[House Hearing, 114 Congress]
[From the U.S. Government Publishing Office]
DEPARTMENT OF ENERGY OVERSIGHT:
OFFICE OF ENERGY EFFICIENCY
AND RENEWABLE ENERGY
=======================================================================
HEARING
BEFORE THE
SUBCOMMITTEE ON ENERGY
COMMITTEE ON SCIENCE, SPACE, AND TECHNOLOGY
HOUSE OF REPRESENTATIVES
ONE HUNDRED FOURTEENTH CONGRESS
FIRST SESSION
__________
MARCH 24, 2015
__________
Serial No. 114-12
__________
Printed for the use of the Committee on Science, Space, and Technology
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Available via the World Wide Web: http://science.house.gov
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COMMITTEE ON SCIENCE, SPACE, AND TECHNOLOGY
HON. LAMAR S. SMITH, Texas, Chair
FRANK D. LUCAS, Oklahoma EDDIE BERNICE JOHNSON, Texas
F. JAMES SENSENBRENNER, JR., ZOE LOFGREN, California
Wisconsin DANIEL LIPINSKI, Illinois
DANA ROHRABACHER, California DONNA F. EDWARDS, Maryland
RANDY NEUGEBAUER, Texas SUZANNE BONAMICI, Oregon
MICHAEL T. McCAUL ERIC SWALWELL, California
STEVEN M. PALAZZO, Mississippi ALAN GRAYSON, Florida
MO BROOKS, Alabama AMI BERA, California
RANDY HULTGREN, Illinois ELIZABETH H. ESTY, Connecticut
BILL POSEY, Florida MARC A. VEASEY, Texas
THOMAS MASSIE, Kentucky KATHERINE M. CLARK, Massachusetts
JIM BRIDENSTINE, Oklahoma DON S. BEYER, JR., Virginia
RANDY K. WEBER, Texas ED PERLMUTTER, Colorado
BILL JOHNSON, Ohio PAUL TONKO, New York
JOHN R. MOOLENAAR, Michigan MARK TAKANO, California
STEVE KNIGHT, California BILL FOSTER, Illinois
BRIAN BABIN, Texas
BRUCE WESTERMAN, Arkansas
BARBARA COMSTOCK, Virginia
DAN NEWHOUSE, Washington
GARY PALMER, Alabama
BARRY LOUDERMILK, Georgia
------
Subcommittee on Energy
HON. RANDY K. WEBER, Texas, Chair
DANA ROHRABACHER, California ALAN GRAYSON, Florida
RANDY NEUGEBAUER, Texas ERIC SWALWELL, California
MO BROOKS, Alabama MARC A. VEASEY, Texas
RANDY HULTGREN, Illinois DANIEL LIPINSKI, Illinois
THOMAS MASSIE, Kentucky KATHERINE M. CLARK, Massachusetts
BARBARA COMSTOCK, Virginia ED PERLMUTTER, Colorado
DAN NEWHOUSE, Washington EDDIE BERNICE JOHNSON, Texas
LAMAR S. SMITH, Texas
C O N T E N T S
March 24, 2015
Page
Witness List..................................................... 2
Hearing Charter.................................................. 3
Opening Statements
Statement by Representative Randy K. Weber, Chairman,
Subcommittee on Energy, Committee on Science, Space, and
Technology, U.S. House of Representatives...................... 7
Written Statement............................................ 8
Statement by Representative Alan Grayson, Ranking Minority
Member, Subcommittee on Energy, Committee on Science, Space,
and Technology, U.S. House of Representatives.................. 9
Written Statement............................................ 10
Statement by Representative Lamar S. Smith, Chairman, Committee
on Science, Space, and Technology, U.S. House of
Representatives................................................ 11
Written Statement............................................ 12
Witnesses:
The Honorable David Danielson, Assistant Secretary, Office of
Energy Efficiency and Renewable Energy, U.S. Department of
Energy (DOE)
Oral Statement............................................... 14
Written Statement............................................ 17
Mr. Nick Loris, Herbert and Joyce Morgan Fellow, Heritage
Foundation
Oral Statement............................................... 34
Written Statement............................................ 36
Ms. Ruth McCormick, Director of Federal and State Affairs,
Business Council for Sustainable Energy (BCSE)
Oral Statement............................................... 49
Written Statement............................................ 51
Dr. Veronique de Rugy, Senior Research Fellow, Mercatus Center,
George Mason University
Oral Statement............................................... 63
Written Statement............................................ 65
Discussion....................................................... 82
Appendix I: Answers to Post-Hearing Questions
The Honorable David Danielson, Assistant Secretary, Office of
Energy Efficiency and Renewable Energy, U.S. Department of
Energy (DOE)................................................... 98
Appendix II: Additional Material for the Record
Statement by Representative Eddie Bernice Johnson, Ranking
Member, Committee on Science, Space, and Technology, U.S. House
of Representatives............................................. 118
Document submitted by The Honorable David Danielson, Assistant
Secretary, Office of Energy Efficiency and Renewable Energy,
U.S. Department of Energy (DOE)................................ 119
DEPARTMENT OF ENERGY OVERSIGHT:
OFFICE OF ENERGY EFFICIENCY
AND RENEWABLE ENERGY
----------
FRIDAY, MARCH 24, 2015
House of Representatives,
Subcommittee on Energy
Committee on Science, Space, and Technology,
Washington, D.C.
The Subcommittee met, pursuant to call, at 2:41 p.m., in
Room 2318 of the Rayburn House Office Building, Hon. Randy
Weber [Chairman of the Subcommittee] presiding.
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Chairman Weber. Subcommittee on Energy will come to order.
Without objection, the Chair is authorized to declare recesses
of this Subcommittee at any time.
Welcome to today's hearing titled ``Department of Energy
Oversight: Office of Energy Efficiency and Renewable Energy.''
I recognize myself for five minutes for an opening
statement.
Good afternoon, and as I have already said, welcome to
today's Energy Subcommittee hearing. We are going to examine
the Department of Energy's Office of Energy Efficiency and
Renewable Energy, or EERE. Today, we will hear from the
Department and a broad panel of expert witnesses on the value
of the research, development, demonstration, and
commercialization activities in EERE, and the impact DOE's
clean energy programs have on the energy market and the United
States economy.
EERE is the lead federal agency for clean energy research
and development, with programs in transportation, renewable
energy, and energy efficiency. This office is clearly a top
priority for the Obama Administration, with this year's budget
request coming in at $2.7 billion, which is an increase of over
$800 million from enacted levels. That is a whopping 42 percent
increase in one year. With our national debt at $18 trillion
and rising, and mandatory spending caps guiding budgets on
everything from energy to national defense, this kind of
spending obviously deserves rigorous oversight from Congress.
It is clear that EERE's budget is simply unaffordable. While
every other federal program has had to adjust to spending caps
and work within modest spending goals, EERE's budget has
continued to increase. Despite a budget that has already grown
by 58 percent in the last decade, and received over $16
billion, with a B, in stimulus funds, the Obama Administration
continues to request more year after year. It is time to adjust
EERE's budget to reality. By continuing to grow EERE spending,
the Department of Energy's approach to energy research and
development has also become more and more unbalanced. EERE's
budget dwarfs that of the other applied offices at DOE. The
$2.7 billion budget request for fiscal year 2016 is more than
four times the budget request for fossil energy R&D, five times
the request for nuclear energy R&D, and 16 times the request
for electricity and energy reliability R&D. In fact, the
proposed budget for EERE is more than double the budgets for
nuclear, fossil, and electricity R&D combined.
Finally, the work prioritized by EERE is far too focused on
increasing the use of today's technology, not conducting the
fundamental research to lay the foundation for the next
technology breakthrough. Many EERE programs are focused on
reducing market barriers for existing technology or funding R&D
activities already prioritized by the private sector. For
example, in EERE's Vehicle Technologies program, $40 million is
requested for ``cost-share projects within--with industry''
within the ``SuperTruck 2'' initiative. Funding for SuperTruck
2 is intended to improve the hauling efficiency of heavy-duty,
Class 8 long-haul vehicles by 100 percent by the year 2020. But
the freight industry and auto manufacturers, both billion
dollar industries, already have the means and motivation to
develop innovative technology to increase energy efficiency.
Investing in technology to decrease costs is just good business
sense, and American industry does this every day, with or
without federal funds. And I might add, on the trucking freight
business, I used to do some freight hauling as one of my
businesses. Unless you can decrease the weight of a pound, we
are in for a long wait.
Instead of duplicating work that could be done in the
private sector, the Department should prioritize basic research
and development with broad application to all forms of energy,
and energy efficiency. Models developed in the Office of
Science's ASCR program, the subject of an Energy Subcommittee
hearing earlier this year, can be used to study and improve
techniques in manufacturing, renewable power, and energy
efficiency, enabling the private sector to develop and bring
new technology into the market without American tax dollars.
I want to thank Assistant Secretary Danielson and all our
witnesses for testifying to the Committee today, and I look
forward to a review of EERE's programs and a discussion about
the impact DOE's clean energy programs have on the economy. As
some of our witnesses will point out today, subsidizing one
form of energy over another through federal programs is
damaging to the energy market, it increases costs for the
American people, and actually is often counterproductive to new
the technology development. Investment in the next generation
of energy technology must be balanced, technology-neutral, and
responsible. By funding basic research and development, the
Department of Energy could build a foundation for the private
sector to bring new innovative technologies to market, and to
grow the American economy.
With that, I yield back. And, Mr. Grayson, you are
recognized.
[The prepared statement of Mr. Weber follows:]
Prepared Statement of Subommittee Chairman Randy Weber
Good morning and welcome to today's Energy Subcommittee hearing
examining the Department of Energy's Office of Energy Efficiency and
Renewable Energy, or EERE. Today, we will hear from the Department and
a broad panel of expert witnesses on the value of the research,
development, demonstration and commercialization activities in EERE,
and the impact DOE's clean energy programs have on the energy market
and the U.S. economy.
EERE is the lead federal agency for clean energy research and
development, with programs in transportation, renewable energy, and
energy efficiency. This office is clearly a top priority for the Obama
Administration, with this year's budget request coming in at $2.7
billion, an increase of over $800 million from enacted levels. That's a
whopping 42 percent increase in one year.
With our national debt at $18 trillion and rising, and mandatory
spending caps guiding budgets on everything from energy to national
defense, this kind of spending deserves rigorous oversight from
Congress.
It is clear that EERE's budget is simply unaffordable. While every
other federal program has had to adjust to spending caps and work
within modest spending goals, EERE's budget has continued to increase.
Despite a budget that has already grown by 58% in the last decade, and
received over $16 billion in stimulus funds, the Obama Administration
continues to request more year after year. It's time to adjust EERE's
budget to reality.
By continuing to grow EERE spending, the Department of Energy's
approach to energy research and development has also become more and
more unbalanced. EERE's budget dwarfs that of the other applied offices
at DOE. The $2.7 billion budget request for Fiscal Year 2016 is more
than four times thebudget request for fossil energy R&D, five times the
request for nuclear energy R&D, and 16 times the request for
electricity and energy reliability R&D. In fact, the proposed budget
for EERE is more than double the budgets for Nuclear, Fossil, and
Electricity R&D combined.
Finally, the work prioritized by EERE is far too focused on
increasing the use of today's technology, not conducting the
fundamental research to lay the foundation for the next technology
breakthrough. Many EERE programs are focused on reducing market
barriers for existing technology or funding R&D activities already
prioritized by the private sector.
For example, in EERE's Vehicle Technologies program, $40 million is
requested for ``cost-share projects with industry'' within the
``SuperTruck 2'' initiative. Funding for SuperTruck 2 is intended to
improve the hauling efficiency of heavy-duty, Class 8 long-haul
vehicles by 100% by 2020. But thefreight industry and auto
manufacturers--both billion dollar industries--already have the means
and motivation to develop innovative technology to increase energy
efficiency. Investing in technology todecrease costs is just good
business sense--and American industry does this every day, with or
without federal funds.
Instead of duplicating work that could be done in the private
sector, the Department should prioritize basic research and development
with broad application to all forms of energy, and energy efficiency.
Models developed in the Office of Science's ASCR program--the
subject of an Energy Subcommittee hearing earlier this year--can be
used to study and improve techniques in manufacturing, renewable power,
and energy efficiency, enabling the private sector to develop and bring
new technology into the market without American tax dollars.
I want to thank Assistant Secretary Danielson and all our witnesses
for testifying to the Committee today, and I look forward to a review
of EERE's programs and a discussion about the impact DOE's clean energy
programs have on the economy.
As some of our witnesses will point out today, subsidizing one form
of energy over another through federal programs is damaging to the
energy market, increases costs for the American people, and is often
counterproductive to new technology development.
Investment in the next generation of energy technology must be
balanced, technology-neutral, and responsible. By funding basic
research and development, the Department of Energy could build a
foundation for the private sector to bring innovative new technologies
to market, and grow the American economy.
Mr. Grayson. Thank you, Chairman Weber, for holding this
hearing. And thank you to our witnesses for appearing here
today.
America is mired in a long-term negative energy trade
balance. According to the most recent figures from the Energy
Information Administration, our energy trade deficit as of the
fourth quarter of 2013 was $203 billion, and it has been that
way literally for decades. We must import to make up the
difference, and the question is how much longer are we going to
be able to spend our fortune that way.
Every year for the past two generations, energy imports
have cost us hundreds of billions of dollars. Unfortunately,
there are also massive hidden costs that aren't reflected in
the prices that Americans actually pay for energy. One recent
study estimates that the United States has spent about $8
trillion from 1976 through 2010, merely defending access to oil
supplies in the Persian Gulf, not producing, not acquiring, not
even transporting, but simply defending our access to oil. That
is $25,000 for every man, woman and child in America.
Continuing to pursue a business-as-usual energy policy clearly
costs not only American dollars, but also American lives. We
can't just drill our way out of that problem.
Because the price of oil is set globally, a disruption of
oil from the Middle East could severely spike U.S. oil prices
no matter how much of it we are able to pull from our own
ground. That is why reducing dependence on oil, and not just
foreign oil, is a key strategic objective for both the United
States economy and the U.S. Military. We can and we must end
this strategic energy deficit. We can create a domestic energy
infrastructure that is reliable, resilient and far less
dependent on volatile regions around the world.
Towards these ends, the Department of Energy's Office of
Energy Efficiency and Renewable Energy, which we are here to
talk about today, helps to make that future come faster. Their
sustainable transportation technology program focuses on
improving energy efficiency in vehicles, and developing new
alternative fuels from domestic resources. Research investments
made by this program have reduced electric vehicle battery
costs by 70 percent since 2008. They have also reduced the
manufacturing costs for automotive fuel cells by more than 50
percent just since 2006. Research and development in biofuels
has helped to reduce the production cost of cellulosic ethanol
by more than $6 a gallon, to around $3.20 per gallon today,
making it cost-competitive with gasoline.
Beyond reducing our dependence on oil, these programs
improve energy efficiency in buildings and appliances, and they
are providing major economic and environmental benefits to U.S.
taxpayers as well. Efficiency standards enacted by the
Department of Energy since 2009 are projected to save consumers
hundreds of billions of dollars in their utility bills through
2030, and this agency-supported research in advanced lighting
technology has helped to reduce LED costs by 90 percent since
2008. The renewable energy sector has also benefitted immensely
from the agency-supported research and development. Since 2010,
photovoltaic systems costs have been cut in half. DOE's SunShot
Program, which has the goal of making solar energy costs
competitive with conventional sources by 2020, is already more
than 60 percent of the way to achieving that cost target.
Overall, third party evaluators outside of the government
estimate that from 1976 to 2008, these investments of $15
billion have resulted in an estimated economic benefit to the
United States of $388 billion, a net return of more than 24 to
1. That is a very impressive track record, whether it is in
government or in business, and it is one that we should
continue to support.
Private investors in the energy sector are beginning to
move from project-level loans to holding company loans, which
means renewable energy industries may be starting at long last
to take off. This development is encouraging, but we must
realize that there is no Exxon Mobil, or for that matter, an
Intel or a Pfizer in the renewable energy sector. There is no
one with the capability to spend billions on research that the
government is spending now. There remains a unique government
role in supporting the advancement of new technologies at a
sufficient pace to meet our national economic, environmental
and energy security needs. And that is why I look forward to
this hearing to hear more about that today.
The results from this agency's programs are tangible. They
are having a direct positive impact on peoples' lives and,
therefore, I want to thank Dr. Danielson and his office for
their productive work, and for the information that they
provide for us here today. And thank you again, Mr. Chairman.
And with that, I yield the balance of my time.
[The prepared statement of Mr. Grayson follows:]
Prepared Statement of Subcommittee on Energy
Minority Ranking Member Alan Grayson
Thank you, Chairman Weber, for holding this hearing, and thank you
to our witnesses for appearing here today.
America is mired in a long-term negative energy trade balance.
According to the most recent figures from the Energy Information
Administration, our energy trade deficit--as of the fourth quarter of
2013--was $203 billion.
Every year, for the past two generations, energy imports have cost
us hundreds of billions of dollars. Unfortunately, there are also
massive hidden costs that aren't reflected in the prices Americans
actually pay for energy.
One recent study estimates that the U.S. has spent about $8
trillion from 1976 through 2010, merely defending access to oil
supplies in the Persian Gulf. Not producing, not acquiring, not
transporting--but defending access to oil. That's $25,000 for every
man, woman, and child in America. Continuing to pursue a business-as-
usual energy portfolio clearly costs not only American dollars, but
American lives.
We can't just drill our way out of this problem.
Because the price for oil is set globally, a disruption of oil from
the Middle East could severely spike U.S. oil prices no matter how much
of it we are able to pull from the ground. That's why reducing
dependence on oil, not just ``foreign oil,'' is a key strategic
objective for both the U.S. economy and the U.S. military.
We can, and we must, end this strategic energy deficit. We can
create a domestic energy infrastructure that is reliable, resilient,
and far less dependent on volatile regions of the world.
Toward these ends, the Department of Energy's Office of Energy
Efficiency and Renewable Energy, or ``EERE,'' which we are here to talk
about today, helps make that future come faster. EERE's Sustainable
Transportation technology program focuses on improving efficiency in
vehicles, and developing new alternative fuels from domestic resources.
Research investments made by this program have reduced electric
vehicle battery costs by 70% since 2008. They have also reduced the
manufacturing costs for automotive fuel cells by more than 50% since
2006.
Research and development in biofuels has helped reduce production
costs of cellulosic ethanol by more than $6 per gallon, to around $3.20
per gallon today, making it cost-competitive with gasoline.
Beyond reducing our crippling dependence on oil, EERE's programs to
improve energy efficiency in buildings and appliances are providing
major economic and environmental benefits to U.S. taxpayers as well.
Efficiency standards enacted by the Department of Energy since 2009
are projected to save consumers hundreds of billions of dollars in
their utility bills through 2030, and EERE-supported research in
advanced lighting technology has helped reduce LED costs by 90% since
2008.
The renewable energy sector has also benefited immensely from EERE-
supported research and development. Since 2010, photovoltaic system
costs have been cut in half. DOE's SunShot program, which has the goal
of making solar energy cost-competitive with conventional sources by
2020, is already more than 60% of the way to achieving its cost target.
Overall, third-party evaluators estimate that from 1976 to 2008,
EERE investments of $15 billion have resulted in an estimated economic
benefit to the United States of $388 billion--a net return of more than
24 to 1. That is an impressive track record, and it is one we should
continue to support.
Private investors in the energy sector are beginning to move from
project-level loans to holding company loans, which means renewable
energy industries are starting to take off. While this development is
encouraging, we must realize that there is still no ExxonMobil, nor,
for that matter, an Intel or Pfizer, in the renewable energy sector.
There remains a unique government role in supporting the advancement of
new technologies at a sufficient pace to meet our national economic,
environmental, and energy security needs. And that is what I look
forward to hearing more about today.
The results from EERE's programs are tangible, and they are having
direct, positive impacts on people's lives.
I want to thank Dr. Danielson and his Office for their productive
work, and for the information that they provide here today.Thank you
again, Mr. Chairman, and with that I yield the balance of my time.
Chairman Weber. Thank you, Mr. Grayson.
I now recognize the Chairman of the Full Committee, Mr.
Smith.
Chairman Smith. Thank you, Mr. Chairman.
Today, the Subcommittee on Energy will examine the
Department of Energy's Office of Energy Efficiency and
Renewable Energy, commonly referred to as EERE. The Department
describes EERE as, ``The U.S. Government's primary clean energy
technology organization.'' EERE's goals sound worthy enough. It
seeks to reduce the use of fossil fuels, lower emissions, and
speed up the adoption and decrease the cost of clean energy
technology in transportation, renewable power and energy
efficiency. However, while the EERE is billed as leading clean
energy research and development, there are fundamental concerns
with EERE's approach to advancing energy technology. EERE's
activities demonstrate that it is heavily invested in forcing
the Administration's preferred technology on the American
people. When the government picks winners and losers in the
energy technology marketplace, the American people pay the
price.
The Solar Energy Technologies Program within EERE offers a
ready example. This program's goal is to reduce the cost of
solar power until they are cost-competitive with electricity
from fossil fuels. It aims to achieve this goal by 2020. But
because the program is focused on cost, not technology, EERE
spends taxpayer dollars to market and deploy existing solar
technology. Instead of research on the fundamental science
behind solar energy, or development of new solar technology,
EERE spends taxpayer dollars on ``permitting, financing, and
customer acquisition.'' It essentially puts promoting energy
companies over research and development. Addressing these
issues may help the solar industry market their product, but
that is short-sighted and doesn't really make solar energy more
competitive in the long term.
The Department of Energy should perform groundbreaking
scientific research and develop on new technologies, not spend
American tax dollars to promote what is already commercially
available. The federal government should invest in basic
research that could open the door for widespread use of solar
and other renewable energy technology in the future. For
example, energy storage research and development at the Joint
Center for Energy Storage Research hub in the Office of Science
explores new energy storage possibilities through basic
scientific research. This energy storage research could have a
groundbreaking impact not just on the solar industry, but also
on all forms of energy.
The President's budget proposal for EERE includes a 42
percent, or $809 million, increase in spending. This is almost
three times the requested increase for the Office of Science.
In Congress, we have the responsibility to ensure the efficient
and effective use of American tax dollars. We can't afford to
impose expensive and inefficient technology on the energy
market. We do not have unlimited resources, so we will have to
make choices about where to make the best investment for the
American people. By investing in basic research that benefits
all forms of energy, we can make energy less expensive, and
that benefits consumers and helps the United States achieve
energy independence.
[The prepared statement of Mr. Smith follows:]
Prepared Statement of Full Committee Chairman Lamar S. Smith
Good morning. Today, the Subcommittee on Energy will examine the
Department of Energy's Office of Energy Efficiency and Renewable
Energy, commonly referred to as ``E-E-R-E.'' The Department describes
EERE as, ``The U.S. Government's primary clean energy technology
organization.''
EERE's goals sound worthy enough. It seeks to reduce the use of
fossil fuels, lower emissions, and speed up the adoption and decrease
the cost of clean energy technology in transportation, renewable power
and energy efficiency.
However, while the EERE is billed as leading clean energy research
and development, there are fundamental concerns with EERE's approach to
advancing energy technology. EERE's activities demonstrate that it is
heavily invested in forcing the Administration's preferred technology
on the American people.
When the government picks winners and losers in the energy
technology marketplace, the American people pay the price. The Solar
Energy Technologies Program within EERE offers a ready example. This
program's goal is to reduce the cost of solar power until they are
cost-competitive with electricityfrom fossil fuels. It aims to achieve
this goal by 2020.
But because the program is focused on cost, not technology, EERE
spends taxpayer dollars to market and deploy existing solar technology.
Instead of research on the fundamental science behind solar energy, or
development of new solar technology, EERE spends taxpayer dollars on
``permitting, financing, and customer acquisition.'' It essentially
puts promoting energy companies over research and development.
Addressing these issues may help the solar industry market their
product, but that is short-sighted and doesn't really make solar energy
more competitive in the long term.
The Department of Energy should perform groundbreaking scientific
research and develop new technologies, not spend American tax dollars
to promote what is already commercially available. The federal
government should invest in basic research that could open the door for
widespread use of solar and other renewable energy technology in the
future.
For example, energy storage research and development at the Joint
Center for Energy Storage Researchhub in the Office of Science explores
new energy storage possibilities through basic scientific research.
This energy storage research could have a groundbreaking impact not
just on the solar industry, but alsoon all forms of energy.
The President's budget proposal for EERE includes a 42 percent, or
$809 million, increase in spending. This is almost three times the
requested increase for the Office of Science.
In Congress, we have the responsibility to ensure the efficient and
effective use of American tax dollars. We can't afford to impose
expensive and inefficient technology on the energy market. We do not
have unlimited resources, so we will have to make choices about where
to make the best investment for the American people.
By investing in basic research that benefits all forms of energy,
we can make energy less expensive, and that benefits consumers and
helps the U.S. achieve energy independence.
Chairman Smith. Mr. Chairman, before I yield back, let me
apologize to our witnesses, I have a Judiciary Committee markup
that is ongoing right now, and I am going to have to shuttle
back and forth between the most important hearing going on
today, here, and an obligation to attend the Judiciary
Committee. So I will yield back.
Chairman Weber. Thank you, Chairman. We appreciate you.
Let me introduce our witnesses.
Our first witness today is the Honorable David Danielson,
Assistant Secretary of the Office of Energy Efficiency and
Renewable Energy for the United States Department of Energy.
Previously, he served as program director for Department of
Energy's Advanced Research Projects Agency Energy, where he
developed and led research and development programs. Before
working at the Department of Energy, Dr. Danielson was a clean
energy venture capitalist at General Catalyst Partners, and was
a cofounder of the New England Clean Energy Council. Dr.
Danielson received his Ph.D. in materials science and
engineering from the Massachusetts Institute of Technology, and
his Bachelor's Degree in materials science and engineering from
the University of California at Berkeley. Dr. Danielson, we are
glad you are here.
Mr. Nick Loris--our second witness today is Nick Loris, a
Herbert and Joyce Morgan Fellow for the Heritage Foundation.
Mr. Loris specializes on energy, environmental and regulatory
issues. He has been published and quoted in such publications
as the Wall Street Journal, the New York Times, the Washington
Post, Investor's Business Daily, and the Baltimore Sun. Before
being named a Morgan Fellow, Mr. Loris was a policy analyst
specializing in energy and environmental issues. Mr. Loris
received his Masters in economics from George Mason University,
and his Bachelor's Degree in economics, finance and political
science from Albright College. Mr. Loris, welcome.
Our third witness is Ms. Ruth McCormick, the Director of
Federal and State Affairs for the Business Council for
Sustainable Energy. Ms. McCormick has over 25 years of
experience in energy and environmental policy development.
Prior to joining the council, Ms. McCormick represented the
Western Regional Council, a coalition of businesses in the
western United States. In addition, Ms. McCormick served as the
legislative director for House Energy and Commerce Committee
member Congressman Nielson. Ms. McCormick is a graduate of the
University of Uhah--Utah. I can do this.
And Dr. Veronique, you told me it was okay, de Rugy. Am I
saying that right?
Dr. de Rugy. de Rugy.
Chairman Weber. de Rugy, okay, good. A senior--is our next
witness, a Senior Research Fellow for the Mercatus Center at
George Mason University, with a focus on the U.S. economy, the
federal budget, homeland security, and tax competition and
financial privacy. In addition, Dr. de Rugy writes regular
columns for Reason Magazine and the Washington Examiner, and
she blogs about economics and National Review Online's The
Corner. Previously, Dr. de Rugy has been a Resident Fellow at
the American Enterprise Institute, a policy analyst at the Cato
Institute, and a Research Fellow at the Atlas Economic Research
Foundation. Before moving to the United States, she oversaw
academic programs in France for the Institute for Humane
Studies Europe. Dr. de Rugy received her MA in economics from
the Paris Dauphine University, and her Ph.D. in economics from
the Pantheon-Sorbonne University. Welcome, Doctor.
In order to allow time for discussion, we ask the witnesses
to please limit your testimony to five minutes. And without
objection, your entire written statement will be made a part of
the record.
And I now recognize Dr. Danielson for five minutes to
present his testimony. Doctor.
TESTIMONY OF THE HON. DAVID DANIELSON,
ASSISTANT SECRETARY,
OFFICE OF ENERGY EFFICIENCY AND
RENEWABLE ENERGY,
U.S. DEPARTMENT OF ENERGY (DOE)
Dr. Danielson. Thank you, Chairman. Chairman Smith,
Chairman Weber, Ranking Member Grayson, and distinguished
Members of the Subcommittee, thank you for the opportunity to
appear before you today to discuss the Office of Energy
Efficiency and Renewable Energy, EERE, at the U.S. Department
of Energy.
EERE supports cutting-edge American innovation to
dramatically reduce U.S. reliance on foreign oil, cut energy
costs for American families and businesses, avoid the damaging
economic and health impacts of energy-related pollution, and
enable the U.S. private sector to create good-paying American
jobs through innovation. EERE's efforts in three critical
energy sectors--sustainable transportation, renewable power,
and energy efficiency--supportthe research, development and
demonstration activities that are needed to make clean energy
technologies directly cost-competitive without subsidies.
While clean energy markets grew to approximately $300
billion globally last year, with trillions more in market
opportunity in the years ahead, the energy industry
significantly underinvested in R&D compared to other
industries. The strategic importance of energy to American
economic growth and security means that government has a
necessary and needed role to make the appropriate investments
in cutting-edge energy innovation to seize this clean energy
opportunity.
My experience as an MIT-trained scientist and engineer, a
venture capitalist in the energy sector, and as one of the
founders of ARPA-E, has given me unique insights into what is
required for the U.S. energy innovation ecosystem to be
successful. From this experience, I have developed five core
questions that serve as the guiding principles by which EERE
prioritizes its investments in energy innovation. These
questions include the following. One: Impact. Is this a high-
impact problem? Two: Additionality. Will EERE funding make a
large difference relative to investments being made by the
private sector? Three: Openness. Are we open to new ideas, and
the most promising new energy innovations? Four: Economic
benefit. Will EERE funding result in enduring U.S. economic
impact? And five: Proper role of government. Is this investment
a proper role of government, or something best left to the
private sector to do on its own?
EERE has shown that smart, targeted investments in clean
energy innovation can have a healthy return on investment for
taxpayers. As just one example of many, over a 30-year period,
EERE funded R&D on advanced combustion engines resulted in a
net benefit of about $70 billion, representing a benefit-to-
cost ratio of 53 to 1, at a seven percent discount rate.
In terms of our fiscal year 2016 budget request, in fiscal
year 2016, EERE is requesting from Congress $2.7 billion across
our three sectors to continue these successes, and to enable
the United States to remain a global leader in innovative new
clean energy technologies. The $793 million request for our
sustainable transportation portfolio would help consumers and
businesses use less energy to move business and freight, and
replace conventional fuels with cost-competitive, domestically-
produced, sustainable alternative fuels. And we are making
significant progress. In 2014, the five-year SuperTruck program
exceeded its goal of developing a suite of cutting-edge new
long-haul trucking technologies to enable a 50 percent
improvement in freight efficiency one year ahead of schedule.
Our fiscal year 2016 budget request will enable EERE to
continue our focus on cutting-edge R&D, and advanced combustion
and lightweight vehicles, developing new technologies that can
diversify our fuel mix with drop-in biofuels, and enabling
plug-in electric and fuel cell vehicles to become cost-
competitive.
In our renewable power portfolio, EERE's request of $645
million will build on our R&D goal to enable the a development
of multiple cost-effective renewable power technology options
for every region of the country to diversify our power sector.
Our fiscal year 2016 request will continue our SunShot
Initiative's progress in making solar energy directly cost-
competitive by 2020. Our request will also support the Frontier
Observatory for Research in Geothermal Energy, or FORGE, a
first-of-a-kind field laboratory, to address the key R&D
challenges required to enable cost-effective advanced
geothermal power, in addition to continued R&D efforts to
reduce the cost of wind power, marine and hydrokinetic power,
and hydropower.
Finally, in our energy efficiency portfolio, EERE's request
of $1.03 billion emphasizes cutting-edge R&D and next-
generation efficient building technologies, including high-
efficiency, low-cost heating and cooling technologies. We will
also increase support for next-generation manufacturing R&D to
lower energy costs for American manufacturers, and create
American leadership in the next generation of emerging energy-
related advanced manufacturing technologies.
As just one example of these advanced manufacturing
technology R&D investments, in January we launched the
Institute for Advanced Composites Manufacturing Innovation, a
public-private consortium of 122 leading U.S. manufacturers and
research organizations that will focus on advanced composites,
foundational materials that are three times as strong and twice
as light as the lightest metals.
As EERE invests in high-impact research, development and
demonstration programs to make clean energy solutions more
affordable, accessible, and reliable, we remain fiercely
committed to being a good steward of taxpayer investments. Over
the past two years, EERE has implemented a new active project
management approach under which we hold all of our projects
accountable to annual go/no-go milestones, and under which we
are more aggressively discontinuing projects that are not
achieving key milestones to protect taxpayer interests.
In closing, EERE looks forward to working with this
Committee to make necessary and appropriate investments in
clean energy innovation, to continue to make our organization
effective and accountable to Congress and to taxpayers, and to
ensure that the United States wins the global clean energy
race.
Thank you.
[The prepared statement of Dr. Danielson follows:]
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Chairman Weber. Thank you, Dr. Danielson.
Mr. Loris, you are recognized for five minutes.
TESTIMONY OF MR. NICK LORIS,
HERBERT AND JOYCE MORGAN FELLOW,
HERITAGE FOUNDATION
Mr. Loris. Thank you. Chairman Weber, Ranking Member
Grayson, and distinguished Members of the Subcommittee, thank
you for this opportunity to discuss the Department of Energy's
Office of Energy Efficiency and Renewable Energy.
My name is Nick Loris, and I am the Herbert and Joyce
Morgan Fellow at the Heritage Foundation. The views I express
in this testimony are my own, and should not be construed as
representing any official position of the Heritage Foundation.
Often overlooked in the criticism of policies that pick
winners and losers in energy markets is the proper scrutiny of
all the spending programs within EERE. The given logic for many
of these initiatives is that a gap exists between basic
research and economic viability, and thus, more taxpayer
dollars must be spent to attract private investment. The
reality though is that the market demand for transportation
fuel and electricity are incentive enough to spur competition
and innovative breakthroughs. Globally, these are multitrillion
dollar markets. If any renewable technology captures a mere
slice of that market, it would stand to make billions, if not
tens of billions of dollars in profit annually. Breaking into
this market is not a problem of the so-called valley of death
where good ideas are unable to attract substantial investment.
It is a valley of wealth waiting to be had.
The objectives of this office may be laudable, but it is
simply not the role of the Federal Government to reduce cost
and lower risk. When the government attempts to drive
commercialization, it circumvents the competitive process that
appropriately assigns risk and reward, and disregards how
markets efficiently allocate resources. Take, for instance, the
bioenergy technologies program that aims to make advanced
biofuels cost-competitive with conventional gasoline at $3 per
gallon. Why is that an objective in the first place, and how
does the government know that $3 will be the magic price point
at which alternative fuels become competitive? As we all know,
markets are very unpredictable. And even if somehow $3 does
change the market for alternative fuels, businesses are much
better equipped and flexible to deal with the changing economic
circumstances. Most importantly, the private sector should be
responsible for taking on that risk and innovating to lower
costs.
The same holds true for the electricity sector. For
instance, the budget justification for the SunShot initiative
states a goal of reducing the price for utility scale solar to
6 cents per kilowatt hour without subsidies, and that will
result in rapid, large-scale adoption of solar across the
United States. The problem is that the SunShot initiative in
and of itself is a huge government subsidy by spending hundreds
of millions of taxpayer dollars to reduce the cost of solar.
And if 6 cents per kilowatt hour results in rapid solar
deployment, that is great, but that should be a business
decision. Government has no business trying to make projects
cost-competitive or improving a technology's reliability to
make it more enticing for private financiers. Furthermore, the
government is not very good at it, compared to those industries
that actually have skin in the game. How many times have we
heard from the DOE that an economically viable alternative
energy source was just around the corner, and decades later and
billions of taxpayer dollars squandered, the technology is
still just around that corner.
Another goal for this office is improving energy
efficiency. Programs like the Advanced Manufacturing Office
sound nice and like an easy sell to constituents, but
manufacturers already know that energy is a significant cost,
and will find ways to reduce energy consumption in order to
gain a competitive advantage. Companies will make these
investments if they believe the technology is promising, worth
the risk, and the best use of their investment dollars.
Instead, the Advanced Manufacturing Office provides nothing
more than corporate welfare. For instance, past grant
recipients have been some of the world's largest companies and
massive energy users, including GE, Dow Chemical, and Boeing.
These are not companies that need help from the taxpayer.
Now, when it comes to energy efficiency, one area that
makes more sense as a government function is to reduce energy
use within the federal government. The government as an energy
consumer does not face the same incentive structure, nor do
they always weigh trade-offs like families and businesses do.
But the Federal Energy Management Program should be carried out
in a technology-neutral manner to ensure the purpose is actual
energy savings to save taxpayer dollars, not meet a political
agenda.
All of this is not to say, however, that innovative
technologies cannot emerge from federal spending, but there is
a stark difference between how successes like the Internet
became commercially viable versus attempts to commercialize
specific energy technologies. Government projects that have
become commercial successes, such as the Internet, computer
chips and GPS, were not initially intended to meet a commercial
demand, but instead, national security needs. Entrepreneurs saw
an opportunity and created the commercially viable products
that we enjoy today. The objective for Congress and the federal
government should be to fund that basic research that meets
national objectives, and create the proper pathway for DOE lab
researchers to push that basic research out to the market, and
for the private sector to tap into that expertise at our
national labs.
To conclude, America doesn't need a man-on-the-moon-style
mission for energy because the government has a diverse mix of
energy supplies to competitively price energy, and provide
families and businesses with choice. True reforms that lay the
groundwork and lay the framework for renewable energy
technologies to succeed and achieves--achieve the goal that
EERE sets will not come from more government spending, but
instead, free market reforms that create a competitive economic
environment.
Thank you, and I look forward to your questions.
[The prepared statement of Mr. Loris follows:]
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Chairman Weber. Thank you, Mr. Loris.
Ms. McCormick?
TESTIMONY OF MS. RUTH MCCORMICK,
DIRECTOR OF FEDERAL AND STATE AFFAIRS,
BUSINESS COUNCIL FOR SUSTAINABLE ENERGY (BCSE)
Ms. McCormick. Thank you for the opportunity to testify
today. My name is Ruth McCormick, and I am the Director of
Federal and State Affairs for the Business Council for
Sustainable Energy. The Council is a broad-based industry trade
group, representing companies and associations in the energy
efficiency, renewable energy, and natural gas industries.
Over the past several years, the United States has seen
real market penetration of a wide range of sustainable energy
technologies and resources, and we have witnessed the results
of policies and research and development that work, but to
continue the momentum of growth in these sectors, and to
receive their co-benefits, long-term, stable policies will be
needed to level the playing field and to provide market access.
And the United States needs to continue to invest in energy
research, development and demonstration to increase the
efficiency of our energy generation and use, and to spur new
innovations. This is important both for domestic economic
growth and for U.S. competitiveness in global energy markets.
I would like to focus my testimony in two areas. First, I
would like to share some of the findings from the recently
released 2015 edition of the Sustainable Energy in America Fact
Book. The fact book was researched and produced by Bloomberg
New Energy Finance, and commissioned by the Business Council
for Sustainable Energy. It is intended to be a resource for
policymakers with up-to-date market information.
The second area I would like to discuss is the valuable and
effective role that federal investments in the energy sector
have played, and should continue to play, in the availability
of new innovative energy technologies and practices.
The fact book points to the dramatic changes underway in
the U.S. energy sector. The data shows that traditional energy
sources are declining, and natural gas, renewable energy, and
energy efficiency are on the rise. These changes are increasing
the diversity of the country's energy mix, improving our energy
security, cutting energy waste, increasing our energy
productivity, and reducing air pollution and greenhouse gas
emissions. While technology costs have fallen, market barriers
and grid integration challenges continue to hinder greater use
of clean energy technologies. To continue the momentum of
growth, long-term, stable policies will be needed to level the
playing field and to provide market access to new technologies.
Electricity markets are evolving, and the U.S. power
sector, long organized around large, centralized systems, is
considering distributed power options such as combined heat and
power, waste heat to power, small scale renewables, and fuel
cells. Other changes are also occurring in the U.S. energy
sector, including the introduction of smart grid technologies
for improving grid management, and a growing role for
dispatchable resources such as natural gas plants, hydropower,
and demand response.
Many market structures do not yet fully recognize the
benefits of some of the technologies, such as energy storage,
or best practices, which allow for increased flexibility of the
grid. For this reason, BCSE strongly supports the continued
funding of basic and applied research for clean energy
technologies. This must be balanced with work on
commercialization, market transformation, and other efforts to
ensure that products do not sit on laboratory or university
shelves, but are transferred to the private sector to achieve
the intended public benefit.
There are strong analytical findings that show the overall
return on federal investments in this area. For example, 3
decades of investment in extraction of natural gas from shale
has led to low natural gas prices, saving households and
businesses money, attracting new industrial manufacturing
opportunities in the United States, and helping to create U.S.
jobs. As a result of energy efficiency policies and
investments, total energy use in the United States is down 2.4
percent since 2007, while gross domestic product has grown
eight percent. The cost of solar PV models has fallen more than
80 percent since 2007. Thirty-two percent of new electric
generating capacity came from solar in 2014, and the industry
now employs nearly 175,000 workers, more than tech giants
Google, Apple, Facebook and Twitter combined. These are just a
few examples. The energy sector involves technologies that have
been transformed over the course of more than a century, and it
is critical that the U.S. Government continue to invest in
advancements.
Council members look forward to working with this Committee
and the federal government to ensure that public investments in
these sectors are highly leveraged, effective and efficient in
carrying out the intended policy aims.
Thank you.
[The prepared statement of Ms. McCormick follows:]
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Chairman Weber. Thank you, Ms. McCormick.
Dr. de Rugy.
TESTIMONY OF DR. VERONIQUE DE RUGY,
SENIOR RESEARCH FELLOW,
MERCATUS CENTER,
GEORGE MASON UNIVERSITY
Dr. de Rugy. Good afternoon, Chairman Weber, Ranking Member
Grayson, Members of this Subcommittee. My name is Veronique de
Rugy. I am a Senior Research Fellow at the Mercatus Center at
George Mason University where I study tax and budget issues.
So for decades now, policymakers have tried to expand the
federal role in developing alternative energy technology and
move the economy away from oil, gas and coal. While I agree
that we shouldn't subsidize fossil fuels, we should not
subsidize green energy either. I would like to highlight three
reasons for that.
First, even with the best of intentions, nobody knows which
particular energy sources will make the most sense down the
road. This level of uncertainty is not unique to the energy
industry. Every industry faces similar issues of innovation in
a rapidly changing world. In most industries, the policy
solution is to allow the decentralized market efforts of
entrepreneurs and early adopting consumers to figure out the
best route to the future.
Second, government efforts to push markets in certain
directions has real cost. Some of these costs are very visible,
such as the $5 billion spent since 2009 on the Weatherization
Assistance Program, which was found to be incredibly wasteful
by federal auditors, riddled with corruption and questionable
work, all this at the expense of taxpayers. But not all these
costs are visible either. For instance, government subsidies to
particular technology or industries can also delay the
development of superior alternatives that don't receive
subsidies, and that is because when the government invests in
an area, it tends to shift resources in the private sector and
the capital market away from unsubsidized projects, towards
subsidized project, and that independently of the merits of the
project.
Third, the federal government's track record for picking
winners in industries and technology is very bad. The
Department of Energy has subsidized more than its share of
failed projects. Also, the projects that do not fail often we
find are subsidizing companies that did not need the help in
the first place, and tend to be very well connected
politically. The Department of Energy's 1705 Loan Program is a
good example of the gap that exists between what the program's
proponents claim it will achieve, and what it actually
achieves. So I am going to focus on 1705, but actually, my
findings pretty much apply to every other government programs
that we are talking about here.
These policies were put in place under the claim that
renewable energy companies do not have access to sufficient
credit to support new projects. However, when you look at the
data, nearly 90 percent of the loans went to companies that
were backed by giant, well-connected companies like NRG Energy
Company and Goldman Sachs. It is very hard to imagine that
these projects and these companies would not have access to
capital, absent the 1705 loan. This program is also a good
example of government favoring two distinct interest groups at
the expense of taxpayers. First, in this case it is a loan
guarantee, the lenders who shift the risk away from them, if
they pick a program that ends up defaulting. Second, interest
group, the companies that borrow at very beneficial terms and
rates, especially compared to their competition. But while
banks and companies that receive the guarantee get the upside
of the program, taxpayers bear the risk and shoulder the burden
when companies such as Solyndra and Abound Solar go under and
default on their loans.
So while the data on 1705 Loan Program speaks for itself,
the problem is actually much bigger. Like most government
interventions, these programs create serious and systemic
distortions in the market. These distortions create the
conditions for businesses to maximize profits by pleasing
political interests, rather than by pleasing consumers. This is
called cronyism and it entails enormous and most often unseen
economic costs. The tragedy is that despite the evidence,
lawmakers don't get rid of these programs. They are more likely
to respond to pressure from vested interest than to taxpayers
who are unlikely to realize how much they pay directly and
indirectly for it.
To conclude, I don't pretend to know what America's energy
future will look like, and while I am all in favor of green
energy, we have over six decades of research on government
decision-making that shows that the sensible solution is often
to leave these activities outside of the purview of government.
It is not a loss, but a gain for government. Not only will it
prevent the type of government failures we have been talking
about, it will also allow government to focus on its core
competency, providing public goods, and protecting human and
property rights.
Thank you.
[The prepared statement of Dr. de Rugy follows:]
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Chairman Weber. Thank you, Dr. de Rugy.
We are going to start with the questions portion. I will
recognize myself for five minutes.
Dr. Danielson, the Administration often explains EERE's
large budget by describing the office in three major
categories, and I think you went through them, transportation,
renewable power, and energy efficiency. By the way, I own an
air conditioning company, I have for 34 years, so I am--energy
efficiency is something that we deal with frequently, power
requirements and those types of things. But even after dividing
the EERE budget into these three categories, each category
exceeds the allocation for nuclear or fossil energy research
and development. Now, Dr. de Rugy made the comment that no one
knows going into the future with certainty what is going to be
the best form of energy, and while, you know, our crystal--my
crystal ball doesn't work, apparently the battery is ran down,
didn't have enough energy, I have to say the nuclear is
probably a good possibility. So each category exceeds the
allocation for nuclear or fossil energy research and
development in the fiscal year 2016 budget request, with
transportation actually funded at $793 million, renewable power
funded at $645 million, and energy efficiency at $1 billion in
the proposal. By contrast, fossil energy R&D is $560 million,
nuclear energy R&D is $482 million, and each individual account
in EERE is more than either one. In fact, the proposed budget
for EERE is almost two times, as I said in my opening
statement, more than the budgets for nuclear, fossil and
electricity R&D combined.
Do you think, and you--I mean you say that those three
offices combined, as it were, you heard the figures, do you
think this represents a balanced, all-of-the-above approach to
energy research and development, and do you believe these EERE
programs are more valuable to the American economy than
research on our electric grid, fossil energy or nuclear energy
R&D? And I will let you answer.
Dr. Danielson. Well, thank you, sir. Thanks for that
question. It is an important one.
We and I do believe this is a reasonably balanced agenda as
you look across the different sectors the DOE invests in. You
have pointed out that fossil energy is at $842 million, nuclear
energy at $907 million. Sustainable transportation is about
$793 million, which is comparable to those numbers. That set of
offices is where we do most of our work that relates to the
transportation sector, which is where our foreign oil
dependence is.
Chairman Weber. Okay, but aren't you quoting the figures
for the whole office, not just the R&D portion?
Dr. Danielson. Yes, I am quoting for the whole office.
Chairman Weber. Okay, but we are wanting to compare the R&D
portions of that spending.
Dr. Danielson. Okay, so in terms of R&D, I think maybe a
better way to look at it is that the sustainable and
transportation office is around $793 million. It is an
important area to emphasize in that our transportation sector
is where our dependence on foreign oil is. If you look at
renewable energy, which is where we are addressing the power
sector, and technology and the power sector, that is at $645
million. The nuclear energy office exclusively addresses the
power sector, and so I think comparing the renewable energy
number and the nuclear number is a reasonable thing to do. And
then we are the only office that is addressing efficiency in
the built environment, which is a sector that is not addressed
by the other offices. And if you take out some specific unique
deployment-oriented programs such as the Weatherization
Assistance Program, or Federal Energy Management Program and
our Appliance Standards Program, that is at about $600 million
of research and development.
So I do believe this is a well-balanced portfolio. The
Secretary is always very clear that we are funding all-of-the-
above in the context of a low-carbon future, and in addition,
that we are not looking to prescribe market share, we are
looking to innovate across the board and let the market
determine what the market share will be.
Chairman Weber. Well, let me get to my second question.
Considering that the budget has grown, as I said earlier, 58
percent in the last decade, what successes would you--what
reasons would you point to to tell us why the office needs to
grow another 42 percent?
Dr. Danielson. Well, we are at a unique time in the history
of a number of the technologies in the EERE portfolio where,
after decades of long-term investment, we have gotten to the
point where direct cost competitiveness is in our sights in the
next, you know, 5, 10, 15, 20 years for a number of these
technologies. And we are also seeing significant investments
overseas to try to gain advantage in these areas, and so----
Chairman Weber. I don't mean to cut you off. I get that
but, of course, obviously, with our deficit and the way the
economy is now, then we ought to really, really be focused on
as much cost-cutting as we are about to have some super
expenses.
Mr. Loris, would you agree with his thoughts on the fact
that the--this is an above--you know, all-of-the-above
approach?
Mr. Loris. I would agree in the sense that it is an all-of-
the-above approach to reduce costs, and it is not a proper role
of the government, and we should have the same scrutinies of
the Office of Fossil Energy, the Office of Nuclear Energy to
get rid of all of these things.
Chairman Weber. Okay. Ms. McCormick?
Ms. McCormick. I think this is----
Chairman Weber. Turn your--there you go.
Ms. McCormick. I agree with Dr. Danielson, this is a
critical time for these industries. We have seen significant
cost reductions, and now is not the time to let those go.
Chairman Weber. Irrespective of an $18 trillion deficit?
Ms. McCormick. Well, things will have to be balanced. I
think that we are looking for stable and consistent funding so
that these industries can continue this momentum of growth.
Chairman Weber. Okay. Dr. de Rugy, how about you, do you
agree with Dr. Danielson?
Dr. de Rugy. I mean I actually think--I agree that--with
Nick that it is not the role--the proper role of the federal
government, and a lot of the time when we talk about the
benefit of a given program, it is because we actually don't
look at the net cost. We don't look at the jobs that are
actually lost, the impact on competition. We don't look at, you
know, we don't look at a lot of things, so these benefits are--
happen as if they have happened in a vacuum.
Chairman Weber. All right. Thank you for that. I am past my
time. I am going to yield to the Ranking Member, Mr. Grayson of
Florida.
Mr. Grayson. Thank you. I have never worked in an air
conditioning business. I had the burden of actually being in an
economist for a few years, and before that studied economics, a
further burden that I share with some of you apparently.
So let us start with Dr. de Rugy. You mentioned that one of
the legitimate functions of government is the creation of
public goods. What is a public good?
Dr. de Rugy. Public good is something that the private
sector wouldn't produce, and that would benefit everyone.
Mr. Grayson. And why is it the private sector doesn't
produce public goods?
Dr. de Rugy. Usually because the cost is too high, and no
one is willing to invest in it.
Mr. Grayson. Well, also because not a single commercial
entity can internalize all of the generated profit, isn't that
correct? Isn't that the essence of a public good?
Dr. de Rugy. Yes.
Mr. Grayson. All right, so isn't knowledge a public good?
Dr. de Rugy. Knowledge is a public good, but--actually, no.
No. We have a lot of investment--private investment in
knowledge, and----
Mr. Grayson. Well----
Dr. de Rugy. --private investment in energy too.
Mr. Grayson. That is true, but you cannot internalize
inside one company the benefit that comes from knowledge, and
that includes scientific knowledge, doesn't it?
Dr. de Rugy. But the government is very bad at actually
knowing anything, and one of the reasons is because there is no
cost and benefit, there is no profit and losses, which is the
way, as we know, since Friedrich Hayek, actually the market
disperses the knowledge across millions of actors in the most
efficient way.
Mr. Grayson. Well, that sounds more like ideology than
economics to me----
Dr. de Rugy. That is actually----
Mr. Grayson. --Dr. de Rugy.
Dr. de Rugy. Well, actually, it is interesting because----
Mr. Grayson. And I am very familiar with the work of----
Dr. de Rugy. --Larry Summers has said that this insight of
Hayek is the most important economic insight of the 20th
century, so I don't think----
Mr. Grayson. All right, well, you agree with me that one
company cannot, for instance, internalize the benefit that
comes from conservation? That is a benefit that is spread
across dozens if not hundreds of different companies, even in
our economy, and probably thousands in the world economy. Isn't
it true that scientific knowledge in the form of better
conservation cannot be internalized and, therefore, it is a
public good?
Dr. de Rugy. I don't agree.
Mr. Grayson. Mr. Loris----
Dr. de Rugy. Actually, we see----
Mr. Grayson. --what about you?
Mr. Loris. I wouldn't agree either. I think there----
Mr. Grayson. Really?
Mr. Loris. --are plenty of opportunities for the private
sector to invest in conservation and make a profit from it.
Mr. Grayson. So you wouldn't even concede that the
government should generate public goods as Dr. de Rugy did in
her opening statements?
Mr. Loris. I think the proper role for--is to focus on more
of the things that the Office of Science does, which is----
Mr. Grayson. Answer my question please.
Mr. Loris. Could you repeat the question?
Mr. Grayson. The question is would you concede that the
government does, in fact, have a role in creating public goods,
or you wouldn't even believe then scientific research should be
done to create those public goods?
Mr. Loris. I think it would depend on the circumstance.
Mr. Grayson. Well, the circumstance----
Mr. Loris. Which public good are you talking----
Mr. Grayson. --is the creation of a public good in the form
of scientific knowledge.
Mr. Loris. Scientific knowledge, sure.
Mr. Grayson. Yes. Okay, good.
All right, now, what about externalities. Tell me what an
externality is.
Mr. Loris. An externality is, you know, something that is
not captured by the production of a good, such as pollution, or
external benefits coming from the production of a good as well.
Mr. Grayson. All right, so would you agree with me that it
is a legitimate basis for scientific research by the government
to address the market inefficiencies that are caused by
externalities like pollution----
Mr. Loris. No.
Mr. Grayson. --which is caused by fossil fuels and not by
most renewable energy?
Mr. Loris. No, I don't think the most efficient way to
internalize a negative externality is through government
programs----
Mr. Grayson. I didn't ask you whether it was the most
efficient way, I asked you whether that was legitimate.
Mr. Loris. No, I don't--not spending money on scientific
research to internalize negative externalities, no, I don't
believe that is a----
Mr. Grayson. Well, again, I feel like I am hearing more
ideology than I am economics at this point.
Back to you, Dr. de Rugy. Would you agree with me that a
barrier to entry is a legitimate form of a market imperfection
that could be addressed by the government?
Dr. de Rugy. Well, very often the government is responsible
for putting up----
Mr. Grayson. Oh, my goodness, can I just----
Dr. de Rugy. --barriers to entry.
Mr. Grayson. --have the question answered?
Dr. de Rugy. Well, usually, if a government--if a private
sector has a monopoly and the government tries to break it----
Mr. Grayson. What is a barrier----
Dr. de Rugy. --I think----
Mr. Grayson. --to entry, Dr. de Rugy?
Dr. de Rugy. It is--the barrier--like you have a company
that has a monopoly and a--and prevents other companies to
getting in because the costs are too high for these companies
to compete.
Mr. Grayson. Okay. So lack of capital is a barrier to
entry, is it not? And that lack of capital is addressed by
scientific research done by the government----
Dr. de Rugy. Actually----
Mr. Grayson. --isn't that correct?
Dr. de Rugy. Actually, this is an excuse used by the
government, and there are many, many instances to justify their
program, and when you actually look at the supposedly market
failure that the government identifies, there is none. And the
private sector is the best one use--is the best player to
actually come up with solutions to whatever lack of capital.
Look at the----
Mr. Grayson. All right, your excuse is other people's
reason----
Dr. de Rugy. --export/import bank----
Mr. Grayson. --and progress, but let us finish with this
since my time is almost running out. We spend $6 trillion each
year on energy, we being the human species, humanity. We spend
$6 trillion a year. Now, let us suppose, hypothetically, that
someone could spend $200 billion and create free energy
forever. You will agree with me that that would be an enormous
rate of return, would it not? Yes?
Dr. de Rugy. If----
Mr. Grayson. Mr. Loris? Yes?
Dr. de Rugy. It would be.
Mr. Grayson. Enormous rate of return.
Dr. de Rugy. Yes.
Mr. Grayson. Right, Dr. de Rugy? Enormous rate of return,
right? Can you identify for me anybody now operating in the
renewable energy sector that could come up with $200 billion
and do that?
Dr. de Rugy. But you are assuming that, for instance, if
there is a market failure, which I don't concede there
necessarily is in the energy market, that actually it a
necessary and sufficient condition for the government to
invest. The way the government invests because the decisions
are driven by politics----
Mr. Grayson. All right, Mr. Loris----
Dr. de Rugy. --is actually----
Mr. Grayson. --would you like to answer my question?
Mr. Loris. I think there are six trillion reasons for the
renewable energy sector to capture opportunities, and they
don't need any more.
Mr. Grayson. Can you identify for me a single company in
the renewable energy sector that could raise $200 billion, even
if it was to eliminate the cost of energy forever, one company?
Mr. Loris. I don't know the answer to one company, but I
know you have a lot of companies like BP and major fossil fuel
producers that invest in renewable opportunities to capture----
Mr. Grayson. Which puts those----
Mr. Loris. --those opportunities too----
Mr. Grayson. --out of business if they actually did that
research.
Mr. Loris. Largely----
Mr. Grayson. All right, thank you.
I yield back.
Chairman Weber. The gentleman yields back.
And now recognize the gentleman from Washington, Mr.
Newhouse.
Mr. Newhouse. Thank you, Mr. Chairman. Appreciate it. And
thank you all for being here and helping us look at the
Department's request for the budget for EERE, and a very
interesting conversation.
Could I ask a question of you, Dr. Danielson? I come from
the Pacific Northwest where we are blessed with--I would say a
diverse mix of energy, including hydro, wind, nuclear, gas,
also utilize energy efficiency. We are also a leader in
modernizing our electric grid with the forward-thinking
utilities and world-class research that--institutions like the
University of Washington, my alma mater, Washington State, and
also the Pacific Northwest National Laboratory, which all
worked together to develop test beds to take research from the
lab to demonstrate new innovative technologies.
The Secretary appeared before us, I believe it was in
February. He discussed the DOE's grid modernization which is
very much in line with what we are trying to do in the State of
Washington. So could you clarify for me the EERE programs which
will advance the grid modernization, and how those investments
will benefit states like mine?
Dr. Danielson. Well, thank you for that question,
Congressman. And congratulations on PNNL's 50th anniversary
recently.
Mr. Newhouse. Thank you.
Dr. Danielson. There are some key areas where we are making
innovation investments as it relates to grid modernization. One
area is in the area of predicting solar and wind resources much
more accurately, so using advanced modeling and simulation to
develop tools that would actually allow utilities to know how
much wind and solar are coming and when, which would allow them
to much more effectively operate the grid.
We are also, you know, one of the most exciting and
important emerging opportunities we have as it relates to the
grid is the dramatic reduction in cost of distributed energy
technologies. So Americans, more and more, have the opportunity
to actually generate their own power on-site, whether it is
photovoltaic power, combined heat and power from combustion to
fuel cells. And also with the emergence of advanced information
technologies over the last couple of decades, we now have the
opportunity to set up a truly transactive market where, instead
of having a modern--a grid system that only has a few hundred
or a thousand generators controlled, we can actually empower
the consumer to interact with the grid in a real-time way, and
so that is something we are spending a lot of time and effort
and innovation in is enabling that market--that transactive
market so that homes can transact with the grid in a cost-
effective way.
Mr. Newhouse. Could I also ask you to help us understand
why this is all a role of government, and why the electric
industry, which owns a lot of the grid, is not modernizing on
its own? And maybe that relates to some of that what we have
already been talking about.
Dr. Danielson. When I get together with folks from across
the utility industry, from the solar industry, from Public
Utility Commissions, they all realize and recognize that the
most cost-effective way to get to a low-carbon future will
likely involve distributed energy, but making that transition
is difficult. And so we have a Grid Modernization Laboratory
Consortium where Pacific Northwest National Lab is the lead,
where we are working with utilities to help them understand
what those least-cost approaches are going to be, and how can
they make the best transmission and distribution investments to
enable the most cost-effective, reliable, resilient grid going
into the future.
Mr. Newhouse. Thank you, Doctor.
My time is getting short, so quickly, I am going to ask you
about the energy storage R&D that is scattered throughout
several areas. Let us see, it is the Office of Science, the
Joint Center of Energy Storage Research, the ARPA-E, Energy
Storage Program at the Office of Electric Delivery and Energy
Reliability, Vehicle Technical Program--Technologies Program,
Solar Energy Program, Hydropower Program. There is--the list
goes on. So how many battery and energy storage programs can
there be found within the agency, and can you tell me that we
are sure that the highest priority is--research is funded so
that we avoid duplication?
Dr. Danielson. Thanks for that question. It is an important
one.
Just in the last few years, the Department of Energy has
set up internal Tech Teams that have representatives from each
of the offices of relevance, and in areas like grid storage or
energy storage. And so we are actually very tightly
coordinated, and if you look at each and every one of those
efforts, they are distinct, they are synergistic, and they do
not overlap. And so both in terms of our energy storage work
that is related to electrified transportation, which is the
primary role of our Vehicle Technologies Office, and then when
you look at grid storage, that is a little bit more spread
around the Department, including primarily the Office of
Electricity, but also our Water Power Program does research in
hydropower, which is not done in the Office of Electricity. And
so it is a--spread around in a way that I think is perhaps
unfortunate and not transparent, but it is highly coordinated.
Mr. Newhouse. Good. Good. I appreciate that.
Mr. Chairman, I yield back the negative amount of my time.
Chairman Weber. Thank you, Mr. Newhouse. We will carry that
over for next hearing.
The Chair now recognizes the gentleman from Illinois, Mr.
Lipinski.
Mr. Lipinski. Thank you, Mr. Chairman. If we did that, it
would really shorten things up, you know. So I had better get
going.
I believe that the work that EERE does is critical to
achieving a sustainable energy future and growing our nation's
energy economy. We see that the technologies developed at EERE
provide a more robust energy portfolio, reduces our impact on
the environment, and enables a growing U.S. clean energy
industry. So I am glad to see the 2016 budget request is doing
more to support clean energy innovation and make the United
States a leader in the clean energy marketplace.
So a couple of questions, I want to see how many of these I
can get to about some of the things the EERE is doing. And I am
going to start with a question for Dr. Danielson. We saw that
Paris just temporarily had a ban on half the cars from driving,
in response to smog problems. Transportation contributes to
almost 1/3 of emissions in the United States. Electric vehicles
can enable more environmentally friendly transportation, and at
Argonne National Lab, which is in my district, they are working
to develop new battery technologies that will enable cheaper,
longer-range electric vehicles. Can you describe the biggest
challenges to widespread use of electric vehicles, and how
strong funding for EERE is helping to improve vehicle
technologies?
Dr. Danielson. Well, thanks for that question. You know,
the biggest--the longest pole in the tent as it relates to
electric vehicles having a cost-competitive situation versus
traditional vehicles is really in the battery cost. And as you
mentioned, our Argonne National Laboratory has been an absolute
powerhouse in terms of developing new advanced lithium-ion
battery technologies. Indeed, they have developed basically a
battery that is twice as good as any other battery out there,
and early versions of the material they have developed are now
getting into the market. But I am very optimistic. You know,
right now, if you look at the technology we have, we are at
about $300 per kilowatt hour. Something like a 100-mile
electric vehicle would pay back at that price over five years.
A plug-in hybrid of 40 miles electric range would pay back at
about $200 per kilowatt hour, and a 300-mile electric vehicle
would require a battery cost of about $125 per kilowatt hour.
So we are at about $300 per kilowatt today, but with continued
investments in innovation, using the cutting-edge scientific
facilities at Argonne, in addition to an applied set of
researchers that we are supporting there, and we have since the
90s, we are confident that we are going to get to that cost
goal in the 2020 time frame.
Mr. Lipinski. Very good. I want to move on to the role of
DOE commercialization. In your testimony, Ms. McCormick, you
mentioned that you don't think DOE's mission stops at the
laboratory bench. And I thank you for recognizing the
importance of getting innovative technology transitioned to the
marketplace.
I want to ask, can you describe why federally-funded
technology transition programs are critical to bridging the
valley of death between lab and market, and I just want to
mention the--I know Lab Corps is starting up, which I think is
going to be very helpful, but can you talk about the important
role of the federal government here?
Ms. McCormick. Yes, thank you. The Business Council for
Sustainable Energy represents a broad range of energy
technologies, so the answer to that question is unique to each
industry. It is a little bit different for each one, depending
on where they are and what they do. But I am hearing pretty
universally from the technologies within our coalition about
the need for the government to be a neutral player to help
industries as they break into these markets, and some of these
issues related to things like grid integration or some of these
soft costs that are mentioned, for example, for some industries
like the solar industry, because they do not have a financial
vested interest in the electricity grid. They can sometimes
share best practices from the states, and learn and share that
information to other states and to other players across the
country. So I think that the Department of Energy is uniquely
positioned to provide that kind of technical assistance, and
provide the ability for these technologies to break into the
market, because the electricity sector is a regulated industry,
and it has layers of regulation; the federal level, the state
level, is it not an open free market, and there are reasons for
that. And so the Department of Energy can offer a lot of
assistance to these technologies that are not legacy
technologies, but are newer and more innovative.
Mr. Lipinski. Thank you.
With my few seconds left, I just--I have a question for the
record about hydrogen and what EERE can do with that. As the
author of the H-Prize Act, I am very happy to see that moving
forward right now. So with that, I will yield back.
Chairman Weber. Is the gentleman requesting that question
be read into the record or made a part of the record?
Mr. Lipinski. I--are we going to have five days to submit?
Chairman Weber. Yes, absolutely, without a doubt.
Mr. Lipinski. Yes.
Chairman Weber. Okay, thank you.
Chair now recognizes the gentleman from Kentucky, Mr.
Massie.
Mr. Massie. Thank you, Mr. Chairman.
First off, I want to let you know I drive an electric car,
although I suspect the electrons providing the electromotive
force this morning to get me here came by virtue of the
combustion of fossil fuels. So I have a Friends of Coal license
plate on my electric car. I also live in a house that has a 13
kilowatt solar array on it, and I am very interested in these
things. I tell republicans that you can dislike the subsidies,
I dislike the subsidies, but you shouldn't hate solar panels
because they are rocks that make electricity, and that is a
pretty virtuous rock.
But let me ask you about this, and I have some experience
in this. Mr. Danielson, if you wanted to install another
megawatt of production capacity in our country, would it be
cheaper to do it in a solar form or on 100 households with 10
kilowatt arrays?
Dr. Danielson. You know, I don't know the direct answer to
that question. So the big difference that--I would have to just
do the calculation, would be is that your----
Mr. Massie. Is it cheaper to put a whole bunch of these up
on roofs--on the roofs of houses? To climb up on the roofs----
Dr. Danielson. Okay.
Mr. Massie. --drill holes in your roof, risk falling off,
like I have done, so I am very familiar with this, or to just
build a solar farm--a centralized----
Dr. Danielson. Thank you for that clarifying question.
Mr. Massie. Okay.
Dr. Danielson. The--it is cheaper to build a centralized
solar power plant per kilowatt hour, per megawatt than it is
for a distributed----
Mr. Massie. It is----
Dr. Danielson. --but what I would like to point out is that
it is a different--we are--it could be a different value, that
if you are putting a rooftop system in, you are avoiding the
retail rate, whereas if you have a centralized system, it is
putting power into the grid----
Mr. Massie. Right.
Dr. Danielson. --at a wholesale rate.
Mr. Massie. And you get out of some taxes, I suppose. But
the grid has to be designed for the worst case, not the best
case or the average case, right? So----
Dr. Danielson. Okay.
Mr. Massie. --because solar power is so variable, it still
really doesn't do anything for design--for redesigning the
grid. I suspect it will always be the case that it is cheaper
to put in a larger facility than to go up on your roof and
drill holes and do all these distributed installations. So why
is our government so fixated on subsidizing the installation of
all these distributed systems, which can't even begin to
approach the cost-effectiveness of a more centralized system?
Dr. Danielson. Well, this is something that we are looking
to tackle with our Grid Modernization Laboratory Consortium is
to look at long-term planning and system-level costs so that,
you know, if you are able to put quite a bit of distributed
solar out there, could that reduce your cost of building out
more distribution or more transmission. And so, you know, we
would want to make sure to do that analysis from a system-level
cost basis.
Mr. Massie. Right. Okay. Well, I want to ask another
question because, again, you have to design for the worst case,
and without a better battery, you are basically not going to
improve the situation. You talked about your five criteria;
impact, additionality, openness, economic benefit, proper role
of government. Can you motivate a $7,500 subsidy for a $100,000
car in those five terms? Specifically, I am talking about the
federal tax credit for cars--electric cars that--luxury
vehicles that cost $100,000. What is the price elasticity for a
$100,000 luxury vehicle, and how many more--has the government
gone back to study how many more of those have been sold, and
what the economic benefit to all of society is because of that
tax credit?
Dr. Danielson. So on your first question related to the
application of the five core questions of EERE, we don't
administer the subsidy programs, so those questions wouldn't--I
didn't develop those----
Mr. Massie. Okay.
Dr. Danielson. --I developed those with innovation programs
in mind. And then can you repeat your second question?
Mr. Massie. Well, I am concerned about, is that an
efficient way to achieve goals, to subsidize a luxury good?
Dr. Danielson. Well, what we have seen in the development
of many technologies, including clean energy technologies, is
that, you know, this is something I saw when I was in the
business world, is that innovative new technologies often find
application in first markets where customers are willing to
pay. For example, 35 years ago photovoltaic started in
satellites. Now we have reduced the cost by 99 percent, and so
now they are getting into the grid market. So I think an
expensive electric vehicle, let us say such as what Tesla
makes, is a first market adopter chance to get the EV industry
going and drive volume----
Mr. Massie. So I will point out----
Dr. Danielson. --and drive----
Mr. Massie. --for economic benefit or additionality that
all of those subsidies add up to about $500 million, which is
two percent of their market cap. So I find it hard to believe
that it wouldn't have happened without that subsidy.
While I have a little bit of time left, I want to ask when
was the car invented?
Dr. Danielson. Geez, I don't know the exact----
Mr. Massie. At least 100 years ago?
Dr. Danielson. Yeah. Yeah.
Mr. Massie. And it is fundamentally the same architecture.
So why are we doing car research? When we do electric or
vehicle battery research or fuel cell vehicles, you mentioned,
shouldn't we be doing research on fuel cells and batteries and
not the vehicle itself or the application to the vehicle? I
mean after all, the batteries that are in the car that you
mentioned came literally from a laptop, so why is it more
virtuous if it is a vehicle when we know, in general, we need
battery technology? Shouldn't we be focused on basic research
instead of trying to iterate on something that--whose basic
architecture was settled 100 years ago?
Dr. Danielson. Well, one thing I will point out is that the
preponderance of the work we do at EERE is applied research,
and early stage applied research. And so it is really cutting-
edge innovation. It is not basic research in the sense that it
is just exploratory and really intending to create knowledge--
we are actually trying to develop technologies. And so I did
want to emphasize that. But when we do analyses and look at
what the impact can be, there is a lot of room for improving
the efficiency of the combustion engine. There is a lot of room
for improving the materials that a car is made of to make it
much more lightweight. And we also see great opportunity in
fuel cells and electric vehicles, and we are looking to
innovate in these areas and help achieve cost reduction in
these technologies, but it is ultimately going to be the market
that will decide which of these get into the market.
Mr. Massie. All right, my time has expired.
Chairman Weber. Gentleman yields back.
The gentleman from Texas, Mr. Veasey, is recognized.
Mr. Veasey. Thank you, Mr. Chairman. I appreciate that.
And I wanted to ask about wind energy, particularly to Dr.
Danielson. Dr. Danielson, you may know that in Texas, we are
basically the king of wind. We have about 20 percent of the
capacity nationwide coming out of our state. Most of that was
done with tax credits and different things like that. Some of
that was actually done when Mr. Weber and I were serving in the
Texas legislature together, and so we are very proud of what it
means to our economy, and would hate to see our economy, you
know, wrecked by any policy that would reverse the progress
that we have made in delivering wind to our state, and the--and
what that has meant for the entire country.
And I wanted to ask you in particular about wind, and what
sort of research that you guys are doing to make wind even more
efficient. Like one of the things that I would like to see with
wind, for instance, is, if you have ever been out to west
Texas, you will know that it takes up a lot of space. It takes
up a lot of landmass. What are we doing to make it to where
wind or wind turbines can be moved in various locations, and
maybe made even more efficient to deliver the same amount of
capacity as they currently do?
Dr. Danielson. Well, thanks for that question. You know,
one of the areas that we--is our primary research and
development focus in wind is in wind plant optimization. So you
find that when--if you have a wind turbine all by itself, it
performs in a certain way. When you bring it into a farm, you
typically get 30 percent reduction in the power output because
of the way that the turbines interact with each other. And you
also find that some turbines are getting a lot of turbulence
from the turbine in front of them, and they will break in a
shorter period of time than others. And so we have a consortium
around our national laboratories focused on taking advantage of
high-performance computing capabilities and advanced modeling
simulation in the area of fluid dynamics to try to figure out
how do you put together a wind farm, and how do you control it
in a way that you can get that 30 percent back. So if you could
get 30 percent more energy out of a windfarm without putting
any more hardware on the ground, that is a significant cost
reduction to drive wind towards direct cost-competitiveness
nationwide.
Mr. Veasey. One of the things that often surprises people
when I visit one of the windfarms down in Midland, where they
obviously produce a lot of oil too, I was asking the guy that
was working out there at the windfarm about the generator at
the bottom of the windmill, and he was explaining that, he said
they actually use oil--a renewable oil, almost like a refined
oil, like a 40-weight that you would use to change the oil in
your car, they use this in the bottom of the windmill in order
to, I guess, keep the generator going and to keep everything
lubed. How much petroleum products are they--does wind
currently use in order to make the windmills run properly?
Dr. Danielson. Thank you for that question. I actually
don't know the answer to that question, but I would be more
than happy to take it for the record and find an answer to that
question.
Mr. Veasey. Okay. Well, thank you. I appreciate that. And I
did--I had a question for Ms. McCormick too. I just wanted to
know just about some federal research investments in wind
technologies that are impacting the growth right now in the
wind energy sector.
Ms. McCormick. Well, I do know that the wind industry is
requesting and is supporting some of the funding that the
Department of Energy is proposing for studying the impact on
wildlife, so that they have some specific clarifications that
they are looking for in the DOE budget, but obviously that is
an issue that the industry is interested in seeing further
research on.
Mr. Veasey. Okay.
Thank you, Mr. Chairman. I am going to give back some of
the time that we lost a little bit earlier.
Chairman Weber. Well, good. Will you credit that to the
gentleman from Washington's account?
Mr. Veasey. I will do that.
Chairman Weber. Okay.
Mr. Veasey. Yes.
Chairman Weber. Thank you.
Mr. Veasey. Happy to.
Chairman Weber. And the gentleman from Colorado, Mr.
Perlmutter, is recognized.
Mr. Perlmutter. Thank you, Mr. Chairman. And thank you to
the panel for appearing today. Thank you for your testimony.
Obviously, Dr. Danielson, I just want to congratulate you
at EERE and the Department of Energy for its part--its role in
really reducing the cost of photovoltaics, wind turbines,
biomass efforts, because I would say that I am about
competition, and the more competition that we have among energy
sources the better off we are going to be. And we are seeing a
reduction in demand, so that may be the efficiency side of
EERE. We see other sources in terms of photovoltaics, wind,
biomass, fusion, nuclear, all as competitive pieces, and now we
see a giant drop in the price of oil which, in the past, has
been difficult for the energy sector as a whole because it
wiped our domestic energy, you know, whether it was oil and
gas, fossil fuels, coal, or renewables. Our renewable energy
efforts, can it withstand this drop in oil prices, Dr.
Danielson?
Dr. Danielson. Well, thanks for that----
Mr. Perlmutter. Will people continue to participate in
this?
Dr. Danielson. Thanks for that question. You know, it is
actually the shale gas boom that is creating a more competitive
environment in terms of natural gas power generation. And so
there is no doubt that if those prices remain where they are,
that other forms of energy, renewables or any other, nuclear,
are going to have an even lower price point to compete with to
be competitive. But there are benefits to diversity in any
energy system. There are many folks out there co-ops, for
example, who operate their own grids who see value in the lack
of a fuel cost associated with renewables, so as they are
building out a portfolio of, let us say, natural gas-powered
assets, they want to include renewables in that portfolio as a
way to mitigate risk against price changes in natural gas, for
example.
Mr. Perlmutter. And I guess I would ask the economists on
the panel. Mr. Loris, you, Dr. de Rugy, I mean I guess I am
taking it as an axiom that more competition is better than
less. Would you agree with me on that?
Mr. Loris. Well----
Dr. de Rugy. More competition--yeah, go ahead.
Mr. Loris. Go ahead.
Dr. de Rugy. Go ahead.
Mr. Loris. Please.
Dr. de Rugy. Yeah, no, more competition is good, but the
problem with----
Mr. Perlmutter. It was a yes or no.
Dr. de Rugy. Yes.
Mr. Perlmutter. Okay.
Mr. Loris. Yes.
Dr. de Rugy. More competition is good.
Mr. Perlmutter. Okay. So, Dr. de Rugy, I want to--you know,
we are talking about the politics, and we are in the Congress
of the United States of America, this is politics here, okay,
because different people have different desires for different
things. And so I am speaking today as an elected official. I
used to be a bankruptcy lawyer handling big Chapter 11
bankruptcies, so I got to see the dark side of business and
take them apart. In connection with subsidies and incentives,
do you know how much in way of incentives, either by oil
depletion allowances or other kinds of deductions, we give to
the oil and gas industry?
Dr. de Rugy. I don't know the exact amount.
Mr. Perlmutter. It is about $13.4 billion, which is pretty
much--if you take all the tax deductions available to the
renewable energy sources, they are pretty equivalent. I think
they are about the same, solar and wind. It may be in a perfect
world we shouldn't provide any incentives to either one, but I
am a guy who thinks I want more energy sources, not less, I
want more competition, not less, and if I am going to subsidize
one, I am going to support the other so that we can get the
best of both worlds. Does that makes sense to you, or is that--
--
Dr. de Rugy. Well, at least----
Mr. Perlmutter. --am I mistaken?
Dr. de Rugy. At least you are consistent.
Mr. Perlmutter. Good.
Dr. de Rugy. And see, I don't want subsidies on the fossil
fuels that I don't want on green energy, so----
Mr. Perlmutter. Okay. The Chairman asked a question about,
you know, our debt, and I serve on the Financial Services
Committee as well, so it is the banking, stock market, housing,
economy. And, you know, the one thing that I know from the last
eight years having served on that, we had a surplus at the end
of the Clinton Administration, Revenues exceeded expenses, and
then we had two tax cuts, two wars, and a crash on Wall Street
that is the bulk of the debt that this country has incurred. It
wasn't the cost of EERE or any of the energy, or any of the
other things. The bulk of it was these massive things and tax
cuts, wars and crash. Would you agree with me on that?
Dr. de Rugy. Yeah, you--yes. Too much spending----
Mr. Perlmutter. Okay.
Dr. de Rugy. --for sure.
Mr. Perlmutter. Okay. Mr. Chairman, I appreciate the
opportunity to serve on this committee, and I yield back.
Chairman Weber. The gentleman yields back.
And we appreciate the witnesses and their testimony. In
closing today's hearing, I do want to say that I hope we draw
attention to the fact that there has been a huge 42 percent
increase requested by the Administration in the budget which,
in today's hard economic times, is going to be very, very
tough, so I hope we have served to at least outline and discuss
that back and forth. Thank you for your valuable testimony.
Thank you for sitting through our questions. Thank the Members
for their questions. The record will remain open for two weeks
for additional comments and written questions from Members.
The hearing is adjourned.
[Whereupon, at 4:02 p.m., the Subcommittee was adjourned.]
Appendix I
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Answers to Post-Hearing Questions
Responses by Dr. David Danielson
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Appendix II
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Additional Material for the Record
Prepared statement of Committee Ranking Member
Eddie Bernice Johsnon
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Document submitted by Dr. David Danielson
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