Green Tech

CAMBRIDGE, Mass.--A change in national energy policies would help spur innovation around green technologies, but policymakers are motivated by power and pet projects rather than energy security or environmental protection, a panel of energy and business experts argued here Thursday.

The speakers--three academics with expertise in energy and economics and a venture capitalist from Khosla Ventures--delved into the question of what role government should play in energy at the EmTech emerging technology conference at the Massachusetts Institute of Technology on Thursday. On the whole, they were pessimistic about the prospects of effective legislation for promoting a cleaner energy industry.

The talk was timely. Although political debate in Washington has been dominated by health care over the past few months, the Senate is expected to take up a climate change and energy bill as early as next week, following a House version which narrowly passed in May. The broad House bill proposes a national system for regulating greenhouse gases, introduces higher efficiency standards, and calls for a mandate on renewable energy from utilities.

Many companies and investors see energy as a promising area of economic growth, with more than $5.8 billion of venture capital placed in green tech last year. But energy is very different from information technology or other traditional tech industries. Bringing new energy products to market requires not only technology breakthroughs but also coordination among start-ups, large corporations, financiers, and government.

The panelists argued that the House bill of the version is far from perfect but it's an important step because it puts a price on carbon emissions. Under a cap-and-trade program--one of which is already in effect in the U.S.-- large polluters, such as utilities and manufacturers, are given permits to pollute. Those carbon allowances can be bought and sold among participants so that they stay under a cap set by the government.

"We can go into the details about the problems with all the subsidy schemes that have been tried but fundamentally there is this common sense that underlies cap and trade, which is that if something is bad, you should tax it and that is, in effect, what cap and trade does. And that puts things that don't have that bad characteristic in a better competitive position," said Richard Schmalensee, the director of the MIT Center for Energy and Environmental Policy Research.

Right now, there are subsidies and tax credits to promote the installation of solar and wind power. In the federal stimulus plan, the Department of Energy was allotted tens of billions of dollars to fund long-term research and promote development of existing technologies, such as plug-in electric vehicles.

In the past, renewable energy policies have led to boom and bust periods, which resulted in many failed companies, said Henry Lee, the director of environment and natural resources programs at Harvard University's school of government.

To avoid that cycle, the U.S. needs a combination of policies, including tax incentives, research money, and a cap-and-trade program, Lee said. Caps on carbon emissions won't start to take hold for many years, panelists said. So, abandoning existing supports for solar now would essentially shut that industry down, even though the cost of solar continues to drop, Schmalensee said.

Rising oil prices can help drive investments in clean-energy technologies, but the volatility of prices makes sustained investment difficult, said Lee. Another challenge related to energy in the U.S. is the difficulty of locating good spots for wind and solar power projects and the resistance from states over national efforts to build new transmission lines to transfer solar and wind power.

No kind words
In practice, policy making around energy is messy business, the panelists said. It's even harder now, given the fierce partisanship now in Washington and the shaky economic situation, noted Lee.

The trend in energy policy has to been to promote a set of technologies, such as fuel cells or biofuels, for a while but not stay with it, said Lee. Corn ethanol, for example, has been criticized for questionable environmental benefits and contributing to higher food prices, but maintaining the program makes sense because second-generation ethanol could deliver significant improvements, he said.

"One of the problems with Washington is that they fall in love and then they fall out of love after two or three years," said Lee. "But you can't give up on these things after three or four years and in our government we have a tendency to do that. We don't have a lot of patience and it takes time to make things that really work."

Small green-tech start-ups and venture capitalists are now spending a significant amount of time in Washington because energy is heavily regulated. But there's concern that bills are structured to favor certain technologies, said Alex Kinnier from Khosla Ventures, a Silicon Valley venture capital firm that is making an aggressive push into green tech.

"We're all in agreement we want a price on carbon...The thing that concerns us greatly is that the ways these rules can be written can very much bias who the winners are and who the losers are over the long term and can sub-optimize the ultimate solutions," Kinnier said.

For example, incentives to store carbon underground at coal plants will lead many companies into that field. But Kinnier said that policies should also encourage technologies that use carbon dioxide to make a product, such as building materials or chemicals.

Ken Zweibel, director of the GW Solar Institute at George Washington University, criticized the trend toward overemphasizing high-risk, high-reward energy research. "Programs to do practical research have shrunk during the last five years and programs to do high-risk, blue-sky research have gone through roof," he said. Solar photovoltaics are becoming more affordable as prices fall, but proposals to the newly formed ARPA-E are unlikely to yield anything useful, Zweibel said.

He also complained policymakers make decisions based on "very shallow knowledge" and are easily swayed by the media. Fears that China is taking over leadership in low-carbon technologies appear to motivate policymakers more than protecting the environment or concerns regarding climate change, Zweibel and Schmalensee said.

"We are not convinced that we have a global warming problem," said Zweibel. "Let's face it--that's the truth."

Updated September 26 at 6:50 a.m. PT with correction to Alex Kinnier's affiliation.

The House Energy and Commerce Committee passed an energy and climate bill on Thursday that puts a cap on greenhouse gases in a way designed to give heavy polluters years to transition to low-carbon technologies.

The American Clean Energy and Security Act of 2009, sponsored by Congressmen Henry Waxman and Edward Markey, passed through the committee after four days of marathon "markup" sessions where dozens of amendments were considered.

The bill calls for a cap-and-trade system designed to reduce greenhouse gases and a mandate that would require utilities to get a portion of their electricity from renewable energy sources.

Concessions were made during negotiations, causing some environmental groups, including Greenpeace, to withdraw support for the bill and business groups to warn that the impact on new technology development will muted.

Even after the passage through committee by a 33-25 vote, the bill needs to pass other House committees before it can be voted on later this year.

There is concern that the targets won't effectively cut back on global warming emissions. But on the whole, green technology advocates and business people were pleased to see the U.S. move forward with some form of regulation to put a price on carbon emissions.

Carbon regulations will only affect energy-intensive industries such as utilities and industrial manufacturers. Creating a cap that declines over time will stimulate development of energy efficiency and alternative power generation technologies, proponents said.

"As the President's economic advisers said this week, a cap on global warming pollution is essential to our economic recovery and our long-term financial health. The economic benefits of a cap are too big to pass up, and the costs of inaction on climate are too big to ignore," said Fred Krupp, the president of advocacy group Environmental Defense Fund, in a statement.

Other provisions in the bill include a "cash for clunkers" program where consumers get a credit after purchasing a more fuel-efficient car.

A Clean Energy Bank would be created to help finance development of emerging energy technologies, such as algae-based biofuels and enhanced geothermal.

Coal tech and allowances
The cap on greenhouse gas emissions is set at 17 percent below 2005 levels by 2020, and 83 percent by 2050, which is a less aggressive timescale than originally proposed. The cap-and-trade program would allow heavy polluters to buy and sell pollution permits, or allowances.

A renewable electricity mandate would require utilities to get 6 percent of their electricity from renewable sources--sun, wind, geothermal, or biomass--by 2012 and 20 percent by 2020.

In general, businesses prefer a cap-and-trade system over a tax on carbon emissions. A cap-and-trade system works around permits through which heavy polluters, such as utilities and big manufacturers, can buy and sell theses allowances to emit carbon.

The bill is structured so that energy-intensive industries have time to transition to more efficient and less polluting operations by giving them free permits, rather than auctioning them.

In the utility industry, about one-third of the allowances would be free to utilities during the initial years. Giving away these permits is designed to prevent utilities and natural gas companies from spiking up energy cost for consumers.

However, Waxman told committee members on Thursday that he will hold more hearings on allowances to further refine the details, according to reports.

Many politicians from Midwest and southern states that rely heavily on coal for power generation sought to push back the timing of the caps so that technology to pump carbon dioxide from coal-burning power plants can be developed. Many utilities plans to use carbon capture and storage to meet the emissions caps but the technology is still not commercially available.

Meanwhile, politicians from southeastern states that don't have the same sun or wind resources resisted the renewable energy mandate. In addition to using alternatives such as biomass, utilities can partially meet the mandate through efficiency measures.

Policies now being considered to boost renewable electricity generation and efficiency at utilities will make it cheaper to comply with caps on greenhouse gas emissions, said members of the Energy Future Coalition, a group of business, environmental, and labor advocates.

Both the the House and Senate are expected to move ahead with energy and climate change bills in the coming weeks.

The Waxman Markey bill in the House combines both energy and climate regulations in a single bill, while the Senate is working on separate efforts. Committee markup meetings in the House and Senate are expected, starting as early as this week.

One of the key sticking points to passing a climate change bill is addressing the question of whether putting a cap on greenhouse gas emissions will raise prices for energy and by how much. Also, some utility industry executives have said that a limit on carbon is sufficient action on climate change without a renewable energy mandate.

During a conference call with reporters on Monday, members of the Energy Future Coalition argued that the best way to control the costs of complying with greenhouse gas caps is to set national standards on renewable energy and efficiency at utilities. (Click for PDF of analysis.)

"Energy efficiency and renewable energy are going to reduce the amount of carbon that a cap-and-trade system has to deal with," said Marchant Wentworth, the Washington representative for the clean energy program of the Union of Concerned Scientists, which is a coalition member. "In both cases (these standards) establish a market where was not a market before."

One of the provisions of the House energy bill is a national Energy Efficiency Resource Standard (EERS) where utilities would need to run efficiency programs to cut their customers' energy consumption. Nineteen states have already established efficiency standards. The House bill calls for utilities to save cumulatively 15 percent on electricity and 10 percent on natural gas by 2020

These sorts of energy efficiency measures are considered far less expensive than building new power plants--at three cents per kilowatt-hour versus seven to 17 cents per kilowatt-hour--to meet growing demand, while cutting utility bills.

Also proposed is a national renewable electricity standard--already mandated in 27 states--where utilities would need to get 25 percent of their energy production by 2025 from renewable sources, such as solar, wind, geothermal, and biomass.

Diversifying the energy mix with renewables acts a hedge against volatility in the energy markets for fossil fuels and softens demand for natural gas which is used in power plants, Wentworth said.

Under climate regulations, large polluters, notably utilities and heavy manufacturers, would need to ratchet down their carbon emissions in a cap-and-trade system over the coming decades.

Many coal-dependent utilities anticipate meeting caps on greenhouse gas emissions by installing carbon capture and storage technology at coal plants to pump carbon dioxide underground. That technology is still in the research and development phase and is not expected to be commercially available until about 2020.

Meanwhile, efficiency and renewable energy "are technologies that can make a difference between now and 2020," said David Gardiner, a senior adviser at the Energy Future Coalition, on the call.

Transmission upgrade
Critical, too, is the installation of high-voltage transmission wires to carry wind and solar power from remote areas, according to the Energy Future Coalition.

The Energy Future Coalition recommends a high-voltage transmission network dedicated to transferring electricity from wind and solar farms in remote areas of the U.S. to where most of the electricity is consumed in city centers. Members propose that natural gas "peaker" plants that can meet baseload power be part of that grid "overlay" to ensure demand can be met, said Bill White an advisor to the Energy Future Coalition.

All three measures--efficiency, renewable energy, and a transmission lines--will help create jobs, they said. These policies would also help create demand for green technologies like renewable energy and smart-grid technologies.

This year is turning into a crucial year for legislative action on clean energy and climate change.

Although all the major provisions of a House energy and climate bill are now known, after four days of hearings last week, the House Energy and Environment Subcommittee is still seeking to rally enough votes for passage, according to Energy & Environment Daily.

Much of the pushback appears to focus on the cost of complying with greenhouse gas caps, particularly for states that rely on coal, which emits far more carbon dioxide than natural gas.

Under discussion is whether emissions permits, which could be bought and sold in a cap-and-trade system, will be auctioned or granted to utilities and other businesses. The timetable for emission target reductions and the how much renewable energy utilities need to generate is also being negotiated.

States in the south-east U.S. have resisted renewable electricity mandates because other regions have better wind and solar resources. With a combination of hydroelectric, solar, and wind, that region could meet 50 percent of its current needs, according to Wentworth.

CAMBRIDGE, Mass.--With hearings on an energy and climate bill scheduled to begin next week, "energy czar" Carol Browner on Monday said the Obama administration favors regulating greenhouse gases through "comprehensive legislation" rather than through the Environmental Protection Agency.

Carol Browner, assistant to the president on energy and climate change, speaking at MIT on Monday.

(Credit: Martin LaMonica/CNET)

Browner spoke at a summit at the Massachusetts Institute of Technology hosted by Massachusetts Rep. Edward Markey, who chairs the Energy and Environment subcommittee of the House's Energy and Commerce Committee. The committee two weeks ago released a draft of energy and climate legislation that provides incentives for efficiency and renewable-energy technologies.

Following a Supreme Court decision two years ago, the EPA is moving to determine whether it can regulate greenhouse gas emissions under the Clean Air Act. But Browner, who is assistant to President Obama on energy and climate change, said a law that combines energy policy with climate policy is a more effective approach.

"It is the strong preference of the administration that we secure legislation. There are things that can be done that won't quite work within the existing law," she said in response to a question after her speech.

"We need to be looking at all of the issues that make up our energy future, that give us the kind of clean-energy jobs and give us energy security and ultimately reduction in greenhouse gases. We think that is best achieved in legislation," she said.

Proposals in the energy and climate bill, called the American Clean Energy and Security Act of 2009 (PDF), could have a direct impact on green-technology companies.

The bill, sponsored by Markey and California Rep. Henry Waxman, proposes a national mandate for renewable energy at utilities, efficiency standards, and the creation of a cap-and-trade system through which industries can buy and trade carbon emissions permits. Some of these permits would be auctioned off, creating a fund to invest in clean-energy technologies.

In a press conference on Monday during the summit, Markey said the possibility of the EPA regulating industries over greenhouse gas emissions "becomes a real factor in negotiations."

"I think it becomes a real factor because industries across the country will have to gauge for themselves how lucky they feel if they kill legislation, in terms of how the EPA would treat them," Markey said. "There's greater flexibility in the legislative process to deal with the myriad issues that arise."

The ACES bill calls for emissions permits to be auctioned as a way to establish a price for carbon. However, some of those permits would be given away to heavy-polluting industries, such as steel and paper, in the short term to remain competitive internationally, Markey said.

The bill also proposes a system through which proceeds from the auctions will be used for investments in energy research and to provide discounts to consumers, if there is a rise in electricity prices from the regulations.

Markey said the goal is to have the House vote on the bill before its August recess and to have it signed into law by the end of year, before the next round of climate negotiations in Copenhagen.

CAMBRIDGE, Mass.--Congressional hearings will begin next Tuesday on an energy and climate bill that backers say will spur innovation in clean energy technologies and use the marketplace to put a price on carbon dioxide emissions.

One of the bill's sponsors, Massachusetts Democrat Rep. Edward Markey, hosted a forum on clean energy policy and climate change at the Massachusetts Institute of Technology on Monday where he announced the planned hearings.

Two influential figures in the Obama administration--Carol Browner, assistant to the president for energy and climate change, and John Holdren, the director of the Office of Science and Technology Policy--also delivered speeches at the event, arguing for a sustained commitment to green technologies for economic and environmental reasons.

On the whole, speakers drew a picture of U.S. energy policy in the midst of profound change, driven by concerns over the economy, national security, and the environment. At the same time, they noted the daunting technical and political barriers to a transition to a low-carbon energy industry.

"The energy challenge we face is actually a more difficult challenge than putting a man on the moon was," said Holdren. "We have to do things that pervade our whole economy, not just of this country but around the world, in order to get it done to the degree that is required."

In his talk, Holdren summarized the latest climate science, saying that climate change is happening faster than predicted in previous scenarios done by the United Nation's Intergovernmental Panel on Climate Change.

He said significant harm from climate change is already happening, such as effects on agriculture from changes in monsoons, more flooding from extreme precipitation, and pest population explosions that are affecting the timber industry in the U.S.

"Tipping points" that lead to rapid climate change, such as rapid ice-sheet disintegration in the poles and the release of gases trapped in permafrost, could "occur sooner rather than later," he said.

John Holdren, the director of the president's Office of Science and Technology Policy, speaking about energy and climate policy at MIT Monday.

(Credit: Martin LaMonica/CNET)

The most important technologies needed to mitigate climate change are efficiency, carbon capture and sequestration, advanced vehicles running on better batteries and fuel cells, and much cheaper solar cells.

He also said that the U.S. should develop approaches to nuclear energy that minimize risk from nuclear wastes. Work on nuclear fusion should also continue as well, he said

The options for policy--many of which have a positive economic impact--include removing barriers to the "low-hanging fruit" of efficiency technologies, such as improving consumer education and removing incentives for less efficient products, he said.

Subsidies for high-emitting energy sources should be removed and there should be continued government funding for research and development, he said. Other effective options to reduce the concentration of greenhouse gases in the atmosphere include slowing the rate of deforestation and modifying agriculture practices.

Large-scale geoengineering projects designed to cool the Earth could "conceivably" be done, he said, repeating an assertion he first made last week.

Energy investments
The stimulus package passed earlier this year had $59 billion in direct spending and tax incentives around energy efficient and clean energy, including plans to install 40 million smart electrical meters, loan guarantees for large wind and solar farms, and the installation of new transmission lines to carry renewable energy.

The Obama administration has also boosted spending on research and development, a move that MIT president Susan Hockfield said "represents the best strategy for long-term economic recovery and growth."

Two weeks ago, Markey and Energy and Commerce Committee co-chairman Rep. Henry Waxman presented a draft of the American Clean Energy and Security Act. The proposed legislation seeks to send "a clear signal that the U.S. will be the leader, not the laggard, on clean energy technologies," said Markey.

Speakers at a symposium on clean energy policy at MIT. From left: Cambridge Energy Research Associates Chairman Daniel Yergin, Director of the MIT Energy Initiative Ernest Moniz, Assistant to the President on Energy and Climate Carol Browner, MIT President Susan Hockfield, and Rep. Edward Markey.

(Credit: Martin LaMonica/CNET)

He said three members of the Obama administration--Energy Secretary Steven Chu, Environmental Protection Agency Administrator Lisa Jackson, and Transportation Secretary Ray LaHood are scheduled to testify at hearings on the bill next week. The goal is to have the House vote on the bill before its August recess, and to have a bill signed into law this year before the next round of international climate negotiations in Copenhagen, Denmark.

Officials from fast-growing countries India and China have told him and other members of Congress that they expect the U.S. to lead on reducing greenhouse gas emissions because the U.S. is a large polluter. The U.S. is responsible for 25 percent of global oil consumption but has only three percent of the population. "We can't preach temperance from the barstool," he said.

Policy challenges
Passage of a bill, however, that includes both energy provisions and climate regulations, is expected to be difficult. Residents of states that rely heavily on inexpensive but polluting coal for electricity have balked at the potential increase in electricity costs from putting a price on carbon emissions.

The bill intends to raise tens of billions of dollars by auctioning off polluting permits which can be traded in a cap-and-trade system. The money will be use to invest in energy technologies. There are also provisions to provide relief to people who see higher energy bills, and there are short-term exemptions for heavy-polluting industries, Markey said.

In her talk, Browner put current climate and energy policy initiatives in the context of previous environmental crises, including acid rain and the hole in the ozone layer.

In previous cases, there were people who said that regulations to address these problems would be too expensive or that the technology wasn't available. But in each instance, industry was able to find technical solutions, she said.

"For many years, we had a debate that somehow we had to choose between a healthy economy and a healthy environment. History has shown that we don't have to chose and the two are intrinsically linked," Browner said.