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Truman National Security Project
Congressional Oversight                                                                                                   ...
DOE and the 112th CongressFrom January 2011 - April 2012,the House has: conducted 26 investigations ofDOE; 9 of those inv...
DOE Loan Guarantee Program                                                                            DOE Loan Guarantee P...
Solyndra: exception or rule?Critics of the DOE loan guaranteeprogram spotlight the bankruptcy ofsolar panel manufacturer, ...
And don’t forget…Other topics of congressional investigation include Yucca mountain, high gasprices, Environmental Protect...
Truman National Security Project
How do we pay for all this?                                      2010 - $1.2 trillion                                     ...
The Central Problem      Production Costs vary       widely – anticipated supply,       weather, geopolitics, shipping   ...
Why is government involved? Government significantly  regulates to limit  “negative externalities” –  environmental and s...
Sources of cash Consumption Prices – you know these all too well Production Costs - two main buckets:     Feedstock (ra...
Cost of New GenerationFunds for new facilities (“CapEx”) can come from:       Venture capital – high risk tolerance – but...
Corporate Debt – what is it?   This is a basic business loan – when an energy company (like Exxon) takes a loan from a ba...
Corporate Finance – why use it? Energy company can use the money largely how  it sees fit for any project, rather than be...
Project finance – what is it?   Debt financing of the development, site acquisition, construction and initial    operatio...
Project finance – why use it? Non-recourse nature provides companies or developers  flexibility to separate projects (so ...
Bottom line Financing energy is as complex as creating and  distributing it – all with the goal of taming the naturally  ...
Truman National Security Project
Installation Energy DoD has committed to producing or buying 3  Gigawatts of renewable energy, enough to  power 750,000 h...
Biofuels When the price of oil goes up, DoD’s fuel  expenses skyrocket Navy and Air Force have ambitious goals to  diver...
Energy Efficient Platforms When forces have to be resupplied with fuel by  tankers or convoys, those fuel supply lines ar...
NEPA NEPA is a law that requires the government  to assess potential environmental impacts  when it takes an action that ...
NEPA, continued If an analysis shows that there is a significant  environmental impact by the renewable  project, the gov...
Truman National Security Project
Fossil fuel dependence is the greatestlong-term threat to national security --not just from foreign sources, but allsource...
The U.S. exports $1 billion per dayfor its oil, 40% of which goes tounstable or unfriendly nations. Iran uses its oil rev...
Transportation of fuel to the frontlines requires great expense inblood and treasure. One service member is killed for ev...
The U.S. devotes enormousexpense to safeguarding the freeflow of fuel worldwide. Defense costs      Straights of Hormuz...
Fossil fuel consumption causesenvironmental instability to whichour military will be forced torespond:    Resource scarci...
Truman National Security Project
Renewable Energy Myths and RealitiesFirst: What Do We Mean by RenewableEnergy? In this context we use the term renewable ...
Myth: Renewable Energy is Too Expensive                    Reality: Certain Renewables are Competitive With Natural Gas   ...
Myth: Renewable Energy is Too ExpensiveReality: Natural Gas Generation is a Competitor to Renewablesbut Also a Necessary P...
Myth #3: The Government Shouldn’t Pick WinnersReality: Renewables Aren’t the Only Area theGovernment is SupportingTruman N...
Myth #5: Intermittent Renewables Are UselessReality: Renewable Energy Doesn’t Create Jobs Center for American Progress st...
Truman National Security Project
Sustainability                                                 Source: SustainVU, www.vanderbilt.eduUN Brundtland Commissi...
Sustainability ProgramsSustainability programs becoming the norm at U.S.universities; corporations; & federal, state, coun...
Executive Order 13514: Federal Leadership in  Environmental, Energy, & Economic PerformanceSigned by: President Obama on 5...
Military’s Sustainability ProgramsAll 5 branches addressing E.O. 13514, while buildingtheir own customized sustainability ...
Truman National Security Project                                   4
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Energy 101 - misc

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  • Civilians call the shots. The president decides which wars we enter, sets our strategy, and the number of troops. The Secretary of Defense decides how we fight them. These military bodies – the Joint Chiefs and the Combatant Commands - exist in an advisory capacity. They give their opinions but the military does not bear responsibility for which fights we wage. Civilians are also responsible for Social Policy surrounding the military; i.e. it is not the military that implemented Don’t Ask Don’t Tell … like all other policy, they’re just responsible for enforcing it. These are issues to take up with Congress, or the administration, not the military itself.
  • 1 Includes lease condensate.2 Natural gas plant liquids.3 Conventional hydroelectric power, biomass, geothermal, solar/photovoltaic, and wind.4 Crude oil and petroleum products. Includes imports into the Strategic Petroleum Reserve.5 Natural gas, coal, coal coke, biofuels, and electricity.6 Adjustments, losses, and unaccounted for.7 Coal, natural gas, coal coke, electricity, and biofuels.8 Natural gas only; excludes supplemental gaseous fuels.9 Petroleum products, including natural gas plant liquids, and crude oil burned as fuel.10 Includes 0.01 quadrillion Btu of coal coke net exports.11 Includes 0.09 quadrillion Btu of electricity net imports.12 Total energy consumption, which is the sum of primary energy consumption, electricity retailsales, and electrical system energy losses. Losses are allocated to the end-use sectors inproportion to each sector’s share of total electricity retail sales. See Note, “Electrical SystemsEnergy Losses,” at end of Section 2.Notes: • Data are preliminary. • Values are derived from source data prior to rounding forpublication. • Totals may not equal sum of components due to independent rounding.Sources: Tables 1.1, 1.2, 1.3, 1.4, and 2.1a.
  • Transcript of "Energy 101 - misc"

    1. 1. Truman National Security Project
    2. 2. Congressional Oversight The majority of Department of Energy (DOE) investigations in the 112th Congress have originated in the Republican-led House of Representatives. House committees with jurisdiction to investigate DOE Source: Huffington Post, “House Oversight Committee To Hold McPherson Square Hearing,” January 17, 2012 include Energy & Commerce; House Oversight and Government Reform Science, Space & Technology; Committee Chairman Darrell Issa (R-CA) Armed Services; and Oversight & Government Reform.Their main responsibilities include:1. Oversight: akin to a check-up at the doctor’s office – an opportunity to verify that everything is functioning as it should be1. Investigations: more like exploratory surgery – sometimes they find a problem, often they don’t Truman National Security Project
    3. 3. DOE and the 112th CongressFrom January 2011 - April 2012,the House has: conducted 26 investigations ofDOE; 9 of those investigationshave focused on the DOE loanguarantee program sent the department over 40letters requesting documents orinterviews Source: C-SPAN, “Senate Energy Cmte. Hearing on Presidents 2012 Budget Request with Energy Sec. Steven Chu,” February 16, 2011received over 680,000 pages of Energy Secretary Steven Chu testifiesdocuments from DOE agencies. before the Senate Energy CommitteeTruman National Security Project 3
    4. 4. DOE Loan Guarantee Program DOE Loan Guarantee Program Quick Facts:  The program was enacted as part of the Bush Administration’s 2005 energy bill to support the development of innovative technology at a scale that is too risky for the private sector to financeSource: Gigaom, DOE offers $359M loan guarantee to Sempra for solar farm,June 15, 2011 Congress contemplated the possibility of loss under the program and in the2009 Recovery Act appropriated over $3 billion to cover these potential losses DOE has guaranteed $34.7 billion in loans which have created over 60,000jobs The program supports the world’s largest wind farm, the first all-electricvehicle manufacturing plant in the U.S. and the first nuclear power plant to bebuilt in over 30 yearsTruman National Security Project 4
    5. 5. Solyndra: exception or rule?Critics of the DOE loan guaranteeprogram spotlight the bankruptcy ofsolar panel manufacturer, SolyndraSince January 2011, at least 50 staffmembers from 8 DOE offices havespent thousands of hours responding tocongressional inquiries including: Source: Gigaom, DOE offers $359M loan guarantee to Sempra for solar farm, June 15, 2011 28 requests for documents (almost 2 Solyndra Quick Facts:requests/month for the past year)resulting in the production of 200,000  Solyndra represents only 1.3% ofpages loans dispersed by the DOE loan guarantee program 6 congressional briefings The majority of the loan guarantee 5 congressional hearings (including portfolio is in electrical generationother executive branch agencies) projects, which are structured to have very low risk. Truman National Security Project 5
    6. 6. And don’t forget…Other topics of congressional investigation include Yucca mountain, high gasprices, Environmental Protection Agency regulations, renewable energy taxgrants, the Keystone pipeline, hydraulic fracking and weatherization of low-income homes Sources: Lander County Yucca Mountain Oversight Program, ABC News, Salon, mLiveTruman National Security Project 6
    7. 7. Truman National Security Project
    8. 8. How do we pay for all this? 2010 - $1.2 trillion Consumer ExpendituresProduction Costs Figures are in quadrillion BTUs, Source: Energy Information Administration, Annual Energy Review 2010 ANS: Each in their own way, due to practical differences, business customs, market structures and policy decisions over the last 100 years.Truman National Security Project
    9. 9. The Central Problem Production Costs vary widely – anticipated supply, weather, geopolitics, shipping costs, wages But if Consumption Prices vary widely, we are not happy campers… So the Industry of Financing the Energy Industry exists to smooth out one end of the equation to minimize “spikes” at the otherTruman National Security Project
    10. 10. Why is government involved? Government significantly regulates to limit “negative externalities” – environmental and socio- economic Government also wants to support “positive externalities” (non-financial benefits)  Schools, hospitals and businesses open later and safer, benefitting the society as a whole.  Ex: rural electrificationTruman National Security Project
    11. 11. Sources of cash Consumption Prices – you know these all too well Production Costs - two main buckets:  Feedstock (raw oil, coal, gas):  Manage through futures trading  Pass on to customer  Building new facilities - very capital intensive with upfront costs of construction and permitting running into the billions of dollarsTruman National Security Project
    12. 12. Cost of New GenerationFunds for new facilities (“CapEx”) can come from: Venture capital – high risk tolerance – but expects a very high return Corporate Finance:  Public Stock Markets – ok, with some risk, but also expects high return  Corporate Debt – bonds or institutional loans Project finance for individual power or energy projects• Government loans or guarantees • In order to get a lower rate, the government may guarantee a lender that it will cover certain slice of the risk • Especially for innovative projectsTruman National Security Project
    13. 13. Corporate Debt – what is it? This is a basic business loan – when an energy company (like Exxon) takes a loan from a bank for various corporate needs.  Lenders will only lend to Exxon if Exxon demonstrates to the lenders that it has sufficient assets on its balance sheet to pay back the loan (which is why this is sometimes called “balance sheet” financing). Structure: There IS typically recourse to the energy company. The money is leant to the energy company, which then invests the money in the Project Company.  This means that if there is a default under the loan, then the lenders can foreclose / sue the energy company itself.Truman National Security Project
    14. 14. Corporate Finance – why use it? Energy company can use the money largely how it sees fit for any project, rather than being limited to a specific project. Simpler, more straightforward then project finance (so less costly to put together the financing). Best to use when the energy company has a strong balance sheet (much greater assets than liabilities).Truman National Security Project
    15. 15. Project finance – what is it? Debt financing of the development, site acquisition, construction and initial operation of a power plant, wind farm, terminal, and other energy projects.  Usually for capital-intensive industries.  Projects themselves generate cash to pay off debt. So project finance is most suitable for an energy project where there is a predictable revenue stream to support debt repayment. Typically Non-recourse (like a typical mortgage in the U.S.)  Structure: the lender typically provides the loan to the actual project (typically referred to as the “Project Company”).Truman National Security Project
    16. 16. Project finance – why use it? Non-recourse nature provides companies or developers flexibility to separate projects (so that each project can succeed, or fail, on its own merits).  Often good to separate energy projects so that any regulatory problems, natural disasters, and other events only impact a specific project.  Developer often does not have great credit, but the project itself may be a good investment and generate enough cash to pay off the debt. Separating projects allows developers to manage them better (both operationally and financially).  Lender typically can only make a claim (foreclose) on the assets of the Project Company and not those of the entire energy company.Truman National Security Project
    17. 17. Bottom line Financing energy is as complex as creating and distributing it – all with the goal of taming the naturally cyclic nature of energy (and nature) Government is involved all along the way – and can help that goal by encouraging sustainable methods of production and consistent price signals to the marketplace; OR Government can make things worse by constantly shifting policies or putting decisions on holdTruman National Security Project
    18. 18. Truman National Security Project
    19. 19. Installation Energy DoD has committed to producing or buying 3 Gigawatts of renewable energy, enough to power 750,000 homes Powering bases with locally-generated renewable energy makes bases and operations resilient to grid vulnerabilities Long-term power purchase agreements with renewable generators allow for cost- competitive, clean and secure energy for basesTruman National Security Project
    20. 20. Biofuels When the price of oil goes up, DoD’s fuel expenses skyrocket Navy and Air Force have ambitious goals to diversify fuels sources for ships and planes and reduce budgetary risk of oil price shocks DoD is buying “drop-in” biofuels, which don’t require new or modified engines and run a jet or marine diesel engine the same as petroleum Navy has set a goal to sail a “Great Green Fleet” on biofuels by 2016Truman National Security Project
    21. 21. Energy Efficient Platforms When forces have to be resupplied with fuel by tankers or convoys, those fuel supply lines are at risk of attack by the enemy. If supply lines are cut by enemy attack, our forces are left without fuel, water, and supplies Planes, ships, and tanks that use less fuel don’t have to be resupplied as often DoD is working to make sure that the next generations of platforms are more efficient. This will reduce resupply risk, avoid costs, and save lives.Truman National Security Project
    22. 22. NEPA NEPA is a law that requires the government to assess potential environmental impacts when it takes an action that may affect the environment Renewable technologies in certain areas have potential environmental effects”  Windmills may threaten birds or bats  Large solar panel arrays may threaten species by disrupting their movements (e.g. desert tortiose)  Renewable facilities may obstruct or interfere with views or create noise issuesTruman National Security Project
    23. 23. NEPA, continued If an analysis shows that there is a significant environmental impact by the renewable project, the government may be required to implement mitigation measures, or the project may be stopped completely. The government is working hard to identify federal renewable projects’ potential environmental effects early and to consult with environmental organizations and local communities to resolve the issuesTruman National Security Project
    24. 24. Truman National Security Project
    25. 25. Fossil fuel dependence is the greatestlong-term threat to national security --not just from foreign sources, but allsources. The U.S. consumes 25% of the world’s oil for 5% of the global population The U.S. military is the world’s largest industrial consumer of fossil fuel.Truman National Security Project 25
    26. 26. The U.S. exports $1 billion per dayfor its oil, 40% of which goes tounstable or unfriendly nations. Iran uses its oil revenues to:  finance IED’s that have killed and wounded our toops  supply night vision goggles and other equipment to the TalibanTruman National Security Project 26
    27. 27. Transportation of fuel to the frontlines requires great expense inblood and treasure. One service member is killed for every 24 convoys. The cost to deliver one gallon of fuel to remote locations overseas may be as high as $400.Truman National Security Project 27
    28. 28. The U.S. devotes enormousexpense to safeguarding the freeflow of fuel worldwide. Defense costs  Straights of Hormuz Diplomatic costs  appeasing dictatorsTruman National Security Project 28
    29. 29. Fossil fuel consumption causesenvironmental instability to whichour military will be forced torespond: Resource scarcity Civil unrest Refugee and other humanitarian crises ExtremismTruman National Security Project 29
    30. 30. Truman National Security Project
    31. 31. Renewable Energy Myths and RealitiesFirst: What Do We Mean by RenewableEnergy? In this context we use the term renewable energy to refer to electricity generated by renewable resources. These include:  Wind  Solar  Hydro  BiomassTruman National Security Project 31
    32. 32. Myth: Renewable Energy is Too Expensive Reality: Certain Renewables are Competitive With Natural Gas Even Without Incentives and Prices Continue to Drop $350 LCOE 2008 Note : solar produces largely $324 $300 during peak hours so it often competes with more LCOE 2012 expensive peak power plants $250 LCOE 2016 (estimate)Cost per $/MWH $200 Wind: shown for average wind $150 resource – the best wind (ie, TX, OK, KS) already competitive with natural gas $100 $106 $87 $88 $84 1 $50 $0 Coal CCGT Nuclear Wind Solar PV Note: The cost of renewable energy is largely a function of manufacturing scale in addition to technological improvements. The cost of natural gas generation is largely dependent on the price of a commodity that has large price swings over the last decade. Truman National Security Project
    33. 33. Myth: Renewable Energy is Too ExpensiveReality: Natural Gas Generation is a Competitor to Renewablesbut Also a Necessary Partner Renewable energy without storage requires natural gas generation as back-up power as natural gas, unlike coal or nukes, can be ramped up and down quickly. Although there are benefits to natural gas the primary (non climate-change related) drawback is that natural gas pricing has historically been volatile. Prices are now 20% of what they were at the peak in 2008. Current gas curves anticipate a future of cheap gas but there is no price certainty. Many factors could throw off the current low natural gas curve:  Increased switching from coal to natural gas generation.  Increased use of natural gas as a transport fuel.  Export of natural gas to countries with high natural gas prices.  A price on carbon  Changes in available resource estimates (the U.S. EIA recently cut their estimate by 42%) and extraction costs. Utilities can use renewables to hedge against future price shocks. A generation fleet entirely exposed to natural gas would be as irresponsible as a stock portfolio manager investing in only one company. Many utilities agree. Xcel Energy recently noted that “by displacing natural gas with fixed priced wind energy, the Company has less exposure to potentially volatile natural gas pricing.” A utility’s planning horizon is much longer than a natural gas day traders – or a weekly news cycle. To responsibly meet their customers needs under a range of fuel price scenarios renewables are a responsible choice.Truman National Security Project 33
    34. 34. Myth #3: The Government Shouldn’t Pick WinnersReality: Renewables Aren’t the Only Area theGovernment is SupportingTruman National Security Project 34
    35. 35. Myth #5: Intermittent Renewables Are UselessReality: Renewable Energy Doesn’t Create Jobs Center for American Progress study shows a dollar spent on renewable generation creates 3x as many jobs as a dollar spent on fossil generation. The same study shows the jobs created tend to be higher paying than those in fossil generation. Many jobs are construction related and “temporary” just as any housing construction related jobs are temporary. Even so, to reach 20% renewable energy in the U.S. would result in lots of jobs over a multi-decade timeframe.Truman National Security Project 35
    36. 36. Truman National Security Project
    37. 37. Sustainability Source: SustainVU, www.vanderbilt.eduUN Brundtland Commission Definition (1987): Sustainable development isdevelopment that meets the needs of the present without compromising theability of future generations to meet their own needs. Truman National Security Project Truman National Security Project
    38. 38. Sustainability ProgramsSustainability programs becoming the norm at U.S.universities; corporations; & federal, state, county, andlocal governments Truman National Security Project Truman National Security Project 3
    39. 39. Executive Order 13514: Federal Leadership in Environmental, Energy, & Economic PerformanceSigned by: President Obama on 5 October 2009. Builds on Executive Order 13423,which was signed by President Bush on 24 January, 2007.Goal: to establish an integrated strategy towards sustainability in the FederalGovernment and to make reduction of greenhouse gas emissions (GHG) a priority forFederal agencies.Federal agencies required to:- Select Senior Sustainability Officer- Set percentage reduction target of agency-wide reductions of Scope 1 and 2Greenhouse Gas emissions in absolute terms by FY 2020, relative to FY 2008 baseline- Create a Strategic Sustainability Performance Plan- Increase energy efficiency; increase renewable energy generation- Reduce petroleum consumption, potable water intensity, landscaping/industrialwater; increase recycling and waste reduction efforts- Incorporate sustainability elements into procurement (energy-efficiency, biobased,environmentally preferable, recycled content, etc.) Truman National Security Project Truman National Security Project 3
    40. 40. Military’s Sustainability ProgramsAll 5 branches addressing E.O. 13514, while buildingtheir own customized sustainability efforts Source: U.S. Army Sustainability Office, www.sustainability.army.mil/ Source: Congressional Research ServiceTruman National Security Project Truman National Security Project 4
    41. 41. Truman National Security Project 4
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