ARPA-E 2011 Keynote: Secretary Steven Chu
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SECRETARY STEVEN CHU: Thank you, room. A lot of people here. That’s a good sign. As long as the attendance keeps rising over the coming years, we will be very, very happy.
Let me talk about what we’re facing. This is a recent history – inflation-adjusted history of oil prices from 1996 to 2011. Well, that goes to 2010 but that’s the price today, roughly speaking, $100 a barrel. And, you might ask, by 2020 or 2015, what will the price of oil be? And the answer is we don’t know. It could be down here at $40 a barrel, it could be here at maybe 80 (dollars) or $90 a barrel, or it could be up here.
And so, what do we do? Do we hope for the best, plan an economy at $40 a barrel, or plan for something different? Now every time the price of oil goes up we do this. (Laughter.) And when the price of oil goes down, we do this. (Laughter.) So what I suggest is let’s take a longer-term, more measured approach to solving this problem.
This is the oil trade – lots of arrows going back and forth, lots of arrows coming into the United States. About a billion dollars a day worth of oil comes in. About a billion dollars worth of money goes out. It’s also redefining all the geopolitics of the world. And so, again, this is something I want to remind you of, that there’s a lot of money flowing out of the United States.
There’s also going to be a tremendous increase in the demand for accessible, affordable clean energy, and the accessible, affordable is very important. The sun and the wind actually are in most countries, and so that’s another reason why there will be a deeper demand for accessible clean energy.
And our national security is very dependent on our energy security. And I want to stress this; that the energy we create at home is wealth creation at home, and that’s very important. So, I think our strategy should not be one of hoping for the best and planning for the best, but let’s decide where the world is going to be and skate where it’s going to be, not where it’s been. And I think Wayne Gretzky’s “I skate to where the puck is going to be” is a good philosophy, and I think America should follow that philosophy.
So we have to decrease our dependency on oil, so what are the steps we’re taking? Well, we’re increasing fuel efficiency. Just in case you’re wondering, these are pictures of the Ford Fusion and the Chevy Volt. We are working to electrify vehicles. This is a FedEx all-electric truck and a Nissan Leaf.
And we’re also working on next-generation biofuels. These are Department of Energy bioenergy institutes. They’ve been in operation for about two-and-a-half years, maybe three years, creating a bevy of patents, already spin-offs going to companies.
And these are some of the – Amyris is one company, for example, that is taking some of the intellectual property generated in these bioenergy institutes, JB in particular, and has already contracted with Brazil to set up a pilot plan. They think they can produce – using bacteria and feeding it simple sugars, they can produce diesel fuel and market it at $4 a gallon. So this is going to be testing whether this is commercially viable.
Another biotech company being supported by RPE (ph) so that the – this company is working on something that’s – within the plant itself there are peptide chains that would fold into enzymes after the harvest of the plant, and those enzymes would help digest a plant, so that the most costly part of the process of reducing grasses and straws and lignocellulose would then be actually supplied by the plant itself. So that’s another novel approach, not quite ready for prime time but rapidly advancing because some of the most rapidly advancing areas in science are in biotechnology.
So, anyway, there is a race going on to develop clean energy technologies that the world will demand. China, the EU countries, and others, recognize there are huge opportunities and they’re investing big time. How much are they investing? Well, the top-10 countries in clean energy investments as a fraction of the GDP, we have Spain, China, the United Kingdom, Brazil and so on, and the United States is down here not doing as well.
If you look at China in particular and look at how they’re dealing with this energy challenge, they have, for example, installed the highest-voltage and highest-capacity and lowest-loss high-voltage lines in the world. They have an 800-kilovolt DC line and a 1,000-kilovolt AC line. The DC line, for example, can transmit electricity 1,200 miles with a 7 percent loss in energy.
I looked up what the highest voltage/lowest-loss DC lines in the United States were. If you wanted to transmit that far a distance with those lines, it would have lost 80 percent of the energy, not 7 percent. And so they’re clearly now world leaders and, surprisingly, or not so surprisingly, they feel that there’s a huge market in the United States which will have to rebuild its high-voltage infrastructure.
Out of more than 60 nuclear power plants that have broken ground recently, China has broken ground at 25 of them. They’ve just recently surpassed the United States as the world’s fastest supercomputer.
They hold the record for the highest-speed rail in the world and in some of the rail lines they have scheduled speeds – not one-time record speeds but actually schedules with 220-mile-an-hour operational lines with plans for 5,600 miles of high-speed rail now under construction. By comparison, Japan has 1,500 miles. France has 1,100 miles. And the U.S. – defining high-speed rail as anything 100 miles an hour – has zero.
And China will achieve – certainly in their plan, mandatory they will achieve 15 percent renewable energy by 2020, but the odds – spending odds is they’re going to get to 18, possibly even 20 percent renewables by 2020.
They are also hard at work and not only manufacturing – it’s not only low-cost manufacturing; it’s high-tech manufacturing. And this is the growth – the green curve is growth – of China. The blue curve is the United States. The EU is holding steady. And if you go to China’s factories you find highly roboticized factories, hardly any people – very, very modern factories.
Now, where are these investments coming from? And so, there are several types of investments. There’s asset financing. This is like project financing. This is what the United States and China and the rest of the world uses to install, for example, wind farms. And it’s an indicator of deployment and it directly is related to job creation. And you see that China is way out in front of the world; U.S. is second in asset financing.
This is the deployment of clean energy technologies. There’s public market financing. This is essentially selling stocks. And, again, China is in the lead, although not as much in the lead as the United States, followed by the rest of the EU countries.
There’s one area where we’re ahead, and that’s venture capital funding. And the United States is way in the lead. China is way down here. And so this is certainly one of the small businesses – the venture capital firms are certainly one of the things where we excel in and continue to excel.
The mix of investments in venture capital are very different. In the previous slides you see a large deployment of – blue is wind, by the way. Yellow or orange is solar. And green – all the rest are renewables. So there’s a huge deployment of wind because that’s getting to be a fairly mature technology and close to competitive with fossil fuel. But the venture capital money is now going to next-generation biofuels – solar energy, energy efficiency and smart grid technologies – a very different mix.
So, we have a race. To repeat what I said, China, the EU countries and others are moving because they see this incredible economic opportunity, and what about the U.S.? Well, we are doing this. We’ve recognized that to create jobs is a strength and a security, and in the clean energy race, we do also need long-term range – long-range policies, sustained commitments to support energy innovation. And our president is committed to making America the world’s innovation leader.
So what are we doing? Well, I was fortunate to accompany the president to Penn State to tour one of the engineering labs, and this happened to be sort of a meeting at Penn State where we were showcasing an energy hub that would develop energy efficient buildings.
Now, the accessible energy part is there, all countries have it, but the real question is, can the costs of clean energy – and by that I mean the full costs. The levelized costs of energy, CapEx, the operating expenses, the maintenance, the decommissioning, everything – can it really be competitive with fossil fuel?
So this is from the “America’s Energy Future,” a National Academy of Sciences and Engineering report, and it shows what the current cost of energy is by this dashed line. The new forms of energy, whether it even be new gas or new coal, will be slightly higher than this.
But it also shows you where other forms of energy are. For example, here we have nuclear energy, which is more costly, but there’s a large uncertainty because we don’t actually know whether the new generation of plants can be built on time and on schedule.
And so, one of the things the Department of Energy is trying to do is help the industry get started to demonstrate that these new plans can be built on budget and on schedule. And if we do that, the costs will be driven down.
There is a tremendous amount of headroom – that is to say, room for technological improvement in solar photovoltaics and possibly concentrated solar power and thermal power. Coal/CCS will never be – coal with carbon capture and sequestration – will never be as cheap as without it, but this is – coal and fossil fuel plants and gas plants with carbon capture will be a higher form of energy because it’s really energy on demand, and so one has to fold that in.
But the point here is that we believe, in the Department of Energy – and we look very carefully at the roadmaps of some of these technologies and we believe in certain instances that they can be competitive with fossil fuel. Whether it’s 10 years from today or 15 years from today is the issue, but that is what’s really driving this. If you get renewables that are actually cost competitive with fossil fuel, then it’s a very, very different world
And so, federal support of research and development is critical, and let me give you one example. We’ve had some support of advanced batteries. The Department of Energy supported research that led to the invention of the lithium ion battery by a fellow named John Goodenough, who got one of the most prestigious science awards in the U.S., the so-called Enrico Fermi Award. That was invented by an American but it soon migrated over to Asia, to Japan in particular, and it was Sony that developed the commercial lithium ion battery.
Now there’s a competition between Japan and Korea. However, just because we lost the lead doesn’t mean we can’t get it back, and researchers at the Oregon National Laboratory developed a unique set of patents that describe the cathode material not only made of lithium but actually with a mixture of manganese.
And so, this additional new material has made these batteries much safer, less likely to catch fire, longer lasting, higher energy density and less costly to manufacture. The remarkable thing about this battery is it grew out of very basic research by this team of Argonne scientists using an intense x-ray source of synchrotron facility light source.
The transition from scientific discovery to patent to licensing was just a few years, and then the discoveries that they have made are going to be going into the next-generation Chevy Volt. Already LG Chem and General Motors are beginning to license their suite of patents, so very, very quick adaptation and deployment.
Here’s another basic research study that lent itself to very quick adaptation. We have tremendously high-performing supercomputers in the Department of Energy, and BMI Corporation is using these supercomputers to look at the airflows around the long-haul, you know, 18-wheeler trucks. And by using these aerodynamic simulations they can actually reduce the wind resistance on these trucks.
And BMI, they found that if you actually modified the undercarriage slightly, you can achieve fuel savings between 7 and 12 percent per truck. And if this was installed on all long-haul trucks, we’re talking about 1.5 billion gallons of diesel fuel a year that are saved.
And if you recall how rapidly the streamlining on the upper part of the truck went into place as soon as this was noted, just a few years we will expect that there will be a very rapid deployment on the undercarriage as well.
RPE is also funding some cutting-edge research. In carbon capture and sequestration we have an existence proof that there need not be a large energy penalty in capturing carbon dioxide, transporting it and putting it somewhere else. You’re doing this as I speak now, as you breathe, because, after all, your cells are generating carbon dioxide for metabolism.
Your blood is able to pick up that carbon dioxide, transport it to your lungs. You exhale and the carbon dioxide is expelled. This is all done without any overt energy penalty. And so, if we can then think of catalysts or enzymes that can actually capture the carbon dioxide, and then, with the change of pressure or something like that, release it, this could be greatly – it could greatly decrease the energy costs of carbon capture.
RPE is also looking at a new approach to wind turbines. This funny-looking thing is actually taking its lessons from modern turbine jet engines and then training flows with these jet engines, and in that sense it can actually become much more efficient than the turbines of today.
Looking at a number of other things – building efficiency through innovative thermal devices, looking very closely at whether you can completely rewrite the book on air conditioning. This is the amount of energy per kilogram of cooling.
Cooling is a strange thing. It’s still described in tons. Just in case you’ve ever wondered, that tons of ice. In the old days you had a block of ice and you blew air over it. So, in any case, it’s still – it’s like horse power. Never mind. (Laughter.) What are they, say the younger generation? Anyway, in any case, we could really rewrite the book, we think, in terms of air conditioning, which will be in high demand around the world.
One other thing, we need some sort of guidance so that the – some sort of guidance that will guide the private sector in making investments. And in President Obama’s State of the Union address, he said that, “Clean energy breakthroughs will only translate into clean energy jobs if businesses know there will be a market for what they’re selling.”
So, in the State of the Union address he proposed a clean energy standard, and what does a clean energy standard do? It says, we can define clean energy as nuclear or sun or wind or hydro. Gas can count half clean because it’s half the carbon emissions of coal. Coal with carbon capture and sequestration, if it captures 90 percent of the carbon, counts as 90 percent clean, and so on. So it doesn’t actually say which technology will win, but it does guarantee a market for any clean energy technology.
Today, using that accounting scheme, we’re roughly 40 percent clean energy, and he asked by 2035 to go to 80 percent. So it will give you a guaranteed market for clean energy. As long as you build something competitive, you have a market for it.
That market means there’s investment certainty, and so companies can go to people who can loan them money and say, well, we can sell this for sure. That market certainty actually means that there’s going to be a business, domestic supply lines spring up, especially in the heavy-duty equipment, for example wind turbines in new power plants, new nuclear reactors.
You need a certain number of orders in order for a manufacturer to actually set up a domestic supply line, but if it’s heavy stuff, it’s much more economical to set it up in the home country, and that’s why China is deploying so rapidly. They actually want to set up domestic supply lines.
And, finally, if you look at the states that have renewable energy portfolio standards, that this demand certainty will actually stimulate long-term planning of the grid. So, if you start with a clean energy standard of 2035, all of a sudden you’re going to get planning of the transmission distribution system, which you don’t see in states that, for example, don’t have this. So this again stimulates the best type of investments over the longest period of time.
So, my take-home message – and this is the last slide – is that we still have the opportunity to lead the world in clean energy and capture jobs in the 21st century, but time is running out. Other countries realize this economic opportunity. They’re moving very fast. It is a race and the train is leaving the station. Thank you.