Energy Secretary Chu Fields Questions at ECO:nomics

U.S. Energy Secretary Steven Chu, fresh from the inaugural ARPA-E Energy Innovation Summit, was the final and perhaps most anticipated speaker at last week’s ECO:nomics conference. Throughout the conference, regulatory uncertainty had been the greatest complaint of energy execs and venture capitalists alike. In comparison, the recession had up to this point been addressed rather cursorily: while it has certainly sapped financing for potentially disruptive technologies, the established players at the conference largely claimed that they had not reduced their innovation spend.

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Chu’s initial remarks focused on the DOE’s R&D priorities (with fun acronyms like BEET-IT) and Recovery Act investments. His tone balancing patience with urgency, he advocated for a comprehensive energy bill with a long-term signal that “there will be a cap on carbon and that cap will ratchet down.” Referencing the shifts from wood to coal and from coal to oil and natural gas, he noted that “shifts in energy supplies take decades, typically half a century,” even when the new supplies are economically superior, but that climate change demands we do it faster. During his talk, decades were often the timeframe, e.g., to work out siting and costing issues in long range transmission with centralized renewables. At the same time, Chu invoked China, more often than climate, as a reason to hurry: “We can still be the leader in this new industrial revolution…but the train is leaving the station.”

It was interesting to hear what business leaders, given their chance, wanted to ask Chu about. Following are a few of the topics raised by moderator Robert Thomson, managing editor of the Wall Street Journal, and various audience members.

Recent Buy American pressures on stimulus funds: Chu warned of unintended consequences (i.e., reduced job creation), saying he would still want to go ahead with projects even if only 2/3 of the value of project is American. After all, it was our “on-again, off-again fiscal policy” on green energy that caused much of the technology to migrate from the U.S. in the first place.

Delays in project funding: Earlier in the conference, several speakers noted that they had not yet received promised funds for qualified smart grid projects. Turns out there was an IRS issue with the American Recovery and Reinvestment Act and the Department of Treasury is currently determining whether those funds are taxable. In contrast, Gabriel Alonso, CEO of Horizon Wind Energy, spoke highly of his experience with the 1603 program, which allows companies to receive an upfront cash payment instead of a tax credit for 30% of the project’s qualifying costs. Alonso said, “having that option completely changed our view of the U.S. market.”

The Intergovernmental Panel on Climate Change (IPCC): Continuing a theme established by previous moderators during the conference, Thomson at various times asked whether Chu was frustrated by the “sloppiness” at IPCC, whether its image problems had turned the debate, and whether a change of leadership was warranted. Chu replied that sloppiness doesn’t negate the science and suggested that the IPCC’s call for an independent review was an appropriate and sufficient step.

Is there such thing as “Clean Coal?” If you capture the sulfur oxides, nitrogen oxides, mercury, particulate matter, and 90% of the CO2, Chu responded, “is it pristine clean coal? No, but it’s much much cleaner.”

How can the private sector help get a comprehensive energy policy? Convince colleagues afraid of bigger energy bills that higher energy costs will happen with or without legislation and to prepare for this future by making their businesses and industries as energy efficient as possible.

Unfortunately, in response to a question, Chu had to spend the final minutes of his time defending the science behind anthropogenic climate change. One step forward, one step back.

Chris is interested in how private enterprise can lead in creating social and environmental value alongside economic value. He has broad experience and interest in waste solutions, reverse logistics, energy efficiency, and the valuation of ecosystem services. Chris holds an MBA/MS with high distinction from the University of Michigan, including a focus on cleantech strategy and finance along with natural resource economics and management.