THE POWER OF

CHANGE

Innovation for Development and Deployment of
Increasingly Clean Electric Power Technologies

Committee on Determinants of Market Adoption of Advanced Energy
Efficiency and Clean Energy Technologies

Board on Science, Technology, and Economic Policy
Policy and Global Affairs

Board on Energy and Environmental Systems
Division on Engineering and Physical Sciences

A Report of

THE NATIONAL ACADEMIES PRESS 500 Fifth Street, NW Washington, DC 20001

This activity was supported by Contract Number DE-PI0000010, Order Number DE-DT0004510, with the U.S. Department of Energy; the National Academy of Sciences, Engineering, and Medicine’s Presidents’ Circle Fund, and the National Academy of Sciences Thomas Lincoln Casey Fund. Any opinions, findings, conclusions, or recommendations expressed in this publication do not necessarily reflect the views of any organization or agency that provided support for the project.

International Standard Book Number-13: 978-0-309-37142-1
International Standard Book Number-10: 0-309-37142-2
Digital Object Identifier: 10.17226/21712

The National Academy of Sciences was established in 1863 by an Act of Congress, signed by President Lincoln, as a private, nongovernmental institution to advise the nation on issues related to science and technology. Members are elected by their peers for outstanding contributions to research. Dr. Marcia McNutt is president.

The National Academy of Engineering was established in 1964 under the charter of the National Academy of Sciences to bring the practices of engineering to advising the nation. Members are elected by their peers for extraordinary contributions to engineering. Dr. C. D. Mote, Jr., is president.

The National Academy of Medicine (formerly the Institute of Medicine) was established in 1970 under the charter of the National Academy of Sciences to advise the nation on medical and health issues. Members are elected by their peers for distinguished contributions to medicine and health. Dr. Victor J. Dzau is president.

The three Academies work together as the National Academies of Sciences, Engineering, and Medicine to provide independent, objective analysis and advice to the nation and conduct other activities to solve complex problems and inform public policy decisions. The Academies also encourage education and research, recognize outstanding contributions to knowledge, and increase public understanding in matters of science, engineering, and medicine.

Reports document the evidence-based consensus of an authoring committee of experts. Reports typically include findings, conclusions, and recommendations based on information gathered by the committee and committee deliberations. Reports are peer reviewed and are approved by the National Academies of Sciences, Engineering, and Medicine.

Proceedings chronicle the presentations and discussions at a workshop, symposium, or other convening event. The statements and opinions contained in proceedings are those of the participants and are not necessarily endorsed by other participants, the planning committee, or the National Academies of Sciences, Engineering, and Medicine.

COMMITTEE ON DETERMINANTS OF MARKET ADOPTION OF ADVANCED ENERGY EFFICIENCY AND CLEAN ENERGY TECHNOLOGIES

Charles “Chad” Holliday (NAE), Chair
Chairman
Royal Dutch Shell, PLC

Jerome “Jay” Apt

Professor, Tepper School of Business

Co-director, Carnegie Mellon Electricity Industry Center, Carnegie Mellon University

Frances Beinecke

President (ret.), Natural Resources Defense Council

Nora Brownell

Co-founder, ESPY Energy Solutions

Paul Centolella

President, Paul Centolella & Associates

Senior Consultant, Tabors Caramanis Rudkevich

David Garman

Principal and Managing Partner (ret.), Decker Garman Sullivan and Associates, LLC

Clark Gellings (NAE)

Independent Energy Consultant

Fellow (ret.), Electric Power Research Institute

Bart Gordon

Partner, K&L Gates LLP

Former U.S. Representative, Tennessee, U.S. House of Representatives

William “Bill” Hogan

Raymond Plank Professor of Global Energy Policy and Research Director, Harvard Electricity Policy Group, Harvard Kennedy School of Government

Richard K. Lester

Japan Steel Industry Professor, Department of Nuclear Science and Engineering, and Associate Provost, Massachusetts Institute of Technology

August “Bill” Ritter

Co-Founder, Center for the New Energy Economy, Colorado State University

Former Governor, State of Colorado

James Rogers

President and CEO (ret.), Duke Energy

Theodore “Ted” Roosevelt

Managing Director and Chairman, Clean Tech Initiative Co-chair, Military Services Network, Barclays Bank

Peter Rothstein

President, NECEC

Adm. Gary Roughead (Ret.)

Annenberg Distinguished Fellow, Hoover Institution, Stanford University

Maxine Savitz (NAE)

General Manager for Technology Partnerships (ret.), Honeywell, Inc.

Mark Williams (deceased)

PROJECT STAFF

Paul Beaton

Study Director

Gail Cohen

Director

Stephen Merrill

Director Emeritus

David Ammerman

Financial Officer

Aqila Coulthurst

Associate Program Officer

Alan Crane

Senior Scientist

Christopher J. Jones

Christine Mirzayan Science and Technology Policy Graduate Fellow

Karolina Konarzewska

Program Coordinator

Frederic Lestina

Senior Program Assistant

Kavitha Ramane

Christine Mirzayan Science and Technology Policy Graduate Fellow

Erik Saari

Senior Program Assistant

David Visi

Christine Mirzayan Science and Technology Policy Graduate Fellow

BOARD ON SCIENCE, TECHNOLOGY, AND ECONOMIC POLICY

For the National Academies of Sciences, Engineering, and Medicine, this project was overseen by the Board on Science, Technology, and Economic Policy (STEP), a standing board established in 1991, with the collaboration of the Board on Energy and Environmental Systems (BEES). The mandate of the STEP Board is to advise federal, state, and local governments and inform the public about economic and related public policies to promote the creation, diffusion, and application of new scientific and technical knowledge to enhance the productivity and competitiveness of the U.S. economy and foster economic prosperity for all Americans. The STEP Board and its committees marshal research and the expertise of scholars, industrial managers, investors, and former public officials in a wide range of policy areas that affect the speed and direction of scientific and technological changes and their contributions to the growth of the U.S. and global economies. Results are communicated through reports, conferences, workshops, briefings, and electronic media subject to the procedures of the National Academies to ensure their authoritativeness, independence, and objectivity. The members of the STEP Board and Academies staff involved with this project are listed below:

RICHARD K. LESTER, Chair, Massachusetts Institute of Technology

JEFF BINGAMAN, Former U.S. Senator, New Mexico

ELLEN DULBERGER, Ellen Dulberger Enterprises, LLC, Mahopac, New York

ALAN M. GARBER (NAM), Harvard University

RALPH E. GOMORY (NAS/NAE), New York University

MICHAEL GREEENSTONE, The University of Chicago

JOHN L. HENNESSY (NAS/NAE), Stanford University

LUIS M. PROENZA, University of Akron

KATHRYN L. SHAW, Stanford University

JAY WALKER, Walker Innovation, Inc., Stamford, Connecticut

STEP STAFF

GAIL COHEN, Director

DAVID AMMERMAN, Financial Officer

PAUL BEATON, Senior Program Officer

DAVID DIERKSHEIDE, Program Officer

FREDERIC LESTINA, Senior Program Assistant

ERIK SAARI, Senior Program Assistant

SUJAI SHIVAKUMAR, Senior Program Officer

BOARD ON ENERGY AND ENVIRONMENTAL SYSTEMS

The Board on Energy and Environmental Systems (BEES) is a unit of the Division on Engineering and Physical Sciences (DEPS) of the National Academies of Sciences, Engineering, and Medicine. Since 1975, the BEES Board (formerly the Energy Engineering Board [EEB]) has conducted a diverse program of studies and related activities (workshops, symposia, etc.) to produce authoritative, independent recommendations about the science and technology aspects of public policy questions in energy, the environment, national security, and defense.

ANDREW BROWN, JR. (NAE), Chair, Delphi Corporation (retired), Troy, Michigan

DAVID ALLEN, The University of Texas at Austin

W. TERRY BOSTON (NAE), PJM Interconnection, LLC, Audubon, Pennsylvania

WILLIAM BRINKMAN (NAS), Princeton University, Princeton, New Jersey

EMILY A. CARTER (NAS/NAE), Princeton University, Princeton, New Jersey

JARED COHON (NAE), Carnegie Mellon University, Pittsburgh, Pennsylvania

BARBARA KATES-GARNICK, Tufts University, Boston, Massachusetts

DEBBIE NIEMEIER, University of California, Davis

MARGO OGE, McLean, Virginia

JACKALYNE PFANNENSTIEL, Independent Consultant, Piedmont, California

MICHAEL RAMAGE (NAE), ExxonMobil Research and Engineering Company (retired), New York City

DOROTHY ROBYN, Consultant, Washington, DC

GARY ROGERS, Roush Industries, Livonia, Michigan

ALISON SILVERSTEIN, Consultant, Pflugerville, Texas

MARK THIEMENS (NAS), University of California, San Diego

JOHN WALL (NAE), Cummins Engine Company (retired), Belvedere, California

ROBERT WEISENMILLER, California Energy Commission, Sacramento, California

MARY LOU ZOBACK (NAS), Stanford University, Stanford, California

BEES STAFF

JAMES ZUCCHETTO, Director

DANA CAINES, Financial Associate

LINDA CASOLA, Senior Program Assistant

ALAN CRANE, Senior Scientist

K. JOHN HOLMES, Associate Director/Scholar

LANITA JONES, Administrative Coordinator

MARTIN OFFUTT, Senior Program Officer

BEN WENDER, Associate Program Officer

JONATHAN YANGER, Research Associate

ELIZABETH ZEITLER, Program Officer

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Preface

Reliable access to affordable energy is vital to any economy. Growing economic activity in America and around the globe has led to ever greater demands for energy. Energy intensity (energy consumption per unit of national output) has decreased substantially over the past 40 years in the United States, and energy-efficiency measures have played an important role in reducing the growth in demand for electricity. Nonetheless, the rise in demand and growing recognition of the need to control the pollutants emitted as a result of energy consumption due to increased economic activity have generated a growing need for increasingly clean electric power. One approach to meeting this need has been to install pollution control technologies that capture pollutants after fuel is burned, effectively making the electricity production cleaner; investments in such pollution control technologies have increased significantly since 1990. An additional approach is to use energy sources such as wind, solar, or geothermal that innately produce little to no pollution. Investments in technologies that enable the use of such fuels also have increased recently, more than doubling from 1999 to 2005 and then rising more than six-fold from 2006 to 2012.

The tremendous growth in investment in and use of these various technologies has resulted in dramatic decreases in emissions of pollutants that cause smog, ground-level ozone, and acid rain, and these decreases have resulted in significantly cleaner air across the United States. Despite these gains, however, greenhouse gas emissions have remained relatively constant. A primary challenge is that, absent a price on carbon dioxide, fossil fuels remain the cheapest abundant source of energy, while technologies that make it possible to capture and utilize or store carbon emissions remain costly and nascent. Advanced technologies for capturing or reducing carbon pollution hold great promise for changing the equation, yet many of these technologies can be developed only to the early prototype stage because private-sector financing cannot accommodate the enormous capital requirements and multidecade lag before return on investment can be realized. Technologies for the use of renewable fuel sources such as wind and solar remain costlier still. Nuclear

power accounts for two-thirds of the zero- or low-carbon U.S. electricity supply, but the nuclear fleet is beginning to face age-related attrition issues.

It is within this context that the Department of Energy, with the support of the U.S. Senate, requested that the National Academies convene a committee of experts to analyze the determinants that can enable market adoption of advanced energy efficiency and increasingly clean energy. Specifically, the committee’s task was to “determine whether and how federal policies can accelerate the market adoption of advanced energy efficiency and low- or non-polluting energy technologies.” The committee was asked to focus on the post-research and development (R&D) stages of the electric power supply chain, including scaled-up deployment and widespread adoption, and to consider a range of policy instruments, such as subsidies, tax incentives, demonstration projects, loan guarantees and other financial instruments, procurement, and regulation.

Since 1991, the National Research Council (NRC), under the auspices of the Board on Science, Technology, and Economic Policy, has undertaken a program of activities designed to improve policy makers’ understanding of the interconnections among science, technology, and economic policy and their importance for the American economy and its international competitive position. The board’s activities have corresponded with increased policy recognition of the importance of knowledge and technology to economic growth. New economic growth theory emphasizes the role of technology creation, which is believed to be characterized by significant growth externalities.

Under the auspices of the Board on Energy and Environmental Systems, the NRC has undertaken a program of studies and other activities to provide independent advice to the executive and legislative branches of government and the private sector on issues in energy and environmental technology and related public policy. The board directs expert attention to issues surrounding energy supply and demand technologies and systems, including resource extraction through mining and drilling; energy conversion, distribution and delivery, and efficiency of use; environmental consequences of energy-related activities; environmental systems and controls in areas related to the production, energy conversion, transmission, and use of fuels; and related issues in national security and defense.

A central focus of NRC analysis has been the importance of energy innovation to the growth of the U.S. economy and to the reduction of negative environmental, public health, and other consequences of energy-related activities. Many performance gains remain to be achieved in energy technologies, such as the capture of carbon from the use of fossil fuels, advanced nuclear power, renewable fuels for electricity generation and for vehicles, and increasingly efficient use of energy. Yet undertaking the efforts required to produce the innovations needed to transform the performance of the energy sector so as to mitigate the risks from greenhouse gases and other pollutants may be the greatest challenge humanity has ever faced. It is a worldwide challenge that will require tremendous effort and leadership.

Throughout history, the United States has consistently demonstrated that its greatest resource is its people and their talent for innovation and leadership. There has never been a greater need or opportunity for American leadership than that posed by the challenge of achieving increasingly clean electric power, a challenge that is the subject of this report.

ACKNOWLEDGMENTS

On behalf of the National Academies of Sciences, Engineering, and Medicine, the committee expresses its appreciation for and recognition of the insights, information, experiences, and perspectives made available by the many participants in workshops and roundtables held during the course of this study. We would particularly like to recognize Nidhi Santen, Scot Holliday, Vignesh Gowrishankar, Xin “Charlotte” Wang, David Taylor, and Nathaniel Green for their invaluable research and technical assistance in the preparation of this report. We also thank Frederic Lestina, Erik Saari, Alisa Decatur, and Rona Briere for their assistance in preparing this report for publication.

We would also like to recognize the contributions of committee member Mark Williams who passed away on March 6, 2016. Mark made numerous contributions to the committee, including the fundamental approach to this report’s organization. The quality of this report reflects his invaluable contributions.

Reviewers

This report has been reviewed in draft form by individuals chosen for their diverse perspectives and technical expertise, in accordance with procedures approved by the National Academies of Sciences, Engineering, and Medicine’s Report Review Committee. The purpose of this independent review is to provide candid and critical comments that will assist the institution in making its published report as sound as possible and to ensure that the report meets institutional standards for objectivity, evidence, and responsiveness to the study charge. The review comments and draft manuscript remain confidential to protect the integrity of the process.

We wish to thank the following individuals for their review of this report: Joseph Aldy, Harvard University; George Apostolakis, Massachusetts Institute of Technology; William Brinkman, Princeton University; David Cash (Retired), Massachusetts Executive Office of Environmental Affairs; Ahmad Chatila, SunEdison, Inc.; Linda Cohen, University of California, Irvine; Michael Corradini, University of Wisconsin-Madison; Lewis Davis, GE Power Generation Products; Michael Ettenberg, Dolce Technologies; Peter Fox-Penner, The Brattle Group; Kenneth Gillingham, Yale University;

Robert Repetto, International Institute for Sustainable Development; and Catherine Wolfram, University of California, Berkeley.

Although the reviewers listed above have provided many constructive comments and suggestions, they were not asked to endorse the conclusions or recommendations, nor did they see the final draft of the report before its release. The review of this report was overseen by Elisabeth Drake (Retired), Massachusetts Institute of Technology, and Christopher Whipple (Retired), ENVIRON. Appointed by the Academies, they were responsible for making certain that an independent examination of this report was carried out in accordance with institutional procedures and that all review comments were carefully considered. Responsibility for the final content of this report rests entirely with the authoring committee and the institution.

Contents

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Box, Tables, and Figures

BOX