say about their recent review of Department of Energy
energy R&D programs and I look forward to their suggestions as
to what changes they would suggest to help energy R&D along.
One of the frustrating problems that's been before this
committee for as long as I have been a member, and that's over
20 years, is what to do with our high level waste-spent nuclear
fuel. Our spent waste, I should say. Reprocessing is one
alternative, and I gather that we're going to have a third
panel today of witnesses that will address the issue of
reprocessing of spent nuclear fuel. I'm going to have to go
down to the floor a little after 10 o'clock on energy and water
but I hope to get back to participate in the third panel.
Clearly, one of the issues with nuclear power is the
storage of the high level radioactive waste. According to some
in this Senate, Yucca Mountain is dead. That is pretty hard to
take if you are a taxpayer and consider that we've spent over
$8 billion so far on Yucca Mountain. I don't think it's dead.
Even with Yucca, it makes sense to make as little waste as
possible, and that is the advantage of the advanced technology.
Reprocessing does offer a way to use more of the energy
stored in the fuel to reduce the waste volume. Of course, there
are risks involved, nuclear materials and proliferation, but
there are large benefits to be gained if we can develop new
technologies to reduce and reuse nuclear spent fuel.
And finally, we must recognize that R&D funding alone is
not a sufficient substitute for a comprehensive national energy
policy when you look at what other countries are doing, France
particularly and Japan in this area of high level nuclear waste
reprocessing. In any event, while R&D can help us develop the
technologies of tomorrow, it cannot solve the problems of today
with the current energy crisis. We still need an increase in
supply of conventional fuels, expanded energy efficiency, more
renewables. And we need to invest heavily in the
infrastructures needed to move the energy from the wellhead or
powerplants to the consumers in both pipelines and electric
transmission lines. Energy R&D does have a central role to play
and I look forward to hearing from our witnesses on how we can
better invest in our energy future. Thank you, Mr. Chairman.
The Chairman. Senator Burns.
STATEMENT OF HON. CONRAD BURNS, U.S. SENATOR
FROM MONTANA
Senator Burns. Thank you for holding this hearing. You
know, today's attendance to this hearing is pretty indicative
on how sexy an issue this is. If we were talking about the
sucker fish, I'll guarantee you couldn't get another person in
this place with a shoehorn. But R&D is important for our work
over on the Commerce Committee when we worked with the NSF,
being involved in EPSCOR, and the R&D that is going on in
communications in our universities and even in our energy. No
other committee and no other department has more to do with
climate change in our high energy physics, our
superconductivity, high performance computing. This is where it
happens in this country in the high tech field. Now, we can
talk about what's happening in the technology of
communications, but as far as our every day life, this is where
it's at. And yet, you know, we won't get now what is there over
at the press table, a half a dozen over there that will write
about this hearing today. And yet it's probably one of the most
important hearings that we will hold in this committee, Mr.
Chairman, and I appreciate your interest in this. I appreciate
your holding this hearing.
We have seen great things happening in wireless
communications. I will tell you fuel cells is to the energy
industry what wireless was to communications. And we have to
look at these kind of different things to complete our work.
Thank you, Mr. Chairman. If I can put my statement in, I would
sure appreciate that.
The Chairman. Senator Carper, would you like to make any
statement?
STATEMENT OF HON. THOMAS R. CARPER, U.S. SENATOR
FROM DELAWARE
Senator Carper. I feel inspired by the comments of Senator
Burns and Senator Murkowski. I would make a very brief comment.
I received a memo, I think yesterday, from Robert Simon, our
staff director on the Democratic side and Bryan Hannegan, staff
scientist, and this goes back to a point that Senator Murkowski
was making about not being able to throw money at problems,
even though on the R&D side, and I was just reading this last
night. It says studies of the areas supported by Department of
Energy R&D funding suggest significant payoffs from the
research funded according to Department of Energy and validated
by a GAO study. Efficiency R&D programs have returned over $100
billion to the U.S. economy for Federal investment of less than
$13 billion since 1978. It goes on to mention a new report from
the National Academy of Sciences. It reviews the Department of
Energy's funding of DOE and fossil and energy efficiency areas
and it looked at, I think, 17 R&D programs on energy efficiency
that go back to 1978 and concluded that the Department of
Energy's investment of $1.6 billion resulted in a return of
about $30 billion. So, we're not just throwing money at these
problems and issues but actually making some sound
accomplishments. I would just want to put that on the record.
The Chairman. Thank you very much. Why don't we go ahead
then with Francis Blake who is Deputy Secretary of Energy.
Thank you for being back here with us.
STATEMENT OF FRANCIS BLAKE, DEPUTY SECRETARY, DEPARTMENT OF
ENERGY
Mr. Blake. Mr. Chairman and members of the committee. Thank
you very much for inviting me this morning and also, thank you
for moving on the nomination of Dan Brouillette. We are very
much looking forward to getting him on board the team. As you
know, all major energy legislation has been bipartisan in
nature and we look forward to working with this committee under
your leadership and moving forward on a number of the
legislative proposals you are now considering. For today's
topic on research and development, as you all have mentioned,
there is an important role for the Government and for the
Department of Energy to play on research and development.
There are public benefits that exist that the private
sector simply cannot capture and there is an important role for
the Department in those areas. And in fact we are looking at
technology to address some of the key challenges that we face.
However, we can continue to improve our standard of living and
also address the environmental and other concerns that we have.
I would like to just submit my written testimony for the
record and then briefly summarize the areas where I think we
have agreement and then open my comments up for questions. I
think the areas that are addressed in your legislation actually
mirror fairly well the areas that the Department is spending
research and development monies. You target renewables,
hydropower, solar, wind, and we have activity in all of those
areas. You have some legislation with recommendations on
nuclear energy, particularly in the area of reprocessing. That
is part of the President's national energy plan and we are
supportive of that although we would note that even as we make
progress there, that does not undermine the need for a deep
geological repository for nuclear waste.
We also support focused carbon-based fuels research and
development. It is particularly important in the environmental
area and in improving efficiencies for our installed base and
then more basic research on technologies as Senator Murkowski
was referencing in the areas of hydrogen, fusion and other
varied significant new potential areas. We are at an
interesting point as well because as was mentioned, the
National Academy has come out with its study that has looked at
some of the results from prior Department of Energy R&D
efforts, and I think has concluded that the public has received
a good payback from that investment. They also have made some
suggestions. I haven't read the report but I have seen the
executive summary. They have made some suggestions that are
very much in line with the administration's own thinking on how
we need to be approaching our research and development efforts.
We need to have good performance measures and metrics so that
the money we spend is wisely spent. And we understand what we
are expecting and what the appropriate off-ramps are for our
investments.
We need to have a good understanding of the private public
relationship, what the private sector will do better than the
public sector, and how we can effectively join forces. And I
think, as the NAS has emphasized, we do need a portfolio
approach where we look at a number of different technologies
that address different areas, a number of different stages of
development, some basic research, some research and
development, some demonstration, and also, different benefits
that the research and development can address. Some
environmental; some economic and some national security
benefits. So, I think we are in large agreement with many of
the recommendations that the NAS report is coming out with.
We look forward to working with this committee and just to
echo Senator Burns' comment, if you look at the contribution
that research and development has made in a number of areas, we
view this as one of the critical functions of the department
and very much appreciate your leadership and guidance in these
areas. Thank you.
[The prepared statement of Mr. Blake follows:]
Prepared Statement of Francis Blake, Deputy Secretary,
Department of Energy
Mr. Chairman and Members of the Committee, I welcome the
opportunity to testify before you today on various legislative
proposals pending before the Committee. These proposals include Senate
bills, S. 388, S. 597, S. 90, S. 193, S. 242, S. 259, S. 472, S. 636,
S. 1130 and S. 1166, the provisions of which address various aspects of
the Department's scientific research and technology development
programs.
First, I would like to thank the Chairman and Members of the
Committee for your leadership and commitment in addressing the Nation's
energy issues. I applaud the Committee's efforts to craft comprehensive
long-term energy legislation. This Committee has a long and proud
tradition of developing bipartisan energy legislation, and the
Administration recognizes that all major energy bills have been
bipartisan in nature. I look forward to working with the Committee to
find areas of common ground and interest between the Congress and
President Bush's policy proposals, as outlined in the National Energy
Policy.
Turning to the matter at hand, the general focus of today's hearing
is research and development (R&D). The Administration welcomes the
Committee's interest in and support of the Department's scientific and
research programs. America's energy challenge begins with our expanding
economy, growing population and rising standard of living. Our
prosperity and way of life are sustained by energy use. To meet our
energy challenges of the future--promoting energy conservation,
repairing and modernizing our energy infrastructure, and increasing our
energy supplies in ways that protect and improve our environment--will
require sound science, innovative R&D, and collaborative partnerships
among all of our research organizations, public and private.
The Department's R&D programs are an important part of this effort
to address and meet many of the challenges facing our Nation's future.
They have a long and proven track record of past scientific and
technical contributions in this regard. On one timely note in this
vein, just yesterday, the National Academy of Sciences released its
study of the Department's twenty-year R&D programs in the technology
areas of energy efficiency and fossil energy. The Academy reported that
the benefits to the Nation of these R&D efforts are large and
increasing over time.
The Administration strongly supports research into advanced
technologies and their underlying foundation of basic research. As the
Academy's study suggests, Federal leadership in partnership with others
can have a strong and beneficial influence on the advancement of
technical solutions to many of Nation's greatest challenges.
As part of my responsibilities as Deputy Secretary, it is my
intention to ensure that the Department's scientific and research
portfolio is both well focused on our nation's needs and efficiently
managed. One of the Administration's management priorities is for the
Department to establish performance metrics for R&D expenditures so
that we can look across our portfolio of activities and distinguish
programs that are well-targeted and successful from those that are
performing poorly or could be better undertaken by others. I look
forward to working with this Committee on that effort.
SENATE BILLS
Mr. Chairman, the Senate bills and the particular titles and
sections of these bills that are of interest to the Committee today
cover a diverse mix of scientific interests, programs, enhancements to
these programs, and related administrative actions. There are parts of
ten bills, including eight mentioned in your letter of invitation and
two bills added since then, of interest here today.
I want to assure the Committee that the Administration is
interested in each provision of these bills. I can provide today some
general comments on the salient aspects of some of these bills, but in
other cases the Administration has not yet developed a full or formal
position. We look forward to working with you on this in the weeks and
months ahead.
With regard to S. 90 and S. 193, the Department has not yet taken
any formal position. S. 90 would require the Secretary of Energy to
support an R&D program in nanoscience and nanoengineering, and to
establish similarly focused research centers, at authorizations
totaling $1.36 billion over 5 years. S. 193 would require the Secretary
to support a research program in advanced scientific computing, at
authorizations totaling $1.15 billion over 4 years. Both bills are
supportive of our ongoing programs in these areas, but the
authorization levels are inconsistent with the Administration's budget
requests and recent appropriations levels set by Congress.
S. 242 and S. 472 represent the first major nuclear energy
legislation since the passage of the Energy Policy Act of 1992. At the
outset, I would like to express the Administration's general support
for legislation that sets a direction to implement the nuclear
components of the Administration's National Energy Policy. S. 242 would
require the Secretary to support a program to maintain the Nation's
human resource investment and infrastructure in the nuclear sciences
and engineering, including a program supportive of student fellowships
and university research and training reactors, and authorizes funding
totaling $240 million over 5 years.
S. 472, entitled the Nuclear Energy Electricity Supply Assurance
Act of 2001, would promote expanded use of nuclear energy as a major
component of our Nation's energy strategy. The particular sections and
titles of S. 472 that are of interest to the Committee at this hearing
pertain only to the related research programs (sections 111, 121, 122,
123, 125, 127, 204 and 205), the development of a spent nuclear fuel
strategy (title IV), and the application of advanced proton
accelerators for the production of various isotopes and the
transmutation of spent nuclear fuel and waste (title V). Authorizations
for FY 2002 total $184.2 million for the research programs; $10 million
for title IV; and $120 million for title V.
Similarly, sections 107 and subtitle B of S. 388 require the
development of a national spent nuclear fuel strategy (section 107),
and authorize for FY 2002 a total of $95 million for the nuclear energy
research initiative, nuclear energy plant optimization, and nuclear
energy technology development programs. These nuclear energy bills are
supportive of ongoing R&D programs at the Department, but the
authorization levels are inconsistent with the Administration's budget
request and recent appropriations levels set by Congress.
In addition, S. 388 requires the Secretary to conduct a five-year
program of research for natural gas technologies, including
transportation and distribution infrastructure, and distributed energy
resources and related natural gas-using equipment (section 115), and to
establish an energy efficiency science initiative (title VI, section
607), the latter authorized for $25 million in FY 2002--which is an
amount inconsistent with the Administration's budget request.
The pertinent sections of S. 597, the Comprehensive and Balanced
Energy Policy Act of 2001, concern R&D programs in coal (title VIII);
pipeline safety (for the Secretary of Transportation, in coordination
with the Secretary of Energy, title XI); and a series of enhancements
to R&D programs in energy efficiency, renewable energy, fossil energy,
and nuclear energy, and to the fundamental research programs in energy
sciences (Division E). These provisions, likewise, are generally
supportive of our R&D programs in these areas. However, in light of the
review of R&D investment criteria mentioned above, the Administration
would prefer that the Committee not add new restrictions to funding
allocations that might inhibit optimum allocation of research funds
among basic materials, and development and demonstration in applied
programs. The Department looks forward to working with the Committee on
these matters.
S. 1130, the Fusion Energy Science Act of 2001, requires the
Secretary to develop a plan, to be reviewed by the National Academy of
Sciences, for a magnetic fusion burning plasma experiment and
authorizes a total of $655 million over two years for the fusion energy
sciences program energy. These authorizations exceed current
Administration budget requests and recent appropriations levels set by
Congress. We will be assessing the appropriate funding level for the
Fusion Energy Sciences program.
S. 1166, the Next Generation Lighting Initiative Act of 2001,
requires the Secretary to establish such an initiative, in conjunction
with the establishment of a related research consortium and grant
program, with annual reviews by the National Academy of Sciences. A
total of $230 million is authorized over the first five years. This
initiative is supportive of ongoing research at the Department, but
adds funding and requires programmatic structure not currently
envisioned by the Department.
arkansas nuclear plant decontamination and decommissioning (s. 636)
The Administration opposes S. 636, which directs the Secretary to
establish a decommissioning pilot program to decontaminate and
decommission the sodium-cooled fast breeder experimental test-site
reactor located in northwest Arkansas. The Administration's position is
that the Federal Government is not, and should not be, responsible for
the decommissioning of this privately-owned reactor. The Department has
investigated this situation in the past, in response to Congressional
direction in 1997 and again in 1998. As we reported to Congress on
these occasions, the legislative and contractual records are clear that
the owner of the reactor is responsible for decommissioning. In
addition, there are matters of precedent to weigh. There were 10 other
similar privately-owned research reactor projects which were operated
in coordination with the Atomic Energy Commission. All of these other
privately-owned reactors have been or will be decommissioned by the
owners.
NATIONAL LABORATORIES PARTNERSHIP IMPROVEMENT ACT (S. 259)
Finally, S. 259, the National Laboratories Partnership Improvement
Act of 2001, would amend the Department of Energy Organization Act,
among other provisions, in order to expand the Department's authorities
and activities in the area of technology partnerships. Generally
speaking, the Department already has the necessary and sufficient
authority under current law. The bill's administrative provisions would
unduly restrict the Secretary's discretion to organize the Department
and conduct its activities in ways that are effective, complicate
laboratory management of existing partnering programs, and add to
growing concerns about unfunded mandates.
We note that section 8 of S. 259 would provide DOE with authorities
like those already available to the Department of Defense and other
agencies with similar missions in science and technology, including the
National Aeronautics and Space Administration. We support efforts to
encourage innovative partnering arrangements and provide additional
flexibility in dealing with entities such as R&D consortia. At the same
time, we recognize that ``other transactions'' authority is a highly
flexible authority outside the procurement framework that must be
carefully and thoughtfully applied. While we will need to further
consider the merits of applying other transactions authority to DOE, we
think it is worthwhile to reevaluate current laws as may be necessary
to ensure appropriate flexibility is afforded.
CONCLUSION
In closing, the Administration welcomes the Committee's efforts to
address our Nation's energy challenges and its strong support of the
Department's energy science, research and technology development
programs. The legislation under consideration by the Committee is
ambitious and many of its provisions would have consequences that must
be weighed carefully before enactment. In this regard, I request that
the Department be given the opportunity to continue to work with the
Committee towards a satisfactory resolution of differences.
This concludes my testimony. I would be pleased to answer your
questions.
The Chairman. Thank you very much. Let me ask a very
general question. In the 18 or 19 years that I've been here,
I've noticed sort of a cyclical phenomenon going on where
interest in energy issues, energy policy concerns obviously
increase dramatically as the price of gas goes up and the price
of electricity goes up and the price of natural gas goes up.
And then when the price comes back down, the interest goes
away. And that's a human kind of a reaction which I guess all
of us sort of have come to expect. I have noticed,
unfortunately though, that there is something similar that
happens in the budgeting for energy related research and
development, that the interest in maintaining our efforts in
those areas at the Federal level comes into vogue and is
obvious and then goes away again as soon as the problem recedes
in the public consciousness. And I just wonder the extent to
which, and I know we've had a rough spot here at the beginning
of this administration before you ever came to work, where we
got the request for major cuts in funding for some of the
activities, research and developments activities, that many of
us thought were important. We are correcting that in the
appropriations bills and I think the administration and the
President has made some statements to the effect that he
believes higher levels of funding are appropriate. I'm just
hoping we can see a sustained level of commitment to the higher
levels of funding for research throughout the balance of the
administration. Do you have any way to give us assurance on
that at this stage?
Mr. Blake. First, just on some of the energy efficiency and
renewable budgetary issues, we are, as you know, undertaking a
thorough review of those budgetary submissions. We do think
that the increases in the House and in the Senate look like
they are going to be in line with what we see as the outcome of
that review. I think more generally your point is right. We
have to, when we look at our R&D budget, we have to articulate
what our objectives are in a way that everybody can understand
and that aren't so susceptible to the fluctuations year over
year to the price of gasoline and oil. We should be able to
say, here's why we're doing it; it's a long payoff; and stick
with it.
The Chairman. I've been concerned. I got a briefing 2, 3
weeks ago during our Fourth of July break from people at Sandia
National Laboratory and about the state of the effort that was
going on and the state of the technology in various of the
emerging sources of energy, in wind energy, for example, and
solar energy, and various of these areas, and, frankly, it's a
bit disturbing to see how we have lost the lead internationally
in use and development and perfecting these technologies and in
putting them into application.
My strong sense is that 10 years ago the United States did
have the lead in these areas. Today, we do not, at least in
some of these areas, and I hope that we can regain that lead
and begin to put some real emphasis on energy related research
and development that will help us do that. I don't know if that
is something you have a change to focus on as to what has
happened in some of these areas. Some of the specific examples,
when you say, how about wind turbines, they say, well you have
to buy those in Europe. They are the ones that make the wind
turbines.
Mr. Blake. I will say, in terms of my prior employment
before the Department of Energy I had the opportunity to look
at a number of wind companies. Your observation is correct that
there are far more substantial wind companies in Europe than in
the United States. I would say, though, that when you look at
what are going to be the leading edge technologies for wind
power going forward, turbine design, efficient motors,
efficient gear structures, I believe the United States will in
fact have a leading position on those cutting-edge
technologies.
The Chairman. Let me ask you, in your testimony you refer
to--this is a quote from your testimony--performance metrics
for R&D expenditures is one of the administration's management
priorities. What do you have in mind as far as performance
metrics? I have always thought of research and development as
something that it was a little hard to measure performance
until you actually--I mean, it is one of these things that, if
you do too good a job of insisting on performance, you stifle a
lot of what might prove to be very promising.
Mr. Blake. I think that's a fair point. You have to look at
your metrics, understanding that a lot of what you are doing is
at the developmental stage by definition. I think the Academy
report had an interesting suggestion in terms of how they
developed a matrix. They looked at a matrix. Are you improving
knowledge? Are you getting to commercialization and lower
economic costs? Are you getting environmental benefits? You
should at least be able to articulate what you think are the
potential benefits from the program and then track how you are
moving to those benefits. I think looking both to your current
performance and at what point do you say, well, this isn't
getting what we thought we were going to get and it is time to
move on to a different program or change funding priorities.
The Chairman. And you see the Department of Energy sort of
performing this quantification, or this application of metrics
each year when it puts together a budget? Is that what I am
understanding?
Mr. Blake. Ideally, what we should have is performance
operational reviews where we understand and have agreement on
what the appropriate metrics are, have those reflected in our
budgetary priorities, and be able to engage in pretty
straightforward conversation with the Congress and interested
third parties, on how we see our priorities.
The Chairman. Let me stop with that and defer to Senator
Murkowski.
Senator Murkowski. Thank you very much, Mr. Chairman. With
reprocessing in the sense of the state of the art as we know it
today, with what the French are doing and have done for some
time with the Japanese and some other nations, what is your
opinion on whether we will still need Yucca Mountain as
predetermined by the Congress and as you and I both know, we
have got about $8 billion of taxpayers money in that.
There was a contract signed by the Federal Government with
the nuclear industry back some time ago and the due date to
take that waste was 1989. The Federal Government did not honor
that contract. I do not know what the sanctity of the contract
means to the Federal Government but in this case, clearly not
much. It is my understanding that the ratepayers have paid in
some $18 billion to the general fund, which was to enable the
Federal Government to dispose of the waste. It is my
understanding that there is somewhere in the area of $60 to $80
billion in litigation potential to the Federal Government for
non-performance of that contract. It seems to me that the
taxpayer is looking at a pretty good hit, somewhere in the area
of $100 billion--something of that nature. So, what about Yucca
Mountain?
Mr. Blake. Senator, we will still need Yucca Mountain or a
deep geological repository even with reprocessing. By the
nature of any recycling effort, you still have residues. The
repository will still be needed.
The Chairman. Would you use the word retrievable in
describing the future use of Yucca Mountain?
Mr. Blake. I am not sure I understand.
The Chairman. Well, Yucca Mountain was to be a permanent
repository. My question to you is, as science and technology
changes, should it be structured to be retrievable--the waste
retrievable--as opposed to not?
Mr. Blake. Senator, let me provide an answer for the record
on that. I don't know what the implications of that would be.
Senator Murkowski. While it is not a new subject, it has
been discussed.
Mr. Blake. It is just not one I am personally aware of.
Senator Murkowski. Well, I think it is probably appropriate
that we dust it off again and see if there is any change in the
position of our scientist on it because from time to time we
have heard the argument, well, at some time this is going to be
of value and it will be of value from the standpoint of
reprocessing. And then you get into the discussion on whether
the price of uranium is relatively inexpensive and then you
question the need for it. But nevertheless, we have made a
determination that this is a permanent repository and would
suggest you put it away and keep it there forever and then
others say, no, it should be convertible or retrievable if
indeed that need arises.
Mr. Blake. Senator, I've just been advised that yes we do
believe it would be retrievable.
Senator Murkowski. Okay. Well, I think it would be
appropriate probably to review that and if you want to make it
a policy statement, then I think that would be appropriate that
we recognize that. Secondly, how will decisions on reprocessing
and long term storage facilities like Yucca Mountain affect the
future of the nuclear industry?
Mr. Blake. I think it is very important for the future of
the nuclear industry. Solving the waste issue, I think, is
going to be key to the future development of the industry and
without that, I think the industry obviously faces some severe
and difficult issues.
Senator Murkowski. Well, of course the difficult issue here
is getting Congress to move. The last count we had, we had 66
members basically supporting the proposal to put temporary
waste at Yucca Mountain until we could get the licensing and
the programs. I've got a chart in front of me that was made by
a couple of Philadelphia lawyers that clearly shows the process
that you have to go through and we are somewhere over in the
middle here. In the year 2001 we are funded for a science and
engineering report and supplemental drafts and NAS reports and
so forth. But with the cut of funding proposed in the Energy
and Water Appropriations Committee, this program is going to be
set back for an extended period of time. It is very difficult
to say how long. Can you comment on this?
Mr. Blake. I've been briefed on that timeline and we need
the funding to proceed. I cannot tell you exactly what would
happen on the timeline for each dollar of loss but this
activity is a difficult scientific study that needs to be
undertaken now, to proceed with our obligations as you laid
out.
Senator Murkowski. It is my understanding this reduction
would lay off 650 Federal contract personnel. It would
indefinitely delay license application. It renders the 2010
spent fuel receipt date unachievable. It would provide a loss
of 75 percent of Federal staff performing oversight, a loss of
quality assurance, a loss of ability to conduct independent
technical reviews, termination of the early warning drilling
program, elimination of university involvement and loss of
modeling, loss of licensing application. This list goes on and
on. And when you consider the investment we have here and the
realization that, while I certainly appreciate the position of
our friends from Nevada, which is that they don't want it, but
it has to go somewhere and the taxpayer has a hundred--what is
it, 80 to 90? Well, it just goes on. A billion dollars here, a
hundred billion dollars in this thing and we cannot move it out
of the constriction of the Congress, which is a sad state of
affairs and by cutting it to the extent that it's cut, we're
simply setting it back and saying, well, it's not going to
happen on the watch of a few Senators from the State of Nevada.
I don't know whether I could make it any more plain, and both
of them are my good friends, and I don't have a constituency on
this but I think we have an obligation in this committee to
recognize that nobody wants the waste. We've created it. Twenty
percent of our energy is dependent on it.
My last question, and I would just leave you with that
degree of frustration because, Senator Bingaman, this is
something I inherited and now you've inherited. I wish you a
little better luck than I had but we have simply got to address
it. Given the broad authority of DOE, under the DOE
Organization Act, are specific authorizations necessary for
each and every R&D program?
Mr. Blake. I would not think so. No, I think we can adjust
within our R&D program.
Senator Murkowski. Thank you.
The Chairman. Senator Carper.
Senator Carper. Thank you, Mr. Chairman and Mr. Blake,
welcome. We appreciate your being here and appreciate your
testimony. I want to follow up just a little bit on a somewhat
different direction. The questioning was being pursued by
Senator Murkowski. And if you don't know a whole lot of detail,
that's fine. But with respect to nuclear energy, I'm an old
Navy guy and in the Navy, we have ships that are powered by
nuclear powerplants. We have submarines that are powered by
nuclear powerplants and I told my colleagues at a Senate
Democratic retreat earlier this year that I took a bunch of boy
scouts down to the Norfolk Naval Station and we visited the
Teddy Roosevelt, the big aircraft carrier. It is about a
thousand feet long and about 25 stories high. Maybe 5,000
people aboard when they deploy about 70 aircraft and it needs
to refuel once every 25 years. I was struck by that and the
kind of potential that I think nuclear power continues to offer
to us in this country. I know some of the research that you do
relates to what to do with the waste product that comes from
nuclear powerplants. And I would just appreciate a little
primer on what's the latest. What is going on in that area? Is
there some promise; is there something new that we ought to
know about and be mindful of?
Mr. Blake. Well, I think the technology probably that this
committee is aware of involves using accelerators to reprocess
and render inert the residues. I am not, although I have had
some experience with the nuclear industry, I am not a
technologist. So, I'm going to need a primer as much as you do,
Senator.
Senator Carper. I thought you were talking about the
accelerators on a car.
[Laughter.]
Senator Carper. Can you provide for the record just an
update for me on what's going on, and I'm not looking for a
tome or anything.
Mr. Blake. I will.
Senator Carper. Another issue. I presume that we have a
fair amount of research that goes on within your own
laboratories, your own employees, and I presume that we
contract with folks in academia to do some research projects.
And I presume there's a partnership. They exist in the private
sector. I think that one of our friends from General Motors may
have alluded yesterday to fuel cell research where the
Government played a role. Can you just tell us how it works and
how we try not to end up duplicating one another's efforts but
are actually working together?
Mr. Blake. I can tell you again from the experience I had
in the private sector. The way that works is the Government
suggests areas where further developments and enhancements
would be appropriate. The Department will typically get bids in
from the private sector, saying I can build a car of X-
efficiency or Y-efficiency. They will select the winning bidder
and then the terms of the work is laid out. The Department and
the private sector participant will sit down and they will map
out a program saying this is what we are going to do. We need
to develop these kinds of technologies, materials, and the
like. The Government will typically retain some intellectual
property in what's developed and there will be an agreement on
cost sharing and a review of how costs are allocated to that
contract.
Senator Carper. Okay.
Mr. Blake. And it does vary a bit contract to contract.
Some, the Government share is relatively modest and in others
it is the predominant share.
Senator Carper. Maybe one other question, if I could ask.
The appropriate role, it seems to me, of the Federal Government
is research, R&D in these areas. I like to say the role of
government is to steer the boat, not to row the boat, and I
think that is probably true here. But having said that, I am
also struck sometimes by our inability as a country to take
some very good research and development information and to be
able to commercialize that research and to put it in products
or projects, in some cases products that people will buy.
We had our auto folks here yesterday and we talked a bit
about hybrids. We have hybrids but for the most part, we are
not seeing hybrid cars, trucks, vans produced in this country.
We're not going to see very many produced in this country that
even take good advantage of that technology. However, we're
seeing Toyota and Honda actually begin to work with it pretty
well.
Basically, my question is commercialization. What role does
the Department of Energy play and I ask this as a new member of
the committee. I've been here a week. What role does the
Department play with respect to not just helping fund the R&D
and direct the R&D, but actually to nurture and to encourage
the commercialization of the most promising technologies so we
will get a real payoff from the research that has been done?
Mr. Blake. I think our bias, Senator, is similar to yours
which is that the actual commercialization belongs in the
private sector. There are some instances where the Department
will participate in that but they are infrequent, and the
history is that they haven't been very successful. The fuel
cell is an interesting example in the sense that it was
originally developed as part of a governmental program with
NASA and that technology was not commercialized obviously for
years and years but then when you get changes in energy prices,
some constraints on the transmission grid, some interest in
further fuel efficiency in vehicles, that spurs additional
research and development that the Department participates in,
and then hopefully commercialization. But in direct answer, I
think we try not to involve ourselves too often in the direct
commercialization but leave it that to the private sector.
Senator Carper. Thank you, Mr. Chairman.
The Chairman. Thank you.
Senator Burns.
Senator Burns. Thank you, Mr. Chairman. I am interested in
the statement of energy prices getting real high and it drives
us to do different things in R&D. The other day I was out in
Nebraska, I filled up on Sunday in North Platte, Nebraska for
$1.21 a gallon and I come back here and all the pressure is off
of us to do something about the cost of energy. Emotions go up
and down like that. Nothing spurs conservation or R&D into
conservation like $3 gas. That's what drives conservation.
And we can do a lot of things here. We can go through the
motions of trying to be more efficient and all of that but we
just cannot get any steam behind it until gasoline is $3 a
gallon, and so that's how that works. I was disappointed in it
when we just finished with the Interior appropriations and of
course much of our work that is being done in our fossil fuels
making them more efficient and the impact that fossil fuels
have on our environment. Those funds were cut back but we
restored most of those funds as you well know and they are on
their way. We will conference that. We hope we can hold that
money together for you as time goes on.
Let me ask you, if you had the magic wand on this, what
direction should we be going in our R&D? I am a proponent. I am
really a big proponent of fuel cells. I just believe that they
will play a major role in our energy, and how we deliver it,
and how we manufacture it, and how we store it. And I would
just ask your opinion, is that the direction we should be going
or tell us where do you think we should be going?
Mr. Blake. I think first the right approach, as was
suggested, is a portfolio approach where you look at a number
of different technologies. Some nearer term, some longer term.
You don't put all your bets on one technology. On fuel cells
specifically, it's a very interesting technology. It has some
significant hurdles as well. You have to be able to reform the
fuel as it comes in if you're using natural gas or something
like that. On the front end or on hydrogen, you obviously have
to be able to make the hydrogen and store it. There are other
larger fuel cell technologies where you can do them in combined
applications with existing natural gas fired turbines that look
very promising.
So, there are a lot of interesting developments in that
area. A lot of companies are working in that area. DOE is
supporting that with research dollars, but I think the general
answer is a portfolio approach.
Senator Burns. We are seeing a lot of interest in coal bed
methane right now in our part of the world. And it is a fuel
that can be extracted from a fossil base basically, and once we
figure out what to do with the water and after the extraction,
why, I think it has a great future. Also, in the area of
nuclear, as I looked at Le Hauge in France, where they vitrify
and reprocess high-level nuclear waste and in particular those
rods that come out of powerplants. We look and we're kind of
shortsighted in this country, thinking that well, most of these
rods come from our ability to produce electricity, and I think
Senator Carper brought it up. We've got a Navy that's nuclear.
It moves by nuclear power. We have to do something to deal with
that situation and so I would imagine. Are we still doing some
R&D on vitrification and reprocessing on another way to deal
with high level nuclear waste?
Mr. Blake. Yes, sir. I cannot respond on vitrification but
on reprocessing, yes.
Senator Burns. Well, that tour we took both at Avion and in
Marseille in South of France and also there at Le Hague was
very interesting, and it's my understanding that most of that
technology was developed in this country. So, I'm saying that
even if they don't want to store this in Yucca Mountain, we're
still going to need a repository. There's no doubt about that
and we must just realize that and move on.
So, I appreciate what you do in the R&D area. I plan to be
a very strong supporter of yours as far as dollars are
concerned. There again, dollars as mentioned here is not the
complete answer. But nonetheless our R&D plays an important
role in our every day lives and I want to be a supporter of
that. I thank you for coming today. I thank you for your
testimony.
The Chairman. Senator Craig, did you have questions of this
witness?
Senator Craig. I do not. Thank you, Mr. Chairman.
The Chairman. Well, thank you very much, Secretary Blake.
We appreciate your coming again today. Why don't we move right
to the second panel. If they would come forward, please.
Okay, why don't we go ahead with the second panel. We have
a group of very eminent scientists who are here to testify. Dr.
John Holdren, professor at Harvard University; Dr. Robert
Richardson, vice-provost for research at Cornell University;
Dr. Ernie Moniz, who is a professor at MIT and formerly with
the Department of Energy; Mr. Bob Fri who is the Director of
the Smithsonian Museum of Natural History; Dr. H.M. Hubbard.
Thank you very much for being here. He is with the Pacific
Center for High Technology Research, retired, Lee's Summit,
Missouri; and also Dr. Mike Corradini, who is with the
University of Wisconsin in Madison.
Why don't you go ahead. We'll just take you in that order
and we will include your full statement in the record. But if
you could take 5 or 6 minutes each and summarize the main
points you think we need to be aware of.
Dr. Holdren.
STATEMENT OF DR. JOHN P. HOLDREN, PROFESSOR, HARVARD
UNIVERSITY, CAMBRIDGE, MA
Dr. Holdren. Thank you, Mr. Chairman, members, ladies and
gentleman. I am John Holdren. I am a professor at Harvard, both
in the Kennedy School of Government and in the Department of
Earth and Planetary Sciences. I was a member of President
Clinton's Committee of Advisors on Science and Technology
(PCAST) and in that connection, I served as chairman of three
PCAST studies on energy R&D policy between 1995 and 1999. I am
grateful indeed for the opportunity to testify this morning
before this committee on what I believe and I know you believe
is a very timely and important subject.
The scope of the hearing this morning is very broad. It
covers proposals related to energy and scientific research,
development, technology deployment, education and training
relating to eight different bills in the Senate, and I am going
to focus my own comments more narrowly this morning, confining
myself mainly to the energy research and development sections
of S. 597 and the relation of those provisions to the
recommendations of the PCAST energy R&D studies that I chaired.
The 1997 PCAST study, in particular, was a comprehensive
review of U.S. Federal energy research and development
strategy. It examined the recent history of public and private
energy R&D. It looked at the rationales for public involvement
in this kind of activity. It looked at the existing R&D
programs of the Department of Energy and it offered
recommendations on the focus and targets and budgets for those
Department of Energy R&D programs for the five fiscal years
1999 to 2003. I want to mention that the study was carried out
by a panel of 21 senior individuals who came from industry,
from academia, from public interest organizations. Some had
been previously in government service. It had members from a
wide array of energy expertises, fossil fuels, renewables,
nuclear energy, fusion, increased end-use efficiency and it
included people of senior research and management experience,
including a former chairman of the Council of Economic Advisors
who had no particular brief for increasing Federal expenditures
on energy R&D.
That panel, based on its detailed review of the then-
existing portfolio of applied energy technology R&D efforts in
the Department of Energy, concluded that those programs in DOE
have been well focused and effective within the limits of
available funding but that the programs have not been and are
not commensurate in scope and in scale with the energy
challenges and opportunities that the 21st century will
present. It noted that this judgment takes into account the
likely contributions of the private sector to energy R&D in the
decades ahead, and it argued that the inadequacy of the current
energy R&D is especially acute in relation to the challenge of
responding prudently and cost-effectively to the risk of global
climate change from society's greenhouse gas emissions.
The panel recommended ramping up DOE's applied energy
technology R&D spending from $1.3 billion a year, which is what
it was in the fiscal year 1997 baseline for our study, baseline
at the time the report was written, ramping up that R&D to $2.4
million in as-spent dollars in fiscal year 2003, which would
represent about a 50 per cent increase over a 5-year period in
inflation-corrected dollars. The recommendations were very
detailed in terms of how much should be spent in each area, how
much for efficiency, for fission, for fusion, for renewables,
for fossil fuels. And the budget recommendations were unanimous
notwithstanding the diversity of the panel that produced them
and notwithstanding the long-standing controversies about the
allocation of resources in energy R&D. That unanimity of the
panel emerged from detailed joint review and discussion of the
content of existing programs, the magnitudes of the 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 advances that R&D could bring about.
Efficiency and renewables receive the bulk of the
recommended increment and increase their share of the total
from 50 percent in fiscal year 1997 to about 64 percent in the
recommended budget for FY 2003 because they scored high on
potential public benefits and on R&D needs and opportunities
not likely to be fully addressed by the private sector.
Those recommendations of the 1997 PCAST study have been
partly reflected in administration requests and to a somewhat
lesser degree in congressional appropriations in the
intervening years. In the most recent completed appropriations,
those for fiscal year 2001, the total applied energy technology
R&D budget reflects about half of the increment recommended in
the PCAST study for that year over the fiscal year 1997 or 1998
baseline. Broken down, 100 percent of the increment recommended
by PCAST was appropriated for fossil fuels, 55 percent of the
increment for nuclear, 50 percent for efficiency and for
fusion, but only 30 percent for renewables.
The Bush administration's fiscal year 2002 budget request
for applied energy technology R&D totaled only about $1.3
billion compared to the $1.7 billion appropriation in fiscal
year 2001. That is the request proposed what I would
characterize as a large step backward, one that would return
the country to the fiscal year 1997-1998 R&D spending levels.
That proposal is not consistent with the administration's
recent statements about the importance it attaches to energy
and to the role of technological innovation in addressing
energy issues. In fairness, though, it has to be said that the
fiscal year 2002 budget request had to be submitted before Vice
President Cheney's Energy Task Force had completed its work. In
any case, I hope that Congress's appropriation for fiscal year
2002 will not follow the numbers in the administration's
request but rather will substantially boost energy R&D spending
toward the trajectory recommended by PCAST in 1997.
That brings me to the bills under consideration in today's
hearing, specifically S. 597 and let me say just a couple of
words about that bill. Title XIV of S. 597, the comprehensive
and balanced national energy policy act of which Mr. Chairman,
of course, you were the principal sponsor, contains a great
deal of the recommendations of the PCAST study. The specific
focuses, the targets, the budget levels for the various
components of applied energy technology R&D although slid back
to 2006 from 2003 because of the gap that has materialized in
the meantime, even the PCAST recommendations on the management
of DOE's science and technology programs in title XV of the
bill follow quite closely the PCAST recommendations on those
points.
I just want to say that my colleagues and I on the PCAST
panel are very appreciative of the weight placed on our
recommendations by you, Mr. Chairman, and your co-sponsors in
the development of this bill. We did our best in that study to
develop in our report a comprehensive and balanced Federal
energy R&D program, and we're delighted to see so much of it
reflected in the comprehensive and balanced national energy
policy act that you wrote. As the authors of that bill and the
other bills under consideration in this hearing are well aware,
of course, a comprehensive energy policy has to include a lot
more than R&D. Many of the other elements of a comprehensive
policy--aspects of tax policy, regulatory policy,
infrastructure development, performance standards, consumer
protection--are addressed in the array of bills before the
committee today. Other elements, though, such as an appropriate
framework of incentives and/or regulations to work in
combination with advanced energy technologies to adequately
reduce greenhouse gas emissions remain to be developed. Also
remaining to be developed, in my view, is an adequate approach
to international cooperation in energy technology innovation so
that needed improvements occur worldwide. That was the subject
of the 1999 PCAST study which I am not going to talk about
today.
R&D, in any case, should be the easiest part of energy
policy in respect to gaining approval and finding the money
because it is relatively non-controversial and it is relatively
inexpensive. With respect to cost, let me just note that the
difference between the $1.7 billion being spent on Federal
applied energy technology R&D in fiscal year 2001 and the $2.4
billion recommended by PCAST for fiscal year 2003 amounts to
about two-tenths of one percent of the U.S. military budget and
it is equivalent to an extra 0.7 cents per gallon on the price
of gasoline. Yet recent history makes it clear that even such
modest investments in a secure and sustainable energy future
are astonishingly difficult to attain. The chairman, the
members and the staff of the Senate Committee on Energy and
Natural Resources are to be commended for the major effort that
you're investing as manifested in S. 597 and in this series of
hearings, of which today's is just one, to address this
problem. I thank you for the effort, for the confidence you've
placed in the PCAST recommendations and for allowing me to
present these views this morning.
[The prepared statement of Dr. Holdren follows:]
Prepared Statement of Dr. John P. Holdren, Professor,
Harvard University, Cambridge, MA
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 1995 PCAST
study of ``The U.S. Program of Fusion Energy Research and
Development'', the 1997 PCAST study of ``Federal Energy Research and
Development for the Challenges of the 21st Century'', and the 1999
PCAST study of ``Powerful Partnerships: The Federal Role in
International Cooperation on Energy Research, Development,
Demonstration, and Deployment''. A more complete biographical sketch is
appended to this statement.
My work at Harvard on energy R&D policy over the past five years
has been funded, at various times, by the U.S. Department of Energy,
the Energy Foundation, the Heinz Family Foundation, the MacArthur
Foundation, the Packard Foundation, and the Winslow Foundation. The
opinions I will offer here are my own and not necessarily those of
these funders or of the other organizations with which I am or have
been associated. My statement draws in part on testimonies on energy
policy that I presented to other Congressional hearings earlier this
year and last year (1-3) and on a review of the PCAST energy studies
and their impact that I wrote with a colleague for publication in
Annual Review of Energy and the Environment this fall (4). I am
grateful indeed for the opportunity to testify this morning before the
Senate Committee on Energy and Natural Resources, at this timely and
important hearing.
The scope of this morning's hearing is very broad, covering
proposals related to ``energy and scientific research, development,
technology deployment, education, and training'' in portions of eight
Senate bills (S. 388, S. 597, S. 472, S. 90, S. 193, S. 242, S. 259,
and S. 636). I will focus my comments more narrowly, confining myself
mainly to the energy R&D sections of S. 597 and the relation of those
provisions to the recommendations of the energy R&D studies that I
chaired for PCAST. The 1997 PCAST report (5), in particular, is so
central to my observations here that I ask that its Executive Summary
be included in the hearing record as an appendix to my statement.
That study was a comprehensive review of U.S. federal energy
research and development, examining the recent history of public and
private energy R&D, the rationales for public involvement in this
activity, and the existing energy R&D programs of the Department of
Energy, and offering recommendations on the focus and budgets of these
programs for the five Fiscal Years 1999-2003. The study 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. In what follows, I first summarize the key findings of the
PCAST panel and then turn briefly to the related content of S. 597.
U.S. ENERGY R&D THROUGH FY1997
In the FY1997 base year for the PCAST study, Federal budget
authority for applied energy-technology R&D--that is, R&D focused
specifically on developing or improving technologies for harnessing
fossil fuels, nuclear fission, nuclear fusion, renewable energy
sources, and increased efficiency of energy end use--totaled about $1.3
billion.\1\ Correcting for inflation, this was precisely what the
country had been spending for applied energy-technology R&D thirty
years earlier, in FY1967, when real GNP was 2.5 times smaller and the
reasons for concern about the adequacy of the nation's energy options
were far less manifest (5, p 2-8). Federal applied energy-technology
R&D ramped up sharply after the Arab-OPEC oil embargo of 1973-74,
reaching a peak of over 6 billion 1997 dollars per year in FY1978 in
the process of adding sizable investments in advanced fossil-fuel
technologies, renewables, and end-use efficiency to the fission- and
fusion-dominated portfolio of the 1960s. After Ronald Reagan assumed
the Presidency in 1981, however, with his view that any energy R&D
worth doing would be done by the private sector, applied energy-
technology R&D spending fell 3-fold in the space of 6 years. A Clean
Coal Technology Program that was a joint venture of government and
industry brought a brief and modest resurgence from 1988 to 1994, but
thereafter the overall decline continued. Similar declines in
government-funded energy R&D were also being experienced in most other
industrial nations: the relevant expenditures fell sharply between 1985
and 1995 in all of the other G-7 countries except Japan. Japan's
governmental energy R&D budget in 1995 was nearly $5 billion, in an
economy only half the size of that of the United States. (Nearly $4
billion of the Japanese total was concentrated in nuclear fission and
fusion, however, a pattern similar to that in the United States in the
early 1970s.)
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\1\ The ``energy R&D'' line in DOE's budget contains a number of
other categories that bring the FY1997 total to almost $2.9 billion.
These include Basic Energy Sciences (which includes search in materials
science, chemistry, applied mathematics, biosciences, geosciences, and
engineering that is not directed at developing any particular class of
energy sources), biomedical and environmental research, radioisotope
power sources for spacecraft, and some energy management and
conservation programs that are not actually R&D at all. The PCAST-97
focus was primarily on the applied energy-technology R&D component,
although one recommendation did address, in a general way, the Basic
Energy Sciences part of the budget.
---------------------------------------------------------------------------
Private-sector energy R&D in the United States had been estimated
by a 1995 Secretary of Energy Advisory Board study (6) at about $2.5
billion per year at that time. Complete and consistent R&D figures for
the private sector are difficult to assemble, but it appears that these
expenditures had, like those of the Federal government, been shrinking
for some time: the Department of Energy estimated that U.S. industry
investments in energy R&D in 1993 were $3.9 billion (1997 dollars),
down 33 percent in real terms from 1983's level; a study at Battelle
Pacific Northwest Laboratory showed U.S. private-sector energy R&D
falling from $4.4 billion (1997 dollars) in 1985 to $2.6 billion in
1994, representing a drop of about 40 percent in this period . Combined
public and private investments in applied energy-technology R&D in the
mid-1990s, at under $5 billion per year, amounted to less than one
percent of the nation's expenditures on fuels and electricity. This
meant that the energy business was one of the least research-intensive
enterprises in the country measured as the percent of sales expended on
R&D. Average industrial R&D expenditures for the whole U.S. economy in
1994 were about 3.5 percent of sales; for software the figure was about
14 percent, for pharmaceuticals about 12 percent, and for
semiconductors about 8 percent.
Why had energy R&D investments in the United States fallen so low?
On the private-sector side, R&D incentives had been reduced by the
rapid fall, since 1981, of the real prices of oil and natural gas
(together constituting over 60 percent of U.S. energy supply) and by
energy-sector restructuring (resulting in increased pressure on the
short-term ``bottom line'', to the detriment of R&D investments with
long time horizons and uncertain returns). Perennial factors limiting
energy-industry R&D include the low profit margins that often
characterize energy markets, the great difficulty and long time scales
associated with developing new energy options and driving down their
costs to the point of competitiveness, and the circumstance that much
of the incentive for developing new energy technologies lies in
externality and public-goods issues (e.g., air pollution,
overdependence on oil imports, climate change) not immediately
reflected in the balance sheets of energy sellers and buyers.
As for the government side of low propensity to invest in energy
R&D, the ``let the market do it'' philosophy of the Reagan years was
certainly important in the steep declines from FY1981 through FY1987.
It was augmented by the bad taste left in taxpayers' and policy-makers'
mouths by the ill-fated government forays of the late 1970s into very-
large-scale energy development and commercialization ventures (notably
the Synfuels Corporation and the Clinch River breeder reactor); by the
overall Federal budget stringency characterizing the first Clinton
term; by Congressional concerns about the effectiveness of DOE
management; and by lack of voter interest, in the absence of gasoline
lines or soaring energy bills or rolling blackouts, in energy policy.
There was, finally, the ``eat your siblings'' character of energy-
supply constituencies: the tendency of advocates of each class of
energy options (e.g., nuclear fission, fossil fuels, renewables, energy
end-use efficiency) to disparage the prospects of the other options--a
tendency aggravated by the zero- or declining-sum-game characteristics
of energy R&D funding in this period . In the grip of this syndrome,
segments of the energy community itself formulated the arguments
(``renewables are too costly'', ``fossil fuels are too dirty'',
``nuclear fission is too unforgiving'', ``fusion will never work'',
``efficiency means belt-tightening and sacrifice or is too much work
for consumers'') that were used by various factions in the government
to cut energy R&D programs one at a time. There was no coherent energy-
community chorus calling for a responsible portfolio approach to energy
R&D that seeks to address and ameliorate the shortcomings of all of the
options.
While investments in energy R&D had been falling, however, concerns
about the future adequacy of the country's portfolio of energy options
had been growing. Imports as a fraction of U.S. oil consumption, which
had fallen from a high of 49% in 1977 to just 29% in 1985, had risen
again to 51% by 1996 The rate of decline of energy intensity of the
U.S. economy, which had averaged 2.8 percent per year from 1973 to
1986, had averaged only 0.9 percent per year between 1986 and 1996. The
1995 Second Assessment Report of the Intergovernmental Panel on Climate
Change (IPCC) had concluded that ``the balance of evidence suggests a
discernible human influence on global climate'' and that ``climate
change is likely to have wide-ranging and mostly adverse impacts on
human health'' as well as ``negative impacts on energy, industry, and
transportation infrastructure; human settlements; the property
insurance industry; tourism; and cultural systems and values''. The
United States, one of 170 nations to sign and ratify the United Nations
Framework Convention on Climate Change in the early 1990s, had pledged
along with other industrial-nation signers to hold its year-2000
greenhouse-gas emissions to 1990 levels; but by 1996 U.S. emissions of
carbon dioxide, the most important anthropogenic greenhouse gas, were
9% above 1990 levels and rising. These were among the factors that led
to the President's request for the 1997 PCAST study.
RATIONALE FOR FEDERAL ENERGY R&D
The panel's report began with an overview of the energy-linked
economic, environmental, and national-security challenges faced by the
United States as it moves into the 21st century, noting that (5, p ES-
1)
Our economic well-being depends on reliable affordable
supplies of energy. Our environmental well-being--from
improving urban air quality to abating the risk of global
warming--requires a mix of energy sources that emits less
carbon dioxide and other pollutants than today's mix does. Our
national security requires secure supplies of oil or
alternatives to it, as well as prevention of nuclear
proliferation. And for reasons of economy, environment,
security, and stature as a world power alike, the United States
must maintain its leadership in the science and technology of
energy supply and use.
The report also noted at the outset that U.S. interests in energy
are closely coupled to what is happening in the rest of the world,
above all in developing countries. The panel wrote (5, p ES-1)
The combination of population growth and economic development
in Asia, Africa, and Latin America is driving a rapid expansion
of world energy use, which is beginning to augment
significantly the worldwide emissions of carbon dioxide from
fossil fuel combustion, increasing pressures on world oil
supplies, and exacerbating nuclear proliferation concerns.
Means must be found to meet the economic aspirations and
associated energy needs of all the world's people while
protecting the environment and preserving peace, stability, and
opportunity.
In addressing the rationale for federal government involvement in
energy-technology innovation to help address these challenges, the
panel stressed the large ``public benefits'' dimension of energy
issues--the point that the interests of society as a whole in
environmental quality, reliability of energy supply (in both its
economic and national-security dimensions), meeting the basic energy
needs of society's poorest members, and providing a sustainable energy
basis for economic development considerably exceed the interests of
private firms in these outcomes, as reflected in the returns they can
expect to gain from investments in energy R&D. The panel also noted
that a number of trends within energy industries themselves--such as
deregulation, energy-sector and corporate restructuring, and increasing
competitive pressures on the short-term ``bottom line''--were evidently
combining to reduce private-sector investment in energy R&D, above all
those components of energy R&D entailing substantial risks or long time
horizons.
Notwithstanding the force of these arguments, the panel recognized
that the private sector has the dominant role in bringing advanced
energy technologies into widespread use, that this will be even more
true in the future than it has been in the past, and that, therefore,
it is essential to shape the government's efforts in energy-technology
innovation to complement and utilize the strengths of the private
sector, not in any sense to replace them. The panel wrote, in this
vein, that projects in the federal energy R&D portfolio (5, pp 7\1/2\)
should be shaped, wherever possible, to enable relatively
modest government investments to effectively complement,
leverage, or catalyze work in the private sector. Where
practical, projects should be conducted by industry/national-
laboratory/university partnerships to ensure that the R&D is
appropriately targeted and market relevant, and that it has a
potential commercialization path to ensure that the benefits of
the public R&D investment are realized in commercial products.
Although it had not been asked to address the possibility of
government efforts extending beyond R&D in the direction of
commercialization of advanced energy technologies, the panel offered an
argument that the same public-benefits rationale supporting government
involvement in energy R&D, combined with the existence of a variety of
barriers to private-sector commercialization of some of the advanced
energy technologies offering very large public benefits, does justify a
degree of government engagement in promoting commercialization in
particular circumstances. It wrote (5, p ES-28)
After consideration of the market circumstances and public
benefits associated with the energy-technology options for
which we have recommended increased R&D, the panel recommends
that the nation adopt a commercialization strategy in specific
areas complementing its public investments in R&D. This
strategy should be designed to reduce the prices of the
targeted technologies to competitive levels, and it should be
limited in cost and duration.
The panel did not, however, propose either a magnitude or a source
of funds for such a commercialization initiative, considering this too
far beyond its mandate.
PCAST BUDGETARY AND PROGRAMMATIC RECOMMENDATIONS
From its detailed review of the then-existing portfolio of applied
energy-technology R&D in DOE, in the context of the rationales for
government involvement as just described, the PCAST panel concluded
that these programs ``have been well focused and effective within the
limits of available funding'' but that they ``are not commensurate in
scope and scale with the energy challenges and opportunities the
twenty-first century will present''. It noted that ``[t]his judgment
takes 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'', and it argued that ``the inadequacy of current
energy R&D is especially acute in relation to the challenge of
responding prudently and cost-effectively to the risk of global climate
change from society greenhouse-gas emissions'' (5, p ES-1). It
recommended ramping up DOE's applied energy-technology R&D spending
from the $1.3 billion level of the FY1997 appropriation (and from the
$1.4 billion level of the FY1998 request, not yet acted upon by
Congress at the time the report was written) 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)
----------------------------------------------------------------------------------------------------------------
FY 2003
FY 1997 FY 2003 increment Share of FY Share of FY
actual proposed over FY 1997-2003 2003 total
1997 increment
----------------------------------------------------------------------------------------------------------------
Efficiency......................................... 373 755 382 48.6% 36.5%
Fission............................................ 42 102 60 7.6% 4.9%
Fossil............................................. 365 371 6 0.8% 17.9%
Fusion............................................. 232 281 49 6.2% 13.6%
Renewables......................................... 270 559 289 36.8% 27.0%
----------------------------------------------------------------------------------------------------------------
Total............................................ 1282 2068 786 100% 100%
----------------------------------------------------------------------------------------------------------------
These budget recommendations 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 great bulk of the increment--and increased their share of
the total from 50% in FY1997 to almost 64% in the FY2003
recommendation--because they scored high on potential public benefits
and on R&D needs and opportunities unlikely to be fully addressed by
the private sector.
Among the key findings and recommendations about the main classes
of energy technologies were the following.
Energy End-Use Efficiency--The Panel found particular promise in
enhancements to energy-efficiency R&D, which it found could bring
relatively rapid and cost-effective reductions in local air pollution
and greenhouse-gas emissions, oil imports, and energy costs for
households and businesses. From 1975-1986, the panel noted, U.S. energy
efficiency increased by almost one-third (measured as the ratio of real
GNP to primary energy use); if the energy-intensity of the economy had
remained constant from 1970 to 1997, by contrast, U.S. energy
expenditures in 1997 would have been some $150-200 billion per year
greater than they actually were. The improvements in energy efficiency
that were achieved helped pull the U.S. economy out of the stagflation
that followed the oil-price shocks of the 1970s, helped set the stage
for sharply declining world oil prices, and gave the U.S. economy more
than a decade and a half of opportunity to deal with the energy problem
(an opportunity that, regrettably, went largely unused). The panel
found that investments in advanced energy-efficiency technologies--
beyond those likely to be brought forth by the marketplace--offered the
potential for further large gains in the future and recommended that
the DOE's budget for energy-efficiency R&D be doubled in constant
dollars from the 1997 actual level of $373 million for R&D to $755
million in 2003 (which would be about $880 million in as-spent dollars,
given inflation at the projected rates).\2\
---------------------------------------------------------------------------
\2\ These figures do not include weatherization, state and local
grants, and other non-R&D activities funded by DOE under the ``energy
efficiency'' budget lines.
---------------------------------------------------------------------------
The panel proposed a number of specific goals for efficiency-
improvement efforts in the various end-use sectors, including:
development of the technologies for, and facilitating the
construction by 2010 of, 1 million zero-net-energy buildings,
and achievement in all new buildings of an average 25-percent
increase in energy efficiency as compared to new buildings in
1996;
development, with industry, of a 40-percent efficient
microturbine by 2005 and a 50-percent efficient microturbine by
2010, initiation of new Industries of the Future programs in
agriculture and bio-based renewable products, and reduction of
the energy intensity of the major energy-consuming industries--
forest products, steel, aluminum, metal casting, chemicals,
petroleum refining, glass--by one-fourth by 2010;
cooperation with industry to achieve the goal, previously
established under the Partnership for a New Generation of
Vehicles, of developing an 80-mile-per-gallon production
prototype passenger car by 2004, as well as working with
industry to develop a production prototype of a 100-mpg
passenger car with zero equivalent emissions by 2010, high
efficiency (tripled fuel economy) Class 1-2 trucks and (doubled
fuel economy) Class 3-6 trucks by 2010, and a high efficiency
(10 mpg) heavy truck (Class 7 and 8) by 2005.
The panel concluded that, overall, ``DOE research, complemented by
sound policy, can help the country increase energy efficiency by a
third or more in the next 15 to 20 years.
Fossil Energy Technology--Fossil fuels supply more than three-
quarters of primary energy worldwide and 85 percent of primary energy
in the United States,\3\ and they will remain a mainstay of energy
supply for many decades to come. Recognizing the very large size of the
private sector's fossil-energy activities, including R&D, the panel
emphasized restructuring DOE's fossil-energy program towards activities
with a higher public return. It recommended the phase-out of R&D on
near-term coal power technologies, because there was relatively less
public benefit to be expected from furthering this work than was the
case for longer-term coal-technology programs underway in the
Department--notably Vision-21 (28)--and because the market potential of
these technologies was very limited given the significantly lower cost
of advanced gas turbine cycles fueled by natural gas.\4\ Similarly,
direct coal liquefaction was recommended for termination, on the
grounds that it was not likely to be cost-effective in the foreseeable
future, would significantly increase emissions of carbon dioxide, and
offered no synergies with other technologies under development--in
contrast to indirect coal liquefaction, which uses gasification
technologies that are also relevant to advanced power generation and
other programs. The panel recommended increased support, in the fossil-
fuel sector, for DOE's advanced power, carbon sequestration, fuel cell,
hydrogen, and advanced oil and gas production programs, as these could
increase the country's leverage against the greenhouse-gas/climate-
change and oil-import problems, among others. The initiation of
research on methane hydrates was also recommended, both to better
evaluate the resource and to determine if it could be tapped in the
longer term to supplement conventional gas resources as a bridging fuel
to low- or no-carbon energy systems. Continued support for advanced
technologies for the low-cost recovery of oil and gas from lower margin
resources was also recommended. Such programs have long been targets of
government-spending critics concerned with ``corporate welfare''; but
the panel's review found that those benefitting were small companies
with little ability to conduct research, that advanced approaches
helped maintain domestic production, and that to close these wells
without such recovery would effectively foreclose further production
from them permanently.
---------------------------------------------------------------------------
\3\ These percentages account for the estimated contributions,
often left out of official tabulations, from the ``traditional''
biomass energy sources (fuelwood, charcoal, crop wastes, and dung).
Without these, the fossil-fuel percentage contributions would appear
even larger.
\4\ The Panel did not recommend cuts in R&D on pollution control
technologies for current or near-term coal power systems, however.
---------------------------------------------------------------------------
The panel's review of fossil-energy issues also clarified and
highlighted the importance, for U.S. fossil-energy-technology R&D
strategy, of international markets for these technologies. In the U.S.
electric-power sector, most new capacity in recent years has been in
the form of natural-gas-fired gas-turbine combined cycles, and this is
likely to remain the case until natural gas prices experience sustained
increases to levels that seem improbable in this country for some time
to come. That would mean that the major markets for advanced coal-power
technology will be outside the United States in the decades immediately
ahead, above all in coal-intensive developing countries such as China
and India where natural gas is in very limited supply. For the United
States to maintain leadership in these technologies, they will need to
be developed in forms suitable for those markets and U.S. companies
will need to learn to operate successfully there. Altogether, the
changes recommended by the panel would have resulted in DOE's fossil-
energy R&D budgets staying roughly level in constant dollars from
FY1997 through FY2003.
Nuclear Energy--Energy from nuclear fission supplies about 17
percent of world electricity and 20 percent of that of the United
States. But concerns about nuclear energy's cost, accident risks,
radioactive-waste burdens, and potential links to nuclear proliferation
have clouded its future. No new reactors have been ordered in the
United States since 1978. Federal expenditures on R&D in fission
energy, once as high as $2 billion per year in 1997 dollars, had fallen
by FY1997 to just $40 million (and dropped to $7 million in FY1998).
The panel concluded, however, that the potential role of an expanded
contribution from nuclear energy in helping to address global carbon
dioxide emissions justified a modest Nuclear Energy Research Initiative
(NERI) to determine whether and how improved fission technologies might
be able to address cost, safety, waste, and proliferation concerns.
Whether or not such work led to a possibility of expanding nuclear
energy's contribution in the United States, it would be useful in
helping to maintain positive U.S. influence over the safety and
proliferation resistance of nuclear-energy activities in other
countries.
The panel recommended, accordingly, that DOE funding for nuclear
fission should increase in constant dollars from $42 million in FY1997
to $102 million in FY2003 ($119 million in as-spent dollars in 2003).
In addition to NERI, a small part of this funding--$10 million per
year, to be matched by industry--would be used to investigate problems
that otherwise might prevent the safe extension of the operating life
of existing reactors. The NERI effort, in contrast to previous research
efforts in DOE's Nuclear Energy Program, would be organized as a
competitive solicitation for investigator-initiated R&D focused on the
indicated key issues affecting fission's future.
In the case of fusion energy, the panel endorsed the overall
findings of the 1995 PCAST study of fusion R&D (7) and recommended that
DOE funding for fusion be increased from $232 million in FY1997 to $281
million in 2003 in constant dollars ($328 million in FY2003 in as-spent
dollars). The Panel affirmed that the guiding principles for the U.S.
fusion program should be maintaining a strong domestic base in plasma
science and fusion technology; collaborating internationally on an
experimental program for the next steps in ignition and moderately
sustained burn, and participating in international efforts to develop
practical low-activation materials for fusion energy systems.
Renewable Energy--Few people disagree with the premise of renewable
energy--tapping natural flows of energy from the sun, wind, and other
sources to produce environmentally clean, non-depletable energy for
people's use; the problem has been the high cost of successfully
capturing these diffuse flows of energy and converting them to the
needed end-use forms. Over the past two decades, however, remarkable
progress has been made. The cost of energy from technologies such as
photovoltaics and wind turbines has dropped as much as ten times. Based
on the outstanding progress that has been made, the high potential of
renewable-energy technologies in every sector of the energy economy
(electricity, fuels, and heat for buildings, industry, and
transportation), and the high public benefits of achieving such
contributions, the Panel recommended that funding for DOE's renewable-
energy programs should be increased from $270 million in FY1997 to $559
million in FY2003 in constant dollars ($652 million in FY2003 in as-
spent dollars).
Priority areas identified by the panel for R&D increases included
solar photovoltaics (particularly thin-film technologies and balance-
of-system issues), advanced wind turbines (particularly light-weight,
variable-speed designs), and bioenergy (especially integrated power-
and-fuels systems), as well as solar thermal, geothermal, and hydrogen
energy systems. As for much fossil and nuclear technology, the panel
noted, international markets are critical for renewables. Roughly
three-quarters of U.S. photovoltaics production is exported, and most
of the wind-turbine market has likewise been outside the United States
in recent years (domestic sales of wind-turbines, however, increased
sharply in 1998 and 1999). And the modularity and small scale of many
renewable-energy technologies match well the needs of developing
countries, particularly in rural areas. A further advantage in
developing-country applications is that the inherent cleanliness and
safety of most renewable energy technologies minimizes the need for the
complex regulatory controls that fossil- and nuclear-energy systems
require.
Other Recommendations--Besides the recommendations just summarized
for the applied-energy-technology sectors in DOE's portfolio, the panel
made a number of recommendations that cut across those sectors. In
addition to the recommendation about commercialization strategy,
mentioned above, these included:
increased coordination between DOE's Basic Energy Sciences
(BES) program and its applied-energy-technology programs; \5\
---------------------------------------------------------------------------
\5\ The PCAST-97 study did not review the content of the BES
program, but it did recommend, in light of the close coupling between
advances in BES and progress in the applied-energy-technology R&D, that
DOE consider expanding its BES effort in parallel with the recommended
increase in applied-energy-technology work and the proposed increase in
coordination (5, p ES-2).
---------------------------------------------------------------------------
more systematic efforts within DOE at integrated assessment
of its entire energy R&D portfolio ``in a way that facilitates
comparisons and the development of appropriate portfolio
balance, in light of the challenges facing energy R&D and in
light of the nature of private sector and international efforts
and the interaction of U.S. government R&D with them'' (5, p
ES-6);
other improvements in DOE's management of its energy R&D
portfolio, including that overall responsibility for that
portfolio be assigned to a single person reporting directly to
the Secretary of Energy and that increased use be made of
industry/national-laboratory/university advisory and peer-
review committees, while reducing internal process-oriented
reviews.
The panel also recommended strongly that increased attention be
devoted to the opportunities for strengthening international
cooperation on energy-technology innovation--a recommendation that
became the basis for a subsequent PCAST study with this focus (8).
FEDERAL ENERGY R&D SINCE THE PCAST REPORT
Table 2 shows the distribution, across the energy sectors, of
PCAST's recommended budgets for FY1999-2003, Administration requests
for FY1999-2002, and Congressional appropriations for FY1999-2001,
along with the appropriations from FY1998. These figures show that the
requests and appropriations rose, through 2001, in a pattern similar to
that recommended by PCAST, but at a slower pace and with a particularly
conspicuous shortfall in the renewable category. Notable instances of
progress (or the lack of it), through the FY2001 budget year, on issues
addressed by the 1997 PCAST report include the following:
End-Use Efficiency--The administration launched in 1998 the
Partnership for Advancing Technology in Housing, based in part on
discussions with industry begun in 1994, which aims--with strong
private-sector participation--to achieve an average 50-percent increase
in energy efficiency in new homes by 2010. In concert with industry,
DOE launched an Industries of the Future program for agriculture,
building on DOE's success using this model in other industries. The
Partnership for a New Generation of Vehicles (PNGV), which predated the
PCAST report, has continued on track--the major participating
automobile companies all demonstrated prototype vehicles in early
2000--but a PNGV-2 focused on longer-term options such as fuel cells
has not been initiated. The Twenty-First Century Truck initiative was
launched in Spring 2000, with goals of doubling to tripling the fuel
economy of trucks on a ton-mile basis. Activities in microturbines,
fuel cells, and Combined Heat and Power have been strengthened.
Fossil Fuels--The direct-coal-liquefaction program has been phased
out and near-term clean-coal power-technology R&D has been reduced. The
Vision-21 program, which predated PCAST-97, to develop cost competitive
coal-fired power plants with low or no carbon or polluting emissions
has been strengthened. Geological carbon sequestration and methane
hydrate R&D programs have been launched.
Fusion--Administration requests at $243 million and Congressional
appropriations at $255 million for FY2001 have started to move in the
direction of, but still fall short of, the PCAST recommendation of $290
million (as spent dollars) for fusion energy in FY2001.
Table 2.--FEDERAL ENERGY TECHNOLOGY R&D: CONGRESSIONAL APPROPRIATIONS, ADMINISTRATION REQUESTS, AND PCAST
RECOMMENDATIONS FY1998-2003
[Millions of as-spent-$]
----------------------------------------------------------------------------------------------------------------
effic. renew. foss. fiss. fusn. total
----------------------------------------------------------------------------------------------------------------
FY98 appropriation.............................................. 437 272 356 7 223 1295
FY99 appropriation.............................................. 503 336 384 30 222 1475
Administration request........................................ 598 372 383 44 228 1625
PCAST recommendation.......................................... 615 475 379 66 250 1785
FY00 appropriation.............................................. 552 310 404 40 250 1559
Administration request........................................ 615 398 364 41 222 1640
PCAST recommendation.......................................... 690 585 406 86 270 2037
FY01 appropriation.............................................. 600 375 433 59 255 1722
Administration request........................................ 630 410 376 52 247 1715
PCAST recommendation.......................................... 770 620 433 101 290 2214
FY02 Administration request..................................... 475 237 333 39 255 1339
PCAST recommendation.......................................... 820 636 437 116 320 2329
FY03 PCAST recommendation....................................... 880 652 433 119 328 2412
----------------------------------------------------------------------------------------------------------------
Notes: The values listed here may vary from other tabulations due to rescissions, uncosted obligations,
inclusion or exclusion of other budget lines, and other factors. The efficiency line listed here does not
include state and local grants, or the Federal Energy Management Program. The nuclear fission line includes
only direct civilian energy-related R&D and University training support. The fossil energy line does not
include expenditures for the clean coal program, which is a demonstration rather than a research
anddevelopment effort.
Nuclear Fission--The Administration launched and Congress funded
both the Nuclear Energy Plant Optimization program (addressing issues
related to license extension) and the Nuclear Energy Research
Initiative (addressing the longer-term issues that will shape fission's
future). These two initiatives form the basis of the current DOE
Nuclear Energy program.
Renewables--Administration budget requests and program direction
have largely aligned with PCAST recommendations, but at lower funding
levels, and appropriations have been well below the requests (even
falling from FY1999 to FY2000 before recovering somewhat in FY2001).
With strong bipartisan support, President Clinton issued Executive
Order 13134 which launched an integrated bioproduct, biofuel, and
biopower program with a goal of tripling U.S. bioenergy use by 2010.
Congress passed and the President signed the Agricultural Risk
Protection Act of 2000, Title III of which codified an integrated
bioproduct and bioenergy research program. Principal focuses of
increased renewables funding other than for biomass were for
photovoltaics and advanced wind systems.
Cross-Cutting Issues--Since the PCAST study, DOE has undertaken a
major effort in integrated analysis of the Department's entire energy
R&D portfolio, which reaffirmed the overall direction of the program
while highlighting some key gaps, including energy-system reliability
and international cooperation on energy-technology innovation. DOE has
also made considerable effort at, and progress in, addressing its
management challenges, which were pointed out not only in the 1997
report but also in the 1995 SEAB study (6) and a 1999 review by the
National Academy of Public Administrators. The critical question raised
by PCAST about a role for government in the commercialization of high-
public-benefit energy technologies, moreover, has not yet been
addressed by the Department or, more importantly, by Congress.
As indicated in Table 2, the Bush Administration's FY2002 budget
request for applied energy-technology R&D, totaling about $1.3 billion,
proposed a large step backward--one that would return the country to
essentially the FY1997-1998 spending levels. This proposal is
completely inconsistent with the Administration's recent statements
about the importance it attaches to energy issues and to the role of
technological innovation in addressing them (although, in fairness, it
must be said that the FY2002 budget request had to be submitted before
Vice President Cheney's energy task force had completed its work). In
any case, I hope that Congress's appropriation for FY2002 will ignore
the numbers in the Administration's request and substantially boost
energy R&D spending toward the trajectory recommended by PCAST in 1997.
This brings me to the bills under consideration in today's hearing--
particularly S. 597--to which I now turn.
ENERGY R&D PROVISIONS OF S. 597
The essence of the procedure used to develop the budget
recommendations for applied energy-technology R&D in Title XIV of
Division E of S. 597 (the Comprehensive and Balanced National Energy
Policy Act) was, as I understand it, to shift to FY2006 the FY2003
spending targets recommended in the 1997 PCAST study and then to
provide annual increments above the FY2001 authorization levels so as
to meet those targets by 2006.\6\ (This procedure reflected a concern,
I believe, that the widening gap between the PCAST recommendations and
the actual appropriations out to FY2001 has made it impractical to get
back onto the PCAST-recommended trajectory by 2003.) The specific
focuses and targets of the energy R&D efforts laid out in S. 597 also
match quite closely the recommendations in the PCAST report, as do the
recommendations on management of DOE science and technology programs in
Title XV of the bill. My colleagues on the 1997 PCAST energy panel and
I are most appreciative of the weight placed on our recommendations by
Chairman Bingaman and his co-sponsors in the development of this bill.
We did our best to develop and describe, in our report, a comprehensive
and balanced Federal energy R&D program, and we are delighted to see so
much of it reflected in the Comprehensive and Balanced National Energy
Policy Act.
---------------------------------------------------------------------------
\6\ This is apparent by direct comparison of the PCAST FY2003 and
S. 597 FY2006 budgets in the renewables case but not in the efficiency,
fossil, and nuclear cases, where the authors of the bill used different
conventions than the PCAST panel did in deciding what programs to count
as part of energy R&D. The fusion science budget is treated in the bill
(as DOE also treats it) as part of the Fundamental Energy Science
program rather than as applied energy-technology R&D, and I did not
find a breakdown indicating what part of this program would be
designated for fusion.
---------------------------------------------------------------------------
The recommendations for R&D on nuclear fission in S. 597 combine
programs related to commercial nuclear electricity generation with
programs on nuclear medicine and nuclear power for satellite and space
missions, among other categories, and the bill's budget totals for
fission cannot be compared directly to the PCAST recommendations in
which applications other than commercial electricity generation were
not included. I believe it would be useful to disaggregate these budget
categories in the final version of the bill.
I have some concern, in any case, with the wording in the current
version (Sec. 1405, part 7.b) characterizing the nuclear appropriation
as being for ``demonstration and initial deployment assistance'' as
well as for research and development. The PCAST recommendations on
nuclear fission were for R&D relating to extending the operating
lifetime of existing reactors and to exploring advanced approaches to
improving the economics, safety, waste management, and proliferation
resistance of nuclear energy systems in the future. In my personal
view, the question of whether government resources should be allocated
to demonstration and deployment (as opposed to research and
development) of advanced fission technologies needs further
exploration, and I am certainly not convinced that any of the advanced
approaches warrant government expenditures for demonstration and
deployment today.
CONCLUDING OBSERVATIONS
As the authors of S. 597 and the other bills under consideration in
this hearing are well aware, a comprehensive energy policy must include
far more than energy R&D. Many of the other elements--including aspects
of tax policy, regulatory policy, infrastructure development,
performance standards, and consumer protection--are addressed in this
array of bills. Other elements, such as an appropriate framework of
incentives and/or regulations to work in combination with advanced
energy technologies to adequately reduce greenhouse-gas emissions from
energy supply, remain to be developed.
R&D in any case should be the easiest part of the energy-policy
equation with respect to gaining approval and finding the money,
inasmuch as it is relatively noncontroversial and relatively
inexpensive. With respect to cost, it may be noted that the difference
between the $1.7 billion being spent of federal applied energy-
technology R&D in FY2001 and the $2.4 billion recommended by PCAST for
FY2003 is about two tenths of a percent of the military budget and is
equivalent to an extra 0.7 cents per gallon on the price of gasoline.
Yet recent history reveals that even such modest investments in a
secure and sustainable future energy supply are astonishingly difficult
to attain.
The Chairman, the members, and the staff of the Senate Committee on
Energy and Natural Resources are to be commended for the major effort
they are investing--as manifested in S. 597 and in the series of
hearings of which today's is but one--to address this problem. I thank
you for this effort, for the confidence you have placed in the PCAST
recommendations, and for allowing me to present my views this morning.
REFERENCES
(1) John P. Holdren. ``U.S. Vulnerability to Oil-price Shocks And
Supply Constrictions . . . And How to Reduce It.'' Committee on
Governmental Affairs, United States Senate, Oversight Hearings on
Recent Oil-Price Increases. March 24, 2000. http://www.senate.gov/gov--
affairs/032400--holdren.htm.
(2) John P. Holdren. ``Improving U.S. Energy Security and Reducing
Greenhouse-Gas Emissions: What Role for Nuclear Energy?'' Hearing by
the Subcommittee on Energy and Environment, Committee on Science, U.S.
House of Representatives. July 25, 2000. http://ksgnotes1.harvard.edu/
BCSIA/Library.nsf/pubs/energysecurity.
(3) John P. Holdren. ``Energy Efficiency and Renewable Energy in
the U.S. Energy Future'', Committee on Science, U.S. House of
Representatives, Hearing on The Nation's Energy Future--Roles of
Renewable Energy and Energy Efficiency. February 28, 2001. http://
ksgnotes1.harvard.edu/bcsia/library.nsf/pubs/energy-future.
(4) John P. Holdren and Samuel F. Baldwin, ``The PCAST Energy
Studies: Toward a National Consensus on Energy RD3 Policy'', Annual
Review of Energy and the Environment, 2001, in press.
(5) President's Committee of Advisors on Science and Technology,
Energy Research and Development Panel. Federal Energy Research and
Development for the Challenges of the 21st Century. Washington, DC:
Government Printing Office. November 1997. http://www.ostp.gov/Energy/
index.html.
(6) Secretary of Energy Advisory Board, Task Force on Strategic
Energy R&D. Energy R&D: Shaping Our Nation's Future in a Competitive
World. Washington, DC: Government Printing Office. 1995.
(7) President's Committee of Advisors on Science and Technology,
Fusion Review Panel. The U. S. Program of Fusion Energy Research and
Development. Washington, DC: Government Printing Office. July 1995.
http://www.ostp.gov/PCAST/fusionenergypub.html.
(8) President's Committee of Advisors on Science and Technology,
Panel on International Cooperation in Energy Research, Development,
Demonstration, and Deployment, Powerful Partnerships: The Federal Role
in International Cooperation on Energy Innovation. Washington, DC:
Government Printing Office. June 1999. http://www.ostp.gov/html/
p2epage.html.
The Chairman. Thank you very much for your testimony, Dr.
Richardson. Why don't you go right ahead.
STATEMENT OF DR. ROBERT C. RICHARDSON, PHYSICS PROFESSOR AND
VICE PROVOST FOR RESEARCH, CORNELL UNIVERSITY
Dr. Richardson. Mr. Chairman, Senator Craig, I am Bob
Richardson, I am physics professor and vice provost for
research at Cornell University. I also serve as chair of the
physics policy committee of the American Physical Society, an
organization of 40,000 people. I would like to thank you for
the opportunity to testify today. My testimony principally
concerns the administrative structure of the Department of
Energy and the effect that the structure has had on the
performance of the office of science and the energy research
programs. But first I would like to comment briefly on the
Department of Energy's research budgets for fiscal year 2002,
particularly in the context of the public's renewed awareness
about energy issues.
The Vice-President's energy task force report highlights
the important role that research must play in securing our
energy future by creating and bringing to market new energy
technologies, enhancing efficiency of energy production in use
and mitigating environmental impact of existing technologies. A
sustained commitment must be made to invest in both fundamental
science and applied energy research. Even if energy were not on
the policy front burner, the President's budget request would
short change the Department of Energy's civilian research
programs.
As the chart over there shows, the Department of Energy,
the lead agency for physical sciences, has seen its research
budget decline steadily during the 1990's. Last year,
recognizing that technology drives the economy and that today's
science becomes tomorrow's high tech product, the Republican
Congress and the Democratic White House reversed this trend
with major increases in many of Department of Energy's research
programs.
The budget request submitted by the current administration
turns the clock back. With energy on everybody's mind, that
request is not only bad policy; it is bad politics. Admittedly,
the administration submitted its request before the Vice-
President's energy task force had released its report and its
amended budget. The administration has sought to remedy some of
the deficiencies, but I believe that it has not gone nearly far
enough nor have the House and Senate Appropriations bills. I
hope this committee sends a clear signal through its
authorization bill that the budgetary momentums established
last year for Department of Energy's research programs must be
sustained for fiscal year 2002. Our economic future requires it
and our energy future depends on it and the technology
workforce of the future will vanish without it.
There are many reasons why Department of Energy's research
programs have fared poorly in the budgetary process for some
time. The end of the cold war reduced defense exigencies. Cheap
fuel prices created a feeling of energy security and hazardous
waste, and lax security at some of our national laboratories
gave the Department a bad reputation. But the administrative
structure within the Department of Energy has exacerbated
matters. The highest level administrator with sole authority
for science is the Director of the Office of Science who sits
on three levels below the Secretary. Today, one Under Secretary
oversees the national nuclear security agency and one oversees
all other activities. Only rarely has an Under Secretary had a
science background, with Department of Energy's weapons
programs and environmental management activities absorbing
major attention. Policymakers in the executive branch and in
the Congress have often ignored the Department's research
programs.
I am here today speaking as a representative of a panel of
ten other scientists who have had extensive administrative and
policy experience with Department of Energy's scientific
programs. The report from which the balance of my testimony is
drawn, ``Department of Energy's Science in the Future'' was
stimulated by discussions that took place at a meeting of the
American Physical Society's Physics Policy Committee last year.
With the Chairman's permission, I would like to have this
report included in the record.*
---------------------------------------------------------------------------
* The report can be found in the appendix.
---------------------------------------------------------------------------
The Chairman. We would be glad to include that.
Dr. Richardson. The report makes several observations
specifically regarding the Office of Science. First, the office
oversees outstanding national laboratories whose capabilities
for solving complex interdisciplinary problems are not easily
matched elsewhere. It builds and operates large-scale user
facilities of importance to all areas of science and in large
part has been enormously successful. And it supports a large
array of university research programs that are responsible for
educating and training the next generation of scientists.
Second, as I noted earlier, for about a decade the
Department of Energy's science budgets have been declining and
have fared very badly compared to other agencies. These
difficulties have been exacerbated by perceptions of
mismanagement and security problems throughout the Department.
In many areas, the budget situation has reached crisis
proportions jeopardizing future U.S. leadership in many
essential areas of science.
Last, the Director of the Department of Energy's Office of
Science has responsibilities comparable to those of the
Director of NSF and not very different from those of the
Directors of NIH and NASA, but does not have comparable
authority or visibility.
Mr. Chairman, our report proposed two alternative
recommendations, one of which comes under the purview of this
committee. It is also one that appears in division E, title XV,
section 1503 of S. 597. That recommendation is to establish a
position of Under Secretary for science and technology. I urge
the committee to adopt this in its final mark-up.
Our report also recommended that the Under Secretary serve
as a science advisor to the Secretary as called for in S. 597,
subsection B3. Although our report did not set out additional
details for the Under Secretary, I think the panel would feel
comfortable in endorsing the remaining duties described in
subsection B.
Additionally, as the Department moves toward stricter
accountability for research performance, the Under Secretary
will have an important role in ensuring that the Department of
Energy strive for quality science as well as efficient program
administration. Our report expressed the hope that a qualified
Under Secretary would be an influential scientist who could be
an effective leader and spokesperson for the Department of
Energy science and energy and comparable visibility and
authority to the Directors of NSF, NASA and NIH. I would be
pleased to answer questions.
The Chairman. Well, thank you very much for that testimony.
Dr. Moniz, welcome back to the committee. We are glad to see
you. We are aware of your title and name, so go right ahead.
STATEMENT OF ERNEST J. MONIZ, PROFESSOR OF PHYSICS,
MASSACHUSETTS INSTITUTE OF TECHNOLOGY
Dr. Moniz. Thank you, Mr. Chairman and Senator Craig. It is
good to see you, as well, again. In fact, it is refreshing to
be back here but not having my testimony cleared by the OMB or
without Sherpas to carry the Q&A books that were always
required. Thank you for inviting me to comment on the committee
consideration of bills that can have a significant impact on
energy, scientific research and technology development programs
at the Department of Energy. My perspective is, of course, as a
former Under Secretary and I am very pleased that the record
will show that Bob at least implicitly acknowledged that I am
still competent as a scientist.
I will organize my remarks very briefly along four areas:
science, education and training, R&D management, energy, all
areas touched upon very deeply in the collection of bills
before us. In science, the committee is very well aware of the
Department's key role in American science and technology. The
Department remains the largest supporter of basic and applied
research in the physical sciences and I would like to use that
statement simply to reinforce the importance of administration
and congressional support for balanced Federal investment
across science and engineering, and most specifically,
reinforcing what Bob said, the need to maintain a momentum in
having the physical science investments keep pace with need and
with investments in other areas like life sciences.
Secondly, the Department has had, and I want to emphasize,
a very important role especially through its laboratories in
developing what I would call enabling technologies that cut
across the mission areas and that prove to be of broad and deep
national value. Large scale scientific computing, advanced
materials, accelerators, isotope applications, genomics, many
of these. This context, I think, emphasizes the importance of
some of the bills that the committee has before it. For
example, those on scientific computing and nanoscience. On
computing, for example, the nuclear weapons program has
traditionally been a principal driver for super computer
development. We need a vigorous and integrated push today in
the civilian area. The benefits will be major to ASCI. They
will also be very, very major to science broadly, combustion,
global systems, plasmas infusion, subsurface transport of
contaminants, quark structures of matter, advanced materials,
functional genomics, etc. The convergence of technology and
scientific community commitment has been there now for several
years to drive this kind of enabling technology. The resources
have not kept pace. It is time to get on with the task.
Education and training. The committee has correctly pointed
to the diminished state of university education in nuclear
engineering and has proposed, for example, some human resource
programs to help rectify that. Those are certainly in the right
direction. However, I believe to be effective two other issues
well known to the committee simply must be addressed.
First, to attract young faculty to the field, there must be
a forward looking robust research program. The NERI program
that we started a few years ago, for example, has been a great
stimulus in the field. Congress must now resolve issues about
the program's trajectory, in particular. In my view, the
program cannot sustain itself and attract new people without
evolving into more costly laboratory work based upon the most
promising concepts developed in the earlier phase. This will
take significant increases in funding. The administration
request actually cut the funding, but I think that is a key
policy issue here. If we are to be committed to exploring the
concepts for intrinsically safe, proliferation resistant, waste
minimizing and economic new approaches, then we simply must
make the commitment to move these programs into the laboratory
stage.
The second issue is that of research infrastructure, again
without which human resource development will be ineffective.
University reactors are an example of this and I believe that
we need a systemwide evaluation of those reactors and an
evaluation integrated with that for Department of Energy site
infrastructure. The goal, in my view, should be a well
structured hierarchy of teaching and research facilities on
campuses at strengthened regional academic centers and at
Department of Energy sites.
The third issue: R&D management. Let me start with
portfolio management, which has been a major topic today and
will be, I am sure, later on. Starting in 1998, the Department
did, in fact, substantially revise its approach to R&D
portfolio management with four linked processes: portfolio
development, portfolio analysis, strategic roadmapping and
improved corporate R&D oversight. To a large extent, this is a
realization of the portfolio process recommended by the PCAST
panel on energy that John Holdren chaired. Very importantly,
the products of this portfolio analysis were well integrated
into the fiscal year 2000 and fiscal year 2001 budgets. The
importance of it can be stated in a couple of ways. First of
all, it is very important that portfolio architecture is not
geared to organizational units. It is geared to strategic goals
of the Department. The core of the process is a formal
portfolio analysis that brings out key gaps and opportunities
aligned with strategic goals. The value of the process can be
seen just by giving you examples. In the first year, a focus on
energy system reliability came out well before the problems in
California, with now robust programs in electricity and gas
system reliability. In the second year, the group raised a very
interesting idea of using an environmental air quality multi-
attribute life cycle analysis as criteria for programs. My
point simply is that this shows how a new cross-cutting
perspective has been injected into portfolio management and has
really evolved the portfolio to meet emerging strategic needs
of the Nation. There is considerable buy-in. I believe we need
support for this process. I would make, respectfully, a
recommendation. The committee, for example, in its technology
transfer bill, suggests getting an annual report. I would
respectfully suggest considering asking for an annual report as
well from the portfolio analysis activity. That will couple
this committee very well to the process of aligning R&D with
the strategic goals and help keep the process moving forward.
Tech transfer. I'll be very brief given the time. This
committee continues to show a very important interest in that
area and, indeed, I believe leadership of this committee may be
very important for providing stability and resources essential
for engaging private sector partners. The partners are diverse;
the spill-over effects are enormous. We did, in the last 2
years, establish a formal corporate process that I believe
helps the laboratories, helps the small businesses understand
how to interact with the system. S. 259 could help to solidify
these advances and, again, congressional support is essential
if technology transfer and partnership programs are not only to
be sustained but, frankly, are to be able to withstand success.
A third area in R&D management is organization. Bob has
just spoken about that, the consideration to establish the
position of Under Secretary for Science and Technology. Given
my last position, I must express concern with the proposal, a
concern that can be relieved, certainly, with further
elaboration. My concerns with the proposal would weaken or help
advance the progress made in the last few years in achieving
somewhat better integration and coordination across the
science, energy and environmental quality business lines. The
invigorated R&D council, chaired by the Under Secretary and
particularly the R&D portfolio roadmapping process provided
mechanisms to advance integration and coordination and to
enhance the interception of technology policy with energy and
environmental policy. So, the details are going to matter a lot
here. I don't presume to offer a solution but to raise my
concern in the spirit of a do-no-harm approach in the absence
of greater detail on the overall partitioning of
responsibilities among all Under Secretaries and the deputy
secretary. Integration and coordination games are hard won and
more easily lost.
Finally, in energy, clearly the past year has brought great
energy challenges and the committee has before it the
consideration of many energy technology initiatives. I won't go
through a number of them that have come out in the context of
our portfolio analysis. They are in the written testimony. I
would just conclude by reinforcing the earlier statements that
the challenges and the opportunities being brought out through
portfolio analysis require the kinds of increases in energy and
technology development that John Holdren in particular has
spoken of. Any increase must match the scale of the challenges
and I strongly support the committee's commitment to, in fact,
supporting these programs and to hopefully moving forward with
the portfolio-based approach. Thank you and I will be happy to
answer questions.
[The prepared statement of Dr. Moniz follows:]
Prepared Statement of Ernest J. Moniz, Professor of Physics,
Massachusetts Institute of Technology
Thank you for inviting me here today to discuss proposed
legislative actions that can have a significant impact on energy,
scientific research, and technology development programs at the
Department of Energy. My perspective on these is informed by my recent
service as Under Secretary in the Department.
SCIENCE
This Committee is very well aware of the Department's key role in
American science and energy technology development. Nevertheless, some
aspects bear repeating. The Department remains the largest supporter of
basic and applied research in the physical sciences, activities that
not only underpin national security and economic growth in the
information age, but also provide the technological basis for many
stunning advances in the life and medical sciences. One need only look
at some of the very recent developments to get the flavor of the DOE
national laboratories' continuing importance to the nation's science
and technology enterprise:
a record 14.7 Tesla electromagnet at the Berkeley lab
insight into particle-antiparticle asymmetry at SLAC
creation of the second-hardest bulk substance (after
diamond) at Ames
two Discover Magazine awards to Pacific Northwest, for a
landmine detector and for a combined optical and magnetic
resonance microscope for cellular research
an experimental microbeam radiation therapy at Brookhaven
for brain tumors in infants and young children
This reinforces the importance of Administration and Congressional
support for balanced Federal research investments across science and
engineering. The Administration FY02 budget request is very
disappointing in this regard. Members of this Committee are to be
commended for urging that the Congress restore a stronger investment
approach to research in the physical sciences and engineering; this
will serve both science and the nation well in the years ahead.
More specifically, the Department of Energy, through its unmatched
national laboratory system and its support of university researchers
and educators, and because of the diversity of its missions in nuclear
security, energy, and environmental remediation, has played a very
strong role over many decades in developing enabling technologies that
cut across the mission areas and have proved to be of broad and deep
national value. Examples are well known, including large scale
scientific computing, advanced materials, accelerators, nuclear isotope
applications, genomics, and others. Beyond the evident metrics of
success (such as over seventy Nobel prizes in science, or a third of
the R&D100 Awards for technology), these sustained enabling technology
developments associated with the Department's frontier research
programs and national laboratories underpin a significant part of our
economic productivity gains, year-in and year-out certification of the
nuclear weapons stockpile, unparalleled medical diagnostics, a new
generation of efficient energy technologies, and many more developments
central to our nation's future.
This context brings out the importance of the Committee's
initiatives in advanced scientific computing and in nanoscience. The
nuclear weapons program has traditionally been a principal driver for
supercomputer development and the associated software and applications
tools. This has never been more important to the weapons program than
it is today, with the need to certify the nuclear stockpile without
underground testing. Large scale simulation is the integrator of
previous test data and continuing experimental tests of weapons
subsystems. However, we are also reaching the level of computational
power that will allow true discovery potential to be realized across
numerous areas of basic science and technology development. Indeed, the
DOE and NSF jointly sponsored a 1998 National Academy workshop on
scientific simulation, and the ``friendly skeptic'' chairman, Professor
James Langer of Santa Barbara ( former Director of the Institute for
Theoretical Physics and President of the American Physical Society)
concluded from the meeting that scientific simulation could in this
decade take a place alongside traditional experimental and theoretical
inquiry as a tool of discovery.
The challenge to do so is considerable, but within grasp with
strong support and leadership. The Accelerated Strategic Computing
Initiative (ASCI) in Defense Programs is urgently stretching the
hardware frontier, but much remains to be done in systems software,
visualization, algorithm development, data storage and transmission,
and other areas to most efficiently utilize the raw computational
power. The task calls for large integrated teams of physical
scientists, computer architects and engineers, and software designers.
An equally vigorous and integrated push in the civilian applications
areas (science, energy, environment) will bring a talented and much
larger community in both labs and universities into developing the
necessary tools for a major leap forward in scientific simulation
during the next several years. This will be a major benefit to ASCI.
The broader scientific rewards will be enormous. In 1998, the
Department chartered groups drawn from the entire American research
community to map out the potential impact of such a program in diverse
scientific areas ( combustion, global systems and climate, plasmas and
fusion, subsurface transport of contaminants, quark structure of
matter, advanced materials, functional genomics, . . .). The conclusion
was that several of the areas would immediately make major strides at
the tens of tera-ops level if the integrated program were pursued;
other areas (such as vadose zone science) would do so if the simulation
program was coupled to a synergistic experimental and observational
program.
Permit me to elaborate slightly on one example of relevance to the
energy theme of this hearing. Combustion is one of the areas primed for
a major advance through simulation at the 10-100 tera-op scale.
Quantitative analysis, led by Sandia lab, showed that scientists could
for the first time link molecular level processes all the way to
engineering scale devices. This is a pathway to significant advances
within ten years in efficiency and emissions reductions for combustion
devices. The implications are clear for meeting our expanding energy
needs and stringent environmental demands simultaneously, while also
advancing basic science in chemical reactive flow, turbulence,
multiphase flow, and other areas that come together in a combustion
device. This is why I strongly support the Committee's advancement of
DOE's advanced computing proposals. It is part of the longstanding
tradition of driving critical enabling technology through frontier
research. The convergence of computer technology and scientific
community commitment has been demonstrated over the last three years,
without funding adequate to support that commitment. It is time to get
on with the task.
The nanoscience initiative at DOE and at other agencies (NSF, DOD,
DOC, . . .) is another excellent example of such enabling science and
technology, and the Spallation Neutron Source under construction at Oak
Ridge will soon offer to a national community of university, lab, and
industrial researchers a powerful frontier capability to study advanced
materials. Nanoscience and nanotechnology, which essentially seek to
design and engineer novel materials at the atomic level, will have
profound implications, from communications to life sciences to robotics
and intelligent machines (another area roadmapped by DOE, together with
NSF, NASA, and DOD, in a multi-lab effort). These are all critical
enabling science and technology areas where the national laboratories,
in conjunction with universities, can put together the needed large
interdisciplinary teams, can build upon decades of accomplishment, and
do the work that drives future mission success.
EDUCATION AND TRAINING
The Committee's evaluation of the diminished state of university
education in nuclear engineering correctly suggests that the U.S. (and
possibly other industrialized nations) may soon face a shortage of
trained and creative personnel in this area. That manpower will be
needed not only to satisfy DOE facility staffing and in the event that
nuclear energy is expanded, but also to address the wide spectrum of
nuclear science and technology needs throughout our society. Proposed
programs, such as that for junior faculty research grants, can help
attract talented young people. However, I wish to emphasize two issues,
well known to the Committee, that must be resolved if such human
resource development programs are to succeed.
First, there must be a forward-looking, robust research program.
The Nuclear Energy Research Initiative (NERI) and the associated
Generation IV discussions are central. NERI, in its three year
existence, has stimulated new thinking about advanced reactors, fuels,
and fuel cycle concepts. I note that, at a small nuclear energy meeting
held at MIT a few months ago, much of the discussion about new ideas
had roots in NERI, despite its youth and modest funding. This modest
funding to date has confined the sponsored work to studies, appropriate
for the first few years. However, the Congress must soon resolve issues
about the program's trajectory; in particular, it cannot sustain itself
and attract new people without evolving into more costly laboratory
work based on the most promising concepts developed in the earlier
phase. In this regard, the Administration-proposed budget cut for NERI
will clearly have the opposite effect to that intended by several
members of the Committee. Significant increases in funding are needed
in the years ahead if the nation is committed to exploring advanced
concepts that are intrinsically safe, more proliferation-resistant,
waste minimizing, and still economic. This is not to judge whether any
of these new concepts will play an enhanced role in our future energy
mix, but the time scales for a major impact are long, the constraints
on fossil fuel emissions will become more severe, and exploration of
advanced options belong in a balanced R&D portfolio. This is
independent of whether or not there is an expansion of nuclear power
based on current technology. Further, the NERI program should be
broadened to include as much international collaboration as possible,
consistent with policy and diplomatic constraints.
Second, human resource development and execution of the next phase
of NERI both require an adequate research infrastructure. The Nuclear
Energy Research Advisory Committee (NERAC) has examined this question.
The university reactors are, as a class, underfunded and underutilized.
There are probably too many. An evaluation of the university reactors
as a system is called for, and the evaluation should be integrated with
that for nuclear infrastructure at the DOE sites. The goal should be a
well structured hierarchy of teaching and research facilities on
campuses, at strengthened regional academic centers, and at DOE sites.
This is an area where strong and strategic collaboration between the
DOE labs and facilities and the universities is essential for meeting
long term goals.
Another manpower issue raised by the Committee is that of mobility
of contractor personnel, for example, between different laboratories. I
would like to raise a slightly different point on mobility. The
Department of Energy technical manager corps is in need of augmentation
and rejuvenation. Such positions should be viewed as part of a possible
career path for laboratory scientists and engineers. The Department,
the laboratories, and the programs would benefit (the same holds true
for production sites and cleanup sites). To accomplish this may require
legislation that would permit the type of responsibilities in
rotational assignments that would present the career opportunities
attractively and on an appropriate scale.
R&D MANAGEMENT
Portfolio Management
Starting in l998, the DOE substantially revised its approach to R&D
portfolio management. The approach has been applied, with some
variation, across all four business lines (science, national security,
energy, environmental quality) under the umbrella of the R&D Council,
chaired by the Under Secretary. The approach involves implementation of
four linked processes: (1) portfolio development--identifying
activities and mapping them to strategic goals; (2) portfolio
analysis--identifying gaps and opportunities and defining ``corporate''
priorities; (3) strategic road-mapping--defining directions and
milestones for selected corporate priorities together with
stakeholders; (4) improved corporate R&D oversight--managing the
portfolio and the research enterprise. To a large extent, this is a
realization of the portfolio process recommended by the PCAST panel on
energy R&D, chaired by John Holdren. Very importantly, the portfolio
process was integrated into preparation of the Department and
Administration budget proposals for FY00 and FY01 through active
participation of the Chief Financial Officer.
A few points are worth elaboration in the context of the Energy R&D
Portfolio, which we will focus on for this hearing, and on the
Portfolio Analysis (that is, the first two steps above). The first key
point is that the portfolio architecture is not geared to
organizational units but rather to strategic goals of the Department.
This immediately breaks down some of the stovepipes and provides a
language that interfaces more easily with broader policy makers. Thus,
the portfolio:
1. Describes and explains DOE's current R&D activities and
showcases recent accomplishments.
2. Provides a basis for evaluating portfolio balance vis-a-vis
pursuit of strategic goals.
3. Better aligns technology investments with policy goals.
4. Provides the basis for planning future investments through
portfolio analysis and roadmapping.
The core of the entire process was an annual formal portfolio
analysis exercise, carried out by an expert panel. The Laboratory
Energy R&D Working Group (LERDWG), composed of senior laboratory
personnel, played a key organizational role. The expert panel also had
senior career technical people from DOE and private sector experts
(universities, NGO's, industry groups). A specific analytical tool
developed by the Sandia lab, called the Vital Issues Process, was
applied to the portfolio with the PCAST strategic, diversity, project,
and public-private partnership criteria in mind. The principal output
is a set of priority gaps/opportunities in the portfolio when viewed
from the perspective of strategic goals and a set of cross-cutting
portfolio planning opportunities.
The value of the process can be seen with a couple of examples
(other elements of the output will appear in the next section of the
testimony). In the first year, a strong focus emerged on energy system
reliability (both electric and natural gas infrastructures); I note
that this occurred well before the recent reliability problems
surfaced, demonstrating the value of strategic thinking coupled to
policy. Reliability R&D is an example of a crucial area that did not
fit neatly into programs organized by fuel type. The strong FY00
Department budget proposal in this area is the type of R&D investment
that can have major beneficial consequences down the road.
In the second year, a potentially important direction emerged when
the analysis group raised the issue of using indoor environmental air
quality and multi-attribute life-cycle analysis as important criteria
for evaluating classes of R&D proposals. This interesting idea would
take some time to implement effectively, but can also have significant
benefits. I raise this and the earlier point on reliability here just
to exemplify the type of new cross-cutting perspective injected into
the portfolio management and portfolio evolution process (the Committee
may be interested in the full analysis reports). This earned the
process considerable ``buy-in'' from career professionals, from the
labs, and from external participants and observers. An Executive
Secretariat was set up in the Policy Office. There is considerably more
to be done in advancing the process, such as further integrating the
individual laboratory institutional plans with the portfolios, but
substantial gain has been realized.
As the Committee has considered asking for an annual report from a
technology transfer oversight group (to be discussed below), I
respectfully suggest consideration of requesting an annual report from
the portfolio analysis activity. This can be a way to use a
demonstrably successful process to more rapidly evolve the energy R&D
agenda to meet new challenges associated with strategic goals and to
spur further integration of the entire DOE R&D system.
Technology Transfer
This Committee continues to show considerable interest in
laboratory technology transfer and partnerships, as indicated by S. 259
introduced by Senators Bingaman, Domenici, and Murray. Overall,
Congressional support for partnerships has been very uneven over the
last six or seven years, so the leadership of this Committee may be
important for providing the stability and resources essential for
engaging private sector technology partners. There are many scholarly
discussions about the value of such partnerships and the mechanisms to
be followed, but the value is perhaps made most clear by simply looking
at a few recent examples:
Partnership with Intel: an arrangement to provide a no-fee
license to DOE to redesign Intel's Pentium processor into a
radiation-hardened chip for space and defense uses
Partnership with Celera Genomics: strategic framework for
advancing the state-of-the-art supercomputing and hardware
design for genome-based research in the life sciences
Partnership with Columbia University: an innovative program
to explore the potential of establishing a joint Integrated
Analysis and Modeling of Earth Sciences and Engineering Center
at the unique Biosphere 2; this might provide unprecedented
opportunities for controlled ecological experiments on the
meso-scale
Partnership with California Energy Commission: a model work-
for-others agreement that has resulted in over $20 million in
increased joint research activities
Partnership with ASML: first-of-a-kind cooperative agreement
with this foreign-based firm to join a $250 million U.S. effort
to develop next generation lithography equipment
This is an extraordinarily diverse set of partners. In every case,
the Department's laboratories bring unique expertise and/or facilities
to the partnership and the project is important for DOE missions. The
partners bring a mix of resources, unique facilities, and complementary
expertise. The spillover effects beyond the partners can be
substantial.
During 1998-2000, the Department moved forward to assist the
laboratories with more uniform corporate oversight of technology
transfer. A variety of issues, such as inconsistent treatment of
intellectual property issues at the field level, called for more high-
level corporate attention and centralized policy direction (while
leaving individual CRADA decisions to the laboratories within the
policy framework). A key step was establishing the multi-program
Technology Transfer Working Group (TTWG) under the R&D Council chaired
by the Under Secretary; an Executive Secretariat was established in the
Policy Office, together with that for portfolio management. The TTWG
coordinates policy and implements reforms; a partial list of steps
taken include:
streamlining DOE technology transfer procedures and
practices and, in particular, optimizing the process for
concluding cooperative research and development agreements
(CRADA's)
promoting public awareness of opportunities and resources
available for technology partnerships
developing clear guidance for stewardship of intellectual
property and assuring that international partnerships safeguard
U.S. economic interests
implementing management reforms to assure coordination and
performance of DOE technology transfer activities
drafting two new orders to promote technology transfer
within DOE, to establish DOE policy to leverage resources
through partnerships, and to define clear roles and
responsibilities for programs and field elements
establishing ombudsman capability throughout all thirty DOE
facilities that engage in technology partnerships
developing performance measures for inclusion in M&O
contracts
developing model agreements to streamline process for lab
partnership with state research organizations
A number of these steps particularly facilitate partnerships with
small business.
S. 259 can help solidify these advances and set the stage for new
ones. The level of corporate oversight and systemization provided by
the TTWG and R&D Council produces a reasonable degree of accountability
and allows the Department to more easily facilitate complex CRADA's.
Congressional support is essential if the technology transfer and
partnership programs are to sustain (and withstand) success.
Organization
The Committee is considering establishment of the position of Under
Secretary for Science and Technology. This individual would monitor the
Department's R&D programs. A number of my colleagues in the science
community support such an idea. However, as one who has just served as
Under Secretary for Energy, Science, and Environment and who, I
believe, would generally be accepted as having the qualifications
spelled out for the new position, I must express concern with the
proposal, a concern that might be relieved with further elaboration. I
should add that the nature of the ``customers'' and the agencies with
which one deals does, in my view, support the current structure of two
Under Secretaries, one for the national security mission, another for
civilian missions. This discussion clearly addresses only the latter.
My concern is whether the proposal would weaken or help advance the
progress made in the last few years in achieving somewhat better
integration and coordination across the Science, Energy and
Environmental Quality business lines, in particular the science and
technology programs. The current organization provided an opportunity
to further infuse the energy and environmental quality programs with a
science and technology perspective, to extend the use of competitive
merit-review-based processes in those programs, and to bring a
technically grounded perspective to broader policy discussions in the
Department and within the Administration. The invigorated R&D Council
chaired by the Under Secretary and particularly the R&D portfolio/
roadmapping process provided mechanisms to advance integration and
coordination and to enhance the intersection of technology policy with
energy and environmental policy. The details clearly matter. At one
extreme, if the new Under Secretary had only one office in the line,
the Office of Science, this stovepiping would be detrimental to the
integration and coordination discussed above, since convening power for
R&D monitoring would not match up well to the line organization. The
discussion must be clarified in the context of the responsibilities of
all the Under Secretaries and the Deputy Secretary (in particular, the
COO responsibilities). For example, since most of the civilian R&D is
in the Science and Energy business lines, while the Environmental
Management program offers large scale ``COO-like'' challenges, a
separation along those lines could be effective; this would still
suggest the need to integrate the environmental quality business line
into the overall R&D system, but clearly no organizational scheme can
cleanly meet diverse management issues. I do not presume to offer an
overall solution, but raise my concern in the spirit of a ``do no
harm'' approach in the absence of greater detail on the overall
partitioning of responsibilities. Integration and coordination gains
are hard won, and more easily lost.
ENERGY
The past year is one that has brought energy challenges to the
fore. The Administration's National Energy Policy correctly states that
advanced energy technologies represent the ultimate answer to those
challenges (although the Administration budget proposal for DOE energy
technology programs appears to be inconsistent with that statement).
This Committee's commitment to strong energy R&D will pay dividends
well into the future, just as previous Federal investments have helped
shape today's energy sector. The fact is that, while reliance on
competitive markets is a bipartisan ``first principle'' of U.S. energy
policy, Federal support for energy R&D, often in partnership with the
private sector, is essential for moving energy technology forward at a
competitive pace. The strong externalities in the energy business, the
long time to technology commercialization, the significant R&D cost for
some technologies, the aversion to a high degree of risk in a highly
competitive environment, and the need for a diverse set of technologies
conspire to keep the private sector from making investments
commensurate with the public good benefits. Indeed, deregulation trends
have reduced significantly the longer term, pre-competitive R&D
investments made by industry-wide organizations such as the Electric
Power Research Institute (EPRI) and the Gas Technology Institute (GTI).
It is important that the contributions made by these organizations over
the years be sustained.
The Committee is considering numerous energy technology areas. I
will highlight a few areas tied to the portfolio/roadmap process and
organize my remarks around the preeminent challenges identified in the
1998 Comprehensive National Energy Strategy and the September 2000
Powering the New Economy:
1. Enhancing America's Energy Security
World dependence on oil for transportation and the dependence of
OECD countries on substantial oil imports contribute to volatility in
oil prices and attendant economic and social disruptions for both
consuming and producing nations. Similarly, volatility has been seen in
natural gas markets over the last year. We have three basic strategies
to address this concern:
improved vehicle efficiency (automobiles and trucks)
improved exploration and production technologies ( increased
access and lower cost)
alternative fuels (biofuels, natural gas derived fuels,
hydrogen for oil replacement; natural gas alternatives for
electricity production e.g. renewables; . . .)
All three paths have been vigorously pursued over the last years
and should continue to be pursued aggressively. The first, improved
automotive and truck efficiency, is the area that can have the greatest
impact on oil import requirements in the relatively near term. PNGV has
helped spur development of numerous technologies that can substantially
improve auto efficiency, and hybrid autos may begin penetrating the
market in appreciable numbers within a few years. Major gains are
similarly realizable with trucks. Alternative fuels could have a
similarly large impact in a somewhat longer time frame, as fuels
infrastructure challenges are overcome for widespread use. Also, some
alternative fuels may reduce oil import dependence but place a
significant additional demand on domestic natural gas supply. This
leads back to a continuing focus on cost-shared R&D for new exploration
and production technologies. As one example, the DOE in calendar year
2000 engaged with the private sector to develop a technology roadmap
for ultradeep (5000 feet and substantially deeper) off-shore drilling
technologies. This roadmap envisions fundamentally different
architectures for environmentally sound oil and natural gas production,
with expectations especially high for gas. This development would be
costly, would extend over many years, but could also lead to large
returns for the nation. This type of cost-sharing and risk-sharing with
industry has led to substantial gains in the past. Ultradeep drilling
technology is an example of a roadmap driven by strategic objectives.
2. Increasing the Competitiveness and Reliability of U.S. Energy
Systems
As already noted, this was identified in 1998 as an important R&D
focus area for the Department. The reliability initiative has three
principal components:
Electric reliability by focusing on regional grid control,
distributed resources and microgrids, information system
analysis, possible offsetting of peak summertime electric load
with distributed generation and natural gas cooling
technologies for example, and high capacity transmission
Natural gas infrastructure reliability to include storage,
pipeline and distribution R&D
Critical infrastructure protection, secure energy
infrastructures, vulnerability assessments, risk analysis, and
the development of protection and mitigation technologies
The Committee is considering a variety of natural gas pipeline
integrity and safety issues. The technology development is essential
here, since the public must be assured in the wake of recent tragedies
of pipeline safety if the large natural gas infrastructure expansion
needed over the next decades is to be realized.
We also note the importance of supportive regulation and
legislation if some of these technologies are to be put into widespread
use and thus provide maximal benefit. For example, distributed
generation has enormous potential for enhancing electric system
reliability and power quality and other public goods, but substantial
regulatory and business barriers need to be removed or at least
substantially lowered consistent with legitimate utility concerns.
Here, comprehensive Federal restructuring legislation may be essential
for providing national rules of the road.
3. Mitigating the Environmental Impacts of Energy Production and Use
Energy production and use is the principal contributor to smog,
acid rain, and greenhouse gas emissions that threaten our climate.
Energy technology development is essential for addressing these
problems at various length scales (urban, regional, global) and at
various time scales. For the relatively short time frame, the R&D
portfolio process led to an ultra-clean fuels initiative to address the
need for cleaner fuels within the context of existing refining
infrastructure. The initiative mobilizes industry and the national
laboratories to develop and demonstrate new technologies for making
large volumes of clean fuels from diverse fossil resources. The
initiative is integrated with the PNGV and truck programs to ensure
synergistic development of fuels and very efficient engines. This is
another example of the portfolio process leading to a crosscutting
initiative that addresses strategic goals in the context of an evolving
regulatory environment.
A key component of addressing all these environmental challenges is
increased efficiency. This is applied across all sectors--buildings,
vehicles, industry, energy production. For example, previous DOE
sponsored work has already led to major gains in buildings compact
fluorescent lights, optical coatings for windows, integrated building
designs. These technologies can be advanced further, but new directions
may also take hold, such as fuel cell driven combined heat and power
systems for buildings. Similar successes could be recited for energy
intensive industries (oxy-fuel glass making, . . .) or energy
production (very high efficiency utility scale gas turbines, IGCC coal
technologies, . . .).
Another key ongoing focus is renewable technologies. Very
substantial progress has been made in bringing down the costs of these
clean technologies, for example, wind in the 3 to 7 cents/kWh range and
photovoltaics less than 20 cents/kWh. Niche markets are readily
available to these technologies today and market penetration will
increase with further cost reduction. For the long term, these
technologies can transform many aspects of energy supply in an
environmentally sustainable fashion. Other technologies also have the
potential to be transformative in the very long term. Carbon
sequestration, for which an extensive roadmap was developed jointly by
the Offices of Science and Fossil Energy, could radically change the
prospects for coal use in a greenhouse gas constrained world. And
fusion continues to hold out hope as a major electricity source with
virtually no emissions and unlimited fuel. The increased focus on
alternative concepts is very important, and a burning plasma experiment
is an important step to carry out within the current decade or so,
preferably in collaboration with international partners. It is by no
means clear that these very long term options will realize their
potential. However, it is the very nature of a portfolio approach to
invest in technology developments that cover a range of risks and time
scales, and efforts such as sequestration and fusion carry with them
very substantial scientific gain as part of the integrated science and
technology program. Indeed it is generally the case that the very long
term programs have significant unresolved science questions (complex
plasma behaviors for fusion, and fundamental carbon fixation questions
for long term sequestration).
The greatest international long term environmental challenge is
clearly that of greenhouse gas emissions and climate change. It is
clear that the energy infrastructure development in developing
countries can have global consequences. The U.S. should, in my view,
sponsor a much more extensive and coordinated program of clean energy
development and deployment in such countries. In addition to the
environmental and associated benefits, this would help stimulate the
competitive position of American industry in these markets. In some
cases, the opportunity to engage in technology ``leapfrogging'' there
could have major unexpected benefits here.
4. Providing Diverse Energy Technologies for the Future
We have already indicated the breadth of technologies needed to
address our strategic energy goals and the process introduced into the
Department in 1998 to align the R&D investments with those goals. The
total energy R&D budget has declined dramatically (correcting for
inflation) over the last two decades. I believe an increase would match
the scale of the challenges discussed above and in the Administration
National Energy Strategy. The portfolio process will help ensure that
those additional resources are applied towards strategic goals with an
appropriate balance of time scales and risk for a healthy overall
return on taxpayer dollars.
Thank you, and I would be happy to address any questions from the
Committee.
The Chairman. Thank you very much. Mr. Fri, why don't you
go right ahead.
STATEMENT OF BOB FRI, CHAIRMAN, COMMITTEE ON BENEFITS OF DOE
R&D ON ENERGY EFFICIENCY AND FOSSIL
ENERGY
Mr. Fri. Thank you, Mr. Chairman. While I do have a day job
at the Smithsonian Institution, I am appearing here today as
chair of the committee on benefits of the Department of Energy
R&D and energy efficiency and fossil energy, the Academy report
to which to you and others have already referred this morning.
I have submitted my testimony for the record and since the
report has in fact been discussed several times, let me just
hit the high spots.
The question we were asked was essentially this: Over the
past 22 years the Department of Energy has spent in 1999
dollars $22 billion on these two programs. We were asked, was
it worth it and how can you tell? We developed a methodology
for trying to be able to talk sensibly about the benefits and
the core of it is in the chart across to my left, the matrix to
which Secretary Blake referred earlier this morning, and is
composed of two simple but very powerful ideas which have
already been mentioned this morning. One, Dr. Moniz just
mentioned and that is that the Department has some strategic
goals that energy research and development is supposed to
serve. We have characterized those in the rows of this matrix
as economic, environmental, and security objectives. And the
other is the notion that you mentioned that research and
development has lots of different kinds of products, not
necessarily just finished technologies. We characterize those
in the columns of the matrix as realized benefits, technologies
that are actually in place working and producing real benefits,
options for the future that may be needed in a different
economic and policy environment and very important knowledge
benefits that almost all research and development should
produce. This turns out to be a very useful way of discussing
the benefits of energy research and development and in
distinguishing public benefits--which is the purpose of Federal
funding--from private benefits. Basically, private benefits are
in the northwest corner of this matrix. You would expect the
private sector to realize economic benefits and take advantage
of them. That is important for the Government as well, but the
Government is practically the exclusive player in the other
eight types of benefits that are characterized by this matrix
and that is why we are here talking about energy R&D.
Was it worth it? On the whole, yes. Let me give you a few
figures but first a cautionary note and that is, we were asked
and indeed did look only at actual outcomes of research thus
far. There's a lot of research in progress with benefits that
can reliably be expected to be produced in the future. We did
not count those. We got results, not expectations, but it is
kind of nice to know that results actually prove the pudding as
well.
In terms of realized benefits, we calculated that something
like $40 billion of realized economic benefits had resulted
over this past period from energy R&D. Interestingly, three-
quarters of that benefit came from three small programs in the
energy efficiency area, the sum total of which cost the
Government around $15 million in the building sector. Three
magnificent home runs. However, the results were positive in
virtually all areas.
In the realized environmental benefits, the shoe was on the
other foot. The environmental benefits were of the same order
of magnitude as the economic benefits, if you try to price them
out, which is not easy, but it is possible. But most of those
came from a couple of small programs in fossil energy, which
helped produce particular savings, reductions in nitrogen oxide
omissions in powerplants. Then, if you can do that in a few big
powerplants, that has a big impact just like making
improvements in glass in the building sector does.
The story is less good in security benefits, while some
have been produced. Basically getting at the major oil
consuming sector of our economy, namely, the transportation
sector, which is where the security benefits lie. It has not
been particularly productive thus far. We would have great
hopes for the Partnership for a New Generation of Vehicles
program, but so far that has not been one of the big success
stories.
And finally, there are at least 3 important options that
have been produced that we think are likely to produce very
substantial benefits and very plausible futures. One is the
PNGV program. The other two are the integrated gas fired
combined cycle program and the advanced turbine systems
program. We studied 39 programs, and I am clearly not going to
go into all of that.
Our recommendations boil down to these: One, fill in the
whole matrix. Public funds should try to produce a balanced set
of benefits and public benefits that are described by these
nine boxes.
Secondly, our observation of the actual results strongly
endorses the portfolio approach to planning. Clearly, we had
some fantastic home runs. We had some strike-outs in this
package. We had a bunch of singles and doubles. You need to
look at the whole package and decide whether you are getting
the benefits in taking appropriate risks which will improve
failures.
Thirdly, we looked at a lot of different past evaluations
of these programs, discovered that they were inconsistent,
often overstated. We believe that is important for the
Department and the administration and the Congress to have a
consistent, accepted, uniform peer review method for evaluating
benefits, both retrospectively and prospectively and while we
know that the system that we have developed in our study for
doing that needs a lot of improvement and refinement, we
believe it serves the purpose and we are pleased with the
interest that the Department has already shown and as Secretary
Blake indicated this morning. In implementing that approach, we
look forward to working with the Department to do that and
certainly with the committee and the Congress if we can be
helpful in that regard. Thank you and I would be happy to
answer questions at the appropriate time.
[The prepared statement of Mr. Fri follows:]
Prepared Statement of Robert Fri, Chairman, Committee on Benefits of
DOE R&D on Energy Efficiency and Fossil Energy
Good morning Mr. Chairman, Senator Murkowski, and members of the
Committee. My name is Robert Fri. I am Director of the National Museum
of Natural History and served as the Chair of the Committee on Benefits
of DOE R&D on Energy Efficiency and Fossil Energy of the National
Research Council. The Research Council is the operating arm of the
National Academy of Sciences, National Academy of Engineering, and the
Institute of Medicine, chartered by Congress in 1863 to advise the
government on matters of science and technology. The committee I have
chaired this last year was given the charge of assessing the benefits
and costs of Department of Energy research and development in fossil
energy and energy efficiency since 1978 by the U.S. Congress. The
committee's report was released yesterday afternoon. I appreciate this
opportunity to summarize it for you and to respond to your questions
about our assignment.
The executive summary of the report is attached * to my written
testimony, and both the summary and the full report describe the
analytic approach we adopted to carry out our work. This background
provides essential context for our conclusions. Although I will not
dwell today on these methodological details, it is important to point
out that:
---------------------------------------------------------------------------
* Retained in committee files.
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1. We studied only the fossil energy and energy efficiency programs
of the Department of Energy (DOE) because these programs fall within
the jurisdiction of the House Interior Appropriations Subcommittee,
which directed that the study be undertaken. Since 1978, DOE has spent
about $22.3 billion on these programs, or about 26 percent of its total
energy R&D expenditures.
2. Our assignment was to assess the benefits actually realized
since 1978 as a result of DOE-sponsored research in these programs. We
did not account for benefits that might occur in the future. This focus
on outcomes distinguishes our study from most other evaluations of
DOE's research.
3. Time and human resources constrained us to analyze in depth
thirty-nine of DOE's research programs. We believe that this is a
representative sample for purposes of this study, but falls well short
of looking at all of the research conducted by DOE over the past two
decades. This is particularly true for the energy efficiency area.
4. We had a dual assignment. The more obvious one was to assess the
benefits and costs of energy R&D. The second but equally important task
was to develop an analytic framework for conducting such assessments in
the future.
This said, in the next few minutes I want to concentrate on the
major messages of the report. In particular, I would like focus on four
questions:
What should we count as the benefits of energy research and
development?
Did the benefits of the programs we analyzed exceed their
cost?
What actions might improve the odds of successful energy
R&D?
How can the evaluation of benefits be improved in the
future?
The most fundamental issue we addressed was how to define and
systematically capture the diverse benefits that result from publicly
funded research. To answer this question, we developed an analytic
framework designed to capture two dimensions of such research: 1) that
DOE research is expected to produce public benefits that the private
economy cannot reap, and 2) that some benefits may be created even when
a technology does not immediately enter the marketplace to a
significant degree.
We identified the public benefits to be captured as those
associated with DOE national energy mission:
Economic benefits, measured by the change in the market
value of goods and services resulting from the introduction of
a technology stemming from DOE research.
Environmental benefits, based on changes in the quality of
the environment that have occurred as a result of DOE research.
Security benefits, measured by changes in the probability or
severity of abnormal energy-related events.
To characterize the uncertainty about whether research will in fact
produce benefits that can be captured, we defined three categories of
research outcomes:
Realized benefits; which are benefits almost certain to be
produced. An example is the cost saving resulting from the
development of electronic ballasts for fluorescent lights.
Option benefits, which are associated with technologies that
are fully developed but for which economic and policy
conditions are not yet favorable for commercialization.
Integrated gasifier-combined cycle technology is an example of
research that has produced an option benefit.
Knowledge benefits include all other benefits that we
identified, because all research produces some knowledge. We
recognize that this is a catch-all category, and that a more
refined analysis of knowledge benefits would improve our
methodology.
Using these definitions, we created an accounting framework to
provide a consistent, comprehensive assessment of the benefits and
costs of the fossil energy and energy efficiency programs. The
framework is a matrix, shown on the chart before you. We also defined a
set of rules that provide a calculus for measuring the values to be
entered in each of the yells. These rules are thoroughly documented in
an appendix to our report.
We successfully applied this analytic framework to thirty-nine
technologies funded by DOE since 1978. We found that these programs
yielded significant realized benefits, important technological options
for potential application in the future, and useful additions to the
stock of engineering and scientific knowledge. Tables 2 and 3 in the
executive summary show how each technology we studied produced benefits
in one or more elements of the matrix.
Based on this analysis, we were able to address whether the
benefits we identified exceed the cost of producing them. Our findings
on this question are:
1. The estimated total net realized economic benefits associated
with the energy efficiency program we reviewed were about $30 billion,
substantially exceeding both the $1.6 billion cost of the
representative sample of programs that we analyzed and the $7 billion
in DOE's total research investment in energy efficiency since 1978.
Most of these benefits are attributable to three relatively modest
projects in the buildings sector carried on in the late 1970s and
1980s--more efficient refrigerators, electronic ballasts, and low-e
glass.
2. The estimated realized economic benefits associated with the
fossil energy program amounted to nearly $11 billion, approximately
equal to the cost of DOE's research investment. However, the benefits
of fossil energy programs conducted from 1978 to 1986, which included
several alternate fuels projects, produced benefits of $3.4 billion and
cost $6 billion. From 1986 forward, the economic benefits of $7.4
billion exceed the costs of $4.5 billion.
3. Although quantifying environmental benefits is difficult, we
estimate that both programs realized benefits of this type valued at
between $60 billion and $90 billion. Fossil energy programs that
reduced nitrogen oxide emission account for most of this benefit. Other
environmental benefits came from reducing emissions through energy
efficiency.
4. Both programs produce important technologies that are viable
options for reasonable policy and economic conditions that are likely
to exist in the future. Chief among these option benefits are the
Partnership for a New Generation of Vehicles, the Integrated Gasifier
Combined Cycle program, and the Advanced Turbine Program.
5. National security has been enhanced by a number of programs,
notably fossil energy programs that increased domestic oil production
and reserves additions and efficiency programs that reduced oil
consumption. However, DOE's research programs designed to reduce
dependence on oil in the transportation sector have been disappointing
so far.
Based on our analysis of these programs, we found that the benefits
flowing from DOE's R&D programs were influenced by the structure and
management of the programs. Among the useful lessons learned that can
improve the odds of conducting successful research are the following:
The largest realized benefits accrued in areas where public
funding would be expected to have considerable leverage. Thus,
the buildings sector is fragmented and the prevailing incentive
structure is not conducive to technological innovation.
Similarly, the nitrogen oxide reduction achieved in fossil
energy is an environmental benefit that the private markets
cannot easily capture. We believe, therefore, that DOE's
research should focus on achieving the department's national
public good goals.
Important but smaller benefits were achieved in fossil
energy's oil and gas programs and energy efficiency's industry
programs. We concluded that DOE participation in these areas
took advantage of private sector activity to realize additional
public benefits. The lesson is that a clearly defined DOE role
is crucial to ensuring that public funding is likely to produce
appropriate benefits.
It is particularly important that DOE manage a balanced
portfolio of research. Individual research projects may well
fail to achieve their goals, but DOE and Congressional
policymakers should not view these as symptoms of overall
program failure. Even failures generate considerable knowledge
and a well-designed R&D program will inevitably include such
failures.
Where DOE seeks to develop technologies for near term
deployment (as in the industrial energy efficiency program, for
example), success is more likely when technological goals are
consistent with the economic incentives of users to adopt the
technologies. Standards can also serve as an important
incentive, and the committee saw cases of both success and
failure. Our case studies include a number of instances that
did not meet this condition and so failed to produce
significant economic benefits.
Our case studies highlighted the need for periodic
reevaluation of goals against changes in the regulatory or
policy environment, projected energy prices and availability,
and the performance of alternative technologies. Similarly, DOE
should develop clear performance targets and milestones for
achieving program goals. To evaluate progress against goals, we
recommend that DOE expand its reliance of regular, independent,
peer reviews that enlist the participation of experts who are
not otherwise involved in DOE's programs.
Finally, we addressed the question of how the evaluation of
benefits can be improved in the future. We reviewed many other
evaluations of DOE programs and found no consistent methodology or
framework estimating and evaluating the benefits of research. This
inconsistency was often associated with an overstatement of economic
benefits and/or a tendency to assign too much weight to realized
economic benefits (only one of the nine boxes in our matrix).
On the other hand, we believe that the benefits matrix adopted for
this study is a robust framework for evaluating program outcomes. Its
application imposes a rigor on the evaluation process that clarifies
the benefits achieved and the relationship among them. Accordingly, we
recommend that DOE adopt an analytic framework similar to that used in
our study as a uniform methodology for assessing the costs and benefits
of its R&D programs. DOE should use this framework for reporting to
Congress on its programs and goals under the terms of the Government
Performance and Results Act.
We recognize, however, that the framework we developed for this
study requires refinement. Among other things, DOE should improve the
guidelines for benefits characterization and adopt consistent
assumptions to be used across programs. As a first step, DOE should
convene a workshop of analysts, decision-makers, and members of our
committee to discuss the problems we encountered in the application of
our framework. Longer term, DOE should seek to enhance the transparency
of the process by, among other things, providing external peer review
of the application of the framework.
That concludes my prepared remarks, Mr. Chairman. I want to thank
the members of our committee for the extraordinary effort they put into
this challenging assignment, and to express our collective appreciation
to the DOE staff that so diligently worked to respond to our extensive
requests for data and analysis. I would now be pleased to respond to
any questions you may have.
The Chairman. Thank you very much for that testimony. Dr.
Hubbard, why don't you go right ahead.
STATEMENT OF DR. H.M. HUBBARD, THE PACIFIC CENTER FOR HIGH
TECHNOLOGY RESEARCH (RETIRED), LEE'S SUMMIT, MO
Dr. Hubbard. Mr. Chairman, thank you for the opportunity to
be here. My name is H.M. Hubbard and maybe that is were the B
came from. At the present, I call myself a semi-retired
independent consultant. I am actually spending quite a bit of
time with the University of Missouri system and as special
advisor to the chancellor on engineering and computer science
education. Before that, I had been through a lot of different
kinds of operations. For about 50 years I worked for industry,
the DuPont Company. I was part of their atomic energy division
and part of one of their commercial divisions. I was executive
vice president of a Midwest research institute in the process
of which I ran what was then called SERI, you know, called
The Chairman. You might just pull that microphone a little
closer if you can.
Dr. Hubbard. Is that better?
The Chairman. That is a little better. Thanks.
Dr. Hubbard. Where was I? Let's see. I was at the National
Renewable Energy Laboratory for about 10 years. Since then, I
spent 5 years in Hawaii with the University of Hawaii and with
the Pacific International Center and since that time, I've
spent some 6 years chairing the National Academy's committee
Board for Energy and Environmental Systems and most recently,
and I guess the reason you asked me here, is I chaired a study
committee in the NRC which was looking at the programs for the
Office of Power Technologies. Now, that is a pretty narrow
slice of Department of Energy but it encompasses all renewable
energy technologies, particularly looking at electricity
production. And as you do that, it pretty much transcends that
because you have to look at the connections. And in looking at
those programs, we were looking primarily at the potential for
electrical production and the state of those programs. In
general, the technology itself I would rate as good to
excellent and I am talking about solar radiation and a resource
for biomass, wind, hydropower, geothermal and oceans. When I
say it is excellent, I mean we pretty well understand what the
resource is. And we have a pretty good concept of what you need
to do to get at it. Of those programs, oceans have presently
dropped by the way side, not because the potential is not
there, but we understand it fairly well and in the next few
decades it is unlikely to be economic except in a very few
situations.
We also looked at what I call enabling technology. Now, I
mean storage, hydrogen, superconductivity, et cetera. Again,
the technology is making progress. They need more attention
than they're getting and they need better organization than
they're getting. We began to look at what I would call systems
issues from what Dr. Corradini was talking about. I think he
was talking about cross-cutting issues. How do we integrate
across the programs? What do we know about distributors'
resources? What do we know about coordinating a cross-program
and how about our planning and analytic capabilities? Things
were not so good there. It was somewhat neglected and it needs
a lot more attention.
Let me go into my bottom line which are points that I
really want to emphasize. The first is the importance to our
country's future of having a renewable energy option available.
Renewable energy alone will not solve our energy concerns but
without it our chances and the world's chances of creating a
sustaining energy supply system and distribution system we need
are pretty close to zero. We need a diverse portfolio of
energy, technologies, and energy resources. And there is that
portfolio word again.
The second is that in spite of its problems, and they have
been considerable, the cooperative Federal industry program has
been remarkably successful in developing a science and
technology base and we understand that pretty well. And in many
cases, one in particular, PV, in particular, biomass, to some
degree, there has been pretty effective cooperation between
industry and the Nation and the laboratories. When we talk
about an R&D program, we always talk about it as an RD&D
program, research, development and deployment, because making
that transition from the laboratory to industry or Federal
laboratories to implementation and deployment and
commercialization is difficult and it requires direct contact.
You don't just hand it over. You have got to work it over and
that has sometimes been neglected.
The third is that renewable energy R&D is a necessity, a
long term effort, and we are not there yet. The core program
requires stable funding at reasonable levels tied to program
objectives. Stable funding, reasonable levels, defined program
objectives. Since the early 1980's the program has generally
been underfunded and subject to erratic fluctuation. And it is
also true that in general the energy industry has never been
notable for their investment in research and development. So,
what the government does is really critical, important and
essential.
The fourth is that in general, energy RD&D needs stronger,
more effective leadership than they have usually received. They
need to do better planing, better metrics, clearer definition
of program objectives and more effective coordination of
program elements. Having sat in on some of the nomination
hearings, maybe you need a few more drill sergeants in the
Department. That might help.
At the risk of embarrassing former Under Secretary Moniz,
you need more Ernie Monizes in the Department. That orientation
of one of the senior officials towards R&D and the
understanding of it is critically important and at the time we
looked at the OPT programs, which was in 1999, we looked at the
programs as they were then operating and we saw these
deficiencies more with respect to management and leadership
than with respect to the technological capability. Parallel
with that, the R&D council, which Dr. Moniz referred to, began
to develop a process of strategic planning and a process of
developing administration of the R&D programs by portfolio. We
mentioned those deficiencies in our initial report and the
Department of Energy said, well, we are working on those. And
we said, well, prove it because we don't see the impact yet. In
response to that, we were asked to do a follow-on study with a
letter report in which we reviewed the progress that the R&D
council were making and where they were in that process. That
was very reassuring to us. Now, that needs to go on. It cannot
be dropped at this point without a huge waste of effort and
spinning of wheels. So, that needs to be picked up by the new
Administration. And I think they can build on it, and they
really need to do that.
The fifth one is, as Dan Yergin once said, let's put the E
back in DOE. Only about 20 percent of the budget in general, as
you well know, really addresses energy and energy problems. And
it is also true that sometimes, as has been said in the
hearing, that as a result, the senior management at Department
of Energy has very often been distracted from looking at energy
research and very often, frankly, ignorant of it. So, that
needs attention. And I think the idea of a single person not
just for science but for research, energy research, development
and deployment, responsibility for those programs, would be
important. I think that can be done. And in the process, answer
the legitimate concerns that Dr. Moniz has. And it would be
consistent with a recommendation that was made by the Yergin
study group in 1995; namely, that there should be a single
person at the Under Secretary or Deputy Secretary level
reporting directly to the Secretary of Energy, who has
responsibility for strategy, budgeting, management and
integration over these various energy research programmatic
divisions. With that, I will subside and be happy to answer any
questions. Thank you.
[The prepared statement of Dr. Hubbard follows:]
Prepared Statement of Dr. H.M. Hubbard, The Pacific Center for High
Technology Research (Retired), Lee's Summit, MO
Mr. Chairman and members of the Committee thank you for inviting me
to testify at this important hearing on legislative proposals related
to energy and scientific research, development, technology deployment,
education and training. I was specifically asked to testify on the
condition and prospects for renewable energy.
In May of last year the National Research Council (NRC) issued a
report, Renewable Power Pathways. The report is the result of a study
carried out by the NRC's Study Committee for the Programmatic Review of
the Office of Power Technologies (OPT). this was followed, in late
August, by a letter report of a follow-up study by the Committee on
Recent Initiatives by the Office of Energy Efficiency & Renewable
Energy and The Office of Power Technologies.
The study committee which I had the privilege of chairing consisted
of a group of energy experts coming from different sectors of the
energy research community. The final reports were reviewed by a variety
of reviewers according to the NRC's usual procedures. A list of
committee members and the reviewers is appended to this testimony.
The majority of the opinions and recommendations presented in this
testimony are drawn from those reports and the discussions of the NRC
Study Committee. In areas in which my testimony goes beyond the scope
of the NRC study I have drawn on other sources and my own long
experience in the energy and environmental research and development.
While I believe that the opinions and conclusions presented here are
consistent with the views and conclusions of the Committee, I take
personal responsibility for the testimony as it stands.
ENERGY--A CRISIS OR A CHRONIC CONCERN?
For the last three decades of the twentieth century energy has been
a matter of continuing concern to the American public and hence to our
elected representatives and business leaders. Will we have it--i.e.,
power and fuel--when we need it?
Will it continue to be cheap? What is it doing to our air and
water? And more recently, what is all this noise about ``global
warming''? Is it a myth promoted by over-zealous scientists and over-
wrought environmentalists or do we need to be concerned about it?
Believe me, we do need to be concerned about it and the majority of
the American public understands that. Occasionally our chronic concerns
develop into acute anxiety for good and sufficient reasons. Witness the
impact of electricity blackouts and high prices in California as well
as the high gasoline prices in the Midwest. In the past as a problem
abated public attitudes and political priorities settled down and
energy issues took a back seat but the chronic concern lingered.
To date, energy concerns have rarely if ever reached a state that
could be called a ``national crisis'' but we cannot be sure that this
will always be so. We are confronted by an increasing dependence on
imported fuel, concerns about the environmental damage and health risks
associated with energy production and use. Also there are concerns
arising from questions about economic security and geopolitical
stability. We as a nation have good reason for a continuing anxiety
about our energy supply.
We face a promising but unpredictable future. In the face of these
uncertainties and questions, we know that we need a more robust and
flexible energy infrastructure with a diversity of fuel resources and
energy conversion technologies.
We need a diverse energy portfolio! Where will renewable energy
technologies (RET) fit? Almost all energy planers and analysts from
those of international organizations like the World Bank to the forward
looking energy companies, public and private thank tanks, and non-
governmental (NGO) advocacy groups agree that renewable energy will
play an increasing role over the next century in this portfolio. As the
CEO of one of the world's largest natural gas producers and
distributors remarked to me when we shared the platform at an Aspen
Institute energy forum a decade ago: ``After sometime around 2025 the
energy world will belong to you guys (renewable energy) but until then
it belongs to us.'' That company is now busily engaged in developing
renewable energy projects to complement its primary fossil energy
business.
RENEWABLE ENERGY TECHNOLOGIES--CURRENT STATUS AND PROMISE
The federal government began a major R&D effort twenty-five years
ago to develop the science and the advanced technologies necessary to
provide electric power, transportation fuels and thermal energy from
our domestic renewable resources. These resources include solar
radiation, geothermal energy, hydropower, biomass, wind, and ocean
energy. We have made remarkable progress and the result is a diverse
set of renewable energy technologies several of which are already
making a significant contribution to our energy supply and our economy.
Over this period substantial improvements have been made in the
performance and reductions in cost of these technologies. In fact, most
of DOE's goals and objectives in performance and cost of production
have been met or exceeded. The DOE technical managers and the
laboratory researchers should take a bow. Photovoltaic and wind turbine
technologies are outstanding examples of successful cooperation between
industry and government research. There has been important progress in
other areas as well, biomass conversion, hydrogen fuels, solar building
design, and solar thermal systems, etc. In general the advantages and
disadvantages associated with the different resources and conversion
technologies are well understood.
On the other hand the renewable technologies have disappointed
their supporters. The deployment goals set by DOE and the industry have
not been met and the use of renewable technologies in the U.S. economy
is still limited. There are several reasons for this. Most importantly,
the energy market has changed. Our economy has become much more energy
efficient and the market more competitive. Conventional energy prices
have remained lower than expected. DOE in concert with the emerging
industry has often set deployment goals based on unreasonable
expectations and unrealistic promises.
Nevertheless as R&D continues to reduce costs and as conventional
energy prices fluctuate up and down the new renewable technologies,
i.e. those other than biomass combustion and conventional hydropower,
are emerging in the market at a rapidly increasing rate. U.S. shipments
of solar cell modules increased by 23 percent over the previous year.
The approximately 2500 MW of wind energy capacity installed in the U.S.
is expected to double by the end of this year. New wind farms are going
up in southern California, west Texas, on the high plains of Kansas/
Colorado, in Minnesota and in Iowa. In a related development, a third
or more of U.S. consumers can now choose some type of ``green power'',
i.e. power from renewable sources, from either their regulated utility
or in competitive markets.
What can we expect from renewable energy in the future? Energy
projections and forecasts are notoriously uncertain. But within a broad
uncertainty band there seems to be some consistency among the fearless
experts. Ten years ago the five National Laboratories most involved in
renewable energy were asked to develop a ``consensus'' on the Potential
of Renewable Energy. The resulting ``white paper'' issued in March of
1990 projected a renewable energy contribution in 2030 of between 15
and 28 percent. The lower number in the case of a business as usual
scenario and the higher number if federal policy supports and
``intensified'' Research, Development, and Deployment (R,D&D) scenario.
Other attempts to estimate the RET contribution run in the range of 20
to 50 per cent in the time period of 2025 to 2050.
The Report to the President on Federal Energy Research and
Development for the Challenges of the Twenty-First Century was issued
in November of 1997 by the President's Committee of Advisors on Science
and Technology (PCAST). In that report the Panel on Energy Research and
Development stated that ``the Panel believes that with a strong R&D
program coupled to appropriate demonstration and commercialization
incentives that many of the renewable energy technologies in the (DOE)
portfolio have good prospects of becoming fully competitive with
conventional technologies in whole scale applications. The time to get
there was projected at less than ten years for some (wind appears to be
ahead of schedule), up to 20 to 25 for others, i.e. transportation
fuels from energy crops. Shell International Petroleum Company has
projected that by 2025 ``renewable energy sources could contribute to
global energy one-half to two-thirds as much as fossil fuels do at
present with new renewable sources (excluding hydropower and
traditional biomass) accounting for one-third to one-half of the
renewables total.'' The Intergovermental Panel on Climate Change (IPCC)
has made similar statements concerning the energy contribution from
rewnewables.
There is a problem! In fact a couple of them that make it difficult
for the program planners and the emerging RET industry to know how to
proceed. It also makes achieving the potential of renewables difficult.
The current director of the National Renewable Energy Laboratory,
Admiral Truly, stated them clearly in a recent statement.
``Beginning in the 1970's, every administration and Congress
has had a different set of national goals, R&D investment
levels and policy actions for developing these technologies''
resulting in ``1) the erratic up-and-down nature of annual
federal R&D investments for energy efficiency and renewable
energy, and 2) the confusing and inconsistent array of national
energy strategies, tax incentives, and regulatory policies
(superimposed on the program) since the programs began.''
Hopefully this Committee can do something about these problems! We
need more stability in the budget, and more consistency in policy
direction. Under present conditions it is very difficult to develop and
implement a coherent strategic plan for a long range research and
development program. That however should not keep DOE from trying and
recently they have begun to do so. Hopefully the process will be
continued by the new administration.
RENEWABLE ENERGY PROGRAM MANAGEMENT
The Study Committee was directed to do a ``programmatic'' review of
DOE's office of renewable power technologies. The Office, a major unit
of the Office of Energy Efficiency and Renewable Energy (EERE) conducts
R&D programs for the production and distribution of electricity from
renewable energy resources. The individual program elements dealing
with production include: photovoltaics, wind, solar thermal,
geothermal, biopower, and hydroelectric technologies: Others deal with
``crosscutting'' issues; storage, transmission (including
superconductivity) hydrogen, and distributed power. We began with an
examination of the individual programs but were rapidly lead into the
broader issues of program management, planning, and coordination with
other R&D units in the Department doing related work.
In the report there are recommendations for each of the individual
Programs. I will not go into them here but in general the technical
performance was excellent. The individual program plans varied in
quality from nonexistent to well thought out. While we did not attempt
to give formal ratings to the programs my own opinion that they varied
from ``not bad'' to outstanding with the majority in the ``good to
excellent'' range. We were, however, concerned by the apparent lack of
coherence and coordination among the program elements and with other
governmental organizations doing related work. This is reflected in our
recommendations for the overall program as indicated below.
OPT should develop criteria and a systematic process for
selecting specific research and development programs.
OPT should focus more on integrating its programs,
identifying common needs and opportunities for research, and
clarifying how the individual programs can further their
objective. Bench marking and other planning techniques used by
industry could be adapted for measuring progress and selecting
priorities.
OPT should develop a robust rationale for its portfolio of
renewable energy technology projects. OPT and its individual
programs should de-emphasize short-term deployment goals (which
have often been unrealistic, overly optimistic, and which are
not within DOE control) as the metrics for defining success.
The stated objectives should be the development of a sound
science and engineering base. The metrics should be stated in
terms of technical performance, decreasing costs and the
development of technologies that meet the needs of industry and
the marketplace.
OPT should institute a process of regular external peer
reviews (at least every two years) of its proposed and ongoing
projects and programs as well as its overall goals. As part of
the process OPT should report to the public and the Congress
how it responds to the recommendation of the reviewers.
REVIEW OF RECENT DOE INITIATIVES
First a note of explanation: The OPT programmatic review was
proposed in discussions between EERE and the NRC in the summer of 1988.
The scope work was approved and the study funded in the late fall. The
committee was first convened in March of 1999. A draft report was
produced by the Committee with the help of the study director and his
staff in December for appropriate review resulting in the issue of the
final report in May. As you have seen the Study found a lot of merit in
the programs (along with some deficiencies) but was quite critical of
the renewable energy management because of a lack of leadership in the
areas of coordination, planning, monitoring process, setting realistic
goals and metrics.
While the Study Committee was conducting it's review at the program
level (a kind of bottom-up look at how OPT does it's work) DOE senior
management under the leadership of the under secretary and the newly
established DOE R&D Council was continuing its ``initiative to apply
portfolio approaches to managing Departmental R&D''. This lead to
initiatives by OERE and OPT which in the opinion of OERE management
addressed many of the deficiencies and responded to many of the
recommendations of the Study Committee as well as those contained in a
``top-down'' Review of Management in the Office of Energy Efficiency
and Renewable Energy by the National Academy of Public Administration
(NAPA). As part of their response to the Study Committees report OPT
asked the Study Committees to review those initiatives and recent
managements steps. This review was conducted in June, July, and August
during which time the Committee conducted a review of materials
provided by EERE and OPT regarding those changes and initiatives and
held a meeting to interact with DOE senior managers including the Under
Secretary, the Assistant Secretary of EERE, the Deputy Assistant
Secretary for OPT and the OPT Associate Deputy Assistant Secretary. An
NRC letter report was issued in late August. The letter report should
not be interpreted as a review of the findings, conclusions or
recommendations of the earlier Committee report. Rather the letter
report is strictly a consideration of recent action.
What did the Study Committee conclude? The documents submitted,
``taken together, are the major elements of a comprehensive management
and planning system designed to identify R&D needs in EERE/OPT program
areas, to establish visions, goals, and objectives, and to develop
roadmaps and multi-year plans for achieving them. In addition, EERE and
OPT have made numerous management changes to facilitate and promote
communication, cooperation, coordination and collaboration across
organizational lines, improve capabilities, and enhance management
efficiency and effectiveness.''. . .
``The Committee recognizes that the completion and implementation
of strategic and program plans is a work in progress--as is the
implementation of the recently developed concept of a Strategic
Management System (SMS). The Committee encourages EERE/OPT to complete
the process and believes that the results will address many of the
concerns identified in the recent NAPA and NRC reports.''
Successful long-term implementation depends on the acceptance by
DOE senior career personnel. For the full potential on the initiatives
and management changes to be realized, they must become embedded in the
way DOE/EERE/OPT conduct their business. Among the challenges EERE/OPT
now face is clearly and unambiguously presenting the system and goals
to the Congress and to the new administration along with the benefits
that are expected to result.
In the year 2001, if DOE/EERE/OPT can build on the encouraging
start they made the previous year in improving their program planning
they will clearly be ``moving in the right direction''.
FINAL REMARKS AND RECOMMENDATIONS
In the conclusion there are several points that I would like to
emphasize to the Committee:
The first is the importance to our country's future of
having the renewable energy option available. Renewable energy
alone will not solve our energy concerns but without it our
chances and the world's chances of creating the sustainable
energy supply and distribution system are close to zero.
The second is that in spite of its problems the cooperative
Federal/Industry program has been remarkably successful in
developing the science and technology base.
The third is that renewable energy R&D is of necessity a
long term effort. We are not there yet. The core program
requires stable funding at reasonable levels tied to program
objectives. Since the early 1980's the program has been
generally under-funded and subjected to erratic fluctuations.
The fourth is that energy R&D in general and renewable
energy programs in particular need stronger, more effective
leadership than they have usually received, including better
planning, metrics, clearer definition of program objectives and
more effective coordination of program elements.
The fifth is put the E back in DOE. It is often pointed out
that only about twenty per cent of the DOE budget is devoted to
energy R&D and that the attention of senior DOE officials is
often directed to other responsibilities. In June of 1995 in
the Final Report of the task Force on Strategic Energy Research
and Development know as the Yergin report it was recommended
that ``responsibility for energy R&D portfolio strategy,
budgeting, management, and integration over existing
programmatic division be given to a single person at the Under
Secretary or Deputy Secretary level reporting directly to the
Secretary of Energy.'' The Study Committee in its discussions
endorsed that recommendation and urges its implementation.
The Chairman. Thank you very much. The final witness on
this panel is Dr. Mike Corradini. Why don't you go right ahead,
Dr. Corradini?
STATEMENT OF DR. MICHAEL L. CORRADINI, UNIVERSITY OF WISCONSIN,
MADISON, WI
Dr. Corradini. Thank you. I want to thank the chair and the
committee for inviting me. I have a lot of graphics.
The Chairman. Okay. We are glad to see it.
Dr. Corradini. Typical class. I wanted to thank you all. I
am chair of the nuclear engineering and engineering physics
program at the University of Wisconsin Madison and that is, I
guess, the reason I was asked to be here. I was also chair of
the nuclear energy research advisory committee's panel to study
the future of nuclear engineering programs and university
reactors. And about a year ago, we gave the NERAC our report.
It was endorsed, passed on within the Department of Energy and
from that, as I understand it, S. 242 has addressed a lot of
these concerns. So that will probably be my main topic for my
verbal comments. You have my written testimony which addresses
some of the other Senate bills.
A little history. Nuclear energy, or nuclear engineering, I
should say, is really one of the first disciplines that spanned
engineering systems from the macroscopic world to the
microscopic world. Students learned many things at various
levels and because of that, it really became a major
contributor in three areas to the public good. Energy where it
is a major source of electricity I think has been mentioned at
least five times today. Over 20 percent of our electricity is
from nuclear energy. Secondly, it is an enabling technology in
medical sciences. This is probably not as well known. At
Madison we actually have two departments of nuclear
engineering, so to speak. One in the medical school, medical
physics, and one in engineering, engineering physics. And
third, it is really an underlying technology for national
security. The difficulty is we really have some current threats
and issues.
So, the first thing I put up here is that over the last 20
years, and particularly over the last 10 years, we've had a
precipitous fall in the number of nuclear engineering programs,
that is the degree-programs, approximately 50 percent of what
we had about 20 years ago. Similarly, if I could have the next
one. I am going to make the staff help me a bit here. We've had
a precipitous drop in the number of university research
reactors. Dr. Moniz made a mention of this earlier and I think
this is another indication of our loss of infrastructure. And
probably the most important thing, if you want to move on, so I
can stay within my 5 minutes, is the human resource. The thing
that most concerns me because I am at a university and what
concerns me is education and people, is that we have had a very
precipitous drop, particularly in the last 8 to 10 years of
enrollment in nuclear engineering programs at the Ph.D. level,
the masters level and the BS level. And that has led us to the
final picture. I am used to PowerPoint these days. I apologize.
I am back to posters. And this is a study from the American
Society of Engineering Education, and I want to spend a bit of
time on this. This was done for the ASEE and basically shows
the deficit in employment where we look at bachelors and
masters graduates in the industry. And this is primarily the
nuclear industry. So, I think primarily utility industry is a
sample case. And what you see here is a bar of red which is
growing and something in the future estimated to be about 500
individuals, which is at least three times the number of
graduations we seen in the discipline. So, we have a real
threat relative to the human resource. Okay? And that is really
what I want to address today. The testimony talks abut a number
of things. Our panel work gave a wide range of recommendations
which you have in written form.
I want to address three things. First of all, because I am
interested in the human resource and how we can effectively
change the direction, is that we recommend fellowships for
masters and Ph.D. graduates in nuclear engineering. I focus on
graduate because the masters degree is one of the silent
successes in education. And what you find is we have a number
of people that come from various disciplines--physics,
mathematics, other branches of engineering--into nuclear
engineering and what we are recommending is an increase of the
masters and Ph.D. fellowships to essentially support these
students. Secondly, increased funding for NERER grants. Dr.
Moniz made mention of the NERI program, which is a unique
program for university, industry and laboratory partnership.
But the NERER grants are particularly the equivalent of the NSF
grants for universities. Because it was mentioned earlier,
nuclear engineering, or nuclear energy, is essentially
precluded from support by NSF and so the NERER program is the
only way in which basic research, innovative research, can be
done at universities. So, we recommend and strongly support an
increase in the NERER grant program. What it really does is
really create knowledge and attracts talent. I am back to the
human resource. It attracts talent of faculty going into the
discipline and that to me is incredibly important for keeping
the pipeline going.
And the third thing is continuation and augmentation of
what is called, I guess in the lingo of the DOE industry
matching grant program. What that really is is something that
was thought up about 10 years ago by my predecessor, the chair
of nuclear engineering at Madison, Max Carbin, in where he
suggested that the deal we support with the industry provide a
match, fifty-fifty match, of essentially flexible funds for
departments. Those funds could be used for scholarships,
undergraduate scholarships, for improvement of infrastructure
of the various departments which they have been used for,
laboratories, etc. Also, they could be used for outreach. And
that program has been enormously successful to the point that
it is oversubscribed every year. And it really provides
flexible funds for programs.
And I think that is about it. I want to identify three
things in particular and open it up for questions if you have
any.
[The prepared statement of Dr. Corradini follows:]
Prepared Statement of Dr. Michael L. Corradini, University of
Wisconsin, Madison, WI
It is an honor to present testimony at this committee hearing on
the current state and future of nuclear science and engineering
programs. I would like to thank Chairman Bingaman for inviting me here
today. I currently am chairman of the Engineering Physics Department at
the University of Wisconsin, Madison and a Member of the National
Academy of Engineering. I was also chairman of a seven-member
subcommittee of the Nuclear Energy Research Advisory Committee. This
subcommittee was tasked with examining the Future of Nuclear
Engineering Programs and University Research and Training Reactors. It
is in this capacity that I would like to address the senate committee
today, on the particular issue of human resources and related nuclear
energy topics.
CURRENT SITUATION
Nuclear science and engineering was born from early discoveries of
noted physicists in the late 1890's. These discoveries, along with the
discovery of nuclear fission in the 1930's, convinced a group of
leading physicists and engineers to recommend that the United States
support nuclear research for the common good of the nation; i.e.,
nuclear science and engineering would provide for our nation's
security, supply some of its power and contribute to medical advances
enhancing human health. This promise from nuclear energy has come to
pass. For example, over 20% of the electricity in our nation comes from
nuclear fission power plants. In these times of energy shortages and
electrical power outages, reliable, safe and economic fission power is
a proven, valued and sustainable resource. Additionally, the use of
nuclear science and engineering advances have been pivotal in the
improvement of human health, by advances in medical imaging, nuclear
medicine and radiation treatment of cancer. The key ingredient in all
of these advances is talented people with the motivation, skill and
dedication to innovate, educate and use the technology in a safe,
economic and sustainable manner.
Nuclear engineering programs and departments were originally formed
in the late 1950's and 1960's from interdisciplinary efforts in many of
the top research universities, providing the people for the emerging
nuclear industry. In the same time period, university nuclear reactors
were constructed and began operation, providing key facilities needed
for research and training of students engaged in nuclear technology.
Since the 1960's, U.S. universities have led the world in nuclear
engineering with a commitment to furnish the necessary human resources
and associated infrastructure.
However, over the last decade, the U.S. nuclear science and
engineering educational structure has not only stagnated but is in a
state of serious decline. The number of nuclear engineering degree
programs (Figure 1) and the number of operating university nuclear
research and training reactors (Figure 2) has fallen by about half, and
the enrollment in nuclear engineering degree programs has plummeted
(Figure 3). Enrollment declines are particularly worrisome at the
masters level, where many students from other engineering and science
disciplines focus on nuclear engineering as a capstone professional
degree. Only in the last year have enrollments nationwide seemed to
stabilize, and a small increase is noted in undergraduate enrollments.
On the other hand, the demand for nuclear-trained personnel is
again on the rise. A study by the American Society of Engineering
Education (G. Was, T. Quinn, D. Miller, 1999--see Figure 4) indicates
that the shortfall in qualified nuclear engineers at the bachelor and
masters level could reach over 500 professionals annually by 2003.
Workforce requirements at operating U.S. nuclear power plants are
increasing and will undoubtedly remain high, given the plans for plant-
life extension in the vast majority of operating U.S. light-water
reactors. In addition, there is a continued growth of nuclear power in
the Pacific Rim and continued advances in the design of a future
generation of nuclear fission reactors. Moreover, new initiatives have
begun in applied radiation sciences in collaboration with medical
research as well as biotechnology. Finally, nuclear science and
engineering expertise continues to be needed for national security,
including technology related to arms reduction and verification and
enforcement of international treaties as well as providing the U.S.
Navy with effective, safe nuclear propulsion. There is a need to
provide an adequate supply of professionals to meet the nation's needs
in the coming decades.
FUTURE OF NUCLEAR ENGINEERING PROGRAMS AND FACILITIES: PANEL CHARGE
In November 1999, the DoE Office of Nuclear Energy, Science and
Technology requested that Nuclear Energy Research Advisory Committee
(NERAC) establish an ad hoc panel to consider educational issues
related to the future of nuclear science and engineering; i.e., address
the future of university nuclear engineering programs, establish a
process toward support of university research and training reactors,
and identify appropriate collaborations between DoE national
laboratories and university programs. The panel consisted of myself,
Marvin Adams of the Texas A&M University, Donald Dei, Chief Physicist
of the U.S. Naval Nuclear Propulsion Program, Tom Isaacs, Senior
Scientist at Lawrence Livermore National Laboratory, Glenn Knoll of the
University of Michigan, Warren Miller, Senior Advisor to the Lab
Director at Los Alamos National Laboratory, and Kenneth Rogers, Retired
Commissioner of the U.S. Nuclear Regulatory Commission. The panel made
a series of recommendations to the DoE.
FUTURE OF NUCLEAR ENGINEERING PROGRAMS: RECOMMENDATIONS
First, we recommended that DoE assist universities as they refocus
nuclear engineering programs to enhance research activities in nuclear
science and engineering, as well as to maintain the human resource
necessary for continuing the discipline through the 21st century. It
should be noted that the National Science Foundation has historically
left support of nuclear engineering research and infrastructure to the
DoE. Thus, our panel proposed that specific efforts of the DoE should
focus on:
1. Enhancing the graduate student pipeline to maintain the health
of the discipline: This effort should be focused on providing a
continuing supply of graduates with post-baccalaureate education and
technical expertise that can be employed at our leading universities,
the national laboratories and all parts of the industry; i.e.,
providing role models for future undergraduate and graduate students.
This requires a coordinated effort for recruitment at each level in the
university program as well as the proper resources for graduate student
fellowships and scholarships. Currently, the DoE and the industry have
limited programs for these fellowships; i.e., the current program of
$0.8 million provides fewer than 5 new doctoral fellowships every year
for the whole nation in fission and health physics. This effort needs
to be augmented in size and scope for our future success in the
discipline. This is particularly important at the masters level, where
many undergraduates from various engineering and science disciplines
can obtain advanced training in nuclear engineering. The panel
recommended that the DoE consider the more historic Atomic Energy
Commission traineeship model for doctoral fellowships and masters
scholarships in nuclear science and engineering at a steady-state level
of $5 million per year; i.e., awarding a steady-state of 20 doctoral
fellowships each year and 40 masters scholarships.
2. Recruiting and retaining new faculty in nuclear science and
engineering fields: The panel recognized that nuclear engineering
departments have had difficulties in attracting new faculty members
into their programs. Future faculty need to see potential research
opportunities and active research programs in their field before
seeking an academic career. The panel recommended that a targeted
research program for junior faculty (6 years or less from the time of
their first academic appointment) would be of great benefit to the
young faculty. In addition, it could benefit the nuclear engineering
programs by demonstrating to their administrators that a program exists
to provide new faculty the opportunity to begin their research careers.
This ``Nuclear Engineering Junior Faculty Research Initiation Grant''
program would be run in a manner similar to the NSF or DoD Young
Investigators program. It would be a competitive program in support of
DoE basic research needs in nuclear science and engineering affiliated
with the mission-oriented goals of the nation's energy policy.
3. Enabling and enhancing research discoveries in nuclear science
and engineering: A science-based research program, predicated on
involvement of these universities, should be supported. It should also
extend to the national laboratories and the nuclear industry in peer-
reviewed, pre-competitive research and development. To accomplish this,
we recommend maintaining the Nuclear Engineering Education Research
program (NEER), as well as significantly increasing the base funding
for the NEER. Currently, this program involves a very modest investment
in university research into basic nuclear science and engineering ($5
million in FY2000). This program has allowed university researchers to
be able to pursue high-risk ideas and make discoveries that can take us
beyond our present understanding; i.e., provide the ``spark'' for
innovation and future technologies. Since the NSF and other basic
science programs generally believe that nuclear science and engineering
basic research is the responsibility of the DoE mission-oriented
office, the NEER program plays a very critical role in sustaining the
intellectual growth and development of the discipline in our university
research communities. The panel recommended that the NEER program funds
be substantially increased to near $20 million per year. This program
includes the Junior Faculty Research Initiation Grant program mentioned
above. The panel also supported the Nuclear Energy Research Initiative
program (NERI). The panel also recognized that this program should be
synergistic but remain separate from the NEER program. NERI involves
larger collaborative research and development tasks, which establishes
a research partnership among universities, national laboratories and
industry, and which places a larger emphasis on engineering
applications and integrated technologies that respond to the DoE
mission guidance.
4. Improving the undergraduate nuclear science and engineering
experience: The panel recognized that the undergraduate discipline will
continue to evolve in the 21st century and this evolution will be
different within various university programs. Nevertheless, the panel
feels that the discipline should be preserved as a ``systems
engineering core competency''. This belief is predicated on the need
for our graduates to have professional training in nuclear fission
engineering within the context of systems engineering and design. This
may be one of the most important responsibilities of university nuclear
engineering faculty as they reestablish the groundwork for a resurgence
of the discipline in the future. This is a fertile area for innovation
in which research advances can play a role in the reshaping of
undergraduate and graduate curricula and their associated pedagogy.
Curriculum development should be a key part of DoE resource investment
in the future. The DoE can also partner with the NSF in this particular
area since the NSF has historically been very active and quite
effective in promoting improvement in undergraduate science and
engineering education. The current program at the DoE that supports the
core competency in ``nuclear systems engineering'' is the ``DoE/
Industry'' Matching Grant program. This program was begun in 1991 by
the efforts of my predecessor as chair at the University of Wisconsin.
Over the 10 years since its inception, it has become a powerful force
in improving the educational infrastructure for undergraduates in
nuclear science and engineering. It is a true ``public-private''
partnership, in which industry matches DoE contributions dollar for
dollar, and needs to be maintained in the DoE at a level of at least $1
million/yr. It provides flexibile funds for scholarships as well as
infrastructure improvements for laboratories and curricular
innovations, which are crucial for maintaining excellence of these
educational programs.
5. Enhancing national activity in nuclear science and engineering
outreach. It is my personal opinion that nuclear engineering
specifically (and probably the physical sciences in general) suffers
from a distinct lack of understanding by the general public. One could
contend that this is one of underlying reasons why the technology is
viewed with uncertainty and apprehension. The panel felt that the
university nuclear engineering programs may be in the best position to
work with the DoE to develop an innovative approach to public outreach
and education. Innovations in this area could have a major impact in
regard to the image of the discipline and preserving its future human
resource needs.
FUTURE OF UNIVERSITY RESEARCH AND TRAINING REACTORS: RECOMMENDATIONS
Since nuclear science and engineering is expected to be an
important part of the research and development landscape in the 21st
century, a lasting federal investment is needed to support this
infrastructure at universities. University research and training
reactors (URRs) are an important part of the nuclear engineering
infrastructure that must be maintained. The panel felt that URRs:
Are vital for advancement of knowledge in nuclear science
and engineering education at the graduate level and provide
powerful research tools for the advancement of many other
disciplines;
Provide undergraduate and graduate students with an
otherwise unobtainable ``hands-on'' educational experience,
allowing for learning about nuclear fission reactor processes,
and understanding the interaction of radiation with matter
(also providing for enrichment courses for professional nuclear
engineers);
Give the general public an opportunity through outreach
activities to better understand and become familiar with
nuclear processes and ionizing radiation as well as nuclear
fission power.
The URRs have a major impact on research and development in the
neutron sciences and technologies, and also provide necessary
facilities for the education of future scientists and engineers who are
critical to sustaining the nation's technological base in a diverse
spectrum of fields. Research work at existing URRs is responsible for
developing new radio-pharmaceuticals for diagnosis and treatment of
cancers, for providing structural information on new high-technology
materials, for developing critical data on the behavior of metals,
ceramics, polymers, and reactor coolants in radiation environments, and
for providing critical data from neutron activation analysis to make
advances in a variety of diverse fields (e.g., allowing archaeologists
to date prehistoric artifacts). Most of these areas of technology are
uniquely in the domain of nuclear research reactors and not easily
duplicated on accelerator-based radiation sources. The facilities that
exist or can be developed at URRs for the study of materials, trace
element analysis, and for producing isotopes are complementary rather
than competitive to those found at the National Laboratories. This URRs
are located in the highly creative and multidisciplinary environment of
the university where a diversity of students can take advantage of
these unique resources. In their role of providing graduate education
and training for radiation scientists, URRs exploit these benefits of
the university and provide educational advantages that are generally
superior to those afforded by the national user facilities. This is the
concept for ``feeder research reactors'' that has been highly
successful in Europe and is an important factor in propelling these
countries into their present dominant leadership roles in the nuclear
sciences. With adequate support of URRs, this model can also be
implemented here to help ensure that these technologies are not
permanently lost by the U.S.
The URRs also have a major impact in the realm of undergraduate
education, outreach and training. Based on U.S. data collected by the
panel for its report to NERAC, over 1000 students are enrolled in
courses that use these URRs annually, and over 5000 visitors tour a URR
or are given demonstrations at a URR annually. Beyond these educational
activities, many URRs are used for nuclear reactor operator training
with local nuclear utilities. The panel felt that these URRs and the
university programs that support them are unique and may be in the best
position to work with the DoE to develop innovative approaches to
outreach and education.
Currently, there are twenty-eight university reactors in the U.S.
with total annual support of about $10 million from their individual
university budgets and over $5 million from extramural research and
services. These university expenditures are specifically for the
operational, safety and licensing activities of these nuclear reactors;
i.e., staff salaries as well as materials and supplies related to
operation. The panel has recommended a competitive peer-reviewed
program be instituted to provide the resources above a base program,
that are needed to revitalize URRs as a key resource at universities in
the U.S. The panel proposed to:
Maintain a base program for University Research and Training
Reactors: This panel recognized that the DoE Office of Nuclear Energy
currently has the ``University Reactor Fuel Assistance and Support'' as
an on-going program for university research and training reactors.
These program funds are provided for reactor refueling, reactor
instrumentation and reactor sharing for users of these facilities
(i.e., researchers at universities with funded research in need of
research reactor services). These current programs serve as the minimum
external resource base that helps maintain this educational
infrastructure for the operation of these university research and
training reactors. Specifically, the DoE budget lines for reactor
replacement fuel, reactor instrumentation upgrade and reactor user
sharing total about $4.3 million for FY2000. Note that the bulk of
these funds are for reactor refueling costs ( $2.8 million); the
remaining $1.5 million represents less than 10% of the total
operational costs.
Establish a Competitive Peer-Reviewed Program for University
Reactors: The panel proposes that a competitive peer-reviewed program
augment current DoE financial support for these university research and
training reactors. This program would focus on activities beyond
operation and would support infrastructure costs associated with
personnel and instrumentation upgrades in support of extramurally
funded research (e.g., from DoE NEER or NERI grants) as well as
facility upgrades and personnel costs that involve innovative training
and educational outreach activities. This program would provide
additional multi-year grants for reactor facilities that are part of
focused proposals by groups of collaborators that can emphasize
research, training and/or educational outreach. The panel believes that
such a program can provide the needed financial support for qualified
university research and training reactors. These resources are for
activities that go beyond what is needed only for base operation and
provide a competitive arena where innovative ideas can be nurtured. The
total program cost would be $15 million per year, which is consistent
with the proposals to DoE by the University Working Group in 1996 and
with previous studies dating back to the 1988 study by the National
Resource Council. The panel suggests that this program be instituted
incrementally in FY02 and FY03 budgets to allow for development of the
needed DoE administration that would accompany this new activity. The
panel recommends the following elements for this expanded DoE program
for URR support:
A. Key Elements of Competitive Program
1) Multi-year funding awarded through peer-reviewed proposal
process.
2) Proposals encouraged for research, for education and for public
outreach.
3) Funding levels ranging from small outreach efforts to multi-
university teams.
4) URR is required to ``qualify'' before its proposal is
considered. (Specific qualifying criteria have been proposed by the
panel see part C).
5) University must provide cost-sharing (auditable using NSF-like
procedures).
B. Suggested Guidelines to this Competitive Program
Defined missions: The RFP would include suggestions for
missions for research, education/training and outreach, with a
university or university teams free to propose different
missions.
Base infrastructure funding: The program would allow a
specified fraction of the budget to be used for personnel,
instrumentation upgrades and materials and supplies related to
the specific deliverables in the proposal. If DoE does not wish
to directly fund such items, then the cost sharing offered by
the universities could be used. Overhead (indirect costs) on
the contracts could also help the university with base and
infrastructure funding.
Funding period: One to five years. (5 years would be needed
for a ``center'', but shorter periods should not be discouraged
for other projects.)
Level of cost sharing: This needs to be consistent with
other federal agencies; e.g., NSF and NIH require a 33-50% cost
share (with a possible maximum instituted, so that universities
can afford to submit large proposals).
Funding level: The panel proposed funding to ramp up to
$15M/yr (just for this program, without reducing other NEST
programs). This funding level was taken from the URR Center of
Excellence proposal (1996). It is similar to what was
originally proposed in the NRC study in 1988 and is also
consistent with general comments in the DoE 1994 report and the
proposal by the University Working Group in 1996. The panel
feels this is a minimum level of investment based on the basic
principle that annual infrastructure investments of about 5-10%
of the initial capital investment is needed to maintain a level
of competence; note that the capital investment for these URRs
is well over $250 million. The panel realizes this is a
preliminary estimate and may need to be increased as better
data become available once the competitive program is
operating.
C. Proposed Qualifying Criteria for University Nuclear Reactors
The panel would propose the following criteria to qualify
university nuclear reactors for research support from the Department of
Energy Office of Nuclear Energy under the proposed competitive peer-
reviewed program for research, training and outreach.
The university reactor must demonstrate an acceptable
operational and safety record over the last five years.
The university reactor must demonstrate that it contributes
to the educational infrastructure of a suitable degree
program(s).
The university reactor must demonstrate that substantial
financial support comes from the university and will continue
through at least the program support period.
The university reactor must have a commitment from the
appropriate university official for its continued operation
through at least the program support period.
improvement of university--doe laboratory interactions: recommendations
The first of the current DoE National Laboratories were created,
staffed and managed by university personnel following World War II.
Thus, these laboratories began with intimate ties to universities, and
substantial interactions have continued between the laboratory and
university communities. The panel surveyed several DoE Laboratories and
the survey indicated unanimous agreement that university interactions
are beneficial and should be expanded.
There are a host of ways the laboratories and universities can
continue to build upon their interactions, including collaboration on
papers, student internships at labs, research subcontracts from labs to
universities, large collaborative research projects (for example funded
by NERI program), and many others. All of these are important and
beneficial; however, the panel believes the most important interaction
mechanism is to increase the engagement of faculty members (and thus
their graduate students) in funded research that is of programmatic
interest to the laboratories. Research funding in line with laboratory
objectives is by far the best way to attract both faculty and
laboratory interest; programmatic relevance ensures short-term benefit
to the lab and produces graduates that are interested and expert in
laboratory problems (which is a long-term benefit).
The panel examined several specific approaches that could increase
collaboration between universities and laboratories. Some of these
strategies have a common theme that would require exercising some level
of central authority within the DoE.
Increased Nuclear Engineering and Health Physics
Fellowships: These are an excellent means of interacting with
top graduate students, since these students are required to
spend an intern period at the DoE national laboratories. And
this is directly in accord with our proposed increase of
graduate student fellowships.
Increased personnel exchanges between Laboratories and
Universities: Laboratories could create programs such as a
``Distinguished Visitor Program,'' under which university
faculty could spend extended periods (e.g. sabbaticals) at
laboratories. Laboratories could encourage its staff to give
seminars and/or spend time as visiting faculty at universities.
Designated University Awards: Universities provide largely
untapped resources that could participate more fully in DoE
applied and basic research programs. To take more advantage of
this resource, DoE could negotiate a financial incentive for
subcontracting a certain percentage of the laboratory's budget
to universities. Laboratory management could also require
individual programs (or divisions or directorates) to
subcontract a set amount or percentage to universities each
year.
senate bill 242: university nuclear science and engineering act
I have read Senate Bill 242 in detail and am very supportive of its
elements. It addresses all of the issues that I have outlined
previously. It realistically augments the current DoE University
Programs budget in a phased-fashion, and it is responsive to the needs
of assuring a future that nurtures the human resources nuclear energy
will need. Let me conclude my comments in support of S. 242 with two
major points that I would like to emphasize:
An important aspect of Senate Bill 242 is that it provides
for the enhancement of the human resource that nuclear science
and engineering will need to continue to contribute to the
common good of this nation. This ``people-focus'' supports all
aspects of nuclear science and engineering as the industry
decides to pursue additional nuclear electrical generating
capacity or the medical community uses new advances in medical
imaging and cancer treatments.
In addition, Senate Bill 242 provides the infrastructure
support for the necessary facilities for the education of
future scientists and engineers. This support will provide
undergraduates and graduate students with an otherwise
unobtainable ``hands-on'' educational experience, allowing for
understanding of nuclear fission-reactor processes and
interaction of radiation with matter.
Therefore, I fully support the authorization of $30 million in
FY2002 with increased funding in a phased manner to $64 million by FY
2006.
senate bill 472: support for continued use of nuclear energy
I have also read Senate Bill 472 in some detail and although I do
not consider myself an expert in all of the aspects of this omnibus
bill, I am quite supportive of its general approach and many of its
specific recommendations, as well as the funding needed to accomplish
these tasks. Let me provide comments on significant items:
1. Support for Nuclear Energy
a. Renew Price-Anderson: This legislation provides the essential
liability coverage for nuclear activities. It has been and continues to
be a rational and reasonable way to assure for compensation from
accidents if needed.
b. Assistant Secretary for Nuclear Energy: This is necessary since
it elevates the Director for Nuclear Energy to a position held in prior
administrations.
c. Nuclear Engineering Educational Support: I have commented on
this.
d. Nuclear Engineering Efficiency Improvement: This provision would
provide funding for incentives to utilities to make capital investments
that would increase the electricity output of nuclear power plants. In
this time of rising energy costs and electricity shortages, such a
provision provides a needed mechanism to rapidly provide more
electrical power with this economic, safe and reliable technology.
e. Nuclear Generation Study provides a status of new and re-
licensed plants.
2. Encourage New Nuclear Power Plant Construction
a. Completion of Unfinished Plants: This is a mechanism that can
provide for the industry to bring unfinished nuclear power plants on-
line by the end of 2004, following a careful review of their viability
and reliability.
b. Generation IV Reactor Program: This is an important program that
will allow the DoE to develop a program plan with the needed industrial
input and guidance. The program provides a roadmap for new evolutionary
plant designs, research and development to supply future electrical
energy needs, with improved economics, safety and sustainability.
c. Early-site Permit Demonstration Program: This is an interesting
concept to provide a ``bank'' of locations that are pre-approved by the
Nuclear Regulatory Commission for nuclear power plant sites. This has
the potential of taking several years off of the construction time for
nuclear power plants and making them more economic.
3. Assure a Level Playing Field for Nuclear Power
There are numerous improvements being proposed that will improve
the competitive aspects of nuclear power production. I would endorse
many of these; e.g., qualification for environmentally preferable
purchase programs, consumer information disclosure standards, no
discrimination for international programs.
4. Improve Nuclear Regulatory Commission Regulations
Once again there are numerous improvements that need to be
implemented, which will not compromise the general public health and
safety, but are needed for process enhancement. I would also endorse
many of these; e.g., remove duplicative antitrust review requirements,
simplify hearings for licensing actions, give the NRC authority over
decommissioning obligations of non-licensees.
5. Development of Nuclear Waste Solutions
The stalemate over disposal of high-level waste that has existed
for over three decades is totally unacceptable. This is one of the most
important areas that require legislative attention to assure continued
use of nuclear power in the 21st century. It is my view that this is
primarily a political rather a technical issue. To quote a former
governor and a former Secretary of the Interior, Bruce Babbitt, the
disposal of nuclear waste is ``almost entirely a political issue. There
is not much left to quarrel about'' at Yucca Mountain, Nevada, the site
of the proposed repository for spent nuclear fuel. The former Secretary
of the Interior called the site ``safe and solid'' at a recent Nuclear
Energy Assembly Conference on May 22nd, 2001. Former Secretary Babbitt
said that the political nature of waste disposal ``stems from the
inability to appreciate the reality of geologic time and how stable
land forms are over relatively short times geologically speaking.'' I
am also aware that the proposed Yucca Mountain repository siting
decision is being delayed due to political reasons. Therefore, I fully
support the concept of an Office of Spent Nuclear Fuel Research as a
backup. This proposal has as its charter, the development of a national
strategy for spent fuel. This was part of the Title III interim storage
bill proposed during the 106th Congress.
In summary, the omnibus Senate Bill 472 has my full support.
The Chairman. Thank you all very much. I think all the
testimony has been very useful. Let me just ask a very few
questions here and then we have one additional panel. Dr.
Holdren, let me start with you. One of the things you focused
on in this 1997 PCAST report was, or at least one of the things
you raised there, was the role of government in commercializing
these high public benefit energy technologies. Could you
elaborate a little bit as to what you see as the appropriate
governmental role in this?
Dr. Holdren. Yes, I can do that, although to do so I will
have to go somewhat beyond what the PCAST study 1997 itself
addressed because our mandate was to look at research and
development and not at demonstration and deployment. We went a
little bit beyond that mandate in suggesting that in cases
where there is a very high public benefit associated with a new
technology, the Government's investment in research and
development should be added to by an investment at the
demonstration stage and perhaps in efforts to buy down the
costs of the new technology to the point of commercial
competitiveness with the justification that the high public
benefit not realized in private returns justifies the
Government's moving beyond R&D. In those kinds of cases, one
could imagine, for example, a situation where you have a new
technology whose cost would fall rapidly if you could get the
total quantity of production up a bit. But there is this
barrier to be overcome. The production will not rise under
market conditions if the initial price is too high to compete
with what else is out there. So, you get the Government
involved, and there are various ways to do this, in subsidizing
the incremental cost required to get production to the level
where the new technology becomes competitive, and again the
reason for it is the public benefit. For example, in reduced
emissions of air pollutants, greenhouse gases, reduced
dependence on foreign oil, and so on and so forth, a wide array
of public benefits that might justify that sort of involvement.
The second PCAST study in 1999 on international cooperation
looked at this in more detail because it did have a mandate to
look beyond R&D toward demonstration and deployment. It did
look in more detail at specific mechanisms for doing this and
also looked in more detail at the circumstances under which it
would make sense.
The Chairman. Let me ask Dr. Moniz a question that I asked
Mr. Blake a little bit earlier. This whole problem of
measuring, or metrics, in the expenditure of R&D funds--what do
you believe the pitfalls are in going down that road? I mean I
am concerned, I guess, that building too many metrics into this
system can cause us to make some very shortsighted decisions,
and I would just be interested in any comments you have as to
how we avoid that.
Dr. Moniz. Well, Mr. Chairman, I think the physicist's
response is always, to quote Einstein, ``not everything that
can be counted counts and not everything that counts can be
counted.'' And I think that does apply to much of the research
enterprise. Indeed, in 1996, I would just observe when I was
serving at OSTP we did a multi-agency study of metrics in the
GPRA context for basic research. And I think that report raises
many of the cautions that you elude to. Indeed, it is complex
analysis involving, as Bob said, both retrospective and
prospective issues but when all was said and done, certainly
especially in the research phase, we emphasized that there was
simply no replacement for forums of merit review and peer based
review to evaluate particularly prospective investments.
Now, having said that, we certainly do not argue that R&D
investments are somehow immune from accountability, from using
measures. I believe the Academy report, for example, the matrix
that Bob referred to, is the kind of approach which clearly has
some subjective judgments in filling in the boxes which is
very, very important and a way to go. It is also a case that
when one takes a sensible system, and I will just finish with
one example, that one has in some sense a mixed kind of
approach appropriate to the job. It is not one size fits all.
Let's take for example a major investment, and I will just pick
an example. Let's say, at Fermilab to explore the Higgs boson.
There are clearly very quantitative metrics that should be
applied to the issue of building the facility on time, on
schedule, on costs, et cetera. But those same metrics cannot
sensibly be applied to the actual research outcome because the
outcomes themselves are of course what you are trying to learn.
So, the issue would be, and I would refer back to, and I would
be happy to explain, at some other time, go into more detail,
in the 1996 report together with the National Academy report. I
believe it maps out what is fundamentally a sensible way of
evaluating research programs and looking at progress.
The Chairman. Well, I could ask questions here for several
more hours and I am sure you folks could educate me on a lot of
things, but let me just stop with that. And thank you very much
for coming. We will take your testimony and do our best to
learn from it and incorporate the lessons into what we wind up
legislating here. Thank you very much.
Let's take a 5-minute break and then we will do the third
panel.
[Recess.]
The Chairman. If we go ahead with the third panel. We have
three witnesses here in this third and last panel on
reprocessing of nuclear fuel. First, Dr. Tom Cochran who is a
senior scientist and nuclear program director with the NRDC
here in Washington. Mr. Jacques Bouchard who is with the French
Atomic Energy Commission. Thank you very much for being here.
And Dr. Greg Choppin, who is with the Department of Chemistry
at Florida State University in Tallahassee. Thank you very much
for being here. Dr. Cochran, why don't you go ahead. And the
full statement of each of you will be included in the record.
If you could take just 5 or 6 minutes and summarize your main
points, we would appreciate it.
STATEMENT OF THOMAS B. COCHRAN, PH.D., DIRECTOR, NUCLEAR
PROGRAM NATURAL RESOURCES DEFENSE COUNCIL
Dr. Cochran. Thank you, Mr. Chairman. My name is Thomas B.
Cochran. I am director of nuclear program at the Natural
Resources Defense Council. I am a member of the Department of
Energy's Nuclear Energy Research Advisory Committee but I am
testifying today on behalf of NRDC and not the advisory
committee. I am pleased to be here today to testify about U.S.
nuclear energy policy and proposals for funding, research and
development by the Department of Energy's office of nuclear
energy. My testimony will focus on research and development of
advanced fuel processing technologies and whether the United
States should abandon its long-standing nonproliferation policy
and promote the development and deployment of pyroprocessing
and transmutation technologies.
Let me begin with a few general observations. Civilian
nuclear activities have directly and indirectly contributed to
the spread of nuclear weapons. In my written testimony I've
given you several examples. Several non-weapons States have
pursued nuclear weapons primarily through the plutonium
production and reprocessing route. And again in my written
statement I've given you the example of Taiwan's covert nuclear
weapons program that was conducted under the cloak of its
civilian nuclear energy program. Unfortunately, the nuclear
nonproliferation threat stemming from civilian nuclear power
technologies is still alive today as evidenced by Iran's
pursuit of a nuclear weapons option by purchasing nuclear
expertise and dual use technology from Russia.
Because of the real proliferation risk associated with the
separation of plutonium by reprocessing, the U.S. Government
has long taken the position that it does not encourage the
civilian use of plutonium and accordingly does not itself
engage in commercial plutonium processing. The United States
has also recognized as far back as the Ford administration, and
largely because of the work of Mr. Fri who was on the previous
panel, that the closed nuclear fuel cycle with reprocessing in
plutonium separation and recycling is uneconomical and presents
an unacceptable proliferation risk.
Unfortunately, while the United States has actively sought
to limit reprocessing in some regions of proliferation concern,
it regrettably has taken the position that it will honor its
existing commitments with regard to the use of plutonium in
civilian nuclear programs in Western Europe and Japan, thus
establishing an unworkable double standard in dealing with
global nuclear weapons proliferation and leading to the
stockpiling of huge quantities of weapons usable plutonium in
Western Europe and Japan. Large reprocessing plants, plutonium
stockpiles and advanced research on new fuel processing
technologies in non-weapons States provide an ideal cover for
nascent nuclear weapons States to pursue a nuclear weapons
option while claiming their programs are entirely for peaceful
purposes. Advanced reprocessing research even in weapons States
provides the necessary justification for the nascent nuclear
weapons States to pursue similar research ostensibly for
peaceful purposes.
The Bush administration's national energy policy has
recommended that the United States should reexamine its
policies to allow for research and development and deployment
of fuel conditioning or reprocessing technologies such as
pyroprocessing.
In my view, implementation of the Bush plan and the
supporting legislative proposals would be a grave mistake. Let
me explain why.
First, reprocessing light water reactor spent fuel is
uneconomical today and will remain so for the foreseeable
future. The issue then is whether there are new reactor
concepts using new fuel cycles that are cheaper and more
proliferation resistant than the light water reactor once-
through fuel cycle. The simple answer is that there are no
known fuel cycles that are cheaper, and no known fuel cycles
that rely on reprocessing that are more proliferation resistant
than the once-through fuel cycle. In fact, neither
pyroprocessing nor any other reprocessing scheme proposed to
date is cleaner, less waste intensive or more proliferation
resistant than the once-through fuel cycle, that is, direct
disposal of spent fuel, the practice planned for use in the
United States today.
I will not go into the history of the pyroprocessing
program. It is in my written remarks. The claim that
pyroprocessing, which is an electro-refining technique, the
claim that it is proliferation resistant is misleading.
Pyroprocessing is less proliferation resistant than the once-
through fuel cycle in use today. It is more proliferation
resistant than aqueous reprocessing, which the United States
abandoned commercially more than 20 years ago because it was
uneconomical and because it carries a high proliferation risk.
Pyroprocessing appears less risky than aqueous reprocessing
because the plutonium is not completely separated from other
radioactive actinides and therefore an additional processing
step is needed to obtain weapons-usable plutonium. This would
make it very difficult for terrorists to steal the plutonium
from a pyroprocessing plant or the Integral Fast Reactor fuel
cycle which relied on pyroprocessing.
However, the most serious nonproliferation threat
associated with reprocessing technologies is not the terrorist
threat, but the so-called State threat. The Integral Fast
Reactor concept and the pyroprocessing technique that it
utilized offers little in the way of reducing this State
threat. If pyroprocessing facilities are located in non-weapons
States, these States will have cadres of experts trained in
plutonium chemistry and metallurgy along with hot cells and
other facilities that can be readily used for the recovery of
plutonium for weapons. In this regard, pyroprocessing cannot
meet the so-called timely warning international safeguards
criterion.
In one respect, pyroprocessing is actually worse than
aqueous reprocessing in terms of their respective proliferation
risks. Pyroprocessing involves access to technologies for
working with plutonium in metallic form, the form that is used
for weapons. What is more, engaging in pyroprocessing research
now will encourage or provide an excuse for non-weapons States
to do the same, thus giving these States yet another avenue to
get closer to a weapons option without declaring their true
intention. No one would want to see Iran engaging in
pyroprocessing research associated with the Bushehr reactor now
under construction.
Another problem with pyroprocessing, and this is the
Achilles heel, is that there are no known fuel cycles that rely
on pyroprocessing that show any promise of being economical in
the foreseeable future. For the United States to pursue an
expensive pyroprocessing R&D effort at this stage is simply a
waste of taxpayers money.
Now, I wish to turn to the issue of accelerator
transmutation of waste.
The Chairman. Could you do that fairly quickly for us,
please?
Dr. Cochran. Yes. The argument for transmutation of waste
is that you will select out certain isotopes, burn them in
accelerators or fast reactors, and thereby reduce the long-term
health effects from radioactive release from a geologic
repository and reduce the uncertainty in the long-term dose
assessment as well.
This proposal sounds worthy in theory but in practice, it
is a ridiculous proposal. First, it is extremely expensive. The
Department of Energy estimated that the life cycle cost would
be something on the order of $280 billion. Secondly, even if
you did not go back and process all of the existing spent fuel
but say only process future spent fuel, you would only reduce
the dose from the geologic repository, for example, Yucca
Mountain, by a factor of 2. So, you would be paying hundreds of
billions of dollars to reduce the dose tens of thousands or
hundreds of thousand of years from now by a factor of 2. The
argument is even worse in that there is not a shred of evidence
in any of the accelerated transmutation of waste proposals that
the collective dose reductions associated with the geological
repository will in fact be less than the collective dose from
operating all of the reprocessing facilities in transmutation
facilities. So, in fact you would be spending tens to hundreds
of billions of dollars most likely to give people more cancer
rather than less.
In closing, NRDC does not object to continued support of
university nuclear research programs or the Department of
Energy's Nuclear Energy Research Initiative or the study of
Generation IV reactors and fuel technologies. Research on
advanced fuel cycle technologies should be limited to paper
studies until there is clear evidence that the new technology
is cheaper, inherently safe and more proliferation resistant
than the light water reactor operating on the once through fuel
cycle. At this time, Congress should reject any legislative
proposals to fund dual use technologies such as power
processing and accelerated transmutation of waste beyond such
paper studies. Thank you, Mr. Chairman.
[The prepared statement of Dr. Cochran follows:]
Prepared Statement of Thomas B. Cochran, Ph.D., Director, Nuclear
Program Natural Resources Defense Council
My name is Thomas B. Cochran. I am the director of the Nuclear
Program and hold the Wade Greene Chair for Nuclear Policy at the
Natural Resources Defense Council (NRDC). I am a member of the
Department of Energy's (DOE's) Nuclear Energy Research Advisory
Committee (NERAC), but I am testifying today on behalf of NRDC, not
NERAC. I am a fellow of the American Physical Society and the American
Association for the Advancement of Science. I received my Ph.D. in
nuclear physics from Vanderbilt University, where I also did my Masters
research thesis in radiation chemistry. I was an AEC Health Physics
Fellow at Vanderbilt and spent one month training at a pilot nuclear
fuel reprocessing plant at Oak Ridge National Laboratory. I am the
author of The Liquid Metal Fast Breeder Reactor: An Environmental and
Economic Critique and co-author of several books on nuclear weapons and
the nuclear weapons programs of the United States and the Soviet Union/
Russia.
I am pleased to be here today to testify about U.S. nuclear energy
policy and proposals for funding research and development by the DOE'
Office of Nuclear Energy. My testimony will focus on research and
development of advanced fuel processing technologies and whether the
United States should abandon its longstanding non-proliferation policy
and promote the development and deployment of pyroprocessing and
transmutation technologies. Let me begin with a few general
observations.
Civilian nuclear activities have directly and indirectly
contributed to the spread of nuclear weapons. India's first nuclear
weapons test in 1974, for example, used plutonium produced in a
Canadian-supplied research reactor using U.S.-supplied heavy water as a
moderator, and the plutonium was separated in a reprocessing plant
built from blueprints supplied by an American firm, Vitro
International. This plant was nominally part of India's civilian
breeder reactor research and development program. Between 1955 and
1974, Argonne and other DOE national laboratories trained some 1100
Indian scientists and engineers in nuclear fuel cycle technology,
including techniques for plutonium separation. Some nations have
established nominally civilian nuclear programs as a pretext to acquire
technologies for military programs or have acquired materials,
equipment, technologies or technical personnel from the civilian sector
for their nuclear weapons programs. Israel's plutonium production
reactor and reprocessing plant at Dimona were provided by France
ostensibly for civilian purposes, but were actually used for military
purposes.
Several non-weapon states have pursued nuclear weapons primarily
through the plutonium production and reprocessing route. For example,
Taiwan's covert nuclear weapons program was conducted under the cloak
of its civilian nuclear program. Under intense pressure from the United
States Taiwan's program was shut down in the 1970s, restarted in the
1980s, and shut down a second time under pressure by the United States.
In the 1970s the United States had provided a small amount of plutonium
to Taiwan for research purposes and some was fabricated into metal in
what was claimed to be a civilian facility. Evidence strongly suggested
that Taiwan planned to divert the plutonium from its safeguarded
facility for weapons research. Subsequently, Taiwan provided assurances
to the United States that it would not reprocess, dismantled its
reprocessing research facility and sent the separated plutonium back to
the United States. Similarly, South Korea began a secret nuclear
weapons program based on plutonium production and reprocessing. Under
pressure from the United States South Korea agreed to end its program.
Unfortunately, the nuclear nonproliferation threat stemming from
civilian nuclear power technologies is still alive today, as evidenced
by Iran's pursuit of a nuclear weapons option by purchasing nuclear
expertise and dual-use technology from Russia.
Because of the very real proliferation risks associated with the
separation of plutonium by reprocessing, the United States government
has long taken the position that it does not ``encourage the civil use
of plutonium and accordingly, does not itself engage in plutonium
processing.'' The United States has also recognized as far back as the
Ford Administration that the closed nuclear fuel cycle with
reprocessing and plutonium separation and recycling, is uneconomical
and presents unacceptable proliferation risks. In fact it was the Ford
Administration, not the Carter Administration, which stopped commercial
reprocessing in the United States by refusing to subsidize the
completion of the Barnwell reprocessing plant in South Carolina. For
existing light water reactors the closed fuel cycle has been, continues
to be, and in the foreseeable future is projected to be more expensive
than ``once-through'' utilization followed by direct disposal of spent
fuel.
Unfortunately, while the United States has actively sought to limit
reprocessing in some regions of proliferation concern, it regrettably
has taken the position that it will ``honor its existing commitments
regarding the use of plutonium in civil nuclear programs in Western
Europe and Japan,'' \1\ thus establishing an unworkable double standard
in dealing with global nuclear weapons proliferation and leading to the
stockpiling of huge quantities of weapon-usable plutonium in Western
Europe and Japan.
---------------------------------------------------------------------------
\1\ White House National Policy Statement of September 1993.
---------------------------------------------------------------------------
Large reprocessing plants, plutonium stockpiles and advanced
research on new fuel processing technologies in non-weapon states
provide an ideal cover for nascent nuclear weapon states to pursue a
nuclear weapons option while claiming their programs are entirely for
peaceful purposes. Advanced reprocessing research, even in weapon
states, provides the necessary justification for nascent nuclear weapon
states to pursue similar research ostensibly for peaceful purposes. It
is primarily for these reasons that NRDC believes the better course is
to oppose all commercial use of nuclear weapon-usable materials,
including separated plutonium and highly enriched uranium, and oppose
the research, development and commercialization of nuclear fuel
reprocessing technologies.
The Bush Administration's National Energy Policy has recommended
that ``"the United States should reexamine its policies to allow for
research, development and deployment of fuel conditioning methods
[i.e., reprocessing] (such as pyroprocessing) that reduce waste streams
and enhance proliferation resistance,'' and ``[t]he United States
should also consider technologies, in collaboration with international
partners with highly developed fuel cycles and a record of close
cooperation, to develop reprocessing and fuel treatment technologies
that are cleaner, more efficient, less waste intensive, and more
proliferation resistant.'' Some of the legislative proposals being
considered by the Senate are designed to implement the Bush
Administration proposal. In my view implementation of the Bush plan and
these legislative proposals would be a grave mistake. Let me explain
why.
First, as noted above, reprocessing light water reactor spent fuel
is uneconomical today and will remain so for the foreseeable future.
The issue then is whether there are new reactor concepts using new fuel
cycles that are cheaper and more proliferation resistant than the light
water reactor once-through fuel cycle. The simple answer is that there
are no known fuel cycles that are cheaper, and no known fuel cycles
that rely on reprocessing that are more proliferation resistant, than
the once through fuel cycle. In fact, neither pyroprocessing nor any
other reprocessing scheme proposed to date is cleaner, less waste-
intensive or more proliferation-resistant than the once-through fuel
cycle, i.e., direct disposal of spent fuel, the practice planned for
use in the United States today.
Why is there so much interest in pyroprocessing in the United
States? Pyroprocessing is an outgrowth of the failed Liquid Metal Fast
Breeder Reactor (LMFBR) program. After the Clinch River Breeder Reactor
Demonstration Reactor was cancelled in 1983 in response to criticisms
that the Liquid Metal Fast Breeder Reactor fuel cycle would have
produced huge quantities of separated plutonium and posed a significant
proliferation risk, Argonne National Laboratory began promoting the
Integral Fast Reactor (IFR) concept. The IFR concept relied on
pyroprocessing, an electro-refining technique, instead of aqueous
reprocessing, the traditional method for separating plutonium from
spent fuel. Also the IFR concept envisioned that a pryroprocessing
facility would be located at each fast reactor site. The IFR concept,
like its LMFBR predecessor is grossly uneconomical. When IFR R&D was
terminated, the proponents of pryprocessing used the excuse that this
was the best methodology for processing and disposing of EBR-II spent
fuel. Now that this program has run its course Argonne and Argonne-West
are seeking additional Congressional funding to preserve their program
by suggesting that pryroprocessing R&D could be continued for some
illusory ``proliferation-resistance'' benefit.
The claim that pyroprocessing is ``proliferation resistant'' is
misleading. Pyroprocessing is not more proliferation resistant than the
once-through fuel cycle in use today. It is more proliferation
resistant than aqueous reprocessing, which we abandoned more than 20
years ago because it was uneconomical and because it carried a high
proliferation risk. Pyroprocessing appears less risky than aqueous
reprocessing because the plutonium is not completely separated from
other radioactive actinides and therefore an additional processing step
is needed to obtain weapon-usable plutonium. This would make it very
difficult for terrorists to steal the plutonium from the IFR fuel
cycle. However, the most serious nonproliferation threat associated
with reprocessing technologies is not the terrorist threat, but the so-
called ``state threat.'' The IFR concept and the pyroprocessing
technique offer little in the way of reducing this threat. If
pyroprocessing facilities are located in non-weapon states, these
states will have cadres of experts trained in plutonium chemistry and
metallurgy along with hot cells and other facilities that can be
readily used for the recovery of plutonium for weapons. In this regard
pyroprocessing cannot meet the so-called ``timely warning''
international safeguards criterion.
In one respect pyroprocessing is actually worse than aqueous
reprocessing in terms of their respective proliferation risks.
Pyroprocessing involves access to technologies for working with
plutonium in metallic form, the form most often used for weapons.
What is more, engaging in pryroprocessing research now will
encourage or provide an excuse for non-weapons states to do the same,
thus giving these states yet another avenue to get close to a weapon
option without declaring their true intention. No one would want to see
Iran engaging in pyroprocessing research associated with the Bushehr
reactor now under construction.
Another problem with pyroprocessing is that there are no known fuel
cycles that rely on pyroprocessing that show any promise of being
economical in the foreseeable future. For the United States to pursue
an expensive pyroprocessing R&D effort at this stage is simply a waste
of the taxpayers money.
In sum, pyroprocessing R&D is a waste of money and an unnecessary
proliferation risk. It is being promoted by entrenched interests that
have lived off the taxpayer for decades and are now engaged in a last
ditch effort to preserve their existence without substantive
justification.
I now wish to turn to the issue of accelerator transmutation of
[nuclear] waste (ATW). This program has been combined with accelerator
production of tritium, a proposal to develop a backup method for
producing tritium, under a budget category called ``Advanced
Accelerator Applications.'' The argument for transmutation of waste is
that by reprocessing spent fuel, separating out selected isotopes and
transmute these isotopes with accelerators and/or fast reactors, the
long-term health effects from radioactivity released from a geologic
repository can be reduced and the uncertainty in the long-term dose
assessment would also be reduced. The proposal sounds worthy in theory,
but in terms of practicality it is a ridiculous proposal. First, to
have any significant impact on the first geologic repository, all the
existing spent fuel would have to be reprocessed. This is such an
extremely expensive proposition that it simply not credible. DOE
estimated the life-cycle cost of the ATW program at approximately $280
billion! \2\
---------------------------------------------------------------------------
\2\ DOE, ``A Roadmap for Developing Accelerator Transmutation of
Waste (ATW) Technology,'' October 1999, p. E-2.
---------------------------------------------------------------------------
There are about 40,000 tonnes of power reactor spent fuel spent
fuel in storage in the United States. Over the future lifetime of
existing reactors another 40,000 tonnes or so will be generated. Even
if only the future waste were transmuted, the theoretical impact at the
geologic repository--at Yucca Mountain if it is licensed--would be to
reduce the long-term dose from those isotopes transmuted only by about
one-half. It is ridiculous to suggest that we should spend hundreds of
billions of dollars today to reduce the radiation dose to people living
tens to hundreds of thousands of years from now by a factor of two or
less.
It the arguments get even worse. There is not a shred of evidence
in any of the ATW proposals that the collective dose reductions
associated with the geologic repository, assuming ATW is implemented,
will be less than the collective dose from operating the reprocessing
facilities and the transmutation facilities. In fact everything we know
about these facilities today suggests the opposite--ATW would result in
a higher collective radiation dose to people than they would receive if
ATW were not implemented. We should not spend hundreds of billions of
dollars to give more people cancer. Finally, ATW provides yet another
cover for non-weapon states to engage in reprocessing and the study of
plutonium and actinide chemistry and metallurgy. It is a serious
proliferation risk.
With regard to backup tritium production, this apparently is not a
request coming from the Administration. Rather, this request comes from
a Los Alamos accelerator group which lost a bid to produce tritium for
weapons when the Administration decided to qualify TVA reactors for
this purpose in the event that the pace of nuclear arms reductions lags
behind the decay curve of tritium. If the United States needs a second
backup method for tritium production, we should use another reactor
alternative. Reactors have reliably produced tritium for weapons for 40
years.
The NRDC does not object to continued support of university nuclear
research programs, the DOE Nuclear Energy Research Initiative (NERI),
and the study of Generation IV reactor/fuel cycle technologies.
Research on advanced fuel cycle technologies should be limited to paper
studies until there is clear evidence that the new technology is
cheaper, inherently safe, and more proliferation resistant than the LWR
operating on a once-through fuel cycle. At this time Congress should
reject any legislative proposals to fund pyroprocessing or ATW R&D
beyond such paper studies.
COMMENTS ON SPECIFIC LEGISLATIVE PROPOSALS BEFORE THE 107TH CONGRESS,
1ST SESSION
S. 193 Department of Energy Advanced Scientific Computing Act.
(Bingaman, et al.)
The Department of Energy is already subsidizing the supercomputer
industry through the Accelerated Strategic Computing Initiative (ASCI)
program to the tune of some $5.2 billion for fiscal years 1992-2004. It
should be made clear that funding under S193 should be for non-defense
work, i.e., other than ASCI and other National Nuclear Security
Administration (NNSA) activities, and that it should be accommodated by
drawing down the ASCI weapons computing program to a more sensible
level of funding. GAO has demonstrated in several reports that DOE is
able to effectively utilize only a fraction of the new computing
capacity it is rushing to install.
S. 242 Department of Energy University Nuclear Science and Engineering
Act. (Bingaman, et al.)
I concur that university nuclear science departments are on the
decline. Because of the wide range of nuclear activities in the United
States, including environmental cleanup of sites contaminated by
radioactivity, nuclear medicine and nuclear related national security
programs, as a general matter university nuclear programs could benefit
from federal support. Due to the lack of U.S. student interest in
nuclear engineering, U.S. nuclear engineering departments are
increasingly relying on foreign students to fill the student ranks in
these departments. The Congress may wish to consider restrictions on
nuclear training of foreign nationals, particularly in cases where the
students are from countries that do not share U.S. nonproliferation
policies and objectives. Consequently, I recommend that the
undergraduate and graduate fellowships and faculty grants under this
proposed legislation be limited to the support of U.S. citizens.
S. 259 National Laboratories Partnership Improvement Act of 2001.
(Bingaman, et al.)
This legislative proposal should be rejected in that it is an
unwarranted subsidy for small businesses that meets vague criteria,
e.g., work that can ``support the missions of the National Laboratories
or facilities,'' or encourage ``the exchange of scientific or
technological expertise.''
S. 388 National Energy Security Act of 2001. (Murkowski, et al.)
SEC. 106. Nuclear Generation Study--An NRC report on the state of
nuclear power would be useful. As a regulatory agency NRC at least
should maintain the semblance of independence and not take positions
for or against the relicensing of nuclear power plants.
SEC. 107. Development of a National Spent Nuclear Fuel Strategy and
Establishment of an Office of Spent Nuclear Fuel Research--This
legislative proposal should be rejected. To a large extent this
proposal is an unnecessary duplication of the work of the DOE Office of
Civilian Radioactive Waste Management. There is no evidence that
reprocessing of spent fuel is economical so there is no merit to this
aspect of the proposed activities. Moreover, establishment of this
office and carrying out recycle research activities would be counter to
the nonproliferation interest of the United States for reasons given in
my general comments above.
SEC. 410. Nuclear Energy Research Initiative--The NERI program of
the department is a good program and deserves the support of the
Congress
SEC. 411. Nuclear Energy Plant Optimization Program--Plant
optimization is in the interest of the nuclear industry. Congress
should not subsidize a mature industry to do what is in their economic
interest to do without federal subsidization.
SEC. 412. Nuclear Energy Technology Development Program--A roadmap
to design and develop a new energy facility is premature. There is
nothing coming out of the NERI studies or GEN IV programs that is
commercially attractive and justifies federal support at this time.
SEC. 420. Nuclear Energy Production Initiatives--Congress should
not subsidize a mature industry to do what is in their economic
interest to do without federal subsidization.
SEC. 830. Emission Free Control Measures Under at State
Implementation Plan--Sec. 830 offers unwarranted federal subsidies to
nuclear power plant operators in the form of emission credits, since
the facilities do not emit air pollution causing acid rain (sulfur
dioxide), ozone smog (nitrogen oxide), or mercury as do many fossil
fuel-fired power plants. Under the Clean Air Act, fossil fuel-fired
power plants are offered economic incentives to adopt the most
efficient pollution control measures available for sulfur dioxide and
nitrogen oxide emissions by requiring operators to have emission
allowances equal to the amount of pollution emitted at each fossil
fuel-fired power plant. This section would undermine the reductions in
acid rain and ozone smog pollution achieved under these Clean Air Act
programs at fossil fuel-fired power plants by giving nuclear power
plant operators emission allowances that would flood the market,
significantly lower the value of banked allowances and discourage
continued investment in pollution control measures at fossil fuel-fired
power plants. This is an unjustified and damaging federal subsidy.
S. 472 Nuclear Energy Electricity Supply Assurance Act of 2001.
(Domenici, et al.)
Title I--Support for Continued Use of Nuclear Energy
Subtitle A--Price Anderson Amendments
The Price Anderson Act should not be renewed. This is an
unwarranted federal subsidy to a mature industry. Moreover, the
industry and its supporters cannot have it both ways. They cannot claim
nuclear reactors are safe, and that Generation IV reactors will be even
safer, and then claim that Price Anderson is necessary. Asserting a
requirement for Price Anderson coverage of supposedly ``inherently
safer'' Generation IV reactors is disingenuous and unwarranted. The
single criterion that will do most to insure that Generation IV designs
are safe is for the Congress to explicitly exclude any Price Anderson
coverage of new nuclear power plants.
Subtitle C--Funding of Certain Department of Energy
Programs
SEC. 122. Nuclear Energy Research Initiative--The NERI program of
the department is a good program and deserves the support of the
Congress.
SEC. 123. Nuclear Energy Plant Optimization Program--Plant
optimization is in the interest of the nuclear industry. Congress
should not subsidize a mature industry to do what is in their economic
interest to do without federal subsidization.
SEC. 124. Uprating of Nuclear Plant Operations--Whether to increase
the power at a nuclear power plant is a decision to be made by the
plant owner and the Nuclear Regulatory Commission. Congress should not
by subsidizing a mature industry to do this.
SEC. 125. University Programs--See comments under S. 242 Department
of Energy University Nuclear Science and Engineering Act. (Bingaman, et
al.) above.
SEC. 126. Prohibition of Commercial Sales of Uranium and Conversion
Held by the Department of Energy Until 2006--This legislative proposal
should be supported so as not to jeopardize the HEU Purchase agreement
with Russia.
SEC. 127. Cooperative Research and Development and Special
Demonstration Projects for the Uranium Mining Industry--This appears to
be a sweet heart deal for Rio Algom and possibly other uranium mining
companies. Congress should not by subsidizing the uranium mining
industry which has been in business in the United States for more than
50 years.
SEC. 128. Maintenance of a Viable Domestic Uranium Conversion
Industry--This appears to be a sweet heart deal for Converdyn, owned by
Honeywell and General Atomics, to make them more profitable. General
Atomics has been surviving off of this type of special interest
legislation for 30 years. Congress should not by subsidizing General
Atomics or the uranium conversion industry, a mature industry.
SEC. 129. Portsmouth Gaseous Diffusion Plant--First Congress
privatized the domestic uranium enrichment industry and is now stepping
in to subsidize the maintenance of the Portsmouth gaseous diffusion
plant. This has more to do with job security than nuclear energy
security.
SEC. 130. Nuclear Generation Report--An NRC report on the state of
nuclear power would be useful.
Title II--Construction of New Nuclear Power Plants
SEC. 203. Early Site Permit Demonstration Program--This is an
unwarranted federal subsidy of the nuclear industry, a mature industry
SEC. 204. Nuclear Energy Technology Study for Generation IV
Reactors--The Generation IV studies deserve support. The primary goal
should be to identify reactor concepts that are economically
competitive, inherently safe and more proliferation resistant than
light water reactors operation on a once through fuel cycle. The
following goals should be deleted:
(3) substantially reduce the production of high-level waste,
. . .;
(5) sustainable energy generation . . .
(6), substantially improve thermal efficiency . . .
These goals will generally conflict with, the goals related to
economics, safety and proliferation resistance, and have no independent
utility
Title III--Evaluations of Nuclear Energy
SEC. 302 offers unwarranted federal subsidies to nuclear power
plant operators in the form of emission credits, since the facilities
do not emit air pollution causing acid rain (sulfur dioxide), ozone
smog (nitrogen oxide), or mercury as do many fossil fuel-fired power
plants. Under the Clean Air Act, fossil fuel-fired power plants are
offered economic incentives to adopt the most efficient pollution
control measures available for sulfur dioxide and nitrogen oxide
emissions by requiring operators to have emission allowances equal to
the amount of pollution emitted at each fossil fuel-fired power plant.
This section would undermine the reductions in acid rain and ozone smog
pollution achieved under these Clean Air Act programs at fossil fuel-
fired power plants by giving nuclear power plant operators emission
allowances that would flood the market, significantly lower the value
of banked allowances and discourage continued investment in pollution
control measures at fossil fuel-fired power plants. This is an
unjustified and damaging federal subsidy.
Title IV--Development of National Spent Fuel Strategy
This legislative proposal should be rejected. To a large extent
this proposal is an unnecessary duplication of the work of the DOE
Office of Civilian Radioactive Waste Management. There is no evidence
that reprocessing of spent fuel is economical so there is no merit to
this aspect of the proposed activities. Moreover, establishment of this
office and carrying out advanced fuel recycle research activities would
be counter to the nonproliferation interest of the United States for
reasons given in my general comments above.
Title V--National Accelerator Site
There is no redeeming social merit to this legislative proposal for
reasons given under my general remarks above.
S. 597 Comprehensive and Balanced Energy Policy Act of 2001. (Bingaman,
et al.)
Title XIV--Research and Development Programs
SEC. 1405. Enhanced Nuclear Energy Research and Development--The
goals are very general authorization of appropriations lacks
specificity. With respect to the goals see comments under S. 472
Nuclear Energy Electricity Supply Assurance Act of 2001. (Domenici, et
al.), Sec. 204 Nuclear Energy Technology Study for Generation IV
Reactors, above.
The Chairman. Thank you very much. Mr. Bouchard, why don't
you go right ahead.
STATEMENT OF JACQUES BOUCHARD, DIRECTOR, FRENCH ATOMIC ENERGY
COMMISSION, NUCLEAR ENERGY DIVISION, PARIS, FRANCE
Mr. Bouchard. Mr. Chairman, thank you very much for giving
me the opportunity to testify on the important issue of
reprocessing for the future of nuclear energy. There are few
doubts today that nuclear fission will still play a role in the
satisfaction of future energy needs all around the world. It is
among the solutions that are proposed in the recent NEPD report
and it has been mentioned by both your President and your Vice
President and it was also an important point of the European
Union green report issued last November as well as it is part
of the future plans for energy in Asian countries, in
particular Japan and China.
The results obtained with the 400 existing nuclear reactors
show that nuclear electricity production is today economically
competitive and with a very low impact on the environment. The
safety records for the last 15 years are most satisfactory. The
only problem that remains a real difficulty in some countries,
France in particular, is the management of highly radioactive
wastes. For most of the people, the actual concern is the long
term behavior of long lived radioactive elements. In this
respect, reprocessing of spent fuels is a key point as it
allows a strong reduction of both the volume and the long term
radio toxicity of wastes.
Historically, reprocessing of spent fuels, followed by
recycling of valuable materials, that means uranium and
plutonium, was intended to increase the use of natural
resources. It was part of a scheme which included breeders in
order to extract most of the energy contained in the natural
uranium. That remains a clear objective for the future. With
existing light water reactors, we burn only 1 percent of the
natural uranium and we let aside 99 percent either in
provisional storage or in waste disposal. If we don't improve
the situation, with increasing energy needs, we shall exhaust
in a few decades the uranium resources, at least those which
can be recovered at a reasonable price. Thus, reprocessing is a
cornerstone for satisfying future energy needs.
In shorter terms, it is also a key point for waste
management. In any other activity, a good waste management
policy includes selection of various types of wastes, recycling
of what can be reused and disposal solutions adapted for each
kind of product. Nuclear wastes should not be an exception to
this basic rule.
For France, we consider that nuclear spent fuel is not even
a waste as it still contains a huge amount of energy valuable
products. The way we treat it at the output of the reactor is
of major importance for the waste management policy. With
present technologies, the fuel unloaded from reactors still
contains 95 percent of uranium and 1 percent of plutonium and
it contains also four percent of actual wastes, fission
products and minor actinides.
Reprocessing allows us to separate uranium and plutonium
from the actual wastes and then, with the vitrification
process, to put these wastes in a robust containment for long
term storage or final disposal. It is basically a wise policy
for waste management. The main argument often opposed to this
policy has been that by extracting the plutonium, we could open
various possibilities of diversion and thus we may create a
weakness in the nonproliferation policy. Let me try to bring
some consideration in this discussion.
First, we are certainly not underestimating the risk of
proliferation and we're fully sustaining the various measures
which are taken on an international basis to try to avoid this
risk. The plutonium coming from light water reactors, a large
majority of existing production facilities, is not at all
suitable for nuclear weapons, but we agree on the fact that we
cannot completely exclude a wrong use of it, even if it will be
much more difficult than other proliferation routes. A
reasonable way to limit the risk, while taking benefit of
reprocessing, is to burn the plutonium as soon as possible
after extracting it from spent fuels. It is what we are doing
in France. The plutonium extracted at La Hauge is used to
fabricate MOX fuels and we have presently 20
reactors loaded partially with MOX fuel. That means
that, except for the necessary hold up for recycle management,
we have no plutonium on shelves.
Therefore, the diversion risk is limited to the operations
themselves, output of the reprocessing plant, transportation
and fuel fabrication. There, we have very strict domestic and
international controls, and we are fully convinced that they
are suitable to avoid any significant diversion.
Last but not least, we consider that from the
nonproliferation point of view, it is better to burn plutonium
rather than to keep it in store, even if it will be quite
difficult to recover from stored spent fuel with existing
technologies. In other words, we think it would not be easy to
explain to French people, for instance, that we should have to
dispose of hundreds or thousands of tons of plutonium
underground somewhere in the country.
Now, looking at the future, assuming that nuclear energy
will still be needed, and very probably on a larger scale than
presently, reprocessing will more than ever be necessary for
both economy of resources and waste management. The existing
technology of which we have now a large industrial experience--
I recall that we have reprocessed more than 18,000 tons of
spent fuel in La Hauge--has proved to be efficient and
economic. But progress should be made and we are working on it
in the same way as we are working on future reactor designs.
Taking the present concern on waste management, while
assuming the problem of plutonium is completely solved by
reprocessing and recycling, we should consider the possibility
of destroying the other actinides, the so-called minor ones,
neptunium, americium, et cetera. Several countries have
important R&D programs on partitioning and transmutation. We
have already succeeded in developing complementary processes
which could be implemented in reprocessing plants to extract
those minor actinides. We know how to burn them, either in
reactors or in accelerator driven systems. For the future, we
should try to develop an integrated approach based on the
recycling of all the actinides in such a way that the actual
wastes to be definitely disposed will only be the unavoidable
fission products, the amount of which is directly related to
the energy production.
Other improvements should be considered. One, for instance,
will be to limit as much as possible the transportation of
radioactive materials. And there, an objective could be to have
reprocessing and fuel fabrication on the same site and not too
far from the reactors. Anyway, technical solutions can be
developed, either improvement of existing technologies of
reprocessing or developments of new ones such as, for instance,
dry processing or pyroprocessing which has been successfully
tested in your country in the frame of the Integral Fast
Reactor studies developed by Argonne National Laboratory.
Mr. Chairman, as a conclusion, I would say that
reprocessing will be, in our view, sooner or later a necessity
for use of nuclear energy as sustainable development. It is
already an efficient tool for waste management and in some
countries an industrial reality. It can certainly be improved
to be still more efficient, more proliferation resistant and
cheaper.
Thank you for your attention.
The Chairman. Thank you very much. Dr. Choppin, why don't
you go right ahead.
STATEMENT OF DR. GREGORY R. CHOPPIN, FLORIDA STATE UNIVERSITY,
DEPARTMENT OF CHEMISTRY, TALLAHASSEE, FL
Dr. Choppin. Thank you. A variety of radionuclides are
present in the fuel elements of nuclear reactors after their
irradiation. Many countries process this spent reactor fuel to
recover the unburnt uranium and the plutonium that has been
produced for recycle in a reactor for future power production.
The United States has followed a ``once-through'' policy under
which the spent fuel of power reactors is considered as waste
for direct disposal without processing.
The United States did develop aqueous processing systems in
connection with the weapons production of the cold war. The
spent fuel, whether from reactors for plutonium weapons
production or for civilian power production is treated by the
aqueous PUREX process in which solvent extraction removes the
uranium and plutonium from the fission products. This is a
primary international process for treatment of irradiated fuel
for the recovery of these elements at present. Many of these
radiochemical separations developed for processing and recovery
of plutonium for weapons can be used in the treatment of the
waste to minimize the amount that must be placed in permanent,
long term storage.
Our national policy of direct disposal was based on a
concern over other nations recovering the plutonium from the
irradiated fuel of their power reactors and using it to produce
weapons. Unfortunately, this policy was not adopted by any
other nation, so the nonproliferation intent of the policy must
be considered a failure. A disadvantage of the direct disposal
system is that it may result in the creation of repositories
which can be mined in the future for the recovery of the
plutonium for use as weapons material. Processing schemes that
do not remove all the fission products from the uranium and
plutonium to be recycled to power reactors for further burning
can be a more effective nonproliferation approach than direct
disposal.
New aqueous technologies for handling spent fuels have been
developed but have only been demonstrated in the laboratory or
at the pilot plant level. While these new systems serve to
complement the PUREX process, they do not overcome some of the
disadvantages of that processing technology, such as a large
amount of secondary waste that requires repository disposition.
It is unlikely that any large scale processing of nuclear spent
fuel will, in the future, be based on aqueous systems. Non-
aqueous processes being developed as replacements on properties
such as differences in the volatility of the compounds being
separated or differences in the oxidation-reduction behavior in
molten salt media. The advantages of non-aqueous processing are
that they have a much higher radiation resistance, use more
compact equipment, produce smaller amounts of secondary waste
volume, and are more proliferation-resistant than aqueous
processes. The disadvantages of non-aqueous methods are the
greater difficulty of conducting the separations and the
smaller decontamination factors, in general, than aqueous
processes.
Based on the gaseous diffusion process, which uses the
volatility of uranium hexafluoride for separation of the
uranium isotopes, volatility techniques with fluorides have
been studied for separation of uranium and plutonium from
irradiated fuel. This separation is limited by the fact that
volatile fluorides are formed by several fission products.
Research continues on evaluation of volatility processes for
uses in practical full scale separations. Greater interest in
non-aqueous systems has been focused on the use of pyrochemical
processes in which molten salts are used as the solvent
systems. Such processes have been investigated for the
treatment of the spent fuel from molten salt breeder and light
water power reactors. The inherent radiation resistance of
molten salts allows the processing of spent fuel after
relatively short cooling periods. This is a major advantage in
the consideration of processing methods that might be used in
connection with transmutation of nuclear waste by irradiation
in reactors or accelerators to destroy the longest lived
nuclides.
The electrometallurgical separation process for spent fuel
developed at Argonne National Laboratory is based on a molten
salt system that has been used successfully in a demonstration
project in which stored experimental breeder reactor fuel is
processed. It is also being studied as the processing system
for use should the United States proceed with an accelerator
transmutation program for the destruction of long lived
isotopes and fission projects to reduce concerns over long term
repository safety.
There are problems with the application of non-aqueous
systems to the legacy weapons wastes in this country because of
the huge volume of these wastes. The millions of gallons of
wastes stored in underground tanks at Department of Energy
sites have high salt concentrations that make the application
of non-aqueous systems much more difficult. Modifications of
the PUREX-type solvent extraction system are likely to be the
technologies used for these systems. However, for spent fuel
from civilian reactors and the stored spent fuel from former
weapons production, non-aqueous systems have many advantages
and are expected to be the base for the next generation of
technologies. An apparent disadvantage of the non-aqueous
systems, their lower degree of separation of uranium and
plutonium from some fission products is, in fact, an advantage
since it leaves the separated uranium and plutonium with a
higher level of residual radioactivity, reducing the
possibility of its diversion by theft for clandestine weapons
production.
Thank you.
[The prepared statement of Dr. Choppin follows:]
Prepared Statement of Dr. Gregory R. Choppin, Florida State University,
Department of Chemistry, Tallahassee, FL
A variety of radionuclides are present in the fuel elements of
nuclear reactors after their irradiation. Many countries process this
spent reactor fuel in order to recover the unburnt uranium and the
plutonium that has been produced for recycle in a reactor for further
power production. The United States has followed a ``once-through''
policy under which the spent fuel of power reactors is considered as
primary waste for direct disposal without processing.
The United States developed aqueous processing systems in
connection with the weapons production of the cold war. This processing
resulted in the production of very large quantities of nuclear wastes
which now require attention for final disposition. Many of the
radiochemical separations developed for processing and recovery of the
plutonium for weapons can be used in the treatment of the waste to
minimize the amount that must be placed in permanent, long-term
storage. The usefulness of such separation processes and the operating
parameters for their optimum performance are strongly dependent on the
concentration of the components to be removed, the physical state of
the material, the availability of the processing agents, the nature and
quantity of the secondary waste streams produced, and the capital
costs. In a processing approach, the radionuclides in the waste can be
separated into fractions for permanent storage, for use in industry,
medicine, etc., or for transmutation by further irradiation into non-
radioactive or short-lived nuclides, reducing concerns over the safety
of repository disposition which must extend into the far future.
Our national policy of direct disposal was based on a concern of
other nations recovering the plutonium from the irradiated fuel of
power reactors and using it to produce weapons. Unfortunately, this
policy was not adopted by other nations, so the non-proliferation
intent of the policy must be considered a failure. A disadvantage of
the direct disposal system is that it may result in the creation of
repositories which could be mined in the future for the recovery of
plutonium for use as weapons material. With time, such mining would get
progressively simpler as the radioactivity level decreases greatly over
the first 300-1000 years, while the plutonium can be considered to be
useful by recovery over a period of about a quarter of a million years.
Processing schemes that do not remove all the fission products from the
uranium and plutonium to be recycled to power reactors for further
burning can be a more effective non-proliferation approach than direct
disposal. A strong interest in Europe in transmutation of the longest-
lived nuclides, including plutonium, requires processing in order to
separate these nuclides prior to the destruction in either an
accelerator or a reactor. A further disadvantage of the direct disposal
policy is that it isolates the United States from other nuclear
countries which employ processing and, consequently, reduces our
influence on their national policies in relation the handling and
disposition of potential weapons material.
Now I discuss separation technologies and my view of the direction
in which the development of such technologies should proceed.
Dissolution of the spent fuel, whether from reactors designed for
plutonium weapons production or from civilian power production,
utilizes concentrated nitric acid systems. These aqueous solutions,
since the late 1940's, have been treated by the PUREX process, which
uses a solvent extraction system to remove the uranium and plutonium
from the nitric acid solution in which the fission products remain. The
uranium and plutonium are extracted into an organic solvent and
subsequently, back-extracted into a second aqueous solution for further
purification and separation of the uranium and plutonium. The PUREX
process was developed in connection with the weapons program of the
Manhattan Project in the United States and has remained the primary
international process for treatment of irradiated fuel for the recovery
of the uranium and plutonium.
A variety of new aqueous technologies for handling spent fuel
materials have been developed, both in the United States and in Europe.
Thus far, most of those processes have only been demonstrated in the
laboratory or at the pilot plant level. In many cases, the processes
are designed primarily to improve the separation of specific fission
product elements in order to allow separation of the shorter-lived
radionuclides from the longer-lived ones. The shorter-lived elements
could then be disposed of in short-term repository systems, and the
longer-lived elements reserved for the million-year repository. While
these new systems serve to compliment the PUREX process, they do not
overcome some of the disadvantages of that processing technology. A
major disadvantage of the PUREX and associated aqueous-based
technologies is the large amount of secondary waste that is produced
and which requires repository disposition, either for the short term
(hundreds of years) or long term (hundreds of thousands of years).
It is my strong conviction that any large scale processing of
nuclear spent fuel will not use, in the future, a primary technology
based on aqueous systems. This conviction has been formed as a result
of interactions and collaborations with nuclear scientists and
technologists in Europe, Russia, Japan and elsewhere. British Nuclear
Fuels Ltd. is a leading processor of spent nuclear fuel, not only for
English power plants, but also for those of several other nations.
Frequent contacts with BNFL personnel over the last 5-6 years have
involved discussions of their future processing plans, which emphasize
non-aqueous systems. Similarly, there is extensive research being
conducted in Japan and in France on non-aqueous systems as the main
basis for future processing plants. It should be noted that the United
States has been active in this field, and in particular, Argonne
National Laboratory which completed last year a successful four-year
demonstration program of the application of its electrochemical, molten
salt technique to the processing of a quantity of spent fuel from the
former Experimental Breeder Reactor in Idaho.
Non-aqueous processes have been extensively used for uranium
isotope enrichment in this country and elsewhere, and for
electrorefining of plutonium metal and production of metallic fuel for
advanced nuclear reactors. Such non-aqueous processes are based on
properties such as differences in the volatility of the compounds being
separated or the differences in the oxidation-reduction behavior of
actinide elements in molten salt media. The advantages of non-aqueous
processes are that they have a much higher radiation resistance, use
more compact equipment, produce smaller amounts of secondary waste
volume, and are more proliferation-resistant than aqueous processes.
The disadvantages of non-aqueous methods are the greater difficulty of
conducting the separations and smaller decontamination factors, in
general, than aqueous processes. Most of these non-aqueous processes
are very sensitive to even small amounts of moisture and/or oxygen, and
must be operated in isolated cells under inert atmospheres.
Based on the gaseous diffusion process, which uses the volatility
of uranium hexafluoride for separation of the uranium isotopes,
volatility techniques with fluorides have been used in test
demonstrations for separation of uranium and plutonium from irradiated
fuel. Volatility techniques were also studied for use in fuel
processing in the molten salt reactor project at Oak Ridge National
Laboratory. The separation of uranium and plutonium from the fission
products in irradiated nuclear fuel is limited in these processes by
the fact that volatile fluorides are formed by several fission products
(e.g., iodine, technicium). Other volatile systems, which might be
adaptable to use in the separation of actinides from other radioactive
elements, are not as well developed as the fluoride volatility systems.
Research is continuing in a number of national laboratories on
evaluation of these volatility processes for use in practical full-
scale separation systems.
Greater interest in non-aqueous systems has been focused on the use
of pyrochemical processes in which molten salts are used as the solvent
systems. Such processes have been investigated for the treatment of the
spent fuel from reactors such as the Liquid Metal Fast Breeder Reactor
and the Experimental Breeder Reactor, as well as spent fuel from light
water reactors. The inherent radiation resistance of molten salts
allows the processing of spent fuel after very short cooling periods.
This is a major advantage in the consideration of processing methods
that might be used in connection with transmutation of nuclear waste to
destroy the longest-lived nuclides.
The electrometallurgical separation process for spent fuel
developed at Argonne National Laboratory is based on a molten salt
electrochemical system. In this direct transport process, uranium fuel
is anodically dissolved as U\3\+ from a pool of molten cadmium into a
molten salt, where it is transported through the salt to a cathode
where it is deposited as metallic uranium. As mentioned earlier, this
system has been used in a demonstration project to process a portion of
the stored Experimental Breeder Reactor fuel. It is also being studied
presently as the processing system for use should the United States
proceed with an accelerator transmutation program for the destruction
of long-lived isotopes and fission projects. The transmutation concept
has aroused considerable interest in Europe where an accelerator system
is under serious study as part of a European Union research project. In
the transmutation systems, it is important to be able to recycle the
irradiated material repeatedly with relatively short intermission times
between the cycles as only a small fraction of the long-lived
radioactive nuclides are destroyed in a single cycle. The requirement
for short times between the irradiation cycles essentially eliminates
aqueous processes for processing the irradiated targets between the
successive irradiations to isolate the long-lived nuclides for
production of the target for the next irradiation cycle.
There are problems with the application of non-aqueous systems to
the legacy weapons wastes in this country because of the huge volume of
those wastes. The many millions of gallons of wastes stored in the
underground tanks at the Savannah River and Hanford sites have very
high salt concentrations which would make the application of non-
aqueous systems much more difficult. For these wastes, it would seem
that modifications of the PUREX-type solvent extraction systems would
remain the more useful technologies. However, for spent fuel from
civilian reactors and the stored spent fuel from former weapon
production, non-aqueous systems have many advantages and most likely
will be the base for the next generation of technologies. An apparent
disadvantage of the non-aqueous systems, their lower degree of
separation of uranium/plutonium from some fission products, is, in
fact, an advantage since it leaves the separated uranium and plutonium
to be recycled into fuel with a higher level of residual radioactivity,
reducing the possibility of its diversion by theft for clandestine
weapon production.
The Chairman. Thank you very much. Let me just ask a couple
of questions here. Dr. Cochran, I take it that your view is
that in addition to all the nonproliferation concerns that you
folks have about opening this area up again, you think that
there's just no evidence that it is economical to go forward
with any of this reprocessing or to go forward with any of this
transmutation of nuclear waste. Is that the bottom line from
your perspective?
Dr. Cochran. That is correct. These are dual-use
technologies that can be used for civilian and weapons purposes
and none of them have a shred of a chance of being economical.
Mr. Bouchard claims that reprocessing in France is economical.
What is true, what I would agree is that COGEMA could make a
profit on reprocessing foreign spent fuel because countries
such as Japan and Germany had either legal impediments to
continuing to use nuclear powerplants or public opposition that
forced them to seek a reprocessing option as a solution to
their legal or political problems. That allowed France and also
the U.K. to make money on reprocessing other people's fuel.
However, that fuel cycle is not less expensive than the once-
through fuel cycle. The United States uses the cheaper fuel
cycle and even in France today they are recognizing that the
cost of reprocessing is more than the once-through fuel cycle
and there is pressure on the French to back off on reprocessing
at least the domestic fuel.
The issue before this committee is whether we should
promote dual purpose technologies and you will be promoting
this around the world by bringing in nuclear programs in other
countries, non-weapons countries, whether we should be
promoting this when there's not a shred of a chance of it ever
being economical. If Mr. Bouchard is right that reprocessing is
economical, give him all of our excess plutonium from weapons.
Give it to him for free. He will not take it because it is not
economical even to make the plutonium into MOX if it
is given to him. It is more expensive.
The Chairman. Now, when you are saying is non-economical,
you mean that in comparison to the direct deposit.
Dr. Cochran. Exactly. Now, take the pyroprocessing, the
fuel cycles that use pyroprocessing are really fast reactor
fuel cycles. That means you have to have a reactor hooked up to
this fuel cycle. It is like the liquid metal fast breeder
reactor that we started to build here and they built in France
and it turned out to be all over the world uneconomical. The
electricity price from operating that reactor and that fuel
cycle on a commercial basis would have been two and a half,
three times what it would be to operate an existing light water
reactor fuel cycle on the once through test.
Mr. Bouchard also made another statement about running, if
we expand nuclear power in the future, and there's no evidence
that it is expanding on a global basis, but if we did, we would
run out of low cost uranium. He and many people in the nuclear
industry do not understand some fundamental concepts about
mining metals, minerals. Historically, the increasing
efficiency in the extracting of metals has always outpaced the
depletion, the increase in price due to the depletion of the
low cost resources. Uranium today on the global market is one-
third in today's dollars of what it was when the AEC started
the uranium industry by offering people $7 a pound to go out
and discover and produce yellowcake uranium, even after running
the nuclear industry for the entire life of most of the
reactors in this country. We now are relicensing for another 20
years. After running the entire life of the industry, the price
of uranium has gone down even though we mine the low cost
resources. It goes down; it doesn't go up. It is true of every
mineral resource.
The Chairman. You are saying there's plenty of the resource
particularly as you get better systems for refining.
Dr. Cochran. For extraction. That is the history of every
gold, platinum, iron, you name it. Go to Resources For The
Future, over on Massachusetts Avenue and ask them, give us the
history of mineral prices in constant dollars. Look at all of
them. It goes down; it does not go up.
The Chairman. Let me ask if Mr. Bouchard wished to make any
comment, or Dr. Chopin.
Mr. Bouchard. Yes, thank you Mr. Chairman. I would like to
comment on the economy. In fact, let me say, that it is best is
to look to the figures and we have first, an OECD report which
is not very old. It is 2 years ago which made the comparison on
an international business between the cost of reprocessing and
recycling as compared to a direct cycle and for the part of the
cost which is related to the end of the cycle, they got 0.21
cents, U.S. cents, for the reprocessing and recycling and 0.13,
thirteen, for the direct cycle. So, it is clear that there is a
difference. That does not mean it is exactly equivalent but the
difference is quite low as compared to the cost of the kilowatt
hour. There are more recent studies in France which has been
done by Mr. Charpin deChapella and at least two of them are not
well known as in favor of nuclear energy.
So, let me say that they got similar figures and in the
case of the recycling and reprocessing story, they go through
all the end of the recycle cost 0.23, which is close to the
0.21 of the OECD study. There is only a small difference on the
perimeter of the account. And this is compared to a cost of a
kilowatt hour, which is around 2 cents, U.S. cents, which is
what we got presently in France. And so, we have a difference
which is between the reprocessing and recycling scenario and
the direct cycle. We have a difference, which is on the order
of five percent of the cost of the kilowatt hour. But, but we
know everything on the reprocessing and recycling scenario
because we applied it every day. We have reprocessed a lot. We
have recycled all of the plutonium we got from the reprocessing
and so we know completely all the figures. We know everything.
It is not the same under the direct cycle. We have not yet
solved the problem of direct final disposal of spent fuel and
in our country we are considering today that it will be a dead
end. We have no real solution to a direct final disposal of the
spent fuel. So, in fact, I think that for the economy, there is
no matter today to discuss. We can discuss 0.01 cents on
something. It is not the main problem. The problem is what do
we do with the spent fuel; what do we do with the plutonium and
when Dr. Cochran said that we cannot avoid to recycle and we
can use for a long time, very long times, only 1 percent of the
natural uranium, I say that we don't solve the problem in fact.
Not only, we don't use the resource. But we keep the plutonium
and recoup the plutonium as Dr. Choppin said as a mine. If we
put it in the underground, we keep the plutonium as a mine for
the future.
So, it is certainly not the solution we would prefer on our
side. So, it is clear that on both economy and in the use of
the resources, it is for us, there is no real discussion today
on what is important or what is the benefit. I agree on the
fact that we can discuss some of the values and techniques
according to their proliferation resistance and so on. This is
a matter for development, clearly.
The Chairman. Let me defer to Senator Domenici here. This
is an issue he's spent a lot of time on. Go right ahead.
Senator Domenici. Thank you very much, Mr. Chairman. And I
first apologize for the lateness and I will not take a lot of
time. I want to thank you for the kinds of hearings you are
holding. I've looked at the areas you are covering and I
commend you. It is kind of boring when everybody tells you what
you ought to be doing and then when you do it, nobody shows up.
If there were a few of my brethren here on this side, I would
say that also in front of them. In any event, you are bound and
determined to get the witnesses to tell us about these issues,
and I want to say to the three witnesses, we are glad to have
you here.
Mr. Bouchard, I want Senator Bingaman to know that I have
been to your country and you were my host and Senator it was
truly an experience to see how France is treating nuclear power
and the waste that comes from it. I am reminded that somebody
in high offices in France just recently lectured our President
about Kyoto and it was interesting as I listened to the
exchange. Our President seemed to be asking if the great leader
from France understood that we don't have 75 percent of our
electricity produced by nuclear but rather we have a great deal
of it produced by coal and by sources that pollute the air.
Maybe it would be easier to comply with Kyoto if we had 70
or 80 percent of our powerplants nuclear. On the other hand, to
see their reprocessing and the way they handle the entire cycle
caused me to conclude first, Mr. Chairman, that there is no
real urgency that we immediately find a way to permanently
dispose of nuclear waste. I mean, the nuclear waste in this
country is a small quantity, I am led to believe, that it is
about an American football field, 8 foot high, and that is the
whole thing. That is the whole accumulation. And I would hope
that as a result of these hearings and your bill that we would
say we ought to proceed with ways to resolve this problem and
it might take a little while to do it but in the meantime, we
ought to explore the value of another generation of nuclear
powerplants because they are on the horizon.
And I would hope that soon, Dr. Cochran, you will be able
to sit down with those who are thinking of a small reactor
modular in form and easily licensable because of a duplication
capability that would change dramatically the physical premise
upon which it is built so you can't have a meltdown and a lot
of other things that are going to be happening. And I would
hope we would look at those and say, maybe the world could use
those so we don't have to worry about global warming. And I
note that your organization is concerned occasionally about
growth in the world, economic growth and the production of more
energy, and I commend it for those stands. But I do believe
that we must proceed on both fronts, that is the non-nuclear
and the nuclear in an effort to help really solve the problem
of economic growth and jobs for poor countries and rich
countries. So, let me say to you, or ask you, Mr. Bouchard, in
a brief summary, what advice do you give us with reference to a
spent fuel program?
Mr. Bouchard. Thank you, Senator. I do not think I have to
give advice. I should only say that at the present time once
more we have had some experience with reprocessing in several
countries now. We know the limit and the advantage of the
present technology. It can be used and it is used on an
industrial basis already. And we also see what kind of new
developments can be done in the future. That there is room for
R&D it is clear, room for R&D both on the reactors and on the
fuel cycle which is used with these reactors and I mentioned in
my presentation one or two routes or one or two axis which
seems to us important for the future. One is to try to have a
more integrated fuel cycle, the other reactor, and the other
the fabrication, everything if possible on the same site.
And this is clearly an objective. Another one is to limit
the definite disposal of waste to only that which is completely
unavoidable. That means the fission products themselves. But to
try to recycle everything else, that means uranium, plutonium
and other actinides. And these are roots for the future. I
think that we have a program of development on that and we are
ready to cooperate. We have already had some discussion with
the Department of Energy and we are ready to cooperate on such
programs with your country, clearly.
Senator Domenici. Let me be a little specific. I think we
all understand that in 1977 the then-President of the United
States, President Carter, halted by executive decree United
States efforts to reprocess spent fuel and developed mixed
oxide MOX for our civilian reactors on the ground
that plutonium could be diverted and eventually transformed
into bombs. He argued that the United States should halt its
program of reprocessing as an example to the world to follow.
Now, as I understand it, I am not criticizing what the
President did all those many years ago but the truth of the
matter is, the world did not follow the example and proceeded
with reprocessing such that France, Great Britain, Japan and
Russia all now have some kind of MOX fuel program.
So, it would seem to me that those countries, including yours,
do not believe that reprocessing is a serious adjunct to
proliferation. Would you address that?
Mr. Bouchard. Yes, certainly. I am considering that in the
proliferation route itself it is certainly not the way to a
reprocess light water reactors and to use the plutonium coming
from there. It is certainly not the best proliferation route.
Nevertheless, we have to take precautions to avoid, as I said,
the diversion of plutonium even if it's not good plutonium, the
diversion of plutonium from any step. But the best way for that
is to burn it and there is a reason why we have MOX
fuel. There is a reason why we try to fabricate the
MOX as soon as possible after the reprocessing of
the spent fuel in order to avoid to avoid to keep plutonium on
shelves. It is clear. So, we have only to consider as a risk
the diversion during the operations themselves. And as matter
of fact we have done this, since the time of the decision you
mentioned 25 years ago. Now, there has been no case of
diversion which has been observed on any reprocessing route,
civilian, reprocessing business. So, I mean we have an
experience which is showing that the risk is not so big and we
have many, many controls organized both on domestic and on
international business to be sure that we are following every
gram of plutonium everywhere on the route. So, I mean we
certainly can still improve the situation but it is clear that
we have a solution today which is quite robust and it is clear,
as you said, that if we reprocess, we have to fabricate
MOX fuel as soon as possible in order to burn the
plutonium.
Senator Domenici. I just want to make one more point and I
will ask you all three on the environment on the issue of
plutonium. Let me talk for just a minute and ask you a
question, then I will ask Dr. Cochran a question. Testimony
before the committee seems to try to maintain that reprocessing
is not economic. I am fully aware and the chairman asked the
right question a while ago. Uranium is very cheap and as a
consequence at this particular time in our history if we just
took this reprocessing all by itself, it probably would not be
economic. But let me just say I think there's a debate on the
floor of the Senate right now that talks about the fact that we
have spent $9 billion and have collected $21 billion from
ratepayers to try to establish a permanent underground storage
facility at Yucca Mountain. Now, we cannot discard that as a
cost of a policy that says the only thing we ought to do is
bury it forever. That has got to be built in or it has to be
built in on the other side of the ledger in terms of
reprocessing and what reprocessing does to simplify the waste
disposition issues. So, could I ask you, Dr. Bouchard, and then
I will yield to you on all three questions, Doctor. Does not
reprocessing if it is part of a country or an international
approach, doesn't it simplify the waste disposition issue if
you had before that only considered permanent storage of the
total spent fuel content as they come out of the reactor?
Mr. Bouchard. You're right. Let's say first that
reprocessing simplifies the waste management because it reduces
both the volume, both the volume and the radiotoxicity, the
long-term radiotoxicity of waste and the reason is simple. In
the spent fuel, the main contributor to the long-term
radiotoxicity is the plutonium itself. And so, if you extract
the plutonium and burn it, you have reduced what you have to
put in the waste. It is clear. And on the other hand, as I
said, we are more and more convinced that the final disposition
of spent fuel is not at all easy to manage. Besides the
drawback I mentioned on the creation of the mining of
plutonium, there is also the practical aspect of who will
accept to put all these fuels underground in the final
repository. It is not at all the position in our country, by
the way.
Senator Domenici. Now, Dr. Cochran, if you would like to
address the three things that have come out that I've asked
about, we'd be pleased to hear you.
Dr. Cochran. Yes, I would like to elaborate on the history
that you began with President Carter. In fact, Mr. Bob Fri, who
was on the previous panel, previously served under the Ford
administration at ERDA, and it was in fact the Ford
administration, and Bob Fri played an important part in this,
that stopped the reprocessing industry in the United States
when the Ford administration, after India exploded its first
nuclear test in 1974 and Taiwan had been conducting its covert
nuclear weapons program with reprocessing, decided not to
subsidize the completion of the Barnwell plant in South
Carolina. So, you should always give the Ford administration at
least equal credit for foreseeing the problems, the economic
problems and the nonproliferation problems associated with
reprocessing in this country.
Senator Domenici. If you would permit me, I will correct
the record and say that both the Carter administration and the
Ford administration did it, and I will add to that I think even
though there were two, they both made a mistake.
Dr. Cochran. That is where you and I would disagree. Now,
you mention France, the U.K. and Russia. I would think you
would join me in advocating a moratorium on reprocessing in
Russia and in fact in the last administration, Dr. Moniz, also
on the previous panel, tried to get a 20 year moratorium and
actually got Minister Damov, the Minister of Atomic Energy, to
agree to a 20 year moratorium but the deal fell through over
the Iranian problems. The reason you should join me in seeking
a moratorium on reprocessing in Russia is, in fact, first the
Ministry of Atomic Energy is like our old AEC and military
plutonium production and materials production and weapons
production and civil programs are entirely integrated both in
terms of their management and in terms of their facilities. And
it is not in the U.S. national security interests for Russia to
continue a large commercial reprocessing program at their
military facilities.
Secondly, they are awash in excess plutonium and as you
know they have 30 tons of plutonium from civilian reprocessing
which they could not use, recycle, unlike the French program,
and it is in storage with inadequate physical security. There
was a statement about reprocessing simplifying the waste
disposition issue. That is extremely misleading. First of all,
you do not create less waste by reprocessing in terms of shear
volume of materials because you create a lot of other waste
streams in the process. Secondly, you do not reduce the
problems associated at the repository in any significant extent
other than delaying when you have to build a repository. The
French still have to bury their spent fuel and in fact they are
behind the United States in siting and building a repository.
They simply do not have a site yet. We at least have Yucca
Mountain site. So, they have a lot of fission products. They
are stuck in a vault and they're forcing air over them to cool
them because they do not have a solution to their waste
problem.
Now Mr. Bouchard says, you take the plutonium out and burn
it. In fact, he's going to take the plutonium out and burn from
the first cycle but the economics gets progressively worse on
recycling and he has no plans to continue to recycle and so
forth. And so all of the plutonium doesn't come out of his
waste and he still puts plutonium in the mines. He mentions
that light plutonium from light water reactor fuel is not so
good for weapons. In fact, maybe he does not know it, the
French tested a nuclear weapon with reactor grade plutonium and
in fact it is useful for weapons. It is just not as good for
weapons programs but it was good enough for the Taiwanese. It
was good enough for the South Koreans and that is why they
sought a reprocessing facility.
In fact, the French tried to sell South Korea a
reprocessing plant in 1975 and the United States shut that
program down for national security reasons. So, the issue here
is very simple. We are talking about dual use technologies that
can be used for weapons and for civil research. The civil
aspects look sort of interesting but the weapons aspects look
very dangerous and before you embark on bending metal and
building R&D facilities you ought to think very hard about the
implications of spreading this technology around in non-nuclear
weapons States. I totally agree with you. We should support
university nuclear programs. They are in decline. We have a lot
of use for nuclear engineers and scientists because of our
waste programs, our national security programs, our medical
programs. I support R&D on Generation IV technology. Let's do
the paper studies. But let's don't go out and promote these
programs like pyroprocessing at Argonne which are totally
uneconomical and frankly I do not support your constituents at
Los Alamos developing accelerator transmutation of waste.
I mean, most of us think that that program is being pushed
by people who lost their bid to get the tritium production
facility and they're looking for jobs and they're promoting
this technology as a way to maintain their accelerator program
at Los Alamos and it is an uneconomical program. It will never
go anywhere, Senator, and you should not support it despite the
fact that they're your good friends and constituents. Thank you
very much.
Senator Domenici. Well, let me make sure that for the
record and that you know I am not supporting it for the reasons
you have talked about. I thank you very much for attributing my
tremendous concern for my constituents. But frankly I think it
is a rather exciting idea and you and I will disagree. But
actually, all waste produced in these various processes is not
the same waste. Waste produced by reprocessing is not the same
waste that we are contemplating burying at Yucca Mountain.
Dr. Cochran. It is pretty close.
Senator Domenici. It is less toxic than what we are going
to put underground and plan to leave there for 10,000 years.
There is no question about that and transmutation not only
yields a less toxic but it is so less toxic that there's no
problem with disposing of the residual waste from
transmutation. It is very simple to do. Now, I know we
disagree. I can make my statement and then we will hear you as
an expert. I do not want to leave in any antagonistic mode
because I am thrilled to hear that we ought to proceed with
third and fourth generation nuclear reactor research. I think
that we ought to take the lead in saying that America should do
that with the world and I told my friend, the chairman, I think
America with the world on that would be talking about a post-
Kyoto environment that would permit us to no longer worry about
global warming. It would be a rather exciting concept.
Now, let me ask--there's been a synthesis on the economy.
And I think we have to look at the other issues. For example,
if you look at the fuel cycle, the most dangerous for the
general public, the most dangerous part of it is the uranium
mining. So, that if we do not reprocess, we will have more
uranium mining, not in the United States for quite a while,
maybe 300 years, but eventually. But in the rest of the world,
they will have it right now because they have to keep mining to
produce it and therefore you are exposing the public to more
danger than you are by reprocessing and storing in a
repository.
In our country, we have to look at the fact that we have
one heck of a lot of uranium 235 and plutonium 239. Now, what
are going to do with it from the weapons? We can bury it, and
how do we know what kind of government we will have in a
thousand years, 300 years, ten thousand years. We are burying
stuff that is going to be a tremendous mine. They could go up
and they can start making weapons and devastate the world. And
we are leaving that for a future generation. I do not think
that is moral even. So, we want to burn it. Well, how are we
going to burn it? By making MOX fuel and that
requires fabrication. It requires some kind of recycling. We
can also involve the transmutation. I was on the stats
committee that looked at transmutation sometime ago in the
United States. We recommended against it. Since that time,
there have been better developments, better methodologies. I
was on the international committee that the Department of
Energy had 2 years ago to re-look at the issue.
I have also been very involved in European meetings and so
forth, and I still have concerns about transmutation. I am not
sure it is a proper process but I think it deserves extensive
study and extensive investigation because it could certainly
reduce the long-term problem. It could also reduce the stored
plutonium and uranium problem. And I do not think as the United
States is involved we can ignore those. So, we have a little
different problem. One other aspect, I think that is important
in the question of reprocessing, is that if we reprocess, we
are in line with the rest of the world and therefore we then
can interact and influence their policies. What we have done
with the direct once-through process is to isolate ourselves
from the rest of the world and have no impact on their national
policies with regard to reprocessing and disposition. So, I
think, again for our national welfare independent of economics,
we should be involved to a sufficient extent to share with them
and participate in their discussions. Thank you.
Senator Domenici. Mr. Bouchard, you were shaking your head
negatively while Dr. Corcoran was speaking with reference to
what kind of waste comes out of this stream if you reprocess.
Would you care to express your view in words because we cannot
record your head shaking?
Mr. Bouchard. Thank you very much. I apologize because in
the written testimony we gave some figures with some graphs
showing what happens, but we had no time to prepare the
necessary presentation for the audition. But, if you have time
to look to the written testimony, you will see that we have put
one graph, which is the volume of waste produced by the
reprocessing and comparing the volume of waste for direct cycle
with the various types of waste we create at the reprocessing
and the main part, which is the high level waste, for those who
contains most of the fission products corresponds to something
which is approximately 8 percent of the volume of waste of the
direct cycle. And in addition to that, we create two other
kinds of waste which are less toxic as you said, Senator, and
which are still in low volume. I can show the figure to Dr.
Corcoran, which are still in low volume as compared to the
direct fuel cycle. We have made progress during the last 10
years as you can see on these figures.
Senator Domenici. Mr. Chairman, I want to thank you very
much for staying over and taking this time to let me ask a few
questions. I would make one observation and share it with you
with reference to Russia. This same visit that I spoke of in
France took me to Russia and the result of that trip was that
the U.S. Government put up $2 million within 6 months in the
supplemental appropriation at the request of myself and Senator
Stevens to begin implementing an agreement with Russia so that
the plutonium that they had which was unstored and was
available far more than any of us would ever think should be
the case. And we have started down a path of using that money
to see if we cannot turn that plutonium into something that
could not be used for weapons again.
But I would tell you, what you learn in the meantime is
that you are going to wait for a new generation of Russian
leaders, if ever, to agree with us with reference to the value
of spent fuel. It is valuable to them. They are not one,
they're not even a miniscule interested in getting rid of it.
They want to keep it because they're going to use it. And you
do not have any of their leaders that look at like we do, that
wouldn't it be nice to put in the ground for 10,000 years.
They're saying if you want to be crazy, you be crazy. We are
not going to do that. In fact, they wonder why we do not go to
the breeder reactors. That is what they think about nuclear
activities.
So, I do not think we can stop them from doing what you
suggested we stop them from doing. But I think we have a very
big obligation to work to try to get some of that plutonium
that is part of their military converted and stored so it can
never be used. But to ask for a moratorium there in that
country that would not produce plutonium from reprocessing and
the like, I really do not believe. In many things we ought to
try to get agreements. That one would not work.
And could I close by saying to Dr. Cochran, I do appreciate
your statements. I do not appreciate very much the insinuation,
which you said with a smile on your face, which I will now
record with my words, that I am for transmutation because of
Los Alamos. I am for a lot of things as Los Alamos is for. I am
for a lot of things Sandia is for and Argonne and our great
laboratory in California, but essentially I think the
contribution to this very onerous problem by Los Alamos in
looking at transmutation is a good contribution, and it may not
come out as the technology but I believe the scientists are
doing some real thinking when they work on that. Thank you very
much, Mr. Chairman. It is good to be here.
The Chairman. Thank you very much. Let me thank all three
witnesses very much and indicate that we will keep the record
open on this hearing through next Tuesday to permit anyone to
submit an additional statement if they have a statement to make
or any additional information they think we should be aware of.
Thank you very much for testifying. The hearing is concluded.
[Whereupon, at 12:35 p.m., the hearing was recessed, to be
reconvened on July 19, 2001.]
APENDIXES
----------
Appendix I
Responses to Additional Questions
----------
State of New Hampshire,
Governor's Office of Energy & Community Service,
August 2, 2001.
Hon. Jeff Bingaman,
Chairman, Committee on Energy and Natural Resources, Dirksen Senate
Office Building, Washington, DC.
Re: Response to Questions--July 13, 2001 Hearing
Dear Chairman Bingaman: On behalf of the National Association of
State Energy Officials (NASEO), the following constitutes my response
to the questions provided in your letter of July 20, 2001.
LIHEAP (Questions 1 and 2)
Senator Murkowski's question concerned the appropriate split
between base and emergency funding for LIHEAP. The National Energy
Assistance Directors' Association (NEADA) will be responding to this
question on behalf of the states. As a general matter, both the
approach of Senator Murkowski ($3 billion base funding and $1 billion
emergency funding) and your approach ($3.4 billion base funding and
$600 million emergency funding) would be a tremendous step in a
positive direction. LIHEAP funds are vastly insufficient to respond to
the needs of the public at this time. In general, the states have
strongly supported significant increases in the base funds, with
advanced funding to enable the states to efficiently plan for the
upcoming heating/cooling season. Emergency funds are also critical. We
look forward to the opportunity to work with the Committee to ensure
that appropriations for LIHEAP are significantly increased, consistent
with the proposed authorizations.
STATE ENERGY PROGRAM FUNDING (Questions 5 and 6)
In response to both questions 5 and 6, NASEO and the state energy
offices are strongly supportive of regional energy planning efforts.
With increasing funds regional efforts could expand and permit more
creative solutions to our energy problems. Language on regional efforts
included in Senator Murkowski's bill and in Chairman Bingaman's bill
recognize the importance of these regional efforts. While, in many
cases, states are undertaking activities within their own borders, this
would permit the expansion of those efforts. As you know, many of our
energy markets are not limited to the borders of our own states.
Increased funding would enable states to expand efforts in energy
emergency preparedness. Last December, my office sponsored a meeting in
Manchester, New Hampshire, between all the Northeastern and Mid-
Atlantic states with all relevant industry representatives and federal
agencies (e.g., Coast Guard, Department of Energy, Department of
Transportation, Environmental Protection Agency) to discuss our
response efforts and coordinated pre-planning. In light of increasing
price and supply volatility of critical fuels these regional efforts
need to be expanded.
We have begun to integrate our energy and environmental efforts at
the state and regional level, bringing together NASEO representatives
with those of the National Association of Regulatory Utility
Commissioners (NARUC), Environmental Council of the States (ECOS state
environmental commissioners), State and Territorial Air Pollution
Program Administrators/Association of Local Pollution Control Officials
(STAPPA/ALAPCO), to jointly work on policies, programs and regulations.
This type of regional activity will be supported by expanded SEP funds.
For example, the Western Regional Air Partnership, being led by Utah,
is attempting to respond to the requirements of the Grand Canyon
Visibility Task Force, in a creative and cost-effective manner, by
utilizing energy programs to help deal with environmental imperatives.
This involves both supply-side and demand-side responses. The state
energy offices in the western states, working together and with the
Western Interstate Energy Board and the Western Governors' Association,
are attempting to help the region address complicated siting issues for
energy infrastructure and coordinate transmission and generation
issues. This requires extensive regional cooperation.
In the Southeast, the energy offices working with the Southern
States Energy Board and the Southern Governors' Association are
attempting to develop unique programs on such issues as alternative
fuels, siting, etc. In my region, we are working together with our
environmental officials and our utility commissioners on technical
standards for distributed generation. In each of the regions we are
attempting to learn from each other and coordinate our efforts in
expending our public benefits funds. State Energy Program funds help
facilitate these efforts. They need to be expanded.
One of the great benefits of SEP funding is the enormous leverage
provided from both private and non-federal public funds. Greater
expansion of program funds will allow even more leverage. For example,
most of the state energy offices facilitate private financing of energy
projects both in the public and private sectors. Our most recent
estimates are that the energy service company industry conducts up to
$1.5 billion/year in energy efficiency projects. The energy offices
facilitate these efforts. We hope, in the future, to expand the
regional efforts to embrace greater cost-effectiveness and reduce
transaction costs in project implementation.
In short, the state energy offices are planning on expanding
regional cooperative efforts. We look forward to working with the
Committee in providing creative solutions. We hope this is responsive
to your questions.
Sincerely,
MaryAnn Manoogian,
Director.
______
Maine State Housing Authority,
Energy and Housing Services,
Augusta, ME, August 2, 2001.
Senator Jeff Bingaman,
U.S. Senate, Committee on Energy and Natural Resources, Washington, DC.
Dear Senator Bingaman: The purpose of this letter is in response to
your letter dated July 20, 2001, regarding follow-up questions based on
my testimony for the Committee on Energy and Natural Resources on July
13th.
On behalf of the National Energy Assistance Directors Association,
I have responded to questions 1 through 4 regarding the Low Income Home
Energy Assistance Program, (LIHEAP) and Weatherization Assistance
Program, (WAP) submitted by the Office of Senator Murkowski.
If you have any other questions or concerns, please feel free to
call me at (207) 624-5708 or by email at [email protected].
Thank you for inviting me to speak before the committee.
Sincerely,
Jo-Ann L. Choate,
LIHEAP Manager.
Question 1. What is the virtue of increasing the base LIHEAP
funds--which get distributed to states using a formula--verses
increasing the emergency funds which can go to where they are most
needed?
Answer. Formula grant funds and emergency funds serve different
purposes. Formula grant funds are used to provide planned direct
assistance to approximately 5 million households per year. These are
very low-income households that need program assistance on an ongoing
basis to pay their heating and cooling bills. Emergency funds are
primarily designed to offset higher that expected demand as a result of
lower than average temperatures during the winter months and warmer
than average temperatures during the summer months. In addition, funds
are also used to offset higher than expected energy prices due to
changing market prices.
Question 2. Given that most LIHEAP funds have been spent in
regional areas that experienced extreme weather, wouldn't it make more
sense to set aside more funds for emergency programs?
Answer. While emergency funds are needed to address changes in
temperature and price spikes in energy prices, formula grants are
needed to address on-going needs of low-income households to pay their
home energy bills. As such, setting aside more funds for emergency
programs at the expense of the regular grant program would cause
reduced funding for millions of low income households in areas that did
not experience severe temperature or price increases.
Question 3. Given the wide variance in percentage of households
served by existing LIHEAP funds, doesn't this suggest the need for a
change to the allocation formula?
Answer. The intent of the current law formula is to distribute a
higher relative percentage of funds to states with relatively colder
temperatures when the appropriations level is less than $1.975 billion.
At higher funding levels, funds shift to warmer weather states. As
result, as shown in the following table, at a funding level of $3.4
billion, the total allocation for Maine would increase by 43.9%, while
the allocation for Alabama would increase by 379.2%. A copy of the
allocation table is attached.
Question 4. How much funding would it take to fully fund all needs
under the LIHEAP program--and how many of those homes could be
Weatherized for the same amount of money?
Answer. The LIHEAP program is currently serving approximately 5.0
million households or about 17% of the eligible population. Assuming
that program assistance was expanded to serve 50% of the eligible
population at the current basic level of $225 per household, the total
cost would be approximately $6.6 billion per year.
The weatherizing of homes does not eliminate the need for LIHEAP.
Even if program funds were quadrupled to $612 million, at an average
cost of $1,750 per unit, total funding would only serve 300,000
households or about 6% of total eligible LIHEAP households. At the same
time, by targeting WAP funds to households with the highest energy
burdens and energy consumption levels, the program helps to reduce a
household's energy burden, thereby reducing a least a portion of the
family's need for energy assistance.
The Oak Ridge National Laboratory report entitled ``State Level
Evaluations of the Weatherization Program in 1990-1996: A Meta-
evaluation That Estimates National Savings'' found that the WAP has
significantly improved its energy savings results during the past
several years. In 1996, WAP showed savings of 33.5 percent of gas used
for space heating--up from 18.3 percent savings in 1989. The increase
in savings was based in large part on the introduction and use of more
sophisticated diagnostic tools and audits.
Each family receiving weatherization services can reduce their
energy use by an average of 22 percent, making their energy costs more
affordable. By reducing energy use, each family can realize average
savings of $300 or more each year. More importantly, these savings will
occur each year for several years after the weatherization work has
been provided. The savings achieved as a result of this year's
investment will reach more than $369 million during the life of the
conservation services installed in the homes. More than $72 million is
expected to be saved this year alone in those households weatherized
using DOE and other leveraged funds.
The Oak Ridge Meta-Evaluation report also concluded that the WAP
possessed a favorable cost-benefit ratio of 2.40 to 1.0. Simply stated,
the federal funds provided to support the Program have a 140% return on
investment or nearly $2.50 in benefits for every dollar invested. This
positive ratio of benefits continues to increase as state and local
agencies integrate advanced technologies and constantly improve their
return on investment.
______
National Electrical Manufacturers Association,
Rosslyn, VA, August 3, 2001.
Hon. Jeff Bingaman,
Chairman, Committee on Energy and Natural Resources, Dirksen Senate
Office Building, Washington, DC.
Dear Chairman Bingaman: Thank you for the Committee's thoughtful
questions on our testimony forwarded with your letter of July 20, 2001.
Attached are the responses to the questions you submitted for Senator
Murkowski.
We look forward to working with you, the Committee, and Committee
staff in the months ahead as energy efficiency legislation and
legislation on the electric transmission infrastructure proceed through
the Senate. We believe our members, the manufacturers of electrical
products for our homes, commerce and industry, are stakeholders that
provide unique and valuable perspectives on our Nation's technology
needs.
Sincerely,
Malcolm E. O'Hagen,
President.
[Attachment.]
NEMA Responses to Additional Questions Submitted by Senator Murkowski
Question 9. You mentioned in your testimony that NEMA generally
favors market mechanisms--and favors standards only on a case-by-case
basis. How, then, would you respond to Dr. Nadel's call to broaden the
standards process to include more appliances?
Answer. NEMA supports the National Appliance Energy Conservation
Act (NAECA) requirements to set efficiency levels for covered products
at the level that is technologically feasible and economically
justified, Under existing law, the Secretary of Energy has the
authority to add additional types of consumer products to the list of
products for which mandatory energy efficiency standards are required
under the NAECA and the Energy Policy and Conservation Act.
Specifically, section 322(b) of EPCA authorizes the Secretary of Energy
to classify a consumer product as a covered product, and therefore
subject to efficiency standards requirements, if the Secretary
determines that such a classification is necessary or appropriate in
carrying out the purposes of the Act and that the product in household
use consumes at least 100 kilowatt hours of electricity. Similarly,
section 341(a) of EPCA authorizes the Secretary, by rule, to include
additional types of industrial equipment as covered equipment to be
subject to energy efficiency standards requirements if doing so is
necessary to carry out the purposes of the Act.
Voluntary, consensus-driven codes and standards will achieve the
greatest level of cooperation and distribution of energy efficient
technology in the marketplace. Industry consensus energy efficiency
standards offer an important, cost-effective alternative to government-
imposed standards and provide for more rapid introduction of compliant
technologies. An excellent example is the NEMA PremiumTM
motors program, which illustrates the efforts already undertaken by
industry to accelerate the market penetration of highly efficient
motors. Under the NEMA PremiumTM program, highly efficient
motors of up to 500 horsepower that can comply with stringent energy
efficiency standards receive the NEMA PremiumTM designation.
The NEMA PremiumTM program was a collaborative effort
with the Department of Energy, motor manufacturers end electric
utilities. It has broad support, and has been endorsed by the
Consortium for Energy Efficiency. When compared to existing Federal
regulations, NEMA PremiumTM covers a broader range of motors
than do minimum Federal energy efficiency standards (up to 500
horsepower, where Federal standards apply only up to 200 hp). Moreover,
NEMA PremiumTM is a far more exacting technical standard,
determined by using NEMA MG1 standards, which include over 30 critical
motor operating characteristics in addition to motor efficiency.
Introduction of NEMA PremiumTM motors in the agricultural
and commercial sectors would save 5.8 gigawatts of energy and prevent
the release of nearly 80 million metric tons of CO2 over 10
years.
These and similar market based solutions should be relied upon
wherever possible to expedite the introduction of the most highly
energy efficient equipment. The Federal government can play an
important leadership role and take advantage of the work done to
produce the NEMA PremiumTM standards, by acquiring only
motors that have the NEMA PremiumTM designation, and by
assuring that failed motors are not rewound, but are replaced with
motors that have the NEMA PremiumTM designation.
Before expanding mandatory standards requirements, Congress should
consider carefully DOE's existing workload in the standards-setting
area and the availability of resources. Recognizing that its statutory
mandates exceed the resources available, the Department of Energy has
adopted a prioritization process for meeting its regulatory
responsibilities. NEMA believes that the priority setting process is a
reasonable response by the Department to the many demands it faces.
Expansion of mandatory standards requirements would necessarily impose
additional burdens on the Department of Energy. Congress should be sure
that DOE can meet its existing responsibilities in a timely manner
before increasing those responsibilities.
In all cases, before Congress mandates the issuance of test
procedures, labeling requirements or efficiency standards for any
additional products, it should be assured that such standards are
technically and economically feasible and would contribute to
substantial energy savings. Before new standards are required a study
of the need for such standards should be conducted by the Secretary of
Energy.
Question 10. What other options would you suggest to improve the
rate at which out appliances become more energy efficient? ``Smart''
technology?
Answer. Appliances on the market now are vastly more efficient than
in the past. The appliance industry is highly competitive, and
extremely responsive to consumer demand. Therefore, if consumers place
a value on the energy efficiency of a product, industry can be expected
to respond.
Developing a market demand for energy efficient products has long
been the challenge. With the experience of the State of California in
these last months, the marketplace may be primed to consider energy
efficiency in purchasing decisions. Consumer education and increased
energy efficiency awareness among the general public are essential to
take advantage of this opportunity.
The replacement of older, less efficient appliances with new
efficient ones will save significant amounts of energy. Congress may
wish to consider encouraging the voluntary retirement of less efficient
appliances through the Weatherization program or the Low Income Home
Energy Assistance program. Federal housing programs also should
emphasize early changeout of high energy consumption appliances. For
the public at large, consideration might also be given to a
collaborative incentive program with industry.
Question 11. I was intrigued by a number of your suggestions on the
appropriate Federal role in energy efficiency and energy policy in
general. How many of your suggestions can be accomplished through
administrative action as opposed to legislation?
Answer. A blend of legislative and administrative action is
necessary. For example, DOE can, and does, promote user education on
energy efficiency under its existing authorities. DOE also can, and
does, support energy efficiency upgrades through programs such as FEMP.
There is widespread agreement, however, that some of these programs
will be more effective if certain changes are made to the underlying
statutes, such as the extension and clarification of energy saving
performance contracting authorities. And there are other areas where
statutory limitations, suck as spending limits in the Weatherization
program, may limit the effectiveness of Federal programs in stimulating
the deployment of energy efficient technologies, and need to be
reexamined.
DOE promotion of economically sound energy efficient consumer
products and systems, particularly in collaboration with industry, is
possible under existing authorities, but may be enhanced through
statutory changes, such as the formal authorization of the Energy Star
program and provisions for allocation of responsibilities for this
program between DOE and the Environmental Protection Agency.
NEMA believes that further legislative direction to increase energy
efficiency in Federal facilities is necessary. Many of the existing
federal building energy efficiency authorities date from the Energy
Policy Act of 1992 and before, and need refreshing. With respect to the
procurement of energy efficient products, for example, the Federal
government should lead by example, and specific statutory directives to
assure that the government seeks out the most efficient products on the
market are appropriate. An example is the NEMA PremiumTM
program for motors. NEMA recommends that Congress require the Federal
government to use the NEMA PremiumTM standard as the
specification for the acquisition of new motors, and require that
failed motors not be rewound, but be replaced with motors meeting
carrying the NEMA PremiumTM designation.
Statutory requirements to increase Federal building energy
efficiency would be more effective in achieving results than
Administrative directives or even Executive Orders issued by the
President. While important in expressing the commitment to and
establishing the framework for Federal government energy conservation
efforts, these have not in the past always produced concrete results.
For example, NEMA has recommended specifically that Federal facilities
should be required by law to achieve the Energy Star building rating.
The Department of Energy's Energy Star Buildings Program has made
significant advances in improving the efficiency of commercial
buildings. However, the vast majority of Federal facilities have not
yet achieved the Energy Star rating, a classification given only to the
top 25% of buildings in terms of watts used per square foot. It is time
to assure that Federal facilities measure up. A statutory mandate would
be critical to assuring that agencies treat this as a priority and
devote the necessary resources to implementing all practical efficiency
upgrades.
DOE already has statutory responsibilities with respect to the
adoption and updating of Federal building energy codes, and in
rendering determinations about the energy efficiency of code updates
that then trigger responsive action by the States. NEMA has proposed
that new construction or buildings that undergo major renovation or
remodeling should adhere to the most current consensus energy
efficiency standards, as contained in ASHRAE/IESNA 90.1-1999. An
explicit direction from Congress to the Department of Energy to update
the Federal building energy code to reflect the latest standard update
would be beneficial in expediting the Federal code revision process.
DOE also is required to make a determination as to whether the
ASHRAE/IESNA Standard 90.1-1999 will save energy in commercial
buildings. The issuance of this determination triggers important
requirements that states review and update their building codes
accordingly. Congress should direct DOE to issue this determination
immediately. The 1999 update was developed over 10 years through a
process involving all interested stakeholders. It is ready for
consideration by the states, and that consideration should be
expedited.
With respect to the process by which appliance standards are set,
as indicated in the written testimony, NEMA believes that is essential
that DOE closely follow the ``process improvement rule'' in every
standards-setting activity. The energy efficiency standards program was
stalled for several years before the process improvement rule was
issued in 1996. Since that time, and pursuant to the process
improvement rule, consensus has been reached and new standards
promulgated for products including clothes washers and ballasts. If the
process improvement rule is not utilized and applied fully to every
consumer, industrial and commercial product, however, there is a risk
that the gridlock that characterized the standards program prior to
1996 will return. Direction from Congress to DOE to formally
incorporate the process improvement rule into the department's
regulations would provide additional assurance to industry that the
requirements of the rule would be strictly enforced, and thereby lay
the groundwork for further consensus standards development activities.
______
Goodman Manufacturing Company, L.P.,
Houston, TX, August 3, 2001.
Hon. Jeff Bingaman,
U.S. Senate, Committee on Energy and Natural Resources, Dirksen
Building, Washington, DC.
Re: Committee Hearing held July 13, 2001
Dear Senator Bingaman: Recently, I received your request, to
respond to follow-up questions from the July 13th hearing before the
Energy and Natural Resources Committee submitted for the record by the
office of Senator Murkowski. Please see my responses to Senator
Murkowski's questions below.
Questions for Third Panel--Air Conditioning Standard
Mr. Parks--you indicated that Goodman supports the 13 SEER standard
Question 5. Given your market share and status as the second
largest U.S. manufacturer, wouldn't the 13 SEER standard put you at a
significant advantage relative to your smaller competitors?
Answer. Goodman does not have a significant advantage given the 13
SEER air conditioner is manufactured today and has been for almost 15
years by virtually all manufacturers. 13 SEER technology has been
available to both large manufacturers like Goodman and to small
manufacturers like Goetl Air Conditioning for approximately 15 years.
The Air Conditioner and Refrigeration Institute's own data shows that
virtually all manufacturers including small and large produce 13 SEER
equipment today and most have been for several years. Thus, all
manufacturers would certainly be capable of continuing to produce 13
SEER equipment five years from now when the rule would go into effect.
In addition, we believe that everyone stands to gain from adopting
13 SEER as the new standard. Lower electricity bills for the consumer,
less electricity consumption relieving some of the pressure on utility
companies, our environment gets a break and the HVAC industry has the
opportunity to better meets the needs of our customers. In fact,
raising the minimum efficiency standard to 13 SEER is goad for our
industry because we believe consumers will begin replacing older, lower
efficiency air conditioning units before they break down in order to
save money on their electric bills. When production volumes increase
due to market demand for a higher SEER product, consumer prices for
those units will come down.
Question 6. Given a 12 SEER standard, wouldn't there still be
significant demand for 13+ SEER units among those consumers who
benefit?
Answer. Most often consumers opt to purchase the lowest minimum
energy efficiency product they can find. This is especially true in the
case of property owners that are not responsible for monthly utility
costs leaving the renter with no choice in the matter. As a result,
often those who can least afford it are most effected by high utility
costs. ``We did sell a 10 SEER [current minimum SEER] unit to a lady
with a rental unit. She didn't care if it was a 10 because she wasn't
paying the electric cost.'' This is a quote from a recent article
discussing the importance of increased energy efficiency standards for
air conditioners, the Dallas Morning News, June 19, 2001.
Rather than a select few, Goodman believes that persons of all
income levels should enjoy this benefits by owning the most efficient
equipment available at a reasonable price. The 13 SEER equipment
translates to a 30 percent savings over present standards on consumers'
air conditioning bills and would prevent the need to build at least 53
(400 megawatt) power plants by the year 2020, thereby improving air
quality across the nation.
Establishing a 13 SEER standard is the most cost-effective way to
reduce harmful emissions, keep electric bills more affordable and
reduce the need for new generating plants--all accomplished with
technology that has been available for several years and is in use
today.
On behalf of Goodman Manufacturing, I hope this information is
useful as you consider the role of energy efficiency as part of the
nation's energy solution. We hope you will consider the significant
benefits associated with increased energy efficiency standard for air
conditioners and urge Congress to strengthen air conditioning
efficiency standards to the 13 SEER level. Please feel free to contact
me if you have any further questions.
Sincerely,
David R. Parks, Ph.D.,
President.
______
Air-Conditioning & Refrigeration Institute,
Arlington, VA, August 3, 2001.
Senator Jeff Bingaman,
Chairman, Senate Energy and Natural Resources Committee, Washington DC.
Dear Mr. Chairman: Enclosed please find a copy of my responses to
your questions on the National Appliance Energy Conservation Act
rulemaking covering residential central air conditioning and heat pump
products. I appreciate the opportunity to add to the Senate Energy
Committee's record on this important subject.
If you or your staff have any further questions, please do not
hesitate to contact me.
Thank you.
Very sincerely,
Clifford H. ``Ted'' Rees, Jr..
President.
[Enclosure.]
Responses of Clifford H. ``Ted'' Rees, Jr., to Questions From
Senator Bingaman
Question 1. Why, then, would we require a less cost-effective 13
SEER standard, particularly when those consumers who need a more
efficient air conditioner can go out and buy one?
Answer. There are customers for whom a 13 SEER product makes good
economic sense. They are primarily in the southern half of the country,
particularly in southern Florida and the southern tip of Texas, where
air conditioning is needed virtually all year. Many of the members of
ARI market 13 SEER products--they are more expensive, and for good
reason--they cost more to make. And there certainly would be economic
benefits for those manufacturers who make 13 SEER products to sell more
of them. But those short-term benefits would be outweighed in the long
run by a reduction in overall sales because the 13 SEER standard does
not make good economic or energy efficiency sense for the vast majority
of the country. A 13 SEER standard is simply not a reasonable national
standard.
I should point out, contrary to what the Committee has been told,
that nearly half of the original equipment manufacturers in the United
States today do not make 13 SEER equipment, and risk being put out of
business if a 13 SEER minimum is imposed. The Department of Justice
expressed particular concerns about the anti-competitive impact of such
a standard on smaller manufacturers.
But, as the question suggests, consumers can purchase 13 SEER
equipment today--as well as 14, 15, and 16 SEER products--if they can
afford it and if they believe it makes economic sense. To impose a 13
SEER standard on all American consumers, however, would cause profound
and disproportionate hardship on lower income consumers, the elderly on
fixed incomes, and smaller equipment manufacturers, without justifiable
energy savings.
Question 2. Doesn't it make sense to spend some time reviewing why
the previous Administration despite all advice for a 12 SEER standard--
changed to a less-economic 13 SEER standard at the last minute?
Answer. One of the legal challenges raised by ARI to the last-
minute 13 SEER standard (which was sent to the Federal Register on the
last day of the previous Administration and published on January 22,
2001) is that there was not sufficient time to analyze and respond to
the purported support for a 13 SEER standard. And this is one of the
primary reasons that the current Administration withdrew the rule
published on January 22, 2001--to take the appropriate time to analyze
the potential energy savings and the technological feasibility and
economic justifications for a 13 SEER standard, as DOE is required to
do under the applicable statute. Upon reviewing the millions of dollars
of data in the record at DOE relating to a new SEER standard, DOE has
issued a supplemental proposed rule in the Federal Register on July 25,
2001 which would increase the SEER by 20 percent to a 12 SEER. It is
apparent from the DOE notice of July 25, 2001, that after a more
thorough review DOE believes that there is economic justification in
the record to support raising the standard to a 12 SEER, not a 13 SEER.
Our analysis agrees with their conclusion.
Question 3. Why should consumers in Alaska or Minnesota--where
payback period is more than 20 years--be forced to purchase an
uneconomic air conditioner or heat pump?
Answer. Consumers in most of America--not just Alaska or
Minnesota--should not be forced to purchase a 13 SEER air conditioner.
The attached map of the United States demonstrates that the payback for
such equipment does not make economic sense in energy costs savings in
most of the country. There are other methods of achieving energy
savings without penalizing the customer. For example, ARI members,
except for one, have developed and participated in the North American
Technician Excellence program, which is a program to improve
installation and service of air conditioners and will increase
efficiency enormously. Additionally, service maintenance contracts
would assure continuing efficiency of installed equipment.
Question 4. Wouldn't it be more prudent to promote the 12 SEER
standard, and let consumers in Texas and Florida purchase a more
efficient air conditioner based on their needs?
Answer. Yes. The cost differential between a 12 and 13 SEER product
is simply too extreme to impose the 13 standard on everyone. Although
one manufacturer has claimed that the cost differential between the 2
standards is only $100.00, that estimate was based on a very limited
survey of 3 contractors from 2 states. ARI's estimates, which are based
on variances in equipment costs and nationwide surveys, demonstrate
that the average differential between a 12 and 13 SEER product is
$407.00. (For example, the differential between the installed price
from a contractor in Dumfries, Virginia and one in Riverdale, New
Jersey is $2,577.00!)
Moreover, some critics of the proposed 12 SEER standard allege that
ARI's predictions of increased costs are inflated because predictions
of cost increases in 1992 when the 10 SEER standard was imposed were
not accurate. There is a significant difference in the 1992 predictions
and the current ones, however: (1) in 1992, compressor manufacturers,
independently--as a result of long standing research--introduced a new
scroll compressor technology, at very little cost; and (2) the average
product shipped in 1987 (when the rule was first drafted) was
approximately a 9 SEER product, only one point below the proposed 10
SEER standard; whereas, in the current situation, there is no
compressor technology on the horizon to provide efficiency gains at
minimal cost, and the average product shipped today is close to an 11
SEER product which is two points below a 13 SEER.
And finally, advocates for a 13 SEER standard have claimed that ARI
had inaccurately predicted a $700 increase in cost in 1992 when the 10
SEER standard was imposed, but as the attached transcript of the DOE's
November 16, 2000 hearing clarifies, Steven Nadel of the Association
for Energy Efficiency Economy admits that the $700 ARI estimate
pertained only to a California Energy Commission rulemaking as an
estimate for a California only standard.
In short, the 12 SEER standard is economically justifiable after
taking into appropriate account the climatic, regional and economic
differences in our nation, whereas a 13 SEER minimum standard would
impose unjustifiably harsh punishment on certain consumers and regions
of our country.
2 Attachments: 1. Cooling Hours Payback Map, and 2. Nov. 16, 2000
DOE Hearing Transcript have been retained in committee files.
______
National Energy Management Institute,
Alexandria, VA, July 31, 2001.
Hon. Jeff Bingaman,
Committee on Energy and Natural Resources, U.S. Senate, Washington DC.
Dear Senator Bingaman: I have just arrived back in town and am in
receipt of your letter dated July 20, 2001 relating to Senator
Murkowski's questions.
As I reviewed the list of questions asked by the Senator, I
realized they were out of the scope of my testimony. I have no further
comment on the issues he proposed.
Sincerely yours,
Erik S. Emblem,
Executive Director.
______
Responses of Steven Nadel, American Council for an Energy Efficient
Economy to Questions From Senator Murkowski
Question 1. The 13 SEER standard will save 4 quads of energy at a
cost of $4 billion to consumers; the 12 SEER standard will save 3 quads
of energy at a cost of $1 billion to consumers. In other words, the 12
SEER standard gives consumers 3/4 of the energy savings at 1/4 the
cost. Why then would we require a less cost-effective 13 SEER standard,
particularly when consumers who need a more efficient air conditioner
can go out and buy one?
Answer. This question contains points about energy savings, costs,
and net financial savings. I will attempt to answer each of these.
Regarding energy savings, according to DOE's analysis, a 12 SEER
standard will save 2.9 quads, a 13 SEER standard 4.2 quads, so a SEER
12 standard will have 69% of the savings of the 13 SEER standard. Or
stated another way, a 13 SEER standard will increase savings 45%
relative to a 12 SEER standard. Regarding costs, according to DOE's
analysis, for the most common unit (a split air conditioner), 12 SEER
has an incremental cost to the consumer of $213 and 13 SEER has an
incremental cost of $335, so 12 SEER is 64% of the cost of 13 SEER, not
1/4 of the cost. I am not clear what the $4 billion figure is you refer
to, but the $1 billion I believe is the net savings (benefits minus
costs) for 13 SEER. According to DOE's analysis, the comparable figure
for 12 SEER is $2 billion. In the opinion of my organization, ACEEE,
DOE's estimates of net savings are unrealistically low for both 12 SEER
and 13 SEER and in fact net savings for both standards will be
significantly higher (our rationales are briefly explained below in my
response to question 3).
The reasons to require 13 SEER in our opinion are several-fold.
First, when the economic analysis is corrected, benefits for consumers
are greater at 13 SEER than 12 SEER. Second, energy savings are 45%
higher for 13 SEER than 12 SEER, and given the energy problems facing
the U.S., we need to pursue all cost-effective energy savings. Third,
there are very substantial peak demand savings associated with the
increase from 12 to 13 SEER. Reducing peak demand will improve system
reliability and will reduce summer electricity prices for all consumers
(reduced peak demand increases supply relative to demand, reducing
market-clearing prices). Fourth, the larger energy savings from 13 SEER
translate into larger emissions reductions from the new standard,
helping to reduce the cost of Clean Air Act reforms for ``3
pollutants'' and for likely eventual steps to reduce greenhouse gas
emissions.
Question 2. Doesn't is make sense to spend some time reviewing why
the previous Administration despite all advice for a 12 SEER standard--
changed to a less-economic 13 SEER standard at the last minute?
Answer. In our opinion, given the energy problems facing the
country and the need of the nation to both improve energy efficiency
and increase energy supplies, available Congressional and DOE time
should be devoted to these endeavors and not to a look back at actions
that have already been taken. For example, in the National Energy
Policy, the President has directed that DOE look into opportunities for
setting new standards that are technically feasible and economically
justified. In an effort to help achieve this objective, in my testimony
I suggested a look forward to investigate ways to make the standards-
setting process more effective in the future.
Regarding the statement in the above question, I would like to note
that advice went both ways. Relative to the original proposal for a 12
SEER air conditioner standard and a 13 SEER heat pump standard, some
parties advocated a weaker standard (e.g. 12 SEER on both products) and
some a stronger standard (e.g. 13 SEER on both products). The final
rule was based on comments on the draft rule. It is fairly common for a
final rule to include changes from a draft rule; if changes weren't
sometimes made, then the final hearing and comments would be a charade.
Also, this rulemaking took 7\1/3\ years, and under DOE procedures there
was no proposed rule until more than 7 years had passed, so even the
proposed rule was relatively ``last minute'' with the final rule
following three months later.
Question 3. As the chart shown by Mr. Rees tells us, there are vast
parts of the country where the payback period for a 13 SEER air
conditioner will be too long to allow the consumer to recover their
extra costs. Why should consumers in Alaska or Minnesota--where the
payback period is more than 20 years--be forced to purchase an
uneconomic air conditioner or heat pump?
Answer. There are several responses to your question. First, the
data provided by Mr. Rees are based on ARI cost estimates and are
higher than the incremental cost of these products in many markets
today, even though SEER 13 is presently a niche product today and not a
mass-market product. For this reason, DOE has de-emphasized use of the
ARI cost estimates. Using the DOE cost estimates, payback periods in
northern states would be lower than shown by ARI.
Second, even the DOE analysis doesn't account for two very
important factors: (a) the fact that past experience shows that the
actual cost of standards, once implemented, are substantially less than
a priori DOE estimates; and (b) the fact that summertime electricity
prices (when air conditioning is used) have risen substantially since
1996 (DOE's analysis is based on summer 1996 electric bills). These
issues were discussed in my written testimony. When we correct for
these two factors, even a 13 SEER air conditioner used only 300 hours
per year (a typical figure for the far-north) will have a payback
period of approximately 8 years relative to a 12 SEER unit.
Third, in the far north relatively few homes have central air
conditioners, so relatively few homes are affected relative to the much
larger number of homes in warm climates that have central air
conditioners.
Fourth, there are benefits for northern regions in addition to
direct consumer benefits. These benefits include reduced summertime
peak demand, reduced summertime electricity prices for all consumers
(due to the effect of reduced demand on market prices), and reduced
emissions of air pollutants from power plants. For example, there is
strong support for the 13 SEER standard in Oregon and Washington due to
the impacts of reduced peak demand on summertime electricity prices and
because freeing up power in Oregon and Washington allows them to sell
excess power to California at a profit. And finally, under the federal
standards program as currently implemented, there is a single national
standard, that applies equally in every state. For most products this
works fine, but for climate-sensitive products such as air conditioners
and furnaces, there is always a need to compromise given substantially
different energy use in the northern and southern states. For these
products, it might make sense to split the country into two regions and
set separate standards for each.
Question 4. Wouldn't it be more prudent to promote the 12 SEER
standard, and let consumers in Texas and Florida purchase a more
efficient air conditioner based on their needs?
Answer. Under standards, consumers are always free to buy more
efficient products than the standards require. However, experience
shows that most sales are at or near the standard level and only a
limited number of consumers buy more efficient products due to the many
market barriers that led to the establishment of standards in the first
place. Currently, 13 SEER units have only about a 5% market share
nationally, and while the market share for 13 SEER is higher in Florida
and Texas, my understanding is that even in these states 13 SEER
accounts for a minority of product sales. By setting the federal
standard at 13 SEER, the market share of these units will be much
higher, increasing energy savings, peak demand savings and net economic
benefits (the latter is true with reasonable economic assumptions).
Looked at another way, my understanding is that sales of 12 SEER (but
not 13 SEER) units are already quite high in Florida and Texas, so
without a 13 SEER standard, these states will not receive significant
benefits. One possible compromise might be to set a 12 SEER national
standard but permit warm states to set higher standards. However, for
this option to work, manufacturer support will be needed, as
manufacturers have traditionally opposed such arrangements, insisting
on a uniform national standard.
Question 7. Mr. Nadel, you made several recommendations as to other
appliances that could be covered by an expanded appliance standard
process. Some of your recommendations follow standards adopted by the
California Energy Commission--did they evaluate the costs to consumers
and impacts on consumer choice in setting their standards?
Answer. Yes, California evaluates both of these factors in setting
state standards. The California process to set these standards includes
(1) an initial hearing and data collection/analysis; (2) publication of
draft standards, an energy savings and economic analysis, and a hearing
on these materials; (3) publication of revised materials and a hearing
on these materials; and (4) publication of a final proposal, a hearing
on this proposal, and adoption of a final standard. At this point steps
1-3 are completed and the final step is scheduled to take place
shortly. In general, the California standards are set at levels that
many existing products can meet since the California market is much
smaller than the national market and because the California standards
are typically scheduled to go into effect one year after adoption
rather than the 3 years typically used for federal standards.
Question 8. Will your upcoming report on the effects of these
standards also evaluate consumer costs and other market impacts in
addition to energy savings?
Answer. Yes, our report will fully evaluate consumer costs and
benefits. In the table on the next page I provide our preliminary
results. In addition, we look at other market impacts by reviewing
available data and interviewing industry experts.
ESTIMATED NATIONAL SAVINGS FROM STANDARDS ON PRODUCTS NOT COVERED BY EXISTING FEDERAL STANDARDS
----------------------------------------------------------------------------------------------------------------
National energy National energy
savings in 2010 savings in 2000 NPV for
Effective purchase Benefit-
Products date ---------------------------------------- thru 2020 cost ratio
(year) (Tril. (Tril. ($)
(Twh) Btu) (Twh) Btu)
----------------------------------------------------------------------------------------------------------------
Torchieres.......................... 2005 28.8 293.9 52.4 522.0 22,789 4.4
Ceiling fans........................ 2008 12.0 122.6 48.1 479.1 15,953 4.7
Furnace and heat pump fans.......... 2008 9.2 94.0 46.1 459.0 20,658 6.5
Electronic equip. & power supplies.. 2005 22.5 229.3 28.6 285.1 13,822 5.0
Unit and duct heaters............... 2005 NA 53.1 NA 149.7 4,241 6.2
Dry type transformers............... 2005 1.9 19.7 5.4 54.1 2,796 5.8
Vending machines.................... 2008 1.2 12.1 4.0 40.0 1,198 4.5
Commercial refrigerators & freezers. 2005 1.9 19.9 3.2 31.8 1,375 6.8
Traffic lights...................... 2005 0.3 3.6 2.6 26.2 710 2.6
Exit signs.......................... 2005 0.8 8.5 2.3 23.3 1,179 7.5
Commercial clothes washers.......... 2008 0.7 6.8 2.1 21.3 2,000 6.7
Beverage merchandisers.............. 2008 0.6 6.1 2.0 20.2 621 5.1
Ice-makers.......................... 2005 1.1 10.9 1.7 16.5 564 3.0
Packaged large HVAC................. 2008 0.3 2.9 1.4 14.2 387 3.4
Total............................. 81.4 883.2 199.9 2,142.4 88,293 5.0
----------------------------------------------------------------------------------------------------------------
[Senator Larry E. Craig submitted the following technical
response of Argonne National Laboratory to the testimony of
Thomas B. Cochran and asked that this response be printed in
the hearing record.]
ARGONNE NATIONAL LABORATORY
Responses to the Testimony of Thomas B. Cochran
Cochran. ``My testimony will focus on research and development of
advanced fuel processing technologies and whether the United States
should abandon its longstanding non-proliferation policy and promote
the development and deployment of pyroprocessing and transmutation
technologies.''
Response. The United States government position that it does not
``. . . encourage the civil use of plutonium and accordingly, does not
itself engage in plutonium processing'' is based on proliferation risks
associated with the separation of pure plutonium by reprocessing. The
pyroprocess is an advanced technology that cannot separate pure
plutonium. In fact, the product of the pyroprocess is a highly
radioactive mixture of uranium, plutonium, minor actinides, and some
fission products. This material is not suitable for use as weapons
materials. The implication that promoting development and deployment of
pyroprocessing and transmutation technologies is abandonment of
longstanding nonproliferation policy is false. Indeed, pyroprocessing
provides a proliferation resistant alternative to traditional PUREX
reprocessing that-strongly supports U.S. nonproliferation objectives.
Cochran. ``Civilian nuclear activities have directly and indirectly
contributed to the spread of nuclear weapons.
. . .
Unfortunately, the nuclear nonproliferation threat stemming from
civilian nuclear power technologies is still alive today, as evidenced
by Iran's pursuit of a nuclear weapons option by purchasing nuclear
expertise and dual-use technology from Russia.''
Response. In the history of more than 50 years of civilian nuclear
energy deployment, neither a single commercial electricity generating
reactor plant nor any commercial reprocessing facility has been
utilized to obtain weapons materials. In all cases, the weapons
materials were acquired through uranium enrichment or from plutonium
produced in special purpose small reactors.
In countries that do not already nave nuclear weapons, all
commercial nuclear facilities are under the international safeguards
regime. The economic penalty and the energy security compromise
resulting from safeguards violations are so great that these commercial
nuclear facilities would not be the choice for weapons materials
production, even in the future.
Cochran. ``Advanced processing research, even in weapon states,
provides the necessary justification for nascent nuclear weapon states
to pursue similar research ostensibly for peaceful purposes. It is
primarily for these reasons that NRDC believes the better course is to
oppose all commercial use of nuclear weapon-usable materials, including
separated plutonium and highly enriched uranium, and oppose the
research, development and commercialization of nuclear fuel
reprocessing technologies.''
Response. If a nascent weapons state wishes to produce weapons
material, relatively straightforward chemical reprocessing methods are
already available. Research on advanced technologies such as
pyroprocessing does not increase the already existing proliferation
risks. In fact, developing proliferation-resistant alternatives to
replace already existing aqueous reprocessing will support the U.S.
nonproliferation policy goals.
Since current commercial reactors produce about 40% of their energy
over the life of the fuel by fissioning plutonium, opposing all
commercial use of nuclear weapon-usable materials requires elucidation.
Plutonium is, in fact, simply a natural part of nuclear energy, even in
the once-through uranium fuel cycle. Further, fissioning plutonium in a
fast reactor will reduce the inventory of plutonium already contained
in spent LWR fuel.
Worldwide, nuclear power deployment and R&D is driven by a need for
energy. History has shown that we can guide development in other
countries through technical leadership, but that trying to lead by
abstinence has failed.
Cochran. ``The simple answer is that there are no known fuel cycles
that are cheaper, and no known fuel cycles that rely on reprocessing
that are more proliferation resistant, than the once-through fuel
cycle.''
Response. The once-through fuel cycle may not be cheaper in the
long run if the waste management implications are factored in. The
once-through fuel cycle would add to the accumulation of plutonium
contained in the spent fuel at the rate of about 80 tons of plutonium
per year around the world indefinitely, and at a greater rate if
nuclear enegy expands as expected. After long cooling period, the
plutonium contained in the spent fuel can be more easily accessed,
creating real proliferation concerns, or worse, creating a source of
plutonium that is not a concern because it has been forgotten by the
international community.
Cochran. ``However, the most serious nonproliferation threat
associated with reprocessing technologies is not the terrorist threat,
but the so-called `state threat.' The IFR concept and the
pyroprocessing technique offer little in the way of reducing this
threat.''
Response. This argument is irrelevant to the merits of the IFR
concept and pyroprocessing. Having decided to become a weapons state, a
country would pursue facilities and technologies relevant to that end,
not those that are irrelevant. The IFR has features that ameliorate,
and in large measure eliminate, concerns about nuclear proliferation.
Advantages for nonproliferation are, in fact, a major asset of the IFR.
The IFR is compatible with the most rigorous safeguards provisions,
and it provides a basis for dealing with the most egregious concerns
about safeguards: excess weapons plutonium and the long-term
accumulation of plutonium, both separated and in waste inventories. IFR
technology does not involve separating plutonium. The IFR pyroprocess
that separates fission product wastes cannot produce pure plutonium.
Plutonium is always codeposited with other actinides (neptunium,
americium, curium) and uranium. The product carries enough highly
radioactive fission products to necessitate remote handling of even the
refabricated fuel. All processing steps, including fuel fabrication,
are conducted remotely in a small hot cell. Unauthorized access is
impossible and any attempt would be easy to detect. The compactness of
the fuel cycle facility means that transportation of spent fuel and
refabricated fuel can be eliminated by locating the facility at the
power plant site. IFR products would still need aqueous reprocessing
for any use other than in the IFR (e.g., after covert diversion), just
as does spent LWR fuel. Furthermore, IFR can consume stocks of
plutonium that currently are increasing daily. And finally, by
integrating the latest safeguards technologies into the IFR fuel cycle,
an unprecedented level of nonproliferation transparency can be
achieved.
Nations that choose to pursue nuclear reprocessing presently have
one technology available, called PUREX. This technology was designed
specifically to produce highly purified plutonium for the construction
of nuclear weapons. Introduction of IFR technology would provide a
proliferation-resistant alternative that strongly supports U.S.
nonproliferation objectives.
Cochran. ``In one respect pyroprocesing is actually worse than
aqueous reprocessing in terms of their respective proliferation risks.
Preprocessing involves access to technologies for working with
plutonium in metallic form, the form most often used for weapons.''
Response. This assertion is not true. In the aqueous reprocessing,
plutonium is recovered as plutonium nitrate, which is easily converted
to plutonium metal. In pyroprocessing, pure plutonium metal is never
produced. The product is a highly radioactive mixture of uranium,
plutonium, minor actinides and some fission products, that is
unsuitable as weapons material.
Cochran. ``There is not a shred of evidence in any of the ATW
proposals that the collective dose reductions associated with the
geologic repository, assuming ATW is implemented, will be less than the
collective dose from operating the reprocessing facilities and the
transmutation facilities. In fact everything we know about these
facilities today suggests the opposite--ATW would result in a higher
collective radiation dose to people than they would receive if ATW were
not implemented.''
Response. The radiological toxicity of the spent fuel consists of
two components: fission products which decay to the background
radiological toxicity level of the original uranium ore in about 300
years, and actinides which have long half lives and hence take millions
of years to decay to that extent. With pyroprocessing, the actinides
are recovered collectively and can be transmuted or fissioned in the
ATW or in the fast reactor. The dose from operating the transmutation
facility is the same as the standard nuclear power plant. The dose from
operating a pyroprocessing facility is expected to be a small fraction
of that from a power plant.
On the other hand, the benefits of removing actinides from the
repository are tremendous and would allow the following specific
contributions toward a solution to the nuclear waste problem:
Removal of actinides, which have long half lives hence long-
term radiological toxicity, from the waste, thereby reducing
the effective lifetime of the waste from hundreds of thousands
of years to a few hundred years. Actinides can be recycled as
fuel in the fast reactor.
Since the source for long-term radiological release from the
repository is essentially eliminated, the EPA standard for
long-term release and NRC regulatory requirements can be met
more easily.
The amount of waste stored in the repository can ue
increased by a factor of about 10 because the long-term heat
source is eliminated.
The lower heat source leads to a cooler repository resulting
in higher confidence in superior repository performance
modeling involving ground water movement.
Pyroprocessing does not obviate the need for the Yucca Mountain
repository. The above technical attributes will allow the technical
performance requirements for such a permanent repository to be met more
easily and reduce the burden of long-term stewardship, resulting in
significant improvements in the licensing process and economics.
As for the transmutation, it can be done more effectively and
economically in fast reactors because the engineering complexity and
cost penalties associated with the accelerator driven spallation
neutron source are eliminated. Furthermore, actinides are valuable
resources for electricity generation. Current commercial reactors
utilize less than 1% of uranium resources. Fast reactors can accomplish
a full utilization of uranium resources increasing the nuclear energy
potential by a factor of 100. This will enable nuclear energy to have a
significant impact on reducing the greenhouse gas emission.
In fact, the fast reactor with pyroprocessing is the only advanced
reactor concept that can answer all of the five crucial questions
raised by the New York Times editorial on May 29, 2001, namely: (1)
impact on global warming, (2) weapons risks, (3) waste disposal, (4)
rector safety, and (5) economics.
Appendix II
Additional Material Submitted for the Record
----------
Statement of Chevron Energy Solutions
Chevron Energy Solutions appreciates the opportunity to discuss the
need for energy efficiency in our country, and barriers we have
encountered in trying to do business with the Federal government to
increase energy efficiency in public buildings. We believe that some
small, but critical changes to current law would help increase the use
of Energy Savings Performance Contract provisions which we, as well as
many others, believe are underutilized. These changes would help both
public officials and contractors cut through the ``red tape'', and get
the job done of increasing energy efficiency in our public buildings.
By way of background, Chevron Energy Solutions is an energy
services company headquartered in San Francisco, California, with 12
offices nationwide. In July 2000, Chevron acquired the retail energy
services business of PG&E Corporation, and integrated the expertise
into Chevron's own proven capabilities in this area. Chevron Energy
Solutions has programs for energy management, energy efficiency, power
quality, and power reliability to meet the ever-changing and growing
demand of both private companies and public agencies. With the Federal
government, over the past several years, we have done and continue to
do a substantial amount of contract work for the Department of the Navy
and other Federal agencies (many high security agencies) in both energy
efficiency and infrastructure improvement upgrades. In the State of
California alone, we have implemented energy performance contracts for
community colleges and school districts, municipalities and other
government agencies in an effort to assist them in meeting the
challenges associated with energy shortages and escalating energy
costs. We are also under contract with the Metropolitan Washington
Council of Governments to make energy performance contracts available
to their member agencies and departments throughout the greater
metropolitan Washington area.
Energy Savings Performance contracts are an important and
innovative tool for government agencies to fund energy efficiency
measures. We estimate a savings of over $175 million in energy costs
could be saved in Federal buildings alone under existing law--and
substantially more if some changes are made to existing law. Government
facilities represent a significant opportunity to help us meet our
national energy goals. Our experience has shown that many of these
facilities have aging and energy inefficient equipment and
infrastructure that requires modernization to allow them to operate at
peak efficiency. To help address these needs, and provide a financial
mechanism to obviate the necessity of a large capital outlay, Congress
included ``performance contracts'' as part of the Energy Policy Act of
1992 to allow energy upgrades to be paid for through savings obtained
through energy efficiency.
We are very supportive of the energy contracting provisions in
current law, but we have learned that ``one size does not fit all'',
and increased flexibility is needed. We strongly advocate that changes
be made in existing law to provide for some of this additional
flexibility. If these changes were made, we believe that these
provisions would be more workable and utilized by more Federal
departments and agencies and could result in energy cost savings of
greater than $500 million. In addition, State and local government
agencies are adopting and implementing similar provisions, which mirror
the Federal statute.
The focus of current law is on ``cost savings'' and not necessarily
on ``energy savings''--and it is important that we also address
conservation as a means to help us meet our national energy goals.
Reducing energy use does not always correlate with cost savings,
although in many instances it does. The rising cost per unit of energy
may also mean that a performance contracting initiative may result in a
reduction in the total amount of energy consumed, yet there may be no
cost savings at all. Therefore broadening the scope of the law is not
only desirable, but it is entirely appropriate.
We would recommend that the following changes be made to existing
law and added to the Senate bill S. 352:
(1) Broaden the definition of energy savings measures to include
infrastructure improvements that contribute to energy conservation,
including operational efficiency of building heating, ventilation and
air conditioning systems, lighting systems, building envelopes,
domestic and hot water systems, measures that result in verifiable
operational efficiencies within the building, and other comparable
measures. Certainly, these measures should be a part of the overall
definition because they represent the breadth of what energy efficiency
is about--that certainly operational changes are key to achieving this
goal. Efficiencies do not arise solely from one piece of equipment
within a facility, but from the interrelationship of systems within the
facility.
(2) Allow for a single contract to cover work that is related to
implementing energy efficiency measures. In order to install energy
efficiency measures, often times other incidental work must be done
first. For example, asbestos may need to be removed prior to revamping
a building's electrical system or a roof repaired prior to revamping
the heating system. Under current law, the agency must let a separate
contract for this work although the work is related to installation of
the energy efficiency measures. This work could very well be done, and
should be done by the same contractor. If the Federal agency had the
option to provide one umbrella contract for all work related to
implementing the energy savings contracts, then this would eliminate
``red tape'', and the energy efficiency measures could be installed
faster and less expensively. In addition, Federal agencies should have
the option to finance these costs from their capital budgets.
(3) Expand provision to cover ``energy usage'' as a factor that can
be counted in determining the ``savings.'' This would provide
incentives for conservation, and not restrict the ``savings'' solely to
costs. We recommend that changes would provide for being able to
account for a corresponding reduction or change in energy use. With
rising energy costs, there may be no decrease in funds but yet energy
is being conserved.
(4) Provide incentives and educate school districts regarding
performance contracting. Public schools are continually plagued with
aging inefficient energy systems, and lack funds up front to pay for
the upgrades. Performance contracting is a tool that would allow public
schools to do the necessary upgrades without expending capital funds up
front. We recommend that DOE and the Department of Education work
together to develop incentives for public schools to use performance
contracts.
(5) Provide some flexibility in the methodology in how the energy
savings are verified. In current law, an ``annual energy audit'' is
required. An ``annual audit'' is not always necessary because energy
efficiency standards are in place and the use of these conventional
standards (which have already been verified) is accurate measurement.
For example, if there is a lighting retrofit, the specifications for
those lights include energy use and costs--therefore, ``an annual
energy audit'' performed by the contractor to verify energy savings is
unnecessary and redundant.
Again, we appreciate the opportunity to submit testimony for the
record and believe that these changes are needed to add flexibility to
this provision so that it will be more fully utilized and ultimately
increase energy efficiency at our government facilities. We are hopeful
that Congress will include these changes in the energy legislation now
being considered.
Thank you for your consideration.
______
Statement of Craig G. Goodman, President, National Energy
Marketers Association
I. INTRODUCTION
My name is Craig G. Goodman. I am submitting this testimony as
President of the National Energy Marketers Association (NEM). NEM is a
national, non-profit trade association representing a regionally
diverse cross-section of both wholesale and retail marketers of energy
and energy-related products, services, information and technology
throughout the United States. NEM members include: small regional
marketers, large traditional international wholesale and retail energy
suppliers (as well as wind and solar power), billing and metering
firms, Internet energy providers, energy-related software developers,
risk managers, energy brokerage firms, information technology providers
and manufacturers and suppliers of advanced distributed generation.
Membership includes both affiliated and unaffiliated companies.
Affiliated and independent marketers have come together under the NEM
auspices to forge consensus and to help eliminate as many issues as
possible that would delay competition.
NEM members urge lawmakers and regulators to implement: 1) laws and
regulations that open markets for natural gas and electricity in a
competitively neutral fashion; 2) rates, tariffs, taxes and operating
procedures that unbundle competitive services from monopoly services
and encourage true competition on the basis of price, quality of
service and provision of value-added services; 3) standards of conduct
that protect consumers; and 4) policies that encourage investments in
new technologies, including the integration of energy,
telecommunications and Internet services to lower the cost of energy
and related services.
As a national trade organization, NEM brings a wide range of
experiences, as well as broad perspectives to its testimony in this
proceeding that should aide the United States Senate Committee on
Energy and Natural Resources and enhance the quality of the record to
be developed here. NEM currently participates in more than 50
restructuring proceedings around the country and at FERC. The testimony
and recommendations presented here represent major issues and barriers
to price competition that are most often confronted in proceedings
around the country.
II. BACKGROUND
Electricity represents the last vestige of 60 years of the most
complicated price and allocation controls known to man. The retail U.S.
energy business is one of the largest single businesses in the world.
It represents nearly a trillion dollars a year, of which, energy is
only about $300 billion. Currently, however, utility bills include all
manner of products, services, information and technologies which are
truly separate and very competitive businesses.
In the U.S., there are very few true supply monopolies or demand
monopsonies. But between competitive sources of supply and demand there
are two, full-blown, government sanctioned monopolies. One is an
interstate transmission monopoly, and one is a local distribution
monopoly. Current rules governing these monopolies are incredibly
complex, hard to audit and impose enormously unnecessary costs on
consumers in many different ways.
To help consumers and to lower energy prices quickly, monopoly
barriers to new energy supplies must be repealed, and aggressive
conservation and load reduction incentives must be implemented
immediately. At the same time, both state and federal policies must
squeeze the monopoly profits out of the two monopolies between supply
and demand so that more competitive supplies can meet demand at lower
prices.
Utilities should not have a monopoly or competitive advantage to
provide competitive products, services, information and technologies.
Utilities should perform solely natural monopoly functions. Regulated
utilities should sell transportation services on a ``no frills'' cost
of service basis. Needed infrastructure investments should be given
targeted, performance-based incentives. Regulations, tariff structures,
interconnection rules, back up rates and operational protocols should
be uniform and designed to permit competitive suppliers to provide all
other energy-related products, services, information and technologies
at competitive, not monopoly, prices.
III. RECOMMENDATIONS
There are a number of actions that federal and state governments
need to take to encourage new investments in distributed generation
technologies as an important part of the competitive restructuring of
U.S. energy markets. NEM members operate in virtually every market that
has opened for competition, and their broad base of experience was the
basis for the attached document entitled, ``National Guidelines for
Implementing Distributed Generation and Related Services.'' * In this
document, NEM recommends fair and uniform business practices for
interconnection, reasonable regulation of emissions, balanced planning
and distributed generation valuation, fair tariffs for regulated
services, and the ability to sell excess power.
---------------------------------------------------------------------------
* The document has been retained in committee files.
---------------------------------------------------------------------------
NEM also recommends the expansion of existing energy and
environmental tax credits to include Qualified Restructuring
Investments such as advanced metering, computer system upgrades, and
distributed generation and the provision of tax and performance based
regulatory incentives for infrastructure upgrades, congestion
management, maintenance and streamlined interconnection procedures.
A. Implementation of Distributed Generation Technology
Electric demand is increasing as a result of economic expansion and
the 21st century digital revolution. As congestion on the existing grid
mounts, investment in distributed generation can provide significant
relief to consumers quickly and cost effectively. Accordingly, NEM
urges the adoption of five principles to encourage implementation of
distributed generation.
As a general matter, regulators should unbundle and redesign
distribution rates, eliminate penalties, redundant charges, and
barriers to entry and implement tariffs that encourage investments. As
currently designed, utility tariffs represent significant economic
barriers to consumers that wish to invest in distributed generation and
related technologies. NEM maintains that utility tariffs, operating
practices and procedures must be rewritten to recognize that
distributed generation can increase en orgy supplies, enhance system
reliability and lower energy costs to both the utility and the
consumer.
Utilities must provide equal, non-discriminatory access to markets
for power and auxiliary services. Interconnection of distributed
generation, in and of itself, does not provide distributed generation
investors with equal and open access to either wholesale or retail
markets. Distributed generation must have access to markets for the
sale of generation and capacity as well as ancillary services.
Distributed generators must also be able sell the output of their
generation to the wholesale market and trade demand or energy reduction
as a replacement for generation (``negawatt market''). Additionally,
uniform and reasonable retail wheeling rates should be developed to
maximize customer choice and permit a market for the local sale of
power.
Federal and state governments must adopt uniform technical
requirements and procedures for the interconnection of distributed
generation technology. National, or at a minimum, statewide technical
safety and reliability requirements, application procedures, forms,
standards agreements, related testing and certification requirements
and the elimination of existing penalties can reduce the costs and
risks of investments by consumers in competitive new distributed
generation technology. Uniform interconnection standards, policies and
practices must be implemented to lower the costs of installation.
Consistent siting requirements and reasonable environmental
permitting of distributed generation will reduce the cost and
uncertainty associated with compliance for all parties. Similarly,
local siting and environmental permitting requirements must allow
investors in distributed generation technologies to comply in a
realistic and timely fashion. At a minimum, emissions requirements
should be phased in to provide manufacturers time to meet unrealistic
or overly stringent emissions targets.
Finally, utilities should not be granted a monopoly or competitive
advantage to provide competitive products, services, information or
technology. Utilities should perform solely natural monopoly functions.
Essentially, regulated utilities should sell regulated distribution
services on a ``no frills'' cost of service basis. Regulations, tariff
structures, interconnection rules, back-up rates and operational
protocols should be designed to permit competitive, non-utility
suppliers to provide each of the products, services, information and
technologies that are not natural monopoly functions. The provision of
distributed generation technology can and should be opened immediately
to competition.
B. Federal and State Tax and Regulatory Incentives are Needed
Immediately for Investments in New Energy Supplies,
Conservation, Technology, and Infrastructure Immediately
The United States has entered the digital age with an energy
infrastructure constructed for the industrial revolution. The United
States is operating on a level of reliability that cannot support
digital power quality needs. A flicker of the lights in Silicon Valley
has global impacts.
One of the lowest cost, highest yield policy solutions is to create
targeted tax incentives to encourage all forms of new energy supply,
technology and conservation investments. This includes investments in
new pipes and wires to reduce congestion, advanced metering systems,
new computer systems, new energy supplies as well as distributed
generation. Both the state and federal governments have powerful and
effective tools to encourage new investments in energy supply and
conservation. The federal tax code already contains a myriad of
targeted energy, environmental and efficiency tax credits that should
be updated to increase the supply of electricity and natural gas and
reduce consumption. Either or both the existing energy tax credits
contained in Section 48 of the Internal Revenue Code (IRC), or the
existing credit for research contained in Section 41 of the IRC, could
be expanded to include ``qualified energy restructuring investments.''
The credit should be available to both regulated and unregulated
entities. To ensure that restructuring tax credits and regulatory
incentives are targeted and effective, investments that are not
``qualified'' should also not qualify for stranded cost recovery.
CONCLUSION
Our country is urgently in need of new generation investments, and
it is in the public interest that customers be incented to make these
investments as soon as practicable. Toward that end, competitive
barriers to entry must be removed to create a hospitable market for
distributed generation investments including the adoption of uniform
technical requirements and interconnection procedures as well as the
elimination of redundant fees and charges. Furthermore, reasonable
emissions standards and environmental permitting and siting
requirements for distributed generation should be adopted.
At the wholesale level, distributed generation investors must have
equal and open access to the markets for power and ancillary services.
At the retail level, utilities' tariffs must be fully unbundled, and
the utilities' role in the market should be defined as that of a no-
frills, wires-only distribution company. All other competitive
functions and products, including the installation and supply of
distributed generation, should be provided by the competitive
marketplace.
Additionally, existing tax and regulatory incentives must be
expanded to encourage new investments in energy supply, technology and
conservation. NEM experts are available to work with Committee staff to
draft appropriate language to implement these recommendations.
______
Statement of Rone Lewis III, Senior Vice President of Ingersoll-Rand
(IR) and President of IR's Independent Power Sector
Thank you for giving me the opportunity to submit for the Senate
Energy and Natural Resource hearing record my testimony on the role of
microturbine technology and distributed power generation in addressing
America's growing energy crisis.
First, let me begin by giving you some background information on
Ingersoll-Rand and its Independent Power Sector. Ingersoll-Rand is an
$8.8 billion company with more than 50,000 employees operating in over
100 countries. We serve four major global markets: climate control,
industrial productivity, infrastructure and security and safety. In the
area of Industrial Productivity, I am president of IR's Independent
Power sector, which focuses on identifying, developing and marketing
alternative-power and energy-management solutions.
As you may be aware, Chairman Bingaman and Members of the
Committee, a new type of electrical generator, called a microturbine,
is rapidly becoming available to fit the electricity and heating needs
of typical commercial buildings and industrial plants. About the size
of a commercial refrigerator, microturbins hold great promise in
supplying America's facilities with reliable and affordable power.
Microturbines are small combustion turbines that produce anywhere
from 25 to 500 kilowatts of electric power. They burn a variety of
fuels such as natural gas or diesel to produce the same kind of
electricity provided by a utility electrical grid. Because the gas
turbine engine has relatively few moving parts, it is quite reliable
and can operate for long periods--typically 8,000 hours or more--with
little maintenance. Microturbines produce very low emissions as they
burn fuel. They are designed to easily meet stringent environmental
regulations, including California's strict emission standards.
Microturbines are also relatively quiet emitting low noise levels.
Our PowerWorks brand of microturbines, which has been in
development for more than 10 years, will provide 70 kilowatts of energy
to customers. They are designed to be placed in or near facilities such
as hotels, supermarkets, hospitals, laundries, multi-family dwellings,
schools and greenhouses, to name a few. These are locations that need a
reliable, cost-effective and efficient energy source for electricity
and heat.
A $1.4 million research grant from the U.S. Department of Energy
contributed to the development of the PowerWorks microturbine, which is
designed to meet the same high standards found in chillers, boilers and
furnaces. Our microturbines are manufactured to operate for
approximately 10 years under typical operating conditions. Through
their cogeneration capability, the PowerWorks microturbines can also
fulfill a facility's hot water and other heating requirements.
PowerWorks connects directly to the electrical distribution system
of a facility to provide high quality electricity. Our microturbines
work 24 hours a day, seven days a week for long periods with low
maintenance. Designed to help satisfy electric power needs by producing
electricity at the point of consumption, the PowerWorks microturbine
also supports peak shaving applications. This means that microturbines
can enable businesses and consumers to reduce their reliance on the
power grid, especially during costly peak use hours.
IR began the field-testing phase of its microturbine development
program last fall in several kinds of facilities located throughout the
United States. We plan to introduce our first commercial production
units this fall.
There is no argument that this country's need for this type of
energy is increasing at a steady rate. California's energy crisis
underscores the need for increased energy efficiency, cleaner
technologies and more reliable production. Deregulation, volatile
energy pricing and tighter emission regulations have all prompted an
interest in energy alternatives, such as ``green'' technologies like
the microturbines. And there is probably no better way to get reliable
and affordable energy than from your own, on-site generating equipment.
Distributed energy holds great promise in the United States for
improving the generation of electricity. The report released this
spring by Vice President Dick Cheney's energy task force revealed that
this Administration is committed to the use of renewable and
alternative energy, and specifically that ``microturbines could easily
capture a significant share of the distributed generation market.''
Furthermore, the Cheney Report was absolutely accurate in noting
several challenges to the use of distributed energy. First, there is a
lack of national, uniform standards governing interconnection of
distributed energy to the local power grids, which is hampering the
roll-out of the technology into the local marketplace. The microturbine
industry needs a consistent, reliable process for grid interconnection
approval that focuses on practical and cost effective safety
requirements; a timely approval process that prevents foot dragging on
distributed power projects; and no punitive charges from the utility
for either disconnecting from the grid or using the grid as a backup.
The industry is also interested in support for selling unused power
back to the power grid.
Long-standing regulatory policies that support monopoly supplies
also must be reversed. This will increase competition, and encourage
the development and environmentally-friendly alternative energy
technologies. The Cheney Report correctly states, ``The tools that form
the necessary interface between distributed energy systems and the grid
need to be less expensive, faster, more reliable and more compact.''
We are pleased that the report recommends that the President direct
Energy Secretary Abraham to focus R&D efforts on integrating current
alternative technology programs regarding distributed energy, hydrogen
and fuel cells. Fuel cell technology is of particular interest to IR
because several of our industrial products currently utilize diesel
engines. Fuel cell technology promises a more environmentally sound
alternative and continued federal research programs can accelerate the
development of these programs.
All developers of microturbine technology would be interested in
Congressional and Administration support for tax credits for companies
who install or use microturbine technology. Tax credits are essential
to helping businesses finance their utilization of this technology,
just as they have with other alternative energy sources, such as solar
power. In addition, continued investment in our nation's natural gas
infrastructure will help to ensure that a ready supply of natural gas
is available.
We look forward to working with the Senate Energy and Natural
Resources Committee, the rest of the Congress, and the Bush
Administration to develop the necessary regulatory and legislative
support that would make power from microturbine technology more readily
available. We believe that once the technical, business and regulatory
barriers are removed, distributed power generation will be able to
fulfill its promise to America.
Thank you.
______
Statement of Robert C. Richardson, Cornell University, Chair, Physics
Policy Committee, American Physical Society, and Member, National
Science Board
[DOE Science for the Future--A Discussion Paper]
INTRODUCTION
The role of science and technology in maintaining the well being of
our nation is growing and changing rapidly. Because of the extent and
speed of these changes, it is essential to reexamine the ways in which
support for scientific research is organized within the U.S.
government. The advent of a new Administration and Congress provides an
opportunity to address emerging problems in ways that may not be
possible at other times.
We, the authors of this discussion paper, are especially concerned
about the future of the scientific research supported by the Department
of Energy. The DOE is the federal government's third largest sponsor of
basic research, and the largest sponsor of research in the physical
sciences.
The DOE Office of Science oversees outstanding national
laboratories whose capabilities for solving complex interdisciplinary
problems are not easily matched elsewhere. It also builds and operates
large-scale user facilities of importance to all areas of science. In
large part, it has been enormously successful in these efforts. Thus,
the vitality of the U.S. scientific enterprise is strongly dependent
upon DOE support.
For about a decade, however, DOE Science budgets have been
declining in purchasing power, and have fared significantly less well
than those of other agencies. These difficulties have been exacerbated
by weakness in overall federal support for the physical sciences (as
compared to biology and medicine) and by the perception of management
and security problems throughout the Department.
The decline in funding for DOE Science implies that our nation has
seriously underinvested in the research that it will need to sustain
its health, security, and economic prosperity in the 21st Century.
We believe that this situation has reached crisis proportions, and
that future U.S. leadership in many essential areas of science is in
jeopardy. Our purpose in these remarks is to suggest actions to
strengthen DOE Science that might be taken jointly by the new
Administration and Congress.
We have considered alternatives ranging from keeping the status quo
to major rearrangements of the existing science agencies. Of these
various alternatives, we believe that two kinds of solutions to these
problems--depending upon circumstances--may be feasible and effective.
THE PROBLEMS OF SCIENCE AT DOE
The DOE Science budget has stagnated and declined, in part, because
the DOE roles in civilian basic research and in the support of
university faculty and students are neither adequately understood in
Washington nor appreciated by the public at large.
DOE as a whole has four main missions: national security,
environmental restoration, science and technology, and energy. Its role
in national security is to maintain our nuclear deterrent. The
environmental role is to correct problems left behind under the
pressures of the Cold War. The mission in science and technology
uncovers new knowledge and propels the growth of our economy. The
energy mission is to secure some degree of independence from
fluctuations in the fossil fuel supply, and to develop environmentally
sound energy technologies for sustainable development. In principle,
the four missions can support each other.
It is inevitable in a complex national-security program as large as
that of the DOE that there will be problems from time to time. It is
also inevitable that new environmental problems will be uncovered.
These problems in the DOE weapons and environmental programs have given
the overall agency a negative image that, in practice, has proved
damaging to all of DOE, including its missions in science and energy.
In particular, DOE Science has not received the support that it badly
needs.
The question of leadership is an essential part of the problem. The
Director of the DOE Office of Science has responsibilities comparable
to those of the director of the NSF and not very different from those
of the directors of NIH and NASA; but he or she does not have
comparable authority or visibility. Without that authority, it has
become very difficult for DOE Science to make its case for necessary
long-term investments in research.
In considering responses to this situation, we have agreed upon the
following guidelines:
The DOE missions in national security, environmental clean-
up, science and energy are each important in their own ways.
Any solution to present problems within DOE should tailor
management, facilities, and budgets so as to optimize the
performance of each of these missions rather than applying
``one-size'' solutions to all.
Science and technology in the United States has prospered
greatly from diversity of funding sources and modes of support.
For example, the fact that the NSF differs from the mission
agencies in both purpose and style has made it possible for
U.S. scientists to take risks and tackle challenging and
important problems. Similarly, the DOE has developed great
expertise in building and operating large facilities, and in
overseeing important interdisciplinary national laboratories.
That expertise has been extremely valuable throughout all of
the U.S. scientific and technological community--in government,
industry, and universities. The diversity of funding sources
should be maintained.
The primary responsibility of the DOE's science and energy
programs should be to provide the new knowledge needed for
ensuring the scientific and technological base of our nation's
economic prosperity in the 21st Century. The mode in which
those programs assume this responsibility should take advantage
of the DOE's experience with large facilities and multi-
disciplinary research efforts.
ALTERNATIVE STRATEGIES
Starting from these guidelines, we propose two alternative kinds of
solutions, without indicating a preference for one over the other.
Alternative A is a restructuring of the DOE based on the assumption
that the Department will remain essentially intact in the next
Administration. Alternative B is based on the assumption that it may
become feasible or inevitable that some or all of the present
responsibilities of DOE be shifted to other agencies. After discussing
both of these alternatives, we mention, for the sake of completeness,
two other strategies that we believe are highly undesirable.
Alternative A--Enhance the leadership and visibility of DOE science and
energy by revising the management structure within the
Department
One way to accomplish this goal would be to elevate the Director of
the DOE Office of Science to the rank of Under Secretary for Science
and Energy, with additional responsibilities as Science Adviser to the
Secretary. This scheme would improve the visibility and influence of
science in DOE, and would place the person in charge of science at a
level above the large number of staff offices that are inevitable in
such a complex agency. A primary objective would be to have a widely
respected and influential scientist in a position where he or she can
be an effective leader and spokesperson for DOE science and energy.
A variant of this scheme, which goes part of the way toward our
more ambitious Alternative B described below, would be to remove some
administrative and regulatory responsibilities from DOE and convert it
into a subcabinet agency. The director of this agency, like the
directors of NSF and NASA, would be chosen for scientific and technical
leadership, and would have clear responsibility for guiding the agency
in directions consistent with long-term national goals.
Alternative B--Combine DOE science and energy programs with NIST, NOAA,
and possibly USGS to form the major part of a new 21st Century
Department of Commerce
The idea here is to create a ``National Institutes of Science and
Advanced Technology'' (NISAT) within a cabinet-level department in
analogy to the Natibnal Institutes of Health within HHS. An alternative
would be to combine these same entities; that is, ``NISAT,'' into an
independent sub-cabinet agency analogous to NASA in structure and
governmental status.
The major feature of Alternative B is that it would simultaneously
reorganize both DOE and DOC in a way that would be consistent with the
scientific and technological challenges of the next decades. The new
agency would be a visible recognition by the U.S. government that long-
term research drives economic progress. Its primary mission would be
the initiation and management of large-scale and/or multidisciplinary
research.
While many of the specific responsibilities of this agency would be
closely related to national needs, its style of operation would reflect
our modern understanding of the essential connections between
applications and fundamental new knowledge; thus this agency would
support both basic and applied research. The existence of such an
agency might provide a sharpened focus on the needs of the physical
sciences in federal budgeting processes. As before, scientific
leadership at the highest level would be necessary for the success of
this new agency.
Finally, we mention two alternatives that have been suggested by
others that we consider to be highly UNDESIRABLE.
Move DOE Science into NSF
Merging DOE Science and the NSF would double the size and
complexity of the NSF. There would be a serious mismatch between the
science and management activities, and it might be difficult to
establish a culture that would maintain the strength of the national
laboratories and that would allow both single-investigator ``small
science'' and multidisciplinary, multi-investigator ``big science'' to
thrive.
Whether this merger could happen without degrading what works very
well in DOE or NSF is highly questionable. Diversity of funding sources
for research would be substantially reduced. Many scientific fields
would be limited to one possible federal funding source, and innovative
scientists whose research projects did not fit into NSF programs would
have no other sponsors to whom to appeal.
Most importantly, the NSF is the only federal agency whose sole
responsibility is the support of science, unconstrained by specific
missions. In its fifty years of existence, the NSF has served this
nation extraordinarily well. We believe that it is essential to
maintain the unique quality of this agency.
Create a Department of Science, including all Federal R&D programs
The creation of a federal Department of Science has been proposed
several times in recent years as a means for concentrating federally
funded research and development and making it easier to track and
manage. Presumably, a Department of Science would be a civilian agency,
perhaps including the 6.1, 6.2. and 6.3 programs of the Department of
Defense. This consolidation would have the very major disadvantage of
completely eliminating the diversity of funding sources as well as
destroying the unique nature of the NSF. Other serious disadvantages
have been discussed in previous analyses of this proposal.
______
Statement of Arpad A. Bergh, President, Optoelectronics Industry
Development Association
On behalf of the Optoelectronics Industry Development Association
(``OIDA''), I would like to offer support for a government-industry
initiative to develop a new form of energy efficient lighting based on
solid state optoelectronics. In particular, OIDA endorses legislation
recently introduced by Senators Jeff Bingaman and Mike DeWine--S.
1166--that would establish a government-industry initiative to
accelerate the development of solid state lighting.
The ``Next Generation Lighting Initiative Act'' would create a 10-
year program for the Department of Energy and a consortium of the solid
state lighting industry for the purposes of conducting the research and
development necessary to enable solid state lighting to become a
primary source for the nation's general lighting needs.
OIDA is a non-profit association of optoelectronics companies,
national laboratories and universities established to strengthen and
advance optoelectronics technology. OIDA members are leaders in the
research and development of new enabling optoelectronics technologies
for areas such as fiber optic communications, digital imaging, and
optical storage.
Optoelectronics involves the merging of optics and electronics into
various complementary devices and has become a strategic enabling
technology in today's information-based economy. Optoelectronics
applications extend broadly through society, including the fields of
computing, communication, entertainment, education, electronic
commerce, health care and transportation. Optoelectronics defense
applications include military command and control functions, imaging,
radar, aviation sensors, and optically-guided weapons.
OIDA urges the Congress to pass S. 1166 expeditiously in order to
achieve the considerable benefits of energy savings, productivity
gains, and consumer advancements that would come from full scale
development of solid state lighting.
DOMINANT LIGHTING TECHNOLOGIES
Lighting technology is currently dominated by the incandescent
light bulb and the fluorescent light tube. These two light sources are
the primary means for general lighting in the United States and
throughout the world. Despite the dominant role of these lighting
technologies, neither has achieved significant advancements in energy
efficiency over the past several decades. This is all the more
noteworthy given that approximately 70 percent of the energy used by
these lighting technologies is wasted as heat.
Incandescent and fluorescent lighting, as well as certain other
forms of lighting currently available, are very energy-inefficient.
These forms of lighting convert only a small portion of the consumed
electric energy into visible light. A 100 watt incandescent light bulb,
for instance, emits only 5 percent of the energy it uses as useful
light, while the equivalent figure for the more efficient fluorescent
tube is less than 30 percent. These inefficiencies are dictated by
physics and are not subject to significant improvement.
Lighting consumes a significant portion of the energy generated in
the United States--approximately 20 percent--and this share is growing.
It is widely accepted that the United States must pursue strategies for
limiting the growth of its energy consumption devoted to lighting
needs. Conservation and improved electronic controls alone will not be
sufficient for limiting this energy need. The solution lies with new
technologies, principally solid state lighting.
SOLID STATE LIGHTING
Solid state lighting technology utilizes inorganic and organic
semiconductor devices known as light emitting diodes (``LEDs'') and
organic light emitting diodes (``OLEDs'') to convert electricity to
light. LEDs have existed for over 30 years and today are used in
applications such as digital displays, instrument panel lighting,
signage, and traffic signals. LEDs' primary advantages include
significantly longer-life and energy efficiency. LEDs' use in highway
signs and signals, for example, require 80-90 percent less energy than
incandescent signals and have significantly longer running lives. It
has been estimated that replacing all existing incandescent traffic
signals in the United States with LED signals would save nearly 2.5
billion kilowatt hours annually. OLEDs have the promise of highly
efficient low cost, large area, flexible light sources that can be
mounted on walls and ceilings or even on furniture.
Unlike incandescent and fluorescent technology, solid state
lighting technology is not subject to the same laws of physics that
result in the conventional lighting sources' poor energy efficiency. In
theory, solid state lighting could achieve near 100 percent
electricity-to-light conversion ratio. While actual ratios for solid
state lighting have not yet approached such high levels, technological
advancements are consistently raising the energy efficiency of solid
state lighting.
The adoption of solid state lighting for more general illumination,
such as residential and office lighting, has been stymied by the
inability to produce solid state ``white light'', the most common form
of lighting used by the general public. This barrier, however, has now
been overcome. Several types of white light LEDs have been developed
and efforts are on-going to improve on existing white light technology
for solid state applications. Nevertheless, the industry faces
significant challenges in bringing to market cost-effective white light
LEDs.
solid state lighting as a primary source of general lighting
Adoption of solid state lighting as a primary source of general
lighting in the United States holds the promise of significant and far-
reaching benefits:
Energy, Efficiency. It is estimated that significant adoption of
solid state lighting over the next twenty years could reduce global
electricity usage for lighting by 5O percent, and reduce total global
electricity consumption by 10 percent. These changes equate to an
overall reduction in annual global energy needs of 1,000 terawatt-
hours.
Cost Efficiency. Solid state lighting using LEDs will be more cost
efficient in terms of product maintenance and replacement. Unlike
incandescent bulbs and fluorescent tubes, LEDs are durable, long-
lasting, and easier to program and operate.
Environmental Impact. The energy efficiency of LEDs could translate
into major cuts in carbon emissions if solid state lighting is adopted
broadly. It has been estimated that the United States could avoid 276
metric tons of carbon emissions by 2020 if solid state lighting could
garner a significant share of the general lighting market.
Economic Impact. A flourishing solid state lighting industry would
have important economic benefits to the United States in terms of
employment, growth in supplier and equipment industries, research and
development and new applications. Furthermore, as solid state lighting
becomes a leading source for general lighting outside the United
States, the U.S. solid state lighting and related industries will reap
expanded economic benefits for the nation.
Improved Quality and Flexibility. Solid state lighting promises
better quality and more versatile sources of lighting, including the
ability to tune colors to virtually any shade or tint. In addition,
solid state lighting offers other desirable qualities, such as light-
weight, thinness, flexibility in deployment, and compatibility with
integrated circuits to produce ``smart'' light.
Based on these important qualities and benefits of solid state
lighting, a government-industry solid state lighting initiative would
be in the United States' economic and energy security interests. The
United States would benefit not only from major energy and cost
savings, improved quality, and a positive environmental impact, but
also from the ability to enhance and maintain the competitiveness of
the U.S. solid state lighting industry at a time when this technology
is being aggressively pursued by other nations. These benefits
represent a solid foundation and justification for proceeding with a
solid state lighting initiative as set forth in S. 1166.
FOREIGN DEVELOPMENT EFFORTS AND THE CHALLENGE TO THE UNITED STATES
Efforts are underway in other countries to rapidly develop solid
state lighting as a viable alternative to conventional lighting
technologies. Government-sponsored industry consortia have been
established in Japan, Europe, Korea, and Taiwan to develop more
efficient solid state lighting technologies. It is generally believed
that without a substantial government/industry commitment in the United
States competitors such as Japan and Europe will come to dominate solid
state lighting and become the standard-bearers of this important
technology.
A national investment is necessary to further develop solid state
lighting and to ensure that the United States can obtain a leadership
position. This can best be achieved through the cooperation of
industry, government, and academia.
The optoelectronics industry, the Department of Energy, and several
National Laboratories have been working to develop a coordinated
approach to solid state lighting. OIDA itself has put much effort into
addressing the necessary requirements for full scale development of
solid state lighting. These include much basic research, which is
especially suited for universities, harnessing work at the National
Laboratories, and the development of an infrastructure of supplier and
equipment firms that can be available for the commercialization of this
new technology.
The potential for solid state lighting was thoroughly reviewed this
spring at a National Academies of Science workshop. Based largely on
work from many sources, Senators Jeff Bingaman and Mike DeWine have
formulated legislation that reflects the most promising approach to
this type of broad-based technology development.
THE NEXT GENERATION LIGHTING INITIATIVE ACT--S. 1166
The Next Generation Lighting Initiative Act was introduced on July
11, 2001 and is designed to establish a national research and
development infrastructure for bringing about the types of advances in
solid state lighting that will allow this technology to become more
broadly applied and eventually available as a primary source of general
lighting.
The legislation would involve two types of funding for research and
development on solid state lighting: 1) direct sponsored research from
the Department of Energy, and 2) grants to universities, National
Laboratories and infrastructure providers that would be administered by
an industry-led consortium.
Industry Consortium. The ``Next Generation Lighting Initiative
Consortium'' would be composed of companies, National Laboratories, and
other research entities and would provide basic and manufacturing
related research contracts. The consortium would be funded through both
membership fees and Department of Energy grants. Entities receiving
funding directly from the Department of Energy would obtain full
intellectual property rights, while consortium members would have
royalty-free access to research results from universities, National
Laboratories, and infrastructure providers.
The consortium would provide the framework for the entire program
in that it would coordinate with the Department of Energy in assessing
technology requirements, maintain a technology roadmap, and administer
the efforts of participating universities, National Laboratories, and
supplier and equipment infrastructure firms. All efforts would involve
cost sharing.
The consortium is to be broadly representative of entities engaged
in solid state lighting research and development. It would have a
participation agreement applicable to all members and would be open to
all U.S. companies.
The initiative is designed to result in the commercialization of
solid state lighting technology. As such, it would involve extensive
industry participation. To facilitate such participation, the grants
under the research and development funding program would not be subject
to the Federal Acquisition Regulations, but rather subject to review by
commercial auditors to ensure that funds are expended in a manner
consistent with the program's objectives.
Planning Board. The initiative would also establish a Planning
Board that would include seven members representative of solid state
lighting activity generally. Four members would be appointed by the
Secretary of Energy and three members would be nominated by the
consortium. It is not intended that the Planning Board would function
as a federal advisory committee. Rather, it would have a specific task
of developing strategies for solid state lighting. These strategies
would be made available to the Department of Energy, the consortium,
Congress, and the public.
Annual Review. In addition, the initiative would be subject to an
independent annual review by a federal advisory committee or under the
auspices of the National Academy of Sciences. In particular, the Board
on Science, Technology and Economic Policy of the National Academy of
Sciences would be well qualified to conduct such annual reviews.
Funding. The Department of Energy Initiative would authorize up to
$480 million in grants for solid state lighting research and
development over a period of ten years. The objective of the initiative
is to develop by 2011 white LEDs that, compared to incandescent
lighting technologies, are longer lasting, more energy efficient, and
cost-competitive.
Studies indicate that technology development necessary for
commercializing solid state lighting could be achieved within ten
years. To realize this goal, however, it will be necessary to make
substantial investments in research and development. Based on the
critical tasks identified in the solid state lighting industry's
roadmaps, it appears that annual funding of approximately $50 million
will be necessary to complement current industry efforts. Funding would
not continue beyond the point at which this technology is readily
avail4ble for broad-based applications.
OIDA strongly endorses the Next Generation Lighting Initiative Act
and urges the Congress to enact this important technology development
initiative. This legislation offers the best approach for combining the
resources of industry, government, and academia in an effort to bring
to the commercial marketplace the next generation of lighting
technology and to maintain a leadership role for the United States in
this important field.