I recently returned from the Clean Energy Ministerial in Abu Dhabi where energy ministers from nine countries, including the US, affirmed their commitment to a sustainable energy future…mitigating climate change…dramatically increasing energy efficiency…and developing alternative energy resources, including wind, solar, geothermal, and biomass.
This need for alternatives has been put into much sharper focus by the recent tragic events in Japan, the impacts of which are just starting to be understood. Further, the disaster at Fukushima threatens the future of nuclear power -- one our few large-scale, near-term options for dealing with climate change, the most pervasive and problematic of our all of our energy challenges.
Let me start by saying a few words about climate change. I know my views are not shared by many in today’s congressional leadership -- but I am not a climate denier. The reach of the climate change requires unprecedented cooperation on an international level and a wholesale domestic commitment to developing and deploying low and no-carbon options, including the range of renewable energy sources.
Also, we can’t forget -- not all CO2 emissions are created equal. The emissions we put into the atmosphere today will be with us for hundreds of years, their effects compounded over time.
The historical record suggests that it takes roughly 50 years to transition from one basic fuel to another -- coal to oil to gas, etc. This adds urgency to the timeframe for transitioning to a more sustainable energy future. Also, because energy infrastructures tend to have a life span of at least a half a century, the investment decisions we make today will be with us for decades to come.
The urgency of climate change says we simply don’t have another 50 years. In an extremely abbreviated time frame of the next couple of decades, we have to develop alternative energy sources -- along with production and distribution systems -- at a scale that serves six billion people, every day, in perpetuity.
On top of this, energy demand is expected to increase around 60% by 2035. Throw in a global population that is expected to increase from 6 to 9 billion people by 2050 …the likelihood of peak oil, if not already, sometime in the near future…. lengthening supply chains and the associated security issues … and top it off with “energy equity issues” – the direct correlation between quality of life and electricity consumption. Moving the least developed countries up on UN human development index will entail a major increase in energy consumption.
I know this list sounds like Bill Richardson’s version of Apocalypse Now.
There are however reasons for optimism. I would like to focus the rest of my discussion – the more positive, solution-oriented portion -- on some policy pathways that can help us address these challenges: the US nuclear power industry after Fukushima…the natural gas boom in the US and the role it can play in climate mitigation and transportation…the pairing of natural gas and renewable energy in power generation…federal policy response to these energy challenges…and the urgent need to transition to a renewable energy future.
First, a few observations on nuclear power. I think the response from the policy and political community to the Japan nuclear accident has been surprisingly sober and mature. I don’t underestimate the impact of this accident on US energy policy. But whether this is a black swan event is less clear.
From most fronts, there is a recognition, like it or not, that in the US, nuclear power supplies around 20% of our electricity. We could not replace these tens of thousands of megawatts over night, even if we wanted to.
Also, as I have noted, nuclear, for all its issues, generates carbon free electricity. It is the only truly large scale no carbon energy source we currently have for power generation.
Post-Fukushima, we have to separate the issues of the safety of nuclear power generation in the US into two distinct categories.
First, is the licensing of new plants. These newer designs, while safer and better than the older models, should be heavily scrutinized by the NRC while the Congress…federal agencies…industry…and NGOs analyze what went wrong in Japan and develop corrective actions for operations and design. The NRC can always grant conditional license approvals, which it could withdraw at any time.
More problematic is the re-licensing of existing plants. These plants are much older -- and about a third of them arethe same design and age of the Japanese units. I think we need an immediate review by the NRC of all reactors in the US with this design, focusing on their backup power redundancies, cooling systems, and the vulnerability of their spent fuel pools.
It’s also clear that spent fuel pools were one of the biggest problems at Fukushima. It’s a problem here as well.
The spent fuel pool at the Pilgrim plant in Massachusetts, for example, is four times larger than contemplated in its original license. When this reactor went on line, almost forty years ago, the operators thought they would be moving the spent fuel to a central repository by a date certain -- and, as everyone knows, Yucca Mountain was recently shuttered.
We should also look at all plants that are in seismically active areas or are vulnerable to tsunamis such as the Diablo and San Onofre plants in California. Finally, we should look at a much broader range of failure scenarios – and design mitigation, recovery and evacuation plans to deal with them.
Nuclear waste also remains a problem. To be certain, we need to resolve the nation’s nuclear waste issues. In my view, Yucca Mountain has been a problem from day one -- not so much because of its focus on centralized storage but because of its focus on permanent storage.
Above ground storage, if done correctly, seems to make sense while we refine the nuclear generation and waste technologies of the future. I would support also-- as was recommended in an MIT study on the future of the nuclear fuel cycle -- a consolidation of waste from the nation’s 104 nuclear reactors, into three or four federal sites, most likely at DOE facilities with a history of handling such waste. I look forward to the recommendations from the Obama Administration’s Blue Ribbon Commission on nuclear waste.
Having said all this, I am not going to sugar-coat the future of nuclear power. The fallout from Fukushima will only add to its already high risk premium.
Ultimately the marketplace and investment community will determine the fate of the industry. Because of the critical role nuclear energy plays in both our power sector and in mitigating climate change however, we need to be measured, clear, purposeful and smart about how we regulate the industry in the post-Fukushima world.
I also think that regardless of the market’s ultimate verdict on nuclear power, there will likely be a more immediate impact on demand for other clean energy options, including natural gas and renewables.
Let me now turn to natural gas.
This is a very good news story for the US which, thanks to the revolution in shale gas production, is now the number one producer of natural gas in the world. Abundant domestic supplies of natural gas are creating new opportunities for reducing carbon emissions in both the electricity and transportation sectors. They can also enable the transition to electricity fueled with renewable fuels.
It’s worth remembering that in 2003 Alan Greenspan told Congress that North America was running out of natural gas and imports were the solution. Mr. Greenspan was not the only one beating the LNG drum – it was a view widely shared by policy-makers in Washington at the time.
There were however technology changes taking place just below the policy radar screen – but these changes were not serendipitous and they were long in coming.
It took over 20 years to develop the technologies to affordably produce shale gas – and research alone was not enough. A public-private partnership was a critical element in the process. Also, a well-timed and time-limited tax credit…and sustained research funding over time… were essential to the shale gas success story.
The implications of this convergence of technology and resource base are enormous. First and foremost, it means 100-plus years of affordable supplies of domestic natural gas, with all the energy security and environmental benefits this entails.
And the energy security benefits are substantial. As recently as 2008, EIA forecast that within 15 years, we would be importing a significant percentage of our natural gas. Given that the two largest reserves of conventional natural gas are in Russia and Iran, this posed unpleasant geopolitical options for the US.
The implicit loss of flexibility in US foreign affairs associated with LNG imports – not to mention the security issues associated with long supply lines for this option – can now be largely avoided by producing our large and growing domestic gas resource base.
Further, the extent of global shale and other unconventional natural gas resources is not yet fully understood. The implications of developing these resources – for example, shale production in Poland that could diminish the stranglehold of Russian pipeline gas on European consumers -- are significant and could help re-shape the natural gas geopolitical landscape.
Notwithstanding the prognostications of the former fed chairman, abundant domestic supplies of natural gas are creating new opportunities for reducing carbon emissions in both the electricity and transportation sectors. They can also enable the transition to electricity fueled with renewable energy.
The de-regulation of US wholesale electricity markets in the 1990s paved the way for a new class of merchant power generators, who rushed to build new, highly efficient and flexible natural gas combined cycle gas units. As a consequence of high gas prices in the early years of the 21st century, however, these plants are now operating at only an average of 42% capacity, when they are designed to operate at 85%.
This difference in operating and design capacity creates a new, relatively inexpensive, immediate opportunity for reducing CO2 emissions -- made both possible and attractive by the availability of new, affordable domestic gas supplies. Analysis shows that by utilizing this unused capacity in lieu of old, inefficient coal generation we could reduce CO2 emissions from power generation nationwide by as much as 20%.
It’s worth noting that the nationwide US CO2 reduction target in the Waxman-Markey legislation was 17% by 2020 – over half of this could be met simply by using this surplus NGCC capacity. An added benefit of a policy to achieve this goal: a very inexpensive way of reducing air pollutants regulated under the Clean Air Act.
Natural gas power generation provides another clear benefit for reducing carbon and other emissions: it supplies the firming power needed for intermittent renewables such as wind and solar.
Thirty two states, including Texas, have some kind of renewable electricity or portfolio standards. These standards are critical for establishing firm market share for renewables and they help incentivize innovation in the renewable space. These innovations have dramatically reduced the cost of renewables, particularly for wind and solar. Onshore wind is cost-competitive with natural gas. While solar remains more expensive, its costs have been dramatically reduced in recent years.
If and until, however, we develop the technologies for the affordable utility-scale storage that we need to provide reliable, large-scale power from intermittent these renewables -- when the sun isn’t shining or the wind isn’t blowing -- we will need natural gas generation to help manage the intermittency of wind and solar.
Let me also briefly mention the use of natural gas for transportation. There are environmental benefits for using natural gas in transportation, particularly compressed natural gas, which emits fewer CO2 emissions, as well as other air pollutants. In addition, natural gas as a transportation fuel is currently less expensive than petroleum based fuel.
We should also not forget “natural gas transportation via wire” if we ultimately electrify our transportation system. With our current, coal-centric generation mix, conventional hybrid vehicles provide more CO2 emissions reduction benefits than plug-in hybrids.
As we increase gas fired and renewable power generation, we will simultaneously increase the climate benefits from electric vehicles. And, because of our large and growing natural gas resource base, gas-fired vehicles can also offer energy security benefits.
I note that President Obama recently announced the National Clean Fleets Partnership, which seeks to reduce oil consumption by switching large truck fleets from petroleum to alternative fuels, including compressed natural gas. Industry is already taking steps in this direction. AT&T for example has announced that it will replace 15,000 vehicles over 10 years, including 7000 hybrid vehicles and 8000 CNG vehicles.
In sum, natural gas represents a low-carbon bridge fuel, can increase our energy security and, most importantly is a key enabler for increased power generation from intermittent renewables such as wind and solar – two fuels that are essential to a sustainable energy future.
These new gas resources in the US come at a price however. Shale gas production has major environmental impacts, particularly related to surface water contamination in the Marcellus shale regions of Pennsylvania, West Virginia, Ohio and New York.
These environmental issues can be managed but they are not without challenges. And because of some early problems, largely with bad industry actors, the industry has a significant public trust issue in the new producing regions of the Northeast.
If we are to realize the substantial benefits of our abundant natural gas resources and are going to increase gas consumption, these issues have to be dealt with in a transparent, responsible way sufficient to both protect the environment and engender public confidence that water is being protected, bad actors are being punished and best practices are being used.
Traditional producing regions of the country have a range of experience with shale production with minimal environmental impacts – replication of these best practices in areas of newer shale development would likely help accelerate the resolution of some of the issues.
Also, while natural gas has relatively low carbon emissions – 50% fewer than coal when combusted – it is still a fossil fuel. In the longer-term, it is too carbon-intensive to meet 2050 CO2 emissions reduction targets sufficient to forestall significant global temperature increases.
This is where renewables comes in. We need to continue and increase our investments in research, for renewable energy technologies, with a focus on lowering their costs, which remain high relative to current costs of natural gas and coal.
We also need to aid in the deployment of these technologies, ensuring that we provide incentives and an appropriate market structure for a critical partnership between renewables and natural gas.
In addition, we should support carbon capture and sequestration research and demonstration for both coal and natural gas power generation. Carbon capture and sequestration is an essential technology for ensuring the future of coal use without emitting CO2 into the atmosphere. The current CCS program at DOE is focused exclusively on coal. It should be expanded to include and enhance the longer-term options not just for coal use in a carbon constrained world, but for natural gas as well.
I also think that there is a significant opportunity for demonstrating large scale carbon sequestration in where injection of CO2 could help with enhanced oil recovery. This would be a win-win-win for the US. It would advance our understanding and lower the cost of CCS, enhance energy security by producing more domestic oil, and increase output for producers.
Let me close with a few comments on US energy policy. I am a realist. I know that climate legislation has no chance of passing in the near future.
But I also know that many of the policies we pursue --efficiency…upgrading of the grid…clean energy standards (essential for taking advantage of surplus NGCC capacity)…renewable energy standards…carbon capture and sequestration– will have corresponding and positive impacts for climate mitigation. I urge that we, as responsible stewards of the environment, continue to pursue and support these policies.
Further, I understand that we are going to be consuming oil in our transportation sector for many years to come and that much of this oil will be imported. While we cannot eliminate oil imports or divorce ourselves from global oil markets, we can work to reduce the strategic value of oil by creating options in the transportation sector.
One way to do this is with alternative fuel vehicles. An option for accomplishing this objective which holds great promise is a flex fuel vehicle requirement, in which an individual vehicle could run on a range of liquid fuels including oil, ethanol, and methanol from natural gas. Such a requirement could create more competition for oil and decrease the leverage oil producing nations have over consuming nations.
We are also woefully under-spending on federal research to support renewable energy and a sustainable energy future. I understand that industry is, by far, the largest investor in energy research. This research, however, tends to have a short-term focus. We also need long term solutions to enhance our competitiveness, lower consumer prices and help ease the transition to an economy fueled by renewable energy sources.
The President’s Council of Advisors on Science and Technology – “PCAST” – recently recommended a three-fold increase in spending on federal energy research, with a strong focus on demonstration of alternative energy technologies and carbon capture and sequestration.
It also recommended changing business as usual in the federal research arena, suggesting that this additional funding could be managed in part outside the federal structure through a
quasi-public corporation which would include a high-degree of industry input.
Let me close by saying that we need a wakeup call to a new reality. We urgently need a new roadmap to address the daunting energy challenges of the 21stcentury – there are several new programs at DOE that are “outside the typical bureaucratic box”.
These new programs are designed to solve basic energy research problems…support transformational energy technologies and businesses… and develop cross-cutting centers of energy excellence focused on moving technologies from the concept to commercialization phase.
Much of this agenda is threatened by the current budget cutting atmosphere in Washington. I believe, however, that reducing investments in our energy future is penny wise and profoundly pound foolish.
And, in the final analysis, the worlds’ current fossil-fuel resource base is finite. These resources will deplete -- and will do so more rapidly as the world’s population grows to nine billion people by mid-century when developing nations electrify and start putting more and more vehicles on their roads. Increased demand for energy resources and decreased water availability associated with climate change create new global security concerns and shifting geopolitical alliances.
We need to be prepared for these challenges. In the end, the only way we can effectively address these daunting and critical needs is to develop affordable, scalable renewable energy supplies.
We should re-double our efforts to accelerate the transformation to a renewable energy future. We need committed leadership…additional research and development…investment incentives… an innovative workforce…and policies that effectively and efficiently condition the marketplace for widespread diffusion of renewable energy sufficient to sustain our economy, employ our citizens, and power our energy future. Thank you.
