UNLOCKING AMERICA’S ENERGY 

RESOURCES: NEXT GENERATION 

HEARING 

BEFORE THE 

SUBCOMMITTEE ON ENERGY AND AIR QUALITY 

OF THE 

COMMITTEE ON ENERGY AND 

COMMERCE 

HOUSE OF REPRESENTATIVES 

ONE HUNDRED NINTH CONGRESS 

SECOND SESSION 

MAY 18, 2006 

Serial No. 109-101 

Printed for the use of the Committee on Energy and Commerce 

Available via the World Wide Web: http://www.access.gpo.gov/congress/house 

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WASHINGTON : 2006 

For sale by the Superintendent of Documents, U.S. Government Printing Office 

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29-812PDF 
COMMITTEE ON ENERGY AND COMMERCE 

JOE BARTON, Texas, Chairman 

RALPH M. HALL, Texas 

MICHAEL BILIRAKIS, Florida 

 Vice Chairman 

FRED UPTON, Michigan 

CLIFF STEARNS, Florida 

PAUL E. GILLMOR, Ohio 

NATHAN DEAL, Georgia 

ED WHITFIELD, Kentucky 

CHARLIE NORWOOD, Georgia 

BARBARA CUBIN, Wyoming 

JOHN SHIMKUS, Illinois 

HEATHER WILSON, New Mexico 

JOHN B. SHADEGG, Arizona 

CHARLES W. “CHIP” PICKERING, Mississippi 

 Vice Chairman

VITO FOSSELLA, New York 

ROY BLUNT, Missouri

STEVE BUYER, Indiana 

GEORGE RADANOVICH, California 

CHARLES F. BASS, New Hampshire 

JOSEPH R. PITTS, Pennsylvania 

MARY BONO, California 

GREG WALDEN, Oregon 

LEE TERRY, Nebraska 

MIKE FERGUSON, New Jersey 

MIKE ROGERS, Michigan 

C.L. “BUTCH” OTTER, Idaho 

SUE MYRICK, North Carolina 

JOHN SULLIVAN, Oklahoma 

TIM MURPHY, Pennsylvania 

MICHAEL C. BURGESS, Texas 

MARSHA BLACKBURN, Tennessee 

JOHN D. DINGELL, Michigan 

 Ranking Member 

HENRY A. WAXMAN, California 

EDWARD J. MARKEY, Massachusetts 

RICK BOUCHER, Virginia 

EDOLPHUS TOWNS, New York 

FRANK PALLONE, JR., New Jersey 

SHERROD BROWN, Ohio 

BART GORDON, Tennessee 

BOBBY L. RUSH, Illinois 

ANNA G. ESHOO, California 

BART STUPAK, Michigan 

ELIOT L. ENGEL, New York 

ALBERT R. WYNN, Maryland 

GENE GREEN, Texas 

TED STRICKLAND, Ohio 

DIANA DEGETTE, Colorado 

LOIS CAPPS, California 

MIKE DOYLE, Pennsylvania 

TOM ALLEN, Maine 

JIM DAVIS, Florida 

JAN SCHAKOWSKY, Illinois 

HILDA L. SOLIS, California 

CHARLES A. GONZALEZ, Texas 

JAY INSLEE, Washington 

TAMMY BALDWIN, Wisconsin 

MIKE ROSS, Arkansas 

BUD ALBRIGHT, Staff Director 

DAVID CAVICKE, General Counsel

REID P. F. STUNTZ, Minority Staff Director and Chief Counsel

SUBCOMMITTEE ON ENERGY AND AIR QUALITY 

RALPH M. HALL, Texas, Chairman 

MICHAEL BILIRAKIS, Florida 

ED WHITFIELD, Kentucky 

CHARLIE NORWOOD, Georgia 

BARBARA CUBIN, Wyoming 

JOHN SHIMKUS, Illinois 

HEATHER WILSON, New Mexico 

JOHN B. SHADEGG, Arizona 

CHARLES W. “CHIP” PICKERING, Mississippi 

VITO FOSSELLA, New York 

GEORGE RADANOVICH, California 

MARY BONO, California 

GREG WALDEN, Oregon 

MIKE ROGERS, Michigan 

C.L. “BUTCH” OTTER, Idaho 

JOHN SULLIVAN, Oklahoma 

TIM MURPHY, Pennsylvania 

MICHAEL C. BURGESS, Texas 

JOE BARTON, Texas 

(EX OFFICIO) 

RICK BOUCHER, Virginia 

 Ranking Member 

MIKE ROSS, Arkansas 

HENRY A. WAXMAN, California 

EDWARD J. MARKEY, Massachusetts 

ELIOT L. ENGEL, New York 

ALBERT R. WYNN, Maryland 

GENE GREEN, Texas 

TED STRICKLAND, Ohio 

LOIS CAPPS, California 

MIKE DOYLE, Pennsylvania 

TOM ALLEN, Maine 

JIM DAVIS, Florida 

HILDA L. SOLIS, California 

CHARLES A. GONZALEZ, Texas 

JOHN D. DINGELL, Michigan 

 (EX OFFICIO)

(II)
CONTENTS 

Page 

Testimony of: 

Arvizu, Dr. Dan E., Director, National Renewable Energy Laboratory ........................... 14 

Yoder, Marvin, Manager, City of Galena, AK ................................................................... 21 

Novak, John, Executive Director, Federal and Industry Activities, Environment and 

Generation Sectors, Electric Power Research Sectors................................................... 46 

Abate, Victor R., Vice President, Renewable Energy, GE Energy .................................... 87 

Hammond, Dr. Troy D., Vice President, Products, Plextronics, Inc.................................. 93 

Linebarger, Tom, Executive Vice President and President, Power Generation 

Business, Cummins, Inc................................................................................................. 99 

Katzer, Dr. James, Visiting Scholar, Laboratory for Energy and the Environment, 

Massachusetts Institute of Technology.......................................................................... 107 

Cresci, Joseph E., Chairman, Environmental Power Corporation...................................... 115 

(III) 

(1) 

UNLOCKING AMERICA’S ENERGY 

RESOURCES: NEXT GENERATION 

THURSDAY, MAY 18, 2006 

HOUSE OF REPRESENTATIVES, 

COMMITTEE ON ENERGY AND COMMERCE, 

SUBCOMMITTEE ON ENERGY AND AIR QUALITY, 

Washington, DC. 

The subcommittee met, pursuant to notice, at 10:09 a.m., in Room 

2322 of the Rayburn House Office Building, Hon. Ralph Hall 

(Chairman) presiding. 

 Members present: Representatives Shimkus, Wilson, Bono, Otter, 

Murphy, Burgess, Barton (ex officio), Boucher, Green, Capps, and Hall. 

 Also present: Representative Bass. 

 Staff present: Kurt Bilas, Counsel; Annie Caputo, Professional Staff 

Member; David McCarthy, Chief Counsel for Energy and Environment; 

Sue Sheridan, Minority Senior Counsel; Bruce Harris, Minority 

Professional Staff Member; and Peter Kielty, Legislative Clerk. 

MR. HALL. I would like to welcome all of our witnesses here today 

for our hearing, entitled “Unlocking America’s Energy Resources: Next 

Generation.” Without objection, Mr. Boucher, the Chair will proceed 

pursuant to Committee Rule 4E and recognize Members for three 

minutes for opening statements. If they defer, this time will be added to 

their opening round of questions. 

 With electricity generation expected to grow about 50 percent by 

2030, the need for alternative sources of energy will continue to grow. 

There are many innovative technologies currently being developed that 

will become part of our generation portfolio and take their place along 

side natural gas, coal, and nuclear. This hearing will give us the 

opportunity to hear from two panels of knowledgeable witnesses about 

the new technologies and what to expect down the road. It is important 

that we encourage their development now, in order to avoid future strains 

on the American people and American manufacturers. 

 We have with us today representatives and experts from the wind, 

solar, coal, and the biomass industries to discuss renewable research 

being funded publicly and privately. So we also have with us a 

representative from the city of Galena, Alaska, to talk about their plans to 

build the first small nuclear power plant. I would like to thank all of our 

witnesses for being here today and I look forward to your testimony. 

 [The prepared statement of Hon. Ralph Hall follows:] 
2

PREPARED STATEMENT OF THE HON. RALPH HALL, CHAIRMAN, SUBCOMMITTEE ON ENERGY 

AND AIR QUALITY

I’d like to welcome all of our witnesses here today for our hearing entitled, 

“Unlocking America’s Energy Resources: Next Generation”. Without objection, the 

Chair will proceed pursuant to Committee Rule 4(e) and recognize Members for 3 

minutes for opening statements. If they defer, this time will be added to their opening 

round of questions. 

With electricity generation expected to grow about 50% by 2030, the need for 

alternative sources of energy will continue to grow. There are many innovative 

technologies currently being developed that will become part of our generation portfolio 

and take their place alongside natural gas, coal and nuclear. This hearing will give us the 

opportunity to hear from two panels of knowledgeable witnesses about these new 

technologies, and what to expect down the road. It is important that we encourage their 

development now in order to avoid future strains on the American people and American 

manufacturers. 

We have with us today representatives from the wind, solar, coal and biomass 

industries as well as experts to discuss renewables research being funded publicly and 

privately. We also have with us a representative from the city of Galena, Alaska to talk 

about their plans to build the first small nuclear power plant. 

I’d like to thank our witnesses for being here, and I look forward to their testimony. 

MR. HALL. The Chair at this time recognizes Mr. Boucher, the 

ranking member. 

 MR. BOUCHER. Thank you very much, Mr. Chairman. I want to 

commend you for convening today’s hearing so that our subcommittee 

can learn about cutting-edge technologies for electricity generation. A 

number of technologies are now under development that will assist in 

achieving our national goal of a balanced electricity generation portfolio 

and ensure that our Nation’s growing need for electricity is met in a 

constructive way. I am particularly interested in hearing from our 

witnesses on their assessment of the progress in developing renewable 

technologies such as wind, solar, and biomass. Commentary on 

advances that are currently underway in nuclear technology and 

prospects for its expanding use will also be welcome. 

 I am particularly interested in technological developments with 

regard to electricity generation from coal, our most abundant domestic 

energy resource, with supplies adequate for 250 years. Given its 

domestic availability, it is appropriate that coal constitute a major and 

growing component of our electricity generation fuel mix. New 

technologies, including integrated gasification combined cycle, ultra 

supercritical pulverized coal combustion, and emerging technologies to 

capture the carbon dioxide emissions from coal-fired power plants, all 

hold great promise for the ability to continue to use coal in growing 

tonnages with very minimal, and in some cases, zero emissions. And 

testimony from our witnesses this morning about their view of the role of 

coal in our fuel mix for the years ahead, would also be very welcome. 
3

 Mr. Chairman, I appreciate your convening this hearing. I think it is 

certainly timely and I join with you in looking forward to the testimony 

of our witnesses. 

 MR. HALL. Thank you, Mr. Boucher. Mr. Shimkus of Illinois is 

recognized for an opening statement. 

 MR. SHIMKUS. Thank you, Mr. Chairman. And there are two 

hearings going on simultaneously, this one and a telecommunications 

subcommittee meeting, so if we are running back and forth, those of us 

who share those responsibilities, excuse us. I think those today are 

showing they have a great interest in electricity generation and all of the 

players in having a competitive open-field market. I, like my friend and 

colleague, Mr. Boucher, have been singing the praises and return of coal. 

And in discussion with just average citizens, they think we are just 

shoveling it out of the coal mine and sticking it into a burner and burning 

that coal and creating all of this nasty stuff, whereas, because of 

regulations and rules and new technologies, it is a whole new world. 

 I am excited about Peabody’s investment in Illinois and the Prairie 

State Energy Campus, which uses a new wet electrostatic precipitator. 

That is actually going to start removing some mercury issues from there. 

It is, by definition, one of the cleanest coal-generating power plants on 

the board. We hope to break ground this fall, our first quarter. And the 

frustrating thing is, in the environmental comparisons that they have to 

fight against, the environmental comparisons have plants that are on the 

board that aren’t up and running, that project all of these better 

environmental advantages that we will never see come true because these 

plants are not going to be built. So I just find that an interesting 

dilemma, when you are trying to move with new technology, proven 

technology, then you have to fight this environment of, well, it is not 

perfect, and trying to reach the perfection is the enemy of the good, many 

times, and these are great, great benefits. They are coming from all 

different environments. We are going to hear about nuclear power in a 

smaller package that I am excited about, and also the benefits. I know 

the President has talked about using solar power and the ability to have 

the shingles assist in a home and the like, so I think this is very timely, 

because economics 101 is supply and demand. You have to increase 

supply and you have to address the demand equation and you have to do 

all of them. You know, just cutting demand is not going to address price 

and concerns. You have to increase supply and you have to address 

demand and competitive choices out there with the standard. 

 So this is a very, very important hearing and we are very excited 

about it. Mr. Chairman, thank you for this time and I yield back. 

 MR. HALL. Thank you. The Chair recognizes the gentlelady, Ms. 

Capps, for an opening statement. 
4

 MS. CAPPS. Thank you, Mr. Chairman. I also am glad that we are 

holding this hearing this morning. I welcome our witnesses and I believe 

that putting more attention on the potential of renewable fuels and 

alternative energy is something that many people have been waiting for, 

advocating for, for many years. Increased use of renewables and 

alternative energy would clearly reduce our dependence on fossil fuels. 

And since this country is not exactly awash in oil and natural gas, 

reducing our dependence on them would be good, not only for our 

environment, but also for our national security. 

 To be honest, however, we have to do more than talk about the 

potential that renewables and alternative energy have for this country. 

Talking is something we have been doing for a very long time, but we 

have to put into place more funding for programs to bring these energy 

sources to market, and we have to make changes in our energy policy to 

encourage their use. Unfortunately, the budget that we just voted upon 

last night and that the President had submitted earlier this year, I believe 

shortchanges our Federal investment in this area. The overall energy 

efficiency and renewable energy part of the budget would actually go 

down if this President’s budget then actually becomes enacted in 

Appropriations. In fact, under President Bush’s proposal, I don’t even 

think we are even spending what we spent in the last years of the Clinton 

Administration. 

 I would bring to the committee’s attention a 2004 CRS report that 

projects the percentage of national energy demand supplied by 

renewables in the year 2030 would only be about 6.7 percent. It was 6 

percent in the year 2004, so that isn’t showing very much progress. We 

should be doing much, much more if we are really serious about making 

progress in this area. 

 I would also note that this committee missed historic opportunities, 

time and time again, during the repeated consideration of so-called 

comprehensive energy legislation to embrace renewable energy. Mr. 

Pallone’s amendment to establish a renewable portfolio standard was 

repeatedly rejected by the Majority party in this committee, and we 

weren’t even allowed to have a vote on it on the House floor. Adoption 

of that amendment would have required that our major utilities slowly 

increase the percentage of energy they derive from renewable sources, 

like solar, geothermal, wind, and biomass. At least 13 States have 

similar requirements in place, so we know this can be done without 

disrupting electricity production or raising prices. So while I am pleased 

that the subcommittee is looking at this issue, again, it is very 

disappointing that we seem to be starting over at ground zero. 

 Finally, I find it ironic that mere months ago, we passed legislation 

that was touted by its supporters as providing comprehensive strategy to 
5

deal with our Nation’s energy challenges; and yet, here we are talking 

about the need for more renewables and alternative energy. Last week 

the Majority discovered that maybe making our cars more fuel efficient 

would be a good thing. I feel sort of vindicated in the arguments that 

many of my colleagues on this side and I have been making over the 

years in support of renewables, alternative energy, and increased 

efficiency standards. I only wish that our proposals had carried the day 

then so that Americans today could be benefiting from them. But that 

being said, there is no time like the present to get started and I thank you 

for giving us that opportunity today. I yield back. 

 MR. HALL. Thank you, Ms. Capps. The Chair recognizes the 

gentleman from Texas, Dr. Burgess, for an opening statement. 

 MR. BURGESS. Thank you, Mr. Chairman. I too want to thank you 

for holding today’s hearing. In my district in north Texas, we run the 

gamut of renewable energy. There is a company that manufactures solar 

panels in Keller, Texas, and another manufactures wind turbines in 

Gainesville. I encourage anybody who is in the wind turbine business 

not to buy those cheap Brazilian blades. Those Gainesville blades will 

hold up a lot longer and do you really well. 

 The Lake Dallas Independent School District uses geothermal energy 

to heat and cool its schools. The Wal-Mart in McKinney, Texas, which 

is just outside my district, is one of their two new energy efficient stores 

that uses renewable technologies such as solar panels and roof wind 

turbines in the parking lot, to generate electricity for their store. And in 

Denton, Texas, under the leadership of Mayor Euline Brock, they have 

constructed the world’s first renewable biodiesel facility. The facility is 

powered by the methane gas extracted from the adjacent landfill and has 

the capacity to produce approximately three million gallons of pure 

biodiesel per year. The City of Denton’s use of biodiesel fuel mix is 

expected to reduce emissions by 12 tons per year in the county. That is 

significant because we are under some clean air mandates. The opening 

of this facility demonstrates the City of Denton’s dedication to cleaning 

up the air that we breathe. This is especially important in the north 

Texas region because of the clean air mandates we exist under. 

 Well, Mr. Chairman, that is why the hearing is so important today. 

Our economy is growing in north Texas and of course our demand for 

energy is, as well. As we try to satisfy this demand in an 

environmentally friendly way, affordable renewable fuel sources will 

take on an even greater importance than they do already. Of course, I 

want to thank the witnesses that are appearing here before me. Since I 

haven’t used all of my time, let me just address the renewable portfolio 

standard, because, in Texas, approximately 50 percent of our electricity 

is generated by natural gas and another 38 percent by coal; but Texas has 
6

one of the most aggressive renewable portfolio standards in the country. 

Texas RPS was increased by the State legislature in 1999, requiring that 

Texas use a total of nearly 3,000 megawatts of renewable energy by the 

year 2009. But in August of 2005, Governor Perry signed a bill which 

increased that requirement to almost 6,000 megawatts by 2009. The RPS 

mandate in Texas is a phased-in approach that offers flexibility through a 

renewable energy credits training program. Any company that does not 

satisfy their requirements by directly owning or purchasing renewables, 

may purchase credits to satisfy that requirement. 

 Thank you, Mr. Chairman. I will yield back the balance of my time. 

 [The prepared statement of Hon. Michael Burgess follows:] 

PREPARED STATEMENT OF THE HON. MICHAEL BURGESS, A REPRESENTATIVE IN CONGRESS 

FROM THE STATE OF TEXAS

Mr. Chairman, 

Thank you for convening today’s hearing. 

In my district, we run the gamut of renewable energy - there’s a company that 

manufactures solar panels in Keller and another that manufactures wind turbines in 

Gainesville. 

The Lake Dallas Independent School District uses geothermal energy to heat and 

cool their schools. The Wal-Mart in McKinney, which is near both my district and 

Chairman Barton’s, is one of two of their new “energy efficient” stores and uses 

renewable technologies such as solar panels on the roof and wind turbines in the parking 

lot to generate electricity for the store. 

And in Denton, under the leadership of Mayor Euline Brock, they have constructed 

the world’s first renewable biodiesel facility. The facility is powered by the methane 

extracted from the adjacent City of Denton Landfill and has the capacity to produce 

approximately three million gallons of pure biodiesel per year. 

The City of Denton’s use of a biodiesel fuel mix is expected to reduce emissions by 

twelve tons per year. The opening of this facility opening demonstrates the City of 

Denton’s dedication to cleaning up the air we breathe. This is especially important in the 

North Texas region as we work to comply with Clean Air Act requirements. 

That is why this hearing is so important today. As our economy grows, so too does 

our demand for energy. As we try to satisfy this demand in a environmentally-friendly 

way, affordable renewable fuel sources will take on an even greater importance than they 

do already. 

I’d like to thank the witnesses for appearing before us today; I am looking forward 

to hearing your testimony. 

MR. HALL. Thank you. And I note the presence of the Chairman of 

the Energy and Commerce Committee, and being of sound mind, I 

recognize him at this time for as much time as he consumes. 

 CHAIRMAN BARTON. Thank you, Chairman Hall, for taking a little 

bit of the load off the full committee in holding this hearing today on 

R&D and the new technologies to provide electricity and natural gas for 

America’s future. I want to thank our witnesses for appearing before us 

today. We value your input. Your discussion of new energy 
7

technologies is of particular interest to me, since I began my career as an 

engineer. 

 One way America will be able to secure its energy future is through 

technology. Our panelists today are on the cutting edge of the effort to 

bring new technologies to market. Their work is helping to secure 

America’s energy future. There is another important component to the 

work that you are doing today. Much of it is with technologies that have 

a minimal environmental impact. Clean, safe domestic sources of energy 

are important to develop. Newer technologies such as wind, solar, 

biomass, and other renewables will help put the United States on the 

track for a clean energy-secure future. We must not forget, however, the 

more traditional sources of power. Clean coal, second and thirdgeneration nuclear power, and distributed generation must all make 

important contributions to our energy future. 

 Last year the Congress passed the Energy Policy Act of 2005. I am 

very proud of that bill. It provides incentives for both traditional and 

new sources of electric power generation. Through the research at our 

national laboratories, public/private partnerships, and private research, 

the United States is moving ahead on developing new sources of energy. 

There is another benefit to developing these new sources of electricity, in 

addition to the economic and environmental benefits. It incrementally 

takes the price and demand pressure off of other fossil fuels, like natural 

gas, that are needed for other uses, like chemicals and fertilizer. These 

exciting new technologies will help America conserve its nonrenewable 

resources. 

 Of course, developing new technology is not the only thing we can 

and must do to secure our future. We must unlock our domestic energy 

resources by exploring for energy in the vast tracts that today are off 

limits. We must also conserve without punishing American consumers. 

Our auto efficiency reform bill is a major step towards that end, as are 

the many conservation and energy efficiency provisions in the Energy 

Policy Act of 2005. I think we should also adopt more common sense 

rules and processes that will enable us to move energy to consumers 

faster without compromising our environmental standards. One example 

of that effort is the refinery reform permitting bill that passed this 

committee, or came out of this committee and is expected to be on the 

floor of the House again in the very near future. 

 This hearing is important because it allows Congress to see the 

important research being done in this country on energy sources and 

shows us that the best is yet to come. Thank you again, Mr. Chairman, 

for holding the hearing, and I want to thank our witnesses for being here 

today. I yield back. 

 [The prepared statement of Hon. Joe Barton follows:] 
8

PREPARED STATEMENT OF THE HON. JOE BARTON, CHAIRMAN, COMMITTEE ON ENERGY 

AND COMMERCE

Thank you, Chairman Hall, for holding this hearing today on research and 

development into new technologies to provide electricity and natural gas for America’s 

future. I also want to welcome and thank our excellent panelists for joining us today. We 

value your input. Your discussion of new energy technologies is of particular interest to 

me since I began my career as an engineer. 

 One way America will be able to secure its energy future is through new technology. 

Our panelists today are on the cutting edge of that work to bring new technologies to 

market. Their work is helping to secure America’s energy future. And energy security 

means jobs and a better standard of living for all Americans. 

 There’s another important component to the work you are doing – much of it is with 

technologies that will have a minimal environmental impact. Clean, safe domestic 

sources of energy are important to develop. Newer technologies such as wind, solar, 

biomass and other renewables will help put the United States on track for a clean, energysecure future. However, we must not forget more traditional sources of power, too – 

clean coal, nuclear and distributed generation must all make important contributions to 

our energy future. 

 Last year, Congress passed the Energy Policy Act of 2005. I am very proud of that 

bill. It provided incentives for both traditional and new sources of electric power 

generation. Through research at national labs, public-private partnerships and private 

research, the United States is moving ahead on developing new sources of energy. 

 There is one other benefit to developing these new sources of electricity, in addition 

to the economic and environmental benefits – it incrementally takes the price and demand 

pressure off of other fossil fuels like natural gas that are needed for other uses like 

chemicals and fertilizer. These exciting new technologies will help America conserve its 

non-renewable resources. 

Of course, developing new technology is not the only thing we can and must do to 

secure America’s energy security. We must unlock our domestic energy resources by 

exploring for energy in the vast tracts that today are off-limits. We must conserve 

without punishing American consumers. Our auto fuel efficiency reform bill is a major 

step toward that end, as are the many conservation and efficiency provisions in the 

Energy Policy Act of 2005. 

 We must also adopt more common sense rules and processes that will enable us to 

move energy to consumers faster without compromising our environmental standards. 

One example of our efforts here is the refinery permitting reform bill that the House will 

pass very soon. 

 This hearing is important because it allows Congress to see the important research 

being done in this country on energy sources and shows us that the best is yet to come. I 

look forward to what the panelists have to say. 

 MR. HALL. I thank the Chairman and note the presence of Mr. Bass, 

the gentleman from New Hampshire. We will ask unanimous consent 

that he be allowed to attend and to participate if he chooses. Is there 

objection? The Chair hears none. The Chair recognizes Mr. Otter, the 

gentleman from Idaho. 

 MR. OTTER. I may object. I want to know what he is going to say. 

 MR. HALL. Well, I was with him until one o’clock this morning and 

I think he said it all then. All right, I will recognize you, Governor Otter. 
9

 MR. OTTER. I am going to pass. 

 MR. HALL. We will go to Mr. Green, the gentleman from Texas, for 

an opening statement. 

 MR. GREEN. Thank you, Mr. Chairman. Obviously, I arrived right 

on time. I would like to put my statement into the record, but I 

appreciate the-- 

 MR. HALL. Without objection. 

 MR. GREEN. I appreciate you calling the hearing and I would just 

like to put a statement into the record. In a time of high oil prices, we 

know we need to be able to diversify, and my biggest concern, Mr. 

Chairman, and I am glad for this hearing, is that--and I only wanted to 

look to the future in alternatives, but I also wanted to get through the 

next 20 or 25 years, so that is why we need to look at hydrocarbons, at 

least for the short term, until we can get to some other alternatives. So I 

will put my full statement into the record. Thank you. 

[The prepared statement of Hon. Gene Green follows:] 

PREPARED STATEMENT OF THE HON. GENE GREEN, A REPRESENTATIVE IN CONGRESS FROM 

THE STATE OF TEXAS

Mr. Chairman and Ranking Member, thank you for holding this hearing. 

I support diversifying our energy portfolio in any way possible—more efficient 

natural gas, solar power, clean coal, nuclear power, wind power, and other renewable 

sources of energy. 

We need to avoid picking favorites, because the economy is likely to have a much 

bigger impact than anything the government can do. 

The only good thing to come out of higher oil prices is an increased incentive to use 

alternative sources of energy for transportation. 

While natural gas prices also sky-high relative to their historical prices, perhaps we 

will have a similar incentive to produce new alternative electricity technologies as well, 

such as solar power. 

Coal power will continue to offer affordable and reliable power in places that are 

willing to site new coal facilities, like Texas, but other areas without coal generation are 

going to have to pay higher prices. 

Natural gas used to be the preferred form of new power, since it burns cleanly, but 

as the Department of Energy has noted, the high prices of natural gas are leading people 

to rethink those planned investments. 

We need natural gas in the petrochemical business, where it is irreplaceable. If 

short-term high natural gas prices lead to more coal, nuclear, and alternative energy 

hopefully natural gas prices come down. 

Of course if we really want to improve our natural gas price situation and protect the 

hundreds of thousands of American manufacturing jobs at stake, we should support the 

language in the Interior bill which repeals the Congressional moratoria for natural gas 

drilling in the OCS. 

Thank you and I yield back. 

MR. HALL. All right, I thank the gentleman. The Chair recognizes 

the gentlelady from New Mexico, Mrs. Wilson. 
10

 MRS. WILSON. Thank you, Mr. Chairman. I also wanted to thank 

you for having this hearing today to learn a little bit more about what 

some of the future might look like as we expand our electricity 

generation and as the demand increases. We know that by 2030, we are 

going to have a 50 percent increase in demand over current levels. We 

are going to have to figure out how to supply that demand. 

 In New Mexico, we do some innovative things. The third largest 

wind generation project in the world went on line on October 1, 2003, 

out in eastern New Mexico. And in eastern New Mexico and the high 

plains of eastern New Mexico, we laugh at this time of year and say that 

in New Mexico, at this time of year, Arizona is on its way through to 

Texas and it is all being carried in the wind. It comes one particle at a 

time in the dust. But they have got 136 turbines there, standing 210 feet 

high and generating 200 megawatts of power. That is about enough 

power for 94,000 New Mexico homes. And of course Sandia National 

Laboratories in Albuquerque, New Mexico, develops energy 

technologies, solar energy, and new more-efficient solar technologies are 

emerging from those laboratories and into companies, like Advent Solar, 

that are making solar, highly efficient solar cells for the commercial 

market and manufacturing them in Albuquerque. They are also looking 

at a biomass plant in the east mountains of New Mexico and the east 

mountains of Albuquerque. That is not only going to help restore the 

watershed, but take the waste from that restoration, use it for electricity 

generation in a cogeneration facility, and the heat from the generators 

will be used to warm a greenhouse that employs 70 people full time, 

where it is otherwise not economically viable. 

 So there are a lot of important things happening in new ways with 

renewable energy resources, and we are really looking forward to 

looking at this generation of technologies to see where America is going 

to take us. Thank you, Mr. Chairman. 

 MR. HALL. Does the gentlelady yield back? 

 MRS. WILSON. Yes, sir, I do. 

 MR. HALL. The Chair recognizes Mrs. Bono, the gentlelady from 

California. 

 MS. BONO. Thank you, Mr. Chairman. I will submit my statement 

for the record. 

 [The prepared statement of Hon. Mary Bono follows:] 

PREPARED STATEMENT OF THE HON. MARY BONO, A REPRESENTATIVE IN CONGRESS FROM 

THE STATE OF CALIFORNIA

Mr. Chairman: 

I am very pleased you are holding this hearing today. Too often, Congress is so 

consumed with the here and now that we don’t take time to look towards the future. This 

hearing lets us talk about the future. 
11

While government has a role to play in this debate, it is my belief that the private 

sector, as well as our colleges and universities, can and must play a critical role in 

bringing forth new and innovative technologies. 

Too often, states and local communities are dependent on only a few sources of 

energy. As we see in California, when the cost of natural gas rises, so too do our cooling 

bills. In the California desert, the sweltering summer months must be met with plentiful 

and affordable cooling. It is not a luxury but rather a necessity. So in order not be wedded 

to a single large source of generation, I believe that we can and should look to diversify. 

But our efforts should not stop there – we need to look at a diverse portfolio that includes 

alternative sources of clean and efficient energy. 

All of us have read about various forms of renewable sources of energy. Many of 

these sources, like solar, wind and geothermal, are not new to us. In fact, these sources of 

energy are thriving in California’s 45th Congressional District. But the technologies 

associated with these forms of generation are changing and they are changing for the 

better. The government’s goal should be to encourage honing and improving upon these 

technologies. 

There are also lesser known sources of renewable energy that are a bit more cutting 

edge. Here, our goal should be to foster the growth of promising new resources and then 

find a way to incorporate those into the market. 

It is my hope that this hearing will shed light on both well known and lesser known 

forms of energy that can and should be part of our nation’s future. I want to know how 

Congress can play a positive role in partnering with others to help create new forms of 

energy that are clean and affordable. 

Thank you and I yield back my time. 

 MR. HALL. All right. Mr. Bass, do you care to make an opening 

statement? 

 MR. BASS. Mr. Chairman, I appreciate the courtesy. I will pass. 

 MR. HALL. All right, we will get underway with the testimony. Dr. 

Arvizu and Mr. Yoder. Did I say it right? Close? 

 MR. ARVIZU. Yes, sir. 

 MR. HALL. For government work, it is pretty good. 

 MR. ARVIZU. Not bad at all. 

 MR. HALL. We want to thank you two gentlemen and the others that 

comprise the second. Don’t judge our respect for you and our 

appreciation for you being here by the empty chairs here, because this is 

hopefully the last day we are going to be in session. People have about 

three or four other committees to go to and have a lot of other things 

going on. Your testimony will be heard by these people in the back row, 

and they will tell those of us on the front row what you said. So it is very 

important that you give your testimony so that they hear. It will be taken 

down by a very capable gentleman over here at the end of the table. It 

goes into the record for all the Members of the Congress to see. So it is 

not just talking to empty chairs. But thank you for that. 

Doctor, I recognize you at this time to sum up, if you can, in 4 or 5 

minutes, or whatever you take. We are not going to gavel you down, but 

be as brief as you can. That gives us time to ask questions. Thank you, 

sir. 
12

STATEMENTS OF DAN E. ARVIZU, DIRECTOR, NATIONAL 

RENEWABLE ENERGY LABORATORY; AND MARVIN 

YODER, MANAGER, CITY OF GALENA, ALASKA, 

ACCOMPANIED BY PHILIP MOOR, DIRECTOR, PROJECT 

DEVELOPMENT, BURNS & ROE ENTERPRISES, INC. 

MR. ARVIZU. Thank you, Mr. Chairman and members of the 

committee. It is indeed a big honor for me to be here. I appreciate the 

opportunity to talk and provide commentary to this topic of great 

importance, and I do submit my full written statement for the record and 

trust that that will be accepted in its entirety, and I will summarize that 

testimony in my opening remarks. 

 Mr. Chairman, I am the Director of the National Renewable Energy 

Laboratory, the Department of Energy’s primary lab for research and 

development of renewable energy and energy efficiency technology. Let 

me begin by noting that it was the first energy crisis in 1970 that, while I 

was an engineering student in graduate school, that motivated me to 

pursue a career in renewable energy and I started with the Sandia 

National Laboratory to do just that. The Nation’s attention at that time 

was on energy similar to what it is today. The good news is the Nation 

did respond with an R&D program that over the years has produced 

many benefits in terms of alternative energy. I will get to those here in a 

moment. Perhaps the more sobering news is that we have learned in the 

past three decades that the magnitude of the energy challenge is much 

greater and more complex than we imagined, and the consequences of 

inaction are quite significant. Our Nation needs to produce considerable 

amounts of new energy to serve our citizens and to keep our economy 

going. At the same time, we need to reduce our dependence on oil and 

continue to import--I am sorry--continue to protect our environment, and 

it is clear to me that significant sustained national energy research, 

development and deployment programs are essential across all of our 

energy options, including clean fossil fuel, sustainable nuclear power, 

and energy efficiency and renewable energy. 

 The history of the National Renewable Energy Laboratory, which I 

head, has demonstrated that focused research can yield valuable new 

technologies in the near term, with many collective benefits. Consider, 

for example, that over the past 25 years the cost of wind has declined 

from over 40 cents a kilowatt hour to now in the range of 4 to 6 cents a 

kilowatt hour in good wind sites. The cost of electricity from 

photovoltaics has been reduced by 80 percent over that same time and 

today it is in the utility scale at 15 to 30 cents a kilowatt hour. And it is 

because of the progressively lower costs in both wind and photovoltaics 

and other technologies that these two have become the fastest growing 
13

sources of new electricity in the United States and in the world today, 

and there are similar gains in other technologies as well. 

 President Bush underscored the need for continuing energy research 

when he visited our laboratory earlier this year. The President’s 

Advanced Energy Initiative calls for a 22 percent increase in clean 

energy research at the Department of Energy, and his initiative would 

expand research in renewable fuels as well as solar electricity, and we 

believe this is a really important new development. The renewable 

energy industry is real. Tens of billions of dollars worldwide are 

presently part of that industry. It is rapidly growing and the market 

growth is spurred by a combination of technology advances and public 

policies. Further development of new renewable energy technologies 

will create many opportunities domestically. Renewable energy is 

plentiful across every region of our Nation. Renewable energy 

technologies can be an engine for local economic growth, job creation, 

and we are beginning to see that in a number of States. 

 While we clearly need supply side solutions, it is also clear that 

energy efficient solutions are often the most cost-effective way to meet 

future demands. Energy efficiency should be an ingredient of any 

comprehensive national program. 

For non-hydro renewables such as wind, the technology is beginning 

to mature. Ten gigawatts, 10,000 megawatts of wind are installed in the 

United States, 60,000 in the world, and there is still a need for continued 

research to eventually eliminate the production tax credits that are 

required to make that market go in the United States, and importantly, to 

make this clean energy source more suited to lower wind regimes as 

well. 

 In solar photovoltaics, researchers at our national center are part of 

the President’s Solar America Initiative. They are working to bring the 

cost down of photovoltaics to between 5 and 10 cents a kilowatt hour in 

the next decade. To get there we have to develop more cost-effective 

manufacturing techniques and advanced engineered materials. We are 

seeing those in the laboratory today. I am very excited to note that we 

have a couple of examples of some of those technologies here on display. 

Our troops are using solar battery chargers in the field in Iraq today, 

technology developed at our national laboratory. Additionally, we have 

thin-film photovoltaics on plastics that we fly in space presently, and this 

technology will be ubiquitous in the future; technology is advancing very 

rapidly. 

 On renewable fuels, we have great opportunity there. We believe 

that with domestic resources, we can get to 30 percent of our current U.S. 

gasoline consumption to be supplied by biofuels, and we think that can 

be done in a very short period of time, as well, with, certainly, 
14

competitively priced ethanol from cellulosic biomass that the President 

has put in as his biofuels program. 

 Each of these areas I have highlighted suggest that there are still 

challenges that remain and that we need to continue to get the cost down 

for renewable energies and fuels in order to accelerate their adoption. 

Renewable energy offers us a tremendous opportunity, and from my 

vantage point, the prudence of making serious national investments to 

achieve the full potential of energy efficiency and renewable energy is 

very clear and very compelling. Thank you. 

 [The prepared statement of Dan E. Arvizu follows:] 

PREPARED STATEMENT OF DR. DAN E. ARVIZU, DIRECTOR, NATIONAL RENEWABLE 

ENERGY LABORATORY

Mr. Chairman, thank you for this opportunity to discuss the important role the next 

generation of energy resources and technologies will play in meeting the critical energy 

needs of our nation. I am the director of the National Renewable Energy Laboratory, the 

Department of Energy’s primary laboratory for research and development of renewable 

energy and energy efficiency technologies. 

Our nation is at a critical juncture. We need to produce considerable amounts of new 

energy to serve our citizens and keep our economy growing. At the same time we need to 

reduce our dependence on imported oil and continue to protect our environment. 

The fundamental question -- Where will this new energy come from? – has no one 

answer. The reality is that if we are to solve our energy problems, and meet the 

phenomenal growth in demand for energy, we must have an energy portfolio that is at 

once, both smart and diverse. In my view, it is not a matter of nuclear energy versus 

solar energy, it’s not wind power versus new fossil fuel technologies. The answer is that 

each will have an important place at the table – we will need all of these technologies, 

and more. 

I cannot predict precisely what our energy landscape will look like, say, in 25 years, 

as technology and markets evolve. But I can say with some confidence that we do need a 

significant and sustained national energy research program to get us there. 

With a vital research and development program working on behalf of our nation, I 

am optimistic that we will be able to supply all the energy we need – and develop new 

industries that help grow our economy, and further environmental progress – while doing 

so. Throughout my career in energy research, I have seen time and again just how much 

a well-directed and properly supported R&D effort can accomplish. 

One need look no further than the relatively brief history of our research facility in 

Golden, Colo. Since our laboratory was founded in 1977 (known then as the Solar 

Energy Research Institute) the progress made on so many fronts has been nothing short of 

remarkable. NREL, along with leading academic institutions and corporations 

throughout the U.S., have demonstrated that focused research can yield valuable new 

technologies in the near-term, with many collective benefits for society added over the 

longer term.

Consider that over the past 25 years, the cost of wind energy has declined from 40 

cents per kilowatt-hour to four to six cents a kilowatt-hour today. The cost of electricity 

from photovoltaic technologies has plummeted 80 percent over that same time. These 

progressively lower costs have helped wind and solar energy become two of the fastest 

growing sources of new electricity in the U.S. and the world. Researchers at our 

laboratory attest to similar gains in other energy technologies, ranging from solar thermal 
15

power, biomass power, geothermal energy, hybrid vehicles and a host of advanced 

energy efficient technologies for industry. 

President Bush laid out a timely and compelling energy vision when he came to our 

laboratory earlier this year. The President’s Advanced Energy Initiative calls for a 22 

percent increase in clean energy research at the Department of Energy. These proposals 

emphasize research into renewable fuels, as well as renewable solar and wind 

technologies. 

Renewable energy can and should be one of the key players in meeting future 

demand for electricity and transportation fuels. We have hugely abundant renewable 

resources in the United States. The solar resource is good in every state, and even Alaska 

has the equivalent solar resource of Germany, which today is the largest solar market in 

the world. There are enough wind resources — concentrated in hilly areas of the country, 

coastal regions and the Great Plains — to meet twice the country’s total electricity 

demand. There are major, untapped geothermal resources in the West, and you can find 

vast amounts of useable biomass resources in virtually every state. 

Longer term, although hydrogen is often thought of primarily as an automotive fuel, 

its role as an energy carrier will be important in the electricity sector. Hydrogen can be 

produced from water using any available source of electricity — fossil, nuclear or 

renewable. This makes it possible to overcome the intermittency of wind or solar 

resources by using them to produce and store hydrogen, which can then be used to run a 

generator on demand. 

The challenge that remains before us is to continue to bring down the cost of 

renewable electricity and fuels in order to accelerate their adoption. NREL and its 

industry and university partners have made impressive progress in this area over the past 

three decades but we still have a long way to go before each of the renewable 

technologies realize their full potential and become truly cost-competitive with traditional 

alternatives. 

Our costreduction effort has 

a two-pronged 

strategy. One 

course is to work 

diligently on shortterm, applied R&D 

to bring down the 

cost of existing 

processes and 

manufacturing 

methods. The other 

is to continue with 

mid-term, 

disruptive 

technology 

advancement, and 

long-term, higherrisk and revolutionary basic research that industry can’t afford on its own, to identify and 

develop the next generation of renewable energy technologies. 

A new, 71,000-square-foot Science & Technology Facility at NREL, to be 

completed this year, will allow us to do even more of this "transformational" R&D in 

solar, basic science and hydrogen research. 

So exactly where are we today? And, moreover, what remains to be done to ensure 

that we have the most economic, the most secure and the most environmentally beneficial 

energy portfolio in the future? 
16

Surely, while we clearly need supply-side solutions, it is equally clear that energy 

efficiency can be of significant value in reducing the demand for power. The goal may 

be simple – to use energy more intelligently, and not waste it. But achieving that simple 

goal often requires the same kind of complex and sophisticated concepts and technologies 

that we have come to expect on the energy production side of the equation. 

Energy efficient solutions are often the most cost effective way to meet future 

demand and also provide additional non-energy benefits, such as improved productivity, 

increased durability and reduced air emissions. 

Buildings account for 70% of the nation’s electrical energy use. DOE’s current 

research goal is to develop cost effective, grid-connected Zero Energy Homes by 2020. 

A net Zero Energy Home produces as much energy as it consumes over the course of 

year. A total of nearly 40,000 energy efficient homes have been completed within the 

Building America program, and individual research houses, including the Zero Energy 

Denver Habitat home, are demonstrating the feasibility of reaching the Zero Energy 

Home goals. Expanded investments in private and public research partnerships like 

DOE’s Building America Program, are accelerating the adoption of new efficiency and 

renewable energy technologies within the housing and commercial buildings industries. 

Energy efficiency technology also is having a tremendous impact in the 

transportation sector. DOE’s Clean Cities program has encouraged use of alternative 

fuels, saving more than a billion gallons of oil since its inception. Gasoline-electric 

hybrid vehicles already are successfully boosting the fuel economy of our nation’s 

vehicle fleet, and plug-in hybrids offer the promise of cars that can go 100 miles or more 

on a gallon of gas. 

It is important that energy efficiency, in combination with energy supply, be a key 

ingredient of any comprehensive program for national energy research. 

On the energy production side, some of the most dramatic cost reductions have been 

achieved in solar power technology. In real terms, electricity from photovoltaics - or PV, 

technologies that produce electricity directly from sunlight - cost one fifth or less of what 

they did 25 years ago. Concentrating solar power costs about one seventh of what it did 

then. The price of power from grid-connected PV systems today ranges from 15 to 32 

cents a kilowatt hour. This year industry will ship PV modules capable of producing 1.2 

gigawatts of power into the world marketplace. There is currently 450 megawatts of 

installed capacity from photovoltaics in the U.S. 

Our researchers in the National Center for Photovoltaics at NREL are working to 

bring that cost down to around 4 to 6 cents a kilowatt hour by 2025. To get there, we will 

have to develop better, faster and larger scale manufacturing techniques, and create 

higher efficiency PV panels in the process. Solar technologies have the potential to shift 

a large proportion of daytime peak loads away from natural-gas-fired generators. And 

longer term, we believe solar nano-structured materials now being explored at NREL and 

elsewhere can revolutionize solar PV. 

As for wind power, in the best wind regimes, wind-generated electricity today costs 

about 4 to 6 cents/kWh — one-tenth of what it did 25 years ago. Our engineers and 

industry partners at the National Wind Technology Center are developing new methods 

to drive that cost down to 3.6 cents a kilowatt hour at low wind-speed sites onshore by 

2012, and down to 5 cents a kilowatt hour for shallow water offshore sites by 2014. 

Wind energy is the most mature of the renewable technologies. In some regions, 

wind power can be the cheapest source of electricity. There currently are 10 gigawatts of 

wind power installed in the United States, and 60 gigawatts worldwide. While wind 

power is well established, and is growing at impressive rates, there remains considerable 

need for new research that will further drive down costs, and, importantly, make this 

clean, renewable energy source better suited to areas that have lower average wind speeds 

than the prime areas being developed thus far. 
17

Our work today is focused on developing efficient, low wind-speed turbines, 

advanced power electronics and transferring wind technology to off-shore systems. If we 

continue to develop more advanced methods of accurately forecasting and integrating 

wind into the broader electrical generation system, wind energy has the potential to 

contribute up to 20 percent of the nation’s electricity. 

There is 10,400 megawatts of biopower generation in the U.S. Biopower today costs 

8 to 12 cents a kilowatt hour, half of what it cost 25 years ago. Scientists at NREL’s 

National Bioenergy Center and other labs are hard at work to lower that figure to 6 to 7 

cents a kWh by 2020. 

Geothermal resources contribute 2,400 megawatts to the nation’s power needs. 

Electricity from geothermal resources costs 5 to 8 cents a kilowatt hour today – about 

one-third of the cost 25 years ago. With the technology improvements we see over the 

next two decades, geothermal power is projected to drop to less than 4 cents a kilowatt 

hour by 2025. 

As for ethanol and other fuels made from biomass, there have been significant 

improvements as well. Whereas the cost of producing ethanol was more than $4 a gallon 

25 years ago, it can be made for $1.20 a gallon today. Our nation currently produces 

about 4 billion gallons of ethanol annually, primarily from corn grain. However, corn 

comprises but a small fraction of biomass that can be used to make ethanol. A DOE and 

USDA study suggests that, with aggressive technology developments, biofuels could 

supply some 60 billion gallons per year – 30% of current U.S. gasoline consumption – in 

an environmentally responsible manner, and without affecting food production. 

To gain greater use of “homegrown” renewable fuels, we will need new 

technologies that will produce competitively priced ethanol from cellulosic biomass, such 

as agricultural and forestry residues, municipal wastes, trees and grasses. New 

technologies like those we are now perfecting at NREL can break those cellulosic 

materials down into sugars and ferment them into fuel. The President has set a goal of 

making cellulosic ethanol cost-competitive with corn-based ethanol by 2012, and thereby 

reducing future U.S. oil consumption. 

Essential to the success of each of these emerging technologies is the need to move 

from a predominantly centralized model of power generation to one that includes 

flexible, resilient and distributed energy systems. This will require a concerted effort to 

revamp our electricity infrastructure. By putting in place a more modern and flexible 

electric distribution system, we will be able to take full advantage of each new electric 

generation technology, and do so in a way that maximizes their benefits in differing states 

and regions across the country. 

Most renewable power systems are distributed in nature, and thereby can enhance 

reliability of the electricity grid. Distributed generation can additionally be used instead 

of transmission and infrastructure expansion, and thus save money for utilities and 

consumers. Calculating the financial value of these benefits from renewables can be 

difficult. Renewable systems typically cost more initially, but most have low or no fuel 

costs, which can go a long way toward mitigating price volatility of more conventional 

fuels such as natural gas. We have to be able to put a dollar value on these benefits — 

and we’re working on that at NREL. 
18

Leadership provided by DOE, EPA, and national laboratories has helped state 

agencies encourage the use of renewable energy to help meet air quality goals. 

Maryland, Texas and New Jersey are incorporating energy efficiency and renewable 

technologies into their State Implementation Plan (SIP) planning process. In Texas 

alone, 4 million megawatt-hours of energy efficiency measures have resulted in more 

than 2,000 tons in NOx emission ozone season reductions. Ozone season NOx 

reductions achieved 

through energy 

efficiency and 

renewable energy 

measures in New 

Jersey are predicted to 

improve air quality by 

almost 900 

tons/season/year by 

2012. Illinois is using 

air quality 

improvement as a 

major driver in 

building 6 megawatt of 

new wind and 

renewable capacity in 

the state. 

Having served on the Secretary of Energy’s Coal Council for six years, and having 

been involved with nuclear issues throughout much of my career, I appreciate the 

challenges in each of these technology areas. Now, as director of NREL, I can tell you 

that the pathway to reaching the full potential of energy efficiency and renewable energy 

is clear and compelling. 

Renewable energy and energy efficiency technologies can meet our nation’s 

growing energy demand, largely without pollution or other trade offs. These 

technologies, however, can only achieve their ultimate potential through a significant and 

sustained national effort, focused on technology research, development and deployment. 

Thank you. 

 MR. HALL. Thank you very much. The chair at this time recognizes 

Mr. Marvin Yoder, Manager of the City of Galena, Alaska, and I hope 

we will hear from him something about your city’s efforts and discussion 

to plan to install a small nuclear unit for electricity, a generator to replace 

your diesel generators. We are very interested in that and would like to 

hear something of that. I recognize you to summarize it at this time, and 

then we will go into questions with you later. 

MR. YODER. Thank you, Mr. Chairman, and subcommittee 

members, for the opportunity to testify here today. On the board here, 

you do see the layout of the plant and some of the components that go 

into it. The purpose of my testimony is to, one, review with you the 

urgent needs of Galena, Alaska, and other remote Alaska communities; 

two, emphasize that Galena’s first concern is to develop a safe energy 

source for our citizens that is clean and cost effective; and three, describe 
19

for you the 4S small nuclear power plant design, which we believe 

satisfies our safety concerns and is ready for NRC review and licensing. 

 Galena is a small town of 700 people on the Yukon River. Sixty 

percent are Alaska natives. There are no roads to Galena, so travel is 

primarily by air or on the Yukon River in the summer. These 

transportation constraints increase the cost of goods and services. Milk 

is $10 per gallon, and gas is $4.20 per gallon. Another expensive 

commodity is electricity. The city operates a diesel generator electric 

plant and annually receives 700,000 gallons of fuel by barge. Since 

2000, the cost of fuel has increased by more than 250 percent. Fuel is 

more than 70 percent of our generation cost, and electricity has risen to 

33 cents per kilowatt hour--to three times the national average. The city 

is losing its largest customer, the U.S. Air Force base through the Base 

Realignment and Closure process. The Air Force purchased 

approximately 55 percent of our power. When BRAC is implemented, if 

we don’t have any reuse plans, we are going to lose that load. We 

currently operate a boarding school for 100 high school students and 

offer post-secondary training as well. Low-cost electricity and heat are 

vital to the success of any Galena reuse plan. 

 Because of all of these challenges, the city has been searching for an 

alternative to diesel power for 10 years. We have considered coal, and 

for the ones who consider that, there is a coal bed about 10 miles from 

the city. We have considered methane gas, solar, wind, and in-stream 

hydro. In 2003 we heard of the 4S nuclear plant that is buried 

underground; it is safe and small and will last for 30 years. Built in 

modules, it will lower the cost of electricity by two-thirds, and it can 

generate excess power to serve nearby villages. In 2003, the Toshiba 

Corporation, along with others, traveled to Galena to discuss the 4S, and 

my observation is that Toshiba was pleased with the prospect of working 

with the community and the community present, though the 4S nuclear 

reactor held some promise to meet our needs. 

 In 2004, we worked with the Department of Energy and completed a 

study entitled “Galena Electrical Power: A Situational Analysis.” The 

study compared electric rates and the environmental impacts of various 

electric options. The 4S was determined to be superior to other options 

on both counts. The report noted that this technology would reduce the 

greenhouse gases of our diesel generators and also mitigate the 

likelihood of diesel fuel barge spill on the Yukon River. For the first 

couple of years we pursued this goal we seemed to be swimming against 

the current. In the past few months the current seems to have reversed. 

We are encouraged by several events. First, in November, Mohammed 

Elbaradel, Director General of the International Atomic Energy Agency, 

suggested there could be hundreds of 4S-like reactors providing clean 
20

electric power and desalinated water in locations around the world. 

Secondly, we were encouraged when President Bush included small 

power reactors as integral part of his GNEP initiative. Third, we were 

given seed money from the Governor of the State of Alaska and the State 

legislature to begin a white paper process for eventual submittal to the 

NRC. 

 The 4S is a liquid metal reactor, and it is very similar to the EBR 

reactor that was successfully run at the Idaho National Lab for decades as 

an electric generator. The 4S reactor and the power generation 

equipment are designed to produce 10 megawatts of electricity. The 

facility is quite small, taking up only half an acre. The 4S reactor is 

designed to be fueled once, producing heat and electricity for 30 years. 

The citizens of Galena and I want to have a safe and secure power 

source. As mentioned in my opening comments, facility safety is 

absolutely our first priority, and the 4S plant meets or exceeds our 

expectations in this regard. In fact, tests were run on the EBR-2 that 

proves that the reactor would safely shut down without the need for 

active safety systems or human intervention. The plant is inherently safe 

in its passive design. I want to emphasize that the 4S is a technology that 

is ready to deploy today. Galena has evaluated the alternatives and we 

conclude that the 4S small power facility is the right choice for our 

energy and environmental needs. 

 Toshiba and other Japanese companies have developed the 4S design 

to the point where it is ready for NRC licensing. Other Alaska towns are 

closely following Galena’s 4S program because of skyrocketing costs 

threatening their way of life. Mining interests in Alaska and Canada 

have also contacted us of their interest in the potential low-cost, 

nonpolluting energy source that would allow mining and processing of 

gold and other metals, oil-bearing sands and shale. Our Alaska Senators 

and congressmen view the 4S project as being the first of several projects 

having the potential to lower the cost to remote parts of Alaska and the 

lower 48, while improving the environment. 

 And we are looking for funding to carry this technology through the 

NRC licensing process. Ultimately, we want a design certification and 

license to construct and operate a 4S plant in Galena. We have visited 

the Department of Energy to request funding and appeal to this 

committee to help us meet our goals. Our immediate needs are for funds 

to prepare the environmental work, which will cost $20 million over 2 

years, and we have requested the GNEP provide $2.8 million of that to 

begin immediate air, water, and ground data collection necessary for 

environmental analysis. A 4S small power plant is a source of energy 

that is ready to be built today. We are a small community with a big 

idea, and we ask for your help in deploying this new energy source. 
21

 Thank you, Mr. Chairman, for this opportunity to testify today. I 

request that Galena’s entire written testimony be included in the hearing 

record. In attendance with me is our nuclear engineer, Mr. Philip Moor 

of Burns and Roe Engineering, and we would happy to answer your 

questions. 

 [The prepared statement of Marvin Yoder follows:] 

PREPARED STATEMENT OF MARVIN YODER, MANAGER, CITY OF GALENA, AK 

GALENA’S NEED: Safe, clean, reliable, economic, and environmentally compatible 

energy to replace current diesel-fired electrical production 

o Technology came from the Department of Energy’s EBR-2 reactor at the Idaho 

National Lab (INL) 

o Not new technology – adaptation of technology that is decades old 

o Passively safe (operator can shut off all power and walk away) 

o Provides electricity (10 megawatts), heat and hydrogen for several thousand 

people 

SOLUTION: Small Nuclear Power Plant 

o 30 year reliable energy production without refueling 

o Safe, secure underground facility requiring no periodic maintenance 

o Simple, passive safety systems 

o Produces electricity, heat and hydrogen 

o Near-term availability – 2010 to 2012 operation 

GALENA’S ROLE: Galena an ideal site for first Small Nuclear Power Plant 

o First reactor must be in United States to get U.S. NRC license 

o Progressive, educated community – representative of rural Alaska 

o Economic growth limited by energy availability/costs 

o 4S is cost competitive in Alaska: 

 4S costs $60 - $100/MWh (fully amortized) 

 Alaska diesel cost: $290/MWh 

 Lower 48 costs: Coal - $33 to $41/MWh +$15 to $75 for carbon 

 permits 

 Gas - $35 to $45/MWh +$10 to $50 for carbon 

 permits 

 Large Nuclear - $32 to $50/MWh 

o Transforming technology – hydrogen center of excellence 

o Citizenry involved and willing to undertake a project 

o Initiated Nuclear Regulatory Commission discussions

FEDERAL FUNDING REQUEST: Nuclear Regulatory Commission review 

• FY07: $2.8 million – Regulatory analyses (“white papers”); Early Site Permit 

(“ESP”), and Combined Operating and Construction License (COL) preparations. 

• FY08: $10.0 million to initiate ESP/COL. 

• FY09: $7.2 million to complete ESP/COL. 

Overview:

Mr. Chairman and Members of the Subcommittee my name is Marvin Yoder. I am 

the City Manager for the City of Galena, Alaska. I want to thank you for the opportunity 

to testify today. 

The purpose of my testimony is to (1) review with you the urgent energy needs of 

Galena, Alaska and other remote Alaska communities, (2) to emphasize that Galena’s 
22

first concern is to develop a safe energy source for our citizens, that is clean and costeffective, and (3) describe for you the 4S small nuclear power plant design which we 

believe satisfies our safety concerns and is ready for Nuclear Regulatory Commission 

(NRC) review and licensing. 

Galena, Alaska:

Galena is a small community of 700 people, 60% Alaska Native, living on the banks 

of the Yukon River. There are no roads to Galena so travel is primarily by air. 

Because of our small size it may be difficult to conceptualize the fact that Galena is 

a “hub community”. There are four smaller villages in our region that are partially 

dependent on Galena for transportation and health care. 

Freight is moved by air in the winter because the river is frozen over; however, the 

river is open from June through mid-September, and we do get barge service from 

Fairbanks in the summer. These transportation constraints increase the cost of goods and 

services. For instance milk is $10 per gallon and gas is $4.20 per gallon. 

Another expensive commodity is electricity. The City operates the power plant 

which produces power from diesel generators. The power plant annually receives 

approximately 700,000 gallons of fuel from barges on the river. There is storage for 

enough fuel to operate all winter. 

As everyone knows the cost of fuel is rising dramatically. Since 2000 the cost of 

fuel has increased by more than 250 percent. Fuel is more than 70 percent of our 

generation cost, and electricity has risen to 33 cents per kilowatt hour. 

Impact of BRAC and follow-on plans:

 The effect of this has been exacerbated by the fact that the City is losing our largest 

customer, the U.S. Air Force base, to the Base Realignment and Closure (BRAC) 

process. The Air Force purchases approximately 55% of our power. When BRAC 2005

is fully implemented the city will lose that load unless a reuse for those facilities is found. 

Our aim is to utilize the facilities on the Air Force property by developing commercial 

businesses, and to expand our educational and trade school program. Galena currently 

operates a boarding school for 100 high school students and also offers post secondary 

training. Low cost electricity and heat are vital to the success of any Galena reuse plan. 

Because of all these challenges the City has been searching for an alternative to 

diesel power for 10 years. We have considered coal, methane gas, solar, wind and instream hydroelectric. Galena’s situation is preferable to some of the other Alaskan 

remote villages where the cost of utilities is even higher. There is now concern that some 

of these native villages will be forced to close their doors if alternatives to high energy 

prices are not found. 

4S Small Nuclear Power Plant:

In the summer of 2003 we heard of a “4S” (super-safe, small, simple) nuclear power 

plant that is buried under ground, is safe, small, will last for 30 years, is built in modules, 

and will lower the cost of electricity by two-thirds. Furthermore, it will generate excess 

power beyond the City’s needs that could provide additional power to nearby villages. 

In August of 2003 the Toshiba Corporation along with others traveled to Galena to 

discuss 4S and look at our community. Several members of the City Council attended 

that meeting. 

My observation is that Toshiba was pleased with the prospect of working with the 

community, and the community members present thought the 4S nuclear reactor held 

some promise to meet our power needs. 
23

Alternative energy sources studied:

In 2004 we worked with the U.S. Department of Energy to complete a study entitled 

Galena Electric Power – a Situational Analysis. That study compared the electric rate 

and the environmental impacts of various electric power options. The 4S was 

determined to be superior to the other alternatives on both counts. It was noted in the 

report that this technology would reduce the greenhouse gases of our diesel generators, 

and also mitigate the likelihood of a barge spill of diesel fuel on the Yukon River. 

Based on the results of that study, the Galena City Council, in December of 2004, 

passed a resolution to continue our efforts to determine if the 4S plant was suitable for 

Galena. In February of 2005 the City met with the NRC to inform them of our intentions 

to further evaluate the feasibility of installing a 4S plant in Galena. 

GNEP:

For the first two years that we pursued this goal we seemed to be swimming against 

the current. In past few months the current seems to have reversed and we are 

encouraged by several events. 

First, in November of last year Mohammed Elbaradei, Director General of the 

International Atomic Energy Agency (IAEA), in a speech at MIT, suggested that there 

could be hundreds of small reactors with designs like the 4S providing electrical power 

and clean desalinated water in locations around the world. (It should be noted that the 4S 

is well suited for hydrogen production as well.) 

Second, we were further encouraged when President Bush included small power 

reactors as an integral part of his Global Nuclear Energy Partnership (GNEP) initiative. 

GNEP contains elements that endorse small reactors with a long fuel cycle that are 

proliferation resistant. 

Third, we were given seed money from the Governor of Alaska and State 

Legislature to begin the “White Paper” process for eventual submittal to the NRC. 

And finally, in the past year there have been numerous articles published addressing 

the role that nuclear power may play in reducing greenhouse gases, stabilizing the cost of 

energy, and reducing world demand for fossil fuels. While most of the emphasis is on 

large nuclear facilities we are convinced that small nuclear power plants will also play a 

significant role world-wide. 

4S power plant specifics:

The 4S is a Liquid Metal Reactor (LMR) and is very similar to the EBR-2 reactor 

which was successfully run at the Idaho National Lab for decades as an electric 

generator. The 4S reactor and the power generation equipment are designed to produce 

10 megawatts of electricity. The facility is quite small taking up only about one-half acre 

of land. 

The 4S reactor is designed to be fueled once, producing heat and electricity for 30 

years. In this design all the nuclear heat producing equipment is below grade, and 

contained within separate underground structures. This design prevents access without 

specialized lifting equipment. There is no spent fuel storage on site. Because of its small 

size and simple design the facility can be air cooled during normal operation. The design 

also uses air cooling for the nuclear equipment after it is shutdown. 

Galena’s focus on safety:

The citizens of Galena and I want to have a safe and secure power source. As 

mentioned in my opening comments, facility safety is absolutely our first priority, and the 

4S plant meets or exceeds our expectations in this regard. In fact, tests were run on EBR2 that proves that the reactor would safely shutdown without the need for active safety 

systems or human intervention. The 4S plant is inherently safe in its passive design. I 

want to emphasize that 4S is a technology that is ready to deploy today. Galena has 
24

evaluated all the alternatives and we conclude that a 4S small nuclear power facility is the 

right choice for our energy and environmental needs. 

Nuclear Regulatory Commission review:

Toshiba and other Japanese companies have developed the 4S design to the point 

where it is ready for NRC licensing. Work is being finalized now to prepare the NRC 

application documents. 

Galena has met with the NRC to understand what needs to be done to permit a plant 

like this in the United States. Our aim is to have the 4S facility operational by 2012. We 

expect to pursue with the NRC an Early Site Permit (ESP) and a Combined Operating 

and Construction License (COL) process for the Galena project. We think the permitting 

will take between 3 and 4 years. We will meet with the NRC again in a few weeks to 

continue the dialogue. 

With funding from Governor Murkowski and the Alaska State Legislature, the City 

was able to contract with Burns and Roe, Inc to prepare a series of White Papers. (These 

technical papers will provide further education regarding the safety of the 4S plant.) 

Other Alaska towns are closely following Galena’s 4S program because skyrocketing 

energy costs are threatening their way of life. Mining interests in Alaska and in Canada 

have also contacted us. They are very interested in the potential of a low cost, nonpolluting energy source that would allow mining and processing of gold, other metals, oil 

bearing sands and shale. 

City leaders have met with our Alaska Senators and Congressman and have their 

support for this project. They view Galena’s 4S project as being the first of several 

projects having the potential to bring lower cost energy to remote parts of Alaska and the 

lower 48 states while improving the environment. 

Funding and Design Certification:

 We are looking for funding to carry this technology through the NRC licensing 

process. Ultimately we want a design certification, and a license to construct and operate 

the 4S plant in Galena. We have visited with the Department of Energy (DOE) to request 

funding, and appeal to this Committee to help us meet our goals. Our immediate needs 

are for funds to prepare the environmental work which will cost $20 million over 2 years. 

We have requested the GNEP program provide $2.8 million of that amount to begin 

immediate air, water and ground data collection necessary for the environmental analysis. 

We see the GNEP program as a logical source for funding this program and encourage 

your support of Galena’s efforts to build this 4S small nuclear power plant. 

Conclusion:

The 4S small nuclear power plant is a "today" energy source that is ready to be built. 

We are a small community with a big idea that wants to build it. I ask for your help in 

deploying this new energy source. We are enthusiastic about the opportunity to change 

the cost of living dynamic, and preserve our Native Alaskan way of life in our little 

corner of the world. 

Thank you, Mr. Chairman, for this opportunity to testify today. I request that 

Galena’s entire written testimony be included in the hearing record. In attendance with 

me is our nuclear engineer, Philip Moor, of Burns and Roe Engineering. We would be 

happy to answer your questions. 

 MR. HALL. We thank you very much. I note the presence of the 

Chairman of Energy and Commerce. Mr. Chairman, would you like to 

propound any questions to the witnesses? 
25

 CHAIRMAN BARTON. Well, Mr. Chairman, I have been in 

discussions with Mr. Boucher on the refinery permitting bill, so my mind 

is not focused on new ideas on how to generate electricity. If you will 

give me about 5 minutes to get focused, then I would probably come up 

with some questions. 

 MR. HALL. All right. 

 CHAIRMAN BARTON. But at this point in time, I would like to defer 

for five minutes. 

 MR. HALL. All right. Then I will ask a question of Dr. Arvizu. Did 

I say that right that time? 

 MR. ARVIZU. It’s Arvizu. 

 MR. HALL. Arvizu. 

 MR. ARVIZU. Yes, sir. 

 MR. HALL. And that is not what I said? 

 MR. ARVIZU. That is close. 

 MR. HALL. Remember, I am the Chairman. 

 MR. ARVIZU. Yes, sir, I will change it tomorrow. 

 MR. HALL. I thank you. 

You mentioned hydrogen that was generated from wind power and 

it’s turbine. It is a method to overcome the fact that wind power is 

intermittent. Is this cost competitive, and is anyone doing this today? 

 MR. ARVIZU. Thank you for the question, Mr. Chairman. Actually 

our local utility is the one that approached us about it. They have several 

fairly major wind farms that they currently operate and a couple more 

that they plan, and they are trying to look to the future, because what 

they would like to be able to do is capture that wind energy when there is 

no, perhaps, peak load demand on the system so that they can use it at a 

later time. So they are looking at hydrogen as an opportunity as a 

storage medium. Perhaps it could be used for transportation fuel at some 

time in the future, but that is their motivation. And so they have entered 

a partnership with us at the National Laboratory and we are looking at 

different components to make that cost-effective. Today, I would offer 

that it is not cost-effective, but we believe that it can be with additional 

development. 

 MR. HALL. In your opinion, which of the technologies that you have 

described are ready for deployment now because they are cost 

competitive and available, but are not being deployed to the extent that 

they should be, and what do you think the reluctance may be to deploy 

these technologies? 

 MR. ARVIZU. Well, certainly there are a number of factors that offer 

what I would call barriers to more rapid, accelerated deployment. Many 

of these technologies I mentioned in my remarks are being deployed in 

various markets where the business case can be made and the private 
26

sector can create a sustainable business opportunity. So in the case of 

wind, the technology is far enough along now when we have a good 

wind resource close to a load. You don’t have to add new transmission 

capabilities. You can put wind into the system and essentially it is cost 

effective today. Photovoltaics, when the solar resource matches your 

demand peak, like in Southern California, where people turn on their air 

conditioners in the afternoon, there is an opportunity there to provide 

energy back into the system at a cost that is very competitive with what 

we pay today. So there are ways to do that. A lot of it has to do with 

some policies that are in place and also some structural things that are 

part of the infrastructure we have today. 

 MR. HALL. You state that there are 10,400 megawatts of biopower. 

And so for the record, tell us what you mean by biopower. 

 MR. ARVIZU. Well, there are two ways that you can use a biomass 

or essentially a biomass resource for electricity generation, and many of 

these are smaller power plants that use some form of green waste, 

everything from yard clippings to some of the municipal solid waste 

kinds of things as well, but much of that biomass is also co-fired with 

coal to reduce the emission profiles out of many of the power plants that 

are out there today. So that is the technology that has been in place for 

some time now and it is relatively mature. 

 MR. HALL. Mr. Yoder, tell us just briefly about your city’s plans to 

install a nuclear unit for electricity generation, the cost of it, and how you 

are going to finance something like that. It seems like it is a pretty big 

undertaking. 

 MR. YODER. It is a very large undertaking. We do realize that since 

it is somewhat of a first of its kind, that there are a lot of development 

costs that will not be there in the future ones, and some of that is going to 

be borne by industry, by the manufacturer, by whoever the eventual 

owner is. We will probably be a purchaser of raw power and our 

determination will be based on the cost of that power, not necessarily on 

the cost of the overall plant. 

 MR. HALL. What, if any, existing Federal or State rules are 

hindering deployment of the technologies that you have discussed? 

 MR. YODER. The biggest hurdle I think we have to cross is the 

Nuclear Regulatory Commission’s rules. We expect that process, the 

licensing process, to take several years. Galena, basically as a city, is 

working on the environmental side of it. We expect the manufacturer or, 

rather, industry, to do most of the licensing for the plant itself. Our focus 

is on the environmental part of what goes in Galena, and both of those 

have huge components at the NRC that will take a considerable length of 

time. 
27

 MR. HALL. All right. My time has expired. The Chair recognizes 

the gentleman from Virginia. 

 MR. BOUCHER. Well, Mr. Chairman, thank you very much and, Mr. 

Arvizu-- 

 MR. ARVIZU. Yes, sir? 

 MR. BOUCHER. --thank you for sharing your knowledge with us this 

morning. I notice in your testimony that you are talking about the 

potential for a zero energy home by the year 2020, and I assume that 

means that the home would generate as much electricity as it consumes, 

and so this is a home that can live totally off the grid. Is that a fair 

description of what you have in mind? 

 MR. ARVIZU. It is. On an annual basis, the amount of energy that it 

would generate would essentially be the same as the amount of energy 

that it consumes on an annual basis, maybe not at the same time. But we 

actually have a home in Denver that was part of the Habitat for 

Humanity project and we helped design this essentially net zero energy 

home. It has photovoltaic panels on the roof, it has a very tight envelope 

so that there is very efficient use of energy in the home, and we have a 

single mother with two boys that are the occupants and their electricity 

bills are not zero, but that is not because they are consuming energy. 

That is normally some of the things that the utilities charge for services 

that they otherwise use. 

 MR. BOUCHER. So the home is connected to the grid. 

 MR. ARVIZU. It is. 

 MR. BOUCHER. But it generates as much electricity as it brings in, I 

suppose. 

 MR. ARVIZU. That is correct. 

 MR. BOUCHER. Is it selling excess electricity back into the grid? 

 MR. ARVIZU. Precisely. 

 MR. BOUCHER. Yes. Well, let me ask you this. With regard to a 

broader deployment of zero energy homes, would there be a role for 

demand response in helping to make that possible? And I have a 

particular interest in smart meter technology, and I am wondering if you 

can enlighten us about, first of all, the role that demand response would 

play in the creation of a large number of zero energy homes, and the 

extent to which demand response technologies, including smart metering 

technology, is being deployed at the present time, and any barriers that 

you see to further deployment of demand response technologies. 

 MR. ARVIZU. A very important question, sir. I think one of the 

structural issues that will allow us to more rapidly deploy some of these 

distributed resource technologies, such as the ones we are talking about, 

is in fact both time-of-day pricing; and essentially smart meters which 

are meters that can manage that commerce on both sides of the meter so 
28

that we can begin to allow consumers to make choices about how they 

use energy, based on its value. And if you are at a point in the utility 

infrastructure where you are at or near peak, the cost of supplying that 

energy is very expensive and they pay a lot of money to do that. So as 

we are able to relieve that load, it displaces new generation, it displaces 

maintenance and operation costs, and at the same time gives the 

consumer the opportunity to manage their own energy needs in a way 

that can provide benefit to them and also to the economy and to the 

environment. 

 MR. BOUCHER. So to what extent are smart meters being deployed 

at the present time? Do you have a visibility for that? 

 MR. ARVIZU. Well, yes, it is a little frustrating because there are not 

many places where we do have the entire, what I would call, package of 

those types of incentives. California is the leader. They, in fact, have 

been doing this for some time and I think other States are beginning to 

get on board. There are other activities going on in various forms of 

maturity across the country. We don’t have it in most States and in fact 

it is a fairly significant barrier, even in our own State of Colorado. 

 MR. BOUCHER. Is that a regulatory issue at the State level, or is it 

lack of will on the part of the incumbent utilities to deploy? 

 MR. ARVIZU. Well, I think it probably varies State by State. There 

are a number of different ways in which those policies get put in place, 

and without drawing a conclusion about whose responsibility it is, I look 

at it from the perspective of what can the technology offer, and then 

decisionmakers are in a position to know that this kind of a policy will 

provide this kind of a benefit. And to a large extent, we haven’t had that 

level of transparency in the past that I think now is beginning to become 

known to lots of people, and all of sudden it becomes, I think, a very 

important and healthy debate in many of the State legislatures. 

 MR. BOUCHER. We included in EPAct 2005 just for your 

information, a provision that requires every State to undertake an 

examination of the merits of demand response and smart meter 

technology, and a potential requirement, State by State, that electric 

utilities offer real demand, real-time pricing so that that price signal 

would be sent and consumers would have a basis to choose the time of 

day in which they consume electricity in greater or lesser amounts. I 

suppose you haven’t really looked around the States to see what they are 

doing with that requirement, have you? 

 MR. ARVIZU. No, sir, I haven’t. I can tell you this, I applaud the 

language in the bill because it is absolutely what is necessary. I think my 

observations are that many States are still trying to figure how they do 

that and haven’t yet come to a conclusion about what needs to be done. 

But it is something that we ought to really move on, I think. 
29

 MR. BOUCHER. Do you provide information to States on request? 

Do you have a service that does that? 

 MR. ARVIZU. Yes, sir, we do. 

 MR. BOUCHER. So they can come to you for information? 

 MR. ARVIZU. They certainly can. 

 MR. BOUCHER. All right, thank you, Mr. Arvizu. 

 MR. ARVIZU. Thank you, sir. 

 MR. HALL. All right, the Chair recognizes Mr. Shimkus. 

 MR. SHIMKUS. Thank you, Mr. Chairman, it is great to be here. I 

appreciate your testimony. Sorry, I had to run downstairs. That is 

adjourned. That was a quick hearing and so I get to spend the rest of the 

time up here. A couple questions that I would like to address. And Dr.-- 

 MR. ARVIZU. Arvizu. 

 MR. SHIMKUS. Arvizu. Do you talk anywhere about geothermal? 

Do you consider that part of your portfolio? 

 MR. ARVIZU. We do. Geothermal is a mature technology. We have 

roughly two gigawatts, 2,000 megawatts of geothermal resource that has 

been tapped and generates electricity. Geothermal is still a technology 

that is not only viable, but can provide additional generation for our 

energy mix. In the grand scheme of things, it is one of the technologies 

that we need to pursue and use when the resources are available. The 

research that is required to improve that technology allows incremental 

cost reductions, perhaps doesn’t have as much of an impact longer term 

as some of the other technologies that are moving on a much more rapid 

curve, but it is still a very important part of our portfolio. 

 MR. SHIMKUS. In my investigation, and especially in your 

discussions about the home, really the geothermal applications, it really 

is related to more home heating, but it then adds more to the electricity 

cost, because you are really recirculating the geothermal heating core. 

Through the use of more electricity, you can--with natural gas concerns 

and escalating prices, those in the Midwest or anywhere that relies on 

natural gas, there is a great benefit, especially with the high price of 

home heating, but it does really then address increase electricity use, 

which I am very interested in. I have actually done a lot of research on 

the home heating front and I think it holds great promise, also. 

 MR. ARVIZU. Yes. If I may respond, I think it is absolutely 

essential, and I should make a distinction between a geothermal resource, 

which is really things like tapping the geysers in California, versus a 

ground-coupled geothermal pump, we call it, which really takes 

advantage of that thermal gradient in the Earth to the atmosphere, to 

essentially be a sink and a source for heat and to reduce our heat load in 

our homes. 

 MR. SHIMKUS. Cooling load, too, in the summer. 
30

 MR. ARVIZU. So you can use that thermal gradient. You can use the 

temperature difference, if you will, for providing benefit to the inside of 

a dwelling. 

 MR. SHIMKUS. Right. 

 MR. ARVIZU. And that is what coupled thermal heat pumps are and 

they are very-- 

 MR. SHIMKUS. I am sorry. Let me get to Mr. Yoder real quick. I 

am a big nuclear power proponent and I am very excited about your 

proposal. A major question, though, is, what do you plan to do with the 

waste? And if we don’t open Yucca Mountain--we are not going to build 

any more nuclear power plants in this country unless we have a place to 

store the waste. Your plant is a smaller size than most that we deal with, 

so what are you going to do with your waste? 

 MR. YODER. I think that is a technical question. Mr. Moor is here, 

and he could clearly answer that. 

 MR. SHIMKUS. Is the mic on? 

 MR. YODER. Oh, okay. Mr. Moor is here from Burns and Roe, and 

he has done a white paper on decommissioning, and I would like him to 

answer that question, if he would. 

 MR. MOOR. This is a very small facility, much smaller than the 

commercial nuclear facilities that we are familiar with. It is 50 

megawatts versus over a thousand. The way this facility is designed, it 

has a 30-year core life, so it would be installed once, and based on our 

current construction projection, the spent fuel would be ready for 

repository in 2045. 

 MR. SHIMKUS. A repository. And where is that repository? 

 MR. MOOR. I am not here to respond to whether there will be a 

Yucca Mountain or a recycling facility, but there will be some Federal 

repository. 

 MR. SHIMKUS. That is what we hope. 

 MR. MOOR. That is what we hope, too. 

 MR. SHIMKUS. So that is an interesting debate. Senator Domenici 

really did great harm in his comments yesterday. It is critical that Yucca 

Mountain goes forward and it is critical that we move the spent rods off 

these sites for our nuclear power plants so that they can continue to use 

their plants to generate electricity, and I would hope that you would use 

your connections with some senior Members of the Senate to help 

address the advanced siting with the Administration, or the licensing and 

then the expansion and the move forward on Yucca Mountain. Mr. 

Chairman, my time has expired and I yield back. 

 MR. HALL. I thank the gentleman. The Chair recognizes Mr. Green, 

the gentleman from Texas. 
31

 MR. GREEN. Thank you, Mr. Chairman. I don’t have many 

questions and I will yield back the time. Mr. Yoder, you talked about the 

base closure and your main customer now is the Air Force base and you 

are going to develop that into other uses for commercial and educational. 

I assume most of your diesel now is barged in during the months when 

the river is not frozen. 

 MR. YODER. Yes, that is correct. 

 MR. GREEN. And I guess most of the equipment, because this is a 

pretty ambitious project and I congratulate you on looking at it, I guess 

that most of the equipment would be barged in to build the facility. 

 MR. YODER. Yes. In fact, one of the early diagrams we had from 

Toshiba showed the whole configuration sitting on a single barge and 

coming in, in whole, so they had considered off-site construction and 

bringing it in on a barge. 

 MR. GREEN. You know, that is interesting because I know of an 

experience in Houston where we will do an expansion for a chemical 

plant, for example, and all of the work will be done and it will be towed 

up the Mississippi River and the Ohio River Valley and literally dragged 

up the river bank and placed in one of the chemical facilities there on the 

Ohio River. That is really good. Dr. Arvizu? 

 MR. ARVIZU. Arvizu. Yes, sir. 

 MR. GREEN. I appreciate your testimony, especially on wind power 

and I know, coming from Texas, obviously hydrocarbons are important, 

but I know our State is doing some interesting things off the coast, both 

Galveston, Brazoria County, in the Houston area, but also just off the 

coast at South Padre, with windmills. 

 MR. ARVIZU. Yes. 

 MR. GREEN. And it is going to help the State’s school education 

fund and there will also be an alternative to put power into the grid that 

we don’t use anymore. 

 MR. ARVIZU. Right. 

 MR. GREEN. The biggest concern, though, is the environmental side 

because of our flyways that we have in lots of areas, and I don’t know if 

that has been something the Department of Energy has addressed, or is 

that something someone else would, on expansion of wind power, 

because we already have wind power in west Texas, with windmills. 

 MR. ARVIZU. Sure. Yes. 

 MR. GREEN. And has there been any evidence of a loss, particular 

during migrations? 

 MR. ARVIZU. Yes. Well, it is first of all an issue that the 

Department of Energy is very much focused on. We look at all the 

environmental footprints that any of the renewable energy technologies 

do represent. And certainly what we have learned in 30 years of wind 
32

technology development and deployment is that you really do need to 

stay away from migratory bird flight paths, because there is an issue that 

relates to disruption of some of those avian issues. At the same time, I 

think a lot of these things tend to get a lot more press than they are 

entitled in many respects. We do need to manage those things and it is a 

matter of risk and reward, the benefit that you get from these 

technologies versus whatever risks they might represent. But in the case 

of things like the flight paths for aircraft and even for the military, on the 

offshore technologies and also the migratory bird paths, we are looking 

at those very, very closely. There is a number of studies that we fund 

through universities and other organizations to help us provide the 

greatest amount of knowledge and information so that you site and you 

permit these facilities in the places where they are going to cause 

essentially the least disruption, and we believe that this is not an 

insurmountable issue and in fact is one that we have, I think, made a 

great deal of progress on and I think we got our arms around that one. 

 MR. GREEN. Well, one of the perforations, I know that our offshore 

drilling is at some of the best fishing in the Gulf of Mexico, because 

typically it is just flat, and once you put a rig out there and that is a place 

where the fish can go and find shade, but a lot of sports fishing benefit 

from that. That is why the Ships to Reefs, and even the Rigs to Reefs 

Program, is important, at least for the western Gulf that we use-- 

 MR. ARVIZU. Right. 

 MR. GREEN. --so if you put something in the water and it will 

become a fish habitat, whether you intend to or not. So thank you, Mr. 

Chairman. 

 MR. HALL. The Chair recognizes the gentlelady from California, 

Mrs. Bono. 

 MS. BONO. Thank you, Mr. Chairman. My district, the 45th District 

of California, is probably a district you are very familiar with. We have 

got a lot of wind power, a lot of geothermal, not enough solar. I think 

the Governor is doing a great effort in expanding our solar capabilities, 

so I am very proud of my district. And those of us in California think, 

with the extremely high cost, the crisis that we faced, are on the cutting 

edge, as you mentioned before, perhaps not by choice, but we were 

forced into it. But a lot us are faced now with policies here in 

Washington and it seems that if we could come up with a policy or 

something and focus our energies on sort of a man-to-the-moon type of 

mission, we could do a great deal. So in your written testimony you 

mention that our Government needs a sustained energy research 

program. Can you elaborate on that a little bit? Are you just supporting 

your current efforts, or do we need to do a lot more and what should we 

be doing and how far? Dr. Thomas Friedman, in this book, talks about 
33

the next 10 years, getting completely off of any foreign sources of oil. 

Can you talk a little bit more about this, please? 

 MR. ARVIZU. Yes, thank you. And thank you for the opportunity to 

do that. Actually, Tom Friedman has been out to the laboratory, he spent 

a day taping and he will have some sort of documentary that will 

highlight a number of the technologies that we are presently working on. 

The reason I talk about a sustained effort and the reason that there is still 

additional opportunity for new research and development is that the 

enormity of the problem that we have got to face, and as someone 

mentioned earlier, the projections that over the course of the next several 

decades, the percentage of renewable energy won’t increase. If you just 

project a straight line, that is what the projections would indicate. My 

very, very informed opinion is that we can do a lot better than that. We 

can begin to think about 40, 50 percent of our new generation, midcentury, being supplied by energy efficiency and renewable energy 

technologies, and that is a bold statement. We need a lot of energy. In 

order to do that, we need to continue to drive the cost down and as I 

mentioned, the technologies that are in the laboratory today will be the 

technologies that will supply those markets. 

 I started in this business almost 30 years ago. The technologies that 

we worked on in the laboratory 30 years ago are the commercial products 

of today. And as I told the President when he visited, it is important that 

we not take another 30 years to get the technologies of today into the 

marketplace, and that is where I think additional R&D on manufacturing 

processes, on deployment, perhaps some policies to supplement that, to 

increase that deployment opportunity and accelerate it, those are the 

kinds of things that will lead us, I think, to that future that I know exists 

out there, if we make a national commitment to make that happen. 

 MS. BONO. Well, I will gladly work with you and fully support what 

you are trying to do. Yesterday, I and my staff were trying to kick this 

around quite a bit and arbitrarily, I can’t assign a figure, that in 10 years 

we will be 100 percent off of foreign sources or whatever it would be, 

and I would truly seek your assistance in something like this. I actually 

was speaking with the President about this as well, and had the 

opportunity to be with him and a venture capitalist and to talk about the 

very issue, and this venture capitalist was saying that they are moving 

out of the tech industry now, into alternative fuels. Are you seeing that 

as well? And I know that perhaps that’s not your area of expertise as 

much, but is the venture capitalist world going to be a big part of this 

role, the private sector, or does the Government need to be the largest 

player in this? 

 MR. ARVIZU. Well, I am fully convinced that the Government’s role 

is to try to mobilize that private sector capital and that will certainly 
34

manifest itself early in venture funds and venture technology kinds of 

investments. What we are seeing is a rapid growth in clean energy 

investments and it is in fact growing at a very significant rate. It is over 

a billion dollars now. There is 4 percent of the energy investments now 

going into clean technologies and that is on a very rapid upswing. So all 

of the indicators that are in the financial markets suggest to us that we are 

at a tipping point, that we are going to have some things move quickly 

and it is a matter of how quickly they will move, depending on a variety 

of factors such as government policies and technology development. 

 MS. BONO. I understand, too, a lot of folks in Silicon Valley are 

very excited, very excited about this and I think are very willing to push 

it along. The first question on that note--I get a lot of calls and letters 

from constituents. This might seem like a silly question, but I get it a lot 

and I would love for you to answer. Is there really a project to convert 

water, not to extrapolate the hydrogen, but water, somehow, into energy 

and there is a water-burning engine out there that we are keeping from 

the people? I get this a lot. I don’t know if my colleagues do as well, but 

we do. I hear it. It is when you are in California. That is northern 

California. 

 MR. ARVIZU. Yes, let me not go into a dissertation about that. We 

frequently get lots of people who are so enthusiastic, that they would like 

to create what we call the perpetual motion machines, and there are a 

number of those things. No. There is some really great innovation and 

without speaking specifically to what particular technology someone is 

talking about, I think it is worth taking a look at some of these things. A 

number of them, the first question we ask when we get asked a question 

like that, and certainly feel free to provide those kinds of questions to us 

and we will give you our opinions about things, but we look at, kind of, 

the first law of thermodynamics to make sure that the science hangs 

together and that is kind of the first step that we take. Frequently, that is 

not the issue for deployment. The issue is, how do you get the 

technology into the marketplace and the business planning that goes with 

it? But does the science work? Does it hang together? You know, we 

can give you an honest opinion about that, an informed opinion. I don’t 

know of any water-based energy generators of any kind. It takes energy 

to convert materials to other forms. So I don’t know of any and we are 

not hiding anything that I am aware of. So does that put your mind at 

ease a bit? 

 MS. BONO. Thank you. And it will help for me to say that you said 

that instead of just me. But also, is there a redundancy within the Federal 

government or too many different areas? Is money going out to too 

many different places and we should be basically concentrating our 

efforts more? It sounds like with you. 
35

 MR. ARVIZU. Well, there is always a trade-off with how focused do 

you get and where do you put your priorities. I think, in the Department 

of Energy, that is one of the functions that they perform, it is to assess for 

how much investment what benefit do we get, and that needs to be a very 

thoughtful process and it needs to be continually updated and evaluated. 

So I would say the process is more important than the outcomes in this 

particular case, because we do need to focus very precious taxpayer 

resource dollars into these areas. There is lots of opportunity and there 

are lots of things that we are not doing that we could do if we had more 

money. But for the most part, I think the Department of Energy does a 

pretty good job in prioritizing things. 

 MS. BONO. Thank you, that is good to know. I come from a family, 

a very interesting family. I have a brother who is an automotive 

engineer, another brother who is in the mom and pop oil business, a 

mother who is a chemist and actually worked on the Manhattan Project, 

and my father is a surgeon, so we kick this around a lot and I would have 

to say they are pretty cynical about renewables, and so I think I am the 

black sheep in the family with this. But I will yield back, my time is up, 

but I do look forward to working with you and I would love if you could 

come by and coach me a little bit and give me some ideas. 

 MR. ARVIZU. I would be pleased to do that. 

 MS. BONO. Thank you. 

 MR. ARVIZU. And you are welcome to come to the laboratory. 

 MS. BONO. I actually will do that. Thank you very much. 

 MR. HALL. I thank the lady and recognize the gentleman from 

Pennsylvania, Mr. Murphy. 

 MR. MURPHY. Thank you, Mr. Chairman, and I thank the 

distinguished panel for being here. I have a couple of questions on some 

of the aspects of renewable energy, because--and I read through your 

testimony here, but it has to do with how we are on the path of energy 

independence. First of all, some of the claims I hear sometimes is, we 

really don’t need to pursue drilling for more oil or explore for more oil in 

the United States, because we can take care of our energy problems with 

conservation and with the renewable energy sources we have in America. 

Are we close to doing that? Is there any truth to that at all? 

 MR. ARVIZU. Well, that is a loaded question to some degree. Let 

me try to answer it as honestly as I know how. I don’t believe that we 

are at a point today where we can suggest that renewable energy is our 

total solution, and energy efficiency. You know, 86 percent of the world 

energy consumption is based on a fossil fuel of some sort. The 

projections are that that will continue for some period of time. It would 

be, I think, presumptuous to say that we can get off of that quickly. I 

think eventually, and we are talking many, many years, that we can get 
36

the lion’s share of our energy from renewable resources. It will take a 

much longer and protracted change in how we view energy infrastructure 

to get there. So as a result, my short answer is I would like to think that 

we can get a large fraction of our energy from renewable energy. 

 MR. MURPHY. Well, let me ask another thing, when it comes to 

ethanol, because you do research on that. One of the criticisms about 

ethanol we hear is that it takes more oil to make ethanol than it really 

replaces. Is that true, not true? 

 MR. ARVIZU. The short answer, not true, and I can understand why 

there is a debate about that. When you talk about corn ethanol, what you 

are really talking about is the fermentation process of the corn cobs, if 

you will, into ethanol. If you do the energy balance on that, based on the 

best information we have, it is about 1.4 units of energy out for every one 

unit of energy you put in and that includes everything that it takes to 

grow the corn, to fertilize, to do the production and all the things with it. 

 MR. MURPHY. Are we improving in the efficiency of that? 

 MR. ARVIZU. Well, the other point that I would like to say is also 

that it is not the focus of the national program. The national program is 

focused on cellulosic biomass, which is not the food part of the plant. It 

is the corn stover. It is the balance of that plant. It is ag waste of all 

other kinds. It is forest residues. And if you do the energy balance on 

those, the energy balance is five or six, or perhaps more, to one, five or 

six units of energy out for every unit of energy put in. And that is where, 

you know, 90 percent of the biomass resource that we are talking about 

for our liquid fuel consumption of the future is going to come from. So it 

is a little bit of a red herring to talk about the energy balance on ethanol, 

from essentially a sugars or a fermentation process. 

 MR. MURPHY. Another area, and we are going to hear a little bit 

later on some of the solar issues, too, from Plextronics. But with regard 

to the solar cells, you made reference to the prices coming down 

dramatically on those. How about the--the price is going to be coming 

down, but you still need so much space to have enough of those solar 

panels to provide electricity. Are we improving the efficiency of that as 

well? 

 MR. ARVIZU. Absolutely. The efficiency is, in fact, what is so 

exciting to me. I started, again, in the business 20, 30 years ago and we 

thought about a single material like silicon that we typically think about 

for integrated circuits. Today’s materials are a whole new set of really 

exotic, engineered materials. We are thinking about nanostructures 

today that get beyond the limitations of these bulk materials. And in 

fact, we can begin to think about efficiencies that are not in the 20 

percent range, which is where laboratory scales are, the 20 to 30 percent 

range, we can start to think about efficiencies in the 50, 60, perhaps even 
37

more, percent range and the technology and the physics that go along 

with that being developed in the science programs, in the technology 

development of the national laboratories and universities today. 

 MR. MURPHY. How far are we away from the 50 to 60 percent 

range? 

 MR. ARVIZU. Well, I would offer that we will get there for spacetype applications, we will get there in the next--in fact, we have got a 

DARPA project right now that we expect to have 50 percent scales in the 

next 5 years. Now those will be very expensive and they will be used 

primarily for specialty applications, but the learning we get from that and 

then taking those and putting those into these nano-structured materials is 

probably another decade away beyond that. But that is the technology 

that will take us to mid-century, to this end point that I was talking about 

earlier, where you get essentially a large fraction of our energy mix from 

things like solar photovoltaics. 

 MR. MURPHY. I thank you very much and I yield back the balance 

of my time, Mr. Chairman. Thank you. 

 MR. HALL. I thank the gentleman. I think the Ranking Member has 

other questions he would like to ask at this time. I ask unanimous 

consent to recognize him, though. He has used his time and we do not 

have anyone here to give time or to yield to him. Is there objection? The 

Chair hears none. The Chair recognizes Mr. Boucher. All right. Mr. 

Otter, the Chair recognizes you. I withdraw the recognition of Mr. 

Boucher. 

 MR. OTTER. Mr. Chairman, I will yield to Mr. Boucher. 

 MR. HALL. All right, let us get underway now. 

 MR. BOUCHER. All right, thank you, Mr. Chairman. I just have one 

brief follow-up question and it was actually stimulated by Mr. Murphy’s 

question to you about the difference between corn as a feedstock for 

ethanol and cellulosic materials as a feedstock. 

 MR. ARVIZU. Yes. 

 MR. BOUCHER. Let me confess an absence of a lot of knowledge 

about this, which will become readily apparent as I propound the 

question. I had been told that one of the key differences that leads to a 

favorable energy balance versus what some would argue is a negative 

energy balance with regard to corn, and a more favorable balance on the 

cellulosic side, was the fact that, with regard to corn, you have to 

cultivate the crop every year, and that requires a substantial amount of 

energy input; whereas, with some of the cellulosic materials, perhaps all 

of them, they are more or less like perennials, they regenerate naturally. 

You don’t have to expend energy every year in order to replant the crop. 

Is that a key differentiating factor between the two, or is it more--and if it 

is not that, then what it is? Why is it that you get a 1.4 to one yield with 
38

regard to corn, and a five to one yield with regard to cellulosic material? 

Just explain the factors that differentiate those, if you would. 

 MR. ARVIZU. Well, you have been coached properly. That is a good 

explanation of the primary difference. The resource in cellulosic 

biomass really comes from two sources. One is ag residue and it is not 

just corn stover or the leftovers in the crops. Typically, those things are 

plowed back under and so they are essentially a waste product. You 

need to save about 20 percent of that to re-nutrient the soil and to get the 

consistency back to where it needs to be. But across the agricultural 

landscape, you have got a number of different crops and they are 

essentially field waste. The residue is part of that biomass resource. The 

other biomass resource is what we might call energy crops. So when you 

are talking about things like switch grass and a variety of other things 

that you might, on a periodic basis, seed and grow, because they do grow 

naturally, that is really the other aspect of that. Those two sources 

combined make this broader resource that I was talking about earlier that 

could potentially serve 30 percent of our, you know, equivalent gasoline 

consumption. 

 MR. BOUCHER. Do you have any obvious candidates for the kind of 

feedstock materials on the cellulosic side that would be the most sensible 

for the United States to target as opportunities? 

 MR. ARVIZU. Well, the beauty is that there is really no one single 

crop that is best at this point. In fact, part of the research is to figure out 

how do you make ethanol very efficiently from various kinds of crops, 

and the beauty of that also is that those resources are distributed 

according to the microclimates across the country, and we really don’t 

have to do a lot, other than to take advantage of the things that are 

already in place, forest thinnings and a variety of other things. That 

would be very valuable, I think, in terms of an ecosystem management. 

 MR. BOUCHER. Okay. Well, thank you very much. 

 MR. HALL. The Chair recognizes the very generous Mr. Otter for the 

remaining time. 

 MR. OTTER. Thank you, Mr. Chairman. Mr. Arvizu, am I saying 

that right? 

 MR. ARVIZU. Yes, you are. 

 MR. OTTER. Okay. Mr. Arvizu, mine is Otter, O-t-t-e-r. Mr. 

Arvizu, you made a statement in your opening statement that made me 

curious. When you said in a very short period of time, we can be 

independent, what is your short period of time? 

 MR. ARVIZU. Maybe you can help me with where in my statement. 

It was, in a very short period time, I believe we can get the costs of these 

technologies down to where they can provide a great impact into the 

marketplace. A lot of it has to do with those market forces and the 
39

business cases that have to be made and the investment that has to be 

made. When I say a short period of time, I am really talking about in the 

next 5 to 10 years. 

 MR. OTTER. Okay. 

 MR. ARVIZU. And so we don’t have to wait decades. It can be done-

- 

 MR. OTTER. And a lot of these technologies we are already working 

on, in fact, we have implemented some, haven’t we? 

 MR. ARVIZU. Absolutely. 

 MR. OTTER. And we are maybe in the first generation of some of 

those technologies and-- 

 MR. ARVIZU. Well stated, yes, sir. 

 MR. OTTER. I want to aid you a little bit in your answer to Mr. 

Boucher about ethanol. 

 MR. ARVIZU. Yes. 

 MR. OTTER. In 1984, prior to coming to Congress, I worked for a 

potato company, oddly enough, in Idaho and we used to supply--my 

company used to supply all the potatoes to the McDonald’s restaurants. 

And so once we endure the lawsuits for obesity, we will be able to go 

forward, I suppose. But one of the things we did in 1984 was, we found 

out that we had a biofuel and it was called potato peelings, and so we 

built about three and a half to four million gallon ethanol plants at the 

pipeline of the waste stream coming out, which normally we fed to cattle. 

But we built an ethanol plant on the end of each of those pipelines 

coming out of those processing plants. And so subsequently, we 

produced six to eight million gallons a year of ethanol out of what had 

been a waste stream and we did it economically. Getting through all of 

the permitting processes and everything was a marathon. Once we 

finally got to where we needed to go, we were very successful. I am 

wondering if you think some incentive by the Government would aid 

some of these waste streams that are coming out of the processing plants. 

All the food that we have today, we process about 80 percent of the 

potatoes now that are grown in Idaho. I am wondering if there is any 

kind of an idea or a scheme that you might have in mind. Maybe scheme 

is the wrong word, in these days of earmarks. But are there other sources 

of ethanol besides the switch grass and besides corn, which seems to be 

the most favorable? I am familiar with Brazil’s ability to turn a few 

switches in a sugar plant-- 

 MR. ARVIZU. Absolutely. 

 MR. OTTER. --and go from making granulated sugar, or some other 

kind of product, to ethanol, which has made them independent. Have 

you looked at that side of it? 
40

 MR. ARVIZU. Well, we looked at a variety of things and so many of 

these things are structural. You know, when you have a waste stream 

and you are trying to figure out what to do with it, it always makes sense 

to let us figure out if we can convert that into a benefit or a revenue 

stream in some way, and many times that works well. There are 

structural issues where sometimes you do that and you displace 

somebody else’s market for feedstock for animals or whatever, and all of 

a sudden, now there are regulatory barriers to making those things 

economical. So a lot of what Brazil has done and others have done is 

start with a clean sheet of paper and you design in kind of what your 

outcomes need to be. A biorefinery where you can dial the switch from a 

food product to an energy product makes great sense for them. If we 

could do that, unfetter ourselves from the regulatory equilibrium that we 

are in now for all the various objectives that we have, we make this 

process a lot more efficient and move much more quickly. Now that is 

very complex and very complicated to do, and so my job is to provide 

the decision makers, and people like yourself who are in a position to try 

to formulate those policies, with what can the technology do, because I 

believe the technology opportunities are much greater than we are 

allowing them to contribute in terms of the overall energy mix, but it 

requires a policy framework that is consistent with the objectives. And 

so that is a very, very difficult thing to do, but I am bullish that there is 

an opportunity there. 

 MR. OTTER. I see. And one other question that I wanted to refer to 

is, making a product is just about half of the business to business. It is 

distributing it and getting it to market. 

 MR. ARVIZU. Right. 

 MR. OTTER. Because we already have some inherent problems with 

ethanol on early blending, like in pipelines. 

 MR. ARVIZU. Yes, yes. 

 MR. OTTER. Are we still working on technology to figure out how 

we can get that blend as quick as possible and still be able to wheel our 

energy through these pipelines? That is one part of my question. The 

other part of my question is the end distribution. We have had E-85 in 

this country now for quite some time, and throughout the United States 

there are only 400 pumps. There are only 400 places to get go it, yet we 

are encouraging the automobile industry to develop cars that can burn E85. Now, we had that initial problem in the early 1980s to mid-1980s 

with ethanol. For those of us that were not using MTBE and we chose to 

use ethanol, we didn’t know that we were doing the right thing, because 

we didn’t know what was going to happen, like in last year’s energy bill, 

where we took MTBE out of the equation for environmental reasons, 

which was a smart and an appropriate thing to do. So getting that 
41

distribution is important. Getting it to the marketplace so that the 

consumer can use it is important. 

 MR. ARVIZU. Yes. 

 MR. OTTER. I don’t think we can study just the technology. We also 

have to study the matrix of transportation and marketing. 

 MR. ARVIZU. Yes. 

 MR. OTTER. Are you working on that as well? 

 MR. ARVIZU. Yes, sir, we pride ourselves in being what I call 

market relevant. We need to know what market problem are we solving 

and how does the technology play into that. Many times it is exactly 

what you said, it is the infrastructure and the distribution. So you start 

trying to look at how can I do that locally rather than doing it centrally, 

so that you don’t have to create a whole new distribution infrastructure 

that simply is nonexistent. So there is a blend of those things and we try 

again to move the technology to where its nearest term market 

opportunity lies. So we are looking at, for instance, on the formulation 

side, we look at how does including ethanol in a blend of fuel, what are 

the impacts of that? What are the impacts on emissions? What are the 

impacts on performance? How does the vehicle operate? What does the 

vehicle have to do in order to accommodate that? We look at all of those 

things as part of our transportation efficiency prospect, as well as on the 

generation side, how do you make the stuff and make it economical. But 

your points are very well taken and yes, sir, we are working on all of 

that. 

 MR. OTTER. Thank you, Mr. Chairman, and thank you very much 

for your response. 

 MR. HALL. I thank you, and I presume that you have gone through, 

in your quest for Governor, how to spell potato. All right, Mr. Bass, we 

recognize you at this time if you have questions. 

 MR. BASS. Thank you, Mr. Chairman. And I am just fascinated, 

Dr.-- 

 MR. ARVIZU. Arvizu. 

 MR. BASS. Arvizu. 

 MR. ARVIZU. May I help you? It is just a recreational vehicle, RV, 

going to the zoo. 

 MR. BASS. I am unaccustomed--all right. On the biopower issue, I 

am particularly interested in ethanol derived from cellulose and most 

notably, from my region of the country, wood products. I would like to 

visit your lab some time with a team of people from my State who are 

involved in biology and so forth, and I look forward to doing that. I just 

want to affirm that you have a robust research and development project 

in the use of bacterias and other bugs to convert various substances into 
42

ethanol. Is that a robust program, with showing some results, promising 

results? 

 MR. ARVIZU. Well, the answer is, we would like to make it more 

robust than it is today. We certainly are working on a number of 

enzymes. That is the primary organism that takes you from a cellulosic 

fibrous material into a simple sugar that you can ferment. 

 MR. BASS. Can you skip the sugar part? 

 MR. ARVIZU. Yes, you can. In fact-- 

 MR. BASS. Is that something you are working on or not? 

 MR. ARVIZU. --there is a project called “Genomes to Life,” in the 

Department of Energy. It is a basic energy science and what we are 

trying to do is perhaps even consider engineering the biomass resource 

so that it creates these enzymes naturally, in the wild, so that those--we 

can do one-step processing and essentially move the cost of cellulosic 

biomass down to as little as 60 cents a gallon, which would be 

phenomenal. That is kind of the Holy Grail. We believe that the science 

would allow that, with continued support, so we are very bullish on the 

basic piece as well as on the conversion piece now, which I think can 

solve a more immediate problem. 

 MR. BASS. Do you think there are--one of the challenges facing 

development of these enzymes is small versus large, and is there any 

effort underway to examine the possibility of establishing small-scale 

biodigesters that would create either methane or ethanol, methane gas, 

which, as I understand it, is a simpler process-- 

 MR. ARVIZU. Yes, it is. 

 MR. BASS. --that could burn--I was going to come back for my 

friend from California, Ms. Bono, but I don’t think it is appropriate with-

- 

 MR. HALL. Let us move along. 

 MR. BASS. Yes, sir. I can’t even continue. To develop biodigesters 

that could use wood residues, cardboard, paper, even household garbage, 

to create energy, is this something that you are familiar with or aware of? 

Is there any potential there? 

 MR. ARVIZU. Well, yes. You know, the breakthroughs in enzyme 

formulation, if you will, is what I call a very Edisonian process. We had 

a couple of partners, Novozymes and Genencorp, that had a 

breakthrough, and what they were able to do is to create a cocktail of 

enzymes, we called it. It was about 25 different formulations of things 

that was just the right formulation to break down corn stover into 

ethanol, into sugars that allow us to put into ethanol. The breakthrough 

was the cost. They were able to reduce the cost of that set of enzymes 

down from--well, it was a factor of 30. It is like 25 cents a gallon for the 

actual enzymes. Science can teach us so much about how to engineer 
43

these materials rather than do what we were doing, which essentially is 

trial and error. And we did that and we ended up with some fairly 

significant results. You know, everybody kind of applauded and 

celebrated and said how do we use that? But there is still a lot of science 

left on figuring out how much you engineer that in ways to do precisely 

what you are talking about; is to take different kinds of feedstocks and 

convert them to the same simple six-chain sugars that are very easy to 

ferment, and then it becomes a much easier process. And in fact, the 

capital equipment to make these production facilities would be quite 

small. 

 MR. BASS. So if I were to bring people out to visit you who are 

interested in this subject, they would learn a lot from the visit, do you 

think? 

 MR. ARVIZU. Well, we would probably learn a lot as well. 

 MR. BASS. You have got plenty of expertise? Okay. 

 MR. ARVIZU. Yes, absolutely. And you are all welcome to do that. 

We learn so much by what people are trying to accomplish and then we 

can figure out how the technology can fit those needs. 

 MR. BASS. Okay, thank you very much. Thank you, Mr. Chairman, 

for the courtesy. 

 MR. HALL. All right, thank you very much. I would look to the next 

two witnesses that are going to testify here, and really want to thank the 

two of you for your good testimony, and a good service to your country. 

 MR. ARVIZU. Thank you, sir. 

 MR. HALL. It will be of great service as we pursue legislation to 

match the good information that you have given us, and we thank you 

very much. All right, we thank you, gentlemen. You are in place now 

and, Mr. Novak, you will go first. Mr. Abate? Did I say it right? 

 MR. ABATE. Abate. 

 MR. HALL. Abate? 

 MR. ABATE. Yes. 

 MR. HALL. Mr. Hammond, Vice President, Products, Plextronics, 

Inc; Mr. Linebarger, Executive VP of Power Generation Business; Dr. 

Katzer, a Visiting Scholar, Laboratory for Energy and the Environment; 

and Mr. Cresci, Chairman, Environmental Power Corporation. We will 

start off, Mr. Novak, with you, and if you can, give us 4, 5, maybe 6 

minutes of generalization; then we will zero in on the questions we want 

to ask. I recognize you at this time, sir. Turn your mic on. 

STATEMENTS OF JOHN NOVAK, EXECUTIVE DIRECTOR, 

FEDERAL AND INDUSTRY ACTIVITIES, ENVIRONMENT 

AND GENERATION SECTORS, ELECTRIC POWER 

RESEARCH INSTITUTE; VICTOR R. ABATE, VICE 
44

PRESIDENT, RENEWABLE ENERGY, GE ENERGY; TROY 

D. HAMMOND, VICE PRESIDENT, PRODUCTS, 

PLEXTRONICS, INC.; TOM LINEBARGER, EXECUTIVE 

VICE PRESIDENT AND PRESIDENT, POWER 

GENERATION BUSINESS, CUMMINS, INC.; JAMES 

KATZER, VISITING SCHOLAR, LABORATORY FOR 

ENERGY AND THE ENVIRONMENT, MASSACHUSETTS 

INSTITUTE OF TECHNOLOGY; AND JOSEPH E. CRESCI, 

CHAIRMAN, ENVIRONMENTAL POWER CORPORATION 

 MR. NOVAK. Thank you, Mr. Chairman. Good morning. I am John 

Novak, with the Electric Power Research Institute. EPRI is a nonprofit 

collaborative R&D organization headquartered in Palo Alto, California, 

and we appreciate the opportunity to appear before this subcommittee on 

this important topic. 

 Number one: the United States must keep all of its energy options 

open to meet the uncertainties of the future. For electricity, this means 

building and sustaining a robust portfolio of clean, affordable options for 

the future, and ensuring the continued use of the big five: coal, nuclear, 

gas, renewables, and end-use energy efficiency. R&D can and will make 

a big difference. With sustained levels of R&D, the cost of these five 

electricity options can be substantially reduced over the next decade. 

 Number two: investment decisions being made today about the next 

generation of electricity supply are complicated by four major 

uncertainties, the future cost of CO2, the future price of natural gas, spent 

nuclear fuel storage, and CO2 capture and storage. 

 Number three: we believe that prudent investment decisions for 

plants that have to produce electricity for the next 30 to 40 years will be 

increasingly based on the assumption of a carbon-constrained future. 

Whether decisionmakers assume the cost of carbon dioxide to be zero as 

it is today, or $30 per ton or $50 per ton, dramatically changes the 

relative cost of various supply options. We have taken an objective look 

across all the major supply options, using variable costs for carbon 

dioxide and natural gas, and factored in the technical progress that we 

think is achievable over the next 10 years and reached a central 

conclusion; that is, we have an extraordinary opportunity to begin 

building a low-carbon portfolio by 2020. This portfolio would be 

insensitive to the cost of carbon dioxide, and yet still be affordable. But 

R&D is needed to achieve the technical progress to begin to put this 

portfolio in place. 

 One reason this is so critical is that electricity is going to become 

more important in the future. We have run scenarios that show that 

electricity growth is relatively unaffected by global climate change goals. 
45

Our scenarios show that the tighter the limits on carbon dioxide, the 

greater the percentage of total energy comes from electricity. You can 

think of it this way: electricity is the only practical way to deliver clean 

energy on a large scale. And for those of you who are interested in 

seeing this picture unfold, I would recommend that you watch a 

presentation by our President and CEO, Steve Specker, recently given at 

Resources for the Future and available on the website that I have 

included in my written testimony. 

 I would like to briefly mention some of the priorities for electricitybased research and development. For coal-based generation, EPRI 

believes research and development and demonstration to be accelerated 

for both advanced combustion-based technologies and for gasification 

technologies, or IGCC. I want to point out that IGCC stands for 

integrated gasification combined cycle. Some people have the 

misunderstanding the CC stands for carbon or CO2 captured; it does not. 

Additional processes, equipment, and energy are required to capture the 

CO2 from IGCC and to transport and store the CO2 in a geologic 

formation. We think that CO2 capture for existing and new pulverized 

coal-fired plants needs to be developed and demonstrated. Large-scale, 

long-term CO2 demonstrations will be needed, such as those in 

FutureGen and ongoing DOE R&D programs. For air emissions, nearterm work in mercury control and demonstration needs to continue. 

 On nuclear power, the long-term future of nuclear energy must be 

built on a solid foundation that is grounded in three current ongoing 

nuclear energy initiatives: continued safe and effective operation of our 

current fleet of reactors, near-term licensing and deployment of advanced 

light water reactors, and licensing and construction of a geologic 

repository at Yucca Mountain. Significant R&D needs to exist for the 

current fleet and the new fleet of advanced light water reactors, first, for 

development of a new generation of high reliability, light water reactor 

fuel with much higher burn-up. Other priorities include R&D in the 

areas of age-related materials degradation, fuel reliability, equipment 

reliability, and other areas. In the longer term, the United States needs to 

develop a nuclear system having hydrogen production capability. And 

finally, EPRI supports the long-term goals in the Global Nuclear Energy 

Partnership proposed by the Administration. 

 Renewable priorities include: integration of large intermittent 

resources, including power electronics, interconnection, communication 

and control of distributed generation; cost-effective energy storage 

technology; and demonstration ocean renewable wave, tidal, and 

wind/wave hybrid concept for power generation. 

 End-use efficiency and demand R&D priorities: development of 

advanced communication infrastructure that links electricity consumers 
46

with a fully dynamic electricity marketplace; continued development of 

smart end-use devices; and ensure that we have regulatory and market 

structures that support end-use efficiency and demand response 

objectives. For natural gas, we need to see cost reduction in natural gas 

supply, including the ability to site, obtain, and liquefy natural gas. 

Distributed generation cost reductions and efficiency increase allowed 

DG to compete on the system with larger generation. And finally, fuel 

cells will also find niche applications and require R&D until they are cost 

competitive with central stations. 

 Mr. Chairman, that concludes my testimony. Thank you. 

 [The prepared statement of John Novak follows:] 

PREPARED STATEMENT OF JOHN NOVAK, EXECUTIVE DIRECTOR, FEDERAL AND INDUSTRY 

ACTIVITIES, ENVIRONMENT AND GENERATION SECTORS, ELECTRIC POWER RESEARCH 

INSTITUTE

Introduction 

I am John Novak, Executive Director of Federal and Industry Activities for the 

Environment and Generation Sectors of the Electric Power Research Institute. EPRI is a 

non-profit, collaborative R&D organization headquartered in Palo Alto, California. EPRI 

appreciates the opportunity to provide testimony to the Subcommittee on the next 

generation of electricity based technology. 

Electricity Generation Options

Each year, the Advisory Council and Board of Directors of the Electric Power 

Research Institute convene a diverse group of leaders from industry, academia and 

government to discuss critical issues facing the electricity industry and society. The 

seminar format is designed to air diverse views, to explore common ground and, where 

possible, to develop a new pathway forward. Last year’s Summer Seminar was focused 

on “Making Billion Dollar Advanced Generation Investments in an Emission-Limited 

World.” Attached is the background paper for last year’s seminar. 

The paper contains an outlook for generation technology for the years 2010 and 

2020. We have updated information from the generation technology outlook to reflect 

more current events and trends and have provided some of this updated information in the 

table below. 

Comparative Costs of 2010 Generation Options

Technology Cost of 

Electricity, 

$/MWh 

Key Assumptions 

Pulverized Coal 41 Coal price: $1.50/mmbtu 

Nuclear Power 46 Capital Cost: $1400 - $1700 per kW 

IGCC without carbon 

capture 

47 Coal price: $1.50/mmbtu 

Natural Gas Combined 

Cycle 

56 Fuel Cost: $6/mmbtu 

Biomass 62 

Wind 75 Capacity Factor: 29% 
47

Comparative Costs of 2020 Generation Options

Technology Cost of 

Electricity, 

$/MWh 

Key Assumptions 

Pulverized Coal 64 Coal price: $1.50/mmbtu 

With CO2 capture, transport, storage 

Nuclear Power 46 Capital Cost: $1700 per kW 

IGCC with CO2 capture 54 Coal price: $1.50/mmbtu 

Natural Gas Combined 

Cycle 

52 Fuel Cost: $6/mmbtu 

Biomass 44 New technologies to reduce cost 

Wind 52 Capacity Factor: 29%; substantial 

technology improvement 

Key Points

 EPRI would like to make six key points drawn from the analysis in the attached 

paper and from the discussions at the summer seminar. 

 

1. The U.S. must keep all of its energy options open to meet the uncertainties of 

the future. For electricity, this means building and sustaining a robust portfolio 

of clean, affordable options for the future – ensuring the continued use of the 

“big five”: coal, nuclear, gas, renewables, and end-use energy efficiency. 

2. R&D can and will make a big difference. With sustained levels of R&D, the 

costs of these five electricity options can be substantially reduced over the next 

decade. 

3. Investment decisions being made today about the next generation of electricity 

supply are complicated by four major uncertainties: 

a. Future cost of CO2 

b. Future price of natural gas 

c. Spent nuclear fuel storage 

d. CO2 capture and storage 

4. We believe that prudent investment decisions for plants that have to produce 

electricity for the next 30-40 years will be increasingly based on the assumption 

of a carbon constrained future. Whether decision makers assume the future cost 

of CO2 to be zero as it is today, or $30/ton, or $50/ton, dramatically changes the 

relative cost of the various supply options. 

5. We have taken an objective look across all the major supply options, using 

variable costs for CO2 and natural gas, and factored in the technical progress 

that we think is achievable over the next 10 years, and reached a central 

conclusion --- That is, we have an extraordinary opportunity to put a lowcarbon portfolio in place by 2020. This means the technology would be ready 

by 2015, and installed by 2020. This portfolio would be insensitive to the cost 

of CO2, and yet still be affordable. 

6. One reason this is so critical is that electricity is going to become more 

important in the future. We have run scenarios, and invariably, the tighter the 

limits on CO2, the more electricity that’s going to be required globally. You 

can think of it this way -- electricity is only practical way to deliver clean 

energy on a large scale. 
48

For those of you interested seeing this picture unfold, I would recommend that you 

watch a presentation by our CEO, Steve Specker, recently given at Resources for the 

Future. The web link is http://www.eande.tv/transcripts/?date=040406#transcript 

R&D Priorities

Following is a summary of EPRI’s priorities for electricity based R&D in five key 

areas: coal, nuclear, gas, renewables and end-use energy efficiency. EPRI would be 

pleased to discuss these in greater detail with the Subcommittee. 

Coal

Coal Based Generation

 EPRI believes RD&D should be accelerated for both combustion-based 

technologies and for gasification technology. Three major areas of work need to be 

emphasized, 

o 1) Integrated Gasification Combined Cycle work on hydrogen turbines, 

reliability, cost reduction, and integration with CO2 ; 

o 2) very efficient pulverized coal combustion with options for CO2 capture 

and 

o 3) fluidized bed combustion with options for near zero pollutant emissions 

and CO2 capture. 

 Related technology deployment to reduce costs (initially without CO2 capture until 

storage is demonstrated) as is being done in conjunction with EPRI’s CoalFleet for 

Tomorrow® Program and as a result of the EPACT 2005 enactment. 

CO2

 To assure public acceptance, multiple (~5) large scale ( > 1 MTY), long term CO2 

storage demonstrations in different geologies and locations will be needed in 

addition to FutureGen and DOE RD&D, to assure that storage is safe and effective. 

 Post combustion capture for existing and new PC-fired plants needs to be developed 

and demonstrated. 

Emissions

 Near-term work in mercury control and demonstration to assure that all equipment 

and coal types can be reliably controlled require completion of the field testing 

program currently underway by industry and government 

Gas

 Cost reduction in natural gas supply, including the ability to site and obtain LNG, 

since LNG use is projected to grow rapidly. 

 Distributed generation (DG) cost reduction and efficiency increases in DG to allow 

DG to compete on the system with larger generation. 

 Fuel Cells and applications which support combined heat and power will also find 

niche applications and require RD&D until they are cost competitive with central 

stations. 

Nuclear

 Significant R&D needs exist for the current fleet and the new fleet, especially in 

areas of age-related materials degradation, fuel reliability, equipment reliability and 

obsolescence, plant security, cyber security, and low-level waste minimization. 

 Development of a new generation of high reliability LWR fuel with much higher 

burnup that will better utilize uranium resources, improve operating flexibility, and 

significantly reduce spent fuel volume and transportation needs, resulting in 

additional improvements in nuclear energy economics. These are mid-term R&D 
49

needs whose impact would be considerable if accelerated with government 

investment. 

 n the longer term develop a nuclear system having hydrogen production capability. 

Many believe that a hydrogen economy is essential for revolutionizing 

transportation, in which case the demand for competitive and environmentally 

responsible hydrogen production will greatly increase. A large-scale, economical 

nuclear source would hasten that future. 

Renewables

 Integration of large intermittent resources, including power electronics for more 

effective conversion, smoothing and control of renewable resources 

 Interconnection, communication and control of distributed generation 

 Incremental, low impact hydropower expansions, advanced hydro turbine concepts 

and performance optimization tools 

 Cost-effective energy storage technology for utility T&D applications with 

renewable resources 

 Demonstration of ocean renewable wave, tidal and wind-wave hybrid concepts for 

power generation (see also EPRI Ocean Energy work) 

End Use Efficiency and Demand Response

 Development of an advanced communications infrastructure that links electricity 

consumers with a fully dynamic electricity marketplace. Information could be 

exchanged directly with smart end-use devices, for example, so consumers would 

not have to make hourly or daily energy choices. This “prices to devices” approach 

would allow the appliance itself to optimize its operation under varying costs and 

conditions. 

 Ensure we have regulatory and market structures that support end-use efficiency 

and demand response objectives.

 Continue development of smart end-use devices. An essential premise of efficiency 

and demand response strategies (as well as of the provisions of the U.S. Energy 

Policy Act of 2005) is an infrastructure of intelligent electricity meters and end-use 

devices capable of two way communication with the electricity system. Many enduse technologies are beginning to evolve, through advances in distributed 

intelligence, from static devices to devices with much more dynamic capabilities. 

The Electric Power Research Institute was established in 1973 as an independent, 

nonprofit center for public interest energy and environmental research. EPRI brings 

together members, participants, the Institute’s scientists and engineers, and other leading 

experts to work collaboratively on solutions to the challenges of electric power. These 

solutions span nearly every area of electricity generation, delivery and use, including 

health, safety, and environment. EPRI’s members represent over 90% of the electricity 

generated in the United States. 

Summary of EPRI Testimony – Key Points

1. The U.S. must keep all of its energy options open to meet the uncertainties of the 

future. For electricity, this means building and sustaining a robust portfolio of 

clean, affordable options for the future – ensuring the continued use of the “big 

five”: coal, nuclear, gas, renewables, and end-use energy efficiency. 

2. R&D can and will make a big difference. With sustained levels of R&D, the 

costs of these five electricity options can be substantially reduced over the next 

decade. 

3. Investment decisions being made today about the next generation of electricity 

supply are complicated by four major uncertainties: 
50

a. Future cost of CO2 

b. Future price of natural gas 

c. Spent nuclear fuel storage 

d. CO2 capture and storage 

4. We believe that prudent investment decisions for plants that have to produce 

electricity for the next 30-40 years will be increasingly based on the assumption 

of a carbon constrained future. Whether decision makers assume the future cost 

of CO2 to be zero as it is today, or $30/ton, or $50/ton, dramatically changes the 

relative cost of the various supply options. 

5. We have taken an objective look across all the major supply options, using 

variable costs for CO2 and natural gas, and factored in the technical progress that 

we think is achievable over the next 10 years, and reached a central conclusion --

- That is, we have an extraordinary opportunity to put a low-carbon portfolio in 

place by 2020. This means the technology would be ready by 2015, and installed 

by 2020. This portfolio would be insensitive to the cost of CO2, and yet still be 

affordable. 

6. One reason this is so critical is that electricity is going to become more important 

in the future. We have run scenarios, and invariably, the tighter the limits on 

CO2, the more electricity that’s going to be required globally. You can think of it 

this way -- electricity is only practical way to deliver clean energy on a large 

scale. 

For those of you interested seeing this picture unfold, I would recommend that you 

watch a presentation by our CEO, Steve Specker, recently given at Resources for the 

Future. The web link is http://www.eande.tv/transcripts/?date=040406#transcript 
51
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 MR. HALL. I thank you. We have a vote on the floor and we will be 

in recess until 12:20. 

 [Recess.] 
86

 MR. MURPHY. [Presiding] All right. This hearing is back in 

session. I will be sitting in until Mr. Hall returns. We are going to 

continue on. Mr. Novak, you completed your testimony. We will go 

now to Victor Abate, who is the Vice President of Renewable Energy 

with GE Energy. Proceed. Make sure the microphone is on and close to 

you. Thank you. 

MR. ABATE. Yes. Mr. Chairman and members of the committee, I 

am Victor Abate, Vice President for Renewable Energy at GE Energy. I 

appreciate the opportunity to testify today on the future of wind power. 

 GE is a technology leader in the design and manufacture of powergenerating systems that operate on a wide variety of fuels. In 2002, we 

added wind energy to our portfolio because we recognized the global 

demand for cleaner and more cost-effective renewable power. We see 

wind as a viable energy solution capable of complimenting the world’s 

energy portfolio, and benefiting greatly over time from advances in 

turbine technology. 

 To give you a feel for today’s wind turbine technology, picture 

taking a three-bladed rotor the size of a football field, turning it vertical 

and sliding it 30 stories into the air, mounting it on a 100-ton locomotive 

that is balancing on a pole and spinning it into the wind. That is 

analogous to what we do with our 1.5 megawatt wind turbine, where this 

single wind turbine produces enough electricity to power more than 500 

U.S. homes. 

 We see two critical factors driving the economics for wind power. 

The first is the quality of the wind resource, and the United States has 

abundant high quality wind resources providing us with a global 

economic advantage for the development of wind energy. In fact, the 

U.S. resources are significantly better than other countries, like 

Germany, that actually lead in terms of installed wind capacity. The 

second is wind turbine technology and its ability to efficiently capture 

energy from the wind. A critical indicator of technology level is 

illustrated in the wind turbine’s capacity factor. The capacity factor is 

the ratio of energy produced versus the maximum nameplate rating of the 

machine over the same period. 

 Since 2002, the capacity factor of GE state-of-the-art wind turbines 

has improved from 36 percent to 47 percent, meaning more free energy 

is being captured per turbine, reducing the cost of electricity by more 

than 1 cent a kilowatt hour over this period. The capacity factor has 

improved because of technology advancements in wind turbine 

efficiency, reliability, and availability. Our wind turbines are currently 

available to generate power more than 97 percent of the time, which is up 

dramatically from 85 percent in 2002. This is the result of advancements 

in turbine design, remote monitoring, and system reliability modeling. 
87

Since 1980, the cost of wind-generated electricity has dropped by 80 

percent as the result of technology advancements. Today the cost of 

electricity from wind power, without any incentives, is around 7 cents a 

kilowatt hour. While this is clearly more expensive than today’s mature 

nuclear and coal technologies, it is currently comparable to the cost of 

electricity generated from natural gas at the recent elevated gas price 

levels. And it also provides a natural hedge against rising fuel costs in 

the future, as wind energy provides us with a fixed cost of electricity. 

 The Federal Production Tax Credit provides the necessary economic 

incentive for power producers to generate power from wind, and keeps 

equipment suppliers, such as GE, investing in technology advancements, 

and reducing the cost of wind power. GE is investing more than $70 

million annually in wind turbine R&D, focused at improving turbine 

performance, and hence wind power economics. 

 In 2005, the United States installed nearly two and a half gigawatts 

of wind energy, expanding its installed base to over nine gigawatts, 

which now provides enough wind energy to power over 2.3 million 

homes. The United States is well positioned to benefit from this ample, 

clean, and carbon emissions-free domestic resource. We believe wind 

energy will be an integral part of the world energy mix throughout the 

21st century. 

 Thank you for allowing me to participate in this hearing, and I look 

forward to your questions. 

 [The prepared statement of Victor Abate follows:] 

PREPARED STATEMENT OF VICTOR ABATE, VICE PRESIDENT, RENEWABLE ENERGY, GE

ENERGY

Mr. Chairman and members of the Committee, I am Victor Abate, Vice President, 

Renewable Energy at GE Energy. I appreciate the opportunity to testify today on the 

future of renewable energy. 

GE is a power generation technology leader with leading experience in biomass, 

solar and wind technology. At GE, we believe renewable energy will be an integral part 

of the world energy mix throughout the 21st Century. Today, I’d like to focus specifically 

on the wind industry, but would welcome questions on other renewables. I will address 

my testimony to three issues: the state of wind technology today; costs associated with 

wind energy; and opportunities to drive costs down in the future through continued 

technology advancement. 

Wind Energy and the US Energy Future 

Wind energy can become a significant player in the US energy portfolio and is the 

most commercially viable renewable energy resource today. The industry has recently 

seen record-breaking growth; in 2005, the US installed 2,431 MW of wind energy 

contributing to a total installed base of 9,149 MW, which is enough energy to serve 2.3 

million homes. Although today’s wind technology supplies less than 1 percent of US 

electric generation, the total installed base has nearly doubled over the last three years. 

Wind energy is currently being used to generate power in 30 states. 
88

The two critical factors for success in the wind industry are 1) the quality of the 

wind resource, and 2) advances in wind turbine technology. The US is well positioned 

in both of these areas. 

When compared to Germany, the country with the world’s largest wind energy 

installed base, and other top country wind installers, the US has significantly better wind 

resources. In fact, the American Wind Energy Association (AWEA) claims that current 

US wind resources have the potential to supply up to three times the total electricity 

generated in the US today. 

Tapping the potential of wind as an energy source makes use of this abundant, 

domestic, low to zero carbon emissions resource while reducing overall US dependence 

on imported energy. For example, a 100 MW wind farm in New York State would 

produce the energy equivalent to 590,000 barrels of oil per year and displace 260 million 

pounds of carbon dioxide per year. Furthermore, wind is a fixed cost source of electricity 

which hedges rising prices for other energy sources, such as natural gas and oil. 

In January, President Bush stated that the US could one day generate up to 20 percent of 

its electricity needs through wind technology. We believe that this vision is achievable 

through continued technology advancement. 

Current Wind Energy Technology 

The key measure of the ability to generate electricity from wind energy is the 

turbine’s “capacity factor.” Capacity factor is defined as the ratio of the actual energy 

produced by a turbine over a time period versus the maximum energy the turbine could 

produce if operated at full nameplate rating over the same time period. For example, a 1 

MW unit can produce a maximum of 168,000 kWh of electricity in one week. If the 

turbine actually produces 84,000 kWh, it would have a capacity factor of 50% for that 

week. 

The capacity factor for state-of-the-art wind turbines has increased substantially 

since 2002. As shown on the chart below, in 2002, the best-in-class capacity factor of 
89

wind turbines was less than 36% at a wind speed of 8 meters per second (m/s)(a speed 

which is representative of the quality of US wind resources). In 2006, the capacity factor 

of the best-in-class machines has risen to approximately 47%. As a point of reference, a 

one-point increase in capacity factor over the US wind installed base could produce 

enough electricity to support 90,000 average US households. 

Three key factors influence the turbine capacity factor: blade size, turbine efficiency 

and availability, and the wind resources at the site. Increases in rotor sizes and turbine 

availability have contributed to the significant jump in the capacity factor. 

Since 2002 rotor sizes in similar wind regimes have increased by 17% from 70.5 

meters to 82.5 meters, thereby increasing the energy capture of the turbine by over 35%. 

This also benefits energy production by allowing the turbine to begin generating power at 

lower wind speeds. 

Availability refers to the percentage of time that a wind turbine is ready to generate 

power. In 2002, availability of then state-of-the-art wind turbines was less than 85 

percent. As the result of technology advances in remote monitoring, diagnostics and the 

utilization of GE reliability modeling, today’s wind turbines have availability of more 

than 97 percent. A one percent increase in availability over the US wind installed base 

could produce enough electricity to support 28,000 average US households. 

Proper siting of wind turbines also is critical to energy production and capacity 

factor. As shown below, siting the same 1.5xle unit at an 8 m/s average site versus a 7 

m/s average site will create a 9 point increase in the capacity factor, from 38% to 47%. 

Capacity Factor and AEP on GE 1.5s and 1.5xle Turbines
90

Costs 

Since 1980, the cost of wind-generated electricity has seen an 80 percent price 

reduction as the result of technology advancements in availability, efficiency and output. 

Today, the Cost of Energy for wind, exclusive of any incentives, is 7 cents/kWh. 

Wind is more competitive when the 1.9-cent per kWh production tax credit for wind 

is applied. The Federal production tax credit provides a necessary economic incentive for 

power producers to generate power from wind. As illustrated below, the role of the 

production tax credit in stimulating the installation of wind generation is clear. When the 

wind production tax credit has been allowed to expire, new installed capacity has dropped 

dramatically in the following year due to lack of component availability. Therefore, a 

more stable incentive for wind generation can support the long-term investment by 

suppliers needed to assure that manufacturing capability is available for critical 

components. 

0

500

1,000

1,500

2,000

2,500

3,000

3,500

4,000

4,500

'98 '99 '00 '01 '02 '03 '04 '05 '06 '07

U.S. Annual W ind 

Capacity Additions

Partial PTC Year

Full PTC Year

Forecast w ith 2005 Energy Bill

‘08

?

(MW s)

0

500

1,000

1,500

2,000

2,500

3,000

3,500

4,000

4,500

'98 '99 '00 '01 '02 '03 '04 '05 '06 '07

U.S. Annual W ind 

Capacity Additions

Partial PTC Year

Full PTC Year

Forecast w ith 2005 Energy Bill

‘08

?

(MW s)

For example, today we are seeing a supply-constrained industry where suppliers are 

unable to provide key components such as blades and gearboxes, limiting the number of 

wind turbines being manufactured. To meet the market demand in 2006 and 2007, the 

supply chain needs to make multi-million dollar investments in production capacity. 

US 

cents/kWh

0

10

20

30

40

Gas Coal Nuclear Wind Biomass Solar 

Capital Costs

Fuel

O&M

~4.5 ~4.0

~7

~10

~36

Cost of Electricity 

(20 Year Levelized)

(Non-PTC for Renewables)

~7

NG Basis: $8.00/MMBtu

Coal Basis: $1.33/MMBtu

0

10

20

30

40

Gas Coal Nuclear Wind Biomass Solar 

Capital Costs

Fuel

O&M

~4.5 ~4.0

~7

~10

~36

Cost of Electricity 

(20 Year Levelized)

(Non-PTC for Renewables)

~7

NG Basis: $8.00/MMBtu

Coal Basis: $1.33/MMBtu

*Current PTC expires December 31st, 2007
91

However, unless OEMs can assure suppliers of a future market, suppliers may not make 

the long-term investments that are necessary. A predictable incentive policy is essential 

if we are to grow the wind industry in the US. 

Wind Technology Advances for the Future 

GE is investing more than $70 million annually in advancing wind turbine 

technology to further lower the cost of electricity. These efforts are focused in three key 

areas: larger and more efficient rotors, advanced loads management and enhanced grid 

stabilization. 

The rotors on wind turbines define the energy capture capabilities of the unit. This 

energy capture is a function of two parameters: rotor diameter and blade efficiency. 

Larger rotors capture more energy, but typically increase the up tower mass of the unit 

and therefore, increase the weight and cost of the supporting structures. Utilization of 

higher technology and lighter weight material will allow longer blades without increased 

weight. In addition, advances in computer modeling will allow significant increases in 

blade efficiency through increased understanding of the complex flow fields around 

turbine blades. 

The rotor is also a key contributor to the loads characteristics of the wind turbine. 

Advances in passive and active loads management techniques, through advanced controls 

and materials, will allow increases in turbine size without proportional growth in weight. 

Voltage regulation is key to electrical grid stability. Wind turbines have progressively 

increased their capability to stay on line during grid voltage fluctuations and assist with 

voltage regulation. In the future, wind turbines will be a vital part of grid voltage 

stabilization through advanced power electronics which will be capable of managing grid 

voltage, even when the wind is not blowing. 

Continued development of low speed wind technologies – an important focus of 

government/industry research and development partnerships – will allow the use of wind 

turbines in lower class wind locations that would otherwise not be economically feasible. 

Conclusion 

In conclusion, wind power is a cleaner, viable offset to fossil fuel generation. The 

U.S. is well positioned to benefit from this ample, domestic resource and it is evident that 

wind can become a significant player in the US energy mix through its proven technology 

and strong growth. Predictable incentives, however, are still needed to sustain this 

momentum and drive costs down. 

Thank you for the opportunity to present this testimony. I look forward to your 

questions. 

 MR. MURPHY. Thank you very much. And now we are joined by 

Dr. Troy D. Hammond, Vice President of Products with Plextronics, a 

company around Pittsburgh, and we are pleased that you could be here 

and we were able to have you here. Thank you so much for being with 

us today. Please proceed. 

MR. HAMMOND. Well, I wish to thank Chairman Hall and the 

members of the Subcommittee on Energy and Air Quality for the 

opportunity to present and discuss my views regarding new and 

innovative solar technologies. I have submitted a written copy of my 

testimony for the record and I will summarize it for you today. First of 

all, I commend the Chairman for his leadership in having this hearing. 

This dialogue is important for America, and I thank the subcommittee for 
92

addressing the importance of innovation related to our current energy 

challenges. 

 My name is Troy Hammond, and I am the Vice President of Products 

for Plextronics, Incorporated, in Pittsburgh, Pennsylvania. Plextronics 

was founded in 2002, as a spinout of Carnegie Mellon University. It was 

co-founded by Professor Richard McCullough, Dean of the Mellon 

College of Science at Carnegie Mellon University, where he continues to 

play an active role in Plextronics. Our company is the leader of 

conductive polymer research, development, and commercialization. 

These conductive polymers are a type of plastic material that promises to 

shepherd in a new era of low-cost electronic devices, including polymer 

photovoltaics, or solar cells. 

 On January 31, in his State of the Union address, the President 

announced the Advanced Energy Initiative, stating that America’s energy 

challenges, including our continued economic and national security, can 

be addressed in part through revolutionary solar technology. The 

President set out a clear objective for the contribution of solar 

photovoltaic energy to the Nation’s energy supply; namely, to reduce the 

cost of solar photovoltaic technologies so that they become cost 

competitive by the year 2015. The President has good reason to support 

solar technology. Solar photovoltaic devices directly convert sunlight to 

electric power in a clean, renewable manner, with no direct emissions 

into the atmosphere; however, today’s solar technology cannot yet 

deliver cost-competitive power. 

 While residential, commercial, and industrial customers pay less than 

10 to 12 cents per kilowatt hour in their electric bills, solar energy costs 

25 to 50 cents per kilowatt hour or more depending on the technology 

and the geographical location. As an additional hurdle, the cost of solar 

technology comes as a large capital investment at the time of purchase. 

A residential consumer buying today’s products would pay $10,000 or 

more for two kilowatts peak of solar modules. Installation and necessary 

electronics increase the total cost to $15,000 to $20,000. Projected price 

decreases generated from the annual 30 to 40 percent market growth in 

solar have flattened, if not reversed. The President’s objective will 

require a reduction factor of three to five in the installed system cost, 

which will translate into an energy cost of below 10 cents per kilowatt 

hour by the year 2015. Clearly, if America achieves these targets, it will 

begin changing for the global energy industry. 

 While some would propose that these goals can be achieved through 

evolutionary development of current technology, even advocating tens of 

billions of dollars of subsidies, we believe revolutionary thin-film 

technologies can unlock the sun’s potential. Indeed, America’s engine of 

research and invention has been making critical progress toward new 
93

solar technologies for many years. For example, polymer photovoltaics 

utilize a novel version of plastics that strongly absorb the sun’s light and 

behave like a semiconductor, analogous to silicon in the generation of 

electricity. Rather than requiring expensive manufacturing equipment 

and processes, these polymers are turned into inks that can literally be 

printed much like a newspaper is printed. The total manufacturing cost 

can be as much as a factor of 10, less costly for each square foot of solar 

module. 

 Key discoveries in this technology were made domestically. Current 

state-of-the-art polymer solar cells utilize a technology invented by 

Professor McCullough and manufactured by Plextronics; to be clear, 

additional performance improvement is required. Plextronics’ scientists 

have developed a portfolio of new polymer technologies that have the 

potential to double this performance and extend the lifetime of the 

technology. The focus of our technical development activity is the 

realization of this performance potential, and when achieved, broad 

commercialization is possible. 

 Federal support at this juncture is critical. The President’s 2007 

Budget proposes a Solar America Initiative, with a funding increase of 

$65 million over Fiscal Year 2006. Given the impact that economic 

solar energy could have on global energy supply, we urge Congress not 

only to fund this program fully, but also to ensure America’s leadership 

in revolutionary new solar technologies is accelerated by the Solar 

America Initiative. Thank you. 

 [The prepared statement of Dr. Troy D. Hammond follows:] 

PREPARED STATEMENT OF DR. TROY D. HAMMOND, VICE PRESIDENT, PRODUCTS,

PLEXTRONICS, INC. 

Thank you, Chairman Hall and members of the Subcommittee on Energy and Air 

Quality for the opportunity to present and discuss my views regarding new and 

innovative solar technologies. I have submitted a written copy of my testimony for the 

record and will summarize it for you today. First of all, I commend Chairman Hall for 

his leadership in having this hearing. This dialogue is important for America and I thank 

your Subcommittee for addressing the importance of innovation related to our current 

energy challenges. 

My name is Troy Hammond and I am the Vice President of Products for Plextronics, 

Inc. in Pittsburgh, Pennsylvania. Plextronics was founded in 2002 as a spin-out of 

Carnegie Mellon University and was co-founded by Prof. Richard McCullough, Dean of 

the Mellon College of Science at Carnegie Mellon University, where he continues to play 

an active role in Plextronics. Our company is the leader of conductive polymer research, 

development, and commercialization. These conductive polymers are a type of plastic 

material that promise to shepherd in a new era of low-cost electronic devices including 

polymer photovoltaics, or solar cells. 

On January 31, in his State of the Union address, The President announced the 

Advanced Energy Initiative stating that America’s energy challenges, including our 

continued economic and national security, can be addressed in part through revolutionary 
94

solar technology. The President set out a clear objective for the contribution of solar 

photovoltaic energy to the nations energy supply, namely to reduce the cost of solar 

photovoltaic technologies so that they become cost competitive by 2015. 

The President has good reason to support solar technology. Solar photovoltaic 

devices directly convert sunlight to electric power in a clean, renewable manner with no 

direct emissions into the atmosphere. 

However, today’s solar technology cannot yet deliver cost competitive power. 

While residential, commercial and industrial customers pay less than $0.10 – 0.12 per 

kilowatt-hour in their electric bills, solar energy costs $0.25 to $0.50 per kilowatt-hour or 

more depending on the technology and the geographical location. 

As an additional hurdle, the cost of solar technology comes as a large capital 

investment at the time of purchase. A residential consumer buying today’s products 

would pay $10,000 or more for 2 kilowatts-peak of solar modules. Installation and 

necessary electronics increase the total cost to $15,000 to $20,000. Projected price 

decreases from the annual 30-40% market growth have flattened if not reversed. The 

President’s objective will require a factor of three to five reduction in the installed system 

cost, which will translate into an energy cost of below $0.10 per kilowatt-hour by 2015. 

Clearly, if America achieves these targets, it will be game-changing for the global 

energy industry. While some would propose that these goals can be achieved through 

evolutionary development of current technology, even advocating tens of billions of 

dollars of subsidies, we believe revolutionary thin film technologies can unlock the sun’s 

potential. Indeed, America’s engine of research and invention has been making critical 

progress toward new solar technologies for many years. 

For example, polymer photovoltaics utilize a novel version of plastics that strongly 

absorb the sun’s light and behave like a semiconductor, analogous to silicon, in the 

generation of electricity. Rather than requiring expensive manufacturing equipment and 

processes, these polymers are turned into inks that can literally be printed much like a 

newspaper is printed. The total manufacturing cost can be as much as a factor of ten less 

costly for each square foot of solar module. 

Key discoveries in this technology were made domestically. Current state-of-the-art 

polymer solar cells utilize a polymer technology invented by Prof. McCullough and 

manufactured by Plextronics, yet additional performance improvement is required. 

Plextronics’ scientists have developed a portfolio of new polymer technologies that have 

the potential to double this performance and extend the lifetime of the technology. The 

focus of our technical development activity is the realization of this performance 

potential; when achieved, broad commercialization is possible. 

Federal support at this juncture is critical. The President’s 2007 Budget proposes a 

Solar America Initiative with a funding increase of $65 million over FY06. Given the 

impact that economic solar energy could have on global energy supply, we urge Congress 

not only to fund this program fully, but also to ensure America’s leadership in 

revolutionary, new solar technologies is accelerated by the Solar America Initiative. 

Summary 

1. The President’s Charge 

a. Make solar photovoltaic technology cost competitive by 2015 

b. Address this energy challenge through revolutionary solar technology 

2. The Rationale 

a. Direct conversion of solar energy into electricity 

b. Clean, renewable, no emissions 

3. The Issue 

a. Today’s technology is not cost competitive 

b. $0.25-0.50 or more per kilowatt-hour versus $0.10 or less 

c. Large up-front capital costs (e.g. $20,000 for the residential consumer) 
95

d. Evolutionary improvements, even subsidized, won’t suffice 

4. The Opportunity 

a. Thin-film technologies promise revolutionary costs 

b. Polymer photovoltaics can be printed like inks at 5-10x lower cost 

5. Plextronics, Inc. 

a. Key discoveries by Prof. McCullough; developed by Plextronics 

b. Potential to double current performance and enable commercialization 

6. Federal support is critical, including the Solar America Initiative 

a. Fully fund this Initiative 

b. Demand strong focus on revolutionary technologies 

 MR. MURPHY. Thank you, Dr. Hammond. Our next person 

testifying is Mr. Tom--is it Linebarger? 

 MR. LINEBARGER. Linebarger. 

 MR. MURPHY. Linebarger, Executive Vice President and President 

of Power Generation Business for Cummins. Thank you. You may 

proceed. 

MR. LINEBARGER. Thank you, Mr. Chairman, and thank you, 

members of the committee. It is an honor to be here, and thank you for 

inviting me to testify. I have a written statement that I would like to put 

in the record, and I also have a brief oral testimony. 

I will, of course, be brief. My name is Tom Linebarger. I am the 

President of Cummins Power Generation, and it is a division of 

Cummins, Incorporated. We supply a wide range of power generation 

equipment, from very small units of four kilowatts or so used for 

recreational uses to large power generators up to 2.7 megawatts for large 

industrial loads. All Cummins Power Generation equipment would be 

generally classified as distributed energy, and that is mostly what I want 

to speak to you about today. 

 Like the other witnesses, I think today’s hearing is really important. 

Obviously, reliable and cost-effective energy for the long run is among 

the most important issues facing the country today. It is my belief that 

we need to capitalize on the full range of power generation technologies 

available in order to provide a balanced portfolio of energy, and I think 

the committee is wise to be looking ahead and looking broadly for 

solutions. 

 If I could, I would like to define distributed energy. Distributed 

energy is electricity that is generated near the point of use as opposed to 

a centralized power station, which would then send electricity over 

hundreds of miles, typically, in transmission lines. Most of our power 

today in the United States, of course, is generated by central stations, but 

already more than 5 percent of power is generated in distributed form. 

Distributed energy can use a wide range of fuels. Most of the fuels 

mentioned today can be used in distributed form, and our own 
96

equipment, for example, can use biofuels, coal bed methane, and many 

other fuels. 

 The benefits of distributed energy are many. I will just mention a 

few here. First, it is a compliment to the electrical grid. It provides more 

reliability to the grid by providing built-in support and also relieving 

bottlenecks in the grid. It is quickly deployed and flexible in size and 

location. I just brought a small model of a typical unit that we might 

supply in an emergency response, and we can fit the entire two megawatt 

unit in the back of a semi truck, ready to be installed, and we have used 

these units to respond to many emergencies. I will mention a few later. 

Emergency backup, in stationary form, obviously can protect our 

important industries and facilities, and this kind of backup is more and 

more necessary as we see grid failures and other disasters that impact our 

critical facilities. Distributed energy is environmentally friendly and also 

efficient, and that is increasingly so as we improve technologies. 

 I would like to just highlight a couple of examples that I am familiar 

with from experience. Cummins has had a distributed energy 

deployment that I think highlights some of these benefits. First, a couple 

of years ago there was a drought in Mexico, where a Mexican utility 

needed to bring 160 megawatts online, and they were shooting to get it 

online in 45 days. So using units just like this one that I showed here, we 

were able to get all 160 megawatts online and available for homes in the 

area in actually less than 45 days. In fact, we completed the project in 

41. To put up new power stations would’ve taken them certainly more 

than a year and probably more like two years; so very quick and very 

flexible. 

 A similar example would be, today, we provide 72 megawatts to 

First Energy, the utility First Energy, and these units are based in New 

Jersey. It provides peaking support, which reduces the cost of providing 

energy to consumers in that area by taking off peak loads. And these 

same units, during the winter, we were able to redeploy them to help 

facilities, after Hurricane Katrina, come back online more quickly. We 

were able to, again, drive them down in trucks like this to provide quick 

response. Similarly, in a grid-support application, we have 96 megawatts 

on Long Island where LIPA is building a new transmission line, and 

while that line is being built, they will use these distributed energy 

resources to keep their consumers with power. In the emergency backup 

examples, there are many, but just in the Northeast blackout, for 

example, many of our units were deployed at hospitals, which, because 

they were there, people who were undergoing operations when the 

blackout occurred, those operations were able to continue, and obviously 

those backup units were really important to those that were on the 

operating table. Refineries were able to restart more quickly after 
97

Katrina because they had emergency backup power ready to go and 

already deployed. 

 As an example of the efficiency and environmental benefits of 

distributed energy, we have one unit that is at Chicago’s Museum of 

Science and Industry that allows them to use their unit for peaking 

power. They also have a combined heat and power application where 

they can use hot water to provide the cafeteria and other facilities at the 

museum with hot water and steam. And while this reduces the cost of 

energy for them, it also allows them to come off the grid at peak times in 

the summer, and their cost of energy is significantly reduced. 

 This committee has already recognized, I think, the value of 

distributed energy technologies. Last year’s Energy Policy Act 

authorized $760 million over 3 years for distributed energy research and 

related technologies. However, I would note that the Department of 

Energy only spent about $60 million last year on distributed energy, and 

this year is asking for significantly less, around $30 million. My concern 

is that it will have a negative impact on research in this area when we are 

starting to make some significant advances in efficiency and cost. 

 This committee also adopted an amendment by Congressmen Buyer 

and Boucher on interconnection. This requires States to hold 

proceedings on developing interconnection standards. Also, 

Congressmen Terry and Doyle co-chaired the House Distributed Energy 

Caucus, and this caucus takes a lead in developing policies to promote 

and deploy distributed energy. Congresswoman Wilson, who was here 

earlier, has a long history with interconnection issues. All of these things 

are helping to get distributed energy deployed more widely and more 

effectively in the energy infrastructure. 

 However, I still believe that much more needs to be done for 

distributed energy to reach its potential. There is significant technology 

work that needs to be done for these units to reach their maximum 

efficiency levels, and to expand their use of bio and renewable fuels, 

further improve emissions and air quality, and understand their role in 

the grid more broadly. And I guess what I am asking here is that we 

make sure the money that has been authorized is spent on these critical 

priorities. 

 As an example of the R&D work that the Department of Energy can 

continue to do that would really help is the ARES project. I am familiar 

with this project because Cummins, along with two other industry 

participants, has been working on this ARES project for 5 years now 

with the Department of Energy. This project set out efficiency goals for 

natural gas generators. We started at a 37 percent efficiency. We have 

already been able to increase the efficiency to 44 percent, and our target 

is 50 percent on relatively low amounts of funding. The work needs to 
98

continue until the goals are achieved because we have made significant 

progress. In addition, we can identify other similar areas of technology 

that could be funded to provide some of the benefits I mentioned earlier. 

 Secondly, I think that we need to promote combined heat and power 

as a significant element of distributed energy. Combining heat and 

power offers efficiencies north of 85 or 90 percent due to the use of 

waste heat. Unfortunately, CHP is a significantly underutilized 

technology today. There are a number of barriers and risks to 

implementing these projects, and in order to get more projects done, we 

need to recognize the benefits to the public of 85 or 90 percent efficiency 

and provide incentives. Many more projects will get done with relatively 

small incentives, given how close some of the economics are on some of 

these projects. Many other countries have done similar kind of 

incentives and have had good results in terms of deploying combined 

heat and power. I offer that the same would be true with landfill gas, 

which is a good renewable source of fuel, but again, because of the risks 

in some of these projects, incentives are needed in order to get more 

projects off the ground. 

 Next, in order to help distributed energy to reach its potential, I think 

we need to focus on some of the barriers, and particularly the more 

unreasonable barriers that are preventing implementing distributed 

energy. Most important in this is interconnection. On the subject of 

interconnection, I would just like to highlight one piece of equipment I 

brought with me. This is a master control module which we use to hook 

up our generators onto the grid. This allows us to parallel with the grid 

and ensure that our energy can come on and off safely onto the grid. It 

protects other users that are downstream from the source of power. It 

also ensures that workers are not injured if they are working on the lines 

when we are generating power. This module meets the requirements of a 

standard IEEE 1547. This standard was developed over 5 years by a 

wide range of industry, regulatory, and utility participants. And the 

Energy Policy Act that I mentioned, the amendment by Congressmen 

Buyer and Boucher required that States at least review IEEE 1547 to see 

how it could be deployed. Unfortunately, States have been relatively 

slow to adopt the standard and in fact have adopted them in a very 

inconsistent way. The result is that many projects that could benefit 

from distributed energy do not get done because of inconsistent rules, 

and oftentimes some utility participants will require a roomful of relays 

and cabinets that might be $10,000 or $20,000, instead of a $1,000 

module that can accomplish the same thing. And again, my 

recommendation is that we try to come up with an interconnection 

standard that is nationally consistent. 
99

 Lastly, I think that it would be wise for us to ensure that critical 

infrastructure is protected throughout the United States. We know that 

interruptions in the grid are possible and in fact even likely. Hurricanes, 

grid failures like the Northeast blackout, and homeland security threats 

have already demonstrated what can happen when we lose grid power. I 

think Congress needs to review standby requirements for key facilities 

and industries. Currently, there are very few Federal standards. There 

are many, many facilities, of course, that do have backup power in place, 

but too often managers of critical infrastructure do not fund the purchase 

of backup equipment, because it is much like buying insurance. You can 

either pay the money now or you can hope nothing bad happens, and if 

you are lucky, it won’t. Unfortunately, when something bad does 

happen, the public is the one who suffers from not having power 

available. A few areas that I think deserve focus: petroleum refinery and 

deliver sector, to ensure that there is adequate backup power; water and 

sewage treatment, again, where we have seen evidence of not having 

backup power; communication networks and then emergency responders 

of all types. Reviewing these requirements after emergencies is 

obviously too late, so we if act proactively, we can ensure that our 

infrastructure is in place. 

 Again, I am pleased that you are having this hearing and I thank you 

very much for the honor of testifying today. 

 [The prepared statement of Tom Linebarger follows:] 

PREPARED STATEMENT OF TOM LINEBARGER, EXECUTIVE VICE PRESIDENT AND PRESIDENT,

POWER GENERATION BUSINESS, CUMMINS, INC. 

Introduction

Cummins Power Generation, a subsidiary of Cummins Inc., is a global leader in the 

production and supply of power generation equipment, with specific focus on increasing 

the availability and reliability of environmentally responsible electric power around the 

world. We deliver cost-effective power solutions for a wide variety of customers – 

commercial and industrial businesses, recreational users, emergency responders, 

government agencies, utilities, and homeowners – through our global distribution 

network. 

Background

Distributed energy (DE) is electrical energy that is produced at or near the site where 

the energy is consumed. DE is not one technology – it can be produced by generator sets 

using conventional fuels like diesel and natural gas and other newer fuels like biomass, 

biodiesel, ethanol, or hydrogen. DE can also include emergent technologies such as fuel 

cells, wind turbines or solar. Installation of DE in the U.S. will result in far-reaching 

benefits to consumers, businesses, industry and our national security. Government 

policies must encourage greater use of DE. 

Benefits of deployment of DE technologies

The benefits of DE are numerous. It is energy efficient, it bolsters grid reliability, 

and provides backup power at the point of use when the grid fails. DE is also 
100

environmentally sound. In some situations it can also be a source of lower cost power. 

DE protects some of our nation’s critical infrastructure including water and sewage 

treatment, emergency communications equipment, oil refineries, nuclear power plants, 

financial data centers and much more. 

What is needed to fully reap benefits of DE

We believe there are four major policy areas that the government should pursue to 

allow the country to reap the full benefits of DE technologies: increased Federal R&D 

funding for DE technologies; a review of backup power requirements for critical 

infrastructure; tax policies that favor CHP; and national uniform interconnection 

standards. 

Mr. Chairman and Members of the Committee, thank you for inviting me to testify. 

Today’s topic is an important one and I am glad to represent the distributed energy point 

of view. Today’s high fuel prices and energy security concerns highlight the importance 

of looking beyond centrally-fired power plants for solutions to meet our future electricity 

needs. 

I am appearing here today in my capacity as President of Cummins Power 

Generation. Cummins Power Generation, a subsidiary of Cummins Inc. (NYSE: CMI), is 

a global leader in the production and supply of power generation equipment, with specific 

focus on increasing the availability and reliability of environmentally responsible electric 

power around the world. With over 80 years’ experience, we deliver cost-effective 

power solutions for a wide variety of customers – commercial and industrial businesses, 

recreational users, emergency responders, government agencies, utilities, and 

homeowners -- through our global distribution network. Our products include engines, 

alternators, generator sets, and systems including power control and power transfer 

technologies. Our services range from system design, project engineering and 

management, large scale temporary power projects, and operation and maintenance 

contracts. We also operate several small scale power plants providing electrical power as 

well as hot or chilled water derived from waste heat. 

Distributed energy (DE) is electrical energy that is produced at or near the site where 

the energy is consumed. DE is not one technology – it can be produced by generator sets 

using diesel or natural gas and increasingly other fuels like biomass, biodiesel, ethanol, or 

hydrogen. DE can also include emergent technologies such as fuel cells, wind turbines or 

solar. DE performs a number of important roles for power consumers and utilities 

including: emergency standby power to increase reliability, prime power where power is 

unavailable, peaking power to reduce the load on the grid at times of peak usage, the 

opportunity to utilize combined heat and power to reduce their total energy costs, and as 

protection against line or substation failure in a distribution grid. 

It is estimated that there are approximately 160 gigawatts of emergency standby 

power installed in the US. There are also approximately 11 gigawatts of baseload 

distributed energy and another 6.5 gigawatts of distributed energy being used to meet 

utility peaking needs. It is also worth noting that in the US there are approximately 30 

gigawatts of combined heat and power plants of less than 100 megawatts. 

While these numbers are impressive, they are far short of the potential opportunities 

for DE. In one market study at Cummins, we estimated an additional market potential of 

150 gigawatts for combined heat and power (CHP) installations below 100 megawatts in 

the commercial and industrial sectors. We believe the market opportunity is larger when 

you consider opportunities to expand the use of other types of DE. It is worth noting that 

favorable government policies in Europe have allowed DE technologies to enjoy far 

greater success in the marketplace. DE technologies account for approximately 13% of 

the electricity generated in Europe, more than double their penetration in U.S. markets. 
101

The benefits of DE are numerous. It is energy efficient, it bolsters grid reliability, 

and provides backup power at the point of use when the grid fails. DE is also 

environmentally sound. In some situations it can also be a source of lower cost power. 

DE protects some of our nation’s critical infrastructure including water and sewage 

treatment, emergency communications equipment, oil refineries, nuclear power plants, 

financial data centers and much more. 

During emergencies like last year’s hurricanes or the Northeast blackout of 2003, 

DE played a critical role in assuring first responders could do their jobs and critical 

facilities like hospitals continued to function. DE assured that communication systems 

continued to operate and that critical information, such as the financial data that 

underpins the banking system, was secure. It kept businesses running and mitigated the 

economic impact of these disasters. As a result of their investment in DE, many oil 

refineries were also able to continue to operate, gasoline distribution centers were able to 

load fuel into trucks, and gasoline was made available to consumers. Unfortunately, not 

everyone made such investments and there were interruptions in the fuel delivery system. 

I would like to highlight a few specific cases of how distributed power provided 

critical support to Cummins customers during Hurricane Katrina and the Northeast 

blackout. 

When any major weather event is predicted for the US, Cummins Power Generation 

and its distributors begin to prepare a storm response. In the case of Hurricane Katrina 

our response involved twice daily conference calls (every day for 9 weeks), to organize 

the marshalling not only of generating assets, but technicians, distribution equipment and 

fuel. To respond to the national emergency, generating equipment was relocated from 

around the country, and from Canada and Mexico. We estimate we deployed in excess of 

160MW to the region. Some of that equipment remains in place today. We are proud of 

our ability to mobilize generating equipment in this manner; however, permanent DE 

installations would have provided better protection for the region. 

A hospital that did have emergency DE in place, is Turro Infirmary in Kenner, LA. 

Turro Infirmary is one of the hospitals in the New Orleans area that managed to keep 

operating during Katrina on backup power. After the storm, the hospital recognized the 

value of having sufficient and reliable emergency power and has decided to upgrade its 

system by replacing generators that were over 50 years old with new Cummins Power 

Generation units so that it will continue to be well-prepared for the next emergency. 

The communications industry has also realized the benefits of reliable backup 

power. Verizon Wireless installed Cummins generators at its cell towers and major 

switching stations in upstate New York. During the blackout of 2003, while some people 

stood in long lines at pay phones, these generators meant that Verizon wireless customers 

continued to have uninterrupted wireless access throughout the emergency. 

Also during the blackout, Cummins generators enabled New York Mayor Michael 

Bloomberg to respond to the blackout because New York City Hall was supported by a 

Cummins emergency standby system keeping the lights on, the computers running and 

building systems operating. All airports have standby generation to power air traffic 

control systems and runway lighting, but at Newark Liberty Airport, a Cummins standby 

power system provided uninterrupted power to the entire airport terminal throughout the 

outage making travelers much more comfortable with air conditioning and lighted 

bathrooms. Water systems and sewage treatment facilities stopped working in Detroit, 

Cleveland and several other cities in the affected area, but in Mississauga, Ontario, 

outside of Toronto, a Cummins Power Generation prime power system kept the sewage 

and water system operating for the city’s 800,000 residents. 

Beyond emergencies, DE makes important contributions to grid reliability. For 

example, each summer Cummins places 168 megawatts of power in the Northeast to help 

utilities meet their seasonal peak. This is made up of two large projects, 72 megawatts at 

FirstEnergy in New Jersey and 96 MW at Long Island Power Authority. 
102

At FirstEnergy our portable diesel generators are used to provide reliability support 

to the grid. During peak periods the generators are started, relieving constraints and 

lowering the chance of a system failure. This past fall 40 of those units were unhooked 

from the grid and moved to areas affected by the hurricanes. These generators provided 

emergency power to hospitals, like Forest General Hospital in Hattiesburg, MS; water 

systems, like Veolia Water Works in Kenner, LA; and to support FEMA operations. 

They were recently moved back to First Energy to be in place to meet this summer’s 

peaking requirements. 

The 96 MW’s of Cummins generating capacity on Long Island provide reliability 

support to the local power grid to fill a gap between electricity supply and demand until 

new transmission capacity can be built to meet the needs of Long Island. Without this 

support from DE, on peak days, Long Island would have a serious electricity shortfall. 

Importantly, stringent emission control standards were applied to this project. Each 2 

MW containerized generator is equipped with state-of-the-art emissions control 

technology designed to meet New York Department of Environmental Conservation’s 

stringent air quality standards. The emissions control technologies applied to this site, 

along with the use of ultra-low sulfur fuel, resulted in more than 90% reduction in 

nitrogen oxide, carbon monoxide and particulate matter. The control package utilized on 

the generators reduces emission output to levels that are better than EPA Tier III 

standards. 

Additionally, DE makes important contributions in the area of efficiency. Using DE 

in combined heat and power configurations (CHP) leads to very high efficiencies by 

using heat normally wasted in the electric generation process to do useful work, such as 

heating, air conditioning or serving industrial processes. An example of this benefit is a 

CHP system installed by Cummins at American Honda’s corporate headquarters in 

Torrance, California. That project is saving the company 30% annually on its total 

campus energy expenditures. In addition to the energy savings, the CHP system allows 

American Honda to demonstrate corporate leadership and environmental responsibility. 

As the ethanol industry in the US continues to develop, it is looking increasingly to install 

CHP plants to support its production facilities. 

One of the areas that could most benefit from distributed power technologies is 

utilizing landfill gas to generate electricity. Cummins has installed a landfill gas to 

energy plant at the Viridor Waste Management landfill in Dunbar, Scotland allowing a 

nearby cement plant to obtain a significant portion of its power demand at lower costs 

than can be supplied by the local utility. The Viridor plant not only allows the cement 

plant to save on its energy costs, but harnesses the methane gas produced by the landfill 

which when flared into the atmosphere has about twenty times the greenhouse effect of 

carbon dioxide. This project is also an example of how favorable government policies can 

encourage deployment of these highly efficient technologies. The project was eligible for 

increased revenue in the form of Renewable Obligation Certificates, a UK government 

trading program to encourage development of renewable energy projects making the cost 

of power from such sources more competitive. The Certificates allow Viridor Waste 

Management to invest in the environmentally friendly waste-to-energy project and supply 

cheaper electricity to the cement plant and still make money on the project. 

The benefits DE provides to our nation’s energy infrastructure are undeniable. 

Those benefits go beyond the individual benefits received by the owners or users of the 

DE asset – but benefit all Americans through enhanced reliability, efficiency, and critical 

infrastructure protection. However, more often than not, Federal and state policies treat 

DE as a burden to the electrical system rather than a benefit. DE technology 

advancements are also limited because of a lack of Federal research and development 

funding. Further, connecting DE technology to the grid is difficult because 

interconnection requirements are often inconsistent and expensive to implement. In 
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addition, tax policy does not favor CHP as it does other clean efficient sources of 

electricity by giving production tax credits for the benefits it provides. 

The traditional drivers for DE are being magnified by current global trends. Higher 

fuel costs, climate change initiatives and a push for environmental stewardship, and 

homeland security concerns all point to the use of increased use of DE to secure and 

ensure the viability of continued energy supply into the future. However, unless the US 

adopts policies that create a favorable marketplace for DE, the technologies will continue 

to struggle and much of the electricity generating capacity available in the US will not be 

allowed to feed back on to the grid. I am concerned that, as a result of less favorable 

policies toward DE, its adoption rate has been slowed and this has been to the detriment 

of our power sector and the security of our critical infrastructure. 

What does DE need to reach its full potential? We believe there are four policy 

areas that the government could adopt to allow the country to reap the full benefits of DE 

technologies: increased Federal R&D funding for DE technologies, a review of backup 

power requirements for critical infrastructure, tax policies that favor CHP, and national 

uniform interconnection standards. 

Federal Funding for DE R&D

There are potential technological breakthroughs that could have a significant effect 

on the efficiency, reliability and emissions from generators that run on natural gas, 

biomass and similar fuels. Federal funding to ensure that these technologies are 

developed rapidly could have a major positive impact on fuel consumption and emissions 

in the near or medium term. Federal funding, particularly through the Department of 

Energy, also ensures that the best research by all competitors in the field is brought 

together to get results more quickly and to define how DE can contribute most effectively 

to the grid. 

Similarly, federally funded research on fuel cells for power generation applications 

has already resulted in significant breakthroughs on this important technology. However, 

significant work remains to be done before this technology will be able to meet the 

performance and cost targets required for it to have an impact in our country. 

With the progress that has been made to date, it is critical that funding not be 

stopped mid-stream or we will lose the benefits we have gained. These are technologies 

that can help us fulfill a number of our critical priorities: low cost and reliable energy 

infrastructure: diversifying our fuels to reduce dependence on any single fuel; improving 

the security of our critical infrastructure; using more renewable fuels; and improving the 

efficiency and reducing the emissions of our power sources. Moreover, these 

technologies can contribute to these goals in the near or medium term rather than the 

distant future. We must continue our research focus on DE. 

Last year, this Committee worked to develop the Energy Policy Act of 2005 

(EPAct). That legislation authorized $730 million to be spent on DE technology and 

policy development over the next three years. Unfortunately, the Administration has not 

requested funding at any where near that level for FY07. In FY 2006, DOE allocated 

approximately $60 million for DE work. For FY 2007, it requested only $30 million. As 

Congress finishes the FY07 Appropriations process it should provide additional funding 

for DE research and development. Without full funding, progress on DE will remain 

limited. Key programs may be ended short of their goals and other programs will not 

begin at all. 

One example of the type of work DOE is doing with respect to DE is the Advanced 

Reciprocating Engine Systems (ARES) program. Three engine manufacturers, including 

Cummins, participate in this cost-shared program. The goal of the program is to develop 

a cleaner, more efficient natural gas reciprocating engine. These engines are workhorses 

of the industry, used in nearly every DE application. While making these engines more 

efficient doesn’t sound as glamorous as technologies using unconventional energy 
104

sources, if the goals of the ARES program are achieved and our estimates of market 

demand are correct, there will be a fuel saving of 491 trillion Btu’s of natural gas, NOx 

emissions will be reduced by 170,000 tons, and 26 million tons of CO2 will not be 

emitted into the atmosphere over a ten year period. To make this point another way, for 

every 10GW of ARES products deployed, over 100 trillion Btu’s of energy will be saved, 

reducing oil consumption by 17.2 million barrels annually. We think this is an important 

program and appreciate DOE’s continued support. 

ARES is just one of the many programs industry and DOE are working on to 

encourage advancement of DE technologies and market penetration of those 

technologies. Other important DE programs include the Gridwise Architecture Board, 

DOE Regional Application Centers that promote CHP implementation, and DOE’s 

Landfill Methane Outreach and Coal Bed Methane Outreach Programs that promote the 

useful and environmentally friendly utilization of these waste energy sources nationwide. 

Another area where there is work to be done to advance DE technology is on 

microgrids. Microgrids are defined as single or multiple clean distributed power 

resources serving multiple customer loads (e.g., residential subdivision, mixed-use 

residential and commercial centers, business and industrial parks). Microgrids can 

provide cost savings and enhanced reliability to consumers while simultaneously making 

the grid more robust to outages caused by nature and security breaches. In the event of 

such disasters, microgrids because of their capability to operate in an “island mode” can 

help restore the power grid more rapidly. 

Microgrid research and development has positioned the concept for real world 

application. R&D is currently funded by DOE and the California Energy Commission 

and is aimed at studying the interaction of distributed resources with the grid, 

performance of power electronics, and the seamless transitioning of the microgrid when 

necessary between “island” and “normal” or “parallel” operations with the utility grid. It 

is imperative that funding for such programs be continued and expanded. 

Internationally, Cummins Power Generation is working to develop DE technology 

that uses a variety of readily-available biofuels. In India, Cummins is working with the 

Indian Institute of Science on technologies that use wood chips, rice husks and coconut 

shells, among others things, to generate electricity in a distributed form. We are using 

this technology to support rural electrification in India. These small scale systems (20-

40KW) power entire villages providing new economic opportunities to areas that would 

otherwise be unserved by the grid. Globally, biofuels are becoming an increasingly 

important source of feedstock for power generation. Increased use of these fuels will 

help dampen growing worldwide demand for petroleum. These international programs 

highlight the additional research that is necessary to enable DE power generation to fully 

realize the benefits of biofuels. 

Critical Infrastructure Backup Power Requirements

Congress should consider expanding the role that DE technologies play in assuring 

our homeland security and in disaster relief and recovery. Last year’s hurricanes 

highlighted the fragility of our fuel delivery system. With much of our oil production and 

refining in the Gulf Coast, the impact of a power outage to these key facilities can have 

ramifications well beyond the region; causing fuel supply disruptions in other parts of the 

country. In recognition of this vulnerability, Homeland Security Secretary Chertoff and 

Energy Secretary Bodman recently sent a letter to the oil refining and distribution 

industry asking them to review their current backup generation capabilities and needs and 

to enhance them if necessary. Other industries are equally vulnerable to power supply 

interruptions. In an example close to home, lack of backup power meant Fairfax County 

residents had to boil water after power was knocked out to the local water system after 

Hurricane Isabel hit the east coast -- even well after power restored. Cleveland residents 

faced a similar problem after the Northeast blackout of 2003. 
105

Congress, the Administration and the States should review existing backup power 

requirements in light of today’s changing requirements and then implement new 

requirements where there are gaps. We believe Congress should begin to develop a 

power security policy. Such a policy should include a review of current backup power 

capabilities for critical facilities, and authorization for DHS and/or DOE to require key 

industry sectors to have sufficient backup power available. 

Tax Incentives

We believe tax policies should be adopted to encourage DE, and CHP in particular. 

Specifically, because distributed energy, when used in a CHP application, has significant 

environmental and efficiency benefits, its deployment should be encouraged. CHP 

systems have an overall energy efficiency level of 85%. Compare this with an average of 

34% for central power stations. One way to encourage CHP is through a tax credit and 

faster depreciation. Market penetration of combined heat and power systems would 

increase dramatically with such a credit. This type of tax credit was critical to the 

development of the wind industry in the US. We believe a similar credit would have a 

beneficial impact on the development of new CHP projects. During consideration of 

EPAct, production tax credits for CHP were considered but ultimately removed during 

conference. We believe Congress should reconsider adoption of CHP tax credits.

Uniform Interconnection Standards

In EPAct, Congress passed legislation to require States to develop their own 

interconnection rules. This was a major step. Prior to the legislation many states had no 

interconnection requirements at all. As a result of the legislation, states are beginning to 

develop interconnection processes, but there is still a great deal of variation from state to 

state and utility to utility. Importantly, many of the safety and technical questions about 

interconnection have already been resolved through an industry driven process conducted 

by the Institute of Electrical and Electronics Engineers (IEEE). IEEE 1547 is a technical 

standard for interconnection developed through a consensus process that included 

utilities, DE equipment manufacturers, end-users, and state and regional regulators. 

We believe Congress needs to take another step on the development of uniform 

interconnection standards. Because each state has not adopted IEEE 1547 as written, 

there remains inconsistency in the interconnection process with which those seeking to 

install DE projects must comply. DE project developers are often met with requests for 

unnecessary protective equipment or unreasonable commercial terms that can make an 

otherwise good project uneconomic. Further, a consistent standard would speed the 

interconnection process and lower the costs of DE equipment by allowing manufacturers 

to develop pre-certified interconnection equipment. We believe Congress should require 

the development of a national uniform interconnection standard for small generators, 

which would include the adoption the IEEE standard. 

Mr. Chairman, I thank you for holding this hearing. I think it is important for the 

nation that you fully consider the benefits of DE and adopt policies to encourage its 

continued development and deployment. Again, I thank you for this opportunity to 

testify. 

 MR. HALL. Mr. Linebarger, thank you. Dr. Katzer. 

MR. KATZER. Thank you, Mr. Chairman and members of the 

committee. Good afternoon. My name is James Katzer and as the 

Chairman noted earlier, I am a Visiting Scholar at the Laboratory for 

Energy and the Environment at MIT, focusing on the future of coal. I am 

pleased to be able to testify to you today about the aspects of coal-based 
106

power generation. I will focus on generation technology and associated 

emissions, including carbon dioxide emissions. My formal testimony 

has been submitted for the record. 

 Coal presents significant challenges in large-scale power generation. 

At the same time, the United States has 27 percent of the total global 

recoverable coal reserves, enough for 250 years at current consumption, 

as was noted earlier. Over 50 percent of U.S. electricity was generated 

from coal last year and coal is expected to shoulder its share of the 

demand growth in the future. 

 A primary coal-generating technology is pulverized coal combustion, 

PC combustion. It is a well-established, mature technology, generating 

efficiency increases from about 35 percent for low-severity, subcritical 

units to about 44 percent for high-severity, ultra-supercritical units. This 

efficiency increase reduces the coal required per unit of electricity 

generated by about 25 percent. This also means that CO2 emissions are 

reduced by 25 percent and other emissions produced are also decreased 

by about 25 percent per unit of electricity generated. 

 Most PC plants in the United States are subcritical units, the bottom 

of this range. We have no ultra-supercritical plants. On the other hand, 

Europe and Japan have built almost a dozen ultra-supercritical plants 

over the past decade. We need to have higher efficiency technology 

available for our changing future, and I will comment on this if I have 

some time at the end. Application of advanced emissions control 

technology to PC units can reduce PC emissions to very low levels. 

Further, emissions control technology is continuing to evolve and 

improve, and at this point we do not know just when or where the end 

will be reached. I would say, in general, the issue of PC emissions is not 

technology capability, but breadth of its application. 

 Stepping on, integrated gasification combined cycle, IGCC, 

technology is a competitor to PC generation. Four coal-based IGCC 

demonstrations plants, each between 250 and 300 megawatts, have been 

built, each with government assistance, and each is operating well. Two 

of these are in the United States. In addition, there are about five 

refinery-based IGCC units, three of them at the 500 megawatt level each, 

that are gasified petroleum coke, residua, tars, asphalts, and other 

residues in refineries to produce electricity. IGCC is well established 

commercially in the refinery setting. IGCC should also be considered a 

commercial technology in the electricity generating setting, but in this 

setting it is neither well established nor mature. As such, it is likely to 

undergo significant change as it matures. 

 The estimated cost of electricity for PC generation or bituminous 

coal is about 4.8 cents per kilowatt hour. Under similar conditions, an 

IGCC plant produces electricity for about 5.1 cents a kilowatt hour, or 
107

about three-tenths of a kilowatt hour more than the PC unit; thus, today 

IGCC is not the economic choice. For supercritical PC generation, about 

1 cent per kilowatt hour, or about 20 percent of the total, is associated 

with achieving high levels of emissions control. Reducing emissions 

control by a factor of two further, well beyond or well below any 

permitted levels that are being set today in the United States, increases 

the costs an estimated two-tenths of a cent per kilowatt hour, further 

raising that about 5 cents a kilowatt hour for PC. These added emissions 

costs narrow the gap for IGCC, but do not produce a shift in technology 

choice based on COE. However, IGCC has a potential for order of 

magnitude criteria emissions reductions below PC for 99.5-plus levels of 

mercury and other toxic metals reductions, for much lower water use and 

stabilize solid waste. 

 MR. HALL. Begin to wind up, please. 

 MR. KATZER. Yes. These may become a larger factor in the future 

and may begin to shift the balance toward IGCC. My testimony contains 

details on CO2 capture. 

The conclusion I would like to come out of this with is, when we 

look at all of this and the role of low rank coals in the United States, we 

conclude that among IGCC, oxygen-fired combustion, and air-fired 

combustion, the three competing technologies, at this point, each is in a 

developing stage, they each have a lot of maturity to gain, and it is too 

early to conclude winners and losers at this point in the game. The 

challenges to meet our power needs and protect air quality and the 

environment are substantial, but coal, teamed with the proper technology, 

can be part of the solution. I thank you. 

 [The prepared statement of James Katzer follows:] 

PREPARED STATEMENT OF DR. JAMES KATZER, VISITING SCHOLAR, LABORATORY FOR 

ENERGY AND THE ENVIRONMENT, MASSACHUSETTS INSTITUTE OF TECHNOLOGY

Mr. Chairman and Members of the Subcommittee. Good morning. My name is 

James Katzer, and I am a Visiting Scholar in the Laboratory for Energy and the 

Environment of Massachusetts Institute of Technology. For about the last year, I have 

been working with a group of MIT faculty who have been looking at the future of coal. I 

am pleased to have been invited to discuss some key aspects related to this work with you 

today. I will focus on coal-based generation technology and certain associated 

environmental issues, including carbon dioxide emissions and their control. I am 

submitting my written testimony herewith. 

Coal presents the ideal paradox in power generation. On one hand, it is cheap, 

abundant, and concentrated typically in countries with large human populations and 

limited oil and gas. On the other hand, its use can have significant environmental 

impacts, requires capital-intensive generating plants, and produces large quantities of 

carbon dioxide. Both U.S. and global electricity demand will continue to grow at a brisk 

rate, and coal is certain to play a major role in meeting this demand growth. As you are 

aware the U.S. has 27% of the total global recoverable coal reserves, enough for about 
108

250 years at current consumption. Over 50% of U.S. electricity was generated from coal 

last year. 

The primary technology used to generate this electricity is pulverized coal (PC) 

combustion. It is well-established, mature technology that generates most of the world’s 

coal-based electricity. Although the efficiency of generation depends on a number of 

variables, including coal type and properties, plant location, etc., the most important 

efficiency determinant is the temperature and pressure of the steam cycle that is used. I 

will come back to this in a minute. 

Integrated Gasification Combined Cycle (IGCC) is a competitor to PC generation. 

Four coal-based IGCC demonstration plants, each between 250 and 300 MWe, have been 

built, each with government assistance, and are operating well. In addition, there are 

about 5 refinery-based IGCC units, three at 500 MWe each, that are gasifying petroleum 

coke, or refinery asphalt, residua, tars, and other residues to produce electricity. These 

units often also produce steam and hydrogen for the refinery. IGCC is well established 

commercially in the refinery setting. IGCC can also be considered commercial in the 

coal-based electricity generation setting, but in this setting it is neither well established 

nor mature. As such, it is likely to undergo significant change as it matures. Currently, 

the biggest concern with coal-based IGCC is gasifier availability. 

Because a large number of variables, including coal type and quality, location, etc, 

affect generating technology choice, operation, and cost, my comments here and my 

technology comparisons will center one point set of conditions. This includes one coal, 

Illinois #6 coal, a high-sulfur bituminous coal and generating plants designed to achieve 

criteria emissions levels somewhat lower than the lowest recent permitted plant levels. 

For example, the designs that I refer to here achieve 99.4 % sulfur removal. I will first 

compare these technologies without carbon dioxide capture and then compare them with 

90% carbon dioxide capture. Plant capital costs are based on recent detailed design 

studies and industrial experience of the last 6 years, which represented a relatively stable 

period. I have not attempted to account for recent cost escalation. Here I will focus on 

technologies that are either commercial or well on their way to becoming commercial. 

PC Combustion: The most important variations affecting PC generating efficiency 

is the severity of steam cycle operation: subcritical, supercritical, and ulta-supercritical. 

Generating efficiency is about 35% for subcritical generation, about 38% for supercritical 

generation, and about 44% for ultra-supercritical generation. Increased generating 

efficiency means less emissions per unit of electricity, including less CO2 emissions. In 

moving from subcritical to ultra-supercritical generation, the coal required per unit 

electricity is reduced by about 22%, which means a 22% reduction in CO2 emissions and 

also reduced criteria emissions. Moving from subcritical to supercritical offers about a 

10% reduction. Most PC plants in the U.S. are subcritical units. We have no ultrasupercritical plants in operation, under construction, or being planned. One reason is that 

low coal cost has not provided sufficient economic incentive to offset the slightly higher 

capital costs associated with higher steam cycle operating severity. On the other hand, 

Europe and Japan, which have higher coal costs and stronger culture supporting high 

efficiency, have built almost a dozen ultra-supercitical units over the last decade. These 

units are operating as well as subcritical units, but with much higher generating 

efficiency. The key enabling technology here is improved materials to allow operation at 

higher severity conditions. An expanded U.S. program to advance materials development 

and particularly improved fabrication and repair technologies for these materials would 

advance the potential for increased PC generating efficiency for our changing future. 

Another critical issue with PC generation is criteria and other emissions. 

Application of advanced emissions control technologies to PC units can result in 

extremely low emissions, and emissions control technology continues to improve, 

including the potential for high degrees of mercury control. In general, the issue of PC 
109

emissions is not a question of technology capability but the breadth of its application. 

This may not hold for specific local situations. 

Using detail design study capital costs, EPRI economic TAG guidelines and 

assumptions and coal at $1.50 per million Btu, the estimated cost of electricity (COE) for 

a subcritical PC is about 4.8 ¢/kWe-h, consistent with recent EPRI estimates [1]. The 

COE decreases slightly (~0.1 ¢/kWe-h) from subcritical to ultra-supercritical generation. 

For supercritical generation almost 1 ¢/kWe-h, or about 20%, is associated with achieving 

emissions control to the high design levels assumed here. Reducing emissions by a factor 

of two further would add an estimated 0.2 ¢/kWe-h increasing the COE to about 5.0 

¢/kWe-h. 

IGCC: The promise of IGCC has been high generating efficiency and extremely 

low emissions. There are a number of critical options associated with gasification 

technology and its integration into the total plant that affect efficiency and operability. 

Of these, the gasifier type and configuration are the most important. Table 1 summarizes 

the characteristics of gasifier types. Entrained-flow gasifiers, which are extremely 

flexible, are the basis of each of the IGCC demonstration units. Figure 1 shows the 

configuration of an IGCC employing full quench cooling of the gasifier exit gases. This 

configuration will produce about 35-36 % generating efficiency. Figure 2 illustrates the 

addition of a radiant syngas cooler to raise steam for the steam turbine, which increases 

the electricity output and raises the generating efficiency to 38-39 %. Adding convective 

syngas coolers to recover additional heat as steam is also shown in Figure 2. It can 

increase the generating efficiency to the 39-40 % range. Existing IGCC demonstration 

units, which employ different practical combinations of these options, operate at 

generating efficiencies from 35.5 % (Polk) to 40.5 % (HHV) (Puertolanno Spain). Since 

IGCC is not yet mature, there is still potential for efficiency gain. However, I do not 

expect to see commercial IGCC generating efficiency exceeding that of ultra-supercritical 

PC in the intermediate time frame. The design/engineering firms and the power industry 

need to gain experience with IGCC to develop better designs and achieve improved, more 

reliable operation. 

Current coal-based IGCC units are permitted for and are operating at the same 

criteria emissions levels as the best PC units. An IGCC plant with radiant and convective 

syngas coolers using Illinois #6 coal, operating at 38% efficiency, and achieving high 

levels of criteria emissions control produces electricity for about 5.1 ¢/kWe-h or about 

0.3 ¢/kWe-h higher than a supercritical PC [1, 2]. IGCC would not be the choice based 

on COE alone, independent of gasifier availability concerns. Requiring high levels of 

mercury removal, reducing criteria pollutants by one half from the very low levels that 

we are already considering and including the cost of emissions credits and offsets 

increases the COE for the PC, narrowing the gap, but does not suggest a shift in 

technology choice based on COE. However, IGCC has the potential for order-ofmagnitude criteria emissions reductions, 99.5+ % levels of mercury and other toxic 

metals removal, much lower water consumption, and highly stabilized solid waste 

production. These may become a larger factor in the future. To achieve these order-ofmagnitude criteria emissions reductions is expected to increase IGCC COE, but this 

increase is not expected to be large. Companies considering construction of a new coalbased generating facility need to bring all these considerations into their forward pricing 

scenarios to help frame the decision of which technology to build. 

CO2 Capture: If it becomes commercial practice, CO2 capture will add significantly 

to the COE, independent of which approach is taken. CO2 capture could also change the 

choice of technology in favor of IGCC, although it is too early in technology 

development to declare this a foregone conclusion. History teaches us that one single 

technology is almost never the winner in every situation. The options are: 

• Capture the CO2 from PC unit flue gas. In this case, the CO2 is at a low 

concentration and very low partial pressure because of the large amount of 
110

nitrogen from the combustion air. To capture and recover the CO2 using 

today’s amine (MEA) technology requires a lot of energy. Energy is also 

required to compress the CO2 to a supercritical liquid. This large energy 

consumption reduces plant electricity output by almost 25% and reduces 

generating efficiency by about 9 percentage points. The added capital and the 

efficiency reduction increase the COE by about 60% or about 3.0 ¢/kWe-h to 

about 7.7 ¢/kWe-h. In this situation a 50% reduction in the CO2 capture and 

recovery energy would have a significant impact on PC capture economics. 

Focused research on this issue is clearly warranted. 

• Combust coal with oxygen( Oxy-fuel combustion) to reduce the amount of 

nitrogen in the flue gas. This allows the flue gas to be compressed directly 

liquefying the CO2 without a costly separation step first, significantly reducing 

the energy consumption. The technology required the addition of an air 

separation unit which consumes significant energy and thus would not be used 

except for CO2 capture. This technology is in early development stage, is 

advancing well, and at this point appears to hold significant potential for both 

new-build capture plants and for the retrofitting existing PC plants. The 

estimated COE for oxy-fuel combustion is about 7.0 ¢/kWe-h (includes capture 

and compression to supercritical liquid, but not transport of sequestration) or 

about 0.7 ¢/kWe-h less than for air-blown PC combustion with capture. The 

technology requires further development and demonstration along with detailed 

design studies to allow effective evaluation of its cost and commercial potential. 

• Use IGCC, shift the syngas to hydrogen, and capture the CO2 before 

combustion in the gas turbine. IGCC should give the lowest COE increase for 

CO2 capture because the CO2 is at high concentration and high partial pressure, 

and this is what is observed. The needed technology is all commercial, 

although it has never been fully integrated on the scale that it will need to be 

applied here. The estimated COE is 6.5 ¢/kWe-h [1] which is a 1.4 ¢/kWe-h 

increase over non-capture IGCC and is about about 1.2 ¢/kWe-h less than 

supercritical PC with capture. Oxy-fuel combustion falls in between them 

Lower Rank Coals: As Figure 3 shows, moving from bituminous coal to subbituminous coal and to lignite results in an increase in the capital cost for a PC plant and 

a decrease the generating efficiency (increased heat rate). However, for IGCC, these 

trends are much larger, such that currently demonstrated IGCC technologies become 

more substantially disadvantaged relative to PC for subbituminous coals and lignite. 

Note that over half of the U.S. recoverable coal reserve is either subbituminous coal or 

lignite. Thus, there is a substantial need for improved IGCC technology performance on 

lignite, other low rank coals, and biomass. Options include, but are not limited to, 

improved dry-feed injection into the gasifier, coal drying, fluid transport reactors and 

other gasifier configurations. Development should be at the PDU scale before moving to 

demonstration. 

A variation on PC combustion is fluid-bed combustion in which coal is burned with 

air in a fluid bed, typically a circulating fluid bed (CFB)[2, 3] CFBs are best suited to 

low-cost waste fuels and low-rank coals. Crushed coal and limestone are fed into the 

bed, where the limestone undergoes calcination to produce lime (CaO) which captures 

sulfur. The steam cycle and generating efficiencies are similar to PC. The primary 

advantage of CFB technology is its capability to capture SO2 in the bed, and its flexibility 

to a wide range of coal properties, including low-rank coals, high-ash coals and lowvolatile coals. The technology is fully commercial, and several large new ligniteburning CFB units have been constructed recently. CFBs are well suited to co-firing 

biomass [4]. 
111

When CO2 capture is considered, the differences among IGCC, oxy-fuel PC and airblown PC become significantly less than discussed above for bituminous coal.. In this 

situation all three of the technologies with CO2 capture must be considered to be in the 

early stages of development, and it is simply too early to select one of these technologies 

as the winner vs. the others 

Key Findings: 

• PC technology, although mature, still offers opportunities for improved 

efficiency and thus reduced coal consumption and CO2 emission per unit of 

electricity generated. Higher efficiency generation is important without CO2

capture but also makes CO2 capture less costly. An expanded program to 

develop and apply new materials for more severe steam cycle operation is 

warranted. 

• PC emissions control technology has become very effective in reducing criteria 

emissions, but it continues to expand its capabilities. The limit of the 

technology has not yet been reached although increases in extent of required 

removal and addition of new requirements continue to increase the PC COE. 

• IGCC is commercially demonstrated technology that is not yet mature in the 

power generation arena, although it is mature in the refinery arena. With coal 

its main challenges are gasifier availability and COE. It has the potential of a 

much smaller environmental footprint than PC technology and of markedly 

lower air emissions. In the near term, these advantages do not drive a change 

in generating technology. 

• Current commercial IGCC technology is not well suited for lower rank coals, 

of which the U.S. has a large amount. To expand its potential scope to these 

coals, IGCC technology needs to undergo further targeted development. 

• The technology systems required to capture CO2 from coal-based power 

production are in the early stages of development. Of the three competing 

systems ( PC with CO2 recovery from flue gas, Oxy-fuel combustion with flue 

gas direct compression to liquefy CO2, and IGCC with pre-combustion CO2

capture) it is too early to choose winners because it is not possible to predict 

how technology development and commercial innovation may evolve. Further, 

one technology system may be well suited for bituminous coals, whereas 

another may apply best to low rank coals and lignite.. 

Citations and Notes 

1. Dalton, S., The Future of Coal Generation, in EEI Energy Supply Executive 

Advisory Committee. 2004. 

2. NCC, Opportunities to Expedite the Construction of New Coal-Based Power Plants. 

2004, National Coal Council. 

3. Beer, J.M. The Fluidized Combustion of Coal. in XVIth Symposium (Int’l) on 

Combustion. 1976. MIT, Cambridge: The Combustion Institute, Pittsburgh. 

4. Combustion-Engineering. Fluid Bed Combusiotn Technoloogy for Lignite. 2005 
112

 Table 1. Characteristics of different gasifier types 

 Moving bed* Fluid bed** Entrained 

flow*** 

Outlet 

temperature 

Low 

(425-600 °C) 

Moderate 

(900-1050 °C) 

High 

(1250-1600 °C) 

Oxygen demand Low Moderate High 

Ash conditions Dry ash or 

slagging 

Dry ash or 

agglomerating 

Slagging 

Size of coal feed 6-50 mm 6-10 mm < 100 μm 

Acceptability of 

fines 

Limited Good Unlimited 

Other 

characteristics 

Methane, tars 

and oils present 

in syngas 

Low carbon 

conversion 

Pure syngas, 

high carbon 

conversion 

* Lurgi is an example 

** KBR transport reactor, BHEL, KRW are examples 

*** GE, E-Gas, Shell are examples 

162110 - GJS/CE-01/1-23-02

Coal

Syngas

Quench 

Gasifier

Slag/Fines

Steam

Sulfur 

Removal

Cryogenic 

Oxygen

Particulate 

Removal

Mercury

Removal Steam

7FA Combustion 

Turbine

Steam Turbine

Air HRSG

Electricity

Stack

Water

Solids

Pure Sulfur

Figure 1. IGCC Plant with Entrained Flow (GE) Full Quench Gasifier 
113

Figure 2. Heat Recovery Options for Entrained-Flow Gasifier 

Figure 3 Effect of Coal Type (Rank) on Capital Cost and Heat Rate for PC and 

IGCC 

 MR. HALL. I thank you and I found it very interesting and have 

some questions for you about it. Mr. Cresci. 

MR. CRESCI. Thank you, Mr. Chairman. Good afternoon to you and 

the members of the subcommittee. I am Joe Cresci, Chairman of the 

Environmental Power Corporation. Thank you for inviting us to be here 

today. 

 You have already heard a good deal today about the importance of 

renewable energy and the value of the various programs that support and 

encourage renewables. Therefore, I will focus today on our subsidiary, 

known as Microgy, which is a renewable energy source that most people 

1.00

1.05

1.10

1.15

1.20

1.25

1.30

1.35

1.40

5,000 6,000 7,000 8,000 9,000 10,000 11,000 12,000 13,000 14,000 15,000

Coal Heating Value, Btu/lb HHV

Relative Heat Rate or Capital Cost

 IGCC Capital Cost (E-Gas)

 IGCC Heat Rate (E-Gas)

 PC Capital Cost

 PC Heat Rate

TX Lignite WY PRB

Illinois #6

Pittsburgh #8
114

know much less about than some of the others. Microgy develops biogas 

systems which are very efficient at extracting methane-rich biogas from a 

combination of livestock manure and other organic and food industry 

wastes. Inside Environmental Power, we refer to our biogas as RNG, 

renewable natural gas. Our RNG is used to produce green electric 

power, thermal energy, or it can be refined to pipeline grade methane. 

 To date, we have completed or announced projects in Wisconsin, 

California, Texas, and Nebraska. Microgy, along with our Danish 

licensor, have significantly improved conventional anaerobic digestion 

technology, thereby enabling us to generate RNG at volumes and cost, 

which are commercially attractive. Though the SEC rules in competitive 

considerations do not permit us to discuss a lot about cost and pricing 

matters, I can say that we believe our renewable natural gas can be 

delivered to the pipeline at competitive prices with those projected for 

imported LNG. At the same time, our technology and manure handling 

process have also significantly reduced greenhouse emissions, improved 

water quality, and dramatically reduced odors around animal operations. 

Take notice of the samples of the post-digestive material coming from 

one of our Wisconsin projects and I think you will be surprised by it. 

 Our newest and largest projects to date are in Texas and we will 

produce pipeline grade RNG. One is a 10,000 cow system in 

construction is at Huckabay Ridge in Stephenville and another soon to 

enter construction at the Mission Dairy in Hereford, Texas. These 

represent a major technology upgrade and a significant financial step 

forward for us, moving our systems from small local operations to 

systems capable of providing RNG at volumes equivalent to a good 

natural gas well. Ours, however, is a gas well that needs no depletion 

allowance as long as we have cows and other waste being generated. At 

the Mission Dairy project, there are 24,000 cows permitted for the site. 

In addition, there are tens of thousands of animals within a 10-mile 

radius of that site, including both dairy and feedlot cattle. Each 10,000 

cows represents another potential well site, so to speak. 

 With regard to the scale of the market as a whole, we estimate that 

there are more than 150 Huckabay size projects, including more than 

1,000 individual tanks which would produce in excess of 81 trillion cubic 

feet of renewable natural gas annually. If you add the meat processors, 

swine farmers, and others, we could add the equivalent of 400 to 500 

natural gas wells that produce a renewable natural gas with no depletion. 

 Let me conclude with comments on ethanol in our technology. 

Ethanol and our system are complementary technologies, not 

competitors. One of our EPC digesters in Wisconsin is already partially 

fueled by by-products of the ethanol production process. This increases 

both the efficiency in the production of ethanol and reduces the ethanol 
115

production waste. EPC digesters, more importantly, can supply ethanol 

producers with RNG on site, thereby reducing reliance on conventional 

natural gas and on imports of LNG and in some situations, even the 

infrastructure needed for natural gas transport. 

 Natural gas now costs about $7 a million BTUs and it takes 

approximately 33,000 BTUs of natural gas to manufacture one gallon of 

ethanol, costing, at today’s market, about 23 cents for every gallon of 

ethanol they make. By providing readily available RNG for ethanol 

producers, we can offer a crucial element that will facilitate expansion of 

ethanol production. 

 What are our challenges? The lack of commercial credit and 

limitations on our own capital financing capabilities mean that the 

development of our biogas technology will be significantly slowed if the 

public portion of the public/private partnership, such as Title XVII of the 

Energy Policy Act of 2005, is unavailable to bridge the gap. Further, our 

production of RNG is not included in any of the numerous incentive 

programs available to all other alternative energy producers. 

 As I wrap up, Mr. Chairman, let me say that this committee 

structured the loan guarantee program in Title XVII very well. 

Unfortunately, what we last heard was that the guidelines are still at 

OMB, and the Department of Energy has informed us that renewable 

natural gas from manure and food waste is currently not a high priority 

for them. We at EPC are advancing with the support of accommodative 

equity markets by picking the low hanging fruit in this business. Our 

RNG initiatives could move forward much more quickly with a 

private/public partnership, with participation at simple parity, and 

incentive programs that are available to other renewable energy 

producers. RNG development would benefit from a level playing field 

and from the implementation of Title XVII. 

 I thank this committee for their time and attention, and I would 

welcome you to visit facilities around the country, particularly in Texas, 

where this fall we plan to start delivering RNG to the pipeline. I would 

be pleased to take your questions. But first, I would request of this 

committee that we might submit minor revisions to our written 

testimony, which has already been filed. It was prepared on very short 

notice, and we have a few little things we would like to clean up, if you 

don’t mind. 

 [The prepared statement of Joe Cresci follows:] 

PREPARED STATEMENT OF JOE CRESCI, CHAIRMAN, ENVIRONMENTAL POWER CORPORATION

The focus of my comments is on one of our subsidiaries, Microgy, Inc., 

headquartered in Golden, Colorado. We have significantly improved conventional 

anaerobic digestion technology, enabling us to generate more methane-rich biogas than 
116

earlier technologies, thus making agricultural waste-to-energy projects more feasible. In 

our own company, we have begun to refer to our biogas as RNG---Renewable Natural 

Gas. 

Though SEC regulations and competitive considerations do not permit me to discuss 

pricing issues, I am allowed to say that we believe our RNG can be competitively priced 

as compared to projected prices for imported LNG. At the same time, our technology 

and manure handling process also significantly reduces greenhouse emissions, improves 

water quality, and dramatically reduces odors around animal operations. 

EPC’s future has a place in the fuels world as well. There is potential for LNG 

production as a conventional fuel substitute. But perhaps one of the most important areas 

of potential expansion for EPC, and I know it is an important area for this committee, is 

that our EPC digesters can be fueled with the byproducts of ethanol production, 

increasing both efficiency in the production of ethanol and reducing the wastes. 

Ethanol and anaerobic digestion are complementary technologies, not competitors. 

Ethanol is a liquid fuel source, appropriate for gasoline blending and targeted at the 

automotive market. Biogas, on the other hand, is more appropriate for onsite use in 

heating, electricity generation, and industrial processes, or as a source of RNG for 

delivery via conventional natural gas pipelines. 

Our challenges? The lack of commercial credit and the limitations on our capital 

financing capability, means that the development of this biogas technology will be 

significantly slowed if the public portion of the public/private partnership is unavailable 

to "bridge the gap" until competitively priced commercial financing becomes available. 

We continue to be hopeful that the Title XVII loan guarantees of the Energy Policy 

Act of 2006 would help expedite this exciting partnership with our livestock and food 

processing partners and with our future ethanol operators. 

With some help with the “D” in “R&D” to more rapidly expand this efficient 

technology,” we could move even more quickly through the first integration of our multi 

digester systems, which can be used for on-site, dependable systems for agricultural and 

ethanol operations, for sale of renewable gas into the existing pipeline system, and for 

future expansion to LNG applications. 

Good Morning, Mr. Chairman. I am Joe Cresci, the Chairman of the Board of 

Environmental Power Corporation. EPC was founded in 1982. We are headquartered in 

Portsmouth, New Hampshire. Environmental Power has developed generating facilities 

powered by nonconventional fuels and renewable energy sources, including hydroelectric and waste coal-fired generation. 

The focus of my comments this morning is our subsidiary, Microgy, Inc., 

headquartered in Golden, Colorado. Microgy develops biogas systems, which are very 

efficient at extracting methane-rich biogas from a combination of livestock manure and 

other organic and food industry wastes. Inside Environmental Power, we refer to our 

biogas as RNG – Renewable Natural Gas. Our RNG is used to produce “green” electric 

power, thermal energy, or refined to pipeline-grade methane. Microgy’s biogas 

production system processes waste from livestock manure mixed with other organic 

wastes ranging from ethanol production by-products to multiple varieties of waste from 

the food industry. We have completed or announced anticipated installations for projects 

in Wisconsin, California, Texas, and Nebraska. 

Microgy, along with our Danish licensor, has significantly improved conventional 

anaerobic digestion technology, enabling us to generate RNG at volumes and costs that is 

commercially attractive. 

Although SEC regulations and competitive considerations do not permit me to 

discuss cost and pricing matters in detail, I can say that we believe our RNG will be 

competitively priced compared to projected prices for LNG imports. At the same time, 
117

our technology and manure handling processes also significantly reduce greenhouse 

emissions, improve water quality, and dramatically reduce odors around animal 

operations. 

Microgy’s system operates in the thermophilic temperature range, which provides 

faster, more complete digestion and accelerates composting, dramatically reducing BOD 

(biological oxygen demand) and virtually eliminating pathogens, while also providing 

more energy and a better by-product material. The residual product resulting from this 

process, of which I’ve brought a sample for you today, makes an animal bedding 

material, which is preferred by our customers because it doesn’t carry the potential 

bacteria and pathogens of other products. As you’ll note it looks a bit like peat moss, 

with only a slight earthy odor and a soft texture. 

Our steel tanks, which resemble farm silos, and our piping are built to last, as are the 

high-tech monitoring and control systems. We build, own, and operate our energy 

systems so farmers can farm, while we produce continuous energy output, 24 hours a 

day, 7 days a week. 

Why is Microgy’s system so efficient? We have the exclusive, perpetual U.S. 

license to a European technology that has operated for over 15 years in small applications 

and is now being adapted by Microgy for the traditionally larger U.S. farms with a 

broader diversity of manure quality. We believe that, until now, there has been no 

commercial precedent to our systems in scale and efficiency. We can produce pipelinequality RNG and other “mainstream” energy outputs that are marketable in conventional 

energy markets. 

At the same time, our operations provide significant greenhouse gas reduction. Our 

digesters capture the methane which is a 21 times more powerful greenhouse gas than 

CO2, which would otherwise be given off by the breakdown of manure, equaling an 

approximately 95% reduction in net greenhouse emissions to the atmosphere. We believe 

that our large multi-digester projects could generate 30-60,000 tons of CO2 equivalent 

emission offsets annually. 

 Our systems provide a number of other environmental benefits. They substantially 

diminish odor from waste at animal feeding operations. Manure run-off on farms is 

currently one of the leading water pollution challenges. Our process accelerates the 

natural, existing composting rate. Since we handle the waste anyway, we can more easily 

direct it to organic fertilizer/compost markets or divert it for appropriate alternative 

disposal. Our high temperatures remove pathogens such as e’coli O157:H7 and our 

scrubbers remove toxic gases such as hydrogen sulfide. 

Our initial projects, funded with EPC capital, have demonstrated the effectiveness of 

our technology, and the models are scaled to provide significant cost and productivity 

enhancements. 

Our first U.S. installation, which established the commercial scale and viability of 

our process, is at the Five Star Dairy in Elk Mound, Wisconsin, and has been operational 

since June of 2005. That first anaerobic digester system is one 750,000 gallon tank 

processing waste from 900 milking cows. That is on the high side of a typical size dairy 

farm in the north-central part of the United States. That system produces approximately 

775 KW of renewable energy, the equivalent of electricity for about 600 homes. The 

biogas produced by this installation is sold wholesale by Five Star to Dairyland Power 

Cooperative, which owns the generator. 

The Five Star Dairy project produces about 4 to 5 times as much methane as 

conventional anaerobic digesters, such as the prevalent plug flow systems and the 

prevailing lagoon waste systems. Five Star sells biogas for Dairyland’s use in renewable 

distributed electric generation, capturing an estimated 2,600 tons/year of greenhouse 

gases, and providing improved, no-cost bedding for dairy cows. 

We are in the final permitting stages for a project at the Joseph Gallo Farms in 

Atwater, California. Two digester tanks for the manure from 3,000 milk cows are 
118

projected to generate 130 billion BTU’s of energy per year, the equivalent of heating 

2,200 homes. This closed-loop methane recovery from the farm itself is expected to 

replace 1.4 million gallons of purchased propane used in dairy and cheese-making 

processes. Construction of this project, too, is likely to be funded by EPC, because no 

credit is available, thus far. We estimate 8,000 tons of CO2 greenhouse emission offsets 

from the Gallo project. 

Our next projects, in construction at Huckabay Ridge in Stephenville, Texas, and 

soon to enter construction at Mission Dairy in Hereford, Texas, represent a major 

technology upgrade and a major financial step out, moving our systems from small, local 

operations, to systems capable of providing the equivalent gas of a nice sized natural gas 

well. It is, however, a gas well which needs no depletion allowance, as long as we have 

cows and other wastes. 

Huckabay Ridge at Stephenville has a plan for eight 916,000 gallon digester tanks 

for 10,000 milk cows. (The rule of thumb is one digester for roughly 1,000 cows.) In 

what we believe is a first for biogas, we will be constructing a scrubber plant (not a new 

technology, but a new use for integration in a biogas system) to provide pipeline quality 

gas that can be delivered to the nearby existing pipeline grid. A modest estimate is that 

we will be able to deliver 650,000 MCF of pipeline-grade gas annually, the equivalent 

needs for 11,000 homes or the equivalent of 12,700 gallons a day of heating oil. As 

previously stated, that is equivalent to a good size natural gas well. I might add there are 

a total of 30,000 cows near the Huckabay Ridge project. 

At the Mission Dairy project recently announced in Hereford, Texas, there are 

24,000 cows permitted for the site. However, there are tens of thousands of animals 

within a ten-mile radius of that site, including dairy and feedlot cows. Each 10,000 cows 

is another potential “well” site, so to speak. 

We conservatively estimate that we will be able to deliver at Mission Dairy our first 

application of a modular design/construction program, where we perfect not only 

economies of scale, but the beginnings of a replicable modular system. The component 

producers can then produce “models,” rather than “one-offs,” and we can then replicate 

standardized core designs. The models would be envisioned to be available in modules 

of four tanks. 

With regard to the scale of the market as a whole, we estimate there are more than 

150 Huckabay Ridge-sized projects, including more than 1,000 individual tanks, which 

would result in 81 trillion BTU’s a year, or 81 million MCF of RNG. Our modular 

technology would also allow the participation of smaller dairy farms, where they could be 

economically grouped via tank, pipes, or other transport systems to central digester sites. 

Pigs are a valuable part of our process as well! Indeed, most of the systems based on 

our technology currently operating in Europe operate on swine farms. The potential 

swine market in the U.S. represents, at full utilization, potentially another 65 trillion 

BTU’s a year of natural gas, or 65 million MCF of RNG. 

EPC recently signed a letter of intent with Swift & Company, the world’s secondlargest processor of fresh beef and pork products, where we plan to use our technology to 

extract methane-rich biogas from the animal wastes, as well as meat processing wastes 

and certain wastewater plant residual streams that would otherwise be land filled or land 

applied. We will be cooperating with Swift to look at potential projects at seven other 

beef and pork production facilities throughout North America. We are excited about the 

opportunity to help Swift reduce costs and have a positive impact on the environment. 

If you consider full utilization of wastes from the meat packing industry, which 

includes both their manure and numerous other by-products, you could potentially add 

another 5 trillion BTU’s a year or 5 million MCF of RFG. 

EPC’s future has a place in the fuels world as well. There is potential for LNG 

production as a conventional fuel substitute. But perhaps one of the most important areas 

of potential expansion for EPC, and I know it is an important area for this committee, is 
119

that our EPC digesters are complementary with ethanol production, not in competition 

with it. Ethanol is a liquid fuel source, appropriate for gasoline blending and targeted at 

the automotive market. Biogas, on the other hand, is more appropriate for onsite use in 

heating, electricity generation and industrial processes, or as a source of RNG for 

delivery via conventional natural gas pipelines. 

EPC digesters can supply ethanol producers with natural gas on-site, reducing 

reliance on imports of conventional natural gas, imports of LNG, and even the 

infrastructure needed for natural gas transport. 

Natural gas, which you well know, is subject to wide fluctuations in price, and these 

fluctuations create uncertainty in industrial processes that rely on natural gas. This is no 

less true for the production of ethanol, as natural gas is a crucial element in the ethanol 

production process, and fluctuations in the price of natural gas are certainly hampering 

the implementation of ethanol production. Natural gas now costs $7 per mmBTU; it 

takes approximately 33,000 BTU’s of natural gas to manufacture one gallon of ethanol, 

costing producers $0.23 for every gallon of ethanol they make. By providing readily 

available RNG for ethanol producers, EPC is offering a crucial ingredient that will 

facilitate the expansion of ethanol production. 

Ethanol production uses corn as well as natural gas to create ethanol. The 

byproducts of this process, distillers grain and liquid stillage, can be used as source 

materials to be added to the manure for the digesters that supply the ethanol plant with 

RNG. 

One of EPC’s facilities in Wisconsin is currently co-digesting cow manure with 

liquid waste (stillage) from a nearby ethanol plant. 

Further, if I may quote from RFA’s own Ethanol Industry Outlook 2006, “Many 

estimate the supply of distiller’s grains to reach 12-14 million metric tons by 2012 as the 

RFS (Renewable Fuels Standard) is fully implemented. Some believe this level of output 

will make it necessary to find new markets and uses for co-products.” We believe that 

our systems can make productive use of these co-products to produce gas for the ethanol 

production process. 

There is going to be a huge demand for a reliable, cost-effective, on-site source of 

renewable natural gas if the President’s plan to increase ethanol production to 7.5 billion 

gallons by 2012 (from 4 billion gallons in 2006) is realized. To obtain an increase in 

production of 3.5 billion gallons of ethanol, these plants will need more natural gas. We 

estimate this need will essentially double the industry’s demand for natural gas at the 

same time that domestic and world demand grows. Producing RNG on-site or proximate 

to ethanol plants will help abate their need for purchased natural gas and could help 

stabilize their pricing structure for at least the RNG portion of those energy needs. 

EPC digesters use technology that has been proved successful in digesters 

throughout Europe and at EPC’s first three projects in the United States. Unlike 

renewable energy methods that are exotic, but are yet to be fully tested, EPC has 

technology that is ready today. Our digesters already produce RNG from a diverse 

supply of farm and food wastes. Our technology is currently accommodating waste 

products from ethanol production. We believe that our evolving modular design for the 

digesters will enable rapid deployment at ethanol plants across the country. There are 

currently many ethanol plants under construction, and EPC has identified a market for 

800 new digesters at these plants, bringing the total potential market for digesters to 

5,600 nationwide. 

Our challenges? The lack of commercial credit and the limitations on our capital 

financing capability, mean that the development of this biogas technology will be 

significantly slowed if the public portion of the public/private partnership, such as Title 

XVII of the Energy Policy Act of 2005 (EPACT), is unavailable to "bridge the gap." 

Further, our production of RNG is not included in the numerous incentive programs 

available to all other alternative energy producers. 
120

I quote from EPACT, “New or significantly improved technologies” including 

“renewable energy systems” and “efficient end-use energy technologies” that “Avoid, 

reduce, or sequester air pollutants or anthropogenic emissions of greenhouse gases.” 

We are also looking at some of the existing Agriculture programs to expedite our 

work. . I must tell you, Mr. Chairman, this Committee structured the loan guarantee 

program in Title XVII very well. Unfortunately, when we last heard, the guidelines were 

still at OMB. Moreover, DOE has told us that RNG from manure and food wastes 

(biogas) is not currently a high priority. 

Partial early guarantees, such as those this Committee did in Title XVII of EPACT, 

could help us “bridge the financing gap” for proving commercial viability! With some 

help with the “D” in “R&D” to more rapidly expand this efficient technology,” we could 

move even more quickly through the first integration of our multi digester systems, which 

can be used for on-site, dependable systems for agricultural and ethanol operations, for 

sale of renewable gas into the existing pipeline system, and for future expansion to LNG 

applications. 

We at EPC are advancing with the support of accommodative equity markets, by 

picking the low-hanging fruit. Our RNG initiatives could move forward more quickly 

with a private-public partnership and with participation at simple parity in incentive 

programs already available to all other renewable producers. RNG development would 

benefit from a level playing field and from implantation of Title XVII. It could enable us 

to extend the market place to smaller farms and more distant waste locations that may be 

more costly for us to serve at this time. 

Environmental Power’s path to commercial viability is the expanded large scale 

production capabilities of the technology. The construction and operation of initial 

projects to drive costs out of system will also provide those modularized templates for 

future projects. Commercial success of initial projects will demonstrate the wide range of 

applications; e.g. electricity, pipeline gas, inside the fence, ethanol production, LNG, and 

other thermal energy applications. 

We are very excited about our role of providing our customers with dependable, 

predictable natural gas supplies, of helping establish more independence from imported 

natural gas supplies, of a growing potential synergy with ethanol production, and of 

providing sensible, affordable, environmental solutions. Our trademark: we are making 

Energy That Is Beyond RenewableTM, and moving forward to generating renewable 

natural gas. 

I thank the Committee for their time and attention, and I would welcome you to visit 

our facilities around the country, particularly in Texas, where this fall we plan to start 

delivering RNG to the pipeline. 

I would be pleased to take your questions. 

 MR. HALL. Without objection that will be done, and for questions 

that we may have of the group, and because others who are in other 

committees, we will leave the record open for additional questions from 

members of the committee. And if you could, try to get those back to us 

in maybe 10 days or 2 weeks. Thank you. Go ahead now, Mr. Cresci. 

You have completed? 

 MR. CRESCI. I have completed. Thank you very much for the 

opportunity to present. 

 MR. HALL. Okay. Mr. Novak, you gave us a lot of good facts, 

figures, stories, techniques, and things like that. I think you heard Mr. 

Yoder. Were you here this morning when Mr. Yoder testified about the 
121

fact that their city, a little city, I don’t know how big the city is in 

Alaska, is going to discuss plans to install a small nuclear unit for 

electricity generation to replace diesel generators. In your comparative 

cost, your estimate for nuclear remains the same even though many in 

the industry expect that their plants are going to be less expensive--the 

newer plants getting less expensive. What are the facts on that and why 

is that? 

 MR. NOVAK. Thank you, Mr. Chairman. 

 MR. HALL. And where do they get that? 

 MR. NOVAK. I don’t know if this mic--yes, it does work. We were a 

little bit conservative on the improvements or the reductions in cost 

between 2010 and 2020, and there may be additional cost reductions for 

nuclear out in the future, but we assume that you are going to see a lot of 

standardization in the first-of-the-kind plants built due to the MP2020 

program that is currently underway in DOE. Those plants will contain a 

lot of the standard designs, and you will get cost savings there. So we 

may not see additional cost savings in the 10-year period following. 

 MR. HALL. Can you describe what you would call some promising 

energy storage technologies for use with the renewable sources? You 

want to enlarge on that? 

 MR. NOVAK. Yes. Some battery systems show some promise, and I 

have got a few listed here that I could provide for the record; a nickel 

metal high drive, redox globe battery systems, and some emerging 

lithium ion technology. But also, there are existing energy storage 

technologies such as compressed air and pump storage that still make a 

lot more sense economically than some of the battery technologies. But 

again, those have their own challenges with where you would put pump 

storage in and those are some of the environmental considerations. I 

would be happy to provide more information. 

 MR. HALL. Okay, if you would. And Mr. Cresci, I think you are 

aware of an ongoing debate in Texas and Oklahoma where Superfund 

laws, namely CERCLA and EPGRA, are being applied to animal feeding 

operations and with litigation that is filed by the city of Waco against 

some surrounding ranches there and litigation in Oklahoma. What 

impact could this have on your industry and how would you be affected? 

 MR. CRESCI. Well, the Waco litigation, I believe, has been settled 

and in fact, does involve a number of the farms that are in the Erath 

County area, which is where the Huckabay Ridge project is located. To 

answer your question directly, if you were to treat hazardous waste 

treatment or handling as the handling of a hazardous waste, it would 

probably mean that all people in the process, at least as I understand the 

way the Superfund legislation was originally set up, would probably 

have to treat it in that manner, and I would think that it would drive the 
122

cost of handling waste to make any type of energy extraction from that 

material to be uneconomic. 

 I don’t know of any inherently hazardous materials in animal waste 

and basically, we see waste, animal waste in particular, in this case as a 

resource, and extracting the value from it and having an economic value 

attached to it sufficient to allow it to be processed and handled properly, 

including if, in some instances, perhaps, removal from areas; in other 

instances, digested into compost which can be sold or moved into market 

places requiring fertilizers and other materials for growing in other areas. 

It seems to me that that more than adequately deals with the issues as I 

understand them in terms of over-nutrification. 

 MR. HALL. I know we have had an opportunity to discuss with you, 

your dairy cows around the county. What are the ways you can handle 

it? A constituent in my district, in particular, a guy named Bo Kilgren, 

was very interested in chicken waste. Would you enlarge on that? 

 MR. CRESCI. I will, indeed. Unfortunately, we can’t handle chicken 

waste. It does not really process efficiently through anaerobic digestion. 

There are, I understand, some other technologies that are being talked 

about for chicken waste, but it certainly is a problem. We would like to 

have an answer to it because it seems to be a large problem. The waste 

that we can handle mostly are cattle waste; dairy cattle is, obviously, a 

very good source, but also feed cattle and also swine. Those are the ones 

that are most efficient for us to process. 

 MR. HALL. Okay. My time is up, but Mr. Boucher, when you are 

ready, if you have any questions. 

 MR. BOUCHER. Mr. Chairman, thank you very much. Mr. Novak, 

let me begin with you. You are making a prediction, if I read these 

numbers correctly, that by the year 2010 the cost of IGCC will be $47 

per megawatt hour. The natural gas combined cycle cost will be $56 per 

megawatt hours, so IGCC will be cheaper at that point by a substantial 

margin than the natural gas combined cycle. My questions are this. 

What are the comparisons today between those prices and what 

assumptions are you making about the deployment of IGCC that gets to 

the cost of $47 per megawatt hour from whatever the number is today? 

 MR. NOVAK. Mr. Chairman, the numbers that I presented come 

from an analysis that we did for our summer seminar this past August, 

where we bring chief executives in and the topic was “Making Billion 

Dollar Decisions on New Generation Technology in a Carbon 

Constrained Future.” So what we did was we looked at today’s 

technology and tried to come up with estimates of the cost of electricity 

of today’s technology that were it to be deployed would be on line in a 

2010 time period. So those numbers on a cost of electricity basis are 
123

really today’s technology. Pulverized coal is the lowest cost of 

electricity basis. 

 MR. BOUCHER. No, I understand. It is today’s technology. I am not 

quarreling with that, but I mean, I am told that the more IGCC units that 

get deployed for electricity generation purposes, the lower the cost of the 

units becomes and so as you deploy more of these, you achieve a lower 

cost per megawatt hour than the current cost, so my questions to you are 

what today are the cost comparisons, if you know, between the natural 

gas combined cycle; it is going to be $56 in 2010, what is it today? And 

the IGCC, which will be $47 in 2010; what is that today? Do you know 

the answer to that? 

 MR. NOVAK. I do not. 

 MR. BOUCHER. Okay. Well, let me just go to the second part of it. 

In making your prediction that IGCC is going to get to $47, which is an 

attractive number. I mean, if it gets to that and it is cheaper than natural 

gas combined cycle, we can presume it is going to be widely used. How 

many units of IGCC have to be deployed between now and 2010 to get to 

this $47 number? What is your assumption? 

 MR. NOVAK. We think that $47 is the current number. If you build 

a 600 megawatt plant and have it on line in the 2010-2012 time period, 

over the lifetime of that plant it is $47 per megawatt hour, about 20 

percent more than PC. 

 MR. BOUCHER. Dr. Katzer, you are expert in this. Do you agree 

with that? 

 MR. KATZER. Generally, yes. The difference between my numbers 

and the EPRI numbers are somewhat in the assumptions that we made in 

calculating the cost of electricity. I think we are using a little higher coal 

cost. I think you used $1 a million; we used $1.50, which is a little 

higher than it is on average today. I think those are the differences 

between our numbers, but our deltas, I think, are consistent. So 

basically, we don’t have any differences. We try to look at what we call 

the Nth plant, where N is a small number, not well defined, but a small 

number: 5, 6. That gets you out in the range where you have gotten over 

making mistakes, and you ought to be able to do things, design and 

construction-wise efficiently. 

 MR. BOUCHER. Let me ask you this, Dr. Katzer. We included some 

incentives, tax credits in EPAct 2005 to encourage clean coal technology 

used by electric utilities. We had IGCC primarily in mind at the time 

that we applied those credits. I am told by electric utilities that they do 

make a difference in their planning and that many are looking very 

favorably now at IGCC based upon the availability of tax credits to help 

bring down the cost of deployment. In the process of preparing that 

legislation, we had some analysis that suggested, as you have in your 
124

testimony, that pulverized coal is more economic today than IGCC, but 

that that equation could change and that the more IGCC units were 

deployed, the more that technology is placed in the commercial market 

and refined and the more units that are produced, and just because of 

volume of production, the cost comes down. 

 The time would be reached after about 12 full scale units to find the 

600 megawatts, at least, per unit. When you deploy 12 of these, the cost 

differential vanishes and you wind up with, essentially, an equal cost of 

IGCC and pulverized coal. Now, this is IGCC without the carbon 

capture component, which obviously adds another element of cost. 

Would you agree that that is essentially right and can you also make 

some kind of prediction about the point at which that number of units, 

whether it is 12 or some other number, that equalizes the cost of IGCC 

and pulverized coal is reached? 

 MR. KATZER. I would agree that directionally, that is how things 

happen. To be able to quantitatively predict how things would work out 

for Unit 6 out to Unit 12 or for Unit 2 to Unit 6 is really difficult. 

Directionally, that is the correct direction. The other piece of the 

equation, which is what I tried to address a little bit here, is increasing 

cost of emissions control on PC units. As these permit levels keep going 

down, the cost keeps coming up and that is narrowing the gap between 

IGCC and PC, so if you look out in the future a decade or so, which 

means you have built several plants and you have got a few more in the 

construction stage, you begin to see a point where they look like they are 

coming to parity in terms of cost of electricity generating, yes. 

 MR. BOUCHER. So the basic conclusion is that at some point a 

decade or so down the road, you do achieve parity in cost between the 

two? 

 MR. KATZER. I think that is quite likely, yes. 

 MR. BOUCHER. Okay. Let me ask this question. The EPA, as you 

know, has promulgated a new mercury regulation and it is a bit of a 

challenge for some electric utilities to comply with that; an element of 

cost is involved. Did you factor the cost of retrofitting pulverized coal 

with that or the cost of, if they are planning to use new pulverized coal, 

adding the mercury reduction technology into your calculations, because 

IGCC eliminates mercury, essentially. I think you said 99 plus percent. 

 MR. KATZER. Yes. 

 MR. BOUCHER. And so have you calculated that into your 

assumption that pulverized coal is a cheaper alternative than IGCC? 

 MR. KATZER. In the base unit cost, which is 4.8, you only capture 

the mercury that is captured in the process of flue gas desulphurization in 

a particular removal. Then we have looked down the road to increase the 

reduction of criteria pollutants and have added mercury removal in, and 
125

that was part of the .2 cents per kilowatt hour additional cost that I noted, 

so that is where we put it in. We did not factor it in as explicit 

technology application today because for about 10 years there will not be 

a requirement to explicitly remove additional mercury. 

 MR. BOUCHER. Okay. All right, Mr. Chairman, I appreciate your 

indulgence with this. Thank you very much. 

 MR. HALL. I thank you. I want to go back and ask Dr. Katzer about 

the coal. By the way, do you know John McCatta, that is an authority 

writer? 

 MR. KATZER. Yes, yes. Off-hand, at least. 

 MR. HALL. Okay. 

 MR. KATZER. I met him probably once. 

 MR. HALL. I heard him make a statement about 12 years ago at a 

speech in Dallas that there was enough coal in the mid-section of this 

country, if we could mine it, that would total the output of all OPEC 

nations combined. Could that be anywhere close to being an accurate 

statement? 

 MR. KATZER. Yes. There are a lot of assumptions in terms of 

exactly how you are talking about it, but the answer is in large measure, 

we are the Middle East of coal versus they, the Middle East of oil. It is a 

tremendous resource base we have, we are sitting on. 

 MR. HALL. On the technologies that you have capably laid out and 

described, are there any existing Federal or State rules that are hindering 

the deployment of the technologies that you set forth? And if so, it may 

be a hard question to answer right now, but could you give me some 

information in writing on that if it takes some research? 

 MR. KATZER. Mr. Chairman, I think I would need to do a little 

research on that. That piece of the equation is not one in which I have a 

lot of involvement. 

 MR. HALL. I thank you. And Dr. Murphy had questions that he 

wanted to ask, too, Dr. Hammond. Could you clarify the economic 

impact you believe cost competitive solar technology would have, and 

what the Government is doing to achieve this objective? 

 MR. HAMMOND. Yes, the economic impact of cost-competitive 

solar, if you look at the President’s objective of having cost-competitive 

solar in 2015 and look at a reasonable build out of that solar technology, 

first of all, you might take a simple analysis and just look at the 

economic value of that solar energy at the total kilowatt hours that might 

be produced and multiply that by an average value for electricity. You 

would estimate an economic value of a few billion dollars for that 

electricity at that time, that that simplistic analysis ignores some critical 

aspects of solar technology that must be looked at and make solar a 

really attractive technology. 
126

 If you imagine the hot summer afternoons when you are clicking 

your air conditioning on full and likewise, our natural gas peaking plants 

are clicking on full, that is exactly coincident with the time when you get 

the maximum resource from deployed solar technology. And so the 

coincidence of that with the peak end load has tremendous additional 

benefit. It can relieve strain on the transmission and distribution 

infrastructure at precisely the time that it is maxed out. It would save 

valuable natural gas resources that are being deployed at that time. So 

the economic impact, while much more complicated to calculate, is 

multiples of just the value of the electric energy itself. And that doesn’t 

even account for the fact that it is a zero emission, which brings 

substantial additional economic benefit. 

 What the Government is doing to achieve and capture these 

economic benefits, the most significant recent initiative, of course, is the 

Solar America Initiative. Under that guise through the Department of 

Energy, an additional $65 million has been allocated for Fiscal Year 

2007 directly for solar technologies and that is an important program that 

we strongly encourage Congress to fully fund, but also to make sure that 

it gets deployed in a way that new revolutionary solar technologies have 

a chance to benefit from that, because it is those technologies that are 

going to really enable that cost competitive deployment. 

 At the State level, there are also additional important activities going 

on, including in our State of Pennsylvania, where the Governor and the 

Secretary of the Department of Environmental Protection have 

specifically allocated funds for new solar technology development to 

support Pennsylvania’s aggressive solar renewable portfolio standard. 

So those are a glimpse at some of the activities that are going on from the 

Government’s perspective to support it. Our key message would be that 

the opportunity is so significant; there is a significant opportunity for 

Congress to expand and accelerate that support to make sure that the 

United States plays a leadership role in deployment of solar technology. 

 MR. HALL. All right. I thank you for that. I have other questions I 

would like to ask of Mr. Linebarger. I am going to ask you and they are 

going to be in the record, and I will ask you to give us a written 

explanation. What do you think is the greatest significant opportunity for 

DG in the United States? You might answer that. I think you can do that 

in one sentence, can’t you? 

 MR. LINEBARGER. I sure can, yes. The biggest significant 

opportunity, I think, is deploying, particularly, the energy efficient 

technologies related to combined heat and power and then protecting 

critical infrastructure would be the two things, I think. 
127

 MR. HALL. And he says the committee spends a lot of time thinking 

about energy security. Can you tell me what you mean when you say DE 

has a role in energy security? 

 MR. LINEBARGER. My idea there would be twofold; first, that we 

can use a wide range of renewable fuels, which would reduce our 

dependence on oil; and second, by ensuring that we have critical 

infrastructure ready, we protect ourselves against failures in the grid. 

 MR. HALL. All right, we have other questions. How can DE impact 

the price of electricity on the grid? I will ask you to answer that for the 

record. Do you have further questions? 

 MR. BOUCHER. No. 

 MR. HALL. And the reason we are asking to leave this open, where 

we can ask you, is the lack of availability of other members of the 

subcommittee that have questions they want asked. Those that are still 

here representing them have made notes of those, so we will be back in 

touch with you and I sure do thank you. You have been a good, patient 

panel. You have allowed us to leave to run over to the Capitol and vote. 

I think we voted three or four times over there. We have a committee 

meeting that is beginning at 1:30 that is a markup, so we have to go from 

here to that, but you have your job and you are a very busy man and you 

have been generous with your time, preparing yourself to even be 

solicited to give us information. We take what you say, the information 

you give us. We don’t have to seek it from you and we write the 

legislation from it, or correct the legislation from it, so you are doing a 

real service to your country. I know Chairman Barton appreciates it, and 

the staff does, and we thank you very much and you are dismissed. 

 [Whereupon, at 1:37 p.m., the subcommittee was adjourned.] 

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