Senate Energy Committee Questions Department of Energy Secretary Chu on U.S. Energy Spending and Clean Energy Competitiveness With China

The U.S. Senate Committee on Energy and Natural Resources held a hearing on Wednesday, February 16th, to receive testimony from Energy Secretary Dr. Steven Chu on the Department of Energy’s Fiscal Year 2012 Budget Request. In the Chairman’s opening statement, Senator Bingaman (D-NM) said: “…we actually spend less than China on energy R&D per unit of GDP. China is investing heavily in manufacturing and deploying wind, solar, and nuclear power plants. These investments are already translating into global sales and domestic Chinese jobs in an area where the United States once led the world.”

Secretary Chu laid out the particulars of the budget request by reading from his written testimony, and then answered questions from Committee members. One of his recurring talking points throughout the hearing was that clean energy will be cost competitive with fossil fuels in the near future, and the company or country that develops that technology will gain the advantage in the world market. He repeated this at several points, arguing in favor of the budget’s investment choices in R&D.

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Senator Murkowski (R-AK) asked whether the Clean Energy Standard (CES) will be technology-neutral, and why in the budget request some resources (wind, solar, biomass) are being favored while others (hydropower, nuclear, natural gas) are being reduced or cut.

“The CES will be technology-neutral,” according to Chu. The standard is meant to create market certainty for investors. Regarding the technology investment choices, “If you look at the history of technology development in the United States, there are mature technologies and then there are technologies that need to be further developed. In the first half of the 20th century, oil and gas got considerable help from the federal government. We consider those mature technologies today. And if you look at, for example, the solar industry, we feel that there could be dramatic improvements in photovoltaics and solar-thermal, and, quite frankly, there is a world race to get to those improvements… There is a significant chance that solar energy will be competitive, without any subsidy, with fossil fuel. The country or companies that develop that technology will have a worldwide market.”

Chu also drew attention to the big picture problems, saying that there are many good ideas and technologies already out there, but integrated systems are what matter now, and the Smart Grid, Advanced Battery, and Critical Materials energy innovation hubs are being created to “connect the dots”. He didn’t state it, but this concept obviously supports cooperation with China on Smart Grid development. I think batteries and materials may be a bit more prone to benefiting from healthy competition though.

A few China-specific questions emerged from the Committee:

Senator Hoeven (R-ND) was concerned that DOE might be picking winners and losers with loan guarantees, and asked whether the CES would do the same. Chu replied that the CES does not pick winners and losers, and pointed out that many of the CCS experiments were being done in China, evidence that the Chinese also see an opportunity in the technology.

Senator Sanders (D-VT) prefaced his question with the statistic that roughly half of all solar and wind products are manufactured in China, and asked how the new budget addresses the problem that “technologies developed in the U.S. are slowly and steadily moving to China for manufacture.” Chu stated that “yes, there is a clean technology race on” and “we don’t want [technologies] invented here and manufactured in China.” He pointed out that any wind company prefers to have a local supply chain, but that depends on having a market, and that the CES would work to create that market here.

Senator Barasso (R-WY) turned the discussion to coal, asking “Since the new budget cuts the clean coal category by 26%, does this indicate that DOE believes this is a mature technology?” Chu seemed to dodge this by saying that no it was not mature, but that $4 billion had already been invested under ARRA and elsewhere, and there will be an international market for these technologies in China, Russia and elsewhere. He didn’t comment on the state of Chinese technology development here.

Senator Manchin (D-WV) Asked whether the cost of energy in China has increased as much as ours has in the last year, and is coal to liquids (CTL) technology now attractive? “Yes, their energy costs are going up,” according to Chu, continuing on to point out that CTL actually becomes carbon negative when CCS and biomass components are added, referencing a 2009 AAAS report . (See the ChinaFAQs expert blog for more on China’s CTL pilot project at Ordos).

Senator Risch (R-ID) said that fossil fuels and nuclear power are very important to the American economy, and that the new budget does not reflect that. He asked what Chu would tell the President next election year when gas is $4 a gallon and his constituents are unhappy. Chu replied that using our oil more efficiently will drive prices down, but a long-term strategy is necessary because of rising demand from China, India and the developing world. Risch said that these arguments for the long term don’t carry much weight with constituents feeling everyday pressure at the pump.

View an archived video of the hearing

The Energy and Natural Resources Committee also released their subcommittee assignments on Wednesday.