 Okay, folks, I think it's completely crazy that we're doing substantive work on the 17th of December. I mean, I can't imagine that we're holding real conferences here right the week before Christmas, but we are. But that's because there's so much to talk about, and I'm so glad to have you all come. Thank you. Thank you all for being here. My name is John Hamery. I'm the president at CSIS. I wanted to say a special thanks to Julio Friedman, who's a friend we've known each other for many years. He's fortunately in town serving in government more directly. I mean, he's a government guy, he's out at Lawrence Livermore Labs, but we're so pleased that he can be here at leading at a crucial time when we need to be thinking through a lot of important issues. For very strange reasons recently, I've been doing some personal reading on the history of philosophy and with recently reading about Thomas Robert Malthus. Now he was a British cleric who in the early 18th century, who was a very provocative philosopher because he had very dark views about the future of humanity. You now know him as an adjective. People talk about a Malthusian problem. This is Robert Malthus. He had this very dark view that the population was growing much faster than the capacity of the world to feed the population and people were doomed to die of starvation. He took it over the edge by saying, therefore, we shouldn't help poor people because they're going to die anyway, and so let's not give them anything to help them through this. This is pretty bleak and dire sort of a philosophy, which is why he's now known by the adjective, not known himself. I thought about it, it was relevant for our conversation today. Malthus was wrong because he didn't understand one crucial thing, and that is that in this where the supply and demand curve intersects, it's not static, and the supply curve changes with technology. Back in his day, when he was writing in 1820s, 20s, 30s, there were two and a half billion people in the world. Well, today we've got seven billion people in the world. We've got three times as many people, same size globe, probably a lot less space devoted to agriculture, and we still have hungry people. I'm not minimizing that. But technology has allowed us to address a Malthusian problem and to find a solution. I thought it's a little bit a good context for today. We've got a lot of people in the world that are talking about a very, very dark future because of climate change, and that may be true. I'm not commenting one way or the other on climate change, but what I'm saying is we have to understand that technology is giving us new alternatives, new solutions all the time. We are going to spend some time together today to really explore that. What is technology giving us in terms of clean coal? In one sense, you can't get around the central dynamic that in coal there's four carbon atoms for every one hydrogen atom. In natural gas, you've got only two carbon atoms for one hydrogen atom. There's an irreducible quality to coal is producing more hydrocarbons than putting them in the atmosphere, or carbon atoms putting them in the atmosphere. But there is an enormous possibility for greater efficiency. And I think that's part of the landscape of what we're going to be talking about today, and we're going to be spending a little bit of time digging into that. Now, I'm absolutely at the extreme edge of my knowledge, and now I have to stop because I don't know anything, and it's time for us to turn to Julio so we can really get this conference going for real. But I'd ask people to start with this frame of reference, that the world is constantly evolving and giving us new options and new choices. And instead of locking ourselves into just a rigid position that something is possible, something's not possible, let's spend the afternoon thinking together. So Sarah, are you going to kick this off for real? Why don't you and Julio come on up, and thank you all for coming today. Well, thank you very much. And Dr. Hammer, you sort of have outdone yourself because on the one hand you tease us for doing something substantive, and on the second hand you start off with an introduction that has a Malthusian dilemma and a carbon chain. So that seems pretty substantive to me, so thanks for the good introduction. I'm Sarah Ladislaw. I'm the director of the energy program here at CSIS. Thank you all very much for coming today. We're really excited to have this conference today for many of the reasons that Dr. Hammer highlighted. But because we've been doing so much work on different fuel sources around the world, natural gas and oil in particular because of the sort of renaissance in unconventional oil and gas production, what that's meant for the economies around the world. And sometimes I think it's actually a good friend of us, Charlie Ebinger, who's going to be involved in the session today, as well as Fatih Barol, the head of the International Energy Agency, or excuse me, the World Energy Outlook at the IEA, reminded us that sometimes we forget about coal. And yet most of the world has not forgotten about coal. There is significant sort of coal market dynamics, drivers both for the production and consumption of coal, and also a significant focus on how to make it cleaner and more efficient so that it's compatible with sort of our climate change goals and needs. So we were very, very pleased when our sponsors for the event today, Hitachi Mitsubishi Heavy Industries, Mitsubishi Hitachi Power Systems, provided us with the opportunity to put together a longer than our normal session focus today on some of these dynamics and what it means, both from a global and a U.S. perspective. So we're very pleased that you're going to spend the afternoon with us here today. Before we get started and before I want to be very conscious of Hulia's time, just two quick reminders. We will have, or one quick reminder, we will have a reception following this. So we do hope that you'll be able to stay and participate in the discussion. That'll be part of that reception. Now to kick off today's event, what we wanted to do was invite Hulio Friedman, Dr. Friedman here today, who is the Deputy Assistant Secretary for Clean Coal at the U.S. Department of Energy, and as such runs DOE's R&D program in advanced fossil energy systems, large demonstration projects, carbon capture utilization and storage, and a clean coal deployment. Just that. Yeah. We're very, very pleased to have Hulio here today to talk a little bit about the role of coal in the administration's all-of-the-above energy strategy. So I believe you've got a presentation and we can go ahead and do that and we'll take some questions. Thanks very much. Thank you, Sarah. Thank you, Dr. Henry. I'm just absolutely delighted to be here. For those of you who don't know me, I'm Hulio Friedman. I'm highly confident of the only Hulio Friedman you'll ever meet. There is one other. He lives in Chile. Weirdly, he works at Alstom, so go figure. I feel compelled, given Dr. Amri's introduction, to mention not only philosophically, but also scientifically how often people are wrong, and that sort of gives us humility. Not only was Malthus wildly wrong, but a very storied figure of his time, Lord Kelvin, was also wildly wrong. Lord Kelvin, who is by any measure a very good thermodynamics physicist, calculated the age of the earth based on the heat flux from the crust, definitively laid out that the earth could not be older than 10,000 years, based on the heat flux. There were things he didn't quite know at the time, and as we learn things, things change. In that context, we enter this space with a certain amount of humility, with a certain amount of objectivity as we get into this. We like to lead from a basis of facts, and that's what I'm going to try to talk to you about today in the context of where coal is at, and based on where coal is at, what we see and imagine it not only as a global role, but as a U.S. role continuing into the future. One of the things that most people sort of instinctively understand, but don't explicitly understand, or state, is that we are in an era of fossil energy abundance right now. That was not obvious 10 years ago at all. 10 years ago, there was a lot of discussion around peak oil. 10 years ago, we had imagined a nation and a world in steep natural gas decline, a kind of not that way anymore. The United States is having record oil and gas productions for both. In fact, natural gas is now, I think, about 60 percent unconventional production, something like that, well above 50. We're now the number two oil producer in the world. We're going to eclipse Saudi Arabia sometime next year. That's a little different. From many perspectives, this is very welcome news. There's a lot of good news in this. Not so much in terms of the atmosphere, not so much in terms of the global climate system, and I'll be spending more time talking about that. But from a number of perspectives, from economics, from geopolitical stability, from a number of things, this era of fossil energy abundance is not only important to recognize, but to internalize as we go thinking about our business. Thankfully, we're not the only people who do this. I never thought we'd see coal on the cover of Wired Magazine, but it is. It gives a sense of the fact that this is starting to enter into the zeitgeist a bit, that the presence and abundance of coal, the role that it plays, its persistence is one of those things that has to be sort of recognized and in some context managed. Because, in fact, the future of U.S. fossil energy, man of the global demand, sees an awful lot of fossil use and coal use specifically. Under most scenarios, certainly within the EIA there, default scenario, 75 percent of global primary energy by 2035 is still fossil. The majority that's coal, coal is about to surpass oil as the number one energy fuel worldwide. Even with robust natural gas growth, coal remains a major fuel in the U.S. everywhere. In the context of the United States, even given sort of robust scenarios of low price natural gas and high abundance, we're still looking at 25 percent coal use for the indefinite future. That is a lot of coal and it's a lot of emissions with that. Fossil energy remains the dominant power supply. It's always a mix of coal and gas up to about 70 percent in the United States. Again, that is expected to be that way for a very long time. With that continued use, we will continue to see greenhouse gas emissions grow as well. And that is, in fact, the hard part. Coal has come a very long way. The first use of the phrase clean coal was somewhere in the 1830s. People were talking about the fact that clean coal was about getting your linens dirty. That because coal was dumped into people's houses, clean coal is meant that it wouldn't get all over your apron. And I think the industry has moved quite a bit since then. We've had, in the past couple of decades, something on the order of 90 percent reduction in socks and knocks. We've been able to figure out a whole basket of technologies to manage mercury emissions and particulates and all those other kinds of things. Carbon is the hard one. And it's the central issue in terms of what will the role of coal be in the United States. How do we think about that carbon profile and how do we manage it? For the rest of the world, coal use is still there. Continues to grow in China, in Europe, in Japan. Europe, I think, may have been a surprise for some. It is, in fact, the fastest growing coal market, in part because Germany is shutting down nuclear power plants. And gas wasn't what it used to be in Europe these days for a number of reasons. So they find themselves using more coal. Same thing in Japan with the closure of the nuclear power plants. Japan is building gas plants and coal plants and expects to be using them for a while. There is increased trade and export in coal. And there are new energy security concerns. This is a central issue in the way that China thinks about its work. For them, domestic energy security is a big issue and coal is a big part of how they see their robust energy infrastructure. Same thing in Eastern Europe. It's not just Poland, Poland, Romania, Ukraine. Hungary, a number of Eastern European countries and adjacent countries really rely heavily on coal for their energy supplies. And, of course, with all that, dramatic increase in carbon dioxide emissions. In that context, if we are in an era of fossil energy abundance, carbon capture and storage or carbon capture utilization in storage, CCUS, this is the key technology for an era of fossil energy abundance. If you actually want to deeply reduce emissions, if you want to stabilize atmospheric concentrations, it's one of those things you need to do. This has been recognized formally in the President's Climate Action Plan. In fact, it is central to the literally central. If you open the middle of the document, that's where the CCS piece is. And there's a number of things that have flowed from that. There's a certain amount of controversy around the EPA draft regulations for 111B and 111D, new and existing sources. CCS is listed as compliance option for both of those. And people are busily going about trying to figure out whether or not that makes sense for their state or for their region. In addition to that, there's important technical findings. The most important technical finding is actually that climate change is real and continues to be a persistent issue. The Intergovernmental Panel on Climate Change's recent report has doubled down on that and just says, yes, we really, really understand this, and yes, it's very, very dire. In addition to that, we are starting to recognize that there are new challenges associated with things like resilience. Some of that is resilience in the face of weather threats or climate threats of various kinds. But some of that is resilience issues that have to do with new renewable loading. That's a good challenge to have. We've been adding renewables to the grid, and we've learned a series of things from that. In doing so, though, how you actually maintain resilience as part of the mix is a new and important question. The Department of Energy has not been idle about this. My program has put $6 billion into this effort since President Obama took office. It is a massive investment in trying to keep coal part of a clean energy future. And central to that, again, is carbon capture and storage. For those of you who aren't necessarily familiar with it, it's not that hard. There's two parts, carbon capture and carbon storage. Carbon capture is basically you take carbon dioxide from dilute streams, 12%, 14% from a coal plant, maybe, 3 to 7% from a natural gas plant, and you have to concentrate it up to about 95%. And the reason why is for the second part, for storage, you inject carbon dioxide deep underground. It has to be highly concentrated for that to work properly. But once it goes down, it stays down. The Earth's crust is well configured to store carbon dioxide. We've got a huge body of knowledge to demonstrate that now. It's not rocket science. It's rock science. And we actually know that. There's a lot that we know about that. To a first cut, the United States is not just the Saudi Arabia of coal. It's kind of the Saudi Arabia of everything these days for oil, for gas. But also it turns out for CO2 storage volume. We've got somewhere between, I think, 1600 and 3200 billion tons of storage. We have a huge natural resource for storing carbon dioxide in the United States. And that's lovely. That's really great news, because it means that we have an option that we will want to consider as part of what we do under and all of the above scenario. And I can't state this enough. I'm not here to be a tub-thumper for coal. I think coal has an awful lot of benefits to it. And those are manifest in terms of low cost, diverse supply, ease of transport, domestic production, and a whole number of things. But if you're really going to be serious about climate change, you do need to do all of the above. All of the above includes coal, but it is not just coal. Very robust finding from these kinds of general equilibrium models, like you see here. This one's the EIAs, but it could just as easily be the IEAs, or Stanford's, or Epri's, or any other group. If you look at 13 different vintages and bases for these kinds of equilibrium models around the world, you get a very similar result, which is you always do efficiency. You always do renewables. You always do nuclear. And you always do carbon capture and storage. And you always do fuel switching. You always have all those things. And the numbers are surprisingly robust. This analysis has CCS at about 14 percent, but that's a very robust result. Typically between 12 and 20 percent of the solution set is CCS. One of the things the IEA, the International Energy Agency, made a point of in their 2014 outlook was to say, we've come a long way on a whole bunch of other things. We could go even farther in the CCS space. And in fact, there's grounds for it. One of their ways of thinking about it is this. If you look at all those different equilibrium models, and then you say, what does it take to hit a 450 target for atmospheric stabilization? If you take CCS off the table, half the models don't converge. They actually don't solve the problem at all. A typical estimate from this kind of thing is if you take CCS off the table, the cost of hitting that target goes up about 150 percent. So more than doubles. And the international panel on climate change has actually put more emphasis in this, and this is from David Victor at UC San Diego. If you're trying to hit a 550 target, and you take CCS off the table, the cost goes up about 50 percent. It really goes up between 30 and 80 percent for 550. If you want to hit a 450 target, the cost triples. Goes up between 200 and 400 percent. And that's a lot of money. And it's just because in some markets, coal with CCS is the cheap option. Not everywhere, maybe not in California, maybe not in Arizona, but in a whole bunch of markets and a whole bunch of places in the country and around the world, CCS with coal is the cheapest option for deep abatement. And if you get rid of that cheapest option, you have to replace it with something more costly or less efficient. The good news is we've made a lot of progress on this. This slide is actually a little old, but basically the lower two bars are stuff that's built and operating or will be operating soon because it's being built. So right now, we're here at 2015, we're putting about 50 million tons of carbon dioxide a year underground. That is a decent volume. That's real abatement. That was CO2 that was going in the atmosphere and is not anymore. By the end of this decade, we should beat about 100 million tons, roughly twice that. Right now we've got 20 large projects worldwide. We're on track to have another 20 or so by the end of this decade. That's awesome. We want that knowledge. We want that demonstration. We want the technical findings that come from that kind of an undertaking. It advises decision makers very, very well. This is an important one. This was the birth of a new species. And I was happy enough to witness this October 1st. Boundary dam up in Canada became the first place where someone's retrofit a coal plant to capture the emissions using basically off-the-shelf technology. This is a Canadian technology can solve, fully unsubsidiary of shell. But it's very similar to Mitsubishi's technologies. It's very similar to the Norwegian technologies for U.S. companies, for Alstom's. It's an aiming solution. And basically the steam coming out the top means it's operating. That was venting 1.1 million tons a year. It's not anymore. It's all going underground now. And Sasspower really likes the idea of doing another one of these or another two of these. And they've already learned enough from the first project to cut the cost by 30% on the second. That is a very important finding. And it's something that we find is robust across the portfolio. As people deploy these things, they all come to us and say, we know how to cut the cost on the first project a lot. We'll just do the second project instead. Because the second project is always cheaper than the first by a lot. 20 to 30% is a very typical kind of number. I want to dwell on this for a moment because it helps make the point that I made earlier. An environmental group approached Sasspower at the beginning of this project and said, you're going to spend $1.4 billion on this project. That's a lot of money. We've got a different idea. How about you put a bunch of solar panels? You put in a bunch of wind farms. You do a bunch of efficiency mettergers. And that'll be a better use of your money. It'll be better for your company. And it'll be better for your customers. Reasoned in passion to pitch. The president of Sasspower said, you do know we're in Canada, right? It's dark here half the year. And when it's dark is when we need the energy. So solar isn't a really great solution for us. Also, we can't put up wind farms because we have Chinooks that come through this territory. They run 90-100 miles an hour. They rip apart wind farms. So we'd lose our capital and wouldn't have the energy. And Canada's already put through a lot of efficiency measures. Not that much more we can do. So for our customers, this is the right solution. And I want to underscore that line. For our customers, this is the right solution. Not for everybody, not everywhere. But for some part of the world, this is what clean coal looks like. Virtually no socks, virtually no knocks, virtually no particulates, virtually no mercury arsenic, and a 90% reduction in carbon dioxide emissions. We have not been idle about this in the United States. Canada got there first. But it's been a good run. And we've got a number of projects coming online, which we've put a lot of money into. The total investment from the U.S. side into this so far was about a commitment of about $4.5 billion. It's a substantial commitment to see these things up and running. And the reason why is because it all comes down to projects. Projects are the source of innovation, not just in technology, not just in engineering design, but in business, in policy, financial models, financing, all these things. It all comes into projects, because when you put that kind of money on the table, it focuses the mind, and people get serious about trying to figure out how to make the thing work. Let me give you just a couple of examples. This is one of our favorite projects, the Kemper Project. This is a success in many ways. Part of that is we're scaling up a very useful technology, the Trig Gasifier. It took us 25 years to develop that. We're testing it now at scale. This is a 582 megawatt power plant. It's a big plant. And the thing I want to draw your attention to is two, really two things. One is that little black pile in the corner. They're mining local lignite and coal. They're mining that at $10 a ton. And they've got an 80-year supply. It is an incredibly cheap source of fuel for this plant. And in this part of the country, where they need to maintain resilience due to weather disruptions and all these other sorts of things, a southern company thought this was an important component of their portfolio. Another thing that is not obvious from looking at this, but it is a fact, this is a net water positive power plant. This power plant produces water as a consequence of its function. And part of the reason why is because they have to dry the coal to make it work. So when they do, they recover the water and return it to the environment. We don't often think of fossil energy plants as sources of water. But in fact, they do put water into the environment. That's one of those things that we could consider. And in fact, the DOE is thinking about in terms of its R&D portfolio. You may be familiar with this project, the Petronova project. This is a huge active power plant. I think the total output of this plant is something like 4,400 megawatts, half gas and half coal. These guys went and we gave them some money to do a 60 megawatt retrofit. And they crunched the numbers and they said, 60 megawatts isn't going to cut it. We have to go big. Let's make it four times as big. So they did a 240 megawatt retrofit with no additional investment of government money. But what they did is they innovated their business model. This is the first vertically integrated power plant, Merchant Power Plant. So these guys own the power plant. They also are owning the capture facility. That's all those blue things that are pointed out there. Those are being built right now. We broke ground in September or off to the races. They poured the concrete for the cooling tower. But they also own the CO2 pipeline. And they also own a quarter of the oil field that it's being injected into. So in fact, they are able to make the finances for this project work by trying a new business model. It's important to note that this is also a model of what the future looks like in terms of international partnerships. This project is 50% financed by Japanese banks, by JX Nippon and its partners, Jbook and Mexi. And in fact, has Japanese technology at its core. This is Mitsubishi's technology for post-combustion retrofits. We think there's going to be a lot more projects like this with international financing and other projects of ours are ones in which other governments are looking to play a role as well. This is a utilization project. It's one I'm kind of fond of. It's small by our standards, 750,000 tons a year. But I love this project. These guys are making baking soda. There's not a huge market for baking soda, but they're capturing the CO2. Their feedstock is salt, which is very cheap. And they're selling the baking soda and hydrochloric acid. Hydrochloric acid is a big global market. And so these guys are doing okay. They're actually turning a profit on this and they're looking forward to their second and their third and their fourth plant. Important to understand, once they saturate the baking soda market, which they'll basically do on their next plant, they're going to sell road aggregate. Basically at 11 bucks a ton. It's a cheap product, but it's thermodynamically favored and they can make it with their feedstocks and there's a market for it. So these guys are being very straightforward and cagey about what they're going to do. This is another stimulus project and we were glad to see it built and operating. This is just outside of San Antonio. I encourage all of you to look at the cement plant where they're capturing the CO2 and putting this into the market. So when it comes to what the Department of Energy in particular my program is doing, our top priority are projects like this. It's just getting these commercial demonstrations into operation. One of them is already working from an industrial source in Texas, a refinery. It's the air products project. We've already put 1.6 million tons of CO2 underground on that project operating very, very well. Part of what we have to do is deliver a deep rich set of public learnings from all these projects because this is what they're for. They're actually to advise the public. Among our projects we have pre-combustion, post-combustion, oxy-fired projects. We're injecting into oil fields and into saline formations. We're doing new builds and retrofits. We're doing industrial projects and power projects. Carbonates and plastics. We are covering as much range front as we can to deliver the richest sense, richest set of public learnings back to the nation. We take that mission very, very seriously. Second priority of ours, we have to reimagine our R&D portfolio. I'm going to only talk about that for a minute or two, but if you want the nine-hour version of that talk, let me know. I'm happy to give it. But really, our program was conceived in 1997. The world's changed a bit since then, and so we're busily going about trying to think what is actually important? How do we make the CCS and the Clean Coal R&D Portfolio what it needs to be for the modern world? And the third priority is international partnerships. Our research program was conceived in 1997, in which a unilateral United States seemed obvious to all. Not so obvious these days. There are many international players in this space. There are many partners. The world has become more integrated, more complicated, more multinational in its actions, and we feel like that's an important part of making this situation work. I do want to take a moment and talk about the financing of these plants, and the primary reason why is because this is where, if the focus is projects, then the issue with projects is financing. A lot of people come to me and say the issue with carbon capture and storage is about cost. My rejoinder to them is the issue with carbon capture and storage is about financing, and I'll unpack that in the next couple of slides. It's, I think, fair to say that the cost of a plant with CCS is more expensive than a cost of a plant without it, but we're not really talking about that. We're talking about something different. What clean energy alternatives are there out there? How do we bend that emissions curve in an important way? It's also not just about the technology. A lot of people say to me that this is an unproven or untested basket of technologies. Hawkwash. We've been capturing carbon dioxide since 1938. We've been storing it underground since 1972 at these large commercial scales, and right now there's maybe a dozen vendors worldwide who will sell you a capture technology, project who will sell you a capture technology, heavy equipment at a price with a performance guarantee. So the potential to improve on this is also very, very large. I'll just speak briefly of that. We'll talk about it more. Right now we do these gas separations at about 15% of the thermodynamic efficiency. We're leading 85% of the exergy on the table. There's a lot of room to improve from an engineering basis, from an integration business, from a material science basis, from a thermodynamics basis. There's just a lot of room to improve this, and that means there is a lot of room to ratchet down the costs. With respect to finance, that's really the issue. How do you finance these things? Many options which are open to other clean energy technologies are not open to carbon capture and storage today. These include things like investment tax credits and production tax credits, renewable portfolio standards, which allow you rate recovery, tax exempt debt financing, utilities that will provide that service. And I absolutely want to be clear on this. I do not have a dog in that hunt. I do not make or recommend policy period. Not what I do. But if you want to get the financing done, it's worth asking what kind of policy choices are available to us. And that's a conversation which we are very happy to have and eager to discuss. And in other countries, they're actually pursuing that as well. In the United Kingdom, they have a lovely mechanism called Difference of Contracts, which they're exploring to see if they can finance their big CCS projects. White Rose is the first off the block. In the European Union, they have feed-in tariffs. Feed-in tariffs have not been applied to carbon capture and storage yet. That's a question I know that the Europeans are considering. So just the question is, how do you get these things built? One of the ways that we're trying to do it is through the loan program office. In addition to the $6 billion we spend on my program, we've approved $8 billion of loan authorities strictly for fossil energy projects. Clean coal is very much at the top of those lists. And Peter Davidson, who's the new Executive Director of the Loan Program Office, is keen to get these proposals and in fact is starting to get them now. Now that that program is proving profitable, we are keen to see how the success of this program can be leveraged into clean fossil energy projects, I think the majority of which will ultimately have CCS. I get to talk specifically about the cost issue. I wanted to show you this analysis. This is a levelized cost of electricity analysis. Let me start by saying the obvious. These are thorny, divisive estimates. I don't want you to draw too much from the specific numbers here, but this is an analysis that was done by World Resource Institute and published in their Seeing is Believing document back in October. The reason I mention this is that this shows, I think very nicely, what all of the above actually looks like. If you look at the cost of this, there's coal without CCS and coal with CCS, natural gas without CCS and with CCS, and a range of cost estimates for nuclear, geothermal, solar photovoltaic, solar, thermal, all of these technologies, and to a first cut in some market, some of these is the cheapest. In other markets, they're not, and you can see that here. One of the other things I want to draw your attention to is that we don't have a lot of data points yet for CCS. One of the things we need to do is figure out really what the range is around that. Where will it be higher? Will it be lower? As we start thinking about this going to different markets, what are the costs really look like? But at this point, basically you're talking about something that's a few cents per kilowatt hour additive, maybe? There's a lot of assumptions that go into that. How much capture are you going to do? Is it 50% or 90%? There's a lot of questions in terms of what technology you use, your planter heat rate, all these things. But when you start looking at the range of these costs, one story emerges, which is it's all of the above. There isn't a silver bullet that you can point that and say, this will always be that thing for the market. And you'll do efficiency to some extent, and then you do all these things. And one of the things that comes out of these kinds of analysis is the recognition that as a policy option, as an engineering option, as a deployment option, coal with carbon capture and storage is a very important one and a real one. One of the things that makes it work in the United States may not be harder in other parts of the world is enhanced oil recovery. And I can't overstate this enough. The low end estimates are many tens of billions of barrels of production that could come from CO2 injection underground. That in itself would provide tremendous revenues. If you look at the difference in cost associated with some of these projects, the tax revenues that come from EOR basically are break even on the order of seven or eight years, which means they're net revenue positive to the government after that. We don't always think about it that way, but it's an important finding done by Northbridge Engineering. In terms of storage potential, when you do enhanced oil recovery, you do store carbon dioxide. We're looking at something on the order of more than 25 billion tons of storage in conventional EOR. That's a very large volume of carbon dioxide that would be half the US coal fleet for 20 years. It's a lot of carbon dioxide. And in fact, we are short about 100 million tons a year right now in terms of what the market would buy if you could supply it. So there's grounds to think that this would be helpful. And this helps with the financing. Again, if the financing is the issue, getting some of the financing done through CO2 EOR is a good thing to do. And in that context, this is something that's being considered in the context of the EPA's draft regulations. What's interesting about this, and I don't want to dwell on this, is that CCS and CCUS with EOR is a compliance option, especially under 111B, that's pretty straightforward and explicit. But also how this treated is flexible. So the way that this is accounted for, I think, is something that's still being sorted. We are talking with the EPA, and we're trying to figure out how to make the best recommendations we can to what it is they do. They're a regulatory body. They take their jobs very seriously, and we provide input to that. We hope it's received. But we think that having these successes with EOR, getting these projects built, is going to be important in thinking about the opportunities in the power sector around compliance. Something that is usually not spoken about, but I want to draw your attention to, is residual oil zones. For those of you who are oil and gas economists, you probably don't think about these, because they're not resources and they're not reserves. If you inject water into a residual oil zone to produce it, you get nothing. So it actually only works when you inject carbon dioxide. Something you might not know is that people have been busily doing this around the country for about six years now. There's eight fields in the United States that are producing from their residual oil zones. A recent study done by Advanced Resources International looked at just four counties in Texas. That's the yellow box. The blown-up box is one county in Texas. That's the red box. Their conservative estimate for how much oil could be produced from that is 109 billion barrels in those four counties. One of the things that I'm glad to say is actually we've negotiated a way for them to continue and expand their studies to look to develop a methodology that could be applied to other parts of the country. One of the things that I care about in this is that those residual oil zones would store between 60 and 100 billion tons of carbon dioxide. It's an enormous opportunity. Also important in this is in fact that that would be net carbon negative oil. Let me say that again. Net carbon negative oil production. Today, when you do enhanced oil recovery, if you inject between six and 7,000 standard cubic feet of CO2, that's close to break even at about 7,500, 8,000 scuffs per barrel on a molecular basis, on a weight basis, on a mass basis, on an energetic basis. That's decarbonized if you're using anthropogenic CO2. If you're using natural CO2, it's just more carbon out of the ground. However, if you're using more than 8,000 scuffs per barrel, it's net carbon negative. And I had the great pleasure of meeting with an oil company named Shopperall the other day, which only uses anthropogenic CO2 for their enhanced oil recovery and typically injects between 10,000 and 15,000 standard cubic feet per barrel. These guys are actually producing negative carbon oil today. We're taking carbon dioxide that was going into the atmosphere and putting it underground, and the oil they produce has a lower carbon volume than what they inject. It's an important finding. One of the things the Department of Energy wants to be more clear about and more demonstrable about in the coming years. But in thinking about these residual oil zones, they're almost always going to be net carbon negative. I want to close with a short discussion about international partnerships. This is CSIS. I'd be remiss if I didn't. But also, this is where a lot of the action is. These are required. The global environment is shared. And one of the things that came out of Lima is every country has a job. So we're trying to figure out what this looks like. In my program, we've got things like the Carbon Sequestration Leadership Forum that are actively supporting, not just information sharing, but the development of new policies and the development of new projects. We've been very excited by the leadership Secretary Moniz has shown with this group and the leadership that other ministers have shown in response. The next ministerial will actually be in the Kingdom of Saudi Arabia next November. Watch this space. There's going to be interesting things to come. International partnerships are also required for the commerce. At the end of the day, what will help the climate negotiations is good trade. And so if we can figure out ways to support commercial engagements through commercial, through CCS projects and reductions, that will help everybody. Things like showcase projects, for example, in this country or in others. Also, international partnerships can accelerate the learning sharing, can accelerate deployment. We don't have to build five kinds of plants in five kinds of different countries. If we can just build one plant in one country and share those results, it saves money and saves time in a very useful way. The international landscape is also changing dramatically. I sure many of you here watched the U.S.-China Accord that was announced in November. We were all very, very pleased with this. This includes, among other things, a large CCS project in China and a science project that is a joint international project shared by the United States, China, and other nations. We were thrilled with this outcome. There's also a new kind of project that the Chinese are going to pilot and enhance water recovery project. It's like enhanced oil recovery, only instead of pulling out oil, you pull out brines, and you use the pressure that you're using in injection to drive a reverse osmosis process at the surface. It's very interesting stuff. This technology has been worked by the DOE for about five years. We're ready to pilot. China's going to do a pilot and we're seeking a pilot in the United States. I'm happy to say many other countries have come to us and said, hey, that sounds like fun. We'd like to do a pilot, too. There is this new European Accord. I don't know if you had clocked that one. October 23rd, the European Union inked a deal. It was a very ambitious climate target, 40% reduction. But one of the things that was interesting is they called for policy parity with CCS and with nuclear. And they said that these are also clean energy options and should be considered in the context of what we do. About the same time, the United Nations Economic Council of the, was it Economic Council of Advisors of the UN ECE amended its statutes to include carbon capture and storage and CCS with EOR as part of clean energy technology under the UN Framework Convention. So these policy shifts actually are materially important and we want to see more from it. In addition to that, they put forward an innovation fund. How that works, nobody quite knows yet, but so far so good. It looks like that fund can be used to not only support the development of technology, but hopefully to support projects as well. And we're busily discussing this with our European counterparts to find out what it all means and what's useful and how we can help. There are also new actors on the scene. The UK is putting forward this white rose project I mentioned. Importantly, that's a sale information storage project. We're very excited about that and they're pursuing this new business model with it and a new technology by Alstom. Two groups in the Middle East, the Kingdom of Saudi Arabia and the United Arab Emirates are in the process of building large projects. Saudi Arabia will be online next year, the UAE after that. They're capturing from refineries and steel plants. This is going to be the big first industrial steel plant capture project. And they're going to use the CO2 for enhanced oil recovery. It's important to note that Saudi Arabia is building two 500 megawatt IGCC plants and UAE is announced between 3000 and 5000 megawatts of new coal construction. They are also looking at coal as part of their future, which is a very interesting development, I think. Finally, with the energy reforms in Mexico, we're seeing some interest from them also on CCS and EOR that is also welcome. We just hosted the trilateral here with Canada and Mexico and this was one of the things discussed. We're eager to continue to work with all countries to try to figure out how we can further this kind of deployment. In many ways, though, China is the main event. China is the number one global emitter. Uses half the world's coal and they have to every once in a while shut down the freeway because people can't see the cars in front of them. So they are very serious about trying to figure out how to manage pollution in general, but CCS is part of the conversation now. A lot of that's going forward under the Climate Change Working Group. I'm delighted to be part of that discussion and to help support that with State Department and Treasury as they move forward. And we are seeing them continue to invest and increase their investments in carbon capture and storage and enhanced oil recovery. They are really very serious about this, but they see coal, even with a coal cap, even with diminished coal use, it's going to be a big part of their future. They are currently using four billion tons a year of coal. That's just a lot of coal and they're going to be doing that for a long time. So they acknowledge that this is part of the thing that they have to do at some point and we're pleased that they're really interested in doing this sooner rather than later. We continue to meet with them, talk with them, I'll be going to China next month in part to identify opportunities and discuss what could be done together. One example of this is the fact that we signed in what we call counter-facing projects. We identified a series of projects, some in the United States, and some in China, which would serve as an opportunity to accelerate learning and share deployments. And this is what success to a lot of people looks like. You have John Podesta, Todd Stern, the Climate Envoy, Vice Chairman of NDRC, Xi Jinping. And in front of them, there's a commercial deal being inked by Administrator Zach. But it's a commercial deal witnessed by governments and supported by governments. That's a lovely outcome and one that we're trying to get more of. The last thing I want to say, and trust me again, I can do this all day, but I'd rather have your questions, is that part of the reason we are so committed to the technology angle of this, the research, development, and demonstration piece is that that technology often presages and does, in fact, inform policy decisions. Just as an example, in 2010, the EPA put forward the first class six regulatory framework that was built in part on a set of technical findings which came out of the DOE program. As we build these projects, as we develop technologies and demonstrate their efficiency, as we ratchet down the cost through things like advanced manufacturing technologies or development of new materials or using supercomputers, these things are all going to result in technical findings which then decision makers can look at and think about. Ultimately, we have to build and deploy the large projects. That's the work. That's what's required. And there are real learning opportunities from doing that. There's opportunities to share that information, to build engineering prototypes and models which can be picked up by industry for industry to lead the development of these projects and to tackle financing through the many potential paths that are out there to get these things across the finish line. There's a lot of second and third generation technologies we're enthusiastic about. I'm happy to talk about those. We realize we have to partner with many in the United States at state level, at local level, with industry and of course internationally because coal will be used. The first part of my talk was that. Coal will be used. It will continue to be used in the United States everywhere and CO2 must be controlled. We have to take the climate issues very seriously while we acknowledge that first part. As a consequence, now's the time to build. Now's the time to get on with the work which we know we have to do. With that, I thank you for the opportunity to talk and look forward to some questions. Julia, that was a really fantastic and wonderful conversation not only about the work that you're doing but over the course of the conversation or your presentation, I recall being in the SaskPower offices many years ago where they put forward their idea for this plant that was right for their customers. I think it was a really important part of their message and there was a lot of criticism of whether it was possible or whether it was the right choice and again they said if we weren't the ones to do it we won't see the cost reduction and so it's nice to hear about the outcome of some of that. We've got about 10 minutes for questions so if you do have some questions please raise your hand. We've got a couple of ground rules. We have a number of cameras in the room so there are people watching on the web. We do appreciate if you wait for the microphone so that they can hear your question, state your name and affiliation and your question in the form of a question and we will do our best to get as many as we can in before Dr. Friedman needs to leave so please raise your hand if you've got one. But what I'd like to sort of start with and what people think really quickly is there's often a component between sort of these demonstration projects and creating a market for clean coal and especially CCS and those broader visions of having a significant enough scalable version of CCS to have the cost reduction it would have for any decarbonization pathway and a lot of that is about transportation transportation of the CO2 from consumption centers to places where it can ultimately be captured. I know a lot of what your program does is focus on the learnings that can be had to inform policies around those issues. I wondered if you could speak a little bit about that transportation issue. Thank you. This is actually one of my favorite topics. From a technology standpoint there's almost nothing to talk about because we have in fact got 3,000 miles of CO2 pipelines in this country already. The Department of Transportation has been managing them for 30 years. So the issue though is actually about the infrastructure itself. If you want to take CO2 from where it's emitted to where you wish to store it pipelines are part of what you're going to do and almost always a large part of what you're going to do. Even in cases where there's opportunities to finance a project trying to get those pipeline built is kind of a different issue. And one of the questions I think we are asking ourselves at the Department of Energy and elsewhere is that since we know we have to do those things what are the options we have to get those up? What is the appropriate role for states? What is the appropriate role for banks? It's not actually obvious. The issue with pipelines is that on a per ton basis over the lifetime of the project it's pretty cheap. It's maybe one, maybe two bucks a ton. But it's all capital upfront. Somebody has to build the thing day one before you inject the CO2. So the upfront costs are high and people are reluctant to carry those costs. So I think we as a nation need to think harder about that. I'm delighted that the Department of Energy not only is this a topic that the Secretary is interested in. Melanie Kanderdine who's leading the QER is passionately interested in and we're talking to her about this event along with other topics associated with national infrastructure in the energy sector. I was last over from the International Energy Agency and you probably get this question every day but right now on average a coal plant is being decommissioned in the United States in every two weeks. And isn't there a risk that abundant and cheap natural gas will just kill the interest in clean coal investments except for projects that are underwritten by the DOE? So how you can make sure investment in clean coal in a country with an unlimited supply of cheap gas what is the plan for that? Right. So you're correct. This is something would this is a constant and frequent topic of conversation in our office. We do see the emergence of low-cost abundant natural gas. It's not just a real market phenomenon but the science shows us that we're likely to have a lot of it for a long time. Broadly speaking I think that served the nation well. We have through that reduced some emissions. We also have through that kept production prices low. Doesn't actually solve the climate problem. You actually still need to do CCS on gas plants eventually as well underscored eventually there. We haven't sort of figured out exactly when that is but even with the closure of some coal plants even with abundant low-cost natural gas our analysis reveal that there is remains a large fraction of coal in the power sector and our analysis also suggests that in any number of potential scenarios you would actually still deploy CCS on some of those plants. We've looked at the plants from a heat rate perspective from a permit perspective from a space available perspective from an engineering design from a vintage perspective and you do end up actually retrofitting some of those plants. I think we also learned from the polar vortex last year that gas prices can spike and do even an era of abundance. A lot of our utility partners are building more gas but they're still worried about those price shocks and they see keeping coal in the mix is one of the ways that they can avoid those kinds of shocks as part of what they do. Last thing I'll say of course is that's the United States story in other countries coal is much more prevalent in the availability of gas much more limited. And so from a global perspective we certainly see coal as an important player not just in the United States or not just in North America but in many parts of the world. Hi Charles Ebinger from Brookings. Julio it seems to an outsider that the administration is a bit schizophrenic on CCS and coal in general because on the one hand we have the excellent work that you've highlighted the DOE is doing and on the other hand when we look at organizations like Exxon Bank OPEC and so forth as well as some of our positions and international financial institutions we seem to take a very negative attitude towards finance and coal and other localities. Could you make a comment on whether you think there's any chance the administration might follow your lead and pursue these opportunities to help other countries with advanced coal? Let me start by saying from inside it doesn't seem schizophrenic and I would sort of reject that characterization outright. I think the administration even in casting its policies around the Exxon Bank has said that they're interested in financing clean coal projects ones that have a certain emission thresholds and would include CCS that seems actually to be a very consistent position. I'd also say that on that topic obviously the landscape is changing in real time we're talking to the administration we know what the policy position is now which is we don't want to finance plants that will lead to locked in large emissions and we're trying because that's a serious concern beyond that we are trying to figure out what other things we can do what is rational and I would watch this space it's an interesting time. Jane Nakano CSIS energy program thank you so much Julia for coming and doing a great keynote. My question concerns I guess I can see how the CCS with EOR feature is economically viable for some of the economies with the hydrocarbon resources and for example including China when we look at the even less developed countries though how you know what are some of the ways that the CCS could be little more viable and then also I wanted to see if you could please elaborate on the potential role that the enhanced water recovery sort of benefit may have I'm not sure if it's you know I haven't really thought about the different structures and you say Africa or say South Asia but how that may be sort of a potential game changer to go with the CCS deployment. Thank you. Sure let me start with that second part first Secretary Moniz has repeatedly and volubly underscored his commitment to energy water progress and he sees that as a very important undertaking one of the announcements that came out of the China agreement actually was that the U.S.-China Clean Energy Research Centers would add a program on energy water and that that's very welcome. When we look at this enhanced water recovery technology we're mindful of the fact that oil is between say a thousand to two thousand dollars a ton in terms of its value and water is on the order of half a dollar a ton. You can't actually really finance these things but we do think about this as a good news story because it's in part about the social right license to operate and in water scarce areas the value of the water could be very real. Again it wouldn't surprise you to know that some companies some countries that are very water scarce are very interested in this technology. Our estimate part of the reason we need to pilot and demonstrate our estimate is that the cost is about half the cost of conventional desalination. If that proves true then that can become a very interesting option in terms of thinking about pairing carbon management with water treatment. With respect to developing countries first of all I am simply not the State Department I'm not the person who talks about developing nations and their roles in this. What I would say though is back to sort of our school in thinking this through if you're a developing country without enhanced oil recovery opportunities CCS may not be the best option for your country. This is not we're not technology shoving we're not trying to make everybody do everything all the time. If you're in a country like South Africa it might work but it might not and and those countries have to determine on their own what makes sense for their nations in terms of it's both its emissions reduction strategy and its national needs. I think a good role for developed countries in particular industrialized countries like the United States and Japan like China and members of the EU is how can we ratchet down those costs through demonstration to create a wider optionality for more countries. Because if we can get the costs down to a place where more countries want to adopt it that gives them an option that they can consider that's rational for their lands. Maybe last one We've got time for one last question and I promise we'll get you out of here. Anil Pahawa from State Department as far as CCS is concerned you need to have specific ground properties to be able to push that so there will be some restrictions on where it could be applied it cannot be applied every place. Is that correct assumption? So that is 100% correct. I didn't put that in this talk but I put it in very very many talks and it's something that a lot of people don't really internalize in their thinking if you do not have a storage site you do not have a sequestration project period. If there's no place to put the CO2 CO2 your options are limited. In some countries let's say South Korea they don't have a lot of storage options. So even though they could develop and sell really excellent carbon capture technology they can't really deploy it themselves because they don't really have those storage options. North America is blessed with opportunity in this way but not every country is. Initial assessments of China is it's pretty good in India I think the assessments need more work I don't think we really know what the viability of deployment in South Asia is. In parts of Africa it looks promising in other parts not so much. It's just like gold if you have it on your property you have a natural resources and if you don't you don't. It's a natural resource and it really is a natural resource and it's one that if you have you can consider an exploit in thinking about the deployment of CCS in the United States states that have this option have an option that other states don't. And they will put that into their calculus and figure out how to make it work and if that option is viable for them. But you know the Gulf Coast and the Illinois basin are world-class CO2 storage options. Those states I'm sure are more glad that they have that option than not. With that I really appreciate the opportunity to talk with you today. Thank you very very much. Thanks very much Leah for joining us. Okay at this time maybe we'll welcome up Charlie in the first panel. Please thank you. It's always nice to come back to CSIS since I was the first director of the energy program here from 79 to 87. It's always kind of like returning home to good close friends and former colleagues. So I thank CSIS very much for inviting me here to moderate this very exciting panel. We have a stellar lineup today. We're going to hear from Las Lovaro who heads the office of gas, coal and electricity and the markets division of the IEA clearly one of the most influential forecasters of technologies such as coal. We have a dear old friend and also a former Brookings colleagues Soichi Ito from IEJ who's had a distinguished career both as an independent researcher and as an official in the Japanese government. And we have Mr. Samuel Tomiwa who is the deputy representative and the North American representative of the Asian Development Bank. Also perhaps one of the most critical agencies meaning the coal market since I think most forecasts predict as we look out the next 25 or 30 years that Asia will probably be if not the leading growth market for the use of coal certainly one of the most important. The format today is we're trying to get each speaker to try to limit their remarks to roughly 20 minutes so that we have a good hunk of time at the end for questions. I won't say more now but we'll try to foment the discussion before turning over the floor once they have finished but I would hope that we get into some critical questions among which just to name a few might be how do we look if we look 10, 15, 20 years out how do we see coal particularly in the Asian power market competing against also a resource of great importance and interest these days mainly liquefied natural gas do we think coal will the market for coal will perhaps once again have to be competitive with nuclear energy or is nuclear going to be one of those resources that we allow to wither on the vine with perhaps tragic consequences for our ability to meet our climate change goals I think it would be useful if we could get some insights into really how far along the path towards commercialization around the world not just in the United States where we heard an excellent presentation from Julio but how far away is CCS technology in some other markets and if CCS is far away are there opportunities for using conventional advance coal such as super critical and ultra super critical technology to replace the older generation of technologies that most of us are using so without further ado let us turn to our speaker and we'll start with Laszlo with some opening remarks thank you very much you sir chairman ladies and gentlemen we launched the new coal market outlook of the international agency Monday afternoon and Tuesday morning the first thing I did I jumped on the plane to find is here and share with you so I'm I'm very glad for the perfect timing of this conference this is a very very fresh outlook I should emphasize that we do a lot of policy and climate related analysis that but in this outlook what we look at is not what should happen or what we would like to happen what we look at is what is happening in the with a real life industry and investment outlook in fact the numbers that I'm going to show you are unfortunately mathematically consistent with the first five with the beginning of a six degrees climate trajectory so this is clearly an unsustainable path and that shows that the that the current climate and environmental policies are unfortunately insufficient for a meaningful climate stabilization and we have to move beyond those but with this having said with this coal is not out of the game although I have to say that our headline number which is a 2.1 percent average growth rate for global coal consumption this is actually the lowest number which we ever came up with ever since we have been in the business of projecting coal and the coal had a 15 years of very very robust growth in the past 15 years it was almost half of the of the growth of global prime energy consumption so there is a significant slowdown but it is not out of the game at all it is very much driven by a very robust growth of coal-fired power generation so coal is a very one-dimensional fuel power generation is the most important use of it by far but there has been a very robust investment into new coal-fired power generation capacities all around Asia in fact our image about coal-fired power pens is they are old in fact one-third of the total coal-fired power generation fleet that exists on planet Earth was built after 2005 this is not so bad for the dying industry and we also think that coal will continue to be driven by China so we see a much bigger demand growth in China than in any other region of Asia but we see a decline in both Europe and the United States but that is dwarfed by emerging Asia now in the past couple of months with the Obama-Moroc Xi Jinping climate agreement and the slowdown of the Chinese economy there have been a lot of discussion about the possibility of peak coal in China so we looked at very very carefully certainly the notion that China is supposed to ignore the climate problem is completely out of touch China is doing very very large investment into low carbon sources the ongoing Chinese investments into hydropower are equivalent to roughly 150 million tons of coal not being burned in coal-fired power plants by the end of the decade you know the most of this most of these projects avoided the attention of the western media but China is bringing online on average the equivalent of a three gorgeous dam every year so there is still a lot of mountains and rivers in China to be dumped another big investment wave in China into wind and solar where China is the largest investor by far that is equivalent to another 150 million tons of coal not being burned in coal-fired power plants and I should mention the 27 nuclear power plants that are under construction currently in China and the follow-up plants which is another 150 million tons of coal these three investment waves into hydro, wind, solar and nuclear are individually have a bigger impact on global coal consumption than the Obama climate plan in the United States so the so the notion that China is just traveling on a baseline and doesn't do anything is completely false and also the China is building new high-efficiency coal-fired power plants at a much bigger rate than they did too from the point of view of the electricity demand growth so every year they close down roughly 20 gigawatts of old inefficient coal-fired power plants and replace them with new high-efficiency coal-fired power plants and the the growth of the the growth of the average efficiency of the Chinese fleet also knocks out another another 70 million tons of coal compared to as if they didn't do that if you add together all these investments the investments into more efficient power generation and low-carbon sources are sufficient to cover the Chinese electricity demand growth at 3.1 percent so if if the first 3.1 percent growth of Chinese electricity consumption is covered by the low-carbon sources if Chinese electricity demand grew only by 3.1 percent they wouldn't need new fossil fuel generation at all now under normal macroeconomic conditions Chinese electricity demand growth is higher than that our actual production is 5.5 percent the key question to keep in mind is that China has a slightly bigger electricity system than the United States but it's a complete it has a completely different structure US household electricity consumption is twice as high than the electricity consumption of the Chinese household despite the four times higher population but the Chinese manufacturing sector consumes five times more electricity than the American industry so the big question is the demand for made in China manufacturing products okay when you go to a supermarket buy something made in China you consume Chinese coal but there are also large investments in China which will increase coal demand to reduce environmental quality the most important is synthetic natural gas production from coal gasification which is a very nice sink from a local equity point of view because you leave all the dirty stuff in Inner Mongolia and you deliver clean natural gas to the major cities but it's a complete disaster from a climate change point of view because it has several times higher carbon dioxide emissions than conventional natural gas but this is a very this is a very significant investment wave ongoing in Inner Mongolia and Xinjiang our projection is around 220 million tons of coal converted by the end of the decade and also there also China is now the largest market for environmental control equipment by a significant margin now desulfurization scrubbers and electrostatic field test consume electricity and they lower the net efficiency of the plant by the end of the decade we estimated that around 50 million tons of coal in China will be burned to clean coal to reduce the local air pollution from the power plants now another thing to look at is of course natural gas China is increasing natural gas very robustly and we project a bit more than 200 terawatt hours increase in gas-fired power generation however the Chinese government also have a target for 350 gigawatts of coal-fired power plants equipped with modern environmental controls desulfurization and electrostatic filters by the end of the decade we have absolutely no doubt that this will be done there is a very robust investment in cleaning up the Chinese coal plants now these cleaned up plants will generate around six times more electricity than our projection for the growth of gas-fired power generation so whereas in Europe and the United States natural gas switching to natural gas played a critically important role in reducing coordinated consumption in China we think that cleaning up the coal will actually be more important than natural gas itself and last but not least we shouldn't forget that China has an incredibly imbalanced economic structure which is heavily relied on construction-related activities since 2000 in the past 14 years the Chinese construction industry built the equivalent of the European building stock and today the two key construction-related industries cement and steel consume more coal in China than the entire United States and you can add aluminum which runs on coal-fired electricity and that's more coal-fired electricity than all the coal plants in Germany so what you need for peak coal in China is the current very large investments in low-carbon energy combined with a significant change in the microwave structure are slowed down in manufacturing production and also a rebalancing of the Chinese economy from the construction-related activities the low-carbon investments alone are not sufficient for a peak coal in China but a rebalancing and a manufacturing slowdown could potentially bring a peak coal in China this decade now at the same time the coal conversion is not going to stop even at the current overall prices coal conversion in China is robustly competitive due to the low cost trending coal resources now the good news is that with coal conversion projects you have a pure carbon dioxide stream and there is a very strong awareness in the Chinese industry that one day the Chinese government will mandate those projects to be equipped with CCS that might not be today but one day this will happen so they are quite consciously preparing for that day to come all around Southeast Asia electrification in a much much earlier stage so with a bit of a simplification India and Southeast Asia is roughly in a position where China was in 1990 in 1990 China still had 300 million people without electricity and they comprehensively electrified in 20 years now that 20 years is just beginning in India it's just beginning in Indonesia and Vietnam if you wanted to electrify those countries to a decent medium-sized medium level which I defined it by Malaysia okay the United States would be several times higher even than Malaysia but if you wanted to electrify them to the level of Malaysia without coal you would either need 15 times the current European gas imports from Russia from natural gas or you would need six times so you would need 15 times the current EU wind and solar production or you would need six times the current European gas imports from Russia that frankly that is not going to happen it is it is very very difficult to put together a credible scenario in which India and Southeast Asia is electrified properly without coal that's the numbers just simply don't end up the in fact when we looked at our 450 ppm pathway which is an all-hands-to-the-deck effort to tackle climate change and in the 450 ppm pathway we really pushed our imagination on both renewables and nuclear power coal-fired power generation capacity in India and Southeast Asia is actually increasing quite significantly in even in our 450 ppm case now but one big concern is that a quite substantial proportion of that new investment into coal in Southeast Asia and India is actually is 1970s supercritical technology which locks in a high emission profile if you take only India which currently has 80 gigawatts of coal-fired power generation capacity under construction if you build all the Indian coal-fired power plants that are under construction with the currently best efficiency technologies you would save more carbon dioxide than all the solar panels of the European Union so there's a there's a massive improvement to be made in applying more than high efficiency technologies but what I should emphasize that the reason why the Asian developing countries invest in supercritical technologies is not because they are stupid or evil they they are they have a full awareness of that but ultra supercritical technology is not easy it is a high temperature high pressure cycle and the high temperature and high pressure puts a very heavy strain on the equipment so you need you need very high quality metallurgy, special alloys precise welding very precise manufacturing good project control professional trained maintenance so there are not more than half a dozen engineering companies in the west plus Japan and Korea who can properly build a ultra supercritical coal-fired power plant and in many in many Southeast Asian countries even if you buy a nice shiny and new made in Japan equipment there is absolutely no guarantee that the local personnel can properly operate it so you need you need to build up the human capabilities as well so you need you need you need access to technology you need access to financing and you need to build up the human capabilities in order to bring efficiency up to the required level now crossing the Pacific to the United States we see U.S. coal in trouble and of course the U.S. coal industry is very outspoken about the so-called war on coal in the United States so we looked at who is waging coal who is waging war on U.S. coal and there the first thing to understand is that if you take a look at the historical data new investment into coal fire power generation in the United States dropped dead not with the Obama climate change plan it's not even with shale gas it dropped dead in the early 90s when the electricity and gas markets were liberalized that's what killed new investment into coal fire power plants because coal fire power plants have a much higher initial capital cost and under liberalized market conditions there is a tendency to move for the lower efficiency for the lower capital cost higher flexibility gas plants in fact the 75% of the coal fire power generation capacity in the United States is in states which have not liberalized their electricity markets and that's probably not a coincidence currently you have a rather similar marginal costs for coal and gas plants so and this is our estimation for the cost of the new EPA regulations on coal fire power generation now even if we had Tea Party administration abolishing the environment of protection agency that would not fundamentally transform the investment outlook for coal fire power generation in the United States because it is the capital cost of the coal plants and it is the economic competition with shale gas which is killing private investment into new coal plants the impact of the EPA regulations is much much smaller than the impact of the cheap gas and this is the difference between the Asian LNG prices and the US gas prices without shale gas the United States would be in the business importing expensive LNG and the impact of shale gas in our estimation is roughly five times bigger than the cost impact of the new EPA regulations and moreover I should also emphasize that the new EPA regulations are not something unique in fact with the new EPA regulations the United States is actually catching up with some other regions if you take the main pollutant sources sulfur dioxide nitrogen oxide particulate manner the new EPA regulations are pretty much in line with the large combustion plant directive in Europe and also with the new Chinese the new Chinese environmental regulations are quite tough there have been environmental regulations in China which were quietly ignored by the industry but in our view the new environmental regulations in China will be enforced in a very very throughout manner so in fact you could regard the new EPA regulations as something which is part of a basic package for a modern industrial society now I would cross again the Atlantic to Europe where we had a very short-lived coal renaissance and us being of coal-filed power generation in the years of 2002-2013 that short-lived coal renaissance is now over in fact that was this very short blip between 20 to 1 to 2011 and that was primarily due to the changing relative price of gas and coal coal prices were crashing but high oil prices and oil price indexation kept coal prices high but in Europe we have the large combustion plant directive driving out a lot of coal capacity from the market and also we have a very large scale renewable deployment which constrains the load factor and the operation of coal plants with these two factors means that coal-filed power generation in Europe started to decline and this time irreversibly and indeed there were new investments in coal-filed power plants large new coal-filed power plants are coming online in Germany and the Netherlands but this is not a reaction to the German nuclear phase out because large coal-filed power plants have an investment lead time of 5 to 7 years so this is the schedule of the coal-filed power plants coming online in Germany and this is the final invested decisions the final investment decisions for those plants took place between 2005 and 2007 by the time the nuclear moratorium came those plants were irreversible and under construction what is the big difference between today and the time when these plants were decided is that 2007 is the start of the financial crisis now from the point of view of the financing of the energy industry anything before the eurozone crisis is like ancient Egypt a completely different time which is unrelated to reality the the financing capability of the European energy industry was completely devastated by the eurozone crisis and also if I compare our long-term projections from 2007 with the latest long-term projections our 2030 european electricity demand projections were revised down by 800 terawatt hours so our germany and the spain disappeared from european electricity demand so these plants that are under construction they are already stranded assets they will run because they have low marginal cost but there's no chance in hell they will recover their cost of capital and with the exception of Poland and some other maybe some other eastern european countries I don't think we will see a final investment decision in a coal-fired power plant in europe ever again so these are the last of a dying breed and for the first time for the first time ever we actually can make a medium-term market projection for carbon capture and storage so far we have done only you know scenarios and modeling and so on but carbon capture and storage is coming back from the grave and reelection is taking place in the next five years this is going to be 0.2% of coal-related emissions so there's a long way to go but the journey has already started so that's with that I'm happy to pass the floor thank you very much Laszlo for a very interesting and somewhat sobering projection particularly anybody who's looking for more coal use in europe so Ichi we'll go to you next thank you very much cherry I'm very honored to be invited to this very timely event I'm so happy always to be back in my hometown Washington D.C. and I try to say he used to work as a chief scientist and then moved to Brookings I just did it by special although just a short time and my name once again my name is Shojito I'm a senior analyst at the Institute of Energy Economics today I'd like to elaborate the importance of coal in global context not only from economic but also from political or certain points well nowadays people tend to have very negative image of coal overall just because we are talking about what to do against climate change we have to maximize our efforts to protect environment for the future generations but many people's image on coal tend to be stereotyped I would say well can you believe this is a picture of coal-fired plants very near to Tokyo in Yokohama such a clean coal-fired plant is located in Isogo, Yokohama just 20 minutes by car from Tokyo and everyone from abroad to visit that plant starts to find themselves without any bit of dust or no pollution on the coast after going through the plants well I think this picture tends to be more of a general image of coal-fired plants lots of air pollution smokes something black well then how excuse me how can we look at the future with such different divergent image of coal well let me ask how let's well for some who can use coal very effectively with the most advanced technology coal can be still black diamond but for others it's just thank you so just a little hill well that is a question well my favorite we are on Shakespeare in Harlech where that nothing is a good or bad but singing makes itself thank you well then what will we the global roles of coal let me raise three central questions I'd like to discuss on today first well I don't need to be already notified large role and Dr. Hidon today it is such a bad fact that we will see project is irreversible increases of coal consumption in the global scale second well however we have to be careful how to use coal because we are also concerned about what to do with the future volume of the achieve the emissions at the same time each country has different economic background the way you consume coal must be economically sustainable then what if we cannot use coal in the most effective way what kind of political or geopolitical or impact we may encounter well with regard to two other kinds of hydrocarbons namely oil and gas they are also projected to increase so rapidly especially in Asia as the gravity of global economic growth has already shifted toward the Asia Pacific especially Asia in it and China and India will be the major driving forces within Asia and beyond and well as regards electricity production well once again Asia will increase its share for the current about 40 percent to close to 50 percent in the next two to three decades and again China and India will be major part of that with rapid increases in coal consumption well the increasing trend of coal consumption is not just a matter of China and India as and economies are also projected to rapidly increase coal consumption well as for Indonesia yes Indonesia is one of many no oil and gas producing countries in Asia but the economy is going so fast they're trying to use actually they need to use oil and gas for their domestic consumption meanwhile they also have massive coal and they're exporting massive scale coal at the same time they're trying to use coal for domestic economy by introducing their advanced green coal technologies and Malaysia as well actually Japan is importing massive scale energy from Malaysia but their domestic gas consumption is increasing and they also have some coal and they're trying to make the base of their own coal meanwhile increasing imports of gas and airs well we have to bear in mind that but how they use coal in Asia especially changes the future scale of self sufficiency of energy in the region in other words unless they use coal effectively their external dependence for their hydrocarbon consumption burn to increase we have to be careful what it would cause for the standpoint of considerable competition of oil and gas in the region well once again we have to look at the best fact of how coal has been used in Asia especially in China yet China is such a big giant of consuming huge scale coal at the same time this is a piece of improving thermal efficiency for domestic fire power is just conspicuous at the same time China is very proactually trying to export their clean coal technologies to other developing countries this is also unstoppable this is just today's picture of global coal trade flows and here I have two different pictures illustrated by my Institute IEJ last month as for the advanced transition areas in which actually the gross rate of coal consumption could be curved due to a bunch of technology revolutions including CCS effective use of renewables nuclear et cetera et cetera et cetera even with that kind of most rosy optimistic picture we still need huge sizable scale of coal to be traded on the global scale well what if coal is ineffectively utilized well about from coal as I already showed slides Asian nations especially China, India to be followed by Asian countries we need to consume massive scale of natural gas especially due to environmental consideration et cetera et cetera et cetera with the artificial use of coal well the you know demand for natural gas is bound to increase it will cause it may cause some your political impact within the region and beyond well nowadays everyone is curious about what's going to happen with the rise of China especially in this part of the globe and Chinese trading energy demand for everything all gas et cetera just a remarkable to be followed by India and in case they don't use coal effectively they are actually are big two of the the big coal producers they have a lot of coal domestically and still they are importing coal unless they use coal effectively and in case other nations especially in Asia don't use coal effectively it's would be impact on future hydrocarbon trade especially oil and gas would be something we we need to be concerned about if we leave well let me change the scope to your well we haven't yet found the clue to solve the question of the Ukrainian crisis which is actually escalating we are all in country in such a very critical period of the world history and the European nations trying to figure out how they can ever reduce dependence on all gas import from a single country and well but we have to calm down how many options do they have yes United States has massive scale of natural gas Japan as a nation they're expecting massive arrivals of LNG are import from the States but you cannot see LNG to unlocked countries to poor endless of bike everywhere including Ukraine the physical constraint over there is just there and we have to admit it then what can be the method they have now well they need to make a change in power mix and well and they also need to reconsider the meaning of nuclear but it takes time and upfront cost for building nuclear power plant is just huge and yes EU is suspicious about increasing the share of renewables but the scale of per production by renewable is just limited they're one of the EU solutions for them would be the effective useful core well I also would like to raise a question about the the interlinkage between coal question and nuclear future well as I have repeated already the in effect three years of coal would boost future consumption of especially natural gas and oil for gas well in case coal cannot be effectively used it it would have a major impact upon the future of the city of oil and gas market then countries like China India especially would once again share to consider possible speeding up of deploying nuclear reactors and for many developing countries in Asia and Africa they may find it's quite un affordable to pay for higher prices for oil and gas they may think it's more attractive to introduce a nuclear power plant if someone could provide upfront costs and nowadays for example China is trying to hurry up domesticization of nuclear technologies and being to sign up new contracts with Pakistan you know South Africa etc well we also have to be careful about future possible diffusion of our CVI use of nuclear technologies and when we are wondering what's going to happen to the future of nuclear power generation as a result of US share gas revolution here in America cheap gas prices being to push out coal and nuclear but if you just keep our eyes open globally we should have a different kind of set of pictures and cheap gas prices in the state will not stop our considerable diffusion of nuclear technologies on the global scale let me wrap up my presentation first well we have to keep our eyes open wide globally what may happen here and there which can be the US, China, Japan does not tell you every single piece of global reality second thank you well in the future years of coal will may increase gain political uncertainties or in view of you know conceivable competition over other kinds of hydrocarbons and lastly that exists no perfect energy or no panacaia to solve the question of energy security and we have to be very vast about the cost of environmental and political and economic questions thank you very much for your kind attention thank you Soichi as usual by the time you get to the end of one of your presentations there's always a very provocative thought to think about thank you Samuel good afternoon thank you very much Charles for and CSIS for the opportunity to participate in this panel I'm always a bit intimidated when I speak with such people because they're energy experts I'm the deputy representative of the Asian Development Bank so my job really is good government relationships with Treasury and State Department and with Department of Foreign Affairs Trade and Development in Canada so that's my job but when I first started my career at the Asian Development Bank I started as an investment officer in the energy sector for South Asia so but then I later was coordinating ADB's efforts to increase lending and in renewable energy and energy efficiency so every time I get an opportunity to speak about energy issues I do the background research and I keep my technical technical bits going so it's always interesting to do this but today I thought that we've had some incredible presentations with incredible data perhaps today I thought I would talk about energy security in Asia the energy security challenge in Asia and I'm going to come take it from a book that ADB has just published and will shortly be distributing called Asia's Energy Challenge Key Issues and Policy Options and not sure there we go that's the title of the book then look out for it it has an E at the end of the G I misspelled that I'm sorry but it talks about a lot of sort of the human dimensions of what we've been talking about today we have a lot of data but there's a lot of human dimensions that go into energy security the political and policy decisions the human behaviors that need to take place for Asia in this case to talk about to meet its energy challenge and this is where I'm going to start and this is the premise by which the Asian development starts a lot of its work and it's that you know we did a study a few years ago that says if Asia continues to grow at its current rate of economic growth by 2050 Asia's GDP will be more than half of the global GDP and in fact per capita income in Asia would be about $40,800 per person which is what the per capita income of Europe and North America so this is the premise of where we start a lot of our economic work and this is the premise by which we start a lot of the policy dialogue that we hold with our developing member countries and there's a lot of assumptions there are a lot of premises on this and a lot of the assumptions and the assumptions are based on whether Asia will meet those six points that are on the right side of the slide there whether we can address inequality in the region individual inequality whether Asia can overcome the middle income trap Asia is a region in the world with the least natural resources of the five regions in the world it has the least amount of arable land for growing it has the least amount of fresh water of all the five regions of the world and how Asia addresses these things and it has probably the least amount of natural resources of energy yeah okay and so we'll have and these are the assumptions we're not going to get into that because we're not going to be initially talking about the economics today we're going to talk about energy security but these are the assumptions that are being made we look at the our flagship study called the Asian development outlook over the last few years shows that in fact that is pretty correct that in the last few years for the average six percent growth in the region and our forecasted growth for the rest of 2014 and 2015 going into 6.26.4% for Asia and going forward with a lot of assumptions I think shows that Asia's economic growth will continue at its current rate and in fact some of the issues that we talk about on energy security will come true this is at the same time what the rest of the world is doing in this economic growth and I want to point out 3% for the US that we forecasted for 2015 is going to be excellent growth for the US and will actually underpin a lot of the growth coming from Asia is the strength in the US economy coming out forecasted for next year aggregated a lot of the data that we've been talking a lot about today if Asia was going to meet its economic goals of becoming 50% of the global economy by 2015 this is the energy needs for us to continue to go to continue to meet our economic growth rates currently we use 34% of the global energy and if we're going to continue by 2035 we'll be needing about 56% of the world these are on a business as usual scenarios also if we look at the self-sufficiency index I know it's going to be hard to read but we see there's only three countries that are going to be self-sufficient in Asia and energy we have Kazakhstan Azerbaijan and Brunei everybody else will be net energy importers and you look there where India China are sort of just above the middle there Indonesia is there the big countries Bangladesh is way down in the bottom and these are the big countries with a lot of population and so this is where the energy demand is going to come again we talked about the dearth of energy resources in the region we look at the reserves in coal we look at the reserves in conventional gas and technically recover oil and natural gas and we see that Asia doesn't have a lot of this so how is Asia going to address these shortages to ensure energy security for continued economic growth I think this is a slide similar to yours on the energy demand for Asia in Asia that most of it is going to continue to come from coal moving forward an interesting number there I'm not sure why is why renewables it's not more of a percentage again I'm thinking that it's because it's going to come from this is based on based on the business as usual scenario so perhaps future policies and regulations and incentives will have a greater impact on renewables also on oil imports the oil imports for the region are expected to triple by 2035 and again how is Asia going to manage this I'm flying through the slides because a lot of this has been done and I want to spend a lot more time on the policy options that we're talking about fossil fuels demand still this is for the electricity where electricity in Asia comes from we see that a lot of it still comes from coal in fact it's going to continue to grow and coal will continue to be a large part of the feedstock for energy in Asia along with the points that were made earlier and I'm switching here to infrastructure because the investment needs in the region are big not only do we need energy but Asia needs a lot of infrastructure some of you were here yesterday there was a very interesting session here on Asia's infrastructure needs and I attended a conference based on a report that PwC had done just released this month ago on Asia's infrastructure needs we did our own studies in 2009 to look at Asia's infrastructure needs we can see that OECD infrastructure is scoring out of is 5.4 out of 6 and where the rest of Asia fits in so a lot of investments need to be made in Asia in its infrastructure so we can the reason I bring this up is because this is an opportunity for Asia for the policy makers for the people of Asia the investments we make now will have you know we'll be in place for the next 30, 40, 50 years and with the energy side that's very very important and I'll bring that up a little bit later because of this infrastructure gap we look at we look at at the shortages in the who we it allows us to talk a little bit about electrification in South Asia and Southeast Asia still about 800 million people still do not have access to electricity in the region 1.3 billion people still do not have still use traditional forms of energy for cooking although I'm told that cooking with fire would taste much better than cooking with gas I question that number on internet access that 80 80 percent of Asia still do not have access to the internet I don't know I think perhaps it's less than that but those are the numbers that I have gathered from various ADB reports and this are the the Asia's financing requirements and you see there's a lot of financing requirements especially in the electricity sector in the road sector transport and I bring this up because we're a bank and we do a lot of financing and because we do a lot of financing we the the World Bank and in Africa the African about we have an interesting place at the table to affect some of the investment decisions that are going to be made but now I'd like to spend a bit more time on this on on the three pillars that we think and on our policy discussions are how Asia can get to energy security and the first point here is talk about energy pricing right the subsidies that are going into various forms of energy need to be what's the word I'm looking for need to be alludes me rationalized okay ADB's dialogue with the country so you know you can subsidize but we must understand what we are subsidizing we must understand whether you can afford to provide those subsidies Indonesia is a very good example I'm from Indonesia the previous president cut the subsidies to the energy sector by 50% the current president has cut 30% of the remainder and says that he will continue to do that that frees up a lot of fiscal space to invest in education and healthcare and transportation and other things and these are the same conversations we're having in Bhutan in India in Laos in Vietnam across the border across the board in Asia and this is an important part because until we get to real pricing of energy right and we put the price signals out there we will not get to energy efficiency because energy efficiency as we can see from the numbers that were given by should I talk to this one I don't see this part I just don't okay I'll do the other one okay and as the numbers are given earlier I really like the number 42% of energy growth can come from energy efficiency savings that was from and so yes to get to energy efficiency savings we need to get the price correct we had a a large energy efficiency program in the Asian Development Bank we targeted seven countries India, China Indonesia, Vietnam Bangladesh I can't remember all of them but it was it's still very hard for us to help and to get investments in energy efficiency it makes a lot of financial sense with utilities with industry but because of price distortions and electricity sector it's very hard to get there so number one on our list is really to to work on subsidies and address those and get that the second part is emissions sorry CO2 taxation either a cap and trade system or taxation of CO2 again it's about getting the prices correct on this I believe that perhaps taxation it's much better than the cap and trade system the cap and trade system we've been tried in Europe it's been tried with the CDM but I think taxation perhaps is another way of doing it that will send better signals to the market on what can be done with energy and then we talk about sort of this second part is sort of more aspirational in the dialogue that we're having with the countries we're talking about kind of about smart cities and talking about urban growth and as you know the urban the rate of urbanization in Asia has been phenomenal it's taken Asia less than 100 years or around 100 years to get to be more than 50% urbanized it took North America about 150 years it took Europe about 200 years to become urbanized so the problem of urbanization and the problem of meeting the challenges of urbanization is not that the Asians aren't trying to do something about it it's just happening so fast that they're not able to cope but if we can do this better Asia can urbanize a lot better and we can plan this better I think a lot of the energy use savings for energy use can come from better planning and urbanization and urbanization sorry also on the transport sector right we talked about economic growth we talked about the economic growth of Asia and the growth in per capita income if today vehicle ownership in Asia is about 300 vehicles per thousand people in North America vehicle ownership in North American Europe vehicle ownership is about 700-800 vehicles per thousand people and if Asia goes to a higher per capita income there's going to be huge growth in vehicles so how are we going to meet that how are we going to meet the energy needs for vehicle use we're talking the Asian Development Bank with the governments and with other institutions about a model of avoid shift improved avoid the need to travel in the first place so we're talking about smarter cities we're talking about better urban planning shift shift from private transportation to public transportation and that's a very difficult thing in Asia because again we're talking about behavior the first thing you do when you make money is you buy a motorcycle and you buy a bit more money by car there's no way I'm taking the bus I'm a manager now I'm my garment factory and my staff take my bicycles and they take the bus but I take my car well then if we start talking about bus mass rapid transit and special bus lanes for the reason to do that is to get people out of cars into private into buses and to do that you need comfortable buses that are air conditioned you need hub and spoke systems to get these people to move but to do that you have to price it differently from the normal buses and anyway people who are already taking public transportation you're not that's not your target audience your target audience are these people who are who are you want to move away from the cars into the buses well that doesn't jival with politicians because we're talking about inequality here the comfortable buses are going to be much more expensive than the regular buses the poor people are going to feel like you're not taking care of them and so it's a behavioral change that we have to address and it's a long-term behavioral change and that's something that we're working on with developing member countries another thought is to switch because of abundant and efficient gas I liked it when the police assistant secretary kept he always said abundant and clean gas and so with abundant and clean gas perhaps in Asia we can rethink it and not just use gas to to create steam to create generation it is then transmitted over 100 kilometers and then use to cook water in the stove the infrastructure in the U.S. is such that that's what you would do but perhaps the infrastructure in Asia is not so developed that you can't encourage better gas distribution and use gas as a primary fuel for cooking for and perhaps even for appliances that's a thought that we're exploring and we're looking at investing a lot more in gas distribution the second part of the three-legged stool is environmental sustainability right I liked also the assistant second deputy assistant secretary's topic he called his presentation say the role of coal in all the above strategy and I think with Asia it really has to be all the above there is and you say also there is no panacea for this energy security check it really has to be all the above and investments in renewables wind, solar geothermal geothermal is an important resource that has been really overlooked in Indonesia very underdeveloped and something that really could be done and there's a lot of that and there's wind in the Philippines and the wind is viable in the Philippines again human behavior it's taken them 10 years to pass the Renewable Energy Act it's taken them another five years to do the feed-in tariffs again political action human behavior affects this and I think there's a lot of opportunities where Asia can can do better biofields unforgettable and I call this more efficient use of coal when I was in charge of the Clean Energy Program at ADB I got hammered I used to get hammered all the time by Greenpeace because ADB at the time was called the Asian Dams and Bridges Bank and we financed a lot of coal they say it's changed but they used to hammer us all the time and they said no you can't use clean coal because you're just whitewashing the problem there's no such thing as clean coal coal is just dirty and so we in a peace treaty we decided that whenever we talk about clean coal ADB is supposed to call it more efficient use of coal so when I say more efficient use of coal I mean CCS and I mean we have some funding from the Global CCS Institute and we've been working in India and China Vietnam and Indonesia to look at the potential for CCS for CCS on the geology for CCS we've also been working very hard for the last three or four years to develop the regulatory structure for CCS a lot of a lot of times in Asia when new technology gets adopted it's really delayed because the regulations aren't in place right so we're working in these four countries to get the regulatory structure in place so that when CCS is available and commercially viable that the regulatory structure is ready in place we were there at the Sask Power inauguration our team met with the deputies and secretary we brought in a delegation from China to look at the the Sask Power plant and again just like it's being a demonstration project in the US and North America it's also a demonstration project for Asia so there's a lot that we can do in the greater use of clean energy and more efficient use of energy another thing that where we can get a lot of efficiency is developing an integrated regional market right Central Asia was an integrated regional market once upon a time where Kazakhstan could sell its gas to Europe and use hydropower from Uzbekistan I think and in the summer months and in the winter months you know Uzbekistan can use the gas and electricity that's from Kazakhstan same in the in the Mekong countries where you have interconnection between Laos and Thailand and Cambodia and Vietnam where you can get efficiencies from there and in the system we financed a lot of that in Central Asia in the Mekong countries in Central Asia we're also financing even now between Malaysia and Indonesia in the island of Kalimantan so we're looking at interconnection in the grid in South Asia we've been trying to do that but it's much more difficult because the South Asian countries aren't connected they're only connected through India so it's very difficult Bangladesh has been wanting to buy power from Bhutan for a long time but with the interconnection through India it's been problematic so if we can get a regional structure on this that would be very very efficient way to use the natural resources that are indigenous and finally because we are an organization focused on reduction of poverty we cannot forget the whole access issue you brought up the issue of electrification and and for energy scale we cannot talk about an issue without still talking about access to energy for the poor the first point there is yes the governments all have energy access to energy programs but if you look at the countries that still do not have access to electricity a large India Bangladesh Indonesia is only something like 50 or 60 percent electrified and I've had conversations with Indonesian government officials because I'm in Indonesia I can say this right I say to them you know apparently your government the government gets elected without providing access to electricity with people so until that becomes an important part of the political agenda it's never going to happen in the Indonesia and that doesn't happen so how do we do it so in our work on access to electricity we've been trying to get a lot more of the private sector involved vendors and to get them to invest in solar lantern charging systems we're looking at mini-grids we're looking at micro grids a lot of that has to be done and I think that's a very important part of the equation we cannot forget about access in Asia so those are the three sort of pillars that I wanted to highlight to keep in mind sort of the importance of sort of the human side of behavior the human side of policy making and decision making thank you very much thank you Samuel I'd like to just make a few points and then we'll try to get it to the floor rather than ask extensive questions of the panelists the one area that as one who's worked in a lot of Asian countries for many years on various world bank and Asian development AID projects that I think we have not had enough discussion of is the whole institutional makeup of too many Asian countries where there is simply no respect for the rule of law so you can talk about greater involvement by the private sector but the private sector has to be assured that once they invest rules of the game won't change even where with financial assistance from donor agencies we set up regulatory regimes too often there is no real regulatory enforcement too often when a regulator does make a decision that a new law may say he or she has the right to make the reality is when they try to go cut off somebody's power for non-payment they can even be met by guns at the gate of a factory I've had that happen to me personally rather intimidating we have endemic corruption in things like people bribing meter readers to either falsify their bills or other things holding down electricity usage we have fiscal realities confronted by most Asian utilities that too many people don't pay their bills or in fast growing cities where new addresses are popping up every day bills don't get to where they're supposed to go we have the classic case of as I mentioned non-payment of bills and interestingly when you really do some of these studies the non-payment of bills is usually not the little guy or the small homeowner it's the big industrialists it's the army the navy oftentimes a ministry of finance and it really is a major issue that I think Asia has to come to grips with if they're really going to see serious reform I'm glad Samuel particularly but several of you touched on the question of energy access but I think a critical question is how do we bring the literally hundreds of millions of people without even access to one light bulb or probably several hundred more people who have limited access to energy how do we get them up to a modicum of a reasonable amount of energy to improve their standard of living at the same time do that in the context of ensuring that we aren't just exacerbating the climate change problem because fuel usage particularly of fossil fuels is going up one of the big problems also about reform particularly in the coal sector is the whole issue of employment you know in India it's often the case that the major coal producing states are often in political when congress was at least in power for many years are in political opposition to the congress party when it rules in Delhi and so any reforms of the coal sector that are seen as hostile immediately it becomes politically charged but there are tens of millions of people throughout Asia that work in the coal sector or the logistic sector to move coal and as you talk about reforming coal I think you need to keep up with the realities of how you deal with this I think we have the impact on looking at our discussion on coal the impact of what happens if LNG prices continue to tumble do they undercut coal and if so what does that mean for enhanced LNG demand which right now looks pretty glutted but is that going to last and the whole question of eliminating subsidies is important but it's important how you eliminate subsidies because there is the danger that if you eliminate subsidies and then use the money perhaps legitimately so to build new infrastructure something you may actually increase energy consumption rather than reducing it clearly eliminating subsidies in a sense of giving the right pricing to signals as was noted is extremely important to promote efficiency but it's not as simple as some of the analysis often suggests now with that rant we can now turn to the audience for questions to the panelists floor is open yes sir please identify yourself and wait for the mic please I'm Bob Hershey I'm a consultant what can be done to raise money for these things in the private sector especially by holding meetings online and getting some transparency I think we've talked about this previously and the consultative process that needs to take place through all this is a large is an important part of it I think the inputs the discussions on how we might do this one very recent example that we've been talking about to Indonesia as they cuts its subsidy on fuel is direct payments to the poorest of the poor how do we get direct payments to these poorest of the poor the World Bank and us we've been piloting a program of direct payments with the caveat that the children of these people continue to get health checks and the children of the poor continue to go to school and we can get an electronic system that goes in where you have identification electronic identification the kids go to school they get checked up twice a year they get all the immunizations there's a direct payment from the government to the poor as a subsidy and so we're working on those programs I don't have specific knowledge on how they're doing it but this is something that we're moving more and more towards on the electronic side of the consultations Lenny Wolfe Johns Hopkins University question for Laszlo as we think about gas competing with coal especially the unconventional gas does the is there a rapid decline rate in unconventional gas similar to what we've heard about unconventional oil that would suggest maybe the gas the new gas resource won't last as long well certainly there is a rapid decline rate of non-conventional gas this has been well known from the North American experience which means that you have to drill continuously in order to and if you if you stop drilling then production will fall very very very rapidly now at the same time I have to say that outside outside North America the only country where non-conventional gas has an even money chance to make a real impact on coal consumption is China even in the case of now there's a huge uncertainty over the future of non-conventional gas in China because that's the China so far has drilled only of roughly a hundred shill gas wells in the entire country I mean in the in the United States a hundred shill gas wells is roughly one week so so the the entire understanding of the shill geology in China is is like comparable to the United States 15 years ago so no one really knows but what in China reasonable people can put together a very bullish shill gas scenario we did that we did that unfortunately for for India if I combine the population density the land use problems the road infrastructure you know a single shill gas very requires 500 truck pips and that's a that's a big issue in the India roads the water use issues and so on you have to really really stretch your imagination for a bullish shill scenario in India same goes same goes in in let's say in Indonesia the best non-commercial resources are in regions of swamps mountains jungles very very very difficult infrastructure access problems in Europe shill gas essentially lost the political cultural fight so it's so I have to say that I have to say that that in China shill gas could potentially have a meaningful impact on the outlook of coal but even in China the jury is out there for the for the rest of the world I don't see it having a having a really big impact thanks I'm Dan Millis and I'm an independent consultant Sam you mentioned the subsidies and you know way back long long ago in September of 2009 the G20 meeting in Pittsburgh there was an agreement to phase out fossil fuel subsidies could you comment on that and and and maybe also link it back to U.S. government schizophrenia or amnesia maybe is the right word and anyone else could comment on that too yeah I think I think it's I've been following this fossil fuel subsidy and you know the G20 to ask the IMF to lead the work on looking at subsidies and fuel and fuel subsidies and they were for I think for a year or two a lot of consultants running around looking at the fuel subsidies and where they were and at the time I was in ADB's office in Manila and consultants would come by and said what are you doing on fuel subsidies and this and that my view is that the fuel subsidy issue hasn't moved as an international issue and perhaps those of you and the sort of think tank community can add more to this I don't think it's moved as much as sort of the G20 has wanted it's all got to do with local sort of politics local will I think the Indonesian I track Indonesia because I'm Indonesian has been one of the few where they have taken a large chunks of the subsidy out anybody else can add on that that'd be very helpful thanks I mean all all all politics is local okay so it's it is not I mean it is not the underlying economics which is difficult in the fossil fuel subsidy issue what is difficult is to make sure that the government survives because it can be it can be a politically very very painful process and no wonder no wonder that for example in India it took length style election and a very powerful very determined prime minister to make our real progress recently in Nigeria it was a big political crisis so so so I don't think I don't think that the first there's a very clear understanding and there was a very clear consensus on it and I don't I'm not aware I'm not aware of one one single government which would say that no no no we definitely think this is a good idea we want to maintain it it is just that the prime ministers and the energy ministers are looking for the appropriate political tactics to to do that and again if I if you if you consider that in these countries we are talking about a very substantial proportion of the income of the average person you shouldn't be surprised that it is a politically complicated process but I do think that we make progress I I think I think I wouldn't characterize it as a stalemate if I could just share an anecdote each year at the national press club there's a meeting where all the heads of various energy trade associations come and make presentations on the state of the industry a year ago I got up and asked a question I said how many of your industries would agree to give up all the subsidies you receive if we got rid of all the subsidies and we put on a carbon tax so everybody would have a level playing field not one hand was raised so this issue of subsidies isn't just something that pertains to Asia we've got plenty of them right here at home thank you so much for all of your excellent presentations excuse me so I guess to somewhat build up build on Charlie's earlier sort of question a comment during the keynote so you know currently there is sort of a momentum building from the U.S. and I guess the Western Europe to sort of severely limit the public financing for coal coal technologies but you know we've already sort of you know covered some of the key indicators and they suggest that a coal may still be the only viable option in that light I mean for Asia at least I'm not really talking about the U.S. or Europe or even say let's you know put China and India aside because there you know there's enough of a private financing is public financing really irrelevant for Asia well again with a bit of a simplification in a typical Asian country the electricity industry is a vertically integrated monopoly so that there are no really there are no there's no real retail competition on role or even wholesale competition in most Asian countries that you might have private investment into merchant power generation backed by long term contracts with the government or the the dominant electric utility more often than not those electric utilities are stayed on more than half of the electricity industry stayed on in the industry and the and more often than not that state on the electricity industry has a privileged relationship with state on banks now if if this is in a country where the overall macroeconomic conditions are right and the institution's function and the price regulation is reasonable that's let's say Malaysia is for example I would put that into the category I mean the Malaysian in a country like that the the electric utility can do pretty much whatever investment they want because they have they have strong internal cash flows due to their vertically integrated nature and they have access to capital from from various sources now if you have countries where there is a big implicit subsidy problem so the so the state utility is burning cash or you have a or you have an overall of badly functioning financial systems so the domestic banks are not strong enough and so on there you have a there you have a big there you have a much bigger potential role for development banks and an official funding but the but but we think that the that the a very our number of surges that are very large a very large proportion of the capital need for the electrification could actually be mobilized by these countries themselves or by the private sector or by the by the governments again if you have a if you have the merchant generator model which is quite which is quite popular in some some Asian countries if you have a long-term contract with a government and that government has a proper credibility in capital markets then that long-term contract typically enables the investor to to raise capital let me add I think they're I think I think it's going to be very different depending on the Asian country to add in that because I think you have the lower income countries Laos, Cambodia, Myanmar, Bhutan, Nepal then you got the lower middle income countries sort of Vietnam Bangladesh and then you got the middle income countries and I think the middle income countries is correct where you have some depth in the financial system you got utilities that are decently managed where non-technical losses are being addressed and therefore there is appetite for private banks to invest in these things but the lower and the lower income countries that Laos is talented it's very hard to get the private sector to invest anyway in Laos or Nepal or Cambodia and that's where development financing institutions have a large role to play I think it's in the it's in the middle income countries where the play is very very interesting because on the one hand the long-term strategy should be use the word should should be where the development financial institutions come in and actually the investments we make is a third part of the thing that we do the first part we do should be that policy dialogue to address all those things that Charlie discussed to the governance and in the power sector how it's done should we unbundle the vertically integrated utility to transmission distribution generation transmission distribution do we help can we help them set up a regulator so that they can set up a market like that once we do that then the development financing institutions should come in with some technical assistance to do some capacity building to help establish that regulator to help establish the regulations then only we should come in with the with the financing after that and so then in those countries I think we play a very important role we should also play this role in the in the and I should have said this first but we should also play that role in the the lesser developed countries but for the larger countries the other part of that the your conversation your question which I think was very pointed and you disguised it very well is that you know and it's the question of whether the multilateral should be financing coal right and the question and I think the value addition of the multilateral institution in China or in India is actually an interesting role because you know we lend maybe a 1.5 billion dollars to these something like that's a rounding error for their national budgets we don't really mean anything they don't really need our financing to build roads to build transmission lines that's not where our value addition is it's not financing for them for them they want us to do things that they have never done before so they want us to do PPP for toll roads in some cases which they have done but they want to do more in the power sector they want us to do supercritical or ultra supercritical they want us to do this more efficient use of coal CCS sort of thing and that's the value addition that the MDBs have it's not just the financing but the knowledge that we bring to our projects to try out new things that they haven't tried so it's fungible right if they use our money to do this that frees up some of their capital to do other things that we can't finance so so I think those are the plays there we have to keep in mind that the really large amount of electricity is not to give light bulbs to very very poor people in our in our slum or in our very poor village that that is by the way increasingly done in a decent price and that's and that's a that's a major improvement in the quality of life of these very very poor people but the but the in energy terms the really large amount of electricity is that when you move a step up in human capital when these people go to go to work in a factory which is running with electric machinery and they have money to buy a refrigerator and and next step they go for for air conditioning you know city of Singapore 97 97% of the buildings have air conditioning neighboring Indonesia with the same climate 25 so the so the really really large amount of electricity is not at the bottom of the pyramid we run we run scenarios for comprehensive electrification in Africa and South Asia it's not it's not a large amount of electricity and it's completely unfair to to frame it as a big part of the climate change debate the really large amount of electricity is when you acquire the middle-class lifestyle that's that's when the numbers become very very large we I think we would be remiss if we didn't draw on Soichi's expertise as one of the leading energy geopoliticians I think in Asia so I'm going to ask a question and I think Soichi if you were advising the Japanese government which I'm sure you've done before but today what would you say are the most critical things Japan needs to do to get on a sound energy path where if anywhere in your opinion does Russia fit in as a supplier to not only Japan but the rest of the far east how serious do you think the perception is in Japan that China's bellicosity in the south and east China sees really is a serious issue for people concerned about energy geopolitics in Japan Oh, thank you very much for raising very interesting time question first of all if I were asked to give one specific advice to my government which is I think with my personal capacity though is talking need to restart nuclear reactors as many as and as fast as possible this is no question about it because you know it's just easy why is he sorry no it won't go no second to define we had to find the located on the global map is such a no island country without no domestic hydrocarbon reserves we are completely dependent upon gas and our imports even cold today and what if some some sort of contingency takes place area over the Sierra and communication starting from the straight of homes through Malacca states through South China Sea to East Asia anywhere in that something she has happens you know Japan's lifetime really got cut off all this time of course you know it's easy to to you know conceive this identify the percentage of no that's kind of possibility where we have to be prepared for all sorts of cases as and this is questions especially when it comes to the question of cool or import as regards natural gas the story is a little bit different thanks to US shell revolution Japan's expected to import as much as up to about 20 percent of energy from North America by early 2020s and Japan is also interested in our in the making is taking Alaska projects in my personal analysis of projection told up to the end of 2020s by by 23 Japan can still actually increase its import of energy from North America including US and the can combine up to maybe even 30 percent or so and plus we are importing massive amount of energy from Australia so we you know our gravity of energy import is shifting toward positive side but we cannot expect much the same scenario with regard to cool oil we are bound to depend upon the medium eastern oil for many decades to come unless US decides to export massive amount of good oil this is wonderful for us and for everyone else that's and this is very sensitive and story can be different with regard to the question of Russia well first Russia doesn't have extra capacity to export LNG to the world they have only one project in operation in Sahara it takes many more years to build something new and under the current Asian it takes more and more time and as for the recent big deal of you know Sino Russian gas pipeline contract it's just wonderful it stabilizes the region of global supply demand balance of natural gas and basically Japan is very happy about it I think we