|Tuesday 2/27||10 AM: Senate Finance
America's Energy Future: Bold Ideas, Practical Solutions
Half the witnesses will emphasize synth-fuels; the other half energy efficiency efforts. This should be a genuinely informative hearing.
10:20 Brian Schweitzer I think now it's a question of resolve. In 1980, in response to the last oil shock, "bushel of wheat for a barrel of oil." I was a young agronomist, I went to Saudi Arabia. We have an opportunity. We consume 6.5 bb oil, we produce about 2.2 bb. Conservation. Computers, cars, the way we live, the we way we travel. The administration says we should decrease our consumption by 20%. We can do that. But do we have the resolve? The price of corn has increased by 25%. Do we have the resolve to convert those acres to biofuels. Food will increase in price. Some of the solutions will be our neighbors to the north in Alberta--tar sands aka oil sands. Coal gasification. I see coal states all around. Unless we develop carbon sequestration carbon will not be part of the future energy portfolio.
I've rented the suit for the entire week, so thanks for inviting me during the National Governors Week.
Develop a cap-and-trade system.
10:25 I would conclude by asking do we have the resolve to do this now or will there be another governor in thirty years saying the same thing.
10:26 Michael Aimone has a remarkable comb-over. He will talk about Air Force energy efficiency efforts and using synth-fuels for the B-52 bomber. Our goal in the vehicle world is to have 30% of our base vehicles be electric.
10:30 The big problem is jet fuel. Reducing weight can make a huge difference. Using more simulation. The Air Force in 06 purchased 990 megawatt hours of green power, number three in the United States. 7 megawatts of wind, solar, and landfill gas systems. 8% diesel is 80% diesel-20% biofuel. E85 is not widely available. 30% of our sedans are E85 ready.
B-52 bomber synthetic fuel testing: the first test used 50% synthetic fuel on 2 of the eight engines. Synthetic fuel operates effectively in the engine -- sulfur dioxide and particulates are significantly reduced, but not carbon dioxide. The synthetic fuel was generated from natural gas. There are considerable issues that remain in coal gasification.
10:36 Ken Salazar loves bipartisanship. He's introducing Dan Arvizu. Dan Arvizu has tremendous hair. He looks like a cross between Sen. Dodd and Bill Richardson.
"Never before have we witnessed such a rapid growth in energy efficiency and renewable energy technologies. We need: new technology, market acceptance, and government policy."
Denmark, Spain have passed us in wind turbines; Japan, Germany passed us in solar. It's very frustrating -- many of these technologies were developed here, some I worked on.
If we are to get where we need to be, we need to ask important questions. For biofuels, we need to ask where will this new supply of biomass come from. How will the vehicle fleet evolve? What will be the impacts on water, land, air?
We need a comprehensive plan for biofuels development.
10:45 Robert Socolow: Climate change is a major problem. We can't burn fuel without carbon sequestration. There is no reason to delay full deployment of carbon capture and storage (CCS). The entire Carson Project demonstrates to me that we have all the necessary components. CCS is likely to become a favorable strategy at a price of about $30 per ton of carbon dioxide. CO2 policy should reach far upstream because the low-hanging fruit are far upstream. CO2 is a miracle molecule below ground -- for oil recovery enhancement. And CO2 headed for the sky is domestic oil not being produced.
Unless synfuel production is not accompanied by carbon sequestration, it's a big step backward. No CTO Without CCS is not the world's most impressive bumper sticker but it is an important idea. Restrict credits only to coal plants that use carbon sequestration. Leave it to the market to choose the strategies for sequestration. I believe Sen. Bingaman and Sen. Boxer's oped was instrumental in taking the TXU plants off the table.
10:53 Schweitzer Extend the tax credit for at least 10 years. In 2 years we're at 10%; in 5 years we'll be at 20% renewable energy. I drive a biodiesel car, so wherever I go students come up to me with a gallon of homebrew biodiesel -- it's like hooch. Some get 43 mpg, some get 37 mpg. If I can ask you to do one thing, we've got to have a national cap-and-trade system. We can't balkanize this. Help us with carbon sequestration. We will start not by spending $30 a ton to pump it into limestone. We have enough old oil fields to start with those. How much carbon can we store? We have 40% of America's coal supply, and we're spending only $17 million to study the geology?
10:56 Socolow Commenting on the carbon sequestration op-ed. It's not clear what they were talking about. There are going to be many ways of capturing, they'll be competing with each other. Right now gasification is ahead. Storage is the world of wildcatting. Maybe 1 of 10 at first we store CO2 leak. A slow leak of an underground formation is something that engineers don't want to admit can happen.
Baucus: What do we need to do to understand storage better?
Socolow: Do it, do it! First find where there are promising areas. Then the coal plant is located, they do much more detailed scoping. Then it will generally work, it almost always works. Is there some risk? Sure.
Grassley: Tell me about camellina.
Schweitzer: What a beautiful name. She will yield from 75-100 gallons of diesel per acre. Camellina has a wonderful yellow flower. It produces omega-3. There are many promising biodiesel crops. In Montana our evenings are too cool for soybeans and corn, but we can grow many other crops. I don't know ethanol will produce 100 bb oil, but between ethanol and gasification, we will.
Grassley: Air Force numbers.
Aimone: Air Force consumed 2.6 billion gallons of fuel in 2006, 80% in aviation. 65-70% is domestic. We want to be able to certify the synfuel B-52 by the end of the summer.
11:06 Bingaman Dan Reicher isn't here, but his written testimony calls for an energy efficiency standard (eight states have adopted that).
Socolow: It's a new idea to me as a policy instrument. Utility companies are still rewarded by the kilowatt hours they produce rather than what is accomplished by the energy use. We can do so much more with energy efficiency.
Bingaman: One concern is the biofuel impact on natural gas usage. Do we need additional tax incentives to encourage these new plants so they can operate off of biomass instead of natural gas?
Arvizu: You need to think about the impacts that a very aggressive program in biofuels will have. The use of fossil fuels in the ethanol production process is quite significant for corn ethanol in particular. We are advocating a biorefinery that is entirely self-contained. Lignan is not amenable to being converted to ethanol, so it should be used to produce power for the plant.
Bingaman: Are there any existing self-contained biorefineries?
Avizu: No. We can incentivize that with loan guarantees.
11:12 Dan Reicher arrived. Couldn't land at Dulles, landed at BWI, then took off again and landed again in Dulles. I'm very pleased to be here. I'm with Google. My focus will be on investment and policy measures on energy initiatives.
Energy efficiency. Technology is always developing. The incandescent replaced by florescent, then LED. The internal combustion engine car replaced by hybrids, then plugin hybrids.
Federal policy can truly stimulate private sector investment. That investment needs to be in the trillions of dollars to deal with all the energy policy issues. Federal policy is critical. Energy efficiency has not enjoyed the same kind of federal policy support.
First is putting a price on carbon. We have to get to climate legislation. We've got to internalize the price of carbon emissions.
Second we need to strengthen CAFE standards. There's no doubt about it. That's a very significant energy using component in our economy.
Third, as you consider a federal renewable energy portfolio standard, consider the energy efficiency resource stand. It would set a target for increasing energy efficiency for utility. You would both decrease demand and bring cleaner sources in.
Tax credits are very very helpful. The building-related tax credits have been helpful but they need to be extended and strengthened. I urge you to take up Snowe's legislation.
I think we're headed in the wrong direction for energy efficiency for the poor. Weatherization assistance has been going down. The administration has proposed a $100 million cut. We propose a dramatic increase. Weatherize a million homes a year.
Lastly, the appliance efficiency standards. Refrigerators, air conditioners, freezers. Boring. In the last twenty years, we've taken the energy use of refrigerators by 2/3, same with air conditioners. In the last six years no standards have been adopted.
Thomas (R-WY) In terms of clean coal technology what do you think the state's role is?
Schweitzer: We can work with the government to site the plants. Help us with the financing or bonding the transmission lines. Las Vegas, California, Phoenix are looking to Montana and Wyoming for energy. We're kind of in between technologies. If the government puts in a cap-and-trade system we'll be on a level playing field.
We're waiting for Congress to make the decisions as to what the playing field will look like.
Thomas: What is your research good for in the next 5-10 years?
Arvizu: I've been doing this long enough that when I started it was pure research. Now it's mainstream technology in Europe and Asia.
We have technology today to make a significant dent in our energy use.
Thomas: Coal is our greatest source in our short-term time.
Socolow: If I'm critical, I'm trying to be a friend of coal. There's a collision course between coal and climate unless we brings new technologies to bear. The good news is that the technology exists.
I'm not talking about a world without coal.
11:27 Stabenow (D-MI) We make the wind turbines, and ethanol, and biodiesel. My question relates to the farm bill. Last time we put in an energy title. If you were to pick one or two things within the context of the farm bill what would be the most helpful?
Schweitzer: Our insurance program is built around existing crops, not new ones like safflower. You're driven back to corn, wheat, soybeans. Crop insurance set to new crops at sufficient levels.
Also, Montana not likely to produce a lot of ethanol. We truck it in a hundred miles. Biodiesel is being self-produced, $10,000 plant. If you encourage farmers to produce the crops for biodiesel and give loan guarantees to build their own plants. Manufacturers allow only 20% biodiesel in US, but 80% in Europe.
Reicher: We invested in biodiesel and ethanol plants. Alternative feedstocks will be a part of the future. Using the farm bill to encourage other feedstocks. Cellulosic ethanol makes a lot of sense. A tax credit that goes beyond corn ethanol makes sense. Increase the grant program for renewable/efficiency. It's been heavily oversubscribed. The loan guarantee for our Delaware biodiesel plant was very helpful.
11:34 Salazar Bipartisan bipartisan bipartisan. Incentives? Does it make sense to do a national RPS?
Schweitzer: Renewable tax credit is the most important thing. The loan guarantee. We need to have a national standard. I think 25 by 25 is doable.
Arvizu: Production tax credit is essential. I also think cellulosic biomass the loan guarantee is very good. On national RPS--the state RPS have been very useful. It's problematic to have a national RPS without recognizing regional differences.
Reicher: Long-term extension of the production tax credits. Two year horizon hurts investment. Aggressive energy efficiency tax credits. In terms of the RPS 20 by 15, 25 by 25 good. Complement the RPS with an energy efficiency resource standard.
11:40 Bunning (R-KY) Carbon sequestration is an absolute must.
Can we use coal efficiently?
Bunning: I thought you were anti-coal. Maybe I misunderstood you.
Socolow: I think it's because it's an unfamiliar message. Carbon sequestration gives you coal for centuries under the severe climate restraints of the future. There's going to have to be storage. The USGS is capable of doing a deeper survey.
Bunning: We don't have to reinvent the wheel?
A strong cap-and-trade system will incentivize it plus subsidies for the early movers.
Aimone: What is it we have learned in the last 30 years? We have coal gasification in operation. The university system has moved ahead. There are modern plants in Qatar and Malaysia.
11:48 Baucus is thanking the panel.
11:50 Grassley: How about fertilizer production? If we lose that industry, is that bad?
Socolow: In making urea you're doing practically all the steps of carbon capture. I can't talk to the question, though.
Grassley: What should Congress do to turn the production of alternative energy production?
Arvizu: We're still dominant in the R&D world in photovoltaics, wind energy, biofuels. We've lost the production. Wherever the innovation occurs that's where the opportunity occurs. The next big market in the world will be the US. It would be a shame to import the technology that our tax dollars developed.
The foreign companies are moving into the US because that's where the market will be.
Grassley: Your specialty is structuring public-private funding. What should we do?
Reicher: Most of the capital is coming from the private sector. What the federal government can do is provide support for R&D. Secondly the federal government can provide policy instruments: standards, credits, a whole host of instruments. It worked for ethanol. Make them long term. Companies look at the US and don't want to make the bet on locating production of wind turbines, etc. here.
We can also sequester CO2 from biomass. It's the same CO2, so we can use the same technology we're using coal. But since biomass is carbon neutral, sequestering biomass CO2 means an atmospheric reduction of CO2.
11:58 Bunning: What about China and India?
Socolow: We don't have the standing to encourage new technology if we don't start. We are the leaders in so many ways.
Bunning: I think a base price will be essential, because that gives stability to the marketplace.
Arvizu: For cellulosic ethanol, the price point is $50 per barrel. I've met with oil executives, their price point is $25-$30 per barrel. We could use that as a base for the Air Force, for example. There's such a consumption gap. We consume so much in the military. If we could do something to get off the Middle Eastern production.