The document discusses a conference on power and alternative energy law. It provides an overview of the challenges of achieving energy transformation in electricity and transportation, from innovation to deployment. It notes that private sector investment, innovation, and recovery act funding are helping to jump start energy transformation, but challenges remain around infrastructure investments, managing risks and returns, and cross-industry solutions.

1. 4th Annual Power & Alternative Energy Law
Conference
Houston, Texas
Achieving Energy Transformation in Electricity and
Transportation: From Innovation to Deployment
Presented by:
Robert H. Edwards, Jr.
Deputy General Counsel
for Energy Policy
United States Department of Energy
12 May 2011 1

2. Overview
• The Energy Challenge – U.S. Perspective
• Energy Transformation is Challenging and Complicated
• Private Sector Investment, Innovation and Recovery Act Jump
Start Energy Transformation
– Economics of new technologies must eventually prevail without subsidy
– Business and finance models must provide for return of and on capital
• Challenges to Keep Energy Transformation Going
– Capital for infrastructure investments
– Managing risks and returns
– Cross industry solutions
2

3. Investment in Renewable Energy and Clean Technologies is Needed
Now to Create 21st Century Energy Technology Industries and Jobs, Reduce
Dependence on Foreign Oil and Reduce Greenhouse Gas Emissions
• The U.S. sends $1 Billion per day overseas to purchase foreign oil
• While the U.S. manufactured more than 40% of the world’s solar cells in
the mid-1990s, today we produce just 7%
• When the Recovery Act passed, there were only two small advanced
battery facilities in U.S., and 98% of production was based in Asia
• Long-term results of current deficiencies in our energy system include:
• Loss of leadership in energy innovation • National security problems
• Oil-driven recessions • Increasing CO2 emissions
• Environmental degradation • Trade deficits
3

4. Events During the Recent Past Have Increased
the Need for Accelerated Energy Transformation
to Improve U.S. Energy Security and Economic
Performance
• April 2010: The Deepwater Horizon Oil Spill
• Developments in the Middle East and North Africa
• March 2011: Earthquake and Tsunami in Japan
4

5. Our Energy Challenge
• Electric Sector
– 100 year old architecture and technologies
– Relies heavily on old coal burning power plants
– Industry is fragmented
– Industry regulatory structure leads to slow adoption of new
technologies
• Transportation Sector
– Relies almost exclusively on oil
– Dependence on foreign oil has increased over the decades
– Oil prices are volatile and trending upward
– Existing infrastructure makes transformation to alternative fuels
difficult and slow
5

6. Prudent Development of the Full Range of United
States Energy Resources Is Important
• The Administration has made clear that prudently increasing
U.S. domestic oil production is an integral part of the solution
• Recent technology innovations have given us the opportunity
to tap large reserves of shale gas
• Environmentally sound development of shale gas can assist in
accelerating energy transformation
6

7. ENERGY TRANSFORMATION IS
CHALLENGING AND COMPLICATED
7

8. Energy Change Is Slow
US ENERGY SUPPLY SINCE 1850
100% Renewables
90%
Nuclear
80%
Gas
70%
Oil
60%
Hydro
50%
Coal
40%
30%
Wood
20%
10%
0%
1850 1880 1910 1940 1970 2000
Source: EIA
1880 – Edison Long Lasting Lightbulb 1908 – Model T
1918 – GE Starts Gas Turbine Division 2008 – Tesla EV Roadster
1950s – Nuclear Power Plants Come Online 8

9. IT Moves Much Faster Than Energy
SALES OF PERSONAL AUDIO/VIDEO SINCE 2000
• MP3/MP4 Players
– Sales CAGR (2004-2009): 30.2%
• Google
– Sales CAGR (2004-2008): 61.7%
• Facebook
– Value CAGR (2005-2009): 182%
9

10. Why is Energy Change Slower than
Information Technology Change?
• Infrastructure
– Existing energy delivery systems for oil (pipelines, gas stations) create
barriers to entry for fuels unable to use the existing infrastructure
– Disruptive technologies may require major infrastructure investments
(charging infrastructure for electric vehicles)
• Legacy Assets
– Fully depreciated old coal fired power plants make it challenging for
renewables and clean coal to be cost competitive
• Utilities and Public Utility Commissions – “The Gordian Knot”
• 50 State PUCs + Federal Energy Regulatory Commission (FERC)
• Historically regulation has properly focused on reliability and cost
• Fragmented and slow regulatory structure slows innovation
• Need regulatory innovation to allow for roll-out of
• Smart Grid
• Utility Scale Battery Storage
• New services and business models
10

11. How Can We Make Energy
Transformation Faster?
• Pathways to Scale
– Technological Innovation/Acceptance/Adoption
– Financing Innovation/Infrastructure/Consumer
• Sector/Industry Organization
– Industry incumbents or new entrants to take on new roles
– Electric vehicles – utilities and auto manufacturers share the same
customers
– Smart Grid – who will own customer?
• Government Policy
– Coherent and stable government policy
– Clean Energy Standard
– Consistent tax credit support for new technologies
– Public utility commissions
11

12. ENERGY TRANSFORMATION
IN THE ELECTRIC SECTOR
12

13. Our Current Electric System, Technologies,
and Architecture are 100 Years Old
Edison Would Recognize Most of the System
Alternating
Central Current Distribution End
Power High Voltage
Companies Users
Transmission
Stations Lines
Solar,
Geothermal,
• Transmission • 3,100 Utilities • 100% availability
Wind 2%
>1% congestion and
Hydro
6.6% constraints • Southern Co. • Lowest ¢/kWh
Nuclear serves 4.4M
20%
• Need more customers • Unaware of
transmission potential of
for renewables • Altamaha EMC smart grid
rural electric co-
Natural op serves 19,648
Gas
21%
customers in
13
Liquids
1% Lyons, GA

14. The Challenges are Further Complicated as
Different Regions of the United States Use
Different Fuel Mixes to Generate Electricity
14

15. In Addition, There Is Not a Single National Grid:
Approximately 60% of the U.S. Electric Power Supply is
Managed by ISO/RTOs While the Southeastern Region
Remains Regulated and Vertically Integrated
Source: ISO/RTO Council
Published by: U.S. Energy Information
Administration
15

16. A Green and Sustainable 21st Century Electric
System Will Have Many of the Following Features….
Robust Electric &
Transmission Utility Scale Plug-In Hybrid
Renewable Capacity Storage Vehicles
Generation Smart Grid
Smart Smart Smart
Transmission Storage Consumers
16

17. How Fast Can Renewables be Integrated into
the Electric Grid?
• “Expert” Projections Vary Widely
Renewables and Distributed Generation
Percent of Total Generation in 2030
Charles River Associates 16%
Environmental Protection Agency 16%
Union of Concerned Scientists 24%
National Renewable Energy Laboratory 30%
Google.org 67%
Let’s look at the electric grid on an end-to-end basis to understand how
we can increase the rate of penetration of renewables. . .
17

18. To Accelerate Transformation in the Electric Sector
the Administration has Deployed Resources Through Renewable
Generation
a Range of Tools
• Recovery Act Tax Credits and Other Incentives
– Extension of the production tax credit (PTC) through December 31, 2012, and
the innovation of the § 1603 “Cash Grant In-Lieu of Tax Credit,” for electricity
produced from renewable energy sources
– The § 1603 program, which allows clean energy producers to monetize tax
credits in the form of a cash grant which becomes available as soon as a
renewable energy project is “Placed In Service”
• As of April 6, 2011:
– total number of projects funded = 7,957
– total § 1603 funding = $6.9 Billion
– total private and federal investment in § 1603 projects = $23.2 Billion
– total installed capacity of funded projects = 10.4 GW (91% wind, 4% solar)
– total estimated electricity generation from funded projects = 27.5 TWh
18

19. Selected 2010 & 2011 Loan Guarantee
Projects Accelerate Deployment of Renewable
Generation
Renewable Generation…
• Solar Generation
– Abengoa Solar, Inc., $1.446 billion (250 MW) - Arizona
– Agua Caliente, $967 million (290 MW) - Arizona
– BrightSource Energy, Inc., $1.6 billion (392 MW) - California
– Solar Trust of America (Solar Millenium), $2.105 billion (484 MW) - California
• Wind Generation
– Caithness Shepherds Flat, $1.3 billion (845 MW) - Oregon
– Kahuku Wind Power, LLC, $117 million (30 MW) - Hawaii
– Record Hill Wind, $102 million (50 MW) - Maine
19

20. US Solar Electric Installations: 2007-2010
2500
2000
1500
Cumulative MW
CSP Cumulative
1000 PV Cumulative
500
0
2007 2008 2009 2010
Year
Solar PV installations in 2011 are expected to be twice
2010 levels.
Data source: SEIA
20

21. US Wind Installations: 2007-2010
35000
30000
25000
20000
Cumulative MW
15000
10000
5000
0
2007 2008 2009 2010
Year
The U.S. wind industry has contributed over 35% to all new power
generating capacity created in the nation over the past four
years.
Data source: AWEA
21

22. Robust and Reliable Transmission and
Robust
Distribution Networks Are Essential to the Transmission
Capacity
Development, Integration, and Delivery of Smart
Transmission
Renewable Resources in the Electric Sector . . .
• Bonneville Power Authority (BPA) – McNary-Day Transmission Line
– When energized in early 2012, loan guarantee project will allow BPA to
provide 625 MW of transmission service, including 575 MW of new wind
energy
• Western Area Power Authority (WAPA) – Montana-Alberta Tie Limited Project
(MATL)
– WAPA’s first Recovery Act project will bring new transmission capacity online
to support 300 to 600 MW of wind energy, enough to power 150,000 to
300,000 homes
• Southwest Intertie Project (SWIP) – Loan Guarantee Program
– Transmission project that will carry approximately 2,000 MW of electricity and
enable wind and solar resources in Wyoming, Idaho and Nevada to power the
Southwest and California markets
22

23. Robust and Reliable Transmission and Distribution
Networks Are Essential to the Development, Robust
Transmission
Capacity
Integration, and Delivery of Renewable Resources
Smart
in the Electric Sector (cont’d). . . Transmission
• Nine-Agency MOU
– October 2009 agreement will expedite the siting and construction of qualified
electric transmission infrastructure in the U.S.
• Office of Electricity Delivery and Energy Reliability (OE) – Transmission Planning
– Six Recovery Act awards will promote collaborative long-term analysis and
planning for the Eastern, Western and Texas electricity interconnections,
representing the first-ever effort to take a collaborative, comprehensive look
across each of the three transmission interconnections
23

24. Utility Scale
Advanced Batteries & Storage Storage
Smart
Storage
• Kahuku Wind Power, LLC
– Advanced batteries used to smooth energy production from major wind farm
being integrated into a closed loop transmission grid.
• Flywheels: Loan Programs Office (LPO) – Beacon Power
– Technology focused on grid frequency regulation, with flywheels helping to
maintain the necessary balance between energy supply and demand by
effectively “recycling” electricity.
• Compressed Air Storage: Advanced Research Project Agency – Energy
(ARPA-E)
– At utility scale, energy generated during periods of low energy demand (off-
peak) can be released to meet higher demand (peak load) periods.
• Advanced Batteries: Vehicle Technologies Program
– Rechargeable batteries used for propulsion of advanced vehicles
– As a result of ARRA investments, the U.S. will have the capacity to produce up
to 20 to 40 percent of the world’s advanced batteries (prior to the Act, 98
percent of all production was in Asia).
24

25. Recovery Act Investments Matched By Private
Sector Investment Jumpstarts Smart Grid Smart
Grid
Office of Electricity Delivery and Energy $
Reliability Millions
Smart Grid Investment Grant Program; ≤3 years $3,400
Smart Grid Demonstrations; 3-5 years $615
Interoperability Framework Development by NIST $10
Resource Assessment and Interconnection-Level $80
Transmission Analysis and Planning
State Electricity Regulators Assistance $50
Enhancing State Government Energy Assurance $55
Capabilities and Planning for Smart Grid Resiliency
Workforce Development $100
25

26. Recovery Act Smart Grid Investment Grants
Transform Electricity Delivery Smart Grid
Smart Grid Systems Numbers Improvements Impacts
and Equipment of Units
(self-reported
estimates)
Networked Phasor 877 • Near-nationwide coverage
Measurement Units • 6X the 166 existing networked
Enhanced situational
PMUs
awareness and electric
Smart Transformers 205,983 • Enables preventative system reliability and
maintenance resiliency
Automated 671 • 5% of 12,466 transmission and
Substations distribution substations in the
U.S.
Load Control 176,814 • Enables peak demand
Devices reductions 1444 MWs of peak demand
reduction per year
Smart Thermostats 170,218 • Enables peak demand (self-reported estimates)
reductions
Smart Meters 18,179,912 • 13% of the 142 million
customers in the U.S. Transformational changes in
consumer behavior and
In-Home Display 1,183, 265 • Enables customer empowerment energy consumption
Units
PHEVs/Charging 12/100 • Accelerates market entry Begins the path toward
Stations energy independence
26

27. IT IS ALL CONNECTED . . .
Cross Industry/Horizontal Relationships Can Speed Change Electric &
Plug-In
Electric Vehicles Will Depend on Smart Grid Technology, Hybrid
And in Turn Increase its Value Vehicles
Smart Grid Technology Will Enable the “Smart Charging” Needed to Support Electric Smart
Vehicles, for example: Consumers
 Peak Load Management to deal with the “5PM Surge” when every one returns home and plugs in
 Consumer information to incentivize off -peak charging at night
Smart Grid
Generate Transmit Distribute Consume • Optimized Energy Demand
• Efficient Supply
 Solar, Wind  Super Conductors  AMI  Home Area Networks • Integrated Multiple Low
 Hydro  Recloser Controls  Mesh Networks  Energy Displays
Carbon Energy Sources
 Geothermal  Sensors  WiMAX  Meter Data Mgt (MDMS)
 Battery  Broadband  CPP and TOU Pricing
 Automated Demand
Integration with Grid Integration with Vehicle
Charge Point Advanced EV/PHEVs
Batteries
Grid Impact & Infrastructure & Consumer
Energy Storage
Load Mgmt Technology Adoption
The systems integration and IT challenges are enormous when we
consider the end-to-end requirements of the electric grid
27

28. ENERGY TRANSFORMATION
IN THE TRANSPORTATION SECTOR
28

29. Corporate Average Fuel Economy Standards (CAFE)
• In January 2009, President Obama signed a memorandum instructing the U.S.
Department of Transportation (DOT) and the National Highway Traffic Safety
Administration (NHTSA) to finalize a rule - published in March 2009 - prescribing
increased fuel economy for model year 2011 cars and light duty trucks,
increasing CAFE standards for the first time since 1990
– Cars and Light Duty Trucks: In May 2010, DOT and EPA published additional
amendments to CAFE that will significantly increase mileage requirements
by 2016 to 35.5 mpg, a 40% improvement over current standards
– Medium and Heavy Duty Trucks: In October 2010, DOT and EPA proposed
fuel efficiency and global warming standards for these vehicles for the first
time, which have the potential to reduce GHG emissions by nearly 250
metric tons and save 500 million barrels of oil over the life of vehicles sold
between 2014 and 2018
• Improving efficiency of internal combustion engines
– Advanced Technology Vehicle Manufacturing Loan Programs
– EERE Vehicles Technology Program
29

30. Through Recovery Act and Other Programs DOE is
Supporting Biofuels from Demonstration to
Commercialization
• As part of the Recovery Act, DOE has awarded cost-share grants to 19
integrated biorefinery projects throughout the U.S.
• Projects will accelerate the construction and operation of pilot,
demonstration, and commercial scale facilities
• Biofuels and bioproducts produced through these projects will displace
petroleum and accelerate the industry's ability to achieve production
targets mandated by the Federal Renewable Fuel Standard (RFS).
• The nearly $564 million in Recovery Act funding for these projects will be
matched with more than $700 million in private and non-Federal cost-
share funds, for total project investments of almost $1.3 billion
• DOE is leveraging its national laboratories, universities, and the private
sector to help improve biofuels reliability and overcome key technical
challenges, with the goal of creating third-generation biofuels such as
green gasoline, diesel, and jet fuels
30

31. The Renewable Fuel Standard:
A Framework for the Biofuels Industry
• The original RFS program (RFS1) was established under the Energy Policy Act of
2005 and required 7.5 billion gallons of renewable fuel to be blended into gasoline
by 2012.
• RFS2 was established under the Energy Independence and Security Act of 2007
(EISA) and increased the volume of renewable fuel required to be blended into
transportation fuel from 12.5 billion gallons by 2012 to 36 billion gallons by 2022.
• On December 9, 2010, EPA issued final regulations for the volume requirements
that will apply under the RFS2 program in calendar year 2011.
Applicable Volumes for 2011
Statutory Volume for Final Actual
2011 Volume for 2011
Cellulosic Biofuel 250 mill gal 6.6 mill gal
Bio-mass Based 0.80 bill gal 0.80 bill gal
Diesel
Advanced Biofuel 1.35 bill gal 1.35 bill gal
Renewable Biofuel 13.95 bill gal 13.95 bill gal
31

32. Recovery Act: $2.4 Billion Directly Benefitting
Vehicle Electrification
$1.5 Billion in funding
to accelerate the
manufacturing and
deployment of the
next generation of
U.S. batteries
$500 Million in
funding for electric-
drive components
manufacturing
$400 Million in
funding for
transportation
electrification
32

33. DOE Initiatives: Electric Vehicles and Plug-in Hybrids
• $8.4 Billion from DOE’s Advanced
Technology Vehicle Manufacturing
(ATVM) loan program and $4 Billion in
Recovery Act funding, is supporting a
broad portfolio of clean energy
transportation technologies.
• Products and technologies range from
plug-in hybrids and all-electric vehicles
to natural gas vehicles, advanced
biofuels, as well as improvements to
improve internal combustion engine
efficiency.
• DOE is providing critical long-term
financing to:
– Ford Motor Company, $5.9 billion
– Nissan - $1.4 billion
– Tesla Motors - $465 million
– Fisker Automotive - $528.7 million
33

34. How Fast Can the Market Share of Plug-In Hybrids and
Electric Vehicles Grow?
“Expert” Projections Vary Widely
Comparison of 2020 Global EV /
PHEV Sales % Forecasts
Key Forecast
Differences Emanate
from Differences in:
• Component Cost
Reductions (Primary
Difference)
• Energy Cost
Forecasts
• Future Environmental
Policy
• Consumer
Acceptance
*Includes HEV, PHEV, and EV
34

35. Electric Drive Vehicle Battery and Component
Manufacturing Initiative
Company Project Location
Johnson Controls, Inc. Holland, MI
Lebanon, OR
(Entek)
A123 Systems, Inc. Romulus, MI
Brownstown, MI
KD ABG MI, LLC Midland, MI
(Dow Kokam)
Compact Power, Inc. (on behalf of LG St. Clair, MI
Chem, Ltd.) Pontiac, MI
Holland, MI
EnerDel, Inc. Indianapolis, IN
General Motors Corporation Brownstown, MI
Saft America, Inc. Jacksonville, FL
Exide Technologies with Axion Power Bristol, TN
International Columbus, GA
East Penn Manufacturing Co. Lyon Station, PA
35

36. Vehicle Technologies Program: Advanced Technologies for
High Efficiency Clean Vehicles
Hybrid Electric Advanced Combustion Engine R&D Tech Introduction
Systems • Low Temp. Combustion R&D • EPAct/EISA
• Advanced Batteries • Emission Controls • Rulemaking
• Power Electronics • Light- & Heavy-Duty Engines • Deployment
• Inverters • Solid State Energy Conversion • Student
• Controllers & • Health Impacts Competitions
Motors • Graduate Automotive
• Systems Analysis Technology Education
and Testing • Education
• Aerodynamics, Rolling • Safety, Codes, & Standards
Resistance & Accessory
Loads
• Validation
Materials Technology
Fuel Technologies
• Bio-Based Fuels • Lightweight Structures
• Clean/Efficient Combustion • Composite Development
Fuel Characteristics • Processing/Recycling/
• Fischer-Tropsch Fuels & Manufacturing
Blendstocks • Design Data Test Methods
• Advanced Lubricants • High Temperature
Materials Laboratory
36

37. Some Examples of Progress . . .
• “Ford introduced the new Focus, not at an auto show but at the Consumer Electronics Show in Las Vegas,
a symbolic break in tradition for a car company eager to supercharge a field crowded with plug-in
competition. For Ford, it's a back-to-the-future story. Henry Ford's wife drove an electric car back in 1914,
and now their great grandson Bill Ford will drive an electric vehicle they couldn't have imagined.”
• ABC World News, January 7, 2011
• “*Nissan is+ expanding its production of the Leaf to meet an almost insatiable demand for the electric car. .
. . The company said it is on track to deliver 20,000 Nissan Leaf cars to people who have reserved them by
September.”
• GreenBeat, May 3, 2011
• “*Tesla+ CEO Elon Musk said the company may raise additional funding for its third electric car, the Model X
electric sports utility vehicle, according to reports Thursday. . . . Tesla is currently working on its second car,
the Model S sedan, which is aimed at first-time electric car buyers. That model is expected to hit the
market in the summer of next year.”
• Silicon Valley / San Jose Business Journal , May 5, 2011
37

38. Some Examples of Progress
(cont’d). . .
• “The *A123 plant opening+ was heralded as a sign that manufacturing isn't dead in Michigan,
that public-private partnerships are the answer in today's global marketplace and that
America is on its way to ending the country's dependence on foreign oil.”
• Zlati Meyer (Detroit Free Press), September 14, 2010
• “Nissan’s massive new lithium-ion battery plant is continuing to take shape in Smyrna
*Tennessee+. . . . The facility is being built next to Nissan’s existing Smyrna plant, which is
being retooled to manufacture the all-electric Leaf. Production of the Leaf is scheduled to
begin in Smyrna in late 2012, requiring the battery plant to be operating about three months
prior. At full-capacity, the plant will be capable of producing 200,000 lithium-ion batteries
per year.”
• Nashville Business Journal, March 18, 2011
• “Johnson Controls Inc.'s fiscal second-quarter earnings climbed 29 percent on higher revenue
as all three of its business segments reported double-digit sales increases amid a recovering
global economy.”
• Manufacturing.Net, April 25, 2011
38

39. CONCLUSION
• Our Energy Challenge
– Old infrastructure
– Heavily dependent on fossil fuels
– Transformation is slow
• We Can Accelerate Change
– Technological innovation
– Financing innovation
– Innovation in business models
– Working the verticals
– Integration across the horizontals
39

40. DISCUSSION
THANK YOU
Robert H. Edwards, Jr.
Deputy General Counsel for Energy Policy
United States Department of Energy
Tel: +1-202-586-6758
Robert.Edwards@hq.doe.gov
12 May 2011
40