UNITED STATES COMMISSION ON SECURITY AND COOPERATION IN EUROPE
(HELSINKI COMMISSION) HOLDS HEARING:
CLEARING THE AIR, FEEDING THE FUEL TANK, UNDERSTANDING THE LINK BETWEEN ENERGY
AND ENVIRONMENTAL SECURITY
May 6, 2008
REP. ALCEE L. HASTINGS, D-FLA., CHAIRMAN
REP. LOUISE M. SLAUGHTER, D-N.Y.
REP. MIKE MCINTYRE, D-N.C.
REP. HILDA L. SOLIS, D-CALIF.
REP. G.K. BUTTERFIELD, D-N.C.
REP. CHRISTOPHER H. SMITH, R-N.J.
REP. ROBERT B. ADERHOLT, R-ALA.
REP. MIKE PENCE, R-IND.
REP. JOSEPH R. PITTS, R-PENN.
SEN. BENJAMIN L. CARDIN, D-MD., CO-CHAIRMAN
SEN. CHRISTOPHER J. DODD, D-CONN.
SEN. RUSSELL D. FEINGOLD, D-WIS.
SEN. HILLARY RODHAM CLINTON, D-N.Y.
SEN. JOHN F. KERRY, D-MASS.
SEN. SAM BROWNBACK, R-KAN.
SEN. GORDON H. SMITH, R-ORE.
SEN. SAXBY CHAMBLISS, R-GA.
SEN. RICHARD BURR, R-N.C.
DR. JONATHAN PERSHING,
CLIMATE, ENERGY AND POLLUTION PROGRAM,
WORLD RESOURCES INSTITUTE
DR. RICHARD BRADLEY,
HEAD OF ENERGY EFFICIENCY AND ENVIRONMENT DIVISION,
INTERNATIONAL ENERGY AGENCY
MS. JETTA WONG,
SENIOR POLICY ASSOCIATE,
AGRICULTURE & ENERGY PROGRAM,
ENVIRONMENTAL AND ENERGY STUDY INSTITUTE
MR. JUSTIN M. LEE,
CEO, NEXSUN ENERGY, INC.
DR. ALEX MARKER,
DIRECTOR FOR RESEARCH AND DEVELOPMENT,
SCHOTT NORTH AMERICA
[The hearing was held at 3:00 p.m. in Room B-318 Rayburn House Office
Building, Washington, D.C., Honorable Alcee L. Hastings, Chairman, Commission
on Security and Cooperation in Europe, moderating]
HASTINGS: I will gather the hearing to order and I want to welcome everyone.
Today's hearing is the third in a series of hearings the Helsinki Commission is
holding on energy security. And, frankly, we could not be holding this hearing
at a better time. Not only are we faced with record high oil prices, but at a
time when we are trying to find and use alternative fuel sources, such as
We are seeing a shocking rise in food prices that is devastating the poor and
straining the wallets of the middle class all over the world.
I'm very interested to hear the opinions of our panelists today on what, if
any, connection there is between these two situations.
All government are struggling to find the right mix to meeting what seem to be
competing demands for energy independence, sustainability and affordability.
And there are lots of voices and perspectives out there vying for attention.
Sometimes, and most probably all of the time, it is instructive to take a look
back before we look forward.
In the 1800s we relied on whale oil for heating and lights and it drove the
whale population into decline. Crude oil was around but it hadn't caught on as
a fuel source. In fact, one of the first uses here in the United States was as
a health cure.
In the late 1800's people began scooping up the oil bubbling out of the ground
and used it for kerosene to light their lamps. And more oil was found and
refined to make more kerosene for lamps. The byproduct, gasoline, was simply
thrown out because there was no use for it.
But the invention of the horseless carriage, which could run on the stuff that
was being thrown away, changed history. And by 1920 there were nine million
motor vehicles in the United States along and gas stations were opening
everywhere. And here we are in 2008 consuming over 20 million barrels of oil
What happens next? Can we find the next vehicle or fuel that will carry us
forward to a new energy paradigm or that solves our climate change, oil
dependency and economic problems all at the same time?
The stakes are high. The U.N. reports on climate change underscore a cruel
irony that the overwhelming environmental costs of climate change will be felt
in the countries least responsible for climate change and least able to deal
with the consequences.
It will be an even greater tragedy if our own efforts to ameliorate climate
change add an even greater burden on others.
We need to take a level-headed look at all of our options and try to realize
what the consequences could be because there will be consequences. The
question is whether they are manageable and reasonable.
Before I turn to our first panel of witnesses, I'd like to note for the
audience that, in honor of today's hearing focusing on the environment, we are
going green and have not printed out the statements of each of our witnesses.
You'll be able to find all of the hearing materials on our web site. And we
encourage you to do that. We hope to institute this practice at future
hearings as well, but today is our touchstone hearing so to speak.
You do have copies of the bios for the witnesses so I won't read them to you.
We have with us Dr. Pershing with World Resources Institute.
And when we do get started, Dr. Pershing, we'll come to you, followed by Dr.
Bradley with the International Energy Agency and then Ms. Wong with the
Environment and Energy Study Institute.
We've been joined by my good friend and ranking member, Congressman Smith,
Chris Smith, from New Jersey.
And, Chris, I don't know whether you're aware. I just announced that we're
And all of our hearing is going to be on the web site. We didn't kill a lot of
trees like we normally do today for that purpose.
But I'll turn to the ranking member for any statement he may wish to give.
SMITH: Thank you very much, Mr. Chairman. Green is good. And thank you.
And thank you for the witness for being here and for sharing with us your
expertise and insights.
I'm very pleased we're examining the relationship between the world's growing
energy consumption and our overburdened environment.
Congress has an obligation to work to ensure healthy and safe environments for
the benefit of our current and future generations. To reduce our dependence on
fossil fuels and achieve a healthier environment we need a multifaceted
approach that approaches the tangled web of issues involved. And we need to
foster both energy independence and clean energy.
As ranking member of the House Foreign Affairs Subcommittee on Africa and
Global Health, I'm particularly concerned about the relationship between energy
issues and the sharp rise in food prices in the developing world. Although
right now food prices are rising in the United States, in general and for most
of our lives, Americans have benefited from relatively low food prices.
In fact, the average U.S. consumer spends less than 10 percent of his or her
income on food while in much of the developing world families spend 60 to 80
percent on food. We can easily see how even small increases in food prices can
bring real tragedy to poor countries.
For almost twenty years I've been working on the broad issue of climate
change. Back in 1989 I offered an amendment addressing global warming to
legislation that was before the House. And it passed. In 1990 I introduced a
bill that addressed the international aspects of global climate change.
It's been a long road, but we've taken some important steps. In 2007 I
joined with my good friend and colleague, the late Tom Lantos, on the
International Climate Cooperation Re-Engagement Act of 2007. Portions of that
bill have since become law.
Our witnesses today will address renewable energy technology, a crucial
part of the solution to today's challenges. Renewable energies such as wind,
solar, biomass and geothermal must continue to grow to represent a larger share
of the world's energy supply.
To sharpen the focus on renewable energy, I introduced bipartisan legislation
-- along with my colleague, Representative Ed Markey -- that would have the
United States help create an International Renewable Energy Agency. This
agency would work to "expand the availability and generating capacity of
renewable energy to markets around the world in order to increase economic
opportunity, drive technological innovation, enhance regional and global
security and raise living standards, and reduce global warming pollution."
In the past, the U.S. helped with the creation of other international
energy agencies, but none of them focuses primarily on renewable energy. To
ensure a healthy and safe environment for today and tomorrow, we must continue
to reduce our dependence on fossil fuels and promote 21st century clean energy
Given rising sea levels, the increasing severity of storm surges, and
higher temperatures the world over, the impact of global climate change is
undeniable. Unless we act now, we will see greater and greater threats to our
way of life on this planet.
I'm looking forward to the testimony of our witnesses today. Thank you for
again convening this very important hearing. And we're working together to
find further solutions to the complex relationship between energy needs and
HASTINGS: Thank you, Congress, I appreciate it.
And before we start with Dr. Pershing, I'd like to recognize the lieutenant
governor of Wisconsin, the 43rd lieutenant governor, Barbara Lawton.
Governor, we welcome you.
Thank you so much.
She has a distinguished history in this arena and, among others things, has
resolved to develop her green economy agenda. And working with her colleagues
in the National Lieutenant Governors Association, has done an awful lot of work
in this arena.
We have also have something in common, Governor, even though I'm twice your age.
But also, in Florida, I worked in the Florida Council of the Arts for a number
of years in the early stages of my career. But she has been active, the
governor has, in the Wisconsin Arts Board.
And we are very pleased to have you here today. And if our time permits, we
would welcome your thoughts or questions as well.
Dr. Pershing, we'll begin with you.
PERSHING: Does that work better? Thank you very much. Apologize.
My name is Jonathan Pershing. I am the director of the Climate, Energy and
Pollution Program at an institution called the World Resources Institute.
We're a think tank, a nonprofit, nonpartisan think tank, based here in
Washington; partner with business, with governments, with NGOs around the
world; have partnerships in more than 70 countries working on climate, on
biodiversity, on business practice, on global and environmental problems. So
it's from that perspective that I'll speak.
I wanted to make several key points in my opening remarks and very happy to
answer questions. I have a longer statement, which I have submitted to you.
Hopefully, that will be constructive.
First and underlying everything that I say is I think there's a broad agreement
that we need a safe and environmentally sound, yet a secure infrastructure. No
questions about that.
It's got to provide a full array of services. It's got to ensure collective
health and national security. In my mind, it will require a fundamental
updating of the energy infrastructure.
A successful, sustainable long-term energy policy will only be achieved however
if it's linked to environmental solutions, particularly climate change.
I use the analogy of the frying pan and the fire. If energy security is the
frying pan that we're now in, leaping out into the fire of a global warming
world, those are going to be not in our collective interests.
At the moment we have an immediate energy security problem. Gasoline prices
are rising rapidly. But frankly, the climate change problem is not far behind.
We've already seen substantial damages as indicated in the International
Governmental Panel on Climate Change on impact of climate change.
The second point that I want to make is there are solutions. So this is not a
problem where we have to hide our heads in the same. This is an area where
there are concrete things that we can do today that would both address security
and climate change simultaneously.
Perhaps the most significant of all of these is in fact energy efficiency. In
every successful model of climate change mitigation, as well as every
successful model of long-term energy security, energy efficiency rises to the
top and provides over one-third of emissions reductions projected in those
models. And it has an equivalent affect on global energy demand.
Policy is particularly relevant in the OSCE region. Of course, of interest to
this commission, apply particularly in the context of the former Soviet Union.
And one of the graphs that I put into my chart showed that. And you can get
this very sense of countries that have substantial inefficiencies where gains
are possible. They would lead to gains in environment and gains in security,
promoting national welfare in a combination that almost no other policy could
A second area for progressive research and policy is clearly renewable energy.
And, Mr. Smith and Mr. Hastings, you both raised this in your opening comments.
The United States and nearly every country in the world, but particularly the
countries of the OSCE, have abundant renewable resources. They've got wind.
They've got solar. They clearly all have major biomass potential.
Tapping these resources would mean fewer imports, less fossil fuel in
particular, shorter supply lines. And that also means less vulnerability from
a different side of the energy security debate. And stability in fuel supply
because we're not looking a price spikes in the market; we've got a domestic
capacity which we can use.
The third point is we need to do is investment. Perhaps the best case in point
is capture and storage. We don't tend to think of that as renewable technology
but it's one way to substantially enhance energy supply without creating
The cost of CO2 is going to be high in terms of the CO2 emissions from a fossil
fuel plant. But, if we can capture that CO2, we could use the world's coal.
That's not just the United States but that's Poland, that's Germany, that's
Russia, places of high import globally. But we could capture the CO2 and avoid
the damages caused to the atmosphere not just of course of the CO2 emissions,
but of local pollutants, toxics (inaudible) sulphur, et cetera.
The final point I want to make is the United States has to lead in this area.
Our economy's the world's largest. Our energy use is the highest in the world.
And, on a per capita basis, we're only surpassed by a very few countries.
And, frankly, they're not ones we'd like to have in our list: Qatar, United
Arab Emirates. These are not places where we think of ourselves as being
comparable. We think of ourselves as being more capable than that.
Without U.S. leadership, the rest of the world probably will not succeed in
solving the problem. And, in this context, there are a number of bills that
are before both houses that may be relevant for consideration. I just want to
point out three broad ones as a framework for your consideration.
The first one is a bill that's currently before the Senate, S. 2191, that would
cap greenhouse gas emissions. It includes support for renewable energy. It
includes capture and storage for CO2. These elements are ones that fit the
criteria for energy security and climate.
Next year, you'll all be reconsidering the transportation bill; how that moves
forward, clear implication for energy security and climate. Transport accounts
for the vast majority of U.S. oil imports. And efficiency gains in the
transport sector would be substantial.
So means the bill could look at fuels. We could look at vehicles. And,
perhaps most importantly, we can look at reducing the number of miles that
Americans travel to work and for leisure and for errands, and smart growth
policies that may help reduce total demand.
Finally, on the biofuel side, which you both raised as a key element, I would
suggest this is an indication of how to be careful: what not to do. We rushed
in to promote biofuels because we thought it would be good for energy security.
And we thought it would be good for climate change. But we clearly got it
The most recent science from biofuels suggests that, at best, it's only as good
as gasoline and may be worse if we produce it from corn. We need to find
alternative technologies which may in fact be available, like switchgrass and
other cellulosic solutions.
But, as we currently move down the road, we're leading to cutting down the
forests in the Amazon. We're leading to substantial increases in food prices
globally. This to me speaks to the answer of the problem, which is integrating
our solutions, not doing them piecemeal. We can't have one that only deals
with the climate without also looking at other issues of security. We can't
have one that only deals with security without also looking at things like food
and the rest of the environment.
Integration and careful and thorough work counts.
So, in conclusion, I strongly believe that the issues of energy security and
climate change can be addressed. If we do so, and if we do so wisely, we can
have a much better world, a stronger global economy, one that works for the
U.S., one that works for the OSCE countries and one that works globally.
Thank you very much.
BRADLEY: Chairman Hastings (OFF-MIKE). The IEA estimates that, by 2030,
global energy demand will be 55 percent higher than in 2005 with fossil fuels
constituting 84 percent of the increase.
In the IEA's world energy outlook from 2007, CO2 grows with no change in
current policies by about 57 percent between 2005 and 2030.
Without changed polices globally, the fossil fueled past is prologued to our
energy future. Inertia characterizes both our climate system and our energy
infrastructure. Carbon dioxide has a long atmospheric residence time, more
than a century, making the act of emitting merely irreversible for current
generations and their children.
Much of the electricity generation and consuming infrastructure lasts many
decades to a century. The turnover rates for much of this capital can be
altered, but at a cost, which is largely from the premature retirement of
economically productive capital.
So what can governments do to foster the clean investments and adjust the
relative time that investments are made?
There can be no serious doubt that establishing a price on carbon is a
foundation measure in any domestic and international cost-effective framework.
IEA governments certainly differ with respect to, one, when that price should
be incorporated into the domestic and international portfolio; two, the means
for delivering the price signal, should it be carbon taxes or emissions
trading; or, three, the sectoral and geographic application of price?
Such questions are in negotiations among governments now. However, no policy
measure can locate the least cost reductions in our highly diverse global
economy as effectively as the price on carbon.
Nevertheless, IEA analysis has demonstrated that price will not be enough to
achieve stabilization of emission concentrations. Market failures and barriers
sometimes prevent market participants from having the full range of options
available to them for efficient and timely choices.
Certainly, technology research and development is one example. The market will
not adequately invest in R&D except when a technology is near
Three points need to be made.
Government funding is essential. Carbon capture and storage is an essential
technology as coal is an important feature of the future energy supply mix in
even aggressive policy scenarios.
Governments need to cooperatively build 10 to 15 carbon-capture plants with
various configurations to demonstrate to the market the essential overall
operating characteristics of such a technology.
And, finally, not all renewable technologies are free of energy security risks
not environmentally benign.
Biofuels that are produced with natural gas, for example, are certainly exposed
to energy security risks. And first-generation biofuels can emit more CO2 than
petroleum. Other renewables can be subject to weather-related disruptions for
considerable periods of time.
Energy efficiency is an essential element of any cost-effective policy
framework and will not be fully exploited through market price alone.
It is important that energy efficiency policy address not only the new capital
decisions, but also foster improvements in the existing capital.
Refurbishment of policy can improve the energy consumption character of
refurbishment and maintenance decisions. Energy efficiency is the first pillar
in reconciling the apparently conflicting goals of stabilizing concentrations
at safe levels and synchronizing capital replacement and renewal rates. Energy
efficiency, including that addressed in the existing capital refurbishment, can
alter trends now and can provide time for new technologies to be made cost
effective and to penetrate the market.
At the request of energy ministers at the G-8 Gleneagles Summit, the IEA has
been assessing best practice and end-use policy. From this work, we have made
specific energy efficiency recommendations to the last G-8 summit. We've made
25 now, including the ones we're making in Hokkaido. And progress is already
evident in their implementation.
For example, we recommended that countries adopt a 1-watt standard for
appliances when operating in the standby mode. That is, the mode when
appliances are turned off, when a red light is on. This type of power
consumption is rising rapidly in IEA countries and beyond.
For example, we estimate that without a standby power standard, IEA governments
alone will build 21-gigawatt power plants by 2020 just to run our appliances
when they are turned off.
Governments are starting to act, however. Australia has adopted a standard and
the European Union has proposed one.
U.S. Executive Order 13221 predates the IEA recommendation and applies a
standby power to federal purchases. And I'm pleased to say that two weeks ago
the government of Thailand adopted such a standard.
The next step toward enhanced effectiveness however would be for governments to
coordinate the standard setting in the appliance area.
The IEA has also recommended energy performance standards for lighting that
have the effect of phasing out the most inefficient of incandescent bulbs.
As you know from your own legislation, action is evident here in the United
States. But, in all, IEA governments are either adopting or putting in motion
I want to be clear however: Energy efficiency is not a substitute for putting
in place cleaner investment incentives now. But, rather, it empowers a
technology change agenda by making it affordable and timely.
Putting incentives in place now, like a cost on carbon, is essential for energy
investors -- essential for energy investors so they can begin to factor it into
their investment decisions so they can know where policy is going and how it
will be structured. Investors can then respond effectively and in a timely
fashion. And markets can deliver affordability. But only when governments
clarify their intentions.
Thank you very much.
HASTINGS: Let me say to you what is happening -- to you and to Mr. Lee and to
Dr. Marker. As you heard that bell, and there will be a second one that will
go off in a few minutes, Congress Smith and I will be required to leave and
vote. We are reaching out to see if Senator Brownback, who is, I think, Mr.
Lee knows very well, can come.
If he cannot, then I'm going to exercise the prerogative of the chair with your
permission. And that is this is a hearing and the hearing formality requires
that a commissioner be present at all times during the hearing.
Can he come? OK.
But with your permission, this is so important. And I suspect that once we --
at the House of Representatives, we are probably going to be there an hour.
There are five votes and a motion to instruct and the likelihood is that we
will be there that long.
Rather than have you here, I could, after you, Ms. Wong, declare us not in a
hearing but in a briefing. And if we go to a briefing, then our staff members,
who can go forward and receive your testimony -- you're testimony will be the
same. It'll be on the Web site as we proposed, having gone green.
But as also critically important, I would appreciate it, if Mr. Smith nor I can
get back here, that we be able to submit to you in writing questions that we
would ask. And then we will post those on the web site as well.
Is that a satisfactory arrangement with you? I regret so much the fact that we
are having a truncated environment but it's not much I can do about it.
Ms. Wong, if you want to go forward, I think Mr. Smith and I will at least be
able to receive your testimony.
And then, Mr. Lee and Dr. Marker, if you all would come up after that?
WONG: Chairman Hastings and Congress Smith, thank you very much. And I'll try
to be brief, given the circumstances.
I am very happy to be here to testify on behalf of the Environmental and Energy
Study Institute. EESI is an independent, non-profit organization founded by a
bipartisan congressional caucus in 1984. It provides policymakers with
reliable information on energy and environment issues.
I'd also like to say congratulations on your first green briefing.
In 2006, biomass made up 3.4 percent of all the energy consumed in the United
States. It's important to realize that biomass is not a new technology. It is
in fact the oldest technology.
Biomass energy technology such as biofuels clearly have been recognized as a
renewable energy technology that is a critical component of climate change
As the commission and Congress debate actions to address failing policies in
agriculture, energy and food security, I would encourage them to take a
First, you could address our country's reliance on fossil fuels through
increased production of sustainable biomass for energy production.
Second, you could assess international trade and policy and foreign policy that
are affecting the United States and citizens of other countries on their food
and energy price issues.
As global markets continue to weave themselves together, the tie between
energy, land use for agriculture and climate change will become strikingly more
clear. Biofuel development has brought a laser beam attention to this tangled
The World Food Programme of the United Nations has described the increase in
the price of food as the silent tsunami threatening every continent.
Unfortunately, much of the media has jumped to point fingers without doing its
due diligence to find out what the real problem is. The easiest target for
blame was the increase in the production of biofuels. But the problem is far
more complex than that.
The U.N.'s Food and Agriculture Organization, the FAO, which has been assessing
the food crisis on an ongoing basis, has said that, "There is no single factor
that can be identified as being the main one responsible."
It goes on to say, "Nor is it possible to make a quantitative assessment on the
contributions of the factors that have been influential in the increase in the
price of food."
All the same, it's important to talk about what the different factors.
Supply-side factors influencing the price of food include production shortfalls
due to weather-related activities, diminishing commodity stock levels and, of
course, the increase in energy costs.
Demand-side factors influencing the price of food include changing demands due
to the consumption patterns of countries that are moving into higher growth in
their income, speculation in financial markets, and biofuels for agriculture
In the United States, the acceleration and food price inflation, rising labor
costs, rising commodity prices and rising energy prices have also contributed
to the increase in the price of food.
Although it is clear that the price of food is influenced by a number of
factors, in April 2008, a Texas A&M University study explains, "The underlying
force driving changes in the agriculture industry along with the economy as a
whole is the overall high energy costs."
It is critically important that sustainable biomass be considered as a part of
a strategy to not just reduce energy costs, which they're doing now, but also
to revitalize agriculture, reduce greenhouse gas emissions and restore the
United States as a world leader.
But this can only be done if biomass is produced sustainably. Biomass
technologies must use a wide variety of locally appropriate feed stocks,
including agriculture residue, wood residue, forest thinnings and waste
materials that do not induce a long-use change, as Mr. Bradley has already
Biomass technologies must also be produced as good production practices. They
must be developed through appropriate technologies at the appropriate scale.
As I mentioned earlier, the commission could take a two-pronged approach to
First, they could address the country's reliance on fossil fuels through the
increased production of sustainable biomass. Technologies only become staples
of our everyday lives through considerable investments and research,
demonstrations, employment and commercialization. It will be critically
important to conduct a national biomass assessment to know how much biomass we
can actually use sustainably for biofuels.
Second, you could assess the international trade and foreign policies affecting
the United States and citizens of other countries on food and price issues.
The United States should consider a return to a supply management program or a
strategic grain reserve. We have a strategic petroleum reserve, which has
become essential to our economy. We also need a strategic grain reserve, which
is essential to life.
Finally, although it is clear that several factors have increased the price of
food, a strong domestic U.S. market for biofuels has also contributed to this.
But it has also reduced trade pressures created by the excessive dumping of
cheap commodities on international markets.
This, in turn, has helped to increase international prices for farmers
worldwide, which is a good thing, but only if countries have the ability to
react to those high prices in a way that is beneficial to their citizens.
Unfortunately, this is not what we see happening.
But what is worse: Excessive dumping of cheap U.S. commodities, which have
flooded markets in developing countries, slowing destroying those markets and
putting farmers out of business, eventually forcing them into urban communities
where they no longer have the ability to produce food, putting them at the risk
of starvation; or extremely high food prices due to weather-related crop
failure, political turmoil, depletion of commodity stocks, increased demand,
all converging at once, creating a shortage that has hit developing countries
and poor citizens, causing many more to starve?
I know that neither of these scenarios are what we want. But pointing a finger
at biofuels is not going to solve the problem.
Furthermore, it's important to acknowledge that biofuels are already playing a
substantial role in suspending the finite supplies for petroleum, which we are
seeing is the underlying cause of food prices. In the absence of biofuels,
Merrill Lynch concluded that gasoline prices today would be 15 percent higher
than they are currently. This trend is only likely to strengthen in the near
What kind of effect would this have on the price of fuel? Biofuels, as we've
already discussed, are just one part of a strategy, where more long-term
policies, such as increased vehicle fuel efficiencies, smart growth practices,
conservation and a variety of other technologies, like plug-in hybrids, also
play a key role.
In the meantime, sustainable biofuels offer the only viable substitute to
petroleum and the only means to protect our energy supply in a phase of
uncertain international policies and rising oil prices.
Thank you for your time and attention.
HASTINGS: Ms. Wong, we're going to have a quick question from Congressman
And then, Chris, if you'll be kind enough to put us in recess? We think
Senator Brownback is going to be here shortly. And then he will reconvene.
And then, time permitting, Congressman Smith and I will come back.
And I'm going to head on over there.
SMITH: Thank you, Mr. Chairman.
I have a number of questions but time doesn't permit that.
Let me ask you one question. As we've been working on a number of climate
change issues, it's been disturbing to me that some have seen the crisis as an
engraved invitation to launch more nuclear facilities, which carry, in my
opinion, unacceptable risk when it comes to potential weapon creation, the
issue of the dirty bomb where terrorists might want to do something against one
of those, meltdowns like we saw in Chernobyl, and just the huge proliferation
of fissile material and nuclear material that will result.
And then there's the waste problem, which nobody has solved. Yucca Mountain
will be filled within two years. And you know, I think there's this idea, if
you want to mitigate climate change, go nuclear. And it's becoming a mantra,
at least here on Capitol Hill, that I find very disturbing.
One of our energy bills just recently, a couple of years ago -- and I ended up
voting against it primarily because of this -- was a huge new subsidy and push
to create nuclear facilities.
We have two in the state of New Jersey. I've been to both of them. I'm not
convinced that they're safe from every way that you look at it.
And I know -- for the record, I'm going to look at what your answers are for
the record because I have now about a minute and a half to get to the floor.
But if you could comment on it because it's being used by the nuclear industry
and many in government to say just build out more nuclear facilities. And it's
a global phenomenon, not just a U.S. phenomenon. And we'll pay a price for
that forever I think.
So I would ask you to answer that when this hearing or briefing is reconvened.
And I would -- without objection, the commission stands in recess subject to
the call of the chair.
BROWNBACK: Good afternoon, everybody. My name's Sam Brownback and the
hearing's going to be reconvened from the recess. The House members have had
to go over for a series of votes and so I know they have they send their
apologies and probably have already given those for having to slip out of this
But I wanted to continue with the panels and presentations. It's a very
important topic on energy security and the environment. We're all wrestling
with this. And what's happens anywhere, happens everywhere now because of the
nature of what the environment moves. And you don't contain it within one
So delighted to have on the second panel, Mr. Justin Lee, the CEO of Nexsun
Mr. Lee I'm familiar with and has an enterprise, an innovative ethanol
operation going. And he's building in my state, in Kansas. And I'm delighted
that they're doing it there.
I was just back home over the weekend and they're talking about the balancing
of energy, the environment and the economy, the three E's that I think we're
all going to have to balance a lot to be able to move forward, move forward as
a society, move forward to clean up the environment, move forward to maintain
Also here to speak is Dr. Alex Marker. He's director for research and
development at SCHOTT North America.
And delighted to have both of you gentlemen here. You're full statements will
be placed in the record as if read. So you're welcome to summarize or present
any way that you would like to. And then we'll go to some questions afterwards.
I don't know if my House colleagues or anybody else from the Senate will be
joining us. I'm sure they will, if they can, come back from the vote. But we
want to certainly get this in on the record. And I look forward to being able
to quiz you and discuss these matters with you.
Dr. Lee, you want to start out?
Thank you, Senator Brownback, for holding this important hearing and for your
gracious remarks about Nexsun Energy and for your invitation.
Now today I will testify on energy security and the climate changes.
Nexsun Energy is a developer of biofuel products and facilities, both domestic
and internationally. Our company was formed in 2005 following the enactment of
the Energy Policy Act, which inspired me to build a company which would become
a leading developer of a green energy project.
Today, I will discuss the production and use of ethanol in strengthening the
energy security of this nation and how it benefits the environment.
In the past few decades, our economy greatly expanded with the benefit of cheap
and abundant oil. However, during the past five years, things have changed
Today, we have a decline in oil reserves, unprecedented consumption of fossil
fuels and historically high gasoline prices and dramatic evidence of adverse
This situation weakens our national security and threatens our daily lives.
Unless we find prompt solutions, we and our allies are heading for irreversible
economic and environmental disaster.
I believe alternative energy, such as biofuel, wind, solar and even hydrogen
power, is the most feasible solution to these serious problems. The use of our
country's energy is no longer an option. It is a necessary for our survival.
We cannot rely on conventional sources of energy anymore.
Late last year, in an effort to resolve such concerns, Congress passed the
Energy Independence and Security Act, which sets renewable fuel standards and
mandates over 15 billion gallons of ethanol be blended by the year 2012 and 36
billion gallons by the year 2022.
As this standard is met, the (inaudible) imports will be replaced with
American-made homegrown fuel in significant amounts. Accordingly, our
dependence on foreign oil will be reduced. And our national security will
Thanks to producers, ethanol production has dramatically increased in the last
few years, resulting in approximately seven billion gallons of production in
2007. As of April 4th, the year's consumed almost two billion gallons of
ethanol, the equivalent of nearly 46 billion barrels of oil. Ethanol also
fuels close to 6 percent of American gasoline demand, roughly equal to all oil
currently imported from Nigeria, the U.S.'s fifth largest foreign supplier.
Without ethanol in our fuel supply, gasoline prices could have been more than
25 percent higher than they are today.
Ethanol can reduce oil imports and can replace gasoline in significant amounts.
It can also provide numerous and diverse benefits, including environmental,
technological and economic and national security and health benefits.
Environmentally, ethanol is inherently safer than gasoline because it emits
less hydrocarbons and other toxic gases. It also rapidly biodegrades in
surface water, ground water and soil. As a result, it does not pose long-term
pollution or health hazards.
Ethanol is clean-burning fuel produced by fermented sugars derived from such
basic crops such as corn and (inaudible). These crops are renewable, can be
reproduced indefinitely without depleting our natural resources. With today's
other advanced technologies, we can produce ethanol from cellulosic biomass,
such as wood waste, municipal waste and switchgrass.
With a vast amount of unused farmland available in America, we can grow
abundant biomass and other (inaudible) amounts that sustain the required level
of production of ethanol in the United States. Once implemented, this program
will diminish the demand for conventional biofuel feedstock, such as corn.
Contrary to widespread media reports, ethanol production does not take food out
of people's mouths. Only 10 percent of the corn produced in the U.S. is
actually used for human consumption.
Moreover, ethanol has very little effect on food price. According to industry
data, energy prices and transportation and labor costs are the primary factors
affecting food prices at the store today.
Ethanol industry also provides many positive solutions for America, especially
at the present time. Ethanol production stimulates and expands our economy.
It creates jobs and increases revenues. More importantly, it brings balance,
balance to all sectors of our economy, from agriculture and manufacturing to
the service industry.
These benefits are available to all nations in the global market, including the
member countries of the OSCE.
John Urbanchuk, a renowned biofuel economist, states in a report that was
submitted that in 2007 the ethanol industry created over 236,000 jobs in
various sectors of our economy, $12.3 billion of consumer income, and about $48
million in capital spending, and almost $8 billion in state and federal tax
Let me show an example specific to Nexsun's business. Mr. Urbanchuk has
determined that Nexsun's 48 million gallon ethanol plant, which is under
construction in Ulysses, Kansas, this one plant along will create 54 direct
permanent jobs, as many as 942 indirect jobs, generate approximately $180
million in annual revenues and millions of dollars in tax revenue and increase
the household income.
Senator Brownback, the ethanol industry is growing. It's dynamic. The
necessity and demand is compelling.
However, the industry still remains in an infant stage. It needs government
support to nurture it until it fully develops and can sustain itself as an
independent source of alternative energy.
To accomplish this, we must have long-term sustainable energy polices,
including producer tax credits and the loan programs that support the
widespread development and use of alternative fuels such as ethanol. Such
legislative action will reduce our dependence on foreign oil and strengthen our
Thank you very much.
BROWNBACK: Thank you very much, Mr. Lee.
And I said previously, I really appreciate, particularly the plant you've got
in my state, obviously. But many people have put forward ethanol plants. And
really the productoin has skyrocketed in the country. You note the amount of
ethanol and what we're replacing, of coming in, and the help it's giving on
gasoline prices, that without it, we'd have much higher gasoline prices. So
that there's just a cumulative set of things and it's not the reason we have
food prices going up.
I think that's the big one that we need to talk with people about, that that's
not what's causing it. We had a terrible year on wheat production last year in
my state, as they did in many places around the world, and really drove wheat
prices up a lot. Production's looking much better for this year. And that's a
much closer issue. And also rice and the restrictions on its being able to be
exported from producing countries is one that's a key one, too.
So delighted to have you here. Look forward to some questions and answers and
discussion with you.
Dr. Marker, thank you very much for joining us today. The floor is yours.
MARKER: Senator Brownback, thank you for the opportunity to speak with you
today regarding the role of solar energy as part of a renewable energy
portfolio in creating energy independence.
In just one hour's time, the amount of energy that the sun shines upon the
Earth's surface exceeds the energy consumption of all mankind in an entire
year. In the five minutes I'll be speaking to you today, the sun shining upon
the United States alone contains enough energy to satisfy America's power
demands for an entire month.
Solar energy exists in many forms today. The most commonly type of solar
energy is photovoltaic power, often referred to as P.V. In this technology,
solar cells convert sunlight into valuable electricity.
The other major type of solar energy is called concentrating solar power, or
CSP. This type of energy converts the thermal energy created by the sun's
radiation to heat a fluid that then spins the turbine, producing electricity in
a utility scale-sized operation. The capacity of these power plants is
generally more than 50 megawatts, allowing them to produce enough electricity
to meet the needs of tens of thousands of homes.
Over the decades, both of these technologies have been reliably providing clean
energy to tens of thousands of Americans. Photovoltaics have been in
production for 50 years and SEG plants in the Mojave Desert have been operating
for more than 20 years, providing 350 megawatts of electricity.
Just last year, a 64-megawatt Nevada Solar One facility went on-line producing
clean electricity to provide power to more than 15,000 households.
The U.S. is a sleeping giant when it comes to solar energy. By extending the
investment tax credit, this giant will awaken.
In 2007, the United States' P.V. installations -- installations increased by 45
percent, installing more than 150 megawatts for the year. There is also
growing interest in utility-scale CSP projects. More than 4,000 megawatts of
installed capacity is in the pipeline and scheduled to come on-line in the next
five to 10 years.
But what do these numbers really represent? For one thing, the increase in
solar energy adoption means increase in jobs. It's forecasted if the ITC is
extended, 62,000 manufacturing and distribution jobs will be created directly
as a result of increasing adoption of renewable energy. On top of that, there
will be an increased demand for electricians, plumbers, roofers and engineers;
potentionally thousands of new jobs created each year.
This is job growth for Americans, by Americans, for an industry that will
In addition to job creation, there are other economic benefits. Consumers will
be able to combat volatile energy prices. Utilities will finally have a power
infrastructure that can meet peak demand. Distributed solar operating on
rooftops of buildings can stabilize grids and offset expensive infrastructure
By 2020, the cost of generating solar power is forecast to become competitive
with fossil fuel electricity production.
The company I represent, SCHOTT Solar, is in the construction phase of a large
manufacturing facility in Albuquerque, New Mexico. This plant will employ
1,500 people in the production of photovoltaics and receivers for CSP power
Over the long term, SCHOTT's investment in New Mexico will reach $500 million
and the economic impact, it is forecast, is to exceed $1 billion. And this is
just what one company is doing in one community. There are other companies
undertaking similar large projects from Michigan to Oregon, and many more that
are ready to do so once a clear commitment from the United States govenrment is
established in the form of long-term investment tax credit.
Now is the time for extending the ITC. If the renewable energy credits expire,
the impact next year would be more than 100,000 jobs either lost or not
created, according to Navigant Consulting. Additionally, there'll be more than
$20 billion worth of investments that won't be made. And there is no doubt
that that money and those jobs will go overseas.
Renewable energy is a domestic energy. Domestic energy not only means jobs for
Americans, but it means reducing our dependence upon potentially unstable
regions of the world. Renewable energy is as much about energy security as it
is about reducing greenhouse emissions and creating thousands of new jobs each
We have the opportunity today to address the challenge of global warming while
also growing our economy. All we need to do is harness the power of the sun.
Distinguished members of the commission, I sincerely thank you for your time
and consideration in this important matter.
BROWNBACK: Thank you, Dr. Marker. Appreciate that very much.
What I'd like to do is invite the first panel members back up to the table, if
you don't mind coming up.
And I want to keep you two gentlemen here as well and then just have questions
for everybody. If you're still here, I'd appreciate it. And we'll get some
microphones set up so we can get this all part of the record. As long as we've
got you all here, what I'd like to do is to be able to quiz everybody. That
would be great. We can get that all set up.
While we're doing that, Mr. Lee, let me start with you, if I could. You've got
a plant that's under construction, I believe, or is it still, or is it
LEE: Yes. We completed two plants in the state of Kansas, one in Garden City.
That was 55 million gallons with a capital investment over $100 million. The
second one, one month ago, we just completed in the city of Liberal in Kansas.
That was a 110 million gallon facility and with a capital investment of $120
million -- I'm sorry, $220 million -- which was completed and now is on-line in
BROWNBACK: I've just -- I've been reading about some of these later plants now
being put on hold because of a more difficult economic environment or difficult
capitalization environment. Is that -- I mean, that didn't affect your plants.
Are you finding that in other players in the industry?
LEE: Yes, Senator Brownback. We have some other projects. Three more
projects are in the stage of development. And as everybody knows, we have a
subprime mortgage crisis, and also the downturn of the economy, which impairs
our ability to continue the work of development. And it causes problems, yes.
Definitely, it causes problems. So we are looking for other sources of capital
from overseas as well.
BROWNBACK: I had a gentleman tell me the other day that when the cellulosic
ethanol comes on-line -- and this is a plant designer -- that they believe
they're going to be able to produce ethanol at near or around $1 to $1.20 a
gallon, off of cellulosic ethanol. Have you looked at that in some of your
plants? I know that technology's not production scaled up. It's not scaled up
for production yet. But have you looked at that and the economics on the
LEE: Yes, Senator. We've been working closely with a design builder who has
technology in cellulosic biomass to produce ethanol. And it is not, as you
pointed out, not a commercial scale yet, but we are expecting to be that in
actual production starting from 2010. And of course, it costs more money to
build one with cellulosic biomass.
And we have done some costs analysis. Right now, with corn, per gallon, it
costs about $2. And yet, the cellulosic biomass, it costs more than $3 at this
BROWNBACK: At this point? Really?
LEE: Yes. And moving forward we're expecting with advanced technologies it
will bring down and eventually it'll become more economical to use cellulosic
BROWNBACK: So what's the cost driver right now that puts it above corn ethanol?
LEE: Simply, the technology's still new. And it has to be a larger scale, and
it costs a lot more material to build one. And in particular, the holding in
the biomass to put in that feedstock into the production process, it costs a
lot of money, and also to break the cellulose with enzyme that, again, the
enzyme is quite expensive material.
BROWNBACK: I'm curious. I've had guys tell that what they envision in the
future, that a lot of these plants will get started on grain-based ethanol, but
in the future they will continue to have that, but they will develop a
cellulosic stream of ethanol and that you'll end up probably having plants with
both grain and cellulose streams, and then when it gets to the -- if I know and
my term's right -- the beer stage of it that they'll blend the two components
at that point and continuing the process from there.
Have you looked at that thought or design?
LEE: Yes. The way I understand the cellulosic technology, in the beginning
portion you have to -- now with the current ethanol plant, the conventional way
of production using corn, you have to convert the beginning portion of it at
production facility, which costs more than approximately 25 percent more in
capital expenditure to bring this cellulosic technology on, to use that.
And if I -- did I answer your question?
BROWNBACK: Yes. I'm just curious. Do you think in the future you'll have two
streams of feedstocks into a typical ethanol plant in the Midwest? One will be
grain and one will be cellulose, but they'll go into the same ultimate plant
after the first several steps of processing?
LEE: That's correct. And we will use corn stock or corn cob or corn straw as
the material. Yes, in the beginning portion, yes, we have to use different
feedstock to process to make ethanol and to go through the fermentation
process. Eventually, yes, we come up with the same product.
BROWNBACK: But do you think in the future you'll -- what seems like to me is
likely to happen is we put up a lot of grain-based ethanol plants. In the
future these will be both grain and cellulosic ethanol plants at the same site.
Do you think that would happen or do you see a different vision?
LEE: I think it's not going to be separate, two facilities. And it will be
the beginning portion of the plant that will be sitting jointly in the
beginning portion of it. It'll be one facility. But feedstock, the input will
BROWNBACK: You wanted to get in on this, Ms. Wong?
I think that there are multiple systems that are being developed. Right now,
it might even be up there right now, POET is looking at -- and they're an
existing ethanol facility. They're looking at corn cobs where it's a modular
system where they would do what you're saying, is that it would be one facility
that's existing and then they would co-locate another facility, do the
breakdown through a fermentation process. And then as the sugars come out of
the fermentation process, it would be used in that beer stage that you were
So there's the modular system that people are talking and looking at closely.
And then there's all sorts of other platforms where you could have multiple
feedstocks going into a thermal chemical facility where you wouldn't have to
have a second part of it where -- you know, the thermal chemical facility would
break it out into different types of streams versus the fermentation system,
which would break it out into sugar, which is what we see now.
So I think that there are multiple platforms that we would like to see more
investment in to more toward cellulosic biofuels.
BROWNBACK: Finally, Mr. Lee, there's been some discussion about taking the
tariff off of ethanol coming into the United States, particularly out of
Brazil. I believe we have it off of a certain portion coming out of the
And I think -- is the tariff 50 cents or 75 cents?
WONG: Fifty-four cents right now.
BROWNBACK: Fifty-four cents?
What would that do to investment in the industry in the United States today, do
you think, if that tariff's taken off?
LEE: First of all, the ethanol industry is new in the United States. It's
still in the infant stage. And we need to protect the domestic market before
we start importing.
First of all, in cost analysis, Brazil, in case, they use sugar cane. And
their capital investment a lot less than the ones in the United States because
the process is different.
And so if they produce one gallon of ethanol with $1 and we it costs $2, so
it's more than double. So if we start importing the ethanol, first of all, the
old existing facilities that we have, 120 ethanol plants in the United States,
it'll be all closed down because we cannot compete with the imported ethanol
And so in costwise, we cannot sustain and we cannot meet a renewable fuel
standard, which was set in 2005 and in 2007, late last year. And we need to
keep our renewable energy and ethanol plants -- keep going. If we import it,
of course we understand the tariff issue, which is important, in terms of free
trade, but we will not be able to sustain our ethanol plant. And so,
accordingly, I'm objecting to the idea of lifting the tariff...
BROWNBACK: While the industry is so young.
LEE: And let me point out, Mr. Senator, now, if we start importing ethanol
from Brazil, basically we are end up the same result. We are importing a great
amount of our oil from overseas. We'll be importing energy from overseas. So
rather we want to produce our energy domestically in the market in the United
BROWNBACK: I'm going to get to the rest of you. I want to get Dr. Marker real
quick, if I can. Then I want to bring in the rest of you.
I think everybody loves solar cells. But it just always seems like it's going
to be cost competitive and then, you know, then some places it's come along,
and you (inaudible) these new plants.
You note in your testimony that by 2020 the cost of generating solar power is
forecast to be competitive with fossil fuel. Where is it now? And what has
kept it from being cost competitive with fossil fuel?
MARKER: Most of it has -- the cost, for example, utility-scale power, OK, and
the current technology for that that's in use is what's in use in the Mojave
Desert, which is what's called trough technology, OK. That costs somewhere,
depending on the numbers you get, between 14 cents and about 18 cents, 20 cents
a kilowatt hour. Its primary purpose is it's used for peaking power. And in
places like California, it's already cost competitive.
BROWNBACK: On peaking costs...
MARKER: On peaking costs with traditional coal, particularly gas in
California. Peaking power will pay as much as 36 cents a kilowatt hour for
BROWNBACK: And solar's burning the brightest right in the midday when you got
a big peak.
MARKER: Where the argument comes is the utility companies want to it to cost
the same as coal which, right now, is about $0.05 a kilowatt hour. But that's
unrealistic. The price is coming down because, for example, with the trough
technology, our cells we're producing, the receiver tubes, we produce them in
fully automatic production lines, we mass produced them, we have new production
lines coming on. Initial one in Germany, one just come on-line in Spain. A
third line will come on in Spain. The fourth and fifth line will come on in
So as you get utility or you get large-scale production, that'll help bring
The original tubes used in the Mojave Desert, the tubes that are used in early
facilities were all made one at a time. They weren't made through automated
So the techniques for producing them and the quality of the tubes has
increased. The efficiency of the tubes have gone up. And that all makes it
more positive to bring the cost down.
The costs, especially in California, the costs of what they call the reference
price, is based on a natural gas production facility. They typically list that
as 6 cents to 7 cents a kilowatt hours. But that was when gas was costing $6
per million BTUs. Now it's up to $8, $9, $10 in some cases.
So the cost of producing the traditional systems is coming up just as fast as
the price of the economy of scale in production and gains in efficiency in the
devices is driving the price down.
BROWNBACK: And people want to put solar on their homes.
MARKER: That now, that type is the photovoltaic. That goes on homes. That's
used in distributed systems. It's used -- they're starting to use it in larger
systems, typically -- they just finished a large 15-megawatt P.V. system at
Nellis Air Force Base in Nevada, which is one of the largest distributed grid
connective systems that have been built with P.V. Typically, they've been on
houses. They've been small commercial, under a megawatt-type systems. But
more and more, they're becoming larger distributed systems and they're all...
BROWNBACK: Is that going to be cost competitive soon with fossil fuel?
MARKER: Yes. Again, you have the economy of scale. The more production you
do drives the production cost down because you have more people producing them.
They also are producing them more efficiently.
Part of the holdup in driving the price for P.V. down was the fact that there
was a shortage of silicon, which 90 percent of the solar cells manufactured in
the world are still based on silicon technology. That problem is starting to
be alleviated in that they are -- people are producing more silicon. Also the
manufacturers -- key manufacturers are setting up partnerships or joint
ventures or whatever to guarantee that they have silicon supply so that that
does not become an issue again in the future.
Mr. Pershing, I want to ask you -- appreciated your paper. And I have not read
it through it, but I looked at the chart that I thought was very good on
climate characteristics on the up-and-down axis, vertical axis, and then
there's energy security on the other one, which I think is a nice mix.
I had a great meeting with the head of the Kansas City Power & Light utility
company. And I thought he summarized it the best. He's the CEO of this
Midwest utility company. He says, "You know what? Business people, we don't
And he was saying -- and I thought, "Well, there's a refreshing statement." I
guess I should try that as a politician, just say, "You know what? Look, we
don't know anything about the future."
And so we're always just trying to bet on probabilities in the future. And when
you're a utility, you're betting on big dollars with these probabilities. And
that's the problem here.
Now the one that he could agree upon and he said we all ought to do is
conservation, that's low-lying fruit. Nobody disagrees with it. He'd like to
build it into their rate structure to try to really incentivize that, which
seemed to me to make some sense, too.
But if you're in his seat and you're trying to figure your billion dollars
investment and you literally are betting the company on this, and you've got
your grid and your information, what do you bet on right now?
I know -- I think you're wise in this. You're saying we need to get about it
and not depend on technology breakthroughs because we could exacerbate the
problem. But in a sense, he's kind of trying to wait and see what technology
actually does break through before he puts a multi-billon bet-the-company bet
on. What should he put his money in?
I should say our money.
PERSHING: Our collective money.
It seems that's there's two questions that you're putting together, I think
appropriately, but they're two separate issues.
The first question is what's the political context in which he puts his money
down? Will there be some global concern, some national concern about security?
Will that be the number one priority?
In that case, he should expect energy prices to go up. And if energy prices
goes up, whatever they are -- if coal goes up in price or let's take natural
gas, which is currently the most common new build that he might be investing in
-- that's the one that he's got to deal with.
So if we take Mister -- the last comment, Mr. Marker's comment there about
pricing for gas, it actually peaked out at almost $13 for MTCF (ph). That's an
awful lot higher than $6. So if he's going to bet on gas, he has to take that
Or alternatively, is the environment going to be a big deal? Will the
resolutions that you're currently deliberating now in the Senate, around a cap
on carbon prices, go in? That'll set up a price. Is it going to be $3 a ton?
Well, the number in Reggie (ph), if he's out there in the East Coast, for
electricity is expected to be between $6 and $8 a ton.
Will it be the European price if he's investing globally? The current price in
Europe is over $30 a ton.
That framework will give him very different decisions. I would suggest that
that's the way he will likely do it. He'll do a risk calculation based on
those expected costs and values.
My personal guess, you, collectively in Congress, in the States, are worried
about both problems. You're going to create incentives for him to worry about
energy and you're going to create incentives for him to worry about carbon.
Those two will dictate where he falls on that chart.
My personal guess, if he goes to coal and he can't do capture and storage, he's
going to make a bad investment. If he goes to gas and he hasn't figured in for
a higher gas price and then goes for efficiency, he's made a bad investment.
If he goes to renewables and hasn't looked at intermittency, which is a serious
question, he's also made a bad investment. Those are the points for decision
making that he could use.
BROWNBACK: How about nuclear?
PERSHING: I think it's part of the mix.
The question that was asked a moment ago, just before you arrived, Mr. Senator,
from the two members of the House, was what would one do with nuclear power.
My own sense about this is that it's again a matter of judging risks.
My personal view, and I was one of the lead authors in the IPCC report, my
sense is the science is pretty compelling. We are seeing damages. We've
seeing sea level rise. We are seeing a consequence of less water.
If we take a look at California, for example, we're seeing less water coming
down off the coast range into the sunbelt and into the valley. We're draining
aquifers in the Midwest because of lack of replenishments because of lack of
rainfall. These are going to be big problems.
What's the worst damage? Is the worst damage to have a nuclear power plant
with a waste disposal stream that we currently can't manage or climate change?
And furthermore, if we don't do it here, do we seriously believe that it won't
happen in China? They're investing in nuclear power. So is India. We're not
likely to stop those. We may find a different kind of a paradigm in which we
manage those risks, but we incorporate them into our larger thinking.
BROWNBACK: So, if I'm listening to you as the head of that company, OK, I do
the renewables, but I got to do something for my base power. And I didn't
hear a good recommendation from you on the base power.
PERSHING: I think, at the moment, you're likely to have to manage and hedge
your risks on price with gas and begin to heavily invest in capture and storage
BROWNBACK: Dr. Bradley, (inaudible) as much chance to look at your
I guess I want to -- and I probably ought to conclude on this. Like to give
you and Ms. Wong both a chance to address any of the questions that I've raised
or comments in this panel. Probably be best to fill the record out.
BRADLEY: Well, thank you, Senator. Actually, I'd like to pick up on your last
question about what are utilities likely to do.
I think Jonathan has correctly identified the two kinds of questions that are
involved here and the risks that face utility investors, in fact, energy
investors in general.
I'm sure that you have environmentalists in your office all the time
encouraging you to act for the climate system sooner rather than later. It's
important for energy investors that you act sooner rather than later.
It's the lack of action, the lack of a clarity about where the world's
treatment of carbon is going to go that is holding back many of the
investments. It's hard to make a choice while there's considerable uncertainty
about what the price of carbon is going to be and how carbon is to be treated.
It leads utility investors to instead choose more marginal repowering and
upgrading decisions rather than to do the substantial changes that ultimately
are going to have to happen if we're going to stabilize concentration.
The second thing the utilities in the U.S. are telling us -- I had a
conversation with Electric Power Research Institute the other day and they're
very interested in electric utilities in energy efficiency and ways in which
electric utilities can exploit in their rate base decisions the energy
Why? Well, because it costs a lot of money to build a plant these days. And
it's escalating rapidly.
We saw oil and gas prices go up. And, of course, oil prices are still going
up. But coal prices lately, if you've looked at coal prices in the last year,
have gone up substantially.
The reality is -- and the costs of construction of all those kinds of plants
have gone up.
If you're a utility CEO, you're better off making more money with the existing
capital than trying to build new capital and having that on your books for a
That's the kinds of decisions that if, again, if there was public policy, as
there is in some places in the U.S., where they can exploit assistance they
give for energy efficiency decisions, that would be a quite profitable thing
for them to do in the short run while they -- while we clarify what the long
run situation is going to be on carbon.
BROWNBACK: Ms. Wong, anything to add?
WONG: I just have a few comments.
One of your first questions was on the ethanol secondary tariff. We do agree
that it's very important to make sure that the existing ethanol industry moves
toward cellulose, but we do have to make sure that we make those infrastructure
changes which will be based on the current ethanol industry now. So the tariff
is going to be important to make those changes forward.
But it's also critically important on an environmental side to make sure that
that tariff is up until we move towards more sustainable biomass.
We are very concerned about the issues of land shifting into more biofuel
production in other countries. This is often seen in developing countries
where they have rain forests. And when you see rain forests come up, as Dr.
Pershing already mentioned, the carbon emissions from that are extreme.
WONG: And we do not want to see that. So I think it's important to think
about the ethanol tariff in that perspective as well.
I think when it comes to talking about the new -- and not even new, but
renewable technologies, we were taking P.V. and concentrating solar power
earlier. We have to level the playing field. We have been investing -- the
United States has been investing in fossil fuels for a century at least. We
have to be looking at those subsidies as well. What do we need to do to level
that playing field? We heard about a carbon tax earlier. Is that something
that we need to consider?
And then last, on your last question, utilities, I absolutely agree with what
the other panelists have said. I also think it's important to look at where
that utility is located.
We have renewable resources in the United States that we don't even think
about. When we look at biomass, which is what we mostly work on, there are
other kinds of biomass out there besides switchgrass and corn. We have woody
biomass that we can use, specifically in the Southeast, that has been powering
our sector, our energy sector.
I mentioned earlier in my testimony that biomass is 3.4 percent of the energy
consumed in the United States right now. It's not a new technology.
So what we think is important is that utilities also look at what resources
they have to use when it comes to renewable technologies.
And I think that's about it.
BROWNBACK: It's an interesting point you make.
I've been going through -- we've done an audit at our home in Kansas, what we
can do to make it more energy efficient. And then I'm looking and saying,
"Well, what can I do to generate electricity?" I live on an area that's got
about nine and half miles per hour wind. So we could do that. There's a pond
in the back that's got 15 feet of fall off but there's not enough water in it.
I'm looking at solar voltaic.
But it's the sort of thing you kind of sit there and scratch your head and say,
"well, OK, wait a minute. What could we actually do here"? And it's an
interesting -- and I finally decided that what I need to do is hire somebody as
the consultant to tell me what I need to do.
Because I can't figure it out on my own. And I'm just waiting for this great
technology breakthrough. I can't just spread in on my roof and plug it in and
presto, chango, I've got electricity. But, I mean, it's kind of an interesting
I was just in Greensburg, Kansas, Sunday, which a year ago had been blown away
by a tornado. And that it's caught the imagination of the country -- "Well,
OK, this isn't a huge sized community. It's 1,800 people. Let's rebuild it
green. And we can do this. We can try a whole bunch of interesting things."
So here's this geodesic dome in the flat plains of Kansas being built. And I'm
going, "Now, that's different."
But the guy that had the John Deere dealership, he's there. And he's got two
wind turbines on his unit. One's of kind of a small commercial scale and the
other's a personal scale. Then they're looking at ways they can recycle their
oil to heat the place. And it will be the lead green John Deere dealership in
the country. And they're all excited about it. And I'm excited for them
because let's see how this works. And they're trying a bunch of things.
And then they just put up a little art museum that the K.U. architecture
students developed, built the whole thing. And it's just got windows on the
south side of it. It's got three very small personal wind turbines outside of
it. And then they're brining in -- people are talking about green concrete
that they've got in the area and everything. And it's just a really
interesting project that's going on.
Now whether this all works out, I don't know which one actually hits and makes
it. But I think it's important that we drive it and we try it. And I do think
there's a lot of things.
We've got some people looking at a biomass out of all the manure we've got from
the cattle in the western part of the state. Well, that goes back to a real
old technology. When the pioneers went across the plains, that's what they
I just think we need to be innovative. And we need to not frankly pick winners
and losers but try to incentivize the whole field and see what comes forward.
And I think it can be a very exciting time.
I appreciate your comments about the ethanol tariff. I hadn't thought about
the environmental impact.
A few years back I went to Brazil with the Nature Conservancy. And they were
working with a local group, buying back huge tracks of land in the Atlantic
Rain Forest that had been broken out, farmed, and then the water table rose so
they couldn't farm it anymore. And then they planted this kind of floating
grass on it that Brahma type cattle could feed on. But it's not worth much as
that. So they were buying it back and letting it go back into trees.
We should put tax credits forward incentivizing that. Let's support that
because that helps us all with their tree production, instead of tearing them
up and going into biofuels production that could take place. So I don't want
us to do policy things that are harmful. And it is a bit of a tricky policy
field I think.
I appreciate what Dr. Bradley's saying about there's a lack of investment
because there's a lack of policy clarity now.
And I agree with you.
We're still at kind of the early end of this to try to pick it or even to peg a
price of carbon or even establishing markets on it has big policy impacts and
big cost drivers possibly with it.
So what I'd love to see if a gazillion dollars go into this field, but by
private investment, like Mr. Lee's group, going in and saying we're going to do
this and somebody else is going to try that. The objective all along is to
reduce our CO2 footprint and make a cleaner environment and sustaining the
That's kind of policy threat to weave through. But I think that's what we're
all going to try to do.
I want to thank the panel for your presentation and your thoughts on a very,
very important topic. And we will use those. And I appreciate your expertise
and sharing it.
The hearing's adjourned.
[Whereupon the hearing ended at 04:33 p.m.]