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Energy Secretary Ernest Moniz's Remarks on Climate Change and Resiliency at Columbia University, New York City – As Delivered

August 26, 2013 - 1:51pm


So today I'm going to say a few words, starting out with an area in which this region, this institution, and maybe all of you can -- can help provide some -- some leadership, unfortunately, a leadership opportunity that partly has its genesis in the tragedy of Hurricane Sandy, and we'll come back to some of the specifics there. 

We obviously saw the devastation of many of the region's critical infrastructures, energy infrastructures.  The effects on the energy infrastructures were amplified by the interdependencies of those infrastructures, such as electricity goes out, it turns out getting fuel was kind of tough.  And frankly, that's an example of something that was not fully appreciated until -- until the experience occurred. 

So, in that event, which is hard to remember, was less than a year ago, it seems a long time, the president certainly started a strong response with a kind of a "no red tape" edict that put the full force of the federal government behind the region's response.  Critical was strong collaboration with the states, the governors, and other leaders.  He put together a multi-agency task force, working together under the leadership of the HUD secretary, Shaun Donovan. 

And I think since that time, the administration has maintained its strong commitment to response, and what I want to come back to in the end is that that response certainly has a strong focus in terms of helping individual citizens rebuild their homes, their lives, et cetera, but something that we'll again come back to, a very important component, is that we have to help this rebuilding in a smart way, in a way that prepares the energy infrastructures not for the last storm, but for the next storm, for the next possible major disruptions.  And I think that's where there's a real chance for leadership here in the northeast corridor, as one starts that rebuilding from Sandy's impacts. 

Of course these extreme weather events obviously aren't unique to this part of the country, whether it's hurricanes in the gulf, in the Southeast, or the derecho that knocked out power for 5 million people, mid-Atlantic are just recent cases in point.  And in fact, in the last 10 years, we've been hit by 9 of the 10 most expensive hurricanes in our history, costing well north of $300 billion. 

So this idea of responding to increased resilience, I think, is critical, since these recent events unfortunately are likely harbingers of things to come, scenes that will likely be repeated, as carbon emissions from human activity threaten to alter the global climate, consistent with the longstanding expectations of the climate science community. 

Clearly, one, we understand that we cannot label a specific event to warming, but statistically, we also know that the pattern is unmistakably along the lines of those anticipated for quite some time. 

So today I'm going to talk about the president's climate action plan, what we're doing to prepare for a changing climate, how we are working to try to mitigate its effects.  And then after talking a little bit about that, I'll return to this issue of the infrastructure and the resilience that we need in building for a low-carbon future, but nevertheless a low-carbon future in which we have to expect we will be suffering some of the consequences of climate change. 

On my first day as secretary, I was quoted as saying -- and I would say that quote was accurate -- I'm not here to debate what's not debatable.  I mean, the evidence is overwhelming.  The science is clear, certainly clear for the level that one needs for policymaking, in terms of the real and urgent threat of climate change. 

I think the science community is inherently conservative in its statements about near-consensus positions, and it's instinctively open to questioning grounded in data and analysis.  And that's, of course, appropriate. 

But still the overwhelming conclusion certainly for the policy world is that prudence demands strong, common-sense, near-term policy actions to minimize the risks of global warming, and that's what the president's climate action plan does in the absence of legislative remedies.  

Last week, as we know, the draft findings of the most recent analysis by the U.N.'s IPCC, whether it was officially released or not, the -- it talked about, again, major, major issues coming up, including issues like three feet of sea-level rise in this century and a 95 percent probability that human activity is a principle driver of these issues. 

So, again, the empirical evidence clearly continues to mount. Rising temperatures, fires, droughts, more intense storms posing serious threats to our communities, but also to our energy infrastructure, with the case in point being the recent California declaration of a state of emergency for San Francisco, as forest fires over 100 miles away threatened the power lines that provided power to that city. 

So as most of you know, 84 percent of carbon emissions are energy-related.  Mother Nature seems to be returning the favor, exacting a climate-related toll on the health and reliability of our energy infrastructure. 

In July, DOE released a report detailing these impacts, and here is just a short list of the threats of climate to our energy infrastructure.  The Gulf of Mexico produces half of the U.S. crude and natural gas, contains nearly half the total U.S. refining capacity.  Rising sea levels, storm surges could cost these industries as much as $8 billion per year by 2013 in the projections. 

Power generation units are at risk of partial or full shutdowns, less water and higher temperatures.  Last summer, Braidwood nuclear plant in Illinois had to get special permission from the NRC to continue operating after the temperature of the water in its cooling pond rose to 102 degrees. 

Unconventional oil and gas production, increasingly vulnerable to decreasing water availability, at the same time that U.S. is relying more -- more and more heavily on these energy sources. 

And renewable energy is not exempt.  Hydropower, bioenergy, concentrating solar power all share similar vulnerabilities to water availability.  Electric grid carries less current, operates less efficiently when temperatures are higher.  Fuel transport by rail and barge, growing modes for moving unconventional energy, susceptible to interruption from storms and floods.  And as we have seen here along the Eastern Seaboard and in the Gulf of Mexico, energy infrastructures located along the coasts at risk from sea level rises, storm surges, and flooding. 

So in an effort to both mitigate and adapt to these and other climate-related impacts, on June 25th, President Obama laid out a broad plan to cut carbon emissions, increase the production of clean energy, and double down on energy efficiency.  Because the need to act is urgent, the president's Climate Action Plan utilizes the substantial authorities and resources of the executive branch, engaging all of its agencies in meeting this imperative. 

Again, the president expressed a continuing desire to work with Congress on legislative solutions, but in the meantime, we will focus on doing all that we can with current administrative authorities. 

I'm not going to go into detail in terms of all the specifics of the plan, but note that DOE does play a lead role in -- in a number of the actions called for and as a member of the interagency team and others.  Now, let me talk about a few of these. 

One is the need to improve and enhance opportunities for energy efficiency, which to my way of thinking is an absolutely essential element for any credible response to climate change, risk mitigation to the kinds of lowering of carbon emissions that we will need not just in this decade, but in the decades ahead. 

In fact, the first official event I attended after being confirmed as energy secretary, about two hours after I was sworn in, was an Alliance to Save Energy meeting.  I did so to underscore my commitment to energy efficiency as a way to achieve two critical objectives, a critical avenue for near-term reductions in carbon emissions, with compounded benefits over time, and a way to significantly reduce the energy bills of American consumers and businesses. 

This commitment included working with OMB to expedite agency review of a range of new appliance efficiency rules that were, in many cases, long overdue.  This more activist dialogue between DOE and OMB has produced a final rule for standby efficiency of microwave ovens and, two weeks ago, a proposed rule for metal-halide lamp fixtures. The microwave oven rule was the first to employ the updated social cost of carbon analysis developed by an interagency task force, estimating kind of a central value of $36 per ton of CO2, well within the spectrum of other analyses, perhaps even on the low end. 

We have published a schedule to put out more rules.  And I think this is kind of a new way of approaching between DOE and OMB.  And we're on track.  We said that we'd have two more rules issued this month, August.  And we're pretty much on track for commercial walk-in coolers and freezers and for commercial refrigeration.  We also committed to a very important proposed rule for electric motors this November, and we intend to finalize all four of these rules by May of 2014, even as we continue to work through a now-defined schedule for many, many more efficiency rules. 

Now, the efficiency savings for many individual rules may sound small, given the magnitude of the climate problem. Typically, it may be a few billion dollars and tens of megatons of carbon dioxide over 30 years.  But the cumulative impact is considerable, which is exactly why we need to stay on this course of putting through these technology-grounded efficiency rules for a whole range of appliances and the like. 

In fact, on an analogous point, I would raise a 2001 report from the National Academy of Sciences that examined DOE's fossil and energy efficiency portfolios in their first 20 years.  And it concluded that the 22 programs they analyzed, which cost about $13 billion total between '78 and 2001, yielded economic benefits of about $40 billion, so a substantial return on investment. 

But I think an interesting part of the story is the study attributed three-quarters of the benefits -- $30 billion -- to three efficiency programs that cost $11 million.  So even relatively small efficiency programs can, in fact, yield huge results, both in economic benefits and reductions in carbon emissions. 

So, again, we are going to be very, very strongly focused on advancing this energy efficiency agenda in multiple domains, and certainly with our responsibility for rule-making, I will assure you that we will maintain strong pressure in this direction. 

Another key provision of the president's climate plan directs EPA to issue rules for cutting carbon emissions for both new and existing power plants.  The power sector, the single largest source of CO2 emissions in the United States, and as such, this action has been applauded by many as the most significant step the president can take to reduce carbon emissions, absent legislative action. 

This directive has also been derided by some as an action that is tantamount to, quote, "war on coal."  I think the former is certainly true, that it is the most significant step the president can take right now with executive action and -- but the charges of war on coal, I'd argue, demonstrate misunderstanding or misstatement of what is being called the all-of-the-above approach to U.S. energy policy.

The reason is that, in the view of the administration, the way we are approaching this is we must reduce the CO2 emissions.  The president has a near-term target of 17 percent reduction from 2005, by 2020, and we're about halfway there.  But the idea is that all-of-the-above means we will invest in the technology, research, development, and demonstration so that all of our energy sources can be enabled as marketplace competitors in a low- carbon energy world.  That's what we mean by all-of-the-above. 

It doesn't start by taking CO2 emissions off the table.  It starts with CO2 reductions on the table and kind of a boundary condition, if you like, for going forward. 

But then, if you look at what are we doing about it, in terms of the fossil and energy sources, so in the president's Climate Action Plan, there was a directive to issue a solicitation for up to $8 billion dollars in loan guarantees for fossil energy projects that would reduce greenhouse gas emissions. 

There could be a whole bunch of them.  I mean, going back to my technology days, one of my favorites, for example, is something like chemical looping.  This is a new technology for utilizing coal in a way that, if successful, will dramatically reduce carbon capture costs.  That's just one example. We have advanced combined heat and power, very, very flexible, but saying come forward with good ideas to stretch the technology with fossil-based sources reducing CO2 emissions. 

Of course, the big one for coal in a low-carbon world has to be carbon capture and sequestration, possibly with utilization of the CO2.  And once again, to be blunt, there was a lot of talking the talk for many, many years, because the reality is to demonstrate at a large scale, which will be needed for large-scale sequestration and deep saline aquifers, for example, these are not -- these are not inexpensive projects.  They are big projects. 

So this administration is walking the talk, $6 billion in this administration put on the table for demonstrating these technologies at scale.  So this is what we mean.  We're committed to the low-carbon world, but we advanced the technology development for all of our sources to be competitive.  Obviously, renewables, which by definition is low-carbon, nuclear power, as well, I could discuss those later on.  But I just wanted to take head-on this issue that this is not a war on coal.  Quite the contrary, it is preparing the way for coal to have potentially a place in the low-carbon world that we believe is essential as we go forward. 

Now I'll take another one on that's been very popular, loan guarantee program.  And this tends to reflexively encourage use of the word Solyndra.  And obviously, no one likes a project to fail and to come on the taxpayers' tab. 

But since becoming secretary three months ago, I have had the opportunity to do an extensive review of the loan program.  And what I have found is that this program, first, is supporting a large and diverse $34.4 billion portfolio of more than 30 projects, including one of the world's largest wind farms, several of the world's largest solar-generation and thermal energy storage systems, first new commercial nuclear power plant in three decades, and more than a dozen new or retooled auto manufacturing plants across the country. 

And I might mention here, being in New York, that there are strong New York roots for this program.  Richard Kauffman played a key role in advising on this loan program.  And our relatively new director, Peter Davidson, is also coming from New York. 

Let me give an example of the program working the way it's supposed to.  Utility scale photovoltaic projects.  In 2009, 100 megawatts solar photovoltaic plants in this country were nonexistent, and commercial financing -- particularly debt financing -- was simply unavailable.  So using Recovery Act funds, the department's loan program office financed the first six utility-scale PV projects in the United States.  Since those investments were made, 10 new utility scale projects have been funded by the private investor community, precisely the outcome the president envisioned for this program.  So I think it just had to get a kick-start, and it's going. 

Another great example, Tesla Motors, you've probably been reading about.  The loan to Tesla of nearly $500 million in June 2009 that was originated, it was viewed as very risky, and that was the low point of the American auto industry.  It was the same month G.M. declared bankruptcy.  It was the lowest number of jobs in the auto industry that we had had in a long, long time.  And it was risky. 

But the portfolio was supposed to take some risks and push it ahead.  Now, of course, as we all know, Tesla is certainly looking today like a great success.  They repaid our loan nine years earlier than due.  They provided a prepayment premium for the taxpayer.  They have been called by Consumer Reports the best car they've tested, not the best electric vehicle they've tested, the best car they've tested. 

It's a little bit pricey for some of the people in this room, but it's a business model that is introducing this new technology. You probably also saw that it was essentially rated the safest vehicle tested recently.  And the architecture of it as an electric vehicle was part and parcel of its safety success. 

And then, in 2014, 3,000 jobs right now in California and, in 2014, starting an export business.  In fact, when I was in Paris about a month-and-a-half ago, the American ambassador said that he understood that there were 25,000 orders in Paris alone for the Tesla for next year. 

So, you know, I think this is what this program is about to do.  But of course, not every investment is going to succeed. And, frankly, I think you'd worry about the program if every one did. But the track record is quite remarkable.  The current and projected losses to the taxpayer on certain of the project investments, in our view, is very unlikely to exceed 10 percent of the loan loss reserve fund that Congress voted in, 2 percent of the overall portfolio and less than 10 percent of the loan loss reserve fund.  I think most Wall Street performers might be pretty pleased with that performance. 

So another key part -- and, of course, Department of Energy has been very engaged -- is driving down the cost of low-carbon solutions. And the department has been certainly at the forefront of the administration's attempts to stimulate the science and technology innovation required.  In this administration, new approaches to energy technology innovation have put in place, ARPA-E, Energy Frontier Research Centers, innovation hubs, so we are also innovating in how we stimulate innovation.  And I think that these are extremely promising programs. 

We've seen renewable energy generation from wind and solar double.  And we've seen what's very important -- the point I want to make is really critical reductions in the price of several clean-energy technologies.  And I'm going to take a moment just to look at those in a bit more detail. 

So that's for wind.  So what you're going to see are four slides, four different areas for technologies showing costs over time, the blue bars, and green, the deployment.  And the basic message in all cases is going to be dramatic cost reduction, dramatic deployment increases. 

This is wind.  Just since 2008, wind capacity has nearly tripled and was the fastest-growing source of capacity last year.  Forty-four percent of new generating capacity in 2012 was wind.  And as you can see, again, going back sometime, dramatic reductions to where one is talking about levelized costs of about 6 cents per kilowatt hour. 

Photovoltaics, PV modules, again, dramatic reduction.  This is only since 2008, deployment has increased by a factor of 10, and PV modules -- they cost about 1 percent of what they did 35 years ago, but more important -- and we can argue whether this a true cost or this is Chinese costs or whatever, but the fact is, modules -- PV modules available for about 80 cents a watt and a reminder, the longstanding Holy Grail has been about 50 cents a watt. I mean, this is tremendous progress.  In fact, now it's the soft costs that we have to work on more to get those down.  And, again, you see the cost in deployment. 

I'll pause here just to say that a harbinger of what is coming is when energy incumbents start to seriously re-examine their business models in the face of what's happening.  So many of you have seen today, for example, there are some -- shall we call them -- discussions are going on between the solar industry and utilities, for example, in terms of how are distributed PV systems paid for electricity back to the grid, how are things like distribution system costs shared, et cetera, et cetera. 

Well, you know, it was only a few years ago when nobody cared. But the message is, in all of these -- and I have two more to go through -- the future may not be always 10 years away, as I believe a lot of these technologies are beginning to establish their positions and certainly with policy actions on the climate front will only be helped further. 

Another example, LED lights.  Last five years, again, cost of super-efficient LEDs, fallen more than 85 percent, and sales -- this is a big surprise -- are taking off.  Today, we're up to about 20 million fixtures, and there are many attractions for the LED.  Of course, the problem is, let's say for your 60-watt incandescent light bulb equivalent, we're talking now about $20 for that fixture, 25,000 years of life, 25 times that of an incandescent bulb.  So other than having this upfront capital cost, the economics are clear, especially with using only 20 percent of the power. 

In fact, the estimate is the lifetime savings of that one 60-watt incandescent bulb replaced by the equivalent LED over its 25,000-hour lifetime are well north of $100, one bulb.  But you’ve got to make the $20 upfront investment. 

But this is coming.  And in fact, as an aside, I'll say, this does not even count the hidden costs of what you may need to do to replace the bulb 25 times, particularly if you have a hotel, let's say, lights way up.  You have the maintenance person, the ladders, et cetera, et cetera, coming in, the OSHA violations, who knows? 

There are also hidden savings which can be very, very substantial. 

And finally, for electric vehicles and batteries, again, this shows a factor of two reduction in the batteries, in just a relatively short time.  That can go back to our Tesla discussion, where the costs are becoming much more affordable, but the real message is that, if we come down another factor of four, we're getting into the range where electric vehicles of significant range and much more mass appeal become possible. 

And this deployment, the green curve, just to give you a reference point, I mean, we may be talking about 100,000 electric vehicles this year, much more than was predicted only a short time ago, and this rate of increase in the early stages is substantially greater than that we saw for hybrid vehicles.  These are inherently simpler vehicles, high-performance, et cetera. 

So that's just kind of a sampling of these kind of four different technology areas where I think there still is often a persistent idea that these are somehow decades away.  Well, I think a lot of energy incumbents are beginning to think in a different way. 

I'm going to switch to, then, a last topic, and that's going back now to how I started, when I discussed Sandy and climate preparedness.  Again, the president's Climate Action Plan basically reflected a major -- I would call -- step change in recognizing adaptation as one of the highest policy goals, while favoring mitigation, but recognizing that we cannot turn away from adaptation. 

We are now bringing a suite of technologies and policies to meet this challenge.  This morning, I was in New Jersey, in Secaucus, signing an MOU with Governor Christie and the New Jersey Transit Corporation.  What this is, I think, is a perfect model of rebuilding in ways that are going to be resilient to the future. 

The project, which will be designed by our Sandia National Laboratory -- but I should say, Sandia has already designed 25 microgrids for military installations, but now this will be adapting their tools to a civilian environment, a critical infrastructure environment, basically, the transit in the Northeast Corridor between Trenton and Newark, and at a much bigger scale.  We're talking about distributed generation assets within the microgrid clearly exceeding 50 megawatts. 

And the idea is, again, that this will take a key part of the infrastructure, including, by the way, from Manhattan.  That is an important evacuation corridor for Manhattan, if there's a major problem.  It will address resilience.  It will address economic benefits by providing what is, in effect, a smart grid. 

This is the way that the president put forward for us to be thinking about this resilience -- it's not just about building seawalls, as important as that may be, or about elevating structures close to the sea, but it's also about building smart as we readdress the infrastructure and use this as, perhaps, an opportunity to develop the 21st century infrastructure. 

I should say here in New York, my understanding is the sea level of New York Harbor is about a foot higher than it was a century ago, and so we begin to understand the sensitivity to all of these climate actions.  And we applaud New York for a number of the steps it's taken, including, by the way, establishing a green bank for -- for efficiency and clean-energy technologies. 

I would just add that we are also going to focus at DOE in these coming years on much more work with the states, because we believe this is a critical area for testing things out, for drawing upon the creativity that states and cities have been showing, in terms of energy and climate policy. 

So, finally, I'll just add that, when it comes to emergency response and this adaptation part of the agenda, the Department of Energy -- speaking now for our own responsibilities is head of what's called emergency support function 12, under the umbrella of FEMA, basically as the lead department for addressing energy infrastructure issues. 

We already operate the Northeast Heating Oil Reserve.  We operate the Strategic Petroleum Reserve.  On our nuclear weapons activity that David alluded to, we've had longstanding operational emergency response for nuclear incidents, for controlling nuclear weapons materials globally, but this is a new step out for us in terms of a major operational requirement in the civilian sector, if you like, working with all of our energy companies. 

And partly to do this, we have at the Department of Energy had a reorganization, looking at how our undersecretaries are deployed, basically assigning one of our three undersecretaries to focus on management and performance, so all of these operational questions we are looking to upgrade our focus on that. 

I should add that, in terms of the grid and resilience, of course, extreme weather is one issue, but in addition, things like cybersecurity are an increasing threat, one to which we are also devoting much, much more attention. 

I think, given the time, I'm going to pretty much end there.  I'd be happy to take questions on the Quadrennial Energy Review, for example, but I think the message is, I hope, clear.  One, our program in energy, the Department of Energy, is clearly directed by the president's Climate Action Plan.  That is our focus. 

To do so, we will upgrade our efficiency work.  We will continue to help drive down the costs of low carbon alternatives across the board, all of the above, as we support, also, the work of other agencies, like the EPA in addressing climate. 

But at the same time, as the president said, we have to acknowledge that we are seeing and will see more, frankly, of the impacts of climate, and so we must also look at how we develop our energy infrastructure for that future, an infrastructure that serves our economic goals, but also provides robustness and resilience against extreme weather events.