Precourt Institute for Energy Advisory Council

April 21, 2011

Dan Reicher Executive Director Steyer-Taylor Center for Energy Policy & Finance Stanford University

“The future is not what it used to be.”

Paul Valery French Writer (1871-1944)

Gulf Oil Spill

Fukushima Reactors

“The best way to predict the future

is to invent it.”

Alan Kay Computer Scientist

“Biggest Economic Opportunity of the 21st Century”

The International Energy Agency estimates that the world will have to invest more than $26 trillion in energy infrastructure to meet currently projected demand between now and 2030….

The Elements of Success

Efficiency First!

“All people want is cold beer and hot showers.” - Amory Lovins

We are interested in the services energy provides, not the energy itself. How much energy we use to cool the beer and heat the water is a choice we make.

McKinsey & Co., A Cost Curve for GHG Emissions

Building A Fridge to the 21st Century

Source: U.S. DOE

“If you cannot measure it, you cannot improve it."

-- Lord Kelvin

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How many kW-h do you use each day?

What appliances use the most energy?

What time of day do you use the most energy?

How much have you spent today? this week? this month?

How informed are energy consumers?

You expect more in the grocery store….

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ET Meets IT

Photos: NREL; blueacorn.com

Knowledge Is Less Power

Messaging and Co-Branding

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8

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2

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Levelized Cost C

ents/kWh

Coal IGCC

Geothermal Natural Gas

US Pulverized Coal

Wind Solar Thermal

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Nuclear

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Coal IGCC/CCS

Chinese Pulverized Coal (and U.S. efficiency)

PV

Renewables Can’t Yet Compete with Coal

Generation Type

Enhanced Geothermal Systems (EGS)‏

•  Vast and ubiquitous resource •  Base-load, like coal •  Cost trajectory < 4 cents/kWh •  Scalable projects – 5-500 MW •  No scientific show-stoppers •  Potential for CO2 Sequestration

-- BUT -- •  Commercialization risks

o  High cost of innovation o  High cost of site viability o  High cost of drilling o  Not yet commercially proven o  Inadequate government support o  Induced seismicity question

Geothermal Resource (3-10 km): Texas

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DOE’s 20% Wind Energy by 2030 scenario includes a significant amount of offshore wind (54 GW), much of it in the Mid-Atlantic region

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Off-Shore Wind Resource: Maine to Florida

The Dog Finally Caught the Car!

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Chevy Volt

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Distributed Generation Meets Smart Vehicles

Smart Charging Demo

•  Prototype aggregation system and vehicle dispatch algorithms

•  Real time dispatch of 8 plug-in Priuses commanded from grid operator data

•  Smart charging could help integrate plug-ins and intermittent wind and solar into the grid on a large scale

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Renewable Source Advanced T&D Smart Home Plug-in Vehicle

Tomorrow’s Smart Grid

Technology, Policy and…..Finance: A Critical Role

Risk and Capital: The “Valley of Death”

Capital  Required  

Risk    

VC Capacity

Venture Capital

Low  

High  

Low High

Project  Finance  Growth-stage investing

Risk  tolerance  level:  Project  finance  

VC Investments

Project Finance Investments

Graph Source: Tana Energy Capital LLC

Commercialization Investments

The “Valley of Death”

Meanwhile China is Gearing Up in Manufacturing…

XI’AN, China — For years, many of China’s best and brightest left for the United States, where high-tech industry was more cutting-edge. But Mark R. Pinto is moving in the opposite direction……

And China is Drawing High-Tech R&D From U.S.

Technology, Finance and Policy: Washington’s Critical Role

“We need both a significant price on carbon and complementary energy policies.”

The Stimulus: A Helpful Start

•  Unprecedented investment in clean energy: > $50B

•  Many mechanisms: e.g. R&D, loan guarantees, tax

credits, block grants

•  Many focus areas: e.g. smart grid, energy efficiency,

renewables, hybrid vehicles, weatherization, nuclear

•  Many agencies: DOE, Treasury, Ag, GSA, DOD, DOT

•  Tight timeline: ~2 years

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Beyond Stimulus: Three Critical Energy Policy Needs

•  Increase federal energy R&D funding from $4-5B today

to $15-30B annually as President Obama has called for

•  Adopt federal legislation establishing a national Clean Energy Standard (CES)

•  Create the Clean Energy Deployment Administration (CEDA) to help finance commercial-scale “Valley of Death” energy projects

Steyer-Taylor Center for Energy Policy and Finance A joint center of the Stanford Law School and Graduate School of Business funded by Tom Steyer and Kat Taylor and launched in January 2011 •  Mission: To explore and advance innovative approaches to policy and finance that can accelerate the development and deployment of clean energy

•  Policy to set the stage for fundamental change in our energy system •  Finance to make things happen – from early stage R&D to the broad-scale deployment of clean energy technologies

•  Focus: From renewable energy to energy effciency to advanced fossil and nuclear technologies

•  Including new generating technologies, advanced manufacturing facilities, green buildings, and fuel-efficient vehicles

Research and develop public and private finance mechanisms to help raise capital to move clean energy technologies from pilot-scale to fully commercialized projects and products

•  Research “Valley of Death” problem and solutions •  Support creation of new public and private finance mechanisms •  Explore areas of cooperation and competition with China

Help shape and advance new laws and policies to advance clean generating technologies and dramatically expand energy efficiency in homes, office buildings, factories and cars

•  Federal R&D funding •  Clean Energy Deployment Administration •  National Clean Energy Standard •  Access to energy information •  Carbon price

Initial Projects: Some Examples

Fall 2011: New Course

“Cleantech: Business Fundamentals and Public Policy

Prof. Stefan Reichelstein Prof. Dan Reicher

“Where oil fields are really found, in the final analysis, is in the minds of men…”

W.E. Pratt, 1952

After all….