Acknowledgements
Thank you, Tim [Wirth] for inviting me to this sixteenth Wirth Chair lunch. Naomi and I enjoy our retreats to a very special two acres of Colorado down in the San Juan Mountains, but this is one of the few intrusions into that time that is most welcome.
It’s been a day to address two main issues. That’s because of our shared commitment to addressing the risks of climate change, your seminal contributions to awaken America to the risks and opportunities, and the importance of 2015 as we head to the Paris meetings later this year.
With the Hansen hearings in 1988, you raised the game in having our nation aware of the threat of climate change. Also very important was your early work on cap and trade systems, and your subsequent service as the first Undersecretary of State for Global Affairs leading to Kyoto and then at the U.N. Foundation and the Energy Future Coalition have helped the drive towards international climate action.
Tim was also part of the birth of SERI, now NREL. President Carter made remarks in Golden in 1978 and singled out Floyd Haskell, Gary Hart and Tim Wirth and their dedication to solar programs. I’ll come back to NREL and solar in a bit. I might add that, earlier today in Boulder, I drew upon an opinion piece written by Tim and Gary on the Iran deal – lots of wisdom in it.
I’d like to recognize the efforts of Mark Safty, the current Wirth Chair holder, I understand that Mark was recognized in his legal career for being chosen as “Colorado’s Best Renewable Energy Attorney” by Law Week Colorado.
I also want to thank Dean Teske for his stewardship of the Wirth Chair.
Tim also organized the Senate Task Force on the Expansion of Major League Baseball, and this helped bring Major League Baseball to Colorado! As a lifelong Red Sox fan, I congratulate the Rockies on reaching the World Series in 2007, but I won’t get swept away with baseball talk when we need to focus on clean energy and climate change.
I also thank Tim for his excellent training of Kevin Knobloch, my chief of staff. In addition to keeping the DOE trains running, he coordinates our overall actions to implement President Obama’s Climate Action Plan.
I’d also like to recognize some outstanding Coloradan DOE folks. Alice Madden is a former Wirth Chair herself and served as our inaugural Principal Deputy Assistant Secretary for Intergovernmental affairs at DOE. Heidi VanGenderen, who I’m told organized the very first of these Wirth Chair luncheons, and Tara Trujillo serve with distinction connecting us to the states.
And I want to recognize Ken Salazar, Ed Perlmutter, Jared Polis, Frederico Peña, Former Governor Ritter, and current Governor Hickenlooper, who are outstanding clean energy leaders.
And of course, one of our important seventeen national laboratories, the National Renewable Energy Laboratory, is not far from here.
Under the leadership of Dan Arvizu, NREL has been a vital part of DOE’s renewable energy research and development agenda over the past 10 years. In particular, in my tenure as Secretary, Dan has also stepped up as a leader in our Laboratory Policy Council. This has entailed working with all seventeen laboratory directors to strengthen their engagement in strategic planning for the Department and advance the system wide effectiveness of the labs. Dan, you have my gratitude for what you’ve done and what you will continue to do.
Introduction
Let’s talk about climate change.
Colorado is no stranger to the phenomena that raise deep concern about the future of our climate. We have the western haze generated by unprecedented wildfires. I happened to be visiting NREL in 2013, just after the catastrophic Black Forest fire and just at the start of the torrential rains that overtopped more than a dozen dams and damaged tens of thousands of homes. Near our place in the San Juan mountains, we see the march of the bark beetles, one of the threats to the western forests.
These events remind us why it is so important to take on the challenge of climate change through both mitigation and adaptation.
Today I will touch on two main themes.
First, the road to Paris, when the nations of the world gather for the 21st UN climate conference. This has imperatives for US leadership as laid out in the President’s Climate Action Plan: mitigation, adaptation, international engagement.
Second, the road from Paris. This will require implementing programs to meet ambitious goals agreed to in Paris. A key to the road to and from – that is, through Paris – is continuing clean energy technology innovation.
Road To Paris
It is critical for the US to be in a leading role going into Paris, despite the difficult political environment to do this. You can’t do this unless you walk the talk. The President determined that this was such an overarching priority that he put forward in June 2013 the Climate Action Plan that would accomplish the 2020 target of a 17% emissions reduction solely on the basis of executive action.
For our international collaborations, mitigation is the focus with developed and emerging economies, while adaptation plays a larger role with the poorest countries.
The international scene shifted dramatically with the announcement last November by President Obama and China’s President Xi Jinping of US and Chinese emissions targets beyond 2020. President Obama announced that the U.S. will cut net greenhouse gas emissions by 26 to 28 percent below 2005 levels by 2025, doubling the pace of emissions reductions up to 2020 and on track for an 80 percent reduction by 2050. At the same time, President Xi announced targets to peak China’s CO2 emissions around 2030, with the intention to try to peak early, and set a goal to increase the non-fossil share of all energy to around 20 percent by 2030. The 20% goal is ambitious. China will need to install roughly 800 to 1000 gigawatts of additional nuclear and renewable electricity generation capacity to meet its 2030 coal. For reference, the entire U.S. generation capacity in 2012 was a bit less than 1000 gigawatts.
We have now seen many key nations come forward with substantive emissions reduction goals. Of course European countries put ambitious targets on the table. But Mexico’s ambitious climate commitment sets an example for the Western Hemisphere and the world. I co-chair a joint task force for implementing US and Mexican efforts. Brazil will take extraordinary steps in reforestation. A group of Latin American countries committed to doubling renewables at the Energy and Climate Partnership of the Americas in May.
We are in a better position today heading into Paris than many would have predicted a year ago – but a lot of hard work remains in the next few months. And that brings us back to our domestic efforts within the Climate Action Plan.
The Climate Action Plan has many facets.
For example, the DOE has stepped up the pace on efficiency standards for appliances and equipment. We project having put standards in place during the Obama years (30 standards down and 26 to go) that will account for about three billion tons of CO2 emissions reductions cumulatively to 2030, and at the same time save consumers nearly half a trillion dollars in energy costs.
Strengthened CAFÉ standards for both autos and trucks are already having an impact. Non-CO2 greenhouse gas reduction is also critical, such as HFCs. But of course a centerpiece of the Climate Action Plan is the Clean Power Plan issued earlier this month. EPA projects a 32% reduction in CO2 from power plants by 2030.
A hallmark of the Clean Power Plan is the flexibility it affords the states to meet their individual goals; indeed they can choose between a rate and a mass goal, and can also enter into regional plans for meeting goals most efficiently and economically.
It is no secret that there will be challenges to the Plan, apparently including here in Colorado. But there is a long and robust track record of major environmental regulation benefitting health, improving the air, and being entirely compatible with job growth and a strong economy. This will be no different.
The plan provides ample flexibility and time for a state or regional planning process to address reliability. Indeed there seems to be among a number of politicians a remarkable lack of confidence in the professionals who maintain a very reliable grid in the U.S. and will continue to do so. One concrete example of a threat to reliability that was put forward is that the natural gas infrastructure could not manage a further shift to natural gas. A DOE analysis carried out in the context of the Quadrennial Energy Review showed that in fact there is substantial excess capacity.
Colorado would appear to be especially well positioned to capture the environmental and economic benefits of a low carbon future and the Clean Power Plan, with its leadership position in clean energy. The state is strong in renewables and in natural gas. Colorado was the first state with a voter-approved renewable portfolio standard for electricity generation. After several increases, Colorado’s renewable portfolio standard now requires that by 2020, 30% of electricity sold by investor-owned utilities will be from renewable energy sources. The Clean Air Clean Jobs legislation of 2010 led to the modernization of several coal plants and the early retirement of two urban coal plants, representing 900 MWs of fuel switching to cleaner sources.
I want to recognize Governor Hickenlooper and former Governor Ritter for their pursuit of clean energy as a policy priority.
And of course Colorado is home to NREL, the national lab operated by the DOE Office of Energy Efficiency and Renewable Energy. NREL’s long experience and new capabilities such as the Energy Systems Integration Facility, a cutting edge capability to address issues of renewables integration, should be major assets in analysis of state implementation plans.
Colorado has shown other states what is possible with ambitious goals and follow-through. The energy savings goals set in 2008 by Colorado’s Public Utilities Commission prompted Xcel Energy to invest almost $320 million on energy efficiency incentives through 2013. That investment has already achieved a 26 percent reduction in CO2 emissions compared to 2005 levels.
Policy leadership at the state and local level combined with the technical expertise of NREL make this state a true powerhouse for clean energy innovation – and, as I will note later, it reaches to the international level.
I would add that clean energy represents a growing economic opportunity. They U.S. solar industry now employs more people than auto and light truck manufacturing – over 173,000 – and has been adding jobs twenty times faster than the wider economy.
A robust American clean energy industry, supported by a vibrant research and development ecosystem, can help meet the local, national, and worldwide demand for low-carbon energy.
In concluding this discussion of the road to Paris, I want to focus on innovation. Perhaps because of my own scientific background, I believe that clean energy technology innovation that continues strong cost reduction is ultimately the solution to climate change. Low cost makes policy easier. And the energy system has some inherent features that have historically led to long times for substantial change.
They include:
- Multi-trillion-dollar-per-year revenues
- Very capital intensive and long-lived assets
- As a commodity business, it is cost-sensitive
- Established efficient supply chains, delivery infrastructure, and customer bases
- Provides essential services for all activities
- Reliability valued more than innovation
- Highly regulated
- Complex politics/policy driven by regional considerations
These features do not bring the word “nimble” to mind.
While these features historically have led to half a century time scales for major change, we don’t have that time. We need to pick up the pace of technology innovation – and synergistic business model and regulatory innovation as well.
Consequently we have been in consultations to bring a strong innovation theme to Paris later this year. This will start prior to the COP21, when I chair the biannual IEA ministerial in November in Paris with an innovation focus. We expect this to carry over to COP with the strong support of President Hollande, Foreign Minister Fabius, and Energy and Environment Minister Royal. Our hope of course is that the international community will recognize that the trajectory of technology innovation and cost reduction supports ambition. We also hope to engage investors with passion, a long term horizon for returns, and an appetite for risk in advancing not just near term technology improvements but breakthroughs for the long term.
Let me talk a bit more about solar in the context of innovation.
NREL has set 34 world records for solar cell conversion efficiency, and earned over 150 solar patents. SolarWorld, the leading thin film solar company, developed its critical deposition technology with NREL.
The clean energy challenge has also led to innovative ways of doing business at DOE across the Research, Development, Demonstration and Deployment innovation chain.
In 2009, Energy Frontier Research Centers were established in the Office of Science to support, with several million dollars per year for 5 or 10 years, multi-investigator teams focused on the great science challenges underpinning technology breakthroughs. About 40% of the 46 centers established involve solar. After five years the first EFRCs produced well over 5000 peer reviewed papers and hundreds of inventions at various stages of patents.
ARPA-E was created in 2009 with the charge of high risk technology development and with special operating flexibilities and a commitment to assisting moving technology to market. 34 ARPA-E projects have attracted more than $850 million in private-sector follow-on funding after ARPA-E’s investment of approximately $135 million.
Just last week ARPA-E announced a new program, MOSAIC, that aims to concentrate 50% more light on a flat panel PV with no increase in cost.
Innovation Hubs, with funding of about $25 million per year, for 5 or 10 years, have been established within several DOE programs to span many parts of the innovation chain. One is focused on sunlight to fuel and has made major strides in high throughput characterization.
The Energy Efficiency and Renewable Energy program established SunShot, with NREL playing a key roles. A key idea here is that cost reduction for photovoltaics requires not just technology innovation but system innovation to address the “soft costs” that nor dominate the cost of a rooftop system.
The DOE Loan Office has put over $30 billion of loans and loan guarantees into play. A major success has been in kick-starting the utility-scale PV sector in the US, by supporting the first five projects over 100 Megawatts each. An additional 17 are now going forward with private investment. The loan program has also supported several major solar thermal plants that are pushing the technology envelope, such as the Tonopah project with ten hours of storage to improve dispatch of the plant.
All of this has contributed to the United States now having 21,000 Megawatts of solar energy, with 7,000 coming on line in 2014. Half of U.S. capacity additions in Q1 2015 was solar. And there are a stream of innovations promising breakthroughs in the next years.
All parts of the innovation chain have contributed to the impressive cost performance. Starting four years ago at the start of SunShot, to today, and then to the 2020 SunShot goals, we have unsubsidized levelized costs per kilowatt hour:
- Utility scale PV: 21 to 11 to 6 cents
- Commercial PV: 36 to 13 to 7 cents
- Residential PV 28 to 16 to 8 cents.
- Concentrated solar thermal: 21 to 13 to 6 cents.
Sustaining this kind of accelerated performance into the future, across the board for low carbon energy, will be a key enabler to the kind of global commitment that we need to mitigate climate risks.
The Road from Paris
We need to think about the road from Paris in two time frames – that covered by the individual national greenhouse gas reduction goals at Paris, and then the longer term when the very low carbon future presents a continuing challenge. The kind of progress we are seeing with solar can carry us through the first period, but we are likely to need a number of breakthroughs across the board for the longer term.
That takes us to the need for dramatic scale-up of energy research and development.
In recent years, the American Energy Innovation Council made up of numerous CEOs not directly in the energy business called for a tripling of government support. Some members individually, such as Bill Gates, are announcing their planned personal commitments to stimulating breakthroughs.
An example is provided by ARPA-E. The National Academy report that recommended its creation in 2005 felt that funding at a billion dollars per year is appropriate, but it has been stuck at less than $300 million in the age of sequestration and artificial budget caps. Yet ARPA-E’s open solicitations for good ideas suggest that it can fund only a few percent of the ideas coming forward.
This is one indication of the enormous reservoir of innovation that can be tapped and must be to meet the demands of climate change mitigation. Capturing the fruits of innovation at scale in the energy sector takes time, so we need to fill the pipeline now.
Along with technology innovation, we need business model and regulatory innovation. In the energy business these go together. A clear emerging example today is the battle over distributed generation and net metering.
As you all know Colorado has had big news here. The discussion devolves quickly into discussions about caps, rather than addressing the more fundamental issues of valuation of all services, by utility and by distributed generators. By the nature of the energy business, we will need to move to situations were incumbents can be part of the solution, even in disruptive scenarios such as distributed generation. DOE is increasing its focus on the innovation issues as an important part of the road from Paris.
A third piece of the road from Paris is the continuation and indeed elevation of international collaboration on solutions. The United States helps lead the Clean Energy Ministerial, which brings together 23 of the world’s largest and most forward-leaning countries and the European Commission with the goal of helping each other achieve a global clean energy revolution. CEM countries represent 75 percent of global greenhouse gas emissions and 90 percent of global clean energy investment.
However, the CEM countries also recognize the importance of helping less developed countries if we are collectively to meet our climate goals as well as improve the quality of life and economic opportunity for billions of people. At our most recent annual meeting in May, CEM Energy Ministers decided to further scale-up something called the Clean Energy Solutions Center, which provides real-time, no-cost clean energy expert policy assistance to countries throughout the world. NREL is the engine making the Solutions Center go.
So far, we’ve helped 80 countries around the world to improve their clean energy policies.
Since meeting, several CEM countries have stepped forward both with financial commitments and also with experts who can broaden the set of languages in which the Center can engage countries.
Clearly the road from Paris will require innovation in multiple dimensions.
Conclusion
We should recognize the progress we’ve made together, and work hard to make Paris the beginning of the next part of the journey, one with sustained reduction of greenhouse gas emissions. Here in the U.S., we will need to show sustained leadership. Eventually this will require Congressional action for an economy-wide approach. In the meantime, we will at DOE continue to put in place the innovative technology programs that will underpin long term success in addressing climate change.
Thank you.