US energy chief Moniz: Three reasons for hope on global warming

Question: In the recent weeks, the Intergovernmental Panel on Climate Change (IPCC) issued a couple of reports that once again depict the challenge of rising greenhouse gas emissions. What gives you hope that the US and the global community can make progress on climate change?

Dr. Moniz: I’ll give you three reasons. One is the continuously increasing confidence of the scientific community, as demonstrated in the IPCC reports, and the emphasis that was placed on how a response to climate change risks will be much easier and less expensive if we do it now.

Secondly, the one prior report was on adaptation to what we’re already seeing. I might point out the president’s plan of last June similarly had mitigation and adaptation in there, and I frankly think that the public is being and will be influenced by this adaptation requirement, because increasingly one sees the amplifying effects of global warming on extreme weather, on extreme drought, on storm surges, warming waters, rising sea level, increased wildfires. And I think that we have every reason to believe this trend will continue, and that I think will have a very strong influence on the public.

Third, I’m a technologist, and I believe that we will continue to see the cost reduction in the low-carbon technologies continue very, very rapidly. Solar is a great example. Another one is [light emitting diodes (LEDs)] in terms of efficiency. The cost reduction in both cases is pretty staggering. When we published a little article “Revolution...now” back in September or October, we were stunned to find that 20 million LEDs had already been deployed in the United States as the costs were dropping. We look back now and it’s 34 million already so this is going up … and the reason is cost reduction. We are pursuing technology innovation across the entire innovation chain: research, development, demonstration, deployment. And the object of that innovation is very simple: cost reduction. Make those technologies continuously drop in cost and we will see the deployment go up and the policy be easier to implement. 

Q: The White House issued a crisis support package for Ukraine this week that emphasizes the reversal of natural gas flows from Ukraine’s western neighbors, increased natural gas production, and efficiency gains. Can you offer any specifics on these plans and how the Department of Energy (DOE) is participating in efforts to secure Ukraine’s energy future?

A: With regard to Ukraine specifically, they do have a lot of gas potential that they are not developing, both conventional and unconventional. A lot of American companies or companies operating in America are where most of the expertise lies with regards to unconventional in particular, so we will be facilitating that – DOE, the Department of State working together with the companies. There’s quite a potential there to increase their production.

Secondly, the Ukrainian economy ... [is] opportunity rich for energy efficiency improvements. This is an enormous part of the equation. If they reach the standards of energy efficiency across the economy – this includes in buildings, certainly in the industrial base – they would dampen their natural gas requirements to a state where you’d have a big impact on their needs for Russian gas by both producing more and requiring less. So we’ll be advancing that.

In terms of things like reverse flows, some countries have already done that in these last years. I was recently in the Czech Republic, and they had done some infrastructure development with Germany, which can be very helpful in a shortage situation. We need to do that with Ukraine now. So all of these are important steps.

Finally, in addition to Ukraine specifically, in a couple weeks I will be in Rome where we will have a G7 energy ministers meeting as was charged by the G7 leaders in a meeting that they held in The Hague about three weeks ago. That will be looking more broadly at the whole energy-security issue, and what we can do individually and collectively – first, within our seven countries – but then of course with the countries with whom we interact.

Q: Is it fair to say that the emphasis right now in terms of support for Ukraine is on the exporting of energy technology and expertise as opposed to boosting liquefied natural gas (LNG) exports or reconsidering the ban on oil exports?

A: Our LNG exports will not start until the end of 2015 and they won’t really, frankly, kick into high gear until towards the end of this decade. We have approved or conditionally approved a very significant volume already, but you won’t see that volume flowing for several years. So in the meantime – I think going in parallel – conventional development is something that can happen relatively quickly [in Ukraine]. The unconventional development also will take quite a few years to happen. So, we have to look at different timescales and implement assistance – technical assistance or other kinds of assistance – with those different timescales in mind. Something like efficiency, typically, you can have a pretty short response time if you push on that.  

Q: Can you give any kind of update on the LNG permitting process? Is there any kind of acceleration or pressure to speed those up?

A: We’re always looking at the process. In fact, one of the important public interest determination criteria is the impact on domestic markets and, specifically, the cumulative effect of amounts of export is part of that determination. So, that already tells you we must be looking continuously at this. In our last conditional approval [within the lower 48 states], which was … Jordan Cove in Oregon. There if you look at that order compared to previous ones, the discussion of the geopolitical implications as a criterion was elevated. So, clearly we are looking at that. We are looking at it now; We look at it pretty much continuously.

Q: Would you support lifting the ban on oil exports in the US?

First of all I want to make it very clear: That responsibility lies with Department of Commerce, not with the Department of Energy ... One perspective that is typically not noted in this discussion is the fact that we do still import roughly 7 million barrels a day of oil and oil liquid fuels, so it's not like we are not a major importer. That clearly is part of the equation there.  

Q: One of the things since taking office you have been working to revive is the loan guarantee program, which has drawn some controversy in the past. Looking forward, what changes are you implementing in the program to minimize the risk of repeating past failures?

A: First of all, nobody likes to see any of the projects fail, but I don’t think the portfolio has failed – quite the contrary. We’re talking about a just over 2 percent default rate on a $32 billion portfolio. I think a lot of investment funds would die for that rate. In fact, ironically some say ‘Well maybe you’re not taking enough risk with it,’ but of course in a public sphere it’s a little different. That’s why I haven’t exactly been reticent in talking about the fact that we have a lot of authority left and we plan to use it – $40 billion roughly left in a couple of different pots. So I say the program has been very successful, particularly in first movers.

You look back at 2009-2010, it was very hard to get any debt financing. This program moved forward the first five utility scale [photovoltaic (PV)] plants in the country, the first [concentrating solar power (CSP)] plants. Now, on the PV side, there are 10 more with purely private financing. The Vogtle [nuclear plant in Waynesboro, Ga.] loan – when that originated back in that period – Vogtle was also the first mover for new nuclear plants. The advanced vehicle program has had great successes with Ford, Nissan, Tesla. Also there was the Fisker challenge, but again, as a portfolio, I think it has performed extremely well.

So now, we’re saying we’re going back to it. We have a carbon-reducing fossil technology solicitation of $8 billion. We have proposals – some will be going into due diligence. We have the renewables and efficiency [loan] coming. We also went to the auto supplier companies and made clear to them: We’re open for business on the advanced vehicle program and suppliers can qualify. And as we move towards the CAFE standard driver of 54-1/2 miles per gallon by 2025, suppliers are going to have develop a whole bunch of new components – whether it's tires or engines or lightweight materials. Our philosophy is we still want to be in that kind of first-mover space. We will probably do more co-investing now, given some of the recovery in the debt markets.

Q: You’ve long supported natural gas as a “bridge fuel” to renewables because of the reduced carbon emissions. Lately, there’s been a lot of attention on the issue of methane leaks. How worried are you about this problem, and what needs to be done to ensure that its solved?

It’s something that certainly we are taking very seriously in addressing. We have a multiagency group involving DOE, EPA [Environmental Protection Agency], Department of Interior and … the USDA [US Department of Agriculture], because of course there’s a significant methane emission issue there. So we’re coming together on that. But I want to emphasize is the Department of Energy is having a series of about five round tables bringing together different stakeholders on methane emissions. We’ve had one already – brought together pipe companies, labor, environmental groups, industry types. It was very interesting – much more of a common view than many of us had anticipated. We emphasized in that meeting: It’s not only about methane emissions at wellheads … we should have a more balanced view because a lot of the issue is the whole gathering, transmission, and distribution system and that is tied into our need to renew very old infrastructure. Even recently here in Boston I think there was a gas explosion. Fortunately, I believe no one was killed in that. 

In some sense it’s an opportunity to both cut down on methane emissions and renew our infrastructure for the 21st century. [My visits to Connecticut and Rhode Island Monday] were our first regional meetings – going out to the regions of the country to look at energy infrastructure issues as part of our quadrennial energy review process. While the rest of the country talks about the energy revolution and the great abundance of energy, that’s not how it looks here in New England. Here’s again, a shortage of adequate infrastructure.  

The infrastructure challenges are multiple and different in different regions. If you look at the polar vortex, you had the issues in New England … but you also had these enormous propane issues – some of them here but especially acute in Minnesota, Wisconsin, Michigan, the Upper Peninsula. There, an enormous price differential developed between the big propane hub in Kansas and the propane hub in Texas because the infrastructure wasn’t there to move it north.

We have huge discussions going on about oil by train – a lack of infrastructure. Although now, interestingly enough, some of the operators are saying, well, you know, now that we look at it – we’ve got to handle the safety issues of oil by train – but there are some advantages because the Gulf refineries typically handle the heavier crudes. And the very light crudes, say from North Dakota, are going to East Coast and West Coast refineries that handle the lighter crudes. And right now there is no infrastructure going east-west. Trains are filling that. So it’s a complicated issue and it’s going to take a couple of decades to get it all right, but we need to start now.