BENEFITS OF DOE’S RD&D IN FOSSIL ENERGY AND ENERGY EFFICIENCY

Finding 1. DOE investments in RD&D programs in both the fossil energy and energy efficiency programs during the past 22 years have contributed to the well-being of U.S. citizens by producing economic benefits, options for the future, and knowledge benefits. It is the committee’s judgment that the benefits of these programs substantially exceed the programs’ costs and contribute to improvements in the economy, the environment, and national security, as described below.

The energy efficiency programs evaluated by the committee accounted for roughly 20 percent of the expenditures on all energy efficiency programs in the past 22 years. The committee believes that the programs it reviewed constitute a representative sample of all energy efficiency programs and that the conclusions from this analysis are applicable throughout the energy efficiency portfolio.

The committee’s evaluation of fossil energy programs examined programs accounting for more than 70 percent of fossil energy expenditures during this 22-year period. There is a marked difference in the character of the fossil energy programs launched from 1978 to 1985 and that of the programs launched from 1986 to 2000. The fossil energy programs of the 1978 to 1986 period, which was dominated by an atmosphere of crisis following the 1973 oil embargo, emphasized a high-risk strategy for circumventing commercial-scale demonstrations by going directly from bench-scale to large-scale demonstrations to make synthetic fuels from coal and shale oil and to produce oil using enhanced oil recovery techniques. In the second period, however, the fossil energy R&D program was systematic and involved a more diverse portfolio and greater emphasis on increasing the efficiency of electric power generation using natural gas, on reducing the environmental impact when burning coal, and on advanced oil and gas exploration and production.

The committee found that a relatively small number of programs in energy efficiency and fossil energy accounted for the majority of the economic and environmental benefits. This characteristic of RD&D programs, in which a few “home runs” are responsible for the majority of returns on investments, is shared by industrial R&D programs and underscores the importance of maintaining a diversified portfolio of investments. The areas in which these benefits were greatest relative to program expenditures include residential and commercial construction, an industry that historically was not particularly innovative, and technologies to reduce environmentally harmful pollution. These are precisely the areas in which one would anticipate that public R&D programs are most likely to prove most effective (see below for additional discussion). By contrast, DOE efforts to push the technology to commercial application in large, accelerated RD&D programs such as coal liquefaction have been extremely risky and prone to cost overruns and generally have yielded relatively small realized economic, environmental, or security benefits relative to their high costs. Again, however, this tendency is not unique to DOE RD&D programs but has been demonstrated in numerous other federal and civilian technology RD&D programs.

Finding 1a. Economic benefits. Although the committee was not always able to separate the DOE contribution from that of others, the net realized economic benefits in the energy efficiency and fossil energy programs were judged by the committee to be in excess of the DOE investment.

In the energy efficiency programs reviewed by the committee, most of the realized economic benefits to date are attributable to three relatively modest projects in the building sector carried on the late 1970s and 1980s and continuing into the 1990s. The committee estimated that the total realized economic benefits associated with the energy efficiency programs that it reviewed were in the $30 billion range (valued in 1999 dollars), substantially exceeding the roughly $7 billion (1999 dollars) investment for energy efficiency RD&D over the 22-year life of the programs.

The committee estimated that the realized economic benefits associated with the fossil energy programs that it reviewed amounted to nearly $11 billion (1999 dollars) over the same 22-year period, some of which is attributed to costs avoided by demonstrating that more stringent environmental regulation is unnecessary for waste management and by addressing airborne toxic emissions. As was noted earlier, the estimated economic benefits of programs instituted during the 1986 to 2000 period, $7.4 billion, exceeded the estimated $4.5 billion cost of that period’s fossil energy programs. The realized economic benefits associated with fossil energy programs from 1978 to 1986, $3.4 billion in 1999 dollars, were, however, less than the costs of the period’s fossil energy programs, $6.0 billion in 1999 dollars.

In addition to realized benefits, a number of technologies were developed that provide options for the future if economic or environmental concerns justify their use. For example, the Office of Fossil Energy’s advanced turbine systems (ATS) and integrated coal gasification combined-cycle (IGCC) systems are technologically ready options awaiting changes in the energy marketplace. The energy efficiency RD&D also produced option benefits, with the Partnership for a New Generation of Vehicles (PNGV) and the forest products Industries of the Future program being important examples. The committee made no attempt to evaluate very recent technologies resulting from current R&D programs that extend beyond the period covered by our assessment. For example, carbon sequestration, Vision 21, and the 21st Century Truck Initiative were not assessed, because any benefits that accrue are expected to occur outside the time frame for the committee’s evaluation. This retrospective nature of the evaluation means that no conclusions about the eco-



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