 Good afternoon. Thanks for having me In fact the committee reported while I was there we reported three energy bills two of which became law So we had a pretty good run there And we got awfully close in 2009 With some with some great policies It's a few friends here like Kevin and Jonathan both were big fans of pieces of our bill and And and as I was telling Kevin earlier, I'm still hopeful that some of those things will resurface You know you you have to have a long view in the policy circles around here and So I have adopted that that view that you know nothing nothing is ever quite dead With that uplifting frame and let me Let me move on a little bit to As I was looking through the agenda and some of the speakers and I managed to catch a little bit of the last panel Which was intimidatingly good, so I'm gonna See if I can uphold that I Think the thing that this points to and and actually is the point that I wanted to to get to today is That we really are living in a time of Tremendous change in the energy sector You know whether you whether you consider it disruptive change disruptive technology or or just looking at the incremental effects of technology We're we're we're at a really unique time and place and so let me take just a slight step back and Try to go through at least a few of what I see as some of the key drivers I think that you know the the first and most obvious I think Let me back up one actually let me let me finish this Is the changing global energy landscape We're seeing now world energy consumption growing very quickly and Development of new markets almost overnight in many parts of the developing world And as those developing countries industrialize Really rapidly In fact the energy information and administration has projected that over the the 30 years between 2010 and 2040 world energy consumption will increase by 56 percent But as you know most of that growth Will take place in the non OECD countries Which presents some interesting challenges? In places like the United States where demand growth has has shrunk to nearly zero So that's that's sort of the number of the overriding Context here where the technology development that has traditionally come out of the United States is now against an Year-zero growth environment Whereas the rest of the world is industrializing rapidly Second and more close to home is the current revolution in natural gas and unconventional resources The the breakthrough advances in horizontal drilling and in hydrofracking and their subsequent years of incremental improvements have taken production far beyond really anyone's expectations in the in the recent past and so this leads to a situation where the perception of domestic energy scarcity in the United States is is giving way to Perceptions of of energy abundance and that has a fundamental effect on on the way perceive people perceive Energy policy and what are what our needs are? So let's take that as the second factor But that doesn't mean that we can completely transition to a policy of energy abundance Because of the third thing which is the critical challenge of climate change. And so we cannot completely Assume that we can we can use all fossil resources to their fullest extent because we have this this Fundamental economic drivers and and the findings of the new report from the UN international plan on climate change Are sobering and we really do reinforce the urgency of our need to act as as soon as possible And and as I'll touch on it in a bit These effects of and the threat of climate change are real and can only be reduced by limiting the rate and magnitude at which the change is happening and Finally, let me what I want to cover is the good news and and that's the technology revolution I think we're seeing right now across the board in in energy and This is a sort of been a long-standing Belief that we would hit this technology revolution and and I'm I'm here to say today at least in my opinion It's it's arrived and so we're not we're no longer dreaming of a future where These these things these things can come but we are we're living it now and that that presents challenges and opportunities and So you've you've heard from leaders representing a bunch of points of view Across this but I think you know the the the theme that has come through is that this is a unique time and place So let me let me revisit a little bit in a little bit more depth the the climate change Difficulty we're in So if we look at climate change, we see this a really compelling story of action for action this is the representation just from Munich Munich Ray of the costs of recent climate disasters and This is only one component of the cost We've had the 12 hottest years on record have all come in the last 15 years Each of the last three decades have been successively warmer at the Earth's surface than any preceding decades since 1850 increasing floods heatwaves and droughts not only taking a toll on nations farmers they've led to rising food prices and In 2012 alone there were more than 11 different weather and climate disaster events with estimated losses Exceeding $1 billion each across the United States So we have to remember that there's there's a real human and social cost to To our energy landscape And then getting this is this is a real eye chart We're not going to get into the into the depths of this But what I wanted to point out is that that we have acted last May federal agencies along with numerous White House Offices released an update on how we would how we value Avoiding these these damages and the in the social cost of carbon I know there are economists in the room So we won't we won't get into the discount rates and all the other various aspects of this But the important point I wanted to make about this is this is a mechanism the social cost of carbon that allows agencies to incorporate the social benefits of reducing carbon dioxide emissions into the cost benefit analysis of their actions and and and what they're at least is some measure of their cumulative impact on global emissions Includes but is not limited to changes in net agricultural productivity human health Property damages from increased flood risk and the value of ecosystem services due to climate change So it's this is another component doesn't include everything it need a gray does and and again is is a measure And one way to begin to look at this so While we can argue about the specific Models and the and the appropriate cost and discount rates The power of the social cost of carbon is to begin accounting for these aggregate impacts And really for the first time to inform our decision-making and planning moving forward And so the president summed it up in Georgetown University last June during the State of the Union in January And during the State of the Union in January where he said we have a moral obligation to leave our children a planet that is not polluted or damaged and And summed up here that when our children's children look us in the eye and ask if we did all we could To leave them safer and more stable world with new sources of energy. I want to be able to say yes We did and So as he pointed out in this speech Particularly at the speech of Georgetown it will take a concerted global effort to really address this problem, but future costs Continue to mount while we try to find the best policy framework to address the problem so if we're truly going to avoid passing this climate debt on onto the next generation as he said we can't wait and So this is this was the reason that he introduced the climate action plan and So the climate action plan Focused on three main areas mitigation adaptation and international cooperation and We've continued to play a critical role in helping turn this this climate action plan Into a reality and the way we do that at the Department of Energy is through our all of the above approach to energy So this means more advanced fossil fuel projects avoiding reducering or sequestering greenhouse gas emissions expanding and modernizing the grid Conducting a quadrennial energy review, which I'll talk a little bit more about later and developing and deploying advanced transportation technologies and establishing a new goal for energy efficiency standards In appliances and in and in buildings And it's important but it's but it's really important for us to recognize that the climate action plan is a short-term tactic in a larger overall strategy It's part of what the United States is doing to show our commitment to addressing climate change, but it is by no means enough Luckily the technology story of the last few years tells us that we may not have to wait as long as we fear Let me just give you a quick overview of EERE so we have a little bit of context EERE is is a composed of 10 technology offices and organized into three pillars That are that attempt to break to better break down the known barriers to clean energy market entry those three pillars are sustainable Transportation renewable electricity generation and energy savings in homes buildings and manufacturing So let me get to the technology story First in wind As a result of our work and the work that has been done with our partners across industry our national labs in academia America's at the threshold of a major shift in the low-carbon economy land-based wind shown here Was it was the fastest growing source of electricity in 2012 and represented? 44% of all new generating capacity that year and by 2017 you're going to start to start to see the same kind of curve reappear in the offshore as we begin to to premiere those turbines here in the United States and In solar the same the same basic story you see as deployments deployments dramatically increasing costs dramatically decreasing In fact the cost of solar voltaic photovoltaic modules has fallen so dramatically that today they cost just 1% of what they did 35 years ago That's incredible progress and at that, you know at the time that that president Carter put solar panels on the roof We were several breakthroughs away from that actually being a commercial product Today We're not we're not looking at breakthroughs in solar PV We're not you know, we don't have to improve the efficiency dramatically or the cost of production Those now incremental progress can get us where we need to be and that's and that's the continuing story And I think that the mental shift that people have to undertake To understand where we are with clean energy. We're not breakthroughs away We are on the path and we just need to continue that that path And that path for for solar PV is is embodied in our Sun Shot Grand Challenge And we're more than two-thirds of the way don't towards meeting its goal of six cents per kilowatt hour wholesale generation From photovoltaics and these are just two examples of technologies that are really are ready to go there are many others like LED light bulbs electric vehicle batteries and and in several other technologies that are in my mind reach the commercial tipping point and And these as these technologies reach the commercial tipping point What they're doing is they're adding more and more tools to our climate change abatement toolbox Let me have a slight preview of the way we work in ERE and the way we look at things You don't need to read this chart in any depth This is a little bit of a preview of what's in our ERE strategic plan That's going to be published here in a few in a few weeks but but I want to just kind of give you the the mental image of How we work towards bringing clean energy technologies down the cost curve and we do and reducing their their fundamental costs So we take a suite of technologies across all kinds of development pathways and across different technology development levels and As as the technology progresses down this cost curve from left to right here The investment tends to clarify To a few options for for a few winners Private investment grows and the nature shifts of the investment shifts from R&D to a more market-based effort None of our investments are permanent and we exit at various times that the technology can't compete If better options are available or if the technology is adopted by the marketplace The complexity of ERE's portfolio makes it challenging to describe in the general But there are common themes and principles shown in this chart that you'll see in the strategic plan When it comes out and again in a couple weeks our ultimate goal within ERE Is for investments to make energy services more available and reliable while lowering the unincorporated costs The social costs of those technologies So that's why in this chart when we should the way we show this is we have there's really two costs to an energy There's there's the market price and this is this is what shows us where our exit points are That's the lower price down there. That's our that's our fundamental target But there is a true higher cost which includes pollution and the effects of economic vulnerability that are born by society So our our sweet spot is is operating between these two lines like I said None of our investments are permanent We we may end our involvement for any of four distinct reasons When evaluating a new investment opportunity area Analysis may not be able to identify a credible pathway to market. You may not be able to reach that lower line In in that case, we will suspend our investment and retain our option to potentially invest later if a breakthrough Changes that energy landscape There's also represented on this chart the alternative an alternative comes along that is clearly more promising pathway Gets us to a lower piece of that cost curve more quickly and we will move on to that that cost curve There are also non-technical market barriers And some of that has been talked about today if those are determined to be insurmountable or too costly to overcome We have to exit as well And then finally when the technology reaches competitiveness We don't have much add to that to add to that marketplace then the market takes over and that is our final exit point but so Given that technology landscape How are these gonna finally reach commercialization and this is the the the final real market barrier That's out there and that's the grid integration challenge As technology moves faster and faster, we're inherently going to see more disruptive technologies being produced But are we ready for them? You know is the grid ready for them? I Think you know in my mind we know that the grid has a number of shortcomings. It's too inefficient. It's too expensive It's too unreliable too inflexible and too unresponsive to meet the needs of the 21st century To incorporate these disruptive technologies that are coming out of both our labs and our and and the private sector So a couple years ago the Department of Energy started a grid integration initiative to look at these exact problems We needed technologies to be for a more flexible resilient and dynamic distribution system And that one that is ready and accommodating to new technologies So the grid integration initiative is a multi-program effort at DOE that focuses on system optimization high-resolution data data analytics and tools Sensors control systems owner economics and protection and restoration In February we held the workshop at DOE with industry universities utilities and other stakeholders Focusing on addressing relevant challenges at the building campus distribution and regional scale will continue to have these workshops going forward and And and this this remains a big focus of the department. I Also wanted to to point out that a big part of the grid integration challenge and it's even a little bigger than the grid integration challenge is Is an understanding of the energy landscape and how these technologies can interact? One of the big initiatives that the department is undertaking to try to understand that is the quadrennial energy review This was one of secretary monies is biggest Initiatives what that he brought to the department where we are going to take for the first time really a comprehensive look at What our energy systems need? Where they where we are today and where we need what we need to do in order to move forward in the coming years This this first phase of the the quadrennial Energy review is focused on transmission and distribution and really does get at the heart of these grid integration challenges So I look forward to continuing to work with folks a lot of folks in this room I'm sure we'll be we'll be interacting with as we develop that and that is slated for completion By the end of the year I mean just move on to one of our one of our tools that I just wanted to point out The energy systems integration facility at the National Renewable Energy Laboratory. We undertook this investment You know a few years ago And has now come online It's a hundred and eighty two thousand square foot building and it houses some of the most advanced research laboratories in the world But the building itself is also a laboratory It's working to overcome some of the challenges related to interconnection of distributed energy systems and the integration of renewable energy Technologies into the electricity grid So we're really past the point of wondering whether Renewables will be productive enough to start replacing traditional Electricity production methods and we're now we're trying to figure out how these all work together How all these systems work together and ESIF is one of the tools that we have To put put these things together in an environment where we can actually see how they interact how they talk to each other and and This gives us a I think a sense of where we're What what with the the the potential reactive integrated grid of the future might look like Finally Let me just let me just close saying that To me, this is one of the most exciting times to be an energy It's a difficult time to be in the policymaking landscape because of the of of this rapid level of change And I'm not sure our policy apparatus has actually Figured out how to accommodate the rapidity of change But You know earlier this year, I noticed that series a non-profit investment organization Estimated that the world will need a global investment of 36 trillion dollars or nearly one trillion dollars per year over the next four decades To avoid the worst effects of climate change while supplying the energy needed and managing the demand of the global of global economic development And that sounds like a lot And it is a serious investment But it's small change when you compare it to the world gross domestic product. That was 72 trillion dollars in 2012 And I would argue it's one of the most productive investments that we can possibly make to bring literally millions of jobs while Laying the foundation for a future energy economy that can support everything that we need without the threat of Climate change costs and Doing nothing is simply not an option Because it would be far more expensive than any than any estimate for a Batement going forward and as I thought was also mentioned earlier. These are investments in large measure that are going to happen anyway We're going to have to make investments and Infrastructure in the United States needs to be upgraded Infrastructure in the developing world doesn't exist in many cases So these things are going to get built the question is will we build them with an eye towards the future or an eye towards the past and In our view in the Department of Energy, we simply can't afford to be at the back of the train We have to be at the front leading leading the world in these industries Can't get off the pass where you're on and we can't interrupt the progress that we're making Investing in clean energy isn't a decision that limits our economic potential It's an opportunity to lead the global clean technology markets that are forming right now So with that, let me wrap up and I'd be happy to take some questions. Thank you Mike, thank you so much. I think we'll basically take questions at this point. I have one that I would like to begin with We spoke a little earlier This morning Mike About the advanced vehicle technology program that I understand secretary monies wants to re-invigorate I'm speaking as a beneficiary of this program As a Tesla maniac you know, I think This program has had a lot of political flak Maybe some fair maybe some unfair But I guess the thing that strikes me about it and hopefully you can comment on this is that it doesn't matter to me if there are 23 or 33 or 43 absolute failures if it if one One program gets out there and absolutely changes the world And I don't know if we've seen that yet What are your what's your prognosis for a a green statement of the program and success of it Thanks So, you know, I was involved in that in the in the drafting of that program back for for senator Binghamon and And I think that we had two primary objectives in putting that program in place And one one that's been largely overlooked is that You know in the in the automotive sector It's a global industry and so, you know, there is not only in a Decision point on do we do we go down a particular technology pathway? but where do we build it when once we've decided we're gonna build it and and you know just To be upfront about it. I mean, you know all things being equal are our global competitors are Putting together substantial packages to try to pull that production overseas And so one of the things that we thought could potentially tip the scale was was a financing program And we think it did, you know If you look at what at Ford's scale of investment as they went through a dramatic upgrade of their facilities and built Increasingly advanced technologies. They made the decision to to make those Largely in Michigan as a result of the five billion dollars. They were able to borrow from that program But the important thing was also to to create the opportunity within it within a technology company within within an OEM To to take a little bit more of a technology leap. They knew they had to comply with cafe There's a there's a sort of a steady compliance pathway With upgrading your technology in cafe, but it doesn't have to go fast You know, it doesn't have to you don't have to leapfrog to the next technologies You know you can you can make tweaks along the way and you can probably keep up with cafe What we wanted to do was create the opportunity space so that if somebody really wanted to To take it take a leap to jump to the next technology level and to try to get ahead of their competitors that way The government would would be able to stand there with them and make that an easier leap for them to take And I think we did see that also Barrett's bear out. You know, I think you know, Tesla Might have Could very well have been a successful company without the program, but I think they would argue They couldn't have done anywhere near what they've done as fast as they've done without that program And and I think that Nissan would would back that up as well, you know And moving their battery production from overseas to the United States They almost encapsulate the entire program in their one in their one loan They moved they moved battery production that was originally in Japan to to smear in Tennessee And they they leapt into a marketplace that really didn't much exist And that they really didn't need for cafe compliance now now they are as as committed to that technology as Anybody I think you know on the revitalization of the program. I think one of the one of the central Difficulties with the program was that the supplier community for a variety of reasons didn't realize that they were eligible to get into the program and In large measure and and I think if people who sort of follow the auto industry realize that the suppliers are actually the Technology drivers in large measure of that of that industry And so while we got some good uptake I think from the original equipment manufacturers the large the integrators of the technology and We didn't get the kind of penetration at the supplier community that I think Would really help us advance the technology so that's really the heart of the restart of the program and I think we've done a lot of outreach and they've tried to Tweak the you know the the bits of the program that didn't work for that community And it'll be an ongoing process, but I'm very hopeful that we'll we'll see some some other some more big wins out of that program I'm gonna Just follow that up for one second one of the objections to the program is Government shouldn't be picking technology winners. How are you going to avoid picking technology winners? For example with natural gas You know electricity other kinds of motive forms Be eligible or do you have winners in mind that you want to steer? No, I mean so, you know the way the program is designed isn't in the way Most of our programs are designed is it was with an objective, you know in ATVM. It's very explicit It's got to be 25% more fuel efficient than than than it's competing products You know and in in the in the loan programs generally it was to avoid You know the carbon pollution and other other criteria pollutants So, you know, I think having clear objectives in mind Isn't isn't picking a winner. It's it's actually allowing them to compete with incumbent technologies Which have all the natural advantages of incumbency the The market at the end of the day picks the winners and losers and you know we we exist in a market economy But you know it is it has always been the case as far as I'm aware that Big technology shifts need some kind of support at their initial phase Whether you look at you know, I showed these these great cost curves of wind and solar and the like Their curves, right? I mean at the beginning the first the first ones that roll off the line are pretty expensive The first Tesla is the roll off the line are pretty expensive But that is the way technology works and they you know that Sort of lubricating that market allowing them to get into that marketplace Allows the competitive pressure then to to pull those costs down and we're seeing it across the board I in in all the technologies that I mentioned in many others LED lights is another great example. You know the first LEDs again You know, we had a we had a lighting prize that was that was authorized in a 2007 energy bill that Phillips won with a 60 watt Bulb replacement LED bulb replacement the first ones they tried to sell were 40-something dollars and you know even though they could make the case and it was accurate, right? That this was actually in the long-term best interest of a consumer It was worth 40-something dollars because it lasts 15 years You're never gonna replace the thing it gives you the same quality of light and it uses 160 energy That's still a hard a hard thing for for for a consumer You know to think of a light bulb as an investment and instead of a the disposable good but We got that you know and and Phillips said because they won that because that prize was there They accelerated their their production timetable by on the order of three to five years So they brought that thing to market probably you know definitely faster than they would have maybe faster than the market was ready for And so they didn't sell much at that price point, but within a year you had competitors from Cree And and and also overseas competitors both Cree and Phillips tend to produce most of their stuff in the United States And now you can go and you can buy that same bulb that same that same value proposition for nine or ten bucks at home Depot that is you know That is an incredible market win that was lubricated by a relatively small upfront investment and you know in From the government. I sort of think of these things all in that same context Did I misinterpret that it seems awfully low So that's an awfully complicated graph. I actually went back and forth. No, whether I should even put that up there So what that is is a is an aggregate of a number of different models that have been produced in throughout Academia and what you saw was the different costs of carbon applying different discount rates going forward There is a rich body of literature arguing about what's the proper discount rate to apply? I know there's a connoisseur in the room who would love to probably argue about this but Yeah, and it but you know and there and but I what I will and so what you saw the lowest one I think it's $12 is applying a 5% discount rate I'll say from a social perspective that's that's a very very high discount rate to apply I mean that's discounting our children to a degree that I don't think that that social Policy is really willing to accommodate so that isn't the number we use The the social cost of carbon that is actually computed by OMB is an aggregate of of these different They run all these different scenarios through these different discount rates, and then they average them together I think it today. It's over 30 30 something dollars a ton in the current regulatory environment Anybody In all these publications on solar energy, and I have done one of the presentations in 2008 one of the probably first one on this for the NCAC They show capacity in kilowatts begawatts, whatever But this is really a little unfair. I'm using in scientific publications They put a P a small p letter which is pick capacity. So for a solar panel, it may be 10 minutes a day Is there any way that? You know the research you use some sort of comparators in order to to bring solar power capacity to align it with Conventional coal or gas that is online for 24 hours a day to show the real real capacity As opposed to exaggerating this this sort of these numbers, right? I mean, so there's Actually, this is a distinction that you see throughout the power sector, right? There's there's nameplate capacity and and and then the actual capacity factor You know a coal-fired power plant doesn't run 24 hours a day it runs Its capacity factor is much less than its nameplate capacity And then we have peaking resources and the like I I think but two more fundamental answers to your to your question We have done a fair amount of research within the department on on how When you have integrated resources when you have large balancing areas for example, and you have the ability to have loads and Generation react to each other that you actually get You actually can get up an incredible amount of balancing out of that system just out of a smart reactive system And so we we actually published a scenario In the renewable energy future study that showed that with sort of minimal investments in the storage side of the equation You can actually get to a penetration level of renewables where renewables are taking up About 80 percent. This is in the in the future But with what with existing technologies about 80 percent of our of our demand can be met And that's following the peaks and and the troughs of demand The other part of it though is you know, we do a lot of fundamental research on on on storage on and I Think one of the interesting things I didn't I didn't put it up there, but we do have we're seeing a similar cost curve with with deployment of Batteries and so we actually I think are pretty bullish on the opportunities that that could present in the next, you know 10 to 15 years so I think and particularly when you start thinking about these these two things together when you have a Grid with a lot of sensors and controls on it Medially reactive capacity and then a enough storage that you can buffer Then I think you can you know, then then those numbers will look a lot closer to to the name name plate capacity It's about several years ago. I read about Prospects for nanotechnology applications in batteries if I'm not confused. I'm not technology expert and The story was that battery some experts were expecting that the storage can increase by 40 times Are we anywhere close to this or I mean there's of course this progression curve as well How far are we from actually realizing this this opportunity because storage is and in the end the big big constraint for for Unibles Well, so I'm a lawyer not a technology guy So and but we do have technology folks who can you can answer that question a lot more directly I Whether it's whether it's nanotechnology, whether it's you know, whether it's just process improvements I think one of the things that I find most most fascinating actually is if you track those cost curves Most of the time what they what they will track closest to is deployment. And so, you know with each doubling of deployment you get Somewhere on the on the order of a 20% reduction in in cost and so And that's the point I was trying to make earlier is yes, there are breakthroughs out there on the horizon But in my view on the technologies that we're talking about today. We're not a breakthrough away from commercial Competitiveness we are we are and we are on the right incremental curve To see these things deploy in the very near future Those things might might be a part of how those costs are reduced, but we don't need them We're not we're not waiting anymore. We don't need to wait anymore People it's almost Yes, I'm really troubled by some of the stuff. I'm hearing today Our the whole climate change problem is a global problem. It's not a US problem. It's not an OECD problem You know no matter what we do to reduce our emissions We're not going to make a dent in this problem unless we do something about China and India and the rest of the developing countries in the world and you know we're developing Very expensive renewable energy Technologies these these technologies are only existing because of the massive subsidies that we've thrown at them Those those those technologies are not viable in underdeveloped countries that can't afford those those subsidies it seems to me that that What we ought to be looking at is developing technologies that we can transfer over at a reasonable cost To these other countries. That's the only way we're going to solve the greenhouse gas problem Well, we agree on the on on the conclusion. I we don't agree on the premise the in fact these renewable technologies Are already deploying quite a bit overseas They are affordable The the amount of so-called subsidy in these is actually a quite small Compared to their to their end costs one of the things that I think is really interesting actually when you look at the United States is We we we burden renewables with what we call integration costs, you know, these are these are costs that That we have to that somebody has to bear You know to put these these on the system and some of those costs are things like the wind blows at night Right in the wind the wind blows at night and therefore you have base load generation that has to spin down Well, that's a cost to the system because of the way our system is designed Now in the developing world, you're not necessarily going to design your system that way You're not going to have must-take power You're going to design your system to follow your load and to follow your demands You're also probably not going to have a grid of You know an interconnected grid of high high voltage lines from from coast to coast The the fact of the matter is the cost of these technologies at a fundamental level With with integrated planning and design Makes them a much more affordable option in many of the in many of the developing countries because they don't precisely because they Don't have the sunk costs that we have in the United States