 Thank you very much, Jim. I thought it might be appropriate to start off this summit conference with some good news. I don't often, in my talk on national security, have much good news to present, but I think there is some good news and energy then. I'm going to focus. I'm going to put my primary focus on what could be reasonably called game changers. The game changers are making a real difference in America's energy picture. And if they continue, which I believe they will, they will have a very positive effect not only on America's economy, but on our national security as well. I'm going to start off by observing that every American president, since President Eisenhower, has stated that an increased dependence on foreign oil leads to a decrease in our national security. In addition to that, every president since then has promised, has promised the country that he would break that dependence on the foreign supply. In fact, here is what they said. Eisenhower started off by noting that any import of oil greater than 20 percent was a danger to our national security. Nixon went better than that. He said he was going to have us independent of foreign oil by 1980. Carter called a dependence on oil a moral equivalent of war. Clinton called it a national security issue, and Bush, too, noted that our country seemed to be addicted to oil. So there's been a bipartisan consensus this last 60 years to reduce our dependence on foreign oil. The presidents for the last 60 years have promised to do so. So how well have they done? We've gone since 1970 from $3 billion of imports to $2,800, almost $400 billion. So every president actually presided over a dramatically increased use of foreign oil. And the spirit asked, and how has this failure affected our economy? And one way of measuring that is by looking at our trade balance. In this chart, we see a modest surplus at the top and a huge deficit in the bottom. And note that more than half of that deficit comes from our import of oil, about $400 billion. So it is dramatically affecting our economy and through our surplus, through a deficit. So the economic impact of the trade of balance is certainly an economic problem, but it is also a national security problem, particularly when you consider where this $400 billion is going. It goes largely to Saudi Arabia, Russia, Iran, and Venezuela. Although there's some good news creeping along here is that more and more of our imports of foreign oil are coming from a friendly neighbor to the north of Canada. So in sum, oil dependence is both an economic and a national security problem. And it has been recognized by such, as such by every president since Eisenhower. So why have we not been able to solve this problem? And the short answer is we simply have not funded the development of energy through these years. And what R&D we have funded could take decades to reach a really significant scale. In particular, the solution will devolve the development of radically new technologies, which have been dramatically underfunded. First, I'm going to discuss this R&D funding. Now, I'm known as being a technology wonk, so you may think I'm simply advocating R&D for the sake of R&D. But let's take a look at the few facts. I'm going to draw these facts from a National Academy of Engineering Report, which was published in 2008. So these facts date back a few years. First of all, in terms of energy, R&D, and deployment of a US government budget of $4 trillion. Health was 22%, Department of Defense was about 20%, and energy is a small fraction of 1%. Or we might compare the energy R&D spending to R&D spending in other departments. The R&D in defense in 2008 was $77 billion. In health, $28 billion, and energy R&D was less than $2 billion. So those two charts together make clear, make absolutely clear, that how it were relatively insignificant, our government's effort has been in this regard. In some, energy R&D, or the US spending of the US government, has been small and sporadic. And in fact, with a downward trend since 1981. But some of my colleagues argue that the development of new energy systems does not have to be done by the federal government. The energy industry will take care of it. Let the market forces handle this problem. Well, that's a good point. So let's take a look at how well, in fact, market forces have done in solving this problem in the last few decades. This is a chart of the R&D spending in industry. The pharmaceutical industry spends some 18% of its sales on R&D. Even the stodgy automobile industry spends more than 2% of its sales on R&D. But the energy industry in 2008 spent less than 1 third of 1% of its sales on R&D. So much for the market forces solving the problem, when the problem at hand requires investments that take a long time to pay off. This is a pretty dismal picture. But my talk is supposed to be about the good news. And part of that good news is that we've already started to turn around that dismal picture on R&D spending. Beginning in 2009, the administration reversed the decline in spending on energy on R&D. Most notably, they created ARPA-E, ARPA Energy, which is working to emulate defense ARPA in the development of breakthrough technologies. And is off, I believe, to a very promising start. Besides funding potentially game-changing technologies, they have held an R&D energy summit every year, where leading researchers in this dynamic field exchange ideas and form joint ventures. The last such summit was held just two months ago in March. But this is only R&D. How do we get these developments up to a significant scale? The administration has used several billion dollars of stimulus funds to underwrite new industrial manufacturing plants, in particular for solar systems, to accelerate the date by which solar energy will be cost competitive with coal-fired generating plants. But this has had some failures, which I will have more to say about later in my talk. In any event, as a result of these initiatives, as well as several important developments in industry, I believe that we have, or are developing, the resources and the technology that have the potential to break our heavy dependent on foreign oil in the next five to ten years. To set a baseline for my discussion, I will show you a chart of the different sources of energy today in the United States. These charts show that not only are Americans addicted to oil, as President Bush has said, but that fossil fuels, oil and coal, are the source for 80% of our energy. So we not only have a security problem, we have an environmental problem as well. We need to substantially reduce our use of foreign oil at the same time we are reducing our carbon emissions. Even though the United States has ample low-cost coal, we have actually been decreasing our use of coal this past decade and plan to continue that trend in order to reduce carbon emissions. So we face a double-barreled challenge. The need to develop alternative fuels for coal as well as alternative fuels for oil. In a meeting these challenges, I see four potential game changes, three of them positive and one of them negative. The first three of these game changes can be used to reduce the demand for oil and coal in the United States and globally. The fourth game changer, Fukushima, is negative because that disaster has put a pause to the so-called nuclear renaissance in the United States and has raised serious questions about the safety of nuclear power even in Japan and Korea, which prior to Fukushima had widespread public support for the use of nuclear power. I'm going to organize my discussion by separating the two major uses of energy, transportation and electricity production. First, I'm going to talk about transportation. The global automobile industry, stimulated by the American government's establishment of cafe standards, has made dramatic improvements in efficiencies this past decade and even more dramatic improvements are coming. The next chart shows an estimate by the American Academy of Engineering on how fuel-efficient cars will grow in importance in the next two decades. This chart indicates that in the decade about 50% of the new cars sold will be of design substantially more efficient than present cars. These improvements have already started to take hold. There are already more than a million hybrids operating in the United States and that plus the improvements in the total fleet brought about by cafe standards have actually led to a 13 million gallon decrease in gasoline consumption in the United States last year. That's only a small percentage of the gasoline used in the United States but it is the first significant decrease since World War II. So the trend is good. The question is, can we accelerate that trend? The major new efficiencies will come from plug-in hybrids which are just now reaching the market. Many experts estimate that plug-ins will achieve 100 miles per gallon of fuel efficiencies but that is obviously dependent on the driving pattern of the users. I've owned a plug-in Prius for about two months now and I am getting more than 100 miles per gallon but that's also the consequence of my driving pattern which is typically less than 20 miles a day. At the numbers of plug-in hybrids gradually increase there will be a gradual decrease in the demand for gasoline but I have to say these improvements will be slow to kick in. I mean a million hybrids might seem like a lot but that has to be compared with the fact that we have 250 million cars in the United States who are talking about less than 1% of the car population right now. This favorable trend could be accelerated if the costs of plug-ins go down which would of course lead to the demand going up but that depends on significant improvements in battery efficiency which is a goal of several of the RPE R&D programs. So this is a good news story but car efficiencies, while necessary, are not sufficient. How about the fuel we're using cars? Can we replace oil-based fuel with biomass-based fuel? Is biomass a potential game changer? Already existing technology produces ethanol from corn and from sugarcane in fact it's already at a significant scale in Brazil where 40% of the automobile fuel comes from sugar ethanol but corn and sugar are valuable food crops and the use of them for fuel is guaranteed to keep the cost of the fuel very high. The real potential, of course, is fuel from celluloids agricultural waste, waste paper, scrap wood, sawdust, grasses. We have a huge supply of that kind of low-cost feedstock. The technology to make fuel of this has been demonstrated but not yet at cost and certainly not yet at scale. My own belief is that cellulosic biofuel could become cost-effective and be at a significant scale in less than 10 years. So the bottom line for transportation is that car efficiencies have more than offset the increased demand for fuel in the last few years and the next five years could lead to a continuing decrease in gas consumption. And cellulosic biomass could begin to be a substitute fuel in less than five years and more importantly could become cost-competitive and at a meaningful scale in less than 10 years from now. So my optimism in the transportation field depends on the rapid scale up of biofuel and continued improvements in fuel efficiencies. But of course, if the electric cars and the plug-in hybrids drive fuel efficiencies there will be a concomitant increase in the demand for electricity. So that takes me to the second half of my talk which is the production of electricity. I'm going to start off with a few facts. Fact one, in some industrial nations, nuclear power is the primary source of electricity that's during Japan, Korea and France, for example. Other nations have indicated they plan to turn to nuclear power in the near future as a major source of electricity. The good news if this occurs is that it would lead to a decreased global emissions of carbon. The bad news is that it could substantially complicate the global effort to control proliferation. The most obvious example of the proliferation problem is North Korea which has used a nuclear power program as a cover for going to nuclear weapons and it does seem that Iran is following in the footsteps of North Korea. The United States of course has a large number of nuclear plants and at one time was headed in the same direction as Japan, Korea and France. But after the 3 mile island nuclear accident has stopped building reactors. With the growing concern of global climate change this past decade, the United States has reconsidered its self-imposed moratorium on nuclear power and several new permits have been granted. Many in the United States talked about a nuclear renaissance but I have to say in the wake of Fukushima the nuclear American nuclear renaissance seems to be put on hold. In the meantime we are generating 40% of our electricity from coal plants. Coal is abundant and cheap in the United States but it is also the greatest source of carbon emissions. As a consequence we have substantially reduced our coal plants this past decade and 55% of our electricity demand to 40%. That is really good news. And in the same spirit we have reduced oil generation of electricity from 15% all the way down to 1%. During this same period hydro and nuclear power have remained constant at about 15% each. And after all the years of effort and public attention only 1% of our electricity comes from solar and wind. So nearly all of the decrease in coal and oil use for electricity generation is a result of a substantial increase in gas-fired electricity and co-generator plants. So those are the facts. Now I'm going to offer you a few opinions. First opinion is we should make it a national priority to replace coal plants because they are a major contributor to carbon emission. New hydro is very unlikely. I do not see a three gorgeous project in the United States. Solar and wind will eventually become significant but will be very slow to reach a significant scale. We do have three options open for earlier change. Natural gas which is available at low cost and cleaner than coal or oil by about a factor two although still a source of carbon emissions. Nuclear which has substantial public resistance and efficiencies in the use of electricity. My opinion is that we should move vigorously on all three of those fronts. Not a question whether one is better than another. We need all three of them to make real progress. In terms of efficiencies, light bulbs, efficient houses, efficient office buildings many of those are already underway and I am optimistic about the future. This is an interesting chart here. The left side of the chart forecast that over the next two decades there will be at a one-third increase in the use of electricity. I should say the demand for electricity as our population and economy grow especially as the number of electric and plug-in cars increase but if we continue to pursue building efficiencies aggressively as shown on the right-hand side of this chart we should be able to offset the increased energy demand with improved efficiencies so we can at least hold our own by incorporating available efficiencies. But how do we do better than that so we can actually decrease our use of coal plants? The alternative fuels solar and wind have been developed but as I said they're still too expensive and I believe it will take at least five years to get the cost down to grid parity. That is cost competitive with other sources but most importantly they're not yet to scale and it will take at least 10 to 20 years to go from 1% even to 10% of our grid electricity. So in some alternative fuels are potentially important but still small and will be slow to play a significant role. The primary reason that solar is so slow to kick in is that it still cannot compete economically with other forms of electricity generation and I'm going to just show you one chart to give the basic reason for that. This is the so-called learning curve. This curve explains why solar and other renewables are so slow to be cost competitive. It shows that solar panels are on a 22% learning curve that is to get a 22% decrease in manufacturing costs requires a doubling of production. So we have a classic chicken and egg problem. Solar is too expensive to justify increasing the production but unless the production is increased the costs will not go down. This explains why our Secretary of Energy Steve Chu has undertaken government programs to provide industry with incentives to accelerate the production of solar energy. This incentive program generally has gone well but unfortunately laid a giant political egg on a company known as Cylinder located just across the bay here which went bankrupt two years after the government guaranteed a $400 million loan to build their manufacturing plant. The biggest game changer in the generation of electricity this past decade has been the aggressive and the successful development of shale gas. This has been a remarkable development in and of itself. There's a huge resource of shale gas in the United States. Some have called us the Saudi Arabia of gas and certainly more than a supply for more than a century. The technology is quite mature. It was developed by industry in the United States more than 10 years ago and the success has greatly exceeded anyone's expectations. It's already at scale. It's already gone from 10% to 20% of the total US production of electricity. We've gone just in the last few years from being an importer of natural gas to an exporter of natural gas and I think most remarkably it's demonstrated to be cost effective. Indeed, it's already resulted in lower gas prices. Incidentally, the revolution is not just in shale gas. The New York Times just two months ago did a feature article on new sources of gas and oil being developed and here's a map that they put in that article which I will share with you. In the map you can see that shale gas is the most important new fuel in the United States and oil stands the most important new fuel in Canada. So what is the plausible strategy in electricity for the United States? First of all, we must continue to push on efficiencies. I know that's going to be a subjective discussion in this conference later on today. Our goal should be at least holding even holding even with the increasing demand for electricity as our economy and population increases and that goal I think can be readily achieved. At a high priority, the United States natural gas to replace the remaining use of oil and electricity generation and as alternative fuels come to scale gradually replace our coal-fired plants. This is a viable plan but it will kick in slowly because of the long time for solar and wind power to reach a significant scale. Can we accelerate that goal by building a new generation of nuclear plants? So now I'm going to talk about this awful word nuclear. This seems to generate so much passion and so much emotion on the subject. This is very likely, whatever we do, it's very likely that it happened in China and in India and possibly Korea where there's been good public acceptance of nuclear power. A few years ago, of course, everybody was predicting a nuclear renaissance in the United States but that, as I said, is now on hold. There is research in the United States on adapting naval reactors which have a sterling safety record to civil applications. Proponents propose that these new civil reactors would be significantly smaller, maybe a fifth the size of the current reactors in use and would be built in modules. That is given the name small modular reactors or SMRs. These FMRs were to be accepted. They could replace coal-fired plants faster than solar wind and with no carbon emissions. If not, our plan should be to gradually replace coal-fired plants with natural gas cogeneration plants. This strategy would lead to a long-term major decrease in carbon emissions in the United States and worldwide and would lead to a substantial increase in energy security for the United States. At the same process and technology were introduced globally, it could lead to decreased oil prices and a decreased coercive power of OPEC. Well, that is a somewhat optimistic forecast. I think it's only fair to say what could go wrong with it, which I'll talk about, but I'm also going to talk what could go right, what could be even better than that. I'm going to talk about things that can go wrong, things that go right, which you might say are the bluebirds out there, and things which could go wrong, which are the crows out there. I'm going to start off with the crows, the things that could go wrong. Among those, the foremost concern is that the environmental concerns about so-called fracking for producing natural gas could stop the shale gas drilling or at least slow it down. That is a real concern. Our Secretary of Energy's advisory board just a few months ago issued a report on that subject. Fundamentally, the conclusion of the report was this is that fracking is a very important technology. It should be continued in the United States, but the environmental issues were very real and the balance these two problems required very significant and consistent regulation of the fracking. Secondly, the plug-in hybrid costs could remain too high for general usage. That, of course, is going to depend almost completely on what happens to battery technology. Third, the serialistic fuel, which is already under significant development in the United States, could fall into what the venture capitalist here in this valley called the Valley of Death. That if something gets developed, it never gets produced to scale. That's the value in between those two developments. And finally, we might lack the political will to carry out the hard programs such as SMR. Well, those are the things that could go wrong. We could make the forecast less rosy than I'd given the two, but what could go right? What could go better than that? What are the bluebirds? We could reach grid parity sooner or solar. Renewables could reach 20% of our electricity in 20 years instead of 10%. That depends on being able to scale up more quickly to manufacturing so we get the learning curve operating in our favor. Secondly, DARPA-E could make a real battery breakthrough so electric cars could become a significant market sooner than the forecast. Third, I've talked already about natural gas for electricity, but we could use natural gas for transportation as well. And already it's being used in a small major on some of the large trucks on the highway. And finally, the government could really surprise me and adopt a carbon pricing policy which would be a powerful factor allowing the market forces to work in our favor on this issue. My strategy and forecast did not assume any of these. So I'd like to end this on a high note. That is that on balance, I believe that the bluebirds I've described, the things that could go right, are more likely than the crows, the things that could go wrong. Thank you very much. We have almost 15 minutes for question and answers and Bill, do you want to call on the people or would you like to call on? Okay. We have microphones that will come around here. So hands up. Mitzi. That was terrific. I'm Mitzi Wertheim with the Naval Postgraduate School. I'm responsible for getting the line into the President's State of the Union. The nation is a problem. We're addicted to oil. But I'm a social anthropologist. So my question to you is, how do we change how the American public thinks, feels and behaves about energy? Because all of these things, you can have these great technologies. But if you can't get Americans to feel it's my national duty, the way I felt as a child in World War II, working in our victory garden and whatever, I was helping to win the war. How do we bring the general public along? That's a great question, Mitzi. I think in the first instance, we need better public education on this issue. I think most public simply does not understand what I call the facts of the question day. And if they did understand then they would be more motivated to support progressive actions. I think a summit conference like this where you're educating and the sophisticated people in this field is great, but you have to find a way of getting the messages that you're hearing here today out to the broader public. So I think you should take on as part of your mission the role of trying to educate the public better on this question. And a very special part of that public was called the U.S. Congress, educating them on the issue. Thank you. Jim Pope? Thank you, Jim. Bill, great talk. You bring up an issue that has baffled me for years since I think Carter or the President's were looking at trying to come up with some form of energy independence. And you did a great job showing, frankly, in dollars how poor we've done towards that end. What's confusing to me is the definition of what energy independence is. It seems like we're leading to a point where we're closing down coal plants and exporting coal. We're fracking and recreating a surplus in natural gas and we're exporting natural gas. And we're drilling or have reserves for a pretty significant oil supply in California or in the United States and in some regards, Canada. So I'm struggling with what would be a legitimate definition of energy independence that might have some political traction and some communication traction with the general public. Thank you. Thank you. I'm glad you asked that question because I don't think I was clear in my talk. My talk seemed to imply that energy independence, namely 100% of energy in the United States, was a desirable or achievable goal. I did not mean to imply that. What I meant to argue is that we should be decreasing our dependence and then decreasing the course of power of OPEC over us and decreasing the money that flows into countries like Venezuela and Iran and allow them to do things that are prejudicial to our national security. That can be achieved, I think, at something far less than 100% of energy production in the United States. And in particular, to the extent we talked about independence at all, it's not the United States, it's North America. And I would include the Canadian production just right alongside the American production when I consider that goal. And when I talk about being able to achieve this kind of a goal in 10 years or so, I am thinking of North America and I'm not thinking of 100% either. We don't have to be at 100%. We just have to be in a position where the buyer ourselves, when we're buying, has some control of the market. We're not under the complete control and influence of the seller. So it's reducing the coercive power of OPEC and reducing the flow of money in the nations that might be prejudicial for national security. That goal we can reach, I think, readily in five to 10 years from now at the rate we're going now unless fracking gets derailed by environmental concerns. Okay, I think we have one question over here and then one question here next. Yeah, hi. My name is Volkmar from Sustainable Silicon Valley. I'm from Europe as you might hear and my question is that many European nations and also the Chinese have national energy policies. I can't see that in that way deployed in the US. What is your opinion about that? I'm talking in regards to reducing energy dependency on fossil fuels with clear goals for the future. That's a broader question. I can really answer, but let me make a few comments on it. I talked about the importance of natural gas in the United States and the fracking techniques of achieving that. There is also a sheer gas in many European countries, particularly there's quite a bit in Poland and Ukraine and they are seeking help with the United States to get that developed and we're giving them that help, I think. That would reduce their dependence on importing natural gas from Russia which has been used as a coercive measure on some of the nations in the past. So I think in Europe the introduction of the same drilling techniques used in the United States could be beneficial to have some of the same benefits I've described here. In China, there's apparently quite a large source of a sheer gas and they're also seeking to aggressively pursue the means of extracting that. So I've described this as an American situation today but obviously it's a global problem. Both the use of energy and certainly the carbon dioxide emissions in the atmosphere are global problems and we need to be looking at this more broadly than that. I described the fact that the United States seems not to be moving forward on nuclear energy but on the other hand China and India seem to be pursuing it quite aggressively and that from a point of view of global carbon emissions is quite important. In China, the state is still building and coal-fired electricity production plants. Getting that stopped would be a first major objective, I think. Over here. This is a take-off from your last few more. In China, they're putting one coal plant on. They're putting one coal plant... Yeah. Okay. Well, China is putting one coal plant on a week, a new one. And unless they have some of the philosophy of controlling the use of energy doesn't matter what happens in the United States. Look at the number of cars now that are being used in China and you see it's very reluctant to say that there's been any progress. So what can be done internationally to get other countries besides the United States to accept the idea of energy independence? Let me comment directly about China. China, I believe, is very much aware of both the direct pollution of the air and the carbon to the atmosphere caused by their coal-fired plants and by their increase in automobiles. They are moving aggressively to deal with these problems. It's going to be very, very slow. Secretary Schulz was in China just a few months ago and talked with the incoming president of China about it. George, could I impose on you? Would you be willing to say something about that discussion you had? I think it deals directly with the question of being asked here. Can I give George a microphone? Yeah. The aspect that was particularly notable in our visit to China was in our meeting with a man who will become Premier. And the subject of fracking came up and it turned out that he was really on top of the subject, anxious to learn as much as he could about it. He told me all the different places in China where it would be applicable. And he said something that was quite striking. He said, now it's very important that we use this technology carefully so we don't have some big scandalous event take place and stops it. And I was impressed that he was very conscious of that, but nevertheless aggressive in wanting to develop the shale gas and perhaps oil, but he was focused on the shale gas. So we're very much aware of the problem. Since I have the microphone, I'd like to ask you a question. No good deed goes unpunished. Having to do with solar power, as I understand it, half the costs of solar power are the costs of installation. That is the pick and shovel work. So what are the prospects of people who are designing these things, making them easier to install? Because it would seem to me the opportunity for very sharp reductions in costs are at least as much there as in the more high-powered scientific work. And then on solar power and wind power, a big problem is their intermittency. So it raises the question of the prospects for large-scale storage, not a scale up of batteries, but really large-scale storage that I understand scientists here and at MIT and elsewhere are working on. But do you have any comment on either one of those? Yes. When I was discussing solar power and getting the costs down, I was referring only to the costs of the panels themselves, which as George just correctly said, is only about half the costs of using them. Well, that's an important half, and it's going to take increased manufacturing capacity to get the learning curve down to look. And that's going to, I think that will happen and the question is how fast it will happen. The other aspect, though, is that can we get the cost of installation down? And one real irony here is that the company that I described to Linda, they just went bankrupt. One of the features of their solar panels was the ease of installation, and that was one of their major selling points. I hope that that feature and that aspect will be picked up by other companies that are still in that business because we not only have to get the manufacturing costs down and I think maybe down by a factor two perhaps, but get the installation costs down by that same factor two. I think from what I have seen of what Linda was doing, there is a path forward to doing that. But it's so far that there's no solar panels on the market today that incorporate those features. I think it can be done, though. Good. It's fascinating as this conversation is I've got to bring it to the end because we have another fascinating speaker. So I'd like to thank you, Bill.