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Federal Energy Research and Development for the Challenges of the 21st Century: The 1997 PCAST Study and its Relevance to Provisions of S.597:


July 18, 2001

Author: John P. Holdren, Former Director and Faculty Chair, Science, Technology and Public Policy Program

Belfer Center Programs or Projects: Environment and Natural Resources; Science, Technology, and Public Policy; Energy Technology Innovation Policy


Written Testimony

Holdren testimony for Senate Committee on Energy and Natural Resources  18 July 2001 C page 15




JULY 18, 2001

I am John P. Holdren, a professor at Harvard in both the Kennedy School of Government and the Department of Earth and Planetary Sciences. Since 1996 I have directed the Kennedy School's Program on Science, Technology, and Public Policy, and for 23 years before that I co-led the interdisciplinary graduate program in Energy and Resources at the University of California, Berkeley. Also germane to today's topic, I was a member of President Clinton's Committee of Advisors on Science and Technology (PCAST) and served as chairman of the 1995 PCAST study of The U.S. Program of Fusion Energy Research and Development, the 1997 PCAST study of Federal Energy Research and Development for the Challenges of the 21st Century, and the 1999 PCAST study of Powerful Partnerships: The Federal Role in International Cooperation on Energy Research, Development, Demonstration, and Deployment. A more complete biographical sketch is appended to this statement.

My work at Harvard on energy R&D policy over the past five years has been funded, at various times, by the U.S. Department of Energy, the Energy Foundation, the Heinz Family Foundation, the MacArthur Foundation, the Packard Foundation, and the Winslow Foundation. The opinions I will offer here are my own and not necessarily those of these funders or of the other organizations with which I am or have been associated. My statement draws in part on testimonies on energy policy that I presented to other Congressional hearings earlier this year and last year (1-3) and on a review of the PCAST energy studies and their impact that I wrote with a colleague for publication in Annual Review of Energy and the Environment this fall (4). I am grateful indeed for the opportunity to testify this morning before the Senate Committee on Energy and Natural Resources, at this timely and important hearing.

The scope of this morning's hearing is very broad, covering proposals related to Aenergy and scientific research, development, technology deployment, education, and training in portions of eight Senate bills (S.388, S.597, S.472, S.90, S.193, S.242, S.259, and S. 636). I will focus my comments more narrowly, confining myself mainly to the energy R&D sections of S.597 and the relation of those provisions to the recommendations of the energy R&D studies that I chaired for PCAST. The 1997 PCAST report (5), in particular, is so central to my observations here that I ask that its Executive Summary be included in the hearing record as an appendix to my statement.

That study was a comprehensive review of U.S. federal energy research and development, examining the recent history of public and private energy R&D, the rationales for public involvement in this activity, and the existing energy R&D programs of the Department of Energy, and offering recommendations on the focus and budgets of these programs for the five Fiscal Years 1999-2003. The study was carried out by a panel of 21 senior individuals from industry, academia, and public-interest organizations. In addition to members with experience and expertise across the full range of energy options - fossil fuels, nuclear fission and fusion, renewable energy sources, and increased end-use efficiency - it included others of senior research, management, and policy-advising experience outside the energy field (including a former chair of the Council of Economic Advisors and a former CEO of Hewlett-Packard), who held no prior brief for increasing federal energy research. In what follows, I first summarize the key findings of the PCAST panel and then turn briefly to the related content of S.597.

U.S. Energy R&D through FY1997

In the FY1997 base year for the PCAST study, Federal budget authority for applied energy-technology R&D - that is, R&D focused specifically on developing or improving technologies for harnessing fossil fuels, nuclear fission, nuclear fusion, renewable energy sources, and increased efficiency of energy end use - totaled about $1.3 billion. Correcting for inflation, this was precisely what the country had been spending for applied energy-technology R&D thirty years earlier, in FY1967, when real GNP was 2.5 times smaller and the reasons for concern about the adequacy of the nation's energy options were far less manifest (5, p 2-8). Federal applied energy-technology R&D ramped up sharply after the Arab-OPEC oil embargo of 1973-74, reaching a peak of over 6 billion 1997 dollars per year in FY1978 in the process of adding sizable investments in advanced fossil-fuel technologies, renewables, and end-use efficiency to the fission- and fusion-dominated portfolio of the 1960s. After Ronald Reagan assumed the Presidency in 1981, however, with his view that any energy R&D worth doing would be done by the private sector, applied energy-technology R&D spending fell 3-fold in the space of 6 years. A Clean Coal Technology Program that was a joint venture of government and industry brought a brief and modest resurgence from 1988 to 1994, but thereafter the overall decline continued. Similar declines in government-funded energy R&D were also being experienced in most other industrial nations: the relevant expenditures fell sharply between 1985 and 1995 in all of the other G-7 countries except Japan. Japan's governmental energy R&D budget in 1995 was nearly $5 billion, in an economy only half the size of that of the United States. (Nearly $4 billion of the Japanese total was concentrated in nuclear fission and fusion, however, a pattern similar to that in the United States in the early 1970s.)

Private-sector energy R&D in the United States had been estimated by a 1995 Secretary of Energy Advisory Board study (6) at about $2.5 billion per year at that time. Complete and consistent R&D figures for the private sector are difficult to assemble, but it appears that these expenditures had, like those of the Federal government, been shrinking for some time: the Department of Energy estimated that U.S. industry investments in energy R&D in 1993 were $3.9 billion (1997 dollars), down 33 percent in real terms from 1983's level; a study at Battelle Pacific Northwest Laboratory showed U.S. private-sector energy R&D falling from $4.4 billion (1997 dollars) in 1985 to $2.6 billion in 1994, representing a drop of about 40 percent in this period. Combined public and private investments in applied energy-technology R&D in the mid-1990s, at under $5 billion per year, amounted to less than one percent of the nation's expenditures on fuels and electricity. This meant that the energy business was one of the least research-intensive enterprises in the country measured as the percent of sales expended on R&D. Average industrial R&D expenditures for the whole U.S. economy in 1994 were about 3.5 percent of sales; for software the figure was about 14 percent, for pharmaceuticals about 12 percent, and for semiconductors about 8 percent.

Why had energy R&D investments in the United States fallen so low? On the private-sector side, R&D incentives had been reduced by the rapid fall, since 1981, of the real prices of oil and natural gas (together constituting over 60 percent of U.S. energy supply) and by energy-sector restructuring (resulting in increased pressure on the short-term "bottom line", to the detriment of R&D investments with long time horizons and uncertain returns). Perennial factors limiting energy-industry R&D include the low profit margins that often characterize energy markets, the great difficulty and long time scales associated with developing new energy options and driving down their costs to the point of competitiveness, and the circumstance that much of the incentive for developing new energy technologies lies in externality and public-goods issues (e.g., air pollution, overdependence on oil imports, climate change) not immediately reflected in the balance sheets of energy sellers and buyers.

As for the government side of low propensity to invest in energy R&D, the "let the market do it" philosophy of the Reagan years was certainly important in the steep declines from FY1981 through FY1987. It was augmented by the bad taste left in taxpayers' and policy-makers' mouths by the ill-fated government forays of the late 1970s into very-large-scale energy development and commercialization ventures (notably the Synfuels Corporation and the Clinch River breeder reactor); by the overall Federal budget stringency characterizing the first Clinton term; by Congressional concerns about the effectiveness of DOE management; and by lack of voter interest, in the absence of gasoline lines or soaring energy bills or rolling blackouts, in energy policy.

There was, finally, the Aeat your siblings character of energy-supply constituencies: the tendency of advocates of each class of energy options (e.g., nuclear fission, fossil fuels, renewables, energy end-use efficiency) to disparage the prospects of the other options - a tendency aggravated by the zero- or declining-sum-game characteristics of energy R&D funding in this period . In the grip of this syndrome, segments of the energy community itself formulated the arguments (renewables are too costly, fossil fuels are too dirty, nuclear fission is too unforgiving, fusion will never work, efficiency means belt-tightening and sacrifice or is too much work for consumers) that were used by various factions in the government to cut energy R&D programs one at a time. There was no coherent energy-community chorus calling for a responsible portfolio approach to energy R&D that seeks to address and ameliorate the shortcomings of all of the options.

While investments in energy R&D had been falling, however, concerns about the future adequacy of the country's portfolio of energy options had been growing. Imports as a fraction of U.S. oil consumption, which had fallen from a high of 49% in 1977 to just 29% in 1985, had risen again to 51% by 1996 The rate of decline of energy intensity of the U.S. economy, which had averaged 2.8 percent per year from 1973 to 1986, had averaged only 0.9 percent per year between 1986 and 1996. The 1995 Second Assessment Report of the Intergovernmental Panel on Climate Change (IPCC) had concluded that "the balance of evidence suggests a discernible human influence on global climate" and that "climate change is likely to have wide-ranging and mostly adverse impacts on human health" as well as "negative impacts on energy, industry, and transportation infrastructure; human settlements; the property insurance industry; tourism; and cultural systems and values." The United States, one of 170 nations to sign and ratify the United Nations Framework Convention on Climate Change in the early 1990s, had pledged along with other industrial-nation signers to hold its year-2000 greenhouse-gas emissions to 1990 levels; but by 1996 U.S. emissions of carbon dioxide, the most important anthropogenic greenhouse gas, were 9% above 1990 levels and rising. These were among the factors that led to the President's request for the 1997 PCAST study.

Rationale for Federal Energy R&D

The panel's report began with an overview of the energy-linked economic, environmental, and national-security challenges faced by the United States as it moves into the 21st century, noting that (5, p ES-1)

Our economic well-being depends on reliable affordable supplies of energy. Our environmental well-being from improving urban air quality to abating the risk of global warming requires a mix of energy sources that emits less carbon dioxide and other pollutants than today's mix does. Our national security requires secure supplies of oil or alternatives to it, as well as prevention of nuclear proliferation. And for reasons of economy, environment, security, and stature as a world power alike, the United States must maintain its leadership in the science and technology of energy supply and use.

The report also noted at the outset that U.S. interests in energy are closely coupled to what is happening in the rest of the world, above all in developing countries. The panel wrote (5, p ES-1)

The combination of population growth and economic development in Asia, Africa, and Latin America is driving a rapid expansion of world energy use, which is beginning to augment significantly the worldwide emissions of carbon dioxide from fossil fuel combustion, increasing pressures on world oil supplies, and exacerbating nuclear proliferation concerns. Means must be found to meet the economic aspirations and associated energy needs of all the world's people while protecting the environment and preserving peace, stability, and opportunity.

In addressing the rationale for federal government involvement in energy-technology innovation to help address these challenges, the panel stressed the large "public benefits" dimension of energy issues - the point that the interests of society as a whole in environmental quality, reliability of energy supply (in both its economic and national-security dimensions), meeting the basic energy needs of society's poorest members, and providing a sustainable energy basis for economic development considerably exceed the interests of private firms in these outcomes, as reflected in the returns they can expect to gain from investments in energy R&D. The panel also noted that a number of trends within energy industries themselves - such as deregulation, energy-sector and corporate restructuring, and increasing competitive pressures on the short-term "bottom line" - were evidently combining to reduce private-sector investment in energy R&D, above all those components of energy R&D entailing substantial risks or long time horizons.

Notwithstanding the force of these arguments, the panel recognized that the private sector has the dominant role in bringing advanced energy technologies into widespread use, that this will be even more true in the future than it has been in the past, and that, therefore, it is essential to shape the government's efforts in energy-technology innovation to complement and utilize the strengths of the private sector, not in any sense to replace them. The panel wrote, in this vein, that projects in the federal energy R&D portfolio (5, pp 7-1/2)

should be shaped, wherever possible, to enable relatively modest government investments to effectively complement, leverage, or catalyze work in the private sector. Where practical, projects should be conducted by industry/national-laboratory/university partnerships to ensure that the R&D is appropriately targeted and market relevant, and that it has a potential commercialization path to ensure that the benefits of the public R&D investment are realized in commercial products.

Although it had not been asked to address the possibility of government efforts extending beyond R&D in the direction of commercialization of advanced energy technologies, the panel offered an argument that the same public-benefits rationale supporting government involvement in energy R&D, combined with the existence of a variety of barriers to private-sector commercialization of some of the advanced energy technologies offering very large public benefits, does justify a degree of government engagement in promoting commercialization in particular circumstances. It wrote (5, p ES-28)

After consideration of the market circumstances and public benefits associated with the energy-technology options for which we have recommended increased R&D, the panel recommends that the nation adopt a commercialization strategy in specific areas complementing its public investments in R&D. This strategy should be designed to reduce the prices of the targeted technologies to competitive levels, and it should be limited in cost and duration.

The panel did not, however, propose either a magnitude or a source of funds for such a commercialization initiative, considering this too far beyond its mandate.

PCAST Budgetary and Programmatic Recommendations

From its detailed review of the then-existing portfolio of applied energy-technology R&D in DOE, in the context of the rationales for government involvement as just described, the PCAST panel concluded that these programs have been well focused and effective within the limits of available funding but that they Aare not commensurate in scope and scale with the energy challenges and opportunities the twenty-first century will present. It noted that "[t]his judgment takes into account the contributions to energy R&D that can reasonably be expected to be made by the private sector under market conditions similar to today's," and it argued that Athe inadequacy of current energy R&D is especially acute in relation to the challenge of responding prudently and cost-effectively to the risk of global climate change from society's greenhouse-gas emissions (5, p ES-1). It recommended ramping up DOE's applied energy-technology R&D spending from the $1.3 billion level of the FY1997 appropriation (and from the $1.4 billion level of the FY1998 request, not yet acted upon by Congress at the time the report was written) to to $2.1 billion in FY2003 (expressed in constant 1997 dollars). The following table shows the distribution of the proposed increases.

Table 1. PCAST-Recommended DOE Budget Authority for Energy-Technology R&D
(millions of constant 1997 dollars)

FY1997 actual

FY2003 proposed

FY2003 increment over FY1997

share of FY1997-2003 increment

share of FY2003 total









These budget recommendations were unanimous, notwithstanding the diversity of energy (and nonenergy) backgrounds represented on the panel and notwithstanding the history of disagreements among the different energy constituencies about funding priorities. The unanimity on the panel emerged from detailed joint review and discussion of the content of the existing programs, the magnitudes of unaddressed needs and opportunities, the current and likely future role of private industry in each sector, and the size of the public benefits associated with the advances that R&D could bring about. Efficiency and renewables received the great bulk of the increment - and increased their share of the total from 50% in FY1997 to almost 64% in the FY2003 recommendation - because they scored high on potential public benefits and on R&D needs and opportunities unlikely to be fully addressed by the private sector.

Among the key findings and recommendations about the main classes of energy technologies were the following.

Energy End-Use Efficiency

The Panel found particular promise in enhancements to energy-efficiency R&D, which it found could bring relatively rapid and cost-effective reductions in local air pollution and greenhouse-gas emissions, oil imports, and energy costs for households and businesses. From 1975-1986, the panel noted, U.S. energy efficiency increased by almost one-third (measured as the ratio of real GNP to primary energy use); if the energy-intensity of the economy had remained constant from 1970 to 1997, by contrast, U.S. energy expenditures in 1997 would have been some $150-200 billion per year greater than they actually were. The improvements in energy efficiency that were achieved helped pull the U.S. economy out of the stagflation that followed the oil-price shocks of the 1970s, helped set the stage for sharply declining world oil prices, and gave the U.S. economy more than a decade and a half of opportunity to deal with the energy problem (an opportunity that, regrettably, went largely unused). The panel found that investments in advanced energy-efficiency technologies - beyond those likely to be brought forth by the marketplace - offered the potential for further large gains in the future and recommended that the DOE's budget for energy-efficiency R&D be doubled in constant dollars from the 1997 actual level of $373 million for R&D to $755 million in 2003 (which would be about $880 million in as-spent dollars, given inflation at the projected rates).2

The panel proposed a number of specific goals for efficiency-improvement efforts in the various end-use sectors, including:

• development of the technologies for, and facilitating the construction by 2010 of, 1 million zero-net-energy buildings, and achievement in all new buildings of an average 25-percent increase in energy efficiency as compared to new buildings in 1996;
• development, with industry, of a 40-percent efficient microturbine by 2005 and a 50-percent efficient microturbine by 2010, initiation of new Industries of the Future programs in agriculture and bio-based renewable products, and reduction of the energy intensity of the major energy-consuming industries - forest products, steel, aluminum, metal casting, chemicals, petroleum refining, glass - by one-fourth by 2010;
• cooperation with industry to achieve the goal, previously established under the Partnership for a New Generation of Vehicles, of developing an 80-mile-per-gallon production prototype passenger car by 2004, as well as working with industry to develop a production prototype of a 100-mpg passenger car with zero equivalent emissions by 2010, high efficiency (tripled fuel economy) Class 1-2 trucks and (doubled fuel economy) Class 3-6 trucks by 2010, and a high efficiency (10 mpg) heavy truck (Class 7 and 8) by 2005.

The panel concluded that, overall, "DOE research, complemented by sound policy, can help the country increase energy efficiency by a third or more in the next 15 to 20 years.

Fossil Energy Technology

Fossil fuels supply more than three-quarters of primary energy worldwide and 85 percent of primary energy in the United States. These percentages account for the estimated contributions, often left out of official tabulations, from the "traditional" biomass energy sources (fuelwood, charcoal, crop wastes, and dung). Without these, the fossil-fuel percentage contributions would appear even larger and they will remain a mainstay of energy supply for many decades to come. Recognizing the very large size of the private sector's fossil-energy activities, including R&D, the panel emphasized restructuring DOE's fossil-energy program towards activities with a higher public return. It recommended the phase-out of R&D on near-term coal power technologies, because there was relatively less public benefit to be expected from furthering this work than was the case for longer-term coal-technology programs underway in the Department, notably Vision-21 (28), and because the market potential of these technologies was very limited given the significantly lower cost of advanced gas turbine cycles fueled by natural gas.4 The Panel did not recommend cuts in R&D on pollution control technologies for current or near-term coal power systems, however. Similarly, direct coal liquefaction was recommended for termination, on the grounds that it was not likely to be cost-effective in the foreseeable future, would significantly increase emissions of carbon dioxide, and offered no synergies with other technologies under development, in contrast to indirect coal liquefaction, which uses gasification technologies that are also relevant to advanced power generation and other programs. The panel recommended increased support, in the fossil-fuel sector, for DOE's advanced power, carbon sequestration, fuel cell, hydrogen, and advanced oil and gas production programs, as these could increase the country's leverage against the greenhouse-gas/climate-change and oil- import problems, among others. The initiation of research on methane hydrates was also recommended, both to better evaluate the resource and to determine if it could be tapped in the longer term to supplement conventional gas resources as a bridging fuel to low- or no-carbon energy systems. Continued support for advanced technologies for the low-cost recovery of oil and gas from lower margin resources was also recommended. Such programs have long been targets of government-spending critics concerned with corporate welfare; but the panel's review found that those benefitting were small companies with little ability to conduct research, that advanced approaches helped maintain domestic production, and that to close these wells without such recovery would effectively foreclose further production from them permanently.

The panel's review of fossil-energy issues also clarified and highlighted the importance, for U.S. fossil-energy-technology R&D strategy, of international markets for these technologies. In the U.S. electric-power sector, most new capacity in recent years has been in the form of natural-gas-fired gas-turbine combined cycles, and this is likely to remain the case until natural gas prices experience sustained increases to levels that seem improbable in this country for some time to come. That would mean that the major markets for advanced coal-power technology will be outside the United States in the decades immediately ahead, above all in coal-intensive developing countries such as China and India where natural gas is in very limited supply. For the United States to maintain leadership in these technologies, they will need to be developed in forms suitable for those markets and U.S. companies will need to learn to operate successfully there. Altogether, the changes recommended by the panel would have resulted in DOE's fossil-energy R&D budgets staying roughly level in constant dollars from FY1997 through FY2003.

Nuclear Energy

Energy from nuclear fission supplies about 17 percent of world electricity and 20 percent of that of the United States. But concerns about nuclear energy's cost, accident risks, radioactive-waste burdens, and potential links to nuclear proliferation have clouded its future. No new reactors have been ordered in the United States since 1978. Federal expenditures on R&D in fission energy, once as high as $2 billion per year in 1997 dollars, had fallen by FY1997 to just $40 million (and dropped to $7 million in FY1998). The panel concluded, however, that the potential role of an expanded contribution from nuclear energy in helping to address global carbon dioxide emissions justified a modest Nuclear Energy Research Initiative (NERI) to determine whether and how improved fission technologies might be able to address cost, safety, waste, and proliferation concerns. Whether or not such work led to a possibility of expanding nuclear energy's contribution in the United States, it would be useful in helping to maintain positive U.S. influence over the safety and proliferation resistance of nuclear-energy activities in other countries.

The panel recommended, accordingly, that DOE funding for nuclear fission should increase in constant dollars from $42 million in FY1997 to $102 million in FY2003 ($119 million in as-spent dollars in 2003). In addition to NERI, a small part of this funding, $10 million per year, to be matched by industry, would be used to investigate problems that otherwise might prevent the safe extension of the operating life of existing reactors. The NERI effort, in contrast to previous research efforts in DOE's Nuclear Energy Program, would be organized as a competitive solicitation for investigator-initiated R&D focused on the indicated key issues affecting fission's future.

In the case of fusion energy, the panel endorsed the overall findings of the 1995 PCAST study of fusion R&D (7) and recommended that DOE funding for fusion be increased from $232 million in FY1997 to $281 million in 2003 in constant dollars ($328 million in FY2003 in as-spent dollars). The Panel affirmed that the guiding principles for the U.S. fusion program should be maintaining a strong domestic base in plasma science and fusion technology; collaborating internationally on an experimental program for the next steps in ignition and moderately sustained burn, and participating in international efforts to develop practical low-activation materials for fusion energy systems.

Renewables Energy

Few people disagree with the premise of renewable energy, tapping natural flows of energy from the sun, wind, and other sources to produce environmentally clean, non-depletable energy for people's use; the problem has been the high cost of successfully capturing these diffuse flows of energy and converting them to the needed end-use forms. Over the past two decades, however, remarkable progress has been made. The cost of energy from technologies such as photovoltaics and wind turbines has dropped as much as ten times. Based on the outstanding progress that has been made, the high potential of renewable-energy technologies in every sector of the energy economy (electricity, fuels, and heat for buildings, industry, and transportation), and the high public benefits of achieving such contributions, the Panel recommended that funding for DOE's renewable-energy programs should be increased from $270 million in FY1997 to $559 million in FY2003 in constant dollars ($652 million in FY2003 in as-spent dollars).

Other Recommendations

Besides the recommendations just summarized for the applied-energy-technology sectors in DOE's portfolio, the panel made a number of recommendations that cut across those sectors. In addition to the recommendation about commercialization strategy, mentioned above, these included:

• increased coordination between DOE's Basic Energy Sciences (BES) program and its applied-energy-technology programs;e5 The PCAST-97 study did not review the content of the BES program, but it did recommend, in light of the close coupling between advances in BES and progress in the applied-energy-technology R&D, that DOE consider expanding its BES effort in parallel with the recommended increase in applied-energy-technology work and the proposed increase in coordination (5, p ES-2).
• more systematic efforts within DOE at integrated assessment of its entire energy R&D portfolio "in a way that facilitates comparisons and the development of appropriate portfolio balance, in light of the challenges facing energy R&D and in light of the nature of private sector and international efforts and the interaction of U.S. government R&D with them" (5, p ES-6);
• other improvements in DOE's management of its energy R&D portfolio, including that overall responsibility for that portfolio be assigned to a single person reporting directly to the Secretary of Energy and that increased use be made of industry/national-laboratory/university advisory and peer-review committees, while reducing internal process-oriented reviews.

The panel also recommended strongly that increased attention be devoted to the opportunities for strengthening international cooperation on energy-technology innovation, a recommendation that became the basis for a subsequent PCAST study with this focus (8).

Federal Energy R&D Since the PCAST Report

Table 2 shows the distribution, across the energy sectors, of PCAST's recommended budgets for FY1999-2003, Administration requests for FY1999-2002, and Congressional appropriations for FY1999-2001, along with the appropriations from FY1998. These figures show that the requests and appropriations rose, through 2001, in a pattern similar to that recommended by PCAST, but at a slower pace and with a particularly conspicuous shortfall in the renewable category. Notable instances of progress (or the lack of it), through the FY2001 budget year, on issues addressed by the 1997 PCAST report include the following:

End-Use Efficiency

The administration launched in 1998 the Partnership for Advancing Technology in Housing, based in part on discussions with industry begun in 1994, which aims, with strong private-sector participation, to achieve an average 50-percent increase in energy efficiency in new homes by 2010. In concert with industry, DOE launched an Industries of the Future program for agriculture, building on DOE's success using this model in other industries. The Partnership for a New Generation of Vehicles (PNGV), which predated the PCAST report, has continued on track, the major participating automobile companies all demonstrated prototype vehicles in early 2000, but a PNGV-2 focused on longer-term options such as fuel cells has not been initiated. The Twenty-First Century Truck initiative was launched in Spring 2000, with goals of doubling to tripling the fuel economy of trucks on a ton-mile basis. Activities in microturbines, fuel cells, and Combined Heat and Power have been strengthened.

Fossil Fuels

The direct-coal-liquefaction program has been phased out and near-term clean-coal power-technology R&D has been reduced. The Vision-21 program, which predated PCAST-97, to develop cost competitive coal-fired power plants with low or no carbon or polluting emissions has been strengthened. Geological carbon sequestration and methane hydrate R&D programs have been launched.


Administration requests at $243 million and Congressional appropriations at $255 million for FY2001 have started to move in the direction of, but still fall short of, the PCAST recommendation of $290 million (as spent dollars) for fusion energy in FY2001.

Table 2. Federal Energy Technology R&D: Congressional Appropriations, Administration Requests, and PCAST Recommendations FY1998-2003 (millions of as-spent-$)

effic renew foss fiss fusn total

FY98 appropriation 437 272 356 7 223 1295

FY99 appropriation 503 336 384 30 222 1475
Admin request 598 372 383 44 228 1625
PCAST reccmdtn 615 475 379 66 250 1785

FY00 appropriation 552 310 404 40 250 1559
Admin request 615 398 364 41 222 1640
PCAST reccmdtn 690 585 406 86 270 2037

FY01 appropriation 600 375 433 59 255 1722
Admin request 630 410 376 52 247 1715
PCAST reccmdtn 770 620 433 101 290 2214

FY02 Admin request 475 237 333 39 255 1339
PCAST reccmdtn 820 636 437 116 320 2329

FY03 PCAST reccmdtn 880 652 433 119 328 2412

Notes: The values listed here may vary from other tabulations due to rescissions, uncosted obligations, inclusion or exclusion of other budget lines, and other factors. The efficiency line listed here does not include state and local grants, or the Federal Energy Management Program. The nuclear fission line includes only direct civilian energy-related R&D and University training support. The fossil energy line does not include expenditures for the clean coal program, which is a demonstration rather than a research and development effort.

Nuclear Fission

The Administration launched and Congress funded both the Nuclear Energy Plant Optimization program (addressing issues related to license extension) and the Nuclear Energy Research Initiative (addressing the longer-term issues that will shape fission's future). These two initiatives form the basis of the current DOE Nuclear Energy program.


Administration budget requests and program direction have largely aligned with PCAST recommendations, but at lower funding levels, and appropriations have been well below the requests (even falling from FY1999 to FY2000 before recovering somewhat in FY2001). With strong bipartisan support, President Clinton issued Executive Order 13134 which launched an integrated bioproduct, biofuel, and biopower program with a goal of tripling U.S. bioenergy use by 2010. Congress passed and the President signed the Agricultural Risk Protection Act of 2000, Title III of which codified an integrated bioproduct and bioenergy research program. Principal focuses of increased renewables funding other than for biomass were for photovoltaics and advanced wind systems.

Cross-Cutting Issues

Since the PCAST study, DOE has undertaken a major effort in integrated analysis of the Department's entire energy R&D portfolio, which reaffirmed the overall direction of the program while highlighting some key gaps, including energy-system reliability and international cooperation on energy-technology innovation. DOE has also made considerable effort at, and progress in, addressing its management challenges, which were pointed out not only in the 1997 report but also in the 1995 SEAB study (6) and a 1999 review by the National Academy of Public Administrators. The critical question raised by PCAST about a role for government in the commercialization of high-public-benefit energy technologies, moreover, has not yet been addressed by the Department or, more importantly, by Congress.

As indicated in Table 2, the Bush Administration's FY2002 budget request for applied energy-technology R&D, totaling about $1.3 billion, proposed a large step backward, one that would return the country to essentially the FY1997-1998 spending levels. This proposal is completely inconsistent with the Administration's recent statements about the importance it attaches to energy issues and to the role of technological innovation in addressing them (although, in fairness, it must be said that the FY2002 budget request had to be submitted before Vice President Cheney's energy task force had completed its work). In any case, I hope that Congress's appropriation for FY2002 will ignore the numbers in the Administration's request and substantially boost energy R&D spending toward the trajectory recommended by PCAST in 1997. This brings me to the bills under consideration in today's hearing particularly S.597, to which I now turn.

Energy R&D Provisions of S.597

The essence of the procedure used to develop the budget recommendations for applied energy-technology R&D in Title XIV of Division E of S.597 (the Comprehensive and Balanced National Energy Policy Act) was, as I understand it, to shift to FY2006 the FY2003 spending targets recommended in the 1997 PCAST study and then to provide annual increments above the FY2001 authorization levels so as to meet those targets by 2006.6 This is apparent by direct comparison of the PCAST FY2003 and S.597 FY2006 budgets in the renewables case but not in the efficiency, fossil, and nuclear cases, where the authors of the bill used different conventions than the PCAST panel did in deciding what programs to count as part of energy R&D. The fusion science budget is treated in the bill (as DOE also treats it) as part of the Fundamental Energy Science program rather than as applied energy-technology R&D, and I did not find a breakdown indicating what part of this program would be designated for fusion. (This procedure reflected a concern, I believe, that the widening gap between the PCAST recommendations and the actual appropriations out to FY2001 has made it impractical to get back onto the PCAST-recommended trajectory by 2003.) The specific focuses and targets of the energy R&D efforts laid out in S.597 also match quite closely the recommendations in the PCAST report, as do the recommendations on management of DOE science and technology programs in Title XV of the bill. My colleagues on the 1997 PCAST energy panel and I are most appreciative of the weight placed on our recommendations by Chairman Bingaman and his co-sponsors in the development of this bill. We did our best to develop and describe, in our report, a comprehensive and balanced Federal energy R&D program, and we are delighted to see so much of it reflected in the Comprehensive and Balanced National Energy Policy Act.

The recommendations for R&D on nuclear fission in S.597 combine programs related to commercial nuclear electricity generation with programs on nuclear medicine and nuclear power for satellite and space missions, among other categories, and the bill's budget totals for fission cannot be
compared directly to the PCAST recommendations in which applications other than commercial electricity generation were not included. I believe it would be useful to disaggregate these budget categories in the final version of the bill.

I have some concern, in any case, with the wording in the current version (Sec. 1405, part 7.b) characterizing the nuclear appropriation as being for Ademonstration and initial deployment assistance, as well as for research and development. The PCAST recommendations on nuclear fission were for R&D relating to extending the operating lifetime of existing reactors and to exploring advanced approaches to improving the economics, safety, waste management, and proliferation resistance of nuclear energy systems in the future. In my personal view, the question of whether government resources should be allocated to demonstration and deployment (as opposed to research and development) of advanced fission technologies needs further exploration, and I am certainly not convinced that any of the advanced approaches warrant government expenditures for demonstration and deployment today.

Concluding Observations

As the authors of S.597 and the other bills under consideration in this hearing are well aware, a comprehensive energy policy must include far more than energy R&D. Many of the other elements, including aspects of tax policy, regulatory policy, infrastructure development, performance standards, and consumer protection ¯ are addressed in this array of bills. Other elements, such as an appropriate framework of incentives and/or regulations to work in combination with advanced energy technologies to adequately reduce greenhouse-gas emissions from energy supply, remain to be developed.
R&D in any case should be the easiest part of the energy-policy equation with respect to gaining approval and finding the money, inasmuch as it is relatively noncontroversial and relatively inexpensive. With respect to cost, it may be noted that the difference between the $1.7 billion being spent on federal applied energy-technology R&D in FY2001 and the $2.4 billion recommended by PCAST for FY2003 is about two tenths of a percent of the military budget and is equivalent to an extra 0.7 cents per gallon on the price of gasoline. Yet recent history reveals that even such modest investments in a secure and sustainable future energy supply are astonishingly difficult to attain.
The Chairman, the members, and the staff of the Senate Committee on Energy and Natural Resources are to be commended for the major effort they are investing, as manifested in S.597 and in the series of hearings of which today's is but one, to address this problem. I thank you for this effort, for the confidence you have placed in the PCAST recommendations, and for allowing me to present my views this morning.


(1) John P. Holdren. AU.S. Vulnerability to Oil-price Shocks And Supply Constrictions...And How to Reduce It. Committee on Governmental Affairs, United States Senate, Oversight Hearings on Recent Oil-Price Increases. March 24, 2000.

(2) John P. Holdren. AImproving U.S. Energy Security and Reducing Greenhouse-Gas Emissions: What Role for Nuclear Energy?  Hearing by the Subcommittee on Energy and Environment, Committee on Science, U.S. House of Representatives. July 25, 2000.

(3) John P. Holdren. AEnergy Efficiency and Renewable Energy in the U.S. Energy Future, Committee on Science, U.S. House of Representatives, Hearing on The Nation=s Energy Future C Roles of Renewable Energy and Energy Efficiency. February 28, 2001.

(4) John P. Holdren and Samuel F. Baldwin, AThe PCAST Energy Studies: Toward a National Consensus on Energy RD3 Policy, Annual Review of Energy and the Environment, 2001, in press.
</(5) President's Committee of Advisors on Science and Technology, Energy Research and Development Panel. Federal Energy Research and Development for the Challenges of the 21st Century. Washington, DC: Government Printing Office. November 1997.

(6) Secretary of Energy Advisory Board, Task Force on Strategic Energy R&D. Energy R&D: Shaping OUr Nation's Future in a Competitive World. Washington, DC: Government Printing Office. 1995.

(7) President's Committee of Advisors on Science and Technology, Fusion Review Panel.
The U. S. Program of Fusion Energy Research and Development. Washington, DC: Government Printing Office. July 1995.


Invited testimony before a Hearing of the Committee on Energy and Natural Resources, U.S. Senate, on "Legislative Proposals Related to Energy and Scientific Research, Devlopment, Technology Deployment, Education, and Training"


For more information about this publication please contact the STPP Web Manager at 617-496-1981.

For Academic Citation:

Holdren, John P. "Federal Energy Research and Development for the Challenges of the 21st Century: The 1997 PCAST Study and its Relevance to Provisions of S.597:." Testimony to . July 18, 2001.

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