2—
Role of Renewable Sources of Energy

As the new century begins, the United States and most other developed economies are faced with formidable challenges to ensuring that secure, affordable, and environmentally acceptable energy sources will be available to contribute to economic growth and improvements in the quality of life. Many domestic and global factors must be considered in determining and carrying out R&D on new technologies that can help meet these goals. This chapter provides a brief introduction to the key factors and issues the committee considered in its deliberations. Recommendations for helping OPT refine its strategic plans and define its role in delivering the next generation of advanced renewable energy technologies appear in subsequent chapters.

ENERGY RESEARCH AND DEVELOPMENT

The production and consumption of fuels and electricity have comprised a major sector of the U.S. economy since the industrial revolution. Energy is vital to virtually all components of the U.S. economy. In 1996, for example, expenditures for electricity in the United States reached $214 billion. This electricity was delivered by the power-generation industry, which is perennially the most capital-intensive sector in the economy (EIA, 1999). Even though the structure of the U.S. economy has changed dramatically over the last two decades from an economy based on heavy industry to one much more dependent on information and services, the role of energy, especially electricity, is still vital. Indeed, the availability of affordable, environmentally acceptable energy is central to the nation's economic well being and quality of life.



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Renewable Power Pathways: A Review of the U.S. Department of Energy's Renewable Energy Programs 2— Role of Renewable Sources of Energy As the new century begins, the United States and most other developed economies are faced with formidable challenges to ensuring that secure, affordable, and environmentally acceptable energy sources will be available to contribute to economic growth and improvements in the quality of life. Many domestic and global factors must be considered in determining and carrying out R&D on new technologies that can help meet these goals. This chapter provides a brief introduction to the key factors and issues the committee considered in its deliberations. Recommendations for helping OPT refine its strategic plans and define its role in delivering the next generation of advanced renewable energy technologies appear in subsequent chapters. ENERGY RESEARCH AND DEVELOPMENT The production and consumption of fuels and electricity have comprised a major sector of the U.S. economy since the industrial revolution. Energy is vital to virtually all components of the U.S. economy. In 1996, for example, expenditures for electricity in the United States reached $214 billion. This electricity was delivered by the power-generation industry, which is perennially the most capital-intensive sector in the economy (EIA, 1999). Even though the structure of the U.S. economy has changed dramatically over the last two decades from an economy based on heavy industry to one much more dependent on information and services, the role of energy, especially electricity, is still vital. Indeed, the availability of affordable, environmentally acceptable energy is central to the nation's economic well being and quality of life.

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Renewable Power Pathways: A Review of the U.S. Department of Energy's Renewable Energy Programs In fact, in the wake of growing information, service, and other light industrial sectors, as well as electrification of some industrial sectors (e.g., the steel industry), the economy is becoming more electricity intensive at a faster rate than in the past. In addition, a higher premium is now being placed on the quality of the electricity supply. Hence, in many economic sectors, low energy costs and a highly reliable supply of electricity have become crucial. The production and consumption of energy in the United States and other modern economies also have significant national and international repercussions for the environment. Energy systems for producing electricity raise special concerns, such as the management of radioactive wastes from nuclear power plants and the management of emissions from the combustion of fossil or biomass fuels. Most scientists fear that the accumulation of greenhouse gases (e.g., carbon dioxide) in the earth's atmosphere, principally from the burning of fossil fuels, may lead to substantial climate changes. Slowing (or reducing) the buildup of greenhouse gases from the energy sector, both in this country and abroad, would require a substantial reduction in the carbon intensity of the world's energy system. In other words, the system would have to change to energy technologies that do not use fossil fuels to generate electricity, technologies that generate electricity from fossil fuels much more efficiently, or technologies that improve the efficient end-use of energy. Most likely, all three will be necessary. In addition, DOE is investigating options for continuing the interim use of fossil fuels with either carbon removal or capture and sequestration. The involvement of the federal government in the energy sector in the last four decades has increased for reasons of national and energy security, economic vitality and international competitiveness, and environmental quality (including potential climate change). Federal involvement has included extensive programs in the development of energy technologies and involved substantial expenditures on R&D. Before the oil embargo in 1974, most of the federal government's efforts to promote new energy supply technologies were carried out through the Atomic Energy Commission, with the development of nuclear energy, and the U.S. Department of the Interior, with the development of fossil fuels. Formal programs on energy efficiency or renewable energy technologies were rare before the mid-1970s. One of the earliest programs was a National Science Foundation (NSF) program, Research Applied to National Needs, which investigated alternative sources of energy. Following the oil price shocks of the 1970s, the short-lived Energy Research and Development Administration became part of a new cabinet-level department, the DOE, which has since become the lead agency for federal R&D on energy technologies, although other agencies also have relevant programs. DOE's energy R&D program is now approaching the quarter-century milestone. The NSF also has a large number of basic energy R&D programs. Many aspects of the global energy economy are uncertain, as has been demonstrated by events such as disruptive energy price shocks, the emergence of

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Renewable Power Pathways: A Review of the U.S. Department of Energy's Renewable Energy Programs environmental issues, and the explosive growth in the energy demands of developing countries. The U.S. federal R&D program was conceived initially as an investment in a portfolio of technological options to help the United States cope with uncertain future energy supplies, national security, and environmental circumstances. The underlying rationale for a federal R&D program in energy, especially renewable energy technologies, has evolved considerably in both scale and scope. The committee focused on two aspects of this evolution: determining how well the OPT program has adapted to the changing economic, geopolitical, and environmental circumstances; and determining if OPT has established a process for monitoring circumstances to ensure that its programs are matched with anticipated needs. GOVERNMENT SUPPORT FOR ENERGY RESEARCH AND DEVELOPMENT Prior to the 1970s, the prevailing view was that the private sector was the appropriate place for the development of energy technologies. However, economists are quick to point out that there has been inadequate or little private support for R&D that is itself a ''public good" (i.e., when results of the research will become widely known but the beneficiaries are uncertain) or when the primary initial beneficiary of the R&D is an activity with a large public component, such as national defense, improvements in basic infrastructure (e.g., roads, telecommunications, or the power and natural gas transmission and distribution grids), or activities that improve environmental quality but do not generally translate into the normal functioning of economic markets. In the spectrum of R&D activities, those customarily described as basic research (e.g., clarifying the fundamentals of combustion, solar radiation, or nuclear fusion) are often viewed as public goods because the outcomes often cannot be anticipated, let alone the beneficiaries identified. Hence, basic research must often be supported by government. In some cases, if the outcome may affect national security, for example, the government may choose to undertake an investigation either to accelerate or limit the dissemination of results. Firms in most competitive industries are unwilling to undertake basic research if the probability of an outcome beneficial to them is low or difficult to predict and thus cannot be translated directly into shareholder value. This is certainly true of most basic research on energy. In addition, if a firm foresees that it would have difficulty maintaining the advantage of the research, it will demur; this is becoming increasingly common as the economy becomes more competitive and globally connected. Hence, most basic research must be supported directly by government or supported indirectly through universities or other research institutions. Applied R&D is more often the focus of private sector funds. However,

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Renewable Power Pathways: A Review of the U.S. Department of Energy's Renewable Energy Programs because not all of the benefits of improved energy technologies (e.g., environmental benefits) can be captured by private interests, R&D in this area has been generally underfunded. This is the traditional justification for government sponsorship of R&D for less environmentally intrusive forms of energy conversion (e.g., clean combustion, solar energy technologies, fuel cells), although technology development has been pursued by private interests to meet new regulatory standards or, more recently, to avoid effluent fees on the emissions of pollutants. R&D on innovations that enhance a shared, facilitating mechanism (even though the users may derive some private benefit), such as improved traffic control on road networks or improved power grid operation, also require government support. In these cases, R&D is sometimes financed by charges imposed on the ultimate private beneficiaries who do not generally voluntarily agree to fund the R&D. Other R&D that requires government support is focused on the efficient consumption of common-pool, nonrenewable resources (e.g., oil and gas fields not owned by a single owner) or renewable resources approaching the threshold of extinction (e.g., biomass feedstocks). Another rationale for public intervention in applied R&D is in an industry with an institutional structure that may underallocate or misallocate the benefits (e.g., if an industry exhibits monopolistic behavior or if a national security interest might be affected by the involvement of a multinational enterprise). In these instances, the public is unlikely to benefit fairly from innovation without public intervention and/or support. For example, all other things being equal, an electric utility with a local monopoly franchise and excess generating capacity is not likely to have a compelling reason to invest heavily in R&D on new generation technologies, even though for many reasons that utility's customers might benefit. Finally, government also becomes involved in industrial R&D when a national priority or concern has been perceived. Because profitability is a prime consideration of private sector operations, industry has few incentives to think of anything but short-term returns to satisfy stockholders. With competitors waiting to capture market share, few businesses will risk resources to develop products that do not promise immediate returns. In the energy sector in particular, the trend of the last decade toward more competitive markets has led to a marked decline in industry-sponsored research, and even less is expected in the future. Company and other sources of industrial R&D declined from $2.4 billion in 1987 to $884 million in 1997 (NSF, 1997). This trend has persisted despite the general recognition that U.S. industry, in many sectors including the energy sector, frequently enjoys a competitive edge in global markets because of the results of R&D. For reasons that have less to do with strategic positioning of the federal R&D program and more to do with competing priorities and budget cutbacks, the decline in industrial spending on research has been mirrored by a similar drop in federal government-sponsored research. Overall, federal funds for energy R&D fell throughout the 1980s and 1990s, from $1.2 billion in 1987 to $756 million in 1997 (NSF, 1997). In fact, spending for energy R&D has declined significantly in

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Renewable Power Pathways: A Review of the U.S. Department of Energy's Renewable Energy Programs the last 20 years across the industrialized world. The notable exception to this trend is Japan. While energy R&D spending declined by 58 percent in the United States between 1980 and 1995 and by some 85 percent in Germany, Japan increased its energy R&D investment by some 20 percent in the same period. Some have argued that these cutbacks are detrimental to U.S. energy security and will reduce the capacity of the energy sector to innovate and respond to emerging risks on the international fronts, such as global climate change (Margolis and Kammen, 1999). With fewer dollars available overall, government has increased its attempts to work cooperatively with private industry and others to define attainable long-term R&D goals. However, the decline in federal sponsorship of R&D is only one of the forces shaping the landscape for the development of the next-generation renewable energy technologies. Some other influences are the structure of the economy, the maturity of technologies developed to date, the prevailing attitudes toward regulation, the growing complexity of environmental issues, and change from a bipolar world with two superpowers to a world of regional hot spots. In the following sections, many of these changes are described, and their implications for R&D on renewable energy are outlined. BUDGET FOR THE OFFICE OF POWER TECHNOLOGIES Funds for OPT are included in the congressional appropriations for energy and water. Much of the spending is directed as obligated funds for areas such as high energy or nuclear physics. Energy supply activities, including program obligations for solar and renewable energy and nuclear energy R&D, are included in the obligation for energy research analyses. The budget line item for solar and renewable energy encompasses the majority of OPT's programs. Thus, appropriations for OPT's programs are managed in great detail by Congress, and, as a result, the management of OPT is often as much involved with political and budgetary processes as with R&D technology issues. The total budget for OPT programs was just over $300 million in fiscal year (FY) 1995 but was cut back markedly the next year. In recent years, the budget for OPT has rebounded somewhat (Figure 2-1), which shows the historical mix of funds for renewable power technologies. For budgetary purposes, OPT's programs have been divided into three functional areas: renewable power technologies; power delivery technologies; and cross-program activities. Funding for FY00 and FY01 are shown in Table 2-1. The line item for cross-program activities includes the following: solar program support; international issues; climate challenge; renewable energy resources for Native Americans; and federal buildings/remote power. The funding for crosscutting programs referred to in this report (included in the power delivery category in Table 2-1) is shown for FY95 through FY99 in Figure 2-2.

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Renewable Power Pathways: A Review of the U.S. Department of Energy's Renewable Energy Programs Figure 2-1 Funding for renewable power technologies, FY95 to FY99. Source: DOE, 1999. FORCES OF CHANGE Although the development of renewable energy sources has been an integral part of U.S. energy policy since the early 1970s, the motivation for using renewable energy sources has changed considerably. In the 1970s, in the wake of the oil embargo, policy was driven by energy security concerns. Today, one could argue that environmental concerns are dominant. Therefore, although energy security is still a long-term goal for the development of alternative energy technologies, the urgency of the 1970s no longer prevails. The current oil market is much more diversified, the availability of natural gas has dramatically expanded, and the efficiency of energy use in the economy has considerably improved. Other changes in the economic, environmental, and geopolitical situations of energy markets have also had profound effects on energy supply and demand. A variety of environmental, economic, and security concerns have arisen for preserving and nurturing alternative energy options: End of the Cold War. The change from a world dominated by a bipolar struggle between the United States and the Soviet Union to one with more

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Renewable Power Pathways: A Review of the U.S. Department of Energy's Renewable Energy Programs Table 2-1— Funding for Renewable Power Technology Programs, FY00 and FY01   FY00 Enacted ($ millions) FY01 Request ($ millions) Renewable Power Technologies     Photovoltaics 65.9 82.0 Solar buildings 2.0 4.5 Concentrated solar power 15.2 15.0 Biopower 31.8 48.0 Geothermal power 23.6 27.0 Wind power 32.5 50.0 Hydropower 4.9 5.0 Power Delivery     Superconductivity 31.4 32.0 Energy storage 3.4 5.0 Hydrogen 24.6 23.0 Transmission reliability/distributed power 3.0 11.0 Cross-Program Activities 16.7 31.6 Total (rounded) 255 334.6   Source: Dixon, 2000. regional risks has precipitated sweeping geopolitical changes. As the sense of urgency about national security interests has diminished, the case for heavy expenditures in R&D in many areas, including energy, that had traditionally been based on national security objectives must now be rationalized in other ways. Formerly funded R&D must now compete with other policy imperatives, such as health care, for funding. Globalization of trade, finance, and industry. Revolutions in telecommunications and transportation in the last two decades have led to the development of global financial markets, dramatically increased trade in commodities and technologies, and led to the rapid growth of multinational enterprises and activities, including R&D. Mergers and acquisitions, for which overall cost savings are often cited as benefits, have also reduced funds for "discretionary" activities (such as R&D). Major mergers and acquisitions involving multinational firms have also changed the cast of players involved in the renewable energy technology business dramatically over the last decade. Moreover, as long as energy prices in the United States remain low, the early markets for many renewable technologies are likely to be overseas, especially in developing countries.

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Renewable Power Pathways: A Review of the U.S. Department of Energy's Renewable Energy Programs Figure 2-2 Funding for crosscutting programs, FY95 to FY99. Source: DOE, 1999. Widespread adoption of market-based approaches to regulation. In the last decade, successful experiments in economic deregulation and market-based environmental regulation have led to the adoption of similar strategies at all levels of government. Sweeping changes in federal and state legislation have changed the economic and environmental regulatory context of the energy business, especially the utility business. Restructuring of the electric utility industry. A prime example of the trend toward market-based regulation is the transformation of the electric utility industry to an industry centered on competitive markets for power generation and final markets in other areas. A competitive electricity market may, with appropriate policies, improve the deployment or renewable energy technologies in the long term; these changes have seriously undermined the short-term climate for the adoption of new technology in the electric power business by reducing available funds for industry investment in long-term power-generation alternatives. Restructuring of the oil and gas sectors. Sweeping changes in the oil and gas business over the last decade, including the evolution of futures

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Renewable Power Pathways: A Review of the U.S. Department of Energy's Renewable Energy Programs markets, the diversification of world oil supplies, and dramatic increases in the availability and discovery of new natural gas reserves, have led to persistently low oil and gas prices, which have greatly weakened incentives for the development of alternative energy supplies. Increased role of state governments. The diminishing federal role in energy R&D, coupled with the restructuring of electricity markets in many states, has actually increased the level of activity supported by some states in the development of renewable energy technologies. These state-sponsored programs are likely to have an important impact on the early commercial adoption of some renewable energy technologies in the United States. Renewable portfolio standards and/or systems benefits charges (SBCs) are included in the power industry restructuring in 13 states. In general, the restructuring of the power industry in the direction of more competitive markets has been driven by the potential economic benefits of lower costs and lower prices for electricity. SBC funds have been created by states to enable them to continue funding the public benefit programs that were originally implemented through utility rate structures. SBC funds generally include a component (usually a small component) for improving efficiency overall and developing renewable energy systems during the transition to a fully competitive market. Although SBCs are designed to last for a limited period of time, they do create a substantial challenge to the renewable energy technology community because the infusion by states of almost $1.6 billion through 2010 into technology development and deployment is an opportunity that is not likely to be repeated (Wiser et al., 1999; see Chapter 3). If state programs fail to achieve defined goals, it will be difficult to justify continuing the investment once the current financial incentives expire. Improved understanding of the global environment. Research on global environmental issues has begun to sharpen divisions in the policy debate about global climate change and other issues. Although many uncertainties remain in the science of global climate change, many uncertainties have been resolved or reduced over the past decade. For example, it is now generally accepted that the activities of human populations do affect the global environment, and the debate is shifting to how far-reaching those effects are (e.g., the consequences of a rise in the average temperature of the earth, which has changed weather and rainfall patterns; the incidence of extreme weather events; and rising sea levels). Other serious environmental concerns, such as emissions of sulfur, nitrogen oxides, fine particulates, mercury, and other toxic materials that affect air quality, are crucial for developing countries. Most of these are principally by-products of fossil fuel combustion. Transition from deficit spending to surpluses in U.S. federal budgets. The budget austerity that dominated discussions of federal R&D in the

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Renewable Power Pathways: A Review of the U.S. Department of Energy's Renewable Energy Programs 1980s and much of the 1990s have given way to federal budget surpluses. Current constraints on R&D expenditures are influenced more by competition with other federal programs and priorities, such as health care, than by a desire to balance the budget. Decrease in total energy R&D. More than 80 percent of DOE's budget goes to areas other than energy R&D. Erosion of the boundary between basic and applied research. Innovations in industry are being made at all levels, and even across levels. Better information about industrial processes, more flexible technologies and materials, better process controls, and many other factors have blurred, and sometimes eliminated, the traditional distinction between basic and applied research. For example, fundamental discoveries in materials can make their way into applications, and the experiences of those applications can prompt new directions in basic research so quickly, that the traditional sequence breaks down. Rapid changes have fundamentally changed the selection of research directions and the way proposed projects fit into an integrated program. Thus, the old model of the linear progression of R&D is breaking down. Many renewable technologies will require introduction into the market to complete the development cycle with modular units suitable for mass production. In the past decade, DOE's R&D program, including OPT in renewable energy, has not been able to adapt its strategic rationale for program activities and priorities in response to these changes. Even decisions about the R&D portfolio based on traditional factors, such as persistently low energy prices and uncertain and declining R&D budgets, are not reflected in R&D planning and priorities. As a result, OPT's overall program appears to be outdated, burdened by inertia, and suffering from a lack of clear direction. Until recently, DOE was able to "stay connected" to the thinking and planning of the electric industry, which was rather homogeneous and "open." The emergence of a competitive supply sector with different economic drivers, technology risk profiles, and commercial strategies, has challenged DOE to engage new suppliers, as well as conventional suppliers, in future technology decisions. EVOLUTION OF RESEARCH ON RENEWABLE ENERGY In the 1970s and early 1980s, energy prices were expected to rise, and the opportunity for using natural gas in industry, especially for the production of electric power, was expected to be limited. Indeed, for nearly a decade, the Powerplant and Industrial Fuel Use Act prohibited natural gas from being used in industrial boilers or electric power generation. In the wake of the discovery of large resources of natural gas, that legislation was repealed in 1986.

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Renewable Power Pathways: A Review of the U.S. Department of Energy's Renewable Energy Programs Since then, the widespread availability of natural gas, considerably more efficient uses of energy, and numerous other technological improvements have all contributed to very low energy prices and relegated most alternatives to natural gas technologies to niche markets for the foreseeable future. Even though most renewable energy technologies have met or exceeded expectations with regard to performance and cost, renewables have not met deployment goals mostly because of the declining price of conventional electric power generation (Burtraw et al., 1999). The goals, policies, and technology development programs established in the 1970s were intended to reduce U.S. dependency on foreign oil while conserving U.S. resources of oil and natural gas. A key piece of legislation enacted during this period was the Public Utility Regulatory Policies Act of 1978 (PURPA). Although it did not emerge from court challenges until 1983, PURPA encouraged the use of alternative energy technologies in electric power generation. The cogeneration of thermal energy and electrical power to improve the efficiency of fossil energy use in electric power generation, which was included almost as an afterthought, dominated the implementation of PURPA in the 1980s, even in California, the state with the most extensive deployment of renewable energy technologies. PURPA was also instrumental in accelerating the commercial deployment of renewable energy technologies in the 1980s, especially wind power technologies, but also geothermal technologies and, to a much lesser extent, solar-thermal technologies. Federal sponsorship of demonstration projects, federal and state tax credits and other subsidies (e.g., loan guarantees, low interest loans, and grants), the creation of so-called "standard offer" contracts for new projects to minimize the hassles of negotiating new projects, added costs to meet increasingly stringent regulatory requirements on traditional sources of power-generation (e.g., coal and nuclear energy), a financially struggling electric utility industry, a general expectation of continued increases in energy prices, and occasional geopolitical events that focused attention on energy security all contributed to the deployments of renewable energy technologies in the early 1980s. At the same time, natural gas markets became increasingly deregulated, precipitating a number of important energy technology trends, such as dramatic improvements in exploration and drilling technologies and in the cost and performance of combustion turbine technologies for electric power generation. These trends fundamentally changed the U.S. energy outlook, resulting in persistently low natural gas prices and technology costs relative to other fuels and the current dominance of natural gas-combined cycle units for new electric power generation projects. The impact of low cost, modular natural gas units, and the expiration of many subsidy programs have resulted in a vastly diminished domestic renewable power industry. Despite the dominance of natural gas in new energy markets, concerns about the long-term availability of clean domestic sources of energy are still the basis

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Renewable Power Pathways: A Review of the U.S. Department of Energy's Renewable Energy Programs for the development of renewable energy technologies that would consume virtually no finite resources. However, the R&D agenda for renewable energy technologies has formidable cost and performance hurdles to overcome. STRATEGIC RATIONALE FOR THE OFFICE OF POWER TECHNOLOGIES' PROGRAMS The significant changes in energy markets and the restructuring of the industry in the last decade are not reflected in the strategic direction of OPT's technology programs for the next decade, which are still focused on the cost, performance, and security goals established during the late 1970s and 1980s. The following national energy interests should drive OPT's programs (Office of the President, 1997): competitive market entry environmentally sustainable energy supplies national energy security and the reliability of critical infrastructure Competitive markets are creating new opportunities for particular technologies as commercial and residential buyers are beginning to purchase energy systems tailored to meet specific energy needs. Environmentally preferred and locally distributed energy supplies are examples of new products that could accelerate commercial demands for OPT-developed technologies. At the same time, uncertainties about interconnection pose significant barriers to the market entry of some new technologies. Establishing a strong domestic market for renewable energy technologies will also drive competitiveness in global markets. Industry investments are also being influenced by the addition of risk-mitigation strategies for carbon dioxide emissions to regional and local public health and safety regulations. Increased energy imports make the diversity and security of energy supplies important national considerations. The restructuring of the electricity market has created both opportunities and challenges (e.g., redesign of the transmission and distribution grid to support reliability and competitive access goals) to the deployment of renewable energy technologies. If these technologies become a significant part of the domestic power generation mix, they would not only add to the diversity of energy supplies but would also add to the security of energy supplies. In summary, the strategic drivers described in the section above should define the role of the OPT. Renewable energy technologies developed by OPT could increase the options for meeting national energy objectives, but OPT programs are not currently designed to meet these objectives. OPT has only recently begun to explore ways to redirect its programs to meet the strategic needs of the United States.

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Renewable Power Pathways: A Review of the U.S. Department of Energy's Renewable Energy Programs CONCLUSIONS FROM RECENT ENERGY STUDIES A number of studies related to energy technologies and associated R&D have been conducted during the past few years (see brief summaries in Appendix C). A study in 1995 by the Task Force on Strategic Energy R&D recommended that DOE benchmark its R&D management practices against ''best practices" elsewhere and develop an integrated strategic plan and process for energy R&D, including the establishment of priorities (DOE, 1995). Technology Opportunities to Reduce U.S. Greenhouse Gas Emissions, known as the Five-Laboratory Study, found that renewable energy technologies could have a major effect on the reduction of carbon emissions to the atmosphere, but mostly after 2010 (DOE, 1997). Scenarios of U.S. Carbon Reductions, the Eleven-Laboratory Study, also concluded that renewable energy technologies have a significant potential to reduce greenhouse gases to the atmosphere by displacing electricity generated by fossil fuels and that a national investment in R&D and demonstration over the next three decades would provide a portfolio of technologies that could significantly reduce greenhouse gas emissions (EERE, 1997). A recent report by the President's Committee of Advisors on Science and Technology (PCAST) on federal R&D noted that, although costs have been reduced significantly, the primary challenge facing renewable energy technologies is the relatively high unit costs compared to unit costs using abundant fossil fuels. PCAST recommended significant increases in R&D budgets for renewable energy technologies to increase the probability of developing viable energy options to meet a variety of environmental challenges (PCAST, 1997). In a more recent report, PCAST identified significant international opportunities for renewable energy technologies and suggested that the development and deployment of renewable energy technologies be accelerated, especially technologies that might be appropriate for use in rural areas of developing countries (PCAST, 1999). COMPREHENSIVE NATIONAL ENERGY STRATEGY Despite existing regulations and possible international restraints, the U.S. energy strategy should reflect a balance between environmental concerns and industrial needs to encourage economic growth and decrease the environmental impacts of energy use. In cooperation with other federal agencies, and through a public hearing and comment process, DOE recently codified a Comprehensive National Energy Strategy (CNES) (DOE, 1998). The purpose of this policy plan is to address the major energy challenges facing the United States and to provide a basis for directing and guiding future action. The plan is based on the following five goals:

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Renewable Power Pathways: A Review of the U.S. Department of Energy's Renewable Energy Programs Improve the efficiency of the energy system by making more productive use of energy resources to enhance overall economic performance while protecting the environment and advancing national security. Ensure against energy disruptions by protecting the U.S. economy from external threats of interrupted supplies or infrastructure failure. Promote energy production and use that reflect human health and environmental values thus improving health and local, regional, and global environmental quality. Expand future energy choices by continuing to pursue science and technology to provide future generations with a robust portfolio of clean, affordable sources of energy. Cooperate internationally to address global economic, security, and environmental concerns. DOE's policy objectives are to focus attention on the importance of energy in the U.S. economy and national security, as well as to increase awareness of the environmental effects of using fossil fuels to produce energy. Thus, DOE hopes that public knowledge of how energy is supplied and used will encourage the efficient utilization of energy resources. In the following chapters the committee examines how well the OPT program portfolio furthers these policy objectives and how well the program plans can be adapted to changes in the global and domestic energy markets. REFERENCES Burtraw, D., J. Darmstadter, K. Palmer, and J. McVeigh. 1999. Renewable energy: winner, loser, or innocent victim? Resources 135: 9-13. Dixon, R. 2000. Energy Efficiency and Renewable Energy in the Office of Power Technologies. Presentation by Robert K. Dixon, acting deputy assistant secretary for the Office of Power Technologies, to the Committee for the Programmatic Review of the Office of Power Technologies, U.S. Department of Energy, Washington, D.C., February 7, 2000. DOE (U.S. Department of Energy). 1995. Report of the Task Force on Strategic Energy Research and Development. Washington, D.C.: Secretary of Energy Advisory Board, U.S. Department of Energy. DOE. 1997. Technology Opportunities to Reduce U.S. Greenhouse Gas Emissions. Washington, D.C.: U.S. Department of Energy. Also available on line at: http://www.ornl.gov/climate_change DOE. 1998. Comprehensive National Energy Strategy: National Energy Policy Plan. DOE/S-0124. Washington, D.C.: U.S. Department of Energy. DOE. 1999. Available on line at: http://www.eren.doe.gov/power/budget.html EIA (Energy Information Administration). 1999. Annual Energy Outlook 1999. Washington, D.C.: Energy Information Administration, U.S. Department of Energy. EERE (Office of Energy Efficiency and Renewable Energy). 1997. Scenarios of U.S. Carbon Reductions: Potential Impacts of Energy Technologies by 2010 and Beyond. Washington, D.C.: U.S. Department of Energy.

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Renewable Power Pathways: A Review of the U.S. Department of Energy's Renewable Energy Programs Margolis, R., and D. Kammen. 1999. Underinvestment: the energy technology and R&D policy challenge. Science 285(5427): 690–692. NSF (National Science Foundation). 1997. Survey of Industrial Research and Development. Arlington, Va.: National Science Foundation/Statistical Research Service. Office of the President. 1997. Critical Foundations: Protecting America's Infrastructures. Report by the President's Council on Critical Infrastructure Protection. Washington, D.C.: Office of the President. PCAST (President's Committee of Advisors on Science and Technology). 1997. Federal Energy Research and Development for the Twenty-First Century. Washington, D.C.: Executive Office of the President. PCAST. 1999. Powerful Partnerships: The Federal Role in International Cooperation on Energy Innovation. Washington, D.C.: Executive Office of the President. Wiser, R., K. Porter, and S. Clemmer. 1999. Emerging Markets for Wind Power: The Role of State Policies under Restructuring. In Proceedings WINDPOWER 1999. Available on CD-ROM only. American Wind Energy Association, 122 C Street, NW, 4th Floor, Washington, DC 20001.