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45–193 PDF 2008

S. HRG. 110–573 

CLEAN ENERGY TECHNOLOGIES 

HEARING 

BEFORE THE

COMMITTEE ON 

ENERGY AND NATURAL RESOURCES 

UNITED STATES SENATE 

ONE HUNDRED TENTH CONGRESS 

SECOND SESSION 

TO

RECEIVE TESTIMONY REGARDING LEGISLATION TO IMPROVE THE 

AVAILABILITY OF FINANCING FOR DEPLOYMENT OF CLEAN ENERGY 

AND ENERGY EFFICIENCY TECHNOLOGIES AND TO EHNANCE UNITED 

STATES’ COMPETITIVENESS IN THIS MARKET. SPECIFIC BILLS TO BE 

CONSIDERED ARE S. 3233, INTRODUCED BY SENATOR BINGAMAN AND 

S. 2730, INTRODUCED BY SENATOR DOMENICI 

JULY 15, 2008 

( 

Printed for the use of the 

Committee on Energy and Natural Resources 
(II) 

COMMITTEE ON ENERGY AND NATURAL RESOURCES 

JEFF BINGAMAN, New Mexico, Chairman 

DANIEL K. AKAKA, Hawaii 

BYRON L. DORGAN, North Dakota 

RON WYDEN, Oregon 

TIM JOHNSON, South Dakota 

MARY L. LANDRIEU, Louisiana 

MARIA CANTWELL, Washington 

KEN SALAZAR, Colorado 

ROBERT MENENDEZ, New Jersey 

BLANCHE L. LINCOLN, Arkansas 

BERNARD SANDERS, Vermont 

JON TESTER, Montana 

PETE V. DOMENICI, New Mexico 

LARRY E. CRAIG, Idaho 

LISA MURKOWSKI, Alaska 

RICHARD BURR, North Carolina 

JIM DEMINT, South Carolina 

BOB CORKER, Tennessee 

JOHN BARRASSO, Wyoming 

JEFF SESSIONS, Alabama 

GORDON H. SMITH, Oregon 

JIM BUNNING, Kentucky 

MEL MARTINEZ, Florida 

ROBERT M. SIMON, Staff Director 

SAM E. FOWLER, Chief Counsel 

FRANK MACCHIAROLA, Republican Staff Director 

JUDITH K. PENSABENE, Republican Chief Counsel 
(III) 

C O N T E N T S 

STATEMENTS 

Page 

Bingaman, Hon. Jeff, U.S. Senator From New Mexico ........................................ 1 

Domenici, Hon. Pete V., U.S. Senator From New Mexico .................................... 3 

Eckel, Jeffrey, President and CEO, Hannon Armstrong, Annapolis, MD ........... 26 

Hull, Jeanine, Counsel, Dykema Gossett PLLC ................................................... 16 

Karsner, Alexander, Assistant Secretary, Energy Efficiency and Renewable 

Energy, Department of Energy ........................................................................... 4 

Denniston, John, Partner, Kleiner Perkins Caufield & Byers, Menlo Park, 

CA .......................................................................................................................... 9 

Reicher, Dan W., Director, Climate Change and Energy Initiatives, 

Google.org, Mountain View, CA .......................................................................... 20 

APPENDIX 

Responses to additional questions .......................................................................... 43 

(1) 

CLEAN ENERGY TECHNOLOGIES 

TUESDAY, JULY 15, 2008 

U.S. SENATE, COMMITTEE ON ENERGY AND NATURAL RESOURCES, Washington, DC. 

The committee met, pursuant to notice, at 10:06 a.m. in room 

SD–366, Dirksen Senate Office Building, Hon. Jeff Bingaman, 

chairman, presiding. 

OPENING STATEMENT OF HON. JEFF BINGAMAN, U.S. 

SENATOR FROM NEW MEXICO 

The CHAIRMAN. Ok, sorry for the delay in getting here. This is 

a hearing on various cup of financing bills; one that Senator 

Domenici introduced, one that I introduced. 

Before we call our witnesses and make any opening statement, 

I’m informed that today is going to be the last day with the committee for Judy Pensabene. We wanted to recognize her great service to this committee during the last 11 years; particularly the last 

5 years she has been the Chief Counsel for the Republicans. 

I understand a resolution is being prepared to convey the high 

regard that the committee has for her and her good work, our gratitude for her service to the committee, and our best wishes in her 

future plans. I believe that will be presented to her at a later time. 

Let me just defer to Senator Domenici for any comment he wanted 

on that subject before we proceed to the hearing itself. 

Senator DOMENICI. Thank you very much, Mr. Chairman. 

Yes, I do think this is sort of a bittersweet day for us. Judy is 

attending her last hearing as committee staff member. She’s served 

the committee for more than 11 years including the last five as the 

first female Chief Counsel in this committee’s history. I don’t know 

what that says for this committee. But that just happens to be the 

facts. 

Tomorrow is the first day of a well earned retirement. But today’s a sad one for us. We’ll all greatly miss her. While her forthright counsel and her tireless commitment to getting the work done 

she has had countless opposition lodged against our bills, seems 

like in new ways every year. She has found a way, one way or another to get them done. I think we all have to say a big thank you 

to her for getting that done. 

Mr. Chairman, I will, later on we will have a resolution. I will 

just read the basic paragraph of it so everybody will know. ‘‘And 

it be it resolved that the members of the Committee on Energy and 

Natural Resources record the retirement and commend the service 
2 

of Judith K. Pensabene on this day, July 15, 2008. The members 

hereby offer their congratulations on this cordial occasion and extend their best wishes to Judy and her family in the years ahead.’’ 

Thank you, Judy. Thank you so much for years of service both 

to me, personally and to this committee and to the matter before 

us, we thank you, Mr. Chairman for holding this hearing. Before 

I proceed with the rest of my statement, I yield back to you. 

The CHAIRMAN. Where’s Judy? Let’s give her a big round of applause here. 

[Applause.] 

The CHAIRMAN. Ok. Why don’t we proceed with the more mundane part of today’s hearing. I’ll make a short statement and then 

Senator Domenici and then we’ll call on our witnesses. 

This is a hearing, as I indicated, related to two proposals to support the financing for deployment of new, clean energy technologies. We’ve had other hearings in the committee on the general 

subject. But now there are two bills that are pending related to this 

which better focuses our opinion or our discussion here. 

I’ve heard many around here and elsewhere say that what we 

need is a new Apollo Project to solve our energy needs and to move 

to a clean energy economy. Others have said we need a new Manhattan Project. These are useful analogies, but I don’t know that 

they, either one, capture the entire challenge that we have before 

us. 

I believe Mr. Denniston’s colleague, John Door, talked to us 

sometime ago about this challenge requiring not only speed, but 

scale. These bills are intended to deal with this problem of speed 

and scale both. It’s like undertaking something more akin to nine 

or ten simultaneous Apollo Projects or essentially mobilized in the 

country in the way that we did for war in previous times, World 

War II, in particular. 

I think it’s going to take significant and sustained investment to 

bring the new technologies that we’re all hoping are developed and 

useable to a point where they can be deployed on a scale necessary 

to meet our needs. These technologies relate to, not only meeting 

our energy needs, but dealing with the problem of climate change. 

Promising technologies exist that can address our oil security needs 

both in reducing the demand for fuel through efficient or electric 

drive vehicles and in replacing gasoline with sustainable biofuels. 

The two bills that have been introduced that we’ll be talking 

about today are an attempt to accelerate the time table for moving 

these technologies from the laboratory to the marketplace. Obviously there’s urgency in trying to get this investment made. Our 

commitment needs to be, to deal with, not only greenhouse gas 

emissions, but the enormous drain on our economy from the continued dependence on imported fossil fuels. 

So the need is great. If we fail to make the investments necessary to meet the challenge I think we run the very real risk that 

we are passing on a much diminished opportunity for our grandchildren and children in the future. So it’s a great challenge. I 

think we’re all well aware of that. I think these bills, at least, 

begin the discussion of how we can meet one part of that very substantial challenge. 
3 

Let me defer to Senator Domenici for his statement, then we’ll 

hear from the witnesses. 

STATEMENT OF HON. PETE V. DOMENICI, U.S. SENATOR FROM 

NEW MEXICO 

Senator DOMENICI. Senator Bingaman, fellow members of this 

committee, and the witnesses, let me just say that these are unprecedented times, in my opinion. I have said this many times. 

Each time it’s a little different setting. But I truly believe that our 

great United States is at peril. I believe it’s economic peril. 

I believe we’re measuring this peril by the anger of the American 

people for the price at the pump. That’s obviously what’s happening 

and the people are feeling the impact. 

But the truth of the matter is, there’s a far greater problem than 

the pump price. It’s that the U.S. economy is being drained dry. We 

will soon reach a point where we are exporting somewhere between 

500 billion and 700 billion a year, sending it overseas to other 

countries for the single purpose of acquiring crude oil from them, 

which will be converted to diesel and gasoline fuels to move America. 

The biggest problem is that most of it is used to move the automobile and related to mobility machines that we have chosen to 

love so much that we’ve almost come to the conclusion that we 

can’t get along without them. So it came to me months ago that 

what we needed was to find a way to siphon far more capital into 

new projects, new technology. Somehow or another in talking with 

staff and people that are better informed and have more time to 

think about these things than some of us Senators, the idea came 

and was presented to me that we ought to be doing something like 

OPEC, something like the corporate structure that we use to finance overseas projects of trade. 

That corporation has existed for a long time. It’s self sufficient. 

It’s run by a board of directors. It makes loans. 

In my particular case, the bill I put before us had a very broad 

section of powers, loan guarantees and all kinds of instruments of 

equity, transfer and of moving money around to try to get more of 

it directed at energy technology. There are a number of ways we 

can talk about the difference between the two bills. But essentially 

I would say, there’s not that big a difference. 

There is a little bit of difference in the corporate structure, but 

you could fix that easily if you were interested in a bill on two or 

three other areas where there’s some distance. That could be solved 

in one day. 

But obviously the Senate is not working in a formal manner. It 

wouldn’t have done Senator Bingaman much good, I don’t think, 

had he taken that opportunity to work this bill 3 months ago because I don’t think we’re going to take up a free standing energy 

bill on the floor of the Senate in the condition that we’re in now. 

I don’t think the majority leader would let that happen for reasons 

unto him and unto the partisanship that exists between on energy 

matters. To bring up my bill or his bill 4 months ago would have 

been to open up the entire Senate to a debate on energy matters. 

I wouldn’t mind that at all. I would agree to a set of working conditions. But I’m not sure that could get done. 
4 

I just say to my friend, Senator Bingaman. It’s too bad and in 

saying this I don’t blame anybody. But it is too bad that we waited 

so long to come up with your bill which I would call a democratic 

bill that is matched up with mine. 

But we took so long that I think we’ll never get it done. But 

maybe you think to the contrary. It surely would make me feel 

good if you actually were to say that you were interested in getting 

this bill done this year. At least gotten out of the U.S. Senate because I think capital invested in new technology to produce clean 

energy is the most significant activity that we must deal with during the next 10 to 15 years if we’re going to get out of this enormous, enormous bind that we’re in which is second to none. 

Thirty-six years into my tenure here in the Senate I have not 

witnessed an economic crisis of this magnitude. This is the worst 

I’ve seen. We are having more difficulty in getting out of the problem than any I’ve seen. 

You pull out of one, you get another one. You solve one. You can’t 

solve the other one. You solve something in energy it makes global 

warming worse. On we go. 

So Senator, I would hope we would get moving. In any event, 

let’s get this spread on the record today. I thank you for it. Look 

forward to working with you. 

The CHAIRMAN. Thank you very much. Let’s go ahead with our 

very distinguished panel of witnesses. Let me just introduce the entire panel. Then call on each of you to make whatever points you 

think are important for us to understand. Take a few minutes to 

do that. Then we will have questions. 

The first witness would be Andy Karsner, who is the Assistant 

Secretary for Energy Efficiency and Renewable Energy. He’s a very 

frequent testifier before this committee. We appreciate his good 

counsel and advice each time he testifies. 

Next is John Denniston, who’s a partner with Kleiner Perkins, 

also a frequent witness before our committee. We appreciate him 

coming all the way from California to testify. 

Jeanine Hull, who is counsel with Dykema Gossett. Thank you 

very much for being here. 

Dan Reicher, who used to be here in a different capacity, in a 

previous administration, he’s now the Director of Climate Change 

and Energy Initiatives at Google.org, and we appreciate you being 

here very much. 

Jeffrey Eckel, who is the President and CEO of Hannon Armstrong, we appreciate you being here. 

Why don’t we start and just go across the table. As I said if each 

of you take five or 6 minutes, make the main points you think we 

need to understand. Then we will have questions. Andy, thanks. 

Thanks for being here. 

STATEMENT OF ALEXANDER KARSNER, ASSISTANT SECRETARY, ENERGY EFFICIENCY AND RENEWABLE ENERGY, 

DEPARTMENT OF ENERGY 

Mr. KARSNER. Thank you, Senator and thank you for the opening 

words from you and the ranking member and the leadership you 

provide. 
5 

Mr. Chairman, Ranking Member Domenici, members of the committee, thank you for the opportunity to testify about how our Nation might best accelerate large scale capital formation and deployment of secure, clean energy technologies in the United States. 

Bills introduced by both Senators Bingaman and Domenici, the 

21st Century Energy Deployment Corporation and the Clean Energy Investment Bank of the United States, respectively, boldly 

seek to address our challenges head on. I applaud your leadership, 

Mr. Chairman in calling this hearing to explore the various approaches to meeting these challenges. 

While the Administration has not yet finished its review or determined a position on either bill, certain aspects of these new government entities and financing mechanisms proposed in the bills 

raise a number of issues and concerns that would need to be carefully considered and addressed in the interagency process as these 

bills move forward. Although no single technology solution exists to 

address our Nation’s energy and environmental responsibilities, all 

elements of the solution share a common basis: the need for unprecedented levels of consistent, continuous capital formation to increase market penetration of clean, domestic energy sources and 

technologies. 

As you will hear from the other experts on this esteemed panel, 

the private sector is, of course, the most efficient means of delivering the technological transformation to our marketplace that we 

have sought from recent landmark policies. But markets alone do 

not constitute a national strategy. Our government can play an indispensable and crucial facilitating role in accelerating the outcomes we, as a Nation, seek in a timeframe and at a scale that is 

consequential and commensurate with the magnitude of the economic, environmental and national security challenges that we 

face. 

One such mechanism, as you well know, is the Title XVII Loan 

Guarantee Authority that emerged from the landmark, bipartisan 

Energy Policy Act of 2005, which supports early commercial use of 

domestic, advanced energy technologies that avoid, sequester or reduce greenhouse gas emissions. On June 30, the Department 

issued three new solicitations totaling $30.5 billion. These solicitations for renewable, energy efficiency, electricity transmission, nuclear power facilities, and for the front end of the nuclear cycle. 

DOE anticipates issuing new solicitations later this summer for 

advanced, clean, fossil energy production worthy of $8 billion. Effectively, these two very complementary pieces of legislation seek 

to enhance the efficiency and efficacy and professional risk management capacities of our government to deliver on the Congressional intentions to catalyze commercialization and large scale financing of clean energy technology and energy infrastructure build 

out. 

Together, Congress and this Administration have taken great 

strides, and on a bipartisan basis we can continue by integrating 

approaches and collaborating further with the urgency that the situation merits so that we move beyond problem identification and 

more robustly toward problem solving that will improve our energy 

security and diversify our national portfolio and reduce greenhouse 

gas emissions that contribute to climate change. For the past 30 
6 

years, DOE has helped to reduce the cost of clean energy technologies through research and development, demonstration, and deployment. 

The historic core strength of the Department is in fact, science 

and technology, not facilitating commercialization or financing 

which is necessarily constrained by systemic limitations inherent in 

a conventional civil service institution. National energy goals now 

demand accelerated market penetration and significant capital formation and growth for higher risk technology investments. Meeting 

our ambitious goals will require tremendous investment in emerging technologies. 

While the private sector can and will, in fact, continue to invest 

inclean energy technologies, the urgency of the energy and environmental challenges that you have addressed and that we face requires far, far greater capital formation to occur with immediacy in 

the private sector. The question before us, as a Nation, is how will 

that gap be bridged? 

Before achieving any impact on our national energy goals, an advanced energy technology must evolve from a laboratory experiment to the bench scale to the pilot scale to a technology venture 

to a scaled infrastructure development project. The transition to 

commercial scale and production presents many economic, political 

and technological risk but to name a few. On the positive side secure and free access to abundant sun and wind and geothermal resources allows domestic renewable energy a fundamental economic 

advantage over conventional energy sources when building out a 

much needed national hedge in diversifying our portfolio. 

While increasingly coming into economic parity and direct cost 

competitiveness, renewable energy assets currently cost more per 

unit of production of capital cost, front and installed cost, for their 

production capacity. The much larger profits realized by production 

costs and much lower operating and maintenance costs and zero 

exposure to fuel priced volatility ultimately justify their investments over the lifecycle consistently. On the security front, clean 

energy, including nuclear and clean coal with carbon capture and 

sequestration, like renewables, produced from domestic resources, 

ultimately impacts our geopolitical leverage and our surrounding 

strategic interest in energy commodities. 

Additionally, large scale energy infrastructure, development, and 

deployment is amongst the world’s most complex and capital intensive sectors of our economy. As you will hear from this panel, it requires sophisticated, professional risk management acumens in 

both legal and commercial structuring of project finance that demands long term, stable, predictable cash-flows and long term 

management stability. Evolving energy technology must, in fact, 

avail conventional financing in order to scale. 

High risk technology equity investing that is today emerging in 

record numbers is insufficient in and of itself to scale our energy 

infrastructure needs. I applaud the bipartisan leadership and vision of the members of this committee for their earnest efforts to 

introduce disruptive models and overcome the systemic constraints 

that we presently face in the execution of our mission for national 

security environment stewardship and economic growth. The Congress and the Administration have enumerated numerous concrete 
7 

goals which require unprecedented levels of funding to achieve the 

policy vision at a scale and at a pace that is in fact meaningful. 

This committee’s leadership has been instrumental in the 

progress that we have made toward meeting them. When combined, the elements of both approaches call on us to go further and 

faster with greater facilities at our disposal. We intend to examine 

these bills thoroughly in the weeks ahead. 

Mr. Chairman, this concludes my prepared statement, and I’d be 

happy to answer any questions the committee members may have. 

[The prepared statement of Mr. Karsner follows:] 

PREPARED STATEMENT OF ALEXANDER KARSNER, ASSISTANT SECRETARY FOR ENERGY

EFFICIENCY AND RENEWABLE ENERGY, DEPARTMENT OF ENERGY

Mr. Chairman, Ranking Member Domenici, Members of the Committee—thank 

you for the opportunity to testify about how our nation can best accelerate the large 

scale capital formation and deployment of clean energy technologies in the United 

States. Bills introduced by Senators Bingaman and Domenici, the 21st Century Energy Technology Deployment Act and the Clean Energy Investment Bank Act of 

2008, respectively, seek to address these challenges. I applaud your leadership, Mr. 

Chairman, in calling this hearing to investigate the pros and cons of various approaches to meeting this challenge. While the Administration has not finished its 

review of either bill, certain aspects of the new government entities and financing 

mechanisms proposed in the bills raise a number of issues concerning Federal credit 

policies, and financial risk and cost to the Federal government, along with certain 

constitutional concerns that the Justice Department has indicated would need to be 

carefully considered and addressed. We would have strong concerns about provisions 

that provide additional exposure of the Federal government to large liabilities. 

Although no single technology solution exists to address our Nation’s energy and 

environmental responsibilities, all elements of the solution share a common basis: 

increased market penetration of clean energy technologies. The private sector is the 

appropriate and most efficient means of delivering the solutions to the market at 

scale, but the government can play a facilitating role, where deemed appropriate 

such as it is currently doing by providing direct funding for research, development, 

and demonstration programs; by providing additional support such as risk insurance, loan guarantee programs including Title XVII, and production tax credits. We 

are continuing to review these bills and would like to discuss our ongoing energy 

programs. 

One such mechanism as you well know, is DOE’s Title XVII loan guarantee authority from the Energy Policy Act of 2005 and the 2007 Energy and Water Development Appropriations Act, which supports early commercial use of advanced energy 

technologies that avoid, reduce or sequester air pollutants or anthropogenic emissions of greenhouse gases. The program currently has $42.5 billion in loan volume 

authority that can be used to support a wide-range of innovative technologies including but not limited to advanced renewable, energy efficiency, electricity transmission, nuclear power, and advanced fossil energy. To date DOE has invited 16 

projects to submit full applications under the first solicitation and has received application fees for the first four of these projects, meaning that DOE can begin their 

due diligence evaluation of projects. On June 30 DOE issued three new solicitations 

totaling $30.5 billion. These solicitations are for renewable, energy efficiency, electricity transmission, nuclear power facilities, and front end of the nuclear fuel cycle 

projects. DOE anticipates issuing a new solicitation later this summer for advanced 

fossil energy ($8 billion). 

Together, Congress and this Administration have taken great strides to move beyond problem identification and toward problem solving that will enhance our energy security, diversify our energy systems, and reduce emissions that contribute to 

climate change. On December 19, 2007, the President signed the Energy Independence and Security Act of 2007 (EISA) into law. As you know, EISA includes increased Corporate Average Fuel Economy (CAFE) standards and an increased Renewable Fuel Standard. Specifically, the Act increases CAFE standards to 35 miles 

per gallon for all passenger automobiles, including light trucks, by 2020; and mandates the replacement of 36 billion gallons of gasoline with renewable fuel by 2022, 

including 21 billion gallons of advanced biofuels. The mandates included in EISA 

are aligned with Presidential initiatives to make the future of energy cleaner and 

more sustainable. These include the Advanced Energy Initiative (AEI), announced 
8 

1 IEA World Advanced Energy Outlook, 2003. 

2Data from New Energy Finance desktop 3.0, ‘‘Asset Financings Investment Overview,’’ 

www.newenergyfinance.com 

in 2006 to confront our nation’s addiction to oil and reduce greenhouse gas emissions by developing clean sources of electricity generation, as well as the ‘‘Twentyin-Ten’’ initiative, announced in the 2007 State of the Union, to reduce gasoline consumption by 20% by 2017. 

The President has also called for expanding domestic supply to increase our energy security. Just yesterday, the President lifted the executive ban on offshore 

drilling. He has also asked Congress to: 

• lift the legislative ban and allow exploration and development of offshore oil resources; • eliminate a provision, inserted into last year’s omnibus spending bill, that 

blocks oil shale leasing on federal lands; and • permit exploration in northern Alaska. 

For the past 30 years, DOE has helped to reduce the cost of some clean energy 

technologies through research and development. The President’s new national goal 

to stop the growth in U.S. greenhouse gas emissions by 2025 demands market penetration and significant capital formation and growth in a new and risky technology 

arena beyond the business-as-usual scenario. Meeting this ambitious goal will require tremendous investment in emerging technologies. The International Energy 

Agency estimates that North America will require over $1.5 trillion in cumulative 

energy investment by 2020,1 although they did not disaggregate ‘‘clean tech’’ and 

conventional energy generation. This study indicates a need for North American energy investment of over $100 

billion per year between now and 2020. We expect that a significant portion of new 

energy investment would have to be from clean sources to meet the President’s goal. 

In 2007, the U.S. saw $15.15 billion in clean energy asset investment according to 

New Energy Finance.2 While the private sector can, and I believe will, continue to 

invest in clean energy technologies, the urgency of the energy and environmental 

challenges we face requires that greater capital formation occur in the private sector. The question before us, as a nation, is how will that gap be bridged? 

CLEAN ENERGY INVESTMENT CHALLENGES AND OPPORTUNITIES

Before achieving any impact on our national energy goals, an advanced energy 

technology must evolve from a laboratory experiment, to a technology venture, to 

an infrastructure development project. The transition to commercial scale presents 

many economic, political, and technological risks. 

Economic Risks Include: 

• Chicken and egg problems—for example, which comes first: Flex-fuel vehicles 

or the E85 fuel itself? The availability of critical transmission infrastructure or 

increased generation capacity? Additionally, 

• Historic volatility of energy commodity price signals; 

• Unpredictable feedstock availability, pricing, and quality control; 

• Limited off-take agreement length; and 

• Unknown final design costs due to unforeseen engineering challenges or permitting delays. 

Policy Risks Include: 

• Changing environmental and economic regulations, including a lack of predictable, longterm tax policies; 

• Balkanized regional and state energy policies; and 

• Siting, permitting, interconnection, and transmission and transportation challenges. 

Technological Risks Include: 

• Complications in scaling from laboratory to commercial-scale production; and 

• The development and deployment of cost-effective technology, as well as technological obsolescence. 

On the positive side, however, free access to abundant sun, wind and geothermal 

heat allows clean renewable energy a fundamental economic advantage over traditional energy sources. While renewable energy assets currently cost more per unit 

of production capacity, the larger future profits realized by lower production costs 

and zero exposure to fuel price volatility can economically justify the investment. 
9 

On the security front, clean energy, including nuclear and clean coal with carbon 

sequestration, is generally produced from domestic resources which reduces geopolitical leverage surrounding strategic energy commodities. 

Financial mechanisms are in place to accelerate research and development and 

project implementation for established technologies, but financing for commercialization of new technologies often falls short or is deemed too expensive. Additionally, large-scale energy infrastructure is a capital intensive business to begin with, 

requiring debt financing and stable or predictable cash flows. 

It is essential that we work not only to accelerate R&D for new energy technologies, but also to address the accelerated adoption of technologies into commercial products that are widely available at reasonable cost to all Americans. We seek 

to help enable and accelerate market transformation toward the use of more efficient and cleaner technologies. 

CONCLUSION

National security, environmental stewardship, and economic growth goals form 

the basis of robust U.S. energy policy. National security is enhanced through diversifying our energy mix and reducing dependence on petroleum. Environmental stewardship is maintained through the mitigation of greenhouse gas emissions and other 

negative environmental impacts. Achieving global economic competitiveness entails 

creating a more flexible, more reliable, and higher capacity national energy infrastructure, as well as improving the energy productivity of the U.S. economy and industry. The Congress and the Administration have enumerated concrete goals to 

achieve this policy vision, and this Committee’s leadership has been instrumental 

in the progress that we have made toward meeting them. Mr. Chairman, this concludes my prepared statement and I would be happy to answer any questions the 

Committee Members may have. 

The CHAIRMAN. Thank you very much. John, why don’t you go 

right ahead? 

STATEMENT OF JOHN DENNISTON, PARTNER, KLEINER 

PERKINS CAUFIELD & BYERS, MENLO PARK, CA 

Mr. DENNISTON. Thank you. Thanks very much, Senator Bingaman. Good morning, Ranking Member Domenici, members of the 

committee. 

I testified before this committee in March of last year. I’m honored to return today to share with you my views on how Federal 

policy might support the financing and development of clean energy 

sources. 

Clean energy offers our best hope of confronting all three dimensions of our energy crisis: climate change, energy security and 

American competitiveness. But many breakthrough technologies 

can’t get the loans they require primarily because the lenders today 

think they’re too risky. You have two pieces of legislation before 

you this morning each of which aims to bolster domestic energy 

supplies by increasing private lending activity. 

I know I join millions of other Americans in and outside the industry in applauding this basic tactic. But now let’s look more 

closely at your options. I believe there are two key questions the 

committee needs to answer. 

First, what kind of banking functions can most efficiently increase the supply of credit in the energy market? Credit meaning 

debt, loans. Second, what types of energy projects should the new 

bank target to support. 

On the first question, the question of banking functions, I believe 

the two best available tools are credit enhancement in the form of 

loan guarantees and the creation of a vibrant secondary market for 

energy credits. I’ll now briefly address each of those two topics. 
10 

S. 2730 provides for loan guarantees backed by the full faith and 

credit of the Federal Government, a tactic I heartedly support. 

Today a key impediment to more rapid commercialization of renewable energy is the scarcity of debt financing in the market. Expanded credit availability would help many emerging green technologies transition to large scale production. 

I see this committee is also considering creating a vibrant secondary market for energy securities. By enabling this new bank to 

buy credit instruments relating to clean energy projects creating an 

active secondary market will energize investment and innovation 

in the clean energy sector. 

In a novel feature, S. 3233 goes on to allow the aggregation of 

loans made by private sector lenders to residential and small business users of distributed generation technologies. I enthusiastically 

support this approach which would not only expand the pool of low 

cost capital that home owners and small business owners can tap 

for new clean energy solutions. But also give America’s local banks 

a leadership role in the green tech revolution at a time when America’s financial institutions desperately need new and profitable 

lines of business. 

I realize the committee is also considering empowering the new 

bank to make direct debt and equity investments in clean energy 

projects. I just caution here that while doing so may be appropriate 

under certain circumstances. I think you’ll make the most progress 

by focusing attention and resources on the loan guarantees and the 

creation of a secondary market. 

This leads to the second question in front of this committee. 

What kinds of projects should the new bank target to support? I 

recommend the committee clearly direct the new bank to prioritize 

support for breakthrough technologies. Despite their financial risk 

these innovative technologies offer the greatest potential to help 

solve all three dimensions of our energy crisis. 

Performance standards will be essential in evaluating new energy ventures. We should obviously favor those that can deliver the 

most bang for the buck in terms of all three aspects of our energy 

crisis: reducing greenhouse gas emissions, providing alternatives to 

imported oil and strengthening American competitiveness. The 

problem here however, is that under the existing DOE Loan Guarantee Program roughly 75 percent of the guarantees are directed 

right now to fossil and nuclear projects. I strongly recommend Congress take the approach specified in S. 3233 which aims 75 percent 

of the new support to breakthrough technologies, the ones that will 

address all three dimensions of our energy crisis. 

This is clearly a superior allocation method to address our energy 

needs. Thus if the existing Loan Guarantee Program remains within DOE, I would also urge the committee to take advantage of this 

opportunity by amending the allocation between industries so it’s 

more in line with S. 3233’s approach. 

In closing, I want to emphasize how heartened I am to witness 

this committee’s resolve to confront our energy challenges. Particularly inspiring is your work in passing the CAFE ́ legislation and 

the enhanced Renewable Fuel Standard. Even so, it’s no secret we 

need to do much more to move ahead with a speed and scale commensurate with the scope of our energy crisis. 
11 

Once again I want to thank this committee for inviting me here 

today. I look forward to today’s hearing and learning more about 

how we can work together to build a more secure country and 

world. 

[The prepared statement of Mr. Denniston follows:] 

PREPARED STATEMENT OF JOHN DENNISTON, PARTNER, KLEINER PERKINS CAUFIELD

& BYERS, MENLO PARK, CA 

INTRODUCTION

Good afternoon, Chairman Bingaman, Ranking Member Domenici and Members 

of the Committee. My name is John Denniston. I am a partner at the venture capital firm Kleiner Perkins Caufield & Byers. I testified before this Committee in 

March of last year, and am honored to return today to share my views about how 

federal policy might support the financing and development of clean energy technologies. 

Together with most of the rest of America, venture capital and technology industry professionals—Democrats and Republicans alike—are deeply concerned about 

the risks posed by our energy crisis, encompassing climate change, the rising scarcity and cost of fossil fuels, and increasing threats to our global competitiveness. At 

the same time, our industry is in a unique position to recognize the opportunities 

these challenges present to build our economy, creating jobs and prosperity. 

Founded in 1972, and based in California’s Silicon Valley, Kleiner Perkins is one 

of America’s oldest venture capital firms. We have funded more than 500 start-up 

companies, backing innovative entrepreneurs in the digital, life science and green 

technology industries. More than 170 of our companies have gone public, including 

Amazon.com, AOL, Compaq Computer, Electronic Arts, Genentech, Google, IDEC 

Pharmaceuticals, Intuit, Juniper Networks, Millenium Pharmaceuticals, Netscape, 

Sun Microsystems, Symantec, and VeriSign. Today, our portfolio companies collectively employ more than 275,000 workers, generate $90 billion in annual revenue, 

and contribute more than $400 billion of market capitalization to our public equity 

markets. 

Kleiner Perkins is a member of the National Venture Capital Association and a 

founding member of TechNet, a network of 200 CEOs of the nation’s leading technology companies. I serve on TechNet’s Green Technologies Task Force. My testimony today reflects my own views. 

You’ve asked me specifically to address the new energy legislation before you. But 

before I do, I want to offer an overview of how many of us in the venture capital 

industry perceive the energy challenges and opportunities facing our country today. 

I began my testimony last year in a somewhat similar fashion, but at the risk of 

a little repetition, I believe we must bear in mind the scope of our challenges as 

we move forward with strategies to address them. 

THE ENERGY CRISIS

There’s a fast-growing consensus among Americans today about the need to confront our three main energy challenges: the climate crisis, our dependence on foreign oil, and the risk of losing our global competitive edge by failing to champion 

new technologies that are becoming a huge new source of economic growth, jobs and 

prosperity. 

Renewable energy sources—such as sun, wind, geothermal and biofuels—offer this 

country’s best hope of addressing all three of these dimensions, and of helping us 

rebuild our domestic economy and regain our edge as an economic superpower. 

Climate Change 

Our leading climate scientists predict we have only a short period of time to make 

dramatic cuts in our greenhouse gas emissions or risk potentially catastrophic climate change. Global temperatures and sea levels are already rising and will continue to do so; the question now is whether we can slow down the projected rate 

of future increases. Global warming is not a partisan issue: President Bush and 

both Presidential candidates have publicly declared we must seriously confront our 

climate crisis. Yet perilously, we have so far failed to move with the requisite speed 

and determination. 

Energy Security 

As for our energy security dilemma, this Committee is well aware that America 

continues to import approximately 70% of our oil needs. Rapid growth in worldwide 
12 

energy demand has stretched supplies, causing energy prices across the board—oil, 

natural gas, coal, and even uranium—to skyrocket. As world population and energy 

demand increase, there’s every reason to believe supply and price pressures will persist. 

Global Competitiveness 

Finally, our future prosperity is at risk, and here I speak from very personal experience. As I’ve traveled on business to China and Europe, I’ve witnessed how the 

rest of the world is striving, and often succeeding, to emulate in the renewable energy sector, the technology innovation that has been a hallmark of the U.S. economy 

and perhaps the single most important driver of our enviable standard of living. Increasingly, entrepreneurs overseas enjoy advantages in the form of determined government policies, including financial incentives and large investments in research 

and education. 

Credible economic studies suggest our technology industries are responsible for 

roughly one-half of American GDP growth. Our country would look quite a bit different today had we not, several decades ago, become a global leader in biotechnology, computing, the Internet, medical devices, semiconductors, software and 

telecommunications. And now we find ourselves with a vast new economic opportunity—to grow green energy technologies that seem destined to become the economic engine of the 21st Century. But will America again lead the way? 

RENEWABLES: THE OPPORTUNITIES

Moore’s Law & The Pace of Technological Progress 

In Silicon Valley, we often refer to a principle known as Moore’s Law: a prediction, credited to Intel co-founder Gordon Moore back in the 1960s, that semiconductor performance would double every 24 months. Moore’s law underpins the information technology revolution of the past three decades. Better, faster, and cheaper 

silicon chips led the way, over just the past quarter of a century, from an era of 

big and expensive mainframe computers to affordable handheld cell phones that 

connect us to the Internet and to each other. 

At Kleiner Perkins, we believe we’re already seeing a Moore’s Law dynamic operating in the energy sector, giving us confidence the rate of greentech performance 

improvement and cost reduction will lead to energy solutions we can’t even imagine 

right now. 

Alternative energy is becoming increasingly cost-competitive, as the price of conventional power skyrockets and costs for clean energy such as wind and solar power 

come down. World-class talent is racing into the greentech sector. And a growing 

sense of urgency regarding our energy crisis is boosting demand. We’re seeing 

breakthroughs today in a host of scientific disciplines relating to the energy sectors, 

including material science, physics, electrical engineering, synthetic chemistry, and 

even biotechnology. 

These improvements have occurred over a period of time in which there was relatively little government policy or entrepreneurial focus on these sectors. Solar manufacturers are innovating their way around silicon shortages, with next-generation 

materials including pioneering thin-film technologies. The agriculture industry is 

now beginning to produce transportation fuels from non-edible plants. And 

nanotechnology breakthroughs are creating the promise of new ways to store energy, which will catalyze an electric transportation revolution. Imagine what American ingenuity might accomplish in the future as more and more of our best and 

brightest devote their efforts to the greentech field! 

RENEWABLES: THE CHALLENGES

Our opportunities are truly breathtaking. Yet unfortunately, we’re moving much 

too slowly to take advantage of them. Three major obstacles currently impede faster 

commercialization of renewable energy. 

Scarce Research Funding 

American innovators woefully lack necessary funding for basic, translational and 

applied research in renewable energy. Our leading research institutions are begging 

for federal funding, and faculty interest has never been keener. Yet at roughly $1 

billion annually—most of which is ear-marked—DOE funding is microscopic relative 

to the problem at hand. 

Credit Scarcity 

Many promising new technologies are being delayed or thwarted by the unavailability of commercial loans. In many cases, these new technologies are unproven at 
13 

scale, and the credit markets are unwilling or unable to assume the risk to help 

them grow. 

Competitive Market Disadvantage 

The high cost of renewable energy sources, relative to the incumbent competition, 

is the third main barrier to greater capital investment and more rapid adoption of 

clean power. Why does green power cost more? Primarily because it’s so new, meaning it is produced in such low volumes that the industry has yet to benefit from 

economies of scale, and has only just begun a continuous cost reduction process. 

And older power sources have another comparative advantage. Most coal-fired and 

natural-gas plants were constructed many years ago, and are now fully amortized. 

That means those facilities’ owners no longer need to charge rate-payers for initial 

construction costs. Clean-power companies, in contrast, still need to include construction financing costs in their customer pricing, putting them at a major disadvantage. 

On top of this, government policy to date has provided powerful advantages to fossil fuels and nuclear energy. In some cases, the federal government itself has paid 

directly for electrical generation facilities and transmission and distribution infrastructure. 

Beyond government subsidies, the fossil fuel industry has long benefited by escaping responsibility for the costs of the environmental consequences of its emissions— 

instead, society has paid the price. Clearly, traditional power sources would become 

much more expensive, and alternative sources of energy more cost-competitive, if 

plant owners had to take on the true costs of these emissions. 

In the special case of nuclear power, the federal government has for many decades 

assumed enormous costs for research and development, plant operations, insurance 

and waste disposal—all of which, if borne by nuclear plant operators, would make 

this power source a much less viable option. 

THE PENDING LEGISLATION

Overview 

With anxiety growing throughout America about our energy crisis, Congress today 

has a unique opportunity to tackle the obstacles standing in the way of renewable 

energy development. I’m gratified to see some of the steps you are considering in 

this session may do just that. 

You have before you two pieces of legislation: the 21st Century Energy Technology 

Deployment Act (S. 3233), and the Clean Energy Investment Bank Act of 2008 (S. 

2730). Each, in its way, aims to bolster domestic energy supplies by increasing private lending activity for energy technologies. I know I join millions of other Americans in and outside of industry in applauding this basic strategy. But now let’s look 

more closely at the options before you. 

Goals 

‘‘Goals are dreams with deadlines,’’ writes the author Diana Scharf Hunt. Frankly, the magnitude of our energy problems means we all need to start dreaming some 

very big dreams. Clearly stating our goals at the outset is the first step toward fulfilling them. ] 

At the heart of the 21st Century Energy Technology Deployment Act is the goal 

of promoting domestic development of clean, advanced energy technologies. I believe 

this indeed must be our explicit target. Only by means of a massive deployment of 

renewable energy can we hope to address all three dimensions of our energy crisis, 

protecting our environment and enhancing our national security, while at the same 

time advancing our economy. 

For that reason, I advise you to include a succinct preamble in whatever law you 

approve that defines both this mission and the intended approach. It might read 

something like this: ‘‘The purpose of this Act is to address our three-dimensional 

energy crisis, encompassing climate change, energy security and American competitiveness, by accelerating private loans supporting the rapid adoption of clean energy 

solutions.’’ 

While there are many details to consider in the legislation, I believe there are two 

key questions the Committee needs to answer: 

• What banking functions should Congress charter the new bank to perform in 

order to execute on the mission to expand credit availability? 

• Which types of energy projects should the new bank target to support? 
14 

Banking Functions 

Both pieces of legislation before you would create an entity with banking functions to facilitate new energy technology funding. In my view, the best tools available to you are credit enhancement in the form of loan guarantees; the creation of 

secondary markets; the direct provision of debt-financing; and, in appropriate circumstances, insurance coverage. 

Credit Enhancement 

S. 2730 provides for loan guarantees backed by the full faith and credit of the 

Federal government, a tactic I heartily support. Loan guarantees have tremendous 

potential to help level out the playing field for new energy technologies. In order 

for the loan guarantee program to be effective, it is critical the guarantees be supported by the full faith and credit of the Federal government. 

As I mentioned earlier, a key impediment to more rapid commercialization of renewable energy is the scarcity of debt financing. More available credit would help 

many emerging green technologies transition to large-scale production. Yet lenders 

have been hesitant to finance these projects, mostly due to the novelty of the technologies and their lack of a track record. This leaves green entrepreneurs who want 

to grow fast with the sole option of financing that growth through equity investments. Thus, they start out at a major disadvantage compared to most conventional 

energy sources, which have historically had easy access to the credit markets. 

Loan guarantees would not only eliminate that disadvantage but also help renewable energy projects get more affordable financing terms. That, in turn, would help 

reduce their production costs, addressing another handicap relative to incumbent 

energy sources. 

Timely government support—be it loan guarantees or even direct grants—can 

make a crucial difference for emerging energy technologies, as seen in the recent 

case of cellulosic biofuels. These, as you know, are fuels made from wood chips, 

switchgrass, and other non-food sources. Last year, in a special appropriation, Congress enabled DOE grants to innovative companies in this field that would have otherwise struggled to obtain debt financing for these new production plants. 

Under the existing DOE loan guarantee program, roughly 75% of the guarantees 

are directed to fossil and nuclear projects. It’s not clear to me whether S. 2730 intends to have the newly created bank carry this type of allocation forward. In contrast, S. 3233 sets aside 75% of the new support for breakthrough technologies. S. 

3233 introduces an indisputably superior allocation methodology because it optimizes the impact of the legislation across all three dimensions of our energy crisis. 

If the existing loan guarantee program remains within DOE, I would urge the Committee to take advantage of this opportunity to amend the allocation between industries so it is more in line with S. 3233’s method. 

Secondary Markets 

I see this Committee is also considering creating a secondary market for energy 

securities, by enabling a new government entity to buy credit instruments relating 

to clean energy projects. Until now, there has been no secondary market for renewable energy credits. Creating one could help energize investment and innovation. 

In a novel feature, S. 3233 goes on to enable the aggregation of loans made by 

privately-owned lending institutions to residential and small commercial users of 

distributed generation energy sources (Section 6(e)). I enthusiastically endorse this 

concept, which gives America’s local banks a leadership role in the greentech revolution, while also expanding the pool of low-cost capital that homeowners and small 

business owners can tap for new clean energy solutions. 

Debt Financing 

One of the pieces of legislation before you creates a bank that can make direct 

loans to worthy clean energy projects. While I support giving the bank this capability, I believe you’ll make the most progress by focusing attention and resources 

on the first two tools I’ve mentioned— catalyzing the primary credit markets 

through loan guarantees, and creating a secondary market for clean energy credits. 

Insurance 

One of the bills before you considers offering insurance to energy facilities. I believe there may be instances in the future where insurance could be a useful tool 

to address our energy crisis, such as insuring feedstock supplies for cellulosic 

biofuels producers. However, the legislation is vague on which sectors would be eligible for insurance coverage. I would advise this Committee to be clear in the legislation that Congress does not intend to expand the nuclear industry’s already generous federal insurance subsidy under the Price-Anderson Act. 
15 

Equity Financing 

Another tool before this Committee is to enable the new energy bank to make direct equity investments in projects that have not been able to attract private capital. 

This strategy may be appropriate in some cases, but if used widely could be inefficient. I’d frankly much rather see the government save its scarce dollars for more 

pressing needs, such as funding basic research and facilitating credit, and allow the 

equity markets to serve as a litmus test that alerts the bank to credit-worthy 

projects. 

Prioritization of Energy Projects 

This leads to the question of what kinds of energy projects should be first in line 

for this new government support. I recommend the Committee clearly direct the 

new bank to prioritize support for the ‘‘breakthrough’’ energy projects that, despite 

their risk, offer the greatest potential improvement to our energy crisis. 

Impact on Energy Crisis 

Performance standards will be essential for project selection, and the bank should 

obviously favor projects that can deliver the most bang for the buck in terms of all 

three aspects of our energy crisis: greenhouse gas emissions reduction, providing alternatives to imported oil, and strengthening American competitiveness. 

S. 3233 defines the ‘‘breakthrough’’ technologies it prioritizes for support as those 

having been highly rated by the Advisory Council yet lacking in private investment 

due to their perceived high technical risk. I heartily support this approach. And I 

would also strongly encourage you to consider including advanced battery technology and cellulosic and advanced biofuels projects on the list of prioritized 

projects. Following this agenda, in my view, would help the new law achieve maximum impact. 

Development Stage 

I know I speak for a great many Americans when I also urge you to prioritize 

the cleanest and most advanced new technologies, many of which are still in their 

infancy. It would be a serious mistake to limit new government support to technologies already in wide commercial use. As I’ve mentioned above, traditional fossil 

fuel and nuclear power sources have long enjoyed heavy government subsidies. We 

need now to level the playing field for the most innovative technologies to unleash 

power from the sun, wind, geothermal, biofuels, and other renewable sources. 

Risk 

At issue before you is also the level of risk entailed in projects eligible for government support. Especially in our current economy, it’s hard to imagine creating a 

banking entity that would continuously lose money by supporting only the riskiest 

projects. On the other hand, if such a bank is set up from day one to generate a 

profit on all the projects it supports, it will only fund the safest ventures, losing opportunities to back truly breakthrough technologies that will have the greatest impact on the three dimensions of our energy crisis. 

My advice here is to steer a middle ground: create a bank with the primary purpose of accelerating the market adoption of breakthrough technologies, which would 

therefore be expected to lose money on some fraction of those projects. However, the 

bank could counteract losses by reaping profits through fees, and by issuing some 

of its guarantees for more proven technologies. It could then use those revenues to 

cover its losses on some of the more speculative projects. 

CONCLUSION: WHAT MORE CAN WE DO?

In closing, I want to emphasize how heartened I am to witness this Committee’s 

resolve to confront our energy challenges. Particularly inspiring is your work on 

H.R. 6, the Renewable Fuels Standard, and the recent enhancement of CAFE standards. 

Even so, it’s no secret we need to do much more so we can move ahead with a 

speed and scale commensurate with the scope of our energy crisis. In that spirit, 

I would like to offer five recommendations outside of the scope of this hearing: 

1. We simply must put a price on carbon. And I would urge you, even as Congress deliberates carbon cap-and-trade legislation, to consider the additional potential merit of a carbon tax, as a straightforward signal to the markets. 

2. It is also imperative that we substantially increase Federal funding of renewable energy research and development in American research institutions. 

3. We need to stop the waste in the American energy system. This is one of 

the specified goals in S. 3233, but it cannot be overemphasized. Energy efficiency is America’s hidden powerhouse, with recent estimates that up to 50 bil-
16 

lion barrels of oil could be saved between now and the year 2030 with sustained 

attention to investments in new technologies and simple retrofitting of buildings. 

4. Let’s also move forward with other overdue policy changes, such as creating 

a national renewable portfolio standard and extending federal tax credits—ITC 

and PTC—for clean energy. 

5. More broadly, we must resolve to give our clean energy campaign an appropriate level of attention and resources. You’ve heard talk of a program the size 

of the Apollo and Manhattan projects. Frankly, we need something much larger. 

And because this kind of commitment won’t be free of cost or sacrifice, I suggest 

we also find more effective ways to communicate about our energy challenges 

and opportunities with the American public. 

I’d like to suggest one such strategy: a DOE dashboard to monitor our national energy transition. The dashboard would measure greenhouse gas emissions, the share of U.S. energy consumption powered by imported fuel, U.S. 

market share of the global renewable energy industry, and Federal funding for 

renewable energy research. Updated monthly and widely disseminated, this tool 

would remind Americans of the government’s resolve to make progress in this 

vital area, while encouraging public participation. 

Once again, I want to thank the Committee for inviting me to share my views 

with you. I look forward to today’s hearing and to learning more about how we can 

work together to build a more secure future for America and the world. 

The CHAIRMAN. Thank you very much. 

Ms. Hull, go right ahead. 

STATEMENT OF JEANINE HULL, COUNSEL, DYKEMA 

GOSSETT PLLC 

Ms. HULL. Thank you, Mr. Chairman, Ranking Member Domenici and members of the committee. It is an honor to testify before 

you today in support of S. 3233 and S. 2730. I am currently of 

counsel at Dykema Gossett, a law firm, where I advise clients on 

energy infrastructure and project finance issues. My testimony 

today, however, reflects exclusively my personal opinions. I come to 

this issue with more than 30 years in the energy infrastructure 

and finance sector. 

The introduction of these two bills demonstrates that we are finally well passed the point of debating whether this country must 

undertake a massive energy infrastructure improvement effort. The 

relationship between energy and security has been well discussed 

today and is recognized now as a national priority. I have integrated into my work what I call the four securities. These are energy security, economic security, national security and environmental security. I believe the first three are familiar to all and the 

fourth environmental security refers to the avoidance of the climate 

change and other pollution scenarios. 

The four securities are symbiotically intertwined. One can not be 

achieved fully without the other three. Both bills recognize the 

need for immediate action to solve the challenge of the four securities recognizing that the earlier these actions are undertaken the 

greater and more immediate the payoff will be. 

In fact, the amount of agreement between the bills is quite encouraging. Both bills create a funding entity which can become self 

supporting to support clean, domestic energy technologies. Both 

bills acknowledge that private investment can and ultimately will 

meet the demand for financing domestic clean energy projects. 

But that action is required now to accelerate the ability of the 

private financial markets to rapidly deploy these technologies. Both 
17 

bills acknowledge that the expertise to operate the proposed financing facility is not common in the civil service. The civil service incentives are unlikely to attract the expertise required. 

However, the bills are silent on exactly how the financing entity 

will relate to existing capital markets. It has been my experience 

that the existing markets are attracted to financing large projects. 

Projects that have limited risk. 

The technologies that suffer from a lack of attention are not only 

the projects with technology risk. Which has been discussed today. 

But also the unglamorous projects of residential and solar and commercial solar and efficiency improvements which are too small to 

interest investment banks and equity funds because they cannot 

bear the burden of significant transaction costs. 

Thus there is a huge opportunity space for the funding entity to 

participate in which will not overlap with existing private capital 

markets. To give you an idea of the scale of energy savings opportunities that I’m talking about each ton of solar cooling installed 

using existing technology avoids the production of 2.3 tons of carbon equivalent per year. At ten cents a kilowatt hour and $12 a 

dekatherm, each 50,000 tons of solar cooling systems will shift ten 

million dollars per year from foreign fossil fuel purchases to domestic renewable energy systems that provide good local jobs. 

Over the 20 year useful life of the equipment, each ton of solar 

cooling will reduce fossil fuel purchases by nearly $46,000 on an investment of $10,000. That is a huge payoff. The technology to 

achieve this is currently available. 

The only thing lacking is access to affordable financing which 

could be provided by the proposed funding entity. By enacting legislation creating a new energy funding entity, energy security will 

be enhanced by the development of domestic, affordable, reliable 

and sustainable sources of energy to meet the demand for fuels and 

electricity. Such a system is also less vulnerable to intentional disruption. 

Economic security will be enhanced through increased ability to 

insulate ourselves from the inflationary pressures of a petroleum 

based economy and by slowing the imbalance of payments to oil 

and gas producing nations. Keeping the petro-dollars at home and 

focusing them on a greener economy, the United States can maintain its manufacturing and intellectual competitiveness. 

National security will be enhanced by reducing our need to protect foreign oil and gas infrastructure while allowing the reduction 

of troop presence in sensitive areas. 

Environmental security will be enhanced by reducing the volume 

of emissions which contribute to climate change and otherwise pollute the air, water and ground. 

Mr. Chairman, thank you and the committee today for the opportunity to testify in support of legislation that is so vital to our 

country. I urge the committee to act quickly on these bills and to 

move legislation to the floor as soon as possible. Time is truly of 

the essence on this issue. 

This concludes my prepared remarks. I look forward to your 

questions. 

[The prepared statement of Ms. Hull follows:] 
18 

PREPARED STATEMENT OF JEANINE HULL, COUNSEL, DYKEMA GOSSETT PLLC 

Mr. Chairman, Ranking Member Domenici, and Members of the Committee, it is 

a distinct honor as well as a pleasure to testify before you today in support of S. 

3233, the 21st Century Energy Technology Deployment Act, and S. 2730, the Clean 

Energy Investment Bank Act of 2008. I am currently of counsel at Dykema Gossett, 

PLLC, where I advise clients on energy infrastructure and project finance issues. 

My testimony today, however, reflects exclusively my personal opinions. I come to 

this issue with more than 30 years in the energy sector, and in particular, industry 

structure and finance. 

These bills address the critical challenge of our generation, which is, as the author 

Thomas Friedman states, to resolve the energy-climate problems that will define the 

stability of the 21st century. Our success or failure will determine the living conditions of this planet’s inhabitants in the near as well as distant future. This challenge is critical to each of us personally, it is urgent and it is huge. We are now 

beyond the moral equivalent of war. This is a real war, with immediate security impacts. This is a matter of economic, physicall, and environmental survival. 

A specific experience of mine is relevant to this testimony. In 1998, I became a 

partner in Cantor Fitzgerald LP, with an office on the 105th floor of the North 

World Trade Tower. Cantor was and still is the leading secondary market for US 

Treasuries. It achieved this distinction by providing a marketplace for bond trading 

that is open, transparent, rules-based and heavily monitored. US Treasuries became 

the benchmark against which all other financial actions could be indexed because 

of the safe, trusted and credit worthy market Cantor created. Howard Lutnick, Cantor’s chief executive officer, believed the same kind of market could be created for 

electricity and natural gas. Cantor hired me to help bring the discipline of the financial trading markets to the energy markets. I was working toward that goal on September 11, 2001. I am here to talk about it because I was working here in Washington on that day of the terrorist attack that destroyed the World Trade Towers. 

Almost everyone I worked with and almost everything I had done for five years were 

vaporized. 

We are well past the point of debating whether this country must undertake a 

massive energy infrastructure improvement effort. The relationship between energy 

and security which became part of my personal mission is now recognized as well 

as a national priority. I have integrated into my work what I now refer to as the 

Four Securities. These are: energy security, economic security, national security and 

environmental security. I believe the first three are familiar to all. The fourth, environmental security, refers to avoidance of the more dire climate change scenarios. 

The Four Securities are symbiotically intertwined, as each of the bills recognize, and 

none can be achieved without success in each of the others. The legislation overtly 

recognizes the need for new financing capacity to address the energy and environmental security challenges; but it is important not to lose sight of the economic and 

national security benefits as well. 

Both bills recognize the need for immediate action to solve the challenge of the 

Four Securities, recognizing that the earlier these actions are undertaken, the greater and more immediate the payoff will be. 

Both bills create a funding entity which can become self-supporting. S. 3233 creates the 21st Century Energy Deployment Corporation, while S. 2730 creates the 

Clean Energy Investment Bank of the United States. For simplicity, I will refer to 

the ’financing entity’ created by the bills. Furthermore, the bills also acknowledge 

that federal resources may not be adequate to directly fund the effort at the level 

necessary through annual appropriations. 

Both bills appear to acknowledge that private investment can, and ultimately will, 

meet the demand for financing domestic, reliable, clean energy development 

projects, but that action is required now to provide the foundation for that investment by bearing the immediate risks of technology development. 

Both bills would leverage the unique position of the US Government to accelerate 

the ability of the private financial markets to rapidly deploy technologies which 

have the potential to radically reduce reliance upon carbon-based combustion for 

transportation and generation, and to more efficiently use the energy that is produced, including more efficient and intelligent delivery systems and markets. 

Both bills acknowledge that the expertise to operate the proposed financing facility is not common in the Civil Service and Civil Service incentives are highly unlikely to attract the expertise required. 

Both bills are technology neutral, are clearly non-partisan and do not pit consuming regions against producing regions, the notorious bane of energy legislation. 

Instead these bills benefit innovators and developers who are currently constrained 

by lack of access to the financial markets. 
19 

I turn now to what I believe are the specific strengths of each bill. 

S. 3233 recognizes the vast breadth of technologies that are needed to meet the 

Four Security challenges. Its defined term, ‘Clean Energy Technology,’ covers any 

technology ‘related to the production, use, transmission, control or conservation of 

energy’ that will improve the efficiency of use or transmission of energy, diversify 

the sources of environmentally sustainable energy, or stabilize greenhouse gas 

(‘‘GHG’’) emissions. 

I urge the Committee to retain this definition and to specifically recognize the 

need to update our power delivery system, most of which was built after World War 

II, and which is in desperate need of modernization, including the deployment of 

advanced control and smart grid enabling technologies. Our nation’s power delivery 

system is generally under tremendous strain, at both distribution and transmission 

voltage levels. 

Adequate transmission is necessary for power markets to function properly and 

to attract sufficient liquidity. Many regional markets today are limited by the perception that the delivery system is stacked in favor of the transmission owners to 

the detriment of non-transmission owning market participants. Although this is not 

the forum to address that market structure issue, it is important to note that adequate physical delivery infrastructure is necessary to properly address the structure 

issue. The words ‘congestion pricing’ will continue to depress and distort power markets until congestion is eliminated. 

Expansion of delivery capacity is not just a ploy to benefit speculators and 

arbitrageurs. Neither the energy generated at remote or dispersed renewable energy 

installations nor that generated from existing facilities can be used or priced efficiently without an assured delivery system. Increased interconnectivity will also balance renewables’ intermittency with non-intermittent resources, increasing its usefulness. Buildout of new generation and new transmission must be coordinated to 

prevent the costs of achieving energy security being far greater than would otherwise be necessary. 

S. 2730 provides the financing entity with a broad selection of financing tools and 

flexibility in selecting which tool to use. None of these tools is unique to energy infrastructure and all are used, in varying combinations, by other government sponsored programs. Each tool has a different specific purpose, cost and risk profile, and 

no one tool can perform all tasks. With this wide array of tools, the financing entity 

can more finely tune the project’s need with the funding available. 

One tool that S. 2730 does not explicitly include is the one tool that S. 3233 provides. Securitizing a portfolio of loans for remarketing is critical to adding depth to 

the private financial markets, as it was for home mortgages and farm credit. This 

tool should definitely be available to the financing entity and should be specifically 

stated in the legislation. 

If the goal is to make the financing entity self-supporting, then allowing for limited equity investment, perhaps through preferred stock, may not only be helpful, 

but may also be the most cost-effective way for the financing entity to support a 

particular project. The dividends would also provide a non-appropriated budgetary 

source of funding. In other cases, the financing entity could issue letters of credit 

(‘‘LOC’’) or other credit enhancements, short of loan guarantees, to meet the 

project’s need. The transactional costs in time and dollars charged to the developer 

for a LOC would be significantly reduced compared to the transactional costs of a 

loan guarantee. Similarly, allowing the financing entity to provide insurance to 

transfer an investor’s technology risk on a specific project might be the only support 

necessary for a breakthrough technology to succeed. In addition, for new technologies the issue is usually less the interest rate than it is of finding an investor 

willing to incur the technology, credit and/or development risks. 

I am mindful of the old adage that warns, if one only has a hammer, everything 

looks like a nail. I urge the Committee to provide the financing entity with multiple 

specialized tools which will enable it to deploy and leverage its resources in the 

most cost-effective way possible and support the broadest range of development 

projects. 

I want to emphasize a point that the bills have in common. Both bills recognize 

that the civil service workforce and rules are not conducive to acquiring the sophisticated financial expertise that the financing entity requires. This is not a small issue, 

and I believe it is vital that this facility not be restrained by rules and processes 

that make sense in other contexts, but that have not designed to enable the agencies 

to get the most benefit from the expertise created in the private markets. It is not 

a lack of will on the part of the agencies, they are as frustrated as anyone. The people involved in building this new financing facility will need the ability to move in 

support of the broader private financial markets, exiting one area when private 

markets are capable, and entering others where the market is not yet developed. 
20 

The two bills are silent on exactly how the financing entity will relate to existing 

capital markets. It has been my experience that the existing markets are attracted 

to financing very large projects, such as hundred or thousand megawatt generating 

facilities or large transmission projects, and projects that have limited risks. The 

technologies that suffer from a lack of attention by the financial markets are the 

‘low hanging fruit’ of residential and commercial solar and efficiency improvements, 

which are too small to interest investment banks and equity funds. Other projects 

which have difficulty accessing capital have one or more disqualifying risk, such as 

credit, technology, regulatory, market or development risk. 

Smaller projects, intended for residential and commercial sectors are generally not 

large enough, individually, to benefit from competitive interest rates and cannot 

bear the burden of significant transaction costs. Lack of financing has been an impediment to achieving meaningful market penetration of effective, existing technologies. Savings that could be accomplished by retrofitting solar thermal for heating and cooling in terms of reduced electrical and gas loads are greater than any 

one or ten plants standing alone, but since they are so dispersed, they are also difficult to finance and achieve. 

To give you an idea of the type of savings I am talking about, according to 

Solarsa, a solar developer located in Florida: each ton of solar cooling installed using 

existing technology avoids the production of 2.27 tons of carbon equivalent per year. 

At 10 cents/kwh and $12/Dth, each 50,000 tons of solar cooling systems will shift 

$10 million per year from fossil fuel purchases to renewable energy systems providing good local jobs. Over the 20 year useful life of the equipment, each ton of 

solar cooling will reduce fossil fuel purchases by $45,890 on an investment of 

$10,000. That is a huge payoff and the technology to achieve this is currently available. (Solarsa is not a client of Dykema’s.) I understand the European Union expects 

to meet one fourth of its target GHG reductions by 2020 by aggregating a large 

number of these solar thermal and biomass projects. 

This is one area that I can see the financing entity being most effective while simultaneously not competing with the private capital markets. However, it is important that the new entity be structured to focus its efforts on the gaps in the markets, and to exit that specific area once the private markets are adequate, so as to 

enhance funding for energy infrastructure and not compete with the private sector. 

To conclude, I believe the financing entity will address each of the Four Security 

challenges as follows: 

Energy Security will be enhanced by the development of domestic, affordable, 

reliable and sustainable sources of energy to meet the demand for fuels and 

electricity, and by using energy as the valuable resource it is. 

Economic Security will be enhanced through the increased ability of the 

United States to insulate itself from the inflationary pressures of dependence 

on a petroleum-based economy, as well as slow the balance of payments to oil 

and gas producing nations. By retaining petrodollars at home and refocusing 

them on a ‘‘green’’ economy, the United States can maintain its manufacturing 

and intellectual competitiveness, create and maintain good jobs and support 

thriving new technologies. 

National Security will be enhanced by reducing our need to protect foreign 

infrastructure which produces and transports oil and gas while allowing the reduction of troop presence in sensitive areas. 

Environmental Security will be enhanced by reducing the volume of emissions 

which contribute to climate change and otherwise pollute the air, water and 

ground. 

Mr. Chairman, thank you for the opportunity to testify today in support of legislation that is so vital to our country. I urge this Committee to act on these bills and 

to move legislation to the floor as quickly as possible. Time is truly of the essence. 

this concludes my prepared remarks. I look forward to your questions. 

The CHAIRMAN. Thank you very much. Dan, go right ahead. 

STATEMENT OF DAN W. REICHER, DIRECTOR, CLIMATE 

CHANGE AND ENERGY INITIATIVES, GOOGLE.ORG, MOUNTAIN VIEW, CA 

Mr. REICHER. Mr. Chairman, Ranking Member Domenici, members of the committee, my name is Dan Reicher. I’m very pleased 

to share my perspective today on legislation to advance the deployment of clean energy technology. I’m Director of Climate Change 
21 

and Energy Initiatives for Google.org, a unit of Google which has 

been capitalized with more than $1 billion of Google stock to make 

investments and advance policy in the areas of climate change, energy, poverty and health. 

At Google we have been working to lower the cost and increase 

the deployment of renewable energy through our Renewable Electricity Cheaper than Coal Initiative and also to accelerate the deployment of plug in vehicles through our Recharge It Initiative. 

Prior to my position with Google, I was president and co-founder 

of New Energy Capital, a private equity firm funded by the California State Teachers Retirement System and Vantage Point Venture Partners to invest in clean energy projects. 

Prior to my roles in the private sector, I served in the Clinton 

Administration as Assistant Secretary of Energy for Energy Efficiency and Renewable Energy. 

Mr. Chairman, the good news is that there is an array of clean 

energy technologies that have been developed with government and 

private sector investment that could address many of our energy 

related challenges. The not so good news is that investment in the 

actual deployment of these technologies ‘‘steel in the ground’’ as we 

say in the project investment world is inadequate. 

Sometimes the risk profile of the technology is too high. Sometimes the return profile is too low. Sometimes the technology is too 

costly in comparison with competing technologies. 

The most important point I will make today is that aggressive 

Federal policy can drive private sector investment measured in the 

trillions of dollars that will be required to move the Nation and the 

globe toward a more sustainable energy future. Among these policy 

measures, the Federal Government must provide financial support 

to the private sector to help move immature, higher risk technologies to the market and from there commercial scale. This role 

is well illustrated by the bill you have recently introduced, S. 3233. 

The bill, if enacted, would increase the capital available for clean 

energy projects. Thereby helping to mature the underlying technologies and move them to scale. There are typically two elements 

of energy project finance, equity and debt. 

Federal tax credits, when they are available, have stimulated equity investment in wind, solar and other clean energy projects. Securing loans for projects has been more problematic, especially for 

higher risk projects. Bankers are generally reluctant to provide a 

loan for a project involving a technology that has not been proven 

at commercial scale. 

The bankers are critical however, because a commercial scale energy project can often cause hundreds of millions or billions of dollars, generally beyond the capacity or interest of venture capital investors. This problematic moment moving a technology from a 

small pilot project to a full commercial scale plant is often the point 

at which many promising energy technologies falter. In the clean 

energy technology industry we call it the ‘‘Valley of Death.’’ 

Mr. Chairman, the ‘‘Valley of Death’’ looms large. Failing to 

bridge it has cost a serious progress on many clean energy technologies. In some cases investors from other countries have stepped 

into the breach and the technology has advanced. But we have lost 
22 

the tax and employment benefits of a company based in the United 

States. 

S. 3233 would begin to address this problem. It would increase 

the willingness of banks to make loans for clean energy projects by 

providing a secondary market for their loans through the 21st century Energy Deployment Corporation. Implemented well, this secondary market should increase the capital available for the scale 

up of clean energy technologies with lower risk profiles. 

The critical question is whether the corporation, in its operation, 

would also purchase loans from higher risk, ‘‘Valley of Death’’ 

projects. One of the primary purposes of S. 3233 is promote access 

to affordable debt financing for accelerated deployment of advanced 

clean energy technologies and first of a kind commercial deployments. I am concerned, Mr. Chairman, that the bill will fail to address precisely this kind of higher risk, ‘‘Valley of Death’’ project 

as part of a larger portfolio projects. 

Mr. Chairman, the legislation you have introduced obviously 

comes at a challenging time with a downturn in the economy, tumult in the credit markets and problems at Fannie Mae and 

Freddy Mac. But it is precisely at this moment when clean energy 

projects so vital to our economy, environment and security are facing increasing difficulty getting financed that the mechanism you 

propose is so important. This is especially the case for projects involving innovative technologies with higher associated risk, the 

very technologies that may well hold the keys to addressing the climate crisis, our oil dependence, a deteriorating electric grid and 

also provide a major stimulus to the faltering economy. These higher risk projects should be part of a broader, risk balanced portfolio 

of loans that enter the secondary market created by the corporation 

you propose in the bill. 

In addition to a secondary market for project loans this committee has been focused on various credit enhancement tools for 

some time, including enacting a Loan Guarantee Program in the 

2005 Energy Bill, potentially refining that program in Senator Domenici’s pending bill and considering various tools during the development of S. 3233. These tools include loan guarantees, letter of 

credits, direct loans and related mechanisms. They could directly 

address these higher risk projects. 

Unfortunately S. 3233 as currently written does not provide 

these tools to the corporation. Given the scale of the challenge, I 

suggest you revisit this decision. In sum, S. 3233 as drafted may 

not result in loans for high risk projects finding a home in the secondary market and will not provide credit support such as loan 

guarantees for these high risk projects. 

In March, Senator Domenici introduced S. 2730 which creates 

the Clean Energy Investment Bank. The bank has authority to 

make investments in eligible clean energy projects using a variety 

of tools including loans, loan guarantees and purchase of equity 

shares. The bank however, is restricted to investments in deploying 

a commercial technology. That is, a technology in general use in 

the commercial marketplace. This, combined with the requirements 

that investments be made on a ‘‘self sustaining basis’’ seems to 

limit the scope of the activities to technologies that have already 

navigated the ‘‘Valley of Death.’’ 
23 

So, Mr. Chairman, we have an important dilemma. Your bill, S. 

3233 has a critical focus on high risk, ‘‘Valley of Death’’ projects. 

But as written it does not authorize the corporation to use the most 

effective credit support tools for advancing these critical plants. 

Senator Domenici’s bill, S. 2730 includes these important credit 

support tools, such as loan guarantees, but does not allow the new 

bank to invest in higher risk, ‘‘Valley of Death’’ projects. 

I urge the committee to explore the integration of these two important bills to ensure that the critical need for capital for these 

projects can be addressed through both mechanisms, a secondary 

market for energy project loans and credit support, including direct 

loans and loan guarantees. 

In conclusion, I strongly support the efforts of this committee to 

greatly increase the debt capital available for clean energy projects, 

especially for high risk ventures that might not otherwise cross the 

‘‘Valley of Death.’’ Mr. Chairman, I urge you and Senator Domenici 

to integrate the best aspects of your two bills and thereby provide 

important mechanisms that will stimulate the massive private sector investment required to take clean energy technologies to scale. 

We stand ready at Google to help both of you in your important 

legislative efforts. 

Thank you for the opportunity to testify. 

[The prepared statement of Mr. Reicher follows:] 

PREPARED STATEMENT OF DAN W. REICHER, DIRECTOR, CLIMATE CHANGE AND

ENERGY INITIATIVES, GOOGLE.ORG , MOUNTAIN VIEW, CA 

Mr. Chairman and members of the Committee, my name is Dan Reicher and I 

am pleased to share my perspective on legislation to advance the deployment of 

clean energy technology. I serve as Director of Climate Change and Energy Initiatives for Google.org, a unit of Google which has been capitalized with more than $1 

billion of Google stock to make investments and advance policy in the areas of climate change and energy, global poverty and global health. At Google we have been 

working to lower the cost and increase the deployment of renewable energy through 

our Renewable Electricity Cheaper than Coal (RE<C) Initiative and also to accelerate the deployment of plug-in vehicles through our RechargeIT Initiative. We have 

also been working to increase our use of clean power and energy efficiency at Google 

data centers and offices in the US and other countries. 

Prior to my position with Google, I was President and Co-Founder of New Energy 

Capital, a private equity firm funded by the California State Teachers Retirement 

System and Vantage Point Venture Partners to invest in clean energy projects. New 

Energy Capital has made equity investments and secured debt financing for ethanol 

and biodiesel projects, cogeneration facilities, and a biomass power plant. Prior to 

this position, I was Executive Vice President of Northern Power Systems, one of the 

nation’s oldest renewable energy companies. Northern Power has built almost one 

thousand energy projects around the world and also developed path-breaking energy 

technology. 

Prior to my roles in the private sector, I served in the Clinton Administration as 

Assistant Secretary of Energy for Energy Efficiency and Renewable Energy, the Acting Assistant Secretary of Energy for Policy, and Department of Energy Chief of 

Staff and Deputy Chief of Staff. 

There is an established pathway for investment in clean energy: 

• It often starts with government investment in early stage high risk technology 

research 

• It moves to corporate and venture capital funding of technology development 

• It then proceeds to actual deployment of technologies through project finance 

and other mechanisms. 

Your bill is focused primarily on the final stage of this continuum—the deployment of clean energy technologies at a scale significant enough to actually address 

our energy-related challenges like climate change, national security, economic competitiveness, and poverty alleviation. 
24 

The good news is that there is an array of clean energy technologies that have 

been developed with government and private sector investment that could address 

our many energy-related challenges. 

The not so good news is that investment in the actual deployment of these technologies—‘‘steel in the ground’’ as we say in the project investment world—is inadequate. 

• Sometimes the risk profile of the technology is too high. • Sometimes the return profile of the technology is too low. • Sometimes the technology is too costly in comparison with competing technologies. 

The most important point I will make today is that aggressive federal policy can 

drive private sector investment—measured in the trillions of dollars—that will be 

required to move the nation and the globe toward a more sustainable energy future. 

There are several critical steps the federal government must take: 

• First, the federal government must put a price on greenhouse gas emissions in 

order to internalize the costs of climate change and move energy investments 

toward lower carbon and more efficient technologies. • Second, we must remove barriers to cleaner and more efficient technologies and 

establish rigorous standards to move these technologies to market. • Third, we must significantly increase public funding of research and development of advanced energy technologies. • And fourth, the federal government must provide financial support to the private sector to help move immature and often higher risk technologies to the 

market—and from there to commercial scale. 

The fourth role is well illustrated by the current debate over the reauthorization 

of tax credits for renewable energy. There is no better example of the role of federal 

policy in stimulating—and retarding—investment in clean energy projects than the 

on-again, off-again investment in US wind projects because of the on-again off-again 

nature of the wind production tax credits. For more than a decade these credits 

have been here for a year or two and then gone for months or years. Investors simply will not back a US wind project if it looks like the tax credit authorization will 

expire prior to completion of the project. This has caused a damaging boom and bust 

cycle in the industry. 

This fourth role is also illustrated by the bill you have recently introduced, S. 

3233, the 21st Century Energy Technology Act. The bill, if enacted, would increase 

the capital available for clean energy projects, thereby helping to mature the underlying technologies and move them to scale. I welcome your bill and in this testimony 

provide my thoughts on how it might be improved including integration with a related bill Senator Domenici introduced in March. 

There are typically two elements of energy project finance: equity and debt. Federal tax credits—when they are available—have stimulated equity investment in 

wind, solar and other clean energy projects. Securing loans for projects has been 

more problematic, especially for higher risk projects. Bankers are generally reluctant to provide a loan for a project involving a technology that has not been proven 

at commercial scale. The bankers are critical, however, because a commercial-scale 

energy project can often cost hundreds of millions or billions of dollars, generally 

beyond the capacity or interest of venture capital investors who have often advanced 

the technology through pilot scale. This problematic moment—moving a technology 

from a small pilot project to a full commercial-scale plant—is often the point at 

which many promising energy technologies falter. In the clean energy technology industry we call it the ‘‘Valley of Death’’. It is a major focus of our RE<C (Renewable 

Electricity Cheaper than Coal) Initiative. 

The Valley of Death looms large. Failing to bridge it has cost us serious progress 

on many clean energy technologies from wind, solar, and geothermal, to biofuels and 

efficiency. In some cases investors from other countries have stepped into the breach 

and the technology has advanced but we have lost the tax and employment benefits 

of a company based in the U.S. 

S. 3233 would begin to address this problem. It would increase the willingness 

of banks to make loans for clean energy projects by providing a secondary market 

for their loans through the 21st Century Energy Deployment Corporation (Corporation). Implemented well this secondary market should increase the capital available 

for the scale-up of clean energy technologies with lower risk profiles. The question 

is whether the Corporation in its operation would also purchase loans from higher 

risk ‘‘Valley of Death’’ projects. One of the primary purposes of S. 3233 is ‘‘to promote access to affordable debt financing for accelerated deployment of advanced 

clean energy technologies and first-of-a-kind commercial deployments.’’ The bill di-
25 

rects the Corporation to establish criteria that will enable banks to determine the 

eligibility of loans for resale at the time of initial lending. A key issue in the development of these criteria will be the level of project risk that the Corporation is willing to assume as it develops a portfolio of loans for the secondary market. I am concerned that the bill will fail to address precisely the kind of higher risk Valley of 

Death projects—as part of a larger portfolio of projects—that most need a smart 

push from the government. 

Mr. Chairman, the legislation you have introduced obviously comes at a challenging time with the downturn in the economy and tumult in the credit markets. 

But it is precisely at this moment—when clean energy projects so vital to our economy, environment and security are facing increasing difficulty getting financed— 

that the mechanism you propose is so important. This is especially the case for 

projects involving innovative technologies with higher associated risk—the very 

technologies that may well hold the keys to addressing the climate crisis, our oil 

dependence, a deteriorating electric grid and also provide a major stimulus to the 

faltering economy. These higher risk projects should be part of a broader, risk-balanced portfolio of loans that enter the secondary market created by the Corporation 

you propose in S. 3233. 

In addition to a secondary market for energy project loans, this Committee has 

been focused on various credit enhancement tools for some time, including enacting 

a loan guarantee program in the 2005 energy bill, potentially refining and expanding that program in Senator Domenici’s pending bill, and considering various tools 

during development of S. 3233. These tools, including loan guarantees, letters of 

credit, direct loans and related mechanisms, could directly address these higher risk 

projects. Loan guarantees, for example, help borrowers obtain access to credit with 

more favorable terms than they might otherwise obtain in private lending markets 

because the federal government guarantees to pay lenders if the borrowers default. 

By doing so we could help leverage the vast amounts of private sector capital that 

is so critical to taking clean energy technologies to scale. Unfortunately, S. 3233 as 

currently written does not provide these tools to the Corporation. Given the scale 

of the challenge, I suggest you revisit this decision. 

In summary, S. 3233 as drafted may not result in loans for high-risk projects finding a home in the secondary market and will not provide credit support, such as 

loan guarantees, for these high risk projects. 

In March, Senator Domenici introduced S. 2730, the Clean Energy Investment 

Bank Act of 2008. The bill has goals similar to S. 3233 and the two bills are complementary in certain respects in their approach. S. 2730 creates the Clean Energy 

Investment Bank of the United States which has authority to make investments in 

eligible clean energy projects using a variety of tools including loans, loan guarantees, purchase of equity shares, and participation in royalties, earnings and profits. 

The bank, however, is restricted to investments in projects deploying a ‘‘commercial 

technology’’, i.e. ‘‘a technology in general use in the commercial marketplace.’’ This, 

combined with the requirement that investments be made ‘‘on a self-sustaining 

basis’’ seems to limit the scope of the activities to technologies that have already 

navigated the Valley of Death. 

So we have an interesting dilemma: S. 3233 has an important focus on high-risk 

Valley of Death projects but as written it does not authorize the Corporation to use 

the most effective tools for advancing these critical plants. Senator Domenici’s bill 

includes these important credit support tools, such as loan guarantees, but does not 

allow the new bank to invest in higher risk Valley of Death projects. I urge the 

Committee to explore the integration of these two important bills to ensure that the 

critical need for capital for these projects can be addressed through two important 

mechanisms: a secondary market for energy project loans and credit support including direct loans and loan guarantees. 

As you further explore credit support, one risk mitigation measure you might analyze is whether it would make sense to require that a loan or loan guarantee for 

a high risk early stage project be provided to the underlying technology company 

rather than the typical special purpose limited liability project company. In this way 

if the project fails there may still be revenues, assets etc. in the underlying company 

that can reduce the government’s financial liability. This approach might also reduce the level of technical due diligence required by the government-sponsored bank 

or corporation. 

It is important to note that the existing DOE loan guarantee authority could, in 

principle, address the Valley of Death problem and, more generally, help with scaling important technologies. But DOE’s loan guarantee program (LGP) faces a number of challenges that have in part motivated the legislation this Committee is considering. In a report issued last week the Government Accountability Office reviewed the LGP for the Energy and Water Development Subcommittees of the 
26 

House and Senate Appropriations Committees. GAO concluded that the LGP program has been slow in implementation; as of this month DOE had not approved any 

loan guarantees. GAO also concluded that DOE is not well positioned to manage the 

LGP effectively and maintain accountability. Additionally, GAO found that it will 

be difficult for DOE to estimate the ‘‘subsidy costs’’ of the LGP, i.e. the estimated 

long-term net cost of loan guarantees including, for example, government payments 

of defaults and delinquencies. GAO suggested limiting the amount of DOE loan 

guarantee commitments until DOE had addressed these and other problems. 

Before I conclude let me highlight two other aspects of S. 3233. First, I strongly 

agree with the direction in the legislation to develop deployment goals and numerical performance targets in order ‘‘to guide and measure the performance of the Corporation toward supporting the deployment of clean energy technologies . . . ’’ 

While some details may need to be considered further, these kinds of goals and 

measures are an important element of a successful deployment program. 

Second, I also support your effort in the bill to develop debt instruments that aggregate smaller clean energy technology deployment projects. This could be particularly helpful to an array of energy efficiency projects which tend to be smaller but 

often share enough characteristics to be aggregated into larger financeable packages. 

In conclusion, I strongly support the efforts of this Committee to greatly increase 

the debt capital available for clean energy projects, especially for higher risk ventures that might not otherwise cross the Valley of Death. Mr. Chairman, I would 

urge you and Ranking Member Domenici to integrate the best aspects of your two 

bills and thereby provide important mechanisms that will stimulate the massive private sector investment required to take clean energy technologies to scale. We stand 

ready at Google to help you in your important legislative efforts. 

Thank you for the opportunity to testify today. 

The CHAIRMAN. Thank you very much. 

Mr. Eckel, you’re our final witness here. Go right ahead. 

STATEMENT OF JEFFREY ECKEL, PRESIDENT AND CEO, 

HANNON ARMSTRONG, ANNAPOLIS, MD 

Mr. ECKEL. Thank you Senators Bingaman, Domenici and members on the committee. I appreciate the opportunity to speak to you 

today on these two bills. I last appeared before this committee in 

1988. I appreciate you keeping my resume on file. I hope to come 

back sooner next time. 

I’m going to provide the perspective of a lender in the energy finance business. Hannon Armstrong has pioneered multi-billion dollar securitization facility for clean energy investments. We also 

make direct equity investments. 

We would perhaps be able to describe ourselves as a clean energy 

investment bank with those two activities. The focus of the firm is 

increasing energy productivity. A note, I no longer say energy efficiency or conservation. We call it energy productivity. A domestic 

supply of energy while reducing greenhouse gas impact. 

Three reference projects that I think will establish some credibility. One and a half billion dollar U.S. Transcarbon Project in 

Louisiana basically takes domestic petroleum coke, gasifies it and 

turns it into a synthetic gas to replace all together too expensive 

natural gas in the U.S. fertilizer business. Among the very interesting things about this project is that it has a 100 percent carbon 

sequestration strategy through enhance oil recovery. 

Hannon Armstrong has financed one and a half billion, actually 

more than that, in energy efficiency investments under the Energy 

Savings Performance Contract Program and Utility Energy Service 

Savings Contract Program, UESC Program. Programs that have 

been dramatically re-energized by Assistant Secretary Andy 

Karsner. Thank you, Mr. Karsner. 
27 

We also commenced the first large scale geothermal drilling program in 20 years in the salt and sea area in California. It is the 

single best geothermal resource in the United States. It will result 

in $1 billion of new geothermal power production in the next 5 

years. We’re very excited about what we’ve done, very proud of our 

activities and know that it’s just a drop in the bucket. Much more 

must be done on a much grander scale. 

I believe both the 21st century concept and the clean energy 

bank concept have terrific elements in them that I would agree 

with the panelists probably need to be combined. These are bold 

ideas coming at a critical juncture with an extraordinary opportunity to create change. Of course the enemy of the great is merely 

the ‘‘pretty good.’’ 

I respectfully suggest that we avoid the ‘‘pretty good.’’ Because 

we’ve got a pretty good problem ahead of us. I would say the biggest issue will be the ordinary investments that are far short of the 

extraordinary investments that we need. 

I’m going to highlight three concerns I have with essentially both 

concepts and not really single them out. Determining which investment actually fills a market void or instead crowd out private investment is fundamentally crucial to a government corporation 

that’s in the finance business. It wouldn’t be the first government 

program to have an unintended consequence of reducing private 

sector development or investment of risk taking. 

Particularly the concept of in the 21st century Corporation, to develop a stable secondary market and promote access to affordable 

debt financing. That’s what Hannon Armstrong and a number of 

other firms do. We do it pretty well. 

I think there’s a notion that small transactions don’t get done because of financing. I think our activity on the ESPC program and 

UESC program puts that to the test. The issue is really an engineering and procurement and insulation project. We don’t have 

enough engineers in this country to do energy efficiency on the 

scale necessary to do it. It’s not really a finance problem. 

We don’t need lower interest rates. In fact the history of the last 

10 years in credit markets is credit is priced too cheaply. Fannie 

and Freddie are extremely relevant examples of that. The problem 

is there’s no debt for most of these transactions at any price. 

They’re the larger transactions, the unproven transactions that 

Dan spoke about in the ‘‘Valley of Death.’’ 

The second point is that we really go after extraordinary projects. 

I’m also trying to catch the panel up on time here. The 21st Century concept has a very interesting list of technologies. I think a 

lot of good thinking went into it. 

It does however, leave the latitude to pursue some fairly ordinary 

transaction which I fear it would lead to. I would humbly suggest 

that only projects that satisfy two goals be considered for either of 

these concepts. One is that it improves the Nation’s energy security. Two, it reduces greenhouse gases simultaneously. 

The World Resources Institute has done remarkable work in 

making this an incredibly approachable subject of which technologies actually achieve both. But we have two huge problems. We 

better be going after both of them at the same time. 
28 

The final point is, again, if we’re going after grand scale projects, 

and I believe the Clean Energy Investment Bank says we need 30 

percent private investment. It sounds good on the surface. We 

should have some risk sharing by the private sector. 

But the really big projects are still not going to attract private 

capital initially. I would point out the Niagara and St. Lawrence 

hydro projects in the 1940s, interstate highway system in the 

1950s and even the overused space program analogy. Grand scale 

projects, not private sector financed on the front end. 

Private sector financed on the back end, I think the U.S. Government could make a lot of money with this corporation by underwriting the very grand projects. Then once they’re proven, built 

and operational, sell down to the private sector. I think that would 

be a very terrific use of the incredible power in the U.S. Government in these programs. 

That’s the sum of our comments. Thank you very much. 

[The prepared statement of Mr. Eckel follows:] 

PREPARED STATEMENT OF JEFFREY ECKEL, PRESIDENT AND CEO, HANNON

ARMSTRONG, ANNAPOLIS, MD 

Senators Bingaman, Domenici and the members of the Committee on Energy and 

Natural Resources, I appreciate the opportunity to speak to you today regarding 

Senate Bill 3233 for the establishment of the 21st Century Energy Deployment Corporation and Senate Bill 2730 for the establishment of Clean Energy Investment 

Bank. I will provide the perspective of Hannon Armstrong, a firm that has pioneered the aggregation of small, clean energy investments into a multi-billion dollar 

securitization program. Hannon Armstrong is also a firm that I would describe as 

a Clean Energy Investment Bank; we are a 28 year old investment bank focused 

on financing the projects that advance the US energy system by increasing energy 

productivity and the domestic supply of energy, while reducing the impact of greenhouse gas emissions. Recent examples of our activity include: 

• The $1.5 billion US Transcarbon project in Louisiana that gasifies domestic petroleum coke into a synthetic gas to be used in place of expensive natural gas 

in the nation’s fertilizer industry. Among the notable aspects of this project is 

its 100% carbon sequestration in enhanced oil recovery wells. 

• $1.5 billion in energy efficiency investments under the Federal Energy Savings 

Performance Contracts (‘‘ESPC’’) and Utility Energy Savings Contracts 

(‘‘UESC’’) programs, programs that have been dramatically re-energized by the 

leadership of Asst. Secretary Andy Karsner. 

• Commencement of the the first large scale geothermal drilling program in the 

Salton Sea area of California in over 20 years that will result in over $1 billion 

of new geothermal power production in the next 5 years. 

I am very proud of our activities in the clean energy area and yet am fully aware 

that so much more must be done, on a scale much grander than can be addressed 

by conventional project finance. I believe both the 21st Century concept and the 

Clean Energy Bank concept can fill an absolutely critical role in achieving the scale 

necessary to make a difference. 

This is a bold idea, coming at a critical juncture, with an extraordinary opportunity to create change. Of course the enemy of the great is merely the ‘‘pretty good’’ 

and I respectfully suggest that every effort must be made to ensure either concept 

does not succumb to the temptations of the politically popular, but ultimately ordinary, investments. Among the concerns I have include: 

• The determination of which investments actually fill a market void or instead 

crowd out private investment is fundamental. This would not be the first government program that had the unintended consequence of reducing private sector investment, despite a mission to expand it. I am particularly concerned by 

the stated goals of the 21st Century Corporation to 1) ‘‘develop a stable secondary market for clean energy technology loans’’ and 2) ‘‘promote access to affordable debt financing’’. I would describe those two activities as areas the private sector, my firm included, actually do quite well. More importantly, these 

two notions are very far from the critical market void I believe this legislation 
29 

aspires to fill. In my opinion, I do not think the key focus should be on ‘‘lowering interest rates’’, a theme that runs though S 3233. Too high of an interest 

rate is not the problem in today’s clean energy finance—it is the lack of debt 

at any price for the most ambitious efforts we need to accelerate. • It is absolutely critical to define the type of projects any government corporation 

would pursue in order to achieve the extraordinary. While the 21st Century concept proposes a very specific and useful list of technologies, it provides latitude 

to pursue a very broad range of projects. And while the Clean Energy Investment Bank includes a definition of ‘‘Eligible Projects’’, an essential concept in 

my opinion, I would suggest the definition be revised to include only those 

projects that achieve two goals simultaneously: improve the nation’s energy security AND reduce green house gas emissions. As written, this institution would 

have the latitude to do projects that achieve only one of those objectives, a rather low bar for the opportunity at hand. • The concept of requiring at least 30% private investment in the Clean Energy 

Investment Bank seems sound and appropriate on the surface, ensuring that 

the Bank is not the only institution at risk. But I would suggest that some of 

the great investments in this country that have made real change have been 

initially 100% government investments. Think of the Niagara and St. Lawrence 

hydroelectric projects in the 40’s, the Interstate Highway system in the 50’s, 

and even the space program in the 60’s. There are grand scale projects that will 

need to be done in the areas of carbon sequestration, hot rocks geothermal technology, national transmission lines, the development of a national electric vehicle recharging system among many others, where, if done correctly and on a 

grand enough scale, will still be too ambitious for private sector capital. Once 

these grand projects are constructed, operational and proved successful, the investment can be sold down to private investors. As such, I would propose that 

the 30% private investment target be considered over the life of the project, not 

soley for the initial capitalization. 

I thank the committee for this opportunity to comment on the concept of the 21st 

Century Energy Technology Deployment Act and the Clean Energy Investment 

Bank. 

The CHAIRMAN. Thank you very much. Thank you all for that 

good testimony. Let me start and ask some questions here. I just 

advise folks that we’re scheduled, at least the last word I got, was 

that there’s supposed to be a vote at 12:15—11:15, excuse me. So 

I’ll try to stick by the 5-minutes. 

Let me ask first, a lot of the testimony seems to be that a failure 

of both bills is that we don’t really insure a new source of financing 

for the higher risk projects. I think that was sort of one of the 

themes that I heard. At least both from Dan and from John and 

maybe Andy alluded to that. 

I guess a concern I’ve got is we’ve sort of got two ends of the 

spectrum here. One is the loan program that we’ve already put in 

place in the Department of Energy where I believe the criteria that 

they’re using or the general rule of thumb is they don’t want to 

take on any risky projects. They want every project that they provide a loan guarantee for to be a successful project; none of them 

should fail. 

I believe that’s the position that they are very open about. I don’t 

think I’m misstating that. Now we’re saying ok, what we want to 

do is to set up an entity that will take a very different view. Perhaps sort of, have a target or a focus of looking for some of these 

risky projects and providing assistance there. 

Obviously with all of the turmoil we’re seeing in financial markets today, I’m sure there are a lot of people who would say, wait 

a minute. That’s all the government needs is to find, some more 

risky things to invest in. So Andy, what’s your take on that? 

I guess neither bill really contemplates substantial focus on these 

riskier projects the way I read the two bills. But I think I under-
30 

stood Dan to be saying and maybe John as well that that’s a piece 

that needs to be addressed. 

Mr. KARSNER. Senator, the word risk is the operative word there. 

That’s a very relative term and very broad bandwidth. It can be a 

scary word. 

I’m reminded of people who say well, you know, that mother 

won’t let their kid even cross the street. It’s too big of a risk. From 

my own experience as a power generation developer, the institutional barriers and impediments that we’re talking about are not 

risky if you understand the technology. 

I can tell you a tale of two turbines. The V47 Vestas turbine 

which at one time was the world leading, most installed turbine 

and the V52 which evolved from it, which simply turned the blades 

a little bit, turned the nacelle a little bit so it could optimize that 

turbine’s capacity performance. I wanted to use that later turbine 

on a project, but I couldn’t find anybody to finance it because it 

wasn’t already in the marketplace. 

Now it dominates the marketplace. That turbine optimization 

technology called variable wind speed was developed by NREL. 

There was nobody in government that would do anything less than 

certify that that was available, that it worked. That it was tested. 

That it should be deployed. That it was operational. But you could 

not find the debt, as Jeff says, at any price, to go for something 

that would be considered new technology. 

So we’re distorted. We’re forcing our energy industry to be what 

it is, the most conservative, technology-avoiding, risk averse industry because of the lack of financing available for what we call risk. 

We’re in government, our shop is in the business of developing that 

risk, moving it down the cost curve, certifying it, asserting it. Then 

you all have given us the additional mission through the Loan 

Guarantee Program and other mechanisms, grants, Clean Cities 

etc, to deploy it. 

So overcoming that risk ‘‘Valley of Death’’ that Dan’s talking 

about. Sometimes isn’t jumping the Grand Canyon. It’s merely understanding managed risk and moving it forward because the financial markets are too conservative to act. 

The CHAIRMAN. Dan, did you have a perspective on this you want 

to elaborate on here? I guess what I’m hearing from you Andy is 

you’re saying that even though it is classified today by most as 

high risk, in fact if you know something about the technology, it’s 

not. There may be examples like that. 

But there are other examples, I would assume, that are classified 

as high risk because they are high risk. I think John and Dan were 

saying that we ought to invest in those too. We ought to provide 

credit for those too even though they may fail and we may wind 

up having guaranteed a loan that nobody is going to pay back. 

Mr. REICHER. Yes, Mr. Chairman, let me say when I was in the 

private equity world when we were investing in clean energy 

projects, we would be regularly approached by project developers 

with a higher risk project. Our standard line was, come back after 

you’ve built the first project. We’d love to finance them. 

There’s lot of people standing in line ready to finance the second 

project. It is indeed the first project that is often the real challenge. 

That’s where this comes into play. 
31 

Andy is right. Sometimes this is risk perception. Sometimes you 

just need to push this into the market. People need to see it working. Sometimes, as you indicate, the first projects do indeed fail. 

That’s precisely the point at which I think the Federal Government 

can step in, in those higher risk areas, and move them through 

that early stage. 

It’s not the 50th wind project. It’s the first with a new technology. There is more exposure. But if we want to make progress 

in these technologies, this is an appropriate role for the government. 

The government has taken on risk in the space program, building the interstate highways system, building the hydroelectric 

dams. You know, across a whole area of technologies, in the early 

stages of the nuclear program. It’s the appropriate role for government. Taking people through this ‘‘Valley of Death’’ we will more 

quickly get to a point where the regular commercial credit markets 

can take over. 

Having said that what you propose, I think, can be put in a portfolio approach. There can be a mixture of higher and lower risk 

kinds of loans that are in fact packaged for the secondary market. 

So these are not only high risk. I stress that in the testimony. A 

risk adjusted balanced portfolio. 

But unless we really do support these early stage, high risk ‘‘Valley of Death’’ projects, we won’t be adding very much to the current 

situation. 

The CHAIRMAN. Thank you. 

Senator Domenici. 

Senator DOMENICI. Mr. Chairman, let me just say to the witnesses. I introduced the bill after a lot of staff work, it’s a pretty 

good document. A lot of work went into it. 

I would think you would consider that here’s a Senator, full of 

enthusiasm, trying to find some way to get some real money into 

what’s obvious. That is this whole business of investing in energy 

projects that need money to move us ahead. I was probably wet behind the ears and enthusiastic as could be. 

Now I’ve experienced the 6-months of the U.S. Government trying to get loan guarantees, just plain old loan guarantees, nothing, 

no reinvention of anything, no new technology. Loan guarantees for 

nuclear power plants, which aren’t new things. They’re old dinosaurs. 

We’ve been building them for 40 years. We got some that are 40 

years old. We can’t even get loan guarantees approved and ready 

to go by the government of the United States. You know that 

makes me think that it’s all a waste of time, a waste of time thinking about this corporation which would do exotic things. 

How can you get this through the Federal Government? There’s 

more bureaucrats around at different levels that want to kill anything that involves something unique and different. It’s no different 

now than it was at any time during the last 36 years that I’ve been 

here. When you’ve got something new and different, you just don’t 

have a shot at it. 

But I tell you. We probably won’t get this one done because we 

waited too long in the calendar to get it done. But the United 

States of America is not going to be able to make it in terms of en-
32 

ergy projects that are required with the Loan Guarantee Portfolio 

and the ideas that we have right now of loan guarantees for the 

nuclear industry and eight billion or so for the coal industry and 

whatever the number is for the wind industry. 

That’s not going to work. That’s not going to get much done. But 

I think we’ve got to get that done, nonetheless to show we can do 

something. 

I don’t know how you people in government, including you, Andy. 

I don’t see how you can put up with it. How much longer do you 

think it’s going to take to get the loan guarantees where we can 

say we’re going to do them? 

I’m just fishing around here to get something that would be a 

precursor to this bill. Plain and simple, loan guarantees. We’ve got 

how many billion of them there? We’ve got 20 billion, 20, 21 billion? We haven’t used a nickel. 

Now we’ve already got a GAO report that says they don’t work. 

Of course it was done—GAO was asked to do it by somebody who’s 

anti nuclear so you know it would come out. Everybody thinks 

GAO is objective. It came out just what the person that asked 

wanted that the program is no good. 

Let’s wait about 6 months and Senator Bingaman and I will ask 

them to do one. It will come out the other way. That’s how great 

GAO is. 

Now let me ask you what about it? Can we get loan guarantees 

through before we worry too much about this bill? 

Mr. KARSNER. Senator, we have to. Of course I can’t speak for 

an Administration position on the two bills and how they relate to 

that. But what I can say is we have an obligation in the Energy 

Policy Act to put that up. 

I don’t think I’ve had a hearing with you or this committee where 

this subject matter hasn’t come up. So let me speak to it in the 

terms that you’re speaking to it. What is the time, value, and the 

opportunity cost of not moving forward? 

I think what you all are discussing today, and I’ve had a good 

fortune to discuss with all the leaders in this room privately, is 

what are appropriate means of organizing ourselves to act expediently and with agility with something we know we must do? We’re 

hemorrhaging $700 billion a year. The Northwest Passage is open 

for the first time in human recorded history. 

We inevitably will take these risks to deploy technologies that 

the taxpayer has invested in and matured and are available and 

are in our interest. The question is will we do it at the point of paying or reactively, or will we do it proactively with foresight and vision? I know that’s what you all are striving to do. 

I would urge you to consolidate and integrate approaches in the 

way that these panelists with more than 100 accumulated years of 

energy experience, infrastructure build-out experience, are advocating, and continue to work with the Administration to craft a disruptive organizational approach. Because that’s the only way we’re 

going to see this erupting technology. 

Senator DOMENICI. We don’t even know if the Administration 

concurs with this bill, right? Based on your testimony—— 

Mr. KARSNER. The Administration is still evaluating the bills. 

Senator DOMENICI. Have you had enough time? 
33 

[Laughter.] 

Mr. KARSNER. We’re doing a very thorough job, sir of evaluating 

the—— 

[Laughter.] 

Senator DOMENICI. The point I’m making, it isn’t brand new. I 

mean my bill has been around. We asked them to do it. 

It’s been around how many months? You know, unless you’re 

against it and don’t want to open the blinds, letting sunlight in. 

You could already have this done. 

So I’ve noticed how you very carefully phrased it when you told 

us. I thought you were saying, my God, I’ve got to say this but it 

certainly is foolish. 

Mr. KARSNER. That’s part of my present job description, sir, is 

being very careful. 

Senator DOMENICI. No, it isn’t. You have to state things that are 

foolish. You have to state them anyway. 

The CHAIRMAN. Careful, Andy. 

[Laughter.] 

Senator DOMENICI. Excuse me, Senator. I have questions about 

the make up difference of the two corporations, but look to your 

two high paid people to ask those questions. So I’m just going to 

not ask any. 

You know I think we can put something like this together. Senator Bingaman wants to do it. We’ll do it and be bipartisan and it 

will be something very different. 

But I don’t believe we’ve got any imagination around. The problem is not sufficiently bad for us to be looking for things like this. 

I mean we’re down here in the weeds still trying to find a way out 

of this bill that’s five years old that provided all these things. We 

didn’t even do them. 

You know many of these things are provided in the bill that we 

did, Senator Bingaman. Administration never looked at them. 

They’re just sitting there, this 4-year-old, 5-year-old law. You know 

that. 

For me, I’ve gone all the way from the top of the mountain to 

way down in the valley in terms of what we’re going to get done. 

I think this one terrible crisis for the great people of this country. 

I don’t think we’ve ever had anything like it. It can’t be solved by 

people running around saying let’s do a Manhattan Project. 

He’s closer to any. He said you don’t want one, you need eight 

or ten Manhattan Projects. They’re all so different. You can’t solve 

all the energy crisis with a Manhattan Project. What is the project 

trying to do? 

So anyway, too much talk by me and I’m going to shut up and 

close my binder up and when I do that you can conclude from that 

whatever you’d like. 

The CHAIRMAN. I’ll conclude it’s time for Senator Salazar to ask 

questions. 

Senator SALAZAR. Thank you very much, Chairman Bingaman. 

Let me first at the outset say thank you to Judy Pensabene for all 

her hard work on the matters that we’ve dealt with on this committee for the last three and a half years. She’s been a trooper and 

a great example for this committee. 
34 

To Andy Karsner, also to you as Assistant Secretary, your great 

work at Enrail. Sometimes it seems that Republicans and Democrats can’t get along very well in this town. I think your work at 

the National Renewable Energy Lab has shown that in fact we can 

move forward as we try to develop this new energy frontier for our 

world. 

I agree with the panelists in terms of the energy futures. John, 

the three dimensions that you talked about which I think are imperatives for us in our country. I would look forward, frankly, to 

working with you, Chairman Bingaman and Senator Domenici to 

see whether we might be able to take the advice of the panel and 

integrate the approaches and try to come up with a package that 

we might even be able to move forward with if we can get another 

energy bill. 

It seems to me that the people of America want us to do that. 

I always say about this energy world that we are in we know a lot 

about what we can do. It’s just a matter of how we get that technology, to play it out and make it commercialized. 

You know, Colorado, just a quick example with the National Renewable Energy Lab leading we formed a collaboratory with the 

University of Colorado School of Minds and with the Colorado 

State University to deploy these new technologies out into the private sector. We’re doing that with Conoco Philips and a whole host 

of other organizations that are taking these technologies and trying 

to deploy them out. So I appreciate what we are doing out there. 

I want to ask just a couple questions and ask maybe each of you 

to take 20, 30 seconds to respond to it. With respect to these financing mechanisms that have been proposed in these two legislations, how would those financing mechanisms help us with two specific technologies that we’ve been working on? Some of which we’ve 

made progress on and some of which we are very frustrated with. 

But that is IGCC. We take coal and do what we have to do, including carbon sequestration. 

Two, cellulosic ethanol because we know we have limits on corn. 

We have a RFS here that we have passed. So how would these financing mechanisms here help us advance those technologies? 

Andy, why don’t we start with you and just come across the board. 

If you take 30 seconds each. 

Mr. KARSNER. I’ll just talk on the basic principle and let the pros 

talk to specific characteristics. But the basic principle is all of these 

technologies have higher up front installed capital costs. That they 

pay for themselves through the benefit of how they operate through 

time. 

So if that’s biofuels, the obvious benefits of security in emissions 

and oil dependency and pricing. I mean, we’re now almost at cost 

parity for gasoline today on cellulosic. So giving a long term project 

financing framework enables us to lower that cost on the project 

as opposed to all equity up front. 

Think of buying your home, all cash up front, verses financing 

it over 30 years. You can do that today with our commoditized conventional based economy. You cannot do it with something we 

know we can do, such as the 12 to 17 experimental cellulosic biorefineries we’re putting in motion. 
35 

When project No. 2 of each of those becomes replicable process 

integration—— 

Senator SALAZAR. So these financing mechanisms will help us 

with those projects along? 

Mr. KARSNER. Should help us scale them. Right now we’re perfecting process integration. 

Senator SALAZAR. Ok. 

Mr. KARSNER. Through the government experiments. 

Senator SALAZAR. Mr. Denniston, let me, I want to get everybody. 

Since I have like 5 minutes and you guys got a minute and a half 

here left. 

John. 

Mr. DENNISTON. Yes, thanks, Senator Salazar. It’s a great question. I think you chose two terrific examples. 

I think that cellulosic and advanced biofuels are the poster child 

for what this legislation can do because one of the properties of 

those advanced technologies is that entrepreneurs are now at a 

point where they are working at small scale. What they want to 

do is to introduce them into the market at large scale. That’s not 

been done before. 

Lenders are not signing up to debt finance those projects. This 

is exactly what this new corporation can do with the loan guarantee lenders will step up, finance them, some will work, some will 

not. We have to worry about and think about a portfolio balance 

for the new corporation. But it is the case in point from my perspective of what this corporation can do. 

In terms of the second, do you have a question? 

Senator SALAZAR. No, I only got 20 seconds to go through the 

rest of the panel. 

Mr. DENNISTON. On capture and sequestration I actually think 

that’s more of an R and D phase at the point where we have capture and sequestration technology, the corporation then can give 

guarantees to put it in the market. 

Senator SALAZAR. Ok. 

Ms. Hull. 

Ms. HULL. Yes, sir. The risks on both IGCC and cellulosic are 

technology risks on our scale of risks as everyone said. There’s 

many other risks. But those are the fundamental risks. 

Loan guarantees address that risk. Insurance addresses that 

risk. The ability to bundle and remarket securities can help with 

that so—— 

Senator SALAZAR. So are these two financing mechanisms then 

help address those risks? 

Ms. HULL. Absolutely. 

Senator SALAZAR. Ok. 

Dan. 

Mr. REICHER. Very quickly, Senator. Patent number five million 

with all those zeros was issued in the early 1990s for cellulosic ethanol. When it was issued we had great hopes that we were going 

to see commercial scale plants by the end of the last decade. We 

still haven’t seen commercial scale plants. It goes as my colleagues 

have said to the issue of risk in building plant number one and 

number two, perfect mechanism for addressing this. 
36 

The whole point about debt financing, as we call it, debt tends 

to be cheaper than equity. If you have to equity finance a project 

like that, it’s very expensive. The venture capital world is not prepared to put hundreds of millions or billions into a single project. 

That’s where the debt markets come into play. 

That’s why these debt oriented mechanisms, the secondary market and the credit support mechanisms are absolutely critical. 

We’re not going to do this on the back of equity ownership projects. 

We’re going to have to use the classic mix of equity and debt to 

move these projects forward. 

Senator SALAZAR. Ok. 

Jeff. Thirty seconds. 

Mr. ECKEL. The market void that would be filled by this bank 

on cellulosic ethanol would be to fund the second project. The market void that would be filled by this bank on IGCC is to fund the 

first project. Excellent opportunities for this institution. 

Senator SALAZAR. Thank you for your excellent testimony. Chairman Bingaman you have put your finger on, I think, one of the 

most important issues that we can work on as an Energy Committee. Thank you so much. 

The CHAIRMAN. Thank you so much. Senator Craig. 

Senator CRAIG. Wile our government is suffering from risk aversion, we are suffering from political aversion at the moment. We’re 

probably hand tied for at least 10 to 12 months. I hope it’s different 

than that. But I think the reality is that. 

So let me give the panelists an example because when we passed 

the Energy Policy Act and we established a loan guarantee program, we hoped it would do a variety of things that it has not yet 

done and in many instances you’re saying may not be able to do. 

Phase one of the loan guarantee program was solicitation, was 

issued in August 2006 after the passage in 2005. So still no loan 

guarantees were issued after 2 years. 

DOE received 143 applications in response to this solicitation. 

Still no new projects started. DOE finalized a loan guarantee regulations in October 2007, 2 years after it was authorized. 

Phase two solicitations were just announced on June 30 to cover 

renewables and nuclear projects. The phase two loan guarantees, 

probably based on simply the reality of who we are, a change of Administration, the politics of all of that, establishing a new Administration. My guess it’s November 2009 and more likely November 

2010 before we see this happen. 

So there’s a phenomenal level of frustration here that the bureaucracy grinds not only slowly, but sometimes chooses not to do 

anything. Jeanine, I think you used some nice finessing words saying civil servants could not? There was a phrase in your testimony 

that was a window of opportunity for me to say, were you talking 

about the inability of DOE to get its act together in a timely fashion? 

Ms. HULL. I was talking about the general lack in governmental 

agencies of the type of sophisticated financial expertise that is necessary. 

Senator CRAIG. Ah ha. I thought that’s what you were saying. 

You phrased it differently than I. So tell me how this is different. 

These two bills do it differently and how long it takes. 
37 

It should take from legislation to policy to law that creates it. I 

mean, we put the money up, everything is there. But DOE drags 

along. Industry out there is now watching it and departing. 

Let me suggest on the cellulosic issue. I work very closely with 

Iogen Corporation, one of those new technologies. They finally 

walked away from DOE because of timeliness. 

Another reason, a lot of money out there in the marketplace 

right now that wants to invest in energy. Along came a company 

that had been helping them and said, forget the time lag. We want 

to lead in cellulosic. Here’s a check. Go built the plant. So they’re 

going ahead. That’s good news. Government didn’t have to finance 

it. 

The bad news is government had an opportunity to do a lot of 

things that it didn’t do. The timeline was several years late. What’s 

different about this? 

Ms. HULL. Um, sir. I—— 

Senator CRAIG. Of these two bills, Jeanine? 

Ms. HULL. It’s Jeanine. Thank you. 

Senator CRAIG. Oh, I’m sorry, Jeanine. 

Ms. HULL. Quite alright. 

Senator CRAIG. My apologies. 

Ms. HULL. Both bills are significantly different from the existing 

loan guarantee program which is, as you noted, housed within the 

Department of Energy and is run by career professionals. 

Senator CRAIG. It’s ok. Go ahead. 

Ms. HULL. They are limited by an awful lot of rules and regulations that are there and appropriate in other circumstances, but 

are not geared to getting the financial programs like this off the 

ground quickly. So this—— 

Senator CRAIG. So maybe our mistake—— 

Ms. HULL. But neither one of these bills, sir, as I understand 

them. I haven’t really had a chance to seriously analyze the bill 

that was just, most recently, introduced. But both bills, as I understand it, would separate the entity being created from the civil 

service structure and would allow the entity to acquire the necessary expertise to be able to make this entity capable of responding closer to the timeframe we’re talking about. 

Senator CRAIG. So in the context of the current circumstances 

we’re in, in the mortgage market, having created a quasi governmental marketplace entities that are in trouble today. Jeff, how 

should we do it differently? So we can convince not only our colleagues that these are good ideas, but we can convince the marketplace that this is something that long term, down the road when 

we’ve got hundreds of billions racked up, doesn’t come tumbling 

down? 

Mr. ECKEL. There’s no way to guarantee there won’t be mistakes 

in the future. There better be mistakes in the future. 

Senator CRAIG. I was going to say I hope there are a few. 

Mr. ECKEL. We’re not taking enough risk if there aren’t mistakes. But simply the very act of making it a private corporation. 

We’ve done projects where we’ve borrowed money from OPEC, from 

IFC, from Finish and Dutch Export Credit Agencies. It’s not super 

fast, but it’s way faster than borrowing money from the U.S. Government. 
38 

It’s got to be out of the civil service. I think both bills achieve 

that. 

Senator CRAIG. Thank you. My time’s up. Thank you, Mr. Chairman. 

The CHAIRMAN. Senator Murkowski. 

Senator MURKOWSKI. Thank you, Mr. Chairman. I too, want to 

echo the comments from Senator Salazar that you and Senator 

Domenici have really identified, the crux where we are with our energy crisis now. We’re talking about a lot of policy and we’re talking about technologies as if we are utilizing all of this in our backyard today. 

The fact of the matter is, is we’re not. I think the public is also 

thinking we must be doing it somewhere. Maybe not in my State 

or your State, but we’re doing it somewhere because we keep talking about carbon capture and sequestration. We keep talking about 

IGCC. 

We keep throwing these around. Then they’re not seeing any lowering in the prices of their energy, whether it’s at the pump or 

what they’re paying at home. They don’t understand that the problem to a certain extent is back here as we put up road blocks, if 

you will, to provide for the financing to get these projects off the 

drawing board and into everybody’s backyard so we can really be 

utilizing it. 

I appreciate the frustrations that you have raised, Senator 

Domenici and Senator Craig about the loan guarantees. You know 

we put them in place. We expect them to work and then we don’t 

see those outcomes. 

I would like to think with the approach that both energy leaders 

here at this Dias are presenting. That it’s more than just putting 

something on paper. That we actually have a process that works. 

That does allow for facilitation of the concepts into the market to 

truly make a difference. 

Secretary Karsner, when we had an opportunity to talk about 

Senator Domenici’s legislation some months ago you were mentioning the fact that in your former life you were in an international wind project developer. We had an opportunity to talk 

about other programs that are available if you’re outside the borders of the United States. Did you ever utilize the United States 

funded export/import bank or the Overseas Private Investment 

Corporation for projects overseas? 

We talked about them being models for what we could do here. 

Senator Domenici’s legislation somewhat crafted around similar 

concepts. But are those ideas that we can meld into these two particular pieces of legislation that we have before us now? 

Mr. KARSNER. Again, not taking an Administration position on 

the specific bills. But as we talked about on that occasion, absolutely it was my experience. It is probably my greatest single frustration that coming back to my own country with the technologies 

I now preside over in this portfolio. I could use the taxpayer funded 

mechanisms at the Export-Import Bank for 100 percent credit, if 

I wanted debt, without ever going to Congress or having legislation 

any day of the week. 

If I wanted to finance a project I could use OPIC for help and 

equity arrangement. I could use the Trade Development Agency for 
39 

walking around money, for anemometry, for site development, for 

permitting, only if it was outside the United States. If all the villages that I know you are so concerned about in Alaska are hit 

hardest by these energy situations. 

Whatever has hit it home has hit multiples harder in Alaska; 

where we have geothermal resource, where we have bio-gas, 

gassifiers ready to go. They could easily be economically justified 

over their life cycle. But all I can offer them from here in Washington is small, annualized increments of potential grants from a 

tribal program rather than a guaranteed outcome that would pay 

for itself. 

So instead of doing the right thing today, we force ourselves to 

do it over time. If Alaska were a foreign country, I could walk into 

any of those institutions that the taxpayers already on the book for 

and fund those things tomorrow, based on those technologies that 

are already in my portfolio. 

So you can imagine the irony and the challenge it is for me, mentally, to think that I can deploy these things faster abroad than I 

can deploy them at home. 

Senator MURKOWSKI. It’s incredibly, incredibly frustrating. Let 

me ask just generally, I think most of you, Mr. Reicher and Mr. 

Eckel, certainly, indicated that the best way forward is an integration of the two concepts that we have from Senator Domenici and 

the chairman. Is it possible to do it the way that both gentlemen 

are approaching it? 

Senator Domenici’s perspective is perhaps a little more conservative in respect to which projects receive the funding as opposed to 

Senator Bingaman that looks more toward the breakthrough concepts. Is it doable to integrate, do you believe? Everyone’s in concurrence. 

Mr. Denniston. 

Mr. DENNISTON. No, I do. I agree with Mr. Reicher. I think that 

we have a lot to admire in Senator Domenici’s bill and a lot to admire in Senator Bingaman’s bill. I think there’s a very happy marriage between the two. 

I think the key question that’s left is which projects, which energy projects, does the new corporation aim to support? What’s the 

prioritization? 

Senator MURKOWSKI. But you could, in fact, have this portfolio 

mix, as some have suggested as well? 

Mr. DENNISTON. Undoubtedly. The question is what’s the mix? I 

think that’s where the detail has to—— 

Senator MURKOWSKI. Mr. Reicher. 

Mr. REICHER. Senator Murkowski, I think we could do this. I 

think this is one of those situations where Republicans and Democrats, environmentalists and folks from industry, you know, the left 

and the right. I think there’s an awful lot of agreement here. Unlike so many other issues, I think this could happen. 

I don’t think it would be a huge amount of work to sit down, integrate these bills and get some broad agreement. Then get down 

to details about how you put this entity together. I think it’s really 

critical that we do it. 

Now, I do have to emphasize the government can fulfill this role. 

I have to say when I was in the private equity world we got in-
40 

volved in a bio diesel project. We went to the U.S. Department of 

Agriculture and we got a loan guarantee. That enabled a local bank 

in Delaware to get a loan for a bio diesel project. 

So there are programs, well established track records. But something of this magnitude, with this sort of risk profiles that we’re 

talking about, the time dimensions that are so critical. I do think 

that moving this outside of government into some sort of bank or 

corporation with the government oversight, with some government 

involvement as both bills require. I think that makes a lot of sense. 

What I really want to emphasize, I really think we could bring 

all the right players together to get this done. 

Senator MURKOWSKI. Thank you. Thank you, Mr. Chairman. 

The CHAIRMAN. Thank you. The vote has started. Why don’t we 

go to Senator Sessions? You’ll be the last questioner. Then we’ll 

dismiss everyone and go vote. 

Senator SESSIONS. Thank you, Mr. Chairman. 

Senator DOMENICI. Senator, as you close up would you just permit me to make an observation before you do that? 

Senator SESSIONS. I’d be delighted. Thank you, Chairman Bingaman for your cool head and leadership consistency on this issue 

and Senator Domenici for your long term leadership on this issue. 

We’re going to have some fusses soon, I think over energy. I do 

not believe we need to go home as a Congress until we’ve taken 

some steps that will deal with the reality that the average family, 

since last year, is paying $100 more per month for the same 

amount of gasoline as they paid the year before. This is an incredible hit to their budget which it ripples through the economy. 

We’ve got chemical companies and others that are outsourcing to 

get cheaper natural gas, feed stocks for their progress. It’s just 

$700 billion a year wealth transfer. 

So Mr. Karsner, Congress gets it. I think, is beginning to get it. 

The American people want something done. 

And on this loan matter, I remain baffled, has there not been a 

single loan granted under the program that—— 

Mr. KARSNER. Not as of yet. 

Senator SESSIONS [continuing]. Senator Domenici put through? 

Mr. KARSNER. No, sir, there hasn’t. 

Senator SESSIONS. This is most troubling to me. Is there some 

problem with the legislation? I mean is there something? Have you 

asked us to fix some gap in the legislation so this could go forward? 

Because I mean this is the way I see it. 

I’m just simple minded about it. If we could accelerate, for example, cellulosic ethanol and accelerate it through government intervention, which I don’t loathe to do, a free market person, but if we 

could accelerate that and prove its commercial viability earlier, 

could have already have done that. We may find that that’s a substantial new source of clean energy. Is there some problem here 

that’s keeping this from happening? 

Mr. KARSNER. Sir, first of all let me say my experience with you 

is you are anything but simple minded. So as you know, nobody’s 

doing more than Auburn University and Dr. Bransby to bring down 

that price of cellulosic ethanol. As you’ve heard here what you need 

to do to integrate the process being developed there and build it 

out, physically build it out. 
41 

But when you talk about the impediments, a lot of times it’s not 

as complex as just, at the big level, the bureaucracy stopping us. 

I mean, consider the fact that Dan’s job before, my job now, is a 

transient management position. Typical average on this job might 

not exceed 24 to 30 months. But it takes me 17 months to hire one 

person. 

The likelihood that that person is going to be an MBA or have 

the acumen necessary for this level of risk management for $42.5 

billion in guaranteed capacity when the whole budget of DOE is 

$25 billion is a mismatch in expectations. I had an employee at my 

former company who was recruited in 3 weeks by Korn/Ferry to be 

part of the Millennium Challenge Corporation. He now dispenses 

money as grants for the U.S. Government. He’s got 25 years of energy experience. But I couldn’t possibly hire him at DOE. 

Ok, so we have to deal with the realities, the lack of agilities in 

our institutional infrastructure and posture ourselves, not for the 

cold war, but for the speed of the challenge to alleviate the price 

pressure you’re talking about. 

Senator SESSIONS. This question, do you think that this whole 

concept is doable? I think there’ve been some government sport for 

range fuels, a biofuel, cellulosic fuel plant on the Georgia/Alabama 

line. I know of three others in the State that have gotten no financial assistance. 

They’ve been delayed as a result of that. Actually one of the little 

projects is running below the radar screen and creating from wood 

product natural gas and less price than the commercial natural gas 

prices. So that’s cellulosic without any real subsidy. 

But I guess what I’m saying is that our goal is to accelerate the 

production of these items or could we—can you help us? Does your 

program help or do we need to start over like Senator Bingaman 

and Senator Domenici are proposing? 

Mr. KARSNER. Our program today, the core strength of it is applied science technology, research development, and demonstration. 

So we can do that in the increments that we are given by Congress, 

this year 1.7 billion. So that’s almost two-thirds of a coal-fired 

power facility. 

We can do that at those increments over time. I think we’re postured as an organization to do that well. But the challenge is a cost 

benefit versus $700 billion that needs to be displaced, and growing. 

The challenge is to raise the $15 billion that’s in the private markets today to a clip that gets us to our goals in multi-years. That’s 

more like $80 billion or $100 billion of investment per year. 

So we’ve got to help accelerate that going to market. The current 

institutional framework of the Department of Energy is about 

science and technology, not commercialization and scale deployment. 

Senator SESSIONS. Thank you. 

The CHAIRMAN. Senator Domenici, you had a comment? 

Senator DOMENICI. I wanted to just comment to you, Mr. Chairman. I’ve kind of indicated in my own way how I was so enthusiastic about this as a method of getting some real money into the 

marketplace. How I felt like all our work was probably in vain. 
42 

But I want to take all of that back. Say that I leave today, if 

you’re willing and I’m willing, let’s see if we can put a bill together. 

See if we can do it. 

It’s not the solution to all the problems surrounding the energy 

crisis. But it’s obviously a vacuum that if we could get it done and 

modeled after either the two that do foreign financing. Get it out 

of Congress and to a President who will sign it. I think it could fill 

a gap. 

I would be willing to spend some time, if you are and want to 

make sure the record reflects that. These wonderful people given 

all their time know that I generally love to get things done. It’s 

nothing more thrilling than to do it together as bipartisan. 

I don’t know anymore whether or not you, but whether the hierarchy around here wants things done. So that’s what I was alluding to a while ago. I don’t know. 

If we had something real good to do, I don’t know whether there 

is a message out there that even though we have 49, you have 51. 

I don’t know whether our 49 can say shall we try something or are 

we just wasting time? I don’t and you maybe don’t know either. 

But at least you know from me that I’m willing to try. 

The CHAIRMAN. Thank you very much. Obviously we want to 

work on this and see if we can bring these two bills together and 

fill in any of the gaps that have been identified here by the witnesses. 

Let me thank all the witnesses for your excellent testimony. We 

will conclude the hearing. 

[Whereupon, at 11:39 a.m. the hearing was adjourned.] 
(43) 

APPENDIX 

RESPONSES TO ADDITIONAL QUESTIONS

RESPONSES OF JEFFREY ECKEL TO QUESTIONS FROM SENATOR BINGAMAN

Question 1. You observe that the primary problem for projects is not necessarily 

the expense of debt financing but rather its unavailability. Could a more robust secondary market, make lenders more likely to issue debt or do you believe a more direct intervention is required? 

Answer. The main reason debt is scarce is not supply (present credit crunch notwithstanding) is that the projects are not well enough structured to ‘‘deserve’’ debt. 

The existing Federal loan guarantee programs fill some of that need and should be 

fully utilized. That said, a secondary market will increase debt supply. 

Question 2. You mention the need to substantially increase the scale of the investments in these technologies. What specific mechanisms do you see as the most effective for the federal government? 

Answer. First, getting the price signals right: a price on carbon is essential to increasing investment. Second, changing the way the renewable energy tax credits 

work would be very effective. Moving to a national Renewable Portfolio Standard 

and eliminating tax credits would be a way to accelerate private sector investment. 

Third, this entity should focus on the grand infrastructure projects and enabling 

technologies that change the way energy is used. For example a massive transmission project in the west to get wind energy from the plains to the load centers, 

or hydrogen refueling infrastructure or the carbon sequestration projects, such as 

FutureGen. 

RESPONSES OF JEFFREY ECKEL TO QUESTIONS FROM SENATOR DOMENICI

Question 3. Can you elaborate on the role that you see a more comprehensive 

menu of ‘financial tools’ playing in the Bank’s investments and provide examples as 

to why different projects may require different tools? 

Answer. No comment. 

Question 4. S. 2730 and S. 3233 take different approaches on maximum contingent liability. One bill sets that amount at $100 billion, while the other allows the 

volume of lending activities to be determined by the Corporation itself. Could you 

provide your views on the merits or risks of each approach? 

Answer. No comment. 

Question 5. On the issue of whether or not common stock for the financial entity 

created in either S. 2730 or S. 3233 should be issued, I am concerned about the impact that doing so would have on the advancement of game-changing technologies 

that have a higher level of default risk. How do you believe that such a process 

might change the posture of the financial entity in terms of its willingness (or ability) to take risks versus a likely preference for profit-driven operations when shareholders have a role? 

Answer. By definition, if one can sell stock in the entity on commercial terms, 

then it is effectively crowding out private equity capital. Having the entity make the 

large investments, that transform technologies and industries will probably not be 

the kind of investment the private sector would make, or it would be doing it now. 

RESPONSES OF JEFFREY ECKEL TO QUESTIONS FROM SENATOR MARTINEZ

Question 6a. I would like to get the panelists perspective on a provision included 

in S.3233 that allows a government created and sponsored clean energy corporation 

to issue stock to shareholders. In light of the current financial problems facing 

Fannie Mae and Freddie Mac and their historic governance problems, is it a wise 

idea to give a federally-backed lending institution two seemingly contradictory roles? 
44 

Answer. I agree that it is a contradiction. However, the government should get 

equity, if it can, in the enterprises it creates, similar to the warrants received under 

the TARP program. 

Question 6b. Could the drive to maximize shareholder profit compromise the public mission of a government-backed institution using tax-payer dollars to finance 

clean energy projects? 

Answer. I think that is a very real risk. 

DYKEMA GOSSETT PLLC, 

Washington, DC, September 12, 2008. 

Hon. JEFF BINGAMAN, 

Chairman, Energy and Natural Resources Committee, Dirksen Senate Office Building, Washington, DC. 

DEAR CHAIRMAN BINGAMAN: Attached, please find my answers to your follow-up 

questions to my testimony at the July 15, 2008, hearing of the Senate Energy and 

Natural Resources Committee on S. 3233 and S. 2730. These bills would create a 

federal funding entity (referred to as the ‘‘FFE’’ in my response) whose purpose is 

to invest in energy technology which will create a diversified domestic energy industry capable of meeting a significant portion of the nation’s energy requirements and 

minimize the nation’s emission contribution to climate change from the energy production or use sectors. This attachment also includes my answers to questions from 

Senators Domenici and Martinez. 

The Committee’s questions, and my responses, essentially focus on three questions: 

1. What projects should qualify for funding? 

2. What funding mechanisms should be available to the funding entity? And 

3. What risk management measures should be included in the statutory language? 

Although I elaborate on the responses in the attached, my short answers are: 

1. Any energy project that can make a meaningful contribution to our energy, 

environmental, economic or physical security which cannot access private 

sources of funding due to uncertainties regarding commercial performance, aggregation-related credit issues or certain regulatory risks, should be eligible for 

funding. 

2. The complete suite of financial and funding mechanisms identified in both 

bills should be available to the funding entity. 

3. An absolute cap on the lending, guarantee and investment authority of the 

funding entity should be included specifically in the legislative language. However, the cap should be high enough to reflect the scale of funding required (in 

the order of approximately one trillion dollars over the life of the FFE), and the 

purpose of encouraging new technology will be undermined with a requirement 

for the entity to be self-sustaining, especially in the early years. 

The FFE needs broad authority to fund energy supply solutions that meet the 

goals of energy and environmental security, from new technologies under development to the large pool of technologies that are here today but not are not being 

properly exploited, such as energy efficiency and solar thermal installation. It needs 

the flexibility to invest in potentially high-return solutions that currently are a 

gleam in their inventor’s eye, as well as moderate-return investments that are available today and which provide immediate benefits in job creation and energy security 

of technologies. 

As the front pages of our newspapers tell us, even the best intentioned and drafted legislation can cause enormous pain if it is not appropriately regulated and audited. It is imperative that any FFE created by this Committee not be left to judge 

its own behavior, but be submitted to adequate regular financial and managerial audits by disinterested third parties, such as the Office of the Comptroller of the Currency or the Federal Reserve Bank Board. Regulation is not the bane of free markets. Regulatory failure, not regulation, created the savings and loan crisis of the 

1980’s, the failure of Long Term Capital Markets in the 1990’s, the implosion of the 

electrical markets in 2001 and the recent subprime mortgage market collapse, with 

its attendant disruption of the commercial banking sector. Appropriate regulation 

keeps markets free, open and operating with integrity and competence. 

I elaborate on these and other issues in the Questions and Answers attachment. 

Thank you for the opportunity to participate in promoting these important legislative initiatives. 
45 

ATTACHMENT 

RESPONSES OF JEANINE HULL TO QUESTIONS FROM SENATOR BINGAMAN

Question 1. I agree with your comments on the opportunities in aggregating 

smaller loans to the residential and commercial sectors. We’ve tried to address that 

area in Section 6(e) of my bill. Do you have any recommendations for how we can 

go further to strengthen or expand this program? 

Answer. Section 6(e) is an important recognition of the need to enhance the investment profile of residential and commercial scale energy efficiency and solar 

thermal applications by encouraging the aggregation of such projects for resale to 

a government-sponsored secondary market. In addition, the definitions in Section 3 

of ‘‘clean energy technology’’ and ‘‘novel technology’’ recognize the diversity of solutions that should be supported. However, the requirement of Section 4(d) that 70 

percent of the funding portfolio be invested in ‘‘breakthrough’’ technology may limit 

the ability of the financing entity to support solutions that face non-technical barriers to financing. 

As a country, we currently have available many technologies which are underutilized and do not meet the definition of ‘novel’ or ‘breakthrough.’ However, they have, 

if broadly deployed, the potential to significantly and immediately reduce the percent of energy wasted in the U.S. today, reduce the per capita use of electricity and 

natural gas, reduce the production of greenhouse gases (GHG), reduce the amount 

of diesel fuels needed to transport coal and other feedstocks and relieve over-burdened electrical transmission infrastructure. 

There is no bigger ‘‘bang for the buck’’ for a federal dollar than loan guarantees, 

energy-efficient mortgages, and secondary market support for energy efficiency, 

solar thermal applications and other similar technologies. It is the cost of aggregations, credit risk and low returns that limit the widespread deployment of these deserving, but ‘unsexy’ programs. This is exactly the kind of investment that a federal 

funding entity (FFE) should look to make. 

As government investment makes energy efficiency and other programs capable 

of harvesting ‘low-hanging-fruit’ available and widely deployed, the private sector 

will step up to participate. Private sector funding is highly unlikely to happen without direct government intervention in the market through the tools provided in the 

bills. 

Question 2. Can you expand further on your comments regarding some of the constraints that you see as impeding government programs such as the DOE loan guarantee program? What kind of form do you estimate would be most successful? 

Answer. The biggest constraint to the success of current government financing 

programs is that the government system is not structured to reward the skill sets 

that are necessary to make efficient judgments about financial risk. People making 

financial risk decisions must be experienced in the market sector. They must understand market fluctuations and how risks are valued. Learning how to evaluate and 

manage risk effectively is a skill learned primarily through experience, and the government has to be ready to pay for that. Using consultants to provide these services 

is an expensive way around the civil service structure which fails to provide an inhouse capability and diffuses decision making responsibility. From my years as a 

consultant, educating senior management and Boards of Directors on the management of energy traders, I can say that FFE managers will need to thoroughly understand these risk in order to properly manage this program. 

Therefore, I recommend that a provision similar to Section 4(e)2 of S. 2370, exempting employees of the funding entity from the civil service laws and regulations 

be included the Committee’s merged bills. 

This is not to say that there is no role for input from qualified civil service employees, including the national labs. The Department has exceptionally qualified 

and talented engineers and scientists who are experts in research and development 

of alternate technologies. Basic R&D in these fields is a role that must be performed 

by government, if it is to be performed at all, given the exceptional lead-time for 

commercialization of these technologies. It also provides a ready and trained talent 

pool to assist the financial entity in evaluating technologies for investment. The 

FFE can and should reimburse the government for the consulting services of these 

individuals. 

As critical as it is that the FFE get into markets in a timely manner, it is equally 

critical that the government get out of the market when it is no longer needed. The 

FFE should be sunsetted in the organic statute. It would be difficult to set up, operate and then disband a ‘permanent’ bureaucracy within the existing civil service 

structure. 
46 

1 I recommend against inclusion of the provision of S. 2730 that requires all ‘eligible projects’ 

to use commercial technology, and the funding allocation of S. 3233, which is heavily biased toward breakthrough technology. 

Attracting young, bright, well educated (if not highly experienced) employees 

should not be a problem for an entity that can be a jumping-off place for the lucrative equity finance private sector. In this regard, a preventive conflict-of-interest policy should be in place early on. 

With respect to the organizational structure of the FFE: I do not believe a perfect 

template exists for an FFE, although similar functions can be found in the Highway 

Trust Fund, Federal National Mortgage Association (FANNIE MAE), the Small 

Business Administration Loan and Loan Guarantee Programs, the various development and commercialization programs conducted by the Department of Energy and 

Agriculture, the Overseas Private Investment Corporation and the Export-Import 

Bank of the US, among many others. 

The Department of Energy has studies which analyze various templates for the 

FFE which the Committee is presumably studying to determine exactly what structure is most appropriate and the powers and authorities needed by such an entity. 

I do not think you will find the template for this entity ‘‘on the shelf.’’ 

The structure, however, will not determine the success or failure of this program. 

That will be determined by the quality of people hired to set up the FFE and retained over time to operate it, together with policies and procedures that ensure 

transparency and accountability, demand professionalism and avoid to the maximum extent possible conflicts of interest, partisanship, politization and other selfdefeating betrayals of the public trust. 

The structure must allow for, indeed encourage, risk-taking within the pre-determined bounds of technological potential or commercial operability, or rapid deployment of energy-saving methods among lower-income families who may not be able 

to pay back the investment, or perhaps who should not even be asked to do so. 

These are not normal commercial risks and the entity’s progress can only be 

measured accurately over time, in years not in quarters, on a total portfolio and societal benefit basis. The FFE’s ability to pay back all capital or to be self-supporting 

within a specific time frame are not the kind of ‘success’ that is required from this 

effort. Yes, there must be a risk/reward equation which balances, but those who 

bear the risk will not in all cases be the same as those who are rewarded. Some 

benefits, such as unrepaid direct investment in weatherproofing low income homes 

or in energy-efficient transportation systems, should be considered valid and appropriate investments and should be encouraged. In those cases, all Americans benefit 

when less energy is imported, wasted or exhausted into the atmosphere. 

Question 3. Assuming we were to merge the bills before us today and develop an 

entity that could provide the most important services of each entity, that would entail some risk to the taxpayers of businesses failing. Beyond this risk of project failure, I’m also concerned that safeguards be in place to give us some assurance that 

the risks undertaken by the new entity be prudent and targeted towards providing 

real societal benefits. Can you recommend any additional safeguards or standards 

for a combined bill that might give us such assurance? 

Answer. The manner in which the FFE approaches risk management is a key 

issue that must be addressed in legislation, merging and supporting the various approaches identified in S. 2730 and S. 3233. 

The issue is not whether individual projects will fail, since some failure is inevitable. A normal private equity sector success ratio is that one out of ten projects 

pay off. There is no reason to think that the government will do better. The issue 

is the overall success of risk management, so that gains from successes protect taxpayers (as opposed to the financing entity) from bearing the cost of unnecessary failures. Note that taxpayers can also lose as a result of inaction in the face of opportunity, by not underwriting ‘‘necessary risks.’’ If 100 breakthrough technologies that 

change the U.S. energy security profile are financed as a result of 1,000 investments, the risk will have equaled the reward, although, of course, quantification is 

required. 

Under an optimized merged bill, the FFE would support a number of different 

technologies with widely differing risk profiles. These different categories are already defined in the two bills: ‘‘breakthrough technology,’’ ‘‘novel technology,’’ and 

‘‘commercial technology.’’1 (See S. 3233 Sections 3(3), 3(7), and S. 2730 Section 2(4) 

and (5), respectively.) Each definition would represent a separate funding silo with 

different evaluation criteria, funding mechanisms and risk-reward characteristics. 

The proposed FFE would create a portfolio divided into the three silos. Specific 

investment goals and risk models should be tailored for each silo. This is both an 

additional safeguard that allows more effective risk evaluation, and an additional 
47 

way to ensure that the entity will meet its statutory goals. The proportion of funding allocated to the three silos should be determined by market and opportunity 

analysis under the leadership of the FFE Board rather than legislated, should be 

flexible, and should be an ongoing evaluation task. 

Certain technologies, such as new transmission communications and control 

equipment, which are commercially available today but are more expensive than 

conventional equipment, are subject to prudence reviews, multi-state approvals and 

diversified ratemaking scenarios which expose developers to greater regulatory 

risks. The FFE needs explicit authority to backstop these types of risks as well as 

market-based risks. In addition, expansion of the transmission grid to resource rich, 

but currently undeveloped regions, such as the areas with wind resources in Wyoming and North Dakota, are subject to a chicken and egg guessing game. Lenders 

are unwilling to lend to wind developers due to the lack of transmission service to 

the areas, and transmission developers are unwilling to risk line extensions to an 

undeveloped resource area. The FFE is in the best position to work with the regional grid planning entities to ensure that both the supply and transmission service projects are developed in a timely manner. 

Oversight would be provided by properly structured boards, the Secretary of Energy and either the OCC or Federal Reserve Board. Regular and attentive Congressional oversight will have a substantial impact on risk management and goal 

achievement. I will reiterate, however, how important it is that the FFE take the 

risks to be enumerated in the legislation, which should include, at a minimum technology risk, scale-up risk, certain regulatory risk, operational risk for novel technologies and aggregated credit risk. 

From highest risk to lowest risk, the primary tools which should be available to 

the FFE are: equity investments, loans, loan guarantees, letters of credit, and insurance. The provision and operation of the secondary market is a critical element to 

support the funding authority. Each of these can be found in either S. 2370 or S. 

3233. 

The FFE legislation should address the future role of the DOE Loan Guarantee 

Program Office (LGPO), which could continue to provide a service in energy financing, or could be rolled into the FFE. In either case, the role and limitations of the 

LGPO should be clearly recognized. The LGPO supports technology already demonstrated at pilot scale where the primary risk is scaling up. However, due to the 

statutory interpretation that the LGPO be self-sustaining, the transaction requirements and costs of LGPO loans may be limited LGPO customers to projects of about 

$20 million or greater, and may result in more money being available for loan guarantees than there are applicants for the support. 

It is crucial that risk methodology enable the financing entity to value the societal 

benefit of alternatives, and to aggregate these benefits when appropriate and necessary to create an efficient investment package. One technology may have widespread benefits where each application’s benefits are small. Nuclear technology risk 

should be limited by the Price-Anderson Nuclear Industries Indemnity Act. Direct 

investments of the entity in nuclear projects should be subject to provisions of the 

Price-Anderson Act covering DOE facilities. 

RESPONSES OF JEANINE HULL TO QUESTIONS FROM SENATOR DOMENICI

Question 4. Can you elaborate on the role that you see a more comprehensive 

menu of ‘financial tools’ playing in the Bank’s investments, and then provide examples as to why different projects may require different tools? 

Answer. This is one case where that old saw ‘‘one size fits all’’ definitely does not 

apply. The projects eligible for financial support under a combined bill should be (1) 

breakthrough, (2) novel and (3) commercial technologies, as discussed in the response to Question 3. That means that projects will be in early-stage, mid-stage and 

late stage development when they approach the FFE for funding. Just as venture 

capitalists (VCs) have different criteria than commercial bankers and different vehicles and mechanisms available for funding, the FFE will need to have the tools appropriate for angel, VC, mezzanine and quasi-commercial investing. One of the most 

effective risk management tools the funding entity can have is a full set of tools specially tailored to various types of risk. The ability to use the tool that imposes the 

least risk on the FFE, while achieving its intended function, is a key factor in the 

entity’s ability to successfully meet its goal and purpose. Having the appropriate 

tools will also allow the FFE to assist more projects if each project uses just the 

amount of funding or credit capacity it actually needs and no more. 

Technologies in the breakthrough silo are dominated by the risk they will not 

work as intended. These technologies will need greater support, perhaps for a longer 

period of time, than a project that has been demonstrated at pilot scale where the 
48 

risk is limited to scale-up, or a ‘‘novel’’ technology. In the first example, a direct loan 

or loan guaranty may be required to be in place for a period of five or more years. 

In the second example, insurance may be sufficient to encourage private lenders to 

take the funding risk. ‘Scale-up’ insurance may only be required for 1 to 3 years, 

until the commercial-size facility is operational. The cost of providing, and receiving, 

these two types of financial support will likely vary greatly. Both are necessary, but 

not for all projects. ‘‘Angel’’ investing should be limited, but where justified, is likely 

to take the form of a direct equity investment. 

Question 5. S. 2730 and S. 3233 take different approaches on maximum contin- gent liability. One bill sets that amount at $100 billion, while the other allows the 

volume of lending activities to be determined by the Corporation itself. Could you 

provide your views on the merits or risks of each approach? 

Answer. I believe in managing to budget limits. Therefore, I would encourage the 

Committee to set an explicit limit on maximum direct investment, direct lending 

and contingent liability as a first line risk management tool. Such a limit would 

serve as a baseline for audits, would help force management accountability, and 

would force better decision-making on tough issues. I also believe that Congress 

should revisit the cap on a regular basis to evaluate the overall performance of the 

FFE. 

However, the total amount available to the FFE should be more like $500 billion 

over the life of the program. I would also suggest attention to a gradual scaling up 

of the financial authority of the FFE over time. The first year authority will be 

spent primarily on hiring personnel and developing investment policies and screening mechanisms. For these reasons, the FFE will not likely be able to provide funding until its second year of operation. Depending upon the financing mechanism (direct appropriations, a Highway-Trust fund fee approach or sales of government 

Clean Energy Bonds or a combination of these and other methods), the total commitment (direct debt and equity) and contingent liability caps should be adjusted 

yearly to make available adequate funds and capacity to ensure wise investment decisions, but not too much as to encourage unnecessary risk taking. 

RESPONSES OF JEANINE HULL TO QUESTIONS FROM SENATORS DOMENICI

AND MARTINEZ

Question 6. On the issue of whether or not common stock for the financial entity 

created in either S. 2730 or S. 3233 should be issued, I am concerned about the impact that doing so would have on the advancement of game-changing technologies 

that have a higher level of default risk. How do you believe that such a process 

might change the posture of the financial entity, in terms of its willingness (or ability) to take risks versus a likely preference for profit-driven operations when shareholders have a role? I would like to get the panelists perspective on a provision included in S.3233 that allows a government created and sponsored clean energy corporation to issue stock to shareholders. In light of the current financial problems 

facing Fannie Mae and Freddie Mac and their historic governance problems, is it 

a wise idea to give a federally-backed lending institution two seemingly contradictory roles? 

Could the drive to maximize shareholder profit compromise the public mission of 

a government-backed institution using tax-payer dollars to finance clean energy 

projects? 

Answer. I share your concern that offering shares to the public would drastically 

curtail the ability and willingness of the entity’s officers and Board of Directors to 

take the type of risks that must be taken for the facility to meet the goal of domestic 

energy security. 

I am flatly opposed to allowing a government sponsored clean energy bank to 

issue shares of its stock to the public. I would, however, have no problem with the 

sale of government-backed clean energy bonds to the public as a means to ensure 

adequate capitalization of the funding entity, but only after the first five years of 

operation. 

In addition, and I can speak from personal experience on this issue, allowing the 

entity to sell stock to the public would impose a significant distraction on management to ensure compliance with state and federal securities laws and regulations 

and would lead to a never-ending debate over the laws from which the entity should 

be exempted (such as environmental, Freedom of Information, Federal Advisory 

Committee Act and on and on . . .). 

It is key that the funding powers and life expectancy of this entity be limited in 

explicit statutory language. When private capital markets are ready and willing to 

venture into a field cultivated by the FFE, the FFE must decamp to another underserved field or roll back operations. It will not be easy to determine when there is 
49 

adequate participation by private markets, but there must be specific indicators 

identified and monitored. It is not the role of this entity to compete with private 

capital markets, but to develop them into robust funders of a robust domestic energy 

industry and a rules-based secondary market for its debt. 

If, after 5-10 years of operation, there is no greater incursion by private markets 

into energy infrastructure development, then I believe the FFE will have failed at 

one part of its 3-part mission. I believe, however, that within the expected 20 years 

lifespan of the FFE, the FFE can jumpstart the creation of a diversified domestic 

energy industry capable of meeting a significant portion of the nation’s energy requirements and minimize the nation’s emission contribution to climate change from 

the energy production or use sectors. It should then remove itself from the market 

completely, allowing private capital markets to take over from there. 

[Responses to the following questions were not received at the 

time the hearing went to press:] 

QUESTIONS FOR ALEXANDER KARSNER FROM SENATOR BINGAMAN

Question 1. Given the significant investments you mention that will be needed to 

achieve market transformation in clean energy technologies, in your personal opinion is there an opportunity for the federal government to play a constructive role 

in financing beyond the currently authorized programs? 

Question 2. In addition to the loan guarantee program authorized in the 2005 bill, 

the 2007 energy bill authorized a sizable new direct loan program for automotive 

manufacturing to help push forward domestic production of fuel efficient vehicles; 

is it likely that such a program would be implemented on a schedule like we’ve seen 

with the loan guarantee program? Are there advantages inherent in placing such 

a program within or without the Executive Branch? 

Question 3. Based on your experiences in the private sector and in government, 

can you give us your personal perspective on the strengths and limitations of financial market interventions in each of the bills we are discussing today? 

Question 4. Assuming we were to merge the bills before us today and develop an 

entity that could provide the most important services of each entity, that would entail some risk to the taxpayers of businesses failing. Beyond this risk of project failure, I’m also concerned that safeguards be in place to give us some assurance that 

the risks undertaken by the new entity be prudent and targeted towards providing 

real societal benefits. Can you recommend any additional safeguards or standards 

for a combined bill that might give us such assurance? 

QUESTIONS FOR ALEXANDER KARSNER FROM SENATOR MENENDEZ

Question 5. If S. 3233 were enacted, you would serve on the Clean Energy Development Corporation’s board of directors, and your Department would be responsible 

for developing the technology roadmap which would guide Corporation. You would 

be responsible for balancing riskier investments with less risky ones. How large of 

a role do you see for solar panels in this theoretical portfolio? 

Question 6. I am concerned that small investment projects might not receive sufficient attention from either the CEIBUS Bank or the Century Energy Development 

Corporation. Many of our country’s best opportunities for energy efficiency and renewable energy are widely distributed. In addition, it can be even more costly to 

assess the risk associated with many small projects. What could be done to improve 

the ability of the proposed Energy Development Corporation to improve its ability 

to finance small, distributed projects? 

Question 7. One of the philosophical differences between S. 2730 and S. 3233 is 

that the former only invests in ‘‘commercial technology’’ which is ‘‘in general use’’. 

It also requires that its investments be made on a self-sustaining basis. I am concerned that this might preclude a number of technologies which we need in order 

to solve our energy crisis. Could CEIBUS support investments in photovoltaic solar 

power? What about plug-in hybrids? Can you give me an estimate of how much Federal incentives are already available for the established technologies which it could 

support, either through direct support, tax incentives, or through programs like the 

DOE Loan Guarantee Program? 

QUESTIONS FOR ALEXANDER KARSNER FROM SENATOR DOMENICI

Question 8. As an Assistant Secretary, I would like your opinion on how these 

bills differ in their approach to filling positions on the Board of Directors. One pro-
50 

vides for Presidential nominations with the Senate’s advice and consent, while the 

other relies upon Presidential appointments. One requires balanced representation 

of the political parties, while the other does not. 

Question 9. Having faced Senate confirmation, can you discuss the advantages 

and disadvantages of using that process to find the quality of individuals that we 

would seek to run an entity like those contemplated by S. 2730 and S. 3233? How 

important do you believe it is to have bipartisan representation on the Board of Directors? 

Question 10. S. 2730 and S. 3233 take different approaches on maximum contin- gent liability. One bill sets that amount at $100 billion, while the other allows the 

volume of lending activities to be determined by the Corporation itself. Could you 

provide your views on the merits or risks of each approach? 

Question 11. On the issue of whether or not common stock for the financial entity 

created in either S. 2730 or S. 3233 should be issued, I am concerned about the impact that doing so would have on the advancement of game-changing technologies 

that have a higher level of default risk. How do you believe that such a process 

might change the posture of the financial entity, in terms of its willingness (or ability) to take risks versus a likely preference for profit-driven operations when shareholders have a role? 

QUESTIONS FOR ALEXANDER KARSNER FROM SENATOR MARTINEZ

Question 12. I would like to get the panelists perspective on a provision included 

in S. 3233 that allows a government created and sponsored clean energy corporation 

to issue stock to shareholders. In light of the current financial problems facing 

Fannie Mae and Freddie Mac and their historic governance problems, is it a wise 

idea to give a federally-backed lending institution two seemingly contradictory roles? 

Question 13. Could the drive to maximize shareholder profit compromise the public mission of a government-backed institution using tax-payer dollars to finance 

clean energy projects? 

QUESTIONS FOR JOHN DENNISTON FROM SENATOR BINGAMAN

Question 1. Mr. Eckel indicated in his testimony that he doesn’t see a great need 

for a secondary market in energy project development loans, but you seem to disagree. What needs do you see as still going unaddressed in this area by the marketplace? 

Question 2. You talked a bit about risk and charting a middle course by balancing 

risk with fees generated through supporting more proven technologies. At the same 

time, one criticism of the DOE loan guarantee program is that in attempting to 

make the program self-sufficient, they may not be reducing costs sufficiently for the 

riskier technologies. How do you see striking this balance, and over what time period would you think a new entity should strive to be self-sustaining? Or should it 

be self-sustaining at all-should it leave the marketplace at some point? 

Question 3. Assuming we were to merge the bills before us today and develop an 

entity that could provide the most important services of each entity, that would entail some risk to the taxpayers of businesses failing. Beyond this risk of project failure, I’m also concerned that safeguards be in place to give us some assurance that 

the risks undertaken by the new entity be prudent and targeted towards providing 

real societal benefits. Can you recommend any additional safeguards or standards 

for a combined bill that might give us such assurance? 

QUESTIONS FOR JOHN DENNISTON FROM SENATOR DOMENICI

Question 4. One of the most constant refrains that we hear from witnesses before 

the Committee is that we must refrain from choosing technological winners and losers as we formulate a sound national energy policy. And yet, your testimony advocated the exact opposite approach-specifying which technologies should get financial 

assistance (batteries and biofuels, in your opinion) and which ones should not (nuclear and fossil fuels, again, in your opinion). I have trouble squaring your assertion 

that breakthrough technologies should be a top priority with your attempt to cross 

certain technologies off the list from the outset. Is it also your opinion that there 

are no breakthroughs left to be had in the nuclear and fossil sectors-would fission 

and affordable CCS for coal not constitute major breakthroughs? 

Question 5. Your discussion of a three-dimensional energy crisis does not include 

any mention of the need to keep energy affordable for Americans. I believe this is 

done, at least in part, by ensuring a healthy supply of energy that is capable of 

meeting demand for it. Do you agree with that assertion? 
51 

Question 6. At the hearing and in your testimony, you discussed some concerns 

with the eligibility criteria in S. 2730, which is modeled after Title XVII of the Energy Policy Act of 2005, and I would like to better understand those concerns. What 

technologies, exactly, do you believe would not be eligible under S. 2730? 

Question 7. S. 2730 and S. 3233 take different approaches on maximum contingent liability. One bill sets that amount at $100 billion, while the other allows the 

volume of lending activities to be determined by the Corporation itself. Could you 

provide your views on the merits or risks of each approach? 

Question 8. On the issue of whether or not common stock for the financial entity 

created in either S. 2730 or S. 3233 should be issued, I am concerned about the impact that doing so would have on the advancement of game-changing technologies 

that have a higher level of default risk. How do you believe that such a process 

might change the posture of the financial entity, in terms of its willingness (or ability) to take risks versus a likely preference for profit-driven operations when shareholders have a role? 

Question 9. In your testimony, you note that you have witnessed efforts in other 

nations, such as China and those in Europe, to dramatically accelerate the use of 

renewable energy. You state that, ‘‘Increasingly, entrepreneurs overseas enjoy advantages in the form of determined government policies, including financial incentives and large investments in research and education.’’ 

Congress has taken significant steps in recent years-particularly in the Energy 

Policy Act of 2005, the America COMPETES Act, and the Energy Independence and 

Security Act of 2007-to improve the United States’ offerings in those areas. It is my 

hope that Congress will renew the Production Tax Credits for solar and renewable 

energy projects before they expire, and substantial revenues are being invested in 

clean energy in the United States. In Ernst & Young’s most recent Country 

Attractiveness Indices for Renewable Energy, our nation remained atop the ‘‘All Renewables Index.’’ 

Can you provide additional details as to why you believe the U.S. is falling behind 

other nations with regard to renewable energy? Could you provide specific examples 

of advantages available in other nations that are not being offered by the United 

States, and provide your thoughts on how we can close whatever gaps continue to 

exist? 

Question 10. I was very interested in your comments on the Loan Guarantee Program-in particular, your suggestions for the current allocation of funding among the 

various low-carbon and carbon-free energy sectors. The structure of this program is 

the result of two years’ worth of bipartisan negotiations with our colleagues in the 

House of Representatives, and I believe its allocations are both realistic and appropriate. According to my staff, a total of $42.5 billion has been made available for 

loan guarantees. Approximately $4 billion has been solicited to date, and will be allocated between 13 renewable projects and 3 coal projects. Of the funds that remain, 

more than 80 percent will be distributed to nuclear and renewable projects-even 

though those technologies currently account for just 21 percent of our nation’s electricity. 

Given the need to keep energy affordable, can you explain in greater detail how 

the theoretical allocations that would be established by S. 3233 are an improvement 

over our current process? 

QUESTIONS FOR JOHN DENNISTON FROM SENATOR MARTINEZ

Question 11a. I would like to get the panelists perspective on a provision included 

in S.3233 that allows a government created and sponsored clean energy corporation 

to issue stock to shareholders. In light of the current financial problems facing 

Fannie Mae and Freddie Mac and their historic governance problems, is it a wise 

idea to give a federally-backed lending institution two seemingly contradictory roles? 

Question 11b. Could the drive to maximize shareholder profit compromise the 

public mission of a government-backed institution using tax-payer dollars to finance 

clean energy projects? 

Æ