1 October 6, 2005 U.S. Department of Energy Energy Policy Update Dr. Robert C. Marlay Director, Science and Technology Policy Deputy Director, U.S. Climate Change Technology Program Office of Policy and International Affairs U.S. Department of Energy October 11, 2005 Fusion Power Associates Annual Meeting

2 October 6, 2005 U.S. Department of Energy Outline l Recent Events and Near-Term Energy Outlook –Fuels, World Oil, N. Gas, Heating Oil, Power –Gulf Coast Situation l Administration Responses and Near-Term Actions –Ensure Critical Supplies –Restore Energy Infrastructure –Energy Conservation and Efficiency l Longer-Term Energy Outlook l Framework for R&D – A Confluence of Forces –Global Economic Prosperity, Reduction of Poverty & Pollution –Clean Development Supported by Abundant Energy –Concerns About Climate Change and Reducing Emissions

3 October 6, 2005 U.S. Department of Energy Near-Term Energy Outlook l Oil and Related Fuels –Gasoline, Diesel Fuel –World Oil Outlook –Heating Fuels l Gulf Coast Infrastructure – Impacts & Outlook l Potential Economic Ramifications l Natural Gas –N. American Outlook –Rising Demand, Including by Power Producers –LNG Outlook l Electricity

4 October 6, 2005 U.S. Department of Energy Administration Actions – Near-Term l Supply –Facilitate Repairs to Infrastructure –Facilitate Suppliers and Market Functioning –Ease Federal Restrictions and EPA Regs, Where Critical –Work With IEA to Release Refined Products to Am. Mkts. –Make Available Oil from the SPR (All That is Needed) l Energy Conservation and Efficiency –Release of “Energy $avers” Guide –Radio Public Service Announcements (4,500 Stations) –Give Added Visibility to “Energy Hog” Program –Energy Teams for 200 Top Energy-Using Factories –Super-FEMP for Gov’t; Pres. Memo to Cabinet Heads l Worries About Impacts of High Energy Prices –Higher Costs for Consumers, Dampening Consumption –Higher Costs for Businesses, Undermining Competitiveness –Potential to Contribute to Inflation and Interest Rates

5 October 6, 2005 U.S. Department of Energy Administration Actions – Longer-Term l Energy Policy Act of 2005 –Promote Energy Efficiency in Homes, Buildings –Efficiency of Appliances, Energy Using Products –Energy Perf. Contracts for Federal Buildings, Agencies –Gov’t procurement of “Energy Star” Products –Modernizing the Electric Grid, To Spur Efficiency, Reduce Barriers –Diversification of Future Energy Supplies from Renewable Sources »Fuels »Power –New Generation of Transport Vehicles –Many Incentives for New Forms of Supply l Implement the 106 Recs. of National Energy Policy Report Available at:

6 October 6, 2005 U.S. Department of Energy Longer-Term Energy Outlook l Oil –World Oil Demand Rising at Unprecedented Rates –Significant New Players in Asia, S. Asia, Americas, Etc. –Long-Term Forecasts of $50/Bbl for a Decade or More l N. Gas –Methane is the Fuel of Choice, Environmentally Driven –N. American Supplies Constrained; LNG Uncertain l High Prices Will Drive Major Investments, But... l Electricity –Global Demand Very High – Many-Fold Increases by 2100 l Growing Support for Addressing Climate Change

7 October 6, 2005 U.S. Department of Energy Long-Term Framework for R&D l A Confluence of Forces... –Global Economic Prosperity, Reduction of Poverty & Pollution –Clean Development Supported by Abundant, Affordable, Reliable Energy Supply –Concerns About Climate Change and Reducing Green House Gas Emissions

8 October 6, 2005 U.S. Department of Energy The U.S. is Committed, With Climate Change Policy and Programs l Presidential Leadership l Cabinet-Level Engagement l Near-Term Actions l Financial Incentives for Investments l $4 Billion / Year In Federal S&T –Science to Inform Policy –Technology to Facilitate Action l International Cooperation l Deliberate Approach to Long-Term Goal, Consistent with UNFCCC l Climate Friendly Technologies l A Collaborative Path Forward SCIENCE, 30 July 2004, Volume 305, Number 5684

9 October 6, 2005 U.S. Department of Energy Technology -- Seeking Better and More Cost- Effective Solutions – to Facilitate Action l U.S. Climate Change Technology Program –An Ambitious Program of RDD&D –$3 Billion / Year l Climate Technology Goals: 1.Reduce Emissions From Energy End Use & Infrastructure 2.Reduce Emissions From Energy Supply 3.Advance CO 2 Capture & Sequestration 4.Reduce Emissions From Non-CO 2 Gases 5.Enhancing Measurement & Monitoring 6.Fortifying Foundations l Public Review Draft Available – Comments Due Nov 2

10 October 6, 2005 U.S. Department of Energy Examples of Multi-Lateral Cooperation... International Partnerships l Carbon Sequestration Leadership Forum: 19 Members; Focused on CO 2 Capture & Storage Technologies. l International Partnership for the Hydrogen Economy: 17 Members; Organizes, Coordinates, and Leverages Hydrogen RD&D Programs. l Generation IV International Forum: 11 Members; Devoted to R&D of Next Generation of Nuclear Systems. l ITER: 6 Members; Project to Develop Fusion as a Commercial Energy Source. l Methane to Markets: 16 Members; Recovery and use of Methane from Landfills, Mines, and Oil & Gas Systems.

11 October 6, 2005 U.S. Department of Energy 11 Source: Placet M; Humphreys, KK; Mahasenan, NM. Climate Change Technology Scenarios: Energy, Emissions and Economic Implications. Pacific Northwest Nation Laboratory, PNL-14800, August Available at: Century-Long Planning Horizon, Supported by Analyses

Beyond the Standard Suite for High Emissions Constraint

13 October 6, 2005 U.S. Department of Energy Near-TermMid-TermLong-TermCCTP Goals Goal #1 Energy End-Use & Infrastructure Goal #2 Energy Supply Goal #3 Capture, Storage & Sequestration Goal 4 Other Gases l Hybrid & Clean Diesel Vehicles l High-Efficiency Appliances l High-Performance Buildings l High-Efficiency Industrial Processes & Boilers l Modernized Grids l Wind, Hydro, Solar & Geothermal l Biomass, Biodiesel, Clean Fuels l Distributed Electric Generation l IGCC Coal Plants l Stationary H 2 Fuel Cells l Enhanced Nuclear Power l CSLF & Regional Partnerships l Oxy-Fuel Combustion l Enhanced Oil Recovery l Reforestation l Soils Conservation l Methane to Markets l Alternatives to High GWP Gases l Bioreactor Landfill Technology l H 2 Fuel Cell Vehicles l High-Efficiency Aviation l Net-Zero Buildings l Expanded Solid-State Lighting l Transformational Technologies for Energy-Intensive Industries l Advanced Energy Storage & Controls l Large-Scale Wind Power l Community-Scale Solar l Bio-Fuels, Bio-Refineries l Advanced Bio-Refining of Cellulose & Biomass l FutureGen Scale-Up l Gen IV Nuclear Energy l Improved CO 2 Capture l Safe Geologic Storage l Environmental Guidelines l Bio-Based & Recycled Products l Soils Uptake & Land Use l Methane Emissions Reduction l Precision Agriculture l PFC Substitutes l Low-Emission Intelligent Transport Systems l Net-Zero Communities l Low-Emission Industrial Production l Closed-Cycle Products & Materials l Low-Loss Energy Transmission & Distribution l Widespread Renewable Energy l Bio-Inspired Energy & Fuels l Zero-Emission Fossil Energy l H 2 & Electric Economy l Widespread Safe Nuclear Energy l Fusion Power Deployment l CO 2 as Commodity Chemical l Large Global CO 2 Storage l Large-Scale Sequestration l Carbon-Based Products & Materials l Low Emissions of Other GHGs l Low-Emission Agriculture l Genetically Designed Forages & Bacteria Technologies That Will Make A Difference

14 October 6, 2005 U.S. Department of Energy Conclusions... l Energy is, Again, in the “Big Picture” l So Is the Environment –Air and Water Quality, Locally, Regionally, Trans-Boundary –Global Warming, Oceans, Atmosphere l Solutions Must Engage Innovation and Technology l Planning is Increasingly: –Longer-Term, with Century-Long Horizons –International and Cooperative –Searching for Ways to Engage Developing Nations l Is Fusion Energy on the Cusp of Realizing Its Potential? l The Circumstances Have Never Been Better

15 October 6, 2005 U.S. Department of Energy Back-Up Slides

16 October 6, 2005 U.S. Department of Energy Presidential Leadership... “(We will) set America on a path to slow the growth of our greenhouse gas emissions and, as science justifies, to stop and then reverse the growth of emissions.” - President George W. Bush February 14, 2002 “I reaffirm America’s commitment to the United Nations Framework Convention and its central goal, to stabilize atmospheric greenhouse gas concentrations at a level that will prevent dangerous human interference with the climate.”

17 October 6, 2005 U.S. Department of Energy ** CEQ, OSTP, and OMB also Participate Climate Change Policy and Program Review by NSC, DPC, NEC Office of the President Chair: Secretary of Energy* Co-Chair: Secretary of Commerce* Executive Director: OSTP Director Secretary of State NEC Director Secretary of Transportation Secretary of Agriculture NASA Administrator Secretary of Defense EPA Administrator Secretary of the Interior CEQ Chairman OMB Director Secretary of HHS NSF Director Committee on Climate Change Science and Technology Integration Chair: Deputy/Under Secretary of Commerce* Chair: Deputy/Under Secretary of Energy Executive Secretary: OSTP Associate Director for Science Members DS/US Level: CEQ, DOD, DOI, DOS, DOT, EPA, HHS, NASA, NEC, NSF, OMB, USDA Interagency Working Group on Climate Change Science and Technology Director: Assistant Secretary of Commerce For Oceans and Atmosphere Members:** DOC, DOD, DOE, DOI, DOS, DOT, EPA, HHS, NASA, NSF, Smithsonian, USAID, USDA Climate Change Science Program Director: Senior Official U.S. Department of Energy Members:** DOC, DOD, DOE, DOI, DOS, DOT, EPA, HHS, NASA, NSF, USAID, USDA Climate Change Technology Program * Chair and Vice Chair of Committee and Working Group alternate annually. Cabinet-Level Engagement

18 October 6, 2005 U.S. Department of Energy Near-Term Actions... l Voluntary Programs –Climate VISION ( –Climate Leaders ( –SmartWay Transport Partnership ( –Voluntary Reporting of Emissions Reductions, EPACT 1605(b) l Incentives for Investment –Tax incentives for Renewable Energy, Hybrids, Deployment Partnerships –USDA Incentives for Sequestration –USAID and Global Environmental Fund Funding –Tropical Forest Conservation l Rules and Regulations –Fuel Economy Increase for Light Trucks –Non-Road Diesel Rule –Interstate Air Quality Rule –Initiative Against Illegal Logging White House Climate Change Fact Sheet website:

19 October 6, 2005 U.S. Department of Energy Financial Incentives for Investment... Nearly $4 Billion/Year in Tax Incentives $M / Year* Renewable Energy Production Credits ** 355 Residential Solar Energy Systems (Tax Credit)** 10 Hybrid and Fuel Cell Vehicles (Tax Credit)** 316 Industry for Landfill Gas and Combined Heat and Power ** 133 Biofuels, Coal Bed Methane (Production Credit) 1,000 Biomass Ethanol (Exemption from Excise Taxes) 1,100 Hydroelectric, Biomass Elec. (Excl. of Interest on Bonds) 100 Clean Fuel Cars, Truck and Refueling Stations 50 Investment Tax Credits for Solar, Geothermal Facilities 50 Total 3,114 * Congressional Research Service Analysis of Tax Expenditures for 2003** Fed. Climate Change Expenditures Report, FY 2004

20 October 6, 2005 U.S. Department of Energy CCTP-Related Financial Incentives* in EPACT ($ Millions) l Renewable Energy –Extend Renewable Electricity Production Credit2,747 –Renewable Energy Bonds 411 l Nuclear –Production Credit for Advanced Nuclear 278 l Fossil –Investment in Clean Coal Facilities, Including IGCC1,612 l Energy Infrastructure (Transmission)1,549 l Conservation and Energy Efficiency1,284 l Alternative Motor Vehicles and Fuels1,318 l Total CCTP Related Tax Incentives9.2 B 10-Years * Title XVII also authorizes loan guarantees not scored here

21 October 6, 2005 U.S. Department of Energy Energy Bill Tax Incentives ($ Millions) l Fossil –Investment in Clean Coal Facilities1,612 –Domestic Fossil Fuel Production & Security2,822 –Amortization of Air-Pollution Control Facilities1,147 l Renewable Energy –Extend Renewable Electricity Production Credit2,747 –Renewable Energy Bonds 411 l Nuclear –Decommissioning Rules1,293 –Production Credit for Advanced Nuclear 278 l Energy Infrastructure 1,549 l Conservation and Energy Efficiency 1,284 l Alternative Motor Vehicles and Fuels 1,318 l R&D Tax Credit 92 l Total Tax Incentives 14,553

22 October 6, 2005 U.S. Department of Energy Science -- Seeking Better Knowledge and Understanding – to Inform Policy l U.S. Climate Change Science Program –An Ambitious Program of Research –$2 Billion / Year l Climate Science Goals 1.Improve Knowledge of Climate and Environment 2.Improve Quantification of Forces Driving Changes to Climate 3.Reduce Uncertainty in Projections of Future Climate Changes 4.Understand Sensitivity and Adaptability of Natural and Manmade Ecosystems 5.Explore Uses and Limits of Managing Risks and Opportunities

23 October 6, 2005 U.S. Department of Energy Core Programs & Initiatives  Energy Efficiency & Infrastructure  FreedomCAR  Building America  Industrial Process Alternatives  Carbon Capture and Sequestration  Regional Partnerships  Other Gases  Methane to Markets  Energy Supply  Renewable Energy  Hydrogen Fuel Initiative  FutureGen  Generation IV Nuclear Power  Fusion (ITER)  Basic Science

24 October 6, 2005 U.S. Department of Energy Example: Asia-Pacific Partnership Data source: Placet, et. all, “Climate change technology scenarios: energy, emissions, and economic implications.” PNNL-14800, 2004 * Australia and New Zealand data combined in data set. New Zealand not part of APP. Projected Carbon Emissions from Asia-Pacific Partnership Countries Non-APP Emissions APP Emissions 100-Year Cumulative Emissions from Asia-Pacific Partnership Countries United States India Japan Australia/ New Zealand* South Korea All Other Nations China APP Vision Statement: