A National Energy Policy

Background
2002. It's amazing the US doesn't have a national energy policy. If you want to create a national energy policy you need to first establish a vision of where you want to be in 30 to 50 years. Then you figure out how to get there. So you create a "vision," then you create a set of goals and milestones to accomplish that vision. Then you create a set of strategies for achieving those goals. 

What you should not do to create an energy policy is put 30 people in a room, none of whom are experts in energy, and have them come up with 100 recommendations. It's irresponsible that his panel did not seek input from national experts. It's amazing that the process was secret (and that they continue to hide this info from the GAO which is now looking at filing a lawsuit to get the records). What's so secret about energy? It's irresponsible that his panel ignored input from leading energy experts (such as NRDC) who tried to be heard. It's irresponsible that his panel ignored virtually all the progress we've made in renewables in the last 30 years. It is completely unacceptable that there is no vision, no goals, and no milestones. We top that off with the head of the Teamsters declaring that "Clearly, we can explore ANWR without harming the environment" as if America looked to the Teamsters as an authority on the environment.  The American people deserve better. That's why the NEPI group was formed: to convene world experts to develop a responsible plan for America.

We can't just let market forces operate. Look what happened when California let market forces operate in their energy market. It resulted in statewide power blackouts and shortages, a major utility bankruptcy, and nearly bankrupted the state. Indeed, the energy community needs the federal government to "kick start" a transition to the hydrogen economy (this would happen on it's own anyway, but if the government accelerates the transition to hydrogen, the US will save a lot of money that is going overseas). We also need the government to make decisions that are inefficient for the market to make. For example, on-board H2 reformers vs. pure H2 fuel cell vehicles. There are equally good arguments for each, but if we don't put all our wood behind one approach, we lack economies of scale. So government intervention will make the markets more efficient.

Finally, we better start doing something now. We've burned through half the oil on this planet in the last 50 years and, at the rate we're consuming it today, it's virtually certain that there won't be any oil left in 50 years. Not one drop. See the first chapter in Hubbert's Peak. We'll have consumed in 100 years all the oil that took 100 million years to create. And we'll be dumping carbon and CO2 into the atmosphere at a rate 1 million times faster than normal. That's setting ourselves up for an environmental disaster that is coming that we may not be able to reverse. That's bad for Americans, it's bad for the economy, and it's bad for business.

4 simple things we can do today
A national energy policy isn't simple. But if you buy the vision and goals that are articulated below, then you can come up with 4 simple things that, if passed by Congress today, can have dramatic impact on our future:

• Accelerate putting hydrogen-powered fuel-cell vehicles on the road using incentives and requirements to ramp up production to 100,000 vehicles by 2010 and 2.5 million by 2020. These vehicles would use one-third the energy of today's cars (none of it from oil) and produce near-zero pollution. For example, you could create a $1B reward pool. Pay it out in 2007 based on the percentage of highway capable H2 powered FCVs sold by each American manufacturer. So if Ford sells half the American produced FCVs in 2007, they will get $500M. There would be a minimum threshold of 10,000 vehicles to qualify to participate in sharing the pool and only pure H2 fueled vehicles would qualify (so it will provide the decision the industry needs in trying to decide whether to use on-board reformers or direct H2 fuel). Create a second $1B reward pool for 2012. That way, we create healthy market competition. And instead of incentivizing an industry where half our money goes overseas, we create new American jobs, new American industries, and leverage 100% American energy sources. 
• Incentivize the hydrogen fueling infrastructure. Provide a $10B pool to reimburse people for 80% of the cost of  home-installed electrolyzers and natural gas reformers installed at service stations. This breaks the chicken-egg infrastructure problem quickly. And it's still a lot cheaper than sending $50B overseas every year! Require new gas pipelines to be capable of carrying hydrogen. 
• Only allow clean power plants to be built. Clean plants produce power at roughly the same cost as dirty plants, so why should we continue to permit dirty plants? After 2010, only issue permits for electricity generation plants that are zero emissions or environmentally neutral: biomass, geothermal, solar, wind, hydro, are the best, but we could also permit Coal IGCC (integrated gasifier combined cycle with underground carbon sequestration) plants and NGCC (natural gas combined cycle) plants. Provide generous tax credits for erecting large wind turbine farms with CAES units. Beef up the existing federal inter-state electrical grid infrastructure where required to accommodate new wind power sources. By tapping into the wind energy in a few states, we can accommodate all our new electrical requirements both cheaply and cleanly. 
• Improve the fuel economy of new vehicles powered by gasoline-engine technology. Congress should steadily increase standards for the combined fleet of cars and light trucks to 40 mpg by 2012 and 55 mpg by 2020. The NAS study shows that CAFE standards can be raised substantially without reducing vehicle weight and therefore without affecting safety, regardless of what you believe about the relationship between weight and safety.

Short term vision
A transportation system in the long term characterized by near-zero emissions of both air pollutants and greenhouse gases, as well as a diversification of the supply system away from petroleum.

Long term  vision (e.g., 50 to 100 years)

• Our country is 100% powered from energy sources that are: 
  • Clean/safe for people and environment 
  • Renewable/available 
  • Inexpensive 
  • Reliable 
• We use fossil fuels only for lubrication.
• We have eliminated our dependence on foreign energy sources
• We export our technology to other countries to reduce the threat of global warming
• Our air quality meets state and federal guidelines 100% of the time

Primary goals of this policy

• Independence: Substantially reduce national dependence on foreign energy sources and keep reducing it every year
• Stability: Ensure stable energy supply and prices
• Cost: Maintain or reduce energy costs every year
• Efficiency: Encourage the invention and adoption of new technologies that save power at a cost that is less than the cost of the generation of that power
• Safety: Adopt new technologies that are as-safe or safer than today's systems (e.g., H2-powered vehicles are as safe or safer than gas vehicles)
• Emissions: Minimize global warming contribution (CO₂ emission) and adopt policies that will keep reducing it every year to the maximum extent possible but still consistent with the other goals

Secondary goals of this policy

• Create new jobs for Americans
• Help existing American businesses and the American economy
• Reduce dependence on non-renewable fossil fuels
• Minimize air pollution and keep reducing it every year
• Adopt energy policies and programs required to enable states to meet state and federal clean air guidelines 
• Provide any necessary guidance to industry to eliminate ambiguity whenever this would be beneficial to achieving any of the above goals 

Key milestones
Electricity 

• Sustained 30-40% annual growth rates for both wind and PV for a period ~ 2 decades
• 2005: New permits will only be issued for plants that are as clean as today's natural gas plants.
• 2007: CO₂ emissions from US power plants will be reduced to 1990 levels
• 2010: New permits will only be allowed for plants that are zero emissions or environmentally neutral: biomass, geothermal, solar, wind, hydro.
• 2010: Tougher new emissions standards for all power plants will encourage retirement of older, more polluting plants, e.g., conversion of existing steam-electric plants into coal gasification plants

Transportation (cost, emissions, efficiency)

• 2005: Achieve 35mpg average fuel economy
• 2005: Tighten standards to reduce particulate emissions from new diesel vehicles by a factor of four from 2000 levels (soot is a major contributor to global warming)
• 2006: Each major car manufacturer would be required to produce 5,000 or more FCVs per year. 
• 2010: FCVs are produced in high volume (hundreds of thousands per manufacturer per year)
• 2010: Achieve 40mpg average fuel economy (for fossil fueled vehicles). This is achievable through technology improvements and HEV adoption.
• 2020: All new passenger cars are hydrogen FCVs
• 2020: Consume <10M barrels of oil/day (we are consuming 20M barrels/day today). This is achievable with aggressive penetration of HEVs plus FCVs plus scrappage credits.
• 2025: Achieve 10% worldwide market penetration for FCVs. This is important to reduce GHG emissions worldwide.

Key strategies
Electricity 

• Incentivize efficiency in generation and consumer usage thorough regulation and tax credits
• Incentivize wind and PV through RPS, net metering, and reverse auctions 
• Set emission standards (and allow trading of emission credits)
• Establish a $257/tC carbon tax (so that natural gas CO2 sequestered plants can be justified on an economic basis)
• Require that all new plants permitted after 2005 pollute at levels less than today's natural gas plants and tighten these standards every year as technology improves. After 2010, only permit zero emission plants.
• Incentivize ways to produce power that are both cleaner and lower cost than traditional sources
  • Wind power
    The cheapest way to add new energy capacity is to tap into the wind power potential of the Great Plains states and other states with abundant wind power. This will require enhancing our existing national electrical grid to move this power (as electricity) along the highest demand pathways and transmitting baseload wind power, which means load leveling by coupling the wind power to a compressed air energy storage (CAES) unit or other means. This can be done efficiently and cheaply. Provide tax credits for erecting large wind turbine farms with CAES units. Incentivize through RPS and reverse auctions (see PV paper below)
  • Coal IGCC (integrated gasifier combined cycle) plants and NGCC (natural gas combined cycle) plants
    New coal gasification plants are almost as clean as natural gas plants
  • Residential rooftop PV systems (incentivize through requiring net metering, tax credits, reverse auctions, and RPS mandates). With such support mechanisms, markets would be sufficiently large that manufacturers could profitably build and operate 100 MWp/year PV module factories, and electricity costs for residential rooftop PV systems would compare favorably with residential electricity prices in certain areas (e.g., California and the greater New York region in the U.S.). With public policies that reflect the distributed and environmental benefits offered by PV—and that can sustain domestic PV market demand growth at three times the historical growth rate for a period of the order of two decades—PV could provide 3% of total U.S. electricity supply by 2025.

Transportation

• Government intervention is required to achieve these goals. They will not happen on their own with normal market forces. The methods available for government to do this include:
  • regulation/mandates
  • fuel taxes
  • taxes on vehicles
  • feebates, and feebate/clean technology mandate combinations
• See Williams paper below for details on each of these mechanisms
• Stop allowing people to pollute without paying the cost
  • Incentivize advanced ice/electric hybrid and compressed natural gas vehicles by instituting a revenue-neutral feebate system providing large dollar incentives ($5,000 or more) for clean vehicles (proportional to their environmental cost) with comparatively minor ($375) assessments for purchasers of traditional gas vehicles 
• Incentivize efficiency
  • Higher fuel economy through increased CAFE standards: 35mpg by 2005 and 40mpg by 2010 to encourage the marketing of HEVs that get double the mileage of today's typical new cars
  • Institute a "scrap and trade" program to speed fleet turnover. Scrappage will disproportionately boost fleet efficiency (i.e., cut down on the money we pay overseas), cut smog and CO2, and expand automakers' new-car markets and hence jobs. We must get inefficient old cars off the road-they're worth far more dead than alive. So your trade in credit is higher the more your old car pollutes. Base the credit on gpm (the inverse of mpg) difference between old and new cars.
• Accelerate the move to hydrogen fuel cell vehicles
  • Two formidable challenges to commercializing FCVs are the current high cost of such vehicles and the current lack of a fueling infrastructure. Therefore, government action is required to stimulate initial demand and help incentivize the infrastructure development.
  • The hydrogen (H2 ) fuel cell vehicle (FCV) stands out as offering the least environmental damage cost among all the advanced options. 
    • Fuel source: Direct hydrogen powered
    • On-board storage: Compressed hydrogen
    • Re-fueling: Hydrogen from pipelines (cities) or delivered by truck (less dense areas) or generated on site (via small scale natural gas reformers or electrolysis)
    • Generation: Generate H2 from (in order of cost): fossil fuels (coal gasification, natural gas with geological sequestration of the separated CO2), biomass (environmentally neutral, but slightly higher cost than hydrogen from fossil fuels), and electrolysis (zero emissions, but the most costly for the next 10 years; about double the cost of H2 from fossil fuels). Although generating H2 from fossil fuels (with CO2 sequestration) is not as environmental friendly as wind/electrolysis (zero emissions), it's still 10X cleaner overall than the emissions from traditional gas vehicles. 
  • The most cost-effective way to introduce FCVs is by initially targetting centrally fueled fleets since this circumvents the lack of fueling infrastructure. This allows manufacturers to ramp up manufacturing volume/cost curves much more economically than trying to solve two problems at once. This can be accomplished via buydown strategies. 
  • Incentives should target manufacturers, service stations, and consumers.
  • Resolve fuel choice ambiguity for fuel cells by picking direct H2 as the fuel (with compressed on-board storage which is the most viable approach today) and provide cash incentivizes to help manufacturers justify the enormous capital costs in switching over to a new technology and provide incentive for car companies to compete against each other in pioneering a new market. For example, create a $1B reward pool. Pay it out in 2007 based on the percentage of highway capable H2 powered FCVs sold by each American manufacturer. So if Ford sells half the American produced FCVs in 2007, they will get $500M. Create a second $1B reward pool for 2012.
  • Provide federal re-imbursement to cover 80% of the cost of installing methane reformers and hydrogen pumps at the first 10% of American service stations to apply for re-imbursement. While this is not a good long term solution (it consumes a non-renewable resource and generates CO₂), it's a reasonable and cost-effective (cheaper than generating hydrogen from electrolysis) way to kick-start the fueling infrastructure. It allow gas stations to use the existing natural gas pipelines to generate hydrogen for fueling vehicles. Since we only reimburse the first stations to install the pumps, there is tremendous incentive to act quickly, especially if you believe that this is the way all stations will be heading. 
  • Provide federal tax credit of 80% of the cost of an efficient in-home electrolyzers (such as from Stuart Energy Systems of Toronto) so that consumers can fill up their cars at home (just as we know from electric cars, this one incentive alone is sufficient to kick start the system). At some point, wind electricity may become so cheap we can extract hydrogen from water cheaper than from natural gas. This has environmental benefits (no CO₂).
  • Adopt a federal ZEV mandate, similar to the ZEV mandate in California, that require any major car manufacturer selling in America to sell at least 50% ZEVs by 2015.
  • Incentives for HEVs mentioned earlier would provide invaluable experience with electric drive trains that would benefit future fuel cell vehicle technology

Other

• Require all new gas pipelines to be hydrogen capable
• Allocate $1B each year for the next 10 years for renewable research and development including:
  • methods for reducing the costs of CO2 separation in H2 manufacture and to increasing the capacity for its secure disposal in geological formations
  • matching grants for labs working on fuel cell manufacturing processes
  • technologies for power generation
  • technologies for H2 generation from a wide variety of fuels
  • onboard H2 storage
  • R&D grants on advanced solar cells, 
  • studies of the security, safety, and environmental impacts of geological sequestration of CO2 and large-scale production of biomass for H2 production in the quest for near-zero emissions.
• Appoint a panel of 5 to 10 nationally recognized energy experts to develop a plan within 12 months to achieve these goals. The plan should set milestone goals for efficiency and for use of renewables in the energy mix and for emission reductions and should lay out specific recommendations to achieve those milestones. 

Summary

• Government intervention is required to make the switch to FCVs; it will take decades to happen on it's own. However, the switch will both save money and reduce pollution. The sooner we can make the switch, the better.
• The cheapest way to "generate" energy is through efficiency. This should be incentivized whenever economically viable.
• Attach a monetary value to pollution
• Maximize our use of wind power whenever possible especially with big wind plants, CAES (compressed air storage); beef up the electrical grid along key routes to enable that power to be delivered where it is needed within a reasonable distance (so that Montana or New Mexico might power California rather than going all the way to North Dakota) 
• Coal gasification technology (with CO2 sequestration) for production of electricity and H2 is very viable, both economically and environmentally
• We should start with direct hydrogen fuel cell vehicles (FCV) for fleets focusing on getting the costs down before we shift the emphasis to massive deployment
• FCVs will use compressed H2 (and onboard reformers or solid h2 storage or sodium borohydride) but that will mean using new material for making cars lighter 
• Promote gas/electric hybrids today; it promotes efficiency and moves us down the learning curve
• CAES needs focused attention--large scale for remote wind in the near term and small-scale (located in distribution networks) for backing up PV in the long term...CAES is on hardly anyone's radar screen.
•  

It is vital that we have some reasonable estimate as to how much the combined steps will equal in terms of annual energy use. The goal, of course, is displacing as much oil as we reasonably can. So we should have a table showing the impact of each strategy/milestone. Here's some useful data that shows if you are aggressive, you don't impact the usage % wise by very much (under 10%) so this would justify we need to do more than this to move the needle.

• Just-released staff report from theCalifornia Energy Commission (www.energy.ca.gov/reports/) entitled Base Case Forecast of California Transportation Energy Demand (It also produces an alternative scenario
  for the State's energy consumption, depending on the advancement of fuel
  efficiency in cars and trucks, and the acceptance in the marketplace of
  hybrid-electric vehicles.) concluded this:
  
  • If more fuel-efficient vehicles - including "hybrids" - enter the
    marketplace in sufficient numbers, they could cut gasoline usage in
    California by approximately 500 million gallons in 2010, and more than 900
    million gallons by 2020 under the alternative scenerio

References

E-mail message from Bob Williams outlining the most promising energy strategies

Ogden, Williams and Larson, Toward a Hydrogen-Based Transportation System 
Shows that there are plausible futures for transportation based on advanced technologies, notably H2 FCV-based futures, that could provide transportation services at direct economic costs that are not much higher than at present but that offer the potential for near-zero emissions of both air pollutants and greenhouse gases, while simultaneously making it possible to diversify transportation energy away from the present near-exclusive dependence on oil.

R.H. Williams, Toward Zero Emissions for Transportation Using Fossil Fuels
Looks at the merits of coal IGCC (integrated gasifier combined cycle) plants and NGCC (natural gas combined cycle) plants

Accelerating residential PV expansion: supply analysis, Energy Policy, 29: 787-800, 2001
Argues that residential PV systems are now practical to incentivize.

Other info

Online Office of Senator John Kerry has speech on "Energy Security is American Security"

1-24 - Transcript of Gephardt's speech on Economy, Looking Ahead

LIBRARY-Energy link to Amory Lovin's Fool's Gold

Reality Test for Energy Plan, LA Times editorial

A national energy policy (my original notes!)