On Friday, March 12, we held a briefing on jobs and opportunities in clean energy markets.
Today, the President signed an Executive Order creating an Export Promotion Cabinet of top officials and an Export Promotion Council, a private-sector advisory body. This Executive Order serves to highlight once again how important American exports and competitiveness are to economic recovery and continued US economic strength. While much hand-wringing has occurred over the potential for climate and energy policy to hurt the ability of U.S. firms to compete in international markets, the opportunity of such policy to enhance the competitiveness of U.S. businesses has received less notice. The irony is that even as the planet warms, the United States may be left standing out in the cold if it doesn’t choose to lead in the development of next-generation energy technologies.
First among the big news items related to nuclear power is the official naming by the Obama Administration of a much-anticipated Blue Ribbon Commission on America’s Nuclear Future to recommend a safe, long-term solution for used nuclear fuel and nuclear waste. The commission, announced on January 29, will issue its final report within 24 months. Energy Secretary Chu noted that the commission is not tasked with recommending a site for a long-term waste repository.
In a letter to Secretaries Clinton, Geithner, and Locke, Attorney General Holder, and US Trade Representative Kirk, 19 business groups, including the National Association of Manufacturers, argue that new “indigenous innovation” programs are designed by the Chinese government to find “national champions” of industry that can be advantaged in a variety of sectors, including green technology, and create "barriers to competition." The Hillicon Valley technology blog over at The Hill notes that this concern comes in the context of rising trade conflicts between the United States and China.
This attention comes on the heels of increasing concern over China’s leadership in clean energy technology. As noted in this weekend’s New York Times piece on the subject, the country has become the world’s largest manufacturer of wind and solar generation equipment. Through industrial policy, China is trying to take advantage of the growing export market for power sector equipment of all types, especially clean energy.
We should have expected that China would be a strong competitor in the clean energy sector. Regardless of the outcome of continuing international climate negotiations, countries from Europe to most U.S. states to China itself have already made unilateral policy choices to increase the use of clean energy technology in the coming decades for a multitude of reasons. The demand will be tremendous for the manufacture of clean energy technologies, and there is potential for fortunes to be made in their export.
What should the appropriate policy response be? As the authors of the letter suggest, the US should promote fair access for American goods and services in foreign markets. Protectionist responses and trade wars have never helped any country grow its economy and create jobs.
But reducing protectionism is not enough to regain the American lead in the clean energy sector. The US needs to have a policy of its own that encourages innovation and gives the right incentives for US companies to compete globally. America is a land of innovation, and we should be the ones taking advantage of these new and growing markets, not ceding them to competitors. Part of the answer is for the US to put a price on carbon. Doing so would encourage innovation in the private sector and provide regulatory certainty for companies to make investments here in clean energy technologies. American ingenuity is second to none, and Congress needs to work on a climate and energy bill that provides the right framework for our businesses to flourish.
Michael Tubman is a Congressional Affairs Fellow
We just added a brief on natural gas to its Climate TechBook that helps to explain why natural gas is unique among fossil fuels. Natural gas is both a contributor to climate change (natural gas combustion accounts for about 16 percent of total U.S. greenhouse gas emissions) and an option for reducing emissions since natural gas is less carbon-intensive than coal and petroleum. The United States could actually reduce total greenhouse gas emissions by burning more natural gas if it’s displacing other fossil fuel use (this is particularly the case for fuel switching from coal to gas in power generation).
Like coal, but unlike petroleum, natural gas is primarily a domestic energy resource, with net imports of natural gas constituting only about 13 percent of U.S. consumption and about 90 percent of imports coming from North America. Unlike coal (93 percent consumed for electricity generation) and petroleum (more than two thirds used for transportation), natural gas consumption is more evenly split across the electric power, industrial, residential, and commercial sectors.
The past few years have seen a “revolution” in the outlook for natural gas supply. Until recently, experts thought that the United States would become increasingly dependent on expensive imports of liquefied natural gas (LNG) from overseas, but the recent boom in domestic “unconventional” gas production (driven by shale gas) and the dramatically increased estimate of U.S. gas reserves have led to projections of increasing domestic natural gas production and declining imports.
Natural gas is receiving a lot of attention in the discussion about U.S. climate and energy policy. The gas industry is pressing for favorable treatment in possible climate and energy legislation, with a specific set of policy priorities recently put forth by a major industry lobby group.
While some tout natural gas as a “bridge fuel” to a low-carbon future others fear that a “dash for gas” (i.e., fuel switching by electric power generators) could increase demand for and the price of natural gas, thus negatively impacting manufacturers that rely on natural gas for energy and as a feedstock.
Recent analysis by the U.S. Energy Information Administration (EIA) of the climate and energy bill passed by the House in June 2009, illustrates how the projected role of natural gas in reducing U.S. greenhouse gas emissions depends in large part on the use of offsets under cap and trade and the relative cost and commercial availability of low-carbon technologies (e.g., wind, solar, carbon capture and storage, and nuclear power). When low-carbon technology deployment and offsets are constrained, EIA finds a much heavier reliance on natural gas for electricity generation under cap and trade, but the new outlook on U.S. natural gas supply means that even this pessimistic scenario does not lead to major increases in projected natural gas prices.
A new modeling analysis from Resources for the Future (RFF) sought to quantify the implications of the dramatically expanded U.S. natural gas supply. RFF researchers found that without new energy and climate policy, more abundant and less expensive natural gas could actually mean slightly higher U.S. greenhouse gas emissions in 2030 than would otherwise be the case (as cheaper natural gas competes with non-emitting energy sources and increases total energy consumption).
This last point brings us back to the overarching importance of implementing a policy that puts a price on carbon, as a greenhouse gas cap-and-trade program would do. Putting a price on carbon would harness market forces to drive the deployment of a portfolio of low- and lower-carbon technologies and fuels, including increased natural gas use to the extent it can cost-effectively reduce emissions.
Steve Caldwell is a Technology and Policy Fellow
Nearing the first anniversary of the United States’ first greenhouse gas (GHG) cap-and-trade program, members of the northeast Regional Greenhouse Gas Initiative (RGGI) joined with Pennsylvania to build on their effort to reduce GHG emissions. Governors from these eleven Northeast and Mid-Atlantic states signed a Memorandum of Understanding to establish the framework for a Low Carbon Fuel Standard (LCFS) by 2011.
The RGGI LCFS will operate in conjunction with national fuel economy standards that will increase the efficiency of passenger vehicles. A our new resource updates our comparison of fuel economy standards around the world and shows the fuel economy gains that will be made from these new standards. Click on the graph below for more detail.
In other climate and transportation news, we recently released a report on two modes of transportation that haven’t received a lot of attention from U.S. climate policymakers: the aviation and marine sectors. The report, Aviation and Marine Transportation: GHG Mitigation Potential and Challenges, finds that reductions in GHG emissions of more than 50 percent below business-as-usual (BAU) levels are possible by 2050. Though aviation and marine transportation currently represent only 3 percent of emissions, BAU CO2 emissions from the global aviation and marine transport sectors are projected to quadruple and nearly triple, respectively, by mid-century; controlling growth in these emissions will be an important part of reducing overall emissions from transportation.
Our President Eileen Claussen says, “Aviation and marine shipping are two of the fastest growing modes of transportation. Their greenhouse gas emissions are growing rapidly as well. To protect the climate, we need to reduce emissions across the entire economy. Aviation and marine shipping are part of the climate problem, and this report shows that they can be part of the solution.”
Tara Ursell is a Communications Associate
Shortly before the new year, Vice President Biden issued a memo summarizing the federal government’s progress in promoting “clean energy,” primarily via the 2009 stimulus bill (the American Recovery and Reinvestment Act, or ARRA). The Dec. 15 memo highlights significant incentives provided for efficiency, renewable electricity, biofuels, plug-in hybrid-electric vehicles, carbon capture and storage, and other low-carbon technologies. It summarizes where things stood one year ago (e.g., in terms of generating capacity, number of homes with smart meters) and where things are expected to be in the next few years.
The memo notes that ARRA provides $80 billion for clean energy investments. In terms of impacts, Vice President Biden claims, for example, that ARRA and other policies put the United States on track to double by 2012 non-hydro renewable electricity generation capacity compared to the level at the beginning of 2009. The memo says the rate of home energy efficiency retrofits will increase by an order of magnitude from 2009 to 2012 (to one million per year). While there are currently no commercial-scale carbon capture and storage projects in operation, the memo projects that there will be five by 2015. There are also evaluations of vehicle fuel economy, biofuels, nuclear power, electric vehicles, smart grid, and clean energy manufacturing.
While the clean energy advances touted by the Vice President are undoubtedly positive developments, the key policy for significantly reducing U.S. greenhouse gas emissions—i.e., putting a price on carbon—is still being debated in Congress. The House passed a climate and energy bill that included a greenhouse gas cap-and-trade program in June, and the Senate continues deliberations on a similar bill.
In considering efforts to transition to a low-carbon future, it’s helpful to remember that climate change is a “tale of two market failures.” First, and most importantly, businesses and households do not face any price associated with emitting greenhouse gases despite the social costs (e.g., costs of damage to coastal communities from sea level rise, increase in costs due to reduction in water resources) associated with their contribution to dangerous climate change. Thus businesses and households lack a key financial incentive to invest in efficiency or lower-carbon energy sources. Second, while intellectual property protections help firms profit from their investments in new technology, the nature of innovation is such that the gains to society (i.e., to other businesses and consumers) from a single company’s investments in innovation generally exceed the returns to that company. Thus businesses tend to under-invest in innovation.
With respect to fostering innovation, a summary from Harvard’s Belfer Center of U.S. Department of Energy research, development, and demonstration (RD&D) funding over time illustrates that the $7.5 billion in energy-related RD&D funding in ARRA is more than half as much as DOE received, cumulatively, in the five years from FY2005 through FY2009.
We know that a combination of a market-based climate policy that puts a price on carbon (e.g., via a greenhouse gas cap-and-trade program) to “pull” a portfolio of low-carbon technologies into the market coupled with incentives for low-carbon technology research, development, demonstration, and deployment (RDD&D)—i.e., policies to “push” low-carbon technologies into the market—make reducing greenhouse gas emissions less costly overall than a reliance on only “push” or “pull” policies alone.
The efforts outlined in the Vice President’s progress report are providing a much needed “push” for clean energy—such as government funding and loan guarantees to leverage private-sector investment in commercial-scale demonstrations of carbon capture and storage. But, ultimately, the United States will not make the required significant, absolute reductions in emissions without the market “pull” created by an economy-wide carbon price.
Steve Caldwell is a Technology and Policy Fellow
In February 2009 Congress passed the American Recovery and Reinvestment Act (ARRA or the stimulus package) providing the largest single investment in clean energy in American history. About $84 billion of the $787 billion in stimulus funds targets energy, transportation, and climate investment in the form of grants, tax cuts, and loan guarantees. Given the magnitude of this investment and its anticipated role of laying the groundwork for American leadership in a global clean energy economy, it is beneficial to follow how these funds are spent.
We recently published the first installment of a brief on the spending of ARRA funds by the U.S. Department of Energy (DOE), the agency with jurisdiction over the majority of energy expenditures. The brief specifically examines how the funds have been appropriated, awarded, and spent as a way to track how quickly the money is moving out the door along with the impact of this spending on job creation. We plan to keep tabs on the use of ARRA funds over time and update this brief accordingly.
On the whole, ARRA money is moving at a slower pace than expected – as of November 13, 2009 only 3.9 percent of the DOE’s total appropriated ARRA funds had been spent. But ARRA is leveraging private investment and, as Vice President Biden noted in a recent memo to President Obama, “jumpstarting a major transformation of our energy system.” For example, with these funds and additional leveraged private investment, renewable energy generation is expected to double from 27.8 GW in January 2009 to 55.6 GW by 2012.1
ARRA funds will also lead to significant growth in the manufacturing capacity for clean energy technology, advanced vehicle and fuel technologies, components of a smarter electric grid, home weatherization, and carbon capture and storage technologies. New industry and funding for programs already in existence will create and save jobs in the clean energy sector. At the end of October 2009, the Bureau of Labor Statistics reported nearly 10,000 jobs created from the DOE’s use of Recovery Act funds. This number is expected to grow considerably as more of the ARRA money is committed to and spent by recipients (Biden’s memo predicts 253,000 jobs will be supported from new renewable generation and advanced energy manufacturing alone).
Stay tuned for updates as we continue to follow the spending progress and impacts of DOE ARRA funds.
Olivia Nix is the Innovative Solutions intern
The smart grid is a hot topic these days. President Obama touted the smart grid during his campaign and continues to be a booster. The 2009 stimulus bill (the American Recovery and Reinvestment Act, ARRA) provided nearly $4.5 billion to the Department of Energy (DOE) for smart grid investments. In October, DOE made $3.4 billion in awards under the Smart Grid Investment Grant Program, and, in November, DOE announced awards totaling $620 million as part of the Smart Grid Regional and Energy Storage Demonstration Project.
Last month, we added a smart grid factsheet to its Climate Techbook. While it’s not easy to give a short definition of the smart grid, one can think of it as the application of digital technology to the electric power sector to improve reliability, reduce cost, and increase efficiency. Smart grid technologies—including communication networks, advanced sensors, and monitoring devices—provide new ways for utilities to generate and deliver power and for consumers to understand and control their electricity consumption.
The smart grid has several anticipated benefits unrelated to climate change, such as improving electricity reliability (e.g., fewer power outages) and reducing utilities’ operating costs (e.g., by eliminating meter reading). Much of the buzz around the smart grid, however, has to do with the ways that smart grid technology can facilitate greenhouse gas emission reductions.
Efficiency, renewables, and plug-in hybrid electric vehicles (PHEV) are three of the primary climate solutions the smart grid can enable. Initial evidence suggests that giving consumers direct feedback on their electricity use via smart meters and associated display devices can by itself lead to energy savings of 5-15 percent. One of the challenges that will become increasingly important as the United States relies more on renewable electricity from wind and solar power is that these resources are variable (i.e., they only generate electricity when the wind blows or the sun shines) rather than schedulable like traditional fossil fuel power plants. Smart grid technology makes it easier to add energy storage to the grid and to exploit demand response (e.g., cycling air conditioners on and off) to more easily balance electricity supply and demand as output from variable renewables fluctuates. Finally, smart grid technology would facilitate charging PHEVs during periods of low electricity demand (when generating costs are lowest and existing capacity is underutilized) so that PHEV charging can be done most cost-effectively.
Achieving greenhouse gas emission reductions at the lowest cost will require deploying a portfolio of energy efficiency measures and low-carbon energy technologies, several of which can build upon smart grid technology.
Steve Caldwell is a Technology and Policy Fellow
Not surprisingly, Senator Byron Dorgan (D-ND) is interested in carbon capture and storage (CCS) and its application to coal-fueled electricity generation. North Dakota gets almost 90 percent of its electricity from coal, and the state is the 10th largest producer of coal in the United States.
In mid-2008, Senator Dorgan convened a group of stakeholders with interest in CCS under the banner of a “Clean Coal and Carbon Capture and Sequestration Technology Development Pathways Initiative” (CCS Initiative) and asked them to provide input related to a number of key questions regarding CCS. Participants included representatives from the electric power industry, coal industry, manufacturing, labor, academics, and NGOs. The questions posed by the Senator focused on such issues as how much funding for CCS is required to ensure the technology is ready for broad deployment and how the United States can expand its cooperation with other key coal-producing and coal-consuming nations to accelerate international deployment of CCS.
On December 1, Senator Dorgan released a report prepared by the National Energy Technology Laboratory (NETL) that summarized input provided by the CCS Initiative participants.
This week, Senators Lamar Alexander (R-TN) and Jim Webb (D-VA) released a bill intended, among other things, to dramatically expand the U.S. nuclear reactor fleet and, reportedly, to double the production of nuclear power in the United States by 2020.
In previous blog posts, we have highlighted what proposed climate and energy legislation in the House and Senate does for nuclear power. Many analyses, such as studies by the U.S. Environmental Protection Agency (EPA) and the Energy Information Administration (EIA), agree that the bulk of the most cost-effective initial greenhouse gas (GHG) emission reductions are found in the electricity sector and that nuclear power can play a key role in reducing GHG emissions from electricity generation as part of a portfolio of low-carbon technologies.
Putting a price on carbon, as a GHG cap-and-trade program would do, is likely the best option for expanding nuclear power generation since it makes the cost of electricity from nuclear and other low-carbon technologies more economical compared to traditional fossil fuel technologies. For example, in its analysis of the American Clean Energy and Security Act of 2009 (ACESA) passed by the House of Representatives in June of 2009, EIA projected that nuclear power might provide nearly twice as much electricity in 2030 as it does today.
A key challenge is cost. The construction of much of the existing nuclear fleet saw significant cost overruns and delays, which makes financing the first new plants after a hiatus of several decades difficult. Government loan guarantees can help the first-mover new nuclear power plants overcome the financing challenge. The demonstration of on-budget and on-time construction and operation by these first movers would facilitate commercial financing of subsequent plants.
Could the U.S. undertake a very large expansion of nuclear power? Nuclear power plants are massive undertakings, and a typical plant might cost on the order of $6 billion dollars and take 9-10 years to build from licensing through construction. Nonetheless, 17 applications for construction and operating licenses (COLs) for 26 new reactors are under review by the Nuclear Regulatory Commission (NRC)—all submitted since 2007. One can also look at the historical pace of nuclear power deployment in the United States for a sense of what might be reasonable once the nuclear industry ramps up. More than a third of the 100 gigawatts (GW) of nuclear generating capacity that provides a fifth of U.S. electricity came online in 1971-75, and more than 90 GW of U.S. nuclear power came online in the 1970s and 1980s.
One can see that putting a price on carbon, via cap and trade, will likely spur a significant expansion in U.S. nuclear power over the coming decades (as part of a portfolio of low-carbon technologies) facilitated by loan guarantees to support a few first-mover projects.
Steve Caldwell is a Technology and Policy Fellow