Demand Subsidies vs. Funding R&D - Characterizing the Uncertain Impacts of Policy for Pre-commercial, Low-Carbon Technologies
This is a seminar presented by DOE/EERE’s Office of Planning, Budget, and Analysis and NREL’s Strategic Energy Analysis Center, featuring Gregory Nemet, Assistant Professor, University of Wisconsin.
Demand subsidies or funding R&D – which works best? During this “bonus” seminar, Gregory Nemet of the University of Wisconsin will talk about his analysis combining an expert elicitation and a bottom-up manufacturing cost model to compare the effects of R&D and demand subsidies. In his work, he modeled the effects on the future costs of a low-carbon energy technology that is not currently commercially available, purely organic photovoltaics (PV). His research found that (1) successful R&D programs reduced costs more than did subsidies, (2) successful R&D enabled PV to achieve a cost target of 4c/kWh, and (3) the cost of PV did not reach the target when only subsidies, and not R&D, were implemented. He’ll also discuss how these results are insensitive to two levels of policy intensity, the level of a carbon price, the availability of storage technology, and uncertainty in the main parameters used in the model. However, a case can still be made for subsidies: comparisons of stochastic dominance show that subsidies provide a hedge against failure in the R&D program.
Gregory Nemet is an assistant professor at the University of Wisconsin in the Nelson Institute for Environmental Studies and in the La Follette School of Public Affairs. He is also a member of the university’s Energy Sources and Policy Cluster and a senior fellow at the Center for World Affairs and the Global Economy. His research and teaching focus on improving understanding of the environmental, social, economic, and technical dynamics of the global energy system. He also teaches courses in international environmental policy and energy systems analysis. He holds a master’s degree and doctorate in energy and resources, both from the University of California, Berkeley. His undergraduate degree from Dartmouth College is in geography and economics.
National Renewable Energy Laboratory 901 D Street SW (adjacent to the Forrestal Building) or 370 L’Enfant Promenade; Ninth Floor.
Please contact Wanda Addison, of Midwest Research Institute (MRI), at email@example.com or 202-488-2202
- Raymond Orbach, Under Secretary for Science, Department of Energy
- Alexander Karsner, Assistant Secretary for Energy Efficiency and Renewable Energy, Department of Energy
- David Frantz, Director, Office of Loan Guarantees, Department of Energy
Ben Geman reports for E&E News:
DOE: Loan guarantee program advancing, official tells Senate panel (04/03/2008) Ben Geman, E&E Daily senior reporter
A high-level Energy Department official assured lawmakers yesterday that the department is making progress on a “clean energy” loan guarantee program and expects to begin receiving the first full applications this month.
David Frantz, who heads the loan guarantee office, also told a Senate Appropriations panel that DOE plans to issue the solicitation for the next round of projects within months.
Congress last year required DOE to provide House and Senate appropriators a loan guarantee implementation plan to define award levels and eligible technologies at least 45 days before a new solicitation. Lawmakers should receive this plan later this month, Franz told the Senate Energy and Water Subcommittee.
The Energy Policy Act of 2005 authorized federal loan guarantees for low-emissions energy facilities such as new nuclear plants, renewable energy projects, carbon sequestration and other technologies. But lawmakers
- notably Sen. Pete Domenici (R-N.M.) -say the program has been slow getting off the ground.
Frantz said DOE is on the cusp of receiving full applications from some of the first 16 projects the department is considering and expects them to come in over the next several months. These projects include integrated gasification combined cycle power plants, solar energy projects, cellulosic ethanol plants, a hydrogen fuel cell project and others. DOE hopes to begin issuing the first guarantees this year.
Nuclear power plant developers are eager to receive the federal loan backing and see the program as a crucial way to get a much-anticipated wave of plants off the ground after a decades-long lull in new nuclear construction.
But loan guarantees for nuclear plants are on a longer time frame. Frantz told reporters it is not clear whether nuclear will be one of the technologies included in the next solicitation. “It is still very much in the planning stage, and we have not made a final determination,” he said after the hearing.
The omnibus fiscal 2008 appropriations bill provides DOE with authority to issue $38.5 billion worth of loan guarantees through the end of fiscal 2009, including $18.5 billion for nuclear power projects. The department already had an additional $4 billion in loan guarantee authority through prior legislation.
But DOE, as part of the current budget proposal, is asking lawmakers to extend this time frame through fiscal 2011 for nuclear power projects and fiscal 2010 for other projects. Franz called the extension “absolutely essential.”
“It takes us months and years on these larger projects to do our credit underwriting and due diligence process,” he told reporters.
Frantz said he envisioned the $18.5 billion in loan guarantee authority for nuclear plants would cover guarantees for three to four projects. The program allows the federal government to issue guarantees for loans that cover up to 80 percent of a project’s cost—a federal backstop that is designed to help energy project developers secure Wall Street financing.
Sen. Larry Craig (R-Idaho) urged Frantz to move quickly in implementing the loan program. “I hope that you have running shoes on,” he said.
The Committee will explore the importance of basic research to U.S. competitiveness. The hearing will examine research and development budgets at agencies in the Committee’s jurisdiction, particularly the National Institute of Standards and Technology (NIST) and the National Science Foundation (NSF), as well as interagency science programs addressing climate change, nanotechnology, and information technology.
NASA was given over $100 million in taxpayers money to build the Deep Space Climate Observatory (DSCOVR), a spacecraft designed to measure the energy budget of our warming planet from the unique vantage of a million miles away.
Even though it is fully completed over five years ago, DSCOVR is still sitting in a box at the Goddard Space Center – likely for political reasons.
In 2006, Anderson filed a FOIA request with NASA, receiving only letters from scientists to NASA concerned about the cancellation, but no documents about the internal decision-making process.
In 2007, NOAA proposed a joint NASA-NOAA mission with the private launch company Space Services Inc. using the DSCOVR satellite.Anderson now reports on his 2007 FOIA request to NOAA on the fate of DSCOVR:
My request was sent in November. I was told my documents would be emailed on December 11. Then I got call from NOAA General Counsel Hugh Schratwieser before Christmas telling me that it going to take longer than they thought but I should get the document package in early January. Mr. Schratwieser also assured me NOAA takes pride in their compliance with the Freedom of Information Act and that I shouldn’t worry.
I have since sent five unanswered emails to NOAA requesting updates on my request. Government bodies like NOAA have a legal obligation to respond to FOIA requests in 20 working days. It is now over three times that long and counting.
Since I was repeatedly told over the last two months that the package of documents was very close to being assembled, I can only assume that it is now complete but being held up for political reasons.
Overall, the fiscal 2009 USDA budget would cut discretionary spending by 4.8 percent. The major increases in the budget would go to food assistance programs to cover the growing number of people who qualify for food stamps and other aid programs. Two of the hardest hit areas of the budget would be research and conservation, which would each see budget cuts of almost 15 percent.Witness
The administration’s proposal would cut more than 10 percent from USDA’s research budget, which includes a wide range of programs, from livestock safety to farm-based energy, biotechnology and food safety. USDA Deputy Secretary Chuck Conner said last week that the cuts came from wiping out congressional earmarks for different research projects.
The White House also made what has become an annual effort to zero out funding for a number of discretionary programs it says are redundant, including local watershed surveys and flood prevention programs. The Bush administration has tried to eliminate the programs in previous years, but congressional appropriators have restored them each year. DeLauro noted she plans to restore the funds again this year.
This year the administration also targeted a popular renewable energy program in its spending cuts for the first time. The budget includes no funding for grants or loans for the “Section 9006” renewable energy program, which gives money to help farmers improve energy efficiency on their farms and develop small on-farm business ventures in wind, solar, biomass or geothermal energy.
The House and Senate both proposed large increases for the renewable energy program in last year’s farm bill and appropriations measures, and the administration had proposed expanding it in the farm bill. USDA included it this year in a list of programs that “serve limited purposes for which financing and other assistance is available.”
- Edward Schafer, Secretary of Agriculture
A massive switch from coal, oil, natural gas and nuclear power plants to solar power plants could supply 69 percent of the U.S.’s electricity and 35 percent of its total energy by 2050.
A vast area of photovoltaic cells would have to be erected in the Southwest. Excess daytime energy would be stored as compressed air in underground caverns to be tapped during nighttime hours.
Large solar concentrator power plants would be built as well.
A new direct-current power transmission backbone would deliver solar electricity across the country.
But $420 billion in subsidies from 2011 to 2050 would be required to fund the infrastructure and make it cost-competitive.
By way of contrast, the Friends of the Earth analysis finds that Lieberman-Warner (S. 2191) allocates approximately $800 billion in subsidies to the fossil fuel industry, with about $350 billion to subsidize carbon capture and sequestration specifically. About $350 billion is allocated to all sustainable technologies (wind, solar, biomass, geothermal).
On October 30, The Hamilton Project at Brookings will host a two-part forum on mitigating climate change through market mechanisms and new technologies. In addition to the release of a new Hamilton Project strategy paper, the forum will highlight two new discussion papers on how to best design market mechanisms to reduce greenhouse gas emissions and will include proposals to expand — and possibly restructure — the federal research and development program to better promote the development of new greenhouse gas reducing technologies.
Former U.S. Treasury Secretary Robert E. Rubin and Hamilton Project Director Jason Furman, also a Brookings senior fellow, will open the event with a special award presentation, followed with opening remarks by former U.S. Treasury Secretary Lawrence H. Summers on economic approaches to energy security and climate change—the subject of the new strategy paper.
The new Hamilton Project strategy paper argues that the best way to address climate change is to give the private sector the right incentives to undertake emissions reductions. At the same time, the strategy calls for policies to protect low- and middle-income families from the consequences of higher energy prices.
The two new discussion papers will feature alternate views on how to best harness market forces to protect the environment. Gilbert E. Metcalf of Tufts University will discuss his proposal for a carbon tax and Robert N. Stavins of Harvard University will present his proposal for a cap-and-trade system. John Deutch of the Massachusetts Institute of Technology and John Podesta of the Center for American Progress will also discuss their recent proposal for a new federal research and development strategy, and Richard Newell of Duke University and Resources for the Future will share his ideas for creating science and technology policies that would enable new technologies to work effectively.Welcome and Special Presentation
- Robert E. Rubin, Citigroup Inc. and Jason Furman, The Hamilton Project
An Economic Approach to Energy Security and Climate Change
- Lawrence H. Summers, Harvard University
Creating a Green Market: How to Best Price Carbon
- Moderator: Sebastian Mallaby, Council on Foreign Relations
- Gilbert E. Metcalf, Tufts University
- Robert N. Stavins, Harvard University
- Jason Furman
- Kathleen McGinty, Pennsylvania Department of Environmental Protection
Warming up to New Technologies: Innovating Our Way To a Stable Climate
- Moderator: Roger C. Altman, Evercore Partners
- John Deutch, Massachusetts Institute of Technology
- John Podesta, Center for American Progress
- Richard Newell, Duke University
- Kelly Sims Gallagher, Harvard University
- David Sandalow, Brookings Institution
Hyatt Regency Regency Ballroom 400 New Jersey Avenue, NW Washington, DC
- the Renewable Energy and Energy Conservation Tax Act of 2007 (HR 2776) from the Ways and Means Committee, reported out at the end of June
- and the New Direction for Energy Independence, National Security, and Consumer Protection Act (HR 3221), which needs to be signed off by the relevant committees
HR 2776 provides tax incentives for renewable electricity production, biofuels, efficient appliances, plug-in hybrids, and renewable energy bonds. It pays for these incentives buy reducing oil and gas royalties and closing the “Hummer” tax loophole.HR 3221 is a wide-ranging omnibus, under the jurisdiction of the following committees:
- Education and Labor (Title I: green jobs)
- Foreign Affairs (Title II: foreign assistance and trade)
- Small Business (Title III: small business sustainability initiative)
- Science and Technology (Title IV: research funding—HR 364, HR 906, HR 1933, HR 2773, HR 2774, HR 2304, HR 2313)
- Agriculture (Title V: biofuels)
- Oversight and Government Reform (Title VI: carbon-neutral government)
- Natural Resources (Title VII: Energy Policy Act of 2005 reforms, changes in oil and gas royalties, wind energy, CCS, wildlife, oceans)
- Transportation and Infrastructure (Title VIII: public transportation, highways, shipping, public buildings)
- Energy and Commerce (Title IX: appliance, lighting, and building efficiency, smart grid, renewable fuel infrastructure, plug-in hybrids)
- Armed Services (it’s unclear which components are under its jurisdiction)
After the amendment process and ratification, the package will then go into conference to be reconciled with the Senate energy bill, SA 1502, passed mid-June.
H.R. 364 establishes an Advanced Research Projects Agency for Energy (ARPA-E) within the U.S. Department of Energy, similar to the successful DARPA program within the Department of Defense. With a lean and agile organization ARPA-E will assemble cross-disciplinary research teams focused on addressing the nation’s most urgent energy needs through high-risk research and the rapid development of transformational clean energy technologies. By leveraging talent in all sectors – from private industry, to universities, to government labs – ARPA-E will foster a robust and cohesive community of energy researchers and technology developers in the U.S. This bill follows on the direct recommendations of the National Academy of Sciences’ report “Rising Above the Gathering Storm.”Witnesses
- Dr. Stephen R. Forrest
- Mr. John Denniston
- Mr. William B. Bonvillian
- Dr. Richard Van Atta
S.731, to develop a methodology for, and complete, a national assessment of geological storage capacity for carbon dioxide, and S.962, to amend the Energy Policy Act of 2005 to reauthorize and improve the carbon capture and storage research, development, and demonstration program of the Department of Energy.