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tv   [untitled]    June 19, 2012 7:30pm-8:00pm EDT

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in the economy, already contributing. do they need the same number of calories or retention or resources of the family to go forward? and i think you have two different dynamics that you describe there from a public policy point of view and capital flows, but if you look at capital flows, our country is largely a regulated energy industry, both from a profit and an environmental rules point of view, and i think you get into their dynamic, and i would argue that it's probably more like, and i haven't built any plants in china. i'm speculating from what i've learned, that it's probably like what it was in this country 57 years ago, meet with a local politician, get your quote, unquote permit and get your highway and infrastructure asset. in this country anything that's billions of dollars is not a one dinner meeting or one lunch meeting or anywhere in the 50 states so i would argue that they have a simpler regulatory regime for construction decisions around large infrastructure assets, and yoprobably feelingth when you visit. ht. yeah. aan with a chese
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solar developer last year, and he wassked how long it took to permit his 50 megawatt solar project, and he stunned the audience because he said one day. it took one day to get the land permit, the air permit, the construction permit and basically the financing as well, and when you think about the two years, three years, sometimes up to five years it takes in the u.s. to be able to get all of the entities involved to just approve putting the shovel in the ground to start construction, you realize we're at a significant cost disadvantage because that time frame that it takes in the u.s. costs money. it's high-risk development money. it's consultants and a lot of people spending a lot of time writing and doing all the kind of reports and working with all the different governmental entities that are involved in each of those decisions and getting those governmental entities to work together to be able to ultimately come out with the same decision to move the
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project forward, and for every project that moves forward, you have a couple that don't move forward, so there's the further cost of the dead projects and the money that was spent on the projects that didn't get the approval at the end of the day that basically needs to get a return from those projects that are successful, so as mike said, we are at a different stage of maturity as a country in developing these assets. but going back to your original question. i really felt like there was tremendous momentum behind renewables two years ago, and i think that a combination of the negative press from solyndra, the elimination of the ptcs and the gridlock in congress has resulted in a very different mindset about the future for renewables right now. i don't think the basic economics of renewables has gotten worse. in fact, i think they have gotten better. i think the opportunities are as great or even more significant than they were a few years ago. it's just that the overall mindset of the public has
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changed. >> interesting. comments on this? >> yes. so, just to get -- give the audience a sense of what you're talking about in terms of up-front investment and stuff. just kind of give a couple of representative numbers for an offshore wind farm. you've got development period and you might spend, you know, $20 million or $30 million during that development period. if you're successful to build say a 500 megawatt plant, you're looking at say 1.5 billion, so you could afford to throw away -- if you're a big enough company, you can afford to throw away 30 million a couple of times if your 1.5 billion project is successful. >> not if they work for me. cape wind, for example, has been through the permitting process. it's almost ten years now. so they are trying to permit a wind farm in nantucket sound. it's all the principal's money. it's not the shareholder's money. >> jim gordon is a very successful man that sold out gas
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plants to a large ipp and he's playing with the house's money. >> still taken ten years. >> he's got almost $50 million into the permitting. >> compare that to, if you want to do an offshore oil platform in the gulf, it's about two years to do a permit, so that permitting time has -- has a definite effect on the viability of projects. but to answer your question, are things on fire, not from a technology perspective? as i mentioned, i've spent six months in europe last year, and i was in denmark, but interacting with people in germany and the uk and so forth, and in wind technology, that area is very much on fire. all the universities are doing work. they are looking at completely different kind of generators and entire wind machines, and part of it is to get more reliability and the other part is to lower the cost. so we have a little bit of that going on in this country, and
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there's actually some very innovative designs in the u.s., but you don't have the same kind of national support for that as we see in -- in northern europe, for example. >> well, you've given me the perfect question to build up, because i'm going to ask you one last question and then jump to the audience. the new america foundation around the time president obama became elected wrote a report that -- when they did the study, they didn't know how it came out, and when we saw the data, i was then at new america, we had no other way to title it but the green trade deficit, and when you looked at essentially lots of different ways to look at green jobs and the dependants of the united states, we ran huge deficits, but when you look at r & d didaries as well, if my memory is right, three-quarters of that dollar would go to scandinavia or china and part to germany. so how -- i mean, in the last three years, have you seen the u.s. r & d base of this? i was pleased to hear that you mentioned denmark because it so
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of reaified the moment that have study, but have you seen the u.s. national science technology and v.base try to solidify this in the united states or is the idea of green jobs, green research, something that scandinavia and germany are -- >> still they are ahead, but there's definitely been a big infusion over the last three years or so. the department of energy has been the one that's been doing the applied projects, so they have just -- they just let 50 million worth of grants which require, you know, 50% industry cost share. it's not just for some, you know, wild idea, but that really cedes activity. to have maybe two-thirds of those don't come up with anything productive, but it means the other third are getting done which may not have gotten down without that seeding from the federal government. i'd like to see the national science foundation do more in the sort of practical engineering problems, but the
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d.o.e., as far as i've seen, has been the primary funder of pushing the wind industry technology forward. >> mike, are you working with the universities? >> you know, we do in a smaller way. in the u.s. electric business there's very little r & d that's spent by companies like ours to. give you a little context, you folks in the room probably don't swim in our pool that often. as a country, we spend between $350 billion and $400 billion a year on electricity, all of us together. at 3.50 at pump we spend $350 billion to $400 together to buy gasoline for our cars so it gives you a context of what we're talking b.r & d aggregate by all us utility guys or utility holding companies that generate electricity in the mix is a very, very small number. i'd be shocked if it's even $1 billion in aggregate. i don't know the number but it's a very small number. the government investment is another small number. where the capital is flowing in
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the last three to five years because of alternative energy, reknuckleball energy and high fossil fuel prices and the excitement around green area you spoke of earlier, is private equity and private capital. that's something i didn't see 30 years ago when i entered the industry out of college. what you see today is billions of dollars every year deploying due to the price signals that are being sent in the public and a combined signal from public policy-makers, whether that's in this country or another country. and when you talk about leadership, i like to think we're in only the first, second or third inning of this alternative inning or non-traditional energy game. you like -- you asked earlier. we've already lost the game. you know, a lot of runs have been scored by a lot of folks, but if you're only in the second and third inning, there's plenty of pitches an plenty at-bats to go, and whether that's storage or wind or other renewable energies or as the governor was speaking of earlier fracing with gas and oil, these are all game-changers. three to five years ago at a college campus when i was guest lex touring, i'd get an
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unbelievable amount of folks that want to get into wind and sole apartment. today the topic is how do i get into oil and gas? hard to believe the shift, but that's where the mainstream immediate why ant money flow and the capital flow is going. i think you need a combination of all of the above which a lot of folks like the governor have said in the past is necessary. wind is 4% of our electricity. can it be a little higher? certainly. can it be 20%. not without a drastic change in infrastructure spending around transmission or storage or some economic game-changer. at the same time, you know, where those policies go, we'll have 48 different states and a couple hundred utilities making those decisions in the coming decades, but there's no silver bullet that's going to solve it, that any of us see coming, but there's a lot of capital flowing in r & d in the form of private equi equity, whether it's vehicles or fuels we use in our automobiles
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or electric generation. >> we've done a lot of work with the silicon valley and private equity officials. you all know them because they invest in social media, but a huge number of them have also been investing in clean-tech investment. some have not been in win. they have been in smart grid technologies. they have been in solar technologies. they have been in looking at other kinds of fuel storage battery companies for electric vehicles, like aa-1, 2, 3, tesl and others. i think that has made -- made and will continue to make a difference. i mean, the goal is to have the united states become the leader in clean energy the same bay we were and are in internet technology and have the future googles whether it's smart grid or the newest most efficient solar modules or wind turbines come out of the u.s. and be world leaders because it is a world market. >> let's jump to the audience. it's a very interesting point.
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i promised to move out to folks. raise your hand. the microphone over to you, and if you'll identify yourself, please, and we've got c-span here today so stand and -- >> i didn't -- >> give it your best shot. >> joan michaelson, green connections radio. i was at the d.o.e. national business plan competition last week and i will testify, if i may, that the technologies from the universities are astounding. i mean, what these people have come up with would just blow your mind and completely can turn all of this upside down and backwards, so i really applaud them and the universities for the work that they are doing. what is the role of government specifically? if you could have a magic wand, i know we can't do this, but if there's one thing that you want government to do that will really boost the energy market for alternative fuels? what would it be? would it be a price on carbon? would it be something else? i don't want to say silver bullet, but what would the one
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piece -- >> what's the silver bullet? can you even give two things government might do. mike? >> i was kind of hoping you went to marty first. >> it's my job to know that you would want that. >> certainty. you know, it's a -- you might think it's a copout answer. let me explain a little bit. when you sit in our shoes and you're trying to make decisions that are financially commitments that are billions of dollars that are decades long and to get your rate of return and you don't know what the rules are going to be a year or three from now, many of you think, well, that's -- that's -- nobody of u have certainty, none of us don't. that's why some get more minimum wage than others and you've got to make complicated decisions and trade-offs on behalf of your shareholders or government agencies or whoever you are
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representing, but when i come back to it, there is no silver bullet other than something that's free, right, or getting $4 a oil again or gasoline is back to 38 cents when i first got my driver's license. that's not going to happen, right? i look at certainty of rules and regulations and planning and an emphasis of where government gets that direction so that policy-makers are making stable decisions that are balanced perhaps, whether you're from the left or the right, but you can support it. then investment in capital and venture capital are private shareholder capital at publicly traded companies like ours will make prudent decisions, maybe not the way you want because unintended consequences can set in. i would think certainty and that's a broad term though and i realize it's -- it's not specific. >> excellent. >> silver bullet? >> two policies. okay. one is take the external costs
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of energy production, electricity production in particular, and include them in the price, either through actually what consumers or wholesalers pay or through siding new power plant what. do i mean by that? if i'm making bread and i'm trying to compete with somebody else making bread and i got to steal all the flour, i'd have the cheapest bread. if i'm producing electricity and i'm burning coal, you know, east coast moderately built up area, i'm imposing a cost of maybe 10 cents to 15 cents per kilowatt hour on the health of the people in my area. they pay for that. the producer don't pay for it and the buyer and the energy doesn't pay for it either. so if that externality were incorporated in the price, we would have a big shift in what kinds of generation we have. >> that's a carbon tax? >> no, just health. just start with health. >> okay. >> before you even get to
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carbon. >> okay. if you just do it on health, you're going to still burn natural gas and, you know, you're going to have some wind and some solar. solar is still more expensive. you're not going to have new things. >> what's the second one? >> second one is r & d and i'd say let's do it at two to three times the level, you know. we're an r & d shop so you can say he's just trying to up his own budget, but the -- the thing is -- >> at the university of delaware from that? >> right. so our economic competitors are doing this, and it doesn't make sense for us to be underfunding development of new technologies which we know are going to grow over the next couple of decades. we don't know how much they are going to grow in the u.s. in the next five years. it will depend on the ptc and so forth, but we know these will grow a lot over the next decade worldwide, so we don't want to be sitting out of the game and not producing that stuff, not coming up with new technologies
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in the united states. >> martin? >> i would say two things. first is on the supply side i think we ought to have a federal renewable portfolio standard. i think we need to create demand in the next five to ten years for renewables to offset all the advantages that fossil fuels have had, and i think it's clearly happening on a state-by-state basis. it would much more effective if it were a federal policy. secondly on the supply side. i'm a finance guy, spent my life in finance. i'd like to see the cost of finance go down, and one of the best ways to lower the cost of finance is to open access to investing in renewables to individuals, and the way to do that is for congress to change the laws to allow master limited partnerships which are now vest vehicles that raise huge amounts of capital for oil and gas to be available to individuals to invest in renewable energy products, and, secondly, for real estate investment trusts
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which now again are open to individuals and raise billions of dollars for hospitals and long-term care facilities and hotels, et cetera, to also be able to raise capitol for renewable energy products. if you did both of those, you would greatly enhance the access to capital. you'd lower the cost to capital, and that's another way to make us more competitive with the rest of the world in terms of our renewable energy projects. >> we had a tweet up here, the atlantic energy, whatever you're calling, it i wonder if i'll actually learn anything new at this thing. i just learned something new. i had no idea that individuals couldn't invest. but other questions, right here in the back. is that ed? >> edward who'ders, sunshine press. i wonder given the presentation earlier that the utilities aren't investing much in research and development,
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whether there's something about the american economic structure that needs to be jiggered to advance the future of energy? we've -- basically our oil imports are sort of financed by the navy, and -- and this mix between the public and private sector and the academic sector in new york, i wonder if that needs to be jiggered somehow so that we don't have this, for example, the check erboard of different utilities that can't agree on how to do business. there are some things that it seems are better done in the private sector and some in the public sector. do we need to play with the way we've parsed energy production? >> very interesting question.
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mike? >> if you could recharacterize the question, i -- i didn't understand the question. >> i think what he's asking, and i apologize for butchering your questions edward, if i do. i think what he's asking is in particularly the oil and energy sector you essentially have large-scale hidden subsidies. >> mm-hmm. >> the u.s. military costs are essentially a subsidization of the oil industry in that dependins and wondering if -- i mean, it's very hard to undo that right now and when people talk about energy independence or at least energy diversification, in part that's trying to diminish those costs but i think he's asking are there other things that might be done to bolster and upgrade renewables and the sort of social contract and political contract and economic pieces in that ecosystem that surround those pieces. hainesville, which is this documentary that came out on essentially the natural gas boom in the united states, we showed it at the aspen institute last
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year. it's fascinating, because i did not realize you essentially had a beverly hillbillies, probably going to make a lot of people upset, kind of going to make a lot of people upset. people in lots of the lesser developed parts of the united states are getting huge wind falls because of natural gas that is beneath it and it races questions about whether or not you are going to change the share of energy sources in production of the country might you adjust those sources. is that close enough? >> no. na[ inaudible ] >> that require huge investments -- >> there is plenty of capital out there. if anything there is a giant pricing because interest rates
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are very low for a lot of reasons. in the energy sector, i'm not an expert on what exxon shell or bp does in their traditional businesses. but in the electric sector, i'm not trying to stick to a talking point. you have rules and regulation, the capitol will flow there. and there are subsidies in the united states, a lot of folks think it is time to let it go. all subsidies think it must go. it is a relatively new industry. in the scheme of things in this country, we are talking about an industry that has made giant steps, but we must transition to a less carbon dependant infrastructure and you cannot do
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that on a dime and shift and pivot and have an alternative. it is less of an issue than coal is. it may be the bridge fuel and that which makes sense today. it is a cheap resource today. as you try to blend in that diversity and that comfort that you get, you will have to have some sort of subsidy to buy it. right now it is not standing itself in the near term. the question was whether the utility should invest in r and defendant. our experience is they do. we have commitments from three million producers over the last two or three years and we try to spend that money wisely. but, systemically, for example, in wind, technology research, it
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will be the wind manufacturers that are going to invest in the r and d rather than the utility s because they are the ones that benefit and they have a way for utilities to invest a few states have a social benefits charge where a small fraction of each rate pay or's bill that benefits the rate payors in that state. they may invest in technologies that washington hasn't figured out that are going to move forward. but, i don't think most state governments can make wide or indeed decisions i think we can
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intend to get better decisions. but it is possible to do and some states are doing that. yes, right here. >> abigail barnes with the woodrow wilson center. this question speaks to professor kemton's silver bullet if you will. dr. kemp ton's silver bullet with the buzz. and sort of incorporating in those costs. you said address the public health issue and i was curious was to what sort of metrics you
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might be able to propose. public health reports and establishing those links and so forth i was curious if you had a way of evaluating that cost. i was able to bring two staff doing a theosis on this subject. so, one metric, we will base it all on the literature of course. public health studies where you take the cost of emphasema and the cost of a lost workday. you calculate the cost of generation and produces pollution and you back that into
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the cost of a kilowatt hour. and you put that out to the people in the surrounding air yaxt that is a metric for doing it. are you asking how to measure this? >> that is a pretty good discussion of how to take the outside elements of what sounds like a tax to me. it raises interesting issues about japan. i wrote about the energy clip that japan is facing right now. we are investing in 54 large scale nuclear reactors that were shut down in part because of the hot summer but in part because of iran sanctions and the way in which oil closed and the way in which they are to other allies. japan is sitting in an energy
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nightmare. i wrote a piece looking at japan's choices and when i wrote it, i got about 1,000 pieces of hate mail directed at him, not me. i was reporting. but for not taking into account the other larger costs and you also saw imbedded in these letters what i saw as a naive relief regarding scale and other bits of the infrastructure. it is a boiling issue in the body politic right now. the u.s. case may not suffer the kinds of shocks that japan did after an earthquake. >> japan is renewables and poor. it doesn't have to be attacks. state commissions make decisions and they compare multiple types
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and they go on the basis of least costs. they approve building the new plants. arizona has said least costs include everything. it is what you pay on your blue cross, blue shield bill. delaware has a similar loss not quite as strong that just at the time power plant sighting. it is no new sighting. it is just what you pay. >> only that we are not talking about solar. but it goes on rooftops and it does help solve the problem. if you could put a couple of hundred thousand solar modules on residences you could offset the need for future power plants
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as well as transmission. and if you did that across the country you could see how quickly you could eliminate the need for fossil fuel plants. >> i think around the wind industry, it is why you invited us here today. i think from a public policy point of view we need the -- extended. we need to transition to where it is out there. as we have committed to do to work with both sides of the aisle any support that we could get today to get the word out that the tax credit, because all of these global manufacturers can't start and stop those factories and they are starting to wind down. even though we got a one-year extension, the 2013 bill would be

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