SAVE Roundtable:b ildi t i bl f tbuilding a sustainable energy future

Wednesday, April 28, 2010; 8:00 – 9:15 AM

Moderator:Joel Kurtzman, Senior Fellow and Executive Director of SAVE,

Milken InstituteSpeakers:

G. Chris Anderson, Founder and Partner, G.C. Anderson PartnersRoger Conway, Chief Economist, Growth Energy

Gary Dirks, Director, LightWorks, Arizona State UniversityJames McDermott, Managing Director, US Renewables Group

Since 2006, several big initiatives passed, but not one is in effectDomestic Energy Bills: Introduced, Passed, In Effect

Cli t Ch L i l ti I t d d P d I Eff t

For “Video Safe” slides, all information must be inside this box.

Climate Change Legislation Introduced Passed In Effect

California’s A.B. 32 (2006)

Waxman‐Markey, H.R. 2454 (June 26, 2009)

Kerry‐Boxer, S. 1733 (Sept. 30, 2009)

Cantwell‐Collins, S. 2877 (Dec. 11, 2009)

McCain‐Lieberman, S. 280 (Jan. 12, 2007), ( , )

Sanders‐Boxer, S. 309 (Jan. 16, 2007)

Olver‐Gilchrest, H.R. 620  (Jan. 22, 2007)

Copenhagen 15 (2009)

Copenhagen ended in non-binding pledges from the U.S. and China

“The United States has made a non-binding pledge to seek a 17 percent reduction in carbon emissions by 2020, from 2005 levels, mostly by switching to alternative energy, such as wind and solar power. But without legislation from

Source: Reuters

But without legislation from Congress, that goal is unlikely to be met.” --Reuters, March 11, 2010

Cap-and-trade worked for acid rain but looksdoubtful for carbon Anticipating “Business as usual”

Source: World Resources Institute

Skepticism about climate change is risingGallup Poll on the seriousness of global warming

“Americans cooling on climate change, survey says.” January 27, 2010

“More Americans say global warming exaggerated – poll.” March 11, 2010

Highest rates of skepticism since Gallup began to measure climate change sentiments

2006: Release of Al Gore’s “An Inconvenient Truth”

y g g gg p

Believers

Source: Gallup (chart), CNN, Reuters

Skeptics

Missteps by U.N. climate paneland University of East Anglia’s Climate Research Unit

Climategate: the final nail in the coffin of 'Anthropogenic Global Warming'?

“Conspiracy, collusion in exaggerating warming data, possibly illegal destruction of embarrassing information, organised resistance to disclosure, manipulation of data, private admissions of flaws in their public claims and much more ”admissions of flaws in their public claims and much more.

Inhofe: Climategate Shows There's No Global Warming ConsensusSources: Telegraph Media Group Limited, U.S. News & World Report

Uncertainty has led to a collapse of carbon prices in the U.S. …

CCX Carbon Financial Instruments (CFI) Daily Reports

Today$0.10

Source: Chicago Climate Exchange

…though prices have held steadier in a more policy-certain Europe

European public policies support a meaningfulsupport a meaningful carbon market. [Avg €13.30 in 2010]

Source: European Climate Exchange

Investment in clean energymay have plateaued…for now

Quarterly Financial Investment in Clean Energy 2004 to 2009

Source: New Energy Finance

U.S. government spending on clean energyhas increased but is likely to fall

Government spending on green energy (US$ Billions and % of total)

Source: New Energy Finance

China is the biggest governmentinvestor in green energy by far…

Green stimulus spendingUS$ Billions

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Breakdown of U.S. Green stimulus spending

Source: HSBC, 2009U.K.

. . . Even though US energy consumption is far greater

One Thing Leads to Another

Sources: CIA Factbook, IEA CO2 Emissions Report, WRI CAIT, IEA World Energy Statistics

What should the U.S. do?

Policymakers must act quickly to dispel the uncertainty if the U.S. is to maintain a lead.

So far, SAVE has investigated the following strategies

Greater use of biofuels Natural gas as a transition fuelWind power and a single government regulator for the gridSetting floor prices for oil to prevent excessive volatilityCreating residential conservation programs paid via property taxesCredit enhancement for large project investmentsCredit enhancement for large project investments

So far, SAVE has investigated the following strategies

Green banks to securitize biofuels project investmentsCoordination between government departments working on

renewable energyOpening up the gasoline distribution system to biofuels and natural

gasLonger-term tax credits for wind and solarA single sustainability standardA single sustainability standardGovernment help to solve Valley of Death problem

Why has the interest in biofuel grown?

• Energy– In 2008 world consuming 84 4 billion barrels of crude oil dailyIn 2008, world consuming 84.4 billion barrels of crude oil daily– Oil prices unsteady, and uncertainty raises demand for

alternatives• Climate

– Transportation contributes to 25% of carbon emissions– Biofuels can reduce this outputp

• Economic Development– Feedstock production and processing presents new source of

income– Export opportunities

Source: Harvard Kennedy School of Government Biofuels and Sustainable Development.

Biofuel mandates are ambitious

• European Union – 10% of vehicle fuel to be derived from renewable so rces b 2020sources by 2020

• United States – 9 billion gallons blended in 2008 (6% of vehicle fuel consumption) and 36 billion gallons of renewable fuel to be blended with gasoline by 2022 (26% of vehicle fuel if fuel consumption remains consistent)remains consistent)

Source: Harvard Kennedy School of Government Biofuels and Sustainable Development.

Planned incorporation of biofuels resultingfrom Europe’s Renewable Energy Roadmap

Source: European Commission. The impact of a minimum 10% obligation for biofuel use in the 10%p p gEU-27 in 2020 on agricultural markets. April 30, 2007.

bioethanol

10%by

2020

Federal government’s renewablefuel standard trajectory

Total renewable fuel requirementBillion gallons

10152025303540

g

05

Source: Energy Independence and Security Act of 2007.

Process from feedstock to market:Inputs and environmental effects

Source: Energy and Resources Group, UC Berkeley; Richard & Rhoda Goldman School of Public Policy, UC Berkeley Creating Markets for Green Biofuels.

Corn and oil are essential commoditiesPrices correlated, but for how long?

350US$

C

50

100

150

200

250

300

350 Corn ($/ton)

Oil 0

50 ($/barrel)

Biofuel issues

• Food versus fuel• Land use• Ecosystems damage• Market Concerns

– Barriers in the world market

• Incentives need to be well designed• Incentives need to be well designed• Infrastructure for biofuel transport needs development• Can biofuels complete against electric vehicles?

Source: Harvard Kennedy School of Government Biofuels and Sustainable Development.

A Perfect Storm for Biofuels…Demand Trends• Consumption

Supply Trends• Nationalization of p

outpacing discovery

• China & India

reserves• High oil prices• Peak production

Energy Security• Little domestic supply• Unrest in producing

regions

Environmental• Carbon emissions• Drilling/miningPressure to create a significant,

renewable, domestic source of liquid fuels

It’s the oil, not the ethanol

Sources: NYMEX, USDA, RFA

Volume of US ethanol production

400,000500,000600,000700,000800,000900,000

Oct-07

Dec-07

Feb-08

Apr-08

Jun-0

8Aug

-08Oct-

081,00

0 of

US

gallo

ns

Higher commodity prices (like corn) are driven by OIL prices, not ethanol production volumes!

Why Do Corn Prices Track Oil?

Crude Oil Price (NYMEX)January 2007 to October 2008

Corn Price (CBOT)January 2007 to October 2008

Starch Ethanol Gasoline Oil

Biofuel feedstocks are fungible into transportation fuelsTraders recognize this and in a free market system will price the feedstock accordingly

Biofuels Interagency Working Group

On May 5, 2009, President Obama signed the directive establishing a new working group to be chaired by theestablishing a new working group to be chaired by the Secretaries of Energy and Agriculture and the Administrator of the EPA.

The group will work with the National Biomass Research and Development Board on:

• Creating a biofuel market development program to boost next-generation biofuels, increase use of flex-fuel vehicles, and assist retail market development

• Coordinating infrastructure policies

Finally

Not one new piece of technology needs to be developed

to SAVE the planet

SAVE RoundtableBuilding a Sustainable Energy

FutureFutureGary DirksDirector, LightWorks

28

Milken Institute Global ConferenceApril 28 , 2010

“The world’s energy system is at a crossroads. Current global d i l d i l i bl

a global challenge

trends in energy supply and consumption are patently unsustainable -- environmentally, economically or socially.”

IEA World Energy Outlook 2008

29

• Primary demand grows by 1.5%

2009 reference scenario

• 40% absolute increase• Developing Asia and Middle East• $26 Trillion dollars real (2008)

– Over 50% for power– Over 50% in developing countries

• 1000 ppm CO2

IEA World Energy Outlook 2009 2007 - 2030

• securityreliable

energy systemchallenges

– reliable– ample– affordable

• climate– Carbon Dioxide in the atmosphere

energy production system evolved over 100s of years

energy production

energy production system evolved over 100s of years.– technical innovation – public support and intervention– massive public and private investment

production and consumption co evolve

energy ecosystem

production and consumption co-evolve

– wells, plants, lines, pipes, cars, roads, appliances, suburbia one system– minimize cost - maximize security, reliability and convenience– like nature – diverse competitive, adaptive, resilient to externalities sensed

and priced

• security and climate threat are:

vulnerabilities

• security and climate threat are:– hard to perceive the nature of the threat– difficult to price risk

• system powerless to respond

• current system is hostile to point interventions; it will fight back.

intervention

• even disruptive technologies can’t compete when they first appear. – risky to rely on finding them

• evolve to minimize new investment and avoid large scale social disruptions.

• integrate technical and policy

ecosystem response

integrate technical and policy• focus on packages of technology• catalytic policy interventions

– catalyze what is too costly or too risky– frameworks not winners

• support research for integration toolssupport research for integration tools– better models

• global market for clean tech

third driver emerges

– green energy – energy efficiency, – “cradle to cradle” designs.– carbon management (CCS, credits)

• national imperative - a basis for growthUS Chi G UK J S K– US, China, Germany, UK, Japan, S. Korea

– large national investment - China