Remarks by
Robert S. Kripowicz
Acting Assistant Secretary for Fossil Energy
U.S. Department of Energy
to the
National Coal Council
November 9, 2000

Good morning. There are always two distinct disadvantages for any career government official - like myself - who speaks immediately following a Presidential election:

One - he runs the risk of saying something that displeases the incoming team and therefore, faces the prospects of being banished into some kind of bureaucratic purgatory for the next 4 or maybe 8 years; and

Two - he runs the risk of not having his audience pay attention because any policy pronouncements he makes could change once the new Administration takes over.

That's something of the situation I'm in this morning - and I hope all of you appreciate that as I stand up here this morning.

Nonetheless, there are certain factors at work that make what I am going to say today relevant regardless of the outcome of this week's election.

The first - and perhaps most important - is the fact that today, energy is back on the minds of Americans in a big way.

It's been a while since Americans were reminded of the role that energy plays in their everyday lives. But this summer - and now this winter - that message is being driven home.

It seems that we've been experiencing the energy equivalent of the "triple witching hour"... only it's been going on for several weeks now, if not months. Higher gasoline prices at the pump....the prospect of high prices and possible shortages of heating oil in New England...rolling brownouts and blackouts in the California power market and voluntary power cutbacks in the Northeast.

Someone once said that "you never fully appreciate the value of water until the well runs dry." And while the well isn't really running dry in the energy sector, to many Americans, it seems that way. And that has brought energy back into the national spotlight.

Now we can spend a lot of time debating the root cause of the problem. We can talk about whether it's a problem of price spikes or actual power shortages. We can discuss the impact of restructuring. We can argue over whether California's problems, in particular, stem from a cutback in hydroelectric power. Or whether it's the impact of air pollution regulations...for example, those that currently limit the output of many gas turbines in California.

We can look at how electricity is generated in neighboring states, and where that electricity is being consumed. Is it making its way into California, or being sent to other high-demand regions of the country?

We can examine the demand side of the equation - and factor in the extraordinary increases in power consumption that are being created by a growing economy and especially, because of the new digital revolution.

Did you know, for example, that a Palm Pilot consumes only minuscule amounts of electricity, but plug it into the Internet and it can add as much new electric load as a refrigerator?

It's amazing to think that, today, more than 13% of U.S. electric power output goes to manufacture and run computers and to power the Nation's electronic infrastructure. And that figure is growing rapidly.

All of these are likely to be key factors in an increasingly complex equation. We can...and we will...need to obtain a much more accurate picture of California's problems before determining whether they are harbingers of those yet to be faced elsewhere in the country.

Yet, I believe that if you peel back the current problems, the underlying core is going to be relatively straightforward - this country is going to need more power...and it is going to need it sooner than a lot of people have predicted. Certainly sooner than many utilities have planned. And probably sooner than many of our regulatory processes are set up to allow.

So I think it's time for both the industry - and the incoming Administration - to look at two fundamental goals to assure future power reliability:

One is to find a way to extend the life of existing power plants....perhaps squeezing a few more percentage points in generating efficiency out of our existing fleet without compromising environmental goals.

And two - finding ways to accelerate the introduction of new power generating units, either by building new grassroot plants or by repowering brownfield units with cleaner, more efficient technology. Most likely, it will be a combination of both.

The opportunity exists today to place these objectives high up on the nation's policy agenda. Quite frankly, we haven't had an opportunity like this for some time.

For the last decade or so, the prospects of growing budget deficits would have made any talk of federal incentives for new power capacity off-limits.

Moreover, projections of a two percent annual growth rate in power demand pushed back the need for the next wave of baseload construction.

To many analysts, demand for electricity over the next few years could be filled easily by gas turbines.

But now we know that electricity demand for the past two years has increased at more than three percent per year - 50 percent higher than prior forecasts. That's without the new "dot.coms" that are today causing demand for power to skyrocket in many areas of the country.

And now there are questions over whether we can make and install enough gas turbines fast enough - and given the current price of natural gas, whether we can generate power with them cheaply enough.

Congress, especially, has become more receptive to looking at a broader range of options.

That was clearly evidenced in the appropriations bill for the Fossil Energy program that was passed and signed into law last month. Not only did Congress support the major priorities of our budget request - our longer-range Vision 21 program and a very healthy increase in carbon sequestration - they also added $95 million specifically for a power plant improvement initiative.

Let me read you a couple of sentences from the Conference Report that accompanied the legislation:

"In the coming years, the surge in U.S. demand for electric power shows no signs of abating. Yet, in many regions, our expanding 21st century economy is being powered by an out-of-date and undersized electric power system."

Skipping down a few sentences.....

"More than half of our nation's electricity is currently supplied by coal, and for decades into the future, plentiful American coal will continue to provide low cost and reliable electricity....As the U.S. electric industry transitions to a new and more competitive business structure, the demands on the existing fleet of coal-based electric generating facilities are changing.

Power plants must operate in a fashion that reduces environmental impacts, achieves greater efficiency in operation, reduces carbon dioxide and other emissions, remains cost-competitive, and responds quickly to changing customer demand. By achieving greater efficiency, these generating plants will be capable of supplying more electricity, which is needed in today's economy and for the future."

I couldn't have said it better myself. And on that basis, Congress approved funding for a new initiative that will demonstrate advanced coal-based technologies for both existing and new power plants.

This is not intended to be a protracted R&D program. Rather, it will be a short-term, 50/50 cost-shared initiative that Congress expects to produce technological improvements that [quote] "can be commercialized over the next few years." [unquote]

They did not underscore the words "next few years" but I will. That is what we will be looking for - technologies that can extend the life of existing power plants, squeeze out higher generating efficiencies - several more percentage points - be applicable to new plants, and ensure that we extract the full benefits of coal in meeting near-term power reliability concerns.

Moreover, Congress told us not to waste any time in getting this program started. We are to have a draft program solicitation out for public comment and then a final request for proposals, all within 120 days. We expect to make our initial project selections shortly after September 30, 2001.

At the present time, we anticipate awarding financial cost-sharing for multiple projects from the initial solicitation, but we also are examining the feasibility of additional solicitations after that.

What will be the criteria for the initial projects? Timeframe will be important. We will be looking for projects that, as Congress stated, can be commercialized over the next few years.

Also, as Congress stated, we will be looking for demonstrations that advance the efficiency, environmental controls, and cost-competitiveness of coal-fired capacity well beyond that which is in operation now or has been demonstrated to date.

We also may want to look at technologies that provide a higher capacity factor from existing plants, although Congress didn't explicitly cite this in its report.

This is a significant new initiative - one that emerged from Congress with bipartisan support.

It signals that our nation's decisionmakers are looking for ways to strengthen the reliability of our energy infrastructure. And it recognizes that coal must be part of the equation.

It also signals that perhaps now is the time to discuss other factors - factors such as the power industry's need for "regulatory certainty."

Our goal is to use these new power plant improvement projects to demonstrate classes of technology that have minimal or no significant environmental impacts. If regulatory requirements can be fixed reasonably in advance, and these classes of technology "pre-qualified," it could significantly shorten the lead time for commercial replication.

That could be a major step in maintaining grid reliability and restoring adequate reserve margins.

But there may be other steps that should be taken. And if there are, now is the time to make them known.

That's why we have asked the Coal Council to take on a new study.

We want you to focus not only on ways to use improved coal technologies to produce more power, but also on ways to bring new or repowered plants online faster without compromising environmental objectives.

Reducing regulatory barriers could include:

• Reducing regulatory review and siting and construction permitting lead times for extremely clean power systems;
• Creating regulatory mechanisms to reward greater reliability;and
• Conducting R&D to facilitate a comprehensive approach to addressing environmental issues facing existing coal-fired power plants.

Like I said, there is no better time to be examining this issue.

The reliability of our power supply is going to be one of the major energy issues that will be with us for some time into the future. And it's an issue that can have a direct and obvious impact on the everyday lives of consumers.

When a homeowner in San Diego sees his or her electric bill double almost overnight, when a rolling blackout in Silicon Valley raises the prospects that a computer chip company can lose weeks of production because power was interrupted for a single millisecond, when a half dozen Internet data centers in Seattle consume the electricity equivalent of six oil refineries, people gain a new appreciation for electricity. And they begin to recognize that affordable, reliable electricity is something that is going to take some effort.

It isn't preordained, and it isn't guaranteed.

The public had suddenly become aware of energy again, and they - and their representatives - are looking for information and ultimately, for answers.

The ball is now in our court to bring about this new appreciation for what powers this economy....and what will continue to power it for well into the foreseeable future. Perhaps we might even begin to put aside once-and- for-all that question I suspect we have all been asked, "Why do we need to use coal when we have electricity?"

We want you on this Council to work with us in putting together the proper combination of new technology, regulatory streamlining, and local and federal incentives. This new cost-sharing demonstration program - something akin to the Clean Coal Technology Program - is a step in the right direction. But it must be part of a bigger picture.

We need you to help us look at the bigger picture, and to work with us in putting together a package of initiatives that, together, can help assure that when tomorrow's consumer flips the switch, the result will be clean, affordable power.

Thank you for your willingness to be involved in this effort.