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2. Congressional Oversight
The majority of Department of
Energy (DOE) investigations in
the 112th Congress have
originated in the Republican-led
House of Representatives.
House committees with
jurisdiction to investigate DOE
Source: Huffington Post, “House Oversight Committee To Hold McPherson Square Hearing,” January 17, 2012
include Energy & Commerce;
House Oversight and Government Reform Science, Space & Technology;
Committee Chairman Darrell Issa (R-CA) Armed Services; and Oversight
& Government Reform.
Their main responsibilities include:
1. Oversight: akin to a check-up at the doctor’s office – an opportunity to verify that
everything is functioning as it should be
1. Investigations: more like exploratory surgery – sometimes they find a problem,
often they don’t
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3. DOE and the 112th Congress
From January 2011 - April 2012,
the House has:
 conducted 26 investigations of
DOE; 9 of those investigations
have focused on the DOE loan
guarantee program
 sent the department over 40
letters requesting documents or
interviews Source: C-SPAN, “Senate Energy Cmte. Hearing on President's 2012 Budget Request
with Energy Sec. Steven Chu,” February 16, 2011
received over 680,000 pages of Energy Secretary Steven Chu testifies
documents from DOE agencies. before the Senate Energy Committee
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4. DOE Loan Guarantee Program
DOE Loan Guarantee Program Quick Facts:
 The program was enacted as part of the
Bush Administration’s 2005 energy bill to
support the development of innovative
technology at a scale that is too risky for the
private sector to finance
Source: Gigaom, DOE offers $359M loan guarantee to Sempra for solar farm,
June 15, 2011
 Congress contemplated the possibility of loss under the program and in the
2009 Recovery Act appropriated over $3 billion to cover these potential losses
 DOE has guaranteed $34.7 billion in loans which have created over 60,000
jobs
 The program supports the world’s largest wind farm, the first all-electric
vehicle manufacturing plant in the U.S. and the first nuclear power plant to be
built in over 30 years
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5. Solyndra: exception or rule?
Critics of the DOE loan guarantee
program spotlight the bankruptcy of
solar panel manufacturer, Solyndra
Since January 2011, at least 50 staff
members from 8 DOE offices have
spent thousands of hours responding to
congressional inquiries including: Source: Gigaom, DOE offers $359M loan guarantee to Sempra for solar farm, June 15, 2011
 28 requests for documents (almost 2 Solyndra Quick Facts:
requests/month for the past year)
resulting in the production of 200,000  Solyndra represents only 1.3% of
pages loans dispersed by the DOE loan
guarantee program
 6 congressional briefings
The majority of the loan guarantee
 5 congressional hearings (including portfolio is in electrical generation
other executive branch agencies) projects, which are structured to have
very low risk.
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6. And don’t forget…
Other topics of congressional investigation include Yucca mountain, high gas
prices, Environmental Protection Agency regulations, renewable energy tax
grants, the Keystone pipeline, hydraulic fracking and weatherization of low-
income homes
Sources: Lander County Yucca Mountain Oversight Program, ABC News, Salon, mLive
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8. How do we pay for all this?
2010 - $1.2 trillion
Consumer Expenditures
Production Costs
Figures are in quadrillion BTUs,
Source: Energy Information Administration, Annual Energy Review 2010
ANS: Each in their own way, due to practical differences,
business customs, market structures and policy
decisions over the last 100 years.
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9. The Central Problem
 Production Costs vary
widely – anticipated supply,
weather, geopolitics, shipping
costs, wages
 But if Consumption
Prices vary widely, we
are not happy
campers…
 So the Industry of Financing the
Energy Industry exists to smooth
out one end of the equation to
minimize “spikes” at the other
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10. Why is government involved?
 Government significantly
regulates to limit
“negative externalities” –
environmental and socio-
economic
 Government also wants
to support “positive
externalities” (non-financial
benefits)
 Schools, hospitals and
businesses open later and safer,
benefitting the society as a whole.
 Ex: rural electrification
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11. Sources of cash
 Consumption Prices – you know these all too well
 Production Costs - two main buckets:
 Feedstock (raw oil, coal, gas):
 Manage through futures trading
 Pass on to customer
 Building new facilities - very capital intensive with
upfront costs of construction and permitting running
into the billions of dollars
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12. Cost of New Generation
Funds for new facilities (“CapEx”) can come from:
 Venture capital – high risk tolerance – but expects a
very high return
 Corporate Finance:
 Public Stock Markets – ok, with some risk, but also expects
high return
 Corporate Debt – bonds or institutional loans
 Project finance for individual power or energy projects
• Government loans or guarantees
• In order to get a lower rate, the government may guarantee a lender
that it will cover certain slice of the risk
• Especially for innovative projects
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13. Corporate Debt – what is it?
 This is a basic business loan – when an energy company (like Exxon) takes a loan from a bank
for various corporate needs.
 Lenders will only lend to Exxon if Exxon demonstrates to the lenders that it has sufficient
assets on its balance sheet to pay back the loan (which is why this is sometimes called
“balance sheet” financing).
 Structure: There IS typically recourse to the energy company. The money is leant to the energy
company, which then invests the money in the Project Company.
 This means that if there is a default under the loan, then the lenders can foreclose / sue the
energy company itself.
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14. Corporate Finance – why use it?
 Energy company can use the money largely how
it sees fit for any project, rather than being
limited to a specific project.
 Simpler, more straightforward then project
finance (so less costly to put together the
financing).
 Best to use when the energy company has a
strong balance sheet (much greater assets than
liabilities).
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15. Project finance – what is it?
 Debt financing of the development, site acquisition, construction and initial
operation of a power plant, wind farm, terminal, and other energy projects.
 Usually for capital-intensive industries.
 Projects themselves generate cash to pay off debt. So project finance is
most suitable for an energy project where there is a predictable revenue
stream to support debt repayment.
 Typically Non-recourse (like a typical mortgage in the U.S.)
 Structure: the lender typically provides the loan to the actual project
(typically referred to as the “Project Company”).
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16. Project finance – why use it?
 Non-recourse nature provides companies or developers
flexibility to separate projects (so that each project can
succeed, or fail, on its own merits).
 Often good to separate energy projects so that any regulatory
problems, natural disasters, and other events only impact a
specific project.
 Developer often does not have great credit, but the project itself
may be a good investment and generate enough cash to pay off
the debt.
 Separating projects allows developers to manage them
better (both operationally and financially).
 Lender typically can only make a claim (foreclose) on the assets of the Project Company and
not those of the entire energy company.
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17. Bottom line
 Financing energy is as complex as creating and
distributing it – all with the goal of taming the naturally
cyclic nature of energy (and nature)
 Government is involved all along the way – and can help
that goal by encouraging sustainable methods of
production and consistent price signals to the
marketplace; OR
 Government can make things worse by constantly
shifting policies or putting decisions on hold
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19. Installation Energy
 DoD has committed to producing or buying 3
Gigawatts of renewable energy, enough to
power 750,000 homes
 Powering bases with locally-generated
renewable energy makes bases and
operations resilient to grid vulnerabilities
 Long-term power purchase agreements with
renewable generators allow for cost-
competitive, clean and secure energy for
bases
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20. Biofuels
 When the price of oil goes up, DoD’s fuel
expenses skyrocket
 Navy and Air Force have ambitious goals to
diversify fuels sources for ships and planes
and reduce budgetary risk of oil price shocks
 DoD is buying “drop-in” biofuels, which don’t
require new or modified engines and run a jet
or marine diesel engine the same as
petroleum
 Navy has set a goal to sail a “Great Green
Fleet” on biofuels by 2016
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21. Energy Efficient Platforms
 When forces have to be resupplied with fuel by
tankers or convoys, those fuel supply lines are at
risk of attack by the enemy.
 If supply lines are cut by enemy attack, our forces
are left without fuel, water, and supplies
 Planes, ships, and tanks that use less fuel don’t
have to be resupplied as often
 DoD is working to make sure that the next
generations of platforms are more efficient. This
will reduce resupply risk, avoid costs, and save
lives.
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22. NEPA
 NEPA is a law that requires the government
to assess potential environmental impacts
when it takes an action that may affect the
environment
 Renewable technologies in certain areas
have potential environmental effects”
 Windmills may threaten birds or bats
 Large solar panel arrays may threaten species by
disrupting their movements (e.g. desert tortiose)
 Renewable facilities may obstruct or interfere with
views or create noise issues
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23. NEPA, continued
 If an analysis shows that there is a significant
environmental impact by the renewable
project, the government may be required to
implement mitigation measures, or the project
may be stopped completely.
 The government is working hard to identify
federal renewable projects’ potential
environmental effects early and to consult
with environmental organizations and local
communities to resolve the issues
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25. Fossil fuel dependence is the greatest
long-term threat to national security --
not just from foreign sources, but all
sources.
 The U.S. consumes 25% of the world’s oil
for 5% of the global population
 The U.S. military is the world’s largest
industrial consumer of fossil fuel.
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26. The U.S. exports $1 billion per day
for its oil, 40% of which goes to
unstable or unfriendly nations.
 Iran uses its oil revenues to:
 finance IED’s that have killed and wounded
our toops
 supply night vision goggles and other
equipment to the Taliban
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27. Transportation of fuel to the front
lines requires great expense in
blood and treasure.
 One service member is killed for every 24
convoys.
 The cost to deliver one gallon of fuel to
remote locations overseas may be as high as
$400.
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28. The U.S. devotes enormous
expense to safeguarding the free
flow of fuel worldwide.
 Defense costs
 Straights of Hormuz
 Diplomatic costs
 appeasing dictators
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29. Fossil fuel consumption causes
environmental instability to which
our military will be forced to
respond:
 Resource scarcity
 Civil unrest
 Refugee and other humanitarian crises
 Extremism
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31. Renewable Energy Myths and Realities
First: What Do We Mean by Renewable
Energy?
 In this context we use the term renewable
energy to refer to electricity generated by
renewable resources. These include:
 Wind
 Solar
 Hydro
 Biomass
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32. Myth: Renewable Energy is Too Expensive
Reality: Certain Renewables are Competitive With Natural Gas
Even Without Incentives and Prices Continue to Drop
$350
LCOE 2008 Note : solar produces largely
$324
$300 during peak hours so it often
competes with more
LCOE 2012 expensive peak power plants
$250
LCOE 2016 (estimate)
Cost per $/MWH
$200
Wind: shown for average wind
$150
resource – the best wind (ie,
TX, OK, KS) already
competitive with natural gas
$100 $106
$87 $88
$84
1
$50
$0
Coal CCGT Nuclear Wind Solar PV
Note: The cost of renewable energy is largely a function of manufacturing scale in
addition to technological improvements. The cost of natural gas generation is largely
dependent on the price of a commodity that has large price swings over the last decade.
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33. Myth: Renewable Energy is Too Expensive
Reality: Natural Gas Generation is a Competitor to Renewables
but Also a Necessary Partner
 Renewable energy without storage requires natural gas generation as back-up power as natural
gas, unlike coal or nukes, can be ramped up and down quickly.
 Although there are benefits to natural gas the primary (non climate-change related) drawback is
that natural gas pricing has historically been volatile. Prices are now 20% of what they were at the
peak in 2008. Current gas curves anticipate a future of cheap gas but there is no price certainty.
 Many factors could throw off the current low natural gas curve:
 Increased switching from coal to natural gas generation.
 Increased use of natural gas as a transport fuel.
 Export of natural gas to countries with high natural gas prices.
 A price on carbon
 Changes in available resource estimates (the U.S. EIA recently
cut their estimate by 42%) and extraction costs.
 Utilities can use renewables to hedge against future price shocks. A generation fleet entirely
exposed to natural gas would be as irresponsible as a stock portfolio manager investing in only
one company. Many utilities agree. Xcel Energy recently noted that “by displacing natural gas with
fixed priced wind energy, the Company has less exposure to potentially volatile natural gas
pricing.”
 A utility’s planning horizon is much longer than a natural gas day traders – or a weekly news cycle.
To responsibly meet their customers needs under a range of fuel price scenarios renewables are a
responsible choice.
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34. Myth #3: The Government Shouldn’t Pick Winners
Reality: Renewables Aren’t the Only Area the
Government is Supporting
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35. Myth #5: Intermittent Renewables Are Useless
Reality: Renewable Energy Doesn’t Create Jobs
 Center for American Progress study shows a dollar spent on
renewable generation creates 3x as many jobs as a dollar spent on
fossil generation.
 The same study shows the jobs created tend to be higher paying
than those in fossil generation.
 Many jobs are construction related and “temporary” just as any
housing construction related jobs are temporary. Even so, to reach
20% renewable energy in the U.S. would result in lots of jobs over a
multi-decade timeframe.
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37. Sustainability
Source: SustainVU, www.vanderbilt.edu
UN Brundtland Commission Definition (1987): Sustainable development is
development that meets the needs of the present without compromising the
ability of future generations to meet their own needs.
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38. Sustainability Programs
Sustainability programs becoming the norm at U.S.
universities; corporations; & federal, state, county, and
local governments
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39. Executive Order 13514: Federal Leadership in
Environmental, Energy, & Economic Performance
Signed by: President Obama on 5 October 2009. Builds on Executive Order 13423,
which was signed by President Bush on 24 January, 2007.
Goal: to establish an integrated strategy towards sustainability in the Federal
Government and to make reduction of greenhouse gas emissions (GHG) a priority for
Federal agencies.
Federal agencies required to:
- Select Senior Sustainability Officer
- Set percentage reduction target of agency-wide reductions of Scope 1 and 2
Greenhouse Gas emissions in absolute terms by FY 2020, relative to FY 2008 baseline
- Create a Strategic Sustainability Performance Plan
- Increase energy efficiency; increase renewable energy generation
- Reduce petroleum consumption, potable water intensity, landscaping/industrial
water; increase recycling and waste reduction efforts
- Incorporate sustainability elements into procurement (energy-efficiency, biobased,
environmentally preferable, recycled content, etc.)
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40. Military’s Sustainability Programs
All 5 branches addressing E.O. 13514, while building
their own customized sustainability efforts
Source: U.S. Army Sustainability Office, www.sustainability.army.mil/
Source: Congressional Research Service
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