Energy Policy Update

1. Energy Policy Update Dr. Robert C. Marlay Director, Science and Technology Policy Deputy Director, U.S. Climate Change Technology Program Office of Policy and International Affairs U.S. Department of Energy robert.marlay@hq.doe.gov October 11, 2005 Fusion Power Associates Annual Meeting

2. Outline • Recent Events and Near-Term Energy Outlook • Fuels, World Oil, N. Gas, Heating Oil, Power • Gulf Coast Situation • Administration Responses and Near-Term Actions • Ensure Critical Supplies • Restore Energy Infrastructure • Energy Conservation and Efficiency • Longer-Term Energy Outlook • Framework for R&D – A Confluence of Forces • Global Economic Prosperity, Reduction of Poverty & Pollution • Clean Development Supported by Abundant Energy • Concerns About Climate Change and Reducing Emissions

3. Near-Term Energy Outlook • Oil and Related Fuels • Gasoline, Diesel Fuel • World Oil Outlook • Heating Fuels • Gulf Coast Infrastructure – Impacts & Outlook • Potential Economic Ramifications • Natural Gas • N. American Outlook • Rising Demand, Including by Power Producers • LNG Outlook • Electricity

4. Administration Actions – Near-Term • Supply • Facilitate Repairs to Infrastructure • Facilitate Suppliers and Market Functioning • Ease Federal Restrictions and EPA Regs, Where Critical • Work With IEA to Release Refined Products to Am. Mkts. • Make Available Oil from the SPR (All That is Needed) • Energy Conservation and Efficiency • Release of “Energy $avers” Guide • Radio Public Service Announcements (4,500 Stations) • Give Added Visibility to “Energy Hog” Program • Energy Teams for 200 Top Energy-Using Factories • Super-FEMP for Gov’t; Pres. Memo to Cabinet Heads • Worries About Impacts of High Energy Prices • Higher Costs for Consumers, Dampening Consumption • Higher Costs for Businesses, Undermining Competitiveness • Potential to Contribute to Inflation and Interest Rates

5. Administration Actions – Longer-Term • Energy Policy Act of 2005 • Promote Energy Efficiency in Homes, Buildings • Efficiency of Appliances, Energy Using Products • Energy Perf. Contracts for Federal Buildings, Agencies • Gov’t procurement of “Energy Star” Products • Modernizing the Electric Grid, To Spur Efficiency, Reduce Barriers • Diversification of Future Energy Supplies from Renewable Sources • Fuels • Power • New Generation of Transport Vehicles • Many Incentives for New Forms of Supply • Implement the 106 Recs. of National Energy Policy Report Available at: http://www.whitehouse.gov/energy/

6. Longer-Term Energy Outlook • Oil • World Oil Demand Rising at Unprecedented Rates • Significant New Players in Asia, S. Asia, Americas, Etc. • Long-Term Forecasts of $50/Bbl for a Decade or More • N. Gas • Methane is the Fuel of Choice, Environmentally Driven • N. American Supplies Constrained; LNG Uncertain • High Prices Will Drive Major Investments, But . . . • Electricity • Global Demand Very High – Many-Fold Increases by 2100 • Growing Support for Addressing Climate Change

7. Long-Term Framework for R&D • A Confluence of Forces . . . • Global Economic Prosperity, Reduction of Poverty & Pollution • Clean Development Supported by Abundant, Affordable, Reliable Energy Supply • Concerns About Climate Change and Reducing Green House Gas Emissions

8. The U.S. is Committed, With Climate Change Policy and Programs • Presidential Leadership • Cabinet-Level Engagement • Near-Term Actions • Financial Incentives for Investments • $4 Billion / Year In Federal S&T • Science to Inform Policy • Technology to Facilitate Action • International Cooperation • Deliberate Approach to Long-Term Goal, Consistent with UNFCCC • Climate Friendly Technologies • A Collaborative Path Forward SCIENCE, 30 July 2004, Volume 305, Number 5684

9. Technology -- Seeking Better and More Cost-Effective Solutions – to Facilitate Action • U.S. Climate Change Technology Program • An Ambitious Program of RDD&D • $3 Billion / Year • Climate Technology Goals: • Reduce Emissions From Energy End Use & Infrastructure • Reduce Emissions From Energy Supply • Advance CO2 Capture & Sequestration • Reduce Emissions From Non-CO2 Gases • Enhancing Measurement & Monitoring • Fortifying Foundations • Public Review Draft Available – Comments Due Nov 2 www.climatetechnology.gov

10. Examples of Multi-Lateral Cooperation . . . International Partnerships • Carbon Sequestration Leadership Forum: 19 Members; Focused on CO2 Capture & Storage Technologies. • International Partnership for the Hydrogen Economy: 17 Members; Organizes, Coordinates, and Leverages Hydrogen RD&D Programs. • Generation IV International Forum: 11 Members; Devoted to R&D of Next Generation of Nuclear Systems. • ITER: 6 Members; Project to Develop Fusion as a Commercial Energy Source. • Methane to Markets: 16 Members; Recovery and use of Methane from Landfills, Mines, and Oil & Gas Systems.

11. Century-Long Planning Horizon, Supported by Analyses Source: Placet M; Humphreys, KK; Mahasenan, NM. Climate Change Technology Scenarios: Energy, Emissions and Economic Implications. Pacific Northwest Nation Laboratory, PNL-14800, August 2004. Available at: http://www.pnl.gov/energy/climatetechnology.stm 11

12. Beyond the Standard Suite for High Emissions Constraint

13. CCTP Goals Near-Term Mid-Term Long-Term Technologies That Will Make A Difference

14. Conclusions . . . • Energy is, Again, in the “Big Picture” • So Is the Environment • Air and Water Quality, Locally, Regionally, Trans-Boundary • Global Warming, Oceans, Atmosphere • Solutions Must Engage Innovation and Technology • Planning is Increasingly: • Longer-Term, with Century-Long Horizons • International and Cooperative • Searching for Ways to Engage Developing Nations • Is Fusion Energy on the Cusp of Realizing Its Potential? • The Circumstances Have Never Been Better

15. Back-Up Slides

16. Presidential Leadership . . . “I reaffirm America’s commitment to the United Nations Framework Convention and its central goal, to stabilize atmospheric greenhouse gas concentrations at a level that will prevent dangerous human interference with the climate.” “(We will) set America on a path to slow the growth of our greenhouse gas emissions and, as science justifies, to stop and then reverse the growth of emissions.” - President George W. Bush February 14, 2002

17. Office of the President Climate Change Policy and Program Review by NSC, DPC, NEC Chair: Secretary of Energy* Co-Chair: Secretary of Commerce* Executive Director: OSTP Director Secretary of State NEC Director Secretary of Transportation Secretary of Agriculture NASA Administrator Secretary of Defense EPA Administrator Secretary of the Interior CEQ Chairman OMB Director Secretary of HHS NSF Director Committee on Climate Change Science and Technology Integration Chair: Deputy/Under Secretary of Commerce* Chair: Deputy/Under Secretary of Energy Executive Secretary: OSTP Associate Director for Science Members DS/US Level: CEQ, DOD, DOI, DOS, DOT, EPA, HHS, NASA, NEC, NSF, OMB, USDA Interagency Working Group on Climate Change Science and Technology Director: Assistant Secretary of Commerce For Oceans and Atmosphere Members:** DOC, DOD, DOE, DOI, DOS, DOT, EPA, HHS, NASA, NSF, Smithsonian, USAID, USDA Climate Change Science Program Director: Senior Official U.S. Department of Energy Members:** DOC, DOD, DOE, DOI, DOS, DOT, EPA, HHS, NASA, NSF, USAID, USDA Climate Change Technology Program Cabinet-Level Engagement * Chair and Vice Chair of Committee and Working Group alternate annually. ** CEQ, OSTP, and OMB also Participate

18. Near-Term Actions . . . • Voluntary Programs • Climate VISION (www.climatevision.gov) • Climate Leaders (www.epa.gov/climateleaders) • SmartWay Transport Partnership (www.epa.gov/smartway) • Voluntary Reporting of Emissions Reductions, EPACT 1605(b) • Incentives for Investment • Tax incentives for Renewable Energy, Hybrids, Deployment Partnerships • USDA Incentives for Sequestration • USAID and Global Environmental Fund Funding • Tropical Forest Conservation • Rules and Regulations • Fuel Economy Increase for Light Trucks • Non-Road Diesel Rule • Interstate Air Quality Rule • Initiative Against Illegal Logging White House Climate Change Fact Sheet website: http://www.whitehouse.gov/news/releases/2005/05/20030930-4.html

19. Financial Incentives for Investment . . . • Nearly $4 Billion/Year in Tax Incentives$M / Year* • Renewable Energy Production Credits ** 355 • Residential Solar Energy Systems (Tax Credit)** 10 • Hybrid and Fuel Cell Vehicles (Tax Credit)** 316 • Industry for Landfill Gas and Combined Heat and Power ** 133 • Biofuels, Coal Bed Methane (Production Credit) 1,000 • Biomass Ethanol (Exemption from Excise Taxes) 1,100 • Hydroelectric, Biomass Elec. (Excl. of Interest on Bonds) 100 • Clean Fuel Cars, Truck and Refueling Stations 50 • Investment Tax Credits for Solar, Geothermal Facilities 50 • Total 3,114 * Congressional Research Service Analysis of Tax Expenditures for 2003 ** Fed. Climate Change Expenditures Report, FY 2004

20. CCTP-Related Financial Incentives* in EPACT 2005-2015 ($ Millions) 10-Years • Renewable Energy • Extend Renewable Electricity Production Credit 2,747 • Renewable Energy Bonds 411 • Nuclear • Production Credit for Advanced Nuclear 278 • Fossil • Investment in Clean Coal Facilities, Including IGCC 1,612 • Energy Infrastructure (Transmission) 1,549 • Conservation and Energy Efficiency 1,284 • Alternative Motor Vehicles and Fuels 1,318 • Total CCTP Related Tax Incentives 9.2 B * Title XVII also authorizes loan guarantees not scored here

21. Energy Bill Tax Incentives 2005-2015 ($ Millions) • Fossil • Investment in Clean Coal Facilities 1,612 • Domestic Fossil Fuel Production & Security 2,822 • Amortization of Air-Pollution Control Facilities 1,147 • Renewable Energy • Extend Renewable Electricity Production Credit 2,747 • Renewable Energy Bonds 411 • Nuclear • Decommissioning Rules 1,293 • Production Credit for Advanced Nuclear 278 • Energy Infrastructure 1,549 • Conservation and Energy Efficiency 1,284 • Alternative Motor Vehicles and Fuels 1,318 • R&D Tax Credit 92 • Total Tax Incentives 14,553

22. U.S. Climate Change Science Program An Ambitious Program of Research $2 Billion / Year Climate Science Goals Improve Knowledge of Climate and Environment Improve Quantification of Forces Driving Changes to Climate Reduce Uncertainty in Projections of Future Climate Changes Understand Sensitivity and Adaptability of Natural and Manmade Ecosystems Explore Uses and Limits of Managing Risks and Opportunities Science -- Seeking Better Knowledge and Understanding – to Inform Policy www.climatescience.gov

23. Core Programs & Initiatives • Energy Supply • Renewable Energy • Hydrogen Fuel Initiative • FutureGen • Generation IV Nuclear Power • Fusion (ITER) • Basic Science • Energy Efficiency & Infrastructure • FreedomCAR • Building America • Industrial Process Alternatives • Carbon Capture and Sequestration • Regional Partnerships • Other Gases • Methane to Markets

24. 100-Year Cumulative Emissions from Asia-Pacific Partnership Countries India Japan China Australia/ New Zealand* South Korea United States All Other Nations Example: Asia-Pacific Partnership APP Vision Statement: http://www.state.gov/g/oes/rls/fs/50335.htm Projected Carbon Emissions from Asia-Pacific Partnership Countries APP Emissions Non-APP Emissions Data source: Placet, et. all, “Climate change technology scenarios: energy, emissions, and economic implications.” PNNL-14800, 2004 * Australia and New Zealand data combined in data set. New Zealand not part of APP.