It’s good to be here. Let me actually start by just introducing people you probably know who are in the coal chain of command.
Lynn Orr. As you know, Lynn came from Stanford. He is well-known to reside in the subsurface as an expert in that realm, and has the responsibility where we have combined the science and energy responsibilities, I think, quite well.
Chris Smith you certainly know from his years of service in fossil energy, heading that program.
And Dave Mohler you probably also know, although some of you may know him from his previous life more than from his still relatively short tenure at DOE. But Dave heading the coal program.
I’ll also note, I assume he’s not here, but Julio Friedmann, of course, was very active in our coal program, now back at Livermore. I was going to say that this way we get his services while somebody else pays him, but actually we pay him there, too. And we’ve welcomed Doug Hollett, who is not here today, into that – into that role.
I want to start by thanking the Coal Council for your timely and, I must say, prompt report: “Leveling the Playing Field” for carbon capture utilization and storage. We asked for that paper in mid-September, delivered in mid-November, in time for the – for the COP21 discussions in Paris. And, in fact, 10 nations – including Canada, China, Saudi Arabia – declared specifically in their INDCs – in their intended nationally determined contributions, their climate goals – that carbon capture and sequestration would be a part of their national efforts.
It’s going to be part of our national effort. It is and will continue to be part of our national efforts. But I just want to say that as is known here that, in my view, having both the National Coal Council and the National Petroleum Council, in my view, produce some timely, fast, focused papers. I think this is an excellent way for us – for us to work. And it’s really extremely timely, I appreciate that.
Today, we’re going to talk mainly about our innovation agenda, of course, in CCUS, and how we plan to achieve and accelerate that innovation in partnership with industry. But first, let me say that today we are going to make available very soon a little paper we’ve pulled together called “Federal Investments in Coal as Part of a Clean Energy Innovation Portfolio.”
So let me just say that, look, we all know that there are some challenges, some tough times in significant parts of coal country. There’s challenges along the entire coal supply chain. Obviously, we all know that. And I’ll be talking about, again, the Innovation Agenda going forward, hopefully ultimately at least addressing some of those challenges. But this paper that we’ll be making available, I hope it’ll be useful in ongoing dialogue.
What it points out, basically, is, look, first of all, DOE’s coal technology, you know, R&D programs – or RDD&D programs – are clearly important. They extend beyond the core fossil energy R&D program. Our Science Office has programs quite relevant to the coal agenda. And you can buttonhole Lynn and Chris later on, and Dave, for more discussion.
ARPA-E has had three programs of direct relevance in CCS. We have some cross-cutting initiatives, one quite relevant to – again, to Lynn Orr’s disciplinary background on subsurface science and engineering, that cuts across a number of issues involving the subsurface, obviously relevant to sequestration. And we have a number of international cooperation agreements that also have some work, with China and others.
I’ll be talking later about something called Mission Innovation. I just want to say there, in talking to other countries about joining, they were – we also had specific discussions about CCUS as an area of collaboration. I’ll come back to that.
But then there are the coal technology demonstration and deployment activities, the large demonstration projects. The loan guarantee program is often forgotten, but they are actively looking at a set of proposals for the $8.5 billion loan program for fossil fuels. It’s not only CCS, but obviously CCS is part of that portfolio going forward. And, very importantly – again, I may come back to these, but just to summarize everything upfront – of course, we have proposed, some members of Congress have proposed – we didn’t get over the finish line yet on CCUS deployment incentives, specifically tax credits. And the Administration’s version of that we kind of priced out at likely $5 billion worth of tax credits. But, again, we thought we were on the verge of getting something over the finish line, but the game isn’t over yet.
And finally, I do want to say – and this is very much across the Administration, and most especially not in DOE typically – but there are also targeted economic and workforce development programs looking at, obviously, some of the dislocations in – particularly in coal country. There’s an interagency POWER Initiative. The Small Business Administration, of course, has some programs. Office of Surface Mining Reclamation and Enforcement. Department of Labor, Employment and Training Administration has programs. So these are all spelled out in this document. It describes what they are, and I think it gives a little bit of a different picture to understand kind of holistically what’s being done, I think, of relevance to this – to this community.
So, again, that was kind of a long aside, but I think an important one. And I hope that –we’re also open, through Dave and Chris in particular, for comments on the paper, if you have them.
So, anyway, so getting back to our – to our discussion, again, we certainly remain committed to our all-of-the-above energy strategy. Coal will continue to be a major player in – again, as I just emphasize, in many parts of our – of our portfolio. We all know that the sustained low prices for natural gas has had a big effect on actually coal and nuclear, I might add, existing nuclear plants. And, you know, and we all know that this year the EIA is projecting that, for the first time, natural gas will on a yearly basis have a slightly larger market share in the power sector than coal; I think like 33 (percent) and 32 percent or something like that is the current projection.
And, obviously, with domestic imperatives and also the Paris Accord, obviously, we are anticipating a continued drive towards a lower-carbon energy future. And that’s where, of course, the carbon capture and utilization technologies become so important, in our view, as being sure that we maintain a portfolio where we have all the options on the table – which will get exercised, we expect, in different ways in different countries and in different parts of our country. I mean, the low-carbon portfolios of the future will not look the same in all – in all places. And so we want to make sure that CCUS is on the table as a marketplace option to be used.
I might also add that, in addition to of course coal power plants, that the CCUS we see as also important for a variety of industrial processes, where carbon capture may be, frankly, the only way of addressing low carbon in a whole set – a whole set of industries – you know, refineries, steel, cement, petrochemical sector, and the – and the like. So these are all part of – part of the agenda.
I’d just note, again, probably well-known in this group, but the IEA – the International Energy Agency – in their scenarios, they estimate the contribution of CCUS at roughly 14 percent of the cumulative emissions reductions between now and mid-century if we are to stay on this path towards the kind of international consensus of holding global temperature rise to 2 degrees centigrade or less. And so that’s a big piece, and that’s why, again, we need to keep maintaining this as an as an option.
Similarly, the IPCC has estimated that, without CCUS in the mix, meeting that climate goal would cost roughly 140 percent more than with it. So, again, this is all saying – I think preaching to the choir that I think we need to continue this innovation push.
Let me talk about Mission Innovation now, with a capital M and a capital I. Again, I don’t know how familiar this is to this group, but on the first day of the Paris meeting – COP21 – on November 30th, that’s the day when the national leaders were present. The French intentionally made the choice that, rather than have the leaders present on the last day like in Copenhagen, they were better there on the first day, make a good announcement, and get out of the way of the negotiators. And I think that worked out, I think, quite well.
On that first day, President Obama, together with 19 other leaders from 19 other countries, the vast majority of which actually at the head-of-state level, announced this Mission Innovation. And what it is is a commitment to seek a doubling of energy technology R&D funding over a five-year period. I’ll come back to where we stand on that and what the path forward is, but that was the commitment. And given the fact that the countries – the 20 countries represent more than 80 percent of global R&D, it’s kind of a big – it’s kind of a big, big commitment, the – opening up the innovation pipeline.
What I want to emphasize is that, in this construct, there is no requirement, shall we say, of pooling funds, of doing bilateral or certainly multilateral, twenty-lateral R&D projects. Quite the contrary. Every country manages its own portfolio. If it chooses to do international collaboration, presumably driven by a project imperative, that’s fine. And we expect that we will have more international collaboration, but that is not a requirement.
And that’s what I will say, is for example, when I was in Riyadh talking to the Saudis, who are members of Mission Innovation, their first question is: Is this kind of restricted to renewables, or is it a broad portfolio? And my answer was, as long as it’s heading towards implementation of a low-carbon future, it’s anything. And they made it very clear, well, our focus is going to be on carbon management, for obvious reasons. And we made it very clear that we are certainly prepared to join with them, as well as others, in that kind of expansion of our – of our portfolio.
At the same time as the Mission Innovation coalition was announced, a separate coalition was announced. Bill Gates put together a coalition of 28 investors from 10 different countries, needless to say with rather deep pockets, prepared to put billions of dollars on the table with extreme patience – 20 years to a return. And, frankly, this is a business where we know nothing is going to turn over fast. So a lot of patience, a lot of risk tolerance, and a willingness to take some of the key technologies that emerge all the way, if you like, end to end, to the scale-up. And again, this is a business where we know the capital requirements get large when you reach that stage. So this is a very interesting synergy.
Anyway, so this is, I think, a very interesting construct that we think has a lot of progress to be made.
I’ll make a couple of points. Another aspect of our structuring or our proposed structuring of the portfolio, United States, with the increase in funding that we anticipate over this let’s call it five-or-so-year time period is we proposed – we proposed to start it with $110 million. I’ll come back to where we stand on appropriations. We’re not going to get it this year, but – to be perfectly honest about it, but doesn’t mean we’re not going to start anyway in taking the first steps. We proposed that part of this increase be directed towards regional innovation partnerships. And exactly how it will be designed remains – we left it intentionally flexible for discussions with Congress, et cetera. We proposed it with a maximum of 10 regions across the country.
And by the way, as an aside, if you haven’t read an article that appeared on the front page of The New York Times Week in Review Section on Sunday, I recommend it to your attention. It was written by a scholar of the United States who happens to live in Singapore. But it emphasized that, when we look at the – a lot of the policy issues, a lot of the innovation challenges going forward, that in reality state lines might actually matter less than things like metropolitan areas and regional linkages of those, addressing problems common to those regions. But its concept is that our view is that, just as different countries will have very different portfolios in Mission Innovation, will have very different portfolios in meeting their targets, so is that the case within the United States. And we would like to see a set of regional innovation partnerships set up where presumably a nonprofit organization formed by regional players is not a research performer directly, but a research portfolio developer and manager. Meaning that they will be looking at what are the regional resources as far as innovation, what are the regional energy resources, what are the regional energy needs. And they, not the Department of Energy, will set those portfolios to move forward.
We think this is really good policy, frankly, to get more of that happening. And in fact, the National Research Council has observed a few years ago that, in some sense, we don’t do enough in terms of encouraging a regional focus, regional innovation going forward. And so that’s something that, you know, we’d welcome your comment on. And if you think it’s a good idea, well, you might want to say so. But clearly, if we think in terms of coal, it has obvious implications in terms of how portfolios would be set in at least a couple of major regions of our – of our country. I won’t name names, but you know what I’m talking about.
In that spirit, we are attending a set of regional meetings to discuss this. We just had the first one Monday in Providence, Rhode Island, with some people from Connecticut and Massachusetts present. The second one will be tomorrow. It’ll be hosted at the University of Kentucky. And obviously, we expect a lot of discussion on the topics that we are talking about today.
So I think those are really some of the important things I wanted to talk about.
Now, in terms of some of the things that are happening, obviously, in terms of major projects, actually, the Great Plains Synfuels Plant, of the maligned synfuels program of decades ago, you know, it’s now I think past 10 years of – and past 20 megatons of CO2 for EOR.
A whole variety of others in Canada, certainly the Boundary Dam Project coming on.
In the United States, we supported – again, in the industrial plant category – Archer Daniels Midland for an ethanol plant in Illinois, which will be going to deep-aquifer sequestration, as opposed to most of the EOR projects.
Of course, the Kemper project is now 99 percent complete, they say, and hopefully it will be coming on soon with its multiple product streams. And again, we helped support that.
The Petra Nova coal – NRG Petra Nova in Texas, near Houston, retrofitting an existing boiler with post-combustion technology, scheduled for commissioning this year.
So there’s quite a bit happening in this – in this front. But also, going forward in innovation, we have something called innovation – not with a capital I – capital CCS, and in the Fossil Energy Office. And again, you can talk more with Lynn and Chris and Dave. We want to move forward on the planning and then execution of some significant pilot projects, typically in the 10 or 10s, maybe as high as 50 megawatts, a modular approach to maximize learning by doing, drive down costs, and hopefully enable industry to more rapidly replicate these successes and scale up. And these will include areas such as oxy-combustion, chemical looping, so really trying to get into some new approaches – or, well, new in terms of implementing, finding out how it actually works, how you actually build it and operate it, for these kinds of – these kinds of technologies.
I do want to say that, in addition to that, I mean, on the innovation side, three of our Energy Frontier Research Centers, which are operated out of the Office of Science, continue their CCS-focused research. One is on carbon capture technologies, advanced technologies, and two of them are on the storage side. I want to say these EFRCs, we have 32 of them cross the entire spectrum of grand energy technology challenges, and so roughly 10 percent are in the CCS regime. These have been a tremendous success, in my view, in general, these EFRCs. And in our Mission Innovation, for example, we are – in the first year only we would – we would seek to – we proposed to add five more of these – of these EFRCs.
We also – I also alluded to cost-cutting initiatives that have been enabled in no small measure by combining the undersecretaryships of energy and science, which is what Lynn does. And four of those out of a total of – is it eight, Lynn? Or something like – it’s that order. Maybe it’s eight. But four of them touch on CCS. There’s one on super-critical CO2 technology that mainly involves fossil and nuclear at the moment. Maybe – EERE is involved? That’s right, three offices involved in that. So looking at using CO2 as a – as a working fluid, basically, and getting very high – getting higher thermal efficiencies from that kind of a cycle.
I already mentioned the subsurface science and technology initiative, which obviously addresses sequestration. We have another on the energy-water nexus crosscut involving, again, multiple offices. And obviously there’s a big water demand in CCUS technologies.
And we have another new one on advanced materials for energy innovation, and clearly materials that can operate in more extreme environments – temperature, pressure, corrosion, corrosive environments, et cetera. Again, a very important enabling technology – enabling science and technology for this.
So, again, I think there’s a lot going on, and we will – we will certainly continue to emphasize this.
Maybe just circling back – and ending – to some of the recommendations in your white paper on “Leveling the Playing Field,” there was advocacy for expansion and extension of tax credits for CCUS. I already mentioned that that was part of our president’s proposed FY ’17 budget. And that considered both an investment tax credit for electric generation and – that deploys CCUS, as well as a CO2 sequestration tax credit that would be both refundable and uncapped. In addition, within the Congress, there was also the Conaway bill, H.R. 4622, and that’s been actively discussed. And it would make the sequestration tax credit uncapped, unlike the current 75-million-ton CO2 cap in the 45Q Section. Now, again, it was a very active discussion. We were very supportive of these tax credits. You all know the story – I think you probably all know the story, but I just want to say that, you know, there still remains a lot of interest in these tax credits, and we certainly are going to be paying a lot of attention to the possibility of that coming back on the – on the table.
Talking about Congress, I’ll talk about the – just say a word about the Mission Innovation budget proposal. Basically, this innovation agenda and an innovation agenda across the board has received a lot of positive response in both chambers and on both sides of the aisle. Regrettably, that will not translate into the 21 percent increase that we had hoped for this year because the numbers don’t add up. Actually, what happened is, in FY ’16, we got a pretty nice increase in the Department of Energy budget, which raised our baseline, and then FY ’17 was flat. And frankly, the allocations, at least for one of our Appropriations Committees, was even negative compared to FY ’16. So that’s going to be – it’s not going to be a great year in terms of the kinds of advance we want, although the Congress, I think, within those constraints tried to be as favorable as they could to elements of the innovation agenda. And I think – for example, I think our innovation in the Fossil Energy Office, I think, is going to work out – now, as long as – as long as we don’t get a CR in the end.
So we’ll keep pushing on that. But you will see that even in the language – in report language, at least in the – in the – they haven’t conferenced, obviously, but in report language, lots of favorable stuff – including, by the way, an amendment offered by Senator Cantwell strongly endorsing this idea of regional partnerships. So I think there’s a lot here. I mean, we’re not going to get discouraged. We’re not going to jump off the bridge if one year the numbers don’t add up. We’ll see where the budgets go in the next years. We’ve got to keep pushing. The next administration’s got to keep pushing. You need to keep pushing. All of those who support this innovation agenda have got to keep pushing. There’s a lot of people who want to get to yes, and we’re just going to have to get through this tight budget constraint.
So that’s what I wanted to say. And again, the main message is we are going to keep, certainly for the next nine months – today is the 20th, so I do mean nine months for the next nine months, we’re going to say on this agenda. And be happy to work with all of you in terms of making some progress. Thank you.