this hearing is called to order today as president bush gets ready to tell america that he has come around on global warming and that he supports freezing us global warming pollution seventeen years into the future we welcome a group that does have the vision in bishan to seriously address this problem these individuals probe the technological trenches of silicon valley and other innovation hotspots to find the solutions that will solve the energy and climate crisis they pull the strings of capitalism enabling him young geniuses to turn today's dreams it's a technological reality capitalist play a key role in innovation the twenty six billion in us venture capital investment in two thousand and six represented less than one percent of u s but the two point three trillion in revenues these firms generated made up eighteen percent of u your capital back companies employed over nine percent of the u s private sector workforce and job growth in these companies is occurring at nearly three times the rate of the rest of the private sector the corporate behemoths that dominate the business pages  most are mostly mature company based fierce competition that often forces them to outsource manufacturing in order to stay competitive but low wage developing countries cannot compete with we should salute the american entrepreneurs that for decades have pushed the american economy through the technological edge where wages and growth the high the challenge today is to channel these creative energies to help solve  global warming problems and to help put the economy back on track governments can take two approaches to solving great technical changes like reducing global warming pollution they can prescribe the answer for example by massively subsidizing nuclear power generation as president bush supports they can set a target and leverage the creative genius of the innovators of the world to find the answers the first is to cling to the technological pas it also means compliance at the highest possible approach is akin to investing in a candle maker because promise at a light bulb will never catch on it's like doubling down on mainframes because you don't believe many people will want computers we don't know what all the answers will be to the global warming problem but investing taxpayers dollars on yesterday's technologies will ensure that the world's innovators will have to look outside the united states to find the market energy are good of course these types of investments will help the economy and i'm glad to see that venture capitalists and other private taking an interest in alternative energy investments will help the economy  create a true free market the cost of renewable energy are going down and more communities will make investments in new technologies because they offer many benefits in some places renewable energy is a great option for electricity prices so high that they are causing unrest and gasoline is still as expensive as ever i agree with what we will hear from today's witnesses that can help spur the investment in new technology they will also claim that without government regulations renewable energy will not share in the marketplace venture capitalists are famous for the risks they take but that doesn't sound too risky to me i skeptical of both need for regulation and mandates that renewable energy want to expand without government assistance i am especially skeptical of the idea of a mandatory cap and trade system is needed to bring about this change  energy production for reports analyzing the economic effects of the leading cap and trade bill in the senate and all forecasts fewer jobs and slower economic growth in the future at a time when the economy is slowing down while it is true that alternative energy will create some jobs the burden the cap and trade regulation will put on this economy will sap away many more models show that twenty thirty flawed system one of our witnesses today mr brown who also happens to be my constituents warns lawmakers that the cap and trade system must be ready before it's rolled out while i disagree with  cap and trade system seems to have his own concerns about the speed in which rushing into this process i do agree with that about the need to make the tax credits permanent and i welcome him here today to testify another concern that i have with cap and trade is that it fails to produce measurable results for the environment for us together a cap and trade system and that emissions are still rising there while the u s without a mandatory and the subject of that meeting will be the subject of the hearing and so i'm anxiously awaiting your testimony the potential for grain industry to benefit our country is unlimited especially when you consider that the hemorrhaging nature of our economy today at the start is a correct and and green industry can create  half a million new jobs in the next two years then this is where we ought to place a substantial portion of our capital venture capital firms such as those represented by those of you here today invest in new and promising companies connected to the green industry the benefit could be invaluable to congress and so i look forward to dialoguing with you further out of this disruption chairman i'll keep it short students at arlington high school in arlington new york duchess county just came up with an idea to put solar panels on the roof of the new wing of their high school which is being built took the initiative to go to nice to get state funding and then came to our office and asked for help rather than waiting for the uncertainty of a pro creation i was able to find my staff was able to find private grant funding for it and we presented with it with a check for one hundred eight thousand dollars to complete their budget for that now that's leadership coming from the next generation and not only is that going on but we have in district in orange county a private firm that's processing municipal solid waste from an entire town which previously was being landfilled and is now has taken it through this process producing ethanol gas that can be burnt to spend a turbine and put the power into the grid hydrogen that can be used from the gas because forty eight percent of the gas they produce is hydrogen so that they can charge fuel cells and everything is being recycled and nothing's being put in the ground and the total impact in terms of greenhouse gases from their process is seventy five percent less than if they landfill the same m creek where it enters the hudson river there's a small low head hydro private facility that's generating a flat two and a half megawatts of base power from hydro electric is just happening by itself just want to test one two  this year congress will soon be considering additional legislation that will affect global climate change i believe that congressional to be guided by certain core principles a clear appreciation that there is a wrong way chairman rockport capital partners is a venture capital firm based in boston and menlo park our funds comprise one of the largest pools of capital in the fast growing sector of venture capital called clean tech about four hundred million dollars and that amount is about double as i said i'm here also on behalf of the national venture capital association which represents saying that i think the outlook for continued growth and investment in the renewable energy sector is excellent and it's driven by a number of factors most important being the promise of exciting returns based on the innovation in this space  we are today clean to where the industry was about thirty five years ago and where the biotech industry was about twenty years ago and we are dealing in a much larger total market than either of those two markets the key issue today is what the federal government in particular congress can do to help cultivate the environment for this innovation from what i know about the market demand and the technologies and most importantly the roadmaps of a number of these technologies this is going to happen regardless of how intelligent the energy policy we have from the united states so i  think the challenge for the government is to come up with intelligent policies that foster a good transition to minimize the pain that this economy is going to face in this transition from old energy to new energy these technologies make sense other countries are aggressively pursuing them with policies that foster innovation and there are a number of examples where other countries have taken the lead away from the united states already due to more enlightened policies so that is what we're really dealing with here in our humble you it's not that whether this is going to happen it's where the u s is going to stand when this is all done for the purposes of my oral test the money i'd like to just focus on a few of the policies that suggestions that i've provided in the written testimony the first is the long term extension of the renewable energy investment tax credits and production tax credits we applaud the house for passing a very robust energy tax package ideally from the investment community we'd love to see these extensions over a long period of time but i think we recognize the difficulty in longer term credits from a budget point of view however i am here to urge you strongly to reach a compromise on the two bills and get a bill signed  into law without delay i can cite several examples from my own portfolio companies where young fragile companies that are doing good things for the economy and creating jobs in this economy are having to already unfortunately small companies are good at being nimble having to turn on a dime and move from sales in the united states to stales in places like spain and korea because of the uncertainty about the another  important area is the national renewable energy standard which i would recommend in the range of twenty percent combined with decoupling of utility revenues to disconnect the utilities incentive to get profits from increasing kilowatt hour sales what we'd really like to see is energy efficiency and not penalize the companies for this saving energy third transportation i think is very important  rather than favoring just biofuels i think encouraging a results oriented approach we in particular have for investments in the areas of electric drive train and hybrid vehicles even with the very meager subsidies that there are right now for those technologies those technologies make a lot a sense from a marketplace even without some intelligent incentives if nothing else just the cafe standards helps to level the playing field among technologies rather than favoring one type of transformation taishan technology over another fourth i'd like to highlight r and d spending i serve on the advisory board of the national renewable energy lab and in fact two of our most promising companies u se technologies that were not developed and real but the expertise that was resident at enron was substantially helpful in actually getting these technologies to the place where their market one of them is in the market today and doing very very well the other is about to launch an exciting new product in the solar space that i think is going to revolutionize the solar industry the chairman earlier noted the tremendous impact that venture has on job growth and the economy and i think the energy industry today is a new market opportunity where innovation has the opportunity to create even more jobs and more exciting opportunities  people then previous examples of success in the in the venture capital community every single clean tech company that we invest in today holds a promise of bringing a much needed innovation when that happens there are many winners are definitely winners entrepreneurs and most importantly the american public who will benefit from new jobs new companies in a cleaner environment for a venture capitalist it is definitely the intersection of the best of all worlds we can do well by doing good thank you very much for the opportunity to testify and i look forward to answering your question thank you mr brennan just so you know everything you said that totally agrees with you so that's record mission point capital was founded in his chair by mark swartz former chairman of goldman sachs asia and c e o of soros fund management our team has deep energy and environmental domain expertise from based on senior carbon center investment thesis is really grounded in two convictions first that unabated climate change is the greatest foreseeable risk facing humanity today and second that mitigating it constitutes one of the greatest investment and job creation opportunities in history evidence indicates a climate change is accelerating even to the point of routinely astonishing field scientists and mission point aims to respond by accelerating in turn the formation and deployment of capital to reduce emissions in the window that remains open to us to avoid the most severe impacts of climate change admission point we're investing hundreds of millions of dollars in private companies that can generate clean energy and cut carbon emissions and taking an active role in building those companies examples include solar development in technology companies including one called sun edison a wind operations and maintenance services company called up wind a specialty finance company called hannan armstrong which is overcoming financial finance financing obstacles to energy and dance moves including in the federal government a carbon offset development in finance come company called greenhouse gas services which we have launched with general electric n a s a carbon trading infrastructure company a company called advanced arab oil technologies which manufactures advanced complements to increase efficiency of natural gas plants and also offers software that optimizes operation of gas and coal plants reducing  fuel use as well as emissions so we believe that mitigating carbon is primarily a commercialization and adoption problem not an innovation problem meaning that the technologies in many cases are already in existence and simply need to be pulled through into widespread usage and this belief leads us to focus less on new venture investing that we do do in venture investing when we find exceptionally transformative opportunities in innovation but really more on the growth stage companies so fundamentally we believe that the energy sector is in the midst of a profound transformation the primary criteria we use to demand our energy where that it be cheap and reliable and now today we've added really to more which is secure and clean so optimizing that four dimensional equation really does change things it requires us to bring new levels of entrepreneurship to the energy sector than it has really ever seen before renewable energy is thriving with twenty to forty percent year over year compound growth rates because it answers well to the two new criteria secure and clean and is getting much more competitive on the first two cheap and reliable it's becoming more affordable as it scales  the declining cost curves are robust trend we're seeing the potential for grid parity for solar on subsidized solar as soon as the two thousand and fifteen renewables are also achieving higher reliability which with the added experience in operating hours so key point number one from us is really that our outlook for growth investment in job creation in the strategic industry is bullish based on direct hands on experience with our portfolio companies as well as on high industry growth rates and on the strategic value of the industry on the dimensions i've mentioned i would expect that the job creation potential here would be particularly welcome given the economic conditions in our country today and we just add there that the renewable industry is particularly job intensive for example one m tt of solar produces according to some studies on the order of seven to ten times the number of person hours of employment as one megawatt of conventional power but key point number two and here i'm underscoring what to the prior panels have said is that our ability to continue to invest in realizing this bullish forecast and accelerating the growth of this industry really does depend on a comprehensive and stable set of supportive policies including a long term extension of the investment in production tax credits that remain in limbo today at long last putting a price on carbon as a rule of the road which we believe will be just enormously catalytic so first on the investment tax credit in the production tax credit the boom bust cycle of expiration of these credits has historically driven a clear dropoff in renewable power installations those of us in the industry spent time estimating underwriting and trying to share the extension risk around these credits pondering the imponderables of what whether and when congress may act in the compromise one year extension cycles really don't give time to get a wind project placed into service let alone something like a geothermal project so we can understand underwrite business plans in these situations once it's operating the ten year horizon of the production credit is not always sufficient to provide the needed return on these capital intensive projects so really congress does need to send a stronger more stable and long term signal to the investment community the durations really should be matched to the front lawn project life cycles as well as the long project so it's pretty straightforward uncertainty in the financial world translates to higher cost of capital which translates to project is delayed or canceled and i by one estimation the current expiration risk is putting at risk forty two thousand  megawatts of new construction one of our portfolio companies sun edison is an example of a company whose innovative deployment model for solar power has counted on the i t c in these early years but that is rapidly scaling the industry down its cost curve by deploying solar systems on wal mart's kohl's other big box retailers and you know other commercial entities so we we hope you can navigate the paygo faceoff between the oil and gas and renewable industries and get this done soon the face off is somewhat ironic to us because it really underscores that both industries are in fact subsidized and also the way that we think about the climate change narrative is that it's really not between these industries in fact we believe we are going to have to continue to invest in the  fuel sector but do so in a way that aggressively manages the carbon liability in the decades ahead that they'll be with us the low carbon playing field both for policy and investing is much bigger than renewables the way to stimulate this is to make sure that the stable policy framework is built on the foundation of carbon pricing and we believe this should be through a cap cap and trade system putting a price on carbon will reward investments in companies like advanced arab oil technologies which reduce emissions of fossil fuel power plants  investment and does require it for a price on carbon and we would we would encourage you to do that the u s is right now the runaway leader in moving and compressing and injecting carbon dioxide it's it's a critical technology and we fine tuning ways that other subsidies might be reallocated so that the tax code is more even handed the third area that we would be use the best power of the federal government the department of defense general services administration to achieve that i've got a couple more minutes here that i'd turn over to you folks for any thoughts or observations on it but and i would love to follow about that i think the trick as you pointed out is coming up with another way to make it profitable for the utilities energy not just manufacture more energy  and one of the things that one of our portfolio companies done a company called com birds that went public last year was to look at the existing regulatory framework and say how can we outsource what they call which is saving power in times when there is a demand and the regulatory bodies were able to incorporate that kind of thing into the framework investment is another question and i think there does need to be some sort of regulatory framework that allows investment on some sort of reasonable rate of return for energy saving projects that might be  e to two quick examples and then i'll defer to to dan one is the energy saving performance contracts this is an existing contractual vehicle that has been in existence since one nine hundred seventy eight i believe one of our portfolio companies hannon armstrong  been a leader in securitizing the cash flows from those we have not understood why but this year the defense department has really not been using that authority to the extent that they have in the past it was it's looking like some when the neighbor of twenty percent of the prior usage in this comes at a time when the actual energy efficiency standards have been strengthened through the pack two thousand and five in the january two thousand and seven executive order issued by the president looking for three percent year over year reductions in energy intensity reaching thirty percent by two thousand and fifteen so there's an existing vehicle and what these contracts do is they allowed the government to not appropriate the upfront funding for the energy efficiency investment and then to reap that the benefit of those with an energy savings share with you know that that is facilitated through third party finance to date it's been quite successful over the years four hundred projects five point two billion in savings is somewhat smaller on the net basis but a very substantial savings so we're somewhat perplexed by why that isn't being used to its full extent and i guess we'd encourage you to the extent there are formal or informal things you due to prompt them to to use that would be happy to work with you to say that a second very quick one is i understand the defense department has requested  contracting authority for power purchase agreements be extended from the current limit which is ten years up to twenty years which is much more in line with what a typical power developers need to have in order to finance their projects so this is what of the carbon is flowing today and where the reduction opportunities are are also very significant as well as on the demand side just tremendous opportunity so what we really need is a broad pricing signal to motivate and discipline really all market participants and by that i mean  you know investors entrepreneurs large corporations even consumers to respond if you unleash the market we know that it's not predictable but we do know that will unleash tremendous entrepreneurship in finding every last mission reduction opportunity at the lowest cost possible that's what the markets good at so what it needs is just that rule of the road we really think that is the foundation and then these more targeted investment tax credits and so forth for specific sectors like the renewable sector are very very important given that the stage in those technologies development markets because of some questionable trading going on or at least none transparency in the market what you would do to allay or answer those fears and there are other things to do in this market to prevent to make sure there's