Global Energy Challenges: Don’t Forget the Private Sector
World Energy Dialogue
Ambassador William R. Timken, Jr.
Hannover, April 17, 2007
As prepared for delivery.
Last year, I had the privilege of participating in this same forum. I spoke then of the relationship between economic growth, energy consumption and environmental issues. I outlined some of the initiatives of the Bush Administration to address the energy challenges of the 21st century. I called for greater cooperation between the U.S. and Germany to find solutions. Throughout his presidency, President Bush has supported and significantly accelerated technology development in the field of energy. The United States has invested in climate change science. We have implemented measures to slow the growth in greenhouse gas emissions. To achieve this, we have worked in collaboration with research organizations, the private sector and other governments.
Germany is one of our most important partners. Chancellor Merkel has, like President Bush, increased research budgets for clean energy technology and made enhancing energy security a major goal of her administration.
Chancellor Merkel has made energy and the environment a priority of Germany’s EU presidency. My president and your chancellor have frequently discussed the challenges of ensuring an economically viable, environmentally friendly energy supply.
Both the Chancellor and President Bush agree that sustained investment is one of the keys to meeting these challenges with the least economic cost to their citizens. It should be totally clear to our citizens as consumers and job-holders that the cost and burden of many of the changes being proposed by policy makers to address global warming and energy security will be paid for by our citizens. That cost can be lessened by innovation.
The United States and the European Union are in a unique position to advance a common transatlantic and global energy agenda. Our two sides are leaders in the development of renewable energy sources and innovative energy-saving technology. Because of this background, we can play a special role in working to solve global energy challenges.
Last month Secretary of State Rice and Foreign Minister Steinmeier co-hosted a U.S.-EU Energy Technology CEO Forum in Washington. They brought together the leaders of some of the most prominent companies in the energy and related industries, along with venture capitalists and major research institutions on both sides of the Atlantic. The goal was to create a dialogue to foster public-private cooperation in facing the challenges of developing new, clean energy, efficiency technologies—and, most importantly, bringing new products to consumers that rely on these technologies. As Secretary Rice said, when it comes to energy, we need to make sure that there are seats at the table not just for policymakers, but also for the private sector.
Why is it so important? Let me put it this way. On both sides of the Atlantic, there are public and private campaigns to encourage energy efficiency. Even something as simple as replacing incandescent light bulbs with more efficient light bulbs could have a huge effect. Some governments are considering legislation on this issue. What do you think? In the United States, people tell light bulb jokes. I understand you tell them in Germany too. How many politicians do you think it will it take to change those incandescent light bulbs? None. It’s up to consumers and the private sector to finance and decide to make this and other basic changes that will increase our energy efficiency.
It’s important that government and the private sector work together on environmental and energy security challenges. Energy and resource efficiency, as well as the prevention of climate change, are not just ecological questions but hard-nosed economic issues.
There is no better place than gatherings like the Secretary’s CEO Forum last month in Washington or events like this annual World Energy Dialogue to share smart growth successes. Smart growth is smart for our environment, smart for our economy and smart for our quality-of-life.
Here again, the United States and Germany have a special role to play. As the first and third largest economies in the world, our capital markets and our entrepreneurs have grown many of the world’s most innovative companies. Germany is the largest exporting country in the world and a leader in several advanced clean energy technologies, including solar energy. The U.S. focus on energy research and development means we too have made great strides in several new energy technologies, including carbon capture and storage.
People want the jobs, economies, revitalization, and opportunities that growth can bring but they want it without negative environmental impact. One hundred years ago, at the turn of the 20th century, U.S. President Theodore Roosevelt said, “Conservation means development as much as it means protection.” Roosevelt recognized then that we cannot stop progress or halt growth, but that we need to manage it to protect the environment as we foster economic growth.
Today the challenges of meeting the global demand for energy seem to many to be daunting. Extremists are painting grim scenarios for the future as absolute certainty. We forget, however, the advances in energy technology that have been made in the last 100 years. Over the next few decades, we are likely to see technological advances that most of us, brought up in the age of hydrocarbons, can't even imagine. We are pursuing the peaceful uses of the atom, as we should, but we are also finding ways to meet our energy needs through efficient uses of the corn stalk and prairie grass, the hydrogen fuel cell, the lithium-ion battery, the photovoltaic solar cell and perhaps, one day, the workings of the microbes in a termite’s stomach.
Governments are spending research dollars to help push some of these technologies forward. In the U.S., we are investing heavily in clean technology and instituting policies to help it become cost-competitive. From 2001 through 2006, the U.S. Government devoted more than $29 billion to climate science, technology, international assistance, and incentive programs. In addition, we have programs totalling 11.5 billion dollars for clean technologies, solar, wind, geothermal as well as hybrid vehicles and clean diesel vehicles. These amounts are unmatched by any other nation on earth. But while government financing will remain important, it cannot be the only solution. It’s the private sector that has to identify innovative ways to establish a sustainable infrastructure. It is the market that will need to pick which technologies will meet the needs of consumers, individuals and business alike. The consumers must be able to choose the path for themselves which minimizes the higher cost they must bear.
What we are doing with clean coal initiatives illustrates the advantages of public-private partnerships. As Sam Bodman, our Secretary of Energy, has said, there is more energy available in U.S. coal than in nearly all of the oil in the world. The government is splitting the price tag on large scale implementation of “near ready” technologies and the development of longer term next generation technologies with the private sector. This will help us find ways to use coal in an environmentally sensitive way. The Energy Policy Act of 2005 authorized tax credits as incentives to move advanced technologies to the marketplace. Last November, nine companies received $1 billion in federal tax incentives to bring about the rapid deployment of advanced coal-based power generation and gasification technologies. Next year there will be another 500 million Dollars. We expect 10-1 leveraging by the private sector.
Duke Energy was one of those nine companies. James Rogers, the CEO of Duke Energy, testified in March before a congressional committee about the way forward on climate change regulation. He made the case that any climate legislation must be structured in a manner that promotes innovation, is creative in its ability to encourage investment in new and emerging technologies, and fairly distributes the costs that will be necessary to achieve environmental improvement.
Because if the past is a guide, the current, robust demand for energy will lead to a new age of energy innovation and abundance. I have confidence in the power of the private sector. Just as a river wears down the largest boulder in its path, market forces have the power and the persistence to remove obstacles. The current energy crisis is marked by questions about the reliability of supplies, rising energy costs and concerns about climate change. Rising costs mean that vast opportunities exist for innovators and investors who seek to bring new technologies to market. The risks are high, but the rewards are great.
Right now, energy efficiency is one of the hottest topics in business. Between 1973 and 2000, the U.S. economy grew 148 percent. The population went up from 212 million to over 282 million people. Nevertheless, total U.S. energy consumption grew by only 32 percent. In other words, the energy intensity of the economy dropped considerably. What accounted for the change? Well, consumers purchased more fuel-efficient cars and appliances. They insulated and weatherproofed their homes. They adjusted thermostats to reduce energy consumption. Companies adopted more energy-saving technologies. Conserving energy doesn’t have to be just a form of abstinence – riding bicycles using candles, and taking fewer showers, but can result from making smart choices to utilize technologies that are readily available.
As many of you know, I come from the manufacturing sector. In the United States, manufacturers consume nearly one-third of U.S energy. When energy prices rose dramatically, they had no choice but to develop methods to combat skyrocketing fossil fuel costs. Businesses retrofitted their buildings with more efficient heating and cooling equipment. They installed energy management and control systems. Factories adopted energy efficient manufacturing processes and employed more efficient motors for conveyors, pumps, fans, and compressors. Billions of dollars were added to the bottom line and environmental impact was reduced at the same time. These days conservation is about efficiency: getting the same, or better, results from just a fraction of the energy. Gains in energy productivity, prompted by high fuel costs and healthy government policies, represent one of the great economic success stories of this century. More will be done.
Contrary to what some in Europe believe, the United States is and has been committed to setting goals and creating an environment where solutions can be conceived, developed and implemented. While the challenges we face may be great, they can be met if we continue to work together. Our citizens, scientists, and businesses need to be open to the advances being made on both sides of the ocean. By successfully expanding our energy sources, increasing our efficiency and improving our means of transmission, we can ensure that our nations and the global economy continue to grow well into the future.
