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[Senate Hearing 111-6]
[From the U.S. Government Publishing Office]

                                                          S. Hrg. 111-6
 
                         RENEWABLE ELECTRICITY 

=======================================================================

                                HEARING

                               before the

                              COMMITTEE ON
                      ENERGY AND NATURAL RESOURCES
                          UNITED STATES SENATE

                     ONE HUNDRED ELEVENTH CONGRESS

                             FIRST SESSION

                                   TO

RECEIVE TESTIMONY ON A MAJORITY STAFF DRAFT FOR A RENEWABLE ELECTRICITY 
                           STANDARD PROPOSAL

                               __________

                           FEBRUARY 10, 2009

                       Printed for the use of the
               Committee on Energy and Natural Resources

                               ----------
                         U.S. GOVERNMENT PRINTING OFFICE 

48-193 PDF                       WASHINGTON : 2009 

For sale by the Superintendent of Documents, U.S. Government Printing 
Office Internet: bookstore.gpo.gov Phone: toll free (866) 512-1800; 
DC area (202) 512-1800 Fax: (202) 512-2104 Mail: Stop IDCC, 
Washington, DC 20402-0001 

               COMMITTEE ON ENERGY AND NATURAL RESOURCES

                  JEFF BINGAMAN, New Mexico, Chairman

BYRON L. DORGAN, North Dakota        LISA MURKOWSKI, Alaska
RON WYDEN, Oregon                    RICHARD BURR, North Carolina
TIM JOHNSON, South Dakota            JOHN BARRASSO, Wyoming
MARY L. LANDRIEU, Louisiana          SAM BROWNBACK, Kansas
MARIA CANTWELL, Washington           JAMES E. RISCH, Idaho
ROBERT MENENDEZ, New Jersey          JOHN McCAIN, Arizona
BLANCHE L. LINCOLN, Arkansas         ROBERT F. BENNETT, Utah
BERNARD SANDERS, Vermont             JIM BUNNING, Kentucky
EVAN BAYH, Indiana                   JEFF SESSIONS, Alabama
DEBBIE STABENOW, Michigan            BOB CORKER, Tennessee
MARK UDALL, Colorado
JEANNE SHAHEEN, New Hampshire

                    Robert M. Simon, Staff Director
                      Sam E. Fowler, Chief Counsel
               McKie Campbell, Republican Staff Director
               Karen K. Billups, Republican Chief Counsel

                            C O N T E N T S

                              ----------                              

                               STATEMENTS

                                                                   Page

Bingaman, Hon. Jeff, U.S. Senator From New Mexico................     1
Furman, Don, Senior Vice President for Business Development, 
  Transmission and Policy, Iberdrola Renewables, Inc., Portland, 
  OR.............................................................    10
Izzo, Ralph, President, Chairman and CEO, Public Service 
  Enterprise Group, Inc., Newark, NJ.............................     6
Jones, Scott P., Executive Vice President, Forest Landowners 
  Association, Atlanta, GA.......................................    21
Lave, Lester B., University Professor, Higgins Professor of 
  Economics & Professor of Engineering & Public Policy, Carnegie 
  Mellon University, Pittsburgh, PA..............................    27
Murkowski, Hon. Lisa, U.S. Senator From Alaska...................     3
Wright, David A., Chairman, Southeastern Association of 
  Regulatory Utility Commissioners, Columbia, SC.................    15

                               APPENDIXES
                               Appendix I

Responses to additional questions................................    61

                              Appendix II

Additional material submitted for the record.....................    95

                         RENEWABLE ELECTRICITY

                              ----------                              

                       TUESDAY, FEBRUARY 10, 2009

                                       U.S. Senate,
                 Committee on Energy and Natural Resources,
                                                    Washington, DC.

    The committee met, pursuant to notice, at 10:03 a.m. in 
room SD-366, Dirksen Senate Office Building, Hon. Jeff 
Bingaman, chairman, presiding.

OPENING STATEMENT OF HON. JEFF BINGAMAN, U.S. SENATOR FROM NEW 
                             MEXICO

    The Chairman. OK, why don't we go ahead with the hearing.
    During the past four Congresses, we have passed a 
requirement that utilities provide a specific percentage of 
their electricity from renewable resources, again and again. In 
the 107th and the 108th and the 109th Congresses, we passed 
such provision in the Senate, but the House would not accept 
it. In the 110th Congress, the House passed it, but we could 
not get a vote on it here in the Senate.
    My own view is, it's time that we finally pass this 
provision in both houses and include it in legislation that we 
send to the President. It is one of the President's highest 
priorities.
    The provision that the hearing is on today is a majority 
staff draft. It's similar, as to its mechanics, to the 
provisions that we have passed before, but it does have some 
significant differences. First, the requirement is raised from 
15 percent by 2020 to 20 percent by 2021. Second, the resources 
that can be used to comply with the requirement have expanded; 
up to one-quarter of the requirement can come from energy 
efficiency. We've also included a new hydro--included new 
hydropower at existing dams that currently do not have 
generation.
    The reasons to pass such provision are as compelling as 
ever. In my view, the renewable standard can reduce our 
dependence on fossil fuel sources, can reduce emissions of 
greenhouse gases and other pollutants. Another effect of this 
reduction is to cause a reduction in the price of the fossil 
fuels that are displaced. Such a standard diversifies our 
resource base, lessening the effect of supply disruptions on--
or shortages, creating greater economic stability. It reduces 
our dependence on foreign sources of energy and creates greater 
energy security. This standard would also spur the development 
of a national green energy economy, creating hundreds of 
thousands jobs, many of them in rural areas.
    Over the years, we've seen many economic analyses of the 
renewable standards that have been proposed. All of these 
analyses, that have been done by independent analysts, conclude 
that the cost of implementing the standard ranged from 
negligible to positive, with many showing significant 
reductions in the overall cost of energy to Americans. When you 
add the fact that we're going to do something to put a price on 
carbon emissions--and I hope we are able to do that, probably 
through a cap-and-trade system--you have to know that the cost 
of whatever we do to reduce carbon emissions will be greatly 
reduced by a significant spur to the renewable generation of 
electricity, such as in a renewable electricity standard.
    I think that the votes are present in the Senate to pass a 
renewable electricity standard. I think they're present in the 
House, as well. I think that we need to get on with figuring 
out the precise provisions of that legislation. I hope to work 
closely with Senator Murkowski and other members of the 
committee on this job. The witnesses here today can help us 
greatly in that process. I look forward to hearing their 
testimony.
    [The prepared statements of Senators Mark Udall and Burr 
follow:]

   Prepared Statement of Hon. Mark Udall, U.S. Senator From Colorado
    Mr. Chairman, I would like to thank you for holding today's hearing 
on this important topic.
    Establishing a national Renewable Electricity Standard (RES) is 
something that I've been working on my entire career in public service.
    In 1997, as a Colorado state legislator, I introduced several bills 
designed to advance renewable energy, including a state renewable 
portfolio standard. While my bills were voted down in committee and 
never reached the full House floor, my work in the Colorado House laid 
the path for action.
    In 2004, I traveled across Colorado with the state House Speaker, 
Republican Lola Spradley, campaigning for the nation's first statewide 
RES ballot measure. Colorado voters approved Amendment 37, which 
required 10% renewable energy production for the state by 2015.
    The Colorado legislature has since increased this RES to 20% by 
2020.
    I continued this work at a national level after being elected to 
the U.S. House of Representatives. In 2003, along with my cousin, then-
Congressman and now-Senator Tom Udall, I introduced a bill to create a 
national RES. This bill became the basis for the RES amendment that 
passed the House in 2007. This amendment would have created an RES of 
15% by 2020.
    An RES is important for so many reasons. As demand for energy 
continues to grow in this country, we need to make sure that we 
continue to have affordable and reliable supplies. And, most 
importantly, as we move to more competition in the delivery of 
electricity, we must make sure that the environment and consumers are 
protected.
    So it makes sense to put incentives in place to ensure that less 
polluting and environmentally friendly sources of energy can find their 
way into the marketplace. And that's what a renewable electricity 
standard, or RES, would help to do.
    But it's not just about doing the right thing for the environment.
    With almost all new electricity generation during the last decade 
fueled by natural gas, our domestic supply cannot sustain our needs. 
Iran, Russia, and Qatar together hold 58 percent of the world's natural 
gas reserves. As demand for power continues to grow, we shouldn't be 
forced to rely on these unstable regions to sustain our economy, nor do 
we have to.
    The best way to decrease our vulnerability and dependence on 
foreign energy sources is to diversify our energy portfolio. Half of 
the States in our great Union have already figured this out and have 
made the commitment to producing a percentage of their electricity 
using renewable energy. But all of our States will benefit under a 
national standard, which will bring natural gas costs down nationwide, 
create new economies of scale in manufacturing and installation, and 
offer greater predictability to long-term investors.
    By reducing the cost of new clean technologies and making them more 
available, it will help restrain natural gas price increases by 
creating more competition for those fuels.
    An RES will spur economic development in the form of billions of 
dollars in new capital investment and in new property tax revenues for 
local communities, and millions of dollars in new lease payments to 
farmers and rural landowners.
    Just look at what has happened in Colorado. At the time the RES 
passed, Colorado had less than 1MW of solar power installed statewide. 
Last year, Colorado installed over 18 MW, and there is over 40MW 
installed statewide today. My state is very much ahead of schedule to 
meet the 20% by 2020 requirement--half of the solar requirement for the 
full 2020 period has been met in the first four years.
    Not only has that meant cleaner energy for Coloradans, but also 
more jobs. A major wind turbine supplier, Vestas, identified our state 
RES as a determining factor in locating 2,500 jobs to Colorado for its 
manufacturing headquarters for wind turbines. Governor Bill Ritter's 
office has estimated that just the solar component of the RES has 
brought nearly 1,500 new solar jobs to Colorado.
    Some have argued that a national RES would burden some regions of 
the country at the expense of others. That is inaccurate--a national 
RES would create public benefits for all.
    The argument that the Southeast is disadvantaged by the RES--that 
the Southeast has no renewable resources--ignores the plain truth. In 
fact, the Southeast is one of the regions of the country that will see 
the most benefit from this proposal. According to Department of 
Energy's Energy Information Administration, the technology that does 
best under a 15% RES is biomass. Already, 2500 megawatts of generation 
come from biomass in the Southeast, and much of the waste from pulp and 
paper mills is not being used to generate electricity.
    In summary, a national renewable electricity standard will reduce 
harmful air and water pollution, provide a sustainable, secure energy 
supply now, and will create new investment, income and jobs in 
communities all over the country.
    A national RES would be good for the environment, good for the 
economy, and good for our country. So I look forward to hearing from 
our witnesses today about the Chairman's draft, which would create a 
20% RES by 2021.
    Thank you.
                                 ______
                                 
         Prepared Statement of Hon. Richard Burr, U.S. Senator 
                          From North Carolina
    Chairman Bingaman, Ranking Member Murkowski, thank you for having 
this hearing today. It is important that we examine the details of a 
national renewable portfolio standard. I look forward to hearing from 
our witnesses today about the benefits and goals of a national RPS. 
North Carolina is the first and only southeastern state to implement a 
state RPS. While the southeast region lacks in renewable resources, 
North Carolina took a hard look at what the state could achieve and set 
goals accordingly.
    As with most programs, the devil is in the details. We must be sure 
to craft a policy that utilizes all resources that achieve the goal of 
reduced emissions. This includes ramping up energy efficiency measures 
and perhaps including nuclear and hydropower. Over half the states in 
this country already have a state RPS. We need to find a way to 
incorporate these state programs into a national RPS so that we do not 
unfairly penalize the good work of early adopting states. I look 
forward to working with the committee to draft legislation that meets 
the goals of a national RPS while taking into consideration regional 
differences.
    While I look forward to the testimony from the witnesses this 
morning, I am disappointed that we do not have an Administration 
witness to explain how an RPS would be implemented at the federal 
level. It is my hope that Chairman Bingaman will be able to schedule a 
second hearing on this issue so that we might be able to hear from the 
Administration.
    Thank you, Mr. Chairman.

    Before introducing our witnesses, let me call on Senator 
Murkowski for her statement.

        STATEMENT OF HON. LISA MURKOWSKI, U.S. SENATOR 
                          FROM ALASKA

    Senator Murkowski. Thank you, Mr. Chairman. I want to thank 
you for holding the hearing today. I want to welcome some of 
our new members that have not joined us on the Republican side 
before today. Welcome to you all.
    This is the first in a series of hearings that the Energy 
Committee will conduct as we work to craft our third 
comprehensive energy bill. We recognize that we don't have any 
administration witnesses before us today. I would like to thank 
you, Mr. Chairman, for agreeing to hold a second hearing, 
regarding the issue of the RPS, to provide the Department of 
Energy and perhaps FERC, the opportunity to can explain how 
this complicated program should be implemented if we do move 
forward. I would also like to hear from another panel of 
stakeholders at that time.
    I do know that this is an important issue for you, Mr. 
Chairman. You have been a champion on the national renewable 
portfolio standard. This was a new approach in the 107th 
Congress, when we first began considering renewable energy 
requirements for utilities. At that time, there was just a 
handful of States that had such programs. Today, we have got 29 
States, including the District of Columbia, who have fashioned 
their own renewable energy programs.
    States are in a better position, I believe, than Congress 
to determine what resources and what timetables work best for 
them. A one-size-fits-all national standard raises some serious 
concerns about regional disparities. We recognize that there 
are some parts of our Nation that are blessed with abundant 
renewable resources; others, particularly in the Southeast, 
lack the renewable resources, perhaps other than biomass, that 
would be needed to reach a 20-percent requirement.
    I think we need to ask ourselves what are we trying to 
achieve with this program? Is our aim simply to increase 
renewable energy production, or is the goal to reduce 
greenhouse gas emissions? If the latter is true, it would seem 
to me that additional noncarbon-emitting technologies should be 
included. Now, some point out that choosing specific 
technologies actually conflicts with the goals for a market-
based carbon-reduction program such as cap-and-trade. I think 
that one issue that people have reached consensus is that the 
RPS, as drafted, is not a climate-change solution.
    I do not think that we can consider RPS in a vacuum. We 
know that our existing transmission network is inadequate to 
support our environmental goals. If the necessary transmission 
is not put in place--and that means dealing with the siting 
issues, the permitting, the cost allocation issues--if the 
necessary transmission isn't there, it is impossible to reach 
the new Federal mandate, and the customer will end up paying 
the cost of noncompliance.
    I think we all agree that we have to find ways to power our 
lives, that are cleaner, more efficient, and more 
environmentally protective. Certainly at this time we must do 
it in ways that help our economy.
    As we move forward, we must consider whether the RPS is the 
right policy at this time or whether perhaps it has been 
overtaken by the need to address climate change issues. If 
Congress chooses to impose the national standards, how can we 
make this work for all parts of the country? How do we handle 
the existing State programs that are already in place? How do 
we deal with the transmission impediments? What about the 
costs? I think, in this time of economic crisis, we can't be 
asking people to choose between something as basic as energy 
and putting food on the table.
    I thank you, Mr. Chairman, for the opportunity to have the 
first of these hearings. I think we'll get some good 
discussion, put some real meat on the bones of the issue. I 
look forward to the testimony of our witnesses today and to 
working with you as we move forward.
    [The prepared statement of Senator Murkowski follows:]

  Prepared Statement of Hon. Lisa Murkowski, U.S. Senator From Alaska
    Mr. Chairman, thank you for convening this hearing today. This is 
the first in a series of hearings the Energy Committee will conduct as 
we work to craft the third comprehensive energy bill in as many 
Congresses.
    Because the Administration was unable to appear before us today, 
I'd like to thank Chairman Bingaman for agreeing to hold a second 
hearing on the RPS issue so the Department of Energy, and perhaps even 
FERC, can explain how this complicated program should be implemented, 
if enacted. I'd also like to hear from another panel of stakeholders at 
that time.
    I know this is an important issue for the Chairman, who has been a 
long-time champion of a national Renewable Portfolio Standard. This was 
a new approach when the 107th Congress first began considering a 
renewable energy requirement for utilities. At that time, only a 
handful of states had such programs. Today, 29 states, plus the 
District of Columbia have fashioned their own renewable energy 
programs.
    States, of course, are in a far better position than Congress to 
determine what resources and timetables work best for them. A one-size-
fits-all national standard raises serious concerns with about regional 
disparities. While some parts of our nation are blessed with abundant 
renewable resources others-particularly the Southeast-lack renewable 
resources other than biomass needed to reach a 20% requirement. I have 
a number of questions on the feasibility of the Southeast using biomass 
as the sole means to meet this requirement, including the land use 
needs, carbon emissions, and environmental impacts.
    We need to ask ourselves what we are trying to achieve with this 
program. Is our aim simply to increase renewable energy production? Or 
is the goal to reduce greenhouse gas emissions?
    If so, it would seem that additional non-carbon emitting 
technologies should be included. Some point out that choosing specific 
technologies actually conflicts with the goals for a market-based 
carbon reduction program, such as cap and trade. One thing people do 
agree on is that the RPS, as drafted, is not a climate change solution.
    Further, we cannot consider the RPS in a vacuum. We know that our 
existing transmission network is inadequate to support our 
environmental goals. If the necessary transmission is not put in place-
and that means dealing with thorny siting, permitting and cost-
allocation issues-it will be impossible to reach this new federal 
mandate and the customer will end up paying the cost of non-compliance.
    We all agree that we must find ways to power our lives that are 
cleaner, more efficient, and of course, environmentally protective. And 
now we must do so in a way that helps right our economy.
    So, as we go forward, we must consider whether the RPS is the right 
policy at this time or has it been overtaken by the need to address 
climate change issues? If Congress chooses to impose a national 
standard, how can we make this work for all parts of the country? How 
do we handle existing state programs? How do we deal with the 
transmission impediments? And what about the costs? In this economic 
crisis, we can't be asking people to choose between something as basic 
as energy and putting food on the table.
    I'd like to thank all of our witnesses for joining us today. I look 
forward to hearing your testimony and getting your thoughts on the 
issues I have outlined. Mr. Chairman, thank you again for convening 
this important hearing.

    The Chairman. Thank you very much.
    We have five excellent witnesses today. One of our 
witnesses is from New Jersey, and Senator Menendez had asked to 
make that introduction.
    Why don't you go ahead with that, and then I'll introduce 
the others.
    Senator Menendez. Thank you, Mr. Chairman, first of all, 
for holding this hearing, which I think is incredibly 
important, and for the privilege of introducing Dr. Ralph Izzo, 
who is the chairman of the board, the president, and the CEO of 
the Public Service Enterprise Group.
    I didn't know you had that many titles, Ralph, so--I 
didn't.
    PSEG is one of the Nation's ten largest energy companies in 
the Nation, and it's one of the most important subsidiaries as 
New Jersey's utility. As many on the committee may already 
know, New Jersey has an incredibly ambitious plan to reduce our 
carbon footprint, and perhaps the centerpiece of that plan is 
our State's renewable portfolio standard: 22.5 percent of New 
Jersey's electricity must come from renewable sources by 2021. 
We also have a specific carve-out for solar energy which 
requires 2.15 percent of all electricity to come from solar. 
The success New Jersey has achieved thus far from renewable 
energy is just the tip of the iceberg, due, in large part, to 
Dr. Izzo's commitment to help New Jersey meet its environmental 
standards.
    Just today, his company announced that it is seeking 
approval for a new Solar 4 All Program to bring 120 megawatts 
of solar power directly to communities and customers throughout 
its service territory. That program will result in savings to 
municipal and county budgets, it will create hundreds of new 
jobs, and it will eliminate 1.7 million tons of CO2 
emissions, which is the equivalent of removing nearly 310,000 
cars from the road for 1 year.
    So, I could go on about Dr. Izzo's other efforts, but I 
think you'll hear from him. His leadership and experience in 
New Jersey should serve as a model for the Nation. I think, Mr. 
Chairman, only if we have energy producers and electric utility 
companies working alongside policymakers can we ever hope to 
achieve our shared vision of the Nation thriving on the 
economic growth of green industries and a Nation free of--
independent of foreign energy sources. I really appreciate you 
having Dr. Izzo here today.
    The Chairman. Thank you very much.
    Let me just introduce our other four witnesses, and then we 
will hear from all of them before we ask questions.
    Next is Don Furman, who is with Iberdrola Renewables, in 
Portland, Oregon--we're very pleased to have you; Commissioner 
David Wright, representing SEARUC, from Columbia, South 
Carolina--thank you for being here; Scott Jones is here--
representing the Forest Landowners Association, in Atlanta; and 
Professor Lester Lave is here from Carnegie Mellon University, 
and has been very involved with the National Academies of 
Science, in their ongoing study, which we're looking for the 
results of very soon.
    Dr. Izzo, why don't you start. If each of you could take 5 
or 6 minutes and tell us the main points you think we need to 
understand, and then we will have questions.

 STATEMENT OF RALPH IZZO, PRESIDENT, CHAIRMAN AND CEO, PUBLIC 
           SERVICE ENTERPRISE GROUP, INC., NEWARK, NJ

    Mr. Izzo. Thank you, Mr. Chairman, Senator Murkowski, 
Senator Menendez, and members of the committee.
    As the Senator mentioned, our family of companies 
distributes electricity and natural gas to more than 2 million 
customers in New Jersey, and we own and operate approximately 
17,000 megawatts of electric generating capacity, primarily in 
the Northeast, but also in the Mid-Atlantic and Texas.
    I'm pleased to appear before you this morning to express my 
strong desire to see this Congress adopt a national renewable 
portfolio standard. I applaud you, Chairman Bingaman, for your 
leadership on this issue over many years, and I also recognize 
the leadership of my home-State Senator, Robert Menendez.
    Global warming, in my opinion, is the most important 
environmental challenge of our time. To avoid catastrophic 
impacts from climate change, most scientists are telling us 
that we must achieve carbon emission reductions of 80 percent 
by 2050. To reach this target, we urgently need decisive 
Federal action; not a patchwork of State and regional fixes, 
but a strong, progressive national energy policy. An RPS is an 
essential component of such an energy policy, because it 
creates the demand for technologies that will transform the way 
in which we generate electricity. As we electrify 
transportation, it'll be even more important that renewable 
electric generation will become fundamental to our energy 
security.
    Also with this policy, we will be creating jobs. We will 
develop new technologies that we can export all over the world. 
So, investment in renewable energy is a strategy for long-term 
growth. As an investor and as a businessman, I believe the 
adoption of a Federal RPS would create tremendous 
opportunities.
    PSEG, our company, is already beginning to invest heavily 
in alternative energy. Today, as was mentioned, our utility 
filed a proposal with New Jersey regulators to invest almost 
$800 million in solar generation over the next 5 years. This 
will include putting solar installations on brownfield sites, 
low-income housing, government buildings, and over 200,000 
utility poles. But, we're not stopping there. We've also 
proposed, and are planning to develop, a 350-megawatt offshore 
wind farm, which would be located 16 miles off the coast of 
southern New Jersey. We recently created a joint venture to 
develop compressed-air storage facilities that can store energy 
from renewables and help make them more competitive. ``Them,'' 
meaning the renewables.
    A Federal RPS will send clear market signals to companies 
like ours to increase our investment in renewable electric 
generation. In the long term, these investments will be a net 
benefit to customers. In the short term, however, renewable 
energy is more expensive than fossil-fuel generation. We must 
be up front with consumers about these additional costs.
    The most effective way to minimize costs, however, is 
through a national approach. A strong national program, such as 
the one being considered by this committee, will create 
economies of scale and drive down production costs. Once 
developers can rely upon a stable national market for renewable 
energy credits, it will reduce their risk and, therefore, 
reduce their cost of capital.
    It is also worth noting that certain emerging renewable 
technologies, such as offshore wind and solar, will need 
additional Federal incentives, particularly through the tax 
code. Fostering these industries is important to our long-term 
climate-change strategy.
    In closing, Mr. Chairman, as you know, our country faces 
daunting challenges. We must dramatically reduce carbon 
emissions and transform our energy economy. This, while we face 
rising unemployment and an unprecedented economic crisis. 
Implementing an RPS will send a clear signal to investors that 
a true shift has occurred in our approach to national energy 
policy. Let us encourage these types of sustainable investments 
to power our way out of this economic downturn. We need to get 
started now.
    Mr. Chairman, I ask that my full written testimony be 
entered into the record.
    Thank you, and I'd be pleased to answer any questions 
later.
    [The prepared statement of Mr. Izzo follows:]

 Prepared Statement of Ralph Izzo, President, Chairman and CEO, Public 
               Service Enterprise Group, Inc., Newark, NJ
    Mr. Chairman, Senator Murkowski and Members of the Committee, my 
name is Ralph Izzo and I am President, Chairman and CEO of Public 
Service Enterprise Group. Our family of companies distributes 
electricity and natural gas to more than two million utility customers 
in New Jersey, and owns and operates approximately 17,000 megawatts of 
electric generating capacity concentrated in the Northeast, Mid-
Atlantic and Texas.
    I am pleased to appear before you this morning to express my strong 
desire to see this Congress adopt a national Renewable Portfolio 
Standard. I applaud you, Chairman Bingaman, for your leadership on this 
issue over many years, and I also recognize the leadership of my home-
state Senator Robert Menendez.
    I support a national RPS as a citizen who is deeply concerned about 
climate change; as an investor who sees exciting opportunities in the 
renewable sector; and as the head of a company concerned about its 
customers and their ability to pay for green investments, particularly 
in this economic environment.
    The reports of how our climate is already changing are increasingly 
alarming. Temperatures are rising, and the Arctic ice sheet and 
glaciers around the world are melting even faster than anticipated.
    Global warming is the most important environmental challenge of our 
time. To avoid catastrophic impacts from climate change, most 
scientists agree that we must achieve carbon emission reductions of 80% 
by 2050. To reach this target, we urgently need decisive federal 
action--not a patchwork of state and regional fixes, but a strong, 
progressive national energy policy.
    PSEG has advocated a three-pronged approach to reduce carbon 
emissions.

   Conservation through energy efficiency improvements.
   Development of renewable energy resources.
   And an expansion of clean, zero-and low-carbon central 
        station electric generation, such as nuclear power.

    Putting a price on carbon with a carbon cap-and-trade program is a 
crucial step toward achieving all three of these strategies. But we 
need a comprehensive package of policy solutions to achieve our goals. 
A federal RPS is an essential component of that package, targeted 
specifically at growing America's renewable energy industry. We cannot 
only focus on short-term, least-cost carbon reduction measures; we also 
need to create demand for technologies that will transform the way we 
generate electricity. And from an energy security perspective, it is 
crucial that we decarbonize our electric generation in tandem with 
efforts to electrify transportation.
    With America's skilled workforce and entrepreneurial spirit, we 
should be leading this charge. But today we are playing catch up with 
other nations in developing renewable energy industries. A key factor 
that gives those countries a competitive advantage is a clear, pro-
renewable energy policy.
    With the right national policy, America can develop the world's 
leading clean energy industry. We will create jobs. And we will develop 
new technologies that we can export all over the world. Investment in 
renewable energy is a strategy for long-term growth.
    As an investor and businessman, I believe the adoption of a federal 
RPS would create tremendous opportunities. PSEG is already beginning to 
invest heavily in alternative energy. Today, our utility filed a 
proposal with New Jersey regulators to invest almost $800 million in 
solar generation over the next five years. This will include putting 
solar generation on brownfields, low-income housing and government 
buildings. It also will include roughly 200,000 solar installations on 
top of our utility poles. This is in addition to the more than $100 
million our utility is already investing in solar generation.
    Our merchant renewable generating company is also developing solar, 
offshore wind and other alternative energy projects. Most notable among 
these is a joint venture with Deepwater Wind to build a 350 megawatt 
wind generation facility roughly 17 miles off the coast of South 
Jersey. This project will use a patented technology that allows us to 
locate wind farms in deep water, virtually out of sight from the shore. 
We also recently created a joint venture called Energy Storage and 
Power to develop compressed air storage facilities that can store 
energy. This technology can be paired with intermittent renewable 
generation resources to make them more reliable and competitive.
    Projects such as these are just the starting point of what America 
must build if we are going to combat climate change and grow a robust 
renewable energy industry. A national RPS will send clear market 
signals to companies like PSEG to increase their investment in 
renewable electric generation.
    Finally, as the head of a company with over two million customers, 
including the majority of New Jersey's low- and moderate-income 
families, I worry about customers' ability to pay for green 
investments.
    In the long term, these investments will be a net benefit to 
customers. In addition to reduced carbon emissions, benefits include 
job creation, economic development, cleaner air and greater energy 
security. Moreover, modeling by the Energy Information Administration 
has shown that the renewable generation spurred by a national RPS will 
likely displace older and less efficient fossil fuel plants, placing 
downward pressure on fossil fuel prices and the wholesale price of 
electricity. And over time, renewable technologies will become 
competitive with traditional sources of generation.
    In the short term, however, these investments generally increase 
customer costs because today electricity from renewable generation is 
more expensive than electricity from fossil fuel generation. We must be 
candid with our customers about these higher costs as we emphasize the 
important benefits.
    The most effective way to minimize costs is through a national 
approach. A federal program will create economies of scale, and it will 
reduce the cost of capital once developers can rely on a stable, 
national market for renewable energy credits, or RECs. I believe that 
by establishing a robust national RPS program, we will begin to move 
toward a single REC market as state policymakers eventually elect not 
to maintain separate regional renewable energy ``currencies.''
    For example, New Jersey has an RPS that must be met with renewable 
energy generated within PJM, our regional electric grid. Energy from a 
wind farm in Illinois may count, but energy from a wind farm in 
Nebraska does not count, even though it may be a more affordable 
compliance option. Once a strong federal program is in place, state 
policymakers may decide that making that distinction no longer makes 
sense for their ratepayers.
    Of course, states will always be able to go above and beyond the 
federal standard and set a higher RPS target. And states will likely 
want to maintain targeted efforts to promote specific renewable 
industries in their state, as New Jersey is doing with solar and 
offshore wind. But with a strong national program, we will begin to see 
more stability and uniformity in the market place.
    Let me address a few more specifics in the latest draft RPS 
legislation. The target of 20 percent by 2021 is consistent with the 
target set by New Jersey. It is aggressive but achievable, and the 
alternative compliance mechanism of 3 cents per kilowatt hour provides 
reasonable assurance that costs will not spiral out of control ahead of 
technological breakthroughs.
    I also appreciate the effort to promote small distributed 
generation by awarding it triple federal credits. However, by defining 
distributed generation as being ``at a customer site,'' you may exclude 
certain types, such as the solar panels on utility poles that we are 
proposing to install. We think a small change in the definition could 
address this issue.
    As for the inclusion of energy efficiency as a compliance 
mechanism, I believe the RPS should be used exclusively to promote 
renewable energy. Investments in conservation and efficiency are 
crucial, as they are currently the most affordable way to reduce carbon 
emissions. But Congress should promote energy efficiency through 
separate initiatives rather than allowing investment in efficiency to 
displace investment in renewables. Given the steep decreases in carbon 
emissions that we must make over the next 40 years, we need to pursue 
both efficiency and renewables at full speed.
    In addition, it is worth noting that certain emerging renewable 
technologies will need additional federal incentives, particularly 
through the tax code. A market driven approach like the RPS will 
appropriately drive investment toward what are currently the most cost-
competitive forms of renewable generation. However, developing 
promising industries, like solar and offshore wind, is an important 
part of our long-term climate change solution.
    Finally, as I said earlier, the development of clean, central 
station power is a critical element to a coherent climate change 
policy. PSEG is a nuclear company, with over half of our generation 
output coming from our three nuclear units in South Jersey and a unit 
we partially own in Pennsylvania. Investment in new nuclear generation 
needs federal support. This should include fixing the loan guarantee 
program and supporting the manufacturing of key nuclear components. But 
I do not believe a federal RPS is the appropriate mechanism to provide 
incentives for new nuclear generation.
    In closing, Mr. Chairman, as you know, America faces daunting 
challenges. We must reduce carbon emissions 80% by 2050. We must 
transform our energy economy and establish America as the world's 
leader in innovative and clean energy technologies. And as the Senate 
considers the American Reinvestment and Recovery Act this week, we face 
rising unemployment and an unprecedented economic crisis. We can begin 
to address all of these challenges by implementing a strong, national 
RPS program and sending a clear signal to investors that a true shift 
has occurred in our approach to national energy policy. Let us 
encourage sustainable investments to power our way out of this economic 
downturn. The time to act is now.

    The Chairman. Thank you very much. We will include 
everyone's full statement in the record.
    Mr. Furman, go right ahead.

   STATEMENT OF DONALD N. FURMAN, SENIOR VICE PRESIDENT FOR 
 DEVELOPMENT, TRANSMISSION, AND POLICY, IBERDROLA RENEWABLES, 
                       INC., PORTLAND, OR

    Mr. Furman. Mr. Chairman, Senator Murkowski, and the 
committee, thank you again for the opportunity to appear before 
you.
    I'm senior vice president of transmission development and 
policy for Iberdrola Renewables. We're a United States 
corporation headquartered in Portland, Oregon. We're the second 
largest developer and operator of wind farms in the United 
States. We're also actively developing solar and biomass 
facilities. In 2008 alone, we invested over $2 billion just in 
wind-generating facilities in the United States. I'm here, 
obviously perhaps, to urge the support and the passage of a 
national RPS.
    There are three benefits that we see to a national RPS. 
Depending on what's playing in the papers on any point in time, 
one may surge to the front, in terms of being most important, 
but they're all solid reasons for doing it.
    The first one is economic. In 2008, the wind industry in 
this country built 8,000 megawatts of wind--in excess of 8,000 
megawatts--$17 billion invested, 35,000 jobs. That is a good, 
positive thing that happened, and those effects lasted all the 
way through the end of 2008 and are continuing into 2009.
    The RPS has been estimated to create, if passed in its 
current form as proposed, 185,000 new jobs, $66 billion in new 
investment. This is all according to a study by the Union for 
Concerned Scientists. So, it's an economic stimulative package 
that involves investment, not just spending money on things 
that won't yield a return, but on long-term investment.
    The benefits are the next two reasons--the benefits of 
those investments. Equally important, in my view, is national 
security. If you look at the last 10 to 15 years in this 
country, we have built largely natural-gas-fired generation in 
order to meet our growing needs. Natural gas is a good way to 
generate electricity. It's flexible. There are many benefits to 
it. But, we have a limited supply. At some point, we will start 
to run out of domestic supplies. Guess who owns most of the 
world's natural gas? It's people who don't like us very much. 
So, this is, in my view, a national security imperative, that 
we find ways, and start planning for that time in the future 
when our domestic supplies start to wane and we do begin to 
seriously import liquified natural gas. I think it's essential 
to our way of life. Energy is such an important part of our 
economy, it is essential that we get ahead of that.
    The third obvious benefit is environmental. This is not the 
sole solution to global--to climate change and to carbon, but 
it is a major component to it, and there's no reason not to get 
started on it today. EIA estimates 15 percent RPS would result 
in 3 billion tons of carbon reduction. That's substantial. That 
is a substantial amount of carbon. UCS estimates that 20-
percent RPS would be the equivalent of taking $36 million--36 
million cars off the road. So, it is a substantial part of 
dealing with carbon.
    There are several arguments against the RPS; we've heard 
some of them already. One of them is that it's discriminatory, 
in terms of regions of the country. I don't think nothing could 
be further from the truth. The whole purpose of an RPS is to 
create a trading system that will allow you to trade renewable 
rights. The idea behind that is, essentially, to have a single 
price. Everybody will pay the same price. That's an important 
component. A lot has been made about wealth transfer, and I 
don't think that holds water at all.
    Second, higher prices. Perhaps, in the very short term. 
But, an RPS, as was pointed out by Dr. Izzo, will actually 
drive prices down as we achieve economies of scale. More 
importantly, particularly for the wind business, which is going 
to be where the bulk of the compliance comes from--wind is a 
logistically driven business. If you don't--if you have high 
transportation costs, if you're not manufacturing, domestically 
and locally, you're going to have high costs, and that's one of 
the reasons it's more expensive. An RPS will give companies the 
incentives to invest in manufacturing facilities, locally.
    The last argument is that it should be done by the States. 
I think it's clear that results in a Balkanized system. It's a 
compliance nightmare for utilities. It's very, very difficult.
    In terms of the current draft, I've included in my 
testimony a number of things that--including a number of maps 
that demonstrate that there is renewable energy across this 
country. There's substantial biomass in the Southeast, there is 
a lot of ability to comply at a reasonable level.
    The current draft--we've pointed out, in my written 
testimony, a number of things--I would call out energy 
efficiency, though, as an important thing that we think ought 
to be done first. Utilities ought to start with energy 
efficiency, but it ought not to be put in this bill, because it 
will create an accounting nightmare.
    I will conclude my remarks by noting that I testified 
before this committee in favor of an RPS 4 years ago, and at 
that time I was employed by--it was a different part of my 
life, and I was employed by, actually, the largest coal-burning 
utility west of the Mississippi. The reasons I testified for 
the RPS then are the same reasons as I'm testifying now and 
that I urge its support. The difference is, the urgency is far 
greater.
    Thank you for this opportunity to speak, and I'd ask that 
my written comments be included in the record. Thank you, Mr. 
Chairman, for the opportunity.
    [The prepared statement of Mr. Furman follows:]

   Prepared Statement of Donald N. Furman, Senior Vice President for 
  Development, Transmission, and Policy, Iberdrola Renewables, Inc., 
                              Portland, OR
    Mr. Chairman, Senator Murkowski and members of the Committee, thank 
you for the opportunity to appear before you today and thank you for 
holding this important hearing. My name is Don Furman. I am Senior Vice 
President for Development, Transmission, and Policy for Iberdrola 
Renewables, Inc. Iberdrola Renewables is a U.S. corporation \1\, 
headquartered in Portland, Oregon. We are America's second-largest 
developer and operator of wind energy generating facilities. We also 
are engaged in the development and operation of solar and biomass 
generating facilities and other energy activities. In 2008, alone, 
Iberdrola Renewables invested more than $2 billion in energy projects 
located throughout the country.
---------------------------------------------------------------------------
    \1\ Iberdrola Renewables in affiliate of Iberdrola Renovables--the 
world's largest wind power generator with operations in more than 20 
countries.
---------------------------------------------------------------------------
    The purpose of my testimony is to urge the Congress to enact 
national renewable portfolio standard (RPS) legislation. Mr. Chairman, 
Iberdrola Renewables appreciates your leadership in promoting a 
national RPS over the years. We would not be close to enacting this 
legislation without your commitment and persistence. The time has 
arrived for the House and Senate to send to the President a robust RPS 
bill that will help expand the economy, protect the environment, reduce 
consumer energy costs and enhance our national security.
    President Obama's New Energy for America Plan calls for an RPS that 
``ensures 10 percent of our electricity comes from renewable sources by 
2012, and 25 percent by 2025.'' While these targets might appear 
ambitious, they are certainly achievable. Last year, the Department of 
Energy issued a report concluding that, if certain barriers are 
eliminated, wind energy alone could provide up to 20 percent of the 
nation's electricity supply by 2030. Other renewable energy 
technologies including solar, biomass and geothermal also have the 
potential to produce substantial amounts of electricity in the near-
term, if the proper policies are adopted.
                benefits of renewable energy deployment
    A national RPS, by increasing the deployment of renewable electric 
generation capacity, will produce enormous economic benefits. Until 
recently, renewable energy had been one of the few bright spots in the 
U.S. economy. In 2008, more than 8,000 MW of wind power capacity 
(accounting for 42% of all new electric capacity additions) was 
installed in the United States. This activity created an additional $17 
billion in investment and 35,000 jobs throughout the economy \2\--and 
not just in states hosting wind farms. For example, at least three 
manufacturers have announced plans to build windmill blade and turbine 
manufacturing facilities in Arkansas--investing approximately $300 
million and adding more than 2,000 jobs to the State's economy. 
Enactment of a national RPS would be a significant boost for the 
economy. According to a 2007 analysis prepared by the Union of 
Concerned Scientists, a 20 percent national RPS, by itself, would 
create 185,000 new jobs and generate approximately $66 billion in new 
capital investment.\3\
---------------------------------------------------------------------------
    \2\ ``Wind Generation Grows by Record 8,300 MW in 2008'', American 
Wind Energy Association Press Release (January 27, 2009).
    \3\ ``Cashing In On Clean Energy'', Union of Concerned Scientists 
(July 12, 2007).
---------------------------------------------------------------------------
    An increased reliance on renewable energy to power our homes and 
businesses would also substantially reduce the emission of greenhouse 
gases and other harmful pollutants. The Energy Information 
Administration (EIA) in 2007 concluded that a 15 percent national RPS 
would reduce carbon dioxide emissions by 3 billion tons.\4\ The Union 
of Concerned Scientists estimates that a 20 percent RPS would amount to 
the emissions reduction equivalent of removing 36.4 million cars from 
the road.\5\
---------------------------------------------------------------------------
    \4\ ``Impact of a 15-Percent Renewable Portfolio Standard'', Energy 
Information Administration (June, 2007).
    \5\ ``Cashing In On Clean Energy'', Union of Concerned Scientists 
(July 12, 2007).
---------------------------------------------------------------------------
    The increased deployment of renewable energy will also enhance our 
national energy security. The electric generation sector in the U.S. 
has become dangerously reliant on natural gas. According to the EIA, 
natural gas-fired facilities are expected to account for approximately 
half of all electric generation capacity additions over the next four 
years.\6\ Although domestic natural gas production has risen, it is 
unlikely to maintain pace with demand. This will raise gas prices and 
increase our reliance on liquefied natural gas (LNG) imported from 
countries that aren't necessarily friendly with the United States. In 
fact, natural gas exporting countries from unstable parts of the world, 
including Russia and Iran, recently held discussions aimed at forming 
an OPEC-style cartel. Mr. Chairman, Americans can not afford to be 
subjected to another international energy cartel. Renewable energy can 
act as an important hedge--reducing overall gas demand and limiting our 
reliance on natural gas imports. According to a 2007 report prepared by 
Wood Mackenzie--a firm that does consulting work for the natural gas 
industry--a 15 percent national RPS would reduce natural gas demand by 
three bcf per day and lower U.S. natural gas prices by more than 15 
percent.\7\
---------------------------------------------------------------------------
    \6\ ``Planed Nameplate Capacity Additions from New Generators by 
Energy Source'', Energy Information Administration (www.eia.doe.gov/
cneaf/electricity/epa/epat2p4.html).
    \7\ ``The Impact of a Federal Renewable Portfolio Standard'', Wood 
Mackenzie (February, 2007).
---------------------------------------------------------------------------
                   a national rps is urgently needed
    Today, the only significant incentives for renewable energy 
development are located in the tax code--the renewable production tax 
credit (PTC), the solar investment tax credit (ITC) and accelerated 
depreciation (MACRS). These tax incentives have been successful to a 
point. However, they have also led to a substantial amount of 
uncertainty that has, at times, inhibited investment in renewable 
generation and blocked the development of a domestic renewable energy 
manufacturing base.
    The PTC, which was first enacted in 1992, has expired on three 
different occasions and has neared expiration several other times. When 
Congress has extended the PTC, the extensions have always been for 
short time horizons. Until recently, the ITC had suffered a similarly 
inconsistent history. This uncertainty has inhibited long term planning 
for renewable project developers. In addition, it has limited 
investment in a domestic manufacturing base. The vast majority of 
renewable energy equipment is still manufactured overseas, often using 
technology developed here.
    The ongoing congressional debate on the economic stimulus package 
over the relief necessary to enable renewable energy developers to use 
existing renewable energy tax incentives illustrates the urgent need 
for enactment of a national RPS. Because they operate very capital 
intensive businesses, most renewable energy developers do not have 
sufficient taxable incomes to directly utilize these tax incentives. As 
a result, they have been forced to enter into Internal Revenue Service-
sanctioned ``tax equity partnerships'' with companies that had large 
amounts of taxable income--primarily very large financial institutions. 
These arrangements were grossly inefficient--Wall Street intermediaries 
ended up with up to 30 percent of the value of the renewable energy tax 
incentives, at the expense of renewable energy projects and consumers.
    The recent collapse of a large number of financial service 
companies has virtually eliminated even that avenue for renewable 
energy developers to utilize the PTC, ITC and MACRS. Unless action is 
taken by Congress soon, investment in new renewable energy capacity in 
2009 and 2010 is expected to decline dramatically--costing upwards of 
100,000 jobs. The renewable energy industry is hopeful that the 
economic stimulus bill will provide some temporary relief to enable 
renewable energy developers to monetize renewable energy tax 
incentives.
    This, of course, begs the question: why are we using an inefficient 
tax policy to accomplish a goal that is critical to our security and of 
strategic important to our future as a nation? A national RPS will 
provide a simple, direct signal to the market place that will drive 
renewable energy development and eventually obviate the need for the 
PTC. By establishing a market for renewable energy over a reasonable 
period, a national RPS would provide the long-term certainty that is 
essential for developing a vibrant domestic renewable energy industry.
                 opponents' arguments are unconvincing
    Mr. Chairman, we are encouraged that the concept of a national RPS 
is growing in popularity, even among electric utilities. On January 30, 
nine publicly-owned and investor-owned utilities (representing diverse 
regions and generation sources) were among a group of companies that 
signed a letter to President Obama's Chief of Staff urging the 
enactment of national RPS. There remain, however, a number of opponents 
that continue to make the same tired, old arguments, no matter how many 
times they are refuted. These arguments are pure sophistry.
    First, critics argue that a national RPS will discriminate against 
states that don't have substantial wind power resources. However, this 
ignores the fact that a variety of renewable technologies would be 
eligible for RPS compliance. As the attached maps demonstrate, each 
region of the country is blessed with substantial amounts of renewable 
resources. For years, opponents of a national RPS have mockingly 
referred to it as a ``wind portfolio standard''. However, the EIA, in 
analyzing previous national RPS proposals considered in the House and 
Senate, has consistently concluded that biomass energy, not wind, would 
benefit the most and that solar power would also receive a substantial 
amount of renewable energy credits.\8\ EIA has also concluded that 
utilities in the Southeastern U.S.--a region with limited wind power 
potential--would have access to a substantial amount of renewable 
energy in order to comply with a national RPS.
---------------------------------------------------------------------------
    \8\ See e.g., ``Impacts of a 15-Percent Renewable Portfolio 
Standard'', Energy Information Administration (June, 2007); ``Energy 
and Economic Impacts of Implementing Both a 25-Percent Renewable 
Portfolio Standard and a 25-Percent Renewable Fuel Standard by 2025'', 
Energy Information Administration (August, 2007).
---------------------------------------------------------------------------
    Utilities could also economically comply with a national RPS 
through renewable energy generated in other states. For instance, a 
proposed transmission expansion plan by the Southwest Power Pool is 
expected to bring the Southeast significant wind power resources from 
the central plains. Moreover, by establishing a national renewable 
energy credit (REC) trading market and enabling utilities to comply 
through the acquisition of RECs, a national RPS will ensure that the 
most cost effective renewable energy facilities will be deployed. Many 
of the naysayers that argue that a statute causing a utility to 
purchase renewable energy or RECs associated with renewable energy 
generated elsewhere somehow would amount to a regional wealth transfer, 
are the same utilities that currently import large amounts of coal and 
uranium mined thousands of miles away. The fact is that our nation has 
always been heavily dependent on interregional transfers of energy to 
ensure reliability and benefit consumers.
    Second, opponents claim that a national RPS will dramatically raise 
energy prices. However, the facts don't bear that out. According to 
Wood Mackenzie, a 15 percent national RPS, because it significantly 
reduces the demand for natural gas and thus the price of electricity 
generated with gas, would cause electricity costs to decline by 
approximately $240 billion over 20 years.\9\ Further, EIA's analysis of 
a 15 percent national RPS proposal considered in the previous Congress 
concluded that overall it would cause consumer energy costs to rise by 
less than one-half of one percent over a 25 year period.\10\ Now that 
EIA is forecasting higher natural gas prices over the long term, an 
updated analysis will likely demonstrate greater savings.
---------------------------------------------------------------------------
    \9\ ``The Impact of a Federal Renewable Portfolio Standard'', Wood 
MacKenzie (February, 2007).
    \10\ ``Impact of a 15-Percent Renewable Portfolio Standard'', 
Energy Information Administration (June, 2007).
---------------------------------------------------------------------------
    Third, some suggest that RPS programs are better left for the 
states to consider and administer individually. Twenty seven states 
have adopted their own renewable portfolio standard programs. These 
state programs have helped create markets for renewable energy. 
However, the state programs have their limitations. Some state RPS 
programs are better designed than others. It is not yet clear whether 
some of these state programs will actually cause much additional 
renewable generation to be built. In addition, certain states have 
erected barriers to renewable energy generated in other states, 
eliminating the efficiencies that come from interstate trading of 
renewable energy and the development of a national REC market. 
Moreover, certain states are unlikely to promote the development of a 
significant amount of renewable energy. A national RPS (supplemented by 
state programs that exceed the national floor) is the only policy that 
can ensure the development of significant amounts of renewable energy 
in the most cost effective manner.
    Finally, certain opponents argue that Congress should focus instead 
on the adoption of a greenhouse gas cap-and-trade regime because a 
national RPS would not do enough to prevent climate change. While it is 
true that the RPS would not obviate the need for greenhouse gas 
regulation, the fact is that it will likely take some time before a 
greenhouse gas regulatory scheme actually causes a significant shift in 
the electric generation resource mix. Renewable energy and energy 
efficiency are the only available mechanisms for reducing emissions in 
the near-term. In addition, as I have already noted, a national RPS 
produces other benefits (both economic and security-related) beyond the 
reduction of greenhouse gas emissions.
                     comments on draft rps proposal
    Mr. Chairman, I would like to take a moment to comment on the draft 
national RPS legislation you recently circulated. This legislation 
would help promote a vibrant domestic renewable energy industry and we 
urge the Committee to favorably report the bill, with some 
modifications.
    First, it is important that a national RPS bill contain compliance 
requirements that are achievable, yet ambitious enough to lead to 
greater investments in renewable energy. The draft legislation requires 
utilities regulated under the provision to meet an RPS target that 
begins at 4 percent in 2011 and ramps-up to 20 percent by 2021 and 
remains at 20 percent through 2039. On their own, these targets may 
appear to be reasonable. However, the legislation includes a number of 
provisions that would have the effect of reducing overall renewable 
generation levels. For instance, utilities with retail sales of less 
than 4 million megawatt-hours would be exempted. In addition, utilities 
would deduct sales of hydropower and power generated from municipal 
solid waste before calculating the level of renewable energy required 
to comply with the Act. Moreover, in some cases utilities will be able 
to use energy efficiency to meet up to 25 percent of their renewable 
energy requirement. Finally, distributed generation facilities that 
utilize renewable resources and renewable generation located on tribal 
land would be eligible for credit multipliers. Although these 
provisions may be necessary to meet other public policy objectives, 
they could significantly reduce the overall renewable energy target. We 
urge that the RPS compliance targets be strengthened to account for 
these exceptions.
    The draft RPS legislation would permit utilities, if their 
governors so petition, to use energy efficiency credits to comply with 
up to 25 percent of their RPS obligations. Energy efficiency should 
always be the first resource option for every utility and efficiency 
certainly should be encouraged as much as possible. However, issuing 
energy efficiency credits for ``qualified energy savings'' and 
permitting those credits to be utilized for RPS compliance could be 
problematic. It is very simple to determine when a kilowatt-hour of 
renewable electricity is generated. It is far more complicated to 
determine when an action leads to an actual reduction of energy use and 
how much energy savings are actually achieved directly as a result of 
that action. For instance, the energy efficiency provisions of the 
draft RPS bill arguably would provide a factory owner with efficiency 
credits if the owner shuts down a factory due to the economic downturn. 
We believe that Congress should seek to encourage and require energy 
efficiency actions outside of the context of RPS legislation.
    We also believe that the funds received by the government would be 
better used if they were allocated back to utilities in the proportion 
those utilities submitted Federal Renewable Energy Credits in 
compliance with the bill. Such a provision, which is included in the 
Markey-Platts RPS bill that was recently introduced in the House, would 
further encourage utility compliance with the RPS through the 
generation of renewable energy and the acquisition of RECs rather than 
by making an alternative compliance payment. This concept is similar to 
an approach utilized in Great Britain's RPS program.
    Mr. Chairman, I want to briefly address a separate, but related, 
subject--electric transmission. Many sites with good wind, solar and 
geothermal resources are located great distances from load centers. 
Many of these sites aren't being developed because of insufficient 
transmission capacity to enable the power to be transported to 
consumers. Congress, by enacting, a national RPS, will help incent 
utilities to build additional amounts of transmission to allow them to 
access the most cost effective sources of renewable energy. However, 
more needs to be done. The current patchwork of regulatory 
responsibility over the planning and siting of transmission facilities 
and the allocation of the costs associated with those facilities has 
proven ineffective. We urge this Committee to also enact legislation 
that would provide a greater role for the Federal government to address 
the current regulatory impediments to the development of much needed 
interstate transmission designed to access renewable energy.
    Mr. Chairman, this concludes my prepared presentation.

    The Chairman. Thank you very much.
    Mr. Wright--Commissioner Wright, go right ahead.

     STATEMENT OF DAVID A. WRIGHT, CHAIRMAN, SOUTHEASTERN 
 ASSOCIATION OF REGULATORY UTILITY COMMISSIONERS, COLUMBIA, SC

    Mr. Wright. Thank you. My name is David Wright, and I'm a 
commissioner with the South Carolina Public Service Commission. 
Before I start, I'd like to thank the committee and thank the 
staff, both Jean and Kelly, for the job they did in assisting 
us, getting us ready on such short notice. So, thank you, and 
please pass that along to them.
    As regulators in the SEARUC region, we are responsible for 
ensuring that retail electricity customers receive safe, 
reasonably priced, reliable electric service. We believe 
establishing a uniform national renewable portfolio standard 
without regard to crucial regional differences will drive up 
electricity costs unnecessarily, jeopardize reliability, and 
divert capital needed to achieve aggressive carbon targets.
    Federal policy should give States the flexibility to 
promote renewable energy in a way that doesn't undercut the 
higher priority of reducing carbon emissions cost-effectively.
    South Carolina, for example, does not possess a wealth of 
renewable energy sources, such as the abundant solar energy 
that is available to States in the desert Southwest, the wind-
turbine generation available to States located in the Great 
Plains, or hydro generation in the Pacific Northwest. As a 
result, my State and our region must seek to encourage the 
growth of research and development in the use of renewable 
sources that are available and economically viable to provide 
for our future needs.
    During many of the earlier years covered in the discussion 
draft RPS, we still have to continue our reliance on 
conventional base-load-generation sources, including new 
nuclear energy, to ensure that reliable, reasonably priced 
electricity is available to all of our citizens.
    As for solar power--with the current technology, solar has 
a low capacity factor, takes significant space, and is not 
always available during times of greatest need. In my State, 
we've had testimony that as much as 90 percent of any wind or 
solar power would have to be backed up with conventional 
generation sources. Electricity consumers want power even when 
the sun is not shining and the wind is not blowing.
    Because the availability and cost-effectiveness of 
traditional renewable energy sources vary so widely among 
States and regions, the SEARUC States believe that decisions 
regarding renewable energy portfolios should be left to the 
States. While we do urge Congress to support renewables, if you 
should decide to adopt an RPS mandate, we also ask that you 
carefully craft it to be practically achievable on a State-by-
State basis. An RPS should be based on what a State can 
possibly achieve if it employs its best efforts to promote 
renewable generation.
    Some States are truly blessed with renewable resources, 
others are not. As the SEARUC region, we wish to emphasize that 
the aim of Federal energy legislation should not be to transfer 
wealth from one region of our Nation to another through the 
enforced purchase of renewable energy credits, or RECs. A very 
large concern for the SEARUC region is that the money used to 
purchase the RECs and alternate compliance payments will leave 
our States and our region, the very areas that need the money 
most. A one-size-fits-all Federal RPS would hit consumers hard 
in the Southeast, the region with the least renewable resources 
and the greatest poverty. Electricity customers would have to 
pay an expensive premium on top of higher costs that will come 
with meeting carbon targets. For instance, in my State we have 
one of the lowest income levels in the U.S., and one of the 
highest unemployment levels, and many of them live in mobile 
homes and other energy-inefficient housing. These low-income 
households are truly unable to participate in any energy 
efficiency and conservation efforts, which greatly limit our 
ability to achieve the proposed RPS or conservation goals.
    Because they live in energy-inefficient housing, their 
consumption rate of electricity is higher, and, naturally, so 
is their bill for electricity. A sad fact is, the only time 
they conserve is when they're forced to, when their power is 
shut off for inability to pay the bill.
    This is an important reason why we believe the money in the 
utility--i.e., the ratepayer--pays for RECs, and alternate 
compliance payments should not leave the State. The money 
should be reinvested in the State where it was paid, to develop 
and implement energy efficiency programs, to help low-income 
households, and to help make these renewable technologies more 
affordable.
    The energy policy report recently prepared and released by 
our public utilities review committee concluded that renewable 
resources would provide about 4 percent of South Carolina's 
generation by 2027. That would leave us--if you assume that we 
could get 5 percent from conservation and efficiency, it would 
leave us 11 percent short of the proposed 20-percent RPS by 
2020. Others in our region will face the same fate.
    North Carolina is the only State in the SEARUC region that 
has adopted and is operating under an RPS, a 12-and-a-half-
percent RPS by 2021, with 40 percent of that total being 
allowed to come from energy efficiency. Regulators there have 
told me that if the national RPS were adopted as it is proposed 
in this discussion draft, the-cent kilowatt-hour alternate 
compliance payment alone would more than double the current 
cost to their customers.
    I was taught that you should not criticize something unless 
you are prepared to offer an alternative solution. With that in 
mind, I would ask that you and the Congress strongly consider 
doing exactly what was done in the Energy Policy Act of 2005, 
when you charged public utility commissions across this Nation 
with setting standards for net metering and smart metering. 
Before moving forward with a national renewable portfolio 
standard, first give States a chance by charging those State 
public utility commissions across this Nation who do not have a 
renewable portfolio standard in place with creating such a 
standard. Like EPAct 2005 legislation, give commissions a 
deadline to get it done and in place. I know your goal is not 
to penalize anyone. Please move slowly on this issue and 
consider my suggestion to allow States to adopt and address 
their standards.
    Thank you for your time today, and it's truly an honor to 
be here.
    [The prepared statement of Mr. Wright follows:]

    Prepared Statement of David A. Wright, Chairman, Southeastern, 
     Association of Regulatory Utility Commissioners, Columbia, SC
    Good Morning. I am honored to have the opportunity to appear before 
this distinguished Committee today to present testimony before you as 
you wrestle with this difficult issue.
    My name is David Wright. I am a legislatively elected Commissioner 
of the South Carolina Public Service Commission. I am here today as 
Chairman of the ten member states that comprise the Southeastern 
Association of Regulatory Utility Commissioners (SEARUC), a regional 
association of the National Association of Regulatory Utility 
Commissioners (NARUC). I am also representing my state commission and 
myself as a South Carolina Commissioner.
    As regulators, my fellow commissioners and I in the SEARUC region 
are responsible for ensuring that retail electricity customers receive 
safe, reasonably priced, reliable electric service. We are concerned 
that a uniform, federal Renewable Portfolio Standard (RPS) mandate 
fails to recognize that there are significant differences among the 
states in terms of available and cost-effective renewable energy 
resources, and that having such a standard in energy legislation will 
ultimately increase consumers' electricity bills.
    Establishing a uniform national RPS, without regard to crucial 
regional differences, unnecessarily drives up electricity costs, 
jeopardizes reliability, and diverts capital needed to achieve 
aggressive carbon targets. If we are going to have renewable portfolio 
standards, they should be politically sustainable, and take into 
account what best efforts can achieve in each state, given its 
potential for renewable energy. Federal policy should give states the 
flexibility to promote renewable energy in a way that doesn't undercut 
the higher priority of reducing carbon emissions cost-effectively.
    Some regions of the country have unique renewable energy sources, 
like geothermal. Not all states are fortunate enough to have abundant 
traditional renewable energy resources, such as wind, or have them 
located close enough to the load center to render them cost-effective. 
The Southeast and large parts of the Midwest certainly face this 
circumstance.
    In particular, my state, South Carolina, does not possess a wealth 
of renewable energy sources, such as the abundant solar energy that is 
available to states in the Desert Southwest, the wind turbine 
generation available to states located in the Great Plains, or the 
hydro generation in the Pacific Northwest. As a result, my state, and 
our region, must seek to encourage the growth of research and 
development in the use of renewable resources that are available and 
economically viable to provide for our future needs. During the earlier 
years covered in the discussion draft being considered we will also 
have to continue our reliance on conventional base load generation 
sources including new nuclear energy to ensure that reliable, 
reasonably priced, electricity is available to all of our citizens.
    Even in regions of the country that do have access to wind energy, 
there frequently is stiff local opposition to building huge wind 
turbines, significant costs for the additional transmission needed, and 
reliability concerns. As a result, some renewable wind energy projects 
do not get built, while others take years to build.
    As for solar power, with the current technology, it has a low 
capacity factor, takes significant space, and is not always available 
during times of greatest need. In my state, we have had testimony that 
as much as 90% of any wind or solar power would have to be backed up 
with conventional generation sources. Electricity consumers want power 
even when the sun is not shining and the wind is not blowing.
    Because the availability and cost-effectiveness of traditional 
renewable energy resources varies so widely among states and regions, 
the SEARUC states believe that decisions regarding renewable energy 
portfolios should be left to the states. Renewable energy is touted as 
a way to achieve energy independence, reduce green house gas emissions 
and reduce our carbon footprint. All of these are admirable goals.
    But what is it that the country really needs? Is it energy 
independence? Is it a reduced carbon footprint? Is it greenhouse gas-
free energy? Like many, I believe it makes sense to do the best we can 
to achieve all of the above. But at what price? Additionally, to remove 
political influences, or the artificial `feel-good' nature a RPS might 
bring, you should consider relying on sound science as you craft a 
policy. By this I mean, the claims of trade groups or others who are 
promoting specific renewable technologies should be proven by sound 
scientific principles, using independent scientific methodology in a 
transparent way. The claims should be able to proven and reproducible 
others.
    After so many years of not having a real national energy policy, 
we're now in great danger of establishing a national policy that is 
doomed to failure--with a renewables policy and climate policy at 
cross-purposes. Consumers and our economy will pay a heavy price for 
the unintended consequences.
    While we agree with the overall goals as stated above, and urge 
Congress to support renewables, we also ask that you carefully craft 
any RPS mandate to be practically achievable on a state-by-state basis. 
Because of the differences in availability of renewable resources, some 
states' ``best efforts'' in developing renewables may produce results 
much lower than those that are practically achievable in other states. 
As the SEARUC region, we wish to emphasize that the aim of federal 
energy legislation should not be to transfer wealth from one region of 
our nation to another through the enforced purchase of Renewable Energy 
Credits, or RECs.
    Quite honestly, the utilities in my region will not be able to meet 
the renewable portfolio standard as set forth in this legislation. 
Instead, in order to achieve compliance, they will be forced to write 
very large checks for the RECs, money that will come from our 
ratepayers, and the money will leave our region where it is needed 
most. This will be a very significant dollar amount, too.
    As attachments to my testimony, I have included sources, links, 
memos, articles and letters from states in the SEARUC region to support 
my testimony.* Public Utility Commissions and Commissioners throughout 
the SEARUC region all tell me the same thing. While all of our states 
strongly support renewable and alternative energy generation, we do not 
support a federally mandated one-size-fits-all Renewable Portfolio 
Standard. As regulators and public officials, our statutory charge is 
to ensure safe, reasonably priced, and reliable electric service. We 
are concerned that a federally mandated RPS that fails to account for 
differences in regional and local characteristics could increase the 
cost of service for all consumers and businesses who use and pay for 
electricity and could reduce reliability, while providing no incentive 
for investment in our states or benefit to the customers in return for 
those higher bills.
---------------------------------------------------------------------------
    * The following documents listed have been retained in committee 
files: Ryan H. Wiser--The Treatment of solar Elecgtricity in Renewables 
Portfolio Standards; Wood Mackenzie--North America Gas & Power: 
Balancing CO2 Goals with Gas & Power Market Conditions; Wood 
Mackenzie--The Impact of a Federal Renewable Portfolio Standard; The 
Southeastern United States Can Benefit from a National Renewable 
Electricity Standard; Impacts of a 15-Percent Renewable Portfolio 
Standard; Commissioner WRIGHT--Appendices A-H; Estimate by Arkansas 
Electric Coops of Impact of RPS Legislation on All Arkansas Consumers; 
Estimate by Arkansas Electric Coops of Impact of RPS Legislation on All 
Arkansas' Electric Cooperatives; Analysis of cost of Renewables for 
Arkansas; Analysis of Cost of Renewables for Arkansas' Cooperatives; 
Senator Bingaman's Renewable Portfolio Standard Discussion Draft; 
Sources and LINKS; Estimates by Entergy for Entergy Arkansas and All of 
Arkansas Consumers; Estimate by Entergy For Entergy Utility Service 
Area; RX FOR RPS: ADDRESSING THE REGIONAL DISPARITIES; Florida PSC 
Response to Information Request; Letter to Senator Martinez; 
Electricity Modernzation Act of 2005; Lester B. Lave--A National 
Renewable Portfolio Standard; Not Practical; Letter from MARUC; Udall/
Platts RPS Amendment; NARUC's Position on Legislation Establishing a 
Federal RPS Program; State of North Carolina Utilities Commission 
Raleigh; North Carolina comprehensive Energy legislation key Messages; 
Key Points--2007 Promote Renewables Energy and Energy Efficiency Act 
Securing the Right Energy Future for North Carolina; Annual Report of 
the North Carolina Utilities Commission; Net Electric Generation by 
Fuel Source by SEARUC State; Robert Michaels--A Federal Renewable 
Electricity Requirement What's Not to Like; National Renewable 
Portfolio Standard: Smart Policy or Misguided Gesture? RPS Effect on 
Arkansas' Cooperatives Annual Cost and Sales.
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    Although the states in the SEARUC region do not support a `one-
size-fits-all' national renewable portfolio standard, we do support the 
growth of renewables. It is my hope that the Congress will recognize 
that there are truly significant differences in the availability of 
renewable resources from state to state. Some states are truly blessed. 
Others are not.
    I was brought up to believe that you should not criticize or 
complain about something unless you were prepared to offer an 
alternative or a solution.
    With that in mind, I would ask you that you and the Congress 
strongly consider doing exactly what was done in the Energy Policy Act 
of 2005, when you charged public utility commissions across this nation 
with setting standards for net metering and smart metering within a set 
period of time.
    I would ask that, before you move forward with a national Renewable 
Portfolio Standard, you first give the states a chance by charging 
those state public utility commissions across this nation that do not 
already have a Renewable Portfolio Standard in place with creating such 
a standard. And, like in the EPACT 2005 legislation, give our state 
commissions a certain period of time to get it done and in place. Each 
state's RPS should recognize its renewable resource potential and 
should push for a best-achievable RPS within a given period of time. If 
a utility fails to meet the state standard, a penalty or compliance 
payment would have to be made to the state. That money would stay in 
the state where it would be invested in renewable technology or to 
developing and implementing energy efficiency programs for low-income 
households living in mobile homes or other energy-inefficient housing. 
Any utility that meets a state standard would be deemed to be in 
compliance with any federal requirement.
    North Carolina is the only state in the SEARUC region that has 
adopted, and is operating under, a renewable portfolio standard. After 
many studies and hearings on the subject, North Carolina adopted a 
12.5% RPS by 2021 with 40 percent of that total being allowed to come 
from energy efficiency. But, North Carolina also adopted a cost cap. 
Regulators there have told me that if the national RPS were adopted as 
it is proposed in the discussion draft being considered today, the 
$0.03 cents/kwh alternate compliance payment alone would more than 
double the current cost to their customers. Florida is another state 
that is working through and toward a renewable energy policy. The 
Florida Public Utilities Commission is currently studying the issues 
and is consulting with the state legislature.
    A very large concern for my state and the SEARUC region is that the 
money used to purchase the REC's and alternate compliance payments will 
leave our states and our region, the very areas that need the money the 
most.
    Let me explain why I say that. A `one-size-fits-all' federal RPS 
would hit consumers hard in the Southeast, the region with the least 
renewable resources and the greatest poverty. Electricity customers 
would have to pay an expensive premium on top of the higher costs that 
will come with meeting carbon targets.
    South Carolina has one of the lowest income levels in the United 
States and one of the highest unemployment levels. Our workers' average 
annual salary is $27,560, compared to a national average of $33,000. 
There are a significant number of households living at the poverty 
level and below in South Carolina, as in much of the Southeast, and 
many of them live in mobile homes or other energy-inefficient housing. 
These people are proud, but they are poor.
    Literacy levels are low in South Carolina, and pose a significant 
obstacle to our meeting the energy efficiency component of an RPS. 
Statistics indicate that South Carolina has high student dropout rates 
and the majority of residents have some degree of illiteracy. South 
Carolina has the 4th highest percentage of adults at Level I or 2 in 
the country. More than half (56%) of our state's residents fall within 
severe (Level 1) to moderate (Level 2) ranges of illiteracy (level 1 is 
the lowest literacy level. Adults in this category can perform simple 
tasks with text and documents, but display difficulty using certain 
reading, writing, and computational skills considered necessary for 
functioning in everyday life. Adults at literacy level 2 can begin to 
compare and contrast but are unable to perform higher level reading and 
problem solving skills.) If people cannot read or write, they will have 
a difficult time comprehending information about energy efficiency and 
conservation.
    These low-income households are truly unable to participate in any 
energy efficiency and conservation efforts, which greatly limits our 
ability to achieve the proposed RPS or conservation goals. But these 
people still must heat their homes. Because they live in energy-
inefficient housing, their consumption rate of electricity is higher 
and, naturally, so is their bill for electricity, compared to the 
figures for occupants of more well insulated energy efficient homes. A 
sad fact is, the only time they `conserve' is when they are forced to: 
when their power is shut off for inability to pay their bill.
    South Carolina ranks 40th among in the country in median income, 
and 44th in disposable income. Many of our citizens simply can't afford 
weather stripping for the front door, much less energy-efficient 
windows or an energy-efficient heating unit. They may want to conserve, 
to make their homes energy efficient, to buy that Energy Star 
refrigerator, but they can't. They have to settle for that $100 used 
refrigerator, if they can afford it, or have to decide how to pay their 
power bill and buy groceries for the family. This is not an 
exaggeration.
    A better way would be to provide incentives for the use of, or 
integration of, renewable technologies into a company's existing 
portfolio, instead of penalizing them, and ratepayers, for a failure to 
meet an arbitrary standard.The money a utility (i.e. the ratepayer) 
pays for REC's and alternate compliance payments should not leave the 
state. The money should be re-invested in the state where it was paid 
to develop and implement energy efficiency programs to help low-income 
households, and to help make these renewable technologies more 
affordable.
    In the proposed national RPS, development of sources of renewable 
energy would have to cost less than $0.03 cents/kWh to avoid paying the 
alternate compliance payment or it would be wasted money, meaning it 
would be cheaper to make the alternate compliance payment than to 
develop renewables and energy efficiency technologies. In a recent 
hearing before the South Carolina Public Service Commission, an witness 
testified that `` . . . PV solar's cost of energy ranges from 31 cents 
per kWh to over 44 cents per kWh.'' Wind resources in the South 
Carolina and the Southeast that may be suitable for wind generation are 
primarily located along the coast which is subject to hurricanes. No 
offshore wind turbines currently exist in the United States. A proposed 
offshore wind farm in Delaware recently bid to supply generation to 
Delmarva Power & Light for about 13-14 cent per kWh. I do not know 
whether this is a busbar cost or a delivered cost. However, I do know 
that it is above the current average residential retail rate for 
electricity in South Carolina which is about 10 cents per kWh.
    The Energy Policy Report recently prepared and released by the 
Public Utilities Review Committee concluded that renewable resources 
would provide about 4% of South Carolina's generation by 2027. Assuming 
that South Carolina could achieve the 5% conservation and efficiency 
limit and 4% of electric generation from renewable by 2020, the 
utilities in South Carolina would fall 11% short of the proposed 20% 
RPS in 2020. Based on the 2007 total South Carolina generation reported 
by the Energy Information Agency and the proposed 3 cents per kWh 
Alternative Compliance Payment, South Carolina ratepayers would be 
subject to an annual Alternative Compliance Payment of more than $270 
million. This amount is in addition to the added cost of generation 
from renewable resources compared to the cost of generation from 
conventional resources. It is also possible that a civil penalty of 6 
cents per kWh could be assessed on all or part of the 11% shortfall in 
meeting the proposed RPS. From my view as a state regulatory 
commissioner, there are other issues or possible unintended 
consequences to consider as well. If I am to balance the needs of the 
utility against the needs of the ratepayer, where is the regulatory 
tipping point?
    As a regulator, how am I to treat a utility, and protect the 
ratepayer, in a rate proceeding when they have had to spend money to 
try and meet an RPS, and had to spend additional money to pay a penalty 
for not being able to meet the RPS, when what they really need is 
serious baseload generation to meet customer demand for electricity and 
a nuclear reactor is the least-cost generation source for them to meet 
the demand? An arbitrary national Renewable Portfolio Standard will 
hamper me as a regulator in being able to do the job I am charged to 
do. And I say that even before mentioning anything about the economic 
impact possible climate legislation or carbon legislation will have on 
ratepayers. As elected representatives of your states' citizens, you 
carry a heavy burden. But, your constituents trust you to do the right 
thing. I have followed some of your careers very closely and I have the 
honor of knowing some of you personally. I know your goal is not to 
penalize anyone. Please move slowly on this issue. In the meantime, 
also consider my suggestion to require the state utility commissions to 
address and adopt a renewable portfolio standard before you do 
something that may have serious unintended consequences.
    Senators, thank you for your time today. It is truly an honor to be 
here. I look forward to answering any questions that you may have, 
either today or, should you prefer, in writing to the Committee in the 
coming weeks.

    The Chairman. Thank you for your comments.
    Mr. Jones, go right ahead.

 STATEMENT OF SCOTT P. JONES, EXECUTIVE VICE PRESIDENT, FOREST 
              LANDOWNERS ASSOCIATION, ATLANTA, GA

    Mr. Jones. Chairman Bingaman and Ranking Member Murkowski, 
members of the committee, thank you for the opportunity to 
appear before you and speak about the implications of a 
renewable electricity standard for America's family forest 
owners.
    Today, I will talk with you about family forest owners and 
the practicalities they face in trying to hold forestlands as 
forests. Specifically, will family forest owners sell wood, or 
will they sell real estate? Without forestland, there can be no 
forest resources, such as clean water, clean air, wildlife 
habitat, and wood-based commodities.
    I am Scott Jones. I'm a private forest landowner and 
executive vice president of the Forest Landowners Association.
    Today, 60 percent of the commercial forestland in the 
United States is owned by almost 11 million private forest 
landowners, and we are under increasing pressure to convert 
forestland to other uses. Family forest owners need new markets 
for wood, and you can help by creating renewable energy 
opportunities for America. Woody biomass must include all wood 
crops, in all forms and sizes. The use of woody biomass as a 
renewable energy source will provide needed markets for private 
forest landowners and contribute to forest health by creating 
economic incentives to deter conversion of forestland to other 
uses.
    In a mosaic of energy sources across the U.S., we seek a 
level playing field for wood, but we are concerned that 
forestland may be disproportionally burdened by well-meaning, 
but functionally stifling, regulation relative to other 
renewable energy sources. Wood is a reliable feedstock without 
the seasonal fluctuations or serendipity of weather that 
inhibits some other energy sources, and the resource is 
available now.
    In January 1905, the New York Times headline read, ``Timber 
Famine Near, Says President Roosevelt.'' The article said that, 
``This country is in peril of timber famine.'' Unless the 
forest can be made ready to meet the vast demands which growth 
will inevitably bring, commercial disaster is inevitable. 
Remember, at this time, pulpwood was nonexistent, since Charles 
Herty had not yet invented the pulping process. Only when we 
planted trees and encouraged markets did we end our brush with 
a timber famine. The point here is, markets cured the timber 
famine. Forest management for commodities did that. New markets 
did not create sustainability problems, they cured them.
    You may have heard that adding a new RES market to existing 
markets will create an unsustainable resource. This is simply 
not true. We do not have enough markets for the wood that we 
are growing. 2007 Forest Service data shows 41 percent volume 
grown over removal in our country. The reduction in the forest 
products manufacturing not only affects the amount of wood 
grown, but is a threat to the perpetuation of forest 
landowners.
    Traditional markets for forest commodities are moving 
offshore. As fewer and fewer pulp and paper mills remain in 
this country, production has remained unchanged or slightly 
improved, but geographic distribution and access to these 
markets have degenerated.
    A few numbers to show the degeneration of the markets: 136 
pulp and paper mills were closed between 1997 and 2007, and 
none have been built since 1989; 331 softwood saw mills closed 
in the U.S. and Canada, 1995 to 2007--and I know some in your 
districts have seen some recent closures; 314 furniture plants 
closed between 2000 and 2008.
    The incentive for forest landowners to convert forestland 
investments to residential and commercial real estate are led 
by population growth of nearly 30 percent by 2030, according to 
the United States Census Bureau. Projections by the Forest 
Service are that 19 million acres of forestland will be 
developed to other uses between 1992 and 2020 in the Southeast. 
Again, I'm distinguishing between sustainable forestland, 
sustainable forest resources, and note that, without the land, 
there can be no resources.
    In legislation and regulation, if we are truly to meet a--
renewable energy goals, wood must be allowed to make its full 
contribution. Currently, 92 percent of our Nation's forestland 
is natural. However, with the current definition of ``renewable 
biomass'' in the renewable fuel standards at its most 
restrictive, America's natural private forestlands are 
excluded. That's 92 percent of our forestlands excluded from 
the renewable fuel standard. This kind of policy creates 
disincentives to continue to hold and manage forestlands. 
Federal forest policy must address the conundrum of what will 
motivate a forest landowner to continue to hold their 
investment. No definition that harms capital investment in 
energy facilities or takes the siting of these facilities can 
benefit the future of America's forestlands. Without broad, 
inclusive definitions for ``woody biomass,'' we're only 
encouraging the loss of private forestlands to other uses that 
are typically not as environmentally friendly.
    In conclusion, we believe we can help construct an approach 
that addresses concerns about environmental sideboards 
without--appropriately relying on existing practices and 
capabilities. However, the inclusion of a shadow Federal forest 
practice act is not the purpose of a renewable portfolio 
standard, or any energy bill. America's forest landowners 
already operate under, and comply with, some of the most 
strenuous environmental laws and regulations on the globe. With 
inclusive language for wood in the renewable electricity 
standard is the place--is in place, the Forest Landowners 
Association will use our resources, including our grassroots 
networks, to promote legislation that fairly includes the use 
of wood biomass to meet our Nation's energy needs. In fact, 
we've already begun working with land-based allies and the 
environmentalist community in an effort to address any forest 
health pressures that may arise from new energy wood markets.
    I thank the chairman, ranking member, and the members of 
the committee for the opportunity to have made these comments 
on behalf of the Forest Landowners Association. This concludes 
my remarks.
    [The prepared statement of Mr. Jones follows:]

Prepared Statement of Scott P. Jones, Executive Vice President, Forest 
                  Landowners Association, Atlanta, GA
RE: The Renewable Electricity Standard: Implications for Sustaining 
Family Forests\1\
---------------------------------------------------------------------------
    \1\ See the final pages for ``Points of this Testimony''

    Chairman Bingaman, Ranking Member Murkowski, Members of the 
Committee, thank you for the opportunity to appear before you to speak 
about the implications of a Renewable Electricity Standard (RES) for 
America's family forest owners. Today, I will talk with you about 
nonindustrial, private forest landowners and the practicalities they 
face in trying to hold forestlands as forests; that is, how will RES 
markets, energy markets in general, and other market trends affect 
landowner inclinations to keep forestland? More specifically, will 
family forest owners sell wood or will they sell real estate? We 
stipulate--throughout this testimony--that we distinguish between 
forestland and forest resources. Without forestland, there can be no 
forest resources: clean water, clean air, wildlife habitat, healthy 
soils, aesthetics, recreation, and wood-based commodities. For example, 
the state of Georgia loses roughly 219 acres of forestland every single 
day to other uses.\2\
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    \2\ Harper, R.A., N. McClure, and T.G. Johnson, et al. Georgia's 
Possessive Forests, 2004. U.S. Department of Agriculture, Forest 
Service, Southern Research Station. Asheville, NC.
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    Many of you have spent a lot of time on this issue and we in the 
forestry community appreciate it.
    I am Scott P. Jones, Executive Vice President of the Forest 
Landowners Association (FLA), a national association that supports and 
protects the interests of private forest landowners. I am a graduate of 
the University of Georgia, with a Bachelor of Science in Forest 
Resources, a nationally certified forester, a Georgia Registered 
Forester, and a forest landowner.
    Since 1941, FLA has provided its members with education, 
information, and national grassroots advocacy. FLA's outreach on behalf 
of private forest landowners nationwide enhances their forestland 
management practices and stewardship.
    According to the USDA Forest Service's Forest Inventory and 
Analysis program\3\, about 60 percent of the commercial forestland in 
the U.S. is owned by almost 11 million private forest landowners (I 
understand that there are about 2 million farmers in the U.S.). This 
does not include manufacturers, it does not include Real Estate 
Investment Trusts, and it does not include Timberland Investment and 
Management Organizations\4\. It is the ``Moms and Pops''; it is us. And 
we are under more pressure to convert forestland to other uses than in 
any other time in history, and that pressure will increase.
---------------------------------------------------------------------------
    \3\ ``Forest Landscapes in Perspective'' USDA Forest Service, p. 
173
    \4\ ``Forest Resources of the United States'' USDA Forest Service
---------------------------------------------------------------------------
    FLA members look forward to participating in the new markets 
created by developing opportunities to meet national renewable energy 
requirements and we wish to do this while maintaining forest health. We 
support the increased use of alternative energy feedstocks, in 
particular ``woody biomass,'' to help feed our nation's needs for 
energy; thereby, amongst the benefits, help to end a troubling reliance 
on other countries that supply energy for our homes, for our economy, 
for our people. To aid in this increased use, statutory and regulatory 
definitions of woody biomass, as a full partner with other cellulosic 
feedstocks, should include all wood-crops, in all forms and sizes, in 
addition to residues, wastes, and byproducts of processing. The use of 
woody biomass as a renewable energy source will provide new markets for 
private forest landowners and, in so doing, contribute to forest health 
by removing hazardous wildfire fuels, speeding recovery from natural 
disasters, alleviating vegetative-competition that contributes to pest 
and pathogens infestations, and creating economic incentives to deter 
conversion of forestland to other uses.
    Forest landowners are highly interested in the production of 
alternative energy feedstocks from trees, and as segments of the forest 
products industry continues to trend offshore, new markets can help to 
answer the question raised about whether forest landowners will sell 
trees or sell real estate.
    We believe that wood is necessary to meet a Renewable Electricity 
Standard. In a mosaic of energy sources, where each region of the 
country produces energy from its own, best indigenous resources, we 
seek a level playing field for wood. This level field-of-play will 
bring the same jobs and new local tax bases to forested regions as 
other regions will potentially enjoy.
    Biomass, in general, has unique attributes among other renewable 
energy sources. It can be burned in existing coal-fired power 
production with relatively minor and inexpensive modifications, and it 
can be generated whenever the biomass developer or utility chooses.
    But, we have deep concern that, under developing renewable energy 
markets, forestland may be disproportionately burdened by well-meaning 
but functionally stifling regulation, relative to other renewable 
energy sources and their land bases. Simple acknowledgements of the 
impracticality of applying agricultural principles to forestry is a 
small step in the right direction; for example, the seasonal-crop, 
closed-loop approach to energy feedstocks just has no place in dealing 
with a crop that can take decades to culture; i.e., trees. The negative 
impacts of national energy policies could create harm to all family 
forestlands in the U.S. Wood is a reliable feedstock, without the 
seasonal fluctuations or serendipity of weather that inhibit some other 
energy sources. And this resource is available now.
    In January 1905, the New York Times headline read, ``TIMBER FAMINE 
NEAR, SAYS PRESIDENT ROOSEVELT''. The article said that `` ` . . . this 
country is in peril of a timber famine . . . ' as asserted by the 
President this afternoon in an address before the American Forest 
Congress. In the course of his remarks the President said: `If the 
present rate of forest destruction is allowed to continue, a timber 
famine is obviously inevitable. Fire, wasteful and destructive forms of 
lumbering, and legitimate use are together destroying our forest 
resources far more rapidly than they are being replaced . . . Unless 
the forests can be made ready to meet the vast demands which . . .  
growth will inevitably bring, commercial disaster is inevitable.''\5\
---------------------------------------------------------------------------
    \5\ New York Times, Jan. 6,1905; http://query.nytimes.com/gst/
abstract.html?res=940DE4DE133AE733A25755C0A9679C946497D6CF
---------------------------------------------------------------------------
    Here are the words straight from the Times. I think this forcefully 
makes the case for sustainability. Remember, pulpwood was non-existent 
when this quote was made, as Charles Herty (1867-1937) had not yet 
invented the pulping process. Only when we planted trees and encouraged 
markets did we end our brush with a timber famine. The destructive form 
of lumbering, then, was a process that is still called ``high grading'' 
trees, today. Because at that time, only a high quality part of the 
tree was considered valuable for lumber, and the rest of the tree was 
left in the woods to rot or was burned. The point here is: markets 
cured the ``timber famine''. Forest management for commodities did 
that. New markets did not create sustainability problems; they cured 
them.
    In the United States, timber growth has exceeded the harvests since 
1952. Growing-stock volume on U.S. timberland has increased 39 percent 
between 1953 and 2002. That is, the nation's forest inventory accrued 
more volume than it lost by mortality and harvest by over one-third.\6\ 
Today, you will likely hear that adding a new RES market to existing 
markets will create an unsustainable resource. It is simply not true. 
We do not have enough markets for the wood that we are growing, as 
shown in the USDA Forest Services Resource Planning Act (RPA) data 
collected by the Forest Inventory Analysis program. The 2002 data 
showed that across all species in the United States, we were growing 34 
percent more volume then we removed\7\. Now, with the reduction of 
forest products manufacturing, we have seen an increase in the amount 
of growth versus removal. The 2007 RPA data shows a 41 percent volume 
grown over removal\8\. The impact of the reduction of our forest 
products manufacturing is having a clear effect on the amount of wood 
being grown and the threat to the health of our forests and private 
forest landowners is eminent. We believe arguments to the contrary are 
likely disingenuous and perhaps more motivated by competition for raw 
materials and/or feedstock preferences and/or tax avoidance than 
resource sustainability. The forest resource is sustainable and this 
question has been asked and answered before. But, the willingness of 
forest landowners to maintain forestland as forestland has had too 
little attention. Federal forest policy must address the conundrum of 
what would motivate a forest landowner to continue to hold that 
investment when it is threatened by new and evolving forces; whether it 
is opportunities for better financial returns for their families, 
shrinking market access, or investment-dampening legislation and 
regulation.
---------------------------------------------------------------------------
    \6\ ``Report on Terms Used in Biomass Credit Legislation'' 
BioResource Management, Inc., Richard Schroeder May 21, 2007
    \7\ 2002 Forest Resources of the United States, 2002. Gen. Tech 
Rep. NC-241, Table 36
    \8\ Forest Resources of the United States, 2007. Gen. Tech Rep. NC-
xxx, Table 36 (with permission from Greg Reams, National Program 
Manager, F.I.A.)
---------------------------------------------------------------------------
    Urbanization will have the ``most direct, immediate and permanent'' 
effects on southern forests of all forces of change.\9\ The incentives 
for forest landowners to convert forestland investments to residential 
and commercial real estate are led by population growth. U.S. Census 
Bureau \10\ population growth projections between the years 2000 and 
2030 are for 82.1 million new people. That is a 29.2 percent growth, 
and most of that growth will be in the regions heavily dominated by 
private forest ownership.\11\
---------------------------------------------------------------------------
    \9\ Wear and Greis, USDA Forest Service, Southern Forest Resource 
Assessment.
    \10\ US Census Bureau Interim Projections Released April 2005.
    \11\ Susan Stein, et. al., USDA Forest Service, ``Forest on the 
Edge''.
---------------------------------------------------------------------------
    How will this growth affect forestland use? We are distinguishing--
again, throughout this testimony--between sustainable forestland, 
sustainable forest resources, and that without the land there can be no 
resources. Nineteen million acres of forest converted to developed uses 
from 1992 to 2020 in the Southeast.\12\ The need for homes, churches, 
public infrastructure, and other services of 21st century human 
existence will cause fragmentation of forested landscapes, which will 
have its greatest impact in the Southeast,\13\ the region with the 
highest concentration of family forestland, but with a lack of other 
regional sources of renewable energy other than forests. And private, 
family forest landowners who manage smaller tracts of land are at 
greater potential for development.\14\
---------------------------------------------------------------------------
    \12\ David Wear, USDA Forest Service, Southern Forest Resource 
Assessment.
    \13\ Susan Stein, et. al. USDA Forest Service, Forests on the Edge.
    \14\ Butlerand Leatherberry, 2004. America's family forest owners. 
Journal of Forestry 102 (7): 4-9.
---------------------------------------------------------------------------
    Traditional markets for forest commodities are trending offshore or 
are impacted by poor trade policy. For example, as fewer and fewer 
pulp/paper mills remain in this country, production has remained 
unchanged--or slightly improved--but, geographic distribution and 
access to those markets has degenerated.

   136 pulp and/or paper mills closed, 1997-2007 (none have 
        been built since 1989) \15\
---------------------------------------------------------------------------
    \15\ American Forest & Paper Association, 2007
---------------------------------------------------------------------------
   331 softwood sawmills closed in the U.S. & Canada, 1995-2007 
        \16\
---------------------------------------------------------------------------
    \16\ USDA, Profile 2007: Softwood Sawmills in the US and Canada
---------------------------------------------------------------------------
   314 furniture plants closed, 2000-2008 (hardwood indicator) 
        \17\
---------------------------------------------------------------------------
    \17\ George Barrett, Hardwood Review

    In legislation and regulation, if we are truly to meet renewable 
energy goals (whether electricity or biofuels), wood must be allowed to 
make its full contribution. Some well-meaning organizations want 
renewable energy, but want to dictate which forests can participate. 
Currently, 92 percent of our nation's private forestland is natural. In 
the southeastern United States, on private lands, 88 percent of 
forestland is natural. However, with the current definition of 
``renewable biomass'' for the Renewable Fuels Standard of the 2007 
Energy Independence and Security Act (at its most restrictive), 
America's natural private forestlands are excluded from participation 
in the initiative to establish a renewable fuels industry. This kind of 
policy creates disincentives for private forest landowners to continue 
to hold and manage their forestlands. Anecdotally, we know that this 
2007 language has already resulted in acres and acres of tree removals 
for conversion to other land uses. This same definition will result, we 
believe, in land dedicated to fuel production at the expense of other 
traditional markets.
    In order to promote the continuation of sustainably managed forests 
on private lands, we must encourage markets for these landowners; 
voluntary markets. No definition that harms capital investment in 
energy facilities or taints the siting of those facilities can benefit 
the future of America's forestlands. Without broad, inclusive 
definitions for woody biomass, we are only encouraging the loss of 
private forestlands to other uses that typically are less 
environmentally friendly.
    So, our growing population leads to conversion. Fewer markets and 
less market access leads to conversion. And the constraints of new laws 
lead to conversion. The message is that constraints on the resource 
lead to conversion of forestland to other uses. How can one argue that 
disincentives to keep an investment--in this instance, privately held 
forestland--improve the likelihood of it continuance or its 
sustainability?
    Then, it is in the best interest of all who want to maintain a 
forested America to seek out incentives for forest landowners. The 
highest current concern to these landowners regards the definition of 
``woody biomass'' in statute and regulation. That is, woody biomass 
should be defined as ``wood'' in addition to wood residues, wastes, 
and/or byproducts. Ultimately, we must sustainably harvest trees as 
pulpwood, sawtimber, poles, pilings, chip-n-saw, OSB, wafferboard, and 
``energy-wood.'' Landowners would like to see wood as an equal partner 
with grains, grasses, and all cellulosic feedstocks.
    The inclusion of a ``shadow'' federal forest practices act is not 
the purpose of a Renewable Portfolio Standard or any energy bill. 
American forest landowners already operate under and comply with some 
of the most strenuous environmental laws and regulations on the globe. 
Forest practice policies are better determined at the local level to 
account for differences in local conditions and needs rather than 
through prescriptive, one-size-fits-all federal mandates.
    In addition to reducing our dependence on traditional fuels and 
their finite availability, we hope to see increased production of clean 
alternative energy products; products that we are told are 
environmentally cleaner than traditional products. Wood energy sources 
are also renewable, abundant, and economically competitive.
    An incentive-based approach, working within the market system, 
would create new opportunities and incentives for forest landowners, as 
segments of the forest products industry and associated markets trend 
toward an offshore future and other pressures to convert amass. At this 
time, 24 states and the District of Columbia have enacted laws to 
require alternative energy feedstocks--Renewable Portfolio Standards--
for electric power production. A similar national commitment to 
incentives for energy production from alternative feedstock would 
contribute mightily to energy production and secure forestland 
investments with the surety, security, and certainty of a nation 
committed to long-term alternative energy production and maintaining 
family forestlands. These forest lands require a long term commitment. 
Most family forest landowners will only see one or two harvest in their 
lifetime. America needs landowners confident in their forestland 
investments, so that these owners continue to see forestland as 
competitive and to deter forest conversions to other uses.
    In conclusion, we believe we can help construct an approach that 
addresses concerns about environmental sideboards, while appropriately 
relying on existing practices and capabilities. With inclusive language 
for wood in the Renewable Electricity Standard in place, the Forest 
Landowners Association will use our resources, including our grassroots 
networks, to promote legislation that fairly includes the use of wood 
biomass to meet our nation's energy needs. In fact, we have already 
begun work with land-based allies and with the environmentalist 
community in an effort to address any forest health pressures that may 
arise from new energy-wood markets.
    Now to offer an answer to the question of whether landowners will 
sell wood or sell real estate: we've got it, let's use it.
    I thank the Chairman, the Ranking member, and the Members of the 
Committee for the opportunity to have made these comments on behalf of 
the members of the Forest Landowners Association. This concludes my 
remarks. I would be glad to respond to any questions that any member of 
the committee may have and, later, deliver materials and information 
that may help to further clarify our position.
Points of this Testimony:

   Forest Landowners Association members look forward to 
        participating in the new markets created by developing 
        opportunities to meet national renewable energy requirements 
        and we wish to do this while maintaining forest health.
   New markets for forest landowners will help sustain 
        forestland and curtail conversions.
   FLA opposes the creation of a federal forest practices and/
        or land-use act.
   FLA is prepared to help craft good legislation.
   Trees are an abundant, sustainable, renewable, and reliable 
        energy source.
   A few are using an argument of ``threat to sustainability,'' 
        which we believe disingenuous and perhaps more motivated by 
        competition for raw materials and/or feedstock preferences and/
        or tax avoidance.
   Wood is necessary to meet the standard.
   FLA is prepared to help pass well-crafted legislation.
   Make wood an equal partner with other cellulosic feedstocks 
        and the lands producing them.
   FLA is currently working with allies, including the 
        environmentalist community, to address any forest health 
        pressures that may arise from this new market.

    The Chairman. Thank you very much.
    Dr. Lave, go right ahead.

  STATEMENT OF LESTER B. LAVE, UNIVERSITY PROFESSOR, HIGGINS 
  PROFESSOR OF ECONOMICS & PROFESSOR OF ENGINEERING & PUBLIC 
       POLICY, CARNEGIE MELLON UNIVERSITY, PITTSBURGH, PA

    Mr. Lave. Chairman Bingaman, Ranking Member Murkowski, and 
members of the committee, thank you for giving me the 
opportunity to testify on this important legislation.
    At Carnegie Mellon University, I'm a senior professor in 
the Business Engineering and H. John Heinz Colleges. Granger 
Morgan and I direct the Electricity Industry Center, and I'm 
director of the Green Design Institute. I have the privilege of 
serving on two National Academy of Sciences Committees that 
Chairman Bingaman requested to take a look at America's energy 
future. The opinions here are strictly my own.
    Chairman Bingaman, as I listened to your remarks, to the 
remarks of Senator Murkowski and Senator Menendez, as I've 
listened to the remarks of the other people here, I heard a lot 
of goodwill. I heard people of goodwill who are trying to solve 
a problem. So, I think we're agreeing on what the goals are. 
I'm here to try and testify on how to achieve those goals in 
the smartest possible way with the least disruption.
    I think that the legislation here is good legislation in 
pushing us in this direction, but I would recommend two changes 
to it.
    The first is, I think that the definition of ``efficiency'' 
is not quite as tight as it should be. I think it ought to be 
tightened. Then, after that, I don't see a reason to restrict 
how much efficiency can contribute to this.
    The second is, as we've been hearing from other people, I'm 
most concerned about carbon dioxide emissions when we talk 
about electricity, and I think that's what our focus ought to 
be.
    In doing that, I think that we ought to avoid the mistakes 
that we made in the 1970s, which is to have either Congress or 
the Department of Energy choose the winning technologies. I 
think that we need to let the engineers and entrepreneurs find 
out what are the winning technologies, whatever they might be, 
in contrast to what happened in the 1970s; the winning 
technologies turned out to not be the ones that people were 
sure would actually turn out.
    I praise your emphasis on efficiency in the legislation. 
It's clearly our cheapest energy resource. I praise your 
support of distributed generation and combined heat and power. 
I agree that, in the long run, renewables will provide our 
energy. But, I think that we have to be careful not to pick the 
technology that we think is going to win. I think that we ought 
to be trying to face the issues more directly.
    So, let me start off with carbon dioxide. The world has 
about 5 billion tons of fossil fuels. We've burned about 6 
percent of that. If we were to burn any substantial portion of 
that without carbon capture and sequestration, we would 
certainly have major global climate change. In order to avoid 
that, I think it is necessary, not just to take a look at a 15- 
or 20- or even 30-percent renewable portfolio standard, we need 
to address carbon. It's--if you had a 20-percent renewable 
portfolio standard, that would still leave 80 percent of the 
electricity that could be generating CO2 and causing 
other problems. So, it's not that I'm arguing that we ought to 
have a higher standard, it is that we ought to be addressing 
that problem most directly.
    I distributed some maps of wind and solar resources. There 
have been some good comments on wind, so I will not talk about 
that, but let me talk about the solar stuff. Again, I'm trying 
to talk about how to achieve our goals in the smartest, most 
cost-effective way.
    When you look at those maps, Senator Bingaman, your State 
comes out really well. The desert Southwest does very well on 
this. As you get further north and as you get further east, the 
solar resource goes down. So, I love solar, but if you're 
trying to do solar in a place that doesn't have very many solar 
resources, then you're going to wind up demonstrating that 
we're doing something that is expensive and doesn't make a lot 
of sense. So, again, I praise you for not having a solar set-
aside here, but I think that, when we think about this, we 
ought to be thinking about it in a hardheaded way, not just in 
terms of what it is that we think ought to be very good.
    So, in my written testimony, I've emphasized what are some 
of the difficulties of having renewable resources. I don't mean 
that in a mean-spirited way; I mean that those are really the 
difficulties that we have to overcome.
    So, just finally here, Senator Bingaman, I commend you for 
this important legislation. I want to emphasize that we want to 
have as much flexibility as possible. So, I have two 
recommendations. One is to tighten the definition of 
``efficiency'' and let it contribute much more to the standard. 
The second is to focus on reducing carbon dioxide rather than 
singling out renewables as the answer.
    Thank you very much for the opportunity to testify, and I'd 
be happy to answer any questions.
    [The prepared statement of Mr. Lave follows:]

  Prepared Statement of Lester B. Lave, University Professor, Higgins 
  Professor of Economics & Professor of Engineering & Public Policy, 
               Carnegie Mellon University, Pittsburgh, PA
    Chairman Bingaman, Ranking Member Murkowski, and members of this 
committee. Thank you for giving me the opportunity to testify on this 
important legislation.
    At Carnegie Mellon University, I am a senior faculty member in the 
Business, Engineering, and H. John Heinz colleges. Granger Morgan and I 
direct the Electricity Industry Center and I am director of the 
Director Green Design Institute. I have the privilege of serving on two 
National Academy of Sciences committee studying energy issues. The 
opinions here are mine and do not necessarily reflect the views of my 
coauthors, Carnegie Mellon University, or any other institution.
    I praise the draft legislation and recommend that you:

          1. Tighten the definition of efficiency and eliminate the 
        limit on its contribution. This will allow regions that don't 
        have good wind and solar resources to meet the legislative 
        goals at lower cost.
          2. Focus on reducing carbon-dioxide emissions rather than 
        singling out renewables as the answer. There are significant 
        savings from letting all technologies compete in satisfying the 
        goals of lowering greenhouse gas emissions, increasing 
        environmental quality more generally, increasing energy 
        security, and improving sustainability,

    I commend you for Title VIII-Renewable Portfolio Standard. The 
basic approach is sound and well thought out. I share your goals of 
reducing greenhouse gas emissions, improving environmental quality more 
generally, making our energy supply more sustainable, enhancing energy 
security, and of ensuring that energy prices are not so high that they 
derail the economy or prevent Americans from living well. I praise your 
emphasis on efficiency, our cheapest energy ``resource'' and your 
support of distributed generation and combined heat and power. I agree 
that in the long term, renewable fuels will likely provide our energy. 
Finally, I commend you for generally trying to eschew picking the 
winning technologies. Let engineers and entrepreneurs find the best way 
of meeting the goals.
    Unfortunately, there are significant difficulties and costs in 
implementing a federal RPS. While the industry struggles to meet your 
goal of a 20% RPS by 2039, 80% of generation could be emitting carbon-
dioxide, polluting the air and water, and using imported oil and 
natural gas. My point is not that the RPS should be higher, but rather 
that the legislation should address the issues directly.
    My greatest concern for electricity generation is abating carbon-
dioxide emissions. Without controls, we will run out of atmosphere 
before we run out of fossil fuels. The world has 5,000 billion tons of 
fossil fuels, of which we have used only 6%. Burning any appreciable 
fraction of the coal, oil, and natural gas resources will send 
atmospheric carbon dioxide concentrations to far greater levels than 
humans have experienced and lead to major global climate change. Global 
climate change, not our stock of fossil fuels limits how much 
electricity we can generate from these fuels.
    A carbon portfolio standard (CPS) would address this concern 
directly and more effectively. The available renewables technologies 
have quite different carbon emissions; giving equal credit to all 
doesn't make sense. Other technologies also have low carbon emissions 
and should receive attention.
    The maps I have provided of wind and solar resources show vast 
differences among states. For example, the Southeast has neither good 
wind nor solar resources. It does have biomass, but that will be needed 
for producing liquid fuels. The legislation should give each region the 
greatest flexibility to achieve the goals at least cost, including 
focusing on renewables or conservation, fossil fuels with carbon 
capture and sequestration (CCS), and nuclear.
    I emphasize efficiency since it has no emissions of air or water 
pollution, no greenhouse gas emissions, and does not harm the 
environment. After tightening the definition of efficiency in the draft 
legislation, I see no reason to limit efficiency's contribution to 25%. 
The efficiency definition should include distributed generation and 
combined heat and power, since their virtue stems from increased 
efficiency, not merely from having such a program. The energy 
efficiency accomplishments in states, such as California and New York, 
show a vast potential for efficiency, one greater than the likely 
contribution of renewables. Electricity use per capita in these two 
states is 40% less than the national average, twice the RPS goal for 
2039. I recommend aggressive goals for energy efficiency, particularly 
in regions such as the Southeast that have poor wind and solar 
resources.
    Achieving the increases mandated in the bill requires building 
large amounts of transmission from areas with good wind resources to 
population centers. Many people like wind turbines in the abstract but 
don't want them as neighbors, for example, the proposed wind farm off 
Cape Cod. More people oppose transmission lines. If the wind farms and 
transmission lines can be sited, there are likely to be delays of ten 
years or more, particularly for transmission.
    Trading renewable credits will be limited by the combination of 
transmission constraints and the fact that the best wind resources are 
located far from population centers. If the excellent wind resources in 
the upper Midwest and Rocky Mountains cannot be exported, the local 
populations could use only a small proportion of the generation 
potential.
    For large amounts of wind and solar to enter the grid, there must 
be inexpensive bulk storage of electricity. R&D into technologies such 
as compressed air is needed. Until bulk storage is possible, 
integrating more than 15% wind and solar power into the system will be 
costly and could compromise reliability.
    I now summarize the difficulty of integrating large amount of wind 
and solar energy into the electricity grid.
    As you know, wind and solar generation differ from the traditional 
ways of generating electricity because they are generally not available 
when we need power. Wind turbines and solar arrays generate electricity 
when the wind blows and the sun shines. One of the best solar sites in 
the USA is in the Sonora Desert in Arizona. A very large solar site 
there had a capacity factor of 19%, out of the possible 100%, if it had 
generated full power every hour of the year. Wind turbines have higher 
potential in good wind sites but, for example, the average capacity 
factor for the wind turbines in Texas was only 26% in 2006.
    The solar map shows that the good sites are in the desert 
Southwest. Sites in the Southeast have lower potential because of cloud 
cover. The rest of the continental USA has much lower potential for 
generating solar power, particularly the most heavily populated areas. 
The capacity factor is important because almost all the costs are in 
manufacturing and installing the array. Thus, a solar array with a 
capacity factor of 20% would produce electricity at half the cost of an 
array with a capacity factor of 10%. Forcing solar installations into 
the areas where most Americans reside would consume a vast amount of 
resources per kilowatt-hour.
    Nature is more generous in distributing good wind sites around the 
nation, but they are still distant from population centers. In 
particular, note that there are no good wind sites in the Southeast. As 
with solar, the cost of produced power is inversely related to the 
capacity factor since almost all the costs are building the wind farm. 
Thus a site with a capacity factor of 40% would have half the cost per 
kilowatt-hour as a site with a 20% capacity factor.
    In general wind and solar power are not available when demand is 
highest. Wind tends to be strongest at night and lowest in the summer. 
Solar power is best in the summer, but the Arizona data show that the 
arrays have all but stopped producing electricity by 5 PM in the 
summer, just as demand is hitting its peak.
    Another problem is that wind and solar generation are variable. 
Wind speed changes from moment to moment and clouds block the sun, even 
in the desert. This intermittent power challenges the grid to provide 
reliable, high quality power when wind and solar are contributing more 
than 5-10% of total generation.
    One solution to both these problems is to store large amounts of 
electricity when these sources are generating so that it can smooth 
power output and have that output available when demand is high. Pumped 
hydro storage is the best way to store electricity, but few new sites 
are available. Compressed air storage looks promising, but is expensive 
and less efficient than pumped hydro.
    Wind farms can affect climate just downwind, reducing 
precipitation. Massive reliance on wind energy would take energy out of 
the wind, changing the Earth Climate.
    With present technology, the unreliability of generation from wind 
and solar means that reliable generation must backup every kilowatt-
hour. A solar array or wind farm may not generate power for days 
because of a storm or lack of wind. Since we still want electricity, 
fossil fuel or hydro power must be available. A General Electric study 
for Texas found that even in windy April, there were hours when the 
wind farms were producing almost no power, requiring a rapid switch to 
natural gas turbines. Since this occurred during one of the windiest 
months, image the difficulties during the summer months when the demand 
for electricity peaks and wind resources are small.
    The point is that wind and solar can lower the amount of fossil 
fuels used for generation, but they don't lessen the need for reliable 
generation capacity. For new coal generation with carbon capture and 
sequestration, and for new nuclear generators, the capital cost is the 
vast majority of new costs and so the savings are small.
    I have focused my remarks on wind and solar, but there are other 
renewables. Hydroelectric dams generate six times as much power today 
as the other renewables, but there is little prospect for getting 
significantly more power. Dams are being torn down, not being built. 
Geothermal provides power in California and more is planned for the 
Southwest. Run of the river hydro could provide small amounts of power. 
Biomass could provide significant amounts of power at competitive 
costs, but there is a limited amount of land and the biomass is better 
used for transportation fuels. Where there are good geothermal 
resources, this resource can be attractive. However, the good areas are 
limited to the West. Ocean currents and waves can provide power, but 
corrosion and withstanding storms make the power expensive, in addition 
to other problems.
    In good sites, wind power is competitive with new fossil generation 
with carbon capture and sequestration. Even at the best sites, solar 
photovoltaic generation is several times the cost of wind per kilowatt-
hour. Japan engaged in a massive program of subsidizing solar; Germany 
is currently engaged in huge subsidies. While clever in many ways, the 
Japanese and Germans don't seem to understand that extracting power 
from sunlight, when there is relatively little sunlight, is expensive. 
The solar map shows that trying to generate solar power in most of the 
USA would be extremely expensive. At good sites, solar thermal power is 
almost competitive with new fossil generation.
    This catalogue of difficulties should not be regarded as mean-
spirited objections. Rather, my intent is to set out the problems that 
need to be solved. We agree that our energy supply must be made 
sustainable; we must reduce greenhouse gas emissions, enhance energy 
security, and produce energy at a cost that will not derail our 
economy.
    America's largest fossil fuel resource is coal; we will rely on 
coal for much of our energy in the coming decades. In particular, coal 
will continue to provide most baseload electricity generation. It is 
essential that demonstration coal plants with carbon capture be built 
to improve the technology and that DOE shows that massive underground 
injection of carbon-dioxide in a range of geological strata can 
sequester the carbon without leakage. It is also essential that we 
build half a dozen nuclear plants using the new technology to assess 
their costs and performance.
    While solar photovoltaic power is too expensive for massive 
deployment, I urge funding solar photovoltaics research, since this 
technology will ultimately provide most of our energy. I also recommend 
R&D funding for bulk electricity storage, such as compressed air.
    Chairman Bingaman, I commend you for this bill. I particularly 
commend you for not trying to identify the technology winners, such as 
through a solar mandate. I hope that you can make two changes:

          1. Tighten the definition of efficiency and eliminate the 
        limit on its contribution. This will allow regions that don't 
        have good wind and solar resources to comply at lower cost.
          2. Focus on reducing carbon-dioxide rather than singling out 
        renewables as the answer. There are significant savings from 
        letting all technologies compete in satisfying the goals of 
        lowering greenhouse gas emissions, increasing environmental 
        quality more generally, increasing energy security, and 
        improving sustainability, ensuring that energy prices are not 
        so high that they derail the economy.

    Thank you for the opportunity to testify on this important 
legislation. I would be happy to answer any questions.

    The Chairman. Thank you. Thank you all for your excellent 
testimony. Let me start with a few questions.
    Dr. Izzo, you've indicated that New Jersey has an 
aggressive solar program. Dr. Lave just indicated that he 
thinks having a carve-out for solar doesn't make good sense, 
given the variations in solar resources around the country. You 
have a carve-out for solar in New Jersey. Yours is one of the 
States with less solar resources, certainly, than a lot of the 
country. What's your reaction to that? Do you think, as a 
national matter, we should be trying to have a carve-out like 
you've got there in New Jersey, or not?
    Mr. Izzo. Our preferred approach would be to have just the 
one national standard, and then to use the tax code to help 
those nascent industries that need additional help. That would 
include both solar and offshore wind.
    The Chairman. So, you would not favor any kind of carve-out 
for----
    Mr. Izzo. I would allow the States to have their own carve-
outs in their programs, but not in the Federal program.
    The Chairman. OK. Now, also, as I understood Dr. Lave's 
testimony, he was saying that we should not limit the amount of 
whatever standard is established, whether it's 15 percent or 20 
percent, whatever--the amount that you could achieve through 
efficiency should not be limited. Do you agree with that, or 
disagree?
    Mr. Izzo. I disagree with that position. We need every tool 
in our toolkit possible to achieve the 80-percent reduction, 
and we have separate programs on energy efficiency, which we're 
aggressively pursuing. Similarly, we need to pursue carbon 
capture and storage on fossil fuel generation in the R&D space. 
We need to pursue new nuclear. Those are all separate issues. 
All will be needed on top of renewables.
    The Chairman. OK. So, you think having some national 
requirement for production of--or--electricity from renewables, 
separate from a national requirement for improved energy 
efficiency, it makes good sense.
    Mr. Izzo. That's correct, Senator. Because, if you think 
about it, electricity is 35 percent of the CO2 
generated in this Nation. This bill proposes that we have 20 
percent of it come from renewables. Twenty percent of 35 
percent is 7 percent. We're nowhere near the 80-percent 
reduction. We will need to do all the things we've talked 
about.
    The Chairman. OK.
    Commissioner Wright, I was interested in your testimony. It 
seems as though you're arguing that, not only are States in the 
Southeast, such as South Carolina, unable to achieve the 
requirement that we're talking about here with regard to 
production from renewables, also it's very, very difficult, 
because of the economic circumstances you face, for you to 
achieve the energy efficiency reductions--or, improvements that 
we're talking about, that it's inappropriate for us to have a 
national requirement with regard to improved efficiency, as 
well. Is that your position?
    Mr. Wright. Yes, sir. You've got a lot of issues, but 
obviously we--in the Southeast region, we have low-income 
families and households, and they also live in housing that is 
inefficient, from an energy perspective, too. If they're not 
mobile homes, it's other types of housing.
    Because, you know, we've got 10-percent unemployment in 
South Carolina right now; it's going to be 14 percent, they 
say, this time next year. So, it compounds itself. We believe 
that energy efficiency, under the RPS that you've got, that 
we're talking about today, the money leaves the State. We 
believe, if we do have an RPS, if it--that's where the Congress 
would like to go--and we're not opposed to a State-based RPS, 
but one that fits our area.
    The money--if there were penalties paid, if there were 
compliance payments, that money should be reinvested back in 
the State, where it can be used to improve efficiency.
    The Chairman. I remember a speech I heard Millard Fuller 
give, the founder of Habitat for Humanity, where he was saying 
that the people that they are building houses for can't afford 
large mortgages, and they also can't afford large utility 
bills. Therefore, they're building energy-efficient houses, 
Habitat for Humanity is. So, there's a little bit of a 
disconnect with saying, ``Because the people are low-income in 
our State, we can't expect to see improvements in energy 
efficiency.''
    Mr. Wright. You've also got--and I mentioned it in my 
longer version of the testimony, too--you've got a literacy 
problem, too, where they--it's just a hard thing for them to 
understand what they can do. You know, they're level-1 and 
level-2, a significant portion of these people, and it's just 
hard for us to--in the Southeast, to have the money leave our 
region and not be able to stay there, where it would--we could 
use it.
    The Chairman. I'm reminded of our former President's 
concern about the tyranny of low expectations----
    [Laughter.]
    The Chairman [continuing]. Taking charge right here, as 
well.
    Senator Murkowski.
    Senator Murkowski. Thank you, Mr. Chairman.
    Mr. Lave, in your comments, I think you suggested that the 
goal we are all seeking is the same, but then you went on to 
state that by focusing on a renewable energy standard, we're 
not necessarily getting to that goal of reduction in carbon.
    There was an article submitted to the New York Times, at 
the end of January, written by the CEO of Entergy, and he 
suggested the same thing for his company, if we move to a 
renewable energy standard, they will stop doing research 
towards carbon sequestration, then how they can actually get to 
that clean coal technology? They will switch their focus to 
other areas and they won't be working to reduce their 
emissions.
    Are we in agreement as to what it is that we are attempting 
to achieve with the renewable energy standard? Is it the 
reduction of emissions, or is it an increase in renewable 
energy production?
    Mr. Lave. Senator, that's a very good question. I think 
that at least my goals are to try and achieve--or, my--to try 
and achieve the goals at least cost. But, when you have an RPS, 
you reduce carbon dioxide emissions by much less than you would 
have thought, because you need to have backup for all of the 
solar and wind, and generally that backup is a natural-gas 
turbine, and generally that natural-gas turbine is having to 
function at much less than full power, and so, being relatively 
inefficient. So, for example, if we were to achieve this 20-
percent renewable portfolio standard with wind and solar, you 
would have much less than a 20-percent reduction in carbon 
dioxide.
    So, I think that at least my goals are to try and focus on 
these social goals of lowering greenhouse gas emissions, 
increasing environmental quality, increasing energy security, 
improving sustainability, and lowering costs. I think that not 
everybody has exactly those goals.
    Senator Murkowski. Let me ask a question about the regional 
disparity. You've supplied us with a couple of maps. I think we 
know that, across the Nation, wind is not equal, solar is not 
equal, biomass is not equal. I think that there is a disparity.
    Mr. Furman, you've suggested that it's not discriminatory, 
and if in fact, you are going to apply, a one-size-fits-all 
standard, you will have areas that perhaps will not be on an 
even playing field. How can we best address the regional 
disparity?
    Mr. Wright, you have suggested that the States need to 
develop their own renewable energy plans. There's been a 
discussion about whether or not you cap the efficiency aspect 
of it. Should we allow additional sources of clean energy to be 
counted? What is the best way to deal with the regional 
disparity?
    I only have a minute left, so I'd like you to very quickly 
go down the line.
    Mr. Izzo.
    Mr. Izzo. The regional disparities are things we live with 
all the time. New Jersey has no coal, no natural gas, and no 
uranium 238, yet we produce nuclear energy, coal-fired power, 
and natural-gas-fired power. We're very grateful that other 
market sell that stuff to us.
    Senator Murkowski. All, but none of which is counted in 
your renewable energy standard.
    Mr. Izzo. Correct. But, so, too, a national renewable 
portfolio standard will allow us to source renewable energy 
from those places where it's most efficient to source it from.
    Senator Murkowski. OK.
    Mr. Furman.
    Mr. Furman. The most important factor, to me, is a 
functioning renewable energy certificate trading market so that 
Commissioner Wright's consumers, for example, don't have to 
build a wind farm in South Carolina. It's not economic. But, 
what they can do is, they can buy the certificate from somebody 
who develops a wind farm in the Northwest or in the Upper 
Midwest, where it is economic, and they'll pay the same price 
that somebody in the Midwest would pay.
    Senator Murkowski. Commissioner.
    Mr. Furman. To me, that is the best way to equalize the 
economic----
    Senator Murkowski. Commissioner.
    Mr. Wright. We buy our coal and we buy our uranium outside, 
it's--power's produced for our consumers inside the State. So, 
there is a benefit for our consumers in keeping costs low. If 
we have to send our money out, that's driving the cost of power 
up for our consumers, because we have to send that money as a 
compliance payment.
    Senator Murkowski. Mr. Jones.
    Mr. Jones. In my comments on--addressing the regional 
disparities would be a broad, inclusive definition that 
recognizes woods' full capability to play a role in a renewable 
energy package, where 92 percent of the wood that's currently 
being grown in the southeastern United States or across our 
country is being excluded from renewables. So, a broad, 
inclusive definition that would allow it to reach its full 
capability of being used as a renewable source.
    Senator Murkowski. Dr. Lave.
    Mr. Lave. There is something said here that's wrong. This 
notion that if we had tradable certificates, that the price 
would be the same in every region is just not correct. I have a 
Ph.D. student who's done a thesis looking at getting wind 
energy from the Powder River Basin to southern California. The 
transmission line itself would more than double the cost of 
getting the power there. So, if we had to build these 
thousands--tens of thousands of miles of long-distance 
transmission to get wind or solar energy to the major places 
where it's consumed, then I guess we could bear those costs as 
a Nation, but that's usually not the way we do things. I think 
the buyer has to pay those costs. So, the cost of power to 
places where you had to transmit it a long way would be a lot 
higher than the cost of power where it was generated.
    Senator Murkowski. Thank you.
    The Chairman. Senator Dorgan.
    Senator Dorgan. Thank you, Mr. Chairman.
    It seems to me that the lack of some sort of central goal 
or aspiration for our country has been prevalent for a long, 
long while. The proposal of a renewable portfolio standard to 
just say, ``Let's decide where America wants to head, here. 
Let's decide, for the next decade, where we want to go with 
respect to energy.''
    I'm listening to this, and it's kind of interesting. The 
fact is, Commissioner Wright, you all have about 50 percent of 
your power from nuclear, about 40 percent from coal----
    Mr. Wright. Sixty----
    Senator Dorgan. All right.
    Mr. Wright. Sixty-one from coal, according to the PURC 
report that came out.
    Senator Dorgan. All right, then it can't be 50 from 
nuclear----
    Mr. Wright. Right.
    Senator Dorgan [continuing]. But, the fact is, you import 
coal and uranium to produce that power. So, we've built rail 
lines and barge lines, and so on, to be able to ship these 
things to where you need it. But, we had testimony in this 
committee from T. Boone Pickens and many others, about the goal 
of trying to build a national transmission grid, a sort of an 
interstate highway of transmission, to be able to produce 
renewable where you can produce it, and to move it where it's 
needed. I think that's necessary. We've certainly built rail 
lines and so on to accommodate the ability to move coal. We 
ought to do this with respect to transmission lines. If we're 
going to move toward an electric-drive-vehicle future, nearly 
70 percent of the oil we use in the transportation fleet comes 
from outside of our country--if we're going to do all this, it 
seems to me you logically have to create some sort of renewable 
energy standard. A number of States have moved in that 
direction, but I think our country would be well advised to 
have a national standard. We've tried it a good many times. I 
hope this is the time when we will make that happen.
    Having said that, I support coal development. The one point 
I would make, Dr. Lave, is, that--the implication of your 
suggestion is, that nothing else is happening. We've got $4.6 
billion for carbon-capture-and-storage research just in the 
economic recovery bill. The Energy and Commerce subcommittee, 
which I chair is putting a lot of money into research. I'm 
convinced that we're going to be able to use coal in the 
future, and de-carbonized coal. So, it's not as if nothing else 
is happening.
    But, I just wanted to make those points, because I think 
the testimony has been really interesting.
    Mr. Furman, I think you made the point, as well, about 
being able to produce renewables from wherever you can maximize 
that production, and moving it on a grid. Was that the point 
you were making?
    Mr. Furman. It is. Thank you, Senator, because I think 
there's two aspects to this regional issue that I think are 
being misunderstood. One is, we do need more transmission, in 
general, not just for renewables; we've got to do it anywhere. 
I testified a few months ago here about that issue.
    But, in addition, if you are buying a certificate, if you 
are complying, not by buying power out of a wind farm, but 
let's assume that I--my company builds a 100-megawatt wind farm 
in North Dakota--which we are doing, actually--and we have a 
national REC market, renewable-energy-certificate market; we 
can sell those certificates into the market, and we can also 
sell the power into the grid. Now, somebody from South Carolina 
can buy that certificate, somebody from North Dakota can buy 
that certificate. It's the same price, and you turn it in for 
your compliance. It doesn't require, as Dr. Lave suggested, 
that we transmit the power to South Carolina; it simply 
requires that we sell the energy into the grid and then sell 
that certificate on the open market. It is a much more fair, 
egalitarian way of addressing the economics. There are regional 
disparities.
    Senator Dorgan. Yes. There's an old saying, ``If you don't 
care where you're going, you're never going to be lost.'' The 
point is, we need to have a direction, here, as a country.
    I think one of the questions that has been raised by some 
of you is about the market system. I can't think of a more 
effective system in the world to allocate goods and services 
than the free market, frankly. But, there are times when it's 
very important to decide, ``Here's where we want to go,'' set a 
direction, and then try to allow that market system to work 
inside that set of goals. I do not think a Renewable Portfolio 
Standard is in conflict at all with a market system. But, I 
think if we just decide, ``You know what, we'll just let 
whatever happens happen,'' I don't think we'll ever get to 10, 
15 or 20 percent renewable energy, because there are a lot of 
other ways for others to subvert that. I think it's in our 
country's interest to decide to produce more of our electricity 
from renewable sources.
    So, you all have, I think, given us a lot to think about, 
and to my colleague Senator Murkowski, I think, too, there are 
probably things that can be contributed to this discussion and 
the creation of some sort of Renewable Portfolio Standard that 
can come from all areas of philosophy here on this committee. I 
look forward to the discussion that we can have to try to 
determine how we do a lot of things well--produce coal, in a 
manner that is protective of our environment, substantially 
increase renewable energy, and make us less dependent on 
foreign oil, which I think is a huge vulnerability for the 
future of this country. The question is, how do we do all of 
these things well.
    The Chairman. Senator Corker.
    Senator Corker. I didn't realize it was my turn, down here. 
Thank you, Mr. Chairman.
    I have to tell you that I think there are so many things 
right now that could unite our country around energy. I think 
there is a tremendous desire that this country be energy-
secure. I think there's a tremendous desire that we do so in an 
environmentally sound way. It troubles me that the first thing 
we do, right out of the chutes, is discuss a policy that 
divides our country. It's an amazing thing to me.
    I think there's a possibility that, as a country, we could 
come together around something that's transparent, relating to 
cap-and-trade or a carbon tax, that would do the exact market 
things that Senator Dorgan was talking about. Yet, today we 
seek a policy that divides our country, that discriminates. 
Now, if this is the first priority of this Administration--and 
I know that was said in earlier comments--I don't know if 
that's true or not, but if it is, it's an amazing thing to me 
that we would start out with such a crass policy that separates 
this country.
    Mr. Furman, to say that it's not a transference of wealth 
for Mr. Wright to have to purchase certificates, which cost 
money, to meet an obligation so that it can be met in another 
part of a country--of our country, it's just not true. I mean, 
that's just absolutely not true. I don't think you would agree 
with this, but would it not be the same to say that, if you're 
going to benefit from any kind of national subsidies, like this 
would create, that we would make you build wind farms in every 
part of the country with your own money? That would be a 
national standard, and maybe that's one I could get behind, if 
you were doing it with your own money. But, explain to me how, 
in fact, if he has to buy certificates to meet a standard, and 
send money to you, that is not a transference of wealth.
    Mr. Furman. I think we will probably----
    Senator Corker. Please be very brief.
    Mr. Furman. Yes, I----
    Senator Corker. He would have to buy--pay money to buy 
those certificates, is that correct? They would go to another 
part of the country. Just ``yes, yes,'' or ``no, no.''
    Mr. Furman. Every----
    Senator Corker. I mean----
    Mr. Furman. Yes, everyone will buy a certificate in the 
country.
    Senator Corker. OK.
    Mr. Furman. Everybody will pay for it, and we'll be 
essentially the same price. There may be small regional 
differences. But, everybody will do that.
    Senator Corker. OK.
    Mr. Furman. So, it would be----
    Senator Corker. So, it is a transference of wealth.
    Mr. Furman. It's a transfer--well, in the sense that--sure, 
you will pay me to money to----
    Senator Corker. OK.
    Mr. Furman [continuing]. Build my wind farm, and make an 
investment in----
    Senator Corker. What about if we made you build wind farms 
in Tennessee if you're receiving--you don't want to build 'them 
there, because there's no wind; you don't want to build solar, 
because there's no solar. But, what if we made you do that? 
Would you like that transference of wealth?
    Mr. Furman. If--I don't--first of all, I'm not sure that's 
a transference of wealth, because we would only do it if we got 
a reasonable investment return.
    Senator Corker. Which----
    Mr. Furman. Second, I think it would be inefficient--it 
would be a higher-cost solution to what we're talking about. 
The best wind resources are in the Northwest--or in the Upper 
Midwest, and that's where you should----
    Senator Corker. Let me--in the desert areas of our country, 
if we said they had to use hydro power there, how would you--
how do you--is that a good idea?
    Mr. Furman. That--it's a bad idea.
    Senator Corker. What about, in the desert, if we said you 
had to use biomass. Is that a good idea?
    Mr. Furman. Of course not.
    Senator Corker. OK, then I just--I guess what I would say, 
Mr. Chairman, we have an opportunity, in a few months, I think, 
to debate something, like cap-and-trade, or to potentially have 
a carbon tax, both of which we could return 100 percent of the 
money back to taxpayers, and it would be very transparent, and 
it would create a market system. I have no idea why we would 
take this transference-of-wealth component out that--we have 
many environmentalists in our State. I happen to be one of 
them. OK? I happen to support some of these other initiatives. 
I cannot imagine why this administration would chose, on the 
front end, to divide our country--to divide our country instead 
of focusing on uniting our country around something that would 
create exactly the market-based system that Senator Dorgan is 
talking about, and not pit one part of our country against 
another.
    Dr. Izzo, let me ask you this, would you be willing to 
build windmills and solar systems in Tennessee, with your own 
money, if we had sort of a national standard that said you had 
to do this in every part of our country?
    Mr. Izzo. Yes, we would. We would charge you the cost of 
doing that, and your customers----
    Senator Corker. You wouldn't be able to sell it, of course, 
at that cost, but you'd be willing to do that----
    Mr. Izzo. That's my point.
    Senator Corker [continuing]. With your own money?
    Mr. Izzo. That's my point, is that we would do it wherever 
people wanted to, but there are places that it's lower cost to 
do it.
    Senator Corker. OK.
    Mr. Izzo. So, you would have a choice, in Tennessee, of 
paying us 40 cents a kilowatt hour or paying 20 cents a 
kilowatt hour to somebody in Arizona.
    Senator Corker. Yes.
    Mr. Izzo. The choice would be up to Tennessee.
    Senator Corker. That's a transference of wealth, isn't it?
    Mr. Izzo. It's the same as when we buy coal from the 
Midwest or when we buy natural gas from the Gulf or when we buy 
corn from the Midwest.
    Senator Corker. No, because you're producing it in your own 
State, which is a whole----
    Mr. Izzo. Not producing the coal or the natural gas.
    Senator Corker. You're producing the power from that in 
your own State. OK.
    Mr. Chairman, I would hope that, with all the troubles that 
our country has right now, that, instead of creating this 
divisive picking of winners and losers, we would, instead, 
focus on something that will unite our country. I would just 
love if you would respond: Would a cap-and-trade system not 
actually affect carbon and global warming, that you care about 
so deeply, much better than having a renewable portfolio 
standard?
    Mr. Izzo. A cap-and-trade system would be the underpinning 
of making intelligent market decisions. Senator, I never once, 
for a second, thought that a cap-and- trade system, given the 
regional variations in carbon intensivity would be any less 
divisive than the conversation we're having now.
    The Chairman. I hope we get a chance to test that 
proposition later----
    [Laughter.]
    The Chairman [continuing]. Later this year, and have an 
opportunity to do something on cap-and-trade in the Congress, 
as well.
    Let's see, Senator Stabenow is next.
    Senator Stabenow. Thank you.
    First of all, Mr. Chairman, we are honored to be a member 
of this committee, as a new member who has tremendous interest, 
coming from my home State of Michigan, in energy. I want to 
thank you for your ongoing leadership on so many issues, and to 
our distinguished ranking member, as well. So, I'm looking 
forward to working with the committee.
    I'm also looking forward to the provisions in the recovery 
package that really start us down the road as it relates to 
renewable energy incentives, and particularly around 
manufacturing, as well.
    I just want to indicate, for the record, that there are 
8,000 different parts in a wind turbine, and we can make every 
single one of those in Michigan, just for the record.
    We also create about 30 percent of the polysilicon that's 
used as a basic material for solar panels, in Saginaw Township, 
Michigan, through Dow-Corning. I'd like very much to stop 
shipping that out of the country to make solar panels. I'd like 
very much to see it made in Michigan and around the country. 
So, that's my plug for Michigan. It's a plug, actually, for 
jobs, which I believe is very much about what this is about as 
we look at it.
    I wanted to ask a question related particularly to 
forestry. We have 19 million acres, in Michigan, of beautiful 
forests, and one of the issues that I've been focused on is the 
fact that, while the tons of carbon per acre in a forest can 
vary greatly, we know that EPA says that many of our forests 
have about 100 tons per acre, we may be looking at 100 million 
tons of carbon in Michigan alone, so that my concern is, if we 
are not focusing on how we maintain those forests, we are 
actually making global warming worse by releasing tons of 
carbon into the atmosphere. So, I'm anxious to see us have 
forestry policies a part of whatever we do.
    Mr. Jones, I wonder if you might just speak a little bit 
more as to the definition--if we were going to craft a 
definition that best used wood and forest biomass and gave your 
private landowners a market so they were not selling their land 
for a shopping mall or a residential community or whatever--if 
we kept those forests--first, we're keeping carbon capture--
we're stopping carbon from going into the air, but we're also 
then giving you a market. So, I wonder if you might just speak 
a little bit more about that.
    Mr. Jones. I think the two things can work together. With 
the decrease of markets, without a new market for forest 
products that--a good definition--a broad, inclusive definition 
that would say ``trees,'' include all wood products that are 
being grown on private lands and these other lands. Without 
that, I think we run the risk of--higher risk of conversion to 
other uses, other than forestland.
    When we convert the forestland to another use--a shopping 
mall, a residential community--we've lost it. Now we have no 
potential for sequestering carbon or capturing that carbon out 
of the air.
    So, what I'm looking at is saying that, with increased 
markets, we'll encourage, not only the retention of forestland, 
but hopefully the growth of new forestlands, taking marginal 
agricultural lands and putting them into healthy, productive 
forests that, not only helping us meet renewable energy goals, 
but are also out there sequestering carbon and meeting other 
goals that society would benefit from--clean water, clean air, 
wildlife habitat, and all these other things.
    So, if I look at a definition that would be in a renewable 
electricity standard, or an RPS, that would be encouraging, not 
only to the retention and growth of new forests for the 
CO2 carbon benefits and also for those other 
benefits, I would say one that's very broad and says ``trees.''
    Currently, we have some very stringent laws and 
regulations, at the Federal and the regional and the State 
level, that monitor the health and sustainability of our 
forests. The Clean Water Act is a key piece of legislation that 
helps to make sure that we do our forest management practices 
correctly. Almost every State in the country has best 
management practices. Some in the Pacific Northwest are 
mandatory, in the Southeast--they're done on a voluntary basis, 
but they are all monitored. Every State in the country has a 
State forester, and they're monitoring and reporting on the 
health of our forests.
    I'd say, without an inclusion of wood or forests into a 
renewable energy standard with that broad definition, we do run 
the risk of having higher conversion rates of forests into 
other uses, and then we lose all those other benefits.
    Senator Stabenow. OK, thank you.
    Thank you, Mr. Chairman.
    The Chairman. Thank you very much.
    Senator Bennett.
    Senator Bennett. Thank you very much, Mr. Chairman.
    Thank you, to the panel. It's been a very interesting 
discussion. But, it has struck me that the discussion has taken 
place in a stovepipe.
    Let's look at our overall energy situation and energy 
needs. The one thing that is clear to me, as I try to look at 
that in the future, is that we have--I think, Dr. Izzo, you 
have hinted at it--enormous demand for huge scale of 
electricity, much more than we have now.
    Let's, for just a moment, look at the overall energy needs. 
I've driven a hybrid car for 8 years. I didn't buy it for 
environmental purposes, I bought it because I wanted to become 
familiar with the technology, to see how it would work. Senator 
McConnell used to call my first one ``the car you put on like a 
pair of pants''; it was a Honda Insight. As tall as I am, 
people had a hard time understanding how I got in it. Actually, 
it was really quite roomy once you got down that low and in 
that car.
    [Laughter.]
    Senator Bennett. I now drive a Ford Escape hybrid. I 
increased my mileage substantially. If it were a plug-in 
hybrid--and I have driven one of those--we could have mileage 
of over 100 miles to the gallon. All right. Plug it in at 
night.
    If we had, say, 30 million--that's 2 years' production of 
new cars--plug-in hybrids on the road, that would be 30 million 
batteries that could be charged with electricity at night, when 
the utilities are basically giving electricity away, and by--we 
wouldn't need to create any batteries. We would have a massive 
forest, if you will, of batteries that could soak up all of 
that electricity. That would require increased electricity.
    So, when you look at the scale--and then, the economy 
continues to grow; you're going to want more electricity. So, 
if you can transfer the energy required for transportation into 
electricity, and meet the demand for electricity, you're 
talking a tremendous demand.
    You're not going to meet that demand with wind and solar. 
I'm sorry. No matter how many windmills you build, no matter 
how many solar panels you put out, you're only going to be in 
single digits in the percentage of power you can provide in 
that kind of scale.
    So, the thing that strikes me about this conversation is 
that, with the exception of Dr. Izzo and Commissioner Wright, 
no one has used the word for the greatest source of noncarbon 
renewable power that we have in this country, and that's 
nuclear.
    Charles de Gaulle looked at France and said, ``You know, we 
don't have very much natural gas, we don't have very much coal. 
We're going to have import all our power. We're going to become 
nuclear.'' Eighty percent of the electric power in France comes 
from nuclear power, and they sell it over the border into 
Germany, where the greens have called a ban on nuclear power. 
You know, they take the nuclear power, they just don't want to 
have any of it in their own backyard. The French have never had 
any problems with storage, they've never had any problems with 
the fuel rods or any of the rest of it.
    I'd like you to forget wind and forget solar and forget 
biomass for just a minute in this conversation, and talk about 
the scale that could be achieved in noncarbon-emitting 
renewable that we could get from nuclear. I'd like your 
opinions and reactions to that.
    Mr. Lave. Want me to start?
    Senator Bennett. Yes, Dr. Lave.
    Mr. Lave. It was only the ``5 minutes'' that kept me from 
praising nuclear, here. But, again, trying to be smart about 
this, the current nuclear plants we have in the country are 
running with operating factors of more than 90 percent. They're 
doing very well.
    We are on pace to build between four and seven new nuclear 
plants by 2020. We're going to have to see how expensive they 
turn out to be. Right? There's nothing wrong with the 
technology. We just have to see how expensive they are.
    Senator Bennett. Would you support building a reprocessing, 
like they have in France, so that the present spent fuel rods 
are also turned into a major source of power?
    Mr. Lave. I'm looking at Chairman Bingaman on this. This 
National Academy of Sciences study is looking exactly at that, 
and I don't want to comment on that. But in----
    Mr. Izzo [continuing]. About 4 or 6 weeks, you will have, I 
think, a definitive report on how much sense that makes.
    But, here the one thing I'm trying to emphasize is that we 
would like to satisfy having low-carbon electricity, and so on, 
at the lowest cost; that is, we'd like to get these goals so 
we're not wasting any money in doing it. Nuclear certainly has 
a role in that. How much these plants are going to wind up 
costing is then going to determine how much of a role nuclear 
will have in the future.
    Thank you.
    Senator Bennett. Thank you.
    Anyone else? Yes.
    Mr. Wright. Thank you very much for the question. We 
actually have three open dockets--or, two open dockets for 
three plants, nuclear--new reactors in South Carolina, as we 
speak, one, which will be voted on tomorrow, for two reactors, 
possibly. I believe, as you do, that, really, personally, we--
maybe we should be looking at a clean energy policy that uses 
everything that we've got on the table in the United States, 
regardless of region, to try to meet energy independence, 
reduce our carbon footprint, look at greenhouse gas. I mean, 
we're going to need it all.
    You are correct, that the--about the hybrids and the plug-
ins and all that. I mean, those--nuclear would be the way that 
answers that. I believe that it has a place and it will be 
developed.
    Mr. Furman. Senator, I mean, I--just to--since you've asked 
the question, I don't--I don't--this is a personal opinion, but 
I think it was--it would probably also be reflective of my 
company. Nuclear, and, for that matter, clean coal, are 
legitimate tools in the toolbox, as Dr. Izzo pointed out. We're 
going to need all the tools, going forward.
    I think the only issue is timing. You know, you've had a 
number of nuclear projects that have been announced and then 
withdrawn, and partly that's because, as Dr. Lave pointed out, 
we don't know a lot about the costs of building a nuclear 
plant, because we haven't built one in so many years. I think 
what has happened is, you've seen a number of companies start 
to build them and then realize that the costs have gone up far 
more than they realized. It's a big bet, it's putting a lot of 
investment in a single source.
    Having said all of that--and similar for clean coal. Clean 
coal, I think, is definitely in our future. We have tremendous 
coal reserves; we just need to use them in a more 
environmentally responsible way. But, I don't think either 
technology is quite ready for prime time. That's a personal 
opinion. But, I don't think we should ever take away, from Dr. 
Izzo and the other utilities, the tools that we're going to 
need to reduce our carbon and reduce our reliance on foreign 
sources, as well.
    Mr. Izzo. I think the points have already been made. It 
clearly has to be part of the toolkit, and we don't know what 
the capital costs are. We know that nuclear plants run 90 
percent of the time, solar panels in New Jersey run 10 percent 
of the time; a factor-of--10 difference. There's no way I can 
build a new nuclear plant in 4 years. We're putting solar 
panels up today. We'll have offshore wind running in 2 years.
    The science keeps telling us that timing matters. The more 
carbon we put in the atmosphere, the more inertia we build into 
the system, the tougher it'll be to undo it.
    Senator Bennett. But, you're still operating in single 
digits with wind and solar, you're not addressing the scale 
problem.
    Thank you, Mr. Chairman.
    The Chairman. Thank you.
    Senator Bayh.
    Senator Bayh. Thank you, Mr. Chairman.
    My first year at law school, the dean, on our first day, 
advised us to embrace ``exuberant skepticism.'' So, I'm going 
to try and follow in that tradition today. But, don't read too 
much into the questions I'm about to ask; I'm just trying to 
get to the practical bottom line here.
    Dr. Lave, do I have the pronunciation of your name correct? 
Let me start with something--and it gets to what Senator 
Bennett was asking, there at the end. If I understood your 
testimony correctly--I think one of the other panelists 
indicated that about 37 percent of our CO2 emissions 
come from the generation of electricity. So, even if we 
embrace--and I think this is the point you were making--a 20-
percent RPS standard, that gets us to about a 7-percent 
reduction in CO2 emissions. Is that an accurate 
representation of your testimony?
    Mr. Lave. Actually, less than that, because you'd----
    Senator Bayh. I was going to follow up and ask and--then 
you----
    Mr. Lave. Yes. Sure.
    Senator Bayh [continuing]. Referred to backup capacity. So, 
my question to you is, on CO2 emissions, If we adopt 
a 20-percent standard, what is your estimate in terms of what 
we would actually achieve, in terms of net CO2 
reduction?
    Mr. Lave. I think that if the 20 percent came from wind and 
solar, that the reduction in CO2 emissions would--
might be on the order of about--instead of 20 percent, about 12 
percent of the electricity total. Right? So, that is--you're 
getting a little bit more than half of what it is you might 
assume.
    Senator Bayh. My math is not very good. You said--12 
percent of 37 percent gets to what, about 5 percent?
    Mr. Lave. Something on that, sir. Yes, sir.
    Senator Bayh. OK. But then, it's not all going to be wind 
and solar, correct? You are going to have some biomass, you are 
going to have some other things. If you assume that, given the 
geographic complexity, and given the diversity of the country, 
you're looking at something south of 5 percent?
    Mr. Lave. I think that when--when you're looking at biomass 
or geothermal, then--or this new hydro--that's really a kind of 
a one-for-one----
    Senator Bayh. OK.
    Mr. Lave [continuing]. That is, that's reliable. You don't 
need backup on those, so you really get a one-for-one reduction 
in CO2 emissions.
    Senator Bayh. OK. So, we're looking at about 5-percent, 
then?
    Mr. Lave. Perhaps, yes.
    Senator Bayh. If you net it all out.
    Mr. Lave. Yes.
    Senator Bayh. OK. Do any of you--there's really not much of 
an argument to be made that a Renewable Portfolio Standard 
decreases the need to import foreign oil. Is that correct?
    Mr. Lave. Sir, only 2 percent of electricity is generated 
by oil.
    Senator Bayh. Right.
    Mr. Lave. That's generally PEDCO. So, I don't think we're 
talking about that. The point was made earlier about natural 
gas imports. If we started importing a lot of natural gas, that 
would be an energy security issue. I think that's likely to 
happen in about 5 or 6 years. But, there's dispute on that.
    Senator Bayh. So, if we wanted to really seriously tackle 
CO2, we've got to look at things with more scale and 
scope. I think that's the point that Senator Bennett was 
making, and it seems to me that that's the point you are 
making.
    Mr. Lave. Yes, sir.
    Senator Bayh. Let me play the devil's advocate, here, as a 
former Governor, but someone who now has a national perspective 
and understands that sometimes that has to take precedence. Our 
State has considered an RPS standard in our State legislature, 
and has chosen not to adopt it. For those of you who support 
this proposal, why do you think you know more about what is in 
the best interests of the people of Indiana than our State 
legislature or our Governor?
    Mr. Izzo. The primary purpose of the standard is really to 
forge a nexus between three critical issues that are affecting, 
not only the nation, but the planet. The first issue is global 
climate change. It's not ``New Jersey climate change.'' The 
second issue is energy security. It's national energy security, 
it's not ``New Jersey energy security.'' I'm picking on my own 
State.
    Senator Bayh. Right, but----
    Mr. Izzo [continuing]. Third issue is creating jobs.
    Senator Bayh. How does this relate to energy security?
    Mr. Izzo. If you electrify transportation, as I think the 
Nation should seek to do, you're going to just shift the carbon 
production from transportation to electricity.
    Senator Bayh. Correct, but there are other ways to generate 
electricity than just a Renewable Portfolio Standard.
    Mr. Izzo. Not carbon-free. Nuclear and renewables are the 
only way to do that right now. We don't have carbon capture and 
storage. If I put a shovel in the--if I decide, today, to 
invest the money needed to build a nuclear plant, it won't go 
COD for 12 years.
    Senator Bayh. Do any of you have an estimate--our State is 
about--I think we get less than 1 percent of our energy from 
renewables, currently; we're about 95 percent dependent on coal 
generation for our electricity. Any of you care to estimate 
what this would do to the cost of electricity for the 
ratepayers in Indiana? Maybe, Mr. Wright, since that's your 
business, do you have any idea about that? Or any of the 
others, on the other side of the debate? I'd love to hear from 
you, too.
    Mr. Wright. That is a real concern for my State, but I can 
tell you----
    Senator Bayh. This is essentially a tax increase.
    Mr. Wright. It is. It's been estimated that it's about--
around $270-million impact to South Carolina. I have some 
numbers from Arkansas, from their co-ops and from, I believe, 
Entergy, who does theirs, and they were talking as much as--by 
2015, $1.7 billion, at a rate of about $340 million a year----
    Senator Bayh. My time----
    Mr. Wright [continuing]. For----
    Senator Bayh [continuing]. Is expired, but I think your 
point was that if you're going to have to pay for some of these 
things, you'd at least like to have it returned to the State to 
focus on energy efficiency----
    Mr. Wright. Right.
    Senator Bayh [continuing]. To deal with the problem you've 
got.
    Mr. Wright. The ratepayer has to pay it. That's my concern, 
as a regulator. I've got to watch out for the ratepayer.
    Senator Bayh. Mr. Chairman, my time is expired, but anybody 
on the other side of this debate want to address the issue of 
rate increases and that kind of thing?
    Mr. Furman. Senator, I thank you for the opportunity to 
address this--I think one thing that has--that is often not 
taken into account in some of the studies that were just 
cited--they're simply looking at the cost of renewables, 
they're not looking at the impact that renewables will have on 
the gas market--renewable energy, whenever we--and I used to 
operate a utility system, and, you know, during the energy 
crisis in California, you know, we were facing extraordinarily 
high prices. Bringing on wind, we could do it in 18 months, we 
could do it very quickly, and it very--and it absolutely 
displaces natural- gas generation. A lot of the market for 
electricity generation--not everywhere, but a lot of the places 
in the United States--is based on the price of natural gas. So, 
when you drive down what--there's an economic benefit to 
displacing that generation.
    I think the other thing that I would say is, energy is 
national. I mean, when we operate the utility grid, you know, 
we have to pay attention to people like Commissioner Wright, 
because they drive our economics. But, the fact of the matter 
is, electrons go where they want, and the rest of the energy 
network, you know, is a free market. I mean, coal moves freely 
around the country, as does natural gas and other commodities.
    So, this is a national issue. This is an issue of national 
imperative, because 5 or 6 years will be here before we know 
it, and we need to get prepared, not unlike what France did 
with nuclear power, not unlike what Brazil has done with 
ethanol; they've adopted national policies, because they've 
made sense for the times. I think that's where we are.
    Senator Bayh. Thank you, Mr. Chairman.
    The Chairman. Senator Barrasso.
    Senator Barrasso. Thank you very much, Mr. Chairman.
    I believe Senator Bayh is absolutely right, because nearly 
96 percent of our electricity comes from coal in Wyoming. 
Wyoming consumers have some of the lowest retail prices per 
kilowatt hour in the United States. We're at 5.2 cents a 
kilowatt hour for electricity in Wyoming, and it's not a 
coincidence that those low costs are related to coal. Coal is 
still the most affordable, available, reliable, and secure 
source of energy in the United States. I think that mandating a 
national renewable portfolio standard like this will have, you 
know, an immediate impact, and direct impact, on the people in 
Worland, Wyoming, and all across the communities, higher 
electricity costs. It doesn't seem like we heard anyone say, 
here, that it will not have a higher electricity cost.
    But, I want to get back to something Senator Bayh talked 
about, which was the practical bottom line. The Wall Street 
Journal had an article yesterday, ``New Grid for Renewable 
Energy Could be Costly.'' I don't know if you saw that, on page 
A4. It talked about the 15,000 new miles of transmission line 
that'll be needed, about 100 million--$100 billion in cost. 
But, one of the things that they talked about is, the power 
lines will have to be built somewhere, in someone's backyard; 
and they thought 15,000 new miles of transmission would result 
in about 15,000 lawsuits. The question is, How do we, you know, 
address this whole issue when we take a look at legislative 
proposals on a renewable portfolio standard? Is it appropriate, 
at the exact same time, to address the regulatory, the legal 
issues, that create the bureaucratic hurdles, whether it's 
NEPA, whether it's the Endangered Species reform? Those are 
things that come to mind. I'd like to go down the panel to see, 
How do we address that as we look to try to put this national 
energy grid together?
    Mr. Izzo.
    Mr. Izzo. Perhaps incorrectly so, I compartmentalize this 
discussion into two components. Component No. 1 is, Do we need 
renewable sources of energy? The answer to that is, 
emphatically, yes. Then the question becomes, Where do we 
develop them? That answer is much more complicated. That is a 
tradeoff between where are the resources and where are the 
users. Transmission is a cost that has to be applied to that. 
So, the factors of production may favor the Southwest for 
solar, but shipping that to the Northeast will add cost to it. 
One, therefore, has to debate, well, even though there's less 
sun, perhaps, someplace else that's closer, the delivery charge 
is less. So, the whole notion of delivery charges will 
influence where, but not how much.
    Senator Barrasso. So, you're talking about financial cost, 
but there's also a time cost involved in trying to go through 
all of these processes, which, even if the money is there to 
start with, day one, you're still taking a look--and Boone 
Pickens, when he came here, he said his biggest challenge was 
not the money, it was the time delay in trying to get some of 
these things going.
    Mr. Izzo. Absolutely correct, Senator.
    Senator Barrasso. Mr. Furman.
    Mr. Furman. If I could add a couple of things. One, the 
cost of transmission, in the grand scheme of things, is about 
10 to 15 percent of the cost of delivered electricity. So, 
while we can talk about big numbers for transmission, that only 
looks at what it costs--there are--whenever you build a 
transmission line, there's a corresponding benefit. You have 
lower costs of dispatch, you have other benefits. So, 
transmission, in my view, is a good deal.
    Second, we have massively under built and maintained our 
transmission system in this country for the past 10 to 15 
years, maybe 20--maybe approaching 20 years. We have to build a 
lot of transmission. Even if you completely reject a renewable 
portfolio standard, we have to make substantial investments.
    The third point I would make is the impediments to building 
transmission are several. You mentioned siting and 
environmentally--just the whole siting issue. That is a big--
``not in my backyard'' is a big issue. But, second is joint 
planning, the ability to look across States and to plan. Then, 
the third and most important is cost recovery. We're asking 
commissioners, like Commissioner Wright, to make decisions 
every day about building the national grid. It is an interstate 
highway system, and it's as if you were asking a commissioner 
in Pennsylvania to authorize the construction of an interstate 
highway going from, you know, New York to Detroit; it----
    Senator Barrasso. Thank you.
    Mr. Furman [continuing]. Doesn't work.
    Senator Barrasso. Commissioner Wright.
    Mr. Wright. You raised some very good issues. You know, I--
one of the things that I've thought about, just--when they 
talked about, ``Well, South Carolina has possible wind off the 
coast.'' I mean, are we going to go off any lands, like Federal 
lands or anything like that? That would be a real issue. How 
does--how is that going to be addressed? I agree, I think your 
15,000 lawsuits are low. I think there would be more than that.
    But, you know, again, I'm back to the State. I'm 
responsible for making sure that we have reliable, affordable 
power and that our utilities are able to do that at a profit 
that's regulated. So, I think--nationally, I think you do need 
to look at transmission; I think it's going to have to be 
something you've got to do.
    Senator Barrasso. Mr. Jones.
    Mr. Jones. Once again, I think if we allow all available 
renewables to participate, we can help take advantage of some 
of the existing resources and facilities, and hopefully 
somewhat offset the impact of new transmission.
    Senator Barrasso. OK.
    Mr. Lave. The analogy with the interstate highway is not a 
correct analogy. The interstate highway meant that I could get 
on the freeway in one part of Pittsburgh and get off it at 
another part of Pittsburgh. When we build a transmission line, 
it's from here to there. Right? It is directed at a particular 
place. It's not something that somebody else can get on and go. 
So, it's a piece of national infrastructure, but it's not like 
the interstate highway.
    Again, we had a Ph.D. thesis that was done, trying to take 
a look at whether--the difficulty with siting transmission. The 
answer is, there are--it is really difficult to site 
transmission. Under the legislation passed 2 and 4 years ago, 
Pennsylvania--most of Pennsylvania was designated as a national 
transmission corridor. You want to count the amount of 
transmission built in Pennsylvania, or approved? Right? That is 
that we've got a congressional delegation that's going to tell 
you, ``You're not going to build any damn transmission in 
Pennsylvania, thank you very much.'' I think that's going to be 
true.
    Then, just one other part of this, and that is, it is true 
that if we had a national market in these renewable standards, 
that the price would be pretty much equal across the Nation, 
but the price of electricity would not. In your home State, 
electricity would be really cheap. In southern California, it 
would be really expensive. I don't want to get into too much 
jargon, but there are things called ``locational marginal 
prices'' that depend on transmission costs, that depend on 
congestion. Those LMPs are really different between different 
areas.
    So, I think the result of this would be that, yes, South 
Carolina would have to pay 3 cents a kilowatt hour for that, 
but it would be on top of a much higher price of electricity 
than you were paying in Wyoming.
    Senator Barrasso. Thank you.
    Mr. Chairman, Dr. Lave had a wonderful article on the 
issues in Science and Technology, fall 2008, called ``A 
National Renewable Portfolio Standard: Not Practical.''* I 
would commend it to the committee and ask that a copy of it be 
made a part of the record.
---------------------------------------------------------------------------
    * Article has been retained in committee files.
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    The Chairman. We will include it in the record.
    Senator Barrasso. Thank you, Mr. Chairman.
    The Chairman. I think Senator Menendez was here at the 
beginning of the hearing, and he's come back, so perhaps we 
should let him ask questions.
    Senator Menendez. Thank you, Mr. Chairman.
    Dr. Izzo, I know that the RPS that New Jersey has created 
has created hundreds of new jobs. But, if we institute a strong 
national renewable electricity standard, doesn't it have the 
potential to create thousands, or even tens of thousands, of 
new jobs in manufacturing, in installing wind turbines, solar 
panels, jobs boring holes for geothermal projects, jobs 
harvesting biomass, engineering, designing, all of these 
projects? So, when we balance, in terms of the costs, isn't 
this really a very strong job creator?
    Mr. Izzo. There's no doubt, Senator. You've hit upon all of 
the categories, as well. Obviously, we're most affected by the 
installation jobs, but there are manufacturing jobs. I know 
there have been some large announcements made by Vestas, in 
Colorado. The Senator mentioned some jobs that were coming to 
Michigan for blade manufacturing, and then the ensuing 
multiplier effects. But, you said it well.
    Senator Menendez. Let me ask you, 28 States currently have 
an RPS policy in place, and many are much more aggressive than 
any of those being proposed federally. Do you agree that, if we 
were to pass any Federal standards, that States should retain 
the ability to have their own stronger targets?
    Mr. Izzo. Yes, without question. To that point, Senator 
Menendez, I will say that, in 2007, 76 percent of the renewable 
energy generation that was built in this country were in RPS 
States. So, RPS matters in encouraging renewable generation.
    Senator Menendez. Finally, Mr. Chairman, I wanted to get 
Dr. Izzo to agree with me twice so I could disagree with him 
once.
    [Laughter.]
    Senator Menendez. That is, I'd like to ask unanimous 
consent to introduce into the record a study from the Lawrence 
Berkeley National Laboratory. It's entitled ``The Treatment of 
Solar Electricity in Renewable Portfolio Standards.''* The 
study shows that States that had a specific carve-out for solar 
energy successfully created the construction of solar projects, 
while those without a carve-out did not lead to solar 
deployment. It seems to me, if we do not have a carve-out in 
this bill for other technologies, or a reverse carve-out 
limiting how much of a requirement can come from onshore wind, 
we will find ourselves, in 2020, with only one mature renewable 
technology. It seems to me that we need a system that helps 
various--several mature technologies to be achieved in order to 
reach our collective goal.
---------------------------------------------------------------------------
    * Document has been retained in committee files.
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    So, I'd ask unanimous consent to include that in the 
record. I think it's an important part, certainly, of the 
debate, as we move forward in figuring out how we have multiple 
renewable energy sources that can mature to both productivity 
and commercial deployment in a way that meets these goals.
    The Chairman. We will include that in the record.
    Senator Menendez. Thank you, Mr. Chairman.
    The Chairman. Senator Burr.
    Senator Burr. Thank you, Mr. Chairman.
    As you can see, there's tremendous interest in this subject 
and the need for extended hearings, I think, especially to have 
the administration here to tell us how they would implement a 
Federal RPS. So, I know, and I hope, that the chairman will 
have additional meetings.
    I'm sorry Senator Bayh left, because I did have the Duke 
Energy projections of what the RPS would cost for Indiana. I'm 
not sure if Duke's the sole supplier of power there. It's $715 
million over 10 years. Of course, under this proposal, the 
costs would extend to 2039. For North Carolina, the 50 percent 
that Duke covers would be $1.5 billion. For South Carolina, 
Commissioner Wright, $591 million just for the Duke portion. I 
might add that those numbers, for North Carolina, do not 
include the cost--does not take into account the ``renewable 
mandate in North Carolina'' cost. So, it's far going to exceed 
that, before we've actually paid for the power.
    Let me turn to you, Commissioner Wright, if I could. We've 
already discussed that North Carolina is the only southeastern 
State with a renewable portfolio standard, 12 and a half 
percent. How would this Federal program, in your estimation, 
affect North Carolina and its ratepayers?
    Mr. Wright. Those things that are qualified under North 
Carolina's RPS may not be the same as what is in the standard 
that we're talking about here today. I haven't looked at the 
detail, specifically, of the RPS in North Carolina to know 
what's covered and what's not. In North Carolina, the 12-and-a-
half percent--I believe 40 percent of that 12-and-a-half can 
come from energy efficiency, which, I think, you do the math, 
it's--that's 5 percent. So, that's the same as what's in the 
RPS we're talking, today. But, you know, every State is going 
to be different. Those that have RPSs, they're not the same as 
what we're talking about in this particular proposal today. So, 
it will affect States. It's going to be costly to them----
    Senator Burr. Yes.
    Mr. Wright [continuing]. Especially in my region.
    Senator Burr. Mr. Furman, if I understood what you provide 
in the wind generation, you're proposing that you should get a 
renewable--there should be a renewable electricity credit 
that's traded. If South Carolina needed additional renewables 
to meet their portfolio standard, they would pay you for that 
credit. In addition to that, the power you generated, you are 
selling, so you're getting money because you're providing him a 
credit, and you're producing power that you're selling. Do I 
understand it correctly?
    Mr. Furman. That's true.
    Senator Burr. I encourage you to get with General Motors, 
because they cannot figure out how to make money.
    [Laughter.]
    Senator Burr. If they could figure out how to provide a 
picture to people that would like to buy a Suburban, but, 
because of fuel efficiency standards, are buying a hybrid, 
then--and they could make money by selling the picture and 
money by selling the hybrid, I'm sure that they could figure 
out how to make money and compete against the Japanese. But, 
I'm not sure that--unless we give you the honeypot of people 
paying something for nothing, except to meet this arbitrary 
number that we've set--not one that's set by our State, one 
that we have applied a one-size-fits-all across the country and 
said, ``Doesn't matter whether, geographically, you can take 
advantage of anything, we'll give you the ability to buy this 
credit so everybody hits it, but we're not going to pay any 
attention to how much that costs you or how much money you 
export.'' It's a great business model. I commend you for it. 
I'm just not sure that I want to be a participant in something 
that accomplishes a good feeling, but not an effective cost for 
the ratepayers in the States that don't have the benefit.
    Now, we've looked at the trading that goes on with carbon 
trading in Europe. I'm sure it has its supporters and its 
detractors. I want to look at how they've cleaned up their 
emissions. It hasn't cleaned up very much. There's a lot of 
money trading hands. At some point, we've got to get focused on 
the outcome, and that's, Are we improving the emission 
standards in this country?
    Now, let me just turn to you, Dr. Lave, for 1 second. Your 
full testimony had much more about nuclear. I'm in agreement 
with you on that. One specific question. Should nuclear be 
considered a renewable for the purposes of us considering this 
legislation?
    Mr. Lave. Senator, I would never answer a question like 
that.
    [Laughter.]
    Mr. Lave. I think that we have enough uranium so that we 
can generate a tremendous amount of nuclear power for now and 
the future. Whether it is strictly renewable, in the sense of 
going on forever, I think that's not true. But, if you were 
looking at a century, or more than a century, there's certainly 
enough uranium so that we could generate nuclear power----
    Senator Burr. If we adopted reprocessing in this country, 
we could--instead of storing 97 percent, using 3 percent, we 
could use 97 percent and store 3 percent, which is, hopefully, 
the conclusion that the study will come to.
    I think you raised a very good point; we haven't built a 
nuclear plant in some time, we don't know what the cost is.
    I would sort of go back to where Senator Dorgan was. The 
fact that we haven't proceeded forward is because we haven't 
had a comprehensive blueprint of energy policy for the future. 
I wish we could focus on that comprehensive energy blueprint 
first, and figure out what that is and how all these pieces 
fit, before we start creating the pieces. We may find out they 
don't fit in the comprehensive energy policy that's in the best 
interests of the country, both from a standpoint of security 
and from a standpoint of cost-effectiveness.
    I thank the chairman.
    The Chairman. Thank you.
    Next is Senator Landrieu, and then we have Senator Cantwell 
and Senator Shaheen and Senator Lincoln. We're supposed to have 
a vote at 12 o'clock. So, we'll just keep going.
    Senator Landrieu. Thank you, Mr. Chairman.
    I'd like to begin by associating myself with remarks of the 
Senator from Tennessee, in a broad way, that I do hope that, as 
we begin this debate, we can begin with a more unifying call 
than something that could potentially, you know, divide our 
country. I want to say how strongly I agree with him that, in 
my 12 years in the Senate, I have not seen the country more 
ready to embark in a new direction, but it has to be a 
direction that makes sense to them, with clear and defined 
goals.
    I'd like to start, Mr. Chairman, with a visual that might 
help us understand the challenges of what we're talking about 
when we talk about wind. The latest generation of windmills, 
using the most modern technology and construction material, are 
almost 100 meters in diameter, they stretch higher than a 40-
story building, which is about half the size of the Eiffel 
Tower. A windmill produces 1 megawatt of power when the wind is 
blowing at a relatively high speed of 10 meters per second. It 
would require 1500 of these windmills to produce the equivalent 
power of one nuclear power plant, and it would take 90,000 
acres, one wind farm, which is 144 square miles. By way of 
comparison, Washington, DC., is only 68 square miles.
    So, I just want to repeat that. Wind is very attractive. 
I'm attracted to it. Most Americans are. Solar is very 
attractive. But, there are some significant and real challenges 
with wind. Land and space is just one of them.
    The other challenge is a poster that I want to--and 
aesthetics, may I say--the other challenge is represented by 
this poster. In the Southeast, where I'm from, Louisiana, we 
don't have much wind at all. Now, we're blessed with a lot of 
oil and gas, and we have nuclear power, significantly, here, 
and hopefully more. But, we virtually have no wind. We might 
have some, offshore. That is exciting. We may have some tidal 
energy, as well, which is in its infancy stages of development. 
But, we virtually have no wind compared to the other parts of 
the country.
    I also want to hold up a visual about solar. While we think 
we have a lot of sun, and it tends to be hot in Louisiana, we 
don't have the same resources of sun and geothermal in the 
Southeast.
    Which brings me to the goal of what I think we should be 
achieving or looking at, is where most Americans are; they're 
excited about the possibility of being clean--not just 
renewable, but clean--and secure. If there was any feeling of 
the last election, it was that America has an opportunity to be 
secure. If we address this in a broad way, sensitive to 
regions, I think we might be able to achieve some significant 
advancement. I'm not sure that this particular bill is the way 
to get there.
    Let me ask a question, to anyone who would care to answer 
it. This is a Louisiana ratepayer's question. Under the 
proposal that we have before us, that, in my view, puts too 
much of an emphasis on wind and solar, not enough emphasis on 
regional choices and menus that make sense, our ratepayers--let 
me try to understand--would have to purchase large amounts of 
renewable energy credits, primarily from solar and wind; but, 
once they do that, is it not true that they still need to 
generate power? We'll still buy our power from traditional 
sources--coal, gas, and nuclear? So, aren't we asking, Mr. 
Furman and Dr. Izzo, that our ratepayers, like other States, 
would have to pay twice? We'd have to be buying the power for 
renewables, and then also paying the regular rates to maintain 
the current infrastructure that we have now, because it's not 
going to go away.
    Mr. Furman. Senator, no, I don't believe that's true. Let 
me hold up a--it's small, but let me hold up--one thing that is 
being missed in this entire debate is the massive biomass 
resource that exists in the Southeast and the Upper Midwest. 
This picture is from the National Renewable Energy Laboratory, 
and it shows the biomass potential that could be delivered. So, 
anybody in Louisiana, any utility ratepayer in Louisiana, would 
have the option of either buying a credit from anywhere--the 
Upper Midwest--or developing, within the service territory, a 
biomass facility.
    Now, some--a lot has been made about how expensive this 
was. Senator Burr made reference to General Motors. The fact of 
the matter is, this is all going to be market-driven. We will--
the benefit of this approach to a renewable energy policy is 
that the market will be free to deliver the least expensive 
option. So, yes, we will still need to be buying and consuming 
electricity, just from the grid, but this provides a way for 
the Nation, as a whole, to move its consumption of electricity 
toward renewables, reducing demand----
    Senator Landrieu. But, Mr. Furman, do you agree with Mr. 
Jones that, under the current law that we are reviewing right 
now, the current draft, that the biomass definition--or do you 
say, Mr. Jones, the wood products--is not as clear as it could 
be. I don't disagree that we have a lot of forests in the 
Southeast, we also have the opportunity for biofuels. But, it's 
the approach that we take. We are very excited about the 
nuclear--expansion of nuclear. So, I think that we have to take 
that into consideration.
    But, I want to get this on the record. Do you agree that it 
would take 1500 of these giant windmills to produce the same 
power as one nuclear power plant? Do you agree that it would 
take 90,000 acres, or 144 square miles?
    Mr. Furman. I do not.
    Senator Landrieu. OK.
    Mr. Furman [continuing]. If I could clarify why. I think 
the numbers that you gave, Senator, were a 100-meter tower and 
a 1-megawatt wind turbine. In fact, a 100-meter tower is going 
to be a 2- or a 3-megawatt wind turbine. So, we're typically 
seeing 1,000 megawatts--if you want----
    Senator Landrieu. So, instead of 144 square miles, it would 
be two-thirds of that?
    Mr. Furman. It would be less. It would be----
    Senator Landrieu. A half.
    Mr. Furman [continuing]. Significantly less. I think the--
the other thing that is interesting about how you look at 
wind----
    Senator Landrieu. Which would be about the whole size of 
Washington, DC., not twice the size.
    Mr. Furman. Yes.
    Senator Landrieu. It would be the whole size of Washington, 
DC.
    Let me just end with this, Mr. Chairman. As a Senator who's 
represented oil and gas, which is tough these days, I have to 
hear my colleagues say to me, ``We don't want an oil and gas 
facility anywhere near us.'' Now, I think they look pretty 
nice, particularly at night. It looks like a Christmas tree to 
me out in the Gulf. But, you know, I can appreciate that they 
don't want to look at it. How are we going to get them to look 
at these windmills, acres and acres and acres, mile after mile 
after mile? I mean, I don't think they're ugly, but I don't say 
they're any prettier than oil and gas fabrication facilities.
    So, until someone really gets a handle on what the 
landscape of this country is going to look like if we are so 
determined to upstart a wind industry, as opposed to trying to 
make America clean and energy-secure, I think that we have to 
adjust our direction here.
    Thank you.
    The Chairman. Senator Cantwell.
    Senator Cantwell. Thank you, Mr. Chairman.
    Thank you, gentlemen, for your testimony. I've listened 
with interest to my colleagues making various statements. I 
guess I look at this issue a little differently, considering 
the excitement around distributed generation. Just like the 
change from mainframe computers to computers on a desk, the 
same efficiency now can come from distributed generation, as 
from centralized power plants and that is bringing the source 
of energy closer to those that use it. It's more cost-
effective.
    In that, I also think that we are missing some of the 
issues about hidden costs. I mean, everybody always looks at 
the cost of CO2, and we haven't quite put the price 
tag on that here, legislatively. But, there are other issues. I 
am thinking, Mr. Furman, of your testimony, particularly as it 
relates to natural gas. Farmers in Washington State almost went 
out of business over the price spike in natural gas in recent 
years. We cannot continue to have natural gas go up to $14 on 
whatever it was, and think that we're going to survive.
    The electricity grid, with 50 percent of its power 
generated from coal and a big chunk of it from natural gas, as 
you pointed out, would benefit from a renewable portfolio 
standard that would allow us to diversity our fuel mix. Would 
it actually reduce the cost of natural gas by 15 percent as the 
report says? Is that right, Mr. Furman?
    Mr. Furman. Yes.
    Senator Cantwell. So, that's a big advantage. That's a big 
advantage to farmers all across America, if we can keep down 
the cost of fertilizer. These pressures are going to continue 
to grow. So, I think we have to include all the costs.
    But, I do have another question. Mr. Jones, we tried very 
hard, here in the United States Senate, to have our language on 
``sustainable woody biomass'' prevail in the 2007 bill. We 
weren't successful with the House in doing that, but we'll go 
back and we'll try again.
    But, my question is, given the current state of PTC-ITC 
lack of credit flow, and given this discussion about RES, is it 
possible to look at ways to make those regional projects more 
cost-effective? We've been battering around loan-guarantee 
concepts between the House and the Senate. Should we be looking 
at meeting the RES standard with further incentives from the 
government, something like low-interest loans amortized, maybe 
over 30 years, with, perhaps Fed rate--near zero--that would 
help, actually realize the cost-effectiveness for the 
ratepayers of these projects in some of these regions?
    Mr. Furman. Senator, if I could answer--there's no question 
that all of those programs help, and particularly--you know, 
our current problem is--the whole system of incentivization for 
renewables has sort of broken down with the collapse of Wall 
Street, and we're unable to monetize any of this. You know, 
most of that benefit, if not all of it, does flow back to 
consumers in the pricing that we provide to utilities.
    Loan guarantees, I think, are, you know, definitely a help, 
not just in incentivizing, but also in helping us to get 
through this short-term problem that we have with the collapse 
of the markets.
    But, I think that, in terms of regional differences, which 
is what you were, I think, alluding to----
    Senator Cantwell. For the Northwest, with 72 percent hydro 
and on the way for other renewables, yes, those are easier 
challenges to meet. But, maybe part of RES is the ability to 
get access to capital at a low rate to help drive down the cost 
of some of these implementations.
    Mr. Furman. There's no question that would help.
    Senator Cantwell. Mr. Jones.
    Mr. Jones. I would say, in the current writing of the 
definition, the issue we're hearing from power companies that 
are looking to my members to--as a resource in the Southeast 
who are about to build biomass facilities, the issue they have 
now is, Will landowners survive long enough in order to provide 
that resource? The way the definition is written right now, 
it's hard to site an energy facility and say, ``Where can we 
put this energy facility where we know we'll have a guaranteed 
supply of wood?'' That's stopping the financing of these 
facilities, because the financing of these facilities are--
they're saying, ``Can you guarantee a supply of wood 3 years 
from now?'' With the current market situation and where we're 
going, that's tough to say. The way the definition is written 
is a further constraint, because it's putting very narrow 
boundaries on the amount of available wood that can be there, 
when we have a lot of wood, but only a certain amount can be 
utilized.
    So, I would say, by broadening the definition, we can 
definitely, hopefully, free up some incentives for these 
facilities to come in and make the banks a little more willing 
to make loans to their startup.
    Senator Cantwell. The language that we had about 
``sustainable woody biomass,'' that met the test?
    Mr. Jones. I think when we talk about sustainability, we're 
looking more at the forest health, so I think we could be 
broader and just say that, you know, we just have ``all woody 
biomass,'' that includes all plants and trees, and that would 
help meet the test.
    Senator Cantwell. Thank you.
    Thank you, Mr. Chairman.
    The Chairman. Thank you.
    Mr. Lave, I'm informed that you need to leave to catch a 
flight. We appreciate you being here, and we certainly excuse 
you.
    Senator Shaheen.
    Senator Shaheen. Thank you, Mr. Chairman. Thank you, to all 
of the panelists.
    I certainly agree with several of you who have talked about 
the need to move this country in a new energy direction that 
uses more clean energy technologies and that that's not only an 
environmental imperative and a national security imperative, 
it's also an economic imperative. I think that a renewable 
portfolio standard could be essential to doing that.
    Two years ago in New Hampshire, we enacted an aggressive 
renewable portfolio standard law that requires all utilities, 
as well as competitive suppliers, to produce 23.8 percent of 
their power from renewable sources by 2025. Now, one of the 
reasons that we require competitive suppliers to do it is 
because, when I was Governor, New Hampshire restructured its 
electric industry to make generation of power a competitive 
function. I'm sorry Dr. Lave is gone, because one of the 
reasons we got to that point was because we built the last 
licensed nuclear power plant in the country in Seabrook. That 
gave us the highest average electric rates in the country. So, 
trying to get to a more competitive power supply was important.
    But, my question really is--and, Dr. Izzo, I would ask you 
if you would take a crack at this first--should a national 
renewable electricity standard apply to competitive suppliers, 
in addition to utilities? Then, should it also apply to all 
utilities? In New Hampshire, we have a number of municipal 
utilities; they don't generate 4 million megawatt hours a year. 
But, should an RES or an RPS apply to everybody?
    Mr. Izzo. The answer to that is yes. The way we do that in 
New Jersey is, we make it the burden of what we call the load-
serving entity, the company that owns the meter and the wire 
into the home. So, when they require it of the supplier, the 
regulator typically allows them to pass the higher costs from 
the supplier--because it is higher cost--to their customer. It 
works seamlessly. But, the short answer to your question is, 
yes, it should apply to everyone.
    Senator Shaheen. Can you talk a little bit about what you 
think the consequences might be, if any, of not having it 
applied to everyone?
    Mr. Izzo. Besides the inconsistency, I mean, a ton of 
carbon, whether it's emitted by a utility-owned generation 
plant or whether it's owned by a competitive power plant or 
whether it's owned by a municipal co-op or whether it's owned 
by an IOU, is still a ton of carbon. Once again, if we are 
going to give birth to some nascent industries here, whether 
that's onshore wind, offshore wind, biomass, solar, the 
economies of scale matter. So, why chip away at that? We're 
talking about 7 percent of the 80 percent. We have a lot of 
work to do here.
    Senator Shaheen. Thank you.
    The Chairman. Senator Lincoln.
    Senator Lincoln. Thank you, Mr. Chairman. Mr. Chairman, I'd 
note that the women have been hanging in here with you at the 
end.
    [Laughter.]
    The Chairman. The women are the stalwarts of this 
committee, I agree.
    [Laughter.]
    Senator Lincoln. We're hanging in there with you.
    We want to thank, certainly, the chairman for bringing us 
together on this issue, and getting started on this debate and 
trying to figure out the solutions to the challenges that we 
face. We thank you all for bringing your expertise to our area 
of renewable energy.
    Just a couple of questions. You know, I think we all agree 
that we need to take steps to reduce our greenhouse gas 
emissions. We need to encourage technology that's going to be 
maximize the renewable resources available to us. But, I do 
think that it's important for us to ask questions about how any 
standards we do set will ensure equity among the various 
regions of our country. You've heard that from so many of us. 
We come from all different parts of this great nation. We all 
feel like we have a tremendous amount to give, in terms of 
contributions to solving this problem ut, we also feel very 
strongly that we need to be recognized for the strengths that 
we have, and not punished because of the weaknesses that might 
exist in our areas.
    In Arkansas, I'm extremely proud. We're contributing to the 
supply chain for wind energy by manufacturing the blades and 
the turbines. But, as Senator Landrieu showed you in that map, 
we don't produce a whole heck of a lot of wind, except for 
those of us that talk a lot.
    [Laughter.]
    Senator Lincoln. It is a critical part of making sure that 
we are allowed to make our contribution to the solution.
    Arkansas has great potential to contribute to a new energy 
economy through biomass supply, not only in terms of--I think, 
Mr. Jones, you mentioned the broad definition, in terms of what 
the forest landowners and others can contribute--but 
agricultural waste, animal waste, there's a whole host of 
different things that we can do in different regions, but it 
has to be recognized as a contribution in helping to solve that 
problem, and I hope we will.
    One of the things that hasn't been talked about an awful 
lot today, and I would like to just bring up, and that is the 
hydropower. In the current RES draft, the hydropower is 
excluded from the base amount from which the percentages are 
calculated. I've never really understood why existing hydro, in 
this debate, is not given more credit as a renewable energy 
source. It's something age-old that, for eons, civilization has 
used as a power source. Any of you all want to try to give 
somebody like me an explanation of why you think hydro is not 
talked about more often?
    Mr. Furman. Senator, if I could take that on. The goal here 
is not to recognize, necessarily, existing resources, it's to 
reduce carbon, it's to, you know, create jobs and economic 
development, and it's to reduce our dependence on foreign 
imports, now or in the future.
    If we could do that, we could recognize existing hydro. I 
think that, in order to accomplish those three goals, though, 
you would have to raise the numbers in the RPS, in terms of the 
targets.
    Senator Lincoln. What if you take it away?
    Mr. Furman. I'm sorry.
    Senator Lincoln. What if you eliminate it?
    Mr. Furman. Eliminate hydro?
    Senator Lincoln. Uh-huh.
    Mr. Furman. We----
    Senator Lincoln. Existing hydro. Does that not set you 
back, in terms of what you're trying to accomplish?
    Mr. Furman. This legislation won't do that, though. The 
existing hydro will continue to operate, just as the existing 
coal and the existing nuclear will continue to operate.
    Senator Lincoln. But, in terms of what you're saying, the 
contribution of carbon--I mean, obviously, that doesn't exist 
with hydro. In terms of, you know, taking that away as a source 
of power that exists today, you're going to have to replace it. 
I don't understand why it's not counted as something that is 
basically neutral, in terms of the environment.
    Mr. Furman. To be clear, we're not taking away the hydro. 
All we're saying is, going forward----
    Senator Lincoln. You're not going to count it.
    Mr. Furman [continuing]. You have to add new renewables 
into your portfolio.
    Senator Lincoln. Uh-huh.
    Mr. Furman. So, it will continue to operate. We're not 
going to take it away. We're not going to even dis-incentivize 
anybody from continuing to operate it. These plants are among 
our least expensive resources in the country for providing 
power, and I don't expect them ever to stop operating.
    Senator Lincoln. If you quit supporting them, they will.
    Mr. Furman. No, they'll still be paid for by the market and 
by ratepayers. They will still be in the rate base, they will--
Bonneville Power Administration will continue to generate and 
sell that power to the marketplace, and it will be very cost-
effective.
    Senator Lincoln. I guess I tend to agree--disagree with 
you, in the sense that, you know, when you don't support things 
that, I think, are productive, then point in fact is, people 
are not going to use 'them. If it's going to be a part of how 
credits are traded and how people are evaluated, in terms of 
what they produce, particularly regionally, then it's going to 
become less and less of a viable source. People are not going 
to make the investment. I know, certainly, in terms of hydro 
facilities that exist today, it becomes harder and harder here 
to be able to find the resources to make the repairs in, you 
know, hydro projects that have been very, very successful and 
productive over the years. Yet, you know, being able to make 
the investment in the infrastructure for turbines and other 
things that need to be replaced or reworked becomes virtually 
impossible, and so, then you just lose that power.
    Maybe we'll just have to disagree on that one. It seems----
    Mr. Furman. I think we will.
    Senator Lincoln [continuing]. Seems like--it seems like--as 
I said, for eons it's been a great resource for mankind, 
something that we probably should continue to focus on.
    Mr. Jones, in the South, and certainly in Arkansas, the use 
of biomass as a renewable energy, I think, must be utilized as 
much as we can in order to meet any future RES standard that's 
going to happen. There's an abundance of forest resources and 
infrastructure for the potential to process our forest biomass 
for energy use. You were concerned, I think, about the current 
definition of ``renewable biomass.'' You've touched a little 
bit on that. I know you mentioned to Senator Landrieu, there--
do you--anything else there that we need to be aware of?
    Mr. Jones. Yes. The current definition that's being 
proposed in this piece of legislation really takes an 
agricultural or seasonal-crop approach to a long-term 
investment, like trees, which won't apply.
    Senator Lincoln. Right.
    Mr. Jones. Basically, it's a closed-loop approach, which is 
very difficult for a long-term investment, like growing a stand 
of trees, to participate in. So, not only are we talking about 
excluding natural forests, but we're also taking the wrong 
approach to allowing them to participate.
    Senator Lincoln. Do you believe it's possible for States in 
the South to meet a strict renewable electricity standard if 
forests are restricted from being used to meet the standard?
    Mr. Jones. I don't think so. We've talked about the 
regional differences, and Senator Landrieu's maps showed it 
very well and very clearly, that we do have some resource 
restrictions when it comes to wind and solar, but we do not 
have those restrictions when it comes to biomass resources in 
the South. You were correct to say that some ag products and 
animal waste products go in there, as well. But, we have an 
abundance of forest resources in the southeastern United States 
that currently are losing their markets, the mills aren't 
located where everybody can access them now. These energy 
markets have the potential to set up right there, take a low-
cost--basically take small trees--these are small trees that 
are being cleared out for--to increase forest health and manage 
for a higher-value product, and also the byproducts of saw-
milling and waste from these manufacturing facilities. So, it 
goes to help, not only landowners, but the manufacturing 
facilities that we have, and preserve some of the jobs that are 
currently being lost----
    Senator Lincoln. Certainly----
    Mr. Jones [continuing]. Through the reduction of industry.
    Senator Lincoln. Certainly one of the issues there is 
making sure there's parity, in terms of incentivizing these 
types of fuel uses, as well. So, that's important.
    Mr. Chairman, I'd just also like to add my comments, that 
some of the other--my colleagues made, in terms of nuclear. 
Arkansas has been very successful, because it has been a 
diverse State, where it has used diverse power, whether it's 
been woody biomass, whether it is nuclear, whether it's hydro, 
whether it's coal, natural gas--we've tried to be--I think, set 
an example, in terms of what needs to happen.
    I would just echo the comments of some of my colleagues, 
where we're not going to get from where we need to be unless we 
ensure that we're going to be looking at all of the resources 
that we have, certainly looking at them in a correct way, 
making sure that we're using the most efficient and effective 
ways that we possibly can, but making sure that we are 
recognizing all of the resources that exist before us. So, I 
hope we will, and particularly in terms of nuclear.
    Thanks, Mr. Chairman.
    The Chairman. Thank you.
    Thanks, to all of you, for testifying. I think it's been a 
very good hearing, and we appreciate it. We will proceed to 
consider this further in the future.
    [Whereupon, at 12:10 p.m., the hearing was adjourned.]
                               APPENDIXES

                              ----------                              

                               Appendix I

                   Responses to Additional Questions

                              ----------                              

    Responses of David A. Wright to Questions From Senator Bingaman
    Question 1. Does the inclusion of energy efficiency help?
    Answer. Yes. Energy efficiency should be included in any discussion 
about the need for clean energy. Energy efficiency reduces the need for 
generation and should be considered as a substitute for renewable 
generation in a RPS for areas where renewable resources may be limited. 
It certainly should be included in any federal mandate for certain 
mixes of energy sources. It should count as any other source and it 
should not be constrained by bureaucratic hurdles that do not apply to 
other energy sources (i.e. requiring a Governor to petition for its 
use) nor should its use be capped in counting towards compliance with a 
federal standard. While including energy efficiency will help mitigate 
the cost impact for Southeastern consumers, it will not eliminate the 
potentially significant cost of compliance with a Federal RPS.
(Alabama sent the following comment):

    ``If the overall intention of energy efficiency is to reduce 
emissions, then the effect of energy efficiency is the same as the 
production of zero-emission energy. The inclusion of energy efficiency 
is therefore vital to this discussion. However, it is also vital to 
appropriately and reasonably address the notion of minimum or maximum 
energy efficiency requirements. Because of regional variations in 
energy efficiency opportunity, states (and the utilities that serve 
them) should be given sufficient latitude to determine the kind and 
amount of energy efficiency measures to implement in their respective 
jurisdictions.''
    Question 2. I have been troubled that energy efficiency credits may 
differ in value from program to program and from state to state. Should 
such credits be tradeable like renewables credits? Should they be 
limited to use for compliance only within the state that has petitioned 
for the right to use efficiency credits?
    Answer. While each state has different avoided costs which impact 
the monetary ``value'' of an avoided MW or MWh, the same is true for 
renewable generation. If Renewable Energy Credits are tradable so 
should be Energy Efficiency Credits.
    Energy efficiency should count like any other energy source toward 
meeting a federal renewables mandate. Accounting issues will exist with 
all fuel and energy sources and therefore trading of efficiency credits 
should not be constrained anymore than those for wind, solar, etc.
    My thought is that energy efficiency credits that are tradeable 
from state to state would create a situation where the benefits of the 
efficiency improvements are seen in one state and paid for by another. 
These benefits would include not only lower emissions but decreased 
need for new generation. My initial thought is that energy efficiency 
credits, if used as a substitute for renewables, should be created and 
remain within each state. However, a cost/benefit analysis should be 
performed to consider the cost of an allowance created within the state 
versus outside of the state along with the impact on generation needs, 
emissions and lost revenues.
(A comment in response to this question from the North Carolina 
        Utilities Commission):

    ``If a national market is created for renewable energy RECs, then 
it might not be inappropriate to allow a national market for energy 
efficiency RECs in order to reduce to the greatest extent possible the 
cost of compliance with a federal RPS.''
    Responses of David A. Wright to Questions From Senator Murkowski
    Question 1. How much back up power from conventional power plants 
is needed to meet a 20% RPS requirement by 2021? At what cost?
    Answer. This will depend on what mix of renewable resources are 
used to meet the RPS. If all the resources are biomass, then very 
little conventional power plants are needed. If all resources are wind 
or solar, then anywhere from 75% to 100% back up is needed due to the 
unpredictability of the resource. The cost of the backup, based on 
adding simple cycle natural gas-fired combustion turbines to provide 
the needed reliability, would be approximately $600-800/kW installed 
(in 2008 dollars). The need for this much backup generation will most 
likely be met through some combination of natural gas-fired 
intermediate and peaking type facilities.
    Most of the renewable resources defined by the majority draft RPS 
that would count toward compliance are intermittent in their generation 
output and have low capacity factors. A recent study titled the ``Joint 
Coordinated System Plan'' (JCSP) was released by the Midwest ISO, PJM, 
MAPP, the Southwest Power Pool and TVA. It confirmed that wind 
generation has a capacity factor of 30%, requiring backup generation 
for the remaining 70% of power needs. Solar generation's capacity 
factor is typically even lower. This backup generation would almost 
always be natural gas-fired combustion turbines or combined cycle 
units.
    This JCSP study examined the impacts of the eastern U.S. getting 
5%, 20% and 30% of its electricity from wind. The study shows that to 
meet the demand for energy in the Eastern Interconnection from 2008--
2024 with 5% wind would require the installation or import of 57,000 MW 
of wind capacity while the amount to meet a 20% wind requirement would 
require some 229,000 MW of wind. (At 2 MW each, this level would 
require the installation of 115,000 windmills.) The study also shows 
that each of these levels would also require the installation of 
substantial amounts of natural gas-fired capacity above the base case. 
The 5% wind scenario would result in the need for 46,500 MW of natural 
gas capacity above the base case, and the 20% wind scenario would 
require 67,200 MW of natural gas capacity.
    Using 2008 EIA cost estimates for gas fired capacity, both wind 
scenarios would require tens of billions of dollars of capital 
investment above and beyond the costs of the renewable capacity.
    Without significant improvement in storage technology, intermittent 
renewable generation resources, such as wind and solar, are not 
suitable to replace conventional base load generation resources.
    Question 2. Do you agree that as it now stands, our country's 
transmission infrastructure is woefully inadequate to achieve a 20% by 
2021 RPS requirement?
    Answer. Speaking nationally, you may be correct when you say that 
our current transmission infrastructure is inadequate to support the 
amount of new renewable energy that is currently being contemplated. 
Without the necessary upgrades, the reliability of our nation's 
transmission grid will constantly be a concern. Similar to what we saw 
recently in Texas when the availability of wind generated electricity 
suddenly dropped in a matter of minutes, operators will continually be 
on heightened alert to ensure a constant and steady supply of 
electricity generated from renewable resources, as well as back-up 
capacity, is available.
    The same is not the case in the Carolinas, however. While the grid 
may not currently be constructed to wheel power from remote, 
unpopulated locations in some parts of the country where there is a 
great wind potential, it is adequate to handle biomass and distributed 
generation, e.g., solar, without major upgrades. In the Carolinas, much 
of the wind potential can also be accommodated without major upgrades. 
The grid was never intended to deliver offshore wind power or wave/
tidal power, but even these sources may be delivered once the 
infrastructure is added to get the power on shore.
    The existing grid is highly reliable and serves its intended 
purpose of delivering the most economic sources of energy to customers. 
The impact of renewable resources should be addressed on a local or 
regional basis, rather than attempting to overhaul the entire system.
    Question 3. What are the estimated infrastructure costs to meet the 
legislation's requirement? How realistic is it to get the necessary 
transmission in place in time to meet the hard and fast deadlines of 
the national mandate? Should Congress build some flexibility into the 
program if inadequate transmission prevents compliance?
    Answer. Yes, flexibility should be built into the program if 
transmission capacity limits renewable resource availability within 
individual states and to account for disparities in the amount of 
renewable resources available within a given state.
    The JCSP study cited above examined two different resource and 
transmission paths to serve a total of 745,000 MW of coincident peak 
load in the Eastern Interconnection (except Florida) in 2024. The 
Reference Scenario, which assumes that present RPS requirements are met 
with local on-shore wind resources, would add 10,000 miles of new extra 
high voltage transmission at an assumed cost of approximately $50 
billion. With 5 percent of the Interconnection's energy coming from 
wind and 54 percent from base load steam generation, total energy 
production costs in 2024 would equal $104 billion and total generation 
capital costs would equal $674 billion.
    In contrast, the 20 percent Wind Energy Scenario, which assumes a 
20 percent national RPS requirement such as proposed in the majority 
draft, would add 15,000 miles of new EHV transmission at an assumed 
cost of approximately $80 billion if met by U.S. on-shore wind 
development,. Under this scenario, energy production costs in 2024 
would equal $85 billion and the capital cost of new generation would 
equal $1,050 billion. These results should be viewed as illustrative or 
``ballpark'' costs rather than definitive findings about the costs of 
new transmission and generation related to either the status quo 
expansion path or a high-renewables scenario. Even with that caveat, 
the findings suggest that transmission overlays should be strongly 
considered as a way to improve the future reliability and economics of 
the nation's bulk power electric system under either policy path.
    Siting new transmission infrastructure is a contentious issue that 
needs to be addressed. If new transmission is not available, it will 
not matter how much renewable energy is produced because that energy 
will not be available for delivery. In that case, Congress needs to 
ensure that states and consumers are not unfairly penalized for 
something beyond their control.
(Comments in response to this question from the North Carolina 
        Utilities Commission):

    ``We have no estimates about infrastructure costs to meet the 
proposed federal RPS. Although the development of renewable resources 
in other regions has created a backlog of transmission interconnection 
requests, we believe that we have adequate transmission planned or in 
place in North Carolina to meet our REPS requirement (12.5% by 2021, up 
to 40% of which can be met with energy efficiency savings) with in-
state or regional generation resources.''
    Question 4. Given the different goals and definitions of renewable 
energy in the various state renewable energy standard programs, how 
does the majority staff draft ensure consistency and coordination of 
the state and federal programs?
    Answer. There is general consensus that the following resources are 
considered renewable: solar photovoltaic; solar thermal; wind; biomass; 
wave and ocean current. However the draft program does not recognize 
the useful thermal energy created from a combined heat and power system 
using a renewable resource, such as biomass.
    While the majority staff draft does recognize the ability of states 
to have their own RES programs it does nothing to ensure consistency 
and coordination. In fact, if a state has an RES program that is in any 
way different than the majority draft, then a utility in that state 
will have to comply with both the state and federal requirement. 
Currently some 28 states have RES programs and almost all are different 
in some respect than the majority draft either in the definition of 
what qualifies as ``renewable'', in percentage requirements, the level 
of alternative compliance payments or in the timelines for achieving 
levels of renewable energy. Each utility will be forced to comply with 
both state and federal requirements even if different.
(Alabama sent the following comment):

    ``The majority staff draft should recognize the unequal 
distribution of renewable resource potential as well as the unequal 
distribution of load obligations throughout the country. Areas of low 
renewable potential and high electrical demand are inherently 
disadvantaged by nature of their resource allotment and the incumbent 
economic base in their area. One size will not fit all.''
(Comments in response to this question from the North Carolina 
        Utilities Commission):

    ``It purports to require coordination, but doesn't practically do 
anything to ensure consistency and coordination of the federal and 
state programs. It includes its own definition of renewable resources 
that may or may not coincide with a particular state's definitions. It 
gives no credit for renewable generation that may be allowed in a state 
but not in the federal definition. We have seen drafts [the House 
draft, we believe] that are more limiting in the definition of biomass, 
for example, such as limiting forestry residues to biomass on federal 
lands. Some drafts do not include non-electric energy production such 
as solar thermal and waste heat recovery, both of which are included in 
the North Carolina REPS.''
    Question 5. Do you agree that any federal RPS program must account 
for the regional variations in the supply of renewable resources?
    Answer. Yes. All states do not have the same amounts or levels of 
renewable resources as defined in the majority draft. Therefore, unless 
these innate differences are recognized, if a penalty kWh charge is 
levied for non-compliance, or out of state RECs must be purchased to 
satisfy the requirement, all that is being accomplished is a wealth 
transfer. Even when regions have native resources (i.e., solar in the 
west, wind in the mid-west, biomass in the Southeast) it makes no sense 
to establish one standard for each region's resources. Any federal 
mandate for energy sources must allow a region to take into account the 
resources that economically exist in that region. Otherwise utility 
customers are merely making payments for RECs or alternative compliance 
payments that don't return any value to those same customers. As I 
mentioned in my appearance before the Committee, a more logical 
approach to a federal mandate than the majority draft would be to 
require each state to adopt an RPS that is consistent with the energy 
resources available in that state or region. That would make more sense 
for the energy needs and utility ratepayers of that region.
(Alabama sent the following comment):

    ``Yes. If regional variations are not considered, then the 
government would in effect be promoting economic discrimination in the 
name of promoting renewable energy.''
(Comments in response to this question from the North Carolina 
        Utilities Commission):

    ``Any federal RPS program must absolutely account for regional 
variations in the supply of renewable resources. While a federal RPS 
may ignore state boundaries with regard to compliance, it must respect 
the decisions of states which enact their own RPS to encourage 
development of indigenous renewable resources.''
    Question 6. I know you're concerned that the Southeast is penalized 
under a national program because the region lacks sufficient wind or 
solar power. Proponents of a federal mandate, however, insist that the 
Southeast can meet the new requirement through the use of biomass. How 
do you respond?
    Answer. Biomass is a resource available in the Southeast, but its 
use to generate 20% of retail sales is not practical. Those who say the 
Southeast can comply with a RPS with biomass greatly underestimate the 
amount of energy needed to provide 20% of retail sales, and they 
overestimate the ability of biomass to meet the requirements. For one 
thing, much of the biomass technology is currently in the research and 
development stage, and not commercially proven as to operation or cost. 
In addition, an estimate for the area of the Southeastern Electric 
Reliability Council (SERC) shows that for the utilities in the region 
to meet a 20% RPS with biomass would require some 17,500 MW of biomass 
generating capacity. To fuel that capacity would require the annual 
collection, transport and burning of almost 200 million tons a year of 
biomass. To grow that much biomass would require tens of millions of 
acres of land to be able to plant and harvest that many tons on an 
annual basis. Such a commitment of land would not be practical and the 
planting, harvesting and transport of such an amount would have 
tremendous impacts of its own.
    The December 2006 La Capra study, Analysis of a Renewable Portfolio 
Standard for the State of North Carolina, found that North Carolina 
could only achieve about 7% energy of its energy needs from biomass 
(including wood and agricultural waste, landfill gas and animal waste) 
by 2017. In Florida, the Navigant study, Florida Renewable Energy 
Potential Assessment, showed that biomass (existing and new, but 
excluding MSW, which does not qualify under the federal proposals) 
could only provide up to 6 or 6.5% of the state's energy requirement by 
2020 in the most favorable circumstances. In South Carolina, the La 
Capra study estimated practical biomass potential to be about 4%.
    Speaking specifically of the concerns I have heard from the state 
of Georgia, while biomass is Georgia's best source of renewable energy, 
it is also limited. Plant size is generally limited to less than 100 
MWs, with fuel supplies coming from within 50 miles of the plant. 
Building 2000 to 3000 MWs of biomass in Georgia may not be possible due 
to limits on fuel supply. A study of the maximum biomass potential in 
Georgia needs to be considered. Competition for fuel sources between 
plants and with the pulp, paper and timber industry may drive prices 
higher and may push industry out of the state.
(Alabama sent the following comment):

    ``This statement fails to consider the dangers of over utilization 
of biomass and the corresponding impacts to those interests that 
already rely on these resources. Alabama, for example, does have 
substantial biomass resources that could be used for electricity 
generation. However, to fully meet the Federally mandated RPS 
requirements using biomass could require as much as 30% of the state's 
commercial pine forest lands (roughly 2.8 million acres or 4400 sq 
miles).
    If Alabama generators attempted to meet the RPS requirement with 
biomass alone, it would mean:

   Wood prices in the South would rise enormously, just as the 
        price of corn did when this crop was converted from a food crop 
        to an ethanol crop.
   Pulp and paper making in Alabama, and across the South, 
        would be severely threatened, potentially costing thousands of 
        jobs.
   The cost of electricity would rise, imposing added costs on 
        families and businesses. Rising costs on businesses would, in 
        turn, eliminate more jobs in the region.
   Rising cost of electricity would put the state and the 
        region at a considerable disadvantage in attracting new 
        industry because other sections of the country, blessed with 
        abundant solar and wind resources, would not experience the 
        same increases in costs.''
(Comments from the North Carolina Utilities Commission in response to 
        this question):

    ``No, we do not believe that North Carolina can meet the proposed 
federal RPS standard solely through the use of biomass. North Carolina 
adopted an aggressive REPS given the potential for renewable energy 
development, including biomass, in the State. This also includes a 
significant amount of wind energy development and an allowance for 
energy savings from the implementation of energy efficiency measures. 
Even so, the North Carolina REPS requirement increases only to 12.5% 
(5% of which can be from energy efficiency)--far less than the 20-25% 
proposed in drafts of federal legislation. As a part of its REPS, North 
Carolina allows utilities to purchase renewable energy RECs from out-
of-state to meet up to 25% of their REPS requirement. We expect that 
utilities will take advantage of this provision both for resource 
availability and cost considerations.''
    Question 7. Some dismiss the argument that the RPS will result in a 
wealth transfer from areas of the country that lack renewable resources 
to those that are blessed with them. As a state regulator, can you 
explain why you believe a federal mandate will result in increased 
rates for those in the Southeast?
    Answer. The cost of energy produced by the limited renewable 
resources in the Southeast is two to three times greater than the cost 
of energy produced from traditional sources. Requiring the use of the 
higher-cost renewable resources will increase the cost of power, which 
will be recovered through rates paid by consumers. In addition, many 
renewable resources such as wind and solar are intermittent and 
therefore some amount of traditional capacity must be available to 
backup these resources which will add additional cost. Another option 
is to purchase RECs. But if a utility must purchase RECs to satisfy a 
federal RPS and does not also get the kWhs of energy they represent, it 
basically is paying twice for the energy needed to meet its customers? 
needs. If it also receives the kWhs, it will be paying a premium for 
such RECs and kWhs, thus driving up the price of electricity for that 
state.
    According to the draft proposal, excluding energy efficiency, there 
are essentially three ways for a utility and its consumers to comply 
with the renewable portion of the mandate: (1) build or contract for 
renewable energy to be delivered to electricity consumers served by the 
utility; (2) buy a renewable energy credit (REC) from designated 
renewables placed in service after January 1, 2006; and/or (3) pay an 
alternative compliance payment (ACP) of 3.0 cents per KWh.
    Unlike other areas of the country, the Southeast is not blessed 
with enough available resources for all the utilities to build or 
contract for the amount of renewable generation that each of them will 
be required to supply to their consumers under the majority's draft 
proposal. While many supporters cite the availability of biomass as an 
option, what those supporters fail to acknowledge is that there will be 
competing interests for this fuel source. Congress recently increased 
the mandate for renewable fuels, which means more will need to come 
from cellulosic biomass. This will be on top of what the pulp and paper 
industry already uses to produce its product. Add to that the need from 
the energy industry and you are looking at substantial competition 
among sectors for the same product. As we all know, when demand for a 
product outpaces supply, prices tend to increase.
    As a regulator my main concern is to ensure consumers are protected 
and are provided with safe and secure low-cost electricity. This is 
especially important in the Southeast where the cost of energy makes up 
a significant portion of their monthly household budgets.
    Because of the lack of available wind or solar resources, biomass 
would have to be counted on for compliance. If biomass cannot provide 
the amount of electricity that is required to meet the annual 
requirement then utilities and their consumers will have only two 
options available to them for compliance--either buy a REC or pay the 
ACP. During testimony it was somewhat glossed over, but the fact is 
that no electricity comes with the ACP or the REC. Therefore, consumers 
will continue to pay, like they do today, for the electricity needed to 
keep their lights on, but they will also be required to pay extra for 
either the REC or the ACP under the new mandate.
    Neither the REC nor the ACP will provide these consumers with any 
additional benefit for what they are required to pay. Instead, the 
required payment will either be sent to states that have the resources 
available, helping them expand their economic development initiatives, 
or go to the federal government for new government programs subject to 
appropriations. To force consumers to pay additional costs, not because 
they refuse to do something, but because they can't do it, seems 
unjust, unfair and unreasonable.
    Back in 2005 this Committee passed a mandate requiring a certain 
amount of fuel sold in the U.S. to contain renewable fuel, such as 
ethanol. And in 2007 Congress increased this mandate. A lot of people 
support this mandate as a way to reduce our dependence on foreign oil, 
and I think it can provide some context to today's debate on renewable 
electricity. What if Congress changed the law and said that instead of 
applying nation-wide, the mandate required fuel sold in each state to 
contain a specific amount of renewable content--I assume there would 
still be significant support for the program. Now, add that the 
renewable content can only come from sources grown in that state and 
can only be sugarcane, rice or cotton.
    If the requirement is not met, then the federal gas tax is 
increased by 2-3 cents per gallon. This, at its very core, is what 
Congress and supporters of a one-size-fits-all renewable approach are 
contemplating for the electricity sector--do it using these resources 
or pay a penalty.
(Alabama sent the following comment):

    ``As currently proposed, the RPS defines renewable fuels only as 
solar, wind, geothermal, ocean energy, landfill gas, biomass, and new 
hydro. Solar and wind are not viable broad-scale generation 
technologies in Alabama. Biomass has some potential, but even it is 
limited. Given this, plus the fact that no consideration is given to 
either nuclear or existing hydro, Alabama will be left with little 
alternative but to buy its way into compliance through the purchase of 
Renewable Energy Credits Alternative Compliance Payment. Unfortunately, 
for Alabama, this reduces an RPS to nothing more than a transfer of 
wealth or a tax.
    Interestingly, and perhaps ironically, the Department of Energy's 
own study ranks Alabama 6th in the nation and 1st in the Southeast in 
the use of renewable generation. Importantly, this study takes into 
account Alabama's existing hydro generation. generation that is 
excluded under the proposed standard.''
(Comments from the North Carolina Utilities Commission in response to 
        this question):

    ``By definition, renewable generation requires a premium over 
conventional generation in the Southeast. Otherwise, renewable 
developers would not need a state or federal RPS to increase the amount 
they are paid for their electric generation. If utilities are required 
to purchase renewable generation as an alternative to conventional 
generation, these additional costs must be passed through to their 
customers--resulting in higher utility rates. States, if they desire, 
should be allowed the freedom to develop indigenous renewable resources 
to supplement conventional generation to support policies of improved 
air quality and reduced carbon emissions. Stakeholders and policy-
makers in North Carolina, in adopting a REPS, have reached agreement on 
how much consumers are willing and should be required to pay to fund 
renewable generation yet avoid job losses due to increased electricity 
rates.''
    Question 8. In the Southeast, only North Carolina has adopted a 
state renewable mandate. How does that program differ than the federal 
program proposed in this draft legislation? How would North Carolina's 
program, and its ratepayers, be impacted by the adoption of a federal 
mandate?
    Answer. The NC Utilities Commission authorized an independent study 
to look at the feasibility of implementing an energy portfolio mandate. 
It came to the conclusion that NC could implement a standard, but much 
less aggressive than what is being contemplated at the federal level. 
The NC standard has a more reasonable long-term goal of 12.5 percent by 
2021 and more realistic interim requirements to meet this goal. Unlike 
the majority proposal, the NC standard also has price caps--capping the 
amount consumers will be forced to pay as a result of the policy.
    When a federal standard is implemented, much of the investment 
being made at the state level will be diverted in order to try and 
comply with the federal requirement. When there are certain carve-outs 
at the state level (like swine and poultry carve-outs in NC) investment 
must continue in those areas even if they do not comport with the 
federal standard. There will continue to be questions of how competing 
standards can work together without the federal standard replacing what 
the state has diligently put in place.
    The NC REPS differs from the federal proposals in several ways, 
including:

   a lower requirement; the highest North Carolina REPS 
        requirement is 12.5%.
   a higher allowed percentage from energy efficiency; up to 
        40% of the highest REPS requirement can be satisfied by energy 
        efficiency savings.
   the presence of a monetary cap on compliance costs which 
        protects customers from excessive rates.
   no alternative compliance payment.
   the inclusion of solar thermal and waste heat recovery.
   Because the federal proposals impose a substantially greater 
        RPS requirement and lack any cost cap, the costs to North 
        Carolina citizens will be much greater under the federal 
        proposals than the North Carolina REPS. RPS compliance costs to 
        North Carolina residential ratepayers could easily triple under 
        the federal proposals as compared to the NC requirements.
   The NCUC has the authority to modify or delay the program if 
        that is in the public interest.

    Question 9. You propose that before Congress moves forward with a 
national RPS, we should first direct those states that don't already 
have a program, to create one. Would the states support such an action? 
If so, how quickly could states without current programs develop those 
programs?
    It is unrealistic to assume that states can meet the mandates of a 
federal `one-size-fits-all' renewable policy. More than half the states 
have passed some form of an advanced energy portfolio, but I do not 
believe any of these programs directly align with what Senator Bingaman 
and others are proposing. While some states have chosen to implement 
energy portfolios, others have assessed their resources and decided 
otherwise. As Senator Bayh indicated during the hearing, Indiana looked 
at implementing a standard and chose not to. They concluded they did 
not have the resources available for such a standard. So, is the 
federal government simply going to tell those officials that they were 
wrong and simply didn't look closely enough?
    States are in the unique position to decide what is best for their 
constituencies when it comes to delivering in-state electricity. They 
are positioned to gather all the necessary information and make an 
informed decision on what is available and how to provide incentives 
for increased energy generation. North Carolina did this and is the 
first southern state to implement a renewable standard. But North 
Carolina, like other states that have implemented similar programs, 
included a price cap on the amount the program could cost consumers. In 
North Carolina the maximum annual cost of the program to each class of 
customer is capped as follows:

------------------------------------------------------------------------
                                                              2015 and
                                  2008-2011     2012-2014    thereafter
------------------------------------------------------------------------
Residential                        $10/year      $12/year      $34/year
------------------------------------------------------------------------
Commercial                         $50/year     $150/year     $150/year
------------------------------------------------------------------------
Industrial                        $500/year   $1,000/year   $1,000/year
------------------------------------------------------------------------

    One way to ensure states move forward on implementing some type of 
energy standard is to set a federal floor and then, like transportation 
funding, have future federal funding for renewables tied to states 
implementing a program that equals or goes beyond the federal level. 
This carrot approach, as opposed to the stick mentality currently being 
advocated at the federal level, would incent states to move forward as 
quickly and as reasonably as possible without being punitive in nature.
(Alabama sent the following comment):

    ``Inherent in the notion that any State would develop its own RPS 
is the assumption that is would do so in a way that makes sense for 
that State. For Alabama, it is reasonable to assume such a program 
would most certainly include existing hydro. It is equally reasonable 
that such a program would be largely void of solar and wind 
requirements. That being the case, given the requirements of the 
current proposed Federal RPS, development of such a program would 
appear to be an exercise in futility. If, however, State programs were 
to be deemed as satisfying any Federal requirement, then such a pursuit 
would be more worthwhile and would be more likely to gain support.''
(Comments from the North Carolina Utilities Commission in response to 
        this question):

    ``Each state should have the opportunity to decide what is 
appropriate for itself given the diversity of resources available in 
the state or surrounding region. In addition, states should be able to 
assess how costly they are willing to let electricity become in order 
to gain the advantages of renewable resources. State policy-makers are 
accountable to the electorate for increases in the price of electricity 
due to renewable policy. While Congress may wish to consider how best 
to encourage states without and RPS to adopt such a program, it should 
respect the decisions with regard to cost, resource eligibility, etc. 
made in those states that have already adopted and RPS. Federal policy-
makers should respect the decisions already made in North Carolina and 
other states regarding how much their citizens should be required to 
pay for green energy and to what degree they are willing to accept 
unbundled renewable energy RECs from out-of-state.''
     Response of David A. Wright to Question From Senator Landrieu
    Question 1. I know that we can achieve efficiency gains in both the 
interstate transmission of electricity as well as the retail 
distribution of electricity. In Sen. Bingaman's draft language that has 
been circulated, it only allows for savings from the retail 
distribution of electricity. Don't you think there are huge efficiency 
gains to be made through efficiency upgrades to our transmission 
backbone? Shouldn't that also be included in any efficiency portion of 
a RES?
    Answer. There are gains to be made in transmission grid efficiency, 
and the savings should also be encouraged and recognized in any 
efficiency portion of a RES. While losses on a transmission grid are 
relatively low as a percentage of the power transferred, the magnitude 
of the power transfers would produce significant savings for even small 
gains in efficiency.
    So the simple answer to this question is yes, but with 
consideration given to cost-effectiveness, too. Recently, the subject 
of increasing the reliability and efficiency of our transmission grid 
has received a lot of attention, especially when it comes to connecting 
renewable energy to the grid. The fact is, development of renewable 
sources will be in rural areas and the electricity generated will need 
to be transported over long distances to serve the load centers. At 
this point it would seem that the transmission needed to carry 
renewable energy to those load centers is just as important as erecting 
the wind turbines or solar panels which would supply the power.
    If this measure is truly intended to be a first-step in addressing 
climate change, the question that needs to be answered is why should we 
artificially limit the investment that utilities can make in energy 
efficiency? According to the proposal, only 25 percent of the yearly 
requirement can come from energy efficiency. This means that utilities 
can only invest a certain amount in energy efficiency and then they are 
required to re-direct investment to paying for needed RECs or ACPs. It 
would seem more logical that utilities be allowed to meet as much of 
the requirement as possible through energy efficiency. At least then 
consumers of those utilities would see actual benefits from the 
program. In the recently enacted stimulus package Congress provided 
approximately $20 billion for energy efficiency. This shows that 
efficiency is critical and it seems inappropriate for Congress on the 
one hand to provide so much public funding for it, but on the other 
hand limit the amount of investment by the private sector.
    Additionally, since increased transmission is critical to bringing 
new renewables onto the grid, it would seem that investment in 
transmission upgrades should count towards achieving compliance with 
the standard. In this way, the RPS requirement could be seen as a tax 
liability and investment, up to a certain point, and could be used as a 
tax credit--offsetting the costs associated with not achieving the 
renewable amount required under the mandate.
(Alabama sent the following comment):

    ``Opportunities for energy efficiency gains, while most likely 
yielding more potential at distribution levels, should not be limited 
to those locations. Utilities should have the liberty to try and 
achieve efficiency gains where they are most warranted (distribution or 
transmission).''
(Comments from the North Carolina Utilities Commission in response to 
        this question):

    ``Utilities should be encouraged to increase efficiency in all 
aspects of their operations, including electric generation, 
transmission and distribution.''
    Responses of David A. Wright to Questions From Senator Sessions
    Question 1. What are we trying to achieve through a Renewable 
Electricity Standard (RES)? What are the goals? By focusing solely on 
renewables, are we limiting our options to achieve an adequate supply 
of clean, low-carbon, reliable and affordable electricity?
    Answer. Yes, by focusing solely on renewables, we are limiting our 
options for achieving an adequate supply of clean, low-carbon, reliable 
and affordable electricity. If the goal is to reduce carbon emissions, 
and encourage clean, safe, reliable, low-carbon and affordable sources 
of electricity, then other options such as nuclear power should be 
included.
    Our goal should be to encourage all clean energy sources to meet 
our future energy needs. We should not focus only a narrow definition 
of certain energy sources like wind, solar, biomass and geothermal. 
That narrow definition does not even include all renewable sources 
since the majority draft does not include hydro-electric energy.
    The federal government should not pick winners and losers for 
certain energy technologies. States and regions should be able to focus 
on meeting their energy needs in ways that make the most sense for 
their economies and ratepayers.
(Alabama sent the following comment):

    ``The goals of any Renewable Electricity Standard should be to 
improve air quality, lower American dependence on foreign fuel sources, 
and encourage clean, economical, dependable electric generation. To 
achieve these goals, any Renewable Electricity Standard must include 
and encourage the use of clean alternative fuels including nuclear 
energy and clean coal technology. Any Renewable Electricity Standard 
must ensure that States are given sufficient latitude to pursue the 
inclusion of clean energy alternatives that make sense for their 
individual economies.''
(Comments from the North Carolina Utilities Commission in response to 
        this question):

    ``Many states, in addition to the reduction of carbon emissions, 
have enacted an RPS to support the following policy goals: (1) improved 
air quality from reduced emissions from conventional fossil-fired 
generating facilities; (2) increased energy independence through the 
development of indigenous energy resources, such as wind, biomass, 
solar, hydro, etc.; (3) increased economic development and increase of 
local tax base from the construction, operation, fuel collection, and 
other activities associated with indigenous energy resources; and (4) 
the potential to attract manufacturers and other ``green'' jobs 
associated with an increase in demand for renewable generation in the 
state. A federal RPS with national markets for renewable energy RECs 
supports none of these additional goals. Rather, it merely creates a 
rush to purchase credits from wind-rich regions, thus straining the 
transmission infrastructure in those regions while providing no local 
economic benefit to those required to pay the bills. North Carolina has 
already decided what its citizens are willing to pay for the benefits 
of locally-sited renewable energy.''
    Question 2. If the main concern surrounding RES is to have clean 
energy then we should consider nuclear power. Nuclear power is produced 
in the United States, it has zero carbon dioxide emissions, and it does 
not put stress on agriculture products or the timber industry. Why has 
this source not been considered in the RES discussion?
    Answer. Nuclear power absolutely should be included in any 
conversation about clean energy. Unfortunately, some supporters of a 
federal RES also oppose nuclear power. Nuclear is the only base load 
electricity source available that has zero emissions of greenhouse 
gases or other pollutants. A federal RES that imposes the same standard 
across the country will result in ratepayers in some regions sending 
their money to purchase RECs or make alternative compliance payments to 
the federal government. Such money could be invested in clean energy 
sources like nuclear that can reliably and cost effectively serve those 
areas.
    Some environmentalists have refused to acknowledge that if the goal 
is to reduce carbon emissions, nuclear generation is a cost effective 
viable solution that must be considered. There is not one legitimate 
argument to exclude nuclear. The concerns raised most often are 
``safety'' and spent fuel storage. Regarding safety, this argument was 
debunked decades ago. Nuclear generation for electricity and nuclear 
powered military ships has been safely operated for over 40 years.
    Regarding spent fuel storage, the US is obligated to take 
possession and build a national repository. Even in the event this does 
not happen, safe on-site storage is available and has been tested over 
time. In addition, while the supply of uranium to fuel nuclear reactors 
is finite, as reprocessing of used nuclear fuel becomes more prevalent 
and economic, nuclear fuel becomes virtually renewable.
(Alabama sent the following comment):

    ``That nuclear energy has been excluded from this discussion is 
indeed puzzling. Nuclear plants don't burn fossil fuels, therefore they 
produce zero air emissions. Nuclear generation is the only large-scale, 
clean-air electricity source that can be expanded widely to produce 
large amounts of electricity in the Southeast in general and Alabama in 
particular. Any Renewable Electricity Standard should focus on lowering 
emissions and encouraging cleaner production of electricity. Clean 
generation sources, like nuclear, must be part of any serious 
discussion of this issue.''
(Comments from the North Carolina Utilities Commission in response to 
        this question):
    ``While it may be appropriate to credit nuclear energy in 
greenhouse gas reduction policy, we did not find it necessary to 
include nuclear power in the NC RPS. Nuclear energy is a relatively 
mature technology and receives its own economic subsidies. Nuclear 
generating facilities already provide a substantial amount of energy in 
North Carolina and other states, and a number of new nuclear facilities 
have been proposed. Nevertheless, we agree that the option for future 
development of nuclear power must be maintained. One important hurdle 
continues to be the inaccessibility of funds in the Nuclear Waste Fund 
for the development of the Yucca Mountain repository. North Carolina 
consumers are one of the largest contributors to that fund.''
    Question 3. Why do you include energy sources that may yield some 
benefit in the future and do not have any short term benefits, but 
continue to exclude nuclear power that has both short term and long 
term benefits?
    Answer. SEARUC and the utilities in the Southeast support nuclear 
power as a clean, reliable energy resource. As discussed in the answer 
to your second question, I believe that all clean energy sources should 
be utilized in meeting our future energy needs and that certainly would 
include nuclear power.
(Alabama sent the following comment):
    ``Nuclear generation must be a part of any serious discussion of a 
Renewable Energy Standard.''
(Comments from the North Carolina Utilities Commission in response to 
        this question):
    ``Just as with renewable energy resources, each state's decision 
with respect to the extent of use of nuclear generation should be 
respected. Utilities in North Carolina are looking at nuclear as well 
as other options to meet their obligation to provide safe, reliable 
power at a reasonable cost to consumers.''
    Question 4. The US consumes approximately 1000 gigawatts of 
electricity every year. The RES legislation would require approximately 
200-220 gigawatts to come from renewable energy sources by 2020. What 
percentage of the renewable energy mandate will be supplied by wind and 
why does wind have a larger potential than other renewable sources such 
as hydro or nuclear?
    Answer. Wind does not necessarily have greater potential than 
nuclear; however, nuclear power is not included in the list of eligible 
resources listed in the draft proposals. While there are significant 
wind resources in the U.S., not all regions of the country have readily 
available, cost effective wind resources. The majority of potential 
wind resources available in the Southeast are offshore and face 
technical and economic challenges that on-shore resources in other 
areas of the country do not.
    It is difficult to say how much of a 20% RPS would be met with wind 
in all parts of the country. Georgia tells me, very little will be 
contributed by wind unless their utilities purchase wind tags from 
other states.
    Obviously states in the west and upper midwest would have a greater 
ability to rely on wind to meet renewables requirements than other 
regions. But, even in those states, as compared to other sources like 
nuclear or hydro, wind would have a lower capacity factor and be more 
unreliable. Wind generation will also require the installation of large 
amounts of natural gas generation to provide the power when wind power 
is not available. Recent studies have shown this could be up to 70% of 
the time.
(Alabama sent the following comment):
    ``The Southeast in general and Alabama in particular, will be 
virtually unable to rely on wind energy to meet any RES requirement. A 
sustained wind of about 14.3 mph is the threshold for reliable wind 
generation. The vast majority of locations in Alabama do not meet this 
threshold.''
(Comments from the North Carolina Utilities Commission in response to 
        this question):

    ``While the potential for new wind development may be larger than 
that of hydro (because of opposition to new impoundments and the prior 
development of significant hydro resources), its potential is not 
likely larger than nuclear. In addition, nuclear and wind have 
different operating characteristics that do not make them comparable. 
Nuclear operates at 95% capacity factor, while wind operates only when 
the wind blows and cannot be relied upon to operate when its power is 
needed. Thus, much more wind capacity is necessary to generate the same 
amount of energy as from a conventional generating facility. Even then, 
the actual generation from wind may be zero when needed on a hot summer 
afternoon.''
    Question 5. In your opinion, how will the Southeast states meet 
their mandate requirements since wind is not a significant energy 
source in this region?
    Independent studies have shown the most readily available renewable 
resource is biomass, primarily wood waste from the forest industry. 
However, studies in North Carolina, South Carolina and Florida estimate 
that biomass can practically provide only about 4 to 7% of utilities' 
retail sales, leaving a significant gap to meet a 20% renewable 
requirement. Solar generation would also play a part; however, solar 
generation is currently one of the most costly renewable resources, 
which may limit the amount installed due to other competitive renewable 
resources available in other regions of the country.
    I believe that the Southeast can meet limited amounts of the 
proposed RES mandate requirements with energy efficiency and possible 
conversion of some older coal plants to biomass, new construction 
biomass including landfill gas, and also co-firing of existing coal 
facilities with wood and/or agricultural waste. But, utilizing these 
resources will increase costs to the ratepayer. Energy efficiency is 
limited to 5% of the 20% mandate and it is not practical for biomass to 
meet the 20% requirement either. I believe most of the compliance with 
the federal RES in the Southeast will come from either purchasing RECs 
from other regions or making alternative compliance payments to the 
federal government.
(Alabama sent the following comment):

    ``Assuming that nuclear and existing hydro are excluded (which they 
shouldn't be), Alabama will left with little choice but to resort to 
the purchase of Renewable Energy Credits of payment of an Alternative 
Compliance Payment (ACP). Biomass does hold some compliance opportunity 
for the Southeast, but even it is limited.''
(Comments from the North Carolina Utilities Commission in response to 
        this question):

    ``Utilities in Southeastern states will have no option in meeting 
such a high federal mandate but to purchase renewable energy RECs from 
out-of-state or purchase credits from DOE''.
    Question 6. How will a RES affect the price of electricity in 
Southeast states?
    A Federal RPS proposal, such as that proposed by Senator Bingaman, 
could easily increase rates in the Southeast by 5 to 6%. More 
aggressive requirements, such as the 25-by-25 proposal, could increase 
rates by 11 to 15%. As noted in the North Carolina La Capra study, 
costs are not scalable because higher RPS requirements will necessitate 
greater use of higher cost resources.
    Prices will increase if Southern states are required to build or 
purchase renewable energy when other forms of energy are cheaper. It is 
unavoidable that ratepayers will pay more for electricity due to the 
imposition of a federal RES. Resources, like biomass, that are 
available in the region have a higher cost than the current energy 
sources of coal, nuclear and hydro. The gap between what can be 
achieved with energy efficiency and biomass will have to be met by 
either purchasing RECs from other regions or making alternative 
compliance payments to the federal government. Billions of dollars will 
be paid by ratepayers in the Southeast for this program. This could 
equate to several hundred dollars a year in higher electric bills to 
the individual ratepayer. This money will mostly be sent to other 
regions or the federal government rather than being available to invest 
in energy infrastructure to meet the future needs of the state or 
region where the ratepayer lives.
(Alabama sent the following comment):

    ``An RES will cause electricity prices in Alabama to 
rise.precipitously. Unfortunately, because Alabama would likely have to 
comply with an RES (at least as currently proposed) through the ACP, 
Alabama ratepayers will see absolutely no benefit associated with 
compliance.''
(Comments from the North Carolina Utilities Commission in response to 
        this question):

    See answer to Senator Murkowski, Question #7.
    Response of David A. Wright to Question From Senator Mark Udall
    Question 1. Currently, does each state rely exclusively or 
substantially on fuels derived from that state to generate electricity? 
Particularly for the Southeast, where does the fuel come from that 
currently provides electricity generation?
    Answer. This was an issue that was also discussed during the 
hearing. Approximately 45% of the electric generation in the Southeast 
is provided by coal, which is procured predominately from the central 
and northern Appalachian region. 35% is provided from nuclear 
generation and the balance is from natural gas, oil and other sources.
    While a great deal of the fuel used to generate electricity comes 
from out-of-state, there are significant differences in relying upon 
out-of-state traditional fuels as compared to relying upon intermittent 
renewable resources to generate electricity in another region of the 
country which is then delivered over transmission lines.

          1) The total cost of electricity generated from coal and 
        uranium is very economical compared to the total cost of 
        renewable resources.
          2) Supplies of coal and uranium fuel can be managed to 
        maintain sufficient fuel inventories to ride through high 
        prices and/or supply disruptions and continue to generate low-
        cost electricity. The delivery of renewable-generated 
        electricity from some other region over transmissions lines is 
        not as reliable due to the intermittent nature of renewables 
        such as wind and solar, and also because delivery of the energy 
        is subject to interruption due to transmission line outages 
        resulting from storms or other causes.
          3) The cost of the additional transmission lines necessary to 
        deliver large amounts of energy from another region will be 
        costly, and siting of the lines will be controversial and time 
        consuming.
          4) The transmission of electricity over long distances, such 
        as from the Midwest to the Southeast, would result in 
        significant electrical losses which will reduce the amount of 
        electricity actually delivered, These losses are avoided when 
        electricity is generated in closer proximity to load centers 
        where it is delivered to end-use customers.
          5) Although the fuel is imported, the investment in 
        generation, transmission and distribution remains in the state 
        and creates jobs in the state. Such is not the case with 
        renewable resources located outside the state.

    While it is correct that coal, natural gas and uranium are imported 
by states for generation purposes, it is usually more cost effective to 
transport fuels such as uranium, coal or natural gas than to transport 
electricity. That is why generation has almost always been built near 
the load. In addition, it does not follow that wind and other renewable 
resources could be substituted for current electric generation in these 
states. Under this theory wind or solar would have to be imported and 
then used to generate electricity to displace the current generation in 
a state--which cannot be done.
    Even if the transmission capability existed to import all the 
electricity required to meet the standard, it would be at an increased 
cost to consumers and would not provide the local economic benefits 
that electricity generated in-state would carry. Also, if the RES is 
supposed to be a step to reducing carbon then why not look at nuclear 
generation? Increasing the amount of nuclear generation would increase 
local economic development and increase local job creation, both during 
construction and long-term plant operation.
    As I have stated in previous questions, the REC or the ACP does not 
provide any electricity. Therefore, customers in those states that lack 
renewable resources would still have to rely on their current electric 
generation in addition to paying the costs for the REC or ACP, all for 
no additional benefit.
(Alabama sent the following comment):

    ``Many states meet a material amount of their electric generation 
fuel needs within their state. Alabama is no exception, and sources 
much of its fuel needs from in-state coal, natural gas, hydro, as well 
as some biomass from customer owned generation facilities. In the 
United States electrically utilities source almost all of their fuel 
needs within the country. This is largely due to the reliance on and 
abundant availability of coal within the United States.''
(Comments from the North Carolina Utilities Commission in response to 
        this question):
    ``Utilities in North Carolina primarily rely on coal, nuclear, and 
natural gas for electric generation--each of which is purchased from 
out-of-state. This, in part, led North Carolina to adopt an RPS to 
support development of indigenous energy resources, such as small-scale 
hydro, solar, wind, and biomass. In addition to the increased energy 
independence, development of in-state energy resources provides for 
local air quality improvements and local economic development. The 
difference between purchasing fuel from out-of-state and purchasing 
renewable energy RECs from out-of-state is that in the latter case 
consumers are incurring an additional cost with no additional 
benefit''.
                                 ______
                                 
      Responses of Ralph Izzo to Questions From Senator Murkowski
    Question 1. How much back up power from conventional power plants 
is needed to meet a 20% RPS requirement by 2021? At what cost?
    Answer. The amount and cost of backup energy that will be necessary 
is dependent on many variables, including what type of renewable 
generation is developed and where it is located. Therefore, it is 
difficult to predict with much accuracy how much back up power would be 
needed, and at what cost. Some types of renewable generation, such as 
biomass or geothermal energy deliver consistent and reliable power and 
can be treated much like traditional generation assets. Intermittent 
renewable generation resources will need back up power at times, but 
with a diversity of generation resources, the use of demand response, 
and improved energy storage technologies--such as batteries or 
compressed air storage--we can improve reliability and help minimize 
any additional cost.
    Question 2. Do you agree that as it now stands, our country's 
transmission infrastructure is woefully inadequate to achieve a 20% by 
2021 RPS requirement?
    Answer. Whether or not our transmission infrastructure is adequate 
to support 20% renewable generation depends entirely on where renewable 
generation is built. For example, with significant growth in offshore 
wind generation located close to electric load centers in the 
Northeast, you could expand our nation's renewable resources 
significantly without major new transmission infrastructure.
    Question 3. What are the estimated infrastructure costs to meet the 
legislation's requirement? How realistic is it to get the necessary 
transmission in place in time to meet the hard and fast deadlines of 
the national mandate? Should Congress build some flexibility into the 
program if inadequate transmission prevents compliance?
    Answer. The scale of necessary infrastructure upgrades will depend 
on where the renewable generation is built. The time and expense of new 
transmission is a factor that should be considered in such decisions. 
For example, currently offshore wind is more expensive to build than 
onshore wind, but when the associated time and expense of transmission 
is considered, offshore wind becomes a more attractive investment. By 
creating an open national market for renewable generation credits and 
allowing for alternative compliance payments, I believe the majority 
staff draft builds in the necessary flexibility to deal with these and 
other complicating factors.
    Question 4. Given the different goals and definitions of renewable 
energy in the various state renewable energy standard programs, how 
does the majority staff draft ensure consistency and coordination of 
the state and federal programs?
    Answer. The majority staff draft sets the appropriate framework for 
coordinating state and federal programs. As I understand it, credits 
for state RPS requirements can be used to meet the federal obligation, 
as long as they are generated from a renewable resource that meets the 
federal definition of renewable energy. Some details about federal and 
state coordination remain to be worked out, but that should be 
addressed by subsequent regulations promulgated by the Department of 
Energy.
    Question 5. Do you agree that any federal RPS program must account 
for the regional variations in the supply of renewable resources?
    Answer. I believe the majority staff draft does account for 
regional variations in the supply of renewable resources by creating a 
national market for renewable energy credits, allowing states to 
purchase credits from the least cost renewable generation anywhere in 
the country. Each region has its relative strengths and weaknesses with 
regard to renewable resources, which will be reflected in the types of 
investments that are made in each region. Furthermore, each state 
remains free to enact policies to develop local renewable energy 
industries.
    Question 6. I understand that in order to meet New Jersey's 22.5% 
RPS requirement by 2020, offshore wind would need to provide 48% of the 
renewable energy. According to reports, that means you need at least 
1,000 megawatts generated by offshore wind turbines by 2012 and at 
least 3,000 megawatts by 2020. Given that we still have no offshore 
wind power production in this country--and this despite several years 
of effort on the Cape Wind proposal--such a scenario seems wildly 
optimistic. How do you respond?
    Answer. Governor Corzine has set a goal of 1,000 MW of offshore 
wind by 2012 and 3,000 MW by 2020. The State is developing a series of 
policy initiatives to help New Jersey reach that goal. PSEG is 
currently developing a 350 MW offshore wind project that will be 
supported by these state policies. We believe that Governor Corzine's 
leadership on this issue, will allow us to overcome existing barriers 
to offshore wind and develop an industry that will create local jobs, 
improve air quality and reduce carbon emissions.
    The state's offshore wind initiative will help New Jersey meet its 
RPS; however, offshore wind is not essential for New Jersey to meet its 
RPS targets because New Jersey's standard can be met with any renewable 
generation within PJM, our regional electric grid. Thus far, New Jersey 
has fully complied with its RPS through the development of renewable 
generation throughout PJM.
    Question 7. How is the financial crisis impacting your company's 
planned renewable projects? I understand that PSEG anticipates cutting 
back its expected investments on some wind and solar projects.
    Answer. What is the status of PSEG's Solar Initiative? In 2007, 
your company introduced a $100-million plan to spur the investment of 
solar systems on homes, businesses, and municipal buildings. This 
program was to help you fulfill 50% of your RPS requirements for 2009 
and 2010. Do any of these problems at the state level signal a need for 
greater flexibility in a federal program?
    The financial crisis has forced every company to reevaluate its 
capital spending, and PSEG is no exception. However, we are moving 
ahead with the renewable energy projects we have previously announced, 
and New Jersey is continuing to meet its RPS requirements.
    The renewable energy projects PSEG is pursuing include a 350-
megawatt offshore wind farm. We are also continuing to implement our 
$105 million solar loan program, which is poised to help finance over 
11 MW of solar generation projects. And we recently announced a 
proposal for our utility to invest in nearly $800 million of solar 
generation on government buildings, low-income housing, brownfields and 
utility poles. These investments are driven by our state RPS, and we 
believe such investments are particularly important during an economic 
downturn as they can create jobs and help stimulate our local economy.
    Question 8. Would it be correct to say that your state regulators 
carefully analyzed the needs and available resources in New Jersey in 
the course of developing its RPS policy?
    Answer. Our state RPS can be fulfilled with renewable generation 
located anywhere in PJM, our regional electric grid (with the exception 
of our solar carve out, which must be met with New Jersey-based 
generation). Therefore, in evaluating our state RPS, our regulators 
focused on evaluating the available renewable resources located 
throughout the PJM region.
    Question 9. It is my understanding that the New Jersey 22.5% by 
2020 RPS requirement is subdivided into different classes of eligible 
resources--Class I (solar, wind, biomass, and a few others); Class II 
(small hydro and ``resource recovery facilities''); and a requirement 
that solar comprise a certain percentage of the total.
    Answer. New Jersey's structure obviously differs from the majority 
staff draft. How do you believe the differences between the federal 
program and New Jersey's program should be resolved?
    I do not believe these differences need to be resolved because, as 
I understand it, the majority staff draft does not preempt states from 
pursuing their own state standards, which may include different 
definitions of renewable energy than the federal standard. This will 
add some complexity to efforts to coordinate state and federal 
programs, but I believe these issues can be resolved through the 
regulatory process as the Department of Energy develops rules for 
coordinating state programs.
    Question 10. Is it fair to say that the adoption of a federal RPS 
will create investment opportunities for your company?
    Answer. A federal RPS would create business opportunities for any 
company that wants to invest in renewable generation. In turn, this 
will create jobs and provide stimulus for our economy.
    PSEG's core businesses are an electric and gas distribution 
utility, a nuclear generation company and a fossil fuel generation 
company, which includes both coal and natural gas powered generation 
assets. We are beginning to grow both a regulated and unregulated 
renewable generation business, but these businesses are in the early 
stages of development. However, we see renewable energy as part of our 
long-term growth strategy.
    Question 11. Is it correct that you believe nuclear energy is vital 
to a carbon-constrained future and that all options must remain on the 
table?
    Answer. Yes. If we are to reduce carbon emissions 80% by 2050, we 
need to aggressively pursue energy efficiency, renewable energy and 
clean central station power, such as nuclear generation. I believe an 
RPS is the best policy to directly support renewable electric 
generation. Different policies should be used to support energy 
efficiency and clean central station power.
    Question 12. In 2007, before the financial crisis, you were quoted 
in New Jersey Business as saying:

     . . . we are asking people to sacrifice in exchange for the 
environmental benefits. For some customers, the choice might mean not 
buying the extra sail for the boat. For others, it might mean not being 
able to put that third meal on the table. Some people are more 
concerned about meeting today's bills than being concerned about carbon 
dioxide levels 100 yeas from now.

    I'm not concerned with the guy who can't buy a new sail for his 
boat, but we're all concerned with asking people already hard hit to 
choose between energy and putting meals on the table. Is this a fair 
choice?
    Answer. PSEG serves the majority of New Jersey's low-and moderate-
income families, and I am concerned about their ability to pay for 
green investments. As I said in my testimony, in the long run investing 
in renewable energy will be a net benefit for customers, but in the 
short run it will be more expensive.
    In the worst case scenario, by 2021 the majority staff draft would 
impose an additional three cents per kilowatt hour on 20% of our 
electricity, or an additional 0.6 cents on all of our electricity. 
Presuming we have 10 cent electricity that would mean an increase of 
roughly 6% in 2021, or approximately 0.5% per year. For most families 
this cost is manageable, but for families struggling to make ends meet 
it will be an added burden.
    PSEG is a strong proponent of LIHEAP and state-based programs 
designed to help customers pay their energy bills, because no family 
should be forced to choose between heat and putting food on their 
table. We also strongly support energy efficiency programs targeted at 
low- and moderate-income families. Our utility is beginning to 
implement such programs in our urban areas to help families reduce 
their bills.
        Response of Ralph Izzo to Question From Senator Landrieu
    Question 1. I know that we can achieve efficiency gains in both the 
interstate transmission of electricity as well as the retail 
distribution of electricity. In Sen. Bingaman's draft language that has 
been circulated, it only allows for savings from the retail 
distribution of electricity. Don't you think there are huge efficiency 
gains to be made through efficiency upgrades to our transmission 
backbone? Shouldn't that also be included in any efficiency portion of 
a RES?
    Answer. I agree that we could make efficiency improvements in both 
our transmission and distribution systems. I believe, however, that the 
RPS should be used exclusively to promote renewable generation, and 
that other federal policies should be developed to incent investments 
in energy efficiency. Both are needed.
       Responses of Ralph Izzo to Questions From Senator Sessions
    Question 1. What are we trying to achieve through a Renewable 
Electricity Standard (RES)? What are the goals? By focusing solely on 
renewables, are we limiting our options to achieve an adequate supply 
of clean, low-carbon, reliable and affordable electricity?
    Answer. I believe the goal of the RPS is to increase our use of 
renewable electric generation and to develop industries that will 
benefit our environment and economy for generations. And as we 
electrify our transportation sector, renewable electric generation will 
become critical to America's energy security.
    To make the reductions in greenhouse gas emissions that scientists 
say are necessary to avert catastrophic impacts from climate change, we 
need a portfolio of policies. This should include a national carbon 
cap-and-trade system, adequate incentives for new nuclear generation, 
programs to promote energy efficiency, and a federal RPS that will 
drive demand for technologies that will transform the way we generate 
electricity.
    Question 2. If the main concern surrounding RES is to have clean 
energy then we should consider nuclear power. Nuclear power is produced 
in the United States, it has zero carbon dioxide emissions, and it does 
not put stress on agriculture products or the timber industry. Why has 
this source not been considered in the RES discussion?
    Answer. I agree that nuclear power has to be part of our climate 
change solution. However, nuclear power is not a renewable resource. 
Moreover, the challenges for building new nuclear are different than 
the challenges of growing renewable energy industries. Nuclear power 
requires a very large, up-front capital investment; it has a very long 
construction time; and it faces unique regulatory hurdles. We need 
federal support for new nuclear generation, but that support is not 
best delivered through an RPS.
    Question 3. Why do you include energy sources that may yield some 
benefit in the future and do not have any short term benefits, but 
continue to exclude nuclear power that has both short term and long 
term benefits?
    Answer. Please see the answer to question #2 above.
    Question 4. The US consumes approximately 1000 gigawatts of 
electricity every year. The RES legislation would require approximately 
200-220 gigawatts to come from renewable energy sources by 2020. What 
percentage of the renewable energy mandate will be supplied by wind and 
why does wind have a larger potential than other renewable sources such 
as hydro or nuclear?
    Answer. It is difficult to predict with any accuracy the percentage 
of the RPS that will be fulfilled by any one generation technology. At 
this point, onshore wind is among the most cost-competitive renewable 
generation resources, so we would expect a significant percentage of 
the RPS to be met with onshore wind. However, as the RPS drives 
investment into renewable energy industries we could see significant 
improvements in the capacity factors and reductions in the production 
costs of other renewable energy technologies, making them more 
competitive.
    Nuclear and hydro power constitute a far greater percentage of our 
current electric generating capacity than any of the other technologies 
eligible under the majority staff draft bill; however, there are unique 
challenges to expanding our reliance on either nuclear energy or hydro 
power. Therefore, it is difficult to compare the relative potential of 
nuclear power, hydro and onshore wind. But all forms of carbon-free 
electricity will be needed to reduce emissions 80% by 2050.
    Question 5. In your opinion, how will the Southeast states meet 
their mandate requirements since wind is not a significant energy 
source in this region?
    Answer. It is difficult to predict specifically how different 
states will comply with a federal RPS, particularly over the long term. 
As some of the maps that were entered into the record indicate, the 
southeastern states have considerable potential to develop biomass 
generation. In addition, state policies can drive investment in certain 
renewable technologies. For example, because of state policies, New 
Jersey is second in the nation to California in solar installations 
despite having relatively weak solar energy resources. To the extent 
that local renewable generation resources are not sufficient to meet 
the federal RPS, all states will be able to purchase the lowest cost 
renewable energy credits from anywhere in the country.
    Question 6. How will a RES affect the price of electricity in 
Southeast states?
    Answer. With the exception of states that are already paying for 
state RPS programs, the cost of complying with the RPS should be fairly 
equal in all regions of the country. This is because the majority staff 
draft sets up a national renewable credit trading system, under which 
all states will have the opportunity to buy renewable credits from the 
least-cost renewable generation resources in the country.
        Response of Ralph Izzo to Question From Senator Menendez
    Question 1. Dr. Izzo, as you know New Jersey has a specific carve 
out for solar technology in its Renewable Portfolio Standard. You have 
testified that you do not believe there should be a carve out for a 
specific technology, such as solar, for a national Renewable 
Electricity Standard. I do not agree, but I can understand how one 
could think that a national standard should not single out one 
technology in this manner.
    I am concerned, however, that the RES proposal before us would 
drive investment only for onshore wind. If we rely so heavily on one 
technology I believe that in a decade or so we would regret such a 
policy because the best land-based wind resources can only take us so 
far.
    One way to ensure a wide variety of technologies are incentivized 
by a National Electricity Standard would be to include a reverse carve 
out. This would mean that no one technology could be used to fulfill 
more than a certain percentage of the RES. Such an approach could help 
spur distributed sources of generation, biomass, offshore wind, 
geothermal, and a host of other technologies. Would you support a 
reverse carve out in a national Renewable Electricity Standard?
    Answer. Yes I would. As I said in my testimony, it is important 
that we use the RPS and other tools to support a range of technologies 
in our effort to decarbonize our electric generation. If we establish a 
strong, federal RPS, I believe it will create a flourishing national 
market for renewable generation, which I expect will drive investment 
toward a number of renewable technologies. However, a reverse carve out 
would be a sensible backstop to ensure that the RPS does not almost 
exclusively support a single technology.
      Responses of Ralph Izzo to Questions From Senator Mark Udall
    Question 1. Each region of the U.S. is blessed with excellent 
renewable resources. If wind power potential is not very good in the 
southeastern U.S., does that mean that utilities in that region of the 
country will be unable to provide their customers with electricity 
generated from renewable resources under a RES?
    Answer. No. The majority staff draft would allow states to meet the 
RPS requirements either with the development of local renewable energy 
resources, or by purchasing renewable energy certificates generated 
anywhere else in the nation.
    Question 2. During the Bush Administration, the Energy Information 
Administration analyzed several different national RES legislative 
proposals. In each case, EIA determined that biomass would receive the 
most RES credits of any renewable technology eligible to receive 
credits. Please identify which regions of the country have the greatest 
biomass potential.
    Answer. Analysis by the National Renewable Energy Laboratory 
indicates that there are strong biomass resources in the West, Upper 
Midwest and Southeast, along with pockets of biomass potential in 
various other states throughout the country.
    Question 3. If the U.S. were to generate up to 25% of its power 
from renewable resources, how would this impact our country's reliance 
on natural gas to generate electricity?
    Answer. If the U.S. generated 25% of its electricity from renewable 
resources, that would reduce demand for electricity generated from 
traditional resources. Analysis from the Energy Information 
Administration shows that the decreased demand for traditional 
generation would reduce our demand for, and reliance on, natural gas.
    Question 4. If the country switches to plug-in hybrids to power our 
automobiles and also adopts a 25% national RES, what would the impact 
be on oil and gas imports over the next 25 years?
    Answer. Transitioning from gasoline-powered cars to electric cars 
is crucial for our long-term energy security and our efforts to reduce 
demand for foreign oil. But as we electrify our transportation sector, 
it will become increasingly important that we decarbonize our electric 
generation so that we can reduce our carbon emissions. If we can pursue 
these two goals in tandem, we will reduce oil imports, reduce demand 
for natural gas, reduce carbon emissions and increase our energy 
security.
                                 ______
                                 
     Responses of Lester B. Lave to Questions From Senator Bingaman
    Question 1. You argue that we should include nuclear power and coal 
with carbon equestration in our standard. I we did so would we not have 
to make this standard much higher in order to achieve within it the 
goals that we would hope for with those technologies?
    Answer. You are correct. If an RES contained nuclear and CCS, it 
should be much larger than 20%. I favor including more ``reduced 
carbon'' technologies in the standard in order to allow greater 
flexibility for states that don't have one or another of the resources. 
The proposed legislation singles out several technologies as being the 
answer to social concerns including carbon-dioxide emissions, 
sustainability, air pollution emissions, energy security, and 
environmental quality more generally. Renewable do help meet some of 
these concerns, but they are not the only technologies for doing this 
and, in many cases, are neither the most effective way of reducing 
carbon-dioxide emissions nor the least cost way of providing the 
electricity.
    While I believe that renewables will become an essential part of 
the way of attaining these goals, along with energy efficiency, one 
clear lesson from the 1970s is that the market place, not Congress or 
the Department of Energy, should choose the winning technologies. 
Congress and DOE must make decisions about R&D, but this is quite 
different from mandating that a technology be deployed.
    While I am concern about energy security, general environmental 
quality, and sustainability, these are not large problems for 
electricity generation at this time. Congress and EPA have firm control 
of general environmental quality; I see no need to press for renewables 
to improve general environmental quality. Sustainability is not the 
highest priority now, since we have adequate uranium and coal 
resources. Natural gas could become a sustainability concern, if the 
shales do not produce as much natural gas as some project. Thus, my 
primary concern for electricity generation is carbon-dioxide emissions.
    I support and urge Congress and DOE to adequately fund basic 
research on photovoltaic technology and battery technologies. Both are 
key to our future, but neither is sufficiently developed for commercial 
success in baseload generation (photovoltaic) or applications such as 
plug-in hybrid vehicles or electric vehicles.
    Question 2. If you acknowledge that the main obstacles to nuclear 
power are lack of a solution to the waste problem, concerns over 
proliferation of nuclear weapons, and costs, what is it that the RES 
does to resolve those difficulties?
    Answer. All technologies for producing electricity have 
difficulties. Through regulation we need to handle these problems, 
whether they be proliferation, spent nuclear fuel, or greenhouse gases. 
I am optimistic that we can, save possible for proliferation. If we 
cannot prevent nations wanting nuclear weapons from getting then from a 
nuclear reactor program, we have to ask whether we could stop them from 
getting nuclear reactors. I do not think that we can. Thus, while I am 
concerned about proliferation, I do not see that there is much that we 
can do about it. President Carter stopped fuel reprocessing in order to 
present a model to other nations. Perhaps that worked for a time, but 
is not working now.
    The largest issue is going to be competition among the technologies 
for generating electricity. If nuclear power plants are cheapest for 
some regions, there is little that we will be able to do to stop other 
nations for building them.
    Question 3. If you expand the RES to push the development of 
sufficient nuclear power, and the problems currently preventing nuclear 
plant development are not resolved would not you then have an 
unworkable RES?
    Answer. If, as you suggest in question 1, we included nuclear and 
efficiency in the RPS and expanded its scope, and if nuclear proved to 
be non competitive, there would be greater difficulty in meeting the 
RPS. However, that would be the real world. If we are to lower 
greenhouse gas emissions, we need to find a combination of generation 
and efficiency that does not. Nuclear should be helpful, but if it 
isn't, we still need to lower greenhouse gas emissions.
    Question 4. If you don't expand the RES but include nuclear power 
and those problems are resolved, would this standard result in anything 
other than what was going to happen anyway? Would more new renewables 
be built?
    Answer. This question amplifies the previous two questions. The low 
carbon technologies should compete. If nuclear is the cheapest, it 
should dominate. The price of electricity is important for both 
consumers and business. If renewables are competitive, they will be 
deployed. If not, I am not clear why we ought to mandate their 
deployment.
    I want to qualify that statement in the sense that I want a 
portfolio of generation technologies. Fuel prices and environmental 
concerns change over time and so it is prudent to have a portfolio of 
generation technologies, even if one appears to be cheapest at this 
time.
    Responses of Lester B. Lave to Questions From Senator Murkowski
    Question 1. How much back up power from conventional power plants 
is needed to meet a 20% RPS requirement by 2021? At what cost?
    Answer. There would be almost no reduction in the need for backup 
capacity (dispatchable capacity) if there were a 20% RPS. The amount of 
generation capacity needed depends on the peak demand (with a margin 
for safety). Renewables would lower the amount of fossil, hydro, and 
nuclear generation capacity needed only insofar as they could be 
depended upon to generate power during the peak hours of the year. In 
most areas of the USA, peak demand occurs between 5 and 6 PM on the 
hottest summer day. That is generally a time when there is little wind. 
Although solar energy is high on those days, the sun is low enough to 
the horizon by 5 PM that it is generating little electricity.
    Solar thermal arrays might be constructed to provide some 
generation during these periods by storing heat. Alternatively, if 
there were cheap bulk storage of electricity, wind and photovoltaic 
electricity could be stored for peak demand. However, with current 
technology, wind and solar would relieve little of the need for 
``dispatchable'' capacity, capacity that the utility can depend upon to 
be available when they need it.
    A 20% RES would reduce the amount of fuel (coal or natural gas) 
required to generate electricity. However, since a gas turbine is 
generally used to fill in the momentary drop-offs in wind or solar 
generation, the fuel saved would be much less than 20%. Thus, there 
would be almost no savings in total investment in dispatchable plants 
and less than a proportional savings in fuel costs. Getting a realistic 
estimate of the cost of wind energy requires including the cost of 
backup or storage.
    Since wind farms and solar arrays have low capacity factors (10-40% 
for wind and 10-20% for solar), it would take 2.25 to 9 units of wind 
capacity to replace on unit of nuclear capacity and 4.5 to 9 units of 
solar capacity to replace on unit of nuclear capacity. For example, a 
solar array in New Jersey with a capacity factor of 10% would have to 
have nine times the capacity of a nuclear reactor to produce the same 
amount of electricity. A wind farm with a capacity factor of 30% would 
have to have three times the capacity of the nuclear reactor to produce 
the same amount of electricity. Thus, a 1,000 MW nuclear reactor 
produces as much electricity as 9,000 MW of solar cells in New Jersey 
or 3,000 MW of wind farms in Pennsylvania.
    Question 2. Do you agree that as it now stands, our country's 
transmission infrastructure is woefully inadequate to achieve a 20% by 
2021 RPS requirement?
    Answer. Yes. The vast majority of the current transmission grid was 
built to transfer energy from the generators owned by a utility to its 
customers. Some transmission was built to interconnect utilities. Since 
restructuring began in 1998, there has been little investment in 
transmission in restructured areas. Thus, the grid is not designed to 
get renewable energy from the best wind and solar sites to population 
centers. Massive investment in transmission would be needed to 
implement a 20% RES.
    Question 3. What are the estimated infrastructure costs to meet the 
legislation's requirement? How realistic is it to get the necessary 
transmission in place in time to meet the hard and fast deadlines of 
the national mandate? Should Congress build some flexibility into the 
program if inadequate transmission prevents compliance?
    Answer. The National Academy of Sciences ``America's Energy 
Future'' study deals with this question and should be available within 
two months. I have seen estimated costs for a modern grid that could 
accommodate renewables that exceed $200 billion. A doctoral 
dissertation done a few years ago at Carnegie Mellon documented the 
difficulties in siting new transmission lines. Particularly in densely 
populated areas, there are formidable difficulties since few people 
want a transmission line on their property or close by. In the 2005 or 
2007 energy legislation, Congress authorized the Secretary of Energy to 
designate national transmission corridors. I do not think that this 
designation has been terribly helpful in overcoming the objections to 
siting new transmission lines. There is considerable doubt that new 
lines can be sited to transmit the electricity to population centers. 
For example, Texas' requirement for renewables resulted in large 
investments in wind farms in the west, but it took some years to build 
the transmission to bring the electricity to market.
    Question 4. Given the different goals and definitions of renewable 
energy in the various state renewable energy standard programs, how 
does the majority staff draft ensure consistency and coordination of 
the state and federal programs?
    Answer. There is a vast, inconsistent array of definitions of 
renewable power among the states. For example, Pennsylvania includes 
electricity generated from waste coal piles. Some states have a solar 
set aside. Some states include methane from landfills. There is no 
uniformity across states; I don't see a possibility for coordination. A 
federal standard could set a minimum requirement that states could be 
free to supplement.
    My understanding is that the usual justification given for federal 
legislation overriding what states consider their prerogative is 
interstate commerce. However, Texas has essentially isolated its 
electricity grid from much of the nation and so there is little 
interstate commerce for electricity between Texas and the rest of the 
nation.
    Question 5. Do you agree that any federal RPS program must account 
for the regional variations in the supply of renewable resources?
    Answer. Renewable resources are not uniformly spread across the 
USA. The Northern Great Plains have the best wind resources, the desert 
Southwest has the best solar resources and the West has the best 
geothermal. The West generally has poor biomass resources because of 
low rainfall. A national RES would be punitively expensive if it 
doesn't allow a great deal of flexibility in how to meet the standard.
    I favor a carbon portfolio standard that would focus on the most 
important issue for electricity generation. I would include efficiency 
in that standard to give a region such as the Southeast with poor wind 
and solar resources an inexpensive way to comply. For example, 
California and New York State both use 40% less electricity per capita 
than the national average. They have achieved this efficiency with 
major expenditures and programs. If the Southeast could lower its 
electricity use by 40%, they would achieve more than twice the carbon-
dioxide emissions reduction of a 20% RES.
    Question 6. Instead of a Renewable Portfolio Standard, you advocate 
the creation of a Carbon Portfolio Standard (CPS). How would something 
like that work? How would you treat energy efficiency under a CPS?
    Answer. I do favor a carbon portfolio standard. California has 
already created a model for this. They allow no more than a specified 
amount of carbon-dioxide to be emitted per megawatt-hour of generation. 
The standard can be met by renewables, by nuclear, or by fossil fuels 
with CCS. I would also allow the standard to be met by increased energy 
efficiency. That could be done by setting a standard for carbon-dioxide 
emissions due to electricity use per capita. Assume that the CPS called 
for a reduction of 40% of carbon-dioxide emissions. For a state that 
uses 30,000 kWh of electricity per capita per year, they could meet the 
standard by lowering carbon-dioxide in electricity generation or by 
lowering electricity use. For example, the state could lower 
electricity use by 20% to 24,000 kWh per capita and lower carbon-
dioxide emissions per kWh by 20% in order to meet the standard.
    Question 7. How are the states doing in implementing their own RPS 
requirements? I understand that Massachusetts is behind, in part 
because the proposed wind farm off Cape Cod has yet to be built--and 
it's been under review for the past several years.
    Are the long-distance transmission lines needed to deliver the 
power, to meet the state requirements, being built?
    Answer. Massachusetts has been unable to meet its RPS until this 
year. Utilities were forced to buy renewable energy credits for about 6 
cents per kWh for their shortfall. States such as California and New 
York have set extremely ambitious RPS and it is far from certain that 
they will be able to attain them. Difficulties in siting wind farms and 
transmission lines have slowed the introduction of renewables.
    There has been little investment in transmission in the deregulated 
states.
    Question 8. Can you explain the problems with integrating 
intermittent renewable resources into the grid? It was just last 
February that the Texas grid was forced to shed load when the wind 
stopped blowing, dropping from 2000 MW to 350 MW just as demand peaked. 
What kind of investments in transmission and storage do we need to make 
to ensure the reliability of renewable power?
    Answer. Both wind and solar resources are variable, meaning that 
the generation varies from minute to minute. To keep power quality 
high, investments are needed to fill in the generation gaps. For very 
short term variation, batteries, flywheels, and capacitors can be used. 
For variation that occurs over hours, generally gas turbines (or 
hydropower where available) are used. Prediction of wind and clouds has 
gotten better, but are far from perfect. There are recent experiences 
in Texas and Hawaii when unpredicted drop-offs in wind resulted in near 
blackouts because alternative generation could not be ramped up fast 
enough.
    The variation in wind and solar can be dampened by hooking in wind 
farms and solar arrays from distant sites. However, this is only a 
partial solution; a study done by GE for Texas found five days during 
April when there was essentially no wind energy available in Texas.
    To supply reliable, high quality power, the wind and solar 
generation must be backed up with a variety of quick acting and longer 
lasting instruments. For example, batteries, flywheels, and capacitors 
can be used to correct minute to minute variable while hydro or gas 
turned can be used to fill in generation shortfalls that are hours in 
duration.
    I cannot estimate the required investment in transmission, apart 
from the estimate of more than $200 billion. The investment to overcome 
the minute to minute variability is about 1 cent per kWh.
    Question 9. In your opinion, should Congress be trying to pick 
technology ``winners and losers'' with a national RPS? How can we best 
accommodate future technological innovation?
    Answer. No. An important lesson from the 1970s is that government 
needs to decide which technologies to spend R&D money on, but should 
not pick which technologies should be implemented. Engineers and 
entrepreneurs should make that decision. I am a technological optimist 
and believe that better technologies will emerge over the next decade 
or so. Our research monies should support the development of these new 
technologies, but they should have to compete with other technologies 
for implementation.
    Question 10. Proponents of a national RPS insist the Southeast can 
meet the mandate through the use of biomass. Do you agree? Is this the 
best use for biomass, with its land limitations, or is this resource 
better used in transportation fuels?
    Answer. The Southeast has abundant biomass resources. There might 
be sufficient biomass to meet a 20% RPS. However, in a world with 
stringent greenhouse gas emissions constraints, we know how to produce 
electricity with little or no carbon emissions through hydro, nuclear, 
wind, solar, and fossil fuels with CCS. Producing liquid fuels for 
cars, aircraft, and ships is a much more difficult problem. Liquid 
fuels without carbon-dioxide emissions can be produced from biomass. In 
a carbon constrained world, we would want to devote biomass to 
producing liquid fuels, not to generating electricity.
      Response of Lester B. Lave to Question From Senator Landrieu
    Question 1. I know that we can achieve efficiency gains in both the 
interstate transmission of electricity as well as the retail 
distribution of electricity. In Sen. Bingaman's draft language that has 
been circulated, it only allows for savings from the retail 
distribution of electricity. Don't you think there are huge efficiency 
gains to be made through efficiency upgrades to our transmission 
backbone? Shouldn't that also be included in any efficiency portion of 
a RES?
    Answer. The usual estimate is that about 2% of electricity is lost 
in transmission and 8% in distribution. However, current transmission 
lines are relatively short. If we attempted to transmit power over long 
distances with today's relatively low voltage alternating current 
lines, transmission losses would be much greater. If we need to 
construct transmission to take wind from North Dakota to Florida, the 
cheapest, most efficient way to transmit electricity over long 
distances is with high voltage direct current lines. Building an 
infrastructure with HVDC lines would be expensive and time consuming 
because of siting objections. There would be substantial electricity 
lost even for these lines due to the distance.
     Responses of Lester B. Lave to Questions From Senator Sessions
    Question 1. What are we trying to achieve through a Renewable 
Electricity Standard (RES)? What are the goals? By focusing solely on 
renewables, are we limiting our options to achieve an adequate supply 
of clean, low-carbon, reliable and affordable electricity?
    Answer. People have different goals for an RES. The national 
interest would be served by lowering carbon-dioxide emissions, 
increasing environmental quality more generally, increasing 
sustainability and energy security, and by keeping electricity prices 
low enough not to have inordinate economic and personal penalties. Some 
people want an RES because they want to sell equipment that they make. 
Others support an RPS because they think they already know which 
technology is best at attaining these goals. I agree with the social 
objectives and think that equipment makers have the right to try to 
persuade people to buy their products. I do not see how someone could 
know what is the best technology to attain the social objectives at 
such an early stage of development of the technologies.
    Rather than focusing on a RES, I favor a carbon portfolio standard 
that includes energy efficiency. In my judgment, this approach would 
allow us to attain our social goals at least cost and with the least 
disruption.
    Question 2. If the main concern surrounding RES is to have clean 
energy then we should consider nuclear power. Nuclear power is produced 
in the United States, it has zero carbon dioxide emissions, and it does 
not put stress on agriculture products or the timber industry. Why has 
this source not been considered in the RES discussion?
    Answer. Senator, I agree that all sources of low carbon energy 
should be considered and allowed to compete. I do not know why nuclear 
has not been considered.
    Question 3. Why do you include energy sources that may yield some 
benefit in the future and do not have any short term benefits, but 
continue to exclude nuclear power that has both short term and long 
term benefits?
    Answer. Senator, respectfully, I would like nuclear to be able to 
compete to provide low carbon power to the nation.
    Question 4. The US consumes approximately 1000 gigawatts of 
electricity every year. The RES legislation would require approximately 
200-220 gigawatts to come from renewable energy sources by 2020. What 
percentage of the renewable energy mandate will be supplied by wind and 
why does wind have a larger potential than other renewable sources such 
as hydro or nuclear?
    Answer. Sir, the US electricity industry produced 4.1 million 
gigawatt-hours in 2006. A federal RPS would require up to 0.8 million 
gigawatt-hours from renewables, if there were no efficiency gains. At 
this time, wind turbines in good wind locations are the least expensive 
way to generate a significant amount of additional renewable 
electricity. During the 20th century, we built a tremendous amount of 
hydroelectric capacity by damming major rivers. Few good locations 
remain to be exploited. Flooding large amounts of land behind high dams 
has major environmental impacts, as well as impeding fish migration. At 
this time, the nation is not building new major hydroelectric projects, 
but rather is breaching some dams. There are some ``run of the river'' 
hydro that could be developed and some ``low-head'' hydro on small 
rivers and streams, but the total amount of electricity that could be 
generated is relatively small. Geothermal generation, where there are 
good resources, can compete with wind. In some locations, solar thermal 
is almost competitive. Solar photovoltaic is much more expensive than 
current generation. Nuclear has vast potential for power generation, 
but the cost of power from new nuclear reactors is uncertain until we 
construct new plants.
    Thus, wind turbines in good locations offer the lowest cost 
electricity; there are much greater wind resources than other 
renewables, except solar. Thus, major develop of renewable resources 
has focused on wind.
    Question 5. In your opinion, how will the Southeast states meet 
their mandate requirements since wind is not a significant energy 
source in this region?
    Answer. The Southeast could meet an RES in three ways. It could use 
biomass in the form of trees, it could import wind energy from good 
locations, or it could buy renewable energy credits from areas that can 
more than meet the RES. Biomass is probably the cheapest alternative, 
unless the biomass is wanted for producing transportation fuels. 
Building long transmission lines will greatly increase the cost of 
delivered power. For example, we estimated that a 1,000 mile 
transmission line would double the delivered cost of power. Buying 
renewable energy credits would be limited by the ability of areas with 
good wind resources to absorb wind energy. For example, North Dakota 
has perhaps the best wind resources in the nation. However, there is 
very limited ability to absorb large amounts of wind generated 
electricity locally. As a practical matter, if more than 15-20% of 
electricity is provided by wind, there would have to be major 
investment to buffer the variability of wind and to ramp up quickly 
when wind speeds dropped.
    There is a fourth alternative: Develop wind and solar generation 
where the resource is extremely limited. This would result in very 
costly power.
    Question 6. How will a RES affect the price of electricity in 
Southeast states?
    Answer. If biomass is available to meet the RES, electricity 
generation costs might rise by perhaps 25-50%. If long transmission 
lines are built, the wholesale price of electricity in the Southeast is 
likely to double or more. If they are able to buy renewable energy 
credits, electricity prices will rise by 3 cents per kWh.
      Responses of Lester B. Lave to Questions From Senator Corker
    Question 1. I was interested in the testimony you provided 
regarding biomass and the Renewable Fuel Standard. Could you discuss 
why you believe biomass is best suited for transportation fuel and not 
for an RES? Do you have any sense of what the available biomass 
resources are in the Southeast and approximately how much of those 
resources would be used for the RFS? If there are not enough biomass 
resources in the Southeast to meet the demands of both the RFS and RES, 
would an RES essentially force the Southeast to direct this renewable 
resource to the less efficient ``market'' or would the available 
biomass be used for the RFS, forcing the Southeast to comply with an 
RES through the purchase of credits or alternative compliance payments?
    Answer. Biomass could be used either for electricity generation or 
production of liquid transportation fuels. Since there are a variety of 
technologies for producing electricity with little or no carbon-dioxide 
emissions, biomass would not be terribly important for this use. In 
contrast, ethanol is the best source of liquid fuel for transportation 
without net carbon-dioxide emissions, assuming the ethanol comes from 
biomass, not corn. Thus, if large reductions in carbon-dioxide 
emissions are required, biomass would be used to produce ethanol, not 
electricity.
    If the Southeast were required to satisfy a 20% RPS and biomass was 
the cheapest way of doing it, biomass would be diverted from a higher 
use.
    The National Academy of Sciences ``America's Energy Future'' report 
will present the best estimates of biomass resources. Until then, a 
study from many of the National Labs estimates that 500-1,000 million 
tons of biomass could be available for transformation into electricity 
or liquid fuels. The study gives details on the state by state biomass 
availability.
    Question 2. A federal RPS would dramatically increase wood demand 
and, as a consequence, increase prices on the forest products industry 
which relies upon affordable and reliable wood fiber. During these 
difficult economic times, such price increases would threaten good jobs 
in this industry, particularly in rural America. Is it true that a 
federal RES, as currently constructed, would drive up wood fiber costs 
and directly lead to job loss in the forest products industry?
    Answer. I am not an expert on the variety of jobs in the forest 
products industry. If the trees are being cut for fuel to generate 
electricity, there would be fewer jobs than if the trees are converted 
into liquid fuels. I conjecture that large scale tree farming with 
conversion of the biomass into liquid fuels would generate many jobs 
and substantial income in the Southeast.
    Responses of Lester B. Lave to Questions From Senator Mark Udall
    Question 1. Each region of the U.S. is blessed with excellent 
renewable resources. If wind power potential is not very good in the 
southeastern U.S., does that mean that utilities in that region of the 
country will be unable to provide their customers with electricity 
generated from renewable resources under a RES?
    Answer. The draft legislation allows a state to meet the federal 
RPS by buying renewable energy from another state or by buying 
renewable energy credits. If states in the Southeast found it too 
expensive to generate renewable electricity within their state, they 
could meet the requirement in the other two ways. The likely 
implication is that these states would have higher electricity prices 
than states with good wind resources.
    I would like to see greater flexibility in the legislation. I would 
tighten the definition of efficiency and remove, or at least lessen the 
cap. I would include all low or no-carbon generation in the definition. 
Of course, I would then raise the standard that each state would have 
to attain, given this more flexible definition.
    My point is that society needs to be clear on the goals that the 
legislation is seeking to achieve. In my judgment, reducing carbon-
dioxide emissions and preserving reasonable low costs are the two most 
important goals. We have sufficient coal and uranium so that 
sustainability is not a first order concern. Energy security is not 
currently a first order concern since only 2% of electricity is 
generation from petroleum and we import substantial amounts of natural 
gas only from Canada. Congress and EPA should monitor environmental 
quality carefully and enact whatever legislation and standards are 
needed to ensure high environmental quality, particularly if we are 
mining and burning greater quantities of coal. For these reasons, I 
urge you to focus this legislation on the goals of lowering carbon 
dioxide emissions at a reasonable cost.
    Question 2. During the Bush Administration, the Energy Information 
Administration analyzed several different national RES legislative 
proposals. In each case, EIA determined that biomass would receive the 
most RES credits of any renewable technology eligible to receive 
credits. Please identify which regions of the country have the greatest 
biomass potential.
    Answer. The National Academy of Sciences ``America's Energy 
Future'' studies will present good estimates of biomass potential. 
Until the report is available, there is a report on biomass potential 
by a consortium of National labs.
                                 ______
                                 
       Responses of Don Furman to Questions From Senator Bingaman
    Question 1. In your experience, are the multiple state standards 
able to produce a credit trading market that can generate a reasonably 
consistent national value for renewables credits?
    Answer. No. While there is a loose market of traded renewable 
credits, it is illiquid and highly inefficient. Each state defines 
renewable energy differently. In addition, certain states prohibit the 
use of RECs associated with renewable energy generated in other states 
to be used for compliance purposes, or place a different value on out-
of-state RECs and in-state RECs. A consistent definition of eligible 
renewable energy and a nationwide trading platform--both of which would 
be achieved with the enactment of your RPS bill--is needed if we are 
going to be able to reap the full benefits of REC trading.
    Question 2. In our proposal we allow states implement their own 
standards that are stronger than the federal standard and to regulate 
what their utilities can do as far as selling excess federal credits, 
while not compelling them either to allow the sale or to disallow it. 
Does this, in your view, result in more renewables built and generated?
    Answer. Yes. The Bingaman RPS proposal would establish a national 
renewable energy floor but allow states to exceed that floor if they so 
choose. This will lead to greater amounts of renewable energy than if 
the Bingaman proposal preempted state opportunities to promote 
renewable energy. In addition, if a state that chooses to require its 
utilities to exceed the national requirement also requires those 
utilities to ``retire'' RECs that the utility won't need to comply with 
the national RPS instead of selling those credits to other utilities, 
this will lead to a greater amount of renewable generation because 
additional RECs will be required for national RPS compliance.
      Responses of Don Furman to Questions From Senator Murkowski
    Question 1. How much back up power from conventional power plants 
is needed to meet a 20% RPS requirement by 2021? At what cost?
    Answer. Because the issuance of renewable energy credits under the 
Bingaman RPS proposal is dependent on the generation of renewable 
electricity, no back up power from non-renewable power plants will be 
necessary to meet the RPS requirement.
    Some opponents of renewable energy argue that, for every 
installation of wind or solar power, utilities will need to build an 
equal amount of thermal power plants (generally fueled with natural 
gas) to provide power when the wind isn't blowing or the sun isn't 
shining. This is a dramatic overstatement. We will need to build some 
additional thermal generation, as well as transmission, in order to 
accommodate a higher percentage of intermittent generation. However, 
the additional thermal generation required to support a given amount of 
wind or solar is a small fraction. This issue becomes less significant 
depending on the size of a particular utility control area. The broader 
the control area, the easier it is for utilities to manage plant 
outages without additional generating capacity. Equally important, with 
or without an RPS, utilities will need to build and acquire reserve 
generation capacity to address situations where conventional and non-
conventional generation facilities are temporarily unavailable.
    Question 2. Do you agree that as it now stands, our country's 
transmission infrastructure is woefully inadequate to achieve a 20% by 
2021 RPS requirement?
    Answer. Our country's transmission structure is inadequate with or 
without the enactment of a national RPS. NERC has on numerous occasions 
noted that substantial additions to transmission capacity are necessary 
if we are going to maintain the reliability of the grid. The additional 
investments needed to restore reliability will also allow utilities to 
manage intermittent generation, such as wind and solar, at much lower 
costs. Also, one of the benefits of an expanded grid is the ability to 
access some of the best renewable energy resources which are often 
located in remote regions of the country, some distance from load. 
Enhancing our transmission infrastructure would help lower the cost of 
compliance of a national RPS.
    Question 3. What are the estimated infrastructure costs to meet the 
legislation's requirement? How realistic is it to get the necessary 
transmission in place in time to meet the hard and fast deadlines of 
the national mandate? Should Congress build some flexibility into the 
program if inadequate transmission prevents compliance?
    Answer. It is not possible to provide an estimate of the investment 
in transmission infrastructure that would be necessary to meet the RPS' 
requirement because there is no particular level of transmission 
infrastructure that would be required to meet the RPS. The same 
response applies to the request for the time deadline for having the 
transmission infrastructure in place. Additional transmission 
infrastructure will help reduce the compliance costs of the RPS but 
utilities will not necessarily be left without compliance options if 
transmission is not built. The Bingaman proposal already provides 
flexibility to utilities by enabling them to make an alternative 
compliance payment if they aren't able to generate/acquire renewable 
energy or renewable energy credits that are more cost effective.
    Question 4. Given the different goals and definitions of renewable 
energy in the various state renewable energy standard programs, how 
does the majority staff draft ensure consistency and coordination of 
the state and federal programs?
    Answer. The Bingaman proposal would require the Secretary of Energy 
to, the maximum extent practicable, facilitate coordination between the 
Federal RPS program and state RPS programs. The lack of consistency 
between state RPS programs is one of the reasons we need a Federal RPS 
to ensure a consistent national approach but would also allow states to 
impose additional requirements on their utilities.
    Question 5. Do you agree that any federal RPS program must account 
for the regional variations in the supply of renewable resources?
    Answer. As long as the definition of ``renewable energy'' is as 
broad as it is in Senator Bingaman's RPS proposal, each region of the 
country would be able to comply with a national RPS. Some opponents of 
a national RPS have attempted to portray the Southeastern United States 
as being disadvantaged because wind resources in the Southeast are not 
optimal. Nothing could be further from the truth. As the Energy 
Information Administration has repeatedly found, biomass, not wind, 
would generate the most renewable energy credits under a RPS and the 
Southeast has substantial biomass resources and also has a reasonable 
amount of solar power potential.
    Question 6. Wind energy had a record year least year, installing 
over 8,300 megawatts of new generating capacity on line and bringing 
domestic wind capacity to 25,000 megawatts. Given the various federal 
incentives we provide for the wind industry, from R&D funding, the 
Production Tax Credit, the CREBS program, and the new loan guarantee 
program created in the stimulus package, to name just a few, why does 
the wind industry need a federal Renewable Portfolio Standard?
    Answer. To date, the Federal government has chosen to incent 
renewable electricity production primarily through the tax code. 
Although the renewable production tax credit (PTC) has been successful 
it has also produced a great amount of uncertainty because the PTC has 
never been extended on a long-term basis. As a result, U.S. investment 
in manufacturing capability has fallen far behind the rest of the 
world, and at least half the equipment installed is manufactured 
overseas. The recent collapse of the tax equity market--which many 
renewable energy developers had utilized to monetize the PTC--has added 
even more uncertainty. Renewable energy developers need a more stable 
public policy approach. The RPS provides more long-term certainty by 
establishing a market for renewable energy over a reasonable period of 
time. It will also provide the certainty to cause investors to build 
manufacturing facilities in the U.S., employing Americans and saving 
consumers money.
    Question 7a. You highlight last year's Department of Energy report 
that determined wind could produce up to 20% of the nation's power by 
2030. The DOE report found that in order to reach a 20% level, we would 
need 300,000 megawatts of wind generation--an 1100% increase in wind 
power capacity. How much of this would have to be off-shore wind since, 
as you know, we still don't have any off-shore wind in this country?
    Answer. The continental U.S. has more than enough potential to meet 
the 300 GW target for wind energy which the DOE has estimated to be 
feasible. Off-shore wind could play a role, but it is not necessary.
    Question 7b. Is the lack of adequate transmission another 
impediment? How much transmission would we need to accommodate a 20% 
level of wind power?
    Answer. The lack of sufficient transmission capacity was one of the 
barriers identified in the DOE report. According to DOE, $60 billion in 
transmission will be needed to satisfy the 20% target. If this 
investment is made, many regions of the country would gain access to 
less expensive renewable and non-renewable generation. It is also 
important to point out that much of the $60 billion investment needs to 
be made anyway, to increase reliability and reduce congestion. Both 
transmission congestion and reliability concerns cost the economy 
billions of dollars per year.
    Question 7c. A new study undertaken by MISO, PJM, SPP, the SERC 
Reliability Region, and TVA found that in order to get 20% of our 
nation's electricity by 2024, we would need to upgrade our transmission 
system at a cost of $100 billion, and the wind turbines needed to 
generate that power would cost almost $720 billion. Do you agree with 
this assessment? If not, why not?
    Answer. I haven't yet reviewed the entire study. However, I 
understand the study concluded that this investment would save 
consumers in the Eastern U.S. approximately $12 billion per year. As I 
noted earlier, investments in transmission infrastructure offer 
consumers significant benefits that need to be taken into account when 
assessment whether such investments should be made.
    Question 8. You testified that a national RPS will provide a direct 
signal to the market place that will drive renewable energy development 
and eventually obviate the need for the Production Tax Credit. At what 
point do you see that happening? If we adopt a national Renewable 
Portfolio Standard, do we really need to continue the PTC? Shouldn't it 
be one or the other?
    Answer. If a national RPS is enacted and it is robust enough to 
encourage investment in new renewable energy generating capacity, I 
believe it would be appropriate to phase-out the PTC. Given that each 
national RPS that has been proposed contains a ramp-up mechanism, it 
will be important to ensure that the national renewable target has 
ramped-up sufficiently to incent enough demand in renewable energy to 
negate further need for the PTC.
    Question 9. I understand from your testimony that you do not 
support the inclusion of energy efficiency as a potential resource to 
meet even a small portion of the RPS standard. Rather than set a 
completely separate energy efficiency standard, as you propose, isn't 
there a way to make energy efficiency work in the context of an RPS?
    Answer. It is very easy to determine when a kwh of renewable energy 
has been generated. However, it is much more difficult to calculate 
when a specific action has reduced a kwh of energy demand. That is why, 
although I believe energy efficiency should be strongly encouraged and 
should be our nation's highest priority, a portfolio standard approach 
is not the best public policy approach for achieving energy efficiency. 
I am concerned that the energy efficiency provisions contained in the 
Bingaman bill could reward credits that don't actually achieve specific 
energy savings.
    Question 10. As drafted, Chairman Bingaman's draft provides for 
some exemptions such as those utilities with retail sales of less than 
4 million megawatt-hours and taking hydropower out of the baseline 
calculation. What don't you support these exemptions? With regard to 
hydropower, are you actually advocating the displacement of this clean, 
renewable, base load generation?
    I don't support or oppose these exemptions. I simply noted in my 
testimony that, if these exemptions are included, it is important that 
the RPS standard be set higher to take into account the reductions in 
renewable energy generation due to these exemptions.
    Question 11. In your written testimony, you contend that our 
electric generating sector has become ``dangerously reliant'' on 
natural gas and that domestic supply is ``unlikely'' to keep pace with 
demand. But the facts seem to tell another story. We used natural gas 
to generate just over 20% of our electricity last year. Roughly 85% of 
that gas was produced here in the United States, and about 98% was 
produced in North America.
    It also appears that we have more than enough natural gas to 
facilitate the generation you mentioned. EIA recently announced the 
largest-ever increase in its estimate of domestic reserves. Looking 
forward, EIA has projected that consumption will increase by an average 
of 0.2% per year through 2030--with imports accounting for just 3% of 
total consumption that year. And, a significant boost in supply is 
expected to come from my home state, Alaska, which is making progress 
on a natural gas pipeline that will transport 4 billion cubic feet per 
day.
    Can you explain then, why you see natural gas as an unacceptable 
resource for electric generation?
    Answer. I don't view natural gas as an unacceptable resource for 
electric generation. In fact, Iberdrola Renewables owns several gas-
fired electric generation facilities. I also believe that natural gas 
will be a critical component of our energy supply going forward. I am 
concerned, however, with our growing reliance on natural gas-fired 
capacity and with a return to the trend of the 1990s where virtually 
all new electric generation was natural gas-fired.
    The demand for natural gas in the electric generation sector has 
increased by approximately 62 percent over the last 14 years. Outside 
of wind, almost all of the new generating capacity built over the last 
several years is powered by natural gas and that trend is expected to 
continue into the future--especially if Congress restricts greenhouse 
gas emissions without adopting additional policies aimed at increasing 
renewable generation.
    It may very well be that new domestic sources of natural gas, 
including those located in Alaska will help limit natural gas imports. 
However, we also could experience a significant increase in the demand 
for gas in the transportation, electric generation, industrial, 
agriculture and home heating sectors. It is important to remember that 
EIA's forecast does not assume the imposition of restrictions on 
greenhouse gas emissions.
    Finally, I think it is important to note that T. Boone Pickens 
believes we need to substantially reduce the use of natural gas in the 
electric generation sector in order to enable the increased use of gas 
for transportation in order to reduce our reliance on foreign imports 
of oil.
        Response of Don Furman to Question From Senator Landrieu
    Question 1. I know that we can achieve efficiency gains in both the 
interstate transmission of electricity as well as the retail 
distribution of electricity. In Sen. Bingaman's draft language that has 
been circulated, it only allows for savings from the retail 
distribution of electricity. Don't you think there are huge efficiency 
gains to be made through efficiency upgrades to our transmission 
backbone? Shouldn't that also be included in any efficiency portion of 
a RES?
    Answer. We can and should make improvements to the transmission 
grid that result in fewer losses associated with the transportation of 
electricity. The Federal government should certainly encourage these 
improvements. The Bingaman RPS proposal rewards efficiency in the 
distribution of electricity but not necessarily the interstate 
transmission of electricity. If there is going to be an energy 
efficiency standard, it might be appropriate to include transmission 
efficiency. However, as I noted in my testimony, I don't support the 
inclusion of an efficiency component in a national RPS because it is 
too difficult to actually measure energy savings attributable to 
specific actions.
       Responses of Don Furman to Questions From Senator Sessions
    Question 1. What are we trying to achieve through a Renewable 
Electricity Standard (RES)? What are the goals? By focusing solely on 
renewables, are we limiting our options to achieve an adequate supply 
of clean, low-carbon, reliable and affordable electricity?
    Answer. The national RPS should be designed to encourage the 
development of a domestic renewable energy industry. This will enable 
the renewable energy industry to make a major contribution to our 
national economy, energy security and our goals of reducing greenhouse 
gas emissions. However, other policies will also be necessary to reduce 
greenhouse gas emissions. We often hear from opponents of a national 
RPS that nuclear power should be eligible for credits. However, it is 
highly unlikely, given how long it will be before we see the next 
generation of nuclear power plants placed in service, that new nuclear 
power facilities can be a major contributor to our generation portfolio 
in the near term. That is why we aren't seeing the nuclear industry 
push for the inclusion of nuclear in a RPS.
    Question 2. If the main concern surrounding RES is to have clean 
energy then we should consider nuclear power. Nuclear power is produced 
in the United States, it has zero carbon dioxide emissions, and it does 
not put stress on agriculture products or the timber industry. Why has 
this source not been considered in the RES discussion?
    Answer. See response to Question 1.
    Question 3. Why do you include energy sources that may yield some 
benefit in the future and do not have any short term benefits, but 
continue to exclude nuclear power that has both short term and long 
term benefits?
    Answer. See response to Question 1.
    Question 4. The US consumes approximately 1000 gigawatts of 
electricity every year. The RES legislation would require approximately 
200-220 gigawatts to come from renewable energy sources by 2020. What 
percentage of the renewable energy mandate will be supplied by wind and 
why does wind have a larger potential than other renewable sources such 
as hydro or nuclear?
    Answer. The Energy Information Administration, in analyzing 
previous RPS proposals, has consistently concluded that biomass will 
provide more renewable energy generation than wind in order to meet a 
national RPS requirement. Incremental hydropower capacity would be 
eligible to be used for RPS compliance but most experts don't 
anticipate a significant amount of incremental hydropower potential.
    Question 5. In your opinion, how will the Southeast states meet 
their mandate requirements since wind is not a significant energy 
source in this region?
    Answer. The Energy Information Administration has determined that 
utilities in the Southeastern U.S. would have access to significant 
amounts of biomass energy as well as the ability to import wind power 
generated in nearby states in order to meet a national RPS requirement.
    Question 6. How will a RES affect the price of electricity in 
Southeast states?
    Answer. According to the Union of Concerned Scientists, consumers 
in the southeast will experience a reduction in their energy bills of 
$94 billion if Congress adopts Congressman Markey's 25% by 2025 
national RPS. The reason for this reduction is that a national RPS will 
reduce the demand for natural gas for electric generation which will 
reduce both electric generation prices and the price of natural gas 
used for home heating and cooking.
      Responses of Don Furman to Questions From Senator Mark Udall
    Question 1. Each region of the U.S. is blessed with excellent 
renewable resources. If wind power potential is not very good in the 
southeastern U.S., does that mean that utilities in that region of the 
country will be unable to provide their customers with electricity 
generated from renewable resources under a RES?
    Answer. The Energy Information Administration has determined that 
utilities in the Southeastern U.S. would have access to significant 
amounts of biomass energy as well as the ability to import wind power 
generated in nearby states in order to meet a national RPS requirement.
    Question 2. During the Bush Administration, the Energy Information 
Administration analyzed several different national RES legislative 
proposals. In each case, EIA determined that biomass would receive the 
most RES credits of any renewable technology eligible to receive 
credits. Please identify which regions of the country have the greatest 
biomass potential.
    Answer. The Southeast and the Midwest have the greatest biomass 
potential and each region would benefit greatly if a national RPS is 
enacted.
    Question 3. If the U.S. were to generate up to 25% of its power 
from renewable resources, how would this impact our country's reliance 
on natural gas to generate electricity?
    Answer. Every credible study that has analyzed the impact of a 
national RPS has concluded that the RPS would significantly reduce the 
demand for natural gas in the electric generation sector.
    Question 4. If the country switches to plug-in hybrids to power our 
automobiles and also adopts a 25% national RES, what would the impact 
be on oil and gas imports over the next 25 years?
    Answer. Oil imports would be dramatically reduced because plug-in 
hybrids will require substantially less oil than conventional vehicles. 
In addition, if a national RES is enacted, plug-in hybrid batteries 
could very well be recharged with electricity generated with renewable 
resources which would then reduce our nation's demand for natural gas. 
The reduced demand for oil and gas should translate into significant 
reductions in imports.
                                 ______
                                 
    Responses of Scott P. Jones to Questions From Senator Murkowski
    Question 1. How much back-up power from conventional power plants 
is needed to meet a 20% percent RPS requirement by 2021? At what cost?
    Question 2. Do you agree that as it now stands, our country's 
transmission infrastructure is woefully inadequate to achieve a 20 
percent RPS requirement by 2021?
    Question 3. What are the estimated infrastructure costs to meet the 
legislation's requirement? How realistic is it to get the necessary 
transmission in place in time to meet the hard and fast deadlines of 
the national mandate? Should Congress build some flexibility into the 
program if inadequate transmission prevents compliance?
    Question 4. Given the different goals and definitions of renewable 
energy in the various state renewable energy standard programs, how 
does the majority staff draft ensure consistency and coordination of 
the state and federal programs?
    Answer. Staff can ensure consistency and coordination of the state 
and federal programs by incorporating existing programs, such as the 
USDA Forest Service Forest Inventory and Analysis (FIA) program and 
programs initiated and implemented by the Farm Bill.
    Question 5. Do you agree that any federal RPS program must account 
for the regional variations in the supply of renewable resources?
    Answer. We would agree that any federal RPS program must account 
for regional variations in sources and supplies of renewable energy 
resources.
    We believe that wood is necessary to meet a Renewable Electricity 
Standard. In a mosaic of energy sources, where each region of the 
country produces energy from its own, best indigenous resources, we 
seek a level playing field for wood. This level field of play will 
bring the same jobs and new local tax bases to forested regions as 
other regions will potentially enjoy.
    But, we have deep concern that, under developing renewable energy 
markets, forestland may be disproportionately burdened by well-meaning 
but functionally stifling regulation, relative to other renewable 
energy sources and their land bases. Simple acknowledgements of the 
impracticality of applying agricultural principles to forestry is a 
small step in the right direction; for example, the seasonal-crop, 
closed-loop approach to energy feedstocks just has no place in dealing 
with a crop that can take decades to culture, i.e., trees.
    The negative impacts of national energy policies could create harm 
to all family forestlands in the U.S. Wood is a reliable feedstock, 
without the seasonal fluctuations or serendipity of weather that 
inhibit some other energy sources. And this resource (wood) is 
available now.
    Question 6. In your testimony, you state that ``forest practice 
policies are better determined at the local level to account for 
differences in local conditions and needs, rather than through 
prescriptive, one-size-fits-all federal mandates.'' Doesn't the same 
hold true for a national Renewable Portfolio Standard requirement where 
states are in a better position to develop programs that account for 
the differences in available resources?
    Answer. The majority of our forests are owned by private forest 
landowners. Therefore, we have many individuals and companies working 
across this country to maintain healthy, working forests. In certain 
regions, we have state policy to offer guidance but in the majority of 
the country we have state developed and monitored ``best management 
practices''. These voluntary guidelines assist landowners in the 
management of their forests to have minimal impact on water quality and 
various other aspects of the land.
    Since we have variations of species composition, Boreal forests in 
Alaska, spruce and fir in the Pacific Northwest, southern yellow pine 
in the Southeast, ponderosa pine in the Southwest, and hardwoods in the 
Appalachians and Northeast, we are presented with a variety of specific 
needs that can only be addressed properly at the local level.
    If and how this would apply to energy production in the United 
States is unclear to us at this time. However, we do believe that each 
region should be allowed to utilize the renewable resources that they 
have in order to meet any renewable goals that might be set at the 
state or national level.
    Question 7. You note in your testimony that your members look 
forward to participating in the new markets created by new national RPS 
requirements, so could the RPS policy be a money-making proposition for 
your members? How do you propose to balance forest sustainability 
issues with the new market demands?
    Answer. In short, yes, landowners do stand to benefit from the new 
markets for woody biomass that will result from a national RES. That 
being said, it is important to understand the basic economics of 
managing and maintaining a stand of timber, as well as the relative 
value of all of the products removed from the forest. In order to 
receive an acceptable return on investment (ROI) from a timberland 
investment, trees must be grown to their highest potential value. In 
most cases, this means growing trees long enough to be able to sell the 
timber for sawlogs and veneer. As part of this process, and in order to 
maintain a healthy, productive forest, timber stands must be thinned of 
poorer quality, less vigorous trees in order to free up the site 
resources for the better quality trees. In order to perform these 
thinning treatments, adequate markets must exist to be able to have an 
economically viable timber harvest of this material. Woody biomass for 
energy consumption, which will likely consist of smaller diameter 
trees, limbs, and tops removed during these thinning operations 
represent the lowest value product removed from the forest as well as 
the lowest percentage of overall income per acre during any specific 
harvest. It is highly unlikely the energy markets created by a National 
RES will drive a landowner's harvest and management decisions. The 
higher value sawlogs will still be a requirement to justify a 
reasonable return on a timberland investment. As such, the same laws, 
standards, and protections that currently apply to all timber harvests 
across the nation and in all states will still provide the same level 
of protection.
    Otherwise: In January 1905, the New York Times headline read, 
``TIMBER FAMINE NEAR, SAYS PRESIDENT ROOSEVELT''. The article said that 
``` . . . this country is in peril of a timber famine . . . ' as 
asserted by the President this afternoon in an address before the 
American Forest Congress. In the course of his remarks the President 
said: `If the present rate of forest destruction is allowed to 
continue, a timber famine is obviously inevitable. Fire, wasteful and 
destructive forms of lumbering, and legitimate use are together 
destroying our forest resources far more rapidly than they are being 
replaced . . . Unless the forests can be made ready to meet the vast 
demands which . . . growth will inevitably bring, commercial disaster 
is inevitable.''[1]
    Here are the words straight from the Times. I think this forcefully 
makes the case for sustainability. Remember, pulpwood was non-existent 
when this quote was made, as Charles Herty (1867--1937) had not yet 
invented the pulping process. Only when we planted trees and encouraged 
markets did we end our brush with a timber famine. The destructive form 
of lumbering, then, was a process that is still called ``high grading'' 
trees, today. Because at that time, only a high quality part of the 
tree was considered valuable for lumber, and the rest of the tree was 
left in the woods to rot or was burned. The point here is: markets 
cured the ``timber famine''. Forest management for commodities did 
that. New markets did not create sustainability problems; they cured 
them.
    Question 8. As you know, proponents of a national RPS point to 
biomass as the sole renewable resource available to meet the 20 percent 
by 2021 requirement. Do you believe that the Southeast has enough 
biomass to meet a 20 percent requirement and still fulfill demand for 
other wood products such as pulpwood and saw logs?
    Answer. This is not an easy question to answer, but it is safe to 
say that in the Southeast, 100 percent of the ``20 percent 
requirement'' would not have to originate from forest biomass. It is 
also safe to say that forests in the U.S. South are accumulating 
significantly more woody biomass than is currently consumed annually 
and have done so for decades; indicating excess availability of woody 
biomass to meet new demand.
    Some of the contemplated legislation has considered efficiency as a 
possible contributor. There are also many other forms of biomass 
available to help meet the standards such as mill residues and 
byproducts, urban wood, nursery and right-of-way trimmings, agriculture 
wastes, timber from salvage operations, storm debris, clean 
construction waste, etc. There are, although in much smaller 
quantities, other available renewable resources such as some possible 
solar opportunity in Florida, a small amount of geothermal in Louisiana 
and Arkansas, and potentially, with eased political pressures, some 
untapped hydros. All in all, biomass will still make up the dominant 
proportion of renewable energy in the Southeast, but the availability 
of these other options must be assessed to accurately reflect the 
percent of renewable energy that will ultimately come from biomass.
    In the United States as a whole, similar to southeastern 
statistics, timber growth has exceeded the harvests since 1952. 
Growing-stock volume on U.S. timberland has increased 39 percent 
between 1953 and 2002. That is, the nation's forest inventory accrued 
more volume than it lost by mortality and harvest by over one-third 
[2].
    You may hear that adding a new RES market to existing markets will 
create an unsustainable resource. It is simply not true. We do not have 
enough markets for the wood that we are growing, as shown in the USDA 
Forest Service's Resource Planning Act (RPA) data collected by the 
Forest Inventory Analysis program. The 2002 data showed that across all 
species in the United States, we were growing 34 percent more volume 
then we removed [3]. Now, with the reduction of forest products 
manufacturing, we have seen an increase in the amount of growth versus 
removal. The 2007 RPA data shows a 41 percent volume grown over removal 
[4]. The impact of the reduction of our forest products manufacturing 
is having a clear effect on the amount of wood being grown and the 
threat to the health of our forests and private forest landowners is 
eminent. We believe arguments to the contrary are likely disingenuous 
and perhaps more motivated by competition for raw materials, and/or 
feedstock preferences, and/or tax avoidance than resource 
sustainability. The forest resource is sustainable and this question 
has been asked and answered before. But, the willingness of forest 
landowners to maintain forestland as forestland has had too little 
attention. Federal forest policy must address the conundrum of what 
would motivate a forest landowner to continue to hold that investment 
when it is threatened by new and evolving forces; whether it is 
opportunities for better financial returns for their families, 
shrinking market access, or investment-dampening legislation and 
regulation.
    Question 9. What are the transportation expenses associated with 
woody biomass? I understand that because transporting biomass is 
expensive, it is more likely to be used only near existing coal-fired 
power plants or in plants especially built for biomass. Is that 
correct?
    Answer. Woody biomass is expensive to transport long distances. 
This is typically a function of the density of the biomass material and 
the moisture. Biomass (woodchips, needles, bark, sawdust, etc.) is 
usually loosely packed in a truck, therefore the amount of energy being 
transported per unit measure (ton, cubic foot, etc.) is much less than 
other fuels used to produce electricity. With regard to moisture, for 
every percent of moisture, it will take some of the Btu value of the 
biomass to evaporate that water, thus ``stripping'' some Btus away from 
the production of energy. Thus, the dryer and denser the material can 
be, typically, the further the material can be economically hauled. Due 
to this, it is advantageous to locate the consuming facility as close 
to the biomass source as possible. This is typically assumed to be 
within 50 to 80 miles of the consuming facility.
    Question 10. Professor Lave notes that biomass is hampered by land 
limitations and that biomass is better used for transportation fuels. 
You've noted that forestlands are being converted to other uses at a 
rapid rate. Do you agree that biomass is better used for transportation 
fuels instead of electricity production?
    Answer. Where available and economically feasible, all raw 
materials can and should be used as sources for energy production, 
whatever the form of energy produced. Some feedstocks may be more 
economical regionally, and the market will determine that. But, the 
markets will make those determinations; hopefully with some initial 
stimulus to jumpstart these new alternative energy production 
opportunities.
    Question 11. You noted that the definition of ``renewable biomass'' 
included in the 2007 Energy Independence and Security Act has excluded 
America's natural private forest landowners from ``participation in the 
initiative to establish a renewable fuels industry.'' How would you 
change the definition of biomass in the 2007 Renewable Fuels Standard 
to ensure your members can participate in these new markets and to slow 
the conversation of natural forest on private lands to housing tracts? 
Do you think southeast states would be able to meet their mandated 
requirements if they are not allowed to use woody biomass to generate 
electricity?
    Answer. Healthy working forests, either naturally or artificially 
regenerated, are dependent on viable, sound markets in which to sell 
timber. Without markets, the economic justification of keeping land in 
a forested state is lessened or completely disappears. Developing as 
broad a definition as possible, with the inclusion of the whole tree 
and all tree parts regardless of their natural or artificial origin, 
would be the most complete way of assuring that landowners have the 
optimal opportunity to continue to manage their forests as forests and 
does not heap disincentives on an endeavor that is currently burdened 
by external pressures to convert from forestland to other land uses.
    The willingness of forest landowners to maintain forestland as 
forestland has had too little attention. Federal forest policy must 
address the conundrum of what would motivate a forest landowner to 
continue to hold that investment when it is threatened by new and 
evolving forces; whether it is opportunities for better financial 
returns for their families, shrinking market access, or investment-
dampening legislation and regulation.
    Urbanization will have the ``most direct, immediate and permanent'' 
effects on southern forests of all forces of change [1]. The incentives 
for forest landowners to convert forestland investments to residential 
and commercial real estate are led by population growth. U.S. Census 
Bureau [2] population growth projections between the years 2000 and 
2030 are for 82.1 million new people. That is a 29.2 percent growth, 
and most of that growth will be in the regions heavily dominated by 
private forest ownership [3].
    How will this growth affect forestland use? We are distinguishing--
again, throughout this testimony--between sustainable forestland, 
sustainable forest resources, and that without the land there can be no 
resources. Nineteen million acres of forest converted to developed uses 
from 1992 to 2020 in the Southeast [4]. The need for homes, churches, 
public infrastructure, and other services of 21st century human 
existence will cause fragmentation of forested landscapes, which will 
have its greatest impact in the Southeast [5], the region with the 
highest concentration of family forestland, but with a lack of other 
regional sources of renewable energy other than forests. And private, 
family forest landowners who manage smaller tracts of land are at 
greater potential for development [6].
    Traditional markets for forest commodities are trending offshore or 
are impacted by poor trade policy. For example, as fewer and fewer 
pulp/paper mills remain in this country, production has remained 
unchanged--or slightly improved--but, geographic distribution and 
access to those markets has degenerated:

   136 pulp and/or paper mills closed, '97--'07 (none have been 
        built since 1989) [7]
   331 softwood sawmills closed in the U.S. & Canada, '95--'07 
        [8]
   314 furniture plants closed, '00--'08 (hardwood indicator) 
        [9]

    In legislation and regulation, if we are truly to meet renewable 
energy goals (whether electricity or biofuels), wood must be allowed to 
make its full contribution. Some well-meaning organizations want 
renewable energy, but want to dictate which forests can participate. 
Currently, 92 percent of our nation's private forestland is natural 
[12]. In the southeastern United States, on private lands, 88 percent 
of forestland is natural [12]. However, with the current definition of 
``renewable biomass'' for the Renewable Fuels Standard of the 2007 
Energy Independence and Security Act (at its most restrictive), 
America's natural private forestlands are excluded from participation 
in the initiative to establish a renewable fuels industry. This kind of 
policy creates disincentives for private forest landowners to continue 
to hold and manage their forestlands. Anecdotally, we know that this 
2007 language has already resulted in acres and acres of tree removals 
for conversion to other land uses. This same definition will result, we 
believe, in land dedicated to fuel production at the expense of other 
traditional markets.
    In order to promote the continuation of sustainably managed forests 
on private lands, we must encourage markets for these landowners; 
voluntary markets. No definition that harms capital investment in 
energy facilities or taints the siting of those facilities can benefit 
the future of America's forestlands. Without broad, inclusive 
definitions for woody biomass, we are only encouraging the loss of 
private forestlands to other uses that typically are less 
environmentally friendly.
    So, our growing population leads to conversion. Fewer markets and 
less market access leads to conversion. And the constraints of new laws 
lead to conversion. The message is that constraints on the resource 
lead to conversion of forestland to other uses. How can one argue that 
disincentives to keep an investment--in this instance, privately held 
forestland--improve the likelihood of it continuance or its 
sustainability?
    Then, it is in the best interest of all who want to maintain a 
forested America to seek out incentives for forest landowners. The 
highest current concern to these landowners regards the definition of 
``woody biomass'' in statute and regulation. That is, woody biomass 
should be defined as ``wood'' in addition to wood residues, wastes, 
and/or byproducts. Ultimately, we must sustainably harvest trees as 
pulpwood, sawtimber, poles, pilings, chip-n-saw, OSB, wafferboard, and 
``energy-wood.'' Landowners would like to see wood as an equal partner 
with grains, grasses, and all cellulosic feedstocks.
                               references
          [1] Wear and Greis, USDA Forest Service, Southern Forest 
        Resource Assessment.
          [2] US Census Bureau Interim Projections Released April 2005
          [3] Susan Stein, et. al., USDA Forest Service, ``Forests on 
        the Edge''
          [4] David Wear, USDA Forest Service, ``Southern Forest 
        Resource Assessment''
          [5] Susan Stein, et. al. USDA Forest Service, ``Forests on 
        the Edge''
          [6] Butlerand Leatherberry, 2004. America's family forest 
        owners. Journal of Forestry 102 (7): 4-9
          [7] American Forest & Paper Association, 2007
          [8] USDA, ``Profile 2007: Softwood Sawmills in the US and 
        Canada''
          [9] George Barrett, Hardwood Review
          [1] New York Times, Jan. 6, 1905; http://query.nytimes.com/
        gst/abstract.html?res=940DE4DE133AE733A25755C0A9679C946497D6CF
          [2] ``Report on Terms Used in Biomass Credit Legislation'' 
        BioResource Management, Inc., Richard Schroeder May 21, 2007
          [3] 2002 Forest Resources of the United States, 2002. Gen. 
        Tech Rep. NC-241, Table 36
          [4] Forest Resources of the United States, 2007. Gen. Tech 
        Rep. NC-xxx, Table 36 (with permission from Greg Reams, 
        National Program Manager, F.I.A.)
     Responses of Scott P. Jones to Questions From Senator Sessions
    Question 1. What are we trying to achieve through a Renewable 
Electricity Standard (RES)? What are the goals? By focusing solely on 
renewables, are we limiting our options to achieve an adequate supply 
of clean, low-carbon, reliable, and affordable electricity?
    If the main concern surrounding RES is to have clean energy, then 
we should consider nuclear power. Nuclear power is produced in the 
United States, it has zero carbon dioxide emissions, and it does not 
put stress on agriculture products or the timber industry. Why has this 
source not been considered in the RES discussion?
    Answer. If an RES, an RPS, or any other energy provision, act, or 
package is passed by Congress, all sources of domestic energy feedstock 
are needed and should be used.
    But, please allow a correction to the implication that stress will 
be put on the timber industry. You may hear that adding a new RES 
market to existing markets will create an unsustainable resource. It is 
simply not true. We do not have enough markets for the wood that we are 
growing, as shown in the USDA Forest Services Resource Planning Act 
(RPA) data collected by the Forest Inventory Analysis program. The 2002 
data showed that across all species in the United States, we were 
growing 34 percent more volume then we removed [1]. Now, with the 
reduction of forest products manufacturing, we have seen an increase in 
the amount of growth versus removal. The 2007 RPA data shows a 41 
percent volume grown over removal [2]. The impact of the reduction of 
our forest products manufacturing is having a clear effect on the 
amount of wood being grown and the threat to the health of our forests 
and private forest landowners is eminent. We believe arguments to the 
contrary are likely disingenuous and perhaps more motivated by 
competition for raw materials, and/or feedstock preferences, and/or tax 
avoidance than resource sustainability. The forest resource is 
sustainable and this question has been asked and answered before. But, 
the willingness of forest landowners to maintain forestland as 
forestland has had too little attention. Federal forest policy must 
address the conundrum of what would motivate a forest landowner to 
continue to hold that investment when it is threatened by new and 
evolving forces; whether it is opportunities for better financial 
returns for their families, shrinking market access, or investment-
dampening legislation and regulation.
    Question 2. Why do you include energy sources that may yield some 
benefit in the future and do not have any short-term benefits, but 
continue to exclude nuclear power that has both short-and long-term 
benefits?
    Question 3. The US consumes approximately 1,000 gigawatts of 
electricity every year. The RES legislation would require approximately 
200 to 220 gigawatts to come from renewable energy sources by 2020. 
What percentage of the renewable energy mandate will be supplied by 
wind and why does wind have a larger potential than other renewable 
sources such as hydro or nuclear?
    Question 4. In your opinion, how will the southeastern states meet 
their mandate requirements since wind is not a significant energy 
source in this region?
    Answer. The southeastern states will need to tap their most 
plentiful renewable resource, woody biomass. However, this will not 
happen unless a broad definition of renewable biomass is enacted.
    Question 5. How will a RES affect the price of electricity in 
southeastern states?
    Answer. As with all renewable technologies, renewable power 
production is more expensive than current base load or peaking 
capacity. Thus, it can be expected that ultimately, any mandated 
renewable power mandate will increase the cost of electricity to the 
rate payer. However, the advantage of biomass energy is that biomass 
produces the least expensive power of all available and viable 
renewable technologies; is base load, meaning it produces power all the 
time as opposed to intermittently like wind and solar; and happens to 
be the South's most abundant renewable resource. Biomass, in general, 
has unique attributes among other renewable energy sources: it can be 
burned in existing coal-fired power production with relatively minor 
and inexpensive modifications; and it can be generated whenever the 
biomass developer or utility chooses.
                               references
          [1] 2002 Forest Resources of the United States, 2002. Gen. 
        Tech Rep. NC-241, Table 36
          [2] Forest Resources of the United States, 2007. Gen. Tech 
        Rep. NC-xxx, Table 36 (with permission from Greg Reams, 
        National Program Manager, F.I.A.)
    Responses of Scott P. Jones to Questions From Senator Mark Udall
    Question 1. How important are markets for woody-biomass, such as 
the one that could be created by the RES, in addressing forest health 
threats including insects, disease, and wildfire, not only in Colorado, 
but across the nation?
    Answer. Healthy forests and strong markets go hand in hand. As a 
part of maintaining and managing a forest, intermittent treatments to 
remove poor quality material, dead or dying material as a result of 
disease or insects, reducing fuel loads such as smaller diameter 
understory, etc. becomes necessary. The justification for a private 
landowner to be able to perform these treatments means that it must be 
economically viable, thus either break even or generate a profit. Any 
additional profit generated by the landowner will create cashflow that 
can then be use to meet other landowner objectives, often times putting 
money back into the land via establishing the ``next'' forest.
    Question 2. By removing woody biomass in responding to forest 
health threats and utilizing it towards renewable energy goals, what 
types of activities can landowners take to ensure their lands continue 
to be managed sustainably?
    Answer. Private forests are already regulated extensively via the 
Clean Air Act, the Clean Water Act, the Endangered Species Act, state 
mandatory and voluntary programs such as BMPs and state administered 
forest harvesting laws, cooperative agreements, and the like. All of 
these aim at maintaining the values that we deem as important from our 
nations private forests, such as clean air, water, protection of 
wildlife, recreation, aesthetics, etc. These standards apply to all 
harvesting removals from the forest, regardless of the type of product 
removed, and will undoubtedly apply to the removal of woody biomass for 
energy. Continued operation under this vast array of protections should 
continue to provide the same level of protection currently enjoyed.
                              Appendix II

              Additional Material Submitted for the Record

                              ----------                              

                        Statement of KeLa Energy
    KeLa Energy appreciates the opportunity to share our perspective on 
Chairman Bingaman's proposal for a national Renewable Electricity 
Standard or RES. Our company strongly supports policy efforts promoting 
use of renewable energy and we believe that our technology can help the 
nation achieve the renewable energy objectives specified in the 
Chairman's proposal.
    KeLa has patented an environmentally preferable fuel technology 
that blends waste products that currently have very few end markets and 
combines these wastes with renewable biomass to form a solid fuel that 
produces numerous energy and environmental benefits. The blended 
product can be used by electric utilities to generate power or by 
industrial users to fire boilers for combined heat and power systems 
and other applications.
    The components of the fuel are:

   Waste Carpet: carpet that is pulled from homes and 
        businesses during demolition and renovation that would 
        otherwise be destined for land disposal. Currently, landfills 
        receive between 7 and 10 billion pounds of carpet annually.
   Recycled Plastics: plastic material diverted from landfills. 
        Consumer and industrial waste--including difficult to handle 
        mixed-stream plastics, plastic bottles, trays and other 
        materials.
   Renewable, Carbon Neutral Biomass: saw dust and wood 
        residuals (bark, limbs, trimmings) from sustainable forestry 
        operations.
   Coal Fines: these so-called fines are just that--coal 
        particles that separate from already-mined coal during 
        transportation or preparation that are too small to process and 
        lay in piles at impoundment sites. Currently, over 2 billion 
        tons of coal fines are resting in 700 impoundment sites with 50 
        million tons added every year.

    The waste carpet and recycled plastics serve as binding agents for 
the coal fines and biomass. The end product is a pellet that resembles 
coal but with many enhanced performance characteristics:

   Considerably higher (20 percent) BTU value compared to coal
   Quick ignition producing less smoke on start-up than coal
   Combusts efficiently with far less unburned carbon in ash 
        than coal (29% v. 2%)
   Resists moisture so it can be stored outside

    In addition to enhanced performance, the fuel produces important 
emissions reduction benefits. KeLa fuel reduces carbon dioxide 
(CO2) emissions by almost 12 percent compared to coal. 
Sulfur emissions are reduced by 35 percent. Our certified test burns 
also demonstrate lower nitrogen oxide (NOX) emissions, lower 
volatile organic compound (VOC) emissions and reduced emissions of 
hazardous air pollutants. These benefits are delivered utilizing fines 
from coal that has already been mined, maximizing efficient use of the 
resource. In addition, the blended product can substitute for coal in 
the fuel delivery and combustion systems of existing boilers without 
equipment modification.
    The draft RES currently under consideration acknowledges 
traditional sources of renewable energy. We are concerned that this 
approach may risk excluding emerging fuel technologies like KeLa that 
blend renewable energy sources with waste diverted material to produce 
fuel that will help meet the legislation's objectives We understand 
that a fuel comprised of renewable and waste diverted components may 
not compare to virtual emissions-free performance that wind and solar 
technologies boast. However, wind and solar capacity is not prevalent 
in every region in the country. Moreover, the reduced emissions and 
efficiency benefits that have been demonstrated in our test burns are 
real and suggest that this fuel and others like it could serve as a 
critical bridge technology that will facilitate movement toward a green 
energy economy. As the Committee begins the process of further refining 
the RES proposal, we respectfully request that clarifying language be 
added to the bill that will allow emerging fuel technologies like ours 
to qualify in a national renewable electricity standard.
    We thank the committee for creating an opportunity to comment on 
this important issue and look forward to working with you in the coming 
months to craft a workable and balanced renewable energy policy.
                                 ______
                                 
                 Statement of Plum Creek Timber Company
                              introduction
    Plum Creek Timber Company is pleased to submit these comments to 
the Senate Committee on Energy and Natural Resources regarding the 
proposal for a Renewable Electricity Standard (RES). Plum Creek owns 
approximately 7.5 million acres of forest land in 19 states and is the 
nation's largest owner of private land and the largest seller of wood 
fiber. Plum Creek was also the first forest land owner to have its 
lands nationwide certified as sustainably managed under a third party 
program.
    Plum Creek believes that woody biomass from forests can make an 
important contribution to the nation's renewable energy goals if 
allowed to do so, and should be provided equitable treatment with other 
feedstocks and renewable energy technologies. With significant 
experience in long-term forest management, Plum Creek is equipped and 
willing to provide meaningful assistance to the committee as you seek 
to formulate an effective RES.
    Plum Creek is a member of the National Alliance of Forest owners 
(NAFO) and also of the Forest Landowners Association (FLA) who have 
both already submitted comments which we strongly support.
    In our comments, we would like to highlight two important 
underlying concepts and two policy considerations as you develop a RES.
    Two underlying concepts:

          1. New renewable energy markets can enhance the viability of 
        working forests and help ensure that the economic and 
        environmental benefits that forests provide society will 
        continue in the future. In other words, new renewable energy 
        markets are good for forestry and long-term forestland 
        ownership.
          2. Meanwhile, forestry is good for renewable energy. Forests 
        can help provide a diverse, sustainable supply of renewable 
        energy feedstocks, and can help ensure that we meet our 
        renewable energy goals at reasonable cost, therefore imposing 
        no additional cost burdens on the federal government.

    Two policy considerations:

          A. RES should contain a broad definition for renewable 
        biomass in order to assure an adequate supply of resources to 
        meet energy objectives.
          B. A RES should recognize the strong and effective existing 
        regulatory mechanisms already covering forestry activities.
                        two underlying concepts
1. New renewable energy markets are good for forestry
    The availability of energy markets for wood fiber provides forest 
land owners with a new tool to enhance forest health, to reduce forest 
fire hazard, and to justify investments in forest productivity. New 
wood fiber markets in renewable energy will promote thinning, forest 
health treatments and improved forest utilization, which is 
particularly welcome as traditional markets decline and, in some 
locations, disappear.
    The development of fiber markets for energy in this time of rapidly 
shrinking pulpwood demand will provide an incentive for timberland 
owners of all kinds to invest in their forests and to keep them in 
forests rather than converting to other uses. Private forests can 
increasingly provide for our renewable energy needs as forest 
productivity increases while providing a valuable service in capturing 
carbon from our atmosphere as well as the abundant other values that 
forests provide the nation.
2. Forestry is good for renewable biomass
    Our nation is endowed with a range of resources that can be used to 
achieve renewable energy goals, and the use of woody biomass from 
forests has some great advantages without which a RES is likely to fall 
short of its goal.

   Energy fiber can be produced as a co-product of forest 
        harvests and does not require land use conversion.
   Biomass generated electricity provides base load power that 
        can be used as a valuable backstop for other kinds of renewable 
        electricity.
   Forest biomass can be produced on a year-round basis and 
        does not require costly storage.
   Feedstock collection and transportation infrastructure is 
        largely in place and will not require large scale 
        infrastructure development.
   Forest biomass is plentiful in regions where other renewable 
        energy resources are lacking.
                       two policy considerations
A. A RES should contain a broad definition for renewable biomass

    A broad definition for renewable biomass that includes whole trees 
on private forest lands is important primarily for two reasons.
    The first is that a limited definition can severely constrain the 
amount of woody biomass that is available for meeting the RES. This 
limitation is unnecessary and poses the risk of eliminating this option 
as a viable contributor to the solution.

   Consider that production tax credits have been available as 
        an incentive for the use of closed loop biomass for over 20 
        years and has not resulted in the production of a single 
        megawatt hour from a forestry feedstock source since its 
        inception. ``Closed loop'' is a definition that is limited to 
        biomass that is specifically grown as an energy crop.
   The inclusion of wood that is ``waste'' or ``non-
        merchantable'' includes some additional material, but this 
        additional material can only be collected after all other 
        commercial opportunities are exhausted. Energy fiber should be 
        allowed to compete in the market place with other uses of wood 
        fiber.

    Some contend that limiting the definition of renewable biomass is 
important because of a concern that new energy markets will encourage 
land owners to harvest all of their forests today rather than growing 
them for more valuable markets tomorrow. This contention is unwarranted 
since the value of the fiber markets is the lowest produced from a 
forest, and energy fiber is the lowest value among fiber markets, and 
is therefore unlikely to drive the landowner's harvest timing 
decisions.
    Secondly, a definition that considers one part of a tree as 
renewable and another part not to be carries with it unworkable chain-
of-custody implications that would be a disincentive to woody biomass 
producers, especially given that energy material is often removed from 
the harvest site after being chipped or ground up.
B. A RES should recognize the strong and effective existing regulatory 
        mechanism already covering forestry activities
    Plum Creek is aware that certain interests are concerned that 
renewable energy incentives for wood fiber will create unintended 
consequences that need to be addressed and mitigated in the RES. These 
concerns are unfounded, largely because of the existing regulatory 
framework that governs forestry practices on forest lands throughout 
the nation at the state level. This approach has successfully enlisted 
landowners as partners with states without the force of direct federal 
regulation. To be effective as an incentive to private landowners' 
contributions to renewable energy, a RES must avoid new direct federal 
forest practice regulation.
    Every state with a forestry resource has a State Forester who is 
responsible for implementing a framework of practices that address 
environmental impacts related to forestry. This framework has been in 
place for decades. The State Foresters work closely with state water 
quality and wildlife agencies to implement oversight of forest 
management activities in their respective states. This accountability 
is supported by state sponsored monitoring which evaluates compliance 
with state best management practices, forest practice regulations, and 
accredited certification programs as well as evaluating effectiveness 
of the practices themselves. Results of this monitoring over years have 
demonstrated that this is a successful approach and is improving In 
some places, the increased utilization associated with an available 
energy market (biomass harvesting) has occurred for over 20 years hand 
has been incorporated into this monitoring and feedback loop that 
produces continually improving practices.
    Additionally, federal involvement in forest practices adds a new 
cost that is unnecessary and which the federal government can ill 
afford.
                               conclusion
    Thank you for considering Plum Creek's comments on this important 
legislation. We look forward to working productively with a wide group 
of stakeholders to help achieve America's energy goals.
                                 ______
                                 
            Statement of George Fitch, Mayor, Warrenton, VA
    Please accept my comments on an important exclusion which needs to 
be addressed to realize the full potential of renewable energy 
resources. I would like these comments to be part of the record for the 
RES hearings:
    The use of biosolids to produce different forms of renewable energy 
can make an important contribution to the goals of reducing our 
dependence on fossil fuels, reducing greenhouse gas emissions and 
increasing the supply of energy from renewable resources. As Congress 
has promoted the potential of other forms of biomass, and renewable 
sources, to be used in the production of fuels and energy, Congress 
should extend the same incentives to the use of biosolids in the 
production of fuel. All other forms of biomass including agricultural 
wastes, wood wastes and animal manures are identified as eligible 
biomass for certain tax incentives and financial assisstance programs. 
Biosolids is not included. Specifically, section 48 of the IRS Code 
needs to be amended to extend the 30% investment tax credit to Combined 
Heat & Power and other renewble energy facilities that use biosolids to 
produce a biofuel. Also, Section 45 of the IRS Code needs to include 
biosolids as an eligible biomass which when used to produce electricity 
is entitled to the production tax credit.
    Biosolids is used as a fertilizer in land application which often 
creates an environmental hazard because it can seep into the watershed 
and, in the case of Virginia and Maryland, end up in the Chesapeake 
Bay. (See attachment).* Instead, with the same encouragement extended 
by legislation to other forms of biomass, biosolids can be used to 
create renewable energy.
---------------------------------------------------------------------------
    * Graphic has been retained in committee files.
---------------------------------------------------------------------------
    (Gina, as you might recall when I testified back in February 2007, 
Senator DeMint encouraged me to look at all types of wastes for my 
waste to energy project to make Warrenton and Fauquier energy 
independent. Well, here's a waste that has been overlooked in the 
discussion and legislation on renewable energy)
    Please let me know if you require any additional information.
                                 ______
                                 
         Statement of the Biomass Thermal Energy Council (BTEC)
    The Biomass Thermal Energy Council appreciates the opportunity to 
share our perspective on a proposed national Renewable Electricity 
Standard (RES). BTEC is an association of biomass fuel producers, 
appliance manufacturers, supply chain companies and non-profit 
organizations that view biomass thermal energy as a renewable, 
responsible, clean and energy-efficient pathway to meeting America's 
energy needs. BTEC engages in research, education and public advocacy 
for the fast growing industry of biomass thermal energy.
    BTEC supports the committee's efforts at finding renewable energy 
solutions. Our concerns with the current draft RES are grounded in the 
proposal's narrow focus on electricity generation while overlooking the 
benefits of thermal energy as part of a broader suite of renewable 
energy solutions. Energy consumption in America can be divided roughly 
into thirds: one third electric generation, one third transportation, 
and one-third heating (thermal) (USDOE EIA). Federal and state energy 
policy has focused almost entirely on electric generation and 
transportation. State electric generation renewable portfolio standards 
(RPS) now exist in 32 states (Database of State Incentives for 
Renewables and Efficiency), providing powerful incentives for 
investment in and development of solar, wind, hydro, biomass and other 
electric generation renewable energy technologies. Federal production 
tax credits exist for biomass, solar, geothermal and wind electric 
generation. In recent years, federal policy has strongly supported 
development of renewable transportation fuels such as grain-based and 
cellulosic ethanol and biodiesel, through strong research and 
development support, demonstration project funding, and direct 
production credits and subsidies.
    Yet virtually no such support exists for thermal renewable energy 
technologies (except for some limited residential tax credits). The use 
of biomass to produce thermal energy must compete for finite feedstocks 
with electric and transportation fuel technologies that are strongly 
supported through subsidies; an unlevel playing field that places 
biomass thermal at a competitive disadvantage. For example, in New 
Hampshire there are seven commercial wood-fired power plants, 
collectively consuming approximately 1.7 million green tons of wood 
biomass annually to produce about 165 MW of electric output. Operating 
revenues at these facilities are supplemented by federal production tax 
credits and sale of renewable energy credits in New England states with 
RPS programs. Biomass heating must compete for wood resources that are 
artificially elevated in cost by these subsidies, yet the same public 
policy goals that provide the rational basis for these subsidies are 
also met by using biomass to make heat--at much higher energy 
conversion efficiencies than electric generation.
    The Biomass Thermal Energy Council supports outcome-based energy 
policy, rather than technology--based energy policy. We believe that 
policy should encourage energy technologies that maximize efficiency, 
minimize carbon emissions, reduce or eliminate demand for imported 
fossil energy, and reduce harmful air emissions such as particulate 
matter, and acid rain caused by SO2 and NOX. 
Policy should support those technologies that achieve the greatest 
combination of net benefit in furtherance of these attributes. For 
example, biomass is converted to electric energy at an efficiency rate 
of about 20-40%; biomass is converted to a liquid transportation fuel 
at an efficiency rate of about 40-50%; biomass can be converted to heat 
energy at an efficiency rate of 85-95%. However, our federal policy 
promotes and encourages biomass electric and cellulosic ethanol 
technologies, but provides virtually no support for the much more 
efficient biomass thermal technologies. As the committee continues to 
refine the RES proposal, we respectfully request that provisions be 
added that recognize the considerable benefits of thermal energy. For 
example, we would support 1) adding language that requires biomass 
electric generation to qualify for renewable energy credits only if it 
meets a minimum efficiency threshold of 50 percent (with credit for 
thermal output), effectively requiring cogeneration, 2) allowance for 
renewable energy credits for any thermal output from existing biomass-
fueled cogeneration facilities, and 3) a commitment by Congress and the 
administration to fully analyze the mechanisms to extend similar 
incentives and credits for thermal renewable energy technologies, e.g. 
biomass, solar thermal, and geothermal. we have specific suggestions 
for language that we would be pleased to share with the committee.
    We thank the committee for creating an opportunity to comment on 
this important issue and look forward to working with you in the coming 
months to craft a workable and balanced renewable energy policy.
                                 ______
                                 
Statement of John Droz, Physicist & Environmental Activist, Brantingham 
                                Lake, NY
    Thank you for reaching out for inputs from experts and concerned 
citizens concerning the possibility of a national Renewable Portfolio 
Standard.
    I am a physicist (with electrical energy expertise) with a 25+ year 
record as an environmental activist.
    My concern with some of the terms and conditions of the Economic 
Stimulus package, is that federal and state governments are about to 
throw a few hundred billion dollars down the drain. We cannot afford 
that!
    What's worse is that their likely plan will essentially assure (if 
Dr. Hansen, Al Gore, etc. are right) that we will have an environmental 
calamity of historic proportions.
    This is all coming about for one very simple reason: solutions to 
our very real energy problems are being driven by lobbyists, not the 
science.
    For instance, the carte blanche support of essentially all 
renewables--as if they are all roughly equivalent sources of electrical 
power--is inaccurate, and is not scientifically supportable.
    We should indeed be seriously considering alternative sources of 
electrical power, but the criteria should be that they would only 
receive government support (e.g. via RPS, PTC, etc.) if they are are 
least equal to existing sources of electrical power.
    ``Equal'' would be such well-defined grid considerations as 
reliability, predictability, dispatchability, cost, etc.
    Determining whether or not alternatives meet this critical criteria 
is a straightforward matter: subject each candidate to scientific 
methodology.
    So far, this has NOT HAPPENED with heavily promoted renewables like 
wind power and solar power.
    The good news on all this is that I have a guaranteed solution--and 
one that will cost us nothing! [See attached article about EEA.]
    Let me make an analogy here. Let's say I came to you 6 years ago 
and asked that the applicable senate committee do a well-researched 
series on subprime lending, and its offspring (e.g. derivatives).
    PBS had a recent special about how (with all the financial geniuses 
we have in the US) that we've gotten ourselves into such a financial 
mess. Interestingly the experts interviewed identified the exact same 
reasons that exist today regarding electrical energy: 1) we were too 
trusting, 2) the plans were built on faulty premises, 3) no thinking 
outside the box was listened to, etc.
    If an objective, comprehensive analysis had been done then, 
consider the extraordinarily enormous positive ramifications that would 
have had on hundreds of millions of Americans--indeed on billions of 
people world wide.
    Without exaggeration, this situation is of equal magnitude to the 
subprime fiasco. Indeed there are many that believe that the fate of 
the planet is at stake based on what we do right now.
    Please read the attached ``RPS--An Illusion of a Solution'' (PDF) 
for a different perspective on this matter.
    In short, the implications of the energy policies we are adopting 
(e.g. RPS's, blind support for all things renewable, not genuinely 
supporting nuclear power, etc.) all will have EXTRAORDINARILY NEGATIVE 
ECONOMIC & ENVIRONMENTAL CONSEQUENCES for our country.
    The solution is to carefully assess our options, and choose only 
those that have been independently and objectively proven to make 
scientific, economic and environmental sense.
                                 ______
                                 
      Statement of Laurence D. Wiseman, American Forest Foundation
    The American Forest Foundation, a nonprofit conservation 
organization that focuses on ensuring the continued viability of 
America's family-owned forests, believes that family forests offer 
tremendous potential as a source of clean, renewable energy to fuel 
both our nation's electricity and fuel needs. If Congress is to pass a 
renewable electricity mandate, such as that included in the draft 
legislation being considered by this Committee, it must allow for 
electricity generation from sustainable biomass from family forests.
    Currently, biomass supplies roughly three percent of our total 
energy consumption in the U.S. Most of this is consumed through 
industrial heat and steam production at pulp and paper and other wood 
manufacturing facilities. If you consider current forest inventories, 
family forests can sustainably supply a significant portion of 
additional biomass, which can be used to heat and power millions of 
homes or fuel millions of vehicles.
    While providing the nation with renewable energy, biomass 
harvesting from family forests can also increase the economic and 
environmental viability of these forests, helping landowners practice 
conservation and stay on the land.
    Because of the benefits for family forest owners and the 
environment, the American Forest Foundation supports increased 
opportunities for the production of renewable energy from sustainably 
managed family forests.
    To increase opportunities for renewable energy production from 
sustainable family forests biomass, Congress should enact renewable 
energy policies that:

   Allow all sustainably harvested forest biomass: renewable 
        energy policies, whether incentives or mandates, should 
        encourage the use of all forest biomass that is harvested 
        sustainably, including with verification through appropriate 
        mechanisms.
   Encourage family forest owner participation in markets: 
        renewable energy policies should ensure that small family 
        forest owners can participate in market opportunities and avoid 
        overly burdensome requirements that would prevent landowners 
        from participating.
   Ensure long-term viability of the industry: renewable energy 
        policies should encourage a long-term, sustainable, renewable 
        energy industry that supports strong rural economies and 
        healthy forest landscapes.
   Help Supplement forest products markets: Renewable energy 
        policies should supplement, not replace, existing forest 
        products markets.
   Consider Impacts on Forest Resources: Policies that 
        encourage energy production from forest biomass must consider 
        both the short and long-term impacts of renewable energy 
        markets on forest resources and avoid incentives that lead to 
        unsustainable forest management practices.

    Unfortunately, a previous market setting standard, the Renewable 
Fuels Standard, includes a very narrow definition of the forest biomass 
that is considered renewable under the standard. This definition 
restricts the use of biomass harvested from naturally regenerated 
forests, new plantation forests, and other ill-defined forest 
categories. We urge the Committee to avoid this prescriptive approach 
and instead encourage inclusion of all biomass that is harvested 
sustainably.
    It will be very difficult to meet a renewable electricity mandate, 
particularly in the southern part of the U.S., unless sustainable 
forest biomass is considered renewable and can be used to meet the 
standard.
    It is critical however, that we utilize this tremendous resource in 
a sustainable way--ensuring that family forests can continue to be a 
renewing, clean resource that the nation can depend on.
    Each year, the American Forest Foundation trains 30,000 educators 
and helps over 90,000 family landowners manage forests for wildlife, 
habitat, recreation and sustainable products. Through our programs such 
as the American Tree Farm System, and our conservation work on the 
ground, the Foundation strives to create new opportunities to help 
family forest owners stay on the land and manage it sustainably. 
Members of the Tree Farm system and participants in our other forest 
programs are committed to conservation and sustainable management, 
helping to ensure Americans have clean water and air, recreational 
opportunities, wildlife habitat, beautiful scenery, and products, 
including renewable energy.
    The American Tree Farm System is an internationally recognized and 
credible forest certification system, recently recognized by the 
Program for the Endorsement of Forest Certification Systems (PEFC). 
Family landowners certified in this system agree to comply with 9 
standards of sustainability, have a management plan that guides their 
forest management activities over the long-term, comply with all 
federal, state, and local laws, and agree to periodic auditing and 
verification of their forest management.
    Across the country there are over 10 million family forest owners 
who own nearly two-thirds of the private forestland in the U.S. These 
lands are critical national infrastructure, especially as climate 
change calls for additional carbon storage to reduce greenhouse gas 
emissions and demands increase for renewable energy to reduce our 
reliance on foreign energy sources.
    Producing renewable energy from sustainable family forests, gives 
family owners additional markets and revenue streams for their 
products. As traditional wood products markets, like those for paper or 
furniture products, continue to decline, family forest owners are left 
looking for other sources of revenue to help them stay on the land and 
keep their investment in their forest viable. AFF strongly believes 
that any renewable energy incentives should help supplement, not 
replace existing forest products markets. We believe both market 
opportunities have value and we can accommodate both on the landscape.
    While the markets for real-estate are low in many areas, family 
forest owners, particularly in rapidly growing areas, still feel the 
pressure to sell their land when developers come knocking. National 
averages point to a loss of roughly 2,000 acres a day of forests, as 
they are converted to parking lots, strip malls, and condominiums, 
never to be recovered. Annually, this amounts to about 1 million acres, 
an area roughly the size of the state of Delaware.
    In addition to forest loss, forested tracts are being broken up 
into smaller tracts at alarming rates, as more people move into 
forested areas. The US Forest Service predicts that by the year 2030, 
roughly 44.2 million acres of forests will see substantial increases in 
housing density.
    As you can see, the pressures are mounting, as family forest owners 
strive to stay on the land and keep their land as forests.
    Yet communities across America need privately owned forests to 
ensure clean water, wildlife habitat, recreation, and the many public 
benefits forests provide. Good forest management practices can also 
help reduce flooding, decrease the risk of large and uncontrolled 
fires, and reduce carbon from our atmosphere. Each year, our nation's 
forests capture and store ten percent of our total U.S. carbon 
emissions.
    Harvesting renewable energy from family forests in a sustainable 
manner will provide an important tool to help family forest owners stay 
on the land and maintain healthy, working forests in communities across 
America.
    Most renewable energy markets will rely on small diameter trees, 
tops, limbs and residues, and trees removed to allow room for healthier 
trees to grow. Removing these materials can increase the health of 
forests, making the forest more resilient when impacted with insects, 
diseases, or wildfires. Often, removing these materials improves 
wildlife habitat and forage areas for key species.
    Many existing forest management tools, such as forest certification 
systems, management planning, professional forester involvement, and 
the implementation of best management practices, are in place to help 
family forest owners to manage their lands sustainably. We urge the 
Committee to utilize these existing tools to the greatest extent, and 
avoid new stipulations that would reduce the viability of the biomass 
market for small forest owners.
    The American Forest Foundation looks forward to working with you to 
craft legislation that addresses the above issues and gain support for 
these concepts.
                                 ______
                                 
        Statement of the National Association of State Foresters
    The National Association of State Foresters (NASF) greatly 
appreciates the opportunity to provide a written statement to the 
Senate Energy and Natural Resources (Committee) majority staff 
regarding a proposed federal renewable electricity standard (RES). NASF 
is a non-profit organization comprised of the directors of all state 
and territorial forest management agencies in our country. Our members 
have a public trust responsibility for managing and protecting two-
thirds of the nations' forestland, which is held in private or state 
ownership. NASF views forests as a strategic national resource and 
offers the following recommendations as the Committee and Congress work 
toward a solution addressing climate change and the nation's economic 
and energy security needs.
  I. NASF Supports an RES that Takes Advantage of Forests' Energy and 
                            Climate Benefits
    NASF promotes the development of policies and programs related to 
harvesting forest biomass for energy that ensure the sustainability of 
forest resources. State Foresters approach issues related to wood-based 
bioenergy and renewable fuels from the following perspective:

   NASF views forests as a strategic national resource and 
        supports diverse and robust markets for the full spectrum of 
        woody materials to allow landowners and forest managers to 
        practice sustainable forestry. Emerging and existing markets 
        for wood-based bioenergy and renewable fuels offer new 
        opportunities to utilize previously unused, unmerchantable 
        material.
   Intensive forest management can improve growth rates and 
        productivity of forest stands resulting in increases in woody 
        biomass (and other forest products) and greater ability of 
        forests to sequester carbon.
   Woody-biomass is a secure, cost-effective source of 
        renewable energy, which--in many cases--is produced locally and 
        can generate revenue for urban and other forest-based 
        communities. Biomass electric facilities can create between 2.4 
        and 5.0 direct jobs for each MWH of installed capacity.*
---------------------------------------------------------------------------
    * Innovative Natural Resources Solutions. 2008. A Strategy for 
Increasing the Use of Woody Biomass for Energy. Prepared for the 
National Association of State Foresters Forest Markets Committee. Last 
accessed online at: http://www.stateforesters.org/
---------------------------------------------------------------------------
   Forest residues in the United States can generate enough 
        electricity (56 million MWH) to power all of Wyoming, Montana, 
        Delaware, DC and Vermont annually. These same 93 million green 
        tons of residue could alternatively produce four billion 
        gallons of ethanol to displace the gasoline used each year in 
        Washington, D.C., Delaware, Maryland, New Jersey and 
        Pennsylvania.*
    ii. federal policy should not interfere with the ability of the 
     nation's forests to sustainably contribute to renewable energy
    Forestlands in the U.S. can produce 368 million dry tons of biomass 
feedstock annually, yet the country currently derives only three 
percent of its energy from wood. Woody biomass as a fuel source has the 
potential to create thousands of new jobs and substantially increase 
the percentage of renewable sources needed to meet the nation's energy 
demands. Sustainably managed trees and forests can mitigate and adapt 
to climate change while providing other societal benefits such as clean 
air and water, wildlife habitat, recreation and thousands of forest 
products. Trees in urban areas provide enormous savings in commercial 
and residential energy costs and provide environmental air and water 
benefits beyond any other form of engineering. Wood-based bioenergy 
initiatives are also providing new markets that give landowners more 
options to retain and manage their forests while generating income and 
promoting economic development in forest-based communities. Realizing 
these benefits, however, will hinge on Congress' ability to craft 
federal policy that does not interfere with the ability of all the 
nation's forests to potentially contribute to renewable energy.
    NASF has particular concerns with the current definition of 
eligible biomass found in the Energy Independence and Security Act of 
2007 (EISA). As it stands, the definition severely constrains the 
ability of non-federal forest lands to supply feedstock to our nation's 
renewable fuels goals. Mandating that the over two-thirds of our 
nation's forests that fall outside of federal ownership can only supply 
feedstock as a byproduct of other production ignores the fact that our 
state and private forests can supply biomass effectively and in an 
environmentally sustainable manner. Limiting the ability of forest 
landowners to profit from their forests increases the likelihood that 
the forest will subsequently be converted to some form of non-forested 
development. New plantations either established on bare land or 
converted from other vegetative cover after the date of enactment do 
not qualify as source material.
    The current definition also effectively and practically eliminates 
the ability of our public forest lands to supply feedstock for 
renewable fuels. Permitting public forest lands to supply feedstock 
would provide a multitude of benefits, including improved overall 
forest health and the reduction of the hazardous fuels that serve as 
the lynchpin for catastrophic wildfire. The exclusion is overly 
restrictive--particularly in light of the extensive network of federal 
environmental laws (e.g., NEPA, NFMA) which guarantee sustainability--
and essentially eliminates market forces from helping cover the rising 
costs of forest health and fuel reduction treatments at a time when 
warming climates and limited budgets suggest it is needed most.
     iii. federal policy should provide states flexibility to help 
                   accomplish renewable energy goals
    State Foresters have statutory authority to ensure the 
sustainability of the nation's nearly 500 million acres of state and 
private forests. The forest types in each state are as diverse as the 
people and the economies in which they are situated. As a result, a 
national, one-size-fit all approach to defining forest management and 
land use policy in an RES will be problematic as it does not reflect 
the diverse and unique context for each and every forest and the laws 
of each state. NASF supports shifting focus of criteria away from 
federal definitions and towards addressing sustainability through 
existing tools, common forestry practices and other well established 
procedures. State Foresters are best-positioned to make decisions 
regarding sustainable forest biomass utilization that do not adversely 
impact local forest conditions.
    NASF supports an approach that takes advantage of the strong 
environmental record provided by the vigorous network of federal and 
state laws and regulations alongside other voluntary programs that 
provide the necessary safeguards for woody-biomass removals. 
Accomplishing renewable energy goals should rely on the ongoing work of 
federal natural resource agencies, state forestry agencies and state 
forest management Best Management Practice (BMP) bodies, and 
nongovernmental natural resource professionals.
    State Foresters want to ensure sustainability in an RES, while 
avoiding impractical prescriptions and pricing biomass utilization 
systems out of the range of feasibility. Sustainability requirements 
should be defined by the state, be feasible in implementation and 
enforcement, and should limit administrative, ``transaction'' and 
operational costs to allow all forest landowners to participate. 
Without these elements, forests--particularly from the 10 million 
small, non-industrial ownerships--will play a limited role in meeting 
the RES.
iv. broad definition of forest biomass should be included in a federal 
                     renewable electricity standard
    NASF urges a broad definition of renewable biomass that fully 
recognizes that all of our nation's forests are a renewable resource 
and ready source of biomass feedstock regardless of the political 
boundaries that surround them. Restricting wood from private lands and 
prohibiting the use of wood from federal lands are unnecessary 
constraints that leave out completely sustainable and readily available 
sources of green energy. This will needlessly hamper our nation's 
efforts to address greenhouse gas emissions and national security 
concerns related to reliance on foreign fossil fuel sources.
    A broad definition in the RES can help address many of the barriers 
which stand in the way of meeting management objectives on all of the 
nation's forests. First, it can help generate critical markets for 
woody biomass which provide new income sources for families and 
individuals helping them cover their costs to own and maintain their 
forests. Keeping forestlands working and sustainable is a primary 
driver for our policy positions. Second, new markets are accompanied by 
new industry and an opportunity for communities to create and maintain 
family-wage jobs and diversity their economies. Third, local biomass 
markets provide new opportunities for public land managers to treat 
more ``at-risk'' acres, dispose of slash in way that is timely, and 
reduce emissions released by wildfires.
v. nasf is ready to help craft responsible renewable energy legislation 
                   that benefits the nation's forests
    NASF commends the Committee and Congress on addressing the immense 
challenge of reducing the nation's dependence on fossil fuels. All 
renewable resources will be needed to meet the country's energy needs. 
Forests have a key advantage given their ability to produce energy 
independent of atmospheric conditions that other renewable sources are 
subject to. NASF believes there are constructive and practical options 
to consider as we work to ensure the sustainability of our nation's 
forest resource. We stand ready to help craft a RES that addresses 
sustainability concerns related to forests in a way that draws upon the 
strength of existing--and adapting where necessary--forest practices to 
meet local forest conditions.
                                 ______
                                 
             Statement of the Society of American Foresters
    On behalf of the Society of American Foresters (SAF), which 
represents every segment of forestry in the United States with more 
than 14,000 members, please accept the following testimony for the 
Hearing Record on the Renewable Electricity Standard (RES) held 
February 10, 2009.
    As an organization chartered to advance the science, education, 
technology, and practice of forestry for the benefit of society, the 
SAF believes that woody biomass energy from our nation's forests is 
part of the solution to supplying America with reliable renewable 
energy. As the Senate is aware, it is distressing that at a time when 
considerable efforts are being made to address global climate change--
by preventing the conversion of forests to competing uses and by 
mitigating the likelihood of increasingly devastating wildfires--the 
definition of ``biomass'' in a federal RES could needlessly limit the 
management options available to federal land managers, and diminish the 
market incentives available to private forest landowners that allow 
them to resist development pressures and maintain their land as forest. 
We commend the Senate's efforts to craft a more scientifically, 
socially, and ecologically appropriate definition, which can help 
balance the nation's most pressing forest management needs and 
safeguard the important environmental and societal values our 
forestlands provide.
    SAF supports strategies and policies that promote the development 
of economically and environmentally viable forest biomass energy 
production together with those that assist communities, forest owners, 
public forest managers, and local entrepreneurs in accomplishing urgent 
wildfire prevention and forest health improvement projects. This 
includes appropriately defining ``woody biomass'' in any federal 
legislation.
    Increased utilization of forest biomass will also help combat 
global climate change and improve the nation's energy security by 
providing an abundant, renewable fuel resource as a substitute for 
imported fossil fuels in both public utility and industrial power 
generation facilities. On public lands in the West, many of the 
silvicultural treatments prescribed to reduce the risk of catastrophic 
wildfire and improve forest health will generate large volumes of 
forest biomass. Increased utilization of forest biomass can improve 
forest conditions in the eastern and southern states as well, where 
additional markets for low-quality and small-diameter trees also will 
enable forest managers to improve forest health. On other forests, both 
public and private across the country, forest health and restoration 
treatments are needed to control insects and disease and to improve 
wildlife habitat and watersheds. This type of management can be costly, 
as much of the biomass removed currently has little to no value. An 
RES, structured appropriately, would help to create a market for woody 
biomass. This, in turn, could encourage much-needed forest health or 
fuels reduction projects by offsetting some of the cost of biomass 
removal. An RES with a restrictive, one-size-fits-all definition would 
encourage the opposite.
    Lately, there has been much discussion of the sustainability of 
biomass power generation under a federal RES. There are two potential 
approaches to addressing sustainability. An outcome based approach 
would allow a broad definition and the flexibility to manage forestland 
sustainably. Ideally, on private land, this would be done with the 
assistance of a professional forester who writes a management plan that 
addresses soil conservation, water quality, wildlife habitat, and 
biodiversity. This approach would allow management decisions to be site 
specific and unique to the forest stand being managed. It also would 
serve as a powerful incentive for landowners to consult with 
professional foresters to promote best management principles, and to 
allow management efforts to adapt to changes in the landscape or as new 
science and management techniques become available (i.e., adapting 
climate change or other disturbances).
    The second approach is prescriptive and process-based, and would 
include a one-size-fits-all definition that precludes certain biomass 
through diameter limits or other prescriptive requirements. Although 
this method may give some interested parties a level of comfort, it is 
a disservice to our nation's forests and has no basis in science. 
Forests are complex, diverse, and in constant flux as a result of 
natural and man-made disturbances. No two acres are alike and, as such, 
no two acres should be treated alike. Thus, a prescriptive definition 
could serve as a disincentive to restore forest health in many areas, 
because federal requirements would be too onerous and may even 
contradict necessary silvicultural treatments. The 2007 Energy Bill's 
Renewable Fuels Definition of ``renewable biomass'' is a good example 
of this problem.
    In regard to public lands, the SAF believes current laws and 
regulations, such as the National Environmental Policy Act (NEPA), 
National Forest Management Act (NFMA), and the Federal Land Policy and 
Management Act (FLPMA), provide more than adequate requirements for the 
sustainability of biomass removal. Past biomass definitions have 
excluded areas such as Wilderness, Wilderness Study Areas, and 
inventoried Roadless areas. Although this is politically 
understandable, from a forestry perspective it makes little sense. Some 
of these areas are in need of habitat restoration, insects and disease 
containment, or fuels reduction projects, which could maintain the 
character of these special designations while simultaneously improving 
forest health. Land managers in the Forest Service and Bureau of Land 
Management should decide what projects are needed and where. The 
biomass from these projects should count toward an RES that helps 
offset the cost of removal and stretch appropriated dollars toward the 
further improvement of public lands.
    Finally, it's important to remember that forest resources are 
renewable. Although some biomass may be removed from public or private 
land, it will inevitably grow back and likely need to be removed again. 
There are roughly 20 billion board feet of new growth and 10 billion 
board feet of mortality on our national forests every year. In 
contrast, there are (on average) two billion board feet of removals. As 
we discuss the sustainability of biomass, which is imperative, we 
cannot forget that we are losing ground in our efforts to restore 
public forests. We also must remember that creating a viable biomass 
market through an RES will help protect private forestlands from 
development and safeguard the environmental and economic benefits on 
which we all depend.
                                 ______
                                 
          Statement of the National Alliance of Forest Owners
                              introduction
    The National Alliance of Forest Owners (NAFO) is pleased to submit 
comments to the Senate Committee on Energy and Natural Resources 
(Committee) majority staff draft for a Renewable Electricity Standard 
(RES) proposal. NAFO is an organization of private forest owners 
committed to promoting Federal policies that protect the economic and 
environmental values of privately-owned forests at the national level. 
NAFO membership encompasses more than 74 million acres of private 
forestland in 47 states. NAFO members are well positioned to help our 
nation meet its renewable energy objectives, and NAFO is prepared to 
work with the Committee and Congress toward that end.
    Private working forests are a fundamental part of the strategic 
natural resources infrastructure of our nation, producing renewable, 
recyclable and reusable wood and paper products, sustaining plants and 
wildlife, producing clean water and air, and providing recreation 
experiences. Working forests also play a substantial role in helping 
this country achieve energy independence while reducing greenhouse gas 
(GHG) emissions. Forest biomass is a renewable energy feedstock that 
can help meet our national renewable energy goals in all regions of the 
country, if placed on a level playing field with other renewable energy 
sources.
    NAFO asks this Committee to recognize biomass from private working 
forests as an eligible feedstock on an even playing field with other 
renewable energy sources as it 1develops a federal renewable 
electricity standard. The RES should recognize that forest owners 
already work within a well established framework of laws, regulations 
and non-regulatory programs and actions that promote and maintain 
responsible forest management, and will continue to do so as they help 
our nation meet its renewable electricity objectives.
ii. our nation will not meet its objectives to increase our reliance on 
secure, domestic sources of renewable energy without the contributions 
                           of working forests
    Wood is a dependable, domestic renewable energy resource that can 
be utilized for energy production through a variety of processes like 
biomass generation, wood gasification, and conversion to cellulosic 
biofuels. Wood, wood residuals and other plant material can be utilized 
to produce steam and heat hot water boilers. Steam can be converted to 
electrical power by turbines or used to heat to buildings through 
piping distribution networks. Newer ``wood gasification'' technologies 
heat wood in an oxygen-starved environment, collect gases from the 
wood, and later mix the gases with air or pure oxygen for combustion. 
Wood gases can be cooled, filtered, and purified to remove pollutants 
and used as fuel for internal combustion engines, micro-turbines, and 
gas turbines.
    As members of the Committee have discussed in the past, a federal 
RES that does not appropriately include all forms of forest biomass 
poses challenges to regions of the country where forest biomass is the 
prevailing renewable energy source and where wind, geothermal, solar or 
hydroelectric power are not expected to make a significant 
contribution. Biomass, for example, already produces roughly 53 percent 
of the nation's non-hydro renewable electricity.\1\
---------------------------------------------------------------------------
    \1\ U.S. EIA at www.eia.doe.gov/cneaf/alternate/page/
renew_energy_consump/table3_html--Biomass is the primary energy source 
for 55.4 billion kilowatt hours of the 103 billion kilowatt hours of 
non-hydro renewable energy produced in 2007 (preliminary figures, 
subject to revision).
---------------------------------------------------------------------------
    Existing state RES policies reflect the importance of utilizing 
biomass to successfully lower demand for traditional fossil fuels. To 
help meet renewable energy goals, at least 25 states and the District 
of Columbia have all included biomass as a renewable generation source. 
A federal standard that does not acknowledge or encourage the full use 
of forest biomass could jeopardize the nation's ability to meet its 
overall renewable energy objective.
   iii. definitions of eligible biomass feedstock should put working 
  forests on an even playing field with other renewable energy sources
    Definitions of qualifying renewable energy feedstocks should 
provide a level playing field for market access across all feedstock 
sources and encompass the full range of forest biomass, including trees 
and other plants, forest residuals (e.g., tops, branches, bark, etc), 
and byproducts of manufacturing (e.g., sawdust, bark, chips, dissolved 
wood retrieved from the paper-making process, etc). Presently there are 
at least four different definitions of qualifying forest biomass in 
federal statute\2\. This adds complexity and confusion to project 
developers, biomass producers and federal program administrators who 
are required to determine how the various, and at times conflicting, 
definitions interact with one another.
---------------------------------------------------------------------------
    \2\ Separate definitions of eligible forest biomass can be found in 
Section 45 (c)(3) of the Internal Revenue Code (26 U.S.C. 45(c)(3)); 
Section 203(b)(1) of the Energy Policy Act of 2005 (42 U.S.C. 
15852(b)); Section 201(1)(I) of the Energy Independence and Security 
Act of 2007 (42 U.S.C. 7545(o)(1)(I)); and Section 9001(13) of the 
Food, Conservation, and Energy Act of 2008 (7 U.S.C. 8101 (12)).
---------------------------------------------------------------------------
    NAFO has particular concern about the definition of eligible forest 
biomass found in the Energy Independence and Security Act of 2007 
(EISA). As currently written, this definition places confusing 
parameters on significant acreages of private forestlands in the form 
of land use restrictions. These restrictions limit the ability of 
forest biomass to contribute to meeting the ambitious mandate to 
produce 36 billion gallons of renewable fuels annually by 2022.
    The EISA definition significantly restricts the use of forest 
biomass from naturally growing and regenerating forests, which make up 
more than 90 percent of our nation's non-federal forests. By doing so, 
it removes potential markets and viable economic options needed by 
private forest owners to support thinning for a variety of sustainable 
forest management practices, and who are already experiencing economic 
pressures from the steep declines in traditional markets such as solid 
wood and pulp and paper manufacturing. It also places forest biomass at 
a significant disadvantage to other biomass feedstocks, such as short 
rotation agricultural crops that require more energy, nutrients and 
water to grow, as well as other renewable energy sources.
    If applied to a federal renewable electricity standard, the 
definition of qualifying forest biomass in the EISA could discourage 
necessary and appropriate forest management activities that promote 
forest health and sustainability. It also creates complex chain-of-
custody requirements that could cause electricity producers to exclude 
large portions of potential feedstock supply in order to meet 
compliance requirements. If identifying qualifying feedstock becomes 
too complex or costly, project developers may forego the development of 
facilities that use forest biomass altogether, thereby placing the 
overall RES in jeopardy.
iv. utilizing working forests will both meet our nation's energy needs 
    and help reduce atmospheric greenhouse gas (ghg) concentrations
    Experts have long recognized working forests as a source of real 
and verifiable reductions in greenhouse gases and a cost-effective 
source of industrial GHG offsets. The United Nations' 2007 
Intergovernmental Panel on Climate Change (IPCC) highlights forest 
management as a primary tool to reduce GHG emissions. The IPCC states 
that, ``In the long term, a sustainable forest management strategy 
aimed at maintaining or increasing forest stocks, while producing an 
annual sustained yield of timber, fiber or energy from the forest, will 
generate the greatest mitigation benefit''.\3\
---------------------------------------------------------------------------
    \3\ Climate Change 2007: Mitigation. Contribution of Working Group 
III to the Fourth Assessment Report of the Intergovernmental Panel on 
Climate Change [B. Metz, O.R. Davidson, P.R. Bosch, R. Dave, L.A. Meyer 
(eds)], Cambridge University Press, Cambridge, United Kingdom and New 
York, NY, USA, page 543.
---------------------------------------------------------------------------
    Similarly, the EPA has concluded that there is ``scientific 
consensus' that the carbon dioxide emitted from burning biomass will 
not increase CO2 in the air if it is done on a sustainable 
basis.''\4\ This position is supported not only by the IPCC, but also 
by the Energy Information Administration (EIA), the World Resources 
Institute (WRI) and other credible scientific bodies.
---------------------------------------------------------------------------
    \4\ U. S. Environmental Protection Agency Combined Heat and Power 
Partnership, Biomass Combined Heat and Power Catalog of Technologies, 
96 (Sept. 2007) available at www.epa.gov/chp/documents/
biomass_chp_catalog.pdf.
---------------------------------------------------------------------------
    Appropriately including forest biomass in an RES standard would 
take full advantage of these carbon mitigation benefits in the energy 
context. Likewise, a policy that discourages forest biomass utilization 
will forfeit these benefits, particularly in areas where fossil fuels 
are the predominant source of energy production and where alternative 
forms of renewable energy, such as wind, solar and geothermal, are not 
viable options.
  v. forest owners work within a well-established framework of laws, 
   regulations and non-regulatory programs and actions that maintain 
                     responsible forest management
    Private forestry operations are regulated by a fairly complex set 
of laws, regulations, and non-regulatory policies at the federal, state 
and local level. While the resulting framework is fairly complicated 
and can vary widely between jurisdictions, overall it has been very 
effective in improving the environmental performance of forestry 
operations, and can be expected to do so in the future.
    Under this framework, working forests provide significant 
environmental benefits while providing important economic benefits like 
renewable energy. Watershed protection, wildlife habitat, carbon 
dioxide absorption, and other ``environmental services'' are currently 
provided by private landowners at little or no cost to society. 
Whenever policymakers consider new environmental requirements on 
private forestry, such as eligibility requirements for forest biomass 
intended for energy use, the implications for the economic viability of 
working forests should be considered. If new regulatory requirements 
reduce the private forest owner's ability to realize value from a 
working forest; or if new market limitations constrain market 
opportunities for working forests, private forest owners might be 
compelled to consider other uses for their forests, which could result 
in the reduction of many of the broader environmental benefits they 
provide.
    Attached is a white paper describing the various federal, state and 
local laws, regulations and non-regulatory programs and activities 
influencing private forest management. We anticipate that this summary 
will be helpful to the Committee in comparing the environmental 
performance of private forests to other biomass feedstock sources and 
ensuring that new policies do not duplicate, complicate or jeopardize 
the already successful delivery of environmental benefits provided by 
current forest practices.
 vi. nafo is prepared to work with congress and other stakeholders to 
  realize the contributions of working forests in energy policy in an 
                    environmentally responsible way
    NAFO is prepared to help develop a constructive approach to using 
forest biomass to help meet our nation's energy needs. Notwithstanding 
the strong record of environmental benefits private forests 
provide,NAFO is prepared to work with policy makers and other 
stakeholders to ensure that forest biomass, and all other sources of 
renewable energy, help meet our renewable energy objectives in an 
environmentally responsible way.
    NAFO suggests the Committee apply the following principles when 
crafting legislation addressing the eligibility of forest biomass as a 
renewable energy source

          1. Federal renewable energy policy should promote rather than 
        discourage the use of forest biomass for renewable energy.--
        Federal policy, and definitions of qualifying forest biomass in 
        particular, should be broad and inclusive so as to encourage 
        forest biomass utilization and foster cost-effective 
        compliance. If definitions and compliance requirements become 
        too complex (e.g. the RFS definition), they will place forest 
        biomass at a disadvantage with respect to other feedstocks or 
        renewable energy sources and ultimately discourage its use. 
        This, in turn, would jeopardize the overall goal of the RES and 
        potentially reduce the carbon mitigation and other 
        environmental services private working forests provide.
          2. Federal policy should acknowledge and support existing 
        federal, state, local, and nongovernmental forestry practices 
        and capabilities.--Federal policy should acknowledge and 
        support the existing framework of federal, state and local 
        laws, practices and capabilities that influence current forest 
        practices, including the ongoing work of federal natural 
        resource agencies, state forestry agencies, bodies that 
        administer state water quality BMPs, and nongovernmental 
        natural resource professionals. This existing framework is well 
        suited to address local conditions and needs. Federal policies 
        should also assume that this framework will continue in the 6 
        long-term and be applied to all forestry practices, whether 
        associated with traditional or emerging markets.
          3. Federal policy should recognize that state and local 
        resource professionals are best positioned to identify and 
        address changing resource conditions and emerging needs.--Given 
        the uniqueness and diversity of forest ecosystems across the 
        nation, it is extremely problematic to set forest management or 
        land use standards in a federal policy. Potentially changing 
        resource conditions and needs are best addressed with a more 
        tailored approach at the local level by state and local 
        authorities using existing tools, common forestry practices, 
        and well-established procedures.
          State and local authorities should continue to fulfill their 
        responsibilities to assess any changing resource conditions 
        associated with existing or future forest practices, including 
        the use of biomass to meet federal energy standards, and make a 
        determination as to whether additional measures are needed to 
        address emerging needs. If state or local authorities determine 
        that additional measures are necessary, they should be allowed 
        to continue the current practice of identifying and taking 
        necessary corrective measures, following the BMP model that has 
        proven highly successful across the country in protecting water 
        quality.
                            vii. conclusion
    NAFO strongly supports our nation's efforts to establish new 
sources of renewable energy, and thereby reduce its dependence on 
fossil fuels and imported energy. America's working forests can play a 
fundamental role in meeting these new and growing energy needs. U.S. 
policies should encourage investment in forests as a source of 
renewable energy, by establishing non-restrictive definitions of forest 
biomass eligible for use in renewable energy programs.
    A Federal RES, if adopted, should fully include forest biomass as a 
renewable energy source, and ensure that the definition of biomass 
encompasses the full range of forest biomass, including trees and other 
plants; forest residuals; and wood byproducts including sawdust, bark, 
wood chips, and dissolved wood. In addition, Federal policy should 
allow state and local authorities to continue their current role in 
assessing resource conditions associated with forest management 
establishing, where needed, any additional measures that may be needed 
to address emerging resource needs associated with the use of forest 
biomass for renewable energy production.
    Such an approach will enable our country to meet is renewable 
energy objectives and allow working forests to make their full 
contribution to our nation's renewable energy portfolio while providing 
important additional environmental benefits, such as reduced GHG 
emissions, clean water, wildlife habitat quality recreation and other 
environmental benefits Americans need and enjoy.
                        Attachment.--White paper
  the environmental regulation of private forests in the united states
    Private forestry operations are regulated by a fairly complex set 
of laws, regulations, and non-regulatory policies at the federal, state 
and local level. While the resulting framework is fairly complicated 
and can vary widely between jurisdictions, it has been effective in 
improving the environmental performance of forestry operations, and can 
be expected to do so in the future.
    In addition to useful forest products, jobs and economic activity, 
working forests provide significant environmental benefits. Watershed 
protection, wildlife habitat, carbon dioxide absorption, and other 
``environmental services'' are currently provided by private landowners 
at little or no cost to society. Whenever policymakers consider new 
environmental requirements on private forestry, such as eligibility 
requirements for biomass feedstocks intended for energy use, the 
implications for the economic viability of working forests should be 
considered. If new regulatory requirements reduce the private forest 
owner's ability to realize value from a working forest; or if new 
market limitations constrain market opportunities for working forests, 
private forest owners might be compelled to consider other uses for 
their forests, which could result in the reduction of many of the 
broader environmental benefits they provide.
                               background
    Private forests are currently regulated at the federal, state, and 
local level. The Federal Clean Water Act, Clean Air Act, Endangered 
Species Act, Insecticide Fungicide and Rodenticide Act, and the Coastal 
Zone Management Act each apply to private forest operations. These laws 
have been implemented through a variety of state programs, regulations, 
court decisions, agency precedents and policies. More narrowly focused 
State forest management regimes, local land use requirements, zoning 
and other stipulations have also been used to regulate or manage 
forestry operations. Additionally, third party sustainable forestry 
programs and a variety of voluntary agreements have also been used to 
achieve desired environmental goals.
    There is considerable evidence that this complex framework of 
regulatory and non-regulatory activities has substantially reduced 
adverse environmental impacts from forestry, and will continue to do so 
in the future. While this paper will not exhaustively chronicle the 
scope of methods available to government at every level to regulate, 
manage, encourage or influence activities on private forests, many of 
the primary methods are listed here.
                          the clean water act
    The Clean Water Act\1\ is arguably the federal law of predominant 
relevance and application. Since forestry operations generally involve 
the construction of access roads and water crossings, as well as the 
disturbance or removal of trees and plants that would otherwise tend to 
control erosion, most of the environmental concerns related to forestry 
operations involve the protection of water quality and aquatic habitat. 
Forestry operations can also involve the disturbance of plant litter 
and soil, the application of herbicides and fertilizers, equipment 
lubrication and refueling.
---------------------------------------------------------------------------
    \1\ The Federal Water Pollution Control Act of 1972 (Public Law 92-
500), as amended.
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    Under the Clean Water Act, ``point sources'' such as industrial 
facilities and wastewater treatment plants with effluents that can be 
directly monitored at known outfalls are regulated with a permit system 
based on technology-based effluent limitations. Conversely, ``non point 
sources'' such as runoff from forests and farms cannot be so easily 
monitored, measured or regulated. This is particularly true with 
forestry, since forestry activities generally involve numerous 
relatively small operations occurring sporadically over large amounts 
of space and long periods of time, often by different landowners 
operating independently of one another. Complicating the situation is 
the fact that different forests, even those in close proximity with one 
another, may have vastly different characteristics in terms of 
topography, tree species, soil types, wildlife habitat, geology and 
hydrology. Consequently, the approach to protecting the environment 
from forestry activities must be adapted to local conditions and 
circumstances.
    Efforts to control non point source pollution from forest 
operations have been fairly successful. National Water Quality 
Inventories conducted by the Environmental Protection Agency now 
contend that ``the most significant source of water quality impairment 
to rivers and streams and lakes, ponds, and reservoirs is agriculture, 
and the most significant source of impairment to estuaries is municipal 
point sources of pollution.''\2\ Other significant sources include 
urban runoff, storm sewer discharges, and pollutants deposited from the 
atmosphere.\3\
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    \2\ National Management Measures to Control Nonpoint Source 
Pollution from Forestry. Page 1-1. EPA-841-B-05-001, United States 
Environmental Protection Agency, April 2005. (Emphasis added.)
    \3\ Ibid.
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    Although forestry operations create fewer water quality impacts 
than agricultural operations, urban runoff and storm water, sewage 
plants and natural sources,\4\ major hydrologic events such as 100 year 
storms can nevertheless result in significant releases of sediments\5\ 
when sound forest management practices have not been employed. Although 
forest watershed protection efforts began on an ad hoc basis in the 
early half of the 20th Century, Section 208 of the Clean Water Act, 
adopted in 1972, directed states to develop watershed or regional water 
quality management plans to identify significant non point sources and 
assess their cumulative effects, and to ``set forth procedures and 
methods (including land use requirements) to control to the extent 
feasible such sources.''\6\ In 1987, the Clean Water Act was amended to 
include, among other provisions, Section 319, requiring states to 
develop control plans for any non point source activities that were 
causing state waters to fall short of water quality goals. Taken 
together, sections 218 and 319 comprise the authority for States to 
control non point source pollution, with oversight by EPA.
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    \4\ National Water Quality Inventory: 2002 Report to Congress. EPA 
841-R-07-001, United States Environmental Protection Agency, October 
2007.
    \5\ National Management Measures to Control Nonpoint Source 
Pollution from Forestry. EPA-841-B-05-001, United States Environmental 
Protection Agency, April 2005.
    \6\ Section 208(2)(F)(ii) of the Federal Water Pollution Control 
Act of 1972.
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    To control non point source pollution from forestry operations, 
most states have adopted Best Management Practices (BMPs) designed to 
take regional climate, soils, topography, biota, legal, technical and 
socioeconomic factors into account. BMPs vary widely among 
jurisdictions, which is understandable since a BMP that is appropriate 
for a coastal plain pine forest in Georgia may be wholly inadequate for 
a mountainous temperate rainforest in Oregon.
    In spite of their variations, there are aspects common to most BMPs 
across jurisdictions. The general philosophy of BMPs is to ``avoid, 
minimize, and mitigate.'' More specifically, BMPs will generally strive 
to 1) minimize soil compaction and the extent of bare soils; 2) 
separate exposed soils from surface waters; 3) separate fertilizer and 
herbicide applications from surface waters; 4) inhibit hydraulic 
connections between bare ground and surface waters; 5) provide forested 
buffers around watercourses; and 6) promote stable roads and 
watercourse crossings.\7\
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    \7\ Olszewski, R. and C.R. Jackson. 2006. Best management practices 
and water quality. In A primer on the top ten forest environmental and 
sustainability issues in the southern United States. NCASI Special 
Report No. 06-06. Research Triangle Park, NC: National Council for Air 
and Stream Improvement, Inc.
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    Different states manage BMPs in different ways. Some states employ 
mandatory BMPs administered by State Foresters under a focused state 
forest practices act. Other states employ non-regulatory BMPs developed 
or approved by state agencies, with landowner education to encourage 
compliance, and authority for agencies to take action against 
landowners who do not comply. Regardless of the approach, BMPs and the 
broader non point source pollution prevention programs implemented by 
the states are subject to EPA oversight and approval. States whose 
water quality inventories fail to show continued improvement invite 
closer scrutiny and review by the EPA, and poor performance can result 
in grant funding reductions or a federal takeover of the state program. 
Over time, BMPs have become an accepted, well understood, widely 
adopted method of protecting water quality in the waters of the United 
States.
    Although it is beyond dispute that BMPs are widely stipulated, it 
is appropriate to consider 1) how effective they are in protecting 
water resources and other environmental values, 2) what the compliance 
rates are for BMP implementation, and 3) the factors associated with 
high rates of implementation and compliance.
    There is a high correlation between high water quality and forested 
areas. Most of the waters failing to meet EPA-approved water quality 
standards and requiring the establishment of Total Maximum Daily Load 
(TMDL) specifications are in urban or industrial areas. But this 
correlation alone does not prove the effectiveness of BMPs. 
Fortunately, a variety of watershed scale research projects in the 
published literature have evaluated the effectiveness of BMPs in the 
United States. These studies, some of which are summarized by Stednick 
and Ice,\8\ have found BMPs to be highly effective when they are used. 
Other studies point out that the major impediment to the protecting 
water quality is the lack of compliance with BMPs.\9\
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    \8\ Ice, G.G.; Stednick, J.D. (eds). 2004. A Century of Forest and 
Wildland Watershed Lessons. Bethesda, MD, USA: Society of American 
Foresters. 292 p.
    \9\ Ice, G.G.; Stewart, G.W.; Waide, J.B.; Irland, L.C.; Ellefson, 
P.V; July, 2007. 25 Years of the Clean Water Act: How Clean are Forest 
Practices? Journal of Forestry. Pages 9-13.
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    A more expansive treatment of this subject is contained in a 
technical paper currently in draft\10\ by the National Council for Air 
and Stream Improvement (NCASI), soon to be published as a NCASI 
Technical Bulletin. Some of its key points are as follows:
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    \10\ National Council for Air and Stream Improvement, Inc. (NCASI). 
2008. Compendium of state and provincial forestry best management 
practices. Technical Bulletin or Special Report In Draft. Research 
Triangle Park, N.C.: National Council for Air and Stream Improvement, 
Inc.

   Forestry BMP prescriptions vary among jurisdictions due to a 
        multitude of factors, but properly implemented BMPs are 
        effective regardless of jurisdictional requirements;
   While monitoring programs and protocols vary among 
        jurisdictions, rates of BMP implementation are generally very 
        high.
   Jurisdictions having long-term monitoring programs in place 
        have shown steady improvement in compliance rates over time.
   Forest certification programs, along with education and 
        outreach programs, have had a positive and significant role in 
        increasing BMP compliance with the various jurisdictional 
        recommendations and/or recommendations.

    This last point is particularly important. According to NCASI, the 
high rates of BMP compliance reported for industrially managed 
forestlands ``are primarily attributable to sustainable forestry 
programs'' such as the Sustainable Forestry Initiative (SFI), the 
Forestry Stewardship Council (FSC), and the American Tree Farm program. 
NCASI contends that these third party verification programs have been 
documented to result in higher compliance rates with BMPs.
    BMPs have become, therefore, effective tools to advance the goals 
of the Federal Clean Water Act. As a consequence of this success, BMPs 
are increasingly being used to address ancillary issues such as 
wildlife habitat and other issues, some of which fall under the 
cognizance of other federal laws.
                       the endangered species act
    The Endangered Species Act\11\ (ESA) applies to private forestry 
operations as a direct federal regulatory program which relies mainly 
on prohibitions against the ``taking'' of listed threatened or 
endangered plant and animal species. About 1,320 species in the United 
States and U.S. waters have been listed as threatened or 
endangered,\12\ many of which spend at least part of their life cycle 
in forests or waters affected by forestry activities.
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    \11\ 7 U.S.C.136; 16 U.S.C.460 et seq.
    \12\ 12See http://www.nmfs.noaa.gov/pr/species/esa/
---------------------------------------------------------------------------
    Although the ESA does not enlist the support of States or state 
programs in ways comparable to other federal environmental laws, States 
and localities have amended their laws, regulations, land use plans, 
policies and BMPs to help protect ESA-listed species and their 
habitats. In addition, some private landholders have entered into 
habitat conservation plans (HCPs) designed to improve habitat for 
listed species, although HCPs have often proven to be costly, difficult 
and time-consuming to negotiate.
    Still other private landholders have been encouraged by the ESA to 
engage in land sales and exchanges to bring important habitat into 
conservation easements, non-profit ownership, or public ownership.
                           the clean air act
    The Clean Air Act\13\ directs the Environmental Protection Agency 
to establish air quality standards protective of public health and 
welfare. States, in turn, develop plans and programs to achieve those 
standards. The direct impact of these plans and programs on forest 
management activities is to limit slash burning and prescribed fires. 
Indirect impacts include the demand for fuel wood in homes and other 
facilities. Finally, the motor vehicles and equipment used in forestry 
must be compliant with all applicable air quality standards.
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    \13\ The Clean Air Act (42 U.S.C. 7401-7626) consists of Public Law 
159 (July 14, 1955; 69 Stat.322) and the amendments made by subsequent 
enactments.
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     the federal insecticide, fungicide and rodenticide act (fifra)
    The Federal Insecticide, Fungicide and Rodenticide Act,\14\ or 
FIFRA, establishes comprehensive programs regulating use of pesticides 
in forestry, agriculture and other situations. Under its provisions, 
pesticide compounds must be ``registered'' with (approved by) EPA for 
specific purposes and used only in accordance with EPA-approved 
``label'' instructions designed to protect environmental resources. 
Pesticides which could pose environmental or health hazards if 
improperly handled or used by untrained people are restricted so they 
can be purchased and applied only by applicators trained and licensed 
by state agencies under EPA-approved programs.
---------------------------------------------------------------------------
    \14\ 7 U.S.C. 136 et seq.
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    Although FIFRA is applicable to private forest lands, the forestry 
market for pesticides is relatively small compared to agricultural and 
urban markets. Because trees grow for long periods compared to food and 
forage crops, forest-use pesticides usually are applied on particular 
lands only rarely (e.g. when establishing new plantations or responding 
to rare pest infestations), in contrast to agriculture, urban lawns, 
golf courses and other areas where the same chemicals are applied more 
often. It is not surprising, therefore, that environmental damage from 
forest-use pesticides has not been documented in the legal or 
scientific literature as a significant problem.
                      coastal zone management act
    Unlike the Clean Water Act, Endangered Species Act, Clean Air Act, 
and Federal Insecticide, Fungicide and Rodenticide Act, the Coastal 
Zone Management Act\15\ directly addresses broader land use issues 
rather than narrower environmental concerns. Twenty-nine states 
bordering on the West, East and Gulf Coasts, Pacific Ocean or Great 
Lakes participate in voluntary federal-state partnerships under the 
CZMA,\16\ including most major private timber producing states.\17\ 
These CZMA programs are developed with technical assistance and funding 
from, and then subject to approval of, the National Oceanographic and 
Atmospheric Administration (NOAA) through its Office of Ocean and 
Coastal Resource Management (OCRM). They address a wide range of issues 
including coastal development, water quality, shoreline erosion, public 
access, natural resource protection, energy facility siting, and 
coastal hazards such as hurricanes and flooding.\18\ Other states also 
address these issues through land use planning laws, local zoning 
ordinances, etc. Summaries of NOAA-approved CZMA programs are available 
through a NOAA website.\19\
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    \15\ Public Law 92-583, 16 U.S.C.1451-1456, as amended.
    \16\ See http://coastalmanagement.noaa.gov/mystate/welcome.html , a 
NOAA website containing a map of participating and eligible states and 
territories. Illinois is the only eligible state currently not 
participating.
    \17\ Except Montana, Arkansas, Tennessee, West Virginia and New 
Hampshire.
    \18\ See http://oceanservice.noaa.gov/topics/coasts/management/
    \19\ At http://coastalmanagement.noaa.gov/mystate/welcome.html. 
Click on the map to bring up a summary for a particular state.
---------------------------------------------------------------------------
    An important component of CZMA programs is the Coastal Nonpoint 
Pollution Control Program under which states and territories with 
approved coastal zone management programs must develop and implement 
programs to control nonpoint source pollution from six main sources 
including forestry and losses of wetland and riparian areas.\20\ 
Understandably, there are considerable variations among the states on 
how forestry issues are addressed in CZMA programs, reflecting 
differences in state constitutions, agency roles, court decisions, 
political and economic factors and environmental conditions.
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    \20\ CZMA Sec. 3217; see also http://coastalmanagement.noaa.gov/
programs/coast--div.html
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                  state forestry and land use programs
    States have adopted a wide variety of regulatory and non-regulatory 
programs addressing forest-related environmental and land use issues. 
Generally these are incorporated into federally approved programs under 
the federal statutes listed above, but many deal with other forestry 
issues as well. All 50 states have a State Forester, who is responsible 
for administering forestry programs and coordinating regulatory and 
non-regulatory programs administered by his department and other 
agencies.\21\
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    \21\ See National Association of State Foresters website, http://
www.stateforesters.org/
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    Some states have forest practices acts regulating all or most 
forest management activities. Some require reforestation after timber 
harvests. Some require local government approval to convert forestlands 
to non-forest uses. Some provide various kinds of tax incentives to 
encourage forest owners to keep their lands in forests. All states 
provide landowner education and technical assistance delivered by State 
Foresters, land grant colleges and universities, and other 
institutions, often with federal funding through the by U.S. Forest 
Service state and private forestry programs and Natural Resources 
Conservation Service extension service programs.
    Some states have struggled to contend with stakeholders who wish to 
see stricter regulation of forestry activities, notwithstanding the 
nearly universal view that greater environmental benefits result when 
forest owners keep their lands in forests rather than convert them to 
other uses. If forest owners encounter environmental regulations or 
environmental litigation risks that make forest management uneconomic, 
many are often compelled to consider alternative ways to obtain 
economic returns from their property. The problem is compounded by the 
fact that most forestry investments are ``sunk'' at or near the 
beginning of a forest stand rotation while most of the economic return 
is received decades later when the stand is harvested. Therefore, 
willingness to invest in new forest stands can depend on perceptions 
about whether harvest will be allowed decades later and what costs 
might be imposed by regulatory programs at that time. Many states have 
addressed this dilemma by trying to keep both administrative 
``transaction'' costs and operational costs of forest regulation 
reasonable, relying on landowner education and voluntary cooperation as 
much as possible, providing technical assistance on forestry issues, 
favorable tax treatment for forestlands and forestry activities, and 
other incentives to encourage owners to increase forestry investments 
and keep lands in forest use. This incentive-based approach has 
sometimes been criticized by those seeking more regulatory mechanisms, 
but overall it seems to have produced good results: The amounts of 
forestland have been gradually increasing in most states for about 90 
years as forests have grown back on former farmlands and pasture lands 
at faster rates than forestlands have been lost to urban development 
and other non-forest uses. For example, in some New England states land 
uses have shifted from about 80% agriculture to about 80% forests over 
the last 100 years or so. Similarly in southern states many lands 
formerly used for grazing, tobacco, cotton or other agricultural uses 
have returned to forests. In most regions the volumes of standing 
timber and other biomass have been increasing and could increase 
further if landowners could be induced to increase forestry investments 
to enhance timber growth and thus increase their forestry-based 
economic returns.
                    voluntary cooperative activities
    In addition to the regulatory and non regulatory approaches listed 
above, some innovative cooperative projects between private landowners, 
states, and private foundations have resulted in the protection of 
critically important natural ecosystems and the interests of private 
landowners and other stakeholders. Here are a few recent notable 
examples:

   In 2007, the Nature Conservancy, the Lyme Timber Company, 
        Conservation Forestry LLC and the State of Tennessee completed 
        the largest conservation transaction in Tennessee since the 
        creation of the Great Smoky Mountains National Park in the 
        1930s, protecting nearly 130,000 acres of hardwood forests, 
        mountains and streams on the Cumberland Plateau, through a 
        combination of working forest agreements, conservation 
        easements, and land purchases.
   In 2008, Plum Creek Timber Company and King County, 
        Washington entered into an agreement to protect the Green River 
        Watershed by granting the county a conservation easement at no 
        cost to the taxpayer, in exchange for Development Credits that 
        allowed for increased development density in urban areas.
   In 2007, Forest Capital Partners signed an agreement with 
        the Minnesota Department of Natural Resources that will 
        restrict development on more than 51,000 acres of their 
        privately owned forestland in Itasca and Koochiching counties 
        in Minnesota. State and private money was used to purchase a 
        working forest conservation easement from Forest Capital 
        Partners, the largest single transaction for conservation in 
        three decades in Minnesota. The terms of the conservation 
        easement, which is in perpetuity, guarantees public access for 
        outdoor recreation, ensures sustainable forest management, and 
        conserves wildlife habitat.
    In 2001, the Pingree family forest ownership in Maine, in 
        partnership with the New England Forestry Foundation, created 
        the world's largest conservation easement (764,000 acres) 
        designed to maintain this land in an undeveloped condition 
        while promoting continued use of the acreage as a working 
        forest.

    These kinds of creative arrangements--employed alongside the 
methods already available to the federal, state and local governments 
to regulate, manage, or influence activities on private forests through 
direct regulation, regulatory and non-regulatory BMPs, land use 
planning, and incentive arrangements--constitute a rich set of tools 
that can be used in pursuit of national goals, while remaining 
responsive to local needs and interests.
 will an increased demand for energy biomass require changes in forest 
                         management regulation?
    As a result of the growing dependence of the United States of 
foreign oil and the desire to increase the supply of renewable energy 
sources, working forests have been increasingly viewed as an important 
potential source of wood and biomass for conversion into electricity or 
liquid fuels such as cellulosic ethanol. Some have expressed concern 
that a ``biomass boom'' might result in the wholesale conversion of 
working forests into plantations of short rotation woody crops for the 
exclusive purpose of energy production, resulting in a loss of wood 
supply for saw logs, wood chips for pulp, or other forest products. 
Still others have expressed concerns that such a conversion might 
result in a loss of some of the environmental benefits that working 
forests provide.
    It is important to note the forest products industry is already a 
major producer and user of renewable electricity, and that biomass 
already produces roughly 53% of the nation's non-hydro renewable 
electricity.\22\ Forest landowners have harvested biomass for energy in 
some locations for more than 20 years. In many instances, forest 
management that includes biomass harvesting has been included in BMP 
audits and third party certification programs.
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    \22\ U.S. EIA at www.eia.doe.gov/cneaf/alternate/page/
renew_energy_consump/table3.html--Biomass is the primary energy source 
for 55.4 billion kilowatt hours of the 103 billion kilowatt hours of 
non-hydro renewable energy produced in 2007 (preliminary figures, 
subject to revision).
---------------------------------------------------------------------------
    Market history also suggests that wholesale conversion of working 
forests to dedicated energy crops is unlikely, since biomass intended 
to be used as an energy feedstock generally has a lower market value 
than other forest products. While wholesale conversion may be a valid 
concern in the case of ``row crop'' agriculture, where native 
grasslands, lands set aside for conservation purposes, or lands in food 
production might be converted to dedicated energy crops, such is not 
the case for working forests where energy biomass removals are likely 
to be in addition to, not in lieu of, the existing production of higher 
value products.
    But there probably are opportunities for working forests to be 
managed, in the pursuit of higher value products, to produce increasing 
amounts of biomass for renewable energy production. To ensure that soil 
productivity, wildlife habitat, or other values are not compromised by 
the removal of additional material that would otherwise be left in the 
forest without an ancillary market for biomass energy feedstocks, some 
states are exploring approaches to revise existing BMPs, or to 
establish new guidelines in addition to existing BMPs, to guide in the 
harvest of biomass for large scale energy. Because BMPs or the 
development of other BMP-like guidelines can take local factors into 
account, it seems prudent that enhancements or adjustments to state 
practices and guidelines be considered without federal interference, 
particularly as we gain a greater understanding of how biomass 
conversion technologies and markets will actually evolve.
    With respect to the other potential impacts of increased forest 
biomass utilization for energy on air and water quality, wildlife 
habitat, and pesticide use, it is difficult to speculate beyond broad 
generalizations. However, the removal of additional biomass could be 
beneficial to air quality to the extent that it reduces the need for 
prescribed burns, lowers the risk of catastrophic wildfire or displaces 
fossil fuels as an energy source. Water quality would arguably be 
unchanged, since the largest factor in non-point source pollution 
associated with forest operations involves the construction and 
placement of roads, and biomass collection would likely occur using the 
same roads and access points used for the higher value product 
harvests. Increased use of wood for renewable electric power generation 
is unlikely to occur to the detriment of ESA-listed species since most 
wood-based biofuels have been and probably will continue to be 
byproducts of timber harvests conducted primarily for production of 
lumber, pulp, paper and other traditional forest products. Increased 
use of wood for renewable energy could contribute to increased 
pesticide use in some intensively managed plantations, mainly at the 
time new crops are being established. However, healthy fast-growing 
intensively managed timber crops are seldom subject to the kinds of 
insect and disease problems that sometimes require use of insecticides 
in ``overmature'' timber stands or other stands containing large 
amounts of dead, dying or damaged trees that attract forest pests. 
Therefore increased use of wood-based biomass seems unlikely to 
generate widespread pesticide problems or increased use of pesticides 
in the forestry sector.
                               conclusion
    A robust yet flexible array of tools, in the form of federal, state 
and local laws, regulations, programs and Best Management Practices 
have measurably improved the environmental performance of forest 
operations in the United States. In addition, voluntary activities and 
third party sustainability programs have worked to promote 
environmental goals without sacrificing jobs and economic activity. As 
policymakers consider the imposition of new environmental requirements 
on private working forests, or market limitations on the participation 
of private working forests in emerging renewable energy markets, the 
implications for the economic viability of working forests must be 
considered to avoid inviting an unintended result--compelling private 
forest owners to consider alternative uses for working forests that do 
not provide the environmental services that provide healthy watersheds, 
wildlife habitat, carbon sequestration and similar benefits that are 
highly valued by society.
                                 ______
                                 
      Statement of the American Forest & Paper Association (AF&PA)
                              introduction
    The American Forest & Paper Association (AF&PA) appreciates this 
opportunity to comment on the proposal to implement a national 
Renewable Electricity Standard (RES).
    AF&PA is the national trade association of the forest products 
industry, representing pulp, paper, packaging and wood products 
manufacturers, and forest landowners. Our companies make products 
essential for everyday life from renewable and recyclable resources 
that sustain the environment. The forest products industry accounts for 
approximately 6 percent of the total U.S. manufacturing GDP, putting it 
on par with the automotive a nd plastics industries. Industry companies 
produce $200 billion in products annually and employ more than 1 
million people earning $54 billion in annual payroll. The industry is 
among the top 10 manufacturing sector employers in 48 states.
    The forest products industry is the leading producer and user of 
renewable biomass energy. In fact, the energy we produce from biomass 
exceeds the total energy produced from solar, wind, and geothermal 
sources combined. Sixty-five percent of the energy used at AF&PA member 
paper and wood products facilities is generated from carbon-neutral 
renewable biomass. The industry also is a leader in highly efficient 
cogeneration of electric power, much of it from biomass, both for 
internal use and for sale to the power grid.
    Since 1995, all AF&PA members must subscribe to the principles of 
the Sustainable Forestry Initiative (SFI), an independent forest 
certification system with rigorous standards that are developed by a 
multi-stakeholder board representing conservation groups and research 
organizations as well as forest landowners and manufacturers. With over 
226 program participants and 156 million acres of certified well 
managed forests, the SFI program demonstrates that America's forest 
and paper companies are committed to sustainable forest management. Our 
historic commitment to renewable energy and sustainable forest 
management demonstrates that a balance between the two is both possible 
and necessary.
                             af&pa position
    While AF&PA supports the goals of a Renewable Electricity Standard 
(RES), we oppose a federal RES that does not provide equal treatment to 
the forest products industry's existing renewable energy generation 
with new generation, applies a onesize-fits-all approach, and which 
would burden the industry with increased costs for energy and its raw 
materials.
    In order to potentially address some of these concerns, if a 
federal RES is enacted, it should:
Treat Energy from Existing and New Facilities Equally
    The forest products industry is an unmatched leader when it comes 
to the generation of renewable biomass energy, and meets an average of 
65 percent of its energy needs from carbon-neutral renewable biomass. 
Any RES should recognize this leadership and investment by treating 
biomass-based electricity from existing industry facilities equally 
with electricity from new facilities. There are currently 35 states 
(including the District of Colombia) that have RES mandates or goals. 
Twenty-five of them allow power from existing facilities to qualify. As 
discussed below, an RES should acknowledge and promote the leadership 
of the states in making their determinations of qualifying power and 
also allow power from existing facilities to qualify.
    The committee's proposed RES legislation would not provide 
tradeable credits for the renewable electricity generated by our 
manufacturing facilities. AF&PA believes the RES should be amended to 
fully recognize the renewable, carbon-neutral power generated by our 
manufacturing facilities, as it displaces fossil-fuel and helps to 
achieve the objectives of the RES.
    As the demand for biomass-based power increases, AF&PA member 
facilities must compete with new market entrants for that biomass--the 
raw material for their products, as well as the source of their own 
renewable, carbon-neutral power. The ability of new market entrants' 
electricity to qualify for, and generate revenue from, renewable energy 
credits (RECs), while existing facilities' biomass-based electricity 
does not qualify, puts existing facilities at a serious competitive 
disadvantage.
    Moreover, utilities complying with an RES typically are able to 
pass through their compliance costs in the form of a state public 
utilities commission approved rate increases to their customers 
(including AF&PA members, who are large ratepayers). Accordingly, 
regulated utilities can pay more for the wood biomass they purchase. In 
contrast, the forest products industry operates in a highly competitive 
global market in which manufacturers cannot pass on higher raw material 
and energy costs to consumers and still remain competitive.
    Forest products manufacturing facilities are major customers of 
utilities. No one benefits if a policy compels those customers to 
compete against their energy suppliers on a playing field that is so 
uneven that the customers' survival is jeopardized. Since 2006, the 
housing crisis and the economic downturn have brought about the loss of 
15 percent of the industry's workforce--about 190,000 jobs. These jobs 
are critical for the survival of the rural communities where our 
facilities often are located.
    Finally, AF&PA supports provisions allowing energy efficiency to 
qualify as a resource to help a utility qualify under the RES. The 
proposed percentages of renewable power are extremely ambitious, and 
every source of possible clean energy will be needed to achieve the RES 
goals. The bill allows states to petition for energy efficiency (such 
as electricity savings from combined heat and power) to meet a portion 
of RES mandate. However, the bill only allows the output of a new 
combined heat and power system to qualify for energy efficiency 
credits, thereby putting our existing combined heat and power systems 
at a disadvantage as compared to new facilities.
Provide Incentives for Reliable and Affordable Regional Fiber Supplies 
        and Promote Sustainable Forest Management
    Renewable energy and climate change policies are projected to 
substantially increase demand on wood biomass as a source of bioenergy. 
Projections released by the Energy Information Administration (EIA) in 
December of 2008 indicate that biomassbased power generation by the 
electric power sector will increase from 10.4 billion kWh in 2007 to 
133.6 billion kWh in 2025.
    Wood is a renewable resource that differs from wind and solar power 
in that is has other uses and demands from existing sources. The 
combined impacts of the federal RES, state RES programs, the existing 
Renewable Fuel Standard, the cellulosic ethanol production tax credit, 
climate change policies, and Federal government support for new 
facilities to process wood biomass into energy have created concerns 
about the reliability and availability of fiber supplies in certain 
regions of the country.
    Without efforts to increase overall biomass supply, the increase in 
demand for wood biomass for electricity will likely have unintended 
consequences on forest products manufacturing facilities that rely on 
woody biomass as their key raw material and energy source. While 
intensified management and research can increase forest productivity, 
incentives should be provided for programs that promote the planting of 
biomass feedstocks, including trees and short rotation woody crops, on 
farm lands, planted forestlands or degraded forestlands, and investment 
in biomass collection. In addition, biomass from Federal public lands 
should also be included as eligible biomass. Increasing the supply of 
biomass can help prevent displacement of existing manufacturing-based 
green jobs in rural communities.
Recognize State Leadership in Renewable Energy
    As stated above, thirty-five states (including Washington, D.C.), 
have proactively adopted RES mandates or goals. Each state RES program 
is the result of the state's legislative process, ballot initiative or 
executive order and is carefully tailored to maximize efficiency and 
minimize cost, based on local political realities, economic conditions 
and resource availability. Imposition of a federal RES that does not 
recognize these program standards could unnecessarily increase costs 
and impose needless economic hardship that state programs are designed 
to avoid and thereby undermine public support for RES programs.
    State RES programs include critical provisions on definitions of 
qualifying resources and the required percentages of renewable energy 
and their associated deadlines, among others. A federal RES should not 
require states to revise their programs to be consistent with the 
federal program. This would require the unnecessary expenditure of 
resources to reconfigure programs already achieving progress on 
renewable energy, severely disrupting program implementation and 
hindering achievement of their goals.
    Any federal legislation should ensure that investments made and 
progress realized under any state RES programs are preserved and 
permitted to qualify on a goingforward basis. We appreciate the 
provisions in the bill that attempt to harmonize the federal and state 
programs, but it does not appear those provisions achieve this goal.
    The states should be provided with mechanism, similar to that in 
the Renewable Fuels Standard (RFS), which would allow a state to obtain 
a waiver from the RES if the Secretary of Energy makes certain 
determinations regarding economic or environmental impacts of RES 
implementation or the adequacy of the supply of renewable energy in the 
state or region.
    AF&PA appreciates the opportunity to offer our views on the 
proposed federal Renewable Electricity Standard. We look forward to 
working with the committee in coming weeks to address the issues raised 
in our statement.
                                 ______
                                 
                                           Free Flow Power,
                                 Gloucester, MA, February 10, 2009.
Hon. Jeff Bingaman,
Chairman,
Hon. Lisa Murkowski,
Ranking Member, Senate Energy and Natural Resources Committee, 304 
        Dirksen Senate Building, Washington, DC.
    Dear Chairman Bingaman, Ranking Member Murkowski, and Members of 
the Committee: Free Flow Power Corporation (FFP) is pleased to present 
these comments for the record of the Committee's Hearing on the 
Renewable Electricity Standard (RES). FFP applauds the Committee for 
advancing the discussion of a national RES, which FFP wholeheartedly 
supports. If enacted, the majority staff draft circulated by the 
Committee would be a landmark step in the development of the United 
States' renewable energy economy. However, without amendment of the 
term ``ocean energy'' in Section 610(a)(8) of the draft, the RES 
legislation would inadvertently exclude hydrokinetic energy generated 
from rivers, this country's best hydrokinetic resource. By amending the 
term to ``marine and hydrokinetic renewable energy,'' as defined in the 
Tax Code (26 U.S.C. Sec.  45), the Committee will ensure that all 
potential sources of clean, renewable energy are recognized.
    FFP is a renewable energy company focused on hydrokinetic 
generation. Hydrokinetic generation uses tides, currents, waves, and 
free flowing rivers to produce electricity without building dams or 
diversions. FFP has developed a suite of proprietary turbine generator 
technologies and is obtaining regulatory approvals to develop over 100 
hydrokinetic sites on the Mississippi, Missouri, and Ohio Rivers. FFP 
has offices in Massachusetts, Louisiana, and Washington and is 
developing projects in the states of Louisiana, Mississippi, Arkansas, 
Tennessee, Kentucky, Missouri, Illinois, and Indiana.
    Globally, the hydrokinetic energy developers have focused primarily 
on ocean tides and currents, and the language of the draft RES bill 
reflects this attention. However, areas of high tidal energy are less 
plentiful in the United States than in other areas of the world, such 
as the British Isles, where several leading hydrokinetic companies are 
currently based. FFP is committed to developing its business in the 
United States and therefore has focused on in-stream hydrokinetics, 
harnessing the flows of America's rivers. Detailed analysis of over 
80,000 potential hydrokinetic sites in the United States led FFP to 
concentrate on the Mississippi River Basin, which drains 40% of the 
continent and is the third largest river system in the world.
    FFP is convinced that developing hydrokinetic sites in rivers 
provides a faster path to commercialization than starting with oceans, 
due to several advantages for river-based deployment. Fresh water is 
less corrosive and less susceptible to bio-fouling than salt water. 
River sites are generally closer to end users of electricity than ocean 
sites, dramatically reducing the costs associated with expensive 
underwater cabling. The uni-directional flows found in rivers are much 
easier to engineer than bi-directional tidal flows, which range from 
zero to maximum capacity. The environmental issues in rivers have been 
studied extensively over time and are much better understood than ocean 
environments. The Mississippi River is an especially strong 
hydrokinetic resource because, unlike the other major river systems in 
the world, the energy of the Mississippi is focused through a fixed 
channel and levee system rather than being allowed to dissipate across 
a flood plain.
    FFP supports the development of wind, solar, and other renewable 
energy resources, all of which are essential to building a diversified 
renewable energy portfolio. FFP believes that development of 
hydrokinetic energy in rivers in the United States must also be a 
component of a diverse renewable energy portfolio that includes wind, 
solar, and other renewable energy resources. Hydrokinetic energy 
generation requires no building of dams or diversions, eliminating the 
environmental concerns that have caused the decline in conventional 
hydropower generation over the past half-century. The advantages of 
hydrokinetic generation are many Hydrokinetic energy facilities are 
ideal in areas where wind and solar resources are marginal, such as the 
Mississippi River Basin. Hydrokinetic sites are located primarily 
underwater and therefore have less visual impact than wind or solar. 
Hydrokinetic energy provides reliable energy output that can be 
predicted with precision days or weeks in advance. FFP believes that it 
can develop most of its hydrokinetic projects at a capital cost that is 
competitive with coal and less expensive than many other renewable 
energy resources, while creating robust operations and maintenance 
businesses that will employ thousands of American workers in jobs close 
to their homes.
    FFP supports the inclusion of hydrokinetic energy resources in the 
draft RES bill and strongly urges the Commission to amend the language 
``ocean energy'' at Section 610(a)(8) to include all categories of 
hydrokinetic resources, including river-based projects. FFP recommends 
implementation of the comprehensive term ``marine and hydrokinetic 
energy,'' which was passed by the Senate and House in the American 
Economic Stabilization Act of 2008 (H.R. 1424) last summer. ``Marine 
and hydrokinetic renewable energy'' is defined in the Tax Code, 26 
U.S.C. Sec.  45, as follows:

          (A) In General.--The term ``marine and hydrokinetic renewable 
        energy'' means energy derived from----

                  (i) waves, tides, and currents in oceans, estuaries, 
                and tidal areas,
                  (ii) free flowing water in rivers, lakes, and 
                streams,
                  (iii) free flowing water in an irrigation system, 
                canal, or other man-made channel, including projects 
                that utilize non-mechanical structures to accelerate 
                the flow of water for electric power production 
                purposes, or
                  (iv) differentials in ocean temperature (ocean 
                thermal energy conversion).

          (B) Exceptions.--Such term shall not include any energy which 
        is derived from any source which utilizes a dam, diversionary 
        structure (except as provided in subparagraph (A)(iii)), or 
        impoundment for electric power production purposes.

    Adoption of the term ``marine and hydrokinetic renewable energy'' 
will ensure that clean, renewable energy that is generated from the 
United States' best hydrokinetic resource--its rivers--will be 
available to satisfy the requirements of the national RES. The 
availability of all sources of hydrokinetic energy is essential to 
ensure equality for electricity consumers in states without ocean 
resources or other viable sources of renewable energy.
    Thank you for your consideration of these comments.
            Respectfully submitted,
                                           Daniel R. Irvin,
                                                 President and CEO.
                                 ______
                                 
                               State of New Jersey,
                                 Board of Public Utilities,
                                      Newark, NJ, February 9, 2009.
Hon. Jeff Bingaman,
Chairman, Senate Energy and Natural Resources Committee, 304 Dirksen 
        Senate Building, Washington, DC 20510.
Re: Comments on Proposed 2009 RES Legislation

    Dear Chairman Bingaman: The New Jersey Board of Public Utilities 
(BPU) respectfully submits written testimony on the Democratic staff 
draft for Chairman Bingaman's Renewable Electricity Standard in the 
context of the U.S. Senate Energy and Natural Resource Committee 
hearing being held on Tuesday, February 10, 2009. We applaud your 
commitment to establish a federal Renewable Energy Standard (RES) and 
the goals reflected in the recent draft RPS legislation released by 
Senator Bingaman (January, 2009 Discussion Draft). We also appreciate 
your concern about the potential impact that a federal RES may have on 
the 29 existing State Renewable Portfolio Standards (RPS). We would 
like to take this opportunity to comment on a few key issues, critical 
to the effective interaction between state RPS programs and a new 
federal RES.
    New Jersey was one of the first States in the nation to implement 
an RPS and is widely recognized for its effective rules and standards 
that have helped advance renewable energy markets. Governor Corzine 
recently announced plans to increase New Jersey's RPS from 22.5% 
Renewable Energy by 2020 to 30% renewable energy by 2020--a goal that 
exceeds the proposed federal RES. In the year ending May 31, 2008, over 
2.3 million MWhs of Class I Renewable Energy was generated to meet New 
Jersey's RPS which represents approximately $23 million in renewable 
energy certificate (REC) sales, supporting countless jobs and economic 
benefits for the State and region.
    Early movers like New Jersey have served as a laboratory of 
effective market design that have helped states and governments develop 
renewable energy programs that work across regions, electric grids and 
electric power markets. New Jersey was one of the first States to adopt 
the use of RECs to demonstrate compliance with our State RPS and 
provide market-based incentives to renewable energy generators based on 
REC value. As part of this initiative New Jersey also help finance and 
establish the PJM-Generator Attribute Tracking System (GATs) to track 
and verify RECs. While we are excited by the opportunity that a federal 
RES represents in terms of market growth and additional stimulus, we 
are also deeply concerned that a federal RES could significantly 
disrupt renewable energy markets in states like New Jersey and REC 
markets in particular. The enclosed document ``Observations on State 
and Federal Interaction with respect to Renewable Portfolio 
Standards'', January, 2009, developed by Clean Energy States Alliance 
(CESA), a multi-state RPS collaborative, provides more detailed 
recommendations that we hope you will consider as you advance federal 
RES legislation. Of particular concern to New Jersey however, are the 
following issues regarding the appropriate and effective interaction 
between state and federal RPS programs which we would like to bring to 
your attention:

          1. State Preemption.--While the current draft legislation 
        explicitly disavows state preemption, the language is general 
        and other provisions of the bill could frustrate the ability of 
        states to achieve higher targets such as those set by New 
        Jersey. A federal RPS should contain comprehensive language to 
        prevent both express and implied preemption of the existing 
        state RPS laws and explicitly allow states to enact RPS 
        requirements that differ from the federal requirement, 
        particularly resource specific requirements such as a carve-
        out, set-aside or a multiplier. Resource specific carve-outs 
        and multipliers, such as New Jersey's solar set aside, have 
        been critical to the growth of important renewable energy 
        resources, such as solar technology and customer-sited 
        resources, that can not at present compete against the lowest 
        cost resources or that face other market barriers. However, 
        these higher cost renewables provide substantial public and 
        energy values, and will experience significant future cost 
        reductions as markets mature with the assistance of RPS 
        programs across the country. A federal RES should also require 
        that any renewable energy credits used to meet a state RPS that 
        are in excess of the federal requirement must be retired rather 
        than sold to utilities in other states or banked for future 
        federal compliance. A federal RES should also prohibit state-
        specific RECs that do not meet the federal RPS from use for 
        federal compliance.
          2. REC Tracking System Integration.--The proposed legislation 
        appears to envision a separate federal REC tracking system that 
        operates in parallel to state or regional REC systems. This 
        dual REC system could add considerable complexity, cause 
        problems with clear title and existing contracts, and risk 
        potential double counting thus undermining New Jersey and other 
        state REC markets. We strongly recommend that a federal RES 
        rely on the network of existing and emerging state or regional 
        tracking systems, such as PJM-GATs, to issue, track and retire 
        renewable energy credits and energy efficiency credits. PJM is 
        the Independent System Operator (ISO) that coordinates and 
        directs the operation of the region's transmission grid; 
        administers a competitive wholesale electricity market, the 
        world's largest; and plans regional transmission expansion 
        improvements to maintain grid reliability and relieve 
        congestion.--PJM-GATs, which was launched in September 2005, 
        tracks and verifies RECs within the PJM Interconnection control 
        area serving 51 million people in all or parts of Delaware, 
        Indiana, Illinois, Kentucky, Maryland, Michigan, New Jersey, 
        North Carolina, Ohio, Pennsylvania, Tennessee, Virginia, West 
        Virginia and the District of Columbia. PJM-GATS was established 
        in response to the needs of state regulatory commissions, other 
        state agencies and market participants for a single, regional, 
        integrated system to implement stateimposed fuel mix and 
        emissions disclosure requirements and renewable portfolio 
        standards. The states and PJM Interconnection market 
        participants believe this integrated system is the most cost-
        effective approach to serve the public policy and regulatory 
        needs. It provides the greatest accuracy and efficient tracking 
        of the ownership of the attributes.
          We believe that a federal RPS tracking system should be 
        required to consult with and rely on such existing tracking 
        systems. The federal RES should also require DOE to reinforce 
        minimum design and operational requirements to support a fully 
        functional national credit trading market for renewable energy 
        credits and energy efficiency credits. Where tracking 
        capability does not exist, the DOE through the federal RES, can 
        create, or delegate authority to create, one or more regional 
        tracking systems.
          3. National REC Definition.--While the proposed legislation 
        defines what resources are eligible for receiving federal RECs, 
        it does not define clearly what a REC and its associated 
        attributes are. Federal legislation should provide a simple, 
        standard definition for RECs that can lay the foundation for 
        well coordinated markets. RECs will be fungible for national 
        RES compliance and support a liquid market only if they have a 
        clear and common definition. A federal RES should use the most 
        universal definition of a REC, based on a unit of production, 
        i.e. 1 MWh = 1 REC, with no derived attributes such as emission 
        credits or allowances. States should also be allowed to retain 
        specific authority to determine how and under what conditions 
        electricity suppliers may purchase, transfer, trade, or retire 
        any RECs or environmental attributes associated with renewable 
        generation used to meet a state RPS.
          4. Alternative Compliance Payments.--Most federal RES 
        proposals have included an alternative compliance payment 
        mechanism (ACP). Because state ACP and noncompliance penalties 
        are so diverse, we recommend that state ACP/penalties do not 
        count towards the federal RES. Because state use of ACP/penalty 
        payments cannot be readily or directly linked to actual 
        renewable generation, counting state ACP or penalty payments 
        towards a federal RPS is not practical. In our view, all 
        options that provide federal compliance credit for state ACP/
        penalties are problematic, regardless of design.
          The proposed legislation also states that revenue from 
        alternative compliance payments and penalties under the federal 
        RPS should be granted to state agencies responsible for 
        developing state energy conservation programs (i.e., state 
        energy offices) to be used for energy conservation and 
        renewable energy development. The bill provides funding 
        preference for those states which have limited renewable energy 
        capacity and for state programs that promote ``innovative'' 
        renewable energy technologies. New Jersey is one of more than 
        20 states who administer a renewable energy fund that has 
        proven highly effective in support of renewable energy project 
        deployment and energy efficiency programs, with funding coming 
        in part from state RPS alternative compliance payments. We 
        strongly recommend that revenues generated by any federal ACP 
        and penalty payments should be provided to states on a purely 
        non-discretionary basis through a formula that allocates these 
        monies back to the state where the compliance payments 
        originated. New Jersey would consider the reallocation of these 
        funds to other states a serious loss of funds that are 
        currently being used to support New Jersey based resources, in 
        particular New Jersey solar. The funds should be provided to 
        the states for use in providing financial assistance to 
        renewable energy projects, as is the common practice among 
        state RPS programs. To do otherwise could seriously undermine 
        public support for RES and weaken existing state clean energy 
        programs. Also, the preference for use of these funds should be 
        for supporting all renewable technologies, both mature and 
        emerging, rather than targeted to only innovative technologies.
          As Congress discusses the merits and design of a federal RES, 
        we strongly recommend that a federal program be designed to 
        complement and coordinate with New Jersey and other state 
        programs to the extent practicable. We would welcome the 
        opportunity to work with your staff and other stakeholders to 
        provide additional input and to review draft legislation.
            Sincerely yours,
                                             Jeanne M. Fox,
                                                         President.
                                 ______
                                 
     Statement of Paul N. Cicio, President, the Industrial Energy 
                          Consumers of America
    Renewable energy has an important place within the U.S. energy mix 
and should be expanded along with other domestic sources of energy. 
Importantly, the Industrial Energy Consumers of America (IECA) believes 
any decision to mandate renewable energy supplies should be left to 
each state--not the federal government.
    Each state has significantly differing renewable resource supply 
profiles, electric transmission and distribution capacity and 
associated costs that must be considered. Expanding use of renewable 
energy will significantly increase the cost of electricity in a time 
when the public and the manufacturing sector cannot afford increased 
costs.
    In general, renewable energy is our most expensive source of 
electricity when the total costs of production, the federal subsidy, 
increased cost of transmission, distribution and backup generation 
costs are combined. As such, we are concerned that an aggressive 
increase in the renewable energy share of the total power generation 
market will raise the cost of electricity to the manufacturing sector. 
Higher costs directly impact our competitiveness.
    Sound U.S. energy policy demands more than simply an increase in 
the supply of renewable energy. It must be globally cost-competitive 
and reliable in supply.
    Why? First, because the manufacturing sector competes globally with 
companies whose energy costs are often lower and sometimes subsidized 
by governments. (China is a good example.) And, when manufacturing 
successfully competes globally it creates domestic high paying jobs 
with benefits and exports that are critical to our country's economic 
recovery.
    Secondly, because manufacturing facilities must have an 
instantaneous supply of electricity--not an intermittent supply, to 
operate a variety of diverse and complex processes, some of which that 
operate 24/7.
    If Congress intends to pass an RES, it must lower the cost of the 
resulting delivery of electricity. The best way to accomplish that is 
to allow ``energy efficiency and waste energy projects'' to compete 
head to head with renewable energy sources. Competition between 
renewable energy and energy efficiency/waste energy will help drive 
down the cost of the delivered electricity. Every home owner, farmer 
and manufacturer will benefit.

   The market--not the Congress should determine winners and 
        losers by letting renewable energy and energy efficiency/waste 
        energy compete head to head.
   In many ways, energy efficiency/waste energy is better than 
        renewable energy because it is delivering clean lower cost 
        energy into the market that is more reliable . . . and less 
        intermittent like wind and solar.
   Unfortunately, renewable energy is our most expensive form 
        of electricity. Non-hydro renewable energy is 402% more 
        expensive than nuclear and 227% more expensive than coal based 
        electricity according to the US Department of Energy, 2006 
        data.

                          Cost of Electricity

                                ($/MWH)

                      Non-Hydro Renewable: $68.00

                          Natural Gas: $49.51

                            Nuclear: $13.54

                              Coal: $20.80

    An important unintended consequence of a federal RES mandate is the 
loss of competitiveness of the pulp and paper industry that uses 
biomass as a feedstock. The federal RES creates competition for the 
finite source of biomass in a regional area and could render paper 
mills in that region non-competitive creating additional loss of jobs.

                                    

      
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